Exhibit 10.16
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into on July 19,
2002 (the "Effective Date"), by and between Xxxxx X. Xxxxx (the "Executive") and
Castle Dental Centers, Inc., a Delaware corporation (the "Company").
W I T N E S S E T H:
WHEREAS, The Company wishes to employ the Executive as President and Chief
Executive Officer, and the Executive wishes to be so employed by the Company,
all upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the promises and mutual covenants and
obligations herein set forth and for other good and valuable consideration, the
receipt, sufficiency and adequacy of which are hereby acknowledged, the parties
hereto hereby agree as follows, intending to be legally bound:
1. EMPLOYMENT AND TERM. The Company hereby employs the Executive to serve
as President and Chief Executive Officer. The term of this Agreement shall begin
on the Effective Date and shall terminate thirty-six (36) months from the
Effective Date, unless earlier terminated by either party hereto in accordance
with the provisions of Section 5 hereof. After the expiration of the initial
36-month term of this Agreement, the Executive's period of employment under this
Agreement shall be automatically renewed for successive one-year terms on each
anniversary of the Effective Date, unless written notice of non-renewal is
delivered by one party to the other at least 120 days before the end of any such
one-year renewal term. During the term of this Agreement, the terms of
employment shall be as set forth herein unless modified by the Executive and the
Company in accordance with the provisions of Section 10 hereof. The Executive
hereby agrees to accept such employment and to perform the services specified
herein, all upon the terms and conditions hereinafter set forth.
2. POSITION AND RESPONSIBILITIES. The Executive shall report to, and be
subject to the general direction and control of, the Board of Directors of the
Company. The Executive will be elected as a member of the Board of Directors of
the Company during the term of this Agreement so long as he is the Chief
Executive Officer of the Company, and the Executive shall also have the right to
participate in the nomination of the member of the Board of Directors not
designated by the holders of Series A-1 Convertible Preferred Stock of the
Company. The Executive shall have other obligations, duties, authority and power
to do all acts and things as are customarily done by a person holding the same
or equivalent position or performing duties similar to those to be performed by
executives in corporations of similar size to the Company and shall perform such
managerial duties and responsibilities for the Company which are not
inconsistent with the Executive's position as may reasonably be assigned to him
by the Board of Directors of the Company. Unless otherwise agreed to by the
Executive, the Executive shall be based at the Company's offices located in the
greater metropolitan area of Houston, Texas.
3. EXTENT OF SERVICE. The Executive shall devote his full business time
and attention to the business of the Company. During the term of this Agreement,
however, it shall not be a violation of this Agreement for the Executive to (a)
serve on any corporate board or committee thereof with the approval of the Board
of Directors, (b) serve on the board of directors of MetroOne
Telecommunications, (c) serve on any academic, university, civic or charitable
board of directors, (d) deliver lectures or make teaching or speaking
engagements, (e) testify as a witness in litigation involving a former employer,
or (f) manage personal investments, so long as such activities do not, taken
together, materially interfere with the performance of the Executive's
responsibilities under this Agreement.
4. COMPENSATION.
(a) Salary. In consideration of the services to be rendered by the
Executive to the Company, the Company will pay the Executive a salary ("Salary")
of $30,208 per month during the term of this Agreement. Such Salary will be
payable in accordance with the Company's customary payroll practices and shall
be subject to all applicable federal and state withholding, payroll and other
taxes. If the Company achieves the targets set forth in the 2002 Bank Plan
attached hereto as Exhibit A (the "Bank Plan"), the Executive's annual Salary
for 2003 will automatically be increased by the greater of $12,500 or an amount
determined by the Compensation Committee of the Company's Board of Directors
(the "Compensation Committee"). In addition, the amount of the Executive's
Salary may be increased from time to time during the term of this Agreement, by,
and at the sole discretion of, the Compensation Committee, which shall review
the Executive's Salary no less regularly than annually.
(b) Bonus. The Executive shall be eligible for an annual bonus of up
to 100% of Executive's annual Salary. A guaranteed bonus of $66,667 will be paid
to the Executive in 2002, with one-half ($33,333.50) payable at the end of the
pay period during which the restructuring of the Company's senior credit
agreement is completed (contemplated to take place in July 2002) and one-half
($33,333.50) payable at the end of the pay period during which the 2002 annual
audit is completed and delivered to the Company. The remaining $295,833 of
available bonus potential for 2002 will be discretionary and based on the
criteria approved by the Compensation Committee, which criteria shall be
determined within 30 days of such committee's formation; provided, however, that
if the Compensation Committee fails to determine such criteria within such
30-day period, the Executive shall be entitled to a bonus in the amount of
$205,208 if the Company achieves the targets set forth in the Bank Plan. Except
for the guaranteed bonus of $66,667 in 2002 and as set forth in the preceding
sentence, any bonus paid to the Executive shall be based on performance and
shall be payable at the sole discretion of the Compensation Committee.
(c) Expenses. During the term of this Agreement, the Company shall
pay or reimburse the Executive for all reasonable out-of-pocket expenses for
travel, meals, hotel accommodations, entertainment and the like incurred by him
in connection with the business of the Company upon submission by him of an
appropriate statement documenting such expenses as required by the Internal
Revenue Code of 1986, as amended (the "Code").
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(d) Relocation Expenses. In connection with the Executive's
relocation to Houston, Texas, the Company agrees to reimburse the Executive for
(i) all reasonable costs incurred by the Executive in moving his personal
belongings to Houston, (ii) a reasonable number of "house hunting" trips for the
Executive and his wife, (iii) a reasonable broker's fee for selling the
Executive's home in Austin, Texas, (iv) the points, if any, on a mortgage for a
new home in Houston and (v) the lost deposit of $8,000 on the vacation that the
Executive cancelled at the Company's request. In addition, if the Executive
suffers a capital loss on the sale of his current home in Austin (which was
purchased for $790,000), the Company, upon request, will loan the Executive up
to the amount of the capital loss at a market rate of interest. Any such loan
will be repaid to the Company by the Executive ratably over five years. Also, if
necessary, the Company will pay for temporary housing and related expenses
pending the Executive's relocation to Houston through December 31, 2002, unless
such date is extended by the Compensation Committee in its sole discretion. All
relocation expenses will be "grossed up" by the Company to compensate the
Executive for the payment of any federal income taxes on such expenses.
(e) Vacation. The Executive shall be entitled to 25 days of paid
vacation for each calendar year during the term of this Agreement, earned on an
accrual basis. Vacation shall start to accrue on the first day of each calendar
year. The Company shall pay the Executive for any accrued but unused portion of
vacation and any such unused portion of vacation shall not be carried forward to
the next year.
(f) Benefits. During the term of this Agreement, the Executive shall
be entitled to participate in and to receive all rights and benefits under any
bonus, stock option, equity incentive, pension, retirement, life, disability,
medical and dental, health and accident and profit sharing or deferred
compensation plans and such other plan or plans as may be implemented by the
Company during the term of this Agreement. The Company shall provide the
Executive with life insurance in an amount equal to the greater of (i) fifty
percent (50%) of the Executive's annual Salary and (ii) the amount to which the
Executive is entitled pursuant to the Company policy, if any, for its executive
employees. The Executive shall also be entitled to participate in and to receive
all rights and benefits under any plan or program adopted by the Company for any
other or group of other executive employees of the Company, including without
limitation, the rights and benefits under the directors' and officers' liability
insurance currently in place under the Company's insurance program for the
directors and officers of the Company, and any indemnification agreements
entered into by the Company with its officers and directors providing them with
indemnification from the Company for claims arising out of their service as
officers and directors of the Company.
(g) Stock Options. The Company shall promptly grant to the Executive
options to purchase approximately 4,600,000 shares of common stock of the
Company at fair market value on the date hereof pursuant to the terms of the
Company's 2002 Stock Option Plan and a stock option agreement to be entered into
in connection therewith by the Executive (the "Executive's Option Agreement").
Such options shall vest as follows: 20% on the date of grant,
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and 20% on each anniversary of the date of grant, until fully vested, unless
otherwise provided in the Executive's Option Agreement.
5. TERMINATION.
(a) Termination by Company; Discharge for Cause. The Company shall be
entitled to terminate this Agreement and the Executive's employment with the
Company at any time and for whatever reason, or at any time for "Cause" (as
defined below), by written notice to the Executive. Termination of the
Executive's employment by the Company shall constitute a termination for "Cause"
if such termination is for one or more of the following reasons: (i) the willful
failure or refusal of the Executive to render services to the Company in
accordance with his obligations under this Agreement, including, without
limitation, the failure or refusal of the Executive to comply with the work
rules, policies, procedures, and directives as established by the Board of
Directors and consistent with this Agreement if such failure or refusal
continues for a period of not less than 30 days after written notice outlining
the situation is given by the Company to the Executive; (ii) a determination by
the Board of Directors, made after reasonable inquiry (including an opportunity
for the Executive to be heard), that the Executive has committed an act of fraud
or embezzlement; (iii) a determination by the Board of Directors, made after
reasonable inquiry (including an opportunity for the Executive to be heard),
that the Executive has committed any other action with the intent to injure the
Company; (iv) the Executive having been convicted of a felony or a crime
involving moral turpitude; (v) a determination by the Board of Directors, made
after reasonable inquiry (including an opportunity for the Executive to be
heard), that the Executive has misappropriated the property of the Company; (vi)
a determination by the Board of Directors, made after reasonably inquiry
(including an opportunity for the Executive to be heard), that the Executive has
engaged in personal misconduct which has materially injured the Company,
including, without limitation, engaging in harassment or discrimination in
violation of the Company's policies; or (vii) the Executive having willfully
violated any law or regulation relating to the business of the Company which
results in material injury to the Company. In the event of the Executive's
termination by the Company for Cause hereunder, the Executive shall be entitled
to no severance or other termination benefits except for any unpaid Salary
accrued through the date of termination. A termination of this Agreement by the
Company without Cause pursuant to this Section 5(a) shall entitle the Executive
to the Severance Payment and other benefits specified in Section 5(f) hereof. In
addition, the parties acknowledge and agree that any election by the Company not
to extend the term of this Agreement pursuant to Section 1 shall not constitute
a termination of this Agreement or of the Executive's employment by the Company.
(b) Death. If the Executive dies during the term of this Agreement
and while in the employ of the Company, this Agreement shall automatically
terminate and the Company shall have no further obligation to the Executive or
his estate except that the Company shall pay to the Executive's estate that
portion of his Salary and benefits accrued through the date of death. All such
payments to the Executive's estate shall be made in the same manner and at the
same time as the Executive's Salary.
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(c) Disability. If during the term of this Agreement, the Executive
shall be prevented from performing his duties hereunder for either (i) a period
of 90 days or (ii) 150 days in any 12-month period by reason of disability, then
the Company, on 30 days prior written notice to the Executive, may terminate
this Agreement. For purposes of this Agreement, the Executive shall be deemed to
have become disabled when the Board of Directors of the Company, upon
verification by a physician designated by the Company, shall have determined
that the Executive has become physically or mentally unable (excluding
infrequent and temporary absences due to ordinary illness) to perform the
essential functions of his duties under this Agreement with or without
reasonable accommodation. In the event of a termination pursuant to this
paragraph (c), the Company shall be relieved of all its obligations under this
Agreement, except that the Company shall pay to the Executive or his estate in
the event of his subsequent death, that portion of the Executive's Salary and
benefits accrued through the date of such termination. All such payments to the
Executive or his estate shall be made in the same manner and at the same time as
his Salary and would have been paid to him had he not become disabled.
(d) Termination for Good Reason. The Executive shall be entitled to
terminate this Agreement and his employment with the Company at any time upon 30
days written notice to the Company for "Good Reason" (as defined below);
provided, however, that if the Company eliminates the reason for such
termination to the reasonable satisfaction of the Executive within such 30-day
period, the Executive shall not be entitled to terminate this Agreement and his
employment with the Company pursuant to this subsection (d). The Executive's
termination of employment shall be for "Good Reason" if such termination is a
result of any of the following events:
(i) the Executive is assigned any responsibilities or duties
materially inconsistent with his position, duties, responsibilities and status
with the Company as in effect at the date of this Agreement or as may be
assigned to the Executive pursuant to Section 2 hereof;
(ii) the Salary payable to the Executive pursuant to
Section 4(a) hereof in any year is reduced by an amount in excess of fifteen
percent (15%) of the previous year's Salary, unless the Executive has otherwise
agreed to such reduction;
(iii) there is (1) a failure by the Company or any successor to
the Company or its assets to continue to provide to the Executive any material
benefit, bonus, profit sharing, incentive, remuneration or compensation plan,
stock ownership or purchase plan, stock option plan, life insurance, disability
plan, pension plan or retirement plan in which the Executive was entitled to
participate in as at the date of this Agreement or subsequent thereto, and the
Company fails to provide a substitute therefor which is substantially similar to
the discontinued material benefit or plan, or (2) the taking by the Company of
any action that materially and adversely affects the Executive's participation
in or materially reduces his rights or benefits under or pursuant to any such
plan, but excluding any such action that is required by law;
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(iv) without Executive's consent, the Company requires the
executive to relocate to any city or community other than one within a 50 mile
radius of the greater metropolitan area of Houston, Texas, except for required
travel on the Company's business to an extent substantially consistent with the
Executive's business obligations under this Agreement;
(v) there is any material breach by the Company of any
provision of this Agreement; or
(vi) there is a Change of Control (as defined below) of the
Company.
For purposes hereof, the term "Change of Control" shall have the
meaning specified in the Option Agreement entered into by the Company and the
Executive as of the date hereof pursuant to the Company's 2002 Stock Option
Plan.
Upon the Executive's termination of this Agreement for Good Reason,
the Executive shall be entitled to the payments and other benefits specified in
Section 5(f) hereof.
(e) Voluntary Termination. Notwithstanding anything to the contrary
herein, the Executive shall be entitled to voluntarily terminate this Agreement
and his employment with the Company at his pleasure upon 30 days written notice
to such effect. In such event, the Executive shall not be entitled to any
further compensation other than any unpaid Salary and benefits accrued through
the last day worked. At the Company's option, the Company may pay to the
Executive the salary and benefits that the Executive would have received during
such 30 day period in lieu of requiring the Executive to remain in the
employment of the Company for such 30 day period.
(f) Termination Benefits Upon Involuntary Termination or Termination
for Good Reason. In the event that the Company terminates this Agreement and the
Executive's employment with the Company for any reason other than for Cause (as
defined in Section 5(a) hereof), death, disability (as defined in Section 5(c)
hereof), then the Company shall pay the Executive an amount (the "Severance
Payment") equal to one year's Salary plus the amount of bonus received by the
Executive related to the fiscal year immediately prior to the year in which such
termination occurs, payable over a 6-month period after such termination in
accordance with the Company's customary payroll practices. In the event that the
Executive terminates this Agreement and his employment with the Company for Good
Reason (as set forth in Section 5(d) hereof), then the Company shall pay the
Executive an amount (the "Good Reason Severance Payment") equal to one year's
Salary plus a portion of the bonus received by the Executive related to the
fiscal year immediately prior to the year in which such termination occurs which
is (1) proportionate to the number of days during such year that the Executive
was employed by the Company and (2) in no event less than fifty percent (50%) of
the preceding year's bonus, payable over a 6-month period after such termination
in accordance with the Company's customary payroll practices. In addition,
following any such termination, the Executive shall be entitled to the following
benefits (collectively, the "Additional Benefits");
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(i) continued coverage, at the Company's cost, under the
Company's group health plan for the applicable coverage period under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") but
only if Executive elects such COBRA continuation in accordance with the time
limits and in the applicable COBRA regulations; and
(ii) an amount equal to the sum of (A) any unreimbursed
expenses incurred by the Executive in the performance of his duties hereunder
through the date of termination, plus (B) any accrued and unused vacation time
or other unpaid benefits as of the date of termination.
The parties agree that, because there can be no exact measure of the
damages which would occur to the Executive as a result of termination of
employment, such payments contemplated in this Section 5(f) shall be deemed to
constitute liquidated damages and not a penalty and the Company agrees that the
Executive shall not be required to mitigate his damages. The Severance Payment
or the Good Reason Severance Payment, as the case may be, and the Additional
Benefits shall be paid in lieu of any amounts payable by reason of any severance
package or agreement offered or in effect by the Company, and shall be paid only
if the Executive executes a termination agreement releasing all legally waivable
claims arising from the Executive's employment.
(g) Survival. Notwithstanding the termination of this Agreement under
this Section 5, all provisions of this Agreement hereof which by their terms are
to be performed following the termination hereof shall survive such termination
and be continuing obligations.
6. COVENANTS OF THE EXECUTIVE.
(a) Confidential Information. The Executive shall not, without the
prior written consent of the Company (except as may be required in connection
with any judicial or administrative proceeding or inquiry), disclose to any
person, other than an officer or director of the Company or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive officer of the
Company, any confidential information obtained by him, before or after the date
hereof, while in the employ of the Company with respect to its business or
assets, including, but not limited to, confidential information relating to the
technology, properties, accounts, books, records, suppliers, trade secrets and
contracts of the Company (collectively, the "Confidential Information");
provided, however, that Confidential Information shall not include any
information known or available to the public (other than as a result of
unauthorized disclosure by the Executive).
(b) Covenant Not to Compete. The Executive acknowledges that he has
been and will continue to be provided with Confidential Information in the
course of his employment with the Company. The Executive agrees that in order to
protect the Company's Confidential Information, it is necessary to enter into
the following restrictive covenant, which is ancillary to the enforceable
promises between the Company and the Executive in Section 6(a) of this
Agreement. The Executive covenants that the Executive shall, during the term of
this Agreement
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and for a period of one (1) year following the termination of the Executive's
employment hereunder for whatever reason, observe the following separate and
independent covenants:
(i) Neither the Executive nor any Affiliate (as defined in
subsection (c) below) will, without the prior written consent of the Company,
within the Area (as defined in subsection (c) below), either directly or
indirectly, (1) become financially interested in a Competing Enterprise (as
defined in subsection (c) below) (other than as a holder of less than five
percent (5%) of the outstanding voting securities of any entity whose voting
securities are listed on a national securities exchange or quoted by the NASDAQ
Stock Market, including the OTC Bulletin Board or any comparable system), or (2)
engage in or be employed by any Competing Enterprise as a consultant, officer,
director, or executive or managerial employee.
(ii) Neither the Executive nor any Affiliate will, without the
prior written consent of the Company, either directly or indirectly, on
Executive's own behalf or in the service or on behalf of others, solicit, divert
or appropriate, or attempt to solicit, divert, or appropriate, to any Competing
Enterprise, any person or entity whose account with the Company was serviced by
or under the Executive's direction or supervision during the term of this
Agreement.
(iii) Neither the Executive nor any Affiliate will, without the
Company's prior written consent, either directly or indirectly, on the
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or hire away, or attempt to solicit, divert, or hire away, to any
Competing Enterprise, any person employed by the Company, any of its
subsidiaries or any dental practices affiliated with the Company or any of its
subsidiaries through a long-term services agreement (collectively, the "Affected
Parties"), whether or not such employee is a full-time or a temporary employee
of any such Affected Party and whether or not such employment is pursuant to
written agreement and whether or not such employment is at will.
(c) The following terms used in Section 6(b) shall have the
definitions set forth below:
"Affiliate" means any person or entity directly or indirectly
controlling, controlled by, or under common control with the Executive. As used
herein, the word "control" means the power to direct the management and affairs
of a person.
"Area" means (i) any "Metropolitan Statistical Area" or "Primary
Metropolitan Statistical Area" (as each such term is defined by the Federal
Office of Management and Budget) in which the Company owns a dental center or
has a dental center under development and (ii) within 10 miles of any dental
center owned or under development by the Company that is not located in a
Metropolitan Statistical Area or a Primary Metropolitan Statistical Area.
"Competing Enterprise" means any person or any business organization
of whatever form, engaged directly or indirectly within the Area in the business
of the Company or any of it subsidiaries or any other related business conducted
by the Company or any of its subsidiaries as of the time of the termination of
the Executive's employment by the Company.
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(d) The parties hereto agree that the Executive's breach of any
covenant contained in this Section 6 could result in substantial damage to the
Company which would be impossible to ascertain. By reason of that fact, the
Executive agrees that, in the event of such breach, the Company shall have the
right to enforce such provisions by injunctive or other relief in equity.
(e) The parties hereto agree that if at any time while the Executive
is subject to the provisions of Section 6(b), the Company breaches its
obligation, if any, to make any Severance Payment or Good Reason Severance
Payment to the Executive, and such breach is not cured within 10 days after
written notice to the Company from the Executive, then the Executive shall be
released from his obligations under Section 6(b).
7. PUT OPTION.
(a) The following terms used in this Section 7 and in Section 8 shall
have the definitions set forth below:
"Common Share Equivalents" means, at any given time, the sum of
(i) the number of Common Shares outstanding, plus (ii) the number of Common
Shares issuable upon the exercise of the Warrants at such time, plus (iii) the
maximum number of Common Shares issuable upon the exercise or conversion of all
other outstanding warrants, options and convertible securities of the Company
from time to time, without regard to whether such exercise or conversion is then
available.
"Common Shares" means shares of common stock of the Company, par value
$.001 per share.
"Fair Market Value Per Common Share" as at any determination date
shall mean:
(i) with respect to securities that are publicly traded, the average
of the daily closing prices of such security for twenty-one (21)
consecutive trading days ending on such date, or if such date is not a
trading day, on the trading day immediately before such date (as adjusted
for any stock dividend, split, combination or reclassification that took
effect during such 21-day trading period). The closing price for each day
shall be the last reported sale price or, in case no reported sale takes
place on such day, the average of the last closing bid and asked prices, in
either case on the Principal Market as reported by Bloomberg Financial
Markets ("Bloomberg"), or, if the Principal Market begins to operate on an
extended hours basis and does not designate the closing bid or asked
prices, then the last bid and asked price of such security prior to 4:00
p.m. New York Time (or such other time as the Principal Market publicly
announces is the official close of trading) as reported by Bloomberg, or,
if the foregoing do not apply, the last closing bid and asked prices of
such security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing bid
price is reported for such security by Bloomberg, the last closing trade
price of such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg,
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the average of the bid prices of any market makers for such security as
reported in the "pink sheets" by the National Quotation Bureau, Inc.; or
(ii) with respect to securities that are not publicly traded,
an amount determined by an Independent Appraiser equal to (i) the fair
market value of the common equity of the Company and its subsidiaries
divided by (ii) the Common Share Equivalents outstanding on such
determination date. In determining the fair market value of the Company and
its subsidiaries, the Independent Appraiser shall value the Company and
such subsidiaries as a going concern assuming the exercise of the Warrants,
and without taking into account any discount for minority interest, absence
of voting rights or lack of liquidity.
"Independent Appraiser" means a business appraiser or investment
banker of recognized regional standing (i) with experience in valuing companies
engaged in businesses similar to that of the Company, (ii) that has no
affiliation with the Company, the Executive or any of their respective
affiliates and (iii) that has been selected in accordance with Section 7(e).
"Note" means the senior subordinated convertible promissory note of
the Company in the original principal amount of $700,000 issued to the Executive
pursuant to the terms of the Note Purchase Agreement.
"Note Purchase Agreement" means that certain Senior Subordinated Note
and Warrant Purchase Agreement dated July 19, 2002 among the Company, the
Executive, Xxxxxx Financial, Inc. and Midwest Mezzanine Fund II, L.P.
"Put/Call Shares" means the Common Shares issued upon the conversion
of the Note and the exercise of the Warrants.
"Warrants" means those certain warrants to purchase Common Shares
issued to the Executive pursuant to the Note Purchase Agreement.
(b) If the Executive's employment is terminated by the Company
without Cause, or if the Executive terminates his employment with the Company
for Good Reason, the Executive shall have the option to require the Company to
(i) purchase the Note for an amount equal to the outstanding principal amount
thereof and all accrued interest thereon through the date of such purchase (such
amount, the "Note Put Price"), and (ii) redeem and purchase all of the Warrants
and Put/Call Shares held by the Executive (the "Put Option"), pursuant to the
terms of this Section 7. The purchase price for the Warrants and the Put/Call
Shares to be acquired by the Company shall be equal to the product of (A) the
Fair Market Value Per Common Share, calculated as of the date the Put Option
Notice (as defined below) with respect to such Put Option was given, and (B) the
number of Put/Call Shares for which the Put Option has been exercised (such
amount, the "Warrant Put Price," and together with the Note Put Price, the "Put
Price"). For purposes of this Section 7, the number of Put/Call Shares for which
the Put Option has been exercised is the number of Put/Call Shares included in
such Put Option plus (without duplication), the number of Common Shares then
issuable if the Warrants included in the Put Option were exercised for Common
Shares on the date for determining the Warrant Put Price.
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(c) The Executive may exercise the Put Option by delivering a written
notice to the Company to that effect at any time within 60 days after the
Executive's termination of employment without Cause or for Good Reason, as the
case may be (the "Put Option Notice"). The Company, in consultation with the
Executive, shall set the date for the closing of such Put Option (the "Sale
Date"), which shall not be more than 120 days after the date on which the Put
Option Notice was given. The Put Price shall be due and payable in full on the
Sale Date, and upon payment of the Put Price, the Executive shall transfer and
deliver to the Company (i) the Note and (ii) the certificate or certificates
representing the Warrants and the certificate of certificates representing the
Put/Call Shares, as the case may be, in each case together with all necessary
assignments and endorsements.
(d) The Company and the Executive acknowledge and agree that in order
for the Company to fulfill its obligation to purchase the Note, the Warrants and
the Put/Call Shares pursuant to this Section 7, the Company may need to obtain
approvals or consents required pursuant to any loan agreement or other
instrument or agreement to which the Company is then a party, enter into new or
additional financing arrangements, and eliminate any legal restriction or
limitation on its ability to consummate the Put Option. If the Put Option is
exercised, the Company agrees to use all commercially reasonable efforts (i) to
obtain any such required approval or consent under any such loan agreement or
other instrument or agreement, (ii) obtain all financing as may be necessary to
provide funds to pay the Put Price, and (iii) eliminate any legal restriction or
limitation on the Company's ability to repurchase the securities hereunder. If
the Put Option is exercised and the Put Price is not paid in full on the Sale
Date, then such Put Option may be terminated by the Executive and the securities
that were the subject of such Put Option may be the subject of a subsequent Put
Option. The Executive acknowledges and agrees that this is the sole remedy for
the Company's failure to pay the Put Price in full on the Sale Date.
(e) The Independent Appraiser determining Fair Market Value Per
Common Share in connection with the exercise of a Put Option shall be selected
within 5 days of the date of the Put Option Notice by mutual agreement of the
Company and the Executive. The cost of any appraisal utilized in calculating the
Warrant Put Price shall be borne by the Company. A copy of all appraisal reports
issued by the Independent Appraiser shall be delivered to the Executive on or
prior to the 90th day after the Put Option Notice was given.
(f) The closing of the Put Option shall take place at the principal
office of the Company or such other place as may be mutually agreed to by the
Executive and the Company. The Put Price shall be paid by cashier's or certified
check or by wire transfer at closing.
8. CALL OPTION.
(a) Upon the termination of the Executive's employment with the
Company for any reason, the Company shall have the right, but not the
obligation, to (i) purchase the Note for an amount equal to the outstanding
principal amount and all accrued interest thereon through the date of such
purchase (the "Note Call Price"), and (ii) redeem and purchase all of the
Warrants and Put/Call Shares held by the Executive (such right, the "Call
Option"), pursuant to
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the terms of this Section 8. The purchase price for the Warrants and the
Put/Call Shares to be acquired by the Company shall be either (A) an amount
equal to the product of (x) the Fair Market Value Per Common Share, calculated
as of the date the Call Notice (as defined below) with respect to such Call
Option was given, and (y) the number of Put/Call Shares for which the Call
Option has been exercised, in the event the Executive's employment with the
Company is terminated due to the Executive's death or disability, termination by
the Company without Cause or termination by the Executive for Good Reason, or
(B) an amount equal to the par value of the Common Shares multiplied by the
number of Put/Call Shares for which the Call Option has been exercised, in the
event the Executive's employment with the Company is terminated for Cause or the
Executive voluntarily terminates his employment with the Company (in each case,
the "Warrant Call Price," and collectively with the Note Call Price, the "Call
Price"). For purposes of this Section 8, the number of Put/Call Shares for which
the Call Option has been exercised is the number of Put/Call Shares included in
such Call Option plus (without duplication), the number of Common Shares then
issuable if the Warrants included in the Call Option were exercised for Common
Shares on the date for determining the Warrant Call Price.
(b) The Company may exercise the Call Option by delivering written
notice to the Executive (the "Call Notice") stating that the Company is
exercising its Call Option, the Call Price to be paid (including supporting
information and schedules to verify such calculation), and the date and time for
the closing of the Call Option, which shall not be more than 120 days after the
date on which the Executive receives the Call Notice. The closing of the Call
Option shall take place at the principal office of the Company or such other
place as may be mutually agreed by the Executive and the Company. The Call Price
shall be due and payable in full on the date of the closing of the Call Option,
and upon payment of the Call Price, the Executive shall transfer and deliver to
the Company (i) the Note and (ii) the certificate or certificates representing
the Warrants and the certificate or certificates representing the Put/Call
Shares, as the case may be, in each case together with all necessary assignments
and endorsements. The Call Price shall be paid by cashier's or certified check
or by wire transfer at closing.
9. CONSENT AND WAIVER BY THIRD PARTIES. The Executive hereby represents
and warrants that he has obtained all necessary waivers and/or consents from
third parties as to enable him to accept employment with the Company on the
terms and conditions set forth herein and to execute and perform this Agreement
without being in conflict with any other agreement, obligations or understanding
with any such third party.
10. NOTICES. All notices, requests, consents and other communications
under this Agreement shall be in writing and shall be delivered personally or
mailed, certified or registered mail, return receipt requested, postage prepaid
or delivered by commercial overnight courier service, charges prepaid to the
following addresses, or such other addresses as shall be given by notice
delivered hereunder, and shall be deemed to have been given upon delivery, if
delivered personally, three business days after mailing, if mailed, or one
business day after delivery to the overnight courier service, if delivered by
overnight courier service:
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If to the Executive: Xxxxx X. Xxxxx
X.X. Xxx 000000
Xxxxxxx, Xxxxx 00000-0000
If to the Company: Castle Dental Centers, Inc.
0000 Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: Chairman, Compensation Committee
Either party hereto may designate a different address by providing written
notice of such new address to the other party hereto.
11. REMEDIES. Nothing contained in this Agreement shall be construed as
prohibiting any party from pursuing any other remedies available to it for any
breach or threatened breach, including, without limitation, the recovery of
money damages. These covenants and disclosures shall each be construed as
independent of any other provisions in this Agreement, and the existence of any
claim or cause of action by the Executive against the Company, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of such covenants and agreements.
12. WAIVERS AND MODIFICATIONS. This Agreement may be modified, and the
rights and remedies of any provision hereof may be waived, only in accordance
with this Section 12. No modification or waiver by the Company shall be
effective without the consent of at least a majority of the Compensation
Committee of the Board of Directors then in office at the time of such
modification or waiver. No waiver by either party of any breach by the other or
any provision hereof shall be deemed to be a waiver of any later or other breach
thereof or as a waiver of any other provision of this Agreement. This Agreement
supersedes all prior agreements between the Executive and the Company and sets
forth all the terms of the understandings between the parties with reference to
the subject matter set forth herein and may not be waived, changed, discharged
or terminated orally or by any course of dealing between the parties, but only
by an instrument in writing signed by the party against whom any waiver, change,
discharge or termination is sought.
13. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Texas and shall be binding upon and enforceable
against the Executive's heirs and legal representatives.
14. SEVERABILITY. In case of one or more of the provisions contained in
this Agreement for any reason shall be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been a part of this Agreement. Notwithstanding the foregoing, however, if for
any reason any provision containing restrictions set forth herein is held to
cover an area or to be for a length of time which is unreasonable, or in any
other way is construed to be too broad or to any extent invalid, any such
provision shall not be determined to be null, void and of no effect, but to the
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extent the same is or would be valid or enforceable under applicable law, any
court of competent jurisdiction shall construe and interpret or reform this
Agreement to provide for a restriction having the maximum enforceable area, time
period and other provisions (not greater than those contained herein) as shall
be valid and enforceable under applicable law.
15. ASSIGNMENT; REPRESENTATIONS. This Agreement shall be binding upon and
inure to the benefit of the Company, its successors, legal representatives and
assigns and upon the Executive, his heirs, executors, administrators, and
representatives. Any reference to the Company herein shall mean the Company as
well as any successors thereto. The Company represents that it has all corporate
power and authority necessary to enter into this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized, executed and
delivered by the Company.
[Signature page follows]
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IN WITNESS WHEREOF, each of the parties hereto has executed this Employment
Agreement as of the date and year first above written.
COMPANY:
CASTLE DENTAL CENTERS, INC.
By: /s/ Xxxx X. Xxxxx
---------------------------------
Name: Xxxx X. Xxxxx
--------------------------------
Title: Secretary
------------------------------
EXECUTIVE:
By: /s/ Xxxxx X. Xxxxx
---------------------------------
Xxxxx X. Xxxxx
