FILED: NEW YORK COUNTY CLERK 05/30/2014 INDEX NO /2014 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 05/30/2014

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1 FILED: NEW YORK COUNTY CLERK 05/30/2014 INDEX NO /2014 NYSCEF DOC. NO. 70 RECEIVED NYSCEF: 05/30/2014 K_ULIK_ GOTTESMAN & SIEGEL LLP Glen L. Kulik Donald S. Gottesman Leonard Siegel Thomas M. Ware II Joseph R. Serpico MitchellS. Brachman Francesca Dioguardi David A. Bemardoni Daniel L. Reback Jeffrey}\. Meinhardt Natalie N. Wright Joanna A rdalan Attorneys at Law Comerica Bank Buildin g Ventura Boulevard Suite 1400 Sherman Oaks, California Telephone (310) (818) Facsimile (310) Sender's address: dgottesman@kgslaw.com File No VIA FACSIMILE AND OVERNIGHT AND U.S. MAIL 725 Twelfth Street, N.W. Washington, D.C Re: Response to January 29, 2014 letters; New Dispute Notice Dear Mr. Brown: I write in response to the letters from you and from Mr. Stratton, both dated January 29, Employment Call Option Danaher contends it can rescind the Consulting Agreement, and thereby avoid the waiver of the Employment Call Option contained therein, on the ground that Dr. Niznick's statement in Exhibit B ( D), that he was not "aware of any claims against Company," was false. My clients reject this contention. In my January 23, 2014 letter to you, I explained how Dr. Niznick became aware of his claims against Danaher. He was not and could not have been aware of these claims when he signed the Consulting Agreement because the National Sales Meeting had not yet occurred, and Danaher purposefully kept and continues to keep material information secret from him. In fact, Dr. Niznick continues to learn of facts, such as the firing of key management personnel who have been with Implant Direct for years, that add to his claims of a de facto merger or consolidation of the JVCs into Danaher and/or Danaher Affiliates undertaken in violation of his veto right under Section 4.02( ) of the Operating Agreements. I will not repeat the content of my January 23 letter with respect to the Consulting Agreement or the attempt to invoke the Employment Call Option. However, your letter raises an additional point not previously addressed, i.e., you describe the statement in D of Exhibit B to the Consulting Agreement as a representation and as a warranty. It quite obviously is neither. A brief look at the Transaction Agreement among Danaher, my clients and others provides an example of customary representation and warranty language: "To induce Sellers to { ;2}

2 KULIK GOTIES11AN & SIEGEL LLP Page 2 enter into the Transaction Documents and consummate the transactions contemplated thereby, Buyer represents and warrants to Sellers, as of the date of this Agreement and as of the Closing (except for any such representation or warranty that addresses matters only as of a particular date, which are made only as of such date), except as disclosed by Buyer in the Buyer's Disclosure Schedule provided to Sellers prior to the execution of this Agreement...." Representations and warranties commonly are accompanied by remedies, such as an indemnification against the consequence of an incompleteness, inaccuracy, or violation of the representations and warranties. Article Vlll of the Transaction Agreement provides a handy example. The paragraph to which you point is accompanied by none of the attributes of representations and warranties, such as contractual remedies. That paragraph merely is what sometimes is referred to as "comfort language." It is nothing more and has no contractual significance. ID' s Right to Appoint the ID Manager Danaher purports to terminate ID's right to appoint the ID Manager under Section 4.02(f) of the Operating Agreements on the ground that Dr. Niznick supposedly terminated his own employment with the Joint Venture Companies "prior to December 31, 2013." Section 4.02(f), however, only allows for the termination of ID's right to appoint a manager if Dr. Niznick terminated his employment with the Company without Good Reason "prior to February 3, 2013" and this date was never changed by a valid amendment to the Operating Agreements signed by the members. Since Dr. Niznick's employment terminated long after February 3, 2013, Danaher has no right to terminate ID' s right to appoint a manager. Moreover, for the reasons stated in my January 23 letter, even if the February 3, 2013 date in Section 4.02(f) had been extended to December 31, 2013 by a valid amendment to the Operating Agreements (although it has not), Danaher would still not be entitled to terminate ID's right to appoint the ID Manager under Section 4.02(f). As noted in that letter, Dr. Niznick had the right to withdraw his November 1, 2013 notice of resignation, and promptly did so, prior to any prejudicial reliance by the Joint Venture Companies. Thus, he did not terminate his employment and, even if he did, he had "Good Reason" to do so, as explained in my January 23 letter. Consequently, ID's right to appoint the ID Manager still remains in full force and effect, and Danaher's purported termination of that right constitutes a breach of contract. I also note that Danaher's purported termination of this right is yet anotheract, after the Consulting Agreement was signed, that facilitates Danaher's de facto merger or consolidation of the Joint Venture Companies into Danaher or Danaher Affiliates by enabling Danaher to hide { ; I}

3 KULIK GOITESJ\1AN & SIEGEL LLP Page 3 Board conduct from ID and prevent it from attempting to influence Board decisions or taking legal action against improper Board conduct. ID relies on having a manager on the Board of Managers to stay informed of the Board's decisions and to voice its viewpoint, which sometimes conflicts with Danaher's interests but furthers the interests of the Joint Venture Companies. In effect, without an ID Manager, there would be no check on Danaher's operation of the Joint Venture Companies to its benefit alone. Any action taken by the Board without the involvement of a Manager designated by ID would be void. Mandatory Buy-Out of 5% ofid's Membership Units Danaher contends it need not comply with its Mandatory Buy-Out obligation, under Section 9.04(a) of the Operating Agreements, to purchase 5% of ID's Membership Units on the grounds it is purportedly "obligated to invoke" the Employment Call and the Cause Call Option "as to all of the 25 Membership Units currently owned by ID...." My clients reject this contention. For the reasons discussed above and in my January 23 letter, Danaher is not obligated, and has no right, to exercise the Employment Call Option. For the reasons discussed below, Danaher is also not obligated, and has no right, to exercise the Cause Call Option either. By openly acknowledging it has no intention of complying with its Mandatory Buy-Out obligation, Danaher is in breach of contract. Cause Call Option Danaher invoked its purported right to exercise the Employment Call Option in unequivocal terms in the second full paragraph of your January 29, 2014 letter. It is not clear, however, whether Danaher has attempted to exercise the Cause Call Option as well. Out of an abundance of caution, I will assume it has attempted to do so. Danaher has no right to exercise the Cause Call Option. First, an express condition precedent of Danaher's right to exercise the Cause Call Option is "the occurrence of the taking of any act or failure to take any act by Niznick... which is determined by a court of competent jurisdiction to constitute Cause.... " Operating Agreements, 9.04(b)(ii) [italics added]. This condition has obviously not been fulfilled and for this reason, among others, Danaher cannot exercise the Cause Call Option at this time. Second, even if Danaher's right to exercise the option could be triggered by the mere existence of Cause without the necessity of a court determination, Danaher would still not have the right to exercise the Cause Call Option because there is no Cause. Mr. Stratton's letter dated { ; 1}

4 KULIK GOTTES:MAN & SIEGEL LLP Page 4 January 29, 2014 (the "Stratton Letter") claims in substance the matters asserted therein amount to "Cause" for purposes of the Cause Call Option contained in Section 9.04(b)(ii) of the Operating Agreements. The concept of "Cause" is defined at page 7 of the Operating Agreements to mean "acts or omissions of Niznick, the Trust, ID or any of their Affiliates that constitute a material breach of Article X of this Agreement (whether or not such provisions are enforceable), which are not cured within thirty (30) days following Niznick's receipt of written notice from the Company thereof." 1 Although the Stratton Letter does not by its terms purport to be the notice required by the definition of "Cause" or offer Dr. Niznick the right to cure the allegedly deficient conduct, we nevertheless will respond on that basis in order to avoid any argument based on the passage of a 30-day period. The Stratton Letter lists 14 items of alleged conduct by Dr. Niznick. I will comment on each of them (using paragraph numbers for those paragraphs in the order presented in the Stratton Letter, although his paragraphs were unnumbered). Before providing those comments, we need to look at the meaning of "Cause". Because "Cause" is defined by reference to Article X of the Operating Agreements, its requirements are the starting point. Section lo.ol(a) obligates Dr. Niznick to disclose all Corporate Opportunities to the Joint Venture Companies. None of Dr. Niznick's alleged conduct involves Corporate Opportunities or implicates Section 10.01(a). Section 10.01(b)(i) prohibits competition by Dr. Niznick. None of Dr. Niznick's alleged conduct involves competition or implicates Section lo.ol (b)(i). Section (b)(ii)(i) provides that Dr. Niznick shall not "... employ or hire away any Restricted Person...." None of Dr. Niznick's alleged conduct involves the hiring of any Restricted Person or implicates Section 10.01(b)(i)(I). Section (b)(ii)(ii) provides that Dr. Niznick shall not "... call upon, solicit or communicate with any Restricted Person for the purpose or with the intent of enticing, or in a manner reasonably likely to entice, such Restricted Person to leave the employment of or sever his or its engagement with the Company..." 1 Because the Stratton Letter only alleges conduct by Dr. Niznick, my responses will refer only to him. { ;1}

5 KULIK GOTTESMAN & SIEGEL LLP Page 5 Before turning to the specific claims, Dr. Niznick has asked me to convey his categorical denial of each of the alleged violations, and his assurance that he has no intention of violating any of the provisions of Article X during the applicable time periods. Here are Dr. Niznick's specific responses by paragraph number: 1. Enticing "Restricted Persons": Dr. Niznick denies that he has offered any of the listed employees and former employees jobs or otherwise enticed them to leave their jobs with the Joint Venture Companies. He has no business opportunities to offer any of them. Without limiting the foregoing, I want to emphasize that the applicable portion of Section 10.01, which is Section lo.ol(b)(ii)(ii), prohibits only the enticement of a Restricted Person. The concept ofenticement indicates an attempt to attract that person to an outside Niznick activity or investment. This is considerably narrower than conduct that convinces a Restricted Person to leave the employment of the Joint Venture Companies. Nevertheless, Dr. Niznick further states that he has done nothing to interfere with continued employment and will not do so during the applicable time periods. 2. Threatening to enforce legal rights: ID is moving forward to protect its valuable rights against Danaher's improper conduct, and that is not a violation of Article X or therefore relevant to the Cause Call Option. 3. Disparagement: This complaint is not of a violation of Article X and therefore is irrelevant to the Cause Call Option, but Dr. Niznick nevertheless denies that he has disparaged the Joint Venture Company or their personnel and confirms that he will not do so in the future. 4. Encouraging employees to sue the Joint Venture Companies: This is not a complaint of a violation of Article X and therefore is irrelevant to the Cause Call Option, but Dr. Niznick denies that he has encouraged any employee to file suit. Furthermore, he warned the Board on November 6, 2013, that initiating an outside investigation of Ms. Josie Jurcoane could lead to her filing a lawsuit. The Board proceeded anyway, and the outside counsel found no evidence of any improper conduct involving Ms. Jurcoane. After that investigation was concluded, he assured the Board that he and Tom Stratton had dissuaded Ms. Jurcoane from considering litigation, but actions by others with regard to Ms. Jurcoane now have caused her to seek legal counsel. Dr. Niznick offered to the Chairman of the Board to step in and mediate a resolution, which would have required a commitment by the Joint Venture Companies not to retaliate against her by { ;1}

6 KULIK GOTTES11AN & SIEGEL LLP Page 6 demoting or firing her, but he received no response. Dr. Niznick further states that he will not in the future encourage any employee of the Joint Venture Companies to file suit against them. 5. Impeding investigations: Dr. Niznick denies that he impeded the investigations, and states that in fact he promptly made himself available to the outside investigator. The investigator quickly concluded that there was no evidence of wrongdoing. This complaint also is not of a violation of Article X and therefore is irrelevant to the Cause Call Option, but Dr. Niznick nevertheless assures that he will not in the future do anything to impede any investigation by the Joint Venture Companies with which he is obligated to cooperate. 6. Sexual harassment: Dr. Niznick denies that he engaged in sexual harassment of Ms. Coletti during the November 26, 2013 Board meeting, as claimed. We further note that Ms. Coletti is not an employee of the Joint Venture Companies, and that the concept of sexual harassment therefore is inapplicable. The slip up in referring to sexual harassment, and failing to recognize the difference between the Joint Venture Companies and Ms. Coletti's employment by Danaher or a Danaher Affiliate, is further evidence of Danaher's treatment of the Joint Venture Companies as being wholly-owned Danaher subsidiaries, of its effort to subvert the interests of minority Members to those of Danaher and Danaher Affiliates, and of its violation of the rights and interests of the minority Members. Once again, this complaint is not of a violation of Article X and therefore is irrelevant to the Cause Call Option. Nevertheless, Dr. Niznick nevertheless assures that he will not engage in any frivolous conduct in the future. 7. Complaint of violations of legal ethics: Dr. Niznick denies that by informing Ms. Coletti of her ethical violations in representing the Joint Venture Companies and KKG, and in demanding on behalf of the Joint Venture Companies that she conform her conduct to her duties as a lawyer, he was responding to anything other than her conflicts of interest and breaches of fiduciary duty. Her conduct would not violate her duties as a lawyer only if the Joint Venture Companies were wholly-owned subsidiaries of Danaher, and they are not. Once again, this complaint is not of a violation of Article X and therefore is irrelevant to the Cause Call Option. 8. Recordings: We are not aware of any applicable law regarding the recording of public events, nor does the Stratton Letter identif\; such laws. In the meantime, Dr. Niznick denies he acted surreptitiously (he was fully observed by Mr. { ; 1}

7 KULIK GOTIESMi\N & SIEGEL LLP Page 7 Stratton, among others, without objection). Once again, this complaint is not of a violation of Article X and therefore is irrelevant to the Cause Call Option. Nevertheless, Dr. Niznick gives his assurance that he will not violate any applicable law in the manner alleged in that paragraph. 9. Encouraging insubordination: Dr. Niznick denies that he encouraged insubordination by any Company employee. Although this is another complaint that is not of a violation of Article X and therefore is irrelevant to the Cause Call Option, Dr. Niznick gives his assurance that he will not provide any such encouragement in the future. 10. Confidentiality: Dr. Niznick denies that he violated any applicable confidentiality provision. Furthermore, there is no confidentiality obligation in Article X and therefore this complaint is irrelevant to the Cause Call Option. Nevertheless, Dr. Niznick gives his assurance that he will not in the future violate any confidentiality obligation by which he is bound. 11. Books and records request: Dr. Niznick denies that he requested access to the books and records of the Joint Venture Companies for any reason other than to ascertain amounts due from retained earnings and to establish the value of the 5% ownership interest that Danaher is obligated to purchase on under the Mandatory Buy-Out. Once more, this complaint is of a matter that is not related to Article X and therefore is irrelevant to the Cause Call Option. Dr. Niznick provides his assurance that he will request access to books and records only as provided by applicable contracts or law (and, of course, if he were to try to exceed that authority, the Joint Venture Companies need only deny his request or seek court intervention). 12. Use of veto rights: Dr. Niznick denies that he has or will use the veto right for any purpose other than as provided in the Operating Agreements. Once more, this complaint is of a matter that is not related to Article X and therefore is irrelevant to the Cause Call Option. Dr. Niznick pmvides his assurance that he will use the veto right only as provided by applicable contracts or law (and, of course, if he vvere to try to exceed that authority, the Joint Venture Companies need only ignore his veto or seek court intervention). 13. Legal fees: Dr. Niznick denies that he caused the Joint Venture Companies to pay legal fees in defending the Zest patent litigation that were not their responsibility under the Transaction Agreement. Dr. Niznick' s obligation was limited to the sale of infringing products prior to the merger and involves only the payment of { ; I}

8 KULIK GOTTESlV1AN & SIEGEL LLP Page 8 royalties or license fees (if any) for products sold prior to the merger should such fees be found to be owing, and not to legal fees. Once more, this complaint is of a matter that is not related to Article X and therefore is irrelevant to the Cause Call Option. Nevertheless, Dr. Niznick provides his assurance that he will not cause the Joint Venture Companies in the future to pay any legal fees related to the Zest patent litigation that are not their contractual obligation. 14. Sales meeting and Board conduct: Dr. Niznick denies that his actions at sales and Board meetings have impeded the business and operations of the Joint Venture companies. He believes that his actions with regard to the administration of the Joint Venture Companies resulted in almost doubling of sales and profits in the three years he served as President. Again, this complaint is of a matter that is not related to Article X and therefore is irrelevant to the Cause Call Option. The Stratton Letter often is so generalized in its references to allegedly improper conduct by Dr. Niznick that it is difficult to understand what he thinks Dr. Niznick might have done or how any such conduct might relate to Article X of the Operating Agreements. We are glad to reply to any more specific explanation. Danaher's effort to argue that it can rescind the Consulting Agreement and invoke the Employment Call Option, and its transparent attempt to invoke the Cause Call Option by relying on false allegations of matters that would not trigger that Option even if true and without offering the contractual right to cure, can be intended only as devices for endeavoring to keep ID in the dark and to avoid honoring ID's rights. Those rights include, without limitation, the purchase by Danaher of 5% of ID's Membership Units for which payment is due today, the distribution of retained earnings also now due, and ID's right to continue its 20% ownership interest in the Joint Venture Companies under management that will not forfeit the interests of the Joint Venture Companies to those of its majority Member. Conclusion Please consider this letter as my clients' written response, pursuant to Section ll.ol(a) of the Operating Agreements, to Danaher's dispute notice. In addition, this letter shall constitute an additional dispute notice by my clients, pursuant to Section ll.ol(a), with respect to the following disputes addressed above: (1) whether Danaher's purported exercise of its right to exercise the Employment Call Option is valid; (2) whether Danaher's purported exercise of its right to exercise the Cause Call Option is valid; (3) whether Danaher has breached the Operating Agreements by purporting to terminate ID's right { ; 1}

9 KULIK GOTTESl\1AN & SIEGEL LLP Page 9 to appoint the ID Manager; and (4) whether Danaher has breached the Operating Agreements by failing to comply with its Mandatory Buy-Out Obligation. My clients again designate Dr. Niznick and Jon Konheim as the senior executives to represent them in attempting to resolve all disputes with Danaher, pursuant to Section ll.ol(a) of the Operating Agreements. Each of my clients reserves all of its rights and remedies, without condition, exception, or other limitation. Very truly yours, ])!4? DonaldS. Gottesman cc: Dane H. Butswinkas, Esq. Robert L. Kehr, Esq. (Both via only) { ;1}