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SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT
DATED AS OF JULY 19, 2002
AMONG
CASTLE DENTAL CENTERS, INC.,
▇▇▇▇▇▇ FINANCIAL, INC.,
MIDWEST MEZZANINE FUND II, L.P.
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇
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EXHIBITS AND SCHEDULES
Exhibit A Form of Notes
Exhibit B Form of Warrants
Exhibit C Form of Compliance Certificate
Schedule 7.02 Liabilities
Schedule 7.03 Litigation
Schedule 7.14 Subsidiaries
Schedule 7.19 Insurance
Schedule 7.21 Material Agreements
Schedule 7.22 Hedging Agreements
Schedule 7.23 Capitalization
Schedule 8.01(e) Reporting Regions
Schedule 9.01 Debt
Schedule 9.02 Liens
Schedule 9.03 Investments, Loans and Advances
THIS SENIOR SUBORDINATED NOTE AND WARRANT PURCHASE AGREEMENT, dated as
of July 19, 2002, is by and among CASTLE DENTAL CENTERS, INC., a Delaware
corporation (the "Company"), ▇▇▇▇▇▇ FINANCIAL, INC., a Delaware corporation
("▇▇▇▇▇▇"), MIDWEST MEZZANINE FUND II, L.P., a Delaware limited partnership
("Midwest") and ▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual ("▇▇▇▇▇"; ▇▇▇▇▇▇, Midwest and
▇▇▇▇▇ are sometimes referred to individually as a "Holder" and collectively, as
the "Holders").
R E C I T A L S
WHEREAS, the Company desires to sell to Holders and Holders desire to
purchase from the Company (i) certain senior subordinated convertible promissory
notes in the aggregate principal amount of $1,700,000, which initially may be
converted into 3,105,618 shares of Common Stock of the Company and (ii) warrants
to acquire 17,974,062 shares of Common Stock of the Company, upon the terms and
subject to the conditions hereinafter set forth;
NOW, THEREFORE, 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", "▇▇▇▇▇▇", "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):
"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 (1) 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 ten percent (10%) or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or ten percent (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,
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"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.
"Annual Meeting" shall have the meaning assigned to such term in
Section 8.08.
"Authorized Share Amendment" shall have the meaning assigned to such
term in Section 7.06.
"Business Day" shall mean any day other than a day on which commercial
banks are authorized or required to close in Chicago, Illinois.
"California LLC" shall mean Castle Dental Centers of California,
L.L.C., a Delaware limited liability company.
"Capital Expenditures" shall mean, for any period and with respect to
any Person, the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability and including that portion of capital
leases that is capitalized on the balance sheet of such Person including in
connection with a sale-leaseback transaction) by such Person and its
Subsidiaries for the acquisition or leasing of fixed or capital assets or
additions to equipment (including replacements, capitalized repairs and
improvements during such period) which are required to be capitalized under GAAP
on a consolidated balance sheet of such Person and its Subsidiaries.
"Castle PC" shall mean Castle Dental Associates of Texas, P.C., a Texas
professional corporation formerly known as ▇▇▇▇ ▇. ▇▇▇▇▇▇ D.D.S., P.C.
"Castle Texas" shall mean Castle Dental Centers of Texas, Inc., a Texas
corporation.
"CDC California" shall mean CDC of California, Inc., a Delaware
corporation.
"Change of Control" shall mean at any time, ▇▇▇▇▇▇ and Midwest,
together, cease to have the right to appoint to the Board of Directors of the
Company a majority of the members of the Board of Directors of the Company.
"Closing Date" shall mean July 19, 2002.
"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.
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"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 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.
"Corpus Transactions" shall mean, collectively: (i) the execution and
delivery of that certain Severance Agreement dated as of June 12, 2002 by and
among the Company, ▇▇▇▇ Castle, Goforth, Inc., a Texas corporation, and Castle
1995 Gift Trust f/b/o ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., (ii) the execution and delivery of
that certain Settlement Agreement dated as of June 12, 2002 by and among the
Company, ▇▇▇▇ ▇. ▇▇▇▇▇▇, D.D.S. and the Estate of ▇▇▇▇ ▇. ▇▇▇▇▇▇, D.D.S., Castle
Texas, Castle PC, Castle Interests Ltd. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual,
and (iii) the sale by the Company of two (2) locations in Corpus Christi, Texas
and one (1) location in Beaumont, Texas pursuant to that certain Asset Purchase
Agreement dated as of June 12, 2002 by and among Dentists Choice 1 L.P., a Texas
limited partnership, ▇▇▇▇ ▇▇▇▇▇▇, Texas Dental Associates, P.A., a Texas
professional association, Castle Texas and Castle PC.
"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
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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 each of the following expenses or charges to the extent
deducted from Consolidated Net Income in such period: interest, taxes,
depreciation, depletion and amortization.
"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,
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
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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.
"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 ninety (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
5
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.
"Existing Seller Notes" shall mean, collectively, each of those certain
subordinated promissory notes issued by the Company prior to the Closing Date to
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, D.D.S.; ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.D.S.; ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
D.M.D.; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, D.D.S.; ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, D.D.S.; ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
D.D.S.; Dental Advisory Group, LLC; DCA Limited Partnership, L.L.P.; and Dental
Administrators of Texas Limited Partnership, L.L.P., in an aggregate amount
outstanding of $3,650,000 (including principal and interest that has accrued
thereunder, but excluding default interest).
"Financial Statements" shall mean the financial statement or statements
of the Company and its Consolidated Subsidiaries described or referred to in
Section 7.02.
"Florida Transaction" shall mean the sale of substantially all of the
property, assets and business relating to the Company's dental centers located
in Sarasota and Venice, Florida pursuant to that certain Asset Purchase
Agreement dated as of June 14, 2002, by and among ▇▇▇▇▇ Dentistry, P.A., a
Florida professional association, Castle Dental Centers of Florida, Inc., a
Florida corporation, and Castle 1st Dental Care, P.A., a Florida professional
association, in exchange for a release of that certain nine percent (9%)
Subordinated Note issued by the Company to ▇▇▇▇▇ Dentistry, P.A. on July 9,
1998, in the original principal amount of $370,000.
"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.
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"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.
"▇▇▇▇▇▇/Midwest Debt Exchange" shall mean the exchange by ▇▇▇▇▇▇ and
Midwest of all liabilities and obligations owed to them by the Company pursuant
to that certain Senior Subordinated Note Purchase Agreement dated as of January
31, 2000 by and among ▇▇▇▇▇▇, Midwest and the Company for 119,520 and 59,760
shares of Series A Preferred Stock, respectively.
"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 and Warrant 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 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.
"Investors Agreement" shall mean that certain Investors Agreement of
even date herewith by and among the Company, ▇▇▇▇▇▇ and Midwest.
"▇▇▇▇ ▇▇▇▇▇▇" shall mean ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., an individual
"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
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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.
"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 and Warrant 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 and Warrant Documents or the
Restructuring Documents on a timely basis.
"Multiemployer Plan" shall mean a Plan defined as such in Section 3(37)
or 4001(a)(3) of ERISA.
"Notes" shall have the meaning assigned such term in Section 2.01(a).
"Other Taxes" shall have the meaning assigned such term in Section
4.03(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,
Governmental Authority 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 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 eighteen percent (18%) per
annum.
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"Prior Registration Rights Agreement" shall mean that certain
Registration Rights Agreement dated as of January 31, 2000, by and among the
Company, ▇▇▇▇▇▇ and Midwest.
"Prior Stockholders Agreement" shall mean that certain Stockholders
Agreement dated as of January 31, 2000, by and among the Company, ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, Midwest, Delaware State Employees' Retirement Fund, Declaration of Trust
For Defined Benefit Plan of ICI American Holdings Inc., Declaration of Trust for
Defined Benefit Plan of Zeneca Holdings Inc., ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., as Trustee of
the Castle 1995 Gift Trust F/B/O ▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Castle Interests, Ltd.,
▇▇▇▇ ▇. ▇▇▇▇▇▇, D.D.S., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, and Gulfstar Investments, Ltd.
"Prior Subordination Agreement" shall mean that certain Subordination
and Intercreditor Agreement dated as of January 31, 2000 by and among ▇▇▇▇▇▇,
Midwest, the Company, Castle Dental Centers of California, L.L.C., a Delaware
limited liability company, Dental World, Inc., a Texas corporation, Castle
Dental Centers of Austin, Inc., Castle dental Centers of Florida, Inc., a
Florida corporation, Castle Dental Centers of Tennessee, Inc., a Tennessee
corporation, Castle Dental Centers of Texas, Inc., a Texas corporation, Dentcor,
Inc., a Florida corporation, CDC of California, Inc., a Delaware corporation,
Castle Texas Holdings, Inc., a Delaware corporation, Academy for Dental
Assistants, Inc., a Florida corporation, and Bank of America, N.A., a national
banking association formerly known as NationsBank, N.A.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Proposal" shall have the meaning assigned to such term in Section 8.08
"Quarterly Date" shall mean the fifteenth (15th) day of each January,
April, July and October, commencing October 15, 2002; 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 even date herewith, 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.
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"Reporting Region" shall mean the dental centers and other business
operations for each of Houston, ▇▇▇▇▇▇, ▇▇▇▇▇▇/Fort Worth, San Antonio,
Tennessee, Florida and California, all as more fully set forth in Schedule
8.01(e).
"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.
"Restructuring Transactions" shall mean, collectively, the
▇▇▇▇▇▇/Midwest Debt Exchange, the ▇▇▇▇▇▇▇ Settlement, the Seller Debt Exchange,
the San Antonio Transaction, the Florida Transaction, the Corpus Transactions
and the amendment of the Certificate of Incorporation of the Company to create
the Series A Preferred Stock.
"Restructuring Documents" shall mean the Senior Credit Documents and
each other document executed or delivered in connection with any of the
Restructuring Transactions, 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.
"▇▇▇▇▇▇▇" shall mean, collectively, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, D.M.D., ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, D.M.D., Inc., a California corporation and ▇▇▇▇▇▇▇ Acquisition Company,
a California corporation.
"▇▇▇▇▇▇▇ Judgment" shall mean that certain judgment rendered against
CDC California, and California LLC, in favor of ▇▇▇▇▇▇▇ in Los Angeles County,
California Superior Court Case No. BS058068 on October 23, 2000, in the initial
amount of $1,108,210.62 plus interest at ten percent (10%) per annum from the
date of such judgment.
"▇▇▇▇▇▇▇ Settlement" shall mean the execution and delivery of that
certain Forbearance Agreement dated as of July 3, 2002 by and among CDC
California, California LLC and ▇▇▇▇▇▇▇ with respect to the ▇▇▇▇▇▇▇ Judgment.
"San Antonio Transaction" means the issuance of Series A Preferred
Stock pursuant to the Settlement Agreement among the Company, Castle Texas,
Castle PC, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Hebron ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇, Dental Centers of America, Inc., Dental Administrators, Inc.,
Senior Agent, Senior Lenders, General Electric Capital Corporation, a Delaware
corporation, ▇▇▇▇▇▇ and Midwest.
"SEC" shall mean the Securities and Exchange Commission or any
successor Governmental Authority.
"Seller Debt Exchange" shall mean the exchange by the holders of
Existing Seller Notes
10
of all liabilities and obligations owed to them by the Company pursuant to the
Seller Notes and all documents related thereto for an aggregate 32,002 shares of
Series A Preferred Stock.
"Senior Agent" shall mean Bank of America, N.A., a national banking
association 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 Second Amended and
Restated Credit Agreement dated as of even date herewith, by and among the
Company, the Senior Agent and the Senior Lenders, as the same may hereafter be
amended, restated, supplemented or otherwise modified and in effect from time to
time as permitted herein and in the Subordination Agreement.
"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.
"Series A Preferred Stock" shall mean the Series A-1 Convertible
Preferred Stock, $.001 par value per share, of the Company.
"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
11
even date herewith, by and among the Company and the stockholders party thereto.
"Subordinated Note and Warrant Documents" shall mean this Agreement,
the Notes, the Warrants, the Stockholders Agreement, the Registration Rights
Agreement and any other stockholder, registration or intercreditor agreement
between or among the holders of such stock, notes, warrants, debentures or other
instruments.
"Subordination Agreement" shall mean that certain Subordination and
Intercreditor Agreement of even date herewith among the Company, Holders,
Subsidiaries 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 (1) or more of its Subsidiaries or by the
Company and one (1) 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 4.03(a).
"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
PURCHASE AND SALE OF NOTES AND WARRANTS
Section 2.01 Purchase and Sale of Notes and Warrants.
(a) Subject to the terms and conditions herein set forth, the Company
agrees that it will issue and sell to each of ▇▇▇▇▇▇, Midwest and ▇▇▇▇▇, and
each of ▇▇▇▇▇▇, Midwest and ▇▇▇▇▇
12
agrees that it will acquire from the Company, on the Closing Date, for the
purchase price of $500,000, $500,000 and $700,000, respectively, the Company's
fifteen percent (15%) senior subordinated convertible promissory notes in
original principal amounts of $500,000, $500,000 and $700,000 each,
respectively, in substantially the form attached hereto as Exhibit A (together
with any and all renewals, extensions for any period, increases, rearrangements,
substitutions or modifications thereof, the "Notes"), which Notes shall
initially be convertible into 913,417, 913,417 and 1,278,784 shares of Common
Stock of the Company, respectively, constituting an aggregate of three and three
tenths percent (3.30%) of the fully diluted Common Stock of the Company as of
the date hereof. The holders of Notes will be entitled to the benefits of the
Stockholders Agreement and the Registration Rights Agreement.
(b) Subject to the terms and conditions herein set forth, the Company
agrees that it will issue and sell to each of ▇▇▇▇▇▇, Midwest and ▇▇▇▇▇, and
each of ▇▇▇▇▇▇, Midwest and ▇▇▇▇▇ agrees that it will acquire from the Company,
on the Closing Date, for the purchase price of $0, $0 and $0, respectively,
warrants of the Company representing the right to acquire 5,286,489, 5,286,489
and 7,401,084 shares of Common Stock of the Company each, respectively,
constituting an aggregate of nineteen and four tenths of one percent (19.4%) of
the fully diluted Common Stock of the Company as of the date hereof, in
substantially the form attached hereto as Exhibit B (together with any and all
renewals, extensions for any period, increases, rearrangements, substitutions or
modifications thereof, the "Warrants"). The holders of Warrants 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 and Warrants 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).
ARTICLE III
PAYMENTS OF PRINCIPAL AND INTEREST
Section 3.01 Payment of Notes. The aggregate outstanding principal
balance of the Notes and all accrued and unpaid interest thereon shall be
payable on June 30, 2007.
Section 3.02 Interest.
(a) Interest Rates. 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, shall accrue at the rate per annum equal to
fifteen percent (15%), except as provided in Section 5.01.
(b) Post-Default Rate. Interest at the applicable Post-Default Rate
shall accrue on
13
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. Interest on the unpaid principal amount of the Notes at
the rate of fifteen percent (15%) per annum from the Closing Date or the
immediately preceding Quarterly Date, as applicable, shall be capitalized, be
compounded and added to the then unpaid principal amount of the Notes as of each
Quarterly Date. As used herein and in the other Subordinated Note and Warrant
Documents, the phrase "unpaid principal amount of the Notes" and other similar
phrases shall mean the original aggregate principal amount of $1,700,000, as
reduced by payments of principal and increased by capitalized interest as
provided herein.
Section 3.03 Prepayments.
(a) Voluntary Prepayments. The Company shall not be permitted to
voluntarily prepay the Notes.
(b) Mandatory Prepayments. Concurrently with the consummation of a
Change in Control, Company shall pay the outstanding principal of the Notes
(together with accrued interest and, if applicable, the prepayment fee described
below).
(c) Pro Rata Payments and Treatment; Notice to Holders.
(i) All interest payments and payments of principal shall be
made and applied pro rata on all outstanding Notes in accordance with
the respective unpaid principal amounts thereof.
(ii) If any Holder (a "Benefited Holder") shall at any time
receive any payment under such Benefited Holder's Note or Notes,
(whether from the Company, any of its Subsidiaries, affiliates or
otherwise and whether by set-off, exercise of subrogation rights or
otherwise) in a greater proportion than its ratable share as set forth
in clause (i) above, then such Benefited Holder shall deliver such
excess payment ratably to the other Holders and thereafter shall be
deemed to have purchased for cash from such other Holders such
participations in the other Holders' Notes as shall be necessary to
cause the Benefited Holder to share the excess ratably with the other
Holders; provided, however, if all or any portion of such excess
payment is thereafter recovered from the Benefited Holder, such
purchase shall be rescinded, and the excess payment shall be returned
to the Benefited Holder to the extent of such recovery, but without
interest. The Company agrees that each Holder so purchasing a
participation in another Holder's Note may exercise all rights of
payment (including, without limitation, rights of set-off, and
subrogation) with respect to such participation so purchased as if such
Holder was the direct creditor of the Company in the amount of such
participation.
14
(iii) Each Holder agrees to give prior notice as soon as
reasonably practicable of its intention to: (A) receive a Mandatory
Prepayment or (B) issue a notice accelerating its Note under Section
10.2(a).
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. If the due
date of any payment under this Agreement or any Note would otherwise fall on a
day which is 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.
Section 4.03 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
15
under this Section 4.03) 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, the Warrants, Common Stock issued upon conversion of
all or any portion of the Notes or exercise of all or any portion of the
Warrants (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 TO, ANY TAXES OR OTHER TAXES IMPOSED BY ANY
GOVERNMENTAL AUTHORITY ON AMOUNTS PAYABLE UNDER THIS SECTION 4.03) 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.
16
ARTICLE V
CAPITAL ADEQUACY
Section 5.01 Capital Adequacy.
(a) Capital Adequacy. 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(a) as promptly as practicable after it determines
to request such compensation.
(b) 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 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(b).
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to Purchase.
The obligation of Holders to purchase the Notes and Warrants is subject
to the receipt by Holders of all 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
and Warrant Documents and the Restructuring
17
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 and Warrant Documents and the Restructuring 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
Subsidiary setting forth (i) resolutions of its board of directors with respect
to the authorization of such Subsidiary to execute and deliver the Subordinated
Note and Warrant Documents and the Restructuring Documents to which it is a
party and to enter into the transactions contemplated in those documents, (ii)
the officers of such Subsidiary (y) who are authorized to sign the Subordinated
Note and Warrant Documents and the Restructuring Documents to which such
Subsidiary 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 Subsidiary, certified as being
true and complete. Holders may conclusively rely on such certificate until they
receive notice in writing from such Subsidiary 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.
(d) A compliance certificate which shall be substantially in the form
of Exhibit C hereto, duly and properly executed by a Responsible Officer and
dated as of the Closing Date.
(e) The Notes and the Warrants, duly completed, executed and delivered
to each Holder, as applicable.
(f) Opinions of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, counsel to the Company and
Subsidiaries, in form and substance satisfactory to Holders, as to such matters
incident to the transactions herein contemplated as Holders may reasonably
request.
(g) A certificate of insurance coverage of the Company evidencing that
the Company is carrying insurance in accordance with Section 7.19.
(h) 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
18
consolidated balance sheet of the Company and its Consolidated Subsidiaries as
of March 31, 2002).
(i) Certified copies of the Senior Credit Documents, the promissory
notes evidencing the Debt described on Schedule 9.01 and the Subordination
Agreement.
(j) Stockholders Agreement, Investors Agreement and Registration Rights
Agreement duly completed, executed and delivered to Holders.
(k) payment of all legal fees and other reasonable expenses incurred by
▇▇▇▇▇▇ and Midwest incurred in connection with the preparation, execution and
delivery of this Agreement and the transactions contemplated hereby.
(l) consummation of the Restructuring Transactions on terms and
conditions and pursuant to the Restructuring Documents acceptable in form and
substance to the Holders.
(m) termination of the Prior Subordination Agreement, the Prior
Registration Rights Agreement and the Prior Stockholders Agreement.
(n) 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 Finance Report), Part A and B, and (iii) letter
regarding SBA matters in form and substance acceptable to Midwest.
(o) such other documents as Holders or special counsel to Holders may
reasonably request.
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 or limited liability company duly organized,
legally existing and in good standing under the laws of the jurisdiction of its
incorporation or formation; (ii) has all requisite corporate or limited
liability company 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.
19
Section 7.02 Financial Condition. The audited consolidated balance
sheet of the Company and its Consolidated Subsidiaries as at December 31, 2001
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 May 31, 2002 and their
related consolidated statements of income, stockholders' equity and cash flow of
the Company and its Consolidated Subsidiaries for the five (5) 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 five (5) 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, 2001, 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, 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 March 31, 2002, 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 and Warrant Documents or the Restructuring 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
20
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 and Warrant Documents and the
Restructuring Documents to which it is a party. The execution, delivery and
performance by the Company and each Subsidiary of the Subordinated Note and
Warrant Documents and the Restructuring Documents to which it is a party, have
been duly authorized by all necessary corporate action on its part. The
Subordinated Note and Warrant Documents and the Restructuring 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 and Warrant Documents or the Restructuring Documents to
which it is a party or for the validity or enforceability thereof, other than
the filing with the Secretary of State of Delaware of a certificate of amendment
to the certificate of incorporation of the Company which either increases the
number of authorized shares of the Common Stock of the Company or effects a
reverse stock split (the "Authorized Share Amendment"), which will be filed when
it is approved at the next meeting of the stockholders of the Company.
Section 7.07 Use of Note and Warrant Proceeds. The proceeds of the sale
of the Notes and Warrants hereunder shall be used to provide financing for (i)
payment of costs and expenses payable to Senior Agent and the Senior Lenders
pursuant to the Senior Credit Agreement and (ii) payment of other costs and
expenses incurred by the Company incurred with respect to the Restructuring
Transactions. 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
21
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.
(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
22
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 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 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, include all rights,
Properties and other assets necessary to permit the Company and its Subsidiaries
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 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 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.
23
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 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
24
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 (3) 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 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 7.21 Material Agreements. Set forth on Schedule 7.21 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 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 7.21.
Section 7.22 Hedging Agreements. Schedule 7.22 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 ▇▇▇▇ to market value
thereof, all credit support agreements relating thereto (including any margin
required or supplied), and the counterparty to each such agreement.
Section 7.23 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 7.23. 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 7.23, all of the issued and outstanding capital
stock and other equity securities of Subsidiaries of the Company are owned by
the Company. Following the filing of the Authorized Share Amendment, the Common
Stock issuable upon conversion of the Notes and the Common Stock issuable upon
exercise of the Warrants will, when issued, be duly authorized, validly issued,
fully paid and non-assessable.
25
Except as provided in the Stockholders Agreement and as set forth on Schedule
7.23, 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.
Section 7.24 Restructuring Documents. Each of the representations and
warranties of the Company and each of its Subsidiaries contained in each of the
Restructuring Documents is true, correct and complete and is hereby incorporated
herein by this reference thereto.
ARTICLE VIII
AFFIRMATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Notes are
outstanding and, with respect to Sections 8.01(a), 8.01(b), 8.01(c), 8.01(d) and
8.03, so long as any of the Warrants or Common Stock issued upon conversion of
all or any portion of the Notes or exercise of all or any portion of the
Warrants are outstanding and held by a Holder or an Affiliate thereof
(including, for such purpose, partners of any Holder which is a partnership):
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 one hundred five (105) days after the end of each fiscal year of the
Company, the audited consolidated and unaudited consolidating statements of
income, 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 the Holders which
opinion shall state that said financial statements fairly present in all
material respects the consolidated and consolidating 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 fifty (50) days after the end of each of the first three (3) 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
26
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 in
all material respects 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) Monthly Financial Statements. As soon as available and in any event
within thirty (30) days after the end of each calendar month, the
Company-prepared consolidated and consolidating statements of income 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 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).
(d) Accounts Receivable. As soon as available and in any event within
thirty (30) days after the end of each calendar month, (i) a report in form
reasonably satisfactory to the Holders reflecting the aging and collection of
the receivables of the Company and its Subsidiaries and (ii) such other reports
with respect to receivables as deemed reasonably necessary by the Holders.
(e) Quarterly Regional Reports. As soon as available and in any event
within forty five (45) days after the end of each of quarterly period of each
fiscal year of the Company, statements of EBITDA for each Reporting Region for
such period and for the period from the beginning of the fiscal year to the end
of such period. Such statements shall be accompanied by a certificate of a
Responsible Officer as to the good faith preparation of such report.
(f) Monthly Regional Statements. As soon as available and in any event
within thirty (30) days after the end of each calendar month of each fiscal year
of the Company, statements of EBITDA for each Reporting Region for such period
and for the period from the beginning of the respective fiscal year to the end
of such period. Such statements shall be accompanied by a certificate of a
Responsible Officer as to the good faith preparation of such report.
(g) Excess Cash Flow. As soon as available but no later than thirty
(30) days after April 30 of each year commencing April 30, 2003, a copy of the
"Excess Cash Flow Certificate" (as such term is defined in the Senior Credit
Agreement) of a Responsible Officer of the Company setting forth in reasonable
detail the Company's calculation of "Excess Cash Flow" (as such term is defined
in the Senior Credit Agreement) and for each month after April 30 of each
27
year for which an "Annual Cash Flow Payment" (as such term is defined in the
Senior Credit Agreement) remains unpaid and is outstanding, and, on the last day
of each month thereafter until such Annual Cash Flow Payment is received by the
Senior Agent in accordance with the terms of the Senior Credit Agreement, a
"Cash Flow Differential Certificate" (as such term is defined in the Senior
Credit Agreement) of a Responsible Officer of the Company setting forth in
reasonable detail the Company's calculation of current "Cash on Hand" (as such
term is defined in the Senior Credit Agreement) and the amount of the unpaid
Annual Cash Flow Payment (as such term is defined in the Senior Credit
Agreement) due for such month.
(h) Cash Flow Forecast. Monthly, a rolling thirteen (13) week cash flow
forecast.
(i) 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 comparative form
corresponding figures from the preceding fiscal year, in reasonable detail.
(j) Notice of Default, Etc. Promptly after the Company knows that any
Default or any Material Adverse Effect has occurred, 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.
(k) Other Accounting Reports. Promptly upon receipt thereof, (i) 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, (ii) 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 and (iii) any reports which the Holders, Senior Agent or Senior Lenders
may reasonably request.
(l) SEC Filings, Etc. Promptly upon its becoming available (and no
later than 10 Business Days after a filing by the Company), 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 (including forms 10K, 10Q and
8K) or any successor agency.
(m) Notices Under Other Loan 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, other than this Agreement and not otherwise required to be furnished
to the Holders pursuant to any other provision of this Section 8.01.
28
(n) Annual Revenue Reports. As soon as available and in any event
within ninety (90) 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 the Holders.
(o) Quarterly Revenue Reports. As soon as available and in any event
within forty five (45) days after each of the first three (3) fiscal quarterly
periods of each fiscal year of the Company, a report by the Company for each
dental center generally in the form previously provided by the Company and
otherwise in form and substance reasonably acceptable to the Holders.
(p) 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 the Holders may
reasonably request.
(q) Capital Expenditures Budget. Promptly upon becoming available and
in any event within thirty (30) days after the end of each fiscal year of the
Company, a capital expenditure budget for the next (or present, as applicable)
fiscal year setting forth all proposed Capital Expenditures to be incurred
during such fiscal year.
(r) Modifications of Management Services Agreements, etc. Promptly upon
the execution thereof, executed copies of any modification or amendment of any
"Management Services Agreement" or "Accounts Receivable Purchase Agreement" (as
such terms are defined in the Senior Credit Agreement).
(s) Further Certification. 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, 9.14, 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 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 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 or any Subsidiary if the value
29
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 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
30
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 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 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 and Warrant
Documents, or to correct any omissions in any of the Subordinated Note and
Warrant Documents, or to state more fully the security obligations set out
herein or in any of the other Subordinated Note and Warrant 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 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.
31
Section 8.08 Authorized Share Amendment; Issuance. The Company will
place on the agenda for its next annual meeting of stockholders, which will take
place on or before the 75th day following the Closing Date (the "Annual
Meeting"), proposals (the "Proposals") to: (a) approve the Authorized Share
Amendment, which shall be sufficient for the Company to issue duly authorized
shares of Common Stock to each Person holding securities of the Company that are
convertible into or exercisable for shares of Common Stock upon such conversion
or exercise, including without limitation the Notes and Warrants, (b) amend its
certificate of incorporation to delete Article IX thereof, which prohibits the
taking of any action requiring a vote of the stockholders of the Company by
written consent in lieu of a meeting of the stockholders, and (c) delete Section
2.14 of the Company's Bylaws. At the Annual Meeting, the Company will recommend
to its stockholders that they vote in favor of, and to solicit proxies for the
purpose of voting in favor of, the Proposals. Upon approval of the Proposals,
the Company will authorize and reserve a sufficient number of shares of Common
Stock with respect to the conversion of the Notes and the exercise of the
Warrants.
Section 8.09 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.
ARTICLE IX
NEGATIVE COVENANTS
The Company covenants and agrees that, so long as any of the Notes are
outstanding, the Company shall perform and comply with, and shall cause each of
its Subsidiaries to perform and comply with, all covenants in this Article IX
applicable to such Person; provided, however, Section 9.18, the proviso to
Section 9.23 and Section 9.25 shall survive repayment of the Notes and the
Company shall perform and comply with such proviso so long as any of the Holders
hold a Warrant or Common Stock issued upon conversion of all or any part of any
Note or exercise of all or any part of any Warrant:
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)
32
from time to time incurred in the ordinary course of business which, if
greater than ninety (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) and purchase
money Debt incurred after the Closing Date, in a combined amount not to
exceed $500,000 per year or $2,000,000 in the aggregate outstanding at
any one time;
(d) Debt of the Company under Hedging Agreements with a Senior
Lender or otherwise approved by Holders;
(e) Debt in existence on the date hereof and described on
Schedule 9.01; and
(f) 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.
(d) Liens securing capital leases and purchase money Debt
allowed under Section 9.01(c), but only on the Property leased with
such capital leases or financed with such purchase money Debt.
(e) Liens originally created to secure purchase money Debt
permitted under Section 9.01(e), which in each case shall not exceed
one hundred percent (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;
33
(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 (1) year from the
date of creation thereof rated in the highest grade by Standard &
Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) deposits maturing within one (1) 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 ▇▇▇▇▇'▇ Investors Service, Inc., respectively; or
(f) deposits in money market funds investing exclusively in
investments described in Section 9.03(c), 9.03(d) or 9.03(e).
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 pursuant to cashless exercise
provisions of such securities; provided, however, as long as no Defaults or
Events of Default have occurred and are continuing and in the event no Default
or Event of Default would arise therefrom, the Company may redeem for cash any
equity securities required to be repurchased by the Company upon the termination
of employment of ▇▇▇▇▇ in accordance with the terms of that certain Employment
Agreement dated as of even date herewith by and between the Company and ▇▇▇▇▇.
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
34
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, except that any Subsidiary may merge into the Company or into any
Wholly-Owned Subsidiary.
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
and Warrant Documents or the Restructuring 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:
(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
35
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 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 Minimum EBITDA. The Company will not permit its EBITDA as
of the end of any fiscal quarter, calculated on a rolling four (4) quarter basis
(except for the quarter ending September 30, 2002, which shall be calculated on
the basis of the three (3) prior fiscal quarters ending on such date), to be
less than the amount for the relevant periods set forth below.
36
Fiscal Quarter Ending Minimum EBITDA
September 30, 2002 $3,870,000
December 31, 2002 $5,310,000
March 31, 2003 $5,940,000
June 30, 2003 $6,210,000
September 30, 2003 $6,480,000
December 31, 2003 $6,750,000
March 31, 2004 $7,110,000
June 30, 2004 $7,380,000
September 30, 2004 $7,470,000
December 31, 2004 $7,650,000
March 31, 2005 $7,920,000
June 30, 2005 and each fiscal $8,100,000
quarter ending thereafter
Section 9.12 Reserved.
Section 9.13 Reserved.
Section 9.14 Debt Service Coverage Ratio. The Company will not permit
its Debt Service Coverage Ratio as of the end of any fiscal quarter, calculated
on a rolling four (4) quarter basis (except for the quarter ending September 30,
2002, which shall be calculated on the basis of the three (3) prior fiscal
quarters ending on such date), to be less than the ratio for the relevant
periods set forth below.
Fiscal Quarter Ending Ratio
September 30, 2002 0.90
December 31, 2002 0.95
March 31, 2003 0.95
June 30, 2003 0.90
September 30, 2003 0.90
December 31, 2003 0.81
March 31, 2004 0.81
June 30, 2004 0.81
September 30, 2004 0.72
37
December 31, 2004 0.72
March 31, 2005 0.68
June 30, 2005 0.81
September 30, 2005 and each 0.90
fiscal quarter ending
thereafter
For purposes of this Section 9.14, "Debt Service Coverage Ratio" shall mean the
ratio for the relevant period of (i) EBITDA less taxes payable in cash less any
unfinanced Capital Expenditures to (ii) cash interest plus principal payments
scheduled during the period.
Section 9.15 Reserved.
Section 9.16 Capital Expenditures. The Company will not make any
Capital Expenditures if, after giving effect thereto, the aggregate of all such
expenditures would, in the case of the twelve (12) month periods ending on the
last day of any fiscal quarter, exceed $2,500,000.
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. 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.
Section 9.19 Subsidiaries. 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 other Subsidiary.
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 and Warrant 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
38
the consent of or notice to other Persons in connection therewith.
Section 9.21 Other Agreements. 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 in
violation of the terms of the Subordination Agreement.
Section 9.22 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.
Section 9.23 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; provided, however, after repayment in full of the Notes, the Company
shall not amend, modify or waive any term or provision of its organizational
documents pertaining to Common Stock, or the rights of any holder thereof, as in
effect on the Closing Date, in a manner which is adverse to any Holder that
holds a Warrant or Common Stock issued upon conversion of any Note or exercise
of any Warrant.
Section 9.24 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 (1) 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 $1,000,000; (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.
Section 9.25 Non-Disclosure. The Company will not and will not permit
any of its Affiliates to, in the future, issue any press release or other public
disclosure using the name of ▇▇▇▇▇▇, Midwest or any of their respective
Affiliates or referring to this Agreement or referring to the other Subordinated
Note and Warrant Documents without at least two (2) Business Days prior written
notice to ▇▇▇▇▇▇ or Midwest, as applicable, and without the prior written
consent of ▇▇▇▇▇▇ or Midwest, as applicable, unless (and only to the extent
that) the Company or such affiliate of the Company is required to so disclose
under law and then, in any event, the Company or such Affiliate will consult
with ▇▇▇▇▇▇ or Midwest, as applicable, before issuing such press release or
other public disclosure. The Company consents to the publication by ▇▇▇▇▇▇
39
and/or Midwest of a tombstone or similar advertising material relating to the
financing transactions contemplated by this Agreement, the other Subordinated
Note and Warrant Documents and/or the Restructuring Documents.
ARTICLE X
EVENTS OF DEFAULT; REMEDIES
Section 10.01 Events of Default. One (1) 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 any Note, or any fees or other amount payable by it hereunder;
provided, however, if such default is a default in the payment of fees, such
default shall continue unremedied for a period of thirty (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 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 and Warrant Documents or any of
the Restructuring Documents by the Company or any Subsidiary, or any certificate
furnished to any Holder pursuant to the provisions hereof or the other
Subordinated Note and Warrant Documents or of the Restructuring Documents, shall
prove to have been materially false or misleading as of the time made or
furnished in any material respect; or
(d) (i) the Company shall default in the performance of any of its
obligations under Article IX, any other Article of this Agreement other than
under Article VIII or Section 8.08 (other than the payment of amounts due, which
shall be governed by Section 10.01(a)); or (ii) the Company shall default in the
performance of any of its obligations under Article VIII (other than Section
8.08 ) and such default shall continue unremedied for a period of thirty (30)
days after the earlier to occur of (x) notice thereof to the Company by any
Holder or (y) 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
40
(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 sixty (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 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 thirty (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 Company discontinues its usual business; or
(j) 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
(k) a Change of Control occurs; or
(l) the Company or any of its Subsidiaries shall default in their
performance of any obligations in any documents executed or delivered in
connection with the Restructuring Transactions and any applicable cure period
provided for in such document has passed; or
(m) the Company shall default in the payment or performance of any
obligations in
41
the Senior Credit Documents after any applicable cure period provided for in
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 (j) to the extent it
relates to clauses (e), (f) or (g), each Holder may, by notice to the Company,
declare the principal amount then outstanding of, and the accrued interest on,
the Notes held by it and all other amounts payable to it by the Company
hereunder and under the 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; 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 (1) 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, the other Subordinated Note and Warrant Documents or
the Restructuring 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 11.01 Accredited Investor. Each Holder represents, as to
itself, that it is an
42
"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 and Warrant Documents
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege under any of the Subordinated Note and Warrant
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 and Warrant Documents (including,
without limitation, any modifications of, or waivers or consents under, this
Agreement or the other Subordinated Note and Warrant 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 and Warrant 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
and Warrant 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 and Warrant 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,
43
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;
(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 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 AND WARRANT 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 THIS AGREEMENT, OR WITH ANY GOVERNMENTAL REQUIREMENT, (V) ANY
INACCURACY OF ANY REPRESENTATION OR ANY BREACH OF ANY WARRANTY OF THE
COMPANY OR ANY SUBSIDIARY SET FORTH IN ANY OF THE SUBORDINATED NOTE AND
WARRANT DOCUMENTS OR (VI) ANY OTHER ASPECT OF THE SUBORDINATED NOTE AND
WARRANT 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
44
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 AND WARRANT 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 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 and 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 may be
amended, modified or waived with the prior written consent of the Company and
the holders of fifty one percent (51%) of the then-outstanding principal balance
of the Notes; provided, however, that no amendment, modification or waiver can
be effected if, by its terms, such amendment, modification or waiver adversely
affects one (1) Holder without having the same adverse effect on all other
Holders without the prior written consent of the adversely affected Holder.
Section 12.05 Successors and Assigns. This Agreement shall be binding
upon and inure
45
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 or the Warrants without the prior consent of Holders.
(b) Subject to applicable securities laws and to the terms and
conditions of the Stockholders Agreement, Holders (and its permitted assigns)
may assign to one (1) or more assignees all or a portion of its rights and
obligations under this Agreement and the other Subordinated Note and Warrant
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 and Warrants, as applicable, 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
references to "Holders" or a "Holder" in this Agreement, the Notes, the Warrants
and the other Subordinated Note and Warrant 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 or a Warrant) 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 thereafter 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 (1) or more of the
provisions contained in any of the Subordinated Note and Warrant 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 or this Agreement.
Section 12.08 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one (1) and
the same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
46
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 and conversion of the 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 shall continue in full
force and effect.
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 AND WARRANT
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 AND WARRANT
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 AND WARRANT 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
47
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 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 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 AND THE
TRANSACTIONS CONTEMPLATED HEREBY 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 and Warrant 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 and Warrant 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
48
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.
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, 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
49
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 AGREES THAT IT
IS CHARGED WITH NOTICE AND KNOWLEDGE OF THE TERMS OF THIS 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 HAS RECEIVED THE
ADVICE OF ITS ATTORNEY IN ENTERING INTO THIS AGREEMENT; AND THAT IT RECOGNIZES
THAT CERTAIN OF THE TERMS OF THIS 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 HERETO AGREES AND
COVENANTS THAT IT WILL NOT CONTEST THE VALIDITY OR ENFORCEABILITY OF ANY
EXCULPATORY PROVISION OF THIS 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 Subsidiaries 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.
- Remainder of Page Intentionally Left Blank -
[Signature Page Follows]
50
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., a
Delaware corporation
By: __________________________
Name: __________________________
Title: __________________________
Address for Notices:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 713.490.8420
Telephone No.: ▇▇▇.▇▇▇.▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Note and Warrant Purchase Agreement
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
▇▇▇▇▇▇:
▇▇▇▇▇▇ FINANCIAL, INC., a Delaware
corporation
By: __________________________
Name: __________________________
Title: __________________________
Address for Notices:
▇▇▇▇▇▇ FINANCIAL, INC.
c/o Heller Healthcare Financial
Services
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopy: 312.441.7598
With a copy to:
▇▇▇▇▇▇ FINANCIAL, INC.
c/o Heller Healthcare Financial
Services
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTN: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy: 301.664.9866
Note and Warrant 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., a
Delaware limited partnership
By: ABN AMRO Mezzanine
Management II, L.P.,
its general partner
By: ABN AMRO Mezzanine
Management II, Inc., its
general partner
By: __________________
Name: J. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Senior Vice
President
Address for Notices:
Midwest Mezzanine Fund II, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
ATTN: J. ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: 312.553.6647
Note and Warrant Purchase Agreement
The parties hereto have caused this Agreement to be duly executed as of
the day and year first above written.
▇▇▇▇▇:
▇▇▇▇▇ ▇. ▇▇▇▇▇, an individual
By: __________________________
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Address for Notices:
c/o Castle Dental Centers, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No.: 713.490.8420
Telephone No.: ▇▇▇.▇▇▇.▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇
Note and Warrant Purchase Agreement