<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q -- QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(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, 1999
--------------------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________________ TO ______________________
COMMISSION FILE NUMBER: 000-25549
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INTERDENT, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-4710504
-------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
222 NO. SEPULVEDA BLVD., SUITE 740, EL SEGUNDO, CA 90245-4340
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(310) 765-2400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NO CHANGE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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 No X
--- ---
As of August 1, 1999, 20,933,445 shares of the issuer's common stock were
outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTERDENT, INC.
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited, in thousands, except share amounts)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,728 $ 8,244
Accounts receivable, net 13,286 10,616
Management fee receivables 5,533 4,536
Current portion of notes and advances receivable from professional associations, net 1,182 1,157
Supplies inventory 3,213 2,887
Prepaid and other current assets 3,650 3,164
------------ -----------
Total current assets 29,592 30,604
------------ -----------
Property and equipment, net 25,277 21,379
Intangible assets, net 123,726 105,111
Notes and advances receivable from professional associations, net of current portion 8,429 4,062
Other assets 3,423 3,978
------------ -----------
Total assets $ 190,447 $ 165,134
============ ===========
LIABILITIES, REDEEMABLE COMMON STOCK AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,275 $ 4,223
Accrued payroll and payroll related costs 8,704 4,862
Other current liabilities 12,691 10,809
Current portion of long-term debt and capital lease obligations 3,672 4,001
------------ -----------
Total current liabilities 28,342 23,895
------------ -----------
Long-term liabilities:
Obligations under capital leases, net of current portion 850 1,243
Long-term debt, net of current portion 55,014 35,854
Convertible senior subordinated debt 30,000 30,000
Deferred income taxes 2,947 2,914
Other long-term liabilities 145 136
------------ -----------
Total long-term liabilities 88,956 70,147
------------ -----------
Total liabilities 117,298 94,042
------------ -----------
Redeemable common stock, no par value, 180,712 shares issued and outstanding 2,109 2,102
------------ -----------
Shareholders' equity:
Preferred stock, 30,000,000 shares authorized:
Preferred stock - Series A, no par value, 100 shares authorized and
outstanding 1 1
Convertible Preferred stock - Series B, no par value, 70,000 shares authorized,
zero shares issued and outstanding - -
Preferred stock - Series C, no par value, 100 shares authorized, zero shares
issued and outstanding - -
Convertible Preferred stock - Series D, no par value, 2,000,000 shares
authorized, 1,628,663 shares issued and outstanding 12,089 12,089
Common stock, no par value, 50,000,000 shares authorized, 20,752,252 and 20,584,416
shares issued and outstanding in 1999 and 1998, respectively 21 21
Additional paid-in capital 61,760 61,129
Shareholder notes receivable (606) (596)
Accumulated deficit (2,225) (3,654)
------------ -----------
Total shareholders' equity 71,040 68,990
------------ -----------
Total liabilities, redeemable common stock and shareholders' equity $ 190,447 $ 165,134
============ ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
INTERDENT, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Dental practice net patient service revenue $ 44,019 $ 20,644 $ 84,416 $ 38,503
Net management fees 10,785 7,442 21,501 12,738
Licensing and other fees 259 173 524 294
----------- ---------- ---------- ----------
Net revenues 55,063 28,259 106,441 51,535
Cost and expenses:
Clinical salaries and benefits 21,188 10,501 40,839 19,325
Practice nonclinical salaries and benefits 7,481 4,269 14,473 7,774
Dental supplies and lab expenses 6,870 3,643 13,285 6,691
Practice occupancy expenses 3,189 1,932 6,312 3,540
Practice selling, general and administrative expenses 5,633 2,844 11,415 5,450
Corporate selling, general and administrative expenses 2,999 1,989 5,795 3,786
Corporate restructure and merger costs 1,348 - 5,029 -
Depreciation and amortization 2,232 1,101 4,349 1,928
----------- ---------- ---------- ----------
Operating income 4,123 1,980 4,944 3,041
----------- ---------- ---------- ----------
Nonoperating income (expense):
Interest expense, net (1,409) (458) (2,760) (653)
Other income (expense), net (30) 11 (8) (7)
----------- ---------- ---------- ----------
Nonoperating expense, net (1,439) (447) (2,768) (660)
----------- ---------- ---------- ----------
Income before income taxes 2,684 1,533 2,176 2,381
Provision for income taxes 549 593 740 915
----------- ---------- ---------- ----------
Net income 2,135 940 1,436 1,466
Accretion of redeemable common stock (3) (5) (7) (12)
----------- ---------- ---------- ----------
Net income attributable to common stock $ 2,132 $ 935 $ 1,429 $ 1,454
=========== ========== ========== ==========
Income per share attributable to common stock - basic $ 0.10 $ 0.05 $ 0.07 $ 0.07
=========== ========== ========== ==========
Income per share attributable to common stock - diluted $ 0.09 $ 0.04 $ 0.06 $ 0.07
=========== ========== ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
INTERDENT, INC.
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,436 $ 1,466
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation and amortization 4,349 1,928
Loss on investment in joint venture - 4
Non-employee stock options granted and stock issued for fees and compensation 28 32
Interest accrued on shareholder notes receivables (10) (9)
Amortization of deferred financing costs 134 3
Deferred income taxes 33 (20)
Changes in assets and liabilities, net of the effect of acquisitions:
Accounts receivable, net (1,129) 1,114
Management fee receivables from professional associations (484) (2,472)
Supplies inventory 3 -
Prepaid expenses and other current assets (207) (973)
Other assets (38) (245)
Accounts payable (1,217) (1,157)
Accrued payroll and payroll related costs 2,836 442
Accrued merger and restructure (82) (1,003)
Other liabilities (885) (748)
------------ ------------
Net cash provided by (used in) operating activities 4,767 (1,638)
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (3,804) (3,537)
Net payments received (advances) on notes receivable from professional associations (509) (396)
Advances to professional associations (3,948) (878)
Cash paid for acquisitions, including direct costs, net of cash acquired (17,981) (23,380)
------------ ------------
Net cash used in investing activities (26,242) (28,191)
------------ ------------
Cash flows from financing activities:
Net proceeds from credit facilities 18,745 11,000
Proceeds from issuance of long term debt - 31,216
Payments on long-term debt and obligations under capital leases (2,627) (21,616)
Payments of deferred financing costs (217) (13)
Proceeds from issuance of common and preferred stock 56 13,825
Exercise of stock options 2 23
------------ ------------
Net cash provided by financing activities 15,959 34,435
------------ ------------
Increase (decrease) in cash and cash equivalents (5,516) 4,606
Cash and cash equivalents, beginning of period 8,244 20,670
------------ ------------
Cash and cash equivalents, end of period $ 2,728 $ 25,276
============ ============
Cash paid for interest $ 3,128 $ 1,099
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
INTERDENT, INC.
AND SUBSIDIARIES
June 30, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
(Unaudited, in thousands, except per share and share amounts)
(1) ORGANIZATION
InterDent, Inc. ("InterDent" or the "Company"), incorporated on October 13,
1998, is a Delaware corporation headquartered in El Segundo, California.
InterDent is one of the largest providers of dental practice management services
to multi-specialty dental professional corporations and associations ("PAs") in
the United States. Including affiliations completed through August 5, 1999,
InterDent provides management services to professional dental associations at
204 dental offices with 603 dentists, including 139 specialists, and 1,744
operatories in selected markets in California, Florida, Georgia, Hawaii, Idaho,
Indiana, Michigan, Nevada, Oregon, Pennsylvania, and Washington.
As part of a delivery network of multi-specialty dental care, the Company
provides management services to affiliated PAs under long-term management
service agreements. Under the terms of the management service agreements, the
Company bills and collects patient receivables and provides all administrative
support services to the PAs. The dentists employed through the Company's network
of PAs provide comprehensive general dentistry services and offer specialty
dental services, which include endodontics, oral pathology, oral surgery,
orthodontics, pedodontics, periodontics, and prosthodontics. The Company's
practice management services facilitate the delivery of convenient, high
quality, comprehensive and affordable dental care to patients in a comfortable
environment. The Company seeks to build geographically dense dental practice
networks in selected markets through a combination of affiliations with dental
practices existing in the area and selectively developing new offices.
(2) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
On March 12, 1999, Gentle Dental Service Corporation ("GDSC") and Dental Care
Alliance, Inc. ("DCA") completed mergers in which each entity became a
wholly-owned subsidiary of InterDent, Inc., a newly formed corporation. The
combination is being accounted for using the pooling-of-interests method of
accounting and reflects the combined financial position and operating results of
GDSC and DCA for all periods presented. The consolidated financial statements
include the accounts of InterDent, Inc. and its subsidiaries and certain PAs, as
discussed below. All significant intercompany transactions and accounts have
been eliminated.
The Emerging Issues Task Force ("EITF") of the Financial Accounting Standards
Board has evaluated certain matters relating to the physician practice
management industry (EITF issue number 97-2) and reached a consensus on the
accounting for transactions between physician practice management companies and
physician practices and the financial reporting of such entities. For financial
reporting purposes, EITF 97-2 mandates the consolidation of physician practice
activities with the practice management company when certain conditions have
been met, even though the practice management company does not have an equity
investment in the physician practice. The accompanying financial statements are
prepared in conformity with the consensus reached in EITF 97-2.
Corporate practice of medicine laws in the states in which InterDent currently
operates generally prohibit it from owning dental practices. In response to
these laws, the Company has executed management services agreements ("MSAs")
with various PAs. Under those circumstances where the MSAs meet the criteria for
consolidation as outlined in EITF 97-2, all the accounts of those PAs are
included in the accompanying consolidated financial statements. Accordingly, the
consolidated statements of operations include the net patient revenues and
related expenses of those PAs. As of June 30, 1999 there are 112 clinical
locations included within the condensed consolidated statements of operations,
including the net patient revenues and related expenses of the PAs.
In instances where the MSAs have not met the criteria for consolidation, the
Company does not consolidate the accounts of the PAs. Accordingly, the
consolidated statements of operations exclude the net patient revenues and
expenses of these PAs, and include only the Company's net management fee revenue
generated from those MSAs and the Company's corresponding expenses associated
with fulfilling its obligations under those MSAs. There are 79 clinical
locations accounted for in this manner within the condensed consolidated
statements of operations as of June 30, 1999.
5
<PAGE>
INTERIM REPORTING
The accompanying unaudited interim consolidated financial statements of
InterDent have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). Certain information and note
disclosures normally included in annual consolidated financial statements have
been condensed or omitted as permitted under those rules and regulations. We
believe all adjustments, consisting only of normal, recurring adjustments
considered necessary for a fair presentation, have been included and that the
disclosures made are adequate to insure that the information presented is not
misleading. To obtain a more detailed understanding of our results, it is
suggested that these financial statements be read in conjunction with the
consolidated financial statements and related notes for the year ended December
31, 1998 included in Form 8-K/A filed on May 28, 1999. The results of operations
for the three and six months ended June 30, 1999 are not necessarily indicative
of the results of operations for the entire year.
NET REVENUES
Revenues consist primarily of PA net patient service revenue and Company net
management fees. Net patient revenue represents the consolidated revenue of the
PAs reported at the estimated net realizable amounts from patients, third party
payors and others for services rendered, net of contractual adjustments. Net
management fees represent amounts charged under MSAs to the unconsolidated PAs
on an agreed-upon percentage of the PAs net patient service revenue, net of
provisions for contractual adjustments and doubtful accounts.
RECEIVABLE FROM PAS
Management fee receivable represents amounts owed to the Company from
unconsolidated PAs related to revenue recorded in accordance with their MSAs and
is recorded based upon the net realizable value of patient accounts receivables
of the PAs. The Company reviews the collectibility of the patient account
receivables of the PAs and adjusts its management fee receivable accordingly.
Advances consist primarily of receivables due in connection with working capital
advances made to certain unconsolidated PAs. Such advances bear interest at
8.5%, adjusted for any changes in the Company's borrowing rate, and are due upon
demand. Note receivables relate to the financing of medical and non-medical
capital additions made by certain unconsolidated PAs. The notes, which are
personally guaranteed by the PA owners, bear interest at rates ranging between
8.5% and 18.5%. The collectibility of receivables from PAs is reviewed based
upon cash flow of the PAs and, where appropriate, the fair market value of
collateral assets. Advance and note amounts to be collected within the next year
are classified as current assets in the accompanying condensed consolidated
balance sheets and are recorded net of provision for allowance.
INTANGIBLE ASSETS
Intangible assets result primarily from the excess of cost over the fair value
of net tangible assets purchased. Such intangibles relate primarily to
non-competition covenants, management services agreements, and goodwill
associated with dental practice acquisition asset and stock purchase
transactions. Intangibles relating to management service agreements consist of
the costs of purchasing the rights to provide management support services to PAs
over the initial non-cancelable terms of the related agreements. Under these
agreements, the PAs have agreed to provide dental services on an exclusive basis
only through facilities provided by the Company which is the exclusive
administrator of all non-dental aspects of the acquired PAs, providing
facilities, equipment, support staffing, management and other ancillary
services. The agreements, which are generally for 25 to 40 year terms, are
non-cancelable except for performance defaults, as defined. Intangible assets
are amortized on the straight-line method, ranging from 5 years for other
intangible assets to 25 years for MSAs and goodwill.
USE OF ESTIMATES
In preparing the financial statements conforming to Generally Accepted
Accounting Principals ("GAAP"), we have made estimates and assumptions that
affect the following:
- Reported amounts of assets and liabilities at the date of the financial
statements;
- Disclosure of contingent assets and liabilities at the date of the
financial statements; and
- Reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates.
6
<PAGE>
NET INCOME PER SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128,
Earnings Per Share ("SFAS 128"). In accordance with SFAS 128, the Company
presents "basic" earnings per share, which is net income divided by the average
weighted common shares outstanding during the period, and "diluted" earnings per
share, which considers the impact of common share equivalents. Dilutive
potential common shares represent shares issuable using the treasury stock
method. Dilutive potential common shares comprised of convertible subordinated
debt have been excluded from the computation of diluted income per share for the
three and six months ended June 30, 1999 and 1998, as their effect is
anti-dilutive. Such excluded issuable shares were 3,257,328. The following table
summarizes the computation of income per share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net income attributable to common stock $ 2,132 $ 935 $ 1,429 $ 1,454
============= ============= ============= =============
Basic Shares Reconciliation:
Weighted average common shares outstanding 20,924,400 19,499,396 20,912,843 19,453,799
Contingently issuable common shares - 140,714 - 131,120
Contingently repurchasable common shares (566,422) - (565,504) -
------------- ------------- ------------- -------------
Basic shares 20,357,978 19,640,110 20,347,339 19,584,919
============= ============= ============= =============
Income per share attributable to common stock -
basic $ 0.10 $ 0.05 $ 0.07 $ 0.07
============= ============= ============= =============
Diluted Shares Reconciliation:
Basic shares 20,357,978 19,640,110 20,347,339 19,584,919
Effects of dilutive potential common shares:
Convertible preferred stock 1,628,665 810,753 1,628,665 407,616
Warrants 90,591 263,624 136,684 240,249
Stock options 227,770 491,090 195,760 397,705
Put rights 90,121 44,015 95,775 48,117
Contingent shares, non-issuable 110,165 - 98,380 -
------------- ------------- ------------- -------------
Diluted shares 22,505,290 21,249,592 22,502,603 20,678,606
============= ============= ============= =============
Income per share attributable to common stock -
diluted $ 0.09 $ 0.04 $ 0.06 $ 0.07
============= ============= ============= =============
</TABLE>
(3) NET REVENUE
Revenues consist primarily of PA net patient service revenue and Company net
management fees. Net patient revenue represents the consolidated revenue of the
PAs reported at the estimated net realizable amounts from patients, third party
payors and others for services rendered, net of contractual adjustments. Net
management fees represent amounts charged under MSAs to the unconsolidated PAs
on an agreed-upon percentage of the PAs net patient service revenue, net of
provisions for contractual adjustments and doubtful accounts.
The following represents amounts included in the determination of dental
practice net patient service revenue and net management fees (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Dental practice net patient service revenue-all PAs $ 59,929 $ 31,468 $ 116,001 $ 57,078
LESS:
Dental practice net patient service revenue-
unconsolidated PAs (15,910) (10,824) (31,585) (18,575)
------------- ------------- ------------- -------------
Reported practice net patient service revenue $ 44,019 $ 20,644 $ 84,416 $ 38,503
------------- ------------- ------------- -------------
Dental practice net patient service revenue-
unconsolidated PAs $ 15,910 $ 10,824 $ 31,585 $ 18,575
7
<PAGE>
LESS:
Amounts retained by dentists (5,125) (3,383) (10,084) (5,837)
------------- ------------- ------------- -------------
Net management fees $ 10,785 $ 7,441 $ 21,501 $ 12,738
============= ============= ============= =============
</TABLE>
(4) BUSINESS COMBINATIONS AND DENTAL PRACTICE ACQUISITIONS
BUSINESS COMBINATIONS
On March 12, 1999 GDSC and DCA completed mergers in which each entity became a
wholly-owned subsidiary of InterDent, Inc. In the mergers, each share of GDSC's
9,178,602 total shares of outstanding common stock, including earn-out shares
that were earned but not yet issued, automatically converted into one share of
common stock of InterDent. Each 10 shares of GDSC's 100 outstanding shares of
Preferred Stock - Series C automatically converted into one share of common
stock of InterDent. Also, each share of GDSC's 100 outstanding shares of
Preferred Stock - Series A and 1,628,663 outstanding shares of Convertible
Preferred Stock - Series D converted into one share of preferred stock of
InterDent with the same rights, preferences, and privileges as to InterDent as
the share of preferred stock had with respect to GDSC. Each share of DCA's
7,031,187 total shares of outstanding common stock was exchanged for 1.67 shares
of InterDent stock. Upon consummation of the mergers, GDSC and DCA stockholders
represent a 43.5% and 56.5%, respective ownership of InterDent, excluding common
share equivalents. Including the impact of potential dilutive common shares
outstanding, upon consummation of the mergers, GDSC and DCA stockholder
ownership was approximately 53.5% and 46.5%, respectively.
The mergers have been accounted for using the pooling-of-interests method of
accounting. Accordingly, the historical financial statements for the periods
prior to the completion of the combination have been restated as though the
companies had been combined. The restated financial statements have been
adjusted to conform the lives in computing depreciation of equipment. The
individual results of operations of GDSC and DCA for 1999 through February 28,
1999, representing the latest available financial statements of the individual
corporations prior to the mergers, are as follows:
<TABLE>
<CAPTION>
GDSC DCA
------------ -----------
<S> <C>
PA net patient service revenue $ 26,048 $ -
Management, consulting, and licensing fees 532 6,441
Net income 1,129 595
</TABLE>
As a result of the mergers the Company recorded direct merger expenses of $3,333
during the six months ended June 30, 1999, consisting of investment banker fees,
advisors fees, investor relations expense, legal fees, accounting fees, printing
expense, and other costs. Also, the Company recorded a restructuring charge of
$1,696 relating to the Company's restructuring plan, including charges for
employee related costs, redirection of certain duplicative operations and
programs, and other costs. Total restructure costs paid during the six months
ended June 30, 1999 were $1,471. Included in accounts payable and other current
liabilities at June 30, 1999 is $3,060 in accrued merger and restructure costs,
of which $1,412 relates to accrued restructure costs. At December 31, 1998 these
liabilities were $3,142.
DENTAL PRACTICE AFFILIATIONS
During the six months ended June 30, 1999, the Company acquired substantially
all of the assets of 27 dental office locations, including cash, accounts
receivable, supplies and fixed assets. The aggregate dental practice acquisition
purchase price recorded during the six months ended June 30, 1999, representing
the fair value of the assets acquired in the above affiliations and earn-out
consideration accrued or paid for transactions completed in current and prior
periods was $25,108. Approximately $20,959 of the purchase price has been
allocated to intangible assets. The total purchase consideration included
$15,399 in cash, $5,106 in liabilities incurred and assumed, and $4,603
aggregate value of payments accrued and shares reserved under earn-out
agreements.
In connection with the completion of certain affiliation transactions, the
Company has agreed to pay to the selling parties possible future consideration
in the form of cash and InterDent common stock. The amount of future
consideration payable by the Company under earn-outs is generally computed based
upon financial performance of the affiliated dental practices during certain
specified periods. The Company accrues earn-out payments with respect to
practice acquisitions when such amounts are probable and reasonably estimable.
During the six months ended June 30, 1999 the Company paid $2,582 in additional
earn-out consideration.
As of June 30, 1999, the Company has accrued $5,179 for future earn-out
payments, of which $764 is included in additional paid-in capital for
anticipated stock to be issued while the remaining accrual for anticipated cash
payments is included
8
<PAGE>
in other current liabilities. For those acquisitions with earn-out provisions,
the Company estimates the total maximum earn-out that could be paid, including
amounts already accrued, is between $20,000 and $30,000 from June 1999 to
December 2002, of which the majority is expected to be paid in cash. In future
years, such additional earn-out consideration could result in additional
amortization of $800 to $1,200 annually.
The above asset purchases in 1999 have been accounted for using the purchase
method of accounting. The excess of the total purchase price over the fair value
of the net tangible and identifiable intangible assets acquired representing the
estimated future value of the management services agreements are being amortized
over the lesser of the term of the related management service agreements or 25
years using the straight-line method. The results of operations for these
practices have been included in the consolidated financial statements of the
Company since the dates of their affiliation.
(5) DEBT
Through June 15, 1999, the Company had two credit facilities providing for a
maximum borrowing of $60,000. Effective June 15, 1999, the Company amended and
restated one of the existing agreements, increasing the revolving credit
commitment from $45,000 to $70,000, with the syndication of banks led by Chase
Manhattan Bank. Proceeds from the amended credit agreement were used to pay-down
the outstanding $15,000 credit facility which has been terminated. The amended
and restated credit agreement has a revolving feature that expires on September
30, 2001, at which time it will convert into a four year term loan to be repaid
in 16 equal quarterly installments. All amounts due under the credit facility
are included in the long-term portion of debt. The financial institution in
which the $15,000 credit facility was terminated has elected to participate in
the syndication of the $70,000 facility amendment. Subsequent to June 30, 1999,
the Company extended its credit facility to $90,000, see note 8.
The credit facility requires the Company to pay unused commitment fees and
contains several covenants including restrictions on the ability of the Company
to incur indebtedness, prohibitions on dividends without prior approval, and
requirements relating to maintenance of a specified net worth and compliance
with specified financial ratios. In addition, the credit facility requires the
Company to notify the lenders prior to making any acquisitions and to obtain the
consent of the lenders prior to making acquisitions over a specified purchase
price. The obligations of the Company under the credit facility and the
subsidiaries under the guarantees are secured by a security interest in the
equipment, fixtures, inventories, receivables, subsidiary stock, certain debt
instruments, accounts and general intangibles of each of such entities.
The Company has issued $30,000 of subordinated convertible notes ("Notes"). The
Notes have an eight-year term and bear interest at 7.0%. See note 6 for
discussion on the conversion of the Notes.
(6) SHAREHOLDERS' EQUITY
The Company has completed a $45,000 private placement, consisting of $30,000 of
subordinated convertible notes and $15,000 of preferred stock. The subordinated
notes have eight-year terms and are convertible into shares of the common stock
at $9.21 for each share of common stock issuable upon conversion of outstanding
principal and accrued but unpaid interest on such subordinated notes. If certain
events of default occur, the subordinated notes then outstanding will
automatically convert into shares of Series B preferred stock at a rate of one
share of Series B preferred stock for each thousand dollars in outstanding
principal and accrued but unpaid interest on the subordinated notes, subject to
adjustment for stock splits, reverse splits, stock dividends, reorganizations
and the like. The subordinated notes and all outstanding shares of preferred
stock, if any, shall be automatically converted into common stock (or, in the
case of Series A preferred stock and Series C preferred stock, redeemed at
nominal cost) if the rolling 21-day average closing market price of the common
stock on 20 out of any 30 consecutive trading days is more than $15.73 on or
prior to May 18, 1999, more than $16.85 on or prior to May 18, 2000, or more
than $17.98 at any time thereafter.
The Company is authorized to issue 30,000,000 shares of preferred stock.
Presently authorized series of preferred stock include the following series:
- - Series A - 100 shares authorized, issued and outstanding
- - Series B - 70,000 shares authorized, zero issued or outstanding
- - Series C - 100 shares authorized, zero shares issued or outstanding
- - Series D - 2,000,000 shares authorized, 1,628,663 shares issued and
outstanding.
The shares of Series B preferred stock are convertible into shares of common
stock at the rate of 108.58 shares of common stock for each share of Series B
preferred stock (assuming there are no declared but unpaid dividends on the
Series B preferred stock), and the shares of Series D preferred stock are
convertible into shares of common stock on a share for share basis (assuming
there are no declared but unpaid dividends on the Series D preferred stock), in
each case subject to
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adjustment for stock splits, reverse splits, stock dividends, reorganizations
and the like. The Series A preferred stock and Series C preferred stock are not
convertible.
(7) CONTINGENCIES
The Company has been named as a defendant in a malpractice case filed in
superior court in Clark County, Washington against one of the PAs and an
orthodontist employed thereby. Following an orthodontic examination, the
plaintiff was referred by the orthodontist to an ear, nose and throat specialist
who then removed plaintiffs tonsils. Several days after the operation, plaintiff
suffered complications resulting in permanent physical damage. The plaintiff has
alleged damages of in excess of $10,000 due to the alleged negligence on the
part of the orthodontist and has alleged that the orthodontist acted as an
employee of the Company. The Company denies these allegations and believes that
the case is without merit and is defending the case vigorously. The Company does
not believe the outcome of this case will have a material impact on the
Company's financial position or results of operations.
(8) SUBSEQUENT EVENTS
Subsequent to June 30, 1999, the Company completed the acquisition of 5 PAs,
representing thirteen clinical office locations. The purchase price for these
affiliations totaled $13,405. The total purchase price included cash paid of
$9,108 and liabilities issued or assumed of $4,297, plus contingent payments to
be made based on future performance. These affiliations were accounted for using
the purchase method of accounting. Funds for the acquisitions were provided
under borrowings on the credit facility.
The Company completed an expansion of its expansion credit facility to $90,000
with a syndication of banks led by Chase Manhattan Bank. The expansion is an
amendment to the agreement outstanding at June 30, 1999 and is subject to the
same constraints and covenants as the $70,000 revolving credit facility
discussed in note 5.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
InterDent, Inc ("InterDent" or the "Company") is one of the largest providers of
dental practice management services to multi-specialty dental professional
corporations and associations ("PAs") in the United States. Including the
affiliations completed through August 5, 1999, InterDent provides management and
licensing services to dental practices at 204 dental offices with 603 dentists,
including 139 specialists, and 1,744 operatories in selected markets in
California, Florida, Georgia, Hawaii, Idaho, Indiana, Michigan, Nevada, Oregon,
Pennsylvania, and Washington.
The Company's practice management services facilitate the delivery of
convenient, high quality, comprehensive and affordable dental care to patients
in a comfortable environment. The dentists affiliated through the Company's
network of PAs provide comprehensive general dentistry services and offer
specialty dental services, which include endodontics, oral pathology, oral
surgery, orthodontics, pedodontics, periodontics, and prosthodontics. The
Company's strategic objective is to maintain and expand its leadership position
in the dental practice management industry. To achieve this objective, the
Company seeks to enter selected geographic markets and develop locally
prominent, multi-specialty dental delivery networks. The key elements of the
Company's strategy are as follows:
- - Provide convenient, comprehensive dental care
- - Focus on quality of patient care
- - Establish a comprehensive dental care network
- - Achieve operational efficiencies and enhance revenue
- - Integrate and leverage management information systems
- - Expand patient volume through proactive marketing
- - Capitalize on managed care expertise
As part of a delivery network of multi-specialty dental care, the Company
provides management and licensing services to affiliated PAs under long-term
management service agreements (collectively referred to as "MSAs"). Under the
terms of the MSAs, the Company bills and collects patient receivables and
provides all administrative and management support services to the PAs. These
administrative and management support services include: financial, accounting,
training, efficiency and productivity enhancement, recruiting, team building,
marketing, advertising, purchasing, and related support personnel. Licensing
services include marketing, advertising, and purchasing.
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As compensation for services provided under the MSAs, the Company receives
management fees from the PAs. Depending upon the individual MSA provisions, the
management fee is calculated based upon one of two methods. Under one method the
management fee is equal to reimbursement of expenses incurred in the performance
of its obligations under the MSAs, plus an additional fee equal to a percentage
of the net revenues of the PAs. Under the other method, the management fee is a
set percentage of the net revenues of the PAs, as defined.
The MSAs have initial terms ranging from 25-40 years with automatic extensions
thereafter, unless either party gives notice before the end of the term. The
MSAs are not subject to early termination by the PAs unless the Company is the
subject of bankruptcy proceedings or the Company materially breaches the MSAs
and does not cure the breach following notice. Certain MSAs have additional
termination events, including the refusal to comply with the decisions of the
joint operating committee, failure to pay the management fee, and a material
change in applicable federal or state law.
RESULTS OF OPERATIONS
The Emerging Issues Task Force ("EITF") of the Financial Accounting Standards
Board evaluated certain matters relating to the physician practice management
industry (EITF issue number 97-2) and reached a consensus on the accounting for
transactions between physician practice management companies and physician
practices and the financial reporting of such entities. For financial reporting
purposes, EITF 97-2 mandates the consolidation of physician practice activities
with the practice management company when certain conditions have been met, even
though the practice management company does not have an equity investment in the
physician practice. The accompanying financial statements are prepared in
conformity with the consensus reached in EITF 97-2.
Under those circumstances where the MSAs meet the criteria for consolidation as
outlined in EITF 97-2, all the accounts of those PAs are included in the
accompanying condensed consolidated financial statements. Accordingly, the
condensed consolidated statements of operations include the net patient revenues
and related expenses of those PAs. In instances where the MSAs have not met the
criteria for consolidation, the Company does not consolidate the accounts of the
PAs. Accordingly, the condensed consolidated statements of operations exclude
the net patient revenues and expenses of these PAs. Rather, the condensed
statements of operations include only the Company's net management fee revenue
generated from those MSAs and the Company's expenses incurred in the performance
of its obligations under those MSAs. The following discussion highlights changes
in historical revenues and expense levels for the three and six months ended
June 30, 1999 and 1998 as reported in the accompanying condensed consolidated
financial statements.
1999 STATEMENT OF OPERATIONS COMPARED TO 1998
DENTAL PRACTICE NET PATIENT REVENUE. Dental practice net patient revenue
represents the clinical patient revenues at 112 current clinical locations
through June 30, 1999 where the consolidation requirements of EITF 97-2 have
been met. Dental practice net patient revenue increased to $44.0 million for the
second quarter of 1999 compared to $20.6 million for the second quarter of 1998,
representing a 113% increase of $23.4 million. Revenues also increased to $84.4
million for the first six months of 1999 compared to the first six months of
1998 of $38.5 million, representing a 119% increase of $45.9 million.
The Company is pursuing an aggressive expansion strategy through additional PA
affiliations. As a result, the majority of this revenue growth is due to 18
affiliations completed during 1998 and the first six months of 1999,
representing 70 current clinical locations. These affiliations have management
services agreements that meet the Emerging Issues Task Force's consolidation
requirements.
The Company was also effectively able to increase total dental practice net
patient service revenue at existing facilities. The Company worked with
affiliated PAs to recruit new dentists to meet increased demand, negotiated
additional contracts with managed care organizations and third party-payors,
leveraged additional specialty dental services, and increased the number of
patients successfully completing their treatment programs with the use of
internally developed propriety software. For those locations affiliated as of
March 31, 1998 where the MSAs meet the criteria for consolidation, same-store
dental practice net patient revenue for the second quarter 1999 increased by
over 10% when compared to revenues for the second quarter of 1998. For those
locations affiliated as of January 1, 1998 where the MSAs meet the criteria
for consolidation, same-store dental practice net patient revenue for the
first six months of 1999 also increased by over 10% when compared to revenues
for the first six months of 1998.
NET MANAGEMENT FEES. Net management fees consist of revenues earned by the
Company in the performance of its obligations under MSAs at 79 current
unconsolidated PA clinical locations. Net management fees increased to $10.8
million for the second quarter of 1999 compared to $7.4 million for the second
quarter of 1998, representing a 44.9% increase of $3.4 million. Revenues also
increased to $21.5 million for the first six months of 1999 compared to the
first six months of 1998 of $12.7 million, representing a 68.8% increase of $8.8
million. The Company is pursuing an aggressive expansion strategy
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through additional PA affiliations. As a result, the majority of this growth is
related to the affiliation of 48 clinical locations during 1998 and 1999.
LICENSING AND OTHER FEES. The Company earns certain fees from unconsolidated PAs
for various licensing and consulting services. The increase is entirely
attributed to the addition of 46 unconsolidated clinical locations during 1998
and 1999.
PRACTICE FACILITY OPERATING EXPENSES. Practice facility operating expenses
("operating expenses") represents the direct costs associated with operating and
managing the practice facility locations, including regional support
departments. These costs are comprised of the following expenses:
- - CLINICAL SALARIES AND BENEFITS AND PROVIDER COSTS include all patient
service provider staff compensation and related payroll costs at the
consolidated dental practices, including dentists, hygienists and dental
assistants, and dental assistants for the unconsolidated PAs.
- - PRACTICE NONCLINICAL SALARIES AND BENEFITS COSTS include all staff
compensation and related payroll costs at all dental facilities other than
dentists, hygienists, and dental assistants.
- - DENTAL SUPPLIES AND LAB COSTS include all direct supply costs in the
performance of patient treatment programs.
- - PRACTICE OCCUPANCY EXPENSES include facility leases, property taxes,
utilities, janitorial services, and repairs and maintenance.
- - PRACTICE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES include general
office, advertising, professional services (excluding dentistry), office
supplies, bank processing fees, local taxes, insurance, bad debt expense,
and other miscellaneous costs at the dental facilities and regional
centers.
Operating expenses have increased significantly during the second quarter and
first six months of 1999 when compared to the same periods in 1998. Second
quarter operating expenses increased to $44.4 million for the second quarter of
1999 compared to $23.2 million for the second quarter of 1998, representing a
91.3% increase of $21.2 million. These expenses also increased to $86.3 million
for the first six months of 1999 compared to the first six months of 1998 of
$42.8 million, an increase of 102% or $43.5 million. The majority of the
increase in operating expenses is due to the 37 affiliations (representing 118
current clinical locations) completed during 1998 and first six months of 1999,
as a result of the Company's aggressive expansion strategy. Of the total
clinical locations affiliated in 1998 through June 30, 1999, 18 of the 37
affiliations have management services agreements that meet the Emerging Issues
Task Force's consolidation requirements.
During the second quarter and first six months of 1999, most categories of
operating expenses varied slightly as a percentage of net revenues when compared
to the second quarter and first six months of 1998 and were anticipated due to
the effect of practice affiliations. During 1999 the Company has shown
significant improvements in the reduction of total operating expenses. As a
percentage of net revenues, operating expenses for the second quarter of 1999
were 80.6% compared to 82.1% for the second quarter of 1998 and 81.1% for the
first six months of 1999 compared to 83.1% for the first six months of 1998. The
overall reduction in operating expenses is a result of the successful
implementation of the Company's operating model at existing facilities and the
proven strong operational and financial track records of current affiliated
practices. As a result, the overall practice facility operating margin for the
second quarter of 1999 was 19.4% compared to 17.9% for the second quarter of
1998 and 18.9% for the first six months of 1999 compared to 16.9% for the first
six months of 1998.
CORPORATE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Corporate selling,
general and administrative expenses ("Corporate G&A expense") include: corporate
salaries, general office costs, investor relations expense, legal and audit,
general and director & officer insurance, corporate office supplies, and other
miscellaneous costs at the corporate facilities. Corporate G&A expense was $3.0
million for the second quarter of 1999 compared to $2.0 million for the second
quarter of 1998, an increase of 50.7%. These expenses also increased to $5.8
million for the first six months of 1999 compared to $3.8 million for the first
six months of 1998, an increase of 53.0%.
The rise in total costs is the result of the Company increasing corporate
staffing levels in the marketing, human resource, finance, and operations
departments to accommodate the additional affiliations completed. Additionally,
resources have been added to respond to the increasing affiliated dental
practice needs for information systems implementation, clinical management and
mentoring programs, and to appropriately develop the support infrastructure of
the Company. At the same time, management seeks to maximize the effectiveness of
corporate infrastructure costs. As a result, Corporate G&A expense as a
percentage of net revenues has steadily declined. Corporate G&A expense for the
second quarter of 1999 was 5.4% of net
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revenues as compared to 7.0% for the second quarter of 1998. G&A expense for
the first six months of, 1999 was 5.4% of net revenues as compared to 7.3% for
the first six months of 1998.
CORPORATE RESTRUCTURE AND MERGER COSTS. The Company recorded merger and
restructure related expenses associated with the combination of Gentle Dental
Service Corporation and Dental Care Alliance, Inc., each of which became a
wholly-owned subsidiary of the Company in March 1999. The combination has been
accounted for as a pooling-of-interests. As a result of the combination, the
Company recorded expense of $1.3 million during the second quarter of 1999 and
$5.0 million of expense for the first six months of 1999. Approximately $3.3
million of the total expense relates to merger costs consisting of investment
banker fees, advisors fees, investor relations expense, legal fees, accounting
fees, printing costs, and other costs. The remaining $1.7 million relates to the
Company's restructuring plan, including charges for employee related costs and
the redirection of certain duplicative operations and systems costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense for the
second quarter of 1999 and first six months of 1999 increased in excess of 100%
over the respective periods in 1998. This increase is primarily due to the
additional property and equipment depreciation and amortization of intangible
costs assigned to management services agreements and goodwill associated with
affiliations completed in 1998 and 1999. It is anticipated that future
acquisitions will result in additional depreciation and amortization throughout
the year.
INTEREST EXPENSE. Interest expense was $1.4 million for the second quarter of
1999 compared to $.5 million for the second quarter of 1998. These expenses also
increased to $2.8 million for the first six months of 1999 compared to $653
thousand for the first six months of 1998. This increase in interest expense was
due to additional debt incurred under the Company's credit facility and private
placement to complete the rapid expansion of additional dental practice
affiliations throughout 1998 and 1999 (See note 4 of Notes to the Condensed
Consolidated Financial Statements). It is anticipated that future acquisitions
will require additional borrowings under the existing credit facility.
Accordingly, management anticipates that interest expense will increase
throughout the year.
PROVISION FOR INCOME TAXES. The current expected tax rate is lower than the
statutory rate as certain merger related expenses are not deductible for income
tax purposes, which are offset by the carry forward of net operating losses from
Company subsidiaries and affiliates. The Company expects to fully utilize the
net operating loss carryforwards in 1999. For the six months ended June 30, 1999
the Company has recorded an expected annual effective tax rate of approximately
34% as compared to the effective rate of 38% recorded during the same period in
1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, cash and cash equivalents were $2.7 million, representing a
$5.5 million decrease in cash and cash equivalents available at December 31,
1998. This decline is due to the amendment to the credit facility, which allowed
us to consolidate cash balances between subsidiaries and pay down the credit
facility balances. Working capital at June 30, 1999 of $1.3 million represents a
decrease from working capital of $6.7 million at December 31, 1998. This
decrease in working capital is primarily attributable to acquisition earn-out
and merger & restructure payables and accruals of approximately $3.1 million
(excluding amounts paid during 1999), payment of earn-out consideration, and
utilization of cash to pay down borrowings under the company's credit facility.
Net cash provided by operations (which includes merger and restructure expenses)
amounted to $4.7 million for the six months ended June 30, 1999 compared to a
use of cash of $1.6 million for the six months ended June 30, 1998. The increase
of net cash provided by operations during the six months ended June 30, 1999 is
attributed to improvements in the Company's results of operations and increases
in accrued payroll and payroll related costs. Excluding merger and restructure
costs, operating income for the six months ended June 30, 1999 and 1998 was
$10.0 million and $3.0 million, respectively. As a result, excluding merger and
restructure costs, net cash provided by operations amounted to $6.9 million for
the six months ended June 30, 1999 compared to cash used of $.6 million for the
six months ended June 30, 1998.
Net cash used in investing activities was $26.2 million for the six months ended
June 30, 1999. Included in the investing activities is cash paid for PA
affiliations of $18.0 million and $3.8 million paid for property and equipment.
These uses of cash were primarily funded through borrowing under the Company's
existing credit facility. As a result, cash provided from the credit facility
amounted to $18.7 million for the six months ended June 30, 1999.
During the six months ended June 30, 1999, the Company acquired substantially
all of the assets of 27 office locations, including cash, accounts receivable,
supplies and fixed assets. The affiliations have been accounted for using the
purchase method of accounting. The aggregate dental practice acquisition
purchase price recorded during the six months ended June 30, 1999, representing
the fair value of the assets acquired, including intangible assets was $25.1
million. Approximately
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$21.0 million of the purchase price has been allocated to intangible assets.
The total purchase consideration included $15.4 million in cash, $5.1 million
in liabilities incurred and assumed, and $4.6 million in accrued earn-out from
transactions completed in current and prior periods.
In connection with the completion of certain affiliation transactions, the
Company has agreed to pay to the selling parties' possible future consideration
in the form of cash and InterDent common stock. The amount of future
consideration payable by the Company under earn-outs is generally computed based
upon financial performance of the affiliated dental practices during certain
specified periods. The Company accrues for earn-out payments with respect to
practice acquisitions when such amounts are probable and reasonably estimable.
During the six months ended June 30, 1999, the Company paid $2.6 million in
additional earn-out consideration.
As of June 30, 1999, the Company has accrued $5.2 million for future earn-out
payments, of which $.8 million is included in additional paid-in capital for
anticipated stock to be issued while the remaining accrual for anticipated cash
payments is included in other current liabilities. For those acquisitions with
earn-out provisions, the Company estimates the total maximum earn-out that could
be paid, including amounts already accrued, is between $20 and $30 million from
January 1999 to December 2002, of which the majority is expected to be paid in
cash. In future years, such additional earn-out consideration could result in
additional amortization of $.8 million to $1.2 million annually.
The Company previously has made loans to various unconsolidated PAs in
connection with the PAs acquisition of assets of dental practices and has made
working capital advances to certain unconsolidated PAs for their operations. The
loans, which are evidenced by interest bearing notes that are payable upon
demand, are being paid in accordance with their terms. The PA owners personally
guarantee both the loans and advances.
The Company currently has a credit facility providing a maximum credit line of
$90 million. The credit facility has a revolving feature expiring on September
30, 2001, at which time it will convert into a four year term loan to be repaid
in 16 equal quarterly installments. Principal amounts owed under the credit
facility bear interest, at the Company's option at varying margins over LIBOR
(2.25%-3.0%) or the prime rate (0.5%-1.25%), at the Company's option, based on
the level of InterDent's leverage ratio. The credit facility requires the
Company to pay an unused commitment fee (depending on amounts of unused
available credit). This fee is based on the average daily amount by which the
bank commitment under the credit facility exceeds the aggregate amount of all
loans then outstanding.
The credit facility contains several covenants including restrictions on the
ability of the Company to incur indebtedness; repurchase, or make dividends with
respect to, its capital stock; and requirements relating to maintenance of a
specified net worth and compliance with specified financial ratios. In addition,
the credit facility requires the Company to notify certain lenders prior to
making any acquisitions and to obtain the consent of the lenders prior to making
acquisitions with purchase prices exceeding a certain amount of cash and
purchase price. The obligations of the Company under the credit facility and its
subsidiaries under the guarantees are secured by a security interest in certain
equipment, fixtures, inventories, receivables, subsidiary stock, certain debt
instruments, accounts and general intangibles of each of such entities.
The Company has $30 million of subordinated notes and $15 million of preferred
stock. The subordinated convertible notes have eight-year terms and are
convertible into shares of common stock at $9.21 for each share of common stock
issuable upon conversion of outstanding principal and accrued but unpaid
interest on such subordinated notes. If certain events of default occur, the
subordinated notes then outstanding will automatically convert into shares of
Series B preferred stock at a rate of one share of Series B preferred stock for
each thousand dollars in outstanding principal and accrued but unpaid interest
on the subordinated notes, subject to adjustment for stock splits, reverse
splits, stock dividends, reorganizations and the like. The subordinated notes
and all outstanding shares of preferred stock shall be automatically converted
into common stock (or, in the case of Series A preferred stock and Series C
preferred stock, redeemed at nominal cost) if the rolling 21-day average closing
market price of the common stock on 20 out of any 30 consecutive trading days is
more than $15.73 on or prior to May 18, 1999, more than $16.85 on or prior to
May 18, 2000, or more than $17.98 at any time thereafter.
The Company is authorized to issue 30,000,000 shares of preferred stock.
Presently authorized series of preferred stock include the following series:
- - Series A - 100 shares authorized, issued and outstanding
- - Series B - 70,000 shares authorized, zero issued or outstanding
- - Series C - 100 shares authorized, zero shares issued or outstanding
- - Series D - 2,000,000 shares authorized, 1,628,663 shares are issued and
outstanding
The shares of Series B preferred stock are convertible into shares of common
stock at the rate of 108.58 shares of common stock for each share of Series B
preferred stock (assuming there are no declared but unpaid dividends on the
Series B
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preferred stock), and the shares of Series D preferred stock are convertible
into shares of common stock on a share for share basis (assuming there are no
declared but unpaid dividends on the Series D preferred stock), in each case
subject to adjustment for stock splits, reverse splits, stock dividends,
reorganizations and the like. The Series A preferred stock and Series C
preferred stock are not convertible.
We believe that proceeds from our existing credit facility and cash flow from
operations will be sufficient to fund our operations for the next fiscal year.
We also believe that such funds will be sufficient to complete a number of other
future dental practice affiliations and any possible future consideration to be
paid. However, to execute our long term business strategy, the Company will
require substantial additional funding through additional long-term or
short-term borrowing arrangements or through the public or private issuance of
additional debt or equity securities to affiliate new practices and to expand
and maintain existing affiliated practices. There can be no assurance that any
such financing will be available or will be available on terms acceptable to
InterDent.
A total of 254,901 and 339,246 outstanding shares of InterDent common stock
issued at a price of $0.45 and $0.225 per share, respectively are subject to
repurchase as a result of a subsidiary's failure to achieve certain specified
performance targets through December 31,1998. It is anticipated that these
shares will be repurchased in the future.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in a data
field. These programs were designed and developed without considering the impact
of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000 or
earlier. The Year 2000 issue affects us in that the dental practice management
business is dependent on computer applications, such as management information
systems and financial and accounting systems.
In order to address the Year 2000 issues facing InterDent, our management
initiated a program to prepare our computer systems and applications for the
Year 2000. As the primary focus of our Year 2000 plans, we have converted
affiliated PAs to target systems identified and believed to be Year 2000
compliant. We have divided our Year 2000 plan into five phases, and chart our
progress in each of the phases, expressed as an approximate percentage of
completion of that phase:
<TABLE>
<CAPTION>
APPROXIMATE
PHASE PERCENTAGE COMPLETED
<S> <C>
Awareness ......................................... 100%
Assessment ........................................ 100%
Renovation ........................................ 80%
Validation ........................................ 80%
Implementation .................................... 75%
</TABLE>
The Company expects to complete all phases of our Year 2000 plan by November
1999.
We expect to incur internal staff costs as well as consulting and other expenses
related to infrastructure enhancements necessary to prepare for the Year 2000.
Validation and conversion of primary system applications and hardware is
expected to cost approximately $1 million and will be incurred by the end of
fiscal year 1999.
As part of our Year 2000 plan, we are undertaking infrastructure and facilities
enhancements and performing tests necessary to ensure that the Company is
adequately prepared for the Year 2000. We are also communicating with vendors
and third-party payors to ensure that they are taking appropriate steps to
address their Year 2000 issues. We are also preparing contingency plans to
minimize potential harm to the Company in the event that any or all of the third
parties with which we conduct business with is unable to attain Year 2000
compliance. The contingency plans being prepared are system and application
specific and are intended to ensure that in the event that certain systems
and/or applications fail by or at the Year 2000, that we will be able to engage
in our core business functions in spite of such failure. The most likely worst
case Year 2000 scenario would be that we experience significant delays in
billing and collecting professional fees due to our affiliated PAs. This delay
would directly impact our cash flow and could have a material adverse effect on
our business, financial condition or results of operations.
We believe that the established Year 2000 plan and other steps being taken are
adequate to ensure that we will not be materially affected by the Year 2000
problem. However, there can be no assurance that the Year 2000 plan and related
remedial and contingency plans will fully protect us from the risks associated
with the Year 2000 problem. The analysis of,
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and preparation for, the Year 2000 and related problems necessarily relies on a
variety of assumptions about future events. There can be no assurance that
management has accurately predicted such future events or that the remedial and
contingency plans for the Company will adequately address such future events.
In the event that our business, vendor, or patients are disrupted as a result
of the Year 2000 problem such disruption could have a material adverse effect
on the Company.
THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING STATEMENTS WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21B OF THE
SECURITIES EXCHANGE ACT OF 1934. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. CERTAIN
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, AMONG OTHERS, THE PACE OF
DEVELOPMENT AND ACQUISITION ACTIVITY, THE DEPENDENCE ON MANAGEMENT AGREEMENTS,
THE PAS AND AFFILIATED DENTISTS, THE REIMBURSEMENT RATES FOR DENTAL SERVICES,
AND OTHER RISKS DETAILED IN THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION
FILINGS. OTHER RISK FACTORS ARE LISTED IN THE COMPANY'S REGISTRATION STATEMENT
NO. 333-66475 AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
No disclosure required.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has been named as a defendant in a malpractice case filed in
superior court in Clark County, Washington against one of the PAs and an
orthodontist employed thereby. Following an orthodontic examination, the
plaintiff was referred by the orthodontist to an ear, nose and throat specialist
who then removed plaintiffs tonsils. Several days after the operation, plaintiff
suffered complications resulting in permanent physical damage. The plaintiff has
alleged damages of in excess of $10 million due to the alleged negligence on the
part of the orthodontist and has alleged that the orthodontist acted as an
employee of the Company. The Company denies these allegations and believes that
the case is without merit and is defending the case vigorously. The Company does
not believe the outcome of this case will have a material impact on the
Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On March 12, 1999 Gentle Dental Service Corporation ("GDSC") and Dental Care
Alliance, Inc. ("DCA") completed mergers of the two corporations in which each
entity became a wholly-owned subsidiary of InterDent, Inc. In the mergers, each
share of GDSC's 9,178,602 total shares of outstanding common stock, including
earn-out shares that were earned but not yet issued, automatically converted
into one share of common stock of InterDent. Each 10 shares of GDSC's 100
outstanding shares of Preferred Stock - Series C automatically converted into
one share of common stock of InterDent. Also, each share of GDSC's 100
outstanding shares of Preferred Stock - Series A and 1,628,663 outstanding
shares of Convertible Preferred Stock - Series D converted into one share of
preferred stock of InterDent with the same rights, preferences, and privileges
as to InterDent as the share of preferred stock had with respect to GDSC. Each
share of DCA's 7,031,187 total shares of outstanding common stock was exchanged
for 1.67 shares of InterDent common stock. Additional information regarding the
rights, preferences, and privileges of the InterDent preferred stock issued in
the mergers are incorporated herein by reference to pages 102 through 106 of
InterDent's Amendment No. 4 to Registration Statement on Form S-4 Registration
No. 333-66475, filed on February 9, 1999. The preferred stock of InterDent was
issued in the mergers pursuant to an exemption from registration under 4(2) of
the Securities Act of 1933, as amended. InterDent common stock is traded on the
Nasdaq National Market under the trading symbol "DENT."
On March 31, 1999, the Company issued 44,000 shares of common stock on exercise
of an employee stock option. The purchase price was paid by delivery of 33,000
shares of common stock. The option was exercised prior to the filing of S-8
Registration Statements covering shares issuable under the Company's stock
option plans. The issuance of the shares was exempt from registration under
Section 4(2) of the Securities Act of 1933 and Rule 506 of Regulation D
thereunder because the purchaser was an accredited investor within the meaning
of Rule 501.
On April 21, 1999, the Company issued 76,080 shares of common stock as
additional consideration for the acquisition of assets of a dental practice. The
issuance of the shares was exempt from registration under Section 4(2) of the
Securities Act of 1933 and Rule 506 of Regulation D thereunder because the
purchaser was an accredited investor within the meaning of Rule 501.
16
<PAGE>
On June 28, 1999, the Company issued 3,708 shares of common stock as additional
consideration for the acquisition of assets of a dental practice. The issuance
of the shares was exempt from registration under Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D thereunder because the purchaser was an
accredited investor within the meaning of Rule 501.
The payment of dividends is within the discretion of InterDent's Board of
Directors; however, the Company intends to retain earnings from operations for
use in the operation and expansion of its business and does not expect to pay
cash dividends in the foreseeable future. Any future decision with respect to
dividends will depend on future earnings, operations, capital requirements and
availability, restrictions in future financing agreements and other business and
financial considerations. In addition, the Company's senior lender currently
prohibits the payment of cash dividends.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1 Restated Certificate of Incorporation. Incorporated by reference to
Exhibit 3.1 of the Company's Registration Statement on Form S-4, Registration
No. 333-66475, filed on October 30, 1998.
3.2 Bylaws, as amended. Incorporated by reference to Exhibit 3.3 of the
Company's Registration Statement on Form S-4, Registration No. 333-66475,
filed on October 30, 1998.
4.1 Restated Certificate of Incorporation (filed as Exhibit 3.1).
4.2 Bylaws, as amended (filed as Exhibit 3.2).
10.1 Amended and Restated Credit Agreement, dated as of June 15, 1999 (the
"Amended and Restated Credit Agreement"), by and among Gentle Dental Service
Corporation, Dental Care Alliance, Inc. and Gentle Dental Management, Inc., as
borrowers (the "Borrowers"), certain of the Company's subsidiaries, as
guarantors (the "Guarantors"), the financial institutions signatory thereto, as
lenders, Union Bank of California, N.A., as administrative agent (the
"Administrative Agent"), and The Chase Manhattan Bank, as syndication agent (the
"Syndication Agent").
10.2 Amendment Agreement No. 1 to the Amended and Restated Credit Agreement,
dated as of July 30, 1999, by and among the Borrowers, the Guarantors, the
financial institutions signatory thereto, as lenders, the Administrative Agent
and the Syndication Agent.
10.3 Amendment Agreement No. 2 to the Amended and Restated Credit Agreement,
dated as of August 9, 1999, by and among the Borrowers, the Guarantors, the
financial institutions signatory thereto, as lenders, the Administrative Agent
and the Syndication Agent.
10.4 Guaranty, dated as of March 12, 1999, by the Company in favor of the
Administrative Agent.
10.5 Confirmation of Guaranty, dated as of June 15, 1999, by the Company in
favor of the Administrative Agent.
27.1 Financial Data Schedule.
99.1 InterDent, Inc. 1999 Stock Incentive Plan.
99.2 InterDent, Inc. Employee Stock Purchase Plan of 1999.
99.3 InterDent, Inc. Dental Professional Stock Purchase Plan of 1999.
(b) Reports on Form 8-K.
On May 28, 1999, the Company filed an amendment to a Current Report on Form
8-K/A to provide consolidated financial statements in connection with the
completed mergers with Gentle Dental Service Corporation ("GDSC") and Dental
Care Alliance Inc. ("DCA") wherein GDSC and DCA each became a wholly-owned
subsidiary of the Company.
17
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTERDENT, INC.
-----------------------------------------
(Registrant)
Date: August 13, 1999 By: /s/ Norman R. Huffaker
------------------------ -------------------------------------
Norman R. Huffaker
Chief Financial Officer
18
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of June 15, 1999
Among
GENTLE DENTAL SERVICE CORPORATION,
GENTLE DENTAL MANAGEMENT, INC.,
and
DENTAL CARE ALLIANCE, INC.,
AS BORROWERS,
THE GUARANTORS NAMED HEREIN,
THE LENDERS NAMED HEREIN,
UNION BANK OF CALIFORNIA, N.A., AS ADMINISTRATIVE AGENT
and
THE CHASE MANHATTAN BANK, AS SYNDICATION AGENT
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.01 CERTAIN DEFINED TERMS. . . . . . . . . . . . . . . . .2
SECTION 1.02 ACCOUNTING TERMS . . . . . . . . . . . . . . . . . . 28
II. THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.01 REVOLVING CREDIT COMMITMENTS AND TERM LOAN . . . . . 29
SECTION 2.02 LOANS. . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.03 NOTICE OF LOANS. . . . . . . . . . . . . . . . . . . 31
SECTION 2.04 NOTES; REPAYMENT OF LOANS. . . . . . . . . . . . . . 32
SECTION 2.05 INTEREST ON LOANS. . . . . . . . . . . . . . . . . . 34
SECTION 2.06 FEES . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.07 TERMINATION AND REDUCTION OF REVOLVING CREDIT
COMMITMENTS . . . . . . . . . . . . . . . . . . . . .35
SECTION 2.08 INTEREST ON OVERDUE AMOUNTS; ALTERNATE RATE
OF INTEREST . . . . . . . . . . . . . . . . . . . . .36
SECTION 2.09 PREPAYMENT OF LOANS. . . . . . . . . . . . . . . . . 36
SECTION 2.10 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES. . . . 40
SECTION 2.11 CHANGE IN LEGALITY . . . . . . . . . . . . . . . . . 42
SECTION 2.12 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . 43
SECTION 2.13 PRO RATA TREATMENT; ASSUMPTION BY AND
DELEGATION OF AUTHORITY TO THE ADMINISTRATIVE
AGENT . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 2.14 SHARING OF SETOFFS . . . . . . . . . . . . . . . . . 46
SECTION 2.15 PAYMENTS AND COMPUTATIONS. . . . . . . . . . . . . . 47
SECTION 2.16 TAXES. . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 2.17 ISSUANCE OF LETTERS OF CREDIT. . . . . . . . . . . . 50
SECTION 2.18 PAYMENT OF LETTERS OF CREDIT; REIMBURSEMENT. . . . . 51
SECTION 2.19 ADMINISTRATIVE AGENT'S ACTIONS WITH RESPECT
TO LETTERS OF CREDIT . . . . . . . . . . . . . . . . 53
SECTION 2.20 LETTER OF CREDIT FEES. . . . . . . . . . . . . . . . 53
III. COLLATERAL SECURITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 3.01 SECURITY DOCUMENTS . . . . . . . . . . . . . . . . . 53
SECTION 3.02 FILING AND RECORDING . . . . . . . . . . . . . . . . 54
IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 4.01 ORGANIZATION, LEGAL EXISTENCE. . . . . . . . . . . . 54
SECTION 4.02 AUTHORIZATION. . . . . . . . . . . . . . . . . . . . 55
SECTION 4.03 GOVERNMENTAL APPROVALS . . . . . . . . . . . . . . . 55
SECTION 4.04 BINDING EFFECT . . . . . . . . . . . . . . . . . . . 55
</TABLE>
i
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<S> <C>
SECTION 4.05 MATERIAL ADVERSE CHANGE. . . . . . . . . . . . . . . 55
SECTION 4.06 LITIGATION; COMPLIANCE WITH LAWS; ETC. . . . . . . . 55
SECTION 4.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . 56
SECTION 4.08 FEDERAL RESERVE REGULATIONS. . . . . . . . . . . . . 56
SECTION 4.09 TAXES. . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 4.10 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . 57
SECTION 4.11 NO MATERIAL MISSTATEMENTS. . . . . . . . . . . . . . 59
SECTION 4.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY
HOLDING COMPANY ACT . . . . . . . . . . . . . . . . 59
SECTION 4.13 SECURITY INTEREST. . . . . . . . . . . . . . . . . . 59
SECTION 4.14 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . 59
SECTION 4.15 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.16 TITLE TO PROPERTIES; POSSESSION UNDER LEASES;
TRADEMARKS . . . . . . . . . . . . . . . . . . . . . 59
SECTION 4.17 SOLVENCY . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 4.18 PERMITS, ETC.. . . . . . . . . . . . . . . . . . . . 61
SECTION 4.19 COMPLIANCE WITH ENVIRONMENTAL LAWS . . . . . . . . . 61
SECTION 4.20 NO CHANGE IN CREDIT CRITERIA OR COLLECTION
POLICIES . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 4.21 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . 62
SECTION 4.22 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . 62
SECTION 4.23 MANAGEMENT AGREEMENTS. . . . . . . . . . . . . . . . 62
V. CONDITIONS OF CREDIT EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 5.01 ALL CREDIT EVENTS. . . . . . . . . . . . . . . . . . 62
SECTION 5.02 FIRST BORROWING. . . . . . . . . . . . . . . . . . . 63
VI. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 6.01 LEGAL EXISTENCE. . . . . . . . . . . . . . . . . . . 68
SECTION 6.02 BUSINESSES AND PROPERTIES. . . . . . . . . . . . . . 68
SECTION 6.03 INSURANCE. . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.04 TAXES. . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 6.05 FINANCIAL STATEMENTS, REPORTS, ETC . . . . . . . . . 69
SECTION 6.06 LITIGATION AND OTHER NOTICES . . . . . . . . . . . . 71
SECTION 6.07 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 6.08 MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS; RIGHT TO AUDIT . . . . . . . . . . . . 73
SECTION 6.09 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . 73
SECTION 6.10 FISCAL YEAR-END. . . . . . . . . . . . . . . . . . . 73
SECTION 6.11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . 73
SECTION 6.12 ADDITIONAL GRANTORS AND GUARANTORS . . . . . . . . . 74
SECTION 6.13 ENVIRONMENTAL LAWS . . . . . . . . . . . . . . . . . 74
SECTION 6.14 PAY OBLIGATIONS TO LENDERS AND PERFORM OTHER
COVENANTS . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
ii
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<CAPTION>
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SECTION 6.15 MAINTAIN OPERATING ACCOUNTS. . . . . . . . . . . . . 76
SECTION 6.16 LIFE INSURANCE . . . . . . . . . . . . . . . . . . . 76
SECTION 6.17 YEAR 2000. . . . . . . . . . . . . . . . . . . . . . 77
SECTION 6.18 ASSIGNMENT OF CONTRACTS. . . . . . . . . . . . . . . 77
SECTION 6.19 RE-EXECUTION OF SERRA PARK MANAGEMENT AGREEMENTS . . 77
GOOD STANDING . . . . . . . . . . . . . . . . . . . 77
SECTION 6.21 LANDLORD WAIVERS; UCC AMENDMENTS . . . . . . . . . . 77
SECTION 6.22 PURCHASE AGREEMENTS. . . . . . . . . . . . . . . . . 78
SECTION 6.23 INTENTIONALLY OMITTED. . . . . . . . . . . . . . . . 78
SECTION 6.24 CASH MANAGEMENT ARRANGEMENTS . . . . . . . . . . . . 78
SECTION 6.25 UCC-1 FINANCING STATEMENTS . . . . . . . . . . . . . 78
VII. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.01 LIENS. . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 7.02 SALE AND LEASE-BACK TRANSACTIONS . . . . . . . . . . 80
SECTION 7.03 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . 80
SECTION 7.04 DIVIDENDS, DISTRIBUTIONS AND PAYMENTS. . . . . . . . 80
SECTION 7.05 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. . . . . 81
SECTION 7.06 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . 81
SECTION 7.07 CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . 82
SECTION 7.08 NET WORTH. . . . . . . . . . . . . . . . . . . . . . 83
SECTION 7.09 LEVERAGE RATIO; INTEREST LEVERAGE RATIO. . . . . . . 83
SECTION 7.10 INTEREST COVERAGE RATIOS . . . . . . . . . . . . . . 84
SECTION 7.11 FIXED CHARGE RATIO . . . . . . . . . . . . . . . . . 85
SECTION 7.12 BUSINESS . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 7.13 SALES OF ACCOUNTS RECEIVABLES. . . . . . . . . . . . 85
SECTION 7.14 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . 85
SECTION 7.15 ERISA. . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 7.16 ACCOUNTING CHANGES . . . . . . . . . . . . . . . . . 86
SECTION 7.17 PREPAYMENT OR MODIFICATION OF INDEBTEDNESS;
MODIFICATION OF CHARTER DOCUMENTS, ETC. . . . . . . 86
SECTION 7.18 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . 86
SECTION 7.19 CONSULTING FEES. . . . . . . . . . . . . . . . . . . 86
SECTION 7.20 NEGATIVE PLEDGES, ETC. . . . . . . . . . . . . . . . 87
VIII. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
IX. AGENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
X. COLLECTION OF RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . . 95
XI. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
SECTION 11.01 NOTICES. . . . . . . . . . . . . . . . . . . . . . . 95
</TABLE>
iii
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<S> <C>
SECTION 11.02 SURVIVAL OF AGREEMENT. . . . . . . . . . . . . . . . 96
SECTION 11.03 SUCCESSORS AND ASSIGNS; PARTICIPATIONS . . . . . . . 96
SECTION 11.04 EXPENSES; INDEMNITY. . . . . . . . . . . . . . . . .100
SECTION 11.05 APPLICABLE LAW . . . . . . . . . . . . . . . . . . .101
SECTION 11.06 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . .101
SECTION 11.07 PAYMENTS ON BUSINESS DAYS. . . . . . . . . . . . . .101
SECTION 11.08 WAIVERS; AMENDMENTS. . . . . . . . . . . . . . . . .102
SECTION 11.09 SEVERABILITY . . . . . . . . . . . . . . . . . . . .103
SECTION 11.10 ENTIRE AGREEMENT; WAIVER OF JURY TRIAL, ETC. . . . .103
SECTION 11.11 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . .104
SECTION 11.12 SUBMISSION TO JURISDICTION . . . . . . . . . . . . .104
SECTION 11.13 COUNTERPARTS; FACSIMILE SIGNATURE. . . . . . . . . .105
SECTION 11.14 HEADINGS . . . . . . . . . . . . . . . . . . . . . .105
XII. GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .105
XIII. LENDERS' ACKNOWLEDGMENT. . . . . . . . . . . . . . . . . . . . . . . . .108
</TABLE>
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<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
<S> <C>
EXHIBIT A Form of Term Note
EXHIBIT B Form of Revolving Credit Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Amended and Restated Pledge Agreement
EXHIBIT E Form of Amended and Restated Security Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Amended and Restated Security Agreement-Patents
and Trademarks
EXHIBIT H Form of Assignment of Contract
EXHIBIT I Form of Assignment of Life Insurance
EXHIBITS J-1, J-2, J-3 Forms of Management Agreement
EXHIBIT K Form of Shares Acquisition Agreement
EXHIBIT L Form of Covenant Compliance Certificates
EXHIBIT M Form of Joinder Agreement
EXHIBIT N Form of Pricing Certificate
EXHIBIT O Intentionally Omitted
EXHIBIT P Form of Intercompany Demand Promissory Note
EXHIBIT Q Form of Confirmation of Holdings Guaranty
</TABLE>
v
<PAGE>
SCHEDULES
<TABLE>
<CAPTION>
<S> <C>
SCHEDULE I Criteria for Management Agreements
SCHEDULE II Certain UCC Filings
SCHEDULE III Serra Park Administrative Services Agreements
SCHEDULE IV Serra Park Succession Agreements
SCHEDULE V Serra Park Affiliated Dental Practices
SCHEDULE 2.01(a) Revolving Credit Commitments
SCHEDULE 2.02 Domestic Lending Offices
SCHEDULE 2.03 Eurodollar Lending Offices
SCHEDULE 2.20 Letter of Credit Fees
SCHEDULE 4.01 Qualified Jurisdictions
SCHEDULE 4.05 Material Adverse Change
SCHEDULE 4.06(a) Litigation
SCHEDULE 4.06(b) Compliance with Laws
SCHEDULE 4.10 ERISA Matters
SCHEDULE 4.15 Subsidiaries
SCHEDULE 4.19 Environmental Law Compliance
SCHEDULE 4.21 Employee Matters
SCHEDULE 6.13 Hazardous Materials
SCHEDULE 6.25 Certain UCC Filings
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.19 Consulting Fees
</TABLE>
vi
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15,
1999, among GENTLE DENTAL SERVICE CORPORATION, a Washington
corporation ("DENTAL SERVICE"), GENTLE DENTAL MANAGEMENT,
INC., a Delaware corporation ("DENTAL MANAGEMENT") and
DENTAL CARE ALLIANCE, INC., a Delaware corporation ("DCA";
DCA, Dental Service and Dental Management, each a
"BORROWER" and collectively, the "BORROWERS"), the
Guarantors named herein and signatories hereto, the
financial institutions from time to time party hereto,
initially consisting of those financial institutions listed
on SCHEDULE 2.01(a) annexed hereto (collectively, the
"LENDERS"), UNION BANK OF CALIFORNIA, N.A., as
administrative agent for the Lenders (in such capacity, the
"ADMINISTRATIVE AGENT") and THE CHASE MANHATTAN BANK, as
syndication agent for the Lenders (in such capacity, the
"SYNDICATION AGENT").
The Original Lenders (such term and all other capitalized terms
used in this paragraph having the respective meanings ascribed to such terms
above or in Article I) made revolving credit loans available to Dental
Service and Dental Management under the Original Credit Agreement in an
aggregate principal amount not in excess of $45,000,000 at any time
outstanding. Proceeds from revolving credit loans made on the Original
Closing Date were used to partially refinance Indebtedness of Dental Service
and Dental Management existing on the Original Closing Date. The proceeds of
revolving credit loans made prior to the Closing Date were also used by
Dental Service and Dental Management for Permitted Acquisitions, Permitted De
Novo Capital Expenditures and for working capital purposes.
The parties hereto desire to amend and restate the Original
Credit Agreement to provide for, among other things, an increase in the Total
Revolving Credit Commitment to $70,000,000. The proceeds of the Revolving
Credit Loans made on the Closing Date shall be used to refinance existing
Indebtedness of DCA under its credit facility with NationsBank, N.A. The
proceeds of the Revolving Credit Loans made after the Closing Date shall be
used for Permitted Acquisitions and for Permitted De Novo Capital
Expenditures, as well as for other capital improvements. The proceeds of the
Revolving Credit Loans shall also be used for general working capital
purposes. The Grantors will continue to provide Collateral in accordance
with the provisions of this Agreement and the Security Documents. Holdings
will continue to guarantee the Loans in accordance with the provisions of the
Holdings Guarantee. The Lenders are severally, and not jointly, willing to
continue to extend such Loans to the Borrowers subject to the terms and
conditions hereinafter set forth. Accordingly, the Borrowers, the Guarantors
(other than Holdings), the Lenders and the Agents hereby agree to amend and
restate the Original Credit Agreement as follows:
<PAGE>
I. DEFINITIONS
SECTION 1.01 CERTAIN DEFINED TERMS. For purposes hereof,
the following terms shall have the meanings specified below (the following
meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"ACQUISITION CAPITAL EXPENDITURES" shall mean, with respect to
any person, all capital expenditures (other than De Novo Capital
Expenditures) incurred (or expected to be incurred) by such person within the
first six months of any dental practice becoming an Affiliated Dental
Practice, including, without limitation, expenditures related to management
information system requirements and expenditures to upgrade the image of such
Affiliated Dental Practice to the Borrowers' standards.
"ADJUSTED EBITDA" shall mean, with respect to any person as of
the last day of any fiscal quarter, the sum of (i) with respect to De Novo
Dental Practices which have been operating for more than six months prior to
such date of determination, the product of (x) EBITDA of such De Novo Dental
Practice for such fiscal quarter (or, if shorter than a full fiscal quarter,
the period commencing with the six-month anniversary of such De Novo Dental
Practice and ending on the last day of such fiscal quarter) and (y) 4 PLUS
(ii) with respect to dental practices (other than De Novo Dental Practices)
that have been Affiliated Dental Practices for at least one full fiscal
quarter (inclusive of the fiscal quarter then ended), the product of (x)
EBITDA of such Affiliated Dental Practice for the fiscal quarter then ended
and (y) 4 PLUS (iii) with respect to dental practices (other than De Novo
Dental Practices ) that have been Affiliated Dental Practices for less than
one full fiscal quarter prior to such date of determination, Pro Forma EBITDA
for such Affiliated Dental Practice for the four fiscal quarter period ending
on the last day of fiscal quarter immediately preceding the date such dental
practice became an Affiliated Dental Practice PLUS (iv) the product of (x)
the aggregate amount of dividends paid by Dedicated Dental to Dental Service
during such fiscal quarter and (y) 4 PLUS (v) with respect to any subsidiary
that is in the Dental Insurance Business and is not a Guarantor, the product
of (x) the aggregate amount of dividends paid by such person to a Borrower or
Guarantor during the fiscal quarter then ended and (y) 4; PROVIDED, HOWEVER,
that for the purposes of calculating the foregoing, the aggregate amount of
such dividends shall not exceed the applicable person's EBITDA for the
applicable period PLUS (vi) without duplication of amounts determined above,
the product of (x) EBITDA of Holdings and its subsidiaries (on a Consolidated
basis) for the fiscal quarter then ended and (y) 4 MINUS (vii) the product of
(x) the aggregate corporate "selling, general and administrative" expenses of
Holdings and its subsidiaries (on a Consolidated basis) for the fiscal
quarter then ended and other expenses not included in the calculation of
EBITDA of Holdings and its subsidiaries and (y) 4 PLUS (viii) the product of
(x) negative EBITDA (if any) of any subsidiary that is in the Dental
Insurance Business and is not a Guarantor for the fiscal quarter then ended
and (y) 4 MINUS (ix) the product of (x) net aggregate advances made by the
Borrowers to Affiliated Dental Practices which are not consolidated with
Holdings during such fiscal quarter
2
<PAGE>
which are attributable to losses suffered by such Affiliated Dental Practices
during such quarter and (y) 4.
"ADJUSTED LIBO RATE" shall mean, with respect to any Eurodollar
Loan for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (i) the LIBO Rate
in effect for such Interest Period and (ii) Statutory Reserves. For purposes
hereof, "STATUTORY RESERVES" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is the
number one MINUS the aggregate of the maximum reserve percentages (including,
without limitation, any marginal, special, emergency, or supplemental
reserves) expressed as a decimal established by the Board with respect to
Eurocurrency Liabilities (as defined in Regulation D). Such reserve
percentages shall include, without limitation, those imposed under Regulation
D. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and as such shall be deemed to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets which may
be available from time to time to any Lender under Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.
"ADJUSTED SENIOR DEBT" shall mean, with respect to any person
as of any date of determination, the total Funded Debt of such person as of
such date MINUS the Subordinated Indebtedness of such person, and shall
include earn-outs which would be payable in cash based upon such person's
operating performance as at such date of determination. Earn-out liabilities
with respect to the current 12-month period being measured shall be
calculated by annualizing year-to-date EBITDA (or, if not determined by
reference to EBITDA, a similar performance methodology) performance assuming
EBITDA ( or similar performance methodology) performance for the remaining
months of the twelve month period being measured will be identical to the
EBITDA (or similar performance methodology) performance of the most recently
ended fiscal quarter (e.g., if there are four months remaining in the
12-month period and the EBITDA performance was $300,000 in the most recently
ended quarter, the estimated EBITDA for the remaining four months would be
$400,000). Earn-out liabilities with respect to subsequent 12-month periods
shall be calculated by multiplying the EBITDA (or similar performance
methodology) performance of the most recently ended fiscal quarter by 4, and
discounting such payments by a factor of 8% in order to determine the present
value thereof.
"ADJUSTED TOTAL FUNDED DEBT" shall mean, with respect to any
person as of any date of determination, the total Funded Debt of such person
as of such date and shall include earn-outs which would be payable in cash in
connection with completed Permitted Acquisitions based upon such person's
operating performance as at such date of determination; PROVIDED, HOWEVER,
that for purposes of determining the Leverage Ratio, the Interest Leverage
Ratio and Pro Forma Adjusted Total Funded Debt, "Adjusted Total Funded Debt"
shall not include the Convertible Subordinated Notes. Earn-out liabilities
with respect to the current 12-month period being measured shall be
calculated by annualizing year-to-date EBITDA (or, if not determined by
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<PAGE>
reference to EBITDA, a similar performance methodology) performance assuming
EBITDA (or similar performance methodology) performance for the remaining
months of the twelve month period being measured will be identical to the
EBITDA (or similar performance methodology) performance of the most recently
ended fiscal quarter (e.g., if there are four months remaining in the
12-month period and the EBITDA performance was $300,000 in the most recently
ended quarter, the estimated EBITDA for the remaining four months would be
$400,000). Earn-out liabilities with respect to subsequent 12-month periods
shall be calculated by multiplying the EBITDA (or similar performance
methodology) performance of the most recently ended fiscal quarter by 4, and
discounting such payments by a factor of 8% in order to determine the present
value thereof.
"ADMINISTRATIVE AGENT" shall have the meaning assigned to such
term in the preamble to this Agreement.
"AFFILIATE" of any person shall mean any other person which,
directly or indirectly, controls or is controlled by or is under common
control with such person and, without limiting the generality of the
foregoing, includes (i) any person which beneficially owns or holds 5% or
more of any class of voting securities of such person or 5% or more of the
equity interest in such person, (ii) any person of which such person
beneficially owns or holds 5% or more of any class of voting securities or in
which such person beneficially owns or holds 5% or more of the equity
interest in such person and (iii) any director, officer or employee of such
person. For the purposes of this definition, the term "control" (including,
with correlative meanings, the terms "controlled by" and "under common
control with"), as used with respect to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the ownership of
voting securities or by contract or otherwise.
"AFFILIATED DENTAL PRACTICE" shall mean a dental practice,
professional association or professional corporation which has entered into a
Management Agreement (and a Shares Acquisition Agreement if the Management
Agreement is in the form of EXHIBIT J-1 annexed hereto) and Purchase
Agreement with any of the Borrowers or any of the Guarantors (other than
Holdings).
"AGENTS" shall have the meaning assigned to such term in
Article IX to this Agreement.
"ALTERNATE BASE LOAN" shall mean a Loan based on the Alternate
Base Rate in accordance with Article II hereof.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the greatest
of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect
on such day PLUS 1%, and (c) the Federal Funds Effective Rate in effect on
such day PLUS 1/2 of 1%. "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by The
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<PAGE>
Chase Manhattan Bank at its principal office in New York City as its prime
rate in effect at such time. "BASE CD RATE" shall mean the sum of (a) the
product of (i) the Three-Month Secondary CD Rate and (ii) Statutory Reserves
and (b) the Assessment Rate. "THREE-MONTH SECONDARY CD RATE" shall mean, for
any day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board through the
public information telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board, be published in
Federal Reserve Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York
City received at approximately 10:00 A.M., New York City time, on such day
(or, if such day shall not be a Business Day, on the next preceding Business
Day) by the Administrative Agent from three New York City negotiable
certificate of deposit dealers of recognized standing selected by it.
"STATUTORY RESERVES" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one MINUS the maximum reserve percentage (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal,
established by the Board and any other banking authority to which the
Administrative Agent is subject for new negotiable nonpersonal time deposits
in dollars of over $100,000 with maturities approximately equal to three
months. Statutory Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage. "ASSESSMENT RATE"
shall mean, for any day, the annual assessment rate (net of refunds and
rounded upwards, if necessary, to the next 1/16 of 1%) estimated by the
Administrative Agent (in good faith, but in no event in excess of statutory
or regulatory maximums) to be payable by the Administrative Agent to the
Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at the
Administrative Agent's domestic offices during the current calendar year.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Administrative Agent from three Federal funds brokers of recognized standing
selected by it. If for any reason the Administrative Agent shall have
determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or the Federal Funds
Effective Rate, or both, for any reason, including, the inability or failure
of the Administrative Agent to obtain sufficient quotations in accordance
with the terms hereof, the Alternate Base Rate shall be determined without
regard to clause (b) or (c), or both, of the first sentence of this
definition, as appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective on the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
5
<PAGE>
"APPLICABLE LENDING OFFICE" shall mean, with respect to each
Lender, such Lender's Domestic Lending Office in the case of an Alternate
Base Loan and such Lender's Eurodollar Lending Office in the case of a
Eurodollar Loan.
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and
acceptance entered into by a Lender and an assignee and accepted by the
Agents, in substantially the form of EXHIBIT F annexed hereto.
"ASSIGNMENT OF CONTRACT" shall mean, collectively, each
Assignment of Contract delivered by a Borrower pursuant to the provisions of
Section 6.18 hereof, each substantially in the form of EXHIBIT H annexed
hereto, each as amended, modified or supplemented from time to time.
"ASSIGNMENT OF LIFE INSURANCE" shall mean, collectively, (i)
the Assignments of Life Insurance dated January 4, 1999 and March 1, 1999, by
Dental Service and the insured in favor of the Administrative Agent, for its
own benefit and for the benefit of the Lenders, and (ii) the Assignment of
Life Insurance dated as of the Closing Date, by the owner and beneficiary
thereof and the insured in favor of the Administrative Agent, for its own
benefit and for the benefit of the Lenders, each substantially in the form of
EXHIBIT I annexed hereto, as amended, modified or supplemented from time to
time.
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"BORROWERS" shall have the meaning assigned to such term in the
preamble to this Agreement.
"BUSINESS DAY" shall mean any day, other than a Saturday,
Sunday or legal holiday in the State of New York, on which banks are open for
substantially all their banking business in New York City except that, if any
determination of a "Business Day" shall relate to a Eurodollar Loan, the term
"Business Day" shall in addition exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"CAPITAL EXPENDITURES" shall mean, with respect to any person,
all Acquisition Capital Expenditures incurred by such person and all other
expenditures incurred by such person with respect to any fixed assets or
improvements or replacements, substitutions or additions thereto, which have
a useful life of more than one year, including the direct or indirect
acquisition of such assets by way of increased product or service charges,
offset items or otherwise; PROVIDED, HOWEVER, that "Capital Expenditures"
shall not include expenditures to the extent that such expenditures
constitute De Novo Capital Expenditures.
"CAPITALIZED LEASE OBLIGATION" shall mean an obligation to pay
rent or other amounts under any lease of (or other arrangement conveying the
right to use) real
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<PAGE>
and/or personal property which obligation is required to be classified and
accounted for as a capital lease on a balance sheet prepared in accordance
with GAAP, and for purposes hereof the amount of such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"CASH INTEREST EXPENSE" shall mean, with respect to any person
for any period, the Interest Expense of such person for such period LESS all
non-cash items constituting Interest Expense during such period (including,
without limitation, amortization of debt discounts and payments of interest
on Indebtedness by issuance of Indebtedness) PLUS the net aggregate advances
made by the Borrowers to Affiliated Dental Practices which are not
consolidated with Holdings which are attributable to interest expense
payments of such Affiliated Dental Practices on their Indebtedness owed to
persons other than a Borrower, Holdings or a subsidiary of any of them.
"CELEBRATION" shall mean Celebration Dental Services, L.C., a
Florida limited liability company.
"CHANGE OF CONTROL" shall mean the occurrence of any of the
following events: (i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended), is or becomes
the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Securities
Exchange Act of 1934, as amended, provided that such person shall be deemed
to have "beneficial ownership" of all shares that such person has the right
to acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 35% of the total
voting power of the outstanding capital stock of Holdings or (ii) Holdings
shall cease to own directly or indirectly 100% of all outstanding shares of
all classes of stock of each of the Borrowers and each subsidiary thereof.
"CLOSING DATE" shall mean the date of the first borrowing under
this Agreement, but in no event later than June 15, 1999.
"CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"COLLATERAL" shall mean all collateral and security as
described in the Security Documents.
"COMMITMENT FEE PERCENTAGE" shall mean, with respect to any
quarter, the percentage per annum set forth below as corresponds to the
average daily outstanding principal balance of the Revolving Loan during such
fiscal quarter:
<TABLE>
<CAPTION>
Average Daily Outstanding Principal Commitment Fee
Balance of Revolving Loan Percentage
----------------------------------- --------------
<S> <C>
Greater than or equal to $60,000,000 0.375%
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<PAGE>
Less than $60,000,000 0.500%
</TABLE>
On the Original Closing Date, the Commitment Fee Percentage shall be 0.500%;
which shall thereafter be adjusted in accordance with the provisions hereof
commencing one year after the Original Closing Date.
"CONFIRMATION OF HOLDINGS GUARANTY" shall mean, the
Confirmation of Guaranty executed by Holdings substantially in the form of
EXHIBIT Q annexed hereto, as amended, modified or supplemented from time to
time.
"CONSOLIDATED" shall mean, in respect of any person, as applied
to any financial or accounting term, such term determined on a consolidated
basis in accordance with GAAP (except as otherwise required herein) for the
person and all consolidated subsidiaries thereof.
"CONTAMINANT" shall mean all Hazardous Materials and all those
substances which are regulated by or form the basis of liability under
Federal, state or local environmental, health and safety statutes or
regulations or any other material or substance which constitutes a material
health, safety or environmental hazard to any person or property.
"CONVERSION DATE" shall have the meaning assigned to such term
in Section 2.01(b) hereof.
"CONVERTIBLE PREFERRED STOCK" shall mean the convertible
preferred stock of Dental Service.
"CONVERTIBLE SUBORDINATED NOTES" shall mean Dental Service's 7%
Convertible Subordinated Notes due May 15, 2006 in the original principal
amount of $30,000,000, and all instruments or other documents related
thereto, in each case as amended, modified or supplemented from time to time
in accordance with their respective terms and the limitations set forth in
Section 7.17 hereof.
"CREDIT EVENT" shall mean each borrowing and each issuance of a
Letter of Credit hereunder.
"CREDITS" shall mean the Loans and the Letters of Credit.
"CURE LOANS" shall have the meaning assigned to such term in
Section 2.13(d) hereof.
"CUSTOMER" shall mean and include the account debtor or obligor
with respect to any Receivable.
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<PAGE>
"DCA" shall have the meaning assigned to such term in the
preamble of this Agreement.
"DCA MERGER" shall mean the merger completed on March 12, 1999
whereby DCA became a wholly-owned subsidiary of Holdings.
"DEBT SERVICE EXPENSE" shall mean, with respect to any person
for any period, the aggregate of regularly scheduled principal payments of
all long-term Indebtedness (including, without limitation, Subordinated
Indebtedness) made or to be made by such person during such period on a
Consolidated basis in accordance with GAAP.
"DEDICATED DENTAL" shall mean Dedicated Dental Systems, Inc., a
California corporation.
"DEFAULT" shall mean any condition, act or event which, with
notice or lapse of time or both, would constitute an Event of Default.
"DE NOVO CAPITAL EXPENDITURES" shall mean, with respect to any
person, the sum of (i) capital expenditures incurred by such person to
establish De Novo Dental Practices in markets in which the Borrowers operate
PLUS (ii) net losses incurred by a De Novo Dental Practice within its first
six months of operation.
"DE NOVO DENTAL PRACTICE" shall mean a dental practice not in
existence prior to its affiliation with any of the Borrowers.
"DENTAL INSURANCE BUSINESS" shall mean (a) the provision,
administration or arrangement of (pursuant to state licensor, certification
or other authorization, if necessary), (i) dental care services, related
ancillary products or both, directly or through a DMO, a provider, a
regulated service contractor or any other business which in the ordinary
course provides, administers or arranges for such services, products or both,
or (ii) dental and related insurance, (b) the provision or management of
dental care services (including dental management claims services and
management through dental information services), pursuant to state licensor,
certification or other authorization, if necessary, and (c) any business
activities related and incidental to any of the foregoing.
"DENTAL MANAGEMENT" shall have the meaning assigned to such
term in the preamble to this Agreement.
"DENTAL OREGON" shall mean Managed Dental Care of Oregon, Inc.,
an Oregon corporation.
"DMO" means any person which operates as a dental maintenance
organization or a similar organization which provides, manages or arranges
dental care services, pursuant to state licensor, certification or other
authorization, if necessary, in
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<PAGE>
the jurisdictions in which any Borrower or any subsidiary of a Borrower
conducts business.
"DENTAL SERVICE" shall have the meaning assigned to such term
in the preamble of this Agreement.
"DOLLARS" or the symbol "$" shall mean lawful currency of the
United States of America.
"DOMESTIC LENDING OFFICE" shall mean, with respect to any
Lender, the office of such Lender specified as its "Domestic Lending Office"
opposite its name in SCHEDULE 2.02 annexed hereto, or such other office of
such Lender as such Lender may from time to time specify to the Borrowers and
the Administrative Agent.
"EBITDA" shall mean, with respect to any person for any period,
without duplication, the sum of (i) Net Income, (ii) Interest Expense, (iii)
depreciation and amortization and other non-cash items properly deducted in
determining Net Income and (iv) federal, state and local income taxes, in
each case of such person for such period MINUS interest income, computed and
calculated in accordance with GAAP; PROVIDED, HOWEVER, that in determining
EBITDA for Holdings and its Consolidated subsidiaries, (w) income related to
Celebration shall not be included in such determination unless and until a
Borrower owns 51% or more of the equity interests of Celebration, (x) the
aggregate amount of dividends paid by Celebration to Dental Service shall be
included in such determination, (y) positive EBITDA of subsidiaries which are
in the Dental Insurance Business and which are not Guarantors shall not be
included in such determination and (z) the aggregate amount of dividends paid
by subsidiaries which are in the Dental Insurance Business and which are not
Guarantors to a Borrower or Guarantor during the applicable period shall be
included in such determination; PROVIDED, FURTHER, that the aggregate amount
of such dividends so included shall not exceed the applicable person's EBITDA
for such period; PROVIDED, HOWEVER, that in determining EBITDA for Holdings
and its Consolidated subsidiaries, merger and restructuring costs incurred in
the 1999 Fiscal Year in connection with the DCA Merger shall not be included
in such determination; PROVIDED, FURTHER, that in no event shall such amount
exceed $7,000,000.
"ENVIRONMENTAL CLAIM" shall mean any written notice of
violation, claim, demand, abatement or other order by any governmental
authority or any person for personal injury (including sickness, disease or
death), tangible or intangible property damage, damage to the environment,
nuisance, pollution, contamination or other adverse effects on the
environment, or for fines, penalties or deed or use restrictions, resulting
from or based upon (i) the existence, or the continuation of the existence,
of a Release (including, without limitation, sudden or non-sudden, accidental
or nonaccidental Releases), of, or exposure to, any Contaminant at, in, by or
from any of the properties of the Borrowers or their subsidiaries, (ii) the
environmental aspects of the transportation, storage, treatment or disposal
of Contaminants in connection with the operation of any of the properties of
the Borrowers or their subsidiaries or (iii) the
10
<PAGE>
violation, or alleged violation by the Borrowers or any of their
subsidiaries, of any statutes, ordinances, orders, rules, regulations,
Permits or licenses of or from any governmental authority, agency or court
relating to environmental matters connected with any of the properties of the
Borrowers or their subsidiaries, under any applicable Environmental Law.
"ENVIRONMENTAL LAWS" shall mean the Comprehensive Environmental
Response, Compensation, and Liability Act (42 U.S.C. Section 9601 ET SEQ.),
the Hazardous Material Transportation Act (49 U.S.C. Section 1801 ET SEQ.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.),
the Federal Water Pollution Control Act (33 U.S.C. Section 1251 ET SEQ.), the
Oil Pollution Act of 1990 (33 U.S.C. Section 2701 ET. SEQ.), the Safe
Drinking Water Act (42 U.S.C. Section 300f, ET SEQ.), the Clear Air Act (42
U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act, as amended
(15 U.S.C. Section 2601 ET SEQ.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), and the Occupational Safety
and Health Act (29 U.S.C. Section 651 ET SEQ.), as such laws have been and
hereafter may be amended or supplemented, and any related or analogous
present or future Federal, state or local, statutes, rules, regulations,
ordinances, licenses, permits and interpretations and orders of regulatory
and administrative bodies.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder, as
in effect from time to time.
"ERISA AFFILIATE" shall mean any trade or business (whether or
not incorporated) which together with any of the Borrowers or any subsidiary
of any thereof would be treated as a single employer under the provisions of
Title I or Title IV of ERISA.
"EURODOLLAR LENDING OFFICE" shall mean, with respect to any
Lender, the office of such Lender specified as its "Eurodollar Lending
Office" opposite its name in SCHEDULE 2.03 annexed hereto (or, if no such
office is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the Borrowers and
the Administrative Agent.
"EURODOLLAR LOAN" shall mean a Loan based on the Adjusted LIBO
Rate in accordance with Article II hereof.
"EVENT OF DEFAULT" shall have the meaning assigned to such term
in Article VIII hereof.
"EXCESS CASH FLOW" shall mean, with respect to any person for
any period, the amount, if any, by which Net Cash Flow of such person and its
subsidiaries on a Consolidated basis for such period exceeds the Debt Service
Expense of such person and its subsidiaries on a Consolidated basis for such
period.
"FINAL MATURITY DATE" shall mean September 30, 2005.
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<PAGE>
"FINANCIAL OFFICER" shall mean, with respect to any person, the
chief financial officer of such person.
"FIRREA" shall mean the Financial Institutions Reform, Recovery
and Enforcement Act of 1989, as amended from time to time.
"FISCAL YEAR" shall mean the fiscal year of each of the
Borrowers for accounting purposes, which in each case ends on December 31 of
each year.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any
person for any period, the ratio of (i) the sum of (x) Funds Flow from
Operations of such person for such period LESS (y) the sum of (x) Capital
Expenditures of such person for such period PLUS (y) De Novo Capital
Expenditures of such person for such period to (ii) the sum of (x) the Debt
Service Expense of such person for such period PLUS (y) all earn-out payments
paid in cash by such person during such period PLUS (z) the aggregate amount
of Preferred Dividends paid in cash by such person during such period.
"FUNDED DEBT" shall mean with respect to any person as of the
date of determination thereof, all Indebtedness of such person and its
subsidiaries on a Consolidated basis outstanding at such time which matures
more than one year after the date of calculation, and any such Indebtedness
maturing within one year from such date of calculation which is renewable or
extendable at the option of the obligor to a date more than one year from
such date and including in any event the Revolving Credit Loans.
"FUNDS FLOW FROM OPERATIONS" shall mean, with respect to any
person for any period, without duplication of addition or subtraction of any
items, the sum for such person for such period of (i) Net Income PLUS (ii)
depreciation and amortization PLUS (iii) other non-cash items properly
deducted in arriving at Net Income PLUS (iv) decreases in deferred tax assets
PLUS (v) increases in deferred tax liabilities MINUS (vi) increases in
deferred tax assets MINUS (vii) decreases in deferred tax liabilities MINUS
(viii) other non-cash items property added in arriving at Net Income MINUS
(ix) the positive Net Income for the applicable period of subsidiaries which
are in the Dental Insurance Business and which are not Guarantors PLUS (x)
the aggregate amount of dividends paid by such person to a Borrower or a
Guarantor during the applicable period; PROVIDED, HOWEVER, that the aggregate
amount of such dividends so added shall not exceed the applicable person's
positive Net Income for such period.
"GAAP" shall have the meaning assigned to such term in Section
1.02 hereof.
"GRANTOR" shall mean any Grantor, Pledgor or Debtor, as such
terms are defined in any of the Security Documents.
"GUARANTEE" shall mean any obligation, contingent or otherwise,
of any person guaranteeing or having the economic effect of guaranteeing any
Indebtedness
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<PAGE>
or obligation of any other person in any manner, whether directly or
indirectly, and shall in any event include the Holdings Guarantee and shall
include, without limitation, any obligation of such person, direct or
indirect, to (i) purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or obligation or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness or obligation, (ii) purchase property, securities or services
for the purpose of assuring the owner of such Indebtedness or obligation of
the payment of such Indebtedness or obligation, or (iii) maintain working
capital, equity capital, available cash or other financial condition of the
primary obligor so as to enable the primary obligor to pay such Indebtedness
or obligation; PROVIDED, HOWEVER, that the term Guarantee shall not include
endorsements for collection or collections for deposit, in either case in the
ordinary course of business.
"GUARANTOR" shall mean, collectively, Holdings, each subsidiary
of any of the Borrowers (other than Dedicated Dental, Dental Oregon and
Capitol Dental Care, Inc., an Oregon corporation) in existence on the Closing
Date and any subsidiary of any of the Borrowers which becomes a guarantor of
the Obligations after the date hereof. Upon the execution of an Joinder
Agreement by a person as a "Guarantor", such person shall be deemed to be a
party to this Agreement as a Guarantor and shall be bound by, and subject to
all terms and provisions set forth herein and in the other Loan Documents
applicable to "Guarantors", including, without limitation, the provisions of
Article XII of this Agreement.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant,
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude
oil or any fraction), any radioactive substance and any polychlorinated
biphenyls; PROVIDED, in the event that any Environmental Law is amended so as
to broaden the meaning of any term defined thereby, such broader meaning
shall apply subsequent to the effective date of such amendment; and PROVIDED,
FURTHER, to the extent that the applicable laws of any state establish a
meaning for "hazardous material," "hazardous substance," "hazardous waste,"
"solid waste" or "toxic substance" which is broader than that specified in
any Federal Environmental Law, such broader meaning shall apply.
"HOLDINGS" shall mean InterDent, Inc., a Delaware corporation.
"HOLDINGS GUARANTY" shall mean the Guaranty by Holdings,
dated as of March 12, 1999, as amended, modified or supplemented from time
to time.
"INDEBTEDNESS" shall mean, with respect to any person, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or other similar instruments or upon which interest charges
are customarily paid, (c) all obligations of such person for the deferred
purchase price of property or services,
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<PAGE>
except current accounts payable arising in the ordinary course of business
and not overdue beyond such period as is commercially reasonable for such
person's business, (d) all obligations of such person under conditional sale
or other title retention agreements relating to property purchased by such
person and all Capitalized Lease Obligations, (e) all payment obligations of
such person with respect to interest rate or currency protection agreements,
(f) all obligations of such person as an account party under any letter of
credit or in respect of bankers' acceptances, (g) the lesser of (1) all
obligations of any third party secured by property or assets of such person
(regardless of whether or not such person is liable for repayment of such
obligations) and (2) the appraised value (as determined by an independent
appraiser acceptable to the Administrative Agent) (less depreciation, if
applicable) of the property and assets of such person securing such
obligations, (h) all Guarantees of such person and (i) the redemption price
of all redeemable preferred stock of such person, but only to the extent that
such stock is redeemable at the option of the holder or requires sinking fund
or similar payments at any time prior to the Final Maturity Date.
"INDEMNITEES" shall have the meaning assigned to such term in
Section 11.04(c) hereof.
"INFORMATION" shall have the meaning assigned to such term in
Section 11.11 hereof.
"INTEREST EXPENSE" shall mean, with respect to any person for
any period, the interest expense of such person during such period determined
on a Consolidated basis in accordance with GAAP, and shall in any event
include, without limitation, (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense, (iii) the portion of
any Capitalized Lease Obligation allocable to interest expense, (iv) all
fixed and all calculable dividend payments on preferred stock, and (v)
payments of interest expense in kind.
"INTEREST LEVERAGE RATIO" shall mean, with respect to any
person for any period, the ratio of (i) Adjusted Total Funded Debt as of the
date of determination to (ii) Adjusted EBITDA of such person for such period.
"INTEREST MARGIN" shall mean, with respect to any Loan, the
amount as set forth below as corresponds to the Interest Leverage Ratio set
forth below, determined on the Closing Date and adjusted thereafter, ten (10)
Business Days after the delivery of the financial statements to the
Administrative Agent required pursuant to Section 6.05(a) or, with respect to
the first three (3) fiscal quarters of each Fiscal Year, Section 6.05(b)
hereof, as applicable, together with the corresponding compliance
certificates required pursuant to Section 6.05(e) hereof and together with a
pricing certificate in the form of EXHIBIT N annexed hereto, commencing with
the financial statements and certificates for the period ending June 30, 1999
or if the Borrowers shall fail to timely deliver such statements and
certificates for any such period or during the
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<PAGE>
continuance of an Event of Default, then at the highest Interest Margin
provided for herein:
<TABLE>
<CAPTION>
Eurodollar Alternate Base
Loan Interest Loan Interest
Interest Leverage Ratio Margin Margin
- ----------------------- ------------- --------------
<S> <C> <C>
Equal to or greater than 3.75:1.00 3.00% 1.25%
Equal to or greater than 3.25:1.00 but less
than 3.75:1.00 2.75% 1.00%
Equal to or greater than 2.50:1.00 but less
than 3.25:1.00 2.50% 0.75%
Less than 2.50:1.00 2.25% 0.50%
</TABLE>
On the Closing Date (i) the Eurodollar Loan Interest Margin shall be 2.50%
and (ii) the Alternate Base Loan Interest Margin shall be 0.75%; each shall
thereafter be adjusted in accordance with the provisions hereof.
"INTEREST PAYMENT DATE" shall mean (i) in the case of an
Alternate Base Loan, the first Business Day of each October, January, April
and July, commencing July 1, 1999 (which shall include Alternate Base Loans
outstanding under the Original Credit Agreement and which are being continued
and extended under this Agreement), and (ii) with respect to any Eurodollar
Loan (which shall include Eurodollar Loans outstanding under the Original
Credit Agreement and which are being continued and extended under this
Agreement), the last day of the Interest Period applicable thereto, and, in
addition, in respect of any Eurodollar Loan of more than three (3) months'
duration, each earlier day which is three (3) months after the first day of
such Interest Period.
"INTEREST PERIOD" shall mean, as to any Eurodollar Loan, the
period commencing on the date of such Eurodollar Loan and ending on the
numerically corresponding day (or, if there is no numerically corresponding
day, on the last day) in the calendar month that is one (1), three (3) or six
(6) months thereafter, as the Borrowers may elect with respect to its
Eurodollar Loans; PROVIDED, HOWEVER, that (x) if an Interest Period would end
on a day that is not a Business Day, such Interest Period shall be extended
to the next succeeding Business Day unless, with respect to Eurodollar Loans,
such next succeeding Business Day would fall in the next calendar month, in
which case such Interest Period shall end on the next preceding Business Day,
(y) no Interest Period shall end later than the Final Maturity Date and (z)
interest shall accrue from and including the first day of an Interest Period
to but excluding the last day of such Interest Period.
"JOINDER AGREEMENT" shall mean an agreement in substantially
the form of EXHIBIT M annexed hereto.
"LENDERS" shall have the meaning assigned to such term in the
preamble to this Agreement.
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<PAGE>
"LETTER OF CREDIT" shall have the meaning assigned to such term
in Section 2.17 hereof.
"LETTER OF CREDIT USAGE" shall mean at any time, (i) the
aggregate undrawn amount of all outstanding Letters of Credit at such time
PLUS (ii) the unreimbursed drawings at such time under all such Letters of
Credit.
"LETTER OF INTEREST" shall mean the letter dated May 4, 1999
and all attachments thereto addressed to Holdings by The Chase Manhattan Bank.
"LEVERAGE RATIO" shall mean, with respect to any person for any
period, the ratio of (i) Adjusted Senior Debt as at the date of determination
to (ii) Adjusted EBITDA of such person for such period.
"LIBO RATE" shall mean, with respect to any Eurodollar Loan for
any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the rate at which dollar deposits
approximately equal in principal amount to the Administrative Agent's portion
of such Eurodollar Loan and for a maturity equal to the applicable Interest
Period are offered in immediately available funds to the Administrative Agent
in the London interbank market at approximately 11:00 A.M., London time, two
(2) Business Days prior to the first day of such Interest Period.
"LIEN" shall mean, with respect to any asset, (i) any mortgage,
lien, pledge, encumbrance, charge or security interest in or on such asset,
(ii) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset, (iii) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities or (iv) any other
right of or arrangement with any creditor to have such creditor's claim
satisfied out of such assets, or the proceeds therefrom, prior to the general
creditors of the owner thereof.
"LOAN" shall mean any Revolving Credit Loan or the Term Loan.
"LOAN DOCUMENTS" shall mean this Agreement, each Security
Document, each Guarantee executed and delivered at any time with respect to
the Obligations, the Notes and each other document, instrument or agreement
now or hereafter delivered to the Administrative Agent or any Lender in
connection herewith or therewith.
"LOAN PARTY" shall mean each Borrower, each Grantor, each
Guarantor, and each subsidiary thereof.
"MAINTENANCE CAPITAL EXPENDITURES" shall mean, with respect to
any person, all Capital Expenditures incurred by such person with respect to
any Affiliated Dental Practice after the six-month anniversary of such dental
practice becoming an Affiliated Dental Practice.
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<PAGE>
"MANAGEMENT AGREEMENT" shall mean the Management Agreements
(having terms of no less than 15 years) entered into by a Borrower or a
Guarantor (other than Holdings) and a dental practice, professional
corporation or professional association, pursuant to which the Borrowers
provide comprehensive management and administrative services to such dental
practice, professional corporation or professional association, and which
shall (i) be in substantially the form attached hereto as EXHIBIT J-1, J-2 or
J-3, (ii) shall meet the criteria set forth on SCHEDULE I annexed hereto or
(iii) shall otherwise be a form approved in writing by the Required Lenders
(notwithstanding the requirements of this definition "Management Agreements"
shall include those Administrative Services Agreements listed on Schedule
III).
"MANDATORY PREPAYMENT" shall mean an amount equal to fifty
percent (50%) of Excess Cash Flow, if any, of the Borrowers and their
subsidiaries for the Fiscal Year then ended.
"MARGIN STOCK" shall have the meaning assigned to such term in
Regulation U.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (i) the business, assets, prospects, operations or financial or other
condition of Holdings and its subsidiaries taken as a whole, (ii) the ability
of the Loan Parties to perform or pay the Obligations in accordance with the
terms hereof or of any other Loan Document, (iii) the rights of, or benefits
available to, the Lenders or the Administrative Agent under any Loan Document
or (iv) the Administrative Agent's Lien on any material portion of the
Collateral or the priority of such Lien.
"MULTIEMPLOYER PLAN" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
"NET CASH FLOW" shall mean, with respect to any person for any
period, without duplication of addition or subtraction of items, (A) the sum
for such period of (i) Net Income, (ii) depreciation and amortization, (iii)
the change (expressed as a positive number in the event of an increase or a
negative number in the event of a decrease) in deferred tax liabilities, (iv)
other noncash items properly deducted in arriving at Net Income and (v) the
change (expressed as a negative number in the event of an increase or a
positive number in the event of a decrease), if any, in deferred tax assets
MINUS (B) the sum of (i) all Capital Expenditures paid in cash during such
period (including, without limitation, the principal component of Capitalized
Lease Obligations) and (ii) all distributions and dividends permitted to be
paid pursuant to the terms of this Agreement (and which are actually paid)
during such period.
"NET INCOME" shall mean, with respect to any person for any
period, the aggregate income (or loss) of such person for such period which
shall be an amount equal to net revenues and other proper items of income for
such person LESS the aggregate for such person of any and all items that are
treated as expenses under GAAP, and LESS Federal, state and local income
taxes, but excluding any extraordinary
17
<PAGE>
gains or losses or any gains or losses from the sale or disposition of assets
other than in the ordinary course of business, all computed and calculated in
accordance with GAAP.
"NET WORTH" shall mean, with respect to any person at any time,
(i) the sum of such person's capital stock, capital in excess of par or
stated value of shares of its capital stock, retained earnings and any other
account which, in accordance with GAAP, constitutes stockholders' equity,
less (ii) treasury stock and any minority interest in subsidiaries, and less
(iii) the amount of any write-up subsequent to the Closing Date in the value
of any asset above the cost or depreciated cost thereof to such person;
PROVIDED, HOWEVER, that in determining Net Worth for Holdings and its
subsidiaries (on a Consolidated basis), merger and restructuring costs
incurred in the 1999 Fiscal Year subsequent to March 31, 1999 in connection
with the DCA Merger shall not be included in such determination; PROVIDED,
FURTHER, that in no event shall such amount exceed $3,319,000.
"NON PRO RATA LOAN" shall have the meaning assigned to such
term in Section 2.13(d) hereof.
"NOTES" shall mean the Term Notes and the Revolving Credit
Notes.
"OBLIGATIONS" shall mean all obligations, liabilities and
Indebtedness of the Borrowers to the Lenders and the Administrative Agent,
arising under one or more of the Loan Documents, whether now existing or
hereafter created, direct or indirect, due or not, whether created directly
or acquired by assignment, participation or otherwise, including without
limitation all obligations, liabilities and Indebtedness of the Borrowers
with respect to the Security Documents and other Loan Documents, the
principal of and interest on the Revolving Credit Loans, the Term Loans and
the payment or performance of all other obligations, liabilities, and
Indebtedness of the Borrowers to the Lenders and the Administrative Agent
hereunder, under the Letters of Credit or under any one or more of the other
Loan Documents (including the payment of amounts that would become due but
for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, and interest that, but for the filing of a petition in
bankruptcy with respect to any Borrower, would accrue on such obligations,
whether or not a claim is allowed against such Borrower for such interest in
the related bankruptcy proceeding), including without limitation all fees,
costs, expenses and indemnity obligations hereunder and thereunder.
"ORIGINAL CLOSING DATE" shall mean September 30, 1998.
"ORIGINAL CREDIT AGREEMENT" shall mean the Credit Agreement,
dated as of the Original Closing Date, among Dental Service, Dental
Management, the Original Lenders, the guarantors named therein, the
Administrative Agent, and the Syndication Agent, as amended through the
Closing Date.
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<PAGE>
"ORIGINAL LENDERS" shall mean those financial institutions
party to the Original Credit Agreement which are identified on Schedule
2.01(a) to the Original Credit Agreement.
"OTHER TAXES" shall have the meaning assigned to such term in
Section 2.16(b) hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PENSION PLAN" shall mean any Plan which is subject to the
provisions of Title IV of ERISA.
"PERMITS" shall have the meaning assigned to such term in
Section 4.18 hereof.
"PERMITTED ACQUISITION" shall mean the acquisition and/or
affiliations with dental practices, dental practice management companies or
persons in the Dental Insurance Business in which:
(i) the purchase price, including the maximum earn-out
consideration (or a reasonable approximation thereof), all
Indebtedness of the acquiree which is not retired in connection
with such acquisition, all seller notes to be issued in connection
with such acquisition and expected Acquisition Capital
Expenditures, is less than or equal to $12,000,000;
(ii) the cash consideration, including the maximum cash
earn-out payments (or a reasonable approximation thereof)
(including, without limitation, earn-outs based upon current
EBITDA), and including all Indebtedness of the acquiree which is
not retired in connection with such acquisition, all seller notes
to be issued in connection with such acquisition and expected
Acquisition Capital Expenditures, is less than or equal to
$7,500,000, but excluding the value of any capital stock issued by
the acquiror as consideration for such acquisition;
(iii) the business of the acquired or affiliated dental
practice is substantially related to that of the other Affiliated
Dental Practices as of the effective date of the proposed
acquisition and such dental practice is located in the United
States;
(iv) no Default or Event of Default shall have occurred
and be continuing at the time of the proposed acquisition or would
occur as a result thereof;
(v) (A) both before and after giving effect to such
acquisition or affiliation and the financing therefor, the
Borrowers shall be in compliance with Sections 7.09(a), 7.09(b)
and 7.10(a) hereof on a pro forma basis for
19
<PAGE>
the fiscal quarter immediately preceding the proposed effective
date of such acquisition or affiliation and (B) after giving
effect to such acquisition or affiliation and the financing
therefor, the Pro Forma Interest Coverage Ratio for the fiscal
quarter immediately preceding the proposed effective date of
such acquisition or affiliation shall not be less than 3.00:1.00,
the Pro Forma Leverage Ratio for the fiscal quarter immediately
preceding the proposed effective date of such acquisition or
affiliation shall not be greater than the ratios set forth in
Section 7.09(a) for such fiscal quarter and the Pro Forma
Interest Leverage Ratio for the fiscal quarter immediately
preceding the proposed effective date of such acquisition or
affiliation shall not be greater than the ratios set forth in
Section 7.09(b) for such fiscal quarter;
(vi) both before and after giving effect to such
acquisition or affiliation and the financing therefor, the
Borrowers shall have adequate availability under the Total
Revolving Credit Commitment for the Borrowers' and their
subsidiaries working capital needs (as determined by the
Administrative Agent in its reasonable discretion at the time of
the proposed acquisition);
(vii) the acquiree has positive pro forma EBITDA, on a
historical basis;
(viii) the proposed acquisition or affiliation is not
hostile;
(ix) the acquiror is a Borrower or a subsidiary of any
of the Borrowers (other than Capitol Dental Care, Inc. and Managed
Dental Care of Oregon, Inc.) which is in good standing in the
state of its incorporation and (other than Dedicated Dental) which
is permitted (under applicable laws or regulations) to have its
shares pledged to the Administrative Agent (for the benefit of the
Lenders) pursuant to the terms of the Pledge Agreement and the
acquiree, in the case of an acquisition, is permitted by
applicable law and regulation to satisfy the provisions of
Section 6.12 hereof;
(x) if the proposed acquisition or affiliation is of a
dental practice, the target dental practice enters into a
Management Agreement (and a Shares Acquisition Agreement if the
Management Agreement is in the form of EXHIBIT J-1 annexed
hereto), with a Borrower or a Guarantor (other than Holdings) or,
if the proposed acquisition is of a dental practice management
company or persons in the Dental Insurance Business, the
Management Agreement and Shares Acquisition Agreements, if any, of
such target are assumed by the acquiror (and assigned pursuant to
an Assignment of Contract in accordance with the provisions of
Section 6.18 hereof); and
20
<PAGE>
(xi) the Borrowers have delivered to the Administrative
Agent as soon as the information is available, but (1) with
respect to acquisitions, the purchase price, including maximum
earn-out consideration (or a reasonable approximation thereof),
all Indebtedness of the acquiree which will not be retired in
connection with such acquisition, all seller notes issued in
connection with such acquisition and expected Acquisition Capital
Expenditures, but excluding the value of any capital stock issued
by the acquiror as consideration for such acquisition, of which is
less than or equal to $5,000,000, no later than concurrently with
the financial statements required to be delivered pursuant to
Section 6.05(c) hereof and (2) with respect to all other
acquisitions, at least 7 days prior to the closing of any such
acquisition, (A) a compliance certificate in form and substance
satisfactory to the Administrative Agent certifying the Borrowers'
compliance with the provisions of this Agreement after giving
effect on a pro forma basis to such acquisition, (B) a report of
the chief financial officer of the Borrowers, in a form
satisfactory to the Administrative Agent and providing sufficient
detail and justification for the information provided therein,
including assumptions, as shall be found to be reasonable by the
Administrative Agent in its good faith discretion after completion
of reasonable due diligence, establishing the basis for the
conclusions contained therein and establishing compliance with
clauses (iv) through (vi) above, (C) a compliance certificate in
form and substance satisfactory to the Administrative Agent
certifying the Borrowers' compliance with clause (iii) and
clauses (vii) through (x) above and, to the extent not consented
to by the Required Lenders as provided below, certifying
compliance with clauses (i) and (ii) above, (D) copies of
substantially the form of all acquisition closing documents
related to a Permitted Acquisition, (E) copies of the acquiree's
balance sheet and profit and loss statement for its most recent
fiscal year and fiscal quarter, (F) one (1) year historical and
three (3) years projected financials for the acquiree and (G) a
narrative description of the proposed acquisition and a chart of
organization for the Borrowers showing the acquiree and its
relationship to all Affiliates of the Borrowers;
PROVIDED, HOWEVER, that, upon the written consent of the Required
Lenders, in the exercise of their reasonable discretion after
their review and satisfaction with all documentation, financial
and other information with respect to any proposed acquisition or
affiliation, the limitations set forth in clauses (i) and (ii)
above shall not apply and such proposed acquisition shall be
deemed a Permitted Acquisition.
With respect to Permitted Acquisitions, the Administrative Agent
may rely upon the certificates and reports of the Borrowers and
the Borrowers' officers with respect to all matters contained
therein, including, but not limited to, the Borrowers' compliance
with the terms of this Agreement, the calculation by the Borrowers
of the purchase price, the cash and non-cash
21
<PAGE>
portions of the purchase price, the Indebtedness components, the
Acquisition Capital Expenditures component, and the maximum
earn-out consideration (or a reasonable approximation thereof)
with respect to any proposed Permitted Acquisition.
Prior to the consummation of any Permitted Acquisition, the
Borrowers will notify the Administrative Agent of any affiliate
that is obligated under the Credit Agreement to become a
Guarantor, Pledgor or Debtor. Concurrently with the closing of a
Permitted Acquisition, the applicable Loan Party and each such
affiliate shall execute and deliver a Joinder Agreement to the
Administrative Agent. Each party executing a Joinder Agreement as
a "Debtor" shall be deemed to be a party to each of the Security
Documents as of and from the date of execution, and shall be bound
by and subject to all of the terms of each of the Security
Documents. Simultaneously with the execution of each Joinder
Agreement pursuant to this paragraph, the Borrowers shall cause
the (i) execution and delivery of each document (including,
without limitation, each Uniform Commercial Code financing
statement) required by law or requested by the Administrative
Agent to be filed, registered or recorded in order to create in
favor of the Administrative Agent, for its own benefit and for the
benefit of the Lenders, a first priority perfected security
interest in the Collateral acquired in connection with such
Permitted Acquisition, in each case in accordance with the
provisions of this Agreement and (ii) delivery to Administrative
Agent of certificates evidencing the capital stock of each
acquiree, together with undated stock powers executed in blank, in
each case, executed by the applicable Grantors.
Notwithstanding anything to the contrary contained in this
Agreement, when determining each component of the Pro Forma
Interest Coverage Ratio, the Pro Forma Leverage Ratio and the Pro
Forma Interest Leverage Ratio with respect to any Permitted
Acquisition during any fiscal quarter, such determinations shall
include calculations with respect to Holdings and its subsidiaries
as of the last day of the immediately preceding fiscal quarter,
calculations with respect to any other Permitted Acquisitions made
during such quarter and calculations with respect to the proposed
Permitted Acquisition.
"PERMITTED DE NOVO CAPITAL EXPENDITURES" shall mean De Novo
Capital Expenditures up to a maximum of $500,000 per De Novo Dental Practice
and $2,500,000 in the aggregate for any Fiscal Year; PROVIDED, HOWEVER, that
upon the written consent of the Required Lenders, the foregoing amounts may
be increased by up to $100,000 and $500,000, respectively; PROVIDED, FURTHER,
that
(i) no Default or Event of Default shall have occurred
and be continuing at the time of the proposed De Novo Capital
Expenditure or would occur as a result thereof;
22
<PAGE>
(ii) (A) both before and after giving effect to such De
Novo Capital Expenditure and the financing therefor, the Borrowers
shall be in compliance with Sections 7.09(a), 7.09(b) and 7.10(a)
hereof on a pro forma basis for the fiscal quarter immediately
preceding the proposed date of such De Novo Capital Expenditure
and (B) after giving effect to such proposed De Novo Capital
Expenditure and the financing therefor, the Pro Forma Interest
Coverage Ratio for the period ending on the last day of the fiscal
quarter immediately preceding the proposed date of such De Novo
Capital Expenditure shall not be less than 3.00:1.00, the Pro
Forma Leverage Ratio for the fiscal quarter immediately preceding
the proposed date of such De Novo Capital Expenditure shall not be
greater than the ratios set forth in Section 7.09(a) for such
fiscal quarter and the Pro Forma Interest Leverage Ratio for the
fiscal quarter immediately preceding the proposed date of such De
Novo Capital Expenditure shall not be greater than the ratios set
forth in Section 7.09(b) for such fiscal quarter;
(iii) both before and after giving effect to such De
Novo Capital Expenditure and the financing therefor, the Borrowers
shall have adequate availability under the Total Revolving Credit
Commitment for the Borrowers' and their subsidiaries working
capital needs (as determined by the Administrative Agent in its
reasonable discretion at the time of the proposed De Novo Capital
Expenditure); and
(iv) the Borrowers shall have delivered to the
Administrative Agent at least 30 days prior to the incurrence of
any such De Novo Capital Expenditure, (A) a compliance certificate
in form and substance satisfactory to the Administrative Agent
certifying the Borrowers' compliance with the provisions of this
Agreement and (B) a report of the chief financial officer of the
Borrowers, in a form satisfactory to the Administrative Agent and
providing sufficient detail and justification for the information
provided therein, including assumptions, as shall be found to be
reasonable by the Administrative Agent in its good faith
discretion after completion of reasonable due diligence,
establishing the basis for the conclusions contained therein and
establishing compliance with clauses (i) through (iii) above.
"PERSON" shall mean any natural person, corporation, business
trust, limited liability company, association, company, joint venture,
professional corporation, limited liability partnership, partnership or
government or any agency or political subdivision thereof.
"PLAN" shall mean any employee benefit plan within the meaning of
Section 3(3) of ERISA and which is maintained (in whole or in part) for
employees of the Borrowers, any subsidiary or any ERISA Affiliate.
23
<PAGE>
"PLEDGE AGREEMENT" shall mean the Amended and Restated Pledge
Agreement dated as of the Original Closing Date, between the Grantor(s) and the
Administrative Agent, for its own benefit and for the benefit of the Lenders, in
substantially the form of EXHIBIT D annexed hereto, as amended, modified or
supplemented from time to time.
"PLEDGED STOCK" shall have the meaning assigned to such term in
the Pledge Agreement.
"PREFERRED DIVIDENDS" shall mean, after the conversion of the
Convertible Subordinated Notes to preferred stock, dividends paid with respect
thereto.
"PRO FORMA ADJUSTED EBITDA" shall mean with respect to any person
for any period, the sum of (i) Adjusted EBITDA of such person for such period
PLUS, in the case of a Permitted Acquisition, (ii) Pro Forma EBITDA of the
proposed acquiree for such period.
"PRO FORMA ADJUSTED SENIOR FUNDED DEBT" shall mean, with respect
to any person as of the date of any proposed Permitted Acquisition or Permitted
De Novo Capital Expenditure, the sum of (i) the Adjusted Senior Debt of such
person as of such date PLUS (ii) senior Funded Debt incurred (or to be incurred)
by such person in connection with such proposed Permitted Acquisition or
Permitted De Novo Capital Expenditure.
"PRO FORMA ADJUSTED TOTAL FUNDED DEBT" shall mean, with respect to
any person as of the date of any proposed Permitted Acquisition or Permitted De
Novo Capital Expenditure, the sum of (i) the Adjusted Total Funded Debt of such
person as of such date PLUS (ii) Funded Debt incurred (or to be incurred) by
such person in connection with such proposed Permitted Acquisition or Permitted
De Novo Capital Expenditure.
"PRO FORMA CASH INTEREST EXPENSE" shall mean, with respect to any
person for any period, the sum of (i) the Interest Expense attributable to any
Indebtedness incurred (or to be incurred) during such period in connection with
any Permitted Acquisition or Permitted De Novo Capital Expenditure, treating any
such Indebtedness as having been outstanding as of the first day of such period
and computing the interest rate on such Indebtedness on a pro forma basis as if
the rate in effect on the date of determination had been the applicable rate for
the entire period PLUS (ii) the Cash Interest Expense of such person for such
period (without duplication of amounts included in clause (i) hereof).
"PRO FORMA EBITDA" shall mean, with respect to any person, EBITDA
of such person adjusted for non-recurring verifiable expense deductions,
including, without limitation, excess owner compensation; PROVIDED, HOWEVER,
that the calculation of Pro Forma EBITDA shall be reasonably acceptable to the
Administrative Agent.
24
<PAGE>
"PRO FORMA INTEREST COVERAGE RATIO" shall mean, with respect to
any person, after giving effect to any potential Permitted Acquisition or
Permitted De Novo Capital Expenditure, the ratio for the one fiscal quarter
period (in the case of proposed acquisitions or capital expenditures to occur
prior to June 30, 1999), two fiscal quarter period (in the case of proposed
acquisitions or capital expenditures to occur on or after June 30, 1999 but
prior to September 30, 1999), three fiscal quarter period (in the case of
proposed acquisitions or capital expenditures to occur on or after September 30,
1999 but prior to December 31, 1999) or four fiscal quarter period (in the case
of proposed acquisitions or capital expenditures to occur on or after December
31, 1999) of (a) the sum of (x) EBITDA of such person for such period PLUS, in
the case of a Permitted Acquisition, (y) Pro Forma EBITDA of such person for
such period to (b) the sum of (x) Pro Forma Cash Interest Expense of such person
for such period PLUS (y) Preferred Dividends paid in cash during such period.
"PRO FORMA INTEREST LEVERAGE RATIO" shall mean, with respect to
any person for any period, after giving effect to any potential Permitted
Acquisition or Permitted De Novo Capital Expenditure, the ratio of (i) Pro Forma
Adjusted Total Funded Debt of such person for such period to (ii) Pro Forma
Adjusted EBITDA for such person for such period.
"PRO FORMA LEVERAGE RATIO" shall mean, with respect to any person
for any period, after giving effect to any potential Permitted Acquisition or
Permitted De Novo Capital Expenditure, the ratio of (i) Pro Forma Adjusted
Senior Debt of such person for such period to (ii) Pro Forma Adjusted EBITDA for
such person for such period.
"PURCHASE AGREEMENT" shall mean the agreement entered into by a
Borrower or a Guarantor (other than Holdings) and a dental practice or a manager
of dental practices whereby such Borrower or Guarantor will acquire all or
substantially all of the assets or stock of such dental practice or such manager
of dental practices.
"RECEIVABLES" shall mean and include all of the Borrowers',
Guarantors' and Affiliated Dental Practices' accounts, instruments, documents,
chattel paper and general intangibles and all management fees due and owing to
the Borrowers in connection with Management Agreements, whether secured or
unsecured, whether now existing or hereafter created or arising, and whether or
not specifically assigned to the Administrative Agent for its own benefit and/or
the ratable benefit of the Lenders.
"REGISTER" shall have the meaning assigned to such term in
Section 11.03(e) hereof.
"REGULATION D" shall mean Regulation D of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"REGULATION T" shall mean Regulation T of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
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"REGULATION U" shall mean Regulation U of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"REGULATION X" shall mean Regulation X of the Board, as the same
is from time to time in effect, and all official rulings and interpretations
thereunder or thereof.
"RELEASE" shall mean any releasing, spilling, leaking, seepage,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental Law,
and shall include any "Threatened Release," as defined in Environmental Law.
"REMEDIAL WORK" shall mean any investigation, site monitoring,
containment, cleanup, removal, restoration or other remedial work of any kind or
nature with respect to any property of any Loan Party or its subsidiaries
(whether such property is owned, leased, subleased or used), including, without
limitation, with respect to Contaminants and the Release thereof.
"REPAYMENT DATE" shall have the meaning assigned to such term in
Section 2.04(c) hereof.
"REPORTABLE EVENT" shall mean a Reportable Event as defined in
Section 4043(c) of ERISA.
"REQUIRED LENDERS" shall mean Lenders having 66 - 2/3% of the
Total Revolving Credit Commitment.
"RESPONSIBLE OFFICER" shall mean, with respect to any person, any
vice president or president, chief executive officer, chief operating officer or
the chief financial officer or controller, of such person.
"REVOLVING CREDIT ALTERNATE BASE LOAN" shall mean a Revolving
Credit Loan that is an Alternate Base Loan.
"REVOLVING CREDIT COMMITMENT" shall mean, with respect to any
Lender, the Revolving Credit Commitment of such Lender as set forth in SCHEDULE
2.01(A) annexed hereto, as the same may be reduced from time to time pursuant to
this Agreement including, without limitation, Section 2.07 hereof.
"REVOLVING CREDIT COMMITMENT FEE" shall have the meaning set forth
in Section 2.06(a) hereof.
"REVOLVING CREDIT EURODOLLAR LOAN" shall mean a Revolving Credit
Loan that is a Eurodollar Loan.
"REVOLVING CREDIT LOAN" shall mean a Revolving Credit Loan made
pursuant to Sections 2.01 and 2.02 hereof.
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"REVOLVING CREDIT NOTES" shall mean the Revolving Credit Notes of
the Borrowers, executed and delivered as provided in Section 2.04 hereof, in
substantially the form of EXHIBIT B annexed hereto, as amended, modified or
supplemented from time to time.
"REVOLVING CREDIT TERMINATION DATE" shall mean such date as the
Revolving Credit Loans shall otherwise be payable in full and the Revolving
Credit Commitment shall terminate, expire or be canceled in accordance with the
terms of this Agreement.
"SECURITY AGREEMENT" shall mean the Amended and Restated Security
Agreement dated as of the Original Closing Date, between the Grantor(s) and the
Administrative Agent, for its own benefit and for the benefit of the Lenders,
substantially in the form of EXHIBIT E annexed hereto, as amended, modified or
supplemented from time to time.
"SECURITY AGREEMENT-PATENTS AND TRADEMARKS" shall mean the Amended
and Restated Security Agreement and Mortgage-Patents and Trademarks, dated as of
the Original Closing Date, between the Debtor(s), as such term is defined
therein, and the Administrative Agent, for its own benefit and for the benefit
of the Lenders, substantially in the form of EXHIBIT G annexed hereto, as
amended, modified or supplemented from time to time.
"SECURITY DOCUMENTS" shall mean the Pledge Agreement, the Security
Agreement, each Assignment of Contract, the Security Agreement-Patents and
Trademarks, the Assignment of Life Insurance, the Confirmation of Holdings
Guaranty and each other agreement now existing or hereafter created providing
collateral security for the payment or performance of any Obligations.
"SERRA PARK" shall mean Serra Park Dental Services, Incorporated,
a Delaware corporation.
"SHARES ACQUISITION AGREEMENT" shall mean the Shares Acquisition
Agreement entered into by a Borrower or a Guarantor (other than Holdings) and
the owner(s) of a dental practice, and, in the case of Shares Acquisition
Agreements entered into after the Original Closing Date, each of which shall (i)
contain a provision substantially similar to Section 3 of the form attached
hereto as EXHIBIT K and (ii) permit the assignment of the rights granted to the
Borrower or Guarantor party thereto pursuant to said provision to the
Administrative Agent (for the ratable benefit of the Lenders).
"SUBORDINATED INDEBTEDNESS" shall mean, with respect to any of the
Borrowers, Indebtedness subordinated in right of payment to such person's
monetary obligations under this Agreement upon terms satisfactory to and
approved in writing by the Administrative Agent, to the extent it does not by
its terms mature or become
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subject to any mandatory prepayment or amortization of principal prior to the
Final Maturity Date, and shall include the Convertible Subordinated Notes.
"SUBSIDIARY" shall mean, with respect to any person, any
corporation, association or other business entity of which securities or other
ownership interests representing more than 50% of the ordinary voting power are,
at the time as of which any determination is being made, owned or controlled,
directly or indirectly, by the parent of such person or one or more subsidiaries
of the parent of such person.
"SYNDICATION AGENT" shall have the meaning assigned to such term
in the preamble to this Agreement.
"TAXES" shall have the meaning assigned to such term in
Section 2.16(a) hereof.
"TERM ALTERNATE BASE LOAN" shall mean a Term Loan that is an
Alternate Base Loan.
"TERM EURODOLLAR LOAN" shall mean a Term Loan that is a Eurodollar
Loan.
"TERM LOAN" shall mean the Term Loan made on the Conversion Date
pursuant to Sections 2.01(b) and 2.02 hereof.
"TERM NOTES" shall mean the Term Notes of the Borrowers when
subsequently executed and delivered as provided in Section 2.04 hereof, in
substantially the form of EXHIBIT A hereto, as amended, modified or supplemented
from time to time.
"TOTAL REVOLVING CREDIT COMMITMENT" shall mean the sum of the
Lenders' Revolving Credit Commitments, as the same may be reduced from time to
time pursuant to this Agreement including, without limitation, Section 2.07
hereof.
"TRANSACTIONS" shall have the meaning assigned to such term in
Section 4.02 hereof.
SECTION 1.02 ACCOUNTING TERMS. Unless otherwise expressly
provided herein, each accounting term used herein shall have the meaning given
it under generally accepted accounting principles in effect from time to time in
the United States applied on a basis consistent with those used in preparing the
financial statements referred to in Section 6.05 hereof ("GAAP"); PROVIDED,
HOWEVER, that each reference in Article VII hereof, or in the definition of any
term used in Article VII hereof, to GAAP shall mean GAAP as in effect on the
date hereof.
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II. THE LOANS
SECTION 2.01 REVOLVING CREDIT COMMITMENTS AND TERM LOAN.
(a) Subject to the terms and conditions and relying upon the representations
and warranties herein set forth, each Lender, severally and not jointly, agrees
to make Revolving Credit Loans to the Borrowers, at any time and from time to
time from the date hereof to the earlier of (i) the Revolving Credit Termination
Date and (ii) the Conversion Date, in an aggregate principal amount at any time
outstanding not to exceed the amount of such Lender's Revolving Credit
Commitment set forth opposite its name in SCHEDULE 2.01(a) annexed hereto, as
such Revolving Credit Commitment may be reduced from time to time in accordance
with the provisions of this Agreement. Notwithstanding the foregoing, the
aggregate principal amount of Revolving Credit Loans outstanding at any time to
the Borrowers shall not exceed the Total Revolving Credit Commitment (as such
amount may be reduced pursuant to this Agreement including, without limitation,
Section 2.07 hereof) MINUS the Letter of Credit Usage at such time (such Letter
of Credit Usage not to exceed $1,000,000 at any time).
Subject to the foregoing and within the foregoing limits, the
Borrowers may borrow, repay (or, subject to the provisions of Section 2.09
hereof, prepay) and reborrow Revolving Credit Loans, on and after the date
hereof and prior to the earlier of (i) the Revolving Credit Termination Date and
(ii) the Conversion Date, subject to the terms, provisions and limitations set
forth herein, including, without limitation, the requirement that no Revolving
Credit Loan shall be made hereunder if after giving effect thereto the sum of
the aggregate principal amount of the Revolving Credit Loans outstanding
hereunder PLUS the Letter of Credit Usage would exceed the Total Revolving
Credit Commitment (as such amount may be reduced pursuant to the provisions of
this Agreement).
(b) Subject to the terms and conditions of this Agreement,
including, without limitation, that no Default or Event of Default shall then
exist, on September 30, 2001 (the "CONVERSION DATE"), then the unpaid principal
amount of Revolving Credit Loans shall be converted into a Term Loan (the "TERM
LOAN") from the Lenders.
SECTION 2.02 LOANS. The Revolving Credit Loans made by the
Lenders on any date shall be in integral multiples of $100,000 (except that the
foregoing limitation shall not be applicable to the extent that the proceeds of
such Loans are requested to be disbursed to the Borrowers' controlled
disbursement account maintained with the Administrative Agent); PROVIDED,
HOWEVER, that the Eurodollar Loans made on any date shall be in a minimum
aggregate principal amount equal to the product of $500,000 times the number of
Lenders on such date.
(b) Loans shall be made ratably by the Lenders in accordance
with their respective Revolving Credit Commitments; PROVIDED, HOWEVER, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder. The initial Revolving Credit Loans
shall be made by the Lenders against delivery of Revolving Credit Notes, payable
to the order of the Lenders, as
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referred to in Section 2.04 hereof. On the Conversion Date, the Term Loans
to be made by the Lenders shall be made against delivery of Term Notes
payable to the order of the Lenders, as referred to in Section 2.04 hereof.
(c) Each Loan shall be either an Alternate Base Loan or a
Eurodollar Loan as the Borrowers may request pursuant to Section 2.03 hereof.
Each Lender may fulfill its obligations under this Agreement by causing its
Applicable Lending Office to make such Loan; PROVIDED, HOWEVER, that the
exercise of such option shall not affect the obligation of the Borrowers to
repay such Loan in accordance with the terms of the applicable Note. Not more
than five (5) Eurodollar Loans may be outstanding at any one time.
(d) Subject to the provisions of paragraph (e) below, each
Lender shall make its Revolving Credit Loans on the proposed dates thereof by
paying the amount required to the Administrative Agent at an address or location
designated by the Administrative Agent in immediately available funds not later
than 12:00 noon, Los Angeles, California time, and the Administrative Agent
shall as soon as practicable, but in no event later than 3:00 P.M., Los Angeles,
California time, credit the amounts so received to the general deposit account
of the Borrowers with the Administrative Agent in immediately available funds
or, if Loans are not to be made on such date because any condition precedent to
a borrowing herein specified is not met, return the amounts so received to the
respective Lenders.
(e) The Borrowers shall have the right at any time upon prior
irrevocable written, telex or facsimile notice (promptly confirmed in writing)
to the Administrative Agent given in the manner and at the times specified in
Section 2.03 with respect to the Loans into which conversion or continuation is
to be made, to convert all or any portion of Eurodollar Loans into Alternate
Base Loans, to convert all or any portion of Alternate Base Loans into
Eurodollar Loans (specifying the Interest Period to be applicable thereto), to
convert the Interest Period with respect to all or any portion of any Eurodollar
Loans to another permissible Interest Period, and to continue all or any portion
of any Eurodollar Loans into a subsequent Interest Period, subject to the terms
and conditions of this Agreement (including the last sentence of Section 2.02(c)
hereof) and to the following:
(i) each conversion or continuation shall be made PRO
RATA among the Lenders in accordance with the respective principal
amounts of the Loans comprising the conversion or continuation,
and in the case of a conversion or continuation of fewer than all
the Loans, the aggregate principal amount of Loans converted or
continued shall not be less than $100,000 in the case of Alternate
Base Loans (except that the foregoing limitation shall not be
applicable to the extent that the proceeds of such Loans are
requested to the disbursed to the Borrowers' controlled
disbursement account maintained with the Administrative Agent) or
$500,000 times the number of Lenders on such date in the case of
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Eurodollar Loans, and, in any event shall be an integral multiple
of $100,000;
(ii) accrued interest on a Eurodollar Loan (or portion
thereof) being converted shall be paid by the Borrowers at the
time of conversion;
(iii) if any Eurodollar Loan is converted at any time
other than the end of an Interest Period applicable thereto, the
Borrowers shall make such payments associated therewith as are
required pursuant to Section 2.12;
(iv) any portion of a Revolving Credit Eurodollar Loan
which is subject to an Interest Period ending on a date that is
less than one (1) month prior to the Revolving Credit Termination
Date may not be converted into, or continued as, a Eurodollar Loan
and shall be automatically converted at the end of such Interest
Period into an Alternate Base Loan;
(v) any portion of a Term Eurodollar Loan required to
be paid on any Repayment Date occurring less than one (1) month
after the end of the then current Interest Period applicable to
such Loan, may not be converted into, or continued as, a Term
Eurodollar Loan and shall be automatically converted at the end of
such Interest Period into a Term Alternate Base Loan; and
(vi) no Default or Event of Default shall have occurred
and be continuing.
The Interest Period applicable to any Eurodollar Loan resulting
from a conversion shall be specified by the Borrowers in the irrevocable notice
of conversion delivered pursuant to this Section; PROVIDED, HOWEVER, that if no
such Interest Period shall be specified, the Borrowers shall be deemed to have
selected an Interest Period of one (1) months' duration; and, PROVIDED, FURTHER,
that no such Interest Period may be for more than one (1) month for the period
commencing on the Closing Date and earlier to occur of (x) the 120th day
following the Closing Date and (y) the completion to the satisfaction of the
Syndication Agent of the syndication of the Total Revolving Credit Commitment
and the Loans and other Credits thereunder. If the Borrowers shall not have
given timely notice to continue any Eurodollar Loan into a subsequent Interest
Period (and shall not otherwise have given notice to convert such Loan), such
Loan (unless repaid or required to be repaid pursuant to the terms hereof) shall
automatically be converted into an Alternate Base Loan. The Administrative
Agent shall promptly advise the Lenders of any notice given pursuant to this
Section and of each Lender's portion of the continuation or conversion
hereunder.
SECTION 2.03 NOTICE OF LOANS. The Borrowers shall, through a
Responsible Officer of any of the Borrowers, give the Administrative Agent
irrevocable
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written, telex or facsimile notice (promptly confirmed in writing) of each
borrowing (including, without limitation, a conversion as permitted by
Section 2.02(e) hereof) not later than 9:00 A.M., Los Angeles, California
time, (i) three (3) Business Days before a proposed Eurodollar Loan borrowing
or conversion and (ii) on the day of an Alternate Base Loan borrowing or
conversion. Such notice shall specify (w) whether the Loans then being
requested are to be Alternate Base Loans or Eurodollar Loans, it being agreed
that all Loans made on the Closing Date shall be Alternate Base Loans, (x)
the date of such borrowing (which shall be a Business Day) and amount thereof
and (y) if such Loans are to be Eurodollar Loans, the Interest Period with
respect thereto. If no election as to the type of Loan is specified in any
such notice, all such Loans shall be Alternate Base Loans. If no Interest
Period with respect to any Eurodollar Loan is specified in any such notice,
then an Interest Period of one (1) month's duration shall be deemed to have
been selected; PROVIDED, HOWEVER, that no such Interest Period may be for
more than one (1) month for the period commencing on the Closing Date and
ending on the earlier to occur of (x) the 120th day following the Closing
Date and (y) the completion to the satisfaction of the Syndication Agent of
the syndication of the Total Revolving Credit Commitment and the Loans and
other Credits thereunder. The Administrative Agent shall promptly advise the
Lenders of any notice given pursuant to this Section 2.03 and of each
Lender's portion of the requested borrowing. In addition, the Borrowers
shall specify whether the requested Loan is for a Permitted Acquisition,
Capital Expenditures (in which case the Borrowers shall certify that such
advance is not in violation of Section 7.07 hereof), or for other
requirements of the Borrowers.
SECTION 2.04 NOTES; REPAYMENT OF LOANS. (a) All Revolving
Credit Loans made by a Lender to the Borrowers shall be evidenced by a single
Revolving Credit Note, duly executed on behalf of the Borrowers, dated the
Closing Date, in substantially the form of EXHIBIT B annexed hereto, delivered
and payable to such Lender in a principal amount equal to its Revolving Credit
Commitment on such date. The outstanding balance of each Revolving Credit Loan,
as evidenced by any such Revolving Credit Note, shall mature and be due and
payable on the Revolving Credit Termination Date if such date occurs earlier
than the Conversion Date or, subject to the terms and conditions of this
Agreement, including, without limitation, that no Default or Event of Default
shall then exist, shall be converted to a Term Loan on the Conversion Date. The
Term Loan made by a Lender on the Conversion Date shall be evidenced by a single
Term Note, duly executed on behalf of the Borrowers, dated the Conversion Date,
in substantially the form of EXHIBIT A annexed hereto, delivered and payable to
such Lender in a principal amount equal to its PRO RATA share (based on its
Revolving Credit Commitment) of the Revolving Credit Loans being converted on
such date; PROVIDED, HOWEVER, that the failure of the Borrowers to deliver Term
Notes pursuant to the provisions of this Section shall not affect the liability
of the Borrowers to repay the amount of Revolving Credit Loans being converted.
(b) Each Revolving Credit Note shall bear interest from its
date on the outstanding principal balance thereof, as provided in Section 2.05
hereof.
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(c) The aggregate principal amount of the Term Loan, as
evidenced by the Term Notes, shall be payable in sixteen (16) consecutive
quarterly installments on the first Business Day of each October, January,
April and July of each year (the date of each such installment, a "REPAYMENT
DATE"), commencing with the first Business Day of the first full fiscal
quarter succeeding the Conversion Date, in the amount set forth in the next
sentence, and such payments shall be distributed ratably among the Lenders in
accordance with their PRO RATA share of such Term Loan. Payments of
principal on each Repayment Date shall be in equal amounts calculated on an
amortization schedule which assumes a maturity date ending four (4) years
subsequent to the Conversion Date and which will be confirmed in writing to
the Borrowers by the Administrative Agent; PROVIDED, HOWEVER, that the final
installment under such Term Note shall be in the amount of the unpaid
principal balance of such Term Note and shall be payable on the Final
Maturity Date.
To the extent not previously paid, the Term Loan shall be due
and payable on the Final Maturity Date. Each Term Note shall bear interest
from its date on the outstanding principal balance thereof, as provided in
Section 2.05. All principal payments in respect of the Term Loan shall be
accompanied by accrued interest on the principal amount being repaid to the
date of payment. No scheduled payment of principal in respect of the Term
Loan shall be made to the extent that a lesser principal payment would result
in the payment in full of the outstanding amount of the Term Loan, and such
lesser amount is paid.
(d) Each Lender, or the Administrative Agent on its behalf,
shall, and is hereby authorized by the Borrowers to, endorse on the schedule
attached to the Term Note or Revolving Credit Note, as applicable, of such
Lender (or on a continuation of such schedule attached to such Note and made
a part thereof) an appropriate notation evidencing the date and amount of
each Loan to the Borrowers from such Lender, as well as the date and amount
of each payment and prepayment with respect thereto; PROVIDED, HOWEVER, that
the failure of any person to make such a notation on a Note shall not affect
any obligations of the Borrowers under such Note. Any such notation shall be
conclusive and binding as to the date and amount of such Loan or portion
thereof, or payment or prepayment of principal or interest thereon, absent
manifest error.
(e) Each of the Borrowers shall be jointly and severally
liable with the other Borrower(s) for the Obligations, and each of the
Obligations shall be secured by all of the Collateral. Each of the Borrowers
acknowledges that it is a co-borrower hereunder and is jointly and severally
liable under this Agreement and the other Loan Documents. All Credits
extended to any of the Borrowers or requested by any of the Borrowers shall
be deemed to be Credits extended for each of the Borrowers, and each of the
Borrowers hereby authorizes each other of the Borrowers to effectuate Credits
on its behalf. Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, the Agents and the Lenders
shall be entitled to rely upon any request, notice or other communication
received by them from any of the Borrowers
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on behalf of all Borrowers, and shall be entitled to treat their giving of
any notice hereunder to any of the Borrowers as notice to each and all
Borrowers.
Each of the Borrowers agrees that the joint and several
liability of the Borrowers provided for in this subsection (e) shall not be
impaired or affected by any modification, supplement, extension or amendment
or any contract or agreement to which the other Borrower(s) may hereafter
agree (other than an agreement signed by the Administrative Agent and the
Lenders specifically releasing such liability), nor by any delay, extension
of time, renewal, compromise or other indulgence granted by the
Administrative Agent or any Lender with respect to any of the Obligations,
nor by any other agreements or arrangements whatsoever with the other
Borrower(s) or with any other person, each of the Borrowers hereby waiving
all notice of such delay, extension, release, substitution, renewal,
compromise or other indulgence, and hereby consenting to be bound thereby as
fully and effectually as if it had expressly agreed thereto in advance. The
liability of each of the Borrowers is direct and unconditional as to all of
the Obligations, and may be enforced without requiring the Administrative
Agent or any Lender first to resort to any other right, remedy or security.
Each of the Borrowers hereby expressly waives promptness, diligence, notice
of acceptance and any other notice with respect to any of the Obligations,
the Notes, this Agreement or any other Loan Document and any requirement that
the Administrative Agent or any Lender protect, secure, perfect or insure any
Lien or any property subject thereto or exhaust any right or take any action
against any of the Borrowers or any other person or any collateral.
Each of the Borrowers hereby irrevocably waives and releases
each other of the Borrowers from all "claims" (as defined in Section 101(5)
of the Bankruptcy Code) to which such Borrowers are or would be entitled by
virtue of the provisions of the first paragraph of this subsection (e) or the
performance of such Borrower's obligations thereunder including, without
limitation, any right of subrogation (whether contractual, under Section 509
of the Bankruptcy Code or otherwise), reimbursement, contribution,
exoneration or similar right, or indemnity, or any right of recourse to
security for any of the Obligations.
SECTION 2.05 INTEREST ON LOANS. (a) Subject to the
provisions of Section 2.05(c) and Section 2.08 hereof, each Alternate Base
Loan shall bear interest at a rate per annum equal to the Alternate Base Rate
PLUS the applicable Interest Margin.
(b) Subject to the provisions of Section 2.05(c) and Section
2.08 hereof, each Eurodollar Loan shall bear interest at a rate per annum
equal to the Adjusted LIBO Rate PLUS the applicable Interest Margin.
(c) Interest on each Loan shall be payable in arrears on
each applicable Interest Payment Date, the Conversion Date, the Revolving
Credit Termination Date and on the Final Maturity Date, as applicable.
Interest on each Alternate Base Loan and Eurodollar Loan shall be computed
based on the number of
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days elapsed in a year of 360 days. The Administrative Agent shall determine
each interest rate applicable to the Loans and shall promptly advise the
Borrowers and the Lenders of the interest rate so determined.
SECTION 2.06 FEES. The Borrowers shall pay each Lender,
through the Administrative Agent, (i) on the first Business Day of each
October, January, April and July, commencing July 1, 1999, (ii) on the date
of any reduction of the Revolving Credit Commitments pursuant to this
Agreement including, without limitation, Section 2.07 hereof and (iii) on the
earlier to occur of (x) the Revolving Credit Termination Date and (y) the
Conversion Date, in immediately available funds, a commitment fee (the
"REVOLVING CREDIT COMMITMENT FEE") equal to the Commitment Fee Percentage on
the average daily unused (treating Letter of Credit Usage as usage) amount of
the Revolving Credit Commitment of such Lender, during the quarter (or
shorter period commencing with the date hereof or ending with the Revolving
Credit Termination Date) ending on such date; PROVIDED, HOWEVER, that with
respect to the period April 1, 1999 to the Closing Date, the Borrowers shall
pay each Original Lender, through the Administrative Agent, on July 1, 1999,
the "Revolving Credit Commitment Fee" under the Original Credit Agreement on
the daily unused amount of such Original Lender's "Revolving Credit
Commitment" under the Original Credit Agreement during such period. The
Revolving Credit Commitment Fee due to each Lender under this Section 2.06
shall commence to accrue on the date hereof and cease to accrue on the
earliest of (i) the Revolving Credit Termination Date, (ii) the termination
of the Revolving Credit Commitment of such Lender pursuant to this Agreement
including, without limitation, pursuant to Section 2.07 hereof and (iii) the
Conversion Date. The Revolving Credit Commitment Fee shall be calculated on
the basis of the actual number of days elapsed in a year of 360 days.
SECTION 2.07 TERMINATION AND REDUCTION OF REVOLVING CREDIT
COMMITMENTS. (a) Upon at least two (2) Business Days' prior irrevocable
written notice (or facsimile notice promptly confirmed in writing) to the
Administrative Agent, the Borrowers may at any time in whole permanently
terminate, or from time to time in part permanently reduce, the Total
Revolving Credit Commitment, ratably among the Lenders in accordance with the
amounts of their Revolving Credit Commitments; PROVIDED, HOWEVER, that the
Total Revolving Credit Commitment shall not be reduced at any time to an
amount less than the Revolving Credit Loans outstanding under the Revolving
Credit Commitments and the Letter of Credit Usage at such time. Each partial
reduction of the Total Revolving Credit Commitment shall be in a minimum of
$100,000 or an integral multiple of $100,000.
(b) Simultaneously with any termination or reduction of the
Total Revolving Credit Commitment pursuant to paragraph (a) of this Section
2.07, the Borrowers shall pay to each Lender, through the Administrative
Agent, the Revolving Credit Commitment Fee due and owing through and
including the date of such termination or reduction on the amount of the
Revolving Credit Commitment of such Lender so terminated or reduced.
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(c) The Revolving Credit Commitment of each Lender shall
automatically and permanently terminate on the earlier of (i) the Revolving
Credit Termination Date and (ii) the Conversion Date, and all Revolving
Credit Loans still outstanding on such date shall be due and payable in full
together with accrued interest thereon on the Revolving Credit Termination
Date, if such date occurs earlier than the Conversion Date, or, subject to
the terms and conditions of this Agreement, including, without limitation,
that no Default or Event of Default shall then exist, shall be converted to a
Term Loan on the Conversion Date.
SECTION 2.08 INTEREST ON OVERDUE AMOUNTS; ALTERNATE RATE OF
INTEREST. (a) If the Borrowers shall default in the payment of the
principal of or interest on any Loan or any other amount becoming due
hereunder, by acceleration or otherwise, the Borrowers shall on demand from
time to time pay interest, to the extent permitted by law, on all Obligations
outstanding up to the date of actual payment of such defaulted amount (after
as well as before judgment) at a rate per annum equal to two percent (2%) in
excess of the rates otherwise applicable thereto.
(b) In the event, and on each occasion, that on the day two
(2) Business Days prior to the commencement of any Interest Period for a
Eurodollar Loan the Administrative Agent shall have determined that dollar
deposits in the amount of each Eurodollar Loan are not generally available in
the London interbank market, or that the rate at which dollar deposits are
being offered will not reflect adequately and fairly the cost to any Lender
of making or maintaining such Eurodollar Loan during such Interest Period, or
that reasonable means do not exist for ascertaining the Adjusted LIBO Rate,
the Administrative Agent shall as soon as practicable thereafter give written
notice (or facsimile notice promptly confirmed in writing) of such
determination to the Borrowers and the Lenders, and any request by the
Borrowers for the making of a Eurodollar Loan pursuant to Section 2.03 hereof
or conversion or continuation of any Loan into a Eurodollar Loan pursuant to
Section 2.02 hereof shall, until the circumstances giving rise to such notice
no longer exist, be deemed to be a request for an Alternate Base Loan. Each
determination by the Administrative Agent made hereunder shall be conclusive
absent manifest error.
SECTION 2.09 PREPAYMENT OF LOANS. (a) Subject to the terms
and conditions contained in this Section 2.09 and elsewhere in this
Agreement, the Borrowers shall have the right to prepay any Loan at any time
in whole or from time to time in part without penalty (except as otherwise
provided for herein); PROVIDED, HOWEVER, that each such partial prepayment of
a Loan shall be in an integral multiple of $100,000.
(b) On the date of any termination or reduction of the Total
Revolving Credit Commitment pursuant to Section 2.07(a) hereof or elsewhere
in this Agreement, the Borrowers shall pay or prepay so much of the Revolving
Credit Loans as shall be necessary in order that the aggregate principal
amount of the Revolving Credit Loans PLUS the Letter of Credit Usage
outstanding will not exceed the Total Revolving Credit Commitment following
such termination or reduction. Any prepayments required by this
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paragraph (b) shall be applied to outstanding Revolving Credit Alternate Base
Loans up to the full amount thereof before they are applied to outstanding
Revolving Credit Eurodollar Loans; PROVIDED, HOWEVER, that the Borrowers
shall not be required to make any prepayment of any Eurodollar Loan pursuant
to this Section until the last day of the Interest Period with respect
thereto SO LONG AS an amount equal to such prepayment is deposited by the
Borrowers in a cash collateral account with the Administrative Agent to be
held in such account on terms satisfactory to the Administrative Agent.
(c) The Borrowers shall make prepayments of the Revolving
Credit Loans from time to time such that the outstanding principal balance of
such Revolving Credit Loans PLUS the Letter of Credit Usage does not exceed
the Total Revolving Credit Commitment. Any prepayments required by this
paragraph (c) shall be applied to outstanding Revolving Credit Alternate Base
Loans up to the full amount thereof before they are applied to outstanding
Revolving Credit Eurodollar Loans; PROVIDED, HOWEVER, that the Borrowers
shall not be required to make any prepayment of any Eurodollar Loan pursuant
to this Section until the last day of the Interest Period with respect
thereto SO LONG AS an amount equal to such prepayment is deposited by the
Borrowers in a cash collateral account with the Administrative Agent to be
held in such account on terms satisfactory to the Administrative Agent.
(d) Within three (3) Business Days of (i) the sale or other
disposition of any assets of any Loan Party (excluding (x) sales of assets in
the ordinary course of business, and (y) subject to Section 6.02 hereof,
sales of worn-out or obsolete assets but only to the extent that the net
proceeds realized are applied within three (3) Business Days of any sale or
other disposition to purchase other assets and pending such application or
prepayment all such net proceeds shall be maintained in a cash collateral
account with the Administrative Agent on terms and conditions acceptable to
the Administrative Agent) or of the capital stock of any Loan Party (subject
to Section 7.05 hereof), or (ii) the consummation of the issuance of any debt
securities of any of the Loan Parties, the Borrowers shall make a mandatory
prepayment of the Loans in an amount equal to 100% of the proceeds received
(net of taxes due and any reasonable expenses of sale), which proceeds shall
be applied as set forth in paragraph (g) below. Nothing contained in this
paragraph (d) shall be or be deemed to be a consent to the sale of any assets
or stock or the issuance of any stock or debt securities.
(e) Within 105 days of the end of each Fiscal Year of the
Borrowers, commencing with the Fiscal Year ending December 31, 2002, the
Borrowers shall make a mandatory prepayment of the Loans in an amount equal
to the Mandatory Prepayment, if any, of the Borrowers and their subsidiaries
for the Fiscal Year then ended, such prepayment to be applied as set forth in
paragraph (g) below.
(f) (i) Except as provided in clause (ii) below, promptly
and in any event not more than three (3) Business Days following the receipt
by the Administrative Agent or any of the Borrowers or any subsidiary of any
of the Borrowers of any net proceeds of (x) any casualty insurance required
to be maintained pursuant to
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Section 6.03 hereof on account of each separate loss, damage or injury (each,
a "CASUALTY EVENT") in excess of $200,000 (or, if there shall be continuing a
Default or an Event of Default, of the full amount of net proceeds) to any
asset of such Borrowers or such subsidiary (including, without limitation,
any Collateral), or (y) any business interruption insurance required to be
maintained pursuant to Section 6.03 hereof on account of any business
interruption event (each, a "BI EVENT") in excess of $200,000 (or, if there
shall be continuing a Default or Event of Default, of the full amount of net
proceeds), such Borrowers or subsidiary shall notify the Administrative Agent
of such receipt in writing or by telephone promptly confirmed in writing, and
not later than three (3) Business Days following receipt by the
Administrative Agent or such Borrowers or subsidiary of any such proceeds,
there shall become due and payable a prepayment of the Loans in an amount
equal to 100% of such proceeds. Prepayments from such net proceeds shall be
applied as set forth in paragraph (g) below.
(ii) In the case of the receipt of net proceeds described in clause
(i) above with respect to a Casualty Event or BI Event, the
Borrowers may elect, by written notice delivered to the
Administrative Agent not later than the day on which a prepayment
would otherwise be required under clause (i), (x) in the case of
proceeds received with respect to a BI Event, to use such proceeds
in the ordinary course of such Borrower's business and (y) in the
case of proceeds received with respect to any Casualty Event, to
apply all or a portion of such net proceeds for the purpose of
replacing, repairing, restoring or rebuilding (referred to herein
as a "REBUILDING") the relevant tangible property, and, in any such
event, any required prepayment under clause (i) above shall be
reduced dollar for dollar by the amount of such election under
clause (x) or clause (y) of this sentence. An election under this
clause (ii) shall not be effective unless: (x) at the time of such
election there is continuing no Default or Event of Default; (y)
the Borrowers shall have certified to the Administrative Agent
that: (i) the net proceeds of the insurance adjustment with
respect to a Casualty Event, together with other funds available to
the Borrowers shall be sufficient to complete such Rebuilding in
accordance with all applicable laws, regulations and ordinances;
and (ii) no Default or Event of Default has arisen or will arise as
a result of such BI Event, Casualty Event or Rebuilding; and (z) if
the amount of net proceeds in question exceeds $1,000,000, the
Borrowers shall have obtained the written consent of the Required
Lenders to such election.
(iii) In the event of an election under clause (ii) above, pending
application of the net proceeds to business operations with respect
to a BI Event or to Rebuilding with respect to a Casualty Event,
the Borrowers shall not later than the time at which prepayment
would have been, in the absence of such election, required under
clause (i) above, apply such net proceeds to the prepayment of the
outstanding principal balance, if any, of the Revolving Credit
Loans (not in permanent reduction of the Revolving Credit
Commitment), and deposit (the "SPECIAL DEPOSIT") with the
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Administrative Agent, the balance, if any, of such net proceeds
remaining after such application, pursuant to agreements in form,
scope and substance reasonably satisfactory to the Administrative
Agent. The Special Deposit, together with all earnings on such
Special Deposit, shall be available to the Borrowers solely for the
applicable Rebuilding or ordinary course business operations, as
the case may be; PROVIDED, HOWEVER, that at such time as a Default
or Event of Default shall occur, the balance of the Special Deposit
and earnings thereon may be applied by the Administrative Agent to
repay the Obligations in such order as the Administrative Agent
shall elect. The Administrative Agent shall be entitled to require
proof, as a condition to the making of any withdrawal from the
Special Deposit, that the proceeds of such withdrawal are being
applied for the purposes permitted hereunder.
(iv) Notwithstanding anything to the contrary contained in this
paragraph (f), on the date three (3) Business Days following the
receipt by the Administrative Agent or any Borrower of any net
proceeds of any insurance referred to in Section 6.16 hereof, there
shall become due and payable a prepayment of principal in respect
of the Obligations in an amount equal to 100% of such net proceeds.
All prepayments made pursuant to this clause (iv) shall be applied
in the manner set forth in paragraph (g) below.
(g) When making a prepayment, whether mandatory or
otherwise, pursuant to paragraph (a), (b), (c), (d), (e) or (f) above or
paragraph (k) below, the Borrowers shall furnish to the Administrative Agent,
not later than 11:00 A.M. (Los Angeles, California time) (i) three (3)
Business Days prior to the date of such prepayment of Alternate Base Loans
and (ii) five (5) Business Days prior to the date of such prepayment of
Eurodollar Loans, written, telex or facsimile notice (promptly confirmed in
writing) of prepayment which shall specify the prepayment date and the
principal amount of each Loan (or portion thereof) to be prepaid, which
notice shall be irrevocable and shall commit the Borrowers to prepay such
Loan by the amount stated therein on the date stated therein. All
prepayments shall be accompanied by accrued interest on the principal amount
being prepaid to the date of prepayment. Prepayments made pursuant to
paragraph (d), (e), (f) or (k) above shall be applied as follows: (A) prior
to the Conversion Date, to outstanding Revolving Credit Alternate Base Loans
up to the full amount thereof and then to Revolving Credit Eurodollar Loans
up to the full amount thereof, and (B) following the Conversion Date, with
respect to the Term Loan, to outstanding Term Alternate Base Loans PRO RATA
over the remaining Repayment Dates up to the full amount thereof and then to
outstanding Term Eurodollar Loans PRO RATA over the remaining Repayment Dates
up to the full amount thereof; PROVIDED, HOWEVER, that if at the time of the
making of any prepayment in accordance with clause (A), there are undrawn
Letters of Credit outstanding, then in the discretion of the Administrative
Agent, all or any portion of any such prepayment (not to exceed an amount
equal to the aggregate undrawn amount of all such outstanding Letters of
Credit) remaining after payment in full of the Revolving Credit Loans shall
be
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deposited by the Borrowers in a cash collateral account to be held by the
Administrative Agent for its own benefit and for the benefit of the Lenders
for application by the Administrative Agent to the payment of any drawing
made under any such Letters of Credit; PROVIDED, HOWEVER, that the Borrowers
shall not be required to make any prepayment of any Term or Revolving Credit
Eurodollar Loan required pursuant to this Section 2.09(g) until the last day
of the Interest Period with respect thereto SO LONG AS an amount equal to
such prepayment is deposited by the Borrowers into a cash collateral account
with the Administrative Agent to be held in such account pursuant to terms
satisfactory to the Administrative Agent.
(h) All prepayments under this Section 2.09 shall be subject
to Section 2.12 hereof.
(i) Except as otherwise expressly provided in this Section
2.09, payments with respect to any paragraph of this Section 2.09 are in
addition to payments made or required to be made under any other paragraph of
this Section 2.09.
(j) All prepayments of the Term Loan under this Section 2.09
shall be applied PRO RATA over the remaining Repayment Dates. The amount of
the Term Loan prepaid may not be reborrowed.
(k) Within one (1) Business Day of the receipt of any funds
pursuant to Section 6.19 hereof, there shall become due and payable a
prepayment of principal in respect of the Obligations in an amount equal to
100% of such net proceeds. All prepayments made pursuant to this paragraph
(k) shall be applied in the manner set forth in paragraph (g) above.
SECTION 2.10 RESERVE REQUIREMENTS; CHANGE IN CIRCUMSTANCES.
(a) Notwithstanding any other provision herein, if after the date of this
Agreement (or in the case of any assignee of any Lender, the date of
assignment) any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof (whether or not
having the force of law), or any change in GAAP or regulatory accounting
principles applicable to the Administrative Agent or any Lender, shall: (i)
subject the Administrative Agent or any Lender (which shall for the purpose
of this Section 2.10 include any assignee or lending office of the
Administrative Agent or any Lender) to any charge, fee, deduction or
withholding of any kind or to any tax with respect to any amount paid or to
be paid to either the Administrative Agent or any Lender with respect to any
Eurodollar Loans made by such Lender to the Borrowers or with respect to the
obligations of any Lender under Sections 2.17 through 2.20 hereof or under
any Letter of Credit (other than (x) taxes imposed on the overall net income
of the Administrative Agent or such Lender and (y) franchise taxes imposed on
the Administrative Agent or such Lender, in either case by the jurisdiction
in which such Lender or the Administrative Agent has its principal office or
its lending office with respect to such Eurodollar Loan or any political
subdivision or taxing authority of either thereof); (ii) change the basis of
taxation of payments to any Lender or the Admini-
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strative Agent of the principal of or interest on any Eurodollar Loan or any
other fees or amounts payable with respect to any Letter of Credit or
otherwise hereunder (other than taxes imposed on the overall net income of
such Lender or the Administrative Agent by the jurisdiction in which such
Lender or the Administrative Agent has its principal office or by any
political subdivision or taxing authority therein); (iii) impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or loans or loan commitments
extended by, or Letters of Credit issued and maintained by such Lender; or
(iv) impose on any Lender or, with respect to Eurodollar Loans, the London
interbank market, any other condition affecting this Agreement, Letters of
Credit issued and maintained by or Eurodollar Loans made by such Lender; and
the result of any of the foregoing shall be to increase the cost to any such
Lender of making or maintaining any Eurodollar Loan or Letter of Credit, or
to reduce the amount of any payment (whether of principal, interest, fee,
compensation or otherwise) receivable by such Lender or to require such
Lender to make any payment in respect of any Eurodollar Loan or Letter of
Credit, then the Borrowers shall pay to such Lender or the Administrative
Agent, as the case may be, upon such Lender's or the Administrative Agent's
demand, such additional amount or amounts as will compensate such Lender or
the Administrative Agent for such additional costs or reduction. The
Administrative Agent and each Lender agree to give notice to the Borrowers of
any such change in law, regulation, interpretation or administration with
reasonable promptness after becoming actually aware thereof and of the
applicability thereof to the Transactions. Notwithstanding anything
contained herein to the contrary, nothing in clause (i) or (ii) of this
Section 2.10(a) shall be deemed to (x) permit the Administrative Agent or any
Lender to recover any amount thereunder which would not be recoverable under
Section 2.16 hereof or (y) require the Borrowers to make any payment of any
amount to the extent that such payment would duplicate any payment made by
the Borrowers pursuant to Section 2.16 hereof.
(b) If at any time and from time to time after the date of
this Agreement, any Lender shall determine that the adoption of any
applicable law, rule, regulation or guideline regarding capital adequacy, or
any change in any applicable law, rule, regulation or guideline regarding
capital adequacy, including, without limitation, the July 1988 report of the
Basle Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards", or
any change in the interpretation or administration of any thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender (or
its lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank
or comparable agency, has or will have the effect of reducing the rate of
return on such Lender's capital or on the capital of such Lender's holding
company, if any, as a consequence of its obligations hereunder to a level
below that which such Lender could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's policies and
the policies of such Lender's holding company with respect to capital
adequacy), then from time to time the Borrowers shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such
reduction. Each Lender agrees to
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give notice to the Borrowers of any adoption of, change in, or change in
interpretation or administration of, any such law, rule, regulation or
guideline with reasonable promptness after becoming actually aware thereof
and of the applicability thereof to the Transactions.
(c) A statement of any Lender or the Administrative Agent
setting forth such amount or amounts, supported by calculations in reasonable
detail, as shall be necessary to compensate such Lender (or the
Administrative Agent) as specified in paragraphs (a) and (b) above shall be
delivered to the Borrowers and shall be conclusive absent manifest error.
The Borrowers shall pay such Lender or the Administrative Agent, as the case
may be, the amount shown as due on any such statement within ten (10) days
after its receipt of the same.
(d) Failure on the part of any Lender or the Administrative
Agent to demand compensation for any increased costs, reduction in amounts
received or receivable with respect to any Interest Period or any Letter of
Credit or reduction in the rate of return earned on such Lender's capital,
shall not constitute a waiver of such Lender's or the Administrative Agent's
rights to demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in rate of return in such Interest Period
or in any other Interest Period or with respect to such Letter of Credit.
The protection under this Section 2.10 shall be available to each Lender and
the Administrative Agent regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by such Lender or the Administrative Agent for
compensation.
(e) Any Lender claiming any additional amounts payable
pursuant to this Section 2.10 agrees to use reasonable efforts (consistent
with legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need for,
or reduce the amount of, any such additional amounts and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.
SECTION 2.11 CHANGE IN LEGALITY. (a) Notwithstanding
anything to the contrary herein contained, if any change in any law or
regulation or in the interpretation thereof by any governmental authority
charged with the administration or interpretation thereof shall make it
unlawful for any Lender to make or maintain any Eurodollar Loan or to give
effect to its obligations to make Eurodollar Loans as contemplated hereby,
then, by written notice to Borrowers and to the Administrative Agent, such
Lender may:
(i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon the Borrowers shall be
prohibited from requesting Eurodollar Loans from such Lender
hereunder unless such declaration is subsequently withdrawn; and
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(ii) require that all outstanding Eurodollar Loans,
made by such Lender be converted to Alternate Base Loans, in which
event (A) all such Eurodollar Loans shall be automatically
converted to Alternate Base Loans as of the effective date of such
notice as provided in paragraph (b) below and (B) all payments of
principal which would otherwise have been applied to repay the
converted Eurodollar Loans shall instead be applied to repay the
Alternate Base Loans resulting from the conversion of such
Eurodollar Loans.
(b) For purposes of Section 2.11(a) hereof, a notice to the
Borrowers by any Lender shall be effective, if lawful, on the last day of the
then current Interest Period or, if there are then two or more current Interest
Periods, on the last day of each such Interest Period, respectively; otherwise,
such notice shall be effective with respect to the Borrowers on the date of
receipt by the Borrowers.
SECTION 2.12 INDEMNITY. The Borrowers shall indemnify the
Administrative Agent and each Lender against any loss or reasonable expense
(including, but not limited to, any loss or reasonable expense sustained or
incurred or to be sustained or incurred by reason of or in connection with the
execution and delivery or assignment of, or payment under, any Letter of Credit,
or in liquidating or employing deposits from third parties acquired to affect or
maintain any Loan or part thereof as a Eurodollar Loan) which the Administrative
Agent or such Lender may sustain or incur as a consequence of the following
events (regardless of whether such events occur as a result of the occurrence of
a Default or an Event of Default or the exercise of any right or remedy of the
Administrative Agent or the Lenders under this Agreement or any other agreement,
or at law): any failure of the Borrowers to fulfill on the date of any Credit
Event the applicable conditions set forth in Article V hereof applicable to it;
any failure of the Borrowers to borrow hereunder after irrevocable notice of
borrowing pursuant to Section 2.03 hereof has been given; any payment,
prepayment or conversion of a Eurodollar Loan on a date other than the last day
of the relevant Interest Period; any default in payment or prepayment of the
principal amount of any Loan or any part thereof or interest accrued thereon, or
with respect to any Letter of Credit, in each case, as and when due and payable
(at the due date thereof, by irrevocable notice of prepayment or otherwise); or
the occurrence of an Event of Default. Without limiting the foregoing, the
Borrowers further agree to indemnify and hold harmless the Administrative Agent,
each Lender as well as their respective officers and directors, each person who
controls the Administrative Agent or Lender within the meaning of Section 15 of
the Securities Act of 1933 or any applicable state securities law and their
respective successors, from and against any and all claims, damages, losses,
liabilities, costs or expenses, joint or several, to which they or any of them
may become subject under any Federal or state securities law, rule or
regulation, at common law or otherwise, insofar as such claims, damages, losses,
liabilities, costs or expenses arise out of or are based upon the execution and
delivery by the Administrative Agent or any Lender of any Letter of Credit or
the execution and delivery of any other document in connection therewith. Such
loss or reasonable expense shall include, without limitation, an amount equal to
the excess, if any, of (i) the amount of interest which would have accrued on
the principal or other amount so paid, prepaid or converted or
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not borrowed for the period from the date of such payment, prepayment or
conversion or failure to borrow to, in the case of a Loan, the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date of such
failure to borrow), at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in reemploying the funds so paid,
prepaid or converted or not borrowed for such period or Interest Period, as the
case may be. Any such Lender shall provide to the Borrowers a statement,
signed by an officer of such Lender, explaining any loss or expense and setting
forth, if applicable, the computation pursuant to the preceding sentence, and
such statement shall be conclusive absent manifest error. The Borrowers shall
pay such Lender the amount shown as due on any such statement within ten (10)
days after the receipt of the same. The indemnities contained herein shall
survive the expiration or termination of this Agreement and of the Letters of
Credit.
SECTION 2.13 PRO RATA TREATMENT; ASSUMPTION BY AND DELEGATION
OF AUTHORITY TO THE ADMINISTRATIVE AGENT. Except as permitted under Sections
2.10, 2.11 and 2.16 hereof or as described in subsection (d) below, each
borrowing, each payment or prepayment of principal of the Notes, each payment of
interest on the Notes, each payment of any fee or other amount payable hereunder
and each reduction of the Total Revolving Credit Commitment shall be made PRO
RATA among the Lenders in the proportions that their Revolving Credit
Commitments bear to the Total Revolving Credit Commitment or that the aggregate
principal amount of such Lender's Term Loan bears to the aggregate principal
amount of the Term Loans made by all of the Lenders, as the case may be.
(b) Notwithstanding the occurrence or continuance of a Default
or Event of Default or other failure of any condition to the making of Loans or
occurrence of other Credit Events hereunder subsequent to the Credit Events on
the Closing Date, unless the Administrative Agent shall have been notified in
writing by any Lender in accordance with the provisions of paragraph (c) below
prior to the date of a proposed Credit Event that such Lender will not make the
amount that would constitute its PRO RATA share of the applicable Credits on
such date available to the Administrative Agent, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent on such date, and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrowers a corresponding amount. If such
amount is made available to the Administrative Agent on a date after such Credit
Event date, such Lender shall pay to the Administrative Agent on demand an
amount equal to the product of (i) the daily average Federal funds rate during
such period as quoted by the Administrative Agent, times (ii) the amount of such
Lender's PRO RATA share of such Credits, times (iii) a fraction the numerator of
which is the number of days that elapse from and including such Credit Event
date to the date on which such Lender's PRO RATA share of such Credits shall
have become immediately available to the Administrative Agent and the
denominator of which is 360. A certificate of the Administrative Agent
submitted to any Lender with respect to any amounts owing under this subsection
shall be conclusive in the absence of manifest error. If such Lender's
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PRO RATA share of such Credits is not in fact made available to the
Administrative Agent by such Lender within three Business Days of such Credit
Event date, the Administrative Agent shall be entitled to recover such amount
with interest thereon at the rate per annum applicable to the Loans hereunder,
on demand, from the Borrowers.
(c) Unless and until the Administrative Agent shall have
received notice from the Required Lenders as to the existence of a Default, an
Event of Default or some other circumstance which would relieve the Lenders of
their respective obligations to extend Credits hereunder, which notice shall be
in writing and shall be signed by the Required Lenders and shall expressly state
that the Required Lenders do not intend to make available to the Administrative
Agent such Lenders' ratable share of Credits extended after the effective date
of such notice, the Administrative Agent shall be entitled to continue to make
the assumptions described in Section 2.13(b) above. After receipt of the notice
described in the preceding sentence, which shall become effective on the third
Business Day after receipt of such notice by the Administrative Agent (unless
otherwise agreed by the Administrative Agent), the Administrative Agent shall be
entitled to make the assumptions described in Section 2.13(b) above as to any
Credits as to which it has not received a written notice to the contrary prior
to 11:00 A.M. (Los Angeles, California time) on the Business Day next preceding
the day on which such Credits are to be extended. The Administrative Agent
shall not be required to extend any Credits as to which it shall have received
notice by a Lender of such Lender's intention not to make its ratable portion of
such Credits available to the Administrative Agent. Any withdrawal of
authorization as described under this Section 2.13(c) shall not affect the
validity of any Credits extended prior to the effectiveness thereof.
(d) In the event that any Lender fails to fund its ratable
portion (based on its Revolving Credit Commitment) of any Revolving Credit Loan
which such Lender is obligated to fund under the terms of this Agreement (the
funded portion of such borrowing being hereinafter referred to as a "NON PRO
RATA LOAN"), until the earlier of such Lender's cure of such failure or the
termination of the Total Revolving Credit Commitment, in the Administrative
Agent's sole discretion, the proceeds of all amounts thereafter repaid to the
Administrative Agent for the benefit of the Lenders by the Borrowers and
otherwise required to be applied to such Lender's share of any other Obligation
pursuant to the terms of this Agreement, may be advanced to the Borrowers by the
Administrative Agent on behalf of such Lender to cure, in full or in part, such
failure by such Lender, but shall nevertheless be deemed to have been paid to
such Lender in satisfaction of such other Obligation. Notwithstanding anything
in this Agreement to the contrary:
(i) the foregoing provisions to this subsection (d)
shall apply only with respect to the proceeds of payments of
Obligations and shall not affect the conversion or continuation of
Loans pursuant to Section 2.02;
(ii) any such Lender shall be deemed to have cured its
failure to fund at such time as an amount equal to such Lender's
ratable portion (based on its Revolving Credit Commitment) of the
requested principal
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portion of such Revolving Credit Loan is fully funded to the
Borrowers whether made by such Lender itself or by operation of
the terms of this subsection (d) and whether or not the Non Pro
Rata Loan with respect thereto has been converted or continued;
(iii) amounts advanced to the Borrowers to cure, in full
or in part, any such Lender's failure to fund its Revolving Credit
Loans ("CURE LOANS") shall bear interest at the rate applicable to
Alternate Base Loans under Section 2.05 in effect from time to
time, and for all other purposes of this Agreement shall be
treated as if they were Alternate Base Loans;
(iv) regardless of whether or not an Event of Default
has occurred and is continuing, and notwithstanding the
instructions of the Borrowers as to their desired application, all
repayments of principal which would be applied to the outstanding
Revolving Credit Alternate Base Loans shall be applied FIRST,
ratably to Revolving Credit Alternate Base Loans constituting Non
Pro Rata Loans, SECOND, ratably to Revolving Credit Alternate Base
Loans other than those constituting Non Pro Rata Loans or Cure
Loans and, THIRD, ratably to Revolving Credit Alternate Base Loans
constituting Cure Loans;
(v) for so long as, and until the earlier of any such
Lender's cure of the failure to fund its ratable portion (based on
its Revolving Credit Commitment) of any Revolving Credit Loan and
the termination of the Total Revolving Credit Commitment, the term
"Required Lenders" for all purposes of this Agreement shall
exclude all Lenders whose failure to fund their ratable portion
(based on their respective Revolving Credit Commitments) of any
Revolving Credit Loan have not been cured; and
(vi) for so long as and until any such Lender's failure
to fund its ratable portion (based on its Revolving Credit
Commitment) of any Revolving Credit Loan is cured in accordance
with this subsection (d), such Lender shall not be entitled to any
Revolving Credit Commitment Fee with respect to its Revolving
Credit Commitment.
SECTION 2.14 SHARING OF SETOFFS. Each Lender agrees that if it
shall, through the exercise of a right of banker's lien, setoff or counterclaim
against the Borrowers, including, but not limited to, a secured claim under
Section 506 of Title 11 of the United States Code or other security or interest
arising from, or in lieu of, such secured claim, received by such Lender under
any applicable bankruptcy, insolvency or other similar law or otherwise, obtain
payment (voluntary or involuntary) in respect of a Note or exposure under the
Letter of Credit Usage held by it as a result of which the unpaid principal
portion of the Notes or exposure under the Letter of Credit Usage held by it
shall be proportionately less than the unpaid principal portion of the Notes or
exposure under the Letter of Credit Usage held by any other Lender, it shall be
deemed to have simultaneously purchased from such other Lender a participation
in the Notes
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and exposure under the Letter of Credit Usage held by such other Lender, so
that the aggregate unpaid principal amount of the Notes and exposure under the
Letter of Credit Usage and participations in Notes and exposure under the
Letter of Credit Usage held by it shall be in the same proportion to the
aggregate unpaid principal amount of all Notes and exposure under the Letter of
Credit Usage then outstanding as the principal amount of the Notes and exposure
under the Letter of Credit Usage held by it prior to such exercise of banker's
lien, setoff or counterclaim was to the principal amount of all Notes and
exposure under the Letter of Credit Usage outstanding prior to such exercise of
banker's lien, setoff or counterclaim; PROVIDED, HOWEVER, that if any such
purchase or purchases or adjustments shall be made pursuant to this Section
2.14 and the payment giving rise thereto shall thereafter be recovered, such
purchase or purchases or adjustments shall be rescinded to the extent of such
recovery and the purchase price or prices or adjustments restored without
interest. The Borrowers expressly consent to the foregoing arrangements and
agree that any Lender holding a participation in a Note and exposure under the
Letter of Credit Usage deemed to have been so purchased may exercise any and
all rights of banker's lien, setoff or counterclaim with respect to any and all
moneys owing by the Borrowers to such Lender as fully as if such Lender held a
Note and exposure under the Letter of Credit Usage in the amount of such
participation.
SECTION 2.15 PAYMENTS AND COMPUTATIONS. The Borrowers shall
make each payment hereunder and under any instrument delivered hereunder not
later than 12:00 noon (Los Angeles, California time) on the day when due in
lawful money of the United States (in freely transferable dollars) for the
account of the Lenders, in immediately available funds, without set-off or
counterclaim to the Administrative Agent at an address or location designated by
the Administrative Agent at least forty-eight (48) hours prior to the date such
payment or delivery is required. Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon. The Administrative Agent shall distribute any such payments
received by it for the account of any other person to the appropriate recipient
promptly following receipt thereof. The Administrative Agent may charge, when
due and payable, the Borrowers' account with the Administrative Agent for all
interest, principal and Revolving Credit Commitment Fees or other fees owing to
the Administrative Agent or the Lenders on or with respect to this Agreement
and/or the Loans and other Loan Documents. If at any time there is not
sufficient availability to cover any of the payments referred to in the prior
sentence, and in any event upon the occurrence of any Default, the Borrowers
shall make any such payments upon demand.
(b) If the Administrative Agent pays an amount to a Lender
under this Agreement in the belief or expectation that a related payment has
been or will be received by the Administrative Agent from Borrower and such
related payment is not received by the Administrative Agent, then the
Administrative Agent will be entitled to recover such amount from such Lender
without setoff, counterclaim or deduction of any kind. If the Administrative
Agent determines at any time that any amount received by
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the Administrative Agent under this Agreement must be returned to Borrowers or
paid to any other person pursuant to any solvency law or otherwise, then,
notwithstanding any other term or condition of this Agreement, the
Administrative Agent will not be required to distribute any portion thereof to
any Lender. In addition, each Lender will repay to the Administrative Agent on
demand any portion of such amount that Agent has distributed to such Lender,
together with interest at such rate, if any, as the Administrative Agent is
required to pay to Borrowers or such other person, without setoff, counterclaim
or deduction of any kind.
SECTION 2.16 TAXES. Any and all payments by the Borrowers
hereunder shall be made, in accordance with Section 2.15 hereof, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings in any such case imposed by the
United States or any political subdivision thereof, excluding:
(i) in the case of the Administrative Agent and each
Lender, taxes imposed or based on its net income, and franchise or
capital taxes imposed on it, (A) if the Administrative Agent or
such Lender is organized under the laws of the United States or
any political subdivision thereof and (B) if the Administrative
Agent or such Lender is not organized under the laws of the United
States or any political subdivision thereof, and its principal
office or Applicable Lending Office is located in the United
States, and in the case of both (A) and (B), withholding taxes
payable with respect to payments to the Administrative Agent or
such Lender at its principal office or Applicable Lending Office
under laws (including, without limitation, any treaty, ruling,
determination or regulation) in effect on the date hereof, but not
any increase in withholding tax resulting from any subsequent
change in such laws (other than withholding with respect to taxes
imposed or based on its net income or with respect to franchise or
capital taxes), and
(ii) taxes (including withholding taxes) imposed by
reason of the failure of the Administrative Agent or any Lender,
in either case that is organized outside the United States, to
comply with Section 2.16(f) hereof (or the inaccuracy at any time
of the certificates, documents and other evidence delivered
thereunder)
(all such nonexcluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "TAXES"). If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lenders or the Administrative Agent, (x) the sum
payable shall be increased by the amount necessary so that after making all
required deductions (including without limitation deductions applicable to
additional sums payable under this Section 2.16) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (y) the Borrowers shall
make such deductions and (z) the Borrowers shall pay the full amount
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deducted to the relevant tax authority or other authority in accordance with
applicable law.
(b) In addition, the Borrowers agree to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "OTHER TAXES").
(c) The Borrowers will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction (except
as specified in clauses (a)(i) and (ii)) on amounts payable under this
Section 2.16) paid by such Lender or the Administrative Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be made within 30
days from the date such Lender or the Administrative Agent (as the case may be)
makes written demand therefor. If any Lender receives a refund in respect of
any Taxes or Other Taxes for which such Lender has received payment from the
Borrowers hereunder, such Lender shall promptly notify the Borrowers of such
refund and such Lender shall, within 30 days of receipt of a request by the
Borrowers, repay such refund to the Borrowers, provided that the Borrowers, upon
the request of such Lender, agrees to return such refund (plus any penalties,
interest or other charges) to such Lender in the event such Lender is required
to repay such refund.
(d) Within 30 days after the date of any payment of Taxes or
Other Taxes withheld by the Borrowers in respect of any payment to any Lender,
the Borrowers will furnish to the Administrative Agent, at its address referred
to in Section 11.01 hereof, such certificates, receipts and other documents as
may be reasonably required to evidence payment thereof.
(e) Without prejudice to the survival of any other agreement
hereunder, the agreements and obligations contained in this Section 2.16 shall
survive the payment in full of principal and interest hereunder.
(f) Each Lender that is organized outside of the United States
shall deliver to the Borrowers on the date hereof (or, in the case of an
assignee, on the date of the assignment) and from time to time as required for
renewal under applicable law duly completed copies of United States Internal
Revenue Service Form 1001 or 4224 (or any successor or additional forms), as
appropriate, indicating in each case that such Lender is entitled to receive
payments under this Agreement without any deduction or withholding of any United
States federal income taxes. The Administrative Agent (if the Administrative
Agent is an entity organized outside the United States) and each Lender that is
organized outside the United States shall promptly notify the Borrowers and the
Administrative Agent of any change in its Applicable Lending Office and upon
written request of the Borrowers such Lender shall, prior to the immediately
following due date of any payment by the Borrowers or any Guarantor hereunder or
under any other Loan
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Document, deliver to the Borrowers or such Guarantor, as the case may be (with
copies to the Administrative Agent), such certificates, documents or other
evidence, as required by the Code or Treasury Regulations issued pursuant
thereto, including without limitation Internal Revenue Service Form 4224, Form
1001 and any other certificate or statement of exemption required by Treasury
Regulation Section 1.1441-4(a) or Section 1.1441-6(c) or any subsequent version
thereof, properly completed and duly executed by such Lender establishing that
such payment is (i) not subject to withholding under the Code because such
payment is effectively connected with the conduct by such Lender of a trade or
business in the United States or (ii) totally exempt from United States tax
under a provision of an applicable tax treaty. The Borrowers shall be entitled
to rely on such forms in their possession until receipt of any revised or
successor form pursuant to this Section 2.16(f). If the Administrative Agent
or a Lender fails to provide a certificate, document or other evidence required
pursuant to this Section 2.16(f), then (i) the Borrowers shall be entitled to
deduct or withhold on payments to the Administrative Agent or such Lender as a
result of such failure, as required by law, and (ii) the Borrowers shall not be
required to make payments of additional amounts with respect to such withheld
Taxes pursuant to clause (x) of Section 2.16(a) to the extent such withholding
is required solely by reason of the failure of the Administrative Agent or such
Lender to provide the necessary certificate, document or other evidence.
(g) Each Lender and the Administrative Agent shall use
reasonable efforts to avoid or minimize any amounts which might otherwise be
payable pursuant to this subsection 2.16 (including seeking refunds of any
amounts that are reasonably believed not to have been correctly or legally
asserted); PROVIDED, HOWEVER, that such efforts shall not include the taking of
any actions by such Lender or the Administrative Agent that would result in any
tax, costs or other expense to such Lender or the Administrative Agent (other
than a tax, cost or other expense for which such Lender or the Administrative
Agent shall have been reimbursed or indemnified by the Borrowers pursuant to
this Agreement or otherwise) or any action which would or might in the
reasonable opinion of such Lender or the Administrative Agent have an adverse
effect upon its business, operations or financial condition or otherwise be
disadvantageous to such Lender or the Administrative Agent.
SECTION 2.17 ISSUANCE OF LETTERS OF CREDIT. Upon the request
of the Borrowers, and subject to the conditions set forth in Article V hereof
and such other conditions to the opening of Letters of Credit as the
Administrative Agent requires of its customers generally, the Administrative
Agent shall from time to time open standby letters of credit (each, a "LETTER OF
CREDIT") for the account of the Borrowers, the aggregate undrawn amount of all
outstanding Letters of Credit not at any time to exceed $1,000,000; PROVIDED,
HOWEVER, that the Borrowers may not request the Administrative Agent to open a
Letter of Credit if after giving effect thereto (measured by the face amount of
such Letter of Credit) the sum of the aggregate principal amount of the
Revolving Credit Loans outstanding hereunder PLUS the Letter of Credit Usage
would exceed the Total Revolving Credit Commitment. The issuance of each Letter
of Credit shall be made on at least three (3) Business Days' prior written
notice from the Borrowers to the Administrative Agent, at its Domestic Lending
Office, which written
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notice shall be an application for a Letter of Credit on the Administrative
Agent's customary form completed to the satisfaction of the Administrative
Agent, together with the proposed form of the Letter of Credit (which shall be
satisfactory to the Administrative Agent) and such other certificates,
documents and other papers and information as the Administrative Agent may
reasonably request. The Administrative Agent shall not at any time be obligated
to issue any Letter of Credit if such issuance would conflict with, or cause
the Administrative Agent or any Lender to exceed any limits imposed by, any
applicable requirements of law. The expiration date of any standby Letter of
Credit shall not be later than 365 days from the date of issuance thereof, and,
in any event, no Letter of Credit shall have an expiration date later than the
Conversion Date. The Letters of Credit shall be issued with respect of
transactions occurring in the ordinary course of business of the Borrowers.
SECTION 2.18 PAYMENT OF LETTERS OF CREDIT; REIMBURSEMENT. Upon
the issuance of any Letter of Credit, the Administrative Agent shall notify each
Lender of the principal amount, the number, and the expiration date thereof and
the amount of such Lender's participation therein. By the issuance of a Letter
of Credit hereunder and without further action on the part of the Administrative
Agent or the Lenders, each Lender hereby accepts from the Administrative Agent a
participation (which participation shall be nonrecourse to the Administrative
Agent) in such Letter of Credit equal to such Lender's PRO RATA (based on its
Revolving Credit Commitment) share of such Letter of Credit, effective upon the
issuance of such Letter of Credit. Each Lender hereby absolutely and
unconditionally assumes, as primary obligor and not as a surety, and agrees to
pay and discharge, and to indemnify and hold the Administrative Agent harmless
from liability in respect of, such Lender's PRO RATA share of the amount of any
drawing under a Letter of Credit. Each Lender acknowledges and agrees that its
obligation to acquire participations in each Letter of Credit issued by the
Administrative Agent and its obligation to make the payments specified herein,
and the right of the Administrative Agent to receive the same, in the manner
specified herein, are absolute and unconditional and shall not be affected by
any circumstance whatsoever, including, without limitation, the occurrence and
continuance of a Default or an Event of Default hereunder, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever. The Administrative Agent shall review, on behalf of the Lenders,
each draft and any accompanying documents presented under a Letter of Credit and
shall notify each Lender of any such presentment. Promptly after it shall have
ascertained that any draft and any accompanying documents presented under such
Letter of Credit appear on their face to be in substantial conformity with the
terms and conditions of the Letter of Credit, the Administrative Agent shall
give telephonic or facsimile notice to the Lenders and the Borrowers of the
receipt and amount of such draft and the date on which payment thereon will be
made, and the Lenders shall, by 11:00 A.M., Los Angeles, California time on the
date such payment is to be made, pay the amounts required to the Administrative
Agent at an address or location designated by the Administrative Agent in
immediately available funds, and the Administrative Agent, not later than
3:00 P.M. Los Angeles, California time on such day, shall make the appropriate
payment to the beneficiary of such Letter of Credit. If in accordance with the
prior sentence the Lenders shall pay any draft presented under a Letter of
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Credit, then the Administrative Agent, on behalf of the Lenders, shall charge
the general deposit account of the Borrowers with the Administrative Agent for
the amount thereof, together with the Administrative Agent's customary
overdraft fee in the event the funds available in such account shall not be
sufficient to reimburse the Lenders for such payment and the Borrowers shall
not otherwise have discharged such reimbursement obligation by 11:00 A.M., Los
Angeles, California time, on the date of such payment. If the Lenders have not
been reimbursed with respect to such drawing as provided above, the Borrowers
shall pay to the Administrative Agent, for the account of the Lenders, the
amount of the drawing together with interest on such amount at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the rate applicable to Alternate Base Loans hereunder PLUS two
percent (2%), payable on demand. The obligations of the Borrowers under this
Section 2.18 to reimburse the Lenders and the Administrative Agent for all
drawings under Letters of Credit shall be joint and several, absolute,
unconditional and irrevocable and shall be satisfied strictly in accordance
with their terms, irrespective of:
(a) any lack of validity or enforceability of any Letter of
Credit;
(b) the existence of any claim, setoff, defense or other right
which the Borrowers or any other person may at any time have against the
beneficiary under any Letter of Credit, the Administrative Agent or any
Lender (other than the defense of payment in accordance with the terms of
this Agreement or a defense based on the gross negligence or willful
misconduct of the Administrative Agent or any Lender) or any other person
in connection with this Agreement or any other transaction;
(c) any draft or other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(d) payment by the Administrative Agent or any Lender under any
Letter of Credit against presentation of a draft or other document which
does not comply with the terms of such Letter of Credit; and
(e) any other circumstance or event whatsoever, whether or not
similar to any of the foregoing.
It is understood that in making any payment under any Letter of
Credit (x) the Administrative Agent's and any Lender's exclusive reliance on the
documents presented to it under such Letter of Credit as to any and all matters
set forth therein, including, without limitation, reliance on the amount of any
draft presented under such Letter of Credit, whether or not the amount due to
the beneficiary equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect, if such document on its face appears to be in order, and whether or not
any other statement or any other document presented pursuant to such Letter of
Credit proves to be forged or invalid or any statement therein proves to be
inaccurate or untrue in any respect whatsoever and (y) any noncompliance
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in any immaterial respect of the documents presented under such Letter of
Credit with the terms thereof shall, in each case, not be deemed willful
misconduct or gross negligence of the Administrative Agent or any Lender.
SECTION 2.19 ADMINISTRATIVE AGENT'S ACTIONS WITH RESPECT TO
LETTERS OF CREDIT. Any Letter of Credit may, in the discretion of the
Administrative Agent or its correspondents, be interpreted by them (to the
extent not inconsistent with such Letter of Credit) in accordance with the
Uniform Customs and Practice for Documentary Credits of the International
Chamber of Commerce, as adopted or amended from time to time, or any other
rules, regulations and customs prevailing at the place where any Letter of
Credit is available or the drafts are drawn or negotiated. The Administrative
Agent and its correspondents may accept and act upon the name, signature, or act
of any party purporting to be the executor, administrator, receiver, trustee in
bankruptcy, or other legal representative of any party designated in any Letter
of Credit in the place of the name, signature, or act of such party.
SECTION 2.20 LETTER OF CREDIT FEES. The Borrowers agree to pay
(i) to the Administrative Agent for the account of each Lender a participation
fee with respect to its participations in Letters of Credit, which shall accrue
at a rate per annum equal to the margin over the Adjusted LIBO Rate applicable
to interest on Eurodollar Loans on the average daily amount of such Lender's PRO
RATA share of the Letter of Credit Usage (excluding any portion attributable to
unreimbursed drawings) during the period from and including the Closing Date to
but excluding the later of the date on which such Lender's Revolving Credit
Commitment terminates and the date on which such Lender ceases to have any share
of the Letter of Credit Usage, and (ii) an issuance fee and other related fees
charged by the Administrative Agent for transactions of this nature as set forth
on SCHEDULE 2.20 hereto (as such Schedule may be amended from time to time)
payable to the Administrative Agent for its own account at its Domestic Lending
Office in immediately available funds. Participation fees and other fees
accrued through and including the last day of September, December, March and
June of each year shall be payable on the first Business Day following each such
period, commencing July 1, 1999; PROVIDED that all such fees shall be payable on
the date on which the Revolving Credit Commitment terminates and any such fees
accruing after the date on which the Revolving Credit Commitment terminates
shall be payable on demand. Any other fees payable to the Administrative Agent
pursuant to this paragraph shall be payable within 10 days after demand. All
participation fees and fronting fees shall be computed on the basis of a year of
360 days and shall be payable for the actual number of days elapsed (including
the first day but excluding the last day).
III. COLLATERAL SECURITY
SECTION 3.01 SECURITY DOCUMENTS. The Obligations shall be
secured by the Collateral described in the Security Documents and are entitled
to the benefits thereof. The Borrowers shall duly execute and deliver the
Security Documents, all consents of third parties necessary to permit the
effective granting of the Liens
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created in such agreements, financing statements pursuant to the Uniform
Commercial Code and other documents, all in form and substance satisfactory to
the Administrative Agent, as may be reasonably required by the Administrative
Agent to grant to the Lenders a valid, perfected and enforceable first priority
Lien on and security interest in (subject only to the Liens permitted under
Section 7.01 hereof) the Collateral.
SECTION 3.02 FILING AND RECORDING. The Borrowers shall, at
their sole cost and expense, cause all instruments and documents given as
evidence of security pursuant to this Agreement to be duly recorded and/or filed
or otherwise perfected in all places necessary, in the opinion of the
Administrative Agent, and take such other actions as the Administrative Agent
may reasonably request, in order to perfect and protect the Liens of the
Administrative Agent and Lenders in the Collateral. The Borrowers, to the
extent permitted by law, hereby authorize the Administrative Agent to file any
financing statement in respect of any Lien created pursuant to the Security
Documents which may at any time be required or which, in the opinion of the
Administrative Agent, may at any time be desirable although the same may have
been executed only by the Administrative Agent or, at the option of the
Administrative Agent, to sign such financing statement on behalf of the
Borrowers and file the same, and the Borrowers hereby irrevocably designate the
Administrative Agent, its agents, representatives and designees as its agent and
attorney-in-fact for this purpose. In the event that any re-recording or
refiling thereof (or the filing of any statements of continuation or assignment
of any financing statement) is required to protect and preserve such Lien, the
Borrowers shall, at the Borrowers' cost and expense, cause the same to be
recorded and/or refiled at the time and in the manner requested by the
Administrative Agent.
IV. REPRESENTATIONS AND WARRANTIES
Each of the Borrowers and each of the Guarantors jointly and
severally represents and warrants to each of the Lenders and each of the Agents
that both before and after giving effect to the consummation of the
Transactions:
SECTION 4.01 ORGANIZATION, LEGAL EXISTENCE. Unless otherwise
noted on Schedule 4.01 annexed hereto, each Loan Party is a legal entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization, has the requisite power and authority to own
its property and assets and to carry on its business as now conducted and as
currently proposed to be conducted and is qualified to do business in every
jurisdiction where such qualification is required, except where the failure to
so qualify would not have a Material Adverse Effect (all such jurisdictions
being listed in SCHEDULE 4.01 annexed hereto). Each Loan Party has the
corporate power to execute, deliver and perform its obligations under this
Agreement and the other Loan Documents to which it is a party, and to borrow
hereunder and to execute and deliver the Notes.
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SECTION 4.02 AUTHORIZATION. The execution, delivery and
performance by each of the Loan Parties of this Agreement and each of the
other Loan Documents to which it is a party, the borrowings hereunder by the
Borrowers, the execution and delivery by the Borrowers of the Notes and the
grant of security interests in the Collateral created by the Security
Documents (collectively, the "TRANSACTIONS") (a) have been duly authorized by
all requisite corporate and, if required, stockholder action and (b) will not
(i) violate (A) any provision of law, statute, rule or regulation or the
certificate or articles of incorporation or other applicable constitutive
documents or the by-laws of any Loan Party, or their respective subsidiaries,
as the case may be, (B) any order of any court, or any rule, regulation or
order of any other agency of government binding upon any Loan Party, or (C)
any provisions of any material indenture, agreement or other instrument to
which any Loan Party, or their respective subsidiaries, or any of their
respective properties or assets are or may be bound, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of
time or both) a default under any material indenture, agreement or other
instrument referred to in (b)(i)(C) above or (iii) result in the creation or
imposition of any Lien of any nature whatsoever (other than in favor of the
Administrative Agent, for its own benefit and for the benefit of the
Lenders, as contemplated by this Agreement and the Security Documents) upon
any property or assets of any Loan Party.
SECTION 4.03 GOVERNMENTAL APPROVALS. No registration or
filing (other than the filings necessary to perfect the Liens created by the
Security Documents) with consent or approval of, or other action by, any
Federal, state or other governmental agency, authority or regulatory body is
or will be required in connection with the Transactions, other than any which
have been made or obtained.
SECTION 4.04 BINDING EFFECT. This Agreement and each of the
other Loan Documents executed and delivered by any of the Loan Parties
constitutes a legal, valid and binding obligation of such person, and is
enforceable in accordance with its terms. Each of the Notes, when duly
executed and delivered by the Borrowers, will constitute a legal, valid and
binding obligation of the Borrowers enforceable in accordance with its terms.
SECTION 4.05 MATERIAL ADVERSE CHANGE. Except as set forth
in SCHEDULE 4.05 annexed hereto, there has been no material adverse change in
the business, assets, operations or financial condition of any of the
Borrowers or any of their subsidiaries since December 31, 1998.
SECTION 4.06 LITIGATION; COMPLIANCE WITH LAWS; ETC. (a)
Except as set forth in SCHEDULE 4.06(a) annexed hereto, there are not any
actions, suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory authority now
pending or, to the knowledge of any Responsible Officer of any Loan Party,
threatened against or affecting any of the Loan Parties or the businesses,
assets or rights of any of the Loan Parties (i) which involve any of the
Transactions or (ii) as to which it is probable (within the meaning of
Statement of Financial Accounting Standards No. 5) that there will be an
adverse
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determination and which, if adversely determined, would, individually or in
the aggregate, materially impair the ability of any of the Loan Parties to
conduct business substantially as now conducted, or have a Material Adverse
Effect.
(b) Except as set forth in SCHEDULE 4.06(b) annexed hereto,
no Loan Party is in violation of any law, or in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court or
governmental agency or instrumentality, except where such violation or
default would not have a Material Adverse Effect.
SECTION 4.07 FINANCIAL STATEMENTS. (a) The Borrowers have
heretofore furnished to the Administrative Agent the financial statements of
Holdings for the three month period ended March 31, 1999. Such financial
statements present fairly the Consolidated financial condition and results of
operations of Holdings and its subsidiaries as of the dates and for the
periods indicated, and such balance sheets and the notes thereto disclose all
material liabilities, direct or contingent, of Holdings and its subsidiaries,
as of the dates thereof.
(b) The Borrowers have heretofore furnished to the
Administrative Agent updated quarterly, through December 31, 1999, and
annually thereafter through the December 31, 2001, projected income
statements, balance sheets and cash flows of Holdings on a Consolidated
basis, together with a schedule confirming the ability of the Borrowers to
consummate the Transactions and demonstrating prospective compliance with all
financial covenants contained in this Agreement, such projections disclosing
all assumptions made by Borrowers in formulating such projections and giving
effect to the Transactions. The projections are based upon reasonable
estimates and assumptions, all of which are reasonable in light of the
conditions which existed at the time the projections were made, have been
prepared on the basis of the assumptions stated therein, and reflect as of
the Closing Date the reasonable estimate of the Borrowers of the results of
operations and other information projected therein.
(c) The Borrowers have heretofore furnished to the
Administrative Agent a Consolidated pro forma balance sheet of Holdings and
which sets forth information before and after giving effect to the
Transactions.
(d) The financial statements referred to in this Section
4.07 have been prepared in accordance with GAAP, in each case subject to
normal year-end audit adjustments and, in the case of the financial
statements delivered pursuant to clauses (b) and (c) above, subject to the
absence of footnotes.
SECTION 4.08 FEDERAL RESERVE REGULATIONS. (a) No Loan
Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock.
(b) No part of the proceeds of the Loans will be used,
whether directly or indirectly, and whether immediately, incidentally or
ultimately, (i) to purchase or carry Margin Stock or to extend credit to
others for the purpose of purchasing or carrying
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Margin Stock or to refund indebtedness originally incurred for such purpose,
or (ii) for any purpose which entails a violation of, or which is
inconsistent with, the provisions of the Regulations of the Board, including,
without limitation, Regulation T, U or X thereof. If requested by any
Lender, the Borrowers or any subsidiary thereof shall furnish to such Lender
a statement on Federal Reserve Form U-1 referred to in said Regulation U.
SECTION 4.09 TAXES. Each Loan Party has filed or caused to
be filed all Federal, state, local and foreign tax returns which are required
to be filed by it, on or prior to the date hereof, other than tax returns in
respect of taxes that (x) are not franchise, capital or income taxes, (y) in
the aggregate are not material and (z) would not, if unpaid, result in the
imposition of any material Lien on any property or assets of any Loan Party.
Each Loan Party has paid or caused to be paid all taxes shown to be due and
payable on such filed returns or on any assessments received by it, other
than (i) any taxes or assessments the validity of which such Loan Party is
contesting in good faith by appropriate proceedings, and with respect to
which such Loan Party shall, to the extent required by GAAP have set aside on
its books adequate reserves and (ii) taxes other than income, capital or
franchise taxes that in the aggregate are not material and which would not,
if unpaid, result in the imposition of any material Lien on any property or
assets of any Loan Party. No Federal income tax returns of any Loan Party
have been audited by the United States Internal Revenue Service and no Loan
Party has as of the date hereof requested or been granted any extension of
time to file any Federal, state, local or foreign tax return. No Loan Party
is party to or has any obligation under any tax sharing agreement.
SECTION 4.10 EMPLOYEE BENEFIT PLANS. With respect to the
provisions of ERISA, except as set forth on SCHEDULE 4.10 hereto:
(i) No Reportable Event has occurred or is continuing with
respect to any Pension Plan.
(ii) No prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code) has occurred with respect to any
Plan subject to Part 4 of Subtitle B of Title I of ERISA.
(iii) None of the Borrowers or any ERISA Affiliate is now, or has
been during the preceding five years, obligated to contribute to a Pension Plan
or a Multiemployer Plan. None of the Borrowers or any ERISA Affiliate has (A)
ceased operations at a facility so as to become subject to the provisions of
Section 4062(e) of ERISA, (B) withdrawn as a substantial employer so as to
become subject to the provisions of Section 4063 of ERISA, (C) ceased making
contributions to any Pension Plan subject to the provisions of Section 4064(a)
of ERISA to which the Borrowers, any subsidiary or any ERISA Affiliate made
contributions, (D) incurred or caused to occur a "complete withdrawal" (within
the meaning of Section 4203 of ERISA) or a "partial withdrawal" (within the
meaning of Section 4205 of ERISA) from a Multiemployer Plan that is a Pension
Plan so as to incur withdrawal liability under Section 4201 of ERISA (without
regard to subsequent reduction or waiver of such liability under Section 4207 or
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4208 of ERISA), or (E) been a party to any transaction or agreement under
which the provisions of Section 4204 of ERISA were applicable.
(iv) No notice of intent to terminate a Pension Plan has been
filed, nor has any Plan been terminated pursuant to the provisions of Section
4041(e) of ERISA.
(v) The PBGC has not instituted proceedings to terminate (or
appoint a trustee to administer) a Pension Plan and no event has occurred or
condition exists which might constitute grounds under the provisions of
Section 4042 of ERISA for the termination of (or the appointment of a trustee
to administer) any such Plan.
(vi) With respect to each Pension Plan that is subject to the
provisions of Title I, Subtitle B, Part 3 of ERISA, the funding method used
in connection with such Plan is acceptable under ERISA, and the actuarial
assumptions and methods used in connection with funding such Pension Plan
satisfy the requirements of Section 302 of ERISA. The assets of each such
Pension Plan (other than the Multiemployer Plans) are at least equal to the
present value of the greater of (i) accrued benefits (both vested and
non-vested) under such Plan, or (ii) "benefit liabilities" (within the
meaning of Section 4001(a)(16) of ERISA) under such Plan, in each case as of
the latest actuarial valuation date for such Plan (determined in accordance
with the same actuarial assumptions and methods as those used by the Plan's
actuary in its valuation of such Plan as of such valuation date). No such
Pension Plan has incurred any "accumulated funding deficiency" (as defined in
Section 412 of the Code), whether or not waived.
(vii) There are no actions, suits or claims pending (other
than routine claims for benefits) or, to the knowledge of the Responsible
Officers of any Loan Party, which could reasonably be expected to be
asserted, against any Plan or the assets of any such Plan. No civil or
criminal action brought pursuant to the provisions of Title I, Subtitle B,
Part 5 of ERISA is pending or, to the knowledge of the Responsible Officers
of any Loan Party threatened against any fiduciary or any Plan. None of the
Plans or any fiduciary thereof (in its capacity as such) has been the direct
or indirect subject of any audit, investigation or examination by any
governmental or quasi-governmental agency.
(viii) All of the Plans comply currently, and have complied in
the past, both as to form and operation, with their terms and with the
provisions of ERISA and the Code, and all other applicable laws, rules and
regulations; all necessary governmental approvals for the Plans have been
obtained and a favorable determination as to the qualification under Section
401(a) of the Code of each of the Plans which is an employee pension benefit
plan (within the meaning of Section 3(2) of ERISA) has been made by the
Internal Revenue Service and a recognition of exemption from federal income
taxation under Section 501(c) of the Code of each of the funded employee
welfare benefit plans (within the meaning of Section 3(1) of ERISA) has been
made by the Internal Revenue Service, and nothing has occurred since the date
of each such determination or recognition letter that would adversely affect
such qualification.
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SECTION 4.11 NO MATERIAL MISSTATEMENTS. No information,
report, financial statement, exhibit or schedule prepared or furnished by or
on behalf of any Loan Party to the Administrative Agent or any Lender in
connection with any of the Transactions or this Agreement, the Security
Documents, the Notes or any other Loan Documents or included therein
contained or contains any material misstatement of fact or omitted or omits
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
SECTION 4.12 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING
COMPANY ACT. No Loan Party is an "investment company" as defined in, or is
otherwise subject to regulation under, the Investment Company Act of 1940.
No Loan Party is a "holding company" as that term is defined in or is
otherwise subject to regulation under, the Public Utility Holding Company Act
of 1935.
SECTION 4.13 SECURITY INTEREST. Each of the Security
Documents creates and grants to the Administrative Agent, for its own
benefit and for the benefit of the Lenders, a legal, valid and perfected
first (except as permitted pursuant to Section 7.01 hereof) priority security
interest in the collateral identified therein. Such collateral or property
is not subject to any other Liens whatsoever, except Liens permitted by
Section 7.01 hereof.
SECTION 4.14 USE OF PROCEEDS. All proceeds of each
borrowing under the Total Revolving Credit Commitment on the Closing Date, if
any, shall be used to refinance existing Indebtedness of DCA under its credit
facility with NationsBank, N.A.. All proceeds of each subsequent borrowing
under the Total Revolving Credit Commitment after the Closing Date shall be
used to finance the consideration required for Permitted Acquisitions and to
finance Permitted De Novo Capital Expenditures as well as other capital
improvements and to provide for working capital requirements and for general
corporate purposes of the Borrowers.
SECTION 4.15 SUBSIDIARIES. As of the Closing Date, SCHEDULE
4.15 annexed hereto sets forth each subsidiary of each Borrower, its
jurisdiction of incorporation, its capitalization and ownership of capital
stock of each subsidiary.
SECTION 4.16 TITLE TO PROPERTIES; POSSESSION UNDER LEASES;
TRADEMARKS. (a) Each Borrower and each of their subsidiaries has good and
marketable title to, or valid leasehold interest in, all of its respective
properties and assets shown on the most recent balance sheet referred to in
Section 4.07(a) hereof and all assets and properties acquired since the date
of such balance sheet, except for such properties as are no longer used or
useful in the conduct of its business or as have been disposed of in the
ordinary course of business, and except for minor defects in title that do
not materially interfere with the ability of any of the Borrowers or any
subsidiary thereof to conduct its business as now conducted. All such assets
and properties are free and clear of all Liens other than those permitted by
Section 7.01 hereof.
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(b) Each Borrower and each of their subsidiaries has
complied with all obligations under all leases to which it is a party and
under which it is in occupancy, except where the failure to so comply would
not have a Material Adverse Effect, and all such leases are in full force and
effect and each Borrower and each of their subsidiaries enjoys peaceful and
undisturbed possession under all such leases.
(c) Each Borrower and each of their subsidiaries owns or
controls all material trademarks, trademark rights, trade names, trade name
rights, copyrights, patents, patent rights and licenses which are necessary
for the conduct of the business of such Borrowers and such subsidiary. No
Borrower or subsidiary thereof is infringing upon or otherwise acting
adversely to any of such trademarks, trademark rights, trade names, trade
name rights, copyrights, patent rights or licenses owned by any other person
or persons. There is no claim or action by any such other person pending, or
to the knowledge of any Responsible Officer of any Borrower or any subsidiary
thereof, threatened, against any Borrowers or any subsidiary thereof with
respect to any of the rights or property referred to in this Section 4.16(c).
SECTION 4.17 SOLVENCY. (a) The fair salable value of the
assets of each Borrower and its Consolidated subsidiaries is not less than
the amount that will be required to be paid on or in respect of the probable
liability on the existing debts and other liabilities (including contingent
liabilities) of such Borrower and its Consolidated subsidiaries, as they
become absolute and mature. For the purposes hereof, the "fair saleable
value" of assets shall mean the price a buyer is willing to pay for such
assets in an arm's-length transaction.
(b) The assets of each Borrower and its Consolidated
subsidiaries do not constitute unreasonably small capital for such Borrowers
and their Consolidated subsidiaries to carry out their business as now
conducted and as proposed to be conducted including the capital needs of such
Borrower and its Consolidated subsidiaries, taking into account the
particular capital requirements of the business conducted by such Borrower
and its Consolidated subsidiaries and projected capital requirements and
capital availability thereof.
(c) No Borrower or any subsidiary thereof intends to incur
debts beyond its ability to pay such debts as they mature (taking into
account the timing and amounts of cash to be received by such Borrower and
such subsidiary, and of amounts to be payable on or in respect of debt of
such Borrowers and such subsidiary). The cash flow of each Borrower and its
Consolidated subsidiaries, after taking into account all anticipated uses of
the cash of such Borrower and its Consolidated subsidiaries, will at all
times be sufficient to pay all such amounts on or in respect of debt of such
Borrower and its Consolidated subsidiaries when such amounts are required to
be paid.
(d) No Borrower or any subsidiary thereof believes that
final judgments against it in actions for money damages presently pending
will be rendered at a time when, or in an amount such that, it will be unable
to satisfy any such judgments promptly in accordance with their terms (taking
into account the maximum reasonable
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amount of such judgments in any such actions and the earliest reasonable time
at which such judgments might be rendered). The cash flow of such Borrower
and its Consolidated subsidiaries, after taking into account all other
anticipated uses of the cash of such Borrower and its Consolidated
subsidiaries (including the payments on or in respect of debt referred to in
paragraph (c) of this Section), will at all times be sufficient to pay all
such judgments promptly in accordance with their terms.
SECTION 4.18 PERMITS, ETC. Each Loan Party possesses all
licenses, permits, approvals and consents, including, without limitation, all
environmental, health and safety licenses, permits, approvals and consents
(collectively, "PERMITS") of all Federal, state and local governmental
authorities as required to conduct properly its business, each such Permit is
and will be in full force and effect, each Loan Party is in compliance in all
material respects with all such Permits, and no event (including, without
limitation, any violation of any law, rule or regulation) has occurred which
allows the revocation or termination of any such Permit or any restriction
thereon.
SECTION 4.19 COMPLIANCE WITH ENVIRONMENTAL LAWS. Except as
disclosed in SCHEDULE 4.19 hereto: (i) the operations of the Loan Parties
comply in all material respects with all applicable Environmental Laws; (ii)
the Loan Parties and all of their present facilities or operations, as well
as to the knowledge of the Responsible Officers of the Borrowers and their
subsidiaries their past facilities or operations, are not subject to any
judicial proceeding or administrative proceeding or any outstanding written
order or agreement with any governmental authority or private party
respecting (a) any Environmental Law, (b) any Remedial Work, or (c) any
Environmental Claims arising from the Release of a Contaminant into the
environment; (iii) to the best of the knowledge of the Responsible Officers
of the Loan Parties, none of their operations is the subject of any Federal
or state investigation evaluating whether any Remedial Work is needed to
respond to a Release of any Contaminant into the environment; (iv) no Loan
Party nor, to the knowledge of the Responsible Officers of the Loan Parties,
any predecessor of any Loan Party has filed any notice under any
Environmental Law indicating past or present treatment, storage, or disposal
of a Hazardous Material or reporting a spill or Release of a Contaminant into
the environment; (v) to the best of the knowledge of the Responsible Officers
of the Loan Parties, no Loan Party has any contingent liability in connection
with any Release of any Contaminant into the environment; (vi) none of the
operations of the Loan Parties involve the generation, transportation,
treatment or disposal of Hazardous Materials, except for Hazardous Materials
used in the ordinary course of business of the Loan Parties in accordance in
all material respects with Environmental Laws; (vii) no Loan Party has
disposed of any Contaminant by placing it in or on the ground or waters of
any premises owned, leased or used by any of them and to the knowledge of the
Loan Parties neither has any lessee, prior owner, or other person; (viii) no
underground storage tanks or surface impoundments are on any property of the
Loan Parties; and (ix) no Lien in favor of any governmental authority for (A)
any liability under any Environmental Law or regulations, or (B) damages
arising from or costs incurred by such governmental authority in
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response to a Release of a Contaminant into the environment, has been filed
or attached to the property of the Loan Parties.
SECTION 4.20 NO CHANGE IN CREDIT CRITERIA OR COLLECTION
POLICIES. There has been no material change in credit criteria or collection
policies concerning account receivables of any of the Borrowers since
December 31, 1998. All account receivables are valid, binding and
enforceable obligations of account debtors, except to the extent reserves are
taken in accordance with GAAP with respect to contractual adjustments for
account receivables.
SECTION 4.21 EMPLOYEE MATTERS. Except as disclosed in
SCHEDULE 4.21 hereto, (a) no Loan Party nor any of such person's employees
are subject to any collective bargaining agreement, (b) to the knowledge on
the date hereof of a Responsible Officer the Loan Parties, no petition for
certification or union election is pending with respect to the employees of
any Loan Party and no union or collective bargaining unit has sought such
certification or recognition with respect to the employees of any Loan Party
and (c) there are no strikes, slowdowns, work stoppages or controversies
pending or, to the knowledge of a Responsible Officer of the Loan Parties,
threatened between any Loan Party and their respective employees, other than
employee grievances arising in the ordinary course of business none of which
could have, either individually or in the aggregate, a Material Adverse
Effect.
SECTION 4.22 YEAR 2000. To the knowledge of the Responsible
Officers of the Borrowers, the cost to the Borrowers of reprogramming and
testing of the Borrowers' and their subsidiaries' computer systems and
related equipment to permit proper functioning in and following the year 2000
(including, without limitation, reprogramming errors) will not reasonably be
expected to result in a Material Adverse Effect.
SECTION 4.23 MANAGEMENT AGREEMENTS. Each of the Management
Agreements (other than the Administrative Services Agreements listed on
SCHEDULE III annexed hereto) entered into by any Borrower or any Guarantor
which is a direct subsidiary of a Borrower prior to the Closing Date either
satisfies the criteria set forth on SCHEDULE I annexed hereto or is
substantially in the form attached hereto as EXHIBIT J-1, J-2 or J-3.
V. CONDITIONS OF CREDIT EVENTS
The obligation of each Lender to make Loans and extend other
Credits hereunder shall be subject to the following conditions precedent:
SECTION 5.01 ALL CREDIT EVENTS. On each date on which a
Credit Event is to occur:
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(a) The Administrative Agent shall have received a notice of
borrowing as required by Section 2.03 hereof or a request for the
issuance of a Letter of Credit pursuant to Section 2.17 hereof.
(b) The representations and warranties set forth in Article
IV hereof and in any documents delivered herewith, including, without
limitation, the Loan Documents, shall be true and correct in all
material respects with the same effect as though made on and as of
such date (except insofar as such representations and warranties
relate expressly to an earlier date).
(c) Each of the Borrowers shall be in compliance with all
the terms and provisions contained herein on its part to be observed
or performed and at the time of and immediately after such Credit
Event no Default or Event of Default shall have occurred and be
continuing.
(d) The Agent shall have received a certificate signed by
the Financial Officer of each of the Borrowers (i) as to the
compliance with (b) and (c) above and (ii) with respect to each
Revolving Credit Loan and each Letter of Credit, demonstrating that
after giving effect thereto the sum of the aggregate principal amount
of Revolving Credit Loans outstanding at such time PLUS the Letter of
Credit Usage outstanding at such time shall not exceed the Total
Revolving Credit Commitment.
SECTION 5.02 FIRST BORROWING. The obligations of the
Lenders in respect of the first Credit Event hereunder is subject to the
following additional conditions precedent:
(a) The Lenders shall have received the favorable written
opinion of counsel for the Borrowers and each of the Guarantors and
Grantors, substantially in the form of EXHIBIT C hereto, dated the
Closing Date, addressed to the Lenders and satisfactory to the
Administrative Agent.
(b) The Lenders shall have received (i) a copy of the
certificate or articles of incorporation or constitutive documents, in
each case as amended to date, of each of the Borrowers, the Grantors
and the Guarantors, certified as of a recent date by the Secretary of
State or other appropriate official of the state of its organization,
and a certificate as to the good standing of each from such Secretary
of State or other official and from the Secretary of State or other
official of each state in which it is qualified to do business, in
each case dated as of a recent date; (ii) a certificate of the
Secretary of each Borrower, Grantor and Guarantor, dated the Closing
Date and certifying (A) that attached thereto is a true and complete
copy of such person's By-laws as in effect on the date of such
certificate and at all times since a date prior to the date of the
resolution described in item (B) below, (B) that attached thereto is a
true and complete copy of a resolution adopted by such person's Board
of Directors authorizing the execution, delivery and performance of
this Agreement, the Security Documents,
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the Notes, the other Loan Documents and the Credit Events hereunder,
as applicable, and that such resolution has not been modified,
rescinded or amended and is in full force and effect, (C) that such
person's certificate or articles of incorporation or constitutive
documents has not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant
to (i) above, and (D) as to the incumbency and specimen signature of
each of such person's officers executing this Agreement, the Notes,
each Security Document or any other Loan Document delivered in
connection herewith or therewith, as applicable; (iii) a certificate
of another of such person's officers as to incumbency and signature of
its Secretary; and (iv) such other documents as the Administrative
Agent or any Lender may reasonably request.
(c) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by the Financial
Officer of each Borrower, confirming compliance with the conditions
precedent set forth in paragraphs (b) and (c) of Section 5.01 hereof
and the conditions set forth in this Section 5.02.
(d) Each Lender shall have received its Revolving Credit
Note (which Note shall replace the "Revolving Credit Note" issued in
connection with the Original Credit Agreement, such replaced Notes to
be no longer of any force or effect and to be returned to the
Borrowers by the Lenders holding same, marked "canceled" promptly
after the Closing Date), each duly executed by the Borrowers, payable
to its order and otherwise complying with the provisions of Section
2.04 hereof.
(e) The Administrative Agent shall have received (i) such
amendments to, or confirmations of (as requested by the Agents), the
Security Documents existing on the Closing Date, (ii) such additional
Security Documents (as requested by the Agents, including, without
limitation, an Assignment of Contract with respect to each Management
Agreement and Shares Acquisition Agreement in effect on the Closing
Date (to the extent not previously delivered to the Administrative
Agent)), (iii) to the extent not previously delivered to the
Administrative Agent, certificates evidencing the Pledged Stock,
together with undated stock powers executed in blank, each duly
executed by the applicable Grantors and (iv) confirmations of the
Guarantees, including, without limitation, the Holdings Guarantee.
(f) The Syndication Agent shall have received certified
copies of requests for copies or information on Form UCC-11 or
certificates satisfactory to the Syndication Agent of a UCC Reporter
Service, listing all effective financing statements which name as
debtor DCA, or any Guarantor or any Grantor, in each case, not in
existence as of the Original Closing Date, and which are filed in the
appropriate offices in the States in which are located the chief
executive office and other operating offices of such person, together
with copies of such financing statements. With respect to any Liens
not permitted pursuant to
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Section 7.01 hereof, the Syndication Agent shall have received
termination statements in form and substance satisfactory to it.
(g) Each document (including, without limitation, each
Uniform Commercial Code financing statement) required by law or
requested by the Syndication Agent to be filed, registered or recorded
in order to create in favor of the Administrative Agent for its own
benefit and for the benefit of the Lenders a first priority perfected
security interest in the Collateral acquired after the Original
Closing Date shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation
thereof is so required or requested. The Syndication Agent shall have
received an acknowledgment copy, or other evidence satisfactory to it,
of each such filing, registration or recordation.
(h) The Syndication Agent shall have received the results of
a search of tax and other Liens, and judgments and of the Uniform
Commercial Code filings made with respect to DCA and each Grantor (not
in existence as of the Original Closing Date) in the jurisdictions in
which DCA and such Grantors are doing business and/or in which any
Collateral is located, and in which Uniform Commercial Code filings
have been made against DCA, each Guarantor (not in existence as of the
Original Closing Date) and each Grantor (not in existence as of the
Original Closing Date) pursuant to paragraph (g) above.
(i) The Lenders and the Agents shall have received and
determined to be in form and substance satisfactory to them:
(i) a copy of a field examination of DCA's books
and records;
(ii) evidence of the compliance by the Borrowers
with Section 6.03 hereof;
(iii) the financial statements described in Section
4.07 hereof;
(iv) evidence that the Transactions are in
compliance with all applicable laws and regulations;
(v) evidence of payment of all fees owed to the
Administrative Agent and Syndication Agent and the Lenders by
the Borrowers under this Agreement, the Letter of Interest or
otherwise;
(vi) evidence that all requisite third party
consents (including, without limitation, consents with respect
to each of the Borrowers and each of the Grantors and
Guarantors) to the Transactions have been received;
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(vii) evidence that there has been no material
adverse change in the business, assets, operations or financial
condition of the Borrowers and subsidiaries since December 31,
1998;
(viii) evidence of the repayment of all amounts owing
under or in connection with, and the termination of, all
security interest filings relating to, the exiting credit
facility of DCA with NationsBank, N.A.;
(ix) evidence that all dental practices affiliated
with any of the Borrowers have entered into a Management
Agreement (and a Shares Acquisition Agreement if the Management
Agreement is in the form of EXHIBIT J-1 annexed hereto) (and
except for (i) Serra Park Dental Group, Robert D. Rutner,
D.D.S. & Associates, Dental Corporation, (ii) Douglas Maxson
D.D.S., Dental Corporation and (iii) Gary L. Dougan D.D.S.,
Dental Corporation an Assignment of Contract has been executed
and delivered in connection thereto);
(x) evidence that there are no actions, suits or
proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory
authority now pending or threatened against or affecting any
Borrowers or any subsidiary thereof or any of their respective
businesses, assets or rights which involve any of the
Transactions; and
(xi) evidence that all of the Uniform Commercial
Code financing statements described on Schedule II have been
properly executed and recorded.
(j) Each Agent and the Lenders shall have had the
opportunity, if they so choose, to examine the books of account and
other records and files of the Borrowers, subsidiaries of the
Borrowers, the Grantors and the Guarantors and to make copies thereof,
and to conduct customer checkings and checkings with suppliers,
insurance companies and dentists affiliated with the Borrowers, and
the results of such examination and checkings shall have been
satisfactory to the Agents and Lenders in all respects.
(k) Each Agent shall have received and had the opportunity
to review and determine to be in form and substance satisfactory to it:
(i) copies of all real property lease agreements
entered into by any of the Borrowers and their subsidiaries (to
the extent not delivered on the Original Closing Date);
(ii) copies of all loan agreements, notes and other
documentation evidencing Indebtedness for borrowed money of any
of the
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Borrowers or their subsidiaries which are not to be repaid on
the Closing Date;
(iii) copies of all Management Agreements, Share
Acquisition Agreements, Purchase Agreements and earn-out
agreements to which any Loan Party is a party as of the Closing
Date (to the extent not delivered on the Original Closing
Date); and
(iv) if applicable, copies of an amendment to the
terms and provisions of the Convertible Subordinated Note in
form and substance satisfactory to the Agents.
(l) Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP,
counsel to the Syndication Agent and Buchalter, Nemer, Fields &
Younger, counsel to the Administrative Agent, shall have each received
payment in full for all legal fees charged, and all costs and expenses
incurred, by such counsel through the Closing Date in connection with
the transactions contemplated under this Agreement, the Security
Documents and the other Loan Documents and instruments in connection
herewith and therewith.
(m) The corporate structure and capitalization of the
Borrowers shall be satisfactory to the Lenders in all respects.
(n) All legal matters in connection with the Transactions
shall be satisfactory to the Administrative Agent, the Lenders and
their respective counsel in their sole discretion.
(o) The Borrowers shall have executed and delivered to the
Administrative Agent a disbursement authorization letter with respect
to the disbursement of the proceeds of the Credit Events made on the
Closing Date, in form and substance satisfactory to the Administrative
Agent.
(p) Each Agent shall have received such other documents as
the Lenders or such Agent or such Agent's counsel shall reasonably
deem necessary.
VI. AFFIRMATIVE COVENANTS
Each of the Borrowers covenant and agree with each Lender and
each Agent that, so long as this Agreement shall remain in effect or the
principal of or interest on any Note, any amount under any Letter of Credit
or any fee, expense or other Obligation payable hereunder or in connection
with any of the Transactions shall be unpaid, it will, and will cause each of
its subsidiaries and, with respect to Section 6.07 hereof, each ERISA
Affiliate, to:
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SECTION 6.01 LEGAL EXISTENCE. Do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
legal existence.
SECTION 6.02 BUSINESSES AND PROPERTIES. At all times do or
cause to be done all things necessary to preserve, renew and keep in full
force and effect the rights, licenses, Permits, franchises, patents,
copyrights, trademarks and trade names material to the conduct of its
businesses; maintain and operate such businesses in the same general manner
in which they are presently conducted and operated; comply with all laws,
rules, regulations and governmental orders (whether Federal, state or local)
applicable to the operation of such businesses whether now in effect or
hereafter enacted (including, without limitation, all applicable laws, rules,
regulations and governmental orders relating to public and employee health
and safety and all Environmental Laws) and with any and all other applicable
laws, rules, regulations and governmental orders, the lack of compliance with
which would have a Material Adverse Effect; take all actions which may be
required to obtain, preserve, renew and extend all Permits and other
authorizations which are material to the operation of such businesses; and at
all times maintain, preserve and protect all property material to the conduct
of such businesses and keep such property in good repair, working order and
condition and from time to time make, or cause to be made, all needful and
proper repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection therewith may
be properly conducted at all times.
SECTION 6.03 INSURANCE. (a) Keep its insurable properties
adequately insured at all times by financially sound and reputable insurers,
(b) maintain such other insurance, to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies similarly situated and in the same or similar
businesses, PROVIDED, HOWEVER, that such insurance shall insure the property
of the Borrowers against all risk of physical damage, including, without
limitation, loss by fire, explosion, theft, fraud and such other casualties
as may be reasonably satisfactory to the Administrative Agent, but in no
event at any time in an amount less than the replacement value of the
Collateral, (c) maintain in full force and effect public liability insurance
against claims for personal injury or death or property damage occurring
upon, in, about or in connection with the use of any properties owned,
occupied or controlled by any Borrowers or any of their subsidiaries, in such
amount as the Administrative Agent shall reasonably deem necessary, (d)
maintain business interruption insurance to such extent as is customary with
companies similarly situated and in the same or similar businesses, (e) cause
each Affiliated Dental Practice to maintain such medical malpractice
insurance as is customary for similar dental practices and (f) maintain such
other insurance as may be required by law or as may be reasonably requested
by the Administrative Agent for purposes of assuring compliance with this
Section 6.03. All insurance covering tangible personal property subject to a
Lien in favor of the Administrative Agent for its own benefit and for the
benefit of the Lenders granted pursuant to the Security Documents shall
provide that, in the case of each separate loss the full amount of insurance
proceeds shall be payable to the Administrative Agent and shall further
provide for at least 30 days' prior written notice to the Administrative
Agent of the cancellation or substantial modification thereof.
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SECTION 6.04 TAXES. Pay and discharge promptly when due all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise, which, if unpaid, might give rise to
Liens upon such properties or any part thereof.
SECTION 6.05 FINANCIAL STATEMENTS, REPORTS, ETC. Furnish to
the Administrative Agent, with copies for each of the Lenders:
(a) within 105 days after the end of each Fiscal Year, (i)
Consolidated balance sheets and Consolidated income statements showing
the financial condition of Holdings and its subsidiaries as of the close
of such Fiscal Year and the results of their operations during such year,
(ii) a Consolidated statement of shareholders' equity and a Consolidated
statement of cash flow, as of the close of such Fiscal Year, comparing
such financial condition and results of operations to such financial
condition and results of operations for the comparable period during the
immediately preceding Fiscal Year, all the foregoing financial statements
to be audited by independent public accountants acceptable to the
Administrative Agent (which report shall not contain any qualification
except with respect to new accounting principles mandated by the
Financial Accounting Standards Board) and to be in form and substance
acceptable to the Administrative Agent, (iii) consolidating income
statements by market place as of the close of such Fiscal Year, such
consolidating income statements to be in form and substance acceptable to
the Agents and (iv) consolidating balance sheets, income statements and
statements of cash flows showing the financial condition of Holdings,
Dental Service and DCA as of the close of such Fiscal Year and the
results of such person's operations during such year, comparing such
financial condition and results of operations to such financial condition
and results of operations for the comparable period during the
immediately preceding Fiscal Year, in the case of clauses (iii) and (iv),
prepared and certified by the Financial Officer of the Borrowers as
having been prepared in accordance with GAAP and, with respect to
clause (iv), as presenting fairly the financial condition and results of
operations of the applicable person;
(b) within 45 days after the end of each fiscal quarter of
Holdings, (i) unaudited Consolidated balance sheets and Consolidated
income statements showing the financial condition and results of
operations of Holdings and its subsidiaries as of the end of each such
quarter, (ii) a Consolidated statement of shareholders' equity, (iii) a
Consolidated statement of cash flow, in each case for the fiscal quarter
just ended and for the period commencing at the end of the immediately
preceding Fiscal Year and ending with the last day of such quarter, and
comparing such financial condition and results of operations to the
projections for the applicable period provided under paragraph (g) below
and to the results for the comparable period during the immediately
preceding Fiscal Year, (iv) consolidating income statements by market
place as of the end of each
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such fiscal quarter, such consolidating income statements to be in form
and substance acceptable to the Agents and shall reconcile with the
Consolidated income statements delivered pursuant to clause (i) of this
paragraph (b) and (v) "same practice" performance comparative
information in form and substance satisfactory to the Administrative
Agent;
(c) within (x) 30 days after the end of each month other than
for any month coinciding with the end of a fiscal quarter and (y) within
45 days after the end of each month coinciding with the end of a fiscal
quarter, (i) unaudited Consolidated balance sheets and income statements
showing the financial condition and results of operations of Holdings and
its subsidiaries as of the end of each such month, (ii) a Consolidated
statement of shareholders' equity, (iii) a Consolidated statement of cash
flow, in each case for the month just ended and for the period commencing
at the end of the immediately preceding Fiscal Year and ending with the
last day of such month, and comparing such financial condition and
results of operations to the projections for the applicable period
provided under paragraph (g) below and to the results for the comparable
period during the immediately preceding Fiscal Year and (iv) income
statements by market place as of the end of each such month, such
financial statements to be in form and substance satisfactory to the
Agents, in each case prepared and certified by the Financial Officer of
the Borrowers as presenting fairly the financial condition and results of
operations of Holdings and its subsidiaries and as having been prepared
in accordance with GAAP, in each case subject to the absence of footnotes
and normal year-end audit adjustments;
(d) promptly after the same become publicly available, copies
of such registration statements, annual, periodic and other reports, and
such proxy statements and other information, if any, as shall be filed by
the Borrowers or any of their subsidiaries with the Securities and
Exchange Commission pursuant to the requirements of the Securities Act of
1933 or the Securities Exchange Act of 1934;
(e) concurrently with any delivery under (a) or (b) above, (i)
a certificate of the Financial Officer of each of the Borrowers, which
certificate shall certify that to the best of his or her knowledge no
Default or Event of Default has occurred (including (i) calculations
demonstrating compliance, as of the dates of the financial statements
being furnished, with the covenants set forth in Sections 7.07, 7.08,
7.09, 7.10 and 7.11 hereof and (ii) appropriate schedules as may be
requested by the Administrative Agent in support of such calculations,
(such schedules to be in substantially the form of EXHIBIT L annexed
hereto) and, if such a Default or Event of Default has occurred,
specifying the nature and extent thereof and any corrective action taken
or proposed to be taken with respect thereto and, if such a Default or
Event of Default has occurred, specifying the nature and extent thereof
and any corrective action taken or proposed to be taken with respect
thereto, and shall in addition certify that in the course of preparing
the audit and the certificate referred to herein, such
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accountants have not become aware of the occurrence of any other Default
or Event of Default and, if such a Default or Event of Default has
occurred, specifying the nature thereof; PROVIDED, HOWEVER, that any
certificate delivered concurrently with (a) above shall be signed by the
Financial Officer of a Borrower and (ii) an update to the organizational
chart for Holdings and its subsidiaries, evidencing any acquisitions
made during the applicable fiscal quarter;
(f) concurrently with any delivery under (a) above, any related
management letter prepared by the independent public accountants who
reported on the financial statements delivered under (a) above, with
respect to the internal audit and financial controls of any of the
Borrowers and their subsidiaries;
(g) within 30 days after the beginning of each Fiscal Year, a
summary of business plans and financial operation projections (including,
without limitation, with respect to Capital Expenditures) for the
Borrowers and their respective subsidiaries for such Fiscal Year
(including monthly balance sheets, statements of income and of cash flow)
and annual projections through the Final Maturity Date prepared by
management and in form, substance and detail (including, without
limitation, principal assumptions) satisfactory to the Administrative
Agent;
(h) as soon as practicable, copies of all reports, forms,
filings, loan documents and financial information submitted to
governmental agencies and/or its shareholders.
(i) immediately upon becoming aware thereof, notice to the
Administrative Agent of the breach by any party of any material agreement
with any of the Borrowers;
(j) within 30 days of the closing of any Permitted Acquisition,
copies of all documents related thereto and which were not previously
required to be delivered to the Administrative Agent pursuant to the
terms of this Agreement; and
(k) such other information as the Administrative Agent or any
Lender may reasonably request.
SECTION 6.06 LITIGATION AND OTHER NOTICES. Give the
Administrative Agent prompt written notice of the following:
(a) the issuance by any court or governmental agency or
authority of any injunction, order, decision or other restraint
prohibiting, or having the effect of prohibiting, the making of the Loans
or occurrence of other Credit Events, or invalidating, or having the
effect of invalidating, any provision of this Agreement, the Notes or the
other Loan Documents, or the initiation of any litigation or similar
proceeding seeking any such injunction, order, decision or other
restraint;
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(b) the filing or commencement of any action, suit or
proceeding against any Borrowers or any of their subsidiaries or, to the
extent known by a Responsible Officer of a Borrower, against any
Affiliated Dental Practice, whether at law or in equity or by or before
any court or any Federal, state, municipal or other governmental agency
or authority, (i) which is material and is brought by or on behalf of any
governmental agency or authority, or in which injunctive or other
equitable relief is sought or (ii) as to which it is probable (within the
meaning of Statement of Financial Accounting Standards No. 5) that there
will be an adverse determination and which, if adversely determined,
would (A) reasonably be expected to result in liability of one or more
Borrowers or a subsidiary thereof or an Affiliated Dental Practice in an
aggregate amount of $200,000 or more, not reimbursable by insurance or
(B) materially impair the right of any Borrowers or a subsidiary thereof
to perform its obligations under this Agreement, any Note or any other
Loan Document to which it is a party;
(c) any Default or Event of Default, specifying the nature and
extent thereof and the action (if any) which is proposed to be taken with
respect thereto; and
(d) any development in the business or affairs of any Borrowers
or any of their subsidiaries which has had or which is likely to have, in
the reasonable judgment of any Responsible Officer of such Borrower, a
Material Adverse Effect.
SECTION 6.07 ERISA. (a) Pay and discharge promptly any
liability imposed upon it pursuant to the provisions of Title IV of ERISA;
PROVIDED, HOWEVER, that neither the Borrowers nor any ERISA Affiliate shall
be required to pay any such liability if (1) the amount, applicability or
validity thereof shall be diligently contested in good faith by appropriate
proceedings, and (2) such person shall have set aside on its books reserves
which, in the opinion of the independent certified public accountants of such
person, are adequate with respect thereto.
(b) Deliver to the Administrative Agent, promptly, and in any
event within 5 days, after (i) the occurrence of any Reportable Event, a copy of
the materials that are filed with the PBGC, or the materials that would have
been required to be filed if the 30-day notice requirement to the PBGC was not
waived, (ii) any Borrowers or any ERISA Affiliate or an administrator of any
Pension Plan files with participants, beneficiaries or the PBGC a notice of
intent to terminate any such Plan, a copy of any such notice, (iii) the receipt
of notice by any Borrowers or any ERISA Affiliate or an administrator of any
Pension Plan from the PBGC of the PBGC's intention to terminate any Pension Plan
or to appoint a trustee to administer any such Plan, a copy of such notice, (iv)
the filing thereof with the Internal Revenue Service, copies of each annual
report that is filed on Treasury Form 5500 with respect to any Plan, together
with certified financial statements (if any) for the Plan and any actuarial
statements on Schedule B to such Form 5500, (v) any Borrowers or any ERISA
Affiliate knows or has
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reason to know of any event or condition which might constitute grounds under
the provisions of Section 4042 of ERISA for the termination of (or the
appointment of a trustee to administer) any Pension Plan, an explanation of
such event or condition, (vi) the receipt by any Borrowers or any ERISA
Affiliate of an assessment of withdrawal liability under Section 4201 of
ERISA from a Multiemployer Plan, a copy of such assessment, (vii) any
Borrowers or any ERISA Affiliate knows or has reason to know of any event or
condition which might cause any one of them to incur a liability under
Section 4062, 4063, 4064 or 4069 of ERISA or Section 412(n) or 4971 of the
Code, an explanation of such event or condition, and (viii) any Borrowers or
any ERISA Affiliate knows or has reason to know that an application is to be,
or has been, made to the Secretary of the Treasury for a waiver of the
minimum funding standard under the provisions of Section 412 of the Code, a
copy of such application, and in each case described in clauses (i) through
(iii) and (v) through (vii) together with a statement signed by the Financial
Officer setting forth details as to such Reportable Event, notice, event or
condition and the action which such Borrowers or such ERISA Affiliate
proposes to take with respect thereto.
SECTION 6.08 MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS; RIGHT TO AUDIT. Maintain financial records in accordance with
accepted financial practices and, upon reasonable notice (which may be
telephonic), at all reasonable times and as often as any Lender may request,
permit any authorized representative designated by such Lender to visit and
inspect the properties and financial records of the Borrowers and their
subsidiaries and to make extracts from such financial records at the
Borrowers' expense, and permit any authorized representative designated by
such Lender to discuss the affairs, finances and condition of the Borrowers
and their subsidiaries with the appropriate Financial Officer and such other
officers as the Borrowers shall deem appropriate and the Borrowers'
independent public accountants, as applicable. The Administrative Agent
agrees that it shall schedule any meeting with any such independent public
accountant through the Borrowers and a Responsible Officer of one or more
Borrowers shall have the right to be present at any such meeting. At the
Borrowers' expense, the Administrative Agent shall have the right to audit,
as often as it may request, the existence and condition of the accounts
receivables, inventory, books and records of the Borrowers and their
subsidiaries and to review their compliance with the terms and conditions of
this Agreement and the other Loan Documents.
SECTION 6.09 USE OF PROCEEDS. Use the proceeds of the
Credit Events only for the purposes set forth in Section 4.14 hereof.
SECTION 6.10 FISCAL YEAR-END. Cause its Fiscal Year to end
on December 31 in each year.
SECTION 6.11 FURTHER ASSURANCES. Execute any and all
further documents and take all further actions which may be required under
applicable law, or which the Administrative Agent may reasonably request
(including any actions necessary to obtain the consents contemplated in
Article XIII hereof), to grant,
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preserve, protect and perfect the first priority security interest created by
the Security Documents in the Collateral.
SECTION 6.12 ADDITIONAL GRANTORS AND GUARANTORS. Promptly
inform the Administrative Agent of the creation or acquisition of any direct
or indirect subsidiary (subject to the provisions of Section 7.06 hereof) and
cause each direct or indirect subsidiary not in existence on the date hereof
to enter into a Guarantee in form and substance satisfactory to the
Administrative Agent, and to execute the Security Documents, as applicable
(PROVIDED, HOWEVER, the Succession Agreements listed on SCHEDULE IV annexed
hereto and the Administrative Services Agreements between Serra Park and each
of (i) Serra Park Dental Group, Robert D. Rutner, D.D.S. & Associates, Dental
Corporation, (ii) Douglas Maxson D.D.S., Dental Corporation and (iii) Gary L.
Dougan D.D.S., Dental Corporation are not required to be assigned to the
Administrative Agent until each is replaced in accordance with Section 6.19
hereof), as a Grantor, and cause the direct parent of each such subsidiary to
pledge all of the capital stock of such subsidiary pursuant to the Pledge
Agreement and cause each such subsidiary to pledge its accounts receivable
and all other assets pursuant to the Security Agreement. In connection with
the foregoing, to the extent that any such subsidiary is acquired or created
in connection with a Permitted Acquisition, each of such subsidiary and its
direct parent shall sign an Joinder Agreement. Promptly inform the
Administrative Agent of the acquisition by any Loan Party of 51% or more of
the equity interests of Celebration and cause Celebration, at such time, to
enter into a Guarantee in form and substance satisfactory to the
Administrative Agent, and to execute the Security Documents, as applicable,
as a Grantor, and cause the direct parent of Celebration to pledge all of the
equity interests in Celebration owned by such parent pursuant to the Pledge
Agreement and cause Celebration to pledge its accounts receivable and all
other assets pursuant to the Security Agreement.
SECTION 6.13 ENVIRONMENTAL LAWS. (a) Comply, and cause
each of their subsidiaries to comply, in all material respects with the
provisions of all Environmental Laws, and shall keep their properties and the
properties of their subsidiaries free of any Lien imposed pursuant to any
Environmental Law. The Borrowers shall not cause or suffer or permit, and
shall not suffer or permit any of their subsidiaries to cause or suffer or
permit, the property of the Borrowers or their subsidiaries to be used for
the generation, production, processing, handling, storage, transporting or
disposal of any Hazardous Material, except for Hazardous Materials used in
the ordinary course of business of the Borrowers and disclosed in SCHEDULE
6.13 hereto, in which case such Hazardous Materials shall be used, stored,
generated, treated and disposed of only in compliance, in all material
respects, with Environmental Law.
(b) Supply to the Administrative Agent copies of all
submissions by the Borrowers or any of their subsidiaries to any governmental
body and of the reports of all environmental audits and of all other
environmental tests, studies or assessments (including the data derived from
any sampling or survey of asbestos, soil, or subsurface or other materials or
conditions) that may be conducted or performed (by or on behalf of the
Borrowers or any of their subsidiaries) on or regarding the properties owned,
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operated, leased or occupied by the Borrowers or any of their subsidiaries or
regarding any conditions that might have been affected by Hazardous Materials
on or Released or removed from such properties. The Borrowers shall also
permit and authorize, and shall cause their subsidiaries to permit and
authorize, the consultants, attorneys or other persons that prepare such
submissions or reports or perform such audits, tests, studies or assessments
to discuss such submissions, reports or audits with the Administrative Agent
and the Lenders.
(c) Promptly (and in no event more than two (2) Business
Days after the Borrowers become aware or are otherwise informed of such
event) provide oral and written notice to the Administrative Agent upon the
happening of any of the following:
(i) any Borrower, any subsidiary of any Borrower, or
any tenant or other occupant of any property of such Borrowers or
such subsidiary receives written notice of any claim, complaint,
charge or notice of a violation or potential violation of any
Environmental Law;
(ii) there has been a spill or other Release of
Hazardous Materials upon, under or about or affecting any of the
properties owned, operated, leased or occupied by any Borrowers or
any subsidiary of any Borrowers in amounts that may have to be
reported under Environmental Law, or Hazardous Materials at levels
or in amounts that may have to be reported, remedied or responded
to under Environmental Law are detected on or in the soil or
groundwater;
(iii) any Borrowers or any subsidiary of any Borrowers
are or may be liable any costs of cleaning up or otherwise
responding to a Release of Hazardous Materials;
(iv) any part of the properties owned, operated, leased
or occupied by any Borrowers or any subsidiary of any Borrowers
are or may be subject to a Lien under any Environmental Law; or
(v) any Borrowers or any subsidiary of any Borrowers
undertakes any Remedial Work with respect to any Hazardous
Materials.
(d) Without in any way limiting the scope of Section
11.04(c) and in addition to any obligations thereunder, each of the Borrowers
hereby indemnifies and agrees to hold the Administrative Agent and the
Lenders harmless from and against any liability, loss, damage, suit, action
or proceeding arising out of its business or the business of its subsidiaries
pertaining to Hazardous Materials, including, but not limited to, claims of
any governmental body or any third person arising under any Environmental Law
or under tort, contract or common law. To the extent laws of the United
States or any applicable state or local law in which property owned,
operated, leased or occupied by any Borrowers or any subsidiary of any
Borrowers are located provide that a Lien upon such property of such
Borrowers or such subsidiary may be obtained for
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the removal of Hazardous Materials which have been or may be Released, no
later than sixty days after notice that a Release has occurred is given by
the Administrative Agent to such Borrowers or such subsidiary, such Borrowers
or such subsidiary shall deliver to the Administrative Agent a report issued
by a qualified third party engineer assessing the existence and extent of any
Hazardous Materials located upon or beneath the specified property. To the
extent any Hazardous Materials located therein or thereunder either subject
the property to Lien or require removal to safeguard the health of any
persons, the removal thereof shall be an affirmative covenant of the
Borrowers hereunder.
(e) In the event that any Remedial Work is required to be
performed by any Borrowers or any subsidiary of any Borrowers under any
applicable Environmental Law, any judicial order, or by any governmental
entity, such Borrowers or such subsidiary shall commence all such Remedial
Work at or prior to the time required therefor under such Environmental Law
or applicable judicial orders and thereafter diligently prosecute to
completion all such Remedial Work in accordance with and within the time
allowed under such applicable Environmental Laws or judicial orders.
SECTION 6.14 PAY OBLIGATIONS TO LENDERS AND PERFORM OTHER
COVENANTS. (a) Make full and timely payment of the Obligations, whether now
existing or hereafter arising, (b) duly comply with all the terms and
covenants contained in this Agreement (including, without limitation, the
borrowing limitations and mandatory prepayments in accordance with Article II
hereof) and in each of the other Loan Documents, all at the times and places
and in the manner set forth therein, and (c) except for the filing of
continuation statements and the making of other filings by the Administrative
Agent as secured party or assignee, at all times take all actions necessary
to maintain the Liens and security interests provided for under or pursuant
to this Agreement and the Security Documents as valid and perfected first
Liens on the property intended to be covered thereby (subject only to Liens
expressly permitted hereunder) and supply all information to the
Administrative Agent necessary for such maintenance.
SECTION 6.15 MAINTAIN OPERATING ACCOUNTS. Maintain all of
its operating accounts and cash management arrangements with the
Administrative Agent or pursuant to arrangements consented to in writing by
the Administrative Agent.
SECTION 6.16 LIFE INSURANCE. (a) Obtain within 90 days of
the Closing Date, and at all times thereafter maintain in full force and
effect, key man life insurance on Steven Matzkin in an amount of not less
than Five Million Dollars ($5,000,000), with the Borrowers as beneficiary
under such policy. The owner and beneficiary of such policy shall
immediately assign to the Administrative Agent for its own benefit and for
the benefit of the Lenders as security for the Obligations all monies payable
under or in respect of such insurance policy pursuant to an Assignment of
Life Insurance.
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(b) Within 10 Business Days of the Closing Date, assign to
the Administrative Agent for its own benefit and for the benefit of the
Lenders as security for the Obligations all monies payable under or in
respect of any key man life insurance on Steven Matzkin existing on the
Closing Date pursuant to an Assignment of Life Insurance.
SECTION 6.17 YEAR 2000. Take all actions necessary to
permit the proper functioning, in and following the year 2000 of (i) the
Borrowers' computer systems and (ii) equipment containing embedded microchips
(including systems and equipment supplied by others or with which Borrowers'
systems interface and which are within the control of the Borrowers) and the
testing of all such systems and equipment, as so programmed, unless the
failure to take such actions would not reasonably be expected to have a
Material Adverse Effect.
SECTION 6.18 ASSIGNMENT OF CONTRACTS. In connection with
each Permitted Acquisition, cause the applicable Loan Party to execute and
deliver to the Administrative Agent an Assignment of Contract with respect to
the related Management Agreement, Purchase Agreement, Shares Acquisition
Agreement or Purchase Agreement, as applicable PROVIDED, HOWEVER, the
Succession Agreements listed on SCHEDULE IV annexed hereto and the
Administrative Services Agreements between Serra Park and each of (i) Serra
Park Dental Group, Robert D. Rutner, D.D.S. & Associates, Dental Corporation,
(ii) Douglas Maxson D.D.S., Dental Corporation and (iii) Gary L. Dougan
D.D.S., Dental Corporation are not required to be assigned to the
Administrative Agent until each is replaced in accordance with Section 6.19
hereof.
SECTION 6.19 RE-EXECUTION OF SERRA PARK MANAGEMENT
AGREEMENTS. Cause Serra Park to enter into Management Agreements with each of
the professional associations and professional corporations it owns pursuant
to Section 4.05 of the Stock Purchase Agreement between Holdings, Dental
Service and Serra Park dated May 13, 1999 (the "SERRA PARK APA") and have its
rights under all such Management Agreements assigned to the Administrative
Agent pursuant to an Assignment of Contracts no later than February 28, 2000.
In addition, should Dental Service receive any funds pursuant to Section
4.05 of the Serra Park APA, all such funds shall be applied in accordance
with Section 2.09(k) hereof.
SECTION 6.20 GOOD STANDING. Within 90 days of the Closing
Date cause each entity described on SCHEDULE 4.01 as not in good standing in
any jurisdiction to be in good standing in each jurisdiction so listed.
SECTION 6.21 LANDLORD WAIVERS; UCC AMENDMENTS. Within 60
days of the Closing Date, obtain a landlord waiver in form and substance
reasonably acceptable to the Administrative Agent with respect to the
Sarasota, Florida location. Within 45 days of the relocation of any of the
Borrowers or Guarantors, obtain a landlord waiver in form and substance
reasonably acceptable to the Administrative Agent with respect to such
location and within five (5) Business Days after such relocation file, or
cause to be filed any and all amendments to Uniform Commercial
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Code financing statements necessary to reflect such relocation of the
Borrowers and the Guarantors.
SECTION 6.22 PURCHASE AGREEMENTS. Upon the request of the
Administrative Agent, enforce any indemnification rights which might arise
under any Purchase Agreement to the extent the related loss, if not
indemnified, would be material.
SECTION 6.23 INTENTIONALLY OMITTED.
SECTION 6.24 CASH MANAGEMENT ARRANGEMENTS. Within 45 days
of the Closing Date, direct (pursuant to documentation acceptable to the
Administrative Agent) each of the banks holding accounts into which the
Affiliated Dental Practices' cash receipts are deposited to sweep the amounts
on deposit in such accounts to an account maintained at bank reasonably
acceptable to the Administrative Agent; PROVIDED, HOWEVER, that to the extent
that such bank is a bank other than the Administrative Agent, such bank enter
into a blocked account letter with the Administrative Agent (such blocked
account letter to be in form and substance satisfactory to the Administrative
Agent); PROVIDED, FURTHER, that to the extent that the Administrative Agent
notifies the Borrowers that any of such bank will not enter into a blocked
account letter, the Borrowers shall, within 30 days of such notice, redirect
each of applicable banks holding the accounts into which the Affiliated
Dental Practices' cash receipts are deposited to sweep the amounts on deposit
in such accounts to an account maintained with the Administrative Agent or to
an account which is subject to a blocked account letter acceptable to the
Administrative Agent.
SECTION 6.25 UCC-1 FINANCING STATEMENTS; SERRA PARK SECURITY
AGREEMENTS. Use commercially reasonable efforts to cause the filing of each
UCC-1 Financing Statement described on SCHEDULE 6.25 hereto within 10
Business Days of the Closing Date. Within 10 days of the Closing Date notify
each party to any security agreement whereby (i) Serra Park is the secured
party and (ii) the name of Serra Park mistakenly appears as "Serra Park
Services, Incorporated" of the proper name of Serra Park, in a manner
acceptable to the Administrative Agent.
VII. NEGATIVE COVENANTS
Each of the Borrowers covenant and agree with each Lender and
each Agent that, so long as this Agreement shall remain in effect or the
principal of or interest on any Note, any amount under any Letter of Credit,
or any fee, expense or other Obligation payable hereunder or in connection
with any of the Transactions shall be unpaid, it will not and will not cause
or permit any of their subsidiaries and, in the case of Section 7.15 hereof,
any ERISA Affiliate to, either directly or indirectly:
SECTION 7.01 LIENS. Incur, create, assume or permit to
exist any Lien on any of its property or assets (including the stock of any
direct or indirect
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subsidiary), whether owned at the date hereof or hereafter acquired, or
assign or convey any rights to or security interests in any future revenues,
except:
(a) Liens incurred and pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old-age pensions and other social security
benefits (not including any lien described in Section 412(m) of the
Code);
(b) Liens imposed by law, such as carriers', warehousemen's,
mechanics', materialmen's and vendors' liens and other similar liens,
incurred in good faith in the ordinary course of business and securing
obligations which are not overdue for a period of more than 15 days or
which are being contested in good faith by appropriate proceedings as to
which any Borrowers or any of their subsidiaries, as the case may be,
shall, to the extent required by GAAP, have set aside on its books
adequate reserves;
(c) Liens securing the payment of taxes, assessments and
governmental charges or levies, that are not delinquent or are being
diligently contested in good faith by appropriate proceedings and as to
which adequate reserves have been established in accordance with GAAP;
PROVIDED, HOWEVER, that in no event shall the aggregate amount of such
reserves be less than the aggregate amount secured by such Liens;
(d) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title (and with respect to leasehold
interests, mortgages, obligations, liens and other encumbrances incurred,
created, assumed or permitted to exist and arising by, through or under a
landlord or owner of the leased property, with or without consent of the
lessee) which do not in the aggregate materially detract from the value
of its property or assets or materially impair the use thereof in the
operation of its business;
(e) Liens upon any equipment acquired through the purchase or
lease by any Borrowers or any of their subsidiaries which are created or
incurred contemporaneously with such acquisition to secure or provide for
the payment of any part of the purchase price of, or lease payments on,
such equipment (but no other amounts and not in excess of the purchase
price or lease payments); PROVIDED, HOWEVER, that any such Lien shall not
apply to any other property of the Borrowers or any of their
subsidiaries; and PROVIDED, FURTHER, that after giving effect to such
purchase or lease, compliance is maintained with Section 7.07 hereof;
PROVIDED, FURTHER, that the aggregate outstanding amount of any such
Liens shall not exceed $5,000,000 at any time outstanding;
(f) Liens existing on the date of this Agreement and set forth
in SCHEDULE 7.01 annexed hereto but not the extension, renewal or
refunding of the Indebtedness secured thereby;
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(g) Liens created in favor of the Administrative Agent for its
own benefit and the benefit of the Lenders;
(h) Liens securing the performance of bids, tenders, leases,
contracts (other than for the repayment of borrowed money), statutory
obligations, surety, customs and appeal bonds and other obligations of
like nature, incurred as an incident to and in the ordinary course of
business; or
(i) Liens granted by any Borrower or any Guarantor other than
Holdings which is a direct subsidiary of one of the Borrowers in
connection with a Permitted Acquisition made by a Borrower or any such
Guarantor to secure seller notes issued in connection with such Permitted
Acquisition.
SECTION 7.02 SALE AND LEASE-BACK TRANSACTIONS. Enter into
any arrangement, directly or indirectly, with any person whereby any
Borrowers or any of their subsidiaries shall sell or transfer any property,
real or personal, and used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other
property which such Borrowers or such subsidiary intends to use for
substantially the same purpose or purposes as the property being sold or
transferred.
SECTION 7.03 INDEBTEDNESS. Incur, create, assume or permit
to exist any Indebtedness other than (i) Indebtedness secured by Liens
permitted under Sections 7.01(f), (ii) Indebtedness (including, without
limitation, Guarantees) existing on the date hereof and listed in SCHEDULE
7.03 annexed hereto, but not the extension, renewal or refunding thereof,
(iii) Indebtedness incurred hereunder, (iv) Indebtedness to trade creditors
incurred in the ordinary course of business, (v) Guarantees constituting the
endorsement of negotiable instruments for deposit or collection in the
ordinary course of business, (vi) Guarantees of the Obligations, (vii)
purchase money Indebtedness to the extent permitted by Sections 7.01(e) and
7.07 hereof, (viii) Subordinated Indebtedness, (ix) earn-out liabilities
incurred in connection with Permitted Acquisitions and (x) Guarantees of
seller notes issued in connection with a Permitted Acquisition made by any
Borrower or any Guarantor (other than Holdings) which is a direct subsidiary
of one of the Borrowers.
SECTION 7.04 DIVIDENDS, DISTRIBUTIONS AND PAYMENTS. Declare
or pay, directly and indirectly, any cash dividends or make any other
distribution, whether in cash, property, securities or a combination thereof,
with respect to (whether by reduction of capital or otherwise) any shares of
its capital stock or directly or indirectly redeem, purchase, retire or
otherwise acquire for value (or permit any subsidiary to purchase or acquire)
any shares of any class of its capital stock or set aside any amount for any
such purpose; PROVIDED, HOWEVER, that the Borrowers may pay Preferred
Dividends so long as no Default or Event of Default shall have occurred and
be continuing at such time or shall occur as a result of such payment;
PROVIDED, FURTHER, that a Guarantor may pay dividends to its immediate parent
so long as such parent is a
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Guarantor or a Borrower and so long as no Default or Event of Default shall
have occurred and be continuing at such time or shall occur as a result of
such payment; PROVIDED, HOWEVER, that the Borrowers may pay dividends to
Holdings, so long as no Default or Event of Default shall have occurred and
be continuing at such time or shall occur as a result of such payment, for
the purpose of enabling Holdings to:
(i) make regularly scheduled payments of interest
under the Subordinated Indebtedness of Holdings incurred in
connection with the exchange (to the extent permitted by the terms
of this Agreement) of the Convertible Subordinated Notes;
PROVIDED, that in no event shall the amount distributed to
Holdings pursuant to this clause exceed the amount of such
scheduled payment of interest;
(ii) repurchase preferred stock of Holdings in
accordance with the terms and provisions of its certificate of
incorporation (as in effect on the Closing Date); PROVIDED, that
in no event shall the amount distributed to Holdings pursuant to
this clause exceed $100 in the aggregate; and
(iii) repurchase common stock of Holdings; PROVIDED,
that in no event shall the amount distributed to Holdings pursuant
to this clause exceed $1,444,276 in the aggregate.
SECTION 7.05 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS.
Consolidate with or merge into any other person, or sell, lease, transfer or
assign to any persons or otherwise dispose of (whether in one transaction or
a series of transactions) any portion of its assets (whether now owned or
hereafter acquired), or sell any of its inventory, other than in the normal
course of business, or permit another person to merge into it, or acquire all
or substantially all the capital stock or assets of any other person, other
than Permitted Acquisitions and Permitted De Novo Capital Expenditures.
SECTION 7.06 INVESTMENTS. Own, purchase or acquire any
stock, obligations, assets (not in the ordinary course of business) or
securities of, or any interest in, or make any capital contribution or loan
or advance to, any other person, or make any other investments, except:
(a) certificates of deposit in dollars of any commercial banks
registered to do business in any state of the United States (i) having
capital and surplus in excess of $1,000,000,000 and (ii) whose long-term
debt rating is at least investment grade as determined by either Standard
& Poor's Ratings Group or Moody's Investors Service, Inc.;
(b) readily marketable direct obligations of the United States
government or any agency thereof which are backed by the full faith and
credit of the United States;
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(c) investments in money market mutual funds having assets in
excess of $2,500,000,000;
(d) commercial paper at the time of acquisition having the
highest rating obtainable from either Standard & Poor's Ratings Group or
Moody's Investors Service, Inc.;
(e) federally tax exempt securities rated A or better by either
Standard & Poor's Ratings Group or Moody's Investors Service, Inc.;
(f) investments in the stock of any subsidiary existing on the
Closing Date, but not any additional investments therein;
(g) Permitted De Novo Capital Expenditures;
(h) Permitted Acquisitions;
(i) loans or advances by a Borrower to a Guarantor (other than
Holdings), PROVIDED, that such loans or advances are evidenced by a
promissory note substantially in the form of Exhibit P annexed hereto or
otherwise in form and substance satisfactory to the Administrative Agent
and such notes are pledged to the Administrative Agent (for its benefit
and for the benefit of the Lenders) pursuant to the Pledge Agreement;
(j) loans or advances by a Borrower to an Affiliated Dental
Practice (PROVIDED, HOWEVER, that no loans or advances shall be made to
an Affiliated Dental Practice listed on SCHEDULE V annexed hereto in
excess of the monthly cash receipts for such entity until such time that
such entity has complied with Section 6.19 hereof), made in the ordinary
course of business to fund operating expenses in accordance with the
terms of the related Management Agreement;
(k) loans or advances by a Borrower to Dedicated Dental, made
in the ordinary course of business to fund operating expenses; and
(l) loans or advances by a Borrower to a subsidiary (other than
a Guarantor) which is in the Dental Insurance Business, made in the
ordinary course of business to fund operating expenses; PROVIDED that the
stock of such subsidiary is pledged to the Administrative Agent pursuant
to the terms of the Pledge Agreement;
PROVIDED that, in each case mentioned in (a), (b), (d) and (e) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
SECTION 7.07 CAPITAL EXPENDITURES. Commencing with the
fiscal quarter ending June 30, 1999, permit the aggregate amount of payments
made for Capital Expenditures and De Novo Capital Expenditures, including
Capitalized Lease
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Obligations and Indebtedness secured by Liens permitted under Section 7.01(e)
hereof, for the one fiscal quarter period (in the case of the fiscal quarter
ending June 30, 1999), two fiscal quarter period (in the case of the fiscal
quarter ending September 30, 1999), three fiscal quarter period (in the case
of the fiscal quarter ending December 31, 1999) or four fiscal quarter period
(in the case of the fiscal quarter ending March 31, 2000) and for each four
fiscal quarter period thereafter, to exceed 6% of the Borrowers' and their
subsidiaries' net patient revenues for such period. Upon the written consent
of the Required Lenders, the foregoing limitation may be increased to an
amount not in excess of 8% of the Borrowers' and their subsidiaries' net
patient revenues for any such period.
SECTION 7.08 NET WORTH. Permit the Net Worth of Holdings
and its subsidiaries (on a Consolidated basis) at any time to be less than
the sum of (i)(x) the Net Worth of Holdings and its subsidiaries (on a
Consolidated basis) on March 31, 1999 MINUS (y) $750,000, PLUS (ii) 100% of
extraordinary gains arising after March 31, 1999 through the date of
determination, PLUS (iii) 100% of the net proceeds received by Holdings after
March 31, 1999 through the date of determination from any sale of common
stock of Holdings, PLUS (iv) 100% of the value of any capital stock issued by
Holdings as consideration in connection with any Permitted Acquisitions
occurring after March 31, 1999 through the date of determination PLUS (v) 70%
of the positive Net Income of Holdings and its subsidiaries (on a
Consolidated basis) for the period commencing on March 31, 1999 through and
including the date of determination.
SECTION 7.09 LEVERAGE RATIO; INTEREST LEVERAGE RATIO. (a)
LEVERAGE RATIO. Permit the Leverage Ratio of Holdings and its subsidiaries
on a Consolidated basis at the end of any fiscal quarter to be greater than
the respective amounts set forth below opposite such dates:
<TABLE>
<CAPTION>
Quarter Ending Ratio
-------------- -----
<S> <C>
March 31, 1999, June 3.75:1.00
30, 1999, September
30, 1999, December
31, 1999, March 31,
2000, June 30, 2000,
September 30, 2000,
December 31, 2000,
March 31, 2001, June
30, 2001 and
September 30, 2001
December 31, 2001 3.50:1.00
and March 31, 2002
June 30, 2002 and 3.00:1.00
September 30, 2002
December 31, 2002 2.50:1.00
and March 31, 2003
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Each June 30, 2.00:1.00;
September 30,
December 31 and
March 31 thereafter
</TABLE>
PROVIDED, HOWEVER, that if Holdings completes an equity
offering prior to the Conversion Date, each of the following ratios shall be
reduced by 0.25 commencing with the last day of the fiscal quarter in which
such equity offering was completed.
(a) INTEREST LEVERAGE RATIO. Permit the Interest Leverage
Ratio of Holdings and its subsidiaries on a Consolidated basis at the end of
any fiscal quarter to be greater than the respective amounts set forth below
opposite such dates:
<TABLE>
<CAPTION>
Quarter Ending Ratio
-------------- -----
<S> <C>
March 31, 1999, June 30, 4.75:1.00
1999, September 30, 1999,
December 31, 1999, March
31, 2000, June 30, 2000,
September 30, 2000,
December 31, 2000, March
31, 2001, June 30, 2001 and
September 30, 2001
December 31, 2001 and March 4.50:1.00
31, 2002
June 30, 2002 and September 4.00:1.00
30, 2002
December 31, 2002 and March 3.50:1.00
31, 2003
Each June 30, September 30, 3.00:1.00;
December 31 and March 31
thereafter
</TABLE>
PROVIDED, HOWEVER, that if Holdings completes an equity
offering prior to the Conversion Date, each of the following ratios shall be
reduced by 0.25 commencing with the last day of the fiscal quarter in which
such equity offering was completed.
SECTION 7.10 INTEREST COVERAGE RATIOS. (a) Commencing with
the fiscal quarter ending March 31, 1999, permit the ratio for each one
fiscal quarter period (in the case of the fiscal quarter ending March 31,
1999), two fiscal quarter period (in the case of the fiscal quarter ending
June 30, 1999), three fiscal quarter period (in the case of the fiscal
quarter ending September 30, 1999) or four fiscal quarter period (in the case
of the fiscal quarter ending December 31, 1999) and for each four fiscal
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quarter period thereafter, of (i) EBITDA of Holdings and its subsidiaries on
a Consolidated basis for such period to (ii) the sum of (x) Cash Interest
Expense of Holdings and its subsidiaries on a Consolidated basis for such
period PLUS (y) the aggregate amount of all Preferred Dividends paid in cash
during such period to be less than 3.00:1.00.
(b) Commencing with the fiscal quarter ending March 31,
1999, permit the ratio for each one fiscal quarter period (in the case of the
fiscal quarter ending March 31, 1999), two fiscal quarter period (in the case
of the fiscal quarter ending June 30, 1999), three fiscal quarter period (in
the case of the fiscal quarter ending September 30, 1999) or four fiscal
quarter period (in the case of the fiscal quarter ending December 31, 1999)
and for each four fiscal quarter period thereafter, of (i) the sum of (x)
EBITDA of Holdings and its subsidiaries on a Consolidated basis for such
period MINUS (y) the aggregate amount of all Maintenance Capital Expenditures
made by the Borrowers and their subsidiaries during such period to (ii) the
sum of (x) Cash Interest Expense of Holdings and its subsidiaries on a
Consolidated basis for such period PLUS (y) the aggregate amount of all
Preferred Dividends paid in cash during such period to be less than 2.50:1.00.
SECTION 7.11 FIXED CHARGE RATIO. Permit the Fixed Charge
Coverage Ratio of Holdings and its subsidiaries on a Consolidated basis for
the four fiscal quarter period ending on the last day of each fiscal quarter
commencing with the fiscal quarter ending December 31, 2001 to be less than
1.25:1.00.
SECTION 7.12 BUSINESS. Alter the nature of its business as
operated on the date of this Agreement in any material respect.
SECTION 7.13 SALES OF ACCOUNTS RECEIVABLES. Sell, assign,
discount, transfer, or otherwise dispose of any accounts receivable,
promissory notes, drafts or trade acceptances or other rights to receive
payment held by it, with or without recourse, except (i) for the purpose of
collection or settlement in the ordinary course of business or (ii) the sale
of any such accounts to the Administrative Agent.
SECTION 7.14 USE OF PROCEEDS. Permit the proceeds of any
Credit Event to be used for any purpose which entails a violation of, or is
inconsistent with, Regulation T, U or X of the Board, or for any purpose
other than those set forth in Section 4.14 hereof.
SECTION 7.15 ERISA. (a) Engage in any transaction in
connection with which any of the Borrowers or any ERISA Affiliate could be
subject to either a material civil penalty assessed pursuant to the
provisions of Section 502 of ERISA or a material tax imposed under the
provisions of Section 4975 of the Code.
(b) Terminate any Pension Plan in a "distress termination"
under Section 4041 of ERISA, or take any other action which could result in a
material liability of any of the Borrowers or any ERISA Affiliate to the PBGC.
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(c) Fail to make payment when due of all amounts which,
under the provisions of any Plan, the Borrowers or any ERISA Affiliate are
required to pay as contributions thereto, or, with respect to any Pension
Plan, permit to exist any material "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA and Section 412 of the Code), whether or
not waived, with respect thereto.
(d) Adopt an amendment to any Pension Plan requiring the
provision of security under Section 307 of ERISA or Section 401(a)(29) of the
Code.
SECTION 7.16 ACCOUNTING CHANGES. Make any change in their
accounting treatment or financial reporting practices except as required or
permitted by GAAP.
SECTION 7.17 PREPAYMENT OR MODIFICATION OF INDEBTEDNESS;
MODIFICATION OF CHARTER DOCUMENTS, ETC. (a) Directly or indirectly
prepay, redeem, purchase or retire any Indebtedness, including, without
limitation, any Subordinated Indebtedness other than Indebtedness incurred
hereunder.
(b) Modify, amend or otherwise alter the terms and
provisions of any Subordinated Indebtedness or any Management Agreement or
Shares Acquisition Agreement (unless any such amendment is required by law);
PROVIDED, HOWEVER, that the Convertible Subordinated Notes may be exchanged
for Subordinated Indebtedness of Holdings so long as (i) no Default or Event
of Default shall have occurred and be continuing at the time of such exchange
or shall occur as a result of such payment, (ii) the Administrative Agent
shall have received at least seven days prior written notice of such
exchange, (iii) such exchange shall not cause a Material Adverse Effect and
(iv) such exchange shall be on such other terms and conditions satisfactory
to the Administrative Agent.
(c) Modify, amend or alter their certificates or articles of
incorporation or preferred stock/certificates of designations.
(d) Change the instructions described in Section 6.24 hereof
to the banks holding accounts into which the Affiliated Dental Practices'
Receivables are deposited.
SECTION 7.18 TRANSACTIONS WITH AFFILIATES. Except as
otherwise specifically set forth in this Agreement, directly or indirectly
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or enter into any other transaction with, any stockholder,
Affiliate or agent of any Borrower, except at prices and on terms not less
favorable to it than that which would have been obtained in an arm's-length
transaction with a non-affiliated third party.
SECTION 7.19 CONSULTING FEES. Pay any management,
consulting or other fees of any kind to any Borrower, or to any Affiliate of
the Borrowers or any of
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the Borrowers' subsidiaries, other than those fees listed on SCHEDULE 7.19
annexed hereto.
SECTION 7.20 NEGATIVE PLEDGES, ETC. Enter into any
agreement (other than this Agreement or any other Loan Document) which (a)
prohibits the creation or assumption of any Lien upon any of the Collateral,
including, without limitation, any hereafter acquired property, or (b)
specifically prohibits the amendment or other modification of this Agreement
or any other Loan Document.
VIII. EVENTS OF DEFAULT
In case of the happening of any of the following events (herein
called "EVENTS OF DEFAULT"):
(a) any representation or warranty made or deemed made by
any Loan Party in or in connection with this Agreement, any of the Security
Documents, the Notes or other Loan Documents or any Credit Events hereunder,
shall prove to have been incorrect in any material respect when made or
deemed to be made;
(b) default shall be made in the payment of any principal of
any Note when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on
any Note, or any fee or any other amount payable hereunder, or under the
Notes, Letters of Credit, or any other Loan Document or in connection with
any other Credit Event or the Transactions when and as the same shall become
due and payable;
(d) default shall be made in the due observance or
performance of any covenant, condition or agreement to be observed or
performed on the part of any Loan Party pursuant to the terms of this
Agreement, any of the Notes, any of the Security Documents or any other Loan
Document;
(e) any Loan Party shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code or any other Federal, state or foreign bankruptcy, insolvency,
liquidation or similar law, (ii) consent to the institution of, or fail to
contravene in a timely and appropriate manner, any such proceeding or the
filing of any such petition, (iii) apply for or consent to the appointment of
a receiver, trustee, custodian, sequestrator or similar official for any Loan
Party or for a substantial part of its property or assets, (iv) file an
answer admitting the material allegations of a petition filed against it in
any such proceeding, (v) make a general assignment for the benefit of
creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take corporate action
for the purpose of effecting any of the foregoing;
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(f) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (i) relief in respect of any Loan Party, or of a substantial part of
the property or assets of any Loan Party, under Title 11 of the United States
Code or any other Federal state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Loan Party or for a
substantial part of the property of any Loan Party, or (iii) the winding-up
or liquidation of any Loan Party; and such proceeding or petition shall
continue undismissed for 30 days or an order or decree approving or ordering
any of the foregoing shall continue unstayed and in effect for 30 days;
(g) default shall be made with respect to any Indebtedness
or obligations under a capitalized lease of any Loan Party (excluding
Indebtedness outstanding hereunder) which either individually or taken
together with other such Indebtedness as to which a default has occurred
shall exceed $150,000 if the effect of any such default shall be to
accelerate, or to permit the holder or obligee of any such Indebtedness or
obligations under a capitalized lease (or any trustee on behalf of such
holder or obligee) at its option to accelerate, the maturity of such
Indebtedness or obligations under a capitalized lease;
(h) (i) a Reportable Event shall have occurred with respect
to a Pension Plan, (ii) the filing by any Loan Party, any ERISA Affiliate, or
an administrator of any Plan of a notice of intent to terminate such a Plan
in a "distress termination" under the provisions of Section 4041 of ERISA,
(iii) the receipt of notice by any Loan Party, any ERISA Affiliate, or an
administrator of a Plan that the PBGC has instituted proceedings to terminate
(or appoint a trustee to administer) such a Pension Plan, (iv) any other
event or condition exists which might, in the opinion of the Administrative
Agent, constitute grounds under the provisions of Section 4042 of ERISA for
the termination of (or the appointment of a trustee to administer) any
Pension Plan by the PBGC, (v) a Pension Plan shall fail to maintain the
minimum funding standard required by Section 412 of the Code for any plan
year or a waiver of such standard is sought or granted under the provisions
of Section 412(d) of the Code, (vi) any Loan Party or any ERISA Affiliate has
incurred, or is likely to incur, a liability under the provisions of Section
4062, 4063, 4064 or 4201 of ERISA, (vii) any Loan Party or any ERISA
Affiliate fails to pay the full amount of an installment required under
Section 412(m) of the Code, (viii) the occurrence of any other event or
condition with respect to any Plan which would constitute an event of default
under any other agreement entered into by any Loan Party or any ERISA
Affiliate, and in each case in clauses (i) through (viii) of this subsection
(h), such event or condition, together with all other such events or
conditions, if any, could subject any Loan Party or any ERISA Affiliate to
any taxes, penalties or other liabilities which, in the opinion of the
Administrative Agent, could have a Material Adverse Effect on the financial
condition of any Loan Party or any ERISA Affiliate;
(i) any Loan Party or any ERISA Affiliate (i) shall have
been notified by the sponsor of a Multiemployer Plan that it has incurred any
material withdrawal
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liability to such Multiemployer Plan, and (ii) does not have reasonable
grounds for contesting such withdrawal liability and is not in fact
contesting such withdrawal liability in a timely and appropriate manner;
(j) a judgment (not reimbursed by insurance policies of any
Loan Party) or decree for the payment of money, a fine or penalty which when
taken together with all other such judgments, decrees, fines and penalties
shall exceed $250,000 shall be rendered by a court or other tribunal against
any Loan Party and (i) shall remain undischarged or unbonded for a period of
30 consecutive days during which the execution of such judgment, decree, fine
or penalty shall not have been stayed effectively or (ii) any judgment
creditor or other person shall legally commence actions to collect on or
enforce such judgment, decree, fine or penalty;
(k) this Agreement, any Note, any of the Security Documents,
any Guarantee or other Loan Documents shall for any reason cease to be, or
shall be asserted by any Loan Party not to be, a legal, valid and binding
obligation of any Loan Party, enforceable in accordance with its terms, or
the security interest or Lien purported to be created by any of the Security
Documents shall for any reason cease to be, or be asserted by any Loan Party
not to be, a valid, first priority perfected security interest in any
Collateral (except to the extent otherwise permitted under this Agreement or
any of the Security Documents);
(l) a Change of Control shall occur; or
(m) any material damage to, or loss, theft or destruction
of, any material Collateral, whether or not insured, or any strike, lockout,
labor dispute, embargo, condemnation, act of God or public enemy, or other
casualty which causes, for more than thirty (30) consecutive days beyond the
coverage period of any applicable business interruption insurance, the
cessation or substantial curtailment of revenue producing activities at any
facility of a Loan Party if any such event or circumstance could have a
Material Adverse Effect; or
(n) change in law shall occur which results in any of the
Borrowers not enjoying rights equivalent to those in effect on the Closing
Date with respect to such Borrower's relationship with Affiliated Dental
Practices;
then, and in any such event (other than an event described in paragraph (e)
or (f) above), and at any time thereafter during the continuance of such
event, the Administrative Agent may, and upon the written request of the
Required Lenders shall, by written notice (or facsimile notice promptly
confirmed in writing) to the Borrowers, take any or all of the following
actions at the same or different times: (i) terminate forthwith all or any
portion of the Total Revolving Loan Commitment and the obligations of the
Lenders to issue Letters of Credit hereunder; (ii) declare the Notes and any
amounts then owing to the Lenders on account of drawings under any Letters of
Credit to be forthwith due and payable, and (iii) require that the Borrowers
remit to the Administrative Agent cash collateral in an amount equal to the
aggregate undrawn
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amount of all outstanding Letters of Credit at such time, such cash
collateral to be held by the Administrative Agent for its own benefit and the
benefit of the Lenders in a cash collateral account on terms and conditions
satisfactory to the Administrative Agent, whereupon the principal of such
Notes, together with accrued interest and fees thereon and any amounts then
owing to the Lenders on account of drawings under any Letters of Credit and
other liabilities of the Borrowers accrued hereunder, shall become forthwith
due and payable both as to principal and interest, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrowers, anything contained herein or in the Notes
to the contrary notwithstanding; PROVIDED, HOWEVER, that with respect to a
default described in paragraph (e) or (f) above, the Total Revolving Credit
Commitment and the obligation of the Lenders to issue Letters of Credit shall
automatically terminate and the principal of the Notes, together with accrued
interest and fees thereon and any amounts then owing to the Lenders on
account of drawings under any Letters of Credit and any other liabilities of
the Borrowers accrued hereunder shall automatically become due and payable,
both as to principal and interest, without presentment, demand, protest or
other notice of any kind, all of which are hereby expressly waived by the
Borrowers, anything contained herein or in the Notes to the contrary
notwithstanding.
IX. AGENTS
In order to expedite the transactions contemplated by this
Agreement, Union Bank of California, N.A. is hereby appointed to act as
Administrative Agent on behalf of the Lenders. Each of the Lenders and each
subsequent holder of any Note or issuer of any Letter of Credit by its
acceptance thereof, irrevocably authorizes the Administrative Agent to take
such action on its behalf and to exercise such actions and powers hereunder
and under the Security Documents and other Loan Documents as are specifically
delegated to or required of the Administrative Agent by the terms hereof and
the terms thereof together with such actions and powers as are reasonably
incidental thereto. Neither the Administrative Agent nor any of its
directors, officers, employees or agents shall be liable as such for any
action taken or omitted to be taken by it or them hereunder or under any of
the Security Documents and other Loan Documents or in connection herewith or
therewith (a) at the request or with the approval of the Required Lenders
(or, if otherwise specifically required hereunder or thereunder, the consent
of all the Lenders) or (b) in the absence of its or their own gross
negligence or willful misconduct. Notwithstanding any provisions to the
contrary elsewhere herein or in the other Loan Documents, the Administrative
Agent shall not have any duties or responsibilities except those expressly
set forth herein or in the other Loan Documents, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into the Credit Agreement or in the other Loan Documents or otherwise exist
against the Administrative Agent.
The Administrative Agent is hereby expressly authorized on
behalf of the Lenders, without hereby limiting any implied authority, (a) to
receive on behalf of each of the Lenders any payment of principal of or
interest on the Notes outstanding
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hereunder and all other amounts accrued hereunder which are paid to the
Administrative Agent, and promptly to distribute to each Lender its proper
share of all payments so received, (b) to distribute to each Lender copies of
all notices, agreements and other material as provided for in this Agreement
or in the Security Documents and other Loan Documents as received by the
Administrative Agent (c) to maintain, in accordance with its customary
business practices, ledgers and records reflecting the status of the Loans,
the Collateral and related matters, (d) to open and maintain bank accounts
and lock boxes as the Administrative Agent deems necessary and appropriate in
accordance with the Loan Documents with respect to the Collateral, (e) to
take all actions with respect to this Agreement and the Security Documents
and other Loan Documents as are specifically delegated to the Administrative
Agent, and (f) to incur and pay such expenses as the Administrative Agent may
deem necessary or appropriate in connection with the foregoing.
In the event that (a) any Borrowers fail to pay when due the
principal of or interest on any Note, any amount payable under any Letter of
Credit, or any fee payable hereunder or (b) the Administrative Agent receives
written notice of the occurrence of a Default or an Event of Default (the
Administrative Agent being deemed not to have knowledge of any Default or
Event of Default unless and until written notice thereof is given to the
Administrative Agent by any Borrower or a Lender), the Administrative Agent
within a reasonable time shall give written notice thereof to the Lenders,
and shall take such action with respect to such Event of Default or other
condition or event as it shall be directed to take by the Required Lenders;
PROVIDED, HOWEVER, that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may take such action or
refrain from taking such action hereunder or under the Security Documents or
other Loan Documents with respect to a Default or Event of Default as it
shall deem advisable in the best interests of the Lenders.
Neither the Administrative Agent nor the Syndication Agent
(collectively, the "AGENTS") shall be responsible in any manner to any of the
Lenders for the effectiveness, enforceability, perfection, value,
genuineness, validity or due execution of this Agreement, the Notes or any of
the other Loan Documents or Collateral or any other agreements or
certificates, requests, financial statements, notices or opinions of counsel
or for any recitals, statements, warranties or representations contained
herein or in any such instrument or be under any obligation to ascertain or
inquire as to the performance or observance of any of the terms, provisions,
covenants, conditions, agreements or obligations of this Agreement or any of
the other Loan Documents or any other agreements on the part of the Borrowers
and, without limiting the generality of the foregoing, the Agents shall, in
the absence of knowledge to the contrary, be entitled to accept any
certificate furnished pursuant to this Agreement or any of the other Loan
Documents as conclusive evidence of the facts stated therein and shall be
entitled to rely on any note, notice, consent, certificate, affidavit,
letter, telegram, teletype message, statement, order or other document which
it believes in good faith to be genuine and correct and to have been signed
or sent by the proper person or persons. It is understood and agreed that
each of the Agents may exercise its rights and powers
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under other agreements and instruments to which it is or may be a party, and
engage in other transactions with the Borrowers, as though it were not one of
the Agents hereunder.
The Administrative Agent shall promptly give notice to the
Lenders of the receipt or sending of any material notice, schedule, report,
projection, financial statement or other document or information pursuant to
this Agreement or any of the other Loan Documents and shall promptly forward
a copy thereof to each Lender.
Neither of the Agents nor any of their respective directors,
officers, employees or agents shall have any responsibility to the Borrowers
on account of the failure or delay in performance or breach by any Lender
other than such Agents of any of its obligations hereunder or to any Lender
on account of the failure of or delay in performance or breach by any other
Lender or the Borrowers of any of their respective obligations hereunder or
in connection herewith.
Each of the Agents may consult with legal counsel selected by
it in connection with matters arising under this Agreement or any of the
other Loan Documents and any action taken or suffered in good faith by it in
accordance with the opinion of such counsel shall be full justification and
protection to it. Each of the Agents may exercise any of its powers and
rights and perform any duty under this Agreement or any of the other Loan
Documents through agents or attorneys.
The Administrative Agent and the Borrowers may deem and treat
the payee of any Note as the holder thereof until written notice of transfer
shall have been delivered as provided herein by such payee to the
Administrative Agent and the Borrowers.
With respect to the Loans made hereunder, the Notes issued to
it and any other Credit Event applicable to it, the Administrative Agent in
its individual capacity and not as an Administrative Agent shall have the
same rights, powers and duties hereunder and under any other agreement
executed in connection herewith as any other Lender and may exercise the same
as though it were not the Administrative Agent, and the Administrative Agent
and its affiliates may accept deposits from, lend money to and generally
engage in any kind of business with the Borrowers or other affiliate thereof
as if it were not the Administrative Agent. Each of the Lenders hereby
acknowledges that each of the Agents and/or one or more Affiliates of such
Agents may at any time and from time to time be a holder of equity interests
in a Loan Party.
Each Lender agrees (i) to reimburse each of the Agents in the
amount of such Lender's PRO RATA share (based on its Revolving Credit
Commitment hereunder) of any expenses incurred for its own benefit and/or for
the benefit of the Lenders by the Agents, including counsel fees and
compensation of agents and employees paid for services rendered on behalf of
the Lenders, not reimbursed by the Borrowers and (ii) to indemnify and hold
harmless each of the Agents and any of their respective directors, officers,
employees or agents, on demand, in the amount of its PRO RATA share, from and
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against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by or asserted against it
in its capacity as the Administrative Agent or any of them in any way
relating to or arising out of this Agreement or any of the other Loan
Documents or any action taken or omitted by it or any of them under this
Agreement or any of the other Loan Documents, to the extent not reimbursed by
the Borrowers; PROVIDED, HOWEVER, that no Lender shall be liable to any of
the Agents for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgment, suits, costs, expenses or disbursements
resulting from the gross negligence or willful misconduct of such Agents or
any of their respective directors, officers, employees or agents. The
foregoing agreement shall survive the repayment of all Obligations and the
termination of this Agreement.
With respect to the release of Collateral, Lenders hereby
irrevocably authorize the Administrative Agent, at its option and in its
discretion, to release any Lien granted to or held by the Administrative
Agent upon any property covered by this Agreement or the other Loan Documents
(i) upon termination of the Total Revolving Credit Commitment and payment and
satisfaction of all Obligations; (ii) constituting property being sold or
disposed of in compliance with the provisions of this Agreement (and the
Administrative Agent may rely in good faith conclusively on any certificate
to such effect, without further inquiry); or (iii) constituting property
leased to any of the Borrowers or any of their subsidiaries under a lease
which has expired or been terminated in a transaction permitted under this
Agreement or is about to expire and which has not been, and is not intended
by such Borrower or such subsidiary to be, renewed or extended; PROVIDED,
HOWEVER, that (x) the Administrative Agent shall not be required to execute
any release on terms which, in the Administrative Agent's opinion, would
expose the Administrative Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without recourse
or warranty, and (y) such release shall not in any manner discharge, affect
or impair the Obligations or any Liens upon (or obligations of any Loan
Party, in respect of), all interests retained by any Loan Party, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute part of the property covered by this Agreement or the Loan
Documents.
With respect to perfecting Lenders' security interest in
Collateral which, in accordance with Article 9 of the Uniform Commercial Code
in any applicable jurisdiction, can be perfected only by possession, each
Lender hereby appoints each other Lender for the purpose of perfecting such
interest. Should any Lender (other than the Administrative Agent) obtain
possession of any such Collateral, such Lender shall notify the
Administrative Agent, and, promptly upon the Administrative Agent's request,
shall deliver such Collateral to the Administrative Agent or in accordance
with the Administrative Agent's instructions. Each Lender agrees that it
will not have any right individually to enforce or seek to enforce this
Agreement or any Loan Document or to realize upon any Collateral for the
Loans, it being understood and agreed that such rights and remedies may be
exercised only by the Administrative Agent.
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In the event that a petition seeking relief under Title 11 of the
United States Code or any other Federal, state or foreign bankruptcy,
insolvency, liquidation or similar law is filed by or against any Loan Party,
the Administrative Agent is authorized to file a proof of claim on behalf of
itself and the Lenders in such proceeding for the total amount of Obligations
owed by such Loan Party. With respect to any such proof of claim which the
Administrative Agent may file, each Lender acknowledges that without reliance on
such proof of claim, such Lender shall make its own evaluation as to whether an
individual proof of claim must be filed in respect of such Obligations owed to
such Lender and, if so, take the steps necessary to prepare and timely file such
individual claim.
Each Lender acknowledges that it has, independently and without
reliance upon the Agents or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and any other Loan Document to which such
Lender is party. Each Lender also acknowledges that it will, independently and
without reliance upon the Agents or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own decisions in taking or not taking action under or based upon this Agreement,
any other Loan Document, any related agreement or any document furnished
hereunder.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders and the Borrowers. Upon any such resignation,
the Lenders shall have the right to appoint a successor Administrative Agent.
If no successor Administrative Agent shall have been so appointed by such
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a successor
Administrative Agent which shall be a bank organized under the laws of the
United States, or any State thereof, having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor bank, such successor shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under each of the other
Loan Documents. After any Administrative Agent's resignation hereunder, the
provisions of this Article shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as
Administrative Agent.
The Lenders hereby acknowledge that the Administrative Agent shall
be under no duty to take any discretionary action permitted to be taken by the
Administrative Agent pursuant to the provisions of this Agreement or any of the
other Loan Documents unless it shall be requested in writing to do so by the
Required Lenders. The Lenders further hereby acknowledge that neither of the
Agents is acting as the fiduciary of, or the trustee for, any of the Lenders and
except as expressly set forth herein, neither of the Agents shall have any duty
to disclose, and shall not be
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liable for the failure to disclose, any information communicated to such
Agents by or relating to the Borrowers or any of their respective
subsidiaries.
X. COLLECTION OF RECEIVABLES
The Borrowers and the Guarantors will, at the request of the
Administrative Agent, at their own cost and expense upon the occurrence of an
Event of Default, (i) arrange for remittances on Receivables owned by the
Borrowers and the Guarantors to be made directly to lockboxes designated by the
Administrative Agent or in such other manner as the Administrative Agent may
direct, and (ii) promptly deposit all payments received by the Borrowers and the
Guarantors on account of Receivables, whether in the form of cash, checks,
notes, drafts, bills of exchange, money orders or otherwise, in one or more
accounts designated by the Administrative Agent in precisely the form received
(but with any endorsements of the Borrowers necessary for deposit or
collection), subject to withdrawal by the Administrative Agent only, as
hereinafter provided, and until such payments are deposited, such payments shall
be deemed to be held in trust by the Borrowers or the Guarantors, as the case
may be, for and as the Lenders' property and shall not be commingled with the
Borrowers' or the Guarantors', as the case may be, other funds.
Upon the occurrence and continuance of an Event of Default, the
Administrative Agent may send a notice of assignment and/or notice of the
Administrative Agent's security interest to any and all Customers or any third
party holding or otherwise concerned with any of the Collateral, and thereafter
the Administrative Agent shall have the sole right to collect the Receivables
and/or take possession of the Collateral and the books and records relating
thereto. Neither the Borrowers nor the Guarantors shall, without the
Administrative Agent's prior written consent, grant any extension of the time of
payment of any Receivable, compromise or settle any Receivable for less than the
full amount thereof, release, in whole or in part, any person or property liable
for the payment thereof, or allow any credit or discount whatsoever thereon
except, prior to the occurrence and continuance of an Event of Default, as may
be customary in the Borrowers' or the Guarantors', as the case may be, business.
XI. MISCELLANEOUS
SECTION 11.01 NOTICES. Notices, consents and other
communications provided for herein shall be in writing and shall be delivered or
mailed (or in the case of telex or facsimile communication, delivered by telex,
graphic scanning, telecopier or other telecommunications equipment, with receipt
confirmed) addressed,
(a) if to all or any of the Borrowers, Guarantors, or Grantors,
at 222 North Sepulveda Boulevard, Suite 740, El Segundo, California 90245,
Attention: Chief
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Financial Officer (Telecopy No. (310) 765-2459), with a copy to the Chief
Executive Officer (Telecopy No. (310) 765-2459), with a copy to McDermott,
Will & Emery, 1301 Dove Street, Newport Beach, California 92660-2444,
Attention: Richard J. Babcock, Esq. (Telecopy No. (949) 851-9348);
(b) if to the Syndication Agent, at The Chase Manhattan Bank,
600 Fifth Avenue, 4th Floor, New York, New York 10020-2302, Attention: Credit
Executive (Telecopy No. (212) 332-4294), with a copy to Kaye, Scholer, et al.,
LLP, at 425 Park Avenue, New York, New York 10022, Attention: Jeffrey M.
Epstein, Esq. (Telecopy No. (212) 836-7151);
(c) if to the Administrative Agent, at Union Bank of
California, N.A., 100 Pringle Avenue, Suite 650 Walnut Creek, California 94596,
Attention: Nancy A. Perkins, Vice President, Commercial Finance Division
(Telecopy No. (925) 943-7442), with a copy to Buchalter, Nemer, Fields &
Younger, 333 Market Street, 29th Floor, San Francisco, CA 94105-2130, Attention:
Gary Nemer, Esq. (Telecopy No. (415) 227-0770); and
(d) if to any Lender, at the address set forth below its name
in SCHEDULE 2.01 annexed hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if hand delivered or three days after being sent by registered
or certified mail, postage prepaid, return receipt requested, if by mail, or
upon receipt if by any telex, facsimile or other telecommunications equipment,
in each case addressed to such party as provided in this Section 11.01 or in
accordance with the latest unrevoked direction from such party.
SECTION 11.02 SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by any Borrowers or any subsidiary thereof
herein and in the certificates or other instruments prepared or delivered in
connection with this Agreement, any of the Security Documents, any Guarantee or
any other Loan Document, shall be considered to have been relied upon by the
Lenders and shall survive the making by the Lenders of the Loans and the
execution and delivery to the Lenders of the Notes and the occurrence of any
other Credit Event and shall continue in full force and effect as long as the
principal of or any accrued interest on the Notes or any other fee or amount
payable under the Notes or this Agreement or any other Loan Document is
outstanding and unpaid and so long as the Total Revolving Credit Commitment has
not been terminated.
SECTION 11.03 SUCCESSORS AND ASSIGNS; PARTICIPATIONS. (a)
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
and all covenants, promises and agreements by or on behalf of any Loan Party,
any ERISA Affiliate, any subsidiary of any thereof, the Administrative Agent or
the Lenders, that are
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contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns. Without limiting the generality of the
foregoing, the Borrowers specifically confirm that any Lender may at any time
and from time to time pledge or otherwise grant a security interest in any
Loan or any Note (or any part thereof) to any Federal Reserve Bank. No
Borrowers may assign or transfer any of its rights or obligations hereunder
without the written consent of all the Lenders.
(b) Each Lender, without the consent of the Borrowers or the
Agents, may sell participations to one or more banks or other entities in all or
a portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Revolving Credit Commitment) and the Loans
owing to it and undrawn Letters of Credit and the Notes held by it); PROVIDED,
HOWEVER, that (i) such Lender's obligations under this Agreement (including,
without limitation, its Revolving Credit Commitment) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) the banks or other entities buying
participations shall be entitled to the cost protection provisions contained in
Section 2.10, 2.12 and 2.16 hereof, but only to the extent any of such Sections
would be available to the Lender which sold such participation, and (iv) the
Borrowers, the Administrative Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement; PROVIDED, FURTHER, HOWEVER, that such Lender
shall retain the sole right and responsibility to enforce the obligations of the
Loan Parties relating to the Loans, including, without limitation, the right to
approve any amendment, modification or waiver of any provision of this
Agreement, other than amendments, modifications or waivers with respect to
decreasing any fees payable hereunder or the amount of principal or the rate of
interest payable on the Loans, or extending the dates fixed for any payment of
principal of or interest on, the Loans or increasing or extending the Revolving
Credit Commitments or the release of all Collateral.
(c) Each Lender may assign by novation, to any one or more
banks or other entities without the prior written consent of the Agents, all or
a portion of its interests, rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, all or a portion of its
Revolving Credit Commitment and the same portion of the Loans and undrawn
Letters of Credit at the time owing to it and the Note or Notes held by it),
PROVIDED, HOWEVER, that (i) each such assignment shall be of a constant, and not
a varying, percentage of all of the assigning Lender's rights and obligations
under this Agreement, which shall include the same percentage interest in the
Loans, Letters of Credit and Notes, (ii) (x) prior to the Conversion Date, the
amount of the Revolving Credit Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Administrative
Agent) shall be in a minimum principal amount of $4,000,000 (unless to another
Lender, in which event there shall be no minimum requirement) and the amount of
the Revolving Credit Commitment retained by such Lender shall not be less than
$4,000,000 (unless such Lender's minimum hold position shall fall below
$4,000,000 by reason of an assignment to another Lender) or shall be zero, and
(y) after the Conversion Date, the amount of
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the Term Loan of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date the Assignment and Acceptance with
respect to such assignment is delivered to the Administrative Agent) shall be
in a minimum principal amount of $4,000,000 (unless to another Lender, in
which event there shall be no minimum requirement) and the amount of the Term
Loan retained by such Lender shall not be less than $4,000,000 (unless such
Lender's minimum hold position shall fall below $4,000,000 by reason of an
assignment to another Lender) or shall be zero, (iii) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for
its acceptance and recording in the Register (as defined below), an
Assignment and Acceptance, together with any Note subject to such assignment
and a processing and recordation fee of $3,000) and (iv) the Assignee, if it
shall not be a Lender, shall deliver to the Administrative Agent an
Administrative Questionnaire in the form provided to such Assignee by the
Administrative Agent. Upon such execution, delivery, acceptance and recording
and after receipt of the written consent of the Administrative Agent, from
and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five (5) Business Days after the
execution thereof, (x) the assignee thereunder shall be a party hereto and,
to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder and under the other Loan Documents and (y)
the Lender which is assignor thereunder shall, to the extent provided in such
Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.10, 2.12, 2.16 and
11.04, as well as any fees accrued for its account hereunder and not yet
paid).
(d) By executing and delivering an Assignment and Acceptance,
the Lender which is assignor thereunder and the assignee thereunder confirm to,
and agree with, each other and the other parties hereto as follows: (i) other
than the representation and warranty that it is the legal and beneficial owner
of the interest being assigned thereunder free and clear of any adverse claim,
and that its Commitment and the outstanding balance of its Loans and
participations in Letters of Credit, in each case without giving effect to
assignments thereof which have not become effective, are as set forth in such
Assignment and Acceptance, such Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement or the execution,
legality, validity, enforceability, perfection, genuineness, sufficiency or
value of this Agreement, the other Loan Documents or any Collateral with respect
thereto or any other instrument or document furnished pursuant hereto or
thereto; (ii) such Lender 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 their respective
obligations under this Agreement, any Guarantees or any of the other Loan
Documents or any other instrument or document furnished pursuant hereto or
thereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance and confirms that it has
received a copy of this Agreement, any Guarantees and of the other Loan
Documents, together with
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copies of financial statements and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Acceptance; (iv) such assignee will, independently
and without reliance upon the Administrative Agent, such Lender 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 this Agreement; (v) such assignee appoints and
authorizes the Administrative Agent to take such action as the Administrative
Agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Administrative Agent by the terms hereof, together with such
powers as are reasonably incidental thereto; and (vi) such assignee agrees
that it will perform in accordance with their terms all of the obligations
which by the terms of this Agreement are required to be performed by it as a
Lender.
(e) The Administrative Agent shall maintain at its address
referred to in Section 11.01 hereof a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses of
the Lenders and the Revolving Credit Commitment, as the case may be, of, and
principal amount of the Loans owing to, each Lender from time to time (the
"REGISTER"). The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrowers, the Administrative Agent and the Lenders may
treat each person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrowers or any Lender at any reasonable time and from time
to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee together with any Note or Notes subject
to such assignment, any processing and recordation fee and, if required, an
Administrative Questionnaire and the written consent to such assignment, the
Administrative Agent shall, if such Assignment and Acceptance has been completed
and is precisely in the form of EXHIBIT F annexed hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Lenders and the Borrowers.
Within five (5) Business Days after receipt of such notice, the Borrowers, at
their own expense, shall execute and deliver to the Administrative Agent in
exchange for each surrendered Note or Notes a new Note or Notes to the order of
such assignee in an amount equal to its portion of the Revolving Credit
Commitment or of the Term Loan, assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained any Revolving Credit
Commitment or Term Loan hereunder, a new Note or Notes to the order of the
assigning Lender in an amount equal to the Revolving Credit Commitment or Term
Loan retained by it hereunder. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note or Notes, or, with respect to the Term Notes, the principal amount of the
Term Notes, outstanding at such time as evidenced by the Term Note or Notes,
shall be dated the effective date of such Assignment and Acceptance and shall
otherwise be in substantially the form of EXHIBIT A or EXHIBIT B, as the case
may be. Notes surrendered to the Borrowers shall be canceled by the Borrowers.
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(g) Notwithstanding any other provision herein, any Lender may,
in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 11.03, disclose to the assignee or
participant or proposed assignee or participant, any information, including,
without limitation, any Information, relating to the Borrowers furnished to such
Lender by or on behalf of the Borrowers in connection with this Agreement;
PROVIDED, HOWEVER, that prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall agree to preserve the
confidentiality of any confidential Information relating to the Borrowers
received from such Lender.
SECTION 11.04 EXPENSES; INDEMNITY. (a) Each of the
Borrowers agrees to pay all reasonable out-of-pocket expenses incurred by the
Agents in connection with the preparation of this Agreement and the other Loan
Documents or with any amendments, modifications, waivers, extensions, renewals,
renegotiations or "workouts" of the provisions hereof or thereof (whether or not
the transactions hereby contemplated shall be consummated) or incurred by the
Agents or any of the Lenders in connection with the enforcement or protection of
its rights in connection with this Agreement or any of the other Loan Documents
or with the Loans made or the Notes or Letters of Credit issued hereunder, or in
connection with any pending or threatened action, proceeding, or investigation
relating to the foregoing, including but not limited to the reasonable fees and
disbursements of counsel for the Agents and ongoing field examination expenses
and charges, and, in connection with such enforcement or protection, the
reasonable fees and disbursements of counsel for the Lenders. Each of the
Borrowers further indemnifies the Lenders from and agrees to hold them harmless
against any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery of this Agreement or the
Notes.
(b) Each of the Borrowers indemnifies the Agents and each
Lender and their respective directors, officers, employees and agents against,
and agrees to hold the Agents, each Lender and each such person harmless from,
any and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees and expenses, incurred by or asserted against the Lender
or any such person arising out of, in any way connected with, or as a result of
(i) the use of any of the proceeds of the Loans, (ii) this Agreement, the
Guarantees, any of the Security Documents, or the other documents contemplated
hereby or thereby, (iii) the performance by the parties hereto and thereto of
their respective obligations hereunder and thereunder (including but not limited
to the making of the Total Revolving Credit Commitment) and consummation of the
transactions contemplated hereby and thereby, (iv) breach of any representation
or warranty, or (v) any claim, litigation, investigation or proceedings relating
to any of the foregoing, whether or not the Agents, any Lender or any such
person is a party thereto; PROVIDED, HOWEVER, that such indemnity shall not, as
to the Agents or any Lender, apply to any such losses, claims, damages,
liabilities or related expenses to the extent that they result from the gross
negligence or willful misconduct of any Agent or any Lender.
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(c) Each of the Borrowers indemnifies, and agrees to defend and
hold harmless the Administrative Agent and the Lenders and their respective
officers, directors, shareholders, agents and employees (collectively, the
"INDEMNITEES") from and against any loss, cost, damage, liability, lien,
deficiency, fine, penalty or expense (including, without limitation, reasonable
attorneys' fees and reasonable expenses for investigation, removal, cleanup and
remedial costs and modification costs incurred to permit, continue or resume
normal operations of any property or assets or business of the Borrowers or any
subsidiary thereof) arising from a violation of, or failure to comply with any
Environmental Law and to remove any Lien arising therefrom except to the extent
caused by the gross negligence or willful misconduct of any Indemnitee, which
any of the Indemnitees may incur or which may be claimed or recorded against any
of the Indemnitees by any person.
(d) The provisions of this Section 11.04 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or the Notes, or any investigation made by or on
behalf of the Agents or any Lender. All amounts due under this Section 11.04
shall be payable on written demand therefor.
SECTION 11.05 APPLICABLE LAW. THIS AGREEMENT AND THE NOTES
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA (OTHER THAN THE CONFLICTS OF LAWS PRINCIPLES THEREOF).
SECTION 11.06 RIGHT OF SETOFF. If an Event of Default shall
have occurred and be continuing, upon the request of the Required Lenders each
Lender shall and is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender to or for the credit or the
account of any of the Borrowers against any and all of the obligations of the
Borrowers now or hereafter existing under this Agreement and the Notes held by
such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement or the Notes and although such obligations may be
unmatured. Each Lender agrees to notify promptly the Administrative Agent and
the Borrowers after any such setoff and application made by such Lender, but the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
setoff) which may be available to such Lender.
SECTION 11.07 PAYMENTS ON BUSINESS DAYS. (a) Should the
principal of or interest on the Notes or any fee or other amount payable
hereunder become due and payable on other than a Business Day, payment in
respect thereof may be made on the next succeeding Business Day (except as
otherwise specified in
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the definition of "Interest Period"), and such extension of time shall in
such case be included in computing interest, if any, in connection with such
payment.
(b) All payments by any of the Borrowers hereunder and all
Loans made by the Lenders hereunder shall be made in lawful money of the
United States of America in immediately available funds at the office of the
Administrative Agent set forth in Section 11.01 hereof.
SECTION 11.08 WAIVERS; AMENDMENTS. (a) No failure or
delay of any Lender in exercising any power or right hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Lenders hereunder are
cumulative and not exclusive of any rights or remedies which they may otherwise
have. No waiver of any provision of this Agreement or the Notes nor consent to
any departure by any of the Borrowers therefrom shall in any event be effective
unless the same shall be authorized as provided in paragraph (b) below, and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice to or demand on any of the Borrowers in
any case shall entitle it to any other or further notice or demand in similar or
other circumstances. Each holder of any of the Notes shall be bound by any
amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or agreements in
writing entered into by the Borrowers and the Required Lenders; PROVIDED,
HOWEVER, that no such agreement shall (i) change the principal amount of, or
extend or advance the maturity of or the dates for the payment of principal of
or interest on, any Note or reduce the rate of interest on any Note, (ii) change
the Revolving Credit Commitment of any Lender or amend or modify the provisions
of this Section, Section 2.06, Section 2.13, Section 4.14 or Section 11.04
hereof or the definition of "Required Lenders," or (iii) release any material
portion of Collateral, in each case without the prior written consent of each
Lender affected thereby, and PROVIDED, FURTHER, HOWEVER, that no such agreement
shall amend, modify or otherwise affect the rights or duties of the Agents under
this Agreement or the other Loan Documents without the written consent of the
Agents. Each Lender and holder of any Note shall be bound by any modification
or amendment authorized by this Section regardless of whether its Notes shall be
marked to make reference thereto, and any consent by any Lender or holder of a
Note pursuant to this Section shall bind any person subsequently acquiring a
Note from it, whether or not such Note shall be so marked.
(c) In the event that the Borrowers request, with respect to
this Agreement or any other Loan Document, an amendment, modification or waiver
and such amendment, modification or waiver would require the unanimous consent
of all of
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the Lenders in accordance with Section 11.08(b) above, and such amendment,
modification or waiver is agreed to in writing by the Borrowers and the
Required Lenders but not by all of the Lenders, then notwithstanding anything
to the contrary in Section 11.08(b) above, with the written consent of the
Borrowers and such Required Lenders, the Borrowers and Required Lenders may,
but shall not be obligated to, amend this Agreement without the consent of
the Lender or Lenders who did not agree to the proposed amendment,
modification or waiver (the "MINORITY LENDERS") solely to provide for (i) the
termination of the Revolving Credit Commitment of each Minority Lender, (ii)
the assignment in accordance with Section 11.03 hereof to one or more persons
of each Minority Lender's interests, rights and obligations under this
Agreement (including, without limitation, all of such Minority Lender's
Revolving Credit Commitment as well as its portion of all outstanding Loans
and the Note or Notes held by such Minority Lender) and the other Loan
Documents and/or an increase in the Revolving Credit Commitment of one or
more Required Lenders, in each case so that after giving effect thereto the
Total Revolving Credit Commitment shall be in the same amounts as prior to
the events described in this paragraph, (iii) the repayment to the Minority
Lenders in full of all Loans outstanding and accrued interest thereon at the
time of the assignment and/or increase in Commitments described in clause
(ii) above with the proceeds of Loans made by such persons who are to become
Lenders by assignment or with the proceeds of Loans made by Required Lenders
who have agreed to increase their Revolving Credit Commitment, (iv) the
payment to the Minority Lenders by the Borrowers of all fees and other
compensation due and owing such Minority Lenders under the terms of this
Agreement and the other Loan Documents and (v) such other modifications as
the Required Lenders and Borrowers shall deem necessary in order to effect
the changes specified in clauses (i) through (iv) hereof.
SECTION 11.09 SEVERABILITY. In the event any one or more of the
provisions contained in this Agreement or in the Notes should be held invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall not
in any way be affected or impaired thereby.
SECTION 11.10 ENTIRE AGREEMENT; WAIVER OF JURY TRIAL, ETC.
(a)This Agreement, the Notes and the other Loan Documents constitute the entire
contract between the parties hereto relative to the subject matter hereof. Any
previous agreement among the parties hereto with respect to the Transactions is
superseded by this Agreement, the Notes and the other Loan Documents. Except as
expressly provided herein or in the Notes or the Loan Documents (other than this
Agreement), nothing in this Agreement, the Notes or in the other Loan Documents,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, the Notes or the other Loan Documents.
(b) Except as prohibited by law, each party hereto hereby
waives any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising
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out of, under or in connection with this Agreement, the Notes, any of the
other Loan Documents or the Transactions.
(c) Except as prohibited by law, each party hereto hereby
waives any right it may have to claim or recover in any litigation referred to
in paragraph (b) of this Section 11.10 any special, exemplary, punitive or
consequential damages or any damages other than, or in addition to, actual
damages.
(d) Each party hereto (i) certifies that no representative,
agent or attorney of any Lender has represented, expressly or otherwise, that
such Lender would not, in the event of litigation, seek to enforce the foregoing
waivers and (ii) acknowledges that it has been induced to enter into this
Agreement, the Notes or the other Loan Documents, as applicable, by, among other
things, the mutual waivers and certifications herein.
SECTION 11.11 CONFIDENTIALITY. The Agents and the Lenders agree
to keep confidential (and to cause their respective officers, directors,
employees, agents and representatives to keep confidential) all information,
materials and documents furnished to the Agents or any Lender (the
"INFORMATION"). Notwithstanding the foregoing, the Agents and each Lender shall
be permitted to disclose Information (i) to such of its officers, directors,
employees, agents and representatives as need to know such Information in
connection with its participation in any of the Transactions or the
administration of this Agreement or the other Loan Documents; (ii) to the extent
required by applicable laws and regulations or by any subpoena or similar legal
process, or requested by any governmental agency or authority; (iii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of this Agreement, (B) becomes available to the Agents or such Lender
on a non-confidential basis from a source other than any Loan Party or any of
its subsidiaries or (C) was available to the Agents or such Lender on a
non-confidential basis prior to its disclosure to the Agents or such Lender by
any Loan Party or any of its subsidiaries; (iv) to the extent any Loan Party or
any of its subsidiaries shall have consented to such disclosure in writing; (v)
in connection with the sale of any Collateral pursuant to the provisions of any
of the other Loan Documents; or (vi) pursuant to Section 11.03(g) hereof.
SECTION 11.12 SUBMISSION TO JURISDICTION. (a) Any legal action
or proceeding with respect to this Agreement or the Notes or any other Loan
Document may be brought in the courts of the State of California or of the
United States of America for the Northern District of California, and, by
execution and delivery of this Agreement, each Loan Party hereby accepts for
itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts.
(b) Each Loan Party hereby irrevocably waives, in connection
with any such action or proceeding, any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
forum non conveniens, which it may now or hereafter have to the bringing of any
such action or proceeding in such jurisdictions.
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(c) Each Loan Party hereby irrevocably consents to the service
of process of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to each such person, as the case may be, at its address set forth in
Section 11.01 hereof.
(d) Nothing herein shall affect the right of the Administrative
Agent or any Lender to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against any Loan Party in any
other jurisdiction.
SECTION 11.13 COUNTERPARTS; FACSIMILE SIGNATURE. This Agreement
may be executed in counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract, and shall
become effective when copies hereof which, when taken together, bear the
signatures of each of the parties hereto shall be delivered to the
Administrative Agent. Delivery of an executed counterpart of a signature page
to this Agreement by telecopier shall be effective as delivery of a manually
executed signature page hereto.
SECTION 11.14 HEADINGS. Article and Section headings and the
Table of Contents used herein are for convenience of reference only and are not
to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
XII. GUARANTEES
Each Guarantor unconditionally guarantees, as a primary obligor
and not merely as a surety, jointly and severally with each other Guarantor, the
due and punctual payment of the principal of and interest on each of the Notes,
when and as due, whether at maturity, by acceleration, by notice of prepayment
or otherwise, and the due and punctual performance of all other Obligations.
Each Guarantor further agrees that the Obligations may be extended and renewed,
in whole or in part, without notice to or further assent from it, and that it
will remain bound upon its guarantee notwithstanding any extension or renewal of
any Obligations.
Each Guarantor waives presentment to, demand of payment from and
protest to the Borrowers of any of the Obligations, and also waives notice of
acceptance of its guarantee and notice of protest for nonpayment. The
obligations of a Guarantor hereunder shall not be affected by (a) the failure of
any Lender or the Administrative Agent to assert any claim or demand or to
enforce any right or remedy against the Borrowers or any other Guarantor under
the provisions of this Agreement, the Notes or any of the other Loan Documents
or otherwise; (b) any rescission, waiver, amendment or modification of any of
the terms or provisions of this Agreement, the Notes, any of the other Loan
Documents, any guarantee or any other agreement; (c) the release of any security
held by the Administrative Agent for the Obligations or
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any of them; or (d) the failure of any Lender to exercise any right or remedy
against any other Guarantor of the Obligations.
Each Guarantor further agrees that its guarantee constitutes a
guarantee of payment when due and not of collection, and waives any right to
require that any resort be had by any Lender to any security (including, without
limitation, any Collateral) held for payment of the Obligations or to any
balance of any deposit account or credit on the books of any Lender in favor of
any of the Borrowers or any other person.
The obligations of each Guarantor hereunder shall not be subject
to any reduction, limitation, impairment or termination for any reason,
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations or otherwise. Without
limiting the generality of the foregoing, the obligations of each Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Administrative Agent or any Lender to assert any claim or demand
or to enforce any remedy under this Agreement, the Notes or under any other Loan
Document, any guarantee or any other agreement, by any waiver or modification of
any provision thereof, by any default, failure or delay, willful or otherwise,
in the performance of the Obligations, or by any other act or omission which may
or might in any manner or to any extent vary the risk of such Guarantor or
otherwise operate as a discharge of such Guarantor as a matter of law or equity.
Each Guarantor further agrees that its guarantee shall continue to
be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be returned by the Administrative Agent or any Lender upon the
bankruptcy or reorganization of any of the Borrowers or otherwise.
Each of the Guarantors irrevocably waives acceptance hereof,
presentment, demand, notices of nonperformance, protests, notices of protest,
notices of dishonor, and notices of acceptance of this guarantee and of the
existence, creation, or incurring of new or additional Obligations and any
notice not provided for herein, as well as any requirement that at any time any
action be taken by any person against the Borrowers or any other person or any
collateral. Each of the Guarantors waives any defense arising by reason of any
disability or other defense of the Borrowers, or the cessation from any cause
whatsoever of the liability of the Borrowers, or any claim that the obligations
of such Guarantor exceed or are more burdensome than those of the Borrowers.
Each of the Guarantors waives any rights and defenses that are or may become
available to such Guarantor by reason of Sections 2787 to 2855, inclusive, of
the California Civil Code. Each of the Guarantors waives all rights and
defenses that such Guarantor may have because any of the Obligations is secured
by real property. This means, among other things: (i) the Administrative Agent
or any Lender may collect from any of the Guarantors without first foreclosing
on any real or personal property collateral pledged by the Borrowers; and (ii)
if the Administrative Agent forecloses on
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any real property collateral pledged by the Borrowers: (1) the amount of the
Obligations may be reduced only by the price for which that collateral is
sold at the foreclosure sale, even if the collateral is worth more than the
sale price, and (2) the Administrative Agent may collect from each or any of
the Guarantors even if the Administrative Agent, by foreclosing on the real
property collateral, has destroyed any right such Guarantor may have to
collect from the Borrowers. This is an unconditional and irrevocable waiver
of any rights and defenses each of the Guarantors may have because any of the
Obligations is secured by real property. These rights and defenses include,
but are not limited to, any rights or defenses based upon Section 580a, 580b,
580d, or 726 of the California Code of Civil Procedure. Each of the
Guarantors waives any right or defense it may have at law or equity,
including California Code of Civil Procedure Section 580a, to a fair market
value hearing or action to determine a deficiency judgment after a
foreclosure. No provision or waiver herein shall be construed as limiting the
generality of any other waiver contained herein.
Each of the Guarantors authorizes the Administrative Agent or any
Lender, without notice or demand and without affecting the liability of each of
the Guarantors hereunder, from time to time, either before or after revocation
hereof, to (a) receive and hold security for the payment of this guarantee or
any of the Obligations, and exchange, enforce, waive, release, fail to perfect,
sell, or otherwise dispose of any such security; (b) apply such security and
direct the order or manner of sale thereof as the Administrative Agent or any
Lender in its discretion may determine; and (c) release or substitute any one or
more of the endorsers or guarantors.
Notwithstanding any payment made by or for the account of any
of the Guarantors pursuant hereto, no Guarantor shall be subrogated to any
right of the Administrative Agent or any Lender until such time as the
Administrative Agent shall have received final payment of the full amount of
all Obligations. Until the Obligations shall have been paid in full, even
though the Obligations are in excess of the liability of any Guarantor
hereunder, such Guarantor waives (a) any right of subrogation, reimbursement,
indemnification, and contribution (contractual, statutory, or otherwise)
including, without limitation, any claim or right of subrogation under the
Bankruptcy Code (Title 11, United States Code) or any successor statute,
arising from the existence or performance hereof, (b) any right to enforce
any remedy which the Administrative Agent or any Lender now has or may
hereafter have against the Borrowers, and (c) any benefit of, and any right
to participate in, any security now or hereafter held by the Administrative
Agent or any Lender. Each of the Guarantors understands and acknowledges
that if the Administrative Agent forecloses, either by judicial foreclosure
or by exercise of power of sale, any deed of trust securing the Obligations,
that foreclosure could impair or destroy any ability that such Guarantor may
have to seek reimbursement, contribution, or indemnification from the
Borrowers or others based on any right such Guarantor may have of
subrogation, reimbursement, contribution, or indemnification for any amounts
paid by such Guarantor under this guarantee. Each of the Guarantors further
understands and acknowledges that in the absence of this paragraph, such
potential impairment or destruction of such Guarantor's rights, if any, may
entitle such Guarantor to assert a defense to this guarantee based on Section
580d of the California Code of Civil Procedure as interpreted in UNION
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BANK V. GRADSKY, 265 Cal. App. 2d. 40 (1968). By executing this agreement,
each of the Guarantors freely, irrevocably, and unconditionally: (i) waives
and relinquishes that defense and agrees that such Guarantor will be fully
liable hereunder even though the Administrative Agent may foreclose, either
by judicial foreclosure or by exercise of power of sale, any deed of trust
securing the Obligations; (ii) agrees that such Guarantor will not assert
that defense in any action or proceeding which the Administrative Agent or
any Lender may commence to enforce this agreement; (iii) acknowledges and
agrees that the rights and defenses waived by such Guarantor herein include
any right or defense that such Guarantor may have or be entitled to assert
based upon or arising out of any one or more of Sections 580a, 580b, 580d, or
726 of the California Code of Civil Procedure or Section 2848 of the
California Civil Code; and (iv) acknowledges and agrees that the
Administrative Agent and each Lender is relying on this waiver in creating
the Obligations, and that this waiver is a material part of the consideration
which the Administrative Agent and each Lender is receiving for creating the
Obligations.
Each of the Guarantors acknowledges and agrees that it shall have
the sole responsibility for obtaining from the Borrowers such information
concerning the Borrowers's financial conditions or business operations as such
Guarantor may require, and that neither the Administrative Agent nor any Lender
has any duty at any time to disclose to such Guarantor any information relating
to the business operations or financial conditions of the Borrowers.
XIII. LENDERS' ACKNOWLEDGMENT
Notwithstanding any language to the contrary in this Agreement or
in any other Loan Document, the Administrative Agent and the Lenders signatory
hereto hereby acknowledge and agree that to the extent required under applicable
rule or law (a) the rights of the Administrative Agent in the pledge by Dental
Service of the capital stock of Dedicated Dental and by Holdings of the capital
stock of Dental Service, in each case in favor of the Administrative Agent,
shall be subordinate at all times to the Regulatory Tangible Net Equity
Requirement of the Knox-Keene Act (as such terms are hereinafter defined) and to
the requirements of Rule 1300.76 promulgated under the Knox-Keene Act and (b)
any transfer or assignment (whether for value or otherwise) of any ownership
interest in the capital stock of Dedicated Dental or Dental Service on
foreclosure or otherwise will require the filing of a notice of a material
modification and prior approval by the California DMO Regulator (as such term is
hereinafter defined) under the Knox-Keene Act.
In addition, (i) the pledge by Dental Service of the capital stock
of Dedicated Dental and by Holdings of the capital stock of Dental Service, in
each case in favor of the Administrative Agent, shall not become effective until
Dental Service and Dedicated Dental (as the case may be) shall have obtained all
Governmental Approvals necessary or required under the California DMO
Regulations in connection with the execution, delivery or performance by, or
enforcement against, Dental Service of this Agreement, including, without
limitation, the Governmental Approvals relating to the filing of a material
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modification application for the approval with the California DMO Regulator,
and that all such Governmental Approvals remain in full force and effect and
(ii) the pledge by Dental Service of the capital stock of Dedicated Dental
and by Holdings of the capital stock of Dental Service, in each case in favor
of the Administrative Agent, of the stock certificates evidencing all of the
issued and outstanding capital stock of Dental Service and Dedicated Dental,
respectively, pursuant to the Pledge Agreement, are subject to applicable
California DMO Regulations, including, without limitation, the "Upstream
Undertakings" made by Dedicated Dental to the California DMO Regulator in
connection with the application for material modification under the
Knox-Keene Laws.
For the purposes of this Article XIII, the following terms shall have the
meanings specified below :
"CALIFORNIA DMO" means a DMO that is subject to the Knox-Keene
Laws and includes, without limitation, Dedicated Dental and any future
subsidiary of Holdings or Dental Service that is a California DMO or regulated
dental care service contractor.
"CALIFORNIA DMO REGULATIONS" means any law (statutory or common),
treaty, rule or regulation applicable to any California DMO under federal or
state law and any regulations, orders or directives promulgated or issued
pursuant to the foregoing and includes, without limitation, the Knox-Keene Laws
which may apply to the Borrowers, Holdings or subsidiaries thereof and any
undertakings required by a California DMO Regulator.
"CALIFORNIA DMO REGULATOR" means any Governmental Authority
charged with the administration, oversight or enforcement of a California DMO
Regulation, whether primarily, secondarily, or jointly.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state
or other political subdivision thereof (including any California DMO Regulator),
any central bank (or similar monetary or regulatory authority) thereof, any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"KNOX-KEENE LAWS" means the Knox-Keene Health Care Service Plan
Act of 1975, as amended, including, without limitation, any rules or regulations
promulgated thereunder or related thereto.
"REGULATORY TANGIBLE NET EQUITY" means, for any California DMO,
"tangible net equity," "net worth" or such similar financial concept as defined
by any California DMO Regulation promulgated by any California DMO Regulator as
shall be applicable to California DMOs.
"REGULATORY TANGIBLE NET EQUITY REQUIREMENT" means, as to any
California DMO, the minimum level at which a California DMO is required by any
applicable California
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DMO Regulation or California DMO Regulator to maintain its Regulatory
Tangible Net Equity.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the Borrowers, Guarantors (other than
Holdings), the Administrative Agent, the Syndication Agent and the Lenders have
caused this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
GENTLE DENTAL SERVICE CORPORATION,
as a Borrower
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT, INC.,
as a Borrower
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE, INC.,
as a Borrower
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
GMS HAWAII ACQUISITION COMPANY, as a
Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF HAWAII,
INC., as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
<PAGE>
GMS DENTAL GROUP MANAGEMENT OF
SOUTHERN CALIFORNIA, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF THE
MOUNTAIN STATES, INC., as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT - PACIFIC
NORTHWEST, INC., as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL OF IRVINE, as a
Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
GDSC OF PIEDMONT, INC., as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
<PAGE>
GENTLE DENTAL LEGACY, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE OF FLORIDA, INC.,
as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
DENTAL CARE ALLIANCE OF MICHIGAN,
INC., as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
DENTAL CARE ALLIANCE OF GEORGIA, INC.,
as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
DENTAL CARE ALLIANCE OF INDIANA, INC.,
as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
<PAGE>
DENTAL ONE ASSOCIATES, INC.,
as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
DENTAL CARE ALLIANCE OF PENNSYLVANIA,
INC., as a Guarantor
By: /s/ Steven R. Matzkin
-----------------------------
Name: Steven R. Matzkin
Title: President
SERRA PARK DENTAL SERVICES,
INCORPORATED, as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
SPDS DMI, INCORPORATED, as a Guarantor
By: /s/ Michael T. Fiore
-----------------------------
Name: Michael T. Fiore
Title: President
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and as a
Lender
By: /s/ Nancy Perkins
-----------------------------
Name: Nancy Perkins
Title:
<PAGE>
THE CHASE MANHATTAN BANK,
as Syndication Agent and as a Lender
By: /s/ Eric Groberg
-----------------------------
Name: Eric Groberg
Title:
U.S. BANK NATIONAL ASSOCIATION, as a
Lender
By: /s/ Brian O'Neill
-----------------------------
Name: Brian O'Neill
Title:
FLEET CAPITAL CORPORATION, as a Lender
By: /s/ James J. Karnowski
-----------------------------
Name: James J. Karnowski
Title:
NATIONSBANK, N.A., as a
Lender
By: /s/ Patricia Oliver
-----------------------------
Name: Patricia Oliver
Title:
<PAGE>
AMENDMENT AGREEMENT NO. 1
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT AGREEMENT NO. 1 dated July 30, 1999 (this "AGREEMENT"), to
AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1999 (the "CREDIT
AGREEMENT"), among GENTLE DENTAL SERVICE CORPORATION, a Washington corporation
("DENTAL SERVICE"), GENTLE DENTAL MANAGEMENT, INC., a Delaware corporation
("DENTAL MANAGEMENT") and DENTAL CARE ALLIANCE, INC., a Delaware corporation
("DCA"; DCA, Dental Service and Dental Management, each a "BORROWER" and
collectively, the "BORROWERS"), the Guarantors named therein, the financial
institutions from time to time party thereto (collectively, the "LENDERS"),
UNION BANK OF CALIFORNIA, N.A., as administrative agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") and THE CHASE MANHATTAN BANK, as
syndication agent for the Lenders (in such capacity, the "SYNDICATION AGENT").
WHEREAS, the Borrowers, the Guarantors and the Lenders desire to increase
the Total Revolving Credit Commitment (as defined in the Credit Agreement) from
$70,000,000 to $75,000,000;
WHEREAS, First National Bank ("FNB") desires to become a Lender under the
Credit Agreement and to have a Revolving Credit Commitment of $5,000,000;
NOW, THEREFORE, the Borrowers, the Guarantors, the Lenders, the
Administrative Agent and the Syndication Agent hereby agree as follows:
SECTION 1 CAPITALIZED TERMS. Capitalized terms used herein and not defined
shall have the respective meanings assigned to such terms in the Credit
Agreement.
SECTION 2 AMENDMENTS TO THE CREDIT AGREEMENT. Upon the fulfillment of the
conditions set forth in Section 5 hereof the Credit Agreement is hereby amended
as follows:
2.1 The amount "$70,000,000" as it appears in the preamble of the
Credit Agreement is hereby deleted and the amount "$75,000,000" is
hereby substituted therefor.
2.2 Schedule 2.01(a) to the Credit Agreement is hereby amended in
its entirety as set forth on Schedule 2.01(a) attached hereto.
<PAGE>
2.3 Schedule 2.02 to the Credit Agreement is hereby amended in its
entirety as set forth on Schedule 2.02 attached hereto.
2.4 Schedule 2.03 to the Credit Agreement is hereby amended in its
entirety as set forth on Schedule 2.03 attached hereto.
SECTION 3 ADDITIONAL LENDER. By its signature below FNB shall become a
party to and be bound by the provisions of the Credit Agreement as a Lender
and shall have the rights and obligations of a Lender hereunder, thereunder
and under the other Loan Documents.
SECTION 4 CONFIRMATION OF LOAN DOCUMENTS. Each Loan Party, by its
execution and delivery of this Agreement, irrevocably and unconditionally
ratifies and confirms in favor of the Administrative Agent that it consents
to the terms and conditions of the Credit Agreement as it has been amended by
this Agreement and that notwithstanding this Agreement, each Loan Document to
which such Loan Party is a party shall continue in full force and effect in
accordance with its terms, as it has been amended by this Agreement, and is
and shall continue to be applicable to all of the Obligations.
SECTION 5 CONDITIONS PRECEDENT. This Agreement shall become effective
upon the execution and delivery of counterparts hereof by all parties hereto
to the Administrative Agent and the fulfillment of the following conditions:
5.1 All legal matters in connection with this Agreement shall be
satisfactory to the Administrative Agent, the Lenders and their
respective counsel in their sole discretion.
5.2 The Administrative Agent shall have received a $3,000
processing and recordation fee from the Borrowers.
5.3 FNB shall have received its Revolving Credit Note duly
executed by the Borrowers, payable to its order and otherwise complying
with the provisions of Section 2.04 of the Credit Agreement.
5.4 The Administrative Agent shall have received a certificate
signed by a Financial Officer of each Borrower and Guarantor that (i)
both before and after giving effect to the transactions contemplated
herein all representations and warranties contained in this Agreement or
otherwise made in writing to the Administrative Agent in connection
herewith shall be true and correct in all material respects on and as of
the date hereof (except insofar as such representations and warranties
relate expressly to an earlier date) and (ii) both before and after
giving effect to the transactions contemplated herein there exists no
unwaived Default or Event of Default.
2
<PAGE>
5.5 The Administrative Agent shall have received a favorable
opinion of counsel in form and substance satisfactory to the
Administrative Agent and its counsel.
5.6 Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
to the Agent, shall have received payment in full for all legal fees
charged, and all costs and expenses incurred, by such counsel through
the date hereof and all legal fees charged, and all costs and expenses
incurred, by such counsel in connection with the transactions
contemplated under this Agreement and the other Loan Documents and
instruments in connection herewith and therewith.
5.7 The Administrative Agent shall have received such other
documents as the Lenders or the Administrative Agent or its counsel
shall reasonably deem necessary.
SECTION 6 MISCELLANEOUS.
6.1 Each Borrower and each Guarantor reaffirms and restates
the representations and warranties set forth in Article IV of the Credit
Agreement, as amended by this Agreement and after giving effect to the
transactions contemplated herein, and all such representations and
warranties shall be true and correct in all material respects on and as
of the date hereof (except insofar as such representations and
warranties relate expressly to an earlier date). Each Loan Party
represents and warrants (which representations and warranties shall
survive the execution and delivery hereof) to the Agent that:
(a) It has the corporate power and authority to execute, deliver
and carry out the terms and provisions of this Agreement and the
transactions contemplated hereby and has taken or caused to be taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(b) No consent of any other person (including, without limitation,
shareholders or creditors of any Loan Party), and no action of, or
filing with any governmental or public body or authority is required to
authorize, or is otherwise required in connection with the execution,
delivery and performance of this Agreement;
(c) This Agreement has been duly executed and delivered on behalf
of each Loan Party by a duly authorized officer, and constitutes a
legal, valid and binding obligation of each Loan Party enforceable in
accordance with its terms, subject to bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting the enforcement
of creditors' rights generally and the exercise of judicial discretion
in accordance with general principles of equity; and
3
<PAGE>
(d) The execution, delivery and performance of this Agreement will
not violate any law, statute or regulation, or any order or decree of
any court or governmental instrumentality, or conflict with, or result
in the breach of, or constitute a default under any contractual
obligation of any Loan Party.
6.2 Except, as herein expressly amended, the Credit Agreement is
ratified and confirmed in all respects and shall remain in full force
and effect in accordance with its terms.
6.3 The Acknowledgment, Waiver and Consent (the "WAIVER AND
CONSENT") dated as of July 23, 1999, among the Administrative Agent, the
Lenders, the Borrower and the Guarantors is hereby ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with its terms. By its signature below FNB shall become a
party to and be bound by the terms and provisions of the Waiver and
Consent.
6.4 All references to the Credit Agreement contained in the Credit
Agreement and the other Loan Documents and the other documents and
instruments delivered pursuant to or in connection therewith shall mean
the Credit Agreement, as amended hereby and as may in the future be
amended, restated, supplemented or modified from time to time.
6.5 This Agreement may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the
same agreement.
6.6 Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
6.7 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO CHOICE OR CONFLICT OF LAW PRINCIPLES THEREOF.
6.8 The parties hereto shall, at any time and from time to time
following the execution of this Agreement, execute and deliver all such
further instruments and take all such further actions as may be
reasonably necessary or appropriate in order to carry out the provisions
of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
4
<PAGE>
IN WITNESS WHEREOF, the Borrowers, Guarantors, the
Administrative Agent, the Syndication Agent and the Lenders have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
GENTLE DENTAL SERVICE CORPORATION,
as a Borrower
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT, INC.,
as a Borrower
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE, INC.,
as a Borrower
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
GMS HAWAII ACQUISITION COMPANY,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF HAWAII, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
<PAGE>
GMS DENTAL GROUP MANAGEMENT
OF SOUTHERN CALIFORNIA, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF
THE MOUNTAIN STATES, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT - PACIFIC
NORTHWEST, INC., as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL OF IRVINE,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GDSC OF PIEDMONT, INC.,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL LEGACY, INC.,
<PAGE>
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE OF FLORIDA, INC.,
as a Guarantor
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF MICHIGAN, INC.,
as a Guarantor
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF GEORGIA, INC.,
as a Guarantor
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF INDIANA, INC.,
as a Guarantor
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL ONE ASSOCIATES, INC.,
as a Guarantor
<PAGE>
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF PENNSYLVANIA, INC.,
as a Guarantor
By: /s/ David P. Nichols
---------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
SERRA PARK DENTAL SERVICES, INCORPORATED,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
SPDS DMI, INCORPORATED,
as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title: President
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and as a Lender
By: /s/ Nancy Perkins
---------------------------------
Name: Nancy Perkins
Title: Vice President
THE CHASE MANHATTAN BANK, as Syndication Agent
and as a Lender
By: /s/ Eric Groberg
---------------------------------
<PAGE>
Name: Eric Groberg
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Brian O'Neill
---------------------------------
Name: Brian O'Neill
Title: V.P.
FLEET CAPITAL CORPORATION,
as a Lender
By: /s/ James J. Karnowski
---------------------------------
Name: James J. Karnowski
Title: Vice President
BANK OF AMERICA, N.A. (successor by merger to
NationsBank, N. A.), as a Lender
By: /s/ Ruth Z. Edwards
---------------------------------
Name: Ruth Z. Edwards
Title: Vice President
FIRST NATIONAL BANK, as a Lender
By: /s/ Roger Smock
---------------------------------
Name: Roger Smock
Title: Chief Lending Officer
<PAGE>
Solely as to Sections 4 and 6: INTERDENT, INC., as a Guarantor
By: /s/ Michael T. Fiore
---------------------------------
Name: Michael T. Fiore
Title:
<PAGE>
KSFH&H DRAFT OF 8/6/99
AMENDMENT AGREEMENT NO. 2
TO
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDMENT AGREEMENT NO. 2 dated August __, 1999 (this "AGREEMENT"),
to AMENDED AND RESTATED CREDIT AGREEMENT dated as of June 15, 1999 (as
heretofore amended and as may be further amended, modified or supplemented
from time to time the "CREDIT AGREEMENT"), among GENTLE DENTAL SERVICE
CORPORATION, a Washington corporation ("DENTAL SERVICE"), GENTLE DENTAL
MANAGEMENT, INC., a Delaware corporation ("DENTAL MANAGEMENT") and DENTAL
CARE ALLIANCE, INC., a Delaware corporation ("DCA"; DCA, Dental Service and
Dental Management, each a "BORROWER" and collectively, the "BORROWERS"), the
Guarantors named therein, the financial institutions from time to time party
thereto (collectively, the "LENDERS"), UNION BANK OF CALIFORNIA, N.A., as
administrative agent for the Lenders (in such capacity, the "ADMINISTRATIVE
AGENT") and THE CHASE MANHATTAN BANK ("CHASE") , as syndication agent for the
Lenders (in such capacity, the "SYNDICATION AGENT").
WHEREAS, the Borrowers, the Guarantors and the Lenders desire to
increase the Total Revolving Credit Commitment (as defined in the Credit
Agreement) from $75,000,000 to $90,000,000;
WHEREAS, State Street Bank and Trust Company ("SSBTC") desires to
become a Lender under the Credit Agreement and to have a Revolving Credit
Commitment of $10,000,000;
WHEREAS, Chase desires to increase its Revolving Credit Commitment
from $10,000,000 to $15,000,000; and
WHEREAS, the Borrowers, the Guarantors and the Lenders desire to
amend certain provisions of the Credit Agreement as set forth herein;
NOW, THEREFORE, the Borrowers, the Guarantors, the Lenders, the
Administrative Agent and the Syndication Agent hereby agree as follows:
SECTION 1 CAPITALIZED TERMS. Capitalized terms used herein and not
defined shall have the respective meanings assigned to such terms in the
Credit Agreement.
SECTION 2 AMENDMENTS TO THE CREDIT AGREEMENT. Upon the fulfillment of
the conditions set forth in Section 5 hereof the Credit Agreement is hereby
amended as follows:
<PAGE>
2.1 The amount "$75,000,000" as it appears in the preamble of
the Credit Agreement is hereby deleted and the amount "$90,000,000" is
hereby substituted therefor.
2.2 The definition of "Required Lenders" contained in Section 1.01
of the Credit Agreement is hereby amended in its entirety to read as
follows:
"REQUIRED LENDERS" shall mean, from the Closing Date until the
Conversion Date, Lenders having 66 2/3% of the Total Revolving Credit
Commitment, and thereafter, at any time, Lenders holding 66 2/3% of
Term Loans outstanding at such time.
2.3 Section 7.01(e) of the Credit Agreement is hereby amended by
deleting the amount "$5,000,000" as it appears in such section and
substituting therefor the amount "$7,500,000".
2.4 Schedule 2.01(a) to the Credit Agreement is hereby amended in
its entirety as set forth on Schedule 2.01(a) attached hereto.
2.5 Schedule 2.02 to the Credit Agreement is hereby amended in its
entirety as set forth on Schedule 2.02 attached hereto.
2.6 Schedule 2.03 to the Credit Agreement is hereby amended in its
entirety as set forth on Schedule 2.03 attached hereto.
SECTION 3 ADDITIONAL LENDER. By its signature below SSBTC shall become a
party to and be bound by the provisions of the Credit Agreement as a Lender
and shall have the rights and obligations of a Lender hereunder, thereunder
and under the other Loan Documents.
SECTION 4 CONFIRMATION OF LOAN DOCUMENTS. Each Loan Party, by its
execution and delivery of this Agreement, irrevocably and unconditionally
ratifies and confirms in favor of the Administrative Agent that it consents
to the terms and conditions of the Credit Agreement as it has been amended by
this Agreement and that notwithstanding this Agreement, each Loan Document to
which such Loan Party is a party shall continue in full force and effect in
accordance with its terms, as it has been amended by this Agreement, and is
and shall continue to be applicable to all of the Obligations.
SECTION 5 CONDITIONS PRECEDENT. This Agreement shall become effective
upon the execution and delivery of counterparts hereof by all parties hereto
to the Administrative Agent and the fulfillment of the following conditions:
2
<PAGE>
5.1 All legal matters in connection with this Agreement shall be
satisfactory to the Administrative Agent, the Lenders and their
respective counsel in their sole discretion.
5.2 The Administrative Agent shall have received a $3,000
processing and recordation fee from the Borrowers.
5.3 Each of SSBTC and Chase shall have received its Revolving
Credit Note duly executed by the Borrowers, payable to their respective
order and otherwise complying with the provisions of Section 2.04 of the
Credit Agreement.
5.4 The Administrative Agent shall have received a certificate
signed by a Financial Officer of each Borrower and Guarantor that (i)
both before and after giving effect to the transactions contemplated
herein all representations and warranties contained in this Agreement or
otherwise made in writing to the Administrative Agent in connection
herewith shall be true and correct in all material respects on and as of
the date hereof (except insofar as such representations and warranties
relate expressly to an earlier date) and (ii) both before and after
giving effect to the transactions contemplated herein there exists no
unwaived Default or Event of Default.
5.5 The Administrative Agent shall have received a favorable
opinion of counsel in form and substance satisfactory to the
Administrative Agent and its counsel.
5.6 Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
to the Agent, shall have received payment in full for all legal fees
charged, and all costs and expenses incurred, by such counsel through
the date hereof and all legal fees charged, and all costs and expenses
incurred, by such counsel in connection with the transactions
contemplated under this Agreement and the other Loan Documents and
instruments in connection herewith and therewith.
5.7 The Administrative Agent shall have received such other
documents as the Lenders or the Administrative Agent or its counsel
shall reasonably deem necessary.
SECTION 6 MISCELLANEOUS.
6.1 Each Borrower and each Guarantor reaffirms and restates the
representations and warranties set forth in Article IV of the Credit
Agreement, as amended by this Agreement and after giving effect to the
transactions contemplated herein, and all such representations and
warranties shall be true and correct in all material respects on and as
of the date hereof (except insofar as such representations and
warranties relate expressly to an earlier date). Each Loan Party
represents and warrants (which representations and warranties shall
survive the execution and delivery hereof) to the Agent that:
3
<PAGE>
(a) It has the corporate power and authority to execute, deliver
and carry out the terms and provisions of this Agreement and the
transactions contemplated hereby and has taken or caused to be taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(b) No consent of any other person (including, without limitation,
shareholders or creditors of any Loan Party), and no action of, or
filing with any governmental or public body or authority is required to
authorize, or is otherwise required in connection with the execution,
delivery and performance of this Agreement;
(c) This Agreement has been duly executed and delivered on behalf
of each Loan Party by a duly authorized officer, and constitutes a
legal, valid and binding obligation of each Loan Party enforceable in
accordance with its terms, subject to bankruptcy, reorganization,
insolvency, moratorium and other similar laws affecting the enforcement
of creditors' rights generally and the exercise of judicial discretion
in accordance with general principles of equity; and
(d) The execution, delivery and performance of this Agreement will
not violate any law, statute or regulation, or any order or decree of
any court or governmental instrumentality, or conflict with, or result
in the breach of, or constitute a default under any contractual
obligation of any Loan Party.
6.2 Except, as herein expressly amended, the Credit Agreement is
ratified and confirmed in all respects and shall remain in full force
and effect in accordance with its terms.
6.3 The Acknowledgment, Waiver and Consent (the "WAIVER AND
CONSENT") dated as of July 23, 1999, among the Administrative Agent, the
Lenders, the Borrower and the Guarantors is hereby ratified and
confirmed in all respects and shall remain in full force and effect in
accordance with its terms. By its signature below SSBTC shall become a
party to and be bound by the terms and provisions of the Waiver and
Consent.
6.4 All references to the Credit Agreement contained in the Credit
Agreement and the other Loan Documents and the other documents and
instruments delivered pursuant to or in connection therewith shall mean
the Credit Agreement, as amended hereby and as may in the future be
amended, restated, supplemented or modified from time to time.
4
<PAGE>
6.5 This Agreement may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of
which shall be an original and all of which shall constitute one and the
same agreement.
6.6 Delivery of an executed counterpart of a signature page to
this Agreement by telecopier shall be effective as delivery of a
manually executed counterpart of this Agreement.
6.7 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA
WITHOUT REGARD TO CHOICE OR CONFLICT OF LAW PRINCIPLES THEREOF.
6.8 The parties hereto shall, at any time and from time to time
following the execution of this Agreement, execute and deliver all such
further instruments and take all such further actions as may be
reasonably necessary or appropriate in order to carry out the provisions
of this Agreement.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
5
<PAGE>
IN WITNESS WHEREOF, the Borrowers, Guarantors, the
Administrative Agent, the Syndication Agent and the Lenders have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
GENTLE DENTAL SERVICE CORPORATION,
as a Borrower
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT, INC.,
as a Borrower
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE, INC.,
as a Borrower
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
GMS HAWAII ACQUISITION COMPANY,
as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF
HAWAII, INC., as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
<PAGE>
GMS DENTAL GROUP MANAGEMENT OF
SOUTHERN CALIFORNIA, INC., as a Guarantor
By: /s/ Michael T. Fiore
-------------------------------------
Name: Michael T. Fiore
Title: President
GMS DENTAL GROUP MANAGEMENT OF
THE MOUNTAIN STATES, INC., as a Guarantor
By: /s/ Michael T. Fiore
-------------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL MANAGEMENT - PACIFIC
NORTHWEST, INC., as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL OF IRVINE, as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
GDSC OF PIEDMONT, INC., as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
GENTLE DENTAL LEGACY, INC.,
<PAGE>
as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
DENTAL CARE ALLIANCE OF FLORIDA, INC.,
as a Guarantor
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF MICHIGAN, INC.,
as a Guarantor
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF GEORGIA, INC.,
as a Guarantor
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF INDIANA, INC.,
as a Guarantor
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL ONE ASSOCIATES, INC.,
as a Guarantor
<PAGE>
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
DENTAL CARE ALLIANCE OF
PENNSYLVANIA, INC., as a Guarantor
By: /s/ David P. Nichols
------------------------------------
Name: David P. Nichols
Title: Chief Financial Officer
SERRA PARK DENTAL SERVICES,
INCORPORATED, as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
SPDS DMI, INCORPORATED, as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title: President
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and as a Lender
By: /s/ Nancy A. Perkins
------------------------------------
Name: Nancy A. Perkins
Title: Vice President
THE CHASE MANHATTAN BANK, as Syndication
Agent and as a Lender
By: /s/ Eric Groberg
------------------------------------
<PAGE>
Name: Eric Groberg
Title: Vice President
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ Forrest Vollmeh
------------------------------------
Name: Forrest Vollmeh
Title: Vice President
FLEET CAPITAL CORPORATION, as a Lender
By: /s/ James J. Karnowski
------------------------------------
Name: James J. Karnowski
Title: Vice President
BANK OF AMERICA, N.A. (successor by
merger to NationsBank, N. A.), as a Lender
By: /s/ Ruth Z. Edwards
------------------------------------
Name: Ruth Z. Edwards
Title: Vice President
FIRST NATIONAL BANK, as a Lender
By: /s/ David S. Walters
------------------------------------
Name: David S. Walters
Title: Vice President
<PAGE>
STATE STREET BANK AND TRUST
COMPANY, as a Lender
By: /s/ F. Andrew Beisl
------------------------------------
Name: F. Andrew Beisl
Title: Vice President
Solely as to Sections 4 and 6: INTERDENT, INC., as a Guarantor
By: /s/ Michael T. Fiore
------------------------------------
Name: Michael T. Fiore
Title:
<PAGE>
GUARANTY
GUARANTY dated as of March 12, 1999, by InterDent, Inc., a Delaware
corporation (the "GUARANTOR"), in favor of Union Bank of California, N.A., as
administrative agent (the "AGENT") for (i) the lenders (the "LENDERS") named
in Schedule 2.01(a) of the Credit Agreement dated as of September 30, 1998,
by and among Gentle Dental Service Corporation, a Washington corporation and
Gentle Dental Management, Inc., a Delaware corporation (the "BORROWERS"), the
Lenders, The Chase Manhattan Bank, as syndication agent and the Agent (as
amended, modified or supplemented from time to time in accordance with its
terms, the "CREDIT AGREEMENT") and (ii) for itself as issuer of the Letters
of Credit. Capitalized terms used herein and not defined herein shall have
the respective meanings assigned to such terms in the Credit Agreement.
The Agent and the Lenders have agreed to extend Loans and certain other
financial accommodations including, without limitation, the issuance of
Letters of Credit to the Borrowers pursuant to, and subject to the terms and
conditions of the Credit Agreement. The obligation of the Lenders to extend
such Loans under the Credit Agreement is conditioned on the execution and
delivery by the Guarantor of a guaranty in the form hereof of the Obligations
(such Obligations to include, without limitation, the due and punctual
payment and performance of (a) the principal of and interest on the Loans,
when and as due, whether at maturity, by acceleration, upon one or more dates
set for prepayment or otherwise, (b) all other obligations of the Borrowers
at any time and from time to time under the Credit Agreement and the other
Loan Documents and (e) all obligations of the Guarantor at any time and from
time to time under the Loan Documents.
Accordingly, in consideration of the premises and in order to induce the
Agent and the Lenders to make Loans and extend other financial accommodations
under the Credit Agreement, the Guarantor hereby agrees as follows:
Section 1. GUARANTY. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Borrowers (the foregoing being herein
referred to as the "GUARANTEED OBLIGATIONS").
Section 2. WAIVER. The Guarantor hereby absolutely, unconditionally and
irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment,
<PAGE>
demand of payment, protest, notice of dishonor or nonpayment and any other
notice with respect to the Guaranteed Obligations, (iii) any requirement that
the Agent or Lenders protect, secure, perfect or insure any security interest
or Lien or any property subject thereto or exhaust any right or take any
action against the Borrowers or any other person or any Collateral, and (iv)
any other action, event or precondition to the enforcement of this Guaranty
or the performance by the Guarantor of the obligations hereunder.
Section 3. GUARANTY ABSOLUTE. (a) The Guarantor guarantees that, to the
fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting
any of such terms or the rights of the Agent or any Lender with respect
thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Credit Agreement, the Notes, or any other Loan
Document or any other agreement or instrument relating thereto, or of all or
any part of the Guaranteed Obligations or of any security therefor shall
affect, impair or be a defense to this Guaranty.
(c) This Guaranty is one of payment and performance, not collection, and
the obligations of the Guarantor under this Guaranty are independent of the
Obligations of the Borrowers, and a separate action or actions may be brought
and prosecuted against the Guarantor to enforce this Guaranty, irrespective
of whether any action is brought against the Borrowers or whether the
Borrowers are joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be absolute
and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to
departure from the Credit Agreement or the Notes or any other Loan
Document, including any increase in the Guaranteed Obligations
resulting from the extension of additional credit to the Borrowers or
any of its subsidiaries or otherwise;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Guaranteed Obligations, and/or
any offset against, or failure to perfect, or continue the perfection
of, any Lien in any such property, or delay in the perfection of any
such Lien, or any amendment or waiver
<PAGE>
of or consent to departure from any other guaranty for all or any of
the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against
the Borrowers or others (including the Guarantor);
(iv) any settlement or compromise of any Obligation, any
security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and any subordination of the payment of all or any part
thereof to the payment of any Obligation (whether due or not) of the
Borrowers to creditors of the Borrowers other than the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner
of sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrowers or any of
its subsidiaries;
(vi) any change, restructuring or termination of the existence
of the Borrowers or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to,
or a discharge of, this Guaranty and/or obligations of the Guarantor
hereunder, or a defense to, or discharge of, the Borrowers or any
other person or party relating to this Guaranty or the obligations of
the Guarantor hereunder or otherwise with respect to the Loans, Letters
of Credit or other financial accommodations to the Borrowers.
(e) The Agent may at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of, or
notice (except as shall be required by applicable statute and cannot be
waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor
hereunder, apply any sums by whomsoever paid or howsoever realized to any
Guaranteed Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if claim is ever made upon the Agent or any Lender for
repayment or recovery of any amount or amounts received by the Agent or such
Lender in payment or on account of any of the Guaranteed Obligations and the
Agent or such Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over the Agent or such Lender or the respective property of
each, or any settlement or compromise of any such claim effected by the Agent
or such Lender with any such claimant (including the Borrowers), then and in
such event the
<PAGE>
Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any
revocation hereof or the cancellation of any note (including the Notes) or
other instrument evidencing any Obligation, and the Guarantor shall be and
remain liable to the Agent and/or such Lender hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by the Agent or such Lender.
Section 4. CONTINUING GUARANTY. This Guaranty is a continuing one and
shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and
be enforceable by, the Agent and its successors, transferees and assigns. All
obligations to which this Guaranty applies or may apply under the terms
hereof shall be conclusively presumed to have been created in reliance hereon.
Section 5. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Guarantor
hereby represents, warrants and covenants to and with the Agent that:
(a) The Guarantor has the corporate power to execute
and deliver this Guaranty and to incur and perform its obligations
hereunder;
(b) The Guarantor has duly taken all necessary corporate
action to authorize the execution, delivery and performance of this
Guaranty and to incur and perform its obligations hereunder;
(c) No consent, approval, authorization or other action by,
and no notice to or of, or declaration or filing with, any governmental
or other public body, or any other Person, is required for the due
authorization, execution, delivery and performance by the Guarantor of
this Guaranty or the consummation of the transactions contemplated
hereby;
(d) The execution, delivery and performance by the Guarantor
of this Guaranty do not and will not violate or otherwise conflict with
any term or provision of any material agreement, instrument, judgment,
decree, order or any statute, rule or governmental regulation
applicable to the Guarantor or result in the creation of any Lien upon
any of its properties or assets pursuant thereto;
(e) This Guaranty has been duly authorized, executed and
delivered by the Guarantor and constitutes the legal, valid and binding
obligation of the Guarantor, and is enforceable against the Guarantor
in accordance with its terms, except as enforcement thereof may be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights
<PAGE>
generally, and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law);
(f) No proceeding referred to in paragraph (e) or (f) of
Article VIII of the Credit Agreement is pending against the Guarantor
and no other event referred to in such Article VIII has occurred and is
continuing, and the property of the Guarantor is not subject to any
assignment for the benefit of creditors;
(g) The capital stock of the Borrowers owned by the Guarantor
on the date hereof consists of all of the authorized, issued and
outstanding capital stock of the Borrowers on the date hereof and the
Borrowers have no outstanding rights, options, warrants or agreements
pursuant to which it may be required to sell any of its capital stock
or other equity security; and
(h) Without the prior written consent of the Agent, own or
operate any assets or properties or engage in any business or other
activity whatsoever (including, without limitation, the incurring of
Indebtedness or the granting of Liens), except for its ownership of the
capital stock of the Borrowers and activities directly in connection
therewith and except as otherwise may be specifically permitted by the
other Loan Documents.
Section 6. EXPENSES. The Guarantor will upon demand reimburse the Agent
for any sums, costs, and expenses which the Agent may pay or incur pursuant
to the provisions of this Guaranty or in negotiating, executing, perfecting,
defending, protecting or enforcing this Guaranty or in enforcing payment of
the Guaranteed Obligations or otherwise in connection with the provisions
hereof, including court costs, collection charges, travel expenses, and
reasonable attorneys' fees, together with interest thereon as specified in
Section 12 hereof.
Section 7. TERMS. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be deemed to
be references to Sections and subsections of this Guaranty unless the context
shall otherwise require.
Section 8. AMENDMENTS AND MODIFICATION. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring
to this Guaranty and to such provision, and executed by the party to be
charged.
<PAGE>
Section 9. SUBORDINATION OF SUBROGATION RIGHTS. The Guarantor hereby
waives and releases any and all rights and claims it may now or hereafter
have or acquire against the Borrowers that would constitute it a "creditor"
of the Borrowers for purposes of the Federal Bankruptcy Code, including all
rights of subrogation against the Borrowers and its property and all rights
of indemnification, contribution and reimbursement from the Borrowers and its
property, regardless of whether such rights arise in connection with this
Guaranty, by operation of law, pursuant to contract or otherwise.
Section 10. REMEDIES UPON DEFAULT; RIGHT OF SET-OFF. (a) Upon the
occurrence and during the continuance of any Event of Default, the Agent may,
without notice to or demand upon the Borrowers or the Guarantor, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantor hereunder.
(b) Upon such declaration by the Agent, the Agent and any Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Agent or any Lender to or for the
credit or the account of the Guarantor against any and all of the obligations
of the Guarantor now or hereafter existing under this Guaranty, whether or
not the Agent or such Lender shall have made any demand under this Guaranty
and although such obligations may be contingent and unmatured. The Agent
agrees promptly to notify the Guarantor after any such set-off and
application, PROVIDED that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of the Agent and
Lenders under this Section 10 are in addition to other rights and remedies
(including other rights of set-off) which the Agent and Lenders may have.
Section 11. STATUTE OF LIMITATIONS. Any acknowledgment or new promise,
whether by payment of principal or interest or otherwise and whether by the
Borrowers or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Agent or Lenders shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
Section 12. INTEREST. All amounts payable from time to time by the
Guarantor hereunder shall bear interest at the interest rate per annum
specified in Section 2.08 of the Credit Agreement.
Section 13. RIGHTS AND REMEDIES NOT WAIVED. No act, omission or delay by
the Agent shall constitute a waiver of its rights and remedies hereunder or
otherwise.
<PAGE>
No single or partial waiver by the Agent of any default hereunder or right or
remedy which it may have shall operate as a waiver of any other default,
right or remedy or of the same default, right or remedy on a future occasion.
Section 14. ADMISSIBILITY OF GUARANTY. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier
for delivery to the Agent shall be admissible in evidence as the original
itself in any judicial or administrative proceeding, whether or not the
original is in existence.
Section 15. NOTICES. All notices, requests and demands to or upon the
Agent or the Guarantor under this Agreement shall be in writing and given as
provided in the Credit Agreement (with respect to the Guarantor, to the
address of the Borrowers as set forth in the Credit Agreement).
Section 16. COUNTERPARTS. This Guaranty may be executed in any number of
counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original and all of
which shall together constitute one and the same agreement.
SECTION 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a) ANY
LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS GUARANTY MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, OR, AT THE ELECTION OF AGENT, IN THE
COURTS OF THE STATE OF CALIFORNIA OR OF THE UNITED STATES OF AMERICA FOR THE
CENTRAL DISTRICT OF CALIFORNIA AND, BY EXECUTION AND DELIVERY OF THIS
GUARANTY, THE GUARANTOR HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. THE GUARANTOR HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH
ANY SUCH ACTION OR PROCEEDING, (i) TRIAL BY JURY, (ii) TO THE EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS AND (iii) THE RIGHT TO
INTERPOSE ANY SET-OFF, COUNTERCLAIM OR CROSS-CLAIM (UNLESS SUCH SET-OFF,
COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE FEDERAL OR
STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER ACTION).
<PAGE>
(b) The Guarantor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by certified mail, postage prepaid, to the Guarantor at its
address determined pursuant to Section 15 hereof.
(c) Nothing herein shall affect the right of the Agent to serve process
in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against the Guarantor in any other jurisdiction.
(d) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
SECTION 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED OBLIGATIONS
SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. CAPTIONS; SEPARABILITY. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of
this Guaranty.
(b) If any term of this Guaranty shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
Section 20. ACKNOWLEDGMENT OF RECEIPT. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Loan Documents.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed as of the date first above set forth.
INTERDENT, INC., a Delaware corporation
By: /s/ Michael T. Fiore
-------------------------------------
Name: Michael T. Fiore
Title: Co-Chairman and
Chief Executive Officer
<PAGE>
CONFIRMATION OF GUARANTY
CONFIRMATION OF GUARANTY dated as of June 15, 1999 by
InterDent, Inc., a Delaware corporation (the "GUARANTOR") in favor of Union
Bank of California, N.A., as agent (in such capacity, the "AGENT") for the
lenders (the "LENDERS") party to the Credit Agreement hereinafter referred to.
WHEREAS, Gentle Dental Service Corporation, a Washington
corporation ("GDSC") and Gentle Dental Management, Inc., a Delaware
corporation ("GDM"),the Agent, and the Lenders, are parties to a Credit
Agreement, dated as of September 30, 1998,(the "ORIGINAL CREDIT AGREEMENT");
WHEREAS, to guaranty the obligations of GDSC and GDM under
the Original Credit Agreement and under the other Loan Documents delivered in
connection therewith, the Guarantor executed a Guarantee, dated as of March
12, 1999, in favor of the Agent (as amended, supplemented, restated or
otherwise modified from time to time, the "GUARANTEE");
WHEREAS, the parties to the Original Credit Agreement are
amending and restating the Original Credit Agreement in its entirety, and
Dental Care Alliance, Inc., a Delaware corporation, ("DCA") is being added as
a borrower (DCA, GDM and GDSC, collectively, the "BORROWERS") pursuant to an
Amended and Restated Credit Agreement dated as of June 15, 1999 among the
Borrowers, the guarantors named therein, the Lenders, The Chase Manhattan
Bank, as syndication agent and the Agent (said agreement, as it may hereafter
be amended, supplemented, restated or otherwise modified from time to time
being the "CREDIT AGREEMENT"; the terms defined therein and not otherwise
defined herein are used herein as therein defined); and
WHEREAS, as a condition to the Agent and the Lenders
amending and restating the Original Credit Agreement and to the addition of
DCA as a Borrower, the Lenders have required the execution and delivery of
this Confirmation by the Guarantor.
NOW, THEREFORE, it is hereby agreed that:
1. The Guarantor hereby irrevocably and unconditionally
confirms in favor of the Agent that it consents to the terms and conditions
of the Credit Agreement and that its Guarantee continues in full force and
effect and is and shall continue to be applicable to all of the Obligations
and to the Credit Agreement.
<PAGE>
2. This Confirmation may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which
shall be an original and all of which shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page by
telecopier shall be effective as delivery of a manually executed counterpart.
3. This Confirmation shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to
the conflicts of laws provisions thereof.
IN WITNESS WHEREOF, the Guarantor and the Agent have caused
this Confirmation to be duly executed by their respective authorized officers
as of the day and year first above written.
INTERDENT, INC.
By: /s/ Michael T. Fiore
-------------------------------------
Name: Michael T. Fiore
Title: Co-Chairman and
Chief Executive Officer
UNION BANK OF CALIFORNIA, N.A., as Agent
By: /s/ Nancy A. Perkins
-------------------------------------
Name: Nancy A. Perkins
Title: Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERDENT,
INC'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
<CASH> 2,728 8,244
<SECURITIES> 0 0
<RECEIVABLES> 13,286 10,616
<ALLOWANCES> 0 0
<INVENTORY> 3,213 2,887
<CURRENT-ASSETS> 29,592 30,604
<PP&E> 25,277 21,379
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 190,447 165,134
<CURRENT-LIABILITIES> 28,342 23,895
<BONDS> 0 0
2,109 2,102
12,090 12,090
<COMMON> 21 21
<OTHER-SE> 58,929 56,879
<TOTAL-LIABILITY-AND-EQUITY> 190,447 165,134
<SALES> 106,441 51,535
<TOTAL-REVENUES> 106,441 51,535
<CGS> 0 0
<TOTAL-COSTS> 101,497 48,494
<OTHER-EXPENSES> (8) (7)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (2,760) (653)
<INCOME-PRETAX> 2,176 2,381
<INCOME-TAX> 740 915
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,436 1,466
<EPS-BASIC> .07 .07
<EPS-DILUTED> .06 .07
</TABLE>
<PAGE>
INTERDENT, INC.
1999 STOCK INCENTIVE PLAN
1. PURPOSE. The InterDent, Inc. 1999 Stock Incentive Plan (the "PLAN")
is intended to provide incentives which will attract and retain highly competent
persons as officers, employees and directors of InterDent, Inc., a Delaware
corporation (the "COMPANY"), its subsidiaries and dentists and other
professionals employed by corporations, partnerships, sole proprietorships or
other business organizations (collectively, the "AFFILIATED DENTAL PRACTICES")
which have entered into agreements with the Company or one of its subsidiaries
under which the Company or one of its subsidiaries manages the non-professional
aspects of the Affiliated Dental Practices, by providing them opportunities to
acquire shares of common stock of the Company, $.001 par value per share
("COMMON STOCK"), or to receive monetary payments based on the value of such
shares pursuant to the Benefits described herein.
2. ADMINISTRATION. The Plan will be administered by the Compensation
Committee of the Board of Directors of the Company or another committee (the
"COMMITTEE"), appointed by the Board from among its members consisting of two or
more non-employee Directors who shall meet the requirements set forth in
Securities and Exchange Commission Regulation Section 240.16b-3 ("RULE 16b-3")
or any successor regulation.
3. PARTICIPANTS. Participants will consist of such employees (including
officers) and directors of the Company or its subsidiaries, consultants, and
dentists and other professionals employed by Affiliated Dental Practices, as the
Committee in its sole discretion determines to be significantly responsible for
the success and future growth and profitability of the Company and whom the
Committee may designate from time to time to receive Benefits under the Plan.
Designation of a participant in any year shall not require the Committee to
designate such person to receive a Benefit in any other year or, once
designated, to receive the same type or amount of Benefit as granted to the
participant in any year. The Committee shall consider such factors as it deems
pertinent in selecting participants and in determining the type and amount of
their respective Benefits.
4. TYPES OF BENEFITS. Benefits under the Plan may be granted in any one
or a combination of (a) Incentive Stock Options; (b) Non-qualified Stock
Options; (c) Stock Appreciation Rights; and (d) Stock Awards.
5. SHARES RESERVED UNDER THE PLAN. There is hereby reserved for issuance
under the Plan an aggregate of two million five hundred thousand (2,500,000)
shares of Common Stock, which may be authorized but unissued or treasury shares.
The maximum number of option shares and stock appreciation rights which may be
awarded to any participant in any calendar year during the term of the Plan is
250,000 shares. Any shares subject to stock options or Stock Appreciation Rights
or issued under such options or rights or as Stock Awards may thereafter be
subject to new options, rights or awards under this Plan if there is a lapse,
expiration or termination of any such options or rights prior to issuance of the
shares or if shares are issued under such options or rights or as such awards,
and thereafter are reacquired by the Company without consideration pursuant to
rights reserved by the Company upon issuance thereof.
<PAGE>
6. STOCK OPTIONS. Incentive Stock Options and Non-qualified Stock
Options will consist of stock options to purchase Common Stock at purchase
prices not less than 85% and 100%, respectively, of the fair market value of the
Common Stock on the date the option is granted. Said purchase price may be paid
by check to the Company or in the discretion of the Committee, payment may also
be made (i) by delivering a promissory note in a form determined by and
acceptable to the Committee (ii) in shares of Common Stock held for the
requisite period necessary to avoid a charge to the Company's earnings for
financial reporting purposes and valued at a fair market value as defined in
paragraph 15 hereof on the date of exercise, or (iii) to the extent the option
is exercised for vested shares, through a special sale and remittance procedure
pursuant to which the participant shall concurrently provide irrevocable written
instructions (A) to a Company-designated brokerage firm to effect the immediate
sale for the purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be withheld by the
Company by reason of such exercise and (B) to the Company to deliver the
certificates for the purchased shares directly to such brokerage firm in order
to complete the sale. Non-qualified Stock Options shall be exercisable not
earlier than six months and not later than fifteen years after the date they are
granted and Incentive Stock Options shall be exercisable not earlier than six
months and not later than ten years after the date they are granted. In the
event of termination of employment, all stock options shall terminate at such
times and upon such conditions or circumstances as the Committee shall in its
discretion set forth in such option at the date of grant. The aggregate fair
market value (determined as of the time the option is granted) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by a participant during any calendar year (under all option plans of
the Company and its subsidiary corporations) shall not exceed $100,000. The
Committee may provide, either at the time of grant or subsequently, that a stock
option include the right to acquire a replacement stock option upon exercise of
the original stock option (in whole or in part) prior to termination of
employment of the participant and through payment of the exercise price in
shares of Common Stock. The terms and conditions of a replacement option shall
be determined by the Committee in its sole discretion.
7. STOCK APPRECIATION RIGHTS. The Committee may, in its discretion,
grant Stock Appreciation Rights to the holders of any stock options granted
hereunder. In addition, Stock Appreciation Rights may be granted independently
of and without relation to options. Each Stock Appreciation Right shall be
subject to such terms and conditions consistent with the Plan as the Committee
shall impose from time to time, including the following:
(a) A Stock Appreciation Right relating to an option may be made
part of such option at the time of its grant or at any time thereafter up to six
months prior to its expiration.
(b) Each Stock Appreciation Right will entitle the holder to elect
to receive the appreciation in the fair market value of the shares subject
thereto up to the date the right is exercised. In the case of a right issued in
relation to a stock option, such appreciation shall be measured from not less
than the option price and in the case of a right issued independently of any
stock option, such appreciation shall be measured from not less than the fair
market value of the Common Stock on the date the right is granted. Payment of
such appreciation shall be made in cash or in Common Stock, or a combination
thereof, as set forth in the award, but no Stock
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<PAGE>
Appreciation Right shall entitle the holder to receive, upon exercise thereof,
more than the number of shares of Common Stock (or cash of equal value) with
respect to which the right is granted.
(c) Each Stock Appreciation Right will be exercisable at the times
and to the extent set forth therein, but no Stock Appreciation Right may be
exercisable more than fifteen years after it was granted. Exercise of a Stock
Appreciation Right shall reduce the number of shares issuable under the Plan
(and the related option, if any) by the number of shares with respect to which
the right is exercised.
8. STOCK AWARDS. Stock Awards will consist of Common Stock transferred
to participants without other payment therefor as additional compensation for
services to the Company and its subsidiaries. Stock Awards shall be subject to
such terms and conditions as the Committee determines appropriate, including,
without limitation, restrictions on the sale or other disposition of such
shares, rights of the Company to reacquire such shares upon termination of the
participant's employment within specified periods and conditions requiring that
the shares be earned in whole or in part upon the achievement of performance
goals established by the Committee over a designated period of time.
9. ADJUSTMENT PROVISIONS.
(a) If the Company shall at any time change the number of issued
shares of Common Stock without new consideration to the Company (such as by
stock dividends or stock splits), the total number of shares reserved for
issuance under this Plan and the number of shares covered by each outstanding
Benefit shall be adjusted so that the aggregate consideration payable to the
Company and the value of each such Benefit shall not be changed. The Committee
may also provide for the continuation of Benefits or for other equitable
adjustments after changes in the Common Stock resulting from reorganization,
sale, merger, consolidation or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without
affecting the number of shares otherwise reserved or available hereunder, the
Committee may authorize the issuance or assumption of Benefits in connection
with any merger, consolidation, acquisition of property or stock, or
reorganization upon such terms and conditions as it may deem appropriate.
(c) In the case of any merger, consolidation or combination of the
Company with or into another corporation, other than a merger, consolidation or
combination in which the Company is the continuing corporation and which does
not result in the outstanding Common Stock being converted into or exchanged for
different securities, cash or other property, or any combination thereof (an
"ACQUISITION"):
(i) any participant to whom a stock option has been granted
under the Plan shall have the right (subject to the provisions of the Plan and
any limitation applicable to such option) thereafter and during the term of such
option, to receive upon exercise thereof the Acquisition Consideration (as
defined below) receivable upon such Acquisition by a holder of the number of
shares of Common Stock which might have been obtained upon exercise of such
option or portion thereof, as the case may be, immediately prior to such
Acquisition;
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(ii) any participant to whom a Stock Appreciation Right has
been granted under the Plan shall have the right (subject to the provisions of
the Plan and any limitation applicable to such right) thereafter and during the
term of such right to receive upon exercise thereof the difference between the
aggregate fair market value on the applicable date (as set forth in such right)
of the Acquisition Consideration receivable upon such Acquisition by a holder of
the number of shares of Common Stock which might have been obtained upon
exercise of the option related thereto or any portion thereof, as the case may
be, immediately prior to such Acquisition and the aggregate option price of the
related option, or the aggregate fair market value on the date of grant of the
right, whichever is applicable.
The term "ACQUISITION CONSIDERATION" shall mean the kind and amount of
shares of the surviving or new corporation, cash, securities, evidence of
indebtedness, other property or any combination thereof receivable in respect of
one share of Common Stock of the Company upon consummation of an Acquisition.
10. NONTRANSFERABILITY. Each Benefit granted under the Plan to a
participant shall not be transferable by such participant otherwise than by will
or the laws of descent and distribution, and shall be exercisable, during such
participant's lifetime, only by such participant. In the event of the death of a
participant, each Benefit theretofore granted to such participant shall be
exercisable within the period after such participant's death established by the
Committee at the time of grant (but not beyond the stated duration of the
Benefit) and then only:
(a) By the executor or administrator of the estate of the deceased
participant or the person or persons to whom the deceased participant's rights
under the Benefit shall pass by will or the laws of descent and distribution;
and
(b) To the extent that the deceased participant was entitled to do
so at the date of his or her death.
Notwithstanding the foregoing, at the discretion of the Committee, an award of a
Benefit may permit the transferability of the Benefit by the participant solely
to members of the participant's immediate family or trusts or family
partnerships for the benefit of such persons subject to such terms and
conditions as may be established by the Committee.
11. RETIREMENT OR GENERAL TERMINATION. Unless otherwise determined by
the Committee, if a participant's employment by the Company or any subsidiary of
the Company is terminated by retirement or for any reason other than death of
such participant, any Incentive Stock Option, Non-qualified Stock Option, Stock
Appreciation Right or Stock Award held by such participant may be exercised at
any time prior to the earlier of (i) its expiration date or (ii) ninety (90)
days after the date of termination of such participant, but only if and to the
extent the participant was vested in such award on the date of termination.
Notwithstanding the foregoing, unless otherwise determined by the Committee, any
Incentive Stock Option, Non-qualified Stock Option, Stock Appreciation Right or
Stock Award granted to an employee under the Plan shall continue to vest in
accordance with its terms after termination of employment so long as such former
employee is continuously retained by the Company or one of its subsidiaries on
an independent contractor basis and for so long as such independent contractor
relationship continues uninterrupted. Transfer of an employee by the Company or
any subsidiary of the Company to the Company or any subsidiary of the Company
shall not be considered a
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termination for purposes of the Plan.
12. OTHER PROVISIONS. The award of any Benefit under the Plan may also
be subject to such other provisions (whether or not applicable to the Benefit
awarded to any other participant) as the Committee determines appropriate,
including without limitation, provisions for the installment purchase of Common
Stock under Stock Options, provisions for the installment exercise of Stock
Appreciation Rights, provisions to assist the participant in financing the
acquisition of Common Stock, restrictions on resale or other disposition,
provisions for the acceleration of exercisability of Benefits in the event of a
change of control of the Company, provisions for the payment of the value of the
Benefits to participants in the event of a change of control of the Company,
provisions to comply with Federal and state securities laws, or understandings
or conditions as to the participant's employment in addition to those
specifically provided for under the Plan.
13. RULES. The Committee may establish such rules and regulations as it
considers desirable for the administration of the Plan.
134. MANNER OF ACTION BY COMMITTEE. A majority of the members of the
Committee qualified to act on a question may act by meeting or by writing signed
without meeting and may execute, or delegate to one of its members authority to
execute, any instrument or document required. The Committee may delegate the
performance of ministerial functions in connection with the Plan to such person
or persons as the Committee may select. The costs of administration of the Plan
will be paid by the Company.
145. FAIR MARKET VALUE. For purposes hereof, fair market value of Common
Stock shall be the closing sale price for the Company's Common Stock on the
Nasdaq National Market, or such other exchange or market on which the Common
Stock is primarily traded, as reported in the Wall Street Journal for the date
of calculation (or on the next preceding trading date if Common Stock was not
traded on the date of calculation).
156. TAXES. The Company shall be entitled if necessary or desirable to
pay or withhold the amount of any tax attributable to any amounts payable under
the Plan after giving the person entitled to receive such amount notice as far
in advance as practicable, and the Company may defer making payment as to any
Benefit if any such tax may be pending until indemnified to its satisfaction.
When a person is required to pay to the Company an amount required to be
withheld under applicable tax laws in connection with exercises of Non-qualified
Stock Options or other Benefits under the Plan, the Committee may, in its
discretion and subject to such rules as it may adopt, permit such person to
satisfy the obligation, in whole or in part, by electing to have the Company
withhold shares of Common Stock having a fair market value equal to the amount
required to be withheld.
167. TENURE. A participant's right, if any, to continue to serve the
Company and its subsidiaries as an officer, employee, or otherwise, or to serve
an Affiliated Dental Practice, shall not be enlarged or otherwise affected by
his designation as a participant under the Plan.
178. AMENDMENT AND TERMINATION. The terms and conditions applicable to
any Benefit granted under the Plan may be amended or modified by mutual
agreement between the Company and the participant or such other persons as may
then have an interest therein. Also, by
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mutual agreement between the Company and a participant hereunder, or under any
other present or future plan of the Company, stock options or other Benefits may
be granted to such participant in substitution and exchange for, and in
cancellation of, any Benefits previously granted such participant under this
Plan, or any Benefit previously or hereafter granted to such participant under
any other present or future plan of the Company. The Board of Directors may
amend the Plan from time to time or terminate the Plan at any time. However, no
action authorized by this paragraph shall reduce the amount of any existing
Benefit or change the terms and conditions thereof without the participant's
consent. The Board of Directors may amend the Plan in any respect without
stockholder approval if stockholder approval is not then required to comply with
Rule 16b-3 or other similar requirements.
19. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of Directors
of the Company on April 20, 1999. The Plan and any Benefits granted hereunder
shall be null and void if stockholder approval is not obtained within twelve
(12) months of the adoption of the Plan by the Board of Directors. This Plan
shall continue in effect until terminated by the Board pursuant to Section 17;
provided, however, that no Incentive Stock Option shall be granted more than ten
years after the date of the adoption of this Plan by the Board.
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INTERDENT, INC.
EMPLOYEE STOCK PURCHASE PLAN OF 1999
1. PURPOSE. InterDent, Inc., a Delaware corporation (the "COMPANY"),
hereby adopts the InterDent, Inc. Employee Stock Purchase Plan of 1999 (the
"PLAN"). The purpose of the Plan is to provide an opportunity for the employees
of the Company and any designated subsidiaries to purchase shares of common
stock, $.001 par value per share (the "COMMON STOCK"), of the Company at a
discount through voluntary automatic payroll deductions, thereby attracting,
retaining and rewarding such persons and strengthening the mutuality of interest
between such persons and the Company's stockholders.
2. SHARES SUBJECT TO PLAN. An aggregate of One Million (1,000,000)
shares of Common Stock (the "SHARES") may be sold pursuant to the Plan. Such
Shares may be authorized but unissued Common Stock, treasury shares or Common
Stock purchased in the open market. If there is any change in the outstanding
shares of Common Stock by reason of a stock dividend or distribution, stock
split-up, recapitalization, combination or exchange of shares, or by reason of
any merger, consolidation or other corporate reorganization in which the Company
is the surviving corporation, the number of Shares available for sale shall be
equitably adjusted by the Committee appointed to administer the Plan to give
proper effect to such change.
3. ADMINISTRATION. The Plan shall be administered by a committee
(the "COMMITTEE") which shall be the Compensation Committee of the Board of
Directors or another committee consisting of not less than two directors of the
Company appointed by the Board of Directors, all of whom shall qualify as
non-employee directors within the meaning of Securities and Exchange Commission
Rule 16b-3 or any successor regulation. The Committee is authorized, subject to
the provisions of the Plan, to establish such rules and regulations as it deems
necessary for the proper administration of the Plan and to make such
determinations and interpretations and to take such action in connection with
the Plan and any Benefits granted hereunder as it deems necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all participants and their legal representatives. No member of
the Board of Directors, no member of the Committee and no employee of the
Company shall be liable for any act or failure to act hereunder, by any other
member or employee or by any agent to whom duties in connection with the
administration of this Plan have been delegated or, except in circumstances
involving his or her bad faith, gross negligence or fraud, for any act or
failure to act by the member or employee.
4. ELIGIBILITY. All regular employees of the Company, and of each
qualified subsidiary of the Company which may be so designated by the Committee,
shall be eligible to participate in the Plan, except, in the discretion of the
Committee:
(a) employees whose customary employment is 20 hours or less per
week;
(b) employees whose customary employment is for not more than
5 months per year;
<PAGE>
(c) employees who have not been employed for at least 60 days
as of any Enrollment Date (as defined in paragraph 5); and
(d) employees covered by a collective bargaining agreement
between the Company or one of its subsidiaries and such employees'
representatives in the negotiation of which stock purchase plan benefits
were the subject of good faith bargaining, unless the bargaining agreement
provides for participation in the Plan;
For the purposes of this Plan, the term "EMPLOYEE" means any individual in an
employee-employer relationship with the Company or a qualified subsidiary of the
Company, but excluding (a) any independent contractor; (b) any consultant, (c)
any individual performing services for the Company or a qualified subsidiary who
has entered into an independent contractor or consultant agreement with the
Company or a qualified subsidiary; (d) any individual performing services for
the Company or a qualified subsidiary under an independent contractor or
consultant agreement, a purchase order, a supplier agreement or any other
agreement that the Company or a qualified subsidiary enters into for services;
and (e) any "LEASED EMPLOYEE" as defined in Section 414(n) of the Internal
Revenue Code. The term "QUALIFIED SUBSIDIARY" means any corporation in which a
fifty percent (50%) or greater interest is, at the time, directly or indirectly
owned by the Company or by one or more subsidiaries or by the Company and one or
more subsidiary which is designated for participation by the Committee.
5. PARTICIPATION. An eligible employee may elect to participate in
the Plan as of any "ENROLLMENT DATE". Enrollment Dates shall occur on the first
day of an Offering Period (as defined in paragraph 8). Any such election shall
be made by completing and forwarding an Enrollment and Change Form to the Human
Resources Department of the Company prior to such Enrollment Date, authorizing
payroll deductions in an amount up to $885 but not less than $5.00 and not
exceeding 15% of the employee's gross pay for the payroll period to which the
deduction applies. A participating employee may increase or decrease payroll
deductions as of any subsequent Enrollment Date by completing and forwarding a
revised Enrollment and Change Form to the Human Resources Department of the
Company at least ten (10) days prior to such subsequent Enrollment Date;
provided, that changes in payroll deductions shall not be permitted to the
extent that they would result in total payroll deductions exceeding 15% of the
employee's gross pay or $885 and that such increase or decrease may be made only
two times in any calendar year. An eligible employee may not initiate, increase
or decrease payroll deductions as of any date other than an Enrollment Date. For
purposes of this Plan, the term "GROSS PAY" means the gross amount of pay an
employee would receive at each regular pay period date before any deduction for
required federal or state withholding and any other amounts which may be
withheld. If a participant has withdrawn from the Plan in accordance with the
provisions of paragraph 7, such participant may resume participation in the Plan
by completing an Enrollment and Change Form indicating a desire to resume
participation and submitting the completed form to the Human Resources
Department such that it is received by the Human Resources Department at least
ten (10) days prior to the first day of the Offering Period for which
participation is to resume.
6. PAYROLL DEDUCTION ACCOUNTS. The Company shall establish a
"PAYROLL DEDUCTION ACCOUNT" for each participating employee, and shall credit
all payroll deductions made
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on behalf of each employee pursuant to paragraph 5 to his or her Payroll
Deduction Account. No interest shall be credited to any Payroll Deduction
Account.
7. WITHDRAWALS. An employee may withdraw from an Offering Period at
any time by completing and forwarding a signed Enrollment and Change Form to the
Human Resources Department of the Company. Upon receipt of such notice, payroll
deductions on behalf of the employee shall be discontinued commencing with the
immediately following payroll period, and such employee may not again be
eligible to participate in the Plan until the next Enrollment Date. Amounts
credited to the Payroll Deduction Account during the Offering Period prior to
receipt by the Human Resources Department of an Enrollment and Change Form
indicating a withdrawal request will be used to purchase shares of Common Stock
for the participant. A participant may withdraw only one time in any calendar
year.
8. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first trading day
on or after January 1, April 1, July 1 and October 1 of each year, or on such
other date as the Committee shall determine, and continuing thereafter to the
last trading day of the respective three-month period or until terminated in
accordance with paragraph 17 hereof. The first Offering Period hereunder shall
commence effective as of January 1, 1999 and the Share Purchase Date (as defined
below in this paragraph 8) for such first Offering Period shall be effective as
of April 1, 1999 (as indicated below). "TRADING DAY" shall mean a day on which
the Nasdaq National Market, or other primary securities exchange or market on
which the Company's Common Stock is then traded, is open for trading. The
Committee shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings. The
last trading day of each Offering Period prior to the termination of the Plan
(or such other trading date as the Committee shall determine) shall constitute
the purchase date (the "SHARE PURCHASE DATE") on which each employee for whom a
Payroll Deduction Account has been maintained shall purchase the number of
Shares determined under paragraph 9(a); provided, that the initial Share
Purchase Date shall be effective as of April 1, 1999. Notwithstanding the
foregoing, the Company shall not permit the exercise of any right to purchase
Shares
(a) to an employee who, immediately after the right is granted,
would own shares possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company or any subsidiary; or
(b) which would permit an employee's rights to purchase shares
under this Plan, or under any other qualified employee stock purchase plan
maintained by the Company or any subsidiary, to accrue at a rate in excess
of $25,000 of the fair market value of such shares (determined at the time
such rights are granted) for each calendar year in which the right is
outstanding at any time.
For the purposes of subparagraph (a), the provisions of Section 424(d) of the
Internal Revenue Code shall apply in determining the stock ownership of an
employee, and the shares which an employee may purchase under outstanding rights
or options shall be treated as shares owned by the employee.
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<PAGE>
9. PURCHASE OF SHARES.
(a) Subject to the limitations set forth in paragraphs 7 and 8, each
employee participating in an offering shall have the right to purchase as many
whole Shares as may be purchased with the amounts credited to his or her Payroll
Deduction Account as of the payroll date coinciding with or immediately
preceding the last Wednesday of the month (or such other date as the Committee
shall determine) in which occurs the applicable Share Purchase Date (the "CUTOFF
DATE"). Fractional shares may not be purchased under the Plan. Any amount
remaining in the Payroll Deduction Account of a participant after the Share
Purchase Date shall be retained in the account for the purchase of additional
Shares in subsequent Offering Periods. Employees may purchase Shares only
through payroll deductions, and cash contributions shall not be permitted.
(b) The "PURCHASE PRICE" for Shares purchased under the Plan shall be
not less than an amount equal to 85% of the average of the closing sales price
of shares of Common Stock on the Nasdaq National Maret (or other primary
securities exchange or market on which the Company's Common Stock is then
traded) during the five trading days prior to and excluding the Share Purchase
Date at the end of the Offering Period. The Committee shall have the authority
to establish a different Purchase Price as long as any such Purchase Price
complies with the provisions of Section 423 of the Internal Revenue Code.
(c) On each Share Purchase Date, the amount credited to each
participating employee's Payroll Deduction Account as of the immediately
preceding Cutoff Date shall be applied to purchase as many whole Shares as may
be purchased with such amount at the applicable Purchase Price.
10. BROKERAGE ACCOUNTS OR PLAN SHARE ACCOUNTS. By enrolling in the
Plan, each participating employee shall be deemed to have authorized the
establishment of a brokerage account on his or her behalf at a securities
brokerage firm selected by the Committee. Alternatively, the Committee may
provide for Plan share accounts for each participating employee to be
established by the Company or by an outside entity selected by the Committee
which is not a brokerage firm. Shares purchased by an employee pursuant to the
Plan shall be held in the employee's brokerage or Plan share account ("PLAN
SHARE ACCOUNT") in his or her name, or if the employee so indicates on his or
her payroll deduction authorization form, in the employee's name jointly with a
member of the employee's family, with right of survivorship.
11. RIGHTS AS STOCKHOLDER; RESTRICTIONS ON TRANSFER. An employee
shall have no rights as a stockholder with respect to Shares subject to any
rights granted under this Plan until payment for such Shares has been completed
at the close of business on the relevant Share Purchase Date. Employees
participating in the Plan may not sell, transfer, pledge, encumber or otherwise
convey any Shares purchased under the Plan until expiration of the first
anniversary of the Share Purchase Date related to such Shares.
12. CERTIFICATES. Certificates for Shares purchased under the Plan
will not be issued automatically. However, upon an employee's written request
certificates for whole Shares purchased shall be issued at any time after the
one year anniversary of the purchase date of the
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<PAGE>
Shares represented by such certificates. The Company may make a reasonable
charge for the issuance of such certificates.
13. TERMINATION OF EMPLOYMENT. If a participating employee's
employment is terminated for any reason, including death, if an employee is
granted a leave of absence of more than 90 days duration (unless such leave
of absence is disability leave approved in writing by the Company or is
covered by the Family and Medical Leave Act (29 U.S.C Sections 2601-2654),
the California Family Rights Act (Cal. Govt. Code Sections 12945.1-12945.2)
or any similar act of any other applicable state) or if an employee otherwise
ceases to be eligible to participate in the Plan, payroll deductions on
behalf of the employee shall be discontinued and any amounts then credited to
the employee's Payroll Deduction Account shall remain in the account and be
used to purchase Shares in accordance with paragraph 9 hereof, subject to the
limitations in paragraph 8 hereof. Any amount remaining in the Payroll
Deduction Account after the final Share Purchase Date shall be refunded to
the employee as soon as practicable.
14. RIGHTS NOT TRANSFERABLE. Rights granted under this Plan are not
transferable by a participating employee other than by will or the laws of
descent and distribution, and are exercisable during an employee's lifetime only
by the employee.
15. EMPLOYMENT RIGHTS. Neither participation in the Plan, nor the
exercise of any right granted under the Plan, shall be made a condition of
employment, or of continued employment with the Company or any subsidiary.
16. APPLICATION OF FUNDS. All funds received by the Company for
Shares sold by the Company on any Share Purchase Date pursuant to this Plan may
be used for any corporate purpose.
17. AMENDMENTS AND TERMINATION. The Board of Directors may amend the
Plan at any time, provided that no such amendment shall be effective unless
approved within 12 months after the date of the adoption of such amendment by
the affirmative vote of stockholders holding shares of Common Stock entitled to
a majority of the votes represented by all outstanding shares of Common Stock
entitled to vote if such stockholder approval is required for the Plan to
continue to comply with the requirements of Securities and Exchange Commission
Rules 16b-3 and Section 423 of the Internal Revenue Code. The Board of Directors
may suspend the Plan or discontinue the Plan at any time. Upon termination of
the Plan, all payroll deductions shall cease and all amounts then credited to
the participating employees' Payroll Deduction Accounts shall be equitably
applied to the purchase of whole Shares then available for sale, and any
remaining amounts shall be promptly refunded to the participating employees.
18. APPLICABLE LAWS. This Plan, and all rights granted hereunder, are
intended to meet the requirements of an "EMPLOYEE STOCK PURCHASE PLAN" under
Section 423 of the Internal Revenue Code, as from time to time amended, and the
Plan shall be construed and interpreted to accomplish this intent. Sales of
Shares under the Plan are subject to, and shall be accomplished only in
accordance with, the requirements of all applicable securities and other laws.
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<PAGE>
19. EXPENSES. Except to the extent provided in paragraph 12, all
expenses of administering the Plan, including expenses incurred in connection
with the purchase of Shares for sale to participating employees, shall be borne
by the Company and its subsidiaries.
20. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of
Directors on April 20, 1999, subject to stockholder approval. The Plan and any
action taken hereunder shall be null and void if stockholder approval is not
obtained at the next annual meeting of stockholders.
6
<PAGE>
INTERDENT, INC.
DENTAL PROFESSIONAL STOCK PURCHASE PLAN OF 1999
1. PURPOSE. InterDent, Inc., a Delaware corporation (the "COMPANY"),
hereby adopts the InterDent, Inc. Dental Professional Stock Purchase Plan of
1999 (the "PLAN"). The purpose of the Plan is to provide an opportunity for the
dentists and other professionals employed by corporations, partnerships, sole
proprietorships and other business organizations (collectively, the "AFFILIATED
DENTAL PRACTICES") which have entered into agreements with the Company or one
its subsidiaries to purchase shares of common stock, $.001 par value per share
(the "COMMON STOCK"), of the Company at fair market value or at a discount, as
described below, through voluntary automatic payroll deductions, thereby
attracting, retaining and rewarding such persons and strengthening the mutuality
of interest between such persons and the Company's stockholders.
2. SHARES SUBJECT TO PLAN. An aggregate of Five Hundred Thousand
(500,000) shares of Common Stock (the "SHARES") may be sold pursuant to the
Plan. Such Shares may be authorized but unissued Common Stock, treasury shares
or Common Stock purchased in the open market. If there is any change in the
outstanding shares of Common Stock by reason of a stock dividend or
distribution, stock split-up, recapitalization, combination or exchange of
shares, or by reason of any merger, consolidation or other corporate
reorganization in which the Company is the surviving corporation, the number of
Shares available for sale shall be equitably adjusted by the Committee appointed
to administer the Plan to give proper effect to such change.
3. ADMINISTRATION. The Plan shall be administered by a committee (the
"COMMITTEE") which shall be the Compensation Committee of the Board of Directors
or another committee consisting of not less than two directors of the Company
appointed by the Board of Directors, all of whom shall qualify as non-employee
directors within the meaning of Securities and Exchange Commission Rule 16b-3 or
any successor regulation. The Committee is authorized, subject to the provisions
of the Plan, to establish such rules and regulations as it deems necessary for
the proper administration of the Plan and to make such determinations and
interpretations and to take such action in connection with the Plan and any
Benefits granted hereunder as it deems necessary or advisable. All
determinations and interpretations made by the Committee shall be binding and
conclusive on all Participants and their legal representatives. No member of the
Board of Directors, no member of the Committee and no employee of the Company
shall be liable for any act or failure to act hereunder, by any other member or
employee or by any agent to whom duties in connection with the administration of
this Plan have been delegated or, except in circumstances involving his or her
bad faith, gross negligence or fraud, for any act or failure to act by the
Participant (as defined below).
4. ELIGIBILITY. All regular dental professionals, including, without
limitation, dentists, specialists and dental hygenists, of an Affiliated Dental
Practice, shall be eligible to participate in the Plan, except, in the
discretion of the Committee:
(a) a dental professional whose customary employment is 20 hours or
less per week;
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<PAGE>
(b) a dental professional whose customary employment is for not more
than 5 months per year;
(c) a dental professional who has not been employed for at least 60
days as of any Enrollment Date (as defined in paragraph 5); and
(d) dental professionals covered by a collective bargaining agreement
between the Company or one of its subsidiaries and such dental
professionals' representatives in the negotiation of which stock purchase
plan benefits were the subject of good faith bargaining, unless the
bargaining agreement provides for participation in the Plan;
For the purposes of this Plan, the term "PARTICIPANT" means any individual in an
employee-employer relationship with an Affiliated Dental Practice, including (a)
any independent contractor; (b) any consultant, (c) any individual performing
services for an Affiliated Dental Practice who has entered into an independent
contractor or consultant agreement with such Affiliated Dental Practice; (d) any
individual performing services for an Affiliated Dental Practice under an
independent contractor or consultant agreement, a purchase order, a supplier
agreement or any other agreement that the Affiliated Dental Practice enters into
for services; and (e) any "leased employee" as defined in Section 414(n) of the
Internal Revenue Code.
5. PARTICIPATION. An eligible Participant may elect to participate in
the Plan as of any "ENROLLMENT DATE". Enrollment Dates shall occur on the first
day of an Offering Period (as defined in paragraph 8). Any such election shall
be made by completing and forwarding an Enrollment and Change Form to the Human
Resources Department of the Company prior to such Enrollment Date, authorizing
payroll deductions in an amount up to $885 but not less than $5.00 and not
exceeding 15% of the Participant's gross pay for the payroll period to which the
deduction applies. A Participant may increase or decrease payroll deductions as
of any subsequent Enrollment Date by completing and forwarding a revised
Enrollment and Change Form to the Human Resources Department of the Company at
least ten (10) days prior to such subsequent Enrollment Date; provided, that
changes in payroll deductions shall not be permitted to the extent that they
would result in total payroll deductions exceeding 15% of the Participant 's
gross pay or $885 and that such increase or decrease may be made only two times
in any calendar year. An eligible Participant may not initiate, increase or
decrease payroll deductions as of any date other than an Enrollment Date. For
purposes of this Plan, the term "GROSS PAY" means the gross amount of pay a
Participant would receive at each regular pay period date before any deduction
for required federal or state withholding and any other amounts which may be
withheld. If a Participant has withdrawn from the Plan in accordance with the
provisions of paragraph 7, such Participant may resume participation in the Plan
by completing an Enrollment and Change Form indicating a desire to resume
participation and submitting the completed form to the Human Resources
Department such that it is received by the Human Resources Department at least
ten (10) days prior to the first day of the Offering Period for which
participation is to resume.
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6. PAYROLL DEDUCTION ACCOUNTS. The Company shall establish a "PAYROLL
DEDUCTION ACCOUNT" for each Participant, and shall credit all payroll deductions
made on behalf of each Participant pursuant to paragraph 5 to his or her Payroll
Deduction Account. No interest shall be credited to any Payroll Deduction
Account.
7. WITHDRAWALS. A Participant may withdraw from an Offering Period at
any time by completing and forwarding a signed Enrollment and Change Form to the
Human Resources Department of the Company. Upon receipt of such notice, payroll
deductions on behalf of the Participant shall be discontinued commencing with
the immediately following payroll period, and such Participant may not again be
eligible to participate in the Plan until the next Enrollment Date. Amounts
credited to the Payroll Deduction Account during the Offering Period prior to
receipt by the Human Resources Department of an Enrollment and Change Form
indicating a withdrawal request will be used to purchase shares of Common Stock
for the Participant. A Participant may withdraw only one time in any calendar
year.
8. OFFERING PERIODS. The Plan shall be implemented by consecutive
Offering Periods with a new Offering Period commencing on the first trading day
on or after January 1, April 1, July 1 and October 1 of each year, or on such
other date as the Committee shall determine, and continuing thereafter to the
last trading day of the respective three-month period or until terminated in
accordance with paragraph 17 hereof. The first Offering Period hereunder shall
commence effective as of January 1, 1999 and the Share Purchase Date (as defined
below in this paragraph 8) for such first Offering Period shall be effective as
of April 1, 1999 (as indicated below). "TRADING DAY" shall mean a day on which
the Nasdaq National Market, or other primary securities exchange or market on
which the Company's Common Stock is then traded, is open for trading. The
Committee shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings. The
last trading day of each Offering Period prior to the termination of the Plan
(or such other trading date as the Committee shall determine) shall constitute
the purchase date (the "SHARE PURCHASE DATE") on which each Participant for whom
a Payroll Deduction Account has been maintained shall purchase the number of
Shares determined under paragraph 9(a); provided, that the initial Share
Purchase Date shall be effective as of April 1, 1999. Notwithstanding the
foregoing, the Company shall not permit the exercise of any right to purchase
Shares
(a) to a Participant who, immediately after the right is granted,
would own shares possessing 5% or more of the total combined voting power
or value of all classes of stock of the Company or any subsidiary; or
(b) which would permit a Participant's rights to purchase shares under
this Plan, or under any other qualified employee stock purchase plan
maintained by the Company or any subsidiary, to accrue at a rate in excess
of $25,000 of the fair market value of such shares (determined at the time
such rights are granted) for each calendar year in which the right is
outstanding at any time.
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For the purposes of subparagraph (a), the provisions of Section 424(d) of the
Internal Revenue Code shall apply in determining the stock ownership of an
employee, and the shares which an employee may purchase under outstanding rights
or options shall be treated as shares owned by the employee.
9. PURCHASE OF SHARES.
(a) Subject to the limitations set forth in paragraphs 7 and 8, each
Participant participating in an offering shall have the right to purchase as
many whole Shares as may be purchased with the amounts credited to his or her
Payroll Deduction Account as of the payroll date coinciding with or immediately
preceding the last Wednesday of the month (or such other date as the Committee
shall determine) in which occurs the applicable Share Purchase Date (the "CUTOFF
DATE"). Fractional shares may not be purchased under the Plan. Any amount
remaining in the Payroll Deduction Account of a Participant after the Share
Purchase Date shall be retained in the account for the purchase of additional
Shares in subsequent Offering Periods. Participants may purchase Shares only
through payroll deductions, and cash contributions shall not be permitted.
(b) The "Purchase Price" for Shares purchased under the Plan shall be
not less than an amount equal to 85% of the average of the closing sales price
of shares of Common Stock on the Nasdaq National Market (or other primary
securities exchange or market on which the Company's Common Stock is then
traded) during the five trading days prior to and excluding the Share Purchase
Date at the end of the Offering Period. The Committee shall have the authority
to establish a different Purchase Price.
(c) On each Share Purchase Date, the amount credited to Participant's
Payroll Deduction Account as of the immediately preceding Cutoff Date shall be
applied to purchase as many whole Shares as may be purchased with such amount at
the applicable Purchase Price.
10. BROKERAGE ACCOUNTS OR PLAN SHARE ACCOUNTS. By enrolling in the
Plan, each Participant shall be deemed to have authorized the establishment of a
brokerage account on his or her behalf at a securities brokerage firm selected
by the Committee. Alternatively, the Committee may provide for Plan share
accounts for each Participant to be established by the Company or by an outside
entity selected by the Committee which is not a brokerage firm. Shares purchased
by a Participant pursuant to the Plan shall be held in the Participant's
brokerage or Plan share account ("PLAN SHARE ACCOUNT") in his or her name, or if
the Participant so indicates on his or her payroll deduction authorization form,
in the Participant's name jointly with a member of the Participant's family,
with right of survivorship.
11. RIGHTS AS STOCKHOLDER; RESTRICTIONS ON TRANSFER. A Participant
shall have no rights as a stockholder with respect to Shares subject to any
rights granted under this Plan until payment for such Shares has been completed
at the close of business on the relevant Share Purchase Date. Participants may
not sell, transfer, pledge, encumber or otherwise convey any
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Shares purchased under the Plan until expiration of the first anniversary of the
Share Purchase Date related to such Shares.
12. CERTIFICATES. Certificates for Shares purchased under the Plan
will not be issued automatically. However, upon a Participant's written request
certificates for whole Shares purchased shall be issued at any time after the
one year anniversary of the purchase date of the Shares represented by such
certificates. The Company may make a reasonable charge for the issuance of such
certificates.
13. TERMINATION OF EMPLOYMENT. If a Participant's employment is
terminated for any reason, including death, if a Participant is granted a leave
of absence of more than 90 days duration (unless such leave of absence is
disability leave approved in writing by the Company or is covered by the Family
and Medical Leave Act (29 U.S.C Sections 2601-2654), the California
Family Rights Act (Cal. Govt. Code Sections 12945.1-12945.2) or any
similar act of any other state) or if a Participant otherwise ceases to be
eligible to participate in the Plan, payroll deductions on behalf of the
Participant shall be discontinued and any amounts then credited to the
Participant's Payroll Deduction Account shall remain in the account and be used
to purchase Shares in accordance with paragraph 9 hereof, subject to the
limitations in paragraph 8 hereof. Any amount remaining in the Payroll Deduction
Account after the final Share Purchase Date shall be refunded to the Participant
as soon as practicable.
14. RIGHTS NOT TRANSFERABLE. Rights granted under this Plan are not
transferable by a Participant other than by will or the laws of descent and
distribution, and are exercisable during an employee's lifetime only by the
Participant.
15. EMPLOYMENT RIGHTS. Neither participation in the Plan, nor the
exercise of any right granted under the Plan, shall be made a condition of
employment, or of continued employment with an Affiliated Dental Practice, the
Company or any subsidiary.
16. APPLICATION OF FUNDS. All funds received by the Company for Shares
sold by the Company on any Share Purchase Date pursuant to this Plan may be used
for any corporate purpose.
17. AMENDMENTS AND TERMINATION. The Board of Directors may amend the
Plan at any time, provided that no such amendment shall be effective unless
approved within 12 months after the date of the adoption of such amendment by
the affirmative vote of stockholders holding shares of Common Stock entitled to
a majority of the votes represented by all outstanding shares of Common Stock
entitled to vote if such stockholder approval is required for the Plan to
continue to comply with the requirements of Securities and Exchange Commission
Rule 16b-3. The Board of Directors may suspend the Plan or discontinue the Plan
at any time. Upon termination of the Plan, all payroll deductions shall cease
and all amounts then credited to the Participants' Payroll Deduction Accounts
shall be equitably applied to the purchase of whole Shares then available for
sale, and any remaining amounts shall be promptly refunded to the Participants.
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18. EXPENSES. Except to the extent provided in paragraph 12, all
expenses of administering the Plan, including expenses incurred in connection
with the purchase of Shares for sale to Participants, shall be borne by the
Company and its subsidiaries.
19. STOCKHOLDER APPROVAL. The Plan was adopted by the Board of
Directors on April 20, 1999, subject to stockholder approval. The Plan and any
action taken hereunder shall be null and void if stockholder approval is not
obtained at the next annual meeting of stockholders.
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