Exhibit 10.7
FORBEARANCE AGREEMENT
---------------------
FORBEARANCE AGREEMENT, dated as of May 31, 1996 (this "Forbearance
-----------
Agreement"), among
---------
(i) NORTHSTAR HEALTH SERVICES, INC., a Delaware corporation (the
"Borrower"),
---------
(ii) NSHS HOLDINGS, INC., a Delaware corporation, NORTHSTAR HS
HOLDINGS, INC., a Delaware corporation, NSHS SERVICES, INC., a Delaware
corporation, NORTHSTAR HEALTH SERVICES OF BEAVER, INC., a Delaware corporation,
NORTHSTAR HEALTH CONSULTING, INC., a Delaware corporation, NORTHSTAR REHAB EAST,
INC., a Delaware corporation, NORTHSTAR REHABILITATION SERVICES, INC., a
Pennsylvania corporation, NORTHSTAR THERAPY SERVICES, INC., a Pennsylvania
corporation, NW REHABILITATION, INC., a Delaware corporation, TRISTATE SPORTS
REHAB & PHYSICAL THERAPY, INC., a Delaware corporation, NSHS CARDIAC HOLDINGS,
INC., a Delaware corporation, NORTHSTAR NUCLEAR SERVICES, INC., a Delaware
corporation, WHITE OAK DIAGNOSTIC SYSTEMS HOLDINGS, INC., a Pennsylvania
corporation, WHITE OAK DIAGNOSTIC SYSTEMS, a Pennsylvania limited partnership,
KEYSTONE REHABILITATION SYSTEMS, INC., a Pennsylvania corporation, KEYSTONE
REHABILITATION MANAGEMENT, INC., a Pennsylvania corporation, VASUSONICS, INC., a
Pennsylvania corporation (collectively, the "Subsidiary Guarantors") and
---------------------
(iii) IBJ XXXXXXXX BANK & TRUST COMPANY ("IBJS");
----
in respect of the Credit Agreement referred to below.
WITNESSETH:
-----------
WHEREAS, the Borrower, the lenders parties thereto (the "Lenders") and
-------
IBJS, as Agent (in such capacity, the "Agent") have entered into that certain
Credit Agreement dated as of October 20, 1995 ( as amended, the "Credit
------
Agreement") and the Borrower has entered into certain other Credit Documents (as
---------
defined in the Credit Agreement); and
WHEREAS, the Subsidiary Guarantors have executed and delivered that
certain Subsidiaries Guarantee dated as of October 20, 1995 (as amended,
supplemented or otherwise modified, the "Subsidiaries Guarantee") to the Agent
----------------------
for the benefit of the Lenders and have entered into certain other Credit
Documents; and
WHEREAS, certain Events of Default (as defined in the Credit Agreement)
exist under the Credit Agreement; and
WHEREAS, the Agent and the Lenders are unwilling to waive the Events of
Default that currently exist; and
WHEREAS, notwithstanding the foregoing, subject to the terms and conditions
hereof, the Agent and the Lenders are willing, through August 31, 1996, to
forbear in certain respects in the enforcement of the remedies set forth in the
Credit Documents as set forth herein; provided, that the rights of the Agent and
--------
the Lenders are not otherwise waived or impaired.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein and for other valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the Borrower, the Subsidiary Guarantors, the
Agent and the Lenders hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined
-----------
herein shall have the meanings ascribed thereto in the Credit Agreement.
2. Acknowledgments.
---------------
(a) The Borrower acknowledges that, as of the date hereof, it is
indebted to the Lenders (i) pursuant to the Term Loan and the Term Note, in the
amount of $6,083,335 plus accrued but unpaid interest in the amount of
$173,228.97 (collectively, the "Existing Term Loan Indebtedness"); (ii) pursuant
-------------------------------
to the Revolving Credit Loans and the Revolving Credit Note, in the amount of
$2,000,000 plus accrued but unpaid interest in the amount of $46,355.64
(collectively, the "Existing Revolving Credit Indebtedness"); (iii) pursuant to
--------------------------------------
the Acquisition Loans and the Acquisition Note, in the amount of $6,000,000 plus
accrued but unpaid interest in the amount of $143,340.42 (collectively, the
"Existing Acquisition Loan Indebtedness"); (the Existing Term Loan Indebtedness,
--------------------------------------
the Existing Revolving Credit Indebtedness and the Existing Acquisition
Indebtedness, the "Outstanding Indebtedness").
------------------------
(b) The Borrower acknowledges the effectiveness and continuing
validity of the Credit Agreement (including, without limitation, Section 12.5
thereof) and of each Credit Document to which it is a party.
(c) The Borrower acknowledges that one or more Events of Default
have occurred and are continuing and that, pursuant to Section 10 of the Credit
Agreement, the Agent is presently entitled, with the consent of the Lenders, to
terminate the Commitments and to declare the Outstanding Indebtedness and the
other amounts owing under the Credit Agreement to be due and payable.
(d) The Borrower acknowledges the cancellation of the unused portion
of the Acquisition Credit Commitment prior to the date hereof.
-2-
(e) Each Subsidiary Guarantor acknowledges the effectiveness and
continuing validity of the Subsidiaries Guarantee and of each Credit Document to
which it is a party.
(f) Each Subsidiary Guarantor acknowledges the existence and amount
of the Outstanding Indebtedness and its liability therefor pursuant to the terms
of the Subsidiaries Guarantee.
(g) Each Subsidiary Guarantor expressly acknowledges and consents
to this Forbearance Agreement and to the terms hereof, such Forbearance
Agreement and terms to be without prejudice to such Subsidiary Guarantor's
liability pursuant to the Subsidiaries Guarantee and the other Credit Documents
to which it is a party.
(h) The Agent and the Lenders recognize that, notwithstanding the
acknowledgments set forth in this Paragraph 2, Keystone Rehabilitation Systems,
Inc., Keystone Rehabilitation Management, Inc. and its officers, directors and
shareholders may have claims against the Borrower or the Subsidiary Guarantors
relating to or arising out of the merger transaction pursuant to which, inter
-----
alia, Keystone Rehabilitation Systems, Inc. and Keystone Rehabilitation
----
Management, Inc. became subsidiaries of the Borrower, and that the execution and
delivery of this Forbearance Agreement by certain of them does not constitute a
waiver of any such claims. Nothing herein is intended as a recognition or
agreement by the Agent or the Lenders that any such claims exist or have merit,
the sole purpose of the addition of this provision to the Forbearance Agreement
being to acknowledge that such claims, to the extent they exist, are not waived
by entry into this Forbearance Agreement.
3. Forbearance; Deferral of Principal; Interest Rate; Termination.
--------------------------------------------------------------
(a) Subject to the terms and conditions set forth herein, the Agent
and the Lenders hereby agree that none of them shall, prior to the Forbearance
Termination Date, exercise any of the remedies set forth in the Credit Agreement
or in any of the other Credit Documents.
(b) Subject to the terms and conditions set forth herein, the Agent
and the Lenders hereby agree that the principal installments of the Term Loan
which were due or became due on the last days of each of April and May 1996,
each in the amount of $83,333, and each principal installment of the Term Loan
that shall become due and payable from the date hereof to the Forbearance
Termination Date, together with accrued interest on the Outstanding Indebtedness
shall be deferred until, and shall be due on, the Forbearance Termination Date.
(c) As of June 1, 1996, the Revolving Credit Commitment shall be
terminated, subject to reinstatement at the sole option of the Lenders.
(d) Subject to the terms and conditions set forth herein, the Agent
and the Lenders hereby waive the imposition of interest at the Default Rate as
provided in Section 5.5(c) of the Credit Agreement from the date hereof to the
Forbearance Termination Date and
-3-
the Agent, the Lenders agree that interest shall accrue on all unpaid
Obligations for the period from the date hereof until the Forbearance
Termination Date at the rates provided for such Obligations in Section 5.5(a)
or (b) (or, if no such rate is so provided, at the rate provided for Revolving
Credit Loans which are Base Rate Loans in Section 5.5(b)).
(e) From and after the date hereof, at the end of the Interest Period
for each Eurodollar Loan, such Eurodollar Loan shall be converted to a Base Rate
Loan.
(f) This Forbearance Agreement shall terminate on August 31, 1996,
unless earlier terminated upon the occurrence of a Forbearance Event of Default
(any such date, the "Forbearance Termination Date").
----------------------------
4. Representations and Warranties. In order to induce the Lenders to
------------------------------
enter into this Forbearance Agreement, the Borrower and each Subsidiary
Guarantor hereby represents and warrants to the Agent and to each Lender that:
(a) each of the representations and warranties made by the
Borrower and each of the Subsidiary Guarantors in each Credit Document to which
it is a party is true and correct in all material respects as of the date hereof
(other than the representations and warranties made pursuant to Sections 6.1,
6.2, 6.6, 6.7, 6.9 (as to the Borrower and its Subsidiaries, other than Keystone
and its Subsidiaries), 6.11, 6.13 (as to the Borrower and its Subsidiaries,
other than Keystone and its Subsidiaries), 6.17, 6.20 and 6.23 of the Credit
Agreement);
(b) the Borrower has provided the Agent with the updated Schedule
6.19 to the Credit Agreement attached hereto as Schedule 1 and has exerted all
reasonable efforts to provide the Agent with true and correct information of the
type described in Section 6.1 of the Credit Agreement, to cure any Events of
Default arising under 6.17 of the Credit Agreement and to apprise the Agent and
the Lenders of the circumstances that render the Borrower incapable of making
the representations and warranties in Sections 6.2, 6.6 and 6.7 of the Credit
Agreement; and
(c) the Borrower has no intention of commencing bankruptcy,
insolvency or similar proceedings prior to August 31, 1996 and has no intention
of commencing such proceedings thereafter if mutually acceptable agreements can
be reached among the Borrower and its principal creditors and shareholders.
5. Conditions Precedent to Effectiveness of Forbearance Agreement.
--------------------------------------------------------------
This Forbearance Agreement shall not become effective unless and until the Agent
has received:
(a) this Agreement, executed and delivered by a duly authorized
officer of the Borrower and each Subsidiary Guarantor;
(b) the executed legal opinion of Xxxxxx, XxXxxxxxx & Xxxxx, P.C.,
counsel to the Borrower and the Subsidiary Guarantors, covering such matters
-4-
incident to the transactions contemplated by this Forbearance Agreement as the
Agent may reasonably require; and
(c) such other documents and information as the Agent may
reasonably require, which documents and information shall be satisfactory to the
Agent in its sole discretion.
6. Covenants. The agreement of the Agent and the Lenders to forbear
---------
from exercising remedies as set forth in Section 4 hereof is expressly
conditioned upon the Borrower's continued compliance with the following:
(a) The Borrower shall continue to comply with the affirmative
covenants set forth in Section 8 of the Credit Agreement.
(b) The Borrower shall furnish weekly reports of actual cash
receipts and disbursements ("Weekly Cash Flow Reports") to the Agent no later
------------------------
than Tuesday of the next succeeding week, certified as correct and complete by a
Responsible Officer of the Borrower.
(c) The Borrower shall cooperate with the special consultant to be
retained by the Agent and the Lenders on or promptly following the date hereof
(the "Consultant"), which Consultant shall, on behalf of the Agent and the
Lenders, review the business of the Borrower and its Subsidiaries generally, and
in particular (i) provide management assessment, (ii) test the Borrower's
projections and assumptions, (iii) assess the likelihood that the Borrower will
achieve its projections, (iv) test the amounts and reasonableness of new
initiatives and investments of the Borrower (including shutdowns), and
(v) generally assist the Agent and the Lenders in assessing the status of the
Borrower's situation and developing credit management strategies. All fees
and expenses of the Consultant shall be for the account of the Agent and
the Lenders.
(d) Beginning with the week ending Friday, May 24, 1996,
collections for each successive four-week period ending on a Friday shall be no
less than $2,800,000.
(e) Beginning with the week ending Friday, May 24, 1996, cash
disbursements for each successive four-week period ended on a Friday, excluding
---------
cash disbursements during such period for (i) the investigation being performed
by the committee referred to in clause (i) of this Section 6, (ii) consulting
fees relating to such investigation and the work-out of the pending Events of
Default, (iii) restructuring expenses, (iv) shareholder lawsuits and (v)
existing payables as of May 17, 1996 which are more than 90 days past due, shall
not exceed collections for such period.
(f) Amounts invoiced by the Borrower and its Subsidiaries on or
prior to the tenth day of June, July and August for the prior month shall be
no less than $3,000,000.
-5-
(g) The amount of accounts payable of the Borrower and its
Subsidiaries as of June 14, July 12 and August 12, 1996 shall not exceed the
amount of accounts payable of the Borrower and its Subsidiaries as of May 17,
1996. For purposes of this clause (h), accounts payable will in any event
include accounts payable included in accruals on the books of the Borrower and
its Subsidiaries, the amount of cash payments made to physical therapists
employed by the Borrower who become entitled to such payments 60 days after
written notice of their election to withdraw from the 25% Pre-Commission Net
Income Provisions pursuant to their respective employment agreements, or any
similar payments payable to physical therapists employed by the Borrower
(collectively, "Withdrawal Payments"), and book cash and checks, but will
---------- --------
exclude withholding taxes.
(h) The Borrower shall provide full disclosure to the Agent of all
interim and final findings and reports of the special committee of the Borrower
that is investigating related third-party transactions and other matters
involving the Borrower's prior senior management, to be provided as and when
such findings and reports are made available to management of the Borrower;
provided, however, that the Borrower shall not be required to disclose materials
-------- -------
subject to attorney-client privilege; provided, further, however, that the
-------- ------- -------
Borrower acknowledges that materials subject to the attorney-client, work
product or other legal privilege shall be deemed not to include materials
relating to factual circumstances (as opposed to materials relating to strategy
and legal advice) and materials otherwise required to be provided to the Agent
pursuant to the Credit Documents.
(i) The Borrower shall promptly provide such additional financial
and other information, including, without limitation, payment plans for
significant creditors not yet negotiated or known as of the date hereof,
certified copies of corporate proceedings of the Borrower and any of its
Subsidiaries, certified copies of management communications and communications
from certified public accountants engaged by the Borrower or any of its
Subsidiaries from time to time, certified copies of all notices from or other
communications with the Securities and Exchange Commission, the National
Association of Securities Dealers and other Governmental Authorities, and such
other information as the Agent or the Lenders may from time to time request.
(j) The Borrower shall use its best efforts to negotiate the
withdrawal of all, notices :from physical therapists seeking to receive
Withdrawal Payments from the Borrower and shall not prepay any Withdrawal
Payment.
7. Events of Default.
-----------------
(a) The agreement of the Agent and the Lenders to make
Forbearance Revolving Credit Loans and to forbear from exercising remedies
pursuant to Section 4 hereof shall immediately terminate and be of no further
force and effect upon the occurrence of any of the following (each, a
"Forbearance Event of Default"):
----------------------------
(i) the occurrence of one or more Defaults or Events of Default
under any of Subsections 10(a), Subsections 10(c) and (d), Subsections (f)
through (j) and Subsection (l) of the Credit Agreement (other than a Default
or Event of Default
-6-
arising solely from a breach of the Borrower's obligations under Section 9.1 or
9.20 of the Credit Agreement); or
(ii) any representation or warranty made or deemed made by the
Borrower or any Subsidiary Guarantor in Section 4 hereof or elsewhere herein or
which is contained in any certificate, document or financial or other statement
created and/or delivered at any time under or in connection with this
Forbearance Agreement or on or subsequent to the date hereof under or in
connection with any other Credit Document shall prove to have been incorrect in
any material respect on or as of the date made or deemed made; or
(iii) the Borrower or any Subsidiary shall default in the
observance or performance of any agreement contained in Section 6; or
(iv) any Withdrawal Payments shall be paid; or
(v) the Agent or the Lenders shall in their sole discretion
determine that an adverse change has occurred in the finances or business
operations of the Borrower or the Subsidiary Guarantors.
(b) Upon the occurrence of a Forbearance Event of Default on or
as of any date, the Forbearance Termination Date shall be deemed to occur on
said date.
8. Absence of Waiver. The parties hereto agree that the agreements
-----------------
set forth in Sections 3 and 4 hereof shall not be deemed to:
(a) be a consent to, or waiver of, any Default or Event of
Default;
(b) except as expressly set forth herein, modify or limit any
other term or condition of the Credit Agreement or any other Credit Document;
(c) impose upon any Lender or the Agent any obligation, express
or implied, to consent to any amendment or further modification of the Credit
Agreement or other Credit Documents, including, without limitation, any further
extension of the Revolving Credit Commitment; or
(d) prejudice any right or remedy that the Agent or the Lenders
may now have or may in the future have under the Credit Agreement or under or
in connection with the other Credit Documents or any instrument or agreement
referred to therein including, without limitation, any right or remedy resulting
from any Default or Event of Default.
9. Miscellaneous.
-------------
-7-
(a) Section headings used in this Forbearance Agreement are for
convenience of reference only and shall not affect the construction of this
Forbearance Agreement.
(b) This Forbearance Agreement may be executed by one or more of
the parties hereto by facsimile or in any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same instrument.
(c) This Forbearance Agreement and the rights and obligations of
the parties under this Forbearance Agreement shall be governed by, and construed
and interpreted in accordance with, the law of the State of New York, without
giving effect to conflicts of laws principles.
(d) All obligations of the Borrower and each Subsidiary Guarantor
and all rights of the Agent and the Lenders that are expressed herein shall be
in addition to and not in limitation of those provided by applicable law.
(e) This Forbearance Agreement, the Credit Agreement and the other
Credit Documents represent the agreement of the Borrower, the Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent or any Lender relative
to subject matter hereof not expressly set forth or referred to herein or in the
other Credit Documents.
(f) Whenever possible, each provision of this Forbearance
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law; but if any provision of this Forbearance Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision of such provision or the remaining
provisions of this Forbearance Agreement.
(g) THE BORROWER AND EACH SUBSIDIARY GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY:
(A) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS FORBEARANCE AGREEMENT AND THE OTHER CREDIT
DOCUMENTS TO WHICH IT IS A PARTY, OR FOR RECOGNITION AND ENFORCEMENT OF ANY
JUDGMENT IN RESPECT THEREOF, TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK, THE COURTS OF THE UNITED STATES OF
AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM
ANY THEREOF;
(B) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN
SUCH COURTS AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE VENUE
-8-
OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR
PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR
CLAIM THE SAME;
(C) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR
PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR
CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE
PREPAID, TO THE BORROWER AT ITS ADDRESS SET FORTH IN SECTION 12.2 OF THE
CREDIT AGREEMENT AND TO EACH SUBSIDIARY GUARANTOR AT ITS ADDRESS SET FORTH
BELOW ITS SIGNATURE ON THE SUBSIDIARIES GUARANTEE, OR AT SUCH OTHER ADDRESS
OF WHICH THE AGENT SHALL HAVE BEEN NOTIFIED PURSUANT THERETO;
(D) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT
SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO XXX IN ANY OTHER JURISDICTION; AND
(E) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY LEGAL ACTION OR PROCEEDING
REFERRED TO IN THIS SECTION ANY SPECIAL, EXEMPLARY, PUNITIVE OR
CONSEQUENTIAL DAMAGES.
(h) EACH OF THE BORROWER, THE SUBSIDIARY GUARANTORS, THE LENDERS
AND THE AGENT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS FORBEARANCE AGREEMENT AND ANY OTHER
CREDIT DOCUMENT TO WHICH IT IS A PARTY AND FOR ANY COUNTERCLAIM THEREIN.
(i) This Forbearance Agreement shall be deemed a "Credit
Document" for purposes of the Credit Agreement and the other Credit Documents.
(j) This Forbearance Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior and contemporaneous oral or written agreements with respect to the
subject matter hereof.
(k) The Borrower and each Subsidiary Guarantor hereby
acknowledges that:
(i) it has been advised by counsel in the negotiation, execution
and delivery of this Forbearance Agreement;
-9-
(ii) neither the Agent nor any Lender has any fiduciary
relationship to the Borrower or any Subsidiary Guarantor, and the relationship
between the Agent and the Lenders, on the one hand, and the Borrower and the
Subsidiary Guarantors, on the other, is solely that of creditor and debtor; and
(iii) no joint venture exists among the Lenders or among the
Borrower, the Subsidiary Guarantors and the Lenders.
[SIGNATURE PAGES FOLLOW]
-10-
Forbearance Agreement
dated as of May 31, 1996
IN WITNESS WHEREOF, the parties hereto have caused this Forbearance
Agreement to be duly executed and delivered as of the day and year first above
written.
IBJ XXXXXXXX BANK & TRUST COMPANY,
as Agent and as a Lender
By /s/ X. X. Xxxxxx
---------------------------------------
Name: X. X. Xxxxxx
Title: Vice President
NORTHSTAR HEALTH SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NSHS HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HS HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-11-
Forbearance Agreement
dated as of May 31, 1996
NSHS SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HEALTH SERVICES OF
BEAVER, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HEALTH
CONSULTING, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR REHAB EAST, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-12-
Forbearance Agreement
dated as of May 31, 1996
NORTHSTAR REHABILITATION SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR THERAPY SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NW REHABILITATION, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
TRISTATE SPORTS REHAB & PHYSICAL
THERAPY, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NSHS CARDIAC HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-13-
Forbearance Agreement
dated as of May 31, 1996
NORTHSTAR NUCLEAR SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
WHITE OAK DIAGNOSTIC SYSTEMS
HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
WHITE OAK DIAGNOSTIC SYSTEMS
By: White Oak Diagnostic Systems
Holdings, Inc., its General Partner
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
KEYSTONE REHABILITATION SYSTEMS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-14-
Forbearance Agreement
dated as of May 31, 1996
KEYSTONE REHABILITATION
MANAGEMENT, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
VASUSONICS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-15-
AMENDMENT TO FORBEARANCE AGREEMENT
AMENDMENT, dated as of September 1, 1996 (this "Amendment"), to the
---------
Forbearance Agreement, dated as of May 31, 1996 (as amended, supplemented or
otherwise modified prior to the date hereof, the "Forbearance Agreement"),
---------------------
among:
(i) NORTHSTAR HEALTH SERVICES, INC., a Delaware corporation (the
"Borrower"),
(ii) NSHS HOLDINGS, INC., a Delaware corporation, NORTHSTAR HS
HOLDINGS, INC., a Delaware corporation, NSHS SERVICES, INC., a Delaware
corporation, NORTHSTAR HEALTH SERVICES OF BEAVER, INC., a Delaware
corporation, NORTHSTAR HEALTH CONSULTING, INC., a Delaware corporation,
NORTHSTAR REHAB EAST, INC., a Delaware corporation, NORTHSTAR
REHABILITATION SERVICES, INC., a Pennsylvania corporation, NORTHSTAR
THERAPY SERVICES, INC., a Pennsylvania corporation, NW REHABILITATION,
INC., a Delaware corporation, TRISTATE SPORTS REHAB & PHYSICAL THERAPY,
INC., a Delaware corporation, NSHS CARDIAC HOLDINGS, INC., a Delaware
corporation, NORTHSTAR NUCLEAR SERVICES, INC., a Delaware corporation,
WHITE OAK DIAGNOSTIC SYSTEMS HOLDINGS, INC., a Pennsylvania corporation,
WHITE OAK DIAGNOSTIC SYSTEMS, a Pennsylvania limited partnership, KEYSTONE
REHABILITATION SYSTEMS, INC., a Pennsylvania corporation, KEYSTONE
REHABILITATION MANAGEMENT, INC., a Pennsylvania corporation, VASUSONICS,
INC., a Pennsylvania corporation (collectively, the "Subsidiary
----------
Guarantors") and
----------
(iii) IBJ XXXXXXXX BANK & TRUST COMPANY ("IBJS").
----
RECITALS
The Borrower has requested IBJS, in its capacity as agent (in such
capacity, the "Agent"), and as a lender (in such capacity, the "Lender"), under
----- ------
the Credit Agreement referred to in the Forbearance Agreement to agree to amend
certain provisions of the Forbearance Agreement as set forth in this Amendment.
The Agent and the Lenders parties hereto are willing to agree to such
amendments, but only on the terms and subject to the conditions set forth in
this Amendment.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Borrower, the Lenders parties hereto and the Agent hereby
agree as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
-------------
Forbearance Agreement are used herein as therein defined.
2. Amendment to Section 3. Section 3(f) of the Forbearance Agreement
----------------------
is hereby amended by deleting such subsection in its entirety and substituting
in lieu thereof the following new Section 3(f):
"(f) This Forbearance Agreement shall terminate on December 2, 1996,
provided that if, on or prior to December 2, 1996, (x) the Borrower shall have
--------
made payments, in addition to the payments required to be made on or prior to
December 2, 1996 pursuant to Section 6(l)(i) and (ii), to IBJS in an aggregate
amount of at least $25,000 and to Cadwalader, Xxxxxxxxxx & Xxxx in an aggregate
amount of at least $12,500, (y) the Borrower shall have provided the Agent and
each Lender with the business plan and projected financial statements referred
to in Section 6(k) and (z) no Forbearance Event of Default shall have occurred
and be continuing, then this Forbearance Agreement shall terminate on December
31, 1996; in any such case unless earlier terminated upon the occurrence of
a Forbearance Event of Default (any such date, the "Forbearance Termination
-----------------------
Date")."
----
3. Amendments to Section 6. (a) Subsection (b) of Section 6 of the
-----------------------
Forbearance Agreement is hereby amended by deleting such subsection in its
entirety and substituting in lieu thereof the following new subsection (b):
"(b) The Borrower shall furnish to the Agent:
(i) weekly reports of actual cash receipts and disbursements
("Weekly Cash Flow Reports") no later than Thursday of the next
------------------------
succeeding week, each such Weekly Cash Flow Report to include a weekly
"Flash" report by source and by region indicating prior week "new"
revenue activity (specifying billed and unbilled);
(ii) monthly reports of actual cash receipts and disbursements
for each month, each period of three months ended on such month and
year-to-date ("Monthly Cash Flow Reports") no later than the
---------------------------
fifteenth day of the next succeeding month, each such Monthly Cash Flow
Report to include a "Flash" report, on a monthly, three-month and year-
to-date basis, by source and by region indicating prior period "new"
revenue activity (specifying billed and unbilled);
(iii) concurrently with the delivery of each Monthly Cash Flow
Report, schedules on an aggregate, regional and by-location basis, of
(A) income (gross and net) by category of service, (B) income by source
and (C) actual costs;
each of such Weekly Cash Flow Reports, Monthly Cash Flow Reports and
schedules to be certified as correct and complete by a Responsible Officer
of the Borrower and to be
-2-
provided both in hard copy form and an electronic form reasonably
satisfactory to the Agent."
(b) Section 6(e) of the Forbearance Agreement is hereby amended by
adding at the end thereof the following new sentence:
"The Borrower and each of its Subsidiaries agrees that it shall not
pay, or commit to pay, or undertake any transaction which would result
in or require the payment of, any cash disbursement that would be
unusual or extraordinary or outside the ordinary course of business,
such determination to be made by reference both to the business of the
Borrower and its Subsidiaries as presently conducted and by reference
to the business plan, budget and projections delivered pursuant to
Section 6(k)."
(c) Section 6 of the Forbearance Agreement is hereby amended by adding
the following new clauses (k) and (1) thereto in the appropriate
alphabetical order:
"(k) The Borrower shall, not later than December 2, 1996,
provide to the Agent and each Lender a business plan and
projected financial statements of the Borrower and its
Subsidiaries for the period from December 1, 1996 to
November 30, 1997 (the "Plan Period"), which business plan and
-----------
projected financial statements shall be in form and substance
reasonably acceptable to the Agent and the Lenders and shall
include, without limitation, the information described on Annex A
to this Forbearance Agreement.
"(l) The Borrower shall pay:
(i) to Cadwalader, Xxxxxxxxxx & Xxxx, an amount
equal to $25,000 during each of October, November and
December, 1996 (assuming, with respect to the payments
for December 1996, that the Forbearance Termination Date
shall have been extended to December 31, 1996 in
accordance with Section 3(f)), payable in equal bimonthly
installments of $12,500 each on the 15th day and the last
day of each of such months, on account of legal fees and
disbursements previously invoiced;
(ii) to the Agent for the account of the Lenders,
an amount for each month listed in the table below set
forth opposite such month below, payable in the equal
bimonthly installments set forth below on the 15th day
and the last day of each of such months (assuming, with
respect to the payments for December 1996, that the
Forbearance Termination Date shall have been extended to
December 31, 1996 in accordance with Section 3(f)):
Monthly Bi-Monthly
Month Amount Installment
----- ------- -----------
October 1996 $25,000 $12,500
November 1996 35,000 17,500
December 1996 50,000 25,000
-3-
in each case on account of accrued and unpaid interest on the
outstanding Loans; and
(iii) to the Agent for the account of the Lenders, concurrently
with the delivery to the Agent of each Weekly Cash Flow Report, an
amount equal to the excess, if any, of (A) collections for such week
over (B) the sum of cash disbursements for such week (including cash
disbursements pursuant to Section 6(l)(i) and (ii) hereof) and an
amount of cash to be retained from such collections determined by the
Borrower in light of reasonably anticipated cash needs and consistent
with maintaining prudent, non-excessive reserves (such excess, "Excess
------
Cash"), which Excess Cash shall be applied by the Agent and the
----
Lenders to the payment of accrued and unpaid interest on the
outstanding Loans, until all such accrued and unpaid interest has been
paid in full."
(d) The Forbearance Agreement is hereby amended by adding at the end
thereof a new Annex A in the form attached as Annex A to this Amendment.
4. Consent and Acknowledgment. The Agent and the Lenders hereby consent,
--------------------------
so long as no Forbearance Event of Default shall have occurred and be
continuing or would result therefrom, to the payment to Xxxxxx X. Xxxxxx, Xxxxx
X. Xxxxxx and the Xxxxxx Family Limited Partnership (collectively, the "Xxxxxx
------
Parties"), concurrently with the payments to the Agent and the Lenders pursuant
-------
to Section 6(l)(ii) of the Forbearance Agreement (as amended by this Amendment),
in an aggregate amount not to exceed (A) on each of October 15 and 31, 1996,
$1,785.71, (B) on each of November 15 and 30, 1996, $2,500.00, and (B) on each
of December 15 and 31, 1996 (assuming the extension of the Forbearance
Termination Date to December 31, 1996 in accordance with Section 3(f) of the
Forbearance Agreement), $3,571.43, in each case on account of accrued and unpaid
interest on the subordinated debt listed as items 1, 2 and 4 on Supplement to
Schedule 2 attached to the Amendment and Supplement to the Subordination
Agreement, dated as of November 15, 1995, which is payable to such Xxxxxx
Parties. Each of the Xxxxxx Parties, the Borrower and the Subsidiary Guarantors,
by their execution of this Amendment below, hereby acknowledges that, subject to
the reservation of rights by Keystone Rehabilitation Systems, Inc., Keystone
Rehabilitation Management, Inc. and its officers, directors and shareholders
provided in Section 2(h) of the Forbearance Agreement (which the parties hereto
intend shall continue notwithstanding the subordination referred to in this
sentence), nothing in this Section 4 shall be deemed to be a waiver, amendment
or modification of any benefits accruing in favor of the Agent and the Lenders
pursuant to the Subordination Agreement, that all of such subordinated debt
continues to be subordinated to all Senior Obligations (as defined in the
Subordination Agreement) in accordance with the terms of the Subordination
Agreement, and that, upon the occurrence and during the continuance of a
Forbearance Event of Default, without the need for any notice or other action on
the part of the Agent or any of the Lenders, any further payments permitted to
be made on or after the date of such Forbearance Event of Default pursuant to
this Section 4, which would otherwise have been prohibited pursuant to the terms
of the Subordination Agreement, shall thereupon again be prohibited in
accordance with the terms of the
-4-
Subordination Agreement, and the Xxxxxx Parties agree that in such circumstances
they shall not request or accept payment thereof.
5. Effectiveness. This Amendment shall become effective upon receipt by
-------------
the Agent of this Amendment, executed and delivered by the Borrower, each
Subsidiary Guarantor and each Xxxxxx Party.
6. Representations and Warranties. To induce the Agent and the Lenders to
------------------------------
enter into this Amendment, the Borrower hereby represents and warrants to the
Agent and the Lenders that, after giving effect to the amendments provided for
herein, the representations and warranties contained in the Forbearance
Agreement will be true and correct in all material respects as if made on and as
of the date hereof and that no Forbearance Event of Default will have occurred
and be continuing.
7. No Other Amendments; Absence of Waiver. (a) Except as expressly amended
--------------------------------------
hereby, the Forbearance Agreement shall remain in full force and effect in
accordance with its terms, without any waiver, amendment or modification of any
provision thereof.
(b) The parties hereto agree that nothing in this Amendment, or the
Forbearance as amended hereby, shall be deemed to:
(i) be a consent to, or waiver of, any Default or Event of
Default;
(ii) except as expressly set forth herein, modify or limit any
other term or condition of the Credit Agreement or any other Credit
Document;
(iii) impose upon any Under or the Agent any obligation, express
or implied, to consent to any amendment or further modification of the
Credit Agreement or other Credit Documents, including, without
limitation, any further extension of the Revolving Credit Commitment;
or
(iv) prejudice any right or remedy that the Agent or the Lenders
may now have or may in the future have under the Credit Agreement or
under or in connection with the other Credit Documents or any
instrument or agreement referred to therein including, without
limitation, any right or remedy resulting from any Default or Event of
Default.
8. Counterparts. This Amendment may be executed by one or more of
------------
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
9. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
--------------
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
[SIGNATURE PAGES FOLLOW]
-5-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
IBJ XXXXXXXX BANK & TRUST COMPANY,
as Agent and as a Lender
By /s/ Xxxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
NORTHSTAR HEALTH SERVICES, INC.
By
---------------------------------------
Name:
Title:
NSHS HOLDINGS, INC.
By
---------------------------------------
Name:
Title:
NORTHSTAR HS HOLDINGS, INC.
By
---------------------------------------
Name:
Title:
-6-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered as of the day and year first above written.
IBJ XXXXXXXX BANK & TRUST COMPANY,
as Agent and as a Lender
By
---------------------------------------
Name:
Title:
NORTHSTAR HEALTH SERVICES, INC
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NSHS HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HS HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-6-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
NSHS SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HEALTH SERVICES OF
BEAVER, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR HEALTH
CONSULTING, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR REHAB EAST, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-7-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
NORTHSTAR REHABILITATION SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NORTHSTAR THERAPY SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NW REHABILITATION, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
TRISTATE SPORTS REHAB & PHYSICAL
THERAPY, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
NSHS CARDIAC HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-8-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
NORTHSTAR NUCLEAR SERVICES, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
WHITE OAK DIAGNOSTIC SYSTEMS
HOLDINGS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
WHITE OAK DIAGNOSTIC SYSTEMS
By: White Oak Diagnostic Systems
Holdings, Inc., its General Partner
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
KEYSTONE REHABILITATION SYSTEMS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-9-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
KEYSTONE REHABILITATION
MANAGEMENT, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
VASCUSONICS, INC.
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: President
-10-
Amendment to
Forbearance Agreement
dated as of September 1, 1996
/s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxx
/s/ Xxxxx. X. Xxxxxx
-----------------------------------------
Xxxxx. X. Xxxxxx
XXXXXX FAMILY LIMITED PARTNERSHIP
By its General Partner, Xxxxxx X. Xxxxxx
By /s/ Xxxxxx Xxxxxx
---------------------------------------
Name: Xxxxxx Xxxxxx
Title: General Partner
By its General Partner, Xxxxx X. Xxxxxx
By /s/ Xxxxx X. Xxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxx
Title: General Partner
-11-
