FIFTH AMENDMENT TO
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THIRD AMENDED AND RESTATED CREDIT AGREEMENT
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This FIFTH AMENDMENT TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT (the
"Agreement") is entered into as of September 23, 1998 between HOME HEALTH
CORPORATION OF DELAWARE, INC., a Delaware corporation (the "Borrower"); each of
the Guarantors set forth on the signature pages hereto (each individually, a
"Guarantor" and collectively, the "Guarantors"); FIRST UNION NATIONAL BANK, a
national banking association and successor by merger to CoreStates Bank, N.A.,
("First Union") and the other banks identified on the signature pages hereto
(each individually a "Bank" and individually and collectively, "Banks"); and
First Union as agent for the Banks ("Agent").
BACKGROUND
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A. The Borrower, the Banks and the Agent are parties to that certain Third
Amended and Restated Credit Agreement dated March 13, 1997 as amended by
Amendment No.1 to Third Amended and Restated Credit Agreement dated September
26, 1997, as further amended by Amendment No. 2 to Third Amended and Restated
Credit Agreement dated November 14, 1997, as further amended by Amendment No. 3
to Third Amended and Restated Credit Agreement dated February 13, 1998, and as
further amended by Amendment No. 4 to Third Amended and Restated Credit
Agreement ("Amendment No. 4") dated May 15, 1998 (collectively, the "Credit
Agreement") pursuant to which the Banks agreed to make available to the Borrower
various credit facilities upon the terms and conditions specified in the Credit
Agreement.
B. Home Health Corporation of America, Inc. ("Parent") and certain of its
subsidiaries other than the Borrower have executed (or joined in) that certain
Amended and Restated Guaranty dated March 13, 1997 (as amended from time to
time, the "Guaranty") in favor of the Banks in connection with the Credit
Agreement.
C. The Borrower has provided the Banks with information that, as more
particularly set forth herein, it is in default under certain provisions set
forth in the Credit Agreement.
D. The Borrower has requested, and the Banks have agreed to, subject to
the terms and conditions hereof, certain amendments and waivers under the Credit
Agreement as set forth herein.
E. All terms capitalized but not otherwise defined herein shall have the
meanings ascribed to them in the Credit Agreement.
AGREEMENT
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NOW, THEREFORE, incorporating the Background Section herein, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, the parties hereby agree
as follows:
Section 1. Acknowledgment of Events of Default; Waiver of Notice; Waiver
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of Defaults; Validity and Enforceability of Documents.
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1.1 The Borrower acknowledges and agrees that Events of Default exist and
are continuing under the Credit Agreement and each of the other Loan Documents
(the "Existing Defaults") because, inter alia, the Borrower has failed to comply
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with certain provisions of the Credit Agreement as set forth on Schedules 2, 3
and 4 which are attached hereto in accordance with paragraphs 7(f), 7(g) and
7(i) hereof. As used herein, the term "Existing Defaults" includes any covenant
defaults of the Borrower that are directly attributable to the accounts
receivable owing by the affiliates of Allegheny Health Education and Research
Foundation or any of its affiliates. The Borrower acknowledges and agrees that
the Existing Defaults are material in nature, and waives any defenses, set-offs
or counterclaims that exist in connection with the Existing Defaults. The Banks
hereby waive the Existing Defaults and their rights to exercise any of the
remedies available to them in connection with the Existing Defaults either under
the Loan Documents or under applicable law. Notwithstanding the foregoing
sentence, nothing contained herein shall constitute or be deemed to constitute a
waiver by the Banks of any of their rights or remedies in connection with any
Events of Default, other than the Existing Defaults, whether presently existing
or occurring subsequent to the date hereof.
1.2 Except as amended and supplemented hereby, all of the terms and
provisions of the Loan Documents shall remain in full force and effect and,
except as expressly amended hereby, are hereby ratified and confirmed. The
Borrower and the Guarantors hereby ratify and confirm that the Loan Documents,
as amended or supplemented hereby, are valid and binding obligations and
enforceable in accordance with their respective terms subject only to
bankruptcy, insolvency, reorganization moratorium or other laws or equitable
principles affecting creditors rights generally. All obligations presently or
hereafter outstanding under the Credit Agreement, the Notes and the other Loan
Documents shall continue to be secured by, among other things, the Collateral,
and this Agreement does not constitute a novation of the Credit Agreement or the
Notes. Nothing contained herein shall alter, amend, modify, or extinguish the
obligations of the Borrower to repay the Loans.
Section 2. Acknowledgment of Obligations. The Borrower acknowledges and
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agrees that, as of the date hereof, the Borrower is indebted to the Banks in the
total principal amounts reflected on Schedule 1 attached hereto (which principal
amounts the Borrower acknowledges may increase as a result of borrowings under
the Revolving Loan) together with accrued and unpaid interest, expenses and
fees, all without offset, counterclaims, or defenses of any kind.
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Section 3. Acknowledgment of Liens. The Borrower acknowledges and agrees
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that Agent holds duly perfected, first priority security interests in and liens
on the Collateral, and that these liens and security interests secure the Loans.
Section 4. Amendments to the Loan Agreement.
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4.1 Paragraph 1.1 of the Credit Agreement is supplemented by adding the
following definitions thereto:
"Fifth Amendment" means the Fifth Amendment to Third Amended and
Restated Credit Agreement dated September 23, 1998 by and among the
Borrower, the Guarantors, the Banks and the Agent.
"Temporary Supplemental Loan" means the loan made available by
the Banks to the Borrower pursuant to Paragraph 2.1(i) hereof.
"Temporary Supplemental Notes" means the notes, in form and
substance satisfactory to the Banks, executed and delivered by the
Borrower to the Banks in connection with the Temporary Supplemental
Loan, as such notes may be amended, modified, extended, consolidated
or restated from time to time.
"Professional Fee Loan" means the loan made available by the
Banks to the Borrower pursuant to Paragraph 2.1(h) hereof.
"Professional Fee Notes" means the notes, in form and substance
satisfactory to the Banks, executed and delivered by the Borrower to
the Banks in connection with the Professional Fee Loan, as such notes
may be amended, modified, extended, consolidated or restated from time
to time.
"Seller Notes" shall mean the Subordinated Seller Notes and the
Unsubordinated Seller Notes.
"Subordinated Seller Notes" shall mean the notes and other earn-
out obligations of the Companies set forth on Exhibit "A" attached to
the Fifth Amendment.
"Unsubordinated Seller Notes" shall mean the notes and the other
earn-out obligations of the Companies set forth on Exhibit "B"
attached to the Fifth Amendment.
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4.2 The following definitions contained in Paragraph 1.1 of the Credit
Agreement are amended and restated as follows:
"Acquisition Commitment" means the aggregate principal amount
which Banks have agreed to make available under Paragraph 2.1(b)
hereof, being Sixty Million Dollars ($60,000,000) on the date hereof,
subject to adjustment from time to time in accordance with Paragraphs
2.1(e) and 2.8 hereof; except, however, that from and after the date
of the Fifth Amendment, such aggregate principal amount shall be not
more than $42,458,135.25.
"Adjusted EBITDA" shall mean EBITDA for the immediately preceding
two (2) fiscal quarters for Parent and its consolidated Subsidiaries,
multiplied by two (2).
"Adjusted EBITDAR" shall mean EBITDAR for the immediately
preceding two (2) fiscal quarters for Parent and its consolidated
Subsidiaries, multiplied by two (2).
"Agent" means First Union National Bank (successor by merger to
CoreStates Bank, N.A.), in its capacity as agent for the Banks
hereunder and any successor appointed pursuant to Paragraph 9.15 and
9.16 hereof.
"Collateral" means the collateral security afforded to Agent, for
the benefit of the Banks, under the Pledge Agreements, the Security
Agreement, the Guaranty and this Agreement.
"EBITDA" means for any period, the sum of operating income for
such period, plus depreciation of equipment held for rental. For
purposes of this definition, the term "operating income" shall mean
net revenues less direct expenses (which shall include depreciation of
equipment held for rental) less indirect expenses less bad debt
expenses (other than with respect to accounts receivable due and owing
from Allegheny Health Education and Research Foundation and its
affiliates which are reflected on the Borrower's financial statements
dated June 30, 1998 in the approximate amount of $1,248,000), all of
the foregoing to be calculated in accordance with GAAP and the
Borrower's past practices. For purposes of this definition, the terms
"direct expenses" and "indirect expenses" shall not include the
following expenses: depreciation (other than of equipment held for
rental as set forth above), amortization, interest, taxes,
Professional Fees, and any and all legal fees incurred by the
Companies due to the failure by the Companies to make required
payments of Subordinated Debt, Unsubordinated Seller Debt or earn-out
payments or other payments to sellers in connection with acquisitions.
For purposes of this definition, the term "Professional Fees" shall be
limited to those fees being paid by the Borrower with funds advanced
under the Professional Fee Loan together with: (i)any future
professional fees incurred by any of the Banks and which must be paid
by the Borrower; and(ii)any professional fees incurred by the Borrower
for professionals retained by the Borrower at the suggestion of the
Banks.
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"Loan" means the aggregate outstanding principal balance of
Indebtedness advanced under the Acquisition Commitment, the Revolving
Commitment, the RSD Commitment, the LHS Commitment, the Temporary
Supplemental Loan, the Professional Fee Loan, and without duplication
the amount available to be drawn under all Letters of Credit and the
amount of all unreimbursed draws under Letters of Credit, together
with interest accrued and fees and expenses incurred in connection
with any of the foregoing.
"Note" means individually and "Notes" means individually and
collectively the Acquisition Notes, the Revolving Notes, the RSD
Notes, the LHS Notes, the Temporary Supplemental Notes and the
Professional Fee Notes.
"Restricted Payments" means redemptions, repurchases, dividends
and distributions of any kind (including redemptions in exchange for
real or tangible personal property held by a Company) in respect of
any class of capital stock of Parent (whether common or preferred, in
any class or series) and payments of principal and interest or other
amounts on Subordinated Debt, including, without limitation, the
obligations of the Borrower or any Guarantor under notes or agreements
entered into or executed by the Borrower or any Guarantor in
connection with any acquisitions of the Borrower or any Guarantor and
all earn out payments associated with any of the foregoing.
"Revolving Commitment" means the maximum aggregate principal
amount which Banks have agreed to make available under Paragraph
2.1(a) hereof, being Thirty Million Dollars ($30,000,000) on the date
hereof, subject to adjustment from time to time in accordance with
Paragraphs 2.1(e) and 2.8 hereof; except, however, that from and after
the date of the Fifth Amendment, such aggregate principal amount shall
be not more than $32,405,255.14.
"RSD Commitment" means the aggregate principal amount which Banks
have agreed to make available under Paragraph 2.1(c) hereof, being Six
Million Dollars ($6,000,000)on the date hereof, subject to adjustment
from time to time in accordance with Paragraph 2.1(e) and Paragraph
2.8 hereof; except, however, that from and after the date of the Fifth
Amendment, such aggregate principal amount shall be not more than
$4,523,104.17.
"Subordinated Debt" means (i) the Existing Subordinated Debt,
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(ii) the LHS II Subordinated Debt and the Nahatan Subordinated Debt,
(iii) additional Indebtedness incurred in favor of sellers in
Permitted Acquisitions evidencing a portion of the purchase price in
such Permitted Acquisitions in an aggregate principal amount under
this clause (iii) not to exceed Three Million Seven Hundred Fifty
Thousand Dollars ($3,750,000) in any one transaction or Five Million
Dollars ($5,000,000) for all transactions in any fiscal year, which
Indebtedness has been subordinated to the obligations of the Companies
to Banks pursuant to a Subordination Agreement, and (iv) to the extent
not included in any of the foregoing, the Subordinated Seller Notes.
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4.3 Paragraph 2.1 of the Credit Agreement is supplemented by adding the
following subparagraphs thereto:
(g) Termination of Advances. Notwithstanding anything to the
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contrary contained herein, as of the date of the Fifth Amendment, no
further advances will be made by the Banks to the Borrower under the
Acquisition Loan, the RSD Loan or the LHS Loan. In addition, any
principal repayments of the Acquisition Loan, the RSD Loan or the LHS
Loan subsequent to the date of the Fifth Amendment shall permanently
reduce the principal balances outstanding thereunder and shall not be
available for reborrowing.
(h) Professional Fee Loan. Beginning on the date of the Fifth
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Amendment and continuing through December 31, 1998 (the "Professional
Loan Revolving Period"), the Banks agree to make available to the
Borrower Professional Fee Loans in the aggregate maximum principal
amount of $500,000 (the "Professional Fee Loan Commitment"). Upon the
request of the Borrower during the Professional Loan Revolving Period,
each Bank severally agrees to make advances to the Borrower in amounts
not to exceed in the aggregate at any one time outstanding the amount
of such Bank's Pro Rata Share of the Professional Fee Loan Commitment.
The Borrower may use the Professional Fee Loans during the
Professional Loan Revolving Period by borrowing, repaying and
reborrowing in accordance with the terms of this Agreement. The
aggregate outstanding principal under the Professional Fee Loans at
any time shall not exceed the Professional Fee Loan Commitment. If,
at any time, the aggregate outstanding principal under the
Professional Fee Loans exceeds the Professional Fee Loan Commitment,
then without any requirement of demand or notice from the Agent or the
Banks, the Borrower shall immediately pay to the Agent, for the
benefit of the Banks, the amount of such excess. On December 31,
1998, the Banks' commitment to make Professional Fee Loans shall
terminate. The entire principal amount outstanding under the
Professional Fee Loans together with any accrued and unpaid interest
shall be due and payable in full on the earlier to occur of: (i) at
the option of the Required Banks, the occurrence and continuation of
an Event of Default; or (ii) March 31, 2000.
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(i) Temporary Supplemental Loan. Beginning on the date of the
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Fifth Amendment and continuing through December 31, 1998 (the
"Temporary Supplemental Loan Revolving Period") and subject to the
provisions contained in Paragraph 2.9(e) hereof, the Banks agree to
make available to the Borrower Temporary Supplemental Loans in the
aggregate maximum principal amount of $1,389,462 (the "Temporary
Supplemental Loan Commitment"). Upon the request of the Borrower
during the Temporary Supplemental Loan Revolving Period, each Bank
severally agrees to make advances to the Borrower in amounts not to
exceed in the aggregate at any one time outstanding the amount of such
Bank's Pro Rata Share of the Temporary Supplemental Loan Commitment.
The Borrower may use the Temporary Supplemental Loans during the
Temporary Supplemental Loan Revolving Period by borrowing, repaying
and reborrowing in accordance with the terms of this Agreement and
subject to the following additional conditions: (i) each borrowing
under the Temporary Supplemental Loan must be paid in full before the
Borrower will be permitted to make any additional borrowings under the
Temporary Supplemental Loan; (ii) each borrowing under the Temporary
Supplemental Loan must be paid in full within seven (7) calendar days
after the borrowing is advanced by the Banks; (iii) no borrowings will
be permitted under the Temporary Supplemental Loan during the seven
calendar days immediately following the repayment in full of a
borrowing under the Temporary Supplemental Loan. The aggregate
outstanding principal under the Temporary Supplemental Loans at any
time shall not exceed the Temporary Supplemental Loan Commitment. If,
at any time, the aggregate outstanding principal under the Temporary
Supplemental Loans exceeds the Temporary Supplemental Loan Commitment,
then without any requirement of demand or notice from the Agent or the
Banks, the Borrower shall immediately pay to the Agent, for the
benefit of the Banks the amount of such excess. On December 31, 1998,
the Banks' commitment to make Temporary Supplemental Loans shall
terminate and all amounts outstanding thereunder shall be immediately
due and payable in full.
4.4 Subparagraph 2.1(e)(ii) of the Credit Agreement is supplemented by
adding the following subparagraph (G) thereto:
(G) Subsequent to the date of the Fifth Amendment, no Adjustment
Request shall be effective.
4.5 The first paragraph of Paragraph 2.2 of the Credit Agreement is
supplemented by adding the following two sentences thereto:
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The Indebtedness of the Borrower to each Bank under the Professional
Fee Loan will be evidenced by a Professional Fee Note executed by the
Borrower in favor of such Bank. The Indebtedness of the Borrower to
each Bank under the Temporary Supplemental Loan will be evidenced by a
Temporary Supplemental Note executed by the Borrower in favor of such
Bank.
4.6 Paragraph 2.3 of the Credit Agreement is supplemented by adding the
following sentence thereto:
Each Bank shall be a lender in the Professional Fee Loan and the
Temporary Supplemental Loan in an amount equal to such Bank's Pro Rata
Share of the Professional Fee Loan Commitment and the Temporary
Supplemental Loan Commitment, respectively.
4.7 Paragraph 2.4 of the Credit Agreement is supplemented by adding the
following subparagraph (e) thereto:
(e) Funds advanced under the Professional Fee Loan shall be used
solely to pay the Extension Fee required under the Fifth Amendment and
the Professional Fees. Funds advanced under the Temporary
Supplemental Loan shall be used solely to pay payroll, payroll taxes
and other expenses directly related thereto.
4.8 The definition of "Applicable Margin" contained in Paragraph 2.6 of
the Credit Agreement shall be amended and restated as follows:
"Applicable Margin" means 1.75% with respect to Base Rate
Portions and 3.25% with respect to Libor Portions.
4.9 Subparagraph 2.7(a) of the Credit Agreement is supplemented by adding
the following sentence thereto:
Notwithstanding the foregoing, subsequent to the date of the Fifth
Amendment, the Banks shall make no further advances to the Borrower
under the Acquisition Commitment, the RSD Commitment or the LHS
Commitment.
4.10 Subparagraphs 2.8(b) and (c) of the Credit Agreement are amended and
restated in its entirety as follows:
(b) Banks. Required Banks shall have the right to terminate or
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reduce the Revolving Commitment, the Acquisition Commitment, the RSD
Commitment, the LHS Commitment, the Commitment or any of them at any
time, in their discretion and upon notice to Borrower , upon the
occurrence and during the continuation of any Event of Default
hereunder (except if an Event of Default described in Paragraph 8.1(i)
shall occur, in which case termination of the Commitment shall occur
automatically).
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(c) Restoration Only With Consent. Except as provided in
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Paragraph 2.1(e) hereof, any termination or reduction of the Revolving
Commitment, the Acquisition Commitment, the RSD Commitment, the LHS
Commitment, the Commitment or any of them pursuant to subparagraphs
2.8(a) and (b) shall be permanent, and any such Commitment cannot
thereafter be restored or increased without the written consent of the
Required Banks.
4.11 Paragraph 2.9 of the Credit Agreement is supplemented by adding the
following subparagraphs (d) and (e) thereto:
(d) Subsequent to the date of the Fifth Amendment, the Borrower
shall pay to the Agent, immediately upon receipt thereof, the
following: (i) any payments received by the Borrower outside the
Borrower's ordinary course of business (including, without limitation,
any and all tax refunds); and (ii) all proceeds from sales of assets
other than from sales in the ordinary course of the Borrower's
business, together with accrued and unpaid interest on the principal
amount being repaid. Any and all mandatory prepayments received by
the Agent or the Banks shall be applied to the Loans in the manner
deemed appropriate by the Agent and the Banks; provided however, that
if the Banks' preference is to apply such prepayment to a Libor
Portion and such application would result in a loss of earnings
payment due and owing by the Borrower under Paragraph 2.6(g) of the
Credit Agreement, such prepayment shall be held by the Agent in an
interest-bearing escrow account and applied to such Libor Portion on
the first date that such payment will not result in a loss of earnings
as described in Paragraph 2.6(g) hereof.
(e) Any new money raised by the Borrower by selling equity in the
Borrower or any subordinated debt obtained by the Borrower
(collectively, "New Equity") may be used by the Borrower in its
business as working capital or for acquisitions (subject to all other
terms, conditions and limitations contained in this Credit Agreement),
and shall not be payable to the Agent or Banks until and unless there
occurs and is continuing an Event of Default and an acceleration of
the Loans. During the existence of an Event of Default, all New
Equity generated by the Borrower shall be paid to the Agent, for the
benefit of the Banks. Notwithstanding the foregoing, if any New
Equity is generated by the Borrower prior to December 31, 1998, the
Borrower must pay the New Equity to the Banks in an amount sufficient
to pay in full all amounts owing to the Banks under the Temporary
Supplemental Loan. If the amount paid to the Bank pursuant to the
preceding sentence is not sufficient to pay in full all amounts owing
by the Borrower under the Temporary Supplemental Loan, such payment
shall constitute a permanent reduction of the amount available under
the Temporary Supplemental Loan. If the New Equity paid to the Banks
is sufficient to pay in full all amounts owing to the Banks under the
Temporary Supplemental Loan, the Temporary Supplemental Loan shall be
terminated. If New Equity is generated prior to December 31, 1998 and
no amounts are outstanding under the Temporary Supplemental Loan, the
Temporary Supplemental Loan Commitment shall be automatically and
permanently reduced by the amount of such New Equity.
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4.12 Paragraph 2.11 of the Credit Agreement is amended as follows:
(a) The first sentence of paragraph 2.11 is amended and restated in its
entirety as follows:
Borrower shall pay to Agent, for the benefit of Banks in accordance
with their Pro Rata Shares, a non-refundable commitment fee at the
rate of three-eighths of one percent (3/8%) per annum on the
unborrowed portion of the Revolving Commitment, Acquisition
Commitment, RSD Commitment and LHS Commitment (other than the
principal amount of any unborrowed portions of any such Commitments
that the Companies are prohibited from borrowing) from the date hereof
through the Revolving Commitment Termination Date, the Acquisition
Commitment Termination Date, the RSD Commitment Termination Date or
the LHS Commitment Termination Date, respectively, which fees shall be
payable at the offices of Agent quarterly in arrears on the first day
of each June, September, December and March and on the applicable
Termination Date.
(b) Paragraph 2.11 of the Credit Agreement is supplemented by adding the
following sentence thereto:
On June 1, 1999, the Borrower shall pay to the Agent, for the benefit
of the Banks, a fee equal to $300,000, provided that on such date the
Credit Agreement is in full force and effect.
4.13 Paragraph 2.13 of the Credit Agreement is supplemented by adding the
following sentence thereto:
Subsequent to the date of the Fifth Amendment, Borrower shall pay to
Agent a fee equal to: (a) $6,000 per month through March 31, 1999;
and (b) $10,000 per month from April 1, 1999 through March 31, 2000,
such fee to be payable on the first day of each calendar month.
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4.14 Paragraph 2A of the Credit Agreement is supplemented by adding the
following Paragraph 2A.8 thereto:
2A.8. Termination of Credits. From and after the date of the
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Fifth Amendment, no Letters of Credit will be issued by the Agent or
the Banks for the account of the Borrower or any of the Guarantors.
4.15 Paragraph 5.8 of the Credit Agreement is amended and restated in its
entirety as follows:
5.8. Books and Records. Keep and maintain accurate and
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complete books and records of Borrower's assets, liabilities and
operations consistent with sound business practices and in accordance
with GAAP, and, at reasonable times and upon reasonable advance notice
to the Companies (provided, however, that notice shall not be required
during the existence of an Event of Default), make or cause such books
and records together with the Borrower's real and personal property to
be available to the Agent, the Banks and/or their duly authorized
employees, agents and representatives as the Agent and/or the Banks
deem necessary for the purpose of reviewing collateral, auditing the
books, appraising collateral and for any other purpose deemed
necessary by the Agent and/or the Banks in their sole and absolute
discretion. The cost of all audits and appraisals performed by the
Agent and/or the Banks shall be borne by the Borrower.
4.16 Paragraphs 5.15, 5.16, 5.17 and 5.24 of the Credit Agreement are
amended and restated as follows:
5.15 Maximum Funded Debt to Adjusted EBITDA Ratio. Maintain as
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of the end of each fiscal quarter set forth in the left hand column
below a ratio of (i) Funded Debt of Parent and its consolidated
Subsidiaries to (ii) Adjusted EBITDA, of not greater than the ratio
set forth in the right hand column below:
Fiscal Quarter Ended Ratio
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September 30, 1998 7.25:1.00
December 31, 1998 6.50:1.00
March 31, 1999 5.50:1.00
June 30, 1999 5.00:1.00
September 30, 1999 4.50:1.00
December 31, 1999 4.50:1.00
March 31, 2000 4.50:1.00
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5.16 Fixed Charge Coverage Ratio. Maintain as of the end of
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each fiscal quarter set forth in the left hand column below a
consolidated Fixed Charge Coverage Ratio of not less than the ratio
set forth in the right hand column below:
Fiscal Quarter Ended Ratio
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September 30, 1998 0.80:1.00
December 31, 1998 0.85:1.00
March 31, 1999 0.90:1.00
June 30, 1999 1.00:1.00
September 30, 1999 1.00:1.00
December 31, 1999 1.00:1.00
March 31, 2000 1.00:1.00
5.17 Maximum Leverage Ratio. Maintain as of the end of each
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fiscal quarter a ratio of consolidated Funded Debt to consolidated
Total Capitalization of not greater than 0.8:1.0.
5.24 Minimum EBITDA. Maintain as of the end of each fiscal
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quarter set forth in the left hand column below EBITDA of not less
than the amount set forth in the right hand column below:
Fiscal Quarter Ended Minimum EBITDA
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September 30, 1998 $3,250,000
December 31, 1998 $4,060,000
March 31, 1999 $5,008,000
June 30, 1999 $5,305,000
September 30, 1999 $5,450,000
December 31, 1999 $5,563,000
March 31, 2000 $5,701,000
4.17 Paragraph 5 of the Credit Agreement is supplemented by adding the
following Paragraphs 5.25 through 5.28 thereto:
5.25. Conversion of Subordinated Seller Notes to Equity.
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Borrower shall use its best efforts (which shall not include the
requirement by the Borrower to pay money) to convert to equity all
amounts outstanding under the Subordinated Seller Notes.
5.26. Reports from Borrower. With Respect to any month end that
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is not also a fiscal quarter or fiscal year end of the Borrower,
furnish to the Agent within 25 days after such month end the
following: (a) an income statement for such month (including a
comparison of actual vs. budgeted amounts), (b) a balance sheet as of
the end of such month, (c) a statement of cash flows for such month,
(d) an accounts receivable aging report as of the end of such month,
(e) an accounts payable aging report as of the end of such month, and
(f) a cash flow projection for the next succeeding two months.
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5.27. Tax Refunds. Upon request by the Agent, execute
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documentation, in form and substance satisfactory to the Agent and the
Banks, to assign to the Agent, for the benefit of the Banks, any and
all federal, state, or other tax returns to which the Borrower or any
of the Companies is entitled.
5.28. Business Plan. Furnish to the Agent on or before June 1,
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1999 a business plan, in form and substance satisfactory to the Agent
and the Banks, for the Borrower's fiscal year ending June 30, 2000.
4.18 Paragraph 6.1 of the Credit Agreement is amended by deleting the
dollar amount "Eight Million Dollars ($8,000,000)" where it appears and
replacing it with a dollar amount of "Eleven Million Dollars ($11,000,000)".
4.19 Paragraph 8.1(e) of the Credit Agreement is amended by substituting
the words "fifteen (15) days" in lieu of "thirty (30) days".
4.20 The name and address of the Agent in Paragraph 10.8 of the Credit
Agreement is amended and restated in its entirety as follows:
First Union National Bank
Capital Markets Special Situations
0000 Xxxxxxxx Xxxxxx, 0xx Xxxxx
XX 4810
Xxxxxxxxxxxx, XX 00000
Attention: Xxx X. Xxxxxxx, Senior Vice President
Telecopier: 000-000-0000
Section 5. Amendments to Amendment No. 4
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5.1 Notwithstanding the provisions contained in paragraph 4 of Amendment
No. 4, the Temporary Additional Fee for the period from August 16, 1998 through
the date hereof has been calculated at a rate of .0625% per month.
5.2 The obligations of the Companies pursuant to paragraphs 16 and 21 of
Amendment No. 4 have either been satisfied by the Companies or waived by the
Banks, it being agreed that any and all such obligations shall be given no
further force or effect. The provisions contained in paragraphs 17(b) and 17(c)
of Amendment No. 4 shall be given no further force or effect.
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Section 6. Release. In consideration for the Agent's and Banks' agreement
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to enter into this Agreement and for other valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the Borrower and each of the
Guarantors, on behalf of themselves and all persons or entities claiming by,
through, or under the Borrower or any Guarantor (collectively, the "Releasors")
do hereby unconditionally remise, release and forever discharge the Agent and
each Bank, their parents, subsidiaries, affiliated companies, past and present
stockholders, partners, officers, directors, employees, agents, attorneys,
divisions, successors and assigns (the "Releasees") from any and all manner of
actions, causes of action, suits, claims, counterclaims, crossclaims, defenses
and demands whatsoever, arising from any and all debts, demands, proceedings,
agreements, contracts, judgments, damages, accounts, reckonings, executions,
controversies, claims, liabilities, and facts whatsoever which the Releasors
have knowledge of or should have knowledge of as of the date hereof, whether
contingent or fixed, liquidated or unliquidated, at law or at equity, if any,
which the Releasors ever had, now have, and/or hereafter may have against the
Releasees, for or by reason of any cause, matter or thing whatsoever arising
from the beginning of the world through the date hereof, including, but not
limited to, all claims relating to the lending relationships between the
Releasors and the Releasees.
Section 7. Representations and Warranties. To induce the Agent and Banks
-------------------------------
to enter into this Agreement, each Company makes the following representations
and warranties to the Agent and Banks, each and all of which shall survive the
execution and delivery of this Agreement:
(a) All corporate actions by each Company and its officers, directors
and stockholders necessary for the due authorization, execution, delivery and
performance of this Agreement or any agreement executed, delivered or performed
by such Company have been taken.
(b) Each person executing the Agreement or any agreement executed in
connection therewith on behalf of each Company is an authorized officer of such
Company and is duly authorized by such Company to execute same.
(c) This Agreement and each document executed by the Companies
pursuant hereto, will be the legal, valid and binding obligation of each
Company, enforceable against them in accordance with their respective terms,
subject only to bankruptcy, insolvency, reorganization, moratorium or other laws
or equitable principles affecting creditors' rights generally.
(d) Each Company is in compliance in all material respects with all
laws (including all applicable environmental laws), regulations, and
requirements applicable to its business and has not received, and has no
knowledge of, any order or notice of any governmental investigation or of any
violation or claim of violation of any law, regulation or other governmental
requirement which would have a material adverse effect upon its business
operations or financial condition.
-14-
(e) The execution, delivery and performance of this Agreement does not
and will not (i) conflict with, violate or result in a material breach of any
provision of any applicable law, rule, regulation or order or (ii) conflict or
result in a breach of any provision of the Articles of Incorporation, Charter or
Bylaws of any Company. No authorization, consent or approval or other action
by, and no notice of or filing with, any governmental authority or regulatory
bodies are required to be obtained or made by any Company for the due execution,
delivery and performance of this Agreement.
(f) Except as set forth on Schedule 2 attached hereto all other
representations and warranties (other than those made only as of a specific
date) made by the Companies in the Credit Agreement and the Loan Documents are
true and correct as of the date of this Agreement as if such representations and
warranties have been made on the date hereof.
(g) Except as provided in Section 1 hereof and except as set forth on
Schedule 3 attached hereto, the Borrower is in full compliance with all of the
covenants and conditions of the Credit Agreement and the Loan Documents, as
amended hereby.
(h) The Agent, on behalf of the Banks holds properly perfected
security interests in all of the Collateral pursuant to the terms and conditions
of, among other things, the Loan Documents, which liens and security interests
secure the payment and performance by the Borrower of the Loans. The Borrower
reaffirms the granting of the aforesaid liens and security interests to the
Agent to secure all of the Loans. The Borrower also reaffirms all of the terms
and conditions of the Security Agreement and acknowledges that the terms of the
Security Agreement and the other Loan Documents continue to be valid and binding
upon the Borrower subject only to bankruptcy, insolvency, reorganization,
moratorium or other laws or equitable principles affecting creditors' rights
generally.
(i) Except as provided in Section 1 hereof and except as set forth on
Schedule 4 attached hereto, no default of Event of Default has occurred and is
continuing under the Loan Documents and no event has occurred which, with the
passage of time, the giving of notice, or both, would result in a default or
Event of Default under the Loan Agreement or the Loan Documents.
(j) Set forth on Schedule 5 is a list of all depository bank accounts
maintained by the Companies, other than depository bank accounts maintained by
the Companies with either the Agent or the Banks.
Section 8. Conditions Precedent to Enforceability of Agreement. This
----------------------------------------------------
Agreement shall be deemed effective only after the occurrence of the following
events:
(a) Each Company's execution and delivery to the Agent of this
Agreement in form and substance satisfactory to the Agent;
-15-
(b) The Borrower's execution and delivery to the Agent of the
Temporary Supplemental Notes and the Professional Fee Notes;
(c) Delivery to the Agent of the draft financial statements for the
Borrower's fiscal year ending June 30, 1998, together with actual financial
statements for the calendar month ending July 31, 1998;
(d) Delivery to the Agent of a certificate in form and substance
satisfactory to the Agent identifying the locations of the books and records of
each Company;
(e) Except as set forth on Schedule 8(e) hereto, the Borrower's
delivery to the Agent of the opinion of Borrower's counsel, dated as of the date
hereof, in form and substance satisfactory to the Agent;
(f) Except as set forth on Schedule 8(f) hereto, each Company's
delivery to the Agent of corporate resolutions of its Board of Directors,
certified by its corporate secretary, authorizing the appropriate officer of
such Company Borrower to execute on such Company's behalf this Agreement and
authorizing such Company to perform all of such Company's obligations
thereunder, together with the governing documents and good standing certificates
for each Company;
(g) The Borrower's payment to the Agent at the closing of an amount
sufficient to cover all of the Agent's fees, costs and expenses to date,
including, without limitation, the Agent's fees, costs and expenses incurred in
connection with the preparation and negotiation of the this Agreement (including
the fees of the Agent's counsel), which fees, costs and expenses the Borrower
authorizes the Agent to pay by setting off the Borrower's account at the Agent
by such amount;
(h) The Borrower's payment to the Agent of an Extension Fee equal to
$213,000; and
(i) The Borrower's execution and delivery or causing the execution and
delivery to the Bank of such agreements and documents as the Agent or the Banks,
in their sole discretion, request.
Section 9. Miscellaneous.
--------------
9.1 Whether or not the transactions contemplated by this Agreement are
fully consummated, the Borrower shall promptly pay (or reimburse, as the Agent
may elect) all fees, costs and expenses which the Agent and the Banks have
incurred or may hereafter incur in
-16-
connection with the negotiation, preparation, reproduction, interpretation, and
enforcement of this Agreement, the collection of all amounts due hereunder and
thereunder, and any amendment, modification, consent or waiver which may be
hereafter requested by the Borrower or otherwise required. Such fees, costs and
expenses shall include, without limitation, the fees and disbursements of
counsel to the Agent or any of the Banks, appraisal and/or examination fees,
searches of public records, costs of filing and recording documents with public
offices, and similar costs and expenses incurred by the Agent or any of the
Banks. The Borrower's reimbursement obligations under this Section shall survive
any termination of the Loan Documents or this Agreement.
9.2 Except as expressly amended hereby, the Credit Agreement, the Loan
Documents, and all the other documents executed in connection therewith remain
in full force and effect and the Companies, the Agent and the Banks hereby
ratify and confirm their rights, duties and obligations under the Credit
Agreement, the Loan Documents, and all of the other documents executed in
connection therewith.
9.3 The Companies agree to take such further action to execute and deliver
to each other such additional agreements, instruments and documents as may
reasonably be required to carry out the purposes of this Agreement.
9.4 This Agreement shall be governed and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania.
9.5 This Agreement contains the entire agreement between the parties
hereto with respect to the subject matter hereof and may not be modified or
changed in any way except in writing signed by all parties.
-17-
IN WITNESS WHEREOF, and agreeing to be legally bound hereby, the
undersigned have caused this Agreement to be executed by their duly authorized
officers on the date and year first written.
Attest: HOME HEALTH CORPORATION OF DELAWARE, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
-------------------- -------------------------------
Title: Chief Financial Officer Title: President
------------------------ ----------------------------
FIRST UNION NATIONAL BANK, for itself and
as Agent
By: /s/ Xxx X. Xxxxxxx
------------------------------
Senior Vice President
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxx
------------------------------
Title: Vice President
---------------------------
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Xxx X. Xxxxxx
------------------------------
Title: First Vice President
---------------------------
-00-
XXXXXXX XXXXXXXX (XXX XXXX), X.X.
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Title: Vice President
---------------------------
FLEET NATIONAL BANK
By: /s/ Xxxx X. Xxxxxxx
----------------------------
Title: Senior Vice President
-------------------------
-19-
The undersigned Guarantors hereby acknowledge and agree to the foregoing
Fifth Amendment to Third Amended and Restated Credit Agreement and agree that
the Guaranty continues in full force and effect and guaranties all obligations
under the Credit Agreement, as amended thereby:
HOME HEALTH CORPORATION
OF AMERICA, INC. HOME HEALTH CORPORATION OF
PENNSYLVANIA HOME HEALTH AMERICA, INC.-TAMPA NURSING
SERVICES/PHILADELPHIA, INC. PENNSYLVANIA HOME HEALTH
PENNSYLVANIA HOME HEALTH SERVICES/SUBURBAN, INC.
SERVICES/NORTHEAST, INC. HHCA, INC.-DELAWARE
PENNSYLVANIA HOME CARE, INC. HHCA - SERVICE CO.
HOME CARE MEDICAL SUPPLY AND HOME HEALTH CORPORATION OF
EQUIPMENT, INC. AMERICA, INC. - EASTERN SHORE
NUTRITIONAL HOME HEALTH HOME HEALTH SYSTEMS, INC.
SERVICES, INC. HHCA TEXAS HOLDINGS, INC.
ALL CARE HEALTH SERVICES, INC. HHCA TEXAS GP, INC.
ALL-CARE HOME HEALTH SERVICES, HHCA TEXAS HEALTH SERVICES,
INC. L.P., by HHCA TEXAS GP, INC., its
HOME HEALTH CORPORATION OF general partner
AMERICA, INC./FT. XXXXXX HHCA TEXAS INFUSION SERVICES,
HOME HEALTH SERVICES L.P., by HHCA TEXAS GP, INC., its
HHCD, INC. general partner
HHCDME, INC. HHCA TEXAS PRIVATE NURSING
PROFESSIONAL HOME HEALTH SERVICES, L.P., by HHCA TEXAS GP,
SERVICES, INC. INC., its general partner
HOME HEALTH CORPORATION OF HHCA TEXAS MEDICAL EQUIPMENT,
AMERICA, INC.-TAMPA L.P., by HHCA TEXAS GP, INC., its
HOME HEALTH CORPORATION OF general partner
AMERICA, INC.-TAMPA R.S.D. MANAGEMENT, INC.
DIAGNOSTIC SERVICES NURSING SERVICES HOME CARE, INC.
HOME HEALTH CORPORATION OF NURSING SERVICES HOME CARE, INC.
AMERICA, INC.-PINELLAS NURSING SERVICES STAFFING OF
HOME HEALTH CORPORATION OF N.H., INC.
AMERICA, INC.-ST. PETERSBURG NURSING SERVICES, INC.
(continued in next column) NAHATAN DRUG, INC.
ATTEST:
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxxxx
-------------------------- ------------------------
Name: Xxxxx X. Xxxxxx Name: Xxxxx X. Xxxxxxx
Title: Chief Financial Officer Title: President
-20-
SCHEDULE 1
OUTSTANDING PRINCIPAL UNDER LOANS
AS OF September 23, 1998
a. Revolving Loan: $32,405,255.14
b. Acquisition Loan: $42,458,135.25
c. RSD Loan: $4,523,104.17
d. LHS Loan: $4,000,000
-21-
SCHEDULE 2
Exceptions to Accuracy of Representations and Warranties
--------------------------------------------------------
3.1 -- As of the date hereof, the Companies have been advised that the
following entities are not in good standing due to the failure by the Companies
to pay all required annual taxes:
HHCA Texas Infusion Services, L.P.
HHCA Texas Private Nursing Services, L.P.
HHCA Texas Medical Equipment, L.P.
Nursing Services Home Care, Inc.
Nursing Services Homecare, Ltd.
Nursing Services, Inc.
Nahatan Drug, Inc.
Nursing Services Staffing of N.H., Inc.
3.4 -- Attached hereto are revisions to Exhibit F to the Credit Agreement.
3.6 --
(a) Pending Litigation --
(1) On February 19, 1998, a shareholder commenced litigation
against HHCA and certain named officers of HHCA. In the
lawsuit, entitled Xxxxxx x. Xxxxxxx, et al., which was filed
-------------------------
in the United States District Court for the Eastern District
of Pennsylvania, the plaintiff alleges that the defendants,
in violation of federal securities laws, engaged in a scheme
to artificially inflate and maintain the market price of
HHCA's common stock by, among other things, making false and
misleading statements or failing to disclose material facts
in documents filed with the Securities and Exchange
Commission or in press releases issued by HHCA, particularly
with respect to HHCA's efforts to obtain timely payment for
HHCA's products and services and HHCA's termination of
business with certain managed care companies. The
plaintiff, who filed the lawsuit on behalf of himself and
all others similarly situated, seeks certification of the
lawsuit as a class action on behalf of all persons who
purchased HHCA's common stock between September 3, 1997 and
February 16, 1998.
(2) The former owners of an acquired business (Nahatan) have
commenced litigation against the Company for nonperformance
under certain provisions of the acquisition documents.
(b) Threatened Litigation -- The holders of the Seller Notes have
threatened to commence litigation to collect the amounts due thereunder.
3.8 -- The regulatory modification of the reimbursement structure has
materially and adversely affected (and the regulatory modification scheduled to
take effect in October 1999 may further materially and adversely affect) the
business, properties, operations and condition of the Companies.
-22-
SCHEDULE 2
SECTION 3.4
SUPPLEMENT TO EXHIBIT F
Material Contracts (updates to Exhibit F)
-------------------------------------------------------------------------------
. Employee Benefit Plans
. Profit Sharing Plan terminated during fiscal 1998
. Employee Benefit Plans HHSI
. Benefit plans terminated and benefits granted to Home Health System,
Inc. employees integrated with Home Health Corporation of America
benefit plans.
. Real Property Leases
. Replace Attachment B with Revised Attachment B September 1998
. Capital Lease Agreements
. Replace Attachment C with Revised Attachment C September 1998
. Other Agreements
. Management Agreement dated January 10, 1997 among Home Health
Corporation of America, Inc., PDN, Inc., Medical I.V., Inc., and Xxxx
X. X'Xxxxx terminated April 1997.
. Mercy Northeast Management Agreement terminated August 1998
. Add St. Xxxxx Medical Center Management Agreement beginning August 1998.
. Financing Agreements
. Delete section in its entirety and replace with Revised Attachment C.
. Business Broker Agreement
. First Renaissance Ventures, Inc. Acquisition Fee Agreement expired
September 16, 1997
. First Union Capital Markets Corp. Fee Arrangement expired December
17, 1997
. Managed Care
Pennsylvania/New Jersey
-----------------------
. Delete -- First Option Health Plan/Pennsylvania
. Delete -- Garden State Health Plan
. Delete -- MetraHealth
. Delete -- Oxford/Oak Tree Health Plan
. Add United Healthcare of the MidAtlantic
. Add Healthguard of Lancaster
New England
-----------
. Delete New England Life Care
Delaware
--------
. Delete -- Principal of Delaware (DelwareCare Medical Assistance)
Home Health Systems, Inc.
------------------------
. Delete Attachment D in it entirety and replace with Revised
Attachment D. Substantially all Managed Care Contracts have been
integrated into Home Health Corporation of America.
-23-
SCHEDULE 2
SECTION 3.4
SUPPLEMENT TO EXHIBIT F
Revised Attachment B
Real Estate Leases
Schedule of Real Estate Leases
-24-
SCHEDULE 2
SECTION 3.4
SUPPLEMENT TO EXHIBIT F
Revised Attachment B
Financing Agreements
Schedule of financing agreements.
-25-
SCHEDULE 2
SECTION 3.4
SUPPLEMENT TO EXHIBIT F
Revised Attachment D
Material Contracts (updates to Exhibit F)
-----------------------------------------
Chicago
-------
. American HMO
. Celtic
. Chicago HMO
. The Xxxxxx Medical Clinic, S.C.
. Management Agreement dated October 10, 1994 between Xxxxxx
Medical Clinic, S.C. and Home Health Systems, Inc.
. Dreyers Health Plans Health Maintenance Organization
Consultant Provider Agreement dated August 1, 1993 between
Xxxxxx Health Plans and Total Care.
The Partnership Agreements with the following HHSI Partnerships provide
for each of them to pay management fees to their respective general
partners:
. Total Care Limited Partnership
. Total Care Limited Partnership II
. Personal Care Limited Partnership
. Total Care of Maryland Limited Partnership
. Total Care Company of Southcentral Pennsylvania
. Total Care of Northern Virginia Limited Partnership
. Total Care Health Systems Company of Eastern Pennsylvania
. Total Care Company of Central New Jersey, LP
. Total Care of Baltimore Limited Partnership
. Total Care Health Systems of Greater Philadelphia Limited Partnership
. Total Care of Chicago, LP
. Gulf Coast Total Care, LP
. Potomac Total Care, LP
-26-
SCHEDULE 2
SECTION 3.11
SUPPLEMENT TO EXHIBIT F
MANAGEMENT AND CONSULTING AGREEMENTS
FOR SENIOR EXECUTIVE SERVICES
Unless otherwise noted, agreements whose term expired have not been renewed.
Employment Agreements--
Acquisition Employee Annual Salary Term
------------------------- -------------------------- -------------------------- --------------------------
N/A Xxxxx Xxxxxxx $342,000 Aug 1998 - Aug 1999
N/A Xxxxx Xxxxxx $165,000 July 1998 - July 2001
N/A Xxxxxx Xxxxxx $129,000 May 1998 - May 2001
N/A Xxxxx Xxxxxxxx $110,000 July 1998 - July 2001
-27-
SCHEDULE 3
Exceptions to Accuracy of Covenants
-----------------------------------
5.1 -- See the matters described on Schedule 2 re: 3.1.
5.7 -- The Companies failed to timely provide to Agent the Form S-3
registration statement filed in February/March 1998 in connection with the
registration of the Nahatan shares. The Companies have delivered such document
in connection with the execution of this Amendment.
5.10 -- See the matters described on Schedule 2 re: 3.6.
5.11 -- See the matters described on Schedule 2 re: 3.1.
5.12 -- The Companies have not paid all of the amounts constituting
Professional Fees.
5.15 -- The Companies were not in compliance with this covenant as of June
30, 1998.
5.16 -- The Companies were not in compliance with this covenant as of June
30, 1998.
5.22 -- The Companies failed to deliver to Agent July's monthly financial
statements. The Companies have delivered such financial statements in connection
with the execution of this Amendment.
5.24 -- The Companies were not in compliance with this covenant as of
June 30, 1998 and July 31, 1998.
6.4 -- The Companies have been advised recently that one of the holders of
Unsubordinated Seller Debt has confessed judgment against Pennsylvania Home Care
and Home Health Corporation of America, Inc. in the amount of $36,717.89.
6.6 -- In July 1998 the Companies made a payment in the amount of
$42,678.14 on account of the RSD Note, which payment was approved in advance by
the banks and for which a waiver was granted.
-28-
SCHEDULE 4
Exceptions to No Defaults
-------------------------
8.1(a) -- See the matters described on Schedule 3 re: 5.12.
8.1(b) -- See the matters described on Schedule 2.
8.1(c) -- Since May 1998 the Companies have not been permitted to make
required payments to the holders of Seller Notes.
8.1(d) -- See the matters described on Schedule 3.
8.1(e) -- See the matters described on Schedule 3.
-29-
SCHEDULE 5
List of Depository Bank Accounts
-30-
EXHIBIT A
Principal Balance of Subordinated Seller Notes as of June 30, 1998
-31-
EXHIBIT B
Principal Balance of Unsubordinated Seller Notes as of June 30, 1998
-32-
