Exhibit10.13
SETTLEMENT AGREEMENT
THIS AGREEMENT dated as of the 12th day of June, 2002, is between Xxxx X.
Xxxxxx, D.D.S., an individual who resided in Xxxxxx County, Texas, and the
Estate of Xxxx X. Xxxxxx, D.D.S. (collectively, the "Seller"), Castle Dental
Centers, Inc., a Delaware corporation ("Castle Dental"), Castle Dental Centers
of Texas, Inc., a Texas corporation ("Castle Texas"), and Castle Dental
Associates of Texas, P.C. (formerly Xxxx X. Xxxxxx, D.D.S., P.C.), a Texas
professional corporation (the "Company"), Castle Interests, Ltd. ("Castle
Interests") and Xxxxxxx X. Xxxxxx ("Xxx. Xxxxxx").
The Seller, Castle Interests, Xxx. Xxxxxx, Castle Dental, Castle Texas and
the Company hereby agree as follows:
1. Effectiveness of Agreement. All of the parties' obligations under this
Agreement shall be subject to and dependent upon the approval of this Agreement
by Castle Dental's board of directors and by Castle Dental's senior lenders (the
"Senior Lenders"). Consequently, unless and until Castle Dental notifies Seller
in writing that it has received the approval of its board of directors and the
Senior Lenders (the "Effective Date"), this Agreement will not be binding on any
of the parties hereto. Castle Dental hereby agrees to submit this Agreement to
its board of directors and to the Senior Lenders for approval forthwith upon its
execution and to diligently seek such approvals. If the Effective Date does not
occur on or before June 30, 2002, any of the parties hereto may terminate this
Agreement by delivery of written notice to the other parties and thereafter this
Agreement will be void and of no further force and effect.
2. Representations and Warranties of the Seller. The Seller
represents and warrants to and agrees with Castle Dental that:
(a) Authority of the Seller. This Agreement, upon execution and
delivery in accordance with its terms, will represent the valid, binding
and enforceable obligation of the Seller in accordance with its terms.
(b) No Conflict. The consummation of the transactions contemplated by
this Agreement will not result in the breach of or constitute a default
under any agreement, instrument, law or court decree to which the Seller is
a party or by which the Seller is bound.
3. Covenants and Agreements.
(a) Trademarks/ Service Marks/ Tradenames. Seller acknowledges that
Castle Dental owns all rights in and to the trademarks, service marks, and
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trade names "Castle Dental Centers", "The Castle" and "Xxxx X. Xxxxxx,
D.D.S., P.C." and all logos heretofore used in connection with those marks
and names. Seller agrees not to (a) challenge the validity of Castle
Dental's exclusive rights in such names and marks at any time or in any
context or forum or (b) use such marks in a manner that infringes upon such
marks. Seller covenants and agrees that any and all advertising using the
term "Castle" prior to the date of this Agreement was pursuant to a license
from Castle Dental and that all such prior use inured to the benefit of
Castle Dental.
(b) Settlement. The parties have agreed to settle finally and
forever any and all claims between them of any nature whatsoever from any
and all liability or damages of any kind, known or unknown, in contract or
in tort. Seller, Castle Dental and Castle Texas agree that (x) each of the
Continuing Agreements (as defined below) remains in full force and effect,
(y) none of them is aware of the breach by any party of any of the parties'
obligations under the Continuing Agreements and (z) that the provisions of
this Agreement and the circumstances surrounding the termination of
Seller's service on the board of directors of Castle Dental do not
constitute a breach of the terms of any of the Continuing Agreements or of
any other obligation, contract, agreement or understanding between the
Company, Castle Dental, Castle Texas and Seller. Seller acknowledges that
he has been provided drafts of the term sheets detailing the terms of the
proposed restructuring of Castle Dental's senior secured debt and
subordinated debt (the "Restructuring") and he understands that his and his
affiliates' common stock in Castle Dental will be subject to severe,
immediate and irreversible dilution upon the consummation of the
transactions contemplated by the Restructuring, with all currently
outstanding common stock of Castle Dental to represent less than 7.5% of
the fully diluted common equity of Castle Dental following the
Restructuring.
(c) Agreement not to Xxx. Except only to enforce the terms of this
Agreement, each party agrees not to bring any claim of any kind against the
other party to this Agreement concerning any matter released by this
Agreement. Each party further agrees that this Agreement constitutes a bar
to any such future claim.
(d) Continuing Agreements. The following agreements shall
remain in full force and effect following the Effective Date: (1) the
Indemnity Agreement dated as of December 18, 1995, between Seller and
Castle Dental (the "Indemnity Agreement"); (2) the Amended and Restated
Registration Rights Agreement dated as of June 16, 1997, by and among
Castle Dental, Delaware State Employees' Retirement Fund, Declaration of
Trust For Defined Benefit Plan of ICI American Holdings Inc., Declaration
of Trust for Defined Benefit Plan of Zeneca Holdings Inc., Xxxx X. Xxxxxx,
Xx., as Trustee of the Castle 1995
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Gift Trust F/B/O Xxxx X. Xxxxxx, Xx., Castle Interests, Ltd., Xxxx X.
Xxxxxx Donnell, as Trustee of the Castle 1995 Gift Trust F/B/O Xxxx X.
Xxxxxx Donnell, Seller, Xxxxxxx X. Xxxxxx, and Gulfstar Investments, Ltd.
(the "Registration Rights Agreement"); and (3) the Stockholders Agreement
dated as of January 31, 2000, by and among Castle Dental, Xxxxxx Financial,
Inc., Midwest Mezzanine Fund II, L.P., Delaware State Employees' Retirement
Fund, Declaration of Trust For Defined Benefit Plan of ICI American
Holdings Inc., Declaration of Trust for Defined Benefit Plan of Zeneca
Holdings Inc., Xxxx X. Xxxxxx, Xx., Xxxx X. Xxxxxx, Xx., as Trustee of the
Castle 1995 Gift Trust F/B/O Xxxx X. Xxxxxx, Xx., Castle Interests, Ltd.,
Seller, Xxxxxxx X. Xxxxxx, and Gulfstar Investments, Ltd. (the
"Stockholders Agreement" and, together with the Indemnity Agreement and the
Registration Rights Agreement, the "Continuing Agreements"). Xxx. Xxxxxx,
on her own behalf, Castle Interests, on its own behalf, and Seller, on his
own behalf and on behalf of his heirs, assigns and affiliates, hereby
consents to Castle Dental, upon the consummation of the Restructuring: (a)
entering into a registration rights agreement with the persons receiving
equity interests in Castle Dental in connection with the Restructuring,
which registration rights are superior to and in conflict with those
granted to Xxx. Xxxxxx, Castle Interests and Seller and his heirs, assigns
and affiliates pursuant to the Registration Rights Agreement, (b) amending
the Registration Rights Agreement to eliminate the demand registration
rights provided for therein and (c) terminating the Stockholders Agreement.
(e) Confidentiality. The parties agree the terms and conditions of
this Agreement shall be confidential, and that no party shall disclose any
part of this Agreement except (i) as required by subpoena or otherwise by
law or (ii) to either party's accountants, tax preparers, legal counsel or
financial advisors.
(f) Release. In consideration of the terms and provisions of this
Agreement, except only to enforce his rights under this Agreement, the
Asset Purchase Agreement (as defined below) and the Continuing Agreements,
Seller on behalf of himself, his affiliates, his heirs, executors,
successors and assigns, forever releases the Company, Castle Dental, Castle
Texas, the lenders under that certain Amended and Restated Credit Agreement
dated as of December 18, 1998, as amended (the "Credit Agreement"), by and
among Castle Dental, Bank of America, N.A., as agent ("Agent") and the
lenders who are parties thereto, and Xxxxxx Financial, Inc. and Midwest
Mezzanine Fund II, L.P. and each of their respective parents, divisions,
subsidiaries, affiliates, and related companies, and their present and
former agents, employees, officers, directors, attorneys, advisors,
fairness opinion givers, stockholders, plan fiduciaries, successors and
assigns (collectively, the "Company Releasees"), from any and all claims,
debts, obligations, demands, actions, causes of action, costs, fees, and
all liability whatsoever, whether known or unknown, fixed or contingent, in
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contract or in tort, or based on any statute or other law, state or federal
(collectively, "Claims"), which Seller has, had, or may have in the future
against the Company Releasees relating to or arising out of (1) Seller's
employment by or services as an officer or director of the Company, Castle
Dental or any subsidiary of Castle Dental whether arising on or prior to
the date of this Agreement under the common law or federal or state
statutory law, whether known or unknown, including, but not limited to, any
law which prohibits discrimination on the basis of sex, race, age, national
origin, veteran status, or any other form of discrimination and (2) any
Claim in any way related to Seller's employment with, or service as a
director of, the Company, Castle Dental or Castle Texas or the
circumstances in which that service ended. In addition, except only to
enforce his rights under this Agreement, effective upon the tender on or
prior to August 31, 2002, by Castle Texas and the Company of the Assets (as
defined in the Asset Purchase Agreement of even date herewith between
Dentists Choice 1 L.P., Xxxx X. Xxxxxx, Xx., Texas Dental Associates, P.A.,
Castle Texas and the Company (the "Asset Purchase Agreement")) in
accordance with the provisions of the Asset Purchase Agreement, Seller on
behalf of himself, his affiliates, his heirs, executors, successors and
assigns, shall and hereby does forever release the Company Releasees from
any and all Claims which Seller has, had, or may have in the future against
the Company Releasees relating to or arising out of (1) the Deferred
Compensation Agreement between Seller and Castle Dental dated December 18,
1995, (2) implementation of any of the transactions, agreements, or stock
and/or debt issuances contemplated by the proposed Restructuring, as it may
be amended from time to time, including claims for breach of fiduciary
duty, including the duties of loyalty and care, or claims for breach of any
other duty or obligation of any of the Company Releasees owed or allegedly
owed to Seller, his affiliates, any other equity or debt holders in Castle
Dental or any other constituency or stakeholder group of Castle Dental or
(3) any other act or omission by any Company Releasee other than those
expressly excepted herein which occurred on or prior to the effective date
of this release. In consideration of the terms and provisions of this
Agreement, except only to enforce its rights under this Agreement, the
Asset Purchase Agreement and the Continuing Agreements, Castle Dental,
Castle Texas and the Company forever release Seller from any claims, debts,
obligations, and causes of action of any kind arising on or prior to the
date of this Agreement relating to Seller's employment with, or service as
a director of, the Company, Castle Dental or Castle Texas, under the common
law or federal or state statutory law, whether known or unknown.
(g) Insurance. Castle Dental hereby agrees that in the event the
Company is voluntarily dissolved or otherwise voluntarily ceases to exist,
that Castle Dental shall, prior to such event, purchase a "tail"
malpractice insurance policy for the benefit of Seller insuring all actions
or omissions that may have occurred prior to such event. In addition, for a
period of three years following the
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Closing Date, Castle Dental shall take such actions as are necessary to
have Seller named as an additional insured on the Company's malpractice
insurance policies.
4. Indemnification.
(a) Indemnification of the Seller. Castle Dental, Castle Texas
and the Company, from and after the Closing Date, jointly and severally,
shall indemnify and hold Seller and his affiliates (the "Seller
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
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 Castle Dental,
Castle Texas or the Company under this Agreement, (b) any liability or
obligation (other than those for which the Company is being indemnified by
Seller and the Shareholder hereunder) which pertains to the ownership,
operation or conduct of the business of the Company arising from any acts,
omissions, events, conditions or circumstances occurring prior to, on or
after the Closing Date. The obligations of Castle Dental, Castle Texas and
the Company hereunder are in addition to, and not in lieu of, any other
indemnifications such persons may have to Seller Indemnitees.
(b) Indemnification of Castle Dental, Castle Texas and the
Company. Seller shall indemnify and hold Castle Dental, Castle Texas, the
Company and their respective officers, directors, agents, employees,
shareholders and affiliates (the "Company Indemnitees") harmless from and
against any and all Damages suffered by any Company Indemnitee as a result
of, caused by, arising out of, or in any way relating to any
misrepresentation, breach of warranty, or nonfulfillment of any agreement
or covenant on the part of the Seller under this Agreement.
(c) 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
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include a formal demand for indemnification under this Agreement. The right
to indemnification hereunder shall not be affected by any failure to give
the indemnifying party such notice or delay in giving the indemnifying
party such notice unless, and then only to the extent that, the rights and
remedies of the indemnifying party shall have been actually prejudiced as a
result of the failure to give, or delay in giving, such notice.
(d) 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. 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
control such litigation; 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 (with such payment to consist of the entire remedy
against the indemnified party) as of the time the indemnifying party made
its request therefor to the indemnified party.
(e) Cooperation. If requested by the indemnifying party, the
indemnified party agrees to cooperate with any reasonable requests by 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
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party for any expenses incurred by it in, and indemnify the indemnified
party for any Damages incurred as a result of, 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.
(f) Right to Participate. To the extent permitted by law and unless
counsel to the indemnified party advises otherwise, 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.
(g) 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.
5. Miscellaneous.
(a) No modification to any provisions contained in this Agreement
shall be binding upon any party unless made in writing and signed by both
parties.
(b) If any provision of this Agreement is held to be unenforceable
for any reason, the remaining parts of the Agreement shall remain in full
force and effect.
(c) Each party represents he or it has not assigned any portion of
the claims released under this Agreement to any third party.
(d) This Agreement shall be construed in accordance with Texas law.
(e) Except as expressly set forth in this Agreement, this Agreement
constitutes a single, integrated written contract expressing the entire
agreement of the parties to this Agreement. Any other agreements,
discussions, promises, and representations (other than the Continuing
Agreements) have been and are integrated into and superseded by this
Agreement.
(f) Each party has fully considered this Agreement. Each
recognizes that no facts can ever be known with certainty and that no
representations or
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warranties other than as set forth in this Agreement have been made to
induce this Agreement.
(g) With respect to Seller, this Agreement shall also bind and
inure to the benefit of his heirs and assigns. With respect to the Company,
Castle Dental and Castle Texas, this Agreement shall also bind and inure to
the benefit of any affiliated entities, successor-in-interests, or assigns.
The Company and Seller each specifically acknowledges and agrees that the
rights and benefits of Castle Dental and Castle Texas under this Agreement
may be assigned by Castle Dental and/or Castle Texas to Agent, as
collateral security for certain obligations and indebtedness of Castle
Dental and/or Castle Texas arising under the Credit Agreement, and the
"Security Instruments" as defined therein.
(h) In the event that any party should bring any action to enforce
any term of this Agreement, the party who does not prevail in any such
action shall pay all the reasonable attorneys' fees and costs incurred by
all other parties because of the action.
(i) The parties agree that the terms of this Agreement are the result
of negotiations between the parties, and constitute a final accord and
satisfaction concerning all disputes both between Seller and the Company,
Castle Dental and Castle Texas.
(j) Seller expressly warrants and represents and does hereby state
and represent that no promise or agreement which is not herein expressed
has been made to him in executing this Agreement, and that Seller is not
relying upon any statement or representation of any agent of the parties
being released hereby. Seller is relying on his own judgment and
acknowledges that he has been represented by competent legal counsel in
this matter. The aforesaid legal counsel has read and explained to Seller
the entire contents of this Agreement, as well as the legal consequences of
the releases contained herein.
(k) Except as expressly stated herein, no party to this Agreement
admits the existence of any liability or wrongdoing, and all such liability
is expressly denied.
(l) The parties each agree that neither shall disparage the other to
any third party at any time.
(m) No failure by any party hereto at any time to give notice of any
breach by another party of, or to require compliance with, any condition or
provision of this Agreement shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
CASTLE DENTAL ASSOCIATES OF TEXAS,
P.C.
By: /s/ Mashalah Ameri
------------------------------
Mashalah Ameri, D.D.S., President
XXXX X. XXXXXX, D.D.S., AND THE
ESTATE OF XXXX X. XXXXXX, D.D.S.
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx X. Xxxxxx, in her capacity as
Executrix of the Estate of Xxxx X. Xxxxxx, D.D.S.
/s/ Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx, Individually
CASTLE INTERESTS, LTD.
By: /s/ Xxxx X. Xxxxxx, Xx.
---------------------------------
Xxxx X. Xxxxxx, Xx., General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx, General Partner
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx, in her capacity as
Executrix of the Estate of Xxxx X. Xxxxxx,
D.D.S., General Partner
CASTLE DENTAL CENTERS OF TEXAS,
INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------------
Xxxxx X. Xxxxx, President and
Chief Executive Officer
CASTLE DENTAL CENTERS, INC.
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By: /s/ Xxxxx X. Xxxxx
----------------------------------
Xxxxx X. Xxxxx, President and
Chief Executive Officer
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