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CREDIT AGREEMENT
Dated as of September 30, 1998
Among
GENTLE DENTAL SERVICE CORPORATION,
and
GENTLE DENTAL MANAGEMENT, 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
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TABLE OF CONTENTS
Page
I. DEFINITIONS..............................................................................................1
SECTION 1.01. Certain Defined Terms..................................................................1
SECTION 1.02. Accounting Terms......................................................................27
II. THE LOANS...............................................................................................27
SECTION 2.01. Revolving Credit Commitments and Term Loan............................................27
SECTION 2.02. Loans.................................................................................28
SECTION 2.03. Notice of Loans.......................................................................30
SECTION 2.04. Notes; Repayment of Loans.............................................................31
SECTION 2.05. Interest on Loans.....................................................................33
SECTION 2.06. Fees..................................................................................33
SECTION 2.07. Termination and Reduction of Revolving Credit
Commitments..................................................................34
SECTION 2.08. Interest on Overdue Amounts; Alternate Rate of
Interest.....................................................................34
SECTION 2.09. Prepayment of Loans...................................................................35
SECTION 2.10. Reserve Requirements; Change in Circumstances.........................................39
SECTION 2.11. Change in Legality....................................................................41
SECTION 2.12. Indemnity.............................................................................42
SECTION 2.13. Pro Rata Treatment; Assumption by and Delegation
of Authority to the Administrative Agent.....................................43
SECTION 2.14. Sharing of Setoffs....................................................................45
SECTION 2.15. Payments and Computations.............................................................46
SECTION 2.16. Taxes.................................................................................47
SECTION 2.17. Issuance of Letters of Credit.........................................................49
SECTION 2.18. Payment of Letters of Credit; Reimbursement...........................................50
SECTION 2.19. Administrative Agent's Actions with respect to Letters
of Credit....................................................................52
SECTION 2.20. Letter of Credit Fees.................................................................52
III. COLLATERAL SECURITY.....................................................................................53
SECTION 3.01. Security Documents....................................................................53
SECTION 3.02. Filing and Recording..................................................................53
IV. REPRESENTATIONS AND WARRANTIES..........................................................................54
SECTION 4.01. Organization, Legal Existence.........................................................54
SECTION 4.02. Authorization.........................................................................54
SECTION 4.03. Governmental Approvals................................................................54
SECTION 4.04. Binding Effect........................................................................55
SECTION 4.05. Material Adverse Change...............................................................55
SECTION 4.06. Litigation; Compliance with Laws; etc.................................................55
i
SECTION 4.07. Financial Statements..................................................................55
SECTION 4.08. Federal Reserve Regulations...........................................................56
SECTION 4.09. Taxes.................................................................................56
SECTION 4.10. Employee Benefit Plans................................................................57
SECTION 4.11. No Material Misstatements.............................................................58
SECTION 4.12. Investment Company Act; Public Utility Holding
Company Act..................................................................58
SECTION 4.13. Security Interest.....................................................................58
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..........................................................................60
SECTION 4.19. Compliance with Environmental Laws. .................................................61
SECTION 4.20. No Change in Credit Criteria or Collection Policies...................................61
SECTION 4.21. Employee Matters......................................................................62
SECTION 4.22. Year 2000.............................................................................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.......................................................................67
SECTION 6.02. Businesses and Properties.............................................................67
SECTION 6.03. Insurance.............................................................................68
SECTION 6.04. Taxes.................................................................................68
SECTION 6.05. Financial Statements, Reports, etc....................................................68
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
SECTION 6.15. Maintain Operating Accounts...........................................................76
SECTION 6.16. Life Insurance........................................................................76
SECTION 6.17. Year 2000.............................................................................76
SECTION 6.18. Assignment of Contracts...............................................................76
SECTION 6.19. Holding Company Structure.............................................................77
ii
SECTION 6.20. Dedicated Dental......................................................................77
SECTION 6.21. Landlord Waivers......................................................................77
SECTION 6.22. Purchase Agreements...................................................................77
SECTION 6.23. Trademark.............................................................................77
SECTION 6.24. Cash Management Arrangements..........................................................77
VII. NEGATIVE COVENANTS......................................................................................77
SECTION 7.01. Liens.................................................................................78
SECTION 7.02. Sale and Lease-Back Transactions......................................................79
SECTION 7.03. Indebtedness..........................................................................79
SECTION 7.04. Dividends, Distributions and Payments.................................................79
SECTION 7.05. Consolidations, Mergers and Sales of Assets...........................................80
SECTION 7.06. Investments...........................................................................80
SECTION 7.07. Capital Expenditures..................................................................81
SECTION 7.08. Net Worth.............................................................................81
SECTION 7.09. Leverage Ratio; Interest Leverage Ratio...............................................82
SECTION 7.10. Interest Coverage Ratios..............................................................83
SECTION 7.11. Fixed Charge Ratio....................................................................84
SECTION 7.12. Business..............................................................................84
SECTION 7.13. Sales of Accounts Receivables.........................................................84
SECTION 7.14. Use of Proceeds.......................................................................84
SECTION 7.15. ERISA.................................................................................84
SECTION 7.16. Accounting Changes....................................................................85
SECTION 7.17. Prepayment or Modification of Indebtedness;
Modification of Charter Documents, etc.......................................85
SECTION 7.18. Transactions with Affiliates..........................................................85
SECTION 7.19. Consulting Fees.......................................................................85
SECTION 7.20. Negative Pledges, Etc.................................................................85
VIII. EVENTS OF DEFAULT.......................................................................................86
IX. AGENTS..................................................................................................89
X. COLLECTION OF RECEIVABLES...............................................................................94
XI. MISCELLANEOUS...........................................................................................95
SECTION 11.01. Notices...............................................................................95
SECTION 11.02. Survival of Agreement.................................................................96
SECTION 11.03. Successors and Assigns; Participations................................................96
SECTION 11.04. Expenses; Indemnity...................................................................99
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..................................................................101
SECTION 11.09. Severability.........................................................................103
iii
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
iv
EXHIBITS
--------
EXHIBIT A Form of Term Note
EXHIBIT B Form of Revolving Credit Note
EXHIBIT C Form of Opinion of Counsel
EXHIBIT D Form of Pledge Agreement
EXHIBIT E Form of Security Agreement
EXHIBIT F Form of Assignment and Acceptance
EXHIBIT G Form of Security Agreement-Patents and Trademarks
EXHIBIT H Form of Assignment of Contract
EXHIBIT I Form of Assignment of Life Insurance
EXHIBIT J Form of Management Agreement
EXHIBIT K Form of Shares Acquisition Agreement
EXHIBIT L Form of Covenant Compliance Certificates
SCHEDULES
---------
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 Dental Practices
SCHEDULE 7.01 Existing Liens
SCHEDULE 7.03 Existing Indebtedness
SCHEDULE 7.19 Consulting Fees
v
CREDIT AGREEMENT dated as of September 30, 1998, among GENTLE
DENTAL SERVICE CORPORATION, a Washington corporation ("Dental
Service") and GENTLE DENTAL MANAGEMENT, INC., a Delaware
corporation ("Dental Management"); 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 Borrowers have applied to the Lenders for Revolving Credit Loans (such
term and all other capitalized terms used in this paragraph having the
respective meanings ascribed to such terms above or hereinafter) at any time and
from time to time prior to the earlier to occur of (i) the Revolving Credit
Termination Date and (ii) the Conversion Date, in an aggregate principal amount
not in excess of $45,000,000 at any time outstanding. The proceeds of the
Revolving Credit Loans shall be used to refinance existing Indebtedness of the
Borrowers, 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 provide Collateral in accordance with the provisions of this
Agreement and the Security Documents. The Lenders are severally, and not
jointly, willing to extend such Loans to the Borrowers subject to the terms and
conditions hereinafter set forth. Accordingly, the Borrowers, the Guarantors,
the Lenders and the Agents hereby agree as follows:
I. DEFINITIONS
SECTION I.1. 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) with respect to the fiscal quarter ended September 30, 1998,
the product of (x) the aggregate amount of dividends paid by Dedicated Dental to
Dental Service during September 1998 and (y) 12, or, in the case of each fiscal
quarter thereafter, 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 the Borrowers and the Guarantors
(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 the Borrowers and the Guarantors (on a Consolidated
basis) for the fiscal quarter then ended and other expenses not included in the
calculation of EBITDA of the Borrowers and the Guarantors 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.
"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
2
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 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,
3
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 which has entered
into a Management Agreement and Shares Acquisition Agreement with any of the
Borrowers.
"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 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
4
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.
"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.
5
"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 the Assignment of Life Insurance
dated as of the date hereof, between Dental Service and the Administrative
Agent, for its own benefit and for the benefit of the Lenders, 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 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.
6
"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).
"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) all or substantially all of the Dental Service's assets, on a
consolidated basis, are sold as an entirety to any person or related group of
persons or there shall be consummated any consolidation or merger of Dental
Service (A) in which Dental Service is not the continuing or surviving company
(other than consolidation or merger with a wholly-owned subsidiary of Dental
Service in which all shares of common stock outstanding immediately prior to the
effectiveness thereof are changed into or exchanged for the same consideration),
(B) pursuant to which the common stock would be converted into cash, securities
or other property, in any case, other than a consolidation or merger of Dental
Service in which the holders of the common stock immediately prior to the sale
of assets or consolidation or merger have, directly or indirectly, at least a
majority of the common stock of the transferee or continuing or surviving
company immediately after such sale of assets or consolidation or merger or (C)
as a result of which Dental Service, as the continuing or surviving company,
would not be permitted by applicable law or regulation to (x) be jointly and
severally liable for the obligations of others or (y) grant a security interest
in its assets to the Administrative Agent pursuant to the Security Documents,
(ii) 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 Dental Service; provided however that for purposes of computing
the total voting power of the outstanding capital stock of Dental Service such
computation shall not include shares of Common Stock issuable upon conversion of
the Convertible Subordinated Notes, Series B Preferred Stock of Dental Service
or Series D Preferred Stock of Dental Service; (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the board of directors of Dental Service cease for any reason to constitute a
majority of the board of directors of Dental Service, then in office; or (iv)
Dental Service or the Holding Company (if any) shall cease to own 100% of all
classes of stock of Dental Management.
"Closing Date" shall mean the date of the first borrowing under this
Agreement, but in no event later than September 30, 1998.
7
"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:
Average Daily Outstanding
Principal Balance of Commitment
Revolving Loan Fee Percentage
--------------------------- ---------------
Greater than or equal to $30,000,000 0.375%
Greater than or equal to $15,000,000
but less than $30,000,000 0.500%
Less than $15,000,000 0.750%
On the 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 Closing Date.
"Commitment Letter" shall mean the letter dated July 22, 1998 and all
attachments thereto addressed to Dental Service by The Chase Manhattan Bank.
"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.
8
"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.
"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
9
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 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, 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, computed and calculated in accordance with GAAP; provided, however, that
in determining EBITDA for the Borrowers and their Consolidated subsidiaries, (w)
income related to Celebration shall not be included in such determination, (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.
"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
10
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
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.
11
"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.
"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
12
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 or obligation of any other person in any manner, whether directly
or indirectly, 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, each subsidiary of any of the
Borrowers (other than Dedicated Dental and Dental Oregon) in existence on the
Closing Date and the Holding Company (if any) or any subsidiary of any of the
Borrowers which becomes a guarantor of the Obligations after the date hereof.
"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.
"Holding Company" shall mean the corporation formed as a holding company in
connection with the implementation of a holding company structure in accordance
with the provisions of Section 6.19 hereof.
13
"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, 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) 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), (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 (b) hereof, as applicable, together with
the corresponding compliance certificates required pursuant to Section 6.05(e)
hereof, commencing with the financial statements and certificates for the period
ending September 30, 1998 or if
14
the Borrowers shall fail to timely deliver such statements and certificates for
any such period or during the continuance of an Event of Default, then at the
highest Interest Margin provided for herein:
Alternate Base
Interest Leverage Ratio Eurodollar Loan Interest Margin Loan Interest Margin
----------------------- ------------------------------- ---------------------
Equal to or greater than 3.75:1.00 3.00% 1.25%
Equal to or greater than 3.25:1.00 but 2.75% 1.00%
less than 3.75:1.00
Equal to or greater than 2.50:1.00 but 2.50% 0.75%
less than 3.25:1.00
Less than 2.50:1.00 2.25% 0.50%
On the Closing Date (i) the Eurodollar Loan Interest Margin shall be 2.25% and
(ii) the Alternate Base Loan Interest Margin shall be 0.50%; 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 October 1, 1998, and (ii) with respect to any Eurodollar Loan, 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.
"Investor Group" shall mean, collectively, Chase Capital Partners, The
Sprout Group, Bessemer Venture Partners, Accel Partners and St. Xxxx Venture
Capital.
15
"Lenders" shall have the meaning assigned to such term in the preamble to
this Agreement.
"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.
"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.
16
"Management Agreement" shall mean the Management Agreements (having terms
of no less than 25 years) entered into by a Borrower or a Guarantor and a dental
practice, pursuant to which the Borrowers provide comprehensive management and
administrative services to such dental practice, and, in the case of Management
Agreements entered into after the Closing Date, each of which shall be in
substantially the form attached hereto as Exhibit J.
"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 the
Borrowers and their 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 gains or losses or any gains or losses from the sale
or disposition of assets other than
17
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.
"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.
"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.
18
"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 and expected Acquisition Capital Expenditures is less
than or equal to $12,000,000;
(ii) the cash consideration, including the maximum earn-out
payments (including, without limitation, earn-outs based upon current
EBITDA), and including 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 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
19
the Administrative Agent in its reasonable discretion at the time of
the proposed acquisition);
(vii) the acquiree has positive EBITDA;
(viii) the proposed acquisition or affiliation is not hostile;
(ix) the acquiror is Dental Management or a subsidiary of any of
the Borrowers (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 with a Borrower 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 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
(xi) the Borrowers have delivered to the Administrative Agent as
soon as the information is available, but at least 14 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 and (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;
provided, however, that, upon the written consent of the Required
Lenders, in the exercise of their reasonable discretion after their
review
20
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.
"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 ($625,000 for the period
commencing on the Closing Date through the end of the 1998 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;
(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
21
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.
"Pledge Agreement" shall mean the Pledge Agreement dated as of the date
hereof, 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 Funded 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
22
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.
"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 December 31,
1998), two fiscal quarter period (in the case of proposed acquisitions or
capital expenditures to occur on or after December 31, 1998 but prior to March
31, 1999), three fiscal quarter period (in the case of proposed acquisitions or
capital expenditures to occur on or after March 31, 1999 but prior to June 30,
1999) or four fiscal quarter period (in the case of proposed acquisitions or
capital expenditures to occur on or after June 30, 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.
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"Purchase Agreement" shall mean the agreement entered into by a Borrower or
a Guarantor 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.
"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.
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"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.
"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 Security Agreement dated as of the date
hereof, 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.
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"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 and each other agreement now
existing or hereafter created providing collateral security for the payment or
performance of any Obligations.
"Shares Acquisition Agreement" shall mean the Shares Acquisition
Agreement entered into by a Borrower or a Guarantor and the owner(s) of a dental
practice, and, in the case of Shares Acquisition Agreements entered into after
the 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 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.
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"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 I.2. 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.
II. THE LOANS
SECTION II.1. 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 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).
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(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 II.2. Loans. (a) 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 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 in Walnut Creek, California 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
28
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 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
29
(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 II.3. Notice of Loans. The Borrowers shall, through a
Responsible Officer of any of the Borrowers, give the Administrative Agent
irrevocable 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 11:00 A.M., Los Angeles, California time,
(i) three (3) Business Days before a proposed Eurodollar Loan borrowing or
conversion and (ii) one Business Day before an Alternate Base Loan borrowing or
conversion (except that no such confirmation will be required, unless requested
by the Administrative Agent, to the extent that the proceeds of such borrowing
are requested to be disbursed to Borrowers' controlled disbursement account
maintained with the Administrative Agent). 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
30
of any notice given pursuant to this Section 2.03 and of each Lender's portion
of the requested borrowing.
SECTION II.4. 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.
(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
31
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 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
32
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 II.5. 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
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 II.6. 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 October 1, 1998, (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. The Revolving
Credit Commitment Fee due to each Lender under this Section 2.06 shall commence
to accrue on the date hereof and
33
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 II.7. 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.
(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 II.8. 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
34
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 II.9. 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 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
35
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 of the Borrowers (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, 2001, 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 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.
36
(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 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
37
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, 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) or (f) 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 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.
38
(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.
SECTION II.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 Administrative 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,
39
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 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
40
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 II.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
(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.
41
SECTION II.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 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
42
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 II.13. Pro Rata Treatment; Assumption by and Delegation of
Authority to the Administrative Agent. (a) 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 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
43
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
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
44
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 II.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 and exposure under the Letter of Credit Usage held by such other
Lender, so that the aggregate unpaid principal
45
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 II.15. Payments and Computations. (a) 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) to the
Administrative Agent at its offices at 000 Xxxxxxx Xxxxxx, Xxxxx 000, Xxxxxx
Xxxxx, Xxxxxxxxxx 00000 for the account of the Lenders, in immediately available
funds, without set-off or counterclaim. 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 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
46
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 II.16. Taxes. (a) 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
47
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
48
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 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 II.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
49
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 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 II.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
50
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 in Walnut
Creek, California 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 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.
51
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 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 II.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 II.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 October 1, 1998; provided that all such fees shall be payable on the
date on which the Revolving Credit Commitment terminates and any such fees
52
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 III.1. 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 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 III.2. 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
53
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 IV.1. Organization, Legal Existence. 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.
SECTION IV.2. 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 IV.3. 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 IV.4. 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
54
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 IV.5. 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, 1997.
SECTION IV.6. 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 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 IV.7. Financial Statements. (a) The Borrowers have
heretofore furnished to the Administrative Agent the financial statements of
the Borrowers for the six month period ended June 30, 1998. Such financial
statements present fairly the Consolidated financial condition and results of
operations of the Borrowers and their 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 the Borrowers and their
subsidiaries, as of the dates thereof.
(b) The Borrowers have heretofore furnished to the Administrative
Agent updated quarterly, through December 31, 1998, and annual, thereafter
through the December 31, 2000, projected income statements, balance sheets and
cash flows of the Borrowers 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
55
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 the Borrowers 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 IV.8. 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 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 IV.9. 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.
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SECTION IV.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
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
57
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.
SECTION IV.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 IV.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 IV.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
58
collateral or property is not subject to any other Liens whatsoever, except
Liens permitted by Section 7.01 hereof.
SECTION IV.14. Use of Proceeds. All proceeds of each borrowing under
the Revolving Credit Commitment on the Closing Date, if any, shall be used to
partially refinance existing Indebtedness of the Borrowers. 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 IV.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 IV.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.
(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).
59
SECTION IV.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 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 IV.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
60
regulation) has occurred which allows the revocation or termination of any such
Permit or any restriction thereon.
SECTION IV.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 response to a Release of a Contaminant into the
environment, has been filed or attached to the property of the Loan Parties.
SECTION IV.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, 1997.
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 IV.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
61
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 IV.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.
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 V.1. All Credit Events. On each date on which a Credit Event
is to occur:
(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
62
Credit Usage outstanding at such time shall not exceed the Total Revolving
Credit Commitment.
SECTION V.2. 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, 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.
63
(d) Each Lender shall have received its Revolving Credit Note, 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 the Security
Documents (including, without limitation, an Assignment of Contract with
respect to each Management Agreement and Shares Acquisition Agreement in
effect on the Closing Date), and certificates evidencing the Pledged Stock,
together with undated stock powers executed in blank, each duly executed by
the applicable Grantors.
(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 any Borrower, any
Guarantor or any Grantor 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 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 shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordatio 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 each of the Borrowers and each Grantor in the
jurisdictions in which the Borrower and the Grantors are doing business
and/or in which any Collateral is located, and in which Uniform Commercial
Code filings have been made against each Borrower, each Guarantor and each
Grantor 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 the Borrowers' books and
records;
64
(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 Commitment Letter 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;
(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, 1997;
(viii) evidence of the repayment in full of exiting credit
arrangements and the termination of all commitments to lend
thereunder, and the termination of all security interests securing
such indebtedness as required under paragraph (f) above;
(ix) evidence that all dental practices affiliated with any of
the Borrowers have entered into a Management Agreement and a Shares
Acquisition Agreement (and an Assignment of Contract has been executed
and delivered in connection thereto); and
(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.
(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.
65
(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;
(ii) copies of all loan agreements, notes and other documentation
evidencing Indebtedness for borrowed money of any of the Borrowers,
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; and
(iv) copies of an amendment to the terms and provisions of the
Convertible Subordinated Note in form and substance satisfactory to
the Agents.
(l) Messrs. Xxxx, Scholer, Fierman, Xxxx & 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) The Borrowers and the Administrative Agent (or another financial
institution acceptable to the Administrative Agent and the Syndication
Agent) shall have entered into lockbox and other cash management
arrangements pursuant to documentation satisfactory in form and substance
to the Administrative Agent and the Syndication Agent.
66
(q) 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:
SECTION VI.1. 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 VI.2. 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 VI.3. 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
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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.
SECTION VI.4. 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 VI.5. 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 the Borrowers and their 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, (iv) balance sheets and income
statements showing the financial condition of Dedicated Dental as of the
close of such Fiscal Year and the results of Dedicated Dental's
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operations during such year and (v) Dedicated Dental's 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, in the case of clauses (iii), (iv) and (v), 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 Dedicated
Dental;
(b) within 45 days after the end of each of the first three (3) fiscal
quarters of the Borrowers, (i) unaudited Consolidated balance sheets and
Consolidated income statements showing the financial condition and results
of operations of the Borrowers and their 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 such fiscal quarter, such consolidating income
statements to be in form and substance acceptable to the Agents, (v)
balance sheets and income statements showing the financial condition and
the results of operations of Dedicated Dental as of the end of each such
quarter and (vi) Dedicated Dental's statement of cash flow 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, in each case prepared and certified by the Financial Officer of
each of the Borrowers as presenting fairly the financial condition and
results of operations of the Borrowers and their subsidiaries, or of
Dedicated Dental, as the case may be, and as having been prepared in
accordance with GAAP, in each case subject to normal year-end audit
adjustments;
(c) within 30 days after the end of each month (i) unaudited
Consolidated balance sheets and income statements showing the financial
condition and results of operations of the Borrowers and their 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, (iv) income
69
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, (v)
balance sheets and income statements showing the financial condition and
the results of operations of Dedicated Dental as of the end of each such
month and (vi) Dedicated Dental's statement of cash flow 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, in each case
prepared and certified by the Financial Officer of the Borrowers as
presenting fairly the financial condition and results of operations of the
Borrowers and their subsidiaries, or of Dedicated Dental, as the case may
be, 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) (i) concurrently with any delivery under (a) or (b) above, 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 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;
(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
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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; and
(j) such other information as the Administrative Agent or any Lender
may reasonably request.
SECTION VI.6. 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;
(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
71
$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 VI.7. 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 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
72
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 VI.8. 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 fina cial 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 VI.9. Use of Proceeds. Use the proceeds of the Credit Events
only for the purposes set forth in Section 4.14 hereof.
SECTION VI.10. Fiscal Year-End. Cause its Fiscal Year to end on
December 31 in each year.
SECTION VI.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, to grant,
preserve, protect and perfect the first priority security interest created by
the Security Documents in the Collateral.
SECTION VI.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, as a Grantor, and cause the
direct parent of each such
73
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.
SECTION VI.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, 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
74
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 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.
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SECTION VI.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 VI.15. Maintain Operating Accounts. Maintain all of its operating
accounts and cash management arrangements with the Administrative Agent.
SECTION VI.16. Life Insurance. Obtain within 90 days of the Closing Date,
and at all times thereafter maintain in full force and effect, key man life
insurance on Xxxxxxx Xxxxx in an amount of not less than Five Million Dollars
($5,000,000), with the Borrowers as beneficiary under such policy. Dental
Service shall 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 the Assignment of Life
Insurance.
SECTION VI.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 sup-plied 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 VI.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 and Shares Acquisition Agreement.
SECTION VI.19. Holding Company Structure. Seek shareholder approval for the
implementation of a holding company structure at or before the Borrowers' 1999
shareholder meeting and effect the implementation of such holding company
structure acceptable to the Required Lenders by July 31, 1999. Immediately upon
the implementation of such holding company structure, the Holding Company shall
enter
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into a pledge agreement in form and substance satisfactory to the Administrative
Agent, pledging the shares of Dental Service.
SECTION VI.20. Dedicated Dental. By no later than 14 days after the Closing
Date, file a Notice of Material Modification with the California Department of
Corporations seeking an Order of Approval in order to effectuate a pledge by
Dental Service of all of the capital shares of Dedicated Dental pursuant to the
terms of the Pledge Agreement and, immediately upon receiving such Order of
Approval, Dental Service shall pledge all of the capital stock of Dedicated
Dental in accordance with the provisions of the Pledge Agreement.
SECTION VI.21. Landlord Waivers. 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 000 Xxxxx Xxxxxxxxx, Xx Xxxxxxx,
Xxxxxxxxxx location.
SECTION VI.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 VI.23. Trademark. By no later than 5 days after the Closing Date,
file an assignment of the "Gentle Dental" trademark in the United States Patent
and Trademark Office evidencing Dental Service's ownership of such trademark.
SECTION VI.24. Cash Management Arrangements. Within 30 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'
Receivables 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).
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SECTION VI.25. UCC-1 Financing Statements. Within 10 Business Days of the
Closing Date, file UCC-1 Financing Statements against the dental practices
listed on Schedule 6.25 hereto, such financing statements to name a Borrower or
a Guarantor as secured party, the Administrative Agent as assignee and the
dental practice as debtor and containing a collateral description reflecting the
collateral described in the related security agreement.
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 VII.1. 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
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
78
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
$3,500,000 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;
(g) Liens created in favor of the Administrative Agent for its own
benefit and the benefit of the Lenders; or
(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.
SECTION VII.2. 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 VII.3. 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
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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 and (ix) earn-out liabilities incurred in
connection with Permitted Acquisitions.
SECTION VII.4. 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 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.
SECTION VII.5. 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, Permitted De Novo Capital Expenditures or in connection
with the implementation of a holding company structure to the extent permitted
pursuant to Section 6.19 hereof.
SECTION VII.6. 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 Xxxxx'x 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 Xxxxx'x
Investors Service, Inc.;
(e) federally tax exempt securities rated A or better by either
Standard & Poor's Ratings Group or Xxxxx'x 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; and
(j) loans or advances by a Borrower to an Affiliated Dental Practice,
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 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 VII.7. Capital Expenditures. Permit the aggregate amount of
payments made for Capital Expenditures and De Novo Capital Expenditures,
including Capitalized Lease 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 September 30, 1998), two fiscal quarter
period (in the case of the fiscal quarter ending December 31, 1998), three
fiscal quarter period (in the case of the fiscal quarter ending March 31, 1999)
or four fiscal quarter period (in the case of the fiscal quarter ending June 30,
1999) and for each four fiscal quarter period thereafter, commencing with the
fiscal quarter ending September 30, 1998, to exceed 6% of the Borrowers' and
their subsidiaries' net revenues (as determined in accordance with GAAP) for
such period. Upon the written consent of the Required Lenders, the foregoing
limitation may
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be increased to an amount not in excess of 8% of the Borrowers' and their
subsidiaries' net revenues (as determined in accordance with GAAP) for any such
period.
SECTION VII.8. Net Worth. Permit the Net Worth of the Borrowers and their
subsidiaries (on a Consolidated basis) at any time to be less than the sum of
(i) (x) the Net Worth of the Borrowers and their subsidiaries (on a Consolidated
basis) on the Closing Date minus (y) $750,000, plus (ii) 100% of extraordinary
gains arising after the Closing Date through the date of determination, plus
(iii) 100% of the net proceeds received by the Borrowers after the Closing Date
through the date of determination from any sale of common stock of any of the
Borrowers, plus (iv) 100% of the value of any capital stock issued by any of the
Borrowers as consideration in connection with any Permitted Acquisitions
occurring after the Closing Date through the date of determination plus (v) 70%
of the positive Net Income of the Borrowers and their subsidiaries (on a
Consolidated basis) for the period commencing with the Closing Date through and
including the date of determination.
SECTION VII.9. Leverage Ratio; Interest Leverage Ratio. (a) Leverage Ratio.
Permit the Leverage Ratio of the Borrowers and their 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:
Quarter Ending Ratio
-------------- -----
September 30, 1998, 3.75:1.00
December 31, 1998,
March 31, 1999, June 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 and 3.50:1.00
March 31, 2002
June 30, 2002 and 3.00:1.00
September 30, 2002
December 31, 2002 and 2.50:1.00
March 31, 2003
Each June 30, September
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30, December 31 and 2.00:1.00;
March 31 thereafter
provided, however, that if the Borrowers' complete 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.
(b) Interest Leverage Ratio. Permit the Interest Leverage Ratio of the
Borrowers and their 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:
Quarter Ending Ratio
-------------- -----
September 30, 1998, 4.75:1.00
December 31, 1998,
March 31, 1999, June 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 and 4.50:1.00
March 31, 2002
June 30, 2002 and 4.00:1.00
September 30, 2002
December 31, 2002 and 3.50:1.00
March 31, 2003
Each June 30, September 3.00:1.00;
30, December 31 and
March 31 thereafter
provided, however, that if the Borrowers' complete 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.
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SECTION VII.10. Interest Coverage Ratios. (a) Permit the ratio for each one
fiscal quarter period (in the case of the fiscal quarter ending September 30,
1998), two fiscal quarter period (in the case of the fiscal quarter ending
December 31, 1998), three fiscal quarter period (in the case of the fiscal
quarter ending March 31, 1999) or four fiscal quarter period (in the case of the
fiscal quarter ending June 30, 1999) and for each four fiscal quarter period
thereafter, commencing with the fiscal quarter ending September 30, 1998, of (i)
EBITDA of the Borrowers and their subsidiaries on a Consolidated basis for such
period to (ii) the sum of (x) Cash Interest Expense of the Borrowers and their
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) Permit the ratio for each one fiscal quarter period (in the case of the
fiscal quarter ending September 30, 1998), two fiscal quarter period (in the
case of the fiscal quarter ending December 31, 1998), three fiscal quarter
period (in the case of the fiscal quarter ending March 31, 1999) or four fiscal
quarter period (in the case of the fiscal quarter ending June 30, 1999) and for
each four fiscal quarter period thereafter, commencing with the fiscal quarter
ending September 30, 1998, of (i) the sum of (x) EBITDA of the Borrowers and
their 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 the Borrowers and their 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 VII.11. Fixed Charge Ratio. Permit the Fixed Charge Coverage Ratio
of the Borrowers and their 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 VII.12. Business. Alter the nature of its business as operated on
the date of this Agreement in any material respect.
SECTION VII.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 VII.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.
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SECTION VII.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.
(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 VII.16. Accounting Changes. Make any change in their accounting
treatment or financial reporting practices except as required or permitted by
GAAP.
SECTION VII.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).
(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 VII.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.
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SECTION VII.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
the Borrowers' subsidiaries, other than those fees listed on Schedule 7.19
annexed hereto.
SECTION VII.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
86
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;
(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
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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 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
88
(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 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
89
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 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
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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 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.
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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 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
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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.
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
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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 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
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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 XI.1. 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 000
Xxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xx Xxxxxxx, Xxxxxxxxxx 00000,
Attention: Chief Financial Officer (Telecopy No. (000) 000-0000), with a
copy to the Chief Executive Officer (Telecopy No. (000) 000-0000), with a
copy to XxXxxxxxx, Will & Xxxxx, 0000 Xxxx Xxxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx 00000-0000, Attention: Xxxxxxx X. Xxxxxxx, Esq. (Telecopy No.
(000) 000-0000);
(b) if to the Syndication Agent, at The Chase Manhattan Bank, 000
Xxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, Attention: Credit
Executive (Telecopy No. (000) 000-0000), with a copy to Kaye, Scholer, et
al., LLP, at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxxx
X. Xxxxxxx, Esq. (Telecopy No. (000) 000-0000);
(c) if to the Administrative Agent, at Union Bank of California, N.A.,
000 Xxxxxxx Xxxxxx, Xxxxx 000 Xxxxxx Xxxxx, Xxxxxxxxxx 00000, Attention:
Xxxxx X. Xxxxxxx, Vice President, Commercial Finance Division (Telecopy No.
(925)
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943-7442), with a copy to Buchalter, Nemer, Fields & Younger, 000 Xxxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxxxxxxx, XX 00000-0000, Attention: Xxxx Xxxxx,
Esq. (Telecopy No. (000) 000-0000); 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 XI.2. 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 XI.3. 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
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
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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 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
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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 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)
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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.
(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
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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 XI.4. 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.
(c) Each of the Borrowers indemnifies, and agrees to defend and hold
harmless the Administrative Agent and the Lenders and their respective officers,
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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 XI.5. 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 XI.6. 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 XI.7. 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 XI.8. 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.
102
(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
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 XI.9. 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 XI.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,
103
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 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 XI.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 XI.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
104
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.
(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 XI.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 XI.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
105
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 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
106
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 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,
107
(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 Bank x.
Xxxxxxx, 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.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
108
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:
----------------------------------------
Name:
Title:
GENTLE DENTAL MANAGEMENT, INC.,
as a Borrower
By:
----------------------------------------
Name:
Title:
GMS HAWAII ACQUISITION COMPANY, as a Guarantor
By:
----------------------------------------
Name:
Title:
GMS DENTAL GROUP MANAGEMENT OF HAWAII, INC.,
as a Guarantor
By:
----------------------------------------
Name:
Title:
GMS DENTAL GROUP MANAGEMENT OF SOUTHERN
CALIFORNIA, INC., as a Guarantor
By:
----------------------------------------
Name:
Title:
109
GMS DENTAL GROUP MANAGEMENT OF THE MOUNTAIN
STATES, INC., as a Guarantor
By:
----------------------------------------
Name:
Title:
GENTLE DENTAL MANAGEMENT - PACIFIC NORTHWEST,
INC., as a Guarantor
By:
----------------------------------------
Name:
Title:
GENTLE DENTAL OF IRVINE, INC., as a Guarantor
By:
----------------------------------------
Name:
Title:
GDSC OF PIEDMONT, INC., as a Guarantor
By:
----------------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A., as
Administrative Agent and as a Lender
By:
----------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Syndication
Agent and as a Lender
By:
----------------------------------------
Name:
Title:
110
U.S. BANK NATIONAL ASSOCIATION, as Lender
By:
----------------------------------------
Name:
Title:
111
SCHEDULE 2.01
REVOLVING CREDIT COMMITMENTS
Approximate
Revolving Credit Percentage of Total
Lender Commitment Revolving Credit Commitment
------ ---------- ---------------------------
The Chase Manhattan Bank $20,000,000 44.4444%
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Credit Executive
Union Bank of California, N.A. $15,000,000 33.3333%
000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attention:
U.S. Bank National Association $10,000,000 22.2222%
000 Xxxxxx Xxxxxx Xxxxx
0xx xxxxx
Xxxxxxxxxxx, XX 00000
Attention:
112
SCHEDULE 2.02
Domestic Lending Offices
------------------------
Lender Domestic Lending Office
------ -----------------------
The Chase Manhattan Bank The Chase Manhattan Bank
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Credit Executive
Union Bank of California, N.A. 000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attn:
U.S. Bank National Association 000 Xxxxxx Xxxxxx Xxxxx
0xx xxxxx
Xxxxxxxxxxx, XX 00000
Attn:
113
SCHEDULE 2.03
Eurodollar Lending Offices
--------------------------
Lender Eurodollar Lending Office
------ -------------------------
The Chase Manhattan Bank The Chase Manhattan Bank
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Credit Executive
Union Bank of California, N.A. 000 Xxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx Xxxxx, XX 00000
Attn:
U.S. Bank National Association 000 Xxxxxx Xxxxxx Xxxxx
0xx xxxxx
Xxxxxxxxxxx, XX 00000
Attn:
114
