EXHIBIT 10.3
WAIVER AND FOURTH AMENDMENT TO
CREDIT AGREEMENT
THIS WAIVER AND FOURTH AMENDMENT TO CREDIT AGREEMENT is made and dated
as of August 14, 2000 (the "Fourth Amendment") among SIERRA HEALTH SERVICES,
INC. (the "Company"), the Banks party to the Credit Agreement referred to below,
and BANK OF AMERICA, N.A., a national banking association, as Administrative
Agent (the "Agent"), and amends that certain Credit Agreement dated as of
October 30, 1998, as amended by that certain First Amendment dated as of
November 23, 1998, that certain Second Amendment to Credit Agreement dated as of
January 15, 1999 and that certain Third Amendment to Credit Agreement dated as
of December 14, 1999 (as further amended or modified from time to time, the
"Credit Agreement").
RECITALS
WHEREAS, the Company has requested that the Agent and the Banks waive
certain financial covenants and amend certain other provisions of the Credit
Agreement, and the Agent and the Banks are willing to do so, on the terms and
conditions specified herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. Terms. All terms used herein shall have the same meanings
as in the Credit Agreement unless otherwise defined herein.
2. Waiver. By their execution hereof, the Banks hereby waive compliance by the
Company with Section 8.14(a) to (c) inclusive of the Credit Agreement for the
period from June 30, 2000 through and including September 15, 2000. This waiver
shall be limited precisely as provided for herein and shall not be deemed to be
a waiver or modification of any other term or provision of the Credit Agreement
or to be a consent to any other transaction or further action on the part of the
Company or any of its Subsidiaries which would require the consent of the Banks
under the Credit Agreement.
3. Amendments. The Credit Agreement is hereby amended
as follows:
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3.1 Amendments to Section 1.01.
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(a) There shall be added to Section 1.01 of the Credit Agreement,
in appropriate alphabetical sequence, the following definitions:
"Non-Restricted Subsidiary" means any Subsidiary of the Company that is
not a Restricted Subsidiary.
"Restricted Subsidiary" means (i) each HMO Subsidiary and any other
Subsidiary of the Company that is regulated by the department of
insurance or similar agency of any State, (ii) any Subsidiary of any
Person described in the preceding clause (iii) 2314 Partnership, and
(iv) any Subsidiary of the Company which has assets of less than
$25,000, provided, however, the aggregate of amount for all Subsidiaries
under this clause (iv) shall not exceed $500,000.
(b) The definition of the term "Applicable Margin" in Section 1.01 of the Credit
Agreement is hereby amended by deleting the following clause therefrom: "and
from December 10, 1999 until the delivery of the Compliance Certificate for the
fiscal quarter ending September 30, 2000, the Applicable Margin shall be Level
6" and replacing it with the following: ", from December 10, 1999 until August
14, 2000, the Applicable Margin shall be Xxxxx 0 and from August 15, 2000 until
September 15, 2000 or such later date as may be determined by Majority Banks,
the Applicable LIBOR Rate Margin shall be 3.25% and the Applicable Base Rate
Margin shall be 2.25%."
3.2 Amendment to Section 2.01.
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(a) Section 2.01 of the Credit Agreement is hereby amended by
adding the following sentence immediately prior to the end
thereof:
"Notwithstanding anything to the contrary herein, unless otherwise
agreed by the Majority Banks, from and after August 1, 2000, the sum of
the Effective Amount of all outstanding Revolving Loans and the
Effective Amount of all L/C Obligations shall not exceed $185,000,000."
3.3 Amendment to Section 7.17.
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(a) There shall be added to the Credit Agreement a new section
7.17 reading in its entirety as follows:
"7.17 Delivery of security documents by each Non-Restricted Subsidiary.
The Company shall cause each of the Non-Restricted Subsidiaries to duly
execute and deliver to Agent:
(a) Resolutions and Incumbency Certificates. On or before August
18, 2000, a copy of board resolutions of the Company and each
Non-Restricted Subsidiary, in form and substance satisfactory to
the Agent, authorizing the execution, delivery and performance
of the Waiver and Fourth Amendment to Credit Agreement, dated as
of August 14, 2000 (the "Fourth Amendment"), and the Loan
Documents contemplated thereby, certified by the Secretary or
Assistant Secretary of such Person, together with an incumbency
certificate for each of the Company and each Non-Restricted
Subsidiary that has executed a Loan Document in connection
herewith.
(b) Guaranty. On or before August 23, 2000, a guaranty in form
and substance reasonably acceptable to Agent, duly executed by
each of the Non-Restricted Subsidiaries.
(c) Security Agreement. On or before August 23, 2000,
a security agreement in form and substance reasonably
acceptable to Agent, duly executed by the Company and each
Non-Restricted Subsidiary, covering all of the property of
such Person described therein, together with
(i) all promissory notes held by the Company
and each Non-Restricted Subsidiary;
(ii) the certificates, evidencing all of the issued and
outstanding shares of capital stock, partnership
interests and membership interests pledged pursuant to
the Security Agreement, which certificates shall in
each case be accompanied by undated stock powers duly
executed in blank, or, if any securities pledged
pursuant to the Security Agreement are uncertificated
securities, confirmation and evidence satisfactory to
the Agent that the security interest in such
uncertificated securities has been transferred to and
perfected by the Agent for the benefit of the Banks in
accordance with Section 9-115 and Section 8-106 of the
Uniform Commercial Code;
(iii) acknowledgment copies of properly filed Uniform
Commercial Code financing statements (Form UCC-1), or
such other evidence of filing as may be acceptable to
the Agent, naming the Company and each Non-Restricted
Subsidiary as the debtors and the Agent as the secured
party, or other similar instruments or documents, filed
under the Uniform Commercial Code of all jurisdictions
as may be necessary or, in the opinion of the Agent,
desirable to perfect the security interest of the Agent
pursuant to the Security Agreement;
(iv) executed copies of proper Uniform Commercial Code
Form UCC-3 termination statements, if any, necessary to
release all Liens and other rights of any Person in any
collateral described in the Security Agreement
previously granted by any Person (other than Permitted
Liens); and
(v) on or before August 31, 2000, certified copies of
Uniform Commercial Code Requests for Information or
Copies (Form UCC-11), or a similar search report
certified by a party acceptable to the Agent, dated a
date reasonably near August 15, 2000 listing all
effective financing statements which name the Company
and its Non-Restricted Subsidiaries (under their
present names and any previous names) as the debtor and
which are filed in the jurisdictions in which filings
were made pursuant to clause (c) above, together with
copies of such financing statements.
(d) Legal Opinions. On or before August 23, 2000, opinions of counsel to
the Company and the Non-Restricted Subsidiaries, addressed to
the Agent and the Banks, in form and substance reasonablysatisfactory to the
Agent.
(e) Other Evidence. Such other evidence with respect
to the Company, each Non-Restricted Subsidiary or any other
Person as the Agent or any Bank may reasonably request to
establish the consummation of the transactions contemplated
hereby, the taking of all corporate action in connection with
the Fourth Amendment and the Credit Agreement and the compliance
with the conditions set forth herein.
3.4 Amendment to Section 7.18.
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(a) There shall be added to the Credit Agreement a new Section 7.18 reading
in its entirety as follows:
"7.18 Delivery of form of mortgage and real property
preliminary title insurance reports.
(a) On or before August 23, 2000, the Company shall finalize the
form of mortgage or deed of trust, as applicable, in form and
substance reasonably acceptable to Agent, that will be
finanlized by the Company or Non-Restricted Subsidiary, as
applicable, on or about September 15, 2000.
(b) On or before September 15, 2000, the Company shall cause
preliminary title reports issued by a title insurance company
reasonably acceptable to Agent, to be delivered to Agent for
every parcel of real property owned by the Company or any
Non-Restricted Subsidiary."
3.5 Amendment to Section 9.01(c).
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(a) Section 9.01(c) of the Credit Agreement is hereby amended in its
entirety to read as follows:
"(c) Specific Defaults. The Company fails to perform or observe any term,
covenant or agreement contained in any of Section 7.01, 7.02, 7.03, 7.09, 7.17
or 7.18 or in Article VIII; or"
3.6 Amendment to Section 11.04.
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(a) Section 11.04 of the Credit Agreement is hereby amended by adding the
following paragraph immediately prior to the end thereof:
"Without limitation of the foregoing, the Company shall pay or
reimburse the Agent within 5 Business Days after demand for all
reasonable costs and expenses incurred by E&Y Restructuring LLC,
consultants retained by the Agent's counsel, in connection with this
Agreement and all reasonable Attorney Costs incurred by or on behalf of
the Agent in connection with this Agreement."
4. Representations and Warranties. The Company represents and warrants to
the Agent and the Banks that, on and as of the date hereof, and after giving
effect to this Fourth Amendment:
4.1 Authorization. The execution, delivery and performance by the
Company of this Fourth Amendment has been duly authorized by all necessary
corporate action, and this Fourth Amendment has been duly executed and delivered
by the Company.
4.2 Binding Obligation. This Fourth Amendment constitutes the legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
4.3 No Legal Obstacle to Amendment. The execution, delivery and
performance of this Fourth Amendment will not (a) contravene the Organization
Documents of the Company; (b) constitute a breach or default under any
contractual restriction or violate or contravene any law or governmental
regulation or court decree or order binding on or affecting the Company which
individually or in the aggregate does or could reasonably be expected to have a
Material Adverse Effect; or (c) result in, or require the creation or imposition
of, any Lien on any of the Company's properties. No approval or authorization of
any governmental authority is required to permit the execution, delivery or
performance by the Company of this Fourth Amendment or the transactions
contemplated hereby or thereby.
4.4 Incorporation of Certain Representations. After giving effect to
the terms of this Fourth Amendment, the representations and warranties of the
Company set forth in Article VI of the Credit Agreement are true and correct in
all respects on and as of the date hereof as though made on and as of the date
hereof, except to the extent such representations relate solely to an earlier
specified date.
4.5 Default. After giving effect to the terms of this Fourth Amendment,
no Default or Event of Default under the Credit Agreement has occurred and is
continuing.
5. Conditions, Effectiveness. The effectiveness of this Fourth Amendment
shall be subject to the compliance by the Company with its agreements herein
contained, and to the delivery of the following to Agent in form and substance
satisfactory to Agent on or before August 14, 2000:
5.1 Execution of Fourth Amendment. The Company, the Agent and the Majority
Banks shall have signed a copy hereof and the same shall have been delivered to
the Agent.
5.2 Pledge Agreement Affirmations. The Agent shall have received
affirmation letters in respect of the Pledge Agreement, substantially in the
form of Exhibit A, from each Pledgor Subsidiary.
5.3 Fees and Expenses. All invoiced fees and expenses of E&Y
Restructuring LLC and all Attorney Costs of Xxxxx, Xxxxx & Xxxxx shall have been
paid or provided for and, after giving effect thereto, E&Y Restructuring LLC
shall hold a retainer in the amount of $100,000 and Xxxxx, Xxxxx & Xxxxx shall
hold a retainer in the amount of $100,000 for the payment of future fees and
expenses.
Upon satisfaction of the foregoing conditions, the effectiveness of this Fourth
Amendment shall be retroactive to June 30, 2000.
6. Miscellaneous.
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6.1 Effectiveness of the Credit Agreement and the Notes. Except as
hereby expressly amended, the Credit Agreement, the Loan Documents and the Notes
shall each remain in full force and effect, and are hereby ratified and
confirmed in all respects on and as of the date hereof.
6.2 Waivers. This Fourth Amendment is limited solely to the matters
expressly set forth herein and is specific in time and in intent and does not
constitute, nor should it be construed as, a waiver or amendment of any other
term or condition, right, power or privilege under the Credit Agreement or under
any agreement, contract, indenture, document or instrument mentioned therein;
nor does it preclude or prejudice any rights of the Agent or the Banks
thereunder, or any exercise thereof or the exercise of any other right, power or
privilege, nor shall it require the Majority Banks to agree to an amendment,
waiver or consent for a similar transaction or on a future occasion, nor shall
any future waiver of any right, power, privilege or default hereunder, or under
any agreement, contract, indenture, document or instrument mentioned in the
Credit Agreement, constitute a waiver of any other right, power, privilege or
default of the same or of any other term or provision.
6.3 Counterparts. This Fourth Amendment may be executed in any number
of counterparts, and all of such counterparts taken together shall be deemed to
constitute one and the same instrument.
6.4 Governing Law. This Fourth Amendment shall be governed by and construed
in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
be duly executed and delivered as of the date first written above.
SIERRA HEALTH SERVICES, INC.
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: V. P./CFO
BANK OF AMERICA, N.A., as Administrative Agent
By: /s/ Xxxxx Xxxx Strand
Name: Xxxxx Xxxx Strand
Title: Managing Director
BANK OF AMERICA, N.A., as a Bank
By: /s/ Xxxxx Xxxx Strand
Name: Xxxxx Xxxx Strand
Title: Managing Director
FIRST UNION NATIONAL BANK, as a Bank
By: /s/ J. Xxxx Xxxxxxx, Xx.
Name: J. Xxxx Xxxxxxx, Xx.
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH, as
a Bank
By: /s/ Xxxx X. Xxxxxx
Name: Xxxx X. Xxxxxx
Title: Vice President
BANK ONE, NA, as a Bank
By: /s/ Xxxxxx X. Xxxxxx
Name: Xxxxxx X. Xxxxxx
Title: First Vice President
XXXXX FARGO BANK, N.A., as a Bank
By: /s/ Xxxxxxx Xxxxxx
Name: Xxxxxxx Xxxxxx
Title: Vice President
UNION BANK OF CALIFORNIA, N.A., as a Bank
By: /s/ Xxxxxxxx X. Xxxxxxx
Name: Xxxxxxxx X. Xxxxxxx
Title: Senior Vice President
DEUTSCHE BANK AG, NEW YORK AND/OR CAYMAN
ISLANDS BRANCHES, as a Bank
By:
Name:
Title:
By:
Name:
Title:
EXHIBIT A to
Fourth Amendment
to Credit Agreement
August 14, 2000
Sierra Health Services, Inc.
Sierra Medical Management, Inc.
Prime Holdings, Inc.
c/o Sierra Health Services, Inc.
0000 Xxxxx Xxxxxx Xxx
Xxx Xxxxx, Xxxxxx 00000
Re: Sierra Health Services, Inc.
Gentlemen:
Please refer to (1) the Credit Agreement, dated as of October 30, 1998,
as amended by that certain First Amendment dated as of November 23, 1998, that
certain Second Amendment dated as of January 15, 1999 and that certain Third
Amendment to Credit Agreement dated as of December 14, 1999 (as so amended, the
"Credit Agreement"), by and among Sierra Health Services, Inc., as the borrower,
the commercial lending institutions party thereto (collectively, the "Lenders")
and Bank of America, N.A., as agent (herein, in such capacity, called the
"Agent") and (2) the Pledge Agreements dated October 30, 1998 from each of the
addressees in favor of the Lenders and the Agent (the "Pledge Agreements").
Pursuant to a waiver and amendment dated of even date herewith, a copy of which
is attached hereto, certain terms of the Credit Agreement were amended. We
hereby request that you (i) acknowledge and reaffirm all of your obligations and
undertakings under your Pledge Agreement and (ii) acknowledge and agree that
your Pledge Agreement is and shall remain in full force and effect in accordance
with the terms thereof.
Please indicate your agreement to the foregoing by signing in the space
provided below, and returning the executed copy to the undersigned.
BANK OF AMERICA, N.A., as Agent
By: /s/ Xxxxx Xxxx Strand
Title: Managing Director
Acknowledged and Agreed to
as of the date hereof
SIERRA HEALTH SERVICES, INC.
SIERRA MEDICAL MANAGEMENT, INC.
By: /s/ Xxxx X. Xxxxxx
Its: V.P., CFO for Sierra Health Services, Inc.
Secretary/Treasurer for Sierra Medical Managements, Inc.
PRIME HOLDINGS, INC.
By: /s/ Xxxxx Xxxxxxx
Its: Secretary
