EXHIBIT 10.3
EXECUTION COPY
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as
of May 15, 2003, by and among Castle Dental Centers, Inc., a Delaware
corporation (the "Company"), Sentinel Capital Partners II, L.P., a Delaware
limited partnership ("Sentinel"), General Electric Capital Corporation, a
Delaware corporation ("GE"), Midwest Mezzanine Fund II, L.P., a Delaware limited
partnership ("Midwest"), James M. Usdan ("Usdan"), Thomas Fitzpatrick
("Fitzpatrick"), and John M. Slack ("Slack").
Sentinel, Fitzpatrick, GE, Midwest, Usdan, Slack and the Company
are parties to a Preferred Stock and Subordinated Note Purchase Agreement dated
as of the date hereof (the "Purchase Agreement"). In order to induce Sentinel,
Fitzpatrick, GE, Midwest, Usdan and Slack to enter into the Purchase Agreement,
the Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
Closing under the Purchase Agreement. It is acknowledged that certain other
parties shall become a party to this agreement following the date hereof in
conjunction with such parties' execution of a joinder to the Purchase Agreement
and their purchase of certain securities of the Company thereunder.
GE, Midwest, Usdan and the Company are parties to a Registration
Rights Agreement dated as of July 19, 2002 (the "Existing Registration Rights
Agreement"). By entering into this Agreement, GE, Midwest and Usdan are
terminating their rights under the Existing Registration Rights Agreement.
Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in Section 9 hereof.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Demand Registrations.
(a) Requests for Registration. Subject to the terms of this
Section 1, at any time and from time to time, the holders of a majority of the
Sentinel Registrable Securities may request registration under the Securities
Act of all or any portion of their Registrable Securities. All registrations
requested pursuant to this Section 1(a) are referred to herein as "Demand
Registrations". Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered, the
anticipated per share price range for such offering and the intended method of
distribution. Within ten days after receipt of any such request, the Company
shall give written notice of such requested registration to all other holders of
Registrable Securities and, subject to the terms of Section 1(d) hereof, shall
include in such registration (and in all related registrations and
qualifications under state blue sky laws or in compliance with other
registration requirements and in any related underwriting) all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 15 days after the receipt of the Company's notice.
(b) Long-Form Registrations. The holders of a majority of the
Sentinel Registrable Securities shall be entitled to request 2 registrations
under the Securities Act on Form S-1 or any similar long-form registrations (the
"Long-Form Registrations") in which the Company shall pay all Registration
Expenses. A registration shall not count as one of the permitted Long-Form
Registrations until it has become effective and the holders of Registrable
Securities are able to register at least 90% of the Registrable Securities
requested to be included in such registration; it being understood and agreed
that the requisite holders of Registrable Securities making a request for a
Demand Registration hereunder may withdraw from such registration at any time
prior to the effective date of such Demand Registration, in which case such
request will not count as one of the permitted Demand Registrations for such
holders. All Long Form Registrations shall be underwritten registrations.
(c) Short-Form Registrations. In addition to the Long-Form
Registrations provided pursuant to Section 1(b), the holders of a majority of
the Sentinel Registrable Securities shall be entitled to request 2 registrations
under the Securities Act on Form S-2 or S-3 or any similar short-form
registrations (the "Short-Form Registrations") in which the Company shall pay
all Registration Expenses. Demand Registrations shall be Short-Form
Registrations whenever the Company is permitted to use any applicable short form
and if the managing underwriters (if any) agree to the use of a Short-Form
Registration. The Company shall use its best efforts to make Short-Form
Registrations available for the sale of Registrable Securities. A registration
shall not count as one of the permitted Short-Form Registrations until it has
become effective and the holders of Registrable Securities are able to register
at least 90% of the Registrable Securities requested to be included in such
registration.
(d) Priority on Demand Registrations. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of at least a
majority of the Registrable Securities initially requesting such registration.
If a Demand Registration is an underwritten offering and the managing
underwriters advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities requested
to be included in such offering exceeds the number of Registrable Securities and
other securities, if any, which can be sold therein without adversely affecting
the marketability of the offering, the Company shall include in such
registration the number which can be sold which in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering, in the following order of priority: (i) first, the Registrable
Securities requested to be included, pro rata among the respective holders
thereof on the basis of the number of Registrable Securities owned by each such
holder, and (ii) second, other securities requested to be included by holders
having registration rights with respect to the Company's securities (including
those holders who are granted rights that are subordinate to the rights set
forth herein, as described in Section 1(f) below), pro rata among the respective
holders thereof on the basis of the number of other securities owned by each
such holder.
2
(e) Selection of Underwriters. In the case of an underwritten
Demand Registration, the holders of a majority of the Registrable Securities
initially requesting such Demand Registration hereunder shall have the right to
select the investment banker(s) and manager(s) to administer the offering, so
long as such firms are reasonably acceptable to the Company.
(f) Other Registration Rights. Except as provided on Exhibit A
hereto, the Company represents and warrants that it is not a party to, or
otherwise subject to, any other agreement granting registration rights to any
Person with respect to any securities of the Company. Except as provided in this
Agreement, the Company shall not grant to any Persons the right to request or
require the Company to register any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
without the prior written consent of the holders of a majority of the
Registrable Securities, unless such registration rights are expressly made
subordinate to the rights set forth herein.
(g) Registration Deferral Right. Notwithstanding the foregoing,
if the Company shall furnish to holders requesting a registration statement
pursuant to this Section 1, a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed and it is therefore essential to
defer the filing of such registration statement, the Company shall have the
right to defer such filing for a period of not more than 60 days after receipt
of the request of the holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company proposes to
register any of its securities under the Securities Act (other than pursuant to
a Demand Registration) and the registration form to be used may be used for the
registration of Registrable Securities (a "Piggyback Registration"), the Company
shall give prompt written notice (in any event within three business days after
its receipt of notice of any exercise of demand registration rights other than
under this Agreement) to all holders of Registrable Securities of its intention
to effect such a registration and, subject to the terms of Sections 2(c) and
2(d) hereof, shall include in such registration (and in all related
registrations or qualifications under blue sky laws or in compliance with other
registration requirements and in any related underwriting) all Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within 20 days after the giving of the Company's notice.
(b) Piggyback Expenses. The Registration Expenses of the holders
of Registrable Securities shall be paid by the Company in all Piggyback
Registrations.
(c) Priority on Primary Registrations. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without adversely
affecting the marketability of the offering, the Company shall include in such
3
registration the number which can be sold which in the opinion of such
underwriters can be sold without adversely affecting the marketability of the
offering, in the following order of priority: (i) first, the securities the
Company proposes to sell, (ii) second, the Registrable Securities requested to
be included and other securities requested to be included by holders having
registration rights with respect to the Company's securities (not including
those holders who are granted rights that are subordinate to the rights set
forth herein, as described in Section 1(f) above), pro rata among the respective
holders thereof on the basis of the number of securities owned by each such
holder, and (iii) third, securities requested to be included by holders having
registration rights with respect to the Company's securities that are
subordinate to the rights set forth herein, as described in Section 1(f) above.
(d) Priority on Secondary Registrations. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities, and the managing underwriters advise the Company in
writing that in their opinion the number of securities requested to be included
in such registration exceeds the number which can be sold in such offering
without adversely affecting the marketability of the offering, the Company shall
include in such registration the number which can be sold which in the opinion
of such underwriters can be sold without adversely affecting the marketability
of the offering, in the following order of priority: (i) first, the Registrable
Securities requested to be included and other securities requested to be
included by holders having registration rights with respect to the Company's
securities (not including those holders who are granted rights that are
subordinate to the rights set forth herein, as described in Section 1(f) above),
pro rata among the respective holders thereof on the basis of the number of
securities owned by each such holder, and (ii) second, securities requested to
be included by holders having registration rights with respect to the Company's
securities that are subordinate to the rights set forth herein, as described in
Section 1(f) above.
(e) Selection of Underwriters. If any Piggyback Registration is
an underwritten offering, the selection of investment banker(s) and manager(s)
for the offering will be selected by the Company and shall be reasonably
acceptable to holders of a majority of the Sentinel Registrable Securities.
(f) Other Registrations. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
Section 1 or pursuant to this Section 2, and if such previous registration has
not been withdrawn or abandoned, the Company shall not file or cause to be
effected, any other registration of any of its equity securities or securities
convertible or exchangeable into or exercisable for its equity securities under
the Securities Act (except on Form S-4, Form S-8 or any successor form), whether
on its own behalf or at the request of any holder or holders of such securities,
until a period of at least 180 days has elapsed from the effective date of such
previous registration.
3. Holdback Agreements.
(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144 of the
Securities Act) of equity securities of the Company, or any securities
convertible into or exchangeable or exercisable for such securities,
4
during the seven days prior to and the 180-day period beginning on the effective
date of any underwritten public offering of the Company's equity securities
(except as part of such underwritten registration), unless the underwriters
managing the registered public offering otherwise agree.
(b) The Company (i) shall not effect any public sale or
distribution of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days prior to
and during the 180-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4, Form S-8 or any successor form), unless the underwriters managing
the registered public offering otherwise agree, and (ii) shall use its best
efforts to cause each officer and director of the Company to agree not to effect
any public sale or distribution (including sales pursuant to Rule 144 of the
Securities Act) of any such securities during such period (except as part of
such underwritten registration, if otherwise permitted), unless the underwriters
managing the registered public offering otherwise agree.
4. Registration Procedures. Whenever the holders of Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this Agreement, the Company shall use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission
a registration statement, and all amendments and supplements thereto and related
prospectuses as may be necessary to comply with applicable securities laws, with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to the counsel selected by the holders of a majority
of the Registrable Securities covered by such registration statement copies of
all such documents proposed to be filed, which documents shall be subject to the
review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare and
file with the Securities and Exchange Commission such amendments and supplements
to such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective for a period
of not less than 90 days and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such registration
statement during such period in accordance with the intended methods of
disposition by the sellers thereof set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as
5
such seller may reasonably request in order to facilitate the public sale or
other disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
any seller reasonably requests and do any and all other acts and things which
may be reasonably necessary to enable such seller to consummate the disposition
in such jurisdictions of the Registrable Securities owned by such seller
(provided that the Company shall not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this subparagraph, (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service of process in any such
jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under the
Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make the statements therein
not misleading, and, at the request of any such seller, the Company shall
prepare a supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not contain an untrue statement of a material fact or omit to state any
fact necessary to make the statements therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed and, if not so listed, to be listed on the NASD automated quotation
system and, if listed on the NASD automated quotation system, use its best
efforts to secure designation of all such Registrable Securities covered by such
registration statement as a NASDAQ "national market system security" within the
meaning of Rule 11Aa2-1 of the Securities and Exchange Commission or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to arrange for at least two
market makers to register as such with respect to such Registrable Securities
with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such registration
statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities (including effecting a stock split or a combination of
shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information
6
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of such
registration or comparable statement and to require the insertion therein of
material, furnished to the Company in writing, which in the reasonable judgment
of such holder and its counsel should be included;
(l) If any such registration or comparable statement refers to
any holder by name or otherwise as the holder of any securities of the Company
and if in its sole and exclusive judgment, such holder is or might be deemed to
be an underwriter or a controlling person of the Company, such holder shall have
the right to require (i) the insertion therein of language, in form and
substance satisfactory to such holder and presented to the Company in writing,
to the effect that the holding by such holder of such securities is not to be
construed as a recommendation by such holder of the investment quality of the
Company's securities covered thereby and that such holding does not imply that
such holder shall assist in meeting any future financial requirements of the
Company, or (ii) in the event that such reference to such holder by name or
otherwise is not required by the Securities Act or any similar Federal statute
then in force, the deletion of the reference to such holder; provided that with
respect to this clause (ii) such holder shall furnish to the Company an opinion
of counsel to such effect, which opinion and counsel shall be reasonably
satisfactory to the Company;
(m) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any common stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order;
(n) use its best efforts to cause such Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to enable the
sellers thereof to consummate the disposition of such Registrable Securities;
and
(o) obtain a cold comfort letter from the Company's independent
public accountants in customary form and covering such matters of the type
customarily covered by cold comfort letters as the holders of a majority of the
Registrable Securities being sold reasonably request (provided that such
Registrable Securities constitute at least 10% of the securities covered by such
registration statement).
7
5. Registration Expenses.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation all registration,
qualification and filing fees, fees and expenses of compliance with securities
or blue sky laws, printing expenses, messenger and delivery expenses, fees and
disbursements of custodians, and fees and disbursements of counsel for the
Company and all independent certified public accountants, underwriters
(excluding discounts and commissions) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), shall be borne
as provided in this Agreement, except that the Company shall, in any event, pay
its internal expenses (including, without limitation, all salaries and expenses
of its officers and employees performing legal or accounting duties), the
expense of any annual audit or quarterly review, the expense of any liability
insurance and the expenses and fees for listing the securities to be registered
on each securities exchange on which similar securities issued by the Company
are then listed or on the NASD automated quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of Registrable
Securities included in such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities included in such registration.
6. Indemnification.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, its officers and directors and each
Person who controls such holder (within the meaning of the Securities Act)
against all losses, claims, actions, damages, liabilities and expenses caused by
(i) any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or (ii) any violation by the Company of any rule or regulation
promulgated under the Securities Act applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification or compliance, and to pay to each holder of
Registrable Securities, its officers and directors and each Person who controls
such holder (within the meaning of the Securities Act), as incurred, any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action, except
insofar as the same are caused by or contained in any information furnished in
writing to the Company by such holder expressly for use therein or by such
holder's failure to deliver a copy of the registration statement or prospectus
or any amendments or supplements thereto. In connection with an underwritten
offering, the Company shall indemnify such underwriters, their officers and
directors and each Person who controls such underwriters (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the holders of Registrable Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing
8
such information and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and, to the extent
permitted by law, shall indemnify the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from (i)
any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such
holder, or (ii) by such holder's failure to deliver a copy of the registration
statement or prospectus or any amendments or supplements thereto; provided that
the obligation to indemnify shall be individual, not joint and several, for each
holder and shall be limited (except in the case of willful fraud by such holder)
to the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with respect
to which it seeks indemnification (provided that the failure to give prompt
notice shall not impair any Person's right to indemnification hereunder to the
extent such failure has not prejudiced the indemnifying party) and (ii) unless
in such indemnified party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist with respect to such claim,
permit such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party. If such defense is assumed,
the indemnifying party shall not be subject to any liability for any settlement
made by the indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim shall not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim. In such instance, the conflicting indemnified parties shall have a right
to retain one separate counsel, chosen by the holders of a majority of the
Registrable Securities included in the registration, at the expense of the
indemnifying party. No indemnifying party, in the defense of such claim or
litigation, shall, except with the consent of each indemnified party, consent to
the entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any officer, director or controlling Person
of such indemnified party and shall survive the transfer of securities.
(e) If the indemnification provided for in this Section 6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable
9
by such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations; provided, that in no event shall any contribution by a holder
under this Section 6(e) exceed the net proceeds from the offering received by
such holder, except in the case of willful fraud by such holder. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by a court of competent jurisdiction.
(f) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided, that (a)
the holders of Registrable Securities to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that any or all of the representations and warranties by the Company to
and for the benefit of such underwriters shall also be made to and for the
benefit of such holders of Registrable Securities and (b) no holder of
Registrable Securities included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters (other than representations and warranties regarding such holder,
such holder's ownership of securities being included in the registration, and
related customer matters, and such holder's intended method of distribution) or
to undertake any indemnification obligations to the Company with respect
thereto, except as otherwise provided in Section 6(b) hereof.
8. Rule 144 Reporting. With a view to making available to the
holders of Registrable Securities the benefits of certain rules and regulations
of the Securities and Exchange Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its reasonable best efforts to:
(a) make and keep current public information available, within
the meaning of Rule 144 or any similar or analogous rule promulgated under the
Securities Act;
(b) file with the Securities and Exchange Commission, in a
timely manner, all reports and other documents required of the Company under the
Securities Act and Exchange Act; and
(c) so long as any party hereto owns any Registrable Securities,
furnish to such party forthwith upon request, a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144, the
Securities Act and the Exchange Act; a copy of
10
the most recent annual or quarterly report of the Company; and such other
reports and documents as such Person may reasonably request in availing itself
of any rule or regulation of the Securities and Exchange Commission allowing it
to sell any such securities without registration.
9. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Business Day" means any day excluding Saturday, Sunday, and any
day which is a legal holiday under the laws of the State of New York or
California or is a day on which banking institutions located in such states are
authorized or required by law or other governmental action to close.
"Common Stock" means the Company's Common Stock, par value
$0.000001 per share.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a limited liability company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Registrable Securities" means (i) any of the Common Stock issued
or issuable upon the exercise or conversion of any Series B Stock, Series A-1
Stock, Series A-2 Stock or Warrants issued to or held by the Stockholders, and
(ii) any Common Stock issued or issuable with respect to the securities referred
to in clause (i) above by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when they have been
distributed to the public pursuant to a offering registered under the Securities
Act or sold to the public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act (or any similar rule then in force),
repurchased by the Company or any subsidiary of the Company. For purposes of
this Agreement, a Person shall be deemed to be a holder of Registrable
Securities, and the Registrable Securities shall be deemed to be in existence,
whenever such Person has the right to acquire directly or indirectly such
Registrable Securities (upon conversion or exercise in connection with a
transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right), whether or not such acquisition
has actually been effected, and such Person shall be entitled to exercise the
rights of a holder of Registrable Securities hereunder.
"Securities Act" means the Securities Act of 1933, as amended.
"Sentinel Registrable Securities" means the Registrable
Securities initially issued to or held by Sentinel.
"Series A-1 Stock" means the Convertible Preferred Stock, Series
A-1, of the Company, par value $0.000001 per share.
11
"Series A-2 Stock" means the Convertible Preferred Stock, Series
A-2, of the Company, par value $0.000001 per share.
"Series B Stock" means the Company's Series B Convertible
Preferred Stock, par value $0.000001 per share.
"Stockholders" means Sentinel, GE, Midwest, Usdan, Fitzpatrick,
Slack and their respective transferees and any other Person becoming party to
this Agreement.
"Warrants" means the warrants to purchase Series A-2 Stock issued
to GE.
10. Miscellaneous.
(a) No Inconsistent Agreements. The Company shall not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the holders of Registrable Securities in
this Agreement.
(b) Adjustments Affecting Registrable Securities. The Company
shall not take any action with respect to its securities which would adversely
affect the ability of the holders of Registrable Securities to include such
Registrable Securities in a registration undertaken pursuant to this Agreement
or which would materially and adversely affect the marketability of such
Registrable Securities in any such registration.
(c) Remedies. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that, in addition to any other rights and
remedies existing in its favor, any party shall be entitled to specific
performance and/or other injunctive relief from any court of law or equity of
competent jurisdiction (without posting any bond or other security) in order to
enforce or prevent violation of the provisions of this Agreement.
(d) Amendments, Waivers and Terminations. Except as otherwise
provided herein, the provisions of this Agreement may be amended, waived or
terminated, on behalf of all holders of Registrable Securities, only upon the
prior written consent of the Company, the holders of a majority of the Sentinel
Registrable Securities, and the holders of a majority of all Registrable
Securities other than Sentinel Registrable Securities; provided, however, no
amendment or waiver can be effected if, by its terms, such amendment or waiver
adversely affects one Stockholder without having the same relative adverse
effect on all Stockholders without the prior written consent of such adversely
affected Stockholder. The failure of any party to enforce any of the provisions
of this Agreement shall in no way be construed as a waiver of such provisions
and shall not affect the right of such party thereafter to enforce each and
every provision of this Agreement in accordance with its terms.
(e) Successors and Assigns. All covenants and agreements in this
Agreement by or on behalf of any of the parties hereto shall bind and inure to
the benefit of the respective
12
successors and assigns of the parties hereto whether so expressed or not. In
addition, whether or not any express assignment has been made, the provisions of
this Agreement which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities.
(f) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
(g) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the signatures of
more than one party, but all such counterparts taken together shall constitute
one and the same Agreement.
(h) Descriptive Headings. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of this
Agreement.
(i) Governing Law. All issues and questions relating to the
construction, interpretation and enforcement of this Agreement shall be governed
by and construed in accordance with the internal laws of the State of New York,
without giving effect to principles of conflicts of laws or choice of law of the
State of New York or any other jurisdiction which would result in the
application of the law of any jurisdiction other than the State of New York.
(j) Notices. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier service
(charges prepaid) or mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications shall be sent to the Company and Sentinel at the address
indicated below:
To the Company, to:
Castle Dental Centers, Inc.
3701 Kirby Drive
Suite 550
Houston, TX 77098
Attention: James M. Usdan
Facsimile: (713) 490-8420
13
With a copy, which shall not constitute notice to the
Company, to:
Haynes and Boone, LLP
1000 Louisiana Street
Suite 4300
Houston, TX 77002
Attention: John W. Menke
Facsimile: (713) 236-5560
To Sentinel, to:
Sentinel Capital Partners
777 Third Avenue
32nd Floor
New York, NY 10017
Attention: David S. Lobel
Paul F. Murphy
Facsimile: (212) 688-6513
With a copy, which shall not constitute notice to Sentinel,
to:
Kirkland & Ellis
Citigroup Center
153 East 53rd Street
New York, NY 10022
Attention: Frederick Tanne, Esq.
Facsimile: (212) 446-4900
14
To GE, to:
General Electric Capital Corporation
c/o Heller Healthcare Financial Services
500 West Monroe Street
Chicago, IL 60661
Attention: Jay Sepanski
Facsimile: (312) 441-7598
With a copy to:
General Electric Capital Corporation
c/o Heller Healthcare Financial Services
2 Wisconsin Circle, 4th Floor
Chevy Chase, MD 20815
Attention: Katherine R. Lofft, Esq.
Facsimile: (301) 664-9866
To Midwest, to:
Midwest Mezzanine Fund II, L.P.
135 South LaSalle Street, Suite 2040
Chicago, IL 60603
Attention: Paul Kreie
Facsimile: (312) 992-4595
To Usdan, to:
c/o Castle Dental Centers, Inc.
3701 Kirby Drive, Suite 550
Houston, TX 77098
Facsimile: (713) 490-8420
To Fitzpatrick, to:
c/o Sentinel Capital Partners
777 Third Avenue
32nd Floor
New York, NY 10017
Attention: David S. Lobel
Paul F. Murphy
Facsimile: (212) 688-6513
To Slack, to:
c/o Castle Dental Centers, Inc.
3701 Kirby Drive, Suite 550
15
Houston, TX 77098
Facsimile: (713) 490-8420
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
(k) Waiver of Jury Trial Each of the parties hereto waives any
right it may have to trial by jury in respect of any litigation based on,
arising out of, under or in connection with this Agreement or any course of
conduct, course of dealing, verbal or written statement or action of any party
hereto.
(l) Time of the Essence; Computation of Time. Time is of the
essence for each and every provision of this Agreement. Whenever the last day
for the exercise of any privilege or other discharge or any duty hereunder shall
fall upon a Non-Business Day, the party having such privilege or duty may
exercise such privilege or discharge such duty on the next succeeding day which
is a regular Business Day.
(m) Termination. GE, Midwest, Usdan and the Company hereby agree
that all registration and other rights granted to Heller Financial, Inc. (or GE
as successor to Heller), Midwest and Usdan under the Existing Registration
Rights Agreement are hereby terminated.
(n) Rights Transfer. If at any time Sentinel and its affiliates
no longer hold any Sentinel Registrable Securities, any and all rights hereunder
which may be exercised by the holders of a majority of the Sentinel Registrable
Securities, will thereafter be exercisable by the holders of a majority of the
Registrable Securities.
* * * * *
16
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
CASTLE DENTAL CENTERS, INC.
By:
-------------------------------------------
Name: James M. Usdan
Title: President and CEO
SENTINEL CAPITAL PARTNERS II, L.P.
By Sentinel Partners II, L.P.
Its: General Partner
By: Sentinel Managing Company II, LLC
Its: General Partner
By:
-------------------------------------------
Name:
Title:
MIDWEST MEZZANINE FUND II, L.P.
By: ABN AMRO Mezzanine Management II, L.P.
Its: General Partner
By: ABN AMRO Mezzanine Management II, Inc.
Its: General Partner
By:
-------------------------------------------
Name: Paul Kreie
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By:
-------------------------------------------
Name:
Title:
----------------------------------------------
JAMES M. USDAN
----------------------------------------------
THOMAS FITZPATRICK
----------------------------------------------
JOHN M. SLACK
2
Exhibit A
3