<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 0-26938
Home Health Corporation of America, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2224800
- ---------------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2200 Renaissance Boulevard
Suite 300
King of Prussia, PA 19406
- ---------------------------------------- ---------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code - 610-272-1717
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date:
Class Outstanding at May 9, 1997
----- --------------------------
Common stock, no par value 9,041,343
Exhibit index is located on page 21
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations for the three
and nine months ended March 31, 1996 and 1997 3
Condensed Consolidated Balance Sheets as of June 30, 1996
and March 31, 1997 4
Condensed Consolidated Statements of Cash Flows for the nine
months ended March 31, 1996 and 1997 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II: OTHER INFORMATION
Item 2. Changes in Securities 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
</TABLE>
2
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
--------------------------- ---------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues........................................ $24,820 $42,267 $68,965 $102,352
Operating costs and expenses:
Patient care..................................... 12,200 20,683 33,451 49,642
General and administrative....................... 8,937 15,367 26,332 36,594
Provision for doubtful accounts.................. 801 1,400 2,297 3,768
Depreciation..................................... 266 409 666 1,025
Amortization..................................... 281 678 685 1,498
Interest expense, net............................ 352 903 1,293 2,073
Merger and other nonrecurring.................... - 300 913 1,884
------------ ------------ ------------ ------------
Total operating costs and expenses............ 22,837 39,740 65,637 96,484
------------ ------------ ------------ ------------
Income before income taxes and extraordinary
item............................................. 1,983 2,527 3,328 5,868
Provision for income taxes.......................... 821 960 1,422 2,255
------------ ------------ ------------ ------------
Income before extraordinary item.................... 1,162 1,567 1,906 3,613
Extraordinary item:
Loss on debt redemption, net..................... - - 1,161 -
------------ ------------ ------------ ------------
Net income.................................... $1,162 $1,567 $745 $3,613
============ ============ ============ ============
Other data, including per share data:
Income available to common stockholders,
before extraordinary item...................... $1,145 $1,567 $1,018 $3,607
============ ============ ============ ============
Income per common and common equivalent
share, before extraordinary item............... $0.14 $0.18 $0.17 $0.42
============ ============ ============ ============
Net income (loss) available to common
stockholders, after extraordinary item......... $1,145 $1,567 $(143) $3,607
============ ============ ============ ============
Net income (loss) per common and common
equivalent share, after extraordinary item..... $0.14 $0.18 $(0.02) $0.42
============ ============ ============ ============
Weighted average shares used in computing
net income (loss) per common and
common equivalent share........................ 8,186 8,826 6,073 8,507
============ ============ ============ ============
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, March 31,
ASSETS 1996 1997
------ ------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................................ $ 1,695 $ 735
Accounts receivable, net of allowance for doubtful accounts of $4,252
and $9,326, respectively................................................ 28,042 48,217
Inventories.............................................................. 1,583 3,607
Prepaid expenses and other............................................... 1,183 3,016
Deferred income taxes.................................................... 925 885
------- --------
Total current assets................................................. 33,428 56,460
Property and equipment, net................................................ 8,945 16,888
Goodwill, net of accumulated amortization of $1,123 and $2,526,
respectively.............................................................. 26,540 62,106
Other assets, net.......................................................... 1,062 1,080
------- --------
Total assets....................................................... $69,975 $136,534
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current maturates of long-term debt...................................... $ 3,688 $ 4,632
Accounts payable......................................................... 3,135 4,763
Accrued salaries and related employee benefits........................... 2,418 4,297
Other current liabilities................................................ 3,181 3,532
Income taxes payable..................................................... 660 -
------- --------
Total current liabilities............................................ 13,082 17,224
Long-term debt, net of current portion..................................... 16,287 67,822
Other liabilities.......................................................... 1,054 782
Deferred income taxes...................................................... 160 172
Common stock, redeemable, no par value, 100 shares issued and
outstanding, stated at redemption value of $5.00 per share............... 500 -
Preferred stock, $.01 par value, 10 shares authorized, 10 shares issued and
outstanding, convertible into 10 shares of common stock or $1,250
upon mandatory redemption on July 13, 1996............................... 1,244 -
Stockholders' equity:
Preferred stock (undesignated), no par value, no shares and 10,000 shares
authorized; no shares issued and outstanding............................. - -
Common stock, no par value, 20,000 shares authorized; 8,075 and
9,134 shares issued, 8,075 and 9,041 outstanding at June 30
and March 31, respectively.............................................. 33,829 43,098
Retained earnings........................................................ 3,837 7,441
------- --------
37,666 50,539
Stock subscriptions receivable........................................... (18) (5)
------- --------
Total stockholders' equity........................................... 37,648 50,534
------- --------
Total liabilities and stockholders' equity......................... $69,975 $136,534
======= ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE>
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine months ended March 31,
-----------------------------------
1996 1997
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities:
Net income............................................................ $ 745 $ 3,613
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, amortization and other................................. 2,250 4,090
Provision for doubtful accounts...................................... 2,297 3,768
Write-off of bridge financing note payable discount.................. 405 -
Write-off of deferred financing fees................................. 200 -
Loss on debt redemption.............................................. 1,161 -
Deferred income taxes................................................ 47 52
Write-off of deferred offering costs................................. - 300
Net changes in certain assets and liabilities, net of acquisitions:
Accounts receivable.................................................. (7,762) (14,694)
Inventories.......................................................... (618) (939)
Prepaid expenses and other........................................... (324) (987)
Accounts payable, accrued expenses and other......................... (480) (5,418)
Income taxes payable................................................. (86) (810)
-------- --------
Net cash flows used in operating activities........................ (2,165) (11,025)
-------- --------
Cash flows used in investing activities:
Purchases of property and equipment................................... (2,928) (2,768)
Cash paid for acquisitions, net of cash acquired...................... (12,780) (32,382)
Increase in other assets.............................................. (12) (292)
-------- --------
Net cash flows used in investing activities........................ (15,720) (35,442)
-------- --------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt.......................................... 5,075 47,890
Repayments of long-term debt.......................................... (1,169) (2,109)
Proceeds from bridge financing........................................ 13,000 -
Repayment of bridge financing......................................... (13,000) -
Repayment of debt with Offering proceeds.............................. (9,984) -
Payment of deferred financing fees.................................... (200) (287)
Repayment of preferred stock and preferred stock dividends............ (607) -
Proceeds from issuance of common stock................................ 24,778 13
-------- --------
Net cash flows provided by financing activities.................... 17,893 45,507
-------- --------
Net increase (decrease) in cash and cash equivalents.................... 8 (960)
Cash and cash equivalents, beginning of year............................ 1,653 1,695
-------- --------
Cash and cash equivalents, end of quarter............................... $ 1,661 $ 735
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
<PAGE>
Home Health Corporation of America, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Home
Health Corporation of America, Inc. and Subsidiaries (the "Company") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. Additionally, although the June
30, 1996 condensed consolidated balance sheet was derived from audited
financial statements, as restated for an acquisition accounted for as a
pooling of interest, described in Note 2, it does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 1997. The unaudited interim condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the year ended June 30, 1996 included in the Company's Form
10-K filed with the Securities and Exchange Commission.
2. Acquisitions
Pooling of Interests
On November 12, 1996, the Company acquired, in a merger transaction, Home
Health Systems, Inc. ("HHSI"), a provider of durable medical equipment and
infusion and respiratory therapy services with $8.2 million in net revenues
for the twelve month period ended June 30, 1996 (the "HHSI Merger") and
operations in New Jersey, Pennsylvania, Maryland and Illinois. The Company
issued 455,238 shares of its Common Stock, net of shares that are treated
similarly to treasury shares for accounting purposes, in exchange for all the
issued and outstanding shares of HHSI. The HHSI Merger was accounted for as a
pooling of interests and, accordingly, the Company's condensed consolidated
financial statements and notes thereto have been restated to combine the
accounts and operations of HHSI with those of the Company for all periods
presented.
6
<PAGE>
Net revenues and net income attributable to the operations of HHSI prior to
the HHSI Merger are as follows:
<TABLE>
<CAPTION>
Three Months Nine Months July 1, 1996 to
Ended March 31, Ended March 31, November 12,
1996 1996 1996
------------------ ------------------ -----------------
(amounts in thousands)
<S> <C> <C> <C>
Net revenues $2,038 $5,999 $3,330
Net income (loss) $ (31) $ (54) $ 76
</TABLE>
Merger costs of $1.6 million, of which $1.3 million are expected to require
the use of cash, resulting from this acquisition were recorded during the
three months ended December 31, 1996 and are reflected in the accompanying
condensed consolidated statements of operations.
Purchases
In the first quarter of fiscal 1997, the Company acquired the assets of (i)
Dailey Resources, Ltd., a provider of durable medical equipment and
respiratory therapy services with $1.8 million in aggregate net revenues for
the twelve month period ended December 31, 1995, and operations in Scranton,
Pennsylvania, (ii) National Home Infusion, Inc., a provider of infusion
therapy services with $1.3 million in aggregate net revenues for the twelve
month period ended September 30, 1995, and operations in Sarasota, Florida,
and (iii) Eastern Shore Health Services, Inc., a provider of home nursing
services with $3.6 million in aggregate net revenues for the twelve month
period ended June 30, 1996, and operations in Berlin and Salisbury, Maryland.
The aggregate purchase price for these acquisitions was $5.3 million. The cash
portion of this consideration was paid through borrowings under the Company's
senior credit facility (the "Credit Facility"). Pro forma results are not
presented as they are not significant.
On October 1, 1996, the Company acquired certain assets and assumed certain
liabilities of Medical Express, Inc., a durable medical equipment and
respiratory therapy company located in Bristol, Pennsylvania with $2.5 million
in net revenues for the twelve month period ended June 30, 1996. The
aggregate purchase price for this acquisition was $3.2 million. The cash
portion of this consideration was paid through borrowings under the Credit
Facility. This acquisition was accounted for as a purchase. Pro forma
results are not presented as they are not significant.
Effective December 1, 1996, the Company acquired all of the outstanding
capital stock of R.S.D. Management Services, Inc., a provider of primarily
Medicare cost-reimbursed nursing and related patient services with
approximately $18.3 million of net revenues for the twelve month period ended
June 30, 1996 and operations in Massachusetts and New Hampshire (the "RSD
Acquisition"). The consideration paid for the RSD Acquisition was
approximately $11.1 million. The cash portion of this consideration was paid
through borrowings under the Credit Facility. This acquisition was accounted
for as a purchase.
7
<PAGE>
Information required to prepare unaudited pro forma summary results of
operations is not available, thus pro forma information is not presented.
Effective January 1, 1997, the Company acquired certain assets of LHS
Holdings, Inc. ("LHS") and certain assets of two of its subsidiaries, which
provide primarily Medicare cost-reimbursed nursing and related patient
services. The Company also purchased certain assets of two LHS affiliated
companies on April 9, 1997, which provide primarily pediatric nursing and
infusion therapy services (collectively, the purchases, including those
related to the affiliates, are hereafter referred to as the "LHS
Acquisition"). The operations of the companies acquired in the LHS
Acquisition had net revenues of $16.0 million for the twelve month period
ended June 30, 1996. The aggregate preliminary consideration payable for the
LHS Acquisition is $8.2 million, including an estimated contingent amount of
$1.6 million, which will be adjusted as of December 31, 1997. Of this amount,
$2.0 million and $6.2 million were paid on January 10, 1997 and April 9, 1997,
respectively, which included $6.2 million funded through borrowings under the
Credit Facility, with the remainder comprised of subordinated notes and common
stock. This acquisition was accounted for as a purchase.
The following unaudited pro forma summary information combines the
consolidated results of operations of the Company and the LHS Acquisition,
assuming this acquisition had occurred at the beginning of each of the
following periods:
<TABLE>
<CAPTION>
Three months Ended Nine Months Ended
March 31, March 31,
1996 1997 1996 1997
------------ ------------ ------------ ------------
unaudited
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Net revenues ......................... $29,672 $44,086 $80,886 $116,814
Income before income taxes and
extraordinary item.................... 1,744 2,546 3,087 6,079
Income before extraordinary item...... 923 1,586 1,664 3,824
Income per share before extraordinary
item.................................. 0.11 0.18 0.13 0.44
Net income............................ 923 1,586 504 3,825
Net income per share.................. $ 0.11 $ 0.18 $ (0.06) $ 0.44
</TABLE>
The pro forma results presented above do not necessarily represent results
which would have occurred if the LHS Acquisition had taken place at the
beginning of each period, nor are they indicative of the results of future
combined operations.
8
<PAGE>
Effective February 1, 1997, the Company acquired the assets of Medical Air
Supply, Inc. and Cambridge Medical Company, durable medical equipment
providers located in Texas with $6.5 million of net revenues for the twelve
month period ended December 31, 1995. Additionally, effective March 1, 1997,
the Company acquired the stock of Nahatan Drug, Inc. ("Nahatan"), a durable
medical equipment provider located in Massachusetts, New Hampshire and Rhode
Island with $7.2 million of net revenues for the twelve month period ended
February 29, 1996. The aggregate consideration paid and debt assumed for these
two acquisitions was $ 23.8 million, the cash portion of which was funded
through the Credit Facility. In the event the Company files a registration
statement to register and sell shares of its stock, the Company may be
required to issue additional shares to the sellers of Nahatan if the fair
market value, as defined in the purchase agreement, of the stock is below
$11.00 per share. This commitment expires after 20 days of the effectiveness
of a shelf registration filed to register these shares or immediately should
the sellers decline the registration of their shares under a registration of
shares being offered by the Company. The Company is required to file a shelf
registration for these shares by October 31, 1997 if it does not otherwise
file to register shares prior to such date. Issuance of additional shares
would be recorded as additional consideration for this acquisition. These
acquisitions were accounted for as purchases. Pro forma results are not
presented as they are not significant.
The purchase prices for the acquisitions accounted for as purchases have been
allocated to identifiable assets, principally accounts receivable, equipment
and inventory. The excess of the purchase prices over the fair value of the
net assets acquired of $37.4 million was recorded as goodwill and is being
amortized on a straight-line basis over 20 to 25 years.
3. Deferred Offering Costs
During the three months ended March 31, 1997, the Company wrote-off deferred
costs aggregating $300,000 related to an offering to sell shares of the
Company's common stock through a Registration Statement on Form S-1 filed with
the Securities and Exchange Commission on November 1, 1996 and withdrawn on
December 30, 1996. The write-off was recorded based upon management's
judgment that a similar offering likely would not occur prior to June 30, 1997
due to current market conditions. The write-off of the deferred costs are
included as a nonrecurring expense in the accompanying fiscal 1997 condensed
consolidated statements of operations.
4. Senior Credit Facility
On March 13, 1997, the Company amended the Credit Facility, the principal
effect of which was to increase available borrowings from $50 to $100 million.
Borrowings under the Credit Facility are due on March 13, 2000.
9
<PAGE>
5. Supplemental Cash Flow Information
Supplemental disclosure of cash flow information for the nine months ended
March 31:
<TABLE>
<CAPTION>
1996 1997
---- ----
(amounts in thousands)
<S> <C> <C>
Non-cash investing and financing activities:
Acquisitions:
Assets acquired.............................. $18,646 $53,759
Less:
Liabilities assumed and acquisition costs.... 1,366 10,902
Issuance of subordinated seller notes....... 1,500 4,925
Issuance of common stock..................... - 5,550
Issuance of convertible subordinated note
payable................................... 3,000 -
------------ ------------
Cash paid, net of cash acquired.......... $12,780 $32,382
============ ============
Capital lease obligations incurred.............. - $ 2,256
============ ============
Conversion of subordinated note to 400 shares
of common stock, no par value................ $ 3,000 -
============ ============
Write-off of Series C preferred stock discount.. $ 787 -
============ ============
Conversion of convertible notes into HHSI
common shares................................ - $ 1,945
============ ============
Exchange of HHSI shares for the Company's common stock:
Conversion of Preferred stock................ - $(1,250)
Additional paid-in capital................... - (2,060)
Common stock, no par......................... - 3,310
------------ ------------
-
============ ============
Recapitalization:
Class A common stock......................... $ (110) -
Class B common stock......................... (173) -
Class C common stock......................... (1,217) -
Redeemable Class B common stock.............. (500) -
Additional paid-in capital................... (3,504) -
Treasury stock............................... 291 -
Redeemable common stock, no par.............. 500 -
Common stock, no par......................... 4,713 -
------------ ------------
- -
============ ============
Reclassification to common stock related to
expiration of redemption requirements........ - $ 500
============ ============
</TABLE>
10
<PAGE>
6. New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 128 ("SFAS 128"), "Earnings Per Share" which
is effective for periods ending after December 15, 1997. The overall
objective of SFAS 128 is to simplify the calculation of earnings per share and
achieve comparability with International Accounting Standards. The Company
will be required to adopt SFAS 128 in the second quarter of fiscal 1998, but
does not expect that the adoption will have a material effect on the Company's
consolidated financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The financial condition and results of operations of the Company for the three
and nine months ended March 31, 1997 compared with the three and nine months
ended March 31, 1996 have been affected by both acquisitions and internal
growth.
On November 12, 1996, the Company acquired, in a merger transaction, Home
Health Systems, Inc. ("HHSI"), a provider of durable medical equipment and
infusion and respiratory therapy services with $8.2 million in net revenues
for the twelve month period ended June 30, 1996 (the "HHSI Merger") and
operations in New Jersey, Pennsylvania, Maryland and Illinois. The Company
issued 455,238 shares of its Common Stock, net of shares that are treated
similarly to treasury shares for accounting purposes, in exchange for all the
issued and outstanding shares of HHSI. The HHSI Merger was accounted for as a
pooling of interests and, accordingly, the Company's condensed consolidated
financial statements and notes thereto have been restated to combine the
accounts and operations of HHSI with those of the Company for all periods
presented. Merger costs of $1.6 million, of which $1.3 million are expected
to require the use of cash, resulting from this acquisition were recorded
during the three months ended December 31, 1996 and are reflected in the
accompanying condensed consolidated statements of operations.
Effective February 1, 1997, the Company acquired the assets of Medical Air
Supply, Inc. and Cambridge Medical Company, durable medical equipment
providers located in Texas with $6.5 million of net revenues for the twelve
month period ended December 31, 1995. Additionally, effective March 1, 1997,
the Company acquired the stock of Nahatan Drug, Inc., a durable medical
equipment provider located in Massachusetts, New Hampshire and Rhode Island
with $7.2 million of net revenues for the twelve month period ended February
29, 1996. The aggregate consideration paid and debt assumed for these two
acquisitions was $23.8 million, the cash portion of which was funded through
the Company's senior credit facility (the "Credit Facility"). These
acquisitions were accounted for as purchases.
11
<PAGE>
Effective January 1, 1997, the Company acquired certain assets of LHS
Holdings, Inc. ("LHS") and certain assets of two of its subsidiaries, which
provide primarily Medicare cost-reimbursed nursing and related patient
services. The Company also purchased certain assets of two LHS affiliated
companies on April 9, 1997, which provide primarily pediatric nursing and
infusion therapy services (collectively, the purchases, including those
related to the affiliates, are hereafter referred to as the "LHS
Acquisition"). The operations of the companies acquired in the LHS
Acquisition had net revenues of $16.0 million for the twelve month period
ended June 30, 1996. The aggregate preliminary consideration payable for the
LHS Acquisition is $8.2 million, including an estimated contingent amount of
$1.6 million, which will be adjusted as of December 31, 1997. Of this amount,
$2.0 million and $6.2 million were paid on January 10, 1997 and April 9, 1997,
respectively, which included $6.2 million funded through borrowings under the
Credit Facility with the remainder comprised of subordinated notes and common
stock. This acquisition was accounted for as a purchase.
Effective December 1, 1996, the Company acquired all of the outstanding
capital stock of R.S.D. Management Services, Inc., a provider of primarily
Medicare cost-reimbursed nursing and related patient services with
approximately $18.3 million of net revenues for the twelve month period ended
June 30, 1996 and operations in Massachusetts and New Hampshire (the "RSD
Acquisition"). The consideration paid for the RSD Acquisition was
approximately $11.1 million. The cash portion of this consideration was paid
through borrowings under the Credit Facility. This acquisition was accounted
for as a purchase.
On October 1, 1996, the Company acquired certain assets and assumed certain
liabilities of Medical Express, Inc., a durable medical equipment and
respiratory therapy company located in Bristol, Pennsylvania with $2.5 million
in net revenues for the twelve month period ended June 30, 1996. The
aggregate purchase price for this acquisition was $3.2 million. The cash
portion of this consideration was paid through borrowings under the Credit
Facility. This acquisition was accounted for as a purchase.
Additionally, the nine months ended March 31, 1997 include the results of
operations from the acquisition during the fourth quarter of fiscal 1996 of
providers of home nursing and mobile diagnostic services in the Tampa/St.
Petersburg, Florida market and from the acquisition during the first quarter
of fiscal 1997 of providers of home nursing, durable medical equipment and
respiratory and infusion therapy services in Scranton, Pennsylvania, Sarasota,
Florida, and Berlin and Salisbury, Maryland. These acquisitions were
accounted for as purchases.
12
<PAGE>
<TABLE>
<CAPTION>
Results of Operations
Percentage of net revenue Percentage of net revenue
for the three months ended for the nine months ended
March 31, March 31,
------------------------------ -----------------------------
1996 1997 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses:
Patient care 49.2 48.9 48.5 48.5
General and administrative 36.0 36.4 38.2 35.8
Provision for doubtful accounts 3.2 3.3 3.3 3.7
Depreciation 1.1 1.0 1.0 1.0
Amortization 1.1 1.6 1.0 1.5
Interest expense, net 1.4 2.1 1.9 2.0
Merger and other nonrecurring - 0.7 1.3 1.8
----------- ----------- ----------- -----------
Income before income taxes 8.0 6.0 4.8 5.7
Income taxes 3.3 2.3 2.0 2.2
Extraordinary loss - - 1.7 -
----------- ----------- ----------- -----------
Net income (loss) 4.7 % 3.7 % 1.1 % 3.5 %
=========== =========== =========== ===========
</TABLE>
Three Months Ended March 31, 1997 Compared with the Three Months Ended
March 31, 1996.
Net revenues. Net revenues increased to $42.3 million during the three
months ended March 31, 1997, representing an increase of $17.4 million, or
70%, compared with the three months ended March 31, 1996. Of this increase,
$14.8 million resulted from the acquisitions completed since the fourth
quarter of fiscal 1996 and $2.6 million resulted from internal growth at
existing branch locations. Internal growth in net revenues relating to
services and products other than Medicare cost-reimbursed nursing and
related patient services from the three months ended March 31, 1996 to the
third quarter in fiscal 1997 was 21%. This growth primarily resulted from
cross-selling the Company's services and products and increasing patient
referrals, particularly nursing services referred to the Company by managed
care organizations. For the same periods, although same-branch Medicare
cost-reimbursed nursing and related patient service visits increased 3%,
same-branch net revenues decreased 4% as a result of a decrease in general
and administrative costs at these branches, resulting in less cost
reimbursement.
Medicare cost-reimbursed nursing and related patient service net revenues,
including net revenues relating to acquired companies, increased 116% to
$19.1 million and related visits increased 161% to 293,000 visits in the
three months ended March 31, 1997 compared with the three months ended March
31, 1996. Non-Medicare nursing hourly- and visit-based net revenues,
including net revenues relating to acquired companies, increased 68% to $8.8
million and related hours and visits increased 173% and 40%,
13
<PAGE>
respectively, during the same period. The increase in Medicare visits and
the increase in non-Medicare hours and visits resulted from acquisitions of
providers of home nursing services in the Tampa/St. Petersburg, Florida
market in the fourth quarter of fiscal 1996 and in the Texas, Maryland,
Massachusetts and New Hampshire markets during fiscal 1997, as well as
increased referrals. Respiratory therapy, infusion therapy and durable
medical equipment net revenues increased $3.7 million, or 35%, to $14.4
million for the three months ended March 31, 1997 from $10.7 million for the
three months ended March 31, 1996 as a result of acquisitions, increased
referrals and effective cross-selling of these services and products to the
Company's nursing patients.
Patient care. Patient care costs increased to $20.7 million during the three
months ended March 31, 1997, representing an increase of $8.5 million, or
70%, compared with the three months ended March 31, 1996. This increase
principally related to increases in net revenues. These costs decreased
slightly as a percentage of net revenues from 49.2% to 48.9%.
General and administrative. General and administrative expenses increased to
$15.4 million during the three months ended March 31, 1997, representing an
increase of $6.4 million, or 72%, compared with the three months ended March
31, 1996. This increase principally related to increases in net revenues.
These costs increased slightly as a percentage of net revenues from 36.0% to
36.4%.
Provision for doubtful accounts. The provision for doubtful accounts
increased to $1.4 million during the three months ended March 31, 1997,
representing an increase of $599,000, or 75%, compared with the three months
ended March 31, 1996. This increase was principally related to increases in
net revenues. Bad debt expense increased slightly as a percentage of net
revenues from 3.2% to 3.3%.
Depreciation. For the three months ended March 31, 1997, depreciation
expense increased to $409,000. This represented an increase of $143,000, or
54%, over the three months ended March 31, 1996. This increase principally
resulted from capital expenditures for vehicles, management information
systems and equipment in support of the Company's internal growth, with the
remainder resulting from depreciation on assets acquired in connection with
acquisitions.
Amortization. For the three months ended March 31, 1997, amortization
increased to $678,000. This represented an increase of $397,000, or 141%,
over the three months ended March 31, 1996. This increase was attributable
to amortization of goodwill arising from acquisitions in fiscal 1996 and
1997.
Interest expense, net. Interest expense, net, increased $551,000, or 157%,
to $903,000 during the three months ended March 31, 1997 compared with the
three months ended March 31, 1996. This increase resulted from increased
borrowings for acquisitions in fiscal 1996 and fiscal 1997 and increased
borrowings to finance working capital requirements for internal growth.
14
<PAGE>
Merger and other nonrecurring. During the three months ended March 31, 1997,
the Company wrote-off deferred costs aggregating $300,000 related to an
offering to sell shares of the Company's common stock through a Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on
November 1, 1996 and withdrawn on December 30, 1996. The write-off was
recorded based upon management's judgment that a similar offering likely
would not occur prior to June 30, 1997 due to current market conditions.
Such costs were comprised principally of legal, accounting and printing
costs.
Provision for income taxes. The Company's effective tax rate decreased to
38.0% of pretax income for the three months ended March 31, 1997 from 41.4%
in the three months ended March 31, 1996 principally due to lower effective
state income tax rates.
Nine months ended March 31, 1997 Compared with the Nine months ended March
31, 1996.
Net revenues. Net revenues increased to $102.4 million during the nine
months ended March 31, 1997, representing an increase of $33.4 million, or
48%, compared with the nine months ended March 31, 1996. Of this increase,
$26.2 million resulted from the acquisitions completed since the fourth
quarter of fiscal 1996 and $7.2 million resulted from internal growth at
existing branch locations. Internal growth in net revenues relating to
services and products other than Medicare cost-reimbursed nursing and
related patient services from the nine months ended March 31, 1996 to the
nine months ended March 31, 1997 was 28%. This growth primarily resulted
from cross-selling the Company's services and products and increasing
patient referrals, particularly nursing services referred to the Company by
managed care organizations. For the same periods, net revenues and visits
from same-branch Medicare cost-reimbursed nursing and related patient
services decreased 5% and 4%, respectively, as a result of the payor shift
of Medicare home nursing patients to managed care organizations,
particularly in the Florida market, and a decrease in general and
administrative costs at these branches during the third quarter of fiscal
1997, resulting in less cost reimbursement.
than Medicare cost-reimbursed nursing and related patient services,
including net revenues relating to acquired companies, increased 56% to
$41.6 million and related visits increased 79% to 591,000 visits in the
three months ended March 31, 1997 compared with the three months ended March
31, 1996. Non-Medicare nursing hourly- and visit-based net revenues,
including net revenues relating to acquired companies, increased 53% to
$23.4 million and related hours and visits increased 128% and 49%,
respectively, during the same period. The increase in Medicare visits and
the increase in non-Medicare hours and visits resulted from acquisitions of
providers of home nursing services in the Tampa/St. Petersburg, Florida
market in the fourth quarter of fiscal 1996 and in the Texas, Maryland,
Massachusetts and New Hampshire markets during fiscal 1997, as well as
increased referrals. Respiratory therapy, infusion therapy and durable
medical equipment net revenues, including net revenues relating to acquired
companies,
15
<PAGE>
increased $10.4 million, or 39%, to $37.4 million for the nine months ended
March 31, 1997 from $27.0 million for the nine months ended March 31, 1996 as
a result of acquisitions, increased referrals and effective cross-selling of
these services and products to the Company's nursing patients.
Patient care. Patient care costs increased to $49.6 million during the nine
months ended March 31, 1997, representing an increase of $16.2 million, or
48%, compared with the nine months ended March 31, 1996. This increase
principally related to increases in net revenues. These costs remained flat
as a percentage of net revenues at 48.5%.
General and administrative. General and administrative expenses increased to
$36.6 million during the nine months ended March 31, 1997, representing an
increase of $10.3 million, or 39%, compared with the nine months ended March
31, 1996. This increase principally related to increases in net revenues.
These costs decreased as a percentage of net revenues from 38.2% to 35.8% due
to the Company's implementation of cost containment initiatives and because
certain general and administrative expenses did not increase directly with
increases in net revenues.
Provision for doubtful accounts. The provision for doubtful accounts increased
to $3.8 million during the nine months ended March 31, 1997, representing an
increase of $1.5 million, or 64%, compared with the nine months ended March
31, 1996. This increase was due partially to increases in net revenues. In
addition, bad debt expense increased as a percentage of net revenues from 3.3%
to 3.7%, primarily due to an increase in net revenues from managed care
organizations whose approval process for authorization and payment for
services is more complex than other payors resulting in more coverage and
payment denials. Also, managed care organizations generally require patients
to be responsible for copayments which may be difficult to collect.
Depreciation. For the nine months ended March 31, 1997, depreciation expense
increased to $1.0 million. This represented an increase of $359,000, or 54%,
over the nine months ended March 31, 1996. This increase principally resulted
from capital expenditures for vehicles, management information systems and
equipment in support of the Company's internal growth, with the remainder
resulting from depreciation on assets acquired in connection with
acquisitions.
Amortization. For the nine months ended March 31, 1997, amortization increased
to $1.5 million. This represented an increase of $813,000, or 119%, over the
nine months ended March 31, 1996. This increase was attributable to
amortization of goodwill arising from acquisitions in fiscal 1996 and 1997.
Interest expense, net. Interest expense, net, increased $780,000, or 60%, to
$2.1 million during the nine months ended March 31, 1997 compared with the
nine months ended March 31, 1996. This increase resulted from increased
borrowings for acquisitions in fiscal 1996 and fiscal 1997 and increased
borrowings to finance working capital requirements for internal growth.
16
<PAGE>
Merger and other nonrecurring. During fiscal 1997, certain nonrecurring
expenses of $1.6 million were recorded during the three months ended December
31, 1996 as a result of the HHSI Merger. Such costs were comprised of
transaction fees, legal and accounting costs and other nonrecurring costs
associated with the merger. Additionally, during the three months ended March
31, 1997, the Company wrote-off deferred costs aggregating $300,000 related to
an offering to sell shares of the Company's common stock through a
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on November 1, 1996 and withdrawn on December 30, 1996. The write-
off was recorded based upon management's judgment that a similar offering
likely would not occur prior to June 30, 1997 due to current market
conditions. Such costs were comprised principally of legal, accounting and
printing costs.
During fiscal 1996, certain nonrecurring expenses of $913,000 were recorded in
connection with bridge financing incurred in connection with an acquisition in
Tampa, Florida and repaid with a portion of the net proceeds from the
Company's initial public offering.
Provision for income taxes. The Company's effective tax rate decreased to
38.4% of pretax income for the nine months ended March 31, 1997 from 42.7% in
the nine months ended March 31, 1996 due principally to lower effective state
income tax rates.
Loss on debt redemption, net. An extraordinary charge of $1.2 million was
recorded in the three months ended December 31, 1995, net of estimated income
tax benefit, related to the write-off of deferred financing costs and
remaining unamortized discounts on senior subordinated indebtedness repaid
with a portion of the proceeds from the Company's initial public offering.
Liquidity and Capital Resources
Working capital increased to $39.2 million at March 31, 1997 from $20.3
million at June 30, 1996, an increase of $18.9 million. The increase
primarily resulted from an increase in accounts receivable of $20.2 million.
This increase was principally due to acquisitions, internal growth and a
slight increase in days net revenues outstanding. The increase in days net
revenues outstanding resulted from an increase in the portion of net revenues
from managed care organizations. Cash flow used in operations was $11.0
million for the nine months ended March 31, 1997 compared with $2.2 million
used in operations in the nine months ended March 31, 1996 due primarily to
the increase in accounts receivable and a decrease in accounts payable during
fiscal 1997.
Cash expenditures for acquisitions were $32.4 million and $12.8 million for
the nine months ended March 31, 1997 and 1996, respectively.
Expenditures for purchases of capital equipment were $2.8 million and $2.9
million for the nine months ended March 31, 1997 and 1996, respectively,
including $2.3 million of
17
<PAGE>
purchases in fiscal 1997 funded through a collateralized master lease
agreement. The Company expects to spend approximately $1.9 million for capital
expenditures for the remainder of fiscal 1997. The Company typically funds its
capital expenditures through a master lease arrangement.
On March 13, 1997, the Company amended the Credit Facility to increase
available borrowings from $50 to $100 million, to be used for acquisitions,
working capital and other general corporate purposes. On May 9, 1997, the
Company had $30.8 million of unused commitment for working capital and
acquisitions under the Credit Facility.
Management anticipates the Company's available lines of credit and cash flow
generated from operations will be adequate to enable the Company to fund its
operations, capital expenditures and anticipated internal growth for at least
the next twelve months. Despite the amount of unused commitment under the
Credit Facility, there is no assurance the Company can continue to acquire
businesses consistent with the size and number of acquisitions completed
through April of fiscal 1997, due to, among other factors, limitations on
access to additional funds imposed by the Credit Facility financial covenants.
See the Company's accompanying condensed consolidated financial statements and
notes thereto for information relating to the impact on the Company of new
accounting pronouncements.
18
<PAGE>
Item 2. Changes in Securities
On March 27, 1997, the Company completed its acquisition of Nahatan and, in
connection therewith, issued to the owners of all the capital stock of Nahatan
in exchange for such stock an aggregate of 380,048 shares of the Company's
common stock. These shares were not registered under the Securities Act of
1933 (the "Act"), as amended, in reliance upon the exemption from such
registration provided by Section 4(2) of the Act.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits
No. Description
--- -----------
<S> <C>
10.1 Third Amended and Restated Credit Agreement
11.1 Computation of primary and fully diluted earnings per share for the
three and nine months ended March 31, 1997.
11.2 Computation of primary and fully diluted earnings per share
before extraordinary item for the three and nine months ended
March 31, 1996.
11.3 Computation of primary and fully diluted earnings (loss) per
share after extraordinary item for the three and nine months ended
March 31, 1996.
27.0 Financial data schedule for the nine month period ended March 31,
1997.
</TABLE>
(a) Reports on Form 8-K
The following reports were filed with respect to Item 2, "Acquisitions
and Dispositions of Assets," and Item 7, "Financial Statements, Pro Forma
Financial Information and Exhibits," on Form 8-K and 8-K/A during the
three months ended March 31, 1997:
(i) Form 8-K on January 24, 1997 related to the LHS Acquisition.
(ii) Form 8-K/A on February 11, 1997, which included pro forma financial
information and audited financial statements of the companies
acquired in the RSD Acquisition.
(iii) Form 8-K/A on March 20, 1997, which included pro forma financial
information and audited financial statements of the companies
acquired in the LHS Acquisition.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HOME HEALTH CORPORATION OF AMERICA, INC.
Date: May 15, 1997 /s/ Bruce J. Colburn
-------------------------------------------
Chief Financial and Accounting Officer
20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
10.1 Third Amended and Restated Credit Agreement
11.1 Computation of primary and fully diluted earnings per share for the
three and nine months ended March 31, 1997.
11.2 Computation of primary and fully diluted earnings per share before
extraordinary item for the three and nine months ended March 31, 1996.
11.3 Computation of primary and fully diluted earnings (loss) per share after
extraordinary item for the three and nine months ended March 31, 1996.
27.0 Financial data schedule for the nine month period ended March 31, 1997.
</TABLE>
21
<PAGE>
EXHIBIT 10.1
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
AMONG
HOME HEALTH CORPORATION OF DELAWARE, INC.
("BORROWER"),
THE BANKS SET FORTH ON SCHEDULE 1 HERETO
("BANKS")
AND
CORESTATES BANK, N.A.,
AS AGENT FOR THE BANKS
("AGENT")
MARCH 13, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SECTION 1 - DEFINITIONS..................................... 1
1.1. Definitions...................................... 1
1.2. Rules of Construction............................ 14
SECTION 2 - CREDIT FACILITIES............................... 15
2.1. The Facilities................................... 15
2.2. Promissory Notes................................. 17
2.3. Banks' Participation............................. 18
2.4. Use of Proceeds.................................. 18
2.5. Repayment........................................ 19
2.6. Interest......................................... 19
2.7. Advances......................................... 26
2.8. Reduction and Termination of Commitment.......... 28
2.9. Prepayment....................................... 29
2.10. Payments........................................ 29
2.11. Commitment Fee.................................. 30
2.12. Closing Fee..................................... 30
2.13. Agent's Fees.................................... 30
2.14. Regulatory Changes in Capital Requirements...... 30
SECTION 2A - LETTERS OF CREDIT.............................. 32
2A.1. Availability of Credits......................... 32
2A.2. Commitment Availability......................... 32
2A.3. Approval and Issuance........................... 33
2A.4. Obligations of the Borrower..................... 33
2A.5. Payment by Banks on Letters of Credit........... 34
2A.6. Collateral Security............................. 35
2A.7. General Terms of Credits........................ 36
SECTION 3 - REPRESENTATIONS AND WARRANTIES.................. 37
3.1. Organization and Good Standing................... 37
3.2. Power and Authority; Validity of Agreement....... 37
3.3. No Violation of Laws or Agreements............... 37
3.4. Material Contracts............................... 37
3.5. Compliance....................................... 37
3.6. Litigation....................................... 38
3.7. Title to Assets.................................. 38
3.8. Accuracy of Information; Full Disclosure......... 38
3.9. Taxes and Assessments............................ 39
3.10. Indebtedness..................................... 39
3.11. Management Agreements............................ 39
3.12. Investments...................................... 39
3.13. ERISA............................................ 40
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
3.14. Fees and Commissions............................. 40
3.15. No Extension of Credit for Securities............ 41
3.16. Perfection of Security Interest.................. 41
3.17. Hazardous Wastes, Substances and Petroleum
Products....................................... 41
3.18. Solvency......................................... 41
3.19. Employee Controversies........................... 42
3.20. Inactive Subsidiaries............................ 42
SECTION 4 - CONDITIONS...................................... 43
4.1. First Advance.................................... 43
4.2. Advances or Issuances............................ 45
SECTION 5 - AFFIRMATIVE COVENANTS........................... 45
5.1. Existence and Good Standing...................... 45
5.2. Quarterly Financial Statements................... 45
5.3. Annual Budget and Financial Statements........... 46
5.4. Compliance Certificate........................... 46
5.5. Reserves, etc.................................... 46
5.7. Public Information............................... 47
5.8. Books and Records................................ 47
5.9. Insurance........................................ 47
5.10. Litigation; Event of Default..................... 47
5.11. Taxes............................................ 47
5.12. Costs and Expenses............................... 48
5.13. Compliance; Notification......................... 48
5.14. ERISA............................................ 49
5.15. Maximum Funded Debt to Adjusted EBITDA Ratio..... 49
5.16. Fixed Charge Coverage Ratio...................... 50
5.17. Maximum Leverage Ratio........................... 50
5.18. Management Changes............................... 50
5.19. Transactions Among Affiliates.................... 50
5.20. Joinders......................................... 50
5.21. Subordination Agreements......................... 51
5.22. Other Information................................ 51
SECTION 6 - NEGATIVE COVENANTS.............................. 51
6.1. Indebtedness..................................... 51
6.2. Guaranties....................................... 51
6.3. Loans............................................ 52
6.4. Liens and Encumbrances........................... 52
6.5. Additional Negative Pledge....................... 52
6.6. Restricted Payments.............................. 53
6.7. Transfer of Assets; Liquidation.................. 53
6.8. Acquisitions and Investments..................... 53
6.9. Payments to Affiliates........................... 55
6.10. Use of Proceeds.................................. 55
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 7 - ADDITIONAL COLLATERAL AND RIGHT OF SET-OFF...... 55
7.1. Additional Collateral............................ 55
7.2. Right of Set-off................................. 55
SECTION 8 - DEFAULT......................................... 56
8.1. Events of Default................................ 56
8.2. Remedies......................................... 59
SECTION 9 - AGENCY PROVISIONS............................... 59
9.1. Application of Payments.......................... 59
9.2. Set-Off.......................................... 60
9.3. Modifications and Waivers........................ 60
9.4. Obligations Several.............................. 60
9.5. Banks' Representations........................... 60
9.6. Investigation.................................... 61
9.7. Powers of Agent.................................. 61
9.8. General Duties of Agent, Immunity and Indemnity.. 61
9.9. No Responsibility for Representations or
Validity, etc.................................. 61
9.10. Action on Instruction of Banks; Right to
Indemnity...................................... 61
9.11. Employment of Agents............................. 62
9.12. Reliance on Documents............................ 62
9.13. Agent's Rights as a Bank......................... 62
9.14. Expenses......................................... 62
9.15. Resignation of Agent............................. 62
9.16. Successor Agent.................................. 62
9.17. Collateral Security.............................. 63
9.18. Enforcement by Agent............................. 63
SECTION 10 - MISCELLANEOUS.................................. 63
10.1. Indemnification and Release Provisions.......... 63
10.2. Participations and Assignments.................. 64
10.3. Binding and Governing Law....................... 64
10.4. Survival........................................ 64
10.5. No Waiver; Delay................................ 64
10.6. Modification.................................... 65
10.7. Headings........................................ 65
10.8. Notices......................................... 65
10.9. Payment on Non-Business Days.................... 65
10.10. Time of Day..................................... 66
10.11. Severability.................................... 66
10.12. Counterparts.................................... 66
10.13. Consent to Jurisdiction and Service of Process.. 66
10.14. WAIVER OF JURY TRIAL............................ 66
10.15. ACKNOWLEDGMENTS................................. 66
</TABLE>
-iii-
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A: Advance Request Forms
A-1: Revolving Loan Advances
A-2: Acquisition Loan Advances
A-3: RSD Loan Advances and LHS Loan Advances
Exhibit B: Letter of Credit Forms
B-1: Request Form
B-2: Application
Exhibit C: Form of Notes
C-1: Revolving Note
C-2: Acquisition Note
C-3: RSD Note
C-4: LHS Note
Exhibit D: Form of Seller Subordination Agreement
Exhibit E: Form of Adjustment Request
Exhibit F: Disclosure Pursuant to Representations and Warranties
Exhibit G: Funding Costs and Loss of Earnings Calculation
Exhibit H: Form of Compliance Certificate
Exhibit I: Notice of Acquisition
Exhibit J: Form of Permitted Acquisition Report
-iv-
<PAGE>
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
-------------------------------------------
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is
made this ___ day of March, 1997, by and among HOME HEALTH CORPORATION OF
DELAWARE, INC., a Delaware corporation ("Borrower"); CORESTATES BANK, N.A., a
national banking association ("CoreStates") and the other banks identified on
Schedule 1 attached hereto (each individually a "Bank" and individually and
collectively, "Banks"); and CoreStates as agent for the Banks ("Agent").
BACKGROUND
----------
A. Borrower and certain of the Banks ("Existing Banks") are parties with
certain of the Banks to that certain Second Amended and Restated Credit
Agreement dated August 22, 1996, as amended (the "Existing Credit Agreement");
and
B. Borrower has requested, and CoreStates and the other Banks have agreed,
to amend and restate the Existing Credit Agreement to increase the aggregate
availability under the Commitment to One Hundred Million Dollars ($100,000,000),
to add additional Banks as lenders, and in certain additional respects, all on
the terms and conditions as set forth herein.
In consideration of the foregoing background and the promises and the
agreements hereinafter set forth, and intending to be legally bound hereby, the
parties hereto amend and restate the Existing Credit Agreement in its entirety
as follows:
SECTION 1
DEFINITIONS
-----------
1.1. Definitions. When used in this Agreement, the following terms
-----------
shall have the respective meanings set forth below.
"Acquisition Commitment" means the aggregate principal amount which
----------------------
Banks have agreed to make available under Paragraph 2.1(b) hereof, being Sixty
Million Dollars ($60,000,000) on the date hereof, subject to adjustment from
time to time in accordance with Paragraphs 2.1(e) and 2.8 hereof.
<PAGE>
"Acquisition Commitment Termination Date" means the earlier of (i)
---------------------------------------
March 31, 2000 or (ii) the date on which the Acquisition Commitment is
terminated pursuant to Paragraph 2.8 hereof.
"Acquisition Loan" means the outstanding principal balance of Advances
----------------
under the Acquisition Commitment, together with interest accrued thereon and
fees and expenses incurred in connection therewith.
"Acquisition Notes" means the Acquisition Notes in the form of Exhibit
-----------------
C-2 attached hereto delivered by Borrower to each Bank, as may be amended,
modified, extended, consolidated or restated from time to time.
"Adjusted EBITDA" shall mean EBITDA for the immediately preceding two
---------------
(2) fiscal quarters for Parent and its consolidated Subsidiaries, multiplied by
two (2), provided, that in the event that any Permitted Acquisition has been
consummated during such two-quarter period and Borrower has delivered to Agent
pro forma historical financial statements for such two (2) fiscal quarters in
form and substance satisfactory to Required Banks, then for purposes of
calculating Adjusted EBITDA hereunder, EBITDA for such two (2) fiscal quarters
shall be calculated for Parent and its consolidated Subsidiaries including such
Permitted Acquisition, based on such pro forma historical financial statements.
"Adjusted EBITDAR" shall mean EBITDAR for the immediately preceding
----------------
two (2) fiscal quarters for Parent and its consolidated Subsidiaries, multiplied
by two (2), provided, that in the event that any Permitted Acquisition has been
consummated during such two-quarter period and Borrower has delivered to Agent
pro forma historical financial statements for such two (2) fiscal quarters in
form and substance satisfactory to Required Banks, then for purposes of
calculating Adjusted EBITDAR hereunder, EBITDAR for such two (2) fiscal quarters
shall be calculated for Parent and its consolidated Subsidiaries including such
Permitted Acquisition based on such pro forma historical financial statements.
"Adjusted Fixed Charges" means Fixed Charges for the immediately
----------------------
preceding two (2) fiscal quarters for Parent and its consolidated Subsidiaries,
multiplied by two (2), provided, that in the event that any Permitted
Acquisition has been consummated during such two-quarter period and Borrower has
delivered to Agent pro forma historical financial statements for such two (2)
fiscal quarters in form and substance satisfactory to Required Banks, then for
purposes of calculating Adjusted Fixed Charges hereunder, Fixed Charges for such
two (2) fiscal quarters shall be calculated for Parent and its consolidated
Subsidiaries
<PAGE>
including such Permitted Acquisition based on such pro forma historical
financial statements.
"Advance" means a borrowing under the Commitment pursuant to Paragraph
-------
2.7 hereof.
"Advance Request Form" means, as applicable, the certificate in the
--------------------
form attached hereto as Exhibit A-1 (in connection with Advances under the
Revolving Commitment), Exhibit A-2 (in connection with Advances under the
Acquisition Commitment)or Exhibit A-3 (in connection with advances under the RSD
Commitment or the LHS Commitment) to be delivered by Borrower to Agent as a
condition of each Advance.
"Affiliate" means as to any party: (i) any person who or entity which
---------
directly or indirectly owns, controls or holds five percent (5%) or more of the
outstanding beneficial interests in such party; (ii) any entity of which five
percent (5%) or more of the outstanding beneficial interest is directly or
indirectly owned, controlled, or held by such party; (iii) any entity which
directly or indirectly is under common control with such party; (iv) any
director or general partner of such party or any Affiliate; or (v) any immediate
family member of any person who is an Affiliate. For purposes of this
definition, "control" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of an entity,
whether through the ownership of voting securities, by contract, or otherwise.
"Agent" means CoreStates Bank, N.A., in its capacity as agent for the
-----
Banks hereunder and any successor appointed pursuant to Paragraph 9.15 and 9.16
hereof.
"Agreement" means this Third Amended and Restated Credit Agreement and
---------
all exhibits hereto, as each may be amended, modified, extended, consolidated or
restated from time to time.
"Alpha Subordinated Debt" means the subordinated indebtedness of
-----------------------
Parent and Home Care Medical Supply and Equipment, Inc. to Alpha Home Care
Services, Inc., as further described on Exhibit F attached hereto.
"Bank" means individually, and "Banks" means individually and
---- -----
collectively, the institutions identified on Schedule 1 attached hereto and
their respective successors and assigns so long as any such institution retains
any portion of the Commitment or Loan hereunder.
"Base Rate" means the higher of (a) the Federal Funds Rate plus one
---------
half of one percent (1/2%) per annum or (b) the Prime Rate.
-3-
<PAGE>
"Borrower" means Home Health Corporation of Delaware, Inc., a Delaware
--------
corporation.
"Business Day" means any day not a Saturday, Sunday or a day on which
------------
banks are required or permitted to be closed under the laws of the Commonwealth
of Pennsylvania.
"Capital Expenditure" means an expenditure for any fixed asset having
-------------------
a useful life of more than one (1) year and a cost in excess of Five Hundred
Dollars ($500), or any improvements or additions thereto, including direct or
indirect acquisition of such assets which expenditures are capitalized in
accordance with GAAP; provided, that expenditures for Permitted Acquisitions and
expenditures for equipment held for rental shall not constitute Capital
Expenditures.
"Capital Leases" means capital leases and subleases, as defined in
--------------
Statement 13 of the Financial Accounting Standards Board dated November 1976, as
amended and updated from time to time.
"CERCLA" means the Comprehensive Environmental Response, Compensation,
------
and Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, as amended from time to time, and all rules and
regulations promulgated in connection therewith.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and regulations with respect thereto in effect from time to time.
"Collateral" means the collateral security afforded to Agent, for the
----------
benefit of Banks, under the Pledge Agreements, the Guaranty, and this Agreement.
"Commitment" means at any time the maximum aggregate principal amount
----------
which Banks have agreed to make available at such time under the Acquisition
Commitment, the Revolving Commitment, the RSD Commitment and the LHS Commitment,
being One Hundred Million Dollars ($100,000,000) in the aggregate on the date
hereof.
"Company" means individually, and "Companies" means individually and
------- ---------
collectively, Borrower and each Guarantor.
"Compliance Certificate" means a certificate in the form of Exhibit H
----------------------
attached hereto delivered by Borrower to Banks pursuant to Paragraph 5.4 or
Paragraph 4.1(f) hereof.
"Dailey Resources Subordinated Debt" means indebtedness of Parent and
----------------------------------
Home Care Medical Supply and Equipment, Inc. to
-4-
<PAGE>
Dailey Resources, Ltd., as further described on Exhibit F attached hereto.
"Default" means an event, condition or circumstance the occurrence of
-------
which would, with the giving of notice or the passage of time or both,
constitute an Event of Default.
"Delaware Subordinated Debt" means the indebtedness of Borrower to
--------------------------
William Moses, Andra H. Moses, Steven R. Altshuler and Jane E. Altshuler, as
further described on Exhibit F attached hereto.
"Dependable Subordinated Debt" means the subordinated indebtedness of
----------------------------
Parent, All Care Health Services, Inc., Home Health Corporation of America, Inc.
- - St. Petersburg and Home Health Corporation of America, Inc. - Tampa Nursing to
Dependable Home Care, Inc., Dependable Nurses, Inc., Dependable Home Care -
District 6, Inc. and Dependable Nurses - District 6, Inc., as further described
on Exhibit F attached hereto.
"Eastern Shore Subordinated Debt" means the subordinated indebtedness
-------------------------------
of Parent, Professional Home Health Services, Inc. and Home Health Corporation
of America, Inc.-Eastern Shore to Eastern Shore Private Care, Inc. and Eastern
Shore Health Services, Inc., as more fully described on Exhibit F attached
hereto.
"EBITDA" means, for any period, net income for such period as defined
------
in accordance with GAAP, plus interest paid in cash, original issue discount
paid in cash, taxes, depreciation and amortization, charges related to
extinguishment of debt, write-off of expenses associated with the registration
statement filed in November 1996 (not to exceed $300,000), and charges
associated with Permitted Acquisitions accounted for as a pooling of interests
for such period, in each case as defined in accordance with GAAP and to the
extent each has been deducted in determining net income.
"EBITDAR" means, for any period, EBITDA for such period plus rental
-------
expense for such period as defined in accordance with GAAP, to the extent
deducted in determining net income for such period.
"Effective Date" means the date that this Agreement becomes effective
--------------
in accordance with Paragraph 4.1 hereof.
"Environmental Control Statutes" means any federal, state, county,
------------------------------
regional or local laws governing the control, storage, removal, spill, release
or discharge of Hazardous Substances, including without limitation CERCLA, the
Solid Waste Disposal Act, as amended by the Resource Conservation and
-5-
<PAGE>
Recovery Act of 1976 and the Hazardous and Solid Waste Amendments of 1984, the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976,
the Hazardous Materials Transportation Act, the Emergency Planning and Community
Right to Know Act of 1986, the National Environmental Policy Act of 1975, the
Oil Pollution Act of 1990, any similar or implementing state law, and in each
case including all amendments thereto and all rules and regulations promulgated
thereunder and permits issued in connection therewith.
"EPA" means the United States Environmental Protection Agency, or any
---
successor thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, all
-----
amendments thereto and all rules and regulations in effect at any time
thereunder.
"ERISA Affiliate" means, when used with respect to any Plan, ERISA,
---------------
the PBGC or a provision of the Code pertaining to employee benefit plans, any
person or entity that is a member of any group or organization within the
meaning of Code Sections 414(b), (c), (m) or (o) of which Borrower or any
Guarantor is a member.
"Event of Default" means an event described in Paragraph 8.1 hereof.
----------------
"Existing Credit Agreement" means the Second Amended and Restated
-------------------------
Credit Agreement dated August 22, 1996 among CoreStates, the Existing Banks and
Borrower, as amended.
"Existing Subordinated Debt" means the Delaware Subordinated Debt, the
--------------------------
Alpha Subordinated Debt, the Tampa Subordinated Debt, the Dependable
Subordinated Debt, the Dailey Resources Subordinated Debt, the Home Infusion
Subordinated Debt, the Eastern Shore Subordinated Debt, the Medical Express
Subordinated Debt, the RSD Subordinated Debt and the Medical Air Subordinated
Debt.
"Federal Funds Rate" means, for any day, the effective rate of
------------------
interest for such day, as announced from time to time by the Board of Governors
of the Federal Reserve System as shown in publication H.15 as the "Federal Funds
Rate."
"First Union Debt" means the indebtedness of certain of the Companies
----------------
to First Union National Bank of Florida assumed in connection with a prior
acquisition and outstanding on the date hereof, as further described on Exhibit
F attached hereto.
"Fixed Charge Coverage Ratio" means, as of the last day of a fiscal
---------------------------
quarter, the ratio of: (a) Adjusted EBITDAR, to (b) Adjusted Fixed Charges.
-6-
<PAGE>
"Fixed Charges" means, for any period, the sum of principal, interest
-------------
and original issue discount paid on Funded Debt (including payments on Capital
Leases), income taxes paid, Capital Expenditures, and the amount paid for rental
expense for such period, in each case without duplication and as defined in
accordance with GAAP.
"Funded Debt" means, as of the date of determination, the sum of (i)
-----------
the aggregate amount available to be drawn under outstanding Letters of Credit
and the aggregate amount of all unreimbursed draws under Letters of Credit, plus
(ii) the aggregate outstanding principal amount of all Indebtedness for:
(A) borrowed money (other than trade Indebtedness incurred in the
normal and ordinary course of business for value received);
(B) the purchase price for installment purchases of real or
personal property;
(C) the principal portion of Capital Leases; and
(D) guaranties of Funded Debt of others;
in each case without duplication.
"GAAP" means generally accepted accounting principles set forth in the
----
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and in statements of the Financial Accounting
Standards Board and in such other statements by such other entity as Agent may
reasonably approve, which are applicable in the circumstances as of the date in
question, subject to Paragraph 1.2(a) hereof; and such principles observed in a
current period shall be comparable in all material respects to those applied in
a preceding period.
"Guarantor" means individually, and "Guarantors" means individually
--------- ----------
and collectively, Parent and each Subsidiary of Parent other than Borrower,
Midwestern Healthcare, Inc. and Inactive Subsidiaries, including any future
Subsidiaries of Parent which may join in the Guaranty pursuant to Paragraph 5.20
hereof.
"Guaranty" means the Amended and Restated Guaranty Agreement by
--------
Guarantors in favor of Banks as required to be delivered pursuant to Paragraph
4.1 hereof and including any joinders thereto pursuant to Paragraph 5.20 hereof,
as may be amended, modified or restated from time to time.
-7-
<PAGE>
"Hazardous Substance" means petroleum products and items defined in
-------------------
the Environmental Control Statutes as "hazardous substances", "hazardous
wastes", "pollutants" or "contaminants" and any other toxic, reactive,
corrosive, carcinogenic, flammable or hazardous substance or other pollutant.
"Home Infusion Subordinated Debt" means indebtedness of Parent and
-------------------------------
Nutritional Home Health Service, Inc. to National Home Infusion, Inc., as
further described on Exhibit F attached hereto.
"Inactive Subsidiary" means a Subsidiary of Parent so designated by
-------------------
Parent to the Banks pursuant to Exhibit F hereof on the date hereof.
"Indebtedness" of any person means and includes all obligations of
------------
such person which, in accordance with GAAP, shall be classified on a balance
sheet of such person as liabilities of such person and in any event shall
include, without duplication, all (i) obligations of such person for borrowed
money or which have been incurred in connection with acquisition of property or
assets, (ii) obligations secured by any lien upon property or assets owned by
such person, notwithstanding that such person has not assumed or become liable
for the payment of such obligations, (iii) obligations created or arising under
any conditional sale or other title retention agreement with respect to property
acquired by such person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capital Leases, (v) guarantees
and (vi) letters of credit and letter of credit reimbursement obligations.
"Letter of Credit" shall mean individually, and "Letters of Credit"
---------------- -----------------
shall mean individually and collectively, the letter(s) of credit in the form
agreed upon at the time of issuance thereof participated in by all the Banks
pursuant to the terms and conditions of Section 2A hereof.
"Letter of Credit Request Form" shall mean the certificate in the form
-----------------------------
attached as Exhibit B-1 to be delivered by Borrower to Agent as a condition of
each issuance of a Letter of Credit pursuant to Paragraph 2A.3 hereof.
"Letter of Credit Sublimit" shall mean the portion of the Revolving
-------------------------
Commitment up to which Banks have agreed to participate in the issuance by Agent
of Letters of Credit pursuant to Section 2A hereof, being on the date hereof Ten
Million Dollars ($10,000,000).
"LHS Commitment" means the aggregate principal amount which Banks have
--------------
agreed to make available under Paragraph 2.1(d) of the Agreement, being Four
Million Dollars ($4,000,000) on the
-8-
<PAGE>
date hereof, subject to adjustment from time to time in accordance with
Paragraph 2.1(e) and Paragraph 2.8 hereof.
"LHS Commitment Cap" means Ten Million Dollars ($10,000,000).
------------------
"LHS Commitment Termination Date" means the earlier of (i) March 31,
-------------------------------
2000 or (ii) the date on which the LHS Commitment is terminated pursuant to
Paragraph 2.8 hereof.
"LHS Loan" means the outstanding principal balance of Advances under
--------
the LHS Commitment, together with interest accrued thereon and fees and expenses
incurred in connection therewith.
"LHS Notes" means the notes in the form of Exhibit C-4 attached hereto
---------
delivered by Borrower to each Bank, as may be amended, modified, extended,
consolidated or restated from time to time.
"LHS II Acquisition" means the acquisition by one or more of the
------------------
Companies of substantially all of the assets of PDN, Inc. and Medical I.V., Inc.
"LHS II Subordinated Debt" means indebtedness of one or more of the
------------------------
Companies to sellers in the LHS II Acquisition in an original principal amount
not to exceed Two Million Dollars ($2,000,000), subordinated pursuant to a
Subordination Agreement.
"Loan" means the aggregate outstanding principal balance of
----
Indebtedness advanced under the Acquisition Commitment, the Revolving
Commitment, the RSD Commitment and the LHS Commitment, and without duplication
the amount available to be drawn under all Letters of Credit and the amount of
all unreimbursed draws under Letters of Credit, together with interest accrued
thereon and fees and expenses incurred in connection with any of the foregoing.
"Loan Documents" means the Agreement, the Note, the Pledge Agreements,
--------------
the Guaranty, the Subordination Agreements and the other documents and
agreements executed and delivered in connection with this Agreement.
"Local Authorities" means individually and collectively the state and
-----------------
local governmental authorities and administrative agencies which govern the
business, commercial activities or facilities owned or operated by any Company.
"Material Adverse Effect" means a material adverse effect on the
-----------------------
business, financial condition or prospects of the Parent and its consolidated
Subsidiaries taken as a whole as a result of any condition, circumstance or
contingency; provided,
-9-
<PAGE>
however, that a change (or proposed change) in laws or regulations affecting the
home health care business or related industries generally, in and of itself,
shall not be deemed to constitute a material adverse effect on the business or
prospects of Parent and its consolidated Subsidiaries in the absence of a
material adverse effect on the financial condition or results of operations of
Parent and its consolidated Subsidiaries.
"Maximum Principal Amount" means the maximum principal amount of the
------------------------
Commitment, and the Revolving Commitment, Acquisition Commitment, RSD Commitment
and LHS Commitment thereunder, as applicable, up to which the applicable Bank
has agreed to lend funds and/or participate in the issuance of Letters of
Credit, as set forth in Schedule 1 attached hereto, as such amounts may be
adjusted from time to time pursuant to Paragraph 2.1(e) hereof or reduced or
terminated from time to time pursuant to Paragraph 2.8 hereof.
"Medical Air Subordinated Debt" means the subordinated indebtedness of
-----------------------------
Parent and HHCA Texas Medical Equipment, L.P. to Medical Air Supply, Inc., as
more fully described on Exhibit F attached hereto.
"Medical Express Subordinated Debt" means the subordinated
---------------------------------
indebtedness of Parent and Home Care Medical Supply and Equipment, Inc. to
Medical Express, Inc., as more fully described on Exhibit F attached hereto.
"Mobilsonix Debt" means the indebtedness of Parent and Home Health
---------------
Corporation of America, Inc. - Tampa Diagnostic Services to Mobilsonix, Inc., as
further described on Exhibit F attached hereto.
"Nahatan Acquisition" means the acquisition by one or more of the
-------------------
Companies of all of the outstanding capital stock of Nahatan Drug, Inc.
"Nahatan Subordinated Debt" means indebtedness of one or more of the
-------------------------
Companies to sellers in the Nahatan Acquisition in an original principal amount
not to exceed Three Million Dollars ($3,000,000), subordinated pursuant to a
Subordination Agreement.
"Net Worth" means Total Assets less Total Liabilities.
---------
"Note" means individually and "Notes" means individually and
---- -----
collectively the Acquisition Notes, the Revolving Notes, the RSD Notes and the
LHS Notes.
"Parent" means Home Health Corporation of America, Inc., a
------
Pennsylvania corporation.
-10-
<PAGE>
"PBGC" means the Pension Benefit Guaranty Corporation, or any
----
successor thereto.
"Permitted Acquisitions" means (i) the LHS II Acquisition and the
----------------------
Nahatan Acquisition; (ii) any acquisition in which the acquisition target is
operating solely in the United States of America and is engaged in the same or a
substantially similar business as the Companies provided that (A) the aggregate
consideration payable by the applicable Companies (including deferred or
contingent obligations accounted for as liabilities in accordance with GAAP)
does not exceed Seven Million Five Hundred Thousand Dollars ($7,500,000) in any
one acquisition or Twenty Million Dollars ($20,000,000) in the aggregate for all
acquisitions consummated pursuant to this clause (ii) after the date of this
Agreement in any fiscal year and (B) not more than twenty-five percent (25%) of
the acquisition price shall be used for the acquisition of real property in such
acquisition; provided further that the Acquisitions described in clause (i)
shall not be included in calculating the foregoing tests; and (iii) any other
acquisition by a Company which is approved in writing by Required Banks.
"Permitted Investments" means (i) investments in commercial paper
---------------------
maturing in 180 days or less from the date of issuance which is rated A1 or
better by Standard & Poor's Corporation or P1 or better by Moody's Investors
Services, Inc.; (ii) investments in direct obligations of the United States of
America or obligations of any agency thereof which are guaranteed by the United
States of America, provided that such obligations mature within twelve (12)
months of the date of acquisition thereof; and (iii) investments in certificates
of deposit maturing within one (1) year from the date of acquisition thereof
issued by a bank or trust company organized under the laws of the United States
or any state thereof, having capital, surplus and undivided profits aggregating
at least $500,000,000 and the long-term deposits of which are rated A1 or better
by Moody's Investors Services, Inc. or equivalent by Standard & Poor's
Corporation.
"Plan" means any employee pension benefit or employee welfare benefit
----
plan as defined in Sections 3(1) or (2) of ERISA maintained or sponsored by,
contributed to, or covering employees of, either Borrower or any ERISA
Affiliate.
"Pledge Agreements" means the pledges by the applicable Companies of
-----------------
all of the issued and outstanding capital stock and partnership interests of
each of their respective Subsidiaries, required to be delivered pursuant to
Paragraph 4.1 hereof, and any additional pledge delivered pursuant to Paragraph
5.20 hereof, each as may be amended, modified or restated from time to
-11-
<PAGE>
time.
"Prime Rate" means the rate of interest announced by Agent from time
----------
to time as its prime rate.
"Pro Rata Share" shall mean, as to a Bank, the ratio which the
--------------
outstanding principal balance of its portion of the Loan hereunder bears to the
aggregate outstanding principal balance of the Loan at any time; or if no
indebtedness is outstanding hereunder or the context otherwise requires, its
percentage share of the Commitment as set forth in Schedule 1 attached hereto;
in each case, either in the aggregate or as to the Revolving Commitment, the
Acquisition Commitment, the RSD Commitment or the LHS Commitment, as the context
shall specify.
"Release" means any spill, leak, emission, discharge or the pumping,
-------
pouring, emptying, disposing, injecting, escaping, leaching or dumping of a
Hazardous Substance.
"Required Banks" shall mean those Banks (which may include Agent in
--------------
its capacity as a Bank) holding Pro Rata Shares of the Loan aggregating sixty-
six and two-thirds percent (66-2/3%) or more.
"Restricted Payments" means redemptions, repurchases, dividends and
-------------------
distributions of any kind (including redemptions in exchange for real or
tangible personal property held by a Company) in respect of any class of capital
stock of Parent (whether common or preferred, in any class or series) and
payments of principal and interest or other amounts on Subordinated Debt.
"Revolving Commitment" means the maximum aggregate principal amount
--------------------
which Banks have agreed to make available under Paragraph 2.1(a) hereof, being
Thirty Million Dollars ($30,000,000) on the date hereof, subject to adjustment
from time to time in accordance with Paragraphs 2.1(e) and 2.8 hereof.
"Revolving Commitment Termination Date" means the earlier of (i) March
-------------------------------------
31, 2000 or (ii) the date on which the Revolving Commitment is terminated
pursuant to Paragraph 2.8 hereof.
"Revolving Loan" means the outstanding principal balance of Advances
--------------
under the Revolving Commitment, together with interest accrued thereon and fees
and expenses incurred in connection therewith.
"Revolving Notes" means the Revolving Notes in the form of Exhibit C-1
---------------
attached hereto delivered by Borrower to each Bank, as may be amended, modified,
extended, consolidated or restated from time to time.
-12-
<PAGE>
"Rolling Period" means a period of four consecutive fiscal quarters.
--------------
"RSD Commitment" means the aggregate principal amount which Banks have
--------------
agreed to make available under Paragraph 2.1(c) of the Agreement, being Six
Million Dollars ($6,000,000) on the date hereof, subject to adjustment from time
to time in accordance with Paragraph 2.1(e) and Paragraph 2.8 hereof.
"RSD Commitment Cap" means Ten Million Dollars ($10,000,000).
------------------
"RSD Commitment Termination Date" means the earlier of (i) March 31,
-------------------------------
2000 or (ii) the date on which the RSD Commitment is terminated pursuant to
Paragraph 2.8 hereof.
"RSD Loan" means the outstanding principal balance of Advances under
--------
the RSD Commitment, together with interest accrued thereon and fees and expenses
incurred in connection therewith.
"RSD Notes" means the notes in the form of Exhibit C-3 attached hereto
---------
delivered by Borrower to each Bank, as may be amended, modified, extended,
consolidated or restated from time to time.
"RSD Subordinated Debt" means the subordinated indebtedness of Parent
---------------------
and Borrower to Randy DiSalvo, as more fully described on Exhibit F attached
hereto.
"Subordinated Debt" means (i) the Existing Subordinated Debt, (ii) the
-----------------
LHS II Subordinated Debt and the Nahatan Subordinated Debt, and (iii) additional
Indebtedness incurred in favor of sellers in Permitted Acquisitions evidencing a
portion of the purchase price in such Permitted Acquisitions, in an aggregate
principal amount under this clause (iii) not to exceed Three Million Seven
Hundred Fifty Thousand Dollars ($3,750,000) in any one transaction or Five
Million Dollars ($5,000,000) for all transactions in any fiscal year, which
Indebtedness has been subordinated to the obligations of the Companies to Banks
pursuant to a Subordination Agreement.
"Subordination Agreement" means individually and "Subordination
----------------------- -------------
Agreements" means individually and collectively (i) the Subordination Agreements
- ----------
in connection with the Existing Subordinated Debt, as confirmed pursuant to the
Confirmations of Subordination Agreement delivered pursuant to Paragraph 4.1
hereof, and (ii) the Subordination Agreements delivered from time to time by
sellers in connection with Permitted Acquisitions in favor of Agent on behalf of
Banks pursuant to Paragraph 5.21 hereof, in the form of Exhibit D attached
hereto, with such
-13-
<PAGE>
changes as Required Banks shall approve, as each may be amended, modified or
restated from time to time.
"Subsidiary" means any corporation or partnership of which any
----------
Company, directly or indirectly (including as beneficiary of a business trust),
owns more than fifty percent (50%) of any class or classes of securities or
partnership interests. Unless otherwise specified, references to "Subsidiaries"
herein shall mean direct and indirect Subsidiaries of Parent.
"Tampa Subordinated Debt" means the subordinated indebtedness of
-----------------------
Parent and Home Health Corporation of America - Tampa, Inc. to Preferred
Diagnostic & Medical Services, Inc., and Preferred Diagnostic Services, Inc., as
further described on Exhibit F hereto.
"Total Assets" means, at any date of determination, all assets of
------------
Parent and its consolidated Subsidiaries, as defined in accordance with GAAP.
"Total Capitalization" of Parent means, as of any date of
--------------------
determination, the sum of (i) the amounts shown by the books of Parent, in
accordance with GAAP, for issued and outstanding shares of capital stock of
Parent plus additional paid-in capital and retained earnings; (ii) Funded Debt;
and (iii) redeemable common stock of Parent not to exceed One Hundred Thousand
(100,000) shares issued and outstanding on the date hereof.
"Total Liabilities" means, at any date of determination, all
-----------------
liabilities and deferred items of Parent and its consolidated Subsidiaries, as
defined in accordance with GAAP, less obligations to redeem the common stock of
Parent not to exceed One Hundred Thousand (100,000) shares issued and
outstanding on the date hereof.
"Unsubordinated Seller Debt" means (i) indebtedness of certain
--------------------------
Companies to Healthcare Professionals, Inc. and the Mobilsonix Debt as
outstanding on the date hereof and reduced by payments thereunder, each as
further described on Exhibit F attached hereto, and (ii) additional
unsubordinated indebtedness in favor of sellers in Permitted Acquisitions not in
excess of Five Hundred Thousand Dollars ($500,000) in any one transaction or in
excess of One Million Dollars ($1,000,000) in any fiscal year.
1.2. Rules of Construction.
---------------------
(a) GAAP. Except as otherwise provided herein, financial and
----
accounting terms used in the foregoing definitions or elsewhere in this
Agreement, shall be defined in accordance
-14-
<PAGE>
with GAAP. If Borrower or Required Banks determine that a change in GAAP from
that in effect on the date hereof has altered the treatment of certain financial
data to its detriment under this Agreement, such party may, by written notice to
the other within ten (10) days after the effective date of such change in GAAP,
request renegotiation of the financial covenants affected by such change. If
Borrower and Required Banks have not agreed on revised covenants within thirty
(30) days after the delivery of such notice, then, for purposes of this
Agreement, GAAP will mean generally accepted accounting principles on the date
just prior to the date on which the change occurred that gave rise to the
notice.
(b) Use of term "consolidated". Any term defined in Paragraph 1.1
--------------------------
hereof, when modified by the word "consolidated," shall have the meaning given
to such term herein as to Parent and all entities whose accounts, financial
results or position, for financial accounting purposes, are consolidated with
those of Parent in accordance with GAAP.
SECTION 2
CREDIT FACILITIES
-----------------
2.1. The Facilities.
--------------
(a) Revolving Credit Facility. From time to time prior to the
-------------------------
Revolving Commitment Termination Date, subject to the provisions below, each
Bank severally agrees to make Advances to Borrower up to its respective Maximum
Principal Amount with respect to the Revolving Commitment, which Borrower may
repay and reborrow prior to the Revolving Commitment Termination Date, for
purposes specified in Paragraph 2.4(a) hereof; provided, however, that the
aggregate outstanding principal amount of such Advances, together with the
aggregate amount of all outstanding Letters of Credit and all unreimbursed draws
under Letters of Credit, shall not exceed at any time the Revolving Commitment.
(b) Acquisition Facility. From time to time prior to the Acquisition
--------------------
Commitment Termination Date, subject to
-15-
<PAGE>
the provisions below, each Bank severally agrees to make Advances to Borrower up
to its respective Maximum Principal Amount with respect to the Acquisition
Commitment, which Borrower may repay and reborrow prior to the Acquisition
Commitment Termination Date, for purposes specified in Paragraph 2.4(b) hereof;
provided, however, that the aggregate outstanding principal amount of such
Advances shall not exceed at any time the Acquisition Commitment.
(c) RSD Facility. From time to time prior to the RSD Commitment
------------
Termination Date, subject to the provisions below, each Bank severally agrees to
make Advances to Borrower up to its respective Maximum Principal Amount with
respect to the RSD Commitment, which Borrower may repay and reborrow prior to
the RSD Commitment Termination Date, for purposes specified in Paragraph 2.4(c)
hereof; provided, however, that the aggregate outstanding principal amount of
such Advances shall not exceed at any time the RSD Commitment.
(d) LHS Facility. From time to time prior to the LHS Commitment
------------
Termination Date, subject to the provisions below, each Bank severally agrees to
make Advances to Borrower up to its respective Maximum Principal Amount with
respect to the LHS Commitment, which Borrower may repay and reborrow prior to
the LHS Commitment Termination Date, for purposes specified in Paragraph 2.4(d)
hereof; provided, however, that the aggregate outstanding principal amount of
such Advances shall not exceed at any time the LHS Commitment.
(e) Adjustments to Commitment Amounts.
---------------------------------
(i) At any time, Borrower may request an adjustment in the respective
amounts of the Revolving Commitment, Acquisition Commitment, RSD Commitment and
LHS Commitment by sending to Agent an Adjustment Request in the form of Exhibit
E attached hereto in accordance with the terms and conditions of this Paragraph
2.1(e), together with a fee in the amount of $35,000 (to be shared in by Banks
in accordance with their Pro Rata Shares) with respect to any requests for
adjustment in excess of two in any annual period. Agent shall promptly forward
such Adjustment Request to Banks, and provided that such Adjustment Request
conforms to the terms and conditions of this Paragraph 2.1(e) and there is no
Event of Default or Default hereunder at such time Banks shall execute such
Adjustment Request and return it to Agent, for delivery to Borrower. Upon
execution of the Adjustment Request by Banks, this Agreement shall be deemed
amended to adjust the amounts of the Revolving Commitment and Acquisition
Commitment in accordance with such Adjustment Request.
(ii) Any Adjustment Request hereunder shall
-16-
<PAGE>
be subject to the following terms and conditions:
(A) the aggregate amount of the Revolving Commitment, Acquisition
Commitment, RSD Commitment and LHS Commitment shall equal the amount of the
Commitment as then in effect;
(B) the aggregate outstanding principal balance of the Acquisition
Loan shall be less than or equal to the Acquisition Commitment as so adjusted;
(C) the aggregate outstanding principal balance of the Revolving Loan,
together with the aggregate available amount of all outstanding Letters of
Credit and all unreimbursed draws under Letters of Credit shall be less than or
equal to the Revolving Commitment as so adjusted; and
(D) the aggregate outstanding principal balance of the RSD Loan shall
be less than or equal to the RSD Commitment as so adjusted;
(E) the aggregate outstanding principal balance of the LHS Loan shall
be less than or equal to the LHS Commitment as so adjusted;
(F) the amount of the RSD Commitment shall not exceed the RSD
Commitment Cap and the amount of the LHS Commitment shall not exceed the LHS
Commitment Cap; and
(G) on the effective date of any adjustment the Borrower shall make
any payments which arise pursuant to Paragraph 2.6(g) in connection with such
Adjustment Request.
(f) Amendment and Restatement. This Agreement amends and restates,
-------------------------
replaces and supersedes the Existing Credit Agreement; provided, that the
execution and delivery of this Agreement shall not in any circumstance be deemed
to have terminated, extinguished or discharged the Companies' Indebtedness under
the Existing Credit Agreement, all of which Indebtedness and the Collateral
therefor shall continue under and be governed by this Agreement and the other
Loan Documents. This Agreement is NOT A NOVATION. Nothing herein is intended
to modify or in any way affect the priority of the Collateral which secures the
Loan (except as expressly provided in this Agreement).
2.2. Promissory Notes. The Indebtedness of the Borrower to each Bank
----------------
under the Revolving Loan will be evidenced by a Revolving Note executed by
Borrower in favor of such Bank. The Indebtedness of Borrower to each Bank under
the Acquisition
-17-
<PAGE>
Loan will be evidenced by an Acquisition Note executed by Borrower in favor of
such Bank. The Indebtedness of Borrower to each Bank under the RSD Loan will be
evidenced by an RSD Note executed by Borrower in favor of such Bank. The
Indebtedness of Borrower to each Bank under the LHS Loan will be evidenced by an
LHS Note executed by Borrower in favor of such Bank. The original principal
amount of each Bank's Revolving Note and Acquisition Note will each be in the
amount identified in Schedule 1 attached hereto as its Total Unallocated Maximum
Principal Amount, and the original principal amount of each Bank's RSD Note and
LHS Note will be in the amount of its Pro Rata Share of the RSD Commitment Cap
and LHS Commitment Cap, respectively; provided, however, that notwithstanding
the face amount of each such Revolving Note, Acquisition Note, RSD Note and LHS
Note, Borrower's liability thereunder shall be limited at all times to the
actual indebtedness, principal, interest, fees and expenses then outstanding to
such Bank under the Revolving Loan, the Acquisition Loan, the RSD Loan and the
LHS Loan, respectively.
The Revolving Notes, Acquisition Notes, RSD Notes and LHS Notes shall
collectively replace and supersede the Amended and Restated Revolving Notes, the
Amended and Restated Acquisition Notes and the Allocated Working Capital Notes
each dated November 27, 1996 by Borrower in favor of the Existing Banks and the
Bridge Note dated February 20, 1997 by Borrower in favor of CoreStates
(collectively, the "Existing Notes"), provided, that the execution and delivery
of the Revolving Notes, Acquisition Notes, RSD Notes and LHS Notes shall not in
any circumstance be deemed to have terminated, extinguished or discharged the
Companies' Indebtedness under the Existing Notes, all of which Indebtedness and
the Collateral therefor shall continue under and be governed by the Revolving
Notes, Acquisition Notes, RSD Notes and LHS Notes, this Agreement, and the other
Loan Documents. The Revolving Notes, Acquisition Notes, RSD Notes and LHS Notes
collectively are a replacement, consolidation, amendment and restatement of the
Existing Notes and are NOT A NOVATION. Nothing herein is intended to modify or
in any way affect the priority of the Collateral which secures the Loan.
2.3. Banks' Participation. Banks shall be lenders in the Revolving
--------------------
Loan, Acquisition Loan, RSD Loan and LHS Loan in the Maximum Principal Amounts
and Pro Rata Shares set forth in Schedule 1 attached hereto.
2.4. Use of Proceeds.
---------------
(a) Funds advanced under the Revolving Loan shall be used solely (i)
to refinance indebtedness under the Revolving Loan under the Existing Credit
Agreement, (ii) for reimbursement
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<PAGE>
of draws under Letters of Credit in accordance with Section Two-A hereof, and
(iii) for the working capital needs and general corporate purposes of the
Companies (other than acquisitions).
(b) Funds advanced under the Acquisition Loan shall be used solely (i)
to fund the purchase price and costs payable by a Company in connection with
Permitted Acquisitions and (ii) to refinance indebtedness under the Acquisition
Loan under the Existing Credit Agreement.
(c) Funds advanced under the RSD Loan shall be used solely to
refinance indebtedness under the Allocated Working Capital Loan under the
Existing Credit Agreement and for working capital purposes with respect to
Nursing Services Home Care, Inc.
(d) Funds advanced under the LHS Loan shall be used solely to
refinance that portion of the indebtedness under the Revolving Loan under the
Existing Credit Agreement incurred to fund working capital needs associated with
HHCA Texas Health Services, L.P. and for additional working capital needs of
HHCA Texas Health Services, L.P.
2.5. Repayment.
---------
(a) Revolving Loan. The aggregate outstanding principal balance under
--------------
the Revolving Loan on the Revolving Commitment Termination Date, together with
all interest, fees and costs due hereunder, shall be due and payable in full on
the Revolving Commitment Termination Date. Notwithstanding the immediately
preceding sentence, the aggregate outstanding balance of the Revolving Loan
shall be due and payable immediately upon acceleration of the Revolving Loan in
accordance with Paragraph 8.2 hereof.
(b) Acquisition Loan. The aggregate outstanding principal balance
----------------
under the Acquisition Loan on the Acquisition Commitment Termination Date shall
be immediately due and payable on the Acquisition Commitment Termination Date.
Notwithstanding the immediately preceding sentence, the aggregate outstanding
balance of the Acquisition Loan shall be due and payable immediately upon
acceleration of the Acquisition Loan in accordance with Paragraph 8.2 hereof.
(c) RSD Loan. The aggregate outstanding principal balance under the
--------
RSD Loan on the RSD Commitment Termination Date, together with all interest,
fees and costs due hereunder, shall be due and payable in full on the RSD
Commitment Termination Date. Notwithstanding the immediately preceding
sentence, the aggregate outstanding balance of the RSD Loan shall be due and
payable immediately upon acceleration of the RSD Loan in accordance with
Paragraph 8.2 hereof.
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<PAGE>
(d) LHS Loan. The aggregate outstanding principal balance under the
--------
LHS Loan on the LHS Commitment Termination Date shall be immediately due and
payable on the LHS Commitment Termination Date. Notwithstanding the immediately
preceding sentence, the aggregate outstanding balance of the Acquisition Loan
shall be due and payable immediately ypon acceleration of the Acquisition Loan
in accordance with Paragraph 8.2 hereof.
2.6. Interest. Portions of the Loan shall bear interest on the
--------
outstanding principal amount thereof in accordance with the following
provisions:
(a) Definitions. As used in this Paragraph 2.6, the following
-----------
words and terms shall have the meanings specified below:
"Adjusted Libor Rate" shall mean, for any Interest Period, as applied
-------------------
to a Portion, the rate per annum (rounded upwards, if necessary to the next
1/100 of 1%) determined pursuant to the following formula:
Adjusted Libor Rate = Libor Rate
------------------------
[1 - Reserve Percentage]
For purposes hereof, "Libor Rate" shall mean, as applied to a Portion, the rate
which appears on the Telerate Page 3750 at approximately 9:00 a.m. Philadelphia
time two London Business Days prior to the commencement of such Interest Period
for the offering to leading banks in the London Interbank Market of deposits in
United States dollars ("Eurodollars") or, if such rate does not appear on the
Telerate page 3750, the rate which appears (or, if two or more such rates
appear, the average rounded up to the nearest 1/100 of 1% of the rates which
appear) on the Reuters Screen LIBO Page as of 9:00 a.m. Philadelphia time two
London Business Days prior to the commencement of the Interest Period, in either
case for an amount substantially equal to such Portion as to which Borrower may
elect the Adjusted Libor Rate to be applicable with a maturity of comparable
duration to the Interest Period selected by Borrower for such Portion, as may be
adjusted from time to time in accordance with Paragraph 2.6(f) hereof.
"Applicable Margin" means the percentage per annum set forth in the
-----------------
appropriate column below that corresponds to the ratio of Funded Debt to
Adjusted EBITDA for Parent and its Consolidated Subsidiaries (the Applicable
Margin being the lowest applicable percentage per annum as to which the ratio
requirement has been attained):
-20-
<PAGE>
<TABLE>
<CAPTION>
Applicable Margin
---------------------
Ratio of Funded Base Rate Libor
Debt to Adjusted EBITDA Portions Portions
- ----------------------- - ---------- ---------
<S> <C> <C>
less than 1.50 to 1 0.00% 1.00%
less than 2.00 to 1 0.00% 1.50%
but greater than or
equal to 1.50 to 1
less than 2.50 to 1 0.50% 2.00%
but greater than or
equal to 2.00 to 1
greater than or 0.75% 2.25%
equal to 2.50 to 1
</TABLE>
The initial Applicable Margin shall be based on the initial Compliance
Certificate delivered pursuant to Paragraph 4.1 hereof; thereafter the
Applicable Margin shall adjust automatically, as appropriate, on the day
following delivery of a quarterly Compliance Certificate in accordance with
Paragraph 5.4 hereof, provided, that in the event that a quarterly compliance
certificate has not been delivered within ten (10) days of the date required by
Paragraph 5.4 then the Applicable Margin shall adjust to the highest margin
provided above as of the date of required delivery; provided further, however,
that the Applicable Margin shall readjust on the day after delivery of such
delinquent Compliance Certificate based on the ratio set forth in such
Compliance Certificate.
"Interest Period" shall mean, with respect to the Adjusted Libor Rate,
---------------
a period of one (1), two (2), three (3) or six (6) months' duration, as Borrower
may elect, during which the Adjusted Libor Rate is applicable; provided,
however, that (a) if any Interest Period would otherwise end on a day which
shall not be a London Business Day, such Interest Period shall be extended to
the next succeeding London Business Day, unless such London Business Day falls
in another calendar month, in which case such Interest Period shall end on the
next preceding London Business Day, subject to clause (c) below; (b) interest
shall accrue from and including the first day of each Interest Period to, but
excluding, the day on which any Interest period expires; and (c) with respect to
an Interest Period which begins on the last London Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period), the Interest Period shall
end on the last London Business Day of a calendar month.
"London Business Day" shall mean any Business Day on
-------------------
-21-
<PAGE>
which banks in London, England are open for business.
"Portion" shall mean a portion of the Loan as to which a specific
-------
interest rate and, in the case of a Portion bearing interest based upon the
Adjusted Libor Rate, an Interest Period, has been elected by Borrower.
"Regulation D" shall mean Regulation D of the Board of Governors of
------------
the Federal Reserve System, comprising Part 204 of Title 12 Code of Federal
Regulations, as amended, and any successor thereto.
"Reserve" shall mean, for any day, that reserve (expressed as a
-------
decimal) which is in effect (whether or not actually incurred) with respect to a
Bank (or any bank Affiliate of such Bank) on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor or any other
banking authority to which a Bank (or any bank Affiliate of such Bank) is
subject including any board or governmental or administrative agency of the
United States or any other jurisdiction to which a Bank (or any bank Affiliate
of such Bank) is subject) for determining the maximum reserve requirement
(including without limitation any basic, supplemental, marginal or emergency
reserves) for Eurocurrency liabilities as defined in Regulation D.
"Reserve Percentage" shall mean, for a Bank (or any bank Affiliate of
------------------
such Bank) on any day, that percentage (expressed as a decimal) prescribed by
the Board of Governors of the Federal Reserve System (or any successor or any
other banking authority to which a Bank (or any bank Affiliate of such Bank) is
subject, including any board or governmental or administrative agency of the
United States or any other jurisdiction to which a Bank is subject), for
determining the reserve requirement (including without limitation any basic,
supplemental, marginal or emergency reserves) for (i) deposits of United States
Dollars or (ii) Eurocurrency liabilities as defined in Regulation D, in each
case used to fund a Portion subject to an Adjusted Libor Rate or any Loan made
with the proceeds of such deposit. The Adjusted Libor Rate shall be adjusted on
and as of the effective day of any change in the Reserve Percentage. On the
date hereof, the Reserve Percentage is zero (0).
(b) Interest on Loan.
----------------
(i) At the Borrower's election in accordance with the provisions of
Paragraph 2.6(c) below, in the absence of an Event of Default hereunder and
prior to maturity or judgment, and subject to clause (ii) below, any Portion of
the Loan shall bear interest at either of the following rates:
-22-
<PAGE>
(A) Base Rate. The Base Rate plus the Applicable
---------
Margin.
(B) Adjusted Libor Rate. The Adjusted Libor Rate plus
-------------------
the Applicable Margin.
(ii) Notwithstanding the foregoing, upon the occurrence and during the
continuance of an Event of Default hereunder, including after maturity and upon
judgment, Borrower hereby agrees to pay to Banks interest (A) on any outstanding
Libor Portion, at the rate which is two percent (2%) per annum in excess of the
Adjusted Libor Rate plus the Applicable Margin for each such Portion through the
end of the applicable Interest Period, and thereafter, at the rate of two
percent (2%) per annum in excess of the Base Rate plus the Applicable Margin,
and (B) on any Portion bearing interest based on the Base Rate, at the rate of
two percent (2%) per annum in excess of the Base Rate plus the Applicable
Margin.
(iii) Prior to the Effective Date, Borrower shall select the interest
rates and Interest Periods as provided in this Paragraph 2.6 which will apply to
all outstanding balances under the Existing Credit Agreement from and after the
Effective Date, as provided in Paragraph 4.1(f) hereof; and Borrower shall pay
to CoreStates on the Effective Date all accrued and unpaid interest to and
including the Effective Date in accordance with the Existing Credit Agreement
together with all funding costs and loss of earnings associated with the
termination of outstanding Libor Portions as of the Effective Date, calculated
in accordance with the Existing Agreement.
(c) Procedure for Determining Interest Periods and Rates of
-------------------------------------------------------
Interest.
- --------
(i) If Borrower elects the rate based on the Base Rate to be
applicable to a Portion, Borrower must notify Agent of such election in writing
prior to eleven o'clock (11:00) a.m. Philadelphia time one (1) Business Day
prior to the proposed application of such rate. If Borrower elects the rate
based on the Adjusted Libor Rate to be applicable to a Portion, Borrower must
notify Agent of such election and the Interest Period selected prior to eleven
o'clock (11:00) a.m. Philadelphia time at least three (3) London Business Days
prior to the commencement of the proposed Interest Period. If Borrower does not
provide notice for the rate based on the Adjusted Libor Rate, then Borrower
shall be deemed to have requested that the rate based on the Base Rate shall
apply to any Portion as to which the Interest Period is expiring and to any new
Advance of the Loan until Borrower shall have given proper notice of a change in
or determination of the rate of interest in accordance with this Paragraph
2.6(c).
-23-
<PAGE>
(ii) Borrower shall not elect more than eight (8) different Libor
Portions to be applicable to the Loan at one time, and any Libor Portion shall
be in an amount equal to One Million Dollars ($1,000,000) or an even multiple of
Two Hundred Fifty Thousand Dollars ($250,000) in excess thereof.
(d) Payment and Calculation of Interest. With respect to Portions
-----------------------------------
which bear interest at the rate based on the Adjusted Libor Rate, interest shall
be due and payable on the last day of each Interest Period for each such
Portion, and, in the case of a Libor Portion with an Interest Period of six (6)
months, on the ninetieth (90) day after the commencement of such Interest Period
and on the last day of the Interest Period. With respect to Portions which bear
interest at the rate based on the Base Rate, interest shall be due and payable
on the last Business Day of each month commencing on the first such date after
the first Advance which bears interest at the rate based on the Base Rate.
Interest shall be calculated in accordance with the provisions of Paragraph
2.6(b) hereof; all interest shall be calculated on the basis of the actual
number of days elapsed over a year of three hundred sixty (360) days.
(e) Reserves. If at any time when a Portion is subject to the rate
--------
based on the Adjusted Libor Rate, a Bank (or a bank Affiliate of such Bank) is
subject to and incurs a Reserve, other than a Reserve Percentage provided in the
calculation of the applicable Adjusted Libor Rate, Borrower hereby agrees to pay
within five (5) Business Days of demand thereof from time to time, as billed by
Agent on behalf of itself or any other Bank, such additional amount as is
necessary to reimburse such Bank (or such Bank's bank Affiliate) for its costs
in maintaining such Reserve. Such amount shall be computed by taking into
account the cost incurred by such Bank (or such Bank's bank Affiliate) in
maintaining such Reserve in an amount equal to such Bank's ratable share of the
Portion on which such Reserve is incurred, which computation shall be set forth
in any such demand by Agent on behalf of itself or any other Bank. The
determination by Agent or any Bank of such costs incurred and the allocation of
such costs among Borrower and other customers which have similar arrangements
with such Bank (or such Bank's bank Affiliate) shall be prima facie evidence of
the correctness of the fact and the amount of such additional costs, if
calculated in a manner consistent with similar charges made by such Bank (or
such Bank's Affiliates) to its other customers having similar arrangements with
such Bank. Each Bank acknowledges that on the date of this Agreement it is not
subject to any Reserve. Upon notification to Borrower of any payment required
pursuant to this Paragraph 2.6(e), Borrower (A) shall make such payment in
accordance with the provisions hereof and (B) may repay the Portion of the Loan
with respect to which such payment is
-24-
<PAGE>
required, subject to the requirements of Paragraph 2.9 and 2.6(g) hereof.
(f) Special Provisions Applicable to Adjusted Libor Rate. The
----------------------------------------------------
following special provisions shall apply to the Adjusted Libor Rate:
(i) Change of Adjusted Libor Rate. The Adjusted Libor Rate may be
-----------------------------
automatically adjusted by Agent on a prospective basis to take into account the
additional or increased cost of maintaining any necessary reserves for
Eurodollar deposits or increased costs due to changes in applicable law or
regulation or the interpretation thereof occurring subsequent to the
commencement of the then applicable Interest Period, including but not limited
to changes in tax laws (except changes of general applicability in corporate
income tax laws) and changes in the reserve requirements imposed by the Board of
Governors of the Federal Reserve System (or any successor), excluding the
Reserve Percentage and any Reserve which has resulted in a payment pursuant to
subparagraph (e) above, that increase the cost to Banks of funding the Loan or a
portion thereof bearing interest based on the Adjusted Libor Rate. Agent shall
give Borrower notice of such a determination and adjustment, which determination
shall be prima facie evidence of the correctness of the fact and the amount of
such adjustment. Borrower may, by notice to Agent, (A) request Agent to furnish
to Borrower a statement setting forth the basis for adjusting such Adjusted
Libor Rate and the method for determining the amount of such adjustment; and/or
(B) repay the Portion of the Loan with respect to which such adjustment is made,
subject to the requirements of Paragraph 2.9 and 2.6(g) hereof.
(ii) Unavailability of Eurodollar Funds. In the event that Borrower
----------------------------------
shall have requested the rate based on the Adjusted Libor Rate in accordance
with Paragraph 2.6(c) and any Bank (or such Bank's bank Affiliate) shall have
reasonably determined that Eurodollar deposits equal to the amount of the
principal of the Portion and for the Interest Period specified are unavailable,
or that the rate based on the Adjusted Libor Rate will not adequately and fairly
reflect the cost of making or maintaining the principal amount of the Portion
specified by Borrower during the Interest Period specified, or that by reason of
circumstances affecting Eurodollar markets, adequate and reasonable means do not
exist for ascertaining the rate based on the Adjusted Libor Rate applicable to
the specified Interest Period, such Bank shall give notice to Agent and Agent
shall promptly give notice of such determination to Borrower that the rate based
on the Adjusted Libor Rate is not available. A determination by such Bank (or
such Bank's bank Affiliate) hereunder shall be prima facie evidence of the
correctness of the fact and amount of such additional costs or unavailability.
Upon
-25-
<PAGE>
such a determination, (i) the obligation to advance or maintain Portions at the
rate based on the Adjusted Libor Rate shall be suspended until Agent shall have
notified Borrower and Banks that such conditions shall have ceased to exist, and
(ii) the rate based on the Base Rate shall be applicable to all such Portions.
(iii) Illegality. In the event that it becomes unlawful for a Bank
----------
(or such Bank's bank Affiliate) to maintain Eurodollar liabilities sufficient to
fund any Portion of the Loan subject to the rate based on the Adjusted Libor
Rate, then such Bank shall immediately notify Borrower thereof (with a copy to
Agent) and such Bank's obligations hereunder to advance or maintain advances at
the rate based on the Adjusted Libor Rate shall be suspended until such time as
such Bank (or such Bank's bank Affiliate) may again cause the rate based on the
Adjusted Libor Rate to be applicable to any Portion of the outstanding principal
balance of the Loan and any such Bank's share of any Portion shall then be
subject to the rate based on the Base Rate.
(g) Funding Costs and Loss of Earnings. In the event that Borrower
----------------------------------
shall have requested the Adjusted Libor Rate to be applicable to a Portion to be
Advanced and Borrower shall revoke the request for such Advance or shall fail to
meet the conditions to such Advance as set forth in Section Four hereof, and in
connection with any prepayment or repayment of a Portion bearing interest at the
rate based on the Adjusted Libor Rate made on other than the last day of the
applicable Interest Period, whether such prepayment or repayment is voluntary,
mandatory, by demand, acceleration or otherwise, Borrower shall pay to Banks all
reasonable funding costs and loss of earnings which may arise in connection with
such revocation of request for or failure to meet the conditions to such Advance
or such prepayment or repayment, as calculated by Agent in accordance with
Exhibit G hereto.
2.7. Advances.
--------
(a) Revolving Loan, RSD Loan or LHS Loan Advance Request. Borrower
----------------------------------------------------
shall give Agent written notice, not later than eleven o'clock (11:00) a.m.
Philadelphia time and (1) Business Day prior to the proposed Advance, of each
requested Advance under the Revolving Commitment, the RSD Commitment or the LHS
Commitment, specifying the date, amount and purpose thereof. Such notice shall
be in the form of the Advance Request Form attached hereto as Exhibit A-1 (in
the case of an Advance under the Revolving Commitment) or Exhibit A-3 (in the
case of an Advance under the RSD Commitment or the LHS Commitment), shall be
certified by the chief executive or chief financial officer of Borrower, and
shall contain the following information and representations, which shall be
deemed affirmed and true and correct as of and upon receipt of the date of and
upon receipt of
-26-
<PAGE>
the requested Advance:
(i) the aggregate amount of the requested Advance, which shall be no
less than $1,000,000 and in multiples of $250,000 in excess thereof, or be the
unborrowed balance of the applicable Commitment;
(ii) confirmation of Borrower's compliance with Paragraphs 5.15
through 5.17 as of the most recently ended fiscal quarter for which a Compliance
Certificate has been (or is required to have been) delivered, and taking into
account any Advances, including the requested Advance, and payments since such
date; and
(iii) statements that the representations and warranties set forth in
Section Three hereof are true and correct as of the date thereof, except those
made only as of a specific date; no Event of Default or Default hereunder has
occurred and is then continuing; and there has been no material adverse change
in Borrower's financial condition, operations or business since the date of the
quarterly and audited annual financial statements most recently delivered by
Borrower to Bank pursuant to Paragraphs 3.8, 5.2 and 5.3 of this Agreement.
(b) Acquisition Advance Request. Not later than eleven o'clock
---------------------------
(11:00) a.m. Philadelphia time and (1) Business Day prior to a proposed Advance
under the Acquisition Commitment, the Borrower shall give Agent written notice
of such requested Advance, specifying the amount, purpose and estimated date
thereof. Such notice shall be in the form of the Advance Request Form attached
hereto as Exhibit A-2, shall be certified by the chief executive or chief
financial officer of Borrower and shall contain the following information and
representations, which shall be deemed affirmed and true and correct as of the
date of and upon receipt of the requested Advance:
(i) the statement that the Advance will be used for the purposes
permitted by Paragraph 2.4(b) hereof;
(ii) the matters required to be made or confirmed pursuant to
subparagraph 2.7(a) hereof, in connection with Revolving Loan Advances;
(iii) the information with respect to the proposed Permitted
Acquisition required pursuant to Paragraph 6.8 hereof; and
(iv) statements that based on the pro forma historical and projected
--- -----
financial statements delivered pursuant to clause (iii) above, there would be no
Default or Event of Default as of the most recent fiscal quarter end for which a
-27-
<PAGE>
Compliance Certificate has been (or is required to have been) delivered and for
each fiscal quarter through the Acquisition Commitment Termination Date.
(c) Procedures.
----------
(i) Upon receiving a request for an Advance in accordance with
subparagraph (a) or (b) above, Agent shall request by prompt notice to Banks
that each Bank advance funds to Agent so that each Bank participates in the
requested Advance in the same percentage as it participates in the applicable
Commitment. In the case of a request for an Advance under the Acquisition
Commitment, Agent shall promptly provide copies of the Advance Request Form and
all attachments and information provided therewith to the Banks. Each Bank
shall advance its applicable percentage of the requested Advance to Agent by
delivering federal funds immediately available at Agent's offices prior to
twelve o'clock (12:00) noon on the date of the Advance. Subject to the
satisfaction of the terms and conditions hereof, Agent shall make the requested
Advance available to Borrower by crediting such amount to Borrower's deposit
account with Agent not later than two o'clock (2:00) p.m. on the day of the
requested Advance; provided, however, that in the event Agent does not receive a
Bank's share of the requested Advance by such time as provided above, Agent
shall not be obligated to advance such Bank's share.
(ii) Unless Agent shall have been notified by a Bank prior to the date
such Bank's share of any such Advance is to be made by such Bank that such Bank
does not intend to make its share of such requested Advance available to Agent,
Agent may assume that such Bank has made such proceeds available to Agent on
such date, and Agent may, in reliance upon such assumption (but shall not be
obligated to), make available to Borrower a corresponding amount. If such
corresponding amount is not in fact made available to Agent by such Bank on the
date the Advance is made, Agent shall be entitled to recover such amount on
demand from such Bank (or, if such Bank fails to pay such amount forthwith upon
such demand, from Borrower) together with interest thereon in respect of each
day during the period commencing on the date such amount was made available to
Borrower and ending on (but excluding) the date Agent recovers such amount, from
such Bank, at a rate per annum equal to the effective rate for overnight federal
funds in New York as reported by the Federal Reserve Bank of New York for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
and from Borrower, at a rate per annum as provided in Paragraph 2.6(b)(i)(A)
hereof.
(d) Requests Irrevocable. Each request for an Advance pursuant to
--------------------
this Paragraph 2.7 shall be irrevocable and
-28-
<PAGE>
binding on Borrower. In the case of any Advance bearing interest at the rate
based upon the Adjusted Libor Rate, Borrower shall indemnify Banks against any
loss, cost or expense incurred by Bank as a result of not borrowing such funds
on the requested Advance date, including as a result of any failure to fulfill
on or before the date specified in such request for an Advance the applicable
conditions set forth in Section Four hereof, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or redeployment of
deposits or other funds acquired by Banks to fund the Advance to be made by
Banks when such Advance, as a result of such failure, is not made on such date,
as calculated by Agent in accordance with Exhibit G attached hereto.
2.8. Reduction and Termination of Commitment.
---------------------------------------
(a) Borrower. Borrower shall have the right at any time and from
--------
time to time, upon three (3) Business Days' prior written notice to Agent, to
reduce the Revolving Commitment, the Acquisition Commitment, the RSD Commitment
and/or the LHS Commitment in whole or in part in increments aggregating
$1,000,000 or multiples thereof without penalty or premium, provided that on the
effective date of such reduction Borrower shall make a prepayment of the
Revolving Loan, the Acquisition Loan or both in an amount, if any, by which the
aggregate outstanding principal balance of the applicable Loan exceeds the
amount of the applicable Commitment as then so reduced, together with accrued
interest on the amount so prepaid and any amounts due pursuant to Paragraph
2.6(g) hereof.
(b) Banks. Required Banks shall have the right to terminate the
-----
Revolving Commitment, the Acquisition Commitment, the RSD Commitment, the LHS
Commitment, or any of them at any time, in their discretion and upon notice to
Borrower, upon the occurrence of any Event of Default hereunder (except if an
Event of Default described in Paragraph 8.1(i) shall occur, in which case
termination of the Commitment shall occur automatically).
(c) Restoration Only With Consent. Except as provided in Paragraph
-----------------------------
2.1(e) hereof, any termination or reduction of the Revolving Commitment, the
Acquisition Commitment, the RSD Commitment, the LHS Commitment or any of them
pursuant to subparagraphs 2.8(a) and (b) shall be permanent, and such Commitment
cannot thereafter be restored or increased without the written consent of Banks.
2.9. Prepayment.
----------
(a) Upon one (1) Business Day's prior written notice by Borrower to
Agent, Borrower may repay all or any
-29-
<PAGE>
portion of the outstanding principal balance under the Revolving Loan, the
Acquisition Loan, the RSD Loan or the LHS Loan without premium or penalty,
provided that any such payment shall include all accrued interest on the amount
prepaid plus any amounts which may be due pursuant to Paragraph 2.6(g) hereof.
(b) Upon any sale of assets pursuant to the proviso to Paragraph
6.7(a), Borrower shall pay to Agent, for application to the Loan in accordance
herewith an amount equal to the full amount of cash proceeds received in
connection with such sale of assets, together with accrued and unpaid interest
on the amount so repaid and all amounts due pursuant to Paragraph 2.6(g) hereof.
Any such payment shall be applied to the Loan as follows: first, if the assets
sold relate to the business financed thereby, to the LHS Loan or RSD Loan, as
applicable; then, if applicable, to the principal balance of the Acquisition
Loan; then, if applicable, to the Revolving Loan; and then, if applicable, to
the RSD Loan and LHS Loan on a pro rata basis.
(c) Payments made pursuant to Paragraph 2.9(a) or (b) prior to the
Revolving Commitment Termination Date or Acquisition Termination Date, as the
case may be, shall not reduce the Commitment and may be reborrowed in accordance
with this Agreement.
2.10. Payments. All payments of principal, interest, fees and other
--------
amounts due hereunder, including any prepayments thereof, shall be made by
Borrower to Agent for the account of Banks in immediately available funds before
twelve o'clock (12:00) noon, Philadelphia time, on any Business Day at the
office of Agent set forth on Schedule 1 hereto. Borrower hereby authorizes
Agent to charge Borrower's account with Agent for all payments of principal,
interest and fees when due hereunder.
2.11. Commitment Fee. Borrower shall pay to Agent, for the benefit
--------------
of Banks in accordance with their Pro Rata Shares, a non-refundable commitment
fee at the rate of three-eighths of one percent (3/8%) per annum on the
unborrowed portion of the Revolving Commitment, Acquisition Commitment, RSD
Commitment and LHS Commitment from the date hereof through the Revolving
Commitment Termination Date, the Acquisition Commitment Termination Date, the
RSD Commitment Termination Date or the LHS Commitment Termination Date,
respectively, which fees shall be payable at the offices of Agent quarterly in
arrears on the first day of each June, September, December and March and on the
applicable Termination Date. The commitment fee shall be calculated on the basis
of the actual number of days elapsed over a year of three hundred sixty (360)
days.
Borrower and Banks hereby agree that for purposes of calculating the
commitment fee to be paid from time to time under
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this Paragraph 2.11, the unborrowed portion of the Revolving Commitment (on
which such fee is calculated) shall be reduced by the amount available to be
drawn under outstanding Letters of Credit and the amount of any unreimbursed
draws on any Letters of Credit.
The commitment fees provided in this Paragraph 2.11 shall apply from
and after the Effective Date, and Borrower shall pay to CoreStates on the
Effective Date all accrued and unpaid commitment fees to and including the
Effective Date in accordance with the Existing Credit Agreement.
2.12. Closing Fee. On the date of execution of this Agreement,
-----------
Borrower shall pay (i) to each Existing Bank, a fee equal to (A) one-eighth of
one percent (1/8%) of such Bank's aggregate Maximum Principal Amount up to such
Bank's aggregate Maximum Principal Amount under the Existing Agreement (which
shall not include, in the case of CoreStates, the Bridge Commitment established
pursuant to Amendment No. 2 to the Existing Agreement), plus (B) one-quarter of
one percent (1/4%) of the amount of such Bank's aggregate Maximum Principal
Amount in excess of such Bank's Maximum Principal Amount under the Existing
Agreement, and (ii) to each Bank that is not an Existing Bank, a fee equal to
one-quarter of one percent (1/4%) of such Bank's aggregate Maximum Principal
Amount.
2.13. Agent's Fees. Borrower shall pay to Agent fees as agreed
------------
between Borrower and Agent pursuant to the Summary Terms and Conditions dated
February 5, 1997.
2.14. Regulatory Changes in Capital Requirements. If any Bank shall
------------------------------------------
have determined that the adoption or the effectiveness after the date hereof of
any law, rule, regulation or guideline regarding capital adequacy, or any change
in any of the foregoing or in the interpretation or administration of any of the
foregoing by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by such
Bank (or any lending office of such Bank) or such Bank's holding company with
any request or directive regarding capital adequacy (whether or not having the
force of law) of any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such Bank's capital or
on the capital of such Bank's holding company, as a consequence of this
Agreement, the Commitment, Advances or the Loan made by such Bank pursuant
hereto to a level below that which such Bank or its holding company could have
achieved but for such adoption, change or compliance (taking into consideration
such Bank's policies and the policies of such Bank's holding company with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time Borrower shall pay to such Bank
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such additional amount or amounts as will compensate such Bank or its holding
company for any such reduction suffered together with interest on each such
amount from the date demanded until payment in full thereof at the rate provided
in Paragraph 2.6(b)(ii) hereof with respect to amounts not paid when due. Such
Bank will notify Borrower of any event occurring after the date of this
Agreement that will entitle such Bank to compensation pursuant to this Paragraph
2.14 as promptly as practicable after it obtains knowledge thereof and
determines to request such compensation, and such compensation shall not be
charged for any period more than three (3) months prior to the date of such
notice.
A certificate of such Bank setting forth such amount or amounts as
shall be necessary to compensate such Bank or its holding company as specified
above shall be delivered to Borrower and shall be conclusive absent manifest
error, if calculated and charged in a manner consistent with similar charges
made by such Bank to its other customers having similar arrangements with such
Bank. Borrower shall pay such Bank the amount shown as due on any such
certificate delivered by such Bank within ten (10) days after its receipt of the
same.
Failure on the part of any Bank to demand compensation for increased
costs or reduction in amounts received or receivable or reductions in return on
capital with respect to any period shall not constitute a waiver of such Bank's
right to demand compensation with respect to any other period except as
otherwise limited by the terms of this Paragraph 2.14.
SECTION 2A
LETTERS OF CREDIT
-----------------
2A.1. Availability of Credits. Subject to the terms and conditions
-----------------------
set forth herein, Banks shall from time to time prior to the Revolving
Commitment Termination Date participate in the issuance by Agent of Letters of
Credit for the account of Borrower on the following terms and conditions:
(a) at the time of issuance of the Letter of
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Credit, the unborrowed portion of the Revolving Commitment shall equal or exceed
the sum of the amount available to be drawn under such Letter of Credit and all
other Letters of Credit then outstanding hereunder plus any unreimbursed draws
under Letters of Credit;
(b) at the time of issuance of the Letter of Credit, the amount
available to be drawn under such Letter of Credit and all other Letters of
Credit then outstanding hereunder plus any unreimbursed draws under Letters of
Credit shall not exceed, in the aggregate, the Letter of Credit Sublimit;
(c) the final expiration date of each Letter of Credit shall be on or
before the earlier of (i) one year from the date of issuance thereof or (ii) the
Revolving Commitment Termination Date;
(d) there shall not exist at the time of issuance of the Letter of
Credit, and as a result thereof, any Default or Event of Default; and
(e) each Letter of Credit issued under this Section 2A shall be
utilized by a Company in the ordinary course of its business or in connection
with a Permitted Acquisition.
Upon issuance of each Letter of Credit, each Bank shall have a
participation interest therein based on its percentage share of the Revolving
Commitment as set forth in Schedule 1 attached to the Credit Agreement.
2A.2. Commitment Availability. The amount available under the
-----------------------
Revolving Commitment as from time to time in effect shall be reduced by the
amount available to be drawn under all outstanding Letters of Credit and
unreimbursed amounts of any draws under Letters of Credit. The amount by which
the Revolving Commitment is so reduced shall not be available for advances
under Paragraph 2.7 hereof, except advances thereunder which are made to
reimburse Agent for draws under the Letters of Credit as permitted pursuant to
Paragraph 2A.4(b) hereof.
2A.3. Approval and Issuance.
---------------------
(a) Borrower shall provide Agent not less than three (3) Business
Days' prior written notice of each request for the issuance of a Letter of
Credit by delivery of a Letter of Credit Request Form and Agent's Letter of
Credit Application in the form attached as Exhibit B-2 hereto. Each Letter of
Credit Request Form submitted by Borrower to Agent requesting the issuance of a
Letter of Credit shall be certified by the chief financial officer or chief
executive officer of Borrower, on behalf of Borrower and the applicable Company
for whose benefit
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the Letter of Credit is to be issued, and shall, in addition to the matters
described in Paragraph 2.7(a) hereof, list all Letters of Credit outstanding for
the account of Borrower at that time and, for each Letter of Credit so listed,
its face amount, outstanding undrawn balance and expiration date. It shall be a
condition to the issuance of any Letter of Credit that Agent shall have received
a Letter of Credit Request Form as described above and that the conditions set
forth in Paragraph 4.2 shall be satisfied.
(b) Agent will promptly provide to Banks written or telephonic
notification of Agent's receipt of the Letter of Credit Request Form and the
Letter of Credit Application which shall state (i) the amount of the Letter of
Credit requested and (ii) the expiration date of the requested Letter of Credit.
2A.4. Obligations of the Borrower.
---------------------------
(a) Borrower agrees to pay to Agent in connection with each Letter of
Credit issued hereunder: (i) immediately upon the demand of Agent on behalf of
all Banks, the amount paid by Agent or any Bank with respect to such Letter of
Credit; (ii) immediately upon demand of Agent, the amount of any draft presented
purporting to be drawn under such Letter of Credit provided that the draft and
accompanying documents conform to the terms of the Letter of Credit but subject
to the terms of Paragraph 2A.7 (whether or not Agent has at such time honored
such draft) and any other amounts paid thereunder (it being understood that
Agent is not required to make demand upon or proceed against any Bank or other
party or to resort to any Collateral before obtaining payment from Borrower);
(iii) quarterly in arrears on the first day of each June, September, December
and March, a fee for the benefit of Banks in accordance with each Bank's Pro
Rata Share of the Revolving Commitment, calculated on the outstanding face
amount and term of such Letter of Credit at a rate per annum equal to the
Applicable Margin for a Portion bearing interest based on the Adjusted Libor
Rate, as set forth in Paragraph 2.6 hereof, as in effect upon the issuance or
renewal of the Letter of Credit, as applicable; (iv) on the date of issuance of
each Letter of Credit and on the effective date of any renewal or extension of
any Letter of Credit a fee of one-eighth of one percent (0.125%) per annum on
the outstanding face amount of such Letter of Credit, payable to Agent for its
own account, and (v) interest on any indebtedness outstanding with respect to
such Letter of Credit, whether for funds paid on drafts on such Letter of
Credit, or otherwise (but such indebtedness shall not include undrawn balances
of such Letter of Credit issued hereunder) at the rate set forth in Paragraph
2.6(b)(i)(A) hereof from the date of payment by Agent (if not reimbursed by
Borrower on the same day) to the date one (1) Business Day after notice to
Borrower of such payment, and
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thereafter at the rate applicable to Portions bearing interest based on the Base
Rate under Paragraph 2.6(b)(ii) hereof. Interest under the preceding clause (v)
shall be paid at the times and in the manner set forth in Paragraph 2.6 hereof,
and shall accrue on amounts paid on a Letter of Credit (if not reimbursed by
Borrower on the same day) from the date of payment by Agent, whether or not
demand is made, until such amounts are reimbursed by Borrower whether before, at
or after demand.
(b) On or before the Revolving Commitment Termination Date, in the
absence of a Default or Event of Default at such time, and subject to the
provisions of Paragraph 2.7 hereof, Banks severally hereby agree to advance
funds to Borrower under the Revolving Loan to make the payments required under
Paragraphs 2A.4(a)(i) and (ii) hereof. If any payment by the Agent of a draft
drawn under a Letter of Credit is for any reason (including without limitation
the occurrence or continuation of a Default or Event of Default hereunder) not
reimbursed prior to or on the date of such payment, the amount of such payment
shall thereupon be deemed for purposes hereof an advance under Paragraph 2.7
hereof. Such reimbursement obligation shall be repayable, prepayable, and
otherwise subject to all the terms and conditions thereof as if advanced by
Banks pursuant to Paragraph 2.7 hereof (but without duplication).
2A.5. Payment by Banks on Letters of Credit.
-------------------------------------
(a) With respect to each Letter of Credit issued hereunder, each Bank
agrees that it is irrevocably obligated to pay to Agent, for each such Letter of
Credit, such Bank's Pro Rata Share of each and every payment made or to be made
by Agent under such Letter of Credit (each such payment to be made, a "LOC
Contribution"). Each Bank's LOC Contribution shall be due from such Bank
immediately upon, and in any event no later than the same day as, receipt of
written notice (which may be sent by telex or telecopier) from Agent (except
that if such notice is received after 3:00 p.m. on any Business Day, payment may
be made on the following Business Day, together with interest equal to the
effective rate for overnight funds in New York as reported by the Federal
Reserve Bank of New York for such day (or, if such day is not a Business Day,
for the next preceding Business Day)) that (i) it has made a payment or (ii) a
draft has been presented purporting to be drawn on a Letter of Credit issued
hereunder. Such payment shall be made at Agent's offices in immediately
available federal funds.
(b) The obligation of each Bank to make its LOC Contribution hereunder
is absolute, continuing and unconditional, and Agent shall not be required first
to make demand upon or proceed against Borrower or any guarantor or surety, or
any others liable with respect to the applicable Letter of Credit and
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<PAGE>
shall not be required first to resort to any Collateral. LOC Contributions shall
be made without regard to termination of this Agreement or the Commitments, the
existence of an Event of Default or Default hereunder, the acceleration of
indebtedness hereunder or any other event or circumstance.
2A.6. Collateral Security.
-------------------
(a) The indebtedness, liabilities and obligations of Borrower under
this Section 2A, however created or incurred, whether now existing or hereafter
arising, due or to become due, absolute or contingent, direct or indirect,
secured or unsecured, are among the obligations secured by the security
interests, liens and encumbrances created by the Collateral, and Agent and the
Banks are entitled to the benefit of the Collateral granted thereunder with
respect to such indebtedness.
(b) Notwithstanding the payment in full of the Loan, the termination
of the Commitments or the occurrence of the Termination Date, the Collateral
shall continue to secure the indebtedness, liabilities and obligations of
Borrower under this Section 2A until all Letters of Credit shall have expired
and all indebtedness, liabilities and obligations under this Section 2A shall
have been paid in full.
(c) On the termination of the Revolving Commitment or the occurrence
of an Event of Default, Required Banks may require (and in the case of an Event
of Default occurring under Paragraph 8.1(i) it shall be required automatically)
that Borrower deliver to Agent cash or U.S. Treasury Bills with maturities of
not more than 90 days from the date of delivery (discounted in accordance with
customary banking practice to present value to determine amount) in an amount
equal at all times to one hundred ten percent (110%) of the outstanding undrawn
amount of all Letters of Credit, such cash or U.S. Treasury Bills and all
interest earned thereon to constitute cash collateral for all such Letters of
Credit. At such time as such collateral is required to be and has not been
deposited, Agent on behalf of Banks shall be entitled to liquidate such of the
other collateral for the Loan (if any) as is necessary or appropriate in its
sole judgment so as to create such cash collateral.
(d) Any cash collateral deposited under subparagraph (c) above, and
all interest earned thereon, shall be held by Agent and invested and reinvested
at the expense and the written direction of Borrower, in U.S. Treasury Bills
with maturities of no more than ninety (90) days from the date of investment.
2A.7. General Terms of Credits. The following terms and conditions
------------------------
apply with respect to each Letter of Credit (a
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<PAGE>
"Credit") notwithstanding anything to the contrary contained herein:
(a) Borrower assumes all risks of the acts or omissions of the
beneficiary of each Credit with respect to the use of the Credit or with respect
to the beneficiary's obligations to Borrower. None of the Banks nor any of
their officers or directors shall be liable or responsible for, and the Banks
hereby agree to indemnify and hold Agent and any issuer of a Credit harmless
(except for the issuer's gross negligence or willful misconduct) with respect
to: (i) the use which may be made of the Credit or for any acts or omissions of
the beneficiary in connection therewith; (ii) the accuracy, truth, validity,
sufficiency or genuineness of documents, or of any endorsement thereon, even if
such documents should in fact prove to be in any or all respects false,
misleading, inaccurate, invalid, insufficient, fraudulent, or forged; (iii) the
payment by Agent against presentation of documents which do not comply with the
terms of the Credit, including failure of any documents to bear any reference or
adequate reference to a Credit; (iv) any other circumstances whatsoever in
making or failing to make payment under a Credit; or (v) any inaccuracy,
interruption, error or delay in transmission or delivery of correspondence or
documents by post, telegraph or otherwise. In furtherance and not in limitation
of the foregoing, Agent may accept documents that appear on their face to be in
order, without responsibility for further investigation, regardless of any
notice or information to the contrary.
(b) Notwithstanding the foregoing, with respect to any Credit,
Borrower shall have a claim against Agent, and Agent shall be liable to
Borrower, to the extent, but only to the extent, of any direct, as opposed to
indirect or consequential, damages suffered by Borrower caused by the Agent's
willful misconduct or gross negligence.
(c) To the extent not inconsistent with this Agreement, the Uniform
Customs and Practices for Documentary Credits (1993 Revision), International
Chamber of Commerce Publication No. 500, are hereby made a part of this
Agreement with respect to obligations in connection with each Credit.
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<PAGE>
SECTION 3
REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants to Banks as follows:
3.1. Organization and Good Standing. Each of the Companies is a
------------------------------
corporation or limited partnership, duly formed and validly existing under the
laws of its state of formation, and has the power and authority to carry on its
business as now conducted and, except as to failures to qualify which do not,
either singly or in the aggregate, have a Material Adverse Effect, each of the
Companies is qualified to do business in all other states in which the nature of
its business or the ownership of its properties requires such qualification.
3.2. Power and Authority; Validity of Agreement. Each of the
------------------------------------------
Companies has the power and authority under applicable law and under its
certificate or articles of incorporation and by-laws or partnership agreement,
as applicable, to enter into and perform the Loan Documents to the extent that
each is a party thereto; and all actions necessary or appropriate for the
execution and performance by the Companies of the Loan Documents have been
taken, and, upon their execution, the same will constitute the valid and binding
obligations of the Companies to the extent each is a party thereto, enforceable
in accordance with their terms, except as such enforceability may be limited by
bankruptcy or equitable principles applicable to the enforcement of creditors'
rights generally.
3.3. No Violation of Laws or Agreements. The making and performance
----------------------------------
of the Loan Documents will not violate any provisions of any law or regulation,
federal, state or local, or the respective certificates or articles of
incorporation or by-laws or partnership agreement, as applicable, of the
Companies, or result in any breach or violation of, or constitute a default
under, any material agreement or instruments by which any of the Companies or
its respective property may be bound.
3.4. Material Contracts. Exhibit F hereto sets forth all contracts
------------------
material to the businesses of the Companies, taken as a whole, as of the date of
this Agreement, including all material third party payor agreements, and there
exists no material default under any of such agreements.
3.5. Compliance.
----------
(a) Each of the Companies is in compliance with all applicable laws
and regulations, federal, state and local (including without limitation those
administered by the Local Authorities), except for such failure to comply as
would not,
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either singly or in the aggregate, have a Material Adverse Effect;
(b) The Companies possess all the franchises, permits, licenses,
certificates of compliance and approval and grants of authority, necessary or
required in the conduct of the Companies' respective businesses as of the date
hereof; and except as identified on Exhibit F attached hereto, as of the date
hereof all such franchises, permits, licenses, certificates and grants are
valid, binding, enforceable and subsisting without any defaults thereunder or
enforceable adverse limitations thereon and are not subject to any proceedings
or claims opposing the issuance, development or use thereof or contesting the
validity thereof, except to the extent that the failure to obtain or maintain
any of the foregoing would not, either singly or in the aggregate, have a
Material Adverse Effect; and
(c) No authorization, consent, approval, waiver, license or formal
exemptions from, nor any filing, declaration or registration with, any court,
governmental agency or regulatory authority (federal, state or local) or non-
governmental entity, under the terms of contracts or otherwise, is required by
reason of or in connection with the Companies' execution and performance of the
Loan Documents, except those which have been obtained.
3.6. Litigation. There are no actions, suits, proceedings or claims
----------
which are pending or, to the best of the Companies' knowledge or information,
threatened against any Company which, if adversely resolved, would have a
Material Adverse Effect.
3.7. Title to Assets. Each of the Companies has good and marketable
---------------
title to all of its properties and assets material to the conduct of its
business, free and clear of any liens and encumbrances except the security
interests granted under the Pledge Agreement, liens and encumbrances permitted
pursuant to Paragraph 6.4 hereof and the liens and security interests identified
on Exhibit F attached hereto. All such assets are fully covered by the
insurance required under Paragraph 5.9 hereof.
3.8. Accuracy of Information; Full Disclosure.
----------------------------------------
(a) All information furnished to Banks concerning the financial
condition of the Companies including Parent's annual consolidated financial
statement for the period ending June 30, 1996 and Parent's interim consolidated
financial statements dated December 31, 1996, copies of which have been
furnished to Banks, has been prepared in accordance with GAAP and fairly present
in all material respects the financial condition of the Companies as of the
dates and for the periods covered and
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discloses all liabilities of the Companies required to be disclosed in
accordance with GAAP, except that interim statements do not have footnotes and
are subject to year-end adjustments, and there has been no material adverse
change in the financial condition or business of the Companies from the date of
such statements to the date hereof; and
(b) All financial statements and other documents furnished by the
Companies to Banks pursuant to this Agreement and the other Loan Documents do
not and will not contain any untrue statement of material fact or omit to state
a material fact necessary in order to make the statements contained herein and
therein not misleading. The Companies have disclosed to the Banks in writing
any and all facts which materially and adversely affect the business,
properties, operations or condition, financial or otherwise, of the Companies
considered as a whole, or the Companies' ability to perform their obligations
under this Agreement and the other Loan Documents.
3.9. Taxes and Assessments. Each of the Companies has filed all
---------------------
required tax returns or has filed for extensions of time for the filing thereof,
and has paid all applicable federal, state and local taxes, other than (a) taxes
not yet due or which may be paid hereafter without penalty and no Company has
knowledge of any deficiency or additional assessment in connection therewith not
provided for in the financial statements required hereunder and (b) such state
and local tax matters as would not, either singly or in the aggregate, have a
Material Adverse Effect.
3.10. Indebtedness. The Companies have no presently outstanding
------------
Indebtedness or obligations, including contingent obligations and obligations
under leases of property from others, except the Indebtedness and obligations
described in Exhibit F hereto or in the Companies' financial statements which
have been furnished to Banks prior to the date hereof pursuant to Paragraph 3.8
hereof, and indebtedness permitted pursuant to Paragraph 6.1 hereof.
3.11. Management Agreements. No Company is a party to any management
---------------------
or consulting agreements for the provision of senior executive services to such
Company except as described on Exhibit F hereto.
3.12. Investments. Each direct and indirect Subsidiary of Parent
-----------
(including Inactive Subsidiaries) is identified on Exhibit F attached hereto,
which indicates the number of shares and classes of the capital stock or
partnership interests, as applicable, of Parent and each such Subsidiary, and,
with respect to each Subsidiary, the ownership thereof. No Company has any
other Subsidiaries or any investments in or loans
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<PAGE>
to any other individuals or business entities except for loans and investments
permitted pursuant to Paragraphs 6.3 or 6.8 hereof.
3.13. ERISA. Each of the Companies and each ERISA Affiliate is in
-----
compliance in all material respects with all applicable provisions of ERISA and
the regulations promulgated thereunder; and,
(a) No Company nor any ERISA Affiliate maintains or contributes to or
has maintained or contributed to any multiemployer plan (as defined in section
4001 of ERISA) under which any Company or any ERISA affiliate could have any
withdrawal liability which is reasonably likely to have a Material Adverse
Effect;
(b) No Company nor any ERISA Affiliate, sponsors or maintains any Plan
under which there is an accumulated funding deficiency within the meaning of
(S)412 of the Code, whether or not waived which is reasonably likely to have a
Material Adverse Effect;
(c) The aggregate liability for accrued benefits and other ancillary
benefits under each defined benefit pension Plan that is sponsored or maintained
by any Company or any ERISA Affiliate (determined on the basis of the actuarial
assumptions prescribed for valuing benefits under terminating single-employer
defined benefit plans under Title IV of ERISA) does not exceed the aggregate
fair market value of the assets under each such defined benefit pension Plan by
an amount which is reasonably likely to have a Material Adverse Effect;
(d) The aggregate liability of each Company, and each ERISA Affiliate
arising out of or relating to a failure of any Plan to comply with the
provisions of ERISA or the Code, is not an amount which is reasonably likely to
have a Material Adverse Effect on any Company; and
(e) There does not exist any unfunded liability (determined on the
basis of actuarial assumptions utilized by the actuary for the Plan in preparing
the most recent Annual Report) of any Company or ERISA Affiliate under any Plan
providing post-retirement life or health benefits which is reasonably likely to
have a Material Adverse Effect.
3.14. Fees and Commissions. The Companies owe no brokers' or
--------------------
finders' fees or commissions of any kind, and know of no claim for any brokers'
or finders' fees or commissions, in connection with the Companies' obtaining the
Commitment or the Loan from Banks, except those provided herein.
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<PAGE>
3.15. No Extension of Credit for Securities. The Companies are not
-------------------------------------
now, nor at any time have they been engaged principally, or as one of their
respective important activities, in the business of extending or arranging for
the extension of credit, for the purpose of purchasing or carrying any margin
stock or margin securities; nor will the proceeds of the Loan be used by any
Company directly or indirectly, for such purposes.
3.16. Perfection of Security Interest. Upon the delivery into the
-------------------------------
possession of Agent, for the benefit of Banks, of stock certificates
representing all of the outstanding shares of capital stock of Borrower and the
other Subsidiaries pursuant to the Pledge Agreements and the filing of UCC
financing statements with respect to partnership interests pledged thereby in
the appropriate jurisdictions, no further action, including any filing or
recording of any document, is necessary in order to establish, perfect and
maintain Agent's security interests, for the benefit of Banks, in the collateral
covered by the Pledge Agreements.
3.17. Hazardous Wastes, Substances and Petroleum Products. Except as
---------------------------------------------------
otherwise set forth on Exhibit F attached hereto:
(a) Except for such matters as would not have a Material Adverse
Effect, each Company (i) has received all permits and filed all notifications
required by the Environmental Control Statutes to carry on its respective
business(es); and (ii) is in compliance with all Environmental Control Statutes.
(b) Each Company has given any written or oral notice to the EPA or
any state or local agency with regard to any actual or imminently threatened
Release of Hazardous Substances on properties owned, leased or operated by such
Company or used in connection with the conduct of its business and operations
which is reasonably likely to have a Material Adverse Effect.
(c) No Company has received notice that it is potentially responsible
for clean-up, remediation, costs of clean-up or remediation, fines or penalties
with respect to any actual or imminently threatened Release of Hazardous
Substances pursuant to any Environmental Control Statute which is reasonably
likely to have a Material Adverse Effect.
3.18. Solvency. To the best of each Company's knowledge, excluding
--------
intercompany indebtedness, each Company is, and after receipt and application of
the first Advance under this Agreement will be, solvent such that (i) the fair
value of its assets (including without limitation the fair salable value of the
goodwill and other intangible property of such Company) is greater than the
total amount of its liabilities, including
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without limitation, contingent liabilities, (ii) the present fair salable value
of its assets (including without limitation the fair salable value of the
goodwill and other intangible property of such Company) is not less than the
amount that will be required to pay the probable liability on their debts as
they become absolute and matured, and (iii) they are able to realize upon their
assets and pay their debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business. No Company
intends to, nor believes that it will, incur debts or liabilities beyond its
ability to pay as such debts and liabilities mature, and no Company is engaged
in a business or transaction, or about to engage in a business or transaction,
for which its property would constitute unreasonably small capital after giving
due consideration to the prevailing practice and industry in which it is
engaged. For purposes of this Paragraph 3.18, in computing the amount of
contingent liabilities at any time, it is intended that such liabilities will be
computed at the amount which, in light of all the facts and circumstances
existing at such time, represents the amount that reasonably can be expected to
become an actual matured liability of the applicable Company.
Each Company hereby agrees that to the extent a Company shall have
paid more than its proportionate share of any payment made hereunder or under
the Guaranty, such Company shall be entitled to seek and receive contribution
from and against any other Company who has not paid its proportionate share of
such payment; provided however such Company shall not seek any such contribution
from any other Company until the Loans have been paid in full and all
Commitments of the Banks hereunder have been terminated. The provisions of this
paragraph shall in no respect limit the obligations and liabilities of any
Company to the Agent and the Banks and each Company shall remain liable to the
Agent and the Banks for the full amount of its obligations hereunder and under
the Guaranty.
3.19. Employee Controversies. There are no material controversies
----------------------
pending or, to the knowledge of the Companies, threatened or anticipated between
any Company and any of its respective employees, and there are no labor
disputes, grievances, arbitration proceedings or any strikes, work stoppages or
slowdowns pending, or to the Companies' knowledge, threatened between any
Company and its respective employees and representatives, which in either event
could impair the ability of the Company to perform their obligations under the
Loan Documents, or which might reasonably be expected to have a Material Adverse
Effect.
3.20. Inactive Subsidiaries. There does not exist, by virtue of
---------------------
statute, common law, contract or otherwise, any liability of, or any activity or
condition relating to, any
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<PAGE>
Inactive Subsidiary, including, without limitation, with respect to any
environmental condition, taxes, employee benefit plan, program or statutory
obligation, tort claim or contract dispute, which may survive the liquidation of
any such Inactive Subsidiary (whether by operation of law, express assumption or
otherwise), except for those liabilities which (a) are reserved for or otherwise
reflected in the financial statements of Parent and its consolidated
Subsidiaries or (b) do not in the aggregate as to all Inactive Subsidiaries
exceed Fifty Thousand Dollars ($50,000).
SECTION 4
CONDITIONS
----------
4.1. First Advance. The effectiveness of this Agreement and the
-------------
obligation of Banks to make the first Advance or issue the first Letter of
Credit under this Agreement shall be subject to Agent's receipt of the following
documents and satisfaction of the following conditions, each in form and
substance satisfactory to Banks:
(a) Promissory Notes. The Notes duly executed by Borrower.
----------------
(b) Guaranty. An Amended and Restated Guaranty Agreement
--------
executed by each Guarantor in favor of Banks.
(c) Authorization Documents. A certificate of the secretary of each
-----------------------
Company attaching and certifying as to (i) the certificate or articles of
incorporation and bylaws or partnership agreement, as applicable, of such
Company; (ii) resolutions or other evidence of authorization by the board of
directors of such Company, if applicable, authorizing its execution and full
performance of this Agreement, the Notes, the Guaranty, the Pledge Agreement and
all other documents and actions required hereunder; and (iii) incumbency
certificates setting forth the name, title and specimen signature of each
officer of such Company who is authorized to execute the Loan Documents on
behalf of such Company.
(d) Opinions of Counsel. Opinion letters from corporate and
-------------------
regulatory counsel for the Companies, as may be reasonably satisfactory to
Agent.
(e) Financial Information. Projected balance sheets and income
---------------------
statements for the Companies on a consolidated basis, for the period from July
1, 1996 through the Revolving Commitment Termination Date, reasonably
satisfactory to Banks and certified as being based on reasonable assumptions by
the chief financial officer of Parent (such projections having taken into
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<PAGE>
account the transactions contemplated by this Agreement (including the LHS II
Acquisition and the Nahatan Acquisition) and identified the sources of cash the
Companies intend to use to meet their cash needs during such period).
(f) Compliance Certificate; Rate Selection. A Compliance Certificate
--------------------------------------
in the form of Exhibit H attached hereto calculated as of the end of the most
recent fiscal quarter of the Companies for which a Compliance Certificate is
required hereunder and on a pro forma basis reflecting all acquisitions
consummated since the end of such fiscal quarter, the LHS II Acquisition and the
Nahatan Acquisition; and selection of the interest rates and Interest Periods to
apply to outstanding Portions from and after the Effective Date in accordance
with Paragraph 2.6 hereof.
(g) Fees and Expenses. Payment of all interest and fees due under the
-----------------
Existing Credit Agreement through and including the Effective Date, and payment
of the fees required by Paragraphs 2.12 and 2.13 hereof, and audit expenses
pursuant to subparagraph (k) below.
(h) Searches. Uniform Commercial Code, tax and judgment searches
--------
against the Companies in those offices and jurisdictions as Agent shall
reasonably request.
(i) Pledge Agreement. An Amended and Restated Pledge Agreement
----------------
executed by Parent and Home Health Corporation of Delaware, Inc. in favor of
Agent, for the benefit of Banks, pledging all of the issued and outstanding
shares of capital stock of each of their respective Subsidiaries as security for
the Loan, together with stock certificates representing all such shares, and
stock powers signed in blank, and an Amended and Restated Security Agreement
(Partnership Interests) executed by HHCA Texas Holdings, Inc. and HHCA Texas GP,
Inc., pledging all of the partnership interests held by such Companies.
(j) Subordination Agreements. Confirmation of the Subordination
------------------------
Agreements with respect to the Existing Subordinated Debt (other than the RSD
Subordinated Debt).
(k) Audit. A completed lending audit of the Companies by an auditor
-----
acceptable to Agent, at the expense of Borrower.
(l) Management Letter. A true and correct copy of the management
-----------------
letter received from the Companies independent accountants in connection with
their audit of the Companies for the fiscal year ended June 30, 1996.
(m) Receivables Policies. A true and correct
--------------------
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<PAGE>
copy of the Companies' policies with respect to reserves for and write-offs of
receivables.
(n) Advance Requests. Initial Advance Requests under the Revolving
----------------
Commitment, Acquisition Commitment, RSD Commitment and LHS Commitment,
respectively.
(o) Other Documents. Such additional documents as Agent
---------------
reasonably may request.
4.2. Advances or Issuances. The obligation of Banks to make
---------------------
additional Advances under the Commitment shall be subject to Borrower's
compliance with Paragraph 2.7 hereof and it shall be a condition to Banks' and
Agent's obligation hereunder to make any such Advance or issue any Letter of
Credit that the representations and warranties set forth herein and in the other
Loan Documents, other than those made only as of a specific date, shall be true
and correct as if made on the date of such Advance or Letter of Credit issuance,
that no Event of Default or Default shall have occurred and be continuing on the
date of such Advance or Letter of Credit issuance or be caused by such Advance
or Letter of Credit issuance, that all fees required pursuant to Paragraphs
2.11, 2.12 and 2.13 hereof have been paid as and when due, and that there shall
have been no event or circumstance
-46-
<PAGE>
which had or is reasonably likely to have a Material Adverse Effect.
SECTION 5
AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that so long as the Commitment of Banks
to Borrower or any Indebtedness of Borrower to Banks is outstanding, unless
Required Banks have otherwise agreed in writing, each of the Companies will (and
with respect to Paragraph 5.14, will cause each ERISA Affiliate) to:
5.1. Existence and Good Standing. Preserve and maintain (a) its
---------------------------
existence as a corporation or limited partnership, as applicable, and its good
standing in all states in which it conducts business and (b) the effectiveness
and validity of all its franchises, licenses, permits, certificates of
compliance or grants of authority required in the conduct of its business,
except for such instances of ineffectiveness or invalidity as would not, either
singly or in the aggregate, have a Material Adverse Effect.
5.2. Quarterly Financial Statements. Furnish to Agent within forty-
------------------------------
five (45) days of the end of each of the first three quarterly periods in each
fiscal year of Parent unaudited quarterly consolidated financial statements, in
form and substance as reasonably required by Agent, including (i) a consolidated
balance sheet, (ii) a consolidated statement of income, (iii) a statement of
cash flows, and (iv) a comparison to the budgeted statement of income, prepared
in accordance with GAAP consistently applied (except that such interim
statements need not contain footnotes and may be subject to year-end
adjustments), together with a certificate executed by the chief executive or
chief financial officers of Parent stating that the financial statements fairly
present in all material respects the financial condition of the Parent and its
consolidated Subsidiaries as of the date and for the periods covered and that as
of the date of such certificate there exists no violation of any provision of
this Agreement or the happening of any Event of Default or Default, or
describing any such violation, Default or Event of Default, and the measures
being taken to address it.
5.3. Annual Budget and Financial Statements.
--------------------------------------
(a) Furnish to Agent within forty-five (45) days after the
commencement of each fiscal year a management-prepared budget for such fiscal
year.
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<PAGE>
(b) Furnish to Agent within ninety (90) days after the close of each
fiscal year audited consolidated annual financial statements, including the
financial statements, information and compliance certificate required under
Paragraph 5.2 hereof, which consolidated financial statements shall be prepared
in accordance with GAAP and shall be certified without qualification (except
with respect to changes in GAAP as to which the Companies' independent certified
public accountants have concurred) by an independent certified public accounting
firm reasonably satisfactory to Agent; and cause Agent to be furnished, at the
time of the completion of the annual audit, with copies of any management
letters prepared by such accountants and with a certificate signed by such
accountants to the effect that to the best of their knowledge there exists no
Event of Default or Default hereunder.
5.4. Compliance Certificate. At the time of delivery of financial
----------------------
statements pursuant to Paragraph 5.2 and 5.3 hereof, deliver to Agent a
certificate in the form of Exhibit H attached hereto executed by the chief
executive officer or chief financial officer of Parent, showing the calculation
of the covenants set forth in Paragraph 5.15 through 5.17 hereof.
5.5. Reserves, etc. (a) At the time of delivery of financial
-------------
statements pursuant to Paragraph 5.2 and 5.3 hereof, deliver to Agent an
accounts receivable aging with reserves by category, in form and substance
satisfactory to Agent; and (b) establish and maintain reserves with respect to
receivables, and write-off receivables, at the times and in the amounts as are
called for pursuant to the Companies' internal policies, as delivered to Banks
pursuant to Paragraph 4.1(m) hereof.
5.6. Interest Rate Hedging. Within 90 days after the date hereof,
---------------------
enter into interest rate protection agreements in a form acceptable to Agent and
from one or more of the Banks or an institution acceptable to Agent, with
respect to at least twenty percent (20%) of the Loan outstanding on the date of
this Agreement and for a period of at least two years; provided, however, that
(a) the protected rate shall be no greater than 1.50% above the all-in rate on
the date hereof; (b) each Bank is hereby granted a security interest in the
Collateral to the extent of such Bank's credit exposure under any such interest
rate protection agreements which is pari passu with the security interests of
Agent on behalf of the Banks; and (c) all documentation for such interest rate
protection shall conform to ISDA standards and must be acceptable to Agent with
respect to intercreditor issues.
5.7. Public Information. Deliver to Agent (with sufficient copies
------------------
for each Bank) promptly upon transmission
-48-
<PAGE>
thereof, copies of all financial statements, proxy statements, notices and
reports as Parent shall send to its shareholders or to the holders of
Subordinated Debt, and copies of any registration statement or annual or
quarterly reports, if any, filed with the Securities and Exchange Commission (or
successor entity).
5.8. Books and Records. Keep and maintain satisfactory and adequate
-----------------
books and records of account in accordance with GAAP and make or cause the same
to be made available to Agent or is agents or nominees at any reasonable time
upon reasonable notice for inspection and to make extracts thereof and permit
Agent to discuss contents of same with senior officers of Parent and also with
outside auditors and accountants of Parent.
5.9. Insurance. Keep and maintain all of its property and assets in
---------
good order and repair and fully covered by insurance with reputable and
financially sound insurance companies against such hazards and in such amounts
as is customary in the industry, under policies requiring the insurer to furnish
reasonable notice to Agent and opportunity to cure any non-payment of premiums
prior to termination of coverage.
5.10. Litigation; Event of Default. Notify Agent in writing
----------------------------
immediately of the institution of any litigation, the commencement of any
administrative proceedings, the happening of any event or the assertion or
threat of any claim, to the extent that any of the foregoing, could have a
Material Adverse Effect or the occurrence of any Event of Default or Default
hereunder.
5.11. Taxes. Pay and discharge all taxes, assessments or other
-----
governmental charges or levies imposed on it or any of its property or assets
prior to the date on which any penalty for non-payment or late payment is
incurred, unless the same are currently being contested in good faith by
appropriate proceedings, diligently prosecuted and covered by appropriate
reserves maintained in accordance with GAAP.
5.12. Costs and Expenses. Pay or reimburse Agent for all reasonable
------------------
out-of-pocket costs and reasonable expenses (including but not limited to
reasonable attorneys' fees and disbursements) Agent may reasonably pay or incur
in connection with the preparation and review of this Agreement and all waivers,
consents and amendments in connection therewith and all other documentation
related thereto, and the making of the Loan hereunder, and pay or reimburse
Banks for all costs, liabilities and expenses associated with the collection,
administration or enforcement of the same, including without limitation any fees
and disbursements incurred in defense of or to retain amounts of principal,
interest or fees paid. All obligations provided for
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<PAGE>
in this Paragraph 5.12 shall survive any termination of this Agreement or the
Commitment and the repayment of the Loan.
5.13. Compliance; Notification.
------------------------
(a) Comply in all material respects with all local, state and federal
laws and regulations applicable to its business (and in all respects with the
Environmental Control Statutes), including without limitation all laws and
regulations of the Local Authorities, and with the provisions and requirements
of all franchises, permits, certificates of compliance, approval and need issued
by regulatory authorities and with other like grants of authority held by any
Company; and notify Agent immediately in detail of any actual or alleged failure
to comply with or perform, breach, violation or default under any such laws or
regulations or under the terms of any of such franchises, licenses or grants of
authority, or of the occurrence or existence of any facts or circumstances which
with the passage of time, the giving of notice or otherwise could create such a
breach, violation or default or could occasion the termination of any of such
franchises, licenses or grants of authority, to the extent that any of the
foregoing could have a Material Adverse Effect.
(b) With respect to the Environmental Control Statutes, immediately
notify Agent when, in connection with the conduct of the Companies' business(es)
or operations, any person (including, without limitation, EPA or any state or
local agency) provides oral or written notification to any Company, or any
Company otherwise becomes aware, of a condition with regard to an actual or
imminently threatened Release of Hazardous Substances which could reasonably be
expected to have a Material Adverse Effect; and notify Agent in detail
immediately upon the receipt by a Company of an assertion of liability under the
Environmental Control Statutes, of any actual or alleged failure to comply with,
failure to perform, breach, violation or default under any such statutes or
regulations which could reasonably be expected to have a Material Adverse Effect
or of the occurrence or existence of any facts, events or circumstances which
with the passage of time, the giving of notice, or both, could create such a
failure to breach, violation or default.
(c) (i) No later than March 19, 1997, deliver to Agent a list of
material licenses by state identifying the applicable operating company, the
identifying features of the license and the name in which the license is issued;
and (ii) within thirty (30) days after the delivery of the foregoing list of
material licenses, deliver to Banks a legal opinion under the laws of Florida,
Massachusetts and Texas regarding the licenses held in such states,
substantially in the form of the regulatory opinion received from Blank, Rome,
Comisky and McCauley pursuant
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<PAGE>
to Paragraph 4.1(d) hereof.
5.14. ERISA. (a) Comply in all material respects with the provisions
-----
of ERISA to the extent applicable to any Plan maintained for the employees of
any Company or any ERISA Affiliate; (b) do or cause to be done all such acts and
things that are required to maintain the qualified status of each Plan and tax
exempt status of each trust forming part of such Plan; (c) not incur any
material accumulated funding deficiency (within the meaning of ERISA and the
regulations promulgated thereunder), or any material liability to the PBGC (as
established by ERISA); (d) not permit any event to occur with respect to any
Plan sponsored by any Company or any ERISA Affiliate (i) as described in Section
4042 of ERISA or (ii) which may result in the imposition of a lien on its
properties or assets; and (e) notify Agent in writing promptly after it has come
to the attention of senior management of any Company of the written assertion or
threat of any event described in Section 4042 of ERISA (relating to the
soundness of a Plan) (including any "reportable event" described in Section
4042(a)(3) of ERISA) or the PBGC's ability to assert a material liability
against it or impose a lien on any Company's, or any ERISA Affiliate's
properties or assets; and (f) refrain from engaging in any prohibited
transactions or actions causing possible liability under Section 502 of ERISA.
5.15. Maximum Funded Debt to Adjusted EBITDA Ratio. Maintain as of
--------------------------------------------
the end of each fiscal quarter during the periods set forth in the left hand
column below a ratio of (a) Funded Debt of Parent and its consolidated
Subsidiaries to (b) Adjusted EBITDA of not greater than the ratio set forth in
the right hand column below:
<TABLE>
<CAPTION>
Period Ratio
- ------ ---------
<S> <C>
Date hereof through
9/30/97 3.25 to 1
10/1/97 through 3/31/98 3.00 to 1
4/1/98 through 12/31/98 2.75 to 1
1/1/99 and thereafter 2.50 to 1
</TABLE>
5.16. Fixed Charge Coverage Ratio. Maintain as of the end of each
---------------------------
fiscal quarter a consolidated Fixed Charge Coverage Ratio of not less than 1.00
to 1:
5.17. Maximum Leverage Ratio. Maintain as of the end of each fiscal
----------------------
quarter during the periods set forth in the left hand column below a ratio of
consolidated Funded Debt to consolidated Total Capitalization of not greater
than the ratio set forth in the right hand column below:
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<PAGE>
<TABLE>
<CAPTION>
Period Ratio
- ------ ---------
<S> <C>
Date hereof through
6/30/97 0.62 to 1
7/1/97 through 12/31/97 0.60 to 1
1/1/98 through 6/30/98 0.57 to 1
7/1/98 through 3/31/99 0.55 to 1
4/1/99 and thereafter 0.50 to 1
</TABLE>
5.18. Management Changes. Notify Agent in writing within ten (10)
------------------
Business Days after any change of its senior officers.
5.19. Transactions Among Affiliates. Cause all transactions between
-----------------------------
and among Affiliates, other than transactions among the Companies, to be on an
arms-length basis and on such terms and conditions as are customary in the
applicable industry between and among unrelated entities.
5.20. Joinders. If any Inactive Subsidiary becomes active or if a
--------
new Subsidiary is formed or acquired (other than a joint venture Subsidiary as
authorized pursuant to Paragraph 6.8 (iii) hereof), cause such Subsidiary to
execute a joinder to the Guaranty and other documents as Agent may reasonably
require, and deliver to Agent, for the benefit of Banks, a Pledge Agreement or
amendment to Pledge Agreement to pledge the shares or partnership interests, as
applicable, of such Subsidiary to Agent for the benefit of Banks, together with
all share certificates for such Subsidiary to Agent together with stock powers
signed in blank.
5.21. Subordination Agreements. On the date that any Indebtedness is
------------------------
incurred by a Company in favor of a seller in connection with a Permitted
Acquisition in excess of Five Hundred Thousand Dollars ($500,000), as permitted
by clause (vi) of Paragraph 6.1 hereof, cause the holder of such Indebtedness to
execute and deliver a Subordination Agreement in favor of Agent on behalf of
Banks in substantially the form attached hereto as Exhibit D.
5.22. Other Information. Provide any Bank with any other documents
-----------------
and information, financial or otherwise, reasonably requested by such Bank from
time to time.
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<PAGE>
SECTION 6
NEGATIVE COVENANTS
------------------
So long as any Commitment or any Indebtedness of Borrower to Banks
remains outstanding hereunder, Borrower covenants and agrees that without
Required Bank's prior written consent, each Company will not:
6.1. Indebtedness. Borrow any monies or create any Indebtedness
------------
except: (i) borrowings from Banks hereunder; (ii) trade Indebtedness in the
normal and ordinary course of business for value received; (iii) Indebtedness
and obligations incurred to purchase or lease fixed or capital assets; provided,
however, that the aggregate outstanding principal amount of such indebtedness
and obligations shall not exceed in the aggregate Eight Million Dollars
($8,000,000) (including the First Union Debt) outstanding at any time; (iv)
Indebtedness of a Company to another Company; (v) Indebtedness under the
Unsubordinated Seller Debt; (vi) Indebtedness under Subordinated Debt; (vii)
accrued expenses arising in the ordinary cause of business, and (viii)
guaranties permitted pursuant to Paragraph 6.2 hereof.
6.2. Guaranties. Guarantee or assume or agree to become liable in
----------
any way, either directly or indirectly, for any additional indebtedness or
liability of others except: (i) to endorse checks or drafts in the ordinary
course of business, (ii) guarantees by Parent of Indebtedness permitted pursuant
to clause (vi) of Paragraph 6.1 hereof, provided that any such guaranty shall be
subordinated to the same extent as such Subordinated Debt; (iii) guaranties by
any Company of the Indebtedness of another Company if such Indebtedness is
permitted pursuant to Paragraph 6.1(i), (ii), (iii), (iv), (v) or (vii) hereof;
and (iv) guaranties issued on behalf of joint venture Subsidiaries, which
together with loans and advances permitted pursuant to Paragraph 6.3(v) hereof
and investments made pursuant to Paragraph 6.8(iii) hereof shall not exceed
after the date hereof Seven Million Dollars ($7,000,000) for all such joint
venture Subsidiaries.
6.3. Loans. Make any loans or advances to others; provided, however,
-----
that: (i) the Companies may make loans and advances to employees in the
ordinary course of business; (ii) Parent may maintain its outstanding loan to
Bruce Feldman, without increase in the amount thereof; (iii) the Companies may
make loans and advances to other Companies; (iv) the Companies may make other
loans and advances in an aggregate principal amount not to exceed Two Million
Dollars ($2,000,000) outstanding at any time and not to exceed One Million
Dollars ($1,000,000) as to any single borrower or group of related borrowers
from the Companies; and (v) loans or advances to joint venture Subsidiaries
which together with guaranties issued pursuant to
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<PAGE>
Paragraph 6.2(iv) hereof and investments made pursuant to Paragraph 6.8(iii)
hereof shall not exceed Seven Million Dollars ($7,000,000) for all such joint
venture Subsidiaries.
6.4. Liens and Encumbrances. Create, permit or suffer the creation
----------------------
of any liens, security interests, or any other encumbrances on (including any
conditional sales arrangement with respect to) any of its property, real or
personal, including, without limitation, liens and security interests in favor
of holders of any class or designation of interests in a Company, except the
pledge of shares and partnership interests of the Companies (other than Parent)
in favor of Agent on behalf of Banks as security for the Loan, and except (i)
liens arising in favor of sellers or lessors for indebtedness and obligations
incurred to purchase or lease fixed or capital assets permitted under Paragraph
6.1(iii) hereof, provided, however, that such liens secure only the indebtedness
and obligations created thereunder and are limited to the assets purchased or
leased pursuant thereto and the proceeds thereof; (ii) mechanic's and workman's
liens, liens for taxes, assessments or other governmental charges, federal,
state or local, which are then being currently contested in good faith by
appropriate proceedings and are covered by appropriate reserves maintained in
cash or cash equivalents and in accordance with GAAP; (iii) pledges or deposits
to secure obligations under workmen's compensation, unemployment insurance or
social security laws or similar legislation; (iv) deposits to secure performance
or payment bonds, bids, tenders, contracts, leases, franchises or public and
statutory obligations required in the ordinary course of business; (v) deposits
to secure surety, appeal or custom bonds required in the ordinary course of
business; and (vi) statutory landlord liens provided that the applicable
landlords have not sought to exercise distraint.
6.5. Additional Negative Pledge. Agree or covenant with or promise
--------------------------
any person or entity other than the Banks that it will not pledge its assets or
properties or otherwise grant any liens, security interests or encumbrances on
its property; provided, that a Company may agree that it will not pledge or
otherwise grant a security interest or encumbrance on its interest in any joint
venture Subsidiary permitted pursuant to Paragraph 6.8(iii) hereof or on any
assets acquired with purchase money indebtedness permitted pursuant to Paragraph
6.1(iii) hereof.
6.6. Restricted Payments. Make any Restricted Payments; provided,
-------------------
however, that in the absence of a Default or Event of Default hereunder at such
time, and if such payment will not create a Default or an Event of Default,
Parent may (a) pay regularly scheduled principal and interest on Subordinated
Debt to the extent permitted by and in accordance with the applicable
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<PAGE>
Subordination Agreement; and (b) make additional Restricted Payments in an
aggregate amount not to exceed One Million Five Hundred Thousand Dollars
($1,500,000) from and after the Effective Date; provided, however that the
foregoing shall not authorize the Parent to make dividends or distributions of
any kind in respect of any class of its capital stock or to purchase Parent's
stock in any open market transaction.
6.7. Transfer of Assets; Liquidation.
-------------------------------
(a) Sell, lease, transfer or otherwise dispose of all or any portion
of its assets, real or personal, other than such transactions in the normal and
ordinary course of business for value received; provided, however, that the
Companies may sell for cash assets not to exceed, in the aggregate for all such
sales, five percent (5%) of total assets of the Parent and its consolidated
Subsidiaries as of the date of the financial statements most recently delivered
pursuant to Paragraph 5.3(b) hereof, subject to the requirements of Paragraph
2.9(b) hereof; or
(b) discontinue, liquidate, or change in any material respect any
substantial part of its operations or business(es).
6.8. Acquisitions and Investments. Purchase or otherwise acquire
----------------------------
(including without limitation by way of share exchange) any part or amount of
the capital stock, partnership interests, or assets of, or make any investments
in, any other firm or corporation; or enter into any new business activities or
ventures not directly related to its present business; or merge or consolidate
with or into any other firm or corporation; or create any Subsidiary; provided,
however that in the absence of a Default or an Event of Default at such time and
if such transaction will not give rise to a Default or an Event of Default, the
Companies may: (i) make Permitted Investments, (ii) form new wholly-owned
Subsidiaries, subject to Paragraph 5.20 hereof, (iii) invest in joint-venture
Subsidiaries operating solely in the United States of America with less than
100% ownership, provided that the aggregate fair market amount contributed to
such Subsidiaries (including without limitation guaranties issued on behalf of
or loans or advances to such Subsidiaries) shall not exceed after the date
hereof Seven Million Dollars ($7,000,000) in the aggregate for all such joint-
venture Subsidiaries, and (iv) make Permitted Acquisitions, provided, however,
that without regard to whether such Permitted Acquisition is being funded by an
Advance under the Acquisition Commitment, Borrower shall provide to Agent, with
a copy to Agent's counsel, no later than ten (10) Business Days prior to a
Permitted Acquisition requiring the approval of Required Banks as provided in
clause (iii) of the definition thereof and no later
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<PAGE>
than five (5) Business Days prior to any other Permitted Acquisition, a Notice
of Acquisition in the form of Exhibit I attached hereto together with:
(A) a narrative description of the proposed acquisition which
demonstrates it to be a Permitted Acquisition, and describes the business to be
acquired, the legal structure for the acquisition (including identification of
any new subsidiaries that will result from the transaction), the acquisition
price to be paid, the anticipated closing date, the anticipated borrowings under
the Commitment in connection therewith, and other material features of the
proposed acquisition;
(B) a report with respect to the Permitted Acquisition and all other
Permitted Acquisitions completed in the same fiscal year in the form of Exhibit
J attached hereto;
(C) copies of the financial statements, if available, or federal
income tax returns if not, dated as of the three (3) most recently ended fiscal
years of such business or the seller of such assets;
(D) a preliminary draft (based upon the information available to
Borrower at that time) of an amendment or supplement to Exhibit F hereto, to
include the required disclosure hereunder as applicable to such business or
assets (with a final amendment or supplement to Exhibit F to be delivered to
Agent, with a copy to Agent's counsel, not later than five (5) Business Days
prior to closing of the acquisition);
(E) pro forma financial statements of the business or assets and
--- -----
Parent and its consolidated Subsidiaries giving effect to the proposed
acquisition on an historical basis for the two most recent fiscal quarters for
which a Compliance Certificate has been delivered and on a projected basis for
the period ending on the Acquisition Commitment Termination Date, including the
information required pursuant to Paragraph 5.2(i), (ii) and (iii) and showing
all adjustments which have been made in connection with such pro forma
statements, and demonstrating compliance with the covenants set forth in
Paragraph 5.15 through 5.17 as of the end of each fiscal quarter; and
(F) such additional documents as Agent may reasonably request, each of
the foregoing to be in form and substance reasonably satisfactory to Agent.
6.9. Payments to Affiliates. Except as set forth in Paragraph
----------------------
6.3(iv), pay any salaries, compensation, management
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fees, consulting fees, service fees, licensing fees, or other similar payments
to Affiliates of any Company other than on an arms-length basis for value, and
on terms and conditions as are customary in the industry between and among
unrelated entities.
6.10. Use of Proceeds. Use any of the proceeds of the Loan, directly
---------------
or indirectly, to purchase or carry margin securities within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System; or engage
as its principal business in the extension of credit for purchasing or carrying
such securities.
SECTION 7
ADDITIONAL COLLATERAL AND RIGHT OF SET-OFF
------------------------------------------
7.1. Additional Collateral. As additional collateral for the payment
---------------------
of any and all of Borrower's indebtedness and obligations to Banks, whether
matured or unmatured, now existing or hereafter incurred or created hereunder or
otherwise, Borrower hereby grants to Banks a security interest in and lien upon
all funds, balances or other property of any kind of Borrower, or in which
Borrower has an interest, limited to the interest of Borrower therein, whether
now or hereafter in the possession, custody or control of any Bank.
7.2. Right of Set-off. Each Bank is hereby authorized at any time
----------------
and from time to time following the occurrence and during the continuation of an
Event of Default hereunder, to the fullest extent permitted by law, to set-off
and apply any and all deposits (general or special, time or demand, provisional
or
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<PAGE>
final) at any time held and other indebtedness at any time owing by such Bank
to or for the credit or the account of Borrower against any and all of the
obligations of Borrower now or hereafter existing under this Agreement and the
Notes, irrespective of whether such Bank shall have made any demand under this
Agreement or such Notes and although such obligations may be unmatured and
irrespective of whether such Bank is otherwise fully secured. Each Bank agrees
promptly to notify Borrower after any such set-off and application made by such
Bank; provided, however, that the failure to give such notice shall not affect
the validity of such set-off and application. The rights of Banks under this
Section Seven are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which Banks may have.
SECTION 8
DEFAULT
-------
8.1. Events of Default. Each of the following events shall be an
-----------------
Event of Default hereunder:
(a) If Borrower shall fail to pay (i) when due any installment of
principal, (ii) within five (5) days of when
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<PAGE>
due any interest, fees, costs, expenses or any other sum payable to Banks or
Agent hereunder, or (iii) within ten (10) days of notice thereof by Agent to
Borrower any fees, costs or expenses due to third parties pursuant to this
Agreement; or
(b) If any representation or warranty made herein or in connection
herewith or in any statement, certificate or other document furnished hereunder
is false or misleading in any material respect when made; or
(c) If any Company shall default (after expiration of any applicable
cure or grace periods) in the payment or performance of any obligation or
Indebtedness to another either singly or in the aggregate in excess of One
Million Dollars ($1,000,000), whether now or hereafter incurred, other than
intercompany indebtedness; or
(d) If Borrower shall default in or fail to observe at any test date
the covenants set forth in Paragraphs 5.15 through 5.17 hereof or in Section 6
hereof; or
(e) If any Company shall default in the performance of any other
agreement or covenant contained herein (other than as provided in subparagraphs
(a), (b) or (d) above) or in any document executed or delivered in connection
herewith, including without limitation with respect to any Collateral, and such
default shall continue uncured for thirty (30) days after notice thereof to
Borrower given by Agent; or
(f) If: (i) (A) any person or group within the meaning of Section
13(d)(3) of the Securities Exchange Act of 1934, as amended (the "1934 Act") and
the rules and regulations promulgated thereunder shall have beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act), directly or indirectly, of
securities of Parent (or other securities convertible into such securities)
other than (1) Bruce Feldman or (2) any person described in Rule 13d-1(b)(i) (D)
or (E) which is eligible to file a Schedule 13G in lieu of a Schedule 13D (only
for so long as such person is so eligible) representing twenty percent (20%) of
the combined voting power of all securities of Parent entitled to vote in the
election of directors (hereinafter called a "Controlling Person"); or (B) a
majority of the Board of Directors of Parent shall cease for any reason to
consist of (1) individuals who on the date hereof were serving as directors of
Borrower or (2) individuals who subsequently become members of the Board if such
individuals' nomination for election or election to the board is recommended or
approved by a majority of the Board of Directors of Parent. For purposes of
clause (A) above, a person or group shall not be a Controlling Person if such
person or group holds voting power in good faith and not for the purpose of
circumventing this Paragraph 8.1(f)(i) as an
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agent, bank, broker, nominee, trustee, or holder of revocable proxies given in
response to a solicitation pursuant to the 1934 Act, for one or more beneficial
owners who do not individually, or, if they are a group acting in concert, as a
group, have the voting power specified in clause (A) above; or
(ii) the Parent ceases to own, either directly or indirectly, one
hundred percent (100%) of the issued and outstanding capital stock of each
Company unless such cessation of ownership is due to a sale or transfer of
assets permitted pursuant to Paragraph 6.7 hereof or an investment permitted
pursuant to Paragraph 6.8 hereof; or
(g) If Bruce Feldman ceases to have the authority to cause the
direction of the day-to-day management and day-to-day policies of the Companies,
unless within ninety (90) days Agent is notified in writing of the identity and
qualifications of a person with experience in the home health business given
such authority and such new management is not objected to in writing by Required
Banks within sixty (60) days of such notice, or if objected to, then within
ninety (90) days after such objection Agent is notified in writing of another
such person given such authority and such management is not objected to within
sixty (60) days of such subsequent notice; or
(h) If custody or control of any substantial part of the property of
any Company representing ten percent (10%) or more of Parent's consolidated net
revenues for the most recent fiscal quarter for which financial statements have
been delivered pursuant to Paragraph 5.2 or 5.3 hereof shall be assumed by any
governmental agency or any court of competent jurisdiction at the instance of
any governmental agency; if any license or franchise of a Company shall be
suspended, revoked, not renewed or otherwise terminated the loss of which would
reasonably be expected to have a Material Adverse Effect; if third party payor
agreements (public or private) representing, either individually or in the
aggregate, fifteen percent (15%) or more of Parent's consolidated net revenues
for the most recent fiscal quarter for which financial statements have been
delivered pursuant to Paragraph 5.2 or 5.3 hereof are revoked, terminated or not
renewed, other than in connection with the execution of a new or replacement
agreement with the existing or another third party payor; if any Company
representing, either individually or in the aggregate fifteen percent (15%) of
Parent's consolidated net revenues for the most recent fiscal quarter for which
financial statements have been delivered pursuant to Paragraph 5.2 or 5.3
hereof, shall lose accreditation by the Joint Commission on Accreditation of
Health Organizations; or if any governmental regulatory authority or judicial
body shall make any other final non-appealable determination the effect of which
would have Material Adverse Effect; or
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(i) If any Company becomes insolvent (excluding intercompany
indebtedness in the case of any Company other than Parent and Borrower),
bankrupt or generally fails to pay its debts as such debts become due; is
adjudicated insolvent or bankrupt; admits in writing its inability to pay its
debts; or shall suffer a custodian, receiver or trustee for it or substantially
all of its property to be appointed and if appointed without its consent, not be
discharged within thirty (30) days; makes a general assignment for the benefit
of creditors; or suffers proceedings under any law related to bankruptcy,
insolvency, liquidation or the reorganization, readjustment or the release of
debtors to be instituted against it and if contested by it not dismissed or
stayed within thirty (30) days; if proceedings under any law related to
bankruptcy, insolvency, liquidation, or the reorganization, readjustment or the
release of debtors is instituted or commenced by any Company; if any order for
relief is entered relating to any of the foregoing proceedings; if any Company
shall call a meeting of its creditors with a view to arranging a composition or
adjustment of its debts; or if any Company shall by any act or failure to act
indicate its consent to, approval of or acquiescence in any of the foregoing; or
(j) any event or condition shall occur or exist with respect to any
activity or substance regulated under the Environmental Control Statutes and as
a result of such event or condition, the Companies have incurred or in the
opinion of Required Banks are reasonably likely to incur liabilities in the
aggregate in excess of One Million Dollars ($1,000,000); or
(k) if any judgment, writ, warrant or attachment or execution or
similar process which calls for payment or presents liability in excess of One
Million Dollars ($1,000,000) shall be rendered, issued or levied against any
Company or its respective property and such process shall not be paid, waived,
stayed, vacated, discharged, settled, satisfied or fully bonded within sixty
(60) days after its issuance or levy unless such judgment is covered by
insurance and the insurer has acknowledged coverage in writing with respect
thereto.
8.2. Remedies. Upon the happening of any Event of Default and at any
--------
time thereafter, and by notice by Agent on behalf of Required Banks to Borrower
(except if an Event of Default described in Paragraph 8.1(i) shall occur in
which case
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acceleration of the Loan and termination of the Commitment shall occur
automatically without notice), the Agent shall, at the request of the Required
Banks, and may, with the consent of the Required Banks, (i) terminate the
Revolving Commitment, the Acquisition Commitment or both and (ii) declare the
entire unpaid balance, principal, interest, fees, and other amounts of all
indebtedness of Borrower to Banks, hereunder or otherwise, to be immediately due
and payable. Upon such declaration, Agent and Banks shall have the immediate
right to enforce or realize on any Collateral granted therefor in any manner or
order it deems expedient without regard to any equitable principles of
marshaling or otherwise. In addition to any rights granted hereunder or in any
of the Loan Documents delivered in connection herewith, Agent and Banks shall
have all the rights and remedies granted by any applicable law, all of which
shall be cumulative in nature.
SECTION 9
AGENCY PROVISIONS
-----------------
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<PAGE>
This Section sets forth the relative rights and duties of Agent and
Banks respecting the Loan and, with the exception of Paragraphs 9.3 and 9.15
hereof, does not confer any enforceable rights on Borrower against Banks or
create on the part of Banks any duties or obligations to Borrower.
9.1. Application of Payments. Agent shall apply all payments of
-----------------------
principal, interest, commitment fee or other amounts hereunder made to Agent by
or on behalf of Borrower with respect to the Revolving Loan, RSD Loan, LHS Loan,
Acquisition Loan and Letters of Credit, as applicable, to Banks on the basis of
their Pro Rata Shares of the outstanding principal balance of the applicable
Loan being paid hereunder, except the fees payable under Paragraphs 2.13 and
2A.4(a)(iv) hereof, which shall be paid solely to Agent. Such distribution of
payments shall be made promptly in federal funds immediately available at the
office of each Bank set forth above.
9.2. Set-Off. In the event a Bank, by exercise of its right of set-
-------
off, or otherwise, receives any payment of principal or interest, in an amount
greater than its Pro Rata Share of such payment based upon the Banks' respective
shares of principal Indebtedness outstanding hereunder immediately before such
payment, such Bank shall purchase a portion of the Indebtedness hereunder owing
to each other Bank so that after such purchase each Bank shall hold its Pro Rata
Share of all the Indebtedness then outstanding hereunder, provided that if all
or any portion of such excess payment is thereafter recovered from such Bank,
such purchase shall be rescinded and the purchase price restored to the extent
of any such recovery, but without interest.
9.3. Modifications and Waivers. No modification or amendment hereof,
-------------------------
consent hereunder or waiver of any Event of Default shall be effective except by
written consent of the Required Banks; provided, however, that the written
consent of all Banks shall be required to (i) modify, amend, waive, discharge,
terminate or suspend compliance with (A) any rate of interest applicable to the
Revolving Loan, RSD Loan, LHS Loan, or Acquisition Loan, to the extent it is
proposed to be decreased, (B) the amount of the Commitment to the extent it is
proposed to be increased, or the Banks' respective shares thereof; (C) the date
or amounts of payment of the Revolving Loan, RSD Loan, LHS Loan, or Acquisition
Loan, or interest thereon, to postpone payment thereof, (D) the commitment fee
set forth in Paragraph 2.11 hereof or other amounts payable by Borrower
hereunder except if payable solely to the Agent, to the extent any such amount
is proposed to be decreased, (E) the definition of Required Banks, (F) this
Paragraph 9.3, or (G) the definition of Pro Rata Share; (ii) release any
Collateral; or (iii) release any Guarantor.
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9.4. Obligations Several. The obligations of the Banks hereunder are
-------------------
several, and each Bank hereunder shall not be responsible for the obligations of
the other Banks hereunder, nor will the failure of one Bank to perform any of
its obligations hereunder relieve the other Banks from the performance of their
respective obligations hereunder.
9.5. Banks' Representations. Each Bank represents and warrants to
----------------------
the other Banks that (i) it has been furnished all information it has requested
for the purpose of evaluating its proposed participation under this Agreement;
and (ii) it has decided to enter into this Agreement on the basis of its
independent review and credit analysis of Borrower, this Agreement and the
documentation in connection therewith and has not relied for such analysis on
any information or analysis provided by any other Bank.
9.6. Investigation. No Bank shall have any obligation to the others
-------------
to investigate the condition of Borrower or any of the Collateral or any other
matter concerning the Loan.
9.7. Powers of Agent. Agent shall have and may exercise those powers
---------------
specifically delegated to Agent herein, together with such powers as are
reasonably incidental thereto.
9.8. General Duties of Agent, Immunity and Indemnity. Upon receipt
-----------------------------------------------
of notices and reports delivered by Borrower to the Agent under this Agreement,
the Agent shall promptly deliver the same in the form received to the Banks.
Required Banks shall also have the right to request Agent to inspect Borrower's
books and records and take the other steps provided in Paragraph 5.8 hereof. In
performing its duties as Agent hereunder, Agent will take the same care as it
takes in connection with loans in which it alone is interested, subject to the
limitations on liabilities contained herein; provided that Agent shall not be
obligated to ascertain or inquire as to the performance of any of the terms,
covenants or conditions hereof by Borrower. Neither Agent nor any of its
directors, officers, agents or employees shall be liable for any action or
omission by any of them hereunder or in connection herewith except for gross
negligence or willful misconduct. Subject to such exception, each of the Banks
hereby indemnifies Agent (in its capacity as Agent) on the basis of such Bank's
Pro Rata Share, against any liability, claim, loss or expense arising from or
relating to any action taken or omitted to be taken with respect to this
Agreement, any other Loan Document or the transactions contemplated thereby or
Borrower, to the extent that the Agent has not been reimbursed therefor by
Borrower, without affecting any obligation of Borrower to reimburse.
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9.9. No Responsibility for Representations or Validity, etc. Each
------------------------------------------------------
Bank agrees that Agent shall not be responsible to any Bank for any
representations, statements, or warranties of Borrower herein. Neither Agent
nor any of its directors, officers, employees or agents shall be responsible for
the validity, effectiveness, sufficiency, perfection or enforceability of this
Agreement and any Collateral, or any documents relating thereto or for the
priority of any of Banks' security interests in any such Collateral.
9.10. Action on Instruction of Banks; Right to Indemnity. Agent
--------------------------------------------------
shall act upon written instruction of Banks or Required Banks, as appropriate,
and in all cases Agent shall be fully protected in acting or refraining from
acting hereunder in accordance with such written instructions to it signed by
Required Banks unless the consent of all the Banks is expressly required
hereunder in which case Agent shall be so protected when acting in accordance
with such instructions from all the Banks. Such instructions and any action
taken or failure to act pursuant thereto shall be binding on all the Banks,
provided that except as otherwise provided herein, Agent may act hereunder in
its own discretion without requesting such instructions.
9.11. Employment of Agents. In connection with its activities
--------------------
hereunder, Agent may employ agents and attorneys-in-fact and shall not be
answerable, except as to money or securities received by it or its authorized
agents, for the default or misconduct of agents or attorneys-in-fact selected
with reasonable care.
9.12. Reliance on Documents. Agent shall be entitled to rely upon
---------------------
(a) any paper or document believed by it to be genuine and correct and to have
been signed or sent by the proper person or persons and (b) upon the opinion of
its counsel with respect to legal matters.
9.13. Agent's Rights as a Bank. With respect to its share of the
------------------------
indebtedness hereunder, Agent shall have the same rights and powers hereunder as
any other Bank and may exercise the same as though it were not Agent. Each of
the Banks may accept deposits from and generally engage in other banking or
trust business with Borrower as if it were not Agent or a Bank hereunder.
9.14. Expenses. Each of the Banks shall reimburse Agent, from time
--------
to time at the request of Agent, for its Pro Rata Share of any expenses incurred
by Agent in connection with the performance of its functions hereunder without
affecting any obligation of Borrower to reimburse, provided however that in the
event Banks shall reimburse Agent for expenses for which Borrower subsequently
reimburses Agent, Agent shall remit to each Bank the
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respective amount received from such Bank against such expenses.
9.15. Resignation of Agent. Agent may at any time resign its
--------------------
position as Agent, without affecting its position as a Bank, by giving written
notice to Banks and Borrower. Such resignation shall take effect upon the
appointment of a successor agent in accordance with this Paragraph 9.15. In the
event Agent shall resign, Required Banks with the consent of Borrower, which
consent will not be unreasonably withheld, shall appoint a Bank as successor
agent. If within thirty (30) days of the Agent's notice of resignation no
successor agent shall have been appointed by Banks and accepted such
appointment, then Agent, in its discretion may appoint any other Bank with
banking powers as a successor agent.
9.16. Successor Agent. The successor Agent appointed pursuant to
---------------
Paragraph 9.15 shall execute and deliver to its predecessor and Banks an
instrument in writing accepting such appointment, and thereupon such successor,
without any further act, deed or conveyance, shall become fully vested with all
the properties, rights, duties and obligations of its predecessor Agent. The
predecessor Agent shall deliver to its successor Agent forthwith all Collateral,
documents and moneys held by it as Agent, if any, whereupon such predecessor
Agent shall be discharged from its duties and obligations as Agent under this
Agreement.
9.17. Collateral Security. Agent will hold, administer and manage
-------------------
any Collateral pledged from time to time hereunder either in its own name or as
Agent on behalf of the Banks, but each Bank shall hold a direct, undivided pro-
rata beneficial interest therein, on the basis of its Pro Rata Share, by reason
of and as evidenced by this Agreement.
9.18. Enforcement by Agent. All rights of action under this
--------------------
Agreement and under the Notes and all rights to the Collateral hereunder may be
enforced by Agent and any suit or proceeding instituted by Agent in furtherance
of such enforcement shall be brought in its name as Agent without the necessity
of joining as plaintiffs or defendants any other Banks, and the
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recovery of any judgment shall be for the benefit of Banks subject to the
expenses of Agent.
SECTION 10
MISCELLANEOUS
-------------
10.1. Indemnification and Release Provisions. Borrower hereby agrees
--------------------------------------
to defend Agent and each Bank and their directors, officers, agents, employees
and counsel from, and hold each of them harmless against, any and all losses,
liabilities (including without limitation settlement costs and amounts, transfer
taxes, documentary taxes, or assessments or charges made by any governmental
authority), claims, damages, interest judgments, costs, or expenses, including
without limitation reasonable fees and disbursements of counsel, incurred by any
of them arising out of or in connection with or by reason of this Agreement, the
Commitment, the making of the Loan or any Collateral therefor, other than those
resulting primarily from any such party's own wilful misconduct or gross
negligence, including without limitation, any and all losses, liabilities,
claims, damages, interests, judgments, costs or expenses relating to or arising
under any Environmental Control Statute or the application of any such Statute
to any of the Companies' properties or assets. Borrower hereby releases Agent
and each Bank and their directors, officers, agents, employees and counsel from
any and all claims for loss, damages, costs or expenses caused or alleged to be
caused by any act or omission on the part of any of them other than those
resulting primarily from any such party's own wilful misconduct or gross
negligence. All obligations provided for in this Paragraph 10.1 shall survive
any termination of this Agreement or the Commitment and the repayment of the
Loan.
10.2. Participations and Assignments. Borrower hereby acknowledges
------------------------------
and agrees that a Bank may at any time: (a) grant participations in all or any
portion of its Maximum Principal Amount of the Loan or of its right, title and
interest therein or in or to this Agreement (collectively, "Participations") to
any other lending office or to any other bank or lending institution
("Participants"); provided, however, that: (i) all amounts payable by Borrower
hereunder shall be determined as if such Bank had not granted such
Participation; and (ii) any agreement pursuant to which any Bank may grant a
Participation: (x) shall provide that such Bank shall retain the sole right and
responsibility to enforce the obligations of Borrower hereunder including,
without limitation, the right to approve any amendment, modification or waiver
of any provisions of this
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Agreement; (y) may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement without the consent of the Participant if
such modification, amendment or waiver would require approval of all Banks
pursuant to Paragraph 9.3 hereof; and (z) shall not relieve such Bank from its
obligations, which shall remain absolute, to make Advances hereunder; and (b)
assign its rights and obligations under the Commitment and the Loan with notice
to Borrower and Agent together with the payment to Agent of a $2,500 transfer
fee, provided, that in the absence of an Event of Default hereunder no Bank
shall assign more than fifty percent (50%) of its rights and obligations
hereunder. Any grant of a participation or assignment pursuant to this Paragraph
10.2 shall be pro rata as to the Acquisition Loan and the Revolving Loan.
Borrower may not assign or otherwise its rights or obligation under this
Agreement without the prior written consent of Banks.
10.3. Binding and Governing Law. This Agreement and all documents
-------------------------
executed hereunder shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns and, except as may be
required by mandatory provisions of applicable law, shall be governed as to
their validity, interpretation and effect by the laws of the Commonwealth of
Pennsylvania.
10.4. Survival. All agreements, representations, warranties and
--------
covenants of Borrower contained herein or in any documentation required
hereunder shall survive the execution of this Agreement and the making of the
Loan hereunder, and except for Paragraphs 5.12 and 10.1 which provide otherwise
will continue in full force and effect as long as any indebtedness or other
obligation of Borrower to Banks remains outstanding.
10.5. No Waiver; Delay. If Banks shall waive any power, right or
----------------
remedy arising hereunder or under any applicable law, such waiver shall not be
deemed to be a waiver upon the later occurrence or recurrence of any of said
events with respect to Banks. No delay by Banks in the exercise of any power,
right or remedy shall, under any circumstances, constitute or be deemed to be a
waiver, express or implied, of the same and no course of dealing between the
parties hereto shall constitute a waiver of Banks' powers, rights or remedies.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
10.6. Modification; Waiver. Except as otherwise provided in this
--------------------
Agreement, no modification or amendment hereof, or waiver or consent hereunder,
shall be effective unless made in a writing signed by appropriate officers of
the parties hereto.
10.7. Headings. The various headings in this Agreement are inserted
--------
for convenience only and shall not affect
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the meaning or interpretation of this Agreement or any provision hereof.
10.8. Notices. Any notice, request or consent required hereunder or
-------
in connection herewith shall be deemed satisfactorily given if in writing and
delivered by hand, mailed (registered or certified mail) or sent by facsimile
transmission to Agent or Borrower at their respective addresses or telecopier
number set forth below, or to Banks at their respective addresses or telecopier
numbers set forth on Schedule 1 attached hereto, or to any party at such other
addresses or telecopier numbers as may be given by any party to the others in
writing:
if to Borrower:
Home Health Corporation of Delaware, Inc.
2200 Renaissance Boulevard
Suite 300
King of Prussia, PA 19406
Attention: Bruce J. Feldman
Telecopier: 610-272-3131
if to Agent:
CoreStates Bank, N.A.
1339 Chestnut Street
Philadelphia, PA 19101
Attention: Jennifer W. Leibowitz
Telecopier: 215-973-2738
10.9. Payment on Non-Business Days. Whenever any payment to be made
----------------------------
hereunder shall be stated to be due on a day other than a Business Day, such
payment may be made on the next succeeding Business Day, provided however that
such extension of time shall be included in the computation of interest due in
conjunction with such payment or other fees due hereunder, as the case may be.
10.10. Time of Day. All time of day restrictions imposed herein
-----------
shall be calculated using Agent's local time.
10.11. Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provisions to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.
10.12. Counterparts. This Agreement may be executed in any number of
------------
counterparts with the same effect as if all the
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signatures on such counterparts appeared on one document, and each such
counterpart shall be deemed to be an original.
10.13. Consent to Jurisdiction and Service of Process. Borrower
----------------------------------------------
irrevocably appoints each officer of Parent as its attorney upon whom may be
served any notice, process or pleading in any action or proceeding against it
arising out of or in connection with this Agreement, the Notes, the Loan
Documents or any of the Collateral; Borrower hereby consents that any action or
proceeding against it be commenced and maintained in any court within the
Commonwealth of Pennsylvania or in the United States District Court for the
Eastern District of Pennsylvania by service of process on any officer of Parent;
and Borrower agrees that the courts of the Commonwealth of Pennsylvania and the
United States District Court for the Eastern District of Pennsylvania shall have
jurisdiction with respect to the subject matter hereof and the person of
Borrower and the Collateral. Notwithstanding the foregoing, Agent, in its
absolute discretion may also initiate proceedings in the courts of any other
jurisdiction in which any Company may be found or in which any of its properties
or Collateral may be located.
10.14. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY
--------------------
KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON OR ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR THE NOTES OR OTHER LOAN DOCUMENTS OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF AGENT OR BANKS. THIS PROVISION IS A MATERIAL INDUCEMENT FOR BANKS'
ENTERING INTO THIS AGREEMENT.
10.15. ACKNOWLEDGMENTS. BORROWER ACKNOWLEDGES THAT IT HAS HAD THE
---------------
ASSISTANCE OF COUNSEL IN THE REVIEW AND EXECUTION OF THIS AGREEMENT AND,
SPECIFICALLY, PARAGRAPH 10.14 HEREOF, AND FURTHER ACKNOWLEDGES THAT THE MEANING
AND EFFECT OF THE FOREGOING WAIVER OF JURY TRIAL HAVE BEEN FULLY EXPLAINED TO
BORROWER BY SUCH COUNSEL.
IN WITNESS WHEREOF, the undersigned, by their duly
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authorized officers, as applicable, have executed this Agreement the day and
year first above written.
HOME HEALTH CORPORATION OF
Attest: DELAWARE, INC.
By:_______________________ By:_____________________________
Name: Name:
Title: Title:
CORESTATES BANK, N.A., for itself and as Agent
By:_____________________________
Name:
Title:
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By:_____________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Name:
Title:
SUNTRUST BANK, CENTRAL FLORIDA,
N.A.
By: ____________________________
Name:
Title:
[EXECUTIONS CONTINUED]
-71-
<PAGE>
TORONTO DOMINION (NEW YORK), INC.
By: ____________________________
Name:
Title:
FLEET NATIONAL BANK
By: ____________________________
Name:
Title:
-72-
<PAGE>
STATE OF GEORGIA
COUNTY OF FULTON
On the ____ day of March 1997 personally appeared ___________, as the
____________ President of Sun Trust Bank, Central Florida, National Association,
and before me executed the attached Third Amended and Restated Credit Agreement
dated as of March __, 1997 between Home Health Corporation of Delaware, Inc.
(the Borrower), the Banks listed on Schedule 1 (including Sun Trust Bank,
Central Florida, National Association, as Lender) and CoreStates Bank, N.A. as
Agent for the Banks.
IN WITNESS WHEREOF, I have hereunto set my hand and official seal, in the
state and county aforesaid.
------------------------------------
Signature of Notary Public,
State of
---------------------------
------------------------------------
(Print, Type or Stamp Commissioned
Name of Notary Public)
Personally known ______; OR
Produced identification _______
Type of identification produced:
------------------------------------
------------------------------------
(Notary Seal)
-73-
<PAGE>
SCHEDULE 1
Banks
-----
CORESTATES BANK, N.A.
1339 Chestnut Street
Philadelphia, PA 19107
Attention: Jennifer W. Leibowitz,
Vice President
Tel: (215) 786-3972
Fax: (215) 973-2738
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
One First Union Center
301 College Street
Charlotte, NC 28288-0735
Attention: David F. Grams,
Vice President
Tel: (704) 383-6249
Fax: (704) 383-9144
PNC BANK, NATIONAL ASSOCIATION
1600 Market Street
22nd Floor
M.S. F2-F070-22-6
Philadelphia, PA 19101
Attention: Gabrielle Wanamaker,
Vice President
Tel: (215) 585-6389
Fax: (215) 585-6987
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
Mail Code 0-1106
200 South Orange Avenue
Tower Ten
Orlando, FL 32801
Attention: Jeffrey R. Dickson
First Vice President
Tel: (407) 237-4541
Fax: (407) 237-2491
TORONTO DOMINION (NEW YORK), INC.
312 West 52nd Street
New York, NY 10019
Attention: David J. Perelman
Associate
Tel: (212) 468-0749
Fax: (212) 974-0396
<PAGE>
with a copy to:
909 Fanin Street
17th Floor
Houston, TX 77010
Attention: Jorge Garcia
Tel: (713) 653-8242
Fax: (713) 951-9921
FLEET NATIONAL BANK
MA BO FO 4A
75 State Street
Boston, MA 02109
Attention: Maryann S. Smith
Tel: (617) 346-1594
Fax: (617) 346-1634
<PAGE>
MAXIMUM PRINCIPAL AMOUNTS
- -------------------------
<TABLE>
<CAPTION>
BANK MAXIMUM PRINCIPAL MAXIMUM PRINCIPAL TOTAL MAXIMUM PRINCIPAL MAXIMUM PRINCIPAL
- --------------------------- AMOUNT OF AMOUNT OF UNALLOCATED AMOUNT OF RSD AMOUNT OF LHS
REVOLVING ACQUISITION MAXIMUM COMMITMENT COMMITMENT
COMMITMENT COMMITMENT PRINCIPAL AMOUNT ----------------- -----------------
------------------ ------------------ ----------------
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CoreStates Bank, N.A. $ 7,500,000 $15,000,000 $22,500,000 $1,500,000 $1,000,000
- ----------------------------------------------------------------------------------------------------------------------------
First Union National
Bank of North
Carolina 6,000,000 12,000,000 18,000,000 1,200,000 800,000
- ----------------------------------------------------------------------------------------------------------------------------
PNC Bank, National
Association 4,500,000 9,000,000 13,500,000 900,000 600,000
- ----------------------------------------------------------------------------------------------------------------------------
SunTrust Bank,
Central Florida, N.A. 4,500,000 9,000,000 13,500,000 900,000 600,000
- ----------------------------------------------------------------------------------------------------------------------------
Toronto Dominion
(New York), Inc. 4,500,000 9,000,000 13,500,000 900,000 600,000
- ----------------------------------------------------------------------------------------------------------------------------
Fleet National Bank 3,000,000 6,000,000 9,000,000 600,000 400,000
- ----------------------------------------------------------------------------------------------------------------------------
$30,000,000 $60,000,000 $90,000,000 $6,000,000 $4,000,000
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
BANK TOTAL PRO
- --------------------------- MAXIMUM RATA
PRINCIPAL SHARE
AMOUNT -----
-------
- -------------------------------------------------------
- -------------------------------------------------------
<S> <C> <C>
CoreStates Bank, N.A. $25,000,000 25.000%
- -------------------------------------------------------
First Union National
Bank of North
Carolina 20,000,000 20.000
- -------------------------------------------------------
PNC Bank, National
Association 15,000,000 15.000
- -------------------------------------------------------
SunTrust Bank,
Central Florida, N.A. 15,000,000 15.000
- -------------------------------------------------------
Toronto Dominion
(New York), Inc. 15,000,000 15.000
- -------------------------------------------------------
Fleet National Bank 10,000,000 10.000
- -------------------------------------------------------
$100,000,000 100.000%
- -------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 11.1
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
Computation of Primary and Fully diluted Earnings Per Share
for the three and nine months ended March 31, 1997
The following calculation is submitted in
accordance with the Securities Act of 1934:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, 1997 March 31, 1997
---------------------------------- -----------------------------------
Primary Fully diluted Primary Fully diluted
----------- ------------------- ------------ ------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income........................... $1,567 $1,567 $3,613 $3,613
Dividends on preferred stock......... - - (6) -
Interest and dividends on
converted securities, net of tax.. - - - 79
----------- ------------------- ------------ ------------------
Net income available to common
stockholders...................... $1,567 $1,567 $3,607 $3,692
=========== =================== ============ ===================
Weighted average number of maximum
shares outstanding during
period............................ 8,678 8,678 8,359 8,378
Weighted average number of maximum
shares subject to exercise under
outstanding stock options and
warrants, net of treasury shares
assumed repurchased............... 148 151 148 155
Shares assumed issued in
connection with conversion of
converted securities, as of the
beginning of period............... - - - 201
----------- ------------------- ------------ ------------------
Weighted average number of common
and common equivalent shares
outstanding....................... 8,826 8,829 8,507 8,734
=========== =================== ============ ==================
Net income per share................. $0.18 $0.18 $0.42 $0.42
=========== =================== ============ ==================
</TABLE>
<PAGE>
Exhibit 11.2
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
Computation of Primary and Fully diluted Earnings Per Share
Before Extraordinary Item
for the three and nine months ended March 31, 1996
The following calculation is submitted in
accordance with the Securities Act of 1934:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, 1996 March 31, 1996
---------------------------------- -----------------------------------
Primary Fully diluted Primary Fully diluted
----------- ------------------- ------------ ------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income before extraordinary item.... $1,162 $1,162 $1,906 $1,906
Dividends on preferred stock............ (17) - (101) (101)
Write-off of discount on preferred
stock................................. - - (787) (787)
Interest and dividends on
convertible securities, net of
tax................................... - 22 - -
----------- ------------------- ------------ ------------------
Net income available to common
stockholders.......................... $1,145 $1,184 $1,018 $1,018
=========== =================== ============ ===================
Weighted average number of maximum
shares outstanding during
period................................ 7,889 7,889 5,808 5,874
Weighted average number of maximum
shares subject to exercise under
outstanding stock options and
warrants, net of treasury shares
assumed repurchased................... 112 132 80 90
Shares assumed issued in connection
with conversion of convertible
securities, as of the beginning of 185 444 185 185
the period............................ ----------- ------------------- ------------ ------------------
Weighted average number of common and
common equivalent shares outstanding.. 8,186 8,465 6,073 6,149
=========== =================== ============ ==================
Net income per share.................... $0.14 $0.14 $0.17 $0.17
=========== =================== ============ ==================
</TABLE>
<PAGE>
Exhibit 11.3
HOME HEALTH CORPORATION OF AMERICA, INC. AND SUBSIDIARIES
Computation of Primary and Fully diluted Earnings (Loss) Per Share
After Extraordinary Item
for the three and nine months ended March 31, 1996
The following calculation is submitted in
accordance with the Securities Act of 1934:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, 1996 March 31, 1996
---------------------------------- -----------------------------------
Primary Fully diluted Primary Fully diluted
----------- ------------------- ------------ ------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net income.............................. $1,162 $1,162 $ 745 $ 745
Dividends on preferred stock............ (17) - (101) (101)
Write-off of discount on preferred
stock................................. - - (787) (787)
Interest and dividends on
convertible securities, net of
tax................................... - 22 - -
----------- ------------------- ------------ ------------------
Net income (loss) available to common
stockholders.......................... $1,145 $1,184 $(143) $(143)
=========== =================== ============ ===================
Weighted average number of maximum
shares outstanding during
period................................ 7,889 7,889 5,808 5,874
Weighted average number of maximum
shares subject to exercise under
outstanding stock options and
warrants, net of treasury shares
assumed repurchased................... 112 132 80 90
Shares assumed issued in connection
with conversion of convertible
securities, as of the beginning of 185 444 185 185
the period............................ ----------- ------------------- ------------ ------------------
Weighted average number of common and
common equivalent shares outstanding.. 8,186 8,465 6,073 6,149
=========== =================== ============ ==================
Net income (loss) per share............. $0.14 $0.14 $(0.02) $(0.02)
=========== =================== ============ ==================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE RELATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 735
<SECURITIES> 0
<RECEIVABLES> 57,543
<ALLOWANCES> 9,326
<INVENTORY> 3,607
<CURRENT-ASSETS> 56,460
<PP&E> 65,032
<DEPRECIATION> 2,526
<TOTAL-ASSETS> 136,534
<CURRENT-LIABILITIES> 17,224
<BONDS> 0
0
0
<COMMON> 43,098
<OTHER-SE> (5)
<TOTAL-LIABILITY-AND-EQUITY> 136,534
<SALES> 102,352
<TOTAL-REVENUES> 102,352
<CGS> 49,642
<TOTAL-COSTS> 92,527
<OTHER-EXPENSES> 1,884<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,073
<INCOME-PRETAX> 5,868
<INCOME-TAX> 2,255
<INCOME-CONTINUING> 3,613
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,613
<EPS-PRIMARY> 0.42
<EPS-DILUTED> 0.42
<FN>
<F1>OTHER EXPENSES ARE COMPRISED OF $1,584 RELATED TO MERGER COSTS INCURRED IN
CONNECTION WITH A POOLING TRANSACTION IN NOVEMBER 1996 AND $300 RELATED TO THE
WRITE-OFF OF DEFERRED OFFERING COSTS AS A RESULT OF THE CANCELLATION ON
DECEMBER 30, 1996 OF A REGISTRATION OF SHARES OF THE COMPANY'S COMMON STOCK.
</FN>
</TABLE>
