EXHIBIT 10.23
CASTLE DENTAL CENTERS, INC.
AND
XXXXXX FINANCIAL, INC.
AND
MIDWEST MEZZANINE FUND II, L.P.
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SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions and Accounting Matters.....................................1
Section 1.01 TERMS DEFINED ABOVE.......................................1
Section 1.02 CERTAIN DEFINED TERMS.....................................1
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS......................12
ARTICLE II
Purchase and Sale of Notes............................................12
Section 2.01 PURCHASE AND SALE OF NOTES...............................12
Section 2.02 FEES.....................................................13
Section 2.03 PREPAYMENTS..............................................13
ARTICLE III
Payments of Principal and Interest....................................14
Section 3.01 PAYMENT OF NOTES.........................................14
Section 3.02 INTEREST.................................................15
ARTICLE IV
Payments; Computations; Etc...........................................15
Section 4.01 PAYMENTS.................................................15
Section 4.02 COMPUTATIONS.............................................16
Section 4.03 INTENTIONALLY OMITTED....................................16
Section 4.04 TAXES....................................................16
ARTICLE V
Capital Adequacy......................................................17
Section 5.01 CAPITAL ADEQUACY; ADDITIONAL COSTS.......................17
Section 5.02 LIMITATION ON EURODOLLAR RATE............................18
Section 5.03 ILLEGALITY...............................................19
Section 5.04 INTEREST ON THE NOTES AT THE BASE RATE PURSUANT TO
SECTIONS 5.01, 5.02 AND 5.03.............................19
Section 5.05 COMPENSATION.............................................19
ARTICLE VI
Conditions Precedent..................................................20
Section 6.01 INITIAL PURCHASE.........................................20
Section 6.02 NO WAIVER................................................22
ARTICLE VII
Representations and Warranties........................................22
Section 7.01 CORPORATE EXISTENCE......................................22
Section 7.02 FINANCIAL CONDITION......................................22
Section 7.03 LITIGATION...............................................23
Section 7.04 NO BREACH................................................23
Section 7.05 AUTHORITY................................................23
Section 7.06 APPROVALS................................................23
Section 7.07 USE OF NOTE PROCEEDS.....................................23
Section 7.08 ERISA....................................................24
Section 7.09 TAXES....................................................25
Section 7.10 TITLES, ETC..............................................25
Section 7.11 NO MATERIAL MISSTATEMENTS................................25
Section 7.12 INVESTMENT COMPANY ACT...................................26
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT.......................26
Section 7.14 SUBSIDIARIES.............................................26
Section 7.15 LOCATION OF BUSINESS AND OFFICES.........................26
Section 7.16 DEFAULTS.................................................26
Section 7.17 ENVIRONMENTAL MATTERS....................................26
Section 7.18 COMPLIANCE WITH THE LAW..................................26
Section 7.19 INSURANCE................................................26
Section 7.20 MANAGEMENT SERVICES AGREEMENTS AND
ACCOUNTS RECEIVABLE PURCHASE AGREEMENTS..................27
Section 7.21 RESTRICTION ON LIENS.....................................27
Section 7.22 MATERIAL AGREEMENTS......................................27
Section 7.23 HEDGING AGREEMENTS.......................................28
Section 7.24 YEAR 2000................................................28
Section 7.25 CAPITALIZATION...........................................28
ARTICLE VIII
Affirmative Covenants.................................................29
Section 8.01 REPORTING REQUIREMENTS...................................29
Section 8.02 LITIGATION...............................................31
Section 8.03 MAINTENANCE, ETC.........................................31
Section 8.04 ENVIRONMENTAL MATTERS....................................32
Section 8.05 FURTHER ASSURANCES.......................................32
Section 8.06 PERFORMANCE OF OBLIGATIONS...............................33
Section 8.07 ERISA INFORMATION AND COMPLIANCE.........................33
Section 8.08 MANAGEMENT SERVICES AGREEMENTS AND
ACCOUNTS RECEIVABLE PURCHASE AGREEMENTS..................33
Section 8.09 GUARANTEE BY ACQUIRED ENTITIES...........................33
Section 8.10 YEAR 2000................................................34
Section 8.11 BOARD OBSERVATION........................................34
Section 8.12 CORRESPONDING AMENDMENT..................................34
ARTICLE IX
Negative Covenants....................................................35
Section 9.01 DEBT.....................................................35
Section 9.02 LIENS....................................................35
Section 9.03 INVESTMENTS, LOANS AND ADVANCES..........................36
Section 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS.................38
Section 9.05 SALES AND LEASEBACKS.....................................38
Section 9.06 NATURE OF BUSINESS.......................................38
Section 9.07 MERGERS, ETC.............................................38
Section 9.08 PROCEEDS OF NOTES........................................38
Section 9.09 ERISA COMPLIANCE.........................................38
Section 9.10 SALE OR DISCOUNT OF RECEIVABLES..........................40
Section 9.11 RATIO OF TOTAL FUNDED DEBT TO CAPITALIZATION.............40
Section 9.12 NET WORTH................................................40
Section 9.13 LEVERAGE RATIO...........................................40
Section 9.14 FIXED CHARGE COVERAGE RATIO..............................40
Section 9.15 RATIO OF TOTAL FUNDED DEBT TO EBITDA.....................41
Section 9.16 CAPITAL EXPENDITURES.....................................41
Section 9.17 ENVIRONMENTAL MATTERS....................................41
Section 9.18 TRANSACTIONS WITH AFFILIATES.............................41
Section 9.19 SUBSIDIARIES.............................................42
Section 9.20 NEGATIVE PLEDGE AGREEMENTS...............................42
Section 9.21 OTHER AGREEMENTS.........................................42
Section 9.22 ACQUIRED ENTITIES........................................42
Section 9.23 AMENDMENT OF CASTLE WEST LLC AGREEMENT...................42
Section 9.24 JUNIOR SUBORDINATION DEBT................................43
Section 9.25 RESTRICTION ON FUNDAMENTAL CHANGES.......................43
Section 9.26 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK...................43
ARTICLE X
Events of Default; Remedies...........................................43
Section 10.01 EVENTS OF DEFAULT.......................................43
Section 10.02 REMEDIES................................................45
ARTICLE XI
Holder Representations and Warranties.................................46
Section 11.01 ACCREDITED INVESTOR.....................................46
ARTICLE XII
Miscellaneous.........................................................46
Section 12.01 WAIVER..................................................46
Section 12.02 NOTICES.................................................47
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC...................47
Section 12.04 AMENDMENTS, ETC.........................................49
Section 12.05 SUCCESSORS AND ASSIGNS..................................49
Section 12.06 ASSIGNMENTS.............................................49
Section 12.07 INVALIDITY..............................................50
Section 12.08 COUNTERPARTS............................................50
Section 12.09 REFERENCES..............................................50
Section 12.10 SURVIVAL................................................50
Section 12.11 CAPTIONS................................................51
Section 12.12 NO ORAL AGREEMENTS......................................51
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION...............51
Section 12.14 INTEREST................................................52
Section 12.15 CONFIDENTIALITY.........................................52
Section 12.16 EFFECTIVENESS...........................................53
Section 12.17 EXCULPATION PROVISIONS..................................53
Section 12.18 SUBORDINATION...........................................54
EXHIBITS AND SCHEDULES
Exhibit A - Form of Subordinated Note
Exhibit B - Form of Convertible Note
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Officer's Certificate
Exhibit E - Due Diligence Items
Exhibit F - Form of Subordination Agreement for Junior Subordinated Debt
Schedule 1.1 - Acquired Entities
Schedule 7.02 - Liabilities
Schedule 7.03 - Litigation
Schedule 7.14 - Subsidiaries
Schedule 7.19 - Insurance
Schedule 7.20 - Management Services Agreements and Accounts Receivable
Purchase Agreements
Schedule 7.22 - Material Agreements
Schedule 7.23 - Hedging Agreements
Schedule 7.25 - Capitalization
Schedule 9.01 - Debt
Schedule 9.02 - Liens
Schedule 9.03 - Investments, Loans and Advances
THIS SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT, dated as of
January 31, 2000, is among CASTLE DENTAL CENTERS, INC., a corporation formed
under the laws of the State of Delaware (the "COMPANY"), XXXXXX FINANCIAL, INC.,
a Delaware corporation ("XXXXXX") and MIDWEST MEZZANINE FUND II, L.P., a
Delaware limited partnership ("MIDWEST") (Xxxxxx and Midwest are sometimes
referred to individually as a "HOLDER" and together, as the "HOLDERS").
R E C I T A L S
A. The Company wishes to sell to Holders, and Holders wish to purchase
from the Company, senior subordinated promissory notes (collectively, the
"SUBORDINATED NOTES") due January 31, 2007, in the aggregate principal amount of
$13,621,536 and senior subordinated convertible promissory notes in the
aggregate principal amount of $1,378,464, convertible into 6% of the fully
diluted common equity ownership of the Company (collectively, the "CONVERTIBLE
NOTES") (the Convertible Notes and Subordinated Notes are collectively referred
to as the "NOTES"), upon the terms and subject to the conditions hereinafter set
forth;
B. In consideration of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
Section 1.01 TERMS DEFINED ABOVE. As used in this Agreement, the terms
"COMPANY", "XXXXXX" , "MIDWEST" and "HOLDER" shall have the meanings indicated
above.
Section 1.02 CERTAIN DEFINED TERMS. As used herein, the following terms
shall have the following meanings (all terms defined in this Article I or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and VICE VERSA):
"ACCOUNTS RECEIVABLE PURCHASE AGREEMENTS" shall mean the Accounts
Receivable Purchase Agreements either previously or, if applicable, hereafter
entered into between an Acquired Entity, as seller, and Company or any
Subsidiary, as buyer, in form and substance satisfactory to Holders.
"ACQUIRED ENTITY" shall mean the entities identified on SCHEDULE 1.1
hereto and all entities (of whatever form) whose assets are acquired by the
Company or any Subsidiary in connection with New Acquisitions, and all new
professional corporations, professional associations or other Persons which
become a party to future Management Services Agreements and Accounts Receivable
Purchase Agreements with Company or any Subsidiary pursuant to New Acquisitions.
"ADDITIONAL COSTS" shall have the meaning assigned such term in Section
5.01(a).
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"AFFECTED NOTES" shall have the meaning assigned such term in Section
5.04.
"AFFILIATE" of any Person shall mean (i) any Person directly or indirectly
controlled by, controlling or under common control with such first Person, (ii)
any director or officer of such first Person or of any Person referred to in
clause (i) above and (iii) if any Person in clause (i) above is an individual,
any member of the immediate family (including parents, spouse and children) of
such individual and any trust whose principal beneficiary is such individual or
one or more members of such immediate family and any Person who is controlled by
any such member or trust. For purposes of this definition, any Person which owns
directly or indirectly 10% or more of the securities having ordinary voting
power for the election of directors or other governing body of a corporation or
10% or more of the partnership or other ownership interests of any other Person
(other than as a limited partner of such other Person) will be deemed to
"CONTROL" (including, with its correlative meanings, "CONTROLLED BY" and "UNDER
COMMON CONTROL WITH") such corporation or other Person.
"AGREEMENT" shall mean this Agreement, as the same may from time to time
be amended, restated, supplemented or otherwise modified from time to time.
"APPLICABLE MARGIN" shall mean (a) with respect to interest calculated by
reference to the Eurodollar Rate, four percent (4%) and (b) with respect to
interest calculated by reference to the Base Rate, two and three quarters
percent (2.75%).
"ASSET PURCHASE" shall mean the acquisition of all or substantially all of
the assets of any Acquired Entity by Company or any Subsidiary pursuant to an
Asset Purchase Agreement.
"ASSET PURCHASE AGREEMENTS" shall mean Asset Purchase Agreements entered
into by Company or any Subsidiary in form and substance satisfactory to Holders
in connection with New Acquisitions.
"BASE RATE" means a variable rate of interest per annum equal to the rate
of interest from time to time published by the Board of Governors of the Federal
Reserve System in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate. Base Rate also includes
rates published in any successor publications of the Federal Reserve System
reporting the Bank prime loan rate or its equivalent. The statistical release
generally sets forth a Bank prime loan rate for each business day. The
applicable Bank prime loan rate for any date not set forth shall be the rate set
forth for the last preceding date. In the event the Board of Governors of the
Federal Reserve System ceases to publish a Bank prime loan rate or equivalent,
the term "Base Rate" shall mean a variable rate of interest per annum equal to
the highest of the "prime rate," "reference rate," "base rate" or other similar
rate as determined by Agent announced from time to time by any of Bankers Trust
Company, The Chase Manhattan Bank or Citibank, N.A. (with the understanding that
any such rate may merely be a reference rate and may not necessarily represent
the lowest or best rate actually charged to any customer by such bank).
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"BUSINESS DAY" shall mean any day other than a day on which commercial
banks are authorized or required to close in Chicago, Illinois or in the
Commonwealth of Pennsylvania and, where such term is used in the definition of
"Quarterly Date" or if such day relates to a payment or prepayment of principal
of or interest on a Note, any day which is also a day on which dealings in
Dollar deposits are carried out in the London interbank market.
"CAPITALIZATION" shall mean shareholder's equity plus Total Funded Debt.
"CHANGE OF CONTROL" shall mean at any time, as a result of one or more
transactions after the date of this Agreement, any "person" or "group" of
persons acting in concert (other than persons owning common stock of the Company
on the Closing Date) shall have "beneficial ownership" of more than 51% of the
outstanding common stock of the Company (within the meaning of Section 13(d) or
14 (d) of the Securities Exchange Act of 1934, as amended, and the applicable
rules and regulations thereunder), PROVIDED that the relationships among the
respective shareholders of the Company on the date of this Agreement shall not
be deemed to constitute all or any combination of them as a "group".
"CLOSING DATE" shall mean January 31, 2000.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time and any successor statute.
"COMMON STOCK" shall mean the common stock, $.001 par value, of the
Company.
"CONSOLIDATED NET INCOME" shall mean with respect to the Company and its
Consolidated Subsidiaries, for any period, the aggregate of the net income (or
loss) of the Company and its Consolidated Subsidiaries after allowances for
taxes for such period, determined on a consolidated basis in accordance with
GAAP; PROVIDED that there shall be excluded from such net income (to the extent
otherwise included therein) the following: (i) the net income of any Person in
which the Company or any Consolidated Subsidiary has an interest (which interest
does not cause the net income of such other Person to be consolidated with the
net income of the Company and its Consolidated Subsidiaries in accordance with
GAAP), except to the extent of the amount of dividends or distributions actually
paid in such period by such other Person to the Company or to a Consolidated
Subsidiary, as the case may be; (ii) the net income (but not loss) of any
Consolidated Subsidiary to the extent that the declaration or payment of
dividends or similar distributions or transfers or loans by that Consolidated
Subsidiary is not at the time permitted by operation of the terms of its charter
or any agreement, instrument or Governmental Requirement applicable to such
Consolidated Subsidiary, or is otherwise restricted or prohibited in each case
determined in accordance with GAAP; (iii) the net income (or loss) of any Person
acquired in a pooling-of-interests transaction for any period prior to the date
of such transaction; (iv) any nonrecurring gains or losses acceptable to Holders
and any extraordinary gains or losses, including gains or losses attributable to
Property sales not in the ordinary course of business; and (v) the
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cumulative effect of a change in accounting principles and any gains or losses
attributable to writeups or write downs of assets.
"CONSOLIDATED SUBSIDIARIES" shall mean each Subsidiary of the Company
(whether now existing or hereafter created or acquired) the financial statements
of which shall be (or should have been) consolidated with the financial
statements of the Company in accordance with GAAP.
"DEBT" shall mean, for any Person the sum of the following (without
duplication): (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or other similar instruments (including principal,
interest, fees and charges); (ii) all obligations of such Person (whether
contingent or otherwise) in respect of bankers' acceptances, letters of credit,
surety or other bonds and similar instruments; (iii) all obligations of such
Person to pay the deferred purchase price of Property or services (other than
for borrowed money); (iv) all obligations under leases which shall have been, or
should have been, in accordance with GAAP, recorded as capital leases in respect
of which such Person is liable (whether contingent or otherwise); (v) all
obligations under leases which require such Person or its Affiliate to make
payments over the term of such lease, including payments at termination, which
are substantially equal to at least eighty percent (80%) of the purchase price
of the Property subject to such lease plus interest as an imputed rate of
interest; (vi) all Debt (as described in the other clauses of this definition)
and other obligations of others secured by a Lien on any asset of such Person,
whether or not such Debt is assumed by such Person; (vii) all Debt (as described
in the other clauses of this definition) and other obligations of others
guaranteed by such Person or in which such Person otherwise assures a creditor
against loss of the debtor or obligations of others; (viii) all obligations or
undertakings of such Person to maintain or cause to be maintained the financial
position or covenants of others or to purchase the Debt or Property of others;
(ix) obligations to deliver goods or services in consideration of advance
payments; and (x) all obligations of such Person under Hedging Agreements.
"DEFAULT" shall mean an Event of Default or an event which with notice or
lapse of time or both would become an Event of Default.
"DOLLARS" and "$" shall mean lawful money of the United States of America.
"EBITDA" shall mean, for any period, the sum of Consolidated Net Income
for such period plus the following expenses or charges to the extent deducted
from Consolidated Net Income in such period: interest, taxes, depreciation,
depletion, amortization and the amount of the settlement of the lawsuit with
Xxxxxx Xxxxxx, D.D.S. up to but not to exceed $1,372,743 as reflected on
Schedule 1 to the Second Amendment to the Senior Credit Agreement, dated as of
September 30, 1999.
"ENVIRONMENTAL LAWS" shall mean any and all Governmental Requirements
pertaining to health or the environment in effect in any and all jurisdictions
in which the Company or any Subsidiary is conducting or at any time has
conducted business, or where any Property of the Company or any Subsidiary is
located, including without limitation, the Oil Pollution Act of 1990 ("OPA"),
the Clean Air Act, as amended, the Comprehensive Environmental, Response,
4
Compensation, and Liability Act of 1980 ("CERCLA"), as amended, the Federal
Water Pollution Control Act, as amended, the Occupational Safety and Health Act
of 1970, as amended, the Resource Conservation and Recovery Act of 1976
("RCRA"), as amended, the Safe Drinking Water Act, as amended, the Toxic
Substances Control Act, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
and other environmental conservation or protection laws. The term "oil" shall
have the meaning specified in OPA, the terms "hazardous substance" and "release"
(or "threatened release") have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") have the meanings specified in
RCRA; PROVIDED, HOWEVER, that (i) in the event either OPA, CERCLA or RCRA is
amended so as to broaden the meaning of any term defined thereby, such broader
meaning shall apply subsequent to the effective date of such amendment and (ii)
to the extent the laws of the state in which any Property of the Company or any
Subsidiary is located establish a meaning for "oil," "hazardous substance,"
"release," "solid waste" or "disposal" which is broader than that specified in
either OPA, CERCLA or RCRA, such broader meaning shall apply.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA AFFILIATE" shall mean each trade or business (whether or not
incorporated) which together with the Company or any Subsidiary would be deemed
to be a "single employer" within the meaning of section 4001(b)(1) of ERISA or
subsections (b), (c), (m) or (o) of section 414 of the Code.
"ERISA EVENT" shall mean (i) a "Reportable Event" described in Section
4043 of ERISA and the regulations issued thereunder, (ii) the withdrawal of the
Company, any Subsidiary or any ERISA Affiliate from a Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA,
(iii) the filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA, (iv) the
institution of proceedings to terminate a Plan by the PBGC or (v) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any Plan.
"EURODOLLAR RATE" shall mean, for each Interest Period, a rate per annum
equal to: (a) the offered rate for deposits in U.S. dollars in an amount
comparable to the amount of the applicable Note in the London interbank market
which is published by the British Bankers' Association, and that currently
appears on Telerate Page 3750, as of 11:00 a.m. (London time) on the day which
is two (2) Business Days prior to the first day of such Interest Period for a
term comparable to such Interest Period; or if, for any reason, such a rate is
not published by the British Bankers' Association on Telerate or any other
source approved by Xxxxxx, the rate per annum equal to the average rate (rounded
upwards, if necessary, to the nearest 1/100 of 1%) at which Xxxxxx determines
that U.S. dollars in an amount comparable to the amount of the applicable Note
is being offered to prime banks at approximately 11:00 a.m. (London time) on the
day which is two (2) Business Days prior to the first day of such Interest
Period for a term comparable to such
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Interest Period for settlement in immediately available funds by leading banks
in the London interbank market selected by Xxxxxx; DIVIDED BY (b) a number equal
to 1.0 MINUS the aggregate (but without duplication) of the rates (expressed as
a decimal fraction) of reserve requirements in effect on the day which is two
(2) Business Days prior to the beginning of such Interest Period (including,
without limitation, basic, supplemental, marginal and emergency reserves under
any regulations of the Board of Governors of the Federal Reserve System or other
governmental authority having jurisdiction with respect thereto, as now and from
time to time in effect) for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) which are required to
be maintained by a member bank of the Federal Reserve System; such rate to be
rounded upward to the next whole multiple of one-sixteenth of one percent
(.0625%).
"EVENT OF DEFAULT" shall have the meaning assigned such term in Section
10.01.
"EXCEPTED LIENS" shall mean: (i) Liens for taxes, assessments or other
governmental charges or levies not yet due or which are being contested in good
faith by appropriate action and for which adequate reserves have been
maintained; (ii) Liens in connection with workmen's compensation, unemployment
insurance or other social security, old age pension or public liability
obligations not yet due or which are being contested in good faith by
appropriate action and for which adequate reserves have been maintained in
accordance with GAAP; (iii) operators', vendors', carriers', warehousemen's,
repairmen's, mechanics', workmen's, materialmen's, construction or other like
Liens arising by operation of law in the ordinary course of business or
statutory landlord's liens, each of which is in respect of obligations that have
not been outstanding more than 90 days or which are being contested in good
faith by appropriate proceedings and for which adequate reserves have been
maintained in accordance with GAAP; (iv) any Liens reserved in leases for rent
and for compliance with the terms of leases in the case of leasehold estates, to
the extent that any such Lien referred to in this clause does not materially
impair the use of the Property covered by such Lien for the purposes for which
such Property is held by the Company or any Subsidiary or materially impair the
value of such Property subject thereto; (v) encumbrances (other than to secure
the payment of borrowed money or the deferred purchase price of Property or
services), easements, restrictions, servitudes, permits, conditions, covenants,
exceptions or reservations in any rights of way or other Property of the Company
or any Subsidiary for the purpose of roads, pipelines, transmission lines,
transportation lines, distribution lines for the removal of gas, oil, coal or
other minerals or timber, and other like purposes, or for the joint or common
use of real estate, rights of way, facilities and equipment, and defects,
irregularities, zoning restrictions and deficiencies in title of any rights of
way or other Property which in the aggregate do not materially impair the use of
such rights of way or other Property for the purposes of which such rights of
way and other Property are held by the Company or any Subsidiary or materially
impair the value of such Property subject thereto; (vi) deposits of cash or
securities to secure the performance of bids, trade contracts, leases, statutory
obligations and other obligations of a like nature incurred in the ordinary
course of business; and (vii) Liens permitted by the Senior Credit Documents.
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"FINANCIAL STATEMENTS" shall mean the financial statement or statements of
the Company and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"GAAP" shall mean generally accepted accounting principles in the United
States of America in effect from time to time.
"GOVERNMENTAL AUTHORITY" shall include the country, the state, county,
city and political subdivisions in which any Person or such Person's Property is
located or which exercises valid jurisdiction over any such Person or such
Person's Property, and any court, agency, department, commission, board, bureau
or instrumentality of any of them including monetary authorities which exercises
valid jurisdiction over any such Person or such Person's Property. Unless
otherwise specified, all references to Governmental Authority herein shall mean
a Governmental Authority having jurisdiction over, where applicable, the
Company, its Subsidiaries or any of their Property or any Holder.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code, ordinance,
order, determination, rule, regulation, judgment, decree, injunction, franchise,
permit, certificate, license, authorization or other directive or requirement
(whether or not having the force of law), including, without limitation,
Environmental Laws, energy regulations and occupational, safety and health
standards or controls, of any Governmental Authority.
"GUARANTORS" shall mean each Subsidiary which may, or is required to,
execute a Subordinated Guaranty Agreement pursuant to Section 9.19.
"HEDGING AGREEMENTS" shall mean any interest rate swap, cap, floor,
collar, forward agreement or other protection agreements or any option with
respect to any such transaction.
"HIGHEST LAWFUL RATE" shall mean the maximum nonusurious interest rate, if
any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the Notes or on other Indebtedness under laws
applicable to Holders which are presently in effect or, to the extent allowed by
law, under such applicable laws which may hereafter be in effect and which allow
a higher maximum nonusurious interest rate than applicable laws now allow.
"INDEBTEDNESS" shall mean any and all amounts owing or to be owing by the
Company or any Subsidiary to Holders in connection with the Subordinated Note
Documents, now or hereafter entered into between or among the Company, any of
its Subsidiaries and any Holder, and all renewals, extensions and/or
rearrangements of any of the above.
"INDEMNIFIED PARTIES" shall have the meaning assigned such term in Section
12.03(a)(ii).
"INDEMNITY MATTERS" shall mean any and all actions, suits, proceedings
(including any investigations, litigation or inquiries), claims, demands and
causes of action made or threatened against a Person and, in connection
therewith, all losses, liabilities, damages (including, without
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limitation, consequential damages) or reasonable costs and expenses of any kind
or nature whatsoever incurred by such Person whether caused by the sole or
concurrent negligence of such Person seeking indemnification.
"INITIAL PURCHASE" shall mean the initial purchase of the Notes upon
satisfaction of the conditions set forth in Sections 6.01 and 6.02.
"INTEREST PERIOD" shall mean each three-month period, with the first
period commencing on the Closing Date and ending on the numerically
corresponding day in the third calendar month thereafter, except that each
Interest Period which commences on the last Business Day of a calendar month (or
on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of the
appropriate subsequent calendar month.
Notwithstanding the foregoing, each Interest Period which would otherwise
end on a day which is not a Business Day shall end on the next succeeding
Business Day (or, if such next succeeding Business Day falls in the next
succeeding calendar month, on the next preceding Business Day).
"JUNIOR SUBORDINATED DEBT" shall mean Debt of the Company or any
Subsidiary that is subordinated to the Indebtedness pursuant to a subordination
agreement substantially in the form of EXHIBIT F and otherwise on terms and
conditions acceptable to Holders.
"LIEN" shall mean any interest in Property securing an obligation owed to,
or a claim by, a Person other than the owner of the Property, whether such
interest is based on the common law, statute or contract, and whether such
obligation or claim is fixed or contingent, and including but not limited to the
lien or security interest arising from a mortgage, encumbrance, pledge, security
agreement, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "LIEN" shall include reservations, exceptions,
encroachments, easements, rights of way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances affecting Property. For the
purposes of this Agreement, the Company or any Subsidiary shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement, or leases under a financing lease or other
arrangement pursuant to which title to the Property has been retained by or
vested in some other Person in a transaction intended to create a financing.
"MAJORITY LENDERS" shall mean the "Majority Lenders" as defined in the
Senior Credit Agreement.
"MANAGEMENT SERVICES AGREEMENTS" shall mean Management Service Agreements
previously or hereafter entered into between an Acquired Entity and Company or
any Subsidiary, in form and substance satisfactory to Holders.
8
"MATERIAL ADVERSE EFFECT" shall mean any material and adverse effect on
(i) the assets, liabilities, financial condition, business, operations or
affairs of the Company and its Subsidiaries taken as a whole different from
those reflected in the Financial Statements or from the facts represented or
warranted in any Subordinated Note Document, or (ii) the ability of the Company
and its Subsidiaries taken as a whole to carry out their business as at the
Closing Date or as proposed as of the Closing Date to be conducted or meet their
obligations under the Subordinated Note Documents on a timely basis.
"MULTIEMPLOYER PLAN" shall mean a Plan defined as such in Section 3(37) or
4001(a)(3) of ERISA.
"NET WORTH" shall mean, as at any date, the sum of the following for the
Company and its Consolidated Subsidiaries determined (without duplication) in
accordance with GAAP:
(i) the amount of preferred stock and common stock at par plus the amount
of surplus of the Company, PLUS
(ii) the retained earnings (or, in the case of retained earnings deficit,
MINUS the amount of such deficit).
"NEW ACQUISITION" shall mean the acquisition of dental practices and/or
management service organizations as permitted by this Agreement.
"NOTES" shall mean the Notes provided for by Section 2.01, together with
any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof.
"OTHER TAXES" shall have the meaning assigned such term in Section
4.04(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions.
"PERSON" shall mean any individual, corporation, company, voluntary
association, partnership, joint venture, trust, unincorporated organization or
government or any agency, instrumentality or political subdivision thereof, or
any other form of entity.
"PLAN" shall mean any employee pension benefit plan, as defined in Section
3(2) of ERISA, which (i) is currently or hereafter sponsored, maintained or
contributed to by the Company, any Subsidiary or an ERISA Affiliate or (ii) was
at any time during the preceding six calendar years sponsored, maintained or
contributed to, by the Company, any Subsidiary or an ERISA Affiliate.
"POST-DEFAULT RATE" shall mean, in respect of any principal of any Note or
any other amount payable by the Company under this Agreement or any other
Subordinated Note Document, a rate
9
per annum during the period commencing on the date of occurrence of an Event of
Default until such amount is paid in full or all Events of Default are cured or
waived equal to 2% per annum above the Eurodollar Rate or the Base Rate, as the
case may be, as in effect from time to time plus the Applicable Margin.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"QUARTERLY DATE" shall mean the 15th day of each January, April, July and
October, commencing April 15, 2000; PROVIDED, HOWEVER, that if any such day is
not a Business Day, such Quarterly Date shall be the next succeeding Business
Day.
"REGISTRATION RIGHTS AGREEMENT" shall mean that certain Registration
Rights Agreement, dated as of January 31, 2000, by and among the Company and the
stockholders party thereto.
"REGULATION D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"REGULATORY CHANGE" shall mean any change after the Closing Date in any
Governmental Requirement (including Regulation D) or the adoption or making
after such date of any interpretations, directives or requests applying to a
class of lenders of or under any Governmental Requirement (whether or not having
the force of law) by any Governmental Authority charged with the interpretation
or administration thereof.
"RESPONSIBLE OFFICER" shall mean, as to any Person, the Chief Executive
Officer, the President or any Vice President of such Person and, with respect to
financial matters, the term "Responsible Officer" shall include the Chief
Financial Officer of such Person. Unless otherwise specified, all references to
a Responsible Officer herein shall mean a Responsible Officer of the Company.
"SEC" shall mean the Securities and Exchange Commission or any successor
Governmental Authority.
"SENIOR AGENT" shall mean Bank of America, N.A. (formerly known as
NationsBank of Texas, N.A.) (together with any duly appointed successor) for the
Senior Lenders.
"SENIOR CREDIT AGREEMENT" shall mean that certain Amended and Restated
Credit Agreement dated as of December 18, 1998, as amended by First Amendment to
Amended and Restated Credit Agreement dated as of July 20, 1999, Second
Amendment to Amended and Restated Credit Agreement dated as of September 30,
1999 and Third Amendment to Amended and Restated Credit Agreement dated as of
January 31, 2000, as the same may hereafter be amended, restated, supplemented
or otherwise modified from time to time as permitted herein and in the
Subordination Agreement.
10
"SENIOR CREDIT DOCUMENTS" shall mean the Senior Credit Agreement and the
"Loan Documents" (as defined in the Senior Credit Agreement) in each instance as
in effect on the date hereof and as the same may be amended, modified or
supplemented from time to time as permitted herein.
"SENIOR INDEBTEDNESS" shall mean "Senior Debt" as such term is defined in
the Subordination Agreement.
"SENIOR FUNDED DEBT" shall mean, at any date and with respect to the
Company and its Subsidiaries, all Debt for borrowed money (excluding the
Indebtedness and other Debt expressly subordinated to the Indebtedness in form
and substance satisfactory to the Holders), any capital lease obligations and
any guaranty with respect to Senior Funded Debt of another person.
"SENIOR LENDERS" shall mean each Person that is or shall become a lender
under the Senior Credit Agreement for so long as such Person shall be a party to
that Agreement.
"SETTLEMENT AGREEMENT" shall mean that certain letter agreement dated
January 28, 2000 among the Company, Castle Dental Centers of California, L.L.C.,
CDC of California, Inc. and the Persons referred to therein as the "DCS
Parties".
"SHARES" shall mean the Common Stock issued and/or issuable upon
conversion of all or any part of the Convertible Notes.
"SPECIAL ENTITY" shall mean any joint venture, limited liability company
or partnership, general or limited partnership or any other type of partnership
or company other than a corporation in which the Company or one or more of its
other Subsidiaries is a member, owner, partner or joint venturer and owns,
directly or indirectly, at least a majority of the equity of such entity or
controls such entity, but excluding any tax partnerships that are not classified
as partnerships under state law. For purposes of this definition, any Person
which owns directly or indirectly an equity investment in another Person which
allows the first Person to manage or elect managers who manage the normal
activities of such second Person will be deemed to "control" such second Person
(E.G. a sole general partner controls a limited partnership).
"STOCKHOLDERS AGREEMENT" shall mean that certain Stockholders Agreement,
dated as of January __, 2000, by and among the Company and the stockholders
party thereto.
"STOCK PURCHASE" shall mean any acquisition of all capital stock of any
Acquired Entity by Company or a Subsidiary pursuant to a Stock Purchase
Agreement.
"STOCK PURCHASE AGREEMENTS" shall mean each stock purchase agreement
entered into by Company or any Subsidiary in connection with New Acquisitions.
11
"SUBORDINATED GUARANTY AGREEMENT" shall mean an agreement executed by the
Guarantors subordinated on terms substantially as provided in the Subordination
Agreement and otherwise in form and substance satisfactory to Holders
guaranteeing, unconditionally, payment of the Indebtedness, as the same may be
amended, modified or supplemented from time to time.
"SUBORDINATED NOTE DOCUMENTS" shall mean this Agreement, the Notes, the
Subordinated Guaranty Agreement, the Stockholders Agreement and the Registration
Rights Agreement.
"SUBORDINATION AGREEMENT" shall mean that certain Subordination and
Intercreditor Agreement of even date herewith among the Company, Holders,
Guarantors and the Senior Agent, as such Agreement may be amended from time to
time as provided therein.
"SUBSIDIARY" shall mean (i) any corporation of which at least a majority
of the outstanding shares of stock having by the terms thereof ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by the Company or one or more of its Subsidiaries or by the Company
and one or more of its Subsidiaries and (ii) any Special Entity. Unless
otherwise indicated herein, each reference to the term "Subsidiary" shall mean a
Subsidiary of the Company.
"TAXES" shall have the meaning assigned such term in Section 4.06(a).
"TOTAL FUNDED DEBT" shall mean Senior Funded Debt, the Indebtedness plus
all other debt expressly subordinated to the Senior Indebtedness, including
without limitation, any contingent Debt resulting from the guaranty of a future
stock price of capital stock issued by the Company or an Affiliate of the
Company to a seller in consideration for an acquisition, all in form and
substance satisfactory to Holders.
"WHOLLY-OWNED SUBSIDIARY" shall mean, as to the Company, any Subsidiary of
which all of the outstanding shares of capital stock or other equity interests,
on a fully-diluted basis, are owned by the Company or one or more of the
Wholly-Owned Subsidiaries or by the Company and one or more of the Wholly-Owned
Subsidiaries.
Section 1.03 ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
determinations with respect to accounting matters hereunder shall be made, and
all financial statements and certificates and reports as to financial matters
required to be furnished to Holders hereunder shall be prepared, in accordance
with GAAP, applied on a basis consistent with the audited financial statements
of the Company referred to in Section 7.02 (except for changes concurred with by
the Company's independent public accountants).
ARTICLE II
12
PURCHASE AND SALE OF NOTES
Section 2.01 PURCHASE AND SALE OF NOTES.
(a) Subject to the terms and conditions herein set forth, the Company
agrees that it will issue and sell to each of Xxxxxx and Midwest, and each of
Xxxxxx and Midwest agrees that it will acquire from the Company on the Closing
Date, the Subordinated Notes in an original principal amount of $9,081,024 and
$4,540,512, respectively, in substantially the form attached hereto as EXHIBIT
A, appropriated completed in conformity herewith, the purchase price of which
shall be $9,081,024 and $4,540,512, respectively.
(b) Subject to the terms and conditions herein set forth, the Company
agrees that it will issue and sell to each of Xxxxxx and Midwest, and each of
Xxxxxx and Midwest agrees that it will acquire from the Company, on the Closing
Date, for the purchase price of $918,976 and $459,488, respectively, the
Convertible Notes in an original principal amount of $918,976 and $459,488,
respectively, in substantially the form attached hereto as EXHIBIT B, which
Convertible Notes shall be convertible into 295,253.33 and 147,626.67 shares of
Common Stock of the Company, respectively, constituting an aggregate of 6% of
the sum of the fully diluted Common Stock of the Company as of the date hereof.
The holders of Convertible Notes will be entitled to the benefits of the
Stockholders Agreement and the Registration Rights Agreement.
(c) The Company and each Holder acknowledge that the purchase prices set
forth above for each of the Notes represent their relative fair market values
and agree to be bound by this allocation for all tax purposes pursuant to
Treasury Regulation ss.1.1273-2(h).
Section 2.02 FEES.
(a) COMMITMENT FEE. The Company shall pay to each of Xxxxxx and Midwest on
the Closing Date the fees set forth in separate letter agreements executed
concurrently herewith.
Section 2.03 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Subject to the terms of the Subordination
Agreement, the Company may prepay the outstanding principal of (together with
accrued interest on and, if applicable, the prepayment fee described below) the
Subordinated Notes in full or in part (in minimum amounts of $1,000,000), at any
time and from time to time on any Quarterly Date as applicable, upon not less
than three (3) Business Days' prior notice to Holders. The Company shall not be
permitted to prepay voluntarily the Convertible Notes.
(b) MANDATORY PREPAYMENTS. Subject to the terms of the Subordination
Agreement:
13
(i) if the Company raises any cash proceeds by the offering of
equity, 20% of the net cash proceeds obtained from such equity offering
shall be used to prepay the outstanding principal of the Subordinated
Notes; and
(ii) concurrently with the consummation of a Change in Control,
Company shall pay the outstanding principal of the Subordinated Notes
(together with accrued interest and, if applicable, the prepayment fee
described below).
(c) PREPAYMENT FEES. If the Company should voluntarily prepay the
Subordinated Notes in their entirety, or shall prepay the Subordinated Notes in
their entirety due to a Change in Control, Company shall pay to Holders a
prepayment fee of 2.00% of the principal amount of the Subordinated Notes
prepaid if such prepayment occurs on or prior to the first anniversary of the
Closing Date and 1.00% of the principal amount of the Subordinated Notes prepaid
if such prepayment occurs after the first anniversary of the Closing Date but
prior to the second anniversary of the Closing Date.
(d) CONVERTIBLE NOTES. Subject to the terms of the Subordination
Agreement, the Convertible Notes may be subject to prepayment prior to their
maturity date pursuant to the terms and provisions of the Stockholders
Agreement.
(e) ALLOCATION. Any partial prepayment of Subordinated Notes shall be
allocated among the Subordinated Notes pro rata in accordance with the
respective outstanding principal balances thereof.
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 PAYMENT OF NOTES. (a) Commencing on March 31, 2005, the
aggregate principal amount of the Subordinated Notes outstanding shall be
payable in eight (8) equal consecutive quarterly installments in the amounts and
at the times described below:
DATE AMOUNT
---- ------
March 31, 2005 $1,702,692
June 30, 2005 $1,702,692
September 30, 2005 $1,702,692
December 31, 2005 $1,702,692
March 31, 2006 $1,702,692
June 30, 2006 $1,702,692
September 30, 2006 $1,702,692
14
December 31, 2006 $1,702,692 plus all remaining
accrued interest
(b) The aggregate outstanding principal balance of the Convertible Notes
shall be payable on January 31, 2009.
Section 3.02 INTEREST.
(a) INTEREST RATES. The Company will pay to Holders, interest on the
unpaid principal amount of the Notes for the period commencing on the Closing
Date to, but excluding, the date such Notes shall be paid in full, at the
Eurodollar Rate plus the Applicable Margin, except as provided in Section 5.04.
(b) POST-DEFAULT RATE. Notwithstanding the foregoing, the Company will pay
to Holders, interest at the applicable Post-Default Rate on any principal of any
Note, and (to the fullest extent permitted by law) on any other amount payable
by the Company hereunder or under any Subordinated Note Document, for the period
commencing on the date of an Event of Default until the same is paid in full or
all Events of Default are cured or waived.
(c) DUE DATES. Accrued interest on the Notes shall be payable on each
Quarterly Date, except that interest payable at the Post-Default Rate shall be
payable from time to time on demand. In addition, accrued interest on
Convertible Notes shall be payable on the date of conversion of all or any part
of such Convertible Note.
(d) DETERMINATION OF RATES. Promptly after the determination of any
interest rate provided for herein or any change therein, the Company shall
promptly notify in writing each Holder thereof.
ARTICLE IV
PAYMENTS; COMPUTATIONS; ETC.
Section 4.01 PAYMENTS. Except to the extent otherwise provided herein, all
payments of principal, interest and other amounts to be made by the Company
under this Agreement and the Notes shall be made in Dollars, in immediately
available funds, to each Holder at such account as such Holder shall specify by
notice to the Company from time to time, not later than 11:00 a.m. Chicago time
on the date on which such payments shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day). Such payments shall be made without (to the fullest
extent permitted by applicable law) defense, set-off or counterclaim. Except as
otherwise provided in the definition of "Interest Period", if the due date of
any payment under this Agreement or any Note would otherwise fall on a day which
is
15
not a Business Day such date shall be extended to the next succeeding Business
Day and interest shall be payable for any principal so extended for the period
of such extension.
Section 4.02 COMPUTATIONS. Interest shall be computed on the basis of a
year of 360 days and actual days elapsed (including the first day but excluding
the last day) occurring in the period for which such interest is payable, unless
such calculation would exceed the Highest Lawful Rate, in which case interest
shall be calculated on the per annum basis of a year of 365 or 366 days, as the
case may be. Interest calculated at the Base Rate shall be computed on the basis
of a year or 365 days or 366 days, as the case may be, and actual days elapsed
(including the first day, but excluding the last day) occurring in the period
for which such interest is payable.
Section 4.03 INTENTIONALLY OMITTED.
Section 4.04 TAXES.
(a) PAYMENTS FREE AND CLEAR. Any and all payments by the Company hereunder
shall be made, in accordance with Section 4.01, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, EXCLUDING, in
the case of any Holder, taxes imposed on its income, and franchise or similar
taxes imposed on it, by (i) any jurisdiction (or political subdivision thereof)
of which such Holder is a citizen or resident, (ii) the jurisdiction (or any
political subdivision thereof) in which such Holder is organized, or (iii) any
jurisdiction (or political subdivision thereof) in which such Holder is
presently doing business which taxes are imposed solely as a result of doing
business in such jurisdiction (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "TAXES"). If the Company shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Holder (i) the sum payable shall
be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 4.04) such Holder shall receive an amount equal to the sum it would
have received had no such deductions been made, (ii) the Company shall make such
deductions and (iii) the Company shall pay the full amount deducted to the
relevant taxing authority or other Governmental Authority in accordance with
applicable law and provide such Holder with a receipt thereof.
(b) OTHER TAXES. In addition, to the fullest extent permitted by
applicable law, the Company agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement, any
assignment of the Notes or Shares, or the Subordinated Guaranty Agreement
(hereinafter referred to as "OTHER TAXES").
(C) INDEMNIFICATION. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
THE COMPANY WILL INDEMNIFY EACH HOLDER FOR THE FULL AMOUNT OF TAXES AND OTHER
TAXES (INCLUDING, BUT NOT LIMITED
16
TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY GOVERNMENTAL AUTHORITY ON AMOUNTS
PAYABLE UNDER THIS SECTION 4.04) PAID BY SUCH HOLDER AND ANY LIABILITY
(INCLUDING PENALTIES, INTEREST AND EXPENSES) ARISING THEREFROM OR WITH RESPECT
THERETO, WHETHER OR NOT SUCH TAXES OR OTHER TAXES WERE CORRECTLY OR LEGALLY
ASSERTED UNLESS THE PAYMENT OF SUCH TAXES WAS NOT CORRECTLY OR LEGALLY ASSERTED
AND SUCH HOLDER'S PAYMENT OF SUCH TAXES OR OTHER TAXES WAS THE RESULT OF ITS
GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. ANY PAYMENT PURSUANT TO SUCH
INDEMNIFICATION SHALL BE MADE WITHIN THIRTY (30) DAYS AFTER THE DATE A HOLDER
MAKES WRITTEN DEMAND THEREFOR. IF A HOLDER RECEIVES A REFUND OR CREDIT IN
RESPECT OF ANY TAXES OR OTHER TAXES FOR WHICH SUCH HOLDER HAS RECEIVED PAYMENT
FROM THE COMPANY IT SHALL PROMPTLY NOTIFY THE COMPANY OF SUCH REFUND OR CREDIT
AND SHALL, IF NO DEFAULT HAS OCCURRED AND IS CONTINUING, WITHIN THIRTY (30) DAYS
AFTER RECEIPT OF A REQUEST BY THE COMPANY (OR PROMPTLY UPON RECEIPT, IF THE
COMPANY HAS REQUESTED APPLICATION FOR SUCH REFUND OR CREDIT PURSUANT HERETO),
PAY AN AMOUNT EQUAL TO SUCH REFUND OR CREDIT TO THE COMPANY WITHOUT INTEREST
(BUT WITH ANY INTEREST SO REFUNDED OR CREDITED), PROVIDED THAT THE COMPANY, UPON
THE REQUEST OF A HOLDER, AGREES TO RETURN SUCH REFUND OR CREDIT (PLUS PENALTIES,
INTEREST OR OTHER CHARGES) TO SUCH HOLDER IN THE EVENT SUCH HOLDER IS REQUIRED
TO REPAY SUCH REFUND OR CREDIT.
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 CAPITAL ADEQUACY; ADDITIONAL COSTS.
(a) EURODOLLAR REGULATIONS, ETC. The Company shall pay directly to each
affected Holder from time to time such amounts as such Holder may determine to
be necessary to compensate itself for any costs which it determines are
attributable to its purchasing or maintaining of any Notes at the Eurodollar
Rate or any reduction in any amount receivable by such Holder hereunder in
respect of any Notes at the Eurodollar Rate (such increases in costs and
reductions in amounts receivable being herein called "ADDITIONAL COSTS"),
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Holder under this Agreement or any Note in respect
of any of such Notes at the Eurodollar Rate (other than taxes imposed on the
overall net income of such Holder for any of such Notes at the Eurodollar Rate
by the jurisdiction in which such Holder has its principal office); or (ii)
imposes or modifies any reserve, special deposit, minimum capital, capital ratio
or similar requirements relating to any extensions of credit or other
17
assets of, or any deposits with or other liabilities of such Holder or the
Eurodollar interbank market; or (iii) imposes any other condition affecting this
Agreement or any Notes (or any of such extensions of credit or liabilities). The
affected Holder will notify the Company of any event occurring after the Closing
Date which will entitle it to compensation pursuant to this Section 5.01(a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.
(b) REGULATORY CHANGE. Without limiting the effect of the provisions of
Section 5.01(a), in the event that at any time (by reason of any Regulatory
Change or any other circumstances arising after the Closing Date affecting (A)
any Holder, (B) the Eurodollar interbank market or (C) such Holders position in
such market), the Eurodollar Rate, as determined in good faith by such Holder,
will not adequately and fairly reflect the cost to such Holder of funding at the
Eurodollar Rate, then, if such Holder so elects, by notice to the Company, the
obligation of such Holder to continue calculating interest on the Notes at the
Eurodollar Rate shall be suspended until such Regulatory Change or other
circumstances ceases to be in effect (in which case the provisions of Section
5.04 shall be applicable).
(c) CAPITAL ADEQUACY. Without limiting the effect of the foregoing
provisions of this Section 5.01 (but without duplication), the Company shall pay
directly to each affected Holder from time to time on request such amounts as
such Holder may reasonably determine to be necessary to compensate itself or its
parent or holding company for any costs which it determines are attributable to
the maintenance by such Holder or its parent or holding company, pursuant to any
Governmental Requirement following any Regulatory Change, of capital in respect
of the Notes, such compensation to include, without limitation, an amount equal
to any reduction of the rate of return on assets or equity of such Holder or its
parent or holding company to a level below that which such Holder or its parent
or holding company could have achieved but for such Governmental Requirement.
Each affected Holder will notify the Company that it is entitled to compensation
pursuant to this Section 5.01(c) as promptly as practicable after it determines
to request such compensation.
(d) COMPENSATION PROCEDURE. Upon notifying the Company of the incurrence
of additional costs under this Section 5.01, the affected Holder shall in such
notice to the Company set forth in reasonable detail the basis and amount of its
request for compensation. Determinations and allocations by such Holder for
purposes of this Section 5.01 of the effect of any Regulatory Change pursuant to
Section 5.01(a) or (b), or of the effect of capital maintained pursuant to
Section 5.01(c), on its costs or rate of return of maintaining Notes at the
Eurodollar Rate and of the amounts required to compensate such Holder under this
Section 5.01, shall be conclusive and binding for all purposes, provided that
such determinations and allocations are made on a reasonable basis. Any request
for additional compensation under this Section 5.01 shall be paid by the Company
within thirty (30) days of the receipt by the Company of the notice described in
this Section 5.01(d).
Section 5.02 LIMITATION ON EURODOLLAR RATE. Anything herein to the
contrary notwithstanding, if, on or prior to the determination of any Eurodollar
Rate for any Interest Period:
18
(i) a Holder determines (which determination shall be conclusive,
absent manifest error) that quotations of interest rates for the relevant
deposits referred to in the definition of "Eurodollar Rate" in Section
1.02 are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest at the Eurodollar
Rate as provided herein; or
(ii) a Holder determines (which determination shall be conclusive,
absent manifest error) that the relevant rates of interest referred to in
the definition of "Eurodollar Rate" in Section 1.02 upon the basis of
which the rate of interest at the Eurodollar Rate for such Interest Period
is to be determined are not sufficient to adequately cover the cost to
such Holder of maintaining Notes at the Eurodollar Rate;
then such Holder shall give the Company prompt notice thereof, and so long as
such condition remains in effect, such Holder shall be under no obligation to
continue calculating interest on the Notes at the Eurodollar Rate.
Section 5.03 ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Holder to continue to
maintain Notes at the Eurodollar Rate hereunder, then such Holder shall promptly
notify the Company thereof and such Holder's obligation to continue to calculate
interest on the Notes at the Eurodollar Rate shall be suspended until such time
as such Holder may again maintain the Notes at the Eurodollar Rate (in which
case the provisions of Section 5.04 shall be applicable).
Section 5.04 INTEREST ON THE NOTES AT THE BASE RATE PURSUANT TO SECTIONS
5.01, 5.02 AND 5.03. If the obligation of any Holder to calculate interest on
its Notes at the Eurodollar Rate shall be suspended pursuant to Sections 5.01,
5.02 or 5.03 ("AFFECTED NOTES"), interest on all Affected Notes which would
otherwise be calculated at the Eurodollar Rate shall be calculated instead at
the Base Rate (and, if an event referred to in Section 5.01(b) or Section 5.03
has occurred and the affected Holder so requests by notice to the Company, all
Affected Notes then outstanding shall be calculated at the Base Rate commencing
on the date specified by such Holder in such notice).
Section 5.05 COMPENSATION. The Company shall pay to each affected Holder
within thirty (30) days of receipt of written request of such Holder (which
request shall set forth, in reasonable detail, the basis for requesting such
amounts and which shall be conclusive and binding for all purposes provided that
such determinations are made on a reasonable basis), such amount or amounts as
shall compensate it for any loss, cost, expense or liability which such Holder
determines are attributable to any payment, prepayment or conversion from a
Eurodollar Rate properly made by such Holder or the Company for any reason
(including, without limitation, the acceleration of the Notes pursuant to
Section 10.01) on a date other than the last day of the Interest Period; or
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the principal amount so paid for the period from the
date of such payment to the last day of the Interest Period
19
at the applicable rate of interest for such Note provided for herein over (ii)
the interest component of the amount such Holder would have bid in the London
interbank market for Dollar deposits of leading banks in amounts comparable to
such principal amount and with maturities comparable to such period (as
reasonably determined by such Holder).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 INITIAL PURCHASE.
The obligation of Holders to purchase the Notes is subject to the receipt
by Holders of all fees payable pursuant to Section 2.02 on or before the Closing
Date and the receipt by Holders of the following documents and satisfaction of
the other conditions provided in this Section 6.01, each of which shall be
reasonably satisfactory to Holders in form and substance:
(a) A certificate of the Secretary or an Assistant Secretary of the
Company setting forth (i) resolutions of its board of directors with respect to
the authorization of the Company to execute and deliver the Subordinated Note
Documents to which it is a party and to enter into the transactions contemplated
in those documents, (ii) the officers of the Company (y) who are authorized to
sign the Subordinated Note Documents to which Company is a party and (z) who
will, until replaced by another officer or officers duly authorized for that
purpose, act as its representative for the purposes of signing documents and
giving notices and other communications in connection with this Agreement and
the transactions contemplated hereby, (iii) specimen signatures of the
authorized officers, and (iv) the articles or certificate of incorporation and
bylaws of the Company, certified as being true and complete. Holders may
conclusively rely on such certificate until it receives notice in writing from
the Company to the contrary.
(b) A certificate of the Secretary or an Assistant Secretary of each
Guarantor setting forth (i) resolutions of its board of directors with respect
to the authorization of such Guarantor to execute and deliver the Subordinated
Note Documents to which it is a party and to enter into the transactions
contemplated in those documents, (ii) the officers of such Guarantor (y) who are
authorized to sign the Subordinated Note Documents to which such Guarantor is a
party and (z) who will, until replaced by another officer or officers duly
authorized for that purpose, act as its representative for the purposes of
signing documents and giving notices and other communications in connection with
this Agreement and the transactions contemplated hereby, (iii) specimen
signatures of the authorized officers, and (iv) the articles or certificate of
incorporation and bylaws of such Guarantor, certified as being true and
complete. Holders may conclusively rely on such certificate until they receive
notice in writing from such Guarantor to the contrary.
(c) Certificates of the appropriate state agencies with respect to the
existence, qualification and good standing of the Company and its Subsidiaries.
20
(d) A compliance certificate which shall be substantially in the form of
EXHIBIT C, duly and properly executed by a Responsible Officer and dated as of
the date of the Initial Purchase.
(e) The Notes, duly completed, executed and delivered to each Holder, as
applicable.
(f) The Subordinated Guaranty Agreement duly completed, executed and
delivered to each Holder.
(g) Opinions of Xxxxx Xxxxx and Xxxxxx, counsel to the Company and
Guarantors, in form and substance satisfactory to Holders, as to such matters
incident to the transactions herein contemplated as Holders may reasonably
request.
(h) A certificate of insurance coverage of the Company evidencing that the
Company is carrying insurance in accordance with Section 7.19.
(i) Unaudited pro forma projected consolidated balance sheet of the
Company and its Consolidated Subsidiaries at the Closing Date (which pro forma
shall be based on the consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 1999), and the unaudited pro forma
projected consolidated statements of income of the Company and its Consolidated
Subsidiaries for five (5) years commencing as of the Closing Date, which
represent the Company's good faith estimate of the pro forma projected
consolidated financial condition of the Company and its Consolidated
Subsidiaries as at the Closing Date, after giving effect to the transactions
contemplated herein provided projections as to future performance should not be
construed as a guarantee of future performance.
(j) Certified copies of the Senior Debt Documents, the promissory notes
evidencing the Debt described on Schedule 9.01 and the subordination agreements
executed in connection therewith.
(k) Stockholder's Agreement and Registration Rights Agreement duly
completed, executed and delivered to Holders.
(l) the "Closing" (as defined in the Settlement Agreement) shall have
occurred and payment of the "Full Settlement Amount" (as defined in the
Settlement Agreement) shall occur concurrently herewith.
(m) evidence that the Company has authorized and reserved a sufficient
number of shares of common stock with respect to the conversion of the
Convertible Notes.
(n) payment of all legal fees of counsel to Holders.
(o) with respect to Midwest, duly executed and completed (i) SBA Form 480
(Size Status Declaration) and SBA Form 652 (Assurance of Compliance), (ii) SBA
Form 1031 (Portfolio
21
Finance Report), Part A and B, and (iii) letter regarding SBA matters in form
and substance acceptable to Midwest.
(p) Such other documents as Holders or special counsel to Holders may
reasonably request.
Section 6.02 NO WAIVER. No waiver of any condition precedent shall
preclude Holders from thereafter declaring that the failure of the Company to
satisfy such condition precedent constitutes a Default.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to each Holder:
Section 7.01 CORPORATE EXISTENCE. Each of the Company and each Subsidiary:
(i) is a corporation duly organized, legally existing and in good standing under
the laws of the jurisdiction of its incorporation; (ii) has all requisite
corporate power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its business as
now being or as proposed to be conducted; and (iii) is qualified to do business
in all jurisdictions in which the nature of the business conducted by it makes
such qualification necessary and where failure so to qualify would have a
Material Adverse Effect.
Section 7.02 FINANCIAL CONDITION. The audited consolidated balance sheet
of the Company and its Consolidated Subsidiaries as at December 31, 1998 and the
related consolidated statement of income, stockholders' equity and cash flow of
the Company and its Consolidated Subsidiaries for the fiscal year ended on said
date, with the opinion thereon of Pricewaterhouse Coopers L.L.P. heretofore
furnished to Holders and the unaudited consolidated balance sheet of the Company
and its Consolidated Subsidiaries as at September 30, 1999 and their related
consolidated statements of income, stockholders' equity and cash flow of the
Company and its Consolidated Subsidiaries for the nine month period ended on
such date heretofore furnished to Holders, are complete and correct and fairly
present the consolidated financial condition of the Company and its Consolidated
Subsidiaries as at said dates and the results of its operations for the fiscal
year and the nine month period on said dates, all in accordance with GAAP, as
applied on a consistent basis (subject, in the case of the interim financial
statements, to normal year-end adjustments). Neither the Company nor any
Subsidiary has on the Closing Date any material Debt, contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments, except as referred to or
reflected or provided for in the Financial Statements or in SCHEDULE 7.02. Since
December 31, 1998, there has been no change or event having a Material Adverse
Effect. Since the date of the Financial Statements, neither the business nor the
Properties of the Company or any Subsidiary have been materially and adversely
affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance,
22
embargo, requisition or taking of Property or cancellation of contracts, permits
or concessions by any Governmental Authority, riot, activities of armed forces
or acts of God or of any public enemy. The unaudited pro forma projected
consolidated balance sheet of the Company and its Consolidated Subsidiaries at
the Closing Date (which proforma shall be based on the consolidated balance
sheet of the Company and its Consolidated Subsidiaries as of September 30, 1999,
adjusted to reflect the transactions contemplated herein), and the unaudited pro
forma projected consolidated statement of income of the Company and its
Consolidated Subsidiaries as of the Closing Date, heretofore furnished to
Holders, represent Company's best estimate of the pro forma projected
consolidated financial condition of the Company and its Consolidated
Subsidiaries as at the Closing Date after giving effect to the transactions
contemplated herein provided projections as to future performance should not be
construed as a guarantee of future performance.
Section 7.03 LITIGATION. Except as set forth on Schedule 7.03, at the
Closing Date there is no litigation, legal, administrative or arbitral
proceeding, investigation or other action of any nature pending or, to the
knowledge of the Company threatened against or affecting the Company or any
Subsidiary which could reasonably be expected to have a Material Adverse Effect.
Section 7.04 NO BREACH. Neither the execution and delivery of the
Subordinated Note Documents, nor compliance with the terms and provisions hereof
or thereof will conflict with or result in a breach of, or require any consent
which has not been obtained as of the Closing Date under, the respective charter
or by-laws of the Company or any Subsidiary, or any Governmental Requirement or
any material agreement or instrument to which the Company or any Subsidiary is a
party or by which it is bound or to which it or its Properties are subject, or
constitute a default under any such material agreement or instrument, or result
in the creation or imposition of any Lien upon any of the revenues or assets of
the Company or any Subsidiary pursuant to the terms of any such material
agreement or instrument other than the Liens created by the Senior Credit
Documents.
Section 7.05 AUTHORITY. The Company and each Subsidiary have all necessary
corporate power and authority to execute, deliver and perform its respective
obligations under the Subordinated Note Documents to which it is a party. The
execution, delivery and performance by the Company and each Subsidiary of the
Subordinated Note Documents to which it is a party, have been duly authorized by
all necessary corporate action on its part. The Subordinated Note Documents
constitute the legal, valid and binding obligations of the Company and each
Subsidiary, enforceable in accordance with their terms.
Section 7.06 APPROVALS. No authorizations, approvals or consents of, and
no filings or registrations with, any Governmental Authority are necessary for
the execution, delivery or performance by the Company or any Subsidiary of the
Subordinated Note Documents to which it is a party or for the validity or
enforceability thereof.
Section 7.07 USE OF NOTE PROCEEDS. The proceeds of the Notes shall be used
to provide financing for (i) New Acquisitions or new store openings, (ii)
repayment of existing indebtedness, (iii) payment of costs and expenses
associated with this transaction, (iv) payment of the "Full
23
Settlement Amount" (as defined in the Settlement Agreement) contemplated by the
Settlement Agreement and (v) payment of approximately $430,000 to DCA Limited
Partnership, LLP and related persons. The Company is not engaged principally, or
as one of its important activities, in the business of extending credit for the
purpose, whether immediate, incidental or ultimate, of buying or carrying margin
stock (within the meaning of Regulation T, U or X of the Board of Governors of
the Federal Reserve System) and no part of the proceeds of the Notes will be
used to buy or carry any margin stock.
Section 7.08 ERISA.
(a) The Company, each Subsidiary and each ERISA Affiliate have complied in
all material respects with ERISA and, where applicable, the Code regarding each
Plan.
(b) Each Plan is, and has been, maintained in substantial compliance with
ERISA and, where applicable, the Code.
(c) No act, omission or transaction has occurred which could result in
imposition on the Company, any Subsidiary or any ERISA Affiliate (whether
directly or indirectly) of (i) either a civil penalty assessed pursuant to
section 502(c), (i) or (l) of ERISA or a tax imposed pursuant to Chapter 43 of
Subtitle D of the Code or (ii) breach of fiduciary duty liability damages under
section 409 of ERISA.
(d) No liability to the PBGC (other than for the payment of current
premiums which are not past due) by the Company, any Subsidiary or any ERISA
Affiliate has been or is expected by the Company, any Subsidiary or any ERISA
Affiliate to be incurred with respect to any Plan. No ERISA Event with respect
to any Plan has occurred.
(e) Full payment when due has been made of all amounts which the Company,
any Subsidiary or any ERISA Affiliate is required under the terms of each Plan
or applicable law to have paid as contributions to such Plan, and no accumulated
funding deficiency (as defined in section 302 of ERISA and section 412 of the
Code), whether or not waived, exists with respect to any Plan.
(f) The actuarial present value of the benefit liabilities under each Plan
which is subject to Title IV of ERISA does not, as of the end of the Company's
most recently ended fiscal year, exceed the current value of the assets
(computed on a plan termination basis in accordance with Title IV of ERISA) of
such Plan allocable to such benefit liabilities. The term "actuarial present
value of the benefit liabilities" shall have the meaning specified in section
4041 of ERISA.
(g) None of the Company, any Subsidiary or any ERISA Affiliate sponsors,
maintains, or contributes to an employee welfare benefit plan, as defined in
section 3(1) of ERISA, including, without limitation, any such plan maintained
to provide benefits to former employees of such entities, that may not be
terminated by the Company, a Subsidiary or any ERISA Affiliate in its sole
discretion at any time without any material liability.
24
(h) None of the Company, any Subsidiary or any ERISA Affiliate sponsors,
maintains or contributes to, or has at any time in the preceding six calendar
years, sponsored, maintained or contributed to, any Multiemployer Plan.
(i) None of the Company, any Subsidiary or any ERISA Affiliate is required
to provide security under section 401(a)(29) of the Code due to a Plan amendment
that results in an increase in current liability for the Plan.
Section 7.09 TAXES. Each of the Company and its Subsidiaries has filed all
United States Federal income tax returns and all other tax returns which are
required to be filed by them and have paid all material taxes due pursuant to
such returns or pursuant to any assessment received by the Company or any
Subsidiary. The charges, accruals and reserves on the books of the Company and
its Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Company, adequate. No tax lien has been filed and, to the
knowledge of the Company, no claim is being asserted with respect to any such
tax, fee or other charge.
Section 7.10 TITLES, ETC.
(a) Each of the Company and its Subsidiaries and each Acquired Entity has
good and defensible title to its material (individually or in the aggregate)
Properties, free and clear of all Liens, except Liens permitted by Section 9.02.
(b) All leases and agreements necessary for the conduct of the business of
the Company and its Subsidiaries and each Acquired Entity are valid and
subsisting, in full force and effect and there exists no default or event or
circumstance which with the giving of notice or the passage of time or both
would give rise to a default under any such lease or leases, which would affect
in any material respect the conduct of the business of the Company and its
Subsidiaries.
(c) The licenses, rights, Properties and other assets presently owned,
leased or licensed by the Company and its Subsidiaries and each Acquired Entity,
include all rights, Properties and other assets necessary to permit the Company
and its Subsidiaries and each Acquired Entity to conduct their business in all
material respects in the same manner as its business has been conducted prior to
the Closing Date.
(d) All of the assets and Properties of the Company and its Subsidiaries
and each Acquired Entity which are reasonably necessary for the operation of its
business are in good working condition and are maintained in accordance with
prudent business standards.
Section 7.11 NO MATERIAL MISSTATEMENTS. No written information, statement,
exhibit, certificate, document or report furnished to Holders by the Company or
any Subsidiary in connection with the negotiation of this Agreement contained
any material misstatement of fact or omitted to state a material fact or any
fact necessary to make the statement contained therein not
25
materially misleading in the light of the circumstances in which made and with
respect to the Company and its Subsidiaries taken as a whole.
Section 7.12 INVESTMENT COMPANY ACT. Neither the Company nor any
Subsidiary is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
Section 7.13 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor
any Subsidiary is a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," or a "public utility" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.14 SUBSIDIARIES. Except as set forth on SCHEDULE 7.14, the
Company has no Subsidiaries. In the event that a new Subsidiary is formed or
acquired, Company will provide Holders with a new, updated SCHEDULE 7.14.
Section 7.15 LOCATION OF BUSINESS AND OFFICES. The Company's principal
place of business and chief executive offices are located at the address stated
on the signature page of this Agreement. The principal place of business and
chief executive office of each Subsidiary are located at the addresses stated on
SCHEDULE 7.14.
Section 7.16 DEFAULTS. Neither the Company nor any Subsidiary is in
default nor has any event or circumstance occurred which, but for the expiration
of any applicable grace period or the giving of notice, or both, would
constitute a default under any agreement or instrument to which the Company or
any Subsidiary is a party or by which the Company or any Subsidiary is bound
which default would have a Material Adverse Effect. No Default hereunder or
under the Senior Credit Documents has occurred and is continuing.
Section 7.17 ENVIRONMENTAL MATTERS. Except as would not have a Material
Adverse Effect, neither any Property of the Company nor any Subsidiary nor the
operations conducted thereon violate any law, order or requirement of any court
or Governmental Authority or any Environmental Laws.
Section 7.18 COMPLIANCE WITH THE LAW. Neither the Company nor any
Subsidiary has violated any Governmental Requirement or failed to obtain any
license, permit, franchise or other governmental authorization necessary for the
ownership of any of its Properties or the conduct of its business, which
violation or failure would have (in the event such violation or failure were
asserted by any Person through appropriate action) a Material Adverse Effect.
Section 7.19 INSURANCE. SCHEDULE 7.19 attached hereto contains an accurate
and complete description of all material policies of fire, liability, workmen's
compensation and other forms of insurance owned or held by the Company and each
Subsidiary. All such policies are in full force and effect, all premiums with
respect thereto covering all periods up to and including the date of the
26
closing have been paid, and no notice of cancellation or termination has been
received with respect to any such policy. Such policies are sufficient for
compliance with all requirements of law and of all agreements to which the
Company or any Subsidiary is a party; are valid, outstanding and enforceable
policies; provide adequate insurance coverage in at least such amounts and
against at least such risks (but including in any event public liability) as are
usually insured against in the same general area by companies engaged in the
same or a similar business for the assets and operations of the Company and each
Subsidiary; will remain in full force and effect through the respective dates
set forth in SCHEDULE 7.19 without the payment of additional premiums; and will
not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement. SCHEDULE 7.19 identifies all
material risks, if any, which the Company and its Subsidiaries and their
respective Board of Directors or officers have designated as being self insured.
Neither the Company nor any Subsidiary has been refused any insurance with
respect to its assets or operations, nor has its coverage been limited below
usual and customary policy limits, by an insurance carrier to which it has
applied for any such insurance or with which it has carried insurance during the
last three years. In the event that a new Subsidiary is formed or acquired,
Company will provide Holders with a new, updated SCHEDULE 7.19.
Section 7.20 MANAGEMENT SERVICES AGREEMENTS AND ACCOUNTS RECEIVABLE
PURCHASE AGREEMENTS. The copies of Management Services Agreements and Account
Receivable Purchase Agreements listed on Schedule 7.20 hereto constitute all of
such agreements to which the Company or any of its Subsidiaries are a party. The
above Management Services Agreements and the Accounts Receivable Purchase
Agreements are valid, binding and enforceable against the parties thereto. The
Company and its Subsidiaries have obtained all consents from Governmental
Authorities necessary to perform under the Management Services Agreements, the
failure of which to obtain could have a Material Adverse Effect. In the event
that a new Subsidiary is formed or acquired, any Management Services Agreements
and Accounts Receivable Purchase Agreements binding such Subsidiary shall be
included within the terms of this representation and warranty.
Section 7.21 RESTRICTION ON LIENS. Neither the Company nor any of its
Subsidiaries is a party to any agreement or arrangement (other than the Senior
Credit Agreement and the Senior Credit Documents), or subject to any order,
judgment, writ or decree, which either restricts or purports to restrict its
ability to grant Liens to other Persons on or in respect of their respective
assets or Properties, except for Property subject to Liens permitted under
Section 9.02.
Section 7.22 MATERIAL AGREEMENTS. Set forth on SCHEDULE 7.22 hereto is a
complete and correct list of all material credit agreements, indentures,
purchase agreements, obligations in respect of letters of credit, guarantees,
joint venture agreements, and other instruments in effect or to be in effect as
of the Closing Date (other than Hedging Agreements) providing for, evidencing,
securing or otherwise relating to any Debt of the Company or any of its
Subsidiaries in excess of $250,000, and all obligations of the Company or any of
its Subsidiaries to issuers of surety or appeal bonds issued for account of the
Company or any such Subsidiary in excess of $250,000, and such list correctly
sets forth the names of the debtor or lessee and creditor or lessor with respect
to the Debt or lease obligations outstanding or to be outstanding and the
Property subject to any Lien securing
27
such Debt or lease obligation. In the event that a new Subsidiary is formed or
acquired, Company will provide each Holder with a new, updated SCHEDULE 7.22.
Section 7.23 HEDGING AGREEMENTS. SCHEDULE 7.23 sets forth, as of the
Closing Date, a true and complete list of all Hedging Agreements of the Company,
the material terms thereof (including the type, term, effective date,
termination date and notional amounts or volumes), the net xxxx to market value
thereof, all credit support agreements relating thereto (including any margin
required or supplied), and the counterparty to each such agreement.
Section 7.24 YEAR 2000.
(a) The Company has analyzed the operations of the Company and its
Subsidiaries and Affiliates that could be adversely affected by failure to
become Year 2000 compliant (that is, that computer applications, imbedded
microchips and other systems will be able to perform date-sensitive
functions prior to and after December 31, 1999). The Company reasonably
believes that it is Year 2000 compliant for its operations and those of
its Subsidiaries and Affiliates except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect upon
the financial condition of the Company.
(b) The Company reasonably believes any suppliers and vendors that
are material to the operations of Company or its Subsidiaries and
Affiliates are Year 2000 compliant for their own computer applications
except to the extent that a failure to do so could not reasonably be
expected to have a Material Adverse Effect upon the financial condition of
the Company.
Section 7.25 CAPITALIZATION. The authorized capital stock and other equity
securities of each of the Company and each of its Subsidiaries is as set forth
on Schedule 7.25. All issued and outstanding shares of capital stock and other
equity securities of each of the Company and each of its Subsidiaries are duly
authorized and validly issued, fully paid, non-assessable, free and clear of all
Liens other than those in favor of Senior Agent, and such shares were issued in
compliance with all applicable state and federal laws concerning the issuance of
securities. No shares of the capital stock of Company or any of its
Subsidiaries, other than those described above, are issued and outstanding.
Except as set forth on Schedule 7.25, all of the issued and outstanding capital
stock and other equity securities of Subsidiaries of the Company are owned by
the Company. Except as provided in the Stockholders Agreement and as set forth
on Schedule 7.25, there are no preemptive or other outstanding rights, options,
warrants, conversion rights or similar agreements or understandings for the
purchase or acquisition from Company or any of its Subsidiaries, of any shares
of capital stock or other securities of any such entity.
28
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Subordinated
Notes are outstanding and, with respect to Sections 8.01(a), 8.01(b), 8.01(c),
8.03 and 8.11, so long as any of the Convertible Notes, or Common Stock issued
upon conversion of all or any portion of the Convertible Notes are outstanding:
Section 8.01 REPORTING REQUIREMENTS. The Company shall deliver, or shall
cause to be delivered, to each Holder:
(a) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
within 120 days after the end of each fiscal year of the Company, the audited
consolidated and unaudited consolidating statements of operations, changes in
stockholders' equity, changes in financial position and cash flow of the Company
and its Consolidated Subsidiaries for such fiscal year, and the related
consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries as at the end of such fiscal year, and setting forth
in each case in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by the related opinion of independent public
accountants of recognized national standing acceptable to Holders which opinion
shall state that said financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Consolidated Subsidiaries as at the end of, and for, such fiscal year and that
such financial statements have been prepared in accordance with GAAP, except for
such changes in such principles with which the independent public accountants
shall have concurred and such opinion shall not contain a "going concern" or
like qualification or exception, and a certificate of such accountants stating
that, in making the examination necessary for their opinion, they obtained no
knowledge, except as specifically stated, of any Default.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event
within 45 days after the end of each of the first three fiscal quarterly periods
of each fiscal year of the Company, consolidated and consolidating statements of
income, stockholders' equity, changes in financial position and cash flow of the
Company and its Consolidated Subsidiaries for such period and for the period
from the beginning of the respective fiscal year to the end of such period, and
the related consolidated and consolidating balance sheets as at the end of such
period, and setting forth in each case in comparative form the corresponding
figures for the corresponding period in the preceding fiscal year, accompanied
by the certificate of a Responsible Officer, which certificate shall state that
said financial statements fairly present the consolidated and consolidating
financial condition and results of operations of the Company and its
Consolidated Subsidiaries in accordance with GAAP, as at the end of, and for,
such period (subject to normal year-end audit adjustments).
(c) BUDGET. As soon as available and in any event within thirty (30) days
after the end of each fiscal year of the Company, a budget for the Company and
its Consolidated Subsidiaries, as approved by the board of directors of the
Company, for the following fiscal year setting forth in
29
comparative form corresponding figures from the preceding fiscal year, in
reasonable detail and certified as to its good-faith preparation by a
Responsible Officer.
(d) NOTICE OF DEFAULT, ETC. Promptly after the Company knows that any
Default or any Material Adverse Effect has occurred hereunder or under the
Senior Credit Documents, a notice of such Default or Material Adverse Effect,
describing the same in reasonable detail and the action the Company proposes to
take with respect thereto.
(e) OTHER ACCOUNTING REPORTS. Promptly upon receipt thereof, a copy of
each other report or letter submitted to the Company or any Subsidiary by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company and its Subsidiaries, and a copy of any
response by the Company or any Subsidiary of the Company, or the Board of
Directors of the Company or any Subsidiary of the Company, to such letter or
report.
(f) SEC FILINGS, ETC. Promptly upon its becoming available, each financial
statement, report, notice or proxy statement sent by the Company to stockholders
generally and each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in respect
thereof filed by the Company with or received by the Company in connection
therewith from any securities exchange or the SEC or any successor agency.
(g) NOTICES UNDER OTHER AGREEMENTS. Promptly after the furnishing thereof,
copies of any material statement, report or notice furnished to or any Person
pursuant to the terms of any indenture, loan or credit or other similar
agreement, including without limitation the Senior Credit Documents, other than
this Agreement and not otherwise required to be furnished to Holders pursuant to
any other provision of this Section 8.01.
(h) ANNUAL REVENUE REPORTS. As soon as available and in any event within
120 days after the end of each fiscal year of the Company, a report prepared by
the Company for each dental center setting forth the revenues, expenses and
contributions to profit of such dental center in form and substance acceptable
to Holders.
(i) QUARTERLY REVENUE REPORTS. As soon as available and in any event
within 45 days after the end of each of the first three fiscal quarterly periods
of each fiscal year of the Company, a report by the Company for each dental
center setting forth the revenues, expenses and contributions to profit of such
dental center in form and substance acceptable to Holders.
(j) PLAN REPORT. From time to time such other information regarding the
business, affairs or financial condition of the Company or any Subsidiary
(including, without limitation, any Plan or Multiemployer Plan and any reports
or other information required to be filed under ERISA) as any Holder may
reasonably request.
(k) HEDGING AGREEMENT REPORT. As soon as available and in any event within
ten (10) Business Days after the last day of each calendar quarter, a report, in
form and substance satisfactory
30
to Holders, setting forth as of the last Business Day of such calendar quarter a
true and complete list of all Hedging Agreements of the Company, the material
terms thereof (including the type, term, effective date, termination date and
notional amounts or volumes), the net xxxx to market value therefor, any new
credit support agreements relating thereto not listed on SCHEDULE 7.23, any
margin required or supplied under any credit support document, and the
counterparty to each such agreement.
(l) CAPITAL EXPENDITURES BUDGET. Promptly upon becoming available and in
any event within 30 days after the end of each fiscal year of the Company, a
capital expenditure budget for the next fiscal year setting forth all proposed
capital expenditures to be incurred during such fiscal year.
(m) MODIFICATIONS OF MANAGEMENT SERVICES AGREEMENTS, ETC. Promptly upon
the execution thereof, executed copies of any modification or amendment of any
Management Services Agreement, Accounts Receivable Purchase Agreement or Senior
Credit Document.
The Company shall furnish to each Holder, at the time it furnishes each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate
substantially in the form of EXHIBIT C hereto executed by a Responsible Officer
(i) certifying as to the matters set forth therein and stating that no Default
has occurred and is continuing (or, if any Default has occurred and is
continuing, describing the same in reasonable detail), and (ii) setting forth in
reasonable detail the computations necessary to determine the Company's Total
Funded Debt, Senior Funded Debt and EBITDA and whether the Company is in
compliance with Sections 9.11, 9.12, 9.13, 9.14, 9.15 and 9.16 as of the end of
the respective fiscal quarter or fiscal year.
Section 8.02 LITIGATION. The Company shall promptly give to each Holder
notice of: (i) all legal or arbitral proceedings, and of all proceedings before
any Governmental Authority affecting the Company, any Acquired Entity or any
Subsidiary, except proceedings which, if adversely determined, would not have a
Material Adverse Effect, and (ii) of any litigation or proceeding against or
adversely affecting the Company, any Acquired Entity or any Subsidiary in which
the amount involved is not covered in full by insurance (subject to normal and
customary deductibles and for which the insurer has not assumed the defense), or
in which injunctive or similar relief is sought. The Company will, and will
cause each of its Subsidiaries to, promptly notify each Holder of any claim,
judgment, Lien or other encumbrance affecting any Property of the Company, any
Acquired Entity or any Subsidiary if the value of the claim, judgment, Lien, or
other encumbrance affecting such Property shall exceed $250,000.
Section 8.03 MAINTENANCE, ETC.
(a) GENERALLY. The Company shall and shall cause each Subsidiary to:
preserve and maintain its corporate existence and all of its material rights,
privileges and franchises; keep books of record and account in which full, true
and correct entries will be made of all dealings or transactions in relation to
its business and activities; comply with all Governmental Requirements
31
if failure to comply with such requirements, individually or in the aggregate,
will have a Material Adverse Effect; pay and discharge all taxes, assessments
and governmental charges or levies imposed on it or on its income or profits or
on any of its Property prior to the date on which penalties attach thereto,
except for any such tax, assessment, charge or levy the payment of which is
being contested in good faith and by proper proceedings and against which
adequate reserves are being maintained; upon reasonable notice, permit
representatives of each Holder, during normal business hours, to examine, copy
and make extracts from its books and records, to inspect its Properties, and to
discuss its business and affairs with its officers, all to the extent reasonably
requested by such Holder; and keep, or cause to be kept, insured by financially
sound and reputable insurers all Property of a character usually insured by
Persons engaged in the same or similar business similarly situated against loss
or damage of the kinds and in the amounts customarily insured against by such
Persons and carry such other insurance as is usually carried by such Persons
including, without limitation, environmental risk insurance to the extent
reasonably available.
(b) PROOF OF INSURANCE. Contemporaneously with the delivery of the
financial statements required by Section 8.01(a) to be delivered for each year,
the Company will furnish or cause to be furnished to each Holder a certificate
of insurance coverage from the insurer in form and substance satisfactory to
Holders and, if requested, will furnish Holders copies of the applicable
policies.
(c) OPERATION OF PROPERTIES. The Company will and will cause each
Subsidiary to operate its Properties or cause such Properties to be operated in
a careful and efficient manner in accordance with the practices of the industry
and in compliance with all applicable contracts and agreements and in compliance
in all material respects with all Governmental Requirements.
Section 8.04 ENVIRONMENTAL MATTERS.
(a) ESTABLISHMENT OF PROCEDURES. The Company will and will cause each
Subsidiary to establish and implement such procedures as may be reasonably
necessary to continuously determine and assure that (i) all Property of the
Company and its Subsidiaries and the operations conducted thereon and other
activities of the Company and its Subsidiaries are, in all material respects, in
compliance with and do not violate the requirements of any Environmental Laws,
and (ii) no oil, hazardous substances or solid wastes are disposed of or
otherwise released on or to any Property owned by any such party except in
compliance with Environmental Laws.
(b) NOTICE OF ACTION. The Company will promptly notify each Holder in
writing of any threatened action, investigation or inquiry by any Governmental
Authority of which the Company has knowledge in connection with any
Environmental Laws, excluding routine testing and corrective action.
Section 8.05 FURTHER ASSURANCES. The Company will and will cause each
Subsidiary to cure promptly any defects in the creation and issuance of the
Notes and the execution and delivery of the Subordinated Guaranty Agreement and
this Agreement. The Company at its expense will and will cause each Subsidiary
to promptly execute and deliver to each Holder upon request all such
32
other documents, agreements and instruments to comply with or accomplish the
covenants and agreements of the Company or any Subsidiary, as the case may be,
in any of the Subordinated Note Documents, or to correct any omissions in any of
the Subordinated Note Documents, or to state more fully the security obligations
set out herein or in any of the other Subordinated Note Documents, or to make
any recordings, to file any notices or obtain any consents, all as may be
necessary or appropriate in connection therewith.
Section 8.06 PERFORMANCE OF OBLIGATIONS. The Company will pay the Notes
according to the reading, tenor and effect thereof; and the Company will and
will cause each Subsidiary to do and perform every act and discharge all of the
obligations to be performed and discharged by them under the Subordinated
Guaranty Agreement and this Agreement, at the time or times and in the manner
specified.
Section 8.07 ERISA INFORMATION AND COMPLIANCE. The Company will promptly
furnish and will cause the Subsidiaries and any ERISA Affiliate to promptly
furnish to each Holder (i) promptly after the filing thereof with the United
States Secretary of Labor, the Internal Revenue Service or the PBGC, copies of
each annual and other report with respect to each Plan or any trust created
thereunder, (ii) immediately upon becoming aware of the occurrence of any ERISA
Event or of any "prohibited transaction," as described in section 406 of ERISA
or in section 4975 of the Code, in connection with any Plan or any trust created
thereunder, a written notice signed by a Responsible Officer specifying the
nature thereof, what action the Company, the Subsidiary or the ERISA Affiliate
is taking or proposes to take with respect thereto, and, when known, any action
taken or proposed by the Internal Revenue Service, the Department of Labor or
the PBGC with respect thereto, and (iii) immediately upon receipt thereof,
copies of any notice of the PBGC's intention to terminate or to have a trustee
appointed to administer any Plan. With respect to each Plan (other than a
Multiemployer Plan), the Company will, and will cause each Subsidiary and ERISA
Affiliate to, (i) satisfy in full and in a timely manner, without incurring any
late payment or underpayment charge or penalty and without giving rise to any
lien, all of the contribution and funding requirements of section 412 of the
Code (determined without regard to subsections (d), (e), (f) and (k) thereof)
and of section 302 of ERISA (determined without regard to sections 303, 304 and
306 of ERISA), and (ii) pay, or cause to be paid, to the PBGC in a timely
manner, without incurring any late payment or underpayment charge or penalty,
all premiums required pursuant to sections 4006 and 4007 of ERISA.
Section 8.08 MANAGEMENT SERVICES AGREEMENTS AND ACCOUNTS RECEIVABLE
PURCHASE AGREEMENTS. The Company will and will cause each Subsidiary to do all
things necessary to maintain and keep in full force and effect and to enforce
compliance with the Management Services Agreements and the Accounts Receivable
Purchase Agreements. In the event that a new Subsidiary is formed, any
Management Services Agreements and Accounts Receivable Purchase Agreements
binding such Subsidiary shall be included within the terms of this affirmative
covenant.
Section 8.09 GUARANTEE BY ACQUIRED ENTITIES. In connection with Company's
or any Subsidiary's purchase of all the outstanding stock of any Acquired Entity
pursuant to any Stock
33
Purchase Agreement, upon the request of any Holder at any time thereafter, the
Company will cause such Acquired Entity to guarantee the Indebtedness upon terms
satisfactory to Holders, which guarantee shall be subordinated to the Senior
Indebtedness on terms substantially similar to the Subordinated Guaranty
Agreement.
Section 8.10 YEAR 2000. The Company will promptly notify each Holder in
the event the Company determines that any computer application which is material
to the operations of the Company, its Subsidiaries or any of its material
vendors or suppliers will not be fully Year 2000 compliant on a timely basis,
except to the extent that such failure could not reasonably be expected to have
a Material Adverse Effect upon the financial condition of the Company.
Section 8.11 BOARD OBSERVATION. Each Holder shall have the right to have
one individual (an "OBSERVER") attend any meeting of the Board of Directors of
the Company (the "BOARD") or any committee thereof. Each Observer shall not have
the right to vote on any matter presented to the Board or any committee thereof.
The Company shall give each Observer written notice of each meeting thereof at
the same time and in the same manner as the members of the Board or such
committee receive notice of such meetings, and the Company shall permit each
Observer to attend as an observer at all meetings thereof. Each Observer shall
be entitled to receive all written materials and other information given to the
directors in connection with such meetings at the same time such materials and
information are given to the directors, and each Observer shall keep such
materials and information confidential. If the Company proposes to take any
action by written consent in lieu of a meeting of the Board, the Company shall
give written notice thereof to each Observer prior to the effective date of such
consent describing the nature and substance of such action or including the
proposed text of such written consent.
If an issue is to be discussed or otherwise arises at any Board meeting
which, in the reasonable judgment of the Board, cannot be discussed in the
presence of the Observers in order to avoid a conflict of interest on the part
of the Observers or to preserve an attorney-client or accountant-client
privilege, then such issue may be discussed without the Observers being present
and may be deleted from any materials being distributed in connection with any
meeting at which such issues are to be discussed, so long as each Observer is
given notice of the occurrence of such meeting and the deletion of such
materials.
Section 8.12 CORRESPONDING AMENDMENT. Company agrees that, in the event
any change or amendment is made to the Senior Credit Documents in consideration
of a waiver of an actual or contemplated default or event of default thereunder,
a corresponding change or amendment shall automatically and simultaneously be
deemed to have been made to this Agreement without further action; provided
Company agrees to execute such documents as any Holder may reasonably request to
further memorialize such change or amendments.
34
ARTICLE IX
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Subordinated
Notes are outstanding and, with respect to Section 9.25, so long as any of the
Convertible Notes are outstanding:
Section 9.01 DEBT. Neither the Company nor any Subsidiary will incur,
create, assume or permit to exist any Debt, except:
(a) the Notes, the Indebtedness or any guaranty of or suretyship
arrangement for the Notes or the Indebtedness;
(b) accounts payable (for the deferred purchase price of Property or
services) from time to time incurred in the ordinary course of
business which, if greater than 90 days past the invoice or billing
date, are being contested in good faith by appropriate proceedings
and reserves adequate under GAAP shall have been established
therefor;
(c) Debt under capital leases (as required to be reported on the
financial statements of the Company pursuant to GAAP) not to exceed
$2,500,000 in the aggregate;
(d) Debt of the Company under Hedging Agreements with a Senior Lender or
otherwise approved by Holders;
(e) purchase money Debt not to exceed $2,500,000 in the aggregate;
(f) Debt described on SCHEDULE 9.01;
(g) Junior Subordinated Debt in connection with New Acquisitions; and
(h) Senior Indebtedness.
Section 9.02 LIENS. Neither the Company nor any Subsidiary will create,
incur, assume or permit to exist any Lien on any of its Properties (now owned or
hereafter acquired), except:
(a) Liens securing the payment of any Senior Indebtedness;
(b) Excepted Liens;
(c) Liens disclosed on SCHEDULE 9.02.
35
(d) Liens securing capital leases allowed under Section 9.01(c), but
only on the Property leased with such capital leases.
(e) Liens originally created to secure purchase money Debt permitted
under Section 9.01(e), which in each case shall not exceed 100% of
the lesser of the total purchase price and the fair market value of
the Property acquired as determined at the time of acquisition;
PROVIDED, THAT, (i) the Property to be purchased with the proceeds
of such Debt shall be purchased not more than sixty (60) days prior
to the date of the creation of such Lien and (ii) such Lien
encumbers only the Property so acquired.
Section 9.03 INVESTMENTS, LOANS AND ADVANCES. Neither the Company nor any
Subsidiary will make or permit to remain outstanding any loans or advances to or
investments in any Person, except that the foregoing restriction shall not apply
to:
(a) investments, loans or advances reflected in the Financial Statements
or which are disclosed in SCHEDULE 9.03;
(b) accounts receivable arising in the ordinary course of business;
(c) direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof,
in each case maturing within one year from the date of creation
thereof;
(d) commercial paper maturing within one year from the date of creation
thereof rated in the highest grade by Standard & Poor's Corporation
or Xxxxx'x Investors Service, Inc.;
(e) deposits maturing within one year from the date of creation thereof
with, including certificates of deposit issued by, any Senior Lender
or any office located in the United States of any other bank or
trust company which is organized under the laws of the United States
or any state thereof, has capital, surplus and undivided profits
aggregating at least $100,000,000.00 (as of the date of such Senior
Lender's or bank or trust company's most recent financial reports)
and has a short term deposit rating of no lower than A2 or P2, as
such rating is set forth from time to time, by Standard & Poor's
Corporation or Xxxxx'x Investors Service, Inc., respectively;
(f) deposits in money market funds investing exclusively in investments
described in Section 9.03(c), 9.03(d) or 9.03(e);
(g) investments in, or purchases of, dental practices, provided that
Company delivers to each Holder a duly completed Officer's
Certificate substantially in the form of EXHIBIT D and further
provided that:
36
(i) such purchase is an Asset Purchase or Stock Purchase and, if
such purchase is a Stock Purchase, such Acquired Entity shall be
merged with and into Company or a Subsidiary, and such Subsidiary
(if the surviving entity) shall have executed a Guaranty Agreement
pursuant to Section 9.19 hereof in favor of Holders in form and
substance satisfactory to Holders;
(ii) (A) any investment of $5,000,000.00 or more in any one dental
practice, (B) any investment in any dental practice which has
incurred a net income loss calculated after adding back any
adjustments for any owner's compensation as though the dental
practice had been owned by the Company throughout the relevant pre-
purchase period, for any of its last three fiscal years, or (C) any
investment in any dental practice which has a total purchase price
in excess of eight (8) times the EBITDA of such dental practice,
shall require the prior written approval of Holders; provided,
however, so long as the Senior Credit Agreement is in effect,
Holders shall have no approval rights with respect to such
investment or purchase provided (I) the Majority Lenders have
approved such investment or purchase, (II) no Default or Event of
Default has occurred and is continuing and (III) such investment and
purchase complies with the terms and conditions set forth in the
Senior Credit Agreement as in effect on the date hereof. The Company
shall deliver to each Holder at least ten (10) Business Days prior
to closing the purchase of any such dental practice (1) pro forma
financial statements demonstrating continued compliance with all
covenants in this Agreement following the inclusion of the target in
Company's consolidated enterprise, (2) completed due diligence
consisting of the information listed on EXHIBIT E, as approved by
Holders, (3) due diligence review conducted by Claymore Partners,
Ltd. if such dental practice is in a region in which neither the
Company nor any Subsidiary owns a dental practice as of the date
hereof and the investment in such practice exceeds $5,000,000.00,
(4) audited or reviewed financial statements of the dental practice
to be acquired for the last three (3) years and interim period or,
in lieu thereof, confirmation of profits, cash flows and accounts
receivable of such dental practice by a third party acceptable to
Holders, (5) any additional information and/or documentation
reasonably requested by any Holder;
(iii) for any investment of $2,000,000 or more but less than
$5,000,000, and which is not a dental practice described in clause
(ii)(B) or (ii)(C) above, the Company shall deliver to each Holder
within ten (10) Business Days after closing the purchase of any such
dental practice (1) pro forma financial statements demonstrating
continued compliance with all covenants in this Agreement following
the inclusion of the target in Company's consolidated enterprise,
(2) completed due diligence consisting of the information listed on
EXHIBIT E, as approved by Holders, (3) compiled financial statements
of the dental practice to be acquired for the last three (3) years
and interim period or, in lieu thereof, confirmation of profits,
cash flows and accounts receivable of such dental practice by a
third party acceptable to
37
Holders, and (4) any additional information and/or documentation
reasonably requested by any Holder.
(iv) for any investment of less than $2,000,000, and which is not a
dental practice described in clause (ii)(B) or (ii)(C) above, the
Company shall deliver to each Holder within ten (10) Business Days
after closing the purchase of any such dental practice, copies of
the tax returns of the target dental practice for the last three
years.
Section 9.04 DIVIDENDS, DISTRIBUTIONS AND REDEMPTIONS. The Company will
not declare or pay any dividend, purchase, redeem or otherwise acquire for value
any of its stock, or options or warrants to acquire such stock, now or hereafter
outstanding, return any capital to its stockholders or make any distribution of
its assets to its stockholders, other than the repurchase and/or redemption of
the Convertible Note as permitted or required herein or therein or of the
Shares.
Section 9.05 SALES AND LEASEBACKS. Neither the Company nor any Subsidiary
will enter into any arrangement, directly or indirectly, with any Person whereby
the Company or any Subsidiary shall sell or transfer any of its Property,
whether now owned or hereafter acquired, and whereby the Company or any
Subsidiary shall then or thereafter rent or lease as lessee such Property or any
part thereof or other Property which the Company or any Subsidiary intends to
use for substantially the same purpose or purposes as the Property sold or
transferred; provided, however, so long as the Senior Credit Agreement is in
effect, this provision shall not prohibit any such transaction to the extent
approved by the Majority Lenders and provided no Default or Event of Default
exists.
Section 9.06 NATURE OF BUSINESS. Neither the Company nor any Subsidiary
will allow any material change to be made in the character of its business.
Section 9.07 MERGERS, ETC. Neither the Company nor any Subsidiary will
merge into or with or consolidate with any other Person, or sell, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its Property or assets to any other Person, another
Subsidiary or in connection with Section 9.03(g), except that any Subsidiary may
merge into the Company or into any Wholly-Owned Subsidiary so long as the
surviving Wholly- Owned Subsidiary is a Guarantor.
Section 9.08 PROCEEDS OF NOTES. The Company will not permit the proceeds
of the Notes to be used for any purpose other than those permitted by Section
7.07. Neither the Company nor any Person acting on behalf of the Company has
taken or will take any action which might cause any of the Subordinated Note
Documents to violate Regulation T, U or X or any other regulation of the Board
of Governors of the Federal Reserve System or to violate Section 7 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect or as the same may hereinafter be in effect.
Section 9.09 ERISA COMPLIANCE. The Company will not at any time:
38
(a) Engage in, or permit any Subsidiary or ERISA Affiliate to engage in,
any transaction in connection with which the Company, any Subsidiary or any
ERISA Affiliate could be subjected to either a civil penalty assessed pursuant
to section 502(c), (i) or (l) of ERISA or a tax imposed by Chapter 43 of
Subtitle D of the Code;
(b) Terminate, or permit any Subsidiary or ERISA Affiliate to terminate,
any Plan in a manner, or take any other action with respect to any Plan, which
could result in any material liability to the Company, any Subsidiary or any
ERISA Affiliate to the PBGC;
(c) Fail to make, or permit any Subsidiary or ERISA Affiliate to fail to
make, full payment when due of all amounts which, under the provisions of any
Plan, agreement relating thereto or applicable law, the Company, a Subsidiary or
any ERISA Affiliate is required to pay as contributions thereto;
(d) Permit to exist, or allow any Subsidiary or ERISA Affiliate to permit
to exist, any accumulated funding deficiency within the meaning of Section 302
of ERISA or section 412 of the Code, whether or not waived, with respect to any
Plan;
(e) Permit, or allow any Subsidiary or ERISA Affiliate to permit, the
actuarial present value of the benefit liabilities under any Plan maintained by
the Company, any Subsidiary or any ERISA Affiliate which is regulated under
Title IV of ERISA to exceed the current value of the assets (computed on a plan
termination basis in accordance with Title IV of ERISA) of such Plan allocable
to such benefit liabilities. The term "actuarial present value of the benefit
liabilities" shall have the meaning specified in section 4041 of ERISA;
(f) Contribute to or assume an obligation to contribute to, or permit any
Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any Multiemployer Plan;
(g) Acquire, or permit any Subsidiary or ERISA Affiliate to acquire, an
interest in any Person that causes such Person to become an ERISA Affiliate with
respect to the Company, any Subsidiary or any ERISA Affiliate if such Person
sponsors, maintains or contributes to, or at any time in the six-year period
preceding such acquisition has sponsored, maintained, or contributed to, (1) any
Multiemployer Plan, or (2) any other Plan that is subject to Title IV of ERISA
under which the actuarial present value of the benefit liabilities under such
Plan exceeds the current value of the assets (computed on a plan termination
basis in accordance with Title IV of ERISA) of such Plan allocable to such
benefit liabilities;
(h) Incur, or permit any Subsidiary or ERISA Affiliate to incur, a
liability to or on account of a Plan under sections 515, 4062, 4063, 4064, 4201
or 4204 of ERISA;
(i) Contribute to or assume an obligation to contribute to, or permit any
Subsidiary or ERISA Affiliate to contribute to or assume an obligation to
contribute to, any employee welfare benefit plan, as defined in section 3(1) of
ERISA, including, without limitation, any such plan
39
maintained to provide benefits to former employees of such entities, that may
not be terminated by such entities in their sole discretion at any time without
any material liability; or
(j) Amend or permit any Subsidiary or ERISA Affiliate to amend, a Plan
resulting in an increase in current liability such that the Company, any
Subsidiary or any ERISA Affiliate is required to provide security to such Plan
under section 401(a)(29) of the Code.
Section 9.10 SALE OR DISCOUNT OF RECEIVABLES. Neither the Company nor any
Subsidiary will discount or sell (with or without recourse) any of its notes
receivable or accounts receivable; provided, however, so long as the Senior
Credit Agreement is in effect, this provision shall not prohibit any such
transaction to the extent approved by the Majority Lenders and provided no
Default or Event of Default exists.
Section 9.11 RATIO OF TOTAL FUNDED DEBT TO CAPITALIZATION. The Company
will not permit its ratio of Total Funded Debt to Capitalization as of the end
of any fiscal quarter to be greater than .65 to 1.0.
Section 9.12 NET WORTH. The Company will not permit its Net Worth to be
less than $33,049,000 at any time, with such minimum amount being permanently
increased by an amount equal to 67.5% of positive net income of the Company
during each fiscal quarter beginning with the fiscal quarter ended September 30,
1999, and 100% of equity capital raised by the Company after the Closing Date,
provided, such minimum amount shall not be decreased as a result of any losses
or negative earnings.
Section 9.13 LEVERAGE RATIO. The Company will not permit its Leverage
Ratio as of the end of any fiscal quarter (calculated on a rolling four quarter
basis) to be greater than 3.25 to 1.0. For any calculation period which would
include one or more quarters prior to any Stock Purchase or any Asset Purchase
or any other future acquisition of an entity, the "rolling four quarters" shall
include the "pro forma" EBITDA of the applicable Acquired Entity for such prior
periods, as approved by Holders, adjusted to reflect costs and expenses which
such Acquired Entity would have included had the Management Services Agreements
between Company and/or any Subsidiary and such Acquired Entity been in effect
(adding back appropriate executive salaries and non-cash charge offs relating to
this transaction), in each instance, as approved by Holders. As used in this
Section 9.13, "LEVERAGE RATIO" shall mean the ratio of (i) Senior Funded Debt to
(ii) EBITDA.
Section 9.14 FIXED CHARGE COVERAGE RATIO. The Company will not permit its
Fixed Charge Coverage Ratio as of the end of any fiscal quarter (calculated on a
rolling four quarter basis) to be less than the ratio for the relevant periods
set forth below.
RATIO PERIOD
--------------------- -----------------------------
1.00 to 1.00 from the Closing Date through
and including 3/31/2001
--------------------- -----------------------------
1.05 to 1.00 from 4/1/2001 and thereafter
--------------------- -----------------------------
For purposes of this Section 9.14, "FIXED CHARGE COVERAGE RATIO" shall mean the
ratio for the relevant period of (i) EBITDA, LESS taxes payable in cash, PLUS
lease and rental expense to the extent deducted in computing net income to (ii)
lease and rental expense, PLUS interest, PLUS, during the Revolving Credit
Period (as defined in the Senior Credit Agreement), one-seventh (1/7) of the
then- outstanding principal balance of the Senior Loans, PLUS, without
duplication, current maturities of long-term debt, PLUS capital leases PLUS,
from and after Revolving Credit Period scheduled payments of principal on Debt
of the Company and its Subsidiaries. For any calculation period which would
include one or more quarters prior to any Stock Purchase or any Asset Purchase
or any other future acquisition of an entity, the "rolling four quarters" shall
include the "pro forma" EBITDA of the applicable Acquired Entity for such prior
periods as approved by Holders, adjusted to reflect costs and expenses which
such Acquired Entity would have included had the Management Services Agreements
between Company and/or any Subsidiary and such Acquired Entity been in effect
(adding back appropriate executive salaries and non-cash charge offs relating to
this transaction), in each instance, as approved by Holders.
Section 9.15 RATIO OF TOTAL FUNDED DEBT TO EBITDA. The Company will not
permit its ratio of Total Funded Debt as of the end of any fiscal quarter to
EBITDA for the four fiscal quarters ending on such date to be greater than 4.25
to 1.0. For purposes hereof, EBITDA shall be calculated as provided in Section
9.13 above.
Section 9.16 CAPITAL EXPENDITURES. The Company will not make any
expenditures for fixed or capital assets if, after giving effect thereto, the
aggregate of all such expenditures would, in the case of the 12 month periods
ending on the last day of the fiscal quarters ending on December 31, 1999, March
31, 2000 and June 30, 2000, respectively, exceed $11,000,000, and in the case of
each 12 month period ending on the last day of each fiscal quarter thereafter,
exceed $10,000,000.
Section 9.17 ENVIRONMENTAL MATTERS. Neither the Company nor any Subsidiary
will cause or permit any of its Property to be in violation of, or do anything
or permit anything to be done which will subject any such Property to any
remedial obligations under any Environmental Laws, assuming disclosure to the
applicable Governmental Authority of all relevant facts, conditions and
circumstances, if any, pertaining to such Property where such violations or
remedial obligations would have a Material Adverse Effect.
Section 9.18 TRANSACTIONS WITH AFFILIATES. Except pursuant to Management
Services Agreements and the Accounts Receivable Purchase Agreements, neither the
Company nor any Subsidiary will enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of Property or the rendering
of any service, with any Affiliate unless such transactions are otherwise
permitted under this Agreement, are in the ordinary course of its business and
are upon fair and reasonable terms no less favorable to it than it would obtain
in a comparable arm's length transaction with a Person not an Affiliate.
40
Section 9.19 SUBSIDIARIES. In each case in which the Company or any of its
Subsidiaries creates or acquires any additional Subsidiaries, each new
Subsidiary shall forthwith execute and deliver a Subordinated Guaranty Agreement
in favor of Holders. The Company shall not and shall not permit any Subsidiary
to sell or to issue any stock of a Subsidiary or any interest in a Special
Entity. The Company shall not permit any Subsidiary to issue any stock except to
the Company or any Guarantors and except in compliance with Section 9.03.
Section 9.20 NEGATIVE PLEDGE AGREEMENTS. Neither the Company nor any
Subsidiary will create, incur, assume or suffer to exist any contract, agreement
or understanding (other than the Senior Credit Documents and the Subordinated
Note Documents) which in any way prohibits or restricts the granting, conveying,
creation or imposition of any Lien on any of its Property or restricts any
Subsidiary from paying dividends to the Company, or which requires the consent
of or notice to other Persons in connection therewith.
Section 9.21 OTHER AGREEMENTS. Neither the Company nor any Subsidiary
shall make or permit any material amendment or modification of the Management
Services Agreements or the Accounts Receivables Purchase Agreements, except for
(i) those amendments or modifications required to comply with Government
Requirements and (ii) those amendments or modifications which would not have an
adverse effect on Borrower or any of its Subsidiaries. The Company will not and
will not permit any of its Subsidiaries directly or indirectly to change or
amend the terms of any of the Senior Credit Documents if the effect of such
amendment is to: (a) increase the principal amount of Senior Indebtedness to an
amount in excess of that permitted in the definition of "Senior Debt" in the
Subordination Agreement or increase the interest rate on such Senior
Indebtedness by more than 200 basis points of the maximum rate of interest set
forth in the Senior Credit Agreement; (b) extend the final maturity of the
Senior Indebtedness by more than two (2) years; (c) shorten the final maturity
of the Senior Indebtedness by more than one (1) year; (d) except as permitted in
clause (c), shorten the dates upon which scheduled payments of principal or
interest are due on such Senior Indebtedness; or (e) change in any manner
adverse to the Company or add any event of default or add or make more
restrictive any covenant with respect to such Senior Indebtedness other than in
consideration for a waiver of an actual or contemplated default or event of
default under the Senior Credit Documents.
Section 9.22 ACQUIRED ENTITIES. Notwithstanding anything to the contrary
contained herein, the Company will not permit any Acquired Entity to create,
incur, assume or permit to exist any Debt (other than the Senior Indebtedness
and the Indebtedness) or Lien, make any loans, advances or investments in any
persons, or sell or transfer any of its property, whether now owned or hereafter
acquired except for Debt and Liens in favor of the Company and Liens permitted
by Section 9.02.
Section 9.23 AMENDMENT OF CASTLE WEST LLC AGREEMENT. Neither the Company
nor any Subsidiary shall make or permit any material amendment or modification
of the Limited Liability Company Agreement of Castle Dental Centers of
California, L.L.C., a Delaware limited liability company, without the prior
written consent of Holders.
41
Section 9.24 JUNIOR SUBORDINATION DEBT. The Company will not, and will not
permit any of is Subsidiaries, to make any payment of principal or interest on
Junior Subordinated Debt except to the extent permitted under, and subject to
the terms and conditions set forth in, the subordination agreement or other such
agreement executed in connection therewith.
Section 9.25 RESTRICTION ON FUNDAMENTAL CHANGES. The Company will not and
will not permit any of its Subsidiaries directly or indirectly to amend, modify
or waive any term or provision of its organizational documents, including
without limitation its articles of incorporation, certificates of designations
pertaining to preferred stock, by-laws, partnership agreement or members'
agreement.
Section 9.26 DISPOSAL OF ASSETS OR SUBSIDIARY STOCK. The Company will not
and will not permit any of its Subsidiaries directly or indirectly to: convey,
sell, lease, sublease, transfer or otherwise dispose of, or grant any Person an
option to acquire, in one transaction or a series of transactions, any of its
property, business or assets, or the capital stock of or other equity interests
in any of its Subsidiaries, whether now owned or hereafter acquired, except for
(a) bona fide sales of inventory to customers for fair value in the ordinary
course of business and dispositions of obsolete equipment not used or useful in
the business and (b) asset dispositions if all of the following conditions are
met: (i) the market value of assets sold or otherwise disposed of in any fiscal
year of the Company does not exceed $2,500,000; (ii) the consideration received
is at least equal to the fair market value of such assets; and (iii) no Default
or Event of Default then exists or shall result from such asset disposition.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 EVENTS OF DEFAULT. One or more of the following events shall
constitute an "EVENT OF DEFAULT":
(a) the Company shall default in the payment or prepayment when due of any
principal of or interest on any Note, or any fees or other amount payable by it
hereunder or under the Subordinated Guaranty Agreement; provided, however, if
such default is a default in the payment of fees (other than fees under Section
2.03(c)), such default shall continue unremedied for a period of 30 days; or
(b) the Company or any Subsidiary shall default in the payment when due of
any principal of or interest on any of its other Debt (other than Senior Debt)
aggregating $250,000 or more, or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such Debt shall occur
if the effect of such event is to cause, or (with the giving of any notice or
the lapse of time or both) to permit the holder or holders of such Debt (or a
trustee or
42
an agent on behalf of such holder or holders) to cause, such Debt to become due
prior to its stated maturity; or
(c) any representation, warranty or certification made or deemed made
herein or in any of the other Subordinated Note Documents by the Company or any
Subsidiary, or any certificate furnished to any Holder pursuant to the
provisions hereof or the other Subordinated Note Documents, shall prove to have
been materially false or misleading as of the time made or furnished in any
material respect; or
(d) the Company shall default in the performance of any of its obligations
under Article IX or any other Article of this Agreement other than under Article
VIII; or the Company shall default in the performance of any of its obligations
under Article VIII or the Subordinated Guaranty Agreement (other than the
payment of amounts due which shall be governed by Section 10.01(a)) and such
default shall continue unremedied for a period of thirty (30) days after the
earlier to occur of (i) notice thereof to the Company by any Holder or (ii) the
Company otherwise becoming aware of such default; or
(e) the Company shall admit in writing its inability to, or be generally
unable to, pay its debts as such debts become due; or
(f) the Company shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee or liquidator of
itself or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary case
under the Federal Bankruptcy Code (as now or hereafter in effect), (iv) file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, winding-up, liquidation or composition or
readjustment of debts, (v) fail to controvert in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Federal Bankruptcy Code, or (vi) take any corporate
action for the purpose of effecting any of the foregoing; or
(g) a proceeding or case shall be commenced, without the application or
consent of the Company, in any court of competent jurisdiction, seeking (i) its
liquidation, reorganization, dissolution or winding-up, or the composition or
readjustment of its debts, (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of the Company of all or any substantial part
of its assets, or (iii) similar relief in respect of the Company under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or composition
or adjustment of debts, and such proceeding or case shall continue undismissed,
or an order, judgment or decree approving or ordering any of the foregoing shall
be entered and continue unstayed and in effect, for a period of 60 days; or (iv)
an order for relief against the Company shall be entered in an involuntary case
under the Federal Bankruptcy Code; or
(h) a judgment or judgments for the payment of money in excess of $250,000
in the aggregate shall be rendered by a court against the Company or any
Subsidiary and the same shall
43
not be discharged (or provision shall not be made for such discharge), or a stay
of execution thereof shall not be (i) fully covered by insurance owned or held
by the Company or such Subsidiary, as applicable, under a policy or policies
which are in full force and effect, or (ii) procured, within thirty (30) days
from the date of entry thereof and the Company or such Subsidiary shall not,
within said period of 30 days, or such longer period during which execution of
the same shall have been stayed, appeal therefrom and cause the execution
thereof to be stayed during such appeal; or
(i) the Subordinated Guaranty Agreement after delivery thereof shall for
any reason, except to the extent permitted by the terms thereof, cease to be in
full force and effect and valid, binding and enforceable in accordance with
their terms, except to the extent permitted by the terms of this Agreement, or
the Company shall so state in writing; or
(j) the Company discontinues its usual business; or
(k) any Guarantor takes, suffers or permits to exist any of the events or
conditions referred to in paragraphs (e), (f), (g) or (h) hereof or if any
provision of any guaranty agreement related thereto shall for any reason cease
to be valid and binding on any Guarantor or if any Guarantor shall so state in
writing; or
(l) any Acquired Entity or any Subsidiary takes, suffers or permits to
exist any of the events or conditions referred to in paragraphs (e), (f), (g) or
(h) hereof; or
(m) any Management Services Agreement (other than the Management Services
Agreement with Ner X. Xxxxxx, D.D.S.) or any Accounts Receivable Purchase
Agreement terminates or a default by the Company occurs thereunder; or
(n) any modification or amendment of any Management Services Agreement
(other than the Management Services Agreement with Ner X. Xxxxxx, D.D.S.) or any
Accounts Receivable Purchase Agreement is made that could result in a monetary
impact to the Company without the prior written consent of Holders; or
(o) a Change of Control occurs; or
(p) the Company shall default in the payment or performance of any
obligations in the Senior Credit Documents after any applicable cure period
provided for in the such document and as a result any Senior Lender causes the
Senior Indebtedness to be accelerated or the Company shall default in the
repayment of such Senior Indebtedness at final maturity.
Section 10.02 REMEDIES.
(a) In the case of an Event of Default other than one referred to in
clauses (e), (f) or (g) of Section 10.01 or in clauses (k) and (l) to the extent
they relates to clauses (e), (f) or (g), each Holder may, by notice to the
Company, declare the principal amount then outstanding of, and the
44
accrued interest on, the Subordinated Notes and/or Convertible Notes held by it
and all other amounts payable to it by the Company hereunder and under the
Subordinated Notes and Convertible Notes to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest, notice of intent to accelerate, notice of acceleration or other
formalities of any kind, all of which are hereby expressly waived by the
Company.
(b) In the case of the occurrence of an Event of Default referred to in
clauses (e), (f) or (g) of Section 10.01 or in clauses (k) and (l) to the extent
they relate to clauses (e), (f) or (g), the principal amount then outstanding
of, and the accrued interest on, the Notes and all other amounts payable by the
Company hereunder and under the Notes shall become automatically immediately due
and payable without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other formalities of any kind, all of
which are hereby expressly waived by the Company.
(c) All proceeds received after maturity of the Notes, whether by
acceleration or otherwise shall be applied first to reimbursement of expenses
and indemnities provided for in this Agreement and the Subordinated Guaranty
Agreement; second to accrued interest on the Notes; third to fees; fourth pro
rata to principal outstanding on the Notes and other Indebtedness; and any
excess shall be paid to the Company or as otherwise required by any Governmental
Requirement.
(d) Upon the occurrence and during the continuance of any one or more
Events of Default, any Holder may proceed to protect and enforce its rights
hereunder by suit in equity, action at law or by other appropriate proceeding,
whether for the specific performance of any covenant or agreement contained in
this Agreements, the Notes or the other Subordinated Note Documents or in aid of
the exercise of any power granted in this Agreement or the Notes, or may proceed
to enforce the payment of the Notes, or to enforce any other of its legal or
equitable rights.
ARTICLE XI
HOLDER REPRESENTATIONS AND WARRANTIES
Section 11.0 ACCREDITED INVESTOR. Each Holder represents, as to itself,
that it is an "accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
ARTICLE XII
MISCELLANEOUS
Section 12.01 WAIVER. No failure on the part of a Holder to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under any of the Subordinated Note Documents shall operate as
a waiver thereof, nor shall any single or partial
45
exercise of any right, power or privilege under any of the Subordinated Note
Documents preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
Section 12.02 NOTICES. All notices and other communications provided for
herein and in the other Subordinated Note Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement
or the other Subordinated Note Documents) shall be given or made by telex,
telecopy, courier or U.S. Mail or in writing and telexed, telecopied, mailed or
delivered to the intended recipient at the "Address for Notices" specified below
its name on the signature pages hereof or in the Subordinated Note Documents;
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement
or in the other Subordinated Note Documents, all such communications shall be
deemed to have been duly given when transmitted, if transmitted before 1:00 p.m.
local time on a Business Day (otherwise on the next succeeding Business Day) by
telex or telecopier and evidence or confirmation of receipt is obtained, or
personally delivered or, in the case of a mailed notice, three (3) Business Days
after the date deposited in the mails, postage prepaid, in each case given or
addressed as aforesaid.
Section 12.03 PAYMENT OF EXPENSES, INDEMNITIES, ETC.
(a) The Company agrees:
(i) whether or not the transactions hereby contemplated are
consummated, to pay all reasonable expenses of Holders in the
administration (both before and after the execution hereof and including
advice of counsel as to the rights and duties of a Holder with respect
thereto) of, and in connection with the negotiation, syndication,
investigation, preparation, execution and delivery of, recording or filing
of, preservation of rights under, enforcement of, and refinancing,
renegotiation or restructuring of, the Subordinated Note Documents and any
amendment, waiver or consent relating thereto (including, without
limitation, travel, photocopy, mailing, courier, telephone and other
similar expenses of Holders, the cost of environmental audits, surveys and
appraisals at reasonable intervals, the reasonable fees and disbursements
of counsel and other outside consultants for Holders and, in the case of
enforcement (including, without limitation, bankruptcy and workout
matters), the reasonable fees and disbursements of counsel for Holders;
and promptly reimburse a Holder for all amounts expended, advanced or
incurred by such Holder to satisfy any obligation of the Company under
this Agreement or the Subordinated Guaranty Agreement;
(II) TO INDEMNIFY EACH HOLDER AND EACH OF ITS AFFILIATES AND EACH OF
ITS OFFICERS, DIRECTORS, EMPLOYEES, REPRESENTATIVES, AGENTS, ATTORNEYS,
ACCOUNTANTS AND EXPERTS ("INDEMNIFIED PARTIES") FROM, HOLD EACH OF THEM
HARMLESS AGAINST AND PROMPTLY UPON DEMAND PAY OR REIMBURSE EACH OF THEM
FOR, THE INDEMNITY MATTERS WHICH MAY BE INCURRED BY OR ASSERTED AGAINST OR
INVOLVE ANY OF THEM (WHETHER OR NOT ANY OF THEM IS DESIGNATED A PARTY
46
THERETO) AS A RESULT OF, ARISING OUT OF OR IN ANY WAY RELATED TO (I) ANY
ACTUAL OR PROPOSED USE BY THE COMPANY OF THE PROCEEDS OF ANY OF THE NOTES,
(II) THE EXECUTION, DELIVERY AND PERFORMANCE OF THE SUBORDINATED NOTE
DOCUMENTS, (III) THE OPERATIONS OF THE BUSINESS OF THE COMPANY AND ITS
SUBSIDIARIES, (IV) THE FAILURE OF THE COMPANY OR ANY SUBSIDIARY TO COMPLY
WITH THE TERMS OF THE SUBORDINATED GUARANTY AGREEMENT OR THIS AGREEMENT,
OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY INACCURACY OF ANY
REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE COMPANY OR ANY
GUARANTOR SET FORTH IN ANY OF THE SUBORDINATED NOTE DOCUMENTS, (VI) ANY
ASSERTION THAT ANY HOLDER WAS NOT ENTITLED TO RECEIVE THE PROCEEDS
RECEIVED PURSUANT TO THE SUBORDINATED GUARANTY AGREEMENT OR (VII) ANY
OTHER ASPECT OF THE SUBORDINATED NOTE DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, THE REASONABLE FEES AND DISBURSEMENTS OF COUNSEL AND ALL OTHER
EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING, DEFENDING OR PREPARING
TO DEFEND ANY SUCH ACTION, SUIT, PROCEEDING (INCLUDING ANY INVESTIGATIONS,
LITIGATION OR INQUIRIES) OR CLAIM AND INCLUDING ALL INDEMNITY MATTERS
ARISING BY REASON OF THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY, BUT
EXCLUDING ALL INDEMNITY MATTERS ARISING SOLELY BY REASON OF THE GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT ON THE PART OF THE INDEMNIFIED PARTY; AND
(III) TO INDEMNIFY AND HOLD HARMLESS FROM TIME TO TIME THE
INDEMNIFIED PARTIES FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, COST
RECOVERY ACTIONS, ADMINISTRATIVE ORDERS OR PROCEEDINGS, DAMAGES AND
LIABILITIES TO WHICH ANY SUCH PERSON MAY BECOME SUBJECT (I) UNDER ANY
ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY SUBSIDIARY OR ANY OF
THEIR PROPERTIES, INCLUDING WITHOUT LIMITATION, THE TREATMENT OR DISPOSAL
OF HAZARDOUS SUBSTANCES ON ANY OF THEIR PROPERTIES, (II) AS A RESULT OF
THE BREACH OR NON-COMPLIANCE BY THE COMPANY OR ANY SUBSIDIARY WITH ANY
ENVIRONMENTAL LAW APPLICABLE TO THE COMPANY OR ANY SUBSIDIARY, (III) DUE
TO PAST OWNERSHIP BY THE COMPANY OR ANY SUBSIDIARY OF ANY OF THEIR
PROPERTIES OR PAST ACTIVITY ON ANY OF THEIR PROPERTIES WHICH, THOUGH
LAWFUL AND FULLY PERMISSIBLE AT THE TIME, COULD RESULT IN PRESENT
LIABILITY, (IV) THE PRESENCE, USE, RELEASE, STORAGE, TREATMENT OR DISPOSAL
OF HAZARDOUS SUBSTANCES ON OR AT ANY OF THE PROPERTIES OWNED OR OPERATED
BY THE COMPANY OR ANY SUBSIDIARY, OR (V) ANY OTHER ENVIRONMENTAL, HEALTH
OR SAFETY CONDITION IN CONNECTION WITH THE SUBORDINATED NOTE DOCUMENTS.
(b) No Indemnified Party may settle any claim to be indemnified without
the consent of the indemnitor, such consent not to be unreasonably withheld.
(c) In the case of any indemnification hereunder, the Indemnified Party
shall give notice to the Company of any such claim or demand being made against
the Indemnified Party and the Company shall have the non-exclusive right to join
in the defense against any such claim or demand
47
provided that if the Company provides a defense, the Indemnified Party shall
bear its own cost of defense unless there is a conflict between the Company and
such Indemnified Party.
(D) THE FOREGOING INDEMNITIES SHALL EXTEND TO THE INDEMNIFIED PARTIES
NOTWITHSTANDING THE SOLE OR CONCURRENT NEGLIGENCE OF EVERY KIND OR CHARACTER
WHATSOEVER, WHETHER ACTIVE OR PASSIVE, WHETHER AN AFFIRMATIVE ACT OR AN
OMISSION, INCLUDING WITHOUT LIMITATION, ALL TYPES OF NEGLIGENT CONDUCT
IDENTIFIED IN THE RESTATEMENT (SECOND) OF TORTS OF ONE OR MORE OF THE
INDEMNIFIED PARTIES OR BY REASON OF STRICT LIABILITY IMPOSED WITHOUT FAULT ON
ANY ONE OR MORE OF THE INDEMNIFIED PARTIES. TO THE EXTENT THAT AN INDEMNIFIED
PARTY IS FOUND TO HAVE COMMITTED AN ACT OF GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT, THIS CONTRACTUAL OBLIGATION OF INDEMNIFICATION SHALL CONTINUE BUT
SHALL ONLY EXTEND TO THE PORTION OF THE CLAIM THAT IS DEEMED TO HAVE OCCURRED BY
REASON OF EVENTS OTHER THAN THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
INDEMNIFIED PARTY.
(e) The Company's obligations under this Section 12.03 shall survive any
termination of this Agreement, conversion of the Convertible Notes and the
payment of the Notes and shall continue thereafter in full force and effect.
(f) The Company shall pay any amounts due under this Section 12.03 within
thirty (30) days of the receipt by the Company of notice of the amount due.
Section 12.04 AMENDMENTS, ETC. Any provision of this Agreement or the
Subordinated Guaranty Agreement may be amended, modified or waived with the
Company's and Holders' prior written consent.
Section 12.05 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
Section 12.06 ASSIGNMENTS.
(a) The Company may not assign its rights or obligations hereunder or
under the Notes without the prior consent of Holders.
(b) Subject to applicable securities laws, in the case of the Notes, and
to the terms and conditions of the Stockholders Agreement, in the case of the
Convertible Notes, Holders (and its permitted assigns) may assign to one or more
assignees all or a portion of its rights and obligations under this Agreement
and the other Subordinated Note Documents to any Person, and any such assignee
may further assign such rights and obligations to any Person. Any such
assignment will become effective upon the execution and delivery to the
assigning Holder of the assignment. Upon the assigning Holder's request, the
Company, will, at its own expense, execute and deliver new Notes to the assignor
and/or assignee, as appropriate, in accordance with their respective interests
as they appear. Upon the effectiveness of any assignment pursuant to this
Section 12.06(b), all
48
references to "Holders" or a "Holder" in this Agreement, the Notes and the other
Subordinated Note Documents shall mean and include each such assignee, each such
assignee shall be deemed a party to this Agreement and bound by all the
agreements and covenants of Holders (other than the covenant to purchase a Note)
contained herein and all actions which are to be taken, and all consents or
waivers to be granted or consents, amendments, waivers and other writings
required to be signed by Holders or a party (other than the Company) to this
Agreement shall be, in each case, effective only if taken or executed or
delivered by Holders and all such assignees.
(c) A Holder may furnish any information concerning the Company in its
possession from time to time to assignees (including prospective assignees);
provided that, such Persons agree to be bound by the provisions of Section
12.15.
(d) Notwithstanding any other provisions of this Section 12.06, no
transfer or assignment of the interests or obligations of a Holder or any grant
of participations therein shall be permitted if such transfer, assignment or
grant would require the Company to file a registration statement with the SEC or
to qualify the Notes under the "Blue Sky" laws of any state.
Section 12.07 INVALIDITY. In the event that any one or more of the
provisions contained in any of the Subordinated Note Documents shall, for any
reason, be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
of the Notes, this Agreement or the Subordinated Guaranty Agreement.
Section 12.08 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 12.09 REFERENCES. The words "herein," "hereof," "hereunder" and
other words of similar import when used in this Agreement refer to this
Agreement as a whole, and not to any particular article, section or subsection.
Any reference herein to a Section shall be deemed to refer to the applicable
Section of this Agreement unless otherwise stated herein. Any reference herein
to an exhibit or schedule shall be deemed to refer to the applicable exhibit or
schedule attached hereto unless otherwise stated herein.
Section 12.10 SURVIVAL. The obligations of the parties, other than under,
but subject to the introductory statement to, Article VIII and Article IX, shall
survive the repayment of the Notes and the conversion of the Convertible Notes.
To the extent that any payments on the Indebtedness are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver or other Person under any
bankruptcy law, common law or equitable cause, then to such extent, the
Indebtedness so satisfied shall be revived and continue as if such payment or
proceeds had not been received and Holders' rights, powers and remedies under
this Agreement and the Subordinated Guaranty Agreement shall continue in full
force and effect. In such event, the Subordinated Guaranty Agreement shall be
automatically reinstated and
49
the Company shall take such action as may be reasonably requested by Holder to
effect such reinstatement.
Section 12.11 CAPTIONS. Captions and section headings appearing herein are
included solely for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
Section 12.12 NO ORAL AGREEMENTS. THE SUBORDINATED NOTE DOCUMENTS EMBODY
THE ENTIRE AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES AND SUPERSEDE ALL
OTHER AGREEMENTS AND UNDERSTANDINGS BETWEEN SUCH PARTIES RELATING TO THE SUBJECT
MATTER HEREOF AND THEREOF. THE SUBORDINATED NOTE DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 12.13 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(A) THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
(B) SUBJECT TO SECTION 12.17, ANY LEGAL ACTION OR PROCEEDING WITH RESPECT
TO THE SUBORDINATED NOTE DOCUMENTS SHALL BE BROUGHT IN THE COURTS OF THE STATE
OF ILLINOIS OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF
ILLINOIS, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE COMPANY
AND EACH HOLDER HEREBY ACCEPTS FOR ITSELF AND (TO THE EXTENT PERMITTED BY LAW)
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS. EACH OF THE COMPANY AND EACH HOLDER HEREBY IRREVOCABLY
WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, 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 SUCH ACTION OR PROCEEDING IN SUCH
RESPECTIVE JURISDICTIONS.
(C) NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY HOLDER TO SERVE PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
(D) THE COMPANY AND EACH HOLDER HEREBY (I) IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY LEGAL ACTION
OR PROCEEDING RELATING TO THIS AGREEMENT OR THE SUBORDINATED GUARANTY AGREEMENT
AND FOR ANY COUNTERCLAIM THEREIN; (II) IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT
NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, OR DAMAGES
OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES; (III) CERTIFY THAT NO PARTY
HERETO NOR ANY REPRESENTATIVE OR AGENT OF COUNSEL FOR ANY PARTY
50
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (IV)
ACKNOWLEDGE THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT, THE
SUBORDINATED GUARANTY AGREEMENT AND THE TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED
IN THIS SECTION 12.13.
Section 12.14 INTEREST. It is the intention of the parties hereto that
Holders shall conform strictly to usury laws applicable to it. Accordingly, if
the transactions contemplated hereby would be usurious as to Holders under laws
applicable to it (including the laws of the United States of America and the
State of Illinois or any other jurisdiction whose laws may be mandatorily
applicable to Holders notwithstanding the other provisions of this Agreement),
then, in that event, notwithstanding anything to the contrary in any of the
Subordinated Note Documents or any agreement entered into in connection with or
as security for the Notes, it is agreed as follows: (i) the aggregate of all
consideration which constitutes interest under law applicable to Holders that is
contracted for, taken, reserved, charged or received by Holders under any of the
Subordinated Note Documents or agreements or otherwise in connection with the
Notes shall under no circumstances exceed the maximum amount allowed by such
applicable law, and any excess shall be canceled automatically and if
theretofore paid shall be credited by Holders on the principal amount of the
Indebtedness (or, to the extent that the principal amount of the Indebtedness
shall have been or would thereby be paid in full, refunded by Holders to the
Company); and (ii) in the event that the maturity of the Notes is accelerated by
reason of an election of the holder thereof resulting from any Event of Default
under this Agreement or otherwise, or in the event of any required or permitted
prepayment, then such consideration that constitutes interest under law
applicable to Holders may never include more than the maximum amount allowed by
such applicable law, and excess interest, if any, provided for in this Agreement
or otherwise shall be canceled automatically by Holders as of the date of such
acceleration or prepayment and, if theretofore paid, shall be credited by
Holders on the principal amount of the Indebtedness (or, to the extent that the
principal amount of the Indebtedness shall have been or would thereby be paid in
full, refunded by Holders to the Company). All sums paid or agreed to be paid to
Holders for the use, forbearance or detention of sums due hereunder shall, to
the extent permitted by law applicable to Holders, be amortized, prorated,
allocated and spread throughout the full term of the Notes until payment in full
so that the rate or amount of interest on account of any Notes hereunder does
not exceed the maximum amount allowed by such applicable law. If at any time and
from time to time (i) the amount of interest payable to Holders on any date
shall be computed at the Highest Lawful Rate applicable to Holders pursuant to
this Section 12.14 and (ii) in respect of any subsequent interest computation
period the amount of interest otherwise payable to Holders would be less than
the amount of interest payable to Holders computed at the Highest Lawful Rate
applicable to Holders, then the amount of interest payable to Holders in respect
of such subsequent interest computation period shall continue to be computed at
the Highest Lawful Rate applicable to Holders until the total amount of interest
payable to Holders shall equal the total amount of interest which would have
been payable to Holders if the total amount of interest had been computed
without giving effect to this Section 12.14.
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Section 12.15 CONFIDENTIALITY. In the event that the Company provides to a
Holder written confidential information belonging to the Company, if the Company
shall denominate such information in writing as "confidential", such Holder
shall thereafter maintain such information in confidence in accordance with the
standards of care and diligence that each utilizes in maintaining its own
confidential information. This obligation of confidence shall not apply to such
portions of the information which (i) are in the public domain, (ii) hereafter
become part of the public domain without a Holder breaching its obligation of
confidence to the Company, (iii) are previously known by a Holder from some
source other than the Company, (iv) are hereafter developed by a Holder without
using the Company's information, (v) are hereafter obtained by or available to a
Holder from a third party who owes no obligation of confidence to the Company
with respect to such information or through any other means other than through
disclosure by the Company, (vi) are disclosed with the Company's consent, (vii)
must be disclosed either pursuant to any Governmental Requirement or to Persons
regulating the activities of a Holder, or (viii) as may be required by law or
regulation or order of any Governmental Authority in any judicial, arbitration
or governmental proceeding. Further, a Holder may disclose any such information
to any independent consultants, any independent certified public accountants,
any legal counsel employed by such Person in connection with this Agreement or
the Subordinated Guaranty Agreement, including without limitation, the
enforcement or exercise of all rights and remedies thereunder, or any assignee
(including prospective assignees) in the Notes; PROVIDED, HOWEVER, that such
Holder shall receive a confidentiality agreement from the Person to whom such
information is disclosed such that said Person shall have the same obligation to
maintain the confidentiality of such information as is imposed upon such Holder
hereunder. Notwithstanding anything to the contrary provided herein, this
obligation of confidence shall cease three (3) years from the date the
information was furnished, unless the Company requests in writing at least
thirty (30) days prior to the expiration of such three year period, to maintain
the confidentiality of such information for an additional three year period. The
Company waives any and all other rights it may have to confidentiality as
against a Holder arising by contract, agreement, statute or law except as
expressly stated in this Section 12.15.
Section 12.16 EFFECTIVENESS. This Agreement shall be effective on the
Closing Date.
Section 12.17 EXCULPATION PROVISIONS. EACH OF THE PARTIES HERETO
SPECIFICALLY AGREES THAT IT HAS A DUTY TO READ THIS AGREEMENT AND THE
SUBORDINATED GUARANTY AGREEMENT AND AGREES THAT IT IS CHARGED WITH NOTICE AND
KNOWLEDGE OF THE TERMS OF THIS AGREEMENT AND THE SUBORDINATED GUARANTY
AGREEMENT; THAT IT HAS IN FACT READ THIS AGREEMENT AND IS FULLY INFORMED AND HAS
FULL NOTICE AND KNOWLEDGE OF THE TERMS, CONDITIONS AND EFFECTS OF THIS
AGREEMENT; THAT IT HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL OF ITS
CHOICE THROUGHOUT THE NEGOTIATIONS PRECEDING ITS EXECUTION OF THIS AGREEMENT AND
THE SUBORDINATED GUARANTY AGREEMENT; AND HAS RECEIVED THE ADVICE OF ITS ATTORNEY
IN ENTERING INTO THIS AGREEMENT AND THE SUBORDINATED GUARANTY AGREEMENT; AND
THAT IT RECOGNIZES THAT CERTAIN OF THE TERMS OF THIS AGREEMENT AND THE
SUBORDINATED GUARANTY AGREEMENT RESULT IN ONE PARTY ASSUMING THE LIABILITY
INHERENT IN SOME ASPECTS OF THE TRANSACTION AND RELIEVING THE OTHER PARTY OF ITS
RESPONSIBILITY FOR SUCH LIABILITY. EACH PARTY
52
HERETO AGREES AND COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR
ENFORCEABILITY OF ANY EXCULPATORY PROVISION OF THIS AGREEMENT AND THE
SUBORDINATED GUARANTY AGREEMENT ON THE BASIS THAT THE PARTY HAD NO NOTICE OR
KNOWLEDGE OF SUCH PROVISION OR THAT THE PROVISION IS NOT "CONSPICUOUS."
Section 12.18 SUBORDINATION. Each of the Company, the Guarantors and
Holders, by their acceptance of this Agreement, agree that all of the
Indebtedness, all payments in respect thereof (prior to the payment in full of
the Senior Indebtedness) and any renewals, refinancings or extensions thereof
shall be subordinate and junior in right to all Senior Indebtedness as set forth
and subject to the terms of the Subordination Agreement.
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The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
Company: CASTLE DENTAL CENTERS, INC.
By:_________________________________
Name: Xxxx X. Xxxxxx, Xx.
Title: Chairman and Chief Executive Officer
Address for Notices: 0000 Xxxx Xxx Xxxxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Telecopier No: (000) 000-0000
Telephone No: (000) 000-0000
Attention: Xxxx X. Xxxxxx, Xx.
Senior Subordinated Note Purchase Agreement
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
Xxxxxx: XXXXXX FINANCIAL, INC.
By: _______________________________
Name: _______________________________
Title:_______________________________
If to Xxxxxx:
XXXXXX FINANCIAL, INC.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
ATTN: Account Manager
Corporate Finance
Telecopy: (000) 000-0000
with a copy to:
XXXXXX FINANCIAL, INC.
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
ATTN: Legal Services
Corporate Finance
Telecopy: (000) 000-0000
Senior Subordinated Note Purchase Agreement
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
Midwest: MIDWEST MEZZANINE FUND II, L.P.
By: ABN AMRO Mezzanine Management
II, L.P., its general partner
By: ABN AMRO Mezzanine Management
II, Inc., its general partner
By:__________________________________
J. Xxxxx Xxxxxx, Senior Vice President
Notices to:
Midwest Mezzanine Fund II, L.P.
000 Xxxxx XxXxxxx Xxxxxx, 00xx xxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
ATTN: J. Xxxxx Xxxxxx
Telecopy: (000) 000-0000
Senior Subordinated Note Purchase Agreement
