<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
<TABLE>
<S> <C>
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: August 31, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-9369
</TABLE>
------------------------
HORIZON/CMS HEALTHCARE CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 91-1346899
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
6001 INDIAN SCHOOL ROAD, N.E., SUITE 530
ALBUQUERQUE, NEW MEXICO 87110
(505) 881-4961
(Address and telephone number of Registrant)
Horizon Healthcare Corporation
(Former name)
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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
Yes _XX_ No ____
Shares of the registrant's Common Stock, $.001 par value, outstanding
exclusive of treasury stock, was 51,074,980 shares at October 10, 1995.
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
INDEX
FORM 10-Q -- FOR THE THREE MONTHS ENDED AUGUST 31, 1995
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE NUMBERS
------------
<S> <C> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
August 31, 1995 and May 31, 1995................ 3
Consolidated Statements of Operations
For the three months ended August 31, 1995 and
1994............................................ 4
Consolidated Statements of Cash Flows
For the three months ended August 31, 1995 and
1994............................................ 5
Notes to Consolidated Financial Statements....... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders......................................... 14
Item 6. Exhibits and Reports on Form 8-K................. 14
Signatures................................................... 15
</TABLE>
2
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HORIZON/CMS HEALTHCARE CORPORATION
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1995 AND MAY 31, 1995
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
AUGUST 31 MAY 31
---------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................................................. $ 48,459 $ 40,674
Accounts receivable, net of allowance for doubtful accounts of $32,172 at August 31 and $29,595 at May
31................................................................................................... 338,753 330,313
Estimated Medicare and Medicaid settlements........................................................... 8,408 --
Prepaid and other assets.............................................................................. 80,511 61,650
Deferred income taxes................................................................................. 21,806 21,806
---------- ----------
Total current assets................................................................................ 497,937 454,443
PROPERTY AND EQUIPMENT, net............................................................................. 618,698 614,379
GOODWILL, net........................................................................................... 167,935 168,861
OTHER INTANGIBLE ASSETS, net............................................................................ 41,166 35,879
NOTES RECEIVABLE, excluding current portion............................................................. 44,299 44,619
OTHER ASSETS............................................................................................ 75,895 79,942
---------- ----------
Total assets........................................................................................ $1,445,930 $1,398,123
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt..................................................................... $ 4,993 $ 5,032
Accounts payable...................................................................................... 32,768 33,280
Accrued expenses...................................................................................... 170,693 131,225
Estimated Medicare and Medicaid settlements........................................................... -- 563
---------- ----------
Total current liabilities........................................................................... 208,454 170,100
LONG-TERM DEBT, excluding current portion............................................................... 572,662 532,688
OTHER LIABILITIES....................................................................................... 25,427 24,353
DEFERRED INCOME TAXES................................................................................... 6,271 6,141
MINORITY INTERESTS...................................................................................... 14,490 14,189
STOCKHOLDERS' EQUITY:
Common stock of $.001 par value, authorized 150,000,000 shares, 50,891,098 shares issued with
50,386,209 shares outstanding at August 31 and 50,679,107 shares issued with 50,174,218 shares
outstanding at May 31.............................................................................. 51 51
Additional paid-in capital.......................................................................... 560,189 559,168
Retained earnings................................................................................... 66,335 99,382
Note receivable from sale of common stock........................................................... (2,362) (2,362)
Treasury stock...................................................................................... (5,587) (5,587)
---------- ----------
Total stockholders' equity........................................................................ 618,626 650,652
---------- ----------
Total liabilities and stockholders' equity........................................................ $1,445,930 $1,398,123
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED
AUGUST 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
NET PATIENT CARE REVENUES................................................................................... $427,025 $378,225
OTHER OPERATING REVENUES.................................................................................... 4,382 3,615
-------- --------
Total operating revenues................................................................................ 431,407 381,840
COST OF SERVICES............................................................................................ 328,700 296,374
ADMINISTRATIVE AND GENERAL.................................................................................. 20,447 18,674
FACILITY LEASES............................................................................................. 21,078 19,160
DEPRECIATION AND AMORTIZATION............................................................................... 14,651 13,197
INTEREST EXPENSE............................................................................................ 13,112 12,163
SPECIAL CHARGE.............................................................................................. 63,540 --
-------- --------
Total operating expenses................................................................................ 461,528 359,568
-------- --------
Earnings (loss) before minority interests and income taxes.............................................. (30,121) 22,272
MINIORITY INTERESTS......................................................................................... (1,324) (1,501)
-------- --------
Earnings (loss) before income taxes..................................................................... (31,445) 20,771
INCOME TAXES................................................................................................ (2,520) 8,611
-------- --------
Net earnings (loss)..................................................................................... $(28,925) $ 12,160
-------- --------
-------- --------
Net earnings (loss) per common and common equivalent share.................................................. $ (0.56) $ 0.27
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
AUGUST 31, 1995 AND 1994
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)....................................................................................... $(28,925) $ 12,160
-------- --------
Adjustments:
Depreciation and amortization........................................................................... 14,651 13,197
Other................................................................................................... 1,943 (131)
Increase (decrease) in cash from changes in assets and liabilities, excluding effects of acquisitions
and dispositions:
Accounts and settlements receivable................................................................... (17,411) (18,241)
Other assets.......................................................................................... (19,521) (15,290)
Deferred income taxes................................................................................. 130 (150)
Accounts payable and accrued expenses................................................................. 38,956 (1,653)
Other liabilities..................................................................................... 1,074 1,469
-------- --------
Total adjustments......................................................................................... 19,822 (20,799)
-------- --------
Net cash used in operating activities..................................................................... (9,103) (8,639)
-------- --------
Cash flows from investing activities:
Payments pursuant to acquisition agreements, net of cash acquired......................................... (1,081) (80,791)
Cash proceeds from sale of property and equipment......................................................... -- 3,900
Other intangible assets................................................................................... (5,981) (3,860)
Acquisition of property and equipment..................................................................... (11,434) (13,903)
Notes receivable.......................................................................................... 660 1,923
Other investing activities................................................................................ (479) (3,016)
-------- --------
Net cash used in investing activities..................................................................... (18,315) (95,747)
-------- --------
Cash flows from financing activities:
Long-term debt borrowings................................................................................. 106,874 105,285
Long-term debt repayments................................................................................. (66,559) (38,696)
Deferred financing costs.................................................................................. (1,829) (1,550)
Issuance of common stock.................................................................................. 1,211 1,362
Capital contributions by minority interests............................................................... 446 320
Distributions to minority interests....................................................................... (1,629) (808)
-------- --------
Net cash provided by financing activities................................................................. 38,514 65,913
-------- --------
Net increase (decrease) in cash and cash equivalents........................................................ 11,096 (38,473)
Cash and cash equivalents, beginning of period.............................................................. 40,674 65,825
Effect of pooling of interests restatement (Note 2)......................................................... (3,311) --
-------- --------
Cash and cash equivalents, end of period.................................................................... $ 48,459 $ 27,352
-------- --------
-------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1995
(UNAUDITED)
(1) BASIS OF PRESENTATION
The consolidated financial statements included herein have been prepared by
Horizon/CMS Healthcare Corporation and its subsidiaries (collectively the
"Company") pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, they are unaudited and certain information and footnote
disclosures normally included in the Company's annual consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, as permitted under the applicable rules and
regulations. In the opinion of management, all adjustments necessary for a fair
presentation of the financial position, results of operations and cash flows for
the periods presented have been made and are of a normal recurring nature.
These consolidated financial statements should be read in conjunction with
the Company's consolidated financial statements and the notes thereto included
in the Company's 1995 Annual Report on Form 10-K (as amended by Form 10-K/A
Amendment No. 1) filed with the Securities and Exchange Commission. The results
of operations for the interim periods presented are not necessarily indicative
of the results to be expected for the entire year.
(2) ACQUISITIONS
The stockholders of the Company and Continental Medical Systems, Inc.
("CMS") approved the merger of one of the Company's wholly-owned subsidiaries
with CMS (the "CMS Merger"). Under the terms of the merger agreement, CMS
stockholders received .5397 (the "Exchange Rate") of a share of the Company's
common stock for each outstanding share of CMS's common stock. Accordingly, the
Company issued approximately 20.9 million shares of its common stock, valued at
approximately $393.9 million based on the closing price of the Company's common
stock on July 10, 1995, for all the outstanding shares of CMS's common stock.
Additionally, outstanding options to acquire CMS's common stock were converted
at the Exchange Rate to options to acquire approximately 3.8 million shares of
the Company's common stock. CMS is one of the largest providers of comprehensive
medical rehabilitation programs and services in the country with a significant
presence in each of the rehabilitation industry's three principal sectors --
inpatient rehabilitation care, outpatient rehabilitation care and contract
therapy. The merger qualified as a tax-free reorganization and has been
accounted for as a pooling of interests. Accordingly, the Company's historical
financial information has been restated to include CMS's financial results. The
consolidated balance sheet as of May 31, 1995, and the consolidated statements
of earnings and cash flows for the quarters ended August 31, 1995 and 1994 have
been restated to reflect the combination. In connection with the CMS Merger, the
Company changed its name to Horizon/CMS Healthcare Corporation.
The accompanying consolidated balance sheet as of May 31, 1995, gives effect
to the combination of the Company's historical assets, liabilities and
stockholders' equity as of May 31, 1995, with the historical assets, liabilities
and stockholders' equity of CMS as of June 30, 1995, the fiscal year end of CMS
prior to the CMS Merger. The accompanying consolidated statement of operations
for the three months ended August 31, 1994, includes the results of operations
of the Company for the three months ended August 31, 1994, and the results of
operations of CMS for the three months ended September 30, 1994. The duplication
of reporting CMS's June 1995 operating results of $4.1 million in fiscal year
1995 and in the three months ended August 31, 1995, has been adjusted for by a
charge to retained earnings. Appropriate adjustments have also been made in the
statement of cash flows for the three months ended August 31, 1995.
6
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) ACQUISITIONS (CONTINUED)
Separate results of the Company and CMS for the periods presented prior to
the consummation of the CMS Merger and in total for the periods are as follows
(in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
AUGUST 31,
------------------
1995 1994
-------- --------
<S> <C> <C>
Total operating revenues:
The Company, prior to the CMS Merger..................... $ 59,065 $137,704
CMS...................................................... 83,684 244,136
The Company, subsequent to the CMS Merger................ 288,658 --
-------- --------
$431,407 $381,840
-------- --------
-------- --------
Net earnings (loss):
The Company, prior to the CMS Merger..................... $ 2,280 $ 6,399
CMS...................................................... 4,122 5,761
The Company, subsequent to the CMS Merger................ (35,327) --
-------- --------
($28,925) $ 12,160
-------- --------
-------- --------
</TABLE>
In September 1995 the Company purchased fee simple title to two skilled
nursing centers in Idaho for approximately $10.0 million. The two centers
operate a total of 224 beds. Also in September 1995, the Company acquired Home
Respiratory Services, Inc., an Oklahoma home respiratory service provider with
approximately $900,000 in annual revenues, in exchange for approximately 119,000
shares of the Company's common stock valued at approximately $2.5 million. Also
in September 1995, the Company acquired Cardio-Diagnostic Services, Inc., a
Texas non-invasive diagnostic services provider with approximately $3.2 million
in annual revenues, in exchange for 122,000 shares of the Company's common stock
valued at approximately $2.65 million. Finally, on September 1, 1995, the
Company purchased the remaining 20% minority interest in Nevada Rehabilitation
Services, Inc. ("NRS") in exchange for approximately 187,000 shares of the
Company's common stock valued at approximately $3.4 million. Prior to the
acquisition of the 20% share, the Company owned an 80% share of NRS, a contract
therapy company with annual revenues of approximately $8.2 million. Each of the
above acquisitions, in addition to various other acquisitions have been
accounted for as purchases. The aggregate effect of these acquisitions is not
material to the results of operations of the Company.
(3) SPECIAL CHARGE
During the first quarter of fiscal 1996, a special charge of approximately
$63.5 million (pre-tax) was recorded. The special charge resulted primarily from
(i) the write-off of costs which had been incurred in completing the CMS Merger
and (ii) the approval by management of the Company of restructuring measures
resulting from efforts to combine the previously separate companies. The special
charge is comprised of several components including transaction costs incurred
to effect the CMS Merger as well as asset impairments charges, termination
benefits, lease exit costs and other charges associated with combining and
restructuring the merged companies operations.
7
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) SPECIAL CHARGE (CONTINUED)
At August 31, 1995, the remaining balance in the $63.5 million special
charge accrual is approximately $37.0 million. The impairment of property and
equipment is reflected as a reduction of the related asset accounts while the
remaining amounts are included in accrued expenses. The components of the
special charge are as follows (in thousands):
<TABLE>
<CAPTION>
ORIGINAL FISCAL YEAR BALANCE
PROVISION 1996 ACTIVITY AUGUST 31, 1995
--------- ------------- ---------------
<S> <C> <C> <C>
Impairment of assets.............. $ 26,144 $ (8,766) $17,378
Termination benefits.............. 20,566 (12,089) 8,477
Transaction costs................. 6,697 (5,713) 984
Lease exit and other.............. 10,133 -- 10,133
--------- ------------- ---------------
$ 63,540 $(26,568) $36,972
--------- ------------- ---------------
--------- ------------- ---------------
</TABLE>
As previously reported, in June 1995 the Company announced that it plans to
sell the assets and leasehold improvements at eight of its long-term care
facilities and anticipates that the intended dispositions will occur during
fiscal 1996. In connection therewith, during the first quarter of fiscal 1996
the Company recorded an $11.9 million pre-tax asset impairment charge as a
component of the special charge. The properties that are the subject of the
planned dispositions or closure, in the aggregate, incurred pre-tax net losses
for the three months ended August 31, 1995 and 1994 of approximately $2.3
million and $.2 million, respectively. Revenues related to these operations for
the first quarter of fiscal years 1996 and 1995 approximated $18.0 million and
$19.0 million, respectively.
The $14.2 million balance of the special charge resulting from impairment of
assets is associated with the elimination or consolidation of operations in the
effort to combine the merged companies. In connection therewith, the Company
intends to consolidate or restructure corporate, contract therapy and physician
locum tenens operations and intends to close a rehabilitation clinic.
Approximately $20.6 million of the special charge is comprised of
involuntary termination benefits to be paid to an estimated 340 employees
impacted by the CMS Merger. Effected personnel are employed primarily within the
Company's corporate offices and contract therapy businesses. Of the $20.6
million total, approximately $9.5 million was paid to the former chairman and
chief executive officer of CMS pursuant to agreements in place prior to
discussions with the Company related to the CMS Merger.
Lease exit costs related to the consolidation efforts described above
approximate $2.2 million. Other one-time charges directly related to the CMS
Merger or costs not associated with activities that will be continued by the
combined company comprise the approximate $7.9 million balance of the special
charge. Such costs primarily include insurance consolidation and continuation
costs and certain employee benefit and other costs.
(4) LONG-TERM DEBT
In July 1995, in connection with the CMS Merger, the Company entered into a
new revolving credit facility which replaced the credit facility outstanding at
May 31, 1995, and increased the amount available for borrowing to $485.0
million. The aggregate principal amount was divided between the Company and CMS
in the amounts of $250.0 million and $235.0 million, respectively. The terms of
the new credit facility are substantially consistent with those of the old
credit facility except that accounts receivable are no longer required as
collateral and the interest component has been revised.
On September 26, 1995, the Company completed a tender offer and consent
solicitation for CMS's 10 3/8% and 10 7/8% senior subordinated notes (the
"Notes"). Tenders and consents were obtained from
8
<PAGE>
HORIZON/CMS HEALTHCARE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) LONG-TERM DEBT (CONTINUED)
the holders of 99.8% of the $118.8 million 10 3/8% notes and holders of 97.5% of
the $146.1 million 10 7/8% notes. The 10 3/8% notes were redeemed at 109.25%
plus a consent fee of 1.05% and the 10 7/8% notes were redeemed at 109.0% plus a
consent fee of .75%. The Company paid $289.5 million to retire the Notes,
including principal, premium, consent fee and other related costs. As a result
of the tender, the Company will record an extraordinary charge related to the
loss on the retirement of the Notes, including the write-off of related deferred
discount, swap cancellation and financing costs, of approximately $22.1 million,
net of tax, in the second quarter of fiscal 1996.
In connection with the tender offer, the Company's credit facility was
amended and restated to increase the facility from $485.0 million to $750.0
million, of which $70.0 million is available in the form of letters of credit.
The Notes were retired with funds drawn on the Company's amended credit
facility. The amended credit facility is also agented by NationsBank of Texas
N.A. for a group of banks and is subject to substantially the same interest and
terms of the previous $485.0 million facility, except that the facility is no
longer divided between the Company and CMS. Aggregate draws, including letters
of credit, under the amended credit facility after retirement of the Notes was
approximately $490.0 million.
(5) SUPPLEMENTAL INFORMATION RELATING TO CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended August 31, 1995 and August 31, 1994, the
following are considered supplemental information for the purposes of the
consolidated statements of cash flows:
a) The issuance of 20.9 million shares of common stock in exchange for
all of the outstanding common stock of CMS, for the three months ended
August 31, 1995, and the issuance of .5 million shares of common stock for
various acquisitions which in the aggregate were insignificant.
b) Cash paid for interest of $10.7 million for the three months ended
August 31, 1995 and $13.3 million for the three months ended 1994.
c) Cash paid for income taxes, net of refunds of $2.3 million for the
three months ended August 31, 1995 and $2.7 million for the three months
ended August 31, 1994.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
As previously reported, the Company acquired CMS on July 10, 1995, by means
of a merger of a wholly owned subsidiary of the Company with and into CMS, with
CMS being the surviving corporation. Upon consummation of the merger, CMS became
a wholly owned subsidiary of the Company. The CMS Merger has been accounted for
as a pooling of interests and all historical financial statements have been
restated to combine the results of the two companies. Under the terms of the
merger agreement, each outstanding share of CMS's common stock was converted
into .5397 of one share of the Company's common stock, resulting in the Company
issuing approximately 20.9 million shares, valued at approximately $393.9
million based on the closing price of the Company's common stock on July 10,
1995. Approximately 50.3 million shares of the Company's common stock were
outstanding following the CMS Merger. Additionally, outstanding options to
acquire shares of CMS's common stock were converted into options to acquire
approximately 3.8 million shares of the Company's common stock. In connection
with the CMS Merger, the Company changed its name to Horizon/CMS Healthcare
Corporation.
The Company's strategic business plan emphasizes operating and expanding its
long-term care and specialty programs and services in regionally concentrated
areas, including the midwest and southwest regions of the United States. The
Company is expanding its specialty health care programs and services through the
development of institutional pharmacies, acquisition and development of therapy
companies and medical diagnostic companies and the conversion and renovation or
acquisition of specialty hospitals. In turn, the acquisition of long-term care
facilities in certain geographic areas has enhanced the Company's expansion of
its specialty programs. Specifically, in certain geographic areas, the Company's
long-term care presence is a platform from which it can vertically integrate its
specialty health care programs and services. The Company intends to expand its
long-term care and specialty health care programs into regional areas served by
existing CMS rehabilitation hospitals to take advantage of operating
efficiencies and to expand the existing continuum of care.
With the merger of CMS, the Company acquired one of the nation's largest
providers of comprehensive inpatient and outpatient medical rehabilitative
services. CMS has a significant clinical and market presence in each of the
medical rehabilitation industry's three principal sectors -- inpatient
rehabilitation care, outpatient rehabilitation care and contract rehabilitation
therapies. CMS operates 37 freestanding rehabilitation hospitals, provides
outpatient rehabilitation services at more than 130 locations and manages 13
inpatient rehabilitation units for general acute care hospitals. CMS also
provides physician staffing services. The Company anticipates continued
expansion of inpatient rehabilitation hospitals and outpatient clinics.
These growth objectives have been, and will continue to be, the basis of a
strategic business plan that has resulted in net earnings of $31.2 million,
$16.6 million and $7.7 million for the fiscal years ended May 31, 1995, 1994 and
1993, respectively, for the Company prior to the restatement for the CMS Merger.
Pro forma net earnings before special charges for the three months ended August
31, 1995 and 1994 were $13.6 million and $12.2 million, respectively.
REGULATION
THERAPY REIMBURSEMENT. In April 1995, the Health Care Financing
Administration ("HCFA") issued a memorandum to its Medicare fiscal
intermediaries (the "Fiscal Intermediaries") providing guidelines for assessing
costs incurred by inpatient providers ("Care Providers") relating to payment of
occupational and speech language pathology services furnished under arrangements
that include contracts between therapy providers and Care Providers. While not
binding on the Fiscal Intermediaries, the HCFA memorandum suggested certain
rates to the Fiscal Intermediaries to assist them in making annual "prudent
buyer" assessments of speech and occupational therapy rates paid by Care
Providers during the Fiscal Intermediary's reviews of the Care Providers' cost
reports. The HCFA memorandum acknowledges that the rates noted in the memorandum
are not absolute limits
10
<PAGE>
and should only be used by the Fiscal Intermediaries for comparative purposes.
Following the issuance of the HCFA memorandum, industry representatives
questioned the data initialized by HCFA in formulating memorandum guidelines.
Subsequent meetings between industry representatives and the HCFA have been held
concerning the merits of the HCFA memorandum. HCFA has asked industry
associations and groups to provide recommendations for inclusion in clarifying
instructions to the Fiscal Intermediaries. In light of the fluid nature of the
HCFA memorandum, the Company cannot predict whether or not the rates suggested
in the HCFA memorandum will continue to be recommended by the HCFA.
Additionally, the Company cannot determine at this time whether the rates
suggested in HCFA memorandum would be used by HCFA as a basis for developing
possible future regulations creating a salary equivalency based reimbursement
system for speech and occupational therapy services.
FEDERAL BUDGET. Both Houses of Congress have adopted a budget resolution or
"blueprint" that is intended to control health care costs, improve access to
medical services for uninsured individuals and balance the federal budget by the
year 2002. At present, no budgetary reconciliation or appropriations have been
approved by either House of Congress. However, certain members of Congress have
introduced budget reconciliation proposals. These proposals have not yet been
reported out of committee. These proposals include reduced rates of growth in
the Medicare and Medicaid programs and proposals to block grant funds to the
states to administer the Medicaid program.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data
expressed as a percentage of total operating revenues:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED AUGUST 31,
-----------------
1995 1994
------- -------
<S> <C> <C>
Total operating revenues................................... 100.0% 100.0%
------- -------
Total routine expenses (1)................................. 80.9 82.5
Total property expenses (2)................................ 11.3 11.7
Special charge............................................. 14.7 --
------- -------
Total operating expenses................................. 106.9 94.2
------- -------
Earnings (loss) before minority interests and income
taxes..................................................... (6.9) 5.8
Minority interests......................................... (0.3) (0.4)
------- -------
Earnings (loss) before income taxes........................ (7.2) 5.4
Income taxes............................................... (0.6) 2.2
------- -------
Net earnings............................................. (6.6)% 3.2%
------- -------
------- -------
</TABLE>
- - ------------------------
(1) Includes cost of services and general and administrative costs.
(2) Includes facility leases, depreciation and amortization and interest
expense.
11
<PAGE>
The following table sets forth a summary of the Company's total operating
revenues by type of service and the percentage of total operating revenues that
each such service represented for each period indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED AUGUST 31,
-----------------------------------
1995 1994
---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term care services................. $ 94,536 21.9% $ 73,469 19.2%
Other operating revenues (1)............ 4,382 1.0 3,615 1.0
Specialty health care services:
Contract therapy...................... 102,321 23.7 93,471 24.5
Rehabilitation........................ 128,955 29.9 120,700 31.6
Other (2)............................. 101,213 23.5 90,585 23.7
-------- ------ -------- ------
Total operating revenues............ $431,407 100.0% $381,840 100.0%
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
- - ------------------------
(1) Includes revenues derived from management fees, interest income, rental
income and other miscellaneous services.
(2) Includes revenues derived from subacute care, institutional pharmacy
operations, Alzheimer's care, noninvasive medical diagnostic testing
services, physicians services and clinical laboratory services.
THREE MONTHS ENDED AUGUST 31, 1995 COMPARED TO
THREE MONTHS ENDED AUGUST 31, 1994
Total operating revenues increased approximately $49.6 million or 13.0% for
the three months ended August 31, 1995, as compared with the same period in
fiscal 1995. The majority of this increase is the result of the Company's
expansion, both internally and through acquisitions. The number of long-term and
specialty healthcare facilities operated increased from approximately 130
facilities at August 31, 1994 to approximately 150 facilities at August 31,
1995. Contract therapy revenues have increased approximately 9.5% as the Company
continues to expand these services. An additional cause of the increase in
revenues is an increase in Medicare, Medicaid and private pay rates. The average
increase in rates per patient day across all pay types for long-term care and
rehabilitation hospitals was approximately 1.7% and 2.5%, respectively. Revenues
attributable to higher margin specialty health care services as a percentage of
total operating revenues decreased slightly from 79.8% for the three months
ended August 31, 1994 to 77.1% for the same period in fiscal 1996. The average
occupancy of the Company's facilities remained consistent at approximately 89%
for long-term care and 69% for rehabilitation hospitals and as a consequence had
little or no effect on operating revenues.
Cost of services increased approximately $32.3 million or 10.9% for the
three months ended August 31, 1995 from $296.4 million for the same period in
fiscal 1995. Administrative and general expense increased approximately $1.8
million or 9.5% for the three months ended August 31, 1995 from $18.7 million
for the same period in fiscal 1995. These increases are due primarily to the
increase in the number of long-term care facilities, specialty hospitals and
subacute care units operated by the Company, as well as the costs associated
with the expansion of specialty health care services and programs.
Facility lease expense and depreciation and amortization and interest
expense increased approximately 9.7% for the three months ended August 31, 1995,
from $44.5 million for the same period in the prior year. This increase in
property related expenses reflects the increased number of facilities operated
during the three months ended August 31, 1995.
The Company recorded an approximate $63.5 million special charge in the
three months ended August 31, 1995. The special charge resulted primarily from
(i) the write-off of costs which had been incurred in completing the CMS Merger
and (ii) the approval by management of the Company of restructuring measures
related to efforts to combine the previously separate companies. The special
12
<PAGE>
charge is comprised of several components including the transaction costs
incurred to effect the CMS Merger as well as asset impairments charges,
termination benefits, lease exit costs and other charges associated with
combining and restructuring the merged companies operations.
As a result of the foregoing factors, pro forma net earnings before the
special charge increased 33.3% to $18.6 million or $.36 per share for the three
months ended August 31, 1995. This compares to net earnings before special
charges of $12.2 million or $.27 per share for same period in fiscal 1995. The
net loss for the three months ended August 31, 1995, inclusive of the special
charge, was $28.9 million or ($.56) per share.
LIQUIDITY AND CAPITAL RESOURCES
OPERATIONS. At August 31, 1995, the Company's working capital was $289.5
million and included cash and cash equivalents of $48.5 million as compared with
$284.3 million in working capital and $40.7 million in cash and cash equivalents
at May 31, 1995. During the three months ended August 31, 1995, the Company used
$9.1 million in net cash in its operations. During the three months of fiscal
1996, accounts and settlements receivable increased $17.4 million, substantially
all of which represents increases generated by existing facilities or by new
facilities after the date of acquisition.
EXPANSION PROGRAM. The net cash used by the Company's investing activities
decreased from $95.7 million in first quarter of fiscal 1995 to $18.3 million in
the same period of fiscal 1996. The primary uses of cash from investing
activities have been capital expenditures including the acquisition of
peopleCare in the first quarter of fiscal 1995. Capital expenditures were $11.4
million in the three months ended August 31, 1995, and $13.9 million in the same
period in the prior year. The principal purpose of the capital expenditures
during each of these periods has been to fund the Company's internal and
external expansion program.
The Company's expansion program requires funds: (i) to acquire assets and to
expand and improve existing and newly acquired facilities; (ii) to discharge
funded indebtedness assumed or otherwise acquired in connection with the
acquisitions of facilities and properties; and (iii) to finance the increase in
patient care and other accounts receivable resulting from acquisitions. The
funds necessary to meet these requirements have been provided principally by the
Company's financing activities and, to a lesser extent, from the sale of
marketable securities and the sale of land, buildings and equipment.
SOURCES. At August 31, 1995, the available credit under the Company's
then-existing credit facility was $266.6 million. To the extent that the
Company's operations and expansion program require cash expenditures in excess
of the amounts available to it under its credit facility, management of the
Company believes that the Company can obtain the necessary funds through other
financing activities, including the issuance and sale of debt and equity
securities in public and private markets.
CREDIT FACILITY
The Company is the borrower under a credit agreement dated as of September
26, 1995 (the "Credit Facility") with NationsBank of Texas, N.A., as Agent, and
the lenders named therein. The aggregate revolving credit commitment under the
Credit Facility is $750 million, of which the Company had borrowed $453.5
million at October 11, 1995. Borrowings under the Credit Facility bear interest,
payable monthly, at a rate equal to either, as selected by the Company, the
Alternate Base Rate (as therein defined) of the Agent in effect from time to
time, or the Adjusted London Inter-Bank Offer Rate plus 0.625% to 1.25% per
annum, depending on the maintenance of specified financial ratios. The
applicable interest rates at October 11, 1995 were 8.75% and 6.87% - 7.13% on
the Alternate Base Rate and Adjusted London Inter-Bank Offer Rate advances,
respectively. In addition, borrowings thereunder mature in September 2000 and
are secured by a pledge of the capital stock of all subsidiaries of the Company.
Under the terms of the Credit Facility, the Company is required to maintain
certain financial ratios and is restricted in the payment of dividends to an
amount which shall not exceed 20% of the Company's net earnings for the prior
fiscal year.
13
<PAGE>
PART II -- OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's Special Meeting of Stockholders, held July 6, 1995, the
following actions were taken:
a. The Amended and Restated Agreement and Plan of Merger dated as of
May 23, 1995 providing for the merger of a wholly owned subsidiary of the
Company with and into CMS was approved and adopted.
The results of the vote were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS BROKER NONVOTES
- - ---------- --------- ----------- ---------------
<S> <C> <C> <C>
19,926,273 1,865,671 40,848 1,463,468
</TABLE>
b. The amendment to the Company's Restated Certificate of Incorporation
to change the Company's name to Horizon/CMS Healthcare Corporation upon the
effectiveness of the CMS Merger was approved and adopted.
The results of the vote were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTENTIONS BROKER NONVOTES
- - ---------- ------- ----------- ---------------
<S> <C> <C> <C>
21,811,804 957,578 121,778 405,100
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
<TABLE>
<S> <C>
10.1 Amended and Restated Credit Agreement dated as of September 26,
1995, by and among the Company, CMS, the Lenders Named Therein
and NationsBank of Texas, N.A.
11.1 Statement Re: Computation of Per Share Earnings
27.1 Financial Data Schedule -- Three months ended August 31, 1995
27.2 Restated Financial Data Schedule -- Twelve months ended May 31,
1995
27.3 Restated Financial Data Schedule -- Nine months ended February
28, 1995
</TABLE>
b. Reports on Form 8-K
A report on Form 8-K/A Amendment No. 1 was filed on June 2, 1995 under "Item
7. Financial Statements and Exhibits" which updated the previously filed Form
8-K regarding the acquisition of Greenery Rehabilitation Group, Inc.
A report on Form 8-K/A Amendment No.2 was filed on June 2, 1995 under "Item
7. Financial Statements and Exhibits" which updated the previously filed Form
8-K/A regarding the acquisition of peopleCARE Heritage Group.
A report on Form 8-K was filed on June 23, 1995 under "Item 5. Other Events"
which announced the Company's plans to sell the assets and leasehold
improvements at eight of its facilities.
A report on Form 8-K was filed on July 25, 1995 under "Item 2. Acquisition
or Disposition of Assets" which disclosed the consummation of the CMS Merger.
This report also disclosed that, in connection with the CMS Merger, the Company
changed its name to Horizon/CMS Healthcare Corporation. This report was also
filed under "Item 7. Financial Statement and Exhibits", however as stated
therein, it was impracticable to provide the required historical and pro forma
financial information by the date of this report. Such information was provided
under Form 8-K/A within 60 days after the date of this report.
A report on Form 8-K was filed on July 25, 1995 under "Item 5. Other Events"
which disclosed the execution of the Credit Agreement dated as of July 6, 1995,
by and among the Company, CMS, the Lenders Named Therein and NationsBank of
Texas, N.A. The Credit Facility increased the Company's available bank credit
from $250 million to $485 million and replaced the two stand alone facilities of
the Company and CMS.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HORIZON/CMS HEALTHCARE CORPORATION
Date: October 16, 1995 By /s/ ERNEST A. SCHOFIELD
-----------------------------------
Ernest A. Schofield
CHIEF FINANCIAL OFFICER AND
SENIOR VICE PRESIDENT
- - ------------------------
*Ernest A. Schofield is signing in the dual capacities as Chief Financial
Officer and as a duly authorized officer of the Company.
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- - ------ --------------------------------------------------------
<C> <S> <C>
10.1 Amended and Restated Credit Agreement dated as of
September 26, 1995, by and among the Company, CMS, the
Lenders Named Therein and NationsBank of Texas, N.A....
11.1 Statement Re: Computation of Per Share Earnings.........
27.1 Financial Data Schedule -- Three months ended August 31,
1995...................................................
27.2 Restated Financial Data Schedule -- Twelve months ended
May 31, 1995...........................................
27.3 Restated Financial Data Schedule -- Nine months ended
February 28, 1995......................................
</TABLE>
16
<PAGE>
CONFORMED COPY
=================================================================
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of September 26, 1995
among
HORIZON/CMS HEALTHCARE CORPORATION,
CONTINENTAL MEDICAL SYSTEMS, INC.,
THE LENDERS NAMED HEREIN,
and
NATIONSBANK OF TEXAS, N.A.
as Agent and as Issuing Bank
=================================================================
<PAGE>
TABLE OF CONTENTS
Article Section Page
ARTICLE I DEFINITIONS
SECTION 1.01. Defined Terms. . . . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally. . . . . . . . . . . . . . 22
SECTION 1.03. Types of Borrowings. . . . . . . . . . . . 23
ARTICLE II THE CREDITS
SECTION 2.01. Restructuring of Horizon Loans and
Continental Loans. . . . . . . . . . . . . 23
SECTION 2.02. Commitment to Make Loans . . . . . . . . . 24
SECTION 2.03. Loans. . . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Notice of Borrowings . . . . . . . . . . . 26
SECTION 2.05. Notes; Repayment of Loans. . . . . . . . . 26
SECTION 2.06. Fees . . . . . . . . . . . . . . . . . . . 26
SECTION 2.07. Interest on Loans. . . . . . . . . . . . . 27
SECTION 2.08. Default Interest . . . . . . . . . . . . . 28
SECTION 2.09. Alternate Rate of Interest . . . . . . . . 28
SECTION 2.10. Reduction of Commitments; Extension of
Commitments. . . . . . . . . . . . . . . . 28
SECTION 2.11. Repayments and Prepayments . . . . . . . . 29
SECTION 2.12. Reserve Requirements; Certain Changes in
Circumstances. . . . . . . . . . . . . . . 30
SECTION 2.13. Change in Legality . . . . . . . . . . . . 32
SECTION 2.14. Indemnity. . . . . . . . . . . . . . . . . 32
SECTION 2.15. Pro Rata Treatment . . . . . . . . . . . . 33
SECTION 2.16. Sharing of Setoffs . . . . . . . . . . . . 33
SECTION 2.17. Payments . . . . . . . . . . . . . . . . . 34
SECTION 2.18. Taxes. . . . . . . . . . . . . . . . . . . 34
SECTION 2.19. Assignment of Commitments Under Certain
Circumstances. . . . . . . . . . . . . . . 37
SECTION 2.20. Letters of Credit. . . . . . . . . . . . . 38
ARTICLE III REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers . . . . . . . . . . . 42
SECTION 3.02. Authorization. . . . . . . . . . . . . . . 42
SECTION 3.03. Enforceability . . . . . . . . . . . . . . 43
SECTION 3.04. Consents and Governmental Approvals. . . . 43
SECTION 3.05. Financial Statements . . . . . . . . . . . 43
SECTION 3.06. No Material Adverse Change . . . . . . . . 44
SECTION 3.07. Title to Properties; Possession Under
Leases . . . . . . . . . . . . . . . . . . 44
SECTION 3.08. Subsidiaries . . . . . . . . . . . . . . . 44
SECTION 3.09. Litigation; Compliance with Laws . . . . . 44
SECTION 3.10. Agreements . . . . . . . . . . . . . . . . 45
<PAGE>
SECTION 3.11. Federal Reserve Regulations. . . . . . . 46
SECTION 3.12. Investment Company Act; Public Utility
Holding Company Act . . . . . . . . . . 46
SECTION 3.13. Use of Proceeds. . . . . . . . . . . . . 46
SECTION 3.14. Tax Returns. . . . . . . . . . . . . . . 46
SECTION 3.15. No Material Misstatements. . . . . . . . 46
SECTION 3.16. Employee Benefit Plans . . . . . . . . . 47
SECTION 3.17. Environmental and Safety Matters . . . . 48
SECTION 3.18. Security Interests . . . . . . . . . . . 48
SECTION 3.19. Solvency . . . . . . . . . . . . . . . . 48
SECTION 3.20. Transactions with Affiliates . . . . . . 48
SECTION 3.21. Insurance. . . . . . . . . . . . . . . . 49
SECTION 3.22. Labor Relations. . . . . . . . . . . . . 49
ARTICLE IV CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to the
Effective Date . . . . . . . . . . . . . 49
SECTION 4.02. All Borrowings . . . . . . . . . . . . . 52
SECTION 4.03. Horizon Notes and Continental Notes. . . 53
ARTICLE V AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties;
Leases and Operating Leases . . . . . . 53
SECTION 5.02. Insurance. . . . . . . . . . . . . . . . 54
SECTION 5.03. Obligations and Taxes. . . . . . . . . . 54
SECTION 5.04. Financial Statements, Reports, etc . . . 55
SECTION 5.05. Litigation and Other Notices . . . . . . 56
SECTION 5.06. ERISA. . . . . . . . . . . . . . . . . . 56
SECTION 5.07. Maintaining Records; Access to
Properties and Inspections . . . . . . . 57
SECTION 5.08. Use of Proceeds. . . . . . . . . . . . . 57
SECTION 5.09. Fiscal Year. . . . . . . . . . . . . . . 57
SECTION 5.10. Material Subsidiaries. . . . . . . . . . 57
SECTION 5.11. Further Assurances . . . . . . . . . . . 57
ARTICLE VI NEGATIVE COVENANTS
SECTION 6.01. Indebtedness . . . . . . . . . . . . . . 58
SECTION 6.02. Negative Pledge. . . . . . . . . . . . . 60
SECTION 6.03. Sale and Lease-Back Transactions . . . . 61
SECTION 6.04. Investments, Loans and Advances. . . . . 61
SECTION 6.05. Mergers, Consolidations, Dispositions
and Acquisitions . . . . . . . . . . . . 63
SECTION 6.06. Dividends and Distributions. . . . . . . 65
SECTION 6.07. Impairment.. . . . . . . . . . . . . . . 66
SECTION 6.08. Limitation on Restrictions on
Subsidiaries . . . . . . . . . . . . . . 66
SECTION 6.09. No Other Negative Pledges. . . . . . . . 66
SECTION 6.10. Transactions with Affiliates . . . . . . 67
SECTION 6.11. Business of Horizon, Continental and
Subsidiaries . . . . . . . . . . . . . . 67
SECTION 6.12. Sales of Receivables.. . . . . . . . . . 67
ii
<PAGE>
SECTION 6.13. Certain Amendments . . . . . . . . . . . 67
SECTION 6.14. Changes in GAAP. . . . . . . . . . . . . 68
SECTION 6.15. Material Agreements. . . . . . . . . . . 68
SECTION 6.16. Issuance of Securities . . . . . . . . . 68
SECTION 6.17. Subordinated Debt. . . . . . . . . . . . 68
SECTION 6.18. Joint Ventures . . . . . . . . . . . . . 69
SECTION 6.19. Financial Covenants. . . . . . . . . . . 69
ARTICLE VII EVENTS OF DEFAULT
ARTICLE VIII THE AGENT AND ISSUING BANK
SECTION 8.01. Appointment and Authorization. . . . . . 75
SECTION 8.02. Liability of Agent . . . . . . . . . . . 75
SECTION 8.03. Action by Agent. . . . . . . . . . . . . 76
SECTION 8.04. Successor Agents . . . . . . . . . . . . 76
SECTION 8.05. Agent and Affiliate. . . . . . . . . . . 77
SECTION 8.06. Indemnification. . . . . . . . . . . . . 77
SECTION 8.07. Credit Decision. . . . . . . . . . . . . 77
ARTICLE IX MISCELLANEOUS
SECTION 9.01. Notices. . . . . . . . . . . . . . . . . 78
SECTION 9.02. Survival of Agreement. . . . . . . . . . 78
SECTION 9.03. Binding Effect . . . . . . . . . . . . . 79
SECTION 9.04. Successors and Assigns . . . . . . . . . 79
SECTION 9.05. Expenses; Indemnity. . . . . . . . . . . 82
SECTION 9.06. Right of Setoff. . . . . . . . . . . . . 84
SECTION 9.07. Applicable Law . . . . . . . . . . . . . 84
SECTION 9.08. Waivers; Amendment . . . . . . . . . . . 84
SECTION 9.09. Interest Rate Limitation . . . . . . . . 85
SECTION 9.10. Entire Agreement . . . . . . . . . . . . 86
SECTION 9.11. Severability . . . . . . . . . . . . . . 86
SECTION 9.12. Counterparts . . . . . . . . . . . . . . 87
SECTION 9.13. Headings . . . . . . . . . . . . . . . . 87
SECTION 9.14. Jurisdiction; Consent to Service of
Process . . . . . . . . . . . . . . . 87
SECTION 9.15. Joint and Several Liability. . . . . . . 88
SCHEDULES
Schedule 2.02 Commitments
Schedule 2.20(l) Outstanding Letters of Credit
Schedule 3.02 Authorizations
Schedule 3.07 Real Property
Schedule 3.08 Subsidiaries
Schedule 3.09 Compliance with Laws
Schedule 3.10 Material Contracts and Licenses
iii
<PAGE>
Schedule 3.16 Employee Benefit Plans
Schedule 3.17 Environmental Matters
Schedule 3.20 Transactions with Affiliates
Schedule 6.01 Permitted Indebtedness
Schedule 6.02 Permitted Liens
Schedule 6.04 Investments, Loans and Advances
Schedule 6.08 Limitations on Restrictions on Subsidiaries
Schedule 6.09 No Other Negative Pledges
EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Horizon Subsidiaries' Consent and Agreement
Exhibit B-2 Form of Continental Subsidiaries' Consent and
Agreement
Exhibit C-1 Form of Horizon Consent and Agreement
Exhibit C-2 Form of Continental Consent and Agreement
Exhibit D Form of Intercompany Note
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Opinion of Counsel
Exhibit G Form of Compliance Certificate
Exhibit H Form of Supplemental Agreement
iv
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT dated as of
September 26, 1995, among HORIZON/CMS HEALTHCARE CORPORATION, a
Delaware corporation, CONTINENTAL MEDICAL SYSTEMS, INC., a
Delaware corporation, the financial institutions listed on the
signature pages hereof and NATIONSBANK OF TEXAS, N.A., as Agent
and as Issuing Bank.
Horizon (such term, and all other capitalized terms herein,
being used as hereinafter defined) and Continental are parties to
the Original Credit Agreement. The Original Credit Agreement
provides (i) that Horizon is entitled to borrow in an aggregate
principal amount of up to $250,000,000 in the form of Horizon
Loans and Horizon Letters of Credit and (ii) that Continental is
entitled to borrow in an aggregate principal amount of up to
$235,000,000 in the form of Continental Loans and Continental
Letters of Credit. Horizon and Continental have requested to
increase the aggregate amount committed under the Original Credit
Agreement from $485,000,000 to $750,000,000 in order to fund the
repurchase of the Subordinated Notes and to combine the separate
facilities and covenants for Horizon and Continental presently
existing under the Original Credit Agreement into a single
consolidated facility (with Horizon and Continental as co-
borrowers), all on the terms and the conditions set forth in this
Amended Agreement.
Accordingly, the Borrowers, the Lenders, the Agent and the
Issuing Bank agree that, on the Effective Date, without any
further action by any person, this Amended Agreement will become
effective and the Original Credit Agreement will be amended to
read in full as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINED TERMS. As used in this Amended
Agreement, the following terms shall have the meanings specified
below:
"ABR BORROWING" shall mean a Borrowing comprised of
ABR Loans.
"ABR LOAN" shall mean any Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance
with the provisions of Article II.
The term "ADDITIONAL AMOUNT" shall have the meaning assigned
to such term in Section 2.18(a).
"ADJUSTED LIBO RATE" shall mean, with respect to any
Eurodollar Borrowing for any Interest Period, an interest rate
per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the product of (a) the Interbank Offered Rate in effect
for such Interest Period and (b) Statutory Reserves.
<PAGE>
"ADMINISTRATIVE QUESTIONNAIRE" shall mean, with respect to
each Lender, the administrative questionnaire in the form
submitted to such Lender by the Agent and returned to the Agent
duly completed by such Lender.
"AFFILIATE" shall mean, when used with respect to a
specified person, another person that directly, or indirectly
through one or more intermediaries, Controls or is Controlled by
or is under common Control with the person specified.
"AGENT" shall mean NationsBank of Texas, N.A., in its
capacity as agent for the Lenders hereunder, and its successors
in such capacity.
"AMENDED AGREEMENT" shall mean this Amended and Restated
Credit Agreement, as amended or modified from time to time.
"ALTERNATE BASE RATE" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of 1%)
equal to the greatest of (a) the Prime Rate in effect on such day
and (b) the Federal Funds Effective Rate in effect on such day
plus 1/2 of 1%. If the Agent shall have determined (which
determination shall be conclusive absent manifest error) that it
is unable to ascertain the Federal Funds Effective Rate for any
reason, including the inability or failure of the Agent to obtain
sufficient quotations in accordance with the terms thereof, the
Alternate Base Rate shall be determined without regard to clause
(b) of the first sentence of this definition until the
circumstances giving rise to such inability no longer exist. Any
change in the Alternate Base Rate due to a change in the Prime
Rate or the Federal Funds Effective Rate shall be effective on
the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively, without notice to the
Borrowers.
"APPROVED EXTENSION" shall have the meaning assigned to such
term in Section 2.10(b).
"ASSIGNMENT AND ACCEPTANCE" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and accepted
by the Agent, in the form of Exhibit E or such other form as
shall be approved by the Agent.
"ATTRIBUTABLE DEBT" in respect of a transaction of the type
referred to in Section 6.03, shall mean, at the time of
determination, the greater of (a) the Fair Market Value of the
property subject to such transaction (as determined in good faith
by a Financial Officer of Horizon) or (b) the present value
(discounted at the interest rate implicit in the applicable
lease, compounded semiannually) of the total obligations of the
lessee for rental payments during the remaining term of the lease
included in such transaction (including any period for which such
lease has been extended).
"AVAILABILITY PERIOD" shall mean the period from and
including the Effective Date to but excluding the earlier of (a)
the Maturity Date and (b) the termination of the Commitments of
the Lenders in accordance with the terms hereof.
2
<PAGE>
"AVERAGE LIFE" shall mean, as of any date, with respect to
any Indebtedness, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from such date to the
dates of each successive scheduled principal payment of such
Indebtedness multiplied by the amount of such payment by (ii) the
sum of all such payments.
"BOARD" shall mean the Board of Governors of the Federal
Reserve System of the United States.
"BORROWERS" shall mean Horizon and Continental, jointly and
severally.
"BORROWING" shall mean a group of Loans of a single Type
made by the Lenders on a single date and as to which a single
Interest Period is in effect.
"BUSINESS DAY" shall mean any day (other than a day which is
a Saturday, Sunday or legal holiday in the State of Texas or the
State of New York) on which banks are open for business in
Dallas, Texas and New York, New York; PROVIDED, HOWEVER, that,
when used in connection with a Eurodollar Loan, the term
"BUSINESS DAY" shall also exclude any day on which banks are not
open for dealings in dollar deposits in the London interbank
market.
"CAPITAL LEASE OBLIGATIONS" of any person shall mean the
obligations of such person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real
or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases
on a balance sheet of such person under GAAP and, for the
purposes of this Amended Agreement, the amount of such
obligations at any time shall be the capitalized amount thereof
at such time determined in accordance with GAAP.
"CASH EQUIVALENTS" shall mean:
(a) direct obligations of, or obligations the
principal of and interest on which are unconditionally
guaranteed by, the United States of America (or by any
agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of America),
in each case maturing within 90 days from the date of
acquisition thereof;
(b) investments in commercial paper maturing within 90
days from the date of acquisition thereof and having, at
such date of acquisition, a credit rating from Standard &
Poor's Corporation of A-2 or better and a credit rating from
Moody's Investors Service, Inc. of P-2 or better;
(c) investments in certificates of deposit, banker's
acceptances and time deposits maturing within 90 days from
the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or
any State thereof which has a combined capital and surplus
and undivided profits of not less than $500,000,000 and a
credit rating for short-term bank
3
<PAGE>
deposits of A-3 or better from Standard & Poor's Corporation
or P-3 or better from Moody's Bank Credit Report Service or of
any Lender;
(d) investments in any deposit or savings account with
any bank or other financial institution to the extent that
such investments are fully insured by the Federal Deposit
Insurance Corporation; and
(e) other investment instruments approved in writing
by the Agent and offered by financial institutions which
have a combined capital and surplus and undivided profits of
not less than $500,000,000.
A "CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) Horizon shall cease to own of record and
beneficially, 100% of each class of outstanding Equity
Interests of Continental, free and clear of all Liens (other
than any Lien created by the Horizon Pledge Agreement),
whether as a result of the issuance of securities of
Continental, any merger, consolidation, liquidation or
dissolution of Continental, any transfer of securities by
Horizon or otherwise;
(b) during any period of two consecutive years,
individuals who at the beginning of such period constituted
the Board of Directors of Horizon, together with any new
directors whose election by such Board of Directors or whose
nomination for election by the shareholders of Horizon was
approved by a vote of the percentage specified in the By-
laws of Horizon (but not less than 66-2/3%) of the directors
of Horizon then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved (collectively for
purposes of this definition, "incumbent directors") cease
for any reason to constitute a majority of the Board of
Directors of Horizon then in office; or
(c) any person or "group" (within the meaning of Rule
13d-5 under the Exchange Act) (i) is or becomes the "benefi-
cial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all shares that any such person
has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or
indirectly, of shares representing more than 20% of the
aggregate ordinary voting power of the outstanding Equity
Interests of Horizon, or (ii) shall otherwise directly or
indirectly Control Horizon (except for any such Control
deemed to exist solely as a result of an incumbent
director's status as a director or executive officer).
"CLOSING DATE" shall mean July 10, 1995.
"CMS BUSINESS" shall mean the provision of medical
rehabilitation programs and services (whether in an inpatient or
outpatient setting or on a contract services basis), the
provision of therapy services and locum tenens services, the
ownership and operation of nursing homes and the provision of
management services for healthcare institutions, physicians
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and other providers, including the operation of inpatient and outpatient
centers, residential care centers, transitional living centers and ambulatory
surgery centers, the provision of home healthcare, diagnostic testing and
laboratory services, and the provision of practice management and other
healthcare provider management services, and activities incidental to or
supporting the competitive position of Horizon and the Subsidiaries in any
such businesses.
"CODE" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.
"COLLATERAL" shall mean all the collateral pledged or purported to be
pledged pursuant to the Pledge Agreements.
"COMMITMENT" shall mean, with respect to any Lender, the commitment of
such Lenders to make Loans hereunder as set forth in Section 2.02, as the
same may be reduced or extended pursuant to Section 2.10.
"COMMITMENT FEE" shall have the meaning assigned to such term in Section
2.06.
"COMMITMENT RATE" shall mean, for any day, calculated on a per annum
basis:
(A) 0.2000%, if such day falls within a Level I Pricing Period;
(B) 0.2500%, if such day falls within a Level II Pricing Period, a
Level III Pricing Period or a Level IV Pricing Period; and
(C) 0.3125%, if such day falls within a Level V Pricing Period or a
Level VI Pricing Period.
"COMMONLY CONTROLLED ENTITY" shall mean each of the Subsidiaries and
each other entity, whether or not incorporated, which is under common control
with either Borrower within the meaning of Section 4001 of ERISA or is part
of a group which includes either Borrower and which is treated as a single
employer under Section 414 of the Code.
"COMMON STOCK" shall mean the Common Stock, par value $.001 per share,
of Horizon and any other Equity Interests of Horizon into which the Common
Stock shall be reclassified or otherwise changed.
"CONSENTING LENDERS" shall mean, at any time, Lenders holding Loans and
participations in Letters of Credit and having unused Commitments,
representing in the aggregate at least 75% of the sum at such time of (a) the
aggregate principal amount of the Loans outstanding, (b) the aggregate amount
of the Letter of Credit Exposure and (c) the aggregate amount of unused
Commitments.
"CONSENT SOLICITATIONS" shall mean the solicitations of consents by
Horizon from the registered holders of the Subordinated Notes in connection
with the Tender Offers.
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"CONSOLIDATED SUBSIDIARIES" shall mean, for any person, all subsidiaries
of such person that should be consolidated with such person for financial
reporting purposes in accordance with GAAP.
"CONTINENTAL" shall mean Continental Medical Systems, Inc., a Delaware
corporation, and its successors.
"CONTINENTAL CONSENT" shall mean the Continental Consent and Agreement
dated as of September 26, 1995 between Continental and the Agent in the form
attached hereto as Exhibit C-2.
"CONTINENTAL GROUP" shall mean Continental and the Continental
Subsidiaries.
"CONTINENTAL LETTERS OF CREDIT" shall mean those Letters of Credit
outstanding immediately prior to the Effective Date as "Continental Letters
of Credit" under the Original Credit Agreement.
"CONTINENTAL LOANS" shall mean the Loans outstanding immediately prior
to the Effective Date as "Continental Loans" under the Original Credit
Agreement.
"CONTINENTAL NOTES" shall mean those promissory notes of Continental
dated July 10, 1995 in favor of the lenders party to the Original Credit
Agreement.
"CONTINENTAL PLEDGE AGREEMENT" shall mean the Pledge and Security
Agreement dated as of July 6, 1995 between Continental and the Agent, as
amended by the Continental Consent and as such Pledge and Security Agreement
may be further amended from time to time.
"CONTINENTAL SUBSIDIARIES' CONSENT" shall mean the Continental
Subsidiaries' Consent and Agreement dated as of September 26, 1995 among the
Continental Subsidiary Guarantors, the Continental Subsidiary Pledgors and
the Agent in the form attached hereto as Exhibit B-2.
"CONTINENTAL SUBSIDIARIES' GUARANTEE AGREEMENT" shall mean the Guarantee
Agreement dated as of July 6, 1995 among the Continental Subsidiary
Guarantors and the Agent, as amended by the Continental Subsidiaries' Consent
and as such Continental Subsidiaries' Guarantee Agreement may be further
amended from time to time.
"CONTINENTAL SUBSIDIARIES' PLEDGE AGREEMENT" shall mean the Pledge and
Security Agreement dated as of July 6, 1995 among the Continental Subsidiary
Pledgors and the Agent, as amended by the Continental Subsidiaries' Consent
and as such Pledge and Security Agreement may be further amended from time to
time.
"CONTINENTAL SUBSIDIARY" shall mean any subsidiary of Continental.
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"CONTINENTAL SUBSIDIARY GUARANTOR" shall mean each Continental
Subsidiary which is designated as a "Continental Subsidiary Guarantor" on
Schedule 3.08 or in a Supplemental Agreement.
"CONTINENTAL SUBSIDIARY PLEDGOR" shall mean each Continental Subsidiary
which is designated as a "Continental Subsidiary Pledgor" on Schedule 3.08 or
in a Supplemental Agreement.
"CONTROL" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "CONTROLLING" and "CONTROLLED" shall have meanings correlative
thereto. For purposes of this definition, beneficial ownership of 10% or
more of the voting Equity Interests (on a fully diluted basis) of any person
shall be deemed to be "Control" of such person.
"DEBT/EBITDAR RATIO" of any person shall mean, as of any day, the ratio
of (a) the sum of (i) Total Funded Debt of such person as of such day and
(ii) 8 times Rental Expense of such person for the Reference Period with
respect to such day to (b) EBITDAR for such Reference Period; PROVIDED,
HOWEVER, that if since the beginning of such Reference Period such person or
any of its Consolidated Subsidiaries shall have acquired all or substantially
all of an operating unit of a business, whether by an acquisition of Equity
Interests or assets, by merger or otherwise (including, in the case of any
Reference Period consisting of any period prior to the Closing Date, the
Merger), then EBITDAR and Rental Expense for such Reference Period shall be
calculated after giving pro forma effect thereto (including the issuance of
any Indebtedness) as if such acquisition occurred on the first day of such
Reference Period. For purposes of this definition, whenever pro forma effect
is to be given to such an acquisition, the pro forma calculations shall be
determined in good faith by a Financial Officer of Horizon, subject to the
review and approval of the Agent. If any Indebtedness bears a floating rate
of interest and is being given pro forma effect, the interest on such
Indebtedness shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire Reference Period.
"DEFAULT" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"DISCLOSURE DOCUMENTS" shall have the meaning assigned to such term in
Section 3.15(b).
"DISQUALIFIED EQUITY INTEREST" of any person shall mean (a) any Equity
Interest of such person which by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable or exercisable),
upon the happening of any event or otherwise (i) matures or is mandatorily
redeemable or subject to any mandatory repurchase requirement, pursuant to a
sinking fund obligation or otherwise, (ii) is convertible into or
exchangeable or exercisable for Indebtedness or Disqualified Equity Interests
or (iii) is redeemable or subject to any mandatory repurchase requirement at
the option of the holder thereof, in whole or in part,
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in each case on or prior to the first anniversary of the Maturity Date and
(b) any Preferred Stock of such person.
"DISSENTING LENDER" shall have the meaning assigned to such term in
Section 2.10(b).
"DOLLARS" or "$" shall mean lawful money of the United States of America.
"EBITDAR" of any person shall mean, for any period, (a) Net Income of
such person for such period, excluding (i) any positive non-cash income and
(ii) any positive income constituting extraordinary items in accordance with
GAAP, plus (b) the following items of such person for such period to the
extent deducted in calculating such Net Income: (i) Interest Paid, (ii)
income tax expense, (iii) depreciation expense, (iv) amortization expense,
(v) Rental Expense and (vi) any expenses constituting extraordinary items in
accordance with GAAP; PROVIDED that in determining EBITDAR of Horizon for
purposes of this definition, Net Income of Horizon shall be determined
without regard to (A) any expenses of Horizon and its Consolidated
Subsidiaries incurred during fiscal year 1996 as a result of the Merger, to
the extent that the aggregate pre-tax amount of all such expenses does not
exceed $60,000,000, (B) restructuring charges of Horizon and its Consolidated
Subsidiaries incurred during the fourth quarter of fiscal 1995 and the first
quarter of fiscal 1996 as a result of the disposition of eight facilities, as
described on Schedule 3.07, to the extent that the aggregate pre-tax amount
of all such charges does not exceed $28,800,000 and (C) special charges of
Continental and its Consolidated Subsidiaries incurred during the second and
third quarters of fiscal 1995, to the extent that the aggregate pre-tax
amount of all such charges does not exceed $18,500,000.
"EFFECTIVE DATE" shall have the meaning assigned to such term in Section
4.01.
"EQUITY INTERESTS" of any person shall mean any and all shares,
partnership and other interests, rights to purchase, warrants, options,
participations or other equivalents of or interests in (however designated)
the equity of such person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"EURODOLLAR BORROWING" shall mean a Borrowing comprised of Eurodollar
Loans.
"EURODOLLAR LOAN" shall mean any Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"EURODOLLAR MARGIN" shall mean, for any day, calculated on a per annum
basis:
(A) 0.6250%, if such day falls within a Level I Pricing Period;
(B) 0.7500%, if such day falls within a Level II Pricing Period;
(C) 0.8750%, if such day falls within a Level III Pricing Period;
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(D) 1.0000%, if such day falls within a Level IV Pricing Period;
(E) 1.2500%, if such day falls within a Level V Pricing Period; and
(F) 1.5000%, if such day falls within a Level VI Pricing Period.
"EVENT OF DEFAULT" shall have the meaning assigned to such term in
Article VII.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
"EXTENSION" shall have the meaning assigned to such term in Section
2.10(b).
"EXTENSION DATE" shall have the meaning assigned to such term in Section
2.10(b).
"FACILITY" shall mean the Loans and the Letters of Credit provided or
participated in by the Lenders to the Borrowers pursuant to this Amended
Agreement and the other Loan Documents.
"FAIR MARKET VALUE" shall mean, with respect to any asset or Equity
Interest, the sale or lease value, as the case may be, that would be obtained
in an arm's-length transaction between an informed and willing seller or
lessor under no compulsion to sell or lease and an informed and willing buyer
or lessee.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a Business Day, the
average of the quotations for the day of such transactions received by the
Agent from three Federal funds brokers of recognized standing selected by it.
Each change in the Federal Funds Effective Rate shall be effective on the
date thereof, without notice to the Borrowers.
"FEE LETTER" shall have the meaning assigned to such term in Section
2.06(b).
"FEES" shall mean the Commitment Fees, the other fees payable pursuant
to Section 2.06 and the Letter of Credit Fees.
"FINANCIAL OFFICER" of any corporation shall mean the chief financial
officer or principal accounting officer of such corporation.
"FINANCIAL STATEMENTS" shall have the meaning assigned to such term in
Section 3.05.
"FIXED CHARGE COVERAGE RATIO" of any person shall mean, as of any day,
the ratio of (a) EBITDAR of such person for the Reference Period with respect
to such day to (b) the sum of (i) Principal Payments of such person for such
Reference Period, (ii) Interest Paid of such
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person for such Reference Period, (iii) Rental Expense of such person for
such Reference Period; PROVIDED, HOWEVER, that if since the beginning of such
Reference Period such person or any of its Consolidated Subsidiaries shall
have acquired all or substantially all of an operating unit of a business,
whether by an acquisition of Equity Interests or assets, by merger or
otherwise (including, in the case of any Reference Period consisting of any
period prior to the Closing Date, the Merger), then EBITDAR, Interest Paid
and Rental Expense for such Reference Period shall be calculated after giving
pro forma effect thereto (including the issuance of any Indebtedness) as if
such acquisition occurred on the first day of such Reference Period. For
purposes of this definition, whenever pro forma effect is to be given to such
an acquisition, the pro forma calculations shall be determined in good faith
by a Financial Officer of Horizon, subject to the review and approval of the
Agent. If any Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness shall be calculated
as if the rate in effect on the date of determination had been the applicable
rate for the entire Reference Period.
"GAAP" shall mean generally accepted accounting principles, applied on a
consistent basis.
"GOVERNMENTAL AUTHORITY" shall mean any Federal, state, local or foreign
governmental department, commission, board, bureau, authority, agency, court,
instrumentality or judicial or regulatory body or entity.
"GREENERY CONVERTIBLE NOTES" shall mean the 6-1/2% Convertible
Subordinated Debentures Due 2011 and the 8-3/4% Convertible Senior
Subordinated Notes Due 2015 of Horizon outstanding on the Effective Date.
"GUARANTEE" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of
such person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that
the term Guarantee shall not include endorsements for collection or deposit,
in either case in the ordinary course of business.
"GUARANTEE AGREEMENTS" shall mean the Horizon Subsidiaries' Guarantee
Agreement and the Continental Subsidiaries' Guarantee Agreement.
"HAZARDOUS MATERIALS" shall have the meaning assigned to such term in
Section 3.17.
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"HIGHEST LAWFUL RATE" shall mean, with respect to each Lender, the
maximum nonusurious interest rate, if any, that at any time or from time to
time may be contracted for, taken, reserved, charged or received on the Notes
or on other Obligations, as the case may be, under laws applicable to such
Lender that are presently in effect or, to the extent allowed by law, under
such applicable laws that may hereafter be in effect and that allow a higher
maximum nonusurious interest rate than applicable laws now allow.
"HORIZON" shall mean Horizon/CMS Healthcare Corporation, a Delaware
corporation, and its successors.
"HORIZON CONSENT" shall mean the Horizon Consent and Agreement dated as
of September 26, 1995 between the Agent and Horizon in the form attached
hereto as Exhibit C-1.
"HORIZON GROUP" shall mean Horizon and its subsidiaries (other than
Continental and its subsidiaries).
"HORIZON LETTERS OF CREDIT" shall mean those Letters of Credit
outstanding immediately prior to the Effective Date as "Horizon Letters of
Credit" under the Original Credit Agreement.
"HORIZON LOANS" shall mean the Loans outstanding immediately prior to
the Effective Date as "Horizon Loans" under the Original Credit Agreement.
"HORIZON NOTES" shall mean those promissory notes of Horizon dated July
10, 1995 in favor of the lenders party to the Original Credit Agreement.
"HORIZON PLEDGE AGREEMENT" shall mean the Pledge and Security Agreement
dated as of July 6, 1995 between Horizon and the Agent, as amended by the
Horizon Consent and as such Pledge and Security Agreement may be further
amended from time to time.
"HORIZON SUBSIDIARIES' CONSENT" shall mean the Horizon Subsidiaries'
Consent and Agreement dated as of September 26, 1995 among the Horizon
Subsidiary Guarantors, the Horizon Subsidiary Pledgors and the Agent in the
form attached hereto as Exhibit B-1.
"HORIZON SUBSIDIARIES' GUARANTEE AGREEMENT" shall mean the Guarantee
Agreement dated as of July 6, 1995 among the Horizon Subsidiary Guarantors
and the Agent, as amended by the Horizon Subsidiaries' Consent and as such
Horizon Subsidiaries' Guarantee Agreement may be further amended from time to
time.
"HORIZON SUBSIDIARIES' PLEDGE AGREEMENT" shall mean the Pledge and
Security Agreement dated as of July 6, 1995 among the Horizon Subsidiary
Pledgors and the Agent, as amended by the Horizon Subsidiaries' Consent and
as such Pledge and Security Agreement may be further amended from time to
time.
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"HORIZON SUBSIDIARY" shall mean any subsidiary of Horizon (other than
the Continental Group).
"HORIZON SUBSIDIARY GUARANTOR" shall mean each Horizon Subsidiary which
is designated as a "Horizon Subsidiary Guarantor" on Schedule 3.08 or in a
Supplemental Agreement.
"HORIZON SUBSIDIARY PLEDGOR" shall mean each Horizon Subsidiary which is
designated as a "Horizon Subsidiary Pledgor" on Schedule 3.08 or in a
Supplemental Agreement.
"INACTIVE SUBSIDIARY" of any person shall mean a subsidiary of such
person that has been dissolved or is dormant or inactive.
"INDEBTEDNESS" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such
person issued or assumed as the deferred purchase price of property or
services, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such person, whether or
not the obligations secured thereby have been assumed, (g) all Guarantees by
such person of Indebtedness of others, (h) all Capital Lease Obligations of
such person, (i) all obligations of such person in respect of Interest Rate
Protection Agreements and (j) all obligations of such person, contingent or
otherwise, as an account party in respect of letters of credit and bankers'
acceptances. The Indebtedness of any person (i) shall include the
Indebtedness of any partnership in which such person is a general partner and
(ii) shall exclude the trade payables of such person incurred in the ordinary
course of business of such person.
"INDEMNIFIED PARTY" shall have the meaning assigned to such term in
Section 9.05(b).
"INTERBANK OFFERED RATE" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, the effective rate (rounded upwards, if
necessary, to the next 1/16 of 1%), determined by an office of the Agent then
determining such rates, at which deposits in immediately available funds in
dollars approximately equal in principal amount to the Agent's portion of
such Eurodollar Borrowing and for a maturity comparable to such Interest
Period are being, have been, or would be offered or quoted by the Agent to
major banks in the applicable interbank market for Eurodollar deposits at
11:00 a.m., local time, two Business Days prior to the commencement of such
Interest Period. If no such offers or quotes are generally available for such
amount, then the Agent shall be entitled to determine the Interbank Offered
Rate by estimating in its reasonable judgment the per annum rate (as
described above) that would be applicable if such quotes or offers were
generally available.
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"INTERCOMPANY NOTES" shall mean the promissory notes of the Horizon
Subsidiaries issued to Horizon and the promissory notes of the Continental
Subsidiaries issued to Continental, as contemplated by Sections 4.01(c)(ii)
and 6.01(f), in the form attached hereto as Exhibit D or such other form as
may be satisfactory to the Agent, representing Subsidiary Intercompany
Indebtedness.
"INTEREST PAID" of any person shall mean, for any period, the aggregate
amount of interest expense of such person and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with GAAP, for such period,
plus, to the extent not included in such interest expense, (a) interest
expense attributable to capital leases, (b) amortization of debt discount and
debt issuance cost, (c) capitalized interest, (d) non-cash interest expense,
(e) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (f) interest actually
paid by such person or any of its Consolidated Subsidiaries under any
Guarantee or other obligation of any other person, (g) net costs associated
with Interest Rate Protection Agreements (including amortization of fees),
(h) dividends paid in respect of all Disqualified Equity Interests of the
subsidiaries of such person, (i) dividends paid in respect of all
Disqualified Equity Interests of such person held by any party other than any
Wholly Owned Subsidiary of such person and (j) cash contributions to any
employee stock ownership plan or similar trust to the extent such
contributions are used by such plan or trust to pay interest or fees to any
party (other than such person) in connection with loans incurred by such plan
or trust to purchase newly issued or treasury shares of such person or any of
its Affiliates.
"INTEREST PAYMENT DATE" shall mean, with respect to any Loan, the last
day of the Interest Period applicable to the Borrowing of which such Loan is
a part and, in the case of any Eurodollar Borrowing with an Interest Period
of more than three months' duration, each day that would have been an
Interest Payment Date had successive Interest Periods of three months'
duration been applicable to such Borrowing and, in addition, the date of any
refinancing of such Borrowing with or to a Borrowing of a different Type.
"INTEREST PERIOD" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the
case may be, and ending on the numerically corresponding day (or, if there is
no numerically corresponding day, on the last day) in the calendar month that
is 1, 2, 3 or, if Eurodollar Loans with such an Interest Period are available
from each Lender, 6 months thereafter, as the applicable Borrower may elect,
and (b) as to any ABR Borrowing, the period commencing on the date of such
Borrowing or on the last day of the immediately preceding Interest Period
applicable to such Borrowing, as the case may be, and ending on the earliest
of (i) the next succeeding March 31, June 30, September 30 or December
31, (ii) the Maturity Date and (iii) the date such Borrowing is repaid or
prepaid in accordance with Section 2.11; PROVIDED, HOWEVER, that if any
Interest Period would end on a day other than a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless, in the
case of a Eurodollar Borrowing only, such next succeeding Business Day would
fall in the next calendar month, in which case such Interest Period shall end
on the next preceding Business Day. Interest shall accrue from and
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including the first day of an Interest Period to, but excluding, the last day
of such Interest Period.
"INTEREST RATE PROTECTION AGREEMENT" shall mean any interest rate swap,
collar, cap, foreign currency exchange agreement or other arrangement
requiring payments contingent upon interest or exchange rates.
"ISSUING BANK" shall mean NationsBank of Texas, N.A., in its capacity as
the issuer of Letters of Credit, and its successors in such capacity;
PROVIDED that "Issuing Bank" shall mean Sunwest Bank of Albuquerque, N.A., in
its capacity as the issuer of the Sunwest Letters of Credit, insofar as such
term is used in relation to the Sunwest Letters of Credit.
"LENDER" shall mean each financial institution listed on the signature
pages hereof, each assignee which becomes a Lender pursuant to Section
9.04(b), and their respective successors.
"LETTER OF CREDIT" shall mean any standby letter of credit issued
pursuant to Section 2.20.
"LETTER OF CREDIT AVAILABILITY PERIOD" shall mean the period from and
including the Effective Date to but excluding the earlier of (a) the date
five Business Days prior to the Maturity Date and (b) the termination of the
Commitments of the Lenders in accordance with the terms hereof.
"LETTER OF CREDIT DISBURSEMENT" shall mean a payment or disbursement
made by the Issuing Bank pursuant to a Letter of Credit.
"LETTER OF CREDIT EXPOSURE" shall mean, at any time, the sum of (i) the
aggregate undrawn amount of all outstanding Letters of Credit, plus (ii) the
aggregate amount of all Letter of Credit Disbursements not yet reimbursed by
the Borrowers as provided in Section 2.20. The Letter of Credit Exposure of
any Lender at any time shall mean its pro rata share (based on the percentage
of the aggregate Commitments represented by such Lender's Commitment) of the
aggregate Letter of Credit Exposure at such time.
"LETTER OF CREDIT FEES" shall mean the fees payable to the Issuing Bank
and the Lenders pursuant to Section 2.20(f).
"LEVEL I PRICING PERIOD" shall mean, subject to Section 2.07(c), any
period during which the Debt/EBITDAR Ratio of Horizon is less than or equal
to 3.00:1.00 and no Event of Default has occurred and is continuing.
"LEVEL II PRICING PERIOD" shall mean, subject to Section 2.07(c), any
period during which the Debt/EBITDAR Ratio of Horizon is greater than
3.00:1.00 but less than or equal to 3.50:1.00 and no Event of Default has
occurred and is continuing.
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"LEVEL III PRICING PERIOD" shall mean, subject to Section
2.07(c), any period during which the Debt/EBITDAR Ratio of
Horizon is greater than 3:50:1.00 but less than or equal to
4.00:1.00 and no Event of Default has occurred and is continuing.
"LEVEL IV PRICING PERIOD" shall mean, subject to Section
2.07(c), any period during which the Debt/EBITDAR Ratio of
Horizon is greater than 4:00:1.00 but less than or equal to
4.50:1.00 and no Event of Default has occurred and is continuing.
"LEVEL V PRICING PERIOD" shall mean, subject to Section
2.07(c), any period during which the Debt/EBITDAR Ratio of
Horizon is greater than 4.50:1.00 but less than or equal to
5.00:1.00 and no Event of Default has occurred and is continuing.
"LEVEL VI PRICING PERIOD" shall mean any period which is not
a Level I Pricing Period, Level II Pricing Period, Level III
Pricing Period, Level IV Pricing Period or Level V Pricing
Period.
"LEVERAGE RATIO" of any person shall mean, as of any day,
the ratio of (a) the sum of (i) Total Funded Debt of such person
as of such day and (ii) 8 times Rental Expense of such person for
the Reference Period with respect to such day to (b) the sum of
(i) Total Funded Debt of such person as of such day, (ii) 8 times
Rental Expense of such person for such Reference Period and
(iii) Stockholders' Equity of such person as of such day.
"LICENSE" shall mean, as to any person, any license, permit,
certificate of need, authorization, certification, accreditation,
franchise, approval, or grant of rights by any Governmental
Authority or other party necessary or appropriate for such person
to own, maintain, or operate its business, properties and assets,
including Medicare and Medicaid certifications.
"LIEN" shall mean, with respect to any asset, any mortgage,
deed of trust, lien, pledge, easement, restriction, restrictive
covenant, lease, sublease, option, charge, security interest or
encumbrance of any kind in respect of such asset. For purposes
hereof, any Borrower or Subsidiary shall be deemed to own subject
to a lien any asset which it has acquired or holds subject to the
interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to
such asset.
"LOAN DOCUMENTS" shall mean (a) this Amended Agreement, (b)
the Notes, (c) the Letters of Credit, (d) the Guarantee
Agreements, (e) the Pledge Agreements, (f) the Intercompany
Notes, (g) any Interest Rate Protection Agreements entered into
after the Closing Date with any Lender as permitted under the
Original Credit Agreement and this Amended Agreement and (h) any
Supplemental Agreements.
"LOANS" shall mean the revolving loans made by the Lenders
to the Borrowers pursuant to Section 2.02. Each Loan shall be a
Eurodollar Loan or an ABR Loan.
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"MAJOR POTENTIAL LIABILITY" shall mean any uninsured claims
in excess of $3,500,000 in the aggregate, uninsured malpractice
claims in excess of $2,000,000 in the aggregate, or contingent
liabilities and any other potential liabilities not owing in the
ordinary course of business in excess of $2,000,000 in the
aggregate.
"MARGIN STOCK" shall have the meaning assigned to such term
under Regulation U.
"MATERIAL ADVERSE CHANGE" shall mean a material adverse
change in the business, assets, liabilities, financial condition,
prospects or results of operations of Horizon and the
Subsidiaries, taken as a whole.
"MATERIAL ADVERSE EFFECT" shall mean (a) a materially
adverse effect on the business, assets, liabilities, financial
condition, prospects or results of operations of Horizon and the
Subsidiaries, taken as a whole, (b) a material impairment of the
ability of either Borrower to perform any of its obligations
under any Loan Document to which it is or will be a party or (c)
a material impairment of the rights of or benefits available to
the Lenders under any Loan Document.
"MATERIAL CONTRACTS" shall have the meaning assigned to such
term in Section 3.10(a).
"MATERIAL SUBSIDIARY" shall mean with respect to any person,
as of any date, any subsidiary of such person that has (i) total
revenues of more than $2,000,000 during the Reference Period with
respect to such date or (ii) total assets of more than $2,000,000
as of the last day of such Reference Period.
"MATURITY DATE" shall mean the fifth anniversary of the
later of (i) the Effective Date (ii) the most recent Extension
Date.
"MERGER" shall mean the merger of CMS Merger Corporation
with and into Continental pursuant to the terms of the Merger
Agreement, as a result of which Continental became a Wholly Owned
Subsidiary of Horizon.
"MERGER AGREEMENT" shall mean the Amended and Restated
Agreement and Plan of Merger dated as of May 23, 1995 among the
Borrowers and CMS Merger Corporation, and any related agreements
for the Merger.
"MINIMUM COMPLIANCE LEVEL" shall have the meaning assigned
to such term in Section 6.19(a).
"MULTIEMPLOYER PLAN" shall mean a Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"NET INCOME" of any person (for purposes of this definition,
the "parent") shall mean, for any period, the net income of the
parent and its Consolidated Subsidiaries (after dividends
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on minority interests), determined on a consolidated basis in
accordance with GAAP; PROVIDED, HOWEVER, that there shall not be
included in such Net Income:
(a) any net income of any person if such person is not
a subsidiary of the parent, except that (i) the parent's
equity in the net income of any such person for such period
shall be included in such Net Income up to the aggregate
amount of cash actually distributed by such person during
such period to the parent or a subsidiary of the parent as a
dividend or other distribution (subject, in the case of a
dividend or other distribution to such a subsidiary, to the
limitations contained in clause (c) below) and
(ii) the parent's equity in a net loss of any such person
for such period shall be included in determining such Net
Income;
(b) any net income of any person acquired by the
parent or a subsidiary of the parent in a pooling of
interests transaction for any period prior to the date of
such acquisition;
(c) any net income of any subsidiary if such
subsidiary of the parent is subject to restrictions,
directly or indirectly, on the payment of dividends or the
making of distributions by such subsidiary, directly or
indirectly, to the parent, except that (i) the parent's
equity in the net income of any such subsidiary for such
period shall be included in such Net Income up to the
aggregate amount of cash actually distributed by such
subsidiary during such period to the parent or another
subsidiary of the parent as a dividend or other distribution
(subject, in the case of a dividend or other distribution to
another subsidiary, to the limitation contained in this
clause) and (ii) the parent's equity in a net loss of any
such subsidiary for such period shall be included in
determining such Net Income;
(d) any net income of any subsidiary of the parent
which is not a Subsidiary Guarantor, except that (i) the
parent's equity in the net income of any such subsidiary for
such period shall be included in such Net Income up to the
aggregate amount of cash actually distributed by such
subsidiary during such period to the parent as a dividend or
other distribution and (ii) the parent's equity in a net
loss of any such subsidiary for such period shall be
included in determining such Net Income; and
(e) the cumulative effect of a change in accounting
principles.
"NET PROCEEDS" shall mean, with respect to any disposition
of Equity Interests or other assets, an amount equal to (a) the
gross proceeds received by or on behalf of a person or any
subsidiary of such person from or in respect of such disposition
less (b) any expenses reasonably incurred by such person and the
subsidiaries of such person in respect of such sale.
"NEW LENDING OFFICE" shall have the meaning assigned to such
term in Section 2.18(g).
"NON-U.S. LENDER" shall have the meaning assigned to such
term in Section 2.18(g).
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"NOTE" shall mean a promissory note of the Borrowers,
substantially in the form of Exhibit A, evidencing the Loans.
"OBLIGATIONS" shall mean (a) the obligations of the
Borrowers in respect of the due and punctual payment of principal
of and interest on the Loans and all amounts drawn under the
Letters of Credit, when and as due, whether at maturity, by
acceleration, upon one or more dates set for prepayment or
otherwise, (b) all Commitment Fees and all other fees, expenses,
indemnities and expense reimbursement obligations of either
Borrower under this Amended Agreement or any other Loan Document
and (c) all other obligations, monetary or otherwise, of either
Borrower or any of the Subsidiaries under any Loan Document
(including any Interest Rate Protection Agreement entered into
after the Closing Date with any Lender as permitted under the
Original Credit Agreement and this Amended Agreement) to which it
is a party, in each case, whether now owing or hereafter
existing.
"OPERATING LEASE" shall mean, as applied to any person, any
lease (including leases which may be terminated by the lessee at
any time) of any property (whether real, personal or mixed) under
which such person is the lessee and which is not a Capital Lease
Obligation.
"ORIGINAL CREDIT AGREEMENT" shall mean the Credit Agreement
dated as of July 6, 1995 among Horizon, Continental, the
financial institutions party thereto and NationsBank of Texas,
N.A., as Agent and Issuing Bank.
"OTHER TAXES" shall have the meaning assigned to such term
in Section 2.18(b).
"OUTSTANDING LETTERS OF CREDIT" shall have the meaning
assigned to such term in Section 2.20(l).
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA or any
successor thereto.
"PERMITTED GUARANTEES" shall have the meaning assigned to
such term in Section 6.01(h).
"PERMITTED SALE AND LEASE-BACK TRANSACTIONS" shall have the
meaning assigned to such term in Section 6.03.
"PERMITTED SENIOR INDEBTEDNESS" shall have the meaning
assigned to such term in Section 6.01(e).
A "PERSON" shall mean any natural person, corporation,
business trust, joint venture, association, company, limited
liability company, partnership, government (or any agency or
political subdivision thereof) or other entity.
"PLAN" shall mean at a particular time, any employee benefit
plan which is covered by ERISA and in respect of which Horizon or
any Commonly Controlled Entity is (or, if such
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plan were terminated at such time, would under Section 4069 of ERISA
be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"PLEDGE AGREEMENTS" shall mean the Horizon Pledge Agreement,
the Horizon Subsidiaries' Pledge Agreement, the Continental
Pledge Agreement and the Continental Subsidiaries' Pledge
Agreement.
"PREFERRED STOCK", as applied to the Equity Interests of any
corporation, shall mean Equity Interests of any class or classes
(however designated) which is preferred as to the payment of
dividends, or as to the distribution of assets upon any voluntary
or involuntary liquidation or dissolution of such corporation,
over shares of Equity Interests of any other class of such
corporation.
"PRICING PERIOD" shall mean a Level I Pricing Period, Level
II Pricing Period, Level III Pricing Period, Level IV Pricing
Period, Level V Pricing Period or Level VI Pricing Period.
"PRIME RATE" shall mean the rate of interest per annum
adopted from time to time by the Agent as its prime rate in
effect at its principal office in Dallas, Texas. Each change in
the Prime Rate shall be effective on the date such change is
adopted, without notice to the Borrowers. The Prime Rate is a
reference rate used by the Agent in determining interest rates on
certain loans and is not intended to be the lowest rate of
interest charged on any extension of credit to any debtor.
"PRINCIPAL PAYMENTS" for any person shall mean, for any
period, all scheduled amortization and other mandatory payments
of principal of Indebtedness (other than Loans) of such person
and its Consolidated Subsidiaries during such period, determined
on a consolidated basis in accordance with GAAP, including
discount or premium relating to such Indebtedness, whether
expensed or capitalized.
"PROPOSED EXTENSION DATE" shall have the meaning assigned to
such term in Section 2.10(b).
"REFERENCE PERIOD" shall mean, with respect to any date and
any person, the period of four consecutive fiscal quarters of
such person immediately preceding, or ending on, such date.
"REGISTER" shall have the meaning assigned to such term in
Section 9.04(d).
"REGULATION G" shall mean Regulation G of the Board as from
time to time in effect and all official rulings and
interpretations thereunder or thereof.
"REGULATION U" shall mean Regulation U of the Board as from
time to time in effect and all official rulings and
interpretations thereunder or thereof.
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"REGULATION X" shall mean Regulation X of the Board as from
time to time in effect and all official rulings and
interpretations thereunder or thereof.
"RENTAL EXPENSE" of any person shall mean, for any period,
the aggregate amount of fixed and contingent rentals payable by
such person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, for such period with
respect to leases of real and personal property (determined
without duplication of any items included in Interest Paid for
such period).
"REPLACEMENT LENDER" shall have the meaning assigned to such
term in Section 2.10(b).
"REPORTABLE EVENT" shall mean any of the events set forth in
Section 4043(c) of ERISA, other than those events as to which the
30-day notice period is waived under subsections .13, .14, .16,
.18, .19 or .20 of PBGC Reg. Section 2615.
"REQUIRED FINANCIAL STATEMENTS" shall mean, with respect to
any period, the financial statements of Horizon for such period
required under Section 5.04.
"REQUIRED LENDERS" shall mean, at any time, Lenders holding
Loans and participations in Letters of Credit and having unused
Commitments, representing in the aggregate at least 51% of the
sum at such time of (a) the aggregate principal amount of the
Loans outstanding, (b) the aggregate amount of the Letter of
Credit Exposure and (c) the aggregate amount of unused
Commitments.
"SEC" shall mean the Securities and Exchange Commission and
any successor agency.
"SECURED PARTIES" shall mean (a) the Lenders, (b) the Agent
in its capacity as such under each Loan Document, (c) the
beneficiaries of each indemnification obligation undertaken by
any Borrower, Subsidiary Guarantor or Subsidiary Pledgor under
any Loan Document, (d) any Lender in its capacity as a
counterparty to an Interest Rate Protection Agreement entered
into after the Closing Date as permitted under the Original
Credit Agreement and this Amended Agreement and (e) the
successors and assigns of the foregoing.
"SINGLE EMPLOYER PLAN" shall mean any Plan which is covered
by Title IV of ERISA, but which is not a Multiemployer Plan.
"SOLVENT" shall have the meaning assigned to such term in
Section 3.19.
"STATED MATURITY" means, with respect to any Indebtedness,
the date specified as the fixed date on which the principal of
such Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision
providing for the repurchase of such Indebtedness at the option
of the holder thereof upon the happening of any contingency).
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"STATUTORY RESERVES" shall mean a fraction (expressed as a
decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the
maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority to which
the Agent is subject for Eurocurrency Liabilities (as defined in
Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar
Loans shall be deemed to constitute Eurocurrency Liabilities and
to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets which may be
available from time to time to any Lender under such Regulation
D. Statutory Reserves shall be adjusted automatically on and as
of the effective date of any change in any reserve percentage.
"STOCKHOLDERS' EQUITY" of any person shall mean, as of any
date, (a) the total of the amounts shown on the balance sheet of
such person and its Consolidated Subsidiaries, determined on a
consolidated basis in accordance with GAAP, as of such date as
(i) the par or stated value of all outstanding Equity Interests
of such person, (ii) paid-in capital or capital surplus relating
to such Equity Interests and (iii) any retained earnings or
earned surplus, plus, (b) in determining Stockholders' Equity of
Horizon for purposes of Section 6.19(a), an amount equal to the
after-tax amount of any expenses of Horizon and its Consolidated
Subsidiaries incurred during fiscal year 1996 as a result of the
Merger, to the extent that the aggregate pre-tax amount of all
such expenses does not exceed $60,000,000, less (c)(i) any
accumulated deficit and (ii) any amounts attributable to
Disqualified Equity Interests.
"SUBORDINATED DEBT" shall mean, (a) all Indebtedness
outstanding under the $2,000,000 7-3/4% Convertible Subordinated
Debentures due May 1, 2012, issued to Rocco A. Ortenzio by
Continental, (b) all Indebtedness outstanding under the
Subordinated Note Indentures, (c) all Indebtedness represented by
the Greenery Convertible Notes and (d) any Indebtedness which is
by its terms subordinate or junior in right of payment to any
other Indebtedness.
"SUBORDINATED NOTES" shall mean the 10-7/8% Notes and the
10-3/8% Notes.
"SUBORDINATED NOTE INDENTURES" shall mean (a) the Indenture
dated as of March 15, 1993, between Continental and NationsBank
of Virginia, N.A., as Trustee, relating to the 10-3/8% Notes
and (b) the Indenture dated as of August 17, 1992, between
Continental and NationsBank of Virginia, N.A., as Trustee,
relating to the 10-7/8% Notes.
"SUBSIDIARIES" shall mean any and all subsidiaries of
Horizon, including the Continental Group.
The term "SUBSIDIARY" shall mean, with respect to any
person (referred to in this definition as the "parent"), any
corporation, partnership, association or other business entity
(a) of which Equity Interests representing at least 50% of the
aggregate ordinary voting power or at least 50% of the
ownership interests is, at the time any determination is being
made, owned, Controlled or held, or (b) which is, at the time
any determination is made, otherwise
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Controlled, by (i) the parent, (ii) one or more subsidiaries of
the parent or (iii) the parent and one or more subsidiaries of
the parent.
"SUBSIDIARY GUARANTORS" shall mean the Horizon Subsidiary
Guarantors and the Continental Subsidiary Guarantors.
"SUBSIDIARY INTERCOMPANY INDEBTEDNESS" shall have the
meaning assigned to such term in Section 6.01(f).
"SUBSIDIARY PLEDGORS" shall mean the Horizon Subsidiary
Pledgors and the Continental Subsidiary Pledgors.
"SUNWEST LETTERS OF CREDIT" shall mean those Letters of
Credit outstanding immediately prior to the Effective Date as
"Existing Letters of Credit" under the Original Credit Agreement.
"SUPPLEMENTAL AGREEMENT" shall mean an agreement between a
Subsidiary and the Agent in the form attached hereto as Exhibit H,
as amended from time to time.
"TAXES" shall have the meaning assigned to such term in
Section 2.18(a).
"TENDER OFFERS" shall mean Horizon's offers to purchase for
cash the Subordinated Notes, as contemplated by Section 4.01(g).
"10-7/8% NOTES" shall mean all of the outstanding 10-7/8%
Senior Subordinated Notes due 2002 of Continental.
"10-3/8% NOTES" shall mean all of the outstanding 10-3/8%
Senior Subordinated Notes due 2003 of Continental.
"TOTAL FUNDED DEBT" of any person shall mean, as of any
date, without duplication, (a) the aggregate amount of
Indebtedness of such person and its Consolidated Subsidiaries as
of such date which has a final maturity more than one year after
such date or which is extendible or renewable at the option of
such person or any of its Consolidated Subsidiaries to a time
more than one year after such date (whether or not renewed or
extended), including any current installment thereof due within
one year after such date, determined on a consolidated basis in
accordance with GAAP, (b) the aggregate undrawn amount on all
outstanding letters of credit (including Letters of Credit) as to
which such person or any of its Consolidated Subsidiaries is the
account party and (c) the aggregate principal amount of
outstanding Loans of such person as of such date; PROVIDED,
HOWEVER, that, in the case of the Total Funded Debt of Horizon,
the Permitted Guarantees shall be excluded.
"TRANSFEREE" shall have the meaning assigned to such term in
Section 2.18(a).
"TYPE" shall have the meaning assigned to such term in
Section 1.03.
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"UNQUALIFIED OPINION" shall have the meaning assigned to
such term in Section 5.04(a).
"WHOLLY OWNED SUBSIDIARY" of any person shall mean, at any
time, any subsidiary of such person all the Equity Interests of
which are at such time directly or indirectly owned by such
person.
SECTION 1.02. TERMS GENERALLY. The definitions in
Section 1.01 shall apply equally to both the singular and
plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by
the phrase "without limitation". All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and
Schedules to, this Amended Agreement unless the context shall
otherwise require. Unless otherwise expressly provided
herein, all terms of an accounting or financial nature used
herein shall be interpreted in accordance with GAAP, as in
effect from time to time; PROVIDED, HOWEVER, that, for
purposes of (a) making any calculation contemplated by the
provisions of Article II and (b) determining compliance with
any covenant set forth in Article VI, such terms shall be
construed in accordance with GAAP as in effect on the
Effective Date applied on a basis consistent with the
application used in preparing Horizon's audited Financial
Statements referred to in Section 3.05. Unless otherwise
expressly provided herein, the word "day" means a calendar day.
SECTION 1.03. TYPES OF BORROWINGS. The term "BORROWING"
refers to the portion of the aggregate principal amount of
Loans outstanding hereunder which bears interest of a specific
Type and for a specific Interest Period pursuant to a notice
of Borrowing pursuant to Section 2.04. Each Lender's ratable
share of each Borrowing is referred to herein as a separate
"LOAN". The "TYPE" of a Loan refers to whether such Loan is
an ABR Loan or a Eurodollar Loan.
ARTICLE II
THE CREDITS
SECTION 2.01. RESTRUCTURING OF HORIZON LOANS AND
CONTINENTAL LOANS. (a) When this Amended Agreement becomes
effective, without further action by any person, all
outstanding Horizon Loans and Continental Loans shall become
Loans hereunder, and shall be subject hereto, in an aggregate
principal amount equal to the aggregate principal amount of
such outstanding Horizon Loans and Continental Loans. All
such Loans hereunder shall be of the same Type, and shall have
the same Interest Period, as the corresponding Horizon Loans
and Continental Loans.
(b) On the Effective Date, each Lender whose percentage
of the total Commitments is greater under this Amended
Agreement than under the Original Credit Agreement (an
"INCREASING LENDER") shall be deemed to have purchased, and
each Lender
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or lender under the Original Credit Agreement whose percentage
of the total Commitments is smaller under this Amended
Agreement (a "DECREASING LENDER") than under the Original
Credit Agreement shall be deemed to have sold and assigned, at
face value, a portion of the aggregate principal amount of
Horizon Loans and Continental Loans of each Decreasing Lender
so that, after giving effect thereto and to any new Borrowings
on the Effective Date, the aggregate principal amount of the
Loans held by each Lender shall be in the same proportion to
the aggregate unpaid principal amount of all Loans then
outstanding as the amount of such Lender's Commitment bears to
the total Commitments. Each Increasing Lender shall pay the
purchase price so determined by wire transfer of immediately
available funds to the Agent (for the account of the Decreasing
Lenders) in Dallas, Texas, not later than 1:00 p.m. on the
Effective Date.
SECTION 2.02. COMMITMENT TO MAKE LOANS. Subject to the
terms and conditions and relying upon the representations and
warranties herein set forth, each Lender agrees, severally and
not jointly, to make Loans to the Borrowers, at any time and from
time to time during the Availability Period; PROVIDED that the
aggregate principal amount at any one time outstanding of all
Loans made by such Lender (including the Loans coming into
existence pursuant to Section 2.01) shall not exceed the excess,
if any, of such Lender's Commitment set forth opposite its name
on Schedule 2.02 (as the same may be reduced from time to time
pursuant to Section 2.10) over its Letter of Credit Exposure at
such time. The Borrowers may borrow, pay or prepay and reborrow
Loans during the Availability Period, within the limits set forth
in this Section 2.02 and upon the other terms and subject to the
other conditions and limitations set forth herein.
SECTION 2.03. LOANS. (a) Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Commitments; PROVIDED, HOWEVER,
that the failure of any Lender to make any Loan shall not in
itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be
responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). The Loans comprising
each Borrowing shall be in an aggregate principal amount which is
equal to (i) $2,500,000 or any greater integral multiple of
$1,000,000 in the case of Eurodollar Loans and (ii) $1,000,000 or
any greater integral multiple of $100,000 in the case of ABR
Loans (or, in either case, an aggregate principal amount equal to
the remaining balance of the Commitments).
(b) A particular Borrowing shall consist solely of ABR
Loans or Eurodollar Loans, as the Borrowers may request pursuant
to Section 2.04. Each Lender may at its option fulfill its
Commitment with respect to any Eurodollar Loan by causing any
domestic or foreign branch or Affiliate of such Lender to make
such Loan; PROVIDED that any exercise of such option shall not
affect the obligation of the Borrowers to repay such Loan in
accordance with the terms of this Amended Agreement and the
applicable Note. Borrowings by the Borrowers of more than one
Type and Eurodollar Loans bearing interest for more than one
specific Interest Period may be outstanding at the same time;
PROVIDED, HOWEVER, that Borrowers shall not be entitled to
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request any Borrowing which, if made, would result in an
aggregate of more than eight separate Eurodollar Loans of any
Lender being outstanding hereunder at any one time. For purposes
of the foregoing, Loans having different Interest Periods,
regardless of whether they commence on the same date, shall be
considered separate Loans.
(c) Subject to Section 2.03(g), each Lender shall make a
Loan in the amount of its pro rata portion, as determined under
Section 2.15, of each Borrowing hereunder on the proposed date
thereof by wire transfer of immediately available funds to the
Agent in Dallas, Texas, not later than 1:00 p.m., Dallas time,
and the Agent shall by 3:00 p.m., Dallas time, credit the amounts
so received to the joint general deposit account of the Borrowers
with the Agent or, if a Borrowing shall not occur on such date
because any condition precedent herein specified shall not have
been met, return the amounts so received to the respective
Lenders.
(d) If the Agent has not received from the Borrowers the
payment required by Section 2.20(g) by 12:30 p.m., Dallas time,
on the date on which the Issuing Bank has notified the Borrowers
and the Agent that payment of a draft presented under the
applicable Letter of Credit will be made, as provided in
Section 2.20(g), the Agent will promptly notify the Issuing Bank
and each Lender of the corresponding Letter of Credit
Disbursement and, in the case of each Lender, its pro rata
portion, as determined under Section 2.15, of such Letter of
Credit Disbursement. Not later than 2:00 p.m., Dallas time, on
such date, each Lender shall make available its pro rata portion
of such Letter of Credit Disbursement, in Federal or other funds
immediately available in Dallas, to the Agent at its address set
forth in Section 9.01, and the Agent will promptly make such
funds available to the Issuing Bank. The Agent will promptly
remit to each Lender that shall have made such funds available
its pro rata portion, as determined under Section 2.15, of any
amounts subsequently received by the Agent from the Borrowers in
respect of such Letter of Credit Disbursement.
(e) Unless the Agent shall have received notice from a
Lender prior to any Borrowing, or prior to the time of any
required payment by such Lender in respect of a Letter of Credit
Disbursement, that such Lender will not make available to the
Agent such Lender's portion of such Borrowing or payment, the
Agent may assume that such Lender has made such portion available
to the Agent on the date of such Borrowing or payment in
accordance with Section 2.03(c) or (d), as applicable, and the
Agent may, in reliance upon such assumption, make available to
the Borrowers or the Issuing Bank, as applicable, on such date a
corresponding amount. If and to the extent that such Lender
shall not have made such portion available to the Agent, such
Lender and the Borrowers agree to repay to the Agent forthwith on
demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the
Borrowers or the Issuing Bank (or, if the Agent and the Issuing
Bank are the same person, from the date of such payment in
respect of a Letter of Credit Disbursement), as applicable, until
the date such amount is repaid to the Agent at, (i) in the case
of Borrowers, the interest rate applicable thereto pursuant to
Section 2.07 or 2.20(g), as applicable, and (ii) in the case of
such Lender, the Federal Funds Effective Rate. If such Lender
shall repay to the Agent such corresponding amount in respect of
a Borrowing, such amount shall constitute such Lender's Loan as
part of such Borrowing for the purposes of this Amended
Agreement.
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(f) Notwithstanding any other provision of this Amended
Agreement, the Borrowers shall not be entitled to request any
Borrowing if the Interest Period requested with respect thereto
would end after the Maturity Date. Any Borrowing which cannot be
refinanced as a Eurodollar Borrowing by reason of the preceding
sentence shall be automatically converted at the end of the
Interest Period in effect for such Borrowing into an ABR
Borrowing.
(g) The Borrowers may refinance all or any part of any
Borrowing with a Borrowing of the same or a different Type, upon
the terms and subject to the conditions and limitations set forth
in this Amended Agreement. Any Borrowing or part thereof so
refinanced shall be deemed to be repaid or prepaid in accordance
with Section 2.05 or 2.11, as applicable, with the proceeds of a
new Borrowing and the proceeds of such new Borrowing (to the
extent they do not exceed the principal amount of the Borrowing
being refinanced) shall not be paid by the Lenders to the Agent
or by the Agent to the Borrowers pursuant to Section 2.03(c).
SECTION 2.04. NOTICE OF BORROWINGS. The Borrowers shall
give the Agent written or telecopy notice (or telephone notice
promptly confirmed in writing or by telecopy) (a) in the case of
a Eurodollar Borrowing, not later than 10:00 a.m., Dallas time,
three Business Days before a proposed borrowing and (b) in the
case of an ABR Borrowing, not later than 11:00 a.m., Dallas time,
on the day of the proposed borrowing. Such notice shall be
irrevocable and shall in each case refer to this Amended
Agreement and specify (i) whether the Borrowing then being
requested is to be a Eurodollar Borrowing or an ABR Borrowing;
(ii) the date of such Borrowing (which shall be a Business Day)
and the amount thereof; and (iii) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto.
If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an
ABR Borrowing. If no Interest Period with respect to any
Eurodollar Borrowing is specified in any such notice, then the
Borrowers shall be deemed to have selected an Interest Period of
one month's duration. If the Borrowers shall fail to give notice
in accordance with this Section 2.04 of their election to
refinance a Borrowing prior to the end of the Interest Period in
effect for such Borrowing, then the Borrowers shall (unless such
Borrowing is repaid at the end of such Interest Period) be deemed
to have given notice of an election to refinance such Borrowing
with an ABR Borrowing. The Agent shall promptly advise the
Lenders of any notice given pursuant to this Section 2.04 and of
each Lender's portion of the requested Borrowing.
SECTION 2.05. NOTES; REPAYMENT OF LOANS. The Loans made by
each Lender shall be evidenced by a Note duly executed and
delivered on behalf of the Borrowers, dated the Effective Date,
in substantially the form attached hereto as Exhibit A, with the
blanks appropriately filled in, payable to the order of such
Lender in a principal amount equal to such Lender's Commitment.
The outstanding principal balance of each Loan, as evidenced by
the Note, shall be payable on the last day of the Interest Period
applicable to such Loan and on the Maturity Date. Each Note
shall bear interest from the Effective Date on the outstanding
principal balance thereof as set forth in Section 2.07. Each
Lender shall, and is hereby authorized by the Borrowers to,
endorse on the schedule attached to the Note delivered to such
Lender (or on a continuation of such schedule attached to such
Note and made a part thereof), or otherwise to record in such
Lender's internal records, an appropriate notation evidencing
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the date and amount of each applicable Loan from such Lender, each
payment and prepayment of principal of any such Loan, each
payment of interest on any such Loan and the other information
provided for on such schedule; PROVIDED, HOWEVER, that the
failure of any Lender to make such a notation or any error
therein shall not affect the obligation of the Borrowers to repay
the Loans made by such Lender in accordance with the terms of
this Amended Agreement and the Note.
SECTION 2.06. FEES. (a) The Borrowers shall pay to the
Agent for the account of each Lender, on the last day of March,
June, September and December in each year, and on the date on
which the Commitment of such Lender shall be terminated as
provided herein, a commitment fee (a "COMMITMENT FEE") on the
average daily unused amount of the Commitment of such Lender
during the preceding quarter (or shorter period commencing with
the Effective Date or ending with the date on which the
Commitment of such Lender shall be terminated), equal to the
Commitment Rate per annum. The "unused amount" of the Commitment
of a Lender on any date means the amount of such Lender's
Commitment on such date, less the sum of its outstanding Loans on
such date and its Letter of Credit Exposure on such date. All
Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. The Commitment Fee
due to each Lender shall commence to accrue from the Effective
Date and shall cease to accrue on the date on which the
Commitment of such Lender shall be terminated as provided herein.
(b) The Borrowers agree to pay to the Agent, for its own
account, the fees set forth in the Fee Letter dated August 25,
1995, as amended (the "FEE LETTER"), among the Agent and the
Borrowers, in the amounts and on the dates provided in the Fee
Letter. The annual administration fee provided in the Fee Letter
shall by payable in advance on each anniversary of the Closing
Date prior to the Maturity Date. Such fees shall be in addition
to reimbursement of the Agent's reasonable out-of-pocket
expenses.
(c) All Fees shall be paid on the dates due, in immediately
available funds. Once paid, none of the Fees shall be refundable
under any circumstances.
SECTION 2.07. INTEREST ON LOANS. (a) Subject to the
provisions of Section 2.08, each Loan comprising an ABR Borrowing
shall bear interest for each day from the date such Loan is made
until it becomes due (computed on the basis of the actual number
of days elapsed over a year of 365 or 366 days, as the case may
be, when determined by reference to the Prime Rate and over a
year of 360 days at all other times unless such calculation would
result in a usurious rate, in which case such interest shall be
computed on the basis of the actual number of days elapsed over a
year of 365 or 366 days, as the case may be) at a rate per annum
equal to the Alternate Base Rate, but in no event to exceed the
Highest Lawful Rate.
(b) Subject to the provisions of Section 2.08, each Loan
comprising a Eurodollar Borrowing shall bear interest for each
day from the date such Loan is made until it becomes due
(computed on the basis of the actual number of days elapsed over
a year of 360 days unless such calculation would result in a
usurious rate, in which case such interest shall be computed on
the basis of the actual number of days elapsed over a year of 365
or 366 days, as
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the case may be) at a rate per annum equal to the Adjusted LIBO Rate
for the Interest Period in effect for such Borrowing, plus the Eurodollar
Margin, but in no event to exceed the Highest Lawful Rate.
(c) Subject to the applicable terms and conditions of
Section 1.01, each Pricing Period shall commence on (and include)
the date of delivery to the Agent of Required Financial
Statements demonstrating that such period has commenced (or, in
the case of a Level VI Pricing Period, on the first date on which
Horizon has failed to deliver any of the Required Financial
Statements when due in accordance with Section 5.04) and shall
terminate on (and exclude) the earlier of (i) the date of
delivery to the Agent of any subsequent Required Financial
Statements demonstrating that such period has terminated and
(ii) the first date on which the Borrowers have failed to deliver
any of its Required Financial Statements when due in accordance
with Section 5.04; PROVIDED that, in the case of a Level VI
Pricing Period arising solely due to Horizon's failure to deliver
any Required Financial Statements, such period shall terminate on
(and exclude) the date of delivery to the Agent of such Required
Financial Statements.
(d) Interest on each Loan shall be payable on the Interest
Payment Dates applicable to such Loan, except as otherwise
provided in this Amended Agreement. The applicable Alternate
Base Rate or Adjusted LIBO Rate for each Interest Period or day
within an Interest Period, as the case may be, shall be
determined by the Agent, and such determination shall be
conclusive absent manifest error.
SECTION 2.08. DEFAULT INTEREST. If the Borrowers shall
default in the payment of the principal of or interest on any
Loan or any other amount becoming due under this Amended
Agreement or any other Loan Document, by acceleration or
otherwise, interest shall accrue, to the extent permitted by law,
on such defaulted amount during the period from (and including)
the date of such default to (but not including) the date of
actual payment (after as well as before judgment) at a rate per
annum (computed on the basis of the actual number of days elapsed
over a year of 365 or 366 days, as the case may be, when
determined by reference to the Prime Rate and over a year of
360 days at all other times unless such calculation would result
in a usurious rate, in which case such interest shall be computed
on the basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be) equal to the rate applicable
to ABR Loans during such period pursuant to Section 2.07, plus
2.00%, but in no event to exceed the Highest Lawful Rate. The
Borrowers shall pay all such accrued but unpaid interest from
time to time upon demand.
SECTION 2.09. ALTERNATE RATE OF INTEREST. In the event,
and on each occasion, that on the Business Day prior to the
commencement of any Interest Period for a Eurodollar Borrowing
the Agent shall have determined that dollar deposits in the
principal amounts of the Loans comprising such Borrowing are not
generally available in the applicable interbank market, or that
the rates at which such dollar deposits are being offered will
not adequately and fairly reflect the cost to any Lender of
making or maintaining its Eurodollar Loan during such Interest
Period, or that reasonable means do not exist for ascertaining
the Adjusted LIBO Rate, the Agent shall, as soon as practicable
thereafter, give written or telecopy notice of such
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determination to the Borrowers and the Lenders. In the event of any
such determination, any request by the Borrowers for a Eurodollar
Borrowing pursuant to Section 2.04 shall, until the Agent shall
have advised the Borrowers and the Lenders that the circumstances
giving rise to such notice no longer exist, be deemed to be a
request for an ABR Borrowing. Each determination by the Agent
hereunder shall be conclusive absent manifest error.
SECTION 2.10. REDUCTION OF COMMITMENTS; EXTENSION OF
COMMITMENTS. (a) The Commitments shall be reduced permanently
(i) by $50,000,000 at 5:00 p.m., Dallas time, on each of the
second and third anniversaries of the later of (A) the Effective
Date and (B) the most recent Extension Date, if any, and (ii) by
$100,000,000 at 5:00 p.m., Dallas time, on the fourth anniversary
of such later date. The Commitments shall be automatically
terminated at 5:00 p.m., Dallas time, on the Maturity Date.
(b) Horizon shall have the option to request the extension
of the Maturity Date by one year, on an annual basis in
accordance with this Section 2.10(b), so that a five-year
Availability Period would be maintained. In the event that
Horizon desires to extend the maturity of the Facility, Horizon
shall give notice of such request to the Agent not less than 90
days, and not more than 120 days, before the date (the "PROPOSED
EXTENSION DATE") which is four years prior to the existing
Maturity Date. The Agent shall give the other Lenders prompt
notice of the receipt of any such request. Such request shall be
deemed granted if, and only if, the Agent shall have received
written notice of the approval of such proposed extension, by
September 30 immediately following the Proposed Extension Date,
from each Lender, except for any Lender which is replaced by
Horizon as provided in this Section 2.10(b); otherwise, the
existing Maturity Date shall not be extended. Any such Lender
which shall have failed to give such notice of approval by such
September 30 is referred to herein as a "DISSENTING LENDER".
Horizon shall have the right to replace any Dissenting Lender by
causing such Lender to transfer and assign all its interests,
rights and obligations under this Amended Agreement to another
financial institution pursuant to Section 2.19 (a "REPLACEMENT
LENDER") by October 15 immediately following such Proposed
Extension Date; PROVIDED that the Consenting Lenders shall have
given written notice to the Agent of the approval of the proposed
extension by such September 30. Horizon may request an extension
of the Maturity Date pursuant to this Section 2.10(b) in each
year, commencing in 1996; PROVIDED that, except in the case of
any such request in 1996, it shall have requested and received an
extension of the Maturity Date pursuant to this Section 2.10(b)
in the previous year. The Agent shall give Horizon and each
Lender prompt written notice of whether any proposed extension
has been granted or denied. Any request for an extension of the
Maturity Date that has been granted in accordance with the
procedure set forth in this Section 2.10(b) is referred to herein
as an "APPROVED EXTENSION" and the Proposed Extension Date
relating to such Approved Extension is referred to herein as an
"EXTENSION DATE".
(c) Upon at least five Business Days' prior irrevocable
written or telecopy notice to the Agent, the Borrowers may at any
time in whole permanently terminate, or from time to time in part
permanently reduce, the Commitments; PROVIDED, HOWEVER, that each
partial reduction of the Commitments shall be in an aggregate
principal amount which is an integral multiple of $1,000,000.
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<PAGE>
(d) Each reduction in the Commitments shall be made ratably
among the Lenders in accordance with their respective applicable
Commitments. On the date of each termination or reduction of the
Commitments, the Borrowers shall pay to the Agent, for the
account of the Lenders, the Commitment Fees on the amount of the
Commitments so terminated or reduced accrued to the date of such
termination or reduction.
SECTION 2.11. REPAYMENTS AND PREPAYMENTS. (a) To the
extent not previously paid, all Borrowings shall be due and
payable on the Maturity Date.
(b) In the event and on each occasion that the sum of (i) the
aggregate outstanding principal amount of the Loans and (ii) the Letter
of Credit Exposure exceeds the aggregate amount of the Commitments at
such time, the Borrowers shall immediately prepay Loans (and, to the
extent that the amount of such excess is greater than the aggregate
principal amount of outstanding Loans, provide cash collateral in respect
of the Letter of Credit Exposure pursuant to Section 2.20(k) and thereupon
such cash shall be deemed to reduce the Letter of Credit Exposure for
purposes of this Section 2.11(b)) in an aggregate principal amount equal
to such excess.
(c) Subject to Section 2.11(d), the Borrowers shall have
the right at any time and from time to time to prepay any
Borrowing, in whole or in part, upon prior written or telecopy
notice (or telephone notice promptly confirmed by written or
telecopy notice) to the Agent (i) in the case of any prepayment
of Eurodollar Loans, at least three Business Days in advance of
the proposed prepayment and (ii) in the case of any prepayment of
ABR Loans, by 11:00 a.m., Dallas time, on the day of the proposed
prepayment; PROVIDED, HOWEVER, that (A) each partial prepayment
of Eurodollar Loans under this Section 2.11(c) shall be in an
aggregate principal amount equal to an integral multiple of
$1,000,000, (B) each partial prepayment of ABR Loans under this
Section 2.11(c) shall be in an aggregate principal amount equal
to an integral multiple of $100,000, (C) a partial prepayment of
a Eurodollar Borrowing under this Section 2.11(c) shall not be
made that would result in the remaining aggregate outstanding
principal amount thereof being less than $2,500,000 and (D) a
partial prepayment of an ABR Borrowing under this Section 2.11(c)
shall not be made that would result in the remaining aggregate
outstanding principal amount thereof being less than $1,000,000.
Each notice of prepayment shall specify the prepayment date, the
Type, the Interest Period of the Borrowing to be prepaid (in the
case of a Eurodollar Borrowing) and the principal amount thereof
to be prepaid, shall be irrevocable and shall commit the
Borrowers to prepay such Borrowing by the amount stated therein
on the date stated therein.
(d) Each payment of Borrowings pursuant to this
Section 2.11 shall be accompanied by accrued interest on the
principal amount paid to but excluding the date of payment. All
payments under this Section 2.11 shall be subject to
Section 2.14, but otherwise shall be without premium or penalty.
Any mandatory prepayment of Loans pursuant to Section 2.11(b)
shall be applied to prepay all ABR Loans before any Eurodollar
Loans are prepaid.
SECTION 2.12. RESERVE REQUIREMENTS; CERTAIN CHANGES IN CIRCUMSTANCES.
(a) Notwithstanding any other provision herein, if after the date of this
Amended Agreement
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any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force
of law) shall change the basis of taxation of payments to any Lender of the
principal of or interest on any Eurodollar Loan made by such Lender or any
Fees or other amounts payable hereunder (other than changes in respect of
taxes imposed on the overall net income of such Lender by the jurisdiction
in which such Lender has its principal office or by any political
subdivision or taxing authority therein), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of or credit extended by such Lender
(except any such reserve requirement which is reflected in the Adjusted
LIBO Rate) or shall impose on such Lender or the applicable interbank market
any other condition affecting this Amended Agreement or Eurodollar Loans
made by such Lender, and the result of any of the foregoing shall be to
increase the cost to such Lender of making or maintaining any Eurodollar
Loan or to reduce the amount of any sum received or receivable by such
Lender hereunder or under the Notes (whether of principal, interest or
otherwise) or Letters of Credit by an amount deemed by such Lender to be
material, then from time to time the Borrowers shall pay to such Lender
upon demand such additional amount or amounts as will compensate such
Lender for such additional costs incurred or reduction suffered with respect
to the Facility.
(b) If any Lender shall have determined that the adoption
after the date hereof of any law, rule, regulation, agreement 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 any Lender (or any
lending office of such Lender) or any Lender'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 Lender's capital or on the
capital of such Lender's holding company, if any, as a
consequence of this Amended Agreement, the Letters of Credit or
the Loans made by such Lender pursuant hereto to a level below
that which such Lender or such Lender's holding company could
have achieved but for such adoption, change or compliance (taking
into consideration such Lender's policies and the policies of
such Lender's holding company with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time
to time the Borrowers shall pay to such Lender upon demand such
additional amount or amounts as will compensate such Lender or
such Lender's holding company for any such reduction suffered
with respect to the Facility.
(c) A certificate of each Lender setting forth such amount
or amounts as shall be necessary to compensate such Lender or its
holding company as specified in paragraph (a) or (b) above, as
the case may be, shall be delivered to the Borrowers and shall be
conclusive absent manifest error. The Borrowers shall pay each
Lender the amount shown as due on any such certificate delivered
by it within 10 days after its receipt of the same.
(d) Failure on the part of any Lender to demand
compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital with
respect to any period shall not constitute a waiver of such
Lender's right to demand compensation with
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respect to any other period. The protection of this Section 2.12
shall be available to each Lender regardless of any possible contention
of the invalidity or inapplicability of the law, rule, regulation,
guideline or other change, condition or circumstances which shall
have occurred or been imposed.
(e) Any Lender claiming compensation for any additional
amounts pursuant to this Section 2.12 shall use reasonable
efforts (consistent with legal and regulatory restrictions) to
change the jurisdiction of its applicable lending office if the
making of such change would avoid the need for or reduce the
amount of any such additional amounts or additional amounts that
may thereafter accrue and that would not be otherwise
disadvantageous to such Lender in its sole judgment.
(f) No Lender shall be entitled to compensation under this
Section 2.12 for any costs incurred or reductions suffered with
respect to any date unless such Lender shall have notified the
Borrowers that it will demand compensation for such costs or
reductions not more than 90 days after the later of (i) such date
and (ii) the date on which such Lender becomes aware of such
costs or reductions.
SECTION 2.13. CHANGE IN LEGALITY. (a) Notwithstanding any
other provision herein, if any change in any law or regulation or
in the interpretation thereof by any Governmental Authority
charged with the administration or interpretation thereof shall
make it unlawful for any Lender to make or maintain any
Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by
written or telecopy notice to the Borrowers and to the Agent,
such Lender may:
(i) declare that Eurodollar Loans will not thereafter
be made by such Lender hereunder, whereupon any request by
the Borrowers for a Eurodollar Borrowing shall, as to such
Lender only, be deemed a request for an ABR Loan unless such
declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans
made by it be converted to ABR Loans, in which event all
such Eurodollar Loans shall be automatically converted to
ABR Loans as of the effective date of such notice as
provided in Section 2.13(b).
In the event that any Lender shall exercise its rights under
clause (i) or (ii) above, all payments and prepayments of
principal which would otherwise have been applied to repay the
Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be
applied to repay the ABR Loans made by such Lender in lieu of, or
resulting from the conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.13, a notice to the
Borrowers by any Lender shall be effective as to each Eurodollar
Loan, if lawful, on the last day of the Interest Period currently
applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by each
Borrower.
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(c) In the event of a change in any law or regulation that
enables any Lender to exercise its rights under clause (i) or
(ii) of Section 2.13(a), such Lender shall use reasonable efforts
(consistent with legal and regulatory restrictions) to change the
jurisdiction of its applicable lending office if the making of
such change would avoid the need for such exercise of rights and
would not be otherwise disadvantageous to such Lender in its sole
judgment.
SECTION 2.14. INDEMNITY. To the fullest extent permitted
under applicable law, the Borrowers shall indemnify each Lender
against any loss or expense which such Lender may sustain or
incur as a consequence of (a) any failure by the Borrowers to
fulfill on the date of any borrowing hereunder the applicable
conditions set forth in Article IV, (b) any failure by the
Borrowers to borrow or to refinance or continue any Loan
hereunder after irrevocable notice of such borrowing or
refinancing has been given pursuant to Section 2.04, (c) any
payment or prepayment of a Eurodollar Loan required by any other
provision of this Amended Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period
applicable thereto, (d) any default in payment or prepayment of
the principal amount of any Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due date
thereof, whether by scheduled maturity, acceleration, irrevocable
notice of prepayment or otherwise) or (e) the occurrence of any
Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a
Eurodollar Loan. Such loss or reasonable expense shall include
an amount equal to the excess, if any, as reasonably determined
by such Lender, of (i) its cost of obtaining the funds for the
Loan being paid, prepaid or not borrowed, refinanced or not paid
or prepaid (assumed to be the Adjusted LIBO Rate applicable
thereto) for the period from the date of such payment, prepayment
or failure to borrow, refinance or failure to pay or prepay to
the last day of the Interest Period for such Loan (or, in the
case of a failure to borrow or refinance, the Interest Period for
such Loan which would have commenced on the date of such failure)
over (ii) the amount of interest (as reasonably determined by
such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid or not borrowed or refinanced for such
period or Interest Period, as the case may be. A certificate of
any Lender setting forth any amount or amounts which such Lender
is entitled to receive pursuant to this Section 2.14 shall be
delivered to the Borrowers and shall be conclusive absent
manifest error. The Borrowers shall pay each Lender the amount
shown as due on any such certificate delivered by it within
10 days after its receipt of the same.
SECTION 2.15. PRO RATA TREATMENT. Except as required under
Section 2.13, each Borrowing, each payment or prepayment of
principal of any Borrowing, each payment of interest on the
Loans, each payment of the Commitment Fees, each reduction of the
Commitments, each refinancing of any Borrowing with a Borrowing
of any Type and each Letter of Credit Disbursement shall be
allocated pro rata among the Lenders in accordance with their
respective Commitments (or, in the case of any Lender which has
not funded its Commitment as required hereunder, in accordance
with the aggregate unpaid principal amount of its Loans). Each
Lender agrees that in computing such Lender's portion of any
Borrowing to be made hereunder, the Agent may, in its discretion,
round each Lender's percentage of such Borrowing, computed in
accordance with Schedule 2.02, to the next higher or lower
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whole dollar amount. The Agent will promptly distribute in lawful
money of the United States and in immediately available funds to
each Lender its pro rata portion, as determined under this
Section 2.15, of each payment received by the Agent for the
account of the Lenders.
SECTION 2.16. SHARING OF SETOFFS. Each Lender agrees that
if it shall, through the exercise of a right of banker's lien,
setoff or counterclaim against either Borrower, or pursuant to a
secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in
respect of any Loan or Loans as a result of which the aggregate
unpaid principal portion of its Loans shall be proportionately
less than the aggregate unpaid principal portion of the Loans of
any other Lender, it shall be deemed simultaneously to have
purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a
participation in such Loans of such other Lender, so that the
aggregate unpaid principal amount of the Loans and participations
in Loans held by each Lender shall be in the same proportion to
the aggregate unpaid principal amount of all Loans then
outstanding as the principal amount of its Loans prior to such
exercise of banker's lien, setoff or counterclaim or other event
was to the principal amount of all Loans outstanding prior to
such exercise of banker's lien, setoff or counterclaim or other
event; PROVIDED, HOWEVER, that, if any such purchase or purchases
or adjustments shall be made pursuant to this Section 2.16 and
the payment giving rise thereto shall thereafter be recovered,
such purchase or purchases or adjustments shall be rescinded to
the extent of such recovery and the purchase price or prices or
adjustment restored without interest. Each Borrower expressly
consents to the foregoing arrangements and agrees that any Lender
holding a participation in a Loan deemed to have been so
purchased may exercise any and all rights of banker's lien,
setoff or counterclaim with respect to any and all moneys owing
by such Borrower to such Lender by reason thereof as fully as if
such Lender had made a Loan directly to such Borrower in the
amount of such participation.
SECTION 2.17. PAYMENTS. (a) The Borrowers shall make each
payment (including principal of or interest on any Borrowing or
any Fees or other amounts) hereunder or under any other Loan
Document not later than 12:00 (noon), Dallas time, on the date
when due in dollars to the Agent at its offices at 901 Main
Street, 13th Floor, Dallas, Texas 75202, in immediately available
funds. Any such payment received after such time on any date
shall be deemed made on the next Business Day.
(b) Whenever any payment (including principal of or
interest on any Borrowing or any Fees or other amounts) hereunder
or under any other Loan Document shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of interest or Fees, if applicable.
SECTION 2.18. TAXES. (a) Any and all payments by the
Borrowers hereunder shall be made, in accordance with
Section 2.17, free and clear of and without deduction for any and
all present or future taxes, levies, imposts, deductions, charges
or withholdings, and all
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liabilities with respect thereto, EXCLUDING (i) taxes imposed on the net
income of the Agent or any Lender (or any transferee or assignee thereof,
including a participation holder (any such entity being called a
"TRANSFEREE")) and (ii) franchise taxes imposed on the Agent or any Lender
(or Transferee), in each case by the jurisdiction under the laws of which the
Agent or any Lender (or Transferee) is organized or any political subdivision
thereof (all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities, collectively or individually, "TAXES"). If the
Borrowers shall be required to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender (or Transferee) or the Agent, (A) the sum
payable shall be increased by the amount (an "ADDITIONAL AMOUNT") necessary
so that after making all required deductions (including deductions applicable
to additional sums payable under this Section 2.18) such Lender (or
Transferee) or the Agent, as the case may be, shall receive an amount equal
to the sum it would have received had no such deductions been made, (B) the
Borrowers shall make such deductions and (C) the Borrowers shall pay the full
amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.
(b) In addition, to the fullest extent permitted under
applicable law, the Borrowers agree to indemnify the Agent, the
Issuing Bank and each Lender from, and hold them harmless
against, and to pay to the relevant Governmental Authority in
accordance with applicable law, any current or future stamp or
documentary taxes or any other excise or property taxes,
assessments, charges or similar levies made by any Governmental
Authority which arise from any payment made hereunder by the
Borrowers or from the execution and delivery by the Borrowers of
this Amended Agreement or any other Loan Document or otherwise
with respect to the Facility (hereinafter referred to as "OTHER
TAXES").
(c) To the fullest extent permitted under applicable law,
the Borrowers will indemnify each Lender (or Transferee) and the
Agent for the full amount of Taxes and Other Taxes paid by such
Lender (or Transferee) or the Agent, as the case may be, and any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted by the relevant
Governmental Authority, in each case to the extent relating to
the Facility. A certificate as to the amount of such payment or
liability prepared by a Lender (or Transferee), or the Agent on
its behalf, or by the Agent on its own behalf, shall be
conclusive absent manifest error. Such indemnification shall be
made within 30 days after the date any Lender (or Transferee) or
the Agent, as the case may be, makes written demand therefor.
(d) If any Lender (or Transferee) or the Agent shall become
aware that it is entitled to claim a refund in respect of Taxes
or Other Taxes as to which it has been indemnified by the
Borrowers, or with respect to which the Borrowers have paid
additional amounts, pursuant to this Section 2.18, it shall
promptly notify the Borrowers of the availability of such refund
claim and shall, within 30 days after receipt of a request by the
Borrowers, make a claim to such Governmental Authority for such
refund at the Borrowers' expense. If any Lender (or Transferee)
or the Agent receives a refund (including pursuant to a claim for
refund made pursuant to the preceding sentence) in respect of any
Taxes or Other Taxes as to which it has been indemnified by the
Borrowers, or with respect to which the Borrowers have paid
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additional amounts, pursuant to this Section 2.18, it shall
within 30 days from the date of such receipt pay over such refund
to the Borrowers (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrowers under this
Section 2.18 with respect to the Taxes or Other Taxes giving rise
to such refund), net of all out-of-pocket expenses of such Lender
(or Transferee) or the Agent and without interest (other than
interest paid by the relevant Governmental Authority with respect
to such refund); PROVIDED, HOWEVER, that the Borrowers, upon the
request of such Lender (or Transferee) or the Agent, agree to
repay the amount paid over to the Borrowers (plus penalties,
interest or other charges) to such Lender (or Transferee) or the
Agent in the event such Lender (or Transferee) or the Agent is
required to repay such refund to such Governmental Authority.
(e) As soon as practicable after the date of any payment of
Taxes or Other Taxes by the Borrowers to the relevant
Governmental Authority, the Borrowers will deliver to the Agent,
at its address referred to in Section 9.01, the original or a
certified copy of a receipt evidencing payment thereof.
(f) To the fullest extent permitted under applicable law,
the provisions of this Section 2.18 shall remain operative and in
full force and effect regardless of the expiration of the term of
this Amended Agreement, the consummation of the transactions
contemplated hereby, the repayment of any of the Loans, the
invalidity or unenforceability of any term or provision of this
Amended Agreement or any other Loan Document, or any
investigation made by or on behalf of the Agent or any Lender.
(g) Each Lender (or Transferee) that is organized under the
laws of a jurisdiction other than the United States, any State
thereof or the District of Columbia (a "NON-U.S. LENDER") shall
deliver to the Borrowers and the Agent two copies of either
United States Internal Revenue Service Form 1001 or Form 4224,
or, in the case of a Non-U.S. Lender claiming exemption from U.S.
Federal withholding tax under Section 871(h) or 881(c) of the
Code with respect to payments of "portfolio interest", a Form W-
8, or any subsequent versions thereof or successors thereto (and,
if such Non-U.S. Lender delivers a Form W-8, a certificate
representing that such Non-U.S. Lender is not a bank for purposes
of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3)(B) of the Code) of
either Borrower and is not a controlled foreign corporation
related to either Borrower (within the meaning of Section
864(d)(4) of the Code), properly completed and duly executed by
such Non-U.S. Lender) claiming complete exemption from, or
reduced rate of, U.S. Federal withholding tax on payments by the
Borrowers under this Amended Agreement and the other Loan
Documents. Such forms shall be delivered by each Non-U.S. Lender
on or before the Effective Date (or, in the case of a Transferee
that is a participation holder, on or before the date such
participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Non-U.S. Lender changes its
applicable lending office by designating a different lending
office (a "NEW LENDING OFFICE"). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or
invalidity of any form previously delivered by such Non-U.S.
Lender. Notwithstanding any other provision of this
Section 2.18(g), a Non-U.S. Lender shall not be required to
deliver any form pursuant to this Section 2.18(g) that such Non-
U.S. Lender is not legally able to deliver.
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(h) The Borrowers shall not be required to indemnify any
Non-U.S. Lender, or to pay any additional amounts to any Non-U.S.
Lender, in respect of United States Federal withholding tax
pursuant to Section 2.18 to the extent that (i) the obligation to
pay such additional amounts would not have arisen but for a
failure by such Non-U.S. Lender to comply with the provisions of
Section 2.18(g) or (ii) the obligation to withhold amounts with
respect to United States Federal withholding tax existed on the
date such Non-U.S. Lender became a party to this Amended
Agreement (or, in the case of a Transferee that is a
participation holder, on the date such participation holder
became a Transferee hereunder) or, with respect to payments to a
New Lending Office, the date such Non-U.S. Lender designated such
New Lending Office with respect to a Loan; PROVIDED, HOWEVER,
that this clause (ii) shall not apply to any Transferee or New
Lending Office that becomes a Transferee or New Lending Office as
a result of an assignment, participation, transfer or designation
made at the request of the Borrowers; and PROVIDED FURTHER,
HOWEVER, that this clause (ii) shall not apply to the extent the
indemnity payment or additional amounts any Transferee, or Lender
(or Transferee) through a New Lending Office, would be entitled
to receive (without regard to this clause (ii)) do not exceed the
indemnity payment or additional amounts that the person making
the assignment, participation or transfer to such Transferee, or
Lender (or Transferee) making the designation of such New Lending
Office, would have been entitled to receive in the absence of
such assignment, participation, transfer or designation.
(i) Any Lender (or Transferee) claiming any indemnity
payment or additional amounts payable pursuant to this Section
2.18 shall use reasonable efforts (consistent with legal and
regulatory restrictions) to file any certificate or document
reasonably requested in writing by the Borrowers or to change the
jurisdiction of its applicable lending office if the making of
such a filing or change would avoid the need for or reduce the
amount of any such indemnity payment or additional amounts that
may thereafter accrue and would not be otherwise disadvantageous
to such Lender (or Transferee) in its sole judgment.
(j) Nothing contained in this Section 2.18 shall require
any Lender (or Transferee) or Agent to make available any of its
tax returns (or any other information that it deems to be
confidential or proprietary).
(k) No Lender (or Transferee) shall be entitled to claim
any indemnity payment or additional amount payable pursuant to
this Section 2.18 with respect to any date unless such Lender
shall have notified the Borrowers that it will demand such
payment or additional amount not more than 90 days after the
later of (i) such date and (ii) the date on which such Lender (or
Transferee) becomes aware of such costs or reductions.
SECTION 2.19. ASSIGNMENT OF COMMITMENTS UNDER CERTAIN
CIRCUMSTANCES. In the event that (a) any Lender shall have
delivered a notice or certificate pursuant to Section 2.12 or
2.13, (b) the Borrowers shall be required to pay additional
amounts to any Lender under Section 2.18 or (c) a proposed
extension shall have been approved by the Consenting Lenders but
a Dissenting Lender shall have given or be deemed to have given
notice to the Agent of its objection thereto, the Borrowers shall
have the right, at their own expense, upon notice to such Lender
and the Agent, to require such Lender to transfer and assign
without recourse (in
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accordance with and subject to the provisions set forth in Section 9.04)
all its interests, rights and obligations under this Amended Agreement to
another financial institution identified by the Borrowers and reasonably
acceptable to the Agent, and such financial institution shall assume such
obligations; PROVIDED that (i) no such assignment shall conflict with any
law, rule, regulation or order of any Governmental Authority and (ii) the
Borrowers shall pay or cause to be paid to the affected Lender in immediately
available funds on the date of such assignment 100% of the aggregate amount
of principal of and interest accrued to the date of payment on the Loans and
participations in the Letter of Credit Disbursements made by it hereunder
and all other amounts accrued for its account or owed to it hereunder;
PROVIDED FURTHER that, in the case of the circumstances or event referred
to in clauses (a) and (b) above, if prior to any such assignment the
circumstances or event that resulted in such Lender's notice or certificate
under Section 2.12 or 2.13 or demand for additional amounts under Section
2.18, as the case may be, shall cease to exist or become inapplicable
for any reason or if such Lender shall waive its rights in respect of such
circumstances or event under Section 2.12, 2.13 or 2.18, as the case may be,
then such Lender shall not thereafter be required to make any such assignment
hereunder.
SECTION 2.20. LETTERS OF CREDIT. (a) The Borrowers may
request the issuance of Letters of Credit, in a form reasonably
acceptable to the Agent and the Issuing Bank, for the account of
the Borrowers at any time and from time to time during the Letter
of Credit Availability Period; PROVIDED that any Letter of Credit
shall be issued only if, and each request by the Borrowers for
the issuance of any Letter of Credit shall be deemed a
representation and warranty of the Borrowers that, immediately
following the issuance of such Letter of Credit, (i) the Letter
of Credit Exposure shall not exceed $70,000,000 and (ii) the sum
of (A) the Letter of Credit Exposure and (B) the aggregate
principal amount of outstanding Loans shall not exceed the
aggregate amount of the Commitments at such time.
(b) Each Letter of Credit (other than any Sunwest Letter of
Credit) shall expire at the close of business on the earlier of
(i) 12 calendar months after the date of issuance of such Letter
of Credit and (ii) the last day of the Letter of Credit
Availability Period, unless such Letter of Credit expires by its
terms on an earlier date. Each Letter of Credit shall provide
for payments of drawings in dollars.
(c) Each issuance of any Letter of Credit shall be made on
at least three Business Days' prior irrevocable written or
telecopy notice (or such shorter notice as shall be acceptable to
the Issuing Bank) from the Borrowers to the Agent and the Issuing
Bank specifying the date of issuance, the date on which such
Letter of Credit is to expire in accordance with Section 2.20(b),
the amount of such Letter of Credit, the name and address of the
beneficiary of such Letter of Credit, and such other information
as may be necessary or desirable to complete such Letter of
Credit. The Issuing Bank will give the Agent prompt notice of
the issuance and amount of such Letter of Credit and the
expiration date of such Letter of Credit (and the Agent shall
give prompt notice thereof to each Lender). During the Letter of
Credit Availability Period, the Issuing Bank also will give the
Agent (and, in the case of clause (ii) below, the Lenders) (i)
daily notice of the amount available to be drawn under each
outstanding Letter of Credit and (ii) a quarterly summary
indicating, on a daily basis during such quarter, the
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issuance of any Letter of Credit and the amount thereof, the expiration of
any Letter of Credit and the amount thereof and the payment on any draft
presented under any Letter of Credit.
(d) By the issuance of a Letter of Credit (including an
Outstanding Letter of Credit) and without any further action on
the part of the Issuing Bank, the Agent or the Lenders in respect
thereof, the Issuing Bank hereby grants to each Lender, and each
Lender hereby acquires from the Issuing Bank, a participation in
such Letter of Credit equal to such Lender's pro rata portion, as
determined under Section 2.15, of the aggregate amount available
to be drawn under such Letter of Credit, effective upon the
issuance of such Letter of Credit. In consideration and in
furtherance of the foregoing, each Lender hereby absolutely and
unconditionally agrees to pay to the Agent, on behalf of the
Issuing Bank, in accordance with Section 2.03(d), such Lender's
pro rata portion, as determined under Section 2.15, of each
Letter of Credit Disbursement made by the Issuing Bank and not
reimbursed by the Borrowers when due in accordance with Section
2.20(g); PROVIDED that the Lenders shall not be obligated to make
any such payment with respect to any wrongful Letter of Credit
Disbursement made as a result of the gross negligence or willful
misconduct of the Issuing Bank.
(e) Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to Section 2.20(d) in respect
of Letters of Credit (including Outstanding Letters of Credit) is
absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance
of a Default or Event of Default, and that each such payment
shall be made without any offset, abatement, withholding or
reduction whatsoever (subject only to the proviso set forth in
Section 2.20(d)).
(f) During the Letter of Credit Availability Period, the
Borrowers shall pay to the Agent, on the last day of March, June,
September and December in each year and on the date on which the
Commitments shall be terminated as provided herein, (i) for the
account of the Lenders, ratably in proportion to their
Commitments, a fee on the average daily aggregate amount
available to be drawn under all outstanding Letters of Credit
(including Outstanding Letters of Credit) during the preceding
quarter (or shorter period commencing with the Effective Date) at
a rate per annum equal to the Eurodollar Margin from time to time
in effect during such period pursuant to Section 2.07 and (ii)
for the account of the Issuing Bank, a fee on the average daily
aggregate amount available to be drawn under all outstanding
Letters of Credit (including Outstanding Letters of Credit) of
such Issuing Bank during the preceding quarter (or shorter period
commencing with the Effective Date) at a rate per annum equal to
0.125%. Such fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. Such fees shall
accrue from and including the Effective Date to but excluding the
last day of the Letter of Credit Availability Period. In
addition to the foregoing, the Borrowers shall pay directly to
the Issuing Bank, for its account, payable within 15 days after
demand therefor by the Issuing Bank, the Issuing Bank's customary
processing and documentation fees in connection with the issuance
or amendment of or payment on any Letter of Credit, including any
trade or documentary Letter of Credit.
(g) If the Issuing Bank shall pay any draft presented under
a Letter of Credit (including an Outstanding Letter of Credit),
the Borrowers shall pay to the Agent, on behalf of
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the Issuing Bank, an amount equal to the amount of such draft before
12:00 noon, Dallas time, on the day on which the Issuing Bank shall
have notified the Borrowers that payment of such draft will be
made. The Agent shall promptly pay any such amounts received by
it to the Issuing Bank. If the Borrowers shall fail to pay any
amount required to be paid under this Section 2.20(g) when due,
such unpaid amount shall bear interest, for each day from and
including the due date to but excluding the date of payment, at a
rate per annum equal to the rate applicable to ABR Revolving
Loans during such period pursuant to Section 2.07, plus 2.00%,
but in no event to exceed the Highest Lawful Rate.
(h) To the fullest extent permitted under applicable law,
the Borrowers' obligations to reimburse Letter of Credit
Disbursements as provided in Section 2.20(g) shall be absolute,
unconditional and irrevocable and shall be performed strictly in
accordance with the terms of this Amended Agreement under any and
all circumstances whatsoever, and irrespective of:
(i) any lack of validity or enforceability of any
Letter of Credit (including any Outstanding Letter of
Credit) or any other Loan Document;
(ii) the existence of any claim, setoff, defense or
other right which Horizon, Continental, any Subsidiary or
any other person may at any time have against the
beneficiary under any Letter of Credit (including any
Outstanding Letter of Credit), the Issuing Bank, the Agent,
any Lender or any other person in connection with this
Amended Agreement, any other Loan Document or any other
related or unrelated agreement or transaction;
(iii) any draft or other document presented under a
Letter of Credit (including an Outstanding Letter of Credit)
proving to be forged, fraudulent, invalid or insufficient in
any respect or failing to comply with the Uniform Customs
and Practices for Documentary Credits, as in effect from
time to time, or any statement therein being untrue or
inaccurate in any respect, except to the extent the same is
attributable to the gross negligence or willful misconduct
of the Issuing Bank;
(iv) payment by the Issuing Bank under a Letter of
Credit (including an Outstanding Letter of Credit) against
presentation of a draft or other document which does not
comply with the terms of such Letter of Credit; PROVIDED
that such payment was not wrongfully made as a result of the
gross negligence or willful misconduct of the Issuing Bank;
and
(v) any other act or omission or delay of any kind or
any other circumstance or event whatsoever, whether or not
similar to any of the foregoing and whether or not
foreseeable, that might, but for the provisions of this
Section 2.20(h), constitute a legal or equitable discharge
of the Borrowers' obligations hereunder, except to the
extent the same is attributable to the gross negligence or
willful misconduct of the Issuing Bank.
(i) To the fullest extent permitted under applicable law,
it is expressly understood and agreed that, for purposes of
determining whether a wrongful payment under a Letter of Credit
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(including an Outstanding Letter of Credit) resulted from the
Issuing Bank's gross negligence or willful misconduct, (i) the
Issuing Bank's acceptance of documents that appear on their face
to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary, (ii) the
Issuing Bank's exclusive reliance on the documents presented to
it under such Letter of Credit as to any and all matters set
forth therein, including the amount of any draft presented under
such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and
whether or not any document presented pursuant to such Letter of
Credit proves to be insufficient in any respect (so long as such
document on its face appears to be in order), and whether or not
any other statement or any other document presented pursuant to
such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any
respect whatsoever and (iii) any noncompliance in any immaterial
respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to
constitute willful misconduct or gross negligence of the Issuing
Bank. It is further understood and agreed that, notwithstanding
the proviso to clause (iv) of Section 2.20(h), the Borrowers'
obligations hereunder to reimburse Letter of Credit Disbursements
will not be excused by the gross negligence or willful misconduct
of the Issuing Bank to the extent that such Letter of Credit
Disbursement actually discharged a liability of, or otherwise
benefited, or was recovered by, either Borrower; PROVIDED that
the foregoing shall not be construed to excuse the Issuing Bank
from liability to the Borrowers to the extent of any direct
damages suffered by the Borrowers that are caused by the Issuing
Bank's gross negligence or willful misconduct in determining
whether drafts and other documents presented under a Letter of
Credit comply with the terms thereof.
(j) The Issuing Bank shall, promptly following its receipt
thereof, examine all documents purporting to represent a demand
for payment under a Letter of Credit. The Issuing Bank shall as
promptly as possible give telephonic notification, confirmed by
telex or telecopy, to the Agent and the Borrowers of such demand
for payment and whether the Issuing Bank has made or will make a
Letter of Credit Disbursement thereunder; PROVIDED that the
failure to give such notice shall not relieve the Borrowers of
their obligation to reimburse any such Letter of Credit
Disbursement in accordance with this Section 2.20. The Agent
shall promptly give each Lender notice thereof.
(k) In the event that the Borrowers are required pursuant
to the terms of this Amended Agreement or any other Loan Document
to provide cash collateral in respect of the Letter of Credit
Exposure, the Borrowers shall deposit in an account with the
Agent, for the benefit of the Lenders, an amount in cash equal to
the Letter of Credit Exposure (or such lesser amount as shall be
required hereunder or thereunder). Such deposit shall be held by
the Agent as collateral for the payment and performance of the
Obligations. The Agent shall have exclusive dominion and
control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of
such deposits in Cash Equivalents, which investments shall be
made as directed by the Borrowers (unless such investments shall
be contrary to applicable law or regulation or a Default or Event
of Default shall have occurred and be continuing, in which case
the determination of whomever to make investments shall be made
at the option and in the discretion of the Agent), such deposits
shall not bear interest.
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Interest or profits, if any, on such investments shall accumulate
in such account. Moneys in such account shall automatically be applied
by the Agent to reimburse the Issuing Bank for Letter of Credit
Disbursements and, if the maturity of the Loans has been accelerated,
to satisfy the Obligations. If the Borrowers are required to provide
an amount of cash collateral hereunder as a result of an Event of Default,
such amount (to the extent not applied as aforesaid) shall be returned to
the Borrowers within three Business Days after all Events of Default have
been cured or waived. If the Borrowers are required to provide an amount
of cash collateral hereunder pursuant to Section 2.11(b), such amount
(to the extent not applied as aforesaid) shall be returned to the Borrowers
upon demand; PROVIDED that, after giving effect to such return, (i) the sum
of (A) the aggregate amount of the Letter of Credit Exposure plus (B) the
aggregate outstanding principal amount of Loans would not exceed the aggregate
Commitments and (ii) no Default or Event of Default shall have occurred and be
continuing.
(l) "OUTSTANDING LETTERS OF CREDIT" shall mean the Horizon
Letters of Credit, the Continental Letters of Credit and the
Sunwest Letters of Credit, all as listed on Schedule 2.20(l).
The parties hereto agree that each Outstanding Letter of Credit
will be treated as if it had been originally issued under this
Amended Agreement. Specifically, and without limitation of the
foregoing or the other provisions of this Section 2.20, (i) the
amount of each Outstanding Letter of Credit shall count towards
the limits set forth in the proviso to Section 2.20(a) and in
Section 2.02, (ii) each Lender hereby absolutely and
unconditionally agrees to pay to the Agent, on behalf of the
Issuing Bank, in accordance with Section 2.03(d), such Lender's
pro rata portion, as determined under Section 2.15, of each
Letter of Credit Disbursement made with respect to any of the
Outstanding Letters of Credit (subject to the proviso set forth
in Section 2.20(d)) and (iii) the Issuing Bank of any of the
Outstanding Letters of Credit shall have the benefit of all
agreements, covenants and indemnities of the Issuing Bank set
forth under this Amended Agreement and shall comply with all
agreements and obligations set forth herein which bind the
"Issuing Bank", insofar as such term is used in relation to the
Outstanding Letters of Credit.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Borrowers represent and warrant to each of the Lenders,
as follows:
SECTION 3.01. ORGANIZATION; POWERS. Each of Horizon and
the Subsidiaries (a) is a corporation or partnership duly
organized, formed or registered, as applicable, validly existing
and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own
its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (c) is qualified to do
business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not
result, individually or in the aggregate, in a Material Adverse
Effect, and (d) has the corporate or partnership power and
authority, as applicable, to execute, deliver and perform its
obligations under each of the Loan Documents and each other
agreement or instrument contemplated
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thereby to which it is or will be a party and, in the case of Horizon,
to consummate the Tender Offers and, in the case of each Borrower, to
obtain extensions of credit hereunder.
SECTION 3.02. AUTHORIZATION. The execution, delivery and
performance by each of Horizon and the Subsidiaries of each of
the Loan Documents to which it is or will be a party and, in the
case of Horizon, the consummation of the Tender Offers and, in
the case of each Borrower, the extensions of credit hereunder
(a) have been duly authorized by all requisite corporate,
partnership and, if required, stockholder action and (b) except
as set forth on Schedule 3.02, will not (i) violate (A) any
provision of law, statute, rule or regulation (including the
federal securities laws and the regulations promulgated
thereunder), or of the articles of incorporation, certificate of
partnership, by-laws, partnership agreement or other constitutive
documents of Horizon or any Subsidiary, (B) any order of any
Governmental Authority or (C) any provision of any indenture or
other material agreement or instrument to which Horizon or any
Subsidiary is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in
a breach of or constitute (alone or with notice or lapse of time
or both) a default or give rise to increased, additional,
accelerated or guaranteed rights of any person under any such
indenture, agreement or other instrument or (iii) except for the
Lien of the Pledge Agreements, result in the creation or
imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by Horizon or any
Subsidiary.
SECTION 3.03. ENFORCEABILITY. This Amended Agreement has
been duly executed and delivered by each Borrower and
constitutes, and each other Loan Document when executed and
delivered by Horizon or any Subsidiary will constitute, a legal,
valid and binding obligation of such party enforceable against
such party in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and by equitable
principles of general applicability (regardless of whether such
enforceability is considered in a proceeding in equity or at
law).
SECTION 3.04. CONSENTS AND GOVERNMENTAL APPROVALS. No
action, consent or approval of, registration or filing with or
any other action by (a) any Governmental Authority (including the
SEC), (b) any stockholder or creditor of Horizon or any
Subsidiary or (c) any other person is or will be required in
connection with the Tender Offers, the Facility or the
performance by Horizon or any Subsidiary of the Loan Documents to
which it is or will be a party, except such as (i) have been made
or obtained and are in full force and effect or (ii) are required
to waive the conflicts, if any, set forth on Schedule 3.02.
SECTION 3.05. FINANCIAL STATEMENTS. Horizon has heretofore
furnished to the Lenders (a)(i) the consolidated balance sheet,
statement of operations and statement of cash flows of Horizon
and its Consolidated Subsidiaries as of and for the fiscal year
ended May 31, 1995, audited by and accompanied by the opinion of
Arthur Andersen LLP, independent public accountants, and (ii) the
consolidated balance sheet, statement of operations and statement
of cash flows of Continental and its Consolidated Subsidiaries as
of and for the fiscal year ended June 30, 1994, audited by and
accompanied by the opinion of Ernst & Young LLP,
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independent public accountants, and (b) the unaudited consolidated
balance sheet, statement of operations and statement of cash flows of
Horizon and its Consolidated Subsidiaries as of July 31, 1995,
certified by a financial officer of Horizon (the financial
statements referred to in clauses (a) and (b) above,
collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements present fairly in accordance with GAAP (subject, in
the case of the unaudited Financial Statements, to normal,
recurring year end audit adjustments) the consolidated financial
position and the consolidated results of operations and
consolidated cash flows of the Borrowers and their Consolidated
Subsidiaries as of such dates and for such periods. Such balance
sheets and the notes thereto disclose all material liabilities,
actual or contingent, of the Borrowers and their Consolidated
Subsidiaries as of the dates thereof. The Financial Statements
were prepared in accordance with GAAP applied on a consistent
basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited Financial
Statements, as permitted by Form 10-Q of the SEC).
SECTION 3.06. NO MATERIAL ADVERSE CHANGE. Since May 31,
1995, except for any such changes expressly disclosed in any
filing with the SEC made after May 31, 1995 and prior to the date
hereof, there has occurred no Material Adverse Change and there
exists no condition, event or occurrence that, individually or in
the aggregate, could reasonably be expected to result in a
Material Adverse Change.
SECTION 3.07. TITLE TO PROPERTIES; POSSESSION UNDER LEASES.
(a) Each of Horizon and the Subsidiaries has good and marketable
title to, or valid leasehold interests in, all its material
properties and assets, except for minor defects in title that do
not interfere with its ability to conduct its business as
currently conducted or to utilize such properties and assets for
their intended purposes. All such properties and assets are free
and clear of Liens, other than Liens permitted by Section 6.02.
(b) Schedule 3.07 sets forth, as of the Effective Date, a
true, complete and correct list of (i) all real property owned by
Horizon and the Subsidiaries having a book value in excess of
$100,000; (ii) all material real property leased by Horizon and
the Subsidiaries; and (iii) the location of each such real
property.
(c) Each of Horizon and the Subsidiaries has complied with
all obligations under all material leases to which it is a party
and all such leases are in full force and effect. Each of
Horizon and the Subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
SECTION 3.08. SUBSIDIARIES. Schedule 3.08 sets forth as of
the Effective Date a list of all the Subsidiaries, the respective
jurisdictions of organization thereof and the percentage
ownership interest, direct or indirect, of Horizon therein and
specifies which of such Subsidiaries are Material Subsidiaries
and which of such Subsidiaries are Inactive Subsidiaries.
SECTION 3.09. LITIGATION; COMPLIANCE WITH LAWS. (a) There
are no actions, suits or proceedings at law or in equity or by or
before any Governmental Authority now pending or, to the
knowledge of the Borrowers, threatened against or affecting
Horizon, any Subsidiary or
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any business, property or rights of Horizon or any Subsidiary (i) which
involve any Loan Document or the Tender Offers or (ii) as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, could be reasonably expected to result, individually or in the
aggregate, in a Material Adverse Effect.
(b) Neither Horizon nor any Subsidiary is in violation of any law, rule
or regulation, or in default with respect to any judgment, writ, injunction,
order or decree, of any Governmental Authority, where such violation or
default could be reasonably expected to result, individually or in the
aggregate, in a Material Adverse Effect. Except as set forth in Schedule
3.09, neither Horizon nor any Subsidiary has received any written
communication during the past three years from any Governmental Authority
that alleges that such party or any of its Affiliates is not in compliance in
any material respect with any law, rule or regulation or any judgment, writ,
injunction or decree. Continental and its subsidiaries have in all material
respects been reimbursed by their fiscal intermediaries for only the correct
amounts for therapeutic recreation services as routine services rather than
ancillary services, and have not in any material respect sought payment from,
nor been paid by, Medicare, for therapeutic recreation services, on a charge
basis.
SECTION 3.10. AGREEMENTS. (a) Each "material contract" (within the
meaning of Item 601(b)(10) of Regulation S-K under the Exchange Act), each
material agreement relating to the incurrence of Indebtedness or Disqualified
Equity Interests and each material Operating Lease to which Horizon or any
Subsidiary is a party or by which it or any of its properties or assets are
or may be bound as of the date hereof is listed on Schedule 3.10 hereto
(collectively, the "MATERIAL CONTRACTS"). Except as expressly set forth in
Schedule 3.10, none of the Material Contracts have been amended, modified or
waived in any respect.
(b) Except as set forth in Schedule 3.10, each Material Contract is
valid, binding and in full force and effect and is enforceable by Horizon or
the Subsidiary which is a party thereto in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforceability of
creditors' rights generally and by equitable principles of general
applicability (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Except as set forth in Schedule 3.10, each
of Horizon and the Subsidiaries has performed in all material respects all
obligations required to be performed by it to date under the Material
Contracts and it is not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and,
to the knowledge of the Borrowers, no other party to any of the Material
Contracts is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any material respect thereunder. Neither
Horizon nor any Subsidiary, nor, to the knowledge of the Borrowers, any other
party to any Material Contract, has given notice of termination of, or taken
any action inconsistent with the continuation of, any Material Contract. None
of such other parties has any presently exercisable right to terminate any
Material Contract nor will any such other party have any right to terminate
any Material Contract on account of the execution, delivery or performance of
the Loan Documents or the consummation of the Tender Offers.
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(c) The Obligations of Continental for money borrowed by Continental
constitute "Senior Indebtedness" within the meaning of the Subordinated Note
Indentures. As of the Effective Date, there is no outstanding "Designated
Senior Indebtedness" within the meaning of the Subordinated Note Indentures,
except for the Facility. As of the Effective Date, no "Default" or "Event of
Default" within the meaning of the Subordinated Note Indentures has occurred
and is continuing.
SECTION 3.11. FEDERAL RESERVE REGULATIONS. (a) Neither Horizon nor
any Subsidiary is engaged principally, or as one of its important activities,
in the business of extending credit for the purpose of purchasing or carrying
Margin Stock.
(b) No part of the proceeds of any Loan and no Letter of Credit will be
used, whether directly or indirectly, and whether immediately, incidentally
or ultimately, for any purpose which entails a violation of, or which is
inconsistent with, the provisions of the regulations of the Board, including
Regulations G, U and X.
SECTION 3.12. INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY
ACT. Neither Horizon nor any Subsidiary is (a) an "investment company" as
defined in, or subject to regulation under, the Investment Company Act of
1940 or (b) a "holding company" as defined in, or subject to regulation
under, the Public Utility Holding Company Act of 1935 or (c) subject to
regulation as a "public utility" or a "public service corporation" or the
equivalent under any federal or state law.
SECTION 3.13. USE OF PROCEEDS. The proceeds of the Loans will be used
solely for the general corporate purposes of Horizon and the Subsidiaries,
including repurchasing the Subordinated Notes and the Greenery Convertible
Notes to the extent permitted in accordance with the terms hereof and
providing funds for working capital, capital expenditures in the ordinary
course of business and acquisitions permitted hereunder. The Letters of
Credit will be issued solely to support various financial and other
performance obligations of Horizon and the Subsidiaries incurred in the
ordinary course of business. The proceeds of Subsidiary Intercompany
Indebtedness of any Subsidiary will be used by such Subsidiary solely for the
general corporate purposes of such Subsidiary, including providing funds for
working capital, capital expenditures in the ordinary course of business and
acquisitions permitted hereunder.
SECTION 3.14. TAX RETURNS. Each of Horizon and the Subsidiaries has
filed or caused to be filed all Federal, state and local tax returns required
to have been filed by it and has paid or caused to be paid all taxes shown to
be due and payable on such returns or on any assessments received by it,
except taxes that are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP have been
set aside on the Financial Statements.
SECTION 3.15. NO MATERIAL MISSTATEMENTS. (a) No information, report,
financial statement, exhibit or schedule furnished by or on behalf of Horizon
or any Subsidiary to the Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto contained, contains or will contain any material
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misstatement of fact or omitted, omits or will omit to state any material
fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading.
(b) The Borrowers have timely and duly filed all the reports and other
material that they were required to file with the SEC since May 31, 1995.
Copies of all such reports and other material, together in each case with all
amendments thereto (collectively, the "DISCLOSURE DOCUMENTS"), have been
delivered to the Agent. Except as reflected in any subsequent amendment or
supplement to a Disclosure Document, no Disclosure Document, including any
financial statement contained therein, at the time it was filed or mailed to
stockholders, as the case may be, contained any misstatement of a material
fact or omitted to state a material fact necessary to make the statements
contained therein, in the light of the circumstances under which they were
made, not misleading.
(c) All representations and warranties of the Borrowers set forth in
the Original Credit Agreement were true and correct in all material respects
on and as of the Closing Date, except to the extent such representations and
warranties expressly relate to an earlier date (in which case such
representations and warranties were true and correct in all material respects
on and as of such earlier date). Immediately prior to the effectiveness of
this Amended Agreement, no Default or Event of Default has occurred and is
continuing under the Original Credit Agreement.
SECTION 3.16. EMPLOYEE BENEFIT PLANS. (a) Each of Horizon and the
Commonly Controlled Entities is in compliance in all material respects with
the applicable provisions of ERISA and the regulations and published
interpretations thereunder. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the Code or Section
302 of ERISA) has occurred within the last five years with respect to any
Plan, and each Plan has complied in all material respects with the applicable
provisions of ERISA and the Code. Neither Horizon nor any Commonly
Controlled Entity has any unsatisfied liability with respect to a Single
Employer Plan that has been terminated and no Lien in favor of the PBGC or a
Plan has arisen during the last five years.
(b) Except as set forth on Schedule 3.16, the present value of all
accrued benefits under each Single Employer Plan in which Horizon or any
Commonly Controlled Entity is a participant (based on those assumptions used
to fund the Plans) did not, as of the last day of the plan year that ended
prior to the date of this Amended Agreement, exceed the value of the assets
of such Plan allocable to such accrued benefits.
(c) Neither Horizon nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan, and neither
Horizon nor any Commonly Controlled Entity would become subject to any
liability under ERISA if Horizon or such Commonly Controlled Entity were to
withdraw completely from all Multiemployer Plans as of the last day of the
plan year that ended prior to the date of this Amended Agreement.
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(d) No such Multiemployer Plan with respect to which Horizon or any
Commonly Controlled Entity could incur potential liability in excess of
$250,000 is in "reorganization" or "insolvent," within the meaning of such
terms as used in ERISA.
(e) The present value (determined using actuarial and other assumptions
which are reasonable in respect of the benefits provided and the employees
participating) of the liability of Horizon and each Subsidiary for post
retirement benefits to be provided to their current and former employees
under Plans which are welfare benefit plans (as defined in Section 3(1) of
ERISA) does not, in the aggregate, exceed the assets under all such Plans
allocable to such benefits, except as set forth in Schedule 3.16.
SECTION 3.17. ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in
Schedule 3.17, each of Horizon and the Subsidiaries has complied in all
material respects with all applicable Federal, state, local and other
statutes, ordinances, orders, judgments, rulings and regulations relating to
protection of the environment or to employee health or safety. Except as set
forth in Schedule 3.17, neither Horizon nor any Subsidiary has received
notice of any material failure so to comply. The facilities of Horizon and
the Subsidiaries do not manage or contain any hazardous wastes, hazardous
substances, hazardous materials, toxic substances, toxic pollutants or
similarly denominated substances, as those terms or similar terms are used in
the Resource Conservation and Recovery Act, the Comprehensive Environmental
Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the
Clean Water Act or any other applicable law relating to protection of the
environment or to employee health and safety (collectively, "HAZARDOUS
MATERIALS"), in violation in any material respect of any such law or any
regulations promulgated pursuant thereto. Except as set forth in Schedule
3.17, to the knowledge of the Borrowers, there are no events, conditions or
circumstances involving environmental pollution, regulation or control or
employee health or safety that are reasonably likely to result in any
material liabilities being incurred by Horizon or any Subsidiary.
SECTION 3.18. SECURITY INTERESTS. The Agent for the benefit of the
Secured Parties will at all times have the Liens provided for in the Pledge
Agreements and the Pledge Agreements will at all times constitute a valid and
continuing lien of record and first priority perfected security interest in
all the Collateral.
SECTION 3.19. SOLVENCY. On and as of the Effective Date, each of
Horizon and the Subsidiaries will be Solvent. "Solvent" means, with respect
to any person, that (a) the sum of the assets of such person, both at a fair
valuation and at present fair salable value, will exceed the liabilities of
such person, (b) such person will have sufficient capital with which to
conduct its business as presently conducted and as proposed to be conducted
and (c) such person has not incurred debts, and does not intend to incur
debts, beyond its ability to pay such debts as they mature. For purposes of
the foregoing definition, "DEBTS" means any liabilities on claims, and
"CLAIM" means (i) a right to payment, whether or not such right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, or (ii) a right
to an equitable remedy for breach of performance if such breach gives rise to
a payment, whether or not such right to an equitable
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remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured or unsecured. With respect to any contingent
or disputed liabilities, such liabilities shall be computed at the amount
which, in light of all the facts and circumstances existing at the time,
represents the amount which can reasonably be expected to become an actual or
matured liability.
SECTION 3.20. TRANSACTIONS WITH AFFILIATES. Except as set forth in
Schedule 3.20 and except for agreements and arrangements among Horizon and
the Subsidiaries or among the Subsidiaries, as of the Effective Date, neither
Horizon nor any of the Subsidiaries is a party to or engaged in any
transaction with, and none of the properties and assets of Horizon or any of
the Subsidiaries is subject to or bound by, any agreement or arrangement
with, any Affiliate of Horizon or any of the Subsidiaries.
SECTION 3.21. INSURANCE. Each of Horizon and the Subsidiaries
maintains policies of fire and casualty, liability, malpractice, business
interruption and other forms of insurance in such amounts, with such
deductibles and against such risks and losses as are reasonable for the
business and assets of Horizon and the Subsidiaries. All such policies are
in full force and effect, all premiums due and payable thereon have been paid
(other than retroactive or retrospective premium adjustments that are not
yet, but may be, required to be paid with respect to any period ending prior
to the Effective Date under comprehensive general liability and workmen's
compensation insurance policies), and no notice of cancellation or
termination has been received with respect to any such policy which has not
been replaced on substantially similar terms prior to the date of such
cancellation. The activities and operations of Horizon and the Subsidiaries
have been conducted in a manner so as to conform in all material respects to
all applicable provisions of such insurance policies.
SECTION 3.22. LABOR RELATIONS. Except for such matters as could not be
reasonably expected to result, individually or in the aggregate, in a
Material Adverse Effect, (a) neither Horizon nor any Subsidiary is engaged in
any unfair labor practice, (b) no unfair labor practice complaint is pending
or, to the knowledge of the Borrowers, threatened against Horizon or any of
the Subsidiaries before the National Labor Relations Board, (c) no grievance
or arbitration proceeding arising out of or under any collective bargaining
agreement is pending or, to the knowledge of the Borrowers, threatened
against Horizon or any Subsidiary, (d) no strike, labor dispute, slowdown or
stoppage is pending or, to the knowledge of the Borrowers, threatened against
Horizon or any Subsidiary, (e) to the knowledge of the Borrowers, no union
representation question exists with respect to the employees of Horizon or
any Subsidiary and (f) to the knowledge of the Borrowers, no union organizing
activities are taking place with respect to the employees of Horizon or any
Subsidiary.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. CONDITIONS PRECEDENT TO THE EFFECTIVE DATE. This Amended
Agreement shall become effective on the first date (the "EFFECTIVE DATE")
when all of the
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following conditions precedent set forth in this Section 4.01, and the
additional conditions precedent set forth in Section 4.02, shall have been
satisfied:
(a) The Agent shall have received counterparts hereof
signed by each of the parties hereto (or, in the case of any
Lender as to which an executed counterpart shall not have
been received, telegraphic, telex, telecopy or other written
confirmation from such party in form satisfactory to the
Agent of the execution of a counterpart hereof by such
Lender).
(b) The Agent shall have received for the account of
each Lender duly executed Notes, dated the Effective Date,
complying with the provisions of Section 2.05.
(c) The Agent on behalf of the Secured Parties shall
have a perfected, first priority security interest in the
Collateral and the Agent shall have received:
(i) counterparts of (A) the Horizon Consent, duly
executed by Horizon, (B) the Continental Consent, duly
executed by Continental, (C) the Horizon Subsidiaries'
Guarantor Consent, duly executed by each Horizon
Subsidiary Guarantor and each Horizon Subsidiary
Pledgor and (D) the Continental Subsidiaries' Guarantor
Consent, duly executed by each Continental Subsidiary
Guarantor and each Continental Subsidiary Pledgor;
(ii) Intercompany Notes, duly executed by the
Subsidiary Guarantors and by North Louisiana
Rehabilitation Center, Inc., Kansas Rehabilitation
Hospital, Inc., CMS Jonesboro Rehabilitation, Inc.,
Houston Rehabilitation Associates and Baton Rouge
Rehab, Inc., accompanied by assignments executed in
blank;
(iii) confirmation by the Borrowers that the
Agent has previously received certificates representing
all outstanding capital stock of Continental and the
other Subsidiaries (other than immaterial Subsidiaries
acceptable to the Agent), accompanied by stock powers
endorsed in blank; and
(iv) confirmation by the Borrowers that no
additional filing, registration or recordation of any
document (including any Uniform Commercial Code
financing statement) is required to be filed,
registered or recorded in order to create in favor of
the Agent for the benefit of the Secured Parties a
valid, legal and perfected security interest in or Lien
on the Collateral that is the subject of the Pledge
Agreements.
(d) The Agent shall have received an opinion of
counsel to the Borrowers, the Subsidiary Guarantors and the
Subsidiary Pledgors substantially in the form of Exhibit F
hereto and covering such additional matters relating to the
transactions contemplated hereby as the Agent may reasonably
request, such opinion to be dated the Effective Date and
addressed to the Agent and the Lenders.
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(e) The Agent shall have received:
(i) a certificate of the Secretary, Assistant
Secretary or other authorized representative of each of
the Borrowers, the Subsidiary Guarantors and the
Subsidiary Pledgors, dated the Effective Date and
certifying (A) that none of the certificates of
incorporation, certificates of partnership, by-laws,
partnership agreements or other constitutive documents,
as applicable, of such party have been amended or
changed since the Closing Date, except as expressly set
forth therein, and (B) that attached thereto is a true
and complete copy of resolutions duly adopted by the
Board of Directors of such party (or, in the case of a
partnership, the managing general partner thereof)
authorizing the execution, delivery and performance of
this Amended Agreement, the Horizon Consent, the
Continental Consent, the Horizon Subsidiaries'
Guarantor Consent and the Continental Subsidiaries'
Guarantor Consent to which such party is or will be a
party and, in the case of Horizon, the consummation of
the Tender Offers and, in the case of each Borrower,
the extensions of credit hereunder, and that such
resolutions have not been modified, rescinded or
amended and are in full force and effect;
(ii) a certificate of another authorized
representative as to the incumbency and specimen
signature of the person executing the certificate
pursuant to clause (i) above; and
(iii) such other documents, opinions,
certificates and agreements in connection with the
transactions contemplated hereby, in form and substance
satisfactory to the Agent, as it or its counsel shall
reasonably request.
(f) The Agent and the Lenders shall have received
financial information satisfactory in all respects to the
Agent and the Lenders, including (i) projected financial
statements of Horizon and the Subsidiaries for the period
after the Effective Date through the fifth anniversary
thereof, (ii) a statement of sources and uses of funds in
connection with the Tender Offers, certified by a Financial
Officer of Horizon and (iii) a certificate of a Financial
Officer of Horizon, substantially in the form attached
hereto as Exhibit G, setting forth the calculations required
under Section 5.04(e)(i).
(g) There shall have occurred the consummation of the
Tender Offers and related consent solicitations in a manner
and on terms satisfactory in all respects to the Agent and
the Lenders and, after giving effect thereto, (i) at least a
majority in aggregate principal amount of the 10-3/8% Notes
shall have been accepted for payment and consents from the
holders thereof shall have been received, (ii) at least a
majority in aggregate principal amount of the 10-7/8% Notes
shall have been accepted for payment and consents from the
holders thereof shall have been received, (iii) the proposed
amendments to the Subordinated Note Indentures, which are
described in the Offers to Purchase and Consent
Solicitations dated August 11, 1995, shall have become
effective, (iv) no default, event of default, prepayment
event or change in control shall
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have occurred and be continuing under the Subordinated Note
Indentures and (v) the obligations of Continental under the
Facility for money borrowed by Continental shall rank senior
to any Subordinated Notes remaining outstanding.
(h) All governmental, regulatory, shareholder and
third party consents, approvals, filings, registrations and
other actions required in order to consummate the Tender
Offers or the Facility shall have been obtained or made, as
applicable, and shall remain in full force and effect, in
each case without the imposition of any condition or
restriction which is, in the judgment of the Agent,
materially adverse to any Borrower or Subsidiary, and the
Agent shall have received satisfactory evidence thereof.
(i) Since May 31, 1995, except for any changes
expressly disclosed in any filing with the SEC made after
May 31, 1995 and prior to the date hereof, no Material
Adverse Change has occurred and there exists no condition,
event or occurrence that, individually or in the aggregate,
could reasonably be expected to result in a Material Adverse
Change.
(j) The Borrowers shall have paid (i) all fees and
interest accrued to, and unpaid as of, the Effective Date
under the Original Credit Agreement and (ii) all Fees and
other amounts due and payable to the Agent or any Lender on
or prior to the Effective Date under the Fee Letter or any
other Loan Document, including reimbursement or payment of
all out-of-pocket expenses required to be reimbursed or paid
by the Borrowers (to the extent invoices or statements
therefor have been received).
(k) Each Lender shall have received payment from the
Borrowers of an amendment fee and an upfront fee equal to
the amount set forth in the invitation letter from the Agent
to such Lender dated August 17, 1995.
The first Borrowing hereunder (consisting of the conversion of the Horizon
Loans and the Continental Loans to Loans hereunder pursuant to Section 2.01)
shall be deemed to constitute a representation and warranty by the Borrowers
on the Effective Date as to the matters specified in paragraphs (g), (h) and
(i) of this Section 4.01. On the Effective Date, the Original Credit
Agreement shall, without further action by any person, be amended and
restated in its entirety to read as set forth herein. From and after such
date, the rights and obligations of the parties hereto shall be governed by
this Amended Agreement and the other Loan Documents.
SECTION 4.02. ALL BORROWINGS. The obligations of the Lenders to make
Loans hereunder, and the obligation of the Issuing Bank to issue Letters of
Credit hereunder, are subject to the satisfaction of the conditions that on
the date of each Borrowing (including the conversion of the Horizon Loans and
the Continental Loans to Loans hereunder pursuant to Section 2.01 and each
Borrowing in which Loans are refinanced with new Loans as contemplated by
Section 2.03(g)) and on the date of issuance of each Letter of Credit:
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(a) The Agent shall have received a notice of such
Borrowing as required by Section 2.04 or a notice requesting
the issuance of a Letter of Credit as required by Section
2.20(c).
(b) The representations and warranties set forth in
Article III hereof (except, in the case of a refinancing of
Loans that does not increase the aggregate principal amount
of Loans outstanding, the representations and warranties set
forth in Section 3.06) and the representations and
warranties of the Borrowers and the Subsidiaries set forth
in the other Loan Documents, shall be true and correct in
all material respects on and as of the date of such
Borrowing or the date of the issuance of such Letter of
Credit with the same effect as though made on and as of such
date, except to the extent such representations and
warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and
correct in all material respects on and as of such earlier
date).
(c) In the case of any Borrowing or the issuance of
any Letter of Credit, at the time of and immediately after
such Borrowing or the issuance of such Letter of Credit, the
aggregate outstanding principal amount of the Loans and the
Letter of Credit Exposure will not exceed the limitations
set forth in Sections 2.02 and 2.20(a), as applicable.
(d) At the time of and immediately after such
Borrowing or the issuance of such Letter of Credit, no
Default or Event of Default shall have occurred and be
continuing.
Each Borrowing hereunder and each request for the issuance of a Letter of
Credit hereunder shall be deemed to constitute a representation and warranty
by the Borrowers on the date of such Borrowing or issuance as to the matters
specified in paragraphs (b), (c) and (d) of this Section 4.02.
SECTION 4.03. HORIZON NOTES AND CONTINENTAL NOTES. On the
Effective Date, the lenders under the Original Credit Agreement will return
the Horizon Notes and the Continental Notes to Horizon and Continental,
respectively, and such notes will be replaced by the Notes issued hereunder.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrowers covenant and agree with each Lender that so long as this
Amended Agreement shall remain in effect or any Obligations shall be unpaid,
and until the Commitments have been terminated and the Loans, together with
interest, Fees and all other Obligations have been paid in full, all Letters
of Credit have been cancelled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing:
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SECTION 5.01. EXISTENCE; BUSINESSES AND PROPERTIES; LEASES AND
OPERATING LEASES.
(a) Horizon will, and will cause each of the Subsidiaries to, do or
cause to be done all things necessary to preserve, renew and keep in full
force and effect its legal existence, except as otherwise expressly permitted
under Section 6.05(a).
(b) Horizon will, and will cause each of the Subsidiaries to, do or
cause to be done all things necessary to obtain, preserve, renew, extend,
comply with and keep in full force and effect the rights, Licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; maintain and operate such business
in substantially the manner in which it is presently conducted and operated;
comply in all material respects with all applicable laws, rules, regulations
and orders of any Governmental Authority, whether now in effect or hereafter
enacted; and at all times maintain and preserve all property material to the
conduct of such business and keep such property in good repair, working order
and condition and from time to time make, or cause to be made, all needful
and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection
therewith may be properly conducted at all times.
(c) Horizon will, and will cause each of the Subsidiaries to, maintain
and comply in all material respects with each of its material Operating
Leases.
SECTION 5.02. INSURANCE. Horizon will, and will cause each of the
Subsidiaries to, keep its insurable properties adequately insured at all
times by financially sound and reputable insurers; maintain such other
insurance, to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses, including business interruption insurance,
malpractice insurance and public liability insurance against claims for
personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied, controlled or
managed by it; maintain such other insurance as may be required by law;
PROVIDED that Horizon may continue through its self insurance program to
provide insurance coverage for employee health claims and workmen's
compensation up to the maximum occurrence limit amount of $100,000 per
occurrence and $250,000 per occurrence, respectively. Horizon will deliver
evidence of renewal of each such insurance policy on or before the date of
expiration, and from time to time shall deliver to the Agent, upon demand,
evidence of the maintenance of such insurance. Horizon will permit the Agent
and an insurance consultant retained by the Agent, at the expense of the
Borrowers, to review the insurance policies maintained by Horizon and the
Subsidiaries on an annual basis and will implement any changes to such
policies reasonably recommended by such consultant.
SECTION 5.03. OBLIGATIONS AND TAXES. Horizon will, and will cause each
of the Subsidiaries to, pay its Indebtedness and other obligations promptly
and in accordance with their terms and pay and discharge promptly when due
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims for
labor, materials and supplies or otherwise which, if unpaid, might give rise
to a Lien upon such
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properties or any part thereof; PROVIDED, HOWEVER, that such payment and
discharge shall not be required with respect to any such tax, assessment,
charge, levy or claim so long as the validity or amount thereof shall be
contested in good faith by appropriate proceedings and Horizon shall have set
aside on its books adequate reserves in accordance with GAAP with respect
thereto.
SECTION 5.04. FINANCIAL STATEMENTS, REPORTS, ETC. Horizon will furnish
to the Agent and each Lender:
(a) within 90 days after the end of each fiscal year,
its consolidated balance sheet and related statements of
operations and cash flows, showing the financial position of
Horizon and its Consolidated Subsidiaries as of the close of
such fiscal year and the results of their operations and
cash flows during such year, all audited by Arthur Andersen
LLP or another nationally recognized "Big Six" independent
public accounting firm and accompanied by an opinion of such
accountants (which shall not be qualified in any material
respect) to the effect that such financial statements fairly
present the consolidated financial position, results of
operations and cash flows of Horizon and its Consolidated
Subsidiaries in accordance with GAAP consistently applied
(an "UNQUALIFIED OPINION"); PROVIDED that the delivery
pursuant to paragraph (f) or (g) below of a copy of the
Annual Report on Form 10-K or Annual Report to Shareholders
of Horizon for such fiscal year filed with the SEC or mailed
to shareholders shall be deemed to satisfy the requirements
of this paragraph (a), if such filing or mailing is timely
made and contains an Unqualified Opinion;
(b) within 45 days after the end of each of the first
three fiscal quarters of each fiscal year, its consolidated
balance sheet and related consolidated statements of
operations and cash flows, showing the consolidated
financial position of Horizon and its Consolidated
Subsidiaries as of the close of such fiscal quarter and the
consolidated results of their operations and cash flows
during such fiscal quarter and the then elapsed portion of
the fiscal year, all certified by a Financial Officer as
fairly presenting the consolidated financial position and
consolidated results of operations and cash flows of Horizon
and its Consolidated Subsidiaries in accordance with GAAP
consistently applied, subject to normal year-end audit
adjustments; PROVIDED that the delivery pursuant to
paragraph (g) below of a copy of the Quarterly Report on
Form 10-Q of Horizon for such quarterly period filed with
the SEC shall be deemed to satisfy the requirements of this
paragraph (b), if such filing is timely made;
(c) within 90 days after the end of each fiscal year
and within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, summary information
presenting the consolidating financial position as of, and
consolidating results of operations and cash flows for, such
period of Horizon and its Consolidated Subsidiaries by line
of business;
(d) within 90 days after the end of each fiscal year
and within 45 days after the end of each of the first three
fiscal quarters of each fiscal year, a certificate of a
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Financial Officer of Horizon certifying that no Default or
Event of Default has occurred or, if such Default or Event
of Default has occurred, specifying the nature and extent
thereof and any corrective action taken or proposed to be
taken with respect thereto;
(e) concurrently with any delivery of a certificate
under paragraph (d) above, a certificate of a Financial
Officer of Horizon, substantially in the form attached
hereto as Exhibit G, (i) setting forth the Debt/EBITDAR
Ratio of Horizon as of the date of such certificate and a
reasonably detailed calculation thereof, (ii) demonstrating
compliance with the covenants contained in Sections 6.06 and
6.19 and setting forth the related computations in
reasonable detail and (iii) stating whether, since the date
of its most recent Required Financial Statements previously
delivered to the Agent, there has been any material change
in the generally accepted accounting principles applied in
the preparation of Horizon's financial statements and, if
so, describing such change;
(f) promptly upon the delivery or mailing thereof to
the holders of Common Stock, copies of all reports,
financial information, proxy statements and other
information so delivered or mailed and promptly upon the
final preparation thereof, copies of the audited financial
statements of Continental and its Consolidated Subsidiaries
as of and for the fiscal year ended June 30, 1995;
(g) promptly upon the filing thereof, copies of all
registration statements (other than exhibits thereto and any
registration statements on Form S-8 or its equivalent) and
reports on Forms 10-K, 10-Q and 8-K (or their equivalents)
which Horizon shall have filed with the SEC; and
(h) promptly, from time to time, such other
information regarding the operations, business affairs and
financial condition of Horizon or any Subsidiary, or
compliance with the terms of any Loan Document, as any Agent
or Lender may reasonably request.
SECTION 5.05. LITIGATION AND OTHER NOTICES. Horizon will furnish to
the Agent and each Lender prompt written notice of the following:
(a) any Default or Event of Default, specifying the
nature and extent thereof and the corrective action (if any)
proposed to be taken with respect thereto;
(b) the filing or commencement of, or any threats or
notices of intention of any person to file or commence, or
any material escalation of, any actions, suits,
investigations or proceedings, whether at law or in equity
or by or before any Governmental Authority, against or
affecting Horizon or any of the Subsidiaries (i) as to which
there is a reasonable possibility of an adverse
determination and which, if so determined, could reasonably
be expected to result, individually or in the aggregate, in
a Material Adverse Effect or (ii) which involves a claim or
series of related claims against Horizon or any Subsidiary
in excess of $1,000,000; and
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(c) any developments that have resulted, or could
reasonably be expected to result, individually or in the
aggregate, in a Material Adverse Effect.
SECTION 5.06. ERISA. (a) Horizon will, and will cause each of the
Subsidiaries to, comply in all material respects with the applicable
provisions of ERISA.
(b) Horizon will promptly give notice to the Agent and each Lender of
the following events, as soon as possible and in any event within 30 days
after Horizon or any Subsidiary knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to any
Single Employer Plan, a failure to make any required contribution to a Plan
(excluding any such failure resulting from an administrative error and
involving an amount that is not material), any Lien in favor of the PBGC or a
Plan, or any withdrawal from, or the termination, reorganization or
insolvency (within the meaning of such terms as used in ERISA) of, any
Multiemployer Plan; or (ii) the institution of proceedings or the taking of
any other action by the PBGC, Horizon, any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the termination,
reorganization or insolvency (within the meaning of such terms as used in
ERISA) of, any Plan covered by Title IV of ERISA (excluding any termination
of a Single Employer Plan pursuant to Section 4041(b) of ERISA).
SECTION 5.07. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. Horizon will, and will cause each of the Subsidiaries to,
maintain all financial records in accordance with GAAP and permit
representatives designated by the Agent or any Lender to visit and inspect
the financial records and the properties of Horizon or any Subsidiary, at
reasonable times and as often as requested, and to make extracts from and
copies of such financial records, and permit representatives designated by
the Agent or any Lender to discuss the affairs, finances and condition of
Horizon or any Subsidiary with the officers thereof and the independent
accountants therefor.
SECTION 5.08. USE OF PROCEEDS. The Borrowers will use the Letters of
Credit and the proceeds of the Loans, and will cause the Subsidiaries to use
the proceeds of the Subsidiary Intercompany Indebtedness, only for the
purposes set forth in Section 3.13.
SECTION 5.09. FISCAL YEAR. Horizon will, and will cause each of the
Subsidiaries (other than any joint venture of Continental or any Continental
Subsidiary which is required by contract with an unrelated third party to
maintain a different fiscal year) to, cause its fiscal year to commence on
June 1 in each year and to end on May 31 in each year.
SECTION 5.10. MATERIAL SUBSIDIARIES. Within 15 days after the due date
for delivery of any of the Required Financial Statements in accordance with
Section 5.04(a) or (b), Horizon will cause any Subsidiary which qualifies as
a Material Subsidiary based on its total assets as of the end of, and its
total revenues for, the then most recent Reference Period, but which is not a
Subsidiary Guarantor and a Subsidiary Pledgor, to execute and deliver a
Supplemental Agreement pursuant to which such Subsidiary shall become a
Subsidiary Guarantor and a
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Subsidiary Pledgor and will cause all the terms of such Supplemental
Agreement to be satisfied.
SECTION 5.11. FURTHER ASSURANCES. Horizon will, and will cause each of
the Subsidiaries to, execute any and all further documents, agreements and
instruments, and take all further action, which may be required under
applicable law, or which the Required Lenders or the Agent may reasonably
request, in order to effectuate the transactions contemplated by the Loan
Documents and in order to grant, preserve, protect and perfect the validity
and first priority of the Liens created or intended to be created by the
Pledge Agreements.
ARTICLE VI
NEGATIVE COVENANTS
The Borrowers covenant and agree with each Lender that so long as this
Amended Agreement shall remain in effect or any Obligations shall be unpaid,
and until the Commitments have been terminated and the Loans, together with
interest, Fees and all other Obligations have been paid in full, all Letters
of Credit have been cancelled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing:
SECTION 6.01. INDEBTEDNESS. Horizon will not, and will not cause or
permit any of the Subsidiaries to, incur, create, issue, assume or permit to
exist any Indebtedness or Disqualified Equity Interests, except:
(a) Indebtedness represented by this Amended Agreement
and the Guarantee Agreements;
(b) Indebtedness and Disqualified Equity Interests
existing on the Effective Date to the extent set forth on
Schedule 6.01;
(c) Capital Lease Obligations of Continental and the
Continental Subsidiaries existing on the Effective Date up
to an aggregate amount of $3,500,000 and other Indebtedness
existing on the Effective Date up to an aggregate principal
amount of $8,000,000;
(d) Indebtedness issued in exchange for, or the
proceeds of which are used to refinance, any Indebtedness
permitted by clause (b) or (c) above, other than any
Indebtedness evidenced by the Subordinated Notes that remain
outstanding after the consummation of the Tender Offers;
PROVIDED, HOWEVER, that (i) the principal amount of the
Indebtedness so issued shall not exceed the principal amount
of the Indebtedness so exchanged or refinanced and (ii) the
Indebtedness so issued (A) shall not mature prior to the
Stated Maturity of the Indebtedness so exchanged or refi-
nanced, (B) shall have an Average Life equal to or greater
than the remaining Average Life of the Indebtedness so
exchanged or refinanced and (C) shall be subordinated in
right of
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payment to the prior payment in full of the Obligations to
at least the same extent as the Indebtedness so exchanged
or refinanced;
(e) Indebtedness of any Subsidiary that is both a
Subsidiary Guarantor and a Subsidiary Pledgor incurred after
the Effective Date ("PERMITTED SENIOR INDEBTEDNESS");
PROVIDED, HOWEVER, that the aggregate principal amount of
such Indebtedness outstanding at any time shall not exceed
an amount equal to 15% of the Stockholders' Equity of
Horizon as of the last day of the then most recent full
fiscal quarter for which Horizon has delivered its Required
Financial Statements to the Agent;
(f) Indebtedness of any Horizon Subsidiary to Horizon
and of any Continental Subsidiary to Continental
(collectively, the "SUBSIDIARY INTERCOMPANY INDEBTEDNESS");
provided that:
(i) such loan from Horizon or Continental is
evidenced by an Intercompany Note issued by such
Horizon Subsidiary to Horizon or by such Continental
Subsidiary to Continental, as applicable;
(ii) such Intercompany Note is subject to the lien
of the Horizon Pledge Agreement or the Continental
Pledge Agreement, as applicable, and has been delivered
to the Agent;
(iii) (A) the aggregate principal amount of
such Indebtedness incurred by any single Horizon
Subsidiary or by any single Continental Subsidiary
which is not both a Subsidiary Guarantor and a
Subsidiary Pledgor, plus the aggregate amount of all
other direct or indirect investments by Horizon or
Continental in such Horizon Subsidiary or Continental
Subsidiary, as applicable, shall not exceed $1,000,000
outstanding at any time, (B) the aggregate principal
amount of such Indebtedness incurred by all such
Horizon Subsidiaries and Continental Subsidiaries
referred to in the foregoing clause (A), plus the
aggregate amount of all other direct or indirect
investments by Horizon in all such Horizon Subsidiaries
and by Continental in all such Continental
Subsidiaries, shall not exceed $20,000,000 outstanding
at any time and (C) no such Horizon Subsidiary or such
Continental Subsidiary shall be a Material Subsidiary;
(iv) such loan from Horizon or Continental is used
by such Horizon Subsidiary or such Continental
Subsidiary as provided in Section 3.13;
(v) no such loan shall be made to any such
Horizon Subsidiary or such Continental Subsidiary that
is the subject of a proceeding described in paragraph
(g) or (h) of Article VII; and
(vi) the principal amount of such Indebtedness
incurred by any majority-owned Subsidiary shall not
exceed any limitation thereon imposed by contract with
or obligation to any holder of a minority interest
therein (other
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than any temporary excess which is in Horizon's good
faith judgment necessary to maintain the operation of
a medical facility of any such Subsidiary and which
will not have a Material Adverse Effect);
(g) Indebtedness of Horizon which is subordinated in
right of payment to the prior payment in full of all
Obligations; PROVIDED, that (i) no scheduled payment of
principal of such Indebtedness is payable prior to the first
anniversary of the Maturity Date, (ii) the other terms and
conditions of such Indebtedness (including covenants,
subordination terms, events of default and other provisions)
are satisfactory in all respects to the Required Lenders and
(iii) Horizon shall have prepared and furnished to the Agent
prior to the incurrence of such Indebtedness pro forma
financial statements demonstrating to the satisfaction of
the Agent that none of the financial covenants in Section
6.19 will be violated after giving pro forma effect to such
proposed incurrence;
(h) Guarantees by either Borrower issued after the
Effective Date of Indebtedness of any Subsidiary ("PERMITTED
GUARANTEES"); PROVIDED that (i) such Indebtedness of such
Subsidiary is otherwise permitted hereunder and (ii) the
aggregate face amount of all such Guarantees is not more
than $10,000,000.
(i) Interest Rate Protection Agreements containing
terms satisfactory to the Agent; PROVIDED that the notional
principal amount of such Interest Rate Protection Agreements
does not exceed the amount of indebtedness of the Borrowers
and the Subsidiaries outstanding on the date such agreements
are entered into.
SECTION 6.02. NEGATIVE PLEDGE. Horizon will not, and will not cause or
permit any of the Subsidiaries to, create, incur, assume or permit to exist
any Lien on any property or assets (including stock or other securities of
any subsidiary or other person) now owned or hereafter acquired by it, or on
any income or revenues or rights in respect of any thereof, except:
(a) Liens in favor of the Agent on behalf of the
Secured Parties created by the Pledge Agreements;
(b) Liens existing on the Effective Date, to the
extent set forth in Schedule 6.02, securing Indebtedness
permitted under Section 6.01(b) or (c) and Operating Leases
existing on the Effective Date, to the extent set forth in
Schedule 6.02;
(c) Liens arising after the Effective Date securing
Permitted Senior Indebtedness or Indebtedness permitted
under Section 6.01(d); PROVIDED that, in the case of Liens
securing such Indebtedness permitted under Section 6.01(d),
such Liens cover only property and assets covered on the
Effective Date and the aggregate principal amount of such
Indebtedness so secured does not exceed the amount so
secured on the Effective Date;
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(d) Liens attributable to Permitted Sale and Lease-
Back Transactions;
(e) Liens for taxes not yet due or which are being
contested in compliance with Section 5.03 and for which
adequate reserves have been established;
(f) carriers', warehousemen's, mechanics',
materialmen's, repairmen's, construction or other like Liens
arising in the ordinary course of business and securing
obligations that are not due or which are being contested in
compliance with Section 5.03 and for which adequate reserves
have been established;
(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than
Capital Lease Obligations), statutory obligations, surety
and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(h) deposits in connection with workmen's
compensation, unemployment insurance, old age pensions, or
other social security or retirement benefits legislation in
respect of employees of Horizon and the Subsidiaries;
(i) zoning restrictions, easements, rights-of-way,
restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business
which, in the aggregate, are not substantial in amount and
do not materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of
the business of Horizon or any of the Subsidiaries; and
(j) other Liens securing Indebtedness or other
obligations up to an aggregate amount of $10,000,000 at any
time outstanding.
SECTION 6.03. SALE AND LEASE-BACK TRANSACTIONS. Horizon will not, and
will not cause or permit any of the Subsidiaries to, enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or lease such
property or other property which it intends to use for substantially the same
purpose or purposes as the property being sold or transferred, except to the
extent that the aggregate amount of Attributable Debt with respect to any
such transactions outstanding at any time is no more than $20,000,000
("PERMITTED SALE AND LEASE-BACK TRANSACTIONS").
SECTION 6.04. INVESTMENTS, LOANS AND ADVANCES. Horizon will not, and
will not cause or permit any of the Subsidiaries to, purchase, hold or
acquire any Equity Interests, evidences of indebtedness or other securities
of, make or permit to exist any loans or advances to, or make or permit to
exist any investment, capital contribution or any other beneficial interest
in, or issue or permit to exist any guarantee of any Operating Lease or other
obligation not constituting Indebtedness of, any other person, except:
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(a) Cash Equivalents;
(b) Subsidiary Intercompany Indebtedness incurred by
any Subsidiary which is both a Subsidiary Guarantor and a
Subsidiary Pledgor; PROVIDED that the principal amount of
such Indebtedness incurred by any majority-owned Subsidiary
shall not exceed any limitation thereon (or on the amount of
Indebtedness that can be secured by the pledge of the Equity
Interests of such person or of any Affiliate of such person)
imposed by contract with or other obligation to any holder
of a minority interest therein (other than any temporary
excess which is in Horizon's good faith judgment necessary
to maintain the operation of a medical facility of any such
Subsidiary and which will not have a Material Adverse
Effect);
(c) promissory notes or notes receivable received in
settlement of customer accounts arising in the ordinary
course of business and payable in accordance with the
customary trade terms of Horizon or any of the Subsidiaries;
(d) equity investments in Continental and the other
Subsidiaries existing on the Effective Date; PROVIDED that
each such other Subsidiary (except for any such Subsidiary
which is not a Material Subsidiary and except for North
Louisiana Rehabilitation Center, Inc., Kansas Rehabilitation
Hospital, Inc., CMS Jonesboro Rehabilitation, Inc., Houston
Rehabilitation Associates and Baton Rouge Rehab, Inc.) is
both a Subsidiary Guarantor and a Subsidiary Pledgor;
(e) equity investments made after the Effective Date
to acquire from unrelated third parties a person in the same
line of business as the Borrowers, which person becomes a
Subsidiary upon consummation thereof, and additional equity
investments in any of the then existing Subsidiaries
acquired from unrelated third parties; PROVIDED in the case
of each such investment, that:
(i) no Default or Event of Default has occurred
and is continuing at the time of such investment or
would occur immediately after giving effect thereto (on
a pro forma basis as if such investment had occurred on
the first day of the applicable Reference Period for
purposes of Section 6.19), and, in the case of any
investments in any single person for aggregate
consideration in excess of $20,000,000, Horizon shall
have prepared and furnished to the Agent prior to the
consummation of such investment pro forma financial
statements demonstrating to the satisfaction of the
Agent that none of the financial covenants in
Section 6.19 will be violated after giving pro forma
effect to such proposed investment;
(ii) the aggregate Fair Market Value of the
consideration, whether payable upon consummation
thereof or in the form of earn-outs, non-competes or
other deferred payment arrangements, for such
investment (in the case of additional equity
investments in an existing Subsidiary, including the
existing amount of the investment in such Subsidiary)
including cash, securities, other
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property and the assumption of Indebtedness, does
not exceed an amount equal to 10% of the Stockholders'
Equity of Horizon as of the last day of the then
most recent full fiscal quarter for which Horizon
has delivered its Required Financial Statements
to the Agent; and
(iii) such person (A) shall have executed and
delivered to the Agent the Horizon Subsidiaries'
Guarantee Agreement or Continental Subsidiaries'
Guarantee Agreement, as applicable, and the Horizon
Subsidiaries' Pledge Agreement or the Continental
Subsidiaries' Pledge Agreement, as applicable, or (B)
shall have executed and delivered to the Agent a
Supplemental Agreement and thereby become a Subsidiary
Guarantor and Subsidiary Pledgor (and all the terms of
such Supplemental Agreement shall have been satisfied);
(f) (i) Subsidiary Intercompany Indebtedness incurred
by, and equity investments in, any Subsidiary which is not a
Material Subsidiary and is not an Inactive Subsidiary, (ii)
other investments not exceeding $5,000,000 and (iii)
advances to K.C. Rehabilitation Hospital, Inc. and to
Arkansas Rehabilitative Associates; PROVIDED that (A) the
aggregate amount of any such investment referred to in
clause (i) or (iii) above by or in any such single
Subsidiary (including K.C. Rehabilitation Hospital and
Arkansas Rehabilitative Associates) shall not exceed
$1,000,000 outstanding at any time and (B) the aggregate
amount of all such investments referred to in clause (i),
(ii) or (iii) above outstanding at any time shall not exceed
$20,000,000;
(g) advances to employees for moving and travel
expenses, drawing accounts and similar expenditures in the
ordinary course of business;
(h) guarantees by either Borrower of Operating Leases
and other obligations not constituting Indebtedness of any
of its Wholly Owned Subsidiaries and guarantees by
Continental outstanding on the Closing Date of Operating
Leases and other obligations of its majority-owned
Subsidiaries;
(i) (A) up to $2,750,000 in investments in Royal Oaks
Partnership existing on the Effective Date and (B) other
investments existing on the Effective Date to the extent set
forth on Schedule 6.04;
(j) advances to North Louisiana Rehabilitation Center,
Inc., Kansas Rehabilitation Hospital, Inc., CMS Jonesboro
Rehabilitation, Inc., Houston Rehabilitation Associates and
Baton Rouge Rehab, Inc., evidenced by Intercompany Notes;
PROVIDED, THAT, the aggregate principal amount thereof to
any such Subsidiary outstanding at any time does not exceed
the amount set forth with respect to such Subsidiary on
Schedule 6.04;
(k) equity investments required to provide the initial
capitalization of Wholly Owned Subsidiaries of Horizon
created after the Effective Date; provided that each such
Wholly Owned Subsidiary shall have executed and delivered to
the Agent a
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Supplemental Agreement and thereby become a Subsidiary
Guarantor and Subsidiary Pledgor (and all the terms of
such Supplemental Agreement shall have been satisfied); and
(l) investments permitted by Section 6.18.
SECTION 6.05. MERGERS, CONSOLIDATIONS, DISPOSITIONS AND ACQUISITIONS.
(a) Horizon will not, and will not cause or permit any of the Subsidiaries
to, (i) merge into or consolidate with any other person, (ii) permit any
other person to merge into or consolidate with it, (iii) sell, transfer,
lease or otherwise dispose of any assets (whether now owned or hereafter
acquired) or any interest therein, including through the creation of any
joint venture, or (iv) issue or sell any Equity Interests of any Subsidiary,
except:
(A) sales in the ordinary course of business
consistent with past practice;
(B) dispositions of obsolete or useless tangible
assets in the ordinary course of business;
(C) dispositions of up to $20,000,000 in aggregate
book value (or $5,000,000 in book value for any single
asset, including Equity Interests of Subsidiaries) of the
assets of Horizon or any of the Subsidiaries, including
Equity Interests of Subsidiaries; PROVIDED that (I) the
proceeds thereof are not required to be used, and are not
used, directly or indirectly, to purchase or otherwise
acquire any Subordinated Debt and (II) in any case involving
a joint venture, the capital contributions to such joint
venture are permitted by Section 6.18; and
(D) if no Default or Event of Default shall have
occurred and be continuing at the time thereof or would
occur after giving effect thereto, (I) either Borrower may
merge with any of its Wholly Owned Subsidiaries in a
transaction in which such Borrower is the surviving
corporation and (II) any such Wholly Owned Subsidiary may
merge into or consolidate with any other such Wholly Owned
Subsidiary in a transaction in which the surviving entity is
a Wholly Owned Subsidiary and no person other than a
Borrower or any of such Wholly Owned Subsidiaries receives
any consideration.
If any person ceases to be a Subsidiary as a result of a disposition
permitted under this Section 6.05(a), the Agent shall cancel and release such
person's obligations under its Subsidiary Guarantee Agreement and Subsidiary
Pledge Agreement.
(b) Horizon will not, and will not cause or permit any of the
Subsidiaries to, purchase, lease or otherwise acquire all or any substantial
part of the assets of any person, except for assets to be used by Horizon or
any of the Subsidiaries in the same line of business as the Borrowers;
PROVIDED that:
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(i) no Default or Event of Default has occurred and is
continuing at the time of any such acquisition or would
occur immediately after giving effect thereto (on a pro
forma basis as if such acquisition had occurred on the first
day of the applicable Reference Period for purposes of
Section 6.19), and, in the case of any single acquisition
for aggregate consideration in excess of $20,000,000,
Horizon shall have prepared and furnished to the Agent prior
to the consummation of such acquisition pro forma financial
statements demonstrating to the satisfaction of the Agent
that none of the financial covenants in Section 6.19 will be
violated after giving pro forma effect to such proposed
acquisition; and
(ii) except in the case of any acquisition from a
Wholly Owned Subsidiary of either Borrower, the aggregate
Fair Market Value of the consideration, whether payable upon
consummation thereof or in the form of earn-outs, non-
competes or other deferred payment arrangements, for such
acquisition (including cash, securities, other property and
assumption of Indebtedness), plus the costs incurred in
acquiring such assets do not exceed the amount equal to 10%
of the Stockholders' Equity of Horizon as of the last day of
the then most recent full fiscal quarter for which Horizon
has delivered its Required Financial Statements to the
Agent; PROVIDED that, in any case involving a joint venture,
the capital contributions to such joint venture are
permitted by Section 6.18.
SECTION 6.06. DIVIDENDS AND DISTRIBUTIONS. Horizon will
not, and will not cause or permit any of the Subsidiaries to, (a)
declare or pay, directly or indirectly, any dividend or make any
other distribution (by reduction of capital or otherwise),
whether in cash, property, securities or a combination thereof,
with respect to any Equity Interests of Horizon or any of the
Subsidiaries, (b) directly or indirectly redeem, purchase, retire
or otherwise acquire for value, any Equity Interests of Horizon
or any of the Subsidiaries or (c) directly or indirectly redeem,
purchase, prepay, retire or otherwise acquire for value, prior to
scheduled maturity, scheduled repayment or scheduled sinking fund
payment, any Indebtedness (other than Loans and Subsidiary
Intercompany Indebtedness) or set aside any amount for any such
purpose; PROVIDED, HOWEVER, that:
(i) any Subsidiary may declare and pay dividends or
make other distributions to Horizon or any Wholly Owned
Subsidiary of Horizon;
(ii) the Borrowers may acquire additional Equity
Interests in a majority-owned Subsidiary; PROVIDED that such
acquisition is permitted by Section 6.04(e);
(iii) Horizon may give notice of redemption of, offer
to repurchase and repurchase the Greenery Convertible Notes;
PROVIDED that the aggregate principal amount of the Greenery
Convertible Notes so redeemed or purchased does not exceed
$26,000,000;
(iv) Horizon may pay cash dividends to holders of
Common Stock during any fiscal year of Horizon in an amount
which does not exceed 20% of the Net Income of
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<PAGE>
Horizon for its immediately preceding fiscal year; PROVIDED,
HOWEVER, that (A) no Default or Event of Default has occurred and
is continuing or would occur immediately after giving effect
thereto; and (B) no such dividends shall be declared or paid
until at least 10 days after receipt by the Agent of the
Required Financial Statements for such preceding fiscal
year;
(v) Horizon or Continental may purchase Indebtedness
to the extent permitted under Section 6.17(c); and
(vi) if no Default or Event of Default has occurred and
is continuing at the time thereof or would occur immediately
after giving effect thereto, any Subsidiary may declare and
pay pro rata cash dividends or make other pro rata cash
distributions to unrelated third parties holding minority
equity interests in such Subsidiaries to the extent
contemplated by applicable agreements with such parties (but
this clause (vi) shall not permit the repurchase or other
acquisition of such interests).
SECTION 6.07. IMPAIRMENT. (a) Horizon will not, and will
not permit any of the Subsidiaries to, take or omit to take any
action, which action or omission might or would have the result
of materially impairing the security interests in favor of the
Agent on behalf of the Secured Parties with respect to the
Collateral, and Horizon will not, and will not permit any of the
Subsidiaries to, grant to any person (other than the Agent on
behalf of the Secured Parties) any interest whatsoever in the
Collateral.
(b) Horizon will not, and will not permit any of the
Subsidiaries to, enter into or be party to any agreement that
subordinates (i) the payment, performance or collateralization
of any obligations owing by any such Subsidiary to either Borrower
to (ii) the payment, performance, or collateralization of any other
obligations (other than the Obligations).
(c) Horizon will not, and will not permit any of the
Subsidiaries to, enter into any agreement, any term or condition
of which would, if complied with by Horizon or such Subsidiary,
result in a Default or Event of Default.
SECTION 6.08. LIMITATION ON RESTRICTIONS ON SUBSIDIARIES.
Horizon will not, and will not cause or permit any of the
Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any consensual
encumbrance or restriction on (a) the ability of any Subsidiary
to (i) pay dividends or make any other distributions on or in
respect of its Equity Interests, or pay any Indebtedness owed to
Horizon or any Subsidiary, (ii) make loans or advances to Horizon
or any Subsidiary or (iii) transfer any of its properties or
assets to Horizon or any Subsidiary or (b) the ability of Horizon
and the Subsidiaries to pledge to the Agent any Equity Interests
in any Subsidiary formed or acquired after the Effective Date,
except for such encumbrances or restrictions existing under or by
reason of:
(i) customary non-assignment provisions in any lease
governing a leasehold interest;
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(ii) this Amended Agreement and the other Loan
Documents;
(iii) encumbrances and restrictions existing on the
Effective Date, to the extent set forth in Schedule 6.08;
and
(iv) encumbrances and restrictions arising after the
Effective Date affecting any Subsidiary; PROVIDED that such
encumbrances and restrictions are created in connection with
a transaction permitted by Section 6.18.
SECTION 6.09. NO OTHER NEGATIVE PLEDGES. Horizon will not,
and will not cause or permit any of the Subsidiaries to, directly
or indirectly, enter into any agreement prohibiting the creation
or assumption of any Lien upon the properties or assets of
Horizon or any of the Subsidiaries, whether now owned or
hereafter acquired, or, except as set forth on Schedule 6.09,
requiring an obligation to be secured if some other obligation is
secured, or prohibiting Horizon or any of the Subsidiaries from
selling, leasing, pledging, hypothecating or otherwise disposing
of any assets of such persons, except for:
(a) this Amended Agreement; and
(b) any agreement with the holder of any Permitted
Senior Indebtedness secured by collateral in accordance with
Section 6.02(b), to the extent such agreement limits or
restricts either Borrower's right to sell, lease, pledge,
hypothecate or otherwise dispose of such collateral.
SECTION 6.10. TRANSACTIONS WITH AFFILIATES. Horizon will
not, and will not cause or permit any of the Subsidiaries to,
sell or transfer any property or assets to, or purchase or
acquire any property or assets from, or otherwise enter into any
other transactions with, any of its Affiliates, except that so
long as no Default or Event of Default shall have occurred and be
continuing, Horizon or any of the Subsidiaries may enter into any
of the foregoing transactions in the ordinary course of business
and pursuant to the reasonable requirements of its business at
prices and on terms and conditions that are (a) set forth in
writing and (b) as favorable to Horizon or such Subsidiary as
would be obtainable at the time in a comparable transaction on an
arm's-length basis from an unrelated third party. The provisions
of this Section 6.10 shall not prohibit (i) any payment permitted
under Section 6.04 or 6.06, (ii) any transaction among Horizon
and any of its Wholly Owned Subsidiaries or among such Wholly
Owned Subsidiaries or (iii) any transaction expressly permitted
by the other provisions of this Amended Agreement or the
provisions of any of the other Loan Documents.
SECTION 6.11. BUSINESS OF HORIZON, CONTINENTAL AND
SUBSIDIARIES. Horizon will not, and will not cause or permit any
of the Subsidiaries to, change the nature of its business as now
conducted in any material respect or engage in any business other
than (a) the acquisition, ownership and operation of nursing home
properties for long term and subacute care, related therapy and
pharmacy operations, laboratory services and other healthcare
operations and (b) the CMS Businesses.
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<PAGE>
SECTION 6.12. SALES OF RECEIVABLES. Horizon will not, and
will not cause or permit any of the Subsidiaries to, sell with
recourse, discount or otherwise sell or dispose of its notes or
accounts receivable.
SECTION 6.13. CERTAIN AMENDMENTS. (a) Horizon will not,
and will not cause or permit any of the Subsidiaries to, enter
into any amendment, modification or waiver in respect of any term
or condition of (i) the certificate of incorporation or by-laws
of either Borrower or of any Material Contract, other than
amendments, modifications and waivers which are not, individually
or in the aggregate, in the reasonable judgment of the Agent,
adverse in any material respect to the rights or interests of the
Lenders, (ii) the articles of incorporation, bylaws, partnership
agreement or joint venture agreement of any Subsidiary, if the
effect is to prohibit a change in control or pledge of the Equity
Interests of such person or (iii) any agreements relating to the
Subordinated Debt of either Borrower, including any of the terms
or provisions contained in any indenture relating to the
subordination of payment of any such Subordinated Debt to the
payment of the Obligations, other than the amendments
contemplated by Section 4.01(g).
(b) Neither Borrower will forgive any Subsidiary
Intercompany Indebtedness.
(c) Neither Borrower will, nor will it cause or permit any
of the Subsidiaries to, amend, modify or waive, or permit the
amendment, modification or waiver of, any of the terms or
provisions contained in any agreements relating to any Permitted
Senior Indebtedness, other than amendments, modifications and
waivers which are not, individually or in the aggregate, in the
reasonable judgment of the Agent, adverse in any material respect
to the rights or interests of the Lenders.
SECTION 6.14. CHANGES IN GAAP. Horizon will not, and will
not cause or permit any of the Subsidiaries to, change its fiscal
year without the prior written consent of the Required Lenders or
change its method of financial accounting except in accordance
with GAAP.
SECTION 6.15. MATERIAL AGREEMENTS. Horizon will not, and
will not cause or permit any of the Subsidiaries to, breach,
violate or be in default under any Material Contract and fail to
cure such breach, violation or default within any applicable cure
period or permit any Major Potential Liability to exist.
SECTION 6.16. ISSUANCE OF SECURITIES. Horizon will not,
and will not cause or permit any of the Subsidiaries to, issue
any capital stock, create any new class of stock, or issue any
other Equity Interests (including any securities convertible
into, or exchangeable for, capital stock); PROVIDED, HOWEVER,
that Horizon shall have the right from time to time to issue
Equity Interests (other than Disqualified Equity Interests) and
create one or more new classes of stock (other than Disqualified
Equity Interests).
SECTION 6.17. SUBORDINATED DEBT. (a) Horizon will not,
and will not cause or permit any of the Subsidiaries to, enter
into any amendment, modification or waiver in respect
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<PAGE>
of any provision of either Subordinated Note Indenture, or any other
document or agreement evidencing or relating to the Subordinated
Debt issued thereunder, if such amendment, modification or waiver
has the effect of (i) changing the definition of "Senior
Indebtedness" or changing the subordination provisions or (ii)
otherwise making the covenants and other provisions more onerous
or restrictive than those in effect on the Effective Date, after
giving effect to the amendments contemplated by Section 4.02(g).
(b) Continental will not designate any Indebtedness as
"Designated Senior Indebtedness," within the meaning of either
Subordinated Note Indenture, except Indebtedness of $50,000,000
or more issued by Continental in accordance with the terms hereof
in any single transaction (so long as any Indebtedness so
designated shall provide that, at least three days prior to
delivery of any notice under either Subordinated Note Indenture,
the holders of such Designated Indebtedness shall deliver a copy
of such notice to the Agent).
(c) Horizon will not, and will not cause or permit any of
the Subsidiaries to, purchase or acquire, or agree to purchase or
acquire, any Subordinated Debt of Continental prior to its Stated
Maturity, except that from time to time Horizon or Continental
may purchase (and agree to purchase) the Subordinated Notes
remaining outstanding after consummation of the Tender Offers on
the Effective Date upon the following conditions:
(i) the aggregate amount of cash spent by Horizon or
any of the Subsidiaries after the Effective Date to make any
purchases of such Subordinated Debt (including principal and
premium, if any) shall in no event exceed $40,000,000; and
(ii) no Default or Event of Default shall have
occurred and be continuing at the time thereof or would
occur immediately after giving effect thereto.
SECTION 6.18. JOINT VENTURES. Horizon will not, and will
not cause or permit any of the Subsidiaries to, directly or
indirectly, enter into or create any joint venture after the
Effective Date, whether by disposing of Equity Interests in
Subsidiaries to third parties, by contributing cash or property
in exchange for the receipt of Equity Interests, or otherwise,
except for transactions in which the aggregate book value of all
capital contributions (including cash, property, Equity Interests
retained and all other consideration contributed to capital)
made, directly or indirectly, by Horizon and the Subsidiaries is
no more than $30,000,000.
SECTION 6.19. FINANCIAL COVENANTS. Horizon will not:
(a) STOCKHOLDERS' EQUITY. Permit the Stockholders'
Equity of Horizon as of the last day of any fiscal quarter
of Horizon to be less than the "MINIMUM COMPLIANCE LEVEL".
The Minimum Compliance Level on the Effective Date shall not
be less than $640,000,000, and shall be increased as of the
last day of each fiscal quarter of Horizon ending after the
Effective Date by an amount equal to the sum of (i) 75% of
Net Income (if positive) for such fiscal quarter, (ii) the
aggregate Net Proceeds received from the issue or sale by
Horizon of Equity Interests subsequent to the Effective
Date, (iii) the amount by which Indebtedness is reduced on
the balance sheet
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<PAGE>
of Horizon and its Consolidated Subsidiaries upon the conversion
or exchange subsequent to the Effective Date of any Indebtedness
convertible into or exchangeable for Equity Interests and (iv) the
amount of Stockholders' Equity of any person acquired after the
Effective Date in a pooling of interests transaction. The
foregoing increases in the Minimum Compliance Level shall be
fully cumulative and no reduction in the Minimum Compliance
Level shall be made to reflect negative Net Income for any
period.
(b) FIXED CHARGE COVERAGE RATIO. Permit the Fixed
Charge Coverage Ratio of Horizon as of the last day of any
fiscal quarter of Horizon ending during any fiscal year
referred to in the chart below to be less than the ratio set
forth in the chart below for such fiscal quarter in such
fiscal year.
<TABLE>
<CAPTION>
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 1.50:1.00 1.50:1.00 1.50:1.00 1.50:1.00
- - ----------------------------------------------------------------------
1997 1.50:1.00 1.50:1.00 1.50:1.00 1.75:1.00
- - ----------------------------------------------------------------------
1998 1.75:1.00 1.75:1.00 1.75:1.00 1.75:1.00
- - ----------------------------------------------------------------------
1999 1.75:1.00 1.75:1.00 1.75:1.00 1.75:1.00
- - ----------------------------------------------------------------------
2000 1.75:1.00 1.75:1.00 1.75:1.00 1.75:1.00
and
thereafter
- - ----------------------------------------------------------------------
</TABLE>
(c) LEVERAGE RATIO. Permit the Leverage Ratio of
Horizon as of the last day of any fiscal quarter of Horizon
ending during any fiscal year referred to in the chart below
to be greater than the ratio set forth in the chart below
for such fiscal quarter in such fiscal year.
<TABLE>
<CAPTION>
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 0.75:1.00 0.75:1.00 0.75:1.00 0.75:1.00
- - ----------------------------------------------------------------------
1997 0.75:1.00 0.75:1.00 0.75:1.00 0.70:1.00
- - ----------------------------------------------------------------------
1998 0.70:1.00 0.70:1.00 0.70:1.00 0.65:1.00
- - ----------------------------------------------------------------------
1999 0.65:1.00 0.65:1.00 0.65:1.00 0.60:1.00
- - ----------------------------------------------------------------------
2000 0.60:1.00 0.60:1.00 0.60:1.00 0.60:1.00
and
thereafter
- - ----------------------------------------------------------------------
</TABLE>
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<PAGE>
(d) DEBT/EBITDAR RATIO. Permit the Debt/EBITDAR Ratio
of Horizon as of the last day of any fiscal quarter of
Horizon ending during any fiscal year referred to in the
chart below to be greater than the ratio set forth in the
chart below for such fiscal quarter in such fiscal year.
<TABLE>
<CAPTION>
Fiscal Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- - ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996 5.50:1.00 5.50:1.00 5.50:1.00 5.00:1.00
- - ----------------------------------------------------------------------
1997 5.00:1.00 5.00:1.00 5.00:1.00 4.50:1.00
- - ----------------------------------------------------------------------
1998 4.50:1.00 4.50:1.00 4.50:1.00 4.50:1.00
- - ----------------------------------------------------------------------
1999 4.50:1.00 4.50:1.00 4.50:1.00 4.00:1.00
- - ----------------------------------------------------------------------
2000 4.00:1.00 4.00:1.00 4.00:1.00 4.00:1.00
and
thereafter
- - ----------------------------------------------------------------------
</TABLE>
ARTICLE VII
EVENTS OF DEFAULT
In case of the happening of any of the following events
("EVENTS OF DEFAULT"):
(a) default shall be made by either Borrower in the
payment of any principal of any Loan or any reimbursement
obligation in respect of a Letter of Credit when and as the
same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by
acceleration thereof or otherwise;
(b) default shall be made in the payment of any
interest on any Loan or any Fee or any other amount (other
than an amount referred to in paragraph (a) above) due under
any Loan Document, when and as the same shall become due and
payable, and such default shall continue unremedied for a
period of three Business Days;
(c) default shall be made in the due observance or
performance by Horizon or any Subsidiary of any covenant,
condition or agreement contained in Section 5.01(a), 5.05,
5.08, 5.09, 5.10 or in Article VI;
(d) default shall be made in the due observance or
performance by Horizon or any Subsidiary of any covenant,
condition or agreement contained in any Loan Document (other
than those specified in paragraph (a), (b) or (c) above) and
such default shall continue unremedied for a period of 30
days after notice thereof from the Agent or any Lender to
such Borrower;
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<PAGE>
(e) any representation or warranty made or deemed made
in or in connection with any Loan Document or the extensions
of credit hereunder, or any representation, warranty,
statement or information contained in any report,
certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in
any material respect when so made, deemed made or furnished;
(f) Horizon or any Subsidiary shall (i) fail to pay
any principal or interest, regardless of amount, due in
respect of any Indebtedness in a principal amount in excess
of $500,000, when and as the same shall become due and
payable, or (ii) fail to observe or perform any other term,
covenant, condition or agreement contained in any agreement
or instrument evidencing or governing any such Indebtedness
if the effect of any failure referred to in this clause (ii)
is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf to cause,
with or without the giving of notice, the lapse of time or
both, such Indebtedness to become due prior to its stated
maturity;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of Horizon or any
Subsidiary, or of a substantial part of its property or
assets, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for
Horizon or any Subsidiary, or for a substantial part of its
property or assets, or (iii) the winding-up or liquidation
of Horizon or any Subsidiary; and such proceeding or
petition shall continue undismissed for 60 days or an order
or decree approving or ordering any of the foregoing shall
be entered;
(h) Horizon or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted
or hereafter amended, or any other Federal, state or foreign
bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing
of any petition described in paragraph (g) above,
(iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar
official for such party or for a substantial part of its
property or assets, (iv) file an answer admitting the
material allegations of a petition filed against it in any
such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) become unable, admit in writing
its inability or fail generally to pay its debts as they
become due or (vii) take any action for the purpose of
effecting any of the foregoing;
(i) one or more judgments or orders for the payment of
money in an aggregate amount in excess of $1,000,000 shall
be rendered against Horizon or any Subsidiary or any
combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any
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<PAGE>
action shall be legally taken by a judgment creditor to levy upon
assets or properties of Horizon or any Subsidiary to enforce any such
judgment;
(j) (i) any person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section
4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any
Single Employer Plan, or any Lien shall arise on the assets
of Horizon or any Commonly Controlled Entity in favor of the
PBGC or a Plan, (iii) a Reportable Event shall occur with
respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or
to terminate, any Single Employer Plan, which Reportable
Event or commencement of proceedings or appointment of a
trustee is, in the reasonable opinion of the Required
Lenders, likely to result in the termination of such Plan
for purposes of Title IV of ERISA, (iv) any Single Employer
Plan shall terminate for purposes of Title IV of ERISA
(excluding any termination of a Single Employer Plan
pursuant to Section 4041(b) of ERISA) or (v) Horizon or any
Commonly Controlled Entity shall incur any liability in
connection with a withdrawal from, or the termination,
reorganization or insolvency of (within the meaning of such
terms as used in ERISA), a Multiemployer Plan; and, in each
case in clauses (i) through (v) above, such event or
condition, together with all other such events or
conditions, if any, could reasonably be expected to involve
possible taxes, penalties, and other liabilities of Horizon
or any Subsidiary in an aggregate amount in excess of
$1,000,000 (or in the case of clause (v) above, $500,000 per
annum); or any other event or condition shall occur or exist
with respect to a Plan and such event or condition, together
with all other such events or conditions, if any, could
reasonably be expected to have a Material Adverse Effect;
(k) any Lien purported to be created by any Pledge
Agreement shall cease to be, or shall for any reason be
asserted by Horizon or any Subsidiary not to be, a valid,
perfected, first priority Lien on the Collateral covered
thereby, other than as a result of an act or omission of the
Agent or any Lender;
(l) any Loan Document shall be declared by any
Governmental Authority to be invalid or unenforceable in
whole or in part in any material respect or shall for any
reason not be, or shall be asserted by Horizon or any
Subsidiary not to be, in full force and effect and
enforceable in accordance with its terms;
(m) any Material Contract or other material agreement
binding on Horizon or any Subsidiary shall be declared by
any Governmental Authority to be invalid or unenforceable in
whole or in part in any material respect or shall for any
other reason not be, or shall be asserted by Horizon or any
Subsidiary not to be, in full force and effect and
enforceable in accordance with its terms or shall be in
default and such event or condition, together with all other
such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect;
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<PAGE>
(n) any License shall lapse, terminate, or be
suspended and such event or condition, together with all
other such events or conditions, if any, could reasonably be
expected to have a Material Adverse Effect;
(o) either (i) Horizon or any Subsidiary shall be
liable, whether directly, indirectly through required
indemnification of any person, or otherwise, for the costs
of investigation and/or remediation of any Hazardous
Material originating from or affecting any property or
properties, whether or not owned, leased or operated by
Horizon or any Subsidiary, which liability, together with
all other such liabilities, could reasonably be expected to
have a Material Adverse Effect or (ii) any Federal, state,
regional, local or other Governmental Authority shall
commence or materially escalate an investigation concerning
any matter or take any other action of any kind that,
together with all other such actions, could reasonably be
expected to have a Material Adverse Effect;
(p) Horizon or any Subsidiary shall, without the prior
written consent of the Required Lenders, (i) take any
affirmative or voluntary action to grant or suffer to exist
any mortgage, pledge, security interest, encumbrance, or
other Lien securing any Subordinated Debt upon any of its
properties or assets, (ii) grant any guarantee of the
payment or performance of any Subordinated Debt or any
obligation relating thereto, (iii) prepay, redeem, purchase
or acquire (except as permitted by Section 6.06 or 6.17),
defease, or otherwise satisfy any Subordinated Debt (or
defease any covenants in respect of any Subordinated Debt)
prior to its scheduled payment date or maturity, or (iv)
agree with any holder of Subordinated Debt to prepay,
redeem, purchase or acquire (except as permitted by Section
6.06 or 6.17), defease, or otherwise satisfy any
Subordinated Debt (or defease any covenants in respect of
any Subordinated Debt) prior to its scheduled payment date
or maturity;
(q) (i) any Obligations of Continental for money
borrowed by Continental shall fail to constitute "Senior
Indebtedness" under either Subordinated Note Indenture or
(ii) Horizon or any Subsidiary shall take any action
inconsistent with the status of such Obligations of
Continental as "Senior Indebtedness" under the Subordinated
Note Indentures; or
(r) any Change in Control shall occur;
then, and in every such event, and at any time thereafter during
the continuance of such event, the Agent, with the consent of the
Required Lenders, may, and at the request of the Required
Lenders, shall, take one or more of the following actions, at the
same or different times: (i) by notice to the Borrowers terminate
the Commitments and they shall immediately terminate; (ii) by
notice to the Borrowers declare the Loans then outstanding to be
forthwith due and payable (in whole or, in the sole discretion of
the Required Lenders, from time to time in part), whereupon the
principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrowers accrued hereunder
or under any other Loan Document, shall thereupon become immediately
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<PAGE>
due and payable, without presentment, demand, protest or any other notice of
any kind, all of which are hereby expressly waived by the Borrowers to the
fullest extent permitted under applicable law, anything contained herein or
in any other Loan Document to the contrary notwithstanding; (iii) require
cash collateral as contemplated by Section 2.20(k) in an amount not exceeding
the Letter of Credit Exposure; (iv) exercise any remedies available under the
Guarantee Agreements, the Pledge Agreements or otherwise; or (v) any
combination of the foregoing; PROVIDED that in the case of (A) any of the
Events of Default with respect to a Borrower described in paragraph (g) or
(h) above and (B) the Event of Default specified in paragraph (r) above, the
Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrowers accrued hereunder or under
any other Loan Document, shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which
are hereby expressly waived by the Borrowers to the fullest extent permitted
under applicable law, anything contained herein or in any other Loan Document
to the contrary notwithstanding.
ARTICLE VIII
THE AGENT AND ISSUING BANK
SECTION 8.01. APPOINTMENT AND AUTHORIZATION. (a) Each of the Lenders,
and each subsequent holder of any Note by its acceptance thereof, hereby
irrevocably appoints and authorizes the Agent and the Issuing Bank to take
such actions as agent on behalf of such Lender or holder and to exercise such
powers as are specifically delegated to the Agent or the Issuing Bank, as the
case may be, by the terms and provisions hereof and of the other Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.
(b) The Agent is hereby expressly authorized by the Lenders, without
hereby limiting any implied authority, and hereby agrees (in the case of
clause (ii) below, at the direction of the Required Lenders), (i) to receive
on behalf of the Lenders all payments of principal of and interest on the
Loans and all other amounts due to the Lenders hereunder, and promptly to
distribute to each Lender its pro rata portion, as determined under Section
2.15, of each payment so received; (ii) to give notice on behalf of each of
the Lenders to the Borrowers of any Event of Default specified in this
Amended Agreement of which the Agent has actual knowledge acquired in
connection with its agency hereunder; and (iii) to distribute to each Lender
copies of all notices, financial statements and other materials delivered by
the Borrowers (including all amendments, waivers and consents entered into)
pursuant to this Amended Agreement as received by the Agent.
SECTION 8.02. LIABILITY OF AGENT. Neither the Agent, the Issuing Bank,
nor any of their respective directors, officers, employees or agents, shall
be liable as such for any action taken or omitted to be taken by any of them,
except for such party's own gross negligence or willful misconduct, or be
responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by
Horizon or any Subsidiary
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of any of the terms, conditions, covenants or agreements contained in any
Loan Document. Neither the Agent nor the Issuing Bank shall be responsible
to the Lenders or the holders of the Notes for the due execution,
genuineness, validity, enforceability or effectiveness of this Amended
Agreement, the Notes or any other Loan Documents or other instruments or
agreements. Each of the Agent and the Issuing Bank may deem and treat the
payee of any Note as the owner thereof for all purposes hereof until it shall
have received from the payee of such Note notice, given as provided herein,
of the transfer thereof in compliance with Section 9.04. Each of the Agent
and the Issuing Bank shall in all cases be fully protected in acting, or
refraining from acting, in accordance with written instructions signed by the
Required Lenders and, except as otherwise specifically provided herein, such
instructions and any action or inaction pursuant thereto shall be binding on
all the Lenders and each subsequent holder of any Note. Each of the Agent
and the Required Lenders shall, in the absence of knowledge to the contrary,
be entitled to rely on any instrument or document believed by it in good
faith to be genuine and correct and to have been signed or sent by the proper
person or persons. To the fullest extent permitted under applicable law,
neither the Agent, the Issuing Bank nor any of their respective directors,
officers, employees or agents, shall have any responsibility to either
Borrower on account of the failure of or delay in performance or breach by
any Lender of any of its obligations hereunder or to any Lender on account of
the failure of or delay in performance or breach by any other Lender or
Horizon or any Subsidiary of any of their respective obligations hereunder or
under any other Loan Document or in connection herewith or therewith. Each
of the Agent and the Issuing Bank may execute any and all duties hereunder by
or through agents or employees, shall be entitled to consult with legal
counsel, independent public accountants and other experts selected by it with
respect to all matters arising hereunder and, to the fullest extent permitted
under applicable law, shall not be liable for any action taken or omitted to
be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts.
SECTION 8.03. ACTION BY AGENT. The Lenders hereby acknowledge that
neither the Agent nor the Issuing Bank shall be under any duty to take any
discretionary action permitted to be taken by it pursuant to the provisions
of this Amended Agreement unless it shall be requested in writing to do so by
the Required Lenders. The obligations of the Agent and the Issuing Bank
under the Loan Documents are only those expressly set forth herein and
therein. Without limiting the generality of the foregoing, the Agent shall
not be required to take any action with respect to any Default or Event of
Default, except as expressly provided in Article VII.
SECTION 8.04. SUCCESSOR AGENTS. Subject to the appointment and
acceptance of a successor as provided below, each of the Agent and the
Issuing Bank (except, in the case of the Issuing Bank, in respect of Letters
of Credit issued by it) may resign at any time by notifying the Lenders and
the Borrowers. Upon any such resignation, the Required Lenders shall have
the right, subject (so long as no Event of Default shall have occurred and be
continuing) to the prior written consent of the Borrowers, to appoint a
successor. If a successor shall not have been so appointed by the Required
Lenders, or shall not have accepted such appointment, within 30 days after
the retiring Agent or Issuing Bank, as the case may be, gives notice of its
resignation, then the retiring Agent or Issuing Bank, as the case
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may be, may, on behalf of the Lenders, appoint a successor, which shall be a
commercial bank organized or licensed under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of
at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance
of any appointment as the Agent or Issuing Bank, as the case may be,
hereunder by a successor bank, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring
Agent or Issuing Bank and the retiring Agent or Issuing Bank shall be
discharged from its duties and obligations hereunder. After the resignation
of the Agent or Issuing Bank, as the case may be, hereunder, the provisions
of this Article and Section 9.05 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Agent or Issuing Bank.
SECTION 8.05. AGENT AND AFFILIATE. With respect to the Loans made by
it hereunder, the Letters of Credit issued by it hereunder and the Notes
issued to it, each of the Agent and the Issuing Bank in its individual
capacity and not as the Agent or Issuing Bank shall have the same rights and
powers as any other Lender and may exercise the same as though it were not
the Agent or Issuing Bank. Each of the Agent and the Issuing Bank (and its
Affiliates) may accept deposits from, lend money to and generally engage in
any kind of business and transactions with Horizon or any Subsidiary or other
Affiliate thereof as if it were not the Agent or Issuing Bank (or such
Affiliate thereof).
SECTION 8.06. INDEMNIFICATION. Each Lender agrees (a) to reimburse
each of the Agent and the Issuing Bank, on demand, in the amount of its pro
rata share (based on its Commitment hereunder) of any expenses incurred for
the benefit of the Lenders by the Agent or the Issuing Bank, as the case may
be, including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been
reimbursed by Horizon or any Subsidiary, and (b) to indemnify and hold
harmless each of the Agent, the Issuing Bank and any of their respective
directors, officers, employees or agents, on demand, in the amount of such
pro rata share, from and against any and all liabilities, taxes, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on,
incurred by or asserted against it in its capacity as the Agent or the
Issuing Bank or any of them in any way relating to or arising out of this
Amended Agreement or any other Loan Document or any action taken or omitted
by it or any of them under this Amended Agreement or any other Loan Document,
to the extent the same shall not have been reimbursed by Horizon or any
Subsidiary; PROVIDED that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence
or willful misconduct of the Agent, the Issuing Bank or any of their
respective directors, officers, employees or agents.
SECTION 8.07. CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Issuing Bank or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Amended Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent, the Issuing Bank or any other Lender and
based on such documents and information as it shall from time to time deem
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appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Amended Agreement or any other Loan Document,
any related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NOTICES. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy
as follows:
(a) if to Horizon or Continental, to it at 6001 Indian
School Road, NE, Suite 530, Albuquerque, New Mexico 87110,
Attention: General Counsel (Telecopy No. (505) 881-5097);
(b) if to the Agent or the Issuing Bank, to it at 901
Main Street, 13th Floor, Dallas, Texas 75202, Attention:
Agency Services (Telecopy No. (214) 508-2118) with copies to
(i) Guillermo Borda, Vice President, at the foregoing
address and (ii) Fennebresque, Clark, Swindell & Hay, at
NationsBank Corporate Center, 100 North Tryon Street, Suite
2900, Charlotte, North Carolina 28202-4011, Attention of
Andrew C. Karp (Telecopy No. (704) 347-3838);
(c) if to a Lender, to it at its address (or telecopy
number) set forth in Schedule 2.02 or in the Assignment and
Acceptance pursuant to which such Lender shall have become a
party hereto; and
(d) if to Sunwest Bank of Albuquerque, N.A., as the
issuer of the Sunwest Letters of Credit, to it at its
address (or telecopy number) set forth on its signature page
hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Amended Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier
service or sent by telecopy or on the date five Business Days after dispatch
by certified or registered mail if mailed, in each case delivered, sent or
mailed (properly addressed) to such party as provided in this Section 9.01 or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01.
SECTION 9.02. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by either Borrower herein or in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Amended Agreement or any other Loan Document shall be
considered to have been relied upon by the Lenders, the Agent and the Issuing
Bank and shall survive the making by the Lenders of the Loans, the execution
and delivery to the Lenders of the Notes evidencing such Loans, and the
issuance of the Letters of
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Credit, regardless of any investigation made by the Lenders, the Agent or the
Issuing Bank or on their behalf, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan, any Fee, any
Letter of Credit Disbursement or any other amount payable under this Amended
Agreement or any other Loan Document is outstanding and unpaid and so long as
the Commitments have not been terminated.
SECTION 9.03. BINDING EFFECT. This Amended Agreement shall become
effective on the Effective Date.
SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) Subject to Section 9.04(i),
whenever in this Amended Agreement any of the parties hereto is referred to,
such reference shall be deemed to include the successors and assigns of such
party and all covenants, promises and agreements by or on behalf of either
Borrower, the Agent, the Issuing Bank or the Lenders that are contained in
this Amended Agreement shall bind and inure to the benefit of their
respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Amended Agreement (including
all or a portion of its Commitment, the Loans at the time owing to it, the
Notes held by it and the participations in Letters of Credit held by it);
PROVIDED, HOWEVER, that (i) except in the case of an assignment to a Lender
or an Affiliate of a Lender, the assigning Lender shall have obtained the
prior written consent to such assignment of the Borrowers and the Agent
(which consent shall not be unreasonably withheld), (ii) except in the case
of an assignment to a Lender or an Affiliate of a Lender, the sum of (A) the
principal amount of the outstanding Loans subject to each such assignment and
(B) the unused amount of the Commitment of the assigning Lender subject to
such assignment (in each case determined as of the date the Assignment and
Acceptance with respect to such assignment is delivered to the Agent) shall
not be less than the lesser of (I) $10,000,000 and (II) the entire remaining
amount of the outstanding Loans and unused Commitment of such Lender, (iii)
the parties to each such assignment shall execute and deliver to the Agent an
Assignment and Acceptance, together with the Note or Notes subject to such
assignment and a processing and recordation fee of $2,500 and (iv) the
assignee, if it shall not be a Lender or an Affiliate thereof, shall deliver
to the Agent an Administrative Questionnaire. Upon acceptance and recording
pursuant to Section 9.04(e), from and after the effective date specified in
each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof (unless the Agent shall otherwise
agree), (A) the assignee (including a Replacement Lender) thereunder shall be
a party hereto and, to the extent of the interest assigned by such Assignment
and Acceptance, have the rights and obligations of a Lender under this
Amended Agreement and (B) the assigning Lender (including a Dissenting
Lender) thereunder shall, to the extent of the interest assigned by such
Assignment and Acceptance, be released from its obligations under this
Amended Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Amended Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.12, 2.14,
2.18 and 9.05, as well as to any interest and Fees accrued for its account
and not yet paid).
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(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner
of the interest being assigned thereby free and clear of any adverse claim;
(ii) except as set forth in clause (i) above, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Amended Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Amended Agreement,
any other Loan Document or any other instrument or document furnished
pursuant hereto, or the financial condition of Horizon or any Subsidiary or
the performance or observance by Horizon or any Subsidiary of any of its
obligations under this Amended Agreement, any other Loan Document or any
other instrument or document furnished pursuant hereto; (iii) such assignee
represents and warrants that it is legally authorized to enter into such
Assignment and Acceptance; (iv) such assignee confirms that it has received a
copy of the Loan Documents, together with copies of the most recent Required
Financial Statements and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and
without reliance upon the Agent, the Issuing Bank, such assigning Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under this Amended Agreement; (vi) such assignee
appoints and authorizes each of the Agent and the Issuing Bank to exercise
such powers under this Amended Agreement as are delegated to such party by
the terms hereof, together with such powers as are reasonably incidental
hereto; and (vii) such assignee agrees that it will perform in accordance
with their terms all the obligations which by the terms of this Amended
Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain at one of its offices in Dallas, Texas, a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments
of, and principal amount of the Loans owing to, each Lender pursuant to the
terms hereof from time to time (the "REGISTER"). The entries in the Register
shall be conclusive in the absence of manifest error, and the Borrowers, the
Agent and the Lenders may treat each person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes
of this Amended Agreement. The Register shall be available for inspection by
the Borrowers, the Issuing Bank and any Lender, at any reasonable time and
from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with the Note or
Notes subject to such assignment, an Administrative Questionnaire completed
in respect of the assignee (unless the assignee shall already be a Lender
hereunder or shall be an Affiliate of a Lender), the processing and
recordation fee referred to in Section 9.04(b) and, if required, the written
consent of each Borrower to such assignment and, if required, upon granting
its own consent to such assignment, the Agent shall (i) accept such
Assignment and Acceptance, (ii) record the
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information contained therein in the Register and (iii) give prompt notice
thereof to the Issuing Bank and the Lenders. Within five Business Days after
receipt of notice, the Borrowers, at their own expense, shall execute and
deliver to the Agent, in exchange for the surrendered Note or Notes, a new
Note payable to the order of such assignee in a principal amount equal to the
Commitment assumed by it pursuant to such Assignment and Acceptance and, if
the assigning Lender has retained a portion of the Commitment, a new Note
payable to the order of such assigning Lender in a principal amount equal to
the remaining portion of the Commitment retained by it. Such new Note or
Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note; such new Note or Notes shall be
dated the date of the surrendered Note which it replaces and shall otherwise
be in substantially the form of Exhibit A hereto. Cancelled Notes shall be
returned to the Borrowers.
(f) Each Lender may sell participations in all or a portion of its
interests, rights and obligations under this Amended Agreement (including all
or a portion of its Commitment, the Loans owing to it, the Notes held by it
and the participations in Letters of Credit held by it) to one or more
participants; PROVIDED, HOWEVER, that (i) such Lender's obligations under
this Amended Agreement shall remain unchanged and such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (ii) except in the case of a participation to a Lender or an
Affiliate of a Lender, such Lender shall have obtained the prior written
consent to such participation of the Borrowers and the Agent (which consent
shall not be unreasonably withheld), (iii) the participating banks or other
entities shall be entitled to the benefit of the cost protection provisions
contained in Sections 2.12, 2.14 and 2.18 to the same extent as if they were
Lenders and (iv) the Borrowers, the Agent, the Issuing Bank and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's interests, rights and obligations under this
Amended Agreement, and such Lender shall retain the sole right to enforce the
obligations of the Borrowers relating to the Loans and to approve any
amendment, modification or waiver of any provision of this Amended Agreement
(other than amendments, modifications or waivers decreasing the principal
amount of any Loan, extending the Maturity Date, extending any date for the
payment of any interest on any Loan or any Fees, waiving or excusing any such
payment or any part thereof, decreasing the rate of interest on any Loan,
changing or extending any Commitment or decreasing any Fees, reducing the
amount of or postponing the date fixed for any reimbursement of a Letter of
Credit Disbursement or, except in connection with a disposition approved by
the Required Lenders, permitting the release or sharing of any Collateral
under any Pledge Agreement or permitting the release of any guarantor from a
Guarantee Agreement or increasing the aggregate Commitments of the Lenders).
An Approved Extension shall not be deemed an amendment, modification or
waiver of any provision of this Amended Agreement for purposes of the
foregoing.
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to Horizon or any of the Subsidiaries
furnished to such Lender by or on behalf of Horizon or any of the
Subsidiaries; PROVIDED that, prior to any such disclosure of information
designated by Horizon
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as confidential, each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or participant
shall agree (subject to customary exceptions) to preserve the confidentiality
of such confidential information.
(h) Any Lender may at any time assign all or any portion of its rights
under this Amended Agreement and the Notes issued to it to a Federal Reserve
Bank; PROVIDED that no such assignment shall release a Lender from any of its
obligations hereunder.
(i) Neither Borrower shall assign or delegate any of its rights or
duties hereunder or any interest herein (whether voluntarily, by operation of
law or otherwise). Any purported assignment or delegation in violation of
the foregoing shall be void.
SECTION 9.05. EXPENSES; INDEMNITY. (a) The Borrowers agree to pay
(whether or not the transactions contemplated hereby shall be consummated)
all reasonable out-of-pocket costs and expenses incurred by the Agent or the
Issuing Bank in connection with the preparation, execution and delivery of
this Amended Agreement and the other Loan Documents, the syndication or
closing of the Facility, the administration of the Facility or any amendment,
modification or waiver of the provisions hereof or thereof or incurred by the
Agent, the Issuing Bank or any Lender in connection with the enforcement or
protection of the rights of the Agent, the Issuing Bank and the Lenders under
this Amended Agreement and the other Loan Documents or in connection with the
Loans made under the Facility, the Notes issued under the Facility or the
Letters of Credit issued under the Facility, including the reasonable fees,
charges and disbursements of (i) Fennebresque, Clark, Swindell & Hay, counsel
for the Agent, (ii) any third party consultants retained to assist the Agent
in analyzing any due diligence issues with respect to the Borrowers and (iii)
in connection with any such enforcement or protection, any other counsel for
the Agent, the Issuing Bank or any Lender (including the non-duplicative
allocated fees and expenses of any in-house staff counsel).
(b) To the fullest extent permitted under applicable law, the
Borrowers agree to indemnify each of the Agent, the Issuing Bank, the
Lenders, the Affiliates of the Agent, the Issuing Bank or the Lenders, and
their respective directors, officers, employees, agents and Controlling
persons (each, an "INDEMNIFIED PARTY") from and against any and all losses,
claims (whether valid or not), damages and liabilities, joint or several, to
which such Indemnified Party may become subject, related to or arising out of
(i) the Tender Offers or the Facility, (ii) the execution or delivery of this
Amended Agreement or any other Loan Document or any agreement or instrument
contemplated hereby or thereby, the performance by the parties hereto or
thereto of their respective obligations, hereunder or thereunder or the
consummation of the Tender Offers and the other transactions contemplated
hereby or thereby, (iii) the use of the Letters of Credit or the proceeds of
the Loans under the Facility or (iv) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnified
Party is a party thereto. The Borrowers further agree to reimburse each
Indemnified Party for all expenses (including reasonable attorneys' fees and
expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action
or proceeding arising therefrom. Notwithstanding the foregoing, the
obligation to indemnify any Indemnified Party under this Section 9.05(b)
shall
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not apply in respect of any loss, claim, damage or liability to the extent
that a court of competent jurisdiction shall have determined by final and
nonappealable judgment that such loss, claim, damage or liability resulted
from such Indemnified Party's willful malfeasance or gross negligence.
(c) To the fullest extent permitted under applicable law, the Borrowers
agree to indemnify each of the Agent, the Issuing Bank, the Lenders and the
other Indemnified Parties from and against any and all losses, claims
(whether valid or not), damages and liabilities, joint or several, to which
such Indemnified Party may become subject, related to or arising out of (i)
any Federal, state, local or other statute, ordinance, order, judgment,
ruling or regulation relating to environmental pollution, regulation or
control affecting Horizon, any of the Subsidiaries or its properties or
assets, (ii) any Hazardous Materials managed by Horizon or any of the
Subsidiaries, (iii) any event, condition or circumstance involving
environmental pollution, regulation or control affecting Horizon or any of
the Subsidiaries or its properties or assets or (iv) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not
any Indemnified Party is a party thereto. The Borrowers further agree to
reimburse each Indemnified Party for all expenses (including reasonable
attorneys' fees and expenses) as they are incurred in connection with the
investigation of, preparation for or defense of any pending or threatened
claim or any action or proceeding arising therefrom. Notwithstanding the
foregoing, the obligation to indemnify any Indemnified Party under this
Section 9.05(c) shall not apply in respect of any loss, claim, damage or
liability to the extent that a court of competent jurisdiction shall have
determined by final and nonappealable judgment that such loss, claim, damage
or liability resulted from (A) such Indemnified Party's willful malfeasance
or gross negligence or (B) a Hazardous Material introduced to a property of
either Borrower or the Subsidiaries after the Agent or any Lender has taken
possession thereof, whether by foreclosure or otherwise.
(d) In the event that the foregoing indemnity of the Borrowers is
unavailable or insufficient to hold an Indemnified Party harmless, then, to
the fullest extent permitted under applicable law, the Borrowers will
contribute to amounts paid or payable by such Indemnified Party in respect of
such Indemnified Party's losses, claims, damages or liabilities in such
proportions as appropriately reflect the relative benefits received by and
fault of the Borrowers and such Indemnified Party in connection with the
matters as to which such losses, claims, damages or liabilities relate and
other equitable considerations.
(e) If any action, proceeding or investigation is commenced, as to
which any Indemnified Party proposes to demand such indemnification, it shall
notify the Borrowers with reasonable promptness; PROVIDED, HOWEVER, that any
failure by such Indemnified Party to notify the Borrowers shall not relieve
the Borrowers from their obligations hereunder except to the extent the
Borrowers are prejudiced thereby. The Borrowers shall be entitled to assume
the defense of any such action, proceeding or investigation, including the
employment of counsel and the payment of all fees and expenses. Each
Indemnified Party shall have the right to employ separate counsel in
connection with any such action, proceeding or investigation and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be paid by such Indemnified Party, unless (i) the Borrowers have failed
to assume the defense and employ
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counsel as provided herein, (ii) the Borrowers have agreed in writing to pay
such fees and expenses of separate counsel or (iii) an action, proceeding or
investigation has been commenced against such Indemnified Party and the
Borrowers and representation of both the Borrowers and such Indemnified Party
by the same counsel would be inappropriate because of actual or potential
conflicts of interest between the parties (in the case of any Agent or
Lender, the existence of any such actual or potential conflict of interest to
be determined by such party, taking into account, among other things, any
relevant regulatory concerns). In the case of any circumstance described in
clause (i), (ii) or (iii) of the immediately preceding sentence, the
Borrowers shall be responsible for the reasonable fees and expenses of such
separate counsel; PROVIDED, HOWEVER, that in any event the Borrowers shall
not be required to pay the fees and expenses of more than one separate
counsel (plus appropriate local counsel under the direction of such separate
counsel) for all Indemnified Parties. The Borrowers shall be liable only for
settlement of any claim against an Indemnified Party made with the Borrowers'
written consent.
(f) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Amended Agreement, the consummation of the transactions contemplated hereby,
the repayment of any of the Loans, the invalidity or unenforceability of any
term or provision of this Amended Agreement or any other Loan Document, or
any investigation made by or on behalf of the Agent or any Lender. All
amounts due under this Section 9.05 shall be payable on written demand
therefor.
SECTION 9.06. RIGHT OF SETOFF. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted under law, to set off and
apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of either Borrower against any of
and all the obligations of the Borrowers now or hereafter existing under this
Amended Agreement and the other Loan Documents held by such Lender,
irrespective of whether or not such Lender shall have made any demand under
this Amended Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of each Lender under this Section
9.06 are in addition to other rights and remedies (including other rights of
setoff) which such Lender may have.
SECTION 9.07. APPLICABLE LAW. THIS AMENDED AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS
OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE FEDERAL LAWS OF THE
UNITED STATES OF AMERICA MAY APPLY.
SECTION 9.08. WAIVERS; AMENDMENT. (a) To the fullest extent permitted
under applicable law, no failure or delay of the Agent, the Issuing Bank or
any Lender in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right
or power, preclude any other or further exercise thereof or the exercise of
any
84
<PAGE>
other right or power. To the fullest extent permitted under applicable law,
the rights and remedies of the Agent, the Issuing Bank and the Lenders
hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. To the
fullest extent permitted under applicable law, no waiver of any provision of
this Amended Agreement or any other Loan Document or consent to any departure
by the Borrowers therefrom shall in any event be effective unless the same
shall be permitted by Section 9.08(b), and then such waiver or consent shall
be effective only in the specific instance and for the purpose for which
given. No notice or demand on the Borrowers in any case shall entitle the
Borrowers to any other or further notice or demand in similar or other
circumstances.
(b) None of this Amended Agreement, the other Loan
Documents nor any provision hereof or thereof may be waived,
amended or modified, except pursuant to an agreement or
agreements in writing entered into by the Borrowers and the
Required Lenders; PROVIDED, HOWEVER, that no such waiver,
amendment or modification shall (i) decrease the principal amount
of any Loan, extend the Maturity Date, extend any date for the
payment of any interest on any Loan or any Fees, or waive or
excuse any such payment or any part thereof, or decrease the rate
of interest on any Loan, without the prior written consent of
each holder of a Note affected thereby, (ii) change or extend the
Commitment or decrease the Fees of any Lender without the prior
written consent of such Lender, (iii) reduce the amount of or
postpone the date fixed for any reimbursement of a Letter of
Credit Disbursement without the prior written consent of each
Lender affected thereby, (iv) except in connection with a
disposition approved by the Required Lenders, permit the release,
transfer or sharing of any Collateral under any Pledge Agreement
or permit the release of any guarantor from any Guarantee
Agreement without the prior written consent of each Lender, (v)
increase the aggregate Commitments of the Lenders without the
prior written consent of each Lender or (vi) amend or modify the
provisions of Section 2.14, 2.15 or 2.16, the provisions of
Section 9.04(i), the provisions of this Section 9.08 or the
definitions of "Required Lenders" or "Consenting Lenders" or
otherwise change the percentage of the Commitments, the
percentage of the aggregate unpaid principal amount of the Notes
or the number of Lenders which shall be required for the Lenders
or any of them to take any action under any provision of this
Amended Agreement or any other Loan Document, without the prior
written consent of each Lender; PROVIDED FURTHER that no such
agreement shall amend, modify or otherwise affect the rights or
duties of the Agent or Issuing Bank hereunder without the prior
written consent of the Agent or the Issuing Bank, as applicable.
An Approved Extension shall not be deemed an amendment,
modification or waiver of any provision of this Amended Agreement
for purposes of the foregoing. Each Lender and each holder of a
Note shall be bound by any waiver, amendment or modification
authorized by this Section 9.08 regardless of whether its Note
shall have been marked to make reference thereto, and any consent
by any Lender or holder of a Note pursuant to this Section 9.08
shall bind any person subsequently acquiring a Note from it,
whether or not such Note shall have been so marked.
SECTION 9.09. INTEREST RATE LIMITATION. It is the
intention of the parties hereto to comply with applicable usury
laws; accordingly, it is agreed that notwithstanding any
provisions to the contrary in this Amended Agreement, the Notes,
the other Loan Documents
85
<PAGE>
or in any of the documents securing payment thereof or otherwise
relating thereto, in no event shall the aggregate of any consideration
that constitutes interest under law applicable to each Lender that is
contracted for, taken, reserved, charged or received under this Amended
Agreement, the Notes, the other Loan Documents or under any of
the aforesaid agreements exceed the maximum amount allowed by
such applicable law. If any such excess of interest contracted
for, charged or received under this Amended Agreement, the Notes,
the other Loan Documents or under the terms of any of the
documents securing payment thereof or otherwise relating thereto,
or if the maturity of the indebtedness evidenced by the Notes is
accelerated in whole or in part, or in the event that all or part
of the principal of or interest on the Notes shall be prepaid, so
that under any of such circumstances the amount of interest
contracted for, charged or received under this Amended Agreement,
the Notes, the other Loan Documents or under any of the documents
securing payment thereof or otherwise relating thereto on the
amount of principal actually outstanding from time to time under
the Notes shall exceed the maximum amount of interest permitted
by applicable usury laws, then in any such event (i) the
provisions of this Section 9.09 shall govern and control, (ii)
neither Horizon, Continental, or any other Subsidiary nor any
other person now or hereafter liable under this Amended Agreement
or the other Loan Documents for the payment of the Notes shall be
obligated to pay in excess of the maximum amount of interest
permitted to be contracted for by, charged to or received from
the person obligated thereon under applicable usury laws, (iii)
any such excess shall be applied as a credit against the then
unpaid principal amount of the Notes or refunded to the person
paying the same, at the holder's option, and (iv) the effective
rate of interest shall be automatically reduced to the maximum
lawful rate of interest permitted under applicable usury laws as
now or hereafter construed by the courts having jurisdiction
thereof. It is further agreed that, without limitation of the
foregoing, all calculations of the rate of interest contracted
for, charged or received under this Amended Agreement, the Notes,
the other Loan Documents or under such other documents or
instruments which are made for the purpose of determining whether
such rate exceeds the maximum lawful rate of interest shall be
made, to the extent permitted by applicable usury laws, by
amortizing, prorating, allocating and spreading in equal parts
during the period of the full stated term of the indebtedness
evidenced by the Notes, all interest at any time contracted for,
charged or received from either Borrower or otherwise by the
holder or holders thereof in connection with the Notes, the other
Loan Documents or this Amended Agreement.
SECTION 9.10. ENTIRE AGREEMENT. (a) This Amended
Agreement, the other Loan Documents and the Fee Letter constitute
the entire contract among the parties relative to the subject
matter hereof and thereof. Any agreement previously entered into
among the parties with respect to the subject matter hereof and
thereof is superseded by this Amended Agreement, the other Loan
Documents and the Fee Letter. Nothing in this Amended Agreement,
the other Loan Documents or the Fee Letter, expressed or implied,
is intended to confer upon any party, other than the parties
hereto and thereto and the other Secured Parties, any rights,
remedies, obligations or liabilities under or by reason of this
Amended Agreement, the other Loan Documents or the Fee Letters.
(b) THIS WRITTEN AGREEMENT, THE NOTES, THE OTHER LOAN
DOCUMENTS, AND THE INSTRUMENTS AND DOCUMENTS EXECUTED IN
86
<PAGE>
CONNECTION HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
SECTION 9.11. SEVERABILITY. To the fullest extent
permitted under applicable law, in the event any one or more of
the provisions contained in this Amended Agreement or in any
other Loan Document should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and
therein shall not in any way be affected or impaired thereby. To
the fullest extent permitted under applicable law, the parties
shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.12. COUNTERPARTS. This Amended Agreement may be
executed in two or more counterparts, each of which shall
constitute an original but all of which when taken together shall
constitute but one contract.
SECTION 9.13. HEADINGS. Article and Section headings and
the Table of Contents used herein are for convenience of
reference only, are not part of this Amended Agreement and are
not to affect the construction of, or to be taken into
consideration in interpreting, this Amended Agreement.
SECTION 9.14. JURISDICTION; CONSENT TO SERVICE OF PROCESS.
(a) To the fullest extent permitted under applicable law, each
Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any
New York State court or Federal court of the United States of
America sitting in New York, New York and any appellate court
from any thereof, in any action or proceeding arising out of or
relating to this Amended Agreement or the other Loan Documents,
or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees
that all claims in respect of any such action or proceeding may
be heard and determined in such New York State or, to the extent
permitted under law, in such Federal court. To the fullest
extent permitted under applicable law, each of the parties hereto
agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.
Nothing in this Amended Agreement shall affect any right that the
Agent, the Issuing Bank or any Lender may otherwise have to bring
any action or proceeding relating to this Amended Agreement or
the other Loan Documents against either Borrower or its
properties in the courts of any jurisdiction.
(b) Each Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of
or relating to this Amended Agreement or the other Loan Documents
in any New York State court or Federal court of the United States
of America sitting in New York, New York. Each of the parties
hereto hereby
87
<PAGE>
irrevocably waives, to the fullest extent permitted under law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) To the fullest extent permitted under applicable law,
each party to this Amended Agreement irrevocably consents to
service of process in the manner provided for notices in
Section 9.01. Nothing in this Amended Agreement will affect the
right of any party to this Amended Agreement to serve process in
any other manner permitted under law.
SECTION 9.15. JOINT AND SEVERAL LIABILITY. (a) All
obligations of the Borrowers hereunder are joint and several in
each and every particular. The obligations of the Borrowers
under this Amended Agreement are independent of each other, and a
separate action or actions may be brought and prosecuted against
either Borrower to enforce this Amended Agreement, irrespective
of whether any action is brought against the other Borrower or
whether the other Borrower is joined in any such action or
actions. All obligations of each Borrower hereunder are primary
obligations concerning which such Borrower is the principal
obligor.
(b) To the fullest extent permitted under applicable law,
each Borrower hereby waives marshalling of assets and liabilities
and sale in inverse order of alienation and waives presentment
to, demand of payment from and protest to the other Borrower or
any Subsidiary Guarantor of any of the Obligations or any of the
Guaranteed Obligations (as defined in each of the Guarantee
Agreements), and also waives promptness, diligence, notice of
acceptance hereunder, any other notice with respect to any of the
Obligations and this Agreement and any requirement that the Agent
or any other Secured Party protect, secure, perfect or insure any
Lien or any property subject thereto. Each Borrower further
waives to the fullest extent permitted under applicable law any
right to require that resort be had by the Agent or any other
Secured Party to any security held for payment of the Obligations
or the Guaranteed Obligations or to any balance of any deposit,
account or credit on the books of the Agent or any other Secured
Party in favor of the other Borrower or any other person. Each
Borrower hereby waives and releases any and all rights of
contribution from the other Borrower or any Subsidiary Guarantor
for payment of the Obligations or the Guaranteed Obligations, as
applicable, to the fullest extent permitted under applicable law.
Each Borrower hereby consents and agrees to each of the following
to the fullest extent permitted by law, and agrees that such
Borrower's obligations under this Agreement shall not be
released, diminished, impaired, reduced or adversely affected by
any of the following, and waives any rights (including rights to
notice) which such Borrower might otherwise have as a result of
or in connection with any of the following:
(i) any renewal, extension, modification, increase,
decrease, alteration or rearrangement of all or any part of
the Obligations or the Guaranteed Obligations or any
instrument executed in connection therewith, or any contract
or understanding with either Borrower, the Agent, the other
Secured Parties, or any of them, or any Subsidiary
Guarantor, pertaining to the Obligations or the Guaranteed
Obligations;
(ii) any adjustment, indulgence, forbearance or
compromise that might be granted or given by the Agent or
any other Secured Party to either Borrower, any
88
<PAGE>
Subsidiary Guarantor or any other person liable on the Obligations
or the Guaranteed Obligations; or the failure of the Agent or
any other Secured Party to assert any claim or demand or to
exercise any right or remedy against either Borrower, any
Subsidiary Guarantor under the provisions of any Loan
Document or otherwise; or any rescission, waiver, amendment
or modification of, or any release from any of the terms or
provisions of, any Loan Document, any guarantee or any other
agreement;
(iii) the insolvency, bankruptcy, arrangement,
adjustment, composition, liquidation, disability,
dissolution or lack of power of either Borrower, any
Subsidiary Guarantor or any other person at any time liable
for the payment of all or part of the Obligations or the
Guaranteed Obligations; or any dissolution of either
Borrower, any Subsidiary Guarantor, or any change,
restructuring or termination of the corporate structure or
existence of either Borrower or any Subsidiary Guarantor, or
any sale, lease or transfer of any or all of the assets of
either Borrower or any Subsidiary Guarantor, or any change
in the shareholders, partners, or members of either Borrower
or any Subsidiary Guarantor; or any default, failure or
delay, willful or otherwise, in the performance of the
Obligations or the Guaranteed Obligations;
(iv) the invalidity, illegality or unenforceability of
all or any part of the Obligations or the Guaranteed
Obligations, or any document or agreement executed in
connection with the Obligations or the Guaranteed
Obligations, for any reason whatsoever, including the fact
that the Obligations, or any part thereof, exceed the amount
permitted by law, the act of creating the Obligations or any
part thereof is ULTRA VIRES, the officers or representatives
executing the documents or otherwise creating the
Obligations or the Guaranteed Obligations acted in excess of
their authority, the Obligations violate applicable usury
laws, either Borrower or any Subsidiary Guarantor has valid
defenses, claims or offsets (whether at law, in equity or by
agreement) which render the Obligations or the Guaranteed
Obligations, as applicable, wholly or partially
uncollectible from all or any of them, the creation,
performance or repayment of the Obligations or the
Guaranteed Obligations (or the execution, delivery and
performance of any document or instrument representing part
of the Obligations or the Guaranteed Obligations or executed
in connection with the Obligations or the Guaranteed
Obligations or given to secure the repayment of the
Obligations or the Guaranteed Obligations) is illegal,
uncollectible, legally impossible or unenforceable, or the
documents or instruments pertaining to the Obligations or
the Guaranteed Obligations have been forged or otherwise are
irregular or not genuine or authentic;
(v) any full or partial release of the liability of
either Borrower on the Obligations or any part thereof, of
any Subsidiary Guarantor now or hereafter liable, whether
directly or indirectly, jointly, severally, or jointly and
severally, to pay, perform, guarantee or assure the payment
of the Guaranteed Obligations or any part thereof, it being
recognized, acknowledged and agreed by each Borrower that
such Borrower may be required to pay the Obligations in full
without assistance or support of any other person, and such
Borrower has not been induced to enter into this Agreement
on the basis of a contemplation, belief, understanding or
agreement that
89
<PAGE>
other parties other than such Borrower will be liable to
perform the Obligations, or the Secured Parties will look to
other parties to perform the Obligations;
(vi) any demand for or acceleration of any payment by
either Borrower to the Agent or any other Secured Party
being stayed under Title 11 of the United States Code or any
similar Federal or state law or any payment by either
Borrower to the Agent or any other Secured Party being held
to constitute a preference under Title 11 of the United
States Code or any similar Federal or state law, or for any
reason the Agent or any other Secured Party being required
to refund such payment or pay such amount to such Borrower
or someone else;
(vii) any other circumstance (including any statute
of limitations) that might in any manner or to any extent
otherwise constitute a defense available to, vary the risk
of, or operate as a discharge of either Borrower or any
Subsidiary Guarantor as a matter of law or equity.
All waivers of each Borrower herein contained shall be without
prejudice to the Agent at its option to proceed against either
Borrower, any Subsidiary Guarantor or any other person, whether
by separate action or by joinder. Without limiting the
generality of the foregoing and to the fullest extent permitted
under applicable law, each Borrower expressly waives each and
every right to which it may be entitled by virtue of the
suretyship law of the State of New York.
[remainder of page left blank]
90
<PAGE>
IN WITNESS WHEREOF, the Borrowers, the Agent, the Issuing
Bank, the Existing Issuing Bank, and the Lenders have caused this
Amended Agreement to be duly executed by their respective
authorized officers as of the day and year first above written.
HORIZON/CMS HEALTHCARE
CORPORATION, as a Borrower
by //s//
---------------------------------------------
Name: Ernest A. Schofield
Title: Senior Vice President
CONTINENTAL MEDICAL SYSTEMS, INC.,
as a Borrower
by //s//
---------------------------------------------
Name: Ernest A. Schofield
Title: Senior Vice President
NATIONSBANK OF TEXAS, N.A.,
as Agent, as Issuing Bank and as a Lender
by //s//
---------------------------------------------
Name: Guillermo Borda
Title: Vice President
BANK OF AMERICA NT & SA,
as Managing Agent and as a Lender
by //s//
---------------------------------------------
Name: Wyatt R. Ritchie
Title: Vice President
BANKERS TRUST COMPANY,
as a Lender
by //s//
---------------------------------------------
Name: Christopher Kinslow
Title: Vice President
<PAGE>
BANQUE PARIBAS,
as a Lender
by //s//
---------------------------------------------
Name: Pierre-Jean de Filippis
Title: General Manager
by //s//
---------------------------------------------
Name: Robert G. Shaw
Title: Vice President
BANQUE NATIONALE de PARIS,
as a Lender
by //s//
---------------------------------------------
Name: C. Bettles
Title: Senior Vice President & Manager
by //s//
---------------------------------------------
Name: Margaret Mudd
Title: Vice President
CHEMICAL BANK,
as a Lender
by //s//
---------------------------------------------
Name: William J. Caggiano
Title: Managing Director
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH,
as Co-Agent and as a Lender
by //s//
---------------------------------------------
Name: Farboud Tavangar
Title: Authorized Signature
<PAGE>
DEUTSCHE BANK AG, LOS ANGELES
AND/OR CAYMAN ISLANDS BRANCHES,
as a Lender
by //s//
---------------------------------------------
Name: J. Scott Jessup
Title: Vice President
by //s//
---------------------------------------------
Name: Ross Howard
Title: Vice President
FIRST INTERSTATE BANK OF TEXAS, N.A.,
as a Lender
by //s//
---------------------------------------------
Name: Rajiv Chopra
Title: Banking Officer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK,
as Co-Agent and as a Lender
by //s//
---------------------------------------------
Name: Robert M. Osieski
Title: Vice President
MELLON BANK, N.A.,
as a Lender
by //s//
---------------------------------------------
Name: Richard A. Lopatt
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION,
as Co-Agent and as a Lender
by //s//
---------------------------------------------
Name: Karen George
Title: Relationship Manager
<PAGE>
SHAWMUT BANK CONNECTICUT, N.A.,
as a Lender
by //s//
---------------------------------------------
Name: Manfred O. Eigenbrod
Title: Managing Director
SOCIETY NATIONAL BANK,
as a Lender
by //s//
---------------------------------------------
Name: Angela G. Mago
Title: Vice President
SUNWEST BANK OF ALBUQUERQUE, N.A.,
as a Lender and as Issuing Bank
by //s//
---------------------------------------------
Name: Nancy K. Madigan
Title: Vice President
Address: P.O. Box 25500, 303 Roma NW,
Albuquerque, NM 87102
Telecopy: 505-282-4178
THE BANK OF TOKYO TRUST COMPANY,
as a Lender
by //s//
---------------------------------------------
Name: M. Sheridan Sunier
Title: Vice President
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS,
as a Lender
by //s//
---------------------------------------------
Name: Juan A. Cazorla
Title: Assistant Vice President
<PAGE>
THE DAIWA BANK, LTD.,
as a Lender
by //s//
---------------------------------------------
Name: James T. Wang
Title: Vice President and Manager
by //s//
---------------------------------------------
Name: Kirk L. Stites
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED, LOS ANGELES AGENCY,
as a Lender
by //s//
---------------------------------------------
Name: Toshinari Iyoda
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN,
LTD., LA AGENCY,
as Co-Agent and as a Lender
by //s//
---------------------------------------------
Name: Yutaka Kamisawa
Title: Deputy General Manager
THE MITSUBISHI BANK, LTD.,
LOS ANGELES BRANCH,
as a Lender
by //s//
---------------------------------------------
Name: Albert W. Kelley
Title: Vice President
<PAGE>
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY,
as a Lender
by //s//
---------------------------------------------
Name: Bernardo E. Correa-Henschke
Title: Vice President & Manager
THE SUMITOMO BANK, LIMITED,
as a Lender
by //s//
---------------------------------------------
Name: Hiroshi Amano
Title: General Manager
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH,
as a Lender
by //s//
---------------------------------------------
Name: Suraj P. Bhatia
Title: Senior Vice President
Manager, Corporate Finance Dept.
TORONTO DOMINION (TEXAS), INC.,
as a Lender
by //s//
---------------------------------------------
Name: Diane Bailey
Title: Vice President
<PAGE>
EXHIBIT 11.1
HORIZON/CMS HEALTHCARE CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE EARNINGS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED AUGUST 31,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
Common and Common Equivalents:
Net earnings (loss)................................................................................. $ (28,925) $12,160
Additional goodwill amortization from contingent shares issuable pursuant to acquisition
agreements......................................................................................... -- (44)
---------- ----------
Net earnings (loss) used for computation of per share earnings...................................... $ (28,925) $12,116
---------- ----------
---------- ----------
Applicable common shares:
Weighted average outstanding shares during the period............................................... 50,798 43,655
Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally
stock options and warrants using the treasury stock method)........................................ 781 1,008
---------- ----------
Total............................................................................................... 51,579 44,663
---------- ----------
---------- ----------
Net earnings (loss) per share......................................................................... $ (0.56) $ 0.27
---------- ----------
---------- ----------
Assuming Full Dilution:
Net earnings (loss)................................................................................. $ (28,925) $12,160
Additional goodwill amortization from contingent shares issuable pursuant to acquisition
agreements......................................................................................... -- (44)
Interest on convertible debentures, net of income taxes............................................. 39 23
---------- ----------
Net earnings (loss) used for computation of per share earnings...................................... $ (28,886) $12,139
---------- ----------
---------- ----------
Applicable common shares:
Weighted average outstanding shares during the period............................................... 50,798 43,655
Weighted average shares issuable upon exercise of common stock equivalents outstanding (principally
stock options and warrants using the treasury stock method)........................................ 973 1,326
---------- ----------
Total............................................................................................... 51,771 44,981
---------- ----------
---------- ----------
Net earnings (loss) per share......................................................................... $ (0.56) $ 0.27
---------- ----------
---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the August
31, 1995 Form 10-Q and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 48,459
<SECURITIES> 0
<RECEIVABLES> 379,333
<ALLOWANCES> 32,172
<INVENTORY> 0
<CURRENT-ASSETS> 497,937
<PP&E> 721,500
<DEPRECIATION> 102,802
<TOTAL-ASSETS> 1,445,930
<CURRENT-LIABILITIES> 208,454
<BONDS> 572,662
<COMMON> 51
0
0
<OTHER-SE> 618,575
<TOTAL-LIABILITY-AND-EQUITY> 1,445,930
<SALES> 0
<TOTAL-REVENUES> 431,407
<CGS> 0
<TOTAL-COSTS> 461,528
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 4,929
<INTEREST-EXPENSE> 13,112
<INCOME-PRETAX> (30,121)
<INCOME-TAX> (2,520)
<INCOME-CONTINUING> (28,925)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (28,925)
<EPS-PRIMARY> (.56)
<EPS-DILUTED> (.56)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-START> JUN-01-1994
<PERIOD-END> MAY-31-1995
<CASH> 40,674
<SECURITIES> 0
<RECEIVABLES> 359,908
<ALLOWANCES> 29,595
<INVENTORY> 0
<CURRENT-ASSETS> 454,443
<PP&E> 707,516
<DEPRECIATION> 93,137
<TOTAL-ASSETS> 1,398,123
<CURRENT-LIABILITIES> 170,100
<BONDS> 532,688
<COMMON> 51
0
0
<OTHER-SE> 650,601
<TOTAL-LIABILITY-AND-EQUITY> 1,398,123
<SALES> 0
<TOTAL-REVENUES> 1,625,326
<CGS> 0
<TOTAL-COSTS> 1,571,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 23,584
<INTEREST-EXPENSE> 53,045
<INCOME-PRETAX> 53,618
<INCOME-TAX> 23,375
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