<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO _________________________
Commission file number: 0-27276
CAREMARK RX, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 63-1151076
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3000 GALLERIA TOWER, SUITE 1000
BIRMINGHAM, ALABAMA 35244
(Address of Principal Executive Offices)
(205)733-8996
(Registrant's Telephone Number, Including Area Code)
(Formerly MedPartners, Inc.)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 1, 1999
----------------------- -------------------------------
COMMON STOCK, PAR VALUE 199,566,476
$.001 PER SHARE
* Includes 8,419,952 shares held in trust to be utilized in employee benefit
plans.
<PAGE> 2
FORWARD LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Section 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Caremark Rx, Inc. ("Caremark Rx" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Caremark Rx. Caremark
Rx undertakes no obligation to update or revise forward-looking statements to
reflect changed assumptions, the occurrence of unanticipated events or changes
to future operating results over time.
The "forward-looking statements" contained in this document are made
under the caption "Management's Discussion and Analysis of Financial Condition
and Results of Operations". Moreover, the Company, through its senior
management, may from time to time make "forward-looking statements" about
matters described herein or other matters concerning the Company.
There are several factors which could adversely affect the Company's
operations and financial results including, but not limited to, the following:
Risks relating to the Company's divestiture of its discontinued
operations; risks relating to the implementation of the Company's
settlement agreement with the State of California; risks relating to
the Company's compliance with or changes in government regulations,
including pharmacy licensing requirements and healthcare reform
legislation; risks relating to adverse resolution of lawsuits pending
against the Company and its affiliates; risks relating to declining
reimbursement levels for products distributed; risks relating to
identification of growth opportunities; risks relating to
implementation of the Company's strategic plan; risks relating to
liabilities in excess of insurance risks; risks relating to the
Company's liquidity and capital requirements; and risks relating to the
Company's failure to ensure its information systems are Year 2000
compliant.
2
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CAREMARK RX, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1999 (Unaudited) and December 31, 1998................................. 4
Condensed Consolidated Statements of Operations (Unaudited) -
Three Months Ended September 30, 1999 and 1998....................................... 5
Condensed Consolidated Statements of Operations (Unaudited) -
Nine Months Ended September 30, 1999 and 1998........................................ 6
Condensed Consolidated Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 1999 and 1998........................................ 7
Notes to Condensed Consolidated Financial Statements (Unaudited). 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................................. 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 20
Item 2. Changes in Securites and use of proceeds............................................. 20
Item 6. Exhibits and Reports on Form 8-K..................................................... 21
</TABLE>
3
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CAREMARK RX, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
------------- -------------
(IN THOUSANDS)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................... $ 20,164 $ 23,100
Accounts receivable, less allowances for bad debts of $12,270 and $11,136 .... 218,340 185,719
Inventories .................................................................. 139,986 171,739
Prepaid expenses and other current assets .................................... 10,231 11,513
Current assets of discontinued operations .................................... 185,066 793,495
----------- -----------
Total current assets .................................................. 573,787 1,185,566
Property and equipment, net .................................................... 108,983 115,835
Intangible assets, net ......................................................... 41,639 27,463
Other assets ................................................................... 78,327 51,272
Non current assets of discontinued operations .................................. 69,169 481,970
----------- -----------
$ 871,905 $ 1,862,106
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable ............................................................. $ 303,111 $ 215,861
Other accrued expenses and liabilities ....................................... 204,517 297,265
Income tax payable ........................................................... 10,896 9,480
Current portion of long-term debt ............................................ 500,365 207
Current liabilities of discontinued operations ............................... 205,462 577,642
----------- -----------
Total current liabilities ............................................. 1,224,351 1,100,455
Long-term debt, net of current portion ......................................... 679,872 1,735,096
Other long-term liabilities .................................................... 31,187 61,954
Long-term liabilities of discontinued operations ............................... 38,902 108,774
----------- -----------
Total liabilities .................................................... 1,974,312 3,006,279
Convertible preferred securities ............................................... 200,000 --
Stockholders' deficit:
Common stock, $.001 par value; 400,000 shares
authorized; issued -- 199,384 in 1999
and 199,032 in 1998 ........................................................ 199 199
Additional paid-in capital ................................................... 952,470 954,420
Shares held in trust, 8,465 in 1999 and 8,838 in 1998 ........................ (135,873) (142,477)
Accumulated deficit .......................................................... (2,119,203) (1,956,315)
----------- -----------
Total stockholders' deficit ........................................... (1,302,407) (1,144,173)
----------- -----------
$ 871,905 $ 1,862,106
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
<PAGE> 5
CAREMARK RX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net revenue .................................................................... $ 812,996 $ 660,608
Operating expenses:
Cost of revenues ............................................................. 738,054 596,024
Selling, general and administrative .......................................... 24,907 20,542
Depreciation and amortization ................................................ 5,594 4,645
Net interest expense ......................................................... 29,335 19,525
----------- -----------
Income from continuing operations before income taxes .......................... 15,106 19,872
Income tax expense ............................................................. 1,179 7,551
----------- -----------
Income from continuing operations before preferred security dividends .......... 13,927 12,321
Preferred security dividends ................................................... 35 --
----------- -----------
Net income from continuing operations available to
common shareholders ........................................................... 13,892 12,321
Loss from discontinued operations .............................................. -- (3,709)
----------- -----------
Net income available to common shareholders .................................... $ 13,892 $ 8,612
=========== ===========
Basic earnings per common share:
Income from continuing operations ............................................ $ 0.07 $ 0.06
Loss from discontinued operations ............................................ -- (0.02)
----------- -----------
Net income ................................................................... $ 0.07 $ 0.04
=========== ===========
Diluted earnings per common share:
Income from continuing operations ............................................ $ 0.07 $ 0.06
Loss from discontinued operations ............................................ -- (0.02)
----------- -----------
Net income ................................................................... $ 0.07 $ 0.04
=========== ===========
Weighted average common shares outstanding ..................................... 190,780 189,585
Dilutive effect of employee stock options ...................................... 6,458 74
----------- -----------
Weighted average shares outstanding, assuming dilution ......................... 197,238 189,659
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
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CAREMARK RX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
----------- -----------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net revenue .................................................................... $ 2,394,261 $ 1,920,291
Operating expenses:
Cost of revenues ............................................................. 2,179,006 1,741,419
Selling, general and administrative .......................................... 72,560 63,540
Depreciation and amortization ................................................ 16,256 13,747
Net interest expense ......................................................... 86,895 60,564
Restructuring charge ......................................................... -- 9,500
----------- -----------
Income from continuing operations before income taxes .......................... 39,544 31,521
Income tax expense ............................................................. 3,087 11,977
----------- -----------
Income from continuing operations before preferred security dividends .......... 36,457 19,544
Preferred security dividends ................................................... 35 --
----------- -----------
Net income from continuing operations available to
common shareholders ......................................................... 36,422 19,544
Loss from discontinued operations .............................................. (199,310) (59,276)
----------- -----------
Net loss ....................................................................... $ (162,888) $ (39,732)
=========== ===========
Basic earnings per common share:
Income from continuing operations ............................................ $ 0.19 $ 0.10
Loss from discontinued operations ............................................ (1.04) (0.31)
----------- -----------
Net loss ..................................................................... $ (0.85) $ (0.21)
=========== ===========
Diluted earnings per common share:
Income from continuing operations ............................................ $ 0.19 $ 0.10
Loss from discontinued operations ............................................ (1.02) (0.31)
----------- -----------
Net loss ..................................................................... $ (0.83) $ (0.21)
=========== ===========
Weighted average common shares outstanding ..................................... 190,622 189,083
Dilutive effect of employee stock options ...................................... 4,485 421
----------- -----------
Weighted average shares outstanding, assuming dilution ......................... 195,107 189,504
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
6
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CAREMARK RX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
1999 1998
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Operating activities:
Net loss ...................................................................... $ (162,888) $ (39,732)
Adjustments for non-cash items:
Non-cash interest expense .................................................... 4,152 3,792
Depreciation and amortization ................................................ 16,256 13,747
Provision for deferred tax expense ........................................... -- 1,848
Restructuring charges ........................................................ -- 9,500
Loss from discontinued operations ............................................ 199,310 59,276
Changes in operating assets and liabilities .................................... 80,560 11,493
----------- -----------
Net cash and cash equivalents provided by continuing operations ............ 137,390 59,924
Investing activities:
Purchase of property and equipment ............................................ (12,757) (22,042)
Proceeds from sales of property and equipment ................................. -- 8,523
Cash used to fund acquisitions ................................................ (12,548) --
----------- -----------
Net cash and cash equivalents used in investing activities ................. (25,305) (13,519)
Financing activities:
Capital contributions ........................................................ 2,049 3,048
Net borrowings (repayments) under credit facility ............................ (554,662) 292,251
Net proceeds from issuance of convertible preferred securities ............... 193,000 --
Repayment of debt ............................................................ (404) (192)
Capitalized loan fees ........................................................ (3,162) (6,100)
Accounts receivable securitization ........................................... 14,690 --
----------- -----------
Net cash and cash equivalents provided by (used in) financing activities ... (348,489) 289,007
Cash paid for restructuring expenses ........................................... (3,596) (4,286)
Cash provided by (used in) discontinued operations ............................. 237,064 (397,252)
----------- -----------
Net decrease in cash and cash equivalents ...................................... (2,936) (66,126)
Cash and cash equivalents at beginning of period ............................... 23,100 109,098
----------- -----------
Cash and cash equivalents at end of period ..................................... $ 20,164 $ 42,972
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
7
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CAREMARK RX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE 1. BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries and have been prepared
in accordance with generally accepted accounting principles for interim
financial reporting and in accordance with Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring items) necessary for a fair presentation of results for the interim
periods presented. The results of operations for any interim period are not
necessarily indicative of results for the full year. The condensed consolidated
balance sheet of the Company at December 31, 1998, has been derived from audited
financial statements, but does not include all disclosures required by generally
accepted accounting principles. These financial statements and footnote
disclosures should be read in conjunction with the December 31, 1998, audited
consolidated financial statements and the notes thereto.
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the accompanying unaudited
condensed consolidated financial statements and notes thereto. Actual results,
including the Company's estimated costs to exit its Physician Practice
Management ("PPM") operations, as discussed in Notes 4 and 5, could differ from
those estimates.
On September 13, 1999, the Company announced that it had changed its
name from MedPartners, Inc. to Caremark Rx, Inc. to reflect its focus on its
core pharmaceutical services operations.
NOTE 2. INCOME TAXES
Significant variations exist in the customary relationship between
income tax expense and pretax income because the Company has utilized net
operating loss carryforwards to offset its taxable federal income and certain
taxable state income. Consequently, the Company has recognized a tax rate of 8%,
its effective state income tax rate.
NOTE 3. CREDIT FACILITY
The Company has amended its credit facility a number of times since its
amendment and restatement in June 1998. In January 1999, the Company amended its
credit facility to permit it to implement its strategy of divesting the
discontinued PPM and contract services businesses. In April 1999, the Company
amended the credit facility to modify its terms in connection with the April
1999, proposed settlement with the State of California discussed below. The
terms of the agreement were modified to, among other things:
- permit the Company to enter into a comprehensive settlement
agreement and transition plan with the State of California and
certain health care service plans;
- permit the sale or other disposition of all of the property
and assets of the discontinued California PPM operations, with
proceeds remaining in those operations to satisfy liabilities
and obligations of those operations; and
- modify certain financial covenants for periods ending on or
after March 31, 1999.
In June 1999, the Company amended the credit facility to modify its
terms primarily in connection with the June 1999, definitive settlement
agreement with the State of California discussed below. The terms of the
agreement were modified to, among other things:
- permit the Company to dispose of the property and assets of
the California PPM operations in accordance with the June
1999, settlement agreement;
- increase the amount of accounts receivable permitted to be
securitized; and
- modify certain financial covenants for periods ending on or
after June 30, 1999.
8
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CAREMARK RX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
The Company entered into two amendments to the credit facility in
August 1999, to modify its terms concerning, among other things: (a) the amount
of cash and non-cash charges that are permitted to be excluded from financial
results for purposes of financial covenant compliance and (b) the retention of
certain net cash proceeds of asset dispositions. Specifically, the Company is
now allowed to exclude up to $233.5 million in cash charges related to the
reclassification of the PPM business as discontinued operations versus the
previous maximum amount of $220 million. The amendments also allow the Company
to retain certain proceeds from asset dispositions on or after July 1, 1999, as
discussed above. In connection with these amendments the Company agreed to
pledge all of the capital stock of the subsidiary that owns its principal
operating subsidiary, as security for the credit facility, with an equal and
ratable pledge in favor of the holders of the 7 3/8% Senior Notes due 2006,
which pledge was made in November 1999.
In September 1999, the Company entered into an amendment to its credit
facility which allowed for the $200 million of 7% Shared Preference Redeemable
Securities offering. The amendment called for $80 million of the proceeds from
the offering to be used to reduce the outstanding balance under the term loans.
In addition, as part of the amendment, up to $93 million of net cash proceeds
from dispositions of clinics occurring on or after July 1, 1999 may be used in
the Company's business and operations in the ordinary course, rather than being
applied to the term loans.
In November 1999, the Company entered into an amendment to its credit
facility which allowed for the modification of certain financial covenants to
reflect, among other things, the completion of the Convertible Preferred
Securities offering, and extended the date required for effectiveness of
settlement agreement with the State of California to December 31, 1999.
NOTE 4. SALES OF DISCONTINUED OPERATIONS
On January 26, 1999, the Company closed the sale of its government
services operations, one of the two businesses that comprised the Company's
contract services business, to America Service Group, Inc. The Company received
approximately $67 million in cash, less certain working capital adjustments, in
this transaction.
On March 12, 1999, the Company closed the sale of its hospital services
operations, the other of the two businesses that comprised the Company's
contract services business, to an unaffiliated third party and the current
management team in a recapitalization transaction. The Company received
approximately $318.9 million in cash, before payment of transaction costs and
other expenses, including insurance coverage for certain medical malpractice
liabilities, in this transaction. The Company retained 7.3% of the equity of the
recapitalized company.
During the nine months ended September 30, 1999, the Company completed
various asset sales of its PPM business. Net proceeds from these sales totaled
$281.0 million. On April 23, 1999, the Company closed the sale of assets of the
PPM business that provides services to the multi-specialty physicians group,
Kelsey-Seybold Medical Group, P.A. to a joint venture. The joint venture
acquired the Caremark Rx and Kelsey-Seybold management services agreement,
related assets and certain real estate for $150 million, less certain working
capital and other adjustments.
During the fourth quarter of 1998, the Company recorded a $1.1 billion
net loss on the disposal of discontinued operations. This loss included
approximately $815.4 million for the impairment and write-offs of intangibles
and other PPM assets, estimated costs to exit the PPM operations of
approximately $340.9 million (including $153.9 million to fully reserve the
Company's deferred tax assets) and approximately $90.8 million, net of taxes of
$55.6 million, for the estimated net gain on the sale of the contract services
businesses. During the second quarter of 1999, the Company recorded an
additional charge for $199.3 million related to the net loss on the disposal of
discontinued operations. This charge is an adjustment to the $1.1 billion dollar
net loss on the disposal of discontinued operations recorded in the fourth
quarter of 1998. The adjustment includes an additional $236.6 million for the
impairment and write-offs of intangibles and other PPM assets and a reduction in
the estimated costs to exit the PPM operations of approximately $37.3 million.
During the first nine months of 1999, the Company realized a loss of $784.8
million on the sale of PPM assets, incurred costs to exit the PPM business,
including losses from operations, of $199.0 million and realized a gain on the
sale of the contract services division of $91.1 million, net of taxes of $55.9
million.
9
<PAGE> 10
CAREMARK RX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
NOTE 5. CALIFORNIA PPM DISCONTINUED OPERATIONS
The Company's California PPM operations includes MedPartners Provider
Network ("MPN"), a wholly-owned subsidiary of the Company and a healthcare
service plan licensed under the Knox-Keene Health Care Service Plan Act of 1975.
In March 1999, the California Department of Corporations (the "DOC") appointed a
conservator and assumed control of the business operations of MPN. The
conservator, purportedly on behalf of MPN, filed a voluntary petition under
Chapter 11 of the United States Bankruptcy Code, placing MPN into bankruptcy.
The Company judicially challenged the authority of both the DOC and the
conservator to take these actions.
On April 9, 1999, the Company and representatives of the State of
California (the "State") reached an agreement in principle to settle the
disputes relating to MPN. The proposed settlement provided for, among other
things: a transition plan for the orderly and timely disposition of the existing
operations of MPN and the Company's California PPM-related assets; the continued
funding of the Company's California PPM operations with all of the proceeds from
such disposition; restoration of MPN's assets, operations and management
responsibilities to the Company, which will operate MPN as a debtor in
possession under the Bankruptcy Code, subject to oversight of the successor to
the originally appointed conservator; and the continuation in a monitoring role
by such successor and the DOC with primary oversight responsibilities on the
fulfillment of the proposed settlement and transition plan. The proposed
settlement also provided for the Company to provide a letter of credit in the
amount of $25 million as security for its funding obligations.
On May 10, 1999, pending execution of a definitive settlement
agreement, the Company and the State reached an interim agreement (the "Interim
Agreement") to begin implementation of the principal terms of the proposed
settlement. As part of the Interim Agreement, the DOC stayed its prior orders,
and sought and received an order from the Superior Court modifying the
conservator's role and appointing him as a special monitor for MPN (the "Monitor
Order"). The Monitor Order was intended to allow the Company to proceed with its
transition plan for the orderly and timely disposition of the existing operation
of MPN and the Company's California PPM-related assets. In particular, the
Monitor Order provided that: MPN property, business, and assets would be
returned immediately to MPN, which would be managed by the Company and operate
as a debtor in possession under the Bankruptcy Code; a special monitor appointed
by the state would provide oversight and supervision of MPN and maintain certain
operational controls over MPN pending approval by the Bankruptcy Court of the
definitive settlement agreement; and the Company would fund, as contemplated in
its transition plan, the working capital requirements of its subsidiaries to
enable the normal continuing operations of the managed physician practices,
including the payment of adjudicated provider claims.
On June 9, 1999, the Company, the State and the special monitor
executed a definitive settlement agreement. In addition to the matters set forth
above, the parties agreed to include in the settlement agreement certain
covenants establishing the foundation for a chapter 11 plan of reorganization
for MPN. The Company and the State subsequently dismissed the Superior Court
litigation and the United States Bankruptcy Court for the Central District of
California (the "Bankruptcy Court") presiding over MPN's chapter 11 bankruptcy
case appointed the former special monitor as an examiner (the "Examiner") with
limited expanded power upon the request of the official committee of unsecured
creditors appointed in MPN's chapter 11 bankruptcy case. On June 16, 1999, the
Company, the State and the Examiner executed an amended and restated settlement
agreement reflecting these developments (the "Settlement Agreement").
At a hearing held on July 19, 1999, the Bankruptcy Court approved the
Settlement Agreement and authorized MPN to enter into and consummate the
transactions contemplated by the Settlement Agreement, with effectiveness and
implementation of the Settlement Agreement to occur according to its terms and
conditions. In addition, as contemplated by and provided for in the Settlement
Agreement, during the course of MPN's chapter 11 case, the Bankruptcy Court has
approved MPN's consent to and/or participation in a series of transactions
implementing the Company's disposition of the operations of MPN. The last such
transaction involving MPN was approved by the Bankruptcy Court at a hearing held
on August 10, 1999. Also as contemplated by the Settlement Agreement, it is
anticipated that MPN will file a plan of reorganization with the Bankruptcy
Court in November 1999, which plan will set forth the terms and conditions upon
which MPN's remaining assets will be distributed to creditors of MPN entitled to
participate therein.
Included in current assets of discontinued operations at September 30,
1999 are restricted cash deposits and invested cash balances of approximately
$46 million. These cash balances are restricted for purposes of satisfying
certain remaining liabilities of the Company's California PPM operations which
were sold during 1999.
10
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CAREMARK RX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
NOTE 6. CONVERTIBLE PREFERRED SECURITIES
In September 1999, the Company privately placed $200 million of 7%
Shared Preference Redeemable Securities ("Convertible Preferred Securities").
The Convertible Preferred Securities represent preferred undivided beneficial
interests in the assets of Caremark Rx Capital Trust I (the "Trust"). The sole
asset of the Trust consists of 7% Convertible Subordinated Debentures due 2029,
which were acquired by the Trust from the Company in connection with the
offering. The Convertible Subordinated Debentures underlying the Convertible
Preferred Securities are securities of, and the Convertible Preferred Securities
are guaranteed by, Caremark Rx. The Convertible Preferred Securities mature in
the year 2029 but are redeemable prior to maturity at the option of the Company
beginning October 15, 2002. Each Convertible Preferred Security is convertible
at the option of the holder into shares of common stock, par value $.001 per
share, of the Company at a conversion rate of 6.7125 shares of common stock for
each Convertible Preferred Security (equivalent to a conversion price of $7.4488
per share of common stock.) Dividends on the Convertible Preferred Securities
will be payable at an annual rate of 7% of the liquidation amount of $50 per
Convertible Preferred Security, and will be payable quarterly in arrears on
January 1, April 1, July 1 and October 1 each year, beginning January 1, 2000.
Dividends on the Convertible Preferred Securities may be deferred by the Company
for up to 20 consecutive quarters. The Company has no intention at the present
time to defer the payment of the dividends.
NOTE 7. CONTINGENCIES
The Company is party to certain legal actions arising in the ordinary
course of business. The Company is named as a defendant in various legal actions
arising primarily out of services rendered by physicians and others employed by
its affiliated medical groups, as well as personal injury and employment
disputes. In addition, certain of its affiliated medical groups are named as
defendants in numerous actions alleging medical negligence on the part of their
physicians. In certain of these actions, the Company and/or the medical group's
insurance carrier has either declined to provide coverage or has provided a
defense subject to a reservation of rights. Management does not view any of
these actions as likely to result in an uninsured award that would have a
material adverse effect on the operating results and financial condition of the
Company.
In June 1995, Caremark Inc. ("Caremark") and Caremark International,
Inc. ("CII") agreed to settle an investigation with certain agencies of the
United States government (the "Settlement Agreement"). The Settlement Agreement
allows Caremark and CII to continue participating in Medicare, Medicaid, and
other government healthcare programs. In the Settlement Agreement, Caremark and
CII agreed to continue to maintain certain compliance-related oversight
procedures until June 15, 2000. Should these oversight procedures reveal
credible evidence of legal or regulatory violations, Caremark and CII are
required to report such violations to the OIG and DOJ. Caremark and CII are
therefore subject to increased regulatory scrutiny and, in the event that either
Caremark or CII commits legal or regulatory violations, it may be subject to an
increased risk of sanctions or penalties, including disqualification as a
provider of Medicare or Medicaid services, which would have a material adverse
effect on the operating results and financial condition of the Company.
In connection with the matters described above relating to the
Settlement Agreement, Caremark and CII are the subject of various
non-governmental claims and may in the future become subject to additional
OIG-related claims. Caremark and CII are the subject of, and may in the future
be subjected to, various private suits and claims being asserted in connection
with matters relating to the OIG settlement by CII's former stockholders,
patients who received healthcare services from Caremark and such patients'
insurers. The Company cannot determine at this time what costs or liabilities
may be incurred in connection with future disposition of non-governmental claims
or litigation.
Beginning in September 1994, Caremark was named as a defendant in a
series of lawsuits added to a pending group of actions (including a class
action) brought in 1993 under the antitrust laws by local and chain retail
pharmacies against brand name pharmaceutical manufacturers, wholesalers and
prescription benefit managers other than Caremark. The lawsuits, filed in
federal district courts in at least 38 states (including the United States
District Court for the Northern District of Illinois), allege that at least 24
pharmaceutical manufacturers provided unlawful price and service discounts to
certain favored buyers and conspired among themselves to deny similar discounts
to the complaining retail pharmacies (approximately 3,900 in number). The
complaints charge that certain defendant prescription benefit managers,
including Caremark, were favored buyers who knowingly induced or received
11
<PAGE> 12
CAREMARK RX, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - (Continued)
discriminatory prices from the manufacturers in violation of the Robinson-Patman
Act. Each complaint seeks unspecified treble damages, declaratory and equitable
relief and attorney's fees and expenses.
All of these actions have been transferred by the Judicial Panel for
Multi-District Litigation to the United States District Court for the Northern
District of Illinois for coordinated pretrial procedures. Caremark was not named
in the class action. In April 1995, the Court entered a stay of pretrial
proceedings as to certain Robinson-Patman Act claims in this litigation,
including the Robinson-Patman Act claims brought against Caremark, pending the
conclusion of a first trial of certain of such claims brought by a limited
number of plaintiffs against five defendants not including Caremark. On July 1,
1996, the district court directed entry of a partial final order in the class
action approving an amended settlement with certain of the pharmaceutical
manufacturers. The amended settlement provides for a cash payment by the
defendants in the class action (which does not include Caremark) of
approximately $351 million to class members in settlement of conspiracy claims
as well as a commitment from the settling manufacturers to abide by certain
injunctive provisions. All class action claims against non-settling
manufacturers as well as all opt out and other claims generally, including all
Robinson-Patman Act claims against Caremark, remain unaffected by this
settlement, although numerous additional settlements have been reached between a
number of parties to the class and individual manufacturers. The class action
conspiracy claims against the remaining defendants were tried in the fall of
1998, and resulted in a judgment by the court at the close of the plaintiffs'
case in favor of the remaining defendants. That judgment was appealed and was
affirmed in part and remanded in part. It is expected that trials of the
remaining individual conspiracy claims will move forward in 1999 or early 2000,
and will precede the trial of any Robinson-Patman Act claims.
In March 1998, a consortium of insurance companies and third-party
private payors sued Caremark alleging violations of the Racketeering Influenced
and Corrupt Organizations Act ("RICO"), the Employee Retirement Income Security
Act ("ERISA") and claims of state law fraud and unjust enrichment. The case was
filed in the United States District Court for the Northern District of Illinois.
The plaintiffs maintain that Caremark's home infusion division implemented a
scheme to submit fraudulent claims for payment to the payors which the payors
unwittingly paid. The complaint seeks unspecified damages, treble damages and
attorney's fees and expenses. In September 1999, the court dismissed all RICO
claims, as well as the claims of all but 9 of the plaintiffs.
The Company is a defendant in two lawsuits filed in Supreme Court of
the State of New York, City of New York, claiming that a "Termination Event" has
occurred with respect to the Threshold Appreciation Price Securities ("TAPS")
issued by the Company in September 1997. One of those actions is brought by
certain entities claiming to "own or control" 1.8 million TAPS and the other
purports to be brought by a holder of an unknown number of TAPS as a class
action on behalf of a purported class of all holders of TAPS. The complaints
allege that a "Termination Event" has occurred because of, among other things,
the actions taken by the DOC described in Note 5, California Discontinued PPM
Operations. The complaints seek an order requiring the Company immediately to
cause to be released to the TAPS holders approximately $400 million of United
States Treasury Notes currently held in escrow. The escrowed funds otherwise
would be released to the Company in exchange for common stock of the Company at
the final settlement date of the TAPS on August 31, 2000. The Company has filed
a motion for summary judgment.
In June 1999, various insureds filed a class action complaint against
Caremark Inc., Caremark International Inc. and third party payors in the United
States District Court for the Northern District of Illinois. The action alleges
violations of the Racketeer Influenced Corrupt Organizations Act, the Illinois
Consumer Fraud Act, and the Employee Retirement Income Security Act as the
result of practices developed by Caremark's Home Infusion Division to submit,
and cause others to submit, fraudulent claims for payment to insurers of health
care benefits. The Home Infusion Division was divested in 1995. The action
alleges that the plaintiff's suffered damages stemming from increased premiums
charged by the third party payors, and increased co-payments and deductibles
charged by Caremark. Plaintiffs request unspecified damages, declaratory relief,
attorneys' fees and costs.
There can be no assurance that the lawsuits will not have a disruptive
effect upon the operations of the business, that the defense of the lawsuits
will not consume the time and attention of senior management of Caremark Rx and
its subsidiaries, or that the resolution of the lawsuits will not have a
material adverse effect on the operating results and financial condition of the
Company. The Company intends to vigorously defend each of these lawsuits. The
Company believes that these lawsuits will not have a material adverse effect on
the operating results and financial condition of the Company.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
The Company is one of the largest pharmaceutical services companies in
the United States, with net revenue of approximately $2.4 billion for the first
nine months of 1999. The Company's core operations are comprised of its pharmacy
benefit management services ("PBM") unit and its therapeutic pharmaceutical
services unit ("CTS"). The services of these two business units are sold both
separately and together to assist corporations, insurance companies, unions,
government employee groups and managed care organizations throughout the United
States in delivering prescription drugs to their members in a cost-effective
manner.
The Company's net revenues generally include payments by its customers
based on the cost of pharmaceuticals dispensed to their members and
administrative fees. Pharmaceuticals are dispensed from retail pharmacies
included in one of the Company's networks or from one of its three wholly-owned
and operated mail service pharmacies. Costs of net revenues are comprised
primarily of pharmaceutical acquisition costs and the cost of services
associated with dispensing drugs and operating systems.
The Company has begun to implement a strategy of marketing to health
plans. While this strategy is expected to result in higher revenues and higher
average revenue per account, the Company anticipates that its gross
margins--that is, gross profit as a percentage of net revenues--will decrease
in the future as it implements this strategy. Health plans typically involve a
higher concentration of retail pharmacy services, which have a lower margin than
the Company's mail service pharmacy and CTS operations. The Company anticipates
that overall margins will decrease in the future as a result of the strategy of
marketing to health plans and as its PBM operations continue to increase at a
faster rate than its higher-margin CTS operations.
On November 11, 1998, the Company announced that Caremark, which
includes its PBM business, would become its core operating unit and announced
its intention to divest its other businesses. As a result, the Company restated
its prior period financial statements to reflect the appropriate accounting for
these discontinued operations. Additionally, the Company recorded a charge
related to discontinued operations of $1.1 billion during the fourth quarter of
1998 and an additional related charge of $199.3 million in the second quarter of
1999. On January 26, 1999, the Company completed the sale of its government
services business for $67 million less certain working capital adjustments. On
March 12, 1999, the Company completed the sale of its Team Health business for
$318.9 million, less certain expenses, and retained approximately 7.3% of the
equity of the recapitalized company. Through September 30, 1999, the Company has
divested all of its contract services operations, all its California PPM
operations and 107 clinics in its non-California PPM operations, generating
approximately $852 million in gross proceeds, including the assumption of
liabilities by purchasers. The Company expects to sell the remaining nine
non-California PPM clinics by the end of 1999.
The Company's significant debt levels in 1998 and prior years were
primarily generated from its PPM operations. The net interest expense allocated
to the discontinued operations was based on the expected net proceeds from the
sale of and exit from the discontinued operations and was limited by generally
accepted accounting principles; accordingly, the interest expense allocated to
continuing operations is not necessarily indicative of the net interest expense
those operations would have incurred as an independent entity.
The Company has tax net operating loss ("NOL") carryforwards of
approximately $819 million as of December 31, 1998. Additionally, its sales of
discontinued operations have generated and will generate substantial additional
tax NOL carryforwards in 1999. As a result, the Company recorded a valuation
allowance to reduce its net deferred tax assets to zero as of the end of 1998.
This valuation allowance had the effect of reducing the Company's effective tax
rate for accounting purposes for the nine months ended September 30, 1999 to
approximately 8%, which results in a tax expense recognized for continuing
operations that is closer to its actual cash taxes payable. The Company's taxes
payable in 2000 and, until such time as its NOLs are utilized, will consist of
state taxes in those states where it does not have state NOL carryforwards, and
alternative minimum taxes for federal income tax purposes. The Company expects
its effective tax rate to be approximately 10% after 1999 until such time as the
NOLs are utilized.
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
Results of Operations
The Company derives its revenues from the sale of PBM and CTS services in
the United States:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- ------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
PERCENT OF TOTAL NET REVENUES
PBM......................................................... 85% 84% 84% 84%
CTS......................................................... 15% 16% 16% 16%
PERCENT OF OPERATING INCOME BEFORE
CORPORATE OVERHEAD
PBM......................................................... 74% 71% 69% 68%
CTS......................................................... 26% 29% 31% 32%
</TABLE>
Results of Operations for the Three Months Ended September 30, 1999 and 1998
The Company's revenues continue to exhibit sustained growth. Key
factors contributing to this growth include high customer retention, additional
service provided to existing customers, new customer contracts and drug cost
inflation. The preponderance of the Company's revenue is earned on a
fee-for-service basis through contracts covering one to three-year periods.
Revenues for selected types of services are earned based on a percentage of
savings achieved or on a per-enrollee or per-member basis; however, these
revenues are not material to total revenues.
For the three months ended September 30, 1999 and 1998, net revenue was
$813.0 million and $660.6 million, representing an increase of $152.4 million
(23.1%) from 1998 to 1999, respectively. These increases are primarily
attributable to pharmaceutical price increases, the addition of new customers,
additional services provided to existing customers and the sale of new products.
Operating income and margins were $44.4 million and 5.5% for the three
months ended September 30, 1999. During the third quarter of 1998, the Company
recorded a one-time benefit of $4.1 million related to an adjustment of an
estimated loss reserve for a risk share contract which was converted to an
administrative services contract. Operating income and margins, adjusted for the
one-time item, were $35.3 million and 5.4% for the three months ended September
30, 1998. The 25.8% increase in operating income is primarily due to the growth
in revenue. (Operating income represents earnings before interest, restructuring
charges and income taxes and excludes losses from discontinued operations.)
Although overall margins showed a modest increase over prior years, Margins in
the CTS unit decreased due to sales of newly introduced products, which have
lower profit margins. The CTS unit also incurred additional expenses during the
third quarter to prepare for the Synagis sales season and to prepare for new
business related to a new managed care customer. The PBM unit's margins
increased due to expense control efforts and productivity gains realized from
previous investments in technology.
Net interest expense was $29.3 million and $19.5 million for the three
months ended September 30, 1999 and 1998, respectively. The period over period
increase in interest expense primarily resulted from increased interest rates on
floating rate debt and the amount of interest allocated to discontinued
operations. Based on the expected net proceeds from the sale and exit of the
discontinued operations, no interest expense has been allocated to these
discontinued operations for the three months ended September 30, 1999.
Nine Months Ended September 30, 1999 and 1998
For the nine months ended September 30, 1999 and 1998, net revenue was
$2,394.3 million and $1,920.3 million, respectively, representing an increase of
$474.0 million (24.7%) from 1998 to 1999. This increase is primarily
attributable to the addition of new customers, pharmaceutical price increases,
additional products and services provided to existing customers and the sale of
new products.
14
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
Operating income was $126.4 million for the nine months ended September 30,
1999, up from $97.5 million (adjusted for the $4.1 million one-time benefit
mentioned above) for the nine months ended September 30, 1998, a 29.6% increase.
Operating income increased primarily from growth in net revenue. Operating
margins were 5.3% in 1999, and 5.1% (adjusted for the $4.1 million one-time
benefit mentioned above) in 1998. (Operating income represents earnings before
interest, restructuring charges and income taxes and excludes losses from
discontinued operations.) Although overall margins showed an increase over prior
years, margins in the CTS unit decreased due to sales of newly introduced
products which have lower profit margins. The PBM unit's margins increased due
to expense control efforts and productivity gains realized from previous
investments in technology.
Net interest expense was $86.9 million and $60.6 million for the nine
months ended September 30, 1999 and 1998, respectively. The period over period
increase in interest expense resulted from increased debt levels, higher
interest rates on floating rate debt and a reduction in the amount of interest
allocated to discontinued operations. During the last three quarters of 1998,
the Company experienced increases in debt levels which were a result of
substantial uses of cash in its discontinued operations for acquisitions,
capital expenditures and working capital requirements. Based on the expected net
proceeds from the sale of and exit from the discontinued operations, interest
expense has been allocated to these discontinued operations in the first quarter
of 1999.
Discontinued Operations
The loss from discontinued operations in the second quarter of 1999 of
$199.3 million is an adjustment to the charge taken during the fourth quarter of
1998. The adjustment includes an additional $236.6 million for the impairment
and write-offs of intangibles and other PPM assets and a reduction in the
estimated costs to exit the PPM operations of approximately $37.3 million.
LIQUIDITY AND CAPITAL RESOURCES
General. The Company broadly defines liquidity as its ability to
generate sufficient cash flow from operating activities to meet its obligations
and commitments. In addition, liquidity includes the ability to obtain
appropriate financing and to convert into cash those assets that are no longer
required to meet existing strategic and financial objectives. Therefore,
liquidity cannot be considered separately from capital resources that consist of
current or potentially available funds for use in achieving business objectives
and meeting debt service commitments.
Currently, the Company's liquidity needs arise primarily from debt
service on its indebtedness and the funding of its discontinued operations, as
well as its working capital requirements and capital expenditures.
Cash Flows. The Company has experienced positive cash flow from
continuing operations for the nine months ended September 30, 1999. This
positive cash flow has been offset by investing activities, primarily capital
expenditures and one acquisition. The Company's cash flow from continuing
operations for the nine months ended September 30, 1999 was $137.4 million, and
was enhanced by an increase in accounts payable days outstanding by
approximately 7 compared to December 31, 1998. This increase in accounts payable
days outstanding produced approximately $50 million in cash flow from
operations. The Company anticipates reducing account payable days outstanding to
more historic levels during the fourth quarter of 1999. The Company also
received net proceeds of $193.0 million from the issuance of convertible
preferred securities. Cash provided by discontinued operations for this period
was $237.1 million. For the nine months ended September 30, 1999, the primary
source of funds provided by discontinued operations related to the sale of the
contract services division and various PPM asset sales. See Note 4 of the
accompanying unaudited Condensed Consolidated Financial Statements.
Credit Facility. The Company has a credit facility with Bank of
America, N.A. (formerly NationsBank N.A.), as administrative agent. The Company
has pledged the capital stock of the subsidiary that owns its primary operating
subsidiary as security for amounts outstanding. The credit facility is
guaranteed by the Company's material subsidiaries and matures in June 2001. The
credit facility consists of the following:
- An amortizing tranche A term loan with $58.1 million
outstanding at September 30, 1999. Quarterly principal
payments on this term loan are scheduled to begin in November
1999. Accordingly, the portion of this debt due with the next
twelve months has been classified as short-term.
- A non-amortizing tranche B term loan with $58.1 million
outstanding at September 30, 1999.
- A revolving credit facility in an aggregate principal amount
of up to $400 million. At September 30, 1999, the Company had
$194.0 million in borrowings and $22.0 million in letters of
credit under the revolving credit facility, and had $25
million reserved for a letter of credit with regard to the
funding obligations under its June 1999 settlement with the
State of California discussed below. Net of these amounts, the
Company had $159.0 million available for borrowing under the
credit facility as of September 30, 1999.
15
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
The credit facility indebtedness currently bears interest at variable
rates based on LIBOR (as defined), plus varying margins. At the Company's
option, or upon certain defaults or other events, credit facility indebtedness
may instead bear interest based on prime rate.
The credit facility provides for net cash proceeds received from asset
sales to be used to reduce the outstanding debt under the term loans, except
that the Company is permitted to retain up to $93 million of net cash proceeds
from asset dispositions occurring on or after July 1, 1999 (in addition to the
$15 million in net cash proceeds previously designated for the payment of
certain promissory notes), for use in its business and operations in the
ordinary course, rather than applying those proceeds to the term loans.
The Company is also required to repay the term loans ratably under the
credit facility with 100% of the net cash proceeds received from certain
issuances of equity or debt or extraordinary receipts, and with 50% of the
excess cash flow (as defined) for each fiscal year. On September 14, 1999, the
Company amended the credit facility to, among other things, permit the
application of only $80 million of the net proceeds from the Company's 7% Shared
Preference Redeemable Securities ("SPURS") to the term loans.
In November 1999, the Company entered into an amendment to its credit
facility which allowed for the modification of certain financial covenants to
reflect, among other things, the completion of the Convertible Preferred
Securities offering.
The credit facility contains covenants that, among other things,
restrict the Company's ability to incur additional indebtedness or guarantee
obligations, engage in mergers or consolidation, dispose of assets, make
investments, loans or advances, engage in certain transactions with affiliates,
conduct certain corporate activities, create liens, make capital expenditures,
prepay or modify the terms of other indebtedness, pay dividends and other
distributions, and change its business. In addition, the Company is required to
comply with specified financial covenants, including a maximum leverage ratio, a
minimum fixed charge coverage ratio and a minimum interest expense coverage
ratio. The credit facility includes various customary and other events of
default, including cross default provisions, defaults for any material judgment
or change in control, and defaults relating to liabilities arising from the
Company making additional investment in its California PPM business.
Current Portion of Long-Term Debt. The Company's current portion of
long-term debt includes $420 million for the Senior Subordinated Notes, due
September 1, 2000 and $61 million of term loan indebtedness under the credit
facility. The TAPS securities, which mature August 31, 2000, will result in the
Company issuing approximately 21.7 million shares of stock to the TAPS holders,
in exchange for $481.4 million of cash. The proceeds from the TAPS will be used
to make the debt payments discussed above.
The Company currently is party to litigation relating to its TAPS
securities, alleging that events have occurred that entitle the TAPS holders to
terminate their obligations to purchase its common stock in August 2000 and that
entitle the TAPS holders to receive the $481.4 million of U.S. Treasury Notes
held under the TAPS arrangements to secure those obligations. Any adverse
determination in this litigation would materially adversely affect the Company's
liquidity position, including its ability to repay the Senior Subordinated Notes
due in September 2000. However, payment of the amounts due under the credit
facility would not be payable on September 1, 2000 if receipt of the TAPS
proceeds are delayed.
Convertible Preferred Securities. In September 1999, the Company
privately placed $200 million of Convertible Preferred Securities. The
Convertible Preferred Securities mature in the year 2029, but are redeemable
prior to maturity at the option of the Company beginning October 15, 2002, at
prices ranging from $52.00 to $50.00 plus accumulated and unpaid interest per
Convertible Preferred Security. Each Convertible Preferred Security is
convertible at the option of the holder into shares of Common Stock at a
conversion rate of 6.7125 shares of Common Stock for each Convertible Preferred
Security (equivalent to a conversion price of $7.4488 per share of Common
Stock.) Dividends on the Convertible Preferred Securities will be payable at an
annual rate of 7% of the liquidation amount of $50 per Convertible Preferred
Security, and will be payable quarterly in arrears on January 1, April 1, July 1
and October 1 each year, beginning January 1, 2000. Dividends on the Convertible
Preferred Securities may be deferred by the Company for up to 20 consecutive
quarters. The Company has no intention at the present time to defer the payment
of the dividends.
Receivables Securitization. The credit facility as amended permits up
to $125 million in accounts receivable securitization. The Company has
securitized certain of its accounts receivable pursuant to an accounts
receivable securitization facility with The Chase Manhattan Bank as funding
agent. As of September 30, 1999, the Company had securitized approximately $90.0
million in accounts receivable.
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
Discontinued Operations. Cash used to fund exit costs, which are
classified in current liabilities as other accrued expenses and liabilities,
will be funded by the revolving credit facility, cash flow from continuing
operations and proceeds from the sales of the discontinued operations. The
Company believes that amounts available from the sales of discontinued
operations, amounts available under the revolving credit facility, and cash flow
from continuing operations will be sufficient to fund the cash requirements of
the discontinued operations. However, there can be no assurance that the cash
generated from such sources will be sufficient to meet these funding needs. If
it is not, the Company would seek to enhance its liquidity position through
further modifications to the credit facility, incurrence of additional
indebtedness, asset sales, restructuring of debt, and/or the sale of securities.
Although the Company currently believes that one or more of such alternatives
would be available to enhance liquidity, each such alternative is dependent upon
future events, conditions and other matters outside its control.
Other Indebtedness. The Company has outstanding two other series of
debt securities. Neither is guaranteed by any subsidiary. The Senior Notes are
in an aggregate principal amount of $450 million and bear interest at 7 3/8%
annually, with all principal amounts due in October 2006. The Senior
Subordinated Notes are in an aggregate principal amount of $420 million and bear
interest at 6 7/8% annually, with all principal amounts due in September 2000.
The indenture for each series of notes contains, among other things,
restrictions on subsidiary indebtedness, sale and leaseback transactions, and
consolidation, merger and sale of assets.
The Senior Notes indenture also contains restrictions on indebtedness
secured by liens. To comply with this covenant, the Company has secured the
Senior Notes with an equal and ratable pledge of all of the capital stock of the
subsidiary that owns its primary operating subsidiary. The two series of these
notes are otherwise unsecured.
TAPS. In September 1997, the Company issued 21.7 million 6.50% TAPS
with a stated amount of $22.1875 per security. Each TAPS consists of (i) a stock
purchase contract which obligates the holder to purchase Common Stock on the
final settlement date (August 31, 2000) and (ii) 6.25% U.S. Treasury Notes due
August 31, 2000. Under each stock purchase contract the Company is obligated to
sell, and the TAPS holder is obligated to purchase on August 31, 2000, between
0.8197 of a share and one share of the Company's Common Stock. The exact number
of common shares to be sold is dependent on the market value of the Company's
Common Stock in August 2000. The number of shares issued by the Company in
conjunction with this security will not be more than approximately 21.7 million
or less than approximately 17.8 million (subject to certain anti-dilution
adjustments). The Treasury Notes forming a part of the TAPS have been pledged to
secure the obligations of the TAPS holders under the purchase contracts.
Pursuant to the TAPS, TAPS holders receive payments equal to 6.50% of the stated
amount per annum consisting of interest on the Treasury Notes at the rate of
6.25% per annum and yield enhancement payments payable semi-annually by the
Company at the rate of 0.25% of the stated amount per annum. Additional paid-in
capital has been reduced by $20.4 million for issuance costs and the present
value of the annual 0.25% yield enhancement payments payable to the holders of
the TAPS. These securities are not included on the balance sheet; an increase in
stockholders' equity would be reflected upon receipt by the Company of cash
proceeds of $481.4 million on August 31, 2000 from the issuance of its common
stock pursuant to the TAPS.
OTHER MATTERS
Year 2000 Compliance. The year 2000 ("Y2K") presents a problem for
computer software and hardware that were not designed to handle dates beyond the
year 1999. The Y2K problem is pervasive and complex because virtually every
computer operation will be affected in some way by the rollover of the last two
digits of the year to "00". As a consequence, any such software and hardware
will need to be modified some time prior to December 31, 1999 in order to remain
functional. Computer systems and hardware that do not properly handle this
rollover could generate erroneous date or fail to function.
The Company has initiated a company-wide program to address Year 2000
readiness with respect to the information systems (software and hardware) and
equipment and systems utilized in its operations. The program includes:
- an inventory of the information systems, hardware, and
equipment utilized in operations,
- an assessment of the Year 2000 issues associated with the
systems, hardware and equipment,
- the remediation of such systems, hardware and equipment to
achieve Year 2000 readiness,
- the testing of its systems, hardware and equipment to achieve
Year 2000 readiness,
- the testing of such systems, hardware and equipment to confirm
Year 2000 readiness, and
- the development of contingency plans to address the principal
risks facing the Company in its efforts to achieve Year 2000
readiness.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - (CONTINUED)
The Year 2000 program also includes the "Trading Partners Initiative,"
which is designed to provide the Company with insights into the Year 2000
readiness of certain of its customers, suppliers and vendors. In addition, the
Company has sent letters to certain manufacturers of the hardware and equipment
utilized in operations requesting that such manufacturers address the Year 2000
readiness of such hardware and equipment.
In terms of the status of the Year 2000 program, including systems
related to discontinued operations, management believes that the inventory of
information systems is approximately 99% complete, that its assessment of Year
2000 issues associated with such information systems is approximately 95%
complete and that its remediation efforts with respect to such information
systems is approximately 75% complete. With respect to the status of the Year
2000 efforts in connection with equipment and systems that include embedded
logic or software which presents Year 2000 issues, management believes that the
inventory of such equipment and systems is approximately 80% complete. The
assessment of Year 2000 issues associated with such equipment and systems is
approximately 80% complete. The Company has completed its assessment of all
these areas for continuing operations. The Company expects to commence testing
efforts with respect to the systems, hardware and equipment following the
completion of the inventory and assessment stages of the Year 2000 program. The
Company has not, to date, received substantial responses to its requests of
customers, suppliers and vendors with respect to their Year 2000 readiness. As a
result, management is currently unable to form an opinion as to the present
level of risk associated with the state of Year 2000 readiness of its customers,
vendors and suppliers, other than a belief that the Year 2000 issues generally
associated with the healthcare industry are very significant and complex and
include issues associated with the delivery of healthcare services and products
as well as the billing and collection of amounts due for such services and
products.
According to a recent report by the Senate Special Subcommittee on the
Year 2000 Technology Problem, the healthcare industry lags behind other
industries in Year 2000 preparedness. While, according to the report, the
pharmaceutical segment appears to be better Year 2000 prepared than other
segments of the healthcare industry, the preparedness of health claim billing
systems of third party payors is progressing slowly.
The Company's management believes that its Year 2000 program relating
is to continuing operations is substantially complete as of the end of October
1999. The Company estimates that the total cost of the Year 2000 program,
including $13.3 million in costs associated with discontinued operations, will
be approximately $19.4 million, of which approximately $16.3 million has been
spent through September 30, 1999. Of such aggregate Year 2000 expenditures made
to date, management currently estimates that approximately $12.3 million
consisted of capital expenditures for new or replacement systems, hardware and
equipment and approximately $4.0 million consisted of expenses of the Year 2000
program. The source of the funding utilized to make such historical expenditures
has been borrowings under the credit facility and cash flow from operations.
Management believes that a significant amount of the funds spent to date and
budgeted in the future for achieving Year 2000 readiness would otherwise have
been spent and budgeted in connection with ongoing information technology
efforts.
The Company believes that the most reasonable likely worse case
scenario with respect to Year 2000 issues is the possibility that equipment and
systems that included embedded logic of software will fail to be Year 2000 ready
and that such failure will cause such equipment to fail to operate or operate
improperly. The failure of such equipment may expose individual patients to
potential injury and may expose the Company to claims and liabilities. At this
time the Company cannot estimate the likelihood or magnitude of any such
equipment or systems failures. The Company has established a contingency plan
for the failure of such equipment or systems which includes, among other things,
alternative delivery systems and closer coordination with its customers and
vendors. The Company is continuously evaluating and updating its contingency
plan.
The Year 2000 problems experienced by the Company's vendors, suppliers
and distribution network could result is its experiencing difficulty in
obtaining and distributing prescription drugs or pharmaceutical therapies,
thereby disrupting the PBM business as historically conducted. Year 2000
problems experienced by HMOs, other third party payors and the government
agencies which administer Medicare, Medicaid and other government sponsored
healthcare programs, may result in delays in payments to the Company for
services or in erroneous payments for such services which could adversely affect
its results of operations and liquidity.
The foregoing discussion involves the estimates and judgments of the
Company's senior management. There can be no assurance that the Company will be
Year 2000 ready or that it will not incur liability or suffer a material adverse
effect as a result of its failure to be Year 2000 ready. In addition, there can
be no assurance that the estimated expenses to make the Company Year 2000 ready
will not be materially higher than estimated or that the Company will not incur
additional expenses associated with its efforts to get Year 2000 ready or the
failure to do so.
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<PAGE> 19
FACTORS THAT MAY AFFECT FUTURE RESULTS
The future operating results and financial condition of the Company are
dependent on the Company's ability to market its services profitably,
successfully increase market share and manage expense growth relative to revenue
growth. The future operating results and financial condition of the Company may
be affected by a number of additional factors, including: the Company's
divestiture strategy; competition for expansion opportunities; efforts to
control healthcare costs; exposure to professional liability; and pharmacy
licensing requirements; healthcare reform legislation; implementation of the
Company's settlement agreement with the State of California; adverse resolution
of lawsuits pending against the Company; implementation of the Company's
strategic plan; the Company's liquidity and capital requirements; the Company's
failure to ensure its information systems are Year 2000 compliant and government
regulation. Changes in one or more of these factors could have a material
adverse effect on the future operating results and financial condition of the
Company.
There are various legal matters which, if materially adversely
determined, could have a material adverse effect on the Company's operating
results and financial condition. See Item 3 of the Company's Annual Report filed
on Form 10-K for the fiscal year ended December 31, 1998 and Notes 5 and 7 of
the unaudited condensed consolidated financial statements included herein.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates
related to its long-term debt. The impact on earnings and value of its current
and long-term debt is subject to change as a result of movements in market rates
and prices. As of September 30, 1999, the Company had $229.9 million in
long-term debt subject to variable interest rates. The remaining $450.0 million
in long-term debt is subject to fixed rates of interest. The Company had $80.4
million in current debt subject to variable interest rates. The remaining $420
million in current debt is subject to fixed rates of interest. A hypothetical
increase in interest rates of 1% would result in potential reductions in future
pre-tax earnings of approximately $3.1 million per year. The impact of such a
change on the carrying value of the current and long-term debt would not be
significant. These amounts are determined based on the impact of the
hypothetical interest rates on the Company's current and long-term debt balances
and do not consider the effects, if any, of the potential changes in the overall
level of economic activity that could exist in such an environment.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to certain legal actions arising in the ordinary
course of business. The Company is named as a defendant in various legal actions
arising primarily out of services rendered by physicians and others employed by
its affiliated medical groups, as well as personal injury and employment
disputes. In addition, certain of its affiliated medical groups are named as
defendants in numerous actions alleging medical negligence on the part of their
physicians. In certain of these actions, the Company and/or the medical group's
insurance carrier has either declined to provide coverage or has provided a
defense subject to a reservation of rights. Management does not view any of
these actions as likely to result in an uninsured award that would have a
material adverse effect on the operating results and financial condition of the
Company.
In June 1995, Caremark Inc. ("Caremark") and Caremark International,
Inc. ("CII") agreed to settle an investigation with certain agencies of the
United States government (the "Settlement Agreement"). The Settlement Agreement
allows Caremark and CII to continue participating in Medicare, Medicaid, and
other government healthcare programs. In the Settlement Agreement, Caremark and
CII agreed to continue to maintain certain compliance-related oversight
procedures until June 15, 2000. Should these oversight procedures reveal
credible evidence of legal or regulatory violations, Caremark and CII are
required to report such violations to the OIG and DOJ. Caremark and CII are
therefore subject to increased regulatory scrutiny and, in the event that either
Caremark or CII commits legal or regulatory violations, it may be subject to an
increased risk of sanctions or penalties, including disqualification as a
provider of Medicare or Medicaid services, which would have a material adverse
effect on the operating results and financial condition of the Company.
In connection with the matters described above relating to the
Settlement Agreement, Caremark and CII are the subject of various
non-governmental claims and may in the future become subject to additional
OIG-related claims. Caremark and CII are the subject of, and may in the future
be subjected to, various private suits and claims being asserted in connection
with matters relating to the OIG settlement by CII's former stockholders,
patients who received healthcare services from Caremark and such patients'
insurers. The Company cannot determine at this time what costs or liabilities
may be incurred in connection with future disposition of non-governmental claims
or litigation.
Beginning in September 1994, Caremark was named as a defendant in a
series of lawsuits added to a pending group of actions (including a class
action) brought in 1993 under the antitrust laws by local and chain retail
pharmacies against brand name pharmaceutical manufacturers, wholesalers and
prescription benefit managers other than Caremark. The lawsuits, filed in
federal district courts in at least 38 states (including the United States
District Court for the Northern District of Illinois), allege that at least 24
pharmaceutical manufacturers provided unlawful price and service discounts to
certain favored buyers and conspired among themselves to deny similar discounts
to the complaining retail pharmacies (approximately 3,900 in number). The
complaints charge that certain defendant prescription benefit managers,
including Caremark, were favored buyers who knowingly induced or received
discriminatory prices from the manufacturers in violation of the Robinson-Patman
Act. Each complaint seeks unspecified treble damages, declaratory and equitable
relief and attorney's fees and expenses.
All of these actions have been transferred by the Judicial Panel for
Multi-District Litigation to the United States District Court for the Northern
District of Illinois for coordinated pretrial procedures. Caremark was not named
in the class action. In April 1995, the Court entered a stay of pretrial
proceedings as to certain Robinson-Patman Act claims in this litigation,
including the Robinson-Patman Act claims brought against Caremark, pending the
conclusion of a first trial of certain of such claims brought by a limited
number of plaintiffs against five defendants not including Caremark. On July 1,
1996, the district court directed entry of a partial final order in the class
action approving an amended settlement with certain of the pharmaceutical
manufacturers. The amended settlement provides for a cash payment by the
defendants in the class action (which does not include Caremark) of
approximately $351 million to class members in settlement of conspiracy claims
as well as a commitment from the settling manufacturers to abide by certain
injunctive provisions. All class action claims against non-settling
manufacturers as well as all opt out and other claims generally, including all
Robinson-Patman Act claims against Caremark, remain unaffected by this
settlement, although numerous additional settlements have been reached between a
number of parties to the class and individual manufacturers. The class action
conspiracy claims against the remaining defendants were tried in the fall of
1998, and resulted in a judgment by the court at the close of the plaintiffs'
case in favor of the remaining defendants. That judgment was appealed and was
affirmed in part and remanded in part. It is expected that trials of the
remaining individual conspiracy claims will move forward in 1999 or early 2000,
and will precede the trial of any Robinson-Patman Act claims.
In March 1998, a consortium of insurance companies and third-party
private payors sued Caremark alleging violations of the Racketeering Influenced
and Corrupt Organizations Act ("RICO"), the Employee Retirement Income Security
Act ("ERISA") and claims of state law fraud and unjust enrichment. The case was
filed in the United States District Court for the Northern District of Illinois.
The plaintiffs maintain that Caremark's home infusion division implemented a
scheme to submit fraudulent claims for payment to the payors which the payors
unwittingly paid. The complaint seeks unspecified damages, treble damages and
attorney's fees and expenses. In September 1999, the court dismissed all RICO
claims, as well as the claims of all but 9 of the plaintiffs.
The Company is a defendant in two lawsuits filed in Supreme Court of
the State of New York, City of New York, claiming that a "Termination Event" has
occurred with respect to the Threshold Appreciation Price Securities ("TAPS")
issued by the Company in September 1997. One of those actions is brought by
certain entities claiming to "own or control" 1.8 million TAPS and the other
purports to be brought by a holder of an unknown number of TAPS as a class
action on behalf of a purported class of all holders of TAPS. The complaints
allege that a "Termination Event" has occurred because of, among other things,
the actions taken by the DOC described in Note 5, California Discontinued PPM
Operations. The complaints seek an order requiring the Company immediately to
cause to be released to the TAPS holders approximately $400 million of United
States Treasury Notes currently held in escrow. The escrowed funds otherwise
would be released to the Company in exchange for common stock of the Company at
the final settlement date of the TAPS on August 31, 2000. The Company has filed
a motion for summary judgment.
In June 1999, various insureds filed a class action complaint against
Caremark Inc., Caremark International Inc. and third party payors in the United
States District Court for the Northern District of Illinois. The action alleges
violations of the Racketeer Influenced Corrupt Organizations Act, the Illinois
Consumer Fraud Act, and the Employee Retirement Income Security Act as the
result of practices developed by Caremark's Home Infusion Division to submit,
and cause others to submit, fraudulent claims for payment to insurers of health
care benefits. The Home Infusion Division was divested in 1995. The action
alleges that the plaintiff's suffered damages stemming from increased premiums
charged by the third party payors, and increased co-payments and deductibles
charged by Caremark. Plaintiffs request unspecified damages, declaratory relief,
attorneys' fees and costs.
There can be no assurance that the lawsuits will not have a disruptive
effect upon the operations of the business, that the defense of the lawsuits
will not consume the time and attention of senior management of Caremark Rx and
its subsidiaries, or that the resolution of the lawsuits will not have a
material adverse effect on the operating results and financial condition of the
Company. The Company intends to vigorously defend each of these lawsuits. The
Company believes that these lawsuits will not have a material adverse effect on
the operating results and financial condition of the Company.
Part II
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
On September 29, 1999, (a) Caremark Rx Capital Trust I (the "Caremark
Trust") issued $200,000,000 of its 7% Shared Preference Redeemable Securities
(the "Preferred Securities") to Warburg Dillon Read LLC, as the initial
purchaser (the "Initial Purchaser") and (b) the Company issued $200,000,000 of
its 7% Convertible Subordinated Debentures due 2029 (the "Convertible
Debentures") to the Caremark Trust. The issuance of the Preferred Security and
the Convertible Debentures were made in reliance on the exemption from the
registration requirements of the Securities Act of 1933, as amended (the "Act")
provided under Section 4(2) of the Act. The Initial Purchaser offered the
Preferred Securities to qualified institutional buyers under Rule 144A of the
Act. The Preferred Securities represent preferred undivided beneficial
interests in the assets of the Caremark Trust. The sole asset of the Caremark
Trust consists of the Convertible Debentures. The Convertible Debentures
underlying the Preferred Securities mature in the year 2029 but are redeemable
prior to maturity at the option of the Company beginning October 15, 2002. Each
Preferred Security is convertible at the option of the holder into shares of
common stock, par value $.001 per share, of the Company ("Common Stock") at a
conversion rate of 6.7125 shares of common stock for each Preferred Security
(equivalent to a conversion price of $7.4488 per share of Common Stock).
Dividends on the Preferred Securities will be payable at an annual rate of 7%
of the liquidation amount of $50 per Preferred Security, and will be payable
quarterly in arrears on January 1, April 1, July 1 and October 1 each year,
beginning January 1, 2000. Dividends on the Preferred Securities may be
deferred by the Company for up to 20 consecutive quarters. The Company has no
intention at the present time to defer the payment of the dividends.
20
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits required by Regulation S-K are set forth in the following list:
(10)-1 Amendment and Waiver No. 9, dated as of August 16, 1999 to the
Amended and Restated Credit Agreement dated as of June 9, 1998 among the
Company, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and the Swing Line Bank thereunder, Credit Lyonnais New York
Branch, The First National Bank of Chicago and Morgan Guaranty Trust Company
of New York, as the Syndication Agents therefor, Banc of America Securities
LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and NationsBank, N.A., as the Administrative Agent for the Lender
Parties thereunder.
(10)-2 Amendment and Waiver No. 10, dated as of August 23, 1999 to the
Amended and Restated Credit Agreement dated as of June 9, 1998 among the
Company, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and the Swing Line Bank thereunder, Credit Lyonnais New York
Branch, The First National Bank of Chicago and Morgan Guaranty Trust Company
of New York, as the Syndication Agents therefor, Banc of America Securities
LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and NationsBank, N.A., as the Administrative Agent for the Lender
Parties thereunder.
(10)-3 Amendment and Waiver No. 11, dated as of August 30, 1999 to the
Amended and Restated Credit Agreement dated as of June 9, 1998 among the
Company, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and the Swing Line Bank thereunder, Credit Lyonnais New York
Branch, The First National Bank of Chicago and Morgan Guaranty Trust Company
of New York, as the Syndication Agents therefor, Banc of America Securities
LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and NationsBank, N.A., as the Administrative Agent for the Lender
Parties thereunder.
(10)-4 Amendment and Waiver No. 12, dated as of September 14, 1999 to the
Amended and Restated Credit Agreement dated as of June 9, 1998 among the
Company, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and the Swing Line Bank thereunder, Credit Lyonnais New York
Branch, The First National Bank of Chicago and Morgan Guaranty Trust Company
of New York, as the Syndication Agents therefor, Banc of America Securities
LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and NationsBank, N.A., as the Administrative Agent for the Lender
Parties thereunder.
(10)-5 Amendment and Waiver No. 13, dated as of November 5, 1999 to the
Amended and Restated Credit Agreement dated as of June 9, 1998 among the
Company, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and the Swing Line Bank thereunder, Credit Lyonnais New York
Branch, The First National Bank of Chicago and Morgan Guaranty Trust Company
of New York, as the Syndication Agents therefor, Banc of America Securities
LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and NationsBank, N.A., as the Administrative Agent for the Lender
Parties thereunder.
(27) Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company's Current Report on Form 8-K filed September 14, 1999
(reporting the merger of a wholly-owned subsidiary into the Company, with
the Company remaining as the surviving entity; also reporting that, in
connection with the merger, the Company changed its name to Caremark Rx,
Inc.).
The Company's Current Report on Form 8-K filed September 24, 1999
(reporting that as of September 20, 1999, the Company's Common Stock listed
on the New York Stock Exchange trades under the symbol CMX; reporting in
addition the issuance of a Notice of Certain Proposed Unregistered
Offerings, pursuant to Rule 135c promulgated under the Securities Act of
1933, as amended).
The Company's Current Report on Form 8-K filed October 1, 1999 (reporting
the issuance of a Notice of Certain Proposed Unregistered Offerings,
pursuant to Rule 135c promulgated under the Securities Act of 1933, as
amended).
No other Items of Part II are applicable to the Company for the period
covered by this Quarterly Report on Form 10-Q.
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<PAGE> 22
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Caremark Rx, Inc.
By: /s/ James H. Dickerson, Jr.
--------------------------------------------------------------------------
James H. Dickerson, Jr., Executive Vice President and Chief Financial
Officer
By: /s/ Howard A. McLure
--------------------------------------------------------------------------
Howard A. McLure, Senior Vice President and Chief Accounting Officer
Date: November 15, 1999
22
<PAGE> 1
EXHIBIT 10.1
AMENDMENT NO. 9 TO THE LOAN DOCUMENTS
AMENDMENT dated as of August 16, 1999 to the Amended and
Restated Credit Agreement dated as of June 9, 1998 (as amended and otherwise
modified by Amendment and Waiver No. 1 to the Loan Documents dated as of
December 4, 1998, Amendment No. 2 to the Loan Documents dated as of January 13,
1999, Amendment No. 3 to the Loan Documents dated as of February 9, 1999,
Amendment and Waiver No. 4 to the Loan Documents dated as of March 18, 1999,
Amendment and Waiver No. 5 to the Loan Documents dated as of April 1, 1999,
Amendment No. 6 to the Loan Documents dated as of April 14, 1999, Amendment No.
7 to the Loan Documents dated as of June 29, 1999 and Amendment No. 8 to the
Loan Documents ("AMENDMENT NO. 8") dated as of August 2, 1999, the "CREDIT
AGREEMENT") among MedPartners, Inc., a Delaware corporation (the "BORROWER"),
the Lenders party thereto, NationsBank, N.A., as the Initial Issuing Bank and
the Swing Line Bank thereunder, Credit Lyonnais New York Branch, The First
National Bank of Chicago and Morgan Guaranty Trust Company of New York, as the
Syndication Agents therefor, Banc of America Securities LLC (formerly
NationsBanc Montgomery Securities LLC), as the Arranger therefor, and
NationsBank, N.A., as the Administrative Agent for the Lender Parties
thereunder. Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified therefor in the Credit Agreement.
PRELIMINARY STATEMENTS
(1) The Borrower has requested that the Lender Parties agree
to amend the Credit Agreement in order to provide, among other things, for the
application of the Net Cash Proceeds of asset dispositions as set forth herein.
(2) The Required Lenders have indicated their willingness to
agree to amend the terms and conditions of the Credit Agreement described above
in Preliminary Statement (1) on the terms and subject to the satisfaction of
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein and in the Loan Documents, the
parties hereto hereby agree as follows:
SECTION 1. Amendments of Certain Provisions of the Credit
Agreement. The Credit Agreement is, upon the occurrence of the Amendment
Effective Date (as hereinafter defined), hereby amended to read as follows:
(a) Section 1.01 of the Credit Agreement is amended by adding in the
appropriate alphabetical order the following definition:
"SENIOR INDENTURE TRUSTEE" means U. S. Bank National Association, in
its capacity as Trustee of the Senior Notes pursuant to the Senior Notes
Indenture, or any successor thereto."
(b) The definition of "AMENDMENT NO. 8 NET CASH PROCEEDS RESERVE" in
Section 1.01 is hereby amended to delete the figure "$20,000,000" and to
substitute therefor the figure "$50,000,000."
<PAGE> 2
(c) Section 2.01(c)(iii)(y) is amended to delete the date "August 31,
1999" and to substitute therefor the date "September 30, 1999."
(d) Section 5.02(b)(xviii) is amended in its entirety to read as
follows:
"(xviii) Indebtedness of the Borrower in an aggregate principal amount
not in excess of $12,000,000, including within such amount Indebtedness
evidenced by Contingent Obligations, which Indebtedness will be
comprised of loans from one or more Plans (as defined in the California
Settlement Agreement) or guarantees of loans by one or more Plans, the
proceeds of which direct Indebtedness will be loaned to one or more
buyers to be used, and the proceeds of which loans guaranteed by such
Contingent Obligations will be used, to finance the working capital
requirements of certain California Operations (as defined in the
California Settlement Agreement) purchased from the Borrower or its
Subsidiaries; provided that in all circumstances, the Borrower shall not
have any payment obligation in respect of such Indebtedness until at
least three years after the date such Indebtedness is incurred."
(e) Section 5.02(d) of the Credit Agreement is hereby amended to delete
the last paragraph thereof immediately following subsection (xiii) therein and
to substitute therefor the following paragraph:
"Notwithstanding any of the provisions of this Section 5.02(d),
the Borrower and its Subsidiaries may retain (A) Net Cash
Proceeds as provided in the Credit Agreement as in effect prior
to the date of Amendment No. 8 to the Loan Documents and (B) up
to 100% of the Net Cash Proceeds received from time to time on or
after July 1, 1999 from one or more sales, leases, transfers or
other dispositions expressly permitted under clause (vii), (viii)
or (xi) of this Section 5.02(d), in each case for use in their
business and operations in the ordinary course, so long as the
aggregate amount of all such Net Cash Proceeds referred to in
subclause (B) so retained by the Borrower and its Subsidiaries
does not exceed $93,000,000, exclusive of up to $15,000,000 of
such Net Cash Proceeds which can be retained by the Borrower and
used solely for the payment of amounts owing under the Amended
Aetna Note when due and payable in accordance with the terms
thereof (such non-excluded Net Cash Proceeds referred to in
subclause (B) being the `Amendment No. 8 Net Cash Proceeds');
provided, however, that all Amendment No. 8 Net Cash Proceeds
received after the date of the Required Lenders' Proceeds Reserve
Application Notice shall be applied immediately upon receipt
thereof to reduce the Term Commitments in accordance with, and to
the extent required under, Section 2.05(b)(vi) and to prepay the
Term Advances outstanding at such time in accordance with, and to
the extent required under, Section 2.06(b)."
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the first date (the
"AMENDMENT EFFECTIVE DATE") on which, and only if, each of the following
conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received on or before 12:00 noon
(Charlotte time) on August 16, 1999, (i) counterparts of this Amendment
executed by the Borrower and the Required Lenders or, as to any of the Lender
Parties, advice satisfactory to the Administrative Agent that such Lender Party
has executed this Amendment, (ii) the Consent attached hereto, executed and
2
<PAGE> 3
delivered by each of the Loan Parties (other than the Borrower) and (iii) for
the benefit of each Lender Party that has executed this Amendment prior to such
time, a fee from the Borrower in an amount equal to 0.125% of the aggregate
Commitment of such Lender Party, which amount will be distributed to the
respective Lender Party no later than the third Business Day following receipt
thereof by the Administrative Agent.
(b) The representations and warranties set forth in each of the Loan
Documents shall be correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to this Amendment, as though
made on and as of such date (except (i) for any such representation and
warranty that, by its terms, refers to a specific date other than the Amendment
Effective Date, in which case as of such specific date, (ii) that the
Consolidated financial statements of the Borrower and its Subsidiaries referred
to in Sections 4.01(f) and 4.01(g) of the Credit Agreement shall be deemed to
refer to the Consolidated financial statements of the Borrower and its
Subsidiaries comprising part of the Required Financial Information most
recently delivered to the Administrative Agent and the Lender Parties pursuant
to Sections 5.03(b) and 5.03(c), respectively, on or prior to the Amendment
Effective Date and (iii) that the forecasted Consolidated financial statements
of the Borrower and its Subsidiaries referred to in Section 4.01(h) of the
Credit Agreement shall be deemed to refer to the forecasted Consolidated
financial statements of the Borrower and its Subsidiaries most recently
delivered to the Administrative Agent and the Lender Parties prior to the
Amendment Effective Date).
(c) No event shall have occurred and be continuing, or shall result
from the effectiveness of this Amendment, that constitutes a Default.
(d) All of the reasonable fees and expenses of the Administrative
Agent and the Arranger (including the reasonable fees and expenses of counsel
for the Administrative Agent) due and payable on the Amendment Effective Date
shall have been paid in full.
The effectiveness of this Amendment is further conditioned upon the accuracy of
all of the factual matters described herein. This Amendment is subject to the
provisions of Section 8.01 of the Credit Agreement.
SECTION 3. Security Interest. The Borrower agrees that as
promptly as practicable after it is permitted under the terms of the Credit
Agreement it will take all actions necessary to grant a perfected security
interest in all of the capital stock of Caremark pursuant to documentation
satisfactory to the Administrative Agent (including, but not limited to, a
trust agreement, pledge agreement and opinions of counsel), in favor of the
Lender Parties, and equally and ratably in favor of the Senior Indenture
Trustee for the benefit of the holders of the Senior Notes.
SECTION 4. Reference to and Effect on the Loan Documents. (a)
On and after the Amendment Effective Date, 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, the Notes and each of the other Loan
Documents, as amended by the amendments specifically provided above in Section
1, are and shall continue to be in full force
3
<PAGE> 4
and effect and are hereby in all respects ratified and confirmed. 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 of the Guaranteed Parties or the Administrative Agent under any of the Loan
Documents, or constitute a waiver of any provision of any of the Loan
Documents.
(c) The Borrower confirms and ratifies its agreement to pay the fee
referred to in Section 3 of Amendment No. 8 with the Application Date referred
to therein to mean the Application Date provided for in this Amendment through
the amendment to Section 2.01(c)(iii)(y) of the Credit Agreement provided for
in Section 1(c) hereof.
SECTION 5. Costs and Expenses. The Borrower hereby agrees to
pay, upon demand, all of the reasonable costs and expenses of the
Administrative Agent and the Arranger (including, without limitation, the
reasonable fees and expenses of counsel for the Administrative Agent) in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Amendment and all of the agreements,
instruments and other documents delivered or to be delivered in connection
herewith, all in accordance with the terms of Section 8.04 of the Credit
Agreement.
SECTION 6. 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 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 7. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers, thereunto duly
authorized, as of the date first written above.
THE BORROWER
MEDPARTNERS, INC.
By
--------------------------------------
Name:
Title:
THE ADMINISTRATIVE AGENT
BANK OF AMERICA, N.A.
By
--------------------------------------
Name:
Title:
THE LENDER PARTIES
BANK OF AMERICA, N.A., as a Lender,
the Swing Line Bank and the Issuing Bank
By
--------------------------------------
Name:
Title:
AMSOUTH BANK
By /s/ Allison J. Sanders
--------------------------------------
Name: Allison J. Sanders
Title: Vice President
5
<PAGE> 6
THE CHASE MANHATTAN BANK
By /s/ Dawn Lee Lum
--------------------------------------
Name: Dawn Lee Lum
Title: Vice President
CITIBANK, N.A.
By /s/ Timothy L. Freeman
--------------------------------------
Name: Timothy L. Freeman
Title: Managing Director/SCO
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Martin Golden
--------------------------------------
Name: Martin Golden
Title: Vice President
DEBT STRATEGIES FUND, INC.
By
--------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. Richard Schiller
--------------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Richard Davis
--------------------------------------
Name: Richard Davis
Title: Vice President
6
<PAGE> 7
FLOATING RATE PORTFOLIO
BY: INVESCO Senior Secured Management, Inc.,
as attorney in fact
By /s/ Anne M. McCarthy
--------------------------------------
Name: Anne M. McCarthy
Title: Authorized Signatory
KZH HIGHLAND-2 LLC
By /s/ Peter Chin
--------------------------------------
Name: Peter Chin
Title: Authorized Agent
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ H.A. Sieger, Jr.
--------------------------------------
Name: H.A. Sieger, Jr.
Title:
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO, INC.
BY: MERRILL LYNCH ASSET
MANAGEMENT L.P., as Investment Advisor
By
--------------------------------------
Name:
Title:
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
BY: MERRILL LYNCH ASSET MANAGEMENT, L.P.,
as Investment Advisor
By
--------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By
--------------------------------------
Name:
Title:
7
<PAGE> 8
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By
--------------------------------------
Name:
Title:
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT L.P.,
as Collateral Manager
By /s/ James Dondero
--------------------------------------
Name: James Dondero, CFA, CPA
Title: President
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD.
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Charles E. LeMieux
--------------------------------------
Name: Charles E. LeMieux, CFA
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Anna Marie Fallon
--------------------------------------
Name: Anna Marie Fallon
Title: Vice President
PAM CAPITAL FUNDING, LP
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ James Dondero
--------------------------------------
Name: James Dondero, CFA, CPA
Title: President
8
<PAGE> 9
PAMCO CAYMAN, LTD.
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ James Dondero
--------------------------------------
Name: James Dondero, CFA, CPA
Title: President
PILGRIM PRIME RATE TRUST
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Charles E. LeMieux
--------------------------------------
Name: Charles E. LeMieux, CFA
Title: Assistant Vice President
SCOTIABANC INC.
By /s/ Dana Maloney
--------------------------------------
Name: Dana Maloney
Title: Relationship Manager
SRV-HIGHLAND, INC.
By /s/ Kelly C. Walker
--------------------------------------
Name: Kelly C. Walker
Title: Vice President
STEIN ROE & FARNHAM INCORPORATED,
as Agent for KEYPORT LIFE INSURANCE
COMPANY
By /s/ James R. Fellows
--------------------------------------
Name: James R. Fellows
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Sonja R. Jordan
--------------------------------------
Name: Sonja R. Jordan
Title: Vice President
9
<PAGE> 10
TRANSAMERICA LIFE INSURANCE AND
ANNUITY CO.
By /s/ John M. Casparian
--------------------------------------
Name: John M. Casparian
Title: Investment Officer
TRANSAMERICA PREMIER HIGH YIELD FUND
By /s/ Heather Creeden
--------------------------------------
Name: Heather Creeden
Title: Investment Officer
VAN KAMPEN PRIME RATE INCOME TRUST
By
--------------------------------------
Name:
Title:
VAN KAMPEN SENIOR INCOME TRUST
By
--------------------------------------
Name:
Title:
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By
--------------------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By /s/ John C. Conty
--------------------------------------
Name: John C. Conty
Title: Assistant Vice President
10
<PAGE> 11
CONSENT TO AMENDMENT NO. 9
TO THE LOAN DOCUMENTS
As of August 16, 1999
Reference is made to Amendment No. 9 to the Loan Documents
dated as of August 16, 1999 (the "AMENDMENT") to the Amended and Restated
Credit Agreement dated as of June 9, 1998 (as amended and otherwise modified by
Amendment No. 1 to the Loan Documents dated as of December 4, 1998, Amendment
No. 2 to the Loan Documents dated as of January 13, 1999, Amendment No. 3 to
the Loan Documents dated as of February 9, 1999, Amendment and Waiver No. 4 to
the Loan Documents dated as of March 18, 1999, Amendment and Waiver No. 5 to
the Loan Documents dated as of April 1, 1999, Amendment No. 6 to the Loan
Documents dated as of April 14, 1999, Amendment No. 7 to the Loan Documents
dated as of June 29, 1999 and Amendment No. 8 to the Loan Documents dated as of
August 2, 1999, the "CREDIT AGREEMENT") among MedPartners, Inc., a Delaware
corporation, the Lenders party thereto, NationsBank, N.A., as the Initial
Issuing Bank and Swing Line Bank thereunder, Credit Lyonnais New York Branch,
The First National Bank of Chicago and Morgan Guaranty Trust Company of New
York, as the Syndication Agents therefor, Banc of America Securities LLC
(formerly NationsBanc Montgomery Securities LLC), as Arranger therefor, and
NationsBank, N.A., as the Administrative Agent for the Lender Parties
thereunder. Capitalized terms not otherwise defined herein shall have the same
meanings as specified therefor in the Credit Agreement.
Each of the undersigned, as a guarantor under the
Subsidiaries Guarantee dated as of June 9, 1998 (as modified to the date
hereof, the "SUBSIDIARIES GUARANTEE") in favor of the Guaranteed Parties,
hereby consents to the execution and delivery of the Amendment and the
performance of the Credit Agreement, as amended thereby, and hereby confirms
and agrees that, notwithstanding the effectiveness of the Amendment, the
Subsidiaries Guarantee is, and shall continue to be, in full force and effect
and is hereby in all respects ratified and confirmed, except that each
reference in the Subsidiaries Guarantee 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
the Amendment.
This Consent 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 one and the same Consent. Delivery of an executed counterpart
of a signature page to this Consent by telecopier shall be effective as
delivery of a manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in
accordance with, the laws of the State of New York.
MEDGP, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
<PAGE> 12
MEDPARTNERS ACQUISITION CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS AVIATION, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
GEORGIA MEDPARTNERS MANAGEMENT,
INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS INTEGRATED NETWORK-
CHANDLER, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PROFESSIONAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
2
<PAGE> 13
ADS HEALTH MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HEALTHWAYS, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
BAY AREA PRACTICE MANAGEMENT
GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CHS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
CAREMARK INTERNATIONAL INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
3
<PAGE> 14
CAREMARK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ Leisa Kizer
----------------------------------------
Name: Leisa Kizer
Title: Treasurer
CAREMARK PHYSICIAN SERVICES OF TEXAS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PRESCRIPTION HEALTH SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
STRATEGIC HEALTHCARE MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
4
<PAGE> 15
CAREMARK INTERNATIONAL HOLDINGS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PHYSICIAN SERVICES INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CAREMARK RESOURCES CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
FRIENDLY HILLS HEALTHCARE
NETWORK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS NSC LTD.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATIVE
SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
5
<PAGE> 16
MEDPARTNERS MANAGED CARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
ACUTE CARE MEDICAL MANAGEMENT, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
BGS HEALTHCARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HOME HEALTH AGENCY OF GREATER
MIAMI, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MANAGED CARE OF SOUTH
BROWARD, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MEDICAL MANAGEMENT OF
OHIO, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
6
<PAGE> 17
LFMG, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PACIFIC MEDICAL GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PACIFIC PHYSICIAN SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS NORTH CAROLINA MEDICAL
MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS RIVERSIDE DIVISION ACQUISITION
AND MANAGEMENT CORP. I
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
7
<PAGE> 18
PPS VALLEY MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PPS INDEMNITY, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
ARIZONA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
NEVADA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PHYSICIANS' HOSPITAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
8
<PAGE> 19
RELIANT HEALTHCARE SYSTEMS, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
-------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS/TALBERT MEDICAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT MEDICAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT HEALTH SERVICES
CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATION, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Treasurer
of MedPartners, Inc., the General
Partner
9
<PAGE> 20
MEDPARTNERS PHYSICIAN
MANAGEMENT, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President of
MedPartners, Inc., the General
Partner
MEDOHIO, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MED TENNESSEE, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDTEX, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MEDPARTNERS PHYSICIAN SERVICES
OF ILLINOIS L.L.C.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
North Suburban Clinic, Ltd.,
a Member
10
<PAGE> 21
CERRITOS INVESTMENT GROUP
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., a Partner
CERRITOS INVESTMENT GROUP II
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Corporate Secretary of
MedPartners, Inc., a Partner
FAMILY MEDICAL CENTER
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary of
Pacific Medical Group, Inc., a Partner
11
<PAGE> 22
5000 AIRPORT PLAZA, L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
the General Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., the General Partner
KS-PSI OF TEXAS L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
MedPartners Physician Services, Inc.,
the General Partner
12
<PAGE> 1
EXHIBIT 10.2
AMENDMENT NO. 10 TO THE LOAN DOCUMENTS
AMENDMENT dated as of August 23, 1999 to the Amended and
Restated Credit Agreement dated as of June 9, 1998 (as amended and otherwise
modified by Amendment and Waiver No. 1 to the Loan Documents dated as of
December 4, 1998, Amendment No. 2 to the Loan Documents dated as of January 13,
1999, Amendment No. 3 to the Loan Documents dated as of February 9, 1999,
Amendment and Waiver No. 4 to the Loan Documents dated as of March 18, 1999,
Amendment and Waiver No. 5 to the Loan Documents dated as of April 1, 1999,
Amendment No. 6 to the Loan Documents dated as of April 14, 1999, Amendment No.
7 to the Loan Documents dated as of June 29, 1999, Amendment No. 8 to the Loan
Documents dated as of August 2, 1999 and Amendment No. 9 to the Loan Documents
dated as of August 16, 1999, the "CREDIT AGREEMENT") among MedPartners, Inc., a
Delaware corporation (the "BORROWER"), the Lenders party thereto, Bank of
America, N.A. (formerly NationsBank, N.A.), as the Initial Issuing Bank and the
Swing Line Bank thereunder, Credit Lyonnais New York Branch, The First National
Bank of Chicago and Morgan Guaranty Trust Company of New York, as the
Syndication Agents therefor, Banc of America Securities LLC (formerly
NationsBanc Montgomery Securities LLC), as the Arranger therefor, and Bank of
America, N.A. (formerly NationsBank, N.A.), as the Administrative Agent for the
Lender Parties thereunder. Capitalized terms not otherwise defined in this
Amendment have the same meanings as specified therefor in the Credit Agreement.
PRELIMINARY STATEMENTS
(1) The Borrower has requested that the Lender Parties agree
to amend the Credit Agreement in order to provide for the granting by the
Borrower of a Lien consisting of a pledge of all of the capital stock of
Caremark and proceeds thereof for the equal and ratable benefit of the Lender
Parties and the holders of the Senior Notes.
(2) The Lender Parties have indicated their willingness to
agree to amend the terms and conditions of the Credit Agreement described above
in Preliminary Statement (1) on the terms and subject to the satisfaction of
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein and in the Loan Documents, the
parties hereto hereby agree as follows:
SECTION 1. Amendments of Certain Provisions of the Credit
Agreement. The Credit Agreement is, upon the occurrence of the Amendment
Effective Date (as hereinafter defined), hereby amended to read as follows:
(a) Section 5.02(a) is amended by renaming the existing clause (viii)
as clause (ix) and by adding a new clause (viii) thereto as follows:
"(viii) Liens consisting of a pledge of all of the capital stock of
Caremark and proceeds thereof for the equal and ratable benefit of the
Lender Parties and the holders of the Senior Notes; and"
<PAGE> 2
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the first date (the
"AMENDMENT EFFECTIVE DATE") on which, and only if, each of the following
conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received: (i) counterparts of
this Amendment executed by the Borrower and all of the Lender Parties or, as to
any of the Lender Parties, advice satisfactory to the Administrative Agent that
such Lender Party has executed this Amendment and (ii) the Consent attached
hereto, executed and delivered by each of the Loan Parties (other than the
Borrower).
(b) The representations and warranties set forth in each of the Loan
Documents shall be correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to this Amendment, as though
made on and as of such date (except (i) for any such representation and
warranty that, by its terms, refers to a specific date other than the Amendment
Effective Date, in which case as of such specific date, (ii) that the
Consolidated financial statements of the Borrower and its Subsidiaries referred
to in Sections 4.01(f) and 4.01(g) of the Credit Agreement shall be deemed to
refer to the Consolidated financial statements of the Borrower and its
Subsidiaries comprising part of the Required Financial Information most
recently delivered to the Administrative Agent and the Lender Parties pursuant
to Sections 5.03(b) and 5.03(c), respectively, on or prior to the Amendment
Effective Date and (iii) that the forecasted Consolidated financial statements
of the Borrower and its Subsidiaries referred to in Section 4.01(h) of the
Credit Agreement shall be deemed to refer to the forecasted Consolidated
financial statements of the Borrower and its Subsidiaries most recently
delivered to the Administrative Agent and the Lender Parties prior to the
Amendment Effective Date).
(c) No event shall have occurred and be continuing, or shall result
from the effectiveness of this Amendment, that constitutes a Default.
(d) All of the reasonable fees and expenses of the Administrative
Agent and the Arranger (including the reasonable fees and expenses of counsel
for the Administrative Agent) due and payable on the Amendment Effective Date
shall have been paid in full.
The effectiveness of this Amendment is further conditioned upon the accuracy of
all of the factual matters described herein. This Amendment is subject to the
provisions of Section 8.01 of the Credit Agreement.
SECTION 3. Reference to and Effect on the Loan Documents. (a)
On and after the Amendment Effective Date, 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, the Notes and each of the other Loan
Documents, as amended by the amendments specifically provided above in Section
1, are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as a
waiver
2
<PAGE> 3
of any right, power or remedy of any of the Guaranteed Parties or the
Administrative Agent under any of the Loan Documents, or constitute a waiver of
any provision of any of the Loan Documents.
SECTION 4. Costs and Expenses. The Borrower hereby agrees to
pay, upon demand, all of the reasonable costs and expenses of the
Administrative Agent and the Arranger (including, without limitation, the
reasonable fees and expenses of counsel for the Administrative Agent) in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Amendment and all of the agreements,
instruments and other documents delivered or to be delivered in connection
herewith, all in accordance with the terms of Section 8.04 of the Credit
Agreement.
SECTION 5. 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 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 6. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers, thereunto duly
authorized, as of the date first written above.
THE BORROWER
MEDPARTNERS, INC.
By
---------------------------------------------
Name:
Title:
THE ADMINISTRATIVE AGENT
BANK OF AMERICA, N.A.
By /s/ Charles A. Kerr
---------------------------------------------
Name: Charles A. Kerr
Title: Managing Director
THE LENDER PARTIES
BANK OF AMERICA, N.A., as a Lender,
the Swing Line Bank and the Issuing Bank
By /s/ Charles A. Kerr
---------------------------------------------
Name: Charles A. Kerr
Ti: Senior Vice President
AMSOUTH BANK
By /s/ Allison J. Sanders
---------------------------------------------
Name: Allison J. Sanders
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Mary Ellen Egbert
---------------------------------------------
Name: Mary Ellen Egbert
Title: Vice President
4
<PAGE> 5
CITIBANK, N.A.
By /s/ Townsend U. Weekes, Jr.
---------------------------------------------
Name: Townsend U. Weekes, Jr.
Title: Attorney-In-Fact
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Henry J. Reukauf
---------------------------------------------
Name: Henry J. Reukauf
Title: Vice President
DEBT STRATEGIES FUND, INC.
By /s/ Colleen M. Cunniffe
---------------------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. Richard Schiller
---------------------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Richard Davis
---------------------------------------------
Name: Richard Davis
Title: Vice President
By
---------------------------------------------
FLOATING RATE PORTFOLIO
BY: INVESCO Senior Secured Management, Inc., as
attorney in fact
By /s/ Gregory Stoeckle
---------------------------------------------
Name: Gregory Stoeckle
Title: Vice President
5
<PAGE> 6
KZH HIGHLAND-2 LLC
By /s/ Virginia Conway
---------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Neil Brisson
---------------------------------------------
Name: Neil Brisson
Title: Director
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO, INC.
BY: MERRILL LYNCH ASSET
MANAGEMENT L.P., as Investment Advisor
By /s/ Colleen M. Cunniffe
---------------------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
BY: MERRILL LYNCH ASSET MANAGEMENT, L.P.,
as Investment Advisor
By /s/ Colleen M. Cunniffe
---------------------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Colleen M. Cunniffe
---------------------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
6
<PAGE> 7
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By /s/ Colleen M. Cunniffe
---------------------------------------------
Name: Colleen M. Cunniffe
Title: Authorized Signatory
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD.
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jeffrey A. Bakalar
---------------------------------------------
Name: Jeffrey A. Bakalar
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Anna Marie Fallon
---------------------------------------------
Name: Anna Marie Fallon
Title: Vice President
PAM CAPITAL FUNDING, LP
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
TitlE: Executive Vice President
PAMCO CAYMAN, LTD.
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
7
<PAGE> 8
PILGRIM PRIME RATE TRUST
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jeffrey A. Bakalar
---------------------------------------------
Name: Jeffrey A. Bakalar
Title: Vice President
SCOTIABANC INC.
By /s/ Dana Maloney
---------------------------------------------
Name: Dana Maloney
Title: Relationship Manager
SRV-HIGHLAND, INC.
By /s/ Allen D. Shifflet
---------------------------------------------
Name: Allen D. Shifflet
Title: President
STEIN ROE & FARNHAM INCORPORATED,
as Agent for KEYPORT LIFE INSURANCE
COMPANY
By /s/ Brian W. Good
---------------------------------------------
Name: Brian W. Good
Title: Vice President & Portfolio Manager
TORONTO DOMINION (TEXAS), INC.
By /s/ Sonja R. Jordan
---------------------------------------------
Name: Sonja R. Jordan
Title: Vice President
TRANSAMERICA LIFE INSURANCE AND
ANNUITY CO.
By /s/ John M. Casparian
---------------------------------------------
Name: John M. Casparian
Title: Investment Officer
8
<PAGE> 9
TRANSAMERICA PREMIER HIGH YIELD FUND
By /s/ Heather E. Creeden
---------------------------------------------
Name: Heather E. Creeden
Title: Investment Manager
VAN KAMPEN PRIME RATE INCOME TRUST
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
VAN KAMPEN SENIOR INCOME TRUST
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
WACHOVIA BANK, N.A.
By /s/ John C. Conty
---------------------------------------------
Name: John C. Conty
Title: Assistant Vice President
9
<PAGE> 10
CONSENT TO AMENDMENT NO. 10
TO THE LOAN DOCUMENTS
As of August 23, 1999
Reference is made to Amendment No. 10 to the Loan Documents
dated as of August 23, 1999 (the "AMENDMENT") to the Amended and Restated
Credit Agreement dated as of June 9, 1998 (as amended and otherwise modified by
Amendment No. 1 to the Loan Documents dated as of December 4, 1998, Amendment
No. 2 to the Loan Documents dated as of January 13, 1999, Amendment No. 3 to
the Loan Documents dated as of February 9, 1999, Amendment and Waiver No. 4 to
the Loan Documents dated as of March 18, 1999, Amendment and Waiver No. 5 to
the Loan Documents dated as of April 1, 1999, Amendment No. 6 to the Loan
Documents dated as of April 14, 1999, Amendment No. 7 to the Loan Documents
dated as of June 29, 1999, Amendment No. 8 to the Loan Documents dated as of
August 2, 1999 and Amendment No. 9 to the Loan Documents dated as of August 16,
1999, the "CREDIT AGREEMENT") among MedPartners, Inc., a Delaware corporation,
the Lenders party thereto, Bank of America, N.A. (formerly NationsBank, N.A.),
as the Initial Issuing Bank and Swing Line Bank thereunder, Credit Lyonnais New
York Branch, The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York, as the Syndication Agents therefor, Banc of America
Securities LLC (formerly NationsBanc Montgomery Securities LLC), as Arranger
therefor, and Bank of America, N.A. (formerly NationsBank, N.A.), as the
Administrative Agent for the Lender Parties thereunder. Capitalized terms not
otherwise defined herein shall have the same meanings as specified therefor in
the Credit Agreement.
Each of the undersigned, as a guarantor under the
Subsidiaries Guarantee dated as of June 9, 1998 (as modified to the date
hereof, the "SUBSIDIARIES GUARANTEE") in favor of the Guaranteed Parties,
hereby consents to the execution and delivery of the Amendment and the
performance of the Credit Agreement, as amended thereby, and hereby confirms
and agrees that, notwithstanding the effectiveness of the Amendment, the
Subsidiaries Guarantee is, and shall continue to be, in full force and effect
and is hereby in all respects ratified and confirmed, except that each
reference in the Subsidiaries Guarantee 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
the Amendment.
This Consent 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 one and the same Consent. Delivery of an executed counterpart
of a signature page to this Consent by telecopier shall be effective as
delivery of a manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in
accordance with, the laws of the State of New York.
MEDGP, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
<PAGE> 11
MEDPARTNERS ACQUISITION CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS AVIATION, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
GEORGIA MEDPARTNERS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS INTEGRATED NETWORK-CHANDLER, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PROFESSIONAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
2
<PAGE> 12
ADS HEALTH MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HEALTHWAYS, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
BAY AREA PRACTICE MANAGEMENT GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CHS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
CAREMARK INTERNATIONAL INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
3
<PAGE> 13
CAREMARK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ Leisa Kizer
----------------------------------------
Name: Leisa Kizer
Title: Treasurer
CAREMARK PHYSICIAN SERVICES OF TEXAS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PRESCRIPTION HEALTH SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
STRATEGIC HEALTHCARE MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
4
<PAGE> 14
CAREMARK INTERNATIONAL HOLDINGS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PHYSICIAN SERVICES INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CAREMARK RESOURCES CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
FRIENDLY HILLS HEALTHCARE NETWORK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS NSC LTD.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATIVE SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
5
<PAGE> 15
MEDPARTNERS MANAGED CARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
ACUTE CARE MEDICAL MANAGEMENT, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
BGS HEALTHCARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HOME HEALTH AGENCY OF GREATER
MIAMI, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MANAGED CARE OF SOUTH
BROWARD, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MEDICAL MANAGEMENT OF
OHIO, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
6
<PAGE> 16
LFMG, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PACIFIC MEDICAL GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PACIFIC PHYSICIAN SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS NORTH CAROLINA MEDICAL
MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS RIVERSIDE DIVISION ACQUISITION
AND MANAGEMENT CORP. I
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
7
<PAGE> 17
PPS VALLEY MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PPS INDEMNITY, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
ARIZONA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
NEVADA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PHYSICIANS' HOSPITAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
8
<PAGE> 18
RELIANT HEALTHCARE SYSTEMS, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
-------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS/TALBERT MEDICAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT MEDICAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT HEALTH SERVICES
CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATION, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Treasurer
of MedPartners, Inc., the General
Partner
9
<PAGE> 19
MEDPARTNERS PHYSICIAN
MANAGEMENT, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President of
MedPartners, Inc., the General
Partner
MEDOHIO, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MED TENNESSEE, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDTEX, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MEDPARTNERS PHYSICIAN SERVICES
OF ILLINOIS L.L.C.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
North Suburban Clinic, Ltd.,
a Member
10
<PAGE> 20
CERRITOS INVESTMENT GROUP
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., a Partner
CERRITOS INVESTMENT GROUP II
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Corporate Secretary of
MedPartners, Inc., a Partner
FAMILY MEDICAL CENTER
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary of
Pacific Medical Group, Inc., a Partner
11
<PAGE> 21
5000 AIRPORT PLAZA, L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
the General Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., the General Partner
KS-PSI OF TEXAS L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
MedPartners Physician Services, Inc.,
the General Partner
12
<PAGE> 1
EXHIBIT 10.3
AMENDMENT NO. 11 TO THE LOAN DOCUMENTS
AMENDMENT dated as of August 30, 1999 to the Amended and
Restated Credit Agreement dated as of June 9, 1998 (as amended and otherwise
modified by Amendment and Waiver No. 1 to the Loan Documents dated as of
December 4, 1998, Amendment No. 2 to the Loan Documents dated as of January 13,
1999, Amendment No. 3 to the Loan Documents dated as of February 9, 1999,
Amendment and Waiver No. 4 to the Loan Documents dated as of March 18, 1999,
Amendment and Waiver No. 5 to the Loan Documents dated as of April 1, 1999,
Amendment No. 6 to the Loan Documents dated as of April 14, 1999, Amendment No.
7 to the Loan Documents dated as of June 29, 1999, Amendment No. 8 to the Loan
Documents dated as of August 2, 1999, Amendment No. 9 to the Loan Documents
dated as of August 16, 1999, and Amendment No. 10 to the Loan Documents dated
as of August 23, 1999, the "CREDIT AGREEMENT") among MedPartners, Inc., a
Delaware corporation (the "BORROWER"), the Lenders party thereto, Bank of
America, N.A. (formerly NationsBank, N.A.), as the Initial Issuing Bank and the
Swing Line Bank thereunder, Credit Lyonnais New York Branch, The First National
Bank of Chicago and Morgan Guaranty Trust Company of New York, as the
Syndication Agents therefor, Banc of America Securities LLC (formerly
NationsBanc Montgomery Securities LLC), as the Arranger therefor, and Bank of
America, N.A. (formerly NationsBank, N.A.), as the Administrative Agent for the
Lender Parties thereunder. Capitalized terms not otherwise defined in this
Amendment have the same meanings as specified therefor in the Credit Agreement.
PRELIMINARY STATEMENTS
(1) The Borrower has requested that the Lender Parties agree
to amend the Credit Agreement in order to provide that the latest date for
approval of the California Transition Plan be extended from August 31, 1999 to
September 30, 1999.
(2) The Lender Parties have indicated their willingness to
agree to amend the terms and conditions of the Credit Agreement described above
in Preliminary Statement (1) on the terms and subject to the satisfaction of
the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein and in the Loan Documents, the
parties hereto hereby agree as follows:
SECTION 1. Amendments of Certain Provisions of the Credit
Agreement. The Credit Agreement is, upon the occurrence of the Amendment
Effective Date (as hereinafter defined), hereby amended to read as follows:
(a) The definition of "CALIFORNIA TRANSITION PLAN" in Section 1.01 is
hereby amended to delete the date "August 31, 1999" in subclause (D) thereof
and to substitute therefor the new date "September 30, 1999."
(b) Section 2.05(b) is hereby amended to delete the date "August 31,
1999" in subclause (vii)(B) thereof and to substitute therefor the new date
"September 30, 1999."
<PAGE> 2
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the first date (the
"AMENDMENT EFFECTIVE DATE") on which, and only if, each of the following
conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received on or before 5:00
p.m. (Charlotte time) on August 30, 1999, (i) counterparts of this Amendment
executed by the Borrower and the Required Lenders or, as to any of the Lender
Parties, advice satisfactory to the Administrative Agent that such Lender Party
has executed this Amendment and (ii) the Consent attached hereto shall have
been executed and delivered by each of the Loan Parties (other than the
Borrower).
(b) The representations and warranties set forth in each of the Loan
Documents shall be correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to this Amendment, as though
made on and as of such date (except (i) for any such representation and
warranty that, by its terms, refers to a specific date other than the Amendment
Effective Date, in which case as of such specific date, (ii) that the
Consolidated financial statements of the Borrower and its Subsidiaries referred
to in Sections 4.01(f) and 4.01(g) of the Credit Agreement shall be deemed to
refer to the Consolidated financial statements of the Borrower and its
Subsidiaries comprising part of the Required Financial Information most
recently delivered to the Administrative Agent and the Lender Parties pursuant
to Sections 5.03(b) and 5.03(c), respectively, on or prior to the Amendment
Effective Date and (iii) that the forecasted Consolidated financial statements
of the Borrower and its Subsidiaries referred to in Section 4.01(h) of the
Credit Agreement shall be deemed to refer to the forecasted Consolidated
financial statements of the Borrower and its Subsidiaries most recently
delivered to the Administrative Agent and the Lender Parties prior to the
Amendment Effective Date).
(c) No event shall have occurred and be continuing, or shall result
from the effectiveness of this Amendment, that constitutes a Default.
(d) All of the reasonable fees and expenses of the Administrative
Agent and the Arranger (including the reasonable fees and expenses of counsel
for the Administrative Agent) due and payable on the Amendment Effective Date
shall have been paid in full.
The effectiveness of this Amendment is further conditioned upon the accuracy of
all of the factual matters described herein. This Amendment is subject to the
provisions of Section 8.01 of the Credit Agreement.
SECTION 3. Reference to and Effect on the Loan Documents. (a)
On and after the Amendment Effective Date, 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, the Notes and each of the other Loan
Documents, as amended by the amendments specifically provided above in Section
1, are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as a
waiver
2
<PAGE> 3
of any right, power or remedy of any of the Guaranteed Parties or the
Administrative Agent under any of the Loan Documents, or constitute a waiver of
any provision of any of the Loan Documents.
SECTION 4. Costs and Expenses. The Borrower hereby agrees to
pay, upon demand, all of the reasonable costs and expenses of the
Administrative Agent and the Arranger (including, without limitation, the
reasonable fees and expenses of counsel for the Administrative Agent) in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Amendment and all of the agreements,
instruments and other documents delivered or to be delivered in connection
herewith, all in accordance with the terms of Section 8.04 of the Credit
Agreement.
SECTION 5. 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 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 6. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers, thereunto duly
authorized, as of the date first written above.
THE BORROWER
MEDPARTNERS, INC.
By
---------------------------------------------
Name:
Title:
THE ADMINISTRATIVE AGENT
BANK OF AMERICA, N.A.
By /s/ Philip S. Durand
---------------------------------------------
Name: Philip S. Durand
Title: Principal
THE LENDER PARTIES
BANK OF AMERICA, N.A., as a Lender,
the Swing Line Bank and the Issuing Bank
By /s/ Philip S. Durand
---------------------------------------------
Name: Philip S. Durand
Title: Principal
AMSOUTH BANK
By /s/ Allison J. Sanders
---------------------------------------------
Name: Allison J. Sanders
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Mary Ellen Egbert
---------------------------------------------
Name: Mary Ellen Egbert
Title: Vice President
4
<PAGE> 5
CITIBANK, N.A.
By /s/ Townsend U. Weekes, Jr.
---------------------------------------------
Name: Townsend U. Weeks, Jr.
Title: Attorney-In-Fact
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Henry J. Reukauf
---------------------------------------------
Name: Henry J. .Reukauf
Title: Vice President
DEBT STRATEGIES FUND, INC.
By
---------------------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. Richard Schiller
---------------------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Richard Davis
---------------------------------------------
Name: Richard Davis
Title: Vice President
FLOATING RATE PORTFOLIO
BY: INVESCO Senior Secured Management, Inc., as
attorney in fact
By /s/ Gregory Stoeckle
---------------------------------------------
Name: Gregory Stoeckle
Title: Vice President
5
<PAGE> 6
KZH HIGHLAND-2 LLC
By /s/ Virginia Conway
---------------------------------------------
Name: Virginia Conway
Title: Authorized Agent
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Neil Brisson
---------------------------------------------
Name: Neil Brisson
Title: Director
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO, INC.
BY: MERRILL LYNCH ASSET
MANAGEMENT L.P., as Investment Advisor
By
---------------------------------------------
Name:
Title:
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
BY: MERRILL LYNCH ASSET MANAGEMENT, L.P.,
as Investment Advisor
By
---------------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By
---------------------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By
---------------------------------------------
Name:
Title:
6
<PAGE> 7
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD.
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jeffrey A. Bakalar
---------------------------------------------
Name: Jeffrey A. Bakalar
Title: Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Anna Marie Fallon
---------------------------------------------
Name: Anna Marie Fallon
Title: Vice President
PAM CAPITAL FUNDING, LP
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
PAMCO CAYMAN, LTD.
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ Mark K. Okada
---------------------------------------------
Name: Mark K. Okada CFA
Title: Executive Vice President
7
<PAGE> 8
PILGRIM PRIME RATE TRUST
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jeffrey A. Bakalar
---------------------------------------------
Name: Jeffrey A. Bakalar
Title: Vice President
SCOTIABANC INC.
By /s/ Dana Maloney
---------------------------------------------
Name: Dana Maloney
Title: Relationship Manager
SRV-HIGHLAND, INC.
By /s/ Kelly C. Walker
---------------------------------------------
Name: Kelly C. Walker
Title: Vice President
STEIN ROE & FARNHAM INCORPORATED,
as Agent for KEYPORT LIFE INSURANCE
COMPANY
By /s/ Brian W. Good
---------------------------------------------
Name: Brian W. Good
Title: Vice President & Portfolio Manager
TORONTO DOMINION (TEXAS), INC.
By /s/ Sonja R. Jordan
---------------------------------------------
Name: Sonja R. Jordan
Title: Vice President
TRANSAMERICA LIFE INSURANCE AND
ANNUITY CO.
By /s/ John M. Casparian
---------------------------------------------
Name: John M. Casparian
Title: Investment Officer
8
<PAGE> 9
TRANSAMERICA PREMIER HIGH YIELD FUND
By /s/ Heather Creeden
---------------------------------------------
Name: Heather Creeden
Title: Investment Officer
VAN KAMPEN PRIME RATE INCOME TRUST
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
VAN KAMPEN SENIOR INCOME TRUST
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By /s/ Douglas J. Smith
---------------------------------------------
Name: Douglas J. Smith
Title: Vice President
WACHOVIA BANK, N.A.
By
---------------------------------------------
Name:
Title:
9
<PAGE> 10
CONSENT TO AMENDMENT NO. 11
TO THE LOAN DOCUMENTS
As of August 30, 1999
Reference is made to Amendment No. 11 to the Loan Documents
dated as of August 30, 1999 (the "AMENDMENT") to the Amended and Restated
Credit Agreement dated as of June 9, 1998 (as amended and otherwise modified by
Amendment No. 1 to the Loan Documents dated as of December 4, 1998, Amendment
No. 2 to the Loan Documents dated as of January 13, 1999, Amendment No. 3 to
the Loan Documents dated as of February 9, 1999, Amendment and Waiver No. 4 to
the Loan Documents dated as of March 18, 1999, Amendment and Waiver No. 5 to
the Loan Documents dated as of April 1, 1999, Amendment No. 6 to the Loan
Documents dated as of April 14, 1999, Amendment No. 7 to the Loan Documents
dated as of June 29, 1999, Amendment No. 8 to the Loan Documents dated as of
August 2, 1999, Amendment No. 9 to the Loan Documents dated as of August 16,
1999 and Amendment No. 10 to the Loan Documents dated as of August 23, 1999,
the "CREDIT AGREEMENT") among MedPartners, Inc., a Delaware corporation, the
Lenders party thereto, Bank of America, N.A. (formerly NationsBank, N.A.), as
the Initial Issuing Bank and Swing Line Bank thereunder, Credit Lyonnais New
York Branch, The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York, as the Syndication Agents therefor, Banc of America
Securities LLC (formerly NationsBanc Montgomery Securities LLC), as Arranger
therefor, and Bank of America, N.A. (formerly NationsBank, N.A.), as the
Administrative Agent for the Lender Parties thereunder. Capitalized terms not
otherwise defined herein shall have the same meanings as specified therefor in
the Credit Agreement.
Each of the undersigned, as a guarantor under the
Subsidiaries Guarantee dated as of June 9, 1998 (as modified to the date
hereof, the "SUBSIDIARIES GUARANTEE") in favor of the Guaranteed Parties,
hereby consents to the execution and delivery of the Amendment and the
performance of the Credit Agreement, as amended thereby, and hereby confirms
and agrees that, notwithstanding the effectiveness of the Amendment, the
Subsidiaries Guarantee is, and shall continue to be, in full force and effect
and is hereby in all respects ratified and confirmed, except that each
reference in the Subsidiaries Guarantee 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
the Amendment.
This Consent 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 one and the same Consent. Delivery of an executed counterpart
of a signature page to this Consent by telecopier shall be effective as
delivery of a manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in
accordance with, the laws of the State of New York.
MEDGP, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
<PAGE> 11
MEDPARTNERS ACQUISITION CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS AVIATION, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
GEORGIA MEDPARTNERS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS INTEGRATED NETWORK-CHANDLER, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PROFESSIONAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
2
<PAGE> 12
ADS HEALTH MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HEALTHWAYS, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
BAY AREA PRACTICE MANAGEMENT GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CHS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
CAREMARK INTERNATIONAL INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
3
<PAGE> 13
CAREMARK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ Leisa Kizer
----------------------------------------
Name: Leisa Kizer
Title: Treasurer
CAREMARK PHYSICIAN SERVICES OF TEXAS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PRESCRIPTION HEALTH SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
STRATEGIC HEALTHCARE MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
4
<PAGE> 14
CAREMARK INTERNATIONAL HOLDINGS INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PHYSICIAN SERVICES INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CAREMARK RESOURCES CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
FRIENDLY HILLS HEALTHCARE NETWORK INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS NSC LTD.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATIVE SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
5
<PAGE> 15
MEDPARTNERS MANAGED CARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
ACUTE CARE MEDICAL MANAGEMENT, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
BGS HEALTHCARE, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HOME HEALTH AGENCY OF GREATER MIAMI, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MANAGED CARE OF SOUTH
BROWARD, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MEDICAL MANAGEMENT OF OHIO, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
6
<PAGE> 16
LFMG, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PACIFIC MEDICAL GROUP, INC.
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PACIFIC PHYSICIAN SERVICES, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS EAST, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS NORTH CAROLINA MEDICAL MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS RIVERSIDE DIVISION ACQUISITION AND
MANAGEMENT CORP. I
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
7
<PAGE> 17
PPS VALLEY MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
----------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PPS INDEMNITY, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES ARIZONA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES NEVADA, INC.
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PHYSICIANS' HOSPITAL MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
----------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
8
<PAGE> 18
RELIANT HEALTHCARE SYSTEMS, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
-------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS/TALBERT MEDICAL MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT MEDICAL MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT HEALTH SERVICES CORPORATION
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATION, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Treasurer
of MedPartners, Inc., the General
Partner
9
<PAGE> 19
MEDPARTNERS PHYSICIAN MANAGEMENT, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President of
MedPartners, Inc., the General
Partner
MEDOHIO, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MED TENNESSEE, INC.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDTEX, L.P.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MEDPARTNERS PHYSICIAN SERVICES OF ILLINOIS L.L.C.
By /s/ James H. Dickerson, Jr.
-------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
North Suburban Clinic, Ltd.,
a Member
10
<PAGE> 20
CERRITOS INVESTMENT GROUP
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., a Partner
CERRITOS INVESTMENT GROUP II
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
a Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Corporate Secretary of
MedPartners, Inc., a Partner
FAMILY MEDICAL CENTER
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary of
Pacific Medical Group, Inc., a Partner
11
<PAGE> 21
5000 AIRPORT PLAZA, L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of MedPartners, Inc.,
the General Partner
By /s/ Sara J. Finley
----------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
MedPartners, Inc., the General Partner
KS-PSI OF TEXAS L.P.
By /s/ James H. Dickerson, Jr.
----------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
MedPartners Physician Services, Inc.,
the General Partner
12
<PAGE> 1
EXHIBIT 10.4
AMENDMENT NO. 12 TO THE LOAN DOCUMENTS
AMENDMENT dated as of September 14, 1999 to the Amended and
Restated Credit Agreement dated as of June 9, 1998 (as amended and otherwise
modified by Amendment and Waiver No. 1 to the Loan Documents dated as of
December 4, 1998, Amendment No. 2 to the Loan Documents dated as of January 13,
1999, Amendment No. 3 to the Loan Documents dated as of February 9, 1999,
Amendment and Waiver No. 4 to the Loan Documents dated as of March 18, 1999,
Amendment and Waiver No. 5 to the Loan Documents dated as of April 1, 1999,
Amendment No. 6 to the Loan Documents dated as of April 14, 1999, Amendment No.
7 to the Loan Documents dated as of June 29, 1999, Amendment No. 8 to the Loan
Documents dated as of August 2, 1999 ("Amendment No. 8"), Amendment No. 9 to the
Loan Documents dated as of August 16, 1999, Amendment No. 10 to the Loan
Documents dated as of August 23, 1999, and Amendment No. 11 to the Loan
Documents dated as of August 30, 1999, the "CREDIT AGREEMENT among Caremark Rx,
Inc. (formerly known as MedPartners, Inc.), a Delaware corporation (the
"BORROWER"), the Lenders party thereto, Bank of America, N.A. (formerly
NationsBank, N.A.; "BOFA"), as the Initial Issuing Bank and the Swing Line Bank
thereunder, Credit Lyonnais New York Branch, The First National Bank of Chicago
and Morgan Guaranty Trust Company of New York, as the Syndication Agents
therefor, Banc of America Securities LLC (formerly NationsBanc Montgomery
Securities LLC), as the Arranger therefor, and BofA, as the Administrative Agent
for the Lender Parties thereunder. Capitalized terms not otherwise defined in
this Amendment have the same meanings as specified therefor in the Credit
Agreement.
PRELIMINARY STATEMENTS
(1) The Borrower has requested that the Lender Parties agree
to amend the Credit Agreement in order to provide (a) for the issuance of trust
convertible preferred stock by a Delaware trust which will be a wholly-owned
Subsidiary of the Borrower and to provide for the application of the proceeds of
such issuance, (b) that the latest date for approval of the California
Transition Plan be extended from September 30, 1999 to November 30, 1999, (c)
that the maximum amount of the Caremark Receivables Securitization be decreased
from $150,000,000 to $125,000,000, (d) that the amount of Net Cash Proceeds from
certain Asset Sales permitted to be retained by the Borrower be increased from
$50,000,000 to $93,000,000, (e) that the weekly reporting requirements of the
Borrower with respect to certain financial information be eliminated subject to
certain conditions, and (f) for certain other changes as set forth herein.
(2) The Lender Parties have indicated their willingness to
agree to amend the terms and conditions of the Credit Agreement described above
in Preliminary Statement (1) on the terms and subject to the satisfaction of the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein and in the Loan Documents, the
parties hereto hereby agree as follows:
SECTION 1. Amendments of Certain Provisions of the Credit
Agreement. The Credit Agreement is, upon the occurrence of the Amendment
Effective Date (as hereinafter defined), hereby amended to read as follows:
(a) Section 1.01 is hereby amended to delete the definition of
"APPLICABLE MARGIN" in its entirety and to substitute therefor the following:
"`APPLICABLE MARGIN' means (a) in the case of the Term A
Facility, (i) at any time during the period from the date of Amendment
No. 1 to the Loan Documents to September 30, 1999, 2.250% per annum for
Base Rate Advances and 3.250% per annum for Eurodollar Rate
<PAGE> 2
Advances, (ii) at any time during the period from September 30, 1999 to
December 31, 1999, 2.500% per annum for Base Rate Advances and 3.500%
per annum for Eurodollar Rate Advances and (iii) at any time and from
time to time on and after December 31, 1999, 2.750% per annum for Base
Rate Advances and 3.750% per annum for Eurodollar Rate Advances, (b) in
the case of the Term B Facility, (i) at any time during the period from
the date of Amendment No. 1 to the Loan Documents to September 30,
1999, 2.500% per annum for Base Rate Advances and 3.500% per annum for
Eurodollar Rate Advances, (ii) at any time during the period from
September 30, 1999 to December 31, 1999, 2.750% per annum for Base Rate
Advances and 3.750% per annum for Eurodollar Rate Advances and (iii) at
any time and from time to time on and after December 31, 1999, 3.000%
per annum for Base Rate Advances and 4.000% per annum for Eurodollar
Rate Advances, and (c) in the case of the Revolving Credit Facility,
(i) at any time during the period from the date of Amendment No. 1 to
the Loan Documents through the Performance Level Determination Date,
2.250% per annum for Base Rate Advances and 3.250% per annum for
Eurodollar Rate Advances and (ii) at any time and from time to time
thereafter, a percentage per annum equal to the applicable percentage
set forth below for the Performance Level set forth below:
<TABLE>
<CAPTION>
======================================================================================
REVOLVING CREDIT REVOLVING CREDIT
PERFORMANCE LEVEL BASE RATE ADVANCES EURODOLLAR RATE ADVANCES
I 0.375% 1.375%
<S> <C> <C>
--------------------------------------------------------------------------------------
II 0.500% 1.500%
--------------------------------------------------------------------------------------
III 0.625% 1.625%
--------------------------------------------------------------------------------------
IV 0.875% 1.875%
--------------------------------------------------------------------------------------
V 1.250% 2.250%
--------------------------------------------------------------------------------------
VI 1.625% 2.625%
--------------------------------------------------------------------------------------
VII 2.000% 3.000%
--------------------------------------------------------------------------------------
VIII 2.250% 3.250%
--------------------------------------------------------------------------------------
IX 2.500% 3.500%
======================================================================================
</TABLE>
For purposes of subclause (c)(ii) of the immediately preceding
sentence, the Applicable Margin for each Base Rate Advance shall be
determined by reference to the Performance Level in effect from time to
time and the Applicable Margin for each Eurodollar Rate Advance shall
be determined by reference to the Performance Level in effect on the
first day of each Interest Period for such Eurodollar Rate Advance."
(b) The definition of "CALIFORNIA TRANSITION PLAN" in Section 1.01 is
hereby amended to delete the date "September 30, 1999" in subclause (D) thereof
and to substitute therefor the new date "November 30, 1999."
(c) Section 1.01 is hereby amended to delete the definition "CAREMARK
RECEIVABLES SECURITIZATION" in its entirety and to substitute therefor the
following:
"`CAREMARK RECEIVABLES SECURITIZATION' means limited recourse
sales and assignments from time to time by Caremark Inc. of its
accounts receivable (including, upon the
2
<PAGE> 3
consummation of the Incremental CTS Receivables Securitization, the
accounts receivable of the Therapeutic Services Division of Caremark
Inc.) to MP Receivables and by MP Receivables of such accounts
receivable or interests therein to one or more financial institutions;
provided, however, that (a) the aggregate principal amount paid by such
financial institutions for all such accounts receivable or interests
therein and to be recovered from all such accounts receivable or
interests therein shall not exceed $125,000,000 at any time
outstanding, (b) the price paid for any such accounts receivable shall
be as set forth in the Caremark Receivables Securitization Documents,
as in effect on the Amendment No. 1 Effective Date, or in the case of
any such accounts receivable included in the Incremental CTS
Receivables Securitization, such price as shall be set forth in the
Caremark Receivables Securitization Documents effected to permit the
Incremental CTS Receivables Securitization (but in any event not less
than 15% of the face amount of such accounts receivable), and (c) each
such sale and assignment of such accounts receivable or interests
therein shall otherwise be effected on the terms and conditions set
forth in the Caremark Receivables Securitization Documents."
(d) The definition of "CHANGE OF CONTROL" in Section 1.01 is hereby
amended (A) to delete the word "or" at the end of subsection (b) thereof, (B) to
delete the period at the end of subsection (c) thereof and to substitute
therefor the phrase "; and" and (C) to add thereto a new subsection (d) to read
as follows:
"(d) a Change of Control as defined in the Trust Agreement."
(e) Section 1.01 is hereby amended to delete the definition
"CONSTITUTIVE DOCUMENTS" in its entirety and to substitute therefor the
following:
"`CONSTITUTIVE DOCUMENTS' means, with respect to any Person,
the certificate of incorporation or registration (including, if
applicable, certificate of change of name), articles of incorporation
or association, memorandum of association, charter, bylaws, partnership
agreement, trust agreement, limited liability company operating or
members agreement, joint venture agreement or one or more similar
agreements, instruments or documents constituting the organization or
formation of such Person including, without limitation, the Convertible
Subordinated Debentures, the Preferred Securities Guarantee and the
Trust Agreement."
(f) Section 1.01 is hereby amended to delete the definition of "FIXED
CHARGE COVERAGE RATIO" in its entirety and to substitute therefor the following:
"`FIXED CHARGE COVERAGE RATIO' means, with respect to the
Borrower and its Subsidiaries for any period, the ratio of (a) the sum
of (i) Consolidated EBITDA of the Borrower and the Restricted
Subsidiaries for such period and (ii) for any such period commencing on
or after January 1, 2000, all rental expense of the Borrower and the
Restricted Subsidiaries for such period to (b) the sum (without
duplication) of (i) all Consolidated Interest Expense of the Borrower
and its Subsidiaries for such period, (ii) all Consolidated Cash Taxes
paid by or on behalf of the Borrower or any of its Subsidiaries during
such period, (iii) for any such period commencing on or after January
1, 2000, the amount of Consolidated Rental Payments made or required to
be made by the Borrower and the Restricted Subsidiaries during such
period and (iv) the aggregate amount of all outstanding Advances
scheduled to be repaid during such period pursuant to Section 2.04(a),
2.04(b) or 2.04(c), excluding the aggregate amount of all Term A
Advances scheduled to be repaid pursuant to Section 2.04(a) on November
30, 1999 in excess of $8,173,264."
3
<PAGE> 4
(g) Section 1.01 is hereby amended to delete the definition of
"INCREMENTAL CTS RECEIVABLES SECURITIZATION" in its entirety and to substitute
therefor the following:
"`INCREMENTAL CTS RECEIVABLES SECURITIZATION' means limited
recourse sales and assignments from time to time by the Therapeutic
Services Division of Caremark, Inc. of its account receivables to MP
Receivables and by MP Receivables of such accounts receivable or
interests therein to one or more financial institutions pursuant to the
Caremark Receivables Securitization Documents that permit such sales
and assignments on substantially the same terms and conditions as are
set forth therein on the Amendment No. 7 Effective Date (except for any
modifications to the eligibility criteria for, and the other provisions
included in, the Caremark Securitization Documents relating to accounts
receivable sold and assigned into the Caremark Receivables
Securitization that are reasonably necessary due to the ordinary course
nature of the accounts receivable of the Therapeutic Services Division
of Caremark, Inc., but solely to the extent permitted under the terms
of the Loan Documents."
(h) Section 1.01 is hereby amended to delete the definition of "MP
RECEIVABLES" in its entirety and to substitute therefor the following:
"`MP RECEIVABLES' means MP Receivables Company, a Delaware
corporation and a wholly-owned subsidiary of Caremark, or any other
Person organized under the laws of the United States or any State
thereof and a wholly-owned Subsidiary of Caremark, in each case formed
by the Borrower in connection with the Caremark Receivables
Securitization."
(i) The definition of "UNUSED REVOLVING CREDIT COMMITMENT" in Section
1.01 is hereby amended to delete the phrase "Amendment No. 8 Net Cash Proceeds
Reserve" from clause (b)(ii)(D)(2) thereof and to substitute therefor the phrase
"Term A Amortization Reserve."
(j) Section 1.01 is hereby amended to delete therefrom the following
definitions in their entirety: "AMENDMENT NO. 8 NET CASH PROCEEDS," "AMENDMENT
NO. 8 NET CASH PROCEEDS RESERVE," "REQUIRED LENDERS' PROCEEDS RESERVE
APPLICATION NOTICE," and "REQUIRED LENDERS' PROCEEDS RESERVE ELIMINATION
NOTICE."
(k) Section 1.01 is hereby amended to add in the appropriate
alphabetical order the following definitions:
"`CONVERTIBLE SUBORDINATED DEBENTURES' means those certain
Convertible Subordinated Debentures issued by the Borrower to
Wilmington Trust Company, as trustee, under the Trust Agreement,
containing provisions subordinating the obligations of the Borrower
thereunder to the obligations of the Borrower hereunder and other terms
and conditions, in each case as provided in the Offering Memorandum or
such other terms and conditions which are not adverse to the interests
of the Lender Parties."
"`DELAWARE TRUST SUBSIDIARY' means the wholly-owned Subsidiary
of the Borrower duly created and validly existing as a statutory
business trust in good standing under the Business Trust Act of the
State of Delaware."
"`LIQUIDITY AMOUNT' means, as of any date, the sum of (a) the
aggregate Unused Revolving Credit Commitment as of such date plus (b)
the aggregate amount of cash and Cash Equivalents maintained as of such
date by the Borrower and its Subsidiaries."
4
<PAGE> 5
"`OFFERING MEMORANDUM' means that certain Offering Memorandum
in draft form dated September 11, 1999 containing a description of the
principal terms and provisions of the Trust Convertible Preferred
Interests."
"`PREFERRED SECURITIES GUARANTEE' means that certain Guarantee
made by the Borrower to guarantee the obligations of the Delaware Trust
Subsidiary in respect of the Trust Convertible Preferred Interests,
containing provisions subordinating the obligations of the Borrower
thereunder to the obligations of the Borrower hereunder and other terms
and conditions, in each case as provided in the Offering Memorandum or
such other terms and conditions which are not adverse to the interests
of the Lender Parties."
"`TERM A AMORTIZATION RESERVE' means the amount of the
required repayment of the Term A Advances due on November 30, 1999 as
provided in Section 2.04(a)."
"`TRUST AGREEMENT' means that certain Trust Agreement between
the Borrower and Wilmington Trust Company, as trustee, entered into in
connection with the issuance of the Trust Convertible Preferred
Interests containing terms and conditions as provided in the Offering
Memorandum or such other terms and conditions which are not adverse to
the interests of the Lender Parties."
"`TRUST CONVERTIBLE PREFERRED INTERESTS' means the Preferred
Interests issued by the Delaware Trust Subsidiary pursuant to the Trust
Agreement having terms and conditions as provided in the Offering
Memorandum or such other terms and conditions which are not adverse to
the interests of the Lender Parties."
(l) Section 2.01(c) is hereby amended to delete subsection (iii)
therefrom and to substitute the following therefor:
"(iii) Term A Amortization Reserve. In the event that the amount of Net
Cash Proceeds of the issuance of the Trust Convertible Preferred
Interests equals or exceeds $200,000,000, the Revolving Credit
Commitment of each Revolving Credit Lender shall be deemed utilized at
any time and from time to time after the date of such issuance by such
Lender's Pro Rata Share of the amount of the Term A Amortization
Reserve. On November 30, 1999 the Term A Amortization Reserve shall be
eliminated in full, and, notwithstanding any other provisions of this
Agreement, the amount of the Term A Amortization Reserve at such date
shall be deemed to constitute a Revolving Credit Borrowing on such date
in such amount and the Borrower irrevocably authorizes the Agent on
such date to repay the Term A Advances outstanding at such time in
accordance with Section 2.04(a)(ii)."
(m) Section 2.04(a)(ii) is hereby amended to add thereto the
following proviso before the period at the end thereof:
"provided, further, however, that in the event that the amount of Net
Cash Proceeds of the issuance of the Trust Convertible Preferred
Interests equals or exceeds $200,000,000, the Borrower shall instead
pay on November 30, 1999 the amounts scheduled above to be paid on
November 30, 1999, February 29, 2000, May 31, 2000, and August 31,
2000."
(n) Section 2.05(b) is hereby amended to delete the date "September 30,
1999" in subclause (vii)(B) thereof and to substitute therefor the new date
"November 30, 1999."
5
<PAGE> 6
(o) Section 2.05(b)(vi) is hereby amended by deleting subsection (C)
therefrom and substituting the following therefor:
"(C) the issuance or sale by the Borrower or any of its
Subsidiaries of any Equity Interests therein (other than: (x) the
issuance of the Trust Convertible Preferred Interests, but solely to
the extent that the Net Cash Proceeds thereof are applied in accordance
with subsection (viii) hereof, (y) the issuance by the Borrower of
Equity Interests upon the conversion of the Trust Convertible Preferred
Interests, and (z) any such issuance or sale of Equity Interests in the
Borrower or any of its Subsidiaries pursuant to Section 5.1 of the TAPS
Indenture, but solely to the extent that the gross proceeds from the
issuance and sale of the Borrower Common Stock pursuant thereto is
applied on the date of such sale to repay the outstanding senior
subordinated notes of the Borrower comprising part of the TAPS in
accordance with Section 5.4 of the TAPS Purchase Contract); and"
(p) Section 2.05(b) is hereby amended to add thereto a new
subsection (viii) to read as follows:
"(viii) The Term Facilities shall be automatically and permanently
reduced, within two Business Days after the date of receipt of the Net
Cash Proceeds by the Borrower or any of its Subsidiaries, from the
issuance of the Trust Convertible Preferred Interests by an amount
equal to:
(A) $80,000,000 in the event that the amount of Net Cash Proceeds
from the issuance of the Trust Convertible Preferred Interests
is less than $200,000,000; and
(B) "2X," where "X" is determined by the following formula, in the
event that the amount of Net Cash Proceeds from the issuance
of the Trust Convertible Preferred Interests is equal to or
greater than $200,000,000:
(P)(.528) = 2X + (A-X)(1/3)
Where:
P = the amount of Net Cash Proceeds from the issuance
of the Trust Convertible Preferred Interests
A = the aggregate principal amount of Term A Advances
outstanding prior to such prepayment
Each reduction of the Term Facilities pursuant to this clause (viii)
shall be applied in the manner set forth in Section 2.05(c)(i)."
(q) Section 5.02(b) is amended to delete subsection (xviii)
therefrom and to substitute the following therefor:
"(xviii) Indebtedness of the Borrower in an aggregate principal amount
not in excess of $12,000,000, including within such amount Indebtedness
evidenced by Contingent Obligations, which Indebtedness will be
comprised of loans from one or more Plans (as defined in the California
Settlement Agreement) or guarantees of loans by one or more Plans, the
proceeds of which direct Indebtedness will be loaned to one or more
buyers to be used, and the proceeds of which loans guaranteed by such
Contingent Obligations will be used, to finance the working
6
<PAGE> 7
capital requirements of certain California Operations (as defined in
the California Settlement Agreement) purchased from the Borrower or its
Subsidiaries; provided that so long as interest thereunder at the
contract rate in effect on the date such Indebtedness is incurred is
paid when due, the Borrower shall not have any payment obligation in
respect of such Indebtedness until at least three years after the date
such Indebtedness is incurred; and provided, further, however, that the
Borrower may be obligated to make a mandatory prepayment upon receipt
by the Borrower of any amount to be remitted to the Borrower pursuant
to Section 3.5(d) of the California Settlement Agreement, in an amount
equal to the lesser of (x) the amount of all mandatory and voluntary
principal repayments made by KPC Medical Management, Inc. of the
promissory note issued by KPC Medical Management, Inc. in partial
payment of the purchase price for certain California Property and
Assets and deposited in the California Deposit Account (as defined in
the California Settlement Agreement) and (y) the amount so received by
the Borrower pursuant to Section 3.5(d) of the California Settlement
Agreement;".
(r) Section 5.02(b) is amended (A) to delete the word "and" at the end
of subsection (xvi) thereof, (B) to delete the word "and" at the end of
subsection (xvii) thereof, (C) to delete the period at the end of subsection
(xviii) thereof and to substitute therefor the phrase "; and" and (D) to add
thereto a new subsection (xix) to read as follows:
"(xix) unsecured Indebtedness of the Borrower to the Delaware Trust
Subsidiary pursuant to the Convertible Subordinated Debentures in an
aggregate principal amount not in excess of 103.1% of the gross
proceeds of the Trust Convertible Preferred Interests, and unsecured
Indebtedness of the Borrower under the Preferred Securities Guarantee."
(s) Section 5.02(d) of the Credit Agreement is hereby amended to delete
the last paragraph thereof immediately following subsection (xiii) therein and
to substitute therefor the following paragraph:
"Notwithstanding any of the provisions of this Section
5.02(d), the Borrower and its Subsidiaries may retain (A) Net Cash
Proceeds as provided in the Credit Agreement as in effect prior to the
date of Amendment No. 8 to the Loan Documents and (B) up to 100% of the
Net Cash Proceeds received from time to time on or after July 1, 1999
from one or more sales, leases, transfers or other dispositions
expressly permitted under clause (vii), (viii) or (xi) of this Section
5.02(d), in each case for use in their business and operations in the
ordinary course, so long as the aggregate amount of all such Net Cash
Proceeds referred to in subclause (B) so retained by the Borrower and
its Subsidiaries does not exceed $93,000,000, exclusive of up to
$15,000,000 of such Net Cash Proceeds which can be retained by the
Borrower and used solely for the payment of amounts owing under the
Amended Aetna Note when due and payable in accordance with the terms
thereof."
(t) Section 5.02(e) is amended (A) to delete the period at the end of
subsection (vii) thereof and to substitute therefor the phrase "; and", (B) to
delete the period at the end of subsection (viii) thereof and to substitute
therefor the phrase "; and", and (C) to add thereto a new subsection (ix) to
read as follows:
"(ix) Investments by the Borrower in an aggregate amount not in excess
of 3.1% of the gross proceeds of the Trust Convertible Preferred
Interests to capitalize the Delaware Trust Subsidiary provided that the
Borrower or any other Subsidiary does not transfer assets to, or
guarantee or otherwise become obligated in respect of the obligations
of, the Delaware Trust Subsidiary other than as provided in the
Preferred Securities Guarantee."
7
<PAGE> 8
(u) Section 5.02(f) is amended (A) to delete the word "and" at the
end of subsection (iv) thereof, (B) to delete the period at the end of
subsection (v) thereof and to substitute therefor the phrase "; and" and (C) to
add thereto a new subsection (vi) to read as follows:
"(vi) the Delaware Trust Subsidiary may issue the Trust Convertible
Preferred Interests, and declare and pay or make dividends in respect
thereof as provided in the Trust Agreement."
(v) Section 5.02(h)(i) is amended (A) to delete the word "and" at the
end of subsection (F) thereof, (B) to insert the word "and" after the semicolon
at the end of subsection (G) thereof, and (C) to add thereto a new subsection
(H) to read as follows:
"(H) the issuance by the Borrower of Equity Interests to the holders of
the Trust Convertible Preferred Interests upon exchange thereof for
Convertible Subordinated Debentures and immediate conversion of such
Convertible Subordinated Debentures, as provided in the Trust
Agreement;"
(w) Section 5.02(k) is amended to delete the phrase "other than a
Special Purpose Vehicle" therefrom and to substitute therefor the phrase "other
than a Special Purpose Vehicle or the Delaware Trust Subsidiary."
(x) Section 5.03 is amended to add the following new paragraph at the
end thereof:
"Notwithstanding the foregoing provisions of this Section 5.03,
commencing with the first week following the date of issuance of the
Trust Convertible Preferred Interests, the Borrower shall not be
required to comply with subsections (w), (x) and (y) of this Section
5.03; provided, however that in the event that the Liquidity Amount as
of any date thereafter is less than $50,000,000, the Borrower shall be
required to comply with subsections (w), (x) and (y) of this Section
5.03 commencing with the first week following such date."
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the first date (the
"AMENDMENT EFFECTIVE DATE") on which, and only if, each of the following
conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received on or before 5:00 p.m.
(Charlotte time) on September 14, 1999, (i) counterparts of this Amendment
executed by the Borrower and the Required Lenders or, as to any of the Lender
Parties, advice satisfactory to the Administrative Agent that such Lender Party
has executed this Amendment, (ii) counterparts of the Consent attached hereto
executed and delivered by each of the Loan Parties (other than the Borrower) and
(iii) for the benefit of each Lender Party that has executed this Amendment
prior to such time, a fee from the Borrower in an amount equal to 0.250% of the
aggregate Commitment of such Lender Party, in each case as of the Business Day
immediately preceding the Amendment Effective Date, which amount shall include
amounts which would have been payable pursuant to Section 3 of Amendment No. 8,
and which amount will be distributed to the respective Lender Party no later
than the Business Day immediately succeeding the Amendment Effective Date.
(b) The representations and warranties set forth in each of the Loan
Documents shall be correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to this Amendment, as though made
on and as of such date (except (i) for any such representation and warranty
that, by its terms, refers to a specific date other than the Amendment Effective
Date, in which case as of such specific date, (ii) that the Consolidated
financial statements of the Borrower and its Subsidiaries referred to in
Sections 4.01(f) and 4.01(g) of the Credit Agreement shall be deemed to refer
8
<PAGE> 9
to the Consolidated financial statements of the Borrower and its Subsidiaries
comprising part of the Required Financial Information most recently delivered to
the Administrative Agent and the Lender Parties pursuant to Sections 5.03(b) and
5.03(c), respectively, on or prior to the Amendment Effective Date and (iii)
that the forecasted Consolidated financial statements of the Borrower and its
Subsidiaries referred to in Section 4.01(h) of the Credit Agreement shall be
deemed to refer to the forecasted Consolidated financial statements of the
Borrower and its Subsidiaries most recently delivered to the Administrative
Agent and the Lender Parties prior to the Amendment Effective Date).
(c) No event shall have occurred and be continuing, or shall result
from the effectiveness of this Amendment, that constitutes a Default.
(d) All of the reasonable fees and expenses of the Administrative Agent
and the Arranger (including the reasonable fees and expenses of counsel for the
Administrative Agent) due and payable on the Amendment Effective Date shall have
been paid in full.
The effectiveness of this Amendment is further conditioned upon the accuracy of
all of the factual matters described herein. This Amendment is subject to the
provisions of Section 8.01 of the Credit Agreement.
SECTION 3. Reference to and Effect on the Loan Documents. (a)
On and after the Amendment Effective Date, 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, the Notes and each of the other Loan
Documents, as amended by the amendments specifically provided above in Section
1, are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. 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 of the Guaranteed Parties or the
Administrative Agent under any of the Loan Documents, or constitute a waiver of
any provision of any of the Loan Documents.
SECTION 4. Costs and Expenses. The Borrower hereby agrees to
pay, upon demand, all of the reasonable costs and expenses of the Administrative
Agent and the Arranger (including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent) in connection with the
preparation, execution, delivery, administration, modification and amendment of
this Amendment and all of the agreements, instruments and other documents
delivered or to be delivered in connection herewith, all in accordance with the
terms of Section 8.04 of the Credit Agreement.
SECTION 5. 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 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 6. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers, thereunto duly
authorized, as of the date first written above.
9
<PAGE> 10
THE BORROWER
CAREMARK RX, INC.
(formerly known as MEDPARTNERS, INC.)
By
------------------------------------------
Name:
Title:
[Remainder of page intentionally left blank.]
10
<PAGE> 11
THE ADMINISTRATIVE AGENT
BANK OF AMERICA, N.A.
By /s/ Philip S. Durand
---------------------------------
Name: Philip S. Durand
Title: Principal
THE LENDER PARTIES
BANK OF AMERICA, N.A., as a Lender,
the Swing Line Bank and the Issuing Bank
By /s/ Philip S. Durand
---------------------------------
Name: Philip S. Durand
Title: Principal
AMSOUTH BANK
By /s/ Allison J. Sanders
---------------------------------
Name: Allison J. Sanders
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Dawn Lee Lum
---------------------------------
Name: Dawn Lee Lum
Title: Vice President
CITIBANK, N.A.
By
---------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Henry J. Reukauf
---------------------------------
Name: Henry J. Reukauf
Title: Vice President
DEBT STRATEGIES FUND, INC.
11
<PAGE> 12
By
---------------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. Richard Schiller
---------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Richard Davis
---------------------------------
Name: Richard Davis
Title: Vice President
FLOATING RATE PORTFOLIO
BY: INVESCO Senior Secured Management, Inc., as
attorney in fact
By
---------------------------------
Name:
Title:
KZH HIGHLAND-2 LLC
By /s/ Peter Chin
---------------------------------
Name: Peter Chin
Title: Authorized Agent
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By /s/ Neil Brisson
---------------------------------
Name: Neil Brisson
Title: Director
12
<PAGE> 13
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO, INC.
BY: MERRILL LYNCH ASSET
MANAGEMENT L.P., as Investment Advisor
By
---------------------------------------
Name:
Title:
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
BY: MERRILL LYNCH ASSET MANAGEMENT, L.P., as
Investment Advisor
By
---------------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By
---------------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By
---------------------------------------
Name:
Title:
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT L.P.,
as Collateral Manager
By /s/ James Dondero
---------------------------------------
Name: James Dondero, CFA, CPA
Title: President
13
<PAGE> 14
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD.
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jason T. Groom
---------------------------------------
Name: Jason T. Groom
Title: Assistant Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Anna Marie Fallon
---------------------------------------
Name: Anna Marie Fallon
Title: Vice President
PAM CAPITAL FUNDING, LP
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ James Dondero
---------------------------------------
Name: James Dondero, CFA, CPA
Title: President
PAMCO CAYMAN, LTD.
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By /s/ James Dondero
---------------------------------------
Name: James Dondero, CFA, CPA
Title: President
PILGRIM PRIME RATE TRUST
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By /s/ Jason T. Groom
---------------------------------------
Name: Jason T. Groom
Title: Assistant Vice President
14
<PAGE> 15
SCOTIABANC INC.
By /s/ Dana Maloney
---------------------------------------
Name: Dana Maloney
Title: Relationship Manager
SRV-HIGHLAND, INC.
By /s/ Kelly C. Walker
---------------------------------------
Name: Kelly C. Walker
Title: Vice President
STEIN ROE & FARNHAM INCORPORATED,
as Agent for KEYPORT LIFE INSURANCE
COMPANY
By /s/ Brian W. Good
---------------------------------------
Name: Brian W. Good
Title: Vice President & Portfolio Manager
TORONTO DOMINION (TEXAS), INC.
By /s/ Sonja R. Jordan
---------------------------------------
Name: Sonja R. Jordan
Title: Vice President
TRANSAMERICA LIFE INSURANCE AND
ANNUITY CO.
By /s/ John M. Casparian
---------------------------------------
Name: John M. Casparian
Title: Investment Officer
TRANSAMERICA PREMIER HIGH YIELD FUND
By /s/ John M. Casparian
---------------------------------------
Name: John M. Casparian
Title: Investment Officer
15
<PAGE> 16
VAN KAMPEN PRIME RATE INCOME TRUST
By /s/ Dennis J. McDonnell
---------------------------------------
Name: Dennis J. McDonnell
Title: President
VAN KAMPEN SENIOR INCOME TRUST
By /s/ Dennis J. McDonnell
---------------------------------------
Name: Dennis J. McDonnell
Title: President
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By /s/ Dennis J. McDonnell
---------------------------------------
Name: Dennis J. McDonnell
Title: President
WACHOVIA BANK, N.A.
By /s/ John C. Carty
---------------------------------------
Name: John C. Carty
Title: Assistant Vice President
16
<PAGE> 17
CONSENT TO AMENDMENT NO. 12
TO THE LOAN DOCUMENTS
As of September 14, 1999
Reference is made to Amendment No. 12 to the Loan Documents
dated as of September 14, 1999 (the "Amendment") to the Amended and Restated
Credit Agreement dated as of June 9, 1998 (as amended and otherwise modified by
Amendment No. 1 to the Loan Documents dated as of December 4, 1998, Amendment
No. 2 to the Loan Documents dated as of January 13, 1999, Amendment No. 3 to the
Loan Documents dated as of February 9, 1999, Amendment and Waiver No. 4 to the
Loan Documents dated as of March 18, 1999, Amendment and Waiver No. 5 to the
Loan Documents dated as of April 1, 1999, Amendment No. 6 to the Loan Documents
dated as of April 14, 1999, Amendment No. 7 to the Loan Documents dated as of
June 29, 1999, Amendment No. 8 to the Loan Documents dated as of August 2, 1999,
Amendment No. 9 to the Loan Documents dated as of August 16, 1999, Amendment No.
10 to the Loan Documents dated as of August 23, 1999, and Amendment No. 11 to
the Loan Documents dated as of August 30, 1999, the "CREDIT AGREEMENT") among
Caremark Rx, Inc. (formerly known as MedPartners, Inc.), a Delaware corporation,
the Lenders party thereto, Bank of America, N.A. (formerly NationsBank, N.A.),
as the Initial Issuing Bank and Swing Line Bank thereunder, Credit Lyonnais New
York Branch, The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York, as the Syndication Agents therefor, Banc of America
Securities LLC (formerly NationsBanc Montgomery Securities LLC), as Arranger
therefor, and Bank of America, N.A. (formerly NationsBank, N.A.), as the
Administrative Agent for the Lender Parties thereunder. Capitalized terms not
otherwise defined herein shall have the same meanings as specified therefor in
the Credit Agreement.
Each of the undersigned, as a guarantor under the Subsidiaries
Guarantee dated as of June 9, 1998 (as modified to the date hereof, the
"SUBSIDIARIES GUARANTEE") in favor of the Guaranteed Parties, hereby consents to
the execution and delivery of the Amendment and the performance of the Credit
Agreement, as amended thereby, and hereby confirms and agrees that,
notwithstanding the effectiveness of the Amendment, the Subsidiaries Guarantee
is, and shall continue to be, in full force and effect and is hereby in all
respects ratified and confirmed, except that each reference in the Subsidiaries
Guarantee 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 the Amendment.
This Consent 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 one and the same Consent. Delivery of an executed counterpart of a
signature page to this Consent by telecopier shall be effective as delivery of a
manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in accordance
with, the laws of the State of New York.
MEDGP, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
<PAGE> 18
MEDPARTNERS ACQUISITION CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS AVIATION, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS EAST, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
GEORGIA MEDPARTNERS MANAGEMENT,
INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS INTEGRATED NETWORK-CHANDLER, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PROFESSIONAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
2
<PAGE> 19
ADS HEALTH MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HEALTHWAYS, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
BAY AREA PRACTICE MANAGEMENT
GROUP, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CHS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
CAREMARK INTERNATIONAL INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
3
<PAGE> 20
CAREMARK INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ Leisa Kizer
---------------------------------------
Name: Leisa Kizer
Title: Treasurer
CAREMARK PHYSICIAN SERVICES OF TEXAS INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PRESCRIPTION HEALTH SERVICES, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
STRATEGIC HEALTHCARE MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
4
<PAGE> 21
CAREMARK INTERNATIONAL HOLDINGS INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PHYSICIAN SERVICES INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CAREMARK RESOURCES CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
FRIENDLY HILLS HEALTHCARE
NETWORK INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS NSC LTD.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATIVE
SERVICES, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
5
<PAGE> 22
MEDPARTNERS MANAGED CARE, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
ACUTE CARE MEDICAL MANAGEMENT, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
BGS HEALTHCARE, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HOME HEALTH AGENCY OF GREATER MIAMI, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MANAGED CARE OF SOUTH BROWARD, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MEDICAL MANAGEMENT OF OHIO, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
6
<PAGE> 23
LFMG, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PACIFIC MEDICAL GROUP, INC.
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PACIFIC PHYSICIAN SERVICES, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS EAST, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS NORTH CAROLINA MEDICAL
MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS RIVERSIDE DIVISION ACQUISITION
AND MANAGEMENT CORP. I
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
7
<PAGE> 24
PPS VALLEY MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PPS INDEMNITY, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
ARIZONA, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
NEVADA, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PHYSICIANS' HOSPITAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
8
<PAGE> 25
RELIANT HEALTHCARE SYSTEMS, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS/TALBERT MEDICAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT MEDICAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT HEALTH SERVICES
CORPORATION
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATION, L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President &
Treasurer of Caremark Rx,
Inc., the General Partner
9
<PAGE> 26
MEDPARTNERS PHYSICIAN
MANAGEMENT, L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President of
Caremark Rx, Inc., the General
Partner
MEDOHIO, L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of
MedGP, Inc., the General Partner
MED TENNESSEE, INC.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDTEX, L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of
MedGP, Inc., the General
Partner
MEDPARTNERS PHYSICIAN SERVICES OF ILLINOIS L.L.C.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
North Suburban Clinic, Ltd.,
a Member
10
<PAGE> 27
CERRITOS INVESTMENT GROUP
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President &
Chief Financial Officer of
Caremark Rx, Inc., a Partner
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., a Partner
CERRITOS INVESTMENT GROUP II
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President &
Chief Financial Officer of
Caremark Rx, Inc., a Partner
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., a Partner
5000 AIRPORT PLAZA, L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President &
Chief Financial Officer of
Caremark Rx, Inc. the General
Partner
By /s/ Sara J. Finley
---------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., the General
Partner
11
<PAGE> 28
KS-PSI OF TEXAS L.P.
By /s/ James H. Dickerson, Jr.
---------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
MedPartners Physician Services,
Inc., the General Partner
12
<PAGE> 29
AMENDMENT NO. 13 TO THE LOAN DOCUMENTS
AMENDMENT NO. 13 TO THE LOAN DOCUMENTS dated as of November 5,
1999, to the Amended and Restated Credit Agreement dated as of June 9, 1998 (as
amended and otherwise modified by Amendment and Waiver No. 1 to the Loan
Documents dated as of December 4, 1998, Amendment No. 2 to the Loan Documents
dated as of January 13, 1999, Amendment No. 3 to the Loan Documents dated as of
February 9, 1999, Amendment and Waiver No. 4 to the Loan Documents dated as of
March 18, 1999, Amendment and Waiver No. 5 to the Loan Documents dated as of
April 1, 1999, Amendment No. 6 to the Loan Documents dated as of April 14, 1999,
Amendment No. 7 to the Loan Documents dated as of June 29, 1999, Amendment No. 8
to the Loan Documents dated as of August 2, 1999, Amendment No. 9 to the Loan
Documents dated as of August 16, 1999, Amendment No. 10 to the Loan Documents
dated as of August 23, 1999, Amendment No. 11 to the Loan Documents dated as of
August 30, 1999, and Amendment No. 12 to the Loan Documents dated as of
September 14, 1999, the "CREDIT AGREEMENT among Caremark Rx, Inc. (formerly
known as MedPartners, Inc.), a Delaware corporation (the "BORROWER"), the
Lenders party thereto, Bank of America, N.A. (formerly NationsBank, N.A.;
"BOFA"), as the Initial Issuing Bank and the Swing Line Bank thereunder, Credit
Lyonnais New York Branch, The First National Bank of Chicago and Morgan Guaranty
Trust Company of New York, as the Syndication Agents therefor, Banc of America
Securities LLC (formerly NationsBanc Montgomery Securities LLC), as the Arranger
therefor, and BofA, as the Administrative Agent for the Lender Parties
thereunder. Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified therefor in the Credit Agreement.
PRELIMINARY STATEMENTS
(1) The Borrower has requested that the Lender Parties agree
to amend the Credit Agreement in order to (a) provide for new financial
covenants, (b) amend the definition of Consolidated Rental Payments and (c) make
certain other changes as set forth herein.
(2) The Lender Parties have indicated their willingness to
agree to amend the terms and conditions of the Credit Agreement described above
in Preliminary Statement (1) on the terms and subject to the satisfaction of the
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements contained herein and in the Loan Documents, the
parties hereto hereby agree as follows:
SECTION 1. Amendments of Certain Provisions of the Credit
Agreement. The Credit Agreement is, upon the occurrence of the Amendment
Effective Date (as hereinafter defined), hereby amended to read as follows:
(a) Section 1.01 is hereby amended:
(i) to amend the definition of "California Transition
Plan" to delete the date "November 30, 1999" in subclause (D)
thereof and to substitute therefor the new date "December 31,
1999"; and
(ii) to amend the definition of "Consolidated Rental Payments"
to add at the end thereof the following proviso: "; provided,
however, that Consolidated Rental Payments shall not include
any one-time payment made to the respective lessor to
terminate an Operating Lease in a discontinued operation of
the respective lessee prior to its scheduled termination
date.".
<PAGE> 30
(b) Section 2.05(b) is hereby amended to delete the date
"November 30, 1999" in subclause (vii)(B) thereof and to substitute
therefor the new date "December 31, 1999."
(c) Section 5.02(b)(xviii) is amended to delete in the first
proviso thereof the phrase "at least three years after the date such
Indebtedness is incurred" and to substitute therefor the phrase "after
November 1, 2001".
(d) Section 5.02(h)(i)(G) is amended to (I) delete the phrase
"within five Business Days of January 1, 2000," and to substitute
therefor the phase "not later than six months after the adoption of the
California Transition Plan," and (II) delete the phrase ", as in effect
on the Amendment No. 7 Effective Date".
(e) Section 5.04 is hereby amended to delete subsections (a),
(b) and (c) thereof in their entirety and to substitute therefor the
following subsections (a), (b) and (c), respectively:
"(a) Leverage Ratio. Maintain a Leverage Ratio at all
times of not more than the amount set forth below for the period set
forth below:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
June 30, 1999 through 6.75:1
September 29, 1999
September 30, 1999 through 6.65:1
December 30, 1999
December 31, 1999 through March 6.45:1
30, 2000
March 31, 2000 through 6.15:1
June 29, 2000
June 30, 2000 through September 6.00:1
29, 2000
September 30, 2000 through 5.50:1
December 30, 2000
December 31, 2000 and thereafter 5.00:1
</TABLE>
(b) Fixed Charge Coverage Ratio. Maintain a Fixed
Charge Coverage Ratio as of the last day of each Measurement
Period of not less than the amount set forth below for each
Measurement Period set forth below:
<TABLE>
<CAPTION>
Measurement Period
Ending In Ratio
--------- -----
<S> <C>
September 1999 and thereafter 1.25:1
</TABLE>
2
<PAGE> 31
(c) Interest Coverage Ratio. Maintain an Interest
Coverage Ratio as of the last day of each Measurement Period
of not less than the amount set forth below for each
Measurement Period set forth below:
<TABLE>
<CAPTION>
Measurement Period
Ending In Ratio
--------- -----
<S> <C>
September 1999 1.25:1
December 1999 1.30:1
March 2000 1.40:1
June 2000 1.50:1
September 2000 1.60:1
December 2000 and thereafter 1.70:1"
</TABLE>
SECTION 2. Conditions Precedent to the Effectiveness of this
Amendment. This Amendment shall become effective as of the first date (the
"AMENDMENT EFFECTIVE DATE") on which, and only if, each of the following
conditions precedent shall have been satisfied:
(a) The Administrative Agent shall have received on or before 5:00 p.m.
(Charlotte time) on November 5, 1999, (i) counterparts of this Amendment
executed by the Borrower and the Required Lenders or, as to any of the Lender
Parties, advice satisfactory to the Administrative Agent that such Lender Party
has executed this Amendment and (ii) counterparts of the Consent attached hereto
executed and delivered by each of the Loan Parties (other than the Borrower).
(b) The representations and warranties set forth in each of the Loan
Documents shall be correct in all material respects on and as of the Amendment
Effective Date, before and after giving effect to this Amendment, as though made
on and as of such date (except (i) for any such representation and warranty
that, by its terms, refers to a specific date other than the Amendment Effective
Date, in which case as of such specific date, (ii) that the Consolidated
financial statements of the Borrower and its Subsidiaries referred to in
Sections 4.01(f) and 4.01(g) of the Credit Agreement shall be deemed to refer to
the Consolidated financial statements of the Borrower and its Subsidiaries
comprising part of the Required Financial Information most recently delivered to
the Administrative Agent and the Lender Parties pursuant to Sections 5.03(b) and
5.03(c), respectively, on or prior to the Amendment Effective Date and (iii)
that the forecasted Consolidated financial statements of the Borrower and its
Subsidiaries referred to in Section 4.01(h) of the Credit Agreement shall be
deemed to refer to the forecasted Consolidated financial statements of the
Borrower and its Subsidiaries most recently delivered to the Administrative
Agent and the Lender Parties prior to the Amendment Effective Date).
(c) No event shall have occurred and be continuing, or shall result
from the effectiveness of this Amendment, that constitutes a Default.
3
<PAGE> 32
(d) All of the reasonable fees and expenses of the Administrative Agent
and the Arranger (including the reasonable fees and expenses of counsel for the
Administrative Agent) due and payable on the Amendment Effective Date shall have
been paid in full.
The effectiveness of this Amendment is further conditioned
upon the accuracy of all of the factual matters described herein. This Amendment
is subject to the provisions of Section 8.01 of the Credit Agreement.
SECTION 3. Reference to and Effect on the Loan Documents. (a)
On and after the Amendment Effective Date, 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, the Notes and each of the other Loan
Documents, as amended by the amendments specifically provided above in Section
1, are and shall continue to be in full force and effect and are hereby in all
respects ratified and confirmed. 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 of the Guaranteed Parties or the
Administrative Agent under any of the Loan Documents, or constitute a waiver of
any provision of any of the Loan Documents.
SECTION 4. Costs and Expenses. The Borrower hereby agrees to
pay, upon demand, all of the reasonable costs and expenses of the Administrative
Agent and the Arranger (including, without limitation, the reasonable fees and
expenses of counsel for the Administrative Agent and of Sugarman & Company LLP)
in connection with the preparation, execution, delivery, administration,
modification and amendment of this Amendment and all of the agreements,
instruments and other documents delivered or to be delivered in connection
herewith, all in accordance with the terms of Section 8.04 of the Credit
Agreement.
SECTION 5. 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 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 6. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
4
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers, thereunto duly
authorized, as of the date first written above.
THE BORROWER
CAREMARK RX, INC.
(formerly known as MEDPARTNERS, INC.)
By
------------------------------
Name:
Title:
THE ADMINISTRATIVE AGENT
BANK OF AMERICA, N.A.
By
------------------------------
Name:
Title:
5
<PAGE> 34
THE LENDER PARTIES
BANK OF AMERICA, N.A., as a Lender,
the Swing Line Bank and the Issuing Bank
By /s/ Charles A. Kerr
------------------------------
Name: Charles A. Kerr
Title: Managing Director
AMSOUTH BANK
By /s/ Allison J. Sanders
------------------------------
Name: Allison J. Sanders
Title: Vice President
THE CHASE MANHATTAN BANK
By /s/ Dawn Lee Lum
------------------------------
Name: Dawn Lee Lum
Title: Vice President
CITIBANK, N.A.
By
------------------------------
Name:
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Henry Reukauf
------------------------------
Name: Henry Reukauf
Title: Vice President
DEBT STRATEGIES FUND, INC.
By
------------------------------
Name:
Title:
6
<PAGE> 35
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ L. Richard Schiller
------------------------------
Name: L. Richard Schiller
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ Joyce L. Barry
------------------------------
Name: Joyce L. Barry
Title: Senior Vice President
FLOATING RATE PORTFOLIO
BY: INVESCO Senior Secured Management, Inc.,
as attorney in fact
By
------------------------------
Name:
Title:
KZH HIGHLAND-2 LLC
By
------------------------------
Name:
Title:
MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By
------------------------------
Name:
Title:
7
<PAGE> 36
MERRILL LYNCH DEBT STRATEGIES
PORTFOLIO, INC.
BY: MERRILL LYNCH ASSET
MANAGEMENT L.P., as Investment Advisor
By
------------------------------
Name:
Title:
MERRILL LYNCH GLOBAL INVESTMENT
SERIES: INCOME STRATEGIES PORTFOLIO
BY: MERRILL LYNCH ASSET MANAGEMENT, L.P., as
Investment Advisor
By
------------------------------
Name:
Title:
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By
------------------------------
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
BY: MERRILL LYNCH ASSET
MANAGEMENT, L.P., as Investment Advisor
By
------------------------------
Name:
Title:
ML CBO IV (CAYMAN) LTD.
BY: HIGHLAND CAPITAL MANAGEMENT L.P.,
as Collateral Manager
By
------------------------------
Name:
Title:
8
<PAGE> 37
ML CLO XX PILGRIM AMERICA
(CAYMAN) LTD.
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By
------------------------------
Name:
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Anna Marie Fallon
------------------------------
Name: Anna Marie Fallon
Title: Vice President
PAM CAPITAL FUNDING, LP
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By
------------------------------
Name:
Title:
PAMCO CAYMAN, LTD.
BY: HIGHLAND CAPITAL MANAGEMENT, L.P.,
as Collateral Manager
By
------------------------------
Name:
Title:
PILGRIM PRIME RATE TRUST
BY: PILGRIM INVESTMENTS, INC.,
as Investment Manager
By
------------------------------
Name:
Title:
9
<PAGE> 38
SCOTIABANC INC.
By /s/ Dana Maloney
------------------------------
Name: Dana Maloney
Title: Relationship Manager
SRV-HIGHLAND, INC.
By
------------------------------
Name:
Title:
STEIN ROE & FARNHAM INCORPORATED,
as Agent for KEYPORT LIFE INSURANCE
COMPANY
By /s/ James R. Fellows
------------------------------
Name: James R. Fellows
Title: Vice President
TORONTO DOMINION (TEXAS), INC.
By /s/ Sonja R. Jordan
------------------------------
Name: Sonja R. Jordan
Title: Vice President
TRANSAMERICA LIFE INSURANCE AND
ANNUITY CO.
By /s/ John M. Casparian
------------------------------
Name: John M. Casparian
Title: Investment Officer
TRANSAMERICA PREMIER HIGH YIELD FUND
By /s/ John M. Casparian
------------------------------
Name: John M. Casparian
Title: Investment Officer
10
<PAGE> 39
VAN KAMPEN PRIME RATE INCOME TRUST
By
------------------------------
Name:
Title:
VAN KAMPEN SENIOR INCOME TRUST
By
------------------------------
Name:
Title:
VAN KAMPEN CLO II, LIMITED
BY: VAN KAMPEN MANAGEMENT, INC.,
as Collateral Manager
By
------------------------------
Name:
Title:
WACHOVIA BANK, N.A.
By
------------------------------
Name:
Title:
11
<PAGE> 1
EXHIBIT 10.5
CONSENT TO AMENDMENT NO. 13
TO THE LOAN DOCUMENTS
As of November 5, 1999
Reference is made to Amendment No. 13 to the Loan Documents
dated as of November 5, 1999 (the "AMENDMENT") to the Amended and Restated
Credit Agreement dated as of June 9, 1998 (as amended and otherwise modified by
Amendment No. 1 to the Loan Documents dated as of December 4, 1998, Amendment
No. 2 to the Loan Documents dated as of January 13, 1999, Amendment No. 3 to the
Loan Documents dated as of February 9, 1999, Amendment and Waiver No. 4 to the
Loan Documents dated as of March 18, 1999, Amendment and Waiver No. 5 to the
Loan Documents dated as of April 1, 1999, Amendment No. 6 to the Loan Documents
dated as of April 14, 1999, Amendment No. 7 to the Loan Documents dated as of
June 29, 1999, Amendment No. 8 to the Loan Documents dated as of August 2, 1999,
Amendment No. 9 to the Loan Documents dated as of August 16, 1999, Amendment No.
10 to the Loan Documents dated as of August 23, 1999, Amendment No. 11 to the
Loan Documents dated as of August 30, 1999, and Amendment No. 12 to the Loan
Documents dated as of September 14, 1999, the "CREDIT AGREEMENT") among Caremark
Rx, Inc. (formerly known as MedPartners, Inc.), a Delaware corporation, the
Lenders party thereto, Bank of America, N.A. (formerly NationsBank, N.A.), as
the Initial Issuing Bank and Swing Line Bank thereunder, Credit Lyonnais New
York Branch, The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York, as the Syndication Agents therefor, Banc of America
Securities LLC (formerly NationsBanc Montgomery Securities LLC), as Arranger
therefor, and Bank of America, N.A. (formerly NationsBank, N.A.), as the
Administrative Agent for the Lender Parties thereunder. Capitalized terms not
otherwise defined herein shall have the same meanings as specified therefor in
the Credit Agreement.
Each of the undersigned, as a guarantor under the Subsidiaries
Guarantee dated as of June 9, 1998 (as modified to the date hereof, the
"SUBSIDIARIES GUARANTEE") in favor of the Guaranteed Parties, hereby consents to
the execution and delivery of the Amendment and the performance of the Credit
Agreement, as amended thereby, and hereby confirms and agrees that,
notwithstanding the effectiveness of the Amendment, the Subsidiaries Guarantee
is, and shall continue to be, in full force and effect and is hereby in all
respects ratified and confirmed, except that each reference in the Subsidiaries
Guarantee 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 the Amendment.
This Consent 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 one and the same Consent. Delivery of an executed counterpart of a
signature page to this Consent by telecopier shall be effective as delivery of a
manually executed counterpart of this Consent.
This Consent shall be governed by, and construed in accordance
with, the laws of the State of New York.
MEDGP, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
<PAGE> 2
MEDPARTNERS ACQUISITION CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS AVIATION, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS EAST, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
GEORGIA MEDPARTNERS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDPARTNERS INTEGRATED NETWORK-CHANDLER, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PROFESSIONAL MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
2
<PAGE> 3
ADS HEALTH MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HEALTHWAYS, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
BAY AREA PRACTICE MANAGEMENT GROUP, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CHS MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
CAREMARK INTERNATIONAL INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
3
<PAGE> 4
CAREMARK INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
By /s/ Leisa Kizer
--------------------------------------------
Name: Leisa Kizer
Title: Treasurer
CAREMARK PHYSICIAN SERVICES OF TEXAS INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PRESCRIPTION HEALTH SERVICES, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
STRATEGIC HEALTHCARE MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
4
<PAGE> 5
CAREMARK INTERNATIONAL HOLDINGS INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS PHYSICIAN SERVICES INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
CAREMARK RESOURCES CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
FRIENDLY HILLS HEALTHCARE
NETWORK INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS NSC LTD.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATIVE
SERVICES, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
5
<PAGE> 6
MEDPARTNERS MANAGED CARE, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
ACUTE CARE MEDICAL MANAGEMENT, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
BGS HEALTHCARE, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
HOME HEALTH AGENCY OF GREATER MIAMI, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MANAGED CARE OF SOUTH BROWARD, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS MEDICAL MANAGEMENT OF OHIO, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
6
<PAGE> 7
LFMG, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
PACIFIC MEDICAL GROUP, INC.
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PACIFIC PHYSICIAN SERVICES, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS EAST, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS NORTH CAROLINA MEDICAL
MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PPS RIVERSIDE DIVISION ACQUISITION
AND MANAGEMENT CORP. I
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
7
<PAGE> 8
PPS VALLEY MANAGEMENT, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
PPS INDEMNITY, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
ARIZONA, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PACIFIC PHYSICIAN SERVICES
NEVADA, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
PHYSICIANS' HOSPITAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
8
<PAGE> 9
RELIANT HEALTHCARE SYSTEMS, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
By /s/ Sara J. Finley
--------------------------------------------
Name: Sara J. Finley
Title: Vice President & Secretary
MEDPARTNERS/TALBERT MEDICAL
MANAGEMENT CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT MEDICAL MANAGEMENT
CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
TALBERT HEALTH SERVICES
CORPORATION
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer
MEDPARTNERS ADMINISTRATION, L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Treasurer
of Caremark Rx, Inc., the General
Partner
9
<PAGE> 10
MEDPARTNERS PHYSICIAN
MANAGEMENT, L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President of
Caremark Rx, Inc., the General
Partner
MEDOHIO, L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MED TENNESSEE, INC.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer
MEDTEX, L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: President & Treasurer of MedGP, Inc.,
the General Partner
MEDPARTNERS PHYSICIAN SERVICES OF ILLINOIS L.L.C.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
North Suburban Clinic, Ltd.,
a Member
10
<PAGE> 11
CERRITOS INVESTMENT GROUP
By /s/ James H. Dickerson, Jr.
--------------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of Caremark Rx, Inc.,
a Partner
By /s/ Sara J. Finley
--------------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., a Partner
CERRITOS INVESTMENT GROUP II
By /s/ James H. Dickerson, Jr.
--------------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of Caremark Rx, Inc.,
a Partner
By /s/ Sara J. Finley
--------------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., a Partner
5000 AIRPORT PLAZA, L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------------
Name: James H. Dickerson, Jr.
Title: Executive Vice President & Chief
Financial Officer of Caremark Rx, Inc.
the General Partner
By /s/ Sara J. Finley
--------------------------------------------------
Name: Sara J. Finley
Title: Corporate Secretary of
Caremark Rx, Inc., the General Partner
11
<PAGE> 12
KS-PSI OF TEXAS L.P.
By /s/ James H. Dickerson, Jr.
--------------------------------------------
Name: James H. Dickerson, Jr.
Title: Vice President & Treasurer of
MedPartners Physician Services, Inc.,
the General Partner
12
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
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200,000
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