EXHIBIT 10.6
EXECUTION COPY
SENTINEL MANAGEMENT AGREEMENT
SENTINEL MANAGEMENT AGREEMENT, made as of May 15, 2003, by and between
Castle Dental Centers, Inc. (the "Company") and Sentinel Capital Partners,
L.L.C. (the "Consultant").
WHEREAS, the Company has retained and availed itself of Consultant,
and Consultant has performed for the Company and its subsidiaries and affiliates
(together with the Company, the "Company Group"), certain services in connection
with the transactions (the "Acquisition") contemplated by that certain Preferred
Stock and Subordinated Note Purchase Agreement, dated as of May 15, 2003, by and
among the Company and certain other parties thereto;
WHEREAS, the Company desires to retain and avail itself of the
Consultant, and the Consultant desires to perform for the Company and its
affiliates certain services; and
WHEREAS, the Consultant, by and through its officers, employees,
agents and affiliates, has developed, in connection with the conduct of their
businesses and affairs, expertise in the fields of management, finance,
marketing and strategic planning.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties do hereby agree as follows:
1. TERM. This Agreement shall remain in effect so long as Sentinel
Capital Partners II, L.P. owns capital stock of the Company or a successor
entity, unless the Company and the Consultant terminate this Agreement by mutual
agreement; provided that Sections 7 and 8 shall survive any termination of this
Agreement.
2. APPOINTMENT. The Company hereby retains the Consultant to render
management and consulting services to the Company (or to such subsidiaries of
the Company as the Company may from time to time request) during the Term as
herein contemplated.
3. CONSULTANT SERVICES. The Consultant hereby agrees that during the
term of this Agreement it shall render to the Company Group by and through such
of its officers, employees, agents, representatives and affiliates as the
Consultant, in its sole discretion, shall designate from time to time advisory
and consulting services in relation to the affairs of the Company Group in
connection with strategic financial planning, and other services not referred to
in the next sentence, including, without limitation, advisory and consulting
services relating to the selection, supervision and retention of independent
auditors, the selection, retention and supervision of outside legal counsel, and
the selection, retention and supervision of investment bankers or other
financial advisors or consultants. It is expressly agreed that the services to
be performed under this paragraph 3 shall not include financial advisory
services rendered by the Consultant to the Company Group in connection with
acquisitions and divestitures by the Company Group, hiring of executive
personnel, refinancings, initial public offerings, sales of stock by the Company
Group or "exit" transactions. In the event services contemplated by the
preceding sentence are requested by the Company, the Consultant may be entitled
to receive additional compensation.
4. CONSULTANTS' FEES. In consideration of the Consultant's agreement
to provide the above-described consulting services, the Company shall pay to the
Consultant a fee of $275,000 per annum (increasing to $300,000 per annum from
and after the date on which EBITDA (as defined in the Credit Agreement (the
"Credit Agreement") dated as of the date hereof by and among the Company and its
senior lenders) for the Company calculated on a trailing twelve month basis,
exceeds $10,000,000) for each year during the term of this Agreement, payable
quarterly in advance on the last business day of each February, May, August and
November beginning on May 30, 2003 (provided that on May 30, 2003, the Company
shall pay Consultant (i) for the period from the date hereof through May 31,
2003, and (ii) its quarterly fee for the quarter commencing June 1, 2003);
provided that if on any date on which the fee payable pursuant to this Section 4
is to be paid, Sentinel Capital Partners II, L.P. and/or its affiliates
(collectively, "Sentinel") holds less than 50% of the number of shares of the
Company's common stock, par value $.000001 per share ("Common Stock"), as
Sentinel holds on the date hereof, then the fee that would otherwise be payable
pursuant to this Section 4 on such date shall be prorated based upon the number
of shares of Common Stock held by Sentinel on such date versus the number of
shares of Common Stock held by Sentinel on the date hereof, provided that all
such determinations shall be made on a fully diluted as if converted basis with
appropriate adjustments made for stock splits, combinations, dividends and
similar transactions. Such fee shall be payable only to the extent such payment
is not prohibited by the terms of the Credit Agreement. In addition, the Company
agrees to reimburse the Consultant for any reasonable out-of-pocket expenses
incurred by it or its affiliates in connection with any services performed
hereunder, provided that this shall not include the salary and benefits provided
by Consultant and/or its affiliates to partners, employees and agents of
Consultant and/or its affiliates.
5. CLOSING PAYMENT. In consideration of the Consultant's provision of
services in connection with the Acquisition, upon the closing of the
Acquisition, the Company shall pay to the Consultant a fee of $485,000 and shall
reimburse Consultant for the out-of-pocket expenses incurred by it or its
affiliates in connection with the Acquisition.
6. PERSONNEL. Consultant shall provide and devote to the performance
of this Agreement such partners, employees and agents as Consultant shall deem
appropriate to the furnishing of the services required; provided, that if a
partner, employee or agent of the Consultant becomes an officer or an employee
of the Company Group, the Company may pay compensation to such partner, employee
or agent which shall not be deemed to be compensation to the Consultant
hereunder.
7. LIABILITY. Neither the Consultant nor any of its respective
affiliates, partners, employees or agents shall be liable to the Company or its
subsidiaries or affiliates for any loss, liability, damage or expense arising
out of or in connection with the performance of services contemplated by this
Agreement, unless such loss, liability, damage or expense shall be proven to
result directly from gross negligence, willful misconduct or bad faith on the
part of such Consultant, its affiliates, partners, employees or agents acting
within the scope of their employment or authority, in which event such
Consultant will be liable to the extent of its individual culpability as proven.
In no event will Consultant be liable for consequential or incidental damages
(including any damages for lost profits or opportunity).
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8. INDEMNITY. The Company Group shall defend, indemnify and hold
harmless the Consultant, its affiliates, partners, employees, agents, directors,
officers and controlling persons (collectively, the "Indemnified Parties") from
and against any and all loss, liability, damage or expense (including attorney
fees and expenses incurred in connection with the investigation, defense or
negotiation of a settlement thereof or otherwise) (collectively, "Losses")
arising from any claim (threatened or actual, just or unjust) (a "Claim") by any
person with respect to, or in any way related to the Acquisition (including
Sentinel Capital Partners II, L.P.'s investment in the Company), this Agreement
or the services (including, without limitation, the engagement of such
Consultant pursuant to this Agreement and the performance by such Consultant of
services pursuant to this Agreement) contemplated by this Agreement. The Company
Group shall, if requested by the Consultant, defend at its own cost and expense
such Claims with attorneys reasonably satisfactory to the Consultant (in which
case the Company shall consult with Consultant on all material decisions in
connection with such Claim and shall not settle any such Claim without the
consent of the Consultant, such consent not to be unreasonably withheld), and,
if not so requested, advance to the Indemnified Party the costs of such defense.
No Indemnified Party shall be entitled to indemnification for Losses under this
Section 8 to the extent it is proven that such Losses arose as the direct result
of gross negligence, bad faith or willful misconduct by such of the Indemnified
Parties; provided that if such determination is proven, the applicable
Indemnified Party(s) shall reimburse the Company for the costs of defense
advanced by the Company.
9. NOTICES. All notices hereunder shall be dated and in writing and
shall be deemed to have been given (i) when delivered, if delivered personally,
(ii) one day following the date sent, if sent by reputable overnight courier,
fee prepaid or (iii) upon receipt of confirmation, if sent by facsimile
transmission (with receipt confirmed and original sent by first class mail), to
the party to whom it is directed, at the applicable address or the facsimile
number set forth in the Company's records.
10. ASSIGNMENT. No party may assign any obligations hereunder to any
other party without the prior written consent of the other party; such consent
shall not be unreasonably withheld; provided, however, that the Consultant may
assign its rights and obligations under this Agreement to any of its affiliates
without the consent of any party. The assignor shall remain liable for the
performance of any assignee.
11. SUCCESSORS. This Agreement and all the obligations and benefits
hereunder shall inure to the successors and assigns of the parties.
12. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein,
the terms
and conditions of this document constitute the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersede and preempt any prior communications, understandings, warranties,
agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
13. AMENDMENT. No amendment or waiver of any provision of this
Agreement, nor consent to any departure by either party from any such provision,
shall in any event be effective unless the same shall be in writing and signed
by an authorized representative
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of each of the parties to this Agreement and then such amendment, waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
14. COUNTERPARTS. This Agreement may be executed and delivered by each
party hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original and all of which taken together shall
constitute but one and the same Agreement.
15. GOVERNING LAW. All provisions of this Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to any principles of conflicts of law or choice of law of
the State of New York or any other jurisdiction which would cause the
application of the law of any jurisdiction other than the State of New York.
* * * * *
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IN WITNESS WHEREOF, the parties have executed this Sentinel Management
Agreement as of the date first written above.
SENTINEL CAPITAL PARTNERS, L.L.C.
By:
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Name:
Title:
CASTLE DENTAL CENTERS, INC.
By:
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Name:
Title:
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