CASTLE DENTAL CENTERS OF TENNESSEE, INC.,
A TENNESSEE CORPORATION
AND
CASTLE MID-SOUTH DENTAL CENTER, P.C.,
A TENNESSEE PROFESSIONAL CORPORATION
EFFECTIVE MAY 31, 1996
TABLE OF CONTENTS
PAGE NO.
ARTICLE I. DEFINITIONS........................................................2
Section 1.1 Act......................................................2
Section 1.2 Adjusted Gross Revenue...................................2
Section 1.3 Adjustments..............................................2
Section 1.4 Ancillary Revenue........................................2
Section 1.5 Base Management Fee......................................2
Section 1.6 Budget...................................................2
Section 1.7 Business Manager.........................................2
Section 1.8 Business Manager Expense.................................2
Section 1.9 Confidential Information.................................3
Section 1.10 Center...................................................3
Section 1.11 Dental Services..........................................3
Section 1.12 Dentist..................................................3
Section 1.13 GAAP.....................................................3
Section 1.14 Management Fee...........................................4
Section 1.15 Management Services......................................4
Section 1.16 Management Services Agreement............................4
Section 1.17 Office Expense...........................................4
Section 1.18 PC.......................................................5
Section 1.19 PC Account...............................................5
Section 1.20 PC Consent...............................................5
Section 1.21 PC Expense...............................................5
Section 1.22 Performance Fee..........................................6
Section 1.23 Practice Territory.......................................6
Section 1.24 Professional Services Revenues...........................6
Section 1.25 Representatives..........................................6
Section 1.26 State....................................................6
Section 1.27 Term.....................................................6
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER.....................6
Section 2.1 Appointment..............................................6
Section 2.2 Authority................................................6
Section 2.3 Patient Referrals and Payments...........................7
Section 2.4 Internal Management of PC................................7
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Section 2.5 Practice of Dentistry....................................7
ARTICLE III. RESPONSIBILITIES OF THE PC.......................................8
Section 3.1 Duties and Responsibilities of the PC....................8
(a) Capital Improvements and Expansion.......................8
(b) Marketing and Advertising................................8
(c) Patient Fees; Collection Policies........................8
(d) Ancillary Services.......................................8
(e) Provider and Payor Relationships.........................8
(f) Strategic Planning.......................................8
(g) Capital Expenditures.....................................8
(h) Dentist Hiring...........................................8
Section 3.2 Dental Treatment Decisions...............................9
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER................9
Section 4.1 Centers and Equipment....................................9
Section 4.2 Dental Supplies.........................................10
Section 4.3 Support Services........................................10
Section 4.4 Quality Assurance, Risk Management,
and Utilization Review.................................11
Section 4.5 Licenses and Permits....................................11
Section 4.6 Personnel...............................................11
Section 4.7 Contract ...............................................11
Section 4.8 Billing and Collection..................................11
Section 4.9 PC Account..............................................13
Section 4.10 Fiscal Matters..........................................13
Section 4.11 Reports and Records.....................................15
Section 4.12 Recruitment of PC Dentists..............................16
Section 4.13 Business Manager's Insurance............................16
Section 4.14 No Warranty.............................................16
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF PC..............................16
Section 5.1 Organization and Operation..............................16
Section 5.2 PC Personnel and Shareholders...........................17
Section 5.3 Professional Standards..................................17
Section 5.4 Dental Services.........................................18
Section 5.5 Peer Review/Quality Assurance...........................18
Section 5.6 PC's Insurance..........................................18
Section 5.7 Confidential and Proprietary Information................19
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Section 5.8 Noncompetition..........................................20
Section 5.9 Name, Trademark.........................................21
Section 5.10 Peer Review.............................................21
Section 5.11 Indemnification.........................................21
ARTICLE VI. FINANCIAL ARRANGEMENT............................................22
Section 6.1 Definitions.............................................22
Section 6.2 Management Fee..........................................22
Section 6.3 Adjustments.............................................22
Section 6.4 Reasonable Value........................................23
Section 6.5 Payment of Management Fee...............................23
Section 6.6 Accounts Receivable.....................................23
Section 6.7 Disputes Regarding Fees.................................24
ARTICLE VII. TERM AND TERMINATION............................................24
Section 7.1 Initial and Renewal Term................................24
Section 7.2 Termination.............................................24
Section 7.3 Effects of Termination..................................25
Section 7.4 Repurchase Obligation...................................26
Section 7.5 Repurchase Option.......................................27
Section 7.6 Closing of Repurchase...................................28
ARTICLE VIII. MISCELLANEOUS..................................................28
Section 8.1 Administrative Services Only............................28
Section 8.2 Status of Contractor; Agency............................28
Section 8.3 Notices.................................................29
Section 8.4 Governing Law...........................................29
Section 8.5 Assignment..............................................30
Section 8.6 Arbitration.............................................30
Section 8.7 Waiver of Breach........................................32
Section 8.8 Enforcement.............................................32
Section 8.9 Gender and Number.......................................32
Section 8.10 Additional Assurances...................................32
Section 8.11 Consents, Approvals, and Exercise of Discretion.........32
Section 8.12 Force Majeure...........................................33
Section 8.13 Severability............................................33
Section 8.14 Divisions and Headings..................................33
Section 8.15 Amendments and Management Services Agreement Execution..33
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Section 8.16 Entire Management Services Agreement....................34
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MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective as
of May 31, 1996, by and between CASTLE DENTAL CENTERS OF TENNESSEE, INC., a
Tennessee corporation ("Business Manager"), and CASTLE MID-SOUTH DENTAL CENTER,
P.C., a Tennessee professional corporation ("PC").
RECITALS
This Management Services Agreement is made with reference to the
following facts:
A. PC is a validly existing Tennessee professional corporation, formed
for and engaged in the practice of dentistry and the provision of dental
services to the general public in the State of Tennessee through individual
dentists who are licensed to practice dentistry in the State of Tennessee and
who are employed or otherwise retained by PC.
B. Business Manager is a validly existing Tennessee corporation, which
has been duly formed to manage the non-dental business aspects of the dental
practice of PC.
C. PC desires to focus its energies, expertise and time on the practice
of dentistry and on the delivery of dental services to patients, and to
accomplish this goal it desires to delegate the increasingly more complex
business functions of its dental practice to persons with business expertise.
D. PC wishes to engage Business Manager to provide such management,
administrative and business services as are necessary and appropriate for the
day-to-day administration of the non-dental aspects of PC's dental practice in
the Practice Territory (as defined below), and Business Manager desires to
provide such services all upon the terms and conditions hereinafter set forth.
E. PC and Business Manager have determined a fair market value for the
services to be rendered by Business Manager, and based on this fair market
value, have developed a formula for compensation for Business Manager that will
allow the parties to establish a relationship permitting each party to devote
its skills and expertise to the appropriate responsibilities and functions.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Management Services Agreement, the following
terms shall have the following meanings ascribed thereto, unless otherwise
clearly required by the context in which such term is used.
Section 1.1 ACT. The term "Act" shall mean TCA 63-5-101 et. seq., as
amended.
Section 1.2 ADJUSTED GROSS REVENUE. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.3 ADJUSTMENTS. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, third party payor
contractual adjustments, discounts, workers' compensation adjustments,
professional courtesies, and other reductions in collectible revenue that result
from activities that do not result in collectible charges.
Section 1.4 ANCILLARY REVENUE. The term "Ancillary Revenue" shall mean
all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues consisting only of prepaid amounts for services
previously billed and collected, and shall include (a) any amounts received by
PC as liquidated damages under Section 4.2 or Section 4.3 of any Dentist's
employment agreement, and (b) the proceeds of key person life and disability
insurance as provided for in Section 4.14 below.
Section 1.5 BASE MANAGEMENT FEE. The term "Base Management Fee" shall
mean the amount set forth in Section 6.1.
Section 1.6 BUDGET. The term "Budget" shall mean an operating budget and
capital expenditure budget for each fiscal year as prepared by Business Manager
and adopted by PC.
Section 1.7 BUSINESS MANAGER. The term "Business Manager" shall mean
Castle Dental Centers of Tennessee, Inc., a Tennessee corporation, or any entity
that succeeds to the interests of Castle Dental Centers of Tennessee, Inc., a
Tennessee corporation, and to whom the obligations of Business Manager are
assigned and transferred.
Section 1.8 BUSINESS MANAGER EXPENSE. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not PC, is financially liable, other than
expenses incurred by Business Manager that directly benefit PC which may be
allocated to Office Expense consistent with the Budget.
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Section 1.9 CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any information of Business Manager or PC, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of PC, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; or (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party.
Section 1.10 CENTER. The term "Center" (collectively referred to as
"Centers") shall mean any office space, clinic, facility, including satellite
facilities, that Business Manager shall own or lease or otherwise procure for
the use of PC, as allowed by law, in the provision of Dental Services pursuant
to this Management Services Agreement.
Section 1.11 DENTAL SERVICES. The term "Dental Services" shall mean
dental care and services, including but not limited to the practice of general
dentistry, orthodontics and all related dental care services provided by PC
through PC's Dentists and other dental care providers that are retained by or
professionally affiliated with PC.
Section 1.12 DENTIST. The term "Dentist" shall mean each individually
licensed professional who is employed or otherwise retained by or associated
with PC, each of whom shall meet the qualifications described in Section 5.2 and
Section 5.3.
Section 1.13 GAAP. The term "GAAP" shall mean generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity or other
practices and procedures as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date
of the determination. For
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purposes of this Management Services Agreement, GAAP shall be applied in a
manner consistent with the historic practices of the person to which the term
applies.
Section 1.14 MANAGEMENT FEE. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article VI hereof.
Section 1.15 MANAGEMENT SERVICES. The term "Management Services" shall
mean the business, administrative, and management services to be provided for PC
as contemplated herein.
Section 1.16 MANAGEMENT SERVICES AGREEMENT. The term "Management
Services Agreement" shall mean this Management Services Agreement by and between
PC and Business Manager and any amendments hereto as may be adopted as provided
in this Management Services Agreement.
Section 1.17 OFFICE EXPENSE. The term "Office Expense" shall mean all
operating and nonoperating expenses incurred by the Business Manager or PC in
the provision of services to or by PC. Office Expense shall not include any
other expense that is a PC Expense or a Business Manager Expense. Without
limitation, Office Expense shall include:
(a) the salaries and benefits of all employees of Business Manager at
the Centers and the salaries and benefits of the non-dental employees of PC, but
not the salaries or benefits of the Dentists;
(b) the direct cost of any employee or consultant that provides services
at or in connection with the Centers for improved clinic performance, such as
management, billing and collections, business office consultation, accounting
and legal services, but only when such services are consistent with the Budget
or otherwise with the consent of the PC;
(c) reasonable recruitment costs and out-of-pocket expenses of Business
Manager or PC directly related to the recruitment of additional dental employees
of PC;
(d) professional liability insurance expenses for Dentists and
comprehensive, general liability and workers' compensation insurance covering
the Centers and employees of PC and Business Manager at each Center;
(e) the expense of using, leasing, purchasing or otherwise procuring
each Center and related equipment, including depreciation;
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(f) the cost of capital (whether as actual interest on indebtedness
incurred on behalf of PC or as reasonable imputed interest on capital advanced
by Business Manager, which shall be deemed to be the prime rate established from
time to time by NationsBank of Texas, N.A. plus four percent, but in no event to
be less than 10%.
(g) the Base Management Fee;
(h) the reasonable out-of-pocket travel expenses associated with
attending meetings, conferences, or seminars to benefit PC;
(i) the reasonable costs and expenses associated with marketing,
advertising and promotional activities to benefit PC;
(j) the cost of dental supplies (including but not limited to drugs,
pharmaceuticals, products, substances, items, or dental devices), office
supplies, inventory, and utilities other than those dental supplies or dental
inventory owned by PC on the date of this Management Services Agreement; and
(k) federal, state or local taxes of PC, including without limitation,
income, payroll, sales and use, property, franchise and business taxes
Section 1.18 PC. The term "PC" shall mean Mid-South Dental Centers,
P.C., a Tennessee professional corporation.
Section 1.19 PC ACCOUNT. The term "PC Account" shall mean the bank
account of PC established as described in Sections 4.8 and 4.9.
Section 1.20 PC CONSENT. The term "PC Consent" shall mean the consent
granted by the PC when requested by Business Manager. When any provision of this
Management Services Agreement requires PC Consent, PC Consent shall not be
unreasonably or arbitrarily withheld.
Section 1.21 PC EXPENSE. The term "PC Expense" shall mean an expense
incurred by the Business Manager or PC that is consistent with the Budget or
otherwise with the consent of PC and for which PC, and not the Business Manager,
is financially liable. PC Expense shall include such items as Dentist salaries,
benefits, and other direct costs (including professional dues, subscriptions,
continuing dental education expenses, and travel costs for continuing dental
education or other business travel but excluding business travel requested by
Business Manager, which shall be an Office Expense).
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Section 1.22 PERFORMANCE FEE. The term "Performance Fee" shall mean the
amount payable to the Business Manager, if any, determined under Section 6.2, as
a Management Fee based upon the Business Manager achieving certain
pre-determined performance criteria.
Section 1.23 PRACTICE TERRITORY. The term "Practice Territory" shall
mean the geographic area within a radius of ten (10) miles of any current or
future facility from which PC provides Dental Services in Tennessee representing
the specific geographic boundaries of the dental practice conducted by PC within
its particular urban metropolitan area.
Section 1.24 PROFESSIONAL SERVICES REVENUES. The term "Professional
Services Revenues" shall mean the sum of all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Dental Services and related services rendered by the shareholders and dental
employees of PC.
Section 1.25 REPRESENTATIVES. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.26 STATE. The term "State" shall mean the State of Tennessee.
Section 1.27 TERM. The term "Term" shall mean the initial and any
renewal periods of duration of this Management Services Agreement as described
in Section 7.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 APPOINTMENT. PC hereby appoints Business Manager as its sole
and exclusive agent for the management and administration of the non-dental
business functions and business affairs of PC, and Business Manager hereby
accepts such appointment, subject at all times to the provisions of this
Management Services Agreement.
Section 2.2 AUTHORITY. Consistent with the provisions of this Management
Services Agreement, Business Manager shall have the responsibility and
commensurate authority to provide Management Services for PC. Subject to the
terms and conditions of this Management Services Agreement, Business Manager is
hereby expressly authorized to provide in good faith the Management Services in
any reasonable manner Business Manager deems appropriate to meet the day-to-day
requirements of the business functions of PC. Business Manager is also expressly
and exclusively authorized to negotiate and execute on behalf of PC contracts
that do not relate to the provision of Dental Services. PC shall give Business
Manager thirty (30) days prior notice of PC's intent to execute any agreement
obligating PC to perform Dental Services or otherwise
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creating a binding legal obligation on PC. Unless an expense is expressly
designated as a Business Manager Expense in this Management Services Agreement,
all expenses incurred by Business Manager in providing services hereunder shall
be an Office Expense. The parties acknowledge and agree that PC, through its
Dentists, shall be responsible for and shall have complete authority,
responsibility, supervision, and control over the provision of all Dental
Services and other professional health care services performed for patients, and
that all diagnoses, treatments, procedures, and other professional health care
services shall be provided and performed exclusively by or under the supervision
of Dentists as such Dentists, in their sole discretion, deem appropriate.
Business Manager shall have and exercise absolutely no control or supervision
over the provision of Dental Services.
Section 2.3 PATIENT REFERRALS AND PAYMENTS. Business Manager and PC
agree that the benefits to PC hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business Manager
to patients of PC in any facility, laboratory or health care operation
controlled, managed, or operated by Business Manager. Further, Business Manager
and PC agree that the payment of monies hereunder in no way represents the
division, sharing, splitting or other allocation of fees for Dental Services
between PC and Business Manager.
Section 2.4 INTERNAL MANAGEMENT OF PC. Matters involving the internal
management, control, or finances of PC, including specifically the allocation of
professional income among the shareholders and Dentist employees of PC, tax
planning, and investment planning, shall remain the responsibility of PC and the
shareholders of PC.
Section 2.5 PRACTICE OF DENTISTRY. The parties acknowledge that Business
Manager is not authorized or qualified to engage in any activity that may be
construed or deemed to constitute the practice of dentistry nor shall Business
Manager now or in the future be regarded as practicing dentistry within the
meaning of Section 63-5-108 of the Act. To the extent any act or service herein
required by Business Manager should be construed by a court of competent
jurisdiction or by the State Board of Dental Examiners to constitute the
practice of dentistry, the requirement to perform that act or service by
Business Manager shall be deemed waived and unenforceable and shall not
constitute a breach or default by Business Manager under this Agreement, and the
parties shall take the actions contemplated by Section 7.2(d) hereof.
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ARTICLE III. RESPONSIBILITIES OF THE PC
Section 3.1 DUTIES AND RESPONSIBILITIES OF THE PC. The PC shall have the
following duties, obligations, and authority:
(a) CAPITAL IMPROVEMENTS AND EXPANSION. Any renovation and expansion
plans and capital equipment expenditures with respect to PC's facilities shall
be reviewed and approved by the PC and shall be based upon economic feasibility,
dentist support, productivity, technological innovations, competitive
alternatives, age of existing capital equipment, and then current market
conditions.
(b) MARKETING AND ADVERTISING. All marketing and other advertising of
the services performed at PC's facilities shall be under the control of the PC.
(c) PATIENT FEES; COLLECTION POLICIES. As a part of the Budget process,
in consultation with Business Manager, the PC shall establish the fee schedule
for Dental Services and shall establish the related collection policies for all
Dental Services and ancillary services rendered by PC.
(d) ANCILLARY SERVICES. The PC shall approve PC-provided ancillary
services based upon the pricing, access to and quality of such services.
(e) PROVIDER AND PAYOR RELATIONSHIPS. Decisions regarding the
establishment or maintenance of relationships with institutional health care
providers and third party payors shall be approved by the PC. The PC shall
review and approve all proposed reimbursement arrangements with third party
payors.
(f) STRATEGIC PLANNING. The PC, in consultation with the Business
Manager, shall develop long-term strategic planning objectives, including but
not limited to the acquisition of or merger with any other dental practices in
the Practice Territory.
(g) CAPITAL EXPENDITURES. The PC shall determine the priority of major
capital expenditures.
(h) DENTIST HIRING. The PC shall determine the number and type of
Dentists required for the efficient operation of PC's facilities. The PC shall
review and approve any variations to the restrictive covenants in any dentist
employment contract.
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Section 3.2 DENTAL TREATMENT DECISIONS. All decisions relating directly
or indirectly to the practice of dentistry will be made solely by the PC. The PC
shall have exclusive jurisdiction over the resolution of issues relating to:
(a) Types and levels of Dental Services to be provided;
(b) Recruitment of dentists to PC, including the specific qualifications
and specialties of recruited dentists;
(c) Fee schedules; and
(d) Any other function or decision relating to the practice of
dentistry.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide all Management Services
as are necessary and appropriate for the day-to-day administration of the
non-dental business aspects of PC's operations, including without limitation
those set forth in this Article IV in accordance with all law, rules,
regulations and guidelines applicable to the provision of Management Services.
Section 4.1 CENTERS AND EQUIPMENT.
(a) Subject to Section 4.1(b), as necessary and appropriate, taking into
consideration the professional concerns of and in consultation with PC, Business
Manager shall in its reasonable discretion lease, acquire or otherwise procure
Centers in a location or locations reasonably acceptable to PC and shall permit
PC to use each such Center pursuant to this Management Services Agreement, by
sublease or otherwise as required by law.
(b) PC shall not enter into any lease or sublease with respect to a
Center without Business Manager's prior written consent. In the event PC is the
lessee of any Center under a lease with an unrelated and nonaffiliated lessor,
Business Manager may require PC to assign such lease to Business Manager upon
receipt of consent from the lessor and Business Manager shall permit PC to use
such Center pursuant to this Management Services Agreement, by sublease or
otherwise as required by law. PC shall use its best efforts to assist in
obtaining the lessor's consent to the assignment. Upon request, PC shall execute
any instruments and shall take any acts that Business Manager may deem necessary
to accomplish the assignment of the lease. Any expenses incurred in the
assignment shall be Office Expenses.
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(c) Business Manager shall provide all non-dental equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Business Manager for the operation of each Center and reasonably necessary for
the provision of Dental Services pursuant to this Management Services Agreement,
by lease, sublease or otherwise as required by law.
(d) Business Manager shall provide, finance, or cause to be provided or
financed dental related equipment as required by PC. PC shall have final
authority in all dental equipment selections, and Business Manager shall have no
authority in regard to dental equipment selection issues. Business Manager may,
however, advise PC on the relationship between its dental equipment decisions
and the overall administrative and financial operations of the practice. All
dental and non-dental equipment acquired for the use of PC shall be owned by
Business Manager.
(e) Business Manager shall be responsible for the repair and maintenance
of each Center, consistent with Business Manager's responsibilities under the
terms of any lease or other use arrangement, and for the repair, maintenance,
and replacement of all equipment other than such repairs, maintenance and
replacement necessitated by the negligence or willful misconduct of PC, its
Dentists or other personnel employed by PC, the repair or replacement of which
shall be a PC Expense and not an Office Expense.
Section 4.2 DENTAL SUPPLIES. Business Manager shall order, procure,
purchase and provide on behalf of and as agent for PC all dental supplies
necessary and appropriate for the practice of PC in the reasonable discretion of
PC unless otherwise prohibited by federal and/or State law. Furthermore,
Business Manager, in consultation with PC, shall ensure that each Center is at
all times adequately stocked with the dental supplies that are necessary and
appropriate for the operation of PC and required for the provision of Dental
Services. The ultimate oversight, supervision and ownership for all dental
supplies is and shall remain the sole responsibility of PC. As used in this
provision the term "dental supplies" shall mean all drugs, pharmaceuticals,
products, substances, items or devices whose purchase, possession, maintenance,
administration, prescription or security requires the authorization or order of
a licensed health care provider or requires a permit, registration,
certification or other governmental authorization held by a licensed health care
provider as specified under any federal and/or State law.
Section 4.3 SUPPORT SERVICES. Business Manager shall provide or arrange
for all printing, stationery, forms, postage, duplication or photocopying
services, and other support services as are reasonably necessary and appropriate
for the operation of each Center and the provision of Dental Services therein.
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Section 4.4 QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW.
Business Manager shall, upon the request of PC, assist PC in PC's establishment
of procedures to ensure the consistency, quality, appropriateness and necessity
of Dental Services provided by PC, and shall provide administrative support for
PC's overall quality assurance, risk management, and utilization review
programs. Business Manager shall perform these tasks in a manner to ensure the
confidentiality and nondiscoverability of these program actions to the fullest
extent allowable under State and federal law.
Section 4.5 LICENSES AND PERMITS. Business Manager shall, on behalf of
and in the name of PC, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and maintain all federal, State,
and local licenses and regulatory permits required for or in connection with the
operation of PC and equipment (existing and future) located at each Center,
other than those relating to the practice of dentistry or the administration of
drugs by Dentists retained by or associated with PC.
Section 4.6 PERSONNEL. Except as specifically provided in Section 5.2(b)
of this Management Services Agreement, Business Manager shall, consistent with
the Budget, employ or otherwise retain and shall be responsible for selecting,
hiring, training, supervising, and terminating, all management, administrative,
clerical, secretarial, bookkeeping, accounting, payroll, billing and collection
and other nonprofessional personnel as Business Manager deems reasonably
necessary and appropriate to enable Business Manager to perform its duties and
obligations under this Management Services Agreement. Business Manager shall,
consistent with the Budget, have sole responsibility for determining the
salaries and providing such fringe benefits, and for withholding, as required by
law, any sums for income tax, unemployment insurance, social security, or any
other withholding required by applicable law or governmental requirement.
Section 4.7 CONTRACT NEGOTIATIONS. Business Manager, in consultation
with PC, shall negotiate, either directly or on PC's behalf, as appropriate and
allowed by law, all contractual arrangements between PC and third parties as are
reasonably necessary and appropriate for PC's provision of Dental Services,
including, without limitation, negotiated price agreements with third party
payors, alternative delivery systems, or other purchasers of group health care
services.
Section 4.8 BILLING AND COLLECTION. On behalf of and for the account of
PC, Business Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall timely bill and collect all
professional and other fees for all Dental Services provided by PC, or Dentists
employed or otherwise retained by PC. Business Manager shall advise and consult
with PC regarding the fees for Dental Services provided by PC; it being
understood, however,
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that PC shall establish the fees to be charged for Dental Services and that
Business Manager shall have no authority whatsoever with respect to the
establishment of such fees. In connection with the billing and collection
services to be provided hereunder, and throughout the Term (and thereafter as
provided in Section 7.3), PC hereby grants to Business Manager a special power
of attorney and appoints Business Manager as PC's exclusive true and lawful
agent and attorney-in-fact, and Business Manager hereby accepts such special
power of attorney and appointment, for the following purposes:
(a) To bill PC's patients, in PC's name and on PC's behalf, for all
Dental Services provided by PC to patients.
(b) To bill, in PC's name and on PC's behalf, all claims for
reimbursement or indem nification from Blue Shield/Blue Cross, insurance
companies and all other third party payors or fiscal intermediaries for all
covered billable Dental Services provided by PC to patients.
(c) To collect and receive in Business Manager's name and for Business
Manager's account all accounts receivable of PC purchased by Business Manager,
and to deposit such collections in an account selected by Business Manager and
maintained in Business Manager's name.
(d) To collect and receive, in PC's name and on PC's behalf, all
accounts receivable generated by such billings and claims for reimbursement that
have not been purchased by Business Manager, to administer such accounts
including, but not limited to, (i) extending the time of payment of any such
accounts for cash, credit or otherwise; (ii) discharging or releasing the
obligors of any such accounts; (iii) suing, assigning or selling at a discount
such accounts to collection agencies; or (iv) taking other measures to require
the payment of any such accounts.
(e) To deposit all amounts collected under clause (d) above into PC
Account which shall be and at all times remain in PC's name. PC covenants to
transfer and deliver to Business Manager for deposit into PC Account (or, with
respect to accounts receivable purchased by Business Manager, Business Manager's
account) all funds received by PC from patients or third party payors for Dental
Services. Upon receipt by Business Manager of any funds from patients or third
party payors or from PC pursuant hereto for Dental Services, Business Manager
shall immediately deposit those that relate to accounts receivable covered by
clause (d) above into the PC Account. Business Manager shall disburse such
deposited funds to creditors and other persons on behalf of PC, maintaining
records of such receipt and disbursement of funds in accordance with Section
4.9(b).
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(f) To take possession of, endorse in the name of PC, and deposit into
the PC Account any notes, checks, money orders, insurance payments, and any
other instruments received in payment for Dental Services that relate to
accounts receivable covered by clause (d) above.
(g) To sign checks, drafts, bank notes or other instruments on behalf of
PC, and to make withdrawals from the PC Account for payments specified in this
Management Services Agreement.
Upon request of Business Manager, PC shall execute and deliver to the financial
institution wherein the PC Account is maintained, such additional documents or
instruments as may be neces sary to evidence or effect the special and limited
power of attorney granted to Business Manager by PC pursuant to this Section 4.8
or pursuant to Section 4.9 of this Management Services Agreement. The special
and limited power of attorney granted herein shall be coupled with an interest
and shall be irrevocable except with Business Manager's written consent. The
irrevocable power of attorney shall expire on the later of when this Management
Services Agreement has been terminated, when all accounts receivable purchased
by Business Manager have been collected, or when all Management Fees due to
Business Manager have been paid. If Business Manager assigns this Management
Services Agreement in accordance with its terms, then PC shall execute a power
of attorney in favor of the assignee including substantially the same terms set
forth in this Section 4.8.
Section 4.9 PC ACCOUNT.
(a) ACCESS. Business Manager shall have access to the PC Account solely
for the purposes contemplated hereby. PC shall not draw checks on the PC
Account.
(b) PRIORITY OF PAYMENTS. Business Manager shall apply on a monthly
basis, except as otherwise stated hereunder, funds that are in the PC Account in
the following order of priority: (i) PC Expenses; (ii) Office Expenses (other
than the Base Management Fee); (iii) Management Fees (both Base Management Fee
and Performance Fee); and (iv) any other expenditures.
Section 4.10 FISCAL MATTERS.
(a) ANNUAL BUDGET.
(1) INITIAL BUDGET. The initial Budget shall be agreed upon and
approved in writing by the parties before the execution of this
Management Services Agreement. The
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initial Budget shall include an exhibit setting forth the criteria under
which Business Manager shall be entitled to receive the Performance Fee.
(2) PROCESS FOR SUCCEEDING BUDGETS. Annually and at least thirty
(30) days prior to the commencement of each fiscal year of PC, Business
Manager, in consultation with PC, shall prepare and deliver to PC for
PC's approval a proposed Budget, setting forth an estimate of PC's
revenues and expenses for the upcoming fiscal year (including, without
limitation, the Management Fee and Performance Fee associated with the
services provided by Business Manager hereunder). PC shall review the
proposed Budget and either approve the proposed Budget or request any
changes within fifteen (15) days after receiving the proposed Budget.
The Budget shall be adopted by PC after its approval thereof and may be
revised or modified only in consultation with the Business Manager.
(3) SUCCEEDING BUDGETS; SPECIAL RATES. In each succeeding Budget,
unless the parties otherwise mutually agree or are otherwise precluded
by law or regulation, the criteria for the Performance Fee and Business
Manager's right to receive the Performance Fee shall be continued on the
same basis.
(4) DEADLOCK. In the event the parties are unable to agree on a
Budget by the beginning of the fiscal year, until an agreement is
reached, the Budget for the prior year shall be deemed to be adopted as
the Budget for the current year, with each line item in the Budget (with
the exception of the Base Management Fee and any one-time or
non-recurring expenses included in such prior Budget) increased or
decreased by (i) the percentage by which the Adjusted Gross Revenue in
the current year has increased or decreased compared to the
corresponding period of the prior year; (ii) the increase or decrease
from the prior year in the Consumer Price Index - Health/Medical
Services, Nashville, Tennessee area; and (iii) the proportionate
increase or decrease in mutually agreed upon personnel costs as measured
by the increase or decrease in full-time- equivalent personnel.
(5) OBLIGATION OF BUSINESS MANAGER. Business Manager shall use
commercially reasonable efforts to manage and administer the operations
of PC as herein provided so that the actual revenues, costs and expenses
of the operation and maintenance of PC during any applicable period of
PC's fiscal year shall be consistent with the Budget.
(b) ACCOUNTING AND FINANCIAL RECORDS. Business Manager shall establish
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business
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and financial affairs of PC and the provision of Dental Services, all of which
shall be prepared and maintained in accordance with GAAP and applicable laws and
regulations. Business Manager shall prepare and deliver to PC, within one
hundred twenty (120) days of the end of each calendar year, a balance sheet and
a profit and loss statement reflecting the financial status of PC in regard to
the provision of Dental Services as of the end of such calendar year, all of
which shall be prepared in accordance with GAAP consistently applied. In
addition, Business Manager shall prepare or assist in the preparation of any
other financial statements or records as PC may reasonably request.
(c) REVIEW OF EXPENDITURES. PC shall review all expenditures related to
the operation of PC, but the PC shall not have the power to prohibit or
invalidate any expenditure that is consistent with the Budget. Business Manager
shall not have any authority to make any expenditures not consistent with the
Budget without PC Consent.
(d) TAX MATTERS.
(1) IN GENERAL. Business Manager shall prepare or arrange for
the preparation by an accountant approved in advance by PC
(which approval shall not be unreasonably withheld) of all
appropriate tax returns and reports required of PC.
(2) SALES AND USE TAXES. Business Manager and PC acknowledge
and agree that to the extent that any of the services to
be provided by Business Manager hereunder may be subject
to any State sales and use taxes, Business Manager may
have a legal obligation to collect such taxes from PC and
to remit same to the appropriate tax collection
authorities. PC agrees to pay in addition to the payment
of the Management Fee, the applicable State sales and use
taxes in respect of the portion of the Management Fees
attributable to such services.
Section 4.11 REPORTS AND RECORDS. Business Manager shall establish,
monitor, and maintain procedures and policies for the timely creation,
preparation, filing and retrieval of all dental records generated by PC in
connection with PC's provision of Dental Services; and, subject to applicable
law, shall use its best efforts to ensure that dental records are promptly
available to Dentists and any other appropriate persons. All such dental records
shall be retained and maintained in accordance with all applicable State and
federal laws relating to the confidentiality and retention thereof. All dental
records shall be and remain the property and under the control of PC and shall
be located at the applicable Center so that they are readily available for
patient
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care, and PC shall remain the custodian thereof and responsible for their
maintenance. Business Manager shall use its reasonable efforts to preserve the
confidentiality of dental records and use information contained in such records
only for the limited purpose necessary to perform the services set forth herein;
provided, however, in no event shall a breach of said confidentiality be deemed
a default under this Agreement.
Section 4.12 RECRUITMENT OF PC DENTISTS. Upon PC's request, Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential Dentist personnel to become employees of PC.
Business Manager shall provide PC with model agreements to document PC's
employment, retention or other service arrangements with such indi viduals. It
will be and remain the sole and complete responsibility of PC to interview,
select, contract with, supervise, control and terminate all Dentists performing
Dental Services or other professional services, and Business Manager shall have
no authority whatsoever with respect to such activities.
Section 4.13 BUSINESS MANAGER'S INSURANCE. Throughout the Term, Business
Manager shall, as an Office Expense, obtain and maintain with commercial
carriers, through self-insurance or some combination thereof, appropriate
worker's compensation coverage for Business Manager's employed personnel
provided pursuant to this Management Services Agreement, and professional,
casualty and comprehensive general liability insurance covering Business
Manager, Business Manager's personnel, and all of Business Manager's equipment
in such amounts, on such basis and upon such terms and conditions as Business
Manager deems appropriate. Upon the request of PC, Business Manager shall
provide PC with a certificate evidencing such insurance coverage. Business
Manager may also carry, as an Office Expense, key person life and disability
insurance on any shareholder or Dentist employee of PC in amounts determined
reasonable and sufficient by Business Manager. Business Manager shall be the
owner and beneficiary of any such insurance.
Section 4.14 NO WARRANTY. PC acknowledges that Business Manager has not
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of dental practice or income to PC.
ARTICLE V. COVENANTS AND RESPONSIBILITIES OF PC
Section 5.1 ORGANIZATION AND OPERATION. PC, as a continuing condition of
Business Manager's obligations under this Management Services Agreement, shall
at all times during the Term be and remain legally organized and operated to
provide Dental Services in a manner
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consistent with all State and federal laws. PC shall operate and maintain within
the Practice Territory a full time practice of dentistry specializing in the
provision of Dental Services.
Section 5.2 PC PERSONNEL AND SHAREHOLDERS.
(a) DENTAL PERSONNEL. PC shall retain, as a PC Expense and not as an
Office Expense, that number of Dentists as are reasonably necessary and
appropriate in the sole discretion of PC for the provision of Dental Services.
Each Dentist retained by PC shall hold and maintain a valid and unrestricted
license to practice dentistry in the State, and shall be competent in the
practice of dentistry, including any subspecialties that the retained Dentist
will practice on behalf of PC. PC shall enter into, maintain and enforce with
each such retained Dentist a written employment agreement in a form reasonably
satisfactory to PC and Business Manager and will not commit and permit to remain
outstanding any breach of such employment agreement that would allow the Dentist
to terminate for cause. No such employment contract may be amended if the effect
of such amendment would be the waiver of rights held by PC. PC shall be
responsible for paying the compensation and benefits, as applicable, for all
Dentists and any other dental personnel or other contracted or affiliated
dentists, and for withholding, as required by law, any sums for income tax,
unemployment insurance, social security, or any other withholding required by
applicable law. Business Manager may, on behalf of PC, establish and administer
the compensation with respect to such individuals in accordance with the written
agreement between PC and each Dentist. Business Manager shall neither control
nor direct any Dentist in the performance of Dental Services for patients.
(b) EMPLOYMENT OF NON-DENTIST DENTAL CARE PERSONNEL. PC shall employ or
retain, as an Office Expense, all non-dentist dental care personnel, such as
dental assistants, dental hygienists and dental technicians, required under the
Act or otherwise required by law to work under the direct supervision of a
Dentist or who Business Manager and PC determine should work under the direct
supervision of a Dentist. Such non-dentist dental care personnel shall be under
PC's control, supervision and direction in the performance of Dental Services
for patients.
(c) OPTION AGREEMENT. Each shareholder of PC shall enter into and comply
with the terms and provisions of an Option Agreement with respect to his or her
ownership interest in PC, substantially in the form of Exhibit A hereto.
Section 5.3 PROFESSIONAL STANDARDS. As a continuing condition of
Business Manager's obligations hereunder, each Dentist and any other dental
personnel retained by PC to provide Dental Services must (i) comply with, be
controlled and governed by and otherwise provide Dental Services in accordance
with in all material respects the code of professional conduct and
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applicable federal, State and municipal laws, rules, regulations, ordinances and
orders, and the ethics and standard of care of the dental community wherein any
Center is located in the provision of Dental Services on behalf of PC.
Section 5.4 DENTAL SERVICES. PC shall ensure that Dentists and
non-dentist dental care personnel are available to provide Dental Services to
patients during the normal operating hours of each Center. In the event that
Dentists are not available to provide Dental Services coverage, PC shall engage
and retain LOCUM TENENS coverage as it deems reasonable and appropriate based on
patient care requirements. Dentists retained on a LOCUM TENENS basis shall meet
all of the requirements of Section 5.3, and the cost of providing LOCUM TENENS
coverage shall be a PC Expense. With the assistance of the Business Manager, PC
and the Dentists shall be responsible for scheduling Dentist and non-dentist
dental care personnel coverage of all dental procedures.
PC shall cause all Dentists to develop and promote PC.
Section 5.5 PEER REVIEW/QUALITY ASSURANCE. PC shall adopt a peer
review/quality assessment program to monitor and evaluate the quality and
cost-effectiveness of Dental Services provided by dental personnel of PC. Upon
request of PC, Business Manager shall provide administrative assistance to PC in
performing its peer review/quality assurance activities, but only if such
assistance can be provided consistent with maintaining the confidentiality and
nondiscoverability of the processes and actions of the Peer Review/Quality
Assurance process of PC and not be regarded as practicing dentistry under the
Act.
Section 5.6 PC'S INSURANCE. PC shall, as an Office Expense, obtain and
maintain with commercial carriers acceptable to Business Manager appropriate
worker's compensation coverage for PC's employed personnel, if any, and
professional and comprehensive general liability insurance covering PC and each
of the Dentists PC retains or employs to provide Dental Services. The
comprehensive general liability coverage shall be in the minimum amount of One
Million Dollars ($1,000,000) for each occurrence and Two Million Dollars
($2,000,000) annual aggregate; and professional liability coverage shall be in
the minimum amount of Five Hundred Thousand Dollars ($500,000) for each
occurrence and One Million Five Hundred Thousand Dollars ($1,500,000) annual
aggregate. The insurance policy or policies shall provide for at least thirty
(30) days advance written notice to PC from the insurer as to any alteration of
coverage, cancellation, or proposed cancellation for any cause, and provide that
a copy of such notice be sent to Business Manager. PC shall cause to be issued
to Business Manager by such insurer or insurers a certificate reflecting such
coverage and shall provide written notice to Business Manager promptly upon
receipt of notice given to Dentist of the cancellation or proposed cancellation
of such insurance for any cause. Upon the termination of this Management
Services Agreement for any reason, PC shall obtain and maintain as a PC Expense
"tail" professional
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liability coverage, in the amounts specified in this section for an extended
reporting period of 15 years, and PC shall be responsible for paying all
premiums for "tail" insurance coverage. In no event shall the professional
liability insurance carrier be replaced or changed without PC Consent and
Business Manager Consent. PC and Business Manager agree to use their best
efforts to have each other named as additional insureds on the other's
respective professional liability insurance at Business Manager's expense.
Section 5.7 CONFIDENTIAL AND PROPRIETARY INFORMATION. PC will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
PC will keep such Confidential Information confidential and will ensure that its
affiliates and advisors who have access to such Confidential Information comply
with these nondisclosure obligations; provided, however, that PC may disclose
Confidential Information to those of its Representatives who need to know
Confidential Information for the purposes of this Management Services Agreement,
it being understood and agreed to by PC that such Representatives will be
informed of the confidential nature of the Confidential Information, will agree
to be bound by this Section, and will be directed by PC not to disclose to any
other person any Confidential Information. PC agrees to be responsible for any
breach of this Section by its Representatives. If PC is requested or required
(by oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands, or similar processes) to disclose or
produce any Confidential Information furnished in the course of its dealings
with Business Manager or its affiliates, advisors, or Representatives, PC will
(i) provide Business Manager with prompt notice thereof and copies, if possible,
and, if not, a description, of the Confidential Information requested or
required to be produced so that Business Manager may seek an appropriate
protective order or waive compliance with the provisions of this Section and
(ii) consult with Business Manager as to the advisability of Business Manager's
taking of legally available steps to resist or narrow such request. PC further
agrees that, if in the absence of a protective order or the receipt of a waiver
hereunder PC is nonetheless, in the written opinion of its legal counsel,
compelled to disclose or produce Confidential Information concerning Business
Manager to any tribunal or to stand liable for contempt or suffer other censure
or penalty, PC may disclose or produce such Confidential Information to such
tribunal legally authorized to request and entitled to receive such Confidential
Information without liability hereunder; provided, however, that PC shall give
Business Manager written notice of the Confidential Information to be so
disclosed or produced as far in advance of its disclosure or production as is
practicable and shall use its best efforts to obtain, to the greatest extent
practicable, an order or other reliable assurance that confidential treatment
will be accorded to such Confidential Information so required to be disclosed or
produced.
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Section 5.8 NONCOMPETITION. PC hereby recognizes and acknowledges that
Business Manager will incur substantial costs in providing the equipment,
support services, personnel, management, administration, and other items and
services that are the subject matter of this Management Services Agreement and
that in the process of providing services under this Management Services
Agreement, PC will be privy to financial and Confidential Information, to which
PC would not otherwise be exposed. The parties also recognize that the services
to be provided by Business Manager will be feasible only if PC operates an
active practice to which the Dentists associated with PC devote their full
professional time and attention. PC agrees and acknowledges that the
noncompetition covenants described hereunder are necessary for the protection of
Business Manager, and that Business Manager would not have entered into this
Management Services Agreement without the following covenants.
(a) During the Term of this Management Services Agreement and except for
its obligations pursuant to this Management Services Agreement, PC shall not
establish, operate, or provide Dental Services at a dental office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, PC
covenants and agrees that during the Term of this Management Services Agreement
and for a period of five (5) years from the date this Management Services
Agreement is terminated, PC shall not directly or indirectly own (excluding
passive ownership of less than five percent (5%) of the equity of any publicly
traded entity), manage, operate, control, or be otherwise associated with, lend
funds to, lend its name to, or maintain any interest whatsoever in any
enterprise (i) having to do with the provision, distribution, promotion, or
advertising of any type of management or administrative services or products to
third parties in competition with Business Manager, in the Practice Territory;
and/or (ii) offering any type of service(s) or product(s) to third parties
substantially similar to those offered by Business Manager to PC in the Practice
Territory. Notwithstanding the above restriction, nothing herein shall prohibit
PC or any of its shareholders from providing management and administrative
services to its or their own dental practices after the termination of this
Management Services Agreement.
(c) The written employment agreements described in Section 5.2 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with PC within the Practice Territory for one
(1) year after termination of the employment agreement in accordance with the
terms, conditions and limitations contained therein.
(d) PC shall obtain formal written agreements from its dentist employees
in the form of Exhibit 5.2(a), pursuant to which the employees agree not to
compete with PC within the
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Noncompetition Territory (as defined in such employment agreements) for one (1)
year after termination of the employment agreement in accordance with the terms,
conditions and limitations contained therein.
(e) PC understands and acknowledges that the foregoing provisions in
Section 5.7 and Section 5.8 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Dentists of PC. Accordingly, if PC
breaches any obligation of Section 5.7 or Section 5.8, in addition to any other
remedies available under this Management Services Agreement, at law or in
equity, Business Manager shall be entitled to enforce this Management Services
Agreement by injunctive relief and by specific performance of the Management
Services Agreement. Additionally, nothing in this paragraph shall limit Business
Manager's right to recover any other damages to which it is entitled as result
of PC's breach. If any provision of the covenants is held by a court of
competent jurisdiction to be unenforceable due to an excessive time period,
geographic area, or restricted activity, the covenant shall be reformed to
comply with such time period, geographic area, or restricted activity that would
be held enforceable.
Section 5.9 NAME, TRADEMARK. PC represents and warrants that, as of the
date hereof, PC conducts its professional practice under the name of, and only
under the name of "Mid-South Dental Centers, P.C." and that such name has been
licensed to PC by Business Manager. PC covenants and promises that, without the
prior written consent of the Business Manager, PC will not:
(a) take any action or omit to take any action that is reasonably likely
to result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to
use the name to any dental practice, dentist, professional corporation, or any
other entity; or
(c) cease conducting the professional practice of PC under the name.
Section 5.10 PEER REVIEW. PC shall designate a committee of Dentists to
function as a dental peer review committee to review credentials of potential
recruits, perform quality assurance functions, and otherwise resolve dental
competence issues. The dental peer review committee shall function pursuant to
formal written policies and procedures.
Section 5.11 INDEMNIFICATION. PC shall indemnify, hold harmless and
defend Business Manager, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), whether or
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not covered by insurance, caused or asserted to have been caused, directly or
indirectly, by or as a result of the performance of Dental Services or any other
acts or omissions by PC and/or its shareholders, agents, employees and/or
subcontractors (other than Business Manager) during the term hereof. Business
Manager shall indemnify, hold harmless and defend PC, its officers, directors
and employees, from and against any and all liability, loss, damage, claim,
causes of action and expenses (including reasonable attorneys' fees), caused or
asserted to have been caused, directly or indirectly, by or as a result of the
performance of any intentional acts, negligent acts, or omissions by Business
Manager and/or its shareholders, agents, employees and/or subcontractors (other
than PC) during the term of this Agreement.
ARTICLE VI. FINANCIAL ARRANGEMENT
Section 6.1 DEFINITIONS. For purposes of this Article VI, capitalized
terms used herein shall have the meanings ascribed as follows:
(a) BASE MANAGEMENT FEE. The Base Management Fee shall be the amount,
calculated on a monthly basis, that is equal to twelve and one-half percent
(12.5%) of the Adjusted Gross Revenue attributable to the applicable monthly
period.
(b) PERFORMANCE FEE. The Performance Fee shall be the amount, calculated
on a monthly basis, that is calculated in accordance with the Applicable Exhibit
to the Budget.
Section 6.2 MANAGEMENT FEE. PC and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such
fees are fair and reasonable. Each month, in the priority established by Section
4.9 (b), Business Manager shall be paid the following:
(i) the amount of all Office Expenses (other than the Base
Management Fee) paid by the Business Manager on behalf
of PC.
(ii) the Base Management Fee.
(iii) the Performance Fee.
Section 6.3 ADJUSTMENTS. If there are not sufficient funds to pay either
or both of the Base Management Fee or the Performance Fee, all unpaid amounts
shall accumulate and carry over from month to month until paid or until the
termination of this Management Services Agreement, in which case such unpaid
amounts shall be immediately due and payable as of the
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date of termination. Amounts carried over shall earn interest at the rate of ten
percent (10%) per annum. Furthermore, the amount of the Performance Fee paid
will be monitored and reconciled on an annual basis and any overpayments of the
Performance Fee shall be promptly refunded by the Business Manager.
Section 6.4 REASONABLE VALUE. Payment of the Base Management Fee or
Performance Fee is not intended to be and shall not be interpreted or applied as
permitting Business Manager to share in PC's fees for Dental Services or any
other services, but is acknowledged as the parties' negotiated agreement as to
the reasonable fair market value of the equipment, contract analysis and
support, other support services, purchasing, personnel, office space,
management, administration, strategic management and other items and services
furnished by Business Manager pursuant to this Management Services Agreement,
considering the nature and volume of the services required and the risks assumed
by Business Manager.
Section 6.5 PAYMENT OF MANAGEMENT FEE. To facilitate the payment of the
Management Fee as provided in Section 6.1 hereof, PC hereby expressly authorizes
Business Manager to make withdrawals of the Management Fee from the PC Account
as such fee becomes due and payable during the Term and thereafter as provided
in Section 7.3.
Section 6.6 ACCOUNTS RECEIVABLE. To assure that PC receives the entire
amount of professional fees for its services and to assist PC in maintaining
reasonable cash flow for the payment of Office Expenses, Business Manager may,
during the Term, purchase, without recourse to PC for the amount of the
purchase, the accounts receivable of PC arising during the previous month by
transferring the amount set forth below into the PC Account. The consideration
for the purchase shall be an amount equal to the Adjusted Gross Revenue recorded
each month (according to GAAP reflecting adjustments related to the bad debt
reserve). Business Manager shall be entitled to offset Office Expenses
reimbursement due to Business Manager under Section 6.2 above against the amount
payable for the accounts receivable. Although it is the intention of the parties
that Business Manager purchase and thereby become the owner of the accounts
receivable of PC, in the event such purchase shall be ineffective for any
reason, PC is concurrently herewith granting to Business Manager a security
interest in the accounts so purchased, and PC shall cooperate with Business
Manager and execute all documents in connection with the pledge of such
purchased accounts receivable to Business Manager. All collections in respect to
such accounts receivable purchased by Business Manager shall be received by
Business Manager as the agent of PC and shall be endorsed to Business Manager
and deposited in a bank account at a bank designated by Business Manager. To the
extent PC comes into possession of any payments in respect of such accounts
receivable, PC shall direct such payments to Business Manager for deposit in
bank accounts designated by Business Manager.
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Section 6.7 DISPUTES REGARDING FEES. PC shall not be entitled to a
set-off or reduction in its Management Fees by reason of its belief that
Business Manager has failed to perform its obligations hereunder or otherwise.
ARTICLE VII. TERM AND TERMINATION
Section 7.1 INITIAL AND RENEWAL TERM. The Term of this Management
Services Agreement will be for an initial period of twenty-five (25) years after
the effective date, and shall be automatically renewed for successive five (5)
year periods thereafter, provided that neither Business Manager nor PC shall
have given notice of termination of this Management Services Agreement at least
ninety (90) days before the end of the initial term or any renewal term, or un
less otherwise terminated as provided in Section 7.2 of this Management Services
Agreement.
Section 7.2 TERMINATION.
(a) TERMINATION BY BUSINESS MANAGER. Subject to Section 7.2(c), Business
Manager may only terminate this Management Services Agreement either without
cause upon ninety (90) days' written notice to PC, or upon the occurrence of any
one of the following events which shall be deemed to be "for cause":
(i) The dissolution of PC or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit of
creditors, or other action taken voluntarily or
involuntarily under any State or federal statute for the
protection of debtors;
(ii) Upon a good faith determination by Business Manager that
PC has materially defaulted in the performance of any of
its material duties or obligations hereunder, and such
default continues for thirty (30) days after PC receives
notice of the default, and such default has or is
reasonably expected to have a material adverse effect on
the business or affairs of Business Manager.
(b) TERMINATION BY PC. Subject to Section 7.2(c) PC may only terminate
this Management Services Agreement upon any of the following occurrences which
shall be deemed to be "for cause":
(i) The dissolution of Business Manager or the filing of a
petition in voluntary bankruptcy, an assignment for the
benefit of creditors, or other action taken
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voluntarily or involuntarily under any State or federal
statute for the protection of debtors;
(ii) In the event that Business Manager materially defaults
in the performance of any of its material obligations
hereunder and such default continues for sixty (60) days
after Business Manager receives notice of the default.
Termination by PC hereunder shall require the affirmative vote of three-fourths
of the outstanding voting shares of the common shareholders of PC entitled to
vote.
(c) TERMINATION BY AGREEMENT. In the event PC and Business Manager shall
mutually agree in writing, this Management Services Agreement may be terminated
on the date specified in such written agreement.
(d) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the event there
shall be a change in the Act, any federal or State statutes, case laws,
regulations or general instructions, the interpretation of any of the foregoing,
the adoption of new federal or State legislation, or a change in any third party
reimbursement system, any of which are reasonably likely to materially and
adversely affect the manner in which either party may perform or be compensated
for its services under this Management Services Agreement or which shall make
this Management Services Agreement unlawful, the parties shall immediately enter
into good faith negotiations regarding a new service arrangement or basis for
compensation for the services furnished pursuant to this Management Services
Agreement that complies with the law, regulation, or policy and that
approximates as closely as possible the economic position of the parties prior
to the change. If good faith negotiations cannot resolve the matter, it shall be
submitted to arbitration as referenced in Section 8.6; provided however that in
the event that the Tennessee Board of Dentistry issues a final and
non-appealable order revoking the license of any Dentist on the grounds that
PC's entering into and performing its obligations under this Management Services
Agreement is unlawful, PC may immediately terminate this Management Services
Agreement.
Section 7.3 EFFECTS OF TERMINATION. Upon termination of this Management
Services Agreement, as hereinabove provided, neither party shall have any
further obligations hereunder except for (i) obligations accruing prior to the
date of termination, including, without limitation, payment of the Management
Fees and PC Expenses relating to services provided prior to the termination of
this Management Services Agreement, (ii) obligations, promises, or covenants set
forth herein that are expressly made to extend beyond the Term, including,
without limitation, indemnities, which provisions shall survive the expiration
or termination of this Management Services Agreement for any reason, and
noncompetition provisions, which provisions shall
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survive the expiration or termination of this Management Services Agreement by
Business Manager for cause or by PC in breach of this Agreement, and (iii) the
obligations of PC and Business Manager described in Section 7.4. In effectuating
the provisions of this Section 7.3, PC specifically acknowledges and agrees that
Business Manager shall continue to collect and receive on behalf of PC all cash
collections from accounts receivable in existence at the time this Management
Services Agreement is terminated, it being understood that such cash collections
will represent, in part, compensation to Business Manager for management
services already rendered and compensation on accounts receivable purchased by
Business Manager. Upon the expiration or termination of this Management Services
Agreement for any reason or cause whatsoever, Business Manager shall surrender
to PC all books and records pertaining to PC's dental practice.
Section 7.4 REPURCHASE OBLIGATION. Upon termination of this Management
Services Agreement by Business Manager for cause or by PC in breach of this
Agreement or pursuant to Section 7.2(d) hereof, Business Manager shall have the
option, exercisable at any time within thirty (30) days of such termination, to
require PC to:
(a) Purchase from Business Manager at book value the intangible assets,
deferred charges, and all other amounts on the books of the Business Manager
relating to the Management Services Agreement as adjusted through the last day
of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of the intangible
assets, deferred charges, or covenants. Provided, however, that in the event of
a termination of this Agreement pursuant to Section 7.2(d) hereof, the price at
which the intangible assets of Business Manager shall be purchased by PC shall
be reduced by 20% for each full year that has passed from the date of this
Management Services Agreement as of the date of sale;
(b) Purchase from Business Manager any real estate owned by Business
Manager and used as a Center at the greater of the appraised fair market value
thereof or the then book value thereof. In the event of any repurchase of real
property, the appraised value shall be determined by Business Manager and PC,
each selecting a duly qualified appraiser, who in turn will agree on a third
appraiser. This agreed-upon appraiser shall perform the appraisal which shall be
binding on both parties. In the event either party fails to select an appraiser
within fifteen (15) days of the selection of an appraiser by the other party,
the appraiser selected by the other party shall make the selection of the third
party appraiser;
(c) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Center and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
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(d) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate directly to the performance of
Business Manager's obligations under this Management Services Agreement or the
properties leased or subleased hereunder by Business Manager; and
(e) Purchase from Business Manager at the greater of appraised fair
market value or book value all of the equipment listed as set forth in the
Purchase Agreement or an exhibit thereto, including all replacements and
additions thereto made by Business Manager pursuant to the performance of its
obligations under this Management Services Agreement, and all other assets,
including inventory and supplies, tangibles and intangibles, set forth on the
books of the Business Manager as adjusted through the last day of the month most
recently ended prior to the date of such termination in accordance with GAAP to
reflect operations of each Center, depreciation, amortization, and other
adjustments of assets shown on the books of the Business Manager.
Section 7.5 REPURCHASE OPTION. Upon termination of this Management
Services Agreement by Business Manager in breach of this Agreement or by PC for
cause, PC shall have the option but not the obligation to do all or none of the
following:
(a) Purchase from Business Manager any real estate owned by Business
Manager and used as a Center at the then book value thereof;
(b) Purchase at book value all improvements, additions, or leasehold
improvements that have been made by Business Manager at any Center and that
relate solely to the performance of Business Manager's obligations under this
Management Services Agreement;
(c) Assume all debt, and all contracts, payables, and leases that are
obligations of Business Manager and that relate directly to the performance of
Business Manager's obligations under this Management Services Agreement or the
properties leased or subleased by Business Manager; and
(d) Purchase from Business Manager at book value all of the equipment
listed as set forth in the Purchase Agreement or an exhibit thereto, including
all replacements and additions thereto made by Business Manager pursuant to the
performance of its obligations under this Management Services Agreement, and all
other tangible assets, including inventory and supplies, set forth on the books
of the Business Manager as adjusted through the last day of the month most
recently ended prior to the date of such termination in accordance with GAAP to
reflect operations of each Center, depreciation, amortization, and other
adjustments of assets shown on the books of the Business Manager.
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Section 7.6 CLOSING OF REPURCHASE. PC shall pay cash for the repurchased
assets. The amount of the purchase price shall be reduced by the amount of debt
and liabilities of Business Manager, if any, assumed by PC. PC and any Dentist
who is a shareholder of PC shall execute such documents as may be required to
cause or permit PC to assume the liabilities set forth in Section 7.4(d) or
Section 7.5(c) and to remove or, if PC and such Dentist or Dentists can
establish in good faith that such removal is not possible, to cause or permit PC
to indemnify Business Manager from any liability with respect to such
repurchased asset and with respect to any property leased or subleased by
Business Manager; provided, however, that such Dentist shall not be obligated or
required to guarantee the obligation of PC or otherwise enhance or supplement
the creditworthiness of PC. The closing date for the repurchase shall be
determined by Business Manager but shall in no event occur later than one
hundred eighty (180) days from the date of the notice of termination. The
termination of this Management Services Agreement shall become effective upon
the closing of the sale of the assets under Section 7.4 or Section 7.5 (or, if
PC does not exercise its option under Section 7.5, on the date it notifies
Business Manager of such decision). PC shall be released from the restrictive
covenants provided for in Section 5.8 on the closing date. From and after any
termination, each party shall provide the other party with reasonable access to
the books and records then owned by it to permit such requesting party to
satisfy reporting and contractual obligations that may be required of it.
ARTICLE VIII. MISCELLANEOUS
Section 8.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which PC and its
Dentists perform Dental Services or other professional health care services. The
rendition of all Dental Services, including, but not limited to, the
prescription or administration of drugs shall be the sole responsibility of PC
and its Dentists, and Business Manager shall not interfere in any manner or to
any extent therewith. Nothing contained in this Management Services Agreement
shall be construed to permit Business Manager to engage in the practice of
dentistry, it being the sole intention of the parties hereto that the services
to be rendered to PC by Business Manager are solely for the purpose of providing
nondental management and administrative services to PC so as to enable PC to
devote its full time and energies to the professional conduct of its dental
practice and provision of Dental Services to its patients and not to
administration, or practice management.
Section 8.2 STATUS OF CONTRACTOR; AGENCY. It is expressly acknowledged
that the parties hereto are independent contractors and that this Management
Services Agreement is intended to constitute Business Manager as PC's agent.
Nothing herein shall be construed to create an
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employer/employee, partnership, or joint venture relationship, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this Management
Services Agreement or to permit Business Manager to take any action that would
constitute the practice of dentistry; provided always that the services to be
provided hereunder shall be furnished in a manner consistent with the standards
governing such services and the provisions of this Management Services
Agreement. Each party understands and agrees that (i) the other will not be
treated as an employee for federal tax purposes, (ii) neither will withhold on
behalf of the other any sums for income tax, unemployment insurance, social
security, or any other withholding pursuant to any law or requirement of any
governmental body or make available any of the benefits afforded to its
employees, (iii) all of such payments, withholdings, and benefits, if any, are
the sole responsibility of the party incurring the liability, and (iv) each will
indemnify and hold the other harmless from any and all loss or liability arising
with respect to such payments, withholdings, and benefits, if any.
Section 8.3 NOTICES. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
PC: CASTLE MID-SOUTH DENTAL CENTERS, P.C.
1010 Murphreesboro Road
Suite 196
Franklin, Tennessee 37064
Business Manager: CASTLE DENTAL CENTERS OF TENNESSEE, INC.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 8.4 GOVERNING LAW. This Management Services Agreement shall be
governed by the laws of the State of Tennessee applicable to agreements to be
performed wholly within the
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State. Tennessee law was chosen by the parties after negotiation to govern
interpretation of this Management Services Agreement because Davidson County,
Tennessee is, or is adjacent to, the seat of management for Business Manager.
The federal and State courts of Davidson County, Tennessee shall be the
exclusive venue for any litigation, special proceeding, or other proceeding
between the parties that may arise out of, or be brought in connection with or
by reason of, this Management Services Agreement.
Section 8.5 ASSIGNMENT. Except as may be herein specifically provided to
the contrary, this Management Services Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that PC may not
assign this Management Services Agreement without the prior written consent of
Business Manager, which consent may be withheld. The sale, transfer, pledge, or
assignment of any of the common shares held by any shareholder of PC or the
issuance by PC of common or other voting shares to any other person, or any
combination of such transactions within a period of one (1) year, such that the
existing shareholder in PC fails to maintain a majority of the voting interests
in PC shall be deemed an attempted assignment by PC, and shall be null and void
unless consented to in writing by Business Manager prior to any such transfer or
issuance. Any breach of this provision, whether or not void or voidable, shall
constitute a material breach of this Management Services Agreement, and in the
event of such breach, Business Manager may terminate this Management Services
Agreement upon twenty-four (24) hours notice to PC.
Section 8.6 ARBITRATION.
(a) GENERAL. The parties shall use good faith negotiation to resolve any
controversy, dispute or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of this Section
8.6.
(b) SCOPE. Unless otherwise specifically provided herein, the parties
hereto agree that any claim, controversy, dispute or disagreement between or
among any of the parties hereto arising out of or relating to this Management
Services Agreement (other than claims involving any noncompetition or
confidentiality covenant) shall be governed exclusively by the terms and
provisions of this Section 8.6; provided, however, that the terms and provisions
of this Section 8.6 shall not preclude any party hereto from seeking, or a court
of competent jurisdiction from granting, a temporary restraining order,
temporary injunction or other equitable relief for any breach of (i) any
noncompetition or confidentiality covenant herein or (ii) any duty, obligation,
covenant, representation or warranty, the breach of which may cause irreparable
harm or damage.
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(c) ARBITRATORS. In the event of any claim, controversy, dispute or
disagreement between the parties hereto arising out of or relating to this
Management Services Agreement, and in the further event the parties are unable
to resolve such claim, controversy, dispute or disagreement within thirty (30)
days after notice is first delivered pursuant to Section 8.3, the parties agree
to select arbitrators to hear and decide all such claims under this Section 8.6.
Each party shall select one arbitrator, The two arbitrators so chosen shall then
select a third arbitrator who is experienced in the matter or action that is
subject to such arbitration. If such matter or action involves health-care
issues, then the third arbitrator shall have such qualifications as would
satisfy the requirements of the National Health Lawyers Association Alternative
Dispute Resolution Service. Each of the arbitrators chosen shall be impartial
and independent of all parties hereto. If either of the parties fails to select
an arbitrator within twenty days after the end of such thirty-day period, or if
the arbitrators chosen fail to select a third arbitrator within twenty days,
then any party may in writing request the judge of the United States District
Court for the Middle District of Tennessee senior in term of service to appoint
the arbitrator or arbitrators and, subject to this Section 8.6, such arbitrators
shall hear all arbitration matters arising under this Section 8.6, and, in
default of such selection, may ask the American Arbitration Association.
(d) APPLICABLE RULES.
(i) Each arbitration hearing shall be held at a place in Nashville,
Tennessee acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association to the
extent such rules do not conflict with the terms hereof. The
decision of a majority of the arbitrators shall be reduced to
writing and shall be binding on the parties. Judgment upon the
award(s) rendered by a majority of the arbitrators may be
entered and execution had in any court of competent jurisdiction
or application may be made to such court for a judicial
acceptance of the award and an order of enforcement. The charges
and expenses of the arbitrators shall be shared equally by the
parties to the hearing.
(ii) The arbitration shall commence within thirty (30) days after the
arbitrators are selected in accordance with the provisions of
this Section 8.6. In fulfilling their duties with respect to the
matter in arbitration, the arbitrators may consider such matters
as, in the opinion of the arbitrators, are necessary or helpful
to make a proper valuation. The arbitrators may consult with and
engage disinterested third parties to advise the arbitrators.
The arbitrators shall not add any interest factor reflecting the
time value of money to the amount of any award granted under any
arbitration hereunder and shall not award any punitive damages.
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(iii) If any of the arbitrators selected hereunder should die, resign
or be unable to perform his or her duties hereunder, the
remaining arbitrators or such senior judge (or such judge's
successor) shall select a replacement arbitrator. The procedure
set forth in this Section 8.6 for selecting the arbitrators
shall be followed from time to time as necessary.
(iv) As to the resolution of any claim, controversy, dispute or
disagreement that under the terms hereof is made subject to
arbitration, no lawsuit based on such resolution shall be
instituted by either of the parties hereto, other than to compel
arbitration proceedings or enforce the award of a majority of
the arbitrators.
(v) All privileges under Tennessee and federal law, including
attorney-client and work- product privileges, shall be preserved
and protected to the same extent that such privileges would be
protected in a federal court proceeding applying Tennessee law.
Section 8.7 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 8.8 ENFORCEMENT. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 8.9 GENDER AND NUMBER. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 8.10 ADDITIONAL ASSURANCES. Except as may be herein specifically
provided to the contrary, the provisions of this Management Services Agreement
shall be self-operative and shall not require further agreement by the parties;
provided, however, at the request of either par ty, the other party shall
execute such additional instruments and take such additional acts as are
reasonable and as the requesting party may deem necessary to effectuate this
Management Services Agreement.
Section 8.11 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party,
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or either party must or may exercise discretion, and except where specifically
set forth to the contrary, the parties agree that such consent or approval shall
not be unreasonably withheld or delayed, and that such discretion shall be
reasonably exercised.
Section 8.12 FORCE MAJEURE. Neither party shall be liable or deemed to
be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military authority, acts of public
enemy, war, accidents, fires, explosions, earthquakes, floods, failure of
transportation, strikes or other work interruptions by either party's employees,
or any other sim ilar cause beyond the reasonable control of either party unless
such delay or failure in performance is expressly addressed elsewhere in this
Management Services Agreement.
Section 8.13 SEVERABILITY. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 8.14 DIVISIONS AND HEADINGS. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 8.15 AMENDMENTS AND MANAGEMENT SERVICES AGREEMENT EXECUTION.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of PC by its President, and on behalf of
Business Manager by any duly authorized officer thereof. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
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Section 8.16 ENTIRE MANAGEMENT SERVICES AGREEMENT. With respect to the
subject matter of this Management Services Agreement, this Management Services
Agreement supersedes all previous contracts and constitutes the entire agreement
between the parties. Neither party shall be entitled to benefits other than
those specified herein. No prior oral statements or contemporaneous negotiations
or understandings, except for the Budget, or prior written material not
specifically incorporated herein shall be of any force and effect, and no
changes in or additions to this Management Services Agreement shall be
recognized unless incorporated herein by amendment as provided herein, such
amendment(s) to become effective on the date stipulated in such amendment(s).
The parties specifically acknowledge that, in entering into and executing this
Management Services Agreement, except for the Budget, the parties rely solely
upon the representations and agreements contained in this Management Services
Agreement and no others.
IN WITNESS WHEREOF, PC and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
PC: CASTLE MID-SOUTH DENTAL CENTER, P.C.
By:________________________________
G. Powell Bilyeu
President
BUSINESS MANAGER: CASTLE DENTAL CENTERS OF TENNESSEE,
INC.
By:
Name:
Title:
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EXHIBIT 10.36
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of May
31, 1996 (the "Effective Date"), by and between Castle Dental Centers of
Tennessee, Inc., a Tennessee corporation (the "Company"), and G. Powell Bilyeu,
D.D.S. ("Employee").
RECITALS:
Prior to the date hereof, Employee was the owner of Mid-South Dental
Center, P.C., which along with the Company and the Employee is a party to that
certain Asset Purchase Agreement dated as of April 29, 1996 (the "Asset Purchase
Agreement"). As a condition to the consummation of the transactions contemplated
by the Asset Purchase Agreement and as an inducement for the Company and
Employee to perform their respective obligations under the Asset Purchase
Agreement, the Company and Employee have entered into this Agreement.
The parties agree as follows:
ARTICLE I
1.1 EMPLOYMENT.
(a) The Company agrees to, and hereby does, employ Employee, on the
terms and conditions set forth herein, to hold such offices, have such titles
and perform such duties as are assigned to him from time to time by the Board of
Directors of the Company.
(b) Employee's initial responsibility shall be to participate in the
development and implementation of the strategic plan of the Company for
specified markets in Tennessee, Kentucky, Alabama and portions of northwest
Georgia. Employee's role in the development of the strategic plan shall include,
but not be limited to, an analysis of markets selected by the Company and the
identification of acquisition candidates. Employee's role in the implementation
of the strategic plan, subject to the supervision of the Company's senior
management, shall include, but not be limited to, participating in the
acquisition of dental practices, development of new offices and responsibility
for the management of dental practices in accordance with a management services
agreement to which the Company and such practices are parties.
(c) The Company may reassign Employee from the duties described above
without breaching this Agreement; provided, however, that Employee shall not be
assigned duties inconsistent with his position as an executive of the Company,
and provided further, that no such reassignment shall justify a decrease in the
Base Salary (as herein defined) payable to Employee.
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(d) The duties Employee is to perform hereunder shall be conducted from
the Company's offices in the Nashville, Tennessee metropolitan area. Employee
acknowledges and agrees, however, that, in connection with his employment
hereunder, he may be required to travel to, and to perform his duties hereunder
on a temporary basis at, another place or places as the Board of Directors of
the Company shall designate or as the interests or business opportunities of the
Company may require from time to time. In the event that the duties to be
performed by Employee hereunder are required to be performed on a permanent
basis from a place or places other than the Nashville, Tennessee offices of the
Company, the Company shall be deemed to be in breach of this Agreement and
Employee may elect to terminate this Agreement.
(e) Employee shall devote his business time, efforts and abilities to
the business of the Company in a manner consistent with prior periods. Employee
shall use his reasonable best efforts to promote the interests of the Company.
ARTICLE II
2.1 SALARY. As compensation for his service during the term of this
Agreement (or until terminated pursuant to the provisions hereof), the Company
shall pay Employee a salary at the rate of $150,000 per annum (the "Base
Salary"), subject to annual review relative to increase, through and until the
Expiration Date, as herein defined, payable in accordance with the regular
payroll practices of the Company as in effect from time to time, and which
currently provide for payment on a bi-weekly basis. Such Base Salary shall be
subject to withholding for the prescribed federal and state income tax, social
security and other items as required by law, and for other items consistent with
the Company's policy with respect to health insurance and other benefit plans
for similarly situated employees.
2.2 DEFERRED COMPENSATION. Following the Expiration Date, for the three
year period commencing on the Expiration Date, Employee will be entitled to an
aggregate compensation for such period equal to three times the amount of the
Incentive Bonus Plan compensation paid or payable to Employee (computed in
accordance with Section 2.3), during the twelve month period immediately
preceding the Expiration Date (the "Deferred Compensation"). The Deferred
Compensation will be prorated over such three year term, will be paid in
accordance with the regular payroll practices of the Company in effect from time
to time, and will be subject to withholding for the prescribed federal and state
income tax, social security and other items as required by law, and for other
items consistent with the Company's policy with respect to health insurance and
other benefit plans for similarly situated employees.
2.3 INCENTIVE BONUS COMPENSATION. The Company hereby establishes the
Castle Dental Centers of Tennessee, Inc. Incentive Bonus Plan (the "Plan") which
provides for the Company to set aside for grant to the Employee, Philip Hamner
and David North an aggregate of
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ten percent (10%) of the pretax income of the Company in excess of
$[REDACTED] per year. Pre-tax income of the Company shall be computed in
accordance with generally accepted accounting principles, but shall exclude the
periodic change in unbilled patient receivables resulting from the recognition
of orthodontic revenues on the proportional performance method of accounting for
service contracts, and shall be attributable to the operations of the Company in
Kentucky, Alabama, Tennessee and portions of northwest Georgia, as set forth in
Schedule 2.3 hereto, computed without general overhead allocation or charge with
respect to the general and administrative expenses of Castle Dental Center,
Inc., a Delaware corporation ("Castle"), but taking into account direct costs
incurred by Castle on behalf of the Company, and including a deduction equal to
the cost of capital invested (exclusive of initial acquisition costs) in the
Company by Castle. For the purposes of this Agreement, Castle's cost of capital
shall be deemed to be the prime rate established from time to time by
NationsBank of Texas, N.A. plus two percent, until such time as Castle's
subordinated debt described on Schedule 2.3 hereto is paid in full, and
thereafter shall be the prime rate established from time to time by NationsBank
of Texas, N.A. plus one percent. The Employee is hereby granted the right to
participate in the Plan for each year prior to the Expiration Date. Employee,
Mr. Hamner and Mr. North (each, a "Participant") shall be paid 60%, 20% and 20%,
respectively, under the Plan. In the event a Participant shall cease to be
employed by the Company during the term of this Agreement, the amount payable to
such Participant under the Plan shall thereafter be paid pro rata to the
Participants remaining in the employ of the Company. The annual amount payable
under the Plan shall be determined as soon as practicable each year following
the availability of the Company's financial statements for the preceding year,
and shall be paid in cash or other readily available funds to the Participants
within ten days following such determination.
2.4 STOCK OPTIONS.
2.4.1 As a condition to Employee's obligations hereunder,
Employee and Castle shall enter into a Stock Option Agreement in usual and
customary form providing Employee the option to purchase an aggregate of 50,000
shares of Common Stock of Castle (the "Options"), pursuant to the Castle Dental
Centers, Inc. Omnibus Stock and Incentive Plan (the "Stock Option Plan"). The
Options will vest according to a five-year vesting schedule, with twenty percent
(20%) of such shares vesting on the first anniversary of the date hereof, and an
additional twenty percent (20%) vesting at the end of each twelve month period
of continuous employment with the Company thereafter, until full vesting of all
the Options is completed.
2.4.2 The exercise price of the Options will be $5.00 per share,
and shall be subject to the anti-dilution and other provisions contained in the
Stock Option Plan.
2.5 BENEFITS. During the terms of this Agreement, Employee also shall be
entitled to receive such benefits as are made available to other personnel of
the Company in comparable positions, with comparable service credit and with
comparable duties and responsibilities, which
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shall include, in the case of Employee, four weeks paid vacation each year
during the term of this Agreement, plus one week paid leave to the extent such
week is devoted to required continuing dental education. Such benefits, other
than paid vacation and leave, shall be subject to the terms of the applicable
plan documents, summary plan descriptions and/or employment policies and shall
be subject to modification, amendment or revocation in accordance with the terms
of such documents, policies and procedures.
2.6 REIMBURSEMENT OF EXPENSES. The Company shall reimburse all
reasonable travel and entertainment expenses incurred by Employee in connection
with the performance of his duties pursuant to this Agreement, consistent with
the Company's policies then in effect. Employee shall provide the Company with
written expense reports of his expenses in accordance with the usual customary
practice of the Company.
ARTICLE III
3.1 TERM. Upon the terms and subject to the conditions of this
Agreement, the Company hereby employs Employee and Employee accepts employment
with the Company for a term commencing on the date hereof and ending on May 30,
2001 (the "Expiration Date"), subject to the right of either party to terminate
this agreement as provided below.
3.2 DEATH; DISABILITY. This Agreement shall be automatically terminated
on the death of Employee or on the permanent disability of Employee if he is no
longer able, with reasonable accommodation, to perform the essential functions
of his position with the Company. In the event of Employee's disability, this
Agreement shall not terminate unless and until Employee has been unable to
perform the essential functions of his position hereunder for a period of three
(3) consecutive months as a result of the Employee's disability.
3.3 TERMINATION WITHOUT CAUSE. Either the Company or Employee may
terminate this Agreement at any time, without cause, by giving the other thirty
(30) days' written notice of termination.
3.4 TERMINATION WITH CAUSE. In addition to the Company's right to
terminate this Agreement without cause as provided in Section 3.3 hereof, the
Company may terminate this Agreement for "Cause." "Cause" means the termination
by the Company of Employee's employment for any of the following grounds:
(a) the commission of any act of fraud on the part of Employee
resulting or intending to result in personal gain or enrichment at the expense
of the Company;
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(b) misappropriation, embezzlement, theft or willful and material
damage of or to any asset of the Company or the use of the Company funds or
assets for any illegal purpose;
(c) a good faith determination by the Board of Directors of the
Company that Employee has violated this Agreement or committed an act of gross
negligence or willful misconduct (in the case of a breach, following notice
thereof to Employee by the Company and a thirty day period thereafter within
which Employee shall have the opportunity to cure such breach) that has or is
reasonably expected to have a material adverse effect on the business or affairs
of the Company;
(d) the commission of any felony on the part of Employee which,
in the sole discretion of the Board of Directors of the Company, materially and
adversely, directly or indirectly, affects the name or goodwill of the Company;
or
(e) the termination of the Management Services Agreement (the
"Management Agreement") by and between the Company and Castle Mid-South Dental
Center, P.C. ("New PC") during the period that Employee is the majority
shareholder of New PC pursuant to Section 7.2(a)(ii) of the Management
Agreement.
A notice of termination pursuant to this Section 3.4 shall be in writing
and shall state the alleged reason for termination. With respect to a
termination pursuant to Section 3.4 (a)-(d), within not less than five (5) nor
more than twenty (20) days after such notice, Employee shall be given the
opportunity to appear before the Board of Directors of the Company, or a
committee thereof, to rebut or dispute the alleged violation. If the Board of
Directors or committee determines, by vote of a majority of the directors other
than Employee (if Employee is then a director), that one or more grounds exist
for termination of Employee for Cause, the Company may immediately terminate
Employee's employment under this Section 3.4. The Company may elect, during the
pendency of such inquiry, to relieve Employee of his regular duties.
3.5 OTHER TERMINATION. This Agreement shall terminate automatically on
the termination of the Management Agreement pursuant to Section 7.2(d) thereof.
3.6 SEVERANCE PAY. In the event of termination, Employee shall be
entitled to compensation (the "Severance Pay") in accordance with the following:
(a) If Employee's employment is terminated by reason of a
disability, Employee shall be entitled to Severance Pay in an amount equal to
the amount of monthly Base Salary (at his then current Base Salary rate
excluding any increases that would have taken effect beyond the date of
termination and any bonus and noncash benefits) the Employee would have earned
for the three month period subsequent to the effective date of termination,
payable at such time or times as would
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have been paid to Employee had he remained employed by the Company. In addition,
for a three year period commencing on the date of termination, Employee shall be
entitled to a pro rata amount of Deferred Compensation, equal to the product of
(i) the amount of Incentive Bonus Plan compensation payable or paid to Employee
during the twelve months immediately preceding the date of such termination (the
"Bonus Amount"), times (ii) the product (the "Pro-Rata Period Amount") of three
times a fraction, the numerator of which is the total number of months in which
Employee shall have been employed under this Agreement, and the denominator of
which is sixty. Such Deferred Compensation shall be prorated and paid over a
three year term as if it were Deferred Compensation under Section 2.2.
(b) If (i) Employee voluntarily terminates his employment (other
than due to a breach of this Agreement by the Company), (ii) the Company
terminates this Agreement for Cause, (iii) if Employee's employment is
terminated by reason of his death, or (iv) this Agreement is terminated pursuant
to Section 3.5 hereof, Employee shall not be entitled to receive any additional
salary, bonus or benefits beyond those earned or accrued as of the effective
date of the termination of his employment; except that, in the case of
Employee's death or termination of this Agreement pursuant to Section 3.5
hereof, for a three year period commencing as of such termination, Employee or
Employee's estate, as the case may be, shall be entitled to a pro rata amount of
Deferred Compensation equal to the product of (i) the Bonus Amount, times (ii)
the Pro Rata Period Amount. Such Deferred Compensation shall be prorated and
paid over a three year term as if it were Deferred Compensation under Section
2.2.
(c) If Employee's employment hereunder is terminated prior to the
Expiration Date of this Agreement, and such termination is either (i) due to a
breach of this Agreement by the Company, or (ii) by the Company and not for
Cause, Employee shall be entitled to Severance Pay in an amount equal to the
amount of Base Salary that the Employee would have earned between the effective
date of termination through the Expiration Date, less applicable payroll
deductions (and any other deductions authorized in writing by the Employee),
payable at such time or times as would have been paid to Employee had he
remained employed by the Company through the Expiration Date; provided, however,
prior to the termination of this Agreement as the result of a breach hereof by
the Company, Employee shall give written notice of such breach and a thirty day
period within which to cure such breach. In addition, for a period of three
years commencing as of such termination, Employee shall be entitled to Deferred
Compensation equal to the product of (i) the Bonus Amount, times (ii) three.
Such Deferred Compensation shall be prorated and paid over a three year term as
if it were Deferred Compensation under Section 2.2. Further, the Options granted
to Employee pursuant to Section 2.4.1 hereof shall immediately and fully vest.
3.7 EFFECT OF TERMINATION ON AGREEMENT. Any termination of Employee's
employment shall not release either the Company or Employee from their
respective obligations
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under this Agreement that are required to be performed subsequent to the date of
such termination, including but not limited to those obligations set forth under
Articles III, IV, V and VI.
3.8 PAYMENTS TO ESTATE. If Employee should die before all amounts
payable to him pursuant to Section 3.6 have been paid, such unpaid amounts shall
be paid to the personal representative of Employee's estate.
ARTICLE IV
4.1 ADDITIONAL ACTS BY EMPLOYEE. Employee further agrees at the request
of the Company (but without additional compensation from the Company during his
employment by the Company) to execute any and all papers and (at the expense of
the Company) perform all lawful acts that the Company deems necessary to
consummate and make effective the transactions contemplated by the Asset
Purchase Agreement and related documents.
ARTICLE V
5.1 NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee
understands and agrees that his employment by the Company creates a relationship
of confidence and trust between himself and the Company with respect to
Confidential Information (as defined below). Employee recognizes that he will
have access to and knowledge of Confidential Information. Employee will not,
during or after the term of his employment by the Company, in whole or in part,
disclose such Confidential Information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall he
make use of any such Confidential Information for his own purposes or for the
purposes of others; provided, however, that nothing in this Article shall be
construed to prohibit the disclosure of such Confidential Information by the
Employee (i) to another officer, director employee or agent of the Company; (ii)
as is reasonably necessary for the performance of his duties and
responsibilities under this Agreement; or (iii) as otherwise required by law. If
Employee is required by law to disclose "Confidential Information," Employee
shall notify the Company's Board of Directors, in writing, of the nature of such
disclosure and the Confidential Information to be disclosed, as soon as is
possible and/or practical, and permit the Company the opportunity to contest or
limit such disclosure.
5.2 CONFIDENTIAL INFORMATION DEFINED. The term "Confidential
Information" shall mean and include any and all records, computer programs,
data, patent applications, trade secrets, customer lists, customer databases,
video programs and programming, proprietary information, technology, pricing
policies, financial information, methods of doing business, policy and/or
procedure manuals, training and recruiting procedures, accounting procedures,
the status and content of the Company's contracts with its customers, the
Company's business philosophy, and servicing methods and techniques at any time
used, developed, or investigated by the Company, before or during
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Employee's tenure of employment, or other information of any kind expressed or
recorded on any medium arising out of, concerning, or acquired in connection
with the research, development, commercialization and other activities of the
Company; but "Confidential Information" does not include information (i)
generally known or available in the industry, through no fault of Employee; or
(ii) available from a third party without violation of any duty of
confidentiality by Employee or others.
5.3 DELIVERY OF MATERIALS. Employee further agrees to deliver to the
Company at the termination of his employment, or at any other time upon request
by the Company, all correspondence, memoranda, notes, records (including
computer records and data), drawings, sketches, plans, customer lists, and other
documents, which are made, composed, or received by Employee, solely or jointly
with others, during the term of his employment and which are in Employee's
possession, custody, or control at such date and which are related in any manner
to the past, present or anticipated business of the Company.
ARTICLE VI
6.1 NONINTERFERENCE WITH EMPLOYMENT RELATIONSHIPS. During the term of
Employee's employment and during the twenty-four months following the
termination of the Employee's employment, Employee agrees not to solicit or
induce any employee of the Company or Mid-South Dental Centers, P.C. to
terminate his or her employment, accept employment with anyone else, or to
interfere in a similar manner with the business of the Company or Mid-South
Dental Centers, P.C.
6.2 NONSOLICITATION OF CUSTOMERS AND SUPPLIERS During the employment of
the Employee pursuant to this Agreement and during the twenty-four months
following the termination of the Employee's employment, Employee agrees not to
contact, communicate with or solicit any customer, supplier, vendor,
distributor, promoter, contractor or prospective customer of the Company or Mid-
South Dental Centers, P.C. for the purpose of engaging in the Same or Similar
Business (as defined below) as the Company within the Restricted Territory (as
defined below).
6.3 NONCOMPETITION. Employee recognizes that in connection with the
performance of the Employee's duties and obligations under this Agreement, the
Company will provide Employee with confidential, proprietary and trade secret
information, which is necessary to Employee's employment with the Company, and
which Employee has agreed to protect and maintain as confidential, proprietary
and trade secret information for the Company's benefit. To protect and maintain
the confidentiality of the information, Employee agrees that, during the
employment of the Employee pursuant to this Agreement, including the period
during which Employee is receiving Deferred Compensation or Severance Pay
hereunder, Employee shall not directly or indirectly engage in, manage, operate,
join, control, or participate in the ownership, management, operation, or
control of, or be employed or engaged or act as a consultant to in any manner
by, any business
-8-
competing in the Same or Similar Business as the Company or Mid-South Dental
Center, P.C. within a ten mile radius around the city limits of any city in the
States of Alabama, Kentucky, Tennessee or Georgia in which the Company is
operating or managing a location providing dental service as of the date of
Employee's employment hereunder (the "Restricted Territory").
6.4 SAME OR SIMILAR BUSINESS DEFINED. For purposes of this Article VI,
the "Same or Similar Business" as the Company or Mid-South Dental Centers, P.C.
shall be defined as any business that is engaged to a significant extent in the
provision of dental care and services, including but not limited to the practice
of general dentistry, orthodontics and all related dental care services, the
management of such services or practices, or the management of or consulting
with dental practice management companies or insurance companies.
6.5 REASONABLENESS OF RESTRICTIONS. Employee has carefully read and
considered the provisions of this Article VI and, having done so, agrees that
the restrictions set forth in such Article contain reasonable limitations as to
time, geographical area, scope of activity to be restrained, and do not impose a
greater restraint than is necessary to protect the goodwill or other legitimate
business interests of the Company. The Employee further understands and agrees
that, if at some later date, a court of competent jurisdiction determines that
the scope, duration or geographic area of any covenant set forth in this Article
is overbroad or unenforceable for any reason, these covenants shall be reformed
by the court and enforced to the maximum extent permissible under Tennessee law.
ARTICLE VII
7.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties and their heirs, legal representatives, successors and assigns. The
Company may assign its interest in this Agreement, and all covenants, conditions
and provisions hereunder shall inure to the benefit of and be enforceable by its
assignee or successor in interest. The rights and obligations of Employee under
this Agreement are personal to him, and no such rights, benefits or obligations
shall be assignable, except that his personal representatives and heirs may
enforce the obligations of the Company hereunder.
7.2 WAIVER OF BREACH. The waiver by any party to this Agreement of a
breach or violation of any provisions hereof shall not operate or be construed
to be a waiver of any subsequent breach hereof.
7.3 NOTICES. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing and given in person,
or shall be deemed given five (5) days after sent by certified mail, return
receipt requested, to the address as set forth below on the signature pages of
this Agreement. If any party hereto desires to amend its address hereunder, that
party shall send written notice of the new address to all other parties hereto.
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7.4 GOVERNING LAW. This Agreement shall be interpreted, construed and
governed in accordance with the laws of the State of Tennessee, without regard
to conflict of laws provision. This Agreement is performable in Williamson
County, Tennessee.
7.5 HEADINGS. The paragraph headings contained in this Agreement are for
convenience only, and shall in no manner be construed to be part of this
Agreement.
7.6 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same agreement. A fully executed copy of
this Agreement shall be delivered to each party hereto.
7.7 LEGAL CONSTRUCTION. In case anyone or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not effect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. In addition, such invalid, illegal or unenforceable
provision shall be modified to the minimum extent necessary to permit it to be
valid, legal and enforceable. For all purposes hereof "day" shall mean calendar
day and shall include weekends and holidays; provided, however, that if any
notice period terminates on a weekend or holiday, the person who is required to
deliver the notice shall have until the next business day to complete the notice
requirement.
7.8 AMENDMENT. No modification, amendment, addition to, or termination
of this Agreement, nor waiver of any of its provisions, shall be valid or
enforceable unless it is in writing and signed by all of the parties hereto.
7.9 PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole and
only Agreement of the parties hereto and supersedes any prior understanding or
written or oral agreements, correspondence or communications between the parties
respecting the subject matter hereof.
7.10 ARBITRATION. EXCEPT FOR THE REMEDY PROVIDED UNDER SECTION 7.11
BELOW, ANY CLAIM OR DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE
EMPLOYMENT OF EMPLOYEE BY THE COMPANY SHALL BE SUBMITTED TO FINAL AND BINDING
ARBITRATION IN NASHVILLE, TENNESSEE PURSUANT TO THE EMPLOYMENT DISPUTE
RESOLUTION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. THE PARTIES AGREE THAT
ANY PARTY REQUESTING ARBITRATION OF ANY DISPUTE UNDER THIS SECTION MUST GIVE
FORMAL WRITTEN NOTICE OF THE PARTY'S DEMAND FOR ARBITRATION ("ARBITRATION
NOTICE") WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER SUCH DISPUTE FIRST ARISES
AND FAILURE TO TIMELY COMMUNICATE ARBITRATION NOTICE SHALL
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CONSTITUTE A WAIVER OF SUCH DISPUTE. THE PARTIES FURTHER AGREE THAT EACH PARTY
MAY BE REPRESENTED BY COUNSEL IN ANY PROCEEDING UNDER THIS SECTION, AND THAT ALL
EXPENSES AND FEES INCURRED IN CONNECTION WITH ANY PROCEEDING UNDER THIS SECTION
SHALL BE PAID BY THE NON-PREVAILING PARTY (AS DETERMINED BY THE ARBITRATORS).
BOTH PARTIES AGREE THAT NOTHING IN THIS SECTION SHALL BE CONSTRUED TO REQUIRE
THE ARBITRATION OF ANY DISPUTE OR CLAIM (i) ARISING UNDER ARTICLES IV, V OR VI
OF THIS AGREEMENT; (ii) FOR UNEMPLOYMENT COMPENSATION BENEFITS; OR (iii) FOR
WORKERS' COMPENSATION BENEFITS. BY THEIR EXECUTION OF THIS AGREEMENT, EACH PARTY
TO THIS AGREEMENT CONSENTS, ON BEHALF OF HIMSELF OR ITSELF AND THEIR RESPECTIVE
SUCCESSORS, HEIRS AND ASSIGNS, TO SUCH BINDING ARBITRATION IN ACCORDANCE WITH
THE TERMS OF THIS SECTION.
7.11 REMEDIES. Employee agrees that the remedy at law for any breach of
any provision of Articles IV, V and VI will be inadequate and that the Company
will be entitled to injunctive and equitable relief for any such breach, in
addition to all other remedies permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement in Nashville, Tennessee as of the date first set forth above.
ARTICLE I.
DEFINITIONS............................................................1
1.1 Definitions.....................................................1
ARTICLE II.
THE TRANSACTION........................................................5
2.1 Purchase and Sale of Assets.....................................5
2.2 Excluded Assets.................................................6
2.3 Assumption of Obligations.......................................6
2.4 Nonassignable Contracts and Leases..............................6
2.5 Closing.........................................................7
ARTICLE III.
PAYMENT OF PURCHASE PRICE..............................................7
3.1 Amount; Allocation; Delivery....................................7
3.2 Purchase Price Adjustment.......................................8
3.3 Agency Relationship.............................................8
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE SHAREHOLDERS...................................................9
4.1 Representations and Warranties of Sellers and
the Shareholders................................................9
4.2 Existence and Good Standing.....................................9
4.3 Authorization and Validity of Agreement.........................9
4.4 Capital Stock...................................................9
4.5 Consents and Approvals; No Violations..........................10
4.6 Subsidiaries and Affiliates....................................10
4.7 Financial Statements; No Material Adverse Change...............10
4.8 Books and Records..............................................11
4.9 Title to Properties; Encumbrances; Condition...................11
4.10 Real Property..................................................11
4.11 Leases.........................................................11
4.12 Material Contracts.............................................11
4.13 Permits........................................................12
4.14 Litigation.....................................................12
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4.15 Taxes..........................................................12
4.16 Insurance......................................................13
4.17 Intellectual Properties........................................13
4.18 Compliance with Laws...........................................14
4.19 Employment Relations...........................................14
4.20 Employee Benefit Plans.........................................14
4.21 Environmental Laws and Regulations.............................14
4.22 Interests in Customers, Suppliers, Etc.........................15
4.23 Compensation of Employees......................................15
4.24 Payors.........................................................15
4.25 Accounts Receivable; Accounts Payable..........................15
4.26 Solvency.......................................................15
4.27 Disclosure.....................................................16
4.28 Investments....................................................16
4.29 Broker's or Finder's Fees......................................16
4.30 Copies of Documents............................................16
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND CASTLE DENTAL........................................16
5.1 Existence and Good Standing of Purchaser;
Power and Authority............................................16
5.2 No Violations..................................................16
5.3 Litigation.....................................................17
5.4 Compliance with Laws...........................................17
5.5 Broker's or Finder's Fees......................................17
5.6 Existence and Good Standing of Castle Dental;
Power and Authority............................................17
5.7 Financial Statements...........................................18
5.8 Litigation.....................................................18
ARTICLE VI.
CONDITIONS TO SELLERS' AND THE SHAREHOLDERS' OBLIGATIONS..............18
6.1 Truth of Representations and Warranties........................18
6.2 Performance of Agreements......................................19
6.3 No Litigation Threatened.......................................19
6.4 Consideration..................................................19
6.5 Governmental Approvals.........................................19
6.6 Proceedings....................................................19
6.7 Good Standing Certificates.....................................19
6.8 Due Diligence..................................................19
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ARTICLE VII.
CONDITIONS TO PURCHASER'S OBLIGATIONS.................................19
7.1 Truth of Representations and Warranties........................20
7.2 Performance of Agreements......................................20
7.3 Documents of Conveyance........................................20
7.4 No Litigation Threatened.......................................20
7.5 Governmental Approvals.........................................20
7.6 Consents.......................................................20
7.7 Legal Opinion..................................................20
7.8 Proceedings....................................................20
7.9 JHC............................................................20
7.10 Subordination Agreements.......................................21
7.11 Due Diligence..................................................21
7.12 Sellers Name Change............................................21
7.13 Termination of Agreements......................................21
7.14 Good Standing Certificates.....................................21
7.15 Releases of Liens..............................................21
7.16 Noncompetition Agreement.......................................21
7.17 License Agreement..............................................21
ARTICLE VIII.
COVENANTS OF SELLERS AND THE SHAREHOLDERS.............................22
8.1 Cooperation by Sellers.........................................22
8.2 Conduct of Business............................................22
8.3 Exclusive Dealing..............................................22
8.4 Review of the Assets...........................................22
8.5 Further Assurances.............................................23
8.6 Accounts Payable; Accounts Receivable; Management..............23
ARTICLE IX.
COVENANTS OF PURCHASER................................................23
9.1 Cooperation by Purchaser.......................................23
9.2 Books and Records; Personnel...................................23
9.3 Further Assurances.............................................24
9.4 Due Diligence Investigation....................................24
ARTICLE X.
TERMINATION...........................................................24
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10.1 Termination....................................................24
10.2 Effect on Obligations..........................................25
ARTICLE XI.
SURVIVAL AND INDEMNIFICATION..........................................25
11.1 Indemnification of Sellers.....................................25
11.2 Indemnification of the Purchaser...............................26
11.3 Demands........................................................26
11.4 Right to Contest and Defend....................................26
11.5 Cooperation....................................................27
11.6 Right to Participate...........................................27
11.7 Payment of Damages.............................................27
ARTICLE XII.
MISCELLANEOUS.........................................................27
12.1 Entire Agreement...............................................27
12.2 Successors and Assigns.........................................28
12.3 Counterparts...................................................28
12.4 Headings.......................................................28
12.5 Modification and Waiver........................................28
12.6 No Third-Party Beneficiary Rights..............................28
12.7 Sales and Transfer Taxes.......................................28
12.8 Expenses.......................................................28
12.9 Notice.........................................................28
12.10 Governing Law..................................................29
12.11 Confidentiality; Publicity.....................................29
12.12 Consent to Jurisdiction........................................30
12.13 Severability...................................................30
12.14 Enforcement....................................................30
SCHEDULES
Schedule 2.2(b) Excluded Contracts
Schedule 2.2(e) Excluded Assets
Schedule 2.3 Assumed Obligations
Schedule 3.1 Allocation of Purchase Price
Schedule 4.5 Consents
Schedule 4.6 Asset Owned by Third Parties which are Used
in the Business
Schedule 4.7 Material Adverse Change
-iv-
Schedule 4.9 Encumbrances
Schedule 4.10 Real Property
Schedule 4.11 Leased Personal Property
Schedule 4.12 Material Contracts and Proposals
Schedule 4.13 Permits
Schedule 4.14 Litigation
Schedule 4.15 Taxes
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.21 Environmental Matters
Schedule 4.23 Employee Compensation
Schedule 4.25 Accounts Receivable
Schedule 5.7 Castle Dental Financial Statements
Schedule 7.13 Agreements to be Terminated
EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Legal Opinion
Exhibit C-1 Subordination Agreement - NationsBank of Texas, N.A.
Exhibit C-2 Subordination Agreement - Senior Subordinated Notes
Exhibit D Noncompetition Agreement
Exhibit E License Agreement
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ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of August 9, 1996, by and among Castle
Dental Centers of Texas, Inc., a Texas corporation ("Purchaser"), Consolidated
Industries, Inc., a Texas corporation ("Consolidated"), S. A. Dental Services,
P.C., a Texas professional corporation, C.A. Dental Services, P.C., a Texas
professional corporation, S.C.A. Dental Services, P.C., a Texas professional
corporation, and Austin Periodontist Associates, Inc., a Texas professional
corporation (collectively, the "Dental Centers"), and Joseph A. Bonola, D.D.S.,
the sole shareholder of each of the Dental Centers and a shareholder of
Consolidated, and Kristen Bonola, a shareholder of Consolidated. Joseph A.
Bonola and Kristen Bonola are referred to herein collectively as the
"Shareholders," and Consolidated and the Dental Centers are referred to herein
collectively as the "Sellers."
WITNESSETH:
WHEREAS, Sellers wish to sell, and Purchaser wishes to purchase,
substantially all of the property, assets and business of the Dental Centers and
certain assets of Consolidated, all upon the terms and subject to the conditions
set forth below;
NOW THEREFORE, for the mutual covenants and other consideration
described herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
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 the Dental
Centers.
"ACCOUNTS PAYABLE": the current payables of the Dental Centers to trade
account and other creditors that are not more than thirty (30) days old as of
August 1, 1996.
"AFFILIATE": with respect to any Person, any other Person directly or
indirectly controlling (including, but not limited to, all directors and
officers of such Person), controlled by, or under direct or indirect common
control with such Person. For purposes of Section 11.1 of this Agreement, the
term "Affiliates" shall include the individuals who have signed lease agreements
as tenant or guarantor on behalf of the Dental Centers, which are being assumed
by Purchaser hereunder.
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"AGREEMENT": this Asset Purchase Agreement, as amended from time to time
as provided herein.
"ASSETS": as defined in Section 2.1 hereof.
"ASSIGNED CONTRACTS": as defined in Section 2.3 hereof.
"ASSUMED OBLIGATIONS": as defined in Section 2.3 hereof.
"BALANCE SHEET DATE": as defined in Section 3.2 hereof.
"BASE DATE NET ASSET VALUE": as defined in Section 3.2 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
any books, records, files and other data of Sellers which relate exclusively to
organizational and corporate governance proceedings of Sellers.
"BUSINESS": the practice management of dentistry, including orthodontics
and periodontics and all other management and related activities currently
conducted by Sellers related to the Business.
"CLOSING": as defined in Section 2.5 hereof.
"CLOSING DATE": as defined in Section 2.5 hereof.
"CLOSING DATE BALANCE SHEET": as defined in Section 3.2 hereof.
"CLOSING DATE NET ASSET VALUE": as defined in Section 3.2 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.
"CONSOLIDATED": as defined in the preamble of this Agreement.
"DENTAL CENTERS": as defined in the preamble of this Agreement.
"ENCUMBRANCES": liens, security interests, options, rights of first
refusal, easements, mortgages, charges, debentures, indentures, deeds of trust,
rights-of-way, restrictions, agreements,
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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 that would have a Material Adverse
Effect.
"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, remedial 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
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.
"EXCLUDED CONTRACTS": as defined in Section 2.2(b) hereof.
"FINANCIAL STATEMENTS": as defined in Section 4.7 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
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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 an
governmental authority.
"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.
"JHC": Jack H. Castle, D.D.S., P.C., a Texas professional corporation.
"MATERIAL ADVERSE EFFECT": material adverse effect on the assets,
liabilities, Business, condition (financial or otherwise), results or operations
or prospects of Sellers, or its Affiliates.
"PERMITS": as defined in Section 4.13 hereof.
"PERMITTED ENCUMBRANCES": as defined in Section 4.9 hereof.
"PERSON": any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other department or agency
thereof or other entity.
"PLANS": as defined in Section 4.20 hereof.
"PRE-CLOSING PERIODS": as defined in Section 4.15(a) hereof.
"PRICE ALLOCATION": as defined in Section 3.1 hereof.
"PURCHASE PRICE": as defined in Section 3.1 hereof.
"PURCHASER": as defined in the preamble of this Agreement.
"RETURNS": as defined in Section 4.15(a) hereof.
"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.
"SELLERS": as defined in the preamble of this Agreement.
"SELLERS' PROPERTY": any real property and improvements thereon
presently owned, leased, operated or occupied by Sellers.
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"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.
"TRANSFER DATE": August 1, 1996.
ARTICLE II.
THE TRANSACTION
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase from Sellers and the Shareholders,
and Sellers and the Shareholders agree to sell, convey, transfer, assign and
deliver, and cause to be sold, conveyed, transferred, assigned and delivered, to
Purchaser, on the Closing Date, against the receipt by Sellers and the
Shareholders of the consideration specified in Section 3.1 hereof, the Assets,
free and clear of any Encumbrances except Permitted Encumbrances. The term
"Assets" shall mean all of the rights, title and interests of Sellers and the
Shareholders in and to the assets used in or relating to the conduct of the
Business on 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. The Assets shall include
but are not limited to the following categories of assets:
(a) all title to, interest in or rights with respect to real
property, including leasehold interests, described in Schedule 4.10 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 and used or held for use in the conduct of the
Business;
(c) contracts, documents, instruments, insurance and indemnity
policies and general intangibles of Sellers, other than the Excluded Contracts;
(d) Accounts Receivable as of August 1, 1996;
(e) all licenses, permits, registrations and authorizations,
proprietary information, methods, know-how, designs, processes, procedures,
goodwill and all rights to other Intellectual Property used in the Business;
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(f) Books and Records;
(g) any rights pertaining to any counterclaims, set-offs or
defenses it may have with respect to any Assumed Obligations;
(h) all deposits, advance payments, prepaid claims, prepaid
taxes, prepaid insurance premiums and other prepaid expense items; and
(i) third-party indemnities, policies of insurance identified by
Purchaser, fidelity, surety or similar bonds and the coverages afforded thereby
relating to the Assets.
2.2 EXCLUDED ASSETS. The Assets shall not include any of the following
(the "Excluded Assets"):
(a) cash, cash equivalents, securities, letters of credit naming
Sellers as account party, certificates of deposit, notes, drafts, checks and
similar instruments;
(b) each dentist employment contract, managed care contract,
insurance or third party reimbursement agreement or other contract set forth on
Schedule 2.2(b) (the "Excluded Contracts");
(c) tax refunds related to the Business or the Assets received or
receivable by Sellers or the Shareholders relating to taxes paid by Sellers or
the Shareholders for all periods prior to the Closing Date;
(d) minute books and governance documents of Sellers; and
(e) any Asset listed on Schedule 2.2(e).
2.3 ASSUMPTION OF OBLIGATIONS. Upon the sale of the Assets by Sellers,
Purchaser 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
Sellers in respect of (a) the licenses, leases, permits, contracts, notes and
other debts set forth in Schedule 2.3 (the "Assigned Contracts") which are being
assigned to Purchaser hereunder, and (b) the Accounts Payable (collectively,
"Assumed Obligations"). Notwithstanding anything contained herein to the
contrary, Purchaser does not assume, and hereby expressly disclaims
responsibility for, any obligation or liability of Sellers or the Shareholders
not described on Schedule 2.3.
2.4 NONASSIGNABLE CONTRACTS AND LEASES. In the case of any 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, Sellers and the
Shareholders agree to use their best efforts to obtain, or cause to be obtained,
prior to the Closing Date, any written consents necessary to convey to Purchaser
the
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benefit thereof. Purchaser shall cooperate with Sellers and the Shareholders, 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 Sellers and the Shareholders are unable to obtain such necessary
written consents for the remaining term of such Assigned Contract, Purchaser
shall act as such Sellers' and the Shareholders' agent in the performance of all
obligations and liabilities under such Assigned Contract and such Sellers and
the Shareholders shall act as Purchaser's agents in the receipt of any benefits,
rights or interests which inure to such Sellers or the Shareholders under such
Assigned Contract.
2.5 CLOSING. Subject to the satisfaction of the conditions to closing
set forth herein, the closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Bracewell & Patterson, L.L.P., 711
Louisiana, Suite 2900, Houston, Texas 77002, on or before July ___, 1996, or
such other place, date and time as may be mutually agreed upon by the parties.
Such time and date are referred to herein as the "Closing Date."
ARTICLE III.
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY. Sellers and the Shareholders agree and
direct Purchaser to pay the Purchase Price (as defined below) to Joseph A.
Bonola. At the Closing, Purchaser shall pay to Joseph A. Bonola the following
(the "Purchase Price"):
(a) $2,225,000 in cash on the Closing Date, which shall be paid
by wire transfer of immediately available funds to an account or accounts of
Sellers identified by Sellers; and
(b) a five-year subordinated promissory note of Castle Dental
payable to Joseph A. Bonola in the original principal amount of $1,000,000
payable in equal quarterly installments of principal and interest at the rate of
10% per annum substantially in the form of Exhibit A attached hereto.
Purchaser and Sellers hereby agree to allocate the Purchase Price in
accordance with Section 1060 of the Code among the Assets in accordance with
Schedule 3.1 attached hereto (the "Price Allocation"). The parties hereby
undertake and agree to file timely any information that may be required to be
filed pursuant to regulations promulgated under Section 1060(b) of the Code. The
parties further agree that they will report the federal, state, municipal,
foreign and local and other tax consequences of the purchase and sale hereunder
in a manner consistent with the Price Allocation, as so adjusted, and that they
will not take any position inconsistent therewith.
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3.2 PURCHASE PRICE ADJUSTMENT.
(a) Each of the Sellers previously has delivered to Purchaser an
unaudited balance sheet (the "Base Date Balance Sheet") as of March 31, 1996
(the "Balance Sheet Date"), (the book value of the Assets included in such
balance sheet less the book value of the Assumed Obligations included in such
balance sheet is hereinafter referred to as the "Base Date Net Asset Value").
(b) Within 45 days following the Transfer Date, each of the
Sellers shall prepare and deliver to Purchaser a balance sheet as of the
Transfer Date (the "Closing Date Balance Sheet"), together with a calculation of
the book value of the Assets and Assumed Obligations determined on the same
basis as the March 31, 1996, balance sheet (such book value of such Assets less
such book value of such Assumed Obligations is hereinafter referred to as the
"Closing Date Net Asset Value"). Purchaser and its representatives shall have
the right to review all work papers and procedures used to prepare the Base Date
Balance Sheet and the Closing Date Balance Sheet and the calculation of the Base
Date Net Asset Value and the Closing Date Net Asset Value, and shall have the
right to perform any other reasonable procedures necessary to verify the
accuracy thereof. Unless Purchaser, within 20 days after delivery to Purchaser
of the Closing Date Balance Sheet, notifies Sellers in writing that it objects
to the Base Date Balance Sheet or the Closing Date Balance Sheet or the
calculation of the Base Date Net Asset Value or the Closing Date Net Asset
Value, and specifies the basis for such objection, the Base Date Balance Sheet
and the Closing Date Balance Sheet and the calculation of the Base Date Net
Asset Value and the Closing Date Net Asset Value shall become final and binding
upon the parties for purposes of this Agreement. If Purchaser and Sellers are
unable to resolve any objections within 10 days after any such notification has
been given, the dispute shall be submitted to Coopers & Lybrand, L.L.P. (or
another nationally recognized public accounting firm mutually agreed upon by
Purchaser and Sellers). Such accounting firm shall make a final and binding
determination as to the matter or matters in dispute. Purchaser and Sellers
agree to cooperate with each other and with each other's authorized
representatives in order to resolve any and all matters in dispute as soon as
practicable.
(c) Within 10 days after the Closing Date Net Asset Value has
been finally determined, the difference, if any, between the Base Date Net Asset
Value and the Closing Date Net Asset Value shall be added to the principal
amount of the promissory note described in Section 3.1(b) (if the Closing Date
Net Asset Value exceeds the Base Date Net Asset Value) or deducted from the
principal amount of the promissory note described in Section 3.1(b) (if the Base
Date Net Asset Value exceeds the Closing Date Net Asset Value).
(d) Purchaser and Sellers, in the aggregate, each shall bear
one-half of the fees, costs and expenses of the accounting firm retained under
subsection (c) to resolve any dispute.
3.3 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
Sellers or the Shareholders receive any funds, documents or instruments which
constitute or are delivered in respect of Assets transferred to Purchaser
pursuant to this Agreement, Sellers and the Shareholders
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agree to hold such funds, documents or instruments in trust for Purchaser and as
Purchaser's agent therefor.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE SHAREHOLDERS
4.1 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE SHAREHOLDERS. As
an inducement to the Purchaser to enter into and perform this Agreement, Sellers
and the Shareholders, jointly and severally, hereby represent and warrant to
Purchaser as follows:
4.2 EXISTENCE AND GOOD STANDING. Each of the Sellers are a corporation
duly organized and validly existing under the laws of the State of Texas. Each
of the Sellers have the full corporate power and authority to own, lease and
operate its property and to carry on the Business as now being conducted and to
own or lease the Assets owned or leased by it. Each of the Sellers are duly
qualified or licensed to do business in each jurisdiction in which the character
or location of the properties owned or leased by it or the nature of the
business conducted by it makes such qualification necessary and the absence of
which would have a Material Adverse Effect.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. Sellers have full corporate
power and authority, and the Shareholders have full power and authority to
execute and deliver this Agreement, to perform their respective obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Sellers and the consummation by
them of the transactions contemplated hereby, have been duly authorized and
approved by the Board of Directors and the shareholders of Sellers, and no other
action on the part of Sellers or their shareholders is necessary to authorize
the execution, delivery and performance of this Agreement by Sellers and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Sellers and the Shareholders and is a valid and
binding obligation of Sellers and the Shareholders 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.
4.4 CAPITAL STOCK. The authorized capital stock of each of the Dental
Centers (except Austin Periodontist Associates, Inc.) consists solely of
1,000,000 shares of common stock, $.01 par value per share, of which 100,000
shares have been issued, and are outstanding, all of which are owned by Joseph
A. Bonola. The authorized capital stock of Austin Periodontist Associates, Inc.
consists solely of 10,000 shares of common stock, $1.50 par value per share, of
which 751 shares have been issued, and are outstanding, all of which are owned
by Joseph A. Bonola. The authorized capital stock of Consolidated consists
solely of 1,000,000 shares of common stock, $.01 par value per share, of which
100,000 shares have been issued, and are outstanding, all of which are owned
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by the Shareholders. All of the shares of common stock of Sellers have been duly
and validly authorized and issued, and are fully paid and nonassessable and free
of any liens or encumbrances.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
Schedule 4.5, the execution, delivery and performance of this Agreement by
Sellers and the Shareholders and the consummation by Sellers and the
Shareholders 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 Sellers; (b) to the knowledge of Sellers and the Shareholders,
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 Sellers or the Shareholders or by which any of Sellers' properties
or assets may be bound; (c) to the knowledge of Sellers and the Shareholders,
require any filing by Sellers or the Shareholders with, or require Sellers or
the Shareholders to obtain any permit, consent or approval of, or require
Sellers or the Shareholders to give any notice to, any governmental or
regulatory body, agency or authority other than as set forth in Schedule 4.5
attached hereto; or (d) result in a violation or breach by Sellers or the
Shareholders of, conflict with, constitute (with or without due notice or lapse
of time or both) a default by Sellers or the Shareholders (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 Sellers
or the Shareholders pursuant to, 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 Sellers or
the Shareholders are a party, or by which Sellers or any of their properties or
assets may be bound, except in the case of Subsections 4.5(b), (c) and (d), for
such violations, consents, breaches, defaults, terminations and accelerations
which in the aggregate would not have a Material Adverse Effect.
4.6 SUBSIDIARIES AND AFFILIATES. Sellers have no subsidiaries. Except as
set forth on Schedule 4.6, all of the Assets used in the Business are owned by
Sellers, and on consummation of the transactions contemplated hereby Purchaser
will have acquired all of the Assets used in the Business.
4.7 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. Each of the
Sellers have heretofore furnished Purchaser with its unaudited balance sheet as
of the Balance Sheet Date and the unaudited statements of operations and cash
flows for the year then ended (the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial position of
Sellers at the date thereof and the results of operations of Sellers and their
respective cash flows for the period indicated. Except as set forth in Schedule
4.7 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 Sellers.
Other than as (a) disclosed on the Financial Statements, (b) incurred
since the Balance Sheet Date in the ordinary course of business or (c) disclosed
on Schedule 4.7 or another Schedule hereto, Sellers have no direct or indirect
indebtedness, liability, claim, deficiency, obligation or
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responsibility, known or unknown, fixed or contingent, liquidated or
unliquidated, accrued, absolute or otherwise.
4.8 BOOKS AND RECORDS. Sellers have previously made available to
Purchaser true, correct and complete copies of their respective articles of
incorporation and bylaws, and all amendments to each. The minute books of
Sellers, as previously made available to Purchaser and its representatives,
contain accurate records in all material respects of the meetings of, the
shareholders and Board of Directors of Sellers.
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION. Except as set forth in
Schedules 4.9 or 4.10, 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, Sellers have
good and valid title to the Assets, in each case subject to no Encumbrances
except for (a) 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 Sellers in the operation of the Business,
(b) Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due or delinquent, (c) Encumbrances created by
Purchaser, and (d) Encumbrances relating to Assumed Obligations (liens of the
type described in clauses (a), (b), (c) and (d) above are hereinafter sometimes
referred to as "Permitted Encumbrances"). Sellers have heretofore furnished
Purchaser with a fixed asset ledger, which sets forth all fixed assets owned by
Sellers as of the Balance Sheet Date. Sellers and the Shareholders are not aware
of any defects in such assets that would have a Material Adverse Effect on the
ability of Purchaser to use such assets in the Business, ordinary wear and tear
excepted.
4.10 REAL PROPERTY. Schedule 4.10 identifies all interests in real
property used by Sellers in the Business, including leases, and includes the
name of the record title holder thereof. All of the buildings, structures and
appurtenances situated on the real property owned or leased by Sellers 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. No condemnation or
similar proceeding is pending or, to the best knowledge of Sellers and the
Shareholders, threatened, which would preclude or impair the use of any such
property, except where such proceeding would not have a Material Adverse Effect.
4.11 LEASES. Schedule 4.11 contains an accurate and complete list of all
personal property leases to which Sellers are a party (as lessee or lessor) and
a description of all such leases to which Sellers are a party as lessee. Each
lease set forth in Schedule 4.11 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.
4.12 MATERIAL CONTRACTS. Except as set forth in Schedule 4.12, the
Assigned Contracts do not include (a) any agreement, contract or commitment
relating to the employment of any person by
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Sellers, (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 $5,000, (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 Sellers to engage in
any line of business or to compete with any Person, (h) any agreement, contract
or commitment that involves $5,000 or more and is not cancelable without penalty
within 30 days, or (i) any other agreement, contract or commitment which would
have a Material Adverse Effect. Also set forth in Schedule 4.12 is a list of all
proposals submitted by Sellers to any third party that, if accepted by such
third party, would require disclosure on Schedule 4.12. Except where it would
not have a Material Adverse Effect, each contract or agreement set forth in
Schedule 4.12 is in full force and effect and 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.
4.13 PERMITS. Schedule 4.13 attached hereto lists all of the
governmental and other third party permits (including occupancy permits),
licenses, consents and authorizations ("Permits") required, to the knowledge of
Sellers and the Shareholders, in connection with the use, operation or ownership
of the Assets and the conduct of the Business as currently conducted. Sellers
hold all of the Permits listed on Schedule 4.13, and none is presently subject
to revocation or challenge. Except as set forth on Schedule, all such Permits
will be assigned to Purchaser, and none of such Permits will be subject to
revocation or termination as a result thereof.
4.14 LITIGATION. Except as set forth in Schedule 4.14, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of Sellers and
the Shareholders, threatened, against or affecting the properties, rights or
goodwill of Sellers, the Shareholders, or employees of Sellers, and Sellers and
the Shareholders do not know of any 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 Sellers and the Shareholders
threatened, seeking to prevent or challenge the transactions contemplated by
this Agreement. Purchaser will assume no liability whatsoever with respect to
any matter described on Schedule 4.14. Schedule 4.14 also describes any actions,
suits, disciplinary proceedings and investigations undertaken by the Dental
Board of the State of Texas, or other body regulating the activities of
dentists.
4.15 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
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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 Sellers (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, and all such Taxes showed to be due
and owing have been paid.
(b) Except as provided in Schedule 4.15 there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of Sellers or the Shareholders, threatened by any authority regarding
any Taxes relating to Sellers for any Pre-Closing Period.
(c) There are no liens or security interests on any of the assets
of Sellers that arose in connection with any failure (or alleged failure) to pay
any Taxes.
(d) Except as provided in Schedule 4.15, there are no agreements
for the extension or waiver of the time for assessment of any Taxes relating to
Sellers for any Pre-Closing Period and Sellers have not been requested to enter
into any such agreement or waiver.
(e) All Taxes relating to Sellers which Sellers are 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.
(f) Sellers are not now nor have ever been a party to any Tax
allocation or sharing agreement that could result in any liability to Purchaser.
4.16 INSURANCE. Set forth in Schedule 4.16 is a complete list of
insurance policies that Sellers maintain with respect to their Business and
properties that are included in the Assets or on their employees. Such policies
are in full force and effect and are free from any right of termination on the
part of the insurance carriers. In the judgment of Sellers, such policies, with
respect to their amounts and types of coverage, are adequate to insure against
risks to which Sellers and their property and assets are normally exposed in the
operation of the Business, subject to customary deductibles and policy limits.
4.17 INTELLECTUAL PROPERTIES. Schedule 4.17 sets forth all Intellectual
Property used in the Business and the owner of such Intellectual Property. The
operation of the Business as conducted by Sellers as of the Closing Date
requires no rights under Intellectual Property other than rights under
Intellectual Property listed on Schedule 4.17 and rights granted to Sellers
pursuant to agreements listed on Schedule 4.17. Except as otherwise set forth in
Schedule 4.17, Sellers own all right, title and interest in the Intellectual
Property listed in Schedule 4.17. No litigation is pending or, to the knowledge
of Sellers or the Shareholders, threatened wherein Sellers are accused of
infringing or otherwise violating the Intellectual Property rights of another,
or of breaching a contract conveying rights under Intellectual Property.
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4.18 COMPLIANCE WITH LAWS. To the knowledge of Sellers and the
Shareholders, Sellers are in compliance with all applicable laws, regulations,
orders, judgments and decrees applicable to their respective business, except
where any noncompliance would not have a Material Adverse Effect on the assets,
liabilities, business, condition (financial or otherwise), results of operation
or prospects of Sellers.
4.19 EMPLOYMENT RELATIONS. Sellers are not and have not engaged in any
unfair labor practice; to the knowledge of Sellers and the Shareholders, no
representation question exists respecting the employees of Sellers; Sellers have
not been notified of any grievance that might 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 Sellers.
4.20 EMPLOYEE BENEFIT PLANS. Sellers have delivered to Purchaser 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 Sellers and the Shareholders, been maintained in compliance with
its terms and the requirements of all applicable laws. None of the Plans are
subject to Title IV of ERISA or the minimum funding obligations of Section 412
of the Code, and Sellers and any entity required to be aggregated therewith
pursuant to Section 414(b) or (c) of the Code have no liability under Title IV
of ERISA or under Section 412(f) or 412(n) of the Code.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth in Schedule
4.21, and except where it would not have a Material Adverse Effect Hazardous
Materials have not been generated, used, treated or stored on, or transported to
or from, any Sellers Property by Sellers, its authorized agents or its
independent contractors (including suppliers) or any property adjoining any
Sellers Property, Hazardous Materials have not been Released or disposed of by
Sellers, its authorized agents or its independent contractors (including
suppliers) on any Sellers Property or any property adjoining any Sellers
Property except such Releases which do not violate any Environmental Laws,
Sellers are, to its and the Shareholders's knowledge, in compliance with all
applicable Environmental Laws and the requirements of any Permits issued under
such Environmental Laws with respect to any Sellers Property, there are no
pending or, to the knowledge of Sellers and the Shareholders, threatened
Environmental Claims against Sellers or any Sellers Property, (e) there are no
facts or circumstances, conditions, pre-existing conditions or occurrences on
any Sellers Property known to Sellers or the Shareholders that could reasonably
be anticipated (A) to form the basis of an Environmental Claim against Sellers
or any Sellers Property, or (B) to cause such Sellers Property to be subject to
any restrictions on the ownership, occupancy use or transferability of such
Sellers Property under any Environmental Law, (f) there are not now and there
never have been any underground storage tanks located on any Sellers Property,
and (g) Sellers have not in the ordinary course of business transported or
stored Hazardous Materials.
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4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except for relationships
with Affiliates, Sellers do not possess, directly or indirectly, any financial
interest in, and no Shareholder serves as a director, officer or employee of,
any corporation, firm, association or business organization which is a supplier,
customer, lessor, lessee, or competitor of Sellers.
4.23 COMPENSATION OF EMPLOYEES. Set forth in Schedule 4.23 is an
accurate and complete list showing the names of all persons whose compensation
from Sellers collectively for the fiscal year ended on the Balance Sheet Date
exceeded an annualized rate of $20,000, together with a statement of the full
amount paid or payable to each such person for services rendered during the
current fiscal year to date.
4.24 PAYORS. No significant payor has canceled or otherwise terminated
or, to the knowledge of Sellers or the Shareholders threatened to cancel or
otherwise terminate its relationship with Sellers within the last three years.
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. Except as set forth on
Schedule 4.25, the Accounts Receivable on the Closing Date Balance Sheet are
collectible in the ordinary course of business, net of the reserves established
with respect thereto. Except as set forth on Schedule 4.25, there has been no
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
Sellers or the allowances with respect thereto, or Accounts Payable by Sellers,
from that reflected in the Base Date Balance Sheet.
4.26 SOLVENCY. Sellers are not entering into this Agreement with actual
intent to hinder, delay or defraud creditors. Immediately prior to and
immediately subsequent to the Closing Date:
(a) the present fair salable value of the Assets of Sellers (on a
going concern basis) will exceed the liability of Sellers on its debts
(including its contingent obligations);
(b) Sellers have not incurred, nor does it intend to or believe
that it will incur, debts (including contingent obligations) beyond its ability
to pay such debts as such debts mature (taking into account the timing and
amounts of cash to be received from any source, and of amounts to be payable on
or in respect of debts); and the amount of cash available to Sellers after
taking into account all other anticipated uses of funds is anticipated to be
sufficient to pay all such amounts on or in respect of debts, when such amounts
are required to be paid; and
(c) Sellers will have sufficient capital with which to conduct
its business, and the property of Sellers do not constitute unreasonably small
capital with which to conduct its business.
For purposes of this Section 4.26 "debt" means any liability or a (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable secured, or unsecured; or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such a right
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to an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured.
4.27 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.
4.28 INVESTMENTS. The Assets do not include any capital stock or other
equity ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
4.29 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Sellers 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.
4.30 COPIES OF DOCUMENTS. Sellers have caused to be made available for
inspection and copying by Purchaser and its advisers, true, complete and correct
copies of all documents referred to in this Article IV or in any Schedule
attached hereto.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND CASTLE DENTAL
Purchaser represents and warrants to Sellers and the Shareholders as
follows:
5.1 EXISTENCE AND GOOD STANDING OF PURCHASER; POWER AND AUTHORITY.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser has full corporate power and
authority to make, execute, deliver and perform this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized and approved by all required corporate
action of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and is a valid and binding obligation of Purchaser enforceable against
Purchaser 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.
5.2 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser 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
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breach or default under any provision of the certificate of incorporation or
by-laws of Purchaser; (b) to the knowledge of Purchaser, 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 Purchaser or
by which any of its properties or assets may be bound; (c) to the knowledge of
Purchaser, require any filing by Purchaser with, or require Purchaser to obtain
any permit, consent or approval of, or require Purchaser to give any notice to,
any governmental or regulatory body, agency or authority or any third party; or
(d) result in a violation or breach by Purchaser of, conflict with, constitute
(with or without due notice or lapse of time or both) a default by Purchaser (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 Purchaser pursuant to, 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 Purchaser
is a party, or by which it or any of its properties or assets may be bound,
except in the case of Subsections 5.2(b), (c) and (d), for such violations,
consents, breaches, defaults, terminations and accelerations which in the
aggregate would not have a Material Adverse Effect.
5.3 LITIGATION. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Purchaser, threatened, against or affecting the
properties, rights or goodwill of Castle Dental, Purchaser or their employees,
except where such Proceeding would not have a material adverse effect on the
assets, liabilities, business, condition (financial or otherwise), results of
operations or prospects of Castle Dental or Purchaser, and Purchaser does not
know of any valid basis for any such action, proceeding or investigation. There
are no such Proceedings pending or, to the knowledge of Purchaser, threatened,
seeking to prevent or challenge the transactions contemplated by this Agreement.
5.4 COMPLIANCE WITH LAWS. To the knowledge of Purchaser, Purchaser are
in compliance with all applicable laws, regulations, orders, judgments and
decrees applicable to their respective business, except where any noncompliance
would not have a Material Adverse Effect on the assets, liabilities, business,
condition (financial or otherwise), results of operations or prospects of
Purchaser.
5.5 BROKER'S OR FINDER'S FEES. Except for a fee payable by or on behalf
of Purchaser to The GulfStar Group, no agent, broker, Person or firm acting on
behalf of Purchaser 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.
Castle Dental represents and warrants to Sellers and Shareholders as
follows:
5.6 EXISTENCE AND GOOD STANDING OF CASTLE DENTAL; POWER AND AUTHORITY.
Castle Dental is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Castle Dental has full
corporate power and authority to make, execute, deliver and
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perform this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. This Agreement has been duly authorized
and approved by all required corporate action of Castle Dental. This Agreement
has been duly executed and delivered by Castle Dental and is a valid and binding
obligation of Castle Dental enforceable against Castle Dental 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.
5.7 FINANCIAL STATEMENTS. The audited financial statements of Castle
Dental as of December 31, 1995, attached hereto as Schedule 5.7, are complete
and correct in all material respects and present fairly in accordance with
generally accepted accounting principles consistently applied, the financial
condition of Castle Dental and the results of operations of Castle Dental as of
the dates thereof and for the periods indicated. Since December 31, 1995, 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 Castle Dental.
5.8 LITIGATION. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Castle Dental, threatened, against or affecting the
properties, rights or goodwill of Castle Dental, Castle Dental or their
employees, except where such Proceeding would not have a material adverse effect
on the assets, liabilities, business, condition (financial or otherwise),
results of operations or prospects of Castle Dental, and Castle Dental does not
know of any valid basis for any such action, proceeding or investigation. There
are no such Proceedings pending or, to the knowledge of Castle Dental,
threatened, seeking to prevent or challenge the transactions contemplated by
this Agreement.
ARTICLE VI.
CONDITIONS TO SELLERS' AND THE SHAREHOLDERS' OBLIGATIONS
The obligations of Sellers and the Shareholders under this Agreement to
sell, or cause to be sold, the Assets and to consummate the other 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:
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser 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 Purchaser shall have delivered to Sellers on the Closing Date
a certificate of an authorized officer of Purchaser, dated the Closing Date, to
such effect.
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6.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Purchaser to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Purchaser shall have delivered to Sellers a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect.
6.3 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
Purchaser shall have delivered to Sellers a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect to the best knowledge of
such officer.
6.4 CONSIDERATION. Joseph A. Bonola, on behalf of Sellers, shall have
received the consideration described in Section 3.1.
6.5 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.
6.6 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 Sellers and the
Shareholders and their counsel, and Sellers and the Shareholders shall have
received copies of all such documents and other evidence as its or their counsel
may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
6.7 GOOD STANDING CERTIFICATES. Sellers shall have received good
standing and corporate existence certificates respecting Purchaser and Castle
Dental.
6.8 DUE DILIGENCE. Joseph A. Bonola shall have satisfactorily completed
his due diligence review of Castle Dental and Purchaser and shall not have
determined, in the exercise of his reasonable discretion, that the information
obtained from such review materially and adversely affects his appraisal of the
business, prospects and financial condition of Castle Dental.
ARTICLE VII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser under this Agreement to purchase the Assets
and to consummate the other transactions contemplated hereby shall be subject to
the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of all
of the following conditions:
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7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers and the Shareholders contained herein 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 Sellers and the Shareholders shall have delivered to
Purchaser on the Closing Date a certificate of an authorized representative of
Sellers and the Shareholders, dated the Closing Date, to such effect.
7.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Sellers to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Sellers shall have delivered to Purchaser a certificate of an authorized
representative of Sellers, dated the Closing Date, to such effect.
7.3 DOCUMENTS OF CONVEYANCE. Purchaser shall have received from Sellers
fully executed documents of conveyance, in form and substance satisfactory to
Purchaser and its counsel, vesting in Purchaser good and valid title to the
Assets, free and clear of any Encumbrances except Permitted Encumbrances.
7.4 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 Sellers
shall have delivered to Purchaser a certificate of an authorized representative
of Sellers, dated the Closing Date, to such effect to the best knowledge of such
officer.
7.5 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.
7.6 CONSENTS. Each of the consents referred to in Schedule 4.5 attached
hereto shall have been obtained, and Purchaser shall have also received the
consent of all other parties, including its senior lender, whose consent is
required to permit Purchaser to perform its obligations hereunder.
7.7 LEGAL OPINION. Sellers shall have delivered to Purchaser the opinion
of their counsel, substantially in the form of Exhibit B attached hereto.
7.8 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 Purchaser and its
counsel, and Purchaser 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.
7.9 JHC. Contemporaneous with the Closing, (a) JHC shall have entered
into employment agreements with Drs. Kuhlman, Kubo and Jones, (b) the employment
agreements
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between the other dentists presently employed by the Dental Centers shall have
been duly and validly assigned to JHC, (c) all reimbursement contracts with
third-party insurance companies, managed care companies and other reimbursement
sources shall have been duly and validly assigned to JHC, (d) all patient
records shall have been delivered to JHC and (e) all permits and other Assets as
are required for JHC to perform its obligations under the Management Services
Agreement by and between Purchaser and JHC shall have been duly and validly
assigned to JHC.
7.10 SUBORDINATION AGREEMENTS. Joseph A. Bonola shall have executed and
delivered Subordination Agreements with respect to the promissory note described
in Section 3.1(b), substantially in the forms of Exhibits C-1 and C-2 attached
hereto, which shall also be in form and substance satisfactory to the senior and
senior subordinated lenders of Castle Dental.
7.11 DUE DILIGENCE. Purchaser shall have satisfactorily completed a due
diligence review of Sellers 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 their appraisal of the business,
prospects and financial condition of Sellers or the Business.
7.12 SELLERS NAME CHANGE. Sellers shall have changed their corporate
name and/or any assumed names currently being used by them in connection with
the Business to a name not including the words "Horizon Dental Center."
7.13 TERMINATION OF AGREEMENTS. All agreements, contracts, commitments
and understandings between (a) the Dental Centers and the entities and persons
listed on Schedule 7.13 and (b) the Dental Centers and Consolidated shall be
terminated on or before the Closing Date.
7.14 GOOD STANDING CERTIFICATES. Purchaser shall have received good
standing and corporate existence certificates respecting Sellers.
7.15 RELEASES OF LIENS. Purchaser shall have received evidence
satisfactory to Purchaser and its counsel to the effect that all liens and other
encumbrances on the Assets being transferred to Purchaser (other than Permitted
Encumbrances) have been released.
7.16 NONCOMPETITION AGREEMENT. Joseph A. Bonola shall have entered into
a Noncompetition Agreement with Castle Dental, substantially in the form of
Exhibit D attached hereto.
7.17 LICENSE AGREEMENT. Joseph A. Bonola and Purchaser shall have
entered into a License Agreement, whereby Mr. Bonola grants the Purchaser the
right to use the name "Horizon Dental Center" substantially in the form of
Exhibit E attached hereto.
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ARTICLE VIII.
COVENANTS OF SELLERS AND THE SHAREHOLDERS
Sellers and the Shareholders hereby covenant and agree with Purchaser as
follows:
8.1 COOPERATION BY SELLERS. Sellers and the Shareholders shall use their
reasonable best efforts to cooperate with Purchaser to secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to enable Sellers and the Shareholders to effect
the transactions contemplated on its or his part hereby, and Sellers and the
Shareholders 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 it has
control to be satisfied. Sellers and the Shareholders further agree to deliver
to Purchaser 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 Sellers or the Shareholders contained herein being untrue in any
material respect.
8.2 CONDUCT OF BUSINESS. Except as Purchaser may otherwise consent to in
writing, between the date hereof and the Closing Date, Sellers shall, (a)
conduct the Business only in the ordinary course, (b) use its reasonable efforts
to keep available the services of its employees and maintain satisfactory
relationships with licensors, suppliers, lessors, distributors, customers,
clients and others, (c) maintain, consistent with past practice and good
business judgment, all the Assets in customary repair, order and condition,
ordinary wear and tear excepted, and insurance upon all the 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 the Books and Records in the usual, regular and ordinary manner, on a
basis consistent with past practice.
8.3 EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date or the termination of this Agreement, neither
Sellers nor the Shareholders 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 Purchaser, concerning any sale of the
Assets or any material part thereof or a similar transaction involving Sellers
or the Shareholders.
8.4 REVIEW OF THE ASSETS. Purchaser may, prior to the Closing Date,
through its representatives, review (a) the Assets, (b) the complete working
papers of Sellers' certified public accountants used in their preparation of
financial statements for Seller and (c) the Books and Records of Sellers and to
otherwise review the financial and legal condition of Sellers as Purchaser deems
necessary or advisable to familiarize itself with the Business and related
matters; such review shall not, however, affect the representations and
warranties made by Sellers and the Shareholders hereunder or the remedies of
Purchaser for breaches of those representations and warranties. Such review
shall occur only during normal business hours upon reasonable notice by
Purchaser. Sellers and the Shareholders shall permit Purchaser and its
representatives to have, after the execution of
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this Agreement, full access to employees of any Sellers who can furnish
Purchaser with financial and operating data and other information with respect
to the Business as Purchaser shall from time to time reasonably request.
8.5 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, Sellers and the Shareholders shall, at the reasonable request of
Purchaser and at Purchaser's expense, execute and deliver any further
instruments or documents and take all such further action as Purchaser may
reasonably request in order to consummate and make effective the sale of the
Assets and the assumption of the Assumed Obligations pursuant to this Agreement.
8.6 ACCOUNTS PAYABLE; ACCOUNTS RECEIVABLE; MANAGEMENT. The parties agree
as follows:
(a) From and after the Closing until July 31, 1996, the Dental
Centers shall continue to collect for their account any amounts received by them
in payment of accounts receivable of the Business. Following July 31, 1996, the
Dental Centers shall remit to Purchaser any amounts received by them in payment
of any accounts receivable of the Business.
(b) Purchaser shall assume all Accounts Payable as of August 1,
1996. From and after the Closing until July 31, 1996, Sellers agree to pay all
bills in the normal course of business. In addition, Sellers agree that payroll
respecting any periods in July will be paid by Sellers. With respect to payroll
for the dentists, the Dental Centers agree to pay the dentists' payroll due on
August 5, 1996, and Purchaser agrees to pay the dentists' payroll due on August
20, 1996.
ARTICLE IX.
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with Sellers and the Shareholders
as follows:
9.1 COOPERATION BY PURCHASER. Purchaser will use its reasonable best
efforts, and will cooperate with Sellers and the Shareholders, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable Purchaser to effect the
transactions contemplated on its part hereby, and Purchaser will otherwise use
its 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 it has control to be satisfied. Purchaser
further agrees to deliver to Sellers and the Shareholders 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 Purchaser contained
herein being untrue in any material respect.
9.2 BOOKS AND RECORDS; PERSONNEL. At all times after the Closing Date,
Purchaser shall allow Sellers and any agents of any Sellers, upon reasonable
advance notice to Purchaser, access to
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all Books and Records of Sellers which are transferred to Purchaser in
connection 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, during normal
working hours at Purchaser's principal places of business or at any location
where such Books and Records are stored, and Sellers shall have the right, at
Sellers' sole cost, to make copies of any such Books and Records.
9.3 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, Purchaser shall, at the request of Sellers or the Shareholders and
at such Sellers' expense, execute and deliver any further instruments or
documents and take all such further action as Sellers may reasonably request in
order to consummate and make effective the sale of the Assets and the assumption
of the Assumed Obligations pursuant to this Agreement.
9.4 DUE DILIGENCE INVESTIGATION. Prior to the Closing Date, Purchaser
and Castle Dental will make available to Sellers and the Shareholders and their
respective attorneys, accountants, consultants and agents, any and all
information regarding Purchaser and Castle Dental and their respective
businesses, operations, financial affairs and management, to the extent such
information is in the possession of Purchaser or Castle Dental or can be
obtained without unreasonable burden or expense, to permit Sellers and the
Shareholders to familiarize themselves with the business of the Purchaser and
Castle Dental and to make an informed investment judgment with respect to the
Common Stock of Castle Dental referred to in Section 3.1(c). The Purchaser and
Castle Dental agree to make available to Sellers and the Shareholders and their
respective attorneys, accountants, consultants and agents management members and
representatives of Purchaser and Castle Dental to respond to any questions or
inquiries from such parties regarding the Purchaser, Castle Dental and their
respective businesses, operations, financial affairs and management.
The due diligence investigation shall be conducted at the principal
offices of Castle Dental in Houston, Texas, at such time or times during normal
business hours as are reasonably requested by Sellers and the Shareholders.
Sellers and the Shareholders agree to complete such investigation on or before
July __, 1996.
All parties participating in the due diligence review shall be bound by
confidentiality agreements in form and substance satisfactory to the Purchaser
and Castle Dental.
ARTICLE X.
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of Purchaser, the Shareholders
and Sellers; or
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(b) by Purchaser, the Shareholders, or Sellers 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), if the Closing Date shall not have occurred on or before July 31,
1996; or
(c) by either Purchaser, on the one hand, or the Shareholders and
Sellers, 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), if the other party
shall (i) fail to perform its or their covenants or agreements contained herein
required to be performed prior to the Closing Date, or (ii) breach or have
breached any of its representations or warranties contained herein.
10.2 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 12.8 and 12.11 hereof and the obligations set
forth in the next succeeding sentence of this Section 10.2. Upon any termination
of this Agreement each party hereto will redeliver 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 XI.
SURVIVAL AND INDEMNIFICATION
11.1 INDEMNIFICATION OF SELLERS. The Purchaser, from and after the
Closing Date, shall indemnify and hold Sellers and the Shareholders and their
respective Affiliates (the "Sellers Indemnitees") harmless from and against any
and all damages, including 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 Sellers 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 the
Purchaser under this Agreement or any misrepresentation in or omission from any
list, schedule, certificate, or other instrument furnished or to be furnished to
Sellers by the Purchaser pursuant to the terms of this Agreement or (b) any
liability or obligation (other than those for which Purchaser are being
indemnified by Sellers and the Shareholders 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. Castle Dental, from and after the Closing Date, shall indemnify and hold
the Sellers Indemnitees harmless from and against any and all Damages suffered
by any Sellers Indemnitee as a result of, caused by, arising out of, or in any
way relating to any breach of warranty of Sections 5.6, 5.7 or 5.8 of this
Agreement.
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11.2 INDEMNIFICATION OF THE PURCHASER. Sellers and the Shareholders,
jointly and severally, shall indemnify and hold Purchaser and its Affiliates
(the "Purchaser Indemnitees") harmless from and against any and all Damages
suffered by any Purchaser 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 Sellers or the
Shareholders under this Agreement or any misrepresentation in or omission from
any list, schedule, certificate, or other instrument furnished or to be
furnished to the Purchaser by Sellers pursuant to the terms of this Agreement,
(b) any liability or obligation (other than those for which Sellers and the
Shareholders are being indemnified by Purchaser hereunder and other than those
relating to 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) the uncollectibility of any Account Receivable (net of applicable
reserve), after six months.
11.3 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 knowingly 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
knowing failure to notify the indemnifying party has actually resulted in
prejudice or damage to the indemnifying party.
11.4 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 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, 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
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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 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
unconditionally to accept in payment or compromise as of the time the
indemnifying party made its request therefor to the indemnified party.
11.5 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 expenses incurred by it in so
cooperating. At no cost or expense to the indemnified party, the indemnifying
party shall cooperate with the indemnified party and its counsel in contesting
any Claim.
11.6 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.
11.7 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.
ARTICLE XII.
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) set 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.
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12.2 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 this Agreement, including the representations
and warranties herein, may not be assigned by Sellers or the Shareholders
without the prior written consent of Purchaser or by Purchaser to any Person
without the prior written consent of Sellers.
12.3 COUNTERPARTS. This Agreement may be executed in two 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.
12.4 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.
12.5 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 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). No delay on the part of either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
12.6 NO THIRD-PARTY BENEFICIARY RIGHTS. This Agreement is not intended
to and shall not be construed to give any Person (other than the parties
signatory hereto 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.
12.7 SALES AND TRANSFER TAXES. Purchaser shall be responsible for and
pay all applicable sales, stamp, transfer, documentary, use, registration,
filing and other taxes and fees (including any penalties and interest) that may
become due or payable in connection with this Agreement and the transactions
contemplated hereby.
12.8 EXPENSES. Except as otherwise provided in this Agreement, Sellers,
the Shareholders and Purchaser shall each pay all costs and expenses incurred by
them or on their behalf in connection with this Agreement and the transactions
contemplated hereby.
12.9 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, addressed as follows:
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if to Purchaser, to:
Castle Dental Centers of Texas, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056-3021
with a copy to:
Mr. William D. Gutermuth
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2856
if to Sellers or the Shareholders to:
Dr. Joseph A. Bonola
1109 Smethwick Cove
Keller, Texas 76248
with a copy to:
Mr. David Wright
Heard & Wright
201 Main Street, Suite 1820
Ft. Worth, Texas 76102
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.
12.10 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.
12.11 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 Purchaser may disclose
such information as is required to comply with the requirements of its lenders
and investors and to comply with applicable securities laws. 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 obtaining
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the prior approval of the other party hereto to the contents and the manner of
presentation and publication thereof.
12.12 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 Houston, Texas, and, by execution and delivery of this
Agreement, each of the parties to this Agreement accepts for itself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
12.13 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.
12.14 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 the sale of the Assets or any other matter hereunder, this Agreement
shall be enforceable in a court of equity 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.
[The remainder of this page has been intentionally left blank.]
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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:
Name:
Title:
CASTLE DENTAL CENTERS OF TEXAS, INC.
By:
Name:
Title:
CONSOLIDATED INDUSTRIES, INC.
By:
Name:
Title:
S.A. DENTAL SERVICES, P.C.
By:
Name:
Title:
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S.C.A. DENTAL SERVICES, P.C.
By:
Name:
Title:
C.A. DENTAL SERVICES, P.C.
By:
Name:
Title:
AUSTIN PERIODONTIST ASSOCIATES, INC.
By:
Name:
Title:
Joseph A. Bonola, D.D.S.
Kristen Bonola
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EXHIBIT 10.38
PLAN AND AGREEMENT OF REORGANIZATION
Dated as of August 9, 1996
By and Among
Castle Dental Centers, Inc.,
Castle Dental Centers of Texas, Inc.,
as Purchaser,
N.A. Dental Services, P.C.,
EFW Dental Services, P.C.,
HDC Dental Services, P.C.,
Midcities Dental Services, P.C.,
NEFW Dental Services, P.C. and
West Ft. Worth Dental Services, P.C.,
as Sellers
and
Joseph A. Bonola, D.D.S.,
Kristen Bonola and Larry Charles Jackson
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS............................................................2
1.1 Definitions.....................................................2
ARTICLE II
THE TRANSACTION........................................................6
2.1 Purchase and Sale of Assets.....................................6
2.2 Excluded Assets.................................................7
2.3 Assumption of Obligations.......................................7
2.4 Nonassignable Contracts and Leases..............................7
2.5 Closing.........................................................8
ARTICLE III
PAYMENT OF PURCHASE PRICE..............................................8
3.1 Amount; Allocation; Delivery....................................8
3.2 Purchase Price Adjustment.......................................9
3.3 Agency Relationship............................................10
3.4 Escrow Arrangement.............................................11
3.5 No Action to Violate Tax-Free Reorganization...................12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE SHAREHOLDERS..................................................12
4.1 Representations and Warranties of Sellers and
the Shareholders...............................................12
4.2 Existence and Good Standing....................................12
4.3 Authorization and Validity of Agreement........................12
4.4 Capital Stock..................................................13
4.5 Consents and Approvals; No Violations..........................13
4.6 Subsidiaries and Affiliates....................................14
4.7 Financial Statements; No Material Adverse Change...............14
4.8 Books and Records..............................................14
4.9 Title to Properties; Encumbrances; Condition...................14
4.10 Real Property..................................................15
4.11 Leases.........................................................15
4.12 Material Contracts.............................................15
4.13 Permits........................................................16
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4.14 Litigation.....................................................16
4.15 Taxes..........................................................16
4.16 Insurance......................................................17
4.17 Intellectual Properties........................................17
4.18 Compliance with Laws...........................................17
4.19 Employment Relations...........................................17
4.20 Employee Benefit Plans.........................................18
4.21 Environmental Laws and Regulations.............................18
4.22 Interests in Customers, Suppliers, Etc.........................18
4.23 Compensation of Employees......................................18
4.24 Payors. .......................................................19
4.25 Accounts Receivable; Accounts Payable..........................19
4.26 Solvency.......................................................19
4.27 Disclosure.....................................................19
4.28 Investments....................................................20
4.29 Broker's or Finder's Fees......................................20
4.30 Copies of Documents............................................20
4.31 Investment Representations.....................................20
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND CASTLE DENTAL........................................21
5.1 Existence and Good Standing of Purchaser;
Power and Authority............................................21
5.2 No Violations..................................................21
5.3 Litigation.....................................................22
5.4 Compliance with Laws...........................................22
5.5 Broker's or Finder's Fees......................................22
5.6 Existence and Good Standing of Castle Dental;
Power and Authority............................................22
5.7 Financial Statements...........................................22
5.8 Capital Stock..................................................23
5.9 Litigation.....................................................23
ARTICLE VI
CONDITIONS TO SELLERS' AND THE SHAREHOLDERS' OBLIGATIONS..............23
6.1 Truth of Representations and Warranties........................23
6.2 Performance of Agreements......................................23
6.3 No Litigation Threatened.......................................24
6.4 Consideration..................................................24
6.5 Governmental Approvals.........................................24
6.6 Proceedings....................................................24
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6.7 Good Standing Certificates.....................................24
6.8 Registration Rights Agreement..................................24
6.9 Stockholders Agreement.........................................24
6.10 Due Diligence..................................................24
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS.................................24
7.1 Truth of Representations and Warranties........................25
7.2 Performance of Agreements......................................25
7.3 Documents of Conveyance........................................25
7.4 No Litigation Threatened.......................................25
7.5 Governmental Approvals.........................................25
7.6 Consents.......................................................25
7.7 Legal Opinion..................................................25
7.8 Proceedings....................................................25
7.9 JHC............................................................26
7.10 Stockholders Agreement.........................................26
7.11 Due Diligence..................................................26
7.12 Sellers Name Change............................................26
7.13 Termination of Agreements......................................26
7.14 Good Standing Certificates.....................................26
7.15 Releases of Liens..............................................26
7.16 Noncompetition Agreement.......................................26
7.17 License Agreement..............................................27
ARTICLE VIII
COVENANTS OF SELLERS AND THE SHAREHOLDERS.............................27
8.1 Cooperation by Sellers.........................................27
8.2 Conduct of Business............................................27
8.3 Exclusive Dealing..............................................27
8.4 Review of the Assets...........................................27
8.5 Further Assurances.............................................28
8.6 Accounts Payable; Accounts Receivable..........................28
ARTICLE IX
COVENANTS OF PURCHASER................................................28
9.1 Cooperation by Purchaser.......................................28
9.2 Books and Records; Personnel...................................29
9.3 Further Assurances.............................................29
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9.4 Due Diligence Investigation....................................29
ARTICLE X
TERMINATION...........................................................30
10.1 Termination....................................................30
10.2 Effect on Obligations..........................................30
ARTICLE XI
SURVIVAL AND INDEMNIFICATION..........................................30
11.1 Indemnification of Sellers.....................................30
11.2 Indemnification of the Purchaser...............................31
11.3 Demands........................................................31
11.4 Right to Contest and Defend....................................32
11.5 Cooperation....................................................32
11.6 Right to Participate...........................................32
11.7 Payment of Damages.............................................33
ARTICLE XII
MISCELLANEOUS.........................................................33
12.1 Entire Agreement...............................................33
12.2 Successors and Assigns.........................................33
12.3 Counterparts...................................................33
12.4 Headings.......................................................33
12.5 Modification and Waiver........................................33
12.6 No Third-Party Beneficiary Rights..............................34
12.7 Sales and Transfer Taxes.......................................34
12.8 Expenses.......................................................34
12.9 Notice.........................................................34
12.10 Governing Law..................................................35
12.11 Confidentiality; Publicity.....................................35
12.12 Consent to Jurisdiction........................................35
12.13 Severability...................................................35
12.14 Enforcement....................................................36
SCHEDULES
Schedule 2.2(b) Excluded Contracts
Schedule 2.2(e) Excluded Assets
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Schedule 2.3 Assumed Obligations
Schedule 4.5 Consents
Schedule 4.6 Asset Owned by Third Parties which are Used in the
Business
Schedule 4.7 Material Adverse Change
Schedule 4.9 Encumbrances
Schedule 4.10 Real Property
Schedule 4.11 Leased Personal Property
Schedule 4.12 Material Contracts and Proposals
Schedule 4.13 Permits
Schedule 4.14 Litigation
Schedule 4.15 Taxes
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.21 Environmental Matters
Schedule 4.23 Employee Compensation
Schedule 4.25 Accounts Receivable
Schedule 5.7 Castle Dental Financial Statements
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Legal Opinion
Exhibit C Stockholders Agreement
Exhibit D Registration Rights Agreement
Exhibit E Noncompetition Agreement
Exhibit F License Agreement
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PLAN AND AGREEMENT OF REORGANIZATION
PLAN AND AGREEMENT OF REORGANIZATION dated as of August 9, 1996, by and
among Castle Dental Centers, Inc., a Delaware corporation ("Castle Dental"),
Castle Dental Centers of Texas, Inc., a Texas corporation ("Purchaser"),
(hereinafter referred to as the "Agreement"), N.A. Dental Services, P.C., a
Texas professional corporation, EFW Dental Services, P.C., a Texas professional
corporation, HDC Dental Services, P.C., a Texas professional corporation,
Midcities Dental Services, P.C., a Texas professional corporation, NEFW Dental
Services, P.C., a Texas professional corporation and West Ft. Worth Dental
Services, P.C., a Texas professional corporation (collectively, the "Dental
Centers") and Joseph A. Bonola, D.D.S., Kristen Bonola and Larry Charles
Jackson. Joseph A. Bonola, Kristen Bonola and Larry Charles Jackson are referred
to herein collectively as the "Shareholders," and the Dental Centers are
referred to herein collectively as the "Sellers." Kristen Bonola is made a party
hereto solely for her community property interest in the Assets (as defined
below).
PLAN OF REORGANIZATION
This Agreement is intended to be a reorganization within the meaning of
Section 368(a)(1)(C) of the Internal Revenue Code of 1986, as amended.
Purchaser shall acquire substantially all of the property, assets and
business of the Dental Centers, in exchange solely for a part of the voting
common stock of Castle Dental, all upon the terms and subject to the conditions
set forth below.
As soon as practical after the Closing (as defined below), the Dental
Centers will completely liquidate and dissolve and will cause to be distributed
to their shareholders, on a pro rata basis based on stock ownership, all of
their right, title and interest in and to the shares of Castle Dental's voting
common stock (including the Escrowed Shares (as defined below)) to be received
in exchange for the surrender by such shareholders for cancellation of
certificates representing all of the Dental Centers' outstanding capital stock.
The foregoing shall be referred to as the Plan of Reorganization.
AGREEMENT
NOW, THEREFORE, for the mutual covenants and other consideration
described herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto approve and
adopt the foregoing Plan of Reorganization and covenant and agree as follows:
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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 the Dental
Centers.
"ACCOUNTS PAYABLE": the current payables of the Dental Centers to trade
account and other creditors that are not more than thirty (30) days old as of
August 1, 1996.
"AFFILIATE": with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person. For purposes of Section 11.1 of this Agreement, the term
"Affiliates" shall include the individuals who have signed lease agreements as
tenant or guarantor on behalf of the Dental Centers, which are being assumed by
Purchaser hereunder.
"AGREEMENT": this Plan and Agreement of Reorganization, as amended from
time to time as provided herein.
"ASSETS": as defined in Section 2.1 hereof.
"ASSIGNED CONTRACTS": as defined in Section 2.3 hereof.
"ASSUMED OBLIGATIONS": as defined in Section 2.3 hereof.
"BALANCE SHEET DATE": as defined in Section 3.2 hereof.
"BASE DATE NET ASSET VALUE": as defined in Section 3.2 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
any books, records, files and other data of Sellers which relate exclusively to
organizational and corporate governance proceedings of Sellers.
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"BUSINESS": the practice management of dentistry, including orthodontics
and periodontics and all other management and related activities currently
conducted by Sellers related to the Business.
"CASTLE DENTAL": as defined in the preamble to this Agreement.
"CLOSING": as defined in Section 2.5 hereof.
"CLOSING DATE": as defined in Section 2.5 hereof.
"CLOSING DATE BALANCE SHEET": as defined in Section 3.2 hereof.
"CLOSING DATE NET ASSET VALUE": as defined in Section 3.2 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.
"DENTAL CENTERS": as defined in the preamble of this Agreement.
"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 that would have a Material Adverse Effect.
"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, remedial 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
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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
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.
"EXCLUDED CONTRACTS": as defined in Section 2.2(b) hereof.
"FINANCIAL STATEMENTS": as defined in Section 4.7 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 an
governmental authority.
"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.
"JHC": Jack H. Castle, D.D.S., P.C., a Texas professional corporation.
"MATERIAL ADVERSE EFFECT": material adverse effect on the assets,
liabilities, Business, condition (financial or otherwise), results or operations
or prospects of Sellers, or its Affiliates.
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"PERMITS": as defined in Section 4.13 hereof.
"PERMITTED ENCUMBRANCES": as defined in Section 4.9 hereof.
"PERSON": any individual, partnership, joint venture, corporation,
trust, unincorporated organization, government or other department or agency
thereof or other entity.
"PLANS": as defined in Section 4.20 hereof.
"PRE-CLOSING PERIODS": as defined in Section 4.15(a) hereof.
"PRICE ALLOCATION": as defined in Section 3.1 hereof.
"PURCHASE PRICE": as defined in Section 3.1 hereof.
"PURCHASER": as defined in the preamble of this Agreement.
"RETURNS": as defined in Section 4.15(a) hereof.
"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.
"SELLERS": as defined in the preamble of this Agreement.
"SELLERS' PROPERTY": any real property and improvements thereon
presently owned, leased, operated or occupied by Sellers.
"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.
"TRANSFER DATE": August 1, 1996.
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ARTICLE II
THE TRANSACTION
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase from Sellers, and Sellers agree to
sell, convey, transfer, assign and deliver, and cause to be sold, conveyed,
transferred, assigned and delivered, to Purchaser, on the Closing Date, against
the receipt by Sellers of the consideration specified in Section 3.1 hereof, the
Assets, free and clear of any Encumbrances except Permitted Encumbrances. The
term "Assets" shall mean all of the rights, title and interests of Sellers and
the Shareholders in and to the assets used in or relating to the conduct of the
Business on 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. The Assets shall include
but are not limited to the following categories of assets:
(a) all title to, interest in or rights with respect to real
property, including leasehold interests, described in Schedule 4.10 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 and used or held for use in the conduct of the
Business;
(c) contracts, documents, instruments, insurance and indemnity
policies and general intangibles of Sellers, other than the Excluded Contracts;
(d) Accounts Receivable as of August 1, 1996;
(e) all licenses, permits, registrations and authorizations,
proprietary information, methods, know-how, designs, processes, procedures,
goodwill and all rights to other Intellectual Property used in the Business;
(f) Books and Records;
(g) any rights pertaining to any counterclaims, set-offs or
defenses it may have with respect to any Assumed Obligations;
(h) all deposits, advance payments, prepaid claims, prepaid
taxes, prepaid insurance premiums and other prepaid expense items; and
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(i) third-party indemnities, policies of insurance identified by
Purchaser, fidelity, surety or similar bonds and the coverages afforded thereby
relating to the Assets.
2.2 EXCLUDED ASSETS. The Assets shall not include any of the following
(the "Excluded Assets"):
(a) cash, cash equivalents, securities, letters of credit naming
Sellers as account party, certificates of deposit, notes, drafts, checks and
similar instruments;
(b) each dentist employment contract, managed care contract,
insurance or third-party reimbursement agreement or other contract set forth on
Schedule 2.2(b) (the "Excluded Contracts");
(c) tax refunds related to the Business or the Assets received or
receivable by Sellers or the Shareholders relating to taxes paid by Sellers or
the Shareholders for all periods prior to the Closing Date;
(d) minute books and governance documents of Sellers;
(e) any Asset listed on Schedule 2.2(e); and
(f) the consideration which Purchaser agrees to pay Sellers
hereunder.
2.3 ASSUMPTION OF OBLIGATIONS. Upon the sale of the Assets by Sellers,
Purchaser 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
Sellers in respect of (a) the licenses, leases, permits, contracts, notes and
other debts set forth in Schedule 2.3 (the "Assigned Contracts") which are being
assigned to Purchaser hereunder, and (b) the Accounts Payable (collectively,
"Assumed Obligations"). Notwithstanding anything contained herein to the
contrary, Purchaser does not assume, and hereby expressly disclaims
responsibility for, any obligation or liability of Sellers or the Shareholders
not described on Schedule 2.3.
2.4 NONASSIGNABLE CONTRACTS AND LEASES. In the case of any 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, Sellers and the
Shareholders agree to use their best efforts to obtain, or cause to be obtained,
prior to the Closing Date, any written consents necessary to convey to Purchaser
the benefit thereof. Purchaser shall cooperate with Sellers and the
Shareholders, 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 Sellers and the Shareholders are unable to obtain
such necessary written
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consents for the remaining term of such Assigned Contract, Purchaser shall act
as such Sellers' and the Shareholders' agent in the performance of all
obligations and liabilities under such Assigned Contract and such Sellers and
the Shareholders shall act as Purchaser's agents in the receipt of any benefits,
rights or interests which inure to such Sellers or the Shareholders under such
Assigned Contract.
2.5 CLOSING. Subject to the satisfaction of the conditions to closing
set forth herein, the closing (the "Closing") of the transactions contemplated
hereby shall be held at the offices of Bracewell & Patterson, L.L.P., 711
Louisiana, Suite 2900, Houston, Texas 77002, on or before July __, 1996, or such
other place, date and time as may be mutually agreed upon by the parties.
Such time and date are referred to herein as the "Closing Date."
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY.
(a) In addition to assuming the liabilities set forth in Schedule
2.3, the purchase price (the "Purchase Price") for the Assets shall consist of
three hundred thirty-seven thousand (337,000) shares of common stock of Castle
Dental, $.001 par value per share (the "Common Stock"). The shares of Common
Stock shall be distributed among the Sellers as follows:
Total Number of
Shares of Received at Escrowed
Dental Center Common Stock Closing Shares
------------- -------- -------- --------
EFW Dental Centers, P.C ................. 21,315 16,590 4,725
NEFW Dental Centers, P.C ................ 70,280 54,605 15,675
HDC Dental Services, P.C ................ 65,095 50,620 14,475
Midcities Dental Services, P.C .......... 71,432 55,532 15,900
West Ft. Worth Dental Services, P.C ..... 59,912 46,562 13,350
N.A. Dental Services, P.C ............... 48,966 38,091 10,875
-------- -------- --------
TOTALS .................................. 337,000 262,000 75,000
(b) Pursuant to Section 3.4 below, seventy-five (75,000) thousand
shares of Common Stock to be delivered by Purchaser, which will be beneficially
owned by Joseph A. Bonola, will be placed in escrow (the "Escrowed Shares"). The
Escrowed Shares are listed under the column heading "Escrowed Shares" in Section
3.1(a) above.
(c) Once the Dental Centers have liquidated and dissolved
pursuant to the Plan of Reorganization, the Shares of Common Stock shall be
distributed to the shareholders of the Dental Centers, on a pro rata basis based
on stock ownership, as follows:
Shares of Common Stock
to be Received
by Shareholders
----------------------------------
Joseph A. Larry
Joseph A. Bonola Charles
Dental Centers Bonola (In Escrow) Jackson
-------------- -------- -------- --------
EFW Dental Centers, P.C ................. 16,590 4,725 --
NEFW Dental Centers, P.C ................ 54,605 15,675 --
HDC Dental Services, P.C ................ 50,620 14,475 --
Midcities Dental Services, P.C .......... 50,532 15,900 5,000
West Ft. Worth Dental Services, P.C ..... 46,562 13,350 --
N.A. Dental Services, P.C ............... 38,091 10,875 --
-------- -------- --------
TOTALS .................................. 257,000 75,000 5,000
3.2 PURCHASE PRICE ADJUSTMENT.
(a) Each of the Sellers previously has delivered to Purchaser an
unaudited balance sheet (the "Base Date Balance Sheet") as of March 31, 1996
(the "Balance Sheet Date"), (the book value of the Assets included in such
balance sheet less the book value of the Assumed Obligations included in such
balance sheet is hereinafter referred to as the "Base Date Net Asset Value").
(b) Within 45 days following the Transfer Date, each of the
Sellers shall prepare and deliver to Purchaser a balance sheet as of the
Transfer Date (the "Closing Date Balance Sheet"), together with a calculation of
the book value of the Assets and Assumed Obligations determined on the same
basis as the March 31, 1996, balance sheet (such book value of such Assets less
such book
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value of such Assumed Obligations is hereinafter referred to as the "Closing
Date Net Asset Value"). Purchaser and its representatives shall have the right
to review all work papers and procedures used to prepare the Base Date Balance
Sheet and the Closing Date Balance Sheet and the calculation of the Base Date
Net Asset Value and the Closing Date Net Asset Value, and shall have the right
to perform any other reasonable procedures necessary to verify the accuracy
thereof. Unless Purchaser, within 20 days after delivery to Purchaser of the
Closing Date Balance Sheet, notifies Sellers in writing that it objects to the
Base Date Balance Sheet or the Closing Date Balance Sheet or the calculation of
the Base Date Net Asset Value or the Closing Date Net Asset Value, and specifies
the basis for such objection, the Base Date Balance Sheet and the Closing Date
Balance Sheet and the calculation of the Base Date Net Asset Value and the
Closing Date Net Asset Value shall become final and binding upon the parties for
purposes of this Agreement. If Purchaser and Sellers are unable to resolve any
objections within 10 days after any such notification has been given, the
dispute shall be submitted to Coopers & Lybrand, L.L.P. (or another nationally
recognized public accounting firm mutually agreed upon by Purchaser and
Sellers). Such accounting firm shall make a final and binding determination as
to the matter or matters in dispute. Purchaser and Sellers agree to cooperate
with each other and with each other's authorized representatives in order to
resolve any and all matters in dispute as soon as practicable.
(c) Within 10 days after the Closing Date Net Asset Value has
been finally determined, the difference, if any, between the Base Date Net Asset
Value and the Closing Date Net Asset Value shall be calculated. If the Closing
Date Net Asset Value exceeds the Base Date Net Asset Value, then Purchaser shall
promptly pay to Joseph A. Bonola (for the account of the Sellers) the amount by
which the Closing Date Net Asset Value exceeds the Base Date Net Asset Value. If
the Base Date Net Asset Value exceeds the Closing Date Net Asset Value, then the
Sellers shall promptly join with Purchaser in joint written instructions to the
Escrow Agent (as defined below) to disburse to Purchaser from the Escrowed
Shares (as defined below) the number of shares of Common Stock equal to the
amount by which the Base Date Net Asset Value exceeds the Closing Date Net Asset
Value. For this purpose, the Escrowed Shares will be valued at $9.00 per share.
If the number of Escrowed Shares is not sufficient for Sellers to satisfy its
obligations to Purchaser pursuant to the foregoing sentence, Sellers shall
promptly pay any shortfall to Purchaser in cash.
(d) Purchaser and Sellers, in the aggregate, each shall bear
one-half of the fees, costs and expenses of the accounting firm retained under
subsection (b) to resolve any dispute.
3.3 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
Sellers or the Shareholders receive any funds, documents or instruments which
constitute or are delivered in respect of Assets transferred to Purchaser
pursuant to this Agreement, Sellers and the Shareholders agree to hold such
funds, documents or instruments in trust for Purchaser and as Purchaser's agent
therefor.
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3.4 ESCROW ARRANGEMENT.
(a) At Closing, the Escrowed Shares will be placed in escrow with
NationsBank of Texas, N.A., as escrow agent (the "Escrow Agent") pursuant to an
escrow agreement in the form attached hereto as Exhibit A (the "Escrow
Agreement"). At the end of the first 12 months following the Closing Date,
Purchaser shall calculate (and deliver such calculation to Joseph A. Bonola) the
aggregate pretax income of the practices formerly conducted by EFW Dental
Services, P.C., NEFW Dental Services, P.C., HDC Dental Services, P.C., Midcities
Dental Services, P.C., and West Ft. Worth Dental Services, P.C. (the "Metroplex
Centers"), which shall be computed without general overhead allocation or charge
with respect to the general and administrative expenses of Castle Dental, but
taking into account direct costs incurred by Castle Dental on behalf of the
Metroplex Centers and including a deduction equal to the cost of capital
invested (exclusive of initial acquisition costs) in the Metroplex Centers by
Castle. If the aggregate pretax income as calculated aforesaid equals or exceeds
$520,000, all of the Escrowed Shares shall be released from escrow and delivered
to Joseph A. Bonola. For purposes of calculating "pretax income" pursuant to
this Section 3.4(a), pretax income shall equal gross collections (excluding
collections relating to orthodontics) LESS operating costs (which shall in no
event exceed 76.5% of such gross collection figure). Castle Dental's cost of
capital shall be deemed to be the prime rate established from time to time by
NationsBank of Texas, N.A. plus 4%, but in no event to be, less than 10%. If the
aggregate pretax income of the Metroplex Centers for such period is less than
$320,000, all of the Escrowed Shares shall be returned to Castle Dental for
cancellation. If the aggregate pretax income for such period is between $320,000
and $520,000, the percentage of the Escrowed Shares to be released from escrow
and delivered to Joseph A. Bonola shall be determined by dividing (i) the amount
by which the aggregate pretax income exceeds $320,000, by (ii) $200,000, and
multiplying the result by 75,000, with the balance of said 75,000 shares
returned to Castle Dental for cancellation.
(b) Unless Joseph A. Bonola, within 10 days after delivery to him
of the calculation of aggregate pretax income, notifies Purchaser in writing
that he objects to such calculation, and specifies the basis for such objection,
the calculation shall become final and binding upon the parties for purposes of
this Agreement. If Purchaser and Joseph A. Bonola are unable to resolve any
objections within 10 days after any such notification has been given, the
dispute shall be submitted to Coopers & Lybrand, L.L.P. (or another nationally
recognized public accounting firm mutually agreed upon by Purchaser and Joseph
A. Bonola). Such accounting firm shall make a final and binding determination as
to the matters in dispute. Purchaser and Joseph A. Bonola agree to cooperate
with each other and with each other's authorized representatives in order to
resolve any and all matters in dispute as soon as practicable. Purchaser and
Joseph A. Bonola each shall bear one-half of the costs of the fees, costs and
expenses of the accounting firm retained pursuant to this subsection (b) to
resolve any dispute.
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(c) If Castle shall effect a split of its outstanding Common
Stock or effect a reclassification or combination of its outstanding Common
Stock by way of recapitalization, merger, consolidation or otherwise, or declare
a stock dividend payable to its stockholders of record with respect to its
Common Stock on the date or dates prior to the Escrowed Shares being released
from escrow, the number of shares of Common Stock shall, in the case of a stock
dividend, be increased by the number of shares or, in the case of a stock split,
combination or reclassification, be changed into such number of shares of Common
Stock or other voting stock as Sellers would have been entitled to receive on
account of such dividend, stock split, reclassification or combination.
3.5 NO ACTION TO VIOLATE TAX-FREE REORGANIZATION. Castle Dental and its
Affiliates will not take any action at any time after the Closing Date which
would cause the transactions described herein not to qualify as reorganizations
within the meaning of Section 368 of the Code for failure to satisfy the
"continuity of business enterprise" requirement of Section 1.368-1(d) of the
Income Tax Regulations, the "substantially all the properties" requirement of
Section 368(a)(2)(D) of the Code, both as presently constituted, or if amended
so as to apply to the transactions, as amended at the time any such action might
be taken, or for any other reason. Castle Dental and its Affiliates will file
their federal income tax returns for all periods beginning after or including
the Closing Date on a basis consistent with the treatment of the transactions as
reorganizations within the meaning of Section 368 of the Code.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
AND THE SHAREHOLDERS
4.1 REPRESENTATIONS AND WARRANTIES OF SELLERS AND THE SHAREHOLDERS. As
an inducement to the Purchaser to enter into and perform this Agreement, Sellers
and the Shareholders, jointly and severally, hereby represent and warrant to
Purchaser as follows:
4.2 EXISTENCE AND GOOD STANDING. Each of the Sellers are a corporation
duly organized and validly existing under the laws of the State of Texas. Each
of the Sellers have the full corporate power and authority to own, lease and
operate its property and to carry on the Business as now being conducted and to
own or lease the Assets owned or leased by it. Each of the Sellers are duly
qualified or licensed to do business in each jurisdiction in which the character
or location of the properties owned or leased by it or the nature of the
business conducted by it makes such qualification necessary and the absence of
which would have a Material Adverse Effect.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. Sellers have full corporate
power and authority, and the Shareholders have full power and authority to
execute and deliver this Agreement, to perform their respective obligations
hereunder and to consummate the transactions contemplated
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hereby. The execution, delivery and performance of this Agreement by Sellers and
the consummation by them of the transactions contemplated hereby, have been duly
authorized and approved by the Board of Directors and the shareholders of
Sellers, and no other action on the part of Sellers or their shareholders is
necessary to authorize the execution, delivery and performance of this Agreement
by Sellers and the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Sellers and the Shareholders
and is a valid and binding obligation of Sellers and the Shareholders
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.
4.4 CAPITAL STOCK. Except for Midcities Dental Services, P.C., the
authorized capital stock of each of the Dental Centers consists solely of
1,000,000 shares of Common Stock, $.01 par value per share, of which 100,000
shares have been issued, and are outstanding, all of which are owned by Joseph
A. Bonola. The authorized capital stock of Midcities Dental Services, P.C.
consists solely of 1,000,000 shares of Common Stock, $.01 par value per share,
of which 100,000 shares have been issued, and are outstanding, all of which are
owned by Joseph A. Bonola and Larry Charles Jackson. All of the shares of Common
Stock of Sellers have been duly and validly authorized and issued, and are fully
paid and nonassessable and free of any liens or encumbrances.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth on
Schedule 4.5, the execution, delivery and performance of this Agreement by
Sellers and the Shareholders and the consummation by Sellers and the
Shareholders 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 Sellers; (b) to the knowledge of Sellers and the Shareholders,
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 Sellers or the Shareholders or by which any of Sellers' properties
or assets may be bound; (c) to the knowledge of Sellers and the Shareholders,
require any filing by Sellers or the Shareholders with, or require Sellers or
the Shareholders to obtain any permit, consent or approval of, or require
Sellers or the Shareholders to give any notice to, any governmental or
regulatory body, agency or authority other than as set forth in Schedule 4.5
attached hereto; or (d) result in a violation or breach by Sellers or the
Shareholders of, conflict with, constitute (with or without due notice or lapse
of time or both) a default by Sellers or the Shareholders (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 Sellers
or the Shareholders pursuant to, 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 Sellers or
the Shareholders are a party, or by which Sellers or any of their properties or
assets may be bound,
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except in the case of Subsections 4.5(b), (c) and (d), for such violations,
consents, breaches, defaults, terminations and accelerations which in the
aggregate would not have a Material Adverse Effect.
4.6 SUBSIDIARIES AND AFFILIATES. Sellers have no subsidiaries. Except as
set forth on Schedule 4.6, all of the Assets used in the Business are owned by
Sellers, and on consummation of the transactions contemplated hereby Purchaser
will have acquired all of the Assets used in the Business.
4.7 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. Each of the
Sellers have heretofore furnished Purchaser with its unaudited balance sheet as
of the Balance Sheet Date and the unaudited statements of operations and cash
flows for the year then ended (the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial position of
Sellers at the date thereof and the results of operations of Sellers and their
respective cash flows for the period indicated. Except as set forth in Schedule
4.7 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 Sellers.
Other than as (a) disclosed on the Financial Statements, (b) incurred
since the Balance Sheet Date in the ordinary course of business or (c) disclosed
on Schedule 4.7 or another Schedule hereto, Sellers have no direct or indirect
indebtedness, liability, claim, deficiency, obligation or responsibility, known
or unknown, fixed or contingent, liquidated or unliquidated, accrued, absolute
or otherwise.
4.8 BOOKS AND RECORDS. Sellers have previously made available to
Purchaser true, correct and complete copies of their respective articles of
incorporation and bylaws, and all amendments to each. The minute books of
Sellers, as previously made available to Purchaser and its representatives,
contain accurate records in all material respects of the meetings of, the
shareholders and Board of Directors of Sellers.
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION. Except as set forth in
Schedules 4.9 or 4.10, 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, Sellers have
good and valid title to the Assets, in each case subject to no Encumbrances
except for (a) 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 Sellers in the operation of the Business,
(b) Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due or delinquent, (c) Encumbrances created by
Purchaser, and (d) Encumbrances relating to Assumed Obligations (liens of the
type described in clauses (a), (b), (c) and (d) above are hereinafter sometimes
referred to as "Permitted Encumbrances"). Sellers have heretofore furnished
Purchaser
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with a fixed asset ledger, which sets forth all fixed assets owned by Sellers as
of the Balance Sheet Date. Sellers and the Shareholders are not aware of any
defects in such assets that would have a Material Adverse Effect on the ability
of Purchaser to use such assets in the Business, ordinary wear and tear
excepted.
4.10 REAL PROPERTY. Schedule 4.10 identifies all interests in real
property used by Sellers in the Business, including leases, and includes the
name of the record title holder thereof. All of the buildings, structures and
appurtenances situated on the real property owned or leased by Sellers 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. No condemnation or
similar proceeding is pending or, to the best knowledge of Sellers and the
Shareholders, threatened, which would preclude or impair the use of any such
property, except where such proceeding would not have a Material Adverse Effect.
4.11 LEASES. Schedule 4.11 contains an accurate and complete list of all
personal property leases to which Sellers are a party (as lessee or lessor) and
a description of all such leases to which Sellers are a party as lessee. Each
lease set forth in Schedule 4.11 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.
4.12 MATERIAL CONTRACTS. Except as set forth in Schedule 4.12, the
Assigned Contracts do not include (a) any agreement, contract or commitment
relating to the employment of any person by Sellers, (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 $5,000, (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 Sellers to engage in any line of business or to compete with any
Person, (h) any agreement, contract or commitment that involves $5,000 or more
and is not cancelable without penalty within 30 days, or (i) any other
agreement, contract or commitment which would have a Material Adverse Effect.
Also set forth in Schedule 4.12 is a list of all proposals submitted by Sellers
to any third party that, if accepted by such third party, would require
disclosure on Schedule 4.12. Except where it would not have a Material Adverse
Effect, each contract or agreement set forth in Schedule 4.12 is in full force
and effect and 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.
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4.13 PERMITS. Schedule 4.13 attached hereto lists all of the
governmental and other third party permits (including occupancy permits),
licenses, consents and authorizations ("Permits") required, to the knowledge of
Sellers and the Shareholders, in connection with the use, operation or ownership
of the Assets and the conduct of the Business as currently conducted. Sellers
hold all of the Permits listed on Schedule 4.13, and none is presently subject
to revocation or challenge. Except as set forth on Schedule, all such Permits
will be assigned to Purchaser, and none of such Permits will be subject to
revocation or termination as a result thereof.
4.14 LITIGATION. Except as set forth in Schedule 4.14, there is no
action, suit, proceeding at law or in equity, arbitration or administrative or
other proceeding by or before (or any investigation by) any governmental or
other instrumentality or agency, pending, or, to the knowledge of Sellers and
the Shareholders, threatened, against or affecting the properties, rights or
goodwill of Sellers, the Shareholders, or employees of Sellers, and Sellers and
the Shareholders do not know of any 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 Sellers and the Shareholders
threatened, seeking to prevent or challenge the transactions contemplated by
this Agreement. Purchaser will assume no liability whatsoever with respect to
any matter described on Schedule 4.14. Schedule 4.14 also describes any actions,
suits, disciplinary proceedings and investigations undertaken by the Dental
Board of the State of Texas, or other body regulating the activities of
dentists.
4.15 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
Sellers (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, and all such Taxes showed to be due and owing have been paid.
(b) Except as provided in Schedule 4.15 there is no material
action, suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of Sellers or the Shareholders, threatened by any authority regarding
any Taxes relating to Sellers for any Pre-Closing Period.
(c) There are no liens or security interests on any of the assets
of Sellers that arose in connection with any failure (or alleged failure) to pay
any Taxes.
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(d) Except as provided in Schedule 4.15, there are no agreements
for the extension or waiver of the time for assessment of any Taxes relating to
Sellers for any Pre-Closing Period and Sellers have not been requested to enter
into any such agreement or waiver.
(e) All Taxes relating to Sellers which Sellers are 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.
(f) Sellers are not now nor have ever been a party to any Tax
allocation or sharing agreement that could result in any liability to Purchaser.
4.16 INSURANCE. Set forth in Schedule 4.16 is a complete list of
insurance policies that Sellers maintain with respect to their Business and
properties that are included in the Assets or on their employees. Such policies
are in full force and effect and are free from any right of termination on the
part of the insurance carriers. In the judgment of Sellers, such policies, with
respect to their amounts and types of coverage, are adequate to insure against
risks to which Sellers and their property and assets are normally exposed in the
operation of the Business, subject to customary deductibles and policy limits.
4.17 INTELLECTUAL PROPERTIES. Schedule 4.17 sets forth all Intellectual
Property used in the Business and the owner of such Intellectual Property. The
operation of the Business as conducted by Sellers as of the Closing Date
requires no rights under Intellectual Property other than rights under
Intellectual Property listed on Schedule 4.17 and rights granted to Sellers
pursuant to agreements listed on Schedule 4.17. Except as otherwise set forth in
Schedule 4.17, Sellers own all right, title and interest in the Intellectual
Property listed in Schedule 4.17. No litigation is pending or, to the knowledge
of Sellers or the Shareholders, threatened wherein Sellers are accused of
infringing or otherwise violating the Intellectual Property rights of another,
or of breaching a contract conveying rights under Intellectual Property.
4.18 COMPLIANCE WITH LAWS. To the knowledge of Sellers and the
Shareholders, Sellers are in compliance with all applicable laws, regulations,
orders, judgments and decrees applicable to their respective business, except
where any noncompliance would not have a Material Adverse Effect on the assets,
liabilities, business, condition (financial or otherwise), results of operation
or prospects of Sellers.
4.19 EMPLOYMENT RELATIONS. (a) Sellers are not and have not engaged in
any unfair labor practice; (b) to the knowledge of Sellers and the Shareholders,
no representation question exists respecting the employees of Sellers; (c)
Sellers have not been notified of any grievance that might have a Material
Adverse Effect and no arbitration proceeding arising out of or under any
collective
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bargaining agreement is pending; and (d) no collective bargaining agreement is
currently being negotiated by Sellers.
4.20 EMPLOYEE BENEFIT PLANS. Sellers have delivered to Purchaser 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 Sellers and the Shareholders, been maintained in compliance with
its terms and the requirements of all applicable laws. None of the Plans are
subject to Title IV of ERISA or the minimum funding obligations of Section 412
of the Code, and Sellers and any entity required to be aggregated therewith
pursuant to Section 414(b) or (c) of the Code have no liability under Title IV
of ERISA or under Section 412(f) or 412(n) of the Code.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth in Schedule
4.21, and except where it would not have a Material Adverse Effect (a) Hazardous
Materials have not been generated, used, treated or stored on, or transported to
or from, any Sellers Property by Sellers, its authorized agents or its
independent contractors (including suppliers) or any property adjoining any
Sellers Property, (b) Hazardous Materials have not been Released or disposed of
by Sellers, its authorized agents or its independent contractors (including
suppliers) on any Sellers Property or any property adjoining any Sellers
Property except such Releases which do not violate any Environmental Laws, (c)
Sellers are, to its and the Shareholders's knowledge, in compliance with all
applicable Environmental Laws and the requirements of any Permits issued under
such Environmental Laws with respect to any Sellers Property, (d) there are no
pending or, to the knowledge of Sellers and the Shareholders, threatened
Environmental Claims against Sellers or any Sellers Property, (e) there are no
facts or circumstances, conditions, pre-existing conditions or occurrences on
any Sellers Property known to Sellers or the Shareholders that could reasonably
be anticipated (A) to form the basis of an Environmental Claim against Sellers
or any Sellers Property, or (B) to cause such Sellers Property to be subject to
any restrictions on the ownership, occupancy use or transferability of such
Sellers Property under any Environmental Law, (f) there are not now and there
never have been any underground storage tanks located on any Sellers Property,
and (g) Sellers have not in the ordinary course of business transported or
stored Hazardous Materials.
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except for relationships
with Affiliates, Sellers do not possess, directly or indirectly, any financial
interest in, and no Shareholder serves as a director, officer or employee of,
any corporation, firm, association or business organization which is a supplier,
customer, lessor, lessee, or competitor of Sellers.
4.23 COMPENSATION OF EMPLOYEES. Set forth in Schedule 4.23 is an
accurate and complete list showing the names of all persons whose compensation
from Sellers collectively for the fiscal year 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.
4.24 PAYORS. No significant payor has canceled or otherwise terminated
or, to the knowledge of Sellers or the Shareholders threatened to cancel or
otherwise terminate its relationship with Sellers within the last three years.
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. Except as set forth on
Schedule 4.25, the Accounts Receivable on the Closing Date Balance Sheet are
collectible in the ordinary course of business, net of the reserves established
with respect thereto. Except as set forth on Schedule 4.25, there has been no
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
Sellers or the allowances with respect thereto, or Accounts Payable by Sellers,
from that reflected in the Base Date Balance Sheet.
4.26 SOLVENCY. Sellers are not entering into this Agreement with actual
intent to hinder, delay or defraud creditors. Immediately prior to and
immediately subsequent to the Closing Date:
(a) the present fair salable value of the Assets of Sellers (on a
going concern basis) will exceed the liability of Sellers on its debts
(including its contingent obligations);
(b) Sellers have not incurred, nor does it intend to or believe
that it will incur, debts (including contingent obligations) beyond its ability
to pay such debts as such debts mature (taking into account the timing and
amounts of cash to be received from any source, and of amounts to be payable on
or in respect of debts); and the amount of cash available to Sellers after
taking into account all other anticipated uses of funds is anticipated to be
sufficient to pay all such amounts on or in respect of debts, when such amounts
are required to be paid; and
(c) Sellers will have sufficient capital with which to conduct
its business, and the property of Sellers do not constitute unreasonably small
capital with which to conduct its business.
For purposes of this Section 4.26 "debt" means any liability or a (i)
right to payment whether or not such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable secured, or unsecured; or (ii) right to an equitable remedy for
breach of performance if such breach gives rise to a payment, whether or not
such a right to an equitable remedy is reduced to judgment, fixed, contingent,
matured, unmatured, disputed, undisputed, secured, or unsecured.
4.27 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
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statements contained herein or therein not misleading in light of the
circumstances under which they were made.
4.28 INVESTMENTS. The Assets do not include any capital stock or other
equity ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
4.29 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting
on behalf of Sellers 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.
4.30 COPIES OF DOCUMENTS. Sellers have caused to be made available for
inspection and copying by Purchaser and its advisers, true, complete and correct
copies of all documents referred to in this Article IV or in any Schedule
attached hereto.
4.31 INVESTMENT REPRESENTATIONS.
(a) Sellers understand that the Common Stock has not been
registered under the Securities Act of 1933, as amended (the "Securities Act").
Sellers also understands that the Common Stock is being offered and sold
pursuant to an exemption from registration contained in the Securities Act based
in part upon his representations contained in this Agreement.
(b) Sellers, in consultation with their accountants, attorneys
and financial advisers, have the requisite experience in evaluating and
investing in private placement transactions of securities so that they are
capable of evaluating the merits and risks of their investment in Castle Dental
and have the capacity to protect their own interests. Sellers understand that
they must bear the economic risk of this investment indefinitely unless the
Common Stock is registered pursuant to the Securities Act, or an exemption from
registration is available. Sellers also understand 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 them to transfer all
or any portion of the Common Stock under the circumstances, in the amounts or at
the times they might propose.
(c) Sellers are acquiring the Common Stock for their own account
for investment only, and not with a view towards distribution.
(d) Sellers represent that by reason of their business or
financial experience, they have the capacity to protect their own interests in
connection with the transactions contemplated in this Agreement.
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(e) Sellers represent that they are each an accredited investor
within the meaning of Regulation D under the Securities Act.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF PURCHASER AND CASTLE DENTAL
Purchaser represents and warrants to Sellers and Shareholders as
follows:
5.1 EXISTENCE AND GOOD STANDING OF PURCHASER; POWER AND AUTHORITY.
Purchaser is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas. Purchaser has full corporate power and
authority to make, execute, deliver and perform this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
This Agreement has been duly authorized and approved by all required corporate
action of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and is a valid and binding obligation of Purchaser enforceable against
Purchaser 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.
5.2 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser 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 certificate of incorporation or by-laws of Purchaser;
(b) to the knowledge of Purchaser, 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 Purchaser or by which any of
its properties or assets may be bound; (c) to the knowledge of Purchaser,
require any filing by Purchaser with, or require Purchaser to obtain any permit,
consent or approval of, or require Purchaser to give any notice to, any
governmental or regulatory body, agency or authority or any third party; or (d)
result in a violation or breach by Purchaser of, conflict with, constitute (with
or without due notice or lapse of time or both) a default by Purchaser (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 Purchaser pursuant to, 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 Purchaser
is a party, or by which it or any of its properties or assets may be bound,
except in the case of Subsections 5.2(b), (c), and (d), for such violations,
consents, breaches, defaults, terminations and accelerations which in the
aggregate would not have a Material Adverse Effect.
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5.3 LITIGATION. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Purchaser, threatened, against or affecting the
properties, rights or goodwill of Purchaser or their employees, except where
such Proceeding would not have a material adverse effect on the assets,
liabilities, business, condition (financial or otherwise), results of operations
or prospects of Purchaser, and Purchaser does not know of any valid basis for
any such action, proceeding or investigation. There are no such Proceedings
pending or, to the knowledge of Purchaser, threatened, seeking to prevent or
challenge the transactions contemplated by this Agreement.
5.4 COMPLIANCE WITH LAWS. To the knowledge of Purchaser, Purchaser is in
compliance with all applicable laws, regulations, orders, judgments and decrees
applicable to their respective business, except where any noncompliance would
not have a Material Adverse Effect on the assets, liabilities, business,
condition (financial or otherwise), results of operations or prospects of
Purchaser.
5.5 BROKER'S OR FINDER'S FEES. Except for a fee payable by or on behalf
of Purchaser to The GulfStar Group, no agent, broker, Person or firm acting on
behalf of Purchaser 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.
Castle Dental represents and warrants to Sellers and Shareholders as
follows:
5.6 EXISTENCE AND GOOD STANDING OF CASTLE DENTAL; POWER AND AUTHORITY.
Castle Dental is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Castle Dental has full
corporate power and authority to make, execute, deliver and perform this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized and
approved by all required corporate action of Castle Dental. This Agreement has
been duly executed and delivered by Castle Dental and is a valid and binding
obligation of Castle Dental enforceable against Castle Dental 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.
5.7 FINANCIAL STATEMENTS. The audited financial statements of Castle
Dental as of December 31, 1995, attached hereto as Schedule 5.7, are complete
and correct in all material respects and present fairly in accordance with
generally accepted accounting principles consistently applied, the financial
condition of Castle Dental and the results of operations of Castle Dental as of
the dates thereof and for the periods indicated. Since December 31, 1995, there
has been no material adverse
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change in the assets or liabilities, or in the business or condition, financial
or otherwise, or in the results of operations of Castle Dental.
5.8 CAPITAL STOCK. Immediately prior to Closing, the authorized capital
stock of Castle Dental consists solely of 18,755,263 shares of Common Stock of
which 4,275,243 shares have been issued, and 1,244,737 shares of Preferred
Stock, $.001 par value per share. all of which shares have been issued. All of
the shares of Common Stock of Castle Dental delivered pursuant to Section 3.1
hereof shall be duly and validly authorized, and, following the Closing, will be
validly issued, fully paid, nonassessable and free of any liens or encumbrances.
5.9 LITIGATION. There is no action, suit, proceeding at law or in
equity, arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Castle Dental, threatened, against or affecting the
properties, rights or goodwill of Castle Dental, Castle Dental or their
employees, except where such Proceeding would not have a material adverse effect
on the assets, liabilities, business, condition (financial or otherwise),
results of operations or prospects of Castle Dental, and Castle Dental does not
know of any valid basis for any such action, proceeding or investigation. There
are no such Proceedings pending or, to the knowledge of Castle Dental,
threatened, seeking to prevent or challenge the transactions contemplated by
this Agreement.
ARTICLE VI
CONDITIONS TO SELLERS' AND THE SHAREHOLDERS' OBLIGATIONS
The obligations of Sellers and the Shareholders under this Agreement to
sell, or cause to be sold, the Assets and to consummate the other 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:
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser 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 Purchaser shall have delivered to Sellers on the Closing Date
a certificate of an authorized officer of Purchaser, dated the Closing Date, to
such effect.
6.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Purchaser to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Purchaser shall have delivered to Sellers a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect.
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6.3 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
Purchaser shall have delivered to Sellers a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect to the best knowledge of
such officer.
6.4 CONSIDERATION. Purchaser shall have delivered the Purchase Price in
the manner described in Section 3.1.
6.5 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.
6.6 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 Sellers and the
Shareholders and their counsel, and Sellers and the Shareholders shall have
received copies of all such documents and other evidence as its or their counsel
may reasonably request in order to establish the consummation of such
transactions and the taking of all proceedings in connection therewith.
6.7 GOOD STANDING CERTIFICATES. Sellers shall have received good
standing and corporate existence certificates respecting Purchaser and Castle
Dental.
6.8 REGISTRATION RIGHTS AGREEMENT. Sellers shall have received a
Registration Rights Agreement, substantially in the form of Exhibit D hereto,
executed by Castle Dental.
6.9 STOCKHOLDERS AGREEMENT. Sellers shall have received a Stockholders
Agreement, substantially in the form of Exhibit C, executed by the Purchaser and
the other parties thereto.
6.10 DUE DILIGENCE. Sellers shall have satisfactorily completed his due
diligence review of Castle Dental and Purchaser and shall not have determined,
in the exercise of his reasonable discretion, that the information obtained from
such review materially and adversely affects his appraisal of the business,
prospects and financial condition of Castle Dental.
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
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The obligations of Purchaser under this Agreement to purchase the Assets
and to consummate the other transactions contemplated hereby shall be subject to
the satisfaction (or waiver by Purchaser) on or prior to the Closing Date of all
of the following conditions:
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Sellers and the Shareholders contained herein 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 Sellers and the Shareholders shall have delivered to
Purchaser on the Closing Date a certificate of an authorized representative of
Sellers and the Shareholders, dated the Closing Date, to such effect.
7.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Sellers to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Sellers shall have delivered to Purchaser a certificate of an authorized
representative of Sellers, dated the Closing Date, to such effect.
7.3 DOCUMENTS OF CONVEYANCE. Purchaser shall have received from Sellers
fully executed documents of conveyance, in form and substance satisfactory to
Purchaser and its counsel, vesting in Purchaser good and valid title to the
Assets, free and clear of any Encumbrances except Permitted Encumbrances.
7.4 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 Sellers
shall have delivered to Purchaser a certificate of an authorized representative
of Sellers, dated the Closing Date, to such effect to the best knowledge of such
officer.
7.5 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.
7.6 CONSENTS. Each of the consents referred to in Schedule 4.5 attached
hereto shall have been obtained, and Purchaser shall have also received the
consent of all other parties, including its senior lender, whose consent is
required to permit Purchaser to perform its obligations hereunder.
7.7 LEGAL OPINION. Sellers shall have delivered to Purchaser the opinion
of their counsel, substantially in the form of Exhibit B attached hereto.
7.8 PROCEEDINGS. All proceedings to be taken in connection with the
transactions contemplated by this Agreement and all documents incident thereto
shall be reasonably satisfactory
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in form and substance to Purchaser and its counsel, and Purchaser 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.
7.9 JHC. Contemporaneous with the Closing, (a) JHC shall have entered
into employment agreements with Drs. Atterson, Jackson and Moore, (b) the
employment agreements between the other dentists presently employed by the
Dental Centers shall have been duly and validly assigned to JHC, (c) all
reimbursement contracts with third-party insurance companies, managed care
companies and other reimbursement sources shall have been duly and validly
assigned to JHC, (d) all patient records shall have been delivered to JHC and
(e) all permits and other Assets as are required for JHC to perform its
obligations under the Management Services Agreement by and between Purchaser and
JHC shall have been duly and validly assigned to JHC.
7.10 STOCKHOLDERS AGREEMENT. Sellers shall have entered into a
Stockholders Agreement with Castle Dental and certain of its other shareholders,
substantially in the form of Exhibit C attached hereto.
7.11 DUE DILIGENCE. Purchaser shall have satisfactorily completed a due
diligence review of Sellers 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 their appraisal of the business,
prospects and financial condition of Sellers or the Business.
7.12 SELLERS NAME CHANGE. Sellers shall have changed their corporate
name and/or any assumed names currently being used by them in connection with
the Business to a name not including the words "Horizon Dental Center."
7.13 TERMINATION OF AGREEMENTS. All agreements, contracts, commitments
and understandings between (a) the Dental Centers and the entities and persons
listed on Schedule 7.13 and (b) Consolidated and the entities and persons listed
on Schedule 7.13 shall be terminated on or before the Closing Date.
7.14 GOOD STANDING CERTIFICATES. Purchaser shall have received good
standing and corporate existence certificates respecting Sellers.
7.15 RELEASES OF LIENS. Purchaser shall have received evidence
satisfactory to Purchaser and its counsel to the effect that all liens and other
encumbrances on the Assets being transferred to Purchaser (other than Permitted
Encumbrances) have been released.
7.16 NONCOMPETITION AGREEMENT. Joseph A. Bonola shall have entered into
a Noncompetition Agreement with Purchaser, substantially in the form of Exhibit
E attached hereto.
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7.17 LICENSE AGREEMENT. Joseph A. Bonola shall have entered into a
License Agreement with Purchaser, whereby Dr. Bonola grants the Purchaser the
right to use the name "Horizon Dental Center," substantially in the form of
Exhibit F attached hereto.
ARTICLE VIII
COVENANTS OF SELLERS AND THE SHAREHOLDERS
Sellers and the Shareholders hereby covenant and agree with Purchaser as
follows:
8.1 COOPERATION BY SELLERS. Sellers and the Shareholders shall use their
reasonable best efforts to cooperate with Purchaser to secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to enable Sellers and the Shareholders to effect
the transactions contemplated on its or his part hereby, and Sellers and the
Shareholders 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 it has
control to be satisfied. Sellers and the Shareholders further agree to deliver
to Purchaser 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 Sellers or the Shareholders contained herein being untrue in any
material respect.
8.2 CONDUCT OF BUSINESS. Except as Purchaser may otherwise consent to in
writing, between the date hereof and the Closing Date, Sellers shall, (a)
conduct the Business only in the ordinary course, (b) use its reasonable efforts
to keep available the services of its employees and maintain satisfactory
relationships with licensors, suppliers, lessors, distributors, customers,
clients and others, (c) maintain, consistent with past practice and good
business judgment, all the Assets in customary repair, order and condition,
ordinary wear and tear excepted, and insurance upon all the 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 the Books and Records in the usual, regular and ordinary manner, on a
basis consistent with past practice.
8.3 EXCLUSIVE DEALING. During the period from the date of this Agreement
to the earlier of the Closing Date or the termination of this Agreement, neither
Sellers nor the Shareholders 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 Purchaser, concerning any sale of the
Assets or any material part thereof or a similar transaction involving Sellers
or the Shareholders.
8.4 REVIEW OF THE ASSETS. Purchaser may, prior to the Closing Date,
through its representatives, review (a) the Assets, (b) the complete working
papers of Sellers' certified public accountants used in their preparation of
financial statements for Seller and (c) the Books and Records
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of Sellers and to otherwise review the financial and legal condition of Sellers
as Purchaser deems necessary or advisable to familiarize itself with the
Business and related matters; such review shall not, however, affect the
representations and warranties made by Sellers and the Shareholders hereunder or
the remedies of Purchaser for breaches of those representations and warranties.
Such review shall occur only during normal business hours upon reasonable notice
by Purchaser. Sellers and the Shareholders shall permit Purchaser and its
representatives to have, after the execution of this Agreement, full access to
employees of any Sellers who can furnish Purchaser with financial and operating
data and other information with respect to the Business as Purchaser shall from
time to time reasonably request.
8.5 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, Sellers and the Shareholders shall, at the reasonable request of
Purchaser and at Purchaser's expense, execute and deliver any further
instruments or documents and take all such further action as Purchaser may
reasonably request in order to consummate and make effective the sale of the
Assets and the assumption of the Assumed Obligations pursuant to this Agreement.
8.6 ACCOUNTS PAYABLE; ACCOUNTS RECEIVABLE. The parties agree as follows:
(a) From and after the Closing until July 31, 1996, the Dental
Centers shall continue to collect for their account any amounts received by them
in payment of accounts receivable of the Business. Following July 31, 1996, the
Dental Centers shall remit to Purchaser any amounts received by them in payment
of any accounts receivable of the Business.
(b) Purchaser shall assume all Accounts Payable as of August 1,
1996. From and after the Closing until July 31, 1996, Sellers agree to pay all
bills in the normal course of business. In addition, Sellers agree that payroll
respecting any periods in July will be paid by Sellers. With respect to payroll
for the dentists, the Dental Centers agree to pay the dentists' payroll due on
August 5, 1996, and Purchaser agrees to pay the dentists' payroll due on August
20, 1996.
ARTICLE IX
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with Sellers and the Shareholders
as follows:
9.1 COOPERATION BY PURCHASER. Purchaser will use its reasonable best
efforts, and will cooperate with Sellers and the Shareholders, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable Purchaser to effect the
transactions contemplated on its part hereby, and Purchaser will otherwise use
its reasonable best efforts to cause the consummation of such transactions in
accordance with
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the terms and conditions hereof and to cause all conditions contained in this
Agreement over which it has control to be satisfied. Purchaser further agrees to
deliver to Sellers and the Shareholders 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 Purchaser contained herein being
untrue in any material respect.
9.2 BOOKS AND RECORDS; PERSONNEL. At all times after the Closing Date,
Purchaser shall allow Sellers and any agents of any Sellers, upon reasonable
advance notice to Purchaser, access to all Books and Records of Sellers which
are transferred to Purchaser in connection 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, during normal working hours at Purchaser's principal
places of business or at any location where such Books and Records are stored,
and Sellers shall have the right, at Sellers' sole cost, to make copies of any
such Books and Records.
9.3 FURTHER ASSURANCES. At any time or from time to time after the
Closing Date, Purchaser shall, at the request of Sellers or the Shareholders and
at such Sellers' expense, execute and deliver any further instruments or
documents and take all such further action as Sellers may reasonably request in
order to consummate and make effective the sale of the Assets and the assumption
of the Assumed Obligations pursuant to this Agreement.
9.4 DUE DILIGENCE INVESTIGATION. Prior to the Closing Date, Purchaser
and Castle Dental will make available to Sellers and the Shareholders and their
respective attorneys, accountants, consultants and agents, any and all
information regarding Purchaser and Castle Dental and their respective
businesses, operations, financial affairs and management, to the extent such
information is in the possession of Purchaser or Castle Dental or can be
obtained without unreasonable burden or expense, to permit Sellers and the
Shareholders to familiarize themselves with the business of the Purchaser and
Castle Dental and to make an informed investment judgment with respect to the
Common Stock of Castle Dental referred to in Section 3.1(c). The Purchaser and
Castle Dental agree to make available to Sellers and the Shareholders and their
respective attorneys, accountants, consultants and agents management members and
representatives of Purchaser and Castle Dental to respond to any questions or
inquiries from such parties regarding the Purchaser, Castle Dental and their
respective businesses, operations, financial affairs and management.
The due diligence investigation shall be conducted at the principal
offices of Castle Dental in Houston, Texas, at such time or times during normal
business hours as are reasonably requested by Sellers and the Shareholders.
Sellers and the Shareholders agree to complete such investigation on or before
July __, 1996.
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All parties participating in the due diligence review shall be bound by
confidentiality agreements in form and substance satisfactory to the Purchaser
and Castle Dental.
ARTICLE X
TERMINATION
10.1 TERMINATION. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by the mutual written consent of Purchaser, the Shareholders
and Sellers; or
(b) by Purchaser, the Shareholders, or Sellers 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), if the Closing Date shall not have occurred on or before July 31,
1996; or
(c) by either Purchaser, on the one hand, or the Shareholders and
Sellers, 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), if the other party
shall (i) fail to perform its or their covenants or agreements contained herein
required to be performed prior to the Closing Date, or (ii) breach or have
breached any of its representations or warranties contained herein.
10.2 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 12.8 and 12.11 hereof and the obligations set
forth in the next succeeding sentence of this Section 10.2. Upon any termination
of this Agreement each party hereto will redeliver 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 XI
SURVIVAL AND INDEMNIFICATION
11.1 INDEMNIFICATION OF SELLERS. The Purchaser, from and after the
Closing Date, shall indemnify and hold Sellers and the Shareholders and their
respective Affiliates (the "Sellers Indemnitees") harmless from and against any
and all damages, including exemplary damages and penalties, losses,
deficiencies, costs, expenses, obligations, fines, expenditures, claims and
liabilities,
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including reasonable counsel fees and reasonable expenses of investigation,
defending and prosecuting litigation (collectively, the "Damages"), suffered by
any Sellers 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 the Purchaser under this Agreement or
any misrepresentation in or omission from any list, schedule, certificate, or
other instrument furnished or to be furnished to Sellers by the Purchaser
pursuant to the terms of this Agreement or (b) any liability or obligation
(other than those for which Purchaser are being indemnified by Sellers and the
Shareholders 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. Castle Dental, from and
after the Closing Date, shall indemnify and hold the Sellers Indemnitees
harmless from and against any and all Damages suffered by any Sellers Indemnitee
as a result of, caused by, arising out of, or in any way relating to any breach
of warranty of Sections 5.6, 5.7, 5.8 or 5.9 of this Agreement.
11.2 INDEMNIFICATION OF THE PURCHASER. Sellers and the Shareholders,
jointly and severally, shall indemnify and hold Purchaser and its Affiliates
(the "Purchaser Indemnitees") harmless from and against any and all Damages
suffered by any Purchaser 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 Sellers or the
Shareholders under this Agreement or any misrepresentation in or omission from
any list, schedule, certificate, or other instrument furnished or to be
furnished to the Purchaser by Sellers pursuant to the terms of this Agreement,
(b) any liability or obligation (other than those for which Sellers and the
Shareholders are being indemnified by Purchaser hereunder and other than those
relating to 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) the uncollectibility of any Account Receivable (net of applicable
reserve), after six months.
11.3 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 knowingly 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
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motion or answer to a complaint, petition, notice or other legal, equitable or
administrative process relating to the Claim, only insofar as such knowing
failure to notify the indemnifying party has actually resulted in prejudice or
damage to the indemnifying party.
11.4 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 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, 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 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 unconditionally to accept in payment or compromise as of the
time the indemnifying party made its request therefor to the indemnified party.
11.5 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 expenses incurred by it in so
cooperating. At no cost or expense to the indemnified party, the indemnifying
party shall cooperate with the indemnified party and its counsel in contesting
any Claim.
11.6 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,
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including governmental authorities, asserting any Claim against the indemnified
party or conferences with representatives of or counsel for such persons.
11.7 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.
ARTICLE XII
MISCELLANEOUS
12.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules) set 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.
12.2 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 this Agreement, including the representations
and warranties herein, may not be assigned by Sellers or the Shareholders
without the prior written consent of Purchaser or by Purchaser to any Person
without the prior written consent of Sellers.
12.3 COUNTERPARTS. This Agreement may be executed in two 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.
12.4 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.
12.5 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 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). No delay on the part of either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.
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12.6 NO THIRD-PARTY BENEFICIARY RIGHTS. Except as otherwise provided in
Section 11.1, this Agreement is not intended to and shall not be construed to
give any Person (other than the parties signatory hereto 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.
12.7 SALES AND TRANSFER TAXES. Purchaser shall be responsible for and
pay all applicable sales, stamp, transfer, documentary, use, registration,
filing and other taxes and fees (including any penalties and interest) that may
become due or payable in connection with this Agreement and the transactions
contemplated hereby.
12.8 EXPENSES. Except as otherwise provided in this Agreement, Sellers,
the Shareholders and Purchaser shall each pay all costs and expenses incurred by
them or on their behalf in connection with this Agreement and the transactions
contemplated hereby.
12.9 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, addressed as follows:
if to Purchaser, to:
Castle Dental Centers of Texas, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056-3021
with a copy to:
Mr. William D. Gutermuth
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2856
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if to Sellers or the Shareholders to:
Dr. Joseph A. Bonola
1109 Smethwick Cove
Keller, Texas 76248
with a copy to:
Mr. David Wright
Heard & Wright
201 Main Street, Suite 1820
Ft. Worth, Texas 76102
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.
12.10 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.
12.11 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 Purchaser may disclose
such information as is required to comply with the requirements of its lenders
and investors and to comply with applicable securities laws. 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 obtaining the prior approval of the other party hereto
to the contents and the manner of presentation and publication thereof.
12.12 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 Houston, Texas, and, by execution and delivery of this
Agreement, each of the parties to this Agreement accepts for itself the
exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
12.13 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.
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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.
12.14 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 the sale of the Assets or any other matter hereunder, this Agreement
shall be enforceable in a court of equity 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.
[The remainder of this page has been intentionally left blank.]
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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:
Name:
Title:
CASTLE DENTAL CENTERS OF TEXAS, INC.
By:
Name:
Title:
N.A. DENTAL SERVICES, P.C.
By:
Name:
Title:
EFW DENTAL SERVICES, P.C.
By:
Name:
Title:
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HDC DENTAL SERVICES, P.C.
By:
Name:
Title:
MIDCITIES DENTAL SERVICES, P.C.
By:
Name:
Title:
NEFW DENTAL SERVICES, P.C.
By:
Name:
Title:
WEST FT. WORTH DENTAL SERVICES, P.C.
By:
Name:
Title:
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Joseph A. Bonola, D.D.S.
Kristen Bonola
Larry Charles Jackson
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EXHIBIT 10.41
JACK H. CASTLE, D.D.S., P.C.
EMPLOYMENT AGREEMENT
This agreement (the "Agreement") is made this ___day of August, 1996, by
and between Jack H. Castle, D.D.S., P.C., a Texas professional corporation
("Castle"), and Joseph A. Bonola, D.D.S., a dentist licensed to practice his/her
profession in the State of Texas ("Employee").
WHEREAS, Employee desires to practice general dentistry as an employee
of Castle, and Castle desires to hire Employee under the terms of this
Agreement;
NOW, THEREFORE, in the mutual agreements of the parties hereinafter set
forth, it is hereby agreed as follows:
ARTICLE I
EMPLOYMENT
1.1 Castle hereby hires Employee and Employee accepts such hiring to
render professional services on behalf of Castle, subject to the rules thereof
and the standards of the dental profession.
1.2 Employee shall at all times be a dental employee subject to the
terms of this Agreement, and nothing contained in this Agreement or in the
relation of Castle and Employee shall be deemed as constituting a partnership,
joint venture or other relationship. Castle and Employee recognize that the
relationship of employer and employee requires Castle to comply with all income
tax laws pertinent to such relationship.
1.3 This Agreement shall commence as of the date first above written,
and shall thereinafter continue until terminated as herein provided, subject to
the terms of this Agreement.
ARTICLE II
TERMINATION
2.1 Termination of this Agreement shall be classified as voluntary or
involuntary.
2.2 Voluntary termination shall be that termination by either Castle or
Employee upon giving not less than thirty (30) days written notice of intent to
terminate to the other party.
2.3 Involuntary termination shall be termination, in Castle's sole
determination, due to any of the following reasons:
A. Employee fails to perform his/her duties hereunder as a result
of illness or other incapacity and such illness or incapacity
shall continue for a period of more than two (2) months;
B. Employee has been disqualified to practice dentistry by reason
of law or fails to maintain insurance in effect as required by
Article VI;
C. Employee shall willfully violate any law or ethical rule
relating to the practice of dentistry; or
D. Employee engages in alcohol or drug abuse; conducts
himself/herself privately or professionally in a manner
detrimental to Castle, which shall be determined solely within
Castle's discretion, or breaches any of the terms of this
agreement.
2.4 In the event of involuntary termination of this Agreement pursuant
to sub-paragraphs 2.3 A-D, Employee's employment may be immediately terminated
by oral or written notification.
ARTICLE III
DUTIES
3.1 Employee will maintain the highest standard of care of the dental
profession.
3.2 Employee shall not provide dental services of any kind to any person
without the advance written consent of Castle. Concurrently with the execution
of this Agreement, Castle shall provide Employee with a letter, whereby Castle
shall agree to Employee's work schedule for the period from August 1, 1996 to
August 31, 1996. Such letter shall satisfy the requirements of the first
sentence of this Section 3.2. Thereafter, on a monthly basis, Castle will issue
a letter addressing Employee's work schedule.
3.3 Employee shall promote, to the extent permitted by law and the
applicable canons of professional ethics, the professional practice of Castle,
and shall to a reasonable extent attend professional conventions, postgraduate
seminars and participate in continuing education courses, and shall do all
things necessary to maintain and improve his/her professional skills.
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3.4 Employee shall secure the patient's (or legal guardian of the
patient, if the patient is a minor) consent in writing to provide treatment,
prior to starting a dental procedure on the patient, in accordance with Texas
law.
3.5 Employee shall not provide or administer nitrous oxide sedation to
patients unless he/she is certified to do so by the Texas State Board of Dental
Examiners.
3.6 Employee agrees that he/she will become familiar with and remain
familiar with the Occupational Safety and Health Act ("OSHA") requirements
applicable to the dental profession. Employee further agrees that he/she will
ensure compliance with OSHA requirements as to himself/herself and any other
personnel working directly with him/her at Castle. In the event Employee fails
to comply with OSHA requirements applicable to the dental professional and such
failure results in any fine or imposition of penalty upon Castle, Employee
agrees to pay to Castle the amount of such fine and make restitution for any
other penalty imposed.
ARTICLE IV
EMPLOYEE COMPENSATION
During the term of this Agreement, the Company agrees to pay Employee an
annual salary of $1.00 ("Salary"). Salary payments shall be subject to all
applicable federal and state payroll, withholding and other taxes.
ARTICLE V
CONDITIONS DURING EMPLOYMENT
5.1 Employee shall maintain records of all discussions with patients
regarding treatment needs and treatment recommendations, all treatment
procedures, and will remain in compliance with all state regulatory rules
regarding patient records. Castle and Employee agree that Castle will retain all
past, current and future dental records on any patient treated by Employee.
Employee shall have access to such records for inspection and copying. In the
event of termination of this Agreement for any reason, all dental records of
patients treated by Employee shall be maintained by Castle and shall be deemed
owned by Castle and shall continue to be maintained by Castle and Employee shall
retain the right to inspect and copy records of patients treated by Employee.
5.2 Unless required by service of legal process, no dental record shall
be displayed or delivered to, nor any information therefrom disclosed to, any
person not connected with Castle, except in strict accordance with the rules
promulgated by Castle and the state dental examiners.
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5.3 Castle shall schedule the days and times Employee shall perform
his/her duties. Changes by Employee in Employee's schedule are to be submitted
at least thirty (30) days in advance. If it is necessary for Employee to be
absent from regularly scheduled patient care, it is his/her responsibility to
contact another Employee to work in his/her place.
ARTICLE VI
INDEMNITY AND INSURANCE
Employee must be covered by professional liability (malpractice)
insurance through an insurance company acceptable to Castle. Castle agrees to
pay the expense of such insurance during the term of this contract. The
insurance shall have limits of not less than $1,000,000.00 per claim or
occurrence, and $3,000,000.00 in aggregate. Proof of such insurance coverage
shall be provided to Castle by Employee two (2) days before Employee commences
his/her duties under this contract. Employee shall provide to Castle proof of
renewal of said coverage ten (10) days prior to the expiration of such policy.
Employee must maintain the insurance required under this article at all times
during the term of this contract. If Employee's insurance is canceled, Employee
shall notify Castle within twenty-four (24) hours after he/she receives such
notice. At no time shall Employee render professional services pursuant to this
Agreement without insurance coverage and Employee shall not perform any
procedures for which his/her professional liability insurance does not provide
coverage. Employee shall hold harmless and indemnify Castle, its employees,
successors and assigns from and against any and all liabilities, costs, damages,
expenses and attorneys' fees resulting from or attributable in whole or in part
to any and all acts or omissions of Employee while providing professional
services for Castle.
ARTICLE VII
CONFIDENTIALITY
7.1 It is agreed by Employee that all patients referred to him/her will
be seen and treated by Employee exclusively at the offices of Castle.
7.2 Employee further agrees that the forms, brochures, operating policy
and procedural manuals used by Castle and marketing programs and techniques
developed by Castle are of a confidential nature and Employee agrees that he/she
shall in no way copy same; or otherwise use Castle's forms, operating policies
and procedures and marketing techniques except in the furtherance of his/her
duties for Castle.
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ARTICLE VIII
ARBITRATION
Any and all disputes, controversies, claims, and demands arising out of
or relating to this Agreement or any provision hereof, or in any way relating to
the relationship between Castle and Employee, whether in contract, tort, or
otherwise, at law or in equity, for damages or any other relief, shall be
resolved by binding arbitration pursuant to the Federal Arbitration Act in
accordance with the Commercial Arbitration Rules then in effect with the
American Arbitration Association. Any such arbitration proceeding shall be
conducted in Harris County, Texas. This arbitration provision shall be
enforceable in either federal or state court in Harris County, Texas pursuant to
the substantive federal laws established by the Federal Arbitration Act. Any
party to any award rendered in such arbitration proceeding may seek a judgment
upon the award and that judgment may be entered by any federal or state court in
Harris County, Texas having jurisdiction.
ARTICLE IX
MISCELLANEOUS
9.1 This Agreement is made pursuant to, and shall be governed by and
construed in accordance with the laws applicable to contracts made and to be
performed entirely within the State of Texas.
9.2 The services provided under this Agreement may be performed only by
Employee and this Agreement is not assignable by Employee.
9.3 The failure of Castle or Employee to seek redress for a violation or
to insist upon strict performance of any covenant agreement, provision or
condition of this Agreement, shall not constitute a waiver of the terms of such
covenant, agreement, provision or condition.
9.4 This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
9.5 Notices required to be given to any party hereunder shall be in
writing and shall be personally delivered or shall be sent by registered mail,
return receipt requested postage prepaid, addressed to the party at their
respective address set forth below.
9.6 This instrument contains the sole Agreement of the parties hereto
and correctly sets forth the rights, duties and obligations of each to the other
as of this day. Any prior agreements, promises, negotiations, or representations
not expressly set forth in this Agreement are of no force and effect.
-5-
IN WITNESS WHEREOF, the parties have set their hands the day and year
first above written.
JACK H. CASTLE, D.D.S., P.C.
1360 Post Oak Road., Suite 1300
Houston, Texas 77056-3021
By:
Jack H. Castle, D.D.S.
President
Employee
Joseph A. Bonola, D.D.S.
Address:
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EXHIBIT 10.72
Doc. No. 21
OPTION AGREEMENT
This OPTION AGREEMENT ("Option Agreement"), effective as of May 31, 1996,
by and between G. Powell Bilyeu (the "Shareholder") and Castle Dental Centers of
Tennessee, Inc. (the "Optionee").
RECITALS
A. The Shareholder is the sole shareholder of Castle Mid-South Dental
Centers, P.C., a Tennessee professional corporation ("New PC"), which is engaged
in the practice of dentistry.
B. Shareholder desires to afford the Optionee an opportunity to purchase
all of the ownership interest held by him in New PC ("Shareholder Interest") on
the terms hereof.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth and for other good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto, intending to be legally bound
hereunder, agree as follows:
1. GRANT OF OPTION. Shareholder hereby irrevocably grants to Optionee the
right and option (hereinafter called the "Option") to purchase all of the
Shareholder Interest at the exercise price set forth in paragraph 2, during the
period and subject to the conditions herein set forth.
2. EXERCISE PRICE. The exercise price (the "Exercise Price") for the
Shareholder Interest shall be One Hundred Dollars ($100.00).
3. OPTION TERM. The term of this Option shall expire simultaneously with
the expiration or termination in accordance with the terms of the Management
Services Agreement (the "Management Services Agreement") effective as of May 31,
1996 between New PC and Optionee (the "Expiration Date").
4. EXERCISE OF OPTION. On execution of this Option Agreement, the Option
shall immediately become exercisable and shall be exercisable at any time
thereafter until the Expiration Date (the "Option Period"); provided that in no
event shall the Option be exercisable by Optionee or by any transferee under
Section 7 until such time as Optionee or such transferee shall have taken
such action as may be necessary to permit such person to lawfully hold an
ownership interest in New PC.
5. NOTICE PERIOD. Before exercising the Option, Optionee shall give at
least twenty-four (24) hours written notice to Shareholder (or Shareholder's
representative). During the notice period, Shareholder (or Shareholder's
representative) may not sell, transfer, exchange, encumber, or otherwise
alienate the Shareholder Interest. Any such sale, transfer, exchange,
encumbrance, or alienation shall be void. In addition, during the notice period,
Shareholder shall not take any action that is materially adverse to New PC's
practice of dentistry.
6. MANNER OF EXERCISE. The notice of exercise of the Option shall be
accompanied by the Optionee's check payable to Shareholder for the amount of the
Exercise Price. Upon delivery of such notice and payment, the Optionee shall be
deemed to have acquired the Shareholder Interest and shall be deemed to have
become a shareholder of New PC without any further action on the part of the
Optionee, the Shareholder or New PC. However, at the Optionee's request,
Shareholder shall also deliver an assignment of his Shareholder Interest in New
PC to the Optionee in form and substance reasonably satisfactory to Optionee. In
the event the Option shall be exercised by any person or persons other than the
Optionee, such notice shall be accompanied by appropriate proof of the right to
such person or persons to exercise the Option.
7. TRANSFERABILITY OF OPTION. The Option is transferable by Optionee at
any time to any person.
8. NO OBLIGATION TO EXERCISE OPTION. Optionee shall be under no obligation
to exercise the Option.
9. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. Shareholder hereby
represents and warrants to, and covenants with, Optionee that Shareholder is the
only shareholder of New PC and no other person will be permitted to become a
shareholder (other than pursuant to the exercise of this Option) without prior
written notice to the Optionee and the grant to Optionee of an option on all of
such person's ownership interest in New PC in form and substance comparable to
this Agreement. For so long as Shareholder is a shareholder of New PC,
Shareholder agrees to maintain his license to practice dentistry in good
standing and in compliance with all laws and regulations of the State of
Tennessee relating to the practice of dentistry, and to maintain professional
liability insurance coverage in amounts contemplated by the Management Services
Agreement.
10. RESTRICTIONS ON TRANSFER OF SHAREHOLDER INTEREST; CONSENTS. During the
Option Period, Shareholder shall not "Transfer" all or any part of his
Shareholder Interest without the prior written
-2-
consent of the Optionee. For purposes of this Option Agreement, "Transfer" shall
include any dissolution of New PC or any assignment, mortgage, hypothecation,
transfer, pledge, creation of a security interest in or lien upon, encumbrance,
gift or other disposition unless such "Transfer" is made subordinate to or
subject to this Option. Further, New PC and the Shareholder shall not amend or
modify New PC's Articles of Incorporation or Bylaws in any manner that would
adversely affect the Optionee's prior written consent.
11. NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed to be properly given when personally delivered to
the party entitled to receive the notice or when sent by certified or registered
mail, postage prepaid, properly addressed to the party entitled to receive such
notice at the address stated below or at such other address as may be furnished
in writing by any party hereto to the other:
If to Shareholder: G. Powell Bilyeu, D.D.S.
1010 Murfreesboro Rd., Suite 196
Franklin, TN 37064
If to Optionee: Castle Dental Centers of Tennessee, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056
Attention: Jack H. Castle, Jr.
12. SUCCESSORS AND ASSIGNS. This Option Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective executors,
administrators, heirs and assigns.
13. GOVERNING LAW. This Option Agreement shall be governed by and
construed under the laws of the State of Tennessee without regard to the
conflicts of laws provisions of that state.
14. COUNTERPARTS. This Option Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. AMENDMENT. This Option Agreement may not be amended except by an
instrument in writing signed by all the parties.
-3-
IN WITNESS WHEREOF, the parties hereto have duly executed this Option
Agreement as of the date first above written.
OPTIONEE:
CASTLE DENTAL CENTERS
OF TENNESSEE, INC.
By: __________________________
Jack H. Castle, Jr.
President
SHAREHOLDER:
G. Powell Bilyeu, D.D.S.
-4-
CONSENT
Castle Mid-South Dental Centers, P.C., a Tennessee professional
corporation, consents to the Option on the Shareholder Interest granted herein,
and agrees to recognize Optionee as a substituted shareholder immediately upon
exercise of this Option with respect to the Shareholder Interest and payment of
the Exercise Price therefor, subject to applicable state laws and regulations.
CASTLE MID-SOUTH DENTAL
CENTERS, P.C., a Tennessee professional
corporation
By: _____________________________
G. Powell Bilyeu, D.D.S.
President
-5-
EXHIBIT 10.73
SECOND AMENDMENT AND SUPPLEMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT AND SUPPLEMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT ("SECOND AMENDMENT") dated as of June 16, 1997, between CASTLE DENTAL
CENTERS, INC. a Delaware Corporation (the "BORROWER"), and NATIONSBANK OF TEXAS,
N.A., a national banking association (the "LENDER").
RECITALS
WHEREAS, the Borrower and the Lender entered into that certain Credit
Agreement dated as of December 19, 1995 (the "PRIOR CREDIT AGREEMENT"); and
WHEREAS, on May 31, 1996, Borrower and Lender amended and restated the
prior Credit Agreement by entering into that certain Amended and Restated Credit
Agreement dated as of May 31, 1996, as amended by First Amendment and Supplement
to Amended and Restated Credit Agreement dated as of August 9, 1996 (such Credit
Agreement as amended is herein called the "CREDIT AGREEMENT") pursuant to which,
upon the terms and conditions stated therein, Lender agreed to make loans to
Borrower; and
WHEREAS, the Borrower and the Lender have agreed, on the terms and
conditions herein set forth, to amend certain aspects of the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Borrower and the Lender hereby agree that the Credit
Agreement shall be amended as follows:
SECTION 1. CERTAIN DEFINITIONS. As used in this Second Amendment, the
terms "Borrower", "Credit Agreement", "Second Amendment", and "Lender" shall
have the meanings indicated above; and unless otherwise defined herein, all
terms beginning with a capital letter which are defined in the Credit Agreement
shall have the same meanings herein as therein unless the context hereof
otherwise requires.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
(a) DEFINED TERMS.
(i) The terms "Advancing Term Loan Termination Date",
"Agreement", "Applicable Margin", "Final Maturity Date", and "Revolving Credit
Termination Date", which are defined in Section 1.02 of the Credit Agreement,
are hereby amended to read in their entirety as follows:
"ADVANCING TERM LOAN TERMINATION DATE" shall mean, unless the
Advancing Term Note is sooner prepaid pursuant to Section 2.07
hereunder, January 31, 1998.
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"AGREEMENT" shall mean the Amended and Restated Credit Agreement,
as amended and supplemented by the First Amendment and the Second
Amendment and as the same may from time to time be further amended or
supplemented.
"APPLICABLE MARGIN" shall mean, for Revolving Credit Loans, 1%
per annum and for the Term Loan and the Advancing Term Loan, 1 1/2% per
annum.
"FINAL MATURITY DATE" shall mean, unless the Term Note is sooner
prepaid pursuant to Section 2.07 hereof, January 31, 1998.
"REVOLVING CREDIT TERMINATION DATE" shall mean, unless the
Commitment is sooner terminated pursuant to Sections 2.03(b) or 10.02
hereof, January 31, 1998.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities
Purchase Agreement dated as of December 19, 1995 among the Borrower and
each of the investors signatory thereto as amended by the Waiver and
Amendment dated as of May 31, 1996 and by Amendment No.
1 dated as of June 16, 1997.
(ii) The proviso at the end of clause (a) of the definition of
"Change of Control" is hereby amended to read as follows:
provided, however, it shall not be deemed a Change of Control for
one or more of the investors under the Securities Purchase
Agreement to own or control legal or beneficial ownership of the
Borrower or JHC PC unless and until such ownership or control in
the aggregate equals or exceeds 40% of the Borrower or JHC PC;
(b) ADDITIONAL DEFINED TERMS. Section 1.02 of the Credit Agreement is
hereby further amended and supplemented by adding the following new definitions,
which read in their entirety as follows:
"EXCESS CASH FLOW" shall mean for any period (i) EBITDA PLUS
lease and rental expense for such period less (ii) the sum of interest
PLUS lease and rental expense PLUS scheduled deferred compensation PLUS
debt service on long-term debt and capital leases PLUS cash taxes for
such period.
"NET CASH PROCEEDS" means in connection with the issuance of any
Debt, capital stock, or other equivalent ownership interest or warrants
or options to purchase any of the foregoing, the cash proceeds received,
net of all reasonable investment banking fees, legal fees, accountant's
fees, underwriting discounts and commissions, and other customary fees
and expenses actually incurred and satisfactorily documented in
connection therewith.
"NEW PECK'S LOAN" shall have the meaning set out in Section
9.01(d) hereof.
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"SECOND AMENDMENT" shall mean that certain Second Amendment and
Supplement to Amended and Restated Credit Agreement dated as of June 5,
1997, between the Lender and the Borrower.
(c) DELETED DEFINED TERMS. Section 1.02 of the Credit Agreement is
hereby further amended by deleting the definition of "Advancing Term Loan
Borrowing Base".
SECTION 3. AMENDMENTS TO THE CREDIT AGREEMENT. The following provisions
of the Credit Agreement shall be amended as follows:
(a) Section 2.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 2.01(c) of the Credit Agreement is hereby
amended by deleting the date "June 30, 1997" and substituting the
words "the date of the Second Amendment" therefor.
(ii) Section 2.01(d) is hereby deleted and restated in its
entirety as follows:
"(d) INTEREST RATE ON ALL LOANS. Notwithstanding
anything to the contrary herein all Loans shall be Base
Rate Loans."
(b) Section 2.07(e) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(e) If the Borrower or any Subsidiary shall issue any
Debt with the consent of the Lender, other than Debt permitted by
Section 9.01 hereof, or any public or private offering pursuant
to which the Company or any of its Subsidiaries sells its equity
securities (the issuance of such Debt or such public or private
offering is hereinafter referred to as a "Refinancing"), 100% of
the Net Cash Proceeds thereof shall on the first Business Day
after receipt be applied
(i) unless a Default specified in Section 10.01(a)
has occurred and is continuing and unless such Default
would not be cured by the Refinancing, to the outstanding
principal and accrued interest owing on the Revolving
Credit Loan, Advancing Term Loan and the New Pecks Loan on
a prorata basis in proportion to the unpaid principal
amounts of the New Pecks Loan on the one hand and the
Revolving Credit Loans and Advancing Term Loan on the
other hand, and after such loans have been paid in full to
the principal and accrued interest owing on the Term Loan;
and
(ii) if a Default specified in Section 10.01(a)
exists and is continuing and such Default would not be
cured by the Refinancing, first to Indebtedness owing to
the Lender and after such Indebtedness has been paid in
full to such other Debt or uses as Borrower may direct."
- 3 -
(c) Section 2.08 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"The Advancing Term Loan Commitment shall at all times be
equal to $5,747,500."
(d) Section 3.01 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 3.01 REPAYMENT OF LOANS. Unless otherwise
required pursuant to Section 2.07, the Borrower will pay to the
Lender the principal payments required by this Section 3.01. On
the Revolving Credit Termination Date the Borrower shall repay
the outstanding principal amount of the Revolving Credit Note.
Commencing on July 30, 1997, the outstanding principal amounts of
the Term Note and the Advancing Term Note shall be payable in
four installments, the first of which shall be equal to 50% of
Excess Cash Flow for the quarter ending on June 30, 1997, to be
applied one-half each to said Notes, the next two of which shall
be in the amount of $301,250 on each such Note (being $602,500 in
the aggregate on each installment date) payable on each of the
Quarterly Dates thereafter, with the final installment of the
remaining principal balance on the Term Note and the Advancing
Term Note due on the Final Maturity Date."
(e) Section 6.04(j) of the Credit Agreement is hereby deleted in
its entirety.
(f) Section 8.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 8.01(h) is hereby amended by deleting the
figure "45" and substituting the figure "30" therefor.
(ii) Section 8.01(l) is hereby deleted and restated in
its entirety as follows:
"(l) Promptly becoming available and in any event
within 30 days after the end of each month, (i)
consolidated and consolidating statements of income,
stockholders' equity, changes in financial position and
cash flow of the Borrower and its Consolidated
Subsidiaries for such month and the related consolidated
and consolidating balance sheets as at the end of such
month, and setting forth in each case in comparative form
the corresponding figures for the preceding month,
accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial
statements fairly present the consolidated and
consolidating financial condition and results of
operations of the Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of,
and for, such month and (ii) a budget variance report
prepared by a Responsible Officer showing any variance
from the fiscal year budget previously furnished to the
Lender."
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(iii) The following new Section 8.01(n) is hereby added:
"(n) Promptly upon becoming available and in any
event within 30 days after the end of each fiscal year of
the Borrower, a capital expenditure budget for the next
fiscal year for the Lender's approval setting forth any
permitted capital expenditures and permitted Liens to be
incurred during the period."
(g) Section 9.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 9.01(d) is hereby deleted and restated in its
entirety as follows:
"(d) A loan in the principal amount of $2,000,000
arranged by Pecks Management Partners Ltd. (the "New
Peck's Loan") to fund the Borrower's purchase of a
purchase option for Southwest Dental Associates, L.C.
("Southwest Dental") and for working capital purposes;
PROVIDED that the documentations for such loan shall be in
the form attached as Exhibit A2 to the Second Amendment
PROVIDED FURTHER the Subordinated Debt shall have been
amended to provide that interest payments due thereon
beginning with interest payments due on or after September
30, 1996 have been and will be paid with non-cash
consideration until the earlier of (i) Final Maturity Date
or (ii) the Refinancing."
(ii) Section 9.01(e) is hereby deleted in its entirety:
(h) Sections 9.02(c) and (d) of the Credit Agreement are hereby
deleted in their entirety.
(i) Section 9.03(g) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(g) subject to the Lender being satisfied that (i) the
Borrower will have sufficient liquid capital to close the
transaction, (ii) the Borrower is, and will be on a PRO FORMA
basis, in material compliance with the provisions of Article VIII
and Article IX hereof, and (iii) no material adverse change has
occurred in the business or financial condition of Southwest
Dental since March 31, 1997, (A) the Borrower's acquisition of a
purchase option for Southwest Dental for a price not to exceed
$1,000,000, and (B) the Borrower's acquisition of Southwest
Dental for a purchase price of not to exceed $3,650,000."
(j) Section 9.07 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 9.07 MERGERS, ETC. Neither the Borrower nor any
Subsidiary will merge into or with or consolidate with any other
Person, or sell, lease or
- 5 -
otherwise dispose of any of its Property or assets to any other
Person other than (i) sales of inventory in the ordinary course
of business and (ii) incidental sales of Property no longer
useful in the Borrower's or Subsidiaries' business."
(k) Section 9.11 of the Credit Agreement is hereby deleted in its
entirety.
(l) Section 9.12 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 9.12 CURRENT RATIO. The Borrower will not permit
its ratio of (i) consolidated current assets to (ii) consolidated
current liabilities (excluding the current maturities of
long-term debt, deferred compensation pursuant to the Deferred
Compensation Agreement and Subordinated Debt) to be less than
1.25 to 1.0 at any time."
(m) Section 9.15 of the Credit Agreement is hereby amended by
deleting and restating in its entirety the first sentence thereof:
"Section 9.15 LEVERAGE RATIO. The Borrower will not permit
its Leverage Ratio as of the end of any fiscal quarter
(calculated on a rolling four quarter basis; PROVIDED, HOWEVER,
the first quarter test shall be for the quarter ended March 31,
1997 and the following rolling cumulative tests will begin with
such quarter ending March 31, 1997 until a full four quarter test
can be achieved) to be greater than 4.0 to 1.0 through March 31,
1997, 3.5 to 1.0 through June 30, 1997, 3.0 to 1.0 through
September 30, 1997 and 2.75 to 1.0 thereafter."
(n) Section 9.16 of the Credit Agreement is deleted and restated
in its entirety as follows:
"Section 9.16 FIXED CHARGE COVERAGE RATIO. The Borrower
will not permit its Fixed Charge Coverage Ratio as of the end of
any fiscal quarter (calculated on a rolling four quarter basis;
PROVIDED, HOWEVER, the first quarter test shall be for the
quarter ended March 31, 1997 and the following rolling cumulative
tests will begin with such quarter ending March 31, 1997 until a
full four quarter test can be achieved) to be less than 1.20 to
1.0. For any calculation period which would include one or more
quarters prior to the Stock Purchase or Asset Purchase or any
other future acquisition of an entity, the "rolling four
quarters" shall include (i) "pro forma" the EBITDA of the
applicable Old PC for such prior periods adjusted to reflect
costs and expenses which such Old PC would have incurred had a
Management Services Agreement between Borrower and/or any
Subsidiary and such Old PC been in effect (adding back
appropriate executive salaries and non-cash charge offs relating
to such transaction) and (ii) deferred compensation and debt
service on long-term debt and capital lease payments assumed for
such
- 6 -
prior periods on the same basis as in effect during the most
current quarterly period. For purposes of this Section 9.16,
"Fixed Charge Coverage Ratio" shall mean the ratio for the
relevant period of (i) EBITDA PLUS lease and rental expense to
(ii) interest PLUS lease and rental expense PLUS deferred
compensation pursuant to Deferred Compensation Agreement PLUS
debt service on long-term debt and capital leases for the subject
period."
(o) Article IX of the Credit Agreement is hereby further amended
as follows:
(i) Section 9.18 is amended by adding the words "New Pecks
Loan documents" in the second line thereof after the word
"Agreements" (the first time it appears) and before the word
"and."
(ii) Section 9.21 is amended by adding the words "New
Pecks Loan documents," in the second line thereof after the words
"modification of the" and before the word "Management".
(iii) Section 9.24 is amended by adding the following
sentence at the end thereof:
"The Borrower shall not make any optional
prepayment of principal or interest on the Subordinated
Debt or the New Pecks Loan or any prepayment under the
Deferred Compensation Agreement. The Borrower will not
amend or modify the Securities Purchase Agreement
(including, without limitation Amendment No. 1 thereto)
without the prior written consent of the Lender.
(iv) A new Section 9.25 is hereby added to read as
follows:
"Section 9.25 MINIMUM EBITDA. The Borrower will not
permit EBITDA to be less than the amounts set forth below:
Period beginning Amount
January 1, 1997
------------------------------ ----------
through March 31, 1997 ....... $ 600,000
through June 30, 1997 ........ $ 800,000
through September 30, 1997 ... $1,000,000
through December 31, 1997 .... $1,000,000
(p) The Credit Agreement is hereby amended by deleting Exhibit J
attached thereto.
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(q) The Credit Agreement is hereby amended by deleting all of the
schedules attached thereto, being Schedules 7.02, 7.03, 7.09, 7.10,
7.14-1, 7.17, 7.19-1, 7.24-1, 7.25, 9.01, 9.02, and 9.03 and
substituting therefore Schedules 7.02, 7.03, 7.09, 7.10, 7.14, 7.17,
7.19, 7.24, 7.25, 9.01, 9.02, and 9.03 attached hereto.
SECTION 4. WAIVERS.
(a) WAIVER OF CURRENT RATIO, LEVERAGE RATIO AND FIXED CHARGE COVERAGE
RATIO. It is understood that immediately prior to the effective date of this
Second Amendment the Borrower is not in compliance with respect to Sections
9.12, 9.15, and 9.16 of the Credit Agreement. Upon the effective date of this
Second Amendment the Borrower hereby represents that it will be in compliance
with all provisions of the Credit Agreement and accordingly the Lender hereby
waives for the periods up to the effective date of this Second Amendment but not
after, the Event of Default under Section 10.01(d) created by the aforesaid
existing noncompliance.
(b) WAIVER OF GREENBURG NOTE DEFAULT. Borrower is in default in payment
of the note payable to 1st Dental Care, Inc., in the principal amount of
$1,787,938 (the "Greenburg Note"). The Lender hereby waives the Event of Default
under Section 10.01(b) created by the aforesaid default in the Greenburg Note
for the periods up to the effective date of this Second Amendment until the date
which is ninety days from and after the date hereof at which time such waiver
shall terminate and the Greenburg Note must no longer be in default.
(c) EXTENT OF WAIVER. The foregoing waiver shall not be deemed to be a
wavier by the Lender of any other covenant, condition or obligation on the part
of the Borrower or any Subsidiary under the Credit Agreement or any other
Security Instrument except as set forth in Sections 4(a) and 4(b) of this Second
Amendment. In addition, the foregoing waivers shall in no respect evidence any
commitment by the Lender to grant any future waivers of any covenant, condition
or obligation on the part of the Borrower or any Subsidiary under the Credit
Agreement or any other Security Instrument including, without limitation,
Sections 9.12, 9.15, 9.16 and 10.01(b) and (d) of the Credit Agreement. Any
further waivers must be specifically agreed to in writing in accordance with
Section 11.04 of the Credit Agreement.
SECTION 5. CONDITIONS PRECEDENT. This Second Amendment shall become
binding upon the following conditions each of which must be satisfied to the
satisfaction of the Lender:
(a) receipt by the Lender of a satisfactory capital expenditure
budget for the 1997 fiscal year;
(b) funding of the New Peck's Loan on terms as set forth an
Exhibit A2 hereto;
(c) the Borrower shall have renegotiated each of the purchase
money notes described on Exhibit A1 hereto to provide for interest only
payments until January 31, 1998 and the waiver of any and all defaults
existing under such notes and related agreements and otherwise being on
terms satisfactory to the Lender;
- 8 -
(d) waiver and deferral of payments under the Deferred
Compensation Agreement and waiver of all existing defaults thereunder;
(e) receipt by the Lender of a restructuring fee equal to 1/2 of
1% of the Commitments;
(f) a certificate of the Secretary of the Borrower setting forth
(i) the resolutions of the Board of Directors of the Borrower adopted in
respect of this Second Amendment, (ii) the officer of the Borrower
authorized to sign this Second Amendment and (iii) the signature of such
authorized officer of the Borrower;
(g) a certificate of the Secretary of each Guarantor and
Subsidiary party hereto setting forth (i) the resolutions of the Board
of Directors of such entity adopted in respect of this Second Amendment,
(ii) the officer of such entity authorized to sign this Second
Amendment, and (iii) the signature of such authorized officer of such
entity;
(h) an opinion of counsel to the Borrower, the Guarantors, and
Subsidiaries party hereto in form and substance satisfactory to the
Lender;
(i) payment by the Borrower of all legal fees and expenses and
all closing costs and expenses in accordance with Section 8 hereof; and
(j) such other documents as the Lender or special counsel to the
Lender may reasonably request.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby reaffirms
that as of the effective date of this Second Amendment, the representations and
warranties made by the Borrower in Article VII of the Credit Agreement, as
hereby amended, will be true and correct as though made on and as of the
effective date of this Second Amendment.
SECTION 7. LIMITATIONS. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement, the
Notes or any of the other Security Instruments, or (b) except as expressly set
forth herein, prejudice any right or rights which the Lender may now have or may
have in the future under or in connection with the Credit Agreement, the Notes,
the Security Instruments, or any of the other documents referred to therein.
Except as expressly supplemented, amended or modified hereby or by express
written amendments thereof, the terms and provisions of the Credit Agreement,
the Notes, any other Security Instruments, or any other documents or instruments
executed in connection with any of the foregoing are and shall remain in full
force and effect. In the event of a conflict between this Second Amendment and
any of the foregoing documents, the terms of this Second Amendment shall be
controlling.
SECTION 8. PAYMENT OF EXPENSES. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Lender harmless from and against liability for the payment of all reasonable
substantiated out-of-pocket costs and expenses arising in connection with the
preparation, execution, delivery, amendment, modification, waiver
- 9 -
and enforcement of, or the preservation of any rights under this Second
Amendment, including, without limitation, the reasonable fees and expenses of
any local or other counsel for the Lender, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Security Instruments. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
SECTION 9. GOVERNING LAW. This Second Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.
SECTION 10. DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the
several Sections of this Second Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 11. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed and delivered by their respective duly authorized offices as
of June ___, 1997, and effective as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS SECOND AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES.
CASTLE DENTAL CENTERS, INC.
By: _______________________
Jack H. Castle, Jr.
President
NATIONSBANK OF TEXAS, N.A.
By: _______________________
Margaret H. Barradas
Senior Vice President
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RATIFICATION
Each of the undersigned hereby agrees that its/his respective
liabilities under the Security Instruments to which it/he is a party shall
remain enforceable against it/him in accordance with the terms of Security
Instruments to which it/he is a party and shall not be reduced, altered,
limited, lessened or in any way affected by the execution and delivery of this
Second Amendment and Supplement to Amended and Restated Credit Agreement. Each
of the undersigned hereby confirms and ratifies its/his liabilities under the
Security Instruments to which it/he is a party in all respects.
CASTLE DENTAL CENTERS OF TEXAS,
INC.
By:______________________________
Name:
Title:
JHCDDS, INC.
By:_______________________________
Name:
Title:
CASTLE DENTAL CENTERS OF
TENNESSEE, INC.
By:_______________________________
Name:
Title:
CASTLE DENTAL CENTERS OF
FLORIDA, INC.
By:________________________________
Name:
Title:
Jack H. Castle, Jr.
- 11 -
EXHIBIT 10.74
SENIOR SUBORDINATED NOTE
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY IS ISSUED WITH ORIGINAL ISSUE
DISCOUNT. FOR INFORMATION CONCERNING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE
DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS AGREEMENT, CONTACT CASTLE
DENTAL CENTERS, INC. AT 1360 POST OAK BLVD., SUITE 1300, HOUSTON, TEXAS 77056.
THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO
OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF SECTION 8 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT
DATED AS OF DECEMBER 18, 1995 (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF), BETWEEN CASTLE DENTAL CENTERS,
INC. AND THE INVESTORS NAMED ON THE SIGNATURE PAGES THEREOF.
CASTLE DENTAL CENTERS, INC.
12% Senior Subordinated Note
due January 31, 1998
No. R-1 January 31, 1998
$1,347,000
FOR VALUE RECEIVED, the undersigned, CASTLE DENTAL CENTERS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called the "COMPANY"), promises to pay to NAP & COMPANY or registered
assigns, the principal sum of $1,347,000 on January 31, 1998, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance thereof at the rate of 12% per annum from the date hereof, payable
monthly in arrears in cash on the last day of each month in each year,
commencing on June 30, 1997, until the principal hereof (or any portion
thereof), shall have become due and payable (whether at maturity, upon
acceleration, upon notice of prepayment or otherwise) or shall have been paid.
Upon the occurrence and during the continuation of any payment default (other
than a payment default in respect of any Installment) under paragraph 9A(i) or
paragraph 9A(ii) of the Agreement (defined below), the rate of interest under
this Senior Subordinated Note shall be increased to a rate per annum from time
to time equal to the lower of (a) 16% and (b) the maximum rate, if any,
permitted by applicable law, compounded quarterly.
Payments of both principal and interest are to be made at the
address shown on the Company's registry or at such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
This Senior Subordinated Note is one of the New Senior Subordinated
Notes of the Company made and delivered by the Company pursuant to a Securities
Purchase Agreement dated as of December 18, 1995 (as amended, supplemented or
otherwise modified from time to time pursuant to the terms thereof, the
"AGREEMENT"), between the Company and the Investors named on the signature pages
thereof and is entitled to the benefits and is subject to the provisions of the
Agreement. As provided in the Agreement, this Senior Subordinated Note is
subject to prepayment in whole or in part in certain cases as specified in the
Agreement. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
This Senior Subordinated Note is a registered Senior Subordinated
Note and, as provided in the Agreement, upon surrender hereof for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or his attorney duly authorized
in writing, one or more new Senior Subordinated Notes of like tenor and for a
like aggregate principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the
Company and any agent of the Company may treat the person in whose name this
Senior Subordinated Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
The Company has agreed to make prepayments of principal on the
dates and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall
occur and be continuing, the principal of this Senior Subordinated Note may be
declared due and payable in the manner and with the effect provided in the
Agreement. Upon the terms set forth in the Agreement, the Company has agreed to
pay, and save the holder hereof harmless against any liability for, liabilities,
losses, damages and expenses arising in connection with the enforcement by the
holder hereof of any of its rights under this Senior Subordinated Note, the
Agreement or any other Related Document.
This Senior Subordinated Note is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with the
law of such State, without giving effect to the conflicts or choice of law
principles of such State.
CASTLE DENTAL CENTERS, INC.
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
EXHIBIT 10.75
SENIOR SUBORDINATED NOTE
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY IS ISSUED WITH ORIGINAL ISSUE
DISCOUNT. FOR INFORMATION CONCERNING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE
DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS AGREEMENT, CONTACT CASTLE
DENTAL CENTERS, INC. AT 1360 POST OAK BLVD., SUITE 1300, HOUSTON, TEXAS 77056.
THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO
OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF SECTION 8 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT
DATED AS OF DECEMBER 18, 1995 (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF), BETWEEN CASTLE DENTAL CENTERS,
INC. AND THE INVESTORS NAMED ON THE SIGNATURE PAGES THEREOF.
CASTLE DENTAL CENTERS, INC.
12% Senior Subordinated Note
due January 31, 1998
No. R-2 January 31, 1998
$267,000
FOR VALUE RECEIVED, the undersigned, CASTLE DENTAL CENTERS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called the "COMPANY"), promises to pay to FUELSHIP & COMPANY or
registered assigns, the principal sum of $267,000 on January 31, 1998, with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid balance thereof at the rate of 12% per annum from the date hereof,
payable monthly in arrears in cash on the last day of each month in each year,
commencing on June 30, 1997, until the principal hereof (or any portion
thereof), shall have become due and payable (whether at maturity, upon
acceleration, upon notice of prepayment or otherwise) or shall have been paid.
Upon the occurrence and during the continuation of any payment default (other
than a payment default in respect of any Installment) under paragraph 9A(i) or
paragraph 9A(ii) of the Agreement (defined below), the rate of interest under
this Senior Subordinated Note shall be increased to a rate per annum from time
to time equal to the lower of (a) 16% and (b) the maximum rate, if any,
permitted by applicable law, compounded quarterly.
Payments of both principal and interest are to be made at the
address shown on the Company's registry or at such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
This Senior Subordinated Note is one of the New Senior Subordinated
Notes of the Company made and delivered by the Company pursuant to a Securities
Purchase Agreement dated as of December 18, 1995 (as amended, supplemented or
otherwise modified from time to time pursuant to the terms thereof, the
"AGREEMENT"), between the Company and the Investors named on the signature pages
thereof and is entitled to the benefits and is subject to the provisions of the
Agreement. As provided in the Agreement, this Senior Subordinated Note is
subject to prepayment in whole or in part in certain cases as specified in the
Agreement. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
This Senior Subordinated Note is a registered Senior Subordinated
Note and, as provided in the Agreement, upon surrender hereof for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or his attorney duly authorized
in writing, one or more new Senior Subordinated Notes of like tenor and for a
like aggregate principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the
Company and any agent of the Company may treat the person in whose name this
Senior Subordinated Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
The Company has agreed to make prepayments of principal on the
dates and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall
occur and be continuing, the principal of this Senior Subordinated Note may be
declared due and payable in the manner and with the effect provided in the
Agreement. Upon the terms set forth in the Agreement, the Company has agreed to
pay, and save the holder hereof harmless against any liability for, liabilities,
losses, damages and expenses arising in connection with the enforcement by the
holder hereof of any of its rights under this Senior Subordinated Note, the
Agreement or any other Related Document.
This Senior Subordinated Note is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with the
law of such State, without giving effect to the conflicts or choice of law
principles of such State.
CASTLE DENTAL CENTERS, INC.
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
EXHIBIT 10.76
SENIOR SUBORDINATED NOTE
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND
IT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR ANY EXEMPTION THEREFROM UNDER SAID ACT AND SUCH LAWS AND THE
RESPECTIVE RULES AND REGULATIONS THEREUNDER.
THE SENIOR SUBORDINATED NOTE REPRESENTED HEREBY IS ISSUED WITH ORIGINAL ISSUE
DISCOUNT. FOR INFORMATION CONCERNING THE ISSUE PRICE, AMOUNT OF ORIGINAL ISSUE
DISCOUNT, ISSUE DATE AND YIELD TO MATURITY OF THIS AGREEMENT, CONTACT CASTLE
DENTAL CENTERS, INC. AT 1360 POST OAK BLVD., SUITE 1300, HOUSTON, TEXAS 77056.
THE INDEBTEDNESS EVIDENCED BY THIS SENIOR SUBORDINATED NOTE IS SUBORDINATED TO
OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED IN, AND IS OTHERWISE
SUBJECT TO THE TERMS OF SECTION 8 OF THAT CERTAIN SECURITIES PURCHASE AGREEMENT
DATED AS OF DECEMBER 18, 1995 (AS AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED
FROM TIME TO TIME PURSUANT TO THE TERMS THEREOF), BETWEEN CASTLE DENTAL CENTERS,
INC. AND THE INVESTORS NAMED ON THE SIGNATURE PAGES THEREOF.
CASTLE DENTAL CENTERS, INC.
12% Senior Subordinated Note
due January 31, 1998
No. R-3 January 31, 1998
$386,000
FOR VALUE RECEIVED, the undersigned, CASTLE DENTAL CENTERS, INC., a
corporation organized and existing under the laws of the State of Delaware
(herein called the "COMPANY"), promises to pay to NORTHMAN & Co. or registered
assigns, the principal sum of $386,000 on January 31, 1998, with interest
(computed on the basis of a 360-day year of twelve 30-day months) on the unpaid
balance thereof at the rate of 12% per annum from the date hereof, payable
monthly in arrears in cash on the last day of each month in each year,
commencing on June 30, 1997, until the principal hereof (or any portion
thereof), shall have become due and payable (whether at maturity, upon
acceleration, upon notice of prepayment or otherwise) or shall have been paid.
Upon the occurrence and during the continuation of any payment default (other
than a payment default in respect of any Installment) under paragraph 9A(i) or
paragraph 9A(ii) of the Agreement (defined below), the rate of interest under
this Senior Subordinated Note shall be increased to a rate per annum from time
to time equal to the lower of (a) 16% and (b) the maximum rate, if any,
permitted by applicable law, compounded quarterly.
Payments of both principal and interest are to be made at the
address shown on the Company's registry or at such other place as the holder
hereof shall designate to the Company in writing, in lawful money of the United
States of America.
This Senior Subordinated Note is one of the New Senior Subordinated
Notes of the Company made and delivered by the Company pursuant to a Securities
Purchase Agreement dated as of December 18, 1995 (as amended, supplemented or
otherwise modified from time to time pursuant to the terms thereof, the
"AGREEMENT"), between the Company and the Investors named on the signature pages
thereof and is entitled to the benefits and is subject to the provisions of the
Agreement. As provided in the Agreement, this Senior Subordinated Note is
subject to prepayment in whole or in part in certain cases as specified in the
Agreement. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Agreement.
This Senior Subordinated Note is a registered Senior Subordinated
Note and, as provided in the Agreement, upon surrender hereof for registration
of transfer, duly endorsed, or accompanied by a written instrument of transfer
duly executed, by the registered holder hereof or his attorney duly authorized
in writing, one or more new Senior Subordinated Notes of like tenor and for a
like aggregate principal amount will be issued to, and registered in the name
of, the transferee. Prior to due presentment for registration of transfer, the
Company and any agent of the Company may treat the person in whose name this
Senior Subordinated Note is registered as the owner hereof for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
The Company has agreed to make prepayments of principal on the
dates and in the amounts specified in the Agreement.
In case an Event of Default, as defined in the Agreement, shall
occur and be continuing, the principal of this Senior Subordinated Note may be
declared due and payable in the manner and with the effect provided in the
Agreement. Upon the terms set forth in the Agreement, the Company has agreed to
pay, and save the holder hereof harmless against any liability for, liabilities,
losses, damages and expenses arising in connection with the enforcement by the
holder hereof of any of its rights under this Senior Subordinated Note, the
Agreement or any other Related Document.
This Senior Subordinated Note is intended to be performed in the
State of New York, and shall be construed and enforced in accordance with the
law of such State, without giving effect to the conflicts or choice of law
principles of such State.
CASTLE DENTAL CENTERS, INC.
By:
Name:
Title:
ATTEST:
By:
Name:
Title:
EXHIBIT 10.77
AMENDMENT NO. 1
TO DEFERRED COMPENSATION AGREEMENT
This Amendment No. 1 to Deferred Compensation Agreement, dated June 16, 1997
(the "Amendment"), by and between Castle Dental Centers, Inc. (the "Company")
and Jack H. Castle, D.D.S. ("Castle") who agree as follows:
1. INTRODUCTION. This Amendment amends the Deferred Compensation Agreement
dated effective December 18, 1995 by and between the Company and Castle (the
"Agreement") and waives any defaults thereunder so that the Company may seek
further credit arrangements.
2. WAIVER.
a. Castle hereby waives any defaults under the Agreement that may
exist on June 12, 1997.
b. The waiver by Castle is limited solely to the purposes and to
the extent provided herein and shall not be construed to be a
waiver of any default that may occur after the date hereof
under the Agreement or a waiver of Castle's right to receive
any payments heretofore due or hereafter due that are deferred
as provided below. Except as provided in this Amendment, the
Agreement will continue in full force and effect.
c. The waiver (i) shall be binding on Castle and his successors
and assigns and shall inure to the benefit of the Company and
its successors and assigns and (ii) constitutes the entire
agreement among the parties with respect to any waiver by
Castle of the terms of the Agreement.
3. POSTPONEMENT OF PAYMENTS UNDER THE AGREEMENT. The parties hereto agree
that, notwithstanding any other provisions of the Agreement, no amounts under
the Agreement shall be payable until the earlier of:
a. the issuance of any indebtedness permitted by the Credit
Agreement, dated as of December 19, 1995, by and between
Castle Dental Centers, Inc. and NationsBank of Texas, N.A., as
amended by the Amended and Restated Credit Agreement dated as
of May 31, 1996, the First Amendment and Supplement to Amended
and Restated Credit Agreement dated as of August 9, 1996 and
the Second Amendment and Supplement to Amended and Restated
Credit Agreement dated as of June 5, 1997 (the "Credit
Agreement") or any public or private offering pursuant to
which the Company or any subsidiary thereof sells its equity
securities the net proceeds of which, in the case of either
such issuance of debt or sale of such equity
securities, are applied to the Credit Agreement and the
$2,000,000 loan arranged by Pecks Management Partners Ltd.
(the "New Pecks Loan") to fund the Company's purchase of a
purchase option from Southwest Dental Associates L.C.; or
b. January 31, 1998.
After payments are no longer prohibited under the preceding sentence, the
scheduled quarterly deferred compensation payments under the Agreement shall
become payable beginning on the next scheduled payment date.
4. REPAYMENT OF MISSED PAYMENTS.
a. In the event the Company conducts an initial public offering
("IPO") of common stock of the Company the gross proceeds to
the Company of which is not less than Twenty-Five Million
Dollars ($25,000,000), the Company shall pay Castle all
scheduled payments under the Agreement that were not paid on
or before the time of the IPO (including payments not made
prior to the date hereof and payments deferred pursuant to
Section 3 hereof); provided, however, that such payments shall
only be made in the event the Company first pays any amounts
owing under the Credit Agreement and the New Pecks Loan.
b. Any payments under the Agreement that were not paid to Castle
due to Section 3 shall be payable on the earlier of an IPO
satisfying the requirements of the foregoing clause (a) or
December 31, 2000.
5. INTEREST. All payments under the Agreement that were deferred under
Section 3 or were in default as of the date of this Agreement ("Deferred
Payments") shall bear interest at 10% from the date each Deferred Payment was
due under the terms of the Agreement before giving effect to this Amendment to,
but not including, the date such payments are made. Accrued interest on a
Deferred Payment or a portion thereof shall be payable on the date such Deferred
Payment or portion thereof is paid. For purposes of the preceding sentence, all
repayments of Deferred Payments will be credited against Deferred Payments in
the order in which they were initially scheduled to be paid under the terms of
the Agreement.
-2-
In witness whereof, the parties hereto have caused this Amendment to be executed
as of the date first written above.
CASTLE DENTAL CENTERS, INC.
By:
Name:
Title:
JACK H. CASTLE, D.D.S.
-3-
EXHIBIT 10.78
OPTION AGREEMENT FOR THE PURCHASE AND SALE OF BUSINESSES
This OPTION AGREEMENT FOR THE PURCHASE AND SALE OF BUSINESSES (this
"AGREEMENT"), dated as of June 1, 1997, is entered into by and among Castle
Dental Centers of Texas, Inc., a Texas corporation ("CDC TEXAS"), Castle Dental
Centers, Inc., a Delaware corporation ("CASTLE"), Jack H. Castle, D.D.S., P.C.,
a Texas professional corporation ("CASTLE PC"), SW Dental Associates, LC, a
Texas limited liability company ("SW DENTAL"), John Goodman,D.D.S. ("GOODMAN")
and Harold Simpson, Jr. ("SIMPSON").
W I T N E S S E T H:
WHEREAS, SW Dental and CDC Texas each wish to grant the other an option to
enter into and consummate the transactions contemplated by the Member Interests
Purchase Agreement substantially in the form of EXHIBIT A hereto (the "Purchase
Agreement");
WHEREAS, CDC Texas wishes to grant, and SW Dental wishes to acquire, an
option for SW Dental to enter into and consummate the transactions contemplated
by an Asset Purchase Agreement substantially in the form of EXHIBIT B hereto
(the "HORIZON AGREEMENT"), which agreement contemplates the purchase by SW
Dental of substantially all of the assets of CDC Texas located in Travis County,
Texas, and all counties contiguous thereto (the "TERRITORY"); and
WHEREAS, in connection with the grant of such options the parties are,
contemporaneously herewith, entering into a Management Services Agreement to
facilitate the transition of business operations in the event that any of the
options contemplated herein is exercised;
NOW, THEREFORE, in consideration for the mutual covenants and other
consideration described herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
ARTICLE I
OPTIONS TO PURCHASE AND SELL BUSINESSES
1.1 CERTAIN DEFINITIONS. As used herein, the following terms shall have
the following meanings ascribed to them:
"EQUITY SECURITIES" shall mean any securities of Castle,
including, without limiting the
1
generality of the foregoing, any common or preferred stock,
securities convertible into or exchangeable for such common or
preferred stock and any warrants, options, rights, or any
instruments (including debt instruments or preferred stock)
convertible into or exchangeable for such common stock or
preferred stock of Castle.
"NET CASH PROCEEDS" shall mean the amount obtained by
subtracting (i) the sum of the legal fees of Castle, printing
costs, filing fees paid to any governmental authority
(including blue sky fees), accountant's fees and fees and
allowances paid to any investment banker, broker, underwriter
or finder attributable to sale(s) of Equity Securities after
the date hereof, from (ii) the total gross proceeds received
by Castle from such sale(s) of Equity Securities.
"ROUND ROCK LEASE" means the lease dated as of August 1, 1997,
between Castle Dental Centers of Texas, Inc., as lessee, and
Socrates Retail Joint Venture, as lessor, covering the
premises known as Lot 4C, Block 1, replat of Lot 4, Block 1,
Socrates Addition, Phase II.
"TELECOMMUNICATIONS RIGHTS" shall mean telephone numbers, fax
numbers and e-mail addresses pertaining to the location
covered by the Round Rock Lease.
1.2 GRANT OF OPTIONS. (a) Subject to the terms and conditions of this
Agreement, (i) CDC Texas shall have an exclusive non-transferable option (the
"CDC OPTION"), but not the obligation, to purchase from Goodman and Simpson all
of the outstanding limited liability company interests in and capital stock of
SW Dental, and (ii) upon the exercise of such option by CDC Texas, Goodman and
Simpson shall be obligated to sell such interests to CDC Texas, such purchase
and sale to be on the terms and conditions set forth in the Purchase Agreement.
During the CDC Purchase Option Term (as such term is defined below), any
certificates representing interests in, or capital stock of, SW Dental shall
contain a legend referring to this Agreement.
(b) Subject to the terms and conditions of this Agreement, SW Dental shall
have an exclusive non-transferable option (the "HORIZON OPTION"), but not the
obligation, to purchase from CDC Texas all of the assets of CDC Texas related to
the conduct of business in the Territory, all as set forth in the Horizon
Agreement, and upon the exercise of such option by SW Dental, CDC Texas shall be
obligated to sell such business and assets to SW Dental, such purchase and sale
to be on the terms and conditions further set forth in the Horizon Agreement.
2
(c) During the period commencing three days after the sale for cash by
Castle, whether in one or more private placements or in a public offering, of
any Equity Securities from which Castle receives aggregate Net Cash Proceeds
(including and combined with any other Net Cash Proceeds received after the date
hereof) in excess of $15,000,000, and ending 10 days after such aggregate Net
Cash Proceeds are received, CDC Texas shall exercise the CDC Option and effect
the purchases contemplated in the Purchase Agreement, subject only to the
conditions (if any) set forth in the Purchase Agreement, and the foregoing
promise of CDC Texas shall be subject to enforcement by court ordered specific
performance.
1.3 OPTION TERMS. (a) CDC Texas may exercise the CDC Option during the
period commencing on the date hereof and ending on the earlier of (i) the first
anniversary of the date hereof, and (ii) ten days after the sale for cash by
Castle, whether in a private placement or in a public offering, of any Equity
Securities from which Castle receives Net Cash Proceeds (including and combined
with any other Net Cash Proceeds received after the date hereof) in excess of
$15,000,000. The period during which such option may be exercised by CDC Texas
is referred to herein as the "CDC PURCHASE OPTION TERM." Upon exercise of the
CDC Option, the Horizon Option shall terminate.
(b) SW Dental may exercise the Horizon Option for a period of 60 days,
commencing on the first to occur of (1) the date the CDC Option expires by its
terms or is canceled or terminated by CDC Texas, (2) the date the Management
Services Agreement, dated as of even date herewith (the "MANAGEMENT SERVICES
AGREEMENT"), between CDC Texas and SW Dental, is terminated by CDC Texas. The
period during which such option may be exercised by SW Dental is referred to
herein as the "HORIZON PURCHASE OPTION TERM".
1.4 CONSIDERATION FOR THE OPTIONS. (a) In consideration of the grant by
Goodman to CDC Texas of the CDC Option, CDC Texas shall (i) pay, immediately
upon the execution hereof, to Goodman $1,000,000 (the "NON-REFUNDABLE PAYMENT"),
(ii) pay to SW Dental, upon the exercise of the CDC Option at the closing of the
transactions contemplated in the Purchase Agreement, (A) if the CDC Option is
exercised more than 180 days but less than 270 days after the date hereof, an
amount equal to $170,000, (b) if the CDC Option is exercised at least 270 days
but less than 300 days after the date hereof, an amount equal to $255,000, and
(C) if the CDC Option is exercised at least 300 days after the date hereof but
on or before the one year anniversary of the date hereof, an amount equal to
$340,000.
(b) In the event that CDC Texas does not exercise the CDC Option and
effect the purchase contemplated by the Purchase Agreement and the CDC Option
expires by its terms, then (i) the Non-Refundable Payment shall be and remain
the sole property of Goodman, (ii) no payments, other than the Non-Refundable
3
Payment as contemplated in Section 1.4(a) hereof, shall be paid and delivered to
SW Dental, and (iii) CDC Texas shall, in lieu of the payments (other than the
Non-Refundable Payment) contemplated in Section 1.4(a), (A) assign and transfer
to SW Dental the Round Rock Lease (in the event that SW Dental is not a party to
the Round Rock Lease as lessee thereunder) and the equipment, fixtures, patient
records, computer software, customer lists, Telecommunications Rights, employee
information and all other property or things of value located at the premises
covered by the Round Rock Lease, and (B) permit (and shall not interfere with,
prohibit or restrict) any offer to employ or the hiring by SW Dental of any or
all employees (including administrative staff as well as dental technicians and
dentists) of CDC Texas employed at the location covered by the Round Rock Lease,
and from and after the date of such assignments and transfers, all property and
assets, real or personal, tangible or intangible, shall be the sole property and
assets of SW Dental, and CDC Texas shall execute such bills of sale and
assignments as SW Dental shall reasonably request to further evidence the
foregoing.
(c) The Non-Refundable Payment is and shall hereafter be the sole and
exclusive property of Goodman. Notwithstanding anything contained in this
Agreement or in any other agreement to which Goodman and any person party hereto
are a party, the Non-Refundable Payment is not refundable to any person, for any
reason or circumstance, including without limitation by reason of (i) any events
or conditions that prevent, prohibit, limit or adversely affect in any way the
exercise by CDC Texas of the CDC Option, (ii) the acts of any governmental
authority to enjoin or limit the exercise of the CDC Option, (iii) any changes
in (A) general economic or local business conditions, or (B) any federal, state
or local laws, rules or regulations, that adversely affect the CDC Option or the
potential profitability of the dental care business, (iv) the breach of any
covenant, by SW Dental or Goodman, set forth in any written agreement with CDC
Texas or any affiliate thereof, or (v) any representation or warranty of Goodman
or SW Dental set forth in any written agreement thereof with CDC Texas or any
affiliate thereof, is untrue or incorrect in any respect, whether or not
material. It is the intention of the parties hereto that the Non-Refundable
Payment is permanently and irrevocably transferred by CDC Texas and its
affiliates to Goodman without any recourse against the Non-Refundable Payment,
and without rights to rescind or recapture the Non-Refundable Payment, by action
in quantum meruit, at common law, in equity or otherwise.
(d) SW Dental has executed the Management Services Agreement in
consideration of the valuable services to be provided thereunder and of the
granting by SW Dental to CDC Texas of the CDC Option.
(e) All payments by any party hereto to any other party hereto pursuant to
this Section 1.4 shall be made by wire transfer of immediately available funds.
1.5 REIMBURSEMENT OF EXPENSES BY CDC TEXAS. CDC Texas acknowledges that SW
Dental has incurred, prior to the date hereof, certain expenses on behalf of CDC
Texas in connection with certain services provided by SW Dental for CDC Texas in
the Territory. A schedule of such expenses is set forth on EXHIBIT C hereto. CDC
4
Texas has reimbursed to SW Dental the total of such expenses in cash on the date
hereof by wire transfer of immediately available funds to an account or accounts
previously identified by SW Dental.
ARTICLE II
EXERCISE OF PURCHASE OPTIONS
2.1 NOTICE OF EXERCISE OF OPTION BY CDC TEXAS. CDC Texas may give notice
in writing (the "CDC PURCHASE NOTICE") to Goodman at any time during the CDC
Purchase Option Term of CDC Texas' intent to exercise the CDC Option. Closing of
the transactions contemplated by the Purchase Agreement (the "Closing") shall be
held within ten days after Goodman's receipt of the CDC Purchase Notice.
2.2 NOTICE OF EXERCISE OF OPTION BY SW DENTAL. SW Dental may give notice
in writing (the "SW PURCHASE NOTICE") to CDC Texas at any time during the
Horizon Purchase Option Term of SW Dental's intent to exercise the Horizon
Option. Closing of the transactions contemplated by the Purchase Agreement shall
be held within ten days after CDC Texas' receipt of the SW Purchase Notice.
ARTICLE III
HORIZON PURCHASE OPTION MATTERS
3.1 NOTICE OF CHANGES TO SCHEDULES. CDC Texas shall, promptly upon
becoming aware that any representation or warranty of CDC Texas in the Horizon
Agreement is not complete or accurate in any material respect, or that it will
be unable to comply in any material respect with any covenant or agreement in
the Horizon Agreement due to changed circumstances, inform SW Dental in writing
(a "HORIZON CHANGE NOTICE"). Each such Horizon Change Notice shall set forth a
description of such change or such inaccurate representation or warranty or
inability to perform such covenant or agreement.
3.2 NOTICE OF EXERCISE OF HORIZON OPTION. SW Dental may give notice in
writing (the "HORIZON NOTICE") to CDC Texas at any time during the Horizon
Purchase Option Term of SW Dental's intent to exercise the Horizon Option.
Closing of the transactions contemplated by the Horizon Agreement (the "HORIZON
CLOSING") shall be held within 30 days after CDC Texas' receipt of the Horizon
Notice, PROVIDED, that SW Dental may decline to close the transactions
contemplated in the Horizon Agreement, whether because of Horizon Change Notices
or for any other reason, it being agreed hereby that the Horizon Option is an
option of SW Dental, and not an obligation.
5
3.3 NONCOMPETITION AND OTHER PROVISIONS VOID. SW Dental and CDC Texas
acknowledge and agree that, if the CDC Option remains unexercised at the end of
the CDC Purchase Option Term, neither SW Dental, John Goodman, D.D.S., nor
Sheryl Goodman shall be subject to any further employment, noncompetition,
confidentiality, secrecy, hiring limitation or nonsolicitation obligations, or
any other contractual limitations, with respect to CDC Texas or any of CDC
Texas' affiliates, and the Management Services Agreement entered into
contemporaneously herewith shall be terminated, void and without further force
or effect at such time.
3.4 RETENTION OF EMPLOYEES. If SW Dental exercises the Horizon Option, SW
Dental shall be entitled to offer employment to and to employ any and all CDC
Texas employees then employed by CDC Texas in the Territory who are not licensed
dentists, and CDC Texas shall use reasonable efforts to obtain consents to the
assignment to SW Dental of all of CDC Texas' employment contracts with licensed
dentists working in the Territory.
ARTICLE IV
CONDUCT OF BUSINESS
4.1 CONDUCT OF THE BUSINESS OF SW DENTAL DURING THE PURCHASE OPTION TERMS.
SW Dental and Goodman hereby covenant that, from the date hereof to and
including the earlier of (i) the expiration of the CDC Purchase Option Term and
the Horizon Purchase Option Term or (ii) the closing of the transactions
contemplated by the Purchase Agreement, except as contemplated by the Management
Services Agreement or otherwise agreed to in writing by CDC Texas:
(a) the business of SW Dental shall be conducted and the assets
used in the business of SW Dental shall be repaired and
maintained in the ordinary and usual course, in a manner
consistent with past practice;
(b) except in the ordinary course of business consistent with past
practice, SW Dental shall not (i) make any commitment to make
any capital expenditures individually in excess of $75,000 or
in the aggregate in excess of $350,000; (ii) dispose of any
capital assets with a book value, individually or in the
aggregate, in excess of $10,000 or encumber any of its capital
assets or other assets; (iii) incur, or guarantee or otherwise
become liable for, any indebtedness for borrowed money, except
as may be required in connection with the Round Rock Lease;
(iv) amend any of its material contracts; (v) enter into any
new employee benefit plan, program or arrangement or amend any
existing employee benefit plan, program or arrangement; or
(vi) issue any additional equity
6
securities or transfer any equity securities of SW Dental,
except for transfers to Goodman from Harold Simpson, Jr.;
(c) SW Dental shall use its best efforts to preserve for CDC Texas
the goodwill of all persons dealing with SW Dental;
(d) on receipt of the CDC Purchase Notice, SW Dental and Goodman
shall cooperate fully with CDC Texas to consummate the closing
of the transactions contemplated in the Purchase Agreement in
an orderly fashion;
(e) SW Dental shall promptly notify CDC Texas of (i) any breach or
violation of, default or event of default under, or actual or
threatened termination or cancellation of any material
contract or other material instrument relating to the business
of SW Dental, (ii) any material loss of, damage to, or
disposition of any of the assets of SW Dental (other than the
sale or use of inventories in the ordinary course of
business), and (iii) any claim or litigation, threatened or
instituted, or any other material adverse event or occurrence
involving or affecting the business of SW Dental; and
(f) SW Dental and Goodman shall not sell, dispose of, distribute,
encumber or enter into any agreement or commitment, whether
oral or written for the sale, disposition, distribution or
encumbrance of any portion of the business of SW Dental (other
than (i) the sale or use of inventories in the ordinary course
of business, (ii) the transfer of interests in SW Dental to
Goodman from Harold Simpson, Jr., and (iii) encumbrances
created in connection with debt incurred to finance leasehold
improvements and purchases of equipment for the Round Rock
Lease) or initiate or participate, through agents,
representatives or otherwise, in any discussions or
negotiations with, or otherwise solicit from, any corporation,
business or person any proposals or offers relating to the
disposition of any such portion of the business of SW Dental,
PROVIDED, that SW Dental and Goodman may, within 90 days prior
to the expiration of the CDC Option, engage in discussions
with financial institutions or investors in anticipation of
the exercise of the Horizon Option.
4.2 CONDUCT OF THE BUSINESS OF CDC TEXAS THROUGH THE HORIZON PURCHASE
OPTION TERM. CDC Texas and Castle hereby covenant that, from the date hereof to
and including the earlier of (i) the expiration of the Horizon Purchase Option
Term or (ii) the closing of the transaction contemplated by the Horizon
Agreement, except as agreed to in writing by SW Dental:
7
(a) the business of CDC Texas in the Territory shall be conducted
and the assets used in the business of CDC Texas in the
Territory shall be repaired and maintained in the ordinary and
usual course, in a manner consistent with past practice;
(b) except in the ordinary course of business consistent with past
practice, CDC Texas shall not, with respect to its business in
the Territory, (i) make any commitment to make any capital
expenditures individually in excess of $75,000 or in the
aggregate in excess of 350,000; (ii) dispose of any capital
assets with a book value, individually or in the aggregate, in
excess of $10,000 or encumber any of its capital assets or
other assets; (iii) incur, or guarantee or otherwise become
liable for, any indebtedness for borrowed money; (iv) amend
any of its material contracts; (v) enter into any new employee
benefit plan, program or arrangement or amend any existing
employee benefit plan, program or arrangement or grant any
increases in employee compensation; or (vi) issue any
additional equity securities or transfer any equity securities
of CDC Texas;
(c) CDC Texas shall use its best efforts to preserve for SW Dental
the goodwill of all persons dealing with CDC Texas in the
Territory;
(d) on receipt of the SW Purchase Notice, CDC Texas and Castle
shall cooperate fully with SW Dental to consummate the
exercise of the Horizon Agreement in an orderly fashion;
(e) CDC Texas shall promptly notify SW Dental of (i) any breach or
violation of, default or event of default under, or actual or
threatened termination or cancellation of any material
contract or other material instrument relating to the business
of CDC Texas in the Territory, (ii) any material loss of,
damage to, or disposition of any of the assets of CDC Texas in
the Territory (other than the sale or use of inventories in
the ordinary course of business), and (iii) any claim or
litigation, threatened or instituted, or any other material
adverse event or occurrence involving or affecting the
business of CDC Texas in the Territory;
(f) CDC Texas and Castle shall not sell, dispose of, distribute,
encumber or enter into any agreement or commitment, whether
oral or written for the sale, disposition, distribution or
encumbrance of any portion of the business of CDC Texas in the
Territory (other than the sale or use of inventories in the
ordinary course of business) or initiate or participate,
through agents, representatives or otherwise, in any
discussions or negotiations
8
with, or otherwise solicit from, any corporation, business or
person any proposals or offers relating to the disposition of
any such portion of the business of CDC Texas in the
Territory.
ARTICLE V
COVENANTS
5.1 CLOSE SW DENTAL FIRST. Until such time as (i) CDC Texas exercises the
CDC Option and closes the transactions contemplated in the Purchase agreement,
or (ii) CDC Texas and Goodman agree in writing to release, extinguish and
terminate the CDC Option, CDC Texas shall not, nor shall it permit its
affiliates Castle or Castle PC to, purchase or acquire for cash, all or
substantially all of the assets or business of any dentist, dental office, oral
or dental surgery center, or multi-site dental or oral care practice
organization; PROVIDED, HOWEVER, that this Section 5.1 shall not prohibit the
construction or lease by CDC Texas of additional dental offices in the Houston,
Texas, area.
5.2 RISK ALLOCATION. CDC Texas shall purchase insurance as CDC Texas may
desire to cover such risks of ownership of SW Dental as CDC Texas may incur in
connection with the ownership thereof after the date hereof arising as a result
of the acquisition of Goodman's capital stock and member interests in CDC Texas.
CDC Texas has agreed under the Purchase Agreement, subject to compliance by SW
Dental with the covenants contained herein, (i) to succeed to the ownership of
SW Dental, and CDC Texas acknowledges the risks inherent therein and the need
for adequate insurance of loss on account of torts, malpractice, workmen's
compensation claims, property damage and other risks of operation of a dental
practice, whether or not similar to any of the foregoing, (ii) that the risks
arising from changes, occurring between the date hereof and the closing date
under the Purchase Agreement, in the business, financial condition,
profitability, prospects, legal and regulatory matters and limitations, asset
condition, and all other risks associated with adverse changes after the date
hereof in the business, financial condition or results of operations of SW
Dental, are risks that have been assumed by CDC Texas as part of the bargain of
the parties hereto, (iii) that CDC Texas has made its decision to purchase the
stock and interests in SW Dental from Goodman based on the representations and
warranties set forth as of the date hereof in the Purchase Agreement (with no
requirement for updates for changes in the relevant facts), and CDC Texas and
its affiliates have agreed to purchase such stock and interests subject only to
the conditions set forth herein, the effect of which is that (A) SW Dental and
its affiliates thereby assume the risk that the business of SW Dental may change
materially and adversely between the date of execution hereof and the date that
CDC Texas purchases such stock and interests pursuant to the Purchase Agreement,
and (B) the representations and warranties of SW Dental, being limited to the
date hereof, may not be true and correct on a subsequent date, but such changes
shall not entitle CDC Texas to refuse to close
9
the transactions contemplated by the Purchase Agreement, and (iv) CDC Texas has
agreed hereby, subject only to (A) its ability to raise sufficient funds to pay
the purchase price under the Purchase Agreement, and (B) the conditions (if any)
set forth in the Purchase Agreement, to purchase the outstanding capital stock
and member interests in SW Dental without regard to changes that occur in the
business, financial condition, prospects, results of operations, profitability,
legal or regulatory matters, assets or any other matters pertaining to or
affecting the business of SW Dental between the date hereof and the closing date
under the Purchase Agreement.
5.3 ROUND ROCK LEASE BUILDOUT. SW Dental is expressly permitted hereunder
to incur expenses and indebtedness which have been mutually agreed to by SW
Dental and CDC Texas in order to build out and complete dental care facilities,
including the construction of leasehold improvements, the purchase of needed
office and dental care equipment, and the incurring of marketing and promotional
expenses associated with the opening of a new dental practice office, at the
location that is the subject of the Round Rock Lease. The leasehold
improvements, and all equipment and other property, at the Round Rock Lease
location shall be owned by SW Dental.
ARTICLE VI
MISCELLANEOUS
6.1 CONSENT TO REFERENCES IN REGISTRATION STATEMENT. SW Dental hereby
irrevocably (i) consents to the references that may be made to it and its
business, and the inclusion of the financial statements of SW Dental, in any
Registration Statement filed by Castle under the Securities Act or offering
memorandum relating to the Common Stock of Castle; and (ii) waives any breach of
any confidentiality agreement to which SW Dental has entered into with CDC Texas
or Castle which may be occasioned by such inclusion.
6.2 ENTIRE AGREEMENT. This Agreement (including the Exhibits) and the
Management Services Agreement set 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, including that certain letter agreement dated September
11, 1996 (the "SEPTEMBER LETTER"), are merged into and superseded by this
Agreement. There are no unwritten or oral agreements among the parties hereto.
Pursuant to the September Letter, CDC Texas paid to SW Dental $500,000, and (i)
such payment constitutes a nonrefundable part (which does not reduce and is not
a credit against any amounts payable hereunder or in connection with the
exercise of the Purchase Agreement) of the consideration to be paid to Goodman
in connection with the expected exercise by CDC Texas of the CDC Option, (ii)
this Agreement constitutes a restructure of the various terms contemplated by
the September Letter, and (iii) the Non-Refundable Payment is in addition to,
and does not reduce, and is not a credit against, the cash payment to be made by
CDC
10
Texas to Goodman pursuant to the Purchase Agreement at the closing contemplated
therein.
6.3 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 this Agreement may not be assigned by SW
Dental without the prior written consent of CDC Texas, or by CDC Texas without
the prior written consent of SW Dental.
6.4 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.
6.5 HEADINGS. The headings, subheadings and captions 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.
6.6 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 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). No
delay on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
6.7 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended to
and shall not be construed to give any person (other than the parties signatory
hereto) 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.
6.8 EXPENSES. Except as otherwise provided in that certain letter
agreement, dated December 26, 1996, between SW Dental and CDC Texas, and except
as expressly provided in this Section 6.8, the parties hereto shall each pay all
costs and expenses incurred by them or on their behalf in connection with this
Agreement and the transactions contemplated hereby. Within 30 days after the
execution hereof, CDC Texas shall pay to Fulbright & Jaworski L.L.P. all fees
incurred by SW Dental or Goodman in connection with the execution and delivery
of this Agreement and the Management Services Agreement.
6.9 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, addressed as follows:
11
if to CDC Texas, Castle or Castle PC, to:
Castle Dental Centers of Texas, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056-3021
with a copy to:
Mr. William D. Gutermuth
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2856
if to SW Dental or Goodman, to:
Southwest Dental Associates, L.C.
713 Beardsley Lane
Austin, Texas 78746
Attn.: John Goodman, D.D.S.
with a copy to:
Mr. Roger K. Harris
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
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.
6.10 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.
6.11 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 CDC Texas and SW Dental
may disclose such information as is required to comply with the requirements of
their respective lenders and investors and to comply with applicable securities
laws. 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,
12
without obtaining the prior approval of the other parties hereto to the contents
and the manner of presentation and publication thereof.
6.12 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 Travis County, Texas, and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts for itself the exclusive jurisdiction
of the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement.
6.13 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.
6.14 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 the grant or exercise of the Option or any other matter hereunder,
this Agreement shall be enforceable in a court of equity 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.
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 OF TEXAS, INC.
By: _________________________
Name: Jack H. Castle, Jr.
Title: President
13
CASTLE DENTAL CENTERS, INC.
By: _________________________
Name: Jack H. Castle, Jr.
Title: President
JACK H. CASTLE, D.D.S., P.C.
By: _________________________
Name: Jack H. Castle, Jr.
Title: President
SW DENTAL ASSOCIATES, LC
By: _________________________
Name: John Goodman, D.D.S.
Title: President
John Goodman, D.D.S.
Harold Simpson, Jr.
14
EXHIBIT 10.79
ASSET PURCHASE AGREEMENT
Dated as of ____________ ___, 199__
By and Among
Castle Dental Centers of Texas, Inc.
Jack H. Castle, D.D.S., P.C.
and
SW Dental Associates, LC
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS.............................................. 1
ARTICLE II
THE TRANSACTION
2.1 PURCHASE AND SALE OF ASSETS.............................. 4
2.2 EXCLUDED ASSETS.......................................... 5
2.3 ASSUMPTION OF OBLIGATIONS................................ 6
2.4 NONASSIGNABLE CONTRACTS AND LEASES....................... 6
2.5 USE OF NAME.............................................. 7
2.6 CLOSING.................................................. 7
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY............................. 7
3.2 AGENCY RELATIONSHIP...................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER................. 7
4.2 EXISTENCE AND GOOD STANDING.............................. 8
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT.................. 8
4.4 CAPITAL STOCK............................................ 8
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS.................... 8
4.6 SUBSIDIARIES AND AFFILIATES.............................. 9
4.7 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE......... 9
4.8 BOOKS AND RECORDS........................................ 9
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION............. 9
4.10 REAL PROPERTY............................................ 10
4.11 LEASES................................................... 10
4.12 MATERIAL CONTRACTS....................................... 10
4.13 PERMITS.................................................. 10
4.14 LITIGATION............................................... 11
4.15 TAXES.................................................... 11
4.16 INSURANCE................................................ 11
4.17 INTELLECTUAL PROPERTIES.................................. 12
4.18 COMPLIANCE WITH LAWS..................................... 12
4.19 EMPLOYMENT RELATIONS..................................... 12
4.20 EMPLOYEE BENEFIT PLANS................................... 12
4.21 ENVIRONMENTAL LAWS AND REGULATIONS....................... 12
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC................... 13
-ii-
4.23 COMPENSATION OF EMPLOYEES................................ 13
4.24 PAYORS................................................... 13
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.................... 13
4.26 SOLVENCY................................................. 13
4.27 DISCLOSURE............................................... 14
4.28 INVESTMENTS.............................................. 14
4.29 BROKER'S OR FINDER'S FEES................................ 14
4.30 COPIES OF DOCUMENTS...................................... 14
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER.............. 14
5.2 EXISTENCE AND GOOD STANDING OF PURCHASER; POWER AND
AUTHORITY................................................ 14
5.3 NO VIOLATIONS............................................ 15
5.4 CAPITAL STOCK............................................ 15
5.5 LITIGATION............................................... 15
5.6 COMPLIANCE WITH LAWS..................................... 16
5.7 FINANCIAL STATEMENTS..................................... 16
5.8 BROKER'S OR FINDER'S FEES................................ 16
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF SELLER, CASTLE PC AND CASTLE
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.................. 16
6.2 PERFORMANCE OF AGREEMENTS................................ 16
6.3 NO LITIGATION THREATENED................................. 17
6.4 CONSIDERATION............................................ 17
6.5 GOVERNMENTAL APPROVALS................................... 17
6.6 PROCEEDINGS.............................................. 17
6.7 GOOD STANDING CERTIFICATES............................... 17
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.................. 17
7.2 PERFORMANCE OF AGREEMENTS................................ 17
7.3 DOCUMENTS OF CONVEYANCE.................................. 17
7.4 NO LITIGATION THREATENED................................. 18
7.5 GOVERNMENTAL APPROVALS................................... 18
7.6 PROCEEDINGS.............................................. 18
7.7 GOOD STANDING CERTIFICATES............................... 18
7.8 RELEASES OF LIENS........................................ 18
7.9 CERTAIN TRANSACTIONS WITH JACK H. CASTLE, D.D.S., P.C.... 18
-iii-
ARTICLE VIII
COVENANTS OF SELLER, CASTLE PC AND CASTLE
8.1 COOPERATION BY SELLER.................................... 18
8.2 REVIEW OF THE ASSETS..................................... 19
8.3 FURTHER ASSURANCES....................................... 19
ARTICLE IX
COVENANTS OF PURCHASER
9.1 COOPERATION BY PURCHASER................................. 19
9.2 BOOKS AND RECORDS; PERSONNEL............................. 19
9.3 FURTHER ASSURANCES....................................... 20
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 INDEMNIFICATION OF THE SELLER, CASTLE PC AND CASTLE...... 20
10.2 INDEMNIFICATION OF THE PURCHASER......................... 20
10.3 DEMANDS.................................................. 20
10.4 RIGHT TO CONTEST AND DEFEND.............................. 21
10.5 COOPERATION.............................................. 21
10.6 RIGHT TO PARTICIPATE..................................... 22
10.7 PAYMENT OF DAMAGES....................................... 22
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT......................................... 22
11.2 SUCCESSORS AND ASSIGNS................................... 22
11.3 COUNTERPARTS............................................. 23
11.4 HEADINGS................................................. 23
11.5 MODIFICATION AND WAIVER.................................. 23
11.6 NO THIRD PARTY BENEFICIARY RIGHTS........................ 23
11.7 SALES AND TRANSFER TAXES................................. 23
11.8 EXPENSES................................................. 23
11.9 NOTICE................................................... 23
11.10 GOVERNING LAW............................................ 24
11.11 CONFIDENTIALITY; PUBLICITY............................... 24
11.12 CONSENT TO JURISDICTION.................................. 24
11.13 SEVERABILITY............................................. 25
11.14 ENFORCEMENT.............................................. 25
Schedule 3.1 Allocation of Purchase Price
Schedule 4.6 Asset Owned by Third Parties which are Used in the
Business
Schedule 4.7 Financial Statements
Schedule 4.10 Real Property
Schedule 4.11 Leased Personal Property
Schedule 4.12 Material Contracts and Proposals
Schedule 4.13 Permits
Schedule 4.14 Litigation
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.21 Environmental Matters
Schedule 4.23 Employee Compensation
Schedule 4.24 Payors
Schedule 5.7 SW Dental Financial Statements
-v-
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of ____________ ____, 199__, is
entered into by and among Castle Dental Centers of Texas, Inc., a Texas
corporation ("CDC Texas" or "Seller"), Castle Dental Centers, Inc., a Delaware
corporation ("Castle"), Jack H. Castle D.D.S., P.C., a Texas professional
corporation ("Castle PC"), and SW Dental Associates, LC, a Texas limited
liability company ("Purchaser").
W I T N E S S E T H:
WHEREAS, Seller, Purchaser and Castle have entered into that certain
Option Agreement for the Purchase and Sale of Businesses, dated March ____, 1997
(the "Option Agreement"), pursuant to which Seller granted to Purchaser an
option to purchase substantially all of the assets of Seller located in Travis
County, Texas, and all counties contiguous thereto (the "Option");
WHEREAS, Purchaser wishes to exercise the Option and purchase
substantially all of the property, assets and business of Seller located in
Travis County, Texas, and all counties contiguous thereto which purchase Seller,
Purchaser and Castle have agreed shall be on the terms and subject to the
conditions set forth below.
NOW, THEREFORE, for the mutual covenants and other consideration described
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
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) and, unless otherwise indicated, all
references herein to Seller's or Castle PC's assets, property and business shall
refer to such of Seller's or Castle PC's assets, property and business as are
located in the Territory, as defined herein, and all references to Seller's or
Castle PC's liabilities or obligations shall refer to such of Seller's or Castle
PC's liabilities or obligations as are incurred directly in connection with
Seller's or Castle PC's Business conducted in the Territory:
"ACCOUNTS RECEIVABLE": all notes and accounts receivable of Seller.
"ACCOUNTS PAYABLE": all accounts payable of Seller.
"AFFILIATE": with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.
"AGREEMENT": this Asset Purchase Agreement, as amended from time to time
as provided herein.
"ASSETS": as defined in Section 2.1 hereof.
"ASSUMED OBLIGATIONS": as defined in Section 2.3 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
patient records or any books, records, files and other data of Seller which
relate exclusively to organizational and corporate governance proceedings of
Seller.
"BUSINESS": the practice management of dentistry, including dental
specialty care and all other management and related activities currently
conducted by Seller and Castle PC in the Territory, but specifically excluding
therefrom the conduct of any activities requiring a license to practice
dentistry.
"CASTLE": means Castle Dental Centers, Inc., a Delaware corporation.
"CASTLE PC": Jack H. Castle, D.D.S., P.C., a Texas professional
corporation.
"CDC TEXAS": means Castle Dental Centers of Texas, Inc., a Texas
corporation.
"CLOSING": as defined in Section 2.5 hereof.
"CLOSING DATE": means the date 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.
"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 that would have a Material Adverse Effect.
"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, remedial or
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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, in each case as
amended and now in effect, 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
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,
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 substituted therefor.
"EXCLUDED ASSETS": as defined in Section 2.2 hereof.
"EXCLUDED CONTRACTS": as defined in Section 2.2(b) hereof.
"FINANCIAL STATEMENTS": as defined in Section 4.7 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 a
governmental authority.
"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.
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"MATERIAL ADVERSE EFFECT": material adverse effect on the assets,
liabilities, Business, condition (financial or otherwise), results or operations
or prospects of the Seller, or its Affiliates.
"PERMITS": as defined in Section 4.13 hereof.
"PERMITTED ENCUMBRANCES": as defined in Section 4.9 hereof.
"PERSON": any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other department or agency thereof or
other entity.
"PLANS": as defined in Section 4.20 hereof.
"PRE-CLOSING PERIODS": as defined in Section 4.15(a) hereof.
"PRICE ALLOCATION": as defined in Section 3.1 hereof.
"PURCHASE PRICE": as defined in Section 3.1 hereof.
"PURCHASER": as defined in the preamble of this Agreement.
"RETURNS": as defined in Section 4.15(a) hereof.
"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.
"SELLER" as defined in the preamble of this Agreement.
"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": Travis County, Texas, and all counties contiguous with Travis
County, Texas.
ARTICLE II
THE TRANSACTION
2.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase from the Seller, and the Seller
agrees to sell, convey, transfer, assign and deliver, and cause to be sold,
conveyed, transferred,
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assigned and delivered, to Purchaser, on the Closing Date, against the receipt
by the Seller of the consideration specified in Section 3.1 hereof, the Assets,
free and clear of any Encumbrances except Permitted Encumbrances. The term
"Assets" shall mean all of the rights, title and interests of Seller in and to
the assets of Seller used in, or used exclusively in connection with, the
conduct of the Business in the Territory on 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. The Assets shall include but are not limited to the following
categories of assets:
(a) real property, if any, including leasehold interests, described
in Schedule 4.9 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 and other fixed assets
owned or leased and used or held for use in the conduct of the Business;
(c) contracts listed on Schedule 2.1(c) (the "Assigned Contracts"),
documents, instruments, insurance and indemnity policies and general intangibles
of Seller, other than the Excluded Contracts;
(d) Accounts Receivable as of the Closing Date;
(e) except as limited by Sections 2.2(e) and 2.5 hereof, all
licenses and permits (to the extent transferable), registrations and
authorizations, proprietary information, methods, know-how, designs, processes,
procedures, goodwill and all rights to other Intellectual Property used in the
Business;
(f) Books and Records;
(g) any rights 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) to the extent transferable, third-party indemnities, policies of
insurance [identified by Purchaser], fidelity, surety or similar bonds and the
coverages afforded thereby relating to the Assets; and
(j) cash in the aggregate amount of $60,000.
2.2 EXCLUDED ASSETS. The Assets shall not include any of the following
(the "Excluded Assets"):
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(a) cash, cash equivalents, deposits, advance payments, securities,
letters of credit naming Seller as account party, certificates of deposit,
notes, drafts, checks and similar instruments in excess of an aggregate of
$60,000;
(b) each dentist employment contract, managed care contract,
insurance or third party reimbursement agreement or other contract set forth on
Schedule 2.2(b) (the "Excluded Contracts");
(c) Tax refunds related to the Business or the Assets received or
receivable by Seller relating to Taxes paid by Seller for all periods prior to
the Closing Date;
(d) minute books and governance documents of the Seller;
(e) except as set forth in Section 2.5, the name "Castle Dental
Centers" and derivations thereof;
(f) patient records; and
(g) any asset listed on Schedule 2.2(g).
2.3 ASSUMPTION OF OBLIGATIONS. Upon the sale of the Assets by Seller,
Purchaser shall assume and agree to pay, perform and discharge, in a timely
manner and in accordance with the terms thereof, the obligations of Seller in
respect of Accounts Payable, accrued liabilities and long term debt (including
automobile notes) in an amount of not more than an aggregate of $250,000
incurred in the ordinary course of business (collectively, "Assumed
Obligations"). Notwithstanding anything contained herein to the contrary,
Purchaser does not assume, and hereby expressly disclaims responsibility for,
any obligation or liability of Seller in excess of an aggregate of $250,000 or
which was not incurred in the ordinary course of business.
2.4 NONASSIGNABLE CONTRACTS AND LEASES. In the case of any Assigned
Contracts which are not by their terms assignable or with respect to which a
consent to assignment has not obtained on or before the Closing Date, Seller
agrees to use its best efforts to obtain, or cause to be obtained, after the
Closing Date, any written consents necessary to convey to Purchaser the benefit
thereof. Purchaser shall cooperate with Seller, 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 with respect to
any Assigned Contract. If Seller is unable to obtain such necessary written
consents for the remaining term of any such Assigned Contract, Purchaser shall
act as Seller's agent in the performance of all obligations and liabilities
under such Assigned Contract and Seller shall act as Purchaser's agent in the
receipt of any benefits, rights or interests which inure to Seller under such
Assigned Contract. Purchaser shall indemnify and hold harmless Seller and its
officers, directors, employees and Affiliates from and against any loss, damage,
costs or expenses (including reasonable costs of defense and attorney's fees)
arising out of such Assigned
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Contract as a result of acts or omissions occurring on or after the Closing
Date, or any failure by Purchaser to fulfill its obligations under this Section
2.4.
2.5 USE OF NAME. Seller, Castle PC and Castle hereby grant, and Purchaser
accepts, a nonexclusive, nontransferable license to use the name "Castle Dental
Centers" and derivations thereof in the Territory for a one year period
commencing on the date hereof.
2.6 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall take place at the time and place at which this Agreement is
executed, if the conditions to Closing set forth in Articles VI and VII herein
have been satisfied or waived. The Closing shall take place on the Closing Date
at 9:00 a.m. at the offices of Bracewell & Patterson, L.L.P., South Tower
Pennzoil Place, Suite 2900, 711 Louisiana Street, Houston, Texas 77002, or such
other place, date and time as may be mutually agreed upon by the parties.
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY. Purchaser agrees to pay to Seller
$3,400,000 (the "Purchase Price") in cash on the Closing Date by wire transfer
of immediately available funds to an account or accounts previously identified
by Seller.
Purchaser and Seller hereby agree to allocate the Purchase Price in
accordance with Section 1060 of the Code among the Assets in accordance with
Schedule 3.1 attached hereto (the "Price Allocation"). The parties hereby
undertake and agree to file timely any information that may be required to be
filed pursuant to regulations promulgated under Section 1060(b) of the Code. The
parties further agree that they will report the federal, state, municipal,
foreign and local and other tax consequences of the purchase and sale hereunder
in a manner consistent with the Price Allocation, as so adjusted, and that they
will not take any position inconsistent therewith.
3.2 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
Seller receives any funds, documents or instruments which constitute or are
delivered in respect of Assets transferred to Purchaser pursuant to this
Agreement, Seller agrees to hold such funds, documents or instruments in trust
for Purchaser and as Purchaser's agent therefor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
4.1 REPRESENTATIONS AND WARRANTIES OF SELLER. As an inducement to the
Purchaser to enter into and perform this Agreement, CDC Texas, Castle PC and
Castle, jointly and severally, hereby make the following representations and
warranties to Purchaser with respect to the operation of the Business in the
Territory (as used in this Article IV, the term "Seller" shall refer to CDC
Texas and Castle PC, and a
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representation or warranty made by "Seller" shall be deemed to have been made
with respect to each of CDC Texas and Castle PC):
4.2 EXISTENCE AND GOOD STANDING. CDC Texas is a corporation duly organized
and validly existing, and Castle PC is a professional corporation duly organized
and validly existing, under the laws of the State of Texas. Seller has the full
power and authority to own, lease and operate its property and to carry on the
Business as now being conducted and to own or lease the Assets owned or leased
by it. Seller is duly qualified or licensed to do business in each jurisdiction
in which the character or location of the properties owned or leased by Seller
or the nature of the business conducted by Seller makes such qualification
necessary and the absence of which would have a Material Adverse Effect.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. Seller has full power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement by Seller and the consummation by it
of the transactions contemplated hereby have been duly authorized and approved
by all requisite corporate action of Seller, and no other action on the part of
Seller or its shareholders is necessary to authorize the execution, delivery and
performance of this Agreement by Seller and the consummation of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Seller and is a valid and binding obligation of Seller enforceable against it 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.
4.4 CAPITAL STOCK. The capital stock of the CDC Texas consists of ________
shares, all of which are owned by Castle. The capital stock of the Castle PC
consists of ________ shares, all of which are owned by __________.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution, delivery and
performance of this Agreement by Seller and the consummation by Seller 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 Seller; (b) to
the knowledge of Seller and Castle, 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 Seller or by which any of
Seller's properties or assets may be bound; (c) to the knowledge of Seller and
Castle, require any filing by Seller with, or require Seller to obtain, any
permit, consent, or approval of, or require Seller to give any notice to, any
governmental or regulatory body, agency or authority; or (d) result in a
violation or breach by Seller or Castle of, conflict with, constitute (with or
without due notice or lapse of time or both) a default by Seller or Castle (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 Seller 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
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which Seller or Castle is a party, or by which Seller or any of its properties
or assets may be bound, except for such violations, consents, breaches,
defaults, terminations, and accelerations which would not have a Material
Adverse Effect.
4.6 SUBSIDIARIES AND AFFILIATES. Seller has no subsidiaries. Except as set
forth on Schedule 4.6, all of the Assets used in the Business are owned by CDC
Texas or Castle PC, and on consummation of the transactions contemplated hereby
Purchaser will have acquired all of the Assets used in the Business.
4.7 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE. Attached hereto as
Schedule 4.7 is the balance sheet of CDC Texas and Castle PC combined as of the
date shown thereon (the "Balance Sheet Date") and the statements of operations
and cash flows for the year then ended with respect to operations of the
Business in the Territory (collectively, the "Financial Statements"). The
Financial Statements fairly present in all material respects the financial
position of the Business in the Territory at the date thereof and the results of
operations of the Business in the Territory and its cash flows for the period
indicated. 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 the Business in the Territory.
To Seller's or Castle's knowledge, other than as (a) disclosed on
the Financial Statements, or (b) incurred since the Balance Sheet Date in the
ordinary course of business, the Seller has no direct or indirect indebtedness,
liability, claim, deficiency, obligation or responsibility, known or unknown,
fixed or contingent, liquidated or unliquidated, accrued, absolute or otherwise
with respect to Seller's operations in the Territory.
4.8 BOOKS AND RECORDS. The Seller has previously made available to
Purchaser true, correct and complete copies of its charter documents, bylaws and
regulations, and all amendments to each. The minute books of Seller, as
previously made available to Purchaser and its representatives, contain accurate
records in all material respects of the meetings of the board of directors and
shareholders of Seller.
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION. 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, CDC Texas and Castle PC have good and valid title to their
respective Assets, in each case subject to no Encumbrances, except for (a)
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 Seller in the operation of the Business, (b) Encumbrances for
current taxes, assessments or governmental charges or levies on property not yet
due or delinquent, (c) Encumbrances created by Purchaser, including but not
limited to Encumbrancees created in accordance with the provisions of this
Agreement; and, (d) Encumbrances relating to Assumed Obligations (liens of the
type described in clauses (a), (b), (c) and (d) above or hereinafter sometimes
referred to as "Permitted Encumbrances"). Seller has heretofore furnished
Purchaser with a fixed asset ledger which sets forth all fixed assets owned by
Seller as of the Balance Sheet Date. Seller
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is not aware of any defects in such assets that would have a Material Adverse
Effect on the ability of Purchaser to use such assets in the Business, ordinary
wear and tear excepted.
4.10 REAL PROPERTY. Schedule 4.10 identifies all interests in real
property used by the Seller in the Business, including leases, and includes the
name of the record title holder thereof. To Seller's and Castle's knowledge, all
of the buildings, structures and appurtenances situated on the real property
owned or leased by Seller are in such an operating condition, and in a state of
maintenance and repair, subject to ordinary wear and tear, as is necessary for
the operation of the Assets in the Business. The real property had adequate
rights of ingress and egress for operation of the Business in the ordinary
course. To Seller's and Castle's knowledge, no condemnation or similar
proceeding is pending or threatened which would preclude or impair the use of
any such property, except where such proceeding would not have a Material
Adverse Effect.
4.11 LEASES. Schedule 4.11 contains an accurate and complete list of all
personal property leases to which Seller is a party (as lessee or lessor) and a
description of all such leases to which Seller is a party as lessee. Each lease
set forth in Schedule 4.11 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 by Seller thereunder.
4.12 MATERIAL CONTRACTS. Except as set forth in Schedule 4.12, the
Assigned Contracts do not include (a) any agreement, contract or commitment
relating to the employment of any person by Seller, (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 $5,000, (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 Seller to engage in any line of business or to compete with any
Person, (h) any agreement, contract or commitment which involves $5,000 or more
and is not cancelable without penalty within 30 days, or (i) any other
agreement, contract, or commitment which would have a Material Adverse Effect.
Also set forth in Schedule 4.12 is a list of all proposals submitted by Seller
to any third party that, if accepted by such third party, would require
disclosure on Schedule 4.12. Except where it would not have a Material Adverse
Effect, each contract or agreement set forth in Schedule 4.12 is in full force
and effect and 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 by Seller thereunder.
4.13 PERMITS. Schedule 4.13 attached hereto lists all of the governmental
and other third party permits (including occupancy permits), licenses, consents
and authorizations ("Permits") required, to the knowledge of Seller and Castle,
in connection with the use, operation or ownership of the Assets and the conduct
of the Business as currently conducted, except for Permits which, if not
obtained or in effect, would not have a Material Adverse Effect. Seller holds
all of the Permits listed on Schedule 4.13,
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and none is presently subject to revocation or challenge. Except as set forth on
Schedule 4.13, all such Permits will be assigned to Purchaser, and none of such
Permits will be subject to revocation or termination as a result thereof.
4.14 LITIGATION. Except as set forth on Schedule 4.14, there is no action,
suit, proceeding at law or in equity, arbitration or administrative or other
proceeding by or before (or any investigation by) any governmental or other
instrumentality or agency, pending, or, to the knowledge of Seller and Castle,
threatened, against or affecting the properties, rights or goodwill of Seller,
Castle, or employees of Seller, and Seller and Castle do not know of any 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
Seller and Castle threatened, seeking to prevent or challenge the transactions
contemplated by this Agreement. Purchaser will assume no liability whatsoever
with respect to any matter described on Schedule 4.14. There have been no
actions, suits, disciplinary proceedings and investigations undertaken by the
Dental Board of the State of Texas or other body regulating the activities of
dentists, against any licensed dentist employed by Seller in the Territory that
could reasonably be expected to have a Material Adverse Effect.
4.15 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
Seller (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) There is no material action, suit, proceeding, investigation,
audit, or claim now pending or, to the knowledge of Seller or Castle, threatened
by any authority regarding any Taxes relating to Seller for any Pre-Closing
Period;
(c) There are no liens or security interests on any of the assets of
Seller that arose in connection with any failure (or alleged failure) to pay any
Taxes;
(d) There are no agreements for the extension or waiver of the time
for assessment of any Taxes relating to Seller for any Pre-Closing Period and
Seller has not been requested to enter into any such agreement or waiver;
(e) All Taxes relating to Seller which Seller 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; and,
(f) Seller is not now nor has ever been a party to any Tax
allocation or sharing agreement that could result in any liability to Purchaser.
4.16 INSURANCE. Set forth in Schedule 4.16 is a complete list of insurance
policies that Seller maintains with respect to its Business and properties that
are
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included in the Assets or on its employees. Such policies are in full force and
effect and are free from any right of termination on the part of the insurance
carriers. In the judgment of Seller, such policies, with respect to their
amounts and types of coverage, are adequate to insure against risks to which
Seller and its property and assets are normally exposed in the operation of the
Business, subject to customary deductibles and policy limits.
4.17 INTELLECTUAL PROPERTIES. Schedule 4.17 sets forth all material
Intellectual Property used in the Business and the owner of such Intellectual
Property. The operation of the Business as conducted by Seller as of the Closing
Date requires no rights under Intellectual Property other than rights under
Intellectual Property listed on Schedule 4.17 and rights granted to Seller
pursuant to agreements listed on Schedule 4.17. Seller owns all right, title and
interest in the Intellectual Property listed in Schedule 4.17. No litigation is
pending or, to the knowledge of Seller or Castle, threatened wherein Seller is
accused of infringing or otherwise violating the Intellectual Property rights of
another, or of breaching a contract conveying rights under Intellectual
Property.
4.18 COMPLIANCE WITH LAWS. To the knowledge of the Seller and Castle,
Seller is in compliance in all material respects with all applicable laws,
regulations, orders, judgments and decrees applicable to the Business.
4.19 EMPLOYMENT RELATIONS.
(a) To the knowledge of Seller and Castle, Seller is not and has not
engaged in any unfair labor practice; (b) to the knowledge of Seller and Castle,
no representation question exists respecting the employees of Seller; (c) Seller
has not been notified of any grievance that might 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 Seller.
4.20 EMPLOYEE BENEFIT PLANS. Seller has delivered to Purchaser 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 Seller and Castle, been maintained in compliance with its terms and
the requirements of all applicable laws. None of the Plans are subject to Title
IV of ERISA or the minimum funding obligations of Section 412 of the Code, and
Seller and any entity required to be aggregated therewith pursuant to Section
414(b) or (c) of the code have no liability under Title IV of ERISA or under
Section 412(f) or 412(n) of the Code.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth on Schedule
4.21 and except where it would not have a Material Adverse Effect (a) Hazardous
Materials have not been generated, used, treated or stored on, or transported to
or from, any of Seller's business locations by Seller, its authorized agents or
its independent contractors (including suppliers), (b) Hazardous Materials have
not been Released or disposed of by Seller, its authorized agents or its
independent contractors (including suppliers) on any of Seller's business
locations except such
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Releases which do not violate any Environmental Laws, (c) Seller is, to its and
Castle's knowledge, in compliance with all applicable Environmental Laws and the
requirements of any Permits issued under such Environmental Laws with respect to
any of Seller's business locations, (d) there are no pending or, to the
knowledge of Seller and Castle, threatened Environmental Claims against Seller
or any of Seller's business locations, (e) there are no facts or circumstances,
conditions, pre-existing conditions or occurrences on any of Seller's business
locations known to Seller or Castle that could reasonably be anticipated (e).1
to form the basis of an Environmental Claim against Seller or any of Seller's
business locations, or (e).2 to cause such of Seller's business locations to be
subject to any restrictions on the ownership, occupancy use or transferability
of such of Seller's business locations under any Environmental Law, and (f)
Seller has not in the ordinary course of business transported or stored
Hazardous Materials.
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except for relationships with
Affiliates, Seller does not possess, directly or indirectly, any financial
interest in, and no shareholder serves as a director, officer or employee of,
any corporation, firm, association or business organization which is a supplier,
customer, lessor, lessee, or competitor of Seller.
4.23 COMPENSATION OF EMPLOYEES. Set forth in Schedule 4.23 is an accurate
and complete list showing the names of all persons whose compensation from
Seller collectively for the fiscal year ended on the Balance Sheet Date exceeded
an annualized rate of $20,000, together with a statement of the full amount paid
or payable to each such person for services rendered during the current fiscal
year to date.
4.24 PAYORS. Schedule 4.24 sets forth the ten largest payors of Seller for
the most recently completed fiscal year. The relationship of Seller with each of
such payors as of the date of this Agreement is a good commercial working
relationship and, except as set forth on Schedule 4.24, no significant payor has
canceled or otherwise terminated or, to the knowledge of Seller or Castle
threatened to cancel or otherwise terminate its relationship with Seller within
the last three years.
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. The Accounts Receivable
reflected on the balance sheet included in the Financial Statements are
collectible in the ordinary course of business, net of the reserves established
with respect thereto. There has been no 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 Seller or the allowances with respect
thereto, or Accounts Payable by Seller, from that reflected in the Balance
Sheet.
4.26 SOLVENCY. Seller is not entering into this Agreement with actual
intent to hinder, delay or defraud creditors. Immediately prior to and
immediately subsequent to the Closing Date:
(a) the present fair salable value of the Assets of Seller (on a
going concern basis) will exceed the liability of Seller on its debts (including
its contingent obligations);
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(b) Seller has not incurred, nor does it intend to or believe that
it will incur, debts (including contingent obligations) beyond its ability to
pay such debts as such debts mature (taking into account the timing and amounts
of cash to be received from any source, and of amounts to be payable on or in
respect of debts); and the amount of cash available to Seller after taking into
account all other anticipated uses of funds is anticipated to be sufficient to
pay all such amounts on or in respect of debts, when such amounts are required
to be paid; and,
(c) Seller will have sufficient capital with which to conduct its
Business, and the property of Seller does not constitute unreasonably small
capital with which to conduct its Business.
For purposes of this Section 4.26 "debt" means any liability or a
(i) right to payment whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such a right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
4.27 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.
4.28 INVESTMENTS. The Assets do not include any capital stock or other
equity ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
4.29 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of Seller 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.
4.30 COPIES OF DOCUMENTS. Seller has caused to be made available for
inspection and copying by Purchaser and its advisers, true, complete and correct
copies of all documents referred to in this Article IV or in any Schedule
attached hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
5.1 REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and
warrants to Seller, Castle PC and Castle as follows:
5.2 EXISTENCE AND GOOD STANDING OF PURCHASER; POWER AND AUTHORITY.
Purchaser is a limited liability company duly organized and validly existing
under the laws of the State of Texas. Purchaser has the full power and authority
to make, execute, deliver and perform this Agreement, to perform its obligations
hereunder and
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to consummate the transactions contemplated hereby. This Agreement has been duly
authorized and approved by all required action of Purchaser. This Agreement has
been duly executed and delivered by Purchaser and is a valid and binding
obligation of Purchaser enforceable against Purchaser 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. Purchaser has full power and authority to own, lease and operate its
property and to carry on its business as now being conducted and to own or lease
the assets owned or leased by it. Purchaser is duly qualified or licensed to do
business in each jurisdiction in which the character or location of the
properties owned or leased by Purchaser or the nature of the business conducted
by Purchaser makes such qualification necessary and the absence of which would
have a material adverse effect on Purchaser.
5.3 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by Purchaser and the consummation by Purchaser 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 Purchaser; (b) to the
knowledge of Purchaser, 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 Purchaser or by which any of its properties or
assets may be bound; (c) to the knowledge of Purchaser, require any filing by
Purchaser with, or require Purchaser to obtain any permit, consent or approval
of, or require Purchaser to give any notice to, any governmental or regulatory
body, agency or authority or any third party; or (d) result in a violation or
breach by Purchaser of, conflict with, constitute (with or without due notice or
lapse of time or both) a default by Purchaser (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 Purchaser
pursuant to, any of the terms, conditions or provision of any note, bond,
mortgage, indenture, license, franchise, permit, agreement, lease, franchise
agreement or other instrument or obligation to which Purchaser is a party, or by
which it or any of its properties or assets may be bound, except in the case of
Subsections 5.3(b), (c), and (d), for such violations, consents, breaches,
defaults, terminations and accelerations which in the aggregate would not have a
material adverse effect on Purchaser.
5.4 CAPITAL STOCK. The capital stock of the Purchaser consists of 1,000
shares, 970 of which are owned by John Goodman and 30 of which are owned by
Harold Simpson, Jr. John Goodman and Harold Simpson, Jr. hold licenses to
practice dentistry in the State of Texas.
5.5 LITIGATION. There is no action, suit, proceeding at law or in equity,
arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of Purchaser, threatened, against or affecting the
properties, rights or goodwill of Purchaser or its employees, except where such
proceeding would not have a material adverse effect on the assets, liabilities,
business, condition (financial or otherwise), results of operations or prospects
of Purchaser, and Purchaser does not know of any valid basis for any such
action, proceeding or investigation. There are no such
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proceedings pending or, to the knowledge of Purchaser, threatened, seeking to
prevent or challenge the transactions contemplated by this Agreement.
5.6 COMPLIANCE WITH LAWS. To the knowledge of Purchaser, Purchaser 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 the assets, liabilities, business, condition
(financial or otherwise), results of operations or prospects of Purchaser.
5.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.7 are the most
recent available audited financial statements of Purchaser as of the date of the
audited balance sheet and for the year then ended, and the most recent available
unaudited financial statements of Purchaser as of the date of the unnaudited
balance sheet and for the year-to-date period then ended (the "Purchaser
Financial Statements"). The Purchaser Financial Statements are complete and
correct in all material respects and present fairly [in accordance with
generally accepted accounting principles consistently applied,] the financial
condition of Purchaser and the results of operations of Purchaser as of the
dates thereof and for the periods indicated. Since the date of the most recent
balance sheet attached hereto as part of Schedule 5.7, 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 Purchaser.
5.8 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of Purchaser 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 VI
CONDITIONS TO THE OBLIGATIONS OF SELLER, CASTLE PC AND CASTLE
The obligations of Seller, Castle PC and Castle under this Agreement to
sell, or cause to be sold, the Assets and to consummate the other 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:
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Purchaser 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 Purchaser shall have delivered to Seller on the Closing Date a
certificate of an authorized officer of Purchaser, dated the Closing Date, to
such effect.
6.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Purchaser to be performed on or before the Closing Date pursuant to
the terms hereof shall have been duly performed in all material respects, and
Purchaser shall have delivered to Seller a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect.
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6.3 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
Purchaser shall have delivered to Seller a certificate of an authorized officer
of Purchaser, dated the Closing Date, to such effect to the best knowledge of
such officer.
6.4 CONSIDERATION. The Seller shall have received the consideration
described in Section 3.1.
6.5 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.
6.6 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 Seller and Castle and
their counsel, and Seller and Castle shall have received copies of all such
documents and other evidence as its or its counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.7 GOOD STANDING CERTIFICATES. Seller shall have received good standing
and corporate existence certificates respecting Purchaser.
ARTICLE VII
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of the Purchaser under this Agreement are subject to the
satisfaction or waiver by Purchaser, on or prior to the Closing Date, of all of
the following conditions:
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Seller, Castle PC and Castle contained herein shall be true and
correct in all material respects on and as of the Closing Date (except with
respect to specific dates) with the same effect as though such representations
and warranties had been made on and as of the Closing Date; and Seller, Castle
PC and Castle shall have delivered to Purchaser on the Closing Date a
certificate of an authorized representative of Seller, Castle PC and Castle,
dated the Closing Date, to such effect.
7.2 PERFORMANCE OF AGREEMENTS. Each and all of the agreements and
covenants of Seller, Castle PC and Castle to be performed on or before the
Closing Date pursuant to the terms hereof shall have been duly performed in all
material respects, and Seller, Castle PC and Castle shall have delivered to
Purchaser certificates of authorized representatives of Seller, Castle PC and
Castle, dated the Closing Date, to such effect.
7.3 DOCUMENTS OF CONVEYANCE. Purchaser shall have received from Seller and
Castle PC fully executed documents of conveyance, in form and substance
reasonably
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satisfactory to Purchaser and its counsel, vesting in Purchaser good and valid
title to the Assets, free and clear of any encumbrances except Permitted
Encumbrances.
7.4 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 Seller,
Castle PC and Castle shall have delivered to Purchaser a certificate of
authorized representatives of Seller, Castle PC and Castle, dated the Closing
Date, to such effect to the best knowledge of such officer. If any such action
or proceeding shall have been instituted, Seller, Castle PC and Castle shall
have reasonable opportunity to cure.
7.5 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.
7.6 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 Purchaser and its
counsel, and Purchaser 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.
7.7 GOOD STANDING CERTIFICATES. Purchaser shall have received good
standing and corporate existence certificates respecting the Seller, Castle PC
and Castle.
7.8 RELEASES OF LIENS. Purchaser shall have received evidence satisfactory
to Purchaser and its counsel to the effect that all liens and other encumbrances
on the Assets being transferred to Purchaser (other than Permitted Encumbrances)
have been released or arrangements for such releases shall have been made.
7.9 CERTAIN TRANSACTIONS WITH JACK H. CASTLE, D.D.S., P.C. Castle PC shall
have transferred to Purchaser all of the contracts described in Section 2.2(b),
Castle PC's patient records and any other asset currently used by Castle PC in
conducting the Business in the Territory, the ownership or operation of which
requires a license to practice dentistry.
ARTICLE VIII
COVENANTS OF SELLER, CASTLE PC AND CASTLE
Seller, Castle PC and Castle hereby covenant and agree with Purchaser as
follows:
8.1 COOPERATION BY SELLER. Seller, Castle PC and Castle shall use their
reasonable best efforts to cooperate with Purchaser to secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties
as shall be required in order to enable Seller, Castle PC and Castle to effect
the transactions contemplated on their part hereby, and Seller, Castle PC and
Castle shall otherwise use their reasonable best efforts to cause the
consummation of such transactions in
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accordance with the terms and conditions hereof and to cause all conditions
contained in this Agreement over which it has control to be satisfied.
8.2 REVIEW OF THE ASSETS. Purchaser acknowledges that it has, prior to the
Closing Date, through its representatives, reviewed (a) the Assets, (b) the
complete working papers of Seller's certified public accountants used in their
preparation of financial statements for Seller and (c) the Books and Records of
Seller and to otherwise review the financial and legal condition of Seller as
Purchaser deems necessary or advisable to familiarize itself with the Business
and related matters; such review shall not, however, affect the representations
and warranties made by Seller, Castle PC and Castle hereunder or the remedies of
Purchaser for breaches of those representations and warranties.
8.3 FURTHER ASSURANCES. At any time or from time to time after the Closing
Date, Seller, Castle PC and Castle shall, at the reasonable request of Purchaser
and at Purchaser's expense, execute and deliver any further instruments or
documents and take all such further action as Purchaser may reasonably request
in order to consummate and make effective the sale of the Assets and the
assumption of the Assumed Obligations pursuant to this Agreement.
ARTICLE IX
COVENANTS OF PURCHASER
Purchaser hereby covenants and agrees with Seller, Castle PC and Castle as
follows:
9.1 COOPERATION BY PURCHASER. Purchaser will use its reasonable best
efforts, and will cooperate with Seller, Castle PC and Castle, to secure all
necessary consents, approvals, authorizations, exemptions and waivers from third
parties as shall be required in order to enable Purchaser to effect the
transactions contemplated on its part hereby, and Purchaser will otherwise use
its 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 it has control to be satisfied.
9.2 BOOKS AND RECORDS; PERSONNEL. At all times after the Closing Date,
Purchaser shall allow Seller and Castle PC and any agents of Seller and Castle
PC, upon reasonable advance notice to Purchaser, access to all Books and Records
of Seller or Castle PC which are transferred to Purchaser in connection
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, during normal
working hours at Purchaser's principal places of business or at any location
where such Books and Records are stored, and Seller and Castle PC shall have the
right, at Seller's sole cost, to make copies of any such Books and Records.
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9.3 FURTHER ASSURANCES. At any time or from time to time after the Closing
Date, Purchaser shall, at the request of Seller, Castle PC or Castle and at
Seller's expense, execute and deliver any further instruments or documents and
take all such further action as Seller or Castle PC may reasonably request in
order to consummate and make effective the sale of the Assets and the assumption
of the Assumed Obligations pursuant to this Agreement.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 INDEMNIFICATION OF THE SELLER, CASTLE PC AND CASTLE. The Purchaser,
for a period of one year after the Closing Date, shall indemnify and hold
Seller, Castle PC and Castle and their respective Affiliates (the "Seller
Indemnitees") harmless from and against any and all damages (including exemplary
damages and including reasonable counsel fees and reasonable expenses of
investigation, defending and prosecuting litigation (collectively, the
"Damages"), suffered by any Seller 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 the Purchaser
under this Agreement or any misrepresentation in or omission from any list,
schedule, certificate, or other instrument furnished or to be furnished to the
Seller, Castle PC or Castle by the Purchaser pursuant to the terms of this
Agreement or (b) any liability or obligation (other than those for which
Purchaser is being indemnified by Seller, Castle PC and Castle 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; provided, however, that Seller Indemnitees in the
aggregate shall not be entitled to make any recovery by way of indemnification
for the initial $50,000 of Seller Indemnitees' claims for indemnification, and
Seller Indemnitees' aggregate recovery for indemnification shall not in any
event exceed $650,000.
10.2 INDEMNIFICATION OF THE PURCHASER. Seller, Castle PC and Castle,
jointly and severally, shall indemnify and hold Purchaser and its Affiliates
(the "Purchaser Indemnitees") harmless from and against any and all Damages
suffered by any Purchaser 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 the Seller, Castle PC
or Castle under this Agreement or any misrepresentation in or omission from any
list, schedule, certificate, or other instrument furnished or to be furnished to
the Purchaser by the Seller, Castle PC or Castle pursuant to the terms of this
Agreement, (b) any liability or obligation (other than those for which Seller,
Castle PC and Castle are being indemnified by Purchaser hereunder and other than
those relating to 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.
10.3 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
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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 knowingly 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
knowing failure to notify the indemnifying party has actually resulted in
prejudice or damage to the indemnifying party. Any claim for indemnification
hereunder shall be made within one year after the Closing Date.
10.4 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 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, 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 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 unconditionally to accept in payment or compromise as of the
time the indemnifying party made its request therefor to the indemnified party.
10.5 COOPERATION. If requested by the indemnifying party, the indemnified
party agrees to cooperate with the indemnifying party and its counsel in
contesting any
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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 expenses incurred by it in so cooperating. At no
cost or expense to the indemnified party, the indemnifying party shall cooperate
with the indemnified party and its counsel in contesting any Claim.
10.6 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.
10.7 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.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto), the Option Agreement (including the Exhibits and Schedules
thereto), and the Management Services Agreement, dated March , 1997, between CDC
Texas and Purchaser, set 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, including that certain letter agreement dated September 11, 1996 (the
"September Letter"), are merged into and superseded by this Agreement. Pursuant
to the September Letter, CDC Texas paid to Purchaser $500,000 (the
"Non-Refundable Payment"), and (i) such payment is nonrefundable by Purchaser to
CDC Texas (and does not increase and is not an addition to any amounts payable
hereunder or in connection with the exercise of this Agreement), and (ii) the
Option Agreement (including the Exhibits and Schedules thereto) constitutes a
restructure of the various terms contemplated by the September Letter.
11.2 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 this Agreement, including the representations
and warranties herein, may not be assigned by Seller, Castle PC or Castle
without the prior written consent of Purchaser or by Purchaser to any Person
without the prior written consent of Seller.
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11.3 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.
11.4 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.
11.5 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 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). No
delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
11.6 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended to
and shall not be construed to give any Person (other than the parties signatory
hereto) 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.
11.7 SALES AND TRANSFER TAXES. Purchaser shall be responsible for and pay
all applicable sales, stamp, transfer, documentary, use, registration, filing
and other taxes and fees (including any penalties and interest) that may become
due or payable in connection with this Agreement and the transactions
contemplated hereby.
11.8 EXPENSES. Except as otherwise provided in this Agreement or in that
certain letter agreement, dated December 26, 1996, between Seller and Purchaser,
Seller, Castle PC, Castle and Purchaser shall each pay all costs and expenses
incurred by them or on their behalf in connection with this Agreement and the
transactions contemplated hereby.
11.9 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, addressed as follows:
if to Seller, Castle PC or Castle, to:
Castle Dental Centers of Texas, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056-3021
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with a copy to:
Mr. William D. Gutermuth
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2856
if to Purchaser to:
John Goodman, D.D.S.
Southwest Dental Associates, L.C.
713 Beardsley Lane
Austin, Texas 78746
with a copy to:
Mr. Roger K. Harris
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
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.
11.10 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.
11.11 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 Purchaser may disclose
such information as is required to comply with the requirements of its lenders
and investors and to comply with applicable securities laws. 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 obtaining the prior approval of the other party hereto
to the contents and the manner of presentation and publication thereof.
11.12 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 Travis County, Texas, and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts for itself the exclusive jurisdiction
of the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement.
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11.13 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.
11.14 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 the sale of the Assets or any other matter hereunder, this Agreement
shall be enforceable in a court of equity 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.
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 OF TEXAS, INC.
By: ________________________________
Name: Jack H. Castle, Jr.
Title: President
CASTLE DENTAL CENTERS, INC.
By: ________________________________
Name: Jack H. Castle, Jr.
Title: President
JACK H. CASTLE, D.D.S., P.C.
By: ________________________________
Name: Jack H. Castle, Jr.
Title: President
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SW DENTAL ASSOCIATES, LC
By: ________________________________
Name: John Goodman, D.D.S.
Title: President
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EXHIBIT 10.80
MEMBER INTERESTS PURCHASE AGREEMENT
Dated as of ____________ ___, 199__
By and Among
Castle Dental Centers of Texas, Inc.,
Castle Dental Centers, Inc.,
Jack H. Castle, D.D.S., P.C.,
SW Dental Associates, LC,
John Goodman, D.D.S.
and
Harold Simpson, Jr.
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS.............................. 1
1.1 DEFINITIONS.............................................. 1
ARTICLE II
THE TRANSACTION............................ 5
2.1 PURCHASE AND SALE OF MEMBER INTERESTS.................... 5
2.2 EXCLUDED ASSETS.......................................... 5
2.3 ASSUMPTION OF OBLIGATIONS................................ 6
2.4 NONASSIGNABLE CONTRACTS AND LEASES....................... 6
2.5 CLOSING.................................................. 7
ARTICLE III
PAYMENT OF PURCHASE PRICE....................... 7
3.1 AMOUNT; ALLOCATION; DELIVERY............................. 7
3.2 AGENCY RELATIONSHIP...................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SWD
AND THE MEMBER............................. 8
4.1 BROKER'S OR FINDER'S FEES................................ 8
4.2 EXISTENCE AND GOOD STANDING.............................. 8
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT.................. 8
4.4 MEMBER INTERESTS......................................... 9
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS.................... 9
4.6 SUBSIDIARIES AND AFFILIATES.............................. 9
4.7 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE......... 9
4.8 BOOKS AND RECORDS........................................ 10
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION............. 10
4.10 REAL PROPERTY............................................ 10
4.11 LEASES................................................... 10
4.12 MATERIAL CONTRACTS....................................... 10
4.13 PERMITS.................................................. 11
4.14 LITIGATION............................................... 11
4.15 TAXES.................................................... 11
4.16 INSURANCE................................................ 12
4.17 INTELLECTUAL PROPERTIES.................................. 12
4.18 COMPLIANCE WITH LAWS..................................... 12
4.19 EMPLOYMENT RELATIONS..................................... 13
4.20 EMPLOYEE BENEFIT PLANS................................... 13
4.21 ENVIRONMENTAL LAWS AND REGULATIONS....................... 13
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC................... 13
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4.23 COMPENSATION OF EMPLOYEES................................ 14
4.24 PAYORS................................................... 14
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE.................... 14
4.26 SOLVENCY................................................. 14
4.27 DISCLOSURE............................................... 15
4.28 INVESTMENTS.............................................. 15
4.29 COPIES OF DOCUMENTS...................................... 15
4.30 INVESTMENT REPRESENTATIONS............................... 15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER, CASTLE PC AND CASTLE.................... 16
5.1 BROKER'S OR FINDER'S FEES................................ 16
5.2 EXISTENCE AND GOOD STANDING OF THE CASTLE ENTITIES;
POWER AND AUTHORITY...................................... 16
5.3 NO VIOLATIONS............................................ 16
5.4 CAPITAL STOCK............................................ 17
5.5 LITIGATION............................................... 17
5.6 COMPLIANCE WITH LAWS..................................... 17
5.7 FINANCIAL STATEMENTS..................................... 17
ARTICLE VI
CONDITIONS TO SWD'S AND THE MEMBER'S OBLIGATIONS............ 18
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.................. 18
6.2 NO LITIGATION THREATENED................................. 18
6.3 CONSIDERATION............................................ 18
6.4 GOVERNMENTAL APPROVALS................................... 18
6.5 PROCEEDINGS.............................................. 18
6.6 GOOD STANDING CERTIFICATES............................... 18
6.7 EMPLOYMENT AGREEMENTS.................................... 18
6.8 PURCHASE OF EQUIPMENT.................................... 19
6.9 REGISTRATION RIGHTS AGREEMENT............................ 19
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE CASTLE ENTITIES............ 19
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES.................. 19
7.2 DOCUMENTS OF CONVEYANCE.................................. 19
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7.3 GOVERNMENTAL APPROVALS................................... 19
7.4 GOOD STANDING CERTIFICATES............................... 19
7.5 TRANSFER OF DENTAL ASSETS................................ 19
7.6 UPDATES TO CERTAIN SCHEDULES............................. 19
ARTICLE VIII
COVENANTS OF SWD AND THE MEMBER.................... 19
8.1 COOPERATION BY SWD....................................... 20
8.2 REVIEW OF THE ASSETS..................................... 20
8.3 FURTHER ASSURANCES....................................... 20
ARTICLE IX
COVENANTS OF THE CASTLE ENTITIES.................... 20
9.1 COOPERATION BY THE CASTLE ENTITIES....................... 20
9.2 BOOKS AND RECORDS; PERSONNEL............................. 20
9.3 FURTHER ASSURANCES....................................... 21
ARTICLE X
SURVIVAL AND INDEMNIFICATION...................... 21
10.1 INDEMNIFICATION OF SWD................................... 21
10.2 INDEMNIFICATION OF THE CASTLE ENTITIES................... 21
10.3 DEMANDS.................................................. 22
10.4 RIGHT TO CONTEST AND DEFEND.............................. 22
10.5 COOPERATION.............................................. 23
10.6 RIGHT TO PARTICIPATE..................................... 23
10.7 PAYMENT OF DAMAGES....................................... 23
10.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SWD AND
THE MEMBER............................................... 23
10.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE CASTLE
ENTITIES................................................. 23
ARTICLE XI
MISCELLANEOUS............................. 23
11.1 ENTIRE AGREEMENT......................................... 23
11.2 SUCCESSORS AND ASSIGNS................................... 24
11.3 COUNTERPARTS............................................. 24
11.4 HEADINGS................................................. 24
11.5 MODIFICATION AND WAIVER.................................. 24
11.6 NO THIRD PARTY BENEFICIARY RIGHTS........................ 24
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11.7 SALES AND TRANSFER TAXES................................. 24
11.8 EXPENSES................................................. 24
11.9 NOTICE................................................... 25
11.10 GOVERNING LAW............................................ 25
11.11 CONFIDENTIALITY; PUBLICITY............................... 25
11.12 CONSENT TO JURISDICTION.................................. 26
11.13 SEVERABILITY............................................. 26
11.14 ENFORCEMENT.............................................. 26
11.15 ALLOCATION OF RISK....................................... 26
SCHEDULES
Schedule A Assets
Schedule B Dental Assets
Schedule 2.2(c) Excluded Contracts
Schedule 4.6 Asset Owned by Third Parties which are Used in the
Business
Schedule 4.7 Financial Statements
Schedule 4.10 Real Property
Schedule 4.11 Leased Personal Property
Schedule 4.12 Material Contracts and Proposals
Schedule 4.13 Permits
Schedule 4.14 Litigation
Schedule 4.16 Insurance Policies
Schedule 4.17 Intellectual Property
Schedule 4.21 Environmental Matters
Schedule 4.23 Employee Compensation
Schedule 4.24 Payors
Schedule 5.7 Castle Dental Financial Statement
EXHIBITS
Exhibit A Form of Employment Agreement
Exhibit B Form of Consulting Agreement
Exhibit C Form of Certificate of Designation of Series B
Convertible Preferred Stock
Exhibit D Registration Rights Agreement
Exhibit E Leased Equipment to be Purchased
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MEMBER INTERESTS PURCHASE AGREEMENT
This MEMBER INTERESTS PURCHASE AGREEMENT, dated as of ____________ ____,
1997, is entered into by and among Castle Dental Centers of Texas, Inc., a Texas
corporation ("Purchaser"), Castle Dental Centers, Inc., a Delaware corporation,
Jack H. Castle, D.D.S., P.C., a Texas professional corporation ("Castle PC"), SW
Dental Associates, LC, a Texas limited liability company ("SWD"), John Goodman,
D.D.S., the majority interest holder of SWD (the "Member"), and Harold Simpson,
Jr., the minority interest holder of SWD ("Simpson").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Option
Agreement for the Purchase and Sale of Businesses, dated March __, 1997 (the
"Option Agreement"), pursuant to which the Member and Simpson granted to
Purchaser an option to purchase all of the capital stock and member interests of
SWD (the "Option");
WHEREAS, Purchaser wishes to exercise the Option and purchase all of the
capital stock and member interests business of SWD, which purchase the parties
hereto have agreed shall be on the terms and subject to the conditions set forth
below.
NOW, THEREFORE, for the mutual covenants and other consideration described
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto covenant and
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 SWD.
"ACCOUNTS PAYABLE": all notes and accounts payable of SWD.
"AFFILIATE": with respect to any Person, any other Person directly or
indirectly controlling (including but not limited to all directors and officers
of such Person), controlled by, or under direct or indirect common control with
such Person.
"AGREEMENT": this Member Interests Purchase Agreement, as amended from
time to time as provided herein.
"ASSETS": means the assets of SWD, excluding the Dental Assets and the
Excluded Assets, including but not limited to the assets described on Schedule A
attached hereto, which is incorporated herein by reference.
"ASSUMED OBLIGATIONS": as defined in Section 2.3 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, including personnel records and files.
"BUSINESS": the practice management of dentistry, including dental
specialty care and all other management and related activities currently
conducted by SWD.
"CASTLE": means Castle Dental Centers, Inc., a Delaware corporation.
"CASTLE ENTITIES": means Castle PC, Castle and Purchaser, collectively.
"CASTLE PC": as defined in the preamble of this Agreement.
"CLOSING": as defined in Section 2.5 hereof.
"CLOSING DATE": means the date the Closing occurs, as contemplated in
Section 2.5 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.
"COMMON STOCK": means the common stock, par value $.001 per share, of
Castle.
"CONVERTIBLE PREFERRED STOCK": means the Series B Convertible Preferred
Stock, par value $.001 per share, of Castle, having substantially the rights and
preferences set forth in Exhibit C hereto.
"DENTAL ASSETS": means the assets described on Schedule B and any and all
other assets of SWD, the ownership or operation of which requires a license to
practice dentistry.
"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 that would have a Material Adverse Effect.
"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
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governmental or regulatory authorities for enforcement, cleanup, removal,
remedial or other actions or for 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, in each case as
amended and now in effect, 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
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,
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 substituted therefor.
"EXCLUDED ASSETS": as defined in Section 2.2 hereof.
"EXCLUDED CONTRACTS": as defined in Schedule A hereto.
"EXECUTION DATE": means the date the Option Agreement was executed.
"FINANCIAL STATEMENTS": as defined in Section 4.7 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 a
governmental authority.
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"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.
"MATERIAL ADVERSE EFFECT": material adverse effect on the assets,
liabilities, Business, condition (financial or otherwise), results or operations
or prospects of SWD or its Affiliates.
"MEMBER INTERESTS": means all of the issued and outstanding capital stock
and member interests of SWD.
"PERMITS": as defined in Section 4.13 hereof.
"PERMITTED ENCUMBRANCES": as defined in Section 4.9 hereof.
"PERSON": any individual, partnership, joint venture, corporation, trust,
unincorporated organization, government or other department or agency thereof or
other entity.
"PLANS": as defined in Section 4.20 hereof.
"PRE-CLOSING PERIODS": as defined in Section 4.15(a) hereof.
"PURCHASE PRICE": as defined in Section 3.1 hereof.
"PURCHASER": Castle Dental Centers of Texas, Inc., a Texas corporation.
"RETURNS": as defined in Section 4.15(a) hereof.
"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.
"ROUND ROCK LEASE": means the lease dated as of August 1, 1997, between
Socrates Retail Joint Venture and Purchaser, covering the premises described as
Lot 4C, Block 1, replat of Lot 4, Block 1, Socrates Addition, Phase II.
"SWD": as defined in the preamble of this Agreement.
"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.
-4-
"WEIGHTED AVERAGE PRICE PER SHARE": means the weighted average price per
share at which Castle issued or sold Common Stock to any person (whether for
cash, for property or on completion for services rendered) between the Execution
Date and the Closing Date, determined by computing the quotient of (A) the
aggregate value of consideration received by Castle from any Common Stock issued
or sold by Castle between the Execution Date and the Closing Date, divided by
(B) the total number of shares of Common Stock issued by Castle in all
transactions occurring between the Execution Date and the Closing Date[,
provided, however, that there shall be excluded from all calculations of the
Weighted Average Price Per Share (i) the first issuance of shares of Common
Stock occurring after the Execution Date to any Person other than an Affiliate
or stockholder of Castle] [or] [delete proviso if the offering has been
completed that was needed to fund the option payment] and (ii) any private
placement of Common Stock to any Affiliate of Castle or to any Person that is a
Castle Stockholder on or before the Execution Date, the gross proceeds of which
do not exceed $2,000,000, and which is effected for the purpose of financing
Castle's initial obligations under the Option Agreement.
ARTICLE II
THE TRANSACTION
2.1 PURCHASE AND SALE OF MEMBER INTERESTS. Subject to the terms and
conditions of this Agreement, Purchaser agrees to purchase from the Member, and
the Member agrees to sell, convey, transfer, assign and deliver, and cause to be
sold, conveyed, transferred, assigned and delivered, to Purchaser, on the
Closing Date, against the receipt by the Member of the consideration specified
in Section 3.1 hereof, the Member Interests free and clear of any Encumbrances.
2.2 EXCLUDED ASSETS. Notwithstanding the purchase by Purchaser of the
Member Interests, the following assets shall not constitute a part of the
Business on the Closing Date and shall be transferred by SWD to Member
immediately prior to the Closing (the "Excluded Assets"), or after the Closing
Date by SWD or its successor in interest in the event that (and within 10 days
after) SWD receives possession of the Excluded Assets described in subsections
(b) or (c) below after the Closing Date:
(a) cash, cash equivalents, deposits, advance payments, securities,
letters of credit naming SWD as account party, certificates of deposit, notes,
drafts, checks and similar instruments in excess of an aggregate of $60,000;
(b) Tax refunds related to the Business received or receivable by
SWD or the Member relating to Taxes paid by SWD or the Member for all periods
prior to the Closing Date; and
(c) any asset listed on Schedule 2.2(c).
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2.3 ASSUMPTION OF OBLIGATIONS.
(a) Upon (and when due after) the sale of the Member Interests by
Member to Purchaser, Member shall cause the following liabilities of SWD to be
discharged and satisfied in full: all obligations of SWD arising prior to the
Execution Date for conduct occurring prior to the Execution Date, for (A)
personal injury claims against SWD, (B) liabilities for torts or malpractice,
including without limitation employee claims (if any) for personal injury or
sexual harassment, (C) obligations owed to the Internal Revenue Service or any
other taxing authority, (D) Environmental Claims, and (E) Accounts Payable,
accrued liabilities and long term debt exceeding, in aggregate, $250,000, except
as set forth in Section 2.3(b) hereof.
(b) Notwithstanding the terms of Section 2.3(a) hereof, or any
indemnity or reimbursement obligation contained herein or any other provision
hereof, the parties hereto agree that (i) all liabilities, indebtedness and
obligations incurred by SWD in connection with the completion of the leasehold
improvements and the equipment purchases for the Round Rock Lease as have been
mutually agreed to by SWD and Purchaser as being necessary for the practice of
dentistry, as SWD currently conducts such practice, are liabilities incurred in
the ordinary course of business of SWD that all parties hereto agree constitute
a part of the liabilities to be discharged by SWD (and not by the Member) when
due, including after the Closing Date if so due then, (ii) all liabilities,
indebtedness and obligations under leases of real property to which SWD is a
party before, on or after the date of this Agreement, constitute obligations to
be discharged by SWD (and not Member) on or after the Closing Date, and (iii)
all Accounts Payable, long term debt, and all other liabilities, indebtedness
and obligations, known and unknown, contingent or liquidated, of SWD arising
after the Execution Date on account of conduct of SWD occurring after the
Execution Date, shall constitute obligations to be paid, satisfied and
discharged by SWD (and not by Member) when due, including after the Closing Date
if so due then (collectively, the "Assumed Obligations").
2.4 NONASSIGNABLE CONTRACTS AND LEASES. In the case of any contracts of
SWD with respect to which a consent to assignment is required for a change in
ownership of SWD and such consent has not been obtained on or before the Closing
Date, the Member agrees to use its best efforts to obtain, or cause to be
obtained, after the Closing Date, any written consents necessary to convey to
Purchaser the benefit thereof. The Castle Entities shall cooperate with the
Member, 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 to assignment with respect to any such contract. Purchaser,
Castle, and Castle PC jointly and severally covenant and agree to indemnify and
hold harmless SWD and Member and their officers, directors, employees and
Affiliates from and against any loss, damage, costs or expenses (including
reasonable costs of defense and attorney's fees) arising out of any such
contract as a result of acts or omissions occurring on or after the Closing
Date, or any failure by the Castle Entities to fulfill their obligations under
this Section 2.4.
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2.5 CLOSING. The closing of the transactions contemplated hereby (the
"Closing") shall take place after the execution hereof at the time at which the
conditions to Closing set forth in Articles VI and VII hereof have been
satisfied or waived. The Closing shall take place on the Closing Date at 9:00
a.m. at the offices of Bracewell & Patterson, L.L.P., South Tower Pennzoil
Place, Suite 2900, 711 Louisiana Street, Houston, Texas 77002, or such other
place, date and time as may be mutually agreed upon by the parties.
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1 AMOUNT; ALLOCATION; DELIVERY. Purchaser, Castle and Castle PC jointly
and severally agree to pay to Member the following (the "Purchase Price"):
(a) a total of $3,650,000 in cash on the Closing Date by wire
transfer of immediately available funds to an account or accounts previously
identified by Member, which reflects total cash consideration of $5,150,000,
credited and reduced by (i) the $1,000,000 paid by Purchaser to Member upon
execution of the Option Agreement, and (ii) the $500,000 paid by Purchaser to
the Member as nonrefundable earnest money pursuant to a letter agreement dated
September 11, 1996, among certain of the parties hereto; and
(b) the number of shares of Convertible Preferred Stock determined
by dividing $1,550,000 by the lower of (i) the Weighted Average Price Per Share
at which Castle has sold Common Stock; PROVIDED, that in the event that Castle
issues or sells Common Stock, to any Affiliate of Castle or to any Person that
is a Castle Stockholder on or before the Execution Date, at any time between the
Execution Date and the Closing Date (other than a private placement of Common
Stock the gross proceeds of which do not exceed $2,000,000, and which is
effected in part for the purpose of financing Castle's initial obligations under
the Option Agreement), then the amount to be used in lieu of the foregoing
Weighted Average Price Per Share in this clause (i) shall instead be the lowest
price per share of Common Stock at which Castle sold or issued Common Stock at
any time between the Execution Date and the Closing Date, or (ii) $8.00. Such
shares shall be issued on the Closing Date in the name of John Goodman, D.D.S.,
or such other name as Member may designate. If Castle has not sold Common Stock
to any Person at any time between the Execution Date and the Closing, the
denominator used in the above computation shall be $8.00.
(c) Computations made in accordance with this Section 3.1 shall be
subject to appropriate adjustments for stock splits, stock dividends or other
recapitalizations of Castle.
(d) Immediately following the Closing, the Member shall deposit a
portion of the Purchase Price equal to $400,000 in a segregated,
interest-bearing bank account, certificate of deposit, treasury bill or other
similar investment grade instrument or account, such instrument or account to be
maintained by the Member for
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one year following the Closing for the satisfaction of valid indemnity claims
(if any) of Purchaser.
3.2 AGENCY RELATIONSHIP. In the event that, following the Closing Date,
the Member receives any funds, documents or instruments which constitute or are
delivered in respect of Assets of SWD, the Member agrees to hold such funds,
documents or instruments in trust for the Castle Entities and as the Castle
Entities' agent therefor.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SWD
AND THE MEMBER
As an inducement to the Purchaser, Castle and Castle PC to enter into and
perform this Agreement, SWD and the Member, jointly and severally, hereby
represent and warrant to Purchaser, Castle and Castle PC as of the Execution
Date (and not as of the Closing Date or as of any other date) as follows:
4.1 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of SWD or the Member 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.
4.2 EXISTENCE AND GOOD STANDING. SWD is a limited liability company duly
organized and validly existing under the laws of the State of Texas. SWD has the
full power and authority to own, lease and operate its property and to carry on
the Business as now being conducted and to own or lease the Assets owned or
leased by it. SWD is duly qualified or licensed to do business in each
jurisdiction in which the character or location of the properties owned or
leased by SWD or the nature of the business conducted by SWD makes such
qualification necessary and the absence of which would have a Material Adverse
Effect.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. SWD and the Member have full
power and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by SWD and the
consummation by it of the transactions contemplated hereby, have been duly
authorized and approved by the Managers and the members of SWD, and no other
action on the part of SWD or its members is necessary to authorize the
execution, delivery and performance of this Agreement by SWD and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by SWD and the Member and is a valid and binding
obligation of each of SWD and the 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.
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4.4 MEMBER INTERESTS. The member interests of SWD are divided into 1,000
shares, 970 of which are owned by the Member and 30 of which are owned by Harold
Simpson, Jr. The Member and Harold Simpson, Jr. hold licenses to practice
dentistry in the State of Texas.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution, delivery and
performance of this Agreement by SWD and the Member and the consummation by SWD
and the 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 SWD; (b) to the knowledge of SWD and the Member, 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 SWD or
the Member or by which any of their respective properties or assets may be
bound; (c) to the knowledge of SWD and the Member, require any filing by SWD or
the Member with, or require SWD or the Member to obtain any permit, consent, or
approval of, or require SWD or the Member to give any notice to, any
governmental or regulatory body, agency or authority; or (d) result in a
violation or breach by SWD or the Member of, conflict with, constitute (with or
without due notice or lapse of time or both) a default by SWD or the 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 SWD or the 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 SWD or the
Member is a party, or by which any of their respective properties or assets may
be bound, except for such violations, consents, breaches, defaults,
terminations, and accelerations which would not have a Material Adverse Effect.
4.6 SUBSIDIARIES AND AFFILIATES. SWD has no subsidiaries. Except as set
forth on Schedule 4.6, all of the Assets used in the Business are owned by SWD.
4.7 FINANCIAL STATEMENTS: NO MATERIAL ADVERSE CHANGE. Attached hereto as
Schedule 4.7 is the balance sheet of SWD as of the date shown thereon (the
"Balance Sheet Date") and the statements of operations and cash flows for the
year then ended (collectively, the "Financial Statements"). The Financial
Statements fairly present in all material respects the financial position of SWD
at the date thereof and the results of operations of SWD and its cash flows for
the period indicated. Between the Balance Sheet Date and the Execution Date
there was 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 SWD.
To SWD's and Member's knowledge, as of the date hereof, other than
as (a) disclosed on the Financial Statements, or (b) incurred since the Balance
Sheet Date in the ordinary course of business, SWD has no direct or indirect
indebtedness, liability, claim, deficiency, obligation or responsibility, known
or unknown, fixed or contingent, liquidated or unliquidated, accrued, absolute
or otherwise.
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4.8 BOOKS AND RECORDS. SWD has previously made available to the Castle
Entities true, correct and complete copies of its articles of organization and
regulations, and all amendments to each. The minute books of SWD, as previously
made available to the Castle Entities and its representatives, contain accurate
records in all material respects of the meetings of the Members and the Managers
of SWD.
4.9 TITLE TO PROPERTIES; ENCUMBRANCES; CONDITION. 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, SWD has good and valid title to the Assets, in each case subject to
no Encumbrances, except for (a) 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 SWD in the operation of
the Business, (b) Encumbrances for current taxes, assessments or governmental
charges or levies on property not yet due or delinquent, (c) Encumbrances
created by any of the Castle Entities, including but not limited to Encumbrances
created in accordance with the provisions of this Agreement; and, (d)
Encumbrances relating to Assumed Obligations (liens of the type described in
clauses (a), (b), (c) and (d) above or hereinafter sometimes referred to as
"Permitted Encumbrances"). SWD has heretofore furnished the Castle Entities with
a fixed asset ledger which sets forth all fixed assets owned by SWD as of the
Balance Sheet Date. SWD and the Member are not aware of any defects in such
assets that would have a Material Adverse Effect on the ability of the Castle
Entities to use such assets in the Business, ordinary wear and tear excepted.
4.10 REAL PROPERTY. Schedule 4.10 identifies all interests in real
property used by SWD in the Business, including leases, and includes the name of
the record title holder thereof. To SWD's and the Member's knowledge, all of the
buildings, structures and appurtenances situated on the real property owned or
leased by SWD are in such an operating condition, and in a state of maintenance
and repair, subject to ordinary wear and tear, as is necessary for the operation
of the Assets in the Business. The real property had adequate rights of ingress
and egress for operation of the Business in the ordinary course. To SWD's and
the Member's knowledge, no condemnation or similar proceeding is pending or
threatened which would preclude or impair the use of any such property, except
where such proceeding would not have a Material Adverse Effect.
4.11 LEASES. Schedule 4.11 contains an accurate and complete list of all
personal property leases to which SWD is a party (as lessee or lessor) and a
description of all such leases to which SWD is a party as lessee. Each lease set
forth in Schedule 4.11 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 by SWD thereunder.
4.12 MATERIAL CONTRACTS. Except as set forth in Schedule 4.12, the
contracts to which SWD is a party do not include (a) any agreement, contract or
commitment relating to the employment of any person by SWD, (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 $5,000, (d)
any loan or advance to, or
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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 SWD to engage in
any line of business or to compete with any Person, (h) any agreement, contract
or commitment which involves $5,000 or more and is not cancelable without
penalty within 30 days, or (i) any other agreement, contract, or commitment
which would have a Material Adverse Effect. Also set forth in Schedule 4.12 is a
list of all proposals submitted by SWD to any third party that, if accepted by
such third party, would require disclosure on Schedule 4.12. Except where it
would not have a Material Adverse Effect, each contract or agreement set forth
in Schedule 4.12 is in full force and effect and there exists no default or
event of default or event, occurrence, condition or act (including the purchase
of the Member Interests 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 by SWD thereunder.
4.13 PERMITS. Schedule 4.13 attached hereto lists all of the governmental
and other third party permits (including occupancy permits), licenses, consents
and authorizations ("Permits") required, to the knowledge of SWD and the Member,
in connection with the use, operation or ownership of the Assets and the conduct
of the Business as currently conducted, except for Permits which, if not
obtained or in effect, would not have a Material Adverse Effect. SWD holds all
of the Permits listed on Schedule 4.13, and none is presently subject to
revocation or challenge. Except as set forth on Schedule 4.13, none of such
Permits will be subject to revocation or termination as a result of the
transactions contemplated hereby.
4.14 LITIGATION. Except as set forth on Schedule 4.14, there is no action,
suit, proceeding at law or in equity, arbitration or administrative or other
proceeding by or before (or any investigation by) any governmental or other
instrumentality or agency, pending, or, to the knowledge of SWD and the Member,
threatened, against or affecting the properties, rights or goodwill of SWD, the
Member, or employees of SWD, and SWD and the Member do not know of any 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
SWD and the Member threatened, seeking to prevent or challenge the transactions
contemplated by this Agreement. Purchaser will assume no liability whatsoever
with respect to any matter described on Schedule 4.14. There have been no
actions, suits, disciplinary proceedings and investigations undertaken by the
Dental Board of the State of Texas or other body regulating the activities of
dentists, against Member that could reasonably be expected to have a Material
Adverse Effect.
4.15 TAXES.
(a) All returns and reports for Taxes for all taxable years or
periods that end on or before the Execution Date and, with respect to any
taxable year or period beginning before the Closing Date ("Pre-Closing
Periods"), which are required to be filed by or with respect to SWD
(collectively, the "Returns"), have been or will be
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filed when due in a timely fashion and such Returns as filed are or will be
accurate in all material respects.
(b) There is no material action, suit, proceeding, investigation,
audit, or claim now pending or, to the knowledge of SWD or the Member,
threatened by any authority regarding any Taxes relating to SWD for any
Pre-Closing Period.
(c) There are no liens or security interests on any of the assets of
SWD that arose in connection with any failure (or alleged failure) to pay any
Taxes;
(d) There are no agreements for the extension or waiver of the time
for assessment of any Taxes relating to SWD for any Pre-Execution Date period
and SWD has not been requested to enter into any such agreement or waiver;
(e) All Taxes relating to SWD which SWD 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; and,
(f) SWD is not now nor has ever been a party to any Tax allocation
or sharing agreement that could result in any liability to the Castle Entities.
4.16 INSURANCE. Set forth in Schedule 4.16 is a complete list of insurance
policies that SWD maintains with respect to its Business and properties that are
included in the Assets or on its employees. Such policies are in full force and
effect and are free from any right of termination on the part of the insurance
carriers. In the judgment of SWD, such policies, with respect to their amounts
and types of coverage, are adequate to insure against risks to which SWD and its
property and assets are normally exposed in the operation of the Business,
subject to customary deductibles and policy limits.
4.17 INTELLECTUAL PROPERTIES. Schedule 4.17 sets forth all material
Intellectual Property used in the Business and the owner of such Intellectual
Property. The operation of the Business as conducted by SWD as of the Closing
Date requires no rights under Intellectual Property other than rights under
Intellectual Property listed on Schedule 4.17 and rights granted to SWD pursuant
to agreements listed on Schedule 4.17. SWD owns all right, title and interest in
the Intellectual Property listed in Schedule 4.17. No litigation is pending or,
to the knowledge of SWD or the Member, threatened wherein SWD is accused of
infringing or otherwise violating the Intellectual Property rights of another,
or of breaching a contract conveying rights under Intellectual Property.
4.18 COMPLIANCE WITH LAWS. To the knowledge of SWD and the Member, SWD is
in compliance in all material respects with all applicable laws, regulations,
orders, judgments and decrees applicable to the Business.
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4.19 EMPLOYMENT RELATIONS.
(a) To the knowledge of SWD and the Member, SWD is not and has not
engaged in any unfair labor practice; (b) to the knowledge of SWD and the
Member, no representation question exists respecting the employees of SWD; (c)
SWD has not been notified of any grievance that might 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 SWD.
4.20 EMPLOYEE BENEFIT PLANS. SWD has delivered to the Castle Entities 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 SWD and the Member, been maintained in compliance with its terms
and the requirements of all applicable laws. None of the Plans are subject to
Title IV of ERISA or the minimum funding obligations of Section 412 of the Code,
and SWD and any entity required to be aggregated therewith pursuant to Section
414(b) or (c) of the code have no liability under Title IV of ERISA or under
Section 412(f) or 412(n) of the Code.
4.21 ENVIRONMENTAL LAWS AND REGULATIONS. Except as set forth on Schedule
4.21 and except where it would not have a Material Adverse Effect (a) Hazardous
Materials have not been generated, used, treated or stored on, or transported to
or from, any of SWD's business locations by SWD, its authorized agents or its
independent contractors (including suppliers), (b) Hazardous Materials have not
been Released or disposed of by SWD, its authorized agents or its independent
contractors (including suppliers) on any of SWD's business locations except such
Releases which do not violate any Environmental Laws, (c) SWD is, to its and the
Member's knowledge, in compliance with all applicable Environmental Laws and the
requirements of any Permits issued under such Environmental Laws with respect to
any of SWD's business locations, (d) there are no pending or, to the knowledge
of SWD and the Member, threatened Environmental Claims against SWD or any of
SWD's business locations, (e) there are no facts or circumstances, conditions,
pre-existing conditions or occurrences on any of SWD's business locations known
to SWD or the Member that could reasonably be anticipated (1) to form the basis
of an Environmental Claim against SWD or any of SWD's business locations, or (2)
to cause such of SWD's business locations to be subject to any restrictions on
the ownership, occupancy use or transferability of such of SWD's business
locations under any Environmental Law, and (f) SWD has not in the ordinary
course of business transported or stored Hazardous Materials.
4.22 INTERESTS IN CUSTOMERS, SUPPLIERS, ETC. Except for relationships with
Affiliates, SWD does not possess, directly or indirectly, any financial interest
in, and no member of SWD serves as a director, officer or employee of, any
corporation, firm, association or business organization which is a supplier,
customer, lessor, lessee, or competitor of SWD.
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4.23 COMPENSATION OF EMPLOYEES. Set forth in Schedule 4.23 is an accurate
and complete list showing the names of all persons whose compensation from SWD
collectively for the fiscal year ended on the Balance Sheet Date exceeded an
annualized rate of $40,000, together with a statement of the full amount paid or
payable to each such person for services rendered during the current fiscal year
to the Execution Date.
4.24 PAYORS. Schedule 4.24 sets forth the ten largest payors of SWD for
the most recently completed fiscal year. The relationship of SWD with each of
such payors as of the date of this Agreement is a good commercial working
relationship and, except as set forth on Schedule 4.24, no significant payor has
canceled or otherwise terminated or, to the knowledge of SWD or the Member
threatened to cancel or otherwise terminate its relationship with SWD within the
last three years.
4.25 ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE. The Accounts Receivable
reflected on the balance sheet included in the Financial Statements are
collectible in the ordinary course of business, net of the reserves established
with respect thereto. There has been no 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 SWD or the allowances with respect
thereto, or Accounts Payable by SWD, from that reflected in the Balance Sheet.
4.26 SOLVENCY. SWD is not entering into this Agreement with actual intent
to hinder, delay or defraud creditors. Immediately prior to the Execution Date:
(a) the present fair salable value of the Assets of SWD (on a going
concern basis) will exceed the liability of SWD on its debts (including its
contingent obligations);
(b) SWD has not incurred, nor does it intend to or believe that it
will incur, debts (including contingent obligations) beyond its ability to pay
such debts as such debts mature (taking into account the timing and amounts of
cash to be received from any source, and of amounts to be payable on or in
respect of debts); and the amount of cash available to SWD after taking into
account all other anticipated uses of funds is anticipated to be sufficient to
pay all such amounts on or in respect of debts, when such amounts are required
to be paid; and,
(c) SWD will have sufficient capital with which to conduct its
Business, and the property of SWD does not constitute unreasonably small capital
with which to conduct its Business.
For purposes of this Section 4.26 "debt" means any liability or a
(i) right to payment whether or not such a right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured; or (ii) right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such a right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
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4.27 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.
4.28 INVESTMENTS. The Assets do not include any capital stock or other
equity ownership or proprietary interest in any other corporation, partnership,
association, trust, joint venture or other entity.
4.29 COPIES OF DOCUMENTS. SWD has caused to be made available for
inspection and copying by the Castle Entities and their advisers, true, complete
and correct copies of all documents referred to in this Article IV or in any
Schedule attached hereto. Any document referred to in this Article IV or in any
Schedule attached hereto that is provided or made available to any Castle Entity
shall be deemed to have been provided to all of the Castle Entities.
4.30 INVESTMENT REPRESENTATIONS.
(a) The Member understands that the Convertible Preferred Stock and
the Common Stock into which shares of Convertible Preferred Stock are
convertible (collectivley, the "Stock") conveyed hereby have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"). The Member
also understands that the Stock is being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
its representations contained in this Agreement.
(b) The Member, in consultation with its accountants, attorneys and
financial advisors, has the requisite experience in evaluating and investing in
private placement transactions of securities so that it is capable of evaluating
the benefits and risks of its investment in Castle and has the capacity to
protect its own interests. The Member understands that he must bear the economic
risk of this investment indefinitely unless the Stock is registered pursuant to
the Securities Act, or an exemption from registration is available. The 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 it to transfer all or any portion of the Stock under the
circumstances, in the amounts or at the times it might propose.
(c) The Member is acquiring the Stock for his own account for
investment only, and not with a view towards distribution.
(d) The Member represents that by reason of its business or
financial experience, he has the capacity to protect his own interests in
connection with the transactions contemplated in this Agreement.
(e) The Member represents that he is an accredited investor within
the meaning of Regulation D under the Securities Act.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
PURCHASER, CASTLE PC AND CASTLE
Purchaser, Castle PC and Castle, jointly and severally, represent and
warrant to SWD and the Member as follows:
5.1 BROKER'S OR FINDER'S FEES. No agent, broker, Person or firm acting on
behalf of the Castle Entities 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.
5.2 EXISTENCE AND GOOD STANDING OF THE CASTLE ENTITIES; POWER AND
AUTHORITY. Purchaser and Castle are corporations duly organized, validly
existing and in good standing under the laws of the States of Texas and
Delaware, respectively. Castle PC is a professional corporation duly organized,
validly existing and in good standing under the laws of the State of Texas. Each
of the Castle Entities has full corporate power and authority to make, execute,
deliver and perform this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been duly
authorized and approved by all required corporate action of each of the Castle
Entities. This Agreement has been duly executed and delivered by each of the
Castle Entities and is a valid and binding obligation of each of the Castle
Entities enforceable against each of the Castle Entities 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.
5.3 NO VIOLATIONS. The execution, delivery and performance of this
Agreement by each of the Castle Entities and the consummation by each of the
Castle Entities 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 charter
document or by-laws of any of the Castle Entities; (b) to the knowledge of any
of the Castle Entities, 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 any of the Castle Entities or by which any of
their respective properties or assets may be bound; (c) to the knowledge of any
of the Castle Entities, require any filing by any of the Castle Entities with,
or require any of the Castle Entities to obtain any permit, consent or approval
of, or require any of the Castle Entities to give any notice to, any
governmental or regulatory body, agency or authority or any third party; or (d)
result in a violation or breach by any of the Castle Entities of, conflict with,
constitute (with or without due notice or lapse of time or both) a default by
any of the Castle Entities (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 any of the Castle Entities
pursuant to, 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 any of the Castle Entities
is a party, or by which they
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or any of their respective properties or assets may be bound, except in the case
of Subsections 5.3(b), (c), and (d), for such violations, consents, breaches,
defaults, terminations and accelerations which in the aggregate would not have a
Material Adverse Effect.
5.4 CAPITAL STOCK. The authorized capital stock of Castle consists solely
of 30,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock,
$.001 par value per share ("Preferred Stock"). All of the shares of Convertible
Preferred Stock delivered pursuant to Section 3.1 hereof have been duly and
validly authorized and, following the Closing, will be validly issued, fully
paid, nonassessable and free of any liens or encumbrances.
5.5 LITIGATION. There is no action, suit, proceeding at law or in equity,
arbitration or administrative or other proceeding by or before (or any
investigation by) any governmental or other instrumentality or agency, pending,
or, to the knowledge of any of the Castle Entities, threatened, against or
affecting the properties, rights or goodwill of any of the Castle Entities or
their respective employees, except where such proceeding would not have a
material adverse effect on the assets, liabilities, business, condition
(financial or otherwise), results of operations or prospects of any of the
Castle Entities, and none of the Castle Entities knows of any valid basis for
any such action, proceeding or investigation. There are no such proceedings
pending or, to the knowledge of any of the Castle Entities, threatened, seeking
to prevent or challenge the transactions contemplated by this Agreement.
5.6 COMPLIANCE WITH LAWS. To the knowledge of each of the Castle Entities,
each of the Castle Entities are in compliance with all applicable laws,
regulations, orders, judgments and decrees applicable to their respective
business, except where any noncompliance would not have a material adverse
effect on the assets, liabilities, business, condition (financial or otherwise),
results of operations or prospects of any of the Castle Entities.
5.7 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.7 are the most
recent available audited financial statements of Castle as of the date of the
audited balance sheet and for the year then ended, and the most recent available
unaudited financial statements of Castle as of the date of the unaudited balance
sheet and for the year-to-date period then ended (the "Castle Financial
Statements"). The Castle Financial Statements are complete and correct in all
material respects and present fairly in accordance with generally accepted
accounting principles consistently applied, the financial condition of Castle
and the results of operations of Castle as of the dates thereof and for the
periods indicated. Since the date of the most recent balance sheet attached
hereto as part of Schedule 5.7, 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 Castle.
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ARTICLE VI
CONDITIONS TO SWD'S AND THE MEMBER'S OBLIGATIONS
The obligations of SWD and the Member under this Agreement to sell, or
cause to be sold, the Member Interests and to consummate the other 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:
6.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Castle Entities 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 the Castle Entities shall have delivered to SWD and the
Member on the Closing Date a certificate of an authorized officer of each of the
Castle Entities, dated the Closing Date, to such effect.
6.2 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
the Castle Entities shall have delivered to SWD and the Member a certificate of
an authorized officer of each of the Castle Entities, dated the Closing Date, to
such effect to the best knowledge of such officer.
6.3 CONSIDERATION. The Member shall have received the consideration
described in Section 3.1.
6.4 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 by the parties hereto.
6.5 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 SWD and the Member and
their counsel, and SWD and the Member shall have received copies of all such
documents and other evidence as its or its counsel may reasonably request in
order to establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
6.6 GOOD STANDING CERTIFICATES. SWD shall have received good standing and
corporate existence certificates respecting each of the Castle Entities.
6.7 EMPLOYMENT AGREEMENTS. The Member and Mrs. Sheryl Goodman shall have
received an Employment Agreement and a Consulting Agreement, respectively,
substantially in the form of Exhibits A and B, respectively, executed by
Purchaser.
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6.8 PURCHASE OF EQUIPMENT. Purchaser shall have executed and delivered,
simultaneously herewith, an agreement to purchase the equipment owned by Sheryl
Goodman and described on Exhibit E for a purchase price of at least $209,000.
6.9 REGISTRATION RIGHTS AGREEMENT. The Member shall have received a
Registration Rights Agreement, substantially in the form of Exhibit D hereto,
executed by Castle.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE CASTLE ENTITIES
The obligations of the Purchaser, Castle and Castle PC under this
Agreement are subject to the satisfaction or waiver by the Castle Entities, on
or prior to the Closing Date, of all of the following conditions:
7.1 TRUTH OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of SWD and the Member contained herein shall be true and correct in
all material respects on and as of the Execution Date.
7.2 DOCUMENTS OF CONVEYANCE. The Purchaser shall have received from SWD
the Stock certificates evidencing the Member Interests, together with a blank
stock power for same.
7.3 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.
7.4 GOOD STANDING CERTIFICATES. Purchaser shall have received good
standing and corporate existence certificates respecting SWD.
7.5 TRANSFER OF DENTAL ASSETS. SWD shall have transferred good and valid
title to the Dental Assets to Castle PC, free and clear of all Encumbrances
except Permitted Encumbrances.
7.6 UPDATES TO CERTAIN SCHEDULES. SWD shall have provided to Purchaser
updates to Schedules 4.11, 4.12 and 4.14 hereof for the period from the
Execution Date to the Closing Date; PROVIDED HOWEVER, that such updates shall
not be deemed to be representations or warranties of SWD, the Member or Simpson
and shall not change the date as of which the representations and warranties of
SWD and the Member herein are made, which date shall be only on and as of the
Execution Date.
ARTICLE VIII
COVENANTS OF SWD AND THE MEMBER
SWD and the Member hereby covenant and agree with the Castle Entities as
follows:
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8.1 COOPERATION BY SWD. SWD and the Member shall use their reasonable best
efforts to cooperate with the Castle Entities to secure all necessary consents,
approvals, authorizations, exemptions and waivers from third parties as shall be
required in order to enable SWD and the Member to effect the transactions
contemplated on its or his part hereby, and SWD and the Member 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 it has control to be satisfied.
8.2 REVIEW OF THE ASSETS. Each of the Castle Entities acknowledges that it
has, prior to the Closing Date, through its representatives or Affiliates,
reviewed (a) the Assets, (b) the complete working papers of SWD's certified
public accountants used in their preparation of financial statements for SWD and
(c) the Books and Records of SWD and to otherwise review the financial and legal
condition of SWD as the Castle Entities deem necessary or advisable to
familiarize themselves with the Business and related matters; such review shall
not, however, affect the representations and warranties made by SWD and the
Member hereunder or the remedies of the Castle Entities for breaches of those
representations and warranties.
8.3 FURTHER ASSURANCES. At any time or from time to time after the Closing
Date, SWD and the Member shall, at the reasonable request of the Castle Entities
and at the Castle Entities' expense, execute and deliver any further instruments
or documents and take all such further action as the Castle Entities may
reasonably request in order to consummate and make effective the sale of the
Member Interests.
ARTICLE IX
COVENANTS OF THE CASTLE ENTITIES
Each of the Castle Entities, jointly and severally, hereby covenants and
agrees with SWD and the Member as follows:
9.1 COOPERATION BY THE CASTLE ENTITIES. Each of the Castle Entities will
use its reasonable best efforts, and will cooperate with SWD and the Member, to
secure all necessary consents, approvals, authorizations, exemptions and waivers
from third parties as shall be required in order to enable the Castle Entities
to effect the transactions contemplated on its part hereby, and each of the
Castle Entities will otherwise use its 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 it has
control to be satisfied.
9.2 BOOKS AND RECORDS; PERSONNEL. At all times after the Closing Date, the
Castle Entities shall allow Member and any agents of Member, upon reasonable
advance notice to the Castle Entities, access to all Books and Records of SWD
which are transferred to the Castle Entities in connection herewith, to the
extent necessary or desirable in anticipation of, or preparation for, existing
or future litigation, employment matters, tax returns or audits of SWD or the
Member, or reports to or filings with governmental agencies, during normal
working hours at the principal places
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of business of the respective Castle Entities or at any location where such
Books and Records are stored, and Member shall have the right, at Member's sole
cost, to make copies of any such Books and Records.
9.3 FURTHER ASSURANCES. At any time or from time to time after the Closing
Date, the Castle Entities shall, at the request of the Member and at Member's
expense, execute and deliver any further instruments or documents and take all
such further action as Member may reasonably request in order to consummate and
make effective the sale of the Member Interests.
ARTICLE X
SURVIVAL AND INDEMNIFICATION
10.1 INDEMNIFICATION OF SWD. The Castle Entities, jointly and severally,
for a period of one year after the Closing Date, shall indemnify and hold SWD,
the Member and Simpson, and their respective Affiliates (the "SWD Indemnitees"),
harmless from and against any and all damages (including exemplary damages and
including reasonable counsel fees and reasonable expenses of investigation,
defending and prosecuting litigation (collectively, the "Damages"), suffered by
any SWD 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 any of the Castle Entities under this
Agreement or any misrepresentation in or omission from any list, schedule,
certificate, or other instrument furnished or to be furnished to SWD or the
Member by any of the Castle Entities pursuant to the terms of this Agreement or
(b) any liability or obligation (other than those for which any of the Castle
Entities is being indemnified by SWD and the Member 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
Execution Date.
10.2 INDEMNIFICATION OF THE CASTLE ENTITIES. The Member shall, for a
period of one year after the Closing Date, indemnify and hold the Castle
Entities and their respective 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 SWD or the Member under this Agreement or any
misrepresentation in or omission from any list, schedule, certificate, or other
instrument furnished or to be furnished to the Castle Entities by SWD or the
Member pursuant to the terms of this Agreement, (b) any liability or obligation
(other than those for which SWD and the Member are being indemnified by the
Castle Entities hereunder) 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 Execution Date; or (c) any Claim (as
hereinafter defined) brought against any Castle Indemnitee by or on behalf of
Monarch Dental, TA Associates or their respective Affiliates, as a result of,
relating to or in any way connected with prior dealings or relationships between
SWD or the Member and Monarch Dental, TA Associates or their respective
Affiliates (a "Monarch Claim"); provided, however, that
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except with respect to a Monarch Claim, the Castle Entities shall not be
entitled to make any recovery by way of indemnification for the initial $50,000
of the Castle Entities' claims for indemnification, and the Castle Entities'
aggregate recovery for indemnification shall never in any event exceed $650,000.
10.3 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 knowingly 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
knowing failure to notify the indemnifying party has actually resulted in
prejudice or damage to the indemnifying party. Any claim for indemnification
hereunder (except with respect to a Monarch Claim, which shall have no
expiration period) shall be made within one year after the Closing Date.
10.4 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 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, 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 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
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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 unconditionally to
accept in payment or compromise as of the time the indemnifying party made its
request therefor to the indemnified party.
10.5 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 expenses incurred by it in so
cooperating. At no cost or expense to the indemnified party, the indemnifying
party shall cooperate with the indemnified party and its counsel in contesting
any Claim.
10.6 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.
10.7 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.
10.8 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF SWD AND THE MEMBER. The
representations and warranties of SWD and the Member which are made as of the
Execution Date pursuant to Article IV hereof shall survive for a period of one
year from the Closing Date, at which time such representations and warranties
shall be without further force and effect. Such survival of such representations
and warranties shall not change the date as of which such representations and
warranties are made, which date shall be only on and as of the Execution Date.
10.9 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE CASTLE ENTITIES.
The representations and warranties of the Castle Entities shall survive for a
period of one year from the Closing Date, at which time such representations and
warranties shall be without further force and effect.
ARTICLE XI
MISCELLANEOUS
11.1 ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto), the Option Agreement (including the Exhibits and Schedules
thereto), and the Management Services Agreement, dated March __, 1997, between
Purchaser and SWD,
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set 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, including that
certain letter agreement dated September 11, 1996 (the "September Letter"), are
merged into and superseded by this Agreement. Pursuant to the September Letter,
Purchaser paid to SWD $500,000 (the "Non-Refundable Payment"), and (i) such
payment is nonrefundable by SWD to Purchaser (and decreases and is a credit
against any amounts payable by Purchaser in connection with this Agreement), and
(ii) the Option Agreement (including the Exhibits and Schedules thereto)
constitutes a restructure of the various terms contemplated by the September
Letter.
11.2 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 this Agreement, including the representations
and warranties herein, may not be assigned by SWD or the Member without the
prior written consent of Purchaser or by any of the Castle Entities to any
Person without the prior written consent of Member.
11.3 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.
11.4 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.
11.5 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 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). No
delay on the part of either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof.
11.6 NO THIRD PARTY BENEFICIARY RIGHTS. This Agreement is not intended to
and shall not be construed to give any Person (other than the parties signatory
hereto 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.
11.7 SALES AND TRANSFER TAXES. Purchaser shall be responsible for and pay
all applicable sales, stamp, transfer, documentary, use, registration, filing
and other taxes and fees (including any penalties and interest) that may become
due or payable in connection with this Agreement and the transactions
contemplated hereby.
11.8 EXPENSES. Except as otherwise provided in this Agreement or in that
certain letter agreement, dated December 26, 1996, between SWD and Purchaser,
SWD,
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the Member and the Castle Entities shall each pay all costs and expenses
incurred by them or on their behalf in connection with this Agreement and the
transactions contemplated hereby.
11.9 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, addressed as follows:
if to any of the Castle Entities, to:
Castle Dental Centers of Texas, Inc.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056-3021
with a copy to:
Mr. William D. Gutermuth
Bracewell & Patterson, L.L.P.
South Tower Pennzoil Place
711 Louisiana, Suite 2900
Houston, Texas 77002-2856
if to SWD or the Member to:
John Goodman, D.D.S.
Southwest Dental Associates, L.C.
713 Beardsley Lane
Austin, Texas 78746
with a copy to:
Mr. Roger K. Harris
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010-3095
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.
11.10 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.
11.11 CONFIDENTIALITY; PUBLICITY. The terms and conditions of this
Agreement shall not be disclosed by any party hereto without the prior written
consent of the
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other parties; provided, however, that the Castle Entities may disclose such
information as is required to comply with the requirements of its lenders and
investors and to comply with applicable securities laws. 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 obtaining the prior approval of the other parties
hereto to the contents and the manner of presentation and publication thereof.
11.12 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 Travis County, Texas, and, by execution and delivery of this Agreement, each
of the parties to this Agreement accepts for itself the exclusive jurisdiction
of the aforesaid courts, and irrevocably agrees to be bound by any judgment
rendered thereby in connection with this Agreement.
11.13 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.
11.14 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 the sale of the Member Interests or any other matter hereunder, this
Agreement shall be enforceable in a court of equity 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.
11.15 ALLOCATION OF RISK. Purchaser, Castle and Castle PC shall purchase
such insurance as Purchaser, Castle and Castle PC may desire to cover such risks
of ownership of SWD as Purchaser, Castle and Castle PC may incur in connection
with the ownership thereof after the date hereof arising as a result of the
acquisition of Member's capital stock and member interests in SWD. Purchaser,
Castle and Castle PC have agreed hereby (i) to succeed to the ownership of SWD,
and Purchaser, Castle and Castle PC acknowledge the risks inherent therein
(including the risks associated with the purchase of SWD with representations
and warranties that are made as of a date prior to the Closing Date) and the
need for adequate insurance of loss on account of torts, malpractice claims,
workmen's compensation claims, property damage and other risks of operation of a
dental practice, whether or not similar to any of the foregoing, (ii) that the
risks arising from changes, occurring between the Execution Date and the Closing
Date, in the business, financial condition, profitability, prospects, legal and
regulatory matters and limitations, asset condition, and all other risks
associated with adverse changes occurring between the Execution Date and the
Closing
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Date in the business, financial condition or results of operations of SWD, are
risks that have been assumed by the Purchaser, Castle and Castle PC as a
negotiated part of the bargain of the parties hereto, (iii) that the Purchaser,
Castle and Castle PC have decided that the Purchaser is to purchase the stock
and interests in SWD from the Member based on the representations and warranties
set forth in this Agreement as of the Execution Date (with no requirement for
updates to the representations and warranties of the Member or SWD through the
Closing Date for changes in the relevant representations and warranties), and
the Purchaser, Castle and Castle PC and their affiliates have agreed that the
Purchaser is to purchase such stock and interests subject only to the conditions
set forth herein, the effect of which is that (A) the Purchaser, Castle and
Castle PC, and their affiliates, thereby assume the risk that the business,
profitability, prospects, financial condition, asset condition or results of
operations of SWD may change materially and adversely between the Execution Date
and the Closing Date (the date that the Purchaser purchases such stock and
interests pursuant to this Agreement), and (B) the representations and
warranties of SWD, being limited to the Execution Date, may not be true and
correct on a subsequent date, including the Closing Date, but the fact that such
representations and warranties are not true and correct in any respect on the
Closing Date shall not entitle or allow the Purchaser, Castle or Castle PC to
make any claim for damages, rescission, restitution, indemnity, reimbursement or
any other claim, against the Member.
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 OF TEXAS, INC.
By:
Name: Jack H. Castle, Jr.
Title: President
CASTLE DENTAL CENTERS, INC.
By:
Name: Jack H. Castle, Jr.
Title: President
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JACK H. CASTLE, D.D.S., P.C.
By:
Name:
Title:
SW DENTAL ASSOCIATES, LC
By:
Name: John Goodman, D.D.S.
Title: President
John Goodman, D.D.S.
Harold Simpson, Jr.
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SCHEDULE A
ASSETS
The Assets shall include but are not limited to the following categories
of assets:
1. real property, if any, including leasehold interests, described
in Schedule 4.10 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;
2. plant, machinery, equipment, operating equipment, tools,
supplies, inventories, furniture, fixtures, furnishings and other fixed assets
owned or leased and used or held for use in the conduct of the Business
(including the equipment leased to SWD by Sheryl Goodman listed on Exhibit E
hereto, which equipment shall be purchased by Purchaser from Sheryl Goodman
concurrently herewith by separate conveyance for a purchase price of $209,000);
3. contracts listed on Schedules 4.11 and 4.12, documents,
instruments, insurance and indemnity policies and general intangibles of SWD,
including the name "S W Dental Associates", "Southwest Dental Associates" and
derivatives thereof, and goodwill associated therewith;
4. Accounts Receivable as of the Closing Date;
5. all non-professional licenses and permits (to the extent
transferable), registrations and authorizations, proprietary information,
methods, know- how, designs, processes, procedures, goodwill and all rights to
other Intellectual Property used in the Business;
6. Books and Records;
7. any rights pertaining to any counterclaims, set-offs or defenses
it may have with respect to any Assumed Obligations;
8. all prepaid claims, prepaid taxes, prepaid insurance premiums and
other prepaid expense items;
9. to the extent transferable, third-party indemnities, policies of
insurance, fidelity, surety or similar bonds and the coverage afforded thereby
relating to the Assets; and
10. cash in the aggregate amount of $60,000.
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SCHEDULE B
DENTAL ASSETS
The Dental Assets shall include the following categories of assets:
1. each dentist employment contract, managed care contract,
insurance or third party reimbursement agreement; and
2. all other assets of SWD, the ownership or operation of which
requires a license to practice dentistry.
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EXHIBIT 10.81
MANAGEMENT SERVICES AGREEMENT
BY AND BETWEEN
CASTLE DENTAL CENTERS OF TEXAS, INC.,
A TEXAS CORPORATION
ARTICLE III. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER.......... 7
Section 3.1 Support Services............................... 7
Section 3.2 Quality Assurance, Risk Management, and
Utilization Review.......................... 7
Section 3.3 Licenses and Permits........................... 7
Section 3.4 Personnel...................................... 8
Section 3.5 Contract ...................................... 8
Section 3.6 Billing and Collection......................... 8
Section 3.7 PC Account..................................... 9
Section 3.8 Fiscal Matters................................. 9
Section 3.9 Reports and Records............................ 10
Section 3.10 Recruitment of PC Dentists..................... 11
Section 3.11 Business Manager's Insurance................... 11
Section 3.12 Advertising.................................... 11
Section 3.13 No Warranty.................................... 11
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF PC......................... 11
Section 4.1 Organization and Operation..................... 11
Section 4.2 PC Personnel and Shareholders.................. 12
Section 4.3 Professional Standards......................... 12
Section 4.4 Dental Services................................ 12
Section 4.5 Peer Review/Quality Assurance.................. 13
Section 4.6 PC's Insurance................................. 13
Section 4.7 Confidential and Proprietary Information....... 13
Section 4.8 Noncompetition................................. 14
Section 4.9 Name, Trademark................................ 16
Section 4.10 Peer Review.................................... 16
Section 4.11 Indemnification................................ 16
ARTICLE V. FINANCIAL ARRANGEMENT......................................... 16
Section 5.1 Base Management Fee............................ 16
Section 5.2 Management Fee................................. 17
Section 5.3 Adjustments.................................... 17
Section 5.4 Reasonable Value............................... 17
Section 5.5 Payment of Management Fee...................... 17
ARTICLE VI. TERM AND TERMINATION......................................... 18
Section 6.1 Initial and Renewal Term....................... 18
-ii-
Section 6.2 Termination.................................... 18
Section 6.3 Effects of Termination......................... 19
ARTICLE VII. MISCELLANEOUS............................................... 20
Section 7.1 Administrative Services Only................... 20
Section 7.2 Status of Contractor; Agency................... 20
Section 7.3 Notices........................................ 21
Section 7.4 Governing Law.................................. 21
Section 7.5 Assignment..................................... 22
Section 7.6 Arbitration.................................... 22
Section 7.7 Waiver of Breach............................... 24
Section 7.8 Enforcement.................................... 24
Section 7.9 Gender and Number.............................. 24
Section 7.10 Additional Assurances.......................... 24
Section 7.11 Consents, Approvals, and Exercise of
Discretion.................................. 24
Section 7.12 Force Majeure.................................. 24
Section 7.13 Severability................................... 25
Section 7.14 Divisions and Headings......................... 25
Section 7.15 Amendments and Management Services Agreement
Execution................................... 25
Section 7.16 Entire Management Services Agreement........... 25
-iii-
MANAGEMENT SERVICES AGREEMENT
THIS MANAGEMENT SERVICES AGREEMENT is made and entered into effective
as of June 1, 1997, by and between CASTLE DENTAL CENTERS OF TEXAS, INC., a Texas
corporation ("Business Manager"), and SW DENTAL ASSOCIATES, LC, a Texas limited
liability company ("PC")
RECITALS
This Management Services Agreement is made with reference to the
following facts:
A. PC is a validly existing Texas limited liability company, formed for
and engaged in the practice of dentistry and the provision of dental services to
the general public in the State of Texas through individual dentists who are
licensed to practice dentistry in the State of Texas and who are employed or
otherwise retained by PC.
B. Business Manager is a validly existing Texas corporation, which has
been duly formed to manage the business aspects of the dental practices in the
State of Texas.
C. PC desires to focus its energies, expertise and time on the practice
of dentistry and on the delivery of dental services to patients, and to
accomplish this goal it desires to delegate the increasingly more complex
business functions of its dental practice to persons with business expertise.
D. PC wishes to engage Business Manager to provide certain management,
administrative and business services for the administration of certain nondental
aspects of PC's dental practice in the Practice Territory (as defined below),
and Business Manager desires to provide such services all upon the terms and
conditions hereinafter set forth.
E. PC and Business Manager have determined a fair market value for the
services to be rendered by Business Manager, and based on this fair market
value, have determined a basis for the compensation for Business Manager that
will allow the parties to establish a relationship permitting each party to
devote its skills and expertise to the appropriate responsibilities and
functions.
NOW, THEREFORE, in consideration of the mutual terms, covenants and
conditions hereinabove and hereinafter set forth, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Management Services Agreement, the following
terms shall have the following meanings ascribed thereto, unless otherwise
clearly required by the context in which such term is used.
Section 1.1 ACT. The term "Act" shall mean Title 71, Chapter Nine (Art
4543-4551) of the Civil Statutes of the State of Texas, as amended.
Section 1.2 ADJUSTED GROSS REVENUE. The term "Adjusted Gross Revenue"
shall mean the sum of Professional Services Revenue and Ancillary Revenue.
Section 1.3 ADJUSTMENTS. The term "Adjustments" shall mean any
adjustments on an accrual basis for uncollectible accounts, third party payor
contractual adjustments, discounts, workers' compensation adjustments,
professional courtesies, and other reductions in collectible revenue that result
from activities that do not result in collectible charges.
Section 1.4 ANCILLARY REVENUE. The term "Ancillary Revenue" shall mean
all other revenue actually recorded each month (net of Adjustments) that is not
Professional Services Revenues consisting only of prepaid amounts for services
previously billed and collected.
Section 1.5 BASE MANAGEMENT FEE. The term "Base Management Fee" shall
mean the amount set forth in Section 5.1.
Section 1.6 BUSINESS MANAGER. The term "Business Manager" shall mean
Castle Dental Centers of Texas, Inc., a Texas corporation, or any entity that
succeeds to the interests of Business Manager and to whom the obligations of
Business Manager are assigned and transferred.
Section 1.7 BUSINESS MANAGER EXPENSE. The term "Business Manager
Expense" shall mean an expense or cost incurred by the Business Manager and for
which the Business Manager, and not PC, is financially liable other than
expenses incurred by Business Manager that directly benefit PC which may be
allocated to Office Expense.
Section 1.8 CASH FLOW. The term "Cash Flow" shall mean for any period,
earnings before depreciation and amortization, less capital expenditures, all
computed in accordance with
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GAAP. For the purpose of calculating Cash Flow, one-half of the compensation
paid to John Goodman and Sheryl Goodman shall be deemed to be an expense of PC.
Section 1.9 CONFIDENTIAL INFORMATION. The term "Confidential
Information" shall mean any information of Business Manager or PC, as
appropriate (whether written or oral), including all notes, studies, patient
lists, information, forms, business or management methods, marketing data, fee
schedules, or trade secrets of the Business Manager or of PC, as applicable,
whether or not such Confidential Information is disclosed or otherwise made
available to one party by the other party pursuant to this Management Services
Agreement. Confidential Information shall also include the terms and provisions
of this Management Services Agreement and any transaction or document executed
by the parties pursuant to this Management Services Agreement. Confidential
Information does not include any information that (i) is or becomes generally
available to and known by the public (other than as a result of an unpermitted
disclosure directly or indirectly by the receiving party or its affiliates,
advisors, or Representatives); (ii) is or becomes available to the receiving
party on a nonconfidential basis from a source other than the furnishing party
or its affiliates, advisors, or Representatives, provided that such source is
not and was not bound by a confidentiality agreement with or other obligation of
secrecy to the furnishing party of which the receiving party has knowledge at
the time of such disclosure; (iii) has already been or is hereafter
independently acquired or developed by the receiving party without violating any
confidentiality agreement with or other obligation of secrecy to the furnishing
party; or (iv) is required to be disclosed by Business Manager in connection
with a financing of its business.
Section 1.10 CENTER. The term "Center" (collectively referred to as
"Centers") shall mean any office space, clinic, facility, including satellite
facilities, owned or leased by PC or which is otherwise used by PC, as allowed
by law, in the provision of Dental Services pursuant to this Management Services
Agreement.
Section 1.11 DENTAL SERVICES. The term "Dental Services" shall mean
dental care and services, including but not limited to the practice of general
dentistry, orthodontics and all related dental care services provided by PC
through PC's Dentists and other dental care providers that are retained by or
professionally affiliated with PC.
Section 1.12 DENTIST. The term "Dentist" shall mean each individually
licensed professional who is employed or otherwise retained by or associated
with PC, each of whom shall meet at all times the qualifications described in
Section 4.2 and Section 4.3.
Section 1.13 GAAP. The term "GAAP" shall mean generally accepted
accounting principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the
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American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity or other practices and procedures as may be
approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of the determination. For
purposes of this Management Services Agreement, GAAP shall be applied on an
accrual basis in a manner consistent with the historic practices of the person
to which the term applies.
Section 1.14 MANAGEMENT FEE. The term "Management Fee" shall mean
Business Manager's compensation established as described in Article V hereof.
Section 1.15 MANAGEMENT SERVICES. The term "Management Services" shall
mean the business, administrative, and management services to be provided for PC
in accordance with Article III hereof.
Section 1.16 MANAGEMENT SERVICES AGREEMENT. The term "Management
Services Agreement" shall mean this Management Services Agreement by and between
PC and Business Manager and any amendments hereto as may be adopted as provided
in this Management Services Agreement.
Section 1.17 OFFICE EXPENSE. The term "Office Expense" shall mean all
operating and nonoperating expenses incurred by the Business Manager in the
provision of services to PC. Office Expense shall not include any State or
federal income tax, or any other expense that is a PC Expense or a Business
Manager Expense. Without limitation, Office Expense shall include:
(a) the salaries and benefits of all employees of Business Manager at
the Centers and the salaries and benefits of the nondental employees of PC, but
not the salaries or benefits of the Dentists;
(b) the direct cost of any employee or consultant that provides
services at or in connection with the Centers for improved clinic performance,
such as management, billing and collections, business office consultation,
accounting and legal services;
(c) the Base Management Fee;
(d) the reasonable out-of-pocket travel expenses associated with
attending meetings, conferences, or seminars to benefit PC; and
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(e) the reasonable costs and expenses associated with marketing,
advertising and promotional activities to benefit PC.
To the extent, if any, that an Office Expense should properly be
allocated in part to PC and in part to other dental practices managed by
Business Manager, the amount allocated to PC shall be in proportion to the ratio
between PC's total Adjusted Gross Revenue to the total Adjusted Gross Revenue of
dental practices managed by Business Manager attributable to operations in the
Practice Territory.
Section 1.18 OPTION AGREEMENT. The term "Option Agreement" shall mean
that certain Option Agreement of even date herewith by and among PC, Business
Manager, Jack H. Castle D.D.S., P.C. and John G. Goodman, D.D.S.
Section 1.19 PC. The term "PC" shall mean SW Dental Associates, LC, a
Texas limited liability company.
Section 1.20 PC ACCOUNT. The term "PC Account" shall mean the bank
account of PC described in Section 3.6.
Section 1.21 PC EXPENSE. The term "PC Expense" shall mean an expense
incurred by the Business Manager or PC and for which PC, and not the Business
Manager, is financially liable. PC Expense shall include such items as Dentist
salaries, benefits, and other direct costs (including professional dues,
subscriptions, continuing dental education expenses, and travel costs for
continuing dental education or other business travel but excluding business
travel requested by Business Manager, which shall be an Office Expense).
Section 1.22 PRACTICE TERRITORY. The term "Practice Territory" shall
mean Travis County, Texas and all counties contiguous thereto.
Section 1.23 PROFESSIONAL SERVICES REVENUES. The term "Professional
Services Revenues" shall mean the sum of all professional fees actually recorded
each month on an accrual basis under GAAP (net of Adjustments) as a result of
Dental Services and related services rendered by the shareholders and dental
employees of PC.
Section 1.24 REPRESENTATIVES. The term "Representatives" shall mean a
party's officers, directors, employees, or other agents or representatives.
Section 1.25 STATE. The term "State" shall mean the State of Texas.
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Section 1.26 TERM. The term "Term" shall mean the duration of this
Management Services Agreement as described in Section 6.1.
ARTICLE II. APPOINTMENT AND AUTHORITY OF BUSINESS MANAGER
Section 2.1 APPOINTMENT. PC hereby appoints Business Manager as its
sole and exclusive agent for the management and administration of the business
functions and business affairs of PC described in Article III hereof, and
Business Manager hereby accepts such appointment, subject at all times to the
provisions of this Management Services Agreement.
Section 2.2 AUTHORITY. Consistent with the provisions of this
Management Services Agreement, Business Manager shall provide to PC the
Management Services set forth in Article III hereof. Subject to the terms and
conditions of this Management Services Agreement, Business Manager is hereby
expressly authorized to provide the Management Services in any reasonable manner
Business Manager deems appropriate. PC shall give Business Manager thirty (30)
days prior notice of PC's intent to execute any agreement obligating PC to
perform Dental Services or otherwise creating a binding legal obligation on PC.
The parties acknowledge and agree that PC, through its Dentists, shall be
responsible for and shall have complete authority, responsibility, supervision,
and control over the provision of all Dental Services and other professional
health care services performed for patients, and that all diagnoses, treatments,
procedures, and other professional health care services shall be provided and
performed exclusively by or under the supervision of Dentists as such Dentists,
in their sole discretion, deem appropriate. Business Manager shall have and
exercise absolutely no control or supervision over the provision of Dental
Services.
Section 2.3 PATIENT REFERRALS AND PAYMENTS. Business Manager and PC
agree that the benefits to PC hereunder do not require, are not payment for, and
are not in any way contingent upon the referral, admission, or any other
arrangement for the provision of any item or service offered by Business Manager
to patients of PC in any facility, laboratory or health care operation
controlled, managed, or operated by Business Manager. Further, Business Manager
and PC agree that the payment of monies hereunder in no way represents the
division, sharing, splitting or other allocation of fees for Dental Services
between PC and Business Manager.
Section 2.4 INTERNAL MANAGEMENT OF PC. Matters involving the internal
management, control, or finances of PC, including specifically the allocation of
professional income among the shareholders and Dentist employees of PC, tax
planning, and investment planning, shall remain the responsibility of PC and the
shareholders of PC.
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Section 2.5 PRACTICE OF DENTISTRY. The parties acknowledge that
Business Manager is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of dentistry nor shall
Business Manager now or in the future be regarded as practicing dentistry within
the meaning of the Act. To the extent any act or service herein required by
Business Manager should be construed by a court of competent jurisdiction or by
the State Board of Dental Examiners to constitute the practice of dentistry, the
requirement to perform that act or service by Business Manager shall be deemed
waived and unenforceable and shall not constitute a breach or default by
Business Manager under this Agreement.
ARTICLE III. COVENANTS AND RESPONSIBILITIES OF BUSINESS MANAGER
During the Term, Business Manager shall provide the Management Services
set forth in this Article III in accordance with all laws, rules, regulations
and guidelines applicable to the provision of Management Services; provided,
however, that prior to incurring any obligation on behalf of or for the account
of PC that by its terms extends beyond the Term of this Management Services
Agreement, Business Manager shall obtain the consent of PC, which shall not be
unreasonably withheld.
Section 3.1 SUPPORT SERVICES. Business Manager shall provide or arrange
for all printing, stationery, forms, postage, duplication or photocopying
services, and other support services as are reasonably necessary and appropriate
for the operation of each Center and the provision of Dental Services therein.
Section 3.2 QUALITY ASSURANCE, RISK MANAGEMENT, AND UTILIZATION REVIEW.
Business Manager shall, upon the request of PC, assist PC in PC's establishment
of procedures to ensure the consistency, quality, appropriateness and necessity
of Dental Services provided by PC, and shall provide administrative support for
PC's overall quality assurance, risk management, and utilization review
programs. Business Manager shall perform these tasks in a manner to ensure the
confidentiality and nondiscoverability of these program actions to the fullest
extent allowable under State and federal law.
Section 3.3 LICENSES AND PERMITS. Business Manager shall, on behalf of
and in the name of PC, coordinate all development and planning processes, and
apply for and use reasonable efforts to obtain and maintain all federal, State,
and local licenses and regulatory permits required for or in connection with the
operation of PC and equipment (existing and future) located at each Center,
other than those relating to the practice of dentistry or the administration of
drugs by Dentists retained by or associated with PC.
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Section 3.4 PERSONNEL. Except as specifically provided in Section
4.2(b) of this Management Services Agreement, Business Manager shall employ or
otherwise retain and shall be responsible for selecting, hiring, training,
supervising, and terminating, all management, administrative, clerical,
secretarial, bookkeeping, accounting, payroll, billing and collection and other
nonprofessional personnel as Business Manager deems reasonably necessary and
appropriate to enable Business Manager to perform its duties and obligations
under this Management Services Agreement. Business Manager shall have sole
responsibility for determining the salaries and providing such fringe benefits,
and for withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law
or governmental requirement. PC shall reimburse Business Manager on a
semi-monthly basis for all payroll costs incurred in connection with such
personnel.
Section 3.5 CONTRACT NEGOTIATIONS. Business Manager shall, upon request
of PC, advise PC with respect to and negotiate, either directly or on PC's
behalf, as appropriate and allowed by law, contractual arrangements between PC
and third parties for PC's provision of Dental Services, including, without
limitation, negotiated price agreements with third party payors, alternative
delivery systems, or other purchasers of group health care services.
Section 3.6 BILLING AND COLLECTION. On behalf of and for the account of
PC, Business Manager shall establish and maintain credit and billing and
collection policies and procedures, and shall timely bill and collect all
professional and other fees for all Dental Services provided by PC, or Dentists
employed or otherwise retained by PC. Business Manager shall advise and consult
with PC regarding the fees for Dental Services provided by PC; it being
understood, however, that PC shall establish the fees to be charged for Dental
Services and that Business Manager shall have no authority whatsoever with
respect to the establishment of such fees. In connection with the billing and
collection services to be provided hereunder, and throughout the Term, PC hereby
grants to Business Manager a special power of attorney and appoints Business
Manager as PC's exclusive true and lawful agent and attorney-in-fact, and
Business Manager hereby accepts such special power of attorney and appointment,
for the following purposes:
(a) To bill PC's patients, in PC's name and on PC's behalf, for all
Dental Services provided by PC to patients.
(b) To bill, in PC's name and on PC's behalf, all claims for
reimbursement or indem nification from Blue Shield/Blue Cross, insurance
companies and all other third party payors or fiscal intermediaries for all
covered billable Dental Services provided by PC to patients.
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(c) To administer such accounts including, but not limited to, (i)
extending the time of payment of any such accounts for cash, credit or
otherwise; (ii) discharging or releasing the obligors of any such accounts;
(iii) suing, assigning or selling at a discount such accounts to collection
agencies; or (iv) taking other measures to require the payment of any such
accounts.
(d) To deposit all amounts collected under clause (c) above into PC
Account which shall be and at all times remain in PC's name. PC covenants to
transfer and deliver to Business Manager for deposit into PC Account all funds
received by PC from patients or third party payors for Dental Services. Upon
receipt by Business Manager of any funds from patients or third party payors or
from PC pursuant hereto for Dental Services, Business Manager shall immediately
deposit those that relate to accounts receivable into the PC Account.
(e) To take possession of, endorse in the name of PC, and deposit into
the PC Account any notes, checks, money orders, insurance payments, and any
other instruments received in payment for Dental Services that relate to
accounts receivable.
Upon request of Business Manager, PC shall execute and deliver to the financial
institution wherein the PC Account is maintained, such additional documents or
instruments as may be neces sary to evidence the nature of Business Manager's
relationship with PC as described herein.
Section 3.7 PC ACCOUNT. Business Manager shall have access to the
records regarding the PC Account solely for the purposes contemplated hereby.
Section 3.8 FISCAL MATTERS.
(a) ACCOUNTING AND FINANCIAL RECORDS. Business Manager shall establish
and administer accounting procedures, controls, and systems for the development,
preparation, and safekeeping of administrative or financial records and books of
account relating to the business and financial affairs of PC and the provision
of Dental Services ("PC Records"), all of which shall be prepared and maintained
in accordance with GAAP and applicable laws and regulations. Business Manager
shall prepare and deliver to PC, (i) within 45 days of the end of each month,
and (ii) within one hundred twenty (120) days of the end of each calendar year,
a balance sheet and a profit and loss statement reflecting the financial status
of PC in regard to the provision of Dental Services as of the end of such
period, including a detailed description of disbursements made by Business
Manager on behalf of PC, all of which shall be prepared in accordance with GAAP
consistently applied. In addition, Business Manager shall prepare or assist in
the preparation of any other financial statements or records as PC may
reasonably request. PC and its authorized representatives shall have access,
during normal business hours, to any and all PC
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Records in the possession of Business Manager, and PC shall have the right to
review and copy any such PC Records, including but not limited to the copying of
any PC Records in electronic format.
(b) REVIEW OF EXPENDITURES. Business Manager shall not have any
authority to make any expenditures not consistent with this Management Services
Agreement without PC Consent.
(c) TAX MATTERS.
(1) IN GENERAL. At PC's request, Business Manager shall
prepare or arrange for the preparation by an
accountant approved in advance by PC (which approval
shall not be unreasonably withheld) of all
appropriate tax returns and reports required of PC.
(2) SALES AND USE TAXES. Business Manager and PC
acknowledge and agree that to the extent that any of
the services to be provided by Business Manager
hereunder may be subject to any State sales and use
taxes, Business Manager may have a legal obligation
to collect such taxes from PC and to remit same to
the appropriate tax collection authorities. PC agrees
to pay in addition to the payment of the Management
Fee, the applicable State sales and use taxes in
respect of the portion of the Management Fee
attributable to such services.
Section 3.9 REPORTS AND RECORDS. Business Manager shall establish,
monitor, and maintain procedures and policies for the timely creation,
preparation, filing and retrieval of all dental records generated by PC in
connection with PC's provision of Dental Services; and, subject to applicable
law, shall use its best efforts to ensure that dental records are promptly
available to Dentists and any other appropriate persons. All such dental records
shall be retained and maintained in accordance with all applicable State and
federal laws relating to the confidentiality and retention thereof. All dental
records shall be and remain the property and under the control of PC and shall
be located at the applicable Center so that they are readily available for
patient care, and PC shall remain the custodian thereof and responsible for
their maintenance. Business Manager shall use its reasonable efforts to preserve
the confidentiality of dental records and use information contained in such
records only for the limited purpose necessary to perform the services set forth
herein; provided, however, in no event shall a breach of said confidentiality be
deemed a default under this Agreement.
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Section 3.10 RECRUITMENT OF PC DENTISTS. Upon PC's request, Business
Manager shall perform all administrative services reasonably necessary and
appropriate to recruit potential Dentist personnel to become employees of PC.
Business Manager shall provide PC with model agreements to document PC's
employment, retention or other service arrangements with such indi viduals. It
will be and remain the sole and complete responsibility of PC to interview,
select, contract with, supervise, control and terminate all Dentists performing
Dental Services or other professional services, and Business Manager shall have
no authority whatsoever with respect to such activities.
Section 3.11 BUSINESS MANAGER'S INSURANCE. Throughout the Term,
Business Manager shall obtain and maintain with commercial carriers, through
self-insurance or some combination thereof, appropriate worker's compensation
coverage for Business Manager's employed personnel provided pursuant to this
Management Services Agreement, and professional, casualty and comprehensive
general liability insurance covering Business Manager, Business Manager's
personnel, and all of Business Manager's equipment in such amounts, on such
basis and upon such terms and conditions as Business Manager deems appropriate.
Upon the request of PC, Business Manager shall provide PC with a certificate
evidencing such insurance coverage.
Section 3.12 ADVERTISING. PC shall reimburse Business Manager on a
monthly basis for PC's pro rata share of advertising expenses incurred in the
Territory determined on the ratio of PC's Adjusted Gross Revenue to the total
Adjusted Gross Revenue of dental practices managed by Business Manager
attributable to operations in the Practice Territory.
Section 3.13 NO WARRANTY. PC acknowledges that Business Manager has not
made and will not make any express or implied warranties or representations that
the services provided by Business Manager will result in any particular amount
or level of dental practice or income to PC.
ARTICLE IV. COVENANTS AND RESPONSIBILITIES OF PC
Section 4.1 ORGANIZATION AND OPERATION. PC, as a continuing condition
of Business Manager's obligations under this Management Services Agreement,
shall at all times during the Term be and remain legally organized and operated
to provide Dental Services in a manner consistent with all State and federal
laws. PC shall operate and maintain within the Practice Territory a full time
practice of dentistry specializing in the provision of Dental Services.
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Section 4.2 PC PERSONNEL AND SHAREHOLDERS.
(a) DENTAL PERSONNEL. PC shall retain, as a PC Expense and not as an
Office Expense, that number of Dentists as are reasonably necessary and
appropriate in the sole discretion of PC for the provision of Dental Services.
Each Dentist retained by PC shall hold and maintain a valid license to practice
dentistry in the State, and shall be competent in the practice of dentistry,
including any subspecialties that the retained Dentist will practice on behalf
of PC. PC shall enter into, maintain and enforce with each such retained Dentist
a written employment agreement in a form reasonably satisfactory to PC and
Business Manager. No such employment contract may be amended without the prior
written consent of Business Manager if such amendment is effective beyond the
Term of this Management Services Agreement. PC shall be responsible for paying
the compensation and benefits, as applicable, for all Dentists and any other
dental personnel or other contracted or affiliated dentists, and for
withholding, as required by law, any sums for income tax, unemployment
insurance, social security, or any other withholding required by applicable law.
Business Manager may, on behalf of PC, establish and administer the compensation
with respect to such individuals in accordance with the written agreement
between PC and each Dentist. Business Manager shall neither control nor direct
any Dentist in the performance of Dental Services for patients.
(b) EMPLOYMENT OF NON-DENTIST DENTAL CARE PERSONNEL. PC shall employ or
retain, as an Office Expense, all non-dentist dental care personnel, such as
dental assistants, dental hygienists and dental technicians, required under the
Act or otherwise required by law to work under the direct supervision of a
Dentist or who Business Manager and PC determine should work under the direct
supervision of a Dentist. Such non-dentist dental care personnel shall be under
PC's control, supervision and direction in the performance of Dental Services
for patients.
Section 4.3 PROFESSIONAL STANDARDS. As a continuing condition of
Business Manager's obligations hereunder, each Dentist and any other dental
personnel retained by PC to provide Dental Services must comply with, be
controlled and governed by and otherwise provide Dental Services in accordance
with the code of professional conduct and applicable federal, State and
municipal laws, rules, regulations, ordinances and orders, and the ethics and
standard of care of the dental community wherein any Center is located.
Section 4.4 DENTAL SERVICES. PC shall ensure that Dentists and
non-dentist dental care personnel are available to provide Dental Services to
patients. In the event that Dentists are not available to provide Dental
Services coverage, PC shall engage and retain LOCUM TENENS coverage as it deems
reasonable and appropriate based on patient care requirements. Dentists retained
on a LOCUM TENENS basis shall meet all of the requirements of Section 5.3, and
the cost of providing
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LOCUM TENENS coverage shall be a PC Expense. With the assistance of the Business
Manager, PC and the Dentists shall be responsible for scheduling Dentist and
non-dentist dental care personnel coverage of all dental procedures.
Section 4.5 PEER REVIEW/QUALITY ASSURANCE. PC shall adopt a peer
review/quality assessment program to monitor and evaluate the quality of Dental
Services provided by dental personnel of PC. Upon request of PC, Business
Manager shall provide advice and administrative assistance to PC in structuring
and performing its peer review/quality assurance activities, but only if such
advice and assistance can be provided consistent with maintaining the
confidentiality and nondiscoverability of the processes and actions of the Peer
Review/Quality Assurance process of PC and not be regarded as practicing
dentistry under the Act. PC shall be under no obligation to act in accordance
with any advice provided to PC by Business Manager pursuant to this Section 4.5.
Section 4.6 PC'S INSURANCE. PC shall obtain and maintain with
commercial carriers appropriate worker's compensation coverage for PC's employed
personnel, if any, and professional and comprehensive general liability
insurance covering PC and each of the Dentists PC retains or employs to provide
Dental Services. The comprehensive general liability coverage shall be in the
minimum amount of One Million Dollars ($1,000,000) for each occurrence and Three
Million Dollars ($3,000,000) annual aggregate; and professional liability
coverage shall be in the minimum amount of Five Hundred Thousand Dollars
($500,000) for each occurrence and One Million Five Hundred Thousand Dollars
($1,500,000) annual aggregate. With respect to any insurance policies to be
renewed or obtained during the Term of this Management Services Agreement, PC
shall use reasonable efforts to obtain a provision in such policies that
provides for at least thirty (30) days advance written notice to PC from the
insurer as to any alteration of coverage, cancellation, or proposed cancellation
for any cause, and provide that a copy of such notice be sent to Business
Manager. PC shall cause to be issued to Business Manager by such insurer or
insurers a certificate reflecting such coverage and shall provide notice to
Business Manager promptly upon receipt of notice given to Dentist of the
cancellation or proposed cancellation of such insurance for any cause. PC and
Business Manager agree to use their best efforts to have each other named as
additional insureds on the other's respective professional liability insurance
at Business Manager's expense.
Section 4.7 CONFIDENTIAL AND PROPRIETARY INFORMATION. PC will not
disclose any Confidential Information of Business Manager without Business
Manager's express written authorization, such Confidential Information will not
be used in any way directly or indirectly detrimental to Business Manager, and
PC will keep such Confidential Information confidential and will take reasonable
steps to ensure that its affiliates and advisors who have access to such
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Confidential Information comply with these nondisclosure obligations; provided,
however, that PC may disclose Confidential Information to those of its
Representatives who need to know Confidential Information for the purposes of
this Management Services Agreement, it being understood and agreed to by PC that
such Representatives will be informed of the confidential nature of the
Confidential Information, will agree to be bound by this Section, and will be
directed by PC not to disclose to any other person any Confidential Information.
If PC is requested or required by a court of competent jurisdiction (by oral
questions, interrogatories, requests for information or documents, subpoenas,
civil investigative demands, or similar processes) to disclose or produce any
Confidential Information furnished in the course of its dealings with Business
Manager or its affiliates, advisors, or Representatives, PC will (i) provide
Business Manager with prompt notice thereof and copies, if possible, and, if
not, a description, of the Confidential Information requested or required to be
produced so that Business Manager may seek an appropriate protective order or
waive compliance with the provisions of this Section and (ii) consult with
Business Manager as to the advisability of Business Manager's taking of legally
available steps to resist or narrow such request. PC further agrees that, if in
the absence of a protective order or the receipt of a waiver hereunder PC is
nonetheless, in the written opinion of its legal counsel, compelled to disclose
or produce Confidential Information concerning Business Manager to any tribunal
or to stand liable for contempt or suffer other censure or penalty, PC may
disclose or produce such Confidential Information to such tribunal legally
authorized to request and entitled to receive such Confidential Information
without liability hereunder; provided, however, that PC shall give Business
Manager written notice of the Confidential Information to be so disclosed or
produced as far in advance of its disclosure or production as is practicable and
shall use its best efforts to obtain, to the greatest extent practicable, an
order or other reliable assurance that confidential treatment will be accorded
to such Confidential Information so required to be disclosed or produced.
Section 4.8 NONCOMPETITION. PC hereby recognizes and acknowledges that
Business Manager will incur substantial costs in providing the support services,
personnel, management, administration, and other items and services that are the
subject matter of this Management Services Agreement and that in the process of
providing services under this Management Services Agreement, PC will be privy to
financial and Confidential Information, to which PC would not otherwise be
exposed. The parties also recognize that the services to be provided by Business
Manager will be feasible only if PC operates an active practice to which the
Dentists associated with PC devote their full professional time and attention.
PC agrees and acknowledges that the noncompetition covenants described hereunder
are necessary for the protection of Business Manager, and that Business Manager
would not have entered into this Management Services Agreement without the
following covenants.
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(a) During the Term of this Management Services Agreement and except
for its obligations pursuant to this Management Services Agreement, PC shall not
establish, operate, or provide Dental Services at a dental office, clinic or
other health care facility anywhere within the Practice Territory.
(b) Except as specifically agreed to by Business Manager in writing, PC
covenants and agrees that during the Term of this Management Services Agreement,
PC shall not directly or indirectly own (excluding passive ownership of less
than five percent (5%) of the equity of any publicly traded entity), manage,
operate, control, or be otherwise associated with, lend funds to, lend its name
to, or maintain any interest whatsoever in any enterprise (i) having to do with
the provision, distribution, promotion, or advertising of any type of management
or administrative services or products to third parties in competition with
Business Manager, in the Practice Territory; and/or (ii) offering any type of
service(s) or product(s) to third parties substantially similar to those offered
by Business Manager to PC in the Practice Territory.
(c) The written employment agreements described in Section 4.2 shall
contain covenants of the shareholder employees pursuant to which the
shareholders agree not to compete with PC within the Practice Territory for the
shorter of (i) the term of the Management Services Agreement or (ii) one (1)
year after termination of the employment agreement in accordance with the terms,
conditions and limitations contained therein.
(d) PC shall obtain formal written agreements from its dentist
employees pursuant to which the employees agree not to compete with PC within
the Practice Territory (as defined in such employment agreements) for the
shorter of (i) the term of the Management Services Agreement or (ii) one (1)
year after termination of the employment agreement in accordance with the terms,
conditions and limitations contained therein.
(e) PC understands and acknowledges that the foregoing provisions in
Section 4.7 and Section 4.8 are designed to preserve the goodwill of Business
Manager and the goodwill of the individual Dentists of PC. Accordingly, if PC
breaches any obligation of Section 4.7 or Section 4.8, in addition to any other
remedies available under this Management Services Agreement, at law or in
equity, Business Manager shall be entitled to enforce this Management Services
Agreement by injunctive relief and by specific performance of the Management
Services Agreement. Additionally, nothing in this paragraph shall limit Business
Manager's right to recover any other damages to which it is entitled as result
of PC's breach. If any provision of the covenants is held by a court of
competent jurisdiction to be unenforceable due to an excessive time period,
geographic area, or restricted activity, the covenant shall be reformed to
comply with such time period, geographic area, or restricted activity that would
be held enforceable.
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Section 4.9 NAME, TRADEMARK. PC represents and warrants that, as of the
date hereof, PC conducts its professional practice under the name of, and only
under the name of "Southwest Dental Associates" and derivatives thereof. PC
covenants and promises that, without the prior written consent of the Business
Manager, PC will not:
(a) take any action or omit to take any action that is reasonably
likely to result in the change or loss of the name;
(b) license, sell, give, or otherwise transfer the name or the right to
use the name to any dental practice, dentist, professional corporation, or any
other entity; or
(c) conduct the professional practice of PC under any name other than
"SW Dental Associates" or "Castle Dental Centers" or respective derivatives
thereof.
Section 4.10 PEER REVIEW. PC shall designate a committee of Dentists to
function as a dental peer review committee to review credentials of potential
recruits, perform quality assurance functions, and otherwise resolve dental
competence issues. The dental peer review committee shall function pursuant to
formal written policies and procedures.
Section 4.11 INDEMNIFICATION. PC shall indemnify, hold harmless and
defend Business Manager, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), whether or not covered by insurance,
caused or asserted to have been caused, directly or indirectly, by or as a
result of the performance of Dental Services or any other acts or omissions by
PC and/or its shareholders, agents, employees and/or subcontractors (other than
Business Manager) during the term hereof. Business Manager shall indemnify, hold
harmless and defend PC, its officers, directors and employees, from and against
any and all liability, loss, damage, claim, causes of action and expenses
(including reasonable attorneys' fees), caused or asserted to have been caused,
directly or indirectly, by or as a result of the performance of any intentional
acts, negligent acts, or omissions by Business Manager and/or its shareholders,
agents, employees and/or subcontractors (other than PC) during the term of this
Agreement.
ARTICLE V. FINANCIAL ARRANGEMENT
Section 5.1 BASE MANAGEMENT FEE. The Base Management Fee shall be the
amount, calculated on a monthly basis, that is equal to fifteen percent (15%) of
the Adjusted Gross Revenue attributable to the applicable monthly period;
provided, however, that in no event shall
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the aggregate Base Management Fee during the Term exceed the aggregate Cash Flow
of PC for the Term.
Section 5.2 MANAGEMENT FEE. PC and Business Manager agree to the
compensation set forth herein as being paid to Business Manager in consideration
of a substantial commitment made by Business Manager hereunder and that such fee
is fair and reasonable. Each month, Business Manager shall be paid the
following:
(i) the amount of all Office Expenses (other than the
Base Management Fee) paid by the Business Manager on
behalf of PC; and
(ii) the Base Management Fee.
Section 5.3 ADJUSTMENTS. If there are not sufficient funds in any
period to pay the Base Management Fee, all unpaid amounts shall accumulate and
carry over from month to month until paid or until the termination of this
Management Services Agreement, in which case such unpaid amounts shall be
immediately due and payable as of the date of termination.
Section 5.4 REASONABLE VALUE. Payment of the Base Management Fee is not
intended to be and shall not be interpreted or applied as permitting Business
Manager to share in PC's fees for Dental Services or any other services, but is
acknowledged as the parties' negotiated agreement as to the reasonable fair
market value of the support services, purchasing, personnel, management,
administration, strategic management and other items and services furnished by
Business Manager pursuant to this Management Services Agreement, considering the
nature and volume of the services required and the risks assumed by Business
Manager.
Section 5.5 PAYMENT OF MANAGEMENT FEE. PC shall pay the Management Fee
with respect to each calendar month by the 15th day of the succeeding calendar
month. If PC fails to pay Business Manager the Management Fee in accordance with
the terms of this Management Services Agreement, and such default continues for
five days after PC receives notice of the default: (i) if Business Manager
elects not to enter into the Member Interests Purchase Agreement referred to in
the Option Agreement, then Business Manager may exercise only such right with
respect to such unpaid Management Fee as Business Manger may have as a creditor
of PC; and (ii) if Business Manager elects to enter into the Member Interests
Purchase Agreement referred to in the Option Agreement, then the purchase price
to be paid in accordance with the terms of the Member Interests Purchase
Agreement shall be reduced by the amount of such unpaid Management Fee.
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ARTICLE VI. TERM AND TERMINATION
Section 6.1 INITIAL AND RENEWAL TERM. The Term of this Management
Services Agreement shall commence effective June 1, 1997 and end on the earlier
of (i) May 31, 1998, and (ii) the closing of the transactions described in the
Member Interests Purchase Agreement referred to in the Option Agreement.
Section 6.2 TERMINATION.
(a) TERMINATION BY BUSINESS MANAGER. Subject to Section 6.2(c),
Business Manager may only terminate this Management Services Agreement either
without cause upon ninety (90) days' written notice to PC, or upon the
occurrence of any one of the following events which shall be deemed to be "for
cause":
(i) The dissolution of PC or the filing of a petition in
voluntary bankruptcy, an assignment for the benefit
of creditors, or other action taken voluntarily or
involuntarily under any State or federal statute for
the protection of debtors;
(ii) PC materially defaults in the performance of any of
its material duties or obligations hereunder, other
than payment to Business Manager of the Management
Fee, and such default continues for thirty (30) days
after PC receives notice of the default; or
(iii) PC fails to pay Business Manager the Management Fee
in accordance with the terms of this Management
Services Agreement, and such default continues for
five (5) days after PC receives notice of the
default.
(b) TERMINATION BY PC. Subject to Section 6.2(c) PC may only terminate
this Management Services Agreement upon any of the following occurrences which
shall be deemed to be "for cause":
(i) The dissolution of Business Manager or the filing of
a petition in voluntary bankruptcy, an assignment for
the benefit of creditors, or other action taken
voluntarily or involuntarily under any State or
federal statute for the protection of debtors;
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(ii) In the event that Business Manager materially
defaults in the performance of any of its material
obligations hereunder and such default continues for
thirty (30) days after Business Manager receives
notice of the default; or
(iii) In the event that a violation of the Act is asserted
by the Texas State Board of Dental Examiners that
could reasonably be expected to result in the
suspension or revocation of, or the imposition of
penalties or disciplinary action on, the dental
license of John Goodman or any Dentists employed by
PC, on the grounds that PC's entering into and
performing its obligations under this Management
Services Agreement is unlawful or as a result of a
violation of the Act by Business Manager.
(c) TERMINATION BY AGREEMENT. In the event PC and Business Manager
shall mutually agree in writing, this Management Services Agreement may be
terminated on the date specified in such written agreement.
(d) LEGISLATIVE, REGULATORY OR ADMINISTRATIVE CHANGE. In the event
there shall be a change in the Act, any federal or State statutes, case laws,
regulations or general instructions, the interpretation of any of the foregoing,
the adoption of new federal or State legislation, or a change in any third party
reimbursement system, any of which are reasonably likely to adversely affect the
manner in which either party may perform or be compensated for its services
under this Management Services Agreement or which shall make this Management
Services Agreement unlawful, the parties shall immediately enter into good faith
negotiations regarding a new service arrangement or basis for compensation for
the services furnished pursuant to this Management Services Agreement that
complies with the law, regulation, or policy and that approximates as closely as
possible the economic position of the parties prior to the change. If good faith
negotiations cannot resolve the matter, it shall be submitted to arbitration as
referenced in Section 7.6; provided however that in the event that a violation
of the Act is asserted by the Texas State Board of Dental Examiners that could
reasonably be expected to result in the suspension or revocation of, or the
imposition of penalties or disciplinary action on, the dental license of John
Goodman or any Dentists employed by PC on the grounds that PC's entering into
and performing its obligations under this Management Services Agreement is
unlawful, or as a result of a violation of the Act by Business Manager, PC may
immediately terminate this Management Services Agreement upon written notice to
Business Manager pursuant to Section 6.2(b)(iii).
Section 6.3 EFFECTS OF TERMINATION. Upon termination of this Management
Services Agreement neither party shall have any further obligations hereunder
except for (i) obligations accruing prior to the date of termination, including,
without limitation, payment of the Manage ment Fee and PC Expenses relating to
services provided prior to the termination of this Management Services Agreement
and (ii) obligations, promises, or covenants set forth herein that are expressly
made to extend beyond the Term, which provisions shall survive the expiration or
termination of this Management Services Agreement for any reason. Without
limiting the generality of the foregoing, upon termination of this Management
Services Agreement for any reason, neither PC, John Goodman, D.D.S. nor Sheryl
Goodman shall be subject to any employment, noncompetition, confidentiality,
secrecy, hiring limitation or nonsolicitation obligations with respect to
Business Manager or any of its affiliates. Upon the expiration or termination of
this Management Services Agreement for any reason or cause whatsoever, Business
Manager shall surrender to PC all books and records pertaining to PC's dental
practice.
ARTICLE VII. MISCELLANEOUS
Section 7.1 ADMINISTRATIVE SERVICES ONLY. Nothing in this Management
Services Agreement is intended or shall be construed to allow Business Manager
to exercise control or direction over the manner or method by which PC and its
Dentists perform Dental Services or other professional health care services. The
rendition of all Dental Services, including, but not limited to, the
prescription or administration of drugs shall be the sole responsibility of PC
and its Dentists, and Business Manager shall not interfere in any manner or to
any extent therewith. Nothing contained in this Management Services Agreement
shall be construed to permit Business Manager to engage in the practice of
dentistry, it being the sole intention of the parties hereto that the services
to be rendered to PC by Business Manager are solely for the purpose of providing
nondental management and administrative services to PC so as to enable PC to
devote its full time and energies to the professional conduct of its dental
practice and provision of Dental Services to its patients and not to
administration, or practice management.
Section 7.2 STATUS OF CONTRACTOR; AGENCY. It is expressly acknowledged
that the parties hereto are independent contractors and that this Management
Services Agreement is intended to constitute Business Manager as PC's agent,
such agency to be strictly limited to the matters set forth herein. Nothing
herein shall be construed to create an employer/employee, partnership, or joint
venture relationship, or to allow either to exercise control or direction over
the manner or method by which the other performs the services that are the
subject matter of this Management Services Agreement or to permit Business
Manager to take any action that would constitute the practice of dentistry;
provided always that the services to be provided hereunder shall be furnished in
a manner consistent with the standards governing such services and the
provisions of this Management Services Agreement. Each party understands and
agrees that (i) the other will not be treated as an employee for federal tax
purposes, (ii) neither will withhold on behalf of the other any sums for income
tax, unemployment insurance, social security, or any other withholding
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pursuant to any employment related law or requirement of any governmental body
or make available any of the benefits afforded to its employees, (iii) all of
such payments, withholdings, and benefits, if any, are the sole responsibility
of the party incurring the liability, and (iv) each will indemnify and hold the
other harmless from any and all loss or liability arising with respect to such
payments, withholdings, and benefits, if any.
Section 7.3 NOTICES. Any notice, demand, or communication required,
permitted, or desired to be given hereunder shall be in writing and shall be
served on the parties at the following respective addresses:
PC: SW DENTAL ASSOCIATES, LC
--------------------------
--------------------------
--------------------------
Business Manager: CASTLE DENTAL CENTERS OF TEXAS, INC.
1360 Post Oak Boulevard
Suite 1300
Houston, Texas 77056
Fax: (713) 513-1401
or to such other address, or to the attention of such other person or officer,
as any party may by written notice designate. Any notice, demand, or
communication required, permitted, or desired to be given hereunder shall be
sent either (a) by hand delivery, in which case notice shall be deemed received
when actually delivered, (b) by prepaid certified or registered mail, return
receipt requested, in which case notice shall be deemed received five calendar
days after deposit, postage prepaid in the United States Mail, or (c) by a
nationally recognized overnight courier, in which case notice shall be deemed
received one business day after deposit with such courier.
Section 7.4 GOVERNING LAW. This Management Services Agreement shall be
governed by the laws of the State of Texas applicable to agreements to be
performed wholly within the State. The law of the State was chosen by the
parties after negotiation to govern interpretation of this Management Services
Agreement because Harris County, Texas is the seat of management for Business
Manager. The federal and State courts of Harris County, Texas shall be the
exclusive venue for any litigation, special proceeding, or other proceeding
between the parties that may arise out of, or be brought in connection with or
by reason of, this Management Services Agreement.
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Section 7.5 ASSIGNMENT. Except as may be herein specifically provided
to the contrary, this Management Services Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives, successors, and assigns; provided, however, that neither party
hereto may assign this Management Services Agreement without the prior written
consent of the other party, which consent may be withheld. The sale, transfer,
pledge, or assignment of any of the common shares held by any shareholder of PC
or the issuance by PC of common or other voting shares to any other person, or
any combination of such transactions shall be deemed an attempted assignment by
PC, and shall be null and void unless consented to in writing by Business
Manager prior to any such transfer or issuance. Any breach of this provision,
whether or not void or voidable, shall constitute a material breach of this
Management Services Agreement, and in the event of such breach, Business Manager
may terminate this Management Services Agreement upon twenty-four (24) hours
notice to PC.
Section 7.6 ARBITRATION.
(a) GENERAL. The parties shall use good faith negotiation to resolve
any controversy, dispute or disagreement arising out of or relating to this
Management Services Agreement or the breach of this Management Services
Agreement. Any matter not resolved by negotiation shall be submitted to binding
arbitration and such arbitration shall be governed by the terms of this Section
7.6.
(b) SCOPE. Unless otherwise specifically provided herein, the parties
hereto agree that any claim, controversy, dispute or disagreement between or
among any of the parties hereto arising out of or relating to this Management
Services Agreement (other than claims involving any noncompetition or
confidentiality covenant) shall be governed exclusively by the terms and
provisions of this Section 7.6; provided, however, that the terms and provisions
of this Section 7.6 shall not preclude any party hereto from seeking, or a court
of competent jurisdiction from granting, a temporary restraining order,
temporary injunction or other equitable relief for any breach of (i) any
noncompetition or confidentiality covenant herein or (ii) any duty, obligation,
covenant, representation or warranty, the breach of which may cause irreparable
harm or damage.
(c) ARBITRATORS. In the event of any claim, controversy, dispute or
disagreement between the parties hereto arising out of or relating to this
Management Services Agreement, and in the further event the parties are unable
to resolve such claim, controversy, dispute or disagreement within thirty (30)
days after notice is first delivered pursuant to Section 7.3, the parties agree
to select arbitrators to hear and decide all such claims under this Section 7.6.
Each party shall select one arbitrator, and the two arbitrators so chosen shall
then select a third arbitrator who is experienced in the matter or action that
is subject to such arbitration. If such matter or action
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involves health-care issues, then the third arbitrator shall have such
qualifications as would satisfy the requirements of the National Health Lawyers
Association Alternative Dispute Resolution Service. Each of the arbitrators
chosen shall be impartial and independent of all parties hereto. If either of
the parties fails to select an arbitrator within twenty days after the end of
such thirty-day period, or if the arbitrators chosen fail to select a third
arbitrator within twenty days, then any party may in writing request the judge
of the United States District Court for the Southern District of Texas senior in
term of service to appoint the arbitrator or arbitrators and, subject to this
Section 7.6, such arbitrators shall hear all arbitration matters arising under
this Section 7.6, and, in default of such selection, may ask the American
Arbitration Association.
(d) APPLICABLE RULES.
(i) Each arbitration hearing shall be held at a place in Houston,
Texas acceptable to a majority of the arbitrators. The
arbitration shall be conducted in accordance with the
Commercial Arbitration Rules of the American Arbitration
Association to the extent such rules do not conflict with the
terms hereof. The decision of a majority of the arbitrators
shall be reduced to writing and shall be binding on the
parties. Judgment upon the award(s) rendered by a majority of
the arbitrators may be entered and execution had in any court
of competent jurisdiction or application may be made to such
court for a judicial acceptance of the award and an order of
enforcement. The charges and expenses of the arbitrators shall
be shared equally by the parties to the hearing.
(ii) The arbitration shall commence within thirty (30) days after
the arbitrators are selected in accordance with the provisions
of this Section 7.6. In fulfilling their duties with respect
to the matter in arbitration, the arbitrators may consider
such matters as, in the opinion of the arbitrators, are
necessary or helpful to make a proper valuation. The
arbitrators may consult with and engage disinterested third
parties to advise the arbitrators. The arbitrators shall not
add any interest factor reflecting the time value of money to
the amount of any award granted under any arbitration
hereunder and shall not award any punitive damages.
(iii) If any of the arbitrators selected hereunder should die,
resign or be unable to perform his or her duties hereunder,
the remaining arbitrators or such senior judge (or such
judge's successor) shall select a replacement arbitrator. The
procedure set forth in this Section 7.6 for selecting the
arbitrators shall be followed from time to time as necessary.
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(iv) As to the resolution of any claim, controversy, dispute or
disagreement that under the terms hereof is made subject to
arbitration, no lawsuit based on such resolution shall be
instituted by either of the parties hereto, other than to
compel arbitration proceedings or enforce the award of a
majority of the arbitrators.
(v) All privileges under Texas and federal law, including
attorney-client and work- product privileges, shall be
preserved and protected to the same extent that such
privileges would be protected in a federal court proceeding
applying Texas law.
Section 7.7 WAIVER OF BREACH. The waiver by either party of a breach or
violation of any provision of this Management Services Agreement shall not
operate as, or be construed to constitute, a waiver of any subsequent breach of
the same or another provision hereof.
Section 7.8 ENFORCEMENT. In the event either party resorts to legal
action to enforce or interpret any provision of this Management Services
Agreement, the prevailing party shall be entitled to recover the costs and
expenses of such action so incurred, including, without limitation, reasonable
attorneys' fees.
Section 7.9 GENDER AND NUMBER. Whenever the context of this Management
Services Agreement requires, the gender of all words herein shall include the
masculine, feminine, and neuter, and the number of all words herein shall
include the singular and plural.
Section 7.10 ADDITIONAL ASSURANCES. Except as may be herein
specifically provided to the contrary, the provisions of this Management
Services Agreement shall be self-operative and shall not require further
agreement by the parties; provided, however, at the request of either par ty,
the other party shall execute such additional instruments and take such
additional acts as are reasonable and as the requesting party may deem necessary
to effectuate this Management Services Agreement.
Section 7.11 CONSENTS, APPROVALS, AND EXERCISE OF DISCRETION. Whenever
this Management Services Agreement requires any consent or approval to be given
by either party, or either party must or may exercise discretion, and except
where specifically set forth to the contrary, the parties agree that such
consent or approval shall not be unreasonably withheld or delayed, and that such
discretion shall be reasonably exercised.
Section 7.12 FORCE MAJEURE. Neither party shall be liable or deemed to
be in default for any delay or failure in performance under this Management
Services Agreement or other interruption of service deemed to result, directly
or indirectly, from acts of God, civil or military
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authority, acts of public enemy, war, accidents, fires, explosions, earthquakes,
floods, failure of transportation, strikes or other work interruptions by either
party's employees, or any other sim ilar cause beyond the reasonable control of
either party unless such delay or failure in performance is expressly addressed
elsewhere in this Management Services Agreement.
Section 7.13 SEVERABILITY. The parties hereto have negotiated and
prepared the terms of this Management Services Agreement in good faith with the
intent that each and every one of the terms, covenants and conditions herein be
binding upon and inure to the benefit of the respective parties. Accordingly, if
any one or more of the terms, provisions, promises, covenants or conditions of
this Management Services Agreement or the application thereof to any person or
circumstance shall be adjudged to any extent invalid, unenforceable, void or
voidable for any reason whatsoever by a court of competent jurisdiction or an
arbitration tribunal, such provision shall be as narrowly construed as possible,
and each and all of the remaining terms, provisions, promises, covenants and
conditions of this Management Services Agreement or their application to other
persons or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this
Management Services Agreement is in violation of applicable law, then the
parties agree to negotiate in good faith to amend the Management Services
Agreement, to the extent possible consistent with its purposes, to conform to
law.
Section 7.14 DIVISIONS AND HEADINGS. The divisions of this Management
Services Agreement into articles, sections, and subsections and the use of
captions and headings in connection therewith is solely for convenience and
shall not affect in any way the meaning or interpretation of this Management
Services Agreement.
Section 7.15 AMENDMENTS AND MANAGEMENT SERVICES AGREEMENT EXECUTION.
This Management Services Agreement and amendments hereto shall be in writing and
executed in multiple copies on behalf of PC by its President, and on behalf of
Business Manager by any duly authorized officer thereof. Each multiple copy
shall be deemed an original, but all multiple copies together shall constitute
one and the same instrument.
Section 7.16 ENTIRE MANAGEMENT SERVICES AGREEMENT. With respect to the
subject matter of this Management Services Agreement, (i) this Management
Services Agreement, the Option Agreement and the Member Interests Purchase
Agreement referred to in the Option Agreement supersedes all previous contracts
and constitutes the entire agreement between the parties; (ii) neither party
shall be entitled to benefits other than those specified herein; and (iii) no
prior oral statements or contemporaneous negotiations or understandings or prior
written material not specifically incorporated herein shall be of any force and
effect, and no changes in or additions
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to this Management Services Agreement shall be recognized unless incorporated
herein by amendment as provided herein, such amendment(s) to become effective on
the date stipulated in such amendment(s).
IN WITNESS WHEREOF, PC and Business Manager have caused this Management
Services Agreement to be executed by their duly authorized representatives, all
as of the day and year first above written.
PC: SW DENTAL ASSOCIATES LC
By: _____________________________
John G. Goodman, D.D.S.
President
BUSINESS MANAGER: CASTLE DENTAL CENTERS OF TEXAS, INC.
_________________________________
Jack H. Castle, Jr.
President
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EXHIBIT 10.82
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of
______________, 1997 (the "Effective Date"), by and between Castle Dental
Centers of Texas, Inc., a Texas corporation (the "Company"), and John Goodman,
D.D.S. ("Employee").
RECITALS:
Prior to the date hereof, Employee was the majority owner of Southwest
Dental Associates, L.C., which along with the Company and the Employee is a
party to that certain Option Agreement dated as of ______________, 1997 (the
"Option Agreement"). As a condition to the consummation of the transactions
contemplated by the Option Agreement and as an inducement for the Company and
Employee to perform their respective obligations under the Option Agreement, the
Company and Employee have entered into this Agreement.
The parties agree as follows:
ARTICLE I
1.1 EMPLOYMENT.
(a) The Company agrees to, and hereby does, employ Employee, on the terms
and conditions set forth herein, to hold such offices, have such titles and
perform such duties as are contemplated hereby. Employee's initial title is Vice
President with responsibility for the Company's operations in and around the
Austin, Texas metropolitan area.
(b) Employee's initial responsibility shall be to manage the Company's
operations, and to participate in the development and implementation of the
strategic plan of the Company, in the
Austin, Texas metropolitan area. Employee's role in the development of the
strategic plan shall include, but not be limited to, an analysis of markets
selected by the Company and the identification of acquisition candidates.
Employee's role in the implementation of the strategic plan, subject to the
supervision of the Company's senior management, shall include, but not be
limited to, participating in the acquisition of dental practices, development of
new offices and responsibility for the management of dental practices in
accordance with a management services agreement to which the Company and such
practices are parties.
(c) The Company may reassign Employee from the duties described above
without breaching this Agreement; provided, however, that Employee shall not be
assigned duties inconsistent with his position as an executive of the Company or
relocate permanently outside of the city of Austin, Texas, and provided further,
that no such reassignment shall justify a decrease in the Base Salary (as herein
defined) payable to Employee.
(d) Employee shall devote his full business time, efforts and abilities to
the business of the Company for the benefit and advantage of the Company. During
the period of employment, Employee shall devote substantially his entire
business hours to the business of the Company, and shall perform such other
services as shall be reasonably designated, from time to time, by the Board of
Directors or senior executive officers of the Company. Employee shall use his
reasonable best efforts to promote the interests of the Company.
ARTICLE II
2.1 SALARY. As compensation for his service during the term of this
Agreement (or until terminated pursuant to the provisions hereof), the Company
shall pay Employee a salary at the rate of $175,000 per annum (the "Base
Salary"), through and until the Termination Date, as herein defined, payable in
accordance with the regular payroll practices of the Company as in effect from
time to time. Such Base Salary shall be subject to withholding for the
prescribed federal and state income tax, social security and other items as
required by law, and for other items consistent with the Company's policy with
respect to health insurance and other benefit plans for similarly situated
employees.
2.2 INCENTIVE BONUS COMPENSATION. The Company has established the Castle
Dental Centers of Texas, Inc. Incentive Bonus Plan (the "Plan") which provides
for the Company to set aside for grant to certain management employees selected
by a committee consisting of Employee
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and the chief executive officer of Castle Dental Centers, Inc., a Delaware
corporation ("Castle") with the approval of the Compensation Committee of the
Board of Directors of Castle an aggregate of ten percent (10%) of the earnings
before interest, taxes, depreciation and amortization ("EBITDA") of the Austin
operations of the Company in excess of $1,120,000 per year, (which amount shall
be reduced for 1997 by the amount, if any, that the EBITDA for 1997 of the four
dental offices acquired by the Company and formerly operated by Horizon Dental
Centers in Austin, Texas is less than $520,000) attributable to the operations
of the Company under the direct management of Employee in the Austin, Texas
metropolitan area (the "Austin Operations"), computed without general overhead
allocation or charge with respect to the general and administrative expenses of
Castle, but taking into account direct costs incurred by Castle on behalf of the
Company and including a deduction equal to the cost of capital invested
(exclusive of initial acquisition costs) in the Austin Operations by Castle. For
the purposes of this Agreement, Castle's cost of capital shall be deemed to be
10%. The Employee is hereby granted the right to participate in the Plan for
each year prior to the Termination Date. The annual amount which the Employee
shall be entitled to receive from the Plan shall be determined by a committee
consisting of Employee and the chief executive officer of Castle with the
approval of the Compensation Committee of the Board of Directors of Castle.
2.3 BENEFITS. During the terms of this Agreement, Employee shall be
entitled to receive such benefits as are made available to other personnel of
the Company in comparable positions, with comparable service credit and with
comparable duties and responsibilities. Such benefits shall be subject to the
terms of the applicable plan documents, summary plan descriptions and/or
employment policies and shall be subject to modification, amendment or
revocation in accordance with the terms of such documents, policies and
procedures.
2.4 REIMBURSEMENT OF EXPENSES. The Company shall reimburse all reasonable
travel and entertainment expenses incurred by Employee in connection with the
performance of his duties pursuant to this Agreement, consistent with the
Company's policies then in effect. Employee shall provide the Company with
written expense reports of his expenses in accordance with the usual customary
practice of the Company.
ARTICLE III
3.1 TERM. The term of this Agreement shall commence on the date hereof and
end on _______________, 2000 subject to the right of either party to terminate
this agreement as provided
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below. The date on which this Agreement is terminated is referred to hereunder
as the "Termination Date".
3.2 DEATH; DISABILITY. Subject to the provisions of Section 3.5(a), this
Agreement shall be automatically terminated on the death of Employee or on the
permanent disability of Employee if he is no longer able, with reasonable
accommodation, to perform the essential functions of his position with the
Company. In the event of Employee's disability, this Agreement shall not
terminate unless and until Employee has been unable to perform the essential
functions of his position hereunder for a period of three (3) consecutive months
as a result of the Employee's disability.
3.3 TERMINATION WITHOUT CAUSE. Either the Company or Employee may
terminate this Agreement at any time, without cause, by giving the other thirty
(30) days' written notice of termination.
3.4 TERMINATION WITH CAUSE. In addition to the Company's right to
terminate this Agreement without cause as provided in Section 3.3 hereof, the
Company may terminate this Agreement for "Cause." "Cause" means the termination
by the Company of Employee's employment for any of the following grounds:
(a) the commission of any act of fraud on the part of Employee
resulting or intending to result in personal gain or enrichment at the expense
of the Company;
(b) misappropriation, embezzlement, theft or willful and material
damage of or to any asset of the Company or the use of the Company funds or
assets for any illegal purpose;
(c) a good faith determination by the Board of Directors of the
Company that Employee has violated this Agreement or committed an act of gross
negligence or willful misconduct (in the case of a breach, following notice
thereof to Employee by the Company and a thirty day period thereafter within
which Employee shall have the opportunity to cure such breach) that has or is
reasonably expected to have a material adverse effect on the business or affairs
of the Company; or
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(d) the commission of any felony on the part of Employee which, in
the sole discretion of the Board of Directors of the Company, materially and
adversely, directly or indirectly, affects the name or goodwill of the Company;
A notice of termination pursuant to this Section 3.4 shall be in writing
and shall state the alleged reason for termination. Within not less than five
(5) nor more than twenty (20) days after such notice, Employee shall be given
the opportunity to appear before the Board of Directors of the Company, or a
committee thereof, to rebut or dispute the alleged violation. If the Board of
Directors or committee determines, by vote of a majority of the directors other
than Employee (if Employee is then a director), that one or more grounds exist
for termination of Employee for Cause, the Company may immediately terminate
Employee's employment under this Section 3.4. The Company may elect, during the
pendency of such inquiry, to relieve Employee of his regular duties.
3.5 SEVERANCE PAY. In the event of termination, Employee shall be entitled
to compensation (the "Severance Pay") in accordance with the following:
(a) If Employee's employment is terminated by reason of his
disability, the Company shall continue to pay Employee's monthly Base Salary (at
his then current Base Salary rate excluding any increases that would have taken
effect beyond the date of termination and any bonus and noncash benefits) the
Employee would have earned for the three month period subsequent to the
effective date of termination, payable at such time or times as would have been
paid to Employee had he remained employed by the Company.
(b) If (i) Employee voluntarily terminates his employment, or (ii)
the Company terminates this Agreement for Cause, or (iii) if Employee's
employment is terminated by reason of his death, Employee shall not be entitled
to receive any additional salary, bonus or benefits beyond those earned or
accrued as of the effective date of the termination of his employment.
(c) If Employee's employment hereunder is terminated prior to the
expiration of the term of this Agreement, and such termination is either (i) due
to a breach of this Agreement by the Company, or (ii) by the Company and not for
Cause, Employee shall be entitled to Severance Pay in an amount equal to the
amount of Base Salary that the Employee would have earned for the remainder of
the Term described in Section 3.1 hereof, less applicable payroll deductions
(and any other deductions authorized in writing by the Employee), payable at
such time or times as would have been paid to Employee had he remained employed
by the Company through the term of this
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Agreement; provided, however, prior to the termination of this Agreement as the
result of a breach hereof by the Company, Employee shall give written notice of
such breach and the Company shall have a thirty day period within which to cure
such breach.
3.6 EFFECT OF TERMINATION ON AGREEMENT. Any termination of Employee's
employment shall not release either the Company or Employee from their
respective obligations under this Agreement that are required to be performed
subsequent to the date of such termination, including but not limited to those
obligations set forth under Articles III, IV, V and VI.
3.7 PAYMENTS TO ESTATE. If Employee should die before all amounts payable
to him pursuant to Section 3.5 have been paid, such unpaid amounts shall be paid
to Employee's estate.
ARTICLE IV
4.1 NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee
understands and agrees that his employment by the Company creates a relationship
of confidence and trust between himself and the Company with respect to
Confidential Information (as defined below). Employee recognizes that he will
have access to and knowledge of Confidential Information. Employee will not,
during or after the term of his employment by the Company, in whole or in part,
disclose such Confidential Information to any person, firm, corporation,
association, or other entity for any reason or purpose whatsoever, nor shall he
make use of any such Confidential Information for his own purposes or for the
purposes of others; provided, however, that nothing in this Article shall be
construed to prohibit the disclosure of such Confidential Information by the
Employee (i) to another officer, director, employee or agent of the Company;
(ii) as is reasonably necessary for the performance of his duties and
responsibilities under this Agreement; or (iii) as otherwise required by law. If
Employee is required by law to disclose "Confidential Information," Employee
shall notify the Company's Board of Directors, in writing, of the nature of such
disclosure and the Confidential Information to be disclosed, as soon as is
possible and/or practical, and permit the Company the opportunity to contest or
limit such disclosure.
4.2 CONFIDENTIAL INFORMATION DEFINED. The term "Confidential Information"
shall mean and include any and all records, computer programs, data, patent
applications, trade secrets, customer lists, customer databases, video programs
and programming, proprietary information, technology, pricing policies,
financial information, methods of doing business, acquisition practices, policy
and/or procedure manuals, training and recruiting procedures, accounting
procedures, the status and
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content of the Company's contracts with its customers, the Company's business
philosophy, and servicing methods and techniques at any time used, developed, or
investigated by the Company, before or during Employee's tenure of employment,
or other information of any kind expressed or recorded on any medium arising out
of, concerning, or acquired in connection with the research, development,
commercialization and other activities of the Company; but "Confidential
Information" does not include information (i) generally known or available in
the industry, through no fault of Employee; or (ii) available from a third party
without violation of any duty of confidentiality by Employee or others.
4.3 DELIVERY OF MATERIALS. Employee further agrees to deliver to the
Company at the termination of his employment, or at any other time upon request
by the Company, all correspondence, memoranda, notes, records (including
computer records and data), drawings, sketches, plans, customer lists, and other
documents, which are made, composed, or received by Employee, solely or jointly
with others, during the term of his employment and which are in Employee's
possession, custody, or control at such date and which are related in any manner
to the past, present or anticipated business of the Company.
ARTICLE V
5.1 NONINTERFERENCE WITH EMPLOYMENT RELATIONSHIPS. During the term of
Employee's employment and during the twenty-four months following the
termination of the Employee's employment, Employee agrees not to solicit or
induce any employee of the Company or Jack H. Castle, D.D.S., P.C. ("Castle PC")
to terminate his or her employment, accept employment with anyone else, or to
interfere in a similar manner with the business of the Company or Castle PC.
5.2 NONSOLICITATION OF CUSTOMERS AND SUPPLIERS During the employment of
the Employee pursuant to this Agreement and during the twenty-four months
following the termination of the Employee's employment, Employee agrees not to
contact, communicate with or solicit any customer of the Company or Castle PC
for the purpose of engaging in the Same or Similar Business (as defined below)
as the Company.
5.3 NONCOMPETITION. Employee recognizes that in connection with the
performance of the Employee's duties and obligations under this Agreement, the
Company will provide Employee with confidential, proprietary and trade secret
information, which is necessary to Employee's employment with the Company, and
which Employee has agreed to protect and maintain as
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confidential, proprietary and trade secret information for the Company's
benefit. To protect and maintain the confidentiality of the information,
Employee agrees that, during the employment of the Employee pursuant to this
Agreement, including the period during which Employee is receiving Severance Pay
hereunder, and during the twenty-four months following such period, Employee
shall not directly or indirectly engage in, manage, operate, join, control, or
participate in the ownership, management, operation, or control of, or be
employed or engaged or act as a consultant to in any manner by, any business
competing in the Same or Similar Business as the Company or Castle PC within a
ten mile radius around the city limits of any city in the State of Texas in
which the Employee has responsibility for the management of locations providing
dental management services as of the date of Employee's employment hereunder;
provided, however, that Employee shall be able to practice dentistry as a sole
practitioner without violating this section.
5.4 SAME OR SIMILAR BUSINESS DEFINED. For purposes of this Article V, the
"Same or Similar Business" as the Company or Castle PC shall be defined as any
business that is engaged to a significant extent in the provision of dental care
and services, including but not limited to the practice of general dentistry,
orthodontics and all related dental care services, the management of such
services or practices, or the management of or consulting with dental practice
management companies.
5.5 REASONABLENESS OF RESTRICTIONS. Employee has carefully read and
considered the provisions of this Article V and, having done so, agrees that the
restrictions set forth in such Article contain reasonable limitations as to
time, geographical area, scope of activity to be restrained, and do not impose a
greater restraint than is necessary to protect the goodwill or other legitimate
business interests of the Company. The Employee further understands and agrees
that, if at some later date, a court of competent jurisdiction determines that
the scope, duration or geographic area of any covenant set forth in this Article
is overbroad or unenforceable for any reason, these covenants shall be reformed
by the court and enforced to the maximum extent permissible under Texas law.
ARTICLE VI
6.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties and their heirs, legal representatives, successors and assigns. The
Company may assign its interest in this Agreement, and all covenants, conditions
and provisions hereunder shall inure to the benefit of and be enforceable by its
assignee or successor in interest. The rights and obligations of Employee under
this Agreement are personal to him, and no such rights, benefits or obligations
shall be
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assignable, except that his personal representatives and heirs may enforce the
obligations of the Company hereunder.
6.2 WAIVER OF BREACH. The waiver by any party to this Agreement of a
breach or violation of any provisions hereof shall not operate or be construed
to be a waiver of any subsequent breach hereof.
6.3 NOTICES. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing and given in person,
or shall be deemed given five (5) days after sent by certified mail, return
receipt requested, to the address as set forth below on the signature pages of
this Agreement. If any party hereto desires to amend its address hereunder, that
party shall send written notice of the new address to all other parties hereto.
6.4 GOVERNING LAW. This Agreement shall be interpreted, construed and
governed in accordance with the laws of the State of Texas without regard to
conflict of laws provision. This Agreement is performable in Travis County,
Texas.
6.5 HEADINGS. The paragraph headings contained in this Agreement are for
convenience only, and shall in no manner be construed to be part of this
Agreement.
6.6 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same agreement. A fully executed copy of this Agreement
shall be delivered to each party hereto.
6.7 LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not effect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. In addition, such invalid, illegal or unenforceable
provision shall be modified to the minimum extent necessary to permit it to be
valid, legal and enforceable. For all purposes hereof "day" shall mean calendar
day and shall include weekends and holidays; provided, however, that if any
notice period terminates on a weekend or holiday, the person who is required to
deliver the notice shall have until the next business day to complete the notice
requirement.
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6.8 AMENDMENT. No modification, amendment, addition to, or termination of
this Agreement, nor waiver of any of its provisions, shall be valid or
enforceable unless it is in writing and signed by all of the parties hereto.
6.9 PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole and
only Agreement of the parties hereto and supersedes any prior understanding or
written or oral agreements, correspondence or communications between the parties
respecting the subject matter hereof.
6.10 ARBITRATION. EXCEPT FOR THE REMEDY PROVIDED UNDER SECTION 6.11 BELOW,
ANY CLAIM OR DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE
EMPLOYMENT OF EMPLOYEE BY THE COMPANY SHALL BE SUBMITTED TO FINAL AND BINDING
ARBITRATION IN AUSTIN, TEXAS PURSUANT TO THE EMPLOYMENT DISPUTE RESOLUTION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. THE PARTIES AGREE THAT ANY PARTY
REQUESTING ARBITRATION OF ANY DISPUTE UNDER THIS SECTION MUST GIVE FORMAL
WRITTEN NOTICE OF THE PARTY'S DEMAND FOR ARBITRATION ("ARBITRATION NOTICE")
WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER SUCH DISPUTE FIRST ARISES AND FAILURE
TO TIMELY COMMUNICATE ARBITRATION NOTICE SHALL CONSTITUTE A WAIVER OF SUCH
DISPUTE. THE PARTIES FURTHER AGREE THAT EACH PARTY MAY BE REPRESENTED BY COUNSEL
IN ANY PROCEEDING UNDER THIS SECTION, AND THAT ALL EXPENSES AND FEES INCURRED IN
CONNECTION WITH ANY PROCEEDING UNDER THIS SECTION SHALL BE PAID BY THE
NON-PREVAILING PARTY (AS DETERMINED BY THE ARBITRATORS). BOTH PARTIES AGREE THAT
NOTHING IN THIS SECTION SHALL BE CONSTRUED TO REQUIRE THE ARBITRATION OF ANY
DISPUTE OR CLAIM (i) ARISING UNDER ARTICLES IV OR V OF THIS AGREEMENT; (ii) FOR
UNEMPLOYMENT COMPENSATION BENEFITS; OR (iii) FOR WORKERS' COMPENSATION BENEFITS.
BY THEIR EXECUTION OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT CONSENTS, ON
BEHALF OF HIMSELF OR ITSELF AND THEIR RESPECTIVE SUCCESSORS, HEIRS AND ASSIGNS,
TO SUCH BINDING ARBITRATION IN ACCORDANCE WITH THE TERMS OF THIS SECTION.
6.11 REMEDIES. Employee agrees that the remedy at law for any breach of
any provision of Articles IV and V will be inadequate and that the Company will
be entitled to seek
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injunctive and equitable relief for any such breach, in addition to all other
remedies permitted by law.
IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement in ____________, Texas as of the date first set forth above.
THE COMPANY:
CASTLE DENTAL CENTERS OF TEXAS, INC.
By: ________________________________
Name: Jack H. Castle, Jr.
Title: President
Address: __________________________
ATTENTION: President
EMPLOYEE:
John Goodman, D.D.S.
Address: ___________________________
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EXHIBIT 10.83
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is entered into as of
_____________, 1997 (the "Effective Date"), by and between Castle Dental Centers
of Texas, Inc., a Texas corporation (the "Company"), and Sheryl L. Goodman
("Consultant").
RECITALS:
Prior to the date hereof, Consultant was an employee of Southwest Dental
Associates, L.C., which along with the Company is a party to that certain Option
Agreement dated as of ___________, 1997 (the "Option Agreement"). As a condition
to the consummation of the transactions contemplated by the Option Agreement and
as an inducement for the Company and Southwest Dental Associates, L.C. to
perform their respective obligations under the Option Agreement, the Company and
Consultant have entered into this Agreement.
The parties agree as follows:
ARTICLE I
1.1 CONSULTING RELATIONSHIP.
(a) The Company agrees to, and hereby does, retain Consultant, on the
terms and conditions set forth herein, to provide consulting services to the
Company as requested from time to time by the Company's senior management.
(b) Consultant shall devote approximately 100 hours per month in
performing the services contemplated hereby for the benefit and advantage of the
Company, provided, however, that Consultant shall not receive any additional
compensation for devoting more than 100 hours per
month in such capacity. Consultant shall use her reasonable best efforts to
promote the interests of the Company.
ARTICLE II
2.1 SALARY. As compensation for her service during the term of this
Agreement (or until terminated pursuant to the provisions hereof), the Company
shall pay Consultant a salary at the rate of $50,000 per annum payable
semi-monthly. Such Base Salary shall not be subject to withholding for any
prescribed federal and state income tax, social security or other items, such
matters being the sole responsibility of the Consultant.
2.2 REIMBURSEMENT OF EXPENSES. The Company shall reimburse all reasonable
travel and entertainment expenses incurred by Consultant in connection with the
performance of her duties pursuant to this Agreement, which have been approved
by the Company in advance. Consultant shall provide the Company with written
expense reports of her expenses in accordance with the usual customary practice
of the Company.
ARTICLE III
3.1 TERM. The term of this Agreement shall commence on the date hereof and
end on _______________, 2000 subject to the right of either party to terminate
this Agreement as provided below. The date on which this Agreement is terminated
is referred to hereunder as the "Termination Date".
3.2 DEATH; DISABILITY. Subject to the provisions of Section 3.5(a), this
Agreement shall be automatically terminated on the death of Consultant or on the
permanent disability of Consultant if she is no longer able, with reasonable
accommodation, to perform her consulting services to the Company. In the event
of Consultant's disability, this Agreement shall terminate automatically on
written notice of termination by the Company.
3.3 TERMINATION WITHOUT CAUSE. Either the Company or Consultant may
terminate this Agreement at any time, without cause, by giving the other thirty
(30) days' written notice of termination.
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3.4 TERMINATION WITH CAUSE. In addition to the Company's right to
terminate this Agreement without cause as provided in Section 3.3 hereof, the
Company may terminate this Agreement for "Cause." "Cause" means the termination
by the Company of Consultant's retention for any of the following grounds:
(a) the commission of any act of fraud on the part of Consultant
resulting or intending to result in personal gain or enrichment at the expense
of the Company;
(b) misappropriation, embezzlement, theft or willful and material
damage of or to any asset of the Company or the use of the Company funds or
assets for any illegal purpose;
(c) a good faith determination by the Board of Directors of the
Company that Consultant has violated this Agreement or committed an act of gross
negligence or willful misconduct (in the case of a breach, following notice
thereof to Consultant by the Company and a thirty day period thereafter within
which Consultant shall have the opportunity to cure such breach) that has or is
reasonably expected to have a material adverse effect on the business or affairs
of the Company; or
(d) the commission of any felony on the part of Consultant which, in
the sole discretion of the Board of Directors of the Company, materially and
adversely, directly or indirectly, affects the name or goodwill of the Company.
A notice of termination pursuant to this Section 3.4 shall be in writing
and shall state the alleged reason for termination. Within not less than five
(5) nor more than twenty (20) days after such notice, Consultant shall be given
the opportunity to appear before the Board of Directors of the Company, or a
committee thereof, to rebut or dispute the alleged violation. If the Board of
Directors or committee determines, by vote of a majority of the directors other
than Consultant (if Consultant is then a director), that one or more grounds
exist for termination of Consultant for Cause, the Company may immediately
terminate Consultant's relationship under this Section 3.4. The Company may
elect, during the pendency of such inquiry, to relieve Consultant of her regular
duties.
3.5 SEVERANCE PAY. In the event of termination, Consultant shall be
entitled to compensation (the "Severance Pay") in accordance with the following:
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(a) If (i) Consultant voluntarily terminates her consulting
relationship, or (ii) the Company terminates this Agreement for Cause, or (iii)
if Consultant's consulting relationship is terminated by reason of her death or
disability, Consultant shall not be entitled to receive any additional fees
beyond those earned or accrued as of the effective date of the termination of
her consulting relationship.
(b) If Consultant's consulting relationship hereunder is terminated
prior to the expiration of the term of this Agreement, and such termination is
either (i) due to a breach of this Agreement by the Company, or (ii) by the
Company and not for Cause, Consultant shall be entitled to Severance Pay in an
amount equal to the amount of the consulting fees that the Consultant would have
earned for the six months following the effective date of termination (but in no
event to extend beyond the Term described in Section 3.1 hereof), payable at
such time or times as would have been paid to Consultant had she maintained her
consulting relationship with the Company through the term of this Agreement;
provided, however, prior to the termination of this Agreement as the result of a
breach hereof by the Company, Consultant shall give written notice of such
breach and the Company shall have a thirty day period within which to cure such
breach.
3.6 EFFECT OF TERMINATION ON AGREEMENT. Any termination of Consultant's
consulting relationship shall not release either the Company or Consultant from
their respective obligations under this Agreement that are required to be
performed subsequent to the date of such termination, including but not limited
to those obligations set forth under Articles III and IV.
3.7 PAYMENTS TO ESTATE. If Consultant should die before all amounts
payable to her pursuant to Section 3.5 have been paid, such unpaid amounts shall
be paid to Consultant's estate.
ARTICLE IV
4.1 NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Consultant
understands and agrees that her retention by the Company creates a relationship
of confidence and trust between herself and the Company with respect to
Confidential Information (as defined below). Consultant recognizes that she will
have access to and knowledge of Confidential Information. Consultant will not,
during or after the term of her consulting relationship with the Company, in
whole or in part, disclose such Confidential Information to any person, firm,
corporation, association, or other entity for any reason or purpose whatsoever,
nor shall she make use of any such Confidential Information for her own purposes
or for the purposes of others; provided, however, that nothing in this Article
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shall be construed to prohibit the disclosure of such Confidential Information
by the Consultant (i) to an officer, director, employee or agent of the Company;
(ii) as is reasonably necessary for the performance of her duties and
responsibilities under this Agreement; or (iii) as otherwise required by law. If
Consultant is required by law to disclose "Confidential Information," Consultant
shall notify the Company's Board of Directors, in writing, of the nature of such
disclosure and the Confidential Information to be disclosed, as soon as is
possible and/or practical, and permit the Company the opportunity to contest or
limit such disclosure.
4.2 CONFIDENTIAL INFORMATION DEFINED. The term "Confidential Information"
shall mean and include any and all records, computer programs, data, patent
applications, trade secrets, customer lists, customer databases, video programs
and programming, proprietary information, technology, pricing policies,
financial information, methods of doing business, acquisition practices, policy
and/or procedure manuals, training and recruiting procedures, accounting
procedures, the status and content of the Company's contracts with its
customers, the Company's business philosophy, and servicing methods and
techniques at any time used, developed, or investigated by the Company, before
or during Consultant's tenure of retention, or other information of any kind
expressed or recorded on any medium arising out of, concerning, or acquired in
connection with the research, development, commercialization and other
activities of the Company; but "Confidential Information" does not include
information (i) generally known or available in the industry, through no fault
of Consultant, or (ii) available from a third party without violation of any
duty of confidentiality by Consultant or others.
4.3 DELIVERY OF MATERIALS. Consultant further agrees to deliver to the
Company at the termination of her retention or at any other time upon request by
the Company, all correspondence, memoranda, notes, records (including computer
records and data), drawings, sketches, plans, customer lists, and other
documents, which are made, composed, or received by Consultant, solely or
jointly with others, during the term of her retention and which are in
Consultant's possession, custody, or control at such date and which are related
in any manner to the past, present or anticipated business of the Company.
ARTICLE V
5.1 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties and their heirs, legal representatives, successors and assigns. The
Company may assign its interest in this Agreement, and all covenants, conditions
and provisions hereunder shall inure to the benefit of
-5-
and be enforceable by its assignee or successor in interest. The rights and
obligations of Consultant under this Agreement are personal to her, and no such
rights, benefits or obligations shall be assignable, except that her personal
representatives and heirs may enforce the obligations of the Company hereunder.
5.2 WAIVER OF BREACH. The waiver by any party to this Agreement of a
breach or violation of any provisions hereof shall not operate or be construed
to be a waiver of any subsequent breach hereof.
5.3 NOTICES. Any and all notices required or permitted to be given under
this Agreement shall be sufficient if furnished in writing and given in person,
or shall be deemed given five (5) days after sent by certified mail, return
receipt requested, to the address as set forth below on the signature pages of
this Agreement. If any party hereto desires to amend its address hereunder, that
party shall send written notice of the new address to all other parties hereto.
5.4 GOVERNING LAW. This Agreement shall be interpreted, construed and
governed in accordance with the laws of the State of Texas without regard to
conflict of laws provision. This Agreement is performable in Travis County,
Texas.
5.5 HEADINGS. The paragraph headings contained in this Agreement are for
convenience only, and shall in no manner be construed to be part of this
Agreement.
5.6 COUNTERPARTS. This Agreement may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same agreement. A fully executed copy of this Agreement
shall be delivered to each party hereto.
5.7 LEGAL CONSTRUCTION. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal,
or unenforceable in any respect, such invalidity, illegality, or
unenforceability shall not effect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein. In addition, such invalid, illegal or unenforceable
provision shall be modified to the minimum extent necessary to permit it to be
valid, legal and enforceable. For all purposes hereof "day" shall mean calendar
day and shall include weekends and holidays; provided, however, that if any
notice period terminates on a weekend or holiday, the person who is required to
deliver the notice shall have until the next business day to complete the notice
requirement.
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5.8 AMENDMENT. No modification, amendment, addition to, or termination of
this Agreement, nor waiver of any of its provisions, shall be valid or
enforceable unless it is in writing and signed by all of the parties hereto.
5.9 PRIOR AGREEMENTS SUPERSEDED. This Agreement constitutes the sole and
only Agreement of the parties hereto and supersedes any prior understanding or
written or oral agreements, correspondence or communications between the parties
respecting the subject matter hereof.
5.10 ARBITRATION. EXCEPT FOR THE REMEDY PROVIDED UNDER SECTION 5.11 BELOW,
ANY CLAIM OR DISPUTE ARISING UNDER OR RELATING TO THIS AGREEMENT OR THE
RETENTION OF CONSULTANT BY THE COMPANY SHALL BE SUBMITTED TO FINAL AND BINDING
ARBITRATION IN AUSTIN, TEXAS PURSUANT TO THE EMPLOYMENT DISPUTE RESOLUTION RULES
OF THE AMERICAN ARBITRATION ASSOCIATION. THE PARTIES AGREE THAT ANY PARTY
REQUESTING ARBITRATION OF ANY DISPUTE UNDER THIS SECTION MUST GIVE FORMAL
WRITTEN NOTICE OF THE PARTY'S DEMAND FOR ARBITRATION ("ARBITRATION NOTICE")
WITHIN ONE HUNDRED TWENTY (120) DAYS AFTER SUCH DISPUTE FIRST ARISES AND FAILURE
TO TIMELY COMMUNICATE ARBITRATION NOTICE SHALL CONSTITUTE A WAIVER OF SUCH
DISPUTE. THE PARTIES FURTHER AGREE THAT EACH PARTY MAY BE REPRESENTED BY COUNSEL
IN ANY PROCEEDING UNDER THIS SECTION, AND THAT ALL EXPENSES AND FEES INCURRED IN
CONNECTION WITH ANY PROCEEDING UNDER THIS SECTION SHALL BE PAID BY THE
NON-PREVAILING PARTY (AS DETERMINED BY THE ARBITRATORS). BOTH PARTIES AGREE THAT
NOTHING IN THIS SECTION SHALL BE CONSTRUED TO REQUIRE THE ARBITRATION OF ANY
DISPUTE OR CLAIM (i) ARISING UNDER ARTICLE IV OF THIS AGREEMENT; (ii) FOR
UNEMPLOYMENT COMPENSATION BENEFITS; OR (iii) FOR WORKERS' COMPENSATION BENEFITS.
BY THEIR EXECUTION OF THIS AGREEMENT, EACH PARTY TO THIS AGREEMENT CONSENTS, ON
BEHALF OF HERSELF OR ITSELF AND THEIR RESPECTIVE SUCCESSORS, HEIRS AND ASSIGNS,
TO SUCH BINDING ARBITRATION IN ACCORDANCE WITH THE TERMS OF THIS SECTION.
5.11 REMEDIES. Consultant agrees that the remedy at law for any breach of
any provision of Article IV will be inadequate and that the Company will be
entitled to seek injunctive and equitable relief for any such breach, in
addition to all other remedies permitted by law.
-7-
IN WITNESS WHEREOF, the parties hereto have executed this Consulting
Agreement in ____________, ____________ as of the date first set forth above.
THE COMPANY:
CASTLE DENTAL CENTERS OF TEXAS, INC.
By: ________________________________
Name: Jack H. Castle, Jr.
Title: President
Address: ___________________________
ATTENTION: President
CONSULTANT:
Sheryl L. Goodman
Address: ___________________________
-8-
CASTLE DENTAL CENTERS
EXHIBIT 11.1 -- COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS)
THREE THREE
MONTHS MONTHS
ENDED ENDED
YEAR ENDED DECEMBER 31, MARCH 31, MARCH 31,
------------------------------- --------- ---------
1994 1995 1996 1996 1997
--------- --------- --------- --------- ---------
PRIMARY:
Weighted average common shares
outstanding........................ 2,000 2,000 2,000 2,000 2,332
Weighted average shares issued for
business acquisitions.............. -- -- 160 -- --
Assumed conversion of preferred stock
issued within one year of initial
public offering.................... 948 948 948 948 948
--------- --------- --------- --------- ---------
Total primary shares................. 2,948 2,948 3,108 2,948 3,280
========= ========= ========= ========= =========
Net income (loss).................... $ 781 $ (2,414) $ (1,086) $ 77 $ 12
========= ========= ========= ========= =========
Net income (loss) per share.......... $ 0.26 $ (0.82) $ (0.35) $ 0.03 $ --
========= ========= ========= ========= =========
FULLY DILUTED:
Weighted average common shares
outstanding........................ 2,000 2,000 2,000 2,000 2,332
Weighted average shares issued for
business acquisitions.............. -- -- 160 -- --
Assumed conversion of preferred stock
issued within one year of initial
public offering.................... 948 948 948 948 948
--------- --------- --------- --------- ---------
Total fully diluted shares........... 2,948 2,948 3,108 2,948 3,280
========= ========= ========= ========= =========
Net income (loss).................... $ 781 $ (2,414) $ (1,086) $ 77 $ 12
========= ========= ========= ========= =========
Net income (loss) per share.......... $ 0.26 $ (0.82) $ (0.35) $ 0.03 $ --
========= ========= ========= ========= =========
CASTLE DENTAL CENTERS
EXHIBIT 11.2 -- COMPUTATION OF EARNINGS PER SHARE
UNDER SAB NO. 55
(IN THOUSANDS)
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
------------ ---------
1996 1997
------------ ---------
PRIMARY:
Weighted average common shares
outstanding........................ 2,000 2,332
Weighted average shares issued for
business acquisitions.............. 160 --
Assumed conversion of preferred stock
issued within one year of initial
public offering.................... 948 948
Assumed issuance of stock to fund
distribution to owner.............. 545 545
------------ ---------
Total primary shares................. 3,653 3,825
============ =========
Net income (loss).................... $ (1,086) $ 12
============ =========
Net income (loss) per share.......... $ (0.30) $ --
============ =========
FULLY DILUTED:
Weighted average common shares
outstanding........................ 2,000 2,332
Weighted average shares issued for
business acquisitions.............. 160 --
Assumed conversion of preferred stock
issued within one year of initial
public offering.................... 948 948
Assumed issuance of stock to fund
distribution to owner.............. 545 545
------------ ---------
Total fully diluted shares........... 3,653 3,825
============ =========
Net income (loss).................... $ (1,086) $ 12
============ =========
Net income (loss) per share.......... $ (0.30) $ --
============ =========
CASTLE DENTAL CENTERS
EXHIBIT 11.3 -- COMPUTATION OF PRO FORMA EARNINGS PER SHARE
(IN THOUSANDS)
THREE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1996 MARCH 31, 1997
PRIMARY:
Weighted average common shares
outstanding........................... 2,000 2,332
Assumed conversion of preferred stock
issued within one year of initial
public offering....................... 948 948
Shares issued for business
acquisitions.......................... 332 --
Net effect of dilutive stock options,
convertible debt, and warrants --
based on the treasury stock method
using average market price............ 6 6
Shares issued in initial public
offering.............................. 2,500 2,500
Less excess shares issued in initial
public offering....................... (33) (33)
----------------- --------------
Total primary shares.................... 5,753 5,753
================= ==============
Pro forma net income.................... $ 718 $ 445
================= ==============
Pro forma net income per share.......... $ 0.12 $ 0.08
================= ==============
FULLY DILUTED:
Weighted average common shares
outstanding........................... 2,000 2,332
Assumed conversion of preferred stock
issued within one year of initial
public offering....................... 948 948
Shares issued for business
acquisitions.......................... 332 --
Net effect of dilutive stock options and
warrants -- based on the treasury
stock method using the year-end market
price, if higher than average market
price................................. 6 6
Shares issued in initial public
offering.............................. 2,500 2,500
Less excess shares issued in initial
public offering....................... (33) (33)
----------------- --------------
Total fully diluted shares.............. 5,753 5,753
================= ==============
Pro forma net Income.................... $ 718 $ 445
================= ==============
Pro forma net income per share.......... $ 0.12 $ 0.08
================= ==============
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1
(File No. 333-11335) of i) our reports dated June 19, 1997, on our audits of the
financial statements and financial statement schedule of Castle Dental Centers,
Inc. and its combined predecessor companies as of December 31, 1995 and 1996 and
for each of the three years in the period ended December 31, 1996, ii) our
report dated June 18, 1997 on our audits of the financial statements of SW
Dental Associates, LC as of December 31, 1995 and 1996 and for each of the two
years in the period ended December 31, 1996, iii) our report dated June 10, 1996
on our audits of the financial statements of 1st Dental Care as of December 31,
1994 and 1995 and for each of the three years in the period ended December 31,
1995, iv) our report dated June 10, 1996 on our audits of the financial
statements of Mid-South Dental Centers as of December 31, 1994 and 1995 and for
each of the three years in the period ended December 31, 1995, and v) our report
dated August 15, 1996 on our audits of the financial statements of Horizon
Dental Centers as of December 31, 1995 and for each of the two years in the
period ended December 31, 1995. We also consent to the reference to our firm
under the caption "Experts."
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