Exhibit 10.1

 

Sentinel Capital Partners II, L.P.

c/o Sentinel Capital Partners, L.L.C.

777 Third Avenue, 32nd Floor

New York, New York 10022

 

April 25, 2004

 

Bright Now! Dental, Inc.

201 E. Sandpointe, Suite 200

Santa Ana, California 92707

Attention: Steven C. Bilt

 

Dear Mr. Bilt:

 

Reference is hereby made to the Agreement and Plan of Merger, dated as of April
25, 2004 (the “Merger Agreement”), by and among Bright Now! Dental, Inc., a
Delaware corporation (“Parent”), Drawbridge Acquisitions, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent (“Merger Sub”), and Castle
Dental Centers, Inc., a Delaware corporation (the “Company”). Defined terms that
are used by not defined in this letter agreement (this “Letter Agreement”) shall
have the meanings ascribed thereto in the Merger Agreement.

 

Sentinel Capital Partners II, L.P. (“Sentinel”), a stockholder of the Company,
hereby acknowledges that it is a condition to Parent and Merger Sub’s
willingness to enter into the Merger Agreement that Parent enter into an
agreement with Sentinel providing for the terms of this Letter Agreement.

 

Accordingly, Sentinel hereby agrees that if (a) the Merger Agreement is
terminated by the Company pursuant to Section 7.1(c)(i) of the Merger Agreement,
and (b) within nine (9) months following the date of such termination, the
Company consummates a transaction resulting from a Takeover Proposal (the
“Consummated Transaction”), then in such event, Sentinel shall pay to Parent the
Payment Amount (as defined below) within three (3) Business Days following the
receipt by Sentinel of any consideration paid to Sentinel in respect of its
shares of the Company as a result of the Consummated Transaction. In such event,
the Payment Amount shall be paid by wire transfer of immediately available funds
to an account designated in writing by Parent.

 

For purposes of this Letter Agreement, the “Payment Amount” shall mean the
product obtained by multiplying 0.75 by the amount, if any, by which the
Consummated Transaction Consideration (as defined below) exceeds the Merger
Agreement Consideration (as defined below), if at all. For purposes of this
Letter Agreement, the “Consummated Transaction Consideration” shall mean the
product obtained by multiplying (x) the consideration paid per share of Company
Common Stock pursuant to the Consummated Transaction by (y) 132,134,988. For
purposes of this Letter Agreement, the “Merger Agreement Consideration” shall
mean the product obtained by multiplying (x) the Common Stock Merger
Consideration by (y) 132,134,988.

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Without duplication to Section 2.5 of the Merger Agreement, in the event of any
stock split, reverse stock split, stock dividend, reorganization,
recapitalization, reclassification or other like change with respect to the
Company having a record date on or after the date hereof and prior to the date
upon which the Payment Amount would be determined, an appropriate and
proportionate adjustment shall be made to the calculation of the Payment Amount
to account for such event.

 

As a holder of the Series B Preferred Stock, Sentinel shall not determine to
treat the Merger as a “Liquidation Event” (as such term is used in the
certificate of designation of the Series A-1 Preferred Stock) or to receive the
“Liquidation Value” (as such term is used in the certificate of designation of
the Series B Preferred Stock).

 

Other than the obligation of Sentinel to pay the Payment Amount if the
conditions to the payment thereof shall have been satisfied or the obligations
of Sentinel set forth in the immediately preceding paragraph, Sentinel shall
have no obligation to Parent, Merger Sub or any other Person, and none of
Parent, Merger Sub or any other Person shall have any right to bring any claim
or make any demand upon Sentinel, in connection with the subject matter hereof.

 

Sentinel represents and warrants to Parent as of the date hereof as follows:

 

(a) Sentinel is the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act, which definition will apply for all purposes of this Letter
Agreement) of, and has good title to, 63,408 shares of Series B Preferred Stock
(the “Sentinel Shares”);

 

(b) the Sentinel Shares constitute all of the shares of capital stock of the
Company beneficially owned, directly or indirectly, by Sentinel;

 

(c) the execution and delivery of this Letter Agreement by Sentinel does not,
and the performance by Sentinel of its obligations hereunder will not, (1)
constitute a violation of, conflict with, result in a default (or an event
which, with notice or lapse of time or both, would result in a default) under
(A) any judgment, writ, decree, order or ruling directly applicable to Sentinel,
or (B) the organizational documents of Sentinel, or (2) require the consent,
authorization or approval of, or the provision of notice to, any other party;

 

(d) Sentinel has full power and authority to execute, deliver and perform this
Letter Agreement and to consummate the transactions contemplated hereby, and the
execution, delivery and performance of this Letter Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized; and

 

(e) this Letter Agreement has been duly and validly executed and delivered by
Sentinel and, assuming due authorization, execution and delivery by Parent,
constitutes a valid and binding agreement of Sentinel, enforceable against
Sentinel in accordance with its terms, except to the extent that enforceability
may be limited by (i) applicable insolvency, bankruptcy, reorganization,
moratorium or other similar laws affecting creditors’ rights generally, and (ii)
applicable equitable principles (whether considered in a proceeding at law or in
equity).

 

This Letter Agreement shall be governed by and construed in accordance with the
laws of the State of New York, without giving effect to any choice of law or
conflict of law principles

 

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thereof or any jurisdiction that would cause the application of the law of any
jurisdiction other than the State of New York. This Letter Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement. This
Letter Agreement or any counterpart may be executed and delivered by facsimile
copies, each of which shall be deemed an original.

 

This Letter Agreement shall terminate automatically upon the earliest of the
following events to occur: (a) the termination of the Merger Agreement other
than pursuant to Section 7.1(c)(i) thereof, (b) the Closing, (c) the nine-month
anniversary of the termination of the Merger Agreement if a Consummated
Transaction shall not have been consummated as of such date, or (d) the date of
payment in full of the Payment Amount.

 

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If the foregoing is acceptable to you, please sign this Letter Agreement on the
appropriate space below, whereupon this Letter Agreement shall become a binding
agreement between the parties hereto.

 

SENTINEL CAPITAL PARTNERS II, L.P. By:  

Sentinel Partners II, L.P.,

    its General Partner

By:  

Sentinel Managing Company II, LLC,

    its General Partner

By:

 

/s/ David S. Lobel

   

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Name:

 

David S. Lobel

Title:

 

Managing Partner

 

Agreed to and accepted as of

the date first written above:

 

BRIGHT NOW! DENTAL, INC. By:  

/s/ Steven C. Bilt

   

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Name:

 

Steven C. Bilt

Title:

 

President and Chief Executive Officer

 

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