EXHIBIT 10.27
FIRST AMENDMENT TO SENIOR SUBORDINATED
NOTE PURCHASE AGREEMENT
This FIRST AMENDMENT TO SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
("AMENDMENT") is dated as of May 19, 2000, and is entered into by and among
CASTLE DENTAL CENTERS, INC., a corporation formed under the laws of Delaware
(the "COMPANY"), XXXXXX FINANCIAL, INC., a Delaware corporation ("XXXXXX") and
MIDWEST MEZZANINE FUND II, L.P., a Delaware limited partnership ("Midwest")
(Xxxxxx and Midwest are sometimes referred to individually as a "HOLDER" and
together as the "HOLDERS").
WHEREAS, the Company and the Holders are parties to a certain Senior
Subordinated Note Purchase Agreement dated January 31, 2000 (as such agreement
has from time to time been amended, supplemented or otherwise modified, the
"AGREEMENT"); and
WHEREAS, the parties desire to amend the Agreement as hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless otherwise
defined herein, shall have the meaning ascribed to such terms in the Agreement.
2. AMENDMENTS. Subject to the conditions set forth below, the Agreement is
hereby amended as follows:
(a) Subsection 1.02 is amended by deleting the definition of
"Applicable Margin" in its entirety and inserting the following in lieu
thereof:
"APPLICABLE MARGIN" shall mean (a) with respect to interest
calculated by reference to the Eurodollar Rate, (i) from January 31,
2000 through April 30, 2000, four percent (4.0%) and (ii) from May
1, 2000 and thereafter, five and one half percent (5.5%) and (b)
with respect to interest calculated by reference to the Base Rate,
(i) from January 31, 2000 through April 30, 2000, two and three
quarters percent (2.75%) and (ii) from May 1, 2000 and thereafter,
four and one quarter percent (4.25%).
(b) Subsection 1.02 is further amended by deleting the definition of
"EBITDA" in its entirety and inserting the following in lieu thereof:
"EBITDA" shall mean, for any period, the sum of Consolidated
Net Income for such period plus the following expenses or charges to
the extent deducted from Consolidated Net Income in such period:
interest, taxes, depreciation, depletion, amortization, the amount
of the settlement of the lawsuit with Xxxxxx Xxxxxx, D.D.S. up to
but not to exceed $1,372,743 as reflected on
Schedule 1 to the Second Amendment to the Senior Credit Agreement,
dated as of September 30, 1999 and the amount of the unreimbursed
(whether by insurance or otherwise) legal feesand expenses related
to the arbitration with Xx. Xxxx Xxxxxxx, D.M.D. that was expensed
in Fiscal year 1999, up to but not to exceed $541,000.
(c) Subsection 1.02 is further amended by inserting the definition
of "Payment Rate" in its entirety and in the proper alphabetical order:
"PAYMENT RATE" shall mean the Eurodollar or Base Rate, as
applicable, PLUS appropriate Applicable Margin in effect from time
to time, LESS, in any case, from May 1, 2000 through December 31,
2000, one and one half percent (1.5%).
(d) Subsection 1.02 is further amended by inserting the definition
of "PIK Interest" in its entirety and in the proper alphabetical order:
"PIK INTEREST" shall mean that interest computed on the unpaid
principal amount of the Notes at one and one-half percent (1.5%)
from May 1, 2000 through December 31, 2000.
(e) Subsection 2.03(a) is hereby amended in its entirety to
hereafter read as follows:
" (a) VOLUNTARY PREPAYMENTS. Subject to the terms of the
Subordination Agreement, the Company may prepay the outstanding
principal of (together with accrued interest on and, if applicable,
the prepayment fee described below) the Subordinated Notes in full
or in part (in minimum amounts of $1,000,000), at any time and from
time to time on any Quarterly Date as applicable, upon not less than
three (3) Business Days' prior notice to Holders. The Company shall
not be permitted to prepay voluntarily the Convertible Notes. Any
prepayment in full of the Subordinated Notes shall be accompanied by
all PIK Interest accrued to date."
(f) Subsection 2.03(b)(ii) is hereby amended in its entirety to
hereafter read as follows:
" (ii) concurrently with the consummation of a Change in Control,
Company shall pay the outstanding principal of the Subordinated
Notes (together with accrued interest and, if applicable, the
prepayment fee described below). Any prepayment in full of the
subordinated Notes shall be accompanied by all PIK Interest accrued
to date."
(g) Subsection 3.02(c) is hereby amended in its entirety to
hereafter read as follows:
" DUE DATES. Accrued interest on the Notes shall be payable at the
Payment Rate on each Quarterly Date, except that interest payable at
the Post-Default Rate shall be payable from time to time on demand.
The PIK Interest shall accrue from
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May 1, 2000 through December 31, 2000 and shall be payable in full
on the first Quarterly Date in the year 2001 and shall also be
payable on demand upon the occurrence of an Event of Default. In
addition, accrued interest on Convertible Notes shall be payable on
the date of conversion of all or any part of such Convertible Note."
(h) Section 9.13 is amended by deleting the first sentence thereof
and inserting the following in lieu thereof:
"The Company will not permit its Leverage Ratio as of the end of any
fiscal quarter (calculated on a rolling four quarter basis) to be
greater than the ratio on the relevant dates set forth below:
DATE RATIO
------------------------------------------------------------
March 31, 2000 3.65 to 1.00
June 30, 2000 3.65 to 1.00
September 30, 2000 3.50 to 1.00
December 31, 2000 and thereafter 3.25 to 1.00."
(i) Section 9.14 is amended in its entirety to hereafter read as
follows:
"Section 9.14 FIXED CHARGE COVERAGE RATIO . The Company will
not permit its Fixed Charge Coverage Ratio as of the end of any
fiscal quarter (calculated on a rolling four quarter basis) to be
less than the ratio on the relevant dates set forth below.
DATE RATIO
------------------------------------------------------------
March 31, 2000 1.15 to 1.00
June 30, 2000 1.15 to 1.00
September 30, 2000 1.15 to 1.00
December 31, 2000 1.15 to 1.00
March 31, 2001 1.00 to 1.00
June 30, 2001 and thereafter 1.05 to 1.00
For purposes of this Section 9.14, "FIXED CHARGE COVERAGE RATIO"
shall mean (a) with respect to all calculations of Fixed Charge
Coverage Ratio through and including December 31, 2000, the ratio
for the relevant period of (i) EBITDA, LESS taxes payable in cash,
PLUS lease and rental expense to the extent deducted in computing
net income to (ii) lease and rental expense, PLUS interest expense,
PLUS, scheduled senior and subordinate principal payments including
Senior Funded Debt, capital leases, the Indebtedness, Junior
Subordinated Debt, Debt described on Schedule 9.01 and other Debt
subordinated or required to be subordinated to the Indebtedness and
(b) with respect to all calculations of Fixed Charge Coverage Ratio
on January 1, 2001 and thereafter, the ratio for the relevant period
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of (i) EBITDA, LESS taxes payable in cash, PLUS lease and rental
expense to the extent deducted in computing net income to (ii) lease
and rental expense, PLUS interest, PLUS, during the Revolving Credit
Period (as defined in the Senior Credit Agreement), one-seventh
(1/7) of the then-outstanding principal balance of the Senior Loans,
PLUS, without duplication, current maturities of long-term debt,
PLUS capital leases PLUS, from and after Revolving Credit Period
scheduled payments of principal on Debt of the Company and its
Subsidiaries. For any calculation period which would include one or
more quarters prior to any Stock Purchase or any Asset Purchase or
any other future acquisition of an entity, the "rolling four
quarters" shall include the "pro forma" EBITDA of the applicable
Acquired Entity for such prior periods as approved by Holders,
adjusted to reflect costs and expenses which such Acquired Entity
would have included had the Management Services Agreements between
Company and/or any Subsidiary and such Acquired Entity been in
effect (adding back appropriate executive salaries and non-cash
charge offs relating to this transaction), in each instance, as
approved by Holders."
(j) Section 9.15 is amended in its entirety to hereafter read as
follows:
"9.15 RATIO OF TOTAL FUNDED DEBT TO EBITDA. The Company will not
permit its ratio of Total Funded Debt as of the end of any fiscal
quarter to EBITDA for the four fiscal quarters ending on such date
to be greater than the ratio for the relevant periods set forth
below:
PERIOD ENDING RATIO
--------------------------------------------------------------
March 31, 2000 5.00 to 1.00
June 30, 2000 5.00 to 1.00
September 30, 2000 4.75 to 1.00
December 31, 2000 and thereafter 4.25 to 1.00.
For purposes hereof, EBITDA shall be calculated as provided in
section 9.13. For clarity purposes, it is understood and agreed that
Total Funded Debt includes, without limitation, any and all deferred
interest under all Total Funded Indebtedness."
3. AMENDMENT FEES. In connection with the execution of this Amendment, the
Company shall pay to Holders, for their ratable benefit, a fee of $37,500
("AMENDMENT FEE"), which Amendment Fee shall be deemed to be earned on the
Effective Date and shall be due and payable on the following dates in the
following amounts:
DATE AMOUNT
----------------------------------------
Effective Date $12,502.50
September 29, 2000 $12,498.75
December 29, 2000 $12,498.75
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;provided, however, in the event the Company pays to Holders the entire
principal balance of the Subordinated Notes prior to December 29, 2000, the
entire unpaid amount of the Amendment Fee shall become immediately due and
payable.
4. CONDITIONS. The effectiveness of this Amendment (the date on which this
Amendment becomes effective shall referred to as the "EFFECTIVE DATE") is
subject to the following conditions precedent (unless specifically waived in
writing by the Holders):
(a) The Company shall have executed and delivered this Amendment,
and such other documents and instruments as the Holders may reasonably
require shall have been executed and/or delivered to the Holders;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to the Holders and
their legal counsel;
(c) Holders shall have received all deliquent payments due
under the Agreement;
(d) After giving effect to this Amendment, no Default or Event
of Default shall have occurred and be continuing;
(e) Each of the Holders shall have received (and the Company
covenants and agrees to deliver to Holders), by May __, 2000 [TWO WEEKS
FROM EFFECTIVE DATE], the documents referred to in Section 8.01(a) of the
Agreement for the fiscal year ended December 31, 1999 and Section 8.01(b)
for the fiscal quarter ended March 31, 2000;
(f) Each of the Holders shall have received consolidated and
consolidating statements of income, stockholders' equity, changes in
financial position and cash flow of the Company and its Consolidated
Subsidiaries for the months ending January 31, 2000 and February 29, 2000,
in each case prepared by the Company and accompanied by the certificate of
a Responsible Officer stating that such financial statements fairly
present the consolidated and consolidating financial condition of the
Company and its Consolidated Subsidiaries in accordance with GAAP, as at
the end of, and for, each such month;
(g) Each of the Holders shall have received evidence that the
requisite number of Senior Lenders have consented to the execution of this
Amendment; and
(h) The Senior Credit Documents shall have been amended in a manner
satisfactory to Holders and such amendment shall have become effective.
5. REPRESENTATIONS AND WARRANTIES. To induce Holders to enter into this
Amendment, the Company represents and warrants to Holders:
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(a) that the execution, delivery and performance of this Amendment
has been duly authorized by all requisite corporate action on the part of
the Company and that this Amendment has been duly executed and delivered
by the Company;
(b) that each of the representations and warranties set forth in
Article VII of the Agreement (other than those which, by their terms,
specifically are made as of certain date prior to the date hereof) are
true and correct in all material respects as of the date hereof; and
6. SEVERABILITY. Any provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
7. REFERENCES. Any reference to the Agreement contained in any document,
instrument or agreement executed in connection with the Agreement shall be
deemed to be a reference to the Agreement as modified by this Amendment.
8. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which taken
together shall be one and the same instrument.
9. RATIFICATION. The terms and provisions set forth in this Amendment
shall modify and supersede all inconsistent terms and provisions of the
Agreement and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
10. WAIVER. The Company and the Holders hereby acknowledge and agree that
prior to the effectiveness hereof, the Company was in default for the months of
January, February, March, April and May 2000 under Sections 3.02, 8.01(a) and
(b), 9.13, 9.14 and 9.15 of the Agreement. Provided that no other defaults by
the Company currently exist and are continuing under the Agreement, and provided
further, the conditions precedent set forth in Section 4 hereof are satisfied,
then the defaults listed above which occurred on or before the date hereof are
hereby waived by the Holders and the Holders' remedies with respect thereto are
hereby waived. Notwithstanding the foregoing, or any other election by the
Holders to date in forgiving any default by the Company or in waiving any
remedies with respect thereto, no such forgiveness or waiver shall affect or be
deemed to affect any default by the Company or any remedy by the Holders
existing after the date hereof, and the Holders shall not be obligated in any
manner to forgive any such defaults, or waive any such remedies. The Holders
hereby reserve, and the Company hereby acknowledges and agrees that the Holders
have effectively preserved, all of their rights, remedies and recourses with
respect to any default under the Agreement except with respect to the defaults
expressly set forth above.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
XXXXXX FINANCIAL, INC., CASTLE DENTAL CENTERS, INC.,
a Delaware corporation a Delaware corporation
By: ________________________ By: ________________________
Name: ________________________ Name: Xxxx X. Xxxxxx, Xx.
Title:________________________ Title: Chief Executive Officer
ATTEST:
MIDWEST MEZZANINE FUND II, L.P., ______________________________
a Delaware limited partnership [ASSISTANT] SECRETARY
[CORPORATE SEAL]
By: ________________________
Name: ________________________
Title:________________________
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CONSENT AND REAFFIRMATION
Each of the undersigned (each a "GUARANTOR", collectively the
"GUARANTORS") hereby (i) acknowledges receipt of a copy of the foregoing First
Amendment to Senior Subordinated Note Purchase Agreement; (ii) consents to the
Company's execution and delivery thereof; (iii) agrees to be bound thereby; and
(iv) affirms that nothing contained therein shall modify in any respect
whatsoever its guaranty of the obligations of Company to Xxxxxx and Midwest
pursuant to the terms of that certain Subordinated Guaranty Agreement dated
January 31, 2000 (the "GUARANTY") and reaffirms that the Guaranty is and shall
continue to remain in full force and effect. Although each Guarantor has been
informed of the matters set forth herein and has acknowledged and agreed to
same, each Guarantor understands that the Holders have no obligation to inform
any Guarantor of such matters in the future or to seek any Guarantor's
acknowledgment or agreement to future amendments or waivers, and nothing herein
shall create such a duty.
IN WITNESS WHEREOF, each of the undersigned has executed this Consent and
Reaffirmation on and as of the date of such Amendment.
ACADEMY FOR DENTAL ASSISTANTS, INC.
CASTLE TEXAS HOLDINGS, INC.
CASTLE DENTAL CENTERS OF
CALIFORNIA, L.L.C.
CASTLE DENTAL CENTERS OF TEXAS, INC.
DENTAL WORLD, INC.
CDC OF CALIFORNIA, INC.
CASTLE DENTAL CENTERS OF AUSTIN, INC.
CASTLE DENTAL CENTERS OF FLORIDA, INC.
CASTLE DENTAL CENTERS OF
TENNESSEE, INC., AND
DENTCOR, INC.
By: ________________________________
Name: Xxxx X. Xxxxxx, Xx.
Title: Chief Executive Officer
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