EXHIBIT (B)(1)
REVOLVING CREDIT, TERM LOAN AND
SECURITY AGREEMENT DATED
DECEMBER 31, 2002
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
AMONG
COAST DENTAL SERVICES, INC.
("Borrower")
AND
CAPITALSOURCE FINANCE LLC
("Lender")
Dated as of
December 31, 2002
REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
TABLE OF CONTENTS
PAGE
I. DEFINITIONS..............................................................................................1
1.1 General Terms...................................................................................1
II. ADVANCES, PAYMENT AND INTEREST...........................................................................1
2.1 The Revolving Facility..........................................................................1
2.2 The Revolving Note; Maturity....................................................................2
2.3 Interest........................................................................................2
2.4 Revolving Facility Disbursements; Requirement to Deliver Borrowing Certificate..................3
2.5 Revolving Facility Collections; Repayment; Borrowing Availability and Lockbox...................4
2.6 Term Loan.......................................................................................4
2.7 Interest on the Term Note.......................................................................5
2.8 Repayment of Term Loan; Maturity................................................................5
2.9 Promise to Pay; Manner of Payment...............................................................5
2.10 Repayment of Excess Advances....................................................................6
2.11 Other Mandatory Prepayments.....................................................................6
2.12 Payments by Lender..............................................................................6
2.13 Grant of Security Interest; Collateral..........................................................7
2.14 Collateral Administration.......................................................................8
2.15 Power of Attorney...............................................................................9
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE.....................................................9
3.1 Commitment Fee..................................................................................9
3.2 Unused Line Fee.................................................................................9
3.3 Collateral Management Fee......................................................................10
3.4 Early Termination Fees.........................................................................10
3.5 Computation of Fees; Lawful Limits.............................................................10
3.6 Default Rate of Interest.......................................................................11
3.7 Intentionally Omitted..........................................................................11
3.8 Warrants.......................................................................................11
3.9 Allocation of Purchase Price...................................................................11
IV. CONDITIONS PRECEDENT....................................................................................11
4.1 Conditions to Initial Advance and Closing......................................................11
4.2 Conditions to the Funding of the Draw under the Term Loan......................................13
4.3 Conditions to Each Advance.....................................................................15
V. REPRESENTATIONS AND WARRANTIES..........................................................................15
5.1 Organization and Authority.....................................................................15
5.2 Loan Documents.................................................................................16
5.3 Subsidiaries, Capitalization and Ownership Interests...........................................16
5.4 Properties.....................................................................................16
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5.5 Other Agreements...............................................................................17
5.6 Litigation.....................................................................................17
5.7 Hazardous Materials............................................................................17
5.8 Tax Returns; Governmental Reports..............................................................17
5.9 Financial Statements and Reports...............................................................18
5.10 Compliance with Law............................................................................18
5.11 Intellectual Property..........................................................................18
5.12 Licenses and Permits; Labor....................................................................18
5.13 No Default.....................................................................................19
5.14 Disclosure.....................................................................................19
5.15 Existing Indebtedness; Investments, Guarantees and Certain Contracts...........................19
5.16 Other Agreements...............................................................................19
5.17 Insurance......................................................................................20
5.18 Names; Location of Offices, Records and Collateral.............................................20
5.19 Non-Subordination..............................................................................20
5.20 Accounts.......................................................................................20
5.21 Dental Centers.................................................................................21
5.22 Survival.......................................................................................21
VI. AFFIRMATIVE COVENANTS...................................................................................21
6.1 Financial Statements, Reports and Other Information............................................21
6.2 Payment of Obligations.........................................................................23
6.3 Conduct of Business and Maintenance of Existence and Assets....................................23
6.4 Compliance with Legal and Other Obligations....................................................23
6.5 Insurance......................................................................................23
6.6 True Books.....................................................................................24
6.7 Inspection; Periodic Audits....................................................................24
6.8 Further Assurances; Post Closing...............................................................24
6.9 Payment of Indebtedness........................................................................25
6.10 Lien Searches..................................................................................25
6.11 Use of Proceeds................................................................................25
6.12 Collateral Documents; Security Interest in Collateral..........................................25
6.13 Right of First Refusal.........................................................................25
6.14 Taxes and Other Charges........................................................................26
VII. NEGATIVE COVENANTS......................................................................................27
7.1 Financial Covenants............................................................................27
7.2 Permitted Indebtedness.........................................................................27
7.3 Permitted Liens................................................................................27
7.4 Investments; New Facilities or Collateral; Subsidiaries........................................28
7.5 Dividends; Redemptions.........................................................................28
7.6 Transactions with Affiliates...................................................................29
7.7 Charter Documents; Life Insurance Policy; Fiscal Year; Dissolution; Use of Proceeds............29
7.8 Truth of Statements............................................................................29
7.9 Changes Relating to Purchased Accounts.........................................................30
7.10 IRS Form 8821..................................................................................30
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VIII. EVENTS OF DEFAULT.......................................................................................30
IX. RIGHTS AND REMEDIES AFTER DEFAULT.......................................................................32
9.1 Rights and Remedies............................................................................32
9.2 Application of Proceeds........................................................................33
9.3 Rights of Lender to Appoint Receiver...........................................................34
9.4 Rights and Remedies not Exclusive..............................................................34
X. WAIVERS AND JUDICIAL PROCEEDINGS........................................................................34
10.1 Waivers........................................................................................34
10.2 Delay; No Waiver of Defaults...................................................................34
10.3 Jury Waiver....................................................................................35
10.4 Cooperation in Discovery and Litigation........................................................35
XI. EFFECTIVE DATE AND TERMINATION..........................................................................35
11.1 Effectiveness and Termination..................................................................35
11.2 Survival.......................................................................................36
XII. MISCELLANEOUS...........................................................................................36
12.1 Governing Law; Jurisdiction; Service of Process; Venue.........................................36
12.2 Successors and Assigns; Participations; New Lenders............................................36
12.3 Application of Payments........................................................................37
12.4 Indemnity......................................................................................37
12.5 Notice.........................................................................................38
12.6 Severability; Captions; Counterparts; Facsimile Signatures.....................................38
12.7 Expenses.......................................................................................38
12.8 Entire Agreement...............................................................................39
12.9 Lender Approvals...............................................................................39
12.10 Confidentiality and Publicity..................................................................39
12.11 Release of Lender..............................................................................40
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REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT, TERM LOAN AND SECURITY AGREEMENT (the
"AGREEMENT") dated as of December 31, 2002, is entered into between COAST
DENTAL SERVICES, INC., a Florida corporation ("BORROWER"); and CAPITALSOURCE
FINANCE LLC, a Delaware limited liability company (the "LENDER").
WHEREAS, Borrower has requested that Lender make available to
Borrower a revolving credit facility (the "REVOLVING FACILITY") in a maximum
principal amount at any time outstanding of up to Two Million Dollars
($2,000,000) (the "FACILITY CAP"), the proceeds of which shall be used for
working capital needs in connection with its dental support services business,
and a term loan (the "TERM LOAN") in a maximum principal amount of up to Two
Million Dollars ($2,000,000) (the "MAXIMUM TERM LOAN AMOUNT"), the proceeds of
which shall be used by Borrower specifically to repurchase shares of its
outstanding capital stock (the "STOCK REPURCHASE"); and
WHEREAS, Lender is willing to make the Revolving Facility and
the Term Loan available to Borrower upon the terms and subject to the
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt and adequacy of which hereby
are acknowledged, Borrower and Lender hereby agree as follows:
I. DEFINITIONS
1.1 GENERAL TERMS
For purposes of this Agreement, in addition to the
definitions above and elsewhere in this Agreement, the terms listed in Appendix
A hereto shall have the meanings given such terms in Appendix A, which is
incorporated herein and made a part hereof. All capitalized terms used which
are not specifically defined shall have meanings provided in Article 9 of the
UCC in effect on the date hereof to the extent the same are used or defined
therein. Unless otherwise specified herein or in Appendix A, any agreement or
contract referred to herein or in Appendix A shall mean such agreement as
modified, amended or supplemented from time to time. Unless otherwise
specified, as used in the Loan Documents or in any certificate, report,
instrument or other document made or delivered pursuant to any of the Loan
Documents, all accounting terms not defined in Appendix A or elsewhere in this
Agreement shall have the meanings given to such terms in and shall be
interpreted in accordance with GAAP.
II. ADVANCES, PAYMENT AND INTEREST
2.1 THE REVOLVING FACILITY
(a) Subject to the provisions of this Agreement, Lender
shall make Advances to Borrower under the Revolving Facility from time to time
during the Term, provided that, notwithstanding any other provision of this
Agreement, the aggregate amount of all Advances at any one time outstanding
under the Revolving Facility (a) shall be no less than the lesser of (i) the
Availability (as defined below) and (ii) $1,000,000; and (b) shall not exceed
either of (i) the Facility Cap and (ii) the Availability; provided, further,
that notwithstanding any other provision of this Agreement, at the Closing
Lender shall make an
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Advance to Borrower under the Revolving Facility in the amount of $1,000,000
(the "INITIAL ADVANCE"). The Revolving Facility is a revolving credit facility,
which may be drawn, repaid and redrawn, from time to time as permitted under
this Agreement. Any determination as to whether there is availability within
the Borrowing Base for Advances shall be made by Lender in its sole discretion
and is final and binding upon Borrower. Unless otherwise permitted by Lender,
each Advance shall be in an amount of at least $1,000. Subject to the
provisions of this Agreement, Borrower may request Advances under the Revolving
Facility up to and including the value, in U.S. Dollars, of eighty-five percent
(85%) of the Borrowing Base minus, if applicable, amounts reserved pursuant to
this Agreement (such calculated amount being referred to herein as the
"AVAILABILITY"). Advances under the Revolving Facility automatically shall be
made for the payment of interest on the Revolving Note and other Obligations on
the date when due to the extent available and as provided for herein.
(b) Lender has established the above-referenced advance
rate for Availability and, in its Permitted Discretion, may further adjust the
Availability and such advance rate by applying percentages (known as "liquidity
factors") to Eligible Receivables by payor class based upon Borrower's actual
recent collection history for each such payor class (i.e., commercial
insurance, etc.) in a manner consistent with Lender's underwriting practices
and procedures, including without limitation Lender's review and analysis of,
among other things, Borrower's historical returns, rebates, discounts, credits
and allowances (collectively, the "DILUTION ITEMS"). Such liquidity factors and
the advance rate for Availability may be adjusted by Lender throughout the Term
as warranted by Lender's underwriting practices and procedures in its Permitted
Discretion. Also, Lender shall have the right to establish from time to time,
in its Permitted Discretion, reserves against the Borrowing Base, which
reserves shall have the effect of reducing the amounts otherwise eligible to be
disbursed to Borrower under the Revolving Facility pursuant to this Agreement.
2.2 THE REVOLVING NOTE; MATURITY
(a) All Advances under the Revolving Facility shall be
evidenced by one or more Revolving Notes, payable to the order of Lender or its
designee, duly executed and delivered by Borrower and dated the Closing Date,
evidencing the aggregate indebtedness of Borrower to Lender resulting from
Advances under the Revolving Facility, from time to time. Lender hereby is
authorized, but is not obligated, to enter the amount of each Advance under the
Revolving Facility and the amount of each payment or prepayment of principal or
interest thereon in the appropriate spaces on the reverse of or on an
attachment to the Revolving Note. Lender will account to Borrower monthly with
a statement of Advances under the Revolving Facility and charges and payments
made pursuant to this Agreement, and in the absence of manifest error, such
accounting rendered by Lender shall be deemed final, binding and conclusive
unless Lender is notified by Borrower in writing to the contrary within 15
calendar days of Receipt of each accounting, which notice shall be deemed an
objection only to items specifically objected to therein.
(b) All amounts outstanding under the Revolving Note and
other Obligations shall be due and payable in full, if not earlier in
accordance with this Agreement, on the earlier of (i) the occurrence of an
Event of Default if required pursuant hereto or Lender's demand upon an Event
of Default, and (ii) the last day of the Term (such earlier date being the
"REVOLVING FACILITY MATURITY DATE").
2.3 INTEREST
Interest on outstanding Advances under the Revolving Note
shall be payable monthly in arrears on the first day of each calendar month at
an annual rate of Prime Rate plus 2.25%, provided,
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however, that, notwithstanding any provision of any Loan Document, the interest
on outstanding Advances under the Revolving Note shall be not less than 7.00%,
in each case calculated on the basis of a 360-day year and for the actual
number of calendar days elapsed in each interest calculation period. Interest
accrued on each Advance under the Revolving Note shall be due and payable on
the first day of each calendar month, in accordance with the procedures
provided for in Section 2.5 and Section 2.9, commencing February 1, 2003, and
continuing until the later of the expiration of the Term and the full
performance and irrevocable payment in full in cash of the Obligations and
termination of this Agreement. Advances under the Revolving Facility for the
payment of interest on the Revolving Facility and other Obligations may be made
by the Lender if such payments are not made by Borrower prior to 2:00 p.m., New
York City time, on the date when due to the extent available and as provided
for herein.
2.4 REVOLVING FACILITY DISBURSEMENTS; REQUIREMENT TO DELIVER
BORROWING CERTIFICATE
(a) So long as no Default or Event of Default shall have
occurred and be continuing, Borrower may give Lender irrevocable written notice
requesting an Advance under the Revolving Facility by delivering to Lender not
later than 11:00 a.m. (New York City time) at least one (1) Business Day but
not more than four (4) Business Days before the proposed borrowing date of such
requested Advance (the "BORROWING DATE"), a completed Borrowing Certificate and
relevant supporting documentation satisfactory to Lender, which shall (i)
specify the proposed Borrowing Date of such Advance which shall be a Business
Day, (ii) specify the principal amount of such requested Advance, (iii) certify
the matters contained in Section 4.1 or Section 4.3, as applicable, and (iv)
specify the amount of any recoupments of any third-party payor being sought,
requested or claimed, or, to Borrower's knowledge, threatened against Borrower
or Borrower's Affiliates.
(b) Each time a request for an Advance is made that
would increase the balance of the outstanding Advances to an amount greater
than the Availability indicated on the Borrowing Certificate most recently
submitted (such current balance amount being referred to herein as the
"REQUIRED BALANCE"), and, in any event and regardless of whether an Advance is
being requested, on the 21st calendar day of each month during the Term (and
more frequently if Lender shall so request) until the Obligations are
indefeasibly paid in cash in full and this Agreement is terminated, Borrower
shall deliver to Lender a Borrowing Certificate accompanied by a separate
detailed aging and categorizing of Borrower's accounts receivable and accounts
payable and such other supporting documentation with respect to the figures and
information in the Borrowing Certificate as Lender shall reasonably request
from a credit or security perspective or otherwise. Borrower hereby represents
that any change in the Borrowing Base that would reduce Availability to below
$1,000,000 will be reported to Lender within three (3) Business Days after
Borrower has knowledge thereof.
(c) Lender shall also make automatic Advances to
Borrower, without the requirement of a Borrowing Certificate ("AUTOMATIC
ADVANCE"), on each Business Day, after Lender has received sufficient
collections in the Concentration Account. The amount of the Automatic Advance
shall equal (i) the amount of any specifically identified extraordinary receipt
of which Borrower has notified Lender in writing by 11:00 a.m., New York City
time at least one (1) Business Day before such receipt ("EXTRAORDINARY
RECEIPT"), plus (ii) the lesser of (A) the amount in the Concentration Account
collected on such Business Day excluding the amount of any Extraordinary
Receipt and (B) $300,000, minus (iii) the outstanding balance of the Advances
in excess of the Required Balance. Borrower represents that all representations
and warranties made in the Borrowing Certificate most recently submitted prior
to an Automatic Advance shall apply to such Automatic Advance and that Borrower
shall notify Lender of any changes thereto.
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(d) On each Borrowing Date, Borrower irrevocably
authorizes Lender to disburse the proceeds of the requested Advance to the
appropriate Borrower's account(s) as set forth on Schedule 2.4, in all cases
for credit to Borrower (or to such other account as to which the appropriate
Borrower shall instruct Lender) via Federal funds wire transfer no later than
4:00 p.m. (New York City time).
2.5 REVOLVING FACILITY COLLECTIONS; REPAYMENT; BORROWING
AVAILABILITY AND LOCKBOX
Borrower shall maintain one or more lockbox accounts
(individually and collectively, the "LOCKBOX ACCOUNT") with one or more banks
acceptable to Lender (each, a "LOCKBOX BANK"), and shall execute with each
Lockbox Bank one or more agreements acceptable to Lender (individually and
collectively, the "LOCKBOX AGREEMENT"), and such other agreements related
thereto as Lender may require. Borrower shall ensure that all collections of
its Accounts and all other cash payments received by Borrower, including credit
card receivables, are paid and delivered directly from Account Debtors and
other Persons into the appropriate Lockbox Account. The Lockbox Agreements
shall provide that the Lockbox Banks immediately will transfer all funds paid
into the Lockbox Accounts into a depository account or accounts maintained by
Lender or an Affiliate of Lender at such bank as Lender may communicate to
Borrower from time to time (the "CONCENTRATION ACCOUNT"). Notwithstanding and
without limiting any other provision of any Loan Document, Lender shall apply,
on a daily basis, all funds transferred into the Concentration Account pursuant
to the Lockbox Agreement and this Section 2.5 in such order and manner as noted
in the Lockbox Agreement. To the extent that any Accounts collections of
Borrower or any other cash payments received by Borrower are not sent directly
to the appropriate Lockbox Account but are received by Borrower or any of its
Affiliates, such collections and proceeds shall be held in trust for the
benefit of Lender and immediately remitted no later than within two (2)
Business Days (except for Accounts or other cash payments received from Dental
Centers or the PA located in Virginia during the first 30 days following the
Closing Date which payments shall be remitted twice monthly), in the form
received, to the appropriate Lockbox Account for immediate transfer to the
Concentration Account. Borrower acknowledges and agrees that compliance with
the terms of this Section 2.5 is an essential term of this Agreement, and that,
in addition to and notwithstanding any other rights Lender may have hereunder,
under any other Loan Document, under applicable law or at equity, upon each and
every failure by Borrower or any of its Affiliates to comply with any such
terms Lender shall be entitled to assess a non-compliance fee which shall
operate to increase the Applicable Rate by two percent (2.0%) per annum during
any period of non-compliance, whether or not a Default or an Event of Default
occurs or is declared, provided that nothing shall prevent Lender from
considering any failure to comply with the terms of this Section 2.5 to be a
Default or an Event of Default. All funds transferred to the Concentration
Account shall be applied to reduce the Obligations under the Revolving Facility
or made the subject of a daily Automatic Advance, but for purposes of
calculating interest hereunder, shall be subject to a seven Business Day
clearance period. If as the result of collections of Accounts and/or any other
cash payments received by Borrower pursuant to this Section 2.5 a credit
balance exists with respect to the Concentration Account, such credit balance
shall not accrue interest in favor of Borrower, but shall be available to the
appropriate Borrower in accordance with the terms of this Agreement. If
applicable, at any time prior to the execution of all or any of the Lockbox
Agreements and operation of all or any of the Lockbox Accounts, Borrower and
its Affiliates shall direct all collections or proceeds it receives on Accounts
or from other Collateral to the accounts(s) and in the manner specified by
Lender in its sole discretion.
2.6 TERM LOAN
(a) Subject to the terms and conditions set forth in
this Agreement, Lender agrees to loan to Borrower in one Draw prior to June 1,
2003 in an amount not to exceed the Maximum Term Loan
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Amount. The Term Loan is not a revolving credit facility, and any repayments of
principal shall be applied to permanently reduce the Term Loan. The Term Loan
shall be evidenced by one or more Term Notes payable to the Lender or its
designee.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, Borrower may give Lender irrevocable written notice
requesting a Draw by delivering to Lender not later than 11:00 a.m. (New York
City time) at least two (2), but not more than four (4), Business Days before
the proposed Draw Date a completed Draw Notice and relevant supporting
documentation satisfactory to Lender, which Draw Notice shall (a) specify the
proposed Draw Date of such Draw, (b) specify the principal amount of such
requested Draw and (c) certify the matters contained in Section 4.2. On the
Draw Date, Borrower irrevocably authorizes Lender to disburse the proceeds of
the requested Draw to the applicable account(s) of Borrower specified in the
applicable Draw Notice, each of which accounts shall constitute one or more of
the accounts set forth on Schedule 2.4, in all cases for credit to the
applicable Borrower (or to such other account as to which Borrower shall
instruct Agent in writing)via Federal funds wire transfer no later than 12:00
p.m. New York City time.
2.7 INTEREST ON THE TERM NOTE
Interest on the outstanding balance of the Term Loan under
the Term Note shall be payable monthly in arrears on the first day of each
calendar month at an annual rate of Prime Rate plus 4.75%, provided, however,
that, notwithstanding, any other provision of any Loan Document, the interest
on the outstanding principal balance of the Term Loan under the Term Note shall
be not less than 10.50%, in each case calculated on the basis of a 360-day year
and for the actual number of calendar days elapsed in each interest calculation
period. Interest accrued on the Term Loan shall be due and payable on the first
day of each calendar month commencing on the first day of the month following
the Draw, and continuing until the later of the Term Loan Maturity Date and the
full performance and irrevocable payment in full in cash of the Obligations and
termination of this Agreement. Advances under the Revolving Facility for the
payment of interest on the Term Loan and other Obligations may be made by the
Lender if such payments are not made by Borrower prior to 2:00 p.m., New York
City time, on the date when due to the extent available and as provided for
herein.
2.8 REPAYMENT OF TERM LOAN; MATURITY
Payment of principal and all other amounts outstanding under
the Term Loan shall be due and payable in equal principal installments based on
an 18 month amortization schedule on the first Business Day of each month
commencing six months after the date of the Draw under the Term Loan, and if
not paid in full earlier in accordance with this Agreement, the remaining
unpaid principal balance on the Term Loan Maturity Date.
2.9 PROMISE TO PAY; MANNER OF PAYMENT
Borrower absolutely and unconditionally promises to pay
principal, interest and all other amounts payable hereunder, or under any other
Loan Document, without any right of rescission and without any deduction
whatsoever, including any deduction for any setoff, counterclaim or recoupment,
and notwithstanding any damage to, defects in or destruction of the Collateral
or any other event, including obsolescence of any property or improvements. All
payments made by Borrower (other than payments automatically paid through
Advances under the Revolving Facility as provided herein), shall be made only
by wire transfer on the date when due, without offset or counterclaim, in U.S.
Dollars, in immediately available funds to such account as may be indicated in
writing by Lender to Borrower from time to time.
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Any such payment received after 2:00 p.m. (New York City time) on the date when
due shall be deemed received on the following Business Day. Whenever any
payment hereunder shall be stated to be due or shall become due and payable on
a day other than a Business Day, the due date thereof shall be extended to, and
such payment shall be made on, the next succeeding Business Day, and such
extension of time in such case shall be included in the computation of payment
of any interest (at the interest rate then in effect during such extension)
and/or fees, as the case may be.
2.10 REPAYMENT OF EXCESS ADVANCES
Any balance of Advances under the Revolving Facility
outstanding at any time in excess of the lesser of the Facility Cap or the
Availability shall be immediately due and payable by Borrower without the
necessity of any demand, at the Payment Office, whether or not a Default or
Event of Default has occurred or is continuing and shall be paid in the manner
specified in Section 2.9.
2.11 OTHER MANDATORY PREPAYMENTS
In addition to and without limiting any provision of any Loan
Document:
(a) If a Change of Control occurs (other than as a
result of the Stock Repurchase or any other transaction intended to take
Borrower private), on or prior to the first Business Day following the date of
such Change of Control, Borrower shall prepay the Loans, including, without
limitation, all outstanding Advances and all other Obligations, in full in cash
together with accrued interest thereon to the date of prepayment and all other
amounts owing to Lender under the Loan Documents.
(b) Except as hereinafter provided, if Borrower sells
any of its assets or properties, sells or issues any securities (debt or
equity), capital stock or ownership interests, receives any capital
contributions, receives any property damage insurance award in excess of
$50,000 which is not used to repair or replace the property covered thereby or
incurs any Indebtedness except for Permitted Indebtedness, then it shall apply
100% of the proceeds thereof to the prepayment (without penalty or premium) of
the Loans together with accrued interest thereon and all other Obligations
owing to Lender under the Loan Documents, such payment to be applied at such
time and in such manner and order as Lender shall decide in its sole
discretion. Notwithstanding the foregoing, (i) if Borrower sells all or a
partial interest in the assets of a Dental Center, Borrower shall only be
required to apply 30% of the net proceeds thereof to the prepayment of the Term
Loan Obligations, and Borrower shall retain the remaining proceeds thereof,
(ii) if Borrower sells promissory notes issued to Borrower or the PA by a
dentist in connection with the acquisition by such dentist of any interest in a
Dental Center, Borrower shall only be required to apply 40% of the net proceeds
thereof to the prepayment of the Term Loan Obligations, and Borrower shall
retain the remaining proceeds thereof, and (iii) Borrower shall have the
ability to continue the equity model and it shall be required to apply 30% of
the net cash proceeds thereof (excluding cash down payment proceeds of up to
$10,000 per Dental Center and any promissory notes issued in connection with
any Dental Center conversions to the equity model) to the prepayment of the
Term Loan Obligations and it shall retain the remaining proceeds thereof.
2.12 PAYMENTS BY LENDER
Should any amount required to be paid under any Loan Document
be unpaid, such amount may be paid by Lender, which payment shall be deemed a
request for an Advance under the Revolving Facility as of the date such payment
is due, and Borrower irrevocably authorizes disbursement of any such funds to
Lender by way of direct payment of the relevant amount, interest or
Obligations. No payment or
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prepayment of any amount by Lender or any other Person shall entitle any Person
to be subrogated to the rights of Lender under any Loan Document unless and
until the Obligations have been fully performed and paid irrevocably in cash
and this Agreement has been terminated. Any sums expended by Lender as a result
of Borrower's or any Guarantor's failure to pay, perform or comply with any
Loan Document or any of the Obligations may be charged to Borrower's account as
an Advance under the Revolving Facility and added to the Obligations.
2.13 GRANT OF SECURITY INTEREST; COLLATERAL
(a) To secure the payment and performance of the
Obligations, Borrower hereby grants to Lender a continuing security interest in
and Lien upon, and pledges to Lender, all of its right, title and interest in
and to the following (collectively and each individually, the "COLLATERAL"),
which security interest is intended to be a first priority security interest:
(i) all of Borrower's tangible personal
property, including without limitation all present and future
Inventory and Equipment (including items of equipment which are or
become Fixtures), now owned or hereafter acquired;
(ii) all of Borrower's intangible personal
property, including without limitation all present and future
Accounts, securities, contract rights, Permits, General Intangibles,
Chattel Paper, Documents, Instruments, Promissory Note Receivables and
Deposit Accounts, Letter-of-Credit Rights and Supporting Obligations,
rights to the payment of money or other forms of consideration of any
kind, tax refunds, insurance proceeds, now owned or hereafter
acquired, and all intangible and tangible personal property relating
to or arising out of any of the foregoing, except for the advances
related to the split dollar key man life insurance;
(iii) all of Borrower's present and future
Government Contracts and rights thereunder and the related Government
Accounts and proceeds thereof, now or hereafter owned or acquired by
Borrower; provided, however, that Lender shall not have a security
interest in any rights under any Government Contract of Borrower or in
the related Government Account where the taking of such security
interest would be a violation of an express prohibition contained in
the Government Contract (for purposes of this limitation, the fact
that a Government Contract is subject to, or otherwise refers to,
Title 31, ss. 203 or Title 41, ss. 15 of the United States Code shall
not be deemed an express prohibition against assignment thereof) or is
prohibited by applicable law; and
(iv) any and all additions to any of the
foregoing, and any and all replacements, products and proceeds
(including insurance proceeds) of any of the foregoing.
(b) Notwithstanding the foregoing provisions of this
Section 2.13, such grant of a security interest shall not extend to, and the
term "Collateral" shall not include, any General Intangibles of Borrower to the
extent that (i) such General Intangibles are not assignable or capable of being
encumbered as a matter of law or under the terms of any license or other
agreement applicable thereto (but solely to the extent that any such
restriction shall be enforceable under applicable law) without the consent of
the licensor thereof or other applicable party thereto, and (ii) such consent
has not been obtained; provided, however, that the foregoing grant of a
security interest shall extend to, and the term "Collateral" shall include,
each of the following: (a) any General Intangible which is in the nature of an
Account or a right to the payment of money or a proceed of, or otherwise
related to the enforcement or collection of, any Account or right to the
payment of money, or goods which are the subject of any Account or right to the
payment of
7
money, (b) any and all proceeds of any General Intangible that is otherwise
excluded to the extent that the assignment, pledge or encumbrance of such
proceeds is not so restricted, and (c) upon obtaining the consent of any such
licensor or other applicable party with respect to any such otherwise excluded
General Intangible, such General Intangible as well as any and all proceeds
thereof that might theretofore have been excluded from such grant of a security
interest and from the term "Collateral."
(c) Upon the execution and delivery of this Agreement,
and upon the proper filing of the necessary financing statements, recordation
of the Collateral Patent, Trademark and Copyright Assignment in the United
States Patent and Trademark Office and/or the United States Copyright Office,
and proper delivery of the necessary instruments, without any further action,
Lender will have a good, valid and perfected first priority Lien and security
interest in the Collateral, subject to no transfer or other restrictions or
Liens of any kind in favor of any other Person except for Permitted Liens. No
financing statement relating to any of the Collateral is on file in any public
office except those (i) on behalf of Lender, and/or (ii) in connection with
Permitted Liens (as defined in Section 7.3).
2.14 COLLATERAL ADMINISTRATION
(a) Except for removal off-site for equipment repairs,
all Collateral (except Deposit Accounts) will at all times be kept by Borrower
at any of the locations set forth on Schedule 5.18B hereto, and may be moved
from one such location to another such location; provided, however, that
Collateral shall not, without thirty (30) calendar days prior written notice to
Lender, be moved to locations other than those set forth on Schedule 5.18B, and
in any case shall not be moved outside the continental United States.
(b) Borrower shall keep accurate and complete records of
its Accounts and all payments and collections thereon and shall submit such
records to Lender on such periodic bases as Lender may reasonably request. In
addition, if Accounts of Borrower in an aggregate face amount in excess of
$10,000 become ineligible because they fall within one of the specified
categories of ineligibility set forth in the definition of Eligible
Receivables, Borrower shall notify Lender of such occurrence on the third
Business Day after Borrower obtains knowledge thereof and the Borrowing Base
shall thereupon be adjusted to reflect such occurrence. If requested by Lender,
Borrower shall execute and deliver to Lender formal written assignments of all
of its Accounts weekly or daily as Lender may request, including all Accounts
created since the date of the last assignment, together with copies of claims,
invoices and/or other information related thereto. To the extent that
collections from such assigned accounts exceed the amount of the Obligations,
such excess amount shall not accrue interest in favor of Borrower, but shall be
available to Borrower upon Borrower's written request in accordance with
Section 2.4.
(c) Whether or not an Event of Default has occurred, any
of Lender's officers, employees, representatives or agents shall have the
right, at any time during normal business hours, in the name of Lender, any
designee of Lender or Borrower, to verify the validity, amount or any other
matter relating to any Accounts of Borrower. Borrower shall cooperate fully
with Lender in an effort to facilitate and promptly conclude such verification
process.
(d) To expedite collection, Borrower shall endeavor in
the first instance to make collection of its Accounts for Lender. Lender shall
have the right at all times after the occurrence and during the continuance of
an Event of Default to notify Account Debtors owing Accounts to Borrower that
its Accounts have been assigned to Lender and to collect such Accounts directly
in its own name and to charge collection costs and expenses, including
reasonable attorney's fees, to Borrower.
8
(e) As and when determined by Lender in its sole
discretion, Lender will perform the searches described in clauses (i) and (ii)
below against Borrower and Guarantors (the results of which are to be
consistent with Borrower's representations and warranties under this
Agreement), all at Borrower's expense: (i) UCC searches with the Secretary of
State and local filing offices of each jurisdiction where Borrower and/or any
Guarantors maintains their respective executive offices, a place of business or
assets; and (ii) judgment, federal tax lien and corporate and partnership tax
lien searches, in each jurisdiction searched under clause (i) above.
(f) Borrower (i) shall provide prompt written notice to
its current bank to transfer all items, collections and remittances received by
Borrower or a Dental Center to the Concentration Account, and (ii) during an
Event of Default, shall provide prompt written notice to each commercial
insurance Account Debtor that shall direct each commercial insurance Account
Debtor to make payments to the appropriate Lockbox Account, and Borrower hereby
authorizes Lender, upon any failure to send such notices and directions within
ten (10) calendar days after the Event of Default (or ten (10) calendar days
after the Person becomes a commercial insurance Account Debtor), to send any
and all similar notices and directions to such commercial insurance Account
Debtors, and (iii) shall do anything further that may be lawfully required by
Lender to secure Lender and effectuate the intentions of the Loan Documents. At
Lender's request, Borrower shall immediately deliver to Lender all items for
which Lender must receive possession to obtain a perfected security interest
and all notes, certificates, and documents of title, Chattel Paper, warehouse
receipts, Instruments, and any other similar instruments constituting
Collateral.
2.15 POWER OF ATTORNEY
Lender is hereby irrevocably made, constituted and appointed
the true and lawful attorney for Borrower (without requiring any of them to act
as such) with full power of substitution to do the following if a Default or
Event of Default has occurred and is continuing: (i) endorse the name of any
such Person upon any and all checks, drafts, money orders, and other
instruments for the payment of money that are payable to such Person and
constitute collections on its or their Accounts; (ii) execute in the name of
such Person any financing statements, schedules, assignments, instruments,
documents, and statements that it is or they or are obligated to give Lender
under any of the Loan Documents; and (iii) do such other and further acts and
deeds in the name of such Person that Lender may deem necessary or desirable to
enforce any Account or other Collateral or to perfect Lender's security
interest or lien in any Collateral. In addition, if any such Person breaches
its obligation hereunder to direct payments of Accounts or the proceeds of any
other Collateral to the appropriate Lockbox Account, Lender, as the irrevocably
made, constituted and appointed true and lawful attorney for such Person
pursuant to this paragraph, may, by the signature or other act of any of
Lender's officers or authorized signatories (without requiring any of them to
do so), direct any federal, state or private payor or fiscal intermediary to
pay proceeds of Accounts or any other Collateral to the appropriate Lockbox
Account.
III. FEES AND OTHER CHARGES; ALLOCATION OF PURCHASE PRICE
3.1 COMMITMENT FEE
On or before the Closing Date, Borrower shall pay to Lender
2.0% of the Maximum Term Loan Amount and 1.0% of the Facility Cap as a
nonrefundable commitment fee.
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3.2 UNUSED LINE FEE
Borrower shall pay to Lender monthly an unused line fee (the
"UNUSED LINE FEE") in an amount equal to 0.083% per month of the difference
derived by subtracting (i) the daily average amount of the balances under the
Revolving Facility outstanding during the preceding month, from (ii) the
Facility Cap. The Unused Line Fee shall be payable monthly in arrears on the
first day of each successive calendar month (starting with February 1, 2003).
3.3 COLLATERAL MANAGEMENT FEE
Borrower shall pay Lender as additional interest a monthly
collateral management fee (the "COLLATERAL MANAGEMENT FEE") equal to 0.105% per
month calculated on the basis of the daily average amount of the aggregate
balances under the Revolving Facility and the Term Loan outstanding during the
preceding month. The Collateral Management Fee shall be payable monthly in
arrears on the first day of each successive calendar month (starting with
February 1, 2003).
3.4 EARLY TERMINATION FEES
If (i) Borrower terminates the Revolving Facility under
Section 11.1 hereof, (ii) Lender demands or Borrower is otherwise required to
make payment in full of the Revolving Facility and/or Obligations relating to
the Revolving Facility upon the occurrence of an Event of Default, (iii) a
Change of Control or payment pursuant to Section 2.11 occurs, (iv) any other
voluntary or involuntary prepayment of the Revolving Facility and/or
Obligations relating to the Revolving Facility by Borrower or any other Person
occurs (other than reductions to zero of the outstanding balance of the
Revolving Facility resulting from the ordinary course operation of the
provisions of Section 2.5), whether by virtue of Lender's exercising its right
of set-off or otherwise, (v) Lender accelerates the Revolving Note or makes any
demand on the Revolving Note, or (vi) any payment or reduction of the
outstanding balance of the Revolving Note and/or the Revolving Facility is made
during a bankruptcy, reorganization or other proceeding or is made pursuant to
any plan of reorganization or liquidation or any Debtor Relief Law, (each, a
"REVOLVER TERMINATION"), then, at the effective date of any such revolver
termination, Borrower shall pay Lender (in addition to the then outstanding
principal, accrued interest and other Obligations relating to the Revolving
Facility pursuant to the terms of this Agreement and any other Loan Document),
as yield maintenance for the loss of bargain and not as a penalty, an amount
equal to the applicable Minimum Termination Fee.
3.5 COMPUTATION OF FEES; LAWFUL LIMITS
All fees hereunder shall be computed on the basis of a year
of 360 days and for the actual number of days elapsed in each calculation
period, as applicable. In no contingency or event whatsoever, whether by reason
of acceleration or otherwise, shall the interest and other charges paid or
agreed to be paid to Lender for the use, forbearance or detention of money
hereunder exceed the maximum rate permissible under applicable law which a
court of competent jurisdiction shall, in a final determination, deem
applicable hereto. If, due to any circumstance whatsoever, fulfillment of any
provision hereof, at the time performance of such provision shall be due, shall
exceed any such limit, then, the obligation to be so fulfilled shall be reduced
to such lawful limit, and, if Lender shall have received interest or any other
charges of any kind which might be deemed to be interest under applicable law
in excess of the maximum lawful rate, then such excess shall be applied first
to any unpaid fees and charges hereunder, then to unpaid principal balance owed
by Borrower hereunder, and if the then remaining excess interest is greater
than the previously unpaid principal balance, Lender shall promptly refund such
excess amount to Borrower and the provisions hereof shall be deemed amended to
provide for such permissible rate. The terms and provisions
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of this Section 3.5 shall control to the extent any other provision of any Loan
Document is inconsistent herewith.
3.6 DEFAULT RATE OF INTEREST
Upon the occurrence and during the continuation of an Event
of Default, the Applicable Rate of interest in effect at such time with respect
to the Obligations shall be increased by 4.0% per annum (the "DEFAULT RATE").
3.7 INTENTIONALLY OMITTED
3.8 WARRANTS
As additional consideration for the Term Loan hereunder and
as more fully described in the Warrant Agreement, Borrower shall issue and
deliver to CapitalSource Holdings LLC the Warrant on the date of the Draw under
the Term Loan. The Warrant and number of securities purchasable upon exercise
of the Warrant shall be subject to adjustment and shall be subject to various
rights in favor of Lender as set forth in the Warrant Agreement.
3.9 ALLOCATION OF PURCHASE PRICE
Under both GAAP consistently applied and the regulations of
the Internal Revenue Service, the issuance to Lender of the Term Note and the
Warrant for an aggregate purchase price equal to the aggregate principal amount
of the Term Note being so purchased results in the creation of "original issue
document" on such Term Note (which original issue discount may also be deemed
to constitute the value of any Warrant issued in connection with the issuance
of such Term Note), and such regulations require the determination of the value
of any warrant so delivered. Pursuant to GAAP consistently applied and
applicable Treasury Regulations, Borrower and Lender agree to allocate
$1,800,000 of the purchase price to the Term Note and the remaining $200,000 of
the purchase price to the Warrant and that such allocation reflects the
relative fair market values of the Term Note and the Warrant as of their issue
date. As a result, the Term Note will be issued with original issue discount of
$200,000. Borrower and Lender agree to recognize and adhere to the
determinations and allocations of original issue discount and valuation of the
Warrant set forth herein for all federal and state income tax purposes. In the
event of any proposed transfer of the Term Note by Lender, Lender shall, prior
to such transfer, ▇▇▇▇ the Term Note with a legend pertaining to the original
issue discount in the form required by Treasury Regulation Section
1.1275-3(b)(1).
IV. CONDITIONS PRECEDENT
4.1 CONDITIONS TO INITIAL ADVANCE AND CLOSING
The obligations of Lender to consummate the transactions
contemplated herein and to make the initial Advance under the Revolving
Facility (the "INITIAL ADVANCE") are subject to the satisfaction, in the sole
judgment of Lender, of the following:
(a) Borrower shall have delivered to Lender (i) the Loan
Documents to which it is a party, each duly executed by an authorized officer
of Borrower and the other parties thereto, (ii) the Life Insurance Policy, and
(iii) a Borrowing Certificate for the Initial Advance under the Revolving
Facility executed by an authorized officer of Borrower;
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(b) all in form and substance satisfactory to Lender in
its sole discretion, Lender shall have received (i) a report of Uniform
Commercial Code financing statement, tax and judgment lien searches performed
with respect to Borrower in each jurisdiction determined by Lender in its sole
discretion, and such report shall show no Liens on the Collateral (other than
Permitted Liens), (ii) each document (including, without limitation, any
Uniform Commercial Code financing statement) required by any Loan Document or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a perfected first priority security interest upon the
Collateral, and (iii) evidence of each such filing, registration or recordation
and of the payment by Borrower of any necessary fee, tax or expense relating
thereto;
(c) Lender shall have received for Borrower (i) the
Charter and Good Standing Documents, all in form and substance acceptable to
Lender, (ii) a certificate of the corporate secretary or assistant secretary
dated the Closing Date, as to the incumbency and signature of the Persons
executing the Loan Documents, in form and substance acceptable to Lender, and
(iii) the written legal opinion of counsel for Borrower, in form and substance
satisfactory to Lender and its counsel;
(d) Lender shall have received a certificate of the
chief financial officer (or, in the absence of a chief financial officer, the
chief executive officer) of Borrower in form and substance satisfactory to
Lender (each, a "SOLVENCY CERTIFICATE"), certifying (i) the solvency of such
Person after giving effect to the transactions and the Indebtedness
contemplated by the Loan Documents, and (ii) as to such Person's financial
resources and ability to meet its obligations and liabilities as they become
due, to the effect that as of the Closing Date and the Borrowing Date for the
Initial Advance and the date of funding of the Term Loan and after giving
effect to such transactions and Indebtedness: (A) the assets of such Person, at
a Fair Valuation, exceed the total liabilities (including contingent,
subordinated, unmatured and unliquidated liabilities) of such Person, and (B)
no unreasonably small capital base with which to engage in its anticipated
business exists with respect to such Person;
(e) Lender shall have completed examinations, the
results of which shall be satisfactory in form and substance to Lender, of the
Collateral, the financial statements and the books, records, business,
obligations, financial condition and operational state of Borrower and
Guarantor, and each such Person shall have demonstrated to Lender's
satisfaction that (i) its operations comply, in all respects deemed material by
Lender, in its sole judgment, with all applicable federal, state, foreign and
local laws, statutes and regulations, (ii) its operations are not the subject
of any governmental investigation, evaluation or any remedial action which
could result in any expenditure or liability deemed material by Lender, in its
sole judgment, and (iii) it has no liability (whether contingent or otherwise)
that is deemed material by Lender, in its sole judgment;
(f) Lender shall have received all fees, charges and
expenses payable to Lender on or prior to the Closing Date pursuant to the Loan
Documents;
(g) Borrower shall be in compliance with Section 6.5,
and Lender shall have received (i) certified copies of all such insurance
policies (except for the Life Insurance Policy), and (ii) original certificates
of such insurance policies (except for the Life Insurance Policy) confirming
that they are in effect and that the premiums due and owing with respect
thereto have been paid in full and naming Lender as sole beneficiary or loss
payee and additional insured, as appropriate;
(h) all corporate and other proceedings, documents,
instruments and other legal matters in connection with the transactions
contemplated by the Loan Documents (including, but not limited to, those
relating to corporate and capital structures of Borrower) shall be satisfactory
to Lender;
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(i) Lender shall have received, in form and substance
satisfactory to Lender, release and termination of any and all Liens, security
interest and/or UCC financing statements in, on, against or with respect to any
of the Collateral (other than Permitted Liens);
(j) No PA shall have any rights in the Accounts, other
than as required by law, and each PA shall have subordinated its interest in
the Accounts and in its right to receive payment of the purchase price for
Purchased Accounts on terms reasonably satisfactory to Lender;
(k) all Dental Centers, and any partnerships related
thereto, shall have assigned its accounts receivable to its respective PA and
each PA shall have further assigned such accounts receivable to Borrower;
(l) Borrower shall have executed a collateral assignment
for the benefit of Lender of each Accounts Receivable Purchase and Sale
Agreement (each an "ACCOUNTS RECEIVABLE ASSIGNMENT") entered into between
Borrower and each PA or Affiliate of PA and each such PA or Affiliate shall
have consented in writing to such assignment;
(m) Borrower shall have assigned its liens and financing
statements on the assets of the PAs to Lender;
(n) Borrower must have Availability equal to a minimum
of $1,000,000;
(o) all promissory notes evidencing Promissory Note
Receivables shall have been delivered to Lender as Collateral; and
(p) Borrower shall have executed and filed IRS Form 8821
with the appropriate office of the Internal Revenue Service.
4.2 CONDITIONS TO THE FUNDING OF THE DRAW UNDER THE TERM LOAN
The obligations of Lender to fund the Draw are subject to the
satisfaction, in the sole judgment of Lender, of the following additional
conditions precedent:
(a) Borrower shall have delivered to Lender the Draw
Notice for the funding of the Term Loan executed by an authorized officer of
Borrower, which shall constitute a representation and warranty by Borrower as
of the Draw Date of such funding that the conditions contained in this Section
4.2 have been satisfied; provided, however, that any determination as to
whether to fund the Draw shall be made by Lender in its sole discretion;
(b) each of the representation and warranties made by
Borrower in or pursuant to this Agreement shall be accurate, before and after
giving effect to the Draw;
(c) no Default or Event of Default shall have occurred
or be continuing or would exist after giving effect to the Draw on such date;
(d) except as disclosed in the historical financial
statements, there shall be no liabilities or obligations with respect to
Borrower of any nature whatsoever which, either individually or in the
aggregate, would reasonably be likely to have a Material Adverse Effect;
13
(e) Borrower shall have received a subordinated and
unsecured loan from an Affiliate the terms of which shall be (i) no principal
payments due until at least 91 days following the end of the Term (ii) current
interest in an amount not to exceed 5% per annum and, (iii) in a principal
amount not less than $1,200,000 to be used in connection with the Stock
Repurchase;
(f) Borrower shall have issued to Lender a Warrant for
the purchase of capital stock of Borrower equal to 1.0% of the outstanding
capital stock of Borrower on a fully diluted basis;
(g) each PA shall have (i) become a Guarantor under the
Loan Documents by delivering a PA Guaranty duly executed and delivered by such
Guarantor or an authorized officer of such Guarantor, as applicable, and the
other parties thereto, (ii) made the representations and warranties set forth
in Article V of this Agreement, and (iii) agreed to covenants set forth in
Article VI herein; each Guarantor shall have delivered to Lender the Loan
Documents to which such Guarantor is a party;
(h) all in form and substance satisfactory to Lender in
its sole discretion, Lender shall have received (i) a report of Uniform
Commercial Code financing statement, tax and judgment lien searches performed
with respect to each Guarantor in each jurisdiction determined by Lender in its
sole discretion, and such report shall show no Liens on the Collateral (other
than Permitted Liens), (ii) each document (including, without limitation, any
Uniform Commercial Code financing statement) required by any Loan Document or
under law or requested by Lender to be filed, registered or recorded to create
in favor of Lender, a perfected first priority security interest upon the
Collateral of each Guarantor, and (iii) evidence of each such filing,
registration or recordation and of the payment by each Guarantor of any
necessary fee, tax or expense relating thereto;
(i) Lender shall have received for each Guarantor (i)
the Charter and Good Standing Documents, all in form and substance acceptable
to Lender, (ii) a certificate of the corporate secretary or assistant secretary
dated the Closing Date, as to the incumbency and signature of the Persons
executing the Loan Documents, in form and substance acceptable to Lender, and
(iii) the written legal opinion of counsel for each Guarantor, in form and
substance satisfactory to Lender and its counsel;
(j) Lender shall have received a Solvency Certificate of
the chief financial officer (or, in the absence of a chief financial officer,
the chief executive officer) of each Guarantor in form and substance
satisfactory to Lender, certifying (i) the solvency of such Person after giving
effect to the transactions and the Indebtedness contemplated by the Loan
Documents, and (ii) as to such Person's financial resources and ability to meet
its obligations and liabilities as they become due, to the effect that as of
the date of funding of the Term Loan and after giving effect to such
transactions and Indebtedness: (A) the assets of such Person, at a Fair
Valuation, exceed the total liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities) of such Person, and (B) no unreasonably
small capital base with which to engage in its anticipated business exists with
respect to such Person;
(k) the Trust Guaranty shall have been executed and
delivered;
(l) Borrower shall use the proceeds of the Draw to
repurchase outstanding shares of capital stock of Borrower; and
(m) Lender shall have received all fees, charges and
expenses payable to Lender on or prior to such date pursuant to the Loan
Documents.
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4.3 CONDITIONS TO EACH ADVANCE
The obligations of Lender to make any Advance (including,
without limitation, the Initial Advance) are subject to the satisfaction, in
the sole judgment of Lender, of the following additional conditions precedent:
(a) Borrower shall have delivered to Lender a Borrowing
Certificate for the Advance executed by an authorized officer of Borrower,
which shall constitute a representation and warranty by Borrower as of the
Borrowing Date of such Advance that the conditions contained in this Section
4.3 have been satisfied; provided, however, that any determination as to
whether to fund Advances or extensions of credit shall be made by Lender in its
sole discretion;
(b) each of the representation and warranties made by
Borrower in or pursuant to this Agreement shall be accurate, before and after
giving effect to such Advance;
(c) no Default or Event of Default shall have occurred
or be continuing or would exist after giving effect to the Advance under the
Revolving Facility on such date;
(d) immediately after giving effect to any requested
Advance, the aggregate outstanding principal amount of Advances under the
Revolving Facility shall not exceed either the Availability and the Facility
Cap;
(e) except as disclosed in the historical financial
statements, there shall be no liabilities or obligations with respect to
Borrower of any nature whatsoever which, either individually or in the
aggregate, would reasonably be likely to have a Material Adverse Effect; and
(f) Lender shall have received all fees, charges and
expenses payable to Lender on or prior to such date pursuant to the Loan
Documents.
V. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as of the date hereof, the
Closing Date, each Borrowing Date and, if applicable, the date of funding of
the Term Loan as follows:
5.1 ORGANIZATION AND AUTHORITY
Borrower is a corporation duly organized, validly existing
and in good standing under the laws of its state of formation. Borrower (i) has
all requisite corporate power and authority to own its properties and assets
and to carry on its business as now being conducted and as contemplated in the
Loan Documents, (ii) is duly qualified to do business in every jurisdiction in
which failure so to qualify could reasonably be expected to have a Material
Adverse Effect, and (iii) has all requisite power and authority (A) to execute,
deliver and perform the Loan Documents to which it is a party, (B) to borrow
hereunder, (C) to consummate the transactions contemplated under the Loan
Documents, and (D) to grant the Liens with regard to the Collateral pursuant to
the Security Documents to which it is a party. Borrower is not an "investment
company" registered or required to be registered under the Investment Company
Act of 1940, as amended, or is controlled by such an "investment company."
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5.2 LOAN DOCUMENTS
The execution, delivery and performance by Borrower of the
Loan Documents to which it is a party, and the consummation of the transactions
contemplated thereby, (i) have been duly authorized by all requisite corporate
action of Borrower and have been duly executed and delivered by or on behalf of
Borrower; (ii) do not violate any provisions of (A) applicable law, statute,
rule, regulation, ordinance or tariff, (B) any order of any Governmental
Authority binding on any such Person or any of their respective properties, or
(C) the certificate of incorporation or bylaws (or any other equivalent
governing agreement or document) of any such Person, or any agreement between
any such Person and its respective stockholders, members, partners or equity
owners or among any such stockholders, members, partners or equity owners;
(iii) are not in conflict with, and do not result in a breach or default of or
constitute an event of default, or an event, fact, condition or circumstance
which, with notice or passage of time, or both, would constitute or result in a
conflict, breach, default or event of default under, any indenture, agreement
or other instrument to which any such Person is a party, or by which the
properties or assets of such Person are bound, the effect of which could
reasonably be expected to have a Material Adverse Effect; (iv) except as set
forth therein, will not result in the creation or imposition of any Lien of any
nature upon any of the properties or assets of any such Person, and (v) except
as set forth on Schedule 5.2, do not require the consent, approval or
authorization of, or filing, registration or qualification with, any
Governmental Authority or any other Person. When executed and delivered, each
of the Loan Documents to which Borrower is a party will constitute the legal,
valid and binding obligation of Borrower, enforceable against Borrower in
accordance with its terms, subject to the effect of any applicable bankruptcy,
moratorium, insolvency, reorganization or other similar law affecting the
enforceability of creditors' rights generally and to the effect of general
principles of equity which may limit the availability of equitable remedies
(whether in a proceeding at law or in equity).
5.3 SUBSIDIARIES, CAPITALIZATION AND OWNERSHIP INTERESTS
Borrower has no Subsidiaries. Schedule 5.3 states the
authorized and issued capitalization of Borrower, the number and class of
equity securities and/or ownership, voting or partnership interests issued and
outstanding of Borrower (including options, warrants and other rights to
acquire any of the foregoing). The outstanding equity securities and/or
ownership, voting or partnership interests of Borrower have been duly
authorized and validly issued and are fully paid and nonassessable. Schedule
5.3 lists the directors of Borrower. Except as listed on Schedule 5.3, Borrower
does not own an interest or participates or engages in any joint venture,
partnership or similar arrangements with any Person.
5.4 PROPERTIES
Borrower (i) is the sole owner and has good, valid and
marketable title to, or a valid leasehold interest in, all of its properties
and assets, including the Collateral, whether personal or real, subject to no
transfer restrictions or Liens of any kind except for Permitted Liens, and (ii)
is in compliance in all material respects with each lease to which it is a
party or otherwise bound. Schedule 5.4 lists all real properties (and their
locations) owned or leased by or to, and all other assets or property that are
leased (other than operating leases) or licensed by Borrower and all Capital
Leases (including leases of leased real property of Borrower and all PAs)
covering or with respect to such properties and assets. Borrower enjoys
peaceful and undisturbed possession under all such leases and such leases are
all the leases necessary for the operation of such properties and assets, are
valid and subsisting and are in full force and effect.
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5.5 OTHER AGREEMENTS
Borrower is not (i) a party to any judgment, order or decree
or any agreement, document or instrument, or subject to any restriction, which
would materially adversely affect its ability to execute and deliver, or
perform under, any Loan Document or to pay the Obligations, (ii) in default in
the performance, observance or fulfillment of any obligation, covenant or
condition contained in any agreement, document or instrument to which it is a
party or to which any of its properties or assets are subject, which default,
if not remedied within any applicable grace or cure period could reasonably be
expected to have a Material Adverse Effect, nor is there any event, fact,
condition or circumstance which, with notice or passage of time or both, would
constitute or result in a conflict, breach, default or event of default under,
any of the foregoing which, if not remedied within any applicable grace or cure
period could reasonably be expected to have a Material Adverse Effect; or (iii)
a party or subject to any agreement, document or instrument with respect to, or
obligation to pay any, service or management fee with respect to, the
ownership, operation, leasing or performance of any of its business or any
facility, nor is there any manager with respect to any such facility.
5.6 LITIGATION
Except as set forth on Schedule 5.6, there is no action,
suit, proceeding or investigation pending or, to its knowledge, threatened
against Borrower that (i) questions or could prevent the validity of any of the
Loan Documents or the right of Borrower to enter into any Loan Document or to
consummate the transactions contemplated thereby, (ii) could reasonably be
expected to be or have, either individually or in the aggregate, any Material
Adverse Change or Material Adverse Effect, or (iii) could reasonably be
expected to result in any Change of Control or other change in the current
ownership, control or management of Borrower. Borrower is not aware that there
is any basis for the foregoing. Except as set forth on Schedule 5.6, Borrower
is not a party or subject to any order, writ, injunction, judgment or decree of
any Governmental Authority. There is no action, suit, proceeding or
investigation initiated by Borrower currently pending. Except as set forth on
Schedule 5.6, Borrower does not have any existing accrued and/or unpaid
Indebtedness to any Governmental Authority or any other governmental payor,
other than ordinary course of business license, permit and franchise fees and
taxes not yet due and unpaid.
5.7 HAZARDOUS MATERIALS
Borrower is in compliance in all material respects with all
applicable Environmental Laws. Borrower has not been notified of any action,
suit, proceeding or investigation (i) relating in any way to compliance by or
liability of Borrower under any Environmental Laws, (ii) which otherwise deals
with any Hazardous Substance or any Environmental Law, or (iii) which seeks to
suspend, revoke or terminate any license, permit or approval necessary for the
generation, handling, storage, treatment or disposal of any Hazardous
Substance.
5.8 TAX RETURNS; GOVERNMENTAL REPORTS
Borrower (i) has filed all federal, state, foreign (if
applicable) and local tax returns and other reports which are required by law
to be filed by Borrower, and (ii) has paid all taxes, assessments, fees and
other governmental charges, including, without limitation, payroll and other
employment related taxes, in each case that are due and payable, except for
ordinary business course taxes and for items that Borrower is currently
contesting in good faith and that are described on Schedule 5.8.
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5.9 FINANCIAL STATEMENTS AND REPORTS
All financial statements and financial information relating
to Borrower that have been or may hereafter be delivered to Lender by Borrower
are accurate and complete and have been prepared in accordance with GAAP
consistently applied with prior periods. Borrower has no material obligations
or liabilities of any kind not disclosed in such financial information or
statements, and since the date of the most recent financial statements
submitted to Lender, there has not occurred any Material Adverse Change,
Material Adverse Effect or, to Borrower's knowledge, any other event or
condition that could reasonably be expected to have a Material Adverse Effect.
5.10 COMPLIANCE WITH LAW
Except as set forth on Schedule 5.10, Borrower (i) is in
compliance with all laws, statutes, rules, regulations, ordinances and tariffs
of any Governmental Authority applicable to Borrower and/or Borrower's
business, assets or operations, including, without limitation, ERISA and
Healthcare Laws, and (ii) is not in violation of any order of any Governmental
Authority or other board or tribunal, except where noncompliance or violation
could not reasonably be expected to have a Material Adverse Effect. There is no
event, fact, condition or circumstance which, with notice or passage of time,
or both, would constitute or result in any noncompliance with, or any violation
of, any of the foregoing, in each case except where noncompliance or violation
could not reasonably be expected to have a Material Adverse Effect. Borrower
has not received any notice that Borrower is not in compliance in any respect
with any of the requirements of any of the foregoing. Borrower has (a) not
engaged in any Prohibited Transactions as defined in Section 406 of ERISA and
Section 4975 of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder, (b) not failed to meet any applicable
minimum funding requirements under Section 302 of ERISA in respect of its plans
and no funding requirements have been postponed or delayed, (c) no knowledge of
any event or occurrence which would cause the Pension Benefit Guaranty
Corporation to institute proceedings under Title IV of ERISA to terminate any
of the employee benefit plans, (d) no fiduciary responsibility under ERISA for
investments with respect to any plan existing for the benefit of Persons other
than its employees or former employees, or (e) not withdrawn, completely or
partially, from any multi-employer pension plans so as to incur liability under
the MultiEmployer Pension Plan Amendments of 1980. With respect to Borrower,
there exists no event described in Section 4043 of ERISA, excluding Subsections
4043(b)(2) and 4043(b)(3) thereof, for which the thirty (30) day notice period
contained in 12 C.F.R. ss. 2615.3 has not been waived. Borrower has maintained
in all material respects all records required to be maintained by the Joint
Commission on Accreditation of Healthcare Organizations, the Food and Drug
Administration, Drug Enforcement Agency and State Boards of Pharmacy and, to
the best knowledge of Borrower, there are no presently existing circumstances
which likely would result in material violations of the Healthcare Laws.
5.11 INTELLECTUAL PROPERTY
Except as set forth on Schedule 5.11, Borrower does not own,
license or utilize, and is not a party to, any patents, patent applications,
trademarks, trademark applications, service marks, registered copyrights,
copyright applications, copyrights, trade names, trade secrets, software or
licenses (collectively, the "INTELLECTUAL PROPERTY").
5.12 LICENSES AND PERMITS; LABOR
Borrower is in compliance with and has all Permits and
Intellectual Property necessary or required by applicable law or Governmental
Authority for the operation of its businesses. All of the
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foregoing are in full force and effect and not in known conflict with the
rights of others, except where such would not constitute a Material Adverse
Effect. Borrower is not (i) in breach of or default under the provisions of any
of the foregoing, nor is there any event, fact, condition or circumstance
which, with notice or passage of time or both, would constitute or result in a
conflict, breach, default or event of default under, any of the foregoing
which, if not remedied within any applicable grace or cure period could
reasonably be expected to have a Material Adverse Effect, (ii) a party to or
subject to any agreement, instrument or restriction that is so unusual or
burdensome that it might have a Material Adverse Effect, and/or (ii) and has
not been involved in any labor dispute, strike, walkout or union organization
which could reasonably be expected to have a Material Adverse Effect
5.13 NO DEFAULT
There does not exist any Default or Event of Default or any
event, fact, condition or circumstance which, with the giving of notice or
passage of time or both, would constitute or result in a Default or Event of
Default.
5.14 DISCLOSURE
No Loan Document nor any other agreement, document,
certificate, or statement furnished to Lender by or on behalf of Borrower in
connection with the transactions contemplated by the Loan Documents, nor any
representation or warranty made by Borrower in any Loan Document, contains any
untrue statement of material fact or omits to state any fact necessary to make
the statements therein not materially misleading. There is no fact known to
Borrower which has not been disclosed to Lender in writing which could
reasonably be expected to have a Material Adverse Effect.
5.15 EXISTING INDEBTEDNESS; INVESTMENTS, GUARANTEES AND CERTAIN
CONTRACTS
Except as contemplated by the Loan Documents or as otherwise
set forth on Schedule 5.15, Borrower (i) has no outstanding Indebtedness, (ii)
is not subject or party to any mortgage, note, indenture, indemnity or
guarantee of, with respect to or evidencing any Indebtedness of any other
Person, or (iii) does not own or hold any equity or long-term debt investments
in, and does not have any outstanding advances to or any outstanding guarantees
for the obligations of, or any outstanding borrowings from, any Person.
Borrower has performed all material obligations required to be performed by
Borrower pursuant to or connection with any items listed on Schedule 5.15 and
there has occurred no breach, default or event of default under any document
evidencing any such items or any fact, circumstance, condition or event which,
with the giving of notice or passage of time or both, would constitute or
result in a breach, default or event of default thereunder.
5.16 OTHER AGREEMENTS
Except as set forth on Schedule 5.16, (i) there are no
existing or proposed agreements, arrangements, understandings or transactions
between Borrower and any of Borrower's officers, members, managers, directors,
stockholders, partners, other interest holders, employees or Affiliates or any
members of their respective immediate families, and (ii) none of the foregoing
Persons are directly or indirectly, indebted to or have any direct or indirect
ownership, partnership or voting interest in, to Borrower's knowledge, any
Affiliate of Borrower or any Person that competes with Borrower (except that
any such Persons may own stock in (but not exceeding two (2%) percent of the
outstanding capital stock of) any publicly traded company that may compete with
Borrower.
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5.17 INSURANCE
Borrower has in full force and effect such insurance policies
as are customary in its industry and as may be required pursuant to Section 6.5
hereof. All such insurance policies are listed and described on Schedule 5.17.
5.18 NAMES; LOCATION OF OFFICES, RECORDS AND COLLATERAL
During the preceding five years, Borrower has not conducted
business under or used any name (whether corporate, partnership or assumed)
other than as shown on Schedule 5.18A. Borrower is the sole owner of all of its
names listed on Schedule 5.18A, and any and all business done and invoices
issued in such names are Borrower's sales, business and invoices. Each trade
name of Borrower represents a division or trading style of Borrower. Borrower
maintains its places of business and chief executive offices only at the
locations set forth on Schedule 5.18B, and all Accounts of Borrower arise,
originate and are located, and all of the Collateral and all books and records
in connection therewith or in any way relating thereto or evidencing the
Collateral are located and shall be only, in and at such locations. All of the
Collateral is located only in the continental United States.
5.19 NON-SUBORDINATION
Except as provided by law, the Obligations are not
subordinated in any way to any other obligations of Borrower or to the rights
of any other Person.
5.20 ACCOUNTS
In determining which Accounts are Eligible Receivables,
Lender may rely on all statements and representations made by Borrower with
respect to any Account. Unless otherwise indicated in writing to Lender, each
Account of Borrower (i) is genuine and in all respects what it purports to be
and is not evidenced by a judgment, (ii) arises out of a completed, bona fide
sale and delivery of goods or rendering of Services by Borrower in the ordinary
course of business and in accordance with the terms and conditions of all
purchase orders, contracts, certifications, participations, certificates of
need and other documents relating thereto or forming a part of the contract
between Borrower and the Account Debtor, (iii) is for a liquidated amount
maturing as stated in a claim or invoice covering such sale of goods or
rendering of Services, a copy of which has been furnished or is available to
Lender, (iv) together with Lender's security interest therein, is not and will
not be in the future (by voluntary act or omission by Borrower), subject to any
offset, lien, deduction, defense, dispute, counterclaim or other adverse
condition, is absolutely owing to Borrower and is not contingent in any respect
or for any reason, (v) there are no facts, events or occurrences which in any
way impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the face amount of the claim or invoice and statements
delivered to Lender with respect thereto, (vi) to the best of Borrower's
knowledge, (A) the Account Debtor thereunder had the capacity to contract at
the time any contract or other document giving rise thereto was executed and
(B) such Account Debtor is solvent, (vii) to the best of Borrower's knowledge,
subject to subsection (x) below, there are no proceedings or actions which are
threatened or pending against any Account Debtor thereunder which might result
in any Material Adverse Change in such Account Debtor's financial condition or
the collectability thereof, (viii) has been billed and forwarded to the Account
Debtor for payment in accordance with applicable laws and is in compliance and
conformance with any requisite procedures, requirements and regulations
governing payment by such Account Debtor with respect to such Account, (ix)
Borrower has obtained and currently has all Permits necessary in the generation
thereof, and (x) Borrower has disclosed to Lender on each Borrowing Certificate
the amount of all Accounts of
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Borrower for which Medicare is the Account Debtor and for which payment has
been denied and subsequently appealed pursuant to the procedure described in
the definition of Eligible Receivables hereof, and Borrower is pursuing all
available appeals in respect of such Accounts.
5.21 DENTAL CENTERS
None of the Dental Centers are legal entities or have any
rights in any of the Collateral.
5.22 SURVIVAL
Borrower makes the representations and warranties contained
herein with the knowledge and intention that Lender is relying and will rely
thereon. All such representations and warranties will survive the execution and
delivery of this Agreement, the making of the Advances under the Revolving
Facility and the funding of the Term Loan.
VI. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until full performance
and satisfaction, and indefeasible payment in full in cash, of all the
Obligations and termination of this Agreement:
6.1 FINANCIAL STATEMENTS, REPORTS AND OTHER INFORMATION
(a) Financial Reports. Borrower shall furnish to Lender
(i) as soon as available and in any event within one hundred five (105)
calendar days after the end of each fiscal year of Borrower, audited annual
financial statements of Borrower, including the notes thereto, consisting of a
balance sheet at the end of such completed fiscal year and the related
statements of income, retained earnings, cash flows and owners' equity for such
completed fiscal year, which financial statements shall be prepared and
certified without qualification by an independent certified public accounting
firm satisfactory to Lender and accompanied by related management letters, if
available, and (ii) as soon as available and in any event within forty-five
(45) calendar days after the end of each calendar month, unaudited financial
statements of Borrower consisting of a balance sheet and statements of income,
retained earnings and cash flows as of the end of the immediately preceding
calendar month. All such financial statements shall be prepared in accordance
with GAAP consistently applied with prior periods. With each such financial
statement, Borrower shall also deliver a certificate of its chief financial
officer stating that (A) such person has reviewed the relevant terms of the
Loan Documents and the condition of Borrower, (B) no Default or Event of
Default has occurred or is continuing, or, if any of the foregoing has occurred
or is continuing, specifying the nature and status and period of existence
thereof and the steps taken or proposed to be taken with respect thereto, (C)
Borrower is in compliance with all financial covenants attached as Annex I
hereto; provided that after the Draw on the Term Loan such financial covenants
shall apply to Borrower and the PAs on an as-if combined basis. Such
certificate shall be accompanied by the calculations necessary to show
compliance with the financial covenants in a form satisfactory to Lender.
(b) Other Materials. Borrower shall furnish to Lender as
soon as available, and in any event within ten (10) calendar days after the
preparation or issuance thereof or at such other time as set forth below: (i)
copies of such financial statements (other than those required to be delivered
pursuant to Section 6.1(a)) prepared by, for or on behalf of Borrower and any
other notes, reports and other materials related thereto, including, without
limitation, any pro forma financial statements, (ii) any reports, returns,
information, notices and other materials that Borrower shall send to its
stockholders, members, partners or other equity owners at any time, (iii)
within twenty-five (25) calendar days after the end of each calendar
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month for such month, (A) a sales and collection report and accounts receivable
and accounts payable aging schedule, including a report of sales, credits
issued and collections received, all such reports showing a reconciliation to
the amounts reported in the monthly financial statements, and (B) a report of
census and occupancy percentage for all payors, (iv) promptly upon receipt
thereof, copies of any reports submitted to Borrower by its independent
accountants in connection with any interim audit of the books of such Person or
any of its Affiliates and copies of each management control letter provided by
such independent accountants, and (v) such additional information, documents,
statements, reports and other materials as Lender may reasonably request from a
credit or security perspective or otherwise from time to time.
(c) Notices. Borrower shall promptly, and in any event
within three (3) calendar days after Borrower or any authorized officer of
Borrower obtains knowledge thereof, notify Lender in writing of (i) any pending
or threatened litigation, suit, investigation, arbitration, dispute resolution
proceeding or administrative proceeding brought or initiated by Borrower or
otherwise affecting or involving or relating to Borrower or any of its property
or assets to the extent (A) the amount in controversy exceeds $100,000, or (B)
to the extent any of the foregoing seeks injunctive relief, (ii) any Default or
Event of Default, which notice shall specify the nature and status thereof, the
period of existence thereof and what action is proposed to be taken with
respect thereto, (iii) any other development, event, fact, circumstance or
condition that could reasonably be expected to have a Material Adverse Effect,
in each case describing the nature and status thereof and the action proposed
to be taken with respect thereto, (iv) any notice received by Borrower from any
payor of a claim, suit or other action such payor has, claims or has filed
against Borrower, (v) any matter(s) affecting the value, enforceability or
collectability of any of the Collateral, including, without limitation, claims
or disputes in the amount of $50,000 or more, singly or in the aggregate, in
existence at any one time, (vi) any notice given by Borrower to any other
lender of Borrower and shall furnish to Lender a copy of such notice, (vii)
receipt of any notice or request from any Governmental Authority or
governmental payor regarding any liability or claim of liability, (viii)
receipt of any notice by Borrower regarding termination of any senior
management team member (which shall include any vice president of Borrower or
any Person holding a position senior to a vice president), (ix) if any Account
becomes evidenced or secured by an Instrument or Chattel Paper, and/or (x) any
late payment, default or pending default by Borrower under any real property
lease.
(d) Consents. Borrower shall obtain and deliver from
time to time all required consents, approvals and agreements from such third
parties as Lender shall determine are necessary or desirable in its sole
discretion and that are satisfactory to Lender with respect to (i) the Loan
Documents and the transactions contemplated thereby, (ii) claims against
Borrower or the Collateral, and/or (iii) any agreements, consents, documents or
instruments to which Borrower is a party or by which any properties or assets
of Borrower or any of the Collateral is or are bound or subject, including,
without limitation, Landlord Waivers and Consents with respect to leases.
(e) Operating Budget. Borrower shall furnish to Lender
on or prior to the Closing Date and for each fiscal year of Borrower thereafter
not less than thirty (30) calendar days prior to the commencement of such
fiscal year, condensed quarterly projected operating budgets, annual
projections, profit and loss statements, balance sheets and cash flow reports
of and for Borrower for such upcoming fiscal year (including an income
statement for each quarter and a balance sheet as at the end of the last month
in each fiscal quarter), in each case prepared in accordance with GAAP
consistently applied with prior periods.
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6.2 PAYMENT OF OBLIGATIONS
Borrower shall make full and timely indefeasible payment in
cash of the principal of and interest on the Loans, Advances and all other
Obligations. Simultaneously upon any prepayment of the Revolving Loan and
termination of the Revolving Facility, Borrower shall make full indefeasible
payment in cash of the principal of and interest on the Term Loan and all other
Obligations relating to the Term Loan.
6.3 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE AND ASSETS
Borrower shall (i) conduct its business in accordance with
good business practices customary to the industry, (ii) engage principally in
the same or similar lines of business substantially as heretofore conducted,
(iii) collect its Accounts in the ordinary course of business, (iv) maintain
all of its material properties, assets and equipment used or useful in its
business in good repair, working order and condition (normal wear and tear
excepted and except as may be disposed of in the ordinary course of business
and in accordance with the terms of the Loan Documents and otherwise as
determined by Borrower using commercially reasonable business judgment), (v)
from time to time to make all necessary or desirable repairs, renewals and
replacements thereof, as determined by Borrower using commercially reasonable
business judgment, (vi) maintain and keep in full force and effect its
existence and all material Permits and qualifications to do business and good
standing in each jurisdiction in which the ownership or lease of property or
the nature of its business makes such Permits or qualification necessary and in
which failure to maintain such Permits or qualification could reasonably be
likely to have a Material Adverse Effect; and (vii) remain in good standing and
maintain operations in all jurisdictions in which currently located.
Notwithstanding the foregoing, Borrower may engage in the Stock Repurchase or
any other transaction intended to take Borrower private, sell the assets of
Dental Centers, convert Dental Centers to Borrower's equity model or sell or
factor promissory notes issued to Borrower or the PA by a dentist in connection
with the acquisition by such dentist of any interest in a Dental Center.
6.4 COMPLIANCE WITH LEGAL AND OTHER OBLIGATIONS
Borrower shall (i) comply with all laws, statutes, rules,
regulations, ordinances and tariffs of all Governmental Authorities applicable
to it or its business, assets or operations, except where the failure to comply
could not reasonably be expected to have a Material Adverse Effect, (ii) pay
all taxes, assessments, fees, governmental charges, claims for labor, supplies,
rent and all other obligations or liabilities of any kind, except liabilities
being contested in good faith and against which adequate reserves have been
established, except where the failure to pay could not reasonably be expected
to have a Material Adverse Effect, (iii) perform in accordance with its terms
each contract, agreement or other arrangement to which it is a party or by
which it or any of the Collateral is bound, except where the failure to perform
could not reasonably be expected to have a Material Adverse Effect, and (iv)
maintain and comply with all Permits necessary to conduct its business and
comply with any new or additional requirements that may be imposed on it or its
business.
6.5 INSURANCE
Borrower shall (i) keep the Life Insurance Policy fully paid
and in full force and effect, (ii) keep business interruption insurance in the
amount of at least $3,000,000 fully paid and in full force and effect, (iii)
keep all of its insurable properties and assets adequately insured in all
material respects against losses, damages and hazards as are customarily
insured against by businesses engaging in similar activities or owning similar
assets or properties and at least the minimum amount required by applicable
law, and
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maintain general public liability insurance at all times against liability on
account of damage to persons and property having such limits, deductibles,
exclusions and co-insurance and other provisions as are customary for a
business engaged in activities similar to those of Borrower; and (iv) maintain
insurance under all applicable workers' compensation laws; all of the foregoing
insurance policies to (A) be satisfactory in form and substance to Lender, (B)
name Lender as loss payee and additional insured thereunder (except that the
Life Insurance Policy shall be assigned to Lender), and (C) expressly provide
that they cannot be altered, amended, modified or canceled without thirty (30)
Business Days prior written notice to Lender and that they inure to the benefit
of Lender notwithstanding any action or omission or negligence of or by
Borrower or any insured thereunder.
6.6 TRUE BOOKS
Borrower shall (i) keep true, complete and accurate books of
record and account in accordance with commercially reasonable business
practices in which true and correct entries are made of all of its and their
dealings and transactions in all material respects; and (ii) set up and
maintain on its books such reserves as may be required by GAAP with respect to
doubtful accounts and all taxes, assessments, charges, levies and claims and
with respect to its business, and include such reserves in its quarterly as
well as year end financial statements.
6.7 INSPECTION; PERIODIC AUDITS
Borrower shall permit the representatives of Lender, at the
expense of Borrower, from time to time during normal business hours upon
reasonable notice, to (i) visit and inspect any of its offices or properties or
any other place where Collateral is located to inspect the Collateral and/or to
examine or audit all of its books of account, records, reports and other
papers, (ii) make copies and extracts therefrom, and (iii) discuss its
business, operations, prospects, properties, assets, liabilities, condition
and/or Accounts with its officers and independent public accountants (and by
this provision such officers and accountants are authorized to discuss the
foregoing).
6.8 FURTHER ASSURANCES; POST CLOSING
At Borrower's cost and expense, Borrower shall (i) within
five (5) Business Days after Lender's demand, take such further actions, obtain
such consents and approvals and duly execute and deliver such further
agreements, assignments, instructions or documents as Lender may request with
respect to the purposes, terms and conditions of the Loan Documents and the
consummation of the transactions contemplated thereby, whether before, at or
after the performance and/or consummation of the transactions contemplated
hereby or the occurrence of a Default or Event of Default, (ii) without
limiting and notwithstanding any other provision of any Loan Document, execute
and deliver, or cause to be executed and delivered, such agreements and
documents, and take or cause to be taken such actions, and otherwise perform,
observe and comply with such obligations, as are set forth on Schedule 6.8, and
(iii) upon the exercise by Lender or any of its Affiliates of any power, right,
privilege or remedy pursuant to any Loan Document or under applicable law or at
equity which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority, execute and deliver, or cause the
execution and delivery of, all applications, certificates, instruments and
other documents that may be so required for such consent, approval,
registration, qualification or authorization. Without limiting the foregoing,
upon the exercise by Lender or any of its Affiliates of any right or remedy
under any Loan Document which requires any consent, approval or registration
with, consent, qualification or authorization by, any Person, Borrower shall
execute and deliver, or cause the execution and delivery of, all applications,
certificates,
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instruments and other documents that Lender or its Affiliate may be required to
obtain for such consent, approval, registration, qualification or
authorization.
6.9 PAYMENT OF INDEBTEDNESS
Except as otherwise prescribed in the Loan Documents,
Borrower shall pay, discharge or otherwise satisfy at or before maturity
(subject to applicable grace periods and, in the case of trade payables, to
ordinary course payment practices) all of its material obligations and
liabilities, except when the amount or validity thereof is being contested in
good faith by appropriate proceedings and such reserves as Lender may deem
proper and necessary in its sole discretion shall have been made.
6.10 LIEN SEARCHES
If Liens other than Permitted Liens exist, Borrower shall
immediately take, execute and deliver all actions, documents and instruments
necessary to release and terminate such Liens.
6.11 USE OF PROCEEDS
Borrower shall use the proceeds from the Revolving Facility
and the Term Loan only for the purposes set forth in the first "WHEREAS" clause
of this Agreement.
6.12 COLLATERAL DOCUMENTS; SECURITY INTEREST IN COLLATERAL
Borrower shall immediately (i) execute, obtain, deliver,
file, register and/or record any and all financing statements, continuation
statements, instruments and other documents, or cause the execution, filing,
registration, recording or delivery of any and all of the foregoing, that are
necessary or required under law or otherwise or reasonably requested by Lender
to be executed, filed, registered, obtained, delivered or recorded to create,
maintain, perfect, preserve, validate or otherwise protect the pledge of the
Collateral to Lender and Lender's perfected first priority Lien on the
Collateral (and Borrower irrevocably grants Lender the right, at Lender's
option, to file any or all of the foregoing), (ii) immediately upon learning
thereof, report to Lender any reclamation, return or repossession of goods in
excess of $50,000.00 (individually or in the aggregate), and (iii) defend the
Collateral and Lender's perfected first priority Lien thereon against all
claims and demands of all Persons at any time claiming the same or any interest
therein adverse to Lender, and pay all reasonable costs and expenses
(including, without limitation, in-house documentation and diligence fees and
legal expenses and reasonable attorneys' fees and expenses) in connection with
such defense, which may at Lender's discretion be added to the Obligations.
6.13 RIGHT OF FIRST REFUSAL
If at any time Borrower receives from a third party an offer,
term sheet or commitment or makes a proposal accepted by any Person (each, an
"OFFER") which provides for any type of financing to or for Borrower, Borrower
shall notify Lender of the Offer in writing (including all material terms of
the Offer) and Lender shall have 15 calendar days after Receipt of such notice
(the "OPTION PERIOD") to agree to provide similar financing in the place of
such Person upon substantially the same terms and conditions (or terms more
favorable to Borrower) as set forth in the Offer. Lender shall notify Borrower
in writing of Lender's acceptance of the Offer pursuant hereto (the "ACCEPTANCE
NOTICE"), in which case Borrower shall obtain such financing from Lender and
shall not accept the Offer from such other Person. If no Acceptance Notice has
been Received from Lender within the Option Period, Borrower may consummate the
Offer with the other Person on the terms and conditions set forth in the Offer
(the "TRANSACTION"); provided, however,
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that none of foregoing or any failure by Lender to issue an Acceptance Notice
shall be construed as a waiver of any of the terms, covenants or conditions of
any of the Loan Documents. If the Transaction is not consummated on the terms
set forth in the Offer or with the Person providing the Offer or during the
ninety (90) calendar day period following the expiration of the Option Period,
Borrower shall not be permitted to consummate the Transaction without again
complying with this Section 6.13. The provisions of this Section 6.13 shall
survive the payment in full of the Obligations and termination of this
Agreement for a period of six months. For purposes of this Section 6.13,
"Lender" shall include CapitalSource Finance LLC and any of its parents,
subsidiaries or Affiliates.
6.14 TAXES AND OTHER CHARGES
All payments and reimbursements to Lender made under any Loan
Document shall be free and clear of and without deduction for all taxes,
levies, imposts, deductions, assessments, charges or withholdings, and all
liabilities with respect thereto of any nature whatsoever, excluding taxes to
the extent imposed on Lender's net income. If Borrower shall be required by law
to deduct any such amounts from or in respect of any sum payable under any Loan
Document to Lender, then the sum payable to Lender shall be increased as may be
necessary so that, after making all required deductions, Lender receives an
amount equal to the sum it would have received had no such deductions been
made; provided, however, if Lender subsequently receives any credit for the
withholding, refund or reimbursement from any taxing authority related to such
additional amounts paid by Borrower to Lender, Lender shall pay to Borrower the
amount of such refund or reimbursement. Notwithstanding anything contained in
this Agreement to the contrary, if Borrower is required to make an additional
payment for taxes pursuant to the previous sentence, Borrower shall have the
option to terminate this Agreement without any termination fees.
Notwithstanding any other provision of any Loan Document, if at any time after
the Closing (i) any change in any existing law, regulation, treaty or directive
or in the interpretation or application thereof, (ii) any new law, regulation,
treaty or directive enacted or any interpretation or application thereof, or
(iii) compliance by Lender with any request or directive (whether or not having
the force of law) from any Governmental Authority: (A) subjects Lender to any
tax, levy, impost, deduction, assessment, charge or withholding of any kind
whatsoever with respect to any Loan Document, or changes the basis of taxation
of payments to Lender of any amount payable thereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to
interest or commitment fees or other fees payable hereunder or changes in the
rate of tax on the overall net income of Lender), or (B) imposes on Lender any
other condition or increased cost in connection with the transactions
contemplated thereby or participations therein; and the result of any of the
foregoing is to increase the cost to Lender of making or continuing any Loan
hereunder or to reduce any amount receivable hereunder, then, in any such case,
Borrower shall promptly pay to Lender any additional amounts necessary to
compensate Lender, on an after-tax basis, for such additional cost or reduced
amount as determined by Lender; provided, however, if Lender subsequently
receives any credit for the withholding, refund or reimbursement from any
taxing authority related to such additional amounts paid by Borrower to Lender,
Lender shall pay to Borrower the amount of such refund or reimbursement. If
Lender becomes entitled to claim any additional amounts pursuant to this
Section 6.14 it shall promptly notify Borrower of the event by reason of which
Lender has become so entitled, and each such notice of additional amounts
payable pursuant to this Section 6.14 submitted by Lender to Borrower shall,
absent manifest error, be final, conclusive and binding for all purposes.
Without limiting or being limited by any other provision of any Loan Document,
Borrower at all times shall retain and use a Person acceptable to Lender to
process, manage and pay its payroll taxes and shall cause to be delivered to
Lender within ten (10) calendar days after the end of each calendar month a
report of its payroll taxes for the immediately preceding calendar month and
evidence of payment thereof.
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VII. NEGATIVE COVENANTS
Borrower covenants and agrees that, until full performance
and satisfaction, and indefeasible payment in full in cash, of all the
Obligations and termination of this Agreement:
7.1 FINANCIAL COVENANTS
Borrower shall not violate the financial covenants set forth
on Annex I to this Agreement, which is incorporated herein and made a part
hereof.
7.2 PERMITTED INDEBTEDNESS
Borrower shall not create, incur, assume or suffer to exist
any Indebtedness, except the following (collectively, "PERMITTED
INDEBTEDNESS"): (i) Indebtedness under the Loan Documents, (ii) any
Indebtedness set forth on Schedule 7.2, (iii) Capitalized Lease Obligations
incurred after the Closing Date and Indebtedness incurred pursuant to purchase
money Liens permitted by Section 7.3(v), provided that the aggregate amount of
Capitalized Lease Obligations outstanding at any time shall not exceed
$1,000,000 during the one year period from and after the date hereof and shall
not exceed $1,500,000 during the two year period from and after the first
anniversary of the date hereof, (iv) Indebtedness in connection with advances
made by a stockholder or an Affiliate in order to cure any default of the
financial covenants set forth on Annex I; provided, however, that such
Indebtedness shall be on an unsecured basis, subordinated in right of repayment
and remedies to all of the Obligations and to all of Lender's rights and in
form and substance satisfactory to Lender; (v) accounts payable to trade
creditors and current operating expenses (other than for borrowed money) which
are not aged more than 120 calendar days from the billing date or more than 30
days from the due date, in each case incurred in the ordinary course of
business and paid within such time period, unless the same are being contested
in good faith and by appropriate and lawful proceedings and such reserves, if
any, with respect thereto as are required by GAAP and deemed adequate by
Borrower's independent accountants shall have been reserved; (vi) ordinary
course of business operating leases; (vii) Indebtedness for loans made to
Borrower by Affiliates to be used in connection with the Stock Repurchase,
provided, however, that any such loans shall provide only for interest payments
during the Term and the interest rate shall be not more than five percent;
(viii) Indebtedness in connection with any loans against the cash surrender
value of key man life insurance policies; (ix) borrowings incurred in the
ordinary course of business and not exceeding $25,000 individually or in the
aggregate outstanding at any one time; provided, however, that such
Indebtedness shall be on an unsecured basis, subordinated in right of repayment
and remedies to all of the Obligations and to all of Lender's rights and in
form and substance satisfactory to Lender, and (x) any Indebtedness arising
from or related to a catastrophic event, including, without limitation, fire or
natural disaster. Borrower shall not make prepayments on any existing or future
Indebtedness to any Person other than to Lender or to the extent specifically
permitted by this Agreement or any subsequent agreement between Borrower and
Lender in excess of $50,000 individually or $150,000 in the aggregate through
the Term).
7.3 PERMITTED LIENS
Borrower shall not create, incur, assume or suffer to exist
any Lien upon, in or against, or pledge of, any of the Collateral or any of its
properties or assets or any of its shares, securities or other equity or
ownership or partnership interests, whether now owned or hereafter acquired,
except the following (collectively, "PERMITTED LIENS"): (i) Liens under the
Loan Documents or otherwise arising in favor of Lender, (ii) Liens imposed by
law for taxes, assessments or charges of any Governmental Authority for claims
not yet due or which are being contested in good faith by appropriate
proceedings and
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being maintained by such Person in accordance with GAAP to the satisfaction of
Lender in its sole discretion, (iii) (A) statutory Liens of landlords (provided
that any such landlord has executed a Landlord Waiver and Consent in form and
substance satisfactory to Lender) and of carriers, warehousemen, mechanics,
materialmen, and (B) other Liens imposed by law or that arise by operation of
law in the ordinary course of business from the date of creation thereof, in
each case only for amounts not yet due or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are being maintained by such Person in accordance
with GAAP to the satisfaction of Lender in its sole discretion, (iv) Liens (A)
incurred or deposits made in the ordinary course of business (including,
without limitation, surety bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Indebtedness), statutory obligations and other
similar obligations, or (B) arising as a result of progress payments under
government contracts, (v) purchase money Liens (A) securing Indebtedness
permitted under Section 7.2(iii), or (B) in connection with the purchase by
such Person of equipment in the normal course of business, provided that such
payables shall not exceed any limits on Indebtedness provided for herein and
shall otherwise be Permitted Indebtedness hereunder, (vi) Liens necessary and
desirable for the operation of such Person's business, provided Lender has
consented to such Liens in writing before their creation and existence and the
priority of such Liens and the debt secured thereby are both subject and
subordinate in all respects to the Liens securing the Collateral and to the
Obligations and all of the rights and remedies of Lender, all in form and
substance satisfactory to Lender in its sole discretion; in (vii) Liens
disclosed on Schedule 7.3.
7.4 INVESTMENTS; NEW FACILITIES OR COLLATERAL; SUBSIDIARIES
Borrower shall not, directly or indirectly, (i) except for
the Stock Repurchase, purchase, own, hold, invest in or otherwise acquire
obligations or stock or securities of, or any other interest in, or all or
substantially all of the assets of, any Person or any joint venture, or (ii)
make or permit to exist any loans, advances or guarantees to or for the benefit
of any Person or assume, guarantee, endorse, contingently agree to purchase or
otherwise become liable for or upon or incur any obligation of any Person
(other than those created by the Loan Documents and Permitted Indebtedness and
other than (A) trade credit extended in the ordinary course of business
(including to the PAs and Affiliates), (B) advances for business travel and
similar temporary advances made in the ordinary course of business to officers,
directors and employees, and (C) the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, or (D) promissory notes in connection with the conversion of Dental
Centers to Borrower's equity model). Borrower, directly or indirectly, shall
not purchase, own, operate, hold, invest in or otherwise acquire any facility,
property or assets or any Collateral that is not located at the locations set
forth on Schedule 5.18B unless Borrower shall provide to Lender at least thirty
(30) Business Days prior written notice. Borrower shall not have Subsidiaries.
7.5 DIVIDENDS; REDEMPTIONS
Borrower shall not (i) declare, pay or make any dividend or
distribution on any shares of capital stock or other securities or interests
(other than dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock), (ii) except for the Stock Repurchase, apply
any of its funds, property or assets to the acquisition, redemption or other
retirement of any capital stock or other securities or interests or of any
options to purchase or acquire any of the foregoing (provided, however, that
Borrower may redeem its capital stock from terminated employees pursuant to,
but only to the extent required under, the terms of the related employment
agreements as long as no Default or Event of Default has occurred and is
continuing or would be caused by or result therefrom), (iii) otherwise make any
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payments or Distributions to any stockholder, member, partner or other equity
owner in such Person's capacity as such, or (iv) make any payment of any
management, service or related or similar fee to any Person or with respect to
any facility owned, operated or leased by Borrower except for payments relating
to or arising under the Services and Support Agreements between Borrower and
any PA.
7.6 TRANSACTIONS WITH AFFILIATES
Borrower shall not enter into or consummate any transaction
of any kind with any of its Affiliates or any Guarantor or any of their
respective Affiliates other than: (i) salary, bonus, employee stock option and
other compensation and employment arrangements with directors or officers in
the ordinary course of business, provided, that no payment of any bonus shall
be permitted if a Default or Event of Default has occurred and remains in
effect or would be caused by or result from such payment, (ii) distributions
and dividends permitted pursuant to Section 7.4, (iii) transactions with Lender
or any Affiliate of Lender, (iv) payments to any Affiliate of Borrower pursuant
to transactions consistent with the current transactions between Borrower and
such Affiliate described on Schedule 5.16 hereto; (v) payments permitted under
and pursuant to written agreements among any Borrower, the PAs or any Guarantor
entered into prior to the Closing and described on Schedule 5.16; that both (A)
reflect and constitute transactions on overall terms at least as favorable to
Borrower as would be the case in an arm's-length transaction between unrelated
parties of equal bargaining power, and (B) are subject to such terms and
conditions as determined by Lender in its sole discretion; provided, that
notwithstanding the foregoing Borrower shall not (y) enter into or consummate
any transaction or agreement pursuant to which it become responsible or liable
as a guarantor, surety or otherwise, pursuant to agreement for any Indebtedness
of any such Affiliate, or (z) other than as described on Schedule 5.16, make
any payment to any of its Affiliates in excess of $25,000 without the prior
written consent of Lender.
7.7 CHARTER DOCUMENTS; LIFE INSURANCE POLICY; FISCAL YEAR;
DISSOLUTION; USE OF PROCEEDS
Borrower shall not (i) amend, modify, restate or change its
certificate of incorporation or formation or bylaws or similar charter
documents in a manner that would be adverse to Lender, (ii) amend, modify,
restate or change the Life Insurance Policy, (iii) change its fiscal year
unless Borrower demonstrates to Lender's satisfaction compliance with the
covenants contained herein for both the fiscal year in effect prior to any
change and the new fiscal year period by delivery to Lender of appropriate
interim and annual pro forma, historical and current compliance certificates
for such periods and such other information as Lender may reasonably request,
(iv) amend, alter or suspend or terminate or make provisional in any material
way, any Permit without the prior written consent of Lender, which consent
shall not be unreasonably withheld, (v) wind up, liquidate or dissolve
(voluntarily or involuntarily) or commence or suffer any proceedings seeking or
that would result in any of the foregoing, or (vi) use any proceeds of any
Advance for "purchasing" or "carrying" "margin stock" as defined in Regulations
U, T or X of the Board of Governors of the Federal Reserve System.
7.8 TRUTH OF STATEMENTS
Borrower shall not furnish to Lender any certificate or other
document that contains any untrue statement of a material fact or that omits to
state a material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.
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7.9 CHANGES RELATING TO PURCHASED ACCOUNTS
Borrower shall not change or amend or terminate any agreement
between Borrower and a PA relating to Purchased Accounts.
7.10 IRS FORM 8821
Borrower shall not alter, amend, restate, or otherwise
modify, or withdraw, terminate or re-file the IRS Form 8821 required to be
filed pursuant to the Conditions Precedent in Section 4.1 hereof.
VIII. EVENTS OF DEFAULT
The occurrence of any one or more of the following shall
constitute an "Event of Default:"
(a) Borrower shall fail to pay (or have paid on its
behalf) any amount on the Obligations or provided for in any Loan Document when
due (whether on any payment date, at maturity, by reason of acceleration, by
notice of intention to prepay, by required prepayment or otherwise), and, if
such failure to pay is a result of a clerical error (such as a properly funded
wire transfer not clearing), such default is not cured within five (5) Business
Days;
(b) any representation, statement or warranty made or
deemed made by Borrower or any Guarantor in any Loan Document or in any other
certificate, document, report or opinion delivered in conjunction with any Loan
Document to which it is a party, shall not be true and correct in all material
respects or shall have been false or misleading in any material respect on the
date when made or deemed to have been made (except to the extent already
qualified by materiality, in which case it shall be true and correct in all
respects and shall not be false or misleading in any respect);
(c) Borrower or any Guarantor or other party thereto
other than Lender shall be in violation, breach or default of, or shall fail to
perform, observe or comply with any covenant, obligation or agreement set forth
in, any Loan Document and such violation, breach, default or failure shall not
be cured within the applicable period set forth in the applicable Loan
Document; provided that, with respect to the affirmative covenants set forth in
Article VI (other than Sections 6.2, 6.3, 6.9 and 6.11 for which there shall be
no cure period), there shall be a thirty (30) calendar day cure period
commencing from the earlier of (i) Receipt by such Person of written notice of
such breach, default, violation or failure, and (ii) the time at which such
Person or any authorized officer thereof knew or became aware, or should have
known or been aware, of such failure, violation, breach or default;
(d) (i) any of the Loan Documents ceases to be in full
force and effect, or (ii) any Lien created thereunder ceases to constitute a
valid perfected first priority Lien on the Collateral in accordance with the
terms thereof, or Lender ceases to have a valid perfected first priority
security interest in any of the Collateral or any securities pledged to Lender
pursuant to the Security Documents;
(e) one or more judgments or decrees is rendered against
Borrower or Guarantor in an amount in excess of $25,000 individually or $50,000
in the aggregate, which is/are not satisfied, stayed, vacated or discharged of
record within thirty (30) calendar days of being rendered, or such longer
period as prescribed by the court;
(f) (i) any default occurs, which is not cured or
waived, (x) in the payment of any amount with respect to any Indebtedness
(other than the Obligations) of Borrower or Guarantor in excess
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of $100,000, (y) in the performance, observance or fulfillment of any provision
contained in any agreement, contract, document or instrument to which Borrower
or Guarantor is a party or to which any of their properties or assets are
subject or bound under or pursuant to which any Indebtedness in excess of
$100,000 was issued, created, assumed, guaranteed or secured and such default
continues for more than any applicable grace period or permits the holder of
any Indebtedness to accelerate the maturity thereof, or (z) in the performance,
observance or fulfillment of any provision contained in any agreement,
contract, document or instrument between Borrower or Guarantor and Lender or
Affiliate of Lender (other than the Loan Documents), or (ii) any Indebtedness
of Borrower or Guarantor in excess of $100,000 is declared to be due and
payable or is required to be prepaid (other than by a regularly scheduled
payment) prior to the stated maturity thereof, or any obligation of such Person
for the payment of Indebtedness in excess of $100,000 (other than the
Obligations) is not paid when due or within any applicable grace period, or any
such obligation becomes or is declared to be due and payable before the
expressed maturity thereof, or there occurs an event which, with the giving of
notice or lapse of time, or both, would cause any such obligation to become, or
allow any such obligation to be declared to be, due and payable;
(g) Borrower or Guarantor shall (i) be unable to pay its
debts generally as they become due, (ii) file a petition under any insolvency
statute, (iii) make a general assignment for the benefit of its creditors, (iv)
commence a proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of the whole or any substantial part of its property,
or (v) file a petition seeking reorganization or liquidation or similar relief
under any Debtor Relief Law or any other applicable law or statute;
(h) (i) a court of competent jurisdiction shall (A)
enter an order, judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of Borrower or Guarantor or the whole or any
substantial part of any such Person's properties, which shall continue unstayed
and in effect for a period of sixty (60) calendar days, (B) shall approve a
petition filed against Borrower or Guarantor seeking reorganization,
liquidation or similar relief under the any Debtor Relief Law or any other
applicable law or statute, which is not dismissed within sixty (60) calendar
days or, (C) under the provisions of any Debtor Relief Law or other applicable
law or statute, assume custody or control of Borrower or Guarantor or of the
whole or any substantial part of any such Person's properties, which is not
irrevocably relinquished within sixty (60) calendar days, or (ii) there is
commenced against Borrower or Guarantor any proceeding or petition seeking
reorganization, liquidation or similar relief under any Debtor Relief Law or
any other applicable law or statute, which (A) is not unconditionally dismissed
within sixty (60) calendar days after the date of commencement, or (B) is with
respect to which Borrower or Guarantor takes any action to indicate its
approval of or consent to;
(i) (i) any Change of Control (other than a Stock
Repurchase or any other transaction intended to take Borrower private) occurs
or any agreement or commitment to cause or that may result in any such Change
of Control is entered into, (ii) any Material Adverse Effect, Material Adverse
Change occurs or is reasonably expected to occur, or (iii) Borrower or
Guarantor ceases any material portion of its business operations as currently
conducted;
(j) Lender receives any indication or evidence that
Borrower or Guarantor may have directly or indirectly been engaged in any type
of activity which, in Lender's judgment, might result in forfeiture of any
property to any Governmental Authority which shall have continued unremedied
for a period of ten (10) calendar days after written notice from Lender;
(k) an Event of Default occurs under any other Loan
Document and continues beyond any applicable cure period;
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(l) uninsured damage to, or loss, theft or destruction
of, any portion of the Collateral occurs that exceeds $300,000 in the
aggregate;
(m) Borrower or Guarantor or any of their respective
directors or senior officers is criminally indicted or convicted under any law
that could lead to a forfeiture of any Collateral;
(n) the issuance of any process for levy, attachment or
garnishment or execution upon or prior to any judgment against Borrower or
Guarantor or any of their property or assets that exceeds $50,000 individually
or $150,000 in the aggregate; or
(o) Borrower or Guarantor does, or enters into or
becomes a party to any agreement or commitment to do, or cause to be done, any
of the things described in this Article VIII or otherwise prohibited by any
Loan Document (subject to any cure periods set forth therein);
then, and in any such event, notwithstanding any other
provision of any Loan Document, Lender may, by notice to Borrower (i) terminate
its obligations to make Loans hereunder, whereupon the same shall immediately
terminate, (ii) declare all or any of the Notes, all interest thereon and all
other Obligations to be due and payable immediately (except in the case of an
Event of Default under Section 8(d), (g), (h) or (i)(iii), in which event all
of the foregoing shall automatically and without further act by Lender be due
and payable, provided that, with respect to non-material breaches or violations
that constitute Events of Default under clause (ii) of Section 8(d), there
shall be a three (3) Business Day cure period commencing from the earlier of
(A) Receipt by the applicable Person of written notice of such breach or
violation or of any event, fact or circumstance constituting or resulting in
any of the foregoing, and (B) the time at which such Person or any authorized
officer thereof knew or became aware, or should have known or been aware, of
such breach or violation and resulting Event of Default or of any event, fact
or circumstance constituting or resulting in any of the foregoing)), in each
case without presentment, demand, protest or further notice of any kind, all of
which are hereby expressly waived by Borrower, and (iii) prohibit any action
permitted to be taken under Article VII hereof.
IX. RIGHTS AND REMEDIES AFTER DEFAULT
9.1 RIGHTS AND REMEDIES
(a) In addition to the acceleration provisions set forth
in Article VIII above, upon the occurrence and continuation of an Event of
Default, Lender shall have the right to exercise any and all rights, options
and remedies provided for in any Loan Document, under the UCC or at law or in
equity, including, without limitation, the right to (i) apply any property of
Borrower held by Lender to reduce the Obligations, (ii) foreclose the Liens
created under the Security Documents, (iii) realize upon, take possession of
and/or sell any Collateral or securities pledged with or without judicial
process, (iv) exercise all rights and powers with respect to the Collateral as
Borrower, as applicable, might exercise, (v) collect and send notices regarding
the Collateral, with or without judicial process, (vi) by its own means or with
judicial assistance, enter any premises at which Collateral and/or pledged
securities are located, or render any of the foregoing unusable or dispose of
the Collateral and/or pledged securities on such premises without any liability
for rent, storage, utilities, or other sums, and no Borrower shall resist or
interfere with such action, (vii) at Borrower's expense, require that all or
any part of the Collateral be assembled and made available to Lender at any
place designated by Lender, (viii) reduce or otherwise change the Facility Cap
and/or the Maximum Term Loan Amount, and/or (ix) relinquish or abandon any
Collateral or securities pledged or any Lien thereon. Notwithstanding any
provision of any Loan Document, Lender, in
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its sole discretion, shall have the right, at any time that Borrower fails to
do so, and from time to time, without prior notice, to: (A) obtain insurance
covering any of the Collateral to the extent required hereunder; (B) pay for
the performance of any of Obligations; (C) discharge taxes or Liens on any of
the Collateral that are in violation of any Loan Document unless Borrower is in
good faith with due diligence by appropriate proceedings contesting those
items; and (D) pay for the maintenance and preservation of the Collateral. Such
expenses and advances shall be added to the Obligations until reimbursed to
Lender and shall be secured by the Collateral, and such payments by Lender
shall not be construed as a waiver by Lender of any Event of Default or any
other rights or remedies of Lender.
(b) Borrower agrees that notice received by it at least
ten (10) calendar days before the time of any intended public sale, or the time
after which any private sale or other disposition of Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Lender without prior notice to Borrower. At any sale or
disposition of Collateral or securities pledged, Lender may (to the extent
permitted by applicable law) purchase all or any part thereof free from any
right of redemption by Borrower which right is hereby waived and released.
Borrower covenants and agrees not to, and not to permit or cause any of the PAs
to, interfere with or impose any obstacle to Lender's exercise of its rights
and remedies with respect to the Collateral. Lender, in dealing with or
disposing of the Collateral or any part thereof, shall not be required to give
priority or preference to any item of Collateral or otherwise to marshal assets
or to take possession or sell any Collateral with judicial process.
9.2 APPLICATION OF PROCEEDS
In addition to any other rights, options and remedies Lender
has under the Loan Documents, the UCC, at law or in equity, all dividends,
interest, rents, issues, profits, fees, revenues, income and other proceeds
collected or received from collecting, holding, managing, renting, selling, or
otherwise disposing of all or any part of the Collateral or any proceeds
thereof upon exercise of its remedies hereunder shall be applied in the
following order of priority: (i) first, to the payment of all costs and
expenses of such collection, storage, lease, holding, operation, management,
sale, disposition or delivery and of conducting Borrower's business and of
maintenance, repairs, replacements, alterations, additions and improvements of
or to the Collateral, and to the payment of all sums which Lender may be
required or may elect to pay, if any, for taxes, assessments, insurance and
other charges upon the Collateral or any part thereof, and all other payments
that Lender may be required or authorized to make under any provision of this
Agreement (including, without limitation, in each such case, in-house
documentation and diligence fees and legal expenses, search, audit, recording,
professional and filing fees and expenses and reasonable attorneys' fees and
all expenses, liabilities and advances made or incurred in connection
therewith); (ii) second, to the payment of all Obligations as provided herein;
(iii) third, to the satisfaction of Indebtedness secured by any subordinate
security interest of record in the Collateral if written notification of demand
therefor is received before distribution of the proceeds is completed,
provided, that, if requested by Lender, the holder of a subordinate security
interest shall furnish reasonable proof of its interest, and unless it does so,
Lender need not address its claims; and (iv) fourth, to the payment of any
surplus then remaining to Borrower, unless otherwise provided by law or
directed by a court of competent jurisdiction, provided that Borrower shall be
liable for any deficiency if such proceeds are insufficient to satisfy the
Obligations or any of the other items referred to in this section.
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9.3 RIGHTS OF LENDER TO APPOINT RECEIVER
Without limiting and in addition to any other rights, options
and remedies Lender has under the Loan Documents, the UCC, at law or in equity,
upon the occurrence and continuation of an Event of Default, Lender shall have
the right to apply for and have a receiver appointed by a court of competent
jurisdiction in any action taken by Lender to enforce its rights and remedies
in order to manage, protect and preserve the Collateral and continue the
operation of the business of Borrower and to collect all revenues and profits
thereof and apply the same to the payment of all expenses and other charges of
such receivership including the compensation of the receiver and to the
payments as aforesaid until a sale or other disposition of such Collateral
shall be finally made and consummated.
9.4 RIGHTS AND REMEDIES NOT EXCLUSIVE
Lender shall have the right in its sole discretion to
determine which rights, Liens and/or remedies Lender may at any time pursue,
relinquish, subordinate or modify, and such determination will not in any way
modify or affect any of Lender's rights, Liens or remedies under any Loan
Document, applicable law or equity. The enumeration of any rights and remedies
in any Loan Document is not intended to be exhaustive, and all rights and
remedies of Lender described in any Loan Document are cumulative and are not
alternative to or exclusive of any other rights or remedies which Lender
otherwise may have. The partial or complete exercise of any right or remedy
shall not preclude any other further exercise of such or any other right or
remedy.
X. WAIVERS AND JUDICIAL PROCEEDINGS
10.1 WAIVERS
Except as expressly provided for herein, Borrower hereby
waives setoff, counterclaim, demand, presentment, protest, all defenses with
respect to any and all instruments and all notices and demands of any
description, and the pleading of any statute of limitations as a defense to any
demand under any Loan Document. Borrower hereby waives any and all defenses and
counterclaims it may have or could interpose in any action or procedure brought
by Lender to obtain an order of court recognizing the assignment of, or Lien of
Lender in and to, any Collateral. With respect to any action hereunder, Lender
conclusively may rely upon, and shall incur no liability to Borrower in acting
upon, any request or other communication that Lender reasonably believes to
have been given or made by a person authorized on Borrower's behalf, whether or
not such person is listed on the incumbency certificate delivered pursuant to
Section 4.1 hereof. In each such case, Borrower hereby waives the right to
dispute Lender's action based upon such request or other communication, absent
manifest error.
10.2 DELAY; NO WAIVER OF DEFAULTS
No course of action or dealing, renewal, release or extension
of any provision of any Loan Document, or single or partial exercise of any
such provision, or delay, failure or omission on Lender's part in enforcing any
such provision shall affect the liability of Borrower or Guarantor or operate
as a waiver of such provision or affect the liability of Borrower or Guarantor
or preclude any other or further exercise of such provision. No waiver by any
party to any Loan Document of any one or more defaults by any other party in
the performance of any of the provisions of any Loan Document shall operate or
be construed as a waiver of any future default, whether of a like or different
nature, and each such waiver shall be limited solely to the express terms and
provisions of such waiver. Notwithstanding any other
34
provision of any Loan Document, by completing the Closing under this Agreement
and/or by making Advances or funding the Term Loan, Lender does not waive any
breach of any representation or warranty of under any Loan Document, and all of
Lender's claims and rights resulting from any such breach or misrepresentation
are specifically reserved.
10.3 JURY WAIVER
EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY
RIGHT TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING UNDER THE LOAN
DOCUMENTS OR IN ANY WAY CONNECTED WITH OR INCIDENTAL TO THE DEALINGS OF THE
PARTIES WITH RESPECT TO THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
THEREBY, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE. EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY,
AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY
OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE
PARTIES TO THE WAIVER OF THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.
10.4 COOPERATION IN DISCOVERY AND LITIGATION
In any litigation, arbitration or other dispute resolution
proceeding relating to any Loan Document, Borrower waives any and all defenses,
objections and counterclaims it may have or could interpose with respect to (i)
any of its directors, officers, employees or agents being deemed to be
employees or managing agents of Borrower for purposes of all applicable law or
court rules regarding the production of witnesses by notice for testimony
(whether in a deposition, at trial or otherwise), (ii) Lender's counsel
examining any such individuals as if under cross-examination and using any
discovery deposition of any of them as if it were an evidence deposition,
and/or (iii) using all commercially reasonable efforts to produce in any such
dispute resolution proceeding, at the time and in the manner requested by
Lender, all Persons, documents (whether in tangible, electronic or other form)
and/or other things under its control and relating to the dispute.
XI. EFFECTIVE DATE AND TERMINATION
11.1 EFFECTIVENESS AND TERMINATION
Subject to Lender's right to terminate and cease making Loans
upon or after any Event of Default, this Agreement shall continue in full force
and effect until the full performance and indefeasible payment in cash of all
Obligations, unless terminated sooner as provided in this Section 11.1.
Borrower may terminate this Agreement at any time upon not less than sixty (60)
calendar days' prior written notice to Lender and upon full performance and
indefeasible payment in full in cash of all Obligations on or prior to such
90th calendar day after Receipt by Lender of such written notice. All of the
Obligations shall be immediately due and payable upon any such termination on
the termination date stated in any notice of termination (the "TERMINATION
DATE"); provided that, notwithstanding any other provision of any Loan
Document, the Termination Date shall be effective no earlier than the first
Business Day of the month following the expiration of the thirty (30) calendar
days' prior written notice period. Notwithstanding any other provision of any
Loan Document, no termination of this Agreement shall affect Lender's rights or
any of the Obligations existing as of the effective date of such termination,
and the provisions of the Loan
35
Documents shall continue to be fully operative until the Obligations have been
fully performed and indefeasibly paid in cash in full. The Liens granted to
Lender under the Security Documents and the financing statements filed pursuant
thereto and the rights and powers of Lender shall continue in full force and
effect notwithstanding the fact that Borrower's borrowings hereunder may from
time to time be in a zero or credit position until all of the Obligations have
been fully performed and indefeasibly paid in full in cash.
11.2 SURVIVAL
All obligations, covenants, agreements, representations,
warranties, waivers and indemnities made by Borrower in any Loan Document shall
survive the execution and delivery of the Loan Documents, the Closing, the
making of the Loans and any termination of this Agreement until all Obligations
are fully performed and indefeasibly paid in full in cash. The obligations and
provisions of Sections 3.5, 3.6, 6.13, 10.1, 10.3, 11.1, 11.2, 12.4, 12.7 and
12.9 shall survive termination of the Loan Documents and any payment, in full
or in part, of the Obligations.
XII. MISCELLANEOUS
12.1 GOVERNING LAW; JURISDICTION; SERVICE OF PROCESS; VENUE
The Loan Documents shall be governed by and construed in
accordance with the internal laws of the State of Maryland without giving
effect to its choice of law provisions. Any judicial proceeding against
Borrower with respect to the Obligations, any Loan Document or any related
agreement may be brought in any federal or state court of competent
jurisdiction located in the State of Maryland. By execution and delivery of
each Loan Document to which it is a party, Borrower (i) accepts the
non-exclusive jurisdiction of the aforesaid courts and irrevocably agrees to be
bound by any judgment rendered thereby, (ii) waives personal service of
process, (iii) agrees that service of process upon it may be made by certified
or registered mail, return receipt requested, pursuant to Section 12.5 hereof,
(iv) waives any objection to jurisdiction and venue of any action instituted
hereunder and agrees not to assert any defense based on lack of jurisdiction,
venue or convenience, and (v) agrees that this loan was made in Maryland, that
Lender has accepted in Maryland Loan Documents executed by Borrower and has
disbursed Advances under the Loan Documents in Maryland. Nothing shall affect
the right of Lender to serve process in any manner permitted by law or shall
limit the right of Lender to bring proceedings against Borrower in the courts
of any other jurisdiction having jurisdiction. Any judicial proceedings against
Lender involving, directly or indirectly, the Obligations, any Loan Document or
any related agreement shall be brought only in a federal or state court located
in the State of Maryland. All parties acknowledge that they participated in the
negotiation and drafting of this Agreement and that, accordingly, no party
shall move or petition a court construing this Agreement to construe it more
stringently against one party than against any other.
12.2 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; NEW LENDERS
The Loan Documents shall inure to the benefit of Lender,
Transferees and all future holders of any Note, the Obligations and/or any of
the Collateral, and each of their respective successors and assigns. Each Loan
Document shall be binding upon the Persons' other than Lender that are parties
thereto and their respective successors and assigns, and no such Person may
assign, delegate or transfer any Loan Document or any of its rights or
obligations thereunder without the prior written consent of Lender. No rights
are intended to be created under any Loan Document for the benefit of any third
party donee, creditor or incidental beneficiary of Borrower or Guarantor.
Nothing contained in any Loan
36
Document shall be construed as a delegation to Lender of any other Person's
duty of performance. BORROWER ACKNOWLEDGES AND AGREES THAT Lender at any time
and from time to time may (I) DIVIDE AND RESTATE ANY NOTE, AND/OR (II) sell,
assign or GRANT PARTICIPATING INTERESTS IN OR transfer all or any part of its
rights or obligations under ANY LOAN DOCUMENT, Note, the obligations AND/OR the
collateral TO OTHER PERSONS (EACH SUCH TRANSFEREE, ASSIGNEE OR PURCHASER, A
"TRANSFEREE"). Each Transferee shall have all of the rights and benefits with
respect to the Obligations, Notes, Collateral and/or Loan Documents held by it
as fully as if the original holder thereof, and either Lender or any Transferee
may be designated as the sole agent to manage the transactions and obligations
contemplated therein; provided that, notwithstanding anything to the contrary
in any Loan Document, Borrower shall not be obligated to pay under this
Agreement to any Transferee any sum in excess of the sum which Borrower would
have been obligated to pay to Lender had such participation not been effected.
Notwithstanding any other provision of any Loan Document, Lender may disclose
to any Transferee all information, reports, financial statements, certificates
and documents obtained under any provision of any Loan Document.
12.3 APPLICATION OF PAYMENTS
To the extent that any payment made or received with respect
to the Obligations is subsequently invalidated, determined to be fraudulent or
preferential, set aside or required to be repaid to a trustee, debtor in
possession, receiver, custodian or any other Person under any Debtor Relief
Law, common law or equitable cause or any other law, then the Obligations
intended to be satisfied by such payment shall be revived and shall continue as
if such payment had not been received by Lender. Any payments with respect to
the Obligations received shall be credited and applied in such manner and order
as Lender shall decide in its sole discretion.
12.4 INDEMNITY
Borrower shall indemnify Lender, its Affiliates and its and
their respective managers, members, officers, employees, Affiliates, agents,
representatives, successors, assigns, accountants and attorneys (collectively,
the "INDEMNIFIED PERSONS") from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses and disbursements of any kind or nature whatsoever (including, without
limitation, reasonable fees and disbursements of counsel and in-house
documentation and diligence fees and legal expenses) which may be imposed on,
incurred by or asserted against any Indemnified Person with respect to or
arising out of, or in any litigation, proceeding or investigation instituted or
conducted by any Person with respect to any aspect of, or any transaction
contemplated by or referred to in, or any matter related to, any Loan Document
or any agreement, document or transaction contemplated thereby, whether or not
such Indemnified Person is a party thereto, except to the extent that any of
the foregoing arises out of the gross negligence or willful misconduct of such
Indemnified Person. If any Indemnified Person uses in-house counsel for any
purpose for which Borrower is responsible to pay or indemnify, Borrower
expressly agrees that its indemnification obligations include reasonable
charges for such work commensurate with the fees that would otherwise be
charged by outside legal counsel selected by such Indemnified Person in its
sole discretion for the work performed. Lender agrees to give Borrower
reasonable notice of any event of which Lender becomes aware for which
indemnification may be required under this Section 12.4, and Lender may elect
(but is not obligated) to direct the defense thereof, provided that the
selection of counsel shall be subject to Borrower's consent, which consent
shall not be unreasonably withheld or delayed. Any Indemnified Person may, in
its reasonable discretion, take such actions as it deems necessary and
appropriate to investigate, defend or settle any event or take other remedial
or corrective actions with respect thereto as may be necessary for the
37
protection of such Indemnified Person or the Collateral. Notwithstanding the
foregoing, if any insurer agrees to undertake the defense of an event (an
"INSURED EVENT"), Lender agrees not to exercise its right to select counsel to
defend the event if that would cause Borrower's insurer to deny coverage;
provided, however, that Lender reserves the right to retain counsel to
represent any Indemnified Person with respect to an Insured Event at its sole
cost and expense. To the extent that Lender obtains recovery from a third party
other than an Indemnified Person of any of the amounts that Borrower has paid
to Lender pursuant to the indemnity set forth in this Section 12.4, then Lender
shall promptly pay to Borrower the amount of such recovery.
12.5 NOTICE
Any notice or request under any Loan Document shall be given
to any party to this Agreement at such party's address set forth beneath its
signature on the signature page to this Agreement, or at such other address as
such party may hereafter specify in a notice given in the manner required under
this Section 12.5. Any notice or request hereunder shall be given only by, and
shall be deemed to have been received upon (each, a "RECEIPT"): (i) registered
or certified mail, return receipt requested, on the date on which such received
as indicated in such return receipt, (ii) delivery by a nationally recognized
overnight courier, one (1) Business Day after deposit with such courier, or
(iii) facsimile or electronic transmission, in each case upon telephone or
further electronic communication from the recipient acknowledging receipt
(whether automatic or manual from recipient), as applicable.
12.6 SEVERABILITY; CAPTIONS; COUNTERPARTS; FACSIMILE SIGNATURES
If any provision of any Loan Document is adjudicated to be
invalid under applicable laws or regulations, such provision shall be
inapplicable to the extent of such invalidity without affecting the validity or
enforceability of the remainder of the Loan Documents which shall be given
effect so far as possible. The captions in the Loan Documents are intended for
convenience and reference only and shall not affect the meaning or
interpretation of the Loan Documents. The Loan Documents may be executed in one
or more counterparts (which taken together, as applicable, shall constitute one
and the same instrument) and by facsimile transmission, which facsimile
signatures shall be considered original executed counterparts. Each party to
this Agreement agrees that it will be bound by its own facsimile signature and
that it accepts the facsimile signature of each other party.
12.7 EXPENSES
Borrower shall pay, whether or not the Closing occurs, all
costs and expenses incurred by Lender and/or its Affiliates, including, without
limitation, documentation and diligence fees and expenses, all search, audit,
appraisal, recording, professional and filing fees and expenses and all other
out-of-pocket charges and expenses (including, without limitation, UCC and
judgment and tax lien searches and UCC filings and fees for post-Closing UCC
and judgment and tax lien searches and wire transfer fees and audit expenses),
and reasonable attorneys' fees and expenses, (i) in any effort to enforce,
protect or collect payment of any Obligation or to enforce any Loan Document or
any related agreement, document or instrument, (ii) in connection with entering
into, negotiating, preparing, reviewing and executing the Loan Documents and/or
any related agreements, documents or instruments, (iii) arising in any way out
of administration of the Obligations, (iv) in connection with instituting,
maintaining, preserving, enforcing and/or foreclosing on Lender's Liens in any
of the Collateral or securities pledged under the Loan Documents, whether
through judicial proceedings or otherwise, (v) in defending or prosecuting any
actions, claims or proceedings arising out of or relating to Lender's
transactions with Borrower, (vi) in seeking, obtaining or receiving any advice
with respect to its rights and obligations under any Loan Document and
38
any related agreement, document or instrument, and/or (vii) in connection with
any modification, restatement, supplement, amendment, waiver or extension of
any Loan Document and/or any related agreement, document or instrument. All of
the foregoing shall be charged to Borrower's account and shall be part of the
Obligations. If Lender or any of its Affiliates uses in-house counsel for any
purpose under any Loan Document for which Borrower is responsible to pay or
indemnify, Borrower expressly agrees that its Obligations include reasonable
charges for such work commensurate with the fees that would otherwise be
charged by outside legal counsel selected by Lender or such Affiliate in its
sole discretion for the work performed. Without limiting the foregoing,
Borrower shall pay all taxes (other than taxes based upon or measured by
Lender's income or revenues or any personal property tax), if any, in
connection with the issuance of any Note and the filing and/or recording of any
documents and/or financing statements.
12.8 ENTIRE AGREEMENT
This Agreement and the other Loan Documents to which Borrower
is a party constitute the entire agreement between Borrower and Lender with
respect to the subject matter hereof and thereof, and supersede all prior
agreements and understandings, if any, relating to the subject matter hereof or
thereof. Any promises, representations, warranties or guarantees not herein
contained and hereinafter made shall have no force and effect unless in writing
signed by Borrower and Lender. No provision of this Agreement may be changed,
modified, amended, restated, waived, supplemented, discharged, canceled or
terminated orally or by any course of dealing or in any other manner other than
by an agreement in writing signed by Lender and Borrower. Each party hereto
acknowledges that it has been advised by counsel in connection with the
negotiation and execution of this Agreement and is not relying upon oral
representations or statements inconsistent with the terms and provisions
hereof.
12.9 LENDER APPROVALS
Unless expressly provided herein to the contrary, any
approval, consent, waiver or satisfaction of Lender with respect to any matter
that is subject of any Loan Document may be granted or withheld by Lender in
its sole and absolute discretion.
12.10 CONFIDENTIALITY AND PUBLICITY
Except as required pursuant to applicable Law or the
regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, each party
hereto agrees, and agrees to cause each of its Affiliates, (i) not to transmit
or disclose provision of any Loan Document to any Person (other than to it's
agents, advisors and officers on a need-to-know basis and any potential
Transferee of Lender) without Lender's prior written consent, (ii) to inform
all Persons of the confidential nature of the Loan Documents and to direct them
not to disclose the same to any other Person and to require each of them to be
bound by these provisions. Lender reserves the right to review and approve all
materials that Borrower or any of its Affiliates prepares that contain Lender's
name or describe or refer to any Loan Document, any of the terms thereof or any
of the transactions contemplated thereby. Borrower shall not, and shall not
permit any of its Affiliates to, use Lender's name (or the name of any of
Lender's Affiliates) in connection with any of its business operations. Nothing
contained in any Loan Document is intended to permit or authorize such Loan
Parties or any of its Affiliates to contract on behalf of Lender. Further,
Borrower hereby agrees that Lender or any Affiliate of Lender may (i) disclose
a general description of transactions arising under the Loan Documents for
advertising, marketing or other similar purposes and (ii) use Borrower's or any
Guarantor's name, logo or other indicia germane to such party in connection
with such advertising, marketing or other similar purposes.
39
12.11 RELEASE OF LENDER
Notwithstanding any other provision of any Loan Document,
Borrower voluntarily, knowingly, unconditionally and irrevocably, with specific
and express intent, for and on behalf of itself, its managers, members,
directors, officers, employees, stockholders, Affiliates, agents,
representatives, accountants, attorneys, successors and assigns and their
respective Affiliates (collectively, the "RELEASING PARTIES"), hereby fully and
completely releases and forever discharges the Indemnified Parties and any
other Person or insurer which may be responsible or liable for the acts or
omissions of any of the Indemnified Parties, or who may be liable for the
injury or damage resulting therefrom (collectively, with the Indemnified
Parties, the "RELEASED PARTIES"), of and from any and all actions, causes of
action, damages, claims, obligations, liabilities, costs, expenses and demands
of any kind whatsoever, at law or in equity, matured or unmatured, vested or
contingent, that any of the Releasing Parties has against any of the Released
Parties as of the date of the Closing. Borrower acknowledges that the foregoing
release is a material inducement to Lender's decision to extend to Borrower the
financial accommodations hereunder and has been relied upon by Lender in
agreeing to make the Loans.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
40
IN WITNESS WHEREOF, each of the parties has duly executed
this Revolving Credit, Term Loan and Security Agreement as of the date first
written above.
COAST DENTAL SERVICES, INC.
By:
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Its: Chairman and Chief Executive Officer
Coast Dental Services, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇,
Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
CAPITALSOURCE FINANCE LLC
By:
----------------------------------------
Name:
--------------------------------------
Its:
---------------------------------------
CapitalSource Finance LLC
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Healthcare Finance Group,
Portfolio Manager
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
E-Mail: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
ANNEX I
FINANCIAL COVENANTS
1) EBITDA
Borrower shall not permit EBITDA for any Test Period to be
less than the following:
FOR ANY TEST PERIOD ENDING: EBITDA:
From January 1, 2003 until $1,000,000
June 30, 2003
July 1, 2003 until December 31, 2003 $1,250,000
From January 1, 2004 until $1,500,000
December 31, 2004
From January 1, 2005 and thereafter $1,750,000
2) NET LEVERAGE RATIO (TOTAL DEBT TO EBITDA)
The Net Leverage Ratio shall not exceed 1.25 to 1.0 from
January 1, 2003 through December 31, 2003, and 1.0 to 1.0 from January 1, 2004
and thereafter.
3) FIXED CHARGE RATIO (EBITDA/FIXED CHARGES)
As measured at the end of each calendar month thereafter, the
Fixed Charge Ratio shall not be less than:
FOR ANY TEST PERIOD ENDING: FIXED CHARGE RATIO:
From January 1, 2003 until 1.25 to 1.00
September 30, 2003
October 1, 2003 until December 31, 2003 1.50 to 1.00
From January 1, 2004 until 1.75 to 1.00
December 31, 2004
From January 1, 2005 and thereafter 2.00 to 1.00
4) CASH VELOCITY
Collections of Borrower's Accounts (including capitated
collections) shall not be less than $6,000,000 for each calendar month during
the Term commencing January 1, 2003; provided, that upon any violation of or
failure to comply with this covenant Lender shall have the right, in its sole
discretion, to consider for all purposes under the Agreement as though Borrower
actually collected Accounts equal to such minimum required amount.
1
5) MINIMUM LIQUIDITY AND WORKING CAPITAL
At Closing and at all other times Borrower shall have not
less than $500,000 of Available Cash on hand.
For purposes of the covenants set forth in this Annex I, the terms
listed below shall have the following meanings:
"Available Cash" shall mean, for and on any date, the sum
without duplication of the following for Borrower: (a) unrestricted cash on
hand on such date, (b) Cash Equivalents held on such date, and (c) the
unborrowed Availability on and as of such date.
"Cash Equivalents" shall mean (a) securities issued, or
directly and fully guaranteed or insured, by the United States or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States is pledged in support thereof) having maturities of not more than six
months from the date of acquisition, (b) U.S. dollar denominated time deposits,
certificates of deposit and bankers' acceptances of (i) any domestic commercial
bank of recognized standing having capital and surplus in excess of
$500,000,000, or (ii) any bank (or the parent company of such bank) whose
short-term commercial paper rating from Standard & Poor's Ratings Services
("S&P") is at least A-2 or the equivalent thereof or from ▇▇▇▇▇'▇ Investors
Service, Inc. ("▇▇▇▇▇'▇") is at least P-2 or the equivalent thereof in each
case with maturities of not more than six months from the date of acquisition
(any bank meeting the qualifications specified in clauses (b)(i) or (ii), an
"APPROVED BANK"), (c) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clause (a), above,
entered into with any Approved Bank, (d) commercial paper issued by any
Approved Bank or by the parent company of any Approved Bank and commercial
paper issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating of at least A-2 or the equivalent thereof by
S&P or at least P-2 or the equivalent thereof by Moody's, or guaranteed by any
industrial company with a long term unsecured debt rating of at least A or A2,
or the equivalent of each thereof, from S&P or Moody's, as the case may be, and
in each case maturing within six months after the date of acquisition and (e)
investments in money market funds substantially all of whose assets are
comprised of securities of the type described in clauses (a) through (d) above.
"EBITDA" shall mean, for any Test Period, the sum, without
duplication, of the following for Borrower, on a condensed basis: Net Income
determined in accordance with GAAP, plus, (a) Interest Expense, (b) taxes on
income, whether paid, payable or accrued, (c) depreciation expense, (d)
amortization expense, (e) all other non-cash, non-recurring charges and
expenses, excluding accruals for cash expenses made in the ordinary course of
business, and (f) loss from any sale of assets, other than sales in the
ordinary course of business, all of the foregoing determined in accordance with
GAAP, minus (a) gains from any sale of assets, other than sales in the ordinary
course of business and (b) other extraordinary or non-recurring gains.
"Fixed Charge Ratio" shall mean, for Borrower on a condensed
basis, the ratio of (a) EBITDA for the Test Period, to (b) Fixed Charges for
the Test Period.
"Fixed Charges" shall mean, the sum of the following: (a)
Total Debt Service, (b) Capital Expenditures, (c) income taxes paid in cash or
accrued, and (d) dividends paid or accrued or declared.
"Interest Expense" shall mean, for any Test Period, total
interest expense (including attributable to Capital Leases in accordance with
GAAP) fees with respect to all outstanding
2
Indebtedness including capitalized interest but excluding commissions,
discounts and other fees owed with respect to letters of credit and bankers'
acceptance financing and net costs under Interest Rate Agreements.
"Interest Rate Agreement" shall mean any interest rate swap,
cap or collar agreement or other similar agreement or arrangement designed to
hedge the position with respect to interest rates.
"Net Income" shall mean, the net income (or loss) determined
in conformity with GAAP, provided that there shall be excluded (i) the income
(or loss) of any Person in which any other Person (other than Borrower) has a
joint interest, except to the extent of the amount of dividends or other
distributions actually paid to Borrower by such Person, (ii) the income (or
loss) of any Person accrued prior to the date it becomes Borrower or is merged
into or consolidated with Borrower or that Person's assets are acquired by
Borrower, (iii) the income of any Subsidiary of Borrower to the extent that the
declaration or payment of dividends or similar distributions of that income by
that Subsidiary is not at the time permitted by operation of the terms of the
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary, (iv) compensation
expense resulting from the issuance of capital stock, stock options or stock
appreciation rights issued to former or current employees, including officers,
of Borrower, or the exercise of such options or rights, in each case to the
extent the obligation (if any) associated therewith is not expected to be
settled by the payment of cash by Borrower or any affiliate thereof, and (v)
compensation expense resulting from the repurchase of capital stock, options
and rights described in clause (iv) of this definition of Net Income.
"Net Leverage Ratio" shall mean, at any date of
determination, for Borrower on a condensed basis, the ratio of (i) Total Debt
on such date, to (ii) EBITDA for the Test Period most recently ended before
such date (taken as one accounting period) multiplied by four.
"Test Period" shall mean the three most recent calendar
months then ended (taken as one accounting period) except that the Test Period
ended the most recent calendar month ended January 31, 2003 shall mean the one
month then ended (taken as one accounting period) multiplied by three (3) and
the Test Period ended the most recent calendar month ended February 28, 2003
shall mean the two (2) calendar months then ended (taken as one accounting
period) divided by two (2) and multiplied by three (3), or such other period as
specified in the Agreement or any Annex thereto.
"Total Debt" shall mean, at any date of determination, for
Borrower, the total Indebtedness on such date less cash and Cash Equivalents
held on such date.
"Total Debt Service" shall mean the sum of (i) scheduled or
other required payments of principal on Indebtedness, and (ii) Interest
Expense, in each case for such period.
3
APPENDIX A
DEFINITIONS
"Accounts" shall mean all "accounts" (as defined in the UCC)
of Borrower (or, if referring to another Person, of such other Person),
including without limitation, accounts, accounts receivables, credit card
receivables, healthcare insurance receivables, monies due or to become due and
obligations in any form (whether arising in connection with contracts, contract
rights, Instruments, General Intangibles or Chattel Paper), in each case
whether arising out of goods sold or services rendered or from any other
transaction and whether or not earned by performance, now or hereafter in
existence, and all documents of title or other documents representing any of
the foregoing, and all collateral security and guaranties of any kind, now or
hereafter in existence, given by any Person with respect to any of the
foregoing.
"Account Debtor" shall mean any Person who is obligated under
an Account.
"Accounts Purchase Agreement" means an agreement governing
the purchase of Purchased Accounts substantially in the form of Exhibit B.
"Advance" shall mean a borrowing under the Revolving
Facility. Any amounts paid by Lender on behalf of Borrower or any Guarantor
under any Loan Document shall be an Advance for purposes of the Agreement.
"Affiliate" shall mean, as to any Person, any other Person
(a) that, directly or indirectly through one or more intermediaries, controls,
is controlled by, or is under common control with, such Person, (b) who is a
director or officer (i) of such Person, (ii) of any Subsidiary of such Person,
or (iii) of any Person described in clause (a) above with respect to such
Person, or (c) which, directly or indirectly through one or more
intermediaries, is the beneficial or record owner (as defined in Rule 13d-3 of
the Securities Exchange Act of 1934, as amended, as the same is in effect on
the date hereof) of five percent (5%) or more of any class of the outstanding
voting stock, securities or other equity or ownership interests of such Person.
For purposes of this definition, the term "control" (and the correlative terms,
"controlled by" and "under common control with") shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies, whether through ownership of securities or other
interests, by contract or otherwise.
"Applicable Rate" shall mean the interest rates applicable
from time to time to Advances under the Agreement.
"Borrowing Base" shall mean, as of any date of determination,
the net collectible U.S. Dollar value of Eligible Receivables, as determined
with reference to the most recent Borrowing Certificate and otherwise in
accordance with the Agreement; provided, however, that if as of such date the
most recent Borrowing Certificate is of a date more than four Business Days
before or after such date, the Borrowing Base shall be determined by Lender in
its sole discretion.
"Borrowing Certificate" shall mean a Borrowing Certificate
substantially in the form of Exhibit A.
"Business Day" shall mean any day other than a Saturday,
Sunday or other day on which the Federal Reserve or Lender is closed.
1
"Capital Expenditures" shall mean, for any Test Period, the
sum (without duplication) of all expenditures (whether paid in cash or accrued
as liabilities) during the Test Period that are or should be treated as capital
expenditures under GAAP.
"Capital Lease" shall mean, as to any Person, a lease of any
interest in any kind of property or asset by that Person as lessee that is,
should be or should have been recorded as a "capital lease" in accordance with
GAAP.
"Capitalized Lease Obligations" shall mean all obligations of
any Person under Capital Leases, in each case, taken at the amount thereof
accounted for as a liability in accordance with GAAP.
"Change of Control" shall mean, with respect to Borrower or
Guarantor, the occurrence of any of the following: (i) a merger, consolidation,
reorganization, recapitalization or share or interest exchange, sale or
transfer or any other transaction or series of transactions in which its
stockholders, managers, partners or interest holders immediately prior to such
transaction or series of transactions receive, in exchange for the stock or
interests owned by them, cash, property or securities of the resulting or
surviving entity or any Affiliate thereof, and, as a result thereof, Persons
who, individually or in the aggregate, were holders of 50% or more of its
voting stock, securities or equity, partnership or ownership interests
immediately prior to such transaction or series of transactions hold less than
50% of the voting stock, securities or other equity, partnership or ownership
interests of the resulting or surviving entity or such Affiliate thereof,
calculated on a fully diluted basis, (ii) a direct or indirect sale, transfer
or other conveyance or disposition, in any single transaction or series of
transactions, of all or substantially all of its assets, (iii) the initial
public offering of its securities, or (iv) any "change in/of control" or "sale"
or "disposition" or similar event as defined in any document governing
indebtedness of such Person which gives the holder of such indebtedness the
right to accelerate or otherwise require payment of such indebtedness prior to
the maturity date thereof; provided, however, that the Stock Repurchase shall
not be deemed a Change of Control.
"Charter and Good Standing Documents" shall mean, for
Borrower (i) a copy of the certificate of incorporation or formation (or other
charter document) certified as of a date satisfactory to Lender before the
Closing Date by the applicable Governmental Authority of the jurisdiction of
incorporation or organization of Borrower, (ii) a copy of the bylaws or similar
organizational documents of certified as of a date satisfactory to Lender
before the Closing Date by the corporate secretary or assistant secretary of
Borrower, (iii) an original certificate of good standing as of a date
acceptable to Lender issued by the applicable Governmental Authority of the
jurisdiction of incorporation or organization of Borrower and of every other
jurisdiction in which Borrower has an office or conducts business or is
otherwise required to be in good standing, and (iv) copies of the resolutions
of the Board of Directors or managers (or other applicable governing body) and,
if required, stockholders, members or other equity owners authorizing the
execution, delivery and performance of the Loan Documents to which Borrower is
a party, certified by an authorized officer of such Person as of the Closing
Date.
"Chattel Paper" shall mean chattel paper as defined in
Section 9-102 of the UCC.
"Closing" shall mean the satisfaction, or written waiver by
Lender, of all of the conditions precedent set forth in the Agreement required
to be satisfied prior to the consummation of the transactions contemplated
hereby.
"Closing Date" shall mean the date the Closing occurs.
2
"Collateral" shall mean, collectively and each individually,
all collateral and/or security granted to Lender, for the benefit of and as
agent for itself and its assignees, by Borrower and/or Guarantors pursuant to
the Loan Documents.
"Collateral Patent, Trademark, Copyright Assignment" shall
mean the Collateral, any patent, trademark or copyright assignment or
acknowledgement executed by and between Borrower and Lender, as such may be
modified, amended or supplemented from time to time.
"Debtor Relief Law" shall mean, collectively, the Bankruptcy
Code of the United States of America and all other applicable liquidation,
conservatorship, bankruptcy, moratorium, rearrangement, receivership,
insolvency, reorganization or similar debtor relief laws from time to time in
effect affecting the rights of creditors generally, as amended from time to
time.
"Default" shall mean any event, fact, circumstance or
condition that, with the giving of applicable notice or passage of time or
both, would constitute or be or result in an Event of Default.
"Dental Center" shall mean a dental office to which Borrower
provides service and support pursuant to a Services and Support Agreement.
"Deposit Account" shall mean, collectively, the Lockbox
Account and all bank or other depository accounts of Borrower.
"Distribution" shall mean any fee, payment, bonus or other
remuneration of any kind, and any repayment of or debt service on loans or
other indebtedness.
"Draw" shall mean the borrowing under the Term Loan.
"Draw Date" shall mean the Business Day upon which the Draw
is to be made.
"Draw Notice" shall mean a Draw Notice substantially in the
form of Exhibit C hereto.
"Eligible Receivables" shall mean each Account arising in the
ordinary course of Borrower's business from the sale of goods or rendering of
Services or purchased by Borrower from a PA pursuant to an Accounts Purchase
Agreement which Lender, in its sole discretion, deems an Eligible Receivable
unless:
(a) it is not subject to a valid perfected first
priority security interest in favor of Lender, subject to no other
Lien;
(b) it is not evidenced by an invoice, statement or
other documentary evidence satisfactory to Lender; provided, that
Lender in its sole discretion may from time to time include as
Accounts that are not evidenced by an invoice, statement or other
documentary evidence satisfactory to Lender as Eligible Receivables
and determine the advance rate, liquidity factors and reserves
applicable to Advances made on any such Accounts;
(c) it or any portion thereof (in which case only such
portion shall not be an Eligible Receivable) is payable by a
beneficiary, recipient or subscriber individually and not directly by
a commercial medical insurance carrier acceptable to Lender;
3
(d) it or any portion thereof (in which case only such
portion shall not be an Eligible Receivable) is payable by a
Medicaid/Medicare Account Debtor;
(e) it or any portion thereof (in which case only such
portion shall not be an Eligible Receivable) is a credit card
receivable;
(f) it arises out of services rendered or a sale made
to, or out of any other transaction between with, one or more
Affiliates of Borrower;
(g) it remains unpaid for longer than the earlier of (i)
120 calendar days after the first to occur of the claim date or
invoice date, and (ii) 150 calendar days after the applicable Services
were rendered;
(h) with respect to all Accounts owed by any particular
Account Debtor and/or its Affiliates, if more than 25% of the
aggregate balance of all such Accounts owing from such Account Debtor
and/or its Affiliates remain unpaid for longer than the earlier of (i)
120 calendar days after the first to occur of the claim date or
invoice date, and (ii) 150 calendar days after the applicable Services
were rendered;
(i) with respect to all Accounts owed by any particular
Account Debtor and/or its Affiliates, 50% or more of all such Accounts
are not deemed Eligible Receivables for any reason hereunder (which
percentage may, in Lender's sole discretion, be increased or
decreased);
(j) with respect to all Accounts owed by any particular
Account Debtor and/or its Affiliates, if such Accounts exceed 30% of
the net collectible dollar value of all Eligible Receivables at any
one time (which percentage may, in Lender's sole discretion, be
increased or decreased);
(k) any covenant, agreement, representation or warranty
contained in any Loan Document with respect to such Account has been
breached and remains uncured;
(l) the Account Debtor for such Account has commenced a
voluntary case under any Debtor Relief Law or has made an assignment
for the benefit of creditors, or a decree or order for relief has been
entered by a court having jurisdiction in respect of such Account
Debtor in an involuntary case under any Debtor Relief Law, or any
other petition or application for relief under any Debtor Relief Law
has been filed against such Account Debtor, or such Account Debtor has
failed, suspended business, ceased to be solvent, called a meeting of
its creditors, or has consented to or suffered a receiver, trustee,
liquidator or custodian to be appointed for it or for all or a
significant portion of its assets or affairs, or Borrower, in the
ordinary course of business, should have known of any of the
foregoing;
(m) it arises from the sale of property or services
rendered to one or more Account Debtors outside the continental United
States or that have their principal place of business or chief
executive offices outside the continental United States;
(n) it represents the sale of goods or rendering of
services to an Account Debtor on a ▇▇▇▇-and-hold, guaranteed sale,
sale-and-return, sale on approval, consignment or any other repurchase
or return basis or is evidenced by Chattel Paper or an Instrument of
any kind or has been reduced to judgment;
4
(o) the applicable Account Debtor for such Account is
any Governmental Authority, unless rights to payment of such Account
have been assigned to Lender pursuant to the Assignment of Claims Act
of 1940, as amended (31 U.S.C. Section 3727, et seq. and 41 U.S.C.
Section 15, et seq.), or otherwise all with applicable statutes or
regulations respecting the assignment of government Accounts have been
complied with;
(p) it is subject to any offset, credit (including any
resource or other income credit or offset) deduction, defense,
discount, chargeback, freight claim, allowance, adjustment, dispute or
counterclaim, or is contingent in any respect or for any reason;
(q) there is any agreement with an Account Debtor for
any deduction from such Account, except for discounts or allowances
made in the ordinary course of business for prompt payment, all of
which discounts or allowances are reflected in the calculation of the
face value of each invoice related thereto, such that only the
discounted amount of such Account after giving effect to such
discounts and allowances shall be considered an Eligible Receivable;
(r) any return, rejection or repossession of goods or
services related to it has occurred;
(s) it is not payable or assigned to Borrower;
(t) Borrower has agreed to accept or has accepted any
non-cash payment for such Account;
(u) with respect to any Account arising from the sale of
goods, the goods have not been shipped to the Account Debtor or its
designee;
(v) with respect to any Account arising from the
performance of Services, the Services have not been actually performed
or the Services were undertaken in violation of any law; or
(w) such account fails to meet such other specifications
and requirements which may from time to time be established by Lender
or is not otherwise satisfactory to Lender, as determined in Lender's
Permitted Discretion.
"Environmental Laws" shall mean, collectively and each
individually ,the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendment and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act, the Toxic Substances Control Act,
the Clean Air Act, the Clean Water Act, any other "Superfund" or "Superlien"
law and all other federal, state and local and foreign environmental, land use,
zoning, health, chemical use, safety and sanitation laws, statutes, ordinances
and codes relating to the protection of the environment and/or governing the
use, storage, treatment, generation, transportation, processing, handling,
production or disposal of Hazardous Substances, in each case, as amended, and
the rules, regulations, policies, guidelines, interpretations, decisions,
orders and directives of Governmental Authorities with respect thereto.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended, and the regulations thereunder.
"Event of Default" shall mean the occurrence of any event set
forth in Article VIII.
5
"Fair Valuation" shall mean the determination of the value of
the consolidated assets of a Person on the basis of the amount which may be
realized by a willing seller within a reasonable time through collection or
sale of such assets at market value on a going concern basis to an interested
buyer who is willing to purchase under ordinary selling conditions in an arm's
length transaction.
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect from time to time as applied by
nationally recognized accounting firms.
"Government Account" shall be defined to mean all Accounts
and Receivables arising out of or with respect to any Government Contract.
"Government Contract" shall be defined to mean all contracts
with the United States Government or with any agency thereof, and all
amendments thereto.
"Governmental Authority" shall mean any federal, state,
municipal, national, local or other governmental department, court, commission,
board, bureau, agency or instrumentality or political subdivision thereof, or
any entity or officer exercising executive, legislative or judicial, regulatory
or administrative functions of or pertaining to any government or any court, in
each case, whether of the United States or a state, territory or possession
thereof, a foreign sovereign entity or country or jurisdiction or the District
of Columbia.
"Guarantor" shall mean, collectively and each individually,
all guarantors of the Obligations or any part thereof.
"Guaranty" shall mean, collectively and each individually,
all guarantees executed by any Guarantors.
"Hazardous Substances" shall mean, without limitation, any
flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls, petroleum and petroleum products,
methane, hazardous materials, hazardous wastes, hazardous or toxic substances
or related materials as defined in or subject to any applicable Environmental
Law.
"Healthcare Laws" shall mean all applicable statutes, laws,
ordinances, rules and regulations of any Governmental Authority with respect to
regulatory matters primarily relating to patient healthcare, healthcare
providers and healthcare services (including without limitation Section
1128B(b) of the Social Security Act, as amended, 42 U.S.C. Section 1320a-7(b)
(Criminal Penalties Involving Medicare or State Health Care Programs), commonly
referred to as the "Federal Anti-Kickback Statute," and the Social Security
Act, as amended, Section 1877, 42 U.S.C. Section 1395nn (Prohibition Against
Certain Referrals), commonly referred to as "▇▇▇▇▇ Statute").
"Indebtedness" of any Person shall mean, without duplication,
(a) all items which, in accordance with GAAP, would be included in determining
total liabilities as shown on the liability side of the balance sheet of such
Person as of the date as of which Indebtedness is to be determined, including
any lease which, in accordance with GAAP would constitute Indebtedness, (b) all
indebtedness secured by any mortgage, pledge, security, Lien or conditional
sale or other title retention agreement to which any property or asset owned or
held by such Person is subject, whether or not the indebtedness secured thereby
shall have been assumed, (c) all indebtedness of others which such Person has
directly or indirectly guaranteed, endorsed (otherwise than for collection or
deposit in the ordinary course of business), discounted or sold with recourse
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in
6
respect of which such Person has agreed to supply or advance funds (whether by
way of loan, stock, equity or other ownership interest purchase, capital
contribution or otherwise) or otherwise to become directly or indirectly
liable.
"Insurer" shall mean a Person that insures another Person
against any costs incurred in the receipt by such other Person of Services, or
that has an agreement with Borrower to compensate it for providing Services to
such Person.
"Inventory" shall mean all "inventory" (as defined in the
UCC) of Borrower (or, if referring to another Person, of such other Person),
now owned or hereafter acquired, and all documents of title or other documents
representing any of the foregoing, and all collateral security and guaranties
of any kind, now or hereafter in existence, given by any Person with respect to
any of the foregoing.
"Landlord Waiver and Consent" shall mean a waiver/consent in
form and substance satisfactory to Lender from the owner/lessor of any premises
not owned by Borrower at which any of the Collateral is now or hereafter
located for the purpose of providing Lender access to such Collateral, in each
case as such may be modified, amended or supplemented from time to time.
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, restriction, lien or charge of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention
agreement or any lease in the nature thereof), or any other arrangement
pursuant to which title to the property is retained by or vested in some other
Person for security purposes.
"Life Insurance Policy" shall mean a current, valid and fully
paid key man life insurance policy insuring the life of ▇▇▇▇▇ ▇▇▇▇▇▇ in the
amount of at least $3,000,000 which (i) names Lender as a primary beneficiary,
(ii) is issued by a carrier and otherwise is in form and substance acceptable
to Lender in its sole discretion, and (iii) expressly provides that it cannot
be altered, amended, modified or canceled without thirty (30) Business Days
prior written notice to Lender and that it inures to the benefit of Lender
notwithstanding any action or omission or negligence of or by Borrower or
Guarantor or any insured thereunder.
"Loan" or "Loans" shall mean, individually and collectively,
the Draw under the Term Loan and all Advances under the Revolving Facility.
"Loan Documents" shall mean, collectively and each
individually, this Agreement, the Notes, the Security Documents, the Life
Insurance Policy, the Landlord Waiver and Consents, the Borrowing Certificates,
the Draw Notices, the Warrant Agreement and the Warrant and all other
agreements, documents, instruments and certificates heretofore or hereafter
executed or delivered to Lender in connection with any of the foregoing or the
Loans, as the same may be amended, modified or supplemented from time to time.
"Lockbox Accounts" shall mean the accounts maintained by
Borrower at the Lockbox Banks into which all collections or payments on its
Accounts and other Collateral are paid.
"Material Adverse Effect" or "Material Adverse Change" shall
mean any event, condition or circumstance or set of events, conditions or
circumstances or any change(s) which (i) has, had or could reasonably be
expected to have any material adverse effect upon or change in the validity or
enforceability of any Loan Document, (ii) has been or could reasonably be
expected to be material and adverse to the value of any of the Collateral or to
the business, operations, prospects, properties, assets, liabilities or
7
condition of Borrower, or (iii) has materially impaired or could reasonably be
expected to materially impair the ability of Borrower to perform the
Obligations or to consummate the transactions under the Loan Documents executed
by such Person.
"Medicaid/Medicare Account Debtor" shall mean any Account
Debtor which is (i) the United States of America acting under the Medicaid or
Medicare program established pursuant to the Social Security Act or any other
federal healthcare program, including, without limitation, CHAMPUS, (ii) any
state or the District of Columbia acting pursuant to a health plan adopted
pursuant to Title XIX of the Social Security Act or any other state health care
program, or (iii) any agent, carrier, administrator or intermediary for any of
the foregoing.
"Minimum Termination Fee" shall mean (for the time period
indicated) the amount equal to (i) three percent (3.0%) of the Facility Cap, if
the date of notice of such termination by Borrower is after the Closing Date
but before the first anniversary of the Closing Date; (ii) one percent (1.0%)
of the Facility Cap, if the date of notice is on or after the first anniversary
of the Closing Date but before the second anniversary of the Closing Date; and
(iii) 0% of the Facility Cap, if the date of notice of such termination by
Borrower is on or after the second anniversary of the Closing Date.
"Note" shall mean, collectively and each individually, each
Revolving Note and each Term Note.
"Obligations" shall mean all present and future obligations,
Indebtedness and liabilities of Borrower and/or Guarantors to Lender at any
time and from time to time of every kind, nature and description, direct or
indirect, secured or unsecured, joint and several, absolute or contingent, due
or to become due, matured or unmatured, now existing or hereafter arising,
contractual or tortious, liquidated or unliquidated, under any of the Loan
Documents or otherwise relating to Notes and/or Loans, including, without
limitation, all applicable fees, charges and expenses and/or all amounts paid
or advanced by Lender on behalf of or for the benefit of Borrower and/or
Guarantor for any reason at any time, including in each case obligations of
performance as well as obligations of payment and interest that accrue after
the commencement of any proceeding under any Debtor Relief Law by or against
any such Person.
"PA" means, collectively, Coast Florida, P.A., Coast Dental
Services, P.A., Coast Dental Services of Georgia, P.C., Coast Dental Services
of Tennessee P.C., and ▇▇▇▇ ▇▇▇▇▇▇, D.D.S. & Associates, P.C., and any other
professional association or professional corporation with whom Borrower has
entered into a Services and Support Agreement and from whom Borrower has
purchased all or a portion of such professional association's or such
professional corporation's now owned or hereafter arising Accounts.
"PA Guaranty" shall mean each Guaranty executed by a PA upon
the Draw under the Term Loan in the form attached hereto as Exhibit D and
guaranteeing all Obligations.
"Payment Office" shall mean initially the address set forth
beneath Lender's name on the signature page of the Agreement, and thereafter,
such other office of Lender, if any, which it may designate by notice to
Borrower to be the Payment Office.
"Permit" shall mean collectively all licenses, leases,
powers, permits, franchises, certificates, authorizations, approvals,
certificates of need, provider numbers and other rights.
8
"Permitted Discretion" shall mean a determination or judgment
made by Lender in good faith in the exercise of reasonable (from the
perspective of a secured lender) business judgment.
"Person" shall mean an individual, a partnership, a
corporation, a limited liability company, a business trust, a joint stock
company, a trust, an unincorporated association, a joint venture, a
Governmental Authority or any other entity of whatever nature.
"Prime Rate" shall mean a fluctuating interest rate per annum
equal at all times to the rate of interest announced publicly from time to time
by Citibank, N.A. as its base rate; provided, that such rate is not necessarily
the best rate offered to its customers, and, should Lender be unable to
determine such rate, such other indication of the prevailing prime rate of
interest as may reasonably be chosen by Lender; provided, that each change in
the fluctuating interest rate shall take effect simultaneously with the
corresponding change in the Prime Rate.
"Promissory Note Receivable" shall mean any promissory note
issued by a dentist or Dental Center and payable to Borrower or any PA.
"Purchased Accounts" means Accounts of a PA that Borrower has
purchased or hereafter purchases.
"Revolving Facility Maturity Date" shall have the meaning
assigned to such term in Section 2.2(b).
"Revolving Note" shall mean, collectively and each
individually, the promissory note(s) payable to the order of Lender executed by
Borrower evidencing the Revolving Facility, as the same may be modified,
amended or supplemented from time to time.
"Security Documents" shall mean the Notes, this Agreement,
Guaranties, Accounts Receivable Assignments, Collateral Patent, Trademark and
Copyright Assignment, Lockbox Agreements, Uniform Commercial Code Financing
Statements and all other documents or instruments necessary to create or
perfect the Liens in the Collateral, as such may be modified, amended or
supplemented from time to time.
"Services" shall mean medical and health care services
provided to a Person, including, but not limited to, medical and health care
services which are covered by a policy of insurance issued by an Insurer,
physician services, nurse and therapist services, dental services, hospital
services, skilled nursing facility services, comprehensive outpatient
rehabilitation services, home health care services, residential and out-patient
behavioral healthcare services.
"Services and Support Agreement" means a services and support
agreement between Borrower and a PA or Dental Center with respect to Borrower's
services to such PA or Dental Center, which agreement, if entered into after
the Closing Date, shall be in form and substance reasonably satisfactory to
Lender.
"Subsidiary" shall mean, (i) as to Borrower, any Person in
which more than 50% of all equity, membership, partnership or other ownership
interests is owned directly or indirectly by Borrower or one or more of its
Subsidiaries, and (ii) as to any other Person, any Person in which more than
50% of all equity, membership, partnership or other ownership interests is
owned directly or indirectly by such Person or by one or more of such Person's
Subsidiaries.
9
"Term" shall mean the period commencing on the date set forth
on the first page hereof and ending on the date that is three years after the
Closing Date.
"Term Loan Maturity Date" shall mean two years after the date
of the Draw under the Term Loan.
"Term Loan Obligations" shall mean principal and interest due
and payable on the Term Loan and all other Obligations arising under any of the
Loan Documents relating to the Term Loan.
"Term Note" shall mean, collectively and each individually,
the promissory note(s) payable to the order of Lender executed by Borrower
evidencing the Term Loan, as the same may be modified, amended or supplemented
from time to time.
"Trust Guaranty" shall mean the Guaranty executed and
delivered by Diasti Family Limited Partnership upon the Draw of the Term Loan,
in the form attached hereto as Exhibit E, and guaranteeing the Term Loan
Obligations.
"UCC" shall mean the Uniform Commercial Code as in effect in
the State of Maryland from time to time.
"Warrant" shall have the meaning given such term in the
Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement to be
issued on the date of the Term Loan Draw by and between Borrower and
CapitalSource Holdings LLC, in the form of Exhibit F hereto, as such may be
modified, restated, amended or supplemented from time to time.
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