AMENDMENT NO. 4, DATED AS OF MARCH 25, 1999, TO THE REVOLVING
CREDIT AND TERM LOAN AGREEMENT, among INTEGRATED HEALTH SERVICES, INC., a
Delaware corporation (the "Borrower"), the lenders parties to the Credit
Agreement referred to below (the "Lenders") and CITIBANK, N.A., as
administrative agent (the "Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agent have entered into
a Revolving Credit and Term Loan Agreement dated as of September 15, 1997 (such
Credit Agreement, as amended, the "Credit Agreement"). Capitalized terms not
otherwise defined in this Amendment have the same meanings as specified in the
Credit Agreement.
(2) The Borrower has requested various amendments to the
Credit Agreement, and the Lenders are, on the terms and conditions stated below,
willing to grant the request of the Borrower and the Borrower and the Lenders
have agreed to amend the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction of
the conditions precedent set forth in Section 3, hereby amended as follows:
(a) The following definitions in Section 1.01 are amended
in full to read as follows:
"`Commitment Fee Rate' means, for commitment fees accruing in
any Pricing Period, the rate per annum set forth below opposite the
Pricing Ratio determined for such Pricing Period:
Pricing Ratio Commitment Fee Rate
------------- -------------------
greater than or equal to 5.25 0.500%
less than 5.25 0.375%
`Fixed Charge Coverage Ratio' means the ratio, (i) as of the
last day of any Quarter other than the Quarter ending September 30,
2000, of (A) EBITDAR minus Capital Expenditures of the Borrower and its
Subsidiaries for the 12-month period then ending to (B) the sum of (1)
(w) Interest Expense, (x) taxes paid in cash, (y) Lease Expense and (z)
all cash dividends paid on the Borrower's common stock and preferred
stock, each during the 12-month period then ending and (2) the Current
Portion of Long-Term Debt as at the last day of such Quarter, and (ii)
as of the last day of the Quarter ending September 30, 2000, of (A)
EBITDAR minus Capital Expenditures of the Borrower and its Subsidiaries
for the 12-month period then ending to (B) the amount of (1) the sum of
(X) (I) Interest Expense, (II) taxes paid in cash, (III) Lease Expense
and (IV) all cash dividends paid on the Borrower's common stock and
preferred stock, each during the 12-month period then ending, (Y) the
Current Portion of Long-Term Debt as at the last day of such Quarter
and (Z) the outstanding principal
amount of the Convertible Subordinated Debt as of the first day of such
Quarter minus (2) the principal amount of any Subordinated Debt not in
excess of $143,750,000 incurred during such Quarter the proceeds of
which are used to repay the Convertible Subordinated Debt.
`Minimum Net Worth' means the sum, as of the last day of any
Quarter, of (i) $1,120,000,000, less up to $25,000,000 of extraordinary
losses (determined in accordance with GAAP) of the Borrower and its
Subsidiaries on a consolidated basis incurred at any time after
December 31, 1997, plus (ii) 75% of the aggregate net income
(determined in accordance with GAAP) of the Borrower and its
Subsidiaries on a consolidated basis earned in the Quarter ended
December 31, 1997 and in each Quarter thereafter, if net income was
earned in such Quarter (and not reduced for a net loss in any Quarter),
plus (iii) 100% of all additions to Adjusted Stockholders' Equity
resulting at any time after December 31, 1997 from the sale or issuance
of any common or preferred stock of the Borrower, except upon
conversion of any Convertible Subordinated Debt; provided, however,
that the amount "$1,120,000,000" referred to above shall be reduced by
the amount of cash used by the Borrower to redeem on the scheduled
maturity date thereof the notes issued under the 1993 Convertible
Subordinated Debt Indenture, but in no event shall the amount of such
reduction exceed $143,750,000.
`Revolving Borrowing Base Rate Margin' means, for any Pricing
Period, the rate per annum set forth below opposite the Pricing Ratio
determined for that Pricing Period:
Pricing Ratio Margin
------------- ------
greater than or equal to 6.50 1.500%
greater than or equal to 6.00 but less 1.250%
than 6.50
greater than or equal to 5.25 but less 1.000%
than 6.0
less than 5.25 0.750%
`Revolving Borrowing Eurodollar Rate Margin' means, for any
Pricing Period, the rate per annum set forth below opposite the Pricing
Ratio determined for that Pricing Period:
Pricing Ratio Margin
------------- ------
greater than or equal to 6.50 2.750%
greater than or equal to 6.00 but less 2.500%
than 6.50
greater than or equal to 5.25 but less 2.250%
than 6.00
less than 5.25 .000%
`Subordinated Debt Indentures' means the 1992 Convertible
Subordinated Debt Indenture; the 1993 Convertible Subordinated Debt Indenture;
the 1994 Subordinated Debt Indenture; the 1995 Subordinated Debt Indenture; the
1996 Subordinated Debt Indenture; the
1997 Subordinated Debt Indenture; the 1997 B Subordinated Debt Indenture; and,
upon the effectiveness thereof, the subordinated debt indenture to be entered
into in connection with the Debt incurred the proceeds of which are to be used
in part or in full to repay the Convertible Subordinated Debt.
`Term Borrowing Base Rate Margin' means, for any Pricing
Period, the rate per annum set forth below opposite the Pricing Ratio determined
for that Pricing Period:
Pricing Ratio Margin
------------- ------
less than 6.00 1.50%
greater than or equal to 6.00 but less 1.75%
than 6.50
greater than or equal to 6.50 2.00%
`Term Borrowing Eurodollar Rate Margin' means, for any Pricing
Period, the rate per annum set forth below opposite the Pricing Ratio determined
for that Pricing Period:
Pricing Ratio Margin
------------- ------
less than 6.00 2.75%
greater than or equal to 6.00 but less 3.00%
than 6.50
greater than or equal to 6.50 3.25%
`Term Loan C Borrowing Base Rate Margin' means, for any
Pricing Period, the rate per annum set forth below opposite the Pricing Ratio
determined for that Pricing Period:
Pricing Ratio Margin
------------- ------
less than 6.00 1.75%
greater than or equal to 6.00 but less 2.00%
than 6.50
greater than or equal to 6.50 2.25%
`Term Loan C Eurodollar Rate Margin' means, for any Pricing
Period, the rate per annum set forth below opposite the Pricing Ratio determined
for that Pricing Period:
Pricing Ratio Margin
------------- ------
less than 6.00 3.00%
greater than or equal to 6.00 but less 3.25%
than 6.50
greater than or equal to 6.50 3.50%"
(b) The definition of "Cash Flow from Operations" in Section
1.01 is amended by adding before the period at the end thereof a new
clause (E) to read as follows:
"and (E) cash severance payments not in excess of
$25,000,000 reserved or accrued during the Quarter ending December 31,
1998 shall be included as an addback to net income for purposes of this
definition to the extent such payments are included in the December 31,
1998 financial statements of the Borrower."
(c) Section 2.05 is amended by deleting subsection (b) therein
and substituting the following therefor:
"(b) The Revolving Facility Amount shall be
automatically and permanently reduced (i) on January 1, 2001 to
$800,000,000, (ii) on January 1, 2002 to $600,000,000, (iii) on
September 30, 2002 to $500,000,000, (iv) on January 1, 2003 to
$400,000,000 and (v) on the Termination Date as provided in Section
2.06(a) below."
(d) Section 2.06 is amended by adding at the end thereof
a new subsection (h) to read as follows:
"(h) Mandatory Prepayments. The Borrower shall, on
the date of receipt of (i) the Net Cash Proceeds of Sale in respect of
any Asset Sale by the Borrower or any of its Subsidiaries or (ii) the
cash proceeds (net of legal and accounting fees and expenses incurred
in connection therewith) in respect of any issuance or sale of debt
(except debt issued or sold where the proceeds of such debt are used to
refinance Subordinated Debt and to pay the costs of such refinancing)
or equity, the Borrower shall prepay the aggregate principal amount of
the Advances in an amount equal to (x) the amount of such Net Cash
Proceeds of Sale in the case of an Asset Sale, (y) the amount of such
cash proceeds in the event of an issuance or sale of debt, or (z) an
amount equal to 50% of such cash proceeds in the event of an issuance
or sale of equity, as applicable; provided, that each such prepayment
shall be applied to the outstanding principal amount of Revolving
Borrowings, Term Borrowings and Term Loan C Borrowings and shall be
applied thereto on a ratable basis calculated on the basis of the
Revolving Facility Amount, Term Borrowings and Term Loan C Borrowings,
respectively, and in the case of prepayments of Term Borrowings and
Term Loan C Borrowings, applied ratably to each respective installment
thereof."
(e) Section 5.01(a) is amended by replacing the table set
forth therein with the table set forth below:
"Quarter(s) Ended Debt/EBITDAR Ratio
---------------- ------------------
December 31, 1998 5.75
March 31, 1999 6.25
June 30, 1999 6.50
September 30, 1999 6.75
December 31, 1999 6.75
March 31, 2000 6.75
June 30, 2000 6.50
September 30, 2000 6.25
December 31, 2000 5.75
March 31, 2001 5.75
June 30, 2001 5.50
September 30, 2001 5.50
December 31, 2001 5.25
March 31, 2002 5.25
June 30, 2002 5.00
September 30, 2002 5.00
December 31, 2002 4.50
In 2003 and thereafter 4.50"
(f) Section 5.01(b) is amended by replacing the table set
forth therein with the table set forth below:
"Quarter(s) Ended Fixed Charge Coverage Ratio
---------------- ---------------------------
December 31, 1998 1.15
March 31, 1999 1.10
June 30, 1999 1.10
September 30, 1999 1.10
December 31, 1999 1.10
March 31, 2000 1.10
June 30, 2000 1.15
September 30, 2000 1.15
December 31, 2000 1.15
March 31, 2001 1.15
June 30, 2001 1.15
September 30, 2001 1.20
December 31, 2001 1.20
March 31, 2002 1.00
June 30, 2002 1.00
September 30, 2002 1.00
December 31, 2002 1.00
In 2003 1.00
In 2004 1.25
In 2005 1.50"
(g) Section 5.03(c) is amended by deleting subsection (ix)
therein, and such subsection shall be left blank.
(h) Section 5.03(c) is amended by deleting subsection (x)
therein and substituting the following therefor:
"(x) Investments by existing, newly-formed or
acquired wholly-owned Subsidiaries of the Borrower in one or more
Health Care Companies or Health Care Facilities; provided that (A) with
respect to such Investments made (i) after the Effective Date of
Amendment No. 4 to this Agreement and during 1999, each such Investment
shall either be (X) in respect of a Health Care Facility licensed as a
skilled
nursing facility; provided that if such Health Care Facility is listed
on Schedule 5.03(c)(x)(A)(i)(X), (1) such Investment shall be acquired
by exercise of a purchase option in respect of such Health Care
Facility, (2) at the time of the exercise of any such purchase option
the Borrower or such Subsidiary shall have entered into a bona fide and
enforceable contract to sell the respective Health Care Facility for a
cash purchase price not less than the gross purchase price thereof paid
by such Subsidiary, and (3) the proceeds of such sale shall be used by
the Borrower to make mandatory prepayments in accordance with the
provisions of Section 2.06(h); and provided, further, that the
aggregate consideration for all such Investments does not exceed
$75,000,000; or (Y) an Investment by RoTech or a Subsidiary of RoTech
in the normal course of its business; provided that the aggregate
consideration for all such Investments does not exceed $50,000,000;
provided, further that the aggregate consideration for all Investments
made pursuant to the preceding clauses (X) and (Y) does not exceed
$100,000,000; and provided, further that in the event that any portion
of the amounts specified in the preceding clauses (X) and (Y) is not
used during 1999, an amount equal to $100,000,000 minus the aggregate
amount of the portions used shall be available during 2000, subject to
the respective restrictions provided in such clauses, in addition to
the amount specified in clause (ii) below; (ii) during 2000, the
aggregate consideration for all such Investments does not exceed
$50,000,000; provided that the portion of such consideration consisting
of cash, cash equivalents and Debt incurred or assumed shall not exceed
$25,000,000 in the aggregate; and provided, further that to the extent
that any portion of such $50,000,000 is not used during 2000, such
portion shall be available during 2001 in addition to the amount
specified in clause (iii) below; and (iii) during 2001, the aggregate
consideration for all such Investments does not exceed $50,000,000;
provided that no portion of such consideration shall consist of cash,
cash equivalents or Debt incurred or assumed; (B) no such Investments
shall be permitted after 2001; (C) at the time of or after giving
effect to any such Investment, no Event of Default or Potential Default
exists or results; and (D) each entity that becomes a Subsidiary of the
Borrower in connection with or as a result of any such Investment shall
comply with the provisions of Section 5.02(e), and neither the Borrower
nor any of its Subsidiaries nor any of their properties shall be or
become bound by or subject to any contractual obligation that is or
would be violated or put in default by reason of such compliance or by
reason of the enforcement of the claims and Liens of the Agent and
Lenders arising from such compliance;"
(i) Section 5.03(d) is amended by deleting the period at the
end of subsection (viii) thereof and substituting therefor "; and" and
adding after such subsection (viii) a new subsection (ix) to read as
follows:
"(ix) Subordinated Debt incurred under an indenture
the terms and conditions of which are no less favorable to the Lenders
than the terms and conditions of the 1997 Subordinated Debt Indenture
in an aggregate principal amount not in excess of $300,000,000 and
having a maturity not earlier than 30 days after the scheduled maturity
of the Term Loan C, and any extension, renewal or refinancing of such
Debt so long as (A) either (I) the principal amount of such Debt is not
increased or (II) any increase in the principal amount of such Debt is
permitted pursuant to another clause of this Section 5.03(d) and (B)
the terms and conditions of any indenture in connection
therewith are no less favorable to the Lenders than the 1997
Subordinated Debt Indenture and (C) the Debt incurred under such
indenture matures not earlier than 30 days after the scheduled maturity
date of the Term Loan C."
(j) Section 5.03(h) is amended by deleting subsection (B)
therein, and such subsection shall be left blank.
(k) Schedule 1.01(a) of the Credit Agreement relating to the
senior Debt excluded from the Current Portion of Long-Term Debt is
amended by adding the contents of the Supplemental Schedule 1.01(a)
attached hereto to such Schedule 1.01(a).
(l) Schedule 1.01(b) of the Credit Agreement relating to the
Schedule 1.01(b) Assets is deleted in its entirety and Schedule 1.01(b)
attached hereto is substituted therefor.
(m) Schedule 5.03(c)(x)(A)(i)(X) attached hereto is added as a
new Schedule 5.03(c)(x)(A)(i)(X) to the Credit Agreement.
(n) Schedule 5.03(f) of the Credit Agreement relating to
Accommodation Obligations is amended by adding the contents of the
Supplemental Schedule 5.03(f) attached hereto to such Schedule 5.03(f).
SECTION 2. Special Interest Provision. Notwithstanding any
other provision contained in the Credit Agreement to the contrary, from the
Effective Date until the date on which the Borrower shall deliver to the Agent
the Pricing Certificate referred to in Section 5.02(c)(viii) of the Credit
Agreement in respect of the Quarter ending June 30, 1999:
(a) the Revolving Borrowing Base Rate Margin shall be 1.25%;
(b) the Term Borrowing Base Rate Margin shall be 1.75%;
(c) the Term Loan C Borrowing Base Rate Margin shall be 2.00%;
(d) the Revolving Borrowing Eurodollar Rate Margin shall be
2.50%;
(e) the Term Borrowing Eurodollar Rate Margin shall be 3.00%;
and
(f) the Term Loan C Borrowing Eurodollar Rate Margin shall be
3.25%.
SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective as of the date hereof (the "Effective Date") if on or before
the date hereof the Agent shall have received (i) counterparts of this Amendment
executed by the Borrower and the Requisite Lenders or, as to any of the Lenders,
advice satisfactory to the Agent that such Lender has executed this Amendment;
(ii) evidence that (a) all fees due under the letter dated March 10, 1999
between the Agent and the Borrower have been paid, (b) the Borrower has paid to
the Agent, for the account of the Lenders executing and delivering this
Amendment on or prior to the
date hereof, a consent fee due under the letter dated March 11, 1999 between the
Agent and the Borrower, which amount will be distributed ratably to such Lenders
as provided in such letter and (c) the Borrower has paid all fees due under
Section 8.04 of the Credit Agreement and (iii) all of the following documents,
each such document in form and substance satisfactory to the Agent and in
sufficient copies for each Lender:
(a) Certified copies of (i) the resolutions of (A) the Finance
Committee of the Board of Directors of the Borrower approving this
Amendment and the matters contemplated hereby and (B) the Board of
Directors of each other Loan Party evidencing approval of the Consent
and the matters contemplated thereby and (ii) all documents evidencing
other necessary corporate action and governmental approvals, if any,
with respect to this Amendment and the Consent and the matters
contemplated hereby and thereby.
(b) A certificate of the Secretary or an Assistant Secretary
of the Borrower and each other Loan Party certifying the names and true
signatures of the officers of the Borrower and such other Loan Party
authorized to sign this Amendment and the Consent and the other
documents to be delivered hereunder and thereunder.
(c) Counterparts of the Consent appended hereto (the
"Consent"), executed by each of the Loan Parties (other than the
Borrower).
(d) A certificate from an Authorized Officer of the Borrower
that (i) the representations and warranties contained in Section 4 of
this Amendment, in Article IV of the Credit Agreement and in Article
III of the Pledge and Security Agreements are correct on and as of such
date as though made on and as of such date and (ii) no event has
occurred and is continuing, or would result from such extension of
credit or from the application of the proceeds therefrom, which
constitutes an Event of Default or a Potential Default.
(e) A favorable opinion of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., counsel for the Borrower, substantially in the form of Exhibit
A hereto and as to such other matters as any Lender through the Agent
may reasonably request.
SECTION 4. Representations and Warranties of the Borrower. The Borrower
represents and warrants as follows:
(a) Each Loan Party is a corporation or partnership duly
organized, validly existing and in good standing (except where the
failure of one or more Loan Parties, other than the Borrower and its
Material Subsidiaries, to be in good standing could not reasonably be
expected to result in a Material Adverse Change) under the laws of the
jurisdiction in which it is organized and is duly qualified to do
business in each jurisdiction where the character of its properties or
the nature of its activities makes such qualification necessary.
(b) Each Loan Party has the corporate or partnership power (i)
to carry on its business as now being conducted and as proposed to be
conducted by it, (ii) to execute,
deliver and perform this Amendment and the Credit Agreement, as amended
hereby, and (iii) to take all action necessary to consummate the
transactions contemplated under this Amendment and the Credit
Agreement, as amended hereby.
(c) The execution, delivery and performance by each Loan Party
of this Amendment, the Credit Agreement, as amended hereby, and the
Consent, as applicable, have been duly authorized by all necessary
action of its board of directors (or, in the case of a partnership, of
its governing authority), and do not contravene (i) its certificate or
articles of incorporation (or, in the case of a partnership, governing
agreements) or (ii) any law or any indenture, lease or written
agreement binding on or affecting it and do not result in or require
the creation of any Lien (other than pursuant to the Collateral
Documents) upon any of its property or assets.
(d) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority is required for
the due execution, delivery and performance by any Loan Party of this
Amendment, the Credit Agreement, as amended hereby, or the Consent, as
applicable.
(e) This Amendment and the Consent have been duly executed and
delivered by the respective Loan Party. This Amendment, the Credit
Agreement, as amended hereby, and the Consent are legal, valid and
binding obligations of the respective Loan Party, enforceable against
the respective Loan Party in accordance with their respective terms,
subject to laws generally affecting the enforcement of creditors'
rights.
(f) There is no pending or overtly threatened action or
proceeding affecting any Loan Party before any court, governmental
agency or arbitrator which would, if adversely determined, result in a
Material Adverse Change or which relates to or could reasonably be
expected to affect the legality, validity or enforceability of this
Amendment, the Credit Agreement, as amended hereby, or the Consent or
the consummation of any of the transactions contemplated hereby.
(g) The execution, delivery and performance of this Amendment,
the Consent and the Credit Agreement, as amended hereby, do not and
will not (i) conflict with, result in a breach of, or constitute (with
or without notice or the lapse of time or both) a default under, any
instrument, lease, indenture, agreement or other contractual obligation
issued by any Loan Party or enforceable against it or any of its
property or assets, except under immaterial agreements for supplies or
services which are readily replaceable without any adverse effect on
such Loan Party or its business or (ii) require any approval of its
stockholders.
SECTION 5. Reference to and Effect on the Credit Agreement and
the Loan Documents.
(a) On and after the effectiveness of this Amendment, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof" or words of like import referring to the Credit Agreement, and
each reference in the Notes and each of the other Loan Documents to
"the Credit Agreement", "thereunder", "thereof" or words of like
import referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement, as amended by this Amendment.
(b) The Credit Agreement, as specifically amended by this
Amendment, is and shall continue to be in full force and effect and is
hereby in all respects ratified and confirmed. Without limiting the
generality of the foregoing, the Collateral Documents and all of the
Collateral described therein do and shall continue to secure the
payment of all Obligations of the Loan Parties under the Loan
Documents, in each case as amended by this Amendment.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of any Lender or the Agent under
the Credit Agreement, nor constitute a waiver of any provision of the
Credit Agreement.
SECTION 6. Costs, Expenses and Taxes. The Borrower agrees to
pay on demand all reasonable and documented costs and expenses of the Agent in
connection with the preparation, execution, delivery and administration,
modification and amendment of this Amendment and the other instruments and
documents to be delivered hereunder (including, without limitation, the
reasonable and documented fees and expenses of counsel for the Agent) in
accordance with the terms of Section 8.04 of the Credit Agreement. In addition,
the Borrower shall pay any and all stamp and other taxes payable or determined
to be payable in connection with the execution and delivery of this Amendment
and the other instruments and documents to be delivered hereunder, and agrees to
save the Agent and each Lender harmless from and against any and all liabilities
with respect to or resulting from any delay in paying or omission to pay such
taxes.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
SUPPLEMENTAL SCHEDULE 1.01(a)
Supplemental List of Senior Debt Excluded from Current Portion of Long-Term Debt
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SUPPLEMENTAL SCHEDULE 1.01(b)
Supplemental List of "Schedule 1.01(b) Assets" Designated for Sale
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SUPPLEMENTAL SCHEDULE 5.03(c)(x)(A)(i)(X)
List of Skilled Nursing Facilities Subject to Purchase Option
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[TO COME]
SUPPLEMENTAL SCHEDULE 5.03(f)
Supplemental List of Accommodation Obligations
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