Exhibit 10.11
EXCHANGE AGREEMENT
This exchange agreement (the "Agreement") is entered into as of the date
set forth below between Castle Dental Centers, Inc., a Delaware corporation (the
"Company"), and the undersigned (the "Exchanging Holder"). The Exchanging Holder
and all other holders of Subordinated Debt (as defined below) who have executed
an agreement similar to this Agreement are referred to herein as the "Exchanging
Holders". The Exchanging Holders are holders of subordinated notes and/or other
subordinated indebtedness issued to various sellers of dental practices to the
Company (collectively, the "Subordinated Debt"). Capitalized terms used in this
Agreement and not otherwise defined herein shall have the respective meanings
ascribed to them in the Company's Confidential Offering Memorandum dated July 5,
2002, as amended to date (the "Memorandum").
WHEREAS, the aggregate principal plus accrued and unpaid interest
(excluding default interest) (the "Indebtedness") outstanding under the
Exchanging Holder's Subordinated Debt (the "Old Note") through June 30, 2002 is
set forth next to the Exchanging Holder's name on the signature page of this
Agreement;
WHEREAS, the Exchanging Holder desires to exchange the Indebtedness for
shares of the Company's Convertible Preferred Stock, Series A-1, par value
$0.001 per share (the "Series A Stock"), upon the terms described in the
Memorandum;
NOW THEREFORE, this Agreement witnesseth that, for and in consideration of
the premises and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Exchanging
Holder agree as follows;
Section 1. Tender and Exchange. Upon the terms and subject to the
conditions of the exchange offer specified in the Memorandum, the Exchanging
Holder hereby tenders to the Company all of, and not a partial interest in, the
principal amount, together with any accrued and unpaid interest (including any
default interest) thereon, of the Old Note. On the Effective Date (defined
below), the Company will exchange the Indebtedness represented by the Old Note
tendered herewith for a number of shares of Series A Stock determined by
dividing the Indebtedness by $100, and rounding up to the nearest whole share of
Series A Stock (the "Exchange"). No fractional shares of Series A Stock will be
issued for such Old Note. No additional payment will be made for default
interest or interest accrued after June 30, 2002 on the Old Note, which is
hereby irrevocably waived. Subject to the Exchange, and effective on the
Effective Date, the Exchanging Holder hereby tenders, exchanges, assigns, and
transfers to, or upon the order of, the Company all right, title, and interest
in and to the Old Note and the Indebtedness represented thereby. The Exchanging
Holder irrevocably constitutes and appoints Xxxxx X. Xxxxx as its
attorney-in-fact and agent, with the power of substitution, for the Exchanging
Holder in any and all capacities, to transfer the Old Note to the Company as set
forth in this Section 1, granting to said attorney-in-fact full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
Exchanging Holder might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact, or its substitute, may lawfully do or cause to
be done by virtue of this power of attorney. Promptly following the Effective
Date and the Company's acceptance of the tender of the Exchanging Holder's
Indebtedness represented by the Old Note, the Company will cause to be delivered
to the Exchanging Holder certificates issued in the Exchanging Holder's name
representing the number of shares of Series A Stock for which such Exchanging
Holder's Indebtedness has been exchanged at the address set forth below the
Exchanging Holder's name on the signature page of this Agreement.
The Exchanging Holder is delivering herewith the original executed copy of
the Old Note representing the Indebtedness tendered hereby. In the event the
exchange offer is terminated for any reason or the Company rejects the tendered
Indebtedness because of a defect in the tender, the Company will promptly return
the Old Note to the Exchanging Holder at the address set forth below the
Exchanging Holder's name on the signature page of this Agreement.
Section 2. Conditions and Effective Date. The Exchange is conditioned
upon:
(a) 100% of the principal plus accrued and unpaid interest outstanding
under the Subordinated Debt being tendered by holders of Subordinated
Debt and the execution of an exchange agreement substantially similar
to this Agreement by each holder of Subordinated Debt;
(b) the Company having entered into the Restructured Credit Agreement;
(c) the Senior Subordinated Notes issued pursuant to the Senior
Subordinated Note Purchase Agreement dated January 31, 2000 having
been exchanged for Series A Stock;
(d) the Company having entered into the Forbearance Agreement with Xx.
Xxxxxxx;
(e) the Company having entered into the Settlement Agreements with Xxxx X.
Xxxxxx, Xx.;
(f) the funding of the $1,700,000 loan to the Company from the New Money
Lenders having occurred; and
(g) the other customary conditions described under "The Exchange
Offer--Conditions to Consummation of the Exchange Offer" in the
Memorandum.
All of the conditions to Exchange, other than those described under subsections
(b) and (c) of this Section 2, may be waived by the Company, in its sole
discretion, at any time. Assuming all of the preceding conditions to the
Exchange have been satisfied or, if
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waivable, waived by the Company, the "Effective Date" of the Exchange will occur
on the date the Company accepts the tendered Subordinated Debt (which in no
event will occur later than the date the Company enters into the Restructured
Credit Agreement).
Section 3. Release.
(a) The Exchanging Holder, on behalf of itself, its affiliates, its
successors and assigns, irrevocably and unconditionally releases, relinquishes,
waives, and forever discharges the Company, Xxxxxx Financial, Inc., Midwest
Mezzanine Fund II, L.P. and each of the lenders under the Amended and Restated
Credit Agreement dated as of December 18, 1998, as amended, among the Company
and Bank of America, N.A., and the other lenders thereto, and each of their
respective parents, divisions, subsidiaries, affiliates, and related companies,
and their present and former agents, employees, officers, directors, attorneys,
advisors, fairness opinion givers, stockholders, plan fiduciaries, successors
and assigns (the "Released Parties") forever, from and against any and all
claims, debts, obligations, demands, actions, suits, causes of action, costs,
fees, and all liability whatsoever, whether known or unknown, fixed or
contingent, in contract or in tort, or based on any statute or other law, state
or federal (collectively "Claims") which the Exchanging Holder has, had, or may
have in the future against the Released Parties, relating to or arising out of
or by virtue of the Old Note, the previous failure to pay interest and principal
thereon, and the transactions giving rise to the issuance thereof.
(b) The Exchanging Holder hereby declares and agrees that, on the
Effective Date following the Exchange, the Old Note will be deemed paid in full
and in all respects terminated and of no further force or effect.
(c) The Exchanging Holder hereby agrees not to bring any claim of any kind
against any Released Party concerning any matter released by this Section 3. The
Exchanging Holder agrees that this Agreement constitutes a bar to any such
future claim.
(d) In confirmation of the foregoing, the Exchanging Holder shall, upon
the reasonable request of a Released Party, but at no out-of-pocket cost to the
Exchanging Holder, execute and deliver such specific or further releases,
terminations or other similar instruments in order to more effectively evidence
the releases, terminations and other actions made or intended to be made by this
Section 3.
Section 4. Transfer of Notes. Prior to the termination of the exchange
offer by the Company as a result of one or more of the conditions specified in
Section 2 not being met or waived by the Company, the Exchanging Holder
covenants not to transfer, pledge, hypothecate, assign, or grant an option to
otherwise acquire any interest in the Old Note unless the transferee of such Old
Note agrees, in writing, to be bound by the terms of this Agreement.
Section 5. Registration Rights Agreement. The Exchanging Holder
irrevocably constitutes and appoints Xxxxx X. Xxxxx as its attorney-in-fact and
agent,
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with the power of substitution, for the Exchanging Holder in any and all
capacities, to execute the Registration Rights Agreement between the Company and
certain parties listed therein to be entered into in connection with this
Agreement by and on behalf of the Exchanging Holder, granting to said
attorney-in-fact full power and authority to do and perform each and every act
and thing requisite and necessary to be done in connection therewith, as fully
to all intents and purposes as the Exchanging Holder might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact, or its
substitute, may lawfully do or cause to be done by virtue of this power of
attorney.
Section 6. Agreement Regarding Conversion. The Exchanging Holder hereby
agrees not to convert the shares of Series A Stock issuable to it hereunder into
Common Stock until the Company's certificate of incorporation has been amended,
until a reverse stock split has been completed, or until another transaction has
been completed which, in each case, results in the Company having sufficient
authorized shares of Common Stock to permit issuance of authorized shares of
Common Stock upon conversion of all of the shares of Series A Stock issued in
connection with the Restructuring.
Section 7. Headings. The headings of the Sections of this Agreement
have been inserted for convenience of reference only, and are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.
Section 8. Governing Laws. The laws of the State of Texas shall govern
this Agreement.
Section 9. Counterparts. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
but all of such counterparts shall together constitute but one and the same
instrument.
Section 10. Investment Representations. The Exchanging Holder represents
and warrants to the Company that:
(a) It is acquiring the Series A Stock and the Common Stock issuable upon
conversion thereof (collectively, the "Offered Securities") for its own account
and that it is an accredited investor.
(b) It acknowledges that the Offered Securities have not been registered
under the Securities Act of 1933 and therefore are not freely tradable.
(c) It understands and agrees:
(A) that the Company is not offering the Offered Securities in a
public offering within the meaning of the Securities Xxx 0000; and
(B) that if it decides to resell, pledge or otherwise transfer the
Offered Securities, the Offered Securities may be subject to transfer
restrictions which limit who may purchase the securities and impose
notification requirements.
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(d) It understands that a legend will be placed on the certificates for
the Offered Securities describing the transfer restrictions applicable to the
Offered Securities.
(e) It has (A) by reason of its business or financial experience, the
capacity to protect its own interests in connection with the transactions
contemplated by the Memorandum and this Agreement, (B) in consultation with its
accountants, attorneys and financial advisors, such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its prospective investment in the Offered Securities; and (C) adequate
means of providing for its current financial needs and contingencies, is able to
bear the substantial economic risks of an investment in the Offered Securities,
has no need for liquidity in such investment, and is able to withstand a
complete loss of such investment.
(f) It has received a copy of the Memorandum and acknowledges that it has
had access to such financial and other information, and has been afforded the
opportunity to ask the Company questions and receive answers thereto, as it
deemed necessary in connection with its decision to acquire the Offered
Securities.
(g) It has read our Annual Report on Form 10-K for the year ended December
31, 2001, and all other materials described in "Where You Can Find More
Information" in the Memorandum.
(h) It understands that the Company and others will rely upon the truth
and accuracy of the foregoing acknowledgments, representations and agreements
and agrees that if any of the acknowledgments, representations and agreements
deemed to have been made by its acquisition of the Offered Securities are no
longer accurate, it will promptly notify the Company.
(i) It is not acquiring the Offered Securities with a view to any
distribution of the Offered Securities in a transaction that would violate the
Securities Act of 1933 or the securities laws of any state of the United States
or any other applicable jurisdiction.
Section 11. Exchanging Holder Representations. The Exchanging Holder
represents that the Exchanging Holder has full power and authority to tender,
exchange, assign, and transfer the Old Note and otherwise carry out the
transactions contemplated thereby, and that upon the Effective Date, the Company
will acquire good title to the Old Note, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim,
right, or option. The Exchanging Holder acknowledges that the Exchanging Holder
understands that, under certain circumstances and subject to the conditions set
forth in Section 2, the Company will not accept for Exchange any of the
Subordinated Debt.
Section 12. Irrevocable. This Agreement shall be irrevocable and survive
the death, incapacity, liquidation, bankruptcy, winding up, dissolution or
similar event of the Exchanging Holder, and shall be binding upon the Exchanging
Holder's heirs, personal
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representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives.
Section 13. Additional Agreements. The Exchanging Holder agrees to
execute such other agreements or amendments reasonably requested by the Company
in order to carry out the purpose and effect of this Agreement.
[Signature Page Follows]
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Tendered this ___ day of July, 2002.
EXCHANGING HOLDER
----------------------------------- Old Note
Name: Principal Amount:
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Indebtedness:
-------------------------
Address:
---------------------------
-----------------------------------
-----------------------------------
The Tender of the Exchanging Holder's
Old Note is Accepted and Agreed To as
of the ___ day of July, 2002
Castle Dental Centers, Inc.
By:
---------------------------------
Name:
-------------------------------
Title:
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