EXHIBIT 10.3
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
(the "Amendment"), dated as of October 4, 2002 is among HORIZON HEALTH
CORPORATION, a Delaware Corporation (the "Parent"), HORIZON MENTAL HEALTH
MANAGEMENT, INC., a Delaware Corporation (the "Borrower"), each of the banks or
other lending institutions party hereto, JPMORGAN CHASE BANK (formerly known as
The Chase Manhattan Bank, who was the successor in interest by merger to Chase
Bank of Texas, National Association, formerly known as Texas Commerce Bank
National Association), as the agent (the "Agent").
RECITALS:
A. The Parent, the Borrower, the Agent, and certain banks and other
lending institutions have entered into that certain Second Amended and Restated
Credit Agreement dated as of May 23, 2002 (as amended by that certain First
Amendment to Second Amended and Restated Credit Agreement dated as of September
25, 2002, and as the same may hereafter be further amended or otherwise
modified, herein the "Agreement").
B. The Parent wishes to repurchase shares of its stock on the open
market or though privately negotiated transactions in an amount not to exceed
$7,500,000.
C. In connection with the Parent's repurchase of shares of its stock,
the Parent and the Borrower have requested that the Agent and the Banks amend
certain provisions of the Agreement. Subject to satisfaction of the conditions
set forth herein, the Agent and the Banks party hereto are willing to amend the
Agreement as herein set forth
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows effective as of the
date hereof unless otherwise indicated:
ARTICLE I.
Definitions
Section 1.1. Definitions. Capitalized terms used in this Amendment, to
the extent not otherwise defined herein, shall have the same meanings as in the
Agreement, as amended hereby.
ARTICLE II.
Amendments
Section 2.1. Amendment to Section 10.4 - RESTRICTIONS ON DIVIDENDS AND
OTHER DISTRIBUTIONS. Section 10.4 of the Agreement is amended by: (a) deleting
the word "and" at the end of clause (ii); (b) replacing the period at the end of
clause (iii) with a semicolon and the word "and"; and (c) adding a new clause
(iv) thereto which shall read in its entirety as set forth in clause (iv) below:
(iv) during the period from October 4, 2002 through April 4, 2002,
Parent may repurchase shares of its stock on the open market or through
privately negotiated transactions (in addition to those purchased under
clause (iii) of this Section 10.4); provided that (A) no Default exists
or would result therefrom, (B) the aggregate amount paid by Parent for
such repurchases completed during such period does not exceed Seven
Million Five Hundred Thousand Dollars ($7,500,000), (C) as of the date
of any such repurchase, the ratio of pro forma Indebtedness outstanding
as of the date of any such
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 1
repurchase (after giving effect to any borrowings made in connection
therewith to fund the purchase thereof) to the Adjusted EBITDA for the
most recently completed four (4) Fiscal Quarter period as of the date
of such repurchase, does not exceed 1.50 to 1.00, and (D) [IF THE
AMOUNT OF ANY SUCH REPURCHASE IS GREATER THAN $100,000 THEN AS OF THE
DATE OF ANY SUCH REPURCHASE,] [AS SOON AS AVAILABLE, AND IN ANY EVENT
WITHIN FIFTEEN (15) DAYS AFTER THE END OF EACH MONTH ENDING DURING SUCH
PERIOD,] Parent delivers to Agent a certificate completed and executed
by the chief executive or chief financial officer of Parent setting
forth in reasonable detail the calculations required to establish
compliance with clauses (B) and (C) of this clause (iv) and stating
that no Default exists [OR WOULD RESULT FROM ANY SUCH REPURCHASE] [OR
EXISTED DURING SUCH MONTH].
Section 2.2. Amendment to Section 11.1 - CONSOLIDATED NET WORTH. The
first sentence of Section 11.1 of the Agreement is amended by: (a) replacing the
period at the end of clause (d) thereof with the word "minus"; and (b) adding a
new clause (e) thereto which shall read in its entirety as set forth in clause
(e) below:
(e) the lesser of $7,500,000 or the aggregate amount paid by Parent for
its repurchase of shares of its stock on the open market or through
privately negotiated transactions pursuant to clause (iv) of Section
10.4.
Section 2.3. Amendment to Exhibit C - COMPLIANCE CERTIFICATE. Exhibit C
to the Agreement is amended in its entirety to read as set forth on Exhibit A
attached hereto.
ARTICLE III.
Conditions Precedent
Section 3.1. Conditions. The effectiveness of Article 2 of this
Amendment is subject to the satisfaction of the following conditions precedent:
(a) The Agent shall have received all of the following, each
dated (unless otherwise indicated) the date of this Amendment, in form and
substance satisfactory to the Agent:
(i) Amendment Fee. Payment of the amendment fee
required by Section 4.6 of this Amendment.
(ii) Additional Information. Such additional
documentation, approvals, opinions, and information as Agent or its legal
counsel Jenkens & Xxxxxxxxx, a Professional Corporation, may request; and
(b) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and correct in all
material respects as of the date hereof as if made on the date hereof, except
for such representations and warranties limited by their terms to a specific
date;
(c) No Default or Event of Default shall have occurred and be
continuing; and
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 2
(d) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documentation and other legal matters
incident thereto shall be satisfactory to the Agent and its legal counsel
Jenkens & Xxxxxxxxx, a Professional Corporation.
ARTICLE IV.
Miscellaneous
Section 4.1. Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Agreement and except as expressly modified and superseded by this
Amendment, the terms and provisions of the Agreement and the other Loan
Documents are ratified and confirmed and shall continue in full force and
effect.
Section 4.2. Representations and Warranties. Borrower hereby represents
and warrants to the Agent and the Banks as follows: (a) after giving effect to
this Amendment, no Default exists; (b) after giving effect to this Amendment,
the representations and warranties set forth in the Loan Documents are true and
correct in all material respects on and as of the date hereof with the same
effect as though made on and as of such date except with respect to any
representations and warranties limited by their terms to a specific date; and
(c) the execution, delivery, and performance of this Amendment has been duly
authorized by all necessary action on the part of Parent, Borrower, and each
Obligated Party and does not and will not (i) violate any provision of law
applicable to the Borrower, the Parent, or any Obligated Party, the certificate
of incorporation, bylaws, partnership agreement, membership agreement, or other
applicable governing document of the Borrower, the Parent, or any Obligated
Party or any order, judgment, or decree of any court or agency of government
binding upon the Borrower, the Parent, or any Obligated Party, (ii) conflict
with, result in a breach of or constitute (with due notice of lapse of time or
both) a default under any material contractual obligation of the Borrower, the
Parent, or any Obligated Party, (iii) result in or require the creation or
imposition of any material lien upon any of the assets of the Borrower, the
Parent, or any Obligated Party, or (iv) require any approval or consent of any
Person under any material contractual obligation of the Borrower, the Parent, or
any Obligated Party.
IN ADDITION, TO INDUCE THE AGENT AND THE BANKS TO AGREE TO THE TERMS OF
THIS AMENDMENT, THE BORROWER, THE PARENT, AND EACH OBLIGATED PARTY (BY IT
EXECUTION BELOW) REPRESENTS AND WARRANTS THAT AS OF THE DATE OF ITS EXECUTION OF
THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS TO ITS OBLIGATIONS UNDER THE LOAN DOCUMENTS AND IN ACCORDANCE
THEREWITH IT:
(a) WAIVER. WAIVES ANY AND ALL SUCH CLAIMS, OFFSETS, DEFENSES
OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE
OF ITS EXECUTION OF THIS AMENDMENT AND
(b) RELEASE. RELEASES AND DISCHARGES THE AGENT AND THE BANKS,
AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
SHAREHOLDERS, AFFILIATES AND ATTORNEYS (COLLECTIVELY THE "RELEASED
PARTIES") FROM ANY AND ALL OBLIGATIONS, INDEBTEDNESS, LIABILITIES,
CLAIMS, RIGHTS, CAUSES OF ACTION OR DEMANDS WHATSOEVER, WHETHER KNOWN
OR UNKNOWN, SUSPECTED OR UNSUSPECTED, IN LAW OR EQUITY, WHICH THE
BORROWER OR ANY OBLIGATED PARTY EVER HAD, NOW HAS, CLAIMS TO HAVE OR
MAY HAVE AGAINST ANY RELEASED PARTY ARISING PRIOR TO THE DATE HEREOF
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 3
AND FROM OR IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY.
Section 4.3. Survival of Representations and Warranties. All
representations and warranties made in this Amendment shall survive the
execution and delivery of this Amendment, and no investigation by the Agent or
any Bank or any closing shall affect the representations and warranties or the
right of the Agent or any Bank to rely upon them.
Section 4.4. Reference to Agreement. Each of the Loan Documents,
including the Agreement, are hereby amended so that any reference in such Loan
Documents to the Agreement shall mean a reference to the Agreement as amended
hereby.
Section 4.5. Expenses of Agent. As provided in the Agreement, the
Borrower agrees to pay on demand all costs and expenses incurred by the Agent in
connection with the preparation, negotiation, and execution of this Amendment,
including without limitation, the costs and fees of the Agent's legal counsel.
Section 4.6. Amendment Fee. The Borrower agrees to pay to each Bank, on
the date hereof, an amendment fee in the amount of $15,000 each, in
consideration for the Banks' agreement to enter into this Amendment.
Section 4.7. Severability. Any provision of this Amendment held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
Section 4.8. Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas and the applicable
laws of the United States of America.
Section 4.9. Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Agent, each Bank and the Borrower and their
respective successors and assigns, except the Borrower may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Banks.
Section 4.10. Counterparts. This Amendment may be executed in one or
more counterparts and on telecopy counterparts, each of which when so executed
shall be deemed to be an original, but all of which when taken together shall
constitute one and the same agreement.
Section 4.11. Effect of Waiver. No consent or waiver, express or
implied, by the Agent or any Bank to or for any breach of or deviation from any
covenant, condition or duty by the Borrower or any Obligated Party shall be
deemed a consent or waiver to or of any other breach of the same or any other
covenant, condition or duty.
Section 4.12. Headings. The headings, captions, and arrangements used
in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 4
Section 4.13. ENTIRE AGREEMENT. THIS AMENDMENT EMBODIES THE FINAL,
ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR
COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR
ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS
OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
PARENT AND BORROWER:
HORIZON HEALTH CORPORATION
HORIZON MENTAL HEALTH MANAGEMENT, INC.
By:
----------------------------------------
Name:
--------------------------------------
Authorized Officer for both Parent and
Borrower
AGENT AND BANKS:
JPMORGAN CHASE BANK (formerly known as The
Chase Manhattan Bank, who was successor-in-
interest by merger to the Chase Bank of
Texas, National Association who was formerly
known as TEXAS COMMERCE BANK NATIONAL
ASSOCIATION), individually as a Bank, as
Agent, and as Issuing Bank
By:
----------------------------------------
D. Xxxxx Xxxxxx, Senior Vice President
BANK OF AMERICA, NATIONAL ASSOCIATION
By:
----------------------------------------
Xxxxxx X. Xxxxxx, Senior Vice President
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 5
OBLIGATED PARTY CONSENT
Each Obligated Party (i) consents and agrees to this Second Amendment
to Second Amended and Restated Credit Agreement; (ii) agrees that the Guaranty,
Subsidiary Security Agreement, and the Subsidiary Pledge Agreement to which it
is a party shall remain in full force and effect and shall continue to be the
legal, valid, and binding obligation of such Obligated Party enforceable against
it in accordance with its terms; (iii) agrees that the "Obligations" as defined
in the Agreement as amended hereby (including, without limitation, all
obligations, indebtedness, and liabilities arising in connection with the
Letters of Credit) are "Obligations" as defined in the Guaranty; and (iv) agrees
that any reference to the "Borrower" in the Guaranty, Subsidiary Security
Agreement or Subsidiary Pledge Agreement shall mean Horizon Mental Health
Management, Inc. as the "Borrower" hereunder successor by assumption to the
obligations of the Parent.
OBLIGATED PARTIES:
MENTAL HEALTH OUTCOMES, INC.
SPECIALTY REHAB MANAGEMENT, INC.
HHMC PARTNERS, INC.
HORIZON BEHAVIORAL SERVICES, INC.
FLORIDA PSYCHIATRIC ASSOCIATES, INC.
HORIZON BEHAVIORAL SERVICES OF FLORIDA, INC.
FPMBH OF TEXAS, INC.
HMHM OF TENNESSEE, INC.
OCCUPATIONAL HEALTH CONSULTANTS OF AMERICA, INC.
EMPLOYEE ASSISTANCE SERVICES, INC.
HORIZON BEHAVIORAL SERVICES IPA, INC.
HORIZON BEHAVIORAL SERVICES OF NEW JERSEY, INC.
HORIZON BEHAVIORAL SERVICES OF NEW YORK, INC.
PROCARE ONE NURSES, LLC
By:
---------------------------------------------
Name:
-------------------------------------------
Authorized Officer for each Obligated Party
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT - Page 6
EXHIBIT A
TO
HORIZON HEALTH CORPORATION
SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Compliance Certificate
EXHIBIT A - Cover Page
COMPLIANCE CERTIFICATE
for the
Fiscal Quarter ending ________ __, ____
To: JPMorgan Chase Bank
X.X. Xxx 000000
Xxxxxx, Xxxxx 00000-0000
Fax No.: (000) 000-0000
Telephone No.: (000) 000-0000
Attention: D. Xxxxx Xxxxxx
Xxxxx Xxxxx
Ladies and Gentlemen:
This Compliance Certificate (the "Certificate") is being delivered
pursuant to Section 9.1(c) of that certain Second Amended and Restated Credit
Agreement (as amended, the "Agreement") dated as of May 23, 2002, among the
Horizon Health Corporation ("Parent"), Horizon Mental Health Management, Inc.
("Borrower"), the banks and lending institutions named therein (the "Banks") and
JPMorgan Chase Bank, as agent for the Banks ("Agent"). All capitalized terms,
unless otherwise defined herein, shall have the same meanings as in the
Agreement. All the calculations set forth below shall be made pursuant to the
terms of the Agreement.
The undersigned, as an authorized financial officer of Parent, and not
individually, does hereby certify to the Agents and the Banks that:
1. DEFAULT.
No Default has occurred and is continuing or if a Default has occurred
and is continuing, I have described on the attached Exhibit A the
nature thereof and the steps taken or proposed to remedy such Default.
2. SECTION 9.1 - FINANCIAL STATEMENTS AND RECORDS
(a) Annual audited financial statements of Parent and the Yes No N/A
Subsidiaries on or before ninety (90) days after the end
of each Fiscal Year.
(b) Quarterly unaudited financial statements of Parent and the Yes No N/A
Subsidiaries within forty-five (45) days after the end of
each Fiscal Quarter
(c) Financial Projections of Parent and Subsidiaries within Yes No N/A
forty-five (45) days after the beginning of each Fiscal
Year.
3. SECTION 9.10(d) - INSIGNIFICANT SUBSIDIARIES
EBITDA for the Insignificant Subsidiaries for the most
recently completed four Fiscal Quarter period not to exceed: $ 250,000
Actual EBITDA for the Insignificant Subsidiaries for the most
recently completed four Fiscal Quarter period: $ Yes No
---------
Compliance Certificate - Page 1
4. SECTION 9.10(e) - RESTRICTED SUBSIDIARIES
EBITDA for the Restricted Subsidiaries for the most recently
completed four Fiscal Quarter period not to exceed 10% of
line 12(f): $
---------
Actual EBITDA for the Restricted Subsidiaries for the most
recently completed four Fiscal Quarter period: $ Yes No
---------
5. SECTION 10.1 - DEBT
(a) Purchase money not to exceed: $ 500,000
Actual Outstanding: $ Yes No
---------
(b) Guarantees of surety, appeal bonds, etc. not to exceed: $1,000,000
Actual Outstanding: $ Yes No
---------
(c) Aggregate Debt of newly acquired or merged Subsidiaries
not to exceed: $1,000,000
Actual Outstanding: $ Yes No
---------
(d) Other Debt not to exceed: $ 250,000
Actual Outstanding: $ Yes No
---------
6. SECTION 10.4 - RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS
The total aggregate amount of redemptions or repurchases
exercised by employees and directors in connection with the
exercise by such Person of stock options granted to such
Person under Parent's benefit programs in any Fiscal Year
shall not exceed: $1,000,000 Yes No
Actual Expended: $
---------
7. SECTION 10.5 - INVESTMENTS
(a) Aggregate amount of loans to physicians employed by a
Subsidiary not to exceed (calculated net of bad debt
reserve): $ 500,000
Actual Outstanding: $ Yes No
---------
(b) Aggregate amount of investments in or contributions to wholly
owned Subsidiaries not to exceed: $ 250,000
Actual Outstanding: $ Yes No
---------
(c) Gross aggregate amount of loans, advances, and investments in
or contributions to Valley Rehabilitation Hospital, LLP
not to exceed: $1,500,000
Actual Aggregate Amount: $ Yes No
---------
(d) Aggregate amount of investments in HBS CA not to exceed the
lesser of $1,500,000 or the minimum amount for compliance
with minimum net worth requirements under Xxxx Xxxxx Act: $
---------
Compliance Certificate - Page 2
Actual Aggregate Amount: $ Yes No
---------
(e) Aggregate amount of investments in Insights in addition to the $1,000,000
Purchase Price paid for Insights not to exceed:
Actual Aggregate Amount: $ Yes No
---------
8. SECTION 10.8 - ASSET DISPOSITIONS
(a) Aggregate book value of assets disposed during any
12-month period not to exceed: $ 500,000
(b) Total book value of asset dispositions for 12-month period
most recently ending: $ Yes No
---------
9. SECTION 10.11 - PREPAYMENT OF DEBT
(a) Aggregate amount of Debt, other than the Obligations,
prepaid or optionally redeemed during period from the
Closing Date to the Termination Date not to exceed: $ 300,000
(b) Total amount of Debt, other than the Obligations, prepaid
or optionally redeemed: $ Yes No
---------
10. SECTION 11.1 - CONSOLIDATED NET WORTH
(a) Base Consolidated Net Worth $
---------
(b) The lesser of (i) $500,000 or (ii) aggregate amount of $
non-cash losses attributable to impairment of goodwill ---------
and incurred and reported on Parent's 8/31/02 financial
statement for such fiscal year which have resulted from
Parent's compliance with statement number 142 of FASB
(c) Cumulative positive Net Income since 2/28/02 Fiscal $
Quarter end ---------
(d) 50% of 9(c) $
---------
(e) Aggregate amount of net cash proceeds or other Capital $
Contribution to Parent since 2/28/02 ---------
(f) the lesser of $7,500,000 or the aggregate amount paid by $
Parent for its repurchase of shares of its stock on the ---------
open market or through privately negotiated transactions
pursuant to clause (iv) of Section 10.4
(g) Required Consolidated Net Worth: $
9(a) minus 9(b) plus 9(d) plus 9(e) minus 9(f) ----------
(h) Actual Consolidated Net Worth $ Yes No
---------
11. SECTION 11.2 - INDEBTEDNESS TO CAPITALIZATION
(a) Debt for borrowed money $
---------
(b) Debt evidenced by bonds, notes, etc. $
---------
(c) Capital Lease Obligations $
---------
Compliance Certificate - Page 3
(f) Reimbursement obligations for letters of credit $
---------
(e) North Central Development Company debt $
---------
(f) Sum of 10(a) through 10(e) $
---------
(g) Actual Consolidated Net Worth $
(from Section 11.1) ---------
(h) 10(f) plus 10(g) $
---------
(j) 10(f) : 10(h) = :1.00
----
(k) Maximum Indebtedness to Capitalization 0.50:1.00 Yes No
12. SECTION 11.3 - FIXED CHARGE COVERAGE
(a) Parent and the Subsidiaries' Consolidated Net Income for
last four Fiscal Quarters (from Schedule 1) $
---------
(b) Plus provisions for tax $
---------
(c) less benefit from tax $
---------
(d) Plus interest expense $
---------
(e) Plus amortization and depreciation $
---------
(f) Parent and the Subsidiaries' EBITDA: $
(11(a) plus 11(b) minus 11(c) plus 11(d) plus 11(e)) ---------
(g) provisions for taxes $
---------
(h) plus benefit from taxes $
---------
(i) minus cash dividends and other distributions made on $
account of the Parent's capital stock ---------
(j) aggregate amount of non-cash losses which have not already $
been excluded in determining Consolidated Net Income and ---------
which are attributable to impairment of Parent's goodwill
incurred and reported by Parent on its financial
statements which have resulted from Parent's compliance
with statement number 142 of FASB
(k) Cash Flow $
(11(f) plus 11(h) minus 11(g) minus 11(i) plus 11(j)) ---------
Compliance Certificate - Page 4
(l) Fixed Charges
(i) Cash interest expense for last four Fiscal Quarters $
---------
(ii) as of each date of determination (A) prior to the
Revolving Termination Date, one-fifth of the
outstanding balance of Loans and (B) on and after the
Revolving Termination Date, current maturities of
long term debt reflected on Parent's consolidated
balance sheet, excluding 2/3 of the final principal
installment due on the Termination Date $
---------
(iii) Aggregate amount of Capital Expenditures for last
four Fiscal Quarters $
---------
(iv) Payments made pursuant to Capital Lease Obligations
for last four Fiscal Quarters $
---------
(v) Sum of 11(l)(i) through (iv)
$
---------
(m) Actual Fixed Charge Coverage (11(k) : 11(l)(v))= :1.00
----
(n) Minimum Fixed Charge Coverage 1.20:1.00 Yes No
13. SECTION 11.4 - INDEBTEDNESS TO ADJUSTED EBITDA
(a) Indebtedness (from 10(f)) $
---------
(b) Actual EBITDA (from 11(f)) $
---------
(c) Goodwill Impairment (from 11(i)) $
---------
(d) Prior Period/Prior Target EBITDA; provided that, (i) the $
EBITDA for a Prior Target will not be included unless it ---------
can be established in a manner satisfactory to Agent based
on financial statements of the Prior Target prepared in
accordance with GAAP without adjustment for expense or
other charges that will be eliminated after the
acquisition; and (ii) if such Prior Target has become a
Restricted Subsidiary, then in calculating its pro forma
EBITDA, any income which could not be distributed to its
parent as a result of restrictions arising under governing
documents, agreement, applicable law or otherwise shall
not be included
(e) Adjusted EBITDA (12(b) plus 12(c) plus 12(d)) $
---------
(f) 12(a) : 12(e) :1.00
----
(g) Maximum Indebtedness to Adjusted EBITDA allowed by Credit
Agreement 2.25:1.00 Yes No
14. SECTION 11.5 - CURRENT RATIO
(a) Consolidated current assets from balance sheet of Parent $
---------
(b) Consolidated current liabilities from balance sheet of
Parent $
---------
(c) Outstanding Principal balance of the Loans to the extent
included in 13(b) $
---------
Compliance Certificate - Page 5
(d) Total Current Liabilities (13(b) minus 13(c)) $
---------
(e) Actual Ratio of Current Assets to Current Liabilities
(13(a) : 13(d)) :1.00
----
(f) Minimum Ratio of Current Assets to Current Liabilities 1.00:1.00 Yes No
15. SECTION 11.6 - MANAGED CARE CONTRACTS
(a) Gross revenue during the immediately preceding 12 month $
period from contracts providing exclusively for ---------
managed care
(b) Gross revenue during the immediately preceding 12 month $
period from the managed care portions of contracts ---------
providing for EAS and managed care
(c) Total Managed Care Gross Revenue (14(a) plus (14(b)) $
---------
(d) Total Gross Revenue during such 12 month period $
---------
(e) 35% of 14(d) $
---------
(f) Maximum Permitted Gross Revenue from Managed
Care Contracts 14(c) greater
than 14(e) Yes No
16. ATTACHED SCHEDULES
Attached hereto as schedules are the calculations supporting the
computation set forth above in this Certificate. All information
contained herein and on the attached schedules is true and correct.
17. FINANCIAL STATEMENTS
The unaudited financial statements attached hereto were prepared in
accordance with GAAP (excluding footnotes) and fairly present (subject
to year end audit adjustments) the financial conditions and the results
of the operations of the Persons reflected thereon, at the date and for
the periods indicated therein.
18. CONFLICT
In the event of any conflict between the definitions or covenants
contained in the Credit Agreement and as they may be interpreted or
abbreviated in the Compliance Certificate, the Credit Agreement shall
control.
IN WITNESS WHEREOF, the undersigned has executed this Certificate
effective this _______ day of ____________,_______.
HORIZON HEALTH CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
Compliance Certificate - Page 6
Schedule 1
to
Compliance Certificate
Parent Consolidated Net Income
for period ______________ to _________________
1. GAAP for Parent (the "Subject Person") excluding the following
consolidated net income $
------------
(a) extraordinary gains or losses or nonrecurring revenue
or expenses ------------
(b) gains on sale of securities
------------
(c) losses on sale of securities
------------
(d) any gains or losses in respect of the write-up of any asset at
greater than original cost or write-down at less than original
cost; ------------
(e) any gains or losses realized upon the sale or other
disposition of property, plant, equipment or intangible assets
which is not sold or otherwise disposed of in the ordinary
course of business; ------------
(f) any gains or losses from the disposal of a discontinued business;
------------
(g) any net gains or losses arising from the extinguishment of any
debt; ------------
(h) any restoration to income of any contingency reserve for long
term asset or long term liabilities, except to the extent that
provision for such reserve was made out of income accrued
during such period; ------------
(i) the cumulative effect of any change in an accounting principle
on income of prior periods; ------------
(j) any deferred credit representing the excess of equity in any
acquired company or assets at the date of acquisition over the
cost of the investment in such company or asset; ------------
(k) the income from any sale of assets in which the book value of
such assets prior to their sale had been the book value
inherited; ------------
(l) the income (or loss) of any Person (other than a subsidiary) in
which the Subject Person or a subsidiary has an ownership
interest; provided, however, that (i) Consolidated Net Income
shall include amounts in respect of the income of such Person
when actually received in cash by the Subject Person or such
subsidiary in the form of dividends or similar distributions
and (ii) Consolidated Net Income shall be reduced by the
aggregate amount of all investments, regardless of the form
thereof, made by the Subject Person or any of its subsidiaries
in such Person for the purpose of funding any deficit or loss
of such Person; ------------
Schedule 1 to Compliance Certificate - Page 1
(m) the income (or loss) of any Restricted Subsidiary; provided,
however, that (i) Consolidated Net Income shall include
amounts in respect of the income of such Restricted Subsidiary
when actually received in cash by the Parent in the form of
dividends or similar distributions and (ii) Consolidated Net
Income shall be reduced by the aggregate amount of all
investments, regardless of the form thereof, made by the
Parent or any of its Subsidiaries in such Restricted
Subsidiaries for the purpose of funding any deficit or loss of
such Restricted Subsidiary; -----------
(n) the income of any subsidiaries to the extent the payment of
such income in the form of a distribution or repayment of any
Debt to the Subject Person or a Subsidiary is not permitted,
whether on account of any restriction in by-laws, articles of
incorporation or similar governing document, any agreement or
any law, statute, judgment, decree or governmental order, rule
or regulation applicable to such Subsidiary; -----------
(o) any reduction in or addition to income tax expense resulting
from an increase or decrease in a deferred income tax asset
due to the anticipation of future income tax benefits; -----------
(p) any reduction in or addition to income tax expense due to the
change in a statutory tax rate resulting in an increase or
decrease in a deferred income tax asset or in a deferred
income tax liability; -----------
(q) any gains or losses attributable to returned surplus assets of
any pension-benefit plan or any pension credit attributable to
the excess of (i) the return on pension-plan assets over (ii)
the pension obligation's service cost and interest cost; ----------
(r) the income or loss of any Person acquired by the Subject
Person or a subsidiary for any period prior to the date of
such acquisition; and ----------
(s) the income from any sale of assets in which the accounting
basis of such assets had been the book value of any Person
acquired by the Subject Person or a subsidiary prior to the
date such Person became a subsidiary or was merged into or
consolidated with the Subject Person or a subsidiary.
TOTAL: $
==========
Schedule 1 to Compliance Certificate - Page 2
