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EXHIBIT 10.1
SECOND AMENDMENT TO CREDIT AGREEMENT
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and
THIRD AMENDMENT TO LETTER LOAN AGREEMENT
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THIS SECOND AMENDMENT TO CREDIT AGREEMENT and THIRD AMENDMENT TO LETTER
LOAN AGREEMENT (the "Amendment"), dated as of September 30, 1998, is among
HORIZON HEALTH CORPORATION, a corporation duly organized and validly existing
under the laws of the State of Delaware (the "Borrower"), each of the banks or
other lending institutions which is a signatory hereto (individually, a "Bank"
and, collectively, the "Banks"), CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
formerly known as Texas Commerce Bank National Association, individually as a
Bank and as agent for itself and the other Banks under the hereinafter defined
Credit Agreement (in its capacity as agent, together with its successors in such
capacity, the "Agent") and in its individual capacity as a lender under the
hereinafter defined Term Loan Agreement (in such capacity, "Chase"), NORTH
CENTRAL DEVELOPMENT AUTHORITY ("North Central") and the other Obligated Parties
(as defined in the Credit Agreement).
RECITALS:
WHEREAS, Borrower, the Banks and Agent have entered into that certain
Credit Agreement dated as of December 9, 1997 (as amended by that certain letter
agreement dated as of June 30, 1998, herein the "Credit Agreement").
WHEREAS, Borrower, certain Subsidiaries of Borrower, North Central and
Chase have entered into that certain Letter Loan Agreement dated as of December
20, 1995 (as amended by that certain First Amendment to Letter Loan Agreement
and Note Modification Agreement dated as of December 9, 1997 and that certain
letter agreement dated as of June 30, 1998, herein the "Term Loan Agreement")
WHEREAS, Borrower, the Obligated Parties, North Central, the Banks,
Agent and Chase now desire to further amend the Credit Agreement and the Term
Loan Agreement as herein set forth.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
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ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Credit Agreement and Term Loan Agreement, as amended hereby.
ARTICLE 2
Amendments
Section 2.1 Amendment to Section 3.4. Effective as of the date hereof,
Section 3.4 of the Credit Agreement is amended in its entirety to read as
follows:
Section 3.4 Use of Proceeds . The proceeds of Term Loans shall be used
by the Borrower to repay the Previous Senior Debt, to finance Permitted
Acquisitions and to finance the redemption or repurchase of its capital stock
(to the extent permitted by Section 10.4 of this Agreement).
Section 2.2 Amendment to Section 10.4. Effective as of the date hereof,
Section 10.4 of the Credit Agreement and the similar provision incorporated into
the Term Loan Agreement pursuant to Section 6.01 of the Term Loan Agreement are
amended in their entirety as follows:
Section 10.4 Restrictions on Dividends and other Distributions. The
Borrower will not and will not permit any Subsidiary to directly or indirectly
declare, order, pay, make or set apart any sum for (a) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
(or other equity interest) of the Borrower or any Subsidiary now or hereafter
outstanding; (b) any redemption, conversion, exchange, retirement, sinking fund
or similar payment, purchase or other acquisition for value, direct or indirect,
of any shares of any class of stock (or other equity interest) of the Borrower
or any Subsidiary now or hereafter outstanding; or (c) any payment made to
retire, or to obtain the surrender of, any outstanding warrants, options, or
other rights to acquire shares of any class of stock (or other equity interest)
of the Borrower or any Subsidiary now or hereafter outstanding; except that (i)
Subsidiaries (other than Borrower) may make, declare and pay dividends and make
other distributions with respect to their capital stock (or other equity
interest) to Borrower or the other Subsidiaries, (ii) the Borrower may redeem or
repurchase shares of its stock issued to employees and directors in connection
with the exercise by such Person of stock options granted to such Person under
the Borrower's stock option plans; provided that no Default exists or would
result therefrom and the Dollar amount of such repurchases in any individual
case shall not exceed an amount equal to exercise price pay by such Person to
exercise the option in question plus all United States federal withholding taxes
arising as a result of such exercise, (iii) this Section 10.4 shall not prohibit
the transactions permitted by clauses (a), (j) or (m) of Section 10.5, and (iv)
from September 30, 1998 through and including August 31, 1999, the Borrower may
redeem or repurchase shares of its capital stock; provided that the aggregate
amount paid by Borrower in connection with such
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redemptions and repurchases does not exceed Nine Million Dollars ($9,000,000)
and no Default exists or would result therefrom.
Section 2.3 Amendment to Section 10.5. Effective as of the date hereof,
Section 10.5 of the Credit Agreement and the similar provision incorporated into
the Term Loan Agreement pursuant to Section 6.01 of the Term Loan Agreement are
amended in their entirety to read as follows:
Section 10.5 Investments. The Borrower will not, and will not
permit any Subsidiary to, make or permit to remain outstanding any
advance, loan, other extension of credit, or capital contribution to or
investment in any Person, or purchase or own any stock, bonds, notes,
debentures, or other securities of any Person, or be or become a joint
venturer with or partner of any Person, except:
(a) Borrower or any wholly owned Subsidiary directly
owned by Borrower may acquire shares, other equity securities
or other evidence of beneficial ownership of a Person or, for
purposes of Section 10.3, all or substantially all of a
Persons's assets or the assets of a division or branch of such
Person, if, with respect to each such acquisition:
(i) Default. No Default exists or would result
therefrom;
(ii) Bank Approval. Borrower shall have obtained the
prior written consent of the Required Banks if (A)
the Purchase Price for the acquisition is greater
than Ten Million Dollars ($10,000,000) or (B) if
after giving effect to such acquisition, the
aggregate Purchase Price of all Permitted
Acquisitions that have occurred (1) from September
30, 1998 through and including August 31, 1999, is
greater than Ten Million Dollars ($10,000,000) and
(2) at any time thereafter, during the twelve (12)
month period then most recently ending, Thirty
Million Dollars ($30,000,000). As used above, the
phrase "Purchase Price" means, as of any date of
determination and with respect to a proposed
acquisition, the purchase price to be paid for the
Target or its assets, including all cash
consideration paid (whether classified as purchase
price, noncompete, consulting or postclosing
performance based payments or otherwise) or to be
paid (based on the estimated amount thereof), the
value of all other assets to be transferred by the
purchaser in connection with such acquisition to the
seller (but specifically excluding any stock of
Borrower issued to the seller which shall not be part
of the Purchase Price for purposes of this clause
(ii)) all valued in accordance with the applicable
purchase agreement and the outstanding principal
amount of all Debt of the
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Target or the seller assumed or acquired in
connection with such acquisition.
(iii) Delivery and Notice Requirements.
Borrower shall provide the Agent fifteen (15) days
prior to the consummation of the acquisition the
following: (A) notice of the acquisition, (B) the
most recent financial statements of the Target that
Borrower has available, (C) such other documentation
and information relating to the Target and the
acquisition as the Agent may reasonably request, and
(D) evidence certified by the chief executive or
chief financial officer of Borrower that Borrower
shall be in compliance with the covenants contained
in Article 11 on a pro forma basis for the four (4)
Fiscal Quarter period then most recently ending
(assuming (1) the consummation of the acquisition in
question; (2) that the incurrence or assumption of
any Debt in connection therewith occurred on the
first day of such period; (3) to the extent such Debt
bears interest at a floating rate, the rate in effect
for the entire period of calculation was the rate in
effect at the time of calculation; and (4) any sale
of Subsidiaries or lines of business which occurred
during such period occurred on the first day of such
period). Within sixty (60) days of such acquisition
the obligations under subsections 9.10(b) and (c)
shall be fulfilled.
(iv) Diligence. Borrower has completed due
diligence on the Target or the assets to be acquired;
(v) U.S. Acquisitions. The Target is
organized under the laws of a state in the United
States of America and is involved in the same general
type of business activities as the Subsidiaries; and
(vi) Structure. If the proposed acquisition
is an acquisition of the stock of a Target, the
acquisition will be structured so that the Target
will become a wholly owned Subsidiary directly owned
by Borrower. If the proposed acquisition is an
acquisition of assets, the acquisition will be
structured so that Borrower or a whole owned
Subsidiary directly owned by Borrower shall acquire
the assets; and
(b) readily marketable direct obligations of the
United States of America or any agency thereof with maturities
of one year or less from the date of acquisition;
(c) fully insured certificates of deposit with
maturities of one year or less from the date of acquisition
issued by any commercial bank
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operating in the United States of America having capital and
surplus in excess of $250,000,000;
(d) commercial paper or bonds of a domestic issuer if
at the time of purchase such paper or bonds are rated in one
of the two highest rating categories of Standard and Poor's
Corporation or Xxxxx'x Investors Service, Inc.;
(e) current trade and customer accounts receivable
for services rendered in the ordinary course of business;
(f) shares of any mutual fund registered under the
Investment Company Act of 1940, as amended, which invests
solely in investment of the type described in clauses (b)
through (d) of this Section 10.5;
(g) loans to physicians; provided that (i) at the
time of such loan no Default shall exist or result therefrom;
(ii) the aggregate amount of such loans made by Borrower and
the Subsidiaries and outstanding at any one time shall not
exceed Two Hundred Fifty Thousand Dollars ($250,000),
calculated net of any bad debt reserves;
(h) advances to employees for business expenses
incurred in the ordinary course of business including, without
limitation, loans in connection with employee relocations and
changes in the Borrower's and the Subsidiaries' payroll
payment dates;
(i) existing investments described on Schedule 10.5
hereto;
(j) the purchase by Horizon Mental Health Management,
Inc. of shares of capital stock of Florida Professional
Psychological Services, Inc. not owned by Horizon Mental
Health Management, Inc. on the Closing Date;
(k) loans, advances and other extensions of credit to
Subsidiaries made in accordance with the restrictions set
forth in subsection 10.1 (b); provided that, at the time any
such loan, advance or other extension of credit is made, no
Default exists or would result therefrom;
(l) Guarantees permitted by Section 10.1; and
(m) if no Default exists, Borrower and the
Subsidiaries may make additional capital contributions to and
or investments in or purchase any stocks, bonds, or other
equity securities authorized to be issued under Section 10.6
of a wholly owned Subsidiary or a newly created Person
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organized by Borrower or a Subsidiary that, immediately after
such investment or purchase, will be a wholly owned Subsidiary
if the obligations under Section 9.10 shall be fulfilled and
the aggregate amount of such contributions and investments
made under the permissions of this clause (m) does not exceed
One Hundred Thousand Dollars ($100,000) during the entire term
of this Agreement.
Section 2.4 Amendment to Section 11.1. Effective as of the date hereof,
Section 11.1 of the Credit Agreement and the similar provision
incorporated into the Term Loan Agreement pursuant to Section 6.01 of
the Term Loan Agreement are amended in their entirety to read as
follows:
Section 11.1 Consolidated Net Worth. The Borrower will at all
times maintain a Consolidated Net Worth in an amount not less than the
sum of (a) Thirty-Two Million Dollars ($32,000,000); plus (b) fifty
percent (50%) of the Borrower's net income determined on a consolidated
basis in accordance with GAAP for each Fiscal Quarter to have
completely elapsed since August 31, 1997; plus (c) one hundred percent
(100%) of the net cash proceeds of any sale of equity securities or
other contributions to the capital of the Borrower received by Borrower
since August 31, 1997, calculated without duplication minus (d) one
hundred percent (100%) of the purchase price of any shares of stock of
the Borrower that are redeemed or repurchased by the Borrower in
accordance with Section 10.4 during the four (4) Fiscal Quarters then
most recently ended as of the date of determination. If Borrower's
consolidated net income for a Fiscal Quarter is zero or less, no
adjustment to the requisite level of Consolidated Net Worth shall be
made. "Consolidated Net Worth" means, at any particular time, all
amounts which, in conformity with GAAP, would be included as
stockholders' equity on a consolidated balance sheet of the Borrower
and the Subsidiaries.
Section 2.5 Amendment to Section 11.2. Effective as of the date hereof,
Section 11.2 of the Credit Agreement and the similar provision incorporated into
the Term Loan Agreement pursuant to Section 6.01 of the Term Loan Agreement are
amended in their entirety to read as follows:
Section 11.2 Indebtedness to Capitalization. The Borrower will
not at any time permit the ratio of Indebtedness to Capitalization to
exceed .50 to 1.00. As used in this Section 11.2, the following terms
have the following meanings:
"Adjusted Consolidated Net Worth" means, at any particular
time, (a) all amounts which, in conformity with GAAP, would be included
as stockholders' equity on a consolidated balance sheet of the Borrower
and the Subsidiaries, plus (b) one hundred percent (100%) of the
purchase price of any shares of stock of the Borrower that are redeemed
or repurchased by the Borrower in accordance with Section 10.4 during
the four (4) Fiscal Quarters then most recently ended as of the date of
determination.
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"Capitalization" for means, at any particular time, the sum of
Adjusted Consolidated Net Worth plus Indebtedness.
"Indebtedness" means, at the time of determination, the sum of
the following determined for Borrower and the Subsidiaries on a
consolidated basis (without duplication); (a) all obligations for
borrowed money; (b) all obligations of such Person evidenced by bonds,
notes, debentures, or other similar instruments; (c) all Capital Lease
Obligations; and (d) the outstanding principal amount of the loans
extended to North Central Development Company which are secured by a
Lien on the facility located at 0000 Xxxxx Xxxxx, Xxxxxxxxxx, Xxxxx
leased by the Borrower.
Section 2.6 Amendment to Exhibit "J". Effective as of the date hereof,
Exhibit "J" to the Credit Agreement and the similar exhibit incorporated into
the Term Loan Agreement pursuant to Section 6.01 of the Term
Loan Agreement are amended in their entirety to read as set forth
in Exhibit "J" hereto.
ARTICLE 3
Waivers
Section 3.1 Waivers of Non-Compliance with Certain Provisions of the
Loan Documents. The Borrower has advised the Agent, the Banks and Chase
(collectively the "Lenders") that it has failed to comply with Section 10.3,
Section 10.5(a)(vi) and Section 10.8 of the Credit Agreement, the similar
provisions incorporated into the Term Loan Agreement pursuant to Section 6.01 of
the Term Loan Agreement and Paragraph 10 of the Borrower Pledge Agreement, each
as more specifically described below (the following specifically described
provisions of the Credit Agreement, the Term Loan Agreement and the Borrower
Pledge Agreement are hereinafter referred to as the "Applicable Covenants").
(a) The Borrower has notified the Agent that (i) FPMBH
Clinical Services, Inc. ("FPMBHC") (a wholly owned Subsidiary directly
owned by Horizon Behavioral Services, Inc., formerly known as FPM
Behavioral Health, Inc., and herein "HBS") was merged with and into
HBS's wholly-owned Subsidiary, Florida Psychiatric Associates, Inc.
("FPA") effective as of September 10, 1998; and (ii) Arizona
Psychiatric Affiliates, Inc. ("APA") was merged with and into FPA
effective as of September 24, 1998 (collectively, the "Florida
Psychiatric Mergers"). The Florida Psychiatric Mergers do not comply
with Section 10.3 of the Credit Agreement and the similar provision
incorporated into the Term Loan Agreement pursuant to Section 6.01 of
the Term Loan Agreement, which require that the Florida Psychiatric
Mergers be structured so that the surviving Person is or becomes a
wholly owned Subsidiary directly owned by Borrower.
(b) HBS acquired all of the shares of capital stock of Choice
Health, Inc. (the "Acquisition") for a Purchase Price equal to
$2,000,000. The structure of the Acquisition
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does not comply with Section 10.5(a)(vi) of the Credit Agreement and
the similar provision incorporated into the Term Loan Agreement
pursuant to Section 6.01 of the Term Loan Agreement, which require that
the Acquisition be structured so that Choice Health, Inc. will become a
wholly owned Subsidiary directly owned by Borrower.
(c) The Borrower has notified the Agent that it has
contributed 100% of the issued and outstanding shares of the capital
stock (the "Shares") of Acorn Behavioral Healthcare Management
Corporation ("ABHMC") (a wholly owned Subsidiary directly owned by
Borrower) to HBS (the "Contribution"). The Contribution does not comply
with (i) Section 10.8 of the Credit Agreement and the similar provision
incorporated into the Term Loan Agreement pursuant to Section 6.01 of
the Term Loan Agreement, which prohibit the Borrower from disposing of
any of its assets except as specifically set forth therein and (ii)
Paragraph 10 of the Borrower Pledge Agreement which prohibits the
disposition of the Shares without the consent of the Agent.
The Borrower, the Obligated Parties and North Central (collectively the
"Loan Parties") have requested that the Lenders waive the Defaults arising as a
result of the failure of the Borrower to comply with the Applicable Covenants
with respect to the transactions specifically described in clauses (a), (b) and
(c) of this Section 3.1 (the "HBS Transactions").
The undersigned Lenders waive the Defaults arising as a result of the
failure of the Borrower to comply with the Applicable Covenants with respect to
the HBS Transactions.
To induce the Lenders to agree to the terms of this Section 3.1 each
Loan Party agrees that the waivers set forth herein shall not be deemed a
consent to the departure from or waiver of (1) the Applicable Covenants for any
purpose other than to permit the HBS Transactions or (2) any other covenant,
condition or Default (including without limitation, any other covenant,
condition or Default set forth in or relating to the Applicable Covenants, in
any Loan Document as defined in the Credit Agreement and as defined in the Term
Loan Agreement (all such Loan Documents, herein the "Transaction Documents")) or
(3) any other default or event of default under any Transaction Document (a
"Transaction Default") that otherwise may arise as a result of the HBS
Transactions. The failure to comply with the Applicable Covenants for any other
transaction of the type restricted by the Applicable Covenants shall constitute
a Transaction Default.
In addition to the foregoing, the Borrower and HBS agree to execute and
deliver to the Agent, on or before October 30, 1998, all documentation requested
by the Agent (1) to pledge to the Agent the shares of stock of HBS that were
issued to the Borrower to reflect HBS's name change from "FPM Behavioral Health,
Inc." to "Horizon Behavioral Services, Inc.", (2) to pledge to the Agent the
shares of stock of FPA that were issued to HBS as a result of the Florida
Psychiatric Mergers, and (3) to pledge to the Agent the shares of stock of ABHMC
that were issued to HBS as a result of the Contribution.
Section 3.2 Consent to Release of Stock of Merged Subsidiaries. The
Borrower has notified the Agent that the following mergers (collectively, the
"Mergers") have been completed,
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all (except the Florida Psychiatric Merger as described above) in accordance
with Section 10.3 of the Credit Agreement: (a) Florida Professional
Psychological Services, Inc. ("FPPS") was merged with and into HBS effective as
of June 4, 1998; (b) FPM/Hawaii, Inc. ("FPMH"), FPM Management, Inc. ("FPMI"),
FPM of Louisiana, Inc. ("FPML"), FPM of Ohio, Inc. ("FPMO"), FPM of Utah, Inc.
("FPMU"), FPM of West Virginia, Inc. ("FPMWV") and FPM/Southeast, Inc. ("FPMSE")
were merged with and into HBS effective as of September 1, 1998; and (c) the
Florida Psychiatric Mergers.
As a consequence of the Mergers, the Borrower has requested that the
Agent release and return the stock certificates together with the accompanying
stock powers evidencing the shares of stock of FPPS, FPMH, FPMI, FPML, FPMO,
FPMU, FPMWV, FPMSE, FPMBHC and APA that were pledged to the Agent pursuant to
the Credit Agreement (the "Stock Certificates"). The Banks hereby consent to the
Agent's release and return of the Stock Certificates.
ARTICLE 4
Miscellaneous
Section 4.1 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and Term Loan Agreement and except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Credit Agreement and Term Loan Agreement and the other Transaction Documents are
ratified and confirmed and shall continue in full force and effect. The Loan
Parties and the Lenders agree that the Credit Agreement and Term Loan Agreement
as amended hereby and the other Transaction Documents shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
Section 4.2 Reference to Credit Agreement and Term Loan Agreement. Each
of the Transaction Documents, including the Credit Agreement and Term Loan
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Credit Agreement or Term Loan Agreement as amended hereby, are
hereby amended so that any reference in such Transaction Documents to the Credit
Agreement or Term Loan Agreement shall mean a reference to the Credit Agreement
and Term Loan Agreement as amended hereby.
Section 4.3 Expenses of Agent. As provided in the Credit Agreement and
the Term Loan Agreement, Borrower agrees to pay on demand all costs and expenses
incurred by the Agent in connection with the preparation, negotiation, and
execution of this Amendment.
Section 4.4 Amendment Fee. As consideration for each of the undersigned
Banks agreement to enter into this Amendment the Borrower agrees to pay to the
Agent for the benefit of each of the undersigned Banks an amendment fee equal
the product of one-tenth of one percent (.10%) multiplied the amount of such
Bank's Commitments (the "Amendment Fee"), which Amendment Fee shall be due and
payable on or before October 15, 1998.
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Section 4.5 Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.6 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 4.7 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Loan Parties, the Lenders and their respective
successors and assigns, except the Loan Parties may not assign or transfer any
of their rights or obligations hereunder without the prior written consent of
the Lenders.
Section 4.8 Counterparts. This Amendment may be executed in one or more
counterparts and on telecopy counterparts, each of which when so executed shall
be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 4.9 Effect of Waiver. No consent or waiver, express or implied,
by any Lender to or for any breach of or deviation from any covenant, condition
or duty by Borrower or any other Loan Party shall be deemed a consent or waiver
to or of any other breach of the same or any other covenant, condition or duty.
Section 4.10 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 4.11 ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
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Executed as of the date first written above.
LENDERS:
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION, as Agent and in its individual
capacity as a Lender under the Credit
Agreement and the Term Loan Agreement
By: /s/ XXXXXX XXXXXXXX
-------------------------------------
Xxxxxx Xxxxxxxx, Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ XXXXXXX XXXX XXXXX
--------------------------------------
Name: Xxxxxxx Xxxx Xxxxx
------------------------------------
Title: Managing Director
-----------------------------------
COMERICA BANK-TEXAS
By: /s/ XXXX XXXXX
--------------------------------------
Name: Xxxx Xxxxx
------------------------------------
Title: Corporate Banking Officer
-----------------------------------
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COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By: /s/ XXXXXX X. XXXXXX
--------------------------------------
Name: Xxxxxx X. Xxxxxx
------------------------------------
Title: Senior Vice President
-----------------------------------
By: /s/ XXXX XXXXXX
--------------------------------------
Name: Xxxx Xxxxxx
------------------------------------
Title: Vice President
-----------------------------------
BANQUE PARIBAS, HOUSTON AGENCY
By: /s/ XXXXX X. XXXXXX
--------------------------------------
Name: Xxxxx X. Xxxxxx
------------------------------------
Title: Director
-----------------------------------
By: /s/ XXXXX X. MAY
--------------------------------------
Name: Xxxxx X. May
------------------------------------
Title: Vice President
-----------------------------------
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LOAN PARTIES
HORIZON HEALTH CORPORATION
HORIZON MENTAL HEALTH MANAGEMENT, INC.
MENTAL HEALTH OUTCOMES, INC.
HHG COLORADO, INC.
GERIATRIC MEDICAL CARE, INC.
SPECIALTY REHAB MANAGEMENT, INC.
ACORN BEHAVIORAL HEALTHCARE MANAGEMENT CORPORATION
HHMC PARTNERS, INC.
HORIZON BEHAVIORAL SERVICES, INC.
FLORIDA PSYCHIATRIC ASSOCIATES, INC.
FLORIDA PSYCHIATRIC MANAGEMENT, INC.
FPMBH OF ARIZONA, INC.
FPMBH OF TEXAS, INC.
By: /s/ XXXXX X. XXXXXX
-------------------------------------------------------
Xxxxx X. XxXxxx, Executive Vice President and Secretary
of each of the above listed Loan Parties
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NORTH CENTRAL DEVELOPMENT COMPANY
By: /s/ XXXX X. XXXXX
---------------------------------
Xxxx X. Xxxxx, President
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EXHIBIT "J"
TO
HORIZON HEALTH CORPORATION
CREDIT AGREEMENT
Compliance Certificate
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COMPLIANCE CERTIFICATE
for the
Fiscal Quarter ending ________ __, ____
To: Chase Bank of Texas, National Association,
as Agent
1111 Fannin, 9th Floor, MS46
Xxxxxxx, Xxxxx 00000
Attention: Loan Syndication Services
re: Horizon Health Corporation
and each Bank
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 9.1(c) of that certain Credit Agreement (as amended, the
"Agreement") dated as of December 9, 1997, among the Horizon Health Corporation,
the banks and lending institutions named therein (the "Banks") and Texas
Commerce Bank National Association, as agent for the Banks ("Agent"). All
capitalized terms, unless otherwise defined herein, shall have the same meanings
as in the Agreement. All the calculations set forth below shall be made pursuant
to the terms of the Agreement.
The undersigned, as an authorized financial officer of the Borrower,
and not individually, does hereby certify to the Agents and the Banks that:
1. DEFAULT.
No Default has occurred and is continuing or if a Default has occurred and is
continuing, I have described on the attached Exhibit "A" the nature thereof and
the steps taken or proposed to remedy such Default.
2. SECTION 9.1 - FINANCIAL STATEMENTS AND RECORDS
(a) Annual audited financial statements of Borrower and the Yes No N/A
Subsidiaries on or before ninety (90) days after the end of each
Fiscal Year.
(b) Quarterly unaudited financial statements of Borrower and the Yes No N/A
Subsidiaries within forty-five (45) days after the end of the first 3
Fiscal Quarters and within ninety (90) days after the last Fiscal
Quarter
(c) Financial Projections of Borrower and Subsidiaries within Yes No N/A
forty-five (45) days after the beginning of each Fiscal Year.
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3. SECTION 10.1 - DEBT
(a) Purchase money not to exceed: $ 500,000
Actual Outstanding: $ Yes No
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(b) Guarantees of surety, appeal bonds, etc. not to exceed: $ 500,000
Actual Outstanding: $ Yes No
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(c) Aggregate Debt of newly acquired or merged Subsidiaries not
to exceed: $ 500,000
Actual Outstanding: $ Yes No
--------
(d) Other Debt not to exceed: $ 100,000
Actual Outstanding: $ Yes No
--------
4. SECTION 10.4 - RESTRICTIONS ON DIVIDENDS AND OTHER
DISTRIBUTIONS
(a) From September 30, 1998 through and including August 31, $ 9,000,000 Yes No
1999, the aggregate amount paid by Borrower in connection with the $
repurchase or redemption of its stock shall not exceed:
Actual Outstanding:
5. SECTION 10.5 - INVESTMENTS
(a) Aggregate amount of loans to physicians employed by a $ 250,000 Yes No
Subsidiary not to exceed (calculated net of bad debt reserve): $
Actual Outstanding:
(b) Aggregate amount of investments in or contributions to wholly $ 100,000 Yes No
owned Subsidiaries not to exceed: $
Actual Outstanding:
6. SECTION 10.8 - ASSET DISPOSITIONS
(a) Aggregate book value of assets disposed during any 12-month $ 200,000
period not to exceed:
(b) Total book value of asset dispositions for 12-month period $ Yes No
--------
most recently ending:
7. SECTION 11.1 - CONSOLIDATED NET WORTH
(a) $ 32,000,000 $
(b) Net income for Current Fiscal Quarter (if positive) $
(c) Aggregate positive Net Income since 8/31/97 Fiscal Quarter $
end (excluding current Fiscal Quarter)
(d) 7(b) + 7(c) $
(e) 50% of 7(d) $
(f) Aggregate amount of net cash proceeds or other Capital $
Contribution to Borrower since 8/31/97
(g) Aggregate amount of purchase price of all shares of stock of $
the Borrower that have been redeemed or repurchased by the Borrower
during the four (4) Fiscal Quarters most recently ending:
(h) Required Consolidated Tangible Net Worth: $
7(a) + 7(e) + 7(f) - 7(g)
(i) Actual Consolidated Net Worth $ Yes No
--------
18
8. SECTION 11.2 - INDEBTEDNESS TO CAPITALIZATION
---------------------------------------------
(a) Debt for borrowed money $
(b) Debt evidenced by bonds, notes, etc. $
(c) Capital Lease Obligations $
(d) North Central Development Company debt $
(e) Sum of 8(a) - 8(d) $
(f) Actual Net Worth
(from Section 11.1) $
(g) Aggregate amount of purchase price of all shares of stock of
the Borrower that have been redeemed or repurchased by the Borrower
during the four (4) Fiscal Quarters most recently ending:
$
(h) 8(e) + 8(f) + 8(g) $
(i) 8(e) / 8(h) = :1.00
------
(j) Maximum Indebtedness to Capitalization 0.50:1.00 Yes No
9. SECTION 11.3 - FIXED CHARGE COVERAGE
(a) Borrower and the Subsidiaries' Consolidated Net Income
for last four Fiscal Quarters (from Schedule 1) $
(b) Plus provisions for tax $
(c) less benefit from tax $
(d) Plus interest expense $
(e) Plus amortization $
(f) Plus depreciation $
(g) Plus, if applicable, 8/97 merger expenses $
(h) Borrower and the Subsidiaries' EBITDA:
(a) plus (b), (d), (e), (f), and (g) less (c) $
(i) provisions for taxes $
(j) plus benefit from taxes $
(k) Cash Flow
9(h) plus 9(j) minus 9(i) $
(l) Fixed Charges $
(i) Cash interest expense for last four Fiscal Quarters $
(ii) Scheduled amortization of Debt (excluding $
outstanding Revolving Loans and Term Loan $
current maturities if prior to 11/30/99) $
(iii) Aggregate amount of Capital Expenditures for $
last four Fiscal Quarters $
(iv) if prior to 11/30/99, an amount equal to #3 below
(1) Term Loans $
(2) (iv)(1) / 20 $
(3) (iv)(2) x 4 $
(v) Sum of 9(l)(i) through (iv) $
(m) Actual Fixed Charge Coverage 9(k) / 9(l)(v)= ______:1.00
(n) Minimum Fixed Charge Coverage 1.2:1.00 Yes No
19
10. SECTION 11.4 - INDEBTEDNESS TO ADJUSTED EBITDA
----------------------------------------------
(a) Indebtedness from 8(e) $
(b) Actual EBITDA (from 9(h)) $
(c) Prior Period/Prior Target EBITDA $
(d) Adjusted EBITDA (10(b) plus 10(c)) $
(e) 10(a) / 10(d) ____:1.00
(f) Maximum Indebtedness to Adjusted EBITDA allowed by
Credit Agreement 2.5:1.00 Yes No
11. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the
computation set forth above in this Certificate. All information
contained herein and on the attached schedules is true and correct.
12. FINANCIAL STATEMENTS
The unaudited financial statements attached hereto were prepared in
accordance with GAAP (excluding footnotes) and fairly present (subject
to year end audit adjustments) the financial conditions and the results
of the operations of the Persons reflected thereon, at the date and for
the periods indicated therein.
13. CONFLICT
In the event of any conflict between the definitions or covenants
contained in the Credit Agreement and as they may be interpreted or
abbreviated in the Compliance Certificate, the Credit Agreement shall
control.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this _______ day of __________ , 199_ .
HORIZON HEALTH CORPORATION
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
20
Schedule 1
to
Compliance Certificate
Borrower Consolidated Net Income
for period ______________ to _________________
1. GAAP for Borrower (the "Subject Person") excluding the following $
consolidated net income ___________
(a) extraordinary gains or losses or nonrecurring revenue
or expenses ___________
(b) gains on sale of securities ___________
(c) losses on sale of securities ___________
(d) any gains or losses in respect of the write-up of any asset at greater
than original cost or write-down at less than original cost; ___________
(e) any gains or losses realized upon the sale or other disposition of
property, plant, equipment or intangible assets which is not sold or
otherwise disposed of in the ordinary course of business; ___________
(f) any gains or losses from the disposal of a discontinued business; ___________
(g) any net gains or losses arising from the extinguishment of any debt; ___________
(h) any restoration to income of any contingency reserve for long term
asset or long term liabilities, except to the extent that provision
for such reserve was made out of income accrued during such period; ___________
(i) the cumulative effect of any change in an accounting principle on income
of prior periods; ___________
(j) any deferred credit representing the excess of equity in any acquired
company or assets at the date of acquisition over the cost of the
investment in such company or asset; ___________
(k) the income from any sale of assets in which the book value of such assets
prior to their sale had been the book value inherited; ___________
(l) the income (or loss) of any Person (other than a subsidiary) in which
the Subject Person or a subsidiary has an ownership interest;
provided, however, that (i) Consolidated Net Income shall include
amounts in respect of the income of such Person when actually received
in cash by the Subject Person or such subsidiary in the form of
dividends or similar distributions and (ii) Consolidated Net Income
shall be reduced by the aggregate amount of all investments,
regardless of the form thereof, made by the Subject Person or any of
its subsidiaries in such Person for the purpose of funding any deficit
or loss of such Person; ___________
(m) the income of any subsidiaries to the extent the payment of such
income in the form of a distribution or repayment of any Debt to the
Subject Person or a Subsidiary is not permitted, whether on account of
any restriction in by-laws, articles of incorporation or similar
governing document, any agreement or any law, statute, judgment,
decree or governmental order, rule or regulation applicable to such
Subsidiary; ___________
(n) any reduction in or addition to income tax expense resulting from an
increase or decrease in a deferred income tax asset due to the
anticipation of future income tax benefits; ___________
(o) any reduction in or addition to income tax expense due to the change
in a statutory tax rate resulting in an increase or decrease in a
deferred income tax asset or in a deferred income tax liability; ___________
21
(p) any gains or losses attributable to returned surplus assets of any
pension- benefit plan or any pension credit attributable to the excess
of (i) the return on pension-plan assets over (ii) the pension
obligation's service cost and interest cost; ___________
(q) the income or loss of any Person acquired by the Subject Person or a
subsidiary for any period prior to the date of such acquisition; and ___________
(r) the income from any sale of assets in which the accounting basis of
such assets had been the book value of any Person acquired by the
Subject Person or a subsidiary prior to the date such Person became a
subsidiary or was merged into or consolidated with the Subject Person
or a subsidiary. ___________
TOTAL: $
===========
