1
EXHIBIT 10.27
March 26, 1999
CONFIDENTIAL
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Re: Separation Agreement
Dear ▇▇▇▇▇▇:
This letter agreement (this "Agreement") formalizes the agreement that
we have reached regarding your agreed resignation from Monarch Dental
Corporation (the "Company") as of December 31, 1998 (the "Resignation Date").
The purpose of this Agreement is to establish an amicable arrangement for ending
your employment relationship. For purposes of this Agreement, all references to
the "Company" shall include Monarch Dental Corporation, a Delaware corporation,
and any of its subsidiaries and affiliated companies including associated
professional corporations, and any successor thereto by merger or otherwise.
In exchange for the promises of you and the Company set forth below,
you and the Company agree as follows:
1. TERMINATION OF EMPLOYMENT. You resign effective as of the
Resignation Date as President and Chief Dental Officer of Monarch Dental
Corporation and from any other position (whether as an officer, director or
employee) currently held by you with Monarch Dental Corporation or any of its
subsidiaries or affiliated companies including associated professional
corporations effective as of the Resignation Date; provided, however, that you
shall remain Chairman of the Board of Directors (the "Board of Directors") of
Monarch Dental Corporation in a non-employee capacity as an independent Director
on the terms set forth in paragraph 3 below. You acknowledge that you have not
been actively employed by the Company since December 31, 1998. Said resignations
are hereby accepted by the Company.
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
2
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 2
2. SUCCESSION EVENT. You hereby agree that your resignation on the
Resignation Date constitutes a "Succession Event" under the terms of that
certain Succession Agreement dated as of February 5, 1996 (the "Succession
Agreement") by and among you, the Company and Modern Dental Professionals, P.C.
(f/k/a ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., P.C.) (the "PC"). You are hereby executing and
delivering and will execute and deliver from time to time on or after the date
hereof at the request of the Company and without further consideration such
instruments of transfer and assignment and take such other action as may be
necessary to effectively transfer and assign to an eligible nominee selected by
the Company all right, title and interest to your shares of the PC and to fully
implement the provisions of this Agreement and the Succession Agreement. The
Company agrees to purchase a 5-year, $1,000,000/$3,000,000 tail coverage
malpractice insurance policy covering you, which policy shall contain terms and
provisions reasonably acceptable to you, and further confirms that the terms of
your Indemnification Agreement referred to below shall apply with respect to any
malpractice claims which exceed this insurance coverage in accordance with its
terms.
3. SEVERANCE; DIRECTOR COMPENSATION. In connection with your
resignation, you shall receive following the Resignation Date, in consideration
of the release of claims set forth herein and the other covenants set forth in
this Agreement, severance payments equal to (i) $730,000 payable on the eighth
day following the execution hereof and (ii) an additional amount of $730,000
less payments made to you from January 1, 1999 to the date of execution of this
agreement in the amount of $75,000.00, payable in equal monthly installments
from April 1999 through July 2001 (provided that the Company shall have the
right to terminate or set-off such payments if and in the event you take any
action which constitutes a material breach any of your agreements set forth
herein or referred to herein and you fail to cure such material breach within 15
days following written notice thereof by the Company, and the Company shall have
established to the satisfaction of JAMS/Endispute as a neutral arbitrator
pursuant to paragraph 14 that such breach has occurred or there is probable
cause to believe such breach has occurred). Your severance payments shall be
payable as part of the Company's payroll in accordance with the Company's
current payroll practices for its executive officers, in all cases subject to
withholding under applicable law; provided, however, that the Company in its
sole discretion may elect to pay at any time any remaining amounts due to you
hereunder in a lump sum and upon the closing of any sale or any bankruptcy
filing of the Company any amounts remaining unpaid under the first sentence of
this paragraph 3 shall be paid to you. The Company shall also pay you (a) a
$35,000 annual retainer plus per
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
3
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 3
meeting fees equal to those paid to other independent (i.e. non-employee)
members of the Board of Directors ("independent Directors") and (b) any other
non-monetary compensation (such as stock options) paid to independent Directors,
in each case for as long as you serve as Chairman of the Board of Directors as
consideration for such service, which amount the Company shall pay you in
accordance with the Company's payment practices for its independent Directors
and which amount the Company shall prorate for partial years. In your capacity
as Chairman of the Board and a Director, you agree to abide by all policies and
procedures of the Company applicable to its Directors generally, including,
without limitation, the Company's ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ policy. In the event that you
cease to serve as Chairman of the Board of Directors, but remain a Director of
Monarch Dental Corporation, you shall be entitled to receive an annual retainer
equal to the highest amount paid to any other independent Director not then
serving as Chairman of the Board of Directors. Other than the payments described
above, the other perquisites set forth in paragraph 5 below and the payments
referred to in paragraph 8, you shall not be entitled to any additional payments
or benefits from the Company relating to your employment with the Company or
your services as a Director or the termination thereof or otherwise, including,
without limitation, any amounts specified in that certain Employment Agreement
dated as of July 1, 1997 by and between you and the Company (the "Employment
Agreement").
4. VESTING. We acknowledge that the circumstances regarding your
resignation contemplated by this Agreement do not constitute a "Termination
Event" for purposes of that certain Restricted Stock Agreement dated as of
February 6, 1996 by and between you and the Company, and further that such
shares are subject to repurchase only in the event a "Termination Event"
relating to a termination of employment under the circumstances described
therein should occur after the date of this Agreement. That certain
Non-Qualified Stock Option Agreement dated as of May 28, 1997 by and between you
and the Company (the "Stock Option Agreement") shall remain in full force and
effect and your options shall be governed by the terms thereof; provided,
however, that the Stock Option Agreement shall be deemed to be amended by this
Agreement to provide that any unvested options thereunder shall be deemed fully
vested on the date on which you cease to be a member of the Board of Directors
for any reason. You shall remain eligible for the repricing of options for so
long as you remain on the Board of Directors if and to the extent options of
independent Directors are repriced.
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
4
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 4
5. BENEFITS. You and your beneficiaries shall be entitled to
participate in any and all medical and dental plans and the Company's 401(k)
plan in which you and your beneficiaries are currently enrolled until July 31,
2001, at which time all such benefits shall terminate, subject to the rights of
you and your beneficiaries to continue certain benefits in accordance with and
subject to the law known as COBRA. In this regard you understand that the
Company shall amend its health insurance policy to provide for benefits to
Directors and you shall be required to pay for such benefits at COBRA rates on
an after tax basis, and the Company shall reimburse you for the monthly premium
paid in respect of participation by you and your family in the health plan,
subject to the limitation on total costs payable by the Company set forth in the
following sentence. Your eligibility to participate in the Company's other
employee benefit plans and programs ceases on or after the Resignation Date,
except that until July 31, 2001 the Company will (i) continue to provide you
with a car at a cost not to exceed $1,500 per month (provided that you shall be
responsible for gas, insurance, maintenance and any other costs associated with
such car), (ii) you shall be entitled to use the home computer previously
purchased by the Company and the balance of your current air pass, and (iii) you
shall be entitled to Internet access, admiral's club membership, cellular phone
reimbursement, airline upgrades, toll tag reimbursement and dental society
memberships; provided, however, that the cost to the Company to pay or reimburse
you for all of the benefits set forth in this clause (iii) and to reimburse you
for your premiums under the Company's medical plan as provided in the preceding
sentence shall not to exceed $2,220 per month. Until July 31, 2001, you shall be
reimbursed for out-of-pocket expenses incurred by you in connection with the
business of the Company in accordance with the Company's policies with respect
thereto as in effect from time to time. You and your spouse, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
agree that all payments to ▇▇. ▇▇▇▇▇▇▇ from the Company shall cease and that the
Company shall not be obligated to provide benefits to her, including, without
limitation, an automobile allowance or telephone, except as contemplated in the
first sentence of this paragraph 5. The Company agrees that if its Chief
Executive Officer receives a bonus with respect to its 1998 fiscal year, you
shall receive a proportionate bonus.
6. NOMINATION TO BOARD OF DIRECTORS. The Company hereby agrees that you
will be a nominee of the Board of Directors for election as a Class II Director
of Monarch Dental Corporation at the 1999 annual meeting of stockholders and
that the Board of Directors will recommend a vote for your election in the
Company's proxy statement relating to such meeting. The Company and the Board
will also support your election as both a member of the Board of Directors and
as Chairman of the Board through July 31, 2001, or until such time as
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
5
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 5
you decline to stand for reelection; provided, that the provisions of this
paragraph 6 shall terminate upon any sale of the Company.
7. STANDSTILL. You hereby agree not to submit or cause the submission
of any proposals or nominations of candidates for election as Directors of the
Company at any meeting of the Company's stockholders prior to July 31, 2001
other than in connection with approving the slate of candidates to be nominated
by the Board of Directors in advance of each meeting of the stockholders in your
capacity as a Director of the Company, and any proposals or nominations made in
violation of this Agreement shall not be placed on the ballot at any meeting of
the Company's stockholders. Except as otherwise requested by the Board of
Directors of the Company and on behalf of the Company, you shall not "solicit"
"proxies" (as such terms are used in the proxy rules of the United States
Securities and Exchange Commission) from other stockholders of the Company in
connection with any meeting of the Company's stockholders prior to July 31,
2001. In connection with any matter submitted to the stockholders of the Company
during such period, you agree to vote, or cause to be voted, your shares either
in accordance with the recommendation of the Board of Directors or in proportion
to the votes of the other stockholders in connection with the relevant matter as
you determine with respect to each matter presented. The Board of Directors
shall not nominate any person for election as a Director of the Company prior to
July 31, 2001 without consulting with you prior to such nomination. The
provisions of this paragraph 7 shall terminate upon the closing of any sale of
the Company.
8. NON-COMPETITION; CONFIDENTIALITY. You hereby acknowledge that you
are still subject to the terms and covenants contained (i) in Article 2 of the
Employment Agreement and (ii) in that certain Non-Competition Agreement dated as
of February 5, 1996 by and between you and the Company (the "Non-Competition
Agreement") and you hereby reaffirm and readopt all of such terms and covenants
as if they were completely restated herein. The Company acknowledges that it
continues to be subject to the obligations contained in Section 1(d) of that
Non-Competition Agreement, commencing January 1, 1999. Each of us confirms that
the Non-Competition Agreement is the only existing agreement in effect setting
forth non-competition obligations to which you are subject, which obligations
remain in effect through February 5, 2001, including following any sale of the
Company.
9. INDEMNIFICATION; REGISTRATION RIGHTS. The Company hereby
acknowledges that it remains subject to the terms and covenants contained in (i)
that certain Indemnification
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
6
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 6
Agreement dated as of February 5, 1996 by and between you and the Company (the
"Indemnification Agreement"), and (ii) Article IV of the Amended and Restated
Stockholders' Agreement dated as of August 28, 1996 by and among you, the
Company and certain other stockholders of the Company (the "Registration Rights
Provisions"), and it hereby reaffirms and readopts all of such terms and
covenants as if they were completely restated herein. You agree not to exercise
registration rights in connection with any secondary registration of shares in
connection with any Valley Forge-related settlements.
10. RETURN OF PROPERTY. The Company and you hereby acknowledge that all
documents, records, materials, software, equipment, information and other
physical or intellectual property that have come into your possession or been
produced or created by you in connection with your employment with or for the
Company ("Property") have been and remain the sole property of the Company. The
Company and you hereby acknowledge that you have returned to the Company all
such Property, except to the extent such Property is being utilized by you in
your role as a Director of the Company and upon cessation of such role any such
property shall be promptly returned.
11. LITIGATION COOPERATION. The Company and you agree to cooperate
fully with each other in (i) the defense, prosecution or investigation of any
claims or actions which already have been brought or threatened, or which may be
brought or threatened in the future against or on behalf of you or the Company
by or against third parties and (ii) responding to, cooperating with, or
contesting any governmental audit, inspection, inquiry or investigation, in
either case that relate to events or occurrences that transpired during your
employment or association with the Company. The full cooperation in connection
with such claims or actions shall include, without implication of limitation:
being reasonably available to meet with counsel to prepare for discovery or
trial; to testify truthfully as a witness when reasonably requested and at
reasonable times designated by you or the Company; and to reasonably meet with
counsel or other designated representative of you or the Company to prepare
responses to and to cooperate with the your or the Company's processing of
governmental audits, inspections, inquiries or investigations. The Company will
reimburse you for any reasonable out-of-pocket expenses that you incur in
connection with such cooperation, subject to reasonable and satisfactory
documentation. The Company will not exercise its rights under this paragraph so
as to interfere with your ability to engage in gainful employment and shall
endeavor to schedule your responsibilities hereunder so as not to interfere with
your schedule
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
7
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 7
so long as you promptly provide timely alternative dates on which you can
fulfill your obligations hereunder.
12. SUBORDINATION. You hereby confirm that your right to payments from
the Company hereunder and under the Non-Competition Agreement shall be
subordinated as set forth in Exhibit A hereto.
13. RELEASE. The Company and you hereby irrevocably and unconditionally
release, acquit and forever discharge the other and each of the Company's
current and former officers, directors, agents, employees, representatives,
co-venturers, parents, subsidiaries, affiliates, predecessors, successors,
assigns, insurers and stockholders (collectively, the "Company Released
Parties") from any and all claims, demands, causes of action, obligations,
damages, losses, expenses and liabilities of any kind or nature whether legal,
equitable or statutory, liquidated or unliquidated, known or unknown, suspected
or unsuspected, fixed or contingent, which the Company or you may have had from
the beginning of time to the date hereof, including but not limited to any such
claims concerning or related, directly or indirectly, to your employment at the
Company and/or the cessation thereof or your status as a stockholder or Director
of the Company. This release includes actions claiming violation of Title VII of
the Civil Rights Act of 1964, as amended, 42 U.S.C. 2000e et seq., the Age
Discrimination in Employment Act, the Americans with Disabilities Act, the Texas
Commission on Human Rights Act, all other labor laws of Texas, and any other
federal, state, or local law, order or regulation. This release also includes
any claims for wrongful discharge or that the Company has dealt with you
unfairly or in bad faith, and actions raising tortious claims, actions raising
any claim of express or implied contract of employment, or any other cause of
action or claims of violation of common law. This release is for any and all
relief, without regard to its form or characterization. Included in this release
are any and all claims for attorneys' fees and for future damages allegedly
arising from the alleged continuation of the effects of any past action,
omission or event. Notwithstanding anything in this release to the contrary,
this release shall not be construed to terminate any party's rights arising
directly under this Agreement (including Article 2 of your Employment Agreement
as incorporated herein), the Indemnification Agreement, the Stock Option
Agreement (as amended hereby) or the Registration Rights Provisions, or to in
any way limit or modify your obligations under the Non-Competition Agreement or
Article 2 of your Employment Agreement.
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
8
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 8
14. MISCELLANEOUS. You have been advised to consult with an attorney
before signing this Agreement and hereby confirm that you have done so.
By signing this Agreement, you acknowledge that you are doing so
voluntarily and only after consultation with your personal attorney. You also
acknowledge that you are not relying on any representations by the undersigned
or any other representative of the Company concerning the meaning of any aspect
of this Agreement.
You acknowledge that you have been given the opportunity, if you so
desired, to consider this Agreement for twenty-one (21) days before executing
it. If not signed by you and returned to ▇▇. ▇▇▇▇ ▇. ▇▇▇▇, Chief Executive
Officer, Monarch Dental Corporation, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, so that he receives it by close of business on the twenty-second
(22nd) day after your receipt of the Agreement, this Agreement will not be
valid. In addition, if you breach any of the conditions of the Agreement within
the twenty-one (21) day period, the offer of this Agreement will be withdrawn
and your execution of the Agreement will not be valid. In the event that you
execute and return this Agreement within twenty-one (21) days or less of the
date of its delivery to you, you acknowledge that such decision was entirely
voluntary and that you had the opportunity to consider this letter agreement for
the entire twenty-one (21) day period. The Company acknowledges that for a
period of seven (7) days from the date on which you execute this Agreement, you
shall retain the right to revoke this Agreement by written notice delivered to
▇▇. ▇▇▇▇ at the address indicated above, and that this Agreement shall not
become effective or enforceable until the expiration of such revocation period.
In the event of any dispute, this Agreement will be construed as a
whole, will be interpreted in accordance with its fair meaning, and will not be
construed strictly for or against either you or the Company. The laws of Texas
will govern any dispute about this Agreement, including any interpretation or
enforcement of this Agreement. In the event that any provision or portion of a
provision of this Agreement shall be determined to be unenforceable, the
remainder of this Agreement shall be enforced to the fullest extent possible as
if such provision or portion of a provision were not included. This Agreement
may be modified only by a written agreement signed by you and an authorized
representative of the Company.
All disputes, claims, or controversies arising out of or relating to
this Agreement or any of the agreements referenced herein or the negotiation,
validity or performance hereof or
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
9
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 9
thereof, that are not resolved by mutual agreement, shall be resolved solely and
exclusively by binding arbitration to be conducted before JAMS/Endispute, Inc.
or its successor. The arbitration shall be held in Dallas, Texas before a single
arbitrator and shall be conducted in accordance with the rules and regulations
promulgated by JAMS/Endispute, Inc.
Both the Company and you hereto irrevocably and unconditionally consent
to the exclusive jurisdiction of JAMS/Endispute, Inc. to resolve all disputes,
claims or controversies arising out of or relating to this Agreement or any of
the agreements referenced herein or the negotiation, validity or performance
hereof or thereof, and further consent to the jurisdiction of the courts of the
State of Texas for the purposes of enforcing the arbitration provisions of this
paragraph 14. Both the Company and you further irrevocably waive any objection
to proceeding before JAMS/Endispute based upon lack of personal jurisdiction or
to the laying of venue and further irrevocably and unconditionally waive and
agree not to make a claim in any court that arbitration before JAMS/Endispute,
Inc. has been brought in an inconvenient forum. You hereby consent to service of
process by registered mail at the address set forth above and the Company hereby
consents to service of process by registered mail at the address previously set
forth in this paragraph 13. Both the Company and you agree that its or your
submission to jurisdiction and its or your consent to service of process by mail
is made for the express benefit of the other.
Notwithstanding anything to the contrary contained herein, the
arbitration provisions of this paragraph 13 shall not prevent any party hereto
from seeking any temporary restraining order or preliminary injunctive relief to
which such party may be entitled hereunder pending and subject to the resolution
of the subject matter thereof in an arbitration proceeding initiated pursuant to
the terms hereof.
This Agreement is complete, reflects the entire agreement of the
parties with respect to all matters between such parties, and supersedes all
previous written or oral negotiations, commitments and writings except Article 2
of your Employment Agreement as incorporated herein, the Indemnification
Agreement, the Stock Option Agreement (as amended hereby), the Registration
Rights Provisions and the Non-Competition Agreement.
The Company is executing this Agreement with you on behalf of itself
and each of its subsidiaries and affiliated companies including associated
professional corporations (other than the PC).
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
10
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 10
If you agree to these terms, please sign and date below and return this
Agreement to the undersigned within the time limitation set forth above.
Sincerely,
MONARCH DENTAL CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Executive Officer
ACCEPTED AND AGREED TO:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Dated: March 26, 1999
---------------------------------
MODERN DENTAL PROFESSIONALS, P.C.
(F/K/A ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S., P.C.)
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.
Title: President
Dated: March 26, 1999
---------------------------------
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
11
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
March 26, 1999
Page 11
SPOUSAL CONSENT: I ACKNOWLEDGE THAT
I HAVE READ THE FOREGOING AGREEMENT
AND THAT I UNDERSTAND THE CONTENTS
THEREOF AND HEREBY ACCEPT AND AGREE
TO THE FOREGOING TERMS.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated: March 26, 1999
-------------------------------
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
12
EXHIBIT A
Subordination.
(a) Subordination to Senior Indebtedness. The right to payments under
the attached Separation Agreement ("Payments") is wholly subordinated, junior
and subject in right of payment, to the extent in the manner hereinafter
provided, to the prior payment of all Senior Indebtedness of the Company now
outstanding or hereinafter incurred. As used herein, the term "Senior
Indebtedness" shall mean the principal of, any premium, if any, and interest on
(i) all indebtedness of the Company for monies borrowed from banks, trust
companies, insurance companies and other financial institutions, including
commercial paper and accounts receivable sold or assigned by the Company to such
institutions; (ii) principal of, and premium, if any, and interest on, any
indebtedness or obligations of others of the kinds described in (i) above
assumed or guaranteed in any manner by the Company; and (iii) deferrals,
renewals, extensions and refundings of any such indebtedness or obligations
described in (i) and (ii) above.
(b) Payment upon Dissolution, Etc.
(i) In the event of any bankruptcy, insolvency,
reorganization, receivership, composition of all or substantially all creditors
of the Company, assignment for benefit of creditors or other similar proceeding
initiated by or against the Company or any dissolution or winding up or total or
partial liquidation of substantially all of the Company's assets or
reorganization of the Company (being hereinafter referred to as a "Proceeding"),
all claims of the holders of the right to Payments in such Proceeding shall be
deemed assigned, pro rata, to the then holders of the Senior Indebtedness on the
basis of the respective amounts of such Senior Indebtedness held by such holder,
and the holders of the rights to Payments hereby agree to execute all documents
that such holders request in order to evidence such assignment; provided,
however, that such assignment shall terminate upon receipt by such holders of
payment in full of all of the Senior Indebtedness. While such assignment is in
effect, the then holders of the Senior Indebtedness shall have the exclusive
right to exercise all rights of the holders of the right to Payments arising
from their claims in the Proceeding, including but not limited to the right to
vote for a trustee and to accept or reject a proposed plan of reorganization or
composition, and the holders of the right to Payments hereby agree to execute
all documents requested by the then holders of the Senior Indebtedness in order
to exercise any such rights whether (at the sole discretion of such holders) in
the holder's own name or in the name of the holders of the right to Payments.
While such assignment is in effect, the holders of the right to Payments also
agree that they shall, upon request, and at their own expense take all
reasonable actions (including but not limited to the execution and filing of
documents and the giving of testimony in any Proceeding, whether or not such
testimony could have been compelled by process) necessary to prove the full
amount of all their claims in any
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
A-1
13
Proceeding, and the holders of the right to Payments shall not expressly, by
implication or by inaction waive any claim in any Proceeding without the written
consent of such holder.
(ii) Upon payment or distribution to creditors in a Proceeding
of assets of the Company of any kind or character, whether in cash, property or
securities, all principal and interest due upon any Senior Indebtedness shall
first be paid in full in cash, or payment thereof in full duly provided for,
before any holders of the right to Payments shall be entitled to receive or, if
received, to retain any payment or distribution on account of the right to
Payments; and upon any such Proceeding, any payment or distribution of assets of
the Company of any kind or character, whether in cash, property or securities,
to which any holders of the right to Payments would be entitled except for the
provisions of this Exhibit shall be paid by the Company or by any receiver,
trustee in bankruptcy, liquidating trustee, agent or other person making such
payment or distribution, or by any holders of the right to Payments who shall
have received such payment or distribution, directly to the holders of the
Senior Indebtedness (pro rata to each such holder on the basis of the respective
amounts of such Senior Indebtedness held by such holder) or their
representatives to the extent necessary to pay all such Senior Indebtedness in
full after giving effect to any concurrent payment or distribution to or for the
holders of such Senior Indebtedness, before any payment or distribution is made
to any holders of the right to Payments. In the event of any Proceeding, the
holders of right to Payments shall be entitled to be paid one hundred percent
(100%) of the principal amount thereof and accrued interest thereon before any
distribution of assets shall be made among the holders of any class of shares of
the capital stock of the Company in their capacities as holders of such shares.
(c) Subrogation. Subject to payment in full of all Senior Indebtedness,
the holders of the right to Payments shall be subrogated to the rights of the
holders of Senior Indebtedness to receive payments or distributions of the
assets of the Company made on such Senior Indebtedness until all principal and
interest on the right to Payments shall be paid in full in cash; and for
purposes of such subrogation, no payments or distributions to the holders of
Senior Indebtedness of any cash, property or securities to which any holders of
the right to Payments would be entitled except for the subordination provisions
of this Exhibit shall, as between the holders of the right to Payments and the
Company and/or its creditors other than the holders of the Senior Indebtedness,
be deemed to be a payment on account of the Senior Indebtedness.
(d) Rights of Holders Unimpaired. The provisions of this
Exhibit are and are intended solely for the purposes of defining the relative
rights of the holder of the right to Payments and the holder of Senior
Indebtedness and nothing in this Exhibit shall impair, as between the Company
and the holder of the right to Payments, the obligation of the Company, which is
unconditional and absolute, to pay to the holder of the right to Payments such
Payments when and as due in accordance with the attached agreement, nor shall
anything
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
A-2
14
herein prevent the holder of the right to Payments from exercising all remedies
otherwise permitted by applicable law or hereunder upon default, subject to the
rights set forth above of holders of Senior Indebtedness to receive cash,
property or securities otherwise payable or deliverable to the holders of the
holder of the right to Payments.
GWC /s/ GWC WFM /s/ WFM JLM /s/ JLM
EXECUTION COPY
A-3
