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EXHIBIT 10 (j)(xi)
NOVACARE, INC.
0000 XXXX XXXXX XXXXXX
XXXX XX XXXXXXX, XX 00000
Dated as of March 31, 1997
PNC Bank, National Association,
as Agent
One PNC Plaza
Xxxxx Xxxxxx xxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxx, Vice President
RE: Amendment No. 10, Waiver and Consent to Credit Agreement (the
"Amendment")
Dear Xxxxxx:
We refer to that certain Credit Agreement, dated as of May 27, 1994,
as amended (the "Credit Agreement"), by and among NovaCare, Inc. ("NovaCare")
and certain of its Subsidiaries, the Banks party thereto and PNC Bank, National
Association, as agent for the Banks ("Agent"). Defined terms used herein, not
otherwise defined herein, shall have the meanings given to them under the Credit
Agreement as amended hereby.
The Borrowers and Guarantors, the Banks and the Agent hereby desire
to amend the Credit Agreement, as hereinafter provided.
The parties hereto in consideration of their mutual covenants and
agreements hereinafter set forth, and intending to be legally bound hereby,
covenant and agree as follows:
AGREEMENT
PART I: AMENDMENT AND WAIVER
1. Amendment to Credit Agreement.
The parties hereto hereby agree that subject to the prior
satisfaction of all conditions precedent to the effectiveness of this Amendment
set forth in Part I, Section 4, the Credit Agreement shall be automatically
amended, as follows:
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(a) Section 8.02 (d) [LIQUIDATIONS, MERGERS, CONSOLIDATIONS,
ACQUISITIONS.], shall be amended by adding the following sentence after the last
sentence thereof:
"Notwithstanding anything herein or in any other Loan Document
to the contrary, for periods on and after March 31, 1997 neither NovaCare nor
any other Loan Party nor any Subsidiary of any Loan Party shall at any time
become a party to any merger or consolidation, or acquire by purchase, lease or
otherwise all or substantially all of the assets or capital stock or other
ownership interests of any other entity or Person which engages in the business
of a Professional Employment Organization, other than the continued ownership of
NovaCare's equity interest of common stock of NovaCare Employee Services, Inc.,
a Delaware corporation, such equity interest to be in an amount which at no time
shall exceed the amount of such interest as of March 31, 1997."
(b) Section 8.02(i) [LOANS AND INVESTMENTS], clause (iv) shall be
deleted in its entirety, and the following clause (iv) shall be inserted in lieu
thereof:
"(iv) Permitted Intercompany Indebtedness, and Investments by
the Loan Parties in other Loan Parties; provided, however, that for periods on
and after March 31, 1997 the Investments by the Loan Parties in other Loan
Parties which are engaged in the business of a Professional Employment
Organization shall be limited solely to the Investment by NovaCare in NovaCare
Employee Services, Inc., a Delaware corporation, such Investment to be in an
amount which at no time shall exceed the amount of such Investment as of March
31, 1997; and"
(c) Section 8.02(n) [FUNDED DEBT TO CASH FLOW FROM OPERATIONS] is
hereby amended and restated in its entirety to read as follows:
"(n) Funded Debt to Cash Flow From Operations. The Loan
Parties shall not permit the ratio of Consolidated Funded Debt to Consolidated
Cash Flow from Operations, calculated as of the end of each fiscal quarter for
the four fiscal quarters then ended, to exceed the ratio set forth below during
the period specified below:
RATIO OF CONSOLIDATED
FUNDED DEBT TO CONSOLIDATED
PERIOD CASH FLOW FROM OPERATIONS
------ -------------------------
Closing Date through 6/30/1995 3.00 to 1.00
7/1/1995 through 12/31/1995 2.75 to 1.00
1/1/1996 through 6/30/1996 2.50 to 1.00
7/1/1996 through 12/31/1996 3.00 to 1.00
1/1/1997 through 6/30/1997 2.75 to 1.00
7/1/1997 and thereafter 2.50 to 1.00"
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2. Background; Certain Representations, Warranties and Covenants of
Loan Parties.
NovaCare advises the Banks that during the fiscal quarter ended
March 31, 1997, the Loan Parties entered into acquisition transactions and
during the fiscal quarter ended June 30, 1997, the Loan Parties anticipate
entering into acquisition transactions, in all such cases the aggregate
Consideration with respect to which exceeds the $150,000,000 limitation for
Consideration paid by the Loan Parties for Permitted Acquisitions in any fiscal
year, as set forth in Section 8.02(d)(ii)(g) of the Credit Agreement.
The Loan Parties represent and warrant that Part A of Exhibit 1
hereto sets forth a complete and accurate list of each acquisition completed
during the fiscal quarter ended March 31, 1997, providing adequate detail of the
following for each acquisition: (i) the name of the acquired entity; (ii)
whether such acquired entity has joined the Credit Agreement as a Borrower or a
Guarantor; (iii) the line of (i) business of the acquired entity; and (iv) the
Consideration paid by the Loan Parties for the Permitted Acquisition. The Loan
Parties represent that all of the equity interests of each acquired entity or of
the entity which acquired such assets have been pledged to the Agent for the
benefit of the Banks on a first priority perfected basis.
The Loan Parties represent and warrant that Part B of Exhibit 1
hereto sets forth a complete and accurate list of each acquisition expected to
be completed during the fiscal quarter ended June 30, 1997, providing adequate
detail of the following for each acquisition: (i) the name of the entity to be
acquired; (ii) whether such entity will join the Credit Agreement as a Borrower
or a Guarantor; (iii) the line of business of the entity to be acquired; and
(iv) a good faith estimate of the expected Consideration to be paid by the Loan
Parties for the entity or such assets. The Banks acknowledge that the
Consideration set forth on Part B of Exhibit 1, is subject to final negotiation
of the terms of each transaction and that, without prior approval of the Banks,
the Loan Parties may increase the aggregate Consideration for each transaction
by not more than 25% of the original estimated Consideration for such
transactions as set forth on Part B of Exhibit 1.
3. Waiver Relating to Liquidations, Mergers, Consolidations,
Acquisitions.
The Banks hereby waive the aggregate limitation of $150,000,000 of
Permitted Acquisitions set forth in Section 8.02(d), clause (ii)(g)
[Liquidations, Mergers, Consolidations, Acquisitions] made by the Loan Parties
in the fiscal year ended June 30, 1997, to permit the Loan Parties to consummate
certain acquisitions listed on Exhibit 1 hereto made during the fiscal quarter
ended March 31, 1997 or to be made during the fiscal quarter ending June 30,
1997, provided that such acquisitions are made during the time periods and for
the Consideration listed on Exhibit 1 and so long as each Permitted Acquisition
otherwise complies with Section 8.02(d) of the Credit Agreement (including
without limitation that all equity interests of the entity acquired or which is
acquiring assets have been pledged to the Agent for the benefit of the Banks on
a first priority, perfected basis). The foregoing waiver is applicable only to
the fiscal quarters ended March 31 and June 30, 1997, and to the extent that the
acquisitions specified on Exhibit 1 are not completed on or before June 30,
1997, such acquisitions must be permitted by the provisions of Section 8.02(d)
and the other provisions of the Credit Agreement. To the extent that the Loan
Parties desire to substitute a potential acquisition listed on Part B of Exhibit
I for a
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different acquisition, or desire to amend Exhibit 1 in any other manner, the
prior consent of the Required Banks, which shall not be unreasonably withheld,
shall be required. Within five (5) Business Days following receipt by the Banks
from NovaCare of a request to amend Part B of Exhibit 1, any Bank objecting to
the proposed amendment shall promptly notify NovaCare and the Agent of such
objection. Any Bank not objecting to a proposed amendment within such time
period shall be deemed to have consented to such proposed amendment.
4. Conditions of Effectiveness.
The effectiveness of the Amendment and Waiver set forth in this Part
I, Sections 1, 2 and 3 is expressly conditioned upon the occurrence and
completion of all of the following to the satisfaction of the Agent, in its sole
discretion:
(i) the Agent's receipt of counterparts of this Amendment duly
executed by the Borrowers, the Guarantors and all of the Banks; and (ii) the
Agent's receipt of a certificate signed by the President, Chief Executive
Officer or Chief Financial Officer of the Borrowers and Guarantors, certifying
as to all action taken by the Borrowers and Guarantors to authorize the
execution, delivery and performance of this Amendment and that all conditions to
the effectiveness of this Amendment have been met. Further, the representations
and warranties of the Loan Parties contained in Article VI of the Credit
Agreement shall be true and accurate on the date hereof with the same effect as
though such representations and warranties had been made on and as of such date
(except representations and warranties which relate solely to an earlier date or
time, which representations and warranties shall be true and correct on and as
of the specific dates or times referred to therein), the Loan Parties shall have
performed and complied with all covenants and conditions contained herein and in
the Loan Documents; no Event of Default or Potential Default under the Credit
Agreement shall have occurred and be continuing or shall exist; the information
set forth on Parts A and B of Exhibit 1 hereto shall be true and correct; and
there shall be delivered to the Agent for the benefit of each Bank a certificate
of the President, Chief Executive Officer or Chief Financial Officer of the Loan
Parties dated as of the date hereof certifying as to each of the foregoing.
PART II: AMENDMENT AND CONSENT REGARDING SPIN-OFF
1. Background; Certain Representations, Warranties and Covenants of
Loan Parties.
NovaCare currently owns at least a 90% interest in a certain
Professional Employment Organization known as NovaCare Employee Services, Inc.,
a Delaware corporation (the "Spin-Off Entity"). NovaCare plans to spin-off a
percentage of its ownership interest in the Spin-Off Entity by either directly
selling a portion of its ownership interest in the Spin-Off Entity or by having
the Spin-Off Entity issue additional shares of capital stock through an initial
public offering of stock (the "Spin-Off"). The Spin-Off will require the consent
of the all of the Banks. NovaCare desires that after the Spin-Off, the Spin-Off
Entity be classified as an Excluded Entity. NovaCare covenants that it shall
consummate the Spin-Off only if: (i) the aggregate proceeds to NovaCare or the
Spin-Off Entity (in either case, net of all reasonable and customary transaction
fees and costs and net of federal, state and local income taxes in connection
with the Spin-Off) shall be in an amount at least equal to the amount necessary
to repay all indebtedness of the Spin-
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Off Entity to NovaCare, including all accrued interest thereon, as of the date
of consummation of the Spin-Off; (ii) a portion of the proceeds of the Spin-Off
shall be used, on the date of consummation of the Spin-Off, by the Spin-Off
Entity to repay all of the outstanding Indebtedness of the Spin-Off Entity to
NovaCare, together with accrued interest thereon, which Indebtedness as of March
31, 1997 had an outstanding principal balance of $26 million; (iii) the Spin-Off
shall occur on or before September 30, 1997, and after giving effect to the
Spin-Off, NovaCare shall own at least 70% of all of the issued and outstanding
equity interests of the Spin-Off Entity; and (iv) at least ten (10) days prior
to consummation of the Spin-Off, NovaCare shall have delivered to the Agent
copies of all documents in connection with the Spin-Off (the "Spin-Off
Documents") which shall be in form and substance satisfactory to the Agent. The
Loan Parties represent and warrant that after giving effect to the Spin-Off, no
Event of Default or Potential Default shall exist or be continuing.
2. Consent of All Banks; Release of Certain Collateral.
(a) The consent of the Banks, as hereinafter provided, is subject to
the terms and conditions of this Amendment, including without limitation the
accuracy of all representations and warranties of the Loan Parties with respect
to the Spin-Off and the prior satisfaction of all covenants and all conditions
precedent set forth in Part II, Section 4 hereof, and subject to the foregoing,
the Banks hereby consent solely to either: (i) the spin-off of a portion of
NovaCare's stock in the Spin-Off Entity as described above or (ii) the issuance
by the Spin-Off Entity of additional shares of capital stock through an initial
public offering of stock. For the limited purpose, solely of permitting the
transactions described in the preceding sentence, the Banks hereby waive the
limitations on sales set forth in Section 8.02(e)(iv) of the Credit Agreement.
(b) Effective upon the consummation of the Spin-Off and satisfaction
of all conditions precedent set forth in Part II, Section 4 hereof, the Banks
consent to the release of their Lien upon the Stock of the Spin-Off Entity owned
by NovaCare and authorize the Agent to take the actions required to so release
such Lien.
3. Amendment to Credit Agreement - Effective Upon Consummation of
Spin-Off.
The parties hereto hereby agree that subject to the prior
satisfaction of all conditions precedent as set forth in Part II, Section 4,
effective upon the consummation of the Spin-Off, the Credit Agreement shall be
automatically amended, as follows:
(a) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by deleting,
in its entirety the definition of "Consolidated Cash Flow from Operations" and
inserting in lieu thereof, the following:
"Consolidated Cash Flow from Operations for any period of
determination shall mean (i) the sum of net income, depreciation, amortization,
other non-cash charges, if any, deducted in the determination of net income,
interest expense and income tax expense, minus (ii) non-cash credits, if any,
included in the determination of net income, in each case of NovaCare and its
Subsidiaries for such period determined and consolidated in accordance with GAAP
but without regard to net income and the other items described in clauses (i)
and (ii) of this sentence
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attributable to NovaCare PEO (for periods on and after the Spin-Off
Consummation) and without regard to net income and the other items described in
clauses (i) and (ii) of this sentence attributable to Restricted Excluded
Entities and; provided that, if a Loan Party shall have made one or more
Permitted Acquisitions during such period, Consolidated Cash Flow from
Operations shall be adjusted on a pro forma basis to give effect to all
Permitted Acquisitions as if they had occurred at the beginning of such period;
and provided further that if any Loan Party shall have effected one or more
Permitted Asset Transfers during such period, Consolidated Cash Flow from
Operations shall be adjusted on a pro forma basis to give effect to all such
Permitted Asset Transfers as if they had occurred at the beginning of such
period. The pro forma adjustments described in the previous sentence shall be
made based upon historical financial statements for the four (4) fiscal quarters
prior to the date of such Permitted Acquisition or Permitted Asset Transfer, as
the case may be, which historical financial statements shall be reasonably
satisfactory to the Agent."
(b) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by deleting,
in its entirety the definition of "Consolidated Earnings Available for Fixed
Charges" and inserting in lieu thereof, the following:
"Consolidated Earnings Available for Fixed Charges shall mean:
(A) for any period of determination from the Closing Date
through, but not including, the Sixth Amendment Effective Date, the sum of net
income, interest expense, income tax expense and expenses under operating
leases, in each case of NovaCare and its Subsidiaries for such period determined
and consolidated in accordance with GAAP, but without regard to net income,
interest expense, income tax expense and expenses under operating leases
attributable to Restricted Excluded Entities; and
(B) for any period of determination from the Sixth
Amendment Effective Date and thereafter, the sum of net income (excluding
non-cash credits, if any, included in the determination of net income), interest
expense, income tax expense, depreciation, amortization, other non-cash charges,
if any, deducted in the determination of net income and expenses under operating
leases, in each case of NovaCare and its Subsidiaries for such period determined
and consolidated in accordance with GAAP, but without regard to net income,
interest expense, income tax expense, depreciation, amortization, other non-cash
charges and expenses under operating leases attributable to NovaCare PEO (for
periods on and after the Spin-Off Consummation) and without regard to such items
attributable to Restricted Excluded Entities.
If a Loan Party shall have made one or more Permitted
Acquisitions during any such period, Consolidated Earnings Available for Fixed
Charges shall be adjusted on a pro forma basis to give effect to all Permitted
Acquisitions as if they had occurred at the beginning of such period; and
provided further that if any Loan Party shall have effected one or more
Permitted Asset Transfers during such period, Consolidated Earnings Available
for Fixed Charges shall be adjusted on a pro forma basis to give effect to all
such Permitted Asset Transfers as if they had occurred at the beginning of such
period. The pro forma adjustments described in the previous sentence shall be
made based upon historical financial statements for the four (4)
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fiscal quarters prior to the date of such Permitted Acquisition or Permitted
Asset Transfer, as the case may be, which historical financial statements shall
be reasonably satisfactory to the Agent."
(c) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting, in its entirety the definition of "Consolidated Fixed Charges" and
inserting in lieu thereof, the following:
"Consolidated Fixed Charges shall mean:
(A) for any period of determination from the Closing Date
through, but not including, the Sixth Amendment Effective Date, the sum of
interest expense plus expenses under operating leases, in each case of NovaCare
and its Subsidiaries for such period determined and consolidated in accordance
with GAAP;
(B) for any period of determination from the Sixth
Amendment Effective Date through and including the Spin-Off Consummation, the
sum of interest expense, expenses under operating leases, income tax expense,
current maturities of long term Indebtedness, and current principal payments
under capitalized leases (for the twelve (12) month period following the date of
determination), in each case of NovaCare and its Subsidiaries for such period
determined and consolidated in accordance with GAAP; and
(C) for any period of determination after the Spin-Off
Consummation, the sum of interest expense, expenses under operating leases,
income tax expense, current maturities of long term Indebtedness, and current
principal payments under capitalized leases (for the twelve (12) month period
following the date of determination), in each case of NovaCare and its
Subsidiaries (other than NovaCare PEO) for such period determined and
consolidated in accordance with GAAP.
If a Loan Party shall have made one or more Permitted
Acquisitions during any such period, Consolidated Fixed Charges shall be
adjusted on a pro forma basis to give effect to all Permitted Acquisitions as if
they had occurred at the beginning of such period; and provided further that if
any Loan Party shall have effected one or more Permitted Asset Transfers during
such period, Consolidated Fixed Charges shall be adjusted on a pro forma basis
to give effect to all such Permitted Asset Transfers as if they had occurred at
the beginning of such period. The pro forma adjustments described in the
previous sentence shall be made based upon historical financial statements for
the four (4) fiscal quarters prior to the date of such Permitted Acquisition or
Permitted Asset Transfer, as the case may be, which historical financial
statements shall be reasonably satisfactory to the Agent."
(d) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting, in its entirety the definition of "Consolidated Funded Debt" and
inserting in lieu thereof, the following:
"Consolidated Funded Debt shall mean (i) as of any date of
determination through but not including the Spin-Off Consummation, any
Indebtedness of NovaCare and its Subsidiaries to persons other than NovaCare and
its Subsidiaries, determined and consolidated in accordance with GAAP, and (ii)
as of any date of determination on and after the Spin-Off Consummation, any
Indebtedness of NovaCare and its Subsidiaries (other than NovaCare PEO),
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to persons other than NovaCare and its Subsidiaries determined and consolidated
in accordance with GAAP. Any items which are included in more than one clause of
the definition of Indebtedness shall not be counted more than one time in
computing the amount of Consolidated Funded Debt."
(e) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting, in its entirety the definition of "Consolidated Net Income" and
inserting in lieu thereof, the following:
"Consolidated Net Income shall mean (i) for any period of
determination for periods prior to the Spin-Off Consummation, the net income of
NovaCare and its Subsidiaries for such period determined and consolidated in
accordance with GAAP, and (ii) for any period of determination for periods on
and after the Spin-Off Consummation, the net income of NovaCare and its
Subsidiaries (other than NovaCare PEO) for such period determined and
consolidated in accordance with GAAP, except that in the case of amounts under
either the forgoing clause (i) or (ii), there shall be excluded from such net
income any increases or decreases in income or expenses resulting from changes
in GAAP on and after the Closing Date."
(f) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting, in its entirety the definition of "Consolidated Net Worth" and
inserting in lieu thereof, the following:
"Consolidated Net Worth shall mean (i) as of any date of
determination for periods prior to the Spin-Off Consummation, total
stockholders' equity of NovaCare and its Subsidiaries as of such date determined
and consolidated in accordance with GAAP, and (ii) as of any date of
determination for periods on and after the Spin-Off Consummation, total
stockholders' equity of NovaCare and its Subsidiaries (other than NovaCare PEO)
as of such date determined and consolidated in accordance with GAAP."
(g) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting, in its entirety the definition of "Excluded Entities" and inserting in
lieu thereof, the following:
"Excluded Entities shall mean collectively (i) any Minority
Subsidiary or Unaffiliated Managed Company in which a Loan Party has made a
Restricted Investment permitted by Section 8.02(i)(v); (ii) the Excluded
Qualifying Subsidiaries; and (iii) effective upon the Spin-Off Consummation,
NovaCare PEO; and Excluded Entity shall mean separately any of the Excluded
Entities."
(h) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting in its entirety the definition of "Intercompany Indebtedness" and
inserting in lieu thereof, the following:
"Intercompany Indebtedness shall mean, for periods prior to
the Spin-Off Consummation, all Indebtedness of NovaCare or any of its
Subsidiaries, as maker, to NovaCare or any other Subsidiary, as holder, and for
periods on or after the Spin-Off Consummation, all Indebtedness of NovaCare or
any of its Subsidiaries (other than NovaCare PEO), as maker, to NovaCare or any
other Subsidiary, as holder. It is expressly agreed that for periods on or after
the Spin-Off Consummation, neither NovaCare nor any Subsidiary of NovaCare shall
make any loans or advances to NovaCare PEO."
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(i) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting clause (C) of the definition of "Minimum Net Worth Requirement" and
inserting in lieu thereof, the following new clause (C):
"(C) for any period of determination from July 1, 1996 and
thereafter, the sum of the amounts under the following clauses (i), (ii), (iii)
and (iv) reduced by the amount under the following clause (v): (i) the amount
determined under the preceding clause (B) as of June 30, 1996, plus (ii)
seventy-five percent (75%) of Consolidated Net Income of NovaCare and its
Subsidiaries (other than, for periods on and after the Spin-Off Consummation,
the portion of Consolidated Net Income attributable to NovaCare PEO) for each
fiscal quarter in which net income was earned (as opposed to a net loss), plus
(iii) to the extent not included in Consolidated Net Income in the preceding
clause (ii), one hundred percent (100%) of federal and state income tax refunds
(collectively the "Tax Refunds") received by NovaCare or a Subsidiary of
NovaCare (other than, for periods on and after the Spin-Off Consummation,
federal and state tax refunds attributable to NovaCare PEO) during the period of
determination relating to the sale by them of their rehabilitation hospitals
during the fiscal year ended June 30, 1995, plus (iv) the proceeds received by
NovaCare in connection with the sale of shares of its capital stock after
deducting any expenses associated with any sale including proceeds from
conversion of the Subordinated Debentures, during the period from July 1, 1996
through (and including) the date of determination, minus (v) the cash purchase
price of common stock of NovaCare repurchased by NovaCare during the period of
determination, up to an aggregate maximum amount for the repurchase of such
common stock of $70,000,000 plus the portion of the Tax Refunds used to
repurchase such common stock, for all periods after July 1, 1995."
(j) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
inserting after the definition of Notes, the following new definition of
"NovaCare PEO":
"NovaCare PEO shall mean NovaCare Employee Services, Inc., a
corporation organized and existing under the laws of the State of Delaware."
(k) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting the definition of "Permitted Investment in Excluded Entities" in its
entirety and inserting, in lieu thereof, the following:
"Permitted Investment in Excluded Entities shall mean
Restricted Investments in Excluded Entities which do not exceed in the aggregate
$50,000,000 for all Excluded Entities or the following amount as to any
individual Excluded Entity: (i) $5,000,000, in the case of a Restricted
Investment in an Excluded Entity which is a Minority Subsidiary; (ii)
$10,000,000, in the case of a Restricted Investment in an Excluded Entity which
is a Subsidiary; (iii) $1,000,000, in the case of a Restricted Investment in
either an Unaffiliated Managed Company or an entity which is neither a
Subsidiary nor a Minority Subsidiary, and (iv) for periods on and after the
Spin-Off Consummation, $0, in the case of any Restricted Investment in NovaCare
PEO. In addition, the aggregate Restricted Investments in Excluded Entities of
the type described in clause (iii) of the preceding sentence shall not exceed
$5,000,000. Notwithstanding anything in this Agreement to the contrary, for
periods on and after the Spin-Off
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Consummation, no Restricted Investments shall be made by NovaCare or any
Subsidiary of NovaCare in NovaCare PEO."
(l) Section 1.01 [CERTAIN DEFINITIONS] shall be amended by
deleting the definition of "Permitted Line of Business" in its entirety and
inserting, in lieu thereof, the following:
"Permitted Line of Business shall mean, for the period
commencing on the Closing Date through the Sixth Amendment Effective Date, the
Existing Lines of Business; for the period commencing on the Sixth Amendment
Effective Date through but not including the date of the Spin-Off Consummation,
the business substantially engaged in by NovaCare and its Subsidiaries on the
Sixth Amendment Effective Date, rehabilitation and subacute care management and
consulting businesses, the ownership and operation of physician practice groups
specializing in occupational medicine and the ownership and operation of
Professional Employment Organizations; and for periods from and after the
Spin-Off Consummation, the business substantially engaged in by NovaCare and its
Subsidiaries on the Sixth Amendment Effective Date, rehabilitation and subacute
care management and consulting businesses and the ownership and operation of
physician practice groups specializing in occupational medicine."
(m) Section 1.01 [CERTAIN DEFINITIONS] shall be amended to include
the following new definitions of "Spin-Off" and "Spin-Off Consummation," which
shall be inserted between the definition of "Solvent" and the definition of
"Subordinated Debentures," as follows:
"Spin-Off shall mean that certain transaction pursuant to
which the following shall have occurred: (i) NovaCare shall have either
completed a spin-off of a percentage of its ownership interests in, or, caused
the issuance, through an initial public offering of stock, of additional shares
of capital stock of NovaCare PEO and as a result of such transaction, NovaCare,
after giving effect thereto, owned at least 70% of all of the issued and
outstanding equity interests of NovaCare PEO, (ii) the aggregate proceeds to
NovaCare or NovaCare PEO (in either case, net of all reasonable and customary
transaction fees and costs and all federal, state and local income taxes in
connection therewith) were at least equal to the amount necessary to repay all
indebtedness of NovaCare PEO to NovaCare, including all accrued interest
thereon, as of the Spin-Off Consummation, and (iii) a portion of such proceeds
were used to repay all outstanding Indebtedness together with accrued interest
thereon, of NovaCare PEO to NovaCare.
Spin-Off Consummation shall mean the date of the consummation
of the Spin-Off in accordance with and subject to the satisfaction of all of the
terms and conditions to the effectiveness of the Tenth Amendment."
(n) Section 1.01 [CERTAIN DEFINITIONS] shall be amended to include
the following new definition of "Tenth Amendment" which shall be inserted
between the definition of "Subsidiary Shares" and the definition of "Termination
Date" as follows:
"Tenth Amendment shall mean that certain tenth amendment to
this Agreement which is dated as of March 31, 1997 and which is effective as
provided therein."
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(o) Section 2.08 [USE OF PROCEEDS], shall be amended and restated
in its entirety to read as follows:
"2.08 Use of Proceeds. The proceeds of the Revolving Credit
Loans shall be used by the Borrowers only for: (i) Permitted Acquisitions and
the refinancing of Indebtedness assumed in connection therewith , (ii) the
development of health care related businesses and facilities and for periods
prior to the Spin-Off Consummation, Professional Employment Organizations, each
as permitted under this Agreement, and (iii) general corporate purposes,
provided, however, that no portion of the Revolving Credit Loans shall be used
directly or indirectly for the purpose of repaying or redeeming the Subordinated
Debentures."
(p)(i) Section 8.01 (m) [CERTIFICATE OF BORROWERS; OTHER REPORTS AND
INFORMATION] is hereby amended by adding the following sentence at the end of
clause (i) [QUARTERLY FINANCIAL STATEMENTS]:
"Notwithstanding anything contained herein to the contrary,
for periods on and after the Spin-Off Consummation, the quarterly financial
statements of NovaCare and its consolidated Subsidiaries required to be prepared
and delivered in accordance with this Section 8.01 (m)(i) shall be prepared on a
consolidated basis in accordance with GAAP but without regard to NovaCare PEO."
(p)(ii) Section 8.01(m) [CERTIFICATE OF BORROWERS; OTHER REPORTS AND
INFORMATION] shall also be amended by adding the following sentence at the end
of clause (ii) [ANNUAL FINANCIAL STATEMENTS]:
"Notwithstanding anything contained herein to the contrary,
for periods on and after the Spin-Off Consummation, the annual financial
statements of NovaCare and its consolidated Subsidiaries required to be prepared
and delivered in accordance with this Section 8.01 (m)(ii) shall be prepared on
a consolidated basis in accordance with GAAP but without regard to NovaCare
PEO."
(q) Section 8.02(a) [INDEBTEDNESS.] is hereby amended by deleting
clause (vii) in its entirety and inserting the following new clause (vii), in
lieu thereof:
"(vii) Permitted Intercompany Indebtedness, provided, however,
that for periods on or after the Spin-Off Consummation, neither NovaCare nor any
Subsidiary of NovaCare shall make any loans or advances to NovaCare PEO."
(r) Section 8.02 (d) [LIQUIDATIONS, MERGERS, CONSOLIDATIONS,
ACQUISITIONS.], shall be amended and restated in its entirety to read as
follows:
"(d) Liquidations, Mergers, Consolidations, Acquisitions. Each
of the Loan Parties shall not, and shall not permit any of its Subsidiaries
(other than NovaCare PEO for any period after the Spin-Off Consummation) to,
dissolve, liquidate or wind-up its affairs, or become a party to any merger or
consolidation, or acquire by purchase, lease or otherwise all or
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12
substantially all of the assets or capital stock or other ownership interests of
any other person, provided that
(i) any wholly-owned Subsidiary of NovaCare may
consolidate or merge into another Loan Party which is wholly-owned by one or
more of the other Loan Parties, and
(ii) any Loan Party may acquire, whether by purchase or by
merger, (A) all of the ownership interests of another Person or (B)
substantially all of the assets of another Person or of a business or division
of another Person (each a "Permitted Acquisition"), provided that each of the
following requirements is met:
(a) such Person shall be a corporation, limited
liability company or other entity with respect to applicable state law provided
that the owners of all stock or other ownership interests in such entity shall
not be liable for any obligations of such entity or for the claims of any
creditors thereof,
(b) if the Loan Parties are acquiring the ownership
interests in such Person, such Person shall join this Agreement as a Borrower or
a Guarantor pursuant to Section 11.18 hereof and the owners of such acquired
Person shall grant Liens in the stock or other ownership interests in such
Person and otherwise comply with Section 11.18 on or before the date of such
Permitted Acquisition,
(c) the board of directors or other equivalent
governing body of such Person shall have approved such Permitted Acquisition,
(d) the business acquired, or the business conducted
by the Person whose ownership interests are being acquired, as applicable, shall
be a Permitted Line of Business,
(e) no Potential Default or Event of Default shall
exist immediately prior to and after giving effect to such Permitted
Acquisition,
(f) after giving effect to such Permitted Acquisition
there shall be Available Revolving Credit Commitments of at least Five Million
Dollars ($5,000,000), and
(g) the Consideration paid by the Loan Parties for
each Permitted Acquisition shall not exceed Thirty Million Dollars
($30,000,000), and after giving effect to such Permitted Acquisition, the
Consideration paid by the Loan Parties for all Permitted Acquisitions made
during the current fiscal year of the Loan Parties shall not exceed One Hundred
Fifty Million Dollars ($150,000,000) (the "Annual Permitted Acquisition Amount")
provided that in no event shall the portion of the Annual Permitted Acquisition
Amount utilized to make Permitted Acquisitions of physician practices in the
specialty of occupational medicine exceed Forty Million Dollars ($40,000,000) in
any fiscal year and in no event shall the portion of the Annual Permitted
Acquisition Amount utilized to make Permitted Acquisitions of Professional
Employment Organizations in any fiscal year prior to the fiscal year during
which the Spin-Off
-12-
13
Consummation occurs exceed Forty Five Million Dollars ($45,000,000).
Notwithstanding anything in this Agreement to the contrary, for periods on or
after the Spin-Off Consummation, no portion of the Annual Permitted Acquisition
Amount shall be utilized to make Permitted Acquisitions of Professional
Employment Organizations."
(s) Section 8.02 (e) [DISPOSITIONS OF ASSETS OR SUBSIDIARIES.],
shall be amended and restated in its entirety to read as follows:
"(e) Dispositions of Assets or Subsidiaries. Each Loan Party
shall not sell, convey, assign, lease, abandon or otherwise transfer or dispose
of, voluntarily or involuntarily, any of its properties or assets, tangible or
intangible (including but not limited to sale, assignment, discount or other
disposition of accounts, contract rights, chattel paper, equipment or general
intangibles with or without recourse or of capital stock, shares of beneficial
interest or partnership interests of a Subsidiary), except transactions
involving (i) any sale, abandonment, transfer or lease of assets in the ordinary
course of business which are no longer necessary or required in the conduct of
such Loan Party's business; (ii) any sale, transfer, abandonment or lease of
assets by any Loan Party which is a wholly owned Subsidiary of NovaCare to
NovaCare or any other Loan Party which is a wholly owned Subsidiary of NovaCare;
(iii) any sale, abandonment, transfer or lease of assets in the ordinary course
of business which are replaced by substitute assets; or (iv) a sale of assets
provided that the sum of the Sale Price received from such sale and from all
prior sales permitted under this clause (iv) (but without regard to the Sale
Price received in connection with the Spin-Off) does not exceed 5% of
Consolidated Net Worth as of the end of the fiscal quarter of NovaCare preceding
the date of such sale and provided that the Loan Parties deliver to the Banks
evidence of compliance with this clause (iv) before making such sale."
(t)(i) Section 8.02(i) [LOANS AND INVESTMENTS], clause (iv) shall be
deleted in its entirety, and the following clause (iv) shall be inserted in lieu
thereof:
"(iv) Permitted Intercompany Indebtedness, and Investments by
the Loan Parties in other Loan Parties; provided, however, that for periods on
or after the Spin-Off Consummation, neither NovaCare nor any Subsidiary of
NovaCare shall make any loans or advances to or investments in NovaCare PEO;
and"
(t)(ii) Section 8.02 (i) [LOANS AND INVESTMENTS], shall also be
amended by adding the following sentence after the last sentence of clause (v)
thereof:
"Notwithstanding anything contained in this Section 8.02(i) to
the contrary, neither NovaCare nor any other Loan Party shall at any time on or
after the Spin-Off Consummation make any loan or advance to, purchase, acquire
or own any stock, bonds, notes or securities of, or any other investment or
interest in, or make any capital contribution to, or agree, become or remain
liable to do any of the foregoing with respect to NovaCare PEO, other than the
continued ownership of NovaCare's equity interest of common stock of NovaCare
PEO as owned as of the Spin-Off Consummation."
-13-
14
(u) Section 8.02(k) [MINIMUM CURRENT RATIO], shall be amended by
adding the following sentence after the table set forth in such Section:
"For periods on and after the Spin-Off Consummation, for
purposes solely of this Section 8.02(k), NovaCare PEO shall not be deemed to be
a Subsidiary of NovaCare for purposes of calculating the ratio set forth above,
and the current assets and current liabilities of NovaCare PEO shall be excluded
from calculation of such ratio."
(v) Section 11.18 [JOINDER OF LOAN PARTIES.], clause (i) shall be
amended by adding the following sentence after the last sentence thereof;
"Notwithstanding the provisions of this Section 11.18(i) to
the contrary, for periods after the Spin-Off Consummation, NovaCare PEO shall
not be required to join this Agreement as a Guarantor or Borrower, and further,
following the Spin-Off Consummation, any equity interests of NovaCare PEO owned
by NovaCare or any Subsidiary of NovaCare shall not be required to be pledged to
the Agent for the benefit of the Banks."
(w) Schedule 1.01(E) [EXCLUDED ENTITIES] to the Credit Agreement
shall be amended and restated in its entirety in the form of such Schedule
attached hereto, for the purpose of including the Spin-Off Entity as an Excluded
Entity.
(x) Exhibit 8.01(m)(iii) [COMPLIANCE CERTIFICATE] to the Credit
Agreement shall be amended and restated in its entirety in the form of such
Exhibit attached hereto.
4. Conditions of Effectiveness.
The effectiveness of the Amendment and Consent set forth in this
Part II, Sections 1, 2 and 3 is expressly conditioned upon the occurrence and
completion of all of the following to the satisfaction of the Agent, in its sole
discretion: (i) the Agent's receipt of counterparts of this Amendment duly
executed by the Borrowers, the Guarantors and all of the Banks; (ii) NovaCare's
and/or the Spin-Off Entity's receipt, in the aggregate, of proceeds as a result
of the Spin-Off, net of all reasonable and customary transaction fees and costs
and net of federal, state and local income taxes in connection with the Spin-Off
in an amount at least equal to the amount necessary to repay all indebtedness of
the Spin-Off Entity to NovaCare, including all accrued interest thereon, as of
the date of consummation of the Spin-Off; (iii) a portion of the proceeds of the
Spin-Off shall be used, on the date of the consummation of the Spin-Off, by the
Spin-Off Entity to repay all of the outstanding Indebtedness of the Spin-Off
Entity to NovaCare, together with accrued interest thereon; (iv) the Spin-Off
shall have occurred on or before September 30, 1997; (v) after giving effect to
the Spin-Off, NovaCare shall own at least 70% of all of the issued and
outstanding equity interests of the Spin-Off Entity; (vi) NovaCare shall have
delivered to the Agent copies of all Spin-Off Documents prior to the
consummation of the Spin-Off, which shall all be in form and substance
satisfactory to the Agent, the Spin-Off shall have been consummated in
accordance with the Spin-Off Documents and the President, Chief Executive
Officer or Chief Financial Officer of NovaCare shall have delivered to the Agent
a Certificate certifying the consummation of the Spin-Off in accordance with the
Spin-Off Documents and attaching a true and complete copy of the Spin-Off
Documents, as certified by such officer; (vii) the Agent's receipt of a
certificate signed by the President, Chief Executive Officer or Chief Financial
Officer
-14-
15
of the Borrowers and Guarantors, certifying as to all action taken by the
Borrowers and Guarantors to authorize the execution, delivery and performance of
the Spin-Off and this Amendment and that all conditions to the effectiveness of
this Amendment have been met; and (viii) the Agent's receipt of an opinion of
Xxxxx X. Xxxxxx, General Counsel of the Loan Parties reasonably satisfactory to
the Agent [including without limitation customary opinions regarding with
respect to the Spin-Off the compliance with all securities laws, including
10b(5) and a Prior Security Interest of remaining stock by NovaCare after the
Spin-Off.] Further, the representations and warranties of the Loan Parties
contained in Article VI of the Credit Agreement shall be true and accurate on
the date hereof with the same effect as though such representations and
warranties had been made on and as of such date (except representations and
warranties which relate solely to an earlier date or time, which representations
and warranties shall be true and correct on and as of the specific dates or
times referred to therein), the Loan Parties shall have performed and complied
with all covenants and conditions contained herein and in the Loan Documents; no
Event of Default or Potential Default under the Credit Agreement shall have
occurred and be continuing or shall exist and there shall be delivered to the
Agent for the benefit of each Bank a certificate of the President, Chief
Executive Officer or Chief Financial Officer of the Loan Parties dated as of the
date hereof certifying as to each of the foregoing.
PART III: MISCELLANEOUS
1. Effective Date of Waiver.
This Amendment shall be dated as of the date and year first above
written, provided, however that the provisions of Part I hereof shall be
effective only upon the satisfaction of all Conditions of Effectiveness set
forth in Part I, Section 4 hereof and provided further that the provisions of
Part II hereof shall be effective only upon the satisfaction of all Conditions
of Effectiveness set forth in Part II, Section 4 hereof.
2. Full Force and Effect.
Except as expressly modified and amended by this Amendment, the
Credit Agreement and the other Loan Documents are hereby ratified and confirmed
and shall remain in full force and effect.
3. Costs, Expenses, Disbursements.
The Borrowers hereby agree to reimburse the Agent and the Banks on
demand for all costs, expenses and disbursements relating to this Amendment
which are payable by the Borrowers as provided in Section 10.05 of the Credit
Agreement.
4. Counterparts.
This Amendment may be executed by different parties hereto in any
number of separate counterparts, each of which, when so executed and delivered,
shall be an original, and all of such counterparts shall together constitute one
and the same instrument.
-15-
16
5. Governing Law.
This Amendment shall be deemed to be a contract under the laws of
the Commonwealth of Pennsylvania and for all purposes shall be governed by and
construed and enforced in accordance with the internal laws of the Commonwealth
of Pennsylvania without regard to its conflict of laws principles.
-16-
17
[Signature Page 1 of 6 to Tenth Amendment, Waiver and Consent]
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto
duly authorized, have executed this Amendment as of the day and year first above
written.
BORROWERS AND GUARANTORS:
ATTEST: NOVACARE, INC., a Delaware corporation, and
each of the other BORROWERS listed on
Schedule 6.01(c) of the Credit Agreement
(which Schedule is attached hereto as
Exhibit I) and each of the GUARANTORS
listed on Schedule 6.01(c) of the Credit
Agreement (which Schedule is attached
hereto as Exhibit I), other than those
listed below
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxxxx X. XxXxxxxx
---------------------------- ---------------------------------
Xxxxxxx X. XxXxxxxx
-------------------------------[Name],
[Seal] the Vice President
---------------------------[Title]
of each Borrower and Guarantor listed on
Schedule 6.01(c) of the Credit Agreement
(which Schedule is attached hereto as
Exhibit I), other than those listed below,
which is a corporation and of each general
partner of each Borrower and Guarantor
which is a partnership
Address for Notices for each of the
foregoing Borrowers and Guarantors:
0000 Xxxx Xxxxx Xxxxxx
Xxxx xx Xxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Chief Financial Officer
Telephone No. (000) 000-0000
18
[Signature Page 2 of 6 to Tenth Amendment, Waiver and Consent]
AGENT:
PNC BANK, NATIONAL ASSOCIATION, as Agent
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Title: Vice President
Address for Notices:
One PNC Plaza
Xxxxx Xxxxxx xxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Regional Healthcare Group
Telephone No. (000) 000-0000
BANKS:
PNC BANK, NATIONAL ASSOCIATION
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Title: Vice President
Address for Notices:
One PNC Plaza
Xxxxx Xxxxxx xxx Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Regional Healthcare Group
Telephone No. (000) 000-0000
19
[Signature Page 3 of 6 to Tenth Amendment, Waiver and Consent]
CORESTATES BANK, N.A.
By: /s/ Xxxxxxxx X. Xxxxxxxxx
_____________________________________
Name: Xxxxxxxx X. Xxxxxxxxx
Title: Vice President
Address for Notices:
0000 Xxxxxxxx Xxxxxx
X.X. Xxx 0000
FC 1-8-3-22
Xxxxxxxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxxxxx X. Xxxxxxxxx
Assistant Vice President
Telephone No. (000) 000-0000
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: /s/ Xxx X. Xxxx
_____________________________________
Name: Xxx X. Xxxx
Title: Senior Vice President
Address for Notices:
One First Union Center
000 X. Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx Xxxxx
Assistant Vice President
Telephone No. (000) 000-0000
20
[Signature Page 4 of 6 to Tenth Amendment, Waiver and Consent]
FLEET NATIONAL BANK
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Vice President
Address for Notices:
Health Care and Non Profit Group
Fleet Center MA BOF 00X
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000-0000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxx
Vice President
Telephone No. (000) 000-0000
MELLON BANK, N.A.
By: /s/ Xxxxxxx X. Cunniffer
--------------------------------
Name: Xxxxxxx X. Cunniffer
Title:
Address for Notices:
Healthcare Banking
Plymouth Meeting/Exec. Campus
000 X. Xxxxxxxxxx Xxxx
Xxxxx 000/XXX #00X-0000
Xxxxxxxx Xxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx X. Cunniffer
Vice President
Telephone No. 000-000-0000
21
[Signature Page 5 of 6 to Tenth Amendment, Waiver and Consent]
NATIONSBANK, N.A.
By: /s/ Xxxxx Xxxxxx
------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
Address for Notices:
Xxx XxxxxxxXxxx Xxxxx
Xxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Telecopier No. (000) 000-0000
Attention: X. Xxxxxx Choppin
Sr. Vice President
Telephone No. (000) 000-0000
THE BANK OF NEW YORK
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxx X. Xxxxxx
Title: Vice President
Address for Notices:
Northeastern Division
Xxx Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxx Xxxxxx
Vice President
Telephone No. (000) 000-0000
22
[Signature Page 6 of 6 to Tenth Amendment, Waiver and Consent]
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ Xxxxx Xxxxxxx
------------------------------------
Name: Xxxxx Xxxxxxx
Title: Vice President
Address for Notices:
Healthcare Banking Group
0-1106, Tower 10
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Telecopier No. (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx
First Vice President
Telephone No. (000) 000-0000
00
XXXXX XX XXXXXXX
XXXXXX XX XXXXXX
Xx the 25th day of April, 1997 personally appeared Xxxxx Xxxxxxx,
as the Vice President of SunTrust Bank, Central Florida, National Association,
and before me executed the attached Tenth Amendment Waiver and Consent dated
as of _____________, 1997 to the Credit Agreement between NovaCare, Inc.,
with SunTrust Bank, Central Florida, National Association, as Lender.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal,
in the state and county aforesaid.
/s/
_______________________________________________
Signature of Notary Public, State of Georgia
Notary Public, Xxxxxxx County, Georgia
My Commission Expires November 1, 1998
(Print, Type or Stamp Commissioned Name of
Notary Public) Personally known X ;
____
OR Produced Identification ____________________
Type of identification produced:_______________
_______________________________________________
24
EXHIBIT 1
PART A - Acquisitions made during fiscal quarter ended March 31, 1997 (See
attached)
PART B - Acquisitions to be made during fiscal quarter ended June 30, 1997 (See
attached)
