EXHIBIT 10.2
AMENDMENT NO. 1 TO
SECURITIES PURCHASE AGREEMENT
AMENDMENT NO. 1 TO SECURITIES PURCHASE AGREEMENT, dated as of June
16, 1997 (this "Consent and Amendment"), among Castle Dental Centers, Inc. (the
"Company"), Xxxx X. Xxxxxx, D.D.S., P.C. ("New PC") and each of the Investors
named on the signature pages hereto (the "Investors"). Capitalized terms used
and not otherwise defined herein shall have the meanings ascribed thereto in the
Securities Purchase Agreement, dated as of December 18, 1995, among the Company,
New PC, Old PC and the Investors, as amended by the Waiver and Amendment, dated
as of May 31, 1996, among the Company, New PC, Old PC and the Investors (as
amended, the "Original Purchase Agreement").
RECITALS
WHEREAS, pursuant to the terms and conditions set forth in this
Consent and Amendment, the Company desires to increase the amount of the loans
made to the Company by the Investors under the Senior Subordinated Notes by
amending and rearranging the obligations of the Company under the documents and
agreements creating the obligations under the Senior Subordinated Notes,
including the Original Purchase Agreement and the other Related Documents;
WHEREAS, the Company has requested that the Investors consent to
certain amendments to, and rearrangements of, the Original Purchase Agreement in
order to increase the amount of, and rearrange the obligations under, the Senior
Subordinated Notes and the documents and agreements creating the obligations
thereunder, including the Original Purchase Agreement and the other Related
Documents;
WHEREAS, pursuant to the terms and conditions set forth in this
Consent and Amendment, the Investors desire to increase the amount of the loans
made to the Company by the Investors and to purchase certain securities of the
Company;
WHEREAS, pursuant to paragraph 13C of the Original Purchase
Agreement, the matters to be consented to herein require the consent of the
holders of a majority of the aggregate unpaid principal amount of the Senior
Subordinated Notes; and
WHEREAS, the holders of all of the Senior Subordinated Notes
outstanding on the date hereof are willing to consent to the matters set forth
herein on the terms and conditions specified herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein, the parties hereto agree as follows:
I. VALIDITY OF ORIGINAL PURCHASE AGREEMENT. The Original Purchase
Agreement shall remain in full force and effect except as the provisions thereof
are specifically modified herein. Other than references to "Securities", "Senior
Subordinated Notes", "Convertible Preferred Stock", "Closing" or "Closing Date"
in Sections 1, 2, 3, 4 and 5 and paragraphs 6B and 10Y of the Original Purchase
Agreement which shall not be modified by this Consent and Amendment, references
in the Original Purchase Agreement to (i) "this Agreement" shall be deemed to
refer to such Agreement as amended by this Consent and Amendment, (ii) the other
Related Documents shall be deemed to refer to such Agreements as amended by the
Amended Related Documents (as defined below), (iii) "Securities" shall be deemed
to include the New Securities, (iv) "Senior Subordinated Notes" shall be deemed
to include the New Senior Subordinated Notes, (v) "Convertible Preferred Stock"
shall be deemed to include the Series C Preferred (as defined below) and (vi)
"Closing" or "Closing Date" shall be deemed to include the Closing or Closing
Date, as applicable, under this Consent and Amendment. Notwithstanding anything
to the contrary in this Consent and Amendment, all provisions hereof remain
subject to the subordination and other provisions of Section 8 of the Original
Purchase Agreement.
II. CONSENT. Pursuant to paragraph 13C of the Original Purchase
Agreement and subject to the terms and conditions contained herein, the holders
of all of the Senior Subordinated Notes outstanding on the date hereof hereby
consent, effective on the date when the conditions set forth in Section V below
shall have been satisfied, to the amendments to the Original Purchase Agreement
effected hereby and to the amendments to the other Related Documents effected by
the Amended Related Documents.
III. AMENDMENTS AND SUPPLEMENTS.
1. AUTHORIZATION OF ISSUE OF SECURITIES. Section 1 of the Original
Purchase Agreement is hereby amended and supplemented by adding the following
paragraphs to the end thereof:
"1A-1. NEW SENIOR SUBORDINATED NOTES. In addition to the Senior
Subordinated Notes, the Company will authorize the issuance, sale and delivery
to the Investors of new senior subordinated notes ("NEW SENIOR SUBORDINATED
NOTES" and individually called a "NEW SENIOR SUBORDINATED NOTE") in the
aggregate principal amount of $2,000,000, to be dated the date of issue thereof,
to mature (subject to Section 4 hereof) January 31, 1998 and to bear interest on
the unpaid balances thereof from the date thereof at the rate of 12% per annum
until the principal thereof shall become due and payable. Upon the occurrence
and during the continuation of any payment default (other than a payment default
in respect of any Installment) under paragraph 9A(i) or paragraph 9A(ii), the
rate of interest under this Senior Subordinated Note shall be increased to a
rate per annum from time to time equal to the lower of (a) 16% and (b) the
maximum rate, if any, permitted by applicable law, compounded quarterly. Such
New Senior Subordinated Notes shall be substantially in the form of Exhibit A
attached to Amendment No. 1 hereto. Interest will be payable monthly in arrears
in cash on the last day of each month in each year, commencing on June 30, 1997.
The New Senior Subordinated Notes shall bear a legend on their face, indicating
that the New Senior Subordinated Notes have been issued with original issue
discount and the name and address of the Company's representative who, upon the
request of a holder, can supply information about such original issue discount.
1B-1. CONVERTIBLE PREFERRED STOCK. The Company will also authorize
the issuance, sale and delivery to the Investors of 485,382 shares of its Series
C Convertible Preferred Stock, par value $.001 per share (herein called the
"SERIES C PREFERRED", and the New Senior Subordinated Notes and the Series C
Preferred shall be referred to herein collectively as the "NEW SECURITIES"). The
powers, designations, preferences and relative participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the Series C Preferred are set forth in the Certificate of Designation of the
Series C Preferred in the form of Exhibit B-1 attached to Amendment No. 1 hereto
(the "CERTIFICATE OF DESIGNATION")."
2. PAYMENTS AND PREPAYMENTS OF THE NEW SENIOR SUBORDINATED NOTES.
Section 4 of the Original Purchase Agreement is hereby amended and supplemented
by adding the following paragraphs to the end thereof:
"4A-1. GENERAL. The New Senior Subordinated Notes shall be subject
to mandatory payments as specified in paragraph 4B-1 and to the optional
prepayments under the circumstances set forth in paragraphs 4C-1 and 4D-1. No
partial prepayment of the New Senior Subordinated Notes pursuant to paragraph
4D-1 shall relieve the Company of its obligations to make any of the required
prepayments pursuant to paragraph 4B-1.
4B-1. MANDATORY PAYMENTS AND PREPAYMENTS OF THE NEW SENIOR
SUBORDINATED NOTES. (a) On January 31, 1998, the principal amount of the New
Senior Subordinated Notes then outstanding, together with all accrued and unpaid
interest thereon to and including such date, shall become immediately due and
payable by the Company and shall be paid by the Company to the Investors.
(b) If the Company or any Subsidiary shall issue any Debt (as
defined in the Bank Debt Agreement), other than Debt permitted by Section 9.01
of the Bank Debt Agreement, or any public or private offering pursuant to which
the Company or any of its Subsidiaries sells its equity securities (the issuance
of such Debt or such public or private offering is hereinafter referred to as a
"REFINANCING"), 100% of the Net Cash Proceeds (as defined in the Bank Debt
Agreement) thereof shall on the first Business Day after receipt be applied:
(i) unless a Default specified in Section 10.01(a) of the Bank
Debt Agreement has occurred and is continuing and unless such Default
would not be cured by the Refinancing, to the outstanding principal and
accrued interest owing on the Revolving Credit Loan (as defined in the
Bank Debt Agreement), Advancing Term Loan (as defined in the Bank Debt
Agreement) and the New Senior Subordinated Notes on a pro rata basis in
proportion to the unpaid principal amounts of the New Senior Subordinated
Notes on the one hand and the Revolving Credit Loans and Advancing Term
Loan on the other hand, and after such loans have been paid in full to the
principal and accrued interest owing on the Term Loan (as defined in the
Bank Debt Agreement); and
(ii) if a Default specified in Section 10.01(a) of the Bank
Debt Agreement exists and is continuing and such Default would not be
cured by the Refinancing, first to Indebtedness owing to the lender under
the Bank Debt Agreement, second to Indebtedness owing under the New Senior
Subordinated Notes and after such Indebtedness has been paid in full to
such other Debt or uses as Borrower may direct.
No later than 30 days prior to any such public or private securities offering or
financing, the Company shall provide written notice to the holders of the New
Senior Subordinated Notes setting forth estimates of the proceeds the Company
will receive therefrom.
4C-1. PREPAYMENTS OF THE NEW SENIOR SUBORDINATED NOTES UPON A CHANGE
OF CONTROL. Upon a Change of Control the principal amount of the New Senior
Subordinated Notes outstanding, together with all accrued and unpaid interest
thereon to the Repayment Date shall become due and payable on the Repayment Date
and shall be paid by the Company to the holders of the New Senior Subordinated
Notes. Upon the occurrence of a Change of Control, or the Company acquiring
knowledge of a pending Change of Control, the notice furnished to each holder of
New Senior Subordinated Notes under paragraph 6N shall (i) refer specifically to
paragraph 4C-1, (ii) state that the Company will prepay the principal amount of
all of the New Senior Subordinated Notes outstanding held by each holder of New
Senior Subordinated Notes, together with all accrued and unpaid interest to the
date of prepayment and (iii) indicate that the Company will prepay the New
Senior Subordinated Notes as provided in clause (ii) above simultaneously with
such Change of Control (the "REPAYMENT DATE"). If a proposed Change of Control
shall not occur, (i) the Company shall have no obligation under this paragraph
4C-1 to prepay any New Senior Subordinated Notes notwithstanding the fact that
the notice required pursuant to Section 6N had previously been delivered in
connection with such proposed Change of Control, (ii) the obligations of the
Company under this paragraph 4C-1 shall not be affected with respect to any
subsequent Change of Control, and (iii) if any holder of Series C Preferred
shall have converted all or any shares of Series C Preferred after receiving the
notice referred to in this paragraph 4C-1, the Company shall be required, at the
election of such holder, to issue new shares of Senior C Preferred in exchange
for the Common Stock issued upon conversion of such shares of Series C
Preferred.
4D-1. OPTIONAL PREPAYMENTS OF THE NEW SENIOR SUBORDINATED NOTES. The
New Senior Subordinated Notes shall be subject to prepayment, in whole or in
part, at the option of the Company at any time and from time to time at a price
equal to (x) the outstanding principal amount of the New Senior Subordinated
Notes to be prepaid PLUS (y) all accrued and unpaid interest thereon up to and
including the date of prepayment.
4E-1. NOTICE OF PREPAYMENTS. In the event of prepayment pursuant to
paragraph 4D-1, written notice of such prepayment shall be given by the Company
by first-class, certified mail, return receipt requested, postage prepaid to the
holders of New Senior Subordinated Notes at their respective addresses as the
same appear on the records of the Company, 30 days prior to the prepayment date,
specifying the prepayment date, the principal amount of the New Senior
Subordinated Notes to be prepaid on such date and that such prepayment is to be
made pursuant to paragraph 4D-1. Notice of prepayment having been given as
aforesaid, the principal amount of the New Senior Subordinated Notes specified
in such notice, together with interest thereon to the prepayment date, shall
become due and payable on such prepayment date.
4F-1. MANDATORY PAYMENTS AND PARTIAL PREPAYMENTS PRO RATA. If there
is more than one holder of the New Senior Subordinated Notes, the aggregate
principal amount of each partial prepayment of the New Senior Subordinated Notes
shall be allocated among the holders of the New Senior Subordinated Notes at the
time outstanding in proportion to the unpaid principal amounts of the New Senior
Subordinated Notes respectively held by each such holder. For purposes of
allocation pursuant to this paragraph 4F-1 only, each New Senior Subordinated
Note (to the extent possible) shall be rounded to the nearest $1,000."
3. REQUIRED REDEMPTION AND OPTIONAL REDEMPTION OF THE SERIES C
PREFERRED. Section 5 of the Original Purchase Agreement is hereby amended and
supplemented by adding the following paragraphs to the end thereof:
"5A-1. OPTION OF HOLDERS TO PUT SERIES C PREFERRED UPON A CHANGE OF
CONTROL. Upon the occurrence of a Change of Control, any holder of shares of
Series C Preferred shall have the right upon written notice as hereinafter
provided in paragraph 5B-1 to require the Company to redeem at the Option
Closing (as hereinafter defined), and the Company agrees to so purchase out of
funds legally available therefor, all or any of the shares of Series C
Preferred. The redemption price for such shares of Series C Preferred shall be
paid by certified check at the Option Closing or by wire transfer of immediately
available funds denominated in U.S. dollars to one or more accounts designated
by the holders of such shares of Series C Preferred to the Company prior to the
Option Closing in an amount equal to the greater of (i) the Fair Market Value at
the time of the Change of Control Notice of the Common Stock into which such
shares of Series C Preferred are then convertible; (ii) the change of control
value of the Common Stock into which such shares of Series C Preferred are
convertible determined by applying to such Common Stock the valuation derived
from the purchase price (giving effect to any and all consideration) paid by the
acquiring Person or Persons in the Change of Control; and (iii) $600,000.
5B-1. EXERCISE OF THE CHANGE OF CONTROL PUT OPTION. Upon the
occurrence of a Change of Control, or the Company acquiring knowledge of a
pending Change of Control, the notice furnished to each holder of New Securities
under clause (iv) of paragraph 6N (the "CHANGE OF CONTROL NOTICE") shall (i)
refer specifically to this paragraph 5B-1, (ii) state that the Company may be
required to redeem all of the outstanding shares of Series C Preferred, (iii)
contain the Company's calculation of the redemption price for the shares of
Series C Preferred to be redeemed (including a detail of the Fair Market Value
of the Common Stock at the time of the Change of Control Notice), (iv) indicate
that the Company will redeem the shares of Series C Preferred as provided in
clause (ii) above at the Option Closing upon written notice of the exercise of
an option by a holder of shares of Series C Preferred, (v) indicate that a
closing (the "OPTION CLOSING") for such purchase and sale shall take place on a
date specified in the notice, which date shall be a date occurring not earlier
than 30 days nor more than 60 days after the date on which the notice is
delivered, (vi) indicate where the Option Closing shall take place and (vii) be
delivered by certified mail return receipt requested. A holder of shares of
Series C Preferred shall furnish written notice to the Company of the exercise
of an option pursuant to paragraph 5B-1 within at least 10 days prior to the
Option Closing. At the Option Closing, the Company shall pay the redemption
price for the securities being redeemed determined as described above against
delivery of the securities being purchased. No waiver by a holder of any shares
of Series C Preferred of its right under this paragraph 5B-1 to require the
redemption of any or all of the shares of Series C Preferred held by such holder
in respect of a Change of Control shall affect the rights of such holder under
this paragraph 5B-1 in respect of any subsequent Change of Control.
5C-1. PUT OPTION OF HOLDERS OF SHARES OF SERIES C PREFERRED UPON THE
ABSENCE OF A LIQUID SECONDARY MARKET. If at any time after June 5, 2002, there
is no Liquid Secondary Market, any holder of shares of Series C Preferred shall
have the right (the "PUT RIGHT") upon delivery of a Put Notice (as hereinafter
defined in paragraph 5D-1), to require the Company to redeem at the Put Option
Closing (as hereinafter defined in paragraph 5D-1), and the Company agrees to so
purchase out of funds legally available therefor, all or any of the shares of
Series C Preferred. The redemption price for the shares of Series C Preferred
shall be paid at the Put Option Closing by certified check or by wire transfer
of immediately available funds denominated in U.S. dollars to one or more
accounts designated by the holders of the shares of Series C Preferred to the
Company prior to the Put Option Closing in an amount equal to the Fair Market
Value at the time of the Put Notice relating to the Common Stock into which the
shares of Series C Preferred subject to the Put Right are convertible. The
redemption price for the Series C Preferred shall bear interest on the unpaid
balances thereof at the rate of 12% per annum from and after the Put Option
Closing until the balance thereof shall have been paid in full.
5D-1. EXERCISE OF THE PUT OPTION. To exercise its Put Right, any
holder of shares of Series C Preferred shall deliver to the Company a written
notice (the "PUT NOTICE") which shall (i) refer specifically to this xxxxxxxxx
0X-0, (xx) state the number of shares of Series C Preferred held by such holder
that the Company is required to redeem, (iii) contain such holder's request that
the Company determine the Fair Market Value at the time of the Put Notice of the
Common Stock into which the shares of Series C Preferred are convertible, (iv)
indicate that a closing (the "PUT OPTION CLOSING") for such redemption shall
take place on a date specified in the notice, which date shall be a date
occurring not earlier than 45 days nor more than 60 days after the date on which
the notice is delivered, (v) indicate where the Put Option Closing shall take
place and (vi) be delivered by certified mail return receipt requested. The
Company covenants that it will promptly (and in any event no later than 25 days
after receipt of the Put Notice) determine, and notify in writing the holders of
shares of Series C Preferred who have delivered a Put Notice of the Fair Market
Value at the time of the Put Notice of the Common Stock in accordance with
paragraph 5E-1 below; PROVIDED, HOWEVER, that in the event that any holder of
shares of Series C Preferred exercises its right to refer the question of
valuation to an investment banking firm, the Put Option Closing shall take place
on the later of (1) the date specified in the Put Notice and (2) 5 Business Days
after the determination of the Fair Market Value has been completed in
accordance with paragraph 5E-1 below. At the Put Option Closing, the Company
shall pay the redemption price for the securities being purchased determined as
described in paragraph 5E-1 below against delivery of the securities being
redeemed.
5E-1. FAIR MARKET VALUE The term "FAIR MARKET VALUE" means the value
(which shall not take into effect any minority discounts) of the Common Stock as
determined by the price per share of such Common Stock which the Company could
obtain from a willing buyer (not a current employee, officer, consultant or
director or any Affiliate of any such Person) for such shares sold by the
Company, as determined in good faith by the Board of Directors of the Company;
PROVIDED, HOWEVER, that if (i) the Investors' nominee on the Board of Directors
of the Company has not affirmatively voted in favor of such determination made
by the Board of Directors of the Company, or (ii) there is no such nominee, the
Investors may refer the question of valuation (which shall not take into effect
any minority discounts) for final settlement to a nationally recognized
investment banking firm designated by the Investors and reasonably acceptable to
the Company; and provided, further, that if the parties cannot agree on such a
firm, each party shall choose a nationally recognized investment banking firm,
which shall choose a third firm which shall be nationally recognized and that
third firm shall determine the Fair Market Value, which determination shall be
final and binding. The cost relating to retaining any investment banking firm(s)
pursuant to this paragraph 5E-1 shall be borne by the Company.
5F-1. OPTIONAL REDEMPTION OF THE SERIES C PREFERRED. (a) Subject to
the rights of holders of shares of Series C Preferred to convert such shares of
Series C Preferred pursuant to the provisions of the Certificate of Designation
and the rights of holders of shares of Series C Preferred to put such shares of
Series C Preferred pursuant to paragraphs 5A-1 or 5C-1 hereof, the shares of
Series C Preferred shall be subject to redemption at the Company's option, in
whole but not in part, at any time on or after a Qualifying Public Offering of
Common Stock.
(b) The redemption price for the shares of Series C Preferred shall
be payable immediately upon redemption, by certified or bank cashier's check,
and shall be $.001 (subject to appropriate adjustments for stock splits,
combinations, recapitalizations, stock dividends and similar events) multiplied
by the number of shares of Common Stock issuable upon conversion of the shares
of Series C Preferred so redeemed.
5G-1. NOTICE OF REDEMPTION. The Company shall give each holder of
shares of Series C Preferred written notice of the redemption pursuant to
paragraph 5G-1 not less than 60 days prior to the redemption date, specifying
such redemption date, that all of the outstanding shares of Series C Preferred
are to be redeemed on such date and that such redemption is to be made pursuant
to paragraph 5G-1. Such notice shall be accompanied by an Officer's Certificate
stating that the applicable conditions set forth in paragraph 5G-1 have been
fulfilled. Notice of redemption having been given as aforesaid, the redemption
amount due in respect of all of the shares of Series C Preferred and as
calculated in paragraph 5G-1(b), shall become due and payable on such redemption
date unless the holder of such shares of Series C Preferred (i) shall have
converted such shares of Series C Preferred, in whole or in part, prior to such
redemption date pursuant to the terms of the Certificate of Designation, (ii)
shall have put such shares of the Series C Preferred, in whole or in part,
pursuant to paragraph 5A-1 or 5C-1 or (iii) unless the filing by the Company of
a registration statement under the Securities Act relating to the Common Stock
obtainable upon conversion of the shares of Series C Preferred shall have been
requested by a holder thereof (either before or after receipt of such notice)
pursuant to the Registration Rights Agreement, in which case the redemption
shall be effected 30 days after the declaration of effectiveness of such
registration statement by the Commission. Should the shares of Series C
Preferred not be redeemed on such redemption date due to the Company's failure
to perform its obligations under this paragraph 5G-1, such redemption may be
effected only after compliance with the provisions of this Section 5 from and
after such redemption date."
4. AFFIRMATIVE COVENANTS. Section 6 of the Original Purchase
Agreement is hereby amended and supplemented by adding the following paragraph
to the end thereof:
"6B-1. USE OF PROCEEDS. The proceeds of the sale of the New
Securities shall be used (i) for general working capital purposes and (ii) to
fund the option payments required to be made under the Option Agreement for the
Purchase and Sale of Businesses of Southwest Dental Associates, L.C. among
Castle Dental Centers of Texas, Inc., the Company, Xxxx Xxxxxxx, D.D.S., Xxxxxx
Xxxxxxx, Xx. and New PC."
5. NEGATIVE COVENANTS. Section 7 of the Original Purchase Agreement
is hereby amended and supplemented by amending paragraphs 7B and 7P thereof in
their entirety to read as follows:
"7B. RESTRICTIONS ON INDEBTEDNESS AND REPAYMENT OF INDEBTEDNESS.
Each of Castle PC and the Company covenants that it will not incur, create,
assume or suffer to exist any Indebtedness or permit any of its Subsidiaries to
do any of the foregoing, other than the following:
(i) Senior Debt;
(ii) Indebtedness represented by the Senior Subordinated Notes
and this Agreement;
(iii) Indebtedness of the Company which by its terms is
subordinated to the Senior Subordinated Notes, provided that no such
Indebtedness is guaranteed or incurred by any Subsidiary of the
Company; and
(iv) Indebtedness secured by Liens permitted pursuant to
paragraph 7C.
In addition, each of Castle PC and the Company covenants that it
will not, and will not permit any Subsidiary to, prepay any Indebtedness junior
to, or pari-passu with, the Senior Subordinated Notes; PROVIDED, HOWEVER, that
the Company may (i) prepay Indebtedness that is pari-passu with the Senior
Subordinated Notes if the Senior Subordinated Notes are prepaid pro-rata with
such pari-passu Indebtedness and (ii) make payments under the Deferred
Compensation Agreement in accordance with the terms thereof."
"7P. COMPENSATION ARRANGEMENTS Except as set forth on Schedule 7P
attached to Amendment No. 1 hereto, each of Castle PC and the Company covenants
that it will not, and will not permit any of its Subsidiaries to, make
compensation payments (whether in the form of salaries, consulting fees,
bonuses, commissions or other supplemental compensation) to any executive
officer of the Company or any Subsidiary."
6. PAYMENT OF INTEREST. Until the earlier to occur of (a) a
Refinancing or (b) Final Maturity Date (as defined in the Bank Debt Agreement),
the Investors hereby agree that in lieu of the cash payment of interest on the
Senior Subordinated Notes (excluding for this purpose the New Senior
Subordinated Notes), the Investors will accept non-cash consideration equivalent
in value, as determined by the mutual agreement of the parties hereto, to the
cash interest payments otherwise due on the Senior Subordinated Notes (excluding
for this purpose the New Senior Subordinated Notes).
7. SUBORDINATION. Section 8A of the Original Agreement is hereby
amended and restated in its entirety to read as follows:
"8A. SUBORDINATED DEBT SUBORDINATE TO SENIOR DEBT. The Senior
Subordinated Notes, the Interest Notes and payments in respect of the redemption
of the Convertible Preferred Stock shall be junior and subordinate to all Senior
Debt (as defined in Section 12) to the extent and in the manner provided in this
Section 8 and each holder of a Senior Subordinated Note, by its acceptance
thereof, agrees to be bound by the provisions of this Section 8. The Senior
Subordinated Notes, the Interest Notes and payments in respect of the redemption
of the Convertible Preferred Stock shall not be junior or subordinate to any
Indebtedness of the Company other than the Senior Debt. For purposes hereof,
Indebtedness evidenced by the Senior Subordinated Notes, the Interest Notes,
including any refinancing, extension or modification thereof, and payments in
respect of the redemption of the Convertible Preferred Stock shall constitute
"SUBORDINATED DEBT"."
8. LEGEND. The certificates evidencing the Convertible Preferred
Stock shall bear the legend set forth below.
"PAYMENTS IN RESPECT OF THE REDEMPTION OF THE CONVERTIBLE PREFERRED STOCK
ARE SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT
PROVIDED IN, AND ARE OTHERWISE SUBJECT TO THE TERMS OF SECTION 8 OF THAT
CERTAIN SECURITIES PURCHASE AGREEMENT DATED AS OF DECEMBER 18, 1995 (AS
AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME PURSUANT TO
THE TERMS THEREOF), BETWEEN CASTLE DENTAL CENTERS, INC. AND THE INVESTORS
NAMED ON THE SIGNATURE PAGES THEREOF."
IV. PURCHASE AND SALE OF SECURITIES.
(a) PURCHASE AND SALE. The Company hereby agrees to sell to the
Investors and, subject to the terms and conditions herein set forth, the
Investors severally agree to purchase from the Company, the securities set forth
opposite the name of each of the Investors on the Signature pages hereof. The
parties hereby agree that (a) the aggregate purchase price for the New Senior
Subordinated Notes is $1,999,514.62 and (b) the aggregate purchase price for the
Series C Preferred is $485.38.
(b) CLOSING. The purchase and delivery of the New Securities to be
purchased by the Investors shall take place at a closing (the "CLOSING") at the
offices of Xxxxxxx Xxxx & Xxxxxxxxx, One Citicorp Center, 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000, at 10:00 a.m., local time, on June 16, 1997 (or at
such other time and place or on such other Business Day thereafter as the
parties hereto shall agree) (herein called the "CLOSING DATE"). On the Closing
Date, the Company will deliver the New Securities to be purchased by the
Investors payable to or registered in the names of the Investors and/or the
Investors' nominees or other designees specified on the signatures pages hereof
in the amounts set forth opposite the name of the Investors on the signature
pages hereof, against receipt of the purchase price therefor by wire transfer to
NationsBank Texas, Houston, Texas, ABA #: 000000000, Account #: 2664811824,
Reference: Castle Dental Centers, Inc. If at the Closing, the Company shall, in
breach of this Agreement, fail to tender to the Investors any of the New
Securities to be purchased by them or if any of the conditions specified in
Section V hereof shall not have been satisfied or waived by the Investors, the
Investors shall, at their election, be relieved of all further obligations under
this Agreement without thereby waiving any other rights they may have by reason
of such failure or such non-fulfillment. Notwithstanding anything to the
contrary, the obligation of the Company to deliver any New Securities to any
Investor at the Closing shall be conditioned on its concurrent receipt of the
purchase price of all of the New Securities from the Investors.
V. CONDITIONS TO EFFECTIVENESS OF CONSENT AND AMENDMENT. The
effectiveness of the consent of the Investors provided for in Section II hereof,
the amendments and supplements provided for in Section III hereof, and the
waiver provided for in Section VII hereof and the Investors' obligation to
purchase and pay for the New Securities to be purchased by them hereunder is
subject to the satisfaction, on or before the Closing Date, of all of the
following conditions:
(a) OPINION OF COUNSEL TO THE COMPANY AND CASTLE PC. The Investors
shall have received from Xxxxxxxxx & Xxxxxxxxx, L.L.P., counsel to the Company
and Castle PC, a legal opinion addressed to the Investors and dated the Closing
Date, substantially in the form of Exhibit C attached hereto. Such opinion shall
also cover such other matters incident to the matters herein contemplated as the
Investors may reasonably request, including the form of all papers and the
validity of all proceedings.
(b) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties contained in Section 10 of the Original Purchase Agreement, as
amended hereby and those otherwise made in writing by or on behalf of the
Company or Castle PC and contained in any document, certificate or other written
statement provided to the Investors, in connection with the transactions
contemplated by this Consent and Amendment shall be true and correct in all
material respects when made and on and as of the Closing Date, except to the
extent of changes caused by the transactions herein contemplated; all of the
covenants and obligations of the Company hereunder or under the Original
Purchase Agreement, as amended hereby to be performed or observed on or prior to
the Closing shall have been duly performed or observed; there shall exist on the
Closing Date and after giving effect to such transactions no Default or Event of
Default; and the Company and Castle PC shall have delivered to the Investors an
Officer's Certificate, dated the Closing Date, to the foregoing effects.
(c) ARTICLES OF INCORPORATION AND BY-LAWS. The Company shall have
amended the Certificate of Incorporation to effect the amendments set forth on
Exhibit B-2 hereto. The Investors shall have received certificates, dated the
Closing Date, of the Secretary of the Company attaching (i) true and complete
copies of the Certificate of Incorporation of the Company as filed with the
appropriate state officials of its jurisdiction of incorporation with all
amendments thereto, (ii) true and complete copies of the By-laws of the Company
in effect as of such date, (iii) certificates of good standing of the
appropriate officials of the jurisdiction of incorporation of the Company, (iv)
resolutions of the Board of Directors of the Company authorizing (a) the
execution, delivery and performance of the Amended Related Documents, (b) the
issuance and delivery of the New Securities and (c) the reservation for issuance
of a sufficient number of shares of Common Stock into which the Series C
Preferred may be exercised to permit such exercise, (v) resolutions of the Board
of Directors of Castle PC authorizing the execution, delivery and performance of
the Amended Related Documents to which it is a party, and (vi) certificate as to
the incumbency of the officers of the Company and Castle PC executing this
Agreement or any other Amended Related Documents.
(d) PURCHASE PERMITTED BY APPLICABLE LAWS. The purchase of and
payment for the New Securities shall not be prohibited by any applicable law or
governmental regulation (including, without limitation, Regulations G, T and X
of the Board of Governors of the Federal Reserve System) and shall not subject
the Investors to any tax, penalty, liability or other onerous condition under or
pursuant to any applicable law or governmental regulation, and the Investors
shall have received such certificates or other evidence as they may request to
establish compliance with this condition.
(e) SECURITYHOLDERS AGREEMENT. The Investors shall have received a
fully executed counterpart of the Amended and Restated Securityholders Agreement
in substantially the form of Exhibit D hereto (the "Amended Securityholders
Agreement") and such Agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived.
(f) REGISTRATION RIGHTS AGREEMENT. The Investors shall have received
a fully executed counterpart of the Amended and Restated Registration Rights
Agreement in substantially the form of Exhibit E hereto (the "Amended
Registration Rights Agreement" and, collectively with the Amended
Securityholders Agreement, the Certificate of Incorporation, as amended by the
Certificate of Designation, and the Original Purchase Agreement, as amended
hereby, the "Amended Related Documents") and such Agreement shall be in full
force and effect and no term or condition thereof shall have been amended,
modified or waived.
(g) COMPLIANCE WITH SECURITIES LAWS. The offering and sale of the
New Securities under this Consent and Amendment shall have complied with all
applicable requirements of federal and state securities laws, and the Investors
shall have received evidence of such compliance in form and substance
satisfactory to them.
(h) PROCEEDINGS. All required corporate and other proceedings taken
or required to be taken in connection with the transactions contemplated hereby
and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors and their counsel, and the Investors and their
counsel shall have received all such counterpart originals or certified or other
copies of such documents as they may reasonably request.
(i) NO ADVERSE U.S. LEGISLATION, ACTION OR DECISION. No legislation,
order, rule, ruling or regulation shall have been enacted or made by or on
behalf of any governmental body, department or agency of the United States, nor
shall any legislation have been introduced and favorably reported for passage to
either House of Congress by any committee of either such House to which such
legislation has been referred for consideration, nor shall any decision of any
court of competent jurisdiction within the United States have been rendered
which, in the Investors' reasonable judgment, would materially and adversely
affect their investment in the New Securities. There shall be no action, suit,
investigation or proceeding, pending or threatened, against or affecting the
Company, its Subsidiaries or any of their respective properties or rights, or
any of their respective affiliates, associates, officers or directors, before
any court, arbitrator or administrative or governmental body which (i) seeks to
restrain, enjoin, prevent the consummation of or otherwise affect the
transactions contemplated by any of the Amended Related Documents or (ii)
questions the validity or legality of any such transaction or seeks to recover
damages or to obtain other relief in connection with any such transaction, and
there shall be no valid basis for any such action, proceeding or investigation.
(j) APPROVAL AND CONSENTS. The Company and Castle PC shall have duly
received all authorizations, consents, approvals, licenses, franchises, permits
and certificates by or of all federal, state and local governmental authorities
necessary or advisable for the issuance of the New Securities and the
consummation of the transactions contemplated hereby and by the Amended Related
Documents, and all thereof shall be in full force and effect at the time of the
Closing. The Company and Castle PC shall have delivered to the Investors an
Officer's Certificate, dated the Closing Date, to such effect.
(k) MATERIAL CHANGES. Since December 31, 1996 there shall not have
been any changes in the business of the Company or any of its Subsidiaries which
have or could reasonably be expected to, individually or in the aggregate, have
a Material Adverse Effect, nor shall there have been any development or
discovery or any material contingency or other liability which could have such
effect. There shall exist no defaults under the provisions of any instrument
evidencing Indebtedness of the Company or any of its Subsidiaries and the
Company and Castle PC shall have delivered to the Investors an Officer's
Certificate, dated the Closing Date, to such effect.
(l) USE OF PROCEEDS. The Investors shall have received evidence in
form and substance reasonably satisfactory to them with respect to the use of
proceeds by the Company in accordance with paragraph 6B-1.
(m) BANK DEBT AGREEMENT. The Company and the other parties to the
Bank Debt Agreement shall have entered into the Second Amendment and Supplement
to Amended and Restated Credit Agreement ("Amendment No. 2"), dated as of the
date hereof, in the form of Exhibit F hereto, which amendment shall include a
consent to the transactions contemplated by the Amended Related Documents
satisfactory in form and substance to the Investors. All of the conditions
precedent to the execution, delivery and performance of Amendment No. 2 to the
Bank Debt Agreement shall have been satisfied or waived in writing by the Bank
and the Bank Debt Agreement, as so amended, shall be in full force and effect.
The Investors shall have received (i) a copy of any waiver referred to in this
clause (m) and (ii) an Officer's Certificate, dated the Closing Date, to the
effect that no default or event of default exists under the Bank Debt Agreement.
(n) CERTIFICATE OF DESIGNATION. The Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware and the
Investors shall have received a certificate, dated the Closing Date, of the
Secretary of the Company attaching a true and complete copy of the Certificate
of Incorporation as filed with the Secretary of State of the State of Delaware.
(o) PAYMENT OF FEES. The Company shall have paid the fees, expenses
and disbursements of the special counsel of the Investors which are reflected in
statements of such counsel rendered prior to or on the Effective Date; and
thereafter the Company will pay, promptly upon receipt of any supplemental
statements therefor from time to time, additional fees, if any, and
disbursements of such special counsel in connection with the transactions hereby
contemplated (including disbursements that are unposted as of the Effective
Date).
VI. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CASTLE PC.
Each of the Company and Castle PC represents and warrants to each Investor that
the representations and warranties of the Company and Castle PC contained in the
Original Purchase Agreement are true and correct as of the date hereof except
that:
(a) Paragraph 10B of the Original Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"10B FINANCIAL STATEMENTS. The Company has furnished the Investors
with (a) the audited balance sheet of the Company and its Subsidiaries as of
December 31, 1996, together with the related statements of income, changes in
stockholders' equity and cash flow of the Company and its Subsidiaries for such
period, (b) the unaudited balance sheet of the Company and its Subsidiaries as
of March 31, 1997, together with the related unaudited statements of income,
changes in stockholders' equity and cash flow of the Company and its
Subsidiaries, for such nine-month period (the "INTERIM FINANCIALS"). Such
financial statements (including any related schedules and notes) have been
prepared in accordance with GAAP consistently applied throughout the period or
periods in question and show all material liabilities, direct or contingent,
required to be shown in accordance with GAAP consistently applied throughout the
period or periods in question and fairly present, in all material respects, the
financial condition of the Company for the periods indicated therein, except for
normal audit adjustments in the case of the Interim Financials. There has been
no material adverse change in the business, condition (financial or other),
assets, properties, rights, operations or prospects of the Company and its
Subsidiaries since December 31, 1996."
(b) Paragraph 10C of the Original Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"10C CAPITAL STOCK AND RELATED MATTERS. As of the Closing Date, and
after giving effect to the transactions contemplated hereby and pursuant to the
Related Documents, (i) the authorized capital stock of the Company will consist
of a total of 35,000,000 shares as follows: (a) 30,000,000 shares of Common
Stock, par value $.001 per share, of which 4,663,992 shares are issued and
outstanding, the ownership and the consideration paid for such shares is as set
forth on Schedule 10C to Amendment No. 1 hereto and 1,397,238 shares of which
are reserved for issuance upon conversion of the Series A Convertible Preferred
Stock and 485,382 shares of which are reserved for issuance upon conversion of
the Series C Convertible Preferred Stock and (b) 1,244,737 shares of Series A
Convertible Preferred Stock, par value $.001 per share, of which 1,244,737
shares are issued and outstanding and 485,382 shares of Series C Convertible
Preferred Stock, par value $.001 per share, of which 485,382 shares are issued
and outstanding; (ii) all issued and outstanding shares shall have been duly and
validly issued, fully paid and non-assessable; (iii) no shares of Common Stock
or Series A or C Convertible Preferred Stock will be owned or held by or for the
account of the Company or any of its Subsidiaries; (iv) except as set forth on
Schedule 10C to Amendment No. 1 hereto, neither the Company nor any of its
Subsidiaries will have outstanding any securities convertible into or
exchangeable for any shares of capital stock or any rights (either preemptive or
other) to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any other character relating to the issuance of,
any capital stock, or any stock or securities convertible into or exchangeable
for any capital stock; (v) except as set forth on Schedule 10C to Amendment No.
1 hereto, neither the Company nor any of its Subsidiaries will be subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire any shares of its capital stock or warrants or options to purchase shares
of its capital stock; (vi) except as set forth on Schedule 10C to Amendment No.
1 hereto, neither the Company nor any of its Subsidiaries is a party to any
agreement (other than this Agreement and the Securityholders Agreement)
restricting the transfer of any shares of its capital stock; and (vii) neither
the Company nor any of its Subsidiaries will have filed or be required to file,
pursuant to Section 12 of the Exchange Act, a registration statement relating to
any class of debt or equity securities as of the date hereof."
(c) Paragraph 10E of the Original Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"10E. OUTSTANDING DEBT; DEFAULTS. Neither the Company nor any of its
Subsidiaries (i) has outstanding Indebtedness, except as permitted by paragraph
7B, and there exist no material defaults under the provisions of any instrument
evidencing such Indebtedness or of any agreement relating thereto, (ii) is in
default under its Articles of Incorporation (as amended to date) or By-laws,
(iii) is in violation of or in default under or with respect to any indenture,
mortgage, lease or any other contract or agreement to which it is a party or by
which it or any of its property is bound or affected in any respect which could
have a Material Adverse Effect, (iv) has any material debts, liabilities,
obligations (whether absolute, accrued, contingent or otherwise) of any nature
whatsoever other than (A) liabilities appearing on the financial statements, (B)
liabilities incurred in the ordinary course of business since March 31, 1997,
(C) liabilities under contracts to which the Company is a party and which are
listed on Schedule 10E to Amendment No. 1 hereto or which have an obligation
thereunder of less than $10,000 and which were entered into in the ordinary
course of business or (D) liabilities described on the other schedules hereto or
(v) is in material default with respect to any order, writ, injunction or decree
of any court or any Federal, state, municipal or other domestic or foreign
governmental department, commission, board, bureau, agency or instrumentality,
and there exists no condition, event or act which constitutes, or which after
notice, lapse of time, or both, would constitute, such a violation or default
under any of the foregoing."
(d) Paragraph 10S of the Original Purchase Agreement is hereby
amended and restated in its entirety to read as follows:
"10S. SUBSIDIARIES. The Subsidiaries set forth on Schedule 10S to
Amendment No. 1 hereto are the only Subsidiaries of the Company. All the
outstanding shares of stock of such Subsidiaries have been validly issued and
are fully paid and non-assessable and are owned by the Company (or, in the case
of Castle PC by Xx. Xxxx Xxxxxx) free and clear of any Lien or claim. Except as
set forth in Schedule 10S to Amendment No. 1 hereto, no such Subsidiary has
outstanding stock or securities convertible into or exchangeable or exercisable
for any shares of capital stock, nor does it have outstanding any rights to
subscribe for or to purchase, any options for the purchase of, any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any other character relating to the issuance of, any
shares of capital stock or any securities convertible into or exchangeable or
exercisable for any shares of capital stock."
(e) Section 10 of the Original Purchase Agreement is hereby amended
and supplemented to add the following paragraph to the end thereof:
"10Y-1. SERIES C PREFERRED AND EQUITY OF THE COMPANY. As of the
Closing Date, upon conversion of the Series C Preferred held by the Investors,
the shares of Common Stock obtained through such exercise would represent in the
aggregate 7% of the Fully Diluted Outstanding Shares."
VII. WAIVER OF DEFAULTS. It is understood that immediately prior to
the effectiveness of this Consent and Amendment the Company is not in compliance
with respect to certain provisions of the Original Purchase Agreement. Upon the
effectiveness of this Consent and Amendment, the Investors hereby waive for the
periods up to the Closing Date of this Consent and Amendment but not after, any
Defaults or Events of Default created by the aforesaid existing noncompliance.
The foregoing waiver shall not be deemed to be a waiver by the Investors of any
other covenant, condition or obligation on the part of the Company or any
Subsidiary under the Original Purchase Agreement or this Consent and Amendment
or any of the Related Documents or Amended Related Documents.
VIII. MISCELLANEOUS.
(a) LIMITED EFFECT. This Consent and Amendment is limited as
specified and shall not constitute a modification, acceptance or waiver of any
other provision of the Purchase Agreement or any other Related Document.
(b) GOVERNING LAW. THIS CONSENT AND AMENDMENT IS BEING DELIVERED IN
THE STATE OF NEW YORK, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF SUCH STATE.
(c) HEADINGS. The descriptive headings of the several sections of
this Consent and Amendment are inserted for convenience only and do not
constitute a part of this Consent and Amendment.
(d) COUNTERPARTS. This Consent and Amendment may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Consent and
Amendment to produce or account for more than one such counterpart.
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Amendment to be executed by their officers thereunto duly authorized as of the
date first above written.
CASTLE DENTAL CENTERS, INC.
By:
Name:
Title:
XXXX X. XXXXXX, D.D.S., P.C.
By:
Name:
Title:
INVESTORS:
The foregoing Agreement is hereby accepted as of the date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ICI AMERICAN HOLDINGS INC.
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: Principal Amount of New Senior
Xxxxxx X. Xxxxxx Subordinated Notes: $386,000
Managing Director 93,841 shares of Series C
Convertible Preferred Stock
Tax ID Number: 000-000-000
Nominee: NORTHMAN & CO.
Bank: State Street Bank & Trust Company
One Enterprise Drive
Xxxxxxx Xxxxxxx Xxxxxxxx, 0X
Xxxxx Xxxxxx, XX 00000
ABA Routing Number: 0110-00028
Account Number: I510 DDA 00000000
for Master Xxxxx/Xxxxx Xxxxxx
Xxxxxx, XX 00000
BNF: ICI Americas
Physical Delivery State Street Bank & Trust Company
Via Federal Express: 000 Xxxxxxxx Xxxxxx
Incoming Securities, Xxxxxxxxxx
Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxx
Account Name: ICI Americas
Acct.# I510
2
The foregoing Agreement is hereby accepted as of the date first above written.
DECLARATION OF TRUST
FOR DEFINED BENEFIT PLANS
OF ZENECA HOLDINGS INC.
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: Principal Amount of New Senior
Xxxxxx X. Xxxxxx Subordinated Notes: $267,000
Managing Director 64,718 shares of Series C
Convertible Preferred Stock
Tax ID Number: 000-000000
Nominee: FUELSHIP & COMPANY
Bank: State Street Bank & Trust Company
One Enterprise Drive
Xxxxxxx Xxxxxxx Xxxxxxxx, 0X
Xxxxx Xxxxxx, XX 00000
ABA Routing Number: 0110-00028
Account Number: JG10 DDA 34758508
for Master Xxxxx/Xxxxx Xxxxxx
Xxxxxx, XX 00000
BNF: Zeneca Holdings
Physical Delivery
Via Federal Express: State Street Bank & Trust Company
000 Xxxxxxxx Xxxxxx
Incoming Securities, Xxxxxxxxxx
Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx Xxx
Account Name: Zeneca Holdings
Acct.# JG10
3
The foregoing Agreement is hereby accepted as of the date first above written.
DELAWARE STATE EMPLOYEES'
RETIREMENT FUND
c/o Pecks Management Partners Ltd.
Xxx Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx
By: Pecks Management Partners Ltd.,
Its Investment Adviser
By: Principal Amount of New Senior
Xxxxxx X. Xxxxxx Subordinated Notes: $1,347,000
Managing Director 326,823 shares of Series C
Convertible Preferred Stock
Tax ID Number: 516-00-0279
Nominee: NAP & COMPANY
Bank: Mercantile Safe Deposit & Trust Company
0 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxx
ABA Routing Number: 052-000618
Account Number: 214380-8 for State of Delaware account.
Physical Delivery: Chemical Bank
A/C State Street Bank and Trust
Company
4 New York Plaza
Ground Floor/Receive Window
New York, New York
Account: Mercantile - Safe
Deposit & Trust
Acct.# QJ25
4
