Exhibit 10.2
FORM OF
WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAS BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, NOR THE
SECURITIES LAWS OF ANY STATE. NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
AT ANY TIME, EXCEPT UPON (1) SUCH REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF
THIS WARRANT OF AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT
REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE
ISSUER OF THIS WARRANT OF OTHER EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER,
TO THE EFFECT THAT ANY SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE
IN VIOLATION OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR OTHER
APPLICABLE SECURITIES LAWS OF ANY STATE, OR ANY RULES OR REGULATIONS PROMULGATED
THEREUNDER.
CASTLE DENTAL CENTERS, INC.
WARRANT TO PURCHASE SERIES A-2 PREFERRED STOCK
Warrant No.: Number of Shares: ____
Date of Issuance: July 19, 2002
Castle Dental Centers, Inc., a Delaware corporation (the "Company"), hereby
certifies that, for value received, ____________________, the registered holder
hereof or its permitted assigns, is entitled, subject to the terms set forth
below, to purchase from the Company upon surrender of this Warrant, at any time
or times on or after the date hereof, but not after 11:59 P.M. New York Time on
the Expiration Date (as defined herein), ________________ (_______) fully paid
and nonassessable shares of the Company's Series A-2 Convertible Preferred Stock
(the "Preferred Stock"), $.001 par value per share (the "Warrant Shares"), at
the purchase price per share equal to the Warrant Exercise Price (as defined
herein).
Section 1. Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
(a) "Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlled by, controlling or under common control with such first
Person, (ii) any director or officer of such first Person or of any Person
referred to in clause (i) above and (iii) if any Person in clause (i) above is
an individual, any member of the immediate family (including parents, spouse and
children) of such individual or any trust whose principal beneficiary is such
individual or one (1) or more members of such immediate family and any Person
who is controlled by any such member or trust. For purposes of this definition,
any Person which owns directly or indirectly ten percent (10%) or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or ten percent (10%) or more of the partnership
or other ownership interests of any other Person (other than as a limited
partner of such other Person) will be deemed to "control" (including, with its
correlative meanings, "controlled by" and "under common control with") such
corporation or other Person.
(b) "Business Day" means any day other than Saturday, Sunday or other day
on which commercial banks in the City of New York are authorized or required by
law to remain closed.
(c) "Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting and/or non-voting) of
corporate stock, and (ii) with respect to any other Person, any and all
partnership, limited partnership, limited liability company or other equity
interest of such Person, whether outstanding on the date of the Warrant or
issued after the date of the Warrant, and any and all rights (other than any
evidence of indebtedness) or warrants exercisable or exchangeable for or
convertible into such capital stock.
(d) "Closing Bid Price" means, for any security as of any date, the last
closing bid price for such security on the Principal Market as reported by
Bloomberg Financial Markets ("Bloomberg"), or, if the Principal Market begins to
operate on an extended hours basis and does not designate the closing bid price,
then the last bid price of such security at 4:00 p.m. New York Time (or such
other time as the Principal Market publicly announces is the official close of
trading) as reported by Bloomberg, or, if the foregoing do not apply, the last
closing bid price of such security in the over-the-counter market on the
electronic bulletin board for such security as reported by Bloomberg, or, if no
closing bid price is reported for such security by Bloomberg, the last closing
trade price for such security as reported by Bloomberg, or, if no last closing
trade price is reported for such security by Bloomberg, the average of the bid
prices of any market makers for such security as reported in the "pink sheets"
by the National Quotation Bureau, Inc. If the Closing Bid Price cannot be
calculated for such security on such date on any of the foregoing bases, the
Closing Bid Price of such security on such date shall be the fair market value
(the "Fair Market Value") as mutually determined by the Company and a Majority
Interest. If the Company and a Majority Interest are unable to agree upon the
Fair Market Value, then such dispute shall be resolved pursuant to Section 2(a)
below. All such determinations to be appropriately adjusted for any stock
dividend, stock split or other similar transaction during such period.
(e) "Common Stock" means the common stock, $.001 par value per share, of
the Company.
(f) "Convertible Securities" means any stock or securities (other than
Options) directly or indirectly convertible into or exchangeable or exercisable
for Common Stock.
(g) "Expiration Date" means July 18, 2012 or, if such date does not fall
on a Business Day or on a day on which trading takes place on the Principal
Market, then the next Business Day.
(h) "Majority Interest" means the Persons holding at least sixty-six and
two-thirds percent (66 2/3%) of the then outstanding Preferred Warrants.
(i) "Options" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
(j) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
(k) "Preferred Warrants" means all warrants, including this Warrant,
issued to the lenders as a condition to closing of that certain Second Amended
and Restated Credit Agreement dated as of July 19, 2002, among the Company and
the Persons referred to therein.
(l) "Principal Market" means the principal securities exchange or trading
market for the Preferred Stock.
(m) "Securities" means the securities obtained or obtainable upon exercise
of the Warrant or securities obtained or obtainable upon exercise, exchange, or
conversion of such securities.
(n) "Securities Act" means the Securities Act of 1933, as amended.
(o) "Warrant" means this Warrant and all warrants issued upon the partial
exercise, assignment, transfer, sale, exchange or replacement thereof.
(p) "Warrant Exercise Price" shall be equal to $.001, subject to
adjustment as hereinafter provided.
Section 2. Exercise of Warrant.
(a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any Business Day on or after the opening of
business on the date hereof and prior to 11:59 P.M. New York Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription form attached as Exhibit A hereto (the "Exercise Notice"), of such
holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) (A) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (the "Aggregate Exercise
Price") or (B) by notifying the Company that this Warrant is being exercised
pursuant to a Cashless Exercise (as defined in Section 2(e), and (iii) if this
Warrant is
being exercised with respect to all of the Warrant Shares for which it can then
be exercised, the surrender to a common carrier for overnight delivery to the
Company as soon as practicable following such date, this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction). In the event of any exercise of the rights
represented by this Warrant in compliance with this Section 2(a), the Company
shall on the third (3rd) Business Day (the "Warrant Share Delivery Date")
following the date of its receipt of the Exercise Notice, the Aggregate Exercise
Price (or notice of Cashless Exercise) and this Warrant (or an indemnification
undertaking with respect to this Warrant in the case of its loss, theft or
destruction) (the "Exercise Delivery Documents") (A) provided that the transfer
agent is participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program and provided that the holder is eligible to receive
shares through DTC, upon the request of the holder of this Warrant, credit the
number of shares of Preferred Stock to which the holder is entitled to the
holder's balance account with DTC through its Deposit Withdrawal Agent
Commission system or (B) issue and deliver to the address specified in the
Exercise Notice, a certificate, registered in the name of the holder, for the
number of shares of Preferred Stock to which the holder is entitled. Upon
delivery of the Exercise Notice and Aggregate Exercise Price referred to in
clause (ii)(A) above or notification to the Company of a Cashless Exercise
referred to in Section 2(e), the holder of this Warrant shall be deemed for all
corporate purposes to have become the holder of record of the Warrant Shares
with respect to which this Warrant has been exercised, irrespective of the date
of delivery of this Warrant as required by clause (iii) above or the
certificates evidencing such Warrant Shares. In the case of a dispute as to the
determination of the arithmetic calculation of the Warrant Exercise Price and
the arithmetic calculation of the number of Warrant Shares, the Company shall
instruct the Transfer Agent to issue to the holder the number of shares of
Preferred Stock that is not disputed and shall transmit an explanation of the
disputed arithmetic calculations to the holder via facsimile within two (2)
Business Days of receipt of such holder's Exercise Notice or other date of
determination. If such holder and the Company are unable to agree upon the
determination of the arithmetic calculation of the Warrant Exercise Price and
the arithmetic calculation of the number of Warrant Shares within two (2)
Business Day of such disputed arithmetic calculation being transmitted to the
holder, then the Company shall within one (1) Business Day submit via facsimile
the disputed arithmetic calculations to the Company's independent, outside
accountant. Furthermore, in the event a Majority Interest, on the one hand, and
the Company, on the other hand, are unable to agree on the Fair Market Value in
accordance with the definition of Closing Bid Price, then the Company shall
submit as soon as reasonably practicable after it becomes apparent that the
parties do not agree as to the Fair Market Value, the disputed determination of
the Fair Market Value to an independent, reputable investment bank selected by
the Company and approved by a Majority Interest. The Company shall cause the
investment bank or the accountant, as the case may be, to perform the
determinations or calculations and notify the Company and the holders of the
Preferred Warrants of the results no later than two Business Days from the time
it receives the disputed determinations or calculations. Such investment bank's
or accountant's determination or calculation, as the case may be, shall be
binding upon all parties. Within one (1) Business Day of the accountant's
determination of the calculation of arithmetic calculation of the Warrant
Exercise Price and the arithmetic calculation of the number of Warrant Shares,
the Company shall deliver to the holder the balance of Preferred Stock that such
holder is entitled to as provided herein (such date also deemed to be a Warrant
Share Delivery Date) and any failure to do so will subject the Company to the
provisions of this Section 2(a).
(b) Notwithstanding anything to the contrary set forth herein, upon
exercise of any portion of this Warrant in accordance with the terms hereof, the
holder of this Warrant shall not be required to physically surrender this
Warrant to the Company unless the full amount of Warrant Shares then represented
by the Warrant have been exercised. The Company shall maintain records showing
the Warrant Shares so exercised and the dates of such exercise or shall use such
other method, reasonably satisfactory to the holder, so as to account for the
number of Warrant Shares that are represented by the Warrant where the exercise
of the Warrant has occurred without the physical surrender of this Warrant.
Notwithstanding the foregoing, if any portion of this Warrant is converted as
aforesaid, thereafter, the holder may not transfer this Warrant unless the
holder first physically surrenders this Warrant to the Company, whereupon the
Company will forthwith issue and deliver to the holder a new Warrant of like
tenor, registered as the holder may request, representing in the aggregate the
remaining Warrant Shares represented by this Warrant. The holder and any
assignee, by acceptance of this Warrant or such new Warrant, acknowledge and
agree that, by reason of the provisions of this paragraph, following exercise of
any portion of this Warrant, the number of Warrant Shares represented by this
Warrant may be less than the number of Warrant Shares set forth on the face
hereof. If a Warrant is delivered to the Company by a holder and the number of
Warrant Shares represented by the Warrant submitted for exercise is greater than
the number of Warrant Shares that have been exercised, then the Company shall,
as soon as practicable and in no event later than three (3) Business Days after
receipt of the Warrant (the "Warrant Delivery Date") and at its own expense,
issue and deliver to the holder a new Warrant representing the number of Warrant
Shares not converted.
(c) No fractional shares of Preferred Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Preferred Stock
issued upon exercise of this Warrant shall be rounded up to the nearest whole
number.
(d) If the Company shall fail for any reason or for no reason to issue and
deliver to the holder within three (3) Business Days of receipt of the Exercise
Delivery Documents a certificate for the number of shares of Preferred Stock to
which the holder is entitled or to credit, at the holder's request, the holder's
balance account with DTC for such number of shares of Preferred Stock to which
the holder is entitled upon the holder's exercise of this Warrant or to issue a
new Warrant for the number of shares of Preferred Stock to which such holder is
entitled pursuant to Section 2(b) hereof, then the Company shall, in addition to
any other remedies under this Warrant or otherwise available to such holder, pay
as additional damages in cash to such holder on each day after the Warrant Share
Delivery Date that such exercise is not timely effected and/or each day after
the Warrant Delivery Date that such Warrant is not delivered, as the case may
be, in an amount equal to 0.5% of the sum of (i) the product of (A) the number
of shares of Preferred Stock not issued to the holder on or prior to the Warrant
Share Delivery Date and (B) the Closing Bid Price of the Preferred Stock on the
Warrant Share Delivery Date, in the case of the failure to deliver Preferred
Stock, and (ii) if the Company has failed to deliver a Warrant to the holder on
or prior to the Warrant Delivery Date, the product of (x) the number of shares
of Preferred Stock issuable upon exercise of the Warrant (without regard to any
limitations on conversions herein or elsewhere, including, but not limited to,
any limitations as a result of the actual number of shares of Preferred Stock
authorized for issuance by the Company) as of the Warrant Delivery Date, and (y)
the Closing Bid Price of the Preferred Stock on the Warrant Delivery Date, in
the case of the failure to deliver a Warrant. If for any reason the
holder has not received all of the shares of Preferred Stock to which it is
entitled to prior to the tenth (10th) Business Day after the expiration of the
Warrant Share Delivery Date, then the holder, upon written notice to the
Company, may void its Exercise Notice with respect to, and retain or have
returned or restored as of the date of the Exercise Notice, as the case may be,
any Warrant Shares pursuant to such holder's Exercise Notice; provided that the
voiding of a holder's Exercise Notice shall not effect the Company's obligations
to make any payments which have accrued prior to the date of such notice
pursuant to this Section 2(d).
(e) Notwithstanding anything contained herein to the contrary, the holder
of this Warrant may, at its election exercised in its sole discretion, exercise
this Warrant in whole or in part and, in lieu of making the cash payment
otherwise contemplated to be made to the Company upon such exercise in payment
of the Aggregate Exercise Price, elect instead to receive upon such exercise the
"Net Number" of shares of Preferred Stock determined according to the following
formula (a "Cashless Exercise"):
Net Number = (A X B) - (A X C) / B
For purposes of the foregoing formula:
A= the total number of shares with respect to which this Warrant
is then being exercised.
B= the Closing Bid Price of the Preferred Stock on the trading day
immediately preceding the date of the Exercise Notice.
C= the Warrant Exercise Price then in effect for the applicable
Warrant Shares at the time of such exercise.
Section 3. Covenants as to Preferred Stock. The Company hereby
covenants and agrees as follows:
(a) This Warrant is, and any Warrants issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued, not subject to any preemptive rights, and free from all taxes, liens,
security interests, charges, and other encumbrances with respect to the issuance
thereof, other than taxes in respect of any transfer occurring contemporaneously
with such issue.
(b) All Warrant Shares which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and not subject to any preemptive rights, and free from all
taxes, liens, security interests, charges, and other encumbrances with respect
to the issuance thereof, other than taxes in respect of any transfer occurring
contemporaneously with such issue.
(c) During the period within which the rights represented by this Warrant
may be exercised, (i) the Company will at all times have authorized and reserved
at least (A) 100% of the number of shares of Preferred Stock needed to provide
for the exercise of the rights then represented by this Warrant and (B) 100% of
the number of shares of Common Stock needed to provide for the conversion of
such shares of Preferred Stock (and if there is ever an insufficient amount of
shares of Preferred Stock or Common Stock to provide for the exercise of the
rights represented by this Warrant, such event shall be an "Authorized Share
Failure"), the Company
shall immediately take all action necessary to increase the Company's authorized
shares of Preferred Stock or Common Stock to an amount sufficient to accomplish
the holder's right of exercise hereunder) and, (ii) the Company will at all
times ensure that the Warrant Exercise Price of this Warrant is less than the
aggregate par value of the greater of (x) the par value of the Preferred Stock
issuable upon exercise of this Warrant and (y) the par value of the number of
shares of Common Stock issuable upon conversion of the Preferred Stock issuable
upon exercise of this Warrant (and if there is ever a time when such Warrant
Exercise Price is less that such amount, such event shall be a "Par Value
Failure"). Without limiting the generality of the foregoing sentence, as soon as
practicable after the date of the occurrence of an Authorized Share Failure, but
in no event later than 75 days after the occurrence of such Authorized Share
Failure, the Company shall hold a meeting of its stockholders for the
authorization of either an increase in the number of authorized shares of
Preferred Stock or Common Stock, as applicable, or a reverse stock split with
respect to such shares. In addition, without limiting the generality of the
foregoing, as soon as practicable after the date of the occurrence of a Par
Value Failure, but in no event later than 75 days after the occurrence of such
Par Value Failure, the Company shall hold a meeting of its stockholders for the
authorization of a reduction in the par value of the Common Stock or Preferred
Stock, as appropriate. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its best efforts
to solicit its stockholders' approval of such increase in authorized shares of
Preferred Stock or Common Stock, reverse stock split or reduction in par value,
as applicable, and to cause its board of directors to recommend to the
stockholders that they approve such proposal.
(d) The Company will not, by amendment of its Certificate of Incorporation
or through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant. Without limiting the generality of the foregoing, the Company (i)
will not increase the par value of any shares of Preferred Stock receivable upon
the exercise of this Warrant above the Warrant Exercise Price then in effect
(except as otherwise provided in Section 3(c) above, and (ii) will take all such
actions as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable shares of Preferred Stock upon
the exercise of this Warrant.
Section 4. Taxes. The Company shall pay any and all taxes which may be
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.
Section 5. Warrant Holder Not Deemed a Stockholder; Notice of Corporate
Action. Except as otherwise specifically provided herein, no holder, as such, of
this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the
holder of this Warrant of the Warrant Shares which he, she, or it is then
entitled to receive upon the due exercise of this Warrant. In addition, nothing
contained in this Warrant shall be construed as imposing any liabilities on such
holder to purchase any securities (upon exercise of this Warrant or otherwise)
or as a stockholder of the Company, whether such liabilities are asserted by the
Company or by creditors of the Company. Notwithstanding this Section 5, the
Company will provide the holder of this Warrant with copies of the same notices
and other information given to the stockholders of the Company generally,
contemporaneously with the giving thereof to the stockholders. Furthermore, so
long as this Warrant has not been exercised in full:
(A) Immediately upon any adjustment of the Exercise Price or the
number of shares of Preferred Stock issuable upon exercise of this Warrant, the
Company will give written notice thereof to the holder of such adjustment and a
certificate of a firm of independent public accountants of recognized national
standing selected by the Board of Directors of the Company (who shall be
appointed at the Company's expense and who may be the independent public
accountants regularly employed by the Company) setting forth the number of
shares of Preferred Stock and the Exercise Price of such shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
(B) The Company will give written notice to the holder at least
twenty (20) Business Days prior to the date on which the Company closes its
books or takes a record (I) with respect to any dividend or distribution upon
the Preferred Stock or the Common Stock, (II) with respect to any pro rata
subscription offer to holders of Preferred Stock or the Common Stock or (III)
for determining rights to vote with respect to any Organic Change (as defined in
Section 9(b)), dissolution or liquidation, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to such holder.
(C) The Company will also give written notice to holder at least
twenty (20) Business Days prior to the date on which any Organic Change,
dissolution or liquidation will take place, provided that such information shall
be made known to the public prior to or in conjunction with such notice being
provided to such holder.
Section 6. Representations of Holder. The holder of this Warrant, by
the acceptance hereof, represents that it is acquiring this Warrant and the
Warrant Shares for its own account for investment only and not with a view
towards, or for resale in connection with, the public sale or distribution of
this Warrant or the Warrant Shares, except pursuant to sales registered or
exempted under the Securities Act; provided, however, that by making the
representations herein, the holder does not agree to hold this Warrant or any of
the Warrant Shares for any minimum or other specific term and reserves the right
to dispose of this Warrant and the Warrant Shares at any time in accordance with
or pursuant to a registration statement or an exemption under the Securities
Act. The holder of this Warrant further represents, by acceptance hereof, that,
as of this date, such holder is an "accredited investor" as such term is defined
in Rule 501(a)(3) of Regulation D promulgated by the Securities and Exchange
Commission under the Securities Act (an "Accredited Investor").
Section 7. Ownership and Transfer.
(a) Warrant Register. The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant, in which
the Company shall record the name and address of the person in whose name this
Warrant has been issued, as well as the name and address of each transferee. The
Company may treat the person in whose name any Warrant is registered on the
register as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, but in all events recognizing any transfers made in
accordance with the terms of this Warrant.
(b) Transferability and Negotiability of Warrant. Title to this Warrant
may be transferred by endorsement (by the holder hereof executing the Assignment
Form attached hereto as Exhibit B) and delivery in the same manner as negotiable
instruments transferable by endorsement and delivery.
(c) Exchange of Warrant Upon a Transfer. This Warrant shall be
transferable by the holder hereof to (i) any Person subject only to the
restrictions set forth in the legend on the first page of this Warrant or (ii)
any of its Affiliates. On surrender of this Warrant for exchange, properly
endorsed on the Assignment Form and subject to the provisions hereof with
respect to compliance with the Securities Act, the Company at its expense shall
issue to or on the order of such holder a new warrant or warrants of like tenor,
in the name of such holder or as such holders (on payment by the holder of any
applicable transfer taxes) may direct, exercisable for the number of shares of
Preferred Stock issuable upon the exercise hereof.
Section 8. Adjustment of Warrant Exercise Price and Number of
Shares. The Warrant Exercise Price and the number of shares of Preferred Stock
issuable upon exercise of this Warrant shall be adjusted from time to time as
follows:
(a) Adjustment of Warrant Exercise Price upon Subdivision or Combination
of Preferred Stock. If the Company at any time after the date of issuance of
this Warrant subdivides (by any stock split, stock dividend, recapitalization or
otherwise) its outstanding shares of Preferred Stock into a greater number of
shares, the Warrant Exercise Price in effect immediately prior to such
subdivision will be proportionately reduced and the number of shares of
Preferred Stock obtainable upon exercise of this Warrant will be proportionately
increased. If the Company at any time after the date of issuance of this Warrant
combines (by combination, reverse stock split or otherwise) its outstanding
shares of Preferred Stock into a smaller number of shares, the Warrant Exercise
Price in effect immediately prior to such combination will be proportionately
increased and the number of shares of Preferred Stock obtainable upon exercise
of this Warrant will be proportionately decreased. The increases and reductions
provided for in this Section 8(a) will be made with the intent and, as nearly as
practicable, the effect that neither the percentage of the total equity of the
Company obtainable on exercise of the Warrant nor the price payable for such
percentage upon such exercise will be affected by any event described in this
Section 8(a). Any adjustment under this Section 8(a) shall become effective at
the close of business on the date the subdivision or combination becomes
effective.
(b) Conversion of Preferred Stock. Should all of the Preferred Stock be,
or if outstanding would be, at any time prior to the expiration of this Warrant
or any portion thereof, converted into shares of Common Stock in accordance with
the conversion terms of such
Preferred Stock, then this Warrant shall become immediately exercisable for that
number of shares of Common Stock equal to the number of shares of the Common
Stock that would have been received if this Warrant had been exercised in full
and the Preferred Stock received thereupon had been simultaneously converted
immediately prior to such event, and the Warrant Exercise Price shall
immediately be adjusted to equal the quotient obtained by dividing (x) the
aggregate Warrant Exercise Price of the maximum number of shares of Preferred
Stock for which this Warrant was exercisable immediately prior to such
conversion, by (y) the number of shares of Common Stock for which this Warrant
is exercisable immediately after such conversion.
(c) Distribution of Securities. If securities of the Company or securities
of any subsidiary of the Company are distributed pro rata to holders of any or
all of the Company's Securities, such number of securities will be distributed
to the holder of this Warrant or its assignee upon exercise of its rights
hereunder as such Warrant holder or assignee would have been entitled to if this
Warrant had been exercised prior to such distribution, giving effect to all
adjustments called for by this Section 8. The provisions with respect to
adjustment of the Preferred Stock provided in this Section 8 will also apply to
the Securities of the Company and securities of any subsidiary to which the
Warrant holder or its assignee is entitled under this Section 8 (c).
(d) Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 8 but not expressly provided for by such provisions,
then the Company's Board of Directors will make an appropriate adjustment in the
Warrant Exercise Price and the number of shares of Preferred Stock obtainable
upon exercise of this Warrant so as to protect the rights of the holders of the
Preferred Warrants.
Section 9. Purchase Rights; Reorganization, Reclassification,
Consolidation, Merger or Sale. (a) In addition to any adjustments pursuant to
Section 8 above, if at any time the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants, securities or
other property pro rata to the record holders of any class of Common Stock (the
"Purchase Rights"), then the holder of this Warrant will be entitled to acquire,
upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Preferred Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Preferred Stock are to be determined for the grant,
issue or sale of such Purchase Rights.
(b) Any recapitalization, reorganization, reclassification, consolidation,
merger, sale of all or substantially all of the Company's assets to another
Person, conveyance to another Person of the property of the Company as an
entirety or substantially as an entirety or other transaction which is effected
in such a way that holders of Preferred Stock are entitled to receive (either
directly or upon subsequent liquidation) Capital Stock, securities or assets
with respect to or in exchange for Preferred Stock is referred to herein as an
"Organic Change." Prior to the consummation of, and as a condition to, any (i)
sale or other conveyance of all or substantially all of the Company's assets to
an acquiring Person or (ii) other Organic Change, the Company, or such other
successor or purchasing Person, as the case may be, shall make lawful and
adequate provision whereby the holder of this Warrant shall have the right
thereafter to receive on exercise of such Warrant the kind and amount of
securities and property receivable upon such Organic Change by a holder of the
number of securities issuable upon exercise of such Warrant immediately prior to
such Organic Change. The above provisions of this Section 9(b) shall similarly
apply to successive Organic Changes.
Section 10. Lost, Stolen, Mutilated or Destroyed Warrant. If this
Warrant is lost, stolen, mutilated or destroyed, the Company shall promptly, on
receipt of an indemnification undertaking (or in the case of a mutilated
Warrant, the Warrant), issue a new Warrant of like denomination and tenor as
this Warrant so lost, stolen, mutilated or destroyed.
Section 11. Notices. Service of all notices under this Warrant shall be
sufficient and considered given if in writing and delivered personally or sent
by certified United States mail, return receipt requested, with postage paid
thereon, to the following address:
To holder: ____________________________
____________________________
____________________________
Attn: ______________________
To Company: Castle Dental Centers, Inc.
____________________________
____________________________
Attn: ______________________
Notice delivered by certified United States mail is considered given on the
date shown on the return receipt. Either party may, by notice given at any time
or from time to time, require subsequent notices to be given to another
individual person, whether a partner, an officer, or a representative, or to a
different address, or both. Notices given before actual receipt of notice of
such change shall not be invalidated by the change.
Section 12. Registration Rights. If the holder hereof is a party to, or
an assignee of rights under, that certain Registration Rights Agreement, dated
as of July 19, 2002, by and among the Company and the Persons who are
signatories thereto, such holder shall be entitled to include with such holder's
registrable securities any shares of Preferred Stock or other securities
received upon exercise of this Warrant, all on the terms and conditions as set
forth in the Registration Rights Agreement.
Section 13. Amendments. This Warrant and any term hereof may be changed,
waived, discharged, or terminated only by an instrument in writing signed by the
Company and a Majority Interest; provided, however, that no amendment,
modification or waiver can be effected if, by its terms, such amendment,
modification or waiver adversely affects one holder without having the same
adverse effect on all other holders without the prior written consent of the
adversely affected holder.
Section 14. Date. The date of this Warrant is July 19, 2002 (the
"Warrant Date"). This Warrant, in all events, shall be wholly void and of no
effect after the close of business on the Expiration Date, except that
notwithstanding any other provisions hereof, the provisions of Section 7 shall
continue in full force and effect after such date as to any Warrant Shares or
other securities issued upon the exercise of this Warrant.
Section 15. Descriptive Headings; Governing Law. The descriptive
headings of the several sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. The corporate
laws of the State of Delaware shall govern all issues concerning the relative
rights of the Company and its stockholders. All other questions concerning the
construction, validity, enforcement and interpretation of this Warrant shall be
governed by the internal laws of the State of Delaware, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
Xxxxxx X. Xxxxx, its Chief Financial Officer, as of the 19th day of July, 2002.
CASTLE DENTAL CENTERS, INC.
By:
----------------------------------------
Xxxxxx X. Xxxxx, Chief Financial Officer
EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT
CASTLE DENTAL CENTERS, INC.
The undersigned holder hereby exercises the right to purchase
_________________ of the shares of Preferred Stock ("Warrant Shares") of Castle
Dental Centers, Inc., a Delaware corporation (the "Company"), evidenced by the
attached Warrant (the "Warrant"). Capitalized terms used herein and not
otherwise defined shall have the respective meanings set forth in the Warrant.
1. Form of Warrant Exercise Price. The Holder intends that payment of the
Warrant Exercise Price shall be made as:
__________ "Cash Exercise" with respect to _________________ Warrant Shares;
and/or
__________ "Cashless Exercise" with respect to _________________ Warrant
Shares (to the extent permitted by the terms of the Warrant).
2. Payment of Warrant Exercise Price. In the event that the holder has
elected a Cash Exercise with respect to some or all of the Warrant Shares to be
issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the
sum of $___________________ to the Company in accordance with the terms of the
Warrant.
3. Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.
Date: _______________ __, ______
Name of Registered Holder
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
ACKNOWLEDGMENT
The Company hereby acknowledges this Subscription Form and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Preferred
Stock in accordance with the Transfer Agent Instructions dated ________________,
20__ from the Company and acknowledged and agreed to by [TRANSFER AGENT].
Castle Dental Centers, Inc.
By:
---------------------------------
Name:
---------------------------------
Title:
---------------------------------
EXHIBIT B TO WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Preferred Stock set forth below:
Name and Address of Assignee No. of Shares of Preferred Stock
and does hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer onto the books of Castle Dental
Centers, Inc. maintained for the purpose, with full power of substitution in the
premises.
Date: Print Name:
------------------------------
Signature:
-------------------------------
Witness:
---------------------------------
