EXHIBIT 99.1
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED, NOR THE SECURITIES LAWS OF ANY STATE. THIS NOTE MAY NOT BE
SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON
(1) SUCH REGISTRATION, OR (2) DELIVERY TO THE ISSUER OF THIS NOTE OF AN OPINION
OF COUNSEL REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
FOR SUCH TRANSFER, OR (3) THE SUBMISSION TO THE ISSUER OF THIS NOTE OF OTHER
EVIDENCE, REASONABLY ACCEPTABLE TO THE ISSUER, TO THE EFFECT THAT ANY SUCH SALE,
PLEDGE, HYPOTHECATION OR TRANSFER WILL NOT BE IN VIOLATION OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED, OR OTHER APPLICABLE SECURITIES LAWS OF ANY
STATE, OR ANY RULES OR REGULATIONS PROMULGATED THEREUNDER.
THE PAYMENT OF THE PRINCIPAL OF, AND INTEREST ON, AND ALL OTHER AMOUNTS OWING IN
RESPECT OF THE INDEBTEDNESS EVIDENCED BY, THIS NOTE, IS AND SHALL BE EXPRESSLY
SUBORDINATED, TO THE EXTENT AND IN THE MANNER SET FORTH HEREIN AND, IF
APPLICABLE, IN THAT CERTAIN SUBORDINATION AGREEMENT, OR ANY OTHER SUBORDINATION
AGREEMENT NOW OR HEREAFTER EXECUTED, AMONG CASTLE, THE PAYEE, NATIONSBANK OF
TEXAS, N.A., ITS SUCCESSORS OR ASSIGNS, OR ANY OTHER HOLDER OF SENIOR DEBT
(COLLECTIVELY, "SENIOR CREDITOR"), (IN ANY SUCH EVENT, THE "SUBORDINATION
AGREEMENT").
ISSUE DATE: DECEMBER 30, 1998
CASTLE DENTAL CENTERS, INC.
6% SUBORDINATED NOTE
NO. 1 HOUSTON, TEXAS $1,250,000.00
CASTLE DENTAL CENTERS, INC., a Delaware corporation with offices at 0000
Xxxx Xxx Xxxxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxx 00000 (hereinafter referred to as
"Castle"), for value received, hereby promises to pay to the order of
______________, at ________________________ ("Payee"), the sum of ONE MILLION
TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($1,250,000.00), together with
interest on the unpaid principal balance hereof from the date hereof until
payment in full, in lawful money of the United States of America which shall be
legal tender for the payment of debts from time to time, at a per annum rate of
Six Percent (6%) prior to maturity. All past due principal, and, to the extent
permitted by applicable law, past due interest, on this Note shall bear interest
from and after maturity until paid at a per annum rate equal to the
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lesser of (i) eighteen percent (18%) or (ii) the maximum nonusurious rate
allowable under applicable law. At any time that the outstanding principal
amount of Xxxxxx's Senior Indebtedness, as defined below, exceeds $55,000,000,
the unpaid principal balance of this Note shall bear interest at a rate equal to
the rate then being paid on Castle's Senior Debt (as defined in the
Subordination Agreement).
This 6% Subordinated Note (hereinafter referred to as the "Note") is being
issued by Castle pursuant to the terms of an Asset Purchase Agreement dated as
of December 30, 1998 (the "Agreement"), executed by and among Castle, the Payee,
Castle Dental Centers of Texas, Inc. ("Purchaser"), and certain other parties
thereto and is subject to rights of offset in favor of Castle and the Purchaser
pursuant to the terms of the Agreement.
1. INTEREST AND PRINCIPAL PAYMENTS. Principal shall be payable in eleven
quarterly installments of SEVENTY-EIGHT THOUSAND ONE HUNDRED TWENTY-FIVE AND
NO/100 DOLLARS ($78,125.00) beginning on March 31, 1999 and ending on December
31, 2001, on which date the entire unpaid principal balance hereof, together
with all accrued but unpaid interest, shall mature and become due and payable.
Accrued interest shall be paid on the same date as installments of principal.
All payments received hereon by Payee shall be applied first to accrued but
unpaid interest, and the balance, if any, shall be returned to Castle, except in
those instances in which principal payment is required or prepayment is
permitted hereunder, in which event such balance shall be applied to the
principal remaining unpaid hereon, up to the amount due or permitted to be
prepaid, as applicable. In the event Castle or any of its affiliates elects to
prepay any outstanding indebtedness to sellers of businesses acquired by Castle
or any such affiliate ("Seller Indebtedness"), Castle shall also be required to
prepay the outstanding principal and interest on this Note. If less than 100% of
the principal amount of such Seller Indebtedness is prepaid, an equal percentage
of the principal amount of this Note shall be prepaid.
2. LIMITATIONS ON PREPAYMENTS. This Note may be prepaid, in whole or in
part, without penalty at any time or from time to time. Notwithstanding the
foregoing or any provision hereof to the contrary, however, no prepayment of
this Note shall be attempted or permitted if such prepayment would be or would
be deemed to be, with notice or lapse of time or both, prohibited under the
Subordination Agreement.
3. SUBORDINATION PROVISIONS. Castle covenants and agrees, and the Payee,
on behalf of Xxxxx and each subsequent holder of this Note, by acceptance hereof
likewise covenants and agrees, that notwithstanding any provision of this Note
to the contrary, the payment of all indebtedness evidenced by this Note is, to
the extent and in the manner set forth in the Subordination Agreement (the terms
of which are incorporated herein by reference), subordinated in right of payment
to all Senior Indebtedness (as hereinafter defined) of Castle and subject to the
payment blockage periods set forth in the Subordination Agreement. For purposes
of this Note, the term "Senior Indebtedness" shall mean and include (i) Senior
Debt (as defined in the Subordination Agreement), including any modifications,
renewals, extensions, rearrangements, increases, replacements or refinancings of
the Senior Debt (regardless of the identity of the holders of such
indebtedness), (ii) "senior" and "senior
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subordinated" indebtedness (as defined in the Agreement), and (iii) such other
indebtedness of Castle as to which the Payee (or other holder hereof) consents
in writing.
4. EVENTS OF DEFAULT. The occurrence and continuation of any one of the
following events or conditions shall constitute an "Event of Default":
(a) Castle fails to make any payment, principal or interest, within
ten (10) days after the date such payment is due under the Note;
(b) Castle fails to perform any of its obligations under this Note
(other than the payment obligation described in Section 4(a) hereof)
within thirty (30) days after receipt from Payee of written notice of such
failure to perform;
(c) An event of default occurs under any arrangement with any holder
of Senior Indebtedness and the Senior Indebtedness is accelerated and not
reinstated; or
(d) Xxxxxx makes an assignment for the benefit of creditors or
becomes insolvent or unable to pay its debts generally as they become due,
or applies to any tribunal for the appointment of a trustee, custodian,
receiver or similar person for all or a substantial part of the assets of
Castle, or commences any proceedings relating to Castle under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debts, dissolution or other liquidation law of any jurisdiction; or any
such application is filed, or any such proceedings are commenced against
Castle and Castle indicates its consent to such proceedings, or an order
is entered appointing such trustee, custodian, receiver or similar person,
or approving the petition in any involuntary bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or other
liquidation proceedings, and such order in any involuntary matter remains
in effect for sixty (60) days.
5. REMEDIES. Subject to the provisions of Section 3 hereof, upon the
occurrence of an Event of Default other than as described in Section 4(d)
hereof, the Payee or other holder of this Note may declare the entire unpaid
principal of this Note, and all accrued but unpaid interest thereon, at once due
and payable, and upon the occurrence of an Event of Default under Section 4(d)
hereof, the entire unpaid principal of this Note and all accrued but unpaid
interest thereon shall automatically be declared at once due and payable, and
upon any such declaration the principal of this Note and such accrued but unpaid
interest shall become and be immediately due and payable, and the Payee or any
other holder of this Note may, subject to the provisions of Section 3 hereof,
thereupon proceed to protect and enforce its rights, whether by suit in equity
or by action at law or by other appropriate proceedings, whether for specific
performance (to the extent permitted by law or equity) of any covenant or
agreement contained herein or in aid of the exercise of any power granted
herein, or proceed to enforce the payment of this Note or to enforce any other
legal or equitable right of the Payee or such other holder. The foregoing shall
not affect the relative rights and obligations as
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between any holder of Senior Indebtedness and the Payee or other holder hereof;
as between such parties, Section 3 shall control the exercise of remedies.
6. IMMUNITY. This Note and the indebtedness and obligations evidenced
hereby are solely corporate indebtedness and obligations, and no personal
liability whatsoever shall attach to or be incurred by any past, present or
future officer, director, shareholder, agent, attorney or employee of Castle,
under or by reason of any of the obligations, covenants or agreements contained
in or implied by this Note.
7. NOTICES. All notices, requests, consents, and other communications
required or permitted under this Note shall be in writing and shall be deemed,
unless otherwise provided, to have been delivered (i) three business days
following the date mailed, postage prepaid, by certified mail, return receipt
requested, (ii) one business day following the deposit thereof with a recognized
overnight courier or (iii) on the date personally delivered:
(i) If to the Payee, to the address of the Payee set forth above;
(ii) If to Castle, to the address of Castle set forth above,
Attention: President, with a copy of such notice to:
Xxxxx, Xxxxx & Xxxxxx Incorporated
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxx X. Xxxxx, Esq;
(iii) If to any holder other than the Payee, to such address as may
have been designated by notice given Castle by such holder;
(iv) If to any holder of Senior Indebtedness, to such address as may
have been designated by notice given Castle by such holder, which Castle
will provide to the holder of this Note upon request.
Castle, the Payee or any other holder hereof may designate a different address
by notice given in accordance with the foregoing.
8. USURY. It is expressly provided and stipulated that notwithstanding any
provision of this Note or any other instrument evidencing or securing the
indebtedness evidenced hereby, in no event shall the aggregate of all interest
paid by Castle to the Payee hereunder ever exceed the Maximum Nonusurious Rate
of interest (as hereinafter defined) which may lawfully be charged Castle under
the laws of the State of Texas or the United States Federal Government, as
applicable, on the principal balance of this Note remaining unpaid. If under any
circumstances the aggregate amounts paid on the indebtedness evidenced by this
Note prior to and incident to the final payment hereof include amounts which by
law are deemed interest and which would exceed the Maximum
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Nonusurious Rate of interest which could lawfully have been charged or collected
on this Note, Castle stipulates that (a) any non-principal payment shall be
characterized as an expense, fee, or premium rather than as interest, and any
excess shall be credited hereon by the holder hereof (or, if this Note shall
have been paid in full, refunded to Castle) and (b) determination of the rate of
interest for determining whether the indebtedness evidenced hereby is usurious
shall be made by amortizing, prorating, allocating, and spreading, in equal
parts during the full stated term of such indebtedness, all interest at any time
contracted for, charged, or received from Castle in connection with such
indebtedness, and any excess shall be canceled, credited or refunded as set
forth in (a) herein.
The "Maximum Nonusurious Rate of interest" which may be charged as herein
contemplated shall be the indicated rate ceiling from time to time in effect
pursuant to the applicable provisions of the Texas Finance Code, as amended,
provided that Payee may also rely on any alternative Maximum Nonusurious Rate of
interest provided by other applicable laws if such other rates are higher than
that allowed by said Article, as amended.
THIS NOTE, THE AGREEMENT, THE SUBORDINATION AGREEMENT AND ALL DOCUMENTS,
INSTRUMENTS AND AGREEMENTS EXECUTED IN CONNECTION HEREWITH OR THEREWITH,
REPRESENT THE FINAL AGREEMENT BETWEEN CASTLE AND PAYEE AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF CASTLE AND THE PAYEE. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
BETWEEN CASTLE AND PAYEE.
THIS NOTE IS SUBJECT TO FINAL ACCEPTANCE IN, AND ALL TERMS, OBLIGATIONS,
AND PROVISIONS OF THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF, THE STATE OF TEXAS.
IN WITNESS WHEREOF, Xxxxxx has authorized this Note to be executed in its
corporate name by its duly authorized officer as of the date first above
written.
CASTLE DENTAL CENTERS, INC.
By:_______________________________
Xxxx X. Xxxxx, Vice President
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