UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
------------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 AND 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): MAY 12, 1997
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HORIZON/CMS HEALTHCARE CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 1-9369 91-1346899
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or org- Identification No.)
anization)
6001 INDIAN SCHOOL ROAD, N.E.
SUITE 530
ALBUQUERQUE, NEW MEXICO
(Address of principal
executive offices)
87110
(Zip Code)
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ITEM 5. OTHER EVENTS
Horizon/CMS Healthcare Corporation ("Horizon/CMS") announced on May 12,
1997, that it had agreed to terminate certain agreements (the "Management
Agreements") between its wholly-owned subsidiary, Horizon Facilities Management,
Inc. ("HFM"), and Texas Health Enterprises, Inc. and certain of its affiliates
(collectively, the "HEA Group") and to restructure and forgive certain
indebtedness of the HEA Group. The HEA Group operates 126 nursing facilities in
Texas, Oklahoma and Michigan. Under the Management Agreements that were
originally effective January 1, 1996, HFM has provided management and
administrative services for such facilities and has provided a line of credit
facility (the "Credit Facility") for the benefit of such facilities. In
addition, certain other subsidiaries of Horizon/CMS have provided ancillary
medical, institutional pharmacy and therapy services to the HEA Group facilities
(the "Ancillary Services").
For the nine months ended February 28, 1997, management fees charged to
the HEA Group by HFM, net of direct expenses, totaled approximately $5.9
million, before income taxes. During this same period, revenues related to the
Ancillary Services provided to the HEA Group by Horizon/CMS and its subsidiaries
totaled approximately $24.5 million.
In March 1997, Horizon/CMS and a third party negotiated, subject to the
consent of the HEA Group, a sale of the stock of HFM and all of the trade debt
owing by the HEA Group to Horizon/CMS and its subsidiaries. At that time,
amounts owed by the HEA Group to Horizon/CMS for management fees, Ancillary
Services, and interest on advances made pursuant to the Credit Facility were
significantly in arrears. The HEA Group, when consulted in April 1997, refused
to consent to such a sale and asserted monetary claims, allegedly of substantial
value, against Horizon/CMS for the manner in which the indebtedness under the
Credit Facility was administered and the manner in which HFM provided management
and administrative services to the HEA Group facilities. Horizon/CMS disputed,
and continues to dispute, the claims made by the HEA Group. By the end of April
1997, amounts owed by the HEA Group to Horizon/CMS, including principal under
the Credit Facility of approximately $26.3 million, aggregated approximately
$61.3 million. After considering (i) the amounts owed by the HEA Group to
Horizon/CMS and its subsidiaries, (ii) the monetary and operational resources
required to provide continuing management services to HEA Group facilities in
light of the increasing uncertainties surrounding the ongoing operations of the
HEA Group facilities, (iii) the ability of the HEA Group facilities to repay the
amounts owing to Horizon/CMS and its subsidiaries, (iv) the ability of
Horizon/CMS and its subsidiaries to pursue the legal remedies available to them
under the Management Agreements and the Credit Facility and to realize on the
same, (v) the merits of the claims asserted by the HEA Group, (vi) the effect of
the foregoing on the patients residing in the HEA Group facilities, (vii)
Horizon/CMS's strategic objectives, and (viii) the pending merger transaction
with
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HEALTHSOUTH Corporation, Horizon/CMS determined in May 1997 that it was in the
best business interest of Horizon/CMS to terminate the Management Agreements, to
restructure certain trade indebtedness of the HEA Group to Horizon/CMS and its
subsidiaries, and to release the HEA Group from liability for amounts owing
under the Management Agreements and the Credit Facility. Although no claims have
been formally asserted by the HEA Group, the agreement with the HEA Group
includes a release of any potential claims the HEA Group may have relating to
services provided by HFM pursuant to the Management Agreements.
Effective upon the termination of the Management Agreements, the
relevant HEA Group entities assumed direct responsibility for all management
functions at the HEA Group facilities. Existing contracts for the provision by
Horizon/CMS subsidiaries of therapy services and institutional pharmacy services
to the HEA Group facilities will remain in effect through July 1, 1997 and
December 31, 1997, respectively. Pursuant to the agreement between the parties,
approximately $17.0 million in aggregate indebtedness for Ancillary Services
owed to Horizon/CMS and its subsidiaries will be converted to a secured
promissory note (the "Trade Note"). Monthly payments on the Trade Note will be
based upon a 30-year amortization schedule with the outstanding principal
balance and all accrued and unpaid interest being due and payable in five years.
The Trade Note will bear interest at 8.0% per annum with repayment being secured
by leasehold mortgages on 17 of the HEA Group facilities and a mortgage on one
owned HEA Group facility. In addition, Horizon/CMS and its subsidiaries will
release the HEA Group from liability for approximately $44.3 million in
management fees, principal and interest under the Credit Facility and
miscellaneous trade payables. A copy of the Compromise, Settlement, Release and
Termination Agreement is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
Horizon/CMS currently anticipates that it will recognize a non-routine
charge of $46.0 million, pre-tax, or $0.56 per share, net of taxes, in its
fiscal quarter ending May 31, 1997 related to the release of liability described
above and the costs of severance and other restructuring measures affecting the
operations previously dedicated to providing management services to the HEA
Group facilities. Also, an additional charge may be required during the fourth
quarter of fiscal 1997 if Horizon/CMS's current efforts to determine the fair
value of the Trade Note indicate that the fair value is less than the face
amount of the Trade Note. The fair value of the Trade Note will be determined
based upon an evaluation of the HEA Group's ability to make scheduled payments
and the value of the underlying collateral.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
(c) Exhibits
99.1 Compromise, Settlement, Release and Termination
Agreement dated May 12, 1997 by and among
Horizon/CMS and its subsidiaries named therein and
the HEA Group.
99.2 Sixth Amendment dated as of May 9, 1997 to the
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., as Agent and Issuing Bank.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Current Report to be signed on its behalf by
the undersigned, thereunto duly authorized.
HORIZON/CMS HEALTHCARE CORPORATION
By: /s/ Scot Sauder
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Scot Sauder
Vice President of Legal Affairs, Secretary and
General Counsel
Date: May 27, 1997.
COMPROMISE, SETTLEMENT,
RELEASE AND TERMINATION AGREEMENT
This COMPROMISE, SETTLEMENT, RELEASE AND TERMINATION AGREEMENT (this
"Agreement") is entered into effective May 12, 1997, by and among Horizon/CMS
Healthcare Corporation, a Delaware corporation ("HHC"), d/b/a Horizon Healthcare
Corporation ("HHC") and Horizon Specialty Hospital ("HSH"), Horizon Facilities
Management, Inc., a Delaware corporation ("HFM"), Horizon Medical Specialty
Services, Inc., a Delaware corporation doing business as Respiratory Supply
Services ("RSS"), Rehabilitative Associates, Inc., a Florida corporation doing
business as RehabWorks ("RAI"), CMS Therapies, Inc., a North Carolina
corporation doing business as RehabWorks of Texas and as RehabWorks of Michigan
("CMS Therapies"), National Institutional Pharmacy Services, Inc., a Delaware
corporation ("NIPSI"), NIPSI Healthcare of Houston Ltd. Partnership, a Texas
limited partnership ("NIPSI-Houston"), NIPSI of Houston, Inc., a Texas
corporation ("NIPSI-H"), Advanced Clinical Technology, Inc., a Delaware
corporation ("ACT"), and LTC Medical Laboratories, Inc. ("LTC") (each, a
"Horizon Entity" and, collectively, the "Horizon Entities") on the one hand, and
HEA Management Group, Inc., a Texas corporation ("HEA"), Texas Health
Enterprises, Inc., a Texas corporation ("THE"), Health Enterprises of Oklahoma,
Inc., an Oklahoma corporation, Health Enterprises of Michigan, Inc., a Michigan
corporation, and PCK-TEX, LTD., a Texas limited partnership (collectively, the
"HEA Group"), on the other.
W I T N E S S E T H:
WHEREAS, HFM is a party to that certain Master Management Agreement
(the "Master Management Agreement") dated as of January 1, 1996 by and among
HFM, as manager, and the HEA Group pursuant to which HFM provides management and
administrative services for and on behalf of the HEA Group in respect of those
nursing facilities located in Texas, Michigan and Oklahoma identified on Exhibit
A attached to the Master Management Agreement (the "HEA Facilities");
WHEREAS, HFM contends that the HEA Group currently owes HFM
approximately $14,321,198.00 for the provision of these management and
administrative services under the terms of the Master Management Agreement;
WHEREAS, HFM is a party to that certain Loan Agreement (the "Loan
Agreement") dated as of January 1, 1996, by and among HFM, as lender, and the
HEA Group pursuant to which HFM made a $35 million line of credit available to
the HEA Group, as borrowers, and pursuant to which each of the HEA Group
executed that certain Promissory Note dated of even date therewith (the "HEA
Group Promissory Note"). In addition, pursuant to the Loan Agreement, each of
the constituent members of the HEA Group executed a Security Agreement, a
Leasehold Deed of Trust
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on each of the leased HEA Group facilities (other than the nine (9) PCK-Tex
facilities), an Assignment of Rents and Leases in respect of each of the leased
HEA Group facilities (other than the nine (9) PCK-Tex facilities), and a Pledge
Agreement of all of the HEA Group's bank and other depository accounts (the Loan
Agreement, the Security Agreement, the Leasehold Deed of Trust, the Assignment
of Rents and Leases, and the Pledge Agreement shall be referred to individually
herein as an "Original Loan Document" and collectively, the "Original Loan
Documents");
WHEREAS, HHC and HFM are parties to that certain Letter of Intent dated
as of December 15, 1995, by and among HHC, HFM, and the HEA Group with respect
to a proposed loan agreement, and a management agreement concerning certain
facilities located in Texas, Michigan and Oklahoma;
WHEREAS, HFM contends that the HEA Group currently owes HFM
approximately $26,250,000 in principal and $2,080,075 in accrued but unpaid
interest on the HEA Group Promissory Note and the Original Loan Documents;
WHEREAS, NIPSI is currently a party to a variety of agreements with the
HEA Group under which NIPSI provides a variety of pharmacy services,
pharmaceuticals, enteral and parenteral supplies and pharmacy consultation
services to a substantial number of the facilities covered by the Master
Management Agreement (the "HEA Group Pharmacy Contracts");
WHEREAS, NIPSI contends that the HEA Group is currently indebted to it
in the amount of $3,347,576.00 (the "NIPSI Indebtedness");
WHEREAS, NIPSI-Houston is currently a party to a variety of agreements
with the HEA Group under which NIPSI-Houston provides a variety of pharmacy
services, pharmaceuticals, enteral and parenteral supplies and pharmacy
consultation services to certain of the facilities covered by the Master
Management Agreement that are located within the vicinity of Houston, Texas (the
"HEA Group Houston Pharmacy Contracts");
WHEREAS, NIPSI-Houston contends that the HEA Group is currently
indebted to it in the amount of $1,529,422.00 (the "NIPSI-Houston
Indebtedness");
WHEREAS, CMS Therapies and RAI (or one or more of its subsidiaries)
(collectively, "RehabWorks") are currently a party to a variety of agreements
with the HEA Group under which RehabWorks provides physical therapy,
occupational therapy and speech therapy services to a substantial number of the
facilities covered by the Master Management Agreement located in Texas and in
Michigan (the "HEA Group Therapy Contracts");
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WHEREAS, RehabWorks contends that the HEA Group is currently indebted
to it in the aggregate amount of $11,861,376.22 (the "RehabWorks Indebtedness");
WHEREAS, HSH is currently a party to a variety of agreements with the
HEA Group under which HSH provides certain specialty hospital services to a
substantial number of the facilities covered by the Master Management Agreement
(the HEA Group Specialty Contracts");
WHEREAS, HSH contends that the HEA Group is currently indebted to it in
the aggregate amount of $1,090,681.11 (the "HSH Indebtedness");
WHEREAS, LTC is currently a party to a variety of agreements with the
HEA Group under which LTC provides clinical laboratory services to a substantial
number of the facilities covered by the Master Management Agreement (the "HEA
Group Lab Contracts");
WHEREAS, LTC contends that the HEA Group is currently indebted to it in
the aggregate amount of $4,916.99 (the "LTC Indebtedness");
WHEREAS, RSS is a party to a variety of agreements with the HEA Group
under which RSS provides durable medical equipment to a substantial number of
the facilities covered by the Master Management Agreement (the "HEA Group DME
Contracts");
WHEREAS, RSS contends that the HEA Group is currently indebted to it in
the amount of $43,347.77 (the "RSS Indebtedness");
WHEREAS, ACT is a party to a variety of agreements with the HEA Group
under which ACT provides mobile x-ray services to a substantial number of the
facilities covered by the Master Management Agreement (the "HEA Group X-Ray
Contracts");
WHEREAS, ACT contends that the HEA Group is currently indebted to it in
the amount of $69,143.00 (the "ACT Indebtedness");
WHEREAS, the Horizon Entities, as a whole, contend that the HEA Group
is currently indebted to HFM and its affiliates as of April 30, 1997 (the
"Aggregate Horizon Indebtedness") as follows:
HEA Group Promissory Note (Principal) $26,250,000.00
HFM Management Fee (est.) 14,321,198.00
HEA Group Promissory Note (Interest) 2,080,075.00
NIPSI Indebtedness 3,347,576.00
NIPSI-Houston Indebtedness 1,529,422.00
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ACT Indebtedness 69,143.00
RehabWorks Indebtedness 11,861,376.22
LTC Indebtedness 4,916.99
RSS Indebtedness 43,347.77
HSH Indebtedness 1,090,681.11
Conservative Care, Inc. (non-affiliate) 667,775.94
---------------
$61,265,512.03
WHEREAS, the HEA Group contends that it has certain monetary claims
against the Horizon Entities for the manner in which the indebtedness
represented by the HEA Group Promissory Note was administered, the manner in
which HFM provided management and administrative services under the Master
Management Agreement, and for costs which it has or will incur in legal,
accounting fees, and other expenses associated with resolving these claims, and
which claims are of a sufficient value to offset the amounts claimed by the
Horizon Entities;
WHEREAS, the Horizon Entities and the HEA Group dispute the respective
contentions and allegations described above, but desire to avoid costly and
protracted litigation to resolve such disputes;
WHEREAS, the Horizon Entities and the HEA Group desire to fully and
finally compromise and settle their respective contentions and allegations as
set forth more fully hereinbelow, including, without limitation, the payment by
Horizon of the amounts claimed by Conservative Care, Inc.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Horizon Entities and the HEA Group agree as follows:
1. INCORPORATION BY REFERENCE. The foregoing recitals are
hereby incorporated by reference.
2. COMPROMISE AND SETTLEMENT OF AGGREGATE HORIZON
INDEBTEDNESS. For and in consideration of the provisions of this Agreement, the
execution and delivery of that certain accounts payable Loan Agreement (the
"Loan Agreement"), a copy of which is attached hereto as Exhibit A and
incorporated herein by reference, the execution and delivery of that certain
Promissory Note executed by the HEA Group in the amount of $17,046,463.09, with
respect to accounts payable and amounts payable to Conservative Care, Inc., a
copy of which is attached hereto as Exhibit B and incorporated herein by
reference, the termination of the Master Management Agreement, and the execution
by the HEA Group of all documents and/or
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instruments necessary to effect the transactions contemplated by this Agreement,
the Horizon Entities hereby acknowledge payment in full of the Aggregate Horizon
Indebtedness.
The Note will be collateralized by the seventeen (17) leasehold
mortgages (Nine (9) in Oklahoma and eight (8) in Michigan) and one (1) deed of
trust lien on Canterbury Villa of Houston, Texas. Horizon shall release and/or
terminate all other documents securing the Original Loan Documents, and the HEA
Group Promissory Note, and documents executed in connection with the Master
Management Agreement, including but not limited to, deeds of trust, fixture
filings, security agreements, leasehold deeds of trust, on each of the leased
HEA Group Facilities, assignment of rents and leases in respect to each of the
leased HEA Group Facilities, memorandum of right of first refusal and option,
facility management agreements for each respective HEA Group Facility, Letter
Agreement dated January 1, 1996, pledge agreements of all HEA Group receivables,
bank and other depository accounts, UCC-1 financing statements, and other
documents which purport to provide the Horizon Entities security or collateral
in connection with the Original Loan Documents, the HEA Group Promissory Note
and/or the Master Management Agreement.
3. TERMINATION OF CERTAIN SUBSIDIARY SERVICE CONTRACTS.
a. The HEA Group shall have the right to terminate
any one or more of the HEA Group Pharmacy Contracts and the HEA Group Houston
Pharmacy Contracts, commencing December 31, 1997, notwithstanding any provision
contained in the HEA Group Pharmacy Contracts and/or the HEA Group Houston
Pharmacy Contracts to the contrary.
b. The HEA Group shall have the right to terminate
any one or more of the HEA Group Therapy Contracts with RehabWorks, commencing
July 1, 1997, notwithstanding any provision contained in the HEA Group Therapy
Contracts to the contrary.
c. The HEA Group shall pay in accordance with the
applicable individual facility HEA Group Pharmacy Contracts, the HEA Group
Houston Pharmacy Contracts, the HEA Group Therapy Contracts, HEA Group Specialty
Contracts, HEA Group Lab Contracts, HEA Group DME Contract, and HEA Group X-Ray
Contracts, all amounts which are incurred on or after May 1, 1997 due to NIPSI,
NIPSI-Houston, RehabWorks, HSH, LTC, RSS, ACT, respectively, within ninety (90)
days of the date of invoicing.
4. TERMINATION OF MASTER MANAGEMENT AGREEMENT. HFM and the HEA
Group hereby terminate the Master Management Agreement which termination shall
be effective as of 12:01 a.m., May 12, 1997 (the "Effective Time").
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5. NO CONTINUING OBLIGATIONS OR LIABILITIES. From and after
the Effective Time, neither HFM nor the respective entities of the HEA Group
(collectively or individually) shall have any rights or obligations under the
Master Management Agreement. Following the Effective Time, all of the
provisions, terms, covenants, representations and warranties contained in the
Master Management Agreement shall have no continuing legal effect.
6. RELEASE. For and in consideration of the provisions of this
Agreement, the execution and delivery of the Loan Agreement, including the
recitals set forth above, the Note, the termination of the Master Management
Agreement, and the execution by the HEA Group of all documents and/or
instruments necessary to effect the transactions contemplated by this Agreement
and save and except for the obligations created by this Agreement, the Loan
Agreement and all Loan Documents and the Note, the Horizon Entities, on the one
hand, and HEA Group, on the other, do hereby voluntarily and knowingly release,
acquit and forever discharge the other and all of the other's agents, employees,
successors, affiliates, directors, officers, shareholders, subsidiaries, parent
corporations, and assigns from any and all claims, demands, debts, causes of
action, liabilities, agreements, obligations, accounts, defenses and damages,
known or unknown, that they or any of them or any of their agents, employees,
successors, predecessors, affiliates, administrators, officers, directors,
subsidiaries, and assigns, or anyone claiming by, under, or through each of any
of them ever had or now has, or may in the future acquire against each other for
or by reason of (i) any matter, cause, or thing done, admitted to, or suffered
to be done by either the Horizon Entities or the HEA Group, as the case may be,
at any time prior to and including the date hereof, in any way connected with,
arising out of, related to or in furtherance of [A] the obligations created
under the Master Management Agreement, [B] any or all agreements, covenants and
obligations of either the Horizon Entities or the HEA Group, as the case may be,
relating to the obligations created under the Master Management Agreement, [C]
any or all prior understandings or agreements, oral or written, and negotiations
related thereto with respect to this Agreement, [D] the exercise, enforcement or
realization by HFM of any deferred management fees under the Master Management
Agreement, or [E] any actions taken or not taken by either HFM or the HEA Group,
as the case may be, with respect to any of the obligations created under the
Master Management Agreement; and (ii) all claims and causes of action which
could have been or could be asserted either offensively or defensively against
either the Horizon Entities or the HEA Group, as the case may be, in any court
in respect of the duties and obligations evidenced by the Master Management
Agreement, the Original Loan Documents, the Aggregate Horizon Indebtedness or
any and all claims and causes of action which could have been or could be
asserted against the Horizon Entities for related party disallowances, prudent
buyer disallowances, excessive charges, and/or coverage denials, etc., at the
Facilities owned and/or operated by the HEA Group prior to the date hereof. This
RELEASE shall include, without limitation, such claims or defenses as fraud,
mistake, duress, overreaching, usury, failure to disclose, and interference with
business management or relating to any of the matters, documents, transactions,
acts or omissions
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described above. Other than as specifically set forth in this Agreement, the
parties make no representations or warranties with respect to the transactions
set forth herein.
7. RETAINED EMPLOYEES. The HEA Group shall have no obligation
whatsoever to hire any HFM employees. Upon execution of this Agreement, the HEA
Group shall provide HFM with a list of HFM employees to whom it has offered or
intends to offer employment with HEA Group following the Effective Time, and a
list of employees who have refused employment. Additionally, for sixty days
following closing, the HEA Group shall provide HFM with prompt written notice of
any additional employees offered employment and any former HFM employees who
have refused to accept employment with HEA Group.
8. FURTHER ASSURANCES. Following the Effective Date, HFM and
the HEA Group agree to assist the other, respectively, as reasonably requested
with ordinary and routine matters arising in the transfer of management from HFM
to the HEA Group, and the parties agree to cooperate and sign releases of
collateral as contemplated herein to effect the terms of this Agreement. Upon
execution of this Agreement, the HEA Group shall have the right to immediate
occupancy of the corporate headquarters at 401 North Elm, Denton, Texas, and any
lease agreement between the parties shall terminate. HFM waives any rights and
interests whether contract, statutory, or otherwise in the corporate
headquarters. The HEA Group agrees to provide the Horizon Entities with
reasonable access to the records transferred hereunder to the HEA Group upon
reasonable notice and during normal business hours to examine and photocopy
patient records and records relating to the operation of the business.
9. NO ADMISSION. The provisions of this Agreement and
accompanying documents do not constitute evidence, or an admission by either of
the parties, or any affiliated or related party, of any liability or wrongful
conduct, and cannot be used by either of the parties, or any affiliated or
related party, in any judicial and/or administrative proceeding against the
other party or parties as an admission of liability or wrongdoing.
10. POLICIES AND PROCEDURES. Any systems, methods, procedures,
written materials, or brochures developed by HFM in connection with or related
to its provision of management and administrative services under the Master
Management Agreement in respect of the Facilities covered by the same, shall be
and become the property of the HEA Group at the Effective Time.
11. ENTIRE AGREEMENT. This Agreement and the Loan Agreement
contain the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior agreements, negotiations, discussions,
arrangements or understandings with respect thereto, including but not limited
to that Letter of Intent dated April 25, 1997, between HEA Group, HFM and
Horizon/CMS Healthcare Corporation, and shall not be amended, supplemented,
modified unless executed in writing by the party to be bound thereby.
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12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the successors, assigns, and legal
representatives of each of the parties hereto.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one agreement binding on all
parties hereto, notwithstanding that all parties are not signatory to the
original or the same counterparts.
14. DUE AUTHORIZATION. The persons signing this Agreement
represent that they are duly authorized to execute this Agreement on behalf of
the respective Horizon Entity or member of the HEA Group.
15. CHOICE OF LAW. This Agreement shall be interpreted under
the laws of the State of Texas without reference to conflict of laws provisions.
16. PRESS RELEASE. For a period of sixty (60) days following
the date of this Agreement, neither party shall release for publication a press
release with respect to this Agreement or the Loan Document without first
submitting a copy of such release to the other party for review and comment.
IN WITNESS WHEREOF, the undersigned have affixed or caused their duly
authorized representatives to affix their signatures effective as of the date
first set forth above.
HORIZON/CMS HEALTHCARE CORPORATION,
a Delaware corporation,
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
HORIZON FACILITIES MANAGEMENT, INC.,
a Delaware corporation,
By: /s/ Scot Sauder
-----------------------------------------------
Scot Sauder, Vice President and Secretary
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HORIZON MEDICAL SPECIALTY SERVICES,
INC., a Delaware corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
NATIONAL INSTITUTIONAL PHARMACY
SERVICES, INC., a Delaware corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
NIPSI OF HOUSTON, INC., a Texas corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
NIPSI HEALTHCARE OF HOUSTON LTD.
PARTNERSHIP, a Texas limited partnership
By: NIPSI of Houston, Inc., a Texas corporation,
its General Partner
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
REHABILITATIVE ASSOCIATES, INC.,
a Florida corporation
By: /s/ Charles H. Gonzales
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Charles H. Gonzales, CEO
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LTC MEDICAL LABORATORIES, INC.,
a Delaware corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
CMS THERAPIES, INC.,
a North Carolina corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Name:
Title: Chief Executive Officer
ADVANCED CLINICAL TECHNOLOGY, INC., an
Arizona corporation
By: /s/ Charles H. Gonzales
-----------------------------------------------
Charles H. Gonzales, Senior Vice President
TEXAS HEALTH ENTERPRISES, INC.,
a Texas corporation
By: /s/ Peter C. Kern
-----------------------------------------------
Peter C. Kern, President
HEALTH ENTERPRISES OF OKLAHOMA, INC.,
an Oklahoma corporation
By: /s/ Peter C. Kern
-----------------------------------------------
Peter C. Kern, President
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HEALTH ENTERPRISES OF MICHIGAN, INC.,
a Michigan corporation
By: /s/ Peter C. Kern
-----------------------------------------------
Peter C. Kern, President
PCK-TEX, LTD., a Texas limited partnership
By: Texas Health Enterprises, Inc.,
a Texas corporation, General Partner
By: /s/ Peter C. Kern
--------------------------------------
Peter C. Kern, President
HEA MANAGEMENT GROUP, INC.,
a Texas corporation
By: /s/ Peter C. Kern
-----------------------------------------------
Peter C. Kern, President
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EXECUTION COPY
SIXTH AMENDMENT dated as of May 9,
1997 (this "Sixth Amendment"), to the
Amended and Restated Credit Agreement dated
as of September 26, 1995 (as amended to the
date hereof, the "Credit Agreement"), among
Horizon/CMS Healthcare Corporation, a
Delaware corporation ("Horizon"),
Continental Medical Systems, Inc., a
Delaware corporation ("Continental", and
together with Horizon, the "Borrowers"), the
lenders listed on the signature pages
thereto (the "Lenders") and NationsBank of
Texas, N.A., as agent for the Lenders (in
such capacity, the "Agent") and as issuing
bank (in such capacity, the "Issuing Bank").
The parties hereto have agreed, subject to the terms and conditions
hereof, to amend the Credit Agreement as provided herein.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the Credit Agreement (the Credit Agreement,
as amended by, and together with, this Sixth Amendment, and as hereinafter
amended, modified, extended or restated from time to time, being called the
"Amended Agreement").
Accordingly, the parties hereto hereby agree as follows:
SECTION 1.01. Amendment to EBITDAR Definition. The following clause is
hereby added at the end of the proviso to the definition of EBITDAR in Section
1.01 of the Amended Agreement:
"and (F) so long as the cash portion of such charges is not material,
up to $53,000,000 of charges incurred in connection with the
termination of Horizon's agreement to manage facilities owned by the
HEA Group".
SECTION 1.02. Amendment to Stockholders' Equity Definition. Clause (b)
of the definition of Stockholders' Equity is hereby deleted in its entirety and
the following clause is hereby substituted in lieu thereof:
"(b) in determining Stockholders' Equity of Horizon for purposes of
Section 6.19(a), (i) 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 and (ii) an amount equal to the after-tax amount of any
charges incurred in connection with the termination of Horizon's
agreement to manage facilities owned by the HEA Group, to the extent
that the aggregate pre-tax amount of all such charges does not exceed
$53,000,000,".
SECTION 1.03. Representations and Warranties. The Borrowers hereby
represent and warrant to the Agent and the Lenders, as follows:
<PAGE>
(a) The representations and warranties set forth in Article
III of the Credit Agreement, and in each other Loan Document, are true
and correct in all material respects on and as of the date hereof and
on and as of the Sixth Amendment Effective Date (as defined below) with
the same effect as if made on and as of the date hereof or the Sixth
Amendment Effective Date, as the case may be, except to the extent such
representations and warranties expressly relate solely to an earlier
date.
(b) Each of the Borrowers, the Subsidiary Pledgors and the
Subsidiary Guarantors is in compliance with all the terms and
conditions of the Credit Agreement and the other Loan Documents on its
part to be observed or performed and no Default or Event of Default has
occurred or is continuing under the Credit Agreement.
(c) The execution, delivery and performance by each of the
Borrowers of this Sixth Amendment have been duly authorized by such
party.
(d) This Sixth Amendment constitutes the legal, valid and
binding obligation of each of the Borrowers, enforceable against it in
accordance with its terms.
(e) The execution, delivery and performance by each of the
Borrowers of this Sixth Amendment (i) do not conflict with or violate
(A) any provision of law, statute, rule or regulation, or of the
certificate of incorporation or by-laws of either of the Borrowers, (B)
any order of any Governmental Authority or (C) any provision of any
indenture, agreement or other instrument to which either of the
Borrowers is a party or by which it or any of its property may be bound
and (ii) do not require any consents under, result in a breach of or
constitute (with notice or lapse of time or both) a default under any
such indenture, agreement or instrument.
SECTION 1.04. Effectiveness. This Sixth Amendment shall become
effective only upon satisfaction of the following conditions precedent (the
first date upon which each such condition has been satisfied being herein called
the "Sixth Amendment Effective Date"):
(a) The Agent shall have received duly executed counterparts
of this Sixth Amendment which, when taken together, bear the authorized
signatures of the Borrowers and the Required Lenders.
(b) The Required Lenders shall be satisfied that the
representations and warranties set forth in Section 1.03 are true and
correct on and as of the Sixth Amendment Effective Date and that no
Default or Event of Default has occurred or is continuing.
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<PAGE>
(c) There shall not be any action pending or any judgment,
order or decree in effect which, in the judgment of the Required
Lenders or their counsel, is likely to restrain, prevent or impose
materially adverse conditions upon performance by any of the
Borrowers, the Subsidiary Pledgors or the Subsidiary Guarantors of its
obligations under the Loan Documents.
(d) The Required Lenders shall have received such other
documents, legal opinions, instruments and certificates as they shall
reasonably request and such other documents, legal opinions,
instruments and certificates shall be satisfactory in form and
substance to the Required Lenders and their counsel. All corporate and
other proceedings taken or to be taken in connection with this Sixth
Amendment and all documents incidental thereto, whether or not referred
to herein, shall be satisfactory in form and substance to the Required
Lenders and their counsel.
(e) Horizon shall have paid in full all amounts due and
payable as of the Sixth Amendment Effective Date under the Credit
Agreement and upon receipt of the Required Lenders' consent shall have
paid to the Agent for the account of each Lender that consents to this
Sixth Amendment an amendment fee equal to 0.02% of the consenting
Lender's Commitments, so long as a signature page to the Sixth
Amendment executed by such Lender is received by Fennebresque, Clark,
Swindell & Hay by 5:00 p.m., Charlotte time, on May 9, 1997.
SECTION 1.05. APPLICABLE LAW. THIS SIXTH AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, 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 1.06. Expenses. The Borrowers shall pay all reasonable
out-of-pocket expenses incurred by the Agent and the Required Lenders in
connection with the preparation, negotiation, execution, delivery and
enforcement of this Sixth Amendment, including, but not limited to, the
reasonable fees and disbursements of counsel. The agreement set forth in this
Section 1.06 shall survive the termination of this Sixth Amendment and the
Amended Agreement.
SECTION 1.07. Counterparts. This Sixth Amendment may be executed in any
number of counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one agreement.
SECTION 1.08. Credit Agreement. Except as expressly set forth herein,
the amendments provided herein shall not by implication or otherwise limit,
constitute a waiver of, or otherwise affect the rights and remedies of the
Lenders, the Agent or the other Secured Parties under the Credit Agreement or
any other Loan Document, nor shall they constitute a waiver of any Default or
Event of Default, nor shall they alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document. Each of the
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<PAGE>
amendments provided herein shall apply and be effective only with respect to the
provisions of the Credit Agreement specifically referred to by such amendment.
Except as expressly amended herein, the Credit Agreement shall continue in full
force and effect in accordance with the provisions thereof. As used in the
Credit Agreement, the terms "Agreement", "herein", "hereinafter", "hereunder",
"hereto" and words of similar import shall mean, from and after the date hereof,
the Amended Agreement.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment
to be duly executed by their duly authorized officers, all as of the date first
above written.
HORIZON/CMS HEALTHCARE CORPORATION,
as a Borrower
by __________________________________
Name:
Title:
CONTINENTAL MEDICAL SYSTEMS, INC.,
as a Borrower
by___________________________________
Name:
Title:
NATIONSBANK OF TEXAS, N.A., as Agent, as Issuing
Bank and as a Lender
by___________________________________
Name:
Title:
BANK OF AMERICA NT & SA, as Managing
Agent and as a Lender
by___________________________________
Name:
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as a Lender
by___________________________________
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH,
as Co-Agent and as a Lender
by___________________________________
Name:
Title:
<PAGE>
LONG TERM CREDIT BANK OF JAPAN, LTD., LA
AGENCY, as Co-Agent and as a Lender
by___________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION, as Co-Agent
and as a Lender
by___________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as successor to
Chemical Bank, as a Lender
by___________________________________
Name:
Title:
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION, formerly First Interstate Bank of
Texas, N.A., as a Lender
by___________________________________
Name:
Title:
TORONTO DOMINION (TEXAS) INC., as a Lender
by___________________________________
Name:
Title:
BANKERS TRUST COMPANY, as a Lender
by___________________________________
Name:
Title:
<PAGE>
BANQUE PARIBAS, as a Lender
by___________________________________
Name:
Title:
by___________________________________
Name:
Title:
BANQUE NATIONALE de PARIS, as a Lender
by___________________________________
Name:
Title:
by___________________________________
Name:
Title:
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES, as a Lender
by___________________________________
Name:
Title:
by___________________________________
Name:
Title:
MELLON BANK, N.A., as a Lender
by___________________________________
Name:
Title:
FLEET NATIONAL BANK, f/k/a/ Fleet Bank of
Massachusetts, as a Lender
by___________________________________
Name:
Title:
<PAGE>
BANK OF TOKYO MITSUBISHI TRUST
COMPANY as successor to The Bank of
Tokyo Trust Company, as a Lender
by___________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED, as a Lender
by___________________________________
Name:
Title:
THE SUMITOMO TRUST & BANKING CO., LTD., NEW
YORK BRANCH, as a Lender
by___________________________________
Name:
Title:
THE SUMITOMO BANK, LIMITED, CHICAGO
BRANCH, as a Lender
by___________________________________
Name:
Title:
THE MITSUBISHI BANK, LTD., LOS ANGELES
BRANCH, as a Lender
by___________________________________
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED,
as a Lender
by___________________________________
Name:
Title:
NATIONSBANK, N.A., as a Lender
by___________________________________
Name:
Title:
<PAGE>
THE SANWA BANK, LIMITED, as a Lender
by___________________________________
Name:
Title:
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.,
as a Lender
by___________________________________
Name:
Title:
CANADIAN IMPERIAL BANK OF COMMERCE, as a Lender
by___________________________________
Name:
Title:
<PAGE>
SUNWEST BANK OF ALBUQUERQUE, N.A., as a Lender and
as Issuing Bank
by____________________________________
Name:
Title:
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS, as a
Lender
by_____________________________________
Name:
Title: