TAG-ALONG RIGHTS AGREEMENT
This Agreement is made and entered into this 27 th day of December, 2006, by and among MICHAEL SILVA, HARRY L. PETERSON, AND MICHAEL BERRETT (individually a “Director” together the “Directors”), DENTAL PATIENT CARE AMERICA, INC ., a Utah corporation (the “Corporation”) and HEARTLAND DENTAL CARE, INC ., a Delaware corporation (“Heartland”).
WHEREAS, each of the Directors is the beneficial owner of shares of common stock of the Corporation (“Shares”) and is a director of the Corporation; and
WHEREAS , Heartland is about to make a subordinated loan to the Corporation and its subsidiaries in an amount up to $1,250,000 (“Loan”) and in connection therewith will be issued by the Corporation a common stock purchase warrant (“Warrant”) that will entitle Heartland to acquire upon exercise in full Shares that when issued will represent up to 10% of the total issued and outstanding Shares of the Corporation: and
WHEREAS , to best align the interest of Heartland with the interest of the Directors, as an inducement to the initial funding of the Loan, the Directors have agreed to allow Heartland to participate pro rata in any transaction in which beneficial ownership of Shares held by the Directors are to be transferred or sold.
NOW, THEREFORE¸ to induce Heartland to make the Loan and for other good and valuable consideration, the receipt and sufficiency is hereby acknowledged, the parties agree as follows:
1. If the Directors, or any one or more of them, shall desire to sell or transfer any Shares in a The Sale Transaction for good and valid consideration to any bona fide, unaffiliated third party (“The Sale Transaction”), then such Director shall give at least thirty (30) days’ advance written notice thereof to Heartland setting forth the price, number of shares, terms and conditions of the Sale Transaction as well as an indication of the maximum number of Shares that Heartland may sell in the Sale Transaction under the terms of this Agreement (a “ Tag-Along Notice ”). If the consideration for such Shares is other than cash, the Tag-Along Notice shall describe the consideration, the method of valuing the Shares and the equivalent per Share cash value attributed to the Shares.
2. Heartland may elect to participate in the Sale Transaction as an additional selling or transferring party, at the same price per Share and on identical terms and conditions as the selling Director(s), by delivering a written notice thereof (a “ Tag-Along Election Notice ”) to the Director having issued the Tag Along Notice within fourteen (14) days after the delivery of such Tag-Along Notice. A Tag-Along Election Notice shall specify the number of Shares which Heartland wishes to sell or transfer in the Sale Transaction, provided that the number of Shares which Heartland may elect to sell or transfer in the Sale Transaction (“Maximum Tag-Along Shares”) shall be less than or equal to (a) the aggregate number of Shares which the Directors proposed to sell or transfer in the Sale Transaction, multiplied by (b) a fraction, the numerator of which is the number of Shares beneficially owned by Heartland, and the denominator of which is
the aggregate number of Shares owned beneficially by Heartland and the Directors (and their affiliates) as a group. If the proposed purchaser does not commit to buy all of the Shares to be sold hereunder by Heartland as well as the Shares to be sold thereunder by the Directors, then the aggregate number of Shares to be sold or transferred by the Directors shall be reduced, so that the aggregate number of Shares to be sold or transferred to such proposed purchaser by Heartland and the Directors shall remain equal to the aggregate number of Shares which the Director(s) originally proposed to sell or transfer in the Sale Transaction.
3. Heartland shall effect its participation in the Sale Transaction by delivering to the transferring Director, no later than three (3) days before the proposed closing date of the Sale Transaction one or more stock certificates, properly endorsed for transfer to the prospective purchaser, representing the number of Shares that Heartland has elected to include in the Sale Transaction. Heartland recognizes that it will be incumbent upon Heartland to exercise the Warrant, if and to the extent necessary, a sufficient period of time before the proposed closing date of the bona fide the Sale to obtain Shares to be sold in the Sale Transaction.
4. If the terms of the Warrant shall limit the number of Shares that Heartland may acquire for resale in the Sale Transaction (other than as a consequence of the cashless exercise provision therein), and subsequent to the closing of the Sale Transaction, Heartland acquires additional Shares by exercise of the Warrant, Heartland shall have the right and option to sell to the Director effecting the Sale Transaction, and such Director shall thereupon purchase from Heartland, at the price per share indicated in the Tag Along Notice, the difference between the Maximum Tag-Along Shares and the number of Shares sold by Heartland in the Sale Transaction. In order for Heartland to exercise the option granted in this Paragraph 4, Heartland must deliver written notice of exercise to the Director effecting the Sale Transaction within 14 days after Heartland shall have vested n the right to acquire the additional Shares under the terms of the Warrant. Closing on the purchase and sale of Shares under this Paragraph 4 shall occur at the office of the Corporation at 10:00 a.m., ten (10) days following delivery of the notice from Heartland hereunder or at such other time, place and date as Heartland and such Director may agree.
5. Heartland acknowledges that the terms and conditions of a