EXHIBIT 99.2
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT ("Agreement") is entered into as of March
30, 1998, by and between Castle Dental Centers of California, L.L.C., a Delaware
limited liability company (the "Company"), and Castle West Holdings, LLC, a
California limited liability company ("Manager").
WHEREAS, on January 30, 1998, Castle Dental Centers, Inc., a
Delaware corporation ("Castle"), the Company, CDC of California, Inc., a
Delaware corporation ("CDC"), Dental Consulting Services, LLC, a California
limited liability company ("DCS"), Manager and each of the other parties listed
on Schedule A thereto entered in that certain Master Contribution and
Combination Agreement (as amended February 27, 1998 and March 16, 1998, the
"Combination Agreement");
WHEREAS, Section 6.1 of the Combination Agreement requires the
Company and Manager to enter into a management agreement pursuant to which
Manager shall provide day-to-day management of the business and operations of
the Company;
WHEREAS, the Company desires that Manager provide day-to-day
management services to the Company upon the terms set forth herein; and
WHEREAS, Manager desires to provide day-to-day management services
the Company upon the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements contained herein, the parties hereto agree
as follows:
1. DUTIES. Subject at all times to the control and direction of the
Company, Manager shall serve as the day-to-day manager of the Company pursuant
to the terms of this Agreement. Unless the Company's Limited Liability Company
Agreement (the "Limited Liability Company Agreement") provides otherwise,
control and direction shall be implemented through the Board of Directors of the
Company (the "Board"). In its capacity as manager, Manager shall do and perform
for the Company in the Territory (as defined in the Combination Agreement)
services that are substantially similar to the services previously performed by
the managers and members of DCS for DCS in connection with the management of
DCS' business as it was conducted prior to its transfer to the Company pursuant
to the Combination Agreement, such services as modified from time to time by the
Company or business necessities. Manager's determination of what services are
necessary or required for the operation or conduct of the business of the
Company shall at all times be subject to the review of the Company. Manager
shall periodically report to the Board, as requested by the Board, with respect
to the performance of its obligations under this Agreement.
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2. TERM AND TERMINATION.
(a) The Agreement shall commence on the Closing Date (as defined in
the Combination Agreement), shall initially be for a term of two (2) years and
shall be renewed automatically for successive terms of one (1) year each, unless
at least one hundred eighty (180) days before the expiration of the initial term
or any renewal term, as applicable, either party gives written notice to the
other of its intention not to renew the Agreement.
(b) The Company may terminate this Agreement, prior to the
expiration of its term, if Manager fails to perform its material obligations
under this Agreement after being provided written notice of the failure and
given a reasonable opportunity to cure such failure. Manager may terminate this
Agreement, prior to the expiration of its term, if the Company fails to perform
its material obligations under this Agreement after being provided written
notice of the failure and given a reasonable opportunity to cure such failure.
(c) Either party may terminate this Agreement prior to the
expiration of its term (i) within ten days of consummation of the C Merger,
pursuant to CDC's exercise of CDC's Call Option (as defined in the Combination
Agreement), or (ii) within ten days of the consummation of the C Merger,
pursuant to one or more Corporate C Member's Merger Option (as defined in the
Combination Agreement), that results in there being no Corporate C Members in
existence.
3. COMPENSATION. As compensation for its time and efforts, the Company
shall pay Manager as follows:
(a) The Company shall pay Manager $160,000 per year, along with an
additional $100,000 per year that may be utilized in connection with the payment
of consultants of Manager, in cash ( collectively the "Base Compensation"). The
Base Compensation shall be payable in monthly installments due on the fifteenth
day of each month. The Base Compensation shall be reviewed on an annual basis
and increased, as determined by the Board in the exercise of its reasonable
discretion, in accordance with the policies of Castle as if the agents of
Manager performing services for the Company were employees of Castle holding
similar senior management positions.
(b) The Company shall pay Manager a management fee equal to five
percent (5%) of the gross revenue derived from the management of "CDC Approved
Expansions." For purposes of this Agreement, a "CDC Approved Expansion" shall
mean any and all expansions, acquisitions or other opportunities that are
approved by the Board if none of the Class C Interest Directors affirmatively
voted to approve such expansion, acquisition or other opportunity.
(c) The Company shall pay the Manager the Incentive Payment
described in Section 6.3 of the Combination Agreement, in accordance with the
terms set forth in the Combination Agreement
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4. BENEFITS. The Company shall either provide, or reimburse Manager for
the cost of providing, to Manager's employees and direct and indirect owners,
including without limitation, the individuals who are ultimately the owners of
the members of the Manager, and Xxxxxxx Xxxxx, a consultant to Brownstone
Holdings (which is a consultant to Dental Advisory Group, LLC, a Delaware
limited liability company, which is a consultant to Manager), employee benefits,
programs and plans substantially the same, in the aggregate, as that provided by
Castle to its senior management executives, from time to time in effect,
including, without limitation, health, life, disability and dental insurance,
qualified and non-qualified retirement plan benefits, stock options granted
pursuant to the Castle Dental Centers, Inc. Omnibus Stock and Incentive Plan
dated January, 1996, or successors thereto, subject to a determination of
eligibility in accordance with the respective terms of such plans (it being
understood that one eligibility requirement is that the person will also have to
be an employee of the Company), and business and entertainment allowances
approved by the Board.
5. EXPENSES. Manager shall submit a cost and expense budget as soon as
practicable after the signing of this Agreement, and thereafter upon the request
of the Board. If a budget is approved by the Board, costs and expenses incurred
by Manager in the performance of its duties or obligations under this Agreement
shall be paid for or promptly reimbursed by the Company in accordance with the
budget and upon submission of receipts in accordance with the Company's
policies. In the absence of a budget for any particular period, Manager shall
not be in breach of this Agreement if the carrying out of its obligations under
this Agreement requires it to expend its own funds and it decides, in its sole
and absolute discretion, not to expend such funds. Should the Manager
nonetheless decide to expend its funds without an approved budget in place, the
Manager shall be reimbursed for costs and expenses incurred in the performance
of its duties or obligations under this Agreement in accordance with the
Company's past practices.
6. LIMITATION ON AUTHORITY. Without the express written consent of the
Company, Manager shall not have any authority to enter into, execute or deliver
any contract, agreement or other instrument in the name or on behalf of the
Company, and nothing herein contained shall authorize or empower or require
Manager to assume or create any obligation, liability or responsibility
whatsoever, express or implied, on behalf of or in the name of the Company, or
to bind the Company in any manner. The officers, directors or members of the
Manager may serve, if appointed by the Board, as officers of the Company, and as
such shall act in accordance with policies established by the Board.
7. RELATIONSHIP BETWEEN PARTIES. Manager has been retained by the Company
only for the purposes and to the extent set forth in this Agreement, and its
relationship to the Company shall be that of an independent contractor.
8. TAXES. No party to this Agreement shall be obligated to pay any income
tax, excise tax, unemployment insurance tax or any other similar tax or charge,
including, without limitation, workers' compensation, that may be payable by or
chargeable to any other party hereto under any present or future laws of the
State of California, the United States or any other governmental agency or
authority. Each party shall withhold all such taxes with respect to its
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employees (and other agents to the extent it is required by law) and shall
indemnify and hold harmless the other party from any claim resulting from the
non-payment thereof.
9. RESOLUTION OF DISPUTES. All disputes among the parties arising out of
or related to this Agreement or breach thereof shall be resolved by binding
arbitration before a qualified, impartial arbitrator, selected in accordance
with this Section, in Los Angeles County, California. Within twenty (20) days of
receiving written demand for arbitration, the parties involved in the dispute
shall attempt to reach agreement upon the selection of a qualified impartial
arbitrator with at least five years of experience in arbitrating commercial
contract disputes. If the parties cannot agree upon an arbitrator within twenty
(20) days from the date written demand for arbitration is given, the party
demanding arbitration may commence an action for the limited purpose of
obtaining appointment of a qualified, impartial arbitrator by the presiding
judge of the Superior Court of the State of California for the County of Los
Angeles. Any arbitration shall be conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, although the
arbitration need not be conducted under the auspices of the Association. The
arbitrator shall have the discretion to order a prehearing exchange of
information by the parties, including without limitation, production of
requested documents, exchange of summaries of testimony of proposed witnesses,
and examination by deposition. The arbitration shall commence within sixty (60)
days of the appointment of the arbitrator, unless the arbitrator extends the
commencement date upon motion and a finding that a party's case could be
materially adversely affected without an extension of time. The arbitrator shall
render its decision within thirty (30) days after the conclusion of the
arbitration hearing, and the decision shall be final and binding. Either party
may appeal the decision; provided however, that the decision of the arbitrator
may be reversed only if the award contains material errors of applicable law or
if the award is arbitrary or capricious. The arbitration decision shall be in
writing and shall specify the factual and legal bases for the award. The
arbitrator shall have the authority to award any remedy or relief that a
California court could order or grant, including without limitation, interim
relief, specific performance and injunctive relief. However, the arbitrator
shall have no authority to award punitive damages.
10. DAMAGES.
(a) If this Agreement is terminated pursuant to Section 2(b) prior
to it being terminated pursuant to Section 2(c), the non-breaching party may
seek damages. If Manager's termination of this Agreement occurs as a result of
the Company's breach, as provided in Section 2(b), the parties agree that
damages shall consist of an amount equal to all compensation that would have
been due to Manager under this Agreement for the remainder of the term (which
shall include the remainder of any renewal term if the term has been renewed in
accordance with Section 2(a)), including without limitation the Base
Compensation and the Incentive Payment, and the Corporate B Members' Merger
Option (as defined in the Combination Agreement) and the Corporate C Members'
Merger Option (as defined in the Combination Agreement) shall become exercisable
in accordance with the terms of the Combination Agreement. If the Company's
termination of this Agreement occurs as a result of Manager's breach, as
provided in Section 2(b), the parties agree that damages shall consist of an
amount equal to the Base Compensation that would have been paid to Manager under
this Agreement for the remainder of the term (which
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shall include the remainder of any renewal term if the term has been renewed in
accordance with Section 2(a)), and CDC's Option to cause a B Merger (as
described in the Combination Agreement) and CDC's Call Option (as defined in the
Combination Agreement) shall become exercisable in accordance with the terms of
the Combination Agreement.
(b) If this Agreement is terminated pursuant to Section 2(c) prior
to it being terminated pursuant to Section 2(b), any compensation due Manager,
including without limitation the Incentive Payment, shall be calculated based on
the entire year and then prorated based on the number of days in the year prior
to termination. Any amounts due shall be payable at such times as they would
otherwise have been paid in accordance with this Agreement or the Combination
Agreement.
11. ATTORNEYS' FEES. Should any party hereto institute any action or
proceeding in arbitration to enforce any provision hereof, including any action
for declaratory relief or for damages by reason of an alleged breach of any
provision of this Agreement, or otherwise in connection with this Agreement, or
any provision hereof, the prevailing party shall be entitled to recover from the
losing party or parties all attorneys' fees and costs for services rendered to
the prevailing party in such action or proceeding.
12. NOTICE. Unless applicable law requires a different method of giving
notice, any and all notices, demands or other communications required or desired
to be given hereunder by any party shall be in writing. Assuming that the
contents of a notice meet the requirements of the specific section of this
Agreement which mandates the giving of that notice, a notice shall be validly
given or made to another party if served either personally or if deposited in
the United States mail, certified or registered, postage prepaid, or if
transmitted by telecopy or other electronic written transmission device or if
sent by overnight courier service, and if addressed to the applicable party as
set forth in the Combination Agreement. If such notice, demand or other
communication is served personally, service shall be conclusively deemed made at
the time of such personal service. If such notice, demand or other communication
is given by mail, service shall be conclusively deemed made seventy-two (72)
hours after the deposit thereof in the United States mail. If such notice,
demand or other communication is given by recognized overnight courier, telecopy
or other electronic written transmission, service shall be conclusively be
deemed made at the time of confirmation of delivery. Either party may change its
or his address by giving written notice in the aforesaid manner to the other
party.
13. INDEMNITY. During the term hereof, the Company shall indemnify and
hold Manager, Xxxxxxx X. Xxxxxxxxx, D.D.S., S. Xxxxxxxxx Xxxxxxxxx, D.M.D.,
Xxxxxx Xxxxxxxxx, D.D.S., Xxxxxx X. Xxxxxxx, D.D.S. and other senior management
officers or members of Manager (an "Indemnitee"), harmless to the fullest extent
that an officer or director of a Delaware corporation MAY be indemnified under
Section 145 of the Delaware General Corporation Law, assuming the Company were a
Delaware corporation and the Indemnitee were an officer or director of such
corporation. If the determination made by the Board utilizing the principles of
Section 145(d) does not provide for indemnification, the requesting Indemnitee
shall have the right to have the matter reviewed by independent legal counsel
agreed to by the Company and the requesting Indemnitee (or appointed by the
presiding judge of the Superior Court for the County
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of Los Angeles if the parties cannot agree within ten days of the request), and
such counsel's written opinion shall be binding on the Indemnitee and the
Company. Without limiting the foregoing, expenses described in Section 145(e),
shall in all events be paid or advanced upon receipt of the undertaking
described therein.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and shall not be assignable by either party
without the written consent of the other party hereto.
15. APPLICABLE LAW. This Agreement shall, in all respects, be governed by
the laws of the State of California, without regard to conflicts of law
principles.
16. COUNTERPARTS. This Agreement may be executed in separate counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
17. CAPTIONS AND DEFINED TERMS. The captions appearing at the commencement
of the sections hereof are descriptive only and for convenience in reference.
Any terms not herein defined shall have the meanings set forth in the
Combination Agreement.
18. INTERPRETATION. The parties hereto acknowledge that each party and
their respective counsel have reviewed and revised this Agreement and agree that
any rule of construction to the effect that ambiguities are to be resolved
against the drafting party shall not apply to the interpretation of this
Agreement or any amendments, exhibits or schedules hereto.
19. FURTHER ASSURANCES. Each party agrees that at any time and from time
to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary to
comply with the terms of this Agreement.
20. ENTIRE AGREEMENT. This Agreement, together with the Combination
Agreement and the Limited Liability Company Agreement, supersede any and all
other agreements, oral or written, between the parties hereto with respect to
the subject matter hereof, and contains the entire agreement among such parties
with respect to the transactions contemplated hereunder.
21. AMENDMENTS. This Agreement shall not be modified or amended except by
an instrument in writing signed by both of the parties hereto.
22. WAIVER. The waiver by any party hereto of a breach of any of the
provisions of this Agreement by another party must be in writing executed by the
waiving party and shall not operate or be construed as a waiver of any
subsequent breach thereof or as a waiver of any other provision hereof.
23. SEVERABILITY. If any provision of this Agreement or the application of
any such provision shall be held invalid, illegal or unenforceable in any
respect by a court of competent jurisdiction, such invalid, illegal or
unenforceable provision shall not affect any other provision
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hereof or any subsequent application of such provision held invalid, illegal or
unenforceable. In lieu of such invalid, illegal or unenforceable provision, the
parties hereto intend that there shall be added as part of this Agreement a
provision as similar in terms to such invalid, illegal or unenforceable
provision as may be possible and be valid, legal and enforceable.
24. OFFICERS. The Company shall elect, appoint or otherwise hire at least
one of the following persons as the president or other executive officer of the
Company with the power and authority to enter into contracts and bind the
Company in connection with obligations and liabilities arising in connection
with the management of the Company ("Manager Executive Officer"): Xxxxxxx X.
Xxxxxxxxx, D.D.S., S. Xxxxxxxxx Xxxxxxxxx, D.M.D., Xxxxxx Xxxxxxxxx, D.D.S., or
Xxxxxx X. Xxxxxxx, D.D.S., provided that at least one of the aforementioned
persons agrees to be employed as a Manager Executive Officer upon terms
satisfactory to the person and the Company (it being understood that such person
will not be compensated under such employment arrangement because he is being
compensated indirectly through this Agreement). Provided that at least one of
the aforementioned persons agrees to be employed as a Manager Executive Officer,
it shall be a failure of the Company to perform its material obligations under
this Agreement if none of such persons is employed by the Company as a Manager
Executive Officer at any time during the term of this Agreement; provided
however, that should there be only one such person acting as a Manager Executive
Officer and he voluntarily terminates his employment with the Company, the
Company shall not be in breach of this Agreement if it appoints another of such
persons as a Manager Executive Officer, upon terms satisfactory to the person
and the Company (it being understood that such person will not be compensated
under such employment arrangement because he is being compensated indirectly
through this Agreement), within seven (7) days of the voluntary termination.
Notwithstanding Section 2(b), no notice or cure period shall be afforded the
Company with respect to the breach described in the preceding sentence.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the date first above written.
CASTLE DENTAL CENTERS OF CALIFORNIA, L.L.C.,
a Delaware limited liability company
By: _______________________________________
Name:
Title:
CASTLE WEST HOLDINGS, LLC,
a California limited liability company
By: __________________________________
Name:
Title:
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