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EXHIBIT 1
SAFEGUARD HEALTH ENTERPRISES, INC.
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TERM SHEET AGREEMENT
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DATE: March 1, 2000 (the "Effective Date")
PARTIES: 3. SafeGuard Health Enterprises, Inc. (the "Company")
4. CAI Partners and Company II, L.P. and CAI Capital
Partners and Company II, L.P. (collectively "CAI")
5. Jack R. Anderson ("Anderson")
6. Silicon Valley Bank ("Bank")
7. John Hancock Mutual Life Insurance Company and the
other holders of the 7.91% Senior Notes of the
Company due September 30, 2005 (collectively
"Hancock")
8. Steven J. Baileys, D.D.S. ("Baileys")
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This Term Sheet Agreement (the "Agreement") summarizes various binding
agreements between the parties. It is not a letter of intent. The parties
contemplate that the agreements evidenced by this Agreement will be memorialized
in further documentation which may include a Shareholders Agreement, to be
prepared and executed by the parties at a later date. However, the agreements
evidenced by this Agreement are not subject to or conditioned upon the execution
and delivery of such further documentation.
1. Investor Senior Loan. On the Effective Date hereof, CAI, Anderson,
and Baileys (collectively the "Investors"), severally and not jointly, shall
loan the Company the aggregate amount of $8,000,000 (the "Investor Senior Loan")
in the following amounts: CAI -- $5,000,000; Anderson -- $2,500,000; and Baileys
-- $500,000. The Investor Senior Loan shall bear interest at the rate of ten
percent (10%) per annum. Interest is payable quarterly and at maturity. The
maturity date of the Investor Senior Loan is April 30, 2001. The maturity date
of the Investor Senior Loan shall be accelerated in the event of a liquidation
or dissolution of the Company. The Investor Senior Loan is unsecured but the
Company agrees with the Investors to comply with the same negative pledges with
respect to liens on its assets as is contained in the Loan Documents between the
Company and the Bank and the Note Purchase Agreement between the Company and
Hancock. The Company shall not incur any other indebtedness senior or equal to
the Investor Senior Loan. Repayment of the Investor Senior Loan in full shall be
prior to repayment of the Bank Loan and the Hancock Notes according to the
subordination agreement set forth below. In the event of the closing of the sale
of the Preferred Stock and Convertible Notes described below, the principal
balance of the Investor Senior Loan shall be cancelled as consideration for the
purchase of the Series A Preferred Stock and Series A Convertible Notes by the
Investors.
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2. Sale of Series A Preferred Stock and Series A Convertible Notes to
the Investors. The Investors, severally and not jointly, agree to purchase from
the Company (a) 64,000 shares of Series A Preferred Stock for an aggregate
purchase price of $6.4 million and (b) Series A Convertible Notes having an
aggregate principal amount of $1.6 million. The consideration for the Series A
Preferred Stock and the Series A Convertible Notes shall be cancellation of the
outstanding principal balance of the Investor Senior Loan. Accrued interest due
under the Investor Senior Loan shall be payable in cash to the Investors on the
date of closing.
a. Series A Preferred Stock. The Series A Preferred Stock
shall have the following rights, preferences and limitations:
i. The Series A Preferred Stock shall have a liquidation
preference of $100 per share or an aggregate liquidation preference of
$6.4 million. The liquidation preference shall be senior to all other
securities of the Company including the Series B, C and D Preferred
Stock described below and the Common Stock.
ii. The Series A Preferred Stock shall not have specified
dividends but shall be entitled to participate on an as-converted basis
in any dividends paid on the Common Stock of the Company or the Series
B, C or D Preferred Stock.
iii. The Series A Preferred Stock shall not be subject to
mandatory redemption at the election of the Investors but shall be
subject to redemption at a redemption price of $100 per share by the
Company at any time on or after ten (10) years after the original date
of issuance.
iv. The Series A Preferred Stock shall be convertible into
shares of Common Stock at a conversion price of $1.00 per share. Each
share of Series A Preferred Stock shall be initially convertible into
100 shares of Common Stock based on the $100 liquidation preferential
amount thereof. The conversion price and number of shares will be
subject to customary anti-dilution adjustments for stock splits, share
dividends, recapitalizations, stock issuances, etc., with the
anti-dilution adjustment for the issuance of shares at less than the
conversion price being determined on the "weighted average method."
v. Subject to the provisions of Section 3A hereof, the Series
A Preferred Stock, voting as a single class, shall be entitled to elect
a majority (4) of the Board of Directors. On all other matters, the
holders of the Series A Preferred Stock shall vote together with the
holders of the Common Stock and the Series B, C and D Preferred Stock
and shall be entitled to cast one vote for each share of Common Stock
into which the Series A Preferred Stock is convertible.
vi. The approval of the Series A Preferred Stock, voting as a
separate class, shall be required for the issuance of any securities
having liquidation or other rights senior or superior or equal in any
respect to the rights of the Series A Preferred Stock.
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b. Series A Convertible Notes. The Series A Convertible Notes
shall have the following terms.
i. The Series A Convertible Notes shall bear interest at the
rate of ten percent (10%) per annum from the date of issuance, payable
quarterly and at maturity.
ii. The Series A Convertible Notes shall be automatically
converted into shares of Series A Preferred Stock upon the approval by
the stockholders of the Company of an amendment to its certificate of
incorporation increasing the number of authorized shares of Common
Stock sufficient for the issuance of Common Stock upon the conversion
of the shares of Series A Preferred Stock and the Series B, C and D
Preferred Stock issuable upon the automatic conversion of the Series A
Convertible Notes and the Series B, C and D Convertible Notes. The
conversion price will be $100 per share and subject to the same
anti-dilution protection as the Series A Preferred Stock. Initially the
Series A Convertible Note will be convertible into an aggregate of
16,000 shares of Series A Preferred Stock.
iii. The Series A Convertible Notes shall have no voting
rights.
iv. The Series A Convertible Notes and the payment thereof
shall be senior and superior to the Series B, C and D Convertible
Notes.
3. Sale of Series B, C and D Preferred Stock and Series B, C and D
Convertible Notes. The Bank and Hancock agree to purchase an aggregate of
176,000 shares of Series B, C and D Preferred Stock and Series B, C and D
Convertible Notes having an aggregate principal balance of $4.4 million. The
consideration for the Series B Preferred Stock and Series B Convertible Notes
shall be the cancellation of all indebtedness and obligations of any kind of the
Company, whether principal, interest, costs, expenses or other, to the Bank and
Hancock, respectively. The amount of shares of Series B, C and D Preferred Stock
and principal amount of the Series B, C and D Convertible Notes shall be
allocated to the Bank and Hancock, respectively, as follows: (i) the Bank and
Hancock shall each purchase 32,000 shares of Series B Preferred Stock (in the
aggregate 64,000 shares) and a Series B Convertible Note with a principal
balance of $.8 million (in the aggregate $1.6 million); (ii) the Bank shall
purchase 24,000 shares of Series C Preferred Stock and a Series C Convertible
Note with the principal balance of $.6 million, and (iii) Hancock shall purchase
88,000 shares of Series D Preferred Stock and a Series D Convertible Note with
the principal balance of $2.2 million.
a. Series B, C and D Preferred Stock. The rights, preferences
and limitations of the Series B, C and D Preferred Stock shall be identical
except as set forth below:
i. The Series B, C and D shall have a liquidation preference
of $100 per share. The Series B Preferred Stock liquidation preference
shall be senior to the Series C Preferred Stock liquidation preference.
The Series C Preferred Stock liquidation preference shall be senior to
the Series D Preferred Stock liquidation preference. The Series B, C
and D Preferred Stock liquidation preferences shall be secondary to the
Series A Preferred Stock but prior to any liquidation rights of the
Common Stock.
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ii. The Series B, C and D Preferred Stock shall not have
specified dividends but shall be entitled to participate on an
as-converted basis in any dividends paid on the Common Stock of the
Company or the Series A, B, C or D Preferred Stock as the case may be.
iii. The Series B, C and D Preferred Stock shall not be
subject to mandatory redemption at the election of the Investors but
shall be subject to redemption at a redemption price of $100 per share
by the Company at any time on or after ten (10) years after the
original date of issuance.
iv. The Series B, C and D Preferred Stock shall be convertible
into shares of Common Stock at a conversion price of $1.00 per share.
Each share of Series B, C and D Preferred Stock shall be initially
convertible into 100 shares of Common Stock based on the $100
liquidation preferential amount thereof. The conversion price and
number of shares will be subject to customary anti-dilution adjustments
for stock splits, share dividends, recapitalizations, stock issuances,
etc., with the anti-dilution adjustment for the issuance of shares at
less than the conversion price being determined on the "weighted
average method."
v. Subject to the provisions of Section 3A hereof, the Series
B, C and D Preferred Stock voting together as a single class, shall be
entitled to elect one director to the Board of Directors. On all other
matters, the holders of the Series B, C and D Preferred Stock shall
vote together with the holders of the Series A Preferred Stock and the
Common Stock and shall be entitled to cast one vote for each share of
Common Stock into which the Series B, C and D Preferred Stock is
convertible.
vi. The approval of the Series B, C and D Preferred Stock,
voting as a separate class, shall be required for the issuance of any
security of the Company having liquidation or other rights senior and
superior or equal in any respect to the rights of the Series B, C and D
Preferred Stock.
b. Series B, C and D Convertible Notes. The terms of the
Series B, C and D Convertible Notes shall be identical to the Series A
Convertible Notes except that (i) the Series B, C and D Convertible Notes shall
be convertible into Series B, C and D Preferred Stock, respectively and (ii)
payment of the Series B Convertible Note shall be senior and superior to the
Series C Convertible Note, (iii) payment of the Series C Preferred Note shall be
senior and superior to payment of the Series D Convertible Note. Initially the
Series B, C and D Convertible Notes will be convertible into an aggregate of
16,000 shares of Series B Preferred Stock, 6,000 shares of Series C Preferred
Stock and 22,000 shares of Series D Preferred Stock, respectively.
3A. Change in Class Vote Applicable to Elections. In the event that CAI
and Anderson at any time sell fifty percent (50%) or more of their respective
Investor Senior Loan or their respective Series A Preferred Stock and Series A
Convertible Notes, then, with respect to the election of directors, the Series
A, B, C and D Preferred Stock shall be entitled to vote together as a single
class to elect five (5) directors to the Board of Directors and the provisions
of Section 2.a.v. and Section 3.a.v. hereof with respect to the election of
directors shall not be applicable.
4. Closing. The closing of the sale of the Preferred Stock and the
Convertible Notes shall occur on the first calendar day of the calendar month
following the month in which satisfaction of the following conditions occurs
effective immediately prior to the commencement of business on such day:
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a. Regulatory Approval. Receipt of all required regulatory
approvals to the transactions contemplated by this Agreement unless otherwise
waived by CAI and Anderson;
b. Performance. The performance by all of the Investors, the
Bank and Hancock of their obligations to purchase the Preferred Stock and the
Convertibles Notes as described above;
c. Bankruptcy. The Company shall not have been placed in
bankruptcy, either voluntary or involuntarily;
d. Receivership. Neither the Company nor any of its
subsidiaries shall have been placed in a receivership or conservatorship by any
regulatory agency unless otherwise waived by CAI and Anderson; and
e. Forbearance. The Banks and Hancock have complied with the
forbearance and subordination agreements set forth in this agreement.
The Closing shall not be subject to any other conditions precedent.
5. Terminated Purchase Agreement. The Company, the Bank and Hancock
acknowledge and agree that CAI and Anderson properly terminated that certain
Debenture and Note Purchase Agreement dated as of June 29, 1999 (the "Terminated
Purchase Agreement") pursuant to Sections 8.4(a) and 8.4(b) thereof and waives
and releases any contrary claim or assertion. This Agreement does not supersede
or extinguish any of the rights of CAI and Anderson under the Terminated
Purchase Agreement that survived the termination thereof including, without
limitation, their rights to be reimbursed costs and expenses as provided
therein. Such costs and expenses which shall not exceed $250,000 in the
aggregate, together with the costs and expenses of CAI and Anderson in
connection with this Agreement, shall be paid immediately after the execution of
this Agreement out of the proceeds of the Investor Senior Loan.
6. Subordination Agreement. The Bank and Hancock agree that the
Investor Senior Loan shall be paid 100% in full in cash before any payment of
any kind shall be made on the Bank Loan or the Hancock Notes. Any distribution
which would otherwise, but for the provision of this Agreement, be payable or
deliverable in respect of the Bank Loan or the Hancock Notes shall be paid or
delivered directly to the Investors in payment of the Investor Senior Loan until
the Investor Senior Loan, principal and interest, is paid 100% in full. For the
purpose thereof "distribution" means, with respect to any indebtedness (a) any
payment or distribution by any person of cash, securities or other property, by
set-off or otherwise, on account of such indebtedness or obligation, (b) any
redemption, purchase or other acquisition of such indebtedness or obligation by
any person or (c) the granting of any lien or security interest to or for the
benefit of the holders of such indebtedness or obligation in or upon any
property of any person. The Investor Senior Loan shall continue to be treated as
debt that is senior to the Bank Loan and the Hancock Notes and the provisions of
this Agreement shall continue to govern the relative rights and priorities of
the Investors, the Bank and Hancock even if all or part of the Investor Senior
Loan is subordinated, set aside, voided, invalidated or disallowed in connection
with any proceeding or sale or transfer or other distribution of all or
substantially all of the assets of the Company and this Agreement shall be
reinstated if at any time any payment of the Investor Senior Loan is rescinded
or must otherwise be returned by any holder of the Investor Senior Loan. The
Bank and Hancock agree not to initiate or prosecute any claim, action, or other
proceeding challenging the enforceability or validity of the Investor Senior
Loan.
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7. Forbearance Agreement. Until April 30, 2001, the Bank and Hancock
shall not demand or accept any payment, principal or interest, or accelerate or
take any enforcement action with respect to the Bank Loan and the Hancock Notes.
For the purposes hereof "enforcement action" means any of the following: (a) to
take from or for the account of the Company by set-off or in any other manner
the whole or any part of any monies which may now or after be owing by the
Company with respect to the Bank Loan or the Hancock Notes; (b) to sue for
payment of, or initiate or participate in any other suit, action or proceeding
against the Company (i) to enforce payment of or to collect the whole or any
part of the Bank Loan or the Hancock Notes or (ii) to enforce any other rights,
powers, privileges or remedies under the Bank Loan Documents or the Hancock Note
Agreement; or (c) to take any action under the provisions of any state or
federal law to enforce, foreclose upon, take possession of or sell any property
or assets of the Company. In addition, the Bank and Hancock shall agree to
cooperate to the extent commercially reasonable with respect to any other
forbearance matters which shall be required in order for the Company to receive
a "clean" audit report in its financial statements without any qualifications or
exceptions.
8. Shareholders Agreement. The Investors, the Bank and Hancock agree to
an agreement among such parties having the following provisions:
a. Voting. Such parties agree to vote all shares of voting
securities of the Company now or hereafter held by such parties (i) to approve
an amendment to the certificate of incorporation of the Company increasing the
authorized number of shares of Common Stock of the Company to a number
sufficient to permit the conversion of the Series A Preferred Stock and the
Series B Preferred Stock issuable upon conversion of the Convertible Notes as
specified above, and (ii) to maintain the size of the Board of Directors at
seven (7), and (iii) to take and authorize any such further actions as may be
necessary or required to fully effectuate this Agreement. The holders of the
Series A Preferred Stock shall elect as a director an individual designated by
the Bank and Hancock and reasonably approved by the holders of the Series A
Preferred Stock. Upon the closing, the director designated by the Bank and
Hancock shall be elected to the Board of Directors to fill the vacant position
as contemplated by Section 9(d) below.
b. Drag-Along Rights. CAI and Anderson shall have drag-along
rights with respect to the shares owned by the Bank and Hancock in connection
with a sale of the Company in a transaction approved by the Board of Directors
of the Company; provided that if the value of the securities of the Company in
such sale is less than $30 million, a fairness opinion by an investment banker
shall be provided.
9. Certain Representations. SafeGuard, acting by and through its duly
authorized officers, and Baileys, individually, hereby represent and warrant to
the Investors, the Bank and Hancock as follows:
a. Material Events. To the best knowledge of the Company and
Baileys, there is no event or claim of any kind whatsoever that has occurred, is
pending or is threatened that has had or could have a material adverse effect on
the Company or would be considered a material event as such term is defined
under federal securities laws (including court decisions interpreting the same)
which event or claim has not been publicly disclosed in a report filed by the
Company with the Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934, as amended, or otherwise publicly disclosed in a press
release issued by the Company or that certain press release dated December 17,
1999 issued by Berman, Devalerio & Pease, L.L.P. related to a class action
lawsuit against the Company. For the purpose hereof, any notice of termination
or non-renewal, notice of intent to terminate or non-renew or termination
<PAGE> 7
or non-renewal of any group or individual customer contracts which either
individually or in the aggregate represent a material number of the members of
the plan of the Company shall constitute a material adverse event.
b. Regulatory Compliance. Up to $5 million of the proceeds of
the Investor Senior Loan will be used immediately for a capital contribution to
Safe Health Life Company, the insurance subsidiary of the Company, required to
be made on the Effective Date by applicable governmental regulations. Except for
such capital infusion, all the other subsidiaries of the Company are in
compliance with all material provisions of the laws, rules and regulations
applicable to the certificate of authority or license held by such subsidiary
and none of the subsidiaries has any deficit in any required reserves, capital
or other funds required to be maintained by such subsidiary under applicable
regulatory requirements.
c. Board Approval. This Agreement and the transactions
provided in this Agreement, including, without limitation, the issuance of the
Investor Senior Loan, the Preferred Stock, the Convertible Notes and the
approval of the amendment to the certificate of incorporation as contemplated
herein, have been approved by the affirmative vote of not less than seventy-five
percent (75%) of the current members of the Board of Directors of the Company at
a meeting duly called and held in accordance with the Bylaws of the Company. The
Board of Directors have taken all action and adopted all approvals necessary in
order that the transactions contemplated by this Agreement do not and shall not
cause the rights issued to the stockholders of the Company pursuant to that
certain Rights Agreement, dated as of March 22, 1996 between the Company and
American Stock Transfer and Trust Company, as Rights Agent, to become
exercisable or any similar rights under any other rights agreement applicable to
the stockholders of the Company to become exercisable.
d. Board of Directors. The following changes with respect to
the Board of Directors of the Company have occurred or have been duly authorized
and approved by the Board of Directors of the Company in accordance with the
Bylaws of the Company:
i. After the Board approvals described in Section 9(c) above,
Messrs. Cox, McKenna, Mann, Stevens and Boyd resigned from the Board of
Directors of the Company and the incumbent directors of the Company
were then Baileys, Brendzel and Dennis Gates;
ii. Jack R. Anderson, Leslie B. Daniels and James E. Buncher
were then by the Board of Directors appointed as directors of the
Company effective upon execution of this Agreement; and
iii. One vacancy shall remain on the Board of Directors of the
Company to be filled upon the closing by the holders of the Series B, C
and D Preferred Stock as provided in Section 8(a)(iii) above.
e. Employment Agreements. Messrs. Cox, Brendzel and Kaufman
have agreed that any acceleration or vesting of any rights or benefits under his
respective employment agreement with the Company or otherwise resulting from a
change of control, including severance payments, shall not occur by virtue of
the transactions contemplated by this Agreement and have waived any claim that
such is the case.
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10. Cancellation of Warrants. Upon the closing of the sale of the
Preferred Stock and the Convertible Notes, Hancock agrees that those certain
Warrants for an aggregate of 382,000 shares of Common Stock of the Company
issued pursuant to that certain First Amendment and Waiver to Note Purchase
Agreement dated as of May 28, 1999 shall be cancelled in all respects.
11. Registration Rights. None of the Investors, the Bank or Hancock
shall have any demand registration rights. The Investors, the Bank and Hancock
shall have piggyback registration rights with respect to any securities offering
by the Company (other than in connection with an acquisition or an employee
benefit plan) on a pro rata basis, subject to any underwriter's cutback on the
total number of shares available to be sold by stockholders of the Company in
the offering. The parties shall have indemnification rights in connection with
any such offering as specified in the Registration Rights Agreement attached as
an Exhibit to the Terminated Purchase Agreement. The Company will pay all
registration expenses but no selling expenses.
12. Certain Covenants.
a. Regulatory Filings. Each party hereto agrees to proceed in
good faith and as soon as practicable to make and pursue all regulatory filings
and to obtain of all regulatory approvals required for the transactions
specified in this Agreement.
b. Stockholder Meeting. Upon the closing of the sale of the
Preferred Stock and the Convertible Notes, SafeGuard shall immediately take all
actions required to call and hold a special meeting of the stockholders for the
purposes of approving an amendment to the certificate of incorporation of the
Company to increase the number of authorized shares of Common Stock of the
Company as contemplated by this Agreement.
13. Other Understandings.
a. Board of Directors. So long as the Investor Senior Loan is
outstanding, three (3) directors of the Company shall be designees of CAI and
Anderson.
b. Senior Debt. Notwithstanding any provision of this
Agreement to the contrary, the Board of Directors of the Company may borrow up
to $3,500,000 for working capital purposes on a basis senior and superior to the
Investor Senior Loan, the Bank Loan, the Hancock Notes, the Preferred Stock and
the Convertible Notes without the consent of the Investors, the Bank or Hancock.
c. Outstanding Shares. In connection with the transactions
provided in this Agreement, the issued and outstanding shares of Common Stock of
the Company on the Effective Date shall remain issued and outstanding and the
stock options granted to employees and officers of the Company under the stock
option plan of the Company prior to the Effective Date shall remain issued and
outstanding in accordance with their terms.
d. Costs and Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, the Company will pay (or
reimburse upon request) all costs and expenses of CAI and Anderson including,
without limitation, reasonable fees and expenses of their consultants, counsel
and
<PAGE> 9
accountants, in connection with or leading to the preparation, negotiation and
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement.
e. Indemnity. The Company will pay and indemnify the
Investors, the Bank and Hancock and their respective stockholders, partners,
trustees, officers, employees and agents, against all liability and loss with
respect to (i) all claims for fees or commissions of brokerage or finders
engaged by the Company with respect to the transactions contemplated by this
Agreement, (ii) all taxes, fees and other public charges payable in connection
with the issuance of any of the Preferred Stock or Convertible Notes or the
execution, delivery, and enforcement of this Agreement for any of the rights of
the Preferred Stock or Convertible Notes, and (iii) all claims and suits, either
direct or derivative, commenced by or on behalf of the Company or the
stockholders of the Company relating to or arising out of this Agreement or the
transactions contemplated herein. Such rights shall survive the termination or
consummation of this Agreement. The Company shall indemnify the three directors
designated by CAI and Anderson to the fullest extent permitted by applicable
law.
f. Waiver. Baileys, the Bank and Hancock agree that they shall
not assert, and hereby waive, any claims in their capacity as a shareholder or
creditor of the Company against the three directors designated by CAI and
Anderson for acts or omissions in their capacity as directors of the Company at
any time during the period from the Effective Date through the closing date
except for intentional acts of fraud or dishonesty.
g. Employment Agreement. Baileys agrees that any acceleration
or vesting of any rights or benefits under his employment agreement or otherwise
resulting from a change of control, including severance payments, shall not
occur by virtue of the occurrence of the transactions contemplated by this
Agreement and waives any claim that such is the case. In addition, Baileys
agrees to voluntarily resign his position as chief executive officer of the
Company as of the Effective Date and the Company shall have no obligation to
make any severance payments of any kind thereunder as a result thereof. Baileys
shall remain as Chairman of the Board of Directors of the Company. All other
provisions of his employment agreement shall remain in full force and effect.
14. Miscellaneous.
a. Notices. All notices and other communications under this
Agreement shall be in writing and shall be deemed given upon (i) confirmation or
receipt of a facsimile transmission (ii) confirmed delivered by standard
overnight carrier, (iii) when delivered by hand or (iv) the expiration of five
(5) business days after the date when mailed by registered or certified mail
(postage prepaid, return receipt requested), addressed to respective parties as
set forth in the prior Purchase Agreement, the Bank Loan Documents or the
Hancock Note Agreement, as applicable.
b. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings (other than the
provisions of the Terminated Purchase Agreement that survive termination
thereof), both written or oral, among the parties or any of them, with respect
to the subject matter hereof.
c. Assignment. This Agreement shall not be assigned by
operation in law or otherwise, except that (i) Anderson may assign part of his
respective rights and obligations hereunder to up to two third
<PAGE> 10
parties and (ii) CAI may assign all or any part of its respective rights and
obligations hereunder to any affiliated investment partnership.
d. Amendment. This Agreement may not be amended except by
instrument in writing signed on behalf of each of the parties hereto.
e. Binding Effect. This Agreement shall be binding upon the
parties hereto, their respective heirs, representatives, successors and
permitted assigns specifically including any transferees of the Bank Loan, the
Hancock Notes, the Investor Senior Loan, the Preferred Stock and the Convertible
Notes.
f. Exculpation. Among Investors, Bank and Hancock. Each of the
Investors, the Bank and Hancock acknowledges that such party is not relying upon
any person, firm or corporation, other than the representations of the Company
contained herein, in making its investment or decision to invest in the Investor
Senior Loan, the Preferred Stock or the Convertible Notes and specifically each
such party has not relied on any representation or warranty of any of such other
parties in making such investment or decision. The Company acknowledges that it
is not relying upon any representation or warranty of the Investors, the Bank
and Hancock in entering into this Agreement.
g. Arbitration. In the event of any dispute between any one or
more or all of the parties to this Agreement with respect to the respective
rights and obligations of the parties under this Agreement, such dispute shall
be settled by arbitration in accordance with the arbitration procedures set
forth in the Terminated Purchase Agreement.
h. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of laws.
i. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have executed this Term Sheet
Agreement as of the Effective Date.
CAI PARTNERS AND COMPANY II, L.P.
By: CAI PARTNERS G.P. AND COMPANY, L.P.,
GENERAL PARTNER
By: /s/ Leslie B. Daniels
----------------------------------
Leslie B. Daniels
CAI CAPITAL PARTNERS AND COMPANY II,
L.P.
By: CAI CAPITAL PARTNERS G.P. AND
COMPANY, L.P., GENERAL PARTNER
By: /s/ Leslie B. Daniels
----------------------------------
Leslie B. Daniels
/s/ Jack R. Anderson
-------------------------------------------
Jack R. Anderson
/s/ Steven J. Baileys
-------------------------------------------
Steven J. Baileys, D.D.S., Trustee
SAFEGUARD HEALTH ENTERPRISES, INC.
By: /s/ Steven J. Baileys
----------------------------------------
Steven J. Baileys, D.D.S.,
Chairman and Chief Executive Officer
By: /s/ Ronald I. Brendzel
----------------------------------------
Ronald I. Brendzel, Secretary
JOHN HANCOCK LIFE INSURANCE
COMPANY f/k/a JOHN HANCOCK MUTUAL
LIFE INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
----------------------------------------
Name: Stephen J. Blewitt
--------------------------------------
Title: Authorized Signatory
-------------------------------------
JOHN HANCOCK VARIABLE LIFE
INSURANCE COMPANY
By: /s/ Stephen J. Blewitt
----------------------------------------
Name: Stephen J. Blewitt
--------------------------------------
Title: Authorized Signatory
-------------------------------------
INVESTORS PARTNER LIFE INSURANCE
COMPANY (f/k/a JOHN HANCOCK LIFE
INSURANCE COMPANY OF AMERICA)
By: /s/ Stephen J. Blewitt
----------------------------------------
Name: Stephen J. Blewitt
--------------------------------------
Title: Authorized Signatory
-------------------------------------
MELLON BANK, N.A., solely in its capacity as
Trustee for Bell Atlantic Master Trust
(f/k/a Nynex Master Pension Trust), (as directed by
John Hancock Mutual Life Insurance Company) and
not in its individual capacity
By: /s/ Carole Bruno
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Name: Carole Bruno
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Title: Authorized Signatory
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SILICON VALLEY BANK
By: /s/ Nido Paras
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Name: Nido Paras
--------------------------------------
Title: Senior Vice President
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