<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM _________ TO _________.
COMMISSION FILE NUMBER
PENTEGRA DENTAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 76-045043
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2999 N. 44TH STREET, SUITE 650, PHOENIX, ARIZONA 85018
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (602) 952-1200
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The Registrant became subject to the reporting requirements of Section 13
of the Securities Exchange Act of 1934 on March 30, 1998.
The number of shares of Common Stock of the Registrant, par value $.001 per
share, outstanding at August 12, 1998 was 7,494,490.
1
<PAGE>
FORM 10-Q REPORT INDEX
10-Q PART AND ITEM NO.
<TABLE>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C>
Item 1 - Consolidated Financial Statements . . . . . . . . . . . . . . . 3
Consolidated Balance Sheets as of March 31, 1998 and
June 30, 1998 (unaudited). . . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the Three Months
Ended June 30, 1997 and June 30, 1998 (unaudited). . . . . . . . 4
Consolidated Statement of Changes in Shareholders'
Equity as of June 30, 1998 (unaudited) . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the Three Months
Ended June 30, 1997 and June 30, 1998 (unaudited). . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . . . 9
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 11
Item 5 - Other Information. . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6 - Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 11
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENTEGRA DENTAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(000s)
<TABLE>
March 31, June 30,
1998 1998
--------- --------
<S> <C> <C>
Assets
------
Current assets:
Cash and cash equivalents $ 6,708 $ 3,094
Receivables from affiliated practices - 3,447
Prepaid and other current assets 101 291
------- -------
Total current assets 6,809 6,832
Property and equipment, net 3,577 4,245
Intangible assets, net 183 6,988
Notes receivables from affiliated practices - 657
Other assets, net 64 90
------- -------
Total assets $10,633 $18,812
------- -------
------- -------
Liabilities and Shareholders' Equity (Deficit)
----------------------------------------------
Current liabilities:
Accounts payable and accrued liabilities $ 1,313 $ 1,850
Accrued employment agreement 1,250 1,190
------- -------
Total current liabilities 2,563 3,040
Long-term debt 1,074 502
------- -------
Total liabilities 3,637 3,542
------- -------
Shareholders' equity
Common stock 6 7
Additional paid-in capital 10,304 17,903
Retained earnings (deficit) (3,314) (2,640)
------- -------
Total shareholders' equity 6,996 15,270
------- -------
Total liabilities and shareholders' equity $10,633 $18,812
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PENTEGRA DENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except share amounts)
<TABLE>
For the three For the three
months months
ended June 30, ended June 30,
1997 1998
---- ----
<S> <C> <C>
Net revenue $ - $ 7,412
------ ----------
Operating expenses:
Clinical salaries, wages and benefits - 2,836
Dental supplies and lab fees - 1,220
Rent - 550
Advertising and marketing - 111
General and administrative 80 876
Compensation expense in connection with
issuance of common stock 148 -
Other operating expenses - 751
Depreciation and amortization - 171
------ ----------
Total operating expenses 228 6,515
------ ----------
Earnings (loss) from operations (228) 897
Interest income, net - 40
------ ----------
Income (loss) before income taxes (228) 937
Income taxes - 263
------ ----------
Net income (loss) $ (228) $ 674
------ ----------
------ ----------
Basic and diluted earnings per share $ 0.10
----------
----------
Weighted average number of shares outstanding:
Basic 6,886,000
----------
----------
Diluted 6,886,000
----------
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PENTEGRA DENTAL GROUP, INC
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
(In thousands, except share amounts)
<TABLE>
Additional Retained Total
Common Stock Paid-In Earnings Shareholders'
Shares Amount Capital (Deficit) Equity
------ ------ ------- --------- ------
<S> <C> <C> <C> <C> <C>
Balance at April 1, 1998 6,441,898 $ 6 $10,304 $(3,314) $ 6,996
Issuance of common stock 375,000 2,929 2,929
Issuance of common stock to affiliated practices 677,592 1 4,670 4,671
Net income 674 674
--------- --- ------- ------- -------
Balance at June 30, 1998 7,494,490 $ 7 $17,903 $(2,640) $15,270
--------- --- ------- ------- -------
--------- --- ------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PENTEGRA DENTAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(000s)
<TABLE>
For the three For the three
months months
ended June 30, ended June 30,
1997 1998
---- ----
<S> <C> <C>
Net cash used in operating activities $ (88) $(1,358)
------ -------
Cash used in investing activities:
Capital expenditures (3) (252)
Acquisition of intangible assets - (2,782)
Issuance of notes receivable to affiliated practices - (718)
------ -------
Net cash used in investing activities (3) (3,752)
------ -------
Cash flows provided by financing activities:
Issuance of common stock 378 2,964
Issuance of preferred stock 763 -
Repayment of indebtedness - (392)
Payment of offering costs (200) (1,076)
Payment of organization costs (6) -
------ -------
Net cash provided by financing activities 935 1,496
------ -------
Net increase (decrease) in cash and cash equivalents 844 (3,614)
------ -------
Balance at beginning of period 1 6,708
------ -------
Balance at end of period $ 845 $ 3,094
------ -------
------ -------
Non-cash activities:
Stock subscription receivable 326 -
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PENTEGRA DENTAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Pentegra Dental Group, Inc. (the "Company") together with its wholly owned
subsidiary, Pentegra Investments, Inc. ("PII"), provides practice management
services to dental practices in the United States. In July 1997, the Pentegra
Dental Group, Inc., changed its name to Pentegra Investments, Inc. and formed a
new wholly owned subsidiary named Pentegra Dental Group, Inc. ("Pentegra Dental"
or "the Company"). On March 30, 1998, simultaneously with the Company's initial
public offering, PII repurchased (the "Share Repurchase") from the stockholders
of PII, on a pro rata basis, at a purchase price of $0.015 per share, that
number of shares as was necessary so that the aggregate number of shares of
Pentegra Dental common stock, par value $.001 per share (the "Common Stock")
issued in connection with the Affiliations (as defined below) and the Share
Exchange (as defined below) would not exceed 3,941,898 shares. Pursuant to that
agreement, PII repurchased 909,237 shares for approximately $14,000. The
shareholders exchanged on a share-for-share basis, shares of PII common stock,
par value $0.015 per share, for 1,756,667 shares of Common Stock (the "Share
Exchange"). On March 30, 1998, Pentegra Dental acquired (the "Affiliations")
simultaneously with the closing of its initial public offering (the "Offering"
or "IPO"), substantially all of the tangible and intangible assets, and assumed
the liabilities, of 50 dental practices (collectively, the "Founding Affiliated
Practices") in exchange for 3.1 million shares of Common Stock, $6.5 million in
cash and net assets assumed of approximately $300,000. The net proceeds of the
2.5 million shares of Common Stock issued in the IPO (after deducting the
underwriting discounts and commissions) were $19.8 million. Total related
offering costs were $3.4 million.
The acquisitions of the Founding Affiliated Practices have been accounted for in
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin ("SAB") No. 48, "Transfers of Nonmonetary Assets by Promoters or
Shareholders". In accordance with SAB No. 48, the acquisition of the assets and
assumption of certain liabilities for all of the Founding Affiliated Practices
pursuant to the Affiliations has been accounted for by the Company at the
transferors' historical cost basis, with the shares of Common Stock issued in
those transactions being valued at the historical cost of the nonmonetary assets
acquired net of liabilities assumed. The cash consideration of approximately
$6.5 million, paid at closing on March 30, 1998, less net assets acquired of
approximately $300,000, is reflected as a dividend by the Company to the owners
of the Founding Affiliated Practices in the quarter ended March 31, 1998. SAB
No. 48 is not applicable to any acquisitions made by the Company subsequent to
the IPO. Acquisitions of certain of the assets and liabilities of practices that
affiliate with the Company after the IPO will generally be accounted for as
purchases, and may result in substantial annual noncash amortization charges for
intangible assets in the Company's statements of operations.
In April, 1998, the over allotment option to sell 375,000 share of common stock
was exercised at a price of $8.50 per share, yielding additional net proceeds to
the Company of approximately $2.9 million.
On April 17, 1998, the Company filed a registration statement on Form S-4 for
1,500,000 shares of Common Stock, which the Company may issue from time to time
in connection with the direct and indirect acquisitions of other businesses,
properties or securities in business combination transactions. The terms upon
which it issues the shares in business combination transactions are determined
through negotiations with the security holders or principal owners of the
businesses whose securities or assets are to be acquired. The shares that are
issued are valued at prices reasonably related to prevailing market prices for
the Common Stock. Persons receiving Common Stock in connection with such
acquisitions may be contractually required to hold all or some portion of the
Common Stock for varying periods of time. As of June 30, 1998, 677,592 shares
registered under this filing had been issued.
In May 1998, the Company changed its fiscal year from December 31 to March 31,
effective for the year beginning April 1, 1998.
The unaudited consolidated financial statements included herein have been
prepared by the Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission (the "SEC"). Pursuant to such
regulations, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
and disclosures, but do not purport to be a complete presentation inasmuch as
all note disclosures required are not included. In the opinion of management,
the consolidated financial statements reflect all elimination entries and normal
adjustments that are necessary for a fair presentation of the results for the
interim period ended June 30, 1998.
Operating results for interim periods are not necessarily indicative of the
results for full years. It is suggested that these consolidated financial
statements be read in conjunction with the Financial Statements of Pentegra
Dental Group, Inc., and related notes thereto, and management's discussion and
analysis related thereto, all of which are included in the Company's
Registration Statement on Form S-1 (No. 333-37633), as amended (the
"Registration Statement"), filed with the SEC in connection with the Offering.
7
<PAGE>
2. SIGNIFICANT ACCOUNTING POLICIES
INTANGIBLE ASSETS
Intangible assets consist primarily of management service fee intangibles which
are amortized over a 25-year period. The Company's management periodically
evaluates the realizability of the intangible assets on a practice by practice
basis considering such factors as profitability and net cash flow. Should this
evaluation result in an assessment that the value of the intangible asset is
impaired, a loss will be recorded in the period that the impairment is
identified. If it is determined that the estimated amortization period requires
revision, that revision will be made on a prospective basis.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred taxes are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted marginal tax rates currently in effect when the differences
reverse.
The Company's effective tax rate for the period was 28%. The difference between
the effective tax rate and the statutory rate reflects the utilization of
operating loss carryforwards.
EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of
shares of common stock and common stock equivalents outstanding during each
period. Diluted earnings per share are not seperately presented because such
amounts would be the same as amounts computed for basic earnings per share.
Outstanding options to purchase 686,666 shares of Common Stock at exercise
prices above the market value of Common Stock were excluded from the calculation
of earnings per share for the three months ended June 30, 1998 because their
effect would have been antidilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates and assumptions by
management in determining the reported amounts of liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of expenses during the reporting period. Actual results
could differ from those estimates.
3. NOTES PAYABLE
On June 1, 1998, the Company closed a revolving bank credit facility with Bank
One, Texas, N.A., which provides the Company with a revolving line of credit
of up to $15.0 million, to be used for general corporate purposes including
financing of acquisitions, capital expenditures and working capital. The credit
facility is collateralized by liens on certain of the Company's assets,
including its rights under the management service agreements and accounts
receivable. The credit facility contain restrictions on the incurrence of
additional indebtedness and payment of dividends on the Common Stock.
Additionally, compliance with certain financial covenants is required and the
lender has approval rights with respect to acquisitions exceeding certain
limits. At June 30, 1998, no amounts were outstanding under the revolving line
of credit.
4. RETAINED EARNINGS (DEFICIT)
The Company's retained earnings (deficit) at June 30, 1998 is primarily
attributable to compensation costs and other costs of managing the Company prior
to its IPO. On March 30, 1998, an employment bonus of $1,250,000 to the
Chairman of the Board of Directors (the "Chairman") was recorded, and therefore
is included in the Company's retained earnings (deficit). Payments of the bonus
have been and will continue to be made in increments of $10,000 on the closing
of each future dental practice affiliation until the bonus has been paid in
full. Pursuant to the terms of the Company's employment agreement with the
Chairman, the employment bonus must be paid in full within three years of the
IPO. At June 30, 1998, a bonus payable of $1,190,000 remained outstanding.
5. NEW DENTIST AFFILIATIONS
During the period from March 30, 1998 through June 30, 1998, the Company
completed new dentist affiliations with 10 practices representing 14 dentists
and 10 office locations. Total consideration related to the new affiliations
consisted of 677,592 shares of Common Stock and $2,782,000 cash.
The cost of each of the above new dental practice affiliations has been
allocated on the basis of the estimated fair market value of the assets acquired
and liabilities assumed, resulting in intangibles of $6,861,000. These
allocations may be adjusted to the extent that management becomes aware of
additional information within one reporting year of the affiliation date which
results in a material change in the amount of any contingency or changes in the
estimated fair market value of assets acquired and liabilities assumed.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THESE STATEMENTS ARE BASED ON CURRENT PLANS AND EXPECTATIONS OF THE
COMPANY AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL FUTURE
ACTIVITIES AND RESULTS OF OPERATIONS TO BE MATERIALLY DIFFERENT FROM THAT SET
FORTH IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER INCLUDE, AMONG OTHERS, RISKS ASSOCIATED WITH
AFFILIATIONS, FLUCTUATIONS IN OPERATING RESULTS BECAUSE OF AFFILIATIONS AND
VARIATIONS IN STOCK PRICE, CHANGES IN GOVERNMENT REGULATIONS, COMPETITION, RISKS
OF OPERATIONS AND GROWTH OF EXISTING AND NEW AFFILIATED DENTAL PRACTICES, AND
RISKS DETAILED IN THE COMPANY'S SEC FILINGS.
OVERVIEW
The Company provides practice management services to fee-for-service dental
practices in the United States. On March 30, 1998, the Company acquired
simultaneously with the closing of its IPO, substantially all of the tangible
and intangible assets, and assumed the liabilities, of the 50 Founding
Affiliated Practices. The Company also began to provide practice management
services to professional corporations or associations owned by the
dentist-owners of the Founding Affiliated Practices (one of which split into
two separate dental practices immediately after the IPO) pursuant to
long-term management service agreements entered into at the time of the
Affiliations. Since the IPO, the Company has affiliated with 10 practices.
The Company expects that its future growth will come from (i) implementing a
comprehensive operating strategy designed to drive internal growth of the
affiliated practices and (ii) entering into management service agreements
with new affiliated practices. The Company manages 61 dental practices,
which include 93 dentists and 71 dental offices in 19 states.
The expenses incurred by the Company in fulfilling its obligations under the
management service agreements will be generally of the same nature as the
operating costs and expenses that would have otherwise been incurred by the
affiliated practices, including salaries, wages and benefits of practice
personnel (excluding dentists and certain other licensed dental care
professionals), dental supplies and office supplies used in administering their
practices and the office (general and administrative) expenses of their
practices. In addition to the operating costs and expenses discussed above, the
Company incurs personnel and administrative expenses in connection with
maintaining a corporate office, which provides management, practice
enhancements, administrative and business development services.
RESULTS OF OPERATIONS (UNAUDITED)
Following completion of the IPO and the Affiliations on March 30, 1998, the
Company began operations effective April 1, 1998. Management service fee
recognition and related expenses began April 1, 1998. The Company began
managing 51 dental practices in 18 states. At June 30, 1998, the Company
managed 61 practices in 71 offices in 19 states.
COMPONENTS OF REVENUES AND EXPENSES
Under the terms of the typical management services agreement with an
Affiliated Practice, the Company becomes the exclusive manager and
administrator of all non-dental services relating to the operation of the
Affiliated Practice. The obligations of the Company include assuming
responsibility for the operating expenses incurred in connection with
managing the dental centers. These expenses include salaries, wages and
related costs of non-dental personnel, dental supplies and laboratory fees,
rental and lease expenses, promotion and marketing costs, management
information systems and other operating expenses incurred at the Affiliated
Practices. In addition, the Company incurs general and administrative
expenses related to the financial and administrative management of dental
operations, insurance, training and development and other typical corporate
expenditures. As compensation for its services under the typical services
agreement and subject to applicable law, the Company is paid a management fee
comprised of two components: (1) the costs incurred by it on behalf of the
Affiliated Practice, and (2) a management fee either fixed in amount or an
amount usually approximating 35% of the Affiliated Practice's operating
profit, before dentist compensation ("Service Fee"). Therefore, net revenues
represent amounts earned by the Company under the terms of its management
services agreements with the Affiliated Practices, which generally equate to
the sum of the Service Fees and the operating expenses that the affiliated
practices paid to the Company under the service agreements.
NET REVENUE
Net revenue generated for the three months ended June 30, 1998 was $7.4 million.
During the three months ended June 30, 1998, the Company affiliated with ten
(10) practices in addition to the initial 50. For the three months ended June
30, 1998, dental center revenues aggregated to approximately $10.9 million.
9
<PAGE>
OPERATING EXPENSES
The Company incurred operating expenses of approximately $6.5 million (87.9% of
net revenue) for the three months ended June 30, 1998. Operating expenses
consisted primarily of salaries, wages and benefits, dental supplies and
laboratory fees, rent, advertising and marketing, and general and administrative
expenses.
General and administrative expenses include primarily the corporate expenses of
the Company. These corporate expenses include salaries, wages and benefits,
rent, consulting fees, travel (primarily related to practice development),
office costs and other general corporate expenses. For the three months ended
June 30, 1998, general and administrative expenses totaled approximately
$876,000, which represented 11.8% of net revenue. The Company expects that
general and administrative expenses will increase as the Company adds personnel
and related costs necessary to manage its affiliated practices and execute its
affiliation strategy.
INCOME TAX EXPENSE
The Company incurred income tax expense of approximately $263,000 for the three
months ended June 30, 1998, which represented a 28% tax rate. The difference
between the effective tax rate and the statutory rate reflects the anticipated
utilization of the operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had a working capital balance of approximately
$3.8 million. Current assets included approximately $3.1 million in cash and
$3.3 million in accounts receivable, due entirely from Affiliated Practices.
Current liabilities consisted of approximately $3.0 million in accounts payable
and accrued liabilities, mostly related to expenses of the Affiliated Practices.
The Company believes that cash on hand, together with the availability under the
revolving line of credit will be sufficient to execute its affiliation strategy.
On June 1, 1998 the Company closed a revolving bank credit facility with Bank
One, Texas, N.A., which provides the Company with a revolving line of credit
of up to $15.0 million, to be used for general corporate purposes including
financing of acquisitions, capital expenditures and working capital. The credit
facility is collateralized by liens on certain of the Company's assets,
including its rights under the management service agreements and accounts
receivable. The credit facility contain restrictions on the incurrence of
additional indebtedness and payment of dividends on the Common Stock.
Additionally, compliance with certain financial covenants is required and the
lender has approval rights with respect with acquisitions exceeding certain
limits. At June 30, 1998, no amounts were outstanding under the revolving line
of credit.
Cash used for investing activities for the three months ended June 30, 1998
included $252,000 for purchases of capital equipment, mostly for assets acquired
in new practice affiliations, and $2.8 million for the purchase of intangibles
associated with those new practice affiliations.
Cash generated from financing activities in the three-month period ended June
30, 1998 included the issuance of 375,000 shares of stock with the exercise of
the over-allotment option which provided cash to the Company of approximately
$2.9 million. Uses of cash during the three-month period ended June 30, 1998 by
financing activities included the payment of costs related to the IPO totaling
approximately $1.0 million, and the repayment of debt assumed in the initial
public offering of $392,000. These payments related to liabilities recognized
at March 31, 1998.
10
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 5. OTHER INFORMATION
In May 1998, the Board of Directors approved the change of Pentegra's fiscal
year from December 31 to March 31, effective for the year beginning April 1,
1998. A Form 10-Q for the transition period was filed on May 14, 1998.
Any shareholder proposal submitted with respect to the Company's 1999 Annual
Meeting of shareholders, which is submitted outside the process of Rule 14a-8
under the Securities Exchange Act of 1934, will be considered ultimately for
purposes of Rule 14a-4 and 14a-5 (and therefore the persons appointed as
proxies may exercise discretionary voting power on those items) if notice
therefore is received by the Company after May 1, 1999, or such earlier date
as may apply under the Company's By-laws. The Company's by-laws provide that
a stockholder proposal with respect to any Annual Meeting of shareholders
will be considered untimely unless written notice of the proposal to the
secretary is received at the Company's principal executive office not less
than 90 nor more than 180 days prior to the date of the meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1* Restated Certificate of Incorporation (incorporated herein by
reference to Exhibit 3.1 of the Company's Registration Statement
on Form S-1 (Registration No. 333-37633)).
3.2* Bylaws (incorporated herein by reference to Exhibit 3.2 of the
Company's Registration Statement on Form S-1(Registration No.
333-37633)).
10.1 Credit Agreement between Pentegra Dental Group, Inc. and Bank
One, Texas, N.A. dated June 1, 1998.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant, Pentegra Dental Group, Inc., has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
PENTEGRA DENTAL GROUP, INC.
Dated: August 14, 1998 /s/ Gary S. Glatter
--------------------------------------------
By: Gary S. Glatter
--------------------------------------------
President - Chief Executive Officer
/s/ Sam H. Carr
--------------------------------------------
By: Sam H. Carr
--------------------------------------------
Sr. Vice President - Chief Financial Officer
11
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CREDIT AGREEMENT
________________________________________
PENTEGRA DENTAL GROUP, INC.
and
BANK ONE, TEXAS, N.A.
________________________________________
$15,000,000
June 1, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C>
CREDIT AGREEMENT................................................................... 1
ARTICLE I - Definitions and References............................................. 1
Section 1.1. Defined Terms.................................................. 1
Section 1.2. Exhibits and Schedules; Additional Definitions.................13
Section 1.3. Amendment of Defined Instruments...............................13
Section 1.4. References and Titles..........................................14
Section 1.5. Calculations and Determinations................................14
ARTICLE II - The Loans.............................................................14
Section 2.1. Commitments to Lend; Notes.....................................14
Section 2.2. Borrower's Reduction of Borrowing Availability.................15
Section 2.3. Requests for New Loans.........................................15
Section 2.4. Continuations and Conversions of Existing Loans................16
Section 2.5. Use of Proceeds................................................17
Section 2.6. Fees...........................................................17
Section 2.7. Reserved.......................................................18
Section 2.8. Mandatory Prepayments..........................................18
ARTICLE III - Payments to Lenders..................................................18
Section 3.1. General Procedures.............................................18
Section 3.2. Increased Cost and Reduced Return..............................19
Section 3.3. Limitation on Types of Loans...................................21
Section 3.4. Illegality.....................................................21
Section 3.5. Treatment of Affected Loans....................................21
Section 3.6. Compensation...................................................22
Section 3.7. Taxes..........................................................22
Section 3.8. Compensation Procedure.........................................24
ARTICLE IV - Conditions Precedent..................................................24
Section 4.1. Documents to be Delivered at Closing...........................24
Section 4.2. Conditions Precedent Prior to First Loan.......................25
Section 4.3. Additional Conditions Precedent................................26
ARTICLE V - Representations and Warranties.........................................27
Section 5.1. No Default.....................................................27
Section 5.2. Organization and Good Standing.................................27
Section 5.3. Authorization..................................................27
Section 5.4. No Conflicts or Consents.......................................27
Section 5.5. Enforceable Obligations........................................28
Section 5.6. Initial Financial Statements...................................28
Section 5.7. Other Obligations and Restrictions.............................28
Section 5.8. Full Disclosure................................................28
i
<PAGE>
Section 5.9. Litigation.....................................................28
Section 5.10. Labor Disputes and Acts of God.................................29
Section 5.11. ERISA Plans and Liabilities....................................29
Section 5.12. Environmental and Other Laws...................................29
Section 5.13. Names and Places of Business...................................30
Section 5.14. Borrower's Subsidiaries........................................30
Section 5.15. Title to Properties; Licenses..................................30
Section 5.16. Government Regulation..........................................30
Section 5.17. Insider........................................................30
Section 5.18. Solvency.......................................................31
ARTICLE VI - Affirmative Covenants of Borrower.....................................31
Section 6.1. Payment and Performance........................................31
Section 6.2. Books, Financial Statements and Reports........................31
Section 6.3. Compliance Certificate.........................................32
Section 6.4. Other Information and Inspections..............................32
Section 6.5. Notice of Material Events and Change of Address................33
Section 6.6. Maintenance of Properties......................................33
Section 6.7. Maintenance of Existence and Qualifications....................33
Section 6.8. Payment of Trade Liabilities, Taxes, etc.......................34
Section 6.9. Insurance......................................................34
Section 6.10. Performance on Borrower's Behalf...............................34
Section 6.11. Interest.......................................................34
Section 6.12. Compliance with Agreements and Law.............................34
Section 6.13. Environmental Matters; Environmental Reviews...................35
Section 6.14. Evidence of Compliance.........................................35
Section 6.15. Agreement to Deliver Security Documents........................35
Section 6.16. Bank Accounts; Offset..........................................36
Section 6.17. Guaranties of Borrower's Subsidiaries..........................36
ARTICLE VII - Negative Covenants of Borrower.......................................36
Section 7.1. Indebtedness...................................................36
Section 7.2. Limitation on Liens............................................37
Section 7.3. Hedging Contracts..............................................37
Section 7.4. Limitation on Mergers, Issuances of Securities.................37
Section 7.5. Limitation on Sales of Property................................38
Section 7.6. Limitation on Dividends and Redemptions........................38
Section 7.7. Limitation on Investments and New Businesses...................38
Section 7.8. Limitation on Credit Extensions................................38
Section 7.9. Transactions with Affiliates...................................38
Section 7.10. Certain Contracts; Amendments; Multiemployer ERISA Plans.......39
Section 7.11. Dental Base....................................................39
Section 7.12. Continuity of Founding Practices and Affiliated Practices......39
Section 7.13. Capital Expenditures...........................................39
Section 7.14. Current Ratio..................................................39
Section 7.15. Total Funded Debt to Capitalization Ratio......................40
ii
<PAGE>
Section 7.16. Total Funded Debt to EBITDA Ratio..............................40
Section 7.17. Total Senior Funded Debt to EBITDA Ratio.......................40
Section 7.18. Fixed Charge Ratio.............................................40
Section 7.19. Debt Service Coverage Ratio....................................40
Section 7.20. Net Worth......................................................40
Section 7.21. Dental Practice Acquisitions...................................40
ARTICLE VIII - Events of Default and Remedies......................................41
Section 8.1. Events of Default..............................................41
Section 8.2. Remedies.......................................................44
ARTICLE IX - Agent.................................................................44
Section 9.1. Appointment and Authority......................................44
Section 9.2. Exculpation, Agent's Reliance, Etc.............................45
Section 9.3. Credit Decisions...............................................45
Section 9.4. Indemnification................................................45
Section 9.5. Rights as Lender...............................................46
Section 9.6. Sharing of Set-Offs and Other Payments.........................46
Section 9.7. Investments....................................................47
Section 9.8. Benefit of Article IX..........................................47
Section 9.9. Resignation....................................................47
ARTICLE X - Miscellaneous..........................................................47
Section 10.1. Waivers and Amendments; Acknowledgments........................47
Section 10.2. Survival of Agreements; Cumulative Nature......................49
Section 10.3. Notices........................................................50
Section 10.4. Payment of Expenses; Indemnity.................................50
Section 10.5. Joint and Several Liability; Parties in Interest; Assignments..51
Section 10.6. Confidentiality................................................53
Section 10.7. Governing Law; Submission to Process...........................53
Section 10.8. Limitation on Interest.........................................55
Section 10.9. Termination; Termination Fee; Limited Survival.................55
Section 10.10. Arbitration....................................................56
Section 10.11. Severability...................................................56
Section 10.12. Counterparts...................................................57
Section 10.13. Waiver of Jury Trial, Punitive Damages, etc....................57
iii
<PAGE>
Schedules and Exhibits:
Lender Schedule
Schedule 1 - Disclosure Schedule
Schedule 2 - Security Schedule
Schedule 3 - Insurance Schedule
Schedule 4-A - Acquisition Conditions Schedule (When Consent is Required)
Schedule 4-B - Acquisition Conditions Schedule (When Consent is not Required)
Exhibit A - Promissory Note
Exhibit B - Borrowing Notice
Exhibit C - Continuation/Conversion Notice
Exhibit D - Certificate Accompanying Financial Statements
Exhibit E - Opinion of Counsel for Restricted Persons
Exhibit F - Assignment and Acceptance Agreement
</TABLE>
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of June 1, 1998, by and among PENTEGRA
DENTAL GROUP, INC., a Delaware corporation (herein called "Borrower"), BANK
ONE, TEXAS, N.A., individually and as agent (herein called "Agent") and the
Lenders referred to below. In consideration of the mutual covenants and
agreements contained herein the parties hereto agree as follows:
ARTICLE I - DEFINITIONS AND REFERENCES
Section 1.1. DEFINED TERMS. As used in this Agreement, each of the
following terms has the meaning given it in this section or in the sections
and subsections referred to below:
"ACCEPTABLE STOCK" means common stock of Borrower as to which dividends
are payable only in additional shares of common stock of Borrower having the
same type of dividend provisions as the common stock for which the dividend
is being paid.
"ACQUISITION INFORMATION SCHEDULE" means Schedule 4 hereto.
"ADDITIONAL EQUITY" means Acceptable Stock or warrants, options or other
rights to purchase Acceptable Stock issued after the date hereof which would
be shown as shareholders' equity on a Consolidated balance sheet of the
Borrower as of the date of issuance, prepared in accordance with GAAP.
"ADJUSTED EURODOLLAR RATE" means, for any Eurodollar Loan for any
Interest Period therefor, the per annum rate equal to the sum of (a) the
Eurodollar Margin plus (b) the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by the Agent to be equal to the
quotient obtained by dividing (i) the Eurodollar Rate for such Eurodollar
Loan for such Interest Period by (ii) 1 minus the Reserve Requirement for
such Eurodollar Loan for such Interest Period. The Adjusted Eurodollar Rate
for any Eurodollar Loan shall change whenever the Eurodollar Margin or the
Reserve Requirement changes. No Adjusted Eurodollar Rate shall ever exceed
the Highest Lawful Rate.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person. A Person shall
be deemed to be "controlled by" any other Person if such other Person
possesses, directly or indirectly, power
(a) to vote 20% or more of the securities (on a fully diluted basis)
having ordinary voting power for the election of directors or managing
general partners; or
(b) to direct or cause the direction of the management and policies
of such Person whether by contract or otherwise.
<PAGE>
"AGENT" means Bank One, Texas, N.A., as Agent hereunder, and its
successors in such capacity; provided, however, that until such time as a
Lender other than Bank One, Texas, N.A. becomes a party hereto, "Agent" shall
mean Bank One, Texas, N.A., individually.
"AGREEMENT" means this Credit Agreement.
"BANK PARTIES" means Agent and all Lenders.
"BASE RATE" means the Prime Rate. If the Prime Rate changes after the
date hereof the Base Rate shall be automatically increased or decreased, as
the case may be, without notice to Borrower from time to time as of the
effective time of each change in Agent's Prime Rate. The Base Rate shall in
no event, however, exceed the Highest Lawful Rate.
"BASE RATE LOAN" means a Loan which bears interest at the Base Rate.
"BASE RATE PAYMENT DATE" means (a) the last day of March, June,
September and December of each year, beginning June 30, 1998, and (b) any day
on which past due interest or principal is owed under the Notes and is
unpaid. If the terms of any Loan Document provide that payments of interest
or principal on the Notes shall be deferred from one Base Rate Payment Date
to another day, such other day shall also be a Base Rate Payment Date.
"BORROWER" means Pentegra Dental Group, Inc., a Delaware corporation.
"BORROWING" means a borrowing of new Loans pursuant to Section 2.2 or a
Continuation or conversion of existing Loans into a single Type (and, in the
case of Eurodollar Loans, with the same Interest Period) pursuant to Section
2.3.
"BORROWING AVAILABILITY PERIOD" means the period from and including each
Quarterly Financial Statement Delivery Date until, but not including, the
next Quarterly Financial Statement Delivery Date. As used in this definition
"Quarterly Financial Statement Delivery Date" means the day on which the
quarterly financial statements of Borrower (and Compliance Certificate with
respect thereto) are delivered to Agent pursuant to Sections 6.2(b) and 6.3.
"BORROWING AVAILABILITY" means, for each Borrowing Availability Period,
the amount which is 3.0 times EBITDA for the two consecutive Fiscal Quarters
immediately preceding the first day of each Fiscal Quarter in which such
Borrowing Availability Period begins, multiplied by two, but in no event
shall the Borrowing Availability exceed the Commitment; PROVIDED that
Borrowing Availability for the first Borrowing Availability Period shall be
three times EBITDA for the Fiscal Quarter ended June 30, 1998, multiplied by
four. For example, Borrowing Availability for the Borrowing Availability
Period beginning approximately August 15, 1998, will be based on Borrower's
Consolidated EBITDA for the Fiscal Quarter ended June 30, 1998, multiplied by
four, and the Borrowing Availability for the Borrowing Availability Period
beginning approximately November 15, 1998, will be based on Borrower's
Consolidated EBITDA for the two Fiscal Quarters ended September 30, 1998,
multiplied by two. The calculation of Borrowing Availability for any
Borrowing Availability Period shall be based on the financial statements and
Compliance Certificate of Borrower delivered to Agent pursuant to
2
<PAGE>
Sections 6.2(b) and 6.3 which shall include Borrower's calculation of the
Borrowing Availability for such Borrowing Availability Period; provided that
if Lender does not receive such financial statements and Compliance
Certificate when due, Lender shall calculate the Borrowing Availability for
such Borrowing Availability Period on the most recent information then
available to Lender.
"BORROWING AVAILABILITY DEFICIENCY" has the meaning given it in Section
2.7(b).
"BORROWING NOTICE" means a written or telephonic request, or a written
confirmation, made by Borrower which meets the requirements of Section 2.2.
"BUSINESS DAY" means a day, other than a Saturday or Sunday, on which
commercial banks are open for business with the public in Dallas, Texas. Any
Business Day in any way relating to Eurodollar Loans (such as the day on
which an Interest Period begins or ends) must also be a day on which, in the
reasonable judgment of Agent, significant transactions in dollars are carried
out in the interbank eurocurrency market.
"CAPITAL EXPENDITURES" means, for any period, the Consolidated
expenditures by the Borrower during such period that are classified as
capital expenditures in accordance with GAAP but shall exclude Dental
Practice Acquisitions.
"CHANGE OF CONTROL" means the occurrence of any of the following: (a)
the sale, lease, transfer, conveyance or other disposition (other than by way
of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Borrower and its Subsidiaries
taken as a whole to any "person" or group ("Group") of related "persons" (as
such terms are used in Section 13(d)(3) of the Securities Exchange Act of
1934, as amended), (b) the adoption of a plan relating to the liquidation or
dissolution of the Borrower or (c) the consummation of any transaction
(including, without limitation, any purchase, sale, acquisition, disposition,
merger or consolidation) the result of which is that any "person" or Group
(as such terms are defined above) becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act) of more
than forty-nine percent (49%) of the outstanding Voting Stock of Borrower.
"CHANGE OF MANAGEMENT" means either of the following events: (i) Omer
Reed ceases to be a member of the board of directors of Borrower; or (ii)
both Gary S. Glatter ceases to be the chief executive officer or a member of
the board of directors of Borrower and Sam H. Carr ceases to the chief
financial officer or a member of the board of directors of Borrower.
"CLOSING DATE" means the date hereof.
"COLLATERAL" means all property of any kind which is subject to a Lien
in favor of Lenders (or in favor of Agent for the benefit of Lenders) or
which, under the terms of any Security Document, is purported to be subject
to such a Lien.
"COMMITMENT" means the amount of $15,000,000, as from time to time
reduced by Borrower pursuant to Section 2.2.
3
<PAGE>
"COMMITMENT PERIOD" means the period from and including the date hereof
until and including the Maturity Date (or, if earlier, the day on which the
Notes first become due and payable in full).
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to
a Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CONSOLIDATED NET WORTH" means all Consolidated assets of Borrower which
would be shown as assets on a Consolidated balance sheet of the Borrower as
of such time prepared in accordance with GAAP, minus all Consolidated
liabilities of Borrower which would be shown as liabilities on a Consolidated
balance sheet of the Borrower as of such time prepared in accordance with
GAAP.
"CONTINUE", "CONTINUATION", and "CONTINUED" shall refer to the continuation
pursuant to Section 2.3 hereof of a Eurodollar Loan as a Eurodollar Loan from
one Interest Period to the next Interest Period.
"CONVERT", "CONVERSION", "CONVERTED", "CONVERTING" shall refer to a
conversion pursuant to Section 2.4 or Article III of one Type of Loan into
another Type of Loan.
"DEFAULT" means any Event of Default and any default, event or condition
which would, with the giving of any requisite notices and the passage of any
requisite periods of time, constitute an Event of Default.
"DEFAULT RATE" means, at the time in question, two percent (2.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Eurodollar Loan with an Interest Period extending beyond the date such
Eurodollar Loan becomes due and payable, "Default Rate" shall mean two percent
(2.0%) per annum plus the related Adjusted Eurodollar Rate. The Default Rate
shall never exceed the Highest Lawful Rate.
"DENTAL PRACTICE ACQUISITION" means the acquisition by any Restricted
Person of any company engaged in providing dental services (including
laboratory services) or engaged in managing companies providing dental
services.
"DENTAL PRACTICE GROUP" means one or more dentists engaged in the
practice of dentistry.
"DISCLOSURE REPORT" means either a notice given by Borrower under
Section 6.4.
"DISCLOSURE SCHEDULE" means Schedule 1 hereto.
"EBITDA" means, for any period, the sum of (a) the Consolidated net
income of Borrower during such period, plus (b) all interest paid or accrued
during such period on Indebtedness (including amortization of original issue
discount and the interest component of
4
<PAGE>
any deferred payment obligations and capital lease obligations) which was
deducted in determining such Consolidated net income, plus (c) all income and
other taxes which were deducted in determining such Consolidated net income,
plus (d) all depreciation, amortization (including amortization of good will
and debt issue costs) and other non-cash charges (including any provision for
the reduction in the carrying value of assets recorded in accordance with
GAAP) which were deducted in determining such Consolidated net income, plus
(e) all non-cash items of income which were included in determining such
Consolidated net income, minus (1) unbilled patient revenue included in
determining such Consolidated Net Income, and (2) management fees which were
included in determining such Consolidated net income and which were not paid
within 30 days of the date of billing; PROVIDED THAT when Borrower makes a
Dental Practice Acquisition, there shall be included in EBITDA on a pro forma
basis, the net income of the acquired company or group for the period of
calculation, adjusted as provided above in this definition; and PROVIDED
FURTHER that, if as a result of such acquisition the compensation paid to
dentists has been reduced, EBITDA shall be further adjusted by reducing such
compensation for the entire period of calculation.
"ELIGIBLE TRANSFEREE" means a Person which either (a) is a Lender, or
(b) is consented to as an Eligible Transferee by Agent and, so long as no
Event of Default is continuing by Borrower, which consents in each case will
not be unreasonably withheld (provided that no Person organized outside the
United States may be an Eligible Transferee if Borrower would be required to
pay withholding taxes on interest or principal owed to such Person).
"ENVIRONMENTAL LAWS" means any and all Laws relating to the environment
or to emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes into the environment including ambient air, surface water, ground
water, or land, or otherwise relating to the manufacture, processing,
distribution use, treatment, storage, disposal, transport, or handling of
pollutants, contaminants, chemicals, or industrial, toxic or hazardous
substances or wastes.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with all rules and regulations
promulgated with respect thereto.
"ERISA AFFILIATE" means Borrower and all members of a controlled group
of corporations and all trades or businesses (whether or not incorporated)
under common control that, together with Borrower, are treated as a single
employer under Section 414 of the Internal Revenue Code of 1986, as amended.
"ERISA PLAN" means any employee pension benefit plan subject to Title IV
of ERISA maintained by any ERISA Affiliate with respect to which any
Restricted Person has a fixed or contingent liability.
"EURODOLLAR LOAN" means a Loan that bears interest at rates based upon
the Adjusted Eurodollar Rate.
5
<PAGE>
"EURODOLLAR MARGIN" for each day during any Fiscal Quarter shall be
determined based on the Total Senior Funded Debt to EBITDA Ratio as set forth
below calculated as of the end of the Fiscal Quarter immediately preceding
the Fiscal Quarter during which such day occurred.
<TABLE>
<S> <C>
---------------------------------------------------
TOTAL SENIOR FUNDED DEBT TO PERCENTAGE
EBITDA RATIO
---------------------------------------------------
Less than or = 1.00 to 1 1.5% per annum
---------------------------------------------------
Less than or = 2.00 to 1 2.0% per annum
---------------------------------------------------
Greater than 2.01 to 1 2.5% per annum
---------------------------------------------------
</TABLE>
"EURODOLLAR RATE" means, with respect to each particular Eurodollar Loan
and the related Interest Period, the rate per annum (rounded upwards, if
necessary, to the nearest 1/16 of 1%) reported, on the date two Business Days
prior to the first day of such Interest Period, on Telerate Access Service
Page 3750 (British Bankers Association Settlement Rate) as the London
Interbank Offered Rate for dollar deposits having a term comparable to such
Interest Period and in an amount of $500,000 or more (or such other Page or
Pages as may replace such Pages on Telerate for the purpose of displaying
such rate, or if such rate is not available on Telerate, then such offered
rate shall be otherwise independently determined by Agent from an alternate,
substantially similar independent source available to Agent or shall be
calculated by Agent by a substantially similar methodology as that
theretofore used to determine such offered rate in Telerate, in the London
interbank eurodollar market for a period of time equal or comparable to the
related Interest Period and in an amount equal to or comparable to the
principal amount of the eurodollar portion to which such Interest Period
relates).
"EVENT OF DEFAULT" has the meaning given it in Section 8.1.
"FACILITY USAGE" means, at the time in question, the aggregate amount of
outstanding Loans at such time.
"FEDERAL FUNDS RATE" shall mean, for any day, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of one percent) equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers
on such day, as published by the Federal Reserve Bank of New York on the
Business Day next succeeding such day, provided that (i) if the day for which
such rate is to be determined is not a Business Day, the Federal Funds Rate
for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day, and (ii) if
such rate is not so published for any day, the Federal Funds Rate for such
day shall be the average rate quoted to Agent on such day on such
transactions as determined by Agent.
"FISCAL QUARTER" means a three-month period ending on March 31, June 30,
September 30 or December 31 of any year.
6
<PAGE>
"FISCAL YEAR" means a twelve-month period ending on March 31 of any
year. "FIXED CHARGES" means for any period, the sum of (i) principal and
interest payments on the Obligations and the Subordinated Debt due during
such period, whether or not paid, (ii) payments under capital leases of
Borrower and its Subsidiaries due during such period (whether or not paid),
(iii) dividends and distributions made by Borrower during such period (if for
any reason this Agreement is modified to permit any such dividends or
distributions) (iv) Borrower's Consolidated Capital Expenditures which are
not financed; and (v) cash tax payments.
"FUNDED DEBT" means the sum of all Liabilities (a) of Borrower for
borrowed money; (b) which constitute obligations of Borrower to pay the
deferred purchase price of property or services; (c) evidenced by Borrower's
bond, debenture, note or similar instrument; (d) which would under GAAP be
shown on Borrower's balance sheet as a liability; or (e) constituting
principal under leases capitalized in accordance with GAAP.
"GAAP" means those generally accepted accounting principles and
practices which are recognized as such by the Financial Accounting Standards
Board (or any generally recognized successor) and which, in the case of
Borrower and its Consolidated subsidiaries, are applied for all periods after
the date hereof in a manner consistent with the manner in which such
principles and practices were applied to the audited Initial Financial
Statements. If any change in any accounting principle or practice is
required by the Financial Accounting Standards Board (or any such successor)
in order for such principle or practice to continue as a generally accepted
accounting principle or practice, all reports and financial statements
required hereunder with respect to Borrower or with respect to Borrower and
its Consolidated subsidiaries may be prepared in accordance with such change
only after notice of such change is given to each Lender and Majority Lenders
agree to such change insofar as it affects the accounting of Borrower or of
Borrower and its Consolidated subsidiaries.
"GUARANTOR" means any Person who has guaranteed the Obligations pursuant
to a guaranty listed on the Security Schedule or any other Person who has
guaranteed the Obligations and who has been accepted by Agent as a Guarantor
or any Subsidiary of Borrower which now or hereafter executes and delivers a
guaranty to Agent pursuant to Section 6.17.
"HAZARDOUS MATERIALS" means any substances regulated under any
Environmental Law, whether as pollutants, contaminants, or chemicals, or as
industrial, toxic or hazardous substances or wastes, or otherwise.
"HIGHEST LAWFUL RATE" means, with respect to each Lender, the maximum
nonusurious rate of interest that such Lender is permitted under applicable
Law to contract for, take, charge, or receive with respect to its Loan. All
determinations herein of the Highest Lawful Rate, or of any interest rate
determined by reference to the Highest Lawful Rate, shall be made separately
for each Lender as appropriate to assure that the Loan Documents are not
construed to obligate any Person to pay interest to any Lender at a rate in
excess of the Highest Lawful Rate applicable to such Lender.
"INDEBTEDNESS" of any Person means Liabilities in any of the following
categories:
7
<PAGE>
(a Liabilities for borrowed money,
(b Liabilities constituting an obligation to pay the deferred purchase
price of property or services,
(c Liabilities evidenced by a bond, debenture, note or similar
instrument,
(d Liabilities which would under GAAP be shown on such Person's
balance sheet as a liability,
(e Liabilities arising under futures contracts, forward contracts,
swap, cap or collar contracts, option contracts, hedging contracts, other
derivative contracts, or similar agreements,
(f Liabilities constituting principal under leases capitalized in
accordance with GAAP (but not operating leases),
(g Liabilities arising under conditional sales or other title
retention agreements,
(h Liabilities owing under direct or indirect guaranties of
Liabilities of any other Person or constituting obligations to purchase or
acquire or to otherwise protect or insure a creditor against loss in respect
of Liabilities of any other Person (such as obligations under working capital
maintenance agreements, agreements to keep-well, or agreements to purchase
Liabilities, assets, goods, securities or services), but excluding
endorsements in the ordinary course of business of negotiable instruments in
the course of collection,
(i Liabilities (for example, repurchase agreements) consisting of an
obligation to purchase securities or other property, if such Liabilities
arises out of or in connection with the sale of the same or similar
securities or property,
(j Liabilities with respect to letters of credit or applications or
reimbursement agreements therefor, or
(k Liabilities with respect to other obligations to deliver goods or
services in consideration of advance payments therefor (only to the extent of
the advance payment);
provided, however, that the "Indebtedness" of any Person shall not include
Liabilities that were incurred by such Person on ordinary trade terms to
vendors, suppliers, or other Persons providing goods and services for use by
such Person in the ordinary course of its business, unless and until such
Liabilities are outstanding more than 90 days past the original invoice or
billing date therefor.
"INTEREST PERIOD" means, with respect to each particular Eurodollar Loan
in a Borrowing, a period of 1, 2, or 3 months, as specified in the Borrowing
Notice applicable thereto, beginning on and including the date specified in
such Borrowing Notice (which must be a Business Day), and ending on but not
including the same day of the month as the day on which it began (e.g., a
8
<PAGE>
period beginning on the third day of one month shall end on but not include
the third day of another month), provided that each Interest Period which
would otherwise end on a day which is not a Business Day shall end on the
next succeeding Business Day (unless such next succeeding Business Day is the
first Business Day of a calendar month, in which case such Interest Period
shall end on the immediately preceding Business Day). No Interest Period may
be elected which would extend past the date on which the associated Note is
due and payable in full.
"INITIAL FINANCIAL STATEMENTS" means the audited annual Consolidated
financial statements of Borrower dated as of December 31, 1997.
"INSURANCE SCHEDULE" means Schedule 3 attached hereto.
"INVESTMENT" means any investment, in cash or by delivery of property
made, directly or indirectly in any Person, whether by acquisition of shares
of capital stock, indebtedness or other obligations or securities or by loan,
advance, capital contribution or otherwise.
"LAW" means any statute, law, regulation, ordinance, rule, treaty,
judgment, order, decree, permit, concession, franchise, license, agreement or
other governmental restriction of the United States or any state or political
subdivision thereof or of any foreign country or any department, province or
other political subdivision thereof.
"LENDERS" means each signatory hereto (other than Borrower and
Restricted Persons a party hereto), including Bank One, Texas, N.A. in its
capacity as a lender hereunder rather than as Agent, and the successors of
each such party as holder of a Note.
"LENDING OFFICE" means, with respect to any Lender, the office, branch,
or agency through which it funds its Eurodollar Loans; and, with respect to
Agent, the office, branch, or agency through which it administers this
Agreement.
"LIABILITIES" means, as to any Person, all indebtedness, liabilities and
obligations of such Person, whether matured or unmatured, liquidated or
unliquidated, primary or secondary, direct or indirect, absolute, fixed or
contingent, and whether or not required to be considered pursuant to GAAP.
"LIEN" means, with respect to any property or assets, any right or
interest therein of a creditor to secure Liabilities owed to him or any other
arrangement with such creditor which provides for the payment of such
Liabilities out of such property or assets or which allows him to have such
Liabilities satisfied out of such property or assets prior to the general
creditors of any owner thereof, including any lien, mortgage, security
interest, pledge, deposit, production payment, rights of a vendor under any
title retention or conditional sale agreement or lease substantially
equivalent thereto, tax lien, mechanic's or materialman's lien, or any other
charge or encumbrance for security purposes, whether arising by Law or
agreement or otherwise, but excluding any right of offset which arises
without agreement in the ordinary course of business and any filed financing
statement, any registration of a pledge (such as with an issuer of
uncertificated securities), or any other arrangement or action which would
serve to perfect any of
9
<PAGE>
the foregoing, regardless of whether such financing statement is filed, such
registration is made, or such arrangement or action is undertaken before or
after such Lien exists.
"LOANS" has the meaning given it in Section 2.1.
"LOAN DOCUMENTS" means this Agreement, the Notes, the Security
Documents, and all other agreements, certificates, documents, instruments and
writings at any time delivered in connection herewith or therewith (exclusive
of term sheets, commitment letters, correspondence and similar documents used
in the negotiation hereof, except to the extent the same contain information
about Borrower or its Affiliates, properties, business or prospects).
"MAJORITY LENDERS" means Bank One, Texas, N.A., in its individual
capacity if it is the only Lender hereunder, otherwise Lenders whose
aggregate Percentage Shares equal or exceed sixty-six and two-thirds percent
(66_%).
"MATERIAL ADVERSE CHANGE" means a material and adverse change, from the
state of affairs presented in the Initial Financial Statements, to (i)
Borrower's and its Subsidiaries' Consolidated financial condition, (ii) the
operations or properties of Borrower and its Subsidiaries, considered as a
whole, (iii) Borrower's ability to timely pay the Obligations, or (iv) the
enforceability of the material terms of any Loan Documents.
"MATURITY DATE" means the date which is three (3) years from the Closing
Date.
"NOTES" has the meaning given it in Section 2.1.
"OBLIGATIONS" means all Liabilities from time to time owing by any
Restricted Person to any Bank Party under or pursuant to any of the Loan
Documents. "OBLIGATION" means any part of the Obligations.
"PERCENTAGE SHARE" means, with respect to any Lender (a) when used in
Sections 2.1 or 2.5, in any Borrowing Notice or when no Loans are outstanding
hereunder, the percentage set forth opposite such Lender's name on Lender
Schedule attached hereto, and (b) when used otherwise, the percentage
obtained by dividing (a) the sum of the unpaid principal balance of such
Lender's Loans at the time in question, by (b) the sum of the aggregate
unpaid principal balance of all Loans at such time.
"PERMITTED INVESTMENTS" means Investments in:
(a) marketable obligations, maturing within 12 months after acquisition
thereof, issued or unconditionally guaranteed by the United States of America
or an instrumentality or agency thereof and entitled to the full faith and
credit of the United States of America.
(b) demand deposits, and time deposits (including certificates of
deposit) maturing within 12 months from the date of deposit thereof, with any
office of any Lender or with a domestic office of any national or state bank
or trust company which is organized under the Laws of the United States of
America or any state therein, which has capital, surplus and undivided
10
<PAGE>
profits of at least $500,000,000, and whose certificates of deposit have at
least the third highest credit rating given by either Rating Agency.
(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 commercial bank meeting the specifications of clause (b) above
(d) open market commercial paper, maturing within 270 days after
acquisition thereof, which has the highest or second highest credit rating
given by either Rating Agency.
(e) investments in money market or other mutual funds substantially all
of whose assets comprise securities of the types described in clauses (a)
through (d) above.
(f) in joint ventures, so long as Agent is given 10 days advance notice
of each such investment and the aggregate amount paid, contributed, lent or
otherwise invested after the date hereof by the Restricted Persons in joint
ventures does not exceed $1,000,000.
(g) in Dental Practice Acquisitions made in compliance with the
provisions of Section 7.21.
(h) credit extensions permitted by Section 7.8 and Section 7.9.
"PERMITTED LIEN" has the meaning given to such term in Section 7.2.
"PERSON" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or trustee
thereof, estate or executor thereof, unincorporated organization or joint
venture, Tribunal, or any other legally recognizable entity.
"PRIME RATE" means the base commercial rate of interest as announced
from time to time by Agent (which may not be the lowest, best or most
favorable rate of interest which Agent may charge on loans to its customers).
"RATING AGENCY" means either Standard & Poor's Ratings Group (a division
of McGraw Hill, Inc.) or Moody's Investors Service, Inc., or their respective
successors.
"REGULATION D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect.
"RESERVE REQUIREMENT" means, at any time, the maximum rate at which
reserves (including, without limitation, any marginal, special, supplemental,
or emergency reserves) are required to be maintained under regulations issued
from time to time by the Board of Governors of the Federal Reserve System (or
any successor) by member banks of the Federal Reserve System against
"Eurocurrency liabilities" (as such term is used in Regulation D). Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect
any other reserves required to be maintained by such member banks with
respect to (a) any category of liabilities which includes deposits by
reference to which the Adjusted Eurodollar Rate is to be determined,
11
<PAGE>
or (b) any category of extensions of credit or other assets which include
Eurodollar Loans. The Adjusted Eurodollar Rate shall be adjusted
automatically on and as of the effective date of any change in the Reserve
Requirement.
"RESTRICTED PERSON" means any of Borrower, Guarantor and each Subsidiary
of Borrower.
"SECURITY DOCUMENTS" means the instruments listed in the Security
Schedule and all other security agreements, deeds of trust, mortgages,
chattel mortgages, pledges, guaranties, financing statements, continuation
statements, extension agreements and other agreements or instruments now,
heretofore, or hereafter delivered by any Restricted Person to Agent in
connection with this Agreement or any transaction contemplated hereby to
secure or guarantee the payment of any part of the Obligations or the
performance of any Restricted Person's other duties and obligations under the
Loan Documents.
"SECURITY SCHEDULE" means Schedule 2 hereto.
"SUBORDINATED DEBT" means all Consolidated Indebtedness of Borrower
which is unsecured and subordinated to the Obligations pursuant to a
subordination agreement in form and substance satisfactory to Lenders which
agreement will provide for, among other things, (a) a 180-day standstill
period, (b) Lenders' right to vote for the subordinated lender in an
insolvency proceeding of Borrower during any standstill period, (c) a
prohibition on all principal payments of the such Indebtedness so long as the
Obligations remain outstanding and (d) permitted interest payments on such
Indebtedness so long as (i) after giving effect to any such payments, no
Default of Event of Default is continuing (ii) no standstill period then
exists and (iii) such payment would not cause a Default or an Event of
Default.
"SUBSIDIARY" means, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate
entity, enterprise or organization which is directly or indirectly (through
one or more intermediaries) controlled by or owned fifty percent or more by
such Person.
"TERMINATION EVENT" means (a) the occurrence with respect to any ERISA
Plan of (a) a reportable event described in Sections 4043(b)(5) or (6) of
ERISA or (ii) any other reportable event described in Section 4043(b) of
ERISA other than a reportable event not subject to the provision for 30-day
notice to the Pension Benefit Guaranty Corporation pursuant to a waiver by
such corporation under Section 4043(a) of ERISA, or (b) the withdrawal of any
ERISA Affiliate from an ERISA Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, or (c) the
filing of a notice of intent to terminate any ERISA Plan or the treatment of
any ERISA Plan amendment as a termination under Section 4041 of ERISA, or (d)
the institution of proceedings to terminate any ERISA Plan by the Pension
Benefit Guaranty Corporation under Section 4042 of ERISA, or (e) any other
event or condition which might constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment of a trustee to administer, any
ERISA Plan.
"TOTAL FUNDED DEBT" means, at any date, all Consolidated Funded Debt.
12
<PAGE>
"TOTAL SENIOR FUNDED DEBT" means, at any date, all Consolidated Funded Debt
of Borrower that would be reflected on a Consolidated balance sheet of Borrower
prepared as of such date in accordance with GAAP, minus all Subordinated Debt
that would be reflected on a Consolidated balance sheet of Borrower prepared as
of such date in accordance with GAAP.
"TOTAL SENIOR FUNDED DEBT TO EBITDA RATIO" means as of the end of any
Fiscal Quarter, the ratio of (i) Total Senior Funded Debt outstanding as of
the end of such Fiscal Quarter to (ii) EBITDA for the two consecutive Fiscal
Quarters then ended, multiplied by two; provided that for the Fiscal Quarter
ending June 30, 1998, EBITDA shall be calculated for that Fiscal Quarter only
and shall be multiplied by four.
"TRIBUNAL" means any government, any arbitration panel, any court or any
governmental department, commission, board, bureau, agency or instrumentality of
the United States of America or any state, province, commonwealth, nation,
territory, possession, county, parish, town, township, village or municipality,
whether now or hereafter constituted and/or existing.
"TYPE" means, with respect to any Loans, the characterization of such Loans
as either Base Rate Loans or Eurodollar Loans.
"UNUSED COMMITMENT FEE RATE" means one quarter of one percent (0.25%) per
annum.
"VOTING STOCK" means, with respect to any Person, securities of any class
or classes of capital stock in such Person normally entitling the holders
thereof to vote in the election of members of the Board of Directors or other
governing body of such Person.
Section 1.2. EXHIBITS AND SCHEDULES; ADDITIONAL DEFINITIONS. All Exhibits
and Schedules attached to this Agreement are a part hereof for all purposes.
Reference is hereby made to the Security Schedule for the meaning of certain
terms defined therein and used but not defined herein, which definitions are
incorporated herein by reference.
Section 1.3. AMENDMENT OF DEFINED INSTRUMENTS. Unless the context
otherwise requires or unless otherwise provided herein the terms defined in this
Agreement which refer to a particular agreement, instrument or document also
refer to and include all renewals, extensions, modifications, amendments and
restatements of such agreement, instrument or document, provided that nothing
contained in this section shall be construed to authorize any such renewal,
extension, modification, amendment or restatement.
Section 1.4. REFERENCES AND TITLES. All references in this Agreement to
Exhibits, Schedules, articles, sections, subsections and other subdivisions
refer to the Exhibits, Schedules, articles, sections, subsections and other
subdivisions of this Agreement unless expressly provided otherwise. Titles
appearing at the beginning of any subdivisions are for convenience only and do
not constitute any part of such subdivisions and shall be disregarded in
construing the language contained in such subdivisions. The words "this
Agreement", "this instrument", "herein", "hereof", "hereby", "hereunder" and
words of similar import refer to this Agreement as a whole and not to any
particular subdivision unless expressly so limited. The phrases "this section"
and "this subsection" and similar phrases refer only to the sections or
subsections hereof in which such phrases occur. The word "or" is not exclusive,
and the word "including" (in its various
13
<PAGE>
forms) means "including without limitation". Pronouns in masculine, feminine
and neuter genders shall be construed to include any other gender, and words
in the singular form shall be construed to include the plural and vice versa,
unless the context otherwise requires.
Section 1.5. CALCULATIONS AND DETERMINATIONS. All calculations under the
Loan Documents of interest chargeable with respect to Eurodollar Loans and of
fees shall be made on the basis of actual days elapsed (including the first day
but excluding the last) and a year of 360 days. All other calculations of
interest made under the Loan Documents shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 365 or
366 days, as appropriate. Each determination by a Bank Party of amounts to be
paid under any of Sections 3.2 through 3.7 or any other matters which are to be
determined hereunder by a Bank Party (such as any Adjusted Eurodollar Rate,
Eurodollar Rate, Business Day, Interest Period, or Reserve Percentage) shall, in
the absence of manifest error, be conclusive and binding. Unless otherwise
expressly provided herein or unless Majority Lenders otherwise consent all
financial statements and reports furnished to any Bank Party hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP.
ARTICLE II - THE LOANS
Section 2.1. COMMITMENTS TO LEND; NOTES. Subject to the terms and
conditions hereof, each Lender agrees to make loans to Borrower (herein called
such Lender's "Loans") upon Borrower's request from time to time during the
Commitment Period, provided that (a) all Lenders are requested to make Loans in
accordance with their respective Percentage Shares and as part of the same
Borrowing, and (b) after giving effect to such Loans, the Facility Usage does
not exceed the Borrowing Availability. The aggregate amount of all Loans in any
Borrowing must be greater than or equal to $500,000 or must equal the remaining
availability under the Commitment. The aggregate amount of all Loans in any
Borrowing of Eurodollar Loans must be greater than or equal to $500,000 (or any
higher multiple thereof) or must equal the remaining availability under the
Commitment. Borrower may have no more than six (6) Borrowings of Eurodollar
Loans outstanding at any time. The obligation of Borrower to repay to each
Lender the aggregate amount of all Loans made by such Lender, together with
interest accruing in connection therewith, shall be evidenced by a single
promissory note (herein called such Lender's "Note") made by Borrower payable to
the order of such Lender in the form of Exhibit A with appropriate insertions.
The amount of principal owing on any Lender's Note at any given time shall be
the aggregate amount of all Loans theretofore made by such Lender minus all
payments of principal theretofore received by such Lender on such Note.
Interest on each Note shall accrue and be due and payable as provided herein and
therein, with Eurodollar Loans bearing interest at the Adjusted Eurodollar Rate
and Base Rate Loans bearing interest at the Base Rate (subject to the
applicability of the Default Rate and limited by the provisions of Section
10.8). Subject to the terms and conditions hereof, Borrower may borrow, repay,
and reborrow hereunder.
Section 2.2. BORROWER'S REDUCTION OF BORROWING AVAILABILITY. Until the
termination of the Commitment Period Borrower may, at least 60 days prior to the
first day of any Borrowing Availability Period (each such period being called in
this section an "Option Period"), reduce the Commitment to any lesser amount;
provided that such reduction shall be in increments of
14
<PAGE>
$1,000,000. To exercise such option Borrower must within an Option Period
send notice to Agent of the amount of the Commitment chosen by Borrower. Any
choice by Borrower of a Commitment shall be effective as of the first day of
the Option Period during which such choice was made and shall continue in
effect until the next date as of which the Commitment is redetermined.
Section 2.3. REQUESTS FOR NEW LOANS. Borrower must give to Agent written
notice (or telephonic notice promptly confirmed in writing) of any requested
Borrowing of new Loans to be advanced by Lenders. Each such notice constitutes
a "Borrowing Notice" hereunder and must:
(a) specify (i) the aggregate amount of any such Borrowing of new Base
Rate Loans and the date on which such Base Rate Loans are to be advanced, or
(ii) the aggregate amount of any such Borrowing of new Eurodollar Loans, the
date on which such Eurodollar Loans are to be advanced (which shall be the first
day of the Interest Period which is to apply thereto), and the length of the
applicable Interest Period; and
(b) be received by Agent not later than 11:00 a.m., Dallas, Texas time, on
(i) the day on which any such Base Rate Loans are to be made, or (ii) the third
Business Day preceding the day on which any such Eurodollar Loans are to be
made.
Each such written request or confirmation must be made in the form and substance
of the "Borrowing Notice" attached hereto as Exhibit B, duly completed. Each
such telephonic request shall be deemed a representation, warranty,
acknowledgment and agreement by Borrower as to the matters which are required to
be set out in such written confirmation. Upon receipt of any such Borrowing
Notice, Agent shall give each Lender prompt notice of the terms thereof. If all
conditions precedent to such new Loans have been met, each Lender will on the
date requested promptly remit to Agent at Agent's office in Dallas, Texas the
amount of such Lender's new Loan in immediately available funds, and upon
receipt of such funds, unless to its actual knowledge any conditions precedent
to such Loans have been neither met nor waived as provided herein, Agent shall
promptly make such Loans available to Borrower. Unless Agent shall have
received prompt notice from a Lender that such Lender will not make available to
Agent such Lender's new Loan, Agent may in its discretion assume that such
Lender has made such Loan available to Agent in accordance with this section and
Agent may if it chooses, in reliance upon such assumption, make such Loan
available to Borrower. If and to the extent such Lender shall not so make its
new Loan available to Agent, such Lender and Borrower severally agree to pay or
repay to Agent within three days after demand the amount of such Loan together
with interest thereon, for each day from the date such amount was made available
to Borrower until the date such amount is paid or repaid to Agent, with interest
at (i) the Federal Funds Rate, if such Lender is making such payment and
(ii) the interest rate applicable at the time to the other new Loans made on
such date, if Borrower is making such repayment. If neither such Lender nor
Borrower pay or repay to Agent such amount within such three-day period, Agent
shall in addition to such amount be entitled to recover from such Lender and
from Borrower, on demand, interest thereon at the Default Rate, calculated from
the date such amount was made available to Borrower. The failure of any Lender
to make any new Loan to be made by it hereunder shall not relieve any other
Lender of its obligation hereunder, if any, to make its new Loan, but no Lender
shall be responsible for the failure of any other Lender to make any new Loan to
be made by such other Lender.
15
<PAGE>
Section 2.4. CONTINUATIONS AND CONVERSIONS OF EXISTING LOANS. Borrower
may make the following elections with respect to Loans already outstanding:
to Convert Base Rate Loans to Eurodollar Loans, to Convert Eurodollar Loans
to Base Rate Loans on the last day of the Interest Period applicable thereto,
or to Continue Eurodollar Loans beyond the expiration of such Interest Period
by designating a new Interest Period to take effect at the time of such
expiration. In making such elections, Borrower may combine existing Loans
made pursuant to separate Borrowings into one new Borrowing or divide
existing Loans made pursuant to one Borrowing into separate new Borrowings.
To make any such election, Borrower must give to Agent written notice (or
telephonic notice promptly confirmed in writing) of any such Conversion or
Continuation of existing Loans, with a separate notice given for each new
Borrowing. Each such notice constitutes a "Continuation/Conversion Notice"
hereunder and must:
(a) specify the existing Loans which are to be Continued or Converted;
(b) specify (i) the aggregate amount of any Borrowing of Base Rate Loans
into which such existing Loans are to be Continued or Converted and the date on
which such Continuation or Conversion is to occur, or (ii) the aggregate amount
of any Borrowing of Eurodollar Loans into which such existing Loans are to be
Continued or Converted, the date on which such Continuation or Conversion is to
occur (which shall be the first day of the Interest Period which is to apply to
such Eurodollar Loans), and the length of the applicable Interest Period; and
(c) be received by Agent not later than 11:00 a.m., Dallas, Texas time, on
(i) the day on which any such Continuation or Conversion to Base Rate Loans is
to occur, or (ii) the third Business Day preceding the day on which any such
Continuation or Conversion to Eurodollar Loans is to occur.
Each such written request or confirmation must be made in the form and substance
of the "Continuation/Conversion Notice" attached hereto as Exhibit C, duly
completed. Each such telephonic request shall be deemed a representation,
warranty, acknowledgment and agreement by Borrower as to the matters which are
required to be set out in such written confirmation. Upon receipt of any such
Borrowing Notice, Agent shall give each Lender prompt notice of the terms
thereof. Each Borrowing Notice shall be irrevocable and binding on Borrower.
During the continuance of any Default, Borrower may not make any election to
Convert existing Loans into Eurodollar Loans or Continue existing Loans as
Eurodollar Loans. If (due to the existence of a Default or for any other
reason) Borrower fails to timely and properly give any notice of Continuation or
Conversion with respect to a Borrowing of existing Eurodollar Loans at least
three days prior to the end of the Interest Period applicable thereto, such
Eurodollar Loans shall automatically be Continued as Eurodollar Loans with an
Interest Period of one month at the end of such Interest Period. No new funds
shall be repaid by Borrower or advanced by any Lender in connection with any
Continuation or Conversion of existing Loans pursuant to this section, and no
such Continuation or Conversion shall be deemed to be a new advance of funds for
any purpose; such Continuations and Conversions merely constitute a change in
the interest rate applicable to already outstanding Loans.
16
<PAGE>
Section 2.5. USE OF PROCEEDS. Borrower shall use all Loans to finance
Dental Practice Acquisitions permitted under Section 7.7 and 7.21, and to
provide working capital for its operations and for other general business
purposes. In no event shall the funds from any Loan be used directly or
indirectly by any Person for personal, family, household or agricultural
purposes or for the purpose, whether immediate, incidental or ultimate, of
purchasing, acquiring or carrying any "margin stock" or any "margin securities"
(as such term is defined in Regulation U promulgated by the Board of Governors
of the Federal Reserve System) or to extend credit to others directly or
indirectly for the purpose of purchasing or carrying any such margin stock or
margin securities. Borrower represents and warrants that Borrower is not
engaged principally, or as one of Borrower's important activities, in the
business of extending credit to others for the purpose of purchasing or carrying
such margin stock or margin securities.
Section 2.6. FEES.
(a) UNUSED COMMITMENT FEES. In consideration of each Lender's commitment
to make Loans, Borrower will pay to Agent for the account of each Lender an
unused commitment fee determined on a daily basis by applying the Unused
Commitment Fee Rate to such Lender's Percentage Share of the unused portion of
the Commitment (as reduced from time to time pursuant to Section 2.2) on each
day during the Commitment Period, determined for each such day by deducting the
Facility Usage from the amount of the Commitment at the end of such day. This
unused fee shall be due and payable in arrears on each Base Rate Payment Date
and at the end of the Commitment Period.
(a UPFRONT CLOSING FEES. In consideration of the commitment of Bank One,
Texas, N.A. to make Loans, Borrower will pay to Bank One, Texas, N.A. an upfront
closing fee for due diligence activities in the aggregate amount of $75,000, due
and payable on the date hereof.
(b MODIFICATION FEES. In consideration of Lenders' review and processing
of any amendment, waiver or other modification of any Loan Document, Borrower
will pay to Agent for the account of Lenders a modification fee in that amount
which is customary for similar modifications at that time, due and payable on
the effective date thereof.
Section 2.7. RESERVED.
Section 2.8. MANDATORY PREPAYMENTS.
(a) If at any time the Facility Usage exceeds the Commitment, Borrower
shall immediately upon demand prepay the principal of the Loans in an amount at
least equal to such excess.
(b) If at any time the Facility Usage is less than the Commitment but in
excess of the Borrowing Availability (such excess being herein called a
"Borrowing Availability Deficiency"), Borrower shall, within five Business Days
after Agent gives notice of such fact to Borrower,
17
<PAGE>
prepay the principal of the Loans in an aggregate amount at least equal to
such Borrowing Availability Deficiency.
(c) Each prepayment of principal under this section shall be accompanied
by all interest then accrued and unpaid on the principal so prepaid. Any
principal or interest prepaid pursuant to this section shall be in addition to,
and not in lieu of, all payments otherwise required to be paid under the Loan
Documents at the time of such prepayment.
ARTICLE III - PAYMENTS TO LENDERS
Section 3.1. GENERAL PROCEDURES. Borrower will make each payment which it
owes under the Loan Documents to Agent for the account of the Bank Party to whom
such payment is owed. Each such payment must be received by Agent not later
than 11:00 a.m., Dallas, Texas time, on the date such payment becomes due and
payable, in lawful money of the United States of America, without set-off,
deduction or counterclaim, and in immediately available funds. Any payment
received by Agent after such time will be deemed to have been made on the next
following Business Day. Should any such payment become due and payable on a day
other than a Business Day, the maturity of such payment shall be extended to the
next succeeding Business Day, and, in the case of a payment of principal or past
due interest, interest shall accrue and be payable thereon for the period of
such extension as provided in the Loan Document under which such payment is due.
Each payment under a Loan Document shall be due and payable at the place
provided therein and, if no specific place of payment is provided, shall be due
and payable at the place of payment of Agent's Note. When Agent collects or
receives money on account of the Obligations, Agent shall distribute all money
so collected or received, and each Bank Party shall apply all such money so
distributed, as follows:
(a first, for the payment of all Obligations which are then due (and if
such money is insufficient to pay all such Obligations, first to any
reimbursements due Agent under Section 6.9 or 10.4 and then to the partial
payment of all other Obligations then due in proportion to the amounts thereof,
or as Bank Parties shall otherwise agree);
(b then for the payment of amounts owing under the Loan Documents (other
than principal on the Notes) if so specified by Borrower;
(c then for the prepayment of principal on the Notes, together with
accrued and unpaid interest on the principal so prepaid; and
(d last, for the payment or prepayment of any other Obligations.
All payments applied to principal or interest on any Note shall be applied first
to any interest then due and payable, then to principal then due and payable,
and last to any prepayment of principal and interest in compliance with Section
2.7. All distributions of amounts described in any of subsections (b), (c) or
(d) above shall be made by Agent pro rata to each Bank Party then owed
Obligations described in such subsection in proportion to all amounts owed to
all Bank Parties which are described in such subsection.
18
<PAGE>
Section 3.2. INCREASED COST AND REDUCED RETURN.
(a) If, after the date hereof, the adoption of any applicable
Law, rule, or regulation, or any change in any applicable Law,
rule, or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank,
or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its
Applicable Lending Office) with any request or directive (whether
or not having the force of Law) of any such governmental authority,
central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending
Office) to any tax, duty, or other charge with respect to any
Eurodollar Loans, its Notes, its obligation to make Eurodollar
Loans, or change the basis of taxation of any amounts payable to
such Lender (or its Applicable Lending Office) under this Agreement
or its Notes in respect of any Eurodollar Loans (other than taxes
imposed on the overall net income of such Lender by the
jurisdiction in which such Lender has its principal office or such
Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve,
special deposit, assessment, or similar requirement (other than the
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or commitments
of, such Lender (or its Applicable Lending Office), including the
Commitment of such Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending
Office) or the London interbank market any other condition
affecting this Agreement or its Notes or any of such extensions of
credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to
such Lender (or its Applicable Lending Office) of making,
Converting into, Continuing, or maintaining any Eurodollar Loans or
to reduce any sum received or receivable by such Lender (or its
Applicable Lending Office) under this Agreement or its Notes with
respect to any Eurodollar Loans, then Borrower shall pay to such
Lender on demand such amount or amounts as will compensate such
Lender for such increased cost or reduction. If any Lender
requests compensation by Borrower under this subsection, Borrower
may, by notice to such Lender (with a copy to Agent), suspend the
obligation of such Lender to make or Continue Loans of the Type
with respect to which such compensation is requested, or to Convert
Loans of any other Type into Loans of such Type, until the event or
condition giving rise to such request ceases to be in effect (in
which case the provisions of Section 3.5 shall be applicable);
PROVIDED that such suspension shall not affect the right of such
Lender to receive the compensation so requested.
(b) If, after the date hereof, any Lender shall have
determined that the adoption of any applicable Law, rule, or
regulation regarding capital adequacy or any change therein or in
the interpretation or administration thereof by any governmental
19
<PAGE>
authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or any request or
directive regarding capital adequacy (whether or not having the
force of Law) of any such governmental authority, central bank, or
comparable agency, has or would have the effect of reducing the
rate of return on the capital of such Lender or any corporation
controlling such Lender as a consequence of the obligations of such
Lender hereunder to a level below that which such Lender or such
corporation could have achieved but for such adoption, change,
request, or directive (taking into consideration its policies with
respect to capital adequacy), then from time to time upon demand
Borrower shall pay to such Lender such additional amount or amounts
as will compensate such Lender for such reduction but only to the
extent that such Lender has not been compensated therefor by an
increase in the Adjusted Eurodollar Rate.
(c) Each Lender shall promptly notify Borrower and Agent of
any event of which it has knowledge, occurring after the date
hereof, which will entitle such Lender to compensation pursuant to
this section and each Lender will designate a different Applicable
Lending Office if such designation will avoid the need for, or
reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to it. Any
Lender claiming compensation under this section shall furnish to
Borrower and Agent a statement setting forth the additional amount
or amounts to be paid to it hereunder which shall be conclusive in
the absence of manifest error. In determining such amount, such
Lender shall act in good faith and may use any reasonable averaging
and attribution methods.
Section 3.3. LIMITATION ON TYPES OF LOANS. If on or prior to the first
day of any Interest Period for any Eurodollar Loan:
(a) Agent determines (which determination shall be
conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining
the Eurodollar Rate for such Interest Period; or
(b) the Majority Lenders determine (which determination shall
be conclusive) and notify Agent that the Adjusted Eurodollar Rate
will not adequately and fairly reflect the cost to Lenders of
funding Eurodollar Loans for such Interest Period;
then Agent shall give Borrower prompt notice thereof specifying the relevant
Type of Loans and the relevant amounts or periods, and so long as such condition
remains in effect, Lenders shall be under no obligation to make additional Loans
of such Type, Continue Loans of such Type, or to Convert Loans of any other Type
into Loans of such Type and Borrower shall, on the last day(s) of the then
current Interest Period(s) for the outstanding Loans of the affected Type,
either prepay such Loans or Convert such Loans into another Type of Loan in
accordance with the terms of this Agreement.
Section 3.4. ILLEGALITY. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to make, maintain, or fund Eurodollar Loans hereunder,
then such Lender shall promptly notify Borrower thereof and such Lender's
obligation to make or Continue Eurodollar Loans and to Convert other
20
<PAGE>
Types of Loans into Eurodollar Loans shall be suspended until such time as
such Lender may again make, maintain, and fund Eurodollar Loans (in which
case the provisions of Section 3.5 shall be applicable).
Section 3.5. TREATMENT OF AFFECTED LOANS. If the obligation of any Lender
to make a particular Type of Loan or to Continue, or to Convert Loans of any
other Type into Loans of a particular Type shall be suspended pursuant to
Section 3.2 or 3.4 hereof (Loans of such Type being herein called "AFFECTED
LOANS" and such Type being herein called the "AFFECTED TYPE"), such Lender's
Affected Loans shall be automatically Converted into Base Rate Loans on the last
day(s) of the then current Interest Period(s) for Affected Loans (or, in the
case of a Conversion required by Section 3.4 hereof, on such earlier date as
such Lender may specify to Borrower with a copy to Agent) and, unless and until
such Lender gives notice as provided below that the circumstances specified in
Section 3.2 or 3.4 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Affected Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by
such Lender as Loans of the Affected Type shall be made or
Continued instead as Base Rate Loans, and all Loans of such Lender
that would otherwise be Converted into Loans of the Affected Type
shall be Converted instead into (or shall remain as) Base Rate
Loans.
If such Lender gives notice to Borrower (with a copy to Agent) that the
circumstances specified in Section 3.2 or 3.4 hereof that gave rise to the
Conversion of such Lender's Affected Loans pursuant to this section no longer
exist (which such Lender agrees to do promptly upon such circumstances ceasing
to exist) at a time when Loans of the Affected Type made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Loans of the Affected Type, to the extent necessary so that, after giving effect
thereto, all Loans held by Lenders holding Loans of the Affected Type and by
such Lender are held pro rata (as to principal amounts, Types, and Interest
Periods) in accordance with their Percentage Shares of the Commitment.
Section 3.6. COMPENSATION. Upon the request of any Lender, Borrower shall
pay to such Lender such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost, or
expense (including loss of anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar
Loan for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 8.1) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by Borrower for any reason (including,
without limitation, the failure of any condition precedent
specified in Article IV to be satisfied) to borrow,
21
<PAGE>
Convert, Continue, or prepay a Eurodollar Loan on the date for such
borrowing, Conversion, Continuation, or prepayment specified in the
relevant notice of borrowing, prepayment, Continuation, or
Conversion under this Agreement.
Section 3.7. TAXES.
(a) Any and all payments by Borrower to or for the account of
any Lender or Agent hereunder or under any other Loan Document
shall be made free and clear of and without deduction for any and
all present or future taxes, duties, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto,
EXCLUDING, in the case of each Lender and Agent, taxes imposed on
its income, and franchise taxes imposed on it, by the jurisdiction
under the Laws of which such Lender (or its Applicable Lending
Office) or Agent (as the case may be) is organized or any political
subdivision thereof (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings, and liabilities being
hereinafter referred to as "TAXES"). If Borrower shall be required
by Law to deduct any Taxes from or in respect of any sum payable
under this Agreement or any other Loan Document to any Lender or
Agent, (i) the sum payable shall be increased as necessary so that
after making all required deductions (including deductions
applicable to additional sums payable under this section) such
Lender or Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) Borrower shall make
such deductions, and (iii) Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable Law.
(b) In addition, Borrower agrees to pay any and all present
or future stamp or documentary taxes and any other excise or
property taxes or charges or similar levies which arise from any
payment made under this Agreement or any other Loan Document or
from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to
as "OTHER TAXES").
(c) Borrower agrees to indemnify each Lender and Agent for
the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this section) paid by such
Lender or Agent (as the case may be) and any liability (including
penalties, interest, and expenses) arising therefrom or with
respect thereto.
(d) Each Lender organized under the Laws of a jurisdiction
outside the United States, on or prior to the date of its execution
and delivery of this Agreement in the case of each Lender listed on
the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to
time thereafter if requested in writing by Borrower or Agent (but
only so long as such Lender remains lawfully able to do so), shall
provide Borrower and Agent with (i) Internal Revenue Service Form
1001 or 4224, as appropriate, or any successor form prescribed by
the Internal Revenue Service, certifying that such Lender is
entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on
payments of interest or certifying that the income receivable
pursuant
22
<PAGE>
to this Agreement is effectively connected with the conduct of a
trade or business in the United States, (ii) Internal Revenue
Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other
form or certificate required by any taxing authority (including any
certificate required by Sections 871(h) and 881(c) of the Internal
Revenue Code), certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to
this Agreement or any of the other Loan Documents.
(e) For any period with respect to which a Lender has failed
to provide Borrower and Agent with the appropriate form pursuant to
Section 3.7(d) (unless such failure is due to a change in treaty,
Law, or regulation occurring subsequent to the date on which a form
originally was required to be provided), such Lender shall not be
entitled to indemnification under Section 3.7(a) or 3.7(b) with
respect to Taxes imposed by the United States; PROVIDED, HOWEVER,
that should a Lender, which is otherwise exempt from or subject to
a reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, Borrower shall
take such steps as such Lender shall reasonably request to assist
such Lender to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or
for the account of any Lender pursuant to this section, then such
Lender will agree to use reasonable efforts to change the
jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if
such change, in the judgment of such Lender, is not otherwise
disadvantageous to such Lender and in the event Lender is
reimbursed for an amount paid by Borrower pursuant to this section,
it shall promptly return such amount to Borrower.
(g) Within thirty (30) days after the date of any payment of
Taxes, Borrower shall furnish to Agent the original or a certified
copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower
contained in this section shall survive the termination of the
Commitment and the payment in full of the Notes.
Section 3.8. COMPENSATION PROCEDURE. Any Lender notifying Borrower of the
incurrence of additional costs under Sections 3.2 through 3.7 shall in such
notice to Borrower and Agent set forth in reasonable detail the basis and amount
of its request for compensation and shall certify that such Lender customarily
charges such additional costs to its similar customers. Determinations and
allocations by each Lender for purposes of Sections 3.2 through 3.7 of the
effect of any change in applicable Laws, treaties, rules or regulations or in
the interpretation or administration thereof, any losses or expenses incurred by
reason of the liquidation or reemployment of deposits or other funds, any taxes,
levies, costs and charges imposed, or the effect of capital maintained on its
costs or rate of return of maintaining Loans or its obligation to make Loans, or
on amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Lender under Sections 3.2 through 3.7 , shall be conclusive and
binding for all purposes, absent manifest error. Any request for compensation
under this section shall be paid
23
<PAGE>
by Borrower within thirty (30) Business Days of the receipt by Borrower of
the notice described in this section.
ARTICLE IV - CONDITIONS PRECEDENT
Section 4.1. DOCUMENTS TO BE DELIVERED AT CLOSING. Borrower shall deliver
all of the following to Agent, at Agent's office in Dallas, Texas, duly executed
and delivered and in form, substance and date satisfactory to Agent prior to or
on the Closing Date:
(a) This Agreement and any other documents that Lenders are
to execute in connection herewith.
(b) Each Note.
(c) Each Security Document listed in the Security Schedule.
(d) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of Borrower, which shall contain
the names and signatures of the officers of Borrower authorized to
execute Loan Documents and which shall certify to the truth,
correctness and completeness of the following exhibits attached
thereto: (1) a copy of resolutions duly adopted by the Board of
Directors of Borrower and in full force and effect at the time this
Agreement is entered into, authorizing the execution of this
Agreement and the other Loan Documents delivered or to be delivered
in connection herewith and the consummation of the transactions
contemplated herein and therein, (2) a copy of the charter
documents of Borrower and all amendments thereto, certified by the
appropriate official of Borrower's state of organization, and (3) a
copy of any bylaws of Borrower; and
(e) An "Omnibus Certificate" of the Secretary and of the
Chairman of the Board or President of each Guarantor which shall
contain the names and signatures of the officers of such Guarantor
authorized to execute Loan Documents and which shall certify to the
truth, correctness and completeness of the following exhibits
attached thereto: (1) a copy of resolutions duly adopted by the
Board of Directors of such Guarantor and in full force and effect
at the time this Agreement is entered into, authorizing the
execution of this Agreement and the other Loan Documents delivered
or to be delivered in connection herewith and the consummation of
the transactions contemplated herein and therein, (2) a copy of the
charter documents of such Guarantor and all amendments thereto,
certified by the appropriate official of such Guarantor's state of
organization, and (3) a copy of any bylaws of such Guarantor.
(f) The Initial Financial Statements.
(g) An Opinion of Counsel for the Restricted Parties in the
form of Exhibit E.
24
<PAGE>
(h) Certificates or binders evidencing Restricted Persons'
insurance in effect on the date hereof.
(i) Payment of all costs and fees due hereunder.
(j) Agent shall have completed its due diligence and shall be
satisfied, in its sole discretion, that the results thereof comply
with Agent's' credit standards and policies.
Section 4.2. CONDITIONS PRECEDENT PRIOR TO FIRST LOAN. No Lender has any
obligation to make its first Loan, unless Agent shall have received (in addition
to the documents described in Section 4.1) all of the following, at Agent's
office in Dallas, Texas, duly executed and delivered and in form, substance and
date satisfactory to Agent or all of the following conditions precedent have
been satisfied, as applicable:
(a) A "Compliance Certificate" of the Chairman of the Board
or President and of the chief financial officer of Borrower, of
even date with such Loan, in which such officers certify to the
satisfaction of the conditions set out in subsections (a), (b), (c)
and (d) of Section 4.3 and the compliance of Borrower with Sections
7.11 through 7.21, with calculations reflecting such compliance.
(b) A certificate (or certificates) of the due formation,
valid existence and good standing of Borrower and each Guarantor in
such Person's state of organization, issued by the appropriate
authorities of such jurisdiction, and certificates of Borrower's
and Guarantor's good standing and due qualification to do
business, issued by appropriate officials in any states in which
Borrower or such Guarantor owns property subject to Security
Documents.
(c) A financial audit for the Fiscal Year ended 1997 shall
have been satisfactorily completed by May 1, 1998, and Agent shall
have determined that the such audit does not show any adverse
change from the Initial Financial Statements.
(d) Pursuant to Borrower's initial public offering, Borrower
shall have received Additional Equity in a gross amount of at least
(a) $22,000,000 or (b) $21,000,000 (if the opening cash position of
Borrower immediately after such offering is greater than
$5,000,000).
Section 4.3. ADDITIONAL CONDITIONS PRECEDENT. No Lender has any
obligation to make any Loan (including its first), unless the following
conditions precedent have been satisfied:
(a) All representations and warranties made by any Restricted
Person in any Loan Document shall be true in all material respects
on and as of the date of such Loan (except to the extent that the
facts upon which such representations are based have been changed
by the extension of credit hereunder) as if such representations
and warranties had been made as of the date of such Loan.
(b) No Default shall exist at the date of such Loan.
25
<PAGE>
(c) No Material Adverse Change shall have occurred to, and no
event or circumstance shall have occurred that could cause a
Material Adverse Change to, Borrower's Consolidated financial
condition or businesses since the date of this Agreement. (d) Each
Restricted Person shall have performed and complied with all
agreements and conditions required in the Loan Documents to be
performed or complied with by it on or prior to the date of such
Loan.
(e) The making of such Loan shall not be prohibited by any
Law and shall not subject any Lender to any penalty or other
onerous condition under or pursuant to any such Law.
(f) Agent shall have received all documents and instruments
which Agent has then requested, in addition to those described in
Sections 4.1 and 4.2, as to (i) the accuracy and validity of or
compliance with all representations, warranties and covenants made
by any Restricted Person in this Agreement and the other Loan
Documents, (ii) the satisfaction of all conditions contained herein
or therein, and (iii) all other matters pertaining hereto and
thereto. All such additional documents and instruments shall be
satisfactory to Agent in form, substance and date.
(g) Agent shall have received payment of all commitment,
facility, agency and other fees required to be paid to any Bank
Party pursuant to any Loan Documents or any commitment agreement
heretofore entered into.
ARTICLE V - REPRESENTATIONS AND WARRANTIES
To confirm each Bank Party's understanding concerning Restricted Persons
and Restricted Persons' businesses, properties and obligations and to induce
each Bank Party to enter into this Agreement and to extend credit hereunder,
Borrower represents and warrants to each Bank Party that:
Section 5.1. NO DEFAULT. No Restricted Person is in default in the
performance of any of the covenants and agreements contained in any Loan
Document. No event has occurred and is continuing which constitutes a Default.
Section 5.2. ORGANIZATION AND GOOD STANDING. Each Restricted Person is
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of organization, having all powers required to carry on its
business and enter into and carry out the transactions contemplated hereby.
Each Restricted Person is duly qualified, in good standing, and authorized to do
business in all other jurisdictions within the United States wherein the
character of the properties owned or held by it or the nature of the business
transacted by it makes such qualification necessary, except where such failure
to qualify would not cause a Material Adverse Change. Each Restricted Person
has taken all actions and procedures customarily taken in order to enter, for
the purpose of conducting business or owning property, each jurisdiction outside
the
26
<PAGE>
United States wherein the character of the properties owned or held by it or
the nature of the business transacted by it makes such actions and procedures
desirable.
Section 5.3. AUTHORIZATION. Each Restricted Person has duly taken all
action necessary to authorize the execution and delivery by it of the Loan
Documents to which it is a party and to authorize the consummation of the
transactions contemplated thereby and the performance of its obligations
thereunder. Borrower is duly authorized to borrow funds hereunder.
Section 5.4. NO CONFLICTS OR CONSENTS. The execution and delivery by the
various Restricted Persons of the Loan Documents to which each is a party, the
performance by each of its obligations under such Loan Documents, and the
consummation of the transactions contemplated by the various Loan Documents, do
not and will not (i) conflict with any provision of (1) any Law, (2) the
organizational documents of any Restricted Person, or (3) any agreement,
judgment, license, order or permit applicable to or binding upon any Restricted
Person, (ii) result in the acceleration of any Indebtedness owed by any
Restricted Person, or (iii) result in or require the creation of any Lien upon
any assets or properties of any Restricted Person except as expressly
contemplated in the Loan Documents. Except as expressly contemplated in the
Loan Documents no consent, approval, authorization or order of, and no notice to
or filing with, any Tribunal or third party is required in connection with the
execution, delivery or performance by any Restricted Person of any Loan Document
or to consummate any transactions contemplated by the Loan Documents.
Section 5.5. ENFORCEABLE OBLIGATIONS. This Agreement is, and the other
Loan Documents when duly executed and delivered will be, legal, valid and
binding obligations of each Restricted Person which is a party hereto or
thereto, enforceable in accordance with their terms except as such enforcement
may be limited by bankruptcy, insolvency or similar Laws of general application
relating to the enforcement of creditors' rights.
Section 5.6. INITIAL FINANCIAL STATEMENTS. Borrower has heretofore
delivered to Agent true, correct and complete copies of the Initial Financial
Statements. The Initial Financial Statements fairly present Borrower's
Consolidated financial position at the respective dates thereof and the
Consolidated results of Borrower's operations and Borrower's Consolidated cash
flows for the respective periods thereof. Since the date of the annual Initial
Financial Statements no Material Adverse Change has occurred. All Initial
Financial Statements were prepared in accordance with GAAP.
Section 5.7. OTHER OBLIGATIONS AND RESTRICTIONS. Other Obligations
and Restrictions. No Restricted Person has any outstanding Liabilities of
any kind (including contingent obligations, tax assessments, and unusual
forward or long-term commitments) which is, in the aggregate, material to
Borrower or material with respect to Borrower's Consolidated financial
condition and not shown in the Initial Financial Statements or disclosed in
the Disclosure Schedule or a Disclosure Report. Except as shown in the
Initial Financial Statements or disclosed in the Disclosure Schedule or a
Disclosure Report, no Restricted Person is subject to or restricted by any
franchise, contract, deed, charter restriction, or other instrument or
restriction which could cause a Material Adverse Change.
27
<PAGE>
Section 5.8. FULL DISCLOSURE. No certificate, statement or other
information delivered herewith or heretofore by any Restricted Person to any
Bank Party in connection with the negotiation of this Agreement or in connection
with any transaction contemplated hereby contains any untrue statement of a
material fact or omits to state any material fact known to any Restricted Person
(other than industry-wide risks normally associated with the types of businesses
conducted by Restricted Persons) necessary to make the statements contained
herein or therein not misleading as of the date made or deemed made. There is
no fact known to any Restricted Person that has not been disclosed to each Bank
Party in writing which could cause a Material Adverse Change.
Section 5.9. LITIGATION. Except as disclosed in the Initial Financial
Statements or in the Disclosure Schedule: (a) there are no actions, suits or
legal, equitable, arbitrative or administrative proceedings pending, or to the
knowledge of any Restricted Person threatened, against any Restricted Person
before any Tribunal which could cause a Material Adverse Change, and (b) there
are no outstanding judgments, injunctions, writs, rulings or orders by any such
Tribunal against any Restricted Person or any Restricted Person's stockholders,
partners, directors or officers which could cause a Material Adverse Change.
Section 5.10. LABOR DISPUTES AND ACTS OF GOD. Except as disclosed in the
Disclosure Schedule or a Disclosure Report, neither the business nor the
properties of any Restricted Person has been affected by any fire, explosion,
accident, strike, lockout or other labor dispute, drought, storm, hail,
earthquake, embargo, act of God or of the public enemy or other casualty
(whether or not covered by insurance), which could cause a Material Adverse
Change.
Section 5.11. ERISA PLANS AND LIABILITIES. All currently existing ERISA
Plans are listed in the Disclosure Schedule or a Disclosure Report. Except as
disclosed in the Initial Financial Statements or in the Disclosure Schedule or a
Disclosure Report, no Termination Event has occurred with respect to any ERISA
Plan and all ERISA Affiliates are in compliance with ERISA in all material
respects. No ERISA Affiliate is required to contribute to, or has any other
absolute or contingent liability in respect of, any "multiemployer plan" as
defined in Section 4001 of ERISA. Except as set forth in the Disclosure
Schedule or a Disclosure Report: (i) no "accumulated funding deficiency" (as
defined in Section 412(a) of the Internal Revenue Code of 1986, as amended)
exists with respect to any ERISA Plan, whether or not waived by the Secretary of
the Treasury or his delegate, and (ii) the current value of each ERISA Plan's
benefits does not exceed the current value of such ERISA Plan's assets available
for the payment of such benefits by more than $500,000.
Section 5.12. ENVIRONMENTAL AND OTHER LAWS. Except as disclosed in the
Disclosure Schedule or a Disclosure Report: (a) Restricted Persons are
conducting their businesses in material compliance with all applicable Laws,
including Environmental Laws, and have and are in material compliance with all
licenses and permits required under any such Laws; (b) none of the operations or
properties of any Restricted Person is the subject of federal, state or local
investigation evaluating whether any material remedial action is needed to
respond to a release of any Hazardous Materials into the environment or to the
improper storage or disposal (including storage or disposal at offsite
locations) of any Hazardous Materials; (c) no Restricted Person (and to the best
knowledge of Borrower, no other Person) has filed any notice under any Law
28
<PAGE>
indicating that any Restricted Person is responsible for the improper release
into the environment, or the improper storage or disposal, of any material
amount of any Hazardous Materials or that any Hazardous Materials have been
improperly released, or are improperly stored or disposed of, upon any
property of any Restricted Person; (d) no Restricted Person has transported
or arranged for the transportation of any Hazardous Material to any location
which is (i) listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
listed for possible inclusion on such National Priorities List by the
Environmental Protection Agency in its Comprehensive Environmental Response,
Compensation and Liability Information System List, or listed on any similar
state list or (ii) the subject of federal, state or local enforcement actions
or other investigations which may lead to claims against any Restricted
Person for clean-up costs, remedial work, damages to natural resources or for
personal injury claims (whether under Environmental Laws or otherwise); and
(e) no Restricted Person otherwise has any known material contingent
liability under any Environmental Laws or in connection with the release into
the environment, or the storage or disposal, of any Hazardous Materials.
Section 5.13. NAMES AND PLACES OF BUSINESS. No Restricted Person has,
during the preceding five years, had, been known by, or used any other trade
or fictitious name, except as disclosed in the Disclosure Schedule. Except
as otherwise indicated in the Disclosure Schedule or a Disclosure Report, the
chief executive office and principal place of business of each Restricted
Person are (and for the preceding five years have been) located at the
address of Borrower set out on the signature page hereto. Except as
indicated in the Disclosure Schedule or a Disclosure Report, no Restricted
Person has any other office or place of business.
Section 5.14. BORROWER'S SUBSIDIARIES. Borrower does not presently
have any Subsidiary or own any stock in any other corporation or association
except those listed in the Disclosure Schedule or a Disclosure Report.
Neither Borrower nor any Restricted Person is a member of any general or
limited partnership, joint venture or association of any type whatsoever
except those listed in the Disclosure Schedule or a Disclosure Report.
Except as otherwise revealed in a Disclosure Report, Borrower owns, directly
or indirectly, the equity interest in each of its Subsidiaries which is
indicated in the Disclosure Schedule.
Section 5.15. TITLE TO PROPERTIES; LICENSES. Each Restricted Person
has good and defensible title to all of its material properties and assets,
free and clear of all Liens other than Permitted Liens and of all material
impediments to the use of such properties and assets in such Restricted
Person's business. To the extent that the failure to do otherwise would
cause a Material Adverse Change, each Restricted Person possesses all
licenses, permits, franchises, patents, copyrights, trademarks and trade
names, and other intellectual property (or otherwise possesses the right to
use such intellectual property without violation of the rights of any other
Person) which are necessary to carry out its business as presently conducted
and as presently proposed to be conducted hereafter, and no Restricted Person
is in violation in any material respect of the terms under which it possesses
such intellectual property or the right to use such intellectual property.
Section 5.16. GOVERNMENT REGULATION. Neither Borrower nor any other
Restricted Person owing Obligations is subject to regulation under the Public
Utility Holding Company Act
29
<PAGE>
of 1935, the Federal Power Act, the Investment Company Act of 1940 (as any of
the preceding acts have been amended) or any other Law which regulates the
incurring by such Person of Indebtedness, including Laws relating to common
contract carriers or the sale of electricity, gas, steam, water or other
public utility services.
Section 5.17. INSIDER. No Restricted Person, nor any Person having
"control" (as that term is defined in 12 U.S.C. Section 375b(9) or in
regulations promulgated pursuant thereto) of any Restricted Person, is a
"director" or an "executive officer" or "principal shareholder" (as those terms
are defined in 12 U.S.C. Section 375b(8) or (9) or in regulations promulgated
pursuant thereto) of any Bank Party, of a bank holding company of which any Bank
Party is a Subsidiary or of any Subsidiary of a bank holding company of which
any Bank Party is a Subsidiary.
Section 5.18. SOLVENCY. Upon giving effect to the issuance of the Notes,
the execution of the Loan Documents by Borrower and the consummation of the
transactions contemplated hereby, Borrower will be solvent (as such term is used
in applicable bankruptcy, liquidation, receivership, insolvency or similar
laws).
ARTICLE VI - AFFIRMATIVE COVENANTS OF BORROWER
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party to
enter into this Agreement and extend credit hereunder, Borrower warrants,
covenants and agrees that until the full and final payment of the Obligations
and the termination of this Agreement, unless Majority Lenders have previously
agreed otherwise:
Section 6.1. PAYMENT AND PERFORMANCE. Borrower will pay all amounts due
under the Loan Documents in accordance with the terms thereof and will observe,
perform and comply with every covenant, term and condition expressed or implied
in the Loan Documents. Borrower will cause each other Restricted Person to
observe, perform and comply with every such term, covenant and condition.
Section 6.2. BOOKS, FINANCIAL STATEMENTS AND REPORTS. Each Restricted
Person will at all times maintain accurate books of account and records.
Borrower will maintain and will cause its Subsidiaries to maintain a standard
system of accounting, will maintain its Fiscal Year, and will furnish the
following statements and reports to each Bank Party at Borrower's expense:
(a) As soon as available, and in any event within 120 days
after the end of each Fiscal Year, complete Consolidated financial
statements of Borrower together with all notes thereto, prepared in
reasonable detail in accordance with GAAP, together with an
unqualified opinion, based on an audit using generally accepted
auditing standards, by Coopers & Lybrand LLP, or other "big six"
independent certified public accountants selected by Borrower,
stating that such Consolidated financial statements have been so
prepared. These financial statements shall contain a Consolidated
balance sheet as of the end of such Fiscal Year and Consolidated
statements of earnings, of cash flows, and of changes in owners'
equity for such Fiscal Year, each setting forth in comparative form
the
30
<PAGE>
corresponding figures for the preceding Fiscal Year. In addition,
within 120 days after the end of each Fiscal Year Borrower will
furnish a management letter signed by such accountants.
(b) As soon as available, and in any event within 45 days
after the end of each Fiscal Quarter (including each Fiscal Quarter
ended December 31), Borrower's Consolidated balance sheets as of
the end of such Fiscal Quarter and Consolidated statements of
Borrower's earnings and cash flows for the period from the
beginning of the then current Fiscal Year to the end of such Fiscal
Quarter, all in reasonable detail and prepared in accordance with
GAAP, subject to changes resulting from normal year-end
adjustments.
(c) As soon as available, and in any event within 30 days
after the end of each month, Borrower's Consolidated balance sheet
as of the end of such month and Consolidated statements of
Borrower's earnings and cash flows for the period from the
beginning of the then current Fiscal Year to the end of such month,
all in reasonable detail and prepared in accordance with GAAP,
subject to changes resulting from normal year-end adjustments.
(d) As soon as available, and in any event within 30 days
after the end of each month, a completed Cumulative Acquisition
Summary Matrix in the form of Exhibit H attached hereto;
(e) Promptly upon their becoming available, copies of all
financial statements and proxy statements sent by any Restricted
Person to its stockholders and all registration statements,
periodic reports and other statements and schedules filed by any
Restricted Person with any securities exchange, the Securities and
Exchange Commission or any similar governmental authority.
(f) As soon as available, and in any event by the last day of
each Fiscal Year, a business and financial plan for Borrower (in
form reasonably satisfactory to Agent) for the following Fiscal
Year, prepared by a senior financial officer thereof, setting forth
yearly financial projections and budgets.
Section 6.3. COMPLIANCE CERTIFICATE. With the financial statements
described in subsections (a) and (b) of Section 6.2, Borrower shall deliver
to Agent a certificate in the form of Exhibit D signed by the chief financial
officer of Borrower stating that the financial statements are accurate and
complete (subject to normal year-end adjustments), stating that he has
reviewed the Loan Documents, containing calculations showing compliance (or
non-compliance) at the end of such Fiscal Quarter with any financial tests
set forth herein at the end of each Fiscal Quarter and the Borrowing
Availability for the succeeding Fiscal Quarter, and stating that no Default
exists at the end of such period or at the time of such certificate or
specifying the nature and period of existence of any such Default.
Section 6.4. OTHER INFORMATION AND INSPECTIONS. Each Restricted Person
will furnish to each Bank Party any information which Agent may from time to
time reasonably request in
31
<PAGE>
writing concerning any covenant, provision or condition of the Loan Documents
or any matter in connection with Restricted Persons' businesses and
operations. Each Restricted Person will permit representatives appointed by
Agent (including independent accountants, auditors, agents, attorneys,
appraisers and any other Persons) to visit and inspect during normal business
hours any of such Restricted Person's property, including its books of
account, other books and records, and any facilities or other business
assets, and to make extra copies therefrom and photocopies and photographs
thereof, and to write down and record any information such representatives
obtain, and each Restricted Person shall permit Agent or its representatives
to investigate and verify the accuracy of the information furnished to Agent
or any Lender in connection with the Loan Documents and to discuss all such
matters with its officers, employees and representatives.
Section 6.5. NOTICE OF MATERIAL EVENTS AND CHANGE OF ADDRESS. Borrower
will promptly notify each Bank Party in writing, stating that such notice is
being given pursuant to this Agreement, of:
(a) the occurrence of any Material Adverse Change,
(b) the occurrence of any Default,
(c) the acceleration of the maturity of any Indebtedness owed
by any Restricted Person or of any default by any Restricted Person
under any indenture, mortgage, agreement, contract or other
instrument to which any of them is a party or by which any of them
or any of their properties is bound, if such acceleration or
default could cause a Material Adverse Change,
(d) the occurrence of any Termination Event,
(e) any claim of $100,000 or more, any notice of potential
liability under any Environmental Laws which might exceed such
amount, or any other material adverse claim asserted against any
Restricted Person or with respect to any Restricted Person's
properties, and
(f) the filing of any suit or proceeding against any
Restricted Person in which an adverse decision could cause a
Material Adverse Change.
Upon the occurrence of any of the foregoing Restricted Persons will take
all necessary or appropriate steps to remedy promptly any such Material
Adverse Change, Default, acceleration, default or Termination Event, to
protect against any such adverse claim, to defend any such suit or
proceeding, and to resolve all controversies on account of any of the
foregoing. Borrower will also notify Agent and Agent's counsel in writing at
least twenty Business Days prior to the date that any Restricted Person
changes its name or the location of its chief executive office or principal
place of business or the place where it keeps its books and records
concerning the Collateral, furnishing with such notice any necessary
financing statement amendments or requesting Agent and its counsel to prepare
the same.
32
<PAGE>
Section 6.6. MAINTENANCE OF PROPERTIES. Each Restricted Person will
maintain, preserve, protect, and keep all Collateral and all other property
used or useful in the conduct of its business in good condition (reasonable
wear and tear excepted) and in compliance with all applicable Laws in all
material respects, and will from time to time make all repairs, renewals and
replacements needed to enable the business and operations carried on in
connection therewith to be promptly and advantageously conducted at all times.
Section 6.7. MAINTENANCE OF EXISTENCE AND QUALIFICATIONS. Each
Restricted Person will maintain and preserve its existence and its rights and
franchises in full force and effect and will qualify to do business in all
states or jurisdictions where required by applicable Law, except where the
failure to qualify will not cause a Material Adverse Change.
Section 6.8. PAYMENT OF TRADE LIABILITIES, TAXES, ETC. Each Restricted
Person will (a) timely file all required tax returns (or obtain extension
thereof); (b) timely pay all taxes, assessments, and other governmental
charges or levies imposed upon it or upon its income, profits or property;
(c) within ninety (90) days after the same becomes due pay all Liabilities
owed by it on ordinary trade terms to vendors, suppliers and other Persons
providing goods and services used by it in the ordinary course of its
business; (d) pay and discharge when due all other Liabilities now or
hereafter owed by it; and (e) maintain appropriate accruals and reserves for
all of the foregoing in accordance with GAAP. Each Restricted Person may,
however, delay paying or discharging any of the foregoing so long as it is in
good faith contesting the validity thereof by appropriate proceedings and has
set aside on its books adequate reserves therefor.
Section 6.9. INSURANCE. Each Restricted Person will keep or cause to
be kept insured by financially sound and reputable insurers its property in
accordance with the Insurance Schedule. Borrower will maintain the
additional insurance coverage as described in the respective Security
Documents. Upon demand by Agent any insurance policies covering Collateral
shall be endorsed (a) to provide for payment of losses to Agent as its
interests may appear, (b) to provide that such policies may not be canceled
or reduced or affected in any material manner for any reason without fifteen
days prior notice to Agent, (c) to provide for any other matters specified in
any applicable Security Document or which Agent may reasonably require; and
(d) to provide for insurance against fire, casualty and any other hazards
normally insured against, in the amount of the full value (less a reasonable
deductible not to exceed amounts customary in the industry for similarly
situated businesses and properties) of the property insured. Each Restricted
Person shall at all times maintain insurance against its liability for injury
to persons or property in accordance with the Insurance Schedule, which
insurance shall be by financially sound and reputable insurers. Without
limiting the foregoing, each Restricted Person shall at all time maintain
liability insurance in the amounts set out on the Insurance Schedule.
Section 6.10. PERFORMANCE ON BORROWER'S BEHALF. If any Restricted
Person fails to pay any taxes, insurance premiums, expenses, attorneys' fees
or other amounts it is required to pay under any Loan Document, Agent may pay
the same. Borrower shall reimburse Agent for any such payments within five
(5) business days of notice of such payment and each amount paid by Agent
shall constitute an Obligation owed hereunder which is due and payable on the
date such amount is paid by Agent.
33
<PAGE>
Section 6.11. INTEREST. Borrower hereby promises to each Bank Party to
pay interest at the Default Rate on all Obligations (including Obligations to
pay fees or to reimburse or indemnify any Bank Party) which Borrower has in
this Agreement promised to pay to such Bank Party and which are not paid when
due. Such interest shall accrue from the date such Obligations become due
until they are paid.
Section 6.12. COMPLIANCE WITH AGREEMENTS AND LAW. Each Restricted
Person will perform all material obligations it is required to perform under
the terms of each indenture, mortgage, deed of trust, security agreement,
lease, franchise, agreement, contract or other instrument or obligation to
which it is a party or by which it or any of its properties is bound. Each
Restricted Person will conduct its business and affairs in compliance with
all Laws applicable thereto in all material respects.
Section 6.13. ENVIRONMENTAL MATTERS; ENVIRONMENTAL REVIEWS.
(a) Each Restricted Person will comply in all material respects with
all Environmental Laws now or hereafter applicable to such Restricted Person
and shall obtain, at or prior to the time required by applicable
Environmental Laws, all environmental, health and safety permits, licenses
and other authorizations necessary for its operations and will maintain such
authorizations in full force and effect.
(b) Borrower will promptly furnish to Agent all written notices of
violation, orders, claims, citations, complaints, penalty assessments, suits
or other proceedings received by Borrower, or of which it has notice, pending
or threatened against Borrower, by any governmental authority with respect to
any alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations in connection with its ownership or use
of its properties or the operation of its business.
(c) Borrower will promptly furnish to Agent all requests for
information, notices of claim, demand letters, and other notifications,
received by Borrower in connection with its ownership or use of its
properties or the conduct of its business, relating to potential
responsibility with respect to any investigation or clean-up of Hazardous
Material at any location.
Section 6.14. EVIDENCE OF COMPLIANCE. Each Restricted Person will
furnish to each Bank Party at such Restricted Person's or Borrower's expense
all evidence which Agent from time to time reasonably requests in writing as
to the accuracy and validity of or compliance with all representations,
warranties and covenants made by any Restricted Person in the Loan Documents,
the satisfaction of all conditions contained therein, and all other matters
pertaining thereto.
Section 6.15. AGREEMENT TO DELIVER SECURITY DOCUMENTS. Borrower agrees
to deliver and to cause each other Restricted Person to deliver, to further
secure the Obligations whenever requested by Agent in its sole and absolute
discretion, deeds of trust, mortgages, chattel mortgages, security
agreements, financing statements and other Security Documents in form and
substance satisfactory to Agent for the purpose of granting, confirming, and
perfecting first and
34
<PAGE>
prior liens or security interests in (i) any real or personal property which
is at such time Collateral or which was intended to be Collateral pursuant to
any Security Document previously executed and not then released by Agent and
(ii) any management services agreements entered into by any Subsidiary of
Borrower and all accounts and general intangibles arising thereunder or with
respect thereto (unless prohibited by the terms thereof). Borrower will from
time to time deliver, and will cause each other Restricted Person from time
to time to deliver, to Agent any financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by Restricted Persons in form and
substance satisfactory to Agent, which Agent requests for the purpose of
perfecting, confirming, or protecting any Liens or other rights in Collateral
securing any Obligations.
Section 6.16. BANK ACCOUNTS; OFFSET. To secure the repayment of the
Obligations Borrower hereby grants to each Bank Party a security interest, a
lien, and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of any Bank Party at common law, under the Loan
Documents, or otherwise, and each of which shall be upon and against (a) any
and all moneys, securities or other property (and the proceeds therefrom) of
Borrower now or hereafter held or received by or in transit to any Bank Party
from or for the account of Borrower, whether for safekeeping, custody,
pledge, transmission, collection or otherwise, (b) any and all deposits
(general or special, time or demand, provisional or final) of Borrower with
any Bank Party, and (c) any other credits and claims of Borrower at any time
existing against any Bank Party, including claims under certificates of
deposit. At any time and from time to time after the occurrence of any Event
of Default, each Bank Party is hereby authorized to foreclose upon, or to
offset against the Obligations then due and payable (in either case without
notice to Borrower), any and all items hereinabove referred to. The remedies
of foreclosure and offset are separate and cumulative, and either may be
exercised independently of the other without regard to procedures or
restrictions applicable to the other.
Section 6.17. GUARANTIES OF BORROWER'S SUBSIDIARIES. Each Subsidiary
of Borrower now existing or created, acquired or coming into existence after
the date hereof shall, promptly upon request by Agent, execute and deliver to
Agent an absolute and unconditional guaranty of the timely repayment of the
Obligations and the due and punctual performance of the obligations of
Borrower hereunder, which guaranty shall be satisfactory to Agent in form and
substance. Each Subsidiary of Borrower existing on the date hereof shall duly
execute and deliver such a guaranty prior to the making of any Loan
hereunder. Borrower will cause each of its Subsidiaries to deliver to Agent,
simultaneously with its delivery of such a guaranty, written evidence
satisfactory to Agent and its counsel that such Subsidiary has taken all
corporate or partnership action necessary to duly approve and authorize its
execution, delivery and performance of such guaranty and any other documents
which it is required to execute.
35
<PAGE>
ARTICLE VII - NEGATIVE COVENANTS OF BORROWER
To conform with the terms and conditions under which each Bank Party is
willing to have credit outstanding to Borrower, and to induce each Bank Party
to enter into this Agreement and make the Loans, Borrower warrants, covenants
and agrees that until the full and final payment of the Obligations and the
termination of this Agreement, unless Majority Lenders have previously agreed
otherwise:
Section 7.1. INDEBTEDNESS. No Restricted Person will in any manner owe
or be liable for Indebtedness except:
(a) the Obligations.
(b) Subordinated Debt.
(c) Indebtedness outstanding under the instruments and agreements
described on the Disclosure Schedule, excluding any renewals or extensions of
such Indebtedness.
(d) purchase money Indebtedness or other acquired or assumed
Indebtedness in connection with a Dental Practice Acquisition in an aggregate
principal amount not to exceed:
(i) from the Closing Date through but not including June 1, 1999,
$1,500,000;
(ii) from and including June 1, 1999 through but not including June 1,
2000, $2,500,000; and
(iii) from and after June 1, 2000, $3,500,000.
Section 7.2. LIMITATION ON LIENS. No Restricted Person will create,
assume or permit to exist any Lien upon any of the properties or assets which
it now owns or hereafter acquires, except, to the extent not otherwise
forbidden by the Security Documents the following ("Permitted Liens"):
(a) Liens which secure Obligations only.
(b) Statutory Liens for taxes, statutory mechanics' and materialmen's
Liens incurred in the ordinary course of business, landlord Liens incurred in
the ordinary course of business, pledges and deposits relating to workers'
compensation incurred in the ordinary course of business, and other similar
Liens incurred in the ordinary course of business, provided such Liens do not
secure Indebtedness and secure only other obligations which are not
delinquent or which are being contested as provided in Section 6.7.
(c) Liens on assets acquired with proceeds of Indebtedness described
in Section 7.1(d) securing only the Indebtedness incurred for the purchase of
such asset.
(d) Liens on equipment (i) acquired in connection with Dental Practice
Acquisitions during the month of March 1998, the value of which equipment
does not exceed $100,000 and
36
<PAGE>
(ii) acquired in connection with a Dental Practice Acquisition for a period
not to exceed twenty days from the effective date of such Dental Practice
Acquisition.
Section 7.3. HEDGING CONTRACTS. No Restricted Person will be a party
to or in any manner be liable on any forward, future, swap or hedging
contract except for contracts to provide interest rate protection for the
Obligations.
Section 7.4. LIMITATION ON MERGERS, ISSUANCES OF SECURITIES. Except as
expressly provided in this subsection or in connection with Dental Practice
Acquisitions, no Restricted Person will merge or consolidate with or into any
other business entity. Any Subsidiary of Borrower may, however, be merged
into or consolidated with (i) another Subsidiary of Borrower, so long as a
Guarantor is the surviving business entity, or (ii) Borrower, so long as
Borrower is the surviving business entity. Borrower will not issue any
additional shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other
securities, except Acceptable Stock or options, warrants or other rights to
acquire Acceptable Stock. No Subsidiary of Borrower will issue any
additional shares of its capital stock or other securities or any options,
warrants or other rights to acquire such additional shares or other
securities except to Borrower and only to the extent not otherwise forbidden
under the terms hereof. No Subsidiary of Borrower which is a partnership
will allow any diminution of Borrower's interest (direct or indirect) therein.
Section 7.5. LIMITATION ON SALES OF PROPERTY. No Restricted Person
will sell, transfer, lease, exchange, alienate or dispose of any of its
material assets or properties or any material interest therein except
equipment which is worthless or obsolete or which is replaced by equipment of
equal suitability and value or is no longer needed for such Restricted
Person's business. Neither Borrower nor any of Borrower's Subsidiaries will
sell, transfer or otherwise dispose of capital stock of any of Borrower's
Subsidiaries except that any Subsidiary of Borrower may sell or issue its own
capital stock to the extent not otherwise prohibited hereunder. No
Restricted Person will discount, sell, pledge or assign any notes payable to
it, accounts receivable or future income except to the extent expressly
permitted under the Loan Documents.
Section 7.6. LIMITATION ON DIVIDENDS AND REDEMPTIONS. No Restricted
Person will declare or pay any dividends on, or make any other distribution
in respect of, any class of its capital stock or any partnership or other
interest in it, nor will any Restricted Person directly or indirectly make
any capital contribution to or purchase, redeem, acquire or retire any shares
of the capital stock of or partnership interests in any Restricted Person
(whether such interests are now or hereafter issued, outstanding or created),
or cause or permit any reduction or retirement of the capital stock of any
Restricted Person; provided that Borrower may make dividends payable only in
Acceptable Stock and Subsidiaries of Borrower may make dividends payable only
to Borrower.
Section 7.7. LIMITATION ON INVESTMENTS AND NEW BUSINESSES. No
Restricted Person will (i) make any expenditure or commitment or incur any
obligation or enter into or engage in any transaction except in the ordinary
course of business, (ii) engage directly or indirectly in any business or
conduct any operations except in connection with or incidental to its present
37
<PAGE>
businesses and operations, (iii) make any acquisitions of or capital
contributions to or other investments in any Person, other than Permitted
Investments.
Section 7.8. LIMITATION ON CREDIT EXTENSIONS. Except for Permitted
Investments, no Restricted Person will extend credit, make advances or make
loans other than normal and prudent extensions of credit to customers buying
goods and services in the ordinary course of business, which extensions shall
not be for longer periods than those extended by similar businesses operated
in a normal and prudent manner.
Section 7.9. TRANSACTIONS WITH AFFILIATES. No Restricted Person will
engage in any material transaction with any of its Affiliates on terms which
are less favorable to it than those which would have been obtainable at the
time in arm's-length dealing with Persons other than such Affiliates,
provided that (a) except for the limitations set forth in the following
clause (b), such restrictions shall not apply to transactions among Borrower
and its wholly owned Subsidiaries that have guaranteed the Obligations and
(b) Borrower shall not extend credit or make advances or loans to Affiliates
which have an aggregate outstanding principal balance in excess of $500,000;
provided, however, that Dental Practice Acquisitions by Affiliates shall not
be included in the calculations made pursuant to this Section 7.9, but shall
be subject to all of the provisions of Section 7.21.
Section 7.10. CERTAIN CONTRACTS; AMENDMENTS; MULTIEMPLOYER ERISA PLANS.
Except as expressly provided for in the Loan Documents, no Restricted Person
will, directly or indirectly, enter into, create, or otherwise allow to exist
any contract or other consensual restriction on the ability of any Subsidiary
of Borrower to: (a) pay dividends or make other distributions to Borrower,
(b) to redeem equity interests held in it by Borrower, (c) to repay loans and
other indebtedness owing by it to Borrower, or (d) to transfer any of its
assets to Borrower. No Restricted Person will amend or permit any amendment
to any contract or lease which releases, qualifies, limits, makes contingent
or otherwise detrimentally affects the rights and benefits of Agent or any
Lender under or acquired pursuant to any Security Documents. No ERISA
Affiliate will incur any obligation to contribute to any "multiemployer plan"
as defined in Section 4001 of ERISA.
Section 7.11. DENTAL BASE. The number of dentists employed by Dental
Practice Groups covered by management service agreements with the Restricted
Persons as of the end of each Fiscal Quarter shall not be less than eighty
percent of the number of dentists so employed as of the date hereof.
Section 7.12. CONTINUITY OF FOUNDING PRACTICES AND AFFILIATED PRACTICES.
The Founding Practices and the Affiliated Practices (as defined below) shall
at all times own, collectively, at least twenty-five percent (25%) of the
capital stock of Borrower. As used in this section, "Founding Practices"
means the Dental Practice Groups that acquired capital stock of Borrower on
the date of Borrower's initial public offering, and "Affiliated Practice
Groups" means the Dental Practice Groups that acquire capital stock of
Borrower in connection with the acquisition or merger of such groups after
the date hereof.
38
<PAGE>
Section 7.13. CAPITAL EXPENDITURES. Borrower's Consolidated Capital
Expenditures shall not exceed:
(i) for the Fiscal Year of Borrower ending on March 31, 1999,
$1,500,000;
(ii) for the Fiscal Year of Borrower ending on March 31, 2000,
$2,500,000;
(iii) for any Fiscal Year of Borrower ending after March 31, 2000,
$3,500,000;
Section 7.14. CURRENT RATIO. As of the end of each Fiscal Quarter, the
ratio of Borrower's Consolidated current assets (less unbilled patient
revenues and management fees not paid within 30 days of the date of billing)
to Borrower's Consolidated current liabilities, all determined in accordance
with GAAP, shall not be less than 1.5 to 1.0. For the purpose of calculating
"current assets," Borrower may include up to $2,000,000 of unused Borrowing
Availability as "current assets."
Section 7.15. TOTAL FUNDED DEBT TO CAPITALIZATION RATIO. As of the end
of each Fiscal Quarter, the ratio of (a) Total Funded Debt as of the end of
such Fiscal Quarter, to (b) the sum of (i) Total Funded Debt as of the end of
such Fiscal Quarter plus (ii) shareholders equity as of the end of such
Fiscal Quarter determined in accordance with GAAP, shall not be greater than
0.40 to 1.00.
Section 7.16. TOTAL FUNDED DEBT TO EBITDA RATIO. The ratio of (a)
Total Funded Debt as of the end of each Fiscal Quarter, to (b) EBITDA for the
two consecutive Fiscal Quarters then ended, multiplied by two, shall not be
greater than 3.5 to 1.00; provided that for purposes of calculating such
ratio for the Fiscal Quarter ending June 30, 1998, EBITDA shall be calculated
for that Fiscal Quarter only and shall be multiplied by four.
Section 7.17. TOTAL SENIOR FUNDED DEBT TO EBITDA RATIO. The ratio of
(a) Total Senior Funded Debt as of the end of each Fiscal Quarter, to (b)
EBITDA for the two consecutive Fiscal Quarters then ended, multiplied by two,
shall not be greater than 3.0 to 1.00; provided that for purposes of
calculating such ratio for the Fiscal Quarter ending June 30, 1998, EBITDA
shall be calculated for that Fiscal Quarter only and shall be multiplied by
four.
Section 7.18. FIXED CHARGE RATIO. As of the end of each Fiscal
Quarter the ratio of (a) EBITDA for the two consecutive Fiscal Quarters then
ended to (b) Fixed Charges for such Fiscal Quarters, shall not be less than
1.3 to 1.0; provided that for purposes of calculating such ratio for the
Fiscal Quarter ending June 30, 1998, EBITDA shall be calculated for that
Fiscal Quarter only and shall be multiplied by four.
Section 7.19. DEBT SERVICE COVERAGE RATIO. As of the end of each
Fiscal Quarter, the ratio of (a) Borrower's EBITDA for the two consecutive
Fiscal Quarters then ended, multiplied by two, to (b) the sum of (i)
twenty-five percent (25%) of the Obligations then outstanding; (ii) scheduled
principal payments on all other Indebtedness due during the next four Fiscal
Quarters, and (iii) interest that was due on all Total Funded Debt during the
preceding four consecutive Fiscal Quarters, shall not be less than 1.50 to
1.0
39
<PAGE>
Section 7.20. NET WORTH. Borrower's Consolidated Net Worth as of the
end of each Fiscal Quarter, shall not be less than $10,000,000 plus the sum
(a) seventy-five percent (75 %) of Borrower's cumulative net income (but not
losses) earned from March 31, 1998 to the end of such Fiscal Quarter , (b)
one hundred percent (100%) of the net proceeds of Additional Equity and (c)
one hundred percent (100%) of net capital contributions to Borrower made
after May 31, 1998.
Section 7.21. DENTAL PRACTICE ACQUISITIONS. Borrower shall not make
any Dental Practice Acquisition unless it complies with the following:
(a) Borrower shall not make any single acquisition of a dental practice
management company for consideration in excess of $1,000,000 without the
prior written consent of Majority Lenders.
(b) If the aggregate amount of consideration paid or payable by
Borrower for all acquisitions of Dental Practice Groups during any Specified
Period (as defined below), is less than $25,000,000, Borrower shall not make
any single acquisition of a Dental Practice Group for consideration in excess
of $4,000,000 without the prior written consent of Majority Lenders. As used
herein, "Specified Period" means each June 1 of each year until May 30 of the
next succeeding year.
(c) If the aggregate amount of consideration paid or payable by
Borrower for all acquisitions of Dental Practice Groups during any Specified
Period, is equal to or greater than $25,000,000, Borrower shall not make any
single acquisition of a Dental Practice Group for consideration in excess of
$2,500,000 without the prior written consent of Majority Lenders.
(d) If such acquisition requires the consent of Majority Lenders,
Borrower shall have furnished Agent the information required in the
Acquisition Information Schedule attached hereto as Schedule 4-A.
(e) If such acquisition does not require the consent of Majority
Lenders, but the purchase price of such acquisition is financed in whole or
in part by any funds advanced to Borrower pursuant to this Agreement,
Borrower shall have furnished Agent the information required in the
Acquisition Information Schedule attached hereto as Schedule 4-B.
(f) If no Obligations are outstanding on the date of an acquisition
described in subsections (a), (b), (c), (d) and (e) above, and no Loan is
made in connection with such acquisition, the provisions of such subsections
shall not apply.
(g) If such acquisition requires the consent of Majority Lenders and
Agent receives a written request for such consent from Borrower and fails to
respond to such consent request within five (5) Business Days from Agent's
receipt thereof, then the consent of Majority Lenders to such acquisition
shall be deemed approved.
40
<PAGE>
ARTICLE VIII - EVENTS OF DEFAULT AND REMEDIES
Section 8.1. EVENTS OF DEFAULT. Each of the following events
constitutes an Event of Default under this Agreement:
(a) Any Restricted Person fails to pay within two (2) Business Days,
any Obligation when due and payable, whether at a date for the payment of a
fixed installment or as a contingent or other payment becomes due and payable
or as a result of acceleration or otherwise;
(b) Any Restricted Person fails to pay any Obligation (other than the
Obligations in clause (a) above) when due and payable, whether at a date for
the payment of a fixed installment or as a contingent or other payment
becomes due and payable or as a result of acceleration or otherwise, within
two (2) Business Days after the same becomes due;
(c) Any "default" or "event of default" occurs under any Loan Document
which defines either such term, and the same is not remedied within the
applicable period of grace (if any) provided in such Loan Document;
(d) Any Restricted Person fails to duly observe, perform or comply with
any covenant, agreement or provision of Section 6.4 or Article VII;
(e) Any Restricted Person fails (other than as referred to in
subsections (a), (b), (c) or (d) above) to duly observe, perform or comply
with any covenant, agreement, condition or provision of any Loan Document,
and such failure remains unremedied for a period of thirty (30) days after
notice of such failure is given by Agent to Borrower;
(f) Any representation or warranty previously, presently or hereafter
made in writing by or on behalf of any Restricted Person in connection with
any Loan Document shall prove to have been false or incorrect in any material
respect on any date on or as of which made, or any Loan Document at any time
ceases to be valid, binding and enforceable as warranted in Section 5.5 for
any reason other than its release or subordination by Agent;
(g) Any Restricted Person fails to duly observe, perform or comply with
any agreement with any Person or any term or condition of any instrument, if
such agreement or instrument is materially significant to Borrower or to
Borrower and its subsidiaries on a Consolidated basis or materially
significant to any Guarantor, and such failure is not remedied within the
applicable period of grace (if any) provided in such agreement or instrument;
(h) Any Restricted Person (i) fails to pay any portion, when such
portion is due, of any of such Restricted Person's Indebtedness to Bank One
Texas, N.A. or any of its Affiliates, or any of such Related Person's other
Indebtedness in excess of $250,000, or (ii) breaches or defaults in the
performance of any agreement or instrument by which any Indebtedness
described in the immediately preceding clause (i) is issued, evidenced,
governed, or secured, and any such failure, breach or default continues
beyond any applicable period of grace provided therefor;
41
<PAGE>
(i) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Internal Revenue Code of 1986, as amended) in excess of
$100,000 exists with respect to any ERISA Plan, whether or not waived by the
Secretary of the Treasury or his delegate, or (ii) any Termination Event
occurs with respect to any ERISA Plan and the then current value of such
ERISA Plan's benefit liabilities exceeds the then current value of such ERISA
Plan's assets available for the payment of such benefit liabilities by more
than $100,000 (or in the case of a Termination Event involving the withdrawal
of a substantial employer, the withdrawing employer's proportionate share of
such excess exceeds such amount); and
(j) Any Restricted Person:
(i) suffers the entry against it of a judgment, decree or order
for relief by a Tribunal of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar Law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended, or
has any such proceeding commenced against it which remains undismissed
for a period of forty-five (45) days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar Law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for or
consents to the entry of an order for relief in an involuntary case
under any such Law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its inability
to pay) its debts as such debts become due; or takes corporate or other
action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within thirty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $250,000 (not covered by insurance
satisfactory to Agent in its discretion), unless the same is discharged
within forty-five (45) days after the date of entry thereof or an appeal
or appropriate proceeding for review thereof is taken within such period
and a stay of execution pending such appeal is obtained; or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any Tribunal against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant of
attachment or any similar process is not stayed or released within
forty-five (45) days after the entry or levy thereof or after any stay
is vacated or set aside; and
(k) Any Change of Control occurs;
42
<PAGE>
(l) Any Change of Management occurs;
(m) Any Material Adverse Change occurs.
Upon the occurrence of an Event of Default described in subsection (j)(i),
(j)(ii) or (j)(iii) of this section with respect to Borrower, all of the
Obligations shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice
of protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which
are hereby expressly waived by Borrower and each Restricted Person who at any
time ratifies or approves this Agreement. Upon any such acceleration, any
obligation of any Lender to make any further Loans shall be permanently
terminated. During the continuance of any other Event of Default, Agent at
any time and from time to time may (and upon written instructions from
Majority Lenders, Agent shall), without notice to Borrower or any other
Restricted Person, do either or both of the following: (1) terminate any
obligation of Lenders to make Loans hereunder, and (2) declare any or all of
the Obligations immediately due and payable, and all such Obligations shall
thereupon be immediately due and payable, without demand, presentment, notice
of demand or of dishonor and nonpayment, protest, notice of protest, notice
of intention to accelerate, declaration or notice of acceleration, or any
other notice or declaration of any kind, all of which are hereby expressly
waived by Borrower and each Restricted Person who at any time ratifies or
approves this Agreement.
Section 8.2. REMEDIES. If any Default shall occur and be continuing,
each Bank Party may protect and enforce its rights under the Loan Documents
by any appropriate proceedings, including proceedings for specific
performance of any covenant or agreement contained in any Loan Document, and
each Bank Party may enforce the payment of any Obligations due it or enforce
any other legal or equitable right which it may have. All rights, remedies
and powers conferred upon Bank Parties under the Loan Documents shall be
deemed cumulative and not exclusive of any other rights, remedies or powers
available under the Loan Documents or at Law or in equity.
ARTICLE IX - AGENT
Section 9.1. APPOINTMENT AND AUTHORITY. Each Lender which becomes a
party to this Agreement hereby irrevocably authorizes Agent, and Agent hereby
undertakes, to receive payments of principal, interest and other amounts due
hereunder as specified herein and to take all other actions and to exercise
such powers under the Loan Documents as are specifically delegated to Agent
by the terms hereof or thereof, together with all other powers reasonably
incidental thereto. The relationship of Agent to the other Bank Parties is
only that of one commercial lender acting as administrative agent for others,
and nothing in the Loan Documents shall be construed to constitute Agent a
trustee or other fiduciary for any holder of any of the Notes or of any
participation therein nor to impose on Agent duties and obligations other
than those expressly provided for in the Loan Documents. With respect to any
matters not expressly provided for in the Loan Documents and any matters
which the Loan Documents place within the discretion of Agent, Agent shall
not be required to exercise any discretion or take any action,
43
<PAGE>
and it may request instructions from Lenders with respect to any such matter,
in which case it shall be required to act or to refrain from acting (and
shall be fully protected and free from liability to all Lenders in so acting
or refraining from acting) upon the instructions of Majority Lenders
(including itself), provided, however, that Agent shall not be required to
take any action which exposes it to a risk of personal liability that it
considers unreasonable or which is contrary to the Loan Documents or to
applicable Law. Upon receipt by Agent from Borrower of any communication
calling for action on the part of Lenders or upon notice from any other Bank
Party to Agent of any Default or Event of Default, Agent shall promptly
notify each other Bank Party thereof.
Section 9.2. EXCULPATION, AGENT'S RELIANCE, ETC..2. Exculpation,
Agent's Reliance, Etc. Neither Agent nor any of its directors, officers,
agents, attorneys, or employees shall be liable for any action taken or
omitted to be taken by any of them under or in connection with the Loan
Documents, INCLUDING THEIR NEGLIGENCE OF ANY KIND, except that each shall be
liable for its own gross negligence or willful misconduct. Without limiting
the generality of the foregoing, Agent (a) may treat the payee of any Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof in accordance with this Agreement, signed by such payee and
in form satisfactory to Agent; (b) may consult with legal counsel (including
counsel for Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any other
Bank Party and shall not be responsible to any other Bank Party for any
statements, warranties or representations made in or in connection with the
Loan Documents; (d) shall not have any duty to ascertain or to inquire as to
the performance or observance of any of the terms, covenants or conditions of
the Loan Documents on the part of any Restricted Person or to inspect the
property (including the books and records) of any Restricted Person; (e)
shall not be responsible to any other Bank Party for the due execution,
legality, validity, enforceability, genuineness, sufficiency or value of any
Loan Document or any instrument or document furnished in connection
therewith; (f) may rely upon the representations and warranties of each
Restricted Person and the Lenders in exercising its powers hereunder; and (g)
shall incur no liability under or in respect of the Loan Documents by acting
upon any notice, consent, certificate or other instrument or writing
(including any telecopy, telegram, cable or telex) believed by it to be
genuine and signed or sent by the proper Person or Persons.
Section 9.3. CREDIT DECISIONS. Each Bank Party acknowledges that it
has, independently and without reliance upon any other Bank Party, made its
own analysis of Borrower and the transactions contemplated hereby and its own
independent decision to enter into this Agreement and the other Loan
Documents. Each Bank Party also acknowledges that it will, independently and
without reliance upon any other Bank Party and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Loan Documents.
Section 9.4. INDEMNIFICATION. Each Lender agrees to indemnify Agent
(to the extent not reimbursed by Borrower within ten (10) days after demand)
from and against such Lender's Percentage Share of any and all liabilities,
obligations, claims, losses, damages, penalties, fines,
44
<PAGE>
actions, judgments, suits, settlements, costs, expenses or disbursements
(including reasonable fees of attorneys, accountants, experts and advisors)
of any kind or nature whatsoever (in this section collectively called
"liabilities and costs") which to any extent (in whole or in part) may be
imposed on, incurred by, or asserted against Agent growing out of, resulting
from or in any other way associated with any of the Collateral, the Loan
Documents and the transactions and events (including the enforcement thereof)
at any time associated therewith or contemplated therein (including any
violation or noncompliance with any Environmental Laws by any Person or any
liabilities or duties of any Person with respect to Hazardous Materials found
in or released into the environment).
THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND
COSTS ARE IN ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY
CLAIM OR THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY
ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY AGENT,
provided only that no Lender shall be obligated under this section to
indemnify Agent for that portion, if any, of any liabilities and costs which
is proximately caused by Agent's own individual gross negligence or willful
misconduct, as determined in a final judgment. Cumulative of the foregoing,
each Lender agrees to reimburse Agent promptly upon demand for such Lender's
Percentage Share of any costs and expenses to be paid to Agent by Borrower
under Section 10.4(a) to the extent that Agent is not timely reimbursed for
such expenses by Borrower as provided in such section. As used in this
section the term "Agent" shall refer not only to the Person designated as
such in Section 1.1 but also to each director, officer, agent, attorney,
employee, representative and Affiliate of such Person.
Section 9.5. RIGHTS AS LENDER. In its capacity as a Lender, Agent
shall have the same rights and obligations as any Lender and may exercise
such rights as though it were not Agent. Agent may accept deposits from,
lend money to, act as Trustee under indentures of, and generally engage in
any kind of business with any Restricted Person or their Affiliates, all as
if it were not Agent hereunder and without any duty to account therefor to
any other Lender.
Section 9.6. SHARING OF SET-OFFS AND OTHER PAYMENTS. Each Bank Party
agrees that if it shall, whether through the exercise of rights under
Security Documents or rights of banker's lien, set off, or counterclaim
against Borrower or otherwise, obtain payment of a portion of the aggregate
Obligations owed to it which, taking into account all distributions made by
Agent under Section 3.1, causes such Bank Party to have received more than it
would have received had such payment been received by Agent and distributed
pursuant to Section 3.1, then (a) it shall be deemed to have simultaneously
purchased and shall be obligated to purchase interests in the Obligations as
necessary to cause all Bank Parties to share all payments as provided for in
Section 3.1, and (b) such other adjustments shall be made from time to time
as shall be equitable to ensure that Agent and all Lenders share all payments
of Obligations as provided in Section 3.1; provided, however, that nothing
herein contained shall in any way affect the right of any Bank Party to
obtain payment (whether by exercise of rights of banker's lien, set-off or
counterclaim or otherwise) of indebtedness other than the Obligations.
Borrower expressly
45
<PAGE>
consents to the foregoing arrangements and agrees that any holder of any such
interest or other participation in the Obligations, whether or not acquired
pursuant to the foregoing arrangements, may to the fullest extent permitted
by Law exercise any and all rights of banker's lien, set-off, or counterclaim
as fully as if such holder were a holder of the Obligations in the amount of
such interest or other participation. If all or any part of any funds
transferred pursuant to this section is thereafter recovered from the seller
under this section which received the same, the purchase provided for in this
section shall be deemed to have been rescinded to the extent of such
recovery, together with interest, if any, if interest is required pursuant to
Tribunal order to be paid on account of the possession of such funds prior to
such recovery.
Section 9.7. INVESTMENTS. Whenever Agent in good faith determines that
it is uncertain about how to distribute to Lenders any funds which it has
received, or whenever Agent in good faith determines that there is any
dispute among Lenders about how such funds should be distributed, Agent may
choose to defer distribution of the funds which are the subject of such
uncertainty or dispute. If Agent in good faith believes that the uncertainty
or dispute will not be promptly resolved, or if Agent is otherwise required
to invest funds pending distribution to Lenders, Agent shall invest such
funds pending distribution; all interest on any such investment shall be
distributed upon the distribution of such investment and in the same
proportion and to the same Persons as such investment. All moneys received
by Agent for distribution to Lenders (other than to the Person who is Agent
in its separate capacity as a Lender) shall be held by Agent pending such
distribution solely as Agent for such Lenders, and Agent shall have no
equitable title to any portion thereof.
Section 9.8. BENEFIT OF ARTICLE IX. The provisions of this Article
(other than the following Section 9.9) are intended solely for the benefit of
Bank Parties, and no Restricted Person shall be entitled to rely on any such
provision or assert any such provision in a claim or defense against any Bank
Party. Bank Parties may waive or amend such provisions as they desire
without any notice to or consent of Borrower or any Restricted Person.
Section 9.9. RESIGNATION. Agent may resign at any time by giving
written notice thereof to Lenders and Borrower. Each such notice shall set
forth the date of such resignation. Upon any such resignation Majority
Lenders shall have the right to appoint a successor Agent. A successor must
be appointed for any retiring Agent, and such Agent's resignation shall
become effective when such successor accepts such appointment. If, within
thirty days after the date of the retiring Agent's resignation, no successor
Agent has been appointed and has accepted such appointment, then the retiring
Agent may appoint a successor Agent, which shall be a commercial bank
organized or licensed to conduct a banking or trust business under the Laws
of the United States of America or of any state thereof. Upon the acceptance
of any appointment as Agent hereunder by a successor Agent, the retiring
Agent shall be discharged from its duties and obligations under this
Agreement and the other Loan Documents. After any retiring Agent's
resignation hereunder the provisions of this Article IX shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent under the Loan Documents.
46
<PAGE>
ARTICLE X - MISCELLANEOUS
Section 10.1. WAIVERS AND AMENDMENTS; ACKNOWLEDGMENTS.
(a) WAIVERS AND AMENDMENTS. No failure or delay (whether by course of
conduct or otherwise) by any Bank Party in exercising any right, power or
remedy which such Bank Party may have under any of the Loan Documents shall
operate as a waiver thereof or of any other right, power or remedy, nor shall
any single or partial exercise by any Bank Party of any such right, power or
remedy preclude any other or further exercise thereof or of any other right,
power or remedy. No waiver of any provision of any Loan Document and no
consent to any departure therefrom shall ever be effective unless it is in
writing and signed as provided below in this section, and then such waiver or
consent shall be effective only in the specific instances and for the
purposes for which given and to the extent specified in such writing. No
notice to or demand on any Restricted Person shall in any case of itself
entitle any Restricted Person to any other or further notice or demand in
similar or other circumstances. This Agreement and the other Loan Documents
set forth the entire understanding between the parties hereto with respect to
the transactions contemplated herein and therein and supersede all prior
discussions and understandings with respect to the subject matter hereof and
thereof, and no waiver, consent, release, modification or amendment of or
supplement to this Agreement or the other Loan Documents shall be valid or
effective against any party hereto unless the same is in writing and signed
by (i) if such party is Borrower, by Borrower, (ii) if such party is Agent,
by such party, and (iii) if such party is a Lender, by such Lender or by
Agent on behalf of Lenders with the written consent of Majority Lenders
(which consent has already been given as to the termination of the Loan
Documents as provided in Section 10.9). Notwithstanding the foregoing or
anything to the contrary herein, Agent shall not, without the prior consent
of each individual Lender, execute and deliver on behalf of such Lender any
waiver or amendment which would: (1) waive any of the conditions specified
in Article IV (provided that Agent may in its discretion withdraw any request
it has made under Section 4.2(f)), (2) increase the Commitment of such Lender
or subject such Lender to any additional obligations, (3) reduce any fees
payable to such lender hereunder, or the principal of, or interest on, such
Lender's Note, (4) postpone any date fixed for any payment of any such fees,
principal or interest, (5) amend the definition herein of "Majority Lenders"
or otherwise change the aggregate amount of Percentage Shares which is
required for Agent, Lenders or any of them to take any particular action
under the Loan Documents, or (6) release Borrower from its obligation to pay
such Lender's Note or any Guarantor from its guaranty of such payment.
(b) ACKNOWLEDGMENTS AND ADMISSIONS. Borrower hereby represents,
warrants, acknowledges and admits that (i) it has been advised by counsel in
the negotiation, execution and delivery of the Loan Documents to which it is
a party, (ii) it has made an independent decision to enter into this
Agreement and the other Loan Documents to which it is a party, without
reliance on any representation, warranty, covenant or undertaking by Agent or
any Lender, whether written, oral or implicit, other than as expressly set
out in this Agreement or in another Loan Document delivered on or after the
date hereof, (iii) there are no representations, warranties, covenants,
undertakings or agreements by any Bank Party as to the Loan Documents except
as expressly set out in this Agreement or in another Loan Document delivered
on or after the date hereof, (iv) no Bank Party has any fiduciary obligation
toward Borrower with respect to any
47
<PAGE>
Loan Document or the transactions contemplated thereby, (v) the relationship
pursuant to the Loan Documents between Borrower and the other Restricted
Persons, on one hand, and each Bank Party, on the other hand, is and shall be
solely that of debtor and creditor, respectively, (vi) no partnership or
joint venture exists with respect to the Loan Documents between any
Restricted Person and any Bank Party, (vii) Agent is not Borrower's Agent,
but Agent for Lenders, (viii) should an Event of Default or Default occur or
exist, each Bank Party will determine in its sole discretion and for its own
reasons what remedies and actions it will or will not exercise or take at
that time, (ix) without limiting any of the foregoing, Borrower is not
relying upon any representation or covenant by any Bank Party, or any
representative thereof, and no such representation or covenant has been made,
that any Bank Party will, at the time of an Event of Default or Default, or
at any other time, waive, negotiate, discuss, or take or refrain from taking
any action permitted under the Loan Documents with respect to any such Event
of Default or Default or any other provision of the Loan Documents, and (x)
all Bank Parties have relied upon the truthfulness of the acknowledgments in
this section in deciding to execute and deliver this Agreement and to become
obligated hereunder.
(c) REPRESENTATION BY LENDERS. Each Lender hereby represents that it
will acquire its Note for its own account in the ordinary course of its
lending business; however, the disposition of such Lender's property shall at
all times be and remain within its control and, in particular and without
limitation, such Lender may sell or otherwise transfer its Note, any
participation interest or other interest in its Note, or any of its other
rights and obligations under the Loan Documents.
(d) JOINT ACKNOWLEDGMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 10.2. SURVIVAL OF AGREEMENTS; CUMULATIVE NATURE. All of
Restricted Persons' various representations, warranties, covenants and
agreements in the Loan Documents shall survive the execution and delivery of
this Agreement and the other Loan Documents and the performance hereof and
thereof, including the making or granting of the Loans and the delivery of
the Notes and the other Loan Documents, and shall further survive until all
of the Obligations are paid in full to each Bank Party and all of Bank
Parties' obligations to Borrower are terminated. All statements and
agreements contained in any certificate or other instrument delivered by any
Restricted Person to any Bank Party under any Loan Document shall be deemed
representations and warranties by Borrower or agreements and covenants of
Borrower under this Agreement. The representations, warranties, indemnities,
and covenants made by Restricted Persons in the Loan Documents, and the
rights, powers, and privileges granted to Bank Parties in the Loan Documents,
are cumulative, and, except for expressly specified waivers and consents, no
Loan Document shall be construed in the context of another to diminish,
nullify, or otherwise reduce the benefit to any Bank Party of any such
representation, warranty, indemnity, covenant, right, power or privilege. In
particular and without limitation, no exception set out in this Agreement to
any representation, warranty, indemnity, or covenant herein contained shall
apply
48
<PAGE>
to any similar representation, warranty, indemnity, or covenant contained in
any other Loan Document, and each such similar representation, warranty,
indemnity, or covenant shall be subject only to those exceptions which are
expressly made applicable to it by the terms of the various Loan Documents.
Section 10.3. NOTICES. All notices, requests, consents, demands and
other communications required or permitted under any Loan Document shall be
in writing, unless otherwise specifically provided in such Loan Document
(provided that Agent may give telephonic notices to the other Bank Parties),
and shall be deemed sufficiently given or furnished if delivered by personal
delivery, by telecopy or telex, by delivery service with proof of delivery,
or by registered or certified United States mail, postage prepaid, to
Borrower and Restricted Persons at the address of Borrower specified on the
signature pages hereto and to each Bank Party at its address specified on the
signature pages hereto (unless changed by similar notice in writing given by
the particular Person whose address is to be changed). Any such notice or
communication shall be deemed to have been given (a) in the case of personal
delivery or delivery service, as of the date of first attempted delivery
during normal business hours at the address provided herein, (b) in the case
of telecopy or telex, upon receipt, or (c) in the case of registered or
certified United States mail, three days after deposit in the mail; provided,
however, that no Borrowing Notice shall become effective until actually
received by Agent.
Section 10.4. PAYMENT OF EXPENSES; INDEMNITY.
(a) PAYMENT OF EXPENSES. Whether or not the transactions contemplated
by this Agreement are consummated, Borrower will promptly (and in any event,
within 30 days after any invoice or other statement or notice) pay: (i) all
transfer, stamp, mortgage, documentary or other similar taxes, assessments or
charges levied by any governmental or revenue authority in respect of this
Agreement or any of the other Loan Documents or any other document referred
to herein or therein, (ii) all reasonable costs and expenses incurred by or
on behalf of Agent (including reasonable attorneys' fees, consultants' fees
and engineering fees, travel costs and miscellaneous expenses) in connection
with (1) the negotiation, preparation, execution and delivery of the Loan
Documents, and any and all consents, waivers or other documents or
instruments relating thereto, (2) the filing, recording, refiling and
re-recording of any Loan Documents and any other documents or instruments or
further assurances required to be filed or recorded or refiled or re-recorded
by the terms of any Loan Document, (3) the borrowings hereunder and other
action reasonably required in the course of administration hereof, (4)
monitoring or confirming (or preparation or negotiation of any document
related to) Borrower's compliance with any covenants or conditions contained
in this Agreement or in any Loan Document, and (iii) all reasonable costs and
expenses incurred by or on behalf of any Bank Party (including reasonable
attorneys' fees, consultants' fees and accounting fees) in connection with
the defense or enforcement of any of the Loan Documents (including this
section) or the defense of any Bank Party's exercise of its rights
thereunder. In addition to the foregoing, until and all Obligations have
been paid in full, Borrower will also pay or reimburse Agent for all
reasonable out-of-pocket costs and expenses of Agent or its agents or
employees in connection with the continuing administration of the Loans and
the related due diligence of Agent, including travel and miscellaneous
expenses and reasonable fees and expenses of Agent's outside counsel, reserve
engineers and consultants engaged in connection with the Loan Documents.
49
<PAGE>
(b) INDEMNITY. Borrower agrees to indemnify each Bank Party, upon
demand, from and against any and all liabilities, obligations, claims,
losses, damages, penalties, fines, actions, judgments, suits, settlements,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
section collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against such
Bank Party growing out of, resulting from or in any other way associated with
any of the Collateral, the Loan Documents and the transactions and events
(including the enforcement or defense thereof) at any time associated
therewith or contemplated therein (including any violation or noncompliance
with any Environmental Laws by any Restricted Person or any liabilities or
duties of any Restricted Person or any Bank Party with respect to Hazardous
Materials found in or released into the environment). THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN
ANY WAY OR TO ANY EXTENT OWED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR THEORY
OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT
OR OMISSION OF ANY KIND BY ANY BANK PARTY,
provided only that no Bank Party shall be entitled under this section to
receive indemnification for that portion, if any, of any liabilities and
costs which is proximately caused by its own individual gross negligence or
willful misconduct, as determined in a final judgment. If any Person
(including Borrower or any of its Affiliates) ever alleges such gross
negligence or willful misconduct by any Bank Party, the indemnification
provided for in this section shall nonetheless be paid upon demand, subject
to later adjustment or reimbursement, until such time as a court of competent
jurisdiction enters a final judgment as to the extent and effect of the
alleged gross negligence or willful misconduct. As used in this section the
term "Bank Parties" shall refer not only to the Persons designated as such in
Section 1.1 but also to each director, officer, agent, attorney, employee,
representative and Affiliate of such Persons.
Section 10.5. JOINT AND SEVERAL LIABILITY; PARTIES IN INTEREST;
ASSIGNMENTS.
(a) All Obligations which are incurred by two or more Restricted
Persons shall be their joint and several obligations and liabilities. All
grants, covenants and agreements contained in the Loan Documents shall bind
and inure to the benefit of the parties thereto and their respective
successors and assigns; provided, however, that no Restricted Person may
assign or transfer any of its rights or delegate any of its duties or
obligations under any Loan Document without the prior consent of Majority
Lenders. Neither Borrower nor any Affiliates of Borrower shall directly or
indirectly purchase or otherwise retire any Obligations owed to any Lender
nor will any Lender accept any offer to do so, unless each Lender shall have
received substantially the same offer with respect to the same Percentage
Share of the Obligations owed to it. If Borrower or any Affiliate of
Borrower at any time purchases some but less than all of the Obligations owed
to all Bank Parties, such purchaser shall not be entitled to any rights of
any Bank Party under the Loan Documents unless and until Borrower or its
Affiliates have purchased all of the Obligations.
50
<PAGE>
(b) No Lender shall sell any participation interest in its commitment
hereunder or any of its rights under its Loans or under the Loan Documents to
any Person other than an Eligible Transferee, and then only if the agreement
between such Lender and such participant at all times provides: (i) that such
participation exists only as a result of the agreement between such
participant and such Lender and that such transfer does not give such
participant any right to vote as a Lender or any other direct claims or
rights against any Person other than such Lender, (ii) that such participant
is not entitled to payment from any Restricted Person under Sections 3.2
through 3.7 of amounts in excess of those payable to such Lender under such
sections (determined without regard to the sale of such participation), and
(iii) unless such participant is an Affiliate of such Lender, that such
participant shall not be entitled to require such Lender to take any action
under any Loan Document or to obtain the consent of such participant prior to
taking any action under any Loan Document, except for actions which would
require the consent of all Lenders under the next-to-last sentence of
subsection (a) of Section 10.1. No Lender selling such a participation
shall, as between the other parties hereto and such Lender, be relieved of
any of its obligations hereunder as a result of the sale of such
participation. Each Lender which sells any such participation to any Person
(other than an Affiliate of such Lender) shall give prompt notice thereof to
Agent and Borrower.
(c) Except for sales of participations under the immediately preceding
subsection (b), no Lender shall make any assignment or transfer of any kind
of its commitments or any of its rights under its Loans or under the Loan
Documents, except for assignments to an Eligible Transferee, and then only if
such assignment is made in accordance with the following requirements:
(i) Each such assignment shall apply to all Obligations owing to
the assignor Lender hereunder and to the unused portion of the assignor
Lender's commitments, so that after such assignment is made the assignor
Lender shall have a fixed (and not a varying) Percentage Share in its
Loans and Note and be committed to make that Percentage Share of all
future Loans, the assignee shall have a fixed Percentage Share in such
Loans and Note and be committed to make that Percentage Share of all
future Loans, and the Percentage Share of the Commitment of both the
assignor and assignee shall equal or exceed $1,000,000.
(ii) The parties to each such assignment shall execute and deliver
to Agent, for its acceptance and recording in the "Register" (as defined
below in this section), an Assignment and Acceptance in the form of
Exhibit F, appropriately completed, together with the Note subject to
such assignment and a processing fee payable to Agent of $2,500. Upon
such execution, delivery, and payment and upon the satisfaction of the
conditions set out in such Assignment and Acceptance, then (i) Borrower
shall issue new Notes to such assignor and assignee upon return of the
old Notes to Borrower, and (ii) as of the "Settlement Date" specified in
such Assignment and Acceptance the assignee thereunder shall be a party
hereto and a Lender hereunder and Agent shall thereupon deliver to
Borrower and each Lender a schedule showing the revised Percentage
Shares of such assignor Lender and such assignee Lender and the
Percentage Shares of all other Lenders.
51
<PAGE>
(iii) Each assignee Lender which is not a United States person
(as such term is defined in Section 7701(a)(30) of the Internal Revenue
Code of 1986, as amended) for Federal income tax purposes, shall (to the
extent it has not already done so) provide Agent and Borrower with the
"Prescribed Forms" referred to in Section 3.6(d).
(d) Nothing contained in this section shall prevent or prohibit any
Lender from assigning or pledging all or any portion of its Loans and Note to
any Federal Reserve Bank as collateral security pursuant to Regulation A of
the Board of Governors of the Federal Reserve System and any Operating
Circular issued by such Federal Reserve Bank; provided that no such
assignment or pledge shall relieve such Lender from its obligations hereunder.
(e) By executing and delivering an Assignment and Acceptance, each
assignee Lender thereunder will be confirming to and agreeing with Borrower,
Agents and each other Lender hereunder that such assignee understands and
agrees to the terms hereof, including Article IX hereof.
(f) Agent shall maintain a copy of each Assignment and Acceptance and a
register for the recordation of the names and addresses of Lenders and the
Percentage Shares of, and principal amount of the Loans owing to, each Lender
from time to time (in this section called the "Register"). The entries in
the Register shall be conclusive, in the absence of manifest error, and
Borrower and each Bank Party may treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes. The Register shall be
available for inspection by Borrower or any Bank Party at any reasonable time
and from time to time upon reasonable prior notice.
(g) Bank One, Texas, N.A. agrees that it will not make any assignment
of the type described under subsection (c) immediately above unless (i) the
Borrowing Availability Exceeds $15,000,000 or (ii) Borrower consents thereto
in writing.
Section 10.6. CONFIDENTIALITY. Each Bank Party agrees that it will
take all reasonable steps to keep confidential any proprietary information
given to it by any Restricted Person, provided, however, that this
restriction shall not apply to information which (i) has at the time in
question entered the public domain, (ii) is required to be disclosed by Law
(whether valid or invalid) of any Tribunal, (iii) is disclosed to any Bank
Party's Affiliates, auditors, attorneys, or agents, (iv) is furnished to any
other Bank Party or to any purchaser or prospective purchaser of
participations or other interests in any Loan or Loan Document, or (v) is
disclosed in the course of enforcing its rights and remedies during the
existence of an Event of Default.
Section 10.7. GOVERNING LAW; SUBMISSION TO PROCESS. EXCEPT TO THE
EXTENT THAT THE LAW OF ANOTHER JURISDICTION IS EXPRESSLY ELECTED IN A LOAN
DOCUMENT, THE LOAN DOCUMENTS SHALL BE DEEMED CONTRACTS AND INSTRUMENTS MADE
UNDER THE LAWS OF THE STATE OF TEXAS AND SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS AND THE LAWS
OF THE UNITED STATES OF AMERICA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAW. CHAPTER 15 OF TEXAS REVISED CIVIL STATUTES ANNOTATED ARTICLE 5069
(WHICH REGULATES CERTAIN REVOLVING
52
<PAGE>
CREDIT LOAN ACCOUNTS AND REVOLVING TRI-PARTY ACCOUNTS) DOES NOT APPLY TO THIS
AGREEMENT OR TO THE NOTES. BORROWER HEREBY IRREVOCABLY SUBMITS ITSELF AND
EACH OTHER RESTRICTED PERSON TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS SITTING IN THE STATE OF TEXAS AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT OR ANY RESTRICTED PERSON IN ANY LEGAL
PROCEEDING RELATING TO THE LOAN DOCUMENTS OR THE OBLIGATIONS BY ANY MEANS
ALLOWED UNDER TEXAS OR FEDERAL LAW. THE PARTIES HERETO HEREBY WAIVE AND
AGREE NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, THAT ANY
SUCH PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF
IS IMPROPER, AND FURTHER AGREE TO A TRANSFER OF ANY SUCH PROCEEDING TO A
FEDERAL COURT SITTING IN THE STATE OF TEXAS TO THE EXTENT THAT IT HAS SUBJECT
MATTER JURISDICTION, AND OTHERWISE TO A STATE COURT IN DALLAS, TEXAS. IN
FURTHERANCE THEREOF, BORROWER AND BANK PARTIES EACH HEREBY ACKNOWLEDGE AND
AGREE THAT IT WAS NOT INCONVENIENT FOR THEM TO NEGOTIATE AND RECEIVE FUNDING
OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT IN SUCH COUNTY AND THAT IT
WILL BE NEITHER INCONVENIENT NOR UNFAIR TO LITIGATE OR OTHERWISE RESOLVE ANY
DISPUTES OR CLAIMS IN A COURT SITTING IN SUCH COUNTY. IN FURTHERANCE OF THE
FOREGOING, BORROWER HEREBY DESIGNATES AND APPOINTS CT CORPORATION SYSTEM, 350
NORTH ST. PAUL STREET, DALLAS, TEXAS 75201, AS AGENT OF BORROWER TO RECEIVE
SERVICE OF ALL PROCESS BROUGHT AGAINST BORROWER WITH RESPECT TO ANY SUCH
PROCEEDING IN ANY SUCH COURT IN TEXAS, SUCH SERVICE BEING HEREBY ACKNOWLEDGED
BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. COPIES OF
ANY SUCH PROCESS SO SERVED SHALL ALSO, IF PERMITTED BY LAW, BE SENT BY
REGISTERED MAIL TO BORROWER AT ITS ADDRESS SET FORTH BELOW, BUT THE FAILURE
OF BORROWER TO RECEIVE SUCH COPIES SHALL NOT AFFECT IN ANY WAY THE SERVICE OF
SUCH PROCESS AS AFORESAID. BORROWER SHALL FURNISH TO BANK PARTIES A CONSENT
OF CT CORPORATION SYSTEM AGREEING TO ACT HEREUNDER PRIOR TO THE EFFECTIVE
DATE OF THIS AGREEMENT. NOTHING HEREIN SHALL AFFECT THE RIGHT OF BANK
PARTIES TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF BANK PARTIES TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION. BORROWER SHALL NOT REVOKE SUCH APPOINTMENT BUT IF
FOR ANY REASON CT CORPORATION SYSTEM SHALL RESIGN OR OTHERWISE CEASE TO ACT
AS BORROWER'S AGENT, BORROWER HEREBY IRREVOCABLY AGREES TO (A) IMMEDIATELY
DESIGNATE AND APPOINT A NEW AGENT ACCEPTABLE TO AGENT TO SERVE IN SUCH
CAPACITY AND, IN SUCH EVENT, SUCH NEW AGENT SHALL BE DEEMED TO BE SUBSTITUTED
FOR CT CORPORATION SYSTEM FOR ALL PURPOSES HEREOF AND (B) PROMPTLY DELIVER TO
BANK PARTIES THE
53
<PAGE>
WRITTEN CONSENT (IN FORM AND SUBSTANCE SATISFACTORY TO AGENT) OF SUCH NEW
AGENT AGREEING TO SERVE IN SUCH CAPACITY.
Section 10.8. LIMITATION ON INTEREST. Bank Parties, Restricted Persons
and any other parties to the Loan Documents intend to contract in strict
compliance with applicable usury law from time to time in effect. In
furtherance thereof such Persons stipulate and agree that none of the terms
and provisions contained in the Loan Documents shall ever be construed to
create a contract to pay, for the use, forbearance or detention of money,
interest in excess of the maximum amount of interest permitted to be charged
by applicable law from time to time in effect. Neither any Restricted Person
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for
unearned interest thereon or shall ever be required to pay interest thereon
in excess of the maximum amount that may be lawfully charged under applicable
law from time to time in effect, and the provisions of this section shall
control over all other provisions of the Loan Documents which may be in
conflict or apparent conflict herewith. Bank Parties expressly disavow any
intention to charge or collect excessive unearned interest or finance charges
in the event the maturity of any Obligation is accelerated. If (a) the
maturity of any Obligation is accelerated for any reason, (b) any Obligation
is prepaid and as a result any amounts held to constitute interest are
determined to be in excess of the legal maximum, or (c) any Bank Party or any
other holder of any or all of the Obligations shall otherwise collect moneys
which are determined to constitute interest which would otherwise increase
the interest on any or all of the Obligations to an amount in excess of that
permitted to be charged by applicable law then in effect, then all sums
determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal
of the related Obligations or, at such Bank Party's or holder's option,
promptly returned to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable,
under any specific circumstance, exceeds the maximum amount permitted under
applicable law, Bank Parties and Restricted Persons (and any other payors
thereof) shall to the greatest extent permitted under applicable law, (i)
characterize any non-principal payment as an expense, fee or premium rather
than as interest, (ii) exclude voluntary prepayments and the effects thereof,
and (iii) amortize, prorate, allocate, and spread the total amount of
interest throughout the entire contemplated term of the instruments
evidencing the Obligations in accordance with the amounts outstanding from
time to time thereunder and the maximum legal rate of interest from time to
time in effect under applicable law in order to lawfully charge the maximum
amount of interest permitted under applicable law. In the event applicable
law provides for an interest ceiling under Section 303 of the Texas Finance
Code (the "Texas Finance Code") and Chapter 1D of Title 79,
Tex.Rev.Civ.Stats. 1925 ("Chapter 1D") as amended, respectively for that day,
the ceiling shall be the "weekly ceiling" as defined in the Texas Finance
Code and Chapter 1D. As used in this section the term "applicable Law" means
the Laws of the State of Texas or the Laws of the United States of America,
whichever Laws allow the greater interest, as such Laws now exist or may be
changed or amended or come into effect in the future.
Section 10.9. TERMINATION; TERMINATION FEE; LIMITED SURVIVAL. In its
sole and absolute discretion Borrower may at any time that no Obligations are
owing elect in a written notice delivered to Agent to terminate this
Agreement. Upon receipt by Agent of such a notice and payment by Borrower of
the termination fee (if any) due hereunder, if no Obligations are then
54
<PAGE>
owing this Agreement and all other Loan Documents shall thereupon be
terminated and the parties thereto released from all prospective obligations
thereunder. Notwithstanding the foregoing or anything herein to the
contrary, any waivers or admissions made by any Restricted Person in any Loan
Document, any Obligations under Sections 3.2 through 3.7 and any obligations
which any Person may have to indemnify or compensate any Bank Party shall
survive any termination of this Agreement or any other Loan Document. At the
request and expense of Borrower, Agent shall prepare and execute all
necessary instruments to reflect and effect such termination of the Loan
Documents. Agent is hereby authorized to execute all such instruments on
behalf of all Lenders, without the joinder of or further action by any Lender.
Section 10.10. ARBITRATION. Agent, Borrower and Lenders agree that
upon the written demand of any party, whether made before or after the
institution of any legal proceedings, but prior to the rendering of any
judgment in that proceeding, all disputes, claims and controversies between
them, whether individual, joint or class in nature, arising from the Loan
Documents or otherwise, including without limitation contract disputes and
tort claims, shall be resolved by binding arbitration pursuant to the
Commercial Rules of the American Arbitration Association. Any arbitration
proceeding held pursuant to this arbitration provision shall be conducted in
the city nearest the Borrower's address having an AAA regional office, or at
any other place selected by mutual agreement of the parties. This
arbitration provisions shall not limit the right of any party during any
dispute, claim or controversy to seek, use, and employ ancillary, or
preliminary rights and/or remedies, judicial or otherwise, for the purposes
of realizing upon, preserving, protecting, foreclosing upon or proceeding
under forcible entry or detainer for possession of, any real or personal
property, and any such action shall not be deemed an election of remedies.
Such remedies include, without limitation, obtaining injunctive relief or a
temporary restraining order, invoking a power of sale under any deed of trust
or mortgage, obtaining a writ of attachment or imposition of a receivership,
or exercising any rights relating to personal property, including taking or
disposing of such property with or without judicial process pursuant to
Article 9 of the Uniform Commercial Code. Any disputes, claims or
controversies concerning the lawfulness or reasonableness of any act, or
exercise of any right or remedy concerning any Loan, including any claim to
rescind, reform, or otherwise modify any agreement relating to the Loan,
shall also be arbitrated; provided, however that no arbitrator shall have the
right or the power to enjoin or restrain any act of any party. Judgment upon
any award rendered by any arbitrator may be entered in any court having
jurisdiction. Nothing in this arbitration provisions shall preclude any party
from seeking equitable relief from a court of competent jurisdiction. The
statute of limitations, estoppel, waiver, laches and similar doctrines which
would otherwise be applicable in an action brought by a party shall be
applicable in any arbitration proceeding, and the commencement of an
arbitration proceeding shall be deemed the commencement of any action for
these purposes. The Federal Arbitration Act. (Title 9 of the United States
Code) shall apply to the construction, interpretation, and enforcement of
this arbitration provision.
Section 10.11. SEVERABILITY. If any term or provision of any Loan
Document shall be determined to be illegal or unenforceable all other terms
and provisions of the Loan Documents shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by applicable Law.
55
<PAGE>
Section 10.12. COUNTERPARTS. This Agreement may be separately executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to constitute
one and the same agreement.
Section 10.13. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC.
BORROWER AND EACH BANK PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY,
AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED
HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED THEREBY OR
ASSOCIATED THEREWITH, BEFORE OR AFTER MATURITY; (B) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN
ANY SUCH LITIGATION ANY "SPECIAL DAMAGES", AS DEFINED BELOW, (C) CERTIFIES
THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OR AGENT OR COUNSEL FOR ANY PARTY
HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT SUCH PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS,
AND (D) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT,
THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION. AS USED IN THIS SECTION, "SPECIAL DAMAGES" INCLUDES ALL
SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW
NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS
EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY HERETO.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
56
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first
written above.
PENTEGRA DENTAL GROUP, INC.,
Borrower
By:
-------------------------------------
Gary S. Glatter
Chief Executive Officer
Address:
PENTEGRA DENTAL GROUP, INC.
2999 N. 44th St., Ste. 650
Phoenix, AZ 85018
Attention: Gary S. Glatter
Chief Executive Officer
Telephone: 602-952-1200
Fax: 602-952-0544
with a copy to each of the following
persons:
James Ryan, Esq.
Jackson Walker, LLP
901 Main Street, Suite 6000
Dallas, Texas 75202
Telephone: 214-953-5801
Fax: 214-953-5822
Sam H. Carr
Chief Financial Officer
Pentegra Dental Group, Inc.
800 West Sam Houston Parkway South
Suite 140
Houston, Texas 77042
Telephone: 713-361-5102
Fax: 713-361-5149
<PAGE>
BANK ONE, TEXAS, N.A.,
Agent and Lender
By:
-------------------------------------
James B. Lukowicz
Vice President
Address:
1717 Main Street
Dallas, Texas 75201
Attention: C. L. Turner, III
Telephone: (214) 290-2586
Telecopy: (214) 290-2492
<PAGE>
SCHEDULE 1
DISCLOSURE SCHEDULE
To supplement the following sections of the Agreement of which this
Schedule is a part, Borrower hereby makes the following disclosures:
1. INITIAL FINANCIAL STATEMENTS:
2. OTHER OBLIGATIONS:
3. LITIGATION:
4. ERISA LIABILITIES:
5. NAMES AND PLACES OF BUSINESS:
6. BORROWER'S SUBSIDIARIES AND STOCKHOLDINGS:
<PAGE>
SCHEDULE 2
SECURITY SCHEDULE
1. Security Agreement dated of even date herewith executed by Borrower
("Security Agreement").
2. Pledge Agreement dated of even date herewith executed by Borrower
("Pledge Agreement").
3. Guaranty dated of even date herewith executed by Pentegra Investments,
Inc. ("Guaranty").
<PAGE>
EXHIBIT A
PROMISSORY NOTE
$15,000,000 Dallas, Texas June _____, 1998
FOR VALUE RECEIVED, the undersigned, PENTEGRA DENTAL GROUP, Inc., a
Delaware corporation (herein called "Borrower"), hereby promises to pay to
the order of Bank One, Texas, N.A., a national banking association (herein
called "Lender"), the principal sum of Fifteen Million Dollars ($15,000,000),
or, if greater or less, the aggregate unpaid principal amount of the Loan
made under this Note by Lender to Borrower pursuant to the terms of the
Credit Agreement (as hereinafter defined), together with interest on the
unpaid principal balance thereof as hereinafter set forth, both principal and
interest payable as herein provided in lawful money of the United States of
America at the offices of the Agent under the Credit Agreement, 1717 Main
Street, Dallas, Texas or at such other place within Dallas County, Texas, as
from time to time may be designated by the holder of this Note.
This Note (a) is issued and delivered under that certain Credit
Agreement of even date herewith among Borrower, Bank One, Texas, N.A., as
Agent, and the lenders (including Lender) referred to therein (herein, as
from time to time supplemented, amended or restated, called the "Credit
Agreement"), and is a "Note" as defined therein, (b) is subject to the terms
and provisions of the Credit Agreement, which contains provisions for
payments and prepayments hereunder and acceleration of the maturity hereof
upon the happening of certain stated events, and (c) is secured by and
entitled to the benefits of certain Security Documents (as identified and
defined in the Credit Agreement). Payments on this Note shall be made and
applied as provided herein and in the Credit Agreement. Reference is hereby
made to the Credit Agreement for a description of certain rights, limitations
of rights, obligations and duties of the parties hereto and for the meanings
assigned to terms used and not defined herein and to the Security Documents
for a description of the nature and extent of the security thereby provided
and the rights of the parties thereto.
For the purposes of this Note, "BASE RATE PAYMENT DATE" means (i) the
tenth (10th) day of each Fiscal Quarter, beginning July 10, 1998, and (ii)
any day on which past due interest or principal is owed hereunder and is
unpaid. If the terms of any Loan Document provide that payments of interest
or principal hereon shall be deferred from one Base Rate Payment Date to
another day, such other day shall also be a Base Rate Payment Date.
So long as no Event of Default has occurred and is continuing, all Base
Rate Loans (exclusive of any past due principal or interest) from time to
time outstanding shall bear interest on each day outstanding at the Base Rate
in effect on such day. If an Event of Default has occurred and is
continuing, all Base Rate Loans (exclusive of any past due principal or
interest) from time to time outstanding shall bear interest on each day
outstanding at the Default Rate in effect on such day. On each Base Rate
Payment Date Borrower shall pay to the holder hereof all unpaid interest
which has accrued on the Base Rate Loans to and including the last day of the
<PAGE>
Fiscal Quarter immediately preceding such Base Rate Payment Date. At all
times, all past due principal of and past due interest on the Base Rate Loans
shall bear interest on each day outstanding at the Default Rate in effect on
such day, and such interest shall be due and payable daily as it accrues.
For the purposes of this Note, "Eurodollar Payment Date" means, with
respect to any Eurodollar Loan: (i) the day on which the related Interest
Period ends and (ii) any day on which past due interest or past due principal
is owed hereunder with respect to such Eurodollar Loan and is unpaid. If the
terms hereof or of the Credit Agreement provide that payments of interest or
principal with respect to such Eurodollar Loan shall be deferred from one
Eurodollar Payment Date to another day, such other day shall also be a
Eurodollar Payment Date.
So long as no Event of Default has occurred and is continuing, all
Eurodollar Loans (exclusive of any past due principal or interest) from time
to time outstanding shall bear interest on each day outstanding at the
Adjusted Eurodollar Rate in effect on such day. If an Event of Default has
occurred and is continuing, all Eurodollar Loans (exclusive of any past due
principal or interest) from time to time outstanding shall bear interest on
each day outstanding at the Default Rate in effect on such day. On each
Eurodollar Payment Date, Borrower shall pay to the holder hereof all unpaid
interest which has accrued on the Eurodollar Loans. At all times, all past
due principal of, and past due interest on, the Eurodollar Loans shall bear
interest on each day outstanding at the Default Rate in effect on such day,
and such interest shall be due and payable daily as it accrues.
The principal amount of this Note, together with all interest accrued
hereon, shall be due and payable in full on the Maturity Date.
Notwithstanding the foregoing provisions of this paragraph: (a) this
Note shall never bear interest in excess of the Highest Lawful Rate, and (b)
if at any time the rate at which interest is payable on this Note is limited
by the Highest Lawful Rate (by the foregoing clause (a) or by reference to
the Highest Lawful Rate in the definitions of Base Rate, Adjusted Eurodollar
Rate, and Default Rate), this Note shall bear interest at the Highest Lawful
Rate and shall continue to bear interest at the Highest Lawful Rate until
such time as the total amount of interest accrued hereon equals (but does not
exceed) the total amount of interest which would have accrued hereon had
there been no Highest Lawful Rate applicable hereto.
Notwithstanding the foregoing paragraph and all other provisions of this
Note, in no event shall the interest payable hereon, whether before or after
maturity, exceed the maximum amount of interest which, under applicable law,
may be charged on this Note, and this Note is expressly made subject to the
provisions of the Credit Agreement which more fully set out the limitations
on how interest accrues hereon. In the event applicable law provides for an
interest ceiling, as defined in Section 303 of the Texas Finance Code and
Chapter 1D of Title 79, Tex. Rev. Civ. Stats. 1925, as amended, that ceiling
shall be the "weekly ceiling" and shall be used in this Note for calculating
the Highest Lawful Rate and for all other purposes. The term "applicable
law" as used in this Note shall mean the laws of the State of Texas or the
laws of the United States, whichever laws allow the greater interest, as such
laws now exist or may be changed or amended or come into effect in the
future.
2
<PAGE>
If this Note is placed in the hands of an attorney for collection after
default, or if all or any part of the indebtedness represented hereby is
proved, established or collected in any court or in any bankruptcy,
receivership, debtor relief, probate or other court proceedings, Borrower and
all endorsers, sureties and guarantors of this Note jointly and severally
agree to pay reasonable attorneys' fees and collection costs to the holder
hereof in addition to the principal and interest payable hereunder.
Borrower and all endorsers, sureties and guarantors of this Note hereby
severally waive demand, presentment, notice of demand and of dishonor and
nonpayment of this Note, protest, notice of protest, notice of intention to
accelerate the maturity of this Note, declaration or notice of acceleration
of the maturity of this Note, diligence in collecting, the bringing of any
suit against any party and any notice of or defense on account of any
extensions, renewals, partial payments or changes in any manner of or in this
Note or in any of its terms, provisions and covenants, or any releases or
substitutions of any security, or any delay, indulgence or other act of any
trustee or any holder hereof, whether before or after maturity.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
3
<PAGE>
THIS NOTE AND THE RIGHTS AND DUTIES OF THE PARTIES HERETO SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW), EXCEPT TO THE EXTENT THE SAME ARE GOVERNED BY APPLICABLE
FEDERAL LAW.
PENTEGRA DENTAL GROUP, INC.
By:
-------------------------------------
Name:
Title:
4
<PAGE>
EXHIBIT B
REQUEST FOR ADVANCE
Reference is made to that certain Credit Agreement dated as of June 1,
1998 (as from time to time amended, the "Agreement"), by and among PENTEGRA
DENTAL GROUP, Inc. ("Borrower"), Bank One, Texas, N.A., as Agent, and certain
financial institutions ("Lenders"). Terms which are defined in the Agreement
are used herein with the meanings given them in the Agreement. Pursuant to
the terms of the Agreement Borrower hereby requests Lenders to make Advances
to Borrower in the aggregate principal amount of $ __________ and specifies
____________, 19__, as the date Borrower desires for Lenders to make such
Advances and for Agent to deliver to Borrower the proceeds thereof.
To induce Lenders to make such Advances, Borrower hereby represents,
warrants, acknowledges, and agrees to and with Agent and each Lender that:
(a) The officer of Borrower signing this instrument is the duly
elected, qualified and acting officer of Borrower as indicated below
such officer's signature hereto having all necessary authority to act
for Borrower in making the request herein contained.
(b) The representations and warranties of Borrower set forth in
the Agreement and the other Loan Documents are true and correct in all
material respects on and as of the date hereof (except to the extent
that the facts on which such representations and warranties are based
have been changed by the extension of credit under the Agreement), with
the same effect as though such representations and warranties had been
made on and as of the date hereof.
(c) There does not exist on the date hereof any condition or event
which constitutes a Default which has not been waived in writing as
provided in Section 10.1(a) of the Agreement; nor will any such Default
exist upon Borrower's receipt and application of the Advances requested
hereby. Borrower will use the Advances hereby requested in compliance
with Section 2.4 of the Agreement.
(d) Except to the extent waived in writing as provided in Section
10.1(a) of the Agreement, Borrower has, in all material respects,
performed and complied with all agreements and conditions in the
Agreement required to be performed or complied with by Borrower on or
prior to the date hereof, and each of the conditions precedent to
Advances contained in the Agreement remains satisfied.
(e) The Facility Usage, after the making of the Advances requested
hereby, will not be in excess of the Borrowing Availability on the date
requested for the making of such Advances.
<PAGE>
(f) The Loan Documents have not been modified, amended or
supplemented by any unwritten representations or promises, by any course
of dealing, or by any other means not provided for in Section 10.1(a) of
the Agreement. The Agreement and the other Loan Documents are hereby
ratified, approved, and confirmed in all respects.
The officer of Borrower signing this instrument hereby certifies that,
to the best of his knowledge after due inquiry, the above representations,
warranties, acknowledgments, and agreements of Borrower are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
PENTEGRA DENTAL GROUP, INC.
By:
-------------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT D
CERTIFICATE ACCOMPANYING
FINANCIAL STATEMENTS
Reference is made to that certain Credit Agreement dated as of June 1,
1998 (as from time to time amended, the "Agreement"), by and among PENTEGRA
DENTAL GROUP, Inc. ("Borrower"), Bank One, Texas, N.A., as Agent, and certain
financial institutions ("Lenders"), which Agreement is in full force and
effect on the date hereof. Terms which are defined in the Agreement are used
herein with the meanings given them in the Agreement.
This Certificate is furnished pursuant to Section 6.2(b) of the
Agreement. Together herewith Borrower is furnishing to Agent and each Lender
Borrower's *[audited/unaudited] financial statements (the "Financial
Statements") as at ____________ (the "Reporting Date"). Borrower hereby
represents, warrants, and acknowledges to Agent and each Lender that:
(a) the officer of Borrower signing this instrument is the duly
elected, qualified and acting ____________ of Borrower and as such is
Borrower's chief financial officer;
(b) the Financial Statements are accurate and complete and satisfy
the requirements of the Agreement;
(c) attached hereto is a schedule of calculations showing Borrower's
compliance as of the Reporting Date with the requirements of Sections
[7.11, 7.12, 7.13, 7.14, 7.15, 7.16] of the Agreement *[and Borrower's non-
compliance as of such date with the requirements of Section(s) ____________
of the Agreement];
(d) on the Reporting Date, Borrower was, and on the date hereof
Borrower is, in full compliance with the disclosure requirements of Section
6.2 of the Agreement, and no Default otherwise existed on the Reporting
Date or otherwise exists on the date of this instrument *[except for
Default(s) under Section(s) ____________ of the Agreement, which *[is/are]
more fully described on a schedule attached hereto];
(d) on the Reporting Date, the Borrowing Availability was $_________;
and
(e) *[Unless otherwise disclosed on a schedule attached hereto,] The
representations and warranties of Borrower set forth in the Agreement and
the other Loan Documents are true and correct, in all material respects,
on and as of the date hereof (except to the extent that the facts on which
such representations and warranties are based have been changed by the
extension of credit under the Agreement), with the same effect as though
such representations and warranties had been made on and as of the date
hereof.
<PAGE>
The officer of Borrower signing this instrument hereby certifies that he
has reviewed the Loan Documents and the Financial Statements and has
otherwise undertaken such inquiry as is in his opinion necessary to enable
him to express an informed opinion with respect to the above representations,
warranties and acknowledgments of Borrower and, to the best of his knowledge,
such representations, warranties, and acknowledgments are true, correct and
complete.
IN WITNESS WHEREOF, this instrument is executed as of ____________, 19__.
PENTEGRA DENTAL GROUP, INC.
By:
-------------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT F
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of June 1, 1998 (the
"CREDIT AGREEMENT") among Pentegra Dental Group, Inc., a Delaware corporation
(the "BORROWER"), the Lenders (as defined in the Credit Agreement) and Bank
One, Texas, N.A., as agent for the Lenders (the "AGENT"). Terms defined in
the Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without
recourse and without representation or warranty except as expressly set forth
herein, and the Assignee hereby purchases and assumes from the Assignor, an
interest in and to the Assignor's rights and obligations under the Credit
Agreement and the other Loan Documents as of the date hereof equal to the
percentage interest specified on Schedule 1 of all outstanding rights and
obligations under the Credit Agreement and the other Loan Documents. After
giving effect to such sale and assignment, the Assignee's Commitment and the
amount of the Loans owing to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Loan
Documents or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any other instrument or
document furnished pursuant thereto; (iii) makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of any Loan Party or the performance or observance by any Loan
Party of any of its obligations under the Loan Documents or any other
instrument or document furnished pursuant thereto; and (iv) attaches the Note
held by the Assignor and requests that the Agent exchange such Note for new
Notes payable to the order of the Assignee in an amount equal to the
Commitment assumed by the Assignee pursuant hereto and to the Assignor in an
amount equal to the Commitment retained by the Assignor, if any, as specified
on Schedule 1.
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 6.2 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action
under the Credit Agreement; (iii) appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under the Credit Agreement as are delegated to the Agent by the terms
thereof, together with such powers and discretion as are reasonably
incidental thereto; (iv) agrees that it will perform in
<PAGE>
accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (v)
attaches any U.S. Internal Revenue Service or other forms required under
Section 3.7.
4. Following the execution of this Assignment and Acceptance, it will
be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "EFFECTIVE DATE")
shall be the date of acceptance hereof by the Agent, unless otherwise
specified on Schedule 1.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement
and, to the extent provided in this Assignment and Acceptance, have the
rights and obligations of a Lender thereunder and (ii) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights
and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement
and the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and unused fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all
appropriate adjustments in payments under the Credit Agreement and the Notes
for periods prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Texas.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart
of this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused Schedule 1
to this Assignment and Acceptance to be executed by their officers thereunto
duly authorized as of the date specified thereon.
2
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
Percentage interest assigned: ________%
Assignee's Commitment: $_______
Aggregate outstanding principal amount
of Loans assigned: $_______
Principal amount of Note payable to Assignee: $_______
Principal amount of Note payable to Assignor: $_______
Effective Date (if other than date
of acceptance by Agent): *_______, 19__
[NAME OF ASSIGNOR], as Assignor
By:
-------------------------------------
Title:
Dated:_____________, 19 __
[NAME OF ASSIGNEE], as Assignee
By:
-------------------------------------
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 3,094
<SECURITIES> 0
<RECEIVABLES> 3,447
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,832
<PP&E> 4,389
<DEPRECIATION> (144)
<TOTAL-ASSETS> 18,812
<CURRENT-LIABILITIES> 3,040
<BONDS> 502
0
0
<COMMON> 7
<OTHER-SE> 15,263
<TOTAL-LIABILITY-AND-EQUITY> 18,812
<SALES> 7,412
<TOTAL-REVENUES> 7,412
<CGS> 6,515
<TOTAL-COSTS> 6,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (40)
<INCOME-PRETAX> 937
<INCOME-TAX> 263
<INCOME-CONTINUING> 674
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 674
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
