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Exhibit 10.8
SECOND AMENDMENT, SEVENTH WAIVER AND AGREEMENT, dated as of
November 11, 1998 (this "Amendment"), among FPA MEDICAL MANAGEMENT, INC., a
Delaware corporation and debtor and debtor-in-possession (the "Borrower"), each
direct and indirect Subsidiary of the Borrower party to the Credit Agreement
referred to below (the "Guarantors"), each of which Guarantors is a debtor and
debtor-in-possession, the several banks and other financial institutions from
time to time parties to the Credit Agreement referred to below (the "Lenders")
and BANKBOSTON, N.A., as administrative agent for the Lenders (in such capacity,
the "Administrative Agent").
W I T N E S S E T H :
WHEREAS, the parties to this Amendment are parties to the
Revolving Credit and Guarantee Agreement dated as of July 20, 1998 (as
heretofore amended, supplemented or otherwise modified, the "Credit Agreement");
WHEREAS, the Borrower has requested that the Lenders agree to
certain amendments, waivers and agreements to the Credit Agreement to reflect
(a) the Lenders' agreement to permit the making of Loans for the limited purpose
of paying certain post-Filing Date liabilities associated with the assets of FPA
Medical Management of California, Inc. formerly known as the "Orange Coast
assets", (b) the Borrower's determination to amend the business units designated
as "Core Businesses" and, in connection therewith, the Borrower's delivery of a
proposed revised Budget (the "November 16 Proposed Budget"), (c) the Borrower's
transfer of its cash management system from Bank of America NT & SA to First
Union National Bank and (d) the waiver of existing Defaults and Events of
Default; and
WHEREAS, the Administrative Agent and the Lenders are willing
to agree to the requested amendments, waivers and agreements, but only upon the
terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS.
Unless otherwise defined herein and except as set forth in
this Amendment, terms defined in the Credit Agreement are used herein as therein
defined.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Amendments to Section 1.1 (Defined Terms) of the Credit
Agreement. Section 1.1 of the Credit Agreement is hereby amended by (a) deleting
the definition of each of
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the terms "Core Business", "Maturity Date" and "Recovery Event" in its entirety
and (b) adding to said Section the following definitions in their appropriate
alphabetical order:
" "Cash Management Bank": First Union National Bank or any
Affiliate thereof, in its capacity as cash management bank of the First
Union Accounts.
"Core Business": each of Sterling, HPI, the Florida Region,
the Kansas City Clinics, Meridian, Carolina Health Care Group and the
San Antonio Region.
"Corporate": the collective reference to the business
operations and administrative functions of the San Diego corporate
office and the business previously known as Cornerstone Physicians
Corporation.
"First Union Accounts": the collective reference to the FPA
Concentration Account, the FPA Investment Account, the Sterling
Concentration Account, the Sterling Investment Account and the First
Union Cash Collateral Account.
"First Union Cash Collateral Account": the account maintained
by the Borrower at the Cash Management Bank as collateral security for
losses of the Cash Management Bank, if any, incurred in connection with
the provision of cash management services to the Borrower and Sterling
and designated as the "FPA Cash Management Cash Collateral Account".
"Florida Region": the businesses operated by FPA Medical
Management of Florida, Inc. and its Subsidiaries and Affiliates in
Florida, including the Humana and PCA clinics in Jacksonville, Orlando
and South Florida and the Tampa MSA's.
"FPA Concentration Account": the account numbered
2000001209167 maintained by the Borrower at the Cash Management Bank.
"FPA Investment Account": the account numbered 00000000
maintained by the Borrower with First Union Capital Markets, a division
of Wheat Capital Markets, Inc. and an Affiliate of First Union National
Bank.
"Kansas City Clinics": the medical clinics operated by
Healthcap-Missouri, Inc. in or around Kansas City, Missouri.
"Maturity Date": February 1, 1999; provided that if on or
before January 25, 1999, the Bankruptcy Court has entered the
Confirmation Order in form and substance satisfactory to the Required
DIP Lenders, confirming a Reorganization Plan in form and substance
satisfactory to the Required DIP Lenders, the "Maturity Date" shall,
automatically, without the necessity of further action by any party (so
long as no Default or Event of Default shall have occurred and be
continuing on the original Maturity Date), be extended to April 1,
1999.
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"Meridian": the medical clinics operated by the Meridian
Medical Group in or around Atlanta, Georgia.
"Recovery Event": any (i) settlement of or payment in respect
of a property or casualty insurance claim relating to any asset of the
Borrower or any of its Subsidiaries, (ii) collection of On Hold
Receivables in excess of an aggregate of $5,000,000 of such
collections, and (iii) collection by the Borrower or any of its
Subsidiaries of accounts receivable relating to closed or sold
businesses.
"San Antonio Region": the businesses operated by Subsidiaries
of the Borrower in or around San Antonio, Texas, including the Xxxxxxx
Medical Group, the Temple Xxxxxxx Clinics and the San Antonio Network
of Physicians.
"Sterling Concentration Account": the account numbered
2115002238844 maintained by Sterling at the Cash Management Bank.
"Sterling Investment Account": the account numbered 00000000
maintained with First Union Capital Markets, a division of Wheat
Capital Markets, Inc. and an Affiliate of First Union National Bank."
2.2 Amendments to Section 2.8 (Mandatory Prepayments and
Commitment Reduction; Use of Cash Collateral). Section 2.8 of the Credit
Agreement is hereby amended by adding to said Section the following new
paragraph (c):
"(c) Notwithstanding anything to the contrary contained in
Section 2.8(b), Net Cash Proceeds from Recovery Events
consisting of collections by the Borrower or any of its
Subsidiaries of accounts receivable relating to closed or sold
businesses shall be applied toward the prepayment of the
outstanding principal amount of the Loans on the first and
fifteenth of each month, commencing with November 15, 1998,
provided that no such application shall be required unless the
amount to be applied is equal to or greater than $100,000.
Any amounts not applied in accordance with the preceding
proviso shall be carried over to next prepayment date."
2.3 Amendments to Section 5.2 (Certificates; Other
Information) of the Credit Agreement. Section 5.2 of the Credit Agreement is
hereby amended by (a) deleting paragraph "(b)" of said Section in its entirety
and (b) substituting in lieu thereof the following new paragraph "(b)":
"(b) the Administrative Agent and each Lender not later than
5:00 p.m., New York City time, on each Wednesday of every
other calendar week, (i) commencing on November 18, 1998 a
forecast, in a form acceptable to the Administrative Agent, of
cash flows of each of (x) the Loan Parties, taken as a whole,
(y) each Core Business and Corporate and (z) the Loan Parties
that are not
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part of a Core Business or Corporate, taken as a whole, for
the period of eight consecutive calendar weeks commencing with
the week in which such forecast is delivered (ii) on each
Wednesday of every calendar week, commencing on November 18,
1998, a comparison of actual cash flows of each of (x) the
Loan Parties, taken as a whole, (y) each Core Business and
Corporate and (z) the Loan Parties that are not part of a Core
Business or Corporate, taken as a whole, for the immediately
preceding week to the most recently forecasted cash flows of
the applicable Loan Parties for such week, with an explanation
of any significant variance, in each case accompanied by a
certificate of a Responsible Officer of the Borrower stating
that such forecast and comparison are based upon reasonable
estimates and assumptions and information that is accurate to
the best knowledge of such Responsible Officer and that such
Responsible Officer has no reason to believe that either of
such forecast or comparison is incorrect or misleading in any
material respect, and (iii) not later than 5:00 p.m., New York
City time, on the Wednesday of every calendar week, commencing
July 29, 1998, a report regarding the termination of, or
material modification to, any contract of the Borrower or any
of its Subsidiaries with any hospitals or other healthcare
facilities, any Affiliated Professional Corporation involving
annual net revenues in excess of $500,000;".
2.4 Amendments to Section 6.2 (Limitation on Liens) of the
Credit Agreement. Section 6.2 of the Credit Agreement is hereby amended by (a)
deleting the word "and" at the end of paragraph (g) of said Section, (b)
deleting the period at the end of paragraph (h) of said Section and substituting
in lieu thereof "; and", and (c) adding at the end of said Section immediately
after paragraph (h) a new paragraph (i) as follows:
"(i) Liens and rights of setoff in favor of the Cash
Management Bank in the First Union Accounts and amounts on
deposit therein to secure losses incurred by the Cash
Management Bank in connection with provision of cash
management services to the Borrower or Sterling, in each case
to the extent provided in an order of the Bankruptcy Court
approving the Borrower's and Sterling's cash management
arrangements with the Cash Management Bank, which order shall
be in form and substance satisfactory to the Administrative
Agent."
2.5 Amendments to Section 6.4 (Limitation on Fundamental
Changes to Core Businesses) of the Credit Agreement. Section 6.4 of the Credit
Agreement is hereby amended by (a) deleting said Section in its entirety and (b)
substituting in lieu thereof the following new Section 6.4:
"6.4 Limitation on Fundamental Changes to Core Businesses. As
to any Loan Party that is part of a Core Business and FPA
Axminster Medical Group, Inc., enter into any merger,
consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or
convey, sell, lease, assign, transfer or otherwise dispose of,
all or substantially all of its property,
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business or assets, or make any material change in its present
method of conducting business, (a) unless any Requirement of
Law requires that any Affiliated Professional Corporation
merge with, or transfer assets to, a Subsidiary of the
Borrower that is part of a Core Business, in which case such
transaction may occur with the consent of the Required Lenders
(not to be unreasonably withheld), (b) except any Loan Party
that is part of a Core Business may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to any other Loan Party that is part
of the same Core Business, and (c) except that FPA Axminster
Medical Group, Inc. may consummate a transaction for the sale
of all or substantially all of its assets on terms not
materially less favorable than the terms set forth on the term
sheet attached hereto as Exhibit A."
2.6 Amendments to Section 6.5 (Limitation on Sale of Assets)
of the Credit Agreement. Section 6.5 of the Credit Agreement is hereby amended
by adding the following proviso to the end of paragraph (b) of said Section:
"provided that FPA Axminster Medical Group, Inc. may sell its
assets as provided in Section 6.4(c)."
2.7 Amendments to Section 6.17 (Reorganization Plan) of the
Credit Agreement. Section 6.17 of the Credit Agreement is hereby amended by
substituting the dates "December 31, 1998" and "March 15, 1999" for the dates
"November 15, 1998" and "December 31, 1998", respectively, in said Section.
2.8 Amendments to Section 6.19 (Minimum Net Cash Flow From
Operations) of the Credit Agreement. Section 6.19 of the Credit Agreement is
hereby amended by deleting said Section in its entirety and substituting in lieu
thereof the following new Section 6.19:
"6.19 Minimum Net Cash Flow From Operations. Permit actual
cumulative Net Cash Flow from Operations of any of (a) the
Borrower and the Guarantors, taken as a whole, (b) Sterling,
(c) the Florida Region, (d) the Kansas City Clinics or (e)
Meridian, for the period from November 1, 1998 through each of
(i) November 27, 1998, (ii) January 1, 1999, (iii) January 29,
1999, and (iv) February 26, 1999 to be less than 85% of the
projected Net Cash Flow from Operations if cumulative Net Cash
Flow from Operations is a positive number or in excess of 115%
of cumulative Net Cash Flow from Operations if cumulative Net
Cash Flow from Operations is a negative number for all
applicable entities, all as set forth for each such period on
the Budget; provided, that for any period set forth above, if
the aggregate cumulative variance from November 1, 1998
through the end of the applicable period (in Dollars) from
projected Net Cash Flow from Operations for those among
Sterling, the Florida Region, the Kansas City Clinics and
Meridian that have failed to satisfy the applicable percentage
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required above is less than $1,000,000, such entities shall be
deemed to be in compliance with this provision."
2.9 Amendments to Section 6.20 (Minimum Receipts) of the
Credit Agreement. Section 6.20 of the Credit Agreement is hereby amended by
deleting said Section in its entirety and substituting in lieu thereof the
following new Section 6.20:
"6.20 Minimum Receipts. Permit actual aggregate cash receipts
of any of (a) the Borrower and the Guarantors, taken as a
whole, (b) Sterling, (c) the Florida Region, (d) the Kansas
City Clinics or (e) Meridian, for the period from November 1,
1998 through each of (i) November 27, 1998, (ii) January 1,
1999, (iii) January 29, 1999, and (iv) February 26, 1999 to be
less than 85% of its projected aggregate cash receipts for the
applicable entities as set forth for each such period on the
Budget, provided that payments made by payors to third party
claimants with respect to post-Filing Date claims on behalf of
the Borrower or any Guarantor, as the case may be, shall be
deemed to be cash receipts for purposes of this provision to
the extent reflected as such on the Budget for the applicable
entity; provided, however, that for any period set forth
above, if the aggregate cumulative variance from November 1,
1998 through the end of the applicable period (in Dollars)
from projected cash receipts for those among Sterling, the
Florida Region, the Kansas City Clinics and Meridian that have
failed to satisfy the applicable percentage required above is
less than $1,000,000, such entities shall be deemed to be in
compliance with this provision."
SECTION 3. AGREEMENTS.
3.1 Budget. The Lenders hereby accept the November 16
Proposed Budget, a copy of which is annexed hereto as Exhibit B, as the "Budget"
for all purposes under the Credit Agreement.
3.2 Orange Coast Loans.
(a) The Borrower has delivered to the Administrative Agent a
schedule (the "OC Liability Schedule"), a copy of which is attached hereto as
Exhibit C, detailing the post-Filing Date liabilities associated with the
business previously operated by FPA Medical Management of California, Inc. known
as "Orange Coast" (each an "OC Liability"; collectively, the "OC Liabilities"),
in form and substance reasonably satisfactory to the Administrative Agent.
(b) Notwithstanding anything to the contrary contained in the
Credit Agreement, including, without limitation, Sections 2.2 and 4.2 thereof,
and notwithstanding the occurrence of the Termination Date, but subject to the
compliance with Sections 3.2(a) and (c) of this Amendment, the Lenders shall
make Loans, severally, on a pro rata basis, in an aggregate amount (the "OC
Limit") not to exceed $2,700,000 (including all such Loans made prior to the
date hereof ) for the limited purpose of paying OC Liabilities (each such Loan,
an "OC Loan";
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collectively, the "OC Loans"); provided that the Lenders' obligation to make OC
Loans shall terminate upon the effective date of any credit facility entered
into in connection with the consummation of a Reorganization Plan for the
Borrower or any Guarantor.
(c) As the condition precedent to the making of any OC Loan
after the date hereof, the Administrative Agent shall have received, with a copy
for each Lender, a certificate executed by a Responsible Officer of the Borrower
(i) specifying (A) the amount of the OC Loan and the OC Liability (or OC
Liabilities) by type as set forth in the OC Liability Schedule to be paid with
the proceeds of the OC Loan, including the payee of such proceeds and (B) the
amount of all then outstanding OC Loans , and (ii) certifying that the proceeds
of the requested OC Loan will be used solely to satisfy the OC Liability (or OC
Liabilities) described in such certificate.
(d) Except as otherwise provided herein, OC Loans shall be
requested and made in accordance with Section 2.2 of the Credit Agreement.
SECTION 4. WAIVERS
Subject to the terms and conditions hereof, the Lenders hereby
waive all Defaults or Events of Default under the Credit Agreement arising out
of the Borrower's failure to comply with Sections 5.2, 6.2, 6.12, 6.17, 6.19 or
6.20 of the Credit Agreement that occurred prior to the effective date of this
Amendment.
5. MISCELLANEOUS.
5.1 Effectiveness. This Amendment shall become effective upon
the date on which the Administrative Agent shall have received, with
counterparts for each Lender, this Amendment, duly executed and delivered by the
Borrower, the Guarantors and the Lenders.
5.2 Representations and Warranties. After giving effect to
this Amendment, each of the representations made by any Loan Party in or
pursuant to the Loan Documents are true and correct in all material respects on
and as of the date hereof.
5.3 Continuing Effect; No Other Amendments or Agreements.
Except as expressly set forth herein, all of the terms and provisions of the
Credit Agreement and the other Loan Documents are and shall remain in full force
and effect. The amendments and agreements contained herein shall not constitute
an amendment of, or agreement as to, any provision of the Credit Agreement or
the other Loan Documents or for any purpose except as expressly set forth
herein.
5.4 Counterparts. This Amendment may be executed in any number
of counterparts by the parties hereto, each of which counterparts when so
executed shall be an original, but all the counterparts shall together
constitute one and the same instrument. This Amendment may be delivered by
facsimile transmission of the relevant signature pages hereof,
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and the failure to deliver an executed counterpart by other means shall not
affect the validity, enforceability or binding effect of this Amendment.
5.5 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
BORROWER
FPA MEDICAL MANAGEMENT, INC.
By:
-------------------------------------
Name:
Title:
GUARANTORS
AHI HEALTHCARE SYSTEMS, INC.
AHI (TEXAS) HEALTHCARE SYSTEMS, INC.
AMG MANAGEMENT COMPANY
AMERICAN HEALTH MEDICAL GROUP, XXXXXX, INC.
ARIZONA MANAGED CARE PROVIDERS, LTD.
AVANTI HEALTH SYSTEMS OF TEXAS, INC.
BHP IPA, INC.
XXXXXXX HILLS/WEST LOS ANGELES MEDICAL NETWORK, A MEDICAL GROUP, INC.
CAROLINA HEALTH CARE GROUP, P.C.
CENTURY FAMILY MEDICAL GROUP, INC.
CINCINNATI HEALTH PARTNERS, INC.
COMPREHENSIVE PRIMARY CARE MSO, INC.
CONNEKT, LLC
CORNERSTONE PHYSICIANS CORPORATION
CORNERSTONE PHYSICIANS OF PHOENIX, INC.
FHC IPA, INC.
FHMG/TDMC MEDICAL GROUP, A PROFESSIONAL CORPORATION
FAMILY PRACTICE ASSOCIATES OF SOUTHERN CALIFORNIA, A MEDICAL CORP.
FPA ACQUISITION CORPORATION
FPA AXMINSTER MEDICAL GROUP, INC.
FPA HOLDING COMPANY OF CALIFORNIA, INC.
FPA INDEPENDENT PRACTICE ASSOCIATION, A MEDICAL CORP.
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FPA MEDICAL FOUNDATION
FPA MEDICAL GROUP OF ARIZONA, P.C.
FPA MEDICAL GROUP OF CALIFORNIA, INC.
FPA MEDICAL GROUP OF DELAWARE, P.A.
FPA MEDICAL GROUP OF FLORIDA, INC.
FPA MEDICAL GROUP OF GEORGIA, P.C.
FPA MEDICAL GROUP OF KANSAS, P.A.
FPA MEDICAL GROUP OF KENTUCKY, INC.
FPA MEDICAL GROUP OF NEW JERSEY, A PROFESSIONAL CORPORATION
FPA MEDICAL GROUP OF NORTHERN CALIFORNIA, INC.
FPA MEDICAL GROUP OF PENNSYLVANIA, A MEDICAL CORPORATION
FPA MEDICAL GROUP OF TEXAS, A TEXAS PROFESSIONAL ASSOCIATION
FPA MEDICAL GROUP OF THE GREATER BAY AREA, INC.
FPA MEDICAL GROUP, P.A.
FPA MEDICAL MANAGEMENT OF ARIZONA, INC.
FPA MEDICAL MANAGEMENT OF CALIFORNIA, INC.
FPA MEDICAL MANAGEMENT OF FLORIDA, INC.
FPA MEDICAL MANAGEMENT OF GEORGIA, INC.
FPA MEDICAL MANAGEMENT OF ILLINOIS, INC.
FPA MEDICAL MANAGEMENT OF KENTUCKY, INC.
FPA MEDICAL MANAGEMENT OF LOUISIANA, INC.
FPA MEDICAL MANAGEMENT OF MISSOURI, INC.
FPA MEDICAL MANAGEMENT OF NORTH CAROLINA, INC.
FPA MEDICAL MANAGEMENT OF SOUTH CAROLINA, INC.
FPA MEDICAL MANAGEMENT OF TENNESSEE, INC.
FPA MEDICAL MANAGEMENT OF TEXAS, INC.
FPA MEDICAL MANAGEMENT OF THE MID-ATLANTIC, INC.
FPA OF GEORGIA, INC.
FPA SURGICAL CENTER, INC.
FPA WOMEN'S CARE OF GEORGIA, INC.
FPA/XXXXXXX MEDICAL GROUP OF NEVADA, LTD.
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FOUNDATION HEALTH IPA, A PROFESSIONAL MEDICAL CORPORATION
G.P.M. IPA, INC.
GATEWAY IPA, INC.
GATEWAY PHYSICIANS SERVICES, INC.
GOTHAM MANAGEMENT, INC.
GOTHAM MID-TOWN MANAGEMENT, INC.
XXXXXXX XXXXXX MEDICAL GROUP, INC.
HEALTH ONE ASSOCIATES, INC.
HEALTH PARTNERS, INC.
HEALTHCAP, INC.
HEALTHCAP-MISSOURI, INC.
HEALTHCAP-NEVADA, INC.
INTERGROUP IPA, P.C.
MID-LEVEL PRACTITIONERS, INC.
MONTEBELLO PHYSICIANS MEDICAL GROUP, INC.
NOVA HEALTHCARE MEDICAL GROUP, INC.
NOVA PHYSICIANS MEDICAL CORPORATION, INC.
OB-GYN MANAGEMENT, INC.
PHYSICIAN NETWORK OF WHITTIER MEDICAL ASSOCIATES, INC.
PHYSICIANS MEDICAL GROUP OF FLORIDA, INC.
PRIMARY CARE MEDICAL GROUP AT LITTLE COMPANY OF XXXX HOSPITAL, INC.
PRIVATE PHYSICIANS GROUP AT STANFORD, A MEDICAL GROUP, INC.
SAN ANTONIO HEALTH PARTNERS, INC.
ST. XXXXXXX CARE MEDICAL GROUP
STERLING ANESTHESIA, INC.
STERLING CREDENTIALS VERIFICATION SERVICES, INC.
STERLING EMERGENCY MEDICAL CARE, INC.
STERLING EMERGENCY TREATMENT ASSOCIATES, INC.
STERLING HEALTHCARE GROUP, INC.
STERLING HEALTHCARE MEDICAL CORP.
STERLING HEALTHCARE OF TEXAS, P.A.
STERLING MEDICAL GROUP OF MICHIGAN, INC.
STERLING MEDICAL GROUP OF MICHIGAN, P.C.
STERLING MEDNET EMERGENCY SERVICES, INC.
STERLING MIAMI, INC.
STERLING MICHIGAN, P.C.
STERLING PROFESSIONAL EMERGENCY
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PHYSICIANS, LLC
STERLING RADIOLOGY, INC.
STERLING REGIONAL EMERGENCY SERVICES, INC.
STERLING SUB TEXAS, INC.
THE DOCTORS OFFICENTER MEDICAL GROUP OF HOUSTON, P.A.
THE DOCTORS OFFICENTER MEDICAL GROUP OF DALLAS, P.A.
XXXXXX-XXXXX MEDICAL CENTERS, P.C.
VIP IPA, A PROFESSIONAL MEDICAL CORPORATION
VIRGINIA HEALTH PARTNERS, INC.
VMS MEDICAL IPA, INC.
By:
-------------------------------
Name:
Title:
BANKBOSTON, N.A., as Administrative Agent and
as a Lender
By:
-------------------------------
Name:
Title:
XXXXXXX XXXXX CREDIT PARTNERS L.P.
By:
-------------------------------
Name:
Title:
XXXXXX COMMERCIAL PAPER INC.
By:
-------------------------------
Name:
Title:
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THE CHASE MANHATTAN BANK
By:
-------------------------------
Name:
Title:
XXX XXXXXX AMERICAN CAPITAL PRIME RATE
INCOME TRUST
By:
-------------------------------
Name:
Title:
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EXHIBIT A - TERM SHEET
15
EXHIBIT B - BUDGET
16
EXHIBIT C - OC LIABILITY SCHEDULE
