EXHIBIT 10.73
SECOND AMENDMENT AND SUPPLEMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT AND SUPPLEMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT ("SECOND AMENDMENT") dated as of June 16, 1997, between CASTLE DENTAL
CENTERS, INC. a Delaware Corporation (the "BORROWER"), and NATIONSBANK OF TEXAS,
N.A., a national banking association (the "LENDER").
RECITALS
WHEREAS, the Borrower and the Lender entered into that certain Credit
Agreement dated as of December 19, 1995 (the "PRIOR CREDIT AGREEMENT"); and
WHEREAS, on May 31, 1996, Borrower and Lender amended and restated the
prior Credit Agreement by entering into that certain Amended and Restated Credit
Agreement dated as of May 31, 1996, as amended by First Amendment and Supplement
to Amended and Restated Credit Agreement dated as of August 9, 1996 (such Credit
Agreement as amended is herein called the "CREDIT AGREEMENT") pursuant to which,
upon the terms and conditions stated therein, Lender agreed to make loans to
Borrower; and
WHEREAS, the Borrower and the Lender have agreed, on the terms and
conditions herein set forth, to amend certain aspects of the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Borrower and the Lender hereby agree that the Credit
Agreement shall be amended as follows:
SECTION 1. CERTAIN DEFINITIONS. As used in this Second Amendment, the
terms "Borrower", "Credit Agreement", "Second Amendment", and "Lender" shall
have the meanings indicated above; and unless otherwise defined herein, all
terms beginning with a capital letter which are defined in the Credit Agreement
shall have the same meanings herein as therein unless the context hereof
otherwise requires.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
(a) DEFINED TERMS.
(i) The terms "Advancing Term Loan Termination Date",
"Agreement", "Applicable Margin", "Final Maturity Date", and "Revolving Credit
Termination Date", which are defined in Section 1.02 of the Credit Agreement,
are hereby amended to read in their entirety as follows:
"ADVANCING TERM LOAN TERMINATION DATE" shall mean, unless the
Advancing Term Note is sooner prepaid pursuant to Section 2.07
hereunder, January 31, 1998.
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"AGREEMENT" shall mean the Amended and Restated Credit Agreement,
as amended and supplemented by the First Amendment and the Second
Amendment and as the same may from time to time be further amended or
supplemented.
"APPLICABLE MARGIN" shall mean, for Revolving Credit Loans, 1%
per annum and for the Term Loan and the Advancing Term Loan, 1 1/2% per
annum.
"FINAL MATURITY DATE" shall mean, unless the Term Note is sooner
prepaid pursuant to Section 2.07 hereof, January 31, 1998.
"REVOLVING CREDIT TERMINATION DATE" shall mean, unless the
Commitment is sooner terminated pursuant to Sections 2.03(b) or 10.02
hereof, January 31, 1998.
"SECURITIES PURCHASE AGREEMENT" shall mean the Securities
Purchase Agreement dated as of December 19, 1995 among the Borrower and
each of the investors signatory thereto as amended by the Waiver and
Amendment dated as of May 31, 1996 and by Amendment No.
1 dated as of June 16, 1997.
(ii) The proviso at the end of clause (a) of the definition of
"Change of Control" is hereby amended to read as follows:
provided, however, it shall not be deemed a Change of Control for
one or more of the investors under the Securities Purchase
Agreement to own or control legal or beneficial ownership of the
Borrower or JHC PC unless and until such ownership or control in
the aggregate equals or exceeds 40% of the Borrower or JHC PC;
(b) ADDITIONAL DEFINED TERMS. Section 1.02 of the Credit Agreement is
hereby further amended and supplemented by adding the following new definitions,
which read in their entirety as follows:
"EXCESS CASH FLOW" shall mean for any period (i) EBITDA PLUS
lease and rental expense for such period less (ii) the sum of interest
PLUS lease and rental expense PLUS scheduled deferred compensation PLUS
debt service on long-term debt and capital leases PLUS cash taxes for
such period.
"NET CASH PROCEEDS" means in connection with the issuance of any
Debt, capital stock, or other equivalent ownership interest or warrants
or options to purchase any of the foregoing, the cash proceeds received,
net of all reasonable investment banking fees, legal fees, accountant's
fees, underwriting discounts and commissions, and other customary fees
and expenses actually incurred and satisfactorily documented in
connection therewith.
"NEW XXXX'X LOAN" shall have the meaning set out in Section
9.01(d) hereof.
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"SECOND AMENDMENT" shall mean that certain Second Amendment and
Supplement to Amended and Restated Credit Agreement dated as of June 5,
1997, between the Lender and the Borrower.
(c) DELETED DEFINED TERMS. Section 1.02 of the Credit Agreement is
hereby further amended by deleting the definition of "Advancing Term Loan
Borrowing Base".
SECTION 3. AMENDMENTS TO THE CREDIT AGREEMENT. The following provisions
of the Credit Agreement shall be amended as follows:
(a) Section 2.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 2.01(c) of the Credit Agreement is hereby
amended by deleting the date "June 30, 1997" and substituting the
words "the date of the Second Amendment" therefor.
(ii) Section 2.01(d) is hereby deleted and restated in its
entirety as follows:
"(d) INTEREST RATE ON ALL LOANS. Notwithstanding
anything to the contrary herein all Loans shall be Base
Rate Loans."
(b) Section 2.07(e) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(e) If the Borrower or any Subsidiary shall issue any
Debt with the consent of the Lender, other than Debt permitted by
Section 9.01 hereof, or any public or private offering pursuant
to which the Company or any of its Subsidiaries sells its equity
securities (the issuance of such Debt or such public or private
offering is hereinafter referred to as a "Refinancing"), 100% of
the Net Cash Proceeds thereof shall on the first Business Day
after receipt be applied
(i) unless a Default specified in Section 10.01(a)
has occurred and is continuing and unless such Default
would not be cured by the Refinancing, to the outstanding
principal and accrued interest owing on the Revolving
Credit Loan, Advancing Term Loan and the New Pecks Loan on
a prorata basis in proportion to the unpaid principal
amounts of the New Pecks Loan on the one hand and the
Revolving Credit Loans and Advancing Term Loan on the
other hand, and after such loans have been paid in full to
the principal and accrued interest owing on the Term Loan;
and
(ii) if a Default specified in Section 10.01(a)
exists and is continuing and such Default would not be
cured by the Refinancing, first to Indebtedness owing to
the Lender and after such Indebtedness has been paid in
full to such other Debt or uses as Borrower may direct."
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(c) Section 2.08 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"The Advancing Term Loan Commitment shall at all times be
equal to $5,747,500."
(d) Section 3.01 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 3.01 REPAYMENT OF LOANS. Unless otherwise
required pursuant to Section 2.07, the Borrower will pay to the
Lender the principal payments required by this Section 3.01. On
the Revolving Credit Termination Date the Borrower shall repay
the outstanding principal amount of the Revolving Credit Note.
Commencing on July 30, 1997, the outstanding principal amounts of
the Term Note and the Advancing Term Note shall be payable in
four installments, the first of which shall be equal to 50% of
Excess Cash Flow for the quarter ending on June 30, 1997, to be
applied one-half each to said Notes, the next two of which shall
be in the amount of $301,250 on each such Note (being $602,500 in
the aggregate on each installment date) payable on each of the
Quarterly Dates thereafter, with the final installment of the
remaining principal balance on the Term Note and the Advancing
Term Note due on the Final Maturity Date."
(e) Section 6.04(j) of the Credit Agreement is hereby deleted in
its entirety.
(f) Section 8.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 8.01(h) is hereby amended by deleting the
figure "45" and substituting the figure "30" therefor.
(ii) Section 8.01(l) is hereby deleted and restated in
its entirety as follows:
"(l) Promptly becoming available and in any event
within 30 days after the end of each month, (i)
consolidated and consolidating statements of income,
stockholders' equity, changes in financial position and
cash flow of the Borrower and its Consolidated
Subsidiaries for such month and the related consolidated
and consolidating balance sheets as at the end of such
month, and setting forth in each case in comparative form
the corresponding figures for the preceding month,
accompanied by the certificate of a Responsible Officer,
which certificate shall state that said financial
statements fairly present the consolidated and
consolidating financial condition and results of
operations of the Borrower and its Consolidated
Subsidiaries in accordance with GAAP, as at the end of,
and for, such month and (ii) a budget variance report
prepared by a Responsible Officer showing any variance
from the fiscal year budget previously furnished to the
Lender."
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(iii) The following new Section 8.01(n) is hereby added:
"(n) Promptly upon becoming available and in any
event within 30 days after the end of each fiscal year of
the Borrower, a capital expenditure budget for the next
fiscal year for the Lender's approval setting forth any
permitted capital expenditures and permitted Liens to be
incurred during the period."
(g) Section 9.01 of the Credit Agreement is hereby amended as
follows:
(i) Section 9.01(d) is hereby deleted and restated in its
entirety as follows:
"(d) A loan in the principal amount of $2,000,000
arranged by Pecks Management Partners Ltd. (the "New
Xxxx'x Loan") to fund the Borrower's purchase of a
purchase option for Southwest Dental Associates, L.C.
("Southwest Dental") and for working capital purposes;
PROVIDED that the documentations for such loan shall be in
the form attached as Exhibit A2 to the Second Amendment
PROVIDED FURTHER the Subordinated Debt shall have been
amended to provide that interest payments due thereon
beginning with interest payments due on or after September
30, 1996 have been and will be paid with non-cash
consideration until the earlier of (i) Final Maturity Date
or (ii) the Refinancing."
(ii) Section 9.01(e) is hereby deleted in its entirety:
(h) Sections 9.02(c) and (d) of the Credit Agreement are hereby
deleted in their entirety.
(i) Section 9.03(g) of the Credit Agreement is hereby amended and
restated in its entirety as follows:
"(g) subject to the Lender being satisfied that (i) the
Borrower will have sufficient liquid capital to close the
transaction, (ii) the Borrower is, and will be on a PRO FORMA
basis, in material compliance with the provisions of Article VIII
and Article IX hereof, and (iii) no material adverse change has
occurred in the business or financial condition of Southwest
Dental since March 31, 1997, (A) the Borrower's acquisition of a
purchase option for Southwest Dental for a price not to exceed
$1,000,000, and (B) the Borrower's acquisition of Southwest
Dental for a purchase price of not to exceed $3,650,000."
(j) Section 9.07 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 9.07 MERGERS, ETC. Neither the Borrower nor any
Subsidiary will merge into or with or consolidate with any other
Person, or sell, lease or
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otherwise dispose of any of its Property or assets to any other
Person other than (i) sales of inventory in the ordinary course
of business and (ii) incidental sales of Property no longer
useful in the Borrower's or Subsidiaries' business."
(k) Section 9.11 of the Credit Agreement is hereby deleted in its
entirety.
(l) Section 9.12 of the Credit Agreement is hereby deleted and
restated in its entirety as follows:
"Section 9.12 CURRENT RATIO. The Borrower will not permit
its ratio of (i) consolidated current assets to (ii) consolidated
current liabilities (excluding the current maturities of
long-term debt, deferred compensation pursuant to the Deferred
Compensation Agreement and Subordinated Debt) to be less than
1.25 to 1.0 at any time."
(m) Section 9.15 of the Credit Agreement is hereby amended by
deleting and restating in its entirety the first sentence thereof:
"Section 9.15 LEVERAGE RATIO. The Borrower will not permit
its Leverage Ratio as of the end of any fiscal quarter
(calculated on a rolling four quarter basis; PROVIDED, HOWEVER,
the first quarter test shall be for the quarter ended March 31,
1997 and the following rolling cumulative tests will begin with
such quarter ending March 31, 1997 until a full four quarter test
can be achieved) to be greater than 4.0 to 1.0 through March 31,
1997, 3.5 to 1.0 through June 30, 1997, 3.0 to 1.0 through
September 30, 1997 and 2.75 to 1.0 thereafter."
(n) Section 9.16 of the Credit Agreement is deleted and restated
in its entirety as follows:
"Section 9.16 FIXED CHARGE COVERAGE RATIO. The Borrower
will not permit its Fixed Charge Coverage Ratio as of the end of
any fiscal quarter (calculated on a rolling four quarter basis;
PROVIDED, HOWEVER, the first quarter test shall be for the
quarter ended March 31, 1997 and the following rolling cumulative
tests will begin with such quarter ending March 31, 1997 until a
full four quarter test can be achieved) to be less than 1.20 to
1.0. For any calculation period which would include one or more
quarters prior to the Stock Purchase or Asset Purchase or any
other future acquisition of an entity, the "rolling four
quarters" shall include (i) "pro forma" the EBITDA of the
applicable Old PC for such prior periods adjusted to reflect
costs and expenses which such Old PC would have incurred had a
Management Services Agreement between Borrower and/or any
Subsidiary and such Old PC been in effect (adding back
appropriate executive salaries and non-cash charge offs relating
to such transaction) and (ii) deferred compensation and debt
service on long-term debt and capital lease payments assumed for
such
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prior periods on the same basis as in effect during the most
current quarterly period. For purposes of this Section 9.16,
"Fixed Charge Coverage Ratio" shall mean the ratio for the
relevant period of (i) EBITDA PLUS lease and rental expense to
(ii) interest PLUS lease and rental expense PLUS deferred
compensation pursuant to Deferred Compensation Agreement PLUS
debt service on long-term debt and capital leases for the subject
period."
(o) Article IX of the Credit Agreement is hereby further amended
as follows:
(i) Section 9.18 is amended by adding the words "New Pecks
Loan documents" in the second line thereof after the word
"Agreements" (the first time it appears) and before the word
"and."
(ii) Section 9.21 is amended by adding the words "New
Pecks Loan documents," in the second line thereof after the words
"modification of the" and before the word "Management".
(iii) Section 9.24 is amended by adding the following
sentence at the end thereof:
"The Borrower shall not make any optional
prepayment of principal or interest on the Subordinated
Debt or the New Pecks Loan or any prepayment under the
Deferred Compensation Agreement. The Borrower will not
amend or modify the Securities Purchase Agreement
(including, without limitation Amendment No. 1 thereto)
without the prior written consent of the Lender.
(iv) A new Section 9.25 is hereby added to read as
follows:
"Section 9.25 MINIMUM EBITDA. The Borrower will not
permit EBITDA to be less than the amounts set forth below:
Period beginning Amount
January 1, 1997
------------------------------ ----------
through March 31, 1997 ....... $ 600,000
through June 30, 1997 ........ $ 800,000
through September 30, 1997 ... $1,000,000
through December 31, 1997 .... $1,000,000
(p) The Credit Agreement is hereby amended by deleting Exhibit J
attached thereto.
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(q) The Credit Agreement is hereby amended by deleting all of the
schedules attached thereto, being Schedules 7.02, 7.03, 7.09, 7.10,
7.14-1, 7.17, 7.19-1, 7.24-1, 7.25, 9.01, 9.02, and 9.03 and
substituting therefore Schedules 7.02, 7.03, 7.09, 7.10, 7.14, 7.17,
7.19, 7.24, 7.25, 9.01, 9.02, and 9.03 attached hereto.
SECTION 4. WAIVERS.
(a) WAIVER OF CURRENT RATIO, LEVERAGE RATIO AND FIXED CHARGE COVERAGE
RATIO. It is understood that immediately prior to the effective date of this
Second Amendment the Borrower is not in compliance with respect to Sections
9.12, 9.15, and 9.16 of the Credit Agreement. Upon the effective date of this
Second Amendment the Borrower hereby represents that it will be in compliance
with all provisions of the Credit Agreement and accordingly the Lender hereby
waives for the periods up to the effective date of this Second Amendment but not
after, the Event of Default under Section 10.01(d) created by the aforesaid
existing noncompliance.
(b) WAIVER OF XXXXXXXXX NOTE DEFAULT. Borrower is in default in payment
of the note payable to 1st Dental Care, Inc., in the principal amount of
$1,787,938 (the "Xxxxxxxxx Note"). The Lender hereby waives the Event of Default
under Section 10.01(b) created by the aforesaid default in the Xxxxxxxxx Note
for the periods up to the effective date of this Second Amendment until the date
which is ninety days from and after the date hereof at which time such waiver
shall terminate and the Xxxxxxxxx Note must no longer be in default.
(c) EXTENT OF WAIVER. The foregoing waiver shall not be deemed to be a
wavier by the Lender of any other covenant, condition or obligation on the part
of the Borrower or any Subsidiary under the Credit Agreement or any other
Security Instrument except as set forth in Sections 4(a) and 4(b) of this Second
Amendment. In addition, the foregoing waivers shall in no respect evidence any
commitment by the Lender to grant any future waivers of any covenant, condition
or obligation on the part of the Borrower or any Subsidiary under the Credit
Agreement or any other Security Instrument including, without limitation,
Sections 9.12, 9.15, 9.16 and 10.01(b) and (d) of the Credit Agreement. Any
further waivers must be specifically agreed to in writing in accordance with
Section 11.04 of the Credit Agreement.
SECTION 5. CONDITIONS PRECEDENT. This Second Amendment shall become
binding upon the following conditions each of which must be satisfied to the
satisfaction of the Lender:
(a) receipt by the Lender of a satisfactory capital expenditure
budget for the 1997 fiscal year;
(b) funding of the New Xxxx'x Loan on terms as set forth an
Exhibit A2 hereto;
(c) the Borrower shall have renegotiated each of the purchase
money notes described on Exhibit A1 hereto to provide for interest only
payments until January 31, 1998 and the waiver of any and all defaults
existing under such notes and related agreements and otherwise being on
terms satisfactory to the Lender;
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(d) waiver and deferral of payments under the Deferred
Compensation Agreement and waiver of all existing defaults thereunder;
(e) receipt by the Lender of a restructuring fee equal to 1/2 of
1% of the Commitments;
(f) a certificate of the Secretary of the Borrower setting forth
(i) the resolutions of the Board of Directors of the Borrower adopted in
respect of this Second Amendment, (ii) the officer of the Borrower
authorized to sign this Second Amendment and (iii) the signature of such
authorized officer of the Borrower;
(g) a certificate of the Secretary of each Guarantor and
Subsidiary party hereto setting forth (i) the resolutions of the Board
of Directors of such entity adopted in respect of this Second Amendment,
(ii) the officer of such entity authorized to sign this Second
Amendment, and (iii) the signature of such authorized officer of such
entity;
(h) an opinion of counsel to the Borrower, the Guarantors, and
Subsidiaries party hereto in form and substance satisfactory to the
Lender;
(i) payment by the Borrower of all legal fees and expenses and
all closing costs and expenses in accordance with Section 8 hereof; and
(j) such other documents as the Lender or special counsel to the
Lender may reasonably request.
SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower hereby reaffirms
that as of the effective date of this Second Amendment, the representations and
warranties made by the Borrower in Article VII of the Credit Agreement, as
hereby amended, will be true and correct as though made on and as of the
effective date of this Second Amendment.
SECTION 7. LIMITATIONS. The amendments set forth herein are limited
precisely as written and shall not be deemed to (a) be a consent to, or waiver
or modification of, any other term or condition of the Credit Agreement, the
Notes or any of the other Security Instruments, or (b) except as expressly set
forth herein, prejudice any right or rights which the Lender may now have or may
have in the future under or in connection with the Credit Agreement, the Notes,
the Security Instruments, or any of the other documents referred to therein.
Except as expressly supplemented, amended or modified hereby or by express
written amendments thereof, the terms and provisions of the Credit Agreement,
the Notes, any other Security Instruments, or any other documents or instruments
executed in connection with any of the foregoing are and shall remain in full
force and effect. In the event of a conflict between this Second Amendment and
any of the foregoing documents, the terms of this Second Amendment shall be
controlling.
SECTION 8. PAYMENT OF EXPENSES. The Borrower agrees, whether or not the
transactions hereby contemplated shall be consummated, to reimburse and save the
Lender harmless from and against liability for the payment of all reasonable
substantiated out-of-pocket costs and expenses arising in connection with the
preparation, execution, delivery, amendment, modification, waiver
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and enforcement of, or the preservation of any rights under this Second
Amendment, including, without limitation, the reasonable fees and expenses of
any local or other counsel for the Lender, and all stamp taxes (including
interest and penalties, if any), recording taxes and fees, filing taxes and
fees, and other charges which may be payable in respect of, or in respect of any
modification of, the Credit Agreement and the other Security Instruments. The
provisions of this Section shall survive the termination of the Credit Agreement
and the repayment of the Loans.
SECTION 9. GOVERNING LAW. This Second Amendment and the rights and
obligations of the parties hereunder and under the Credit Agreement shall be
construed in accordance with and be governed by the laws of the State of Texas
and the United States of America.
SECTION 10. DESCRIPTIVE HEADINGS, ETC. The descriptive headings of the
several Sections of this Second Amendment are inserted for convenience only and
shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 11. COUNTERPARTS. This Second Amendment may be executed in any
number of counterparts and by different parties on separate counterparts and all
of such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment
to be duly executed and delivered by their respective duly authorized offices as
of June ___, 1997, and effective as of the date first above written.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SS.26.02
THIS SECOND AMENDMENT AND OTHER LOAN DOCUMENTS EXECUTED BY ANY OF THE
PARTIES BEFORE OR SUBSTANTIALLY CONTEMPORANEOUSLY WITH THE EXECUTION HEREOF
TOGETHER CONSTITUTE A WRITTEN LOAN AGREEMENT AND REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NOT
UNWRITTEN ORAL AGREEMENT BETWEEN THE PARTIES.
CASTLE DENTAL CENTERS, INC.
By: _______________________
Xxxx X. Xxxxxx, Xx.
President
NATIONSBANK OF TEXAS, N.A.
By: _______________________
Xxxxxxxx X. Xxxxxxxx
Senior Vice President
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RATIFICATION
Each of the undersigned hereby agrees that its/his respective
liabilities under the Security Instruments to which it/he is a party shall
remain enforceable against it/him in accordance with the terms of Security
Instruments to which it/he is a party and shall not be reduced, altered,
limited, lessened or in any way affected by the execution and delivery of this
Second Amendment and Supplement to Amended and Restated Credit Agreement. Each
of the undersigned hereby confirms and ratifies its/his liabilities under the
Security Instruments to which it/he is a party in all respects.
CASTLE DENTAL CENTERS OF TEXAS,
INC.
By:______________________________
Name:
Title:
JHCDDS, INC.
By:_______________________________
Name:
Title:
CASTLE DENTAL CENTERS OF
TENNESSEE, INC.
By:_______________________________
Name:
Title:
CASTLE DENTAL CENTERS OF
FLORIDA, INC.
By:________________________________
Name:
Title:
-------------------------------------
Xxxx X. Xxxxxx, Xx.
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