EXHIBIT 99.6
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT dated as of March 30, 1998, is by and among Castle
Dental Centers of California, L.L.C., a Delaware limited liability company
("Castle West"), CDC of California, Inc., a Delaware corporation ("CDC"), Dental
Consulting Services, LLC, a California limited liability company ("DCS"), Castle
West Holdings, L.L.C., a Delaware limited liability company ("Holdings"), each
of the corporations listed on Schedule A hereto as a member of DCS (the
"Corporate B Members"), each of the stockholders listed on Schedule A hereto of
the Corporate B Members (the "Corporate B Stockholders"), each of the
corporations listed on Schedule A hereto as a member of Holdings (the "Corporate
C Members"), and each of the stockholders listed on Schedule A hereto of the
Corporate C Members (the "Corporate C Stockholders");
WITNESSETH:
WHEREAS, on January 30, 1998, Castle West, Castle Dental Centers, Inc.,
a Delaware corporation ("Castle"), CDC, DCS, Holdings, the Corporate B Members,
the Corporate B Stockholders, the Corporate C Members and the Corporate C
Stockholders entered into that certain Master Contribution and Combination
Agreement ("Combination Agreement") providing for, among other things, the
organization of Castle West; and
WHEREAS, the Corporate B Members collectively own all of the
outstanding membership interests in DCS (the "DCS Interest"), the Corporate B
Stockholders own all of the outstanding capital stock of each of their
respective Corporate B Members (collectively, the "Corporate B Stock"), the
Corporate C Members collectively own all of the outstanding membership interests
in Holdings (the "Holdings Interest"), the Corporate C Stockholders own all of
the outstanding capital stock of each of their respective Corporate C Members
(collectively, the "Corporate C Stock"), Holdings owns all of the outstanding
Class C Interest in Castle West (the "Class C Interests"), and DCS owns all of
the outstanding Class B Interest in Castle West (the "Class B Interest"); and
WHEREAS, pursuant to Article VII of the Combination Agreement, CDC and
Castle granted the Corporate B Members as a group the option ("Corporate B
Members' Merger Option") to cause all of the Corporate B Stock to be converted
into Castle common stock, $.001 par value per share ("Castle Common Stock")
pursuant to a merger of all of the Corporate B Members with and into CDC; and
WHEREAS, pursuant to Article VIII of the Combination Agreement, (a)
each Corporate C Member was granted the one-time right ("Corporate C Members'
Merger Option") to convert its Corporate C Stock into shares of Castle Common
Stock and/or cash through a merger of the Corporate C Members into CDC and (b)
CDC was granted the one-time right ("CDC's Call Option")
1
to convert the Corporate C Stock into shares of Castle Common Stock and/or cash
through a merger of the Corporate C Members into CDC; and
WHEREAS, at the date hereof, the DCS Interest, Holdings Interest, the
Corporate B Stock and the Corporate C Stock are owned by the Corporate B
Members, the Corporate C Members, the Corporate B Stockholders and the Corporate
C Stockholders, respectively, in the amounts set forth on EXHIBIT B hereto; and
WHEREAS, the undersigned desire to promote their mutual interests
imposing certain restrictions and obligations on themselves and the Securities
(as defined below);
NOW, THEREFORE, in consideration of the premises, the mutual promises
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" means (i) with respect to any individual, such
individual's spouse, parents, children, siblings, mothers and
fathers-in-law, sons and daughters-in-law and brothers and
sisters-in-law, any direct descendant of such individual or any Person
established for the benefit of any of the foregoing and (ii) with
respect to a Person, any person which controls, is controlled by or
under common control with such Person.
(b) "B Merger" the merger of each Corporate B Member with and
into CDC in accordance with the terms of the Combination Agreement.
(c) "B Merger Consideration" means the aggregate amount of
merger consideration payable to the Corporate B Stockholders upon
consummation of the B Merger, determined in accordance with Article VII
of the Combination Agreement.
(d) "C Merger" the merger of a Corporate C Member with and
into CDC in accordance with the terms of the Combination Agreement.
(e) "C Merger Consideration" means the aggregate amount of
consideration payable to the Corporate C Members upon consummation of
CDC's Call Option, determined in accordance with Article VIII of the
Combination Agreement.
(f) "Castle West Interests" means the Class B Interest and the
Class C Interest.
(g) "CDC's Call Option" is as defined in the preamble.
2
(h) "Companies" means Castle West, DCS, Holdings, the
Corporate B Members and the Corporate C Members, collectively, and
"Company" refers to any of the Companies, singularly.
(i) "Corporate C Members' Merger Option" is as defined in the
preamble.
(j) "Determination Date" means the last day of the calendar
month immediately preceding the calendar month during which:
(i) for purposes of Section 6, a Shareholder dies;
and
(ii) for purposes of Section 8, an Offering Notice is
delivered to CDC or a Shareholder.
(k) "Disposition" means any sale, passage, assignment, gift,
exchange, distribution, transfer, pledge, mortgage or other
encumbrance, or any other disposition of Securities whatsoever, whether
voluntary or involuntary, and each and every transaction, whether
voluntary or involuntary, occurring by operation of law or otherwise,
which has the purpose or effect of making one or more of the following
changes:
(i) a change in the beneficial or record ownership of
any of the Securities covered by this Agreement or any stock
certificate or certificates representing such Securities; or
(ii) a change in the identity, ownership or control
of the holder or owner of the legal, equitable or beneficial
title of or to any of the Securities covered by this Agreement
or any stock certificate or certificates representing such
Securities;
and shall include the failure of a Shareholder to succeed to any
interest, community or otherwise, of such Shareholder's spouse in the
Securities upon termination of the marital relationship of such
Shareholder by reason of death; provided, however, that such term shall
not include (i) the acquisition by a Shareholder of all or any part of
any interest, community or otherwise, of such Shareholder's spouse, in
any Securities covered by this Agreement, (ii) any Disposition of
Securities by a Shareholder to any other Shareholder who is a party to
this Agreement which, but for this provision, would constitute a
Disposition, (iii) the conversion of any Securities owned or held by a
Shareholder pursuant to a C Merger upon the exercise of CDC's Call
Option or a Corporate C Members' Merger Option, (iv) the conversion of
any Securities owned or held by a Shareholder pursuant to the B Merger,
(v) any pledge, mortgage, encumbrance or other grant of a security
interest in accordance with the provisions of Section 5(b) hereof or
(vi) any Disposition to an Affiliate in accordance with the provisions
of Section 5(c).
(l) "Disqualified Securities" has the meaning provided in
Section 6.
3
(m) "Non-Affiliate" has the meaning provided in Section 6.
(n) "Offering Notice" means a notice from the party obligated
to offer Securities, offering such Securities to CDC or to the
Shareholders other than the one with respect to which such Offering
Notice is being sent, as the case may be, and specifying the Section of
this Agreement pursuant to which such offer is being made and the
nature and details of the circumstances under which such offer is being
made.
(o) The term "Person" shall mean an individual, a corporation,
limited liability company, a trust, a partnership, a joint stock
association, a business trust or a government or agency or subdivision
thereof, as the case may be, and, as applicable, shall include the
singular and the plural.
(p) "Pro Rata Share" means, (a) with respect to a
stockholder's interest in a corporation, the number of shares of
capital stock of such corporation owned by such stockholder divided by
the number of shares of capital stock of such corporation owned by all
stockholders of such corporation and (b) with respect to a
corporation's interest in a limited liability company, the percentage
ownership interest in such limited liability company owned by such
corporation.
(q) "Reply Notice" means a notice from CDC or from any
Shareholder receiving an Offering Notice, stating whether CDC or such
Shareholder, as the case may be, accepts or rejects the offer made by
an Offering Notice.
(r) "Resulting Shareholder" has the meaning provided in
Section 6.
(s) "Securities" means the DCS Interest, Holdings Interest,
the Corporate B Stock, the Corporate C Stock and the Castle West
Interests.
(t) "Securities Act" means the Securities Act of 1933, as
amended, or any successor Federal statute, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder, as in effect from time to time.
(u) "Securities Value" as of the applicable Determination Date
shall mean an amount equal to, (i) with respect to a DCS Interest, the
Pro Rata Share of the B Merger Consideration that would be received by
the Corporate B Stockholder(s) owning the Corporate B Member owning
such DCS Interest upon consummation of the B Merger, (ii) with respect
to a Holdings Interest, the Pro Rata Share of the C Merger
Consideration that would be received by the Corporate C Member owning
such Holdings Interest upon consummation of CDC's Call Option, (iii)
with respect to any Corporate B Stock, the Pro Rata Share of the B
Merger Consideration that would be received by the Corporate B
Stockholder(s) owning such Corporate B Stock upon consummation of the B
Merger, (iv) with respect to any Corporate C Stock, the Pro Rata Share
of the C Merger Consideration
4
that would be received by the Corporate C Member owned by such
Corporate C Stockholder upon consummation of CDC's Call Option, (v)
with respect to the Class B Interest, the B Merger Consideration that
would be received by the Corporate B Stockholder(s) upon consummation
of the B Merger, and (vi) with respect to the Class C Interest, the C
Merger Consideration that would be received by the Corporate C Members
upon consummation of CDC's Call Option.
(v) "Shareholders" means DCS, Holdings, the Corporate B
Members, the Corporate C Members, the Corporate B Stockholders, the
Corporate C Stockholders, and all other Persons who from time to time
hereafter may be the holders of Securities.
2. PROVISIONS OF GENERAL APPLICABILITY. For purposes of this Agreement:
(a) If at any time any Securities owned or held by a
Shareholder are required by this Agreement to be offered to the other
Shareholders, such offer shall be deemed to be made only to the other
Shareholders who hold similar securities (e.g., DCS Interest shall only
be offered to other Corporate B Members, Holdings Interest shall only
be offered to other Corporate C Members, Corporate B Stock shall only
be offered to other Corporate B Stockholders, Corporate C Stock shall
only be offered to other Corporate C Stockholders, the Class B Interest
shall only be offered to Holdings, and the Class C Interest shall only
be offered to DCS), both pro rata in accordance with their respective
holdings at the time of the offer of Securities, and in such other
proportions as such other Shareholders may agree upon among themselves.
Except as may otherwise be agreed upon among such other Shareholders,
each such other Shareholder to whom such Securities are so offered
shall have the right to purchase that portion of Securities offered
which the Securities Value of the Securities of similar kind owned by
such other Shareholders bears to the total Securities Value of
Securities of similar kind owned by all such other Shareholders who
have elected to accept the offer.
(b) Reply Notices accepting an offer made by an Offering
Notice may accept such offer as to all Securities offered by the
Offering Notice or any portion thereof. If any Shareholder or CDC
receives an Offering Notice and fails to deliver a Reply Notice to the
offering party within 30 days from the receipt of such Offering Notice,
the party who fails to so deliver a Reply Notice shall be deemed
conclusively to have delivered a Reply Notice stating that such party
does not accept the offer made by such Offering Notice.
(c) Each transaction of purchase and sale of Securities
pursuant to this Agreement shall be completed by delivery of the
certificates representing such Securities endorsed in blank and by
actual registration of the transfer of such Securities on the books of
the appropriate Company upon payment of the purchase price to the
seller of such Securities as hereinafter set forth. The purchase price
of purchases made pursuant to Section 8 shall be payable in cash. Any
such transaction pursuant to Section 8 shall be closed at such time and
place as shall be agreed upon by the parties thereto, or, if no such
agreement is reached, at
5
the principal office of CDC on the 30th day following the date of
delivery of the last Reply Notice given in connection with such
transaction or, if such day shall not be a business day, in the first
business day thereafter during normal business hours.
(d) Whenever the context requires, the gender of all words
used herein shall include the masculine, feminine and neuter, and the
number of all words shall include the singular and the plural.
3. INVESTMENT REPRESENTATION. Each of the Shareholders hereby
represents that as of the dates any Securities were acquired or are hereafter
acquired by such Shareholder, such Securities were or will be acquired for such
Shareholder's own account, for investment and not with a view to the
distribution thereof. Each of the Shareholders understands that the Securities
which have been or will be acquired by such Shareholder have not been registered
under the Securities Act or any applicable state securities laws pursuant to
exemptions from the registration provisions thereof. Each of the Shareholders
hereby agrees that the Securities which have been acquired by such Shareholder,
and any other Securities hereafter acquired by such Shareholder, pursuant to
exemptions from the registration provisions of the Securities Act and applicable
state securities laws, shall not be sold, transferred, pledged or hypothecated
unless the sale of such Securities is registered under the Securities Act and
all applicable state securities laws or unless there is furnished an opinion of
counsel reasonably satisfactory in form and substance to CDC that registration
of such Securities is not required. Each Shareholder understands that no Company
is under any obligation to register the Securities under the Securities Act or
any applicable state securities laws, and that Rule 144 under the Securities Act
may not be available in connection with any resale of Securities. The provisions
of this Section 3 and the provisions of the following Section 4 shall remain in
effect until, in the opinion of counsel for CDC, they are no longer required.
4. LEGEND ON SECURITIES CERTIFICATES. Each of the Shareholders hereby
agrees that the following legend shall be written, printed or stamped on all
certificates representing Securities owned by such Shareholder or, if such
Securities are not represented by certificates, on the first page of the
agreement pursuant to which such Securities are created:
"The transfer of the Securities represented by this
certificate is restricted by the terms and conditions of a
Shareholders' Agreement (the "Agreement") dated as of ______________,
1998, among Castle Dental Centers, L.L.C. ("Castle West"), CDC of
California, Inc., Dental Consulting Services, LLC ("DCS"), Castle West
Holdings, L.L.C. ("Holdings"), all of the members in DCS and Holdings
and all of the stockholders of the members in DCS and Holdings. A copy
of the Agreement is on file at the registered office of the company
issuing this certificate, and the company shall furnish a copy thereof
to the record holder hereof without charge upon written request."
6
5. DISPOSITION OF SECURITIES BY SHAREHOLDERS.
(a) No Shareholder shall make, cause or allow any Disposition
of any Securities owned or held by such Shareholder except with the
written consent of CDC, the Company and all other Shareholders or
except pursuant to the provisions of this Agreement.
(b) Any Shareholder may pledge, mortgage, encumber or
otherwise grant a security interest in any Securities owned or held by
such Shareholder in connection with a bona fide transaction and to
secure the performance or payment of any obligation or indebtedness of
such Shareholder which such Shareholder fully intends to perform or pay
if and only so long as such Shareholder is entitled to vote such
Securities with respect to any and all matters presented to the holders
of such class of Securities for consideration and action; provided,
however, in the event that the legal or equitable title to any of such
Securities should be divested from such Shareholder as a consequence of
any default in the payment or performance of such indebtedness or
obligation, such divestiture shall constitute an involuntary
Disposition to which the provisions of Section 8 shall apply; provided,
however, that notwithstanding the foregoing, neither DCS nor Holdings
may pledge, mortgage, encumber or otherwise grant a security interest
in the Class B Interest or the Class C Interest.
(c) Any Corporate B Stockholder or Corporate C Stockholder may
make a Disposition of any of the Corporate B Stock or Corporate C Stock
owned or held by such Shareholder to an Affiliate of such Shareholder
provided that such Affiliate is competent to enter into and perform the
obligations of a Shareholder under this Agreement and contemporaneously
with such Disposition such Affiliate agrees to become a party to this
Agreement and the Combination Agreement by entering into an Addendum
Agreement as required by Section 13 (g) of this Agreement.
6. DEATH OF A SHAREHOLDER. If any Shareholder dies, then his or her
executor, administra tor or similar person, or heirs and, with respect to any
Securities owned by such Shareholder in which, at the time of such Shareholder's
death, the spouse of such Shareholder had an interest, community or otherwise,
immediately prior to the date of death, the spouse of such Shareholder, as the
case may be (in any event, the "Resulting Shareholder"), shall be deemed to be a
Shareholder and all the provisions of this Agreement shall apply to any future
Disposition of Securities held by such Resulting Shareholder. If the Resulting
Shareholder (i) is an heir who, prior to the Shareholder's death, was not an
Affiliate of the Shareholder (a "Non-Affiliate") or (ii) intends or is required
by law or the last will and testament of the deceased Shareholder to deliver any
portion of the deceased Shareholder's Securities to any Non-Affiliate, the
Resulting Shareholder shall, within 90 days after such death, offer or cause to
be offered (x) in the case of (i) above, all of the Securities acquired by such
heir or (ii) in the case of (ii) above, the Securities to be delivered to a
Non-Affiliate (in either event, the "Disqualified Securities") first to the
other Shareholders, and if such offer is not accepted in full by the other
Shareholders, then to CDC, at a price equal to the Securities Value of such
7
Securities as of the Determination Date, all in accordance with the following
provisions of this Section 6.
(a) Within 90 days after the date of death of such
Shareholder, the Resulting Shareholder shall deliver an Offering Notice
to each of the other Shareholders, and within 30 days from the receipt
of such Offering Notice, the other Shareholders shall deliver Reply
Notices to the Resulting Shareholder. If by their Reply Notices the
other Shareholders accept the offer of the Resulting Shareholder, such
Reply Notices shall constitute an agreement binding on the Resulting
Shareholder and the other Shareholders to sell and purchase the offered
and accepted Securities at the price and upon the terms stated in this
Agreement, the Offering Notice of the Resulting Shareholder and in such
Reply Notices.
(b) If the other Shareholders shall not have accepted in full
the offer of the Resulting Shareholder pursuant to the foregoing
paragraph (a), the Resulting Shareholder shall, upon receipt of the
Reply Notices from the other Shareholders or upon the expiration of the
30-day period referred to in the foregoing paragraph (a), whichever
shall first occur, deliver an Offering Notice to CDC with respect to
the remaining Securities. If by its Reply Notice delivered within 30
days from the receipt of such Offering Notice CDC accepts the offer of
the Resulting Shareholder, such Reply Notice shall constitute an
agreement binding on the Resulting Shareholder and CDC to sell and
purchase the offered and accepted Securities at the price and upon the
terms stated in this Agreement, the Offering Notice of the Resulting
Shareholder and in such Reply Notice.
(c) If neither the other Shareholders nor CDC timely accepts
an offer of the Resulting Shareholder pursuant to the foregoing
provisions of this Section 6 for all of the applicable Securities, then
(i) in the case of an intended transfer to a Non-Affiliate, the
Resulting Shareholder shall be allowed to make such a transfer of the
Disqualified Securities not so purchased to the Non-Affiliate and the
Non-Affiliate shall be deemed to be a Shareholder and all the
provisions of this Agreement shall apply to any future Disposition of
Securities held by the Non-Affiliate and (ii) in the case of an heir
who is a Non-Affiliate, the Resulting Shareholder shall be deemed to be
a Shareholder and all the provisions of this Agreement shall apply to
any future Disposition of Securities held by the Resulting Shareholder.
7. SALE OF SECURITIES UPON TERMINATION OF MARRIAGE OF A SHAREHOLDER. If
the marriage of a Shareholder is terminated by the death of his or her spouse or
by divorce, and such Shareholder does not succeed to all of his or her spouse's
interest, if any, in the Securities held by him or her at the time of such
termination, then his or her former spouse or the executor, administrator or
similar person or heirs of his or her spouse, as the case may be, shall, be
deemed to be a Shareholder and all the provisions of this Agreement shall apply
to any future Disposition of Securities held by such Shareholder.
8
8. INVOLUNTARY DISPOSITION OF SECURITIES. Upon the reasonable belief of
a Shareholder that any of the Securities of such Shareholder are or will be
subject to an involuntary Disposition, and in any event, as permitted by law,
upon or prior to any involuntary Disposition of such Securities, the Shareholder
who owns such Securities or his or her representative shall offer such
Securities to the other Shareholders, and if such offer is not accepted in full
by the other Shareholders, then the remainder to CDC, at a price equal to the
Securities Value of such Securities as of the Determination Date, in accordance
with the following provisions of this Section 8. For purposes of this Section 8,
"involuntary Disposition" shall include, without limitation, any Disposition or
other transfer of Securities pursuant to or by reason of or under judicial
order, legal or equitable process, execution, attachment or enforcement of a
pledge, trust or other security interest or encumbrance. Also, for the purposes
of this Section 8, the term "Selling Shareholder" shall mean the Shareholder who
owns such Securities subject to the involuntary Disposition, or his or her
representative, as the case may be.
(a) The Selling Shareholder shall deliver an Offering Notice
to each of the other Shareholders, and within 30 days from the receipt
of such Offering Notice, the other Shareholders shall deliver Reply
Notices to the Selling Shareholder. If by their Reply Notices the other
Shareholders accept the offer of the Selling Shareholder, such Reply
Notices shall constitute an agreement binding on the Selling
Shareholder and the other Shareholders to sell and purchase the offered
and accepted Securities at the price and upon the terms stated in this
Agreement, the Offering Notice of such Selling Shareholder and such
Reply Notices.
(b) If the other Shareholders shall not have accepted in full
the offer of the Selling Shareholder pursuant to the foregoing
paragraph (a), the Selling Shareholder shall, upon receipt of the Reply
Notices from the other Shareholders or upon the expiration of the
30-day period referred to in the foregoing paragraph (a), whichever
shall first occur, deliver an Offering Notice to CDC with respect to
the remaining Securities. Within 30 days from the receipt of such
Offering Notice, CDC shall deliver a Reply Notice to the Selling
Shareholder. If by its Reply Notice, CDC accepts the offer of the
Selling Shareholder, such Reply Notice shall constitute an agreement
binding on the Selling Shareholder and CDC to sell and purchase the
offered and accepted Securities at the price and upon the terms stated
in this Agreement, the Offering Notice of such Selling Shareholder and
such Reply Notice.
(c) If neither the other Shareholders nor CDC timely accepts
the offer of the Selling Shareholder pursuant to the foregoing
provisions of this Section 8 for all of the applicable Securities, the
Selling Shareholder shall not be freed and discharged, except as
hereinafter stated, from all obligations under the terms of this
Agreement other than to cause, through action or inaction on the part
of the Selling Shareholder, the involuntary Disposition described in
the Offering Notice to occur. If such involuntary Disposition has not
been affected within six months after the date the Offering Notice is
delivered to the other Shareholders, all the provisions of this
Agreement, including the provisions of this Section 8, shall apply to
any future Disposition of Securities owned by the Selling Shareholder.
9
9. BUSINESS ACTIVITIES; ISSUANCE OF ADDITIONAL SECURITIES. DCS, each
Corporate B Member and each Corporate C Member hereby agrees that the only
business activities it shall conduct following the execution of this Agreement
and prior to the consummation of the C Merger contemplated by the Corporate C
Members' Merger Option or CDC's Call Option shall relate to the ownership of the
Securities currently owned by it or acquired by it under the terms of this
Agreement. Each Company hereby agrees that for so long as such Company remains a
party to this Agreement, without the prior consent of CDC and each Shareholder
then a party to this Agreement, it shall not issue or agree to issue (a) any
shares of capital stock or membership interests in such Company, (b) any
securities convertible into or exchangeable for shares of capital stock or
membership interests in such Company or (c) any other securities that would, in
each case, be entitled to vote upon a merger of such Company into any other
Person. Each of the Shareholders who owns Securities issued by each such Company
agrees to take all corporate action necessary to implement the agreements set
forth in the preceding two sentences.
10. POWER OF ATTORNEY. Each of the Shareholders and each of the parties
who becomes obligated as a Shareholder hereunder does hereby irrevocably make,
constitute and appoint Xxxx X. Xxxxxx, Xx. and Xxxx X. Xxxxx, or either of them,
with full power of substitution and resubstitution to each, the true and lawful
attorneys and proxies of such Shareholder, (a) upon receipt of a notice of
exercise of the Corporate B Members' Merger Option executed by the holders of a
majority in interest of the DCS Interest, to vote the Corporate B Stock of such
Shareholder standing in the name of such Shareholder on the books of any
Corporate B Member in favor of the B Merger if such Shareholder does not
promptly do so, (b) upon receipt of a notice of exercise of a Corporate C
Members' Merger Option, to vote the Corporate C Stock of such Shareholder
standing in the name of such Shareholder on the books of the Corporate C Member
in favor of the C Merger contemplated by that Corporate C Members' Merger Option
if such Shareholder does not promptly do so, (c) upon exercise by CDC of CDC's
Call Option, to vote the Corporate C Stock of such Shareholder standing in the
name of such Shareholder on the books of any Corporate C Member in favor of the
C Merger contemplated by CDC's Call Option if such Shareholder does not promptly
do so, (d) upon the termination of the Management Agreement entered into between
Holdings and Castle West concurrently herewith ("Management Agreement") by
Holdings (other than a termination because of a breach by Castle West which
gives Holdings the right to terminate the Management Agreement) or a breach of
the Management Agreement by Holdings in such a manner as to give Castle West the
right to terminate the Management Agreement, to vote the Corporate C Stock of
such Shareholder standing in the name of such Shareholder on the books of any
Corporate C Member in favor of the C Merger contemplated by CDC's Call Option if
such Shareholder does not promptly do so and to vote the Corporate B Stock of
such Shareholder standing in the name of such Shareholder on the books of any
Corporate B Member in favor of the B Merger if such Shareholder does not
promptly do so and (e) in the event such proxies vote any Securities in
accordance with any of (a) through (d) above and the board of directors of any
such Company fails to cause such Company to comply with such vote, to vote to
elect a replacement board of directors for such Company for such purpose only.
The Shareholders hereby agree that the power of attorney granted herein is
irrevocable and a power of attorney coupled with an interest, shall survive the
death, disability or bankruptcy of a Shareholder, if an individual, or the
bankruptcy, dissolution or any other termination of a
10
Shareholder, if a corporation, trust or partnership or other association, and
shall extend and be binding upon each Shareholder's heirs, successors, personal
representatives and assigns.
11. NOTICES. All notices (including Offering Notices and Reply
Notices), requests, consents and other communications under this Agreement shall
be in writing and shall be deemed to have been delivered on the third day after
the date mailed, postage prepaid, by certified mail, return receipt requested,
on the day after deposited with a recognized overnight courier, or on the date
personally delivered:
(a) if to CDC to Castle Dental Centers, Inc., 0000 Xxxx Xxx
Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000, with a copy to: Xxxx X.
Xxxxx, Esq., Xxxxx, Xxxxx & Xxxxxx, Nine Xxxxxxxx Xxxxx, Xxxxx 0000,
Xxxxxxx, Xxxxx 00000; and
(b) if to any Shareholder, to the address of such shareholder
as it appears opposite the signature of such Shareholder at the end of
this Agreement, with a copy to: Xxxxx X. Xxxxxxxx, Esq., Kaye, Scholer,
Xxxxxxx, Xxxxx & Handler, LLP, 0000 Xxxxxx xx xxx Xxxxx, Xxxxx 0000,
Xxx Xxxxxxx, Xxxxxxxxxx 00000.
Any party hereto may designate a different address by delivering notice thereof
to the other parties hereto.
12. JOINDER OF SPOUSE. Each spouse of a Shareholder is fully aware of,
understands, and fully consents and agrees to the provisions of this Agreement
and its binding effect upon any interest, community or otherwise, she may now or
hereafter own in any Securities, and agrees that the termination of his or her
marriage to such Shareholder for any reason shall not have the effect of
removing any Securities otherwise subject to this Agreement from the coverage
hereof. Each spouse of a Shareholder hereby evidences such awareness,
understanding, consent and agreement by joining in this Agreement and by
executing this Agreement beneath such Shareholder's signature on the signature
pages hereto.
13. MISCELLANEOUS PROVISIONS.
(a) GOVERNING LAW. This Agreement shall be subject to and
governed by the laws of the State of Delaware.
(b) BINDING EFFECT. This Agreement shall be binding upon the
Companies, the Shareholders, and their successors and assigns. Any
Shareholder who makes a Disposition of his or her entire interest in
all of the Securities owned and held by such Shareholder in accordance
with the terms hereof shall cease to have any rights or obligations
under this Agreement.
11
(c) AMENDMENT. This Agreement may be amended from time to time
only by an instrument in writing signed by CDC, the Companies and the
Shareholders who are parties to this Agreement at the time of such
amendment.
(d) TERMINATION. This Agreement shall terminate automatically
upon the consummation of the C Merger contemplated by CDC's Call
Option, provided, however, that the provisions of Section 3 hereof
shall survive the termination of this Agreement under the foregoing
provisions of this sentence and shall thereafter continue in effect as
provided in such Section, subject to the limitations set forth in the
Combination Agreement. This Agreement may also be terminated by an
instrument in writing to such effect signed by CDC, the Companies and
the Shareholders who are parties to this Agreement at the time of the
signing of such instrument.
(e) SPECIFIC PERFORMANCE. Any attempted Disposition in breach
of this Agreement shall constitute an offer made by the Shareholder
attempting or making any such Disposition, and the provisions of this
Agreement, whichever shall be applicable, shall be deemed to be in
effect upon such attempted Disposition, and an Offering Notice shall be
deemed to have been delivered in connection therewith; provided,
however, that the date of delivery of the first Offering Notice for
purposes of any such section shall be deemed to be the date as of which
the party to whom such Offering Notice shall have been deemed to be
sent has actual knowledge of such attempted Disposition. The party to
whom such Offering Notice shall have been deemed to be sent shall, upon
obtaining actual knowledge of such attempted Disposition, deliver a
notice of such attempted Disposition to CDC, and CDC shall thereupon
deliver a notice of such attempted Disposition to each Person to whom
the Securities covered by such attempted Disposition may thereafter be
required to be offered pursuant to the section of this Agreement
governing such attempted Disposition. Each party hereto acknowledges
that a remedy at law for any breach or attempted breach of Section 3 or
any of Sections 8 through 10 shall be inadequate, agrees that each
other party hereto shall be entitled to specific performance and
injunctive and other equitable relief in case of any such breach or
attempted breach and further agrees to waive any requirement for the
securing or posting of any bond in connection with the obtaining of any
such injunctive or other equitable relief.
(f) SEPARABILITY. If any term or provision contained in this
Agreement is or is hereafter found to be inconsistent with, contrary to
or invalid or unenforceable under any applicable law or official rule,
regulation or order, this Agreement shall be deemed to be modified
accordingly and the remaining terms and provisions of this Agreement
shall not be affected thereby and shall continue in full force and
effect.
(g) ADDENDUM AGREEMENT. No Shareholder shall sell or dispose
of any Securities to any Person who is not already a party hereto
unless such Person and the spouse of such Person, if any, agree to
become parties to this Agreement and the Combination Agreement
contemporaneously with the sale of such Securities. Any such Person and
the spouse of such
12
Person shall become parties to this Agreement and the Combination
Agreement by the execution of an Addendum Agreement substantially in
the form attached hereto as Exhibit A, which Addendum Agreement shall
bind them to, and grant them the benefits of, this Agreement and the
Combination Agreement as though they were original parties hereto. For
this purpose, all the Shareholders hereby appoint CDC as their agent
and attorney-in-fact to execute such Addendum Agreement on their behalf
and expressly bind themselves to the Addendum Agreement by CDC's
execution of that Addendum Agreement without further action on their
part.
13
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement in multiple counterparts, each of which shall be deemed an original,
but all of which shall constitute the same instrument, as of the day and year
first above written.
CDC OF CALIFORNIA, INC.
By:______________________________________
Xxxx X. Xxxxx, Vice President and Chief
Financial Officer
CASTLE DENTAL CENTERS OF CALIFORNIA,
L.L.C.
By:______________________________________
Xxxx X. Xxxxx, Vice President and Chief
Financial Officer
DENTAL CONSULTING SERVICES, LLC
By:______________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S., a Manager
CASTLE WEST HOLDINGS, L.L.C.
By:______________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S., a Manager
14
DCS MEMBERS
_________________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S.,
Individually
_________________________________________
S. Xxxxxxxxx Xxxxxxxxx, D.M.D.,
Individually
_________________________________________
Xxxxxx Xxxxxxxxx, D.D.S., Individually
_________________________________________
Xxxxxx Xxxxxxx, D.D.S., Individually
DENTAL ADVISORY GROUP, LLC
a California limited liability company
By:_____________________________________
Name:___________________________________
Title:__________________________________
15
HOLDINGS MEMBERS
_________________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S.,
Individually
_________________________________________
S. Xxxxxxxxx Xxxxxxxxx, D.M.D.,
Individually
_________________________________________
Xxxxxx Xxxxxxxxx, D.D.S., Individually
_________________________________________
Xxxxxx Xxxxxxx, D.D.S., Individually
DENTAL ADVISORY GROUP, LLC
a California limited liability company
By:_____________________________________
Name:___________________________________
Title:__________________________________
________________________________________
Xxxxx X'Xxxxxxx, Individually
16
CORPORATE B MEMBERS
JDS-B CORPORATION
By:_____________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S., President
SAS-B CORPORATION
By:_____________________________________
S. Xxxxxxxxx Xxxxxxxxx, D.M.D., President
MART-B CORPORATION
By:_____________________________________
Xxxxxx Xxxxxxxxx, D.D.S., President
ES-B CORPORATION
By:_____________________________________
Xxxxxx Xxxxxxx, D.D.S., President
DAG-B CORPORATION
By:_____________________________________
Xxxxxxx Xxxxx, President
17
CORPORATE C MEMBERS
JDS-C CORPORATION
By:_____________________________________
Xxxxxxx X. Xxxxxxxxx, D.D.S., President
SAS-C CORPORATION
By:_____________________________________
S. Xxxxxxxxx Xxxxxxxxx, D.M.D., President
MART-C CORPORATION
By:_____________________________________
Xxxxxx Xxxxxxxxx, D.D.S., President
EL-S-C CORPORATION
By:_____________________________________
Xxxxxx Xxxxxxx, D.D.S., President
DAG-C CORPORATION
By:_____________________________________
Xxxxxxx Xxxxx, President
JUL-C CORPORATION
________________________________________
Xxxxx X'Xxxxxxx, President
18
EXHIBIT A
ADDENDUM AGREEMENT
TO
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT made this ____ day of _________, 19__, by and
among ____________ (the "Proposed Shareholder"), and Castle Dental Centers of
California, L.L.C. ("Castle West"), CDC of California, Inc., a Delaware
corporation ("CDC"), Dental Consulting Services, LLC, a California limited
liability company ("DCS"), Castle West Holdings, L.L.C., a Delaware limited
liability company ("Holdings"), each of the members of DCS (the "Corporate B
Members"), each of the stockholders of the Corporate B Members (the "Corporate B
Stockholders"), each of the members of Holdings (the "Corporate C Members"), and
each of the stockholders of the Corporate C Members (the "Corporate C
Stockholders");
WITNESSETH:
WHEREAS, Castle West, CDC, DCS, Holdings, the Corporate B
Members, the Corporate B Stockholders, the Corporate C Members and the Corporate
C Stockholders and the Shareholders are parties to a Shareholders' Agreement
dated ___________, 1998 (the "Agreement"), pertaining to the ownership and
transferability of Securities (as defined in the Agreement) by the Shareholders
(as defined in the Agreement) and other matters; and
WHEREAS, Castle West, CDC, DCS, Holdings, the Corporate B
Members, the Corporate B Stockholders, the Corporate C Members and the Corporate
C Stockholders and the Shareholders are parties to a Master Contribution and
Combination Agreement dated ___________, 1998 (the "Combination Agreement"),
pertaining, among other things, to the ownership and transferability of
Securities by the Shareholders; and
WHEREAS, [_____________], a Shareholder, proposes to transfer
an aggregate of _______ Securities; and
WHEREAS, Section 13(g) of the Agreement requires the Proposed
Shareholder to execute an Addendum Agreement in substantially the form of this
instrument;
NOW, THEREFORE, in consideration of the premises, the Proposed
Shareholder hereby agrees as follows:
1. The Proposed Shareholder agrees that upon the transfer to
(it) (him) (her) of the Securities specified above, the Proposed Shareholder
shall become bound by and shall observe and perform and be entitled to the
benefits of, all of the terms and conditions of the Agreement and the
Combination Agreement, and such Securities, along with all Securities hereafter
acquired, shall
1
continue to be subject to all of the terms and conditions of the Agreement and
the Combination Agreement.
2. The address to which all notices, requests, consents and
other communications under the Agreement shall be sent to the Proposed
Shareholder as provided in Section 11 of the Agreement, is
_________________________________________________________________.
3. This Addendum Agreement shall be attached to and become
part of the Agreement.
PROPOSED SHAREHOLDER:
_____________________________
_____________________________
Spouse of Proposed Shareholder
AGREED to on behalf of the Shareholders, CDC and the Companies pursuant to
Section 13(g) of the Agreement.
CDC of California, Inc.
By_______________________
Name:____________________
Title:___________________
2