Apple Orthodontix, Inc.
Xxx Xxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
May 11, 1997
TriCap Partners, L.L.C.
Xxx Xxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Gentlemen:
Please refer to that certain letter agreement (the "Agreement;" terms used
in this letter and not otherwise defined are used as defined in the Agreement)
dated November 14, 1996, between Apple Orthodontix, Inc. ("Apple") and TriCap
Partners, L. L. C. ("TriCap"), relating to Apple's engagement of TriCap as its
financial advisor in connection with one or more proposed Transactions.
A. The Agreement provides for cash compensation to be paid for financial
advisory services rendered by TriCap to Apple. TriCap still desires to receive
such cash compensation; however, as a result of the conditions imposed by Bear,
Xxxxxxx & Co., Inc. ("Bear, Xxxxxxx") in connection with Bear, Xxxxxxx'
commitment to be lead underwriter of the IPO, TriCap and Apple hereby agree to
amend and restate in their entirety the provisions of Paragraph 2 of the
Agreement to decrease the amount of cash compensation payable to TriCap as
follows:
"2. As compensation for TriCap services hereunder, Apple hereby agrees to:
a. pay to TriCap a fee of $500,000 in cash on the date of the
closing of the IPO;
b. issue to TriCap a warrant (the "Warrant") (in the form attached
hereto as Exhibit A) to purchase shares of Class A Common Stock
of the Company (the "Stock"); and
c. execute and deliver to TriCap a Registration Rights Agreement (in
the form attached hereto as Exhibit B).
B. TriCap and Apple hereby agree to amend and restate in their
entirety the provisions of Paragraph 4 of the Agreement as follows:
"4. The term of TriCap's engagement as financial advisor to Apple shall
commence on November 14, 1996, and shall continue until, and terminate
upon, the consummation of the IPO. The parties agree that all obligations
accruing prior to the date of termination and the obligation set forth in
Paragraph 5 shall survive termination."
C. The provisions of the Agreement other than Paragraphs 2 and 4,
including without limitation Paragraphs 1, 3, 5 and 6 and Schedule A, are not
amended and the parties hereby ratify and confirm these provisions in their
entirety.
This letter agreement may be executed in two or more counterparts, each of
shall be deemed to be an original, but all of which shall constitute the same
agreement. Please confirm that the foregoing is in accordance with your
understanding of our agreement by signing and returning to us a copy of this
letter.
Very truly yours,
APPLE ORTHODONTIX, INC.
/s/ Xxxx X. Xxxxxxx, D.D.S.
Xxxx X. Xxxxxxx, D.D.S.
Chief Executive Officer
Accepted and agreed to as of the date set forth above:
TRICAP PARTNERS, L.L.P.
/s/ A. Xxxx Xxxxx
A. Xxxx Xxxxx
Manager
EXHIBIT A
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE HEREOF NOR ANY
INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE SOLD, ASSIGNED, PLEDGED,
HYPOTHECATED, ENCUMBERED OR IN ANY OTHER MANNER TRANSFERRED OR DISPOSED OF
EXCEPT AS PROVIDED HEREIN. THE HOLDER OF THIS WARRANT AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO THE RESTRICTIONS HEREIN SET FORTH.
---------------------
Warrant No. 1
WARRANT
TO
PURCHASE SHARES OF CLASS A COMMON STOCK
OF
APPLE ORTHODONTIX, INC.
---------------------
This Warrant dated as of April 24, 1997 (this "WARRANT") certifies that,
for good and valuable consideration, APPLE ORTHODONTIX, INC., a Delaware
corporation (the "Company"), grants to TRICAP PARTNERS, L.L.C. ("TriCap"), and,
together with any transferee of this Warrant or Warrant Shares (as defined
below) (the "Warrantholder" or "Warrantholders"), subject to the terms and
conditions set forth herein, the right to subscribe for and purchase from the
Company that number of shares (the "Warrant Shares") of the Company's Class A
common stock, par value $.01 per share ("Common Stock"), which is equal to the
quotient of (i) $1,700,000 divided by (ii) an amount determined by utilizing the
BlackScholes equation and the following variables: the initial public offering
price per share of Common Stock, the Expiration Date (as defined below), a risk
free interest rate equal to the five-year U.S. treasury note rate as quoted in
the WALL STREET JOURNAL on the Initial Exercise Date (as defined below) and a
volatility rate equal to 67.5%. This Warrant shall be exercisable during the
period from and after 9:00 a.m. Houston, Texas time on the date (the "Initial
Exercise Date") of the closing of the Company's initial public offering of
Common Stock ("IPO") and to and including 5:00 p.m. Houston, Texas time on the
date that is five years after the closing date of the IPO (the "Expiration
Date") at a purchase price per share equal to the initial per share public
offering price of Common Stock offered to the public in the Company's
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IPO (the "Exercise Price"). The Exercise Price and the number of Warrant Shares
are subject to adjustment from time to time as provided in Section 5.
1. DURATION AND EXERCISE OF WARRANT; LIMITATION EXERCISE PAYMENT OF
TAXES.
1.1 DURATION AND EXERCISE OF WARRANT.
(a) The rights represented by this Warrant may be exercised by
the Warrantholder of record, in whole, or from time to time in part
(but covering at least the greater of 1,000 shares or the remaining
unexercised portion of this Warrant), by surrender of this Warrant,
accompanied by the Exercise Form annexed hereto (the "Exercise
Form") duly executed by the Warrantholder of record and specifying
the number of Warrant Shares or Net Warrant Shares to be purchased,
to the Company at the office of the Company located at Xxx Xxxx Xxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000 (or such other office or
agency of the Company as it may designate by notice to the
Warrantholder at the address of such Warrantholder appearing on the
books of the Company) during normal business hours on any day (a
"Business Day") other than a Saturday, Sunday or a day on which the
Company is otherwise closed for business (a "Nonbusiness Day") on or
after 9:00 a.m. Houston, Texas time on the Initial Exercise Date but
not later than 5:00 p.m. on the Expiration Date (or 5:00 p.m. on the
next succeeding Business Day, if the Expiration Date is a
Nonbusiness Day), delivery of payment to the Company of the Exercise
Price for the number of Warrant Shares or cash in lieu thereof
specified in the Exercise Form and such documentation as to the
identity and authority of the Warrantholder as the Company may
reasonably request.
(b) Each Warrantholder may (i) pay the Exercise Price in cash,
by certified or official bank check payable to the order of the
Company, or (ii) exercise this Warrant for "Net Warrant Shares" or
cash in lieu of Net Warrant Shares. The number of Net Warrant Shares
will be determined as described by the following formula: Net
Warrant Shares = [WS x (MP-EP)]/MP. "WS" is the number of Warrant
Shares issuable upon exercise of this Warrant or portion thereof.
"MP" is the Market Price of the Common Stock. "Market Price" shall
mean the average of the closing prices of the Common Stock on the
business day immediately preceding the date of the Exercise Form (or
other event for which a Market Price is determined) on all domestic
exchanges on which the Common Stock is then listed, or, if there
shall have been no sales on any such exchange on such day, the
average of the highest bid and lowest asked prices on all such
exchanges at the end of such day, or, if the Common Stock shall not
be so listed, the average of the representative bid and asked prices
quoted in the NASDAQ National Market System as of 3:30 P.M., New
York time, on each such day, or if the Common Stock shall not be
quoted in the NASDAQ National Market System, the average of the high
and low bid and asked prices on each such day in the domestic
over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization. If at
any time the
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Common Stock is not listed on any domestic exchange or quoted in the
NASDAQ National Market System or the domestic over-the-xxxxxxx
market, the "Market Price" shall be deemed to be the highest of (i)
the book value thereof as determined by any firm of independent
public accountants of recognized standing selected by the Board of
Directors of the Company, as at the last day of any month ending
within 60 days preceding the date as of which the determination is
to be made, (ii) the fair value thereof, which shall be reasonably
determined by the Board of Directors of the Company as of a date
which is within 15 days prior to the date as of which the
determination is to be made or (iii) the Exercise Price in effect
immediately prior to the determination of Market Price. "EP" shall
mean the Exercise Price.
(c) Certificates for the Warrant Shares specified in the
Exercise Form shall be delivered to the Warrantholder as promptly as
practicable, and in any event within five business days, after the
date the Company receives the Exercise Form. The stock certificates
so delivered shall be in denominations specified by the
Warrantholder, and shall be issued in the name of the Warrantholder
or, if permitted by subsection 1.4 and in accordance with the
provisions thereof, such other name as shall be designated in the
Exercise Form. Such Warrant Shares shall be deemed by the Company to
be issued to the Warrantholder that is the record holder of such
Warrant Shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for the Warrant
Shares as aforesaid.
(d) If this Warrant shall have been exercised only in part,
the Company shall, at the time of delivery of the certificates for
the Warrant Shares, deliver to the Warrantholder a new Warrant
evidencing the rights to purchase the remaining Warrant Shares,
which new Warrant shall in all other respects be identical with this
Warrant.
(e) No adjustments or payments shall be made on or in respect
of Warrant Shares issuable on the exercise of this Warrant for any
cash dividends paid or payable to holders of record of Common Stock
prior to the date as of which the Warrantholder shall be deemed to
be the record holder of such Warrant Shares.
(f) Notwithstanding anything herein to the contrary, upon
receipt of the Exercise Price (unless the Warrant is exercised for
Net Warrant Shares) the Company may elect to pay the Warrantholder,
in lieu of Warrant Shares, an amount of cash equal to the product of
the Market Price multiplied by the number of Warrant Shares (or Net
Warrant Shares as applicable) specified in the Exercise Form.
Payment shall be made as promptly as practicable, and in any event
within 3 business days after the date the Company receives the
Exercise Form, in same day funds payable to the order of the
Warrantholder.
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1.2 LIMITATION ON EXERCISE. If this Warrant is not exercised prior
to 5:00 p.m. on the Expiration Date (or the next succeeding Business Day,
if the Expiration Date is a Nonbusiness Day), this Warrant, or any new
Warrant issued pursuant to Section 1.1, shall cease to be exercisable and
shall become void and all rights of the Warrantholder hereunder shall
cease. This Warrant shall not be exercisable and no Warrant Shares shall
be issued hereunder, prior to 9:00 a.m. Houston, Texas time on the Initial
Exercise Date.
1.3 PAYMENT OF TAXES. The issuance of certificates for Warrant
Shares shall be made without charge to the Warrantholder for any stock
transfer or other issuance tax in respect thereto; PROVIDED, HOWEVER, that
the Warrantholder shall be required to pay any and all taxes which may be
payable in respect of any transfer involved in the issuance and delivery
of any certificates for Warrant Shares in a name other than that of the
then Warrantholder as reflected upon the books of the Company.
1.4 TRANSFER: RESTRICTION ON TRANSFER AND LEGEND.
(a) Subject to the provisions of Section 1.4(b) below, this
Warrant shall be transferrable, in whole or in part, at any time
after the closing date of the IPO, without the consent of the
Company, by notice from Warrantholder. The Company shall keep at its
principal office a register in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the
registration, transfer and exchange of this Warrant. The Company
will not at any time, except upon the dissolution, liquidation or
winding up of the Company, close such register so as to prevent or
delay the exercise or transfer of this Warrant.
(b) Neither this Warrant nor any of the Warrant Shares, nor
any interest or participation in either, may be in any manner
transferred or disposed of, in whole or in part except in compliance
with applicable United States federal and state securities laws and
paragraph (c) below. Notwithstanding anything herein to the
contrary, the Company acknowledges that distribution of the Warrant
or Warrants to the members of TriCap shall be permissible.
(c) A Warrantholder desiring to sell all or any part of his
Warrant Shares or this Warrant to any person engaged in the business
of providing orthodontic practice management services shall give
notice in writing to the Company stating that the selling
Warrantholder has received a bona fide offer for the purchase of his
Warrant Shares or this Warrant (a "Bona Fide Offer"), the number of
Warrant Shares or portion of the Warrant to be sold, the name and
address of each such person or entity desiring to purchase such
Warrant Shares or Warrant, and the sales price and terms of payment
of the Bona Fide Offer. Such notice shall constitute an offer to
sell all or part of the Warrant Shares or this Warrant to the
Company upon the price and terms proposed in the Bona Fide Offer.
Such offer shall be effective for three business days after the
receipt of such notice by the Company. If at the end of such three
business days the Company has not elected to purchase all of the
offering Warrantholder's Warrant
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Shares or this Warrant, the offering Warrantholder may sell any
unpurchased Warrant Shares or this Warrant pursuant to the Bona Fide
Offer for a period of three business days, after which time he shall
again be subject to the terms of this paragraph 1.4(c).
Each certificate for Warrant Shares and any Warrant issued at any
time in exchange or substitution for any Warrant bearing such a legend
shall bear a legend similar in effect to the foregoing paragraph unless,
in the opinion of counsel for the Company, the Warrant need no longer be
subject to the restriction contained herein. The provisions of this
subsection 1.4 shall be binding upon all subsequent holders of this
Warrant, if any. Warrant Shares transferred to the public as expressly
permitted by, and in accordance with, the provisions of this Warrant shall
thereafter cease to be deemed to be "Warrant Shares" for purposes hereof.
1.5 DIVISIBILITY OF WARRANT. This Warrant may be divided into
warrants representing one Warrant Share or multiples thereof, upon
surrender at the principal office of the Company on any Business Day,
without charge to any Warrantholder, except as provided below. Upon any
such division, and, if permitted by subsection 1.4 and in accordance with
the provisions thereof, the Warrants may be transferred of record to a
name other than that of the Warrantholder of record; PROVIDED, HOWEVER,
that the Warrantholder shall be required to pay any and all transfer taxes
with respect thereto.
1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The
Company hereby represents, warrants and covenants as follows:
(a) EXISTENCE. The Company is a corporation duly organized and
validly existing under the laws of the State of Delaware and is
authorized to do business and is in good standing as a foreign
corporation in every jurisdiction in which it owns or leases real
property or in which the nature of its business requires it to be so
qualified, except where the failure to so qualify, individually or
in the aggregate, could not reasonably be expected to have a
material adverse effect on the Company.
(b) POWER AND AUTHORITY. The Company has all requisite
corporate power and authority, and has taken all corporate action
necessary, to execute, deliver and perform this Warrant, to grant,
issue and deliver this Warrant and to authorize and reserve for
issuance and, upon payment from time to time of the Exercise Price,
to issue and deliver the shares of Common Stock issuable upon
exercise of the Warrant. This Warrant has been duly executed and
delivered by the Company.
(c) RESERVATION, ISSUANCE AND DELIVERY OF COMMON STOCK. There
have been reserved for issuance, and the Company shall at all times
keep reserved, out of the authorized and unissued shares of Common
Stock, a number of shares sufficient to provide for the exercise of
the rights of purchase represented by this Warrant, and such shares,
when issued upon receipt of payment therefor in
5
accordance with the terms of the this Warrant, will be legally and
validly issued, fully paid and nonassessable and will be free of any
preemptive rights of stockholders.
(d) EXECUTION AND DELIVERY. Neither the execution or delivery
of this Warrant nor the consummation of the transactions herein
contemplated does or will result in a breach or violation of any of
the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of
the Company is subject, nor will such action result in any violation
of any provision of the Certificate of Incorporation or Bylaws of
the Company or any statute or any order, rule or regulation or any
court or governmental agency or body having jurisdiction over the
Company or any of its properties.
(e) VALID AND BINDING OBLIGATIONS. This Warrant, when duly
executed and delivered, will constitute legal, valid and binding
obligations of the Company, enforceable in accordance with its
terms, subject to any applicable bankruptcy, insolvency or other
laws of general application affecting creditors' rights and judicial
decisions interpreting any of the foregoing.
1.7 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE WARRANTHOLDER.
The Warrantholder hereby represents, warrants and covenants that he has
not offered to purchase or purchased any shares of Common Stock during the
five-day period prior to the date the Market Price is calculated.
2. RESERVATION AND LISTING OF SHARES.
All Warrant Shares which are issued upon the exercise of the rights
represented by this Warrant shall, upon issuance and payment of the Exercise
Price, be validly issued, fully paid and nonassessable and free from all taxes,
liens, security interests, charges and other encumbrances with respect to the
issue thereof other than taxes in respect of any transfer occurring
contemporaneously with such issue. During the period within which this Warrant
may be exercised, the Company shall at all times have authorized and reserved,
and keep available free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of this Warrant, and shall, at the
Company's expense, procure such listing thereof (subject to official notice of
issuance) as then may be required on all stock exchanges on which the Common
Stock is then listed or provide such required notices to the NASDAQ as required
with respect to the reservation and issuance of such shares. The Company shall,
from time to time, take all such action as may be required to assure that the
par value per share of the Warrant Shares is at all times equal to or less than
the then effective Exercise Price.
3. EXCHANGE, LOSS OR DESTRUCTION OF WARRANT.
If permitted by subsection 1.4 or 1.5 and in accordance with the
provisions thereof, upon surrender of this Warrant to the Company with a duly
executed instrument of assignment and
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funds sufficient to pay any transfer tax, the Company shall, without charge,
execute and deliver a new Warrant of like tenor in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. Upon receipt by the Company of evidence satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant, and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor. The term "Warrant" as used herein includes any Warrants issued in
substitution or exchange of this Warrant.
4. OWNERSHIP OF WARRANT. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in subsections 1.1, 1.4 and 1.5 or in Section 3.
5. CERTAIN ADJUSTMENTS.
The Exercise Price at which Warrant Shares may be purchased hereunder, and
the number of Warrant Shares to be purchased upon exercise hereof, are subject
to change or adjustment after the Initial Exercise Date as follows:
5.1 GENERAL. The number of Warrant Shares purchasable upon the
exercise of this Warrant and the Exercise Price shall be subject to
adjustment as follows:
(a) In case the Company shall after the Initial Exercise Date
(i) pay a dividend in shares of Common Stock or make a distribution
in shares of Common Stock, (ii) subdivide its outstanding shares of
Common Stock into a greater number of shares of Common Stock, (iii)
combine its outstanding shares of Common Stock into a smaller number
of shares of Common Stock or (iv) issue by reclassification of its
shares of Common Stock other securities of the Company (including
any such reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation), the
number of Warrant Shares purchasable upon exercise of this Warrant
shall be adjusted so that the Warrantholder shall be entitled to
receive the kind and number of Warrant Shares or other securities of
the Company that the Warrantholder would have owned or have been
entitled to receive after the happening of any of the events
described above, had this Warrant been exercised immediately prior
to the happening of such event or any record date with respect
thereto. An adjustment made pursuant to this paragraph (a) shall
become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
(b) In case the Company shall after the Initial Exercise Date:
(i) issue rights, options or warrants generally to
holders of its outstanding Common Stock, without any charge to
such holders, entitling them at the time of such issuance to
subscribe for or purchase, pursuant
7
to such an issuance, shares of Common Stock at a price per
share which is lower at the record date for the determination
of stockholders entitled to receive such rights, options or
warrants than the then-current Market Price per share of
Common Stock, or
(ii) distribute generally to holders of its shares of
Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in paragraph (a) of this subsection
5.1) or rights, options or warrants, or convertible or
exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock,
(A) the Company shall deliver to each Warrantholder a notice of such
issuance or distribution at lease 3 business days prior to the
record date established therefor, and (B) make appropriate
adjustments to the number of Warrant Shares purchasable upon the
exercise of the Warrant and/or the Exercise Price in order to
preserve the relative rights and interests of the Warrantholders,
such adjustments to be made by the good faith determination of the
Board of Directors of the Company.
5.2 VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may, at its
option, at any time during the term of the Warrant, reduce the then
current Exercise Price to any amount, consistent with applicable law,
deemed appropriate by the Board of Directors of the Company.
5.3 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
the Exercise Price of such Warrant Shares is adjusted, as herein provided,
the Company shall promptly mail first class, postage prepaid, to all
Warrantholders, notice of such adjustment.
5.4 NO ADJUSTMENT FOR CASH DIVIDENDS. No adjustment in respect of
any cash dividends shall be made during the term of this Warrant or upon
the exercise of this Warrant.
5.5 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION, ETC.
In case of any consolidation of the Company with or merger of the Company
into another person or in case of any sale, transfer or lease to another
corporation of all or substantially all of the assets of the Company, the
Company or such successor or purchaser, as the case may be, shall execute
with the Warrantholders an agreement that the Warrantholders shall have
the right thereafter upon payment of the Exercise Price in effect
immediately prior to such action to purchase upon exercise of each Warrant
the kind and amount of shares and other securities and property that the
holder thereof would have owned or have been entitled to receive after the
happening of such consolidation, merger, sale, transfer or lease had such
Warrant been exercised immediately prior to such action; PROVIDED,
HOWEVER, that no adjustment in respect of cash dividends, interest or
other income on or from such shares or other securities and property shall
be made during the
8
term of this Warrant or upon the exercise of this Warrant. Such agreement
shall provide for adjustment, which shall be as nearly equivalent as
practicable to the adjustments provided for in this Section 5. The
provisions of this subsection 5.5 shall apply similarly to successive
consolidations, mergers, sales, transfers or leases.
6. NO IMPAIRMENT.
The Company shall not by any action, including, without limitation,
amending 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 of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of the
Warrantholders against impairment. Without limiting the generality of the
foregoing, the Company will (a) not change the par value of any shares of Common
Stock receivable upon the exercise of this Warrant to an amount greater than the
amount payable therefor upon such exercise, (b) take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the exercise of this
Warrant, (c) obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof as may be necessary to enable
the Company to perform its obligations under this Warrant, and (d) not undertake
any reverse stock split, combination, reorganization or other reclassification
of its capital stock which would have the effect of making this Warrant
exercisable for less than one share of Common Stock.
Upon the request of the a Warrantholder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
reasonably satisfactory to such Warrantholder, the continued validity of this
Warrant and the Company's obligations hereunder.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Warrant constitutes the entire agreement
between the Company and the Warrantholders with respect to this Warrant
and the Warrant Shares.
7.2 BINDING EFFECTS; BENEFITS. This Warrant shall inure to the
benefit of and shall be binding upon the Company, the Warrantholders and
holders of Warrant Shares and their respective heirs, legal
representatives, successors and assigns. Nothing in this Warrant,
expressed or implied, is intended to or shall confer on any person other
than the Company, the Warrantholders and holders of Warrant Shares, or
their respective heirs, legal representatives, successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Warrant or the Warrant Shares.
7.3 AMENDMENTS AND WAIVERS. This Warrant may not be modified or
amended except by an instrument in writing signed by the Company and the
Warrantholders. The Company, any Warrantholder or holders of Warrant
Shares may, by an instrument in writing, waive compliance by the other
party with any term or provision of this Warrant
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on the part of such other party hereto to be performed or complied with.
The waiver by any such party of a breach of any term or provision of this
Warrant shall not be construed as a waiver of any subsequent breach.
7.4 SECTION AND OTHER HEADINGS. The section and other headings
contained in this Warrant are for reference purposes only and shall not be
deemed to be a part of this Warrant or to affect the meaning or
interpretation of this Warrant.
7.5 FURTHER ASSURANCES. Each of the Company, the Warrantholders and
holders of Warrant Shares shall do and perform all such further acts and
things and execute and deliver all such other certificates, instruments
and/or powers of attorney as may be necessary or appropriate as any party
hereto may, at any time and from time to time, reasonably request in
connection with the performance of any of the provisions of this Warrant.
7.6 NOTICES. All demands, requests, notices and other communications
required or permitted to be given under this Warrant shall be in writing
and shall be deemed to have been duly given if delivered personally or
sent by United States certified or registered first class mail, postage
prepaid, to the parties hereto at the following addresses or at such other
address as any party hereto shall hereafter specify by notice to the other
party hereto:
(a) if to the Company, addressed to:
Apple Orthodontix, Inc.
Xxx Xxxx Xxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: H. Xxxxxx Xxxxxx
(b) if to any Warrantholder or holder of Warrant Shares,
addressed to the address of such person appearing on the books of
the Company.
Except as otherwise provided herein, all such demands, requests,
notices and other communications shall be deemed to have been received on
the date of personal delivery thereof or on the third Business Day after
the mailing thereof.
7.7 SEPARABILITY. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable any other term
or provision of this Warrant or affecting the validity or enforceability
of any of the terms or provisions of this Warrant in any other
jurisdiction.
7.8 FRACTIONAL SHARES. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof,
the Company shall pay to the
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Warrantholder an amount in cash equal to such fraction multiplied by the
then-current market price.
7.9 RIGHTS OF THE HOLDER. No Warrantholder shall, solely by virtue
of this Warrant, be entitled to any rights of a stockholder of the
Company, either at law or in equity.
7.10 GOVERNING LAW. This Warrant shall be deemed to be a contract
made under the laws of the State of Texas and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts made and performed in Texas.
7.11 EXPENSES. The Company shall pay all reasonable legal and other
reasonable out-of-pocket expenses of the Warrantholders and their counsel
in connection with the exercise and sale of the Warrant Shares (including
reasonable brokers' commissions incurred by the Warrantholders upon the
sale of Warrant Shares) as contemplated by this Warrant. The Company
agrees to reimburse TriCap upon demand for its reasonable out-of-pocket
costs and reasonable expenses incurred in connection with the preparation,
review, negotiation, execution and delivery of this Warrant and all other
related documents.
7.12 RIGHT TO INFORMATION. The Company will provide to a
Warrantholder and to all holders of Warrant Shares, on a timely basis,
copies of all documents and reports filed with the Securities and Exchange
Commission (the "Commission") and publicly available annual and quarterly
financial statements, as may be requested in writing by the Warrantholder
or as otherwise agreed in another agreement between the Company and the
Warrantholder.
7.13 MERGER OR CONSOLIDATION OF THE COMPANY. So long as this Warrant
remains in effect, the Company will not merge or consolidate with or into,
or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as
the case may be, (i) shall be the Company or (ii) if not the Company,
shall expressly assume, by supplemental agreement executed and delivered
to the Warrantholders, the performance and observance of each and every
covenant and condition of this Warrant to be performed and observed by the
Company under this Warrant.
7.14 RULE 144. With a view to making available to Warrantholders the
benefits of certain rules of the Commission that may permit the sale of
shares of Common Stock to the public without registration, the Company
hereby covenants and agrees to use its reasonable business efforts after
the Initial Exercise Date to file in a timely manner all reports and other
documents required to be filed by it under the Securities Act of 1933, as
amended the "Act" and the Securities Exchange Act of 1934, as amended, and
the rules and regulations adopted by the Commission thereunder necessary
to permit sales under Rule 144 under the Act, and the Company will take
such further action which does not have material cost to the Company to
the extent required from time to time to enable
11
Warrantholders to sell shares of Common Stock without registration under
the Act within the limitation of the exemptions provided by (a) Rule 144
under the Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the
written request of a Warrantholder, the Company will deliver to such
Warrantholder a written statement as to whether it has complied with such
requirements.
12
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the date first written above.
APPLE ORTHODONTIX, INC.
By:/s/ XXXX X. XXXXXXX, D.D.S.
Xxxx X. Xxxxxxx, D.D.S.
Chief Executive Officer
13
EXERCISE FORM
(To be executed upon exercise of this Warrant)
The undersigned, the record holder of this Warrant, hereby irrevocably
elects to exercise the right, represented by this Warrant, to purchase of the
Warrant Shares, and herewith tenders payment for such Warrant Shares to the
order of APPLE ORTHODONTIX, INC., in the amount of $ in accordance with the
terms of this Warrant. The undersigned requests that a certificate for such
Warrant Shares be registered in the name of
and that such certificate be delivered to ,
whose address is .
Date: Signature:
14
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of April 24, 1997, by and among Apple Orthodontix, Inc., a Delaware
corporation ("Apple"), and TriCap Partners, L.L.C. (the "Stockholder" and,
collectively with any assignee, the "Stockholders").
WHEREAS, Apple desires to provide the Stockholders with an opportunity to
achieve liquidity in their respective investments in Apple by granting the
Holders the right to participate in certain future public offerings of class A
common stock, par value $.001 per share, of Apple ("Common Stock");
WHEREAS, the Stockholder is this date accepting from the Company a warrant
(the "Warrant") entitling the Stockholder to purchase certain shares of Common
Stock; and
WHEREAS, as a condition to its acceptance of the Warrant, the Stockholder
is requiring the Company to enter into this Agreement relating to the
registration of shares of Common Stock which may be issued upon exercise of the
Warrant;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1 . DEFINITIONS. The following capitalized terms shall have the meanings
assigned to them in this SECTION 1 or in the parts of this Agreement referred to
below:
CODE: the Internal Revenue Code of 1986, as amended, and any successor
thereto.
COMMISSION: the Securities and Exchange Commission, and any successor
thereto.
DEMAND REGISTRATION: as defined in SECTION 3.
EFFECTIVE TIME: as defined in SECTION 3.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and any
successor thereto, and the rules and regulations thereunder.
EXEMPT OFFERING: as defined in SECTION 2.
REGISTRABLE COMMON: shares of Common Stock issuable to the Stockholder
pursuant to the Warrant, and any additional shares of Common Stock issued or
distributed in respect of any other shares of Registrable Common by way of a
stock dividend or distribution or stock split or in connection with a
combination of shares, recapitalization, reorganization, merger, consolidation
or otherwise. For purposes of this Agreement, shares of Registrable Common will
cease to be Registrable Common when and to the extent that (i) a registration
statement covering such shares has been declared effective under the Securities
Act and such shares have been disposed of pursuant to such effective
registration statement, (ii) such shares are sold pursuant to Rule 144 or (iii)
such shares have been otherwise transferred to a person or entity, other than
pursuant to SECTION 11 hereof.
REGISTRATION NOTICE: as defined in SECTION 2.
RULE 144: Securities Act Rule 144 (or any similar or successor provision
under the Securities Act).
SECURITIES ACT: the Securities Act of 1933, as amended, and any successor
thereto, and the rules and regulations thereunder.
SELLING STOCKHOLDER: as defined in SECTION 12.
2. PIGGYBACK REGISTRATION RIGHTS. At any time before November 14, 2001, whenever
Apple proposes to register any Common Stock for its own account, or for the
account of any other person holding registration rights, under the Securities
Act for a public offering for cash, other than a registration relating to the
offering or issuance of shares in connection with (i) employee compensation or
benefit plans or (ii) one or more acquisition transactions under a Registration
Statement on either Form S-1 or Form S-4 under the Securities Act (or a
successor to either Form S-1 or Form S-4) (any such offering or issuance being
an "Exempt Offering"), Apple will give each Stockholder written notice of its
intent to do so (a "Registration Notice") at least 20 days prior to the filing
of the related registration statement with the Commission. Such notice shall
specify the approximate date on which Apple proposes to file such registration
statement and shall contain a statement that the Stockholders are entitled to
participate in such offering and shall set forth the number of shares of
Registrable Common (as hereinafter defined) that represents the best estimate of
the lead managing underwriter (or if not known or applicable, Apple) that will
be available for sale by the holders of Registrable Common in the proposed
offering. If Apple shall have delivered a Registration Notice, each Stockholder
shall be entitled to participate on the same terms and conditions as Apple in
the public offering to which such Registration Notice relates and to offer and
sell shares of Registrable Common therein only to the extent provided in this
SECTION 2. Each Stockholder desiring to participate in such offering shall
notify Apple no later than ten days following receipt of the Registration Notice
of the aggregate number of shares of Registrable Common that such Stockholder
then desires to sell in the offering. Each Stockholder desiring to participate
in such public offering may include shares of Registrable Common in the
registration statement relating to the offering to the extent that the inclusion
of such shares shall not reduce the number of shares of Common Stock to be
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offered and sold by Apple to be included therein. If the lead managing
underwriter selected by Apple for a public offering (or, if the offering is not
underwritten, a financial advisor to Apple) determines that marketing factors
require a limitation on the number of shares of Registrable Common to be offered
and sold in such offering, there shall be included in the offering only that
number of shares of Registrable Common, if any, that such lead managing
underwriter or financial advisor, as the case may be, reasonably and in good
faith believes will not jeopardize the success of the offering, PROVIDED that if
the lead managing underwriter or financial advisor, as the case may be,
determines that marketing factors require a limitation on the number of shares
of Common Stock to be offered and sold as aforesaid and so notifies Apple in
writing, the number of shares of Common Stock to be offered and sold by holders
desiring to participate in the offering, shall be allocated among such holders
on a pro rata basis based on their holdings of Common Stock. Apple shall have
the right at any time to reduce the number of shares requested by any
Stockholder to be included in such registration to the extent that Apple
reasonably concludes that inclusion of such shares is likely to jeopardize the
non-recognition status under the Code of any acquisition transaction consummated
pursuant to any of the acquisition agreements entered into by Apple and one of
its founding orthodontic practices; PROVIDED that any determination to exclude
shares from any such registration pursuant to this provision shall be based on
advice of tax counsel to Apple or its independent accountants.
3. DEMAND REGISTRATION RIGHTS. At any time before May 31, 2002, the holders of
at least 33% of the shares of Registrable Common then outstanding may request
(the Stockholders making such request are herein referred to as the "Requesting
Holders") in writing that Apple file a registration statement under the
Securities Act covering the registration of all or a part of the shares of
Registrable Common then held by such Stockholders (a "Demand Registration").
Within ten days of the receipt of such request, Apple shall give written notice
of such request to all other Stockholders and shall use its best efforts to
effect as soon as practicable the registration under the Securities Act in
accordance with SECTION 4 hereof (including without limitation, the execution of
an undertaking to file post-effective amendments) of all shares of Registrable
Common which the Stockholders request be registered within 30 days after the
mailing of such notice; PROVIDED, HOWEVER, that (i) Apple shall not be obligated
to cause a registration statement respecting a Demand Registration to be filed
until the date that is one month before the expiration of any lock-up period set
forth in an underwriting agreement to which Apple is a party, and (ii) Apple
shall be obligated to effect only one Demand Registration pursuant to this
SECTION 3. In connection with a Demand Registration, the holders of a majority
of shares of Registrable Common included in such Demand Registration, in their
sole discretion, shall determine whether (a) to proceed with, withdraw from or
terminate such offering, (b) to select, subject to the approval of Apple (which
approval shall not be unreasonably withheld), a managing underwriter or
underwriters to administer such offering, (c) to enter into an underwriting
agreement for such offering and (d) to take such actions as may be necessary to
close the sale of Registrable Common contemplated by such offering, including,
without limitation, waiving any conditions to closing such sale that may not
have been fulfilled. In the event such holders exercise their discretion under
this paragraph to terminate a proposed Demand Registration, the terminated
Demand Registration shall not constitute the Demand Registration under this
SECTION 3, if the determination to terminate such Demand Registration
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(i) follows the exercise by Apple of any of its rights provided by the last two
paragraphs of this SECTION 3 or (ii) results from a material adverse change in
the condition (financial or other), results of operations or business of the
Company. Notwithstanding the foregoing, a registration will not count as the
Demand Registration under this SECTION 3 until such registration has become
effective and unless the Requesting Holders are able to register and sell at
least 50% of the shares of Registrable Common requested by them to be included
in such registration.
Notwithstanding the preceding paragraph, if at the time of any request by
the Requesting Holders for a Demand Registration, Apple has fixed plans to file
within 90 days after such request for the sale of any of its securities in a
public offering under the Securities Act (other than an Exempt Offering), no
Demand Registration shall be initiated under this SECTION 3 until 20 days after
the effective date of such registration unless Apple is no longer proceeding
diligently to effect such registration; PROVIDED that Apple shall provide the
holders of Registrable Common the right to participate in such public offering
pursuant to, and subject to, SECTION 2 hereof.
4. REGISTRATION PROCEDURES. In connection with registrations under SECTIONS 2
AND 3 hereof, and subject to the terms and conditions contained therein, Apple
shall (a) use its best efforts to prepare and file with the Commission as soon
as reasonably practicable, a registration statement with respect to the
Registrable Common and use its best efforts to cause such registration to
promptly become and remain effective for a period, in the case of a registration
pursuant to SECTION 2, of at least 120 days, or, in the case of a registration
pursuant to SECTION 3 and subject to SECTION 6 hereof, until all the shares
Registrable Common requested to be registered thereby have been sold thereunder
(or, in each such case, such shorter period during which holders shall have sold
all Registrable Common which they requested to be registered); PROVIDED,
HOWEVER, that such 120-day period shall be extended for a period equal to the
period that a Stockholder agrees to refrain from selling any securities included
in such registration in accordance with SECTION 8 hereof; (b) prepare and file
with the Commission such amendments (including post-effective amendments) to
such registration statement and supplements to the related prospectus to
appropriately reflect the plan of distribution of the securities registered
thereunder until the completion of the distribution contemplated by such
registration statement or for so long thereafter as a dealer is required by law
to deliver a prospectus in connection with the offer and sale of the shares of
Registrable Common covered by such registration statement and/or as shall be
necessary so that neither such registration statement nor the related prospectus
shall contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading and so that such registration statement and the related
prospectus will otherwise comply with applicable legal requirements; (c) provide
to any Stockholder requesting to include shares of Registrable Common in such
registration statement and a single counsel for all holders of Registrable
Common requesting to include shares of Registrable Common in such registration
statement, which counsel shall be selected by the holders of a majority of
shares of Registrable Common requested to be included in such registration
statement and shall be reasonably satisfactory to Apple, an opportunity to
review and provide comments with respect to such registration statement (and any
post-effective amendment thereto) prior to such registration statement (or
post-effective amendment) becoming
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effective; (d) use its best efforts to register and qualify the Registrable
Common covered by such registration statement under applicable securities or
"Blue Sky" laws of such jurisdictions as the holders shall reasonably request
for the distribution of the Registrable Common; (e) take such other actions as
are reasonable and necessary to comply with the requirements of the Securities
Act; (f) furnish such number of prospectuses (including preliminary
prospectuses) and documents incident thereto as a Stockholder from time to time
may reasonably request; (g) provide to any Stockholder requesting to include
Registrable Common in such registration statement and any managing underwriter
participating in any distribution thereof, and to any attorney, accountant or
other agent retained by such Stockholder or managing underwriter, reasonable
access to appropriate officers and directors of Apple to ask questions and to
obtain information reasonably requested by any such Stockholder, managing
underwriter, attorney, accountant or other agent in connection with such
registration statement or any amendment thereto; PROVIDED, HOWEVER, that (i) in
connection with any such access or request, any such requesting persons shall
cooperate to the extent reasonably practicable to minimize any disruption to the
operation by Apple of its business and (ii) any records, information or
documents shall be kept confidential by such requesting persons, unless (A) such
records, information or documents are in the public domain or otherwise publicly
available or (B) disclosure of such records, information or documents is
required by court or administrative order or by applicable law (including,
without limitation, the Securities Act); (h) notify each Stockholder and the
managing underwriters participating in the distribution pursuant to such
registration statement promptly (i) when Apple is informed that such
registration statement or any post-effective amendment to such registration
statement becomes effective, (ii) of any request by the Commission for an
amendment or any supplement to such registration statement or any related
prospectus, (iii) of the issuance by the Commission of any stop order suspending
the effectiveness of such registration statement or of any order preventing or
suspending the use of any related prospectus or the initiation or threat of any
proceeding for that purpose, (iv) of the suspension of the qualification of any
shares of Registrable Common included in such registration statement for sale in
any jurisdiction or the initiation or threat of a proceeding for that purpose,
(v) of any determination by Apple that any event has occurred which makes untrue
any statement of a material fact made in such registration statement or any
related prospectus or which requires the making of a change in such registration
statement or any related prospectus in order that the same will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading and
(vi) of the completion of the distribution contemplated by such registration
statement if it relates to an offering by Apple; (i) in the event of the
issuance of any stop order suspending the effectiveness of such registration
statement or of any order suspending or preventing the use of any related
prospectus or suspending the qualification of any shares of Registrable Common
included in such registration statement for sale in any jurisdiction, use its
best efforts to obtain its withdrawal; (j) otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable, but not
later than fifteen months after the effective date of such registration
statement, an earnings statement covering the period of at least twelve months
beginning with the first full fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; (k) use reasonable diligence to cause all
shares of Registrable
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Common included in such registration statement to be listed on any securities
exchange (including, for this purpose, the Nasdaq National Market) on which the
Common Stock is then listed at the initiation of Apple; (l) use reasonable
diligence to obtain an opinion from legal counsel (which may include the General
Counsel of Apple) in customary form and covering such matters of the type
customarily covered by opinions as the underwriters, if any, may reasonably
request; (m) provide a transfer agent and registrar for all such Registrable
Common not later than the effective date of such registration statement; (n)
enter into such customary agreements (including an underwriting agreement in
customary form) as the underwriters, if any, may reasonably request in order to
expedite or facilitate the disposition of such shares of Registrable Common; and
(o) use reasonable diligence to obtain a "comfort letter" from Apple's
independent public accountants in customary form and covering such matters of
the type customarily covered by comfort letters as the underwriters, if any, may
reasonably request. As used in this SECTION 4 and elsewhere herein, the term
"underwriters" does not include any Stockholder.
5. UNDERWRITING AGREEMENT. In connection with each registration pursuant to
SECTIONS 2 AND 3 covering an underwritten registered public offering, Apple and
each participating Stockholder agree to enter into a written agreement with the
managing underwriter in such form and containing such provisions as are
customary in the securities business for such an arrangement between such
underwriter and companies of Apple's size and investment stature, including
provisions for indemnification by Apple and each Selling Stockholder as more
fully described in SECTION 12 hereof.
6. AVAILABILITY OF RULE 144. Notwithstanding anything contained herein to the
contrary, (including SECTIONS 2 AND 3 hereof), Apple shall not be obligated to
register shares of Registrable Common held by any Stockholder when the resale
provisions of Rule 144(k) are available to such Stockholder or such Stockholder
is otherwise entitled to sell the shares of Registrable Common held by him or
her in a brokerage transaction without registration under the Securities Act and
without limitation as to volume or manner of sale or both.
7. RULE 144 REPORTING. With a view to making available the benefits of certain
rules and regulations of the Commission which may permit the sale of the shares
of Registrable Common held by the Stockholders to the public without
registration, Apple agrees to:
(a) make and keep public information available (as those terms are
understood and defined in Rule 144) at all times from and after 90 days
following the effective date of the registration statement;
(b) use its best efforts to file with the Commission in a timely manner
all reports and other documents required of Apple under the Securities Act and
the Exchange Act at any time that it is subject to such reporting requirements;
and
(c) so long as a Stockholder owns any shares of Registrable Common,
furnish to the Stockholder forthwith upon request a written statement by Apple
as to its compliance with the
-6-
reporting requirements of Rule 144, the Securities Act and the Exchange Act (at
any time that it is subject to such reporting requirements), a copy of the most
recent annual or quarterly report of Apple, and such other reports and documents
filed in accordance with such reporting requirements as a Stockholder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing a Stockholder to sell any such securities without
registration; and
(d) if required by the transfer agent and registrar for the Common Stock,
use reasonable diligence to obtain an opinion from legal counsel (which may
include the General Counsel of Apple) addressed to such transfer agent and
registrar, with respect to any sale of shares of Registerable Common pursuant to
Rule 144 (or, at the option of Apple, pay the reasonable fees and expenses of
legal counsel retained by a Stockholder to provide such an opinion).
8. MARKET STANDOFF.
(a) In consideration of the granting to Stockholders of the registration
rights pursuant to this Agreement, each Stockholder agrees that, for so long as
such Stockholder holds shares of Registrable Common, except as permitted by
SECTIONS 2 AND 3 hereof, such Stockholder will not sell, transfer or otherwise
dispose of, including without limitation through put or short sale arrangements,
shares of Common Stock in the ten days prior to the effectiveness of any
registration (other than relating to an Exempt Offering) of Common Stock for
sale to the public and for up to 90 days following the effectiveness of such
registration.
(b) Except for Exempt Offerings or in connection with the acquisition by
Apple of another company or business, Apple shall not offer to sell or sell any
shares of capital stock of Apple during the 90-day period immediately following
the commencement of an underwritten public offering of shares of Registrable
Common pursuant to a Demand Registration.
9. REGISTRATION EXPENSES. All expenses incurred in connection with any
registration, qualification and compliance under this Agreement (including,
without limitation, all registration, filing, qualification, legal, printing and
accounting fees, and underwriting commissions and discounts applicable to shares
of Registrable Common included in the registrations under this Agreement) shall
be borne by Apple. Subject to the foregoing, all expenses incident to Apple's
performance of or compliance with this Agreement, including, without limitation,
all filing fees, fees and expenses of compliance with securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel in
connection with Blue Sky qualifications of the Registrable Common), printing
expenses, messenger and delivery expenses, internal expenses (including, without
limitation, all salaries and expenses of Apple's officers and employees
performing legal or accounting duties), the fees and expenses applicable to
shares of Registrable Common included in connection with the listing of the
securities to be registered on each securities exchange (including, for this
purpose, the Nasdaq National Market) on which similar securities issued by Apple
are then listed at the initiation of Apple, registrar and transfer agents' fees
and fees and disbursements of counsel for Apple and its independent certified
public accountants, securities act liability insurance of Apple and its officers
and directors (if Apple elects to obtain
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such insurance), the fees and expenses of any special experts retained by Apple
in connection with such registration and fees and expenses of other persons
retained by Apple and incurred in connection with each registration hereunder
(but not including, without limitation, any fees and expenses of counsel and any
other special experts retained by the holders of Registrable Common in
connection with a registration required hereunder, and transfer taxes, if any),
will be borne by Apple.
10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No holder of Registrable Common
may participate in any underwritten registration hereunder unless such holder
(a) agrees to sell such holder's securities on the basis provided in any
underwriting arrangements approved by the persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements.
11. TRANSFER OF REGISTRATION RIGHTS; ADDITIONAL GRANTS OF REGISTRATION RIGHTS.
The registration rights provided to the holders of Registrable Common under
SECTIONS 2 AND 3 hereof may not be transferred to any other person or entity,
except to any person who the Stockholder may transfer the Warrant pursuant to
the terms thereof or pursuant to the laws of descent and distribution; PROVIDED
that such transferees are bound by and subject to the terms and conditions
contained herein. Nothing herein shall limit the ability of Apple to grant to
any person or entity any registration or similar rights in the future with
respect to Common Stock or other securities of Apple (whether pursuant to the
foregoing provision or otherwise).
12. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. To the extent permitted by law,
Apple agrees to indemnify and hold harmless each Stockholder who sells shares of
Registrable Common in a registered offering pursuant to either SECTION 2 OR
SECTION 3 hereof (a "Selling Stockholder"), each person, if any, who controls
such Stockholder within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act and the officers, employees or members of the
Stockholder, from and against any and all losses, claims, damages, liabilities
and expenses (including reasonable legal expenses) arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Common or
in any amendment or supplement thereto or in any related preliminary prospectus,
or arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon, any such
untrue statement or omission or allegation thereof based upon information
furnished in writing to Apple by such Selling Stockholder or on such Selling
Stockholder's behalf expressly for use therein. In connection with an
underwritten offering of shares of Registrable Common, Apple will indemnify any
underwriters of the Registrable Common, their partners, officers and directors
and each person who controls such underwriters (within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act) on
substantially the same basis as that of the indemnification of the Selling
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Stockholders provided in this SECTION 12(A). Notwithstanding the foregoing,
Apple's indemnification obligations with respect to any preliminary prospectus
shall not inure to the benefit of any Selling Stockholder or underwriter with
respect to any loss, claim, damage, liability (or actions in respect thereof) or
expense arising out of or based on any untrue statement or alleged untrue
statement or omission or alleged omission to state a material fact in such
preliminary prospectus, in any case where (i) a copy of the prospectus used to
confirm sales of shares of Registrable Common was not sent or given to the
person asserting such loss, claim, damage or liability at or prior to the
written confirmation of the sale to such person and (ii) such untrue statement
or alleged untrue statement or omission or alleged omission was corrected in
such prospectus.
(b) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Promptly after receipt
by a Selling Stockholder of notice of any claim or the commencement of any
action or proceeding brought or asserted against such Selling Stockholder in
respect of which indemnity may be sought from Apple, such Selling Stockholder
shall notify Apple in writing of the claim or the commencement of that action or
proceeding; PROVIDED, HOWEVER, that the failure to so notify Apple shall not
relieve Apple from any liability that it may have to the Selling Stockholder
otherwise than pursuant to the indemnification provisions of this Agreement. If
any such claim or action or proceeding shall be brought against a Selling
Stockholder and such Selling Stockholder shall have duly notified Apple thereof,
Apple shall have the right to assume the defense thereof, including the
employment of counsel. Such Selling Stockholder shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be at the expense of such
Selling Stockholder unless (i) Apple has agreed to pay such fees and expenses or
(ii) the named parties to any such action or proceeding include both such
Selling Stockholder and Apple, and such Selling Stockholder shall have been
advised by counsel that there may be one or more legal defenses available to
such Selling Stockholder which are different from or additional to those
available to Apple, in which case, if such Selling Stockholder notifies Apple in
writing that it elects to employ separate counsel at the expense of Apple, Apple
shall not have the right to assume the defense of such action or proceeding on
behalf of such Selling Stockholder; it being understood, however, that Apple
shall not, in connection with any one such action or proceeding or separate but
substantially similar or related actions or proceedings in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all Selling Stockholders. Apple shall
not be liable for any settlement of any such action or proceeding effected
without Apple's written consent.
(c) INDEMNIFICATION BY HOLDERS OF REGISTRABLE COMMON. In connection
with any registration in which a Selling Stockholder is participating, such
Selling Stockholder will furnish to Apple in writing such information and
affidavits as Apple reasonably requests for use in connection with any related
registration statement or prospectus. To the extent permitted by law, each
Selling Stockholder agrees to indemnify and hold harmless Apple, its directors
and officers who sign the registration statement relating to shares of
Registrable Common offered by such Selling Stockholder and each person, if any,
who controls Apple within the meaning of
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either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from Apple to such Selling Stockholder,
but only with respect to information concerning such Selling Stockholder
furnished in writing by such Selling Stockholder or on such Selling
Stockholder's behalf expressly for use in any registration statement or
prospectus relating to shares of Registrable Common offered by such Selling
Stockholder, or any amendment or supplement thereto, or any related preliminary
prospectus. In case any action or proceeding shall be brought against Apple or
its directors or officers, or any such controlling person, in respect of which
indemnity may be sought against such Selling Stockholder, such Selling
Stockholder shall have the rights and duties given to Apple, and Apple or its
directors or officers or such controlling persons shall have the rights and
duties given to such Selling Stockholder, by the preceding paragraph. Each
Selling Stockholder also agrees to indemnify and hold harmless any underwriters
of the Registrable Common, their partners, officers and directors and each
person who controls such underwriters (within the meaning of either Section 15
of the Securities Act or Section 20 of the Exchange Act) on substantially the
same basis as that of the indemnification of Apple provided in this SECTION
12(C). Notwithstanding anything to the contrary herein, in no event shall the
amount paid or payable by any Selling Stockholder under this SECTION 12(C)
exceed the amount of proceeds received by such Selling Stockholder from the
offering of the Registrable Common.
(d) CONTRIBUTION. If the indemnification provided for in this
SECTION 12 is unavailable to any indemnified party in respect of any losses,
claims, damages, liabilities or expenses referred to herein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and the
indemnified parties in connection with the actions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact
relates to information supplied by such indemnified party or indemnified parties
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. Apple and the Selling
Stockholders agree that it would not be just and equitable if contribution
pursuant to this SECTION 12(D) were determined by pro rata allocation or by any
other method of allocation that does not take account of the equitable
considerations referred to in this SECTION 12(D). No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. If indemnification is available under this SECTION
12, the indemnifying parties shall indemnify each indemnified party to the full
extent provided in SECTIONS 12(A) and (C) without regard to the relative fault
of said indemnifying party or indemnified party or any other equitable
consideration provided for in this SECTION 12(D)
13. MISCELLANEOUS.
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(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless Apple has obtained the written consent of holders of at least 51% of the
shares of Registrable Common then outstanding.
(b) NOTICES. All notices and other communications provided for or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by telex or telecopy, or registered or
certified mail (return receipt requested), postage prepaid, or courier to the
parties at the following addresses (or at such other address for any party as
shall be specified by like notice), PROVIDED that notices of a change of address
shall be effective only upon receipt thereof. Notices sent by mail shall be
effective when answered back, notices sent by telecopier shall be effective when
receipt is acknowledged, and notices sent by courier guaranteeing next day
delivery shall be effective on the next business day after timely delivery by
the courier. Notices shall be sent to the following addresses:
(i) if to a Stockholder, at the most current address given by such
Stockholder to Apple in a writing making specific reference to this
Agreement;
(ii) if to Apple, at the following address:
Apple Orthodontix, Inc.
Xxx Xxxx Xxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: H. Xxxxxx Xxxxxx
Telecopy: (000) 000-0000
with copies to: Xxxxxxx & Xxxxxx, L.L.P.
0000 Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Telecopy: (000) 000-0000
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the heirs, executors, administrators, successors and assigns
of each of the parties.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
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(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED WHOLLY WITHIN THAT STATE.
(g) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all the rights and privileges of the
Stockholders shall be enforceable to the fullest extent permitted by law.
(h) ENTIRE AGREEMENT; TERMINATION. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter. This Agreement, except the provisions of SECTION 12 (which shall
survive until the expiration of the applicable statutes of limitations) and this
SECTION 13, shall terminate and be of no further force or effect on November 14,
2001.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
APPLE:
APPLE ORTHODONTIX, INC.
By: /s/ XXXXXX X. XXXXXXXX
Xxxxxx X. Xxxxxxxx
President
STOCKHOLDERS:
TRICAP PARTNERS, L.L.C.
By:/S/ A. XXXX XXXXX
A. Xxxx Xxxxx
Manager
