Exhibit 10.25
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS NOTE, THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE AND ANY
INTEREST THEREIN MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF, EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR (ii) AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.
THIS NOTE AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE ARE SUBJECT
TO CERTAIN RESTRICTIONS SET FORTH IN A STOCKHOLDERS AGREEMENT, DATED AS OF
JANUARY 31, 2000 (THE "STOCKHOLDERS AGREEMENT"). A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE.
THE PAYMENT OF THE PRINCIPAL OF, AND INTEREST ON, AND ALL OTHER AMOUNTS OWING IN
RESPECT OF THE INDEBTEDNESS EVIDENCED BY, THIS NOTE, IS AND SHALL BE EXPRESSLY
SUBORDINATED, TO THE EXTENT AND IN THE MANNER SET FORTH HEREIN AND, IF
APPLICABLE, IN THAT CERTAIN SUBORDINATION AGREEMENT, OR ANY OTHER SUBORDINATION
AGREEMENT NOW OR HEREAFTER EXECUTED, AMONG THE COMPANY, THE HOLDER, BANK OF
AMERICA, N.A., FORMERLY KNOWN AS NATIONSBANK OF TEXAS, N.A., ITS SUCCESSORS OR
ASSIGNS, OR ANY OTHER HOLDER OF SENIOR DEBT (COLLECTIVELY, "SENIOR CREDITOR"),
(IN ANY SUCH EVENT, THE "SUBORDINATION AGREEMENT").
CONVERTIBLE SUBORDINATED NOTE
JANUARY 31, 2000 $1,378,464
FOR VALUE RECEIVED, CASTLE DENTAL CENTERS, INC., a Delaware corporation
(the "COMPANY"), hereby promises to pay to the order of
________________________________________or registered assigns ("HOLDER") the
principal amount of ONE MILLION THREE HUNDRED SEVENTY EIGHT THOUSAND FOUR
HUNDRED SIXTY FOUR AND NO/00 DOLLARS ($1,378,464.00), on January 31, 2009 (the
"MATURITY DATE"). The Company further promises to pay interest on the
outstanding unpaid principal amount hereof, as provided in the Purchase
Agreement (as defined below), from the date hereof until payment in full hereof
at the applicable rate specified in subsection 3.02(a) of the Purchase
Agreement; provided, however, that if Holder so elects, following the occurrence
and during the continuance of an Event of Default, the Company promises to pay
to Holder interest on the unpaid principal amount hereof at the applicable rate
specified in subsection 3.02(b) of the Purchase Agreement. Interest shall be
payable in accordance with the provisions specified in subsection 3.02(c) of the
Purchase Agreement.
This Convertible Subordinated Note (hereinafter referred to as the "NOTE")
is being issued by the Company pursuant to the terms of the Senior Subordinated
Note Purchase Agreement, dated January 31, 2000 (the "PURCHASE AGREEMENT"),
executed by and among the Company, the Holder and certain other parties thereto.
All terms which are capitalized and used herein
(which are not otherwise specifically defined herein) and which are defined in
the Purchase Agreement shall have the meanings set forth in the Purchase
Agreement.
1. PAYMENTS OF PRINCIPAL AND INTEREST. The principal amount hereof, to the
extent that it has not been converted into shares of Common Stock pursuant to
Section 2 hereof, shall be payable in full on the Maturity Date. All payments of
principal and interest on this Note shall be made in lawful money of the United
States of America by wire transfer of immediately available funds to such
account as the Holder may from time to time designate by written notice in
accordance with the provisions of this Note. If a payment hereunder becomes due
and payable on a day that is not a Business Day, the payment may be made on the
next succeeding Business Day, and such extension of time shall be included in
the computation of the amount of interest due on such succeeding Business Day.
Checks, drafts or similar items of payment received by Holder shall not
constitute payment, but credit therefor shall, solely for the purpose of
computing interest earned by ▇▇▇▇▇▇, be given in accordance with the Purchase
Agreement. In no contingency or event whatsoever shall interest charged
hereunder, however such interest may be characterized or computed, exceed the
highest rate permissible under any law which a court of competent jurisdiction
determines is applicable hereto. In the event of any such determination, the
provisions of subsection 5.03 of the Purchase Agreement shall govern and
control.
2. CONVERSION OF NOTES. This Note shall be convertible into shares of the
Company's common stock, $.001 par value per share (the "COMMON STOCK"), on the
terms and conditions set forth in this Section 2.
(a) HOLDER'S CONVERSION RIGHT; MANDATORY CONVERSION. Subject to the
provisions of Section 2(c), at any time or times on or after the Issuance
Date, the Holder shall be entitled to convert all or any part of the
outstanding and unpaid principal of this Note (in each case, the
"CONVERSION AMOUNT") into fully paid and nonassessable shares of Common
Stock in accordance with Section 2(d), at the Conversion Rate (as defined
below).
(b) CONVERSION RATE. The number of shares of Common Stock issuable
upon conversion of a Conversion Amount of this Note pursuant to Section
2(a) shall be determined according to the following formula (the
"CONVERSION RATE"):
CONVERSION AMOUNT
Conversion Price
(c) REGULATORY PROBLEM. In the event Holder determines that it has a
Regulatory Problem (as defined below), Holder shall have the right to
transfer its entire interest in the Company without regard to any
restriction on transfer set forth in this Note (other than securities laws
restrictions) and the Company agrees to take all such actions as are
reasonably requested by ▇▇▇▇▇▇ in order to (i) effectuate and facilitate
any transfer by Holder of its
-2-
interests to any person designated by Holder (subject to compliance with
applicable federal and state securities) or (ii) to permit Holder (or any
affiliate thereof) to exchange all or any portion of the Common Stock then
held by, or issuable to, it on a "share-for-share" basis for interests of
a class of non-voting stock of the Company, which non-voting stock shall
be identical in all respects to such Common Stock, except such stock shall
be non-voting and shall be convertible into voting stock on such terms as
are requested by such holder in light of regulatory considerations then
prevailing. Company agrees to enter into such additional agreements, adopt
such amendments hereto and to the Certificate of Incorporation of the
Company and to take such additional actions as are reasonably requested by
▇▇▇▇▇▇ in order to effectuate the intent of the foregoing. For purposes
hereof, a "Regulatory Problem" means any set of facts or circumstances
wherein Holder reasonably believes it is not entitled to hold, or exercise
any significant right with respect to, the Common Stock.
(d) MECHANICS OF CONVERSION. Any conversion of this Note at the
option of the Holder shall be conducted in the following manner:
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert this Note into
shares of Common Stock on any date set forth in the Conversion
Notice by the Holder (the "CONVERSION DATE"), the Holder hereof
shall (A) transmit by facsimile (or otherwise deliver), for receipt
on such date, a fully executed notice of conversion in the form
attached hereto as Exhibit A (the "CONVERSION NOTICE") to the
Company with a copy thereof to the Company's designated transfer
agent (the "TRANSFER AGENT") and (B) if required by Section
2(d)(vi), surrender to a common carrier for delivery to the Company
as soon as practicable following such date the original Note being
converted (or an indemnification undertaking with respect to such
Note in the case of its loss, theft or destruction).
(ii) COMPANY'S RESPONSE. Upon receipt by the Company of a
Conversion Notice, the Company shall (A) promptly, and in no event
later than one business day after receipt, immediately send, via
facsimile, a confirmation of receipt of such Conversion Notice to
such Holder and the Transfer Agent, which confirmation shall
constitute an instruction to the Transfer Agent to process such
Conversion Notice in accordance with the terms herein, and (B) on or
before the second Business Day following the date of receipt by the
Company of such Conversion Notice (the "SHARE DELIVERY DATE"): (i)
issue and deliver to the address as specified in the Conversion
Notice, a certificate, registered in the name of the Holder or its
designee, for the number of shares of Common Stock to which the
Holder shall be entitled, or (ii) provided the Transfer Agent is
participating in The Depository Trust Company ("DTC") Fast Automated
Securities Transfer Program, upon the request of the Holder, credit
such aggregate number of shares of Common Stock to which the Holder
shall be entitled to the Holder's or its designee's balance account
with DTC through its Deposit Withdrawal Agent Commission system.
Subject to Section 2(d)(vi), if less than all of the Conversion
Amount of this Note is submitted for conversion, then the Company
shall, as soon as practicable and in no event later than three
Business Days
-3-
after receipt of the Note (the "NOTE DELIVERY DATE") and at its own
expense, issue and deliver to the Holder a new Note for the
outstanding principal amount not converted.
(iii) DISPUTE RESOLUTION. In the case of a dispute as to the
determination of the Current Market Price or the arithmetic
calculation of the Conversion Rate, the Company shall instruct the
Transfer Agent to issue to the Holder the number of shares of Common
Stock that is not disputed and shall submit the disputed
determinations or arithmetic calculations to the Holder via
facsimile within five Business Days of receipt of such ▇▇▇▇▇▇'s
Conversion Notice.
(iv) RECORD HOLDER. The person or persons entitled to receive
the shares of Common Stock issuable upon a conversion of this Note
shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on the Conversion Date.
(v) COMPANY'S FAILURE TO TIMELY CONVERT.
(A) CASH DAMAGES. If within ten Business Days after the
Company's receipt of the Conversion Notice the Company shall
fail to issue a certificate to the Holder or its designee or
credit the Holder's or its designee's balance account with DTC
for the number of shares of Common Stock to which such Holder
or its designee is entitled upon such Holder's conversion of
this Note or, subject to Section 2(d)(vi), the Company shall
fail to issue a new Note representing the principal amount to
which such Holder is entitled, if any, pursuant to Section
2(d)(ii), in addition to all other available remedies which
such Holder may pursue hereunder and under the Purchase
Agreement (including indemnification thereunder), the Company
shall pay additional damages to such Holder for each date
after the Share Delivery Date such conversion is not timely
effected and/or each date after the Note Delivery Date such
new Note is not delivered in an amount equal to 0.5% of the
product of (I) the sum of the number of shares of Common Stock
not issued to the Holder or its designee on or prior to the
Share Delivery Date and to which such Holder or its designee
is entitled and, in the event the Company has failed to
deliver a new Note to the Holder on or prior to the Note
Delivery Date, the number of shares of Common Stock issuable
upon conversion of the Conversion Amount represented by new
Note, as of the Note Delivery Date and (II) the Current Market
Price of the Common Stock on the Share Delivery Date, in the
case of the failure to deliver Common Stock, or the Note
Delivery Date, in the case of failure to deliver a new Note.
If the Company fails to pay the additional damages set forth
in this Section 2(d)(v) within five Business Days of the date
incurred, then the Holder entitled to such payments shall have
the right at any time, so long as the Company continues to
fail to make such payments, to require the Company, upon
written notice, to immediately issue, in lieu of such cash
damages, the number of shares of Common Stock equal to the
quotient of (X) the aggregate amount of the damages payments
described
-4-
herein divided by (Y) the Conversion Price in effect on such
Conversion Date as specified by the Holder in the Conversion
Notice.
(B) VOID CONVERSION NOTICE; ADJUSTMENT TO CONVERSION
PRICE. If for any reason the Holder has not received all of
the shares of Common Stock prior to the tenth Business Day
after the expiration of the Share Delivery Date with respect
to a conversion of this Note, then the Holder, upon written
notice to the Company, may void its Conversion Notice with
respect to, and retain or have returned or restored as of the
Conversion Date, as the case may be, any principal amount of
this Note that has not been converted pursuant to such
Holder's Conversion Notice; PROVIDED that the voiding of a
Holder's Conversion Notice shall not effect the Company's
obligations to make any payments which have accrued prior to
the date of such notice pursuant to Section 2(d)(v)(A) or
otherwise. Thereafter, the Conversion Price of the principal
amount of this Note retained by, or returned or restored in
favor of, the Holder for failure to timely convert shall be
adjusted to the lesser of (I) the Conversion Price as in
effect on the date on which the Holder voided the Conversion
Notice and (II) the lowest Closing Sale Price during the
period beginning on the Conversion Date and ending on the date
such Holder voided the Conversion Notice, subject to further
adjustment as provided in this Note.
(vi) BOOK-ENTRY. Notwithstanding anything to the contrary set
forth herein, upon conversion of any portion of this Note in
accordance with the terms hereof, the Holder thereof shall not be
required to physically surrender this Note to the Company unless the
full Conversion Amount then outstanding is being converted. The
Company shall maintain records showing the Conversion Amount so
converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Holder, so as not to require
physical surrender of this Note upon each such conversion.
Notwithstanding the foregoing, if any portion of this Note is
converted as aforesaid, thereafter, the Holder may not transfer this
Note unless the Holder first physically surrenders this Note to the
Company, whereupon the Company will forthwith issue and deliver upon
the order of the Holder a new Note of like tenor, registered as the
Holder may request, representing in the aggregate the remaining
Conversion Amount represented by this Note. The Holder and any
assignee, by acceptance of this Note or such new Note, acknowledge
and agree that, by reason of the provisions of this paragraph,
following conversion of any portion of this Note, the Conversion
Amount represented by this Note may be less than the principal
amount set forth on the face hereof.
(vii) FRACTIONAL SHARES. No fractional shares of Common Stock
or scrip shall be issued to any Holder in connection with the
conversion of this Note. Instead of any fractional shares of Common
Stock that would otherwise be issuable to such Holder, the Company
will pay to such Holder a cash adjustment in respect of such
fractional interest in an amount equal to that fractional interest
of the then Current Market Price per share of Common Stock.
-5-
(e) TAXES. The Company shall pay any and all taxes that may be
payable with respect to the issuance and delivery of Common Stock upon the
conversion of Notes; provided, however, that the Holder shall be required
to pay any and all taxes that may be payable in respect of any transfer
involved in the issuance and delivery of Common Stock in a name other than
that of the then Holder as reflected upon the books of the Company.
(f) CERTAIN ADJUSTMENTS. In addition to any other adjustments
provided herein, the terms of this Note will be subject to adjustment from
time to time as provided in this Section 2(f).
(i) STOCK DIVIDENDS, SUBDIVISION, COMBINATION OR
RECLASSIFICATION OF COMMON STOCK. If at any time after the Issuance
Date the Company shall (A) declare a stock dividend on the Common
Stock payable in shares of its capital stock (including Common
Stock), (B) increase the number of shares of Common Stock
outstanding by a subdivision or split-up of shares of Common Stock,
(C) decrease the number of shares of Common Stock outstanding by a
combination of shares of Common Stock or (D) issue any shares of its
capital stock in a reclassification of the Common Stock, then, on
the record date for such dividend or the effective date of such
subdivision or split-up, combination or reclassification, as the
case may be, the Conversion Price will be adjusted so that the
Holder will be entitled to receive the number and kind of shares of
Common Stock that such Holder would have owned or been entitled to
receive upon or by reason of such event had this Note been converted
immediately prior thereto, and the Conversion Price will be adjusted
as provided below in paragraph (vii) in this Section 2(f).
(ii) REORGANIZATION, ETC. If at any time after the Issuance
Date any consolidation of the Company with or merger of the Company
with or into any other Person (other than a merger or consolidation
in which the Company, is the surviving or continuing corporation and
which does not result in any reclassification of, or change (other
than a change in par value or from par value to no par value or from
no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock) or any sale,
lease or other transfer of all or substantially all of the assets of
the Company to any other person (each, a "REORGANIZATION EVENT"),
shall be effected in such a way that the holders of Common Stock
shall be entitled to receive cash, stock, other securities or assets
(whether such cash, stock, other securities or assets are issued or
distributed by the Company or another Person) with respect to or in
exchange for Common Stock, then, upon conversion of this Note, the
Holder shall have the right to receive the kind and amount of cash,
stock, other securities or assets receivable upon such
Reorganization Event by a holder of the number of shares of Common
Stock that such Holder would have been entitled to receive upon
conversion of this Note had this Note been converted immediately
before such Reorganization Event, subject to adjustments that shall
be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 2(f).
-6-
(iii) CERTAIN ISSUANCES OF COMMON STOCK. If at any time after
the Issuance Date the Company shall issue or sell, or fix a record
date for the issuance of, (A) Common Stock (or securities
convertible into or exchangeable or exercisable for Common Stock)
(other than Excluded Securities) or (B) rights, options or warrants
entitling the holders thereof to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable or exercisable
for Common Stock) (other than Excluded Securities), in any such
case, at a price per share (treating the price per share of the
securities convertible into or exchangeable or exercisable for
Common Stock as equal to (x) the sum of (i) the price for a unit of
the security convertible into or exchangeable or exercisable for
Common Stock, plus (ii) any additional consideration initially
payable upon the conversion of such security into Common Stock or
the exchange or exercise of such security for Common Stock divided
by (y) the number of shares of Common Stock initially underlying
such convertible, exchangeable or exercisable security) that is less
than the Measuring Price on the date of such issuance or such record
date, then, immediately after the date of such issuance or sale or
on such record date, the number of shares of Common Stock to be
delivered upon conversion of this Note shall be increased so that
the Holder thereafter shall be entitled to receive the number of
shares of Common Stock determined by multiplying the number of
shares of Common Stock such Holder would have been entitled to
receive immediately before the date of such issuance or sale or such
record date by a fraction, the denominator of which shall be the
number of shares of Common Stock outstanding (calculated to include
the shares of Common Stock underlying the Note and all then
currently convertible and exchangeable securities that are "in the
money") on such date plus the number of shares of Common Stock that
the aggregate offering price of the total number of shares so
offered for subscription or purchase (or the aggregate purchase
price of the convertible, exchangeable or exercisable securities so
offered plus the aggregate of amount of any additional consideration
initially payable upon conversion into Common Stock or exchange or
exercise for Common Stock) would purchase at the Measuring Price and
the numerator of which shall be the number of shares of Common Stock
outstanding (calculated to include the shares of Common Stock
underlying the Notes and all then currently exercisable, convertible
and exchangeable securities that are "in the money") on such date
plus the number of additional shares of Common Stock offered for
subscription or purchase (or into or for which the convertible or
exchangeable securities or rights, options or warrants so offered
are initially convertible or exchangeable or exercisable, as the
case may be), and the Conversion Price shall be adjusted as provided
below in paragraph (vii) in this Section 2(f). For purposes of this
Section 2(f)(iii), any shares of Common Stock issued as
consideration in any Acquisition shall be deemed to have been issued
at a "price per share" equal to the Current Market Value thereof on
the date of such issuance.
(iv) EXTRAORDINARY DISTRIBUTIONS. If at any time after the
Issuance Date, the Company shall distribute to all holders of its
Common Stock (including any such distribution made in connection
with a consolidation or merger in which the Company is the
continuing or surviving corporation and the Common Stock is not
changed or
-7-
exchanged) cash, evidences of indebtedness, securities or other
assets (excluding (A) ordinary course cash dividends to the extent
such dividends exceed the Company's retained earnings and (B)
dividends payable in shares of capital stock for which adjustment is
made under Section 2(f)(i)) or rights, options or warrants to
subscribe for or purchase securities of the Company (excluding those
for which adjustment is made under Section 2(f)(iii)), then the
number of shares of Common Stock to be delivered to such Holder upon
conversion of this Note shall be increased so that the Holder
thereafter shall be entitled to receive the number of shares of
Common Stock determined by multiplying the number of shares such
Holder would have been entitled to receive immediately before such
record date by a fraction, the denominator of which shall be the
Current Market Price per share of Common Stock on such record date
minus the then fair market value (as reasonably determined by the
Board of Directors of the Company in good faith) of the portion of
the cash, evidences of indebtedness, securities or other assets so
distributed or of such rights or warrants applicable to one share of
Common Stock (provided that such denominator shall in no event be
less than $.0l) and the numerator of which shall be the Current
Market Price per share of the Common Stock, and the Conversion Price
shall be adjusted as provided below in paragraph (vii) in this
Section 2(f).
(v) PRO RATA REPURCHASES. If at any time after the Issuance
Date, the Company or any subsidiary thereof shall make a Pro Rata
Repurchase, then the number of shares of Common Stock to be
delivered to such Holder upon conversion of this Note shall be
increased so that the Holder thereafter shall be entitled to receive
the number of shares of Common Stock determined by multiplying the
number of shares of Common Stock such Holder would have been
entitled to receive immediately before such Pro Rata Repurchase by a
fraction (which in no event shall be less than one) the denominator
of which shall be (i) the product of (x) the number of shares of
Common Stock outstanding immediately before such Pro Rata Repurchase
and (y) the Current Market Price of the Common Stock as of the day
immediately preceding the first public announcement by the Company
of the intent to effect such Pro Rata Repurchase minus (ii) the
aggregate purchase price of the Pro Rata Repurchase (provided that
such denominator shall never be less than $.0l), and the numerator
of which shall be the product of (i) the number of shares of Common
Stock outstanding immediately before such Pro Rata Repurchase minus
the number of shares of Common Stock repurchased in such Pro Rata
Repurchase and (ii) the Current Market Price of the Common Stock as
of the day immediately preceding the first public announcement by
the Company of the intent to effect such Pro Rata Repurchase.
(vi) CARRYOVER. Notwithstanding any other provision of this
Section 2(f), no adjustment shall be made to the number of shares of
Common Stock to be delivered to the Holder (or to the Conversion
Price) if such adjustment represents less than .05% of the number of
shares to be so delivered, but any lesser adjustment shall be
carried forward and shall be made at the time and together with the
next subsequent adjustment that together with any adjustments so
carried forward shall amount to .05% or more of the number of shares
to be so delivered.
-8-
(vii) CONVERSION PRICE ADJUSTMENT. Whenever the number of
shares of Common Stock purchasable upon the conversion of the Note
is adjusted as provided pursuant to this Section 2(f), the
Conversion Price per share payable upon the conversion of this Note
shall be adjusted by multiplying such Conversion Price immediately
prior to such adjustment by a fraction, of which the numerator shall
be the number of shares of Common Stock purchasable upon the
conversion of the Note immediately prior to such adjustment, and of
which the denominator shall be the number of shares of Common Stock
purchasable immediately thereafter; PROVIDED, HOWEVER, that the
Conversion Price for each share of Common Stock shall in no event be
less than the par value of such share.
(viii) MULTIPLE ADJUSTMENTS. If any action or transaction
would require adjustment of the number of shares of Common Stock to
be delivered to the Holder upon conversion of this Note pursuant to
more than one paragraph of this Section 2(f), only one adjustment
shall be made and each such adjustment shall be the amount of
adjustment that has the highest absolute value.
(g) NOTICE OF ADJUSTMENT. Whenever the number of shares of Common
Stock or the Conversion Price of such shares of Common Stock is adjusted,
as herein provided, the Company shall deliver to the Holder in writing a
notice of such adjustment or adjustments 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
Common Stock and the Conversion 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.
3. RESERVATION OF SHARES. The Company covenants and agrees as follows:
(a) All shares of Common Stock that are issued upon the conversion
of this Note will, upon issuance, be validly issued, fully paid and
nonassessable, 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) During the period within which this Note may be converted, the
Company will 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 the rights represented by this Note.
4. VOTING RIGHTS. Prior to conversion of all or any portion of this Note,
Holders shall have no voting rights, except as required by law, including but
not limited to the General Corporation Law of the State of Delaware, and as
expressly provided in this Note.
-9-
5. NOTICE OF CORPORATE ACTION. So long as this Note has not been converted
or redeemed in full, in the event of:
(a) any consolidation or merger involving the Company and any other
party or any transfer of all or substantially all the assets of the
Company to any other party, or
(b) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will notify the Holder in writing of the date or expected date on
which a reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding- up is to take place and
the time, if any such time is to be fixed, as of which the holders of record of
Common Stock (or other securities) shall be entitled to exchange their shares of
Common Stock (or other securities) for the securities or other property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation or winding- up. Such
notice shall be delivered as soon as practicable and if possible at least twenty
days prior to the date therein specified in the case of any date referred to in
the foregoing sentence. Failure to give the notice specified hereunder shall
have no effect on the status or effectiveness of the action to which the
required notice relates.
6. REISSUANCE OF NOTES. Subject to Section 2(d)(vi), in the event of a
conversion or redemption pursuant to this Note of less than all of the
Conversion Amount represented by this Note, the Company shall promptly cause to
be issued and delivered to the Holder, upon tender by the Holder of the Note
converted or redeemed, a new note of like tenor representing the remaining
principal amount of this Note which has not been so converted or redeemed.
7. DEFINITIONS. As used herein, unless the context otherwise requires, the
following terms have the following meanings:
"ACQUISITION" means any acquisition of another Person by the Company
by merger, purchase of shares of capital stock or purchase of all or
substantially all of such other Person's assets.
"AFFILIATE" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control
with, that Person, (ii) any other Person that owns or controls 5% or more
of any class of equity securities (including any equity securities
issuable upon the exercise of any option or convertible security) of that
Person or any of its Affiliates, or (iii) any director, partner, officer,
agent, employee or relative of such Person. For the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlling", "controlled by", and "under common control with") as
applied to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies
of that Person whether through ownership of voting securities or by
contract or otherwise.
-10-
"CONVERSION PRICE" means THREE AND 11.25/00 DOLLARS ($3.1125),
subject to adjustment as provided herein.
"CURRENT MARKET PRICE" means, with respect to each share of Common
Stock as of any date, the dollar volume-weighted average trading price per
share of Common Stock (as reported by Bloomberg through its "Volume at
Price" function) for the ten consecutive trading days prior to such date;
provided that if on any such date the shares of Common Stock are not
listed or admitted for trading on any national securities exchange or
quoted by NASDAQ or a similar service, the Current Market Price for a
share of Common Stock shall be the fair market value of such share as
determined in good faith by the Board of Directors of the Company. If the
Board of Directors is unable to determine the fair market value, or if the
holders of a majority of the Notes issued pursuant to the Purchase
Agreement disagree with the Board's determination of fair market value by
written notice delivered to the Company within five Business Days after
the Board's determination thereof is communicated in writing to such
holders, then the Company and a majority-in-interest of such holders shall
select an Independent Financial Expert which shall determine such fair
market value. If the Company and such holders are unable to agree upon an
Independent Financial Expert within fifteen Business Days after the notice
by such holders, each of the Company and such holders shall select an
Independent Financial Expert within five Business Days following the
expiration of such fifteen Business Day period, and these Independent
Financial Experts shall select a third Independent Financial Expert, and
the third Independent Financial Expert shall determine such fair market
value. The determination of fair market value by such Independent
Financial Expert shall be final, binding and conclusive on the Company and
all Holders. All costs and fees of any of this Independent Financial
Expert(s) retained in accordance with the foregoing shall be borne by the
Company.
"EXCLUDED SECURITIES" means (i) shares of Common Stock issued upon
conversion or exercise of convertible securities, warrants and options of
the Company, outstanding on the Issuance Date, (ii) shares of Common
Stock, and options to purchase such shares, issued to officers, directors,
employees or former employees of, or consultants to, the Company or any of
its subsidiaries pursuant to any equity incentive plan, agreement or other
arrangement which has been approved by a vote of at least two-thirds of
the Board of Directors of the Company, provided that the total number of
shares of Common Stock which may be Excluded Securities under this clause
(ii) shall not exceed 1,250,000 shares (subject to equitable adjustment
with respect to any stock split, stock dividend, reclassification or other
similar event described in Section 2(f)(i) hereof), and (iii) shares of
Common Stock issued upon conversion of the Note.
"GAAP" means generally accepted accounting principles, consistently
applied.
"INDEPENDENT FINANCIAL EXPERT" means an independent nationally
recognized investment banking firm.
"ISSUANCE DATE" means the date of issuance of the Note.
-11-
"MEASURING PRICE" means, as of any date of determination, (i) with
respect to any issuance of securities as consideration for any Acquisition
by the Company, the Conversion Price as of such date, and (ii) with
respect to any other issuance of securities by the Company, the greater of
the Current Market Price of the Common Stock and the Conversion Price as
of such date.
"PERSON" means any individual, limited liability company,
partnership, joint venture, association, joint-stock company, corporation,
trust, unincorporated organization, estate and other entity or government
or any department or agency thereof.
"PRO RATA REPURCHASE" means any purchase of shares of Common Stock
by the Company or by any of its subsidiaries whether for cash, shares of
capital stock of the Company, other securities of the Company, evidences
of indebtedness of the Company or any other Person or any other property
(including, without limitation, shares of capital stock, other securities
or evidences of indebtedness of a subsidiary of the Company), or any
combination thereof, which purchase is subject to Section 13(e) of the
Securities Exchange Act of 1934, as amended, or is made pursuant to an
offer made available to all holders of Common Stock.
8. LOST OR STOLEN NOTES. Promptly upon receipt by the Company of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Note, and, in the case of loss, theft or destruction, of an indemnification
undertaking by the Holder to the Company in a form reasonably acceptable to the
Company and, in the case of mutilation, upon surrender and cancellation of the
Notes, the Company shall execute and deliver new notes of like tenor and date;
provided, however, the Company shall not be obligated to re-issue notes if the
Holder contemporaneously requests the Company to convert such remaining
principal amount into Common Stock.
9. PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS. If any suit or
action is instituted or attorneys are employed to collect or enforce this Note
or any part thereof, the Company hereby promises and agrees to pay all costs of
collection, including attorneys' fees and court costs.
10. CANCELLATION. After all principal and accrued interest at any time
owed on this Note has been paid in full, this Note shall automatically be deemed
canceled, shall be surrendered to the Company for cancellation and shall not be
reissued.
11. WAIVER OF NOTICE. To the extent permitted by law, the Company hereby
waives demand, notice, protest and all other demands and notices in connection
with the delivery, acceptance, performance, default or enforcement of this Note
and the Purchase Agreement.
12. GOVERNING LAW. This Note shall be construed and enforced in accordance
with, and all questions concerning the construction, validity, interpretation
and performance of this Note shall be governed by, the laws of the State of
Illinois, without giving effect to provisions thereof regarding conflict of
laws.
-12-
13. REMEDIES, CHARACTERIZATIONS, OTHER OBLIGATIONS, BREACHES AND
INJUNCTIVE RELIEF. The remedies provided in this Note shall be cumulative and in
addition to all other remedies available under this Note, at law or in equity
(including a decree of specific performance and/or other injunctive relief), no
remedy contained herein shall be deemed a waiver of compliance with the
provisions giving rise to such remedy and nothing herein shall limit a holder's
right to pursue actual damages for any failure by the Company to comply with the
terms of this Note. The Company covenants to each Holder of Notes that there
shall be no characterization concerning this instrument other than as expressly
provided herein. Amounts set forth or provided for herein with respect to
payments, conversion and the like (and the computation thereof) shall be the
amounts to be received by the Holder thereof and shall not, except as expressly
provided herein, be subject to any other obligation of the Company (or the
performance thereof). The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the holders of the Notes
and that the remedy at law for any such breach may be inadequate. The Company
therefore agrees that, in the event of any such breach or threatened breach, the
holders of the Notes shall be entitled, in addition to all other available
remedies, to an injunction restraining any breach, without the necessity of
showing economic loss and without any bond or other security being required.
14. SPECIFIC SHALL NOT LIMIT GENERAL; CONSTRUCTION. No specific provision
contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the Company
and all holders and shall not be construed against any person as the drafter
hereof.
15. FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of
this Note in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege.
16. NOTICES. Whenever notice is required to be given under this Note,
unless otherwise provided herein, such notice shall be given in accordance with
the notice provisions in the Purchase Agreement. Any party may by notice given
in accordance with this Section 17 designate another address or person for
receipt of notices hereunder.
-13-
IN WITNESS WHEREOF, the Company has caused this Note to be signed by ▇▇▇▇
▇. ▇▇▇▇▇▇, ▇▇., its Chairman and Chief Executive Officer, as of day and year
first written above.
CASTLE DENTAL CENTERS, INC.
By: __________________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Its: Chairman and Chief Executive Officer
Senior Subordinated Convertible Note
-14-
EXHIBIT A
CASTLE DENTAL CENTERS, INC.
CONVERSION NOTICE
Reference is made to the Note issued by Castle Dental Centers, Inc. (the
"COMPANY"). In accordance with and pursuant to the Note, the undersigned hereby
elects to convert the Conversion Amount (as defined in the Note) of the Note,
indicated below into shares of Common Stock, par value $.001 per share (the
"COMMON STOCK"), of the Company as of the date specified below.
Date of Conversion:_______________________________________________________
Aggregate Conversion Amount to be converted:______________________________
Note no(s). of Note to be converted:______________________________________
Please confirm the following information:_______________________________________
Conversion Price:_________________________________________________________
Number of shares of Common Stock to be issued:____________________________
Please issue the Common Stock into which the Note is being converted and, if
applicable, any check drawn on an account of the Company in the following name
and to the following address:
Issue to:_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
Facsimile Number:_________________________________________________________
Authorization:____________________________________________________________
By:_________________________________________
Title:______________________________________
Dated:____________________________________________________________________
Account Number:
(if electronic book-entry transfer):____________________________________
Transaction Code Number
(if electronic book-entry transfer):____________________________________
Senior Subordinated Convertible Note
-15-
ACKNOWLEDGMENT
The Company hereby acknowledges this Conversion Notice and hereby directs
[TRANSFER AGENT] to issue the above indicated number of shares of Common Stock
in accordance with the Transfer Agent Instructions dated ___________ ___, _____
from the Company and acknowledged and agreed to by [TRANSFER AGENT].
CASTLE DENTAL CENTERS, INC.
By:_________________________________________
Name:_______________________________________
Title:______________________________________
Senior Subordinated Convertible Note
-16-