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EXHIBIT 10.118
SECOND AMENDMENT TO CREDIT AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AGREEMENT ("AMENDMENT") is entered into
as of May 20, 1998, by and among RAMSAY HEALTH CARE, INC., a Delaware
corporation ("BORROWER"), certain subsidiaries of Borrower listed on the
signature pages hereto (the "GUARANTORS"), GENERAL ELECTRIC CAPITAL CORPORATION,
a New York corporation ("GE CAPITAL"), and THE ING CAPITAL SENIOR SECURED HIGH
INCOME FUND, L.P., a Delaware limited partnership ("ING;" GE Capital and ING are
hereinafter each individually referred to as a "LENDER", and collectively, as
"LENDERS"), and GENERAL ELECTRIC CAPITAL CORPORATION, as administrative agent
(in such capacity, the "ADMINISTRATIVE AGENT").
RECITALS
A. Borrower, Guarantors, Lenders, Administrative Agent and Syndication
Agent are parties to a certain Credit Agreement dated as of September 30, 1997,
as amended by the First Amendment to Credit Agreement dated as of March 27, 1998
(as so amended, the "CREDIT AGREEMENT;" capitalized terms used herein and not
defined herein have the meanings assigned to them in the Credit Agreement).
B. Borrower has requested that Lenders and Administrative Agent waive
certain Defaults that have occurred for the period ending March 31, 1998 and
consent to the sale of FPM Behavioral Health, Inc. by Ramsay Managed Care, Inc.
and the sale of substantially all of the assets of Greenbrier Hospital, Inc.,
and Lenders and Administrative Agent have agreed to waive such Defaults and to
consent to such sales, subject to the terms and conditions hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and intending to be legally bound, the parties
hereto agree as follows:
A. WAIVER
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Each Lender hereby waives all Defaults that arose under Section 6.11 of
the Credit Agreement as of March 31, 1998.
B. AMENDMENTS
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1. AMENDMENT TO SECTION 1.07. The Credit Agreement is hereby amended by
replacing the reference to "Fiscal Quarter" in Section 1.07(a)(i) with a
reference to "Fiscal Month".
2. AMENDMENT TO SECTION 1.09. The Credit Agreement is hereby further
amended by adding the following as a new subsection (d) to Section 1.09:
(d) In consideration of ING entering into the Second Amendment
to Credit Agreement, Borrower agrees to pay ING an amendment fee of
$37,500 on May 20, 1998, which fee is fully earned and non-refundable.
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(e) In consideration of GE Capital entering into the Second
Amendment to Credit Agreement, Borrower agrees to pay GE Capital the
fees set forth in the Second Amendment Fee Letter, as and when such
fees are due and payable.
3. AMENDMENT TO SECTION 6.01. The Credit Agreement is hereby further
amended by replacing Section 6.01 with the following:
SECTION 6.01. ACQUISITIONS. Borrower will not, and will not
permit any of its Subsidiaries to, make any Acquisition.
4. AMENDMENT TO SECTION 6.04. The Credit Agreement is hereby further
amended by deleting clause (c) thereof and substituting "intentionally omitted"
in lieu thereof.
5. AMENDMENT TO SECTION 6.05. The Credit Agreement is hereby further
amended by adding the following sentence to the end of Section 6.05:
Notwithstanding the foregoing or any other provision of this
Agreement, the Credit Parties shall not pay bonuses to the
persons described on SCHEDULE A to the Second Amendment to
Credit Agreement, until all Obligations and the Bridge Notes
have been paid in full.
6. AMENDMENT TO SECTION 6.06. The Credit Agreement is hereby further
amended by adding the following as a new subsection (e) thereof:
(e) Guaranteed Indebtedness guarantying the Bridge Notes and
the obligations of the Borrower under the Bridge Note Purchase
Agreement.
7. AMENDMENT TO SECTION 6.11. The Credit Agreement is hereby further
amended by adding the following at the end of Section 6.11: "; provided,
however, that for during the period commencing on April 1, 1998 and ending on
September 30, 1998, the foregoing references to ANNEX G shall be deemed to refer
to ANNEX G-2."
8. AMENDMENT TO SECTION 6.07. The Credit Agreement is hereby further
amended by deleting Section 6.07(e) in its entirety and substituting the
following in lieu thereof:
(e) Liens securing the Bridge Notes, and all interest, fees
and obligations arising under the Bridge Note Purchase
Agreement, PROVIDED that such Liens are subordinated to the
Liens securing the Obligations pursuant to an intercreditor
agreement in form and substance reasonably acceptable to the
Lenders; and (f) extensions and renewals of Liens referred to
in paragraphs (b), (d) and (e) above, provided that any such
extension or renewal Lien is limited to the property or assets
covered by the Lien extended or renewed and does not secure
Indebtedness in an amount greater than the amount of the
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outstanding Indebtedness secured thereby immediately prior to
such extension, renewal or replacement.
9. AMENDMENT TO SECTION 6.15. The Credit Agreement is hereby further
amended by replacing all references to "Rolling Four-Quarter Period" in Section
6.15 with references to "Rolling Twelve-Month Period".
10. AMENDMENT TO SECTION 8.01. The Credit Agreement is hereby further
amended by (a) adding the following to the end of Section 8.01(b): "or ANNEX
G-2, as the case may be", (b) adding the following to the end of Section
8.01(l): "and Liens in favor of GE Capital securing its Bridge Note and all
other obligations owed to GE Capital arising under the Bridge Note Purchase
Agreement." and (c) adding the following to the end of Section 8.01 as a new
Section 8.01(o):
(o) Borrower or any of its Subsidiaries make cash
payments in an aggregate amount exceeding $500,000 for which
the offsetting entry on Borrower's Financial Statements is a
debit to a reserve reflected in the 1997 Audited Financial
Statements or in a reserve reflected in unaudited Financial
Statements of the Borrower for the Fiscal Quarter ending March
31, 1998, rather than an expense or reduction of revenues on
Borrower's income statement.
11. AMENDMENTS TO ANNEX A. The Credit Agreement is hereby further
amended by (a) deleting the definitions of "Interest Payment Date", "Material
Subsidiary" and "Revolving Credit Commitment" in Annex A of the Credit Agreement
and by substituting in lieu thereof the following definitions:
"INTEREST PAYMENT DATE" shall mean (a) as to any
Index Rate Loan, the first Business Day of each Fiscal Month
to occur while such Loan is outstanding, (b) as to any LIBOR
Rate Loan, the first Business Day of each Fiscal Month to
occur while such Loan is outstanding and the last day of the
applicable LIBOR Period; PROVIDED that each of (x) the
Commitment Termination Date and (y) the Termination Date shall
be deemed to be an "INTEREST PAYMENT DATE" with respect to any
interest which is then accrued under this Agreement.
"MATERIAL SUBSIDIARY" shall mean, at any time, any
Subsidiary of Borrower (i) whose consolidated EBITDA or net
revenues, determined for such Subsidiary and all of its
Subsidiaries, or (ii) that owns, leases or operates a hospital
or other facility whose EBITDA or net revenues, in each case
determined for the most recent Rolling Twelve-Month Period for
which Borrower is required to deliver a Compliance Certificate
to the Administrative Agent pursuant to ANNEX F, equals five
percent (5%) or more
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of Borrower's consolidated EBITDA or net revenues for such
Rolling Twelve-Month Period.
"REVOLVING CREDIT COMMITMENT" shall mean, as to any
Revolving Lender, the commitment of such Revolving Lender to
make its Pro Rata Share of Revolving Credit Advances and/or
incur Letter of Credit Obligations, as set forth opposite such
Revolving Lender's name on the signature pages hereto or in
the most recent Assignment Agreement executed by such
Revolving Lender, and "REVOLVING CREDIT COMMITMENTS" shall
mean, as to all Revolving Lenders, the aggregate commitment of
all Revolving Lenders to make Revolving Credit Advances and/or
incur Letter of Credit Obligations in the amount of up to
$13,000,000, as such amount may be adjusted, from time to time
in accordance with this Agreement.
and (b) adding the following to Annex A as new definitions, in proper
alphabetical order:
"FPM BEHAVIORAL HEALTH DIVESTITURE" shall mean the
sale by Ramsay Managed Care, Inc. of one hundred percent of
the issued and outstanding shares of FPM Behavioral Health,
Inc. to Horizon Health Corporation pursuant to the FPM
Behavioral Sale Agreement.
"FPM BEHAVIORAL HEALTH SALE AGREEMENT" shall mean the
Stock Purchase Agreement, dated as of May 1, 1998, by and
among Ramsay Managed Care, Inc., Ramsay Health Care, Inc. and
Horizon Health Corporation.
"GREENBRIER HOSPITAL DIVESTITURE" shall mean the sale
by Greenbrier Hospital, Inc. of substantially all of its
assets to Provider Options Holdings, L.L.C., pursuant to the
Greenbrier Hospital Sale Agreement.
"GREENBRIER HOSPITAL SALE AGREEMENT" shall mean the
Asset Purchase Agreement, dated as of May 15, 1998, between
Provider Options Holdings, L.L.C., Greenbrier Hospital, Inc.
and the Borrower.
"LOAN DOCUMENTS" shall mean this Agreement, the GE
Capital Fee Letter, the Second Amendment Fee Letter, the
Notes, the Collateral Documents and all agreements,
instruments, documents and certificates in favor of the
Administrative Agent or Lenders executed in connection with
the transactions contemplated by this Agreement, including,
without limitation, those that are identified in the Schedule
of Closing Documents attached as ANNEX D, and all other
pledges, powers of attorney, consents, assignments, and other
documents and agreements, whether heretofore, now or hereafter
executed by or on behalf of Borrower or any other Credit Party
and delivered
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to the Administrative Agent in connection with this Agreement
or the financing transactions contemplated hereby, other than
the Related Transaction Documents.
"SECOND AMENDMENT TO CREDIT AGREEMENT" shall mean the
Second Amendment to Credit Agreement, dated as of May 20,
1998, by and among Borrower, the Lenders and the
Administrative Agent.
"SECOND AMENDMENT FEE LETTER" shall mean the letter
agreement, dated as of May 20, 1998, between Borrower and GE
Capital with respect to certain Fees to be paid from time to
time by Borrower to GE Capital, individually or in its
capacity as Administrative Agent.
12. AMENDMENTS TO ANNEX C. The Credit Agreement is hereby further
amended by (a) replacing all references in Annex C to the "Rolling Four-Quarter
Period" with references to "Rolling Twelve-Month Period", and (b) replacing all
references in Annex C to "Fiscal Quarter" with references to "Fiscal Month".
13. AMENDMENT TO ANNEX F. The Credit Agreement is hereby further
amended by (a) deleting Section 3(b) of Annex F and substituting the following
in lieu thereof:
(b) a Compliance Certificate of a Responsible
Financial Officer of Borrower for such Fiscal Month,
substantially in the form of Exhibit B to this ANNEX F.
(b) replacing all references in Exhibit B to Annex F to the "Rolling
Four-Quarter Period" with references to "Rolling Twelve-Month Period", (c)
replacing all references in Exhibit B to Annex F to "Fiscal Quarter" with
references to "Fiscal Month" and (d) replacing the reference to "[FOR QUARTERLY
CERTIFICATE:]" in Section 1 of Exhibit B to Annex F with a reference to "[FOR
MONTHLY CERTIFICATE:]".
14. AMENDMENTS TO ANNEX G. The Credit Agreement is hereby further
amended by (a) replacing all references in Annex G to the "Rolling Four-Quarter
Period" with references to "Rolling Twelve-Month Period", (b) replacing the
reference to "Fiscal Quarter" in Section 1(e) with a reference to "Fiscal
Month", (c) deleting Section 1(f) in its entirety and substituting the following
in lieu thereof:
(f) Borrower shall not make Capital Expenditures in
excess of $2,500,000 in the aggregate during its Fiscal Year
ending June 30, 1999 or any Fiscal Year thereafter.
(d) deleting Section 2(a) in its entirety and substituting the following in lieu
thereof:
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(a) TRANSITIONAL RULES. Notwithstanding anything to
the contrary set forth herein, in calculating Borrower's
compliance with the financial covenants set forth in
paragraphs 1(c) and (d) above for the Rolling Twelve- Month
period ending April 30, 1998, May 31, 1998 and June 30, 1998,
the "Rolling Twelve-Month Period" ending April 30, 1998 shall
mean the ten Fiscal Months then ended; the "Rolling
Twelve-Month Period" ending May 31, 1998 shall mean the eleven
Fiscal Months then ended; and the "Rolling Twelve-Month
Period" ending June 30, 1998 shall mean the twelve Fiscal
Months then ended.
and (e) deleting the definitions of "Fixed Charges" and "Rolling Four-Quarter
Period" in Section 3 of Annex G and adding the following definitions of "Fixed
Charges" and "Rolling Twelve-Month Period" in proper alphabetical order:
"FIXED CHARGES" shall mean, with respect to any
fiscal period of Borrower, the sum of (i) Interest Expense for
such period, PLUS (ii) regularly scheduled payments of
principal paid on Funded Debt during such period.
"ROLLING TWELVE-MONTH PERIOD" shall mean, as of the
end of any Fiscal Month of Borrower, the immediately preceding
twelve Fiscal Months (except as set forth in paragraph 2(a)
above), including the Fiscal Month then ending.
15. NEW ANNEX G-2. The Credit Agreement is hereby further amended by
adding ANNEX G-2 attached hereto as a new Annex G-2 to the Credit Agreement.
C. CONSENTS
The Lenders consent to the FPM Behavioral Health Divestiture and the
Greenbrier Hospital Divestiture and waive any Defaults that would arise
therefrom under Section 6.08 of the Credit Agreement, PROVIDED that (i) the FPM
Behavioral Health Divestiture is consummated no later than June 15, 1998 in
accordance with the terms of the FPM Behavioral Health Sale Agreement (without
giving effect to any amendment, waiver or modification), (ii) the Greenbrier
Hospital Divestiture is consummated no later than June 15, 1998 in accordance
with the terms of the Greenbrier Hospital Sale Agreement (without giving effect
to any amendment, waiver or modification), (iii) Greenbrier Hospital, Inc.,
Ramsay Managed Care, Inc. or Borrower receives cash proceeds of at least
$21,600,000 in respect of the FPM Behavioral Health Divestiture and the
Greenbrier Hospital Divestiture, of which (A) $5,000,000 shall be immediately
remitted to the Administrative Agent, who shall apply such proceeds to the
repayment of Revolving Credit Loans and shall establish a Reserve against the
Borrowing Base for a $5,000,000 tax liability arising out of the FPM Behavioral
Health Divestiture, and (B) an amount equal to the greater of (1) the Net
Proceeds from such sales and (2) $13,800,000 shall be immediately remitted to
the Administrative Agent, who shall apply such proceeds in accordance with
Section 1.04(f)(i) and (g) of the Credit Agreement, (iv) Ramsay
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Managed Care, Inc. shall execute and deliver to the Holders, with the written
consent of Horizon Health Corporation and the Escrow Agent (as defined in the
FPM Behavioral Health Sale Agreement), a first-priority assignment (in form and
substance satisfactory to the Holders) of all of its rights in and to the
Indemnity Escrow Deposit (as defined in the FPM Behavioral Health Sale
Agreement) and a first-priority collateral assignment (in form and substance
satisfactory to the Holders) of all of its rights to purchase price adjustments
and post-closing payments payable to Ramsay Managed Care, Inc. or the Borrower
under the FPM Behavioral Health Sale Agreement, and (v) Greenbrier Hospital,
Inc. shall execute and deliver to the Holders, with the written consent of
Provider Options Holdings, L.L.C. and the Escrow Agent (as defined in the
Greenbrier Hospital Sale Agreement), a first-priority assignment (in form and
substance satisfactory to the Holders) of all of the Borrower's rights in and to
the Escrow Deposit (as defined in the Greenbrier Hospital Sale Agreement) and a
first-priority collateral assignment (in form and substance satisfactory to the
Holders) of all of the Borrower's rights to purchase price adjustments and
post-closing payments payable to Greenbrier Hospital, Inc. or the Borrower under
the Greenbrier Hospital Sale Agreement.
D. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Amendment and without
affecting in any manner the rights of the Lenders hereunder, it is understood
and agreed that this Amendment shall not become effective, and the Credit
Agreement shall remain in full force and effect in its unamended form, Borrower
shall have no rights under this Amendment and the Lenders shall not be obligated
to take, fulfill or perform any action hereunder, until the Administrative Agent
shall have received the following, each dated as of the date of this Amendment,
in form and substance reasonably satisfactory to the Administrative Agent and
its counsel:
a. This Amendment, duly executed by all parties hereto;
b. Opinion of Xxxxxx & Xxxxxx, special counsel to the
Credit Parties, in form and substance satisfactory to
the Lenders; and
c. An acknowledgment from each employee listed on
SCHEDULE A acknowledging and accepting the
restriction added to Section 6.05 of the Credit
Agreement in this Amendment.
E. REPRESENTATIONS
Each Credit Party hereby represents and warrants to the Lenders and the
Administrative Agent that:
1. The execution, delivery and performance by such Credit Party of this
Amendment (a) are within such Credit Party's corporate power; (b) have been duly
authorized by all necessary corporate and shareholder action; (c) are not in
contravention of any provision of such Credit Party's certificate of
incorporation or bylaws or other organizational documents; (d) do not violate
any law
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or regulation, or any order or decree of any Governmental Authority; (e) do not
conflict with or result in the breach or termination of, constitute a default
under or accelerate any performance required by, any indenture, mortgage, deed
of trust, lease, agreement or other instrument to which such Credit Party or any
of its Subsidiaries is a party or by which such Credit Party or any such
Subsidiary or any of their respective property is bound; (f) do not result in
the creation or imposition of any Lien upon any of the property of such Credit
Party or any of its Subsidiaries; and (g) do not require the consent or approval
of any Governmental Authority or any other person;
2. This Amendment has been duly executed and delivered for the benefit
of or on behalf of each Credit Party and constitutes a legal, valid and binding
obligation of each Credit Party, enforceable against such Credit Party in
accordance with its terms except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights and remedies in general; and
3. After giving effect to this Amendment, no Default or Event of
Default has occurred and is continuing as of the date hereof.
F. OTHER AGREEMENTS
1. Effective as of the date of this Amendment, the Revolving Credit
Commitment is reduced from $16,000,000 to $13,000,000, and the maximum principal
amount evidenced by the Revolving Credit Note held by GE Capital is
correspondingly reduced from $16,000,000 to $13,000,000.
2. The Administrative Agent hereby imposes a Reserve of $2,000,000
against the Borrowing Base; PROVIDED, HOWEVER, that if no Default or Event of
Default has occurred and is continuing on May 27, 1998 (including without
limitation any Default arising under Section 8.01(e) of the Credit Agreement as
a result of the failure of the Borrower and its Subsidiaries to comply with
Section 6.14(a) of the Bridge Note Purchase Agreement, as amended) and the
Lenders (together with GE Capital as the holder of the Series A Bridge Notes)
have executed and delivered an intercreditor agreement in form and substance
reasonably acceptable to the Lenders, subordinating the Liens securing the
Series A Bridge Notes to the Liens securing the Senior Obligations, then such
Reserve shall be reduced to $1,500,000; PROVIDED, FURTHER, that if no Default or
Event of Default has occurred and is continuing on June 3, 1998 (including
without limitation any Default arising under Section 8.01(e) of the Credit
Agreement as a result of the failure of the Borrower and its Subsidiaries to
comply with Section 6.14(b) of the Bridge Note Purchase Agreement, as amended)
and the Lenders (together with GE Capital as the holder of the Series A Bridge
Notes) have executed and delivered an intercreditor agreement in form and
substance reasonably acceptable to the Lenders, subordinating the Liens securing
the Series A Bridge Notes to the Liens securing the Senior Obligations, then
such Reserve shall be reduced to $0. The Borrower acknowledges and agrees to the
foregoing Reserve.
3. The Borrower agrees that, without the prior written consent of the
Administrative Agent, it shall not request that any Loans be made as LIBOR Rate
Loans, convert all or any part of
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outstanding Loans from Index Rate Loans into LIBOR Rate Loans or continue all or
any portion of any Loan as a LIBOR Rate Loan upon the expiration of the
applicable LIBOR Period.
4. Each Credit Party hereby restates, ratifies and reaffirms each and
every term and condition set forth in the Credit Agreement, as modified by this
Amendment, effective as of the date hereof.
5. Each Guarantor hereby reaffirms and ratifies its unconditional and
irrevocable, joint and several guarantee to Administrative Agent, Syndication
Agent, Lenders and their respective successors, endorsees, transferees and
assigns, of the prompt payment (whether at stated maturity, by acceleration or
otherwise) and performance when due of the Obligations of Borrower arising under
the Credit Agreement, as amended and affirmed hereby, and reaffirms and ratifies
all of its other obligations under the Subsidiary Guaranty. Each Guarantor
hereby consents to the execution and delivery of this Amendment by the Borrower,
and each Guarantor acknowledges that it has received and reviewed a copy of the
Amendment.
6. Each Credit Party acknowledges and reaffirms that (i) all Liens
granted to the Administrative Agent for the benefit of the Lenders under the
Collateral Documents remain in full force and effect and shall continue to
secure the Obligations and (ii) the validity, perfection or priority of the
Liens will not be impaired by the execution and delivery of this Amendment.
7. Borrower agrees to pay on demand all costs and expenses of GE
Capital in connection with the preparation, execution, delivery and enforcement
of this Amendment, including the reasonable fees and out-of-pocket expenses of
counsel to GE Capital. Without limiting the generality of the foregoing,
Borrower agrees to pay the sum of $98,002.17 presently due and payable to King &
Spalding on or before the close of business on May 20, 1998.
8. This Amendment shall be governed by, and construed in accordance
with, the internal laws (and not the laws of conflicts), of the State of New
York and all applicable laws of the United States of America.
9. This Amendment may be executed in any number of separate
counterparts, each of which shall, collectively and separately, constitute one
agreement.
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IN WITNESS WHEREOF, this Amendment has been duly executed as of the
date first written above.
RAMSAY HEALTH CARE, INC.
By:
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Xxxxxxxx X. Xxxxxx
President
GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent
and as a Lender
By:
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Xxxxxx X. Xxxx
Authorized Signatory
THE ING CAPITAL SENIOR SECURED
HIGH INCOME FUND, L.P., as a Lender
By:
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Name:
Title:
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AMERICARE OF GALAX, INC.
XXXXXXX PSYCHIATRIC HOSPITAL, INC.
BOUNTIFUL PSYCHIATRIC HOSPITAL, INC.
CAROLINA TREATMENT CENTER, INC.
EAST CAROLINA PSYCHIATRIC SERVICES
CORPORATION
GREAT PLAINS HOSPITAL, INC.
GREENBRIER HOSPITAL, INC.
GULF COAST TREATMENT CENTER, INC.
HAVENWYCK HOSPITAL, INC.
H. C. CORPORATION
HOUMA PSYCHIATRIC HOSPITAL, INC.
HSA HILL CREST CORPORATION
HSA OF OKLAHOMA, INC.
INTEGRATED BEHAVORIAL SERVICES, INC.
MESA PSYCHIATRIC HOSPITAL, INC.
MICHIGAN PSYCHIATRIC SERVICES, INC.
PSYCHIATRIC INSTITUTE OF WEST
XXXXXXXX
XXXXXX ACQUISITION CORP.
RAMSAY CORRECTIONAL SERVICES, INC.
RAMSAY LOUISIANA, INC.
RAMSAY MANAGEMENT SERVICES OF
WEST VIRGINIA, INC.
RAMSAY NEW ORLEANS, INC.
RAMSAY YOUTH SERVICES, INC.
RHCI SAN ANTONIO, INC.
THE HAVEN HOSPITAL, INC.
By:
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Xxxxx X. Xxxx
Vice President of each of
the foregoing Guarantors
Attest:
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Xxxxxx X. Xxxx
Secretary of each of the foregoing
Guarantors
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H. C. PARTNERSHIP
By: HSA HILL CREST CORPORATION,
its General Partner
By:
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Xxxxx X. Xxxx
Vice President
RAMSAY MANAGED CARE, INC.
ARIZONA PSYCHIATRIC AFFILIATES, INC.
FLORIDA PSYCHIATRIC ASSOCIATES, INC.
FLORIDA PSYCHIATRIC MANAGEMENT,
INC.
FPM BEHAVIORAL HEALTH, INC.
FPM MANAGEMENT, INC.
FPM OF LOUISIANA, INC.
FPM OF OHIO, INC.
FPM OF UTAH, INC.
FPM OF WEST VIRGINIA, INC.
FPM/HAWAII, INC.
FPM/SOUTHEAST, INC.
FPMBH OF ARIZONA, INC.
FPMBH CLINICAL SERVICES, INC.
FPMBH OF TEXAS, INC.
UTAH PSYCHIATRIC AFFILIATES, INC.
RAMSAY CONTRACT SERVICES, INC.
RAMSAY MANAGEMENT SERVICES OF
TEXAS, INC.
RAMSAY YOUTH SERVICES OF ALABAMA,
INC.
RAMSAY YOUTH SERVICES OF FLORIDA,
INC.
By:
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Xxxxx X. Xxxx
Vice President of each of
the foregoing Guarantors
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SCHEDULE A
EMPLOYEES THAT HAVE ACCRUED AND UNPAID MANAGEMENT BONUSES
Employee Name
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Xxxx Xxxxxx
Xxxx Xxxxxx
Xxxxx Xxxx
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ANNEX G-2
Annex G-2 to
CREDIT AGREEMENT
FINANCIAL COVENANTS FOR APRIL 1, 1998 - SEPTEMBER 30, 1998
1. FINANCIAL COVENANTS. Borrower shall not breach or fail to comply
with any of the following financial covenants:
(a) Borrower shall maintain, as of the end of each Rolling
Twelve-Month Period, commencing with the Rolling Twelve-Month Period ending
April 30, 1998, EBITDA for such Rolling Twelve-Month Period of not less than an
amount equal to the sum of (i) $1,050,000 for each Fiscal Month during such
Rolling Twelve-Month Period ending on or prior to the date of consummation of
the FPM Behavioral Health Divestiture and (ii) $780,000 for each Fiscal Month
during such Rolling Twelve-Month Period ending after the date of consummation of
the FPM Behavioral Health Divestiture.
(b) Borrower shall maintain, as of the end of each Rolling
Twelve-Month Period set forth below, a Leverage Ratio of not more than
4.00:1.00.
(c) Borrower shall maintain, as of the end of each Rolling
Twelve-Month Period, commencing with the Rolling Twelve-Month Period ending
April 30, 1998, a Fixed Charge Coverage Ratio of not less than 1.25:1.00.
(d) Borrower shall maintain, as of the end of each Rolling
Twelve-Month Period set forth below, an Interest Coverage Ratio of not less than
1.75:1.00.
(e) Borrower shall maintain, as of the last day of each Fiscal
Month, commencing April 30, 1998, a Tangible Net Worth of not less than an
amount equal to the sum of (i) (A) ($1,100,000) for each Fiscal Month ending
prior to the consummation of the FPM Behavioral Health Divestiture and (B)
$14,000,000 for each Fiscal Month ending after the consummation of the FPM
Behavioral Health Divestiture, PLUS (ii) fifty percent (50%) of Borrower's
cumulative positive Net Income for each Fiscal Month ended subsequent to April
30, 1998 through and including the Fiscal Month then ended (but without
reduction for negative Net Income).
(f) Borrower shall not make Capital Expenditures in excess of
the amount set forth below for the periods corresponding thereto:
Period Ending Amount
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One-month period ending 4/30/98 $220,000
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Two-month period ending 5/31/98 $395,000
Three- month period ending 6/30/98 $570,000
Four-month period ending 7/31/98 $745,000
Five-month period ending 8/31/98 $920,000
Six-month period ending 9/30/98 $1,095,000
2. TRANSITIONAL RULES. Notwithstanding anything to the contrary set
forth herein in calculating Borrower's compliance with the financial covenants
set forth in paragraphs 1(a), (b), (c) and (d) above for the Rolling
Twelve-Month Periods ending April 30, 1998, May 31, 1998, June 30, 1998, July
31, 1998, August 31, 1998 and September 30, 1998, the "Rolling Twelve-Month
Period" ending April 30, 1998 shall mean the Fiscal Month then ended; the
"Rolling Twelve-Month Period" ending May 31, 1998 shall mean the two Fiscal
Months then ended; the "Rolling Twelve-Month Period" ending June 30, 1998 shall
mean the three Fiscal Months then ended; the "Rolling Twelve- Month Period"
ending July 31, 1998 shall mean the four Fiscal Months then ended; the "Rolling
Twelve-Month Period" ending August 31, 1998 shall mean the five Fiscal Months
then ended; and the "Rolling Twelve-Month Period" ending September 30, 1998
shall mean the six Fiscal Months then ended.
3. DEFINITIONS AND RULES OF CONSTRUCTION.
Defined Terms. Capitalized terms used in this ANNEX G-2 and
not defined in ANNEX A to this Agreement shall have the following respective
meanings:
"CAPITAL EXPENDITURES" shall mean, with respect to any fiscal
period of Borrower, all of Borrower's consolidated expenditures during such
period for any fixed assets or improvements, or for replacements, substitutions
or additions thereto, that have a useful life of more than one year and that are
required to be capitalized under GAAP, and, in any event, shall include Capital
Lease Obligations and all asset purchases secured by purchase money security
interests.
"CAPITAL LEASE" shall mean any lease of any property (whether
real, personal or mixed) by any Person as lessee that, in accordance with GAAP,
either would be required to be classified and accounted for as a capital lease
on a consolidated balance sheet of such Person or otherwise be disclosed as such
in a note to such balance sheet.
"CAPITAL LEASE OBLIGATION" shall mean, as of any date, the
amount of the obligation of the lessee under a Capital Lease that, in accordance
with GAAP, would appear on a consolidated balance sheet of such lessee in
respect of such Capital Lease or otherwise be disclosed as such in a note to
such balance sheet.
"EBITDA" shall mean, with respect to any fiscal period of
Borrower, (i) Net Income for such period, PLUS (ii) Interest Expense for such
period, PLUS (iii) Tax Expense for such period, PLUS (iv) to the extent deducted
in determining Net Income, Borrower's depreciation, amortization and other
similar non-cash charges for such period (including, without limitation,
Borrower's
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amortization of the Life Companies Prepayment Premium), MINUS (v) to the extent
included in determining Net Income, Borrower's extraordinary gains for such
period, PLUS (vi) to the extent included in determining Net Income, the non-cash
portion of any of Borrower's extraordinary losses for such period, PLUS (vii)
any losses from asset sales for such period, MINUS (viii) any gains from asset
sales for such period, all determined in accordance with GAAP on a consolidated
basis, MINUS (ix) any cash payments made with respect to extraordinary losses
related to a prior period, MINUS (x) to the extent included in determining Net
Income, any consolidated net income derived from the reversal of a reserve
reflected in the 1997 Audited Financial Statements or a reserve reflected in
unaudited Financial Statements of the Borrower for the Fiscal Quarter ending
March 31, 1998 for which there was not a corresponding cash payment.
"FIXED CHARGE COVERAGE RATIO" shall mean, with respect to any
fiscal period of Borrower, the ratio of (a) the sum of (i) EBITDA for such
period, MINUS (ii) Capital Expenditures during such period, MINUS (iii) that
portion of Tax Expense paid in cash during such period, MINUS (iv) any payment
made in cash for which the offsetting entry on Borrower's Financial Statements
is a debit to a reserve reflected in the 1997 Audited Financial Statements or in
a reserve reflected in unaudited Financial Statements of the Borrower for the
Fiscal Quarter ending March 31, 1998, rather than an expense or reduction of
revenues on Borrower's income statement, to (b) Fixed Charges for such period.
"FIXED CHARGES" shall mean, with respect to any fiscal period
of Borrower, the sum of (i) Interest Expense for such period, PLUS (ii)
regularly scheduled payments of principal paid on Funded Debt during such
period, MINUS (iii) one-half of the scheduled payments of principal paid on the
Term Loans.
"FUNDED DEBT" shall mean all of Borrower's consolidated
Indebtedness which by the terms of the agreement governing or instrument
evidencing such Indebtedness matures more than one year from or is directly or
indirectly renewable or extendible at its option under a revolving credit or
similar agreement obligating the lender or lenders to extend credit over a
period of more than one year from the date of creation thereof, including in
each instance current maturities of long-term debt (and the current portion of
long-term debt in the last year of its term), revolving credit and short-term
debt extendible beyond one year at the option of the debtor, and shall also
include, without limitation, (i) Indebtedness arising under or in connection
with any interest rate swap agree ment or arrangements, (ii) the Revolving
Credit Loan, the Term Loans, the Letter of Credit Obligations and the other
Obligations, and (iii) Subordinated Indebtedness.
"GAAP" shall mean generally accepted accounting principles in
the United States as in effect from time to time, consistently applied.
"INTEREST COVERAGE RATIO" shall mean, with respect to any
fiscal period of Borrower, the ratio of (a) the sum of (i) EBITDA for such
period, PLUS (ii) up to $150,000 of the losses incurred by Greenbrier Hospital,
Inc. during the Fiscal Month ending May 31, 1998 to the extent such losses
reduced Net Income, MINUS (iii) Capital Expenditures during such period
(excluding up to $150,000
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of Capital Expenditures made by Greenbrier Hospital, Inc. during the Fiscal
Month ending April 30, 1998), to (b) Interest Expense for such period.
"INTEREST EXPENSE" shall mean, with respect to any fiscal
period of Borrower, Borrower's consolidated interest expense determined in
accordance with GAAP, including without limitation, the interest component of
any Capital Lease Obligation.
"LEVERAGE RATIO" shall mean, with respect to any period, the
ratio of (a) Funded Debt excluding the Ramsay Subordinated Note, as of the last
day of such period, to (b) EBITDA for such period divided by the number of
Fiscal Months in such period and multiplied by twelve.
"NET INCOME" shall mean, with respect to any fiscal period of
Borrower, Borrower's consolidated net income (or loss) from continuing
operations for such period.
"ROLLING TWELVE-MONTH PERIOD" shall mean, as of the end of any
Fiscal Month of Borrower, the immediately preceding twelve Fiscal Months (except
as set forth in paragraph 2(a) above), including the Fiscal Month then ending.
"TANGIBLE NET WORTH" shall mean, as of any date, (a)
Borrower's consolidated shareholders' equity, MINUS (b) Borrower's consolidated
intangible assets, including, without limitation, the following:
i. any surplus resulting from the write-up of assets
subsequent to the Audit Date;
ii. goodwill, including any amounts (however designated on the
balance sheet) representing the cost of acquisitions of Subsidiaries in excess
of underlying tangible assets;
iii. patents, trademarks, copyrights, etc.; and
iv. deferred charges (including, but not limited to,
unamortized debt discount and expense, organization expenses and experimental
and development expenses, but excluding prepaid expenses), but excluding, to the
extent included therein, transaction costs in an amount not to exceed $3,400,000
incurred by the Borrower in connection with the consummation of the Credit
Agreement, the Bridge Note Purchase Agreement and the Preferred Stock Purchase
Agreement.
"TAX EXPENSE" shall mean, with respect to any fiscal period of
Borrower, Borrower's consolidated provision for income taxes for such period.
4. RULES OF CONSTRUCTION. Any accounting term used in this ANNEX G-2 or
elsewhere in this Agreement shall have, unless otherwise specifically provided,
the meaning customarily given such term in accordance with GAAP, and all
financial computations shall be computed, unless otherwise specifically
provided, on a consolidated basis in accordance with GAAP consistently applied.
That certain items or computations are explicitly modified by the phrase "in
accordance
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with GAAP" shall in no way be construed to limit the foregoing. In the event
that any "Accounting Changes" (as defined below) occur and such changes result
in a change in the calculation of the financial covenants, standards or terms
used in this ANNEX G-2 or elsewhere in this Agreement, then Borrower and the
Administrative Agent agree to enter into negotiations in order to amend such
provisions of this Agreement, subject to the approval of the Required Lenders,
so as equitably to reflect such Accounting Changes with the desired result that
the criteria for evaluating Borrower's financial condition shall be the same
after giving effect to such Accounting Changes as if such Accounting Changes had
not been made. "ACCOUNTING CHANGES" means (i) changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants (or successor thereto or any agency with similar
functions), (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre- Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. and (ii)
changes in accounting principles concurred in by Borrower's independent public
accountants. In the event that Borrower, the Administrative Agent and the
Required Lenders shall have agreed upon any such required amendment, then, after
such amendment has been evidenced in writing and the underlying Accounting
Change with respect thereto has been implemented, any reference to GAAP
contained in this ANNEX G-2 or elsewhere in this Agreement shall, only to the
extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If Borrower, the
Administrative Agent and the Required Lenders cannot agree upon any required
amendment within thirty (30) days following the date of implementation of any
Accounting Change, then all financial statements delivered in accordance with
ANNEX F to this Agreement and all calculations of financial covenants and other
standards and terms in accordance with this ANNEX G-2 shall be prepared,
delivered and made without regard to the underlying Ac counting Change.
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