SECOND AMENDMENT TO CREDIT AGREEMENT
Exhibit 99.1
SECOND
AMENDMENT TO CREDIT AGREEMENT
THIS
SECOND AMENDMENT TO CREDIT AGREEMENT (this
“Amendment”) is
made as of February 24, 2005 (the “Effective
Date”) by and
among MEDICAL
STAFFING NETWORK, INC, a
Delaware corporation (the “Borrower”), the
other Credit Parties signatory hereto, GENERAL
ELECTRIC CAPITAL CORPORATION, a
Delaware corporation (“Administrative
Agent”) for
itself, as a Lender, and as Administrative Agent for the Lenders, LASALLE
BANK NATIONAL ASSOCIATION, as a
Lender and SPECIAL
SITUATIONS INVESTING GROUP, INC., as a
Lender.
Statement
of Facts
WHEREAS,
Administrative Agent, the Lenders, the Borrower and each of the other Credit
Parties are parties to that certain Credit Agreement, dated as of December 22,
2003 (such Credit Agreement, as the same may be amended, supplemented, extended,
renewed, restated or replaced from time to time being hereinafter referred to as
the “Credit
Agreement”);
and
WHEREAS,
Administrative Agent, the Lenders, Borrower and each of the Credit Parties
desire to amend the Credit Agreement in certain respects, all in accordance with
and subject to the terms and conditions set forth herein.
NOW,
THEREFORE, in
consideration of the premises, the covenants and agreements contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree that all capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement (except as otherwise expressly defined or limited herein) and do
hereby further agree as follows:
Statement
of Terms
1. Amendment
to Credit Agreement. Subject
to the terms and conditions of this Amendment, the Credit Agreement is hereby
amended as follows:
1.1 Section
1.1 is
hereby amended by deleting the definitions of “Applicable Margin”, “Applicable
Percentage”, “Availability Block”, “EBITDA”, “EBITDAR” and “Term Loan Maturity
Date” in their entirety and substituting in lieu thereof the following
definitions to read in their entirety as follows:
“Applicable
Margin” means:
(a) (i) 2.50% per annum for LIBOR Loan Advances and 1.25% per annum for Base
Rate Advances, (ii) 1.25% per annum for Swingline Loans, (iii) 2.50% per annum
for the Letter of Credit Fee Applicable Margin and (iv) 0.50% for the Unused
Line Fee Applicable Margin; and (b) (i) 4.50% per annum for Term Loans
constituting LIBOR Loans and (ii) 3.50% per annum for Term Loans constituting
Base Rate Loans.
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“Applicable
Percentage” means
(a) two percent (2%), in the case of a prepayment on or prior to February 24,
2006, and (b) one percent (1%), in the case of a prepayment after February 24,
2006 but prior to the Term Loan Maturity Date.
“Availability
Block” means
an amount equal to $5,000,000, provided that
such amount shall equal (i) $3,000,000 for all times that the Borrower
demonstrates that the Borrower’s EBITDA for the twelve month period ending on
such date of determination is greater than $15,000,000, and (ii) $0 for all
times that the Borrower demonstrates that the Borrower’s EBITDA for the twelve
month period ending on such date of determination is greater than
$20,000,000.
“EBITDA” means,
for any period, with respect to the Credit Parties and their Subsidiaries on a
consolidated basis, the sum of (a) Net Income for such period (excluding the
effect of any (i) intercompany items, (ii) all earnings attributable to equity
interests in Persons that are not Subsidiaries unless actually received by such
Person, (iii) all income arising from the forgiveness, adjustment or negotiated
settlement of any Indebtedness, (iv) any extraordinary items of income and (v)
any increase or decrease in income arising from any change in such Person’s
method of accounting, subject to Section
1.2)
plus (b) an
amount which, in the determination of Net Income for such period has been
deducted for (i) Interest Expense for such period, (ii) total Federal, state,
foreign or other income taxes for such period and (iii) depreciation and
amortization expense for such period, all as determined in accordance with GAAP
minus (c) the
amount of all earn-out payments made during such period in connection with
Permitted Acquisitions consummated subsequent to the Closing Date; provided that,
for the calculation of EBITDA made (i) for the first Fiscal Quarter of Fiscal
Year 2003, EBITDA shall be the sum of the amounts set forth above plus the
amount of the Discontinued Operation Fees First Quarter 2003, (ii) for the
second Fiscal Quarter of Fiscal Year 2003, EBITDA shall be the sum of the
amounts set forth above plus the amount of the Discontinued Operation Fees
Second Quarter 2003 plus the amount of the Restructuring Fees, (iii) during and
for the fourth Fiscal Quarter of Fiscal Year 2003, EBITDA shall be the sum of
the amounts set forth above plus the amount of the Prior Facility Financing Fees
and (iv) for the subsequent four Fiscal Quarters after incurrence, EBITDA shall
be the sum of the amounts set forth above minus the amount of the Severance
Payments and minus the amount of the D&O deductible.
“EBITDAR” means,
for any period, with respect to the Credit Parties and their Subsidiaries on a
consolidated basis, the sum of (a) Net Income for such period (excluding the
effect of any (i) intercompany
2
items,
(ii) all earnings attributable to equity interests in Persons that are not
Subsidiaries unless actually received by such Person, (iii) all income arising
from the forgiveness, adjustment or negotiated settlement of any Indebtedness,
(iv) any extraordinary items of income and (v) any increase or decrease in
income arising from any change in such Person’s method of accounting, subject to
Section
1.2)
plus (b) an
amount which, in the determination of Net Income for such period has been
deducted for (i) Interest Expense for such period, (ii) total Federal, state,
foreign or other income taxes for such period, (iii) depreciation and
amortization expense for such period and (iv) Rent Expense for such period, all
as determined in accordance with GAAP minus (c) the
amount of all earn-out payments made during such period in connection with
Permitted Acquisitions consummated subsequent to the Closing Date; provided that,
for the calculation of EBITDAR made (i) for the first Fiscal Quarter of Fiscal
Year 2003, EBITDAR shall be the sum of the amounts set forth above plus the
amount of the Discontinued Operation Fees First Quarter 2003, (ii) for the
second Fiscal Quarter of Fiscal Year 2003, EBITDAR shall be the sum of the
amounts set forth above plus the amount of the Discontinued Operation Fees
Second Quarter 2003 plus the amount of the Restructuring Fees, (iii) during and
for the fourth Fiscal Quarter of Fiscal Year 2003, EBITDAR shall be the sum of
the amounts set forth above plus the amount of the Prior Facility Financing Fees
and (iv) for the subsequent four Fiscal Quarters after incurrence, EBITDAR shall
be the sum of the amounts set forth above minus the amount of the Severance
Payments and minus the amount of the D&O deductible.
“Term
Loan Maturity Date” means
December 22, 2006.
1.2. Section
2.7 is
hereby amended by deleting clause (c) thereof in its entirety and substituting
in lieu thereof the following revised clause (c) to read in its entirety
as follows:
(c)
Prepayment
Fee. If the
Borrower shall voluntarily prepay all or any portion of the Term Loan prior to
the Term Loan Maturity Date, whether before or after acceleration of the
Obligations, the Borrower shall pay to Administrative Agent, for the ratable
benefit of Term Lenders as liquidated damages and compensation for the costs of
being prepared to make funds available hereunder an amount equal to the
Applicable Percentage multiplied by the
principal amount of the Term Loan prepaid. The Credit Parties agree that the
Applicable Percentages are a reasonable calculation of Term Lenders’ lost
profits in view of the difficulties and impracticality of determining actual
damages resulting from an early termination of the Term Loan.
1.3. Section
2.8 is
hereby amended by deleting clause (e) thereof in its entirety and substituting
in lieu thereof the following revised clause (e) to read in its entirety as
follows:
3
(e)
Intentionally Omitted.
1.4. Section
2.10 is
hereby amended by deleting the first sentence of clause (d) thereof in its
entirety (i.e.,
deleting the sentence that reads “Prepayments described in Section
2.8(e) shall
first be applied to pay the Term Loan(s) and, at any time after the Term Loan(s)
shall have been prepaid in full, such prepayments shall be applied to reduce the
outstanding principal balance of the Revolving Loans.”).
1.5 Section
6.10 is
hereby amended by deleting such section in its entirety and substituting in lieu
thereof the following revised Section
6.10 to read
in its entirety as follows:
Section
6.10 Financial Covenants. The
Borrower’s fiscal year ends on the Sunday closest to December 31 of each
calendar year. Each reference to March 31, June 30, September 30 and December 31
in this Section
6.10 shall be
deemed to refer to the last day of the fiscal quarter or fiscal year of the
Borrower, as applicable, ending on or about such date. In addition, each
reference to January 1, April 1, July 1 and October 1 shall be deemed to refer
to the first day of the fiscal quarter or fiscal year of the Borrower, as
applicable, beginning on or about such date.
(a) Leverage
Ratio. The
Leverage Ratio, at all times during the periods set forth below, shall be less
than or equal to the ratio set forth opposite such period:
|
(i)
|
From
the Closing Date to and including December 31, 2003, 3.00 to
1.0. |
|
(ii)
|
From
January 1, 2004 to and including June 30, 2004, 4.50 to
1.0; |
|
(iii)
|
From
July 1, 2004 to and including September 30, 2004, 5.90 to
1.0. |
|
(iv) |
From
October 1, 2004 to and including December 31, 2004, 7.00 to
1.0. |
|
(v) |
From
January 1, 2005 to and including March 31, 2005, 5.75 to 1.0.
|
|
(vi) |
From
April 1, 2005 to and including June 30, 2005, 4.50 to
1.0. |
|
(vii) |
From
July 1, 2005 to and including September 30, 2005, 3.75 to
1.0. |
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|
(viii) |
From
October 1, 2005 to and including December 31, 2005, 3.00 to
1.0. |
|
(ix) |
From
January 1, 2006 to and including June 30, 2006, 2.50 to
1.0. |
|
(x) |
From
July 1, 2006 and thereafter, 2.25 to 1.0. |
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(b) Fixed
Charge Coverage Ratio. The
Fixed Charge Coverage Ratio, as of the end of each Fiscal Quarter of the
Borrower set forth below, shall be greater than or equal to the ratio set forth
opposite such Fiscal Quarter:
|
Fiscal
Quarter |
Minimum
Fixed Charge Coverage Ratio |
|
Fiscal
Quarter ending December 31, 2003
|
1.15
to 1.0
|
|
Fiscal
Quarter ending March 31, 2004
|
1.15
to 1.0
|
|
Fiscal
Quarter ending June 30, 2004
|
1.25
to 1.0
|
|
Fiscal
Quarter ending September 30, 2004
|
1.00
to 1.0
|
|
Fiscal
Quarter ending December 31, 2004
|
0.75
to 1.0
|
|
Fiscal
Quarter ending March 31, 2005
|
0.75
to 1.0
|
|
Fiscal
Quarter ending June 30, 2005
|
1.10
to 1.0
|
|
Fiscal
Quarter ending September 30, 2005
|
1.15
to 1.0
|
|
Fiscal
Quarter ending December 31, 2005
|
1.25
to 1.0
|
|
Fiscal
Quarter ending March 31, 2006
|
1.50
to 1.0
|
|
Fiscal
Quarter ending June 30, 2006
|
1.50
to 1.0
|
|
Fiscal
Quarter ending September 30, 2006
|
1.50
to 1.0
|
|
Fiscal
Quarter ending December 31, 2006 and each Fiscal Quarter
thereafter
|
1.50
to 1.0
|
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(c) EBITDA. EBITDA,
for each 12 month period ending as of the last day of each Fiscal Quarter set
forth below, shall not be less than the amount set forth opposite such
period:
|
Fiscal
Quarter |
EBITDA |
|
Fiscal
Quarter ending December 31, 2003
|
$21,000,000
|
|
Fiscal
Quarter ending March 31, 2004
|
$13,000,000
|
|
Fiscal
Quarter ending June 30, 2004
|
$11,200,000
|
|
Fiscal
Quarter ending September 30, 2004
|
$8,000,000
|
|
Fiscal
Quarter ending December 31, 2004
|
$6,500,000
|
|
Fiscal
Quarter ending March 31, 2005
|
$7,500,000
|
|
Fiscal
Quarter ending June 30, 2005
|
$8,400,000
|
|
Fiscal
Quarter ending September 30, 2005
|
$9,300,000
|
|
Fiscal
Quarter ending December 31, 2005
|
$11,200,000
|
|
Fiscal
Quarter ending March 31, 2006
|
$15,000,000
|
|
Fiscal
Quarter ending June 30, 2006
|
$16,000,000
|
|
Fiscal
Quarter ending September 30, 2006
|
$17,000,000
|
|
Fiscal
Quarter ending December 31, 2006 and each Fiscal Quarter
thereafter.
|
$18,000,000
|
(d) Days
Sales Outstanding. As of
the end of each Fiscal Month from the
Closing Date, Days Sales Outstanding shall not be greater than 70 days for any
Fiscal Month.
2. No
Other Amendments. Except
for the amendments set forth in Section
1 of this
Amendment, the Credit Agreement shall remain unchanged and in full force and
effect. Nothing in this Amendment is intended, or shall be construed, to
constitute a novation or an accord and satisfaction of any of Borrower’s or any
other Credit Party’s Obligations under or in connection with the Credit
Agreement or any other Loan Document or to modify, affect or impair the
perfection or continuity of Administrative Agent’s security interests in,
security titles to or other liens on any Collateral for the
Obligations.
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3. Representations
and Warranties. To
induce Administrative Agent to enter into this Amendment, Borrower and each of
the other Credit Parties hereby warrant, represent and covenant to
Administrative Agent and Lender that after giving effect to this Amendment:
3.1 Each
representation or warranty of Borrower and each other Credit Party set forth in
the Credit Agreement is true and correct in all material respects on and as of
the date hereof (except to the extent that any such representation or warranty
expressly relates to a prior specific date or period).
3.2 No
Default or Event of Default has occurred and is continuing.
3.3 Borrower
and each other Credit Party have the power and are each duly authorized to enter
into, deliver and perform this Amendment, and this Amendment is the legal, valid
and binding obligation of the Borrower and each other Credit Party enforceable
against it in accordance with its terms.
3.4 The
execution, delivery and performance by each Credit Party of the Credit
Agreement, as amended by this Amendment: (a) is within such Person’s power; (b)
has been duly authorized by all necessary corporate, limited liability company
or limited partnership action; (c) does not contravene any provision of such
Person’s charter or bylaws; (d) does not violate any law or regulation, or any
order or decree of any court or Governmental Authority (including specifically
any applicable rule or regulation relating to the eligibility of such Person or
to receive payment and to participate as an accredited and certified provider of
health care services under Medicare, Medicaid, TRICARE, CHAMPVA or any
equivalent program or relating to the licenses and permits required therein or
in connection therewith); (e) does not conflict with or result in the breach or
termination of, constitute a default under or accelerate or permit the
acceleration of any performance required by, any indenture, mortgage, deed of
trust, lease, agreement or other instrument to which such Person is a party or
by which such Person or any of its property is bound; (f) does not result in the
creation or imposition of any Lien upon any of the property of such Person other
than those in favor of Administrative Agent, on behalf of itself and Lenders,
pursuant to the Loan Documents; and (g) does not require the consent or approval
of any Governmental Authority or any other Person.
4. Conditions
Precedent to Effectiveness of this Amendment. This
Amendment shall become effective, as of the Effective Date, upon receipt by
Administrative Agent, in form and substance satisfactory to Administrative
Agent, of:
4.1 one or
more counterparts of this Amendment duly executed and delivered by Borrower and
each other Credit Party;
4.2 payment
by Borrower to Special Situations Investing Group, Inc. (“SSIG”), an
amount to reduce the outstanding principal amount of the Term Loans held by SSIG
from $6,000,000 to $0;
8
4.3 payment
by the Borrower to SSIG the amount of any LIBOR breakage fee due to such Lender
pursuant to Section 9.4(d) of the Credit Agreement in connection with the
prepayment of such Lender’s Term Loan; and
4.4 payment
by Borrower to the Administrative Agent for the ratable benefit of the Revolving
Lenders of an amendment fee in the amount of $45,000, which fee shall be fully
earned and non-refundable when paid.
5. Reimbursement
of Expenses. The
Borrower hereby agrees that it shall reimburse the Administrative Agent and the
Lenders on demand for all costs and expenses (including without limitation
attorney’s fees) incurred by such parties in connection with the negotiation,
documentation and consummation of this Amendment and the other documents
executed in connection herewith and therewith and the transactions contemplated
hereby and thereby.
6. Ratification;
No Novation.
Borrower and each of the other Credit Parties hereby ratifies and reaffirms each
and every term, covenant and condition set forth or incorporated by reference in
the Credit Agreement (as amended and supplemented by this Amendment), all Loan
Documents and all other documents delivered by Borrower in connection therewith
(including without limitation the other documents executed in connection with
Letters of Credit to which any Credit Party is a party) effective as of the date
hereof and none of the rights, interests and obligations existing and to exist
under such documents are hereby released, diminished or impaired. The execution
and delivery of this Amendment shall not, and shall not be deemed to, constitute
a novation of any indebtedness or other obligations owing to the Administrative
Agent or the Lenders under the Credit Agreement, the other Loan Documents or any
other documents delivered by Borrower in connection therewith (including without
limitation the other documents executed in connection with Letters of Credit to
which any Credit Party is a party). Subject to Section
4, on the
date of this Amendment, the Credit Agreement shall be amended and supplemented
as described in this Amendment, and all loans and other obligations of the
Credit Parties outstanding as of the date hereof under the Credit Agreement
shall be deemed to be loans and obligations outstanding under the Credit
Agreement as amended, without further action by any Person.
7. Waiver
and Release.
To induce
the Administrative Agent and the Lenders to enter into this Amendment, Borrower
and each of the other Credit Parties hereby waives and releases any claim,
defense, demand, action or suit of any kind or nature whatsoever against any or
all of the Administrative Agent or Lenders arising on or prior to the date
hereof in connection with the Credit Agreement or any of the other Loan
Documents, or any of the transactions contemplated thereunder, except that this
Section
7 shall
not waive or release any of the Administrative Agent’s or the Lenders’
contractual obligations under this Amendment, the Credit Agreement or any of the
other Loan Documents.
9
8. Estoppel. To
induce Administrative Agent (in its various capacities) to enter into this
Amendment, Borrower and each of the other Credit Parties hereby acknowledge and
agree that, as of the date hereof, there exists no right of offset, defense or
counterclaim in favor of any Credit Party as against Administrative Agent (in
its various capacities) with respect to the obligations of any Credit Party to
Administrative Agent (in its various capacities) under the Credit Agreement or
the other Loan Documents, either with or without giving effect to this
Amendment.
9. Counterparts. This
Amendment may be executed in multiple counterparts, each of which shall be
deemed to be an original and all of which when taken together shall constitute
one and the same instrument.
10. Governing
Law. THIS
AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE.
11. Severability
of Provisions. Any
provision of this Amendment which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. To the extent permitted by applicable law, Borrower
and each of the other Credit Parties hereby waive any provision of law that
renders any provision hereof prohibited or unenforceable in any
respect.
12. Entire
Agreement.
The
Credit Agreement as amended by this Amendment embodies the entire agreement
between the parties hereto relating to the subject matter hereof and supersedes
all prior agreements, representations and understandings, if any, relating to
the subject matter hereof.
13. Binding
Effect. This
Amendment shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and assigns, provided that no Credit
Party may assign any of its rights or obligations hereunder without the prior
written consent of the Administrative Agent and the Lender.
[Remainder
of page intentionally blank; next page is signature page]
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IN
WITNESS WHEREOF, the
parties hereto have caused this Second Amendment to Credit Agreement to be duly
executed and delivered as of the day and year specified at the beginning
hereof.
MEDICAL
STAFFING NETWORK, INC., as
Borrower
By: /s/
Xxxxx
XxXxxxxxx
Name:
Xxxxx
XxXxxxxxx
Title:
Chief Financial
Officer
OTHER
CREDIT PARTIES:
MEDICAL
STAFFING NETWORK HOLDINGS, INC.
By: /s/ Xxxxx
XxXxxxxxx
Name: Xxxxx
XxXxxxxxx
Title:
Chief Financial
Officer
MEDICAL
STAFFING HOLDINGS, LLC
By:
Medical
Staffing Network Holdings, Inc., as
its sole Member
By:
/s/ Xxxxx
Xxxxxx
Name: Xxxxx
Xxxxxx
Title:
President and Chief Operating
Officer
MSN-ILLINOIS
HOLDINGS, INC.
By:
/s/ Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title:
Director
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MEDICAL
STAFFING NETWORK OF ILLINOIS, LLC
By:
/s/ Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: Manager
MEDICAL
STAFFING NETWORK ASSETS, LLC
By:
/s/ Xxxxx Xxxxxx
Name: Xxxxx
Xxxxxx
Title: Manager
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AGENT AND
LENDERS:
GENERAL ELECTRIC CAPITAL CORPORATION, as Lender
and as Administrative Agent
By: /s/ Xxxxxx
Xxxxxxxx
Name: Xxxxxx
Xxxxxxxx
Its Duly Authorized Signatory
LASALLE BANK NATIONAL ASSOCIATION, as
Lender
By: /s/ Xxxxxxxxx
Xxxxx
Name: Xxxxxxxxx
Xxxxx
Its Duly Authorized Signatory
SPECIAL SITUATIONS INVESTING GROUP, INC., as
Lender
By: /s/ Xxxxxx
Xxxxxxxxxx
Name: Xxxxxx
Xxxxxxxxxx
Its Duly Authorized Signatory
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