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EXHIBIT 10.3
FIRST AMENDMENT TO LETTER LOAN AGREEMENT
AND NOTE MODIFICATION AGREEMENT
THIS FIRST AMENDMENT TO LETTER LOAN AGREEMENT AND NOTE MODIFICATION
AGREEMENT (the "Amendment"), dated as of December 9, 1997, is between NORTH
CENTRAL DEVELOPMENT COMPANY, a Texas corporation ("Borrower"), HORIZON HEALTH
CORPORATION, a Delaware corporation (formerly known as Horizon Mental Health
Management, Inc. and hereinafter the "Parent"), HORIZON MENTAL HEALTH
MANAGEMENT, INC., a Texas corporation ("Management"), MENTAL HEALTH OUTCOMES,
INC., a Delaware corporation ("Outcomes"), HHG COLORADO, INC., a Colorado
corporation ("Colorado"), HHMC PARTNERS, INC., a Delaware corporation
("Partners"), GERIATRIC MEDICAL CARE, INC., a Tennessee corporation
("Geriatric"), SPECIALTY REHAB MANAGEMENT, INC., a Delaware corporation
("Specialty"), ACORN BEHAVIORAL HEALTHCARE MANAGEMENT CORPORATION, a
Pennsylvania corporation ("Acorn"), FLORIDA PROFESSIONAL PSYCHOLOGICAL
SERVICES, INC., a Florida corporation ("FPPS") and TEXAS COMMERCE BANK NATIONAL
ASSOCIATION, in its individual capacity ("Bank").
RECITALS:
A. Borrower, Parent, Management, Outcomes and Bank have entered
into that certain Letter Loan Agreement (the "Agreement") dated as of December
20, 1995.
B. Pursuant to the Agreement, Parent, Management, Outcomes,
Colorado and Partners each executed a separate Guaranty Agreement (the
"Guaranties") dated as December 20, 1995 which guaranteed to Bank the payment
and performance of Term Note B (as defined in the Agreement).
C. Pursuant to the Agreement, Parent, Management, Outcomes,
Colorado and Partners each executed a separate Security Agreement (the
"Security Agreements") dated as December 20, 1995 which granted to Bank a
security interest in certain of its assets to secure the payment and
performance of Term Note B (as defined in the Agreement).
D. Borrower, Bank and the other parties hereto now desire to
amend the Agreement and the Notes (as such term is defined in 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:
FIRST AMENDMENT TO LETTER LOAN AGREEMENT AND NOTE MODIFICATION AGREEMENT-Page 1
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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 Agreement, as amended hereby.
ARTICLE 2
Amendments to Agreement
Section 2.1 Amendment to the Definition of "Parent". The term
"Parent", as defined in the initial paragraph of the Agreement is amended in
its entirety to mean: "Horizon Health Corporation, a Delaware corporation
formerly known as Horizon Mental Health Management, Inc."
Section 2.2 Amendment to Definition of "Guarantor". The term
"Guarantor" as defined in the initial paragraph to the Agreement is amended in
its entirety to mean: "Parent, Management, Colorado, Outcomes, Geriatric
Medical Care, Inc., Specialty Rehab Management, Inc., Acorn Behavioral
Healthcare Management Corporation, Florida Professional Psychological Services,
Inc. and any other person who becomes a party to this Agreement, the Guaranty
Agreement (as defined in Section 3.01(a)(iv)) and the Security Agreements (as
defined in Section 3.01(a)(vi)) in accordance with Section 6.25 of this
Agreement."
Section 2.3 Deletions from Section 6. Sections 6.02 through
6.11, 6.13 through 6.15, 6.18, 6.23, 6.24, 6.27, 6.28, 6.31 and 6.33 through
6.37 are deleted in their entirety.
Section 2.4 Amendment to Section 6.01. Section 6.01 is amended in
its entirety to read as follows:
6.01 Incorporation of Covenants from Credit Agreement.
Parent shall and shall cause each Subsidiary to, comply with each of
the covenants contained in Articles 9 (excluding, however, for
purposes of this Agreement, the covenants contained in Sections 9.6
and 9.10), 10 and 11 (the "Covenants") of that certain Credit
Agreement dated as of December 9, 1997, by and among Parent, Texas
Commerce Bank National Association, as agent, and each of the other
banks and lending institutions named therein, as such credit agreement
exists on December 9, 1997 without giving effect to any amendment or
other modification thereto unless amended or otherwise modified with
the agreement of the Bank and whether or not at any time the Credit
Agreement remains in effect as a valid, binding and enforceable
agreement (in such form, the "Credit Agreement"); provided, that for
the purposes of this Agreement (a) any reference in the Covenants to
"Loan Documents" (excluding the reference to Loan Documents contained
in Subsections 10.1(a) and 10.2(b) of the Credit Agreement) shall mean
the Loan Documents as defined herein;
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(b) any reference to an "Event of Default" in the Covenants shall mean
an Event of Default as defined herein; (c) any reference to a Default
in the Covenants shall mean the occurrence of an event that with the
giving of notice or passage of time or both would be an Event of
Default hereunder; (d) any reference to Agent or the Banks in the
Covenants shall mean the Bank hereunder; (e) any reference to
"Borrower" in the Covenants shall mean Parent; (f) any reference to
the "Collateral" in the Covenants shall mean the Guarantor Collateral;
and (g) any reference to the "Obligations" in the Covenants shall mean
the "Obligations" as defined in the Guaranty Agreement. As modified
by the foregoing proviso, the Covenants and the definitions in the
Credit Agreement of terms utilized therein are incorporated herein by
reference.
Section 2.5 Amendment to Section 6.25. Section 6.25 is hereby
amended to read in its entirety as follows:
6.25 Subsidiaries of Parent. Parent will cause any and all
of its Subsidiaries, other than AHG Partnership (as defined in the
Credit Agreement) formed or created after the date hereof to guaranty
all present and future indebtedness and other obligations of Borrower
to Bank under the Term Loan B and pledge certain of its assets to Bank
to secure its guaranty obligations, both pursuant to the execution and
delivery of a Subsidiary Joinder Agreement substantially the form as
Exhibit A attached to the Guaranty Agreement. As used herein in the
term "Subsidiary" means any corporation (or other entity) of which at
least a majority of the outstanding shares of stock (or other
ownership interests) having by the terms thereof ordinary voting power
to elect a majority of the board of directors (or similar governing
body) of such corporation (or other entity) (irrespective of whether
or not at the time stock (or other ownership interests) of any other
class or classes of such corporation (or other entity) shall have or
might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by the
Parent or one or more of the Subsidiaries or by the Parent and one or
more of the Subsidiaries.
Section 2.6 Amendment to Section 6.12. The reference to "first
priority" contained in the ninth line of Section 6.12 is hereby deleted.
Section 2.7 Amendment to Section 6.21. The reference to "and first
priority" contained in the fifth line of Section 6.21 is hereby deleted.
Section 2.8 Amendment to Section 8.01(b). The last clause in
Section 8.01(b) of the Agreement beginning "; notwithstanding" is amended in
its entirety to read as follows:
; notwithstanding the foregoing, there shall be no such five
day cure period for any of the covenants contained in Sections 5.01,
5.02, 5.07, 5.08, 5.09, 5.10, 5.13, 5.14, 5.15, 5.17, 5.20, 5.31 and
6.01 (but only with respect to Section 6.01 to the extent it relates
to the violation of the following covenants in the Credit
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Agreement as they have been incorporated herein, 9.1, 10.2, 10.3,
10.4, 9.6 and 9.8);
Section 2.9 Amendment to Section 8.01 (p). Section 8.01 (p) is
hereby amended to read in its entirety as follows:
(p) Credit Agreement. A Default (as defined in the
Credit Agreement) or an Event of Default (as defined in the Credit
Agreement) occurs under the Credit Agreement whether or not the Credit
Agreement at the time remains in effect as a valid, binding and
enforceable agreement and such Default or Event of Default continues
to exist after any and all applicable notices, grace periods and
opportunities to cure, if any, have been given;
Section 2.10 Amendment to references to Parent, Management and
Outcomes.
(a) Each reference to "Parent, Management and Outcomes"
in the Agreement is amended to read as follows: "Parent and the other
Guarantors".
(b) Each reference to "Parent, Management and/or
Outcomes" in the Agreement is amended to read as follows: "Parent
and/or any of the other Guarantors".
(c) Each reference to "Parent, Management, Outcomes" in
the Agreement is amended to read "Parent, any other Guarantor".
In furtherance of the foregoing, Colorado, Partners, Geriatric,
Specialty, Acorn and FPPS each hereby assumes all the obligations of a
"Guarantor" under the Agreement and agrees that it is bound as a Guarantor
under the terms of the Agreement as if it had been an original signatory
thereto.
Section 2.11 Amendment to Exhibit "E" to the Agreement. Exhibit
"E" to the Agreement is amended to read in its entirety as set forth in Exhibit
"E" hereto.
Section 2.12 Amendment to Exhibit "G" to the Agreement. Exhibit
"G" to the Agreement is amended to read in its entirety as set forth in Exhibit
"G" hereto.
ARTICLE 3
Modification to the Notes
Section 3.1 Amendment to the Definitions Utilized in the Notes.
Section 1 of each of the Notes is modified as follows:
(a) the definitions of the term "Applicable Libor Margin"
is amended in its entirety to read as follows:
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"Applicable Libor Margin" means the "Eurodollar Rate Margin"
as such term is defined in that certain Credit Agreement dated as of
December 9, 1997 among Horizon Health Corporation, Texas Commerce Bank
National Association, as agent and each of the other banks and lending
institutions named therein, as such credit agreement exists on
December 9, 1997 without giving effect to any amendment or other
modification thereto unless amended or otherwise modified with the
agreement of Payee and whether or not at any time such credit
agreement remains in effect as a valid, binding and enforceable
agreement (in such form, herein the "Credit Agreement").
(b) the definition of the following term is hereby added
to Section 1 of each Note:
"Base Margin" means the "Base Margin" as such term is defined
in the Credit Agreement.
Section 3.2 Amendment to Section 3. Clause (i) of Clause (a) of
the first sentence in Section 3 of each Note is amended in its entirety to read
as follows:
(i) the sum of the Floating Base Rate in effect
from day to day plus the Base Margin or
ARTICLE 4
Conditions Precedent
Section 4.1 Conditions. The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent:
(a) Bank shall have received all of the following, each
dated (unless otherwise indicated) the date of this Amendment, in form
and substance satisfactory to Bank:
(i) Opinion of Counsel. A favorable opinion of
▇▇▇▇▇▇▇▇▇▇▇ & Price, L.L.P., legal counsel to each Guarantor,
as to such matters relating to this Amendment as Bank may
reasonably request;
(ii) Guaranty Agreement and Security Agreement. A
Guaranty Agreement and a Security Agreement executed by each
Guarantor; and
(iii) Additional Information. Such additional
documents, instruments and information as Bank or its legal
counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, a Professional Corporation, may
request; and
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(b) The representations and warranties contained herein
and in all other Loan Documents, as amended hereby, shall be true and
correct as of the date hereof as if made on the date hereof;
(c) No Event of Default shall have occurred and be
continuing and no event or condition shall have occurred that with the
giving of notice or lapse of time or both would be an Event of
Default; and
(d) All corporate proceedings taken in connection with the
transactions contemplated by this Amendment and all documents,
instruments, and other legal matters incident thereto shall be
satisfactory to Bank and its legal counsel, Jenkens & ▇▇▇▇▇▇▇▇▇, a
Professional Corporation.
ARTICLE 5
Ratifications, Representations and Warranties
Section 5.1 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 the Notes and except as expressly modified and
superseded by this Amendment, the terms and provisions of the Agreement and the
Notes and the other Loan Document are ratified and confirmed and shall continue
in full force and effect. Borrower, each Guarantor and Bank agree that the
Agreement and the Notes, as amended hereby, and the other Loan Documents shall
continue to be legal, valid, binding and enforceable in accordance with their
respective terms.
Section 5.2 Representations and Warranties. Each of Borrower and
each Guarantor hereby represents and warrants to Bank that (i) the execution,
delivery and performance of this Amendment and any and all other Loan Documents
executed and/or delivered by it in connection herewith have been authorized by
all requisite corporate action on its part and will not violate its articles of
incorporation or bylaws, (ii) the representations and warranties contained in
the Agreement, as amended hereby, and any other Loan Document to which it is a
party are true and correct on and as of the date hereof as though made on and
as of the date hereof, except to the extent such representations and warranties
relate specifically to an earlier date, (iii) no Event of Default has occurred
and is continuing and no event or condition has occurred that with the giving
of notice or lapse of time or both would be an Event of Default and (iv)
Borrower and each Guarantor is in full compliance with all covenants and
agreements contained in the Agreement as amended hereby and the other Loan
Documents.
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ARTICLE 6
Miscellaneous
Section 6.1 Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan
Document including any Loan Document furnished in connection with this
Amendment shall survive the execution and delivery of this Amendment and the
other Loan Documents, and no investigation by Bank or any closing shall affect
the representations and warranties or the right of Bank to rely upon them.
Section 6.2 Reference to Agreement. Each of the Loan Documents,
including the 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 Agreement as amended hereby, are hereby
amended so that any reference in such Loan Documents to the Agreement or the
Notes shall mean a reference to the Agreement or the Notes, as applicable, as
amended hereby.
Section 6.3 Expenses of Bank. As provided in the Agreement, each
Guarantor, jointly and severally, agrees to pay on demand all costs and
expenses incurred by Bank in connection with the preparation, negotiation, and
execution of this Amendment and the other Loan Documents executed pursuant
hereto.
Section 6.4 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 6.5 Applicable Law. This Amendment and all other Loan
Documents executed pursuant hereto shall be deemed to have been made and to be
performable in Dallas, Dallas County, Texas and shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 6.6 Successors and Assigns. This Amendment is binding upon
and shall inure to the benefit of Bank, Borrower and each of the Guarantors and
their respective successors and assigns, except neither Borrower nor any
Guarantor may assign or transfer any of its rights or obligations hereunder
without the prior written consent of Bank.
Section 6.7 Counterparts. This Amendment may be executed in one or
more 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 instrument.
Section 6.8 Effect of Waiver. No consent or waiver, express or
implied, by Bank to or for any breach of or deviation from any covenant,
condition or duty by Borrower or any Guarantor shall be deemed a consent or
waiver to or of any other breach of the same or any other covenant, condition
or duty.
Section 6.9 Headings. The headings, captions, and arrangements
used in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
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Section 6.10 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH
THIS AMENDMENT EMBODY 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.
BORROWER:
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NORTH CENTRAL DEVELOPMENT
COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇
President
BANK:
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TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President
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GUARANTORS:
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HORIZON HEALTH CORPORATION
HORIZON MENTAL HEALTH
MANAGEMENT, INC.
MENTAL HEALTH OUTCOMES, INC.
HHMC PARTNERS, INC.
HHG COLORADO, INC.
GERIATRIC MEDICAL CARE, INC.
SPECIALTY REHAB MANAGEMENT, INC.
ACORN BEHAVIORAL HEALTHCARE
MANAGEMENT CORPORATION
FLORIDA PROFESSIONAL PSYCHOLOGICAL
SERVICES, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President and
Secretary of each Guarantor
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