|
ITEM 1.01
|
Entry Into a Material Definitive Agreement
|
On February 21,
2008, American Dental Partners, Inc. (the “Company”) and its subsidiary guarantors entered into Amendment No. 5 to Amended and Restated Credit Agreement and Waiver (the “Amended Credit Agreement”) with the lending
institutions (the “Lenders”) party to the credit agreement dated February 22, 2005, as amended (the “Credit Agreement”) and KeyBank National Association, as lender and as administrative agent. Capitalized terms used herein
and not otherwise defined shall have the meaning attributed to them in the Credit Agreement.
On February 21, 2008, the Company and its subsidiary
guarantors entered into Amendment No. 1 to Term Loan Agreement and Waiver (the “Amended Term Loan Agreement”) with the lending institutions party to the term loan agreement dated September 25, 2007 (the “Term Loan
Agreement”) and KBCM Bridge LLC, as lender and as administrative agent.
Pursuant to the terms
of the Amended Credit Agreement, the revolving credit facility will have a capacity of $75,000,000 with $45,474,000 drawn, including outstanding letters of credit, at February 21, 2008. The term loan facility had $100,000,000 outstanding at
February 21, 2008. Both facilities will mature on June 30, 2009, and at current leverage levels, the Company will borrow on both facilities at the Eurodollar rate plus 250 basis points. Commencing on the 90
th
day following the effective date of the Amended Term Loan Agreement, and each 90 day period thereafter, the Applicable Margin rate for the term loan facility
will increase by 50 basis points over the Applicable Margin then in effect.
The amended facilities will permit the Company to borrow up to $15,000,000
annually for capital expenditures, $15,000,000 annually for acquisitions and up to $13,000,000 for earnout and contingent payments on previously completed acquisitions, subject to a maximum debt to earnings before interest, taxes, depreciation and
amortization leverage ratio of 3.75x.
The commitment fee for the unused capacity under the Amended Credit Agreement will be 50.00 basis points, and at the
end of each quarterly period on and after March 31, 2008, the administrative agent shall determine the commitment fee rate, which shall be 37.50 basis points if the Leverage Ratio is less than 3.00 to 1.00 and 50.00 basis points if the Leverage
Ratio is greater than or equal to 3.00 to 1.00.
The Amended Credit Agreement and Amended Term Loan Agreement contain various financial covenants,
including (i) a minimum Consolidated Net Worth equal to 85% of the Consolidated Net Worth for the quarter ended March 31, 2008, plus 50% of Consolidated Net Income for each quarterly period thereafter, plus 100% of the proceeds from any
equity offering; (ii) a Leverage Ratio not to exceed 3.75 to 1.00; (iii) a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00; (iv) Consolidated Capital Expenditures during any fiscal year not to exceed $15,000,000; and
(v) Consolidated EBITDA of not less than $40,000,000. The Amended Credit Agreement and the Amended Term Loan Agreement provide that subsequent management service agreement terminations representing in the aggregate 2.5% or more of the
Consolidated Revenue will be an event of default.
The Amended Credit Agreement and the Amended Term Loan Agreement will become effective upon completion
of the transactions contemplated by the previously announced settlement of litigation among PDG, P.A., PDHC, Ltd., one of the Company’s Minnesota subsidiaries, and the Company. The Company continues to negotiate definitive agreements with PDG
under the Settlement Agreement. If the transactions contemplated by the settlement are not completed on or before February 29, 2008, the Amended Credit Agreement and the Amended Term Loan Agreement will not take effect.
Copies of each of the Amended Credit Agreement and Amended Term Loan Agreement are filed herewith as Exhibits 10.1 and 10.2 and are incorporated herein by reference.
On February 21, 2008, the Company issued a press release announcing the foregoing. A copy of the press release is filed herewith as exhibit 99.1.