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EXHIBIT 10.5
THIRD AMENDMENT TO CREDIT AGREEMENT
and
FOURTH AMENDMENT TO LETTER LOAN AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AGREEMENT and FOURTH AMENDMENT TO LETTER
LOAN AGREEMENT (the "Amendment"), dated as of November 6, 1998, is among HORIZON
HEALTH CORPORATION, a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Borrower"), each of the banks or other
lending institutions which is a signatory hereto (individually, a "Bank" and,
collectively, the "Banks"), CHASE BANK OF TEXAS, NATIONAL ASSOCIATION, formerly
known as Texas Commerce Bank National Association, individually as a Bank and as
agent for itself and the other Banks under the hereinafter defined Credit
Agreement (in its capacity as agent, together with its successors in such
capacity, the "Agent") and in its individual capacity as a lender under the
hereinafter defined Term Loan Agreement (in such capacity, "Chase"), NORTH
CENTRAL DEVELOPMENT AUTHORITY ("North Central") and the other Obligated Parties
(as defined in the Credit Agreement).
RECITALS:
WHEREAS, Borrower, the Banks and Agent have entered into that certain
Credit Agreement dated as of December 9, 1997 (as amended by that certain letter
agreement dated as of June 30, 1998 and that certain Second Amendment to Credit
Agreement and Third Amendment to Letter Loan Agreement (the "Second Amendment")
dated as of September 30, 1998, herein the "Credit Agreement").
WHEREAS, Borrower, certain Subsidiaries of Borrower, North Central and
Chase have entered into that certain Letter Loan Agreement dated as of December
20, 1995 (as amended by that certain First Amendment to Letter Loan Agreement
and Note Modification Agreement dated as of December 9, 1997, that certain
letter agreement dated as of June 30, 1998 and the Second Amendment, herein the
"Term Loan Agreement")
WHEREAS, Borrower, the Obligated Parties, North Central, the Banks,
Agent and Chase now desire to further amend the Credit Agreement and the Term
Loan 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:
ARTICLE 1
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
Credit Agreement and Term Loan Agreement, as amended hereby.
ARTICLE 2
Amendments
Section 1.2 Amendment to Section 10.5. Effective as of the date hereof,
Section 10.5 of the Credit Agreement and the similar provision incorporated into
the Term Loan Agreement pursuant to Section 6.01 of the Term Loan Agreement are
amended in their entirety to read follows:
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Section 10.5 Investments. The Borrower will not, and will not
permit any Subsidiary to, make or permit to remain outstanding any
advance, loan, other extension of credit, or capital contribution to or
investment in any Person, or purchase or own any stock, bonds, notes,
debentures, or other securities of any Person, or be or become a joint
venturer with or partner of any Person, except:
(a) Borrower may acquire shares, other equity
securities or other evidence of beneficial ownership of a
Person or, for purposes of Section 10.3, Borrower or any
wholly owned Subsidiary directly owned by Borrower may acquire
all or substantially all of a Person's assets or the assets
of a division or branch of such Person, if, with respect to
each such acquisition:
(i) Default. No Default exists or would
result therefrom;
(ii) Bank Approval. Borrower shall have
obtained the prior written consent of the Required
Banks if (A) the Purchase Price for the acquisition
is greater than Ten Million Dollars ($10,000,000) or
(B) if after giving effect to such acquisition, the
aggregate Purchase Price of all Permitted
Acquisitions that have occurred (1) from September
30, 1998 through and including August 31, 1999, is
greater than Ten Million Dollars ($10,000,000) and
(2) at any time thereafter, during the twelve (12)
month period then most recently ending, Thirty
Million Dollars ($30,000,000). As used above, the
phrase "Purchase Price" means, as of any date of
determination and with respect to a proposed
acquisition, the purchase price to be paid for the
Target or its assets, including all cash
consideration paid (whether classified as purchase
price, noncompete, consulting or postclosing
performance based payments or otherwise) or to be
paid (based on the estimated amount thereof), the
value of all other assets to be transferred by the
purchaser in connection with such acquisition to the
seller (but specifically excluding any stock of
Borrower issued to the seller which shall not be part
of the Purchase Price for purposes of this clause
(ii)) all valued in accordance with the applicable
purchase agreement and the outstanding principal
amount of all Debt of the Target or the seller
assumed or acquired in connection with such
acquisition.
(iii) Delivery and Notice Requirements.
Borrower shall provide the Agent fifteen (15) days
prior to the consummation of the acquisition the
following: (A) notice of the acquisition, (B) the
most recent financial statements of the Target that
Borrower has available, (C) such other documentation
and information relating to the Target and the
acquisition as the Agent may reasonably request, and
(D) evidence certified by the chief executive or
chief financial officer of Borrower that Borrower
shall be in compliance with the covenants contained
in Article 11 on a pro forma basis for the four (4)
Fiscal Quarter period then most recently ending
(assuming (1) the consummation of the acquisition in
question; (2) that the incurrence or assumption of
any Debt in connection therewith occurred on the
first day of such period; (3) to the extent such Debt
bears interest at a floating rate, the rate in effect
for the entire period of calculation was the rate in
effect at the time of calculation; and (4) any sale
of Subsidiaries or lines of business which occurred
during such period occurred on the first day of such
period). Within sixty (60) days of such acquisition
the obligations under subsections 9.10(b) and (c)
shall be fulfilled.
(iv) Diligence. Borrower has completed due
diligence on the Target or the assets to be acquired;
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(v) U.S. Acquisitions. The Target is
organized under the laws of a state in the United
States of America and is involved in the same general
type of business activities as the Subsidiaries; and
(vi) Structure. If the proposed acquisition
is an acquisition of the stock of a Target, the
acquisition will be structured so that the Target
will become a wholly owned Subsidiary directly owned
by Borrower. If the proposed acquisition is an
acquisition of assets, the acquisition will be
structured so that Borrower or a whole owned
Subsidiary directly owned by Borrower shall acquire
the assets; and
(b) readily marketable direct obligations of the
United States of America or any agency thereof with maturities
of one year or less from the date of acquisition;
(c) fully insured certificates of deposit with
maturities of one year or less from the date of acquisition
issued by any commercial bank operating in the United States
of America having capital and surplus in excess of
$250,000,000;
(d) commercial paper or bonds of a domestic issuer if
at the time of purchase such paper or bonds are rated in one
of the two highest rating categories of Standard and Poor's
Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.;
(e) current trade and customer accounts receivable
for services rendered in the ordinary course of business;
(f) shares of any mutual fund registered under the
Investment Company Act of 1940, as amended, which invests
solely in investment of the type described in clauses (b)
through (d) of this Section 10.5;
(g) loans to physicians; provided that (i) at the
time of such loan no Default shall exist or result therefrom;
(ii) the aggregate amount of such loans made by Borrower and
the Subsidiaries and outstanding at any one time shall not
exceed Two Hundred Fifty Thousand Dollars ($250,000),
calculated net of any bad debt reserves;
(h) advances to employees for business expenses
incurred in the ordinary course of business including, without
limitation, loans in connection with employee relocations and
changes in the Borrower's and the Subsidiaries' payroll
payment dates;
(i) existing investments described on Schedule 10.5
hereto;
(j) the purchase by Horizon Mental Health Management,
Inc. of shares of capital stock of Florida Professional
Psychological Services, Inc. not owned by Horizon Mental
Health Management, Inc. on the Closing Date;
(k) loans, advances and other extensions of credit to
Subsidiaries made in accordance with the restrictions set
forth in subsection 10.1 (b); provided that, at the time any
such loan, advance or other extension of credit is made, no
Default exists or would result therefrom;
(l) Guarantees permitted by Section 10.1; and
(m) if no Default exists, Borrower and the
Subsidiaries may make additional capital contributions to and
or investments in or purchase any stocks, bonds, or other
equity securities authorized to be issued under Section 10.6
of a wholly owned Subsidiary or a newly created Person
organized by Borrower or a Subsidiary that, immediately after
such investment or purchase, will be a wholly owned Subsidiary
if the obligations under Section 9.10 shall be fulfilled and
the amount of such contributions and investments made
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under the permissions of this clause (m) does not, during the
entire term of this Agreement, exceed (i) One Million Dollars
($1,000,000) in the aggregate with respect to contributions to
and or investments in Choice Health, Inc. by Borrower and (ii)
One Hundred Thousand Dollars ($100,000) in the aggregate with
respect to contributions to and or investments in all other
Persons.
ARTICLE 3
Miscellaneous
Section 1.3 Ratifications. The terms and provisions set forth in this
Amendment shall modify and supersede all inconsistent terms and provisions set
forth in the Credit Agreement and Term Loan Agreement and except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Credit Agreement and Term Loan Agreement and the other Transaction Documents are
ratified and confirmed and shall continue in full force and effect. The Loan
Parties and the Lenders agree that the Credit Agreement and Term Loan Agreement
as amended hereby and the other Transaction Documents shall continue to be
legal, valid, binding and enforceable in accordance with their respective terms.
Section 1.4 Reference to Credit Agreement and Term Loan Agreement. Each
of the Transaction Documents, including the Credit Agreement and Term Loan
Agreement and any and all other agreements, documents, or instruments now or
hereafter executed and delivered pursuant to the terms hereof or pursuant to the
terms of the Credit Agreement or Term Loan Agreement as amended hereby, are
hereby amended so that any reference in such Transaction Documents to the Credit
Agreement or Term Loan Agreement shall mean a reference to the Credit Agreement
and Term Loan Agreement as amended hereby.
Section 1.5 Expenses of Agent. As provided in the Credit Agreement and
the Term Loan Agreement, 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.
Section 1.6 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 1.7 Applicable Law. This Amendment shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 1.8 Successors and Assigns. This Amendment is binding upon and
shall inure to the benefit of the Loan Parties, the Lenders and their respective
successors and assigns, except the Loan Parties may not assign or transfer any
of their rights or obligations hereunder without the prior written consent of
the Lenders.
Section 1.9 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.
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Section 1.10 Effect of Waiver. No consent or waiver, express or
implied, by any Lender to or for any breach of or deviation from any covenant,
condition or duty by Borrower or any other Loan 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 1.11 Headings. The headings, captions, and arrangements used in
this Amendment are for convenience only and shall not affect the interpretation
of this Amendment.
Section 1.12 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.
LENDERS:
CHASE BANK OF TEXAS, NATIONAL ASSOCIATION,
as Agent and in its individual capacity as a
Lender under the Credit Agreement and the
Term Loan Agreement
By:
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Vice President
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BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION
By:
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Name:
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Title:
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COMERICA BANK-TEXAS
By:
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Name:
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Title:
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COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK B.A., "RABOBANK
NEDERLAND," NEW YORK BRANCH
By:
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Name:
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Title:
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By:
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Name:
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Title:
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BANQUE PARIBAS, HOUSTON AGENCY
By:
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Name:
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Title:
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By:
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Name:
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Title:
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LOAN PARTIES
HORIZON HEALTH CORPORATION
HORIZON MENTAL HEALTH MANAGEMENT, INC.
MENTAL HEALTH OUTCOMES, INC.
HHG COLORADO, INC.
GERIATRIC MEDICAL CARE, INC.
SPECIALTY REHAB MANAGEMENT, INC.
ACORN BEHAVIORAL HEALTHCARE MANAGEMENT CORPORATION
HHMC PARTNERS, INC.
HORIZON BEHAVIORAL SERVICES, INC.
FLORIDA PSYCHIATRIC ASSOCIATES, INC.
FLORIDA PSYCHIATRIC MANAGEMENT, INC.
FPMBH OF ARIZONA, INC.
FPMBH OF TEXAS, INC.
CHOICEHEALTH, INC.
By:
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Executive Vice President and Secretary
of each of the above listed Loan Parties
NORTH CENTRAL DEVELOPMENT COMPANY
By:
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▇▇▇▇ ▇. ▇▇▇▇▇, President
