EXHIBIT 4.3
STOCKHOLDERS AGREEMENT
Stockholders Agreement (this "AGREEMENT") dated as of January 31, 2000, by
and among Castle Dental Centers, Inc., a Delaware corporation (the "COMPANY"),
Xxxxxx Financial, Inc., a Delaware corporation ("XXXXXX"), Midwest Mezzanine
Fund II, L.P., a Delaware limited partnership ("MIDWEST"), and each Person whose
name appears on SCHEDULE I hereto (collectively, the "CURRENT STOCKHOLDERS").
Capitalized terms used and not otherwise defined herein have the respective
meanings ascribed thereto in Article I.
RECITALS
WHEREAS, contemporaneously with the execution and delivery of this
Agreement, Xxxxxx, Midwest and the Company will enter into a Senior Subordinated
Note Purchase Agreement (the "PURCHASE AGREEMENT");
WHEREAS, pursuant to the Purchase Agreement, Xxxxxx and Midwest will
purchase notes convertible into shares of Common Stock of the Company; and
WHEREAS, each of the Current Stockholders, Xxxxxx, Midwest and the Company
desire to enter into this Agreement to regulate certain aspects of their
relationship and to provide for, among other things, restrictions on the
transfer or other disposition of securities of the Company.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1. DEFINED TERMS.
(a) The following capitalized terms, when used in this Agreement,
have the respective meanings set forth below:
"ACQUISITION" means the acquisition of another Person by the
Company, directly or indirectly, by merger, purchase of shares of capital
stock or purchase of all or substantially all of such other Person's
assets.
"AFFILIATE" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control
with, that Person, (ii) any other Person that owns or controls 5% or more
of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that
Person or any of its Affiliates, or (iii) any director, partner, officer,
agent, employee
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or relative of such Person. For the purposes of this definition, "control"
(including with correlative meanings, the terms "controlling", "controlled
by", and "under common control with") as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person whether through
ownership of voting securities, by contract or otherwise.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a
day on which commercial banks in the State of Illinois are authorized or
required by law or executive order to remain closed.
"CALL PRICE" shall mean 150.00% of the Conversion Amount of the
Convertible Notes called.
"CHANGE OF CONTROL" shall mean (i) the direct or indirect sale,
lease, exchange or other transfer of all or substantially all of the
assets of the Company to any Person or entity or group of Persons or
entities acting in concert as a partnership or other group within the
meaning of Rule 13d-5 under the Exchange Act (a "GROUP OF PERSONS"), (ii)
the merger or consolidation of the Company with or into another
corporation, in which transaction the Company's shares of capital stock
outstanding immediately prior to such transaction would entitle the
holders thereof immediately after such transaction to ownership of less
than a majority of the equity securities of the surviving corporation or
its parent, (iii) the replacement of a majority of the Board of Directors
of the Company, over a two-year period, from the directors who constituted
the Board of Directors at the beginning of such period, except to the
extent any such replacement shall have been approved by the Board of
Directors of the Company as constituted at the beginning of such period,
(iv) a Person or Group of Persons (other than any of the Current
Stockholders, Investor Stockholders or their respective Affiliates) shall,
as a result of a tender or exchange offer, open market purchases,
privately negotiated purchases or otherwise, have become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing a majority of the combined voting
power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right
to vote in the election of directors.
"CLOSING DATE" means the date on which the transaction contemplated
by the Purchase Agreement shall have been consummated.
"COMMISSION" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"COMMON STOCK" means the common stock of the Company, par value
$.001 per share, any securities into which such Common Stock shall have
been changed or any securities resulting from any reclassification or
recapitalization of such Common Stock and all other securities of any
class or classes (however designated) of the Company the holders
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of which have the right, without limitation as to amount, after payment on
any securities entitled to a preference on dividends or other
distributions upon any dissolution, liquidation or winding up, either to
all or to a share of the balance of payments upon such dissolution,
liquidation or winding up, including without limitation, any non-voting
common stock issuable pursuant to Section 3.2 of this Agreement.
"COMPANY" means Castle Dental Centers, Inc., a Delaware corporation.
"CONVERSION AMOUNT" has the meaning ascribed to it in the
Convertible Notes.
"CONVERTIBLE NOTES" means the notes dated the date hereof initially
convertible for an aggregate of 442,880 shares of Common Stock, issued to
Xxxxxx and Midwest, and any securities issued upon subdivision or
combination, or in substitution, thereof.
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the dollar volume-weighted average trading price per
share of Common Stock (as reported by Bloomberg through its "Volume at
Price" function) for the ten (10) consecutive trading days prior to such
date; provided that if on any such date the shares of Common Stock are not
listed or admitted for trading on any national securities exchange or
quoted by NASDAQ or a similar service, the Current Market Price for a
share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company. If the
Board of Directors is unable to determine the fair market value, or if the
Majority Holders disagree with the Board's determination of fair market
value by written notice delivered to the Company within five Business Days
after the Board's determination thereof is communicated in writing to the
holders of Convertible Notes, then the Company and the Majority Holders
shall select an Independent Financial Expert which shall determine such
fair market value. If the Company and the Majority Holders are unable to
agree upon an Independent Financial Expert within fifteen Business Days
after the notice by the Majority Holders, each of the Company and the
Majority Holders shall select an Independent Financial Expert within five
Business Days following the expiration of such fifteen Business Day
period, and these Independent Financial Experts shall select a third
Independent Financial Expert, and the third Independent Financial Expert
shall determine such fair market value. The determination of fair market
value by such Independent Financial Expert shall be final, binding and
conclusive on all parties. All costs and fees of any of this Independent
Financial Expert(s) retained in accordance with the foregoing shall be
borne by the Company.
"CURRENT STOCKHOLDER" means each Person whose name appears on
SCHEDULE I hereto and each of their Permitted Transferees and any other
Person who becomes a "Current Stockholder" by execution and delivery of a
Joinder Agreement. The parties acknowledge and agree that no Investor
Stockholder shall be included in the definition of the term "Current
Stockholder" for purposes of this Agreement.
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"EXEMPTED SECURITIES" means the 100,000 shares of Common Stock
acquired by Xxxx X. Xxxxxx, Xx. in September 1998 and the 103,000 shares
of Common Stock acquired by Xxxx X. Xxxxxx, D.D.S. and Xxxxxxx Xxxxxx,
jointly in September 1998.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"FULLY DILUTED BASIS" means, with respect to the calculation of the
number of shares of Common Stock, (i) all shares of Common Stock
outstanding at the time of determination, and (ii) all shares of Common
Stock issuable upon the conversion, exchange or exercise of all securities
(including the Convertible Notes) convertible, exchangeable or exercisable
for or into shares of Common Stock regardless of whether such securities
are then convertible, exchangeable or exercisable.
"GAAP" means generally accepted accounting principles, consistently
applied.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"INVESTOR STOCKHOLDERS" means, so long as any such Person shall hold
Restricted Securities, Xxxxxx, Midwest and any Person to whom Xxxxxx or
Midwest shall Transfer any Restricted Securities other than pursuant to an
Open Market Sale.
"JOINDER AGREEMENT" means a Joinder Agreement substantially in the
form attached hereto as EXHIBIT A.
"LIEN" means any lien, claim, charge, encumbrance, security interest
or other adverse claim of any kind, other than any restrictions imposed
under this Agreement or under federal or state securities laws.
"MAJORITY HOLDERS" means, as of any particular date, the holders of
a majority of the outstanding Redeemable Securities based upon the sum of
the total number of Redeemable Shares then outstanding and the total
number of shares of Common Stock issuable with respect to any Convertible
Notes then outstanding.
"OPEN MARKET SALE" means a sale of shares of Common Stock pursuant
to a "brokers' transaction" within the meaning of Section 4(4) of the
Securities Act or in a transaction directly with a "market maker", as that
term is defined in Section 3(1) (38) of the Exchange Act.
"OPEN MARKET SALES THRESHOLD" means, as of any particular date, a
number of shares of Restricted Securities equal to the lesser of (i) 1% of
the total number of shares of Common Stock then outstanding, without
giving effect to the conversion, exchange or exercise of any securities,
and (ii) 50% of the average weekly trading volume of the
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Company's Common Stock for the four consecutive calendar weeks immediately
prior to the week in which such date occurs.
"PERMITTED TRANSFEREE" means (i) the spouse or lineal descendants of
any Current Stockholder, (ii) any trust for the benefit of such Current
Stockholder or the benefit of the spouse or lineal descendants of such
Current Stockholder, any corporation or partnership in which such Current
Stockholder, the spouse and the lineal descendants of such Current
Stockholder are the direct and beneficial owners of all of the equity
interests (provided such Current Stockholder, spouse and lineal
descendants agree in writing to remain the direct and beneficial owners of
all of the equity interests thereof), (iii) the personal representative of
such Current Stockholder upon such Current Stockholder's death for
purposes of administration of such Current Stockholder's estate or upon
such Current Stockholder's incompetency for purposes of the protection and
management of the assets of such Current Stockholder, or (iv) with respect
to a Current Stockholder that is a partnership, trust, or other entity,
any partner, beneficiary, or individual that is a beneficial owner of such
entity as of the date hereof; PROVIDED, HOWEVER, in each case, that such
transferee must agree to be bound by the terms of this Agreement by
executing a Joinder Agreement.
"PERSON" means an individual, partnership, corporation, trust,
unincorporated organization, joint venture, government (or agency or
political subdivision thereof) or any other entity of any kind.
"REDEEMABLE SECURITIES" means the Convertible Notes and the
Redeemable Shares.
"REDEEMABLE SHARES" means, as of any given date of determination,
any shares of Common Stock beneficially owned by an Investor Stockholder
that have been issued on or prior to such date upon conversion of the
Convertible Notes and any securities issued with respect thereto as a
result of any stock dividend, stock split, reclassification,
recapitalization, reorganization, merger, consolidation or similar event
or upon the conversion, exchange or exercise thereof.
"REDEMPTION PRICE" means: (i) with respect to any Conversion Amount
of the Convertible Notes tendered for redemption, an aggregate amount
equal to the greater of (A)(I) the number of shares of Common Stock
issuable upon conversion of such Conversion Amount as of the date of the
Redemption Notice, multiplied by (II) the Current Market Price, or (B) the
Conversion Amount of the Convertible Notes tendered for redemption, and
(ii) with respect to any Redeemable Shares tendered for redemption, an
aggregate amount equal to (A) the number of Redeemable Shares tendered for
redemption, multiplied by (B) the Current Market Price, provided, however,
that in the case of an event described in clause (i)(A) of the definition
of "Triggering Event", the Redemption Price shall equal the Conversion
Amount of the Convertible Notes tendered for redemption.
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"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement, dated as of the date hereof, among the Company, Xxxxxx and
Midwest as the same may be amended from time to time.
"REGULATORY PROBLEM" means any set of facts or circumstances wherein
any Investor Stockholder reasonably believes it is not entitled to hold,
or exercise any significant right with respect to, the Common Stock.
"RESTRICTED SECURITIES" means the Common Stock, Convertible Notes,
the Common Stock issued or issuable upon conversion of the Convertible
Notes, and any securities issued with respect thereto as a result of any
stock dividend, stock split, reclassification, recapitalization,
reorganization, merger, consolidation or similar event or upon the
conversion, exchange or exercise thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which an aggregate of 50% or more of the outstanding capital stock having
ordinary voting power to elect a majority of the board of directors of
such corporation (irrespective of whether, at the time, capital stock of
any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned by such Person and/or one or more
Subsidiaries of such Person.
"TRANSFER" means, directly or indirectly, any sale, transfer,
assignment, hypothecation, pledge or other disposition of any Restricted
Securities or any interests therein.
"TRIGGERING EVENT" means the occurrence of any of the following:
(i) with respect to the Convertible Notes and Redeemable Shares:
(A) January 31, 2007;
(B) any prepayment of principal pursuant to any of the
Subordinated Notes (as defined in the Purchase
Agreement); or
(C) the occurrence of an Event of Default (as such term is
defined in the Purchase Agreement); or
(ii) with respect to the Redeemable Shares only:
(A) a Change of Control;
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(B) the Common Stock failing to be traded or listed for
quotation on The New York Stock Exchange, American Stock
Exchange, Nasdaq National Market or Nasdaq Smallcap
Market; or
(C) after January 31, 2003 and prior to January 31, 2004,
the average weekly trading volume of the Company's
Common Stock for four consecutive calendar weeks falling
below 25,000 shares, or after January 31, 2004, the
average weekly trading volume of the Company's Common
Stock for four consecutive calendar weeks falling below
50,000 shares (in both cases, subject to equitable
adjustment with respect to any stock split, stock
dividend, recapitalization or other similar event).
(b) Unless otherwise provided herein, all accounting terms used in
this Agreement shall be interpreted in accordance GAAP as in effect from time to
time.
ARTICLE II
TRANSFERS OF RESTRICTED SECURITIES
2.1. RESTRICTIONS GENERALLY; SECURITIES ACT.
(a) Each Current Stockholder agrees that it will not, directly or
indirectly, Transfer any Restricted Securities except in accordance with the
terms of this Agreement. Each Investor Stockholder agrees that it will not,
directly or indirectly, Transfer any Restricted Securities except in accordance
with Section 2.1(b) of this Agreement. Any attempt to Transfer any Restricted
Securities not in accordance with the terms of this Agreement shall be null and
void and neither the issuer of such securities nor any transfer agent of such
securities shall give any effect to such attempted Transfer in its stock
records.
(b) Each Current Stockholder and Investor Stockholder agrees that,
in addition to the other requirements herein relating to Transfer, it will not
Transfer any Restricted Securities except pursuant to an effective registration
statement under the Securities Act, or upon receipt by the Company of an opinion
of counsel to the Current Stockholder or Investor Stockholder, as the case may
be, reasonably satisfactory to the Company or counsel to the Company, or a
no-action letter from the Commission addressed to the Company, to the effect
that no registration statement is required because of the availability of an
exemption from registration under the Securities Act.
2.2. LEGEND.
(a) Each certificate representing Restricted Securities other than
Exempted Securities shall be endorsed with the following legends and such other
legends as may be required by applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, OR ANY STATE SECURITIES LAWS. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND ANY INTEREST THEREIN MAY NOT BE SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND APPLICABLE STATE SECURITIES LAWS OR (ii) AN EXEMPTION FROM
REGISTRATION UNDER SUCH ACT.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN A STOCKHOLDERS AGREEMENT, DATED AS OF JANUARY
31, 2000. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT
THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
(b) The legends set forth above shall be removed and the Company
shall issue a certificate without such legends to the holder of the Restricted
Securities upon which it is stamped, if, unless otherwise required by state
securities laws, (i) a registration statement with respect to such Restricted
Securities shall have become effective under the Securities Act, and such
Restricted Securities shall have been disposed of in accordance with such
registration statement, (ii) in connection with a Transfer permitted under or
made in compliance with this Agreement, such holder provides the Company, at the
Company's expense, with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Restricted
Securities may be made without registration under the Securities Act, or (iii)
the Restricted Securities are not subject to restrictions on Transfer under this
Agreement and can be sold pursuant to Rule 144 without any restriction as to the
number of securities acquired as of a particular date that can then be
immediately sold.
2.3. TAG-ALONG RIGHTS.
(a) If any Current Stockholder (the "TRANSFEROR") proposes to
Transfer any Restricted Securities ("TRANSFEROR SHARES") to any Person (the
"BUYER"), other than to a Permitted Transferee or pursuant to an Open Market
Sale, then, as a condition to such Transfer, the Transferor shall cause the
Buyer to include an offer (the "TAG-ALONG OFFER") to each of the Investor
Stockholders (collectively, the "OFFEREES"), to purchase from each Offeree, at
the option of each Offeree, up to a number of shares of Restricted Securities
determined in accordance with Section 2.3(b), on the same terms and conditions
as are applicable to the Transferor Shares. The Transferor shall provide a
written notice (the "TAG-ALONG NOTICE") of the Tag-Along Offer to each Offeree,
which may accept the Tag-Along Offer by providing a written notice of acceptance
of the Tag-Along Offer to the Transferor within thirty days of delivery of the
Tag-Along Notice.
(b) Each Offeree shall have the right (a "TAG-ALONG RIGHT") to sell
pursuant to the Tag-Along Offer up to a number of shares of Restricted
Securities equal to: (i) the number of shares of Restricted Securities that the
Buyer is willing to purchase from the Transferor and the Offerees, in the
aggregate, multiplied by (ii) a fraction, the numerator of which is the number
of
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Restricted Securities owned by such Offeree and the denominator of which is the
number of Restricted Securities owned by the Transferor and all of the Offerees
exercising their respective Tag-Along Rights; PROVIDED, HOWEVER, that, if all
Common Stock beneficially owned by all Offerees is permitted to be sold to the
Buyer, the Transferor shall be entitled to sell the number of shares set forth
in the Tag-Along Offer which any Offeree has chosen not to sell without
providing additional notice to the Offerees.
(c) Upon exercise of a Tag-Along Right, at the closing of the
proposed Transfer (which date, place and time shall be designated by the
Transferor and provided to the Offerees in writing at least five Business Days
prior thereto), each Offeree shall deliver to the Buyer a certificate or
certificates representing the shares of Common Stock to be sold or otherwise
disposed of pursuant to the Tag-Along Offer by such Offeree, free and clear of
all Liens, against delivery of the purchase price therefor; PROVIDED that
neither the Transferor nor any Offeree shall sell any Restricted Securities to
any Buyer if such Buyer does not purchase, simultaneously and pursuant to the
same terms, all of the Restricted Securities which the Offerees are entitled to
sell to such Buyer pursuant to Section 2.3(b).
In the event that, following delivery of a Tag-Along Notice, the
30-day period set forth in Section 2.3(a) shall have expired and the Transferor
shall not have received a written notice from any Offeree pursuant to Section
2.3(a), the Transferor shall have the right, during the remainder of the 120-day
period following the expiration of such 30-day period, to sell the Transferor
Shares to the proposed Buyer, at a price not less than the price within the
Tag-Along Offer and on terms no more favorable to such proposed Buyer than the
terms of the Tag-Along Offer.
(d) Promptly after the consummation of the sale or other disposition
of the Transferor Shares and shares of Common Stock of the Offerees to the Buyer
pursuant to the Tag- Along Offer, the Transferor shall notify the Offerees
thereof, and the Buyer shall pay to the Transferor and each of the Offerees
their respective portions of the sales price of the shares of Common Stock sold
or otherwise disposed of pursuant thereto, and shall furnish such other evidence
of the completion of such sale or other disposition and the terms thereof as may
be reasonably requested by the Offerees.
(e) The Exempted Securities shall not be subject to the provisions
of Section 2.3 hereof.
2.4. NOTICE OF OPEN MARKET SALES. In any ninety-day period, a Current
Stockholder may not sell a number of shares of Restricted Securities in excess
of the Open Market Sales Threshold then in effect unless and until all of the
following criteria shall have been met: (a) all of the Restricted Securities
then held by the Investor Stockholders either are (i) then registered for resale
under the Securities Act on a Form S-2 or S-3 (or any successor or similar
short-form registration statement) that remains effective as of the date of such
sale and during the ten Business Days prior thereto, or (ii) freely transferable
in Open Market Sales, other than restrictions with respect to the number of
securities that can be sold pursuant to Rule 144; and (b) no less than ten
Business Days prior to the placing with a broker of an order to execute such
sale or the execution
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directly with a market maker of such sale, such Current Stockholder shall have
filed with the Commission a notice of proposed sale on Form 144 with respect to
such sale and shall have delivered a copy thereof to each of the Investor
Stockholders; provided, however, that the Exempted Securities shall not be
subject to Section 2.4 hereof.
ARTICLE III
COMPANY OBLIGATIONS
3.1. REDEMPTION RIGHT. From the date hereof until January 31, 2009, each
Investor Stockholder shall have the following redemption rights:
(a) In addition to all other rights of any Investor Stockholder
contained herein, within 60 days following a Triggering Event any Investor
Stockholder may notify the Company in writing (the "REDEMPTION NOTICE") of such
Investor Stockholder's desire to cause the Company to redeem all or any portion
of the Redeemable Securities held by such Investor Stockholder for their
Redemption Price. Furthermore, following an event described in clause (ii) of
the definition of a "Triggering Event", but prior to an event described in
clause (i) of the definition of a "Triggering Event", an Investor Stockholder
may convert all or any portion of the Conversion Amount of any Convertible Note
for the purpose of tendering for redemption any shares of Common Stock issuance
upon such exercise pursuant to this Section 3.1.
(b) If the Company receives a Redemption Notice pursuant to Section
3.1(a), it shall deliver to the tendering Investor Stockholders in writing
within thirty days of the receipt by the Company of the Redemption Notice, a
notice stating: (i) the date as of which such redemption shall occur which date
(the "REDEMPTION CLOSING") shall be not less than ten days nor more than thirty
days following the date of such notice, but in any event prior to January __,
2009; (ii) the Redeemable Securities to be redeemed from the such Investor
Stockholders and the Redemption Price (which shall be calculated as of the date
of the Redemption Notice) and (iii) the place or places where the Redeemable
Securities are to be surrendered for payment, subject to Section 3.1(e) below
with respect to any Convertible Notes.
(c) If the Company fails to pay the Redemption Price on the date
fixed for redemption, in addition to any other remedies available to the
Investor Stockholders, the Company shall also pay interest thereon at the rate
of 1.5% per month (prorated for partial months) until such Redemption Price, any
interest thereon and all accrued and unpaid interest on the Convertible Notes
shall have been paid in full.
(d) At the Redemption Closing, the tendering Investor Stockholders
shall deliver to the Company any Redeemable Shares being tendered for
redemption, in each case, duly endorsed for transfer to the Company, and subject
to Section 3.1(e), any Convertible Notes being tendered for redemption, and the
Company shall deliver to each tendering Investor Stockholder a cashier's or
certified check payable to such Investor Stockholder in an amount equal to the
Redemption Price payable thereto plus all accrued and unpaid interest on the
Convertible Notes held by such Investor Stockholder being tendered for
redemption.
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(e) Notwithstanding anything to the contrary set forth herein, upon
redemption of any portion of the Convertible Notes in accordance with the terms
hereof, the Investor Stockholders shall not be required to physically surrender
any of the Convertible Notes to the Company unless the full Conversion Amount
then outstanding with respect thereto is being redeemed. The Company shall
maintain records showing the Conversion Amount so redeemed and the dates of such
redemptions or shall use such other method, reasonably satisfactory to the
Investor Stockholders, so as not to require physical surrender of any
Convertible Note upon any such partial redemption. Notwithstanding the
foregoing, if any portion of a Convertible Note is redeemed as aforesaid,
thereafter, the holder thereof may not transfer a Convertible Note unless such
Investor Stockholder first physically surrenders such Convertible Note to the
Company, whereupon the Company will forthwith issue and deliver upon the order
of such Investor Stockholder a new Convertible Note (a "NEW CONVERTIBLE NOTE")
of like tenor, registered as such Investor Stockholder may request, representing
in the aggregate the remaining Conversion Amount represented by the Convertible
Note. The Investor Stockholders and any assignees, by acceptance of the
Convertible Notes or any New Convertible Note, acknowledge and agree that, by
reason of the provisions of this paragraph, following redemption of any portion
of any Convertible Note, the Conversion Amount represented by a New Convertible
Note may be less than the principal amount set forth on the face of the
corresponding Convertible Note dated January 31, 2000.
(f) The Company shall not (and shall not permit any Affiliate of the
Company to) hereafter enter into any contract or other consensual arrangement
that by its terms restricts the Company's ability to redeem any of the
Redeemable Securities, except as provided in the Senior Credit Agreement and the
Subordination Agreement (as defined in the Purchase Agreement).
3.2. REGULATORY PROBLEM. In the event an Investor Stockholder determines
that it has a Regulatory Problem, such Investor Stockholder shall have the right
to transfer its entire interest in the Company without regard to any restriction
on transfer set forth in this Agreement (other than securities laws
restrictions), and the Company agrees to take all such actions as are reasonably
requested by such Investor Stockholder in order to (i) effectuate and facilitate
any transfer by such Investor Stockholder of its interests to any person
designated by such Investor Stockholder (subject to compliance with applicable
federal and state securities) or (ii) permit such Investor Stockholder (or any
Affiliate thereof) to exchange all or any portion of the Common Stock then held
by, or issuable to, it on a "share-for-share" basis for interests of a class of
non- voting common stock of the Company, which non-voting common stock shall be
identical in all respects to such Common Stock, except such stock shall be
non-voting common stock and shall be convertible into voting common stock on
such terms as are requested by such Investor Stockholder in light of regulatory
considerations then prevailing. Company and each Current Stockholder and each
Investor Stockholder agree to enter into such additional agreements, adopt such
amendments hereto and to the Certificate of Incorporation of the Company and to
take such additional actions as are reasonably requested by such Investor
Stockholder in order to effectuate the intent of the foregoing.
3.3. APPROVAL OF ACQUISITIONS. During the term of this Agreement, any
Acquisition by the Company of another Person shall require the approval of at
least two-thirds of the members of the board of directors then in office.
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ARTICLE IV
OTHER AGREEMENTS
4.1. TERMINATION OF SECURITYHOLDERS AGREEMENT. Each of the Company and the
Current Stockholders hereby agrees that the Amended and Restated Securityholders
Agreement, dated as of June 16, 1997, and as amended to date, among the Company,
Xxxx X. Xxxxxx, D.D.S., P.C. and the Current Stockholders, is hereby terminated
and shall be of no further force and effect.
4.2. CONSENT TO REGISTRATION RIGHTS AGREEMENT. Each of the Current
Stockholders hereby acknowledges that the Company is entering into the
Registration Rights Agreement with the Investor Stockholders and that the
Registration Rights Agreement conflicts with the terms of the Amended and
Restated Registration Rights Agreement, dated as of June 16, 1997, and as
amended to date, among the Company and the Current Stockholders (the "EXISTING
REGISTRATION AGREEMENT") and grants preferential registration rights to the
Investor Stockholders over those registration rights previously granted to the
Current Stockholders pursuant to the Existing Registration Rights Agreement.
Each of the Current Stockholders hereby consents to the Company entering into
the Registration Rights Agreement and to the granting by the Company thereunder
of such preferential registration rights and agrees that all registration rights
held by such Current Stockholder shall be subject to the terms of the
Registration Rights Agreement.
4.3. VOTING AGREEMENTS.
(a) Each of the Current Stockholders hereby agrees that as long as
Delaware State Employees' Retirement Fund, Declaration of Trust for Defined
Benefit Plans of ICI American Holdings Inc. and Declaration of Trust for Defined
Benefit Plans of Zeneca Holdings Inc. (collectively, the "PECKS INVESTORS")
beneficially own in the aggregate at least 4.4 percent of the fully diluted
outstanding shares of Common Stock, the Current Stockholders shall take all
action within their respective power, including without limitation, the voting
of capital stock of the Company, required to cause the Board of Directors of the
Company to at all times consist of at least 4 and no more than 7 members, one of
whom shall be designated by the Pecks Investors (the "DESIGNEE"). Each of the
Current Stockholders agrees to vote all of its shares of Common Stock which are
outstanding at all meetings of stockholders of the Company (or any written
consents in lieu thereof) in which directors are elected in favor of the
Designee.
(b) The Company agrees to place on the agenda for its next annual
meeting of stockholders, which will take place on or before June 1, 2000 (the
"ANNUAL MEETING"), a proposal (the "PROPOSAL") to amend its certificate of
incorporation (the "AMENDMENT") to authorize a class of no less than 500,000
shares of non-voting Common Stock of the Company which will be reserved for
issuance to the Investor Stockholders in accordance with Section 2(c) of the
Convertible Note or Section 3.2 of this Agreement. Furthermore, the Company
agrees to recommend to its stockholders that they vote in favor of, and to
solicit proxies for the purpose of
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voting in favor of, the Proposal at the Annual Meeting. In furtherance of the
foregoing, each of the Current Stockholders agrees to take all actions within
their respective power, including without limitation, the voting of all capital
stock of the Company, required to approve the Proposal, and following such
approval, the Company shall cause the Amendment to be promptly filed with the
Secretary of State of the State of Delaware, and the Company will promptly
deliver to each Investor Stockholder a copy of the Amendment, certified by the
Secretary of State of the State of Delaware, following its filing therewith.
(c) Each of the Current Stockholders hereby agrees that upon the
request of Xxxx X. Xxxxxx, D.D.S. or Xxxxxxx Xxxxxx, the Current Stockholders
shall take all action within their respective power, including without
limitation, the voting of capital stock of the Company, required to cause the
Company to exercise its right under Section 2.2 of the Registration Rights
Agreement to cause the registration of the Registrable Securities (as defined in
the Registration Agreement).
ARTICLE V
CALL RIGHT
5.1. CALL RIGHT. From the date hereof until January 31, 2009, the Company
shall have the following call rights:
(a) At any time within 30 days after the consummation of a Change of
Control of the type described in any of clauses (i), (ii) or (iv) of the
definition of Change of Control, the Company may notify each Investor
Stockholder in writing (the "CALL NOTICE") of the Company's desire to call for
redemption all and not any lesser portion of the Convertible Notes held by such
Investor Stockholder for their Call Price. Following the Call Notice, an
Investor Stockholder shall retain the right to convert all or any portion of the
Conversion Amount of any Convertible Note into shares of Common Stock, or tender
all or any portion of the Conversion Amount of any Convertible Note or the
resulting Redeemable Shares of Common Stock for redemption pursuant to Section
3.1 of this Agreement, at any time prior to the Call Closing (defined below).
(b) The Call Notice shall state: (i) the date as of which such call
shall occur (the "CALL CLOSING"), which date shall not be earlier than the
sixtieth (60th) day following the Call Notice; (ii) the Convertible Notes to be
called from each Investor Stockholder and the Call Price (which shall be
calculated as of the date of the Call Notice) and (iii) the place or places
where the Convertible Notes are to be surrendered for payment.
(c) At the Call Closing, the tendering Investor Stockholders shall
deliver to the Company all Convertible Notes called for redemption and which
have not been converted into shares of Common Stock or tendered for redemption
pursuant to Section 2.1 of this Agreement, in each case, duly endorsed for
transfer to the Company and the Company shall deliver to each tendering Investor
Stockholder a cashier's or certified check payable to such Investor Stockholder
in an amount equal to the Call Price payable thereto plus all accrued and unpaid
interest on the
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Convertible Notes held by such Investor Stockholder being tendered for
redemption pursuant to this Section 5.1.
ARTICLE VI
MISCELLANEOUS
6.1. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
(b) Any legal action or proceeding with respect to this agreement
shall be brought in the courts of the State of Illinois or of the United States
of America for the northern district of Illinois, and, by execution and delivery
of this agreement, each of the Company and each Stockholder and Investor
Stockholder hereby accepts for itself and (to the extent permitted by law) in
respect of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each of the Company and each Current Stockholder and Investor
Stockholder hereby irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of any
such action or proceeding in such respective jurisdictions.
(c) Nothing herein shall affect the right of any holder to serve
process in any other manner permitted by law.
(d) The Company and each Current Stockholder and Investor
Stockholder hereby (i) irrevocably and unconditionally waive, to the fullest
extent permitted by law, trial by jury in any legal action or proceeding
relating to this agreement and for any counterclaim therein; (ii) irrevocably
waive, to the maximum extent not prohibited by law, any right it may have to
claim or recover in any such litigation any special, exemplary, punitive or
consequential damages, or damages other than, or in addition to, actual damages;
(iii) certify that no party hereto nor any representative or agent of counsel
for any party hereto has represented, expressly or otherwise, or implied that
such party would not, in the event of litigation, seek to enforce the foregoing
waivers, and (iv) acknowledge that it has been induced to enter into this
agreement and the transactions contemplated hereby among other things, the
mutual waivers and certifications contained in this Section 5.1.
6.2. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes any and all previous oral or written communications, representations
or agreements. This Agreement may be amended, modified or supplemented only by a
written instrument duly executed by the Company, the Current Stockholders and
the Investor Stockholders.
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6.3. TERM. Sections 2.3 and 2.4, Article III, Section 4.3(b) and Article V
of this Agreement will terminate ("Partial Termination") at the earlier to occur
of (a) such time as the Restricted Securities owned by the Investor
Stockholders, in the aggregate, represent less than both (i) 1% of the Company's
outstanding shares of Common Stock on a Fully Diluted Basis, and (ii) the
average weekly trading volume of the Company's Common Stock for four consecutive
calendar weeks and (b) immediately following the consummation of the Call
Closing or its scheduled date if all Convertible Notes are converted prior to
such date. Following a Partial Termination, the remaining provisions of this
Agreement will terminate when the Pecks Investors beneficially own in the
aggregate less than 4.4 percent of the fully diluted outstanding shares of
Common Stock.
6.4. INSPECTION. For so long as this Agreement shall remain in effect,
this Agreement shall be made available for inspection by any Current Stockholder
or Investor Stockholder at the principal executive offices of the Company.
6.5. RECAPITALIZATION, EXCHANGES, ETC., AFFECTING RESTRICTED SECURITIES.
The provisions of this Agreement shall apply, to the full extent set forth
herein with respect to the Restricted Securities, to any and all shares of the
Company capital stock or any successor or assign of the Company (whether by
merger, consolidation, sale of assets, or otherwise, including shares issued by
a parent corporation in connection with a triangular merger) which may be issued
in respect of, in exchange for, or in substitution of, Restricted Securities and
shall be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, reclassifications and the like occurring after the date hereof.
6.6. WAIVER. No waiver by any party of any term or condition of this
Agreement, in one or more instances, shall be valid unless in writing, and no
such waiver shall be deemed to be construed as a waiver of any subsequent breach
or default of the same or similar nature. Any rights of the Investor
Stockholders hereunder may be waived by the affirmative vote of the Majority
Holders and each of Xxxxxx and Midwest so long as such Investor Stockholders own
any Restricted Securities.
6.7. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, personal representatives, successors
and permitted assigns, as the case may be; PROVIDED, HOWEVER, that nothing
contained herein shall be construed as granting any Current Stockholder the
right to transfer any of its Restricted Securities except in accordance with
this Agreement.
6.8. REMEDIES. In the event of a breach by any party to this Agreement of
its obligations under this Agreement, the loss of any right as provided in this
Agreement as a result of such breach shall not be the sole and exclusive remedy
of any party injured by such breach. Any such injured party will be entitled to
specific performance of its rights under this Agreement, in addition to being
entitled to exercise all rights granted by law, including recovery of damages.
The parties agree that the provisions of this Agreement shall be specifically
enforceable, it being
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agreed by the parties that the remedy at law, including monetary damages, for
breach of any such provision will be inadequate compensation for any loss and
that any defense in any action for specific performance that a remedy at law
would be adequate is waived.
6.9. INVALID PROVISIONS. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
6.10. HEADINGS. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.
6.11. FURTHER ASSURANCES. Each party hereto shall cooperate and shall take
such further action and shall execute and deliver such further documents as may
be reasonably requested by any other party in order to carry out the provisions
and purposes of this Agreement.
6.12. GENDER. Whenever the pronouns "he" or "his" are used herein they
shall also be deemed to mean "she" or "hers" or "it" or "its" whenever
applicable words in the singular shall be read and construed as though in the
plural and words in the plural shall be construed as though in the singular in
all cases where they would so apply.
6.13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
6.14. NOTICES. All notices and other communications provided for herein
(including, without limitation, any modifications of, or waivers or consents
under, this Agreement) shall be given or made by telex, telecopy, courier or
U.S. Mail or in writing and telexed, telecopied, mailed or delivered to the
intended recipient at the address specified below; or, as to any party, at such
other address as shall be designated by such party in a notice to each other
party:
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If to the Company or the Current Stockholders:
Castle Dental Centers, Inc.
0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Xxxx X. Xxxxxx, Xx.
Telecopy: (000) 000-0000
If to Xxxxxx:
Xxxxxx Financial, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Account Manager
Corporate Finance
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Financial, Inc.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Legal Services
Corporate Finance Group
Telecopy: (000) 000-0000
If to Midwest:
Midwest Mezzanine Fund II, L.P.
000 Xxxxx XxXxxxx Xxxxxx, 00xx xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attention: J. Xxxxx Xxxxxx
Telecopy: (000) 000-0000
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted, if transmitted before 1:00 p.m.
local time on a Business Day (otherwise on the next succeeding Business Day) by
telex or telecopier and evidence or confirmation of receipt is obtained, or
personally delivered or, in the case of a mailed notice, three (3) Business Days
after the date deposited in the mails, postage prepaid, in each case given or
addressed as aforesaid.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Stockholders Agreement as of the date first above written.
XXXXXX FINANCIAL, INC.,
A DELAWARE CORPORATION
By :_________________________________
MIDWEST MEZZANINE FUND II, L.P.,
A DELAWARE LIMITED PARTNERSHIP
By: ABN AMRO Mezzanine Management
II, L.P., its general partner
By: ABN AMRO Mezzanine Management
II, Inc., its general partner
By :_________________________________
J. Xxxxx Xxxxxx
Senior Vice President
CASTLE DENTAL CENTERS, INC.,
A DELAWARE CORPORATION
By :_________________________________
Xxxx X. Xxxxxx, Xx.
Chairman and Chief Executive
Officer
STOCKHOLDERS
[SEE FOLLOWING PAGE]
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Exhibit A
FORM OF JOINDER AGREEMENT
Castle Dental Centers, Inc.
0000 Xxxx Xxx Xxxx., Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Gentlemen:
In consideration of the transfer to the undersigned of ________ shares of
Common Stock, par value $.001 per share, [DESCRIBE ANY OTHER SECURITY BEING
TRANSFERRED] of Castle Dental Center, Inc., a Delaware corporation (the
"Company"), the undersigned represents that it is a Permitted Transferee of
[INSERT NAME OF TRANSFEROR] and agrees that, as of the date written below, [HE]
[SHE] [IT] shall become a party to, and a Permitted Transferee as defined in,
that certain Stockholders Agreement dated as of January 31, 2000, as such
agreement may have been amended from time to time (the "Agreement"), among the
Company and the persons named therein, and as a Permitted Transferee shall be
fully bound by, and subject to, all of the covenants, terms and conditions of
the Agreement that were applicable to the undersigned's transferor, as though an
original party thereto and shall be deemed a Current Stockholder for purposes
thereof.
Executed as of the _________ day of __________________________________.
TRANSFEREE:
Address:
ACKNOWLEDGED AND ACCEPTED:
CASTLE DENTAL CENTERS, INC.
By:___________________________________________
Name:___________________________________
Title:__________________________________
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