EXHIBIT 10.26
FOURTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT
This FOURTH AMENDMENT to AMENDED AND RESTATED CREDIT AGREEMENT (this
"FOURTH AMENDMENT") effective as of December 31, 1999 (the "EFFECTIVE DATE" and
to continue to be effective to and including December 31, 2000 as provided in
Section 15 below), is by and among CASTLE DENTAL CENTERS, INC., a Delaware
corporation ("BORROWER"), and BANK OF AMERICA, N.A. (formerly known as
NationsBank, N.A.), a national banking association (in its individual capacity,
"BANK OF AMERICA"), as agent (in such capacity, "AGENT") for each of the lenders
that is a signatory hereto (individually, together with its successors and
assigns, "LENDER" and collectively, "LENDERS") and such Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, the Agent and the Lenders are parties to 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, as amended by Second Amendment to Amended and Restated Credit
Agreement dated as of September 30, 1999, as Amended by Third Amendment to
Amended and Restated Credit Agreement dated as of January 31, 2000 (such Amended
and Restated Credit Agreement as amended and as the same may be further amended
from time to time, the "AGREEMENT"), pursuant to which the Lenders agreed to
make loans to and extensions of credit on behalf of the Borrower; and
WHEREAS, the Borrower has requested that the Agent and the Lenders amend
the Agreement, and the Agent and the Lenders have agreed to amend the Agreement
in the particulars hereinafter provided.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
1. TERMS DEFINED ABOVE. As used in this Fourth Amendment, each of the terms
"Agent," "Bank of America," "Borrower," "Agreement," "Effective Date,"
"Lenders," and "Fourth Amendment" shall have the meaning assigned to such term
herein above.
2. TERMS DEFINED IN AGREEMENT. Each term defined in the Agreement and used
herein without definition shall have the meaning assigned to such term in the
Agreement, unless expressly provided to the contrary.
3. OTHER DEFINITIONAL PROVISIONS. The words "hereby," "herein," "hereinafter,"
"hereof," "hereto," and "hereunder" when used in this Fourth Amendment shall
refer to this Fourth Amendment as a whole and not to any particular paragraph or
provision of this Fourth Amendment.
4. AMENDMENTS AND SUPPLEMENTS TO DEFINITIONS.
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(1) The following terms, which are defined in Section 1.02 of the
Agreement, are hereby amended in their entirety to read as follows:
"APPLICABLE MARGIN" effective as of April 1, 2000, the applicable
per annum percentage set forth at the appropriate intersection in the
table shown below, based on the ratio of Total Funded Debt to EBITDA,
determined as of the end of the most recent fiscal quarter (beginning with
the fiscal quarter ended March 31, 2000) of the Borrower:
------------------------------------------------------------
APPLICABLE APPLICABLE MARGIN
TOTAL FUNDED DEBT TO MARGIN ALTERNATE BASE
EBITDA EURODOLLAR RATE
------------------------------------------------------------
Less than 1.0 2.25% 0.00%
------------------------------------------------------------
Greater than or equal to
1.0 but less than 1.5 2.5% .25%
------------------------------------------------------------
Greater than or equal to
1.5 but less than 2.0 2.75% .25%
------------------------------------------------------------
Greater than or equal to
2.0 but less than 2.5 3.0% .50%
------------------------------------------------------------
Greater than or equal to
2.5 but less than 4.0 3.5% 1.00%
------------------------------------------------------------
Greater than or
equal to 4.0 4.5% 2.00%
------------------------------------------------------------
Each change in the Applicable Margin resulting from a change in the ratio
of Total Funded Debt to EBITDA shall take effect as of the date of
determination of the ratio of Total Funded Debt to EBITDA. For clarity
purposes it is understood and agreed that Total Funded Debt includes,
without limitation, any and all deferred interest under any Subordinated
Debt.
"BORROWING BASE" shall mean (i) for the period from December 31,
1999 through January 31, 2000, the amount equal to three and three
quarters (3.75) times EBITDA as of the end of the most recent fiscal
quarter of the Borrower (calculated on a rolling four quarter basis), (ii)
for the period from February 1, 2000 through December 30, 2000, the amount
equal to three and four tenths (3.40) times EBITDA as of the end of the
most recent fiscal quarter of the Borrower (calculated on a rolling four
quarter basis), (iii) and (iii) on December 31, 2000, three (3.00) times
EBITDA as of the end of the most recent fiscal quarter of the Borrower
(calculated on a rolling four quarter basis). 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 occurring
during the quarter, the "rolling four quarters" shall include the "pro
forma" EBITDA of the applicable Acquired Entity for such prior periods
adjusted to reflect the costs and expenses which such Acquired Entity
would have incurred had the Management Services Agreements between the
Borrower 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).
"CLOSING DATE" shall mean the date that this Fourth Amendment shall
be executed by the Lenders and the Borrower.
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"EBITDA" shall mean, for any period, the sum of Consolidated Net
Income for such period plus the following expenses or charges to the
extent deducted from Consolidated Net Income in such period: interest,
taxes, depreciation, depletion, amortization, the amount of the settlement
of the lawsuit with Xxxxxx Xxxxxx, D.D.S. up but not to exceed $1,372,743
as reflected on Schedule 1 to the Second Amendment, and the amount of
legal fees and expenses related to the arbitration with Xx. Xxxx Xxxxxxx,
D.M.D. that was expensed in Fiscal year 1999, up to but not to exceed
$541,000.
(2) Section 1.02 of the Agreement is hereby further amended and
supplemented by adding the following new definitions where alphabetically
appropriate, which read in their entirety as follows:
"FOURTH AMENDMENT" shall mean that certain Fourth Amendment to
Amended and Restated Credit Agreement dated effective as of the December
31, 1999, by and among the Borrower, the Agent and Lenders.
5. AMENDMENT TO SECTION 8.01. Section 8.01 of the Agreement is hereby amended
by adding the following to the end of Section 8.01(a):
"As soon as available, and in any event on or before two weeks after the
Closing Date, Borrower shall deliver to the Agent the audited annual
financial statements for fiscal year 1999 prepared in accordance with this
Section 8.01(a) accompanied by the related opinion of independent public
accountants as called for in this Section 8.01(a)."
6. AMENDMENT TO SECTION 8.01. Section 8.01 of the Agreement is hereby amended
by deleting the paragraph after Section 8.01(o) in its entirety and replacing it
with the following:
The Borrower shall furnish to the Lenders, at the time it furnishes
financial statements pursuant to paragraph (a) above and within 45 days of
the end of each of the first three fiscal quarters of the Borrower, 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 is reasonable detail),
and (ii) setting forth in reasonable detail the computations necessary to
determine the Borrower's Total Funded Debt, Senior Funded Debt and EBITDA
and whether the Borrower is in compliance with Sections 9.11, 9.12, 9.13,
9.14, 9.15, 9.16, and 9.24 as of the end of the respective fiscal quarter
or fiscal year.
7. AMENDMENT TO SECTION 8.01. Section 8.01 of the Agreement is hereby amended
by adding the following new subsections:
(p) MONTHLY FINANCIAL STATEMENTS. As soon as available and in any
event within 45 days after the end of each calendar month, the
Borrower-prepared consolidated and consolidating statements of income,
cash flow of the Borrower and its Consolidated Subsidiaries for such
period and for the period from the beginning
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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 Borrower and its Consolidated Subsidiaries in accordance
with GAAP, as at the end of, and for, such period (subject to normal
year-end audit adjustments).
(q) MANAGEMENT LETTER. As soon as available and in any event by no
later than two weeks after the Closing Date, an auditor-prepared Fiscal
1999 management letter.
(r) ACCOUNTS RECEIVABLE. As soon as available and in any event
within 45 days after the end of each calendar month, (i) a report in form
reasonably satisfactory to the Agent reflecting the aging and collection
of the receivables of the Borrower and its Subsidiaries, each such aging
report to show in reasonable detail, calculations reflecting compliance
with Section 9.24 and (ii) such other reports as deemed necessary by the
Agent.
8. AMENDMENT TO SECTION 8. Section 8 of the Agreement is hereby amended by
adding a new Section 8.13 to read as follows:
Section 8.13 FIELD EXAM. The Borrower and its Subsidiaries shall
permit the Agent and its representatives to have access, during normal
business hours, to their records of accounts and appropriate personnel for
purpose of conducting an examination of accounts receivable. Such field
exam shall be completed and a report provided to the Agent within 45 days
after the Closing Date.
9. AMENDMENT TO SECTION 9.13. Section 9.13 of the Agreement is hereby amended
in its entirety to read as follows:
9.13 LEVERAGE RATIO. The Borrower will not permit its Leverage Ratio
as of the end of any fiscal quarter (calculated on a rolling four quarter
basis) to be greater than the ratio indicated in the chart below. 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 adjusted to
reflect costs and expenses which such Acquired Entity would have included
had the Management Services Agreements between Borrower 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). As used in this Section 9.13, "Leverage Ratio" shall mean
the ratio of (i) Senior Funded Debt to (ii) EBITDA.
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-------------------------------------------------
PERIOD (QUARTER END DATE) RATIO
-------------------------------------------------
December 31, 1999 3.75 to 1.0
-------------------------------------------------
March 31, 2000 3.40 to 1.0
-------------------------------------------------
-------------------------------------------------
June 30, 2000 3.40 to 1.0
-------------------------------------------------
-------------------------------------------------
September 30, 2000 3.40 to 1.0
-------------------------------------------------
-------------------------------------------------
3.00 to
December 31, 2000 1.0
-------------------------------------------------
10. AMENDMENT TO SECTION 9.14. Section 9.14 of the Agreement is hereby amended
in its entirety to read as follows:
Section 9.14. FIXED CHARGE COVERAGE RATIO. The Borrower 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.
-------------------------------------------------
PERIOD RATIO
-------------------------------------------------
December 31, 1999 through
December 31, 2000 1.30 to 1.0
-------------------------------------------------
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 (ii) lease and rental expense,
plus cash and deferred interest, plus senior and subordinate principal
payments scheduled during the period, plus actual capital lease payments.
The ratio will be determined quarterly on a rolling twelve-month basis.
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 adjusted to reflect costs and expenses which such Acquired Entity
would have included had the Management Services Agreements between
Borrower 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).
11. AMENDMENT TO SECTION 9.15. Section 9.15 of the Agreement is hereby amended
in its entirety to read as follows:
Section 9.15. RATIO OF TOTAL FUNDED DEBT TO EBITDA. The Borrower
will not permit its ratio of Total Funded Debt as of the end of any fiscal
quarter to EBITDA for the four fiscal quarters ending on such date to be
greater than the ratio indicated in the chart below. For purposes hereof,
EBITDA shall be calculated as provided in Section 9.13 above. For clarity
purposes it is understood and agreed that Total Funded Debt includes,
without limitation, any and all deferred interest under any Subordinated
Debt.
-------------------------------------------------
PERIOD (QUARTER END DATE) RATIO
-------------------------------------------------
December 31, 1999 4.25 to 1.0
-------------------------------------------------
March 31, 2000 4.75 to 1.0
-------------------------------------------------
June 30, 2000 4.75 to 1.0
-------------------------------------------------
September 30, 2000 4.60 to 1.0
-------------------------------------------------
December 31, 2000 4.15 to 1.0
-------------------------------------------------
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12. AMENDMENT TO SECTION 9.16. Section 9.16 of the Agreement is hereby amended
in its entirety to read as follows:
Section 9.16. CAPITAL EXPENDITURES. Without the prior written
consent of the Majority Lenders, the Borrower will not make any
expenditures for fixed or capital assets if, after giving effect thereto,
the aggregate of all such expenditures would exceed $3,500,000 during
fiscal year 2000 (January 1, 2000 through December 31, 2000), as outlined
in SCHEDULE 9.16.
13. AMENDMENT TO SECTION 9. Section 9 of the Agreement is hereby amended by
adding the following new Sections:
Section 9.24 ACCOUNTS RECEIVABLE. Neither the Borrower nor any
Subsidiary will permit its Average Accounts Receivable Days [at the end of
any calendar month] to exceed 80 days. For purposes of this Section 9.24,
"Average Accounts Receivable Days" shall mean the (i) net patient
receivables plus net unbilled patient receivables, divided by (ii) net
patient revenues for the 12-month period ending on such date, multiplied
by (iii) 365 days.
Section 9.25 ACQUISITIONS. Neither the Borrower nor any Subsidiary
will, during fiscal year 2000, make any New Acquisition (whether or not
proceeds of any Loans are utilized therefor), unless such New Acquisition
is approved of in advance by all of the Lenders.
Section 9.26 ADVANCES. Unless the Borrower or its Subsidiary
receives prior written consent from all of the Lenders, neither the
Borrower nor any Subsidiary will, during fiscal year 2000, use the
proceeds of any Loan to settle any lawsuit or arbitration if any such
settlement exceeds $100,000, or the aggregate of all settlements for
fiscal year 2000 exceeds $250,000.
14. AMENDMENT TO SECTION 10.01. The period at the end of clause (o) in Section
10.01 is changed to "; or" and a new clause (p) is hereby added to Section 10.01
to read as follows:
"(p) the field exam conducted pursuant to Section 8.13 is determined
by the Majority Lenders in their sole reasonable discretion to be less
than satisfactory.
15. EFFECTIVENESS OF THIS FOURTH AMENDMENT. Except for the definition of
"Applicable Margin", which shall be effective as of December 31, 1999 and
continuing until the Final Maturity Date, this Fourth Amendment shall be
effective as of December 31, 1999 through December 31, 2000. Thereafter, the
terms and conditions of the Agreement as in effect prior to the execution of
this Fourth Amendment shall govern as if this Fourth Amendment had not been
executed.
16. TEMPORARY WAIVER. Borrower's covenant in Section 8.11 is hereby temporarily
waived. This temporary waiver shall terminate 30 days after the Closing Date and
shall not be deemed to be a consent to, or waiver or modification or, any other
term or condition of the Agreement, the Security Agreement, the Guarantee
Agreement, or any other Loan Document.
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17. AMENDMENT FEE. The Borrower shall pay to the Agent for the account of each
Lender an amendment fee equal to .5% of the Aggregate Maximum Commitment Amounts
(the "AMENDMENT FEE"). Borrower shall pay (i) 33.34 % of the Amendment Fee on
Borrower's execution hereof, (ii) 33.33% of the Amendment Fee on September 29,
2000, and (iii) 33.33% of the Amendment Fee on December 29, 2000. If the Loans
are completely paid prior to December 29, 2000, then the balance of the
Amendment Fee shall be due and payable at such time the loans are completely
paid.
18. CONDITIONS. The effectiveness of this Fourth Amendment against the Agent and
the Lenders is subject to the following conditions precedent:
(1) the Agent's receipt of Borrower-prepared financial statements (in form
of the financial statements called for in Section 8.01(b)), at least two
days prior to the Closing Date, for the period ending March 31, 2000;
(2) the Agent's receipt of the reports reflecting compliance (as waived by
the letter dated May 19, 2000 from Agent to Borower) with all financial
covenants as of September 30, 1999, December 31, 1999 and March 31, 2000
applying the terms and conditions of the Agreement as amended by this
Fourth Amendment;
(3) the Agent's receipt of multiple original counterparts, as requested by
the Agent, of this Fourth Amendment, executed and delivered by a duly
authorized officer of the Borrower, the Agent, and each Lender, as
applicable and ratified by the Guarantors; and,
(4) the Agent's receipt of such other instruments or documents as the
Agent may reasonably request.
19. REPRESENTATIONS AND WARRANTIES. Except as affected by the transactions
contemplated in the Agreement and this Fourth Amendment, each of the
representations and warranties made by the Borrower in or pursuant to the
Agreement and the Security Instruments shall be true and correct in all material
respects as of the Effective Date, as if made on and as of such date (except to
the extent such representations and warranties are expressly limited to an
earlier date).
20. ADOPTION, RATIFICATION AND CONFIRMATION OF AGREEMENT. Each of the Borrower,
the Agent, and the Lenders does hereby adopt, ratify and confirm the Agreement,
as amended hereby, and acknowledges and agrees that the Agreement, as amended
hereby, is and remains in full force and effect.
21. SUCCESSORS AND ASSIGNS. This Fourth Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted pursuant to the Agreement.
22. COUNTERPARTS. This Fourth Amendment may be executed by one or more of the
parties hereto in any number of separate counterparts, and all of such
counterparts taken together shall be deemed to constitute one and the same
instrument and shall be enforceable as of the Effective Date upon the execution
of one or more counterparts hereof by the Borrower, the Agent and the Lenders.
In this regard, each of the parties hereto acknowledges that a counterpart of
this Fourth Amendment containing a set of counterpart execution pages reflecting
the execution of each party hereto shall be
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sufficient to reflect the execution of this Fourth Amendment by each necessary
party hereto and shall constitute one instrument.
23. ENTIRE AGREEMENT. This Fourth Amendment constitutes the entire agreement
among the parties hereto with respect to the subject hereof. All prior
understandings, statements and agreements, whether written or oral, relating to
the subject hereof are superseded by this Fourth Amendment.
24. GOVERNING LAW. This Fourth Amendment shall be deemed to be a contract made
under and shall be governed by and construed in accordance with the internal
laws of the State of Texas.
THIS FOURTH AMENDMENT, THE AGREEMENT, AS SUPPLEMENTED AND AMENDED HEREBY,
THE NOTES, AND THE OTHER SECURITY INSTRUMENTS 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.
[SIGNATURES BEGIN ON NEXT PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment
to be duly executed and delivered by their proper and duly authorized officers
as of the Effective Date.
BORROWER: CASTLE DENTAL CENTERS, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
LENDER AND AGENT: BANK OF AMERICA, N.A. (FORMERLY KNOWN AS
NATIONSBANK, N.A.)
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
LENDERS: FLEET NATIONAL BANK (FORMERLY KNOWN AS
BANK BOSTON, N.A.)
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
AMSOUTH BANK
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
XXXXXX FINANCIAL, INC.
By: ________________________________________
Name: ______________________________________
Title: _____________________________________
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RATIFICATION
Each of the Guarantors hereby expressly (i) acknowledges the terms of this
Fourth Amendment, (ii) ratifies and affirms its obligations under its Guaranty
Agreement, in favor of the Agent and the Lenders, as amended, supplemented or
otherwise modified, (iii) acknowledges, renews and extends its continued
liability under its Guaranty Agreement and agrees that said Guaranty Agreement
remains in full force and effect; and (iv) guarantees to the Agent and each
Lender to promptly pay when due all amounts owing or to be owing by it under its
Guaranty Agreement pursuant to the terms and conditions thereof.
GUARANTORS: CASTLE DENTAL CENTERS OF FLORIDA, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
CASTLE DENTAL CENTERS OF TENNESSEE, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
CASTLE DENTAL CENTERS OF TEXAS, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
CDC OF CALIFORNIA, INC.
By: _____________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
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XXXXXX XXXXXX XXXXXXX XX XXXXXXXXXX,
L.L.C.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
DENTAL WORLD, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
CASTLE DENTAL CENTERS OF AUSTIN, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
DENTCOR, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
CASTLE TEXAS HOLDINGS, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
ACADEMY FOR DENTAL ASSISTANTS, INC.
By: ______________________________________
Xxxx X. Xxxxxx, Xx.
Chairman & Chief Executive Officer
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SCHEDULE 9.16
Schedule 9.16, Page 1
