Exhibit 10.1
WAIVER AND AMENDMENT TO RECEIVABLES PURCHASE AND TRANSFER
AGREEMENT AND LOAN AND SECURITY AGREEMENT
WAIVER AND AMENDMENT dated as of September 13, 1999 (the
"Amendment"), to the Receivables Purchase and Transfer Agreement, dated November
9, 1998, (as amended, modified or supplemented from time to time in accordance
with its terms, the a"RPTA"), by and among Star Multi Care Services, Inc., a New
York corporation (the "Primary Servicer"), each of the parties named on Schedule
I thereto (each, including he Primary Servicer, a "Provider" and, collectively,
the "Providers") and SMCS Care, LLC, a New York limited liability company (the
"Purchaser"), and to the Loan and Security Agreement, dated as of November 9,
1998 (as amended, modified or supplemented from time to time in accordance with
its terms, the "LSA") between the Purchaser as borrower (the "Borrower"), and
Daiwa Healthco- 3 LLC (the "Lender"),
WHEREAS, the parties hereto have agreed to amend certain
provisions of the LSA and RPTA,
WHEREAS, the parties hereto have agreed to waive certain
provisions of the LSA and RPTA,
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms. Unless otherwise specifically defined
herein, all capitalized terms used herein shall have the respective meanings
ascribed to such terms in the RPTA and the LSA.
2. Amendment to RPTA. Subject to the conditions as to
effectiveness set forth in Paragraph 6 of this Amendment, the RPTA is hereby
amended as follows:
(A) For the fiscal quarter ended August 31, 1999 and
thereafter, in Exhibit I of the RPTA, the definition of "Tangible Net Worth"
means, with respect to any Person at any time, the sum of (i) such Person's
capital stock, capital in excess of par or stated value of shares of its capital
stock, retained earnings and any other account which, in accordance with GAAP,
constitutes stockholders' equity, less (ii) treasury stock, minus (iii) the book
value of all assets classified as intangible under GAAP, including, without
limitation, goodwill, deferred taxes, deferred financing costs, trademarks,
trade names, patents, copyrights and licenses, plus $2,650,000.
(B) In Exhibit V of the RPTA, the following sections shall
be amended to read:
(x) Consolidated Tangible Net Worth. The Providers
permit the Consolidated Tangible Net Worth, calculated at the end of each fiscal
quarter of the
Providers, to be: (i) less than $2,500,000 for each of the quarters through May
31, 1999, (ii) less than $1,810,000 for the quarter ended August 31, 1999, (iii)
less than $1,977,000 for the quarter ended November 30, 1999, (iv) less than
$2,129,000 for the quarter ended February 29, 2000, (v) less than $2,321,000 for
the quarter ended May 31, 2000, and (vi) less than $2,511,000 for the quarter
ended August 31, 2000.
(y) Consolidated Interest Coverage Ratio. The Providers
permit the Consolidated Interest Coverage Ratio, calculated as of the end of
each fiscal quarter of the Providers for the period of August 30, 1998 to
November 30, 1998, the period of August 30, 1998 to February 28, 1999, the
period of August 30, 1998 to May 31, 1999 to be less than 2.50:1.00, and for
each fiscal quarter thereafter, to be less than 1.80:1.00.
(aa) Consolidated Debt Service Coverage Ratio. The
Providers permit the Consolidated Debt Service Coverage Ratio, calculated as of
the end of each fiscal quarter of the Providers, for the period of August 30,
1998 to November 30, 1998, the period of August 30, 1998 to February 28, 1999,
the period of August 30, 1998 to May 31, 1999 to be less than 1.75:1.00 and for
each fiscal quarter thereafter, to be less than 1.50:1.00
(dd) EBITDA. The Providers permit EBITDA, calculated
as of the fiscal quarter ended August 31, 1999 be less than $475,000, for the
fiscal quarter ended November 30, 1999 to be less than $480,000, for the fiscal
quarter ended February 29, 2000 to be less than $460,000, and for each fiscal
quarter ending May 31, 2000 and ending August 31, 2000 to be less than $515,000.
(ee) Financial Statements. The financial statements
as attached hereto as Attachment I, shall be substantially identical to those
financial statements in the Primary Servicer's Form 10-K filed with the
Securities and Exchange Commission for the fiscal year ended May 31, 1999.
3. Amendment LSA. Effective on the date hereof, the LSA is
hereby amended as follows:
(A) Section 1.05 is hereby amended to read:
Section 1.05 Interest and Non-Utilization
Fee. (a) Interest. The Borrower shall pay interest on the Revolving Loan on (i)
each Interest Payment Date and (ii) the Maturity Date (whether by acceleration
or otherwise), in each case, at an interest rate per annum equal to (x) with
respect to that portion of the Revolving Loan equal to the Basic Borrowing
Amount, the LIBO Rate in effect for applicable Interest Period plus 4% and (y)
with respect to that portion of the Revolving Loan that exceeds the Basic
Borrowing Amount (each such portion, an "Overadvance"and the aggregate principal
balance of all such Overadvances from time to time, the "Overadvance Loan"), the
LIBO Rate in effect for the applicable Interest Period plus 7%; provided,
however, that if the Borrower fails to comply with the provisions of clause (r)
of Exhibit IV, each of the foregoing interest rates shall increase by 2%. Once
any portion of the Revolving Loan exceeds the Basic Borrowing Amount and becomes
an Overadvance, such
portion shall for all purposes hereof be considered an Overadvance
notwithstanding any event which would result in the outstanding principal amount
of the Revolving Loan to be less than the Basic Borrowing Amount.
(b) Default Interest. Notwithstanding
anything to the contrary contained
herein, while any Event of Default
is continuing, interest on the
Revolving Loan shall be payable on
demand at a rate per annum equal to
four percentage points (4.00%) in
excess of the rate then otherwise
applicable to the Revolving Loan.
(c) Non-Utilization Fee. The Borrower
shall pay to the Lender on the
first Funding Date of each month a
fee equal to 0.375% per annum on
the average amount, calculated on a
daily basis, by which the Revolving
Commitment exceeded the Revolving
Loan during the prior Month.
4. Waivers under LSA.
(A) The Lender hereby waives any existing Default or Event
of Default that arose solely as a result of a breach under clause (d) of Exhibit
V of the LSA referring to an Event of Termination under the RPTA specified in
Paragraph 5 of this Amendment.
(B) The Lender hereby waives its rights under the
provisions of Section 3.02(a) and (b) of the LSA solely for the Borrower's
failure to comply with the provisions of clause (d) of Exhibit V of the LSA for
the periods specified in Paragraph 5 of this Amendment.
(C) Except for the specific waivers set above, nothing
herein shall be deemed to be a waiver of any covenant or agreement contained in
the LSA.
5. Waivers under RPTA.
(A) The Purchaser hereby waives any existing Event of
Termination that arose solely as a result of the Providers' failure to comply
with the provisions of: clause (x), (y), (aa) and (bb) of Exhibit V of the RPTA
with respect to the fiscal quarter ended May 31, 1999.
(B) The Purchaser hereby waives its rights under the
provisions of Section 3.02(a) and (b) of the RPTA solely for the Providers'
failure to comply with the provisions of clauses (x), (y), (aa) and (bb) of
Exhibit V of the RPTA for the period specified in Paragraph 5(A) above.
(C) Except for the specific waivers set forth above,
nothing herein shall be deemed to be a waiver of any covenant or agreement
contained in the RPTA.
6. Conditions Precedent. Notwithstanding any term or provision
of this Amendment to the contrary, Paragraphs 2, 3, 4 and 5 hereof shall not
become effective until the Lender and the Purchaser shall have received
counterparts of this Amendment, duly executed and delivered on behalf of the
Primary Servicer, the Providers, the Purchaser, the Borrower and the Lender.
7. Continued Effectiveness. Nothing herein shall be deemed a
waiver of any covenant (except as contained in Paragraphs 4 and 5 herein), or
agreement contained in, or any Default or Event of Default under the LSA, or any
Event of Termination under the RPTA and each of the parties hereto agrees that,
as amended by this Agreement, all of the covenants and agreements and other
provisions contained in the RPTA, LSA and the other Documents shall remain in
full force and effect from and after the date of this Amendment.
8. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall be an original, and all of which, taken
together, shall constitute a single instrument. Delivery of an executed
counterpart of a signature page to this Amendment by facsimile shall be
effective as delivery of a manually executed counterpart of this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
day and year first above written.
BORROWER AND PURCHASER: SMCS CARE, LLC
By:
------------------------------------
Name:
Title:
LENDER: DAIWA HEALTHCO-3 LLC
By:
------------------------------------
Name:
Title:
PROVIDERS: STAR MULTI CARE SERVICES, INC.
By:
------------------------------------
Name:
Title:
STAR MULTI CARE SERVICES OF FLORIDA, INC.
By:
-------------------------------------
Name:
Title:
AMSERV HEALTHCARE OF OHIO, INC.
By:
-------------------------------------
Name:
Title:
AMSERV HEALTHCARE OF NEW JERSEY, INC.
By:
-------------------------------------
Name:
Title:
EFCC ACQUISITION CORP.
By:
-------------------------------------
Name:
Title:
ATTACHMENT I
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
May 31,
------------------------------------
ASSETS (Note 7) 1999 1998
------ -------------- --------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,734,421 $ 1,867,286
Accounts receivable, net of allowance for doubtful
accounts of $2,640,000 and $1,872,000 at May 31,
1999 and 1998, respectively (Notes 7 and 14) 9,767,549 10,108,879
Prepaid expenses and other current assets (Note 3) 349,053 382,899
Income taxes receivable - 1,225,946
Deferred income taxes (Note 8) 1,399,000 1,537,000
-------------- --------------
Total current assets 13,250,023 15,122,010
PROPERTY AND EQUIPMENT, net (Note 4) 1,732,455 1,999,924
NOTES RECEIVABLE FROM OFFICER (Note 12) 48,910 86,260
INTANGIBLE ASSETS, net (Note 5) 11,252,311 11,857,698
DEFERRED INCOME TAXES (Note 8) 1,735,000 619,000
OTHER ASSETS 152,849 185,715
-------------- --------------
$ 28,171,548 $ 29,870,607
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit line (Note 7) $ 6,225,484 $ 6,207,852
Accrued payroll and related expenses 3,074,708 3,214,207
Accounts payable 841,962 1,018,322
Accrued expenses (Note 6) 671,153 2,789,142
Due to Medicare (Note 9) 2,593,324 1,017,287
Current maturities of long-term debt - 125,000
-------------- --------------
Total current liabilities 13,406,631 14,371,810
-------------- --------------
LONG-TERM LIABILITIES:
Other long-term liabilities (Notes 6 and 15) 1,375,932 1,065,770
-------------- --------------
COMMITMENTS AND CONTINGENCY (Notes 15 and 16)
SHAREHOLDERS' EQUITY: (Notes 2, 10, 11, 12 and 15)
Convertible preferred stock - aggregate liquidation value
$575,000; $1.00 par value, 5,000,000 shares authorized;
575 and 0 shares issued, respectively 575 -
Common stock, $.001 par value, 10,000,000 shares authorized;
5,394,863 and 5,362,780 shares issued, respectively 5,395 5,363
Additional paid-in capital 21,463,285 20,951,899
Subscription receivable (397,782) (397,782)
Deficit (7,403,566) (5,847,531)
Treasury stock, 137,500 common shares
at May 31, 1999 and 1998 (278,922) (278,922)
-------------- --------------
Total shareholders' equity 13,388,985 14,433,027
-------------- --------------
$ 28,171,548 $ 29,870,607
============== ==============
See notes to consolidated financial statements
F-3
STAR MULTI CARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended
May 31,
--------------------------------------------------------
1999 1998 1997
--------------- --------------- --------------
REVENUES, net (Note 14) $ 47,108,677 $ 49,335,530 $ 41,857,126
--------------- --------------- --------------
OPERATING EXPENSES (Notes 12, 15 and 17)
Costs of revenues 32,718,139 34,341,973 28,245,533
Selling, general and administrative 12,610,794 13,494,731 9,346,385
Depreciation and amortization 1,106,952 910,659 624,248
Provision for doubtful accounts 1,580,224 1,561,874 479,640
Regulatory costs and related expenses (Note 6) - 2,030,511 -
Impairment of intangible assets 186,946 - -
Restructuring and termination expenses 222,615 362,718 -
--------------- --------------- --------------
48,425,670 52,702,466 38,695,806
--------------- --------------- --------------
OPERATING (LOSS) INCOME (1,316,993) (3,366,936) 3,161,320
INTEREST EXPENSE, net (652,714) (438,140) (140,477)
MERGER TRANSACTION COSTS - - (2,808,224)
--------------- --------------- --------------
(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (1,969,707) (3,805,076) 212,619
(BENEFIT) PROVISION FOR
INCOME TAXES (Note 8) (647,000) (1,183,000) 87,000
--------------- --------------- --------------
(LOSS) INCOME FROM CONTINUING
OPERATIONS (1,322,707) (2,622,076) 125,619
--------------- --------------- --------------
DISCONTINUED OPERATIONS: (Note 18)
Loss from discontinued operations, net of
tax benefit of $65,000, $690,000 and $0
for 1999, 1998 and 1997, respectively (145,008) (1,537,160) -
Loss on disposal, net of tax benefit
of $40,000 for 1999 (88,320) - -
--------------- --------------- --------------
LOSS FROM DISCONTINUED OPERATIONS (233,328) (1,537,160) -
--------------- --------------- --------------
NET (LOSS) INCOME $ (1,556,035) $ (4,159,236) $ 125,619
=============== =============== ==============
BASIC (LOSS) INCOME PER COMMON SHARE:
Continuing operations $(.25) $(.53) $.03
Discontinued operations (.03) (.31) -
Loss on disposal (.02) - -
---- ------ ----
Net (loss) income $(.30) $(.84) $.03
===== ===== ====
DILUTED (LOSS) INCOME PER COMMON SHARE:
Continuing operations $(.25) (.53) $.03
Discontinued operations (.03) (.31) -
Loss on disposal (.02) - -
---- ------ ----
Net (loss) income $(.30) $(.84) $.03
===== ===== ====
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic 5,246,684 4,972,207 3,969,910
========= ========= =========
Diluted 5,246,684 4,972,207 4,206,861
========= ========= =========
See notes to consolidated financial statements
F-4
