EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
By and Among
GENTLE DENTAL SERVICE CORPORATION,
as Borrower,
and
THE OTHER CREDIT PARTIES PARTY HERETO,
and
IMPERIAL BANK
as Agent,
and
THE FINANCIAL INSTITUTIONS PARTY HERETO
Dated as of January 7, 1998
$25,000,000
TABLE OF CONTENTS
Page(s)
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . 2
1.2 Other Interpretive Provisions. . . . . . . . . . . . . . . . . 20
1.3 Accounting Principles. . . . . . . . . . . . . . . . . . . . . 21
ARTICLE II THE CREDITS . . . . . . . . . . . . . . . . . . . . . . . 21
2.1 Amounts and Terms of Commitments . . . . . . . . . . . . . . . 21
2.2 Loan Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3 Procedure for Borrowing. . . . . . . . . . . . . . . . . . . . 28
2.4 Conversion and Continuation Elections for
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . 29
2.5 Voluntary Termination, Reduction of Combined Commitments;
Increase in Combined Commitments . . . . . . . . . . . . . . . 30
2.6 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . 31
2.7 Repayment. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.8 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.9 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
2.10 Computation of Fees and Interest . . . . . . . . . . . . . . . 33
2.11 Payments by the Borrower . . . . . . . . . . . . . . . . . . . 33
2.12 Payments by the Banks to the Agent . . . . . . . . . . . . . . 34
2.13 Sharing of Payments, Etc.. . . . . . . . . . . . . . . . . . . 35
2.14 Security Documents . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE III TAXES, YIELD PROTECTION AND ILLEGALITY. . . . . . . . . . 36
3.1 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.3 Increased Costs and Reduction of Return. . . . . . . . . . . . 38
3.4 Funding Losses . . . . . . . . . . . . . . . . . . . . . . . . 38
3.5 Inability to Determine Rates . . . . . . . . . . . . . . . . . 39
3.6 Certificates of Banks. . . . . . . . . . . . . . . . . . . . . 39
3.7 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE IV CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . 40
4.1 Condition of Initial Loans or Letter of Credit . . . . . . . . 40
4.2 Conditions to All Loans and Letters of Credit. . . . . . . . . 42
ARTICLE V REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . 43
5.1 Existence and Power. . . . . . . . . . . . . . . . . . . . . . 43
5.2 Corporate Authorization; No Contravention. . . . . . . . . . . 43
5.3 Governmental Authorization . . . . . . . . . . . . . . . . . . 44
5.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . 44
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5.5 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.6 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.7 Financial Condition. . . . . . . . . . . . . . . . . . . . . . 44
5.8 ERISA Compliance . . . . . . . . . . . . . . . . . . . . . . . 45
5.9 Use of Proceeds; Margin Regulations. . . . . . . . . . . . . . 45
5.10 Real Property. . . . . . . . . . . . . . . . . . . . . . . . . 46
5.11 Equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.12 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.13 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.14 Environmental Matters. . . . . . . . . . . . . . . . . . . . . 47
5.15 Regulated Entities . . . . . . . . . . . . . . . . . . . . . . 47
5.16 No Burdensome Restrictions . . . . . . . . . . . . . . . . . . 47
5.17 Copyrights, Patents, Trademarks and Licenses, etc. . . . . . . 48
5.18 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . 48
5.19 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
5.20 Business Activity. . . . . . . . . . . . . . . . . . . . . . . 48
5.21 Accreditation, Etc.. . . . . . . . . . . . . . . . . . . . . . 48
5.22 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.23 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . . . . 49
5.24 Transactional Documents . . . . . . . . . . . . . . . . . . . 49
5.25 Full Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . 49
6.1 Financial Statements.. . . . . . . . . . . . . . . . . . . . . 49
6.2 Certificates; Other Information. . . . . . . . . . . . . . . . 50
6.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.4 Preservation of Corporate Existence, Etc.. . . . . . . . . . . 53
6.5 Maintenance of Property. . . . . . . . . . . . . . . . . . . . 53
6.6 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 53
6.7 Payment of Obligations . . . . . . . . . . . . . . . . . . . . 53
6.8 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 54
6.9 Compliance with ERISA. . . . . . . . . . . . . . . . . . . . . 54
6.10 Inspection of Property and Books and Records . . . . . . . . . 54
6.11 Environmental Laws.. . . . . . . . . . . . . . . . . . . . . . 54
6.12 Acquisitions.. . . . . . . . . . . . . . . . . . . . . . . . . 55
6.13 Concentration Account. . . . . . . . . . . . . . . . . . . . . 56
6.14 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . 57
6.15 Additional Credit Parties and Collateral. . . . . . . . . . . 57
6.16 Required Future Action. . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . 59
7.1 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . 59
7.2 Disposition of Assets. . . . . . . . . . . . . . . . . . . . . 61
7.3 Consolidations and Mergers . . . . . . . . . . . . . . . . . . 61
7.4 Change of Business . . . . . . . . . . . . . . . . . . . . . . 61
7.5 Loans and Investments. . . . . . . . . . . . . . . . . . . . . 61
7.6 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . 62
7.7 Contingent Obligations . . . . . . . . . . . . . . . . . . . . 62
7.8 Lease Obligations. . . . . . . . . . . . . . . . . . . . . . . 62
7.9 Restricted Payments. . . . . . . . . . . . . . . . . . . . . . 62
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7.10 Prepayments of Subordinated Permitted
Indebtedness.. . . . . . . . . . . . . . . . . . . . . . . . . 62
7.11 Transactions with Affiliates.. . . . . . . . . . . . . . . . . 63
7.12 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 63
7.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
7.14 Accounting Changes . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE VIII EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . 63
8.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . 63
8.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
8.3 Rights Not Exclusive . . . . . . . . . . . . . . . . . . . . . 67
ARTICLE IX THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . 67
9.1 Appointment and Authorization. . . . . . . . . . . . . . . . . 67
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . 67
9.3 Liability of Agent . . . . . . . . . . . . . . . . . . . . . . 67
9.4 Reliance by Agent. . . . . . . . . . . . . . . . . . . . . . . 68
9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . 69
9.6 Credit Decision. . . . . . . . . . . . . . . . . . . . . . . . 69
9.7 Indemnification of Agent . . . . . . . . . . . . . . . . . . . 69
9.8 Agent in Individual Capacity . . . . . . . . . . . . . . . . . 70
9.9 Successor Agent. . . . . . . . . . . . . . . . . . . . . . . . 70
9.10 Withholding Tax. . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . 72
10.1 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 72
10.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.3 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . 74
10.4 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 74
10.5 Borrower Indemnification . . . . . . . . . . . . . . . . . . . 74
10.6 Payments Set Aside . . . . . . . . . . . . . . . . . . . . . . 75
10.7 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 75
10.8 Assignments, Participations, etc.. . . . . . . . . . . . . . . 75
10.9 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . 77
10.10 Set-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.11 Notification of Addresses, Lending
Offices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . 78
10.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 78
10.13 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 79
10.14 No Third Parties Benefited. . . . . . . . . . . . . . . . . . 79
10.15 Governing Law and Jurisdiction. . . . . . . . . . . . . . . . 79
10.16 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 79
10.17 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 80
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EXHIBITS
Exhibit A Form of Promissory Note
Exhibit B Form of Amended and Restated Guaranty
Exhibit C Form of Amended and Restated Security Agreement
Exhibit D Form of Compliance Certificate
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Notice of Conversion/Extension
Exhibit G Form of Certificate re Real Property and Business
Locations
Exhibit H Terms and Conditions of Permitted Subordinated
Indebtedness
Exhibit I Form of Legal Opinion of Counsel to the Borrower
and Its Subsidiaries
Exhibit J Form of Assignment and Acceptance Agreement
Exhibit K Form of Credit Agreement Supplement
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SCHEDULES
Schedule 1.1(b) Existing Permitted Indebtedness
Schedule 2.1 Commitment
Schedule 4.1(o) List of Transactional Documents
Schedule 5.1 Jurisdictions of Subsidiaries
Schedule 5.5 Litigation
Schedule 5.8 ERISA Compliance
Schedule 5.12 Material Contracts
Schedule 5.14 Environmental Matters
Schedule 5.15 Regulated Entities
Schedule 5.17 Intellectual Property Rights
Schedule 5.18 Ownership of Subsidiaries
Schedule 5.19 Insured Properties
Schedule 7.1 Existing Liens
Schedule 7.6 Indebtedness on Closing Date
Schedule 7.7 Contingent Obligations of Credit Parties as of
Closing Date
Schedule 10.2 Addresses
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ANNEXES
Annex 1 Form of Management Agreement
Annex 2 Form of Security Agreement
Annex 2 Form of Share Acquisition Agreement
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AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is entered
into as of January 7, 1998, among GENTLE DENTAL SERVICE CORPORATION, a
Washington corporation ("Borrower"), GMS DENTAL GROUP MANAGEMENT, INC., a
Delaware corporation ("GMS Management"), GMS DENTAL GROUP MANAGEMENT OF SOUTHERN
CALIFORNIA, INC., a California corporation ("GMS California"), GMS HAWAII
ACQUISITION COMPANY, a Delaware corporation ("GMS Hawaii Acquisition"), GMS
DENTAL GROUP MANAGEMENT OF HAWAII, INC., a Hawaii corporation ("GMS Hawaii"),
GMS DENTAL GROUP MANAGEMENT OF THE MOUNTAIN STATES, INC., a Delaware corporation
("GMS Mountain"), and the Additional Credit Parties (as defined in Section 6.15
hereof) (each of the Borrower, GMS Management, GMS California, GMS Hawaii
Acquisition, GMS Hawaii, GMS Mountain and the Additional Credit Parties herein
called a "Credit Party" and collectively the "Credit Parties"), the financial
institutions from time to time party to this Agreement (collectively, the
"Banks" and individually, a "Bank"), and IMPERIAL BANK, as agent (the "Agent")
for the Banks.
Recitals
--------
A. The Banks and the Agent have entered into the Credit Agreement, dated as
of October 10, 1996, as amended by the First Amendment to Credit Agreement,
dated as of April 21, 1997, the Second Amendment to Credit Agreement, dated as
of May 1, 1997, and the Third Amendment to Credit Agreement, dated as of July
23, 1997 (as so amended, the "Old Credit Agreement"), with GMS Management, GMS
Dental Group, Inc. ("GMS Holding"), GMS California, GMS Hawaii Acquisition, GMS
Hawaii and GMS Mountain. GMS Management was the "borrower" under the Old Credit
Agreement.
B. Pursuant to the Agreement and Plan of Merger, dated as of October 30,
1997, between GMS Holding and the Borrower, (i) GMS Holding was merged with and
into the Borrower on November 4, 1997, (ii) all of the assets and liabilities of
GMS Holding, including the liabilities of GMS Holding under the Loan Documents,
were transferred to the Borrower and (iii) the separate corporate existence of
GMS Holding ceased and the Borrower continued as the surviving corporation.
C. The Old Credit Agreement was further amended pursuant to the Fourth
Amendment to Credit Agreement, dated as of December 31, 1997 (the "Fourth
Amendment"), by and among GMS Management (as the borrower), the Borrower (as a
Credit Party), GMS California, GMS Hawaii Acquisition, GMS Hawaii, GMS Mountain,
the Banks and the Agent in order to increase the maximum aggregate commitment
amount under the Old Credit Agreement from $10,000,000 and $10,500,000.
D. The Credit Parties have requested that (i) the Borrower substitute GMS
Management as the "borrower" under the Old Credit
Agreement, as amended by the Fourth Amendment, and (ii) further increase the
maximum aggregate commitment amount thereunder from $10,500,000 to $25,000,000.
The Banks and the Agent have agreed to accept the request of the Credit Parties.
E. The Credit Parties, the Banks and the Agent have agreed to amend and
restate the Old Credit Agreement, as amended by the Fourth Amendment, upon the
terms and conditions set forth below.
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Defined Terms. The following terms have the following meanings:
"Acquisition" means any transaction or series of related transactions for
the purpose of or resulting, directly or indirectly, in (a) the acquisition of
all or substantially all of the assets of a Person, or of any line or segment of
business or division of a Person or (b) the acquisition of in excess of 50% of
the capital stock, partnership interests, membership interests or equity of any
Person, or otherwise causing any Person to become a Subsidiary.
"Affiliate" means, as to any Person, any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. A Person shall be deemed to control another Person if the
controlling Person possesses, directly or indirectly, the power to direct or
cause the direction of the management policies of the other Person, whether
through the owners of voting securities, membership interests, by contract or
otherwise; provided that no Person shall be deemed to be an Affiliate of the
Borrower or any of its Subsidiaries solely as a result of management or
consulting agreements between such Person and the Borrower or any of its
Subsidiaries executed by the Borrower or any of its Subsidiaries in the ordinary
course of business and pursuant to which the Borrower or its Subsidiaries
provide such services.
"Agent" means Imperial Bank in its capacity as agent for the Banks
hereunder, and any successor agent arising under Section 9.9 hereof.
"Agent-Related Persons" means Imperial Bank and any successor agent arising
under Section 9.9 hereof, together with their respective Affiliates, and the
officers, directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"Agent's Payment Office" means 0000 Xxxxxxxx Xxxxxxxxx, Xxxxxxx Hills, 4th
Floor, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, or such other address as the Agent may
from time to time specify.
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"Agreement" means this Credit Agreement.
"Applicable Margin" means, subject to the following proviso, the rates per
annum set forth below:
PRIME
TOTAL LEVERAGE RATIO RATE LIBOR
-------------------- MARGIN MARGIN
------ ------
Less than 2.25:1 0.00% 2.00%
Greater than or equal to
2.25:1 but lesser than
2.75:1 0.25% 2.25%
Greater than or equal to
2.75:1 but lesser than
3.25:1 0.50% 2.50%
Greater than or equal to
3.25:1 but lesser than
3.75:1 0.75% 2.75%
Greater than or equal to
3.75:1 but lesser than
4.25:1 1.00% 3.00%
Greater than or equal to
4.25:1 1.00% 3.25%
The Applicable Margin shall be based on the Total Leverage Ratio as set forth in
the most recent Compliance Certificate, and shall be effective from and
including the date required by Section 6.2(b) hereof if the Agent receives such
Compliance Certificate on or before such date, to but excluding the next date of
delivery of the Compliance Certificate required by Section 6.2(b) hereof;
provided, however, that if the Agent does not receive the Compliance Certificate
by the date required by Section 6.2(b) hereof, the Applicable Margin shall be,
effective as of such date, the highest Applicable Margin to but excluding the
date the Agent receives such Compliance Certificate. Subject to the foregoing
proviso, until the delivery of the first Compliance Certificate after the
Closing Date, the Applicable Margin for Prime Rate Loans shall be 1.0% and the
Applicable Margin for LIBOR Loans shall be 3.25%.
"Assignee" has the meaning specified in Section 10.8.
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel, the allocated cost of internal legal
services and all disbursements of internal counsel.
"Bank" has the meaning specified in the introductory clause hereto.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11
U.S.C. ss. 101, et seq.).
"Base LIBOR" means, for any Interest Period, the rate of interest per annum
determined by the Agent to be the arithmetic mean (rounded upward, if necessary,
to the nearest 1/16th of it) of the rates of interest per annum notified to the
Agent by the
3
Reference Bank as the rate of interest at which dollar deposits in the
approximate amount of the LIBOR Loan to be made by the Reference Bank, and
having a maturity comparable to such Interest Period, would be offered to major
banks in the London interbank market at their request at approximately 11:00
a.m. (London time) two (2) Business Days prior to the commencement of such
Interest Period.
"Borrower's Business" means providing, directly or indirectly (a) dental
care services, (b) management, administrative or other support services to
providers of dental care services and (c) dental care insurance.
"Borrowing" means a Borrowing hereunder consisting of Loans made on the
same day by the Banks ratably according to their respective Pro Rata Shares and,
in the case of LIBOR Loans, having the same Interest Periods.
"Borrowing Date" means any date on which a Borrowing occurs under Sections
2.3 or 2.12 hereof.
"Business Day" means any day other than a Saturday, Sunday or other day on
which commercial banks in Los Angeles are authorized or required by law to close
and, if the applicable Business Day relates to any LIBOR Loan, means, in
addition to the foregoing, such a day on which dealings are carried on in the
applicable offshore dollar interbank market.
"Capital Adequacy Regulation" means any guideline, request or directive of
any central bank or other Governmental Authority, or any other law, rule or
regulation, whether or not having the force of law, in each case, regarding
capital adequacy of any bank or of any corporation controlling a bank.
"Capital Expenditures" means, for any period, the sum of
(a) the aggregate amount of all expenditures of the Borrower and its
Subsidiaries for fixed or capital assets made during such period which, in
accordance with GAAP, would be classified as capital expenditures; and
(b) the aggregate amount of all monetary obligations of the Borrower
or any of its Subsidiaries under any Capital Lease incurred during such period.
"Capital Lease" means any lease of property which in accordance with GAAP
should be capitalized on the lessee's balance sheet or disclosed in a footnote
thereto as a capitalized lease.
"Change of Control" means the acquisition by any Person or by two or more
Persons acting in concert of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange
4
Commission under the Securities Exchange Act of 1934) of 40% or more of the
outstanding shares of voting stock of the Borrower.
"Closing Date" means the date on which all conditions precedent set forth
in Section 4.1 are satisfied or waived by all Banks.
"Code" means the Internal Revenue Code of 1986, as amended, and regulations
promulgated thereunder.
"Combined Commitments" shall have the meaning set forth in Section 2.1
hereof.
"Commitment," as to each Bank, has the meaning specified in Section 2.1.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit D attached hereto.
"Contingent Obligation" means, as to any Person, any direct or indirect
liability of that Person, whether or not contingent, with or without recourse,
(a) with respect to any indebtedness, lease, dividend, letter of credit or other
obligation (the "primary obligations") of another Person (the "primary
obligor"), including any obligation of that Person (i) to purchase, repurchase
or otherwise acquire such primary obligations or any security therefor, (ii) to
advance or provide funds for the payment or discharge of any such primary
obligation, or to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency or any balance sheet
item, level of income or financial condition of the primary obligor, (iii) to
purchase property, securities or service primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation, or (iv) otherwise to assure or hold
harmless the holder of any such primary obligation against loss in respect
thereof (each, a "Guaranty Obligation"); (b) with respect to any Surety
Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments; or (c) to purchase
any materials, supplies or other property from, or to obtain the services of,
another Person if the relevant contract or other related document or obligation
requires that payment for such materials, supplies or other property, or for
such service shall be made regardless of whether delivery of such materials,
supplies or other property is ever made or tendered, or such services are ever
performed or tendered. The amount of any Contingent Obligation shall, in the
case of Guaranty Obligations, be deemed equal to the stated or determinable
amount of the primary obligation-in respect of which such Guaranty Obligation is
made or, if not stated or if indeterminable, the maximum reasonably anticipated
liability in respect thereof, and in the case of other Contingent Obligations,
5
shall be equal to the maximum reasonably anticipated liability in respect
thereof.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument, document or agreement to
which such Person is a party or by which it or any of its property is bound.
"Conversion/Continuation Date" means any date on which, under Section 2.4,
the Borrower (a) converts Loans of one Type to another Type, or (b) continues as
Loans of the same Type, but with a new Interest Period, Loans having Interest
Periods expiring on such date.
"Coverage Ratio" means, as of the last day of any fiscal quarter of the
Borrower, the ratio of (i) EBITDAR for the fiscal quarter ending on such date to
(ii) Fixed Charges as of such date; provided, however, that EBITDAR as of each
such date shall be multiplied by four (4), so as to represent the four-quarter
equivalent of EBITDAR for such period.
"Current Assets" means, for any period, for the Borrower and its
Subsidiaries on a consolidated basis, all items that would, in accordance with
GAAP, be classified as current assets of the Borrower and its Subsidiaries,
after deducting adequate reserves in each case in which a reserve is proper in
accordance with GAAP.
"Current Liabilities" means, for any period, for the Borrower and its
Subsidiaries on a consolidated basis, all items that would, in accordance with
GAAP, be classified as current liabilities of the Borrower and its Subsidiaries,
including the current portion of long-term Indebtedness and the Loans hereunder.
"Current Ratio" means, as of the last day of any fiscal quarter of the
Borrower, the ratio of (i) Current Assets for such period to (ii) Current
Liabilities for such period.
"Default" means any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dental Practices" means the dental groups engaged in the practice of
dentistry for which the Borrower, directly or indirectly, provides management,
administrative or other support services under long-term management agreements
or other similar agreements and which under GAAP are considered Subsidiaries of
the Borrower for the purposes of determining the Persons whose financial results
are to be consolidated with those of the Borrower.
6
"Dollars," "dollars" and "$" each mean lawful money of the United States.
"EBITDAR" means, for any fiscal period, for the Borrower and its
Subsidiaries on a consolidated basis, earnings before Interest Expense, income
taxes, depreciation, amortization and Operating Lease Rentals; provided,
however, that with respect to any fiscal quarter during which a Permitted
Acquisition has been consummated, EBITDAR for such quarter may be adjusted to
reflect EBITDAR applicable to such Permitted Acquisition for the entire quarter
based on its annual run-rate for such quarter as shown on the financial
projections delivered to and approved by the Agent in connection with such
Permitted Acquisition under Section 6.12(a) hereof.
"Eligible Assignee" means (a) a commercial bank organized under the laws of
the United States, or any state thereof, and having a combined capital and
surplus of at least $100,000,000, (b) a commercial bank organized under the laws
of any other country which is a member of the organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of any such
country, and having a combined capital and surplus of at least $100,000,000,
provided that such bank is acting through a branch or agency located in the
United States and (c) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Bank, (ii) a Subsidiary of
a Person of which a Bank is a Subsidiary, or (iii) a Person of which a Bank is a
Subsidiary, in each case approved by the Borrower pursuant to Section 10.8
hereof.
"Environmental Claims" means all claims asserted by any Governmental
Authority or other Person alleging potential liability or responsibility for
violation of any Environmental Law, or for release or injury to the environment.
"Environmental Laws" means all federal, state or local laws, statutes,
rules, regulations, ordinances and codes, together with all administrative
orders, directed duties, requests, licenses, authorizations and permits of, and
agreements with, any Governmental Authorities, in each case relating to
environmental, health, safety and land use matters.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
7
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations which is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate.
"Event of Default" means any of the events or circumstances specified in
Section 8.1.
"Exchange Act" means the Securities and Exchange Act of 1934, and
regulations promulgated thereunder.
"FDIC" means the Federal Deposit Insurance Corporation, and any
Governmental Authority succeeding to any of its principal functions.
"Federal Funds Rate" means, for any day, the rate set forth in the weekly
statistical release designated as H.15(519), or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor,
"H.15(519)11) on the preceding Business Day opposite the caption "Federal Funds
(Effective)"; or, if for any relevant day such rate is not so published on any
such preceding Business Day, the rate for such day will be the arithmetic mean
as determined by the Agent of the rates for the last transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York City time) on that day by
each of three leading brokers of Federal funds transactions in New York City
selected by the Agent.
"Fee Letter" has the meaning specified in Section 2.9(a).
"Fixed Charges" means, for any fiscal quarter and without duplication, for
the Borrower and its Subsidiaries on a consolidated basis the sum of (i)
Interest Expense and fees paid on, and amortization of debt discount in respect
of, all Indebtedness, multiplied by four (4) plus (ii) Operating Lease Rentals
paid during such period, multiplied by four (4) plus (iii) the aggregate
principal amount of all current maturities of long
8
term Indebtedness (including the principal portion of rentals under Capital
Leases) obligated to be paid by the Borrower and its Subsidiaries.
"FRB" means the Board of Governors of the Federal Reserve System, and any
Governmental Authority succeeding to any of its principal functions.
"GAAP" means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession).
"Governmental Approvals" shall mean any authorization, consent, approval,
license, lease, ruling, permit, waiver, exemption, filing, registration or
notice by or with any Governmental Authority.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
and any corporation or other entity owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"Guaranty Obligation" has the meaning specified in the definition of
"Contingent Obligation."
"Indebtedness" of any Person means, without duplication, (a) all
indebtedness for borrowed money; (b) all obligations issued, undertaken or
assumed as the deferred purchase price of property or services (other than trade
payables entered into in the ordinary course of business on ordinary terms); (c)
all non-contingent reimbursement or payment obligations with respect to Surety
Instruments; (d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses; (e) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to property
acquired by the Person (even though the rights and remedies of the seller or
bank under such agreement in the event of default are limited to repossession or
sale of such property); (f) all obligations with respect to Capital Leases; (g)
all indebtedness referred to in clauses (a) through (f) above secured by (or for
which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Lien upon or in property (including accounts
and contracts rights) owned by such
9
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness; and (h) all Guaranty Obligations in respect of
indebtedness or obligations of others of the kinds referred to in clauses (a)
through (f) above.
"Indemnified Liabilities" has the meaning specified in Section 10.5.
"Indemnified Person" has the meaning specified in Section 10.5.
"Independent Auditor" has the meaning specified in Section 6.1(a).
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other Governmental Authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors; undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Interest Expense" of the Borrower and its Subsidiaries for any period
means the aggregate amount of interest paid, accrued or scheduled to be paid or
accrued in respect of any Indebtedness (including the interest portion of
rentals under Capital Leases) and all but the principal component of payments in
respect of conditional sales, equipment trust or other title retention
agreements or under a Capital Lease paid, accrued or scheduled to be paid or
accrued by the Borrower and its Subsidiaries during such period, in each case
determined in accordance with GAAP on a consolidated basis and excluding
periodic maintenance, insurance, taxes and similar charges not properly
characterized as interest expense under GAAP.
"Interest Payment Date" means, as to any LIBOR Loan, the last day of each
Interest Period applicable to such Loan and, as to any Prime Rate Loan, the last
Business Day of each calendar quarter; provided, however, that if any Interest
Period for a LIBOR Loan exceeds three months, the date that falls three months
after the beginning of such Interest Period and after each Interest Payment Date
thereafter is also an Interest Payment Date.
"Interest Period" means, as to any LIBOR Loan, the period commencing on the
Borrowing Date on which such Loan is disbursed, or on the Conversion/
Continuation Date on which the Loan is converted into or continued as a LIBOR
Loan, and ending on the date one, two, three or six months thereafter as
selected by the Borrower in its Notice of Borrowing or Notice of
10
Conversion/Continuation, as the case may be; provided, however, that:
(a) if any Interest Period would otherwise end on a day that is not a
Business Day, that Interest Period shall be extended to the following Business
Day unless the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day;
(b) any Interest Period pertaining to a LIBOR Loan that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the end of
such Interest Period; and
(c) no Interest Period for any Loan shall extend beyond the Maturity
Date.
"IRS" means the Internal Revenue Service, and any Governmental Authority
succeeding to any of its principal functions under the Code.
"Issuing Bank" means Imperial Bank.
"Issuing Bank Fees" shall have the meaning assigned to such term in Section
2.9(b)(iii) hereof.
"Lending Office" means, as to any Bank, the office or as its "Lending
Office" or "Domestic Lending Office" or "Offshore Lending Office," as the case
may be, on Schedule 10.2 attached hereto, or such other office or offices as
such Bank may from time to time notify the Borrower and the Agent.
"Letter of Credit" means any letter of credit issued by the Issuing Bank
for the account of the Borrower in accordance with the terms of Section 2.1(b)
hereof.
"LIBOR Loan" means any Loan that bears interest based on the LIBOR Rate.
"LIBOR Rate" means, for any Interest Period with respect to a LIBOR Loan,
the rate per annum (rounded upward, if necessary, to the nearest 1/100 of 1%)
determined by the Agent to be equal to the Base LIBOR for such Loan for such
Interest Period divided by 1 minus the Reserve Requirement for such Loan for
such Interest Period.
"Lien" means any security interest, mortgage, deed of trust, pledge,
hypothecation, assignment, charge or deposit arrangement, encumbrance, lien
(statutory or other) or preferential arrangement
11
of any kind or nature whatsoever in respect of any property (including those
created by, arising under or evidenced by any conditional sale or other title
retention agreement, the interest of a lessor under a capital lease, any
financing lease having substantially the same economic effect as any of the
foregoing, or the filing of any financing statement naming the owner of the
asset to which such lien relates as debtor, under the Uniform Commercial Code or
any comparable law) and any contingent or other agreement to provide any of the
foregoing, but not including the interest of a lessor under an operating lease.
"Loan" means a Loan by a Bank to the Borrower under Section 2.3, and may be
a LIBOR Loan or a Prime Rate Loan (each, a "Type" of Loan).
"Loan Documents" means this Agreement, any Notes, the Fee Letter, the
Guaranty, the Security Agreement, the LOC Documents and all other documents
delivered to the Agent or any Bank in connection herewith.
"LOC Documents" means, with respect to any Letter of Credit, such Letter of
Credit, any amendments thereto, any documents delivered in connection therewith,
any application therefor, and any agreements, instruments, guarantees or other
documents (whether general in application or applicable only to such Letter of
Credit) governing or providing for (i) the rights and obligations of the parties
concerned or at risk or (ii) any collateral security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum amount
which is, or at any time thereafter may become, available to be drawn under
Letters of Credit then outstanding, assuming compliance with all requirements
for drawings referred to in such Letters of Credit plus (ii) the aggregate
amount of all drawings under Letters of Credit honored by the Issuing Bank but
not theretofore reimbursed by the Borrower.
"Majority Banks" means at any time Banks holding more than 50% of the then
aggregate unpaid principal amount of the Loans, or, if no such principal amount
is then outstanding, Banks having in excess of 50% of the Combined Commitments.
"Margin Stock" means "margin stock" as such term is defined in Regulation
G, T, U or X of the FRB.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties or condition
(financial or otherwise) of the Borrower and its Subsidiaries taken as a whole;
(b) a material impairment of the ability of the Borrower or any of its
Subsidiaries, including the Borrower, to perform under any Loan Document and to
avoid any Event of Default; or (c) a material adverse effect upon the
12
legality, validity, binding effect or enforceability against the Borrower or any
of its Subsidiaries of any Loan Document.
"Maturity Date" shall mean September 30, 2002.
"Model Documents" shall mean the forms of Management Agreement, Security
Agreement and Share Acquisition Agreement attached hereto as Annexes 1, 2 and 3,
respectively.
"Multiemployer Plan" means a "multiemployer plan", within the meaning of
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA Affiliate makes,
is making, or is obligated to make contributions or, during the preceding three
calendar years, has made, or been obligated to make, contributions.
"Net Worth" means, for any period, for the Borrower and its Subsidiaries on
a consolidated basis an amount equal to the excess of Total Assets over Total
Liabilities.
"Note" means a promissory note executed by the Borrower in favor of a Bank
at its request pursuant to Section 2.2(b) substantially in the form of Exhibit A
attached hereto and evidencing such Bank's Loans.
"Notice of Borrowing" means a notice in substantially the form of Exhibit E
attached hereto.
"Notice of Conversion/Continuation" means a notice in substantially the
form of Exhibit F attached hereto.
"Obligations" means all advances, debts, liabilities, obligations,
covenants and duties arising under any Loan Document, owing by the Borrower to
any Bank, the Agent, or any Indemnified Person, whether direct or indirect
(including those acquired by assignment), absolute or contingent, due or to
become due, now existing or hereafter arising.
"Operating Cash Flow" means, for any period, for the Borrower and its
Subsidiaries (i) net income (before extraordinary gains but after (1)
extraordinary losses and (2) for fiscal quarters ending on December 31, 1997,
March 31, 1998 and June 30, 1998 only, non-recurring merger expenses and
restructuring charges taken by the Borrower during any such fiscal quarter,
which expenses and charges shall not exceed $3,000,000 in aggregate) for such
period plus (ii) Interest Expense, income tax expense, depreciation and
amortization (all to the extent deducted in determining net income) for such
period, all determined on a consolidated basis in accordance with GAAP;
provided, however, that with respect to any fiscal quarter during which a
Permitted Acquisition has been consummated, Operating Cash Flow for such quarter
may be adjusted to reflect Operating Cash Flow applicable to such Permitted
Acquisition for the entire quarter based on its annual run-rate for such quarter
as shown
13
on the financial projections delivered to and approved by the Agent in
connection with such Permitted Acquisition under Section 6.12(a) hereof.
"Operating Lease" means any noncancellable lease of property (real,
personal or mixed) which does not constitute a Capital Lease.
"Operating Lease Rentals" means all rents and other amounts paid or accrued
by the Borrower and its Subsidiaries under and with respect to Operating Leases
during and for the relevant period, but excluding periodic maintenance,
insurance, taxes and similar charges not properly characterized as rent under
GAAP.
"Organization Documents" means, for any corporation, the certificate or
articles of incorporation, the bylaws, any certificate of determination or
instrument relating to the rights of preferred shareholders of such corporation,
any shareholder rights agreement, and all applicable resolutions of the board of
directors (or any committee thereof) of such corporation.
"Other Taxes" means any present or future stamp or documentary taxes or any
other excise or property taxes, charges or similar levies which arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Documents.
"Participant" has the meaning specified in Section 10.8(d).
"PBGC" means the Pension Benefit Guaranty Corporation, or any Governmental
Authority succeeding to any of its principal functions under ERISA.
"Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA)
subject to Title IV of ERISA which the Borrower sponsors, maintains, or to which
it makes, is making, or is obligated to make contributions, or in the case of a
multiple employer plan (as described in Section 4064(a) of ERISA) has made
contributions at any time during the immediately preceding five (5) plan years.
"Permitted Acquisitions" means Acquisitions by the Borrower or any of its
Subsidiaries of assets of a Person which are to be used by Borrower or any of
its Subsidiaries in Borrower's Business; provided, however, that (a) immediately
before and after giving effect to the consummation of each such Acquisition, no
Default has occurred and is continuing or will exist, (b) the Transactional
Documents relating to such Acquisition shall conform in all material respects to
the Model Documents, unless the Agent and the
14
Majority Banks otherwise confirm in writing and (c) the Borrower shall have
complied with the requirements of Sections 6.12(a) and 6.15 hereof.
"Permitted Capital Expenditures" means Capital Expenditures made or used by
the Borrower or any of its Subsidiaries in connection with the Borrower's
Business, provided that (a) immediately before and after giving effect to the
consummation of each such Capital Expenditure, no Default has occurred and is
continuing or will exist, (b) such Capital Expenditures in excess of $5,000,000
in the aggregate, computed on a cumulative consolidated basis for the Borrower
and the Subsidiaries, during any fiscal year of the Borrower shall have been
approved in writing by the Agent and the Majority Banks and (c) the Borrower
shall have complied with the requirements of Section 6.12(c) hereof.
"Permitted Capital Leases" means Capital Leases entered into by the
Borrower or any of its Subsidiaries in the ordinary course of business during
any fiscal year of the Borrower, provided that the aggregate amount of all
obligations created, incurred or assumed thereunder during such fiscal year does
not exceed $2,000,000, computed on a cumulative consolidated basis for the
Borrower and the Subsidiaries.
"Permitted Encumbrances" has the meaning specified in Section 7.1 hereof.
"Permitted Indebtedness" means:
(i) The Obligations of the Borrower and its Subsidiaries under
the Loan Documents;
(ii) Indebtedness of the Borrower and its Subsidiaries listed in
Schedule 1.1(b) and existing on the date of this Agreement;
(iii) Indebtedness of the Borrower and its Subsidiaries arising
from the endorsement of instruments for collection in the ordinary course of the
Borrower's or a Subsidiary's business;
(iv) Indebtedness of the Borrower and its Subsidiaries for trade
accounts payable, provided that (A) such accounts arise in the ordinary course
of business and (B) no material part of such account is more than ninety (90)
days past due (unless subject to a bona fide dispute and for which adequate
reserves have been established);
(v) (A) Permitted Subordinated Indebtedness of the Borrower, (B)
the Indebtedness of GMS Management evidenced by that certain promissory note,
dated July 23, 1997, in the principal amount of up to $6,229,174 (the "Fremont
Subordinated
15
Indebtedness"), made by GMS Management in favor of Fremont Dental Group, which
Indebtedness is subordinated to in right to payment to the Obligations hereunder
pursuant to that certain Intercreditor Agreement, dated as of July 23, 1997 (the
"Fremont Intercreditor Agreement"), among the Borrower, GMS Management, the
Agent and Fremont Dental Group and (C) the Guaranty Obligations of the Borrower
in respect of the Fremont Subordinated Indebtedness (the "Fremont Guaranty
Obligations");
(vi) Indebtedness of the Borrower and its Subsidiaries under
initial or subsequent refinancings of any Indebtedness permitted by clause (ii)
above, provided that (A) the principal amount of any such refinancing does not
exceed the principal amount of the Indebtedness being refinanced and (B) the
material terms and provisions of any such refinancing (including maturity,
redemption, prepayment, default and subordination provisions) are no less
favorable to the Banks than the Indebtedness being refinanced;
(vii) Indebtedness of the Borrower and its Subsidiaries under
purchase money financing incurred by the Borrower or any of its Subsidiaries to
finance the acquisition by such Person of fixtures or equipment; provided,
however, that in each case (A) such Indebtedness is incurred at the time of the
acquisition of such fixture or equipment, (B) such Indebtedness does not exceed
100% of the purchase price of such fixture or equipment so financed and (C) such
Indebtedness in the aggregate at any time outstanding during any fiscal year of
the Borrower, together with the Permitted Capital Leases, does not exceed
$2,000,000;
(viii) Guaranty Obligations of the Borrower in respect of
Permitted Indebtedness of its Subsidiaries; and
(ix) Indebtedness of the Borrower to any of its Subsidiaries,
Indebtedness of any of the Borrower's Subsidiaries to the Borrower or
Indebtedness of any of the Borrower's Subsidiaries to any the Borrower's other
Subsidiaries; provided, however, that (A) such Subsidiaries shall be Credit
Parties and (B) such Indebtedness shall be evidenced by promissory notes and
pledged to the Agent pursuant to the terms of the Security Agreement.
"Permitted Market Investments" means investments having a maturity of not
greater than 180 days from the date of acquisition thereof in (a) obligations
issued or unconditionally guaranteed by the United States or any agency thereof
and (b) certificates of deposit of any commercial bank organized under the laws
of the United States or any State thereof reasonably acceptable to the Agent.
"Permitted Subordinated Indebtedness" means unsecured Indebtedness of the
Borrower (and not any Subsidiary of the
16
Borrower) evidencing seller financing incurred in connection with a Permitted
Acquisition, which Indebtedness is subordinated to the Obligations upon
substantially the terms set forth on Exhibit H attached hereto or upon such
other terms as may be satisfactory to the Agent and the Majority Banks.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture or Governmental Authority.
"Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA)
which the Borrower sponsors or maintains or to which the Borrower makes, is
making, or is obligated to make contributions and includes any Pension Plan.
"Prime Rate" means, for any day, the rate of interest in effect for such
day as publicly announced from time to time by Imperial Bank in Los Angeles,
California, as its "prime rate." (The "prime rate" is a rate set by Imperial
Bank based upon various factors including Imperial Bank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans, which may be priced at, above, or below
such announced rate.) Any change in the prime rate announced by Imperial Bank
shall take effect at the opening of business on the day specified in the public
announcement of such change.
"Prime Rate Loan" means a Loan that bears interest based on the Prime Rate.
"Pro Rata Share" means, as to any Bank at any time, the percentage
equivalent (expressed as a decimal, rounded to the ninth decimal place) at such
time of such Bank's Commitment divided by the Combined Commitments of all Banks.
"Real Property Certificate" means a certificate substantially in the form
of Exhibit G attached hereto.
"Reference Bank" means Imperial Bank.
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder, other than any such event for which the
30-day notice requirement under ERISA has been waived in regulations issued by
the PBGC.
"Requirement of Law" means, as to any Person, any law (statutory or
common), treaty, rule or regulation or determination of an arbitrator or of a
Governmental Authority, in each case applicable to or binding upon the Person or
any of its property or to which the Person or any of its property is subject.
17
"Reserve Requirement" shall mean, for any Interest Period with respect to a
LIBOR Loan, the average maximum rate in effect at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any regulatory change with respect to (i) any category of liabilities
that includes deposits by reference to which the LIBOR Rate is to be determined
as provided in the definition of "LIBOR Rate" in this Article I or (ii) any
category of extensions of credit or other assets that includes LIBOR Loans.
"Responsible Officer" means a chief executive officer, a president or a
chief financial officer of the Borrower, or any other officer having
substantially the same authority and responsibility.
"Revolving Termination Date" means the earlier to occur
(a) September 30, 1999; and
(b) the date on which the Combined Commitments terminate in accordance
with the provisions of this Agreement.
"SEC" means the Securities and Exchange Commission, or any Governmental
Authority succeeding to any of its principal functions.
"Senior Leverage Ratio" means, as of the last day of any fiscal quarter of
the Borrower, the ratio of (i) the sum of (x) the aggregate principal amount of
Indebtedness (including the principal portion of rentals under Capital Leases
but excluding Permitted Subordinated Indebtedness) of the Borrower and its
Subsidiaries on a consolidated basis which matures more than one year from the
date of determination plus (y) the aggregate principal amount of all
Indebtedness (including the principal portion of rentals under Capital Leases
but excluding Permitted Subordinated Indebtedness) which is scheduled to be paid
by the Borrower and its Subsidiaries on a consolidated basis within one year
from the date of determination to (ii) the Operating Cash Flow for the fiscal
quarter ending on such date; provided, however, that Operating Cash Flow as of
each such date shall be multiplied by four (4), so as to represent the
four-quarter equivalent of Operating Cash Flow for such period.
"Solvent" means, when used with respect to any Person, that at the time of
determination:
18
(a) the fair value of its assets (both at fair valuation and at
present fair salable value) is in excess of the total amount of all of its debts
and liabilities, including contingent, subordinated, unmatured and unliquidated
liabilities; and
(b) it is then able to pay its debts as they become due; and
(c) it owns property having a value (both at fair valuation and at
present fair salable value) in excess of the total amount required to pay its
debts; and
(d) it has capital sufficient to carry on its business.
"Subsidiary" of a Person means any corporation, association, partnership,
limited liability company, joint venture or other business entity of which more
than 50% of the voting stock, membership interests or other equity interests (in
the case of Persons other than corporations), is owned or controlled directly or
indirectly by the Person, or one or more of the Subsidiaries of, the Person, or
a combination thereof. Unless the context otherwise clearly requires, references
herein to a "Subsidiary" refer to a Subsidiary of the Borrower. The Dental
Practices shall not be deemed to be Subsidiaries except as provided in Section
1.3 hereof.
"Surety Instruments" means all letters of credit (including standby and
commercial), banker's acceptances, bank guaranties, shipside bonds, surety bonds
and similar instruments.
"Taxes" means any and all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Bank and the Agent, such taxes (including income
taxes or franchise taxes) as are imposed on or measured by each Bank's net
income by the jurisdiction (or any politic subdivision thereof) under the laws
of which such Bank or the Agent, as the case may be, is organized or maintains a
lending office.
"Total Assets" means, for the Borrower and its Subsidiaries on a
consolidated basis, all property, whether real, personal, tangible, intangible
or otherwise, that, in accordance with GAAP, should be included in determining
total assets as shown on the assets side of a consolidated balance sheet.
"Total Leverage Ratio" means, as of the last day of any fiscal quarter of
the Borrower, the ratio of (i) the sum of (x) the aggregate principal amount of
Indebtedness (including the principal portion of rentals under Capital Leases
and Permitted Subordinated Indebtedness) of the Borrower and its Subsidiaries on
a consolidated basis which matures more than one year from the date of
determination plus (y) the aggregate principal amount of all
19
Indebtedness (including the principal portion of rentals under Capital Leases
and Permitted Subordinated Indebtedness) which is scheduled to be paid by the
Borrower and its Subsidiaries on a consolidated basis within one year from the
date of determination to (ii) the Operating Cash Flow for the fiscal quarter
ending on such date; provided, however, that Operating Cash Flow as of each such
date shall be multiplied by four (4), so as to represent the four-quarter
equivalent of Operating Cash Flow for such period.
"Total Liabilities" means, for the Borrower and its Subsidiaries on a
consolidated basis, all obligations that, in accordance with GAAP, should be
included in determining total liabilities as shown on the liabilities side of a
consolidated balance sheet.
"Transactional Documents" means the purchase or acquisition agreement, the
management agreement, the security agreement, the share acquisition agreement
and all other agreements and documents, including all exhibits thereto,
delivered in connection with a Permitted Acquisition.
"Type" has the meaning specified in the definition of "Loan."
"Unfunded Pension Liability" means the excess of a Plan's benefit
liabilities under Section 4001(a)(16) of ERISA, over the current value of that
Plan's assets, determined in accordance with the assumptions used for funding
the Pension Plan pursuant to Section 412 of the Code for the applicable plan
year.
"United States" and "U.S." each means the United States of America.
"Working Capital Loan" means a Loan of any Type made by a Bank to the
Borrower under Section 2.3 hereof the proceeds of which are used to meet the
working capital requirements of the Borrower.
1.2 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms.
(b) The words "hereof," "herein," "hereunder" and similar words refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and subsection, section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.
(c) The term "documents" includes any and all instruments, documents,
agreements, certificates, indentures, notices and other writings, however
evidenced. The term "including" is not limiting and means "including without
limitation." In the computation of periods of time from a
20
specified date to a later specified date, the word "from" means "from and
including'" the words "to" and "until" each mean "to but excluding," and the
word "through" means "to and including."
(d) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto
(including, in the case of this Agreement, all amendments and modifications
validly entered into pursuant to Section 10.1 hereof), but only to the extent
such amendments and other modifications to agreements other than this Agreement
and the other Loan Documents are not prohibited by the terms of any Loan
Document, and (ii) references to any statute or regulation are to be construed
as including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation.
(e) The captions and headings of this Agreement are for convenience of
reference only and shall not affect the interpretation of this Agreement.
(f) This Agreement and other Loan Documents may use several different
limitations, tests or measurements to regulate the same or similar matters. All
such limitations, tests and measurements are cumulative and shall each be
performed in accordance with their terms.
(g) This Agreement and the other Loan Documents are the result of
negotiations among and have been reviewed by counsel to the Agent, the Borrower
and the other parties, and are the products of all parties. Accordingly, they
shall not be construed against the Banks or the Agent merely because of the
Agent's or Banks, involvement in their preparation.
1.3 Accounting Principles. Unless the context otherwise clearly requires,
(a) all accounting terms not expressly defined herein shall be construed, and
all financial computations required under this Agreement shall be made, in
accordance with GAAP, consistently applied, (b) references herein to "fiscal
year" and "fiscal quarter" refer to such fiscal periods of the Borrower and (c)
references herein to "Subsidiary" in Sections 5.7, 6.1, 6.2 and 6.14 hereof
include Dental Practices.
ARTICLE II
THE CREDITS
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2.1 Amounts and Terms of Commitments.
(a) Revolving Loans. Each Bank severally agrees, on the terms and
conditions set forth herein, to make revolving loans to the Borrower (each such
loan, a "Loan") from time to time on any
21
Business Day during the period from the Closing Date to the Revolving
Termination Date, in an aggregate amount not to exceed at any time outstanding
the amount set forth on Schedule 2.1 attached hereto (such amount as the same
may be reduced under Section 2.5(a) or as a result of one or more assignments
under Section 10.8, or increased under Section 2.5(b), the Bank's "Commitment"
and all such Commitments, referred to herein, collectively, as the "Combined
Commitments"); provided, however, that, after giving effect to any Borrowing,
(a) the aggregate principal amount of all outstanding Loans shall not at any
time exceed the Combined Commitments and (b) the sum of (i) the aggregate
principal amount of all outstanding Working Capital Loans and (ii) the LOC
Obligations shall not exceed $4,000,000 at any time. Within the limits of each
Bank's Commitment, and subject to the other terms and conditions hereof, the
Borrower may borrow under this Section 2.1, prepay under Section 2.6 and
reborrow under this Section 2.1.
(b) Letter of Credit Subfacility.
(i) Issuance. Subject to the terms and conditions hereof and of
the LOC Documents, if any, and any other terms and conditions which the Issuing
Bank may reasonably require and in reliance upon the representations and
warranties set forth herein, the Issuing Bank agrees to issue, and each Bank
severally agrees to participate in the issuance by the Issuing Bank of, standby
Letters of Credit in Dollars from time to time from the Closing Date until the
date five (5) days prior to the Revolving Termination Date as the Borrower may
request, in a form acceptable to the Issuing Bank; provided, however, that the
sum of (1) the aggregate principal amount of all outstanding Working Capital
Loans and (2) the LOC Obligations shall not exceed $4,000,000 at any time. No
Letter of Credit shall (x) have an original expiry date more than one year from
the date of issuance or (y) as originally issued or as extended, have an expiry
date extending beyond the Revolving Termination Date. Each Letter of Credit
shall comply with the related LOC Documents. The issuance and expiry dates of
each Letter of Credit shall be a Business Day.
(ii) Notice and Reports. The request for the issuance of a Letter
of Credit shall be submitted by the Borrower to the Issuing Bank at least three
(3) Business Days prior to the requested date of issuance. The Issuing Bank
will, at least quarterly and more frequently upon request, disseminate to each
of the Banks a detailed report specifying the Letters of Credit which are then
issued and outstanding and any activity with respect thereto which may have
occurred since the date of the prior report, and including therein, among other
things, the beneficiary, the face amount and the expiry date, as well as any
payment or expirations which may have occurred.
22
(iii) Participation. Each Bank, upon issuance of a Letter of
Credit, shall be deemed to have purchased without recourse a Participation
Interest from the applicable Issuing Bank in such Letter of Credit and the
obligations arising thereunder and any collateral relating thereto, in each case
in an amount equal to its pro rata share of the obligations under such Letter of
Credit (based on the respective Pro Rata Shares of the Banks) and shall
absolutely, unconditionally and irrevocably assume and be obligated to pay to
the Issuing Bank and discharge when due, its pro rata share of the obligations
arising under such Letter of Credit. Without limiting the scope and nature of
each Bank's Participation Interest in any Letter of Credit, to the extent that
the Issuing Bank has not been reimbursed as required hereunder or under any such
Letter of Credit, each such Bank shall pay to the Issuing Bank its pro rata
share of such unreimbursed drawing in same day funds on the day of notification
by the Issuing Bank of an unreimbursed drawing pursuant to the provisions of
subsection (iv) below. The obligation of each Bank to so reimburse the Issuing
Bank shall be absolute and unconditional and shall not be affected by the
occurrence of a Default, an Event of Default or any other occurrence or event.
Any such reimbursement shall not relieve or otherwise impair the obligation of
the Borrower to reimburse the Issuing Bank under any Letter of Credit, together
with interest as hereinafter provided.
(iv) Reimbursement. In the event of any drawing under any Letter
of Credit, the Issuing Bank will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Bank that the Borrower intends to
otherwise reimburse the Issuing Bank for such drawing, the Borrower shall be
deemed to have requested that the Banks make a Loan in the amount of the drawing
as provided in subsection (v) below on the related Letter of Credit, the
proceeds of which will be used to satisfy the related reimbursement obligations.
The Borrower promises to reimburse the Issuing Bank on the day of drawing under
any Letter of Credit (either with the proceeds of a Loan obtained hereunder or
otherwise) in same day funds. If the Borrower shall fail to reimburse the
Issuing Bank as provided hereinabove, the unreimbursed amount of such drawing
shall bear interest at a per annum rate applicable to a Prime Rate Loan. The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of setoff,
counterclaim or defense to payment the Borrower may claim or have against the
Issuing Bank, the Agent, the Banks, the beneficiary of the Letter of Credit
drawn upon or any other Person, including without limitation any defense based
on any failure of the Borrower or any other Credit Party to receive
consideration or the legality, validity, regularity or unenforceability of the
Letter of Credit. The Issuing Bank will promptly notify the other Banks of the
amount of any unreimbursed drawing and each Bank shall promptly pay to the Agent
for the account of the Issuing Bank in Dollars and in immediately available
funds, the amount of such
23
Bank's pro rata share of such unreimbursed drawing. Such payment shall be made
on the day such notice is received by such Bank from the Issuing Bank if such
notice is received at or before 2:00 P.M. (Pacific Standard Time) otherwise such
payment shall be made at or before 12:00 Noon (Pacific Standard Time) on the
Business Day next succeeding the day such notice is received. If such Bank does
not pay such amount to the Issuing Bank in full upon such request, such Bank
shall, on demand, pay to the Agent for the account of the Issuing Bank interest
on the unpaid amount during the period from the date of such drawing until such
Bank pays such amount to the Issuing Bank in full at a rate per annum equal to,
if paid within two (2) Business Days of the date that such Bank is required to
make payments of such amount pursuant to the preceding sentence, the Federal
Funds Rate and thereafter at a rate equal to the Prime Rate. Each Bank's
obligation to make such payment to the Issuing Bank, and the right of the
Issuing Bank to receive the same, shall be absolute and unconditional, shall not
be affected by any circumstance whatsoever and without regard to the termination
of this Agreement or the Combined Commitments hereunder, the existence of a
Default or Event of Default or the acceleration of the obligations of the
Borrower hereunder and shall be made without any offset, abatement, withholding
or reduction whatsoever. Simultaneously with the making of each such payment by
a Bank to the Issuing Bank, such Bank shall, automatically and without any
further action on the part of the Issuing Bank or such Bank, acquire a
Participation Interest in an amount equal to such payment (excluding the portion
of such payment constituting interest owing to the Issuing Bank) in the related
unreimbursed drawing portion of the LOC Obligation and in the interest thereon
and in the related LOC Documents, and shall have a claim against the Borrower
with respect thereto.
(v) Repayment with Loans. On any day on which the Borrower shall
have requested, or been deemed to have requested, a Loan advance to reimburse a
drawing under a Letter of Credit, the Agent shall give notice to the Banks that
a Loan has been requested or deemed requested by the Borrower to be made in
connection with a drawing under a Letter of Credit, in which case a Loan advance
comprised of Prime Rate Loans (or LIBOR Loans to the extent the Borrower has
complied with the procedures of Section 2.3 hereof with respect thereto) shall
be immediately made to the Borrower by all Banks (notwithstanding any
termination of the Combined Commitments pursuant to Section 2.5(a)) pro rata
based on the respective Pro Rata Shares of the Banks (determined before giving
effect to any termination of the Combined Commitments pursuant to Section 9.2)
and the proceeds thereof shall be paid directly to the Issuing Bank for
application to the respective LOC Obligations. Each such Bank hereby irrevocably
agrees to make its pro rata share of each such Loan immediately upon any such
request or deemed request in the amount, in the manner and on the date specified
in the preceding sentence notwithstanding (i) the amount of such borrowing may
not comply with the minimum amount for advances of
24
Loans otherwise required hereunder, (ii) whether any conditions specified in
Section 4.3 are then satisfied, (iii) whether a Default or an Event of Default
then exists, (iv) failure for any such request or deemed request for Loan to be
made by the time otherwise required hereunder, (v) whether the date of such
Borrowing is a date on which Loans are otherwise permitted to be made hereunder
or (vi) any termination of the Combined Commitments relating thereto immediately
prior to or contemporaneously with such Borrowing. In the event that any Loan
cannot for any reason be made on the date otherwise required above (including,
without limitation, as a result of the commencement of a proceeding under the
Bankruptcy Code with respect to the Borrower or any Credit Party), then each
such Bank hereby agrees that it shall forthwith purchase (as of the date such
Borrowing would otherwise have occurred, but adjusted for any payments received
from the Borrower on or after such date and prior to such purchase) from the
Issuing Bank such Participation Interests in the outstanding LOC Obligations as
shall be necessary to cause each such Bank to share in such LOC Obligations
ratably (based upon the respective Pro Rata Shares of the Banks (determined
before giving effect to any termination of the Combined Commitments pursuant to
Section 2.5(a))), provided that at the time any purchase of Participation
Interests pursuant to this sentence is actually made, the purchasing Bank shall
be required to pay to the Issuing Bank, to the extent not paid to the Issuing
Bank by the Borrower in accordance with the terms of subsection (d) above,
interest on the principal amount of Participation Interests purchased for each
day from and including the day upon which such Borrowing would otherwise have
occurred to but excluding the date of payment for such Participation Interests,
at the rate equal to, if paid within two (2) Business Days of the date of the
Loan advance, the Federal Funds Rate, and thereafter at a rate equal to the
Prime Rate.
(vi) Designation of Credit Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Agreement, a Letter
of Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Credit Party other than the
Borrower, provided that notwithstanding such statement, the Borrower shall be
the actual account party for all purposes of this Agreement for such Letter of
Credit and such statement shall not affect the Borrower's reimbursement
obligations hereunder with respect to such Letter of Credit.
(vii) Renewal; Extension. The renewal or extension of any Letter
of Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
(viii) Uniform Customs and Practices. The Issuing Bank may have
the Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of
25
the date of issue by the International Chamber of Commerce (the "UCP"), in which
case the UCP may be incorporated therein and deemed in all respects to be a part
thereof.
(ix) Indemnification; Nature of Issuing Bank's Duties.
(A) In addition to its other obligations under this Section
2.1(b), the Borrower hereby agrees to pay, and protect, indemnify and
save each Bank harmless from and against, any and all claims, demands,
liabilities, damages, losses, costs, charges and expenses (including
reasonable attorneys' fees) that such Bank may incur or be subject to
as a consequence, direct or indirect, of (1) the issuance of any
Letter of Credit or (2) the failure of such Bank to honor a drawing
under a Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto
government or Governmental Authority (all such acts or omissions,
herein called "Government Acts").
(B) As between the Borrower and the Banks (including the
Issuing Bank), the Borrower shall assume all risks of the acts,
omissions or misuse of any Letter of Credit by the beneficiary
thereof. No Bank (including the Issuing Bank) shall be responsible:
(1) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with
the application for and issuance of any Letter of Credit, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (2) for the validity
or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or
benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (3) for errors,
omissions, interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or
not they be in cipher; (4) for any loss or delay in the transmission
or otherwise of any document required in order to make a drawing under
a Letter of Credit or of the proceeds thereof; and (5) for any
consequences arising from causes beyond the control of such Bank,
including, without limitation, any Government Acts. None of the above
shall affect, impair, or prevent the vesting of the Issuing Bank's
rights or powers hereunder.
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(C) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by any Bank (including the Issuing Bank), under or in
connection with any Letter of Credit or the related certificates, if
taken or omitted in good faith, shall not put such Bank under any
resulting liability to the Borrower or any other Credit Party. It is
the intention of the parties that this Agreement shall be construed
and applied to protect and indemnify each Bank (including the Issuing
Bank) against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by the
Borrower (on behalf of itself and each of the other Credit Parties),
including, without limitation, any and all Government Acts. No Bank
(including the Issuing Bank) shall, in any way, be liable for any
failure by such Bank or anyone else to pay any drawing under any
Letter of Credit as a result of any Government Acts or any other cause
beyond the control of such Bank.
(D) Nothing in this subsection (ix) is intended to limit the
reimbursement obligations of the Borrower contained in subsection (iv)
above. The obligations of the Borrower under this subsection (ix)
shall survive the termination of this Agreement. No act or omissions
of any current or prior beneficiary of a Letter of Credit shall in any
way affect or impair the rights of the Banks (including the Issuing
Bank) to enforce any right, power or benefit under this Agreement.
(E) Notwithstanding anything to the contrary contained in
this subsection (ix), the Borrower shall have no obligation to
indemnify any Bank (including the Issuing Bank) in respect of any
liability incurred by such Bank (1) arising solely out of the gross
negligence or willful misconduct of such Bank, as determined by a
court of competent jurisdiction, or (2) caused by such Bank's failure
to pay under any Letter of Credit after presentation to it of a
request strictly complying with the terms and conditions of such
Letter of Credit, as determined by a court of competent jurisdiction,
unless such payment is prohibited by any law, regulation, court order
or decree.
(x) Responsibility of Issuing Bank. It is expressly understood
and agreed that the obligations of the Issuing Bank hereunder to the Banks are
only those expressly set forth in this Agreement and that the Issuing Bank shall
be entitled to assume that the conditions precedent set forth in Section 4.3
hereof have been satisfied unless it shall have acquired actual
27
knowledge that any such condition precedent has not been satisfied; provided,
however, that nothing set forth in this Section 2.1(b) shall be deemed to
prejudice the right of any Bank to recover from the Issuing Bank any amounts
made available by such Bank to the Issuing Bank pursuant to this Section 2.1(b)
in the event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit constituted gross negligence or
willful misconduct on the part of the Issuing Bank.
(xi) Conflict with LOC Documents. In the event of any conflict
between this Agreement and any LOC Document (including any letter of credit
application), this Agreement shall control.
2.2 Loan Accounts.
(a) The Loans made by each Bank shall be evidenced by one or more loan
accounts or records maintained by such Bank in the ordinary course of business.
The loan accounts or records maintained by the Agent and each Bank shall be
conclusive absent manifest error of the amount of the Loans made by the Banks to
the Borrower and the interest and payments thereon. Any failure so to record or
any error in doing so shall not, however, limit or otherwise affect the
obligation of the Borrower hereunder to pay any amount owing with respect to the
Loans.
(b) Upon the request of any Bank made through the Agent, the Loans
made by such Bank may be evidenced by one or more Notes, instead of loan
accounts. Each such Bank shall endorse on the schedules annexed to its Note the
date, amount and maturity of each Loan made by it and the amount of each payment
of principal made by the Borrower with respect thereto. Each such Bank is
irrevocably authorized by the Borrower to endorse its Note and each Bank's
record shall be conclusive absent manifest error; provided, however, that the
failure of a Bank to make, or an error in making, a notation thereon with
respect to any Loan shall not limit or otherwise affect the obligations of the
Borrower hereunder or under any such Note to such Bank.
2.3 Procedure for Borrowing.
(a) Each Borrowing shall be made upon the Borrower's irrevocable
telephonic notice (such notice to be immediately confirmed in writing) delivered
to the Agent in the form of a Notice of Borrowing (which notice must be received
by the Agent prior to 9:00 a.m. (Los Angeles time) (i) three (3) Business Days
prior to the requested Borrowing Date, in the case of LIBOR Loans, and (ii) one
(1) Business Day prior to the requested Borrowing Date, in the case of Prime
Rate Loans, specifying:
(A) the amount of the Borrowing, which shall be (1) in the case
of a Prime Rate Loan, in an aggregate minimum amount of $100,000 or any multiple
of $100,000 in excess thereof
28
and (2) in the case of a LIBOR Loan, in an aggregate minimum amount of
$1,000,000 or any multiple of $500,000 in excess thereof;
(B) the requested Borrowing Date, which shall be a Business Day;
(C) the Type of Loans comprising the Borrowing; and
(D) with respect to the LIBOR Loans only, the duration of the
Interest Period applicable to such Loans included in such notice. If the Notice
of Borrowing fails to specify the duration of the Interest Period for any
Borrowing comprised of LIBOR Loans, such Interest Period shall be three months.
(b) The Agent will promptly notify each Bank of receipt of any Notice
of Borrowing and of the amount of such Bank's Pro Rata Share of that Borrowing.
(c) Each Bank will make the amount of its Pro Rata Share of each
Borrowing available to the Agent for the account of the Borrower at the Agent's
Payment Office by 12:00 noon (Los Angeles time) on the Borrowing Date requested
by the Borrower in funds immediately available to the Agent. The proceeds of all
such Loans will then be made available to the Borrower or the Borrower's
designee by the Agent by wire transfer in accordance with written instructions
provided to the Agent by the Borrower in like funds as received by the Agent.
(d) After giving effect to any Borrowing, there may not be more than 3
different Interest Periods in effect in respect of all LIBOR Loans then
outstanding.
2.4 Conversion and Continuation Elections for Borrowings.
(a) The Borrower may, upon irrevocable telephonic notice (such notice
to be immediately confirmed in writing), to the Agent in accordance with Section
2.4(b) elect, as of any Business Day, in the case of Prime Rate Loans, or as of
the last day of the applicable Interest Period, in the case of LIBOR Loans, to
convert any such Loans (or any part thereof in an amount not less than
$1,000,000, or that is in an integral multiple of $500,000 in excess thereof);
provided, however, that if at any time the aggregate amount of LIBOR Loans in
respect of any Borrowing is reduced, by payment, prepayment, or conversion of
part thereof to be less than $1,000,000, such LIBOR Loans shall automatically
convert into Prime Rate Loans, and on and after such date the right of the
Borrower to continue such Loans as, and convert such Loans into, LIBOR Loans
shall terminate.
(b) The Borrower shall deliver a Notice of Conversion/Continuation to
be received by the Agent not later than
29
9:00 a.m. (Los Angeles time) at least (i) three (3) Business Days in advance of
the Conversion/Continuation Date, if the Loans are to be converted into or
continued as LIBOR Loans; and (ii) one (1) Business Day in advance of the
Conversion/Continuation Date, if the Loans are to be converted into Prime Rate
Loans, specifying:
(A) the proposed Conversion/Continuation Date;
(B) the aggregate amount of Loans to be converted or continued;
(C) the Type of Loans resulting from the proposed conversion or
continuation; and
(D) other than in the case of conversions into Prime Rate Loans,
the duration of the requested Interest Period.
(c) If upon the expiration of any Interest Period applicable to LIBOR
Loans, the Borrower has failed to select timely a new Interest Period to be
applicable to such LIBOR Loans, or if any Default or Event of Default then
exists, the Borrower shall be deemed to have elected to convert such LIBOR Loans
into Prime Rate Loans effective as of the expiration date of such Interest
Period.
(d) The Agent will promptly notify each Bank of its receipt of a
Notice of Conversion/Continuation, or, if no timely notice is provided by the
Borrower, the Agent will promptly notify each Bank and the Borrower of the
details of any automatic conversion. All conversions and continuation shall be
made ratably according to the respective outstanding principal amounts of the
Loans with respect to which the notice was given held by each Bank.
(e) Unless the Majority Banks otherwise agree, during the existence of
a Default or Event of Default, the Borrower may not elect to have a Loan be made
as or converted into or continued as a LIBOR Loan.
(f) After giving effect to any conversion or continuation of Loans,
there may not be more than three different Interest Periods in effect in respect
of all LIBOR Loans then outstanding.
2.5 Voluntary Termination, Reduction of Combined Commitments; Increase in
Combined Commitments. (a) The Borrower may, upon not less than five (5) Business
Days' prior notice to the Agent, terminate the Combined Commitments, or
permanently reduce the Combined Commitments by an aggregate minimum amount of
$1,000,000 or any multiple of $500,000 in excess thereof, unless, after giving
effect thereto and to any prepayments of Loans made on the effective date
thereof, the then outstanding principal amount of the Loans would exceed the
amount of the Combined Commitments then in effect. Once reduced in accordance
with this Section
30
2.5(a), the Combined Commitments may not be increased. Any reduction of the
Combined Commitments shall be applied to each Bank according to its Pro Rata
Share. All accrued unused commitment fees due and owing, pursuant to Section
2.9(b) hereof, to, but not including the effective date of any reduction or
termination of Combined Commitments, shall be paid on the effective date of such
reduction or termination.
(b) Increase in Combined Commitments. The Borrower shall have the
right upon at least fifteen (15) Business Days' prior written notice to the
Agent to increase the Combined Commitments by up to $5,000,000, in a single
increase, at any time after the Closing Date, subject, however, in any such
case, to satisfaction of the following conditions precedent:
(i) no Default or Event of Default has occurred and is continuing
on the date on which the Combined Commitments increase is to become
effective;
(ii) the representations and warranties set forth in Article V of
this Agreement shall be true and correct in all respects on and as of the
date on which the Combined Commitments increase is to become effective;
(iii) on or before the date on which the Combined Commitments
increase is to become effective, the Agent shall have received, for its own
account, the fees and expenses required by the Fee Letter; and
(iv) such requested Combined Commitments increase shall be
effective on such date only to the extent that, on or before such date, the
Agent shall have received evidence satisfactory to the Agent that the
aggregate amount of net cash proceeds received by the Borrower from an
equity offering of the Borrower exceeds $20,000,000.
2.6 Optional Prepayments. (a) Subject to Section 3.4, the Borrower may, at
any time or from time to time, upon not less than three (3) Business Days'
irrevocable notice to the Agent, ratably prepay Loans in whole or in part, in
minimum amounts of $1,000,000 or any multiple of $500,000 in excess thereof.
Such notice of prepayment shall specify the date and amount of such prepayment
and the Type(s) of Loans to be prepaid. The Agent will promptly notify each Bank
of its receipt of any such notice, and of such Bank's Pro Rata Share of such
prepayment. If such notice is given by the Borrower, the Borrower shall make
such prepayment and the payment amount specified in such notice shall be due and
payable on the date specified therein, together with, in the case of LIBOR Loans
only, accrued interest to each such date on the amount prepaid and any amounts
required pursuant to Section 3.4.
31
2.7 Repayment. The Borrower shall repay to the Banks the aggregate
principal amount of Loans outstanding on the Revolving Termination Date in 12
equal, consecutive quarterly installments commencing ninety days after the
Revolving Termination Date and ending on the Maturity Date; provided, however,
that the last such installment shall be in the amount necessary to pay in full
the unpaid principal amount of the Loans.
2.8 Interest.
(a) Each Loan shall bear interest on the outstanding principal amount
thereof from the applicable Borrowing Date at a rate per annum equal to the
LIBOR Rate or the Prime Rate, as the case may be (and subject to the Borrower's
right to convert to other Types of Loans under Section 2.4), plus the Applicable
Margin.
(b) Interest on each Loan shall be paid in arrears on each Interest
Payment Date. Interest shall also be paid on the date of conversion to another
Type of Loan, on the date of any prepayment for the portion of the Loans so
prepaid and upon payment (including prepayment) in full thereof and, during the
existence of any Event of Default, interest shall be paid on demand of the Agent
at the request or with the consent of the Majority Banks.
(c) Notwithstanding Section (a) of this Section, while any Event of
Default exists or after acceleration, the Borrower shall pay interest (after as
well as before entry of judgment thereon to the extent permitted by law) on the
principal amount of all outstanding Obligations, at a rate per annum which is
determined by adding 2% per annum, to the Applicable Margin then in effect for
such Loans; provided, however, that, on and after the expiration of any Interest
Period applicable to any LIBOR Loan outstanding on the date of occurrence of
such Event of Default or acceleration, the principal amount of such Loan shall,
during the continuation of such Event of Default or after acceleration, bear
interest at a rate per annum equal to the Prime Rate, plus Applicable Margin
plus 2%.
(d) Anything herein to the contrary notwithstanding, the obligations
of the Borrower to any Bank hereunder shall be subject to the limitation that
payments of interest shall not be required for any period for which interest is
computed hereunder, to the extent (but only to the extent) that contracting for
or receiving such payment by such Bank would be contrary to the provisions of
any law applicable to such Bank limiting the highest rate of interest that may
be lawfully contracted for, charged or received by such Bank, and in such event
the Borrower shall pay such Bank interest at the highest rate permitted by
applicable law.
32
2.9 Fees.
(a) Agency Fees. The Borrower shall pay the commitment fee to the
Agent for the Agent's own account, as required by the letter agreement between
the Borrower and the Agent dated December 5, 1997 (the "Fee Letter").
(b) Unused Commitment Fees. The Borrower shall pay to the Agent, for
the period from and including the Closing Date to the Revolving Termination
Date, for the account of each Bank an unused-commitment fee at the rate of 0.50%
per annum on the average daily amount by which the Combined Commitments exceeds
the aggregate amount of all Loans outstanding from time to time; provided,
however, that in the event the Total Leverage Ratio of the Borrower falls below
2.75 to 1 at the end of any fiscal quarter, as reflected in the applicable
Compliance Certificate, the unused-commitment fee shall decrease to 0.375% per
annum, effective from and including the date required by Section 6.2(b) hereof
if the Agent receives such Compliance Certificate on or before such date, to but
excluding the next date of delivery of the Compliance Certificate required by
Section 6.2(b) hereof. Such commitment fee shall be payable in arrears on the
last Business Day of each calendar quarter and on the Revolving Termination
Date.
(c) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee. In consideration of
the issuance of standby Letters of Credit hereunder, the Borrower promises to
pay to the Agent for the account of each Bank a fee (the "Standby Letter of
Credit Fee") on such Bank's Pro Rata Share of the initial maximum amount
available to be drawn under each such standby Letter of Credit computed at a per
annum rate for each day from the date of issuance to the date of expiration
equal to the Applicable Margin then in effect for LIBOR Loans. The Standby
Letter of Credit Fee will be payable quarterly in advance on the date of
issuance and the last Business Day of each March, June, September and December
for the immediately succeeding quarter.
(ii) Issuing Bank Fees. In addition to the Standby Letter of
Credit Fee payable pursuant to clause (i) above, the Borrower promises to pay to
the Issuing Bank for its own account without sharing by the other Banks (A) a
standby letter of credit fronting fee equal to 0.125% on the initial maximum
amount available to be drawn under each such standby Letter of Credit (such fee
to be payable quarterly in advance on the date of issuance and the last Business
Day of each March, June, September and December for the immediately succeeding
quarter) and (B) the customary charges from time to time of the Issuing Bank
with respect to the issuance, amendment, transfer, administration, cancellation
and conversion of, and drawings under, such Letters of Credit (collectively, the
"Issuing Bank Fees").
33
2.10 Computation of Fees and Interest.
(a) All computations of fees and interest shall be made on the basis
of a 360-day year and actual days elapsed (which results in more interest being
paid than if computed on the basis of a 365-day year). Interest and fees shall
accrue during each period during which interest or such fees are computed from
the first day thereof to the last day thereof.
(b) Each determination of an interest rate by the Agent shall be
conclusive and binding on the Borrower and the Banks in the absence of manifest
error.
2.11 Payments by the Borrower.
(a) All payments to be made by the Borrower shall be made without
set-off, recoupment or counterclaim. Except as otherwise expressly provided
herein, all payments by the Borrower shall be made to the Agent for the account
of the Banks to the Agent's account no. 00-000-000, regarding: Gentle Dental
Service Corporation, ABA No. 000000000, or at such other account as the Agent
may from time to time designate by notice to the Borrower, and shall be made in
dollars and in immediately available funds, no later than 12:00 noon (Los
Angeles time) on the date specified herein. The Agent will promptly distribute
to each Bank its Pro Rata Share (or other applicable share as expressly provided
herein) of such payment in like funds as received. Any payment received by the
Agent later than 12:00 noon (Los Angeles time) shall be deemed to have been
received on the following Business Day and any applicable interest or fee shall
continue to accrue.
(b) Subject to the provisions set forth in the definition of "Interest
Period" herein, whenever any payment is due on a day other than a Business Day,
such payment shall be made on the following Business Day, and such extension of
time shall in such case be included in the computation of interest or fees, as
the case may be.
(c) Unless the Agent receives notice from the Borrower prior to the
date on which any payment is due to the Banks that the Borrower will not make
such payment in full as and when required, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date in immediately
available funds and the Agent may (but shall not be so required), in reliance
upon such assumption, distribute to each Bank on such due date an amount equal
to the amount then due such Bank. If and to the extent the Borrower has not made
such payment in full to the Agent, each Bank, shall repay to the Agent on demand
such amount distributed to such Bank, together with interest thereon at the
Federal Funds Rate for each day from the date such amount is distributed to such
Bank until the date repaid.
34
2.12 Payments by the Banks to the Agent.
(a) Unless the Agent receives notice from a Bank on or prior to the
Closing Date or, with respect to any Borrowing after the Closing Date, at least
one Business Day prior to the date of such Borrowing, that such Bank will not
make available as and when required hereunder to the Agent for the account of
the Borrower the amount of that Bank's Pro Rata Share of the Borrowing, the
Agent may assume that each Bank has made such amount available to the Agent in
immediately available funds on the Borrowing Date and the Agent may (but shall
not be so required), in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If and to the extent any Bank
shall not have made its full amount available to the Agent in immediately
available funds and the Agent in such circumstances has made available to the
Borrower such amount, such Bank and the Borrower severally agree to repay to the
Agent forthwith on demand such corresponding amount, together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, (i) in the case of
the Borrower, at a rate per annum equal to the interest rate applicable at the
time to the Loans comprising such Borrowing and (ii) in the case of such Bank,
at the Federal Funds Rate for each day during such period. A notice of the Agent
submitted to any Bank and the Borrower with respect to amounts owing under this
Section 2.12(a) shall be conclusive, absent manifest error. If such Bank shall
repay to the Agent such corresponding amount, such payment so repaid shall
constitute such Bank's Loan as part of such Borrowing for all purposes of this
Agreement.
(b) The failure of any Bank to make any Loan on any Borrowing Date
shall not relieve any other Bank of any obligation hereunder to make a Loan on
such Borrowing Date, but no Bank shall be responsible for the failure of any
other Bank to make the Loan to be made by such other Bank on any Borrowing Date.
The Borrower reserves the right to seek compensation from any Bank wrongfully
failing to make a Loan on a Borrowing Date for any costs, losses and expenses
incurred by the Borrower resulting from such failure.
2.13 Sharing of Payments, Etc. If, other than as expressly provided
elsewhere herein, any Bank shall obtain on account of the Loans made by it any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) in excess of its Pro Rata Share, such Bank shall
immediately (a) notify the Agent of such fact, and (b) purchase from the other
Banks such participations in the Loans made by them as shall be necessary to
cause such purchasing Bank to share the excess payment pro rata with each of
them; provided, however, that if all or any portion of such excess payment is
thereafter recovered from the purchasing Bank, such purchase shall to that
extent be rescinded and each other Bank shall repay to the purchasing Bank the
purchase price paid therefor, together with an amount equal to such paying
35
Bank's ratable share (according to the proportion of (i) the amount of such
paying Bank's required repayment to (ii) the total amount so recovered from the
purchasing Bank) of any interest or other amount paid or payable by the
purchasing Bank in respect of the total amount so recovered. The Borrower agrees
that any Bank so purchasing a participation from another Bank may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off, but subject to Section 10.10) with respect to such
participation as fully as if such Bank were the direct creditor of the Borrower
in the amount of such participation. The Agent will keep records (which shall be
conclusive and binding in the absence of manifest error) of participations
purchased under this Section and will in each case notify the Banks following
any such purchases or repayments.
2.14 Security Documents. The Obligations shall be (a) unconditionally
guaranteed as set forth in an Amended and Restated Guaranty to be executed and
delivered by each of the Subsidiaries of the Borrower (as amended, modified or
supplemented from time to time, the "Guaranty") in the form of Exhibit B
attached hereto and (b) secured by an Amended and Restated Security Agreement to
be executed and delivered by each of the Borrower and by each of the
Subsidiaries of the Borrower (as amended, modified or supplemented from time to
time, the "Security Agreement") in the form of Exhibit C attached hereto.
ARTICLE III
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.1 Taxes. (a) Any and all payments by the Borrower to each Bank or the
Agent under this Agreement and any other Loan Document shall be made free and
clear of, and without deduction or withholding for any Taxes. In addition, the
Borrower shall pay all Other Taxes.
(b) The Borrower agrees to indemnify and hold harmless each Bank and
the Agent for the full amount of Taxes or Other Taxes (including any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section)
paid by the Bank or the Agent and any liability (including penalties, interest,
additions to tax and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Payment under this indemnification shall be made within thirty (30) days after
the date the Bank or the Agent makes written demand therefor.
(c) If the Borrower shall be required by law to deduct or withhold any
Taxes or Other Taxes from or in respect of any sum payable hereunder to any Bank
or the Agent, then:
36
(i) the sum payable shall be increased as necessary so that after
making all required deductions and withholdings (including deductions and
withholdings applicable to additional sums payable under this Section) such Bank
or the Agent, as the case may be, receives an amount equal to the sum it would
have received had no such deductions or withholdings been made;
(ii) the Borrower shall make such deductions and withholdings;
(iii) the Borrower shall pay the full amount deducted or withheld
to the relevant taxing authority or other authority in accordance with
applicable law; and
(iv) the Borrower shall also pay to each Bank or the Agent for
the account of such Bank at the time interest is paid, all additional amounts
which the respective Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such Taxes or Other Taxes had not been imposed.
(d) Within thirty (30) days after the date of any payment by the
Borrower of Taxes or Other Taxes, the Borrower shall furnish the Agent the
original or a certified copy of a receipt evidencing payment thereof, or other
evidence of payment satisfactory to the Agent.
(e) If the Borrower is required to pay additional amounts to any Bank
or the Agent pursuant to subsection (c) of this Section, then such Bank shall
use reasonable efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its Lending Office so as to eliminate any such
additional payment by the Borrower which may thereafter accrue, if such change
in the judgment of such Bank is not otherwise disadvantageous to such Bank.
3.2 Illegality.
(a) If any Bank determines that the introduction of any Requirement of
Law, or any change in any Requirement of Law, or in the interpretation or
administration of any Requirement of Law, has made it unlawful, or that any
central bank or other Governmental Authority has asserted that it is unlawful,
for any Bank or its applicable Lending Office to make LIBOR Loans, then, on
notice thereof by the Bank to the Borrower through the Agent, any obligation of
that Bank to make LIBOR Loans shall be suspended until the Bank notifies the
Agent and the Borrower that the circumstances giving rise to such determination
no longer exist.
(b) If a Bank determines that it is unlawful to maintain any LIBOR
Loan, the Borrower shall, upon its receipt of notice of such fact and demand
from such Bank (with a copy to the Agent), prepay in full such LIBOR Loans of
that Bank then
37
outstanding, together with interest accrued thereon and amounts required under
Section 3.4, either on the last day of the Interest Period thereof, if the Bank
may lawfully continue to maintain such LIBOR Loans to such day, or immediately,
if the Bank may not lawfully continue to maintain such LIBOR Loan. If the
Borrower is required to so prepay any LIBOR Loan, then concurrently with such
prepayment, the Borrower shall borrow from the affected Bank, in the amount of
such repayment, a Prime Rate Loan.
(c) If the obligation of any Bank to make or maintain LIBOR Loans has
been so terminated or suspended, the Borrower may elect, by giving notice to the
Bank through the Agent that all Loans which would otherwise be made by the Bank
as LIBOR Loans shall be instead Prime Rate Committee Loans.
(d) Before giving any notice to the Agent under this Section, the
affected Bank shall designate a different Lending Office with respect to its
LIBOR Loans if such designation will avoid the need for giving such notice or
making such demand and will not, in the judgment of the Bank, be illegal or
otherwise disadvantageous to the Bank.
3.3 Increased Costs and Reduction of Return.
(a) If any Bank determines that, due to either (i) the introduction of
or any change in or in the interpretation of any law or regulation or (ii) the
compliance by that Bank with any guideline or request from any central bank or
other Governmental Authority (whether or not having the force of law), there
shall be any increase in the cost to such Bank of agreeing to make or making,
funding or maintaining any LIBOR Loans then, in any such case, such Bank shall
notify the Borrower of any such event of which it has knowledge and shall
deliver to the Agent and the Borrower a written statement specifying in
reasonable detail the losses or expenses sustained or incurred. The Borrower
shall within ten (10) days following demand therefor, pay the amount sufficient
to compensate such Bank for such increased costs.
(b) If any Bank shall have determined that (i) the introduction of any
Capital Adequacy Regulation, (ii) any change in any Capital Adequacy Regulation,
(iii) any change in the interpretation or administration of any Capital Adequacy
Regulation by any central bank or other Governmental Authority charged with the
interpretation or administration thereof, or (iv) compliance by the Bank (or its
Lending Office) or any corporation controlling the Bank with any Capital
Adequacy Regulation, affects or would affect the amount of capital required or
expected to be maintained by the Bank or any corporation controlling the Bank
and (taking into consideration such Bank's or such corporation's policies with
respect to capital adequacy and such Bank's desired return on capital)
determines that the amount of such capital is increased as a consequence of its
Commitment, loans, credits or obligations
38
under this Agreement; then, in any such case, such Bank shall notify the
Borrower of any such event of which it has knowledge and shall deliver to the
Agent and the Borrower a written statement specifying in reasonable detail the
losses or expense sustained or incurred. The Borrower shall within ten (10) days
following demand therefor, pay the amount sufficient to compensate such Bank for
such increased costs.
3.4 Funding Losses. The Borrower shall reimburse each Bank and hold each
Bank harmless from any loss or expense which the Bank may sustain or incur as a
consequence of:
(a) the failure of the Borrower to make on a timely basis any payment
of principal of any LIBOR Loan;
(b) the failure of the Borrower to borrow, continue or convert a Loan
after the Borrower has given (or is deemed to have given) a Notice of Borrowing
or a Notice of Conversion/Continuation;
(c) the failure of the Borrower to make any prepayment of any Loan in
accordance with any notice delivered under Section 2.6;
(d) the prepayment (including pursuant to Section 2.6 or 3.7) or other
payment (including after acceleration thereof) of any LIBOR Loan on a day that
is not the last day of the relevant Interest Period; or
(e) the automatic conversion under Section 2.4(a) of any LIBOR Loan to
a Prime Rate Loan on a day that is not the last day of the relevant Interest
Period; including any such loss or expense arising from the liquidation or
reemployment of funds obtained by it to maintain its LIBOR Loans or from fees
payable to terminate the deposits from which such funds were obtained.
For purposes of calculating amounts payable by the Borrower to the Banks under
this Section and under subsection 3.3(a), each LIBOR Loan made by a Bank (and
each related reserve, special deposit or similar requirement) shall be
conclusively deemed to have been funded at the LIBOR Rate for such LIBOR Loan by
a matching deposit or other borrowing in the interbank eurodollar market for a
comparable amount and for a comparable period, whether or not such LIBOR Loan is
in fact so funded. Each Bank that claims compensation under this section shall
deliver to the Agent and the Borrower a written statement specifying in
reasonable detail any amounts due to the Banks as provided above.
3.5 Inability to Determine Rates. If the Agent determines that for any
reason adequate and reasonable means do not exist for determining the LIBOR Rate
for any requested Interest Period with respect to a proposed LIBOR Loan, or that
the LIBOR Rate for any
39
requested Interest Period with respect to a proposed LIBOR Loan does not
adequately and fairly reflect the cost to the Banks of funding such Loan, the
Agent will promptly so notify the Borrower and each Bank. Thereafter, the
obligation of the Banks to make or maintain LIBOR Loans, hereunder shall be
suspended until the Agent revokes such notice in writing. Upon receipt of such
notice, the Borrower may revoke any Notice of Borrowing or Notice of
Conversion/Continuation then submitted by it. If the Borrower does not revoke
such Notice, the Banks shall make, convert or continue the Loans, as proposed by
the Borrower, in the amount specified in the applicable notice submitted by the
Borrower, but such Loans shall be made, converted or continued as Prime Rate
Loans instead of LIBOR Loans.
3.6 Certificates of Banks. Any Bank claiming reimbursement or compensation
under this Article III shall deliver to the Borrower (with a copy to the Agent)
a certificate setting forth in reasonable detail the amount payable to the Bank
hereunder and such certificate shall be conclusive and binding on the Borrower
in the absence of manifest error.
3.7 Survival. The agreements and obligations of the Borrower in this
Article III shall survive the payment of all other Obligations.
ARTICLE IV
CONDITIONS PRECEDENT
--------------------
4.1 Condition of Initial Loans or Letter of Credit. The obligation of each
Bank to make its initial Loans or the Issuing Bank to issue the initial Letter
of Credit, whichever shall occur first, hereunder is subject to the condition
that the Agent has received on or before the Closing Date all of the following,
in form and substance satisfactory to the Agent and each Bank, and in sufficient
copies for each Bank:
(a) Credit Agreement. This Agreement executed by the Borrower;
(b) Notes. If requested by any Bank, a Note in favor of such Bank
executed by the Borrower;
(c) Security Documents. The Guaranty and the Security Agreement
executed by each party thereto;
(d) Resolutions; Incumbency.
(i) Copies of the resolutions of the board of directors of the
Borrower and its Subsidiaries parties to any Loan Document authorizing the
transactions contemplated hereby or thereby, certified as of the Closing Date by
the Secretary or an Assistant Secretary of such party; and
40
(ii) A certificate of the Secretary or Assistant Secretary of
each of the Borrower and its Subsidiaries parties to any Loan Document
certifying the names and true signatures of the officers of such party
authorized to execute, deliver and perform, as applicable, this Agreement and
all other Loan Documents to be delivered by such party hereunder;
(e) Organization Documents: Good Standing. Each of the following
documents:
(i) the articles or certificate of incorporation and the bylaws
of each of the Borrower and its Subsidiaries parties to any Loan Document as in
effect on the Closing Date, certified by the Secretary or Assistant Secretary of
such party as of the Closing Date; and
(ii) a good standing and tax good standing certificate for each
of the Borrower and its Subsidiaries parties to any Loan Document from the
Secretary of State (or similar, applicable Governmental Authority) of such
party's state of incorporation and each state where such party is qualified to
do business as a foreign corporation as of a recent date;
(f) Payment of Fees. Evidence of payment to the Agent by the Borrower
of all accrued and unpaid fees, costs and expenses to the extent then due and
payable on the Closing Date, together with Attorney Costs of Imperial Bank and
any such costs, fees and expenses arising under or referenced in Section 2.9(a)
and Section 10.4;
(g) Certificate. A certificate signed by a Responsible Officer, dated
as of the Closing Date:
(i) stating that the representations and warranties contained in
Article V are true and correct on and as of such date, as though made on and as
of such date;
(ii) stating that no Default or Event of Default exists; and
(iii) stating that there has occurred since September 30, 1997,
no event or circumstance that has resulted or could reasonably be expected to
result in a Material Adverse Effect;
(h) Perfection of Liens and Security Interests. The Banks shall have
obtained assurance satisfactory to Majority Banks that the security interests
created by the Security Agreement in the property specified therein shall have
been duly perfected under applicable law and shall be of first priority, subject
only to Permitted Encumbrances, including, without limitation:
41
(i) delivery of pre-filing UCC search reports;
(ii) evidence of pledge of Pledged Equity (as such term is
defined in the Security Agreement) in favor of the Agent;
(iii) evidence of pledge of Pledged Debt (as such term is defined
in the Security Agreement) in favor of the Agent;
(iv) evidence of assignment by the Borrower of all management
agreements between the Borrower and its Subsidiaries in favor of the Agent;
(v) filing of UCC-1 financing statements made by the Credit
Parties in favor of the Agent; and
(vi) filing of UCC-2 amendments made by the Credit Parties in
favor of the Agent to change the name of the Borrower hereunder; and
(vii) post-filing UCC search reports;
(i) Legal Opinion. An opinion of XxXxxxxxx, Will & Xxxxx, counsel to
each of the Borrower and the Subsidiaries parties to any Loan Document, and
addressed to the Agent and the Banks, substantially in the form of Exhibit I
attached hereto;
(j) No Existing Default. No Event of Default or event which, upon the
lapse of time or the giving of notice or both, would constitute an Event of
Default shall exist on the Closing Date or after giving effect to the
transactions contemplated to take place hereunder on such date;
(k) Representations and Warranties Correct. The representations and
warranties set forth in Article V hereof shall be true and correct on the
Closing Date, and after giving effect to the transactions contemplated to occur
on such date;
(l) Insurance. Evidence of insurance called for in Section 5.19 hereof
and evidence satisfactory to the Majority Banks that such insurance is in
effect;
(m) Solvency. The Agent shall have received a certificate of the
Responsible Officer, in form and substance satisfactory to the Majority Banks
that the Borrower and each of its Subsidiaries is Solvent on and as of the
Closing Date;
(n) Regulatory Compliance. A certificate of a Responsible Officer on
behalf of each of the Subsidiaries to the effect that such Subsidiary is in
compliance in all material respects with the Requirements of Law;
42
(o) Transactional Documents. Copies of all Transactional Documents
listed in Schedule 4.1(o) attached hereto relating to the Acquisitions by the
Credit Parties anticipated to be consummated on the Closing Date or as soon as
practicable thereafter (including the Acquisitions in the States of California,
Washington and Oregon); and
(p) Other Documents. Such other approvals, opinions, documents or
materials as the Agent or any Bank may reasonably request.
4.2 Conditions to All Loans and Letters of Credit. The obligations of each
Bank to make, convert or extend any Loan and of the Issuing Bank to issue or
extend any Letter of Credit (including the initial Loans and the initial Letter
of Credit) to be made by it (including its initial Loan), is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date:
(a) Notice of Borrowing. (i) In the case of any Loan, the Agent shall
have received a Notice of Borrowing or (ii) in the case of any Letter of Credit,
the Issuing Bank shall have received an appropriate request for issuance in
accordance with the provisions of Section 2.1(b) hereof.
(b) Continuation of Representations and Warranties. The
representations and warranties in Article V shall be true and correct on and as
of such Borrowing Date with the same effect as if made on and as of such
Borrowing Date (except to the extent such representations and warranties
expressly refer to an earlier date, in which case they shall be true and correct
as of such earlier date); and
(c) No Existing Default. No Default or Event of Default shall exist or
shall result from such Borrowing. Each Notice of Borrowing submitted by the
Borrower hereunder shall constitute a representation and warranty by the
Borrower hereunder, as of the date of each such notice or request and as of each
Borrowing Date that the conditions in this Section 4.2 are satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
Each of the Credit Parties represents and warrants to the Agent and each
Bank that:
5.1 Existence and Power. Such Credit Party and each of its Subsidiaries (a)
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, (b) has the power and authority
and all material Governmental Approvals to own its material assets, carry on its
43
business and to execute, deliver, and perform its obligations under this
Agreement and the other Loan Documents to which it is a party, (c) is duly
qualified as a foreign corporation and is licensed and in good standing under
the laws of each jurisdiction where its ownership, lease or operation of
property or the conduct of its business requires such qualification or license
(except for jurisdictions in which the failure to so qualify or remain in good
standing could not reasonably be expected to have a Material Adverse Effect) and
(d) is in compliance in all material respects with all Requirements of Law. Set
forth in Schedule 5.1 attached hereto is a complete and accurate list of such
Credit Party's Subsidiaries, showing their respective jurisdictions of
incorporation or organization and, as of the Closing Date, the jurisdictions in
which each is qualified to do business.
5.2 Corporate Authorization; No Contravention. The execution, delivery and
performance by such Credit Party of this Agreement and each other Loan Document
to which such Credit Party is party, have been duly authorized by all necessary
corporate action, and do not and will not (a) contravene the terms of any of
such Credit Party's Organization Documents, (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, any document
evidencing any material Contractual Obligation to which such Credit Party is a
party or any material order, injunction, writ or decree of any Governmental
Authority to which such Credit Party or its property is subject or (c) violate
any Requirement of Law.
5.3 Governmental Authorization. No Governmental Approval is necessary or
required in connection with the execution, delivery or performance by, or
enforcement against, such Credit Party of this Agreement or any other Loan
Document.
5.4 Binding Effect. This Agreement and each other Loan Document to which
such Credit Party is a party constitute the legal, valid and binding obligations
of such Credit Party, enforceable against such Credit Party in accordance with
their respective terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
5.5 Litigation. Except as specifically disclosed in Schedule 5.5 attached
hereto, there are no actions, suits, proceedings, claims or disputes pending, or
to the best knowledge of such Credit Party, threatened or contemplated, at law,
in equity, in arbitration or before any Governmental Authority, against such
Credit Party, or its Subsidiaries or any of their respective properties which
(i) purport to affect or pertain to this Agreement or any other Loan Document,
or any of the transactions contemplated hereby or thereby, or (ii) if determined
adversely to such Credit Party or its Subsidiaries, would
44
reasonably be expected to have a Material Adverse Effect. No injunction, writ,
temporary restraining order or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery or performance of this Agreement or any other Loan Document,
or directing that the transactions provided for herein or therein not be
consummated as herein or therein provided.
5.6 No Default. No Default or Event of Default has occurred and is
continuing or would result from the execution, delivery or performance of this
Agreement, the Security Agreement and the other Loan Documents.
5.7 Financial Condition.
(a) The pro forma consolidated financial statements of Credit Parties,
dated as of the fiscal quarter ended September 30, 1997, have been delivered to
the Agent. Except as disclosed in such financial statements or otherwise
disclosed in writing to the Banks, neither such Credit Party nor any Subsidiary
of such Credit Party is liable for any material liability, direct or contingent,
including, but not limited to, liabilities for taxes, long-term leases or
long-term commitments, which would be required to be shown as a liability or
otherwise disclosed in current financial statements.
(b) Since September 30, 1997, there has been no Material Adverse
Effect and there is no fact known to such Credit Party which could reasonably be
expected to have a Material Adverse Effect which has not been disclosed in
documents furnished to the Banks in connection with this Agreement.
5.8 ERISA Compliance. Except as specifically disclosed in Schedule 5.8
attached hereto:
(a) Each Plan is in compliance in all material respects with the
applicable provisions of ERISA, the Code and other federal or state law. Each
Plan which is intended to qualify under Section 401(a) of the Code has received
a favorable determination letter from the IRS and to the best knowledge of such
Credit Party, nothing has occurred which would cause the loss of such
qualification. Such Credit Party and each ERISA Affiliate has made all required
contributions to any Plan subject to Section 412 of the Code, and no application
for a funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of such Credit
Party, threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan which has resulted or could reasonably be
expected to result in a Material Adverse Effect. There has been no prohibited
transaction
45
or violation of the fiduciary responsibility rules with respect to any Plan
which has resulted or could reasonably be expected to result in a Material
Adverse Effect.
(c) (A) No ERISA Event has occurred or is reasonably expected to
occur, (B) no Pension Plan has any Unfunded Pension Liability, (C) neither such
Credit Party nor any ERISA Affiliate has incurred, or reasonably expects to
incur, any liability under Title IV of ERISA with respect to any Pension Plan
(other than premiums due and not delinquent under Section 4007 of ERISA), (D)
neither such Credit Party nor any ERISA Affiliate has incurred, or reasonably
expects to incur, any liability (and no event has occurred which, with the
giving of notice under Section 421 of ERISA, would result in such liability)
under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan and (E)
neither such Credit Party nor any ERISA Affiliate has engaged in a transaction
that could be subject to Section 406 or 4212(c) of ERISA.
5.9 Use of Proceeds; Margin Regulations. The proceeds of the Loans are to
be used solely for the purposes set forth in and permitted by Sections 6.12 and
7.12 of this Agreement. Neither such Credit Party nor any Subsidiary is
generally engaged in the business of purchasing or selling Margin Stock or
extending credit for the purpose of purchasing or carrying Margin Stock.
5.10 Real Property. Such Credit Party and each Subsidiary have good record
and marketable title in fee simple to, or valid leasehold interests in, all real
property necessary or used in the ordinary conduct of their respective
businesses, except for such defects in title as could not, individually or in
the aggregate, have a Material Adverse Effect. As of the Closing Date, the
property of such Credit Party and its Subsidiaries is subject to no Liens, other
than Permitted Encumbrances.
5.11 Equipment. Such Credit Party and its Subsidiaries own or have the
right to use under valid and subsisting leases, equipment and fixtures,
reasonably necessary for the operation of their business as a whole.
Substantially all of the tangible property of such Credit Party and its
Subsidiaries used in connection with their business is in good operating
condition (ordinary wear and tear excepted), usable in the ordinary course of
business, and is adequate for the operation of their business.
5.12 Contracts. Schedule 5.12 attached hereto contains a list of each
material contract to which such Credit Party or any of its Subsidiaries is a
party (the "Material Contracts"). Each of the Material Contracts is in effect.
Except as disclosed in Schedule 5.12 attached hereto, neither such Credit Party,
nor any of its Subsidiaries nor, to the best knowledge of such Credit Party, any
other party to any of the Material Contracts is in material default thereunder,
and there are no presently existing facts or circumstances which, if continued
or on notice, could
46
reasonably be expected to result in such a material default on the part of such
Credit Party or any of its Subsidiaries, or, to the best knowledge of such
Credit Party, on the part of the other party thereto. Such Credit Party does not
have any knowledge that any other party to any of the Material Contracts intends
to terminate such Material Contract. Each contract with a supplier to which such
Credit Party or any of its Subsidiaries is a party is on normal trade terms and
has been entered into in the ordinary course of business. Each contract with a
customer of such Credit Party or any of its Subsidiaries has been entered into
in the ordinary course of business. Performance by the parties to all contracts
and other commitments of such Credit Party and its Subsidiaries would not in the
aggregate have a Material Adverse Effect.
5.13 Taxes. Such Credit Party and its Subsidiaries have filed all Federal
and other material tax returns and reports required to be filed, and have paid
all Federal and other material taxes, assessments, fees and other governmental
charges levied or imposed upon them or their properties, income or assets
otherwise due and payable, except those which are being contested in good faith
by appropriate proceedings and for which adequate reserves have been provided in
accordance with GAAP. There is no proposed tax assessment against such Credit
Party or any Subsidiary that would, if made, have a Material Adverse Effect.
5.14 Environmental Matters. Except as specifically disclosed in Schedule
5.14 attached hereto, (i) the properties and operations of such Credit Party and
each of its Subsidiaries comply in all material respects with all applicable
Environmental Laws; (ii) none of the properties or operations of such Credit
Party or any of its Subsidiaries is subject to any judicial or administrative
proceeding alleging the violation of any Environmental Law; (iii) none of the
properties or operations of such Credit Party or any of its Subsidiaries is the
subject of any federal or state investigation concerning any use or release of
any Hazardous Substance; (iv) neither such Credit Party nor any of its
Subsidiaries, nor, to the best knowledge of such Credit Party, any predecessor
of such Credit Party or any of its Subsidiaries, has filed any notice under any
federal or state law indicating past or present treatment, storage or disposal
of a Hazardous Substance or reporting a spill or release of a Hazardous
Substance into the environment; (v) neither such Credit Party nor any of its
Subsidiaries has any contingent liability in connection with any release of any
Hazardous Substance into the environment and no such release which could, under
applicable law, require remediation has occurred; (vi) neither such Credit
Party's nor any of its Subsidiaries' operations involve the generation,
transportation, treatment, storage or disposal of Hazardous Substances, except
for the generation of Hazardous Substances in the ordinary course of business,
and except for such activities carried out through licensed independent
contractors; (vii) neither such Credit Party nor any of its Subsidiaries has
disposed of any Hazardous Substance in, on or
47
about any premises owned, leased or used by such Credit Party or any of its
Subsidiaries and, to the best of the knowledge of such Credit Party, neither has
any lessee, prior owner, or other Person; and (viii) no surface impoundments or,
to the best of such Credit Party, underground storage tanks are located in, on
or about any of the premises owned, leased or used by such Credit Party or any
of its Subsidiaries.
5.15 Regulated Entities. None of such Credit Party, any Person controlling
such Credit Party, or any Subsidiary, is an "Investment Company" within the
meaning of the Investment Company Act of 1940. Such Credit Party is not subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, the Interstate Commerce Act, any state public utilities code, or
except as specifically disclosed in Schedule 5.15 attached hereto, any other
Federal or state statute or regulation limiting its ability to incur
Indebtedness.
5.16 No Burdensome Restrictions. Neither such Credit Party nor any
Subsidiary is a party to or bound by any Contractual Obligation, or subject to
any restriction in any Organization Document, or any Requirement of Law, which
could reasonably be expected to have a Material Adverse Effect.
5.17 Copyrights, Patents, Trademarks and Licenses, etc. Schedule 5.17
attached hereto contains a complete and correct list of all material patents,
copyrights, trademarks, licenses, service marks, trade names and other similar
rights (the "Intellectual Property Rights") used by such Credit Party or any of
its Subsidiaries. No proceedings have been instituted or are pending or have
been threatened in writing which challenge the validity, ownership or use of any
such Intellectual Property Rights. To the best knowledge of such Credit Party,
no infringement of any Intellectual Property Right of any third party has
occurred or would result in any way from the operations or business of such
Credit Party or any of its Subsidiaries, and, except as set forth in Schedule
5.5 attached hereto, no claim has been made by any such third party based on
allegation of any such infringement.
5.18 Capital Stock. All of the outstanding capital stock of such Credit
Party and its Subsidiaries has been validly issued in compliance with all
federal and state securities laws and is fully paid and nonassessable. Schedule
5.18 attached hereto contains a list of all Subsidiaries of such Credit Party
and its ownership interest in each of such Subsidiaries. All of the capital
stock of or other ownership interest in and each of such Subsidiaries is owned
by such Credit Party or one of its Subsidiaries free and clear of all mortgages,
deeds of trust, pledges, liens, security interests and other charges or
encumbrances other than pursuant to the Loan Documents. Neither such Credit
Party nor any of its Subsidiaries is subject to any obligation (contingent or
otherwise)
48
to repurchase or otherwise acquire or retire any shares of its capital stock or
any other equity interest therein.
5.19 Insurance. Except as specifically disclosed in Schedule 5.19 attached
hereto, the properties of such Credit Party and its Subsidiaries are insured or
self-insured, in such amounts, with such deductibles and covering such risks as
are customary for companies of like size and nature.
5.20 Business Activity. Neither such Credit Party nor any of its
Subsidiaries is engaged in any line or lines of business activity other than the
Dentistry Business.
5.21 Accreditation, Etc. Each of such Credit Party and the Subsidiaries
maintains (i) all material licenses and certifications required pursuant to any
Requirement of Law, (ii) all material certifications and authorizations
necessary to ensure that each of such Credit Party and the Subsidiaries is
eligible for all reimbursements available under the Requirements of Law to the
extent applicable and (iii) all material licenses, permits, authorizations and
qualifications required under the Requirements of Law in connection with the
ownership or operation of its business.
5.22 Solvency. As of the Closing Date and after giving effect to the
transactions contemplated by the Credit Agreement and the other Loan Documents,
including all of the Loans made and to be made hereunder, such Credit Party is
Solvent and each of the Subsidiaries is Solvent.
5.23 Fiscal Year. The fiscal year of such Credit Party ends on December 31.
5.24 Transactional Documents. The Banks have received complete copies of
all Transactional Documents relating to the Acquisitions by the Credit Parties
anticipated to be consummated on the Closing Date or as soon as practicable
thereafter. Each of the Transactional Documents sets forth the entire agreement
among the parties thereto relating to the applicable Acquisition. Each of the
Transactional Documents is in full force and effect and, to the best knowledge
of such Credit Party, no default exists thereunder on the part of any party
thereto.
49
5.25 Full Disclosure. None of the representations or warranties made by
such Credit Party or any Subsidiary in this Agreement or in any of the documents
previously delivered to the Agent and the Banks as of the date such
representations and warranties are made or deemed made, and none of the
statements contained in any exhibit, report, statement or certificate furnished
by or on behalf of such Credit Party or any Subsidiary pursuant to Sections 6.1,
6.2 or 6.3 hereof, contains any untrue statement of material fact or omits any
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they are made, not
materially misleading as of the time when made or delivered.
ARTICLE VI
AFFIRMATIVE COVENANTS
---------------------
So long as any Bank shall have any Commitment hereunder, or any of the
Obligations shall remain unpaid or unsatisfied, unless the Majority Banks waive
compliance in writing:
6.1 Financial Statements. The Borrower shall deliver to the Agent and the
Banks, in form and detail reasonably satisfactory to the Agent and the Majority
Banks:
(a) as soon as available, but not later than ninety (90) days after
the end of each fiscal year (commencing with the fiscal year ended December 31,
1997), a copy of the audited consolidated and consolidating balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year and the related
consolidated and consolidating statements of income or operations, shareholders'
equity and cash flows for such fiscal year, setting forth in each case in
comparative form the figures for the previous fiscal year (except for the
figures for the fiscal year ended December 31, 1995), and accompanied by the
opinion of a nationally-recognized independent public accounting firm (the
"Independent Auditor") which report shall state that such consolidated and
consolidating financial statements present fairly the financial position for the
periods indicated in conformity with GAAP applied on a basis consistent with
prior years. Such opinion shall not be qualified or limited because of a
restricted or limited examination by the Independent Auditor of any material
portion of the Borrower's or any Subsidiary's records;
(b) as soon as available, but not later than forty-five (45) days
after the end of each fiscal quarter of each fiscal year, a copy of the
unaudited consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal quarter and the related consolidated
and consolidating statements of income, shareholders' equity and cash flows for
the period commencing on the first day and ending on the last day of such fiscal
quarter, and certified by a Responsible
50
Officer as fairly presenting, in accordance with GAAP (subject to ordinary, good
faith year-end audit adjustments), the financial position and the results of
operations of such Credit Party and the Subsidiaries; and
(c) as soon as available, but not later than thirty (30) days after
the end of each calendar month (except for the month of December), a copy of the
unaudited consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such calendar month and the related consolidated statements of
income, shareholders' equity and cash flows for the period commencing on the
first day and ending on the last day of such calendar month, and certified by a
Responsible Officer as fairly presenting, in accordance with GAAP (subject to
ordinary, good faith year-end audit adjustments), the financial position and the
results of operations of such Credit Party and the Subsidiaries.
6.2 Certificates; Other Information. Such Credit Party shall furnish to the
Agent and the Banks:
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the Independent Auditor, to the
effect that in the course of the regular annual examination of the business of
the Borrower and its Subsidiaries, which examination was conducted by the
Independent Auditor in accordance with generally accepted auditing standards,
the Independent Auditor has obtained no knowledge that a Default or an Event of
Default has occurred and is continuing as of the date of certification, or if,
in the opinion of the Independent Auditor, a Default or an Event of Default has
occurred and is continuing, a statement as to the nature thereof;
(b) concurrently with the delivery of the financial statements
referred to in Sections 6.1(a) and 6.1(b), a Compliance Certificate and a Real
Property Certificate each executed by a Responsible Officer; provided, however,
that with respect to any fiscal quarter during which a Permitted Acquisition has
been consummated, the financial ratios described in the Compliance Certificate
for such fiscal quarter may be adjusted to reflect the financial ratios
applicable to such Permitted Acquisition for the entire quarter based on its
annual run-rate for such quarter as shown on the financial projections delivered
to and approved by the Agent in connection with such Permitted Acquisition under
Section 6.12(a) hereof;
(c) concurrently with the delivery of the financial statements
referred to in Section 6.1(b), an aging report on accounts receivable of the
Borrower and its Subsidiaries in form and detail satisfactory to the Agent;
(d) promptly, copies of all financial statements and reports that such
Credit Party or any of its Subsidiaries sends to
51
its shareholders, copies of all letters and reports prepared by the Independent
Auditor and delivered to the management of such Credit Party, and copies of all
financial statements and regular, periodical or special reports (including Forms
10K, 10Q and 8K) that such Credit Party or any Subsidiary thereof may make to,
or file with, the SEC;
(e) promptly following the receipt of the same, a copy of each notice
relating to the loss by such Credit Party or any Subsidiary of any material
operating permit, license or certification by any Governmental Authority;
(f) promptly following the receipt of the same, all correspondence
received by such Credit Party or any Subsidiary from a Governmental Authority
which asserts that such Credit Party or any Subsidiary is not in substantial
compliance with any Requirement of Law or which threatens the taking of any
action against such Credit Party or any Subsidiary under any Requirement of Law;
(g) from time to time upon receipt of a request by any Bank through
the Agent specifying in reasonable detail the types of documents to be provided,
copies of any and all statements, audits, studies or reports submitted by or on
behalf of such Credit Party or any Subsidiary to any Governmental Authority; and
(h) promptly, such additional information regarding the business,
financial or corporate affairs of such Credit Party or any Subsidiary as the
Agent, at the request of any Bank, may from time to time reasonably request.
6.3 Notices. Such Credit Party shall promptly, but in no event more than
three (3) Business Days thereafter, notify the Agent and each Bank:
(a) of the occurrence of any Default or Event of Default, and of the
occurrence or existence of any event or circumstance that foreseeably will
become a Default or Event of Default;
(b) of any matter that has resulted or would be reasonably likely to
result in a Material Adverse Effect, including, without limitation, (A) breach
or non-performance of, or any default under, a material Contractual Obligation
of such Credit Party or any Subsidiary, (B) any material dispute, litigation,
investigation, proceeding or suspension between such Credit Party or any
Subsidiary and any Governmental Authority or (C) the commencement of, or any
material development in, any material litigation or proceeding affecting such
Credit Party or any Subsidiary, including pursuant to any applicable
Environmental Laws;
52
(c) of the occurrence of any of the following events affecting such
Credit Party or any ERISA Affiliate (but in no event more than ten (10) days
after such event), and deliver to the Agent and each Bank a copy of any notice
with respect to such event that is filed with a Governmental Authority and any
notice delivered by a Governmental Authority to such Credit Party or any ERISA
Affiliate with respect to such event: (A) an ERISA Event; (B) a material
increase in the Unfunded Pension Liability of any Pension Plan; (C) the adoption
of, or the commencement of contributions to, any Plan subject to Section 412 of
the Code by such Credit Party or any ERISA Affiliate; or (D) the adoption of any
amendment to a Plan subject to Section 412 of the Code, if such amendment
results in a material increase in contributions or Unfunded Pension Liability;
and
(d) of any material change in accounting policies or financial
reporting practices by such Credit Party or any of its Subsidiaries.
Each notice under this Section 6.3 shall be accompanied by a written
statement by a Responsible Officer setting forth details of the occurrence
referred to therein, and stating what action such Credit Party or any affected
Subsidiary proposes to take with respect thereto and at what time. Each notice
under Section 6.3(a) shall describe with particularity any and all clauses or
provisions of this Agreement or other Loan Document that have been (or
foreseeably will be) breached or violated.
6.4 Preservation of Corporate Existence, Etc. Such Credit Party shall, and
shall cause each Subsidiary to:
(a) preserve and maintain in full force and effect its corporate
existence and good standing under the laws of its state or jurisdiction of
incorporation;
(b) except as otherwise expressly permitted by this Agreement,
preserve and maintain in full force and effect all material governmental rights,
privileges, qualifications, permits, licenses and franchises necessary or
desirable in the normal conduct of its business, including all material licenses
and certifications required pursuant to any Requirement of Law, all material
certifications and authorizations necessary to ensure that each of the
Subsidiaries is eligible for all reimbursements available under the Requirement
of Law to the extent applicable, and all material licenses, permits,
authorization and qualifications required under the Requirement of Law in
connection with the ownership or operation of dental practice groups;
(c) except as otherwise expressly permitted by this Agreement, use
reasonable efforts, in the ordinary course of business, to preserve its business
organization and goodwill; and
53
(d) preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could reasonably be
expected to have a Material Adverse Effect.
6.5 Maintenance of Property. Such Credit Party shall maintain, and shall
cause each Subsidiary to maintain, and preserve all its property which is
material to its business in good working order and condition, ordinary wear and
tear excepted.
6.6 Insurance. Such Credit Party shall maintain, and shall cause each
Subsidiary to maintain, insurance or self-insurance with respect to its
properties and business against loss or damage of such types and in such amounts
as are customary for companies of like size and nature.
6.7 Payment of Obligations. Such Credit Party shall, and shall cause each
Subsidiary to, pay and discharge as the same shall become due and payable, all
their respective obligations and liabilities, including:
(a) all tax liabilities, assessments and governmental charges or
levies upon it or its properties or assets, unless the same are being contested
in good faith by appropriate proceedings and adequate reserves in accordance
with GAAP are being maintained by such Credit Party or such Subsidiary;
(b) all lawful claims which, if unpaid, would by law become a Lien
upon its property, except for any such claims that are being contested in good
faith and by appropriate proceedings; and
(c) all Indebtedness, as and when due and payable, but subject to any
subordination provisions contained in any instrument or agreement evidencing
such Indebtedness, and except for any such Indebtedness that is being contested
in good faith and by appropriate proceedings.
6.8 Compliance with Laws. Such Credit Party shall comply, and shall cause
each Subsidiary to comply, in all material respects with all Requirements of Law
of any Governmental Authority having jurisdiction over it or its business,
except such as may be contested in good faith or as to which a bona fide dispute
may exist.
6.9 Compliance with ERISA. Such Credit Party shall, and shall cause each of
its ERISA Affiliates to, (i) maintain each Plan in compliance in all material
respects with the applicable provisions of ERISA, the Code and other federal or
state law, (ii) cause each Plan which is qualified under Section 401(a) of the
Code to maintain such qualification and (iii) make all required contributions to
any Plan subject to Section 412 of the Code.
54
6.10 Inspection of Property and Books and Records. Such Credit Party shall
maintain, and shall cause each Subsidiary to maintain, proper books of record
and account to the extent necessary to permit the preparation of the financial
statements in conformity with GAAP consistently applied. Such Credit Party shall
permit, and shall cause each Subsidiary to permit, representatives and
independent contractors of the Agent, at the request of any Bank, or any Bank to
visit and inspect any of their respective properties, to examine their
respective corporate, financial and operating records, and make copies thereof
or abstracts therefrom, and to discuss their respective affairs, finances and
accounts with their respective officers and independent public accountants, all
at the expense of such Credit Party and at such reasonable times during normal
business hour and as often as may be reasonably desired, upon reasonable advance
notice to such Credit Party; provided, however, when a Default or an Event of
Default exists the Agent or any Bank may do any of the foregoing at the expense
of such Credit Party at any time during normal business hours and without
advance notice.
6.11 Environmental Laws. Such Credit Party shall, and shall cause each
Subsidiary to, conduct its operations and keep and maintain its property in
material compliance with all Environmental Laws.
6.12 Acquisitions. (a) Prior to consummating any Permitted Acquisition, the
Borrower shall have delivered to the Agent (in form and detail satisfactory to
each Bank and in sufficient copies for each Bank) a written request for such
Permitted Acquisition, together with the following:
(i) At least fifteen (15) days prior to the consummation of such
Permitted Acquisition, a description of the substantive terms and
conditions thereof and certified copies of (A) the executed letter of
intent or a memorandum of understanding, (B) the most recent drafts of the
purchase or acquisition agreement (including all exhibits attached thereto)
relating to such Permitted Acquisition, together with copies of business
plans, financing sources, financial projections and budgets and (C) a
description of the differences between the Model Documents and the actual
Transactional Documents relating to such Permitted Acquisition;
(ii) an officer's certificate, executed by a Responsible Officer,
certifying that immediately before and after giving effect to such
Permitted Acquisition (A) no Default has occurred and is continuing or will
exist, (B) that the Borrower will be in compliance with each of the
financial ratios specified in Section 6.14 hereof, together with a
reasonably detailed worksheet setting forth the calculation of such ratios
and (C) that the Borrower will be in compliance
55
with Section 6.15 hereof (including all of the disclosure requirements set forth
therein); and
(iii) copies of the executed purchase or acquisition agreement,
certified by a Responsible Officer, as soon as such agreement is executed
and delivered by the parties thereto.
(b) The Agent and each Bank may accept or reject any request of the
Borrower for a Permitted Acquisition under Section 6.12(a) hereof in their sole
and absolute discretion within fifteen (15) days after receipt thereof and the
failure by the Agent or a Bank to respond to such a request shall be deemed to
be a rejection thereof; provided, however, that with respect to any Permitted
Acquisition (so long as all of the definitional requirements of the term
"Permitted Acquisition" are met), (i) the aggregate purchase price of which is
less than $3,000,000, the approval of the Agent and the Banks shall not be
required and (ii) the aggregate purchase price of which is equal to and greater
than $3,000,000 but less than $5,000,000, the approval of the Agent and the
Banks shall not be required so long as all of the following conditions are met:
(A) the target entity which is the subject of the Permitted
Acquisition is engaged in a business similar to the Borrower's Business;
(B) the aggregate purchase price is less than 600% of the
Operating Cash Flow of the target entity;
(C) the sum of the cash and debt portions of the aggregate
purchase price does not exceed 350% of the Operating Cash Flow of the
target entity;
(D) no Default or Event of Default has then occurred and is
continuing and no Default or Event of Default will occur after giving
effect to such Permitted Acquisition; and
(E) each of the Transactional Documents relating to such
Permitted Acquisition conforms in all material respects to the applicable
Model Document.
(c) Prior to consummating Capital Expenditures in excess of $5,000,000
in the aggregate during any fiscal year of the Borrower, computed on a
cumulative consolidated basis, the Borrower shall have delivered to the Agent
(in form and detail satisfactory to each Bank and in sufficient copies for each
Bank) a written request for such Capital Expenditure, together with the
following:
(i) At least fifteen (15) days prior to the consummation of such
Capital Expenditure, a description of the substantive terms and conditions
thereof, including a list of
56
items being purchased and the source of funds for such Capital Expenditure;
(ii) an officer's certificate, executed by a Responsible Officer,
certifying that immediately before and after giving effect to such Capital
Expenditure (A) no Default has occurred and is continuing or will exist and
(B) that the Borrower and its Subsidiaries, on a consolidated basis, will
be in compliance with each of the financial ratios specified in Section
6.14 hereof, together with a reasonably detailed worksheet setting forth
the calculation of such ratios; and
(iii) copies of the executed purchase agreement relating to such
Capital Expenditure, certified by a Responsible Officer, as soon as such
agreement is executed and delivered by the parties thereto.
The Agent and each Bank may accept or reject any such request in their
sole and absolute discretion within 30 days after receipt thereof. The failure
by the Agent or a Bank to respond to such a request shall be deemed to be a
rejection thereof.
6.13 Concentration Account. The Borrower shall maintain the Concentration
Account (as such term is defined in the Security Agreement) with the Agent.
Within 30 days after the Closing Date, all other bank accounts maintained by the
Borrower or any of its Subsidiaries shall be and at all times remain subject to
instructions to transfer all funds out of such accounts into the Concentration
Account no less frequently than Friday of each week (or, when a Friday is not a
Banking Day, then on the previous Banking Day).
6.14 Financial Covenants. The Borrower shall, on a consolidated basis:
(a) maintain a Senior Leverage Ratio of not more than (i) 3.75 to 1.00
at all times from the Closing Date through and including Xxxxx 0, 0000, (xx)
3.50 to 1.00 at all times from April 2 through and including October 1, 1998 and
(iii) 3.25 to 1.00 at all times thereafter;
(b) maintain a Total Leverage Ratio of not more than (i) 4.85 to 1.00
at all times from the Closing Date through and including Xxxxx 0, 0000, (xx)
4.50 to 1.00 at all times from April 2 through and including October 1, 1998,
(iii) 4.25 to 1.00 at all times after October 2, 1998 through and including
April 1, 1999 and (iv) 4.00 to 1.00 at all times thereafter;
(c) maintain a Current Ratio not less than 1.40 to 1.00 at all times;
57
(d) maintain a Net Worth at all times of not less than the Net Worth
as of December 31, 1997 (i) minus the sum of (A) $500,000 and (B) non-recurring
merger expenses and restructuring charges taken by the Borrower after December
31, 1997 through and including June 30, 1998 and (ii) plus the sum of (A) 100%
of extraordinary gains arising after December 31, 1997, computed on a cumulative
consolidated basis, (B) 100% of net proceeds from any sale of common stock of
the Borrower or any of its Subsidiaries arising after December 31, 1997,
computed on a cumulative consolidated basis, (C) 100% of any capital stock
issued by the Borrower or any of its Subsidiaries as consideration in the
Permitted Acquisitions arising after December 31, 1997, computed on a cumulative
consolidated basis, and (D) 70% of positive net income of the Borrower and its
Subsidiaries arising after December 31, 1997, computed on a cumulative
consolidated basis; and
(e) maintain a Coverage Ratio of not less than (i) 1.15 to 1.00 at all
times after March 30, 1998 through and including June 29, 1998 and (ii) 1.25 to
1.00 at all times thereafter.
6.15 Additional Credit Parties and Collateral. (a) As soon as practicable
and in any event within 5 days after any Person becomes a Subsidiary of any
Credit Party, the Borrower shall provide the Agent with written notice thereof
setting forth information in reasonable detail describing all of the assets of
such Person and shall cause (i) such Person to execute and deliver a supplement
to this Agreement substantially in the form of Exhibit K hereto (each a "Credit
Agreement Supplement"), with such Person being referred to as an "Additional
Credit Party" and becoming a Credit Party, and all other instruments and
documents, including, but not limited to, a supplement to the Guaranty and a
supplement to the Security Agreement, that may be necessary, or that the Agent
may request, in order to enable the Agent to exercise its rights hereunder, (ii)
such Person to furnish to the Agent and the Banks all of the schedules and
exhibits to this Agreement and the Security Agreement, including schedules on
existing Liens and Indebtedness, (iii) all of the capital stock of such Person
owned by any of the Credit Parties to be delivered to the Agent (together with
undated stock powers signed in blank) and pledged to the Agent pursuant to the
Security Agreement and (iv) such Person to deliver such other documentation as
the Agent may reasonably request in connection with the foregoing, including,
without limitation, appropriate UCC- 1 financing statements, insurance policies,
certified resolutions and other organizational and authorizing documents of such
Person, favorable opinions of counsel to such Person (which shall cover, among
other things, the legality, validity, binding effect and enforceability of the
documentation referred to above and the perfection of the Agent's Liens
thereunder) and, to the extent applicable, other items of the types required to
be delivered pursuant to Section 6.12(a), all in form, content and scope
reasonably satisfactory to the Agent. Without limiting the generality of the
above, the Credit Parties will cause
58
100% of the capital stock in each direct or indirect Subsidiary of the Borrower
to be subject at all times to a first priority, perfected Lien in favor of the
Agent pursuant to the terms and conditions of the Security Agreement.
(b) If, subsequent to the Closing Date, a Credit Party shall acquire
any personal property required to be delivered to the Agent as Collateral under
the Security Agreement, the Borrower shall promptly (and in any event within
three (3) Business Days) notify the Agent of same. Each Credit Party shall, and
shall cause each of its Subsidiaries to, take such action at its own expense as
requested by the Agent to ensure that the Agent has a first priority (subject to
Permitted Liens), perfected Lien in all personal property of the Credit Parties
located in the United States. Each Credit Party shall, and shall cause each of
its Subsidiaries to, adhere to the covenants regarding the location of personal
property as set forth in the Security Agreement.
6.16 Required Future Action.
(a) A Subsidiary of the Borrower engaged in the business of providing
management services to Dental Practices shall have entered into certain
Transactional Documents with each of Gentle Dental of Oregon, P.C. and Gentle
Dental of Washington, P.C., which Transaction Documents shall conform with the
Model Documents, on or before April 30, 1998. Such Transaction Documents shall
provide, among other things, that (a) the accounts receivable of such
professional corporations shall secure the obligations of such professional
corporation under the management agreement and (b) an assignment of such
security interest and the management agreement by such Subsidiary in favor of
the Agent in accordance with the Security Agreement. In the event the Borrower
fails to cause such Subsidiary to enter into such Transaction Documents on or
before April 30, 1998, the rate of interest accruing on all Loans then
outstanding shall increase by 0.5% per annum until such failure is remedied.
59
(b) The Borrower shall have converted to a holding company owning no
assets other than the capital stock of its Subsidiaries on or before May 31,
1998. In the event the Borrower fails to convert to such holding company on or
before May 31, 1998, the rate of interest accruing on all Loans then outstanding
shall increase by 0.5% per annum until such failure is remedied; provided,
however, that in the event such failure continues unremedied until July 31,
1998, such failure shall constitute an Event of Default hereunder.
ARTICLE VII
NEGATIVE COVENANTS
------------------
So long as any Bank shall have any Commitment hereunder, or any Loan or
other Obligation shall remain unpaid or unsatisfied, unless the Majority Banks
waive compliance in writing:
7.1 Limitation on Liens. Such Credit Party shall not, and shall not suffer
or permit any Subsidiary to, directly or indirectly, make, create, incur, assume
or suffer to exist any Lien upon or with respect to any part of its property,
whether now owned or hereafter acquired, other than the following ("Permitted
Encumbrances"):
(a) Liens in favor of Agent or any Bank securing the Obligations;
(b) Liens listed in Schedule 7.1 and existing on the date of this
Agreement;
(c) Liens for taxes or other governmental charges not at the time
delinquent or thereafter payable without penalty or being contested in good
faith, provided that adequate reserves for the payment thereof have been
established in accordance with GAAP;
(d) Liens of carriers, warehousemen, mechanics, materialmen, vendors,
and landlords and other similar Liens imposed by law incurred in the ordinary
course of business for sums not overdue or being contested in good faith,
provided that adequate reserves for the payment thereof have been established in
accordance with GAAP;
(e) Deposits under workers' compensation, unemployment insurance and
social security laws or to secure the performance of bids, tenders, contracts
(other than for the repayment of borrowed money) or leases, or to secure
statutory obligations of surety or appeal bonds or to secure indemnity,
performance or other similar bonds in the ordinary course of business, provided
all such Liens in the aggregate would not (even if enforced) cause a Material
Adverse Effect;
60
(f) Zoning restrictions, easements, rights-of-way, title
irregularities and other similar encumbrances, which alone or in the aggregate
are not substantial in amount and do not materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
business of Borrower or any of its Subsidiaries;
(g) Liens on property or assets of any corporation which becomes a
Subsidiary of the Borrower or which are acquired by a Subsidiary or the Borrower
after the date of this Agreement, provided that (i) such Liens exist at the time
the stock of such corporation or property is acquired, (ii) such Liens were
disclosed to the Agent and the Banks under Section 6.15 hereof and (iii) such
Liens were not created in anticipation of such acquisition and provided further
that all such Liens in the aggregate at any time outstanding, together with
Liens permitted under Section 7.1(h) below, do not exceed $2,000,000, computed
on a cumulative consolidated basis for the Borrower and the Subsidiaries;
(h) Liens securing Indebtedness which constitutes Permitted Capital
Expenditures provided that, in each case, such Lien (i) attaches solely to the
property financed by such Permitted Capital Expenditures and (ii) the principal
amount of such Indebtedness secured thereby does not exceed 100% of the cost of
such property;
(i) Liens on the property or assets of any Subsidiary of the Borrower
in favor of the Borrower or any other Subsidiary of the Borrower, provided that
such Subsidiary is a party to this Agreement, the Security Agreement and the
Guaranty;
(j) Liens incurred in connection with the extension, renewal or
refinancing of the Indebtedness secured by the Liens described in clause (b) or
(h) above, provided that any extension, renewal or replacement (i) is limited to
the property covered by the existing Lien and (ii) secures Indebtedness which is
no greater in amount and has material terms no less favorable to the Banks than
the Indebtedness secured by the existing Lien;
(k) Banker's Liens, rights of setoff or similar rights as to deposit
accounts; provided that (i) such deposit account is not a dedicated cash
collateral account and is not subject to restrictions against access by such
Credit Party in excess of those set forth by regulations promulgated by the FRB
and (ii) such deposit account is not intended by such Credit Party to provide
collateral to the depository institution;
(l) Rights of (i) vendors or lessors under conditional sale agreements
or other title retention agreements, provided that (A) any such right covers
only the equipment so acquired and (B) the Indebtedness secured thereby is
permitted under Section 7.6 hereof and (ii) lessors under (A) Operating Leases
permitted by the
61
Agent under Section 7.8(b) hereof and (B) Permitted Capital Leases; and
(m) Liens securing the Fremont Subordinated Indebtedness and the
Fremont Guaranty Obligations.
7.2 Disposition of Assets. Such Credit Party shall not, and shall not
suffer or permit any Subsidiary to, directly or indirectly, sell, assign, lease,
convey, transfer or otherwise dispose of any property (including accounts and
notes receivable, with or without recourse) or enter into any agreement to do
any of the foregoing, except (a) dispositions of inventory, equipment or
operations, all in the ordinary course of business and (b) the sale of equipment
or operations to the extent that such assets are exchanged for credit against
the purchase price of similar replacement assets, or the proceeds of such sale
are reasonably promptly applied to the purchase price of such replacement
assets.
7.3 Consolidations and Mergers. Such Credit Party shall not, and shall not
suffer or permit any Subsidiary to, enter into any merger, consolidation,
reorganization or recapitalization, or any agreement to do any of the foregoing,
except that the Borrower or any of its Subsidiaries may make Permitted
Acquisitions.
7.4 Change of Business. Neither such Credit Party nor any of its
Subsidiaries shall change the nature of its business or engage in any other
business other than the businesses which are substantially similar to the lines
of business in which such Credit Party and its Subsidiaries are engaged as of
the Closing Date.
7.5 Loans and Investments. Such Credit Party shall not purchase or acquire,
or suffer or permit any Subsidiary to purchase or acquire, or make any
commitment therefor, any capital stock, equity interest, or any obligations or
other securities of, or any interest in, any Person, or make or commit to make
any Acquisitions, or make or commit to make any advance, loan, extension of
credit or capital contribution to or any other investment in, any Person, except
for (a) Permitted Market Investments, (b) extensions of credit in the nature of
accounts receivable or notes receivable arising from the sale or lease of goods
or services in the ordinary course of business, (c) Permitted Acquisitions and
(d) wholly-owned Subsidiaries of the Borrower formed in connection with
Permitted Acquisitions.
7.6 Limitation on Indebtedness. Such Credit Party shall not, and shall not
suffer or permit any Subsidiary to, create, incur, assume, suffer to exist, or
otherwise become or remain directly or indirectly liable with respect to, any
Indebtedness, except Permitted Indebtedness.
7.7 Contingent Obligations. Such Credit Party shall not, and shall not
suffer or permit any Subsidiary to, create, incur,
62
assume or suffer to exist any Contingent Obligations, except (a) endorsements
for collection or deposit in the ordinary course of business and (b) Contingent
Obligations of such Credit Party and its Subsidiaries (i) existing as of the
Closing Date and listed in Schedule 7.7 attached hereto or (ii) assumed in
connection with Permitted Acquisitions and disclosed to the Agent and the Banks
under Section 6.15 hereof.
7.8 Lease Obligations. Such Credit Party shall not, and shall not suffer or
permit any Subsidiary to, create or suffer to exist any obligations for the
payment of rent for any property under lease or agreement to lease, except for
(a) leases of such Credit Party and of Subsidiaries in existence on the Closing
Date, (b) Operating Leases entered into by such Credit Party or any Subsidiary
after the Closing Date in the ordinary course of business and (c) Permitted
Capital Leases.
7.9 Restricted Payments. Such Credit Party shall not, and shall not suffer
or permit any Subsidiary to, (a) declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of its capital stock or (b) purchase, redeem
or otherwise acquire for value any shares of its capital stock or any warrants,
rights or options to acquire such shares, now or hereafter outstanding;
provided, however, (i) the Borrower may make the 10% cumulative dividend
payments payable on its Series B-1 and Series B-2 Preferred Stock upon any
initial public offering of the equity securities of the Borrower and (ii) so
long as no Default or Event of Default has occurred and is continuing, the
Borrower may make dividend payments to the Borrower from time to time in an
amount not to exceed the amount required to make the regularly scheduled payment
of interest and principal in respect of any Permitted Subordinated Indebtedness.
7.10 Prepayments of Subordinated Permitted Indebtedness. The Borrower shall
not purchase, redeem, retire or otherwise acquire for value, or set apart any
money for a sinking, defeasance or other analogous fund for, the purchase,
redemption, retirement or other acquisition of, or make any payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Subordinated Permitted Indebtedness, except that the Borrower
may make regularly scheduled payments of interest and principal in respect of
such Permitted Subordinated Indebtedness required pursuant to the instruments
evidencing such Permitted Subordinated Indebtedness in accordance with the terms
and conditions set forth in Exhibit H attached hereto.
7.11 Transactions with Affiliates. Such Credit Party shall not, and shall
not suffer or permit any Subsidiary to, enter into any transaction with any
Affiliate of such Credit Party, except upon fair and reasonable terms no less
favorable to such Credit Party or such Subsidiary than would obtain in a
comparable arm's-
63
length transaction with a Person not an Affiliate of such Credit Party or such
Subsidiary.
7.12 Use of Proceeds. The Borrower shall not, and shall not suffer or
permit any Subsidiary to, use any portion of the Loan proceeds, directly or
indirectly, (a) for any purpose other than for Permitted Acquisitions, Permitted
Capital Expenditures and working capital purposes, provided that (i) the
aggregate principal amount of all outstanding Working Capital Loans and (ii) the
LOC Obligations shall not exceed $4,000,000 at any time, (b) to purchase or
carry Margin Stock, (c) to repay or otherwise refinance indebtedness of the
Borrower or others incurred to purchase or carry Margin Stock, (d) to extend
credit for the purpose of purchasing or carrying any Margin Stock or (e) to
acquire any security in any transaction that is subject to Section 13 or 14 of
the Exchange Act. No part of the proceeds of the Loans will be used for any
purpose which violates the provisions of Regulations G, T, U or X of the FRB.
7.13 ERISA. Such Credit Party shall not, and shall not suffer or permit any
of its ERISA Affiliates to: (a) engage in a prohibited transaction or violation
of the fiduciary responsibility rules with respect to any Plan which has
resulted or could reasonably expected to result in liability of such Credit
Party in an aggregate amount in excess of $250,000; or (b) engage in a
transaction that could be subject to Section 4069 or 4212 (c) of ERISA.
7.14 Accounting Changes. Such Credit Party shall not, and shall not suffer
or permit any Subsidiary to, make any significant change in accounting treatment
or reporting practices, except as required by GAAP or as required to conform the
practices of a Person acquired in connection with a Permitted Acquisition, or
change the fiscal year of such Credit Party or of any Subsidiary.
ARTICLE VIII
EVENTS OF DEFAULT
-----------------
8.1 Event of Default. Any of the following shall constitute an "Event of
Default":
(a) Non-Payment. The Borrower fails to pay, (i) when and as required
to be paid herein, any amount of principal of any Loan or any amount of interest
on any Loan, or (ii) within three (3) Business Days after the same becomes due,
any interest, fee or any other amount payable hereunder or under any other Loan
Document; or
(b) Representation or Warranty. Any representation or warranty by any
Credit Party made or deemed made herein, in any other Loan Document, or which is
contained in any certificate,
64
document or financial or other statement by any Credit Party or any Responsible
Officer, furnished at any time under this Agreement, or in or under any other
Loan Document, is incorrect in any material respect on or as of the date made or
deemed made; or
(c) Specific Defaults. Any Credit Party fails to perform or observe
any term, covenant or agreement contained in (i) Section 6.3, 6.14 or 6.15; (ii)
any of Section 6.1, 6.2, or 6.9 and such default shall continue unremedied for a
period of ten (10) days after the earlier of (A) the date upon which a
Responsible Officer knew or reasonably should have known of such failure or (B)
the date upon which written notice thereof is given to such Credit Party by the
Agent or any Bank; or (iii) Article VII; or
(d) Other Defaults. Such Credit Party fails to perform or observe any
other term or covenant contained in this Agreement or any other Loan Document,
and such default shall continue unremedied for a period of thirty (30) days
after the earlier of (i) the date upon which a Responsible Officer knew or
reasonably should have known of such failure or (ii) the date upon which written
notice thereof is given to such Credit Party by the Agent or any Bank; or
(e) Cross-Default. Any Credit Party (i) fails to make any payment in
respect of any Indebtedness or Contingent Obligation having an aggregate
principal amount (including undrawn committed or available, amounts and
including amounts owing to all creditors under any combined or syndicated credit
arrangement) of more than $250,000 when due (whether by scheduled maturity,
required prepayment, acceleration, demand, or otherwise) and such failure
continues after any applicable grace or notice period, if any; (ii) fails to
perform or observe any other condition or covenant, or any other event shall
occur or condition exist, under any agreement or instrument relating to any such
Indebtedness or Contingent Obligation, and such failure continues after the
applicable grace or notice period, if any, specified in the relevant document on
the date of such failure if the effect of such failure, event or condition is to
cause, or to permit the holder or holders of such Indebtedness or beneficiary or
beneficiaries of such Indebtedness (or a trustee or agent on behalf of such
holder or holders or beneficiary or beneficiaries) to cause such Indebtedness to
be declared to be due and payable prior to its stated maturity, or such
Contingent Obligation to become payable or cash collateral in respect thereof to
be demanded; or (iii) fails to make any payment in respect of any Permitted
Subordinated Indebtedness when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) and such failure continues after
any applicable grace or notice period, if any; or
(f) Insolvency; Voluntary Proceedings. Any Credit Party (i) ceases or
fails to be Solvent, or generally fails to pay, or admits in writing its
inability to pay, its debts as they become
65
due, subject to applicable grace periods, if any, whether at stated maturity or
otherwise; (ii) except as otherwise expressly provided in this Agreement,
voluntarily ceases to conduct its business in the ordinary course; (iii)
commences any Insolvency Proceeding with respect to itself; or (iv) takes any
action to effectuate or authorize any of the foregoing; or
(g) Involuntary Proceedings. (i) Any involuntary Insolvency Proceeding
is commenced or filed against any Credit Party, or any writ, judgment, warrant
of attachment, execution or similar process, is issued or levied against a
substantial part of any Credit Party's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within sixty (60) days after commencement, filing or levy; (ii) any Credit Party
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) any Credit Party acquiesces in
the appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee it possession (or agent therefor), or other similar Person for itself
or a substantial portion of its property or business; or
(h) ERISA. (i) An ERISA Event shall occur with respect to a Pension
Plan or Multiemployer Plan which has resulted or could reasonably be expected to
result in liability of any Credit Party under Title IV of ERISA to the Pension
Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of
$250,000; (ii) the aggregate amount of Unfunded Pension Liability among all
Pension Plans at any time exceeds $250,000; or (iii) any Credit Party or any
ERISA Affiliate shall fail to pay when due, after the expiration of any
applicable grace period, any installment payment with respect to its withdrawal
liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate
amount in excess of $250,000; or
(i) Monetary Judgments. One or more final judgments, final orders,
decrees or arbitration awards is entered against any Credit Party involving in
the aggregate a liability (to the extent not covered by independent third-party
insurance as to which the insurer does not dispute coverage) as to any single or
related series of transactions, incidents or conditions, of $250,000 or more,
and the same shall remain unsatisfied, unvacated and unstayed pending appeal for
a period of twenty (20) days after the entry thereof or such Credit Party shall
not settle such judgment or award for less than $250,000 within ten (10) days
after the entry thereof; or
(j) Non-Monetary Judgments. Any non-monetary judgment, order or decree
is entered against any Credit Party which does or would reasonably be expected
to have a Material Adverse Effect, and
66
there shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(k) Change of Control. There occurs any Change of Control; or
(l) Material Adverse Effect. An event occurs which constitutes a
Material Adverse Effect; or
(m) Invalidity of Security Document Provisions. The provisions of the
Guaranty, the Security Agreement or any agreement or instrument relating thereto
is for any reason revoked or invalidated, or otherwise ceases to be in full
force and effect, any Person contests in any manner the validity or
enforceability thereof or denies that it has any further liability or obligation
thereunder, or the Indebtedness secured by the Security Agreement fails to
maintain, for any reason, the priority contemplated by the Security Agreement.
(n) Invalidity of Subordination Provisions. The subordination
provisions of the Permitted Subordinated Indebtedness set forth in Exhibit H
attached hereto or any agreement or instrument governing any such Permitted
Subordinated Indebtedness is for any reason revoked or invalidated, or otherwise
cease to be in full force and effect, any Person contests in any manner the
validity or enforceability thereof or denies that it has any further liability
or obligation thereunder, or the Indebtedness hereunder is for any reason
subordinated or does not have the priority contemplated by this Agreement or
such subordination provisions.
8.2 Remedies. If any Event of Default occurs, the Agent shall, at the
request of, or may, with the consent of, the Majority Banks,
(a) declare the Commitment of each Bank to make Loans to be
terminated, whereupon such Commitments shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans, all
interest accrued and unpaid thereon, and all other amounts owing or payable
hereunder or under any other Loan Document to be immediately due and payable,
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; and
(c) exercise on behalf of itself and the Banks all rights and remedies
available to it and the Banks under the Loan Documents or applicable law;
provided, however, that upon the occurrence of any event specified in subsection
(f) or (g) of Section 8.1 (in the case of clause (i) of subsection (g) upon the
expiration of the 60-day period mentioned therein), the obligation
67
of each Bank to make Loans shall automatically terminate and the unpaid
principal amount of all outstanding Loans and all interest and other amounts as
aforesaid shall automatically become due and payable without further act of the
Agent or any Bank.
8.3 Rights Not Exclusive. The rights provided for in this Agreement and the
other Loan Documents are cumulative and are not exclusive of any other rights,
powers, privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
ARTICLE IX
THE AGENT
---------
9.1 Appointment and Authorization. Each Bank hereby irrevocably (subject to
Section 9.9) appoints, designates and authorizes the Agent to take such action
on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, the Agent shall not have any duties or responsibilities,
except those expressly set forth herein, nor shall the Agent have or be deemed
to have any fiduciary relationship with any Bank, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into this Agreement or any other Loan Document or otherwise exist against the
Agent.
9.2 Delegation of Duties. The Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agent or attorney-in-fact that it selects with
reasonable care.
9.3 Liability of Agent. None of the Agent-Related Persons shall (a) be
liable for any action taken or omitted to be taken by any of them under or in
connection with this Agreement or any other Loan Document or the transactions
contemplated hereby (except for its own gross negligence or willful misconduct),
or (b) be responsible in any manner to any of the Banks for any recital,
statement, representation or warranty made by the Borrower or any Subsidiary or
Affiliate of the Borrower, or any officer thereof, contained in this Agreement
or in any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by the Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this
68
Agreement or any other Loan Document, or for any failure of the Borrower or any
other party to any Loan Document to perform its obligations hereunder or
thereunder. No Agent-Related Person shall be under any obligation to any Bank to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement or any other Loan
Document, or to inspect the properties, books or records of the Borrower or any
of the Borrower's Subsidiaries or Affiliates.
9.4 Reliance by Agent.
(a) The Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under this Agreement or any
other Loan Document unless it shall first receive such advice or concurrence of
the majority Banks as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Loan Document in accordance with a request or consent of the Majority
Banks and such request and any action taken or failure to act pursuant thereto
shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Sections 4.1 and 4.2, each Bank that has executed this Agreement
shall be deemed to have consented to, approved or accepted or to be satisfied
with, each document or other matter either sent by the Agent to such Bank for
consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Bank.
9.5 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default, except with respect
to defaults in the payment of principal, interest and fees required to be paid
to the Agent for the account of the Banks, unless the Agent shall have received
written notice from a Bank or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default". The Agent will notify the Banks of its receipt of any such
notice. The Agent shall take such action with respect to such Default or Event
of Default as may be requested by the Majority Banks in accordance with Article
VIII;
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provided, however, that unless and until the Agent has received any such
request, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable or in the best interest of the Banks.
9.6 Credit Decision. Each Bank acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it and that no act by the
Agent hereinafter taken, including any review of the affairs of the Borrower and
its subsidiaries, shall be deemed to constitute any representation or warranty
by any Agent-Related Person to any Bank. Each Bank represents to the Agent that
it has, independently and without reliance upon any Agent- Related Person and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and credit worthiness of the Borrower
and its Subsidiaries, and all applicable bank regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Agreement and to extend credit to the Borrower hereunder. Each Bank also
represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigations as it deems necessary
to inform itself as to the business, prospects, operations, property, financial
and other condition and credit worthiness of the Borrower. Except for notices,
reports and other documents expressly herein required to be furnished to the
Banks by the Agent, the Agent shall not have any duty or responsibility to
provide any Bank with any credit or other information concerning the business,
prospects, operations, property, financial and other condition or credit
worthiness of the Borrower which may come into the possession of any of the
Agent-Related Persons.
9.7 Indemnification of Agent. Whether or not the transactions contemplated
hereby are consummated, the Banks shall indemnify upon demand the Agent-Related
Persons (to the extent not reimbursed by or on behalf of the Borrower and
without limiting the obligation of the Borrower to do so), pro rata, from and
against any and all Indemnified Liabilities; provided, however, that no Bank
shall be liable for the payment to the Agent-Related Persons of any portion of
such Indemnified Liabilities resulting solely from such Person's gross
negligence or willful misconduct. Without limitation of the foregoing, each Bank
shall reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this
70
Agreement, any other Loan Document, or any document contemplated by or referred
to herein, to the extent that the Agent is not reimbursed for such expenses by
or on- behalf of the Borrower. The undertaking in this Section 9.7 shall survive
the payment of all Obligations hereunder and the resignation or replacement of
the Agent.
9.8 Agent in Individual Capacity. Imperial Bank and its Affiliates may make
loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with the Borrower and its
Subsidiaries and Affiliates as though Imperial Bank were not the Agent hereunder
and without notice to or consent of the Banks. The Banks acknowledge that,
pursuant to such activities, Imperial Bank or its Affiliates may receive
information regarding the Borrower or its Affiliates (including information that
may be subject to confidentiality obligations in favor of the Borrower or such
Subsidiary) and acknowledge that the Agent shall be under no obligation to
provide such information to them. With respect to its Loans, Imperial Bank shall
have the same rights and powers under this Agreement as any other Bank and may
exercise the same as though it were not the Agent, and the terms "Bank" and
"Banks" include Imperial Bank in its individual capacity.
9.9 Successor Agent. The Agent may, and at the request of the Majority
Banks shall, resign as Agent upon thirty (30) days, notice to the Banks and the
Borrower. If the Agent resigns under this Agreement, the Majority Banks shall
appoint from among the Banks a successor agent for the Banks. If no successor
agent is appointed prior to the effective date of the resignation of the Agent,
the Agent may appoint, after consulting with the Banks and the Borrower, a
successor agent from among the Banks. Upon the acceptance of its appointment as
successor agent hereunder, such successor agent shall succeed to all the rights,
powers and duties of the retiring Agent and the term "Agent" shall mean such
successor agent and the retiring Agent's appointment, powers and duties as Agent
shall be terminated. After any retiring Agent's resignation hereunder as Agent,
the provisions of this Article IX and Sections 10.4, 10.5 and 10.6 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement. If no successor agent has accepted appointment as
Agent by the date which is thirty (30) days following a retiring Agent's notice
of resignation, the retiring Agent's resignation shall nevertheless thereupon
become effective and the Banks shall perform all of the duties of the Agent
hereunder until such time, if any, as the Majority Banks appoint a successor
agent as provided for above.
9.10 Withholding Tax.
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(a) If any Bank is a "foreign corporation, partnership or trust"
within the meaning of the Code and such Bank claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the Code, such
Bank agrees with and in favor of the Agent, to deliver to the Agent:
(i) if such Bank claims an exemption from, or a reduction of,
withholding tax under a United States tax treaty, properly completed IRS Forms
1001 and W-8 prior to the Closing Date and prior to the first day of each
calendar year thereafter;
(ii) if such Bank claims that interest paid under this Agreement
is exempt from United States withholding tax because it is effectively connected
with a United States trade or business of such Bank, two properly completed and
executed copies of IRS Form 4224 prior to the Closing Date and prior to the
first day of each calendar year thereafter and IRS Form W-9; and
(iii) such other form or forms as may be required under the Code
or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Bank agrees to promptly notify the Agent of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Bank claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Bank
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of the Borrower to such Bank, such Bank agrees to notify the
Agent of the percentage amount in which it is no longer the beneficial owner of
Obligations of the Borrower to such Bank. To the extent of such percentage
amount, the Agent will treat such Bank's IRS Form 1001 as no longer valid.
(c) If any Bank claiming exemption from United States withholding tax
by filing IRS Form 4224 with the Agent sells, assigns, grants a participation
in, or otherwise transfers all or part of the Obligations of the Borrower to
such Bank, such Bank agrees to undertake sole responsibility for complying with
the withholding tax requirements imposed by Sections 1441 and 1442 of the Code.
(d) If any Bank is entitled to a reduction in the applicable
withholding tax, the Agent may withhold from any interest payment to such Bank
an amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this Section are not delivered to the Agent, then the Agent may withhold from
any interest payment to such Bank not
72
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United
States or other jurisdiction asserts a claim that the Agent did not properly
withhold tax from amounts paid to or for the account of any Bank (because the
appropriate form was not delivered, was not properly executed, or because such
Bank failed to notify the Agent of a change in circumstances which rendered the
exemption from, or reduction of, withholding tax ineffective, or for any other
reason) such Bank shall indemnify the Agent fully for all amounts aid, directly
or indirectly, by the Agent as tax or otherwise, including penalties and
interest, and including any taxes imposed by any jurisdiction on the amounts
payable to the Agent under this Section, together with all costs and expenses
(including Attorney Costs). The obligation of the Banks under this subsection
shall survive the payment of all Obligations and the resignation or replacement
of the Agent.
ARTICLE X
MISCELLANEOUS
-------------
10.1 Amendments and Waivers. No amendment or waiver of any provision of
this Agreement or any other Loan Document, and no consent with respect to any
departure by the Borrower therefrom, shall be effective unless the same shall be
in writing and signed by the Majority Banks (or by the Agent at the written
request of the Majority Banks) and the Borrower and acknowledged by the Agent,
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
no such waiver, amendment, or consent shall, unless in writing and signed by all
the Banks and the Borrower and acknowledged by the Agent, do any of the
following:
(a) increase or extend the Commitment of any Bank (or reinstate any
Commitment terminated pursuant to Section 8.2);
(b) postpone or delay any date fixed by this Agreement or any other
Loan Document for any payment of principal, interest, fees or other amounts due
to the Banks (or any of them) hereunder or under any other Loan Document;
(c) reduce the principal of, or the rate of interest specified herein
on any Loan, or (subject to clause (ii) below) any fees or other amounts payable
hereunder or under any other Loan Document;
(d) change the percentage of the Combined Commitments or of the
aggregate unpaid principal amount of the Loans which is required for the Banks
or any of them to take any action hereunder;
(e) amend this Section, Section 2.13 or Section 7.1, or any provision
herein providing for consent or other action by all Banks; or
(f) amend the definition of "Change of Control" or waive any Event of
Default under Section 8.1(k).
and, provided further, that (i) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Majority Banks or all the
Banks, as the case may be, affect the rights or duties of the Agent under this
Agreement or any other Loan Document, and (ii) the Fee Letter may be amended, or
rights or privileges thereunder waived, in a writing executed by the parties
thereto.
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10.2 Notices.
(a) All notices, requests and other communications shall be in writing
(including, unless the context expressly otherwise provides, by facsimile
transmission, provided that any matter transmitted by the Borrower by facsimile
(i) shall be immediately confirmed by a telephone call to the recipient at the
number specified on Schedule 10.2, and (ii) shall be followed promptly by
delivery of a hard copy original thereof) and mailed, faxed or delivered, to the
address or facsimile number specified for notices on Schedule 10.2; or, as
directed to the Borrower or the Agent, to such other address as shall be
designated by such party in a written notice to the other parties, and as
directed to any other party, at such other address as shall be designated by
such party in a written notice to the Borrower and the Agent.
(b) All such notices, requests and communications shall, when
transmitted by overnight delivery, or faxed, be effective when delivered for
overnight (next-day) delivery, or transmitted in legible form by facsimile
machine, respectively, or if mailed, upon the third Business Day after the date
deposited into the U.S. mail, or if delivered, upon delivery; except that
notices pursuant to Article II or IX shall not be effective until actually
received by the Agent.
(c) Any agreement of the Agent and the Banks herein to receive certain
notices by telephone or facsimile is solely for the convenience and at the
request of the Borrower. The Agent and the Banks shall be entitled to rely on
the authority of any Person purporting to be a Person authorized by the Borrower
to give such notice and the Agent and the Banks shall not have any liability to
the Borrower or other Person on account of any action taken or not taken by the
Agent or the Banks in reliance upon such telephonic or facsimile notice. The
obligation of the Borrower to repay the Loans shall not be affected in any way
or to any extent by any failure by the Agent and the Banks to receive written
confirmation of any telephonic or facsimile notice or the receipt by the Agent
and the Banks of a confirmation which is at variance with the terms understood
by the Agent and the Banks to be contained in the telephonic or facsimile
notice.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay in
exercising, on the part of the Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or
74
further exercise thereof or the exercise of any other right, remedy, power or
privilege.
10.4 Costs and Expenses. The Borrower shall:
(a) subject to the terms of the Fee Letter, whether or not the
transactions contemplated hereby are consummated, pay or reimburse the Agent
within fifteen (15) Business Days after demand (subject to Section 4.1(e)) for
all costs and expenses incurred by the Agent in connection with the development,
preparation, delivery, administration and execution of, and any amendment,
supplement, waiver or modification to (in each case, whether or not
consummated), this Agreement, any Loan Document and any other documents prepared
in connection herewith or therewith, and the consummation of the transactions
contemplated hereby and thereby, including reasonable Attorney Costs incurred by
the Agent with respect thereto; and
(b) pay or reimburse the Agent and each Bank within five (5) Business
Days after demand for all costs and expenses (including Attorney Costs) incurred
by them in connection with the enforcement, attempted enforcement, or
preservation of any rights or remedies under this Agreement or any other Loan
Document during the existence of an Event of Default or after acceleration of
the Loans (including in connection with any "workout" or restructuring regarding
the Loans, and including in any Insolvency Proceeding or appellate proceeding).
10.5 Borrower Indemnification. Whether or not the transactions contemplated
hereby are consummated, the Borrower shall indemnify and hold the Agent-Related
Persons, and each Bank and each of its respective officers, directors,
employees, counsel, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses and disbursements
(including Attorney Costs) of any kind or nature whatsoever which may at any
time (including at any time following repayment of the Loans and the
termination, resignation or replacement of the Agent or replacement of any Bank)
be imposed on, incurred by or asserted against any such Person in any way
relating to or arising out of this Agreement or any document contemplated by or
referred to herein, or the transactions contemplated hereby, or any action taken
or omitted by any such Person under or in connection with any of the foregoing,
including with respect to any investigation, litigation or proceeding (including
any Insolvency Proceeding or appellate proceeding)
75
related to or arising out of this Agreement or the Loans or the use of the
proceeds thereof, whether or not any Indemnified Person is a party thereto (all
the foregoing, collectively, the "Indemnified Liabilities"); provided, that the
Borrower shall have no obligation hereunder to any Indemnified Person with
respect to Indemnified Liabilities resulting solely from the gross negligence or
willful misconduct of such Indemnified Person. The agreements in this Section
shall survive payment of all other Obligations.
10.6 Payments Set Aside. To the extent that the Borrower makes a payment to
the Agent or the Banks, or the Agent or the Banks exercise their right of
set-off, and such payment or the proceeds of such set-off or any part thereof
are subsequently invalidated, declared to be fraudulent or preferential, set
aside or required (including pursuant to any settlement entered into by the
Agent or such Bank in its discretion) to be repaid to a trustee, receiver or any
other party, in connection with any Insolvency Proceeding or otherwise, then (a)
to the extent of such recovery the obligation or part thereof originally
intended to be satisfied shall be revived and continued in full force and effect
as if such payment had not been made or such set-off had not occurred, and (b)
each Bank severally agrees to pay to the Agent upon demand its pro rata share of
any amount so recovered from or repaid by the Agent.
10.7 Successors and Assigns. The provisions of this Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, except that the Borrower may not assign or transfer any
of its rights or obligations under this Agreement without the prior written
consent of the Agent and each Bank.
10.8 Assignments, Participations, etc.
(a) Any Bank may, with the written consents of the Borrower and the
Agent, which consents shall be at the sole discretion of the Borrower and the
Agent, at any time assign and delegate to one or more Eligible Assignees
(provided that (i) no written consent of the Borrower shall be required during
the existence of an Event of Default after the Agent has declared the Commitment
of each Bank to make Loans to be terminated and (ii) no written consent of the
Borrower or the Agent shall be required in connection with any assignment and
delegation by a Bank to an Eligible Assignee that is an Affiliate of such Bank)
(each an "Assignee") all, or any ratable part of all, of the Loans, the Combined
Commitments and the other rights and obligations of such
76
Bank hereunder, in a minimum amount of $5,000,000; provided, however, that the
Borrower and the Agent may continue to deal solely and directly with such Bank
in connection with the interest so assigned to an Assignee until (i) written
notice of such assignment, together with payment instructions, addresses and
related information with respect to the Assignee, shall have been given to the
Borrower and the Agent such Bank and the Assignee; (ii) such Bank and its
Assignee shall have delivered to the Borrower and the Agent an Assignment and
Acceptance in the form of Exhibit J ("Assignment and Acceptance") together with
any Note or Notes subject to such assignment and (iii) the assignor Bank or
Assignee has paid to the Agent a processing fee in the amount of $2,500.
(b) From and after the date that the Agent notifies the assignor Bank
that it has received (and provided its consent with respect to) an executed
Assignment and Acceptance and payment of the above-referenced processing fee,
(i) the Assignee thereunder shall be a party hereto and, to the extent that
rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Acceptance, shall have the rights and obligations of a Bank under
the Loan Documents, and (ii) the assignor Bank shall, to the extent that rights
and obligations hereunder and under the other Loan Documents have been assigned
by it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Loan Documents.
(c) Within five (5) Business Days after its receipt of notice by the
Agent that it has received an executed Assignment and Acceptance and payment of
the processing fee, (and provided that it consents to such assignment in
accordance with Section 10.8(a)), the Borrower shall execute and deliver to the
Agent, new Notes evidencing such Assignee's assigned Loans and Commitment and,
if the assignor Bank has retained a portion of its Loans and its Commitment,
replacement Notes in the principal amount of the Loans retained by the assignor
Bank (such Notes to be in exchange for, but not in payment of, the Notes held by
such Bank). Immediately upon each Assignee's making its processing fee payment
under the Assignment and Acceptance, this Agreement shall be deemed to be
amended to the extent, but only to the extent, necessary to reflect the addition
of the Assignee and the resulting adjustment of the Combined Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Bank pro tanto.
(d) Any Bank may at any time sell to one or more commercial banks or
other Persons not Affiliates of the Borrower (a "Participant") participating
interests in any Loans, the Commitment of that Bank and the other interests of
that Bank (the "Originator") hereunder and under the other Loan Documents;
provided, however, that (i) the Originator's obligations under this Agreement
shall remain unchanged, (ii) the Originator shall remain solely responsible for
the performance of such obligations, (iii) the Borrower and the Agent shall
continue to deal solely and directly with the Originator in connection with the
Originator's
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rights and obligations under this Agreement and the other Loan Documents, and
(iv) no Bank shall transfer or grant any participating interest under which the
Participant has rights to approve any amendment to, or any consent or waiver
with respect to, this Agreement or any other Loan Document, except to waiver
would require unanimous consent of the Banks as described in the first proviso
to Section 10.1. In the case of any such participation, the Participant shall be
entitled to the benefit of Sections 3.1, 3.3 and 10.5 as though it were also a
Bank hereunder, and if amounts outstanding under this Agreement are due and
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall be deemed to have
the right of set-off in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Bank under this Agreement.
(e) Notwithstanding any other provision in this Agreement, any Bank
may at any time assign all or any portion of its rights under and interest in
this Agreement and the Note held by it for the purpose of creating a security
interest in favor of any Federal Reserve Bank in accordance with Regulation A of
the FRB or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve
Bank may enforce such pledge or security interest in any manner permitted under
applicable law.
10.9 Confidentiality. Each Bank agrees to take and to cause its Affiliates
to take normal and reasonable precautions and exercise due care to maintain the
confidentiality of all information identified as "confidential" or "secret" by
the Borrower and provided to it by the Borrower or any Subsidiary, or by the
Agent on such Company's or Subsidiary's behalf, under this Agreement or any
other Loan Document, and neither it nor any of its Affiliates shall use any such
information other than in connection with or in enforcement of this Agreement
and the other Loan Documents or in connection with other business now or
hereafter existing or contemplated with the Borrower or any Subsidiary; except
to the extent such information (i) was or becomes generally available to the
public other than as a result of disclosure by the Bank, or (ii) was or becomes
available on a non-confidential basis from a source other than the Borrower,
provided that such source is not bound by a legal or contractual obligation
known to the Bank; provided, however, that any Bank may disclose such
information (A) at the request or pursuant to any requirement of any
Governmental Authority to which the Bank is subject or in connection with an
examination of such Bank by any such authority; (B) pursuant to subpoena or
other court process; (C) when required to do so in accordance with the
provisions of any applicable Requirement of Law; (D) to the extent reasonably
required in connection with any litigation or proceeding to which the Agent, any
Bank or their respective Affiliates may be party; (E) after the occurrence of a
Default, to the extent reasonably required in connection with the
78
exercise of any remedy hereunder or under any other Loan Document; (F) to such
Bank's independent auditors and other professional advisors; (G) to any
Participant or Assignee, actual or potential, provided that such Person agrees
in writing to keep such information confidential to the same extent required of
the Banks hereunder; (H) as to any Ban or its Affiliates, as expressly permitted
under the terms of any other document or agreement regarding confidentiality to
which the Borrower or any Subsidiary is party with such Bank or such Affiliate;
and (I) to its Affiliates; provided, however, that in the event any Bank is
requested to disclose confidential information pursuant to this Section 10.9
(A), (B), (C) or (D), such Bank shall notify the Borrower promptly, if it may
lawfully so do, so that the Borrower may seek a protective order or other
appropriate remedy.
10.10 Set-off. In addition to any rights and remedies of the Banks provided
by law, if an Event of Default exists or the Loans have been accelerated, each
Bank or any Affiliate, which is an Eligible Assignee, thereof is authorized at
any time and from time to time, without prior notice to the Borrower, any such
notice being waived by the Borrower to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held by, and other indebtedness at any time
owing by, such Bank to or for the credit or the account of the Borrower against
any and all Obligations owing to such Bank, now or hereafter existing,
irrespective of whether or not the Agent or such Bank shall have made demand
under this Agreement or any Loan Document and although such obligations may be
contingent or unmatured and each such Affiliate is hereby irrevocably authorized
to permit such set-off and appropriation. Each Bank agrees promptly to notify
the Borrower and the Agent after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application.
10.11 Notification of Addresses, Lending Offices, Etc. Each Bank shall
notify the Agent in writing of any changes in the address to which notices to
the Bank should be directed, of addresses of any Lending Office, of payment
instructions in respect of all payments to be made to it hereunder and of such
other administrative information as the Agent shall reasonably request.
10.12 Counterparts. This Agreement may be executed in any number of
separate counterparts, each of which, when so executed, shall be deemed an
original, and all of said counterparts taken together shall be deemed to
constitute but one and the same instrument.
10.13 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or
79
enforceability of the remaining provisions of this Agreement or any instrument
or agreement required hereunder.
10.14 No Third Parties Benefited. This Agreement is made and entered into
for the sole protection and legal benefit of the Borrower, the Banks, the Agent
and the Agent-Related Persons, and successors and assigns and no other Person
shall be a direct or indirect legal beneficiary of, or have any direct or
indirect cause of action or claim in connection with, this Agreement or any of
the other Loan Documents.
10.15 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA; PROVIDED THAT THE AGENT
AND THE BANKS SHALL RETAIN ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF CALIFORNIA, AND BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF The Borrower, THE AGENT AND
THE BANKS CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF The Borrower, THE AGENT AND
THE BANKS IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY OBJECTION TO THE
LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY
NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH
JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. The
Borrower, THE AGENT AND THE BANKS EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
10.16 Waiver of Jury Trial. THE CREDIT PARTIES, THE BANKS AND THE AGENT
EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN
DOCUMENTS, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION,
PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST
ANY OTHER PARTY OR ANY AGENT-RELATED PERSON, PARTICIPANT OR ASSIGNEE, WHETHER
WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR OTHERWISE. THE CREDIT PARTIES,
THE BANKS AND THE AGENT EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL
BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE
PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED
BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY PROVISION HEREOF OR THEREOF.
THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
80
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS.
10.17 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the Credit
Parties, the Banks and the Agent, and supersedes all prior or contemporaneous
agreements and understandings of such Persons, verbal or written, relating to
the subject matter hereof and thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered in Los Angeles by their proper and duly authorized
officers as of the day and year first above written.
GENTLE DENTAL SERVICE CORPORATION
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
GMS DENTAL GROUP MANAGEMENT, INC.
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
GMS DENTAL GROUP MANAGEMENT OF
SOUTHERN CALIFORNIA, INC.
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
GMS HAWAII ACQUISITION COMPANY
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
GMS DENTAL GROUP MANAGEMENT OF
HAWAII, INC.
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
82
GMS DENTAL GROUP MANAGEMENT OF THE
MOUNTAIN STATES, INC.
By: XXXXXXX XXXXXX XXXXX
------------------------------------
Title:
IMPERIAL BANK, as Agent
By: XXXX X. XXXXXX
------------------------------------
Title: SVP
IMPERIAL BANK, as a Bank
By: XXXX X.XXXXXX
------------------------------------
Title: SVP
83
