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EXHIBIT 10.18
DEFAULT FORBEARANCE AGREEMENT
This Default Forbearance Agreement (this "AGREEMENT") is dated as of
February 12, 1999, and is executed and delivered by and among Associated Dental
Services, Inc., a California corporation ("ADS"), Pacific Coast Dental, Inc., a
California corporation and a wholly-owned subsidiary of ADS, ("PCD") (ADS and
PCD together, "BORROWERS"), The Pellkofer Family Trust (40% owner of ADS), Xxxx
X. Xxxxxxxxx (10% owner of ADS), Xxxxx X. Xxxxxxxxx (president of ADS), The
Xxxxxxx Family Trust (40% owner of ADS), and Xxxxxx X. Xxxxxxx, D.D.S. (10%
owner of ADS) ( the "SHAREHOLDERS") and Guards Dental, Inc., a California
corporation ("LENDER"), with respect to the following facts:
R E C I T A L S
A. Lender is the holder of (i) a Promissory Note and Security Interest
dated August 1, 1997, executed by ADS and payable to Lender, in the original
principal amount of Four Million, Five Hundred Thousand Dollars ($4,500,000)
(the "ADS NOTE"); (ii) a Promissory Note and Security Interest dated August 1,
1997, executed by PCD and payable to Lender, in the original principal amount of
Three Million, Five Hundred Thousand Dollars ($3,500,000) (the "PCD NOTE");
(iii) a Promissory Note and Security Interest dated April 1, 1998, executed by
ADS and PCD and payable to Lender, in the original principal amount of Fifteen
Million Dollars ($15,000,000) (the "ADS/PCD NOTE"); (iv) a Promissory Note and
Security Interest dated September 30, 1996, and assumed by ADS and PCD pursuant
to an Assignment and Assumption of Note Agreement dated April 1, 1998 and
payable to Lender, in the original principal amount of One Million Dollars
($1,000,000) (the "GLENDALE NOTE"); (v) a Promissory Note and Security Interest
dated March 31, 1997, and assumed by ADS and PCD pursuant to an Assignment and
Assumption of Note Agreement dated April 1, 1998 and payable to Lender, in the
original principal amount of One Hundred Thirty One Thousand Dollars ($131,000)
(the "EQUIPMENT NOTE"); (vi) a Promissory Note and Security Interest dated
December 30, 1996, and assumed by ADS and PCD pursuant to an Assignment and
Assumption of Note Agreement dated April 1, 1998 and payable to Lender, in the
original principal amount of Six Hundred Thousand Dollars ($600,000) (the
"RANCHO CUCAMONGA NOTE"); (vii) a Promissory Note and Security Interest dated
June 23, 1997, and assumed by ADS and PCD pursuant to an Assignment and
Assumption of Note Agreement dated April 1, 1998 and payable to Lender, in the
original principal amount of Six Hundred Twenty Five Thousand Dollars ($625,000)
(the "KEARNY MESA NOTE"); each as modified by that certain Master Asset Purchase
Agreement dated April 1, 1998 among Lender, ADS and PCD; and (viii) a Promissory
Note and Security Interest dated December 1, 1998 and assumed by ADS and PCD
pursuant to an Assignment and Assumption of Note Agreement dated January 1,
1999, in the original principal amount of Three Hundred Thirty Five Thousand
Dollars ($335,000) (the "XXXXXX VALLEY NOTE"). The ADS Note, PCD Note, ADS/PCD
Note, Glendale Note, Equipment Note, Rancho Cucamonga Note, Kearny Mesa Note and
Xxxxxx Valley Note shall be referred to herein collectively as the "NOTES".
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B. ADS's obligations under the ADS Note are secured pursuant to the
terms of the ADS Note by all tangible, nonorthodontics-related assets of ADS
existing on the date of the ADS Note or thereafter acquired and/or accrued,
including any proceeds or replacements relating to the same. PCD's obligations
under the PCD Note are secured pursuant to the terms of the PCD Note by all
assets of PCD existing on the date of the PCD Note or thereafter acquired and/or
accrued, including any proceeds or replacements relating to the same. Borrowers'
obligations under the ADS/PCD Note are secured pursuant to the terms of the
ADS/PCD Note by all of ADS's assets and PCD's assets related to or associated
with the dental practices located on Schedule 3 attached thereto, or any other
dental practices owned by PCD and ADS existing on the date of the PCD/ADS Note
or thereafter acquired and/or accrued, including any proceeds or replacements
relating to the same. Borrowers' obligations under the Glendale Note are secured
pursuant to the terms of the Glendale Note by all of Borrowers' assets existing
on the date of the Glendale Note or thereafter acquired and/or accrued,
including any proceeds or replacements relating to the same. Borrowers'
obligations under the Equipment Note are secured pursuant to the terms of the
Equipment Note by all of Borrowers' assets existing on the date of the Equipment
Note or thereafter acquired and/or accrued, including any proceeds or
replacements relating to the same. Borrowers' obligations under the Rancho
Cucamonga Note are secured pursuant to the terms of the Rancho Cucamonga Note by
all of Borrowers' assets existing on the date of the Rancho Cucamonga Note or
thereafter acquired and/or accrued, including any proceeds or replacements
relating to the same. Borrowers' obligations under the Kearny Mesa Note are
secured pursuant to the terms of the Kearny Mesa Note by all of Borrowers'
assets existing on the date of the Kearny Mesa Note or thereafter acquired
and/or accrued, including any proceeds or replacements relating to the same.
Borrowers' obligations under the Xxxxxx Valley Note are secured pursuant to the
terms of the Xxxxxx Valley Note by all of Borrowers' assets existing on the date
of the Xxxxxx Valley Note or thereafter acquired and/or accrued, including any
proceeds or replacements relating to the same.
C. Borrowers acknowledge that Borrowers have failed to pay and will not
pay the full amount owing on the Notes for the months of January 1999 through
the date of termination of this Agreement, such monthly deficit equaling
$41,716.41 for the ADS Note, $32,446.09 for the PCD Note, $115,037.02 for the
ADS/PCD Note, $9,309.08 for the Glendale Note, $3,874.46 for the Equipment Note,
$5,570.64 for the Rancho Cucamonga Note, $5,988.87 for the Kearny Mesa Note, and
$2,575.86 for the Xxxxxx Valley Note, for a total deficit per month of
$207,073.33 ("PAYMENT DEFICIT"), and as a result, Borrowers have accrued late
fees in the amounts specified in the Notes ("LATE FEES"). Such failure to pay
the Payment Deficit is referred to herein as the "SPECIFIED DEFICIT."
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D. Borrowers have asked Lender, and Lender is willing to agree, to
forbear temporarily from exercising its rights and remedies with respect to the
Specified Deficit, on the terms and conditions set forth in this Agreement.
E. The Dental Practice Asset Purchase Agreement dated August 1, 1997
between ADS and Lender, the Dental Practices Purchase Agreement dated August 1,
1997 between PCD and Lender, the Master Asset Purchase Agreement dated April 1,
1998 among ADS, PCD and Lender, the Assumption of Note Agreements described
above for the Glendale Note, the Equipment Note, The Rancho Cucamonga Note, the
Kearny Mesa Note, and the Xxxxxx Valley Note, this Agreement, and the Notes,
together with all modifications and amendments thereto and any documents
required thereunder, are referred to herein collectively as the "LOAN DOCUMENTS"
and each individually is referred to as a "LOAN DOCUMENT." Capitalized terms not
otherwise defined herein shall have the respective meanings set forth in the
Notes.
F. All of the parties agree that it is in their best interest to market
and sell the businesses operated by ADS and PCD (the "BUSINESSES") by causing
ADS, PCD and the Shareholders to sign an irrevocable power of attorney in favor
of Lender in the form attached hereto as Exhibit A.
NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency
of which are hereby acknowledged, Borrowers, Shareholders and Lender agree as
follows:
A G R E E M E N T
1. Forbearance. Subject to strict compliance by Borrowers with every
covenant, condition and obligation set forth in this Agreement and in each and
all of the other Loan Documents, Lender hereby agrees, until the earliest to
occur of (i) August 12, 1999; (ii) the occurrence of any default (other than the
Specified Deficit), following the expiration of applicable notice and grace
periods, if any, under any of the Loan Documents, or (iii) any other event
allowing Lender to declare the Notes immediately due and payable; to forbear
from exercising Lender's rights and remedies under the Loan Documents arising
out of or with respect to the Specified Deficit. Borrowers hereby agree and
acknowledge that this forbearance by Lender does not constitute a waiver of the
Specified Deficit or a waiver of Lender's right to assert and enforce its rights
and remedies with respect to any default under the Loan Documents which may
already have occurred (other than the Specified Deficit) or which may occur in
the future. Borrowers further agree that, upon the occurrence of a default under
any of the Loan Documents (other than the Specified Deficit), Lender may
exercise any of its rights and remedies with respect to such default as well as
with respect to the Specified Deficit.
2. Representations and Warranties. ADS, PCD, The Pellkofer Family
Trust, Xxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxxx, The Xxxxxxx Family Trust and
Xxxxxx X. Xxxxxxx, D.D.S., jointly and severally, represent and warrant to
Lender, and agree with Lender, as follows:
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(a) Defaults. Except for the Specified Deficit and the
"Specified Deficit" as defined in the Forbearance Agreement entered
into on the date hereof by and among SafeGuard Enterprises, Inc., ADS
and the Shareholders, no event, omission, breach or failure of
condition has occurred that is a default or, with the giving of notice
or the passage of time or both, would constitute a default under any
Loan Document.
(b) Authority and Enforceability. Borrowers have all requisite
power and authority to execute, deliver and perform their obligations
under this Agreement, and this Agreement is a valid and binding
obligation of Borrowers. The Pellkofer Family Trust, Xxxx X. Xxxxxxxxx,
The Xxxxxxx Family Trust and Xxxxxx X. Xxxxxxx, D.D.S. are the sole
shareholders of ADS. ADS is the sole shareholder of PCD. Xxxxx X.
Xxxxxxxxx represents and warrants that he has been duly authorized to
enter into this Agreement on behalf of ADS, The Pellkofer Family Trust
and Xxxx X. Xxxxxxxxx and has full and complete authority to do so.
Xxxxxx X. Xxxxxxx, D.D.S. represents and warrants that he has been duly
authorized to enter into this Agreement on behalf of PCD and The
Xxxxxxx Family Trust, and has full and complete authority to do so.
(c) Power of Sale. Borrowers have all requisite power and
authority to execute, deliver and perform their obligations under
agreements to sell the Businesses.
(d) Obligations. As of January 1, 1999, (i) the amounts of the
unpaid principal plus accrued interest balances are $4,500,000 for the
ADS Note (plus accrued interest), $3,500,000 for the PCD Note (plus
accrued interest), $15,000,000 for the ADS/PCD Note (plus accrued
interest), $1,060,324.50 for the Glendale Note, $134,558.40 for the
Equipment Note, $636,750.25 for the Rancho Cucamonga Note, $674,997.06
for the Kearny Mesa Note, and $335,000 for the Xxxxxx Valley Note,
and the total unpaid principal balance on the Notes is $25,841,630.21;
and (iii) each and all of such amounts are payable to Lender.
(e) No Conflicts. The execution and delivery of, and the
performance of Borrowers' obligations under, this Agreement do not (i)
require the consent of, or filing of any document with, any individual,
entity, court, governmental agency or other person in order to be
binding on Borrowers; (ii) violate any law, regulation, order or decree
applicable to ADS or PCD; or (iii) conflict with the terms of any deed
of trust, lease, loan, credit agreement, articles of incorporation,
bylaws or other agreement or instrument to which ADS, PCD or any
Affiliate of ADS or PCD is a party or by which they, any of their
Affiliates or the collateral described in the Notes (the "PROPERTY")
may be bound or affected. The term "AFFILIATE" means any person or
entity which controls, is controlled by, or is under common control
with, a specified person or entity.
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3. Sale of Businesses. In consideration of Lender's agreement to
forbear temporarily from exercising its rights and remedies with respect to the
Specified Deficit on the terms and conditions set forth in this Agreement, ADS,
PCD, the Shareholders and Lender agree to cooperate with each other in an effort
to market and sell the Businesses as follows:
(a) Trenwith Securities, Inc., as agent for and acting under
authority granted by Lender ("AGENT"), shall control the marketing of
the Businesses for sale to one or more third parties. Borrowers shall
cooperate with Lender in the marketing and sale of the Businesses by,
among other things, (i) sharing financial and other information
pertaining to the Businesses (ii) providing access to facilities of the
Businesses, and (iii) referring all interested parties to Agent rather
than showing the Businesses for sale independently. Lender shall
cooperate with Borrowers by, among other things, sharing information
about the progress of any sale efforts and the terms of any offers that
are submitted.
(b) Lender shall have sole authority to negotiate and
determine the terms of the transaction in which the Businesses are
sold, including, but not limited to, the sales price and the structure
of the sales transaction. Lender may accept or reject any offer and
Lender may or may not agree to sell the Businesses during the term of
this Agreement. Borrowers shall not enter into any transaction for the
sale of the Businesses which has not been approved by Lender and any
attempt to do so shall constitute a default under this Agreement. As a
condition to Lender entering into this Agreement, ADS, PCD and the
Shareholders shall execute an irrevocable power of attorney in favor of
Lender in the form attached hereto as Exhibit A.
(c) Notwithstanding subsection (b) above, any final sales
transaction must (i) provide for the sale of either all the issued and
outstanding stock of ADS and PCD or the sale of all or substantially
all of the assets of ADS and PCD, and (ii) provide for the payment or
assumption of all of the outstanding trade payables, payroll and
payroll taxes of the Businesses.
(d) The current management teams of ADS and PCD shall retain
control over the day to day operations and management of the
Businesses. However, failure to operate the Businesses in the ordinary
course shall constitute a default under this Agreement. In particular
but without limitation, any increases in salaries, distributions to the
Shareholders or transactions between ADS or PCD and the Shareholders or
their Affiliates shall constitute a default under this Agreement.
(e) The Shareholders acknowledge and agree that they will make
commercially reasonable representations and warranties to the
purchaser(s) of the Businesses in their individual capacities.
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(f) Proceeds from any sale of the Businesses pursuant to this
Agreement shall be divided as follows:
(i) The Shareholders shall receive a minimum of
$500,000 in cash at the time of closing, regardless of the
final sales price for the Businesses. Allocation among the
Shareholders of funds payable to the Shareholders under this
Agreement shall be pursuant to their respective shareholdings.
(ii) Additional proceeds shall be payable to the
Shareholders in cash at the time of closing based upon the
average of the following two formulas: (A) 7.5% of the Net
Sales Proceeds (as defined below) under $10 million plus 15%
of the Net Sales Proceeds over $10 million; and (B) a minimum
payment of $500,000 for any Net Sales Proceeds under $10
million plus 12.5% of any Net Sales Proceeds over $10 million.
Amounts payable to the Shareholders at various assumed amounts
of Net Sales Proceeds under the foregoing formula are
illustrated in the chart below.
AMOUNT PAYABLE
NET SALES PROCEEDS TO SHAREHOLDER
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$15,000,000 $1,312,500
14,000,000 1,175,000
13,000,000 1,037,500
12,000,000 900,000
11,000,000 762,500
10,000,000 625,000
9,000,000 587,500
8,000,000 550,000
7,000,000 512,500
6,000,000 500,000
5,000,000 500,000
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(iii) All Net Sales Proceeds not payable to the
Shareholders pursuant to this Agreement shall be payable to
Lender. The term "NET SALES PROCEEDS" means the gross sale
price of the Businesses, less the direct costs of the sale
(commissions to Agent, escrow fees, attorneys' fees... etc.),
less any of the Businesses' gross liabilities (other than
liabilities owing to Lender or its Affiliates), paid either
(i) by Lender or (ii) by the purchaser of the Businesses where
payment or assumption of such liabilities by the purchaser
reduces the amount of the gross sale price available for
distribution to Lender, less all costs and expenses incurred
by Lender in connection with: (1) the preparation of this
Agreement and any and all other sales agreements contemplated
hereby; (2) the administration of this Agreement and the other
sales agreements; and (3) the enforcement or satisfaction by
Lender of any of Borrowers' obligations under this Agreement
or any sales agreement. For all purposes of this Agreement,
Lender's costs and expenses shall include, without limitation,
all appraisal fees, legal fees, accounting fees and auditor
fees.
(iv) On the closing date of the sale of the
Businesses, an amount equal to the lesser of (i) 25% of the
total proceeds payable to the Shareholders or (ii) $250,000
shall be held back from distribution to the Shareholders and
placed into an interest bearing escrow account for a period of
six months to cover any claims made under the representations,
warranties or guaranties of Borrowers or Shareholders which
Lender or its Affiliates pays within six months of the closing
date. The amount of escrowed funds needed to cover any claim
of Lender will be released to the Lender upon proof of payment
of the liability. If Lender has made no claims by the date
three months from the closing date of the sale, one half of
the escrowed amount will be distributed to the Shareholders.
Any remaining escrowed funds will be distributed to the
Shareholders on the date six months from the closing date of
the sale.
(v) Commissions payable to Agent for the sale of the
Businesses are (i) $250,000 of the Transaction Value, as
defined in the Agreement between SafeGuard Health Enterprises,
Inc. and Agent, up to $10 million, plus (ii) two and one half
percent (2.5%) per million thereafter.
4. Mutual Release.
(a) In consideration of Lender's agreements set forth herein,
Borrowers and Shareholders, for themselves, their Affiliates, and the
respective successors, heirs and assigns of each of the foregoing
(collectively, some or all of such persons and entities shall be
referred to herein as the "BORROWER RELEASORS" and each reference to a
"BORROWER RELEASOR" herein shall refer to each such person or entity
individually), do hereby fully, forever
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and irrevocably release, discharge and acquit Lender, and its
respective past and present Affiliates, and the respective past and
present officers, directors, shareholders, agents, and employees of
each and all of the foregoing entities, and its and their respective
successors, heirs, and assigns, and any other person or entity now,
previously, or hereafter affiliated with any or all of the foregoing
entities (Lender, together with each and all said Affiliates, officers,
directors, shareholders, agents and employees shall be referred to
collectively hereinbelow as the "BORROWER RELEASED PARTIES" and each
such reference shall refer jointly and severally to each and all of
Lender and such other persons and entities) of and from any and all
rights, claims, demands, obligations, liabilities, indebtedness,
breaches of contract, breaches of duty or any relationship, acts,
omissions, misfeasance, malfeasance, cause or causes of action, debts,
sums of money, accounts, compensations, contracts, controversies,
promises, damages, costs, losses and expenses of every type, kind,
nature, description or character, and irrespective of how, why, or by
reason of what facts, whether heretofore or now existing, or that
could, might, or may be claimed to exist, of whatever kind or name,
whether known or unknown, suspected or unsuspected, liquidated or
unliquidated, claimed or unclaimed, whether based on contract, tort,
breach of any duty, or other legal or equitable theory of recovery,
each as though fully set forth herein at length (collectively, a
"CLAIM" or the "CLAIMS") arising from or out of, connected with, or
relating to this Agreement, the transactions contemplated hereby, or
the administration hereof.
(b) In consideration of Borrowers' and Shareholders'
agreements set forth herein, Lender, for itself, its Affiliates, and
the respective successors, heirs and assigns of each of the foregoing
(collectively, some or all of such persons and entities shall be
referred to herein as the "LENDER RELEASORS" and each reference to a
"LENDER RELEASOR" herein shall refer to each such person or entity
individually), does hereby fully, forever and irrevocably release,
discharge and acquit Borrowers and Shareholders, and their respective
past and present Affiliates, and the respective past and present
officers, directors, shareholders, agents, and employees of each and
all of the foregoing entities, and their respective successors, heirs,
and assigns, and any other person or entity now, previously, or
hereafter affiliated with any or all of the foregoing entities
(Borrowers and Shareholders, together with each and all said
Affiliates, officers, directors, shareholders, agents and employees
shall be referred to collectively hereinbelow as the "LENDER RELEASED
PARTIES" and each such reference shall refer jointly and severally to
each and all of Borrowers, Shareholders and such other persons and
entities) of and from any and all Claims arising from or out of,
connected with, or relating to this Agreement, the transactions
contemplated hereby, or the administration hereof.
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(c) Borrower Releasors and Lender Releasors (together, the
"RELEASORS"), and each of them, irrevocably covenant and agree that
each of them shall forever refrain from initiating, filing,
instituting, maintaining, or proceeding upon, or encouraging, advising
or voluntarily assisting any other person or entity to initiate,
institute, maintain or proceed upon any Claim of any nature whatsoever
released in paragraphs 4(a) and 4(b) above.
(d) Releasors, and each of them, represent and warrant that
each of them is the owner of and has not assigned, sold, transferred,
or otherwise disposed of any of the Claims released in paragraphs 4(a)
and 4(b) above.
(e) Releasors, and each of them, represent and warrant that
each of them has the authority and capacity to execute this Agreement.
(f) Releasors, and each of them, for themselves, their
successors and their assigns, hereby agree, represent, and warrant that
the matters released herein are not limited to matters that are known
or disclosed, and Releasors, and each of them, hereby waive any and all
rights and benefits that they now have, or in the future may have,
conferred upon them by virtue of the provisions of Section 1542 of the
Civil Code of the State of California (or any other statute or common
law principles of similar effect), which Section provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE
RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.
In this connection,
(i) Borrower Releasors, and each of them, hereby
agree, represent, and warrant that they realize and
acknowledge that factual matters now unknown to them may have
given or may hereafter give rise to causes of action, claims,
demands, debts, controversies, damages, costs, losses, and
expenses that are presently unknown, unanticipated, and
unsuspected, and they further agree, represent, and warrant
that paragraphs 4(a)-(f) have been negotiated and agreed upon
in light of that realization and that they nevertheless hereby
intend to release, discharge and acquit the Borrower Released
Parties from any such unknown causes of action, claims,
demands, debts, controversies, damages, costs, losses, and
expenses that are in any way related to this Agreement, the
transactions contemplated hereby, or the administration
hereof; and
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(ii) Lender Releasors, and each of them, hereby
agree, represent, and warrant that they realize and
acknowledge that factual matters now unknown to them may have
given or may hereafter give rise to causes of action, claims,
demands, debts, controversies, damages, costs, losses, and
expenses that are presently unknown, unanticipated, and
unsuspected, and they further agree, represent, and warrant
that paragraphs 4(a)-(f) have been negotiated and agreed upon
in light of that realization and that they nevertheless hereby
intend to release, discharge and acquit the Lender Released
Parties from any such unknown causes of action, claims,
demands, debts, controversies, damages, costs, losses, and
expenses that are in any way related to this Agreement, the
transactions contemplated hereby, or the administration
hereof.
(g) The provisions of paragraphs 4(a)-(f) shall survive
payment in full of the Notes, termination of this Agreement, and full
performance of this Agreement and the other Loan Documents.
INITIAL:
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5. Waiver of Anti-Deficiency Protection. Borrowers hereby expressly and
irrevocably disclaim and renounce any right and hereby irrevocably waive any
defense, protection or right under: (a) California Code of Civil Procedure
("CCP") Section 580d concerning the bar against rendition of a deficiency
judgment after foreclosure under a power of sale; (b) CCP Section 580a
purporting to limit the amount of a deficiency judgment which may be obtained
following exercise of a power of sale under a deed of trust; (c) CCP Section 726
concerning exhaustion of collateral, the form of foreclosure proceedings with
respect to real property security located in California and otherwise limiting
the amount of a deficiency judgment which may be recovered following completion
of a judicial foreclosure by reference to the "fair value" of the foreclosure
collateral; and (d) any duty on the part of Lender to conduct a commercially
reasonable sale under California Uniform Commercial Code ("CUCC") Section
9504(3) to the extent any portion of the collateral for the obligations of
Borrowers to Lender consists of personal property or fixtures, including,
without limitation, the making of any election under CUCC Section 9501(4) in
respect of any such personal property or fixtures.
INITIAL:
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6. Non-Impairment. Except as expressly provided herein, nothing in this
Agreement shall alter or affect any provision, condition or covenant contained
in the Notes or in any other Loan Documents or affect and impair any rights,
powers or remedies of Lender, it being the intent of the parties hereto that the
provisions of the Notes and the other Loan Documents shall continue in full
force and effect except as expressly modified hereby. The breach of any
representation or warranty hereunder shall constitute a "DEFAULT" under the Loan
Documents.
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7. Miscellaneous. This Agreement and the other Loan Documents shall be
governed by and interpreted in accordance with the laws of the State of
California, unless and to the extent preempted by Federal law, in which case
this Agreement and the other Loan Documents shall be governed by and interpreted
in accordance with Federal law to such extent. In any action brought or arising
out of this Agreement or the Loan Documents, Borrowers, and the Affiliates of
Borrowers, hereby consent to the jurisdiction of any Federal or State Court
having proper venue within the State of California and also consent to the
service of process by any means authorized by California or Federal law. The
headings used in this Agreement are for convenience only and shall be
disregarded in interpreting the substantive provisions of this Agreement. Except
as expressly provided otherwise herein, all capitalized terms used herein shall
have the respective meanings given to them in the other Loan Documents. Time is
of the essence of each term of the Loan Documents, including this Agreement. The
parties and their attorneys have cooperated in drafting and preparing this
Agreement; consequently, the presumption that ambiguities are resolved against
the drafting party shall be inapplicable, and any such ambiguities shall not be
construed against any party. If any provision of this Agreement or any of the
other Loan Documents shall be determined by a court of competent jurisdiction to
be invalid, illegal or unenforceable, that portion shall be deemed severed from
this Agreement and the remaining parts shall remain in full force as though the
invalid, illegal, or unenforceable portion had never been a part thereof.
8. Knowing, Free, Voluntary Execution. The parties represent that they
have carefully read and understand each of the provisions in this Agreement,
know its contents, and have freely and voluntarily signed it.
9. Advice of Counsel. Each of the parties, by the execution of this
Agreement, represents that it has reviewed each term of this Agreement with its
legal counsel, and that hereafter it shall not deny the validity of the
Agreement on the grounds that it did not have advice of counsel.
10. Integration; Interpretation. This Agreement contains or expressly
incorporates by reference the entire agreement of the parties with respect to
the matters contemplated herein and supersedes all prior negotiations. Clerical
errors, if any, in computing dollar amounts relating to the Notes shall be
corrected as soon as practicable by a written addendum to this Agreement
executed by all the parties. This Agreement shall not be modified except by
written instrument executed by all parties. Any reference in this Agreement to
the Property shall include all or any part of the Property.
11. Authorization. Borrowers expressly waive any defense to this
Agreement based on any lack of authority to enter into and be bound by the terms
of this Agreement.
12. Execution in Counterpart. This Agreement may be executed in any
number of counterparts, each of which when executed and delivered will be deemed
to be an original and all of which, taken together, will be deemed to be one and
the same instrument.
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IN WITNESS WHEREOF, Borrowers, Shareholders and Lender have caused this
Agreement to be duly executed as of the date first above written.
"LENDER"
GUARDS DENTAL, INC.,
a California corporation
By:_________________________________
Its:________________________________
By:_________________________________
Its:________________________________
"BORROWERS"
ASSOCIATED DENTAL SERVICES, INC.
a California corporation
By: /s/ XXXXX X. XXXXXXXXX
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Xxxxx X. Xxxxxxxxx,
President
PACIFIC COAST DENTAL, INC.
a California corporation
By: /s/ XXXXXX X. XXXXXXX, D.D.S.
---------------------------------
Xxxxxx X. Xxxxxxx, D.D.S.,
President
"SHAREHOLDERS"
THE PELLKOFER FAMILY TRUST
By: /s/ XXXXX X. XXXXXXXXX
---------------------------------
Xxxxx X. Xxxxxxxxx,
Trustee
XXXX X. XXXXXXXXX
By: /s/ XXXXX X. XXXXXXXXX
---------------------------------
Xxxxx X. Xxxxxxxxx,
Attorney-in-fact
/s/ XXXXX X. XXXXXXXXX
---------------------------------
Xxxxx X. Xxxxxxxxx
THE XXXXXXX FAMILY TRUST
By: /s/ XXXXXX X. XXXXXXX, D.D.S.
---------------------------------
Xxxxxx X. Xxxxxxx, D.D.S.,
Trustee
/s/ XXXXXX X. XXXXXXX, D.D.S.
---------------------------------
Xxxxxx X. Xxxxxxx, D.D.S.
12
13
IRREVOCABLE POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS that in consideration of Guards Dental, Inc.
entering into that certain Default Forbearance Agreement dated as of February
12, 1999 by and among Guards Dental, Inc., Pacific Coast Dental, Inc.,
Associated Dental Services, Inc., The Pellkofer Family Trust, Xxxx X. Xxxxxxxxx,
Xxxxx X. Xxxxxxxxx, The Xxxxxxx Family Trust, and Xxxxxx X. Xxxxxxx, D.D.S. (the
"Forbearance Agreement") each of the undersigned hereby irrevocably constitutes
and appoints GUARDS DENTAL, INC. as the undersigned's true and lawful
attorney-in-fact and agent, with full power of substitution, for and in the
undersigned's name, place and stead, in any and all capacities, to execute and
deliver any and all agreements, notices, certificates and other documents
arising from and/or relating to the undersigneds' purpose of allowing Guards
Dental, Inc. to control a sale of the businesses of Pacific Coast Dental, Inc.
and Associated Dental Services, Inc. (the "Businesses"), including but not
limited to, the selling of the Businesses, setting of terms, hiring of agents,
marketing the Businesses, establishing a price and any and all other items
contemplated by the Forbearance Agreement to which this Irrevocable Power of
Attorney is attached as such attorney-in-fact, in its sole discretion, deems
advisable.
Each of the undersigned hereby grants to such attorney-in-fact full
power and authority to do and perform any and every act and thing whatsoever
requisite, necessary or proper to be done in the exercise of any of the rights
and powers herein granted, as fully to all intents and purposes as the
undersigned might or could do if personally present, hereby ratifying and
confirming all that such attorney-in-fact, or his substitute or substitutes,
shall lawfully do or cause to be done by virtue of this Irrevocable Power of
Attorney and the rights and powers herein granted; provided, however, that this
Irrevocable Power of Attorney does not grant to the attorney-in-fact authority
to agree to any individual or trust representations or warranties made by The
Pellkofer Family Trust, Xxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxxx, The Xxxxxxx
Family Trust, or Xxxxxx X. Xxxxxxx, D.D.S. in their individual or trust
capacities.
The rights, powers and authority of said attorney-in-fact to exercise
any and all of the rights and powers herein shall commence and be in full effect
on the date hereof and shall continue thereafter and shall only terminate and be
of no further force and effect as of the date of termination of the Forbearance
Agreement.
14
IN WITNESS WHEREOF, the undersigned have executed this Irrevocable
Power of Attorney as of this 12th day of February 1999.
PACIFIC COAST DENTAL, INC.
/s/ XXXXXX X. XXXXXXX, D.D.S.
---------------------------
Xxxxxx X. Xxxxxxx, D.D.S.,
President
ASSOCIATED DENTAL SERVICES, INC.
/s/ XXXXX X. XXXXXXXXX
----------------------------
Xxxxx X. Xxxxxxxxx, President
THE PELLKOFER FAMILY TRUST
/s/ XXXXX X. XXXXXXXXX
----------------------------
Xxxxx X. Xxxxxxxxx, Trustee
XXXX X. XXXXXXXXX
/s/ XXXXX X. XXXXXXXXX
----------------------------
Xxxxx X. Xxxxxxxxx,
Attorney-in-fact
/s/ XXXXX X. XXXXXXXXX
----------------------------
Xxxxx X. Xxxxxxxxx
THE XXXXXXX FAMILY TRUST
/s/ XXXXXX X. XXXXXXX, D.D.S
----------------------------
Xxxxxx X. Xxxxxxx, D.D.S.,
Trustee
/s/ XXXXXX X. XXXXXXX, D.D.S
----------------------------
Xxxxxx X. Xxxxxxx
2
