<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NO. 0-21440
------------------------
PHYSICIAN CORPORATION OF AMERICA
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 48-1006287
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
6101 BLUE LAGOON DRIVE
MIAMI, FL 33126
(Principal Executive Offices, Including Zip Code)
Registrant's telephone number including area code: (305) 267-6633
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
RIGHTS TO PURCHASE COMMON STOCK
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (I) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING TWELVE MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (II) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST NINETY DAYS.
YES __X__ NO _____
Insert by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in PART III of this Form 10-K or any amendment to this
Form 10-K. /X/
As of December 31, 1996, there were 38,829,456 shares of common stock
outstanding and the aggregate market value of such shares (based upon $10.00 per
share, the last reported sale price reported on the NASDAQ National Market on
such date) of Physician Corporation of America held by non-affiliates was
approximately $388,294,560 (For purposes of this valuation, "affiliates" are the
officers and directors whose shares are included in the table appearing in Item
12.)
DOCUMENTS INCORPORATED BY REFERENCE:
None
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PHYSICIAN CORPORATION OF AMERICA
ANNUAL REPORT ON FORM 10-K/A1
FOR FISCAL YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
PART I.
Item 1. Business.................................................................................. 1
Item 2. Properties................................................................................ 10
Item 3. Legal Proceedings......................................................................... 10
Item 4. Submission of Matters to a Vote of Security Holders....................................... 10
PART II.
Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters................. 11
Item 6. Selected Financial Data................................................................... 12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations..... 13
Item 8. Financial Statements and Supplementary Data............................................... 24
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...... 24
PART III.
Item 10. Directors and Executive Officers of the Registrant........................................ 24
Item 11. Executive Compensation.................................................................... 26
Item 12. Security Ownership of Certain Beneficial Owners and Management............................ 29
Item 13. Certain Relationships and Related Transactions............................................ 30
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... 30
Signature Page............................................................................................. 33
Financial Statements and Schedules......................................................................... F-1
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
PHYSICIAN CORPORATION OF AMERICA
<TABLE>
<S> <C>
Date: April 15, 1997 By/s/E. Stanley Kardatzke, M.D.
E. Stanley Kardatzke, M.D.,
CHAIRMAN OF THE BOARD,
CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1934, this Report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
<TABLE>
<S> <C>
By /s/E. Stanley Kardatzke, M.D. Date: April 15, 1997
E. Stanley Kardatzke, M.D.
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR
By /s/Peter E. Kilissanly Date: April 15, 1997
Peter E. Kilissanly
PRESIDENT AND DIRECTOR
By /s/Clifford W. Donnelly Date: April 15, 1997
Clifford W. Donnelly
SR. VICE PRESIDENT OF FINANCE
CHIEF FINANCIAL OFFICER
By /s/Jay M. Grobowsky Date: April 15, 1997
Jay M. Grobowsky
VICE PRESIDENT OF FINANCE
By /s/George J. Farha, M.D. Date: April 15, 1997
George J. Farha, M.D.
DIRECTOR
By /s/William C. Loewen, M.D. Date: April 15, 1997
William C. Loewen, M.D.
DIRECTOR
By /s/Clark R. Mandigo Date: April 15, 1997
Clark R. Mandigo
DIRECTOR
</TABLE>
33
<PAGE>
INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
AND SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
FINANCIAL STATEMENTS:
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets at December 31, 1996 and 1995.................. F-3
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994...................................................... F-5
Consolidated Statements of Stockholders' Equity (Deficit) for the years
ended December 31, 1996, 1995 and 1994................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994...................................................... F-7
Notes to Consolidated Financial Statements................................. F-8
SCHEDULES:
Schedule I Condensed Financial Information of Registrant................... S-1
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Physician Corporation of America:
We have audited the accompanying consolidated balance sheets of Physician
Corporation of America and subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity
(deficit) and cash flows for each of the years in the three-year period ended
December 31, 1996 and the financial statement schedule listed in Item 14(a) of
the Company's 1996 annual report on Form 10-K/A1. These consolidated financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and the financial statement schedule based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Physician
Corporation of America and subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
The accompanying consolidated financial statements and financial statement
schedule have been prepared assuming that the Company will continue as a going
concern. As discussed in Note 2, the Company is seeking alternatives to meet its
obligations to its credit facility lenders which are due October 1, 1997. Such
alternatives include obtaining debt or equity financing, completing a merger
transaction or selling certain assets. As discussed in Note 23, the Company has
submitted a corrective plan to the State of Florida Department of Insurance
(DOI) to show cause why the DOI should not place the Company's workers'
compensation insurance subsidiary under state rehabilitation. In addition, the
Company has suffered significant recent losses and has a deficiency in equity as
of December 31, 1996. These matters raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Notes 2 and 23. The consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
KPMG PEAT MARWICK LLP
Miami, Florida
April 14, 1997
F-2
<PAGE>
PHYSICIAN CORPORATION OF AMERICA (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash..................................................................................... $ 1,325 $ 152
Accounts receivable...................................................................... 416 12
Due from subsidiaries.................................................................... 6,089 17,790
Deferred income taxes.................................................................... 11,780 839
Other current assets..................................................................... 937 390
----------- ----------
Total current assets................................................................... 20,547 19,183
----------- ----------
Investments in subsidiaries.............................................................. 51,465 347,800
Property and equipment, net.............................................................. 5,723 5,022
Intangibles assets, net.................................................................. 12,908 14,425
Other.................................................................................... 739 2,144
----------- ----------
Total assets........................................................................... $ 91,382 $ 388,574
----------- ----------
----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses.................................................... $ 2,368 $ 4,267
Due to subsidiaries...................................................................... 13,658 7,742
Current portion of long-term debt........................................................ 118,695 16,782
Income tax payable....................................................................... 3,916 3,728
Other current liabilities................................................................ 10,824 1,977
----------- ----------
Total current liabilities.............................................................. 149,461 34,496
Long-term debt and capital leases........................................................ 146 143,650
Deferred covenant income................................................................. 2,937 125
Deferred income taxes.................................................................... 3,670 134
----------- ----------
Total liabilities...................................................................... 156,214 178,405
----------- ----------
Common stock............................................................................. 388 386
Additional paid-in capital............................................................... 136,435 137,826
Unrealized gain on investments........................................................... 1,182 464
Treasury stock........................................................................... (9,210) (12,565)
Retained earnings (deficit).............................................................. (193,627) 84,058
----------- ----------
Total stockholders' equity (deficit)................................................... (64,832) 210,169
----------- ----------
Total liabilities and stockholders' equity............................................... $ 91,382 $ 388,574
----------- ----------
----------- ----------
</TABLE>
S-1
<PAGE>
PHYSICIAN CORPORATION OF AMERICA (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS AND SHAREHOLDERS' EQUITY (DEFICIT)
INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Management fees -- intercompany............................................ $ 55,075 $ 42,784 $ 27,569
Other revenues............................................................. 2,397 3,163 5,747
----------- ---------- ----------
Total revenues........................................................... 57,472 45,947 33,316
Expenses:
Administrative expenses.................................................... (38,035) (24,614) (14,854)
Depreciation and amortization.............................................. (3,156) (1,877) (1,002)
Interest expense........................................................... (12,255) (6,564) (1,240)
Gain on sale of subsidiaries............................................... 12,352 -- --
Other expense.............................................................. (3,320) (2,021) (2,227)
Equity in income (losses) of subsidiaries.................................. (289,028) (30,580) 43,924
----------- ---------- ----------
Earnings (loss) before income taxes.......................................... (275,970) (19,709) 57,917
Income tax (expense)......................................................... (1,715) (4,887) (5,370)
----------- ---------- ----------
Net earnings (loss)........................................................ (277,685) (24,596) 52,547
Stockholders' equity, beginning of year...................................... 210,169 233,548 185,942
Exercise of stock options.................................................... 1,966 2,307 12,001
Purchase of treasury stock................................................... -- (7,618) (6,093)
Change in unrealized gain/loss on marketable securities...................... 718 2,026 (1,562)
Issuance/exercise of put warrants............................................ -- 4,502 (9,287)
----------- ---------- ----------
Stockholders' equity (deficit), end of year.................................. $ (64,832) $ 210,169 $ 233,548
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
S-2
<PAGE>
PHYSICIAN CORPORATION OF AMERICA (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOW INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) earnings........................................................ $ (277,685) $ (24,596) $ 52,547
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization.......................................... 3,156 1,877 1,002
Gain on sale of subsidiaries........................................... (12,352) -- --
Deferred income taxes.................................................. (7,405) (1,058) 1,959
Changes in working capital:
Accounts receivable.................................................. (404) 24 103
Due from/to subsidiaries............................................. 17,617 (2,064) (6,986)
Income taxes receivable/payable...................................... 188 3,140 4,275
Accounts payable, accrued expenses and other current liabilities..... (1,899) 3,807 4,597
Other changes in assets and liabilities................................ 12,517 (6,886) 2,602
----------- --------- -----------
Net cash (used in) provided by operating activities.................. (266,267) (25,756) 60,099
----------- --------- -----------
Cash flows from investing activities:
Purchase of investments.................................................... -- -- (5,707)
Sale/maturity of investments............................................... -- -- 6,782
Change in net assets of subsidiaries....................................... 301,184 (23,968) (63,408)
Purchase of property and equipment......................................... (2,340) (5,504) (508)
Acquisition of subsidiaries, net of cash acquired.......................... -- (27,868) (108,116)
Dispositions, net of cash sold............................................. 8,645 -- --
----------- --------- -----------
Net cash (used in) provided by investing activities.................... 307,489 (57,340) (170,957)
----------- --------- -----------
Cash flows from financing activities:
Proceeds from borrowings................................................... -- 95,000 65,000
Principal payments on debt and capital leases.............................. (41,591) (10,261) (1,886)
Proceeds from issuance of common stock..................................... 1,542 1,074 4,303
Payments for repurchase of shares of common stock.......................... -- (19,243) (6,093)
----------- --------- -----------
Net cash (used in) provided by financing activities...................... (40,049) 66,570 61,324
----------- --------- -----------
Net increase (decrease) in cash.............................................. 1,173 (16,526) (49,534)
Cash and cash equivalents at beginning of period............................. 152 16,678 66,212
----------- --------- -----------
Cash and cash equivalents at end of period................................... $ 1,325 $ 152 $ 16,678
----------- --------- -----------
----------- --------- -----------
</TABLE>
S-3
<PAGE>
PHYSICIAN CORPORATION OF AMERICA (PARENT ONLY)
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL INFORMATION
(IN THOUSANDS)
(1) BASIS OF PRESENTATION
The accompanying condensed financial information should be read in
conjunction with Physician Corporation of America's consolidated financial
statements. Capitalized terms are as defined in Physician Corporation of
America's consolidated financial statements.
(2) RESTRICTED ASSETS
The Company's HMO and Insurance Company subsidiaries are regulated by state
insurance departments. These regulations restrict the distribution of assets to
the Company and require the regulated subsidiaries to maintain minimum equity
requirements. As of December 31, 1996 and 1995, the Company's HMO subsidiaries
had net assets of approximately $64,075 and $43,910, respectively, which are
restricted from transfer to the parent without regulatory approval. All of
PCA/P&C's assets are restricted from transfers to the parent at December 31,
1996.
During the years ended December 31, 1996, 1995 and 1994, the Company's
subsidiaries paid cash dividends to the Company of $0, $25,080 and $10,080,
respectively.
(3) DEBT
The Parent Company's future minimum lease payments/obligations under capital
leases through maturity and maturities of long-term debt are as follows.
<TABLE>
<CAPTION>
CAPITAL LONG-TERM
LEASES DEBT TOTAL
---------- ----------- ----------
<S> <C> <C> <C>
1997......................................................................... $ 11 $ 118,684 $ 118,695
1998......................................................................... -- 146 146
Less amount representing interest............................................ -- -- --
---------- ----------- ----------
Total obligation under capital leases and long-term debt..................... 11 118,830 118,841
Less current portion......................................................... 11 118,684 118,695
---------- ----------- ----------
Obligation under capital leases and long-term debt, less current portion..... $ -- $ 146 $ 146
---------- ----------- ----------
---------- ----------- ----------
</TABLE>
S-4
<PAGE>
EXHIBIT 4.1
- -------------------------------------------------------------------------------
PHYSICIAN CORPORATION OF AMERICA
and
BOATMEN'S TRUST COMPANY
Rights Agent
AMENDMENT NO. 1 TO
RIGHTS AGREEMENT
Dated as of November 11, 1996
- -------------------------------------------------------------------------------
<PAGE>
AMENDMENT NO. 1 TO RIGHTS AGREEMENT
This Amendment No. 1 to Rights Agreement, dated as of November 11, 1996
(this "Amendment"), is between Physician Corporation of America, a Delaware
corporation (the "Company"), and Boatmen's Trust Company (the "Rights Agent").
The Company and the Rights Agent have entered into a Rights Agreement,
dated as of January 13, 1995 (the "Rights Agreement"). On November 2, 1996,
the Company, Sierra Health Services, Inc., a Nevada corporation ("Sierra"),
and Sierra Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Sierra ("Sierra Sub"), entered into an Agreement and Plan of
Merger (the "Merger Agreement"). The Company and the Rights Agent wish to
amend the Rights Agreement as provided below.
Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
1. For purposes of this Amendment, the capitalized terms used herein
(in addition to those defined above) have the meaning indicated in the Rights
Agreement, except as otherwise set forth in this Amendment.
2. Section 1(a) of the Rights Agreement is hereby amended in its
entirety to read as follows:
"(a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the
Beneficial Owner (as such term is hereinafter defined) of 15% or more of the
Common Shares then outstanding, but shall not include the Company, any
wholly-owned Subsidiary (as such term is hereinafter defined) of the Company,
any employee benefit plan of the Company or of any Subsidiary of the Company,
any Person holding Common Shares for or pursuant to the terms of any such
plan to the extent, and only to the extent, of the Common Shares so held or
the Exempt Person (as such term is hereinafter defined); "Exempt Person"
shall mean Sierra or any Affiliate of Sierra so long as neither Sierra nor
any Affiliate of Sierra is the Beneficial Owner of any Common Shares other
than Common Shares of which Sierra or any Subsidiary of Sierra is the
Beneficial Owner solely by reason of the execution, delivery or performance
of the Merger Agreement. Notwithstanding the foregoing, no Person shall
become an "Acquiring Person" as the result of an acquisition of Common Shares
by the Company which, by reducing the number of shares outstanding, increases
the proportionate number of shares beneficially owned by such Person to 15%
or more of the Common Shares then outstanding; PROVIDED, HOWEVER, that if a
Person becomes the Beneficial Owner of 15% or more of the Common Shares
<PAGE>
then outstanding by reason of share acquisitions by the Company and shall,
after such share acquisitions by the Company, become the Beneficial Owner of
any additional Common Shares, then such Person shall be deemed to be an
"Acquiring Person"."
3. Section 3 of the Rights Agreement is hereby amended in its entirety to
read as follows:
"Section 3. ISSUE OF RIGHT CERTIFICATES.
(a) Until the earlier (the earlier of such dates being herein
referred to as the "Distribution Date") of (i) the close of
business on the tenth Business Day after the Shares Acquisition
Date and (ii) the close of business on the tenth Business Day after
the date of the commencement by any Person (other than the Company,
any wholly-owned Subsidiary of the Company, any employee benefit
plan of the Company or of any wholly-owned Subsidiary of the
Company, any entity holding Common Shares for or pursuant to the
terms of any such plan, to the extent such entity is so acting with
the approval or consent of the Company, or the Exempt Person) of,
or of the first public announcement of the intention of any Person
(other than the Company, any wholly-owned Subsidiary of the
Company, any employee benefit plan of the Company or of any
wholly-owned Subsidiary of the Company, any entity holding Common
Shares for or pursuant to the terms of any such plan, to the extent
such entity is so acting with the approval or consent of the
Company or as part of its ordinary activities with respect to any
such plan, or the Exempt Person) to commence, a tender or exchange
offer the consummation of which would result in any Person becoming
the Beneficial Owner of 15% or more of the Common Shares then
outstanding (including any such date which is after the date of
this Agreement and prior to the issuance of the Rights), (x) the
Rights will be evidenced (subject to the provisions of Section 3(b)
hereof) by the certificates for Common Shares registered in the
names of the holders thereof (which certificates shall also be
deemed to be Right Certificates) and not by separate Right
Certificates, and (y) the right to receive Right Certificates will
be transferable only in connection with the transfer of Common
Shares of the Company. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be
sent (and the Rights Agent will, if requested, send), by
first-class, insured, postage prepaid mail, to
-2-
<PAGE>
each record holder of Common Shares as of the close of business on
the Distribution Date, at the address of such holder shown on the
records of the Company, a Right Certificate, in substantially the
form of EXHIBIT A hereto (a "Right Certificate"), evidencing one
Right for each Common Share of the Company so held. As of the
Distribution Date, the Rights will be evidenced solely by such
Right Certificates."
4. Section 7(a) of the Rights Agreement is hereby amended in its
entirety to read as follows:
"Section 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF
RIGHTS.
(a) The registered holder of any Right Certificate may exercise
the Rights evidenced thereby (except as otherwise provided herein)
in whole or in part at any time, subject to the last sentence of
Section 23(a) hereof, after the Distribution Date upon surrender of
the Right Certificate, with the form of election to purchase on the
reverse side thereof duly executed, to the Rights Agent at the
principal office of the Rights Agent, together with payment of the
Purchase Price for each Common Share as to which the Rights are
exercised, at or prior to the earliest of (i) the close of business
on January 13, 2005 (the "Final Expiration Date"), (ii) the time at
which the Rights are redeemed as provided in Section 23 hereof (the
"Redemption Date"), (iii) the time at which such Rights are
exchanged as provided in Section 24 hereof and (iv) immediately
before the effective time of the merger set forth in the Merger
Agreement."
5. Section 25(a) of the Rights Agreement is hereby amended in its
entirety to read as follows:
Section 25. NOTICE OF CERTAIN EVENTS.
(a) In case the Company shall propose (i) to pay any dividend
payable in stock of any class to the holders of Common Shares or to
make any other distribution to the holders of Common Shares (other
than a regular quarterly cash dividend), (ii) to offer to the
holders of Common Shares rights or warrants to subscribe for or to
purchase any additional Common Shares or shares of stock of any
class or any other securities, rights or options (iii) to effect
any reclassification of Common Shares (other than a
reclassification involving only the subdivision of outstanding
Common Shares), (iv) to effect any consolidation or merger into or
with, or to effect any sale or other transfer (or to permit one or
more of its Subsidiaries to effect any sale or other transfer), in
one or more transactions, of 50% or more of the assets or earning
power
-3-
<PAGE>
of the Company and its Subsidiaries (taken as a whole) to, any
other Person (other than the Exempt Person), or (v) to effect the
liquidation, dissolution or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for purposes
of such stock dividend, or distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger,
sale, transfer, liquidation, dissolution, or winding up is to take
place and the date of participation therein by the holders of the
Common Shares, if any such date is to be fixed, and such notice
shall be so given in the case of any action described by clause (i)
or (ii) above at least 10 days prior to the record date for
determining holders of the Common Shares for purposes of such
action, and in the case of any such other action, at least 10 days
prior to the date of the taking of such proposed action or the date
of participation therein by the holders of the Common Shares,
whichever shall be the earlier."
6. The Rights Agreement is hereby amended by adding a Section 35 to read
as follows:
"Section 35. SIERRA MERGER. Anything in this Agreement to the
contrary notwithstanding, in no event shall the execution, delivery
or performance of the Merger Agreement (including without
limitation the consummation of the merger set forth in the Merger
Agreement and the exchange of Common Shares for the shares of
Sierra Common Stock (as defined in the Merger Agreement) in
accordance with Article II of the Merger Agreement) cause (A) the
Rights to become exercisable, (B) Sierra or any Affiliate of Sierra
to be deemed an "Acquiring Person", or (C) the "Shares Acquisition
Date" to occur upon any such event and (ii) the "Final Expiration
Date" shall occur immediately prior to the Effective Time (as
defined in the Merger Agreement)."
7. This Amendment shall be deemed effective as of 12:01 a.m., Miami,
Florida time, on November 2, 1996, as if executed by both parties at such
time. Except as expressly set forth herein, the terms and provisions of the
Rights Agreement shall continue in full force and effect.
8. Upon effectiveness of this Amendment, each reference in the Rights
Agreement, to "this Agreement", "hereunder", "herein" or words of like import
shall be a reference to the Rights Agreement, as amended by this Amendment.
9. This Amendment shall be construed and enforced in accordance with
and governed by the laws of the State of Delaware.
-4-
<PAGE>
10. This Amendment may be executed in any number of counterparts, each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the day and year first above written.
Attest: PHYSICIAN CORPORATION
OF AMERICA
By By
--------------------------------- ---------------------------------
John A. Hageman E. Stanley Kardatzke, M.D.
Secretary Chairman of the Board
Attest: BOATMEN'S TRUST COMPANY
By By
--------------------------------- ---------------------------------
Linda Welch Jerry L. Rector
Assistant Vice President and Vice President and
Assistant Secretary Assistant Secretary
-5-
<PAGE>
EXHIBIT 10.1.4
FOURTH AMENDMENT AND CONSENT AGREEMENT
FOURTH AMENDMENT AND CONSENT AGREEMENT dated as of June 10, 1996
(this "Amendment") among Physician Corporation of America (the "Borrower"), the
banks listed on the signature pages hereof (the "Lenders"), Citibank, N.A., as
issuing bank (the "Issuing Bank"), and Citibank, N.A., as agent for the Lenders
and Issuing Bank (the "Agent").
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Revolving Credit Agreement dated as of October 27, 1994,
as amended by an Amendment to Credit Agreement and Consent to Acquisition dated
as of September 22, 1995, by a Second Amendment to Credit Agreement dated as of
March 29, 1996 (the "Second Amendment") and by a Third Amendment to Credit
Agreement dated as of April 5, 1996 (such Revolving Credit Agreement, as so
amended and as further amended, supplemented or otherwise modified and in effect
from time to time being the "Credit Agreement"). Capitalized terms defined in
the Credit Agreement and not otherwise defined herein are used herein as therein
defined; and capitalized terms defined in Section 2 hereof are used elsewhere
herein as so defined (without regard to the conditions to effectiveness in
Section 5 hereof).
2. Pursuant to the Borrower Pledge Agreement, the Borrower has
pledged all of the issued and outstanding stock of Physicians First, Inc.
("PFI"), a wholly owned Subsidiary of the Borrower. PFI is a Guarantor under
its Guaranty dated as of March 29 made for the benefit of the Lenders, the
Issuing Bank and the Agent (the "PFI Guaranty"). PFI's obligations under the
PFI Guaranty are secured by Liens on PFI's properties granted under the
Subsidiary Security Agreement dated as of March 29, 1996 made by PFI in favor of
the Agent for the benefit of the Lenders and the Issuing Bank (the "PFI Security
Agreement").
3. Section 7(b) of the Second Amendment provides that concurrently
upon and subject to the occurrence of all of (x) the consummation of the sale by
the Borrower of the stock of PFI or of all or substantially all of the assets of
PFI in a transaction providing aggregate consideration of not less than $20
million, (y) the Agent's receipt, in immediately available funds, of all Net
Cash Proceeds of such sale pursuant to Section 2.10 of the Credit Agreement and
(z) the pledge to the Agent, on terms and pursuant to documents in each case
satisfactory to the Agent, the Issuing Bank and the Majority Lenders, of all
non-cash proceeds received by the Borrower as part of the consideration for such
sale, the Agent shall
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2
take such action as shall be reasonably necessary (i) to cause the release of
the stock of PFI so sold from the pledge thereof under the Borrower Pledge
Agreement and (ii) to cause PFI to be released from the PFI Guaranty and the PFI
Security Agreement and the Collateral granted by PFI under such PFI Security
Agreement to be released from the Lien thereof.
4. The Borrower proposes to sell all of the issued and outstanding
stock of PFI in a transaction (the "PFI Stock Sale") provided for in the Stock
Purchase Agreement dated as of May 5, 1996 between the Borrower and FPA Medical
Management, Inc. ("FPA"), a copy of which is attached hereto as Annex I (such
Stock Purchase Agreement, as amended, supplemented or otherwise modified from
time to time being the "PFI Stock Purchase Agreement"). The PFI Stock Purchase
Agreement provides for payment of consideration in the form of cash, shares of
the common stock, par value $0.002 per share, of FPA ("FPA Stock"), warrants to
purchase FPA Stock and additional payments, as specified in Section 1.2 of the
PFI Stock Purchase Agreement. The aggregate amount of such consideration is
above the $20 million minimum amount specified in clause (x) of Section 7(b) of
the Second Amendment. The Borrower has requested that the Agent, Issuing Bank
and Majority Lenders consent to the proposed terms, which are provided for
herein, of the pledge to the Agent of the non-cash consideration to be paid
under the PFI Stock Purchase Agreement, which consent, together with
satisfaction of the other requirements of Section 7(b) of the Second Amendment,
is required in order for the release provisions of said Section 7(b) to be
implemented and for the consummation of the PFI Stock Sale.
5. The Borrower proposes to cause its Subsidiary, PCA Property &
Casualty Company ("PCIC") on or before June 30, 1996 to purchase from the
Borrower (the "FPA Stock Monetization Purchase") the FPA Stock (the "FPA Closing
Stock") to be delivered to the Borrower under the PFI Stock Purchase Agreement
on the Closing, as such term is defined in the PFI Stock Purchase Agreement (the
"PFI Closing"). The Borrower proposes that the purchase price to be paid by
PCIC in the FPA Stock Monetization Purchase will be such amount as is stated to
be the fair market value of such FPA Closing Stock in a valuation opinion (the
"FPA Closing Stock Valuation Opinion") to be provided in connection with the
closing of the PFI Stock Sale by a nationally recognized investment banking or
valuation firm to be retained by the Borrower, which will be used by the
Borrower and FPA and their respective auditors as the basis for valuing the FPA
Closing Stock component and related components of the consideration paid in the
PFI Stock Sale. The Borrower has requested that the Super Majority Lenders
consent to the FPA Stock Monetization Purchase, and to the release, upon
consummation of the FPA Stock Monetization Purchase, of the pledge the FPA
Closing Stock that will be granted in favor of the Agent in connection herewith,
and the Super Majority Lenders are willing to grant such consent, in each case
on and subject to the terms hereof.
6. The Borrower has further requested that the Credit Agreement be
amended so that the restrictions in Section 6.02(i) of the Credit Agreement will
not apply to
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3
the Borrower's holding of the non-cash consideration to be paid upon
consummation of the PFI Stock Sale and pledged to the Agent or to PCIC's holding
of the FPA Closing Stock upon and after the FPA Stock Monetization Purchase.
The Agent, Issuing Bank and Majority Lenders are willing to grant such consent
and agree to such amendment upon the terms and subject to the conditions hereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties hereto agree as follows:
SECTION 1. CONSENTS. (a) The Majority Lenders, the Issuing Bank
and the Agent hereby consent to the terms of the pledge to the Agent of the non-
cash consideration to be paid under the PFI Stock Purchase Agreement, as
provided in this Amendment, and upon such pledge confirm satisfaction of the
requirements of clause (z) of Section 7(b) of the Second Amendment.
(b) The Super Majority Lenders hereby consent to the FPA Stock
Monetization Purchase and to the Agent's release in connection therewith of the
FPA Closing Stock from the pledge thereof under the PFI Consideration Pledge
Agreement on or prior to June 30, 1996, subject, in each case, to the
satisfaction of all of the following conditions:
(i) The FPA Closing Stock Valuation Opinion shall have been issued
and the Agent shall have received evidence satisfactory to it that the FPA
Closing Stock Valuation Opinion has been accepted by the Borrower and FPA
and their respective auditors as the basis for valuing the FPA Closing
Stock component and related components of the consideration paid in the PFI
Stock Sale.
(ii) The Borrower shall have or paid or caused to be paid to the Agent
(in the manner specified in Section 2.14 of the Credit Agreement) an amount
equal to the greater of (A) the fair market value of the FPA Closing Stock
as stated in the FPA Closing Stock Valuation Opinion and (B) $7.5 million,
for application in the manner provided for Net Cash Proceeds in Section
2.10(a)(ii)(A) of the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. (a)(i) The definition of
"Loan Documents" set forth in Section 1.01 of the Credit Agreement is hereby
amended in its entirety so as to read in full as follows:
"'LOAN DOCUMENTS' means this Agreement, the Notes, the Fee
Letter, the Second Amendment, the Borrower Pledge Agreement
(including, without limitation, the Amendment to Borrower Pledge
Agreement delivered pursuant to the Fourth Amendment), each of the
Guaranties, Security Agreements and other documents delivered by the
Borrower or any of its Subsidiaries pursuant to Section 6 of the
Second Amendment, the Fourth Amendment, the PFI
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4
Consideration Pledge Agreement and the PFI Consideration Consent
Agreement, in each case as amended, supplemented or otherwise modified
from time to time."
(ii) The definition of "Collateral Documents" set forth in
Section 1.01 of the Credit Agreement is hereby amended in its entirety so
as to read in full as follows:
"'COLLATERAL DOCUMENTS' means the Borrower Pledge Agreement, each
of the Security Agreements and any other agreement that creates or
purports to create a Lien in favor of the Agent for the benefit of the
Secured Parties, including, without limitation, the PFI Consideration
Collateral Documents."
(iii) The Definition of "EBITDA" set forth in Section 1.01 of
the Credit Agreement is hereby amended in its entirety so as to read in
full as follows:
"'EBITDA'" means, for any period, the sum of (i) Net Income, plus
(ii) interest expense, plus (iii) income tax expense, minus (iv)
income tax credits, plus (v) depreciation expense, plus (vi)
amortization expense, in each case determined in accordance with
generally accepted accounting principles."
(iv) The definition of "Fixed Charges" set forth in Section
1.01 of the Credit Agreement is hereby amended in its entirety so as to
read in full as follows:
"'FIXED CHARGES' means, for any period and without duplication,
the sum of (i) Interest Expense and fees, to the extent regularly
scheduled and due and payable during such period on, and amortization
for such period of debt discount in respect of, all Debt (including
the interest portion of rentals under Capital Leases during such
period) PLUS (ii) the aggregate principal amount of all Debt
(including the principal portion of rentals under Capital Leases and
the principal portion of Debt incurred in connection with Capital
Expenditures) to the extent regularly scheduled and due and payable
during such period."
(b) Section 1.01 of the Credit Agreement is hereby amended by the
addition of the following definitions thereto:
"FOURTH AMENDMENT" means the Fourth Amendment and Consent Agreement
dated as of June 10, 1996 among the Borrower, the Lenders parties thereto,
the Issuing Bank and the Agent.
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5
"FPA CLOSING STOCK" has the meaning set forth in Preliminary Statement
5 of the Fourth Amendment.
"FPA CLOSING STOCK MONETIZATION PURCHASE" has the meaning set forth in
Preliminary Statement 5 of the Fourth Amendment.
"FPA NOTE" has the meaning set forth in Section 5(e)(iv) of the Fourth
Amendment.
"FPA STOCK" has the meaning set forth in Preliminary Statement 4 of
the Fourth Amendment.
"FPA WARRANTS" has the meaning set forth in Section 5(e)(iv) of the
Fourth Amendment.
"PFI CONSIDERATION COLLATERAL DOCUMENTS" means the PFI Consideration
Pledge Agreement and the PFI Consideration Consent Agreement, in each case
as amended, supplemented or otherwise modified from time to time.
"PFI CONSIDERATION CONSENT AGREEMENT" has the meaning set forth in
Section 5(e)(xii) of the Fourth Amendment.
"PFI CONSIDERATION PLEDGE AGREEMENT" has the meaning set forth in
Section 5(e)(iv) of the Fourth Amendment.
"PFI STOCK PURCHASE AGREEMENT" has the meaning set forth in
Preliminary Statement 4 of the Fourth Amendment.
(c) Section 6.02(i) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(i) INVESTMENTS IN OTHER PERSONS. Make, or permit any of its
Subsidiaries to make, any loan or advance or gift to, or investment in, any
other Person, or purchase or otherwise acquire, or permit any of its
Subsidiaries to purchase or otherwise acquire, any shares of capital stock,
obligations or other securities, or make any capital contribution to, or
otherwise invest in, any other Person, EXCEPT for (i)(A) Cash Equivalents
and (B) investments by the Borrower or any of its Subsidiaries in
compliance with the Investment Policy and Guidelines applicable to the
Borrower and its Subsidiaries, as approved by the Borrower's Board of
Directors and in effect from time to time (exclusive, however, of any
investment otherwise permitted thereunder that is comprised of a loan or
advance of a type referred to in clause (ii) or (iii) of this Section
6.02(i) or is otherwise a loan or advance to or an
<PAGE>
6
investment in the Borrower or any of its Subsidiaries), (ii) (A) loans or
advances by any Subsidiary of the Borrower that is not a Collateral Party
to any other Subsidiary of the Borrower that is not a Collateral Party and
(B) capital contributions by the Borrower to any HMO Subsidiary or
Insurance Subsidiary whose stock and debt are pledged as Collateral under
the Borrower Pledge Agreement (whether as of or after the Second Amendment
Effective Date) solely to the extent, however, that such capital
contributions are necessary to enable such HMO Subsidiary or Insurance
Subsidiary, as the case may be, to maintain, but not exceed, a level of
105% of the amount of HMO Regulatory Tangible Net Equity or Insurance
Regulatory Tangible Net Equity required under the HMO Regulations or
Insurance Regulations, as the case may be, applicable to such HMO
Subsidiary or Insurance Subsidiary, (iii) loans to employees in connection
with housing relocations; PROVIDED, that, the aggregate outstanding
principal amount thereof does not at any time exceed $250,000 loaned to any
one individual or $2,000,000 in the aggregate and (iv) such loans,
investments and other interests of the Borrower and PCIC, respectively, as
are comprised of (A) the Borrower's interests in the FPA Stock and FPA
Warrants and in the FPA Note and collateral therefor, in each case to the
extent acquired pursuant to the transactions contemplated in the PFI Stock
Purchase Agreement and pledged pursuant to the PFI Consideration Pledge
Agreement and (B) PCIC's holding of the FPA Closing Stock upon and after
the FPA Closing Stock Monetization Purchase."
(d) Section 6.03 of the Credit Agreement is hereby amended by the
addition of a new subsection (f), to read in full as follows:
"(f) COVENANT CALCULATIONS. For purposes of any covenant in this
Section 6.03, calculations made after the date hereof of financial position
or results as at the end of any period shall be made as at the closing of
the financial records for such period and in any event without any
adjustment or restatement of such position or results for such period or
any earlier period after, in any case, the closing of such records
therefor."
(e) Section 7.01(s) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(s) the Borrower shall fail to comply with any obligation in Section
8(b) of the Second Amendment or in Section 6 of the Fourth Amendment; or"
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants as follows:
(a) All representations and warranties of the Borrower contained in
the Credit Agreement, both before and after giving effect to this
Amendment, are true in
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7
all material respects as of the date hereof (except for any such
representation or warranty (or portion thereof) that is qualified by
reference to a specific materiality standard, in which case such
representation or warranty is true in all respects as of the date hereof).
(b) Without limiting the representations and warranties made in
subsection (a) above or in the Credit Agreement, no authorization, consent,
approval or other action by, and no notice to or filing with, any HMO
Regulator or Insurance Regulator is required for, and no HMO Event,
Insurance Event or violation of the HMO Regulations or Insurance
Regulations would result from, the due execution, delivery or performance
by the Borrower of this Amendment or any of the Loan Documents to be
delivered in connection herewith.
(c) The Consolidated balance sheet of the Borrower and its
Subsidiaries, dated March 31, 1996, and the related Consolidated statements
of operations, stockholders' equity and cash flow of the Borrower and its
Subsidiaries for the fiscal quarter then ended, copies of which have been
furnished to the Agent, the Issuing Bank and each Lender, fairly present
the financial condition of the Borrower and its Subsidiaries as at such
date and the results of the operations of the Borrower and its Subsidiaries
for the fiscal quarter ended on such date, all in accordance with generally
accepted accounting principles consistently applied.
SECTION 4. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and
after the Fourth Amendment Effective Date, each reference in the Credit
Agreement to "this Agreement", "hereunder", "hereof", "herein", or words of like
import referring to the Credit Agreement, and each reference to the Credit
Agreement in the other Loan Documents, shall mean and be a reference to the
Credit Agreement as amended hereby.
(b) Except as specifically amended under Section 2 hereof, each of
the Credit Agreement and each other Loan Document shall remain in full force and
effect and is hereby ratified and confirmed.
(c) The Borrower acknowledges and agrees that, except to the extent
specifically amended under Section 2 hereof, it is obligated to comply with each
and every term, covenant, agreement and condition applicable to it under the
Credit Agreement or the other Loan Documents. The execution, delivery and
effectiveness of this Amendment shall not otherwise operate as a waiver of any
right, remedy or privilege of any Lender, the Issuing Bank or the Agent under
the Credit Agreement or any other Loan Document, any and all of which rights,
remedies and privileges are reserved.
SECTION 5. CONDITIONS OF EFFECTIVENESS. Sections 1, 2 and 6 of this
Amendment shall become effective subject to the satisfaction of the following
conditions
<PAGE>
8
precedent as of the date (the "Fourth Amendment Effective Date") when all such
conditions shall first have been satisfied:
(a) The Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Agent, the Issuing Bank and the Super
Majority Lenders.
(b) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement (including those relating to
this Amendment) to the extent that request for such payment has been made
to the Borrower.
(c) The Agent shall have received, in immediately available funds for
application as specified in Sections 2.10(a)(ii)(A) of the Credit
Agreement, an amount equal to the amount certified in the certificate
referred to in Section 5(e)(i) hereof as the amount, if any, of the cash
consideration payable to the Borrower at the PFI Closing pursuant to
Section 1.3.1.1 of the PFI Stock Purchase Agreement.
(d) The Agent shall have received evidence satisfactory to it that
(x) the PFI Stock Purchase Agreement and the documents to be delivered
thereunder have been amended to the extent determined by the Agent to be
reasonably necessary in order for the Borrower's interest in the PFI Stock
Purchase Agreement and the non-cash consideration payable thereunder to be
amenable to pledge and assignment to the Agent for the benefit of the
Lenders and Issuing Bank pursuant to the terms of the PFI Consideration
Collateral Documents, such that the rights and remedies provided for
therein will be available to the Agent, the Lenders and the Issuing Bank
and (y) no amendments to the PFI Stock Purchase Agreement or the
Georgia/Alabama Breakup Fee Agreement (as defined below) have been made
other than those referred to in the foregoing clause (x) and such others as
shall have been approved by the Agent.
(e) The Agent shall have received the following, each dated the
Fourth Amendment Effective Date (unless otherwise specified), in form and
substance satisfactory to the Agent, the Issuing Bank and the Majority
Lenders and (unless otherwise specified) in sufficient copies for the
Agent, Issuing Bank and each Lender:
(i) A certificate of the Borrower, signed by the Borrower's
Chief Executive Officer, Chief Financial Officer or other officer duly
authorized, certifying as follows:
(A) that the PFI Closing has occurred in accordance with
the terms of the PFI Stock Purchase Agreement without any waiver
of the conditions thereto;
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9
(B) that attached thereto is a true and complete copy of
each of the PFI Stock Purchase Agreement and the Georgia/Alabama
Purchase Agreement (as defined below), in each case as in effect
on such date;
(C) the amount of cash payable at the PFI Closing
pursuant to Section 1.3.1.1 of the PFI Stock Purchase Agreement;
and
(D) that (1) each of the representations and warranties
contained in Section 3 hereof is true and correct in all respects
on and as of the date of such certificate and (2) after giving
effect to the PFI Stock Sale and Sections 1 and 2 hereof, no
event has occurred and is continuing which constitutes a Default
or Event of Default.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving each Loan Document to which it is
or is to be a party in connection herewith, and of all documents
evidencing other necessary corporate action and governmental and other
third party approvals and consents, if any, with respect each such
Loan Document.
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement and each
other Loan Document which it is or is to be party and the other
documents to be delivered hereunder and thereunder.
(iv) A Pledge, Security and Assignment Agreement, in form and
substance satisfactory to the Agent (the "PFI Consideration Pledge
Agreement"), duly executed by the Borrower, granting security
interests in and pledges of, the collateral describe therein,
including, without limitation, all of the Borrower's right, title and
interest in and to the following and the rights and interests arising
thereunder:
(A) the note to be delivered by FPA pursuant to Section
1.3.1.2 of the PFI Stock Purchase Agreement (the "FPA Note");
(B) the FPA Closing Stock and all additional shares of
FPA Stock as may be held by the Borrower and indebtedness of FPA
as may be owed to the Borrower in each case from time to time;
(C) the warrants to be delivered by FPA pursuant to
Section 1.3.3 of the PFI Stock Purchase Agreement (the "FPA
Warrants");
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10
(D) the registration rights agreement to be entered into
pursuant to Section 1.10 of the PFI Stock Purchase Agreement (the
"FPA Registration Rights Agreement");
(E) the PFI Stock Purchase Agreement;
(F) each of the guaranties to be delivered by FPA, PFI
Family First Medical Centers, Inc. ("Family First"), Physicians
Medical Group of Florida, Inc. ("Medical Group") and PCA Family
Pharmacy, Inc. ("Pharmacy") pursuant to Section 1.13 of the PFI
Stock Purchase Agreement or otherwise under Section 1 of the PFI
Stock Purchase Agreement (the "FPA Guaranties");
(G) each of the pledge and security agreements to be
delivered by FPA and PFI pursuant to Section 1.11 of the PFI
Stock Purchase Agreement (the "FPA Pledge Agreements"); and
(H) each of the asset security agreements to be delivered
by PFI, Family First, Medical Group and Pharmacy pursuant to
Section 1.12 of the PFI Stock Purchase Agreement (the "FPA
Security Agreements"; together with the FPA Note, the FPA
Warrants, the FPA Registration Rights Agreement, the FPA
Guaranties, the FPA Pledge Agreements and the PFI Stock Purchase
Agreement, in each case as amended, supplemented or otherwise
modified from time to time, being the "FPA Documents").
(v) The executed original of the FPA Note (certified by the
Borrower to be the only such original), duly endorsed in blank.
(vi) The certificates evidencing the FPA Closing Stock, duly
endorsed in blank.
(vii) The executed original of each of the FPA Warrants, duly
endorsed in blank.
(viii) The executed original of each of the FPA Guaranties
(certified by the Borrower to be the only such originals).
(ix) The executed original of each of the FPA Pledge Agreements
(certified by the Borrower to be the only such originals), together
with all certificates and instruments evidencing the shares and
indebtedness pledged thereunder, in each case duly endorsed in blank.
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11
(x) The executed original of each of the FPA Security
Agreements (certified by the Borrower to be the only such originals),
together, in the case of each such FPA Security Agreement, with:
(A) acknowledgment copies or stamped receipt copies of
proper financing statements, duly filed on or before the date of
such FPA Security Agreement under the Uniform Commercial Code of
all jurisdictions that the Agent may deem necessary or desirable
in order to perfect and protect the security interests created
under such FPA Security Agreement and covering the collateral
described in such FPA Security Agreement or other evidence
satisfactory to the Agent that arrangements have been made with a
reputable filing service for such filing of such financing
statements;
(B) acknowledgment copies or stamped receipt copies of
proper assignments, in favor of the Agent, of each of the
financing statements referred to in subsection (A) above, duly
filed on or before the Fourth Amendment Effective Date under
applicable the Uniform Commercial Code or other evidence
satisfactory to the Agent that arrangements have been made with a
reputable filing service for such filing of such assignments; and
(C) evidence of the completion of all other recordings
and filings of or with respect to such FPA Security Agreement
that the Agent may deem necessary or desirable in order to
perfect and protect the security interests created thereby.
(xi) acknowledgment copies or stamped receipt copies of proper
financing statements, duly filed on or before the Fourth Amendment
Effective Date under the Uniform Commercial Code of all jurisdictions
that the Agent may deem necessary or desirable in order to perfect and
protect the security interests created under the PFI Consideration
Pledge Agreement and covering the Collateral described therein or
other evidence satisfactory to the Agent that arrangements have been
made with a reputable filing service for such filing of such financing
statements, together with evidence of the completion of all other
recordings and filings of or with respect to the PFI Consideration
Pledge Agreement that the Agent may deem necessary or desirable in
order to perfect and protect the Liens created thereby.
(xii) A Consent Agreement, in form and substance satisfactory to
the Agent (the "PFI Consideration Consent Agreement"), duly executed
by each of FPA, PFI, Family First, Medical Group, Pharmacy and the
Borrower,
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12
consenting to the PFI Consideration Pledge Agreement and to the grant
provided for therein of security interests, pledges and assignments of
the Borrower's interests in property and obligations of such parties
other than the Borrower and agreeing to such other matters as are
provided for in the PFI Collateral Consent Agreement.
(xiii) An Amendment to Borrower Pledge Agreement, in form and
substance satisfactory to the Agent, duly executed by the Borrower,
providing for the pledge pursuant to the Borrower Pledge Agreement of
the shares of stock held by the Borrower in each of PCA Health Plans
of Puerto Rico, Inc. and PCA Insurance Group of Puerto Rico, Inc.
(collectively, the "Puerto Rico Subsidiaries") together with
(A) certificates representing all of the shares of stock
held by the Borrower of each of the Puerto Rico Subsidiaries, in
each case duly indorsed in blank; and
(B) an opinion of special outside regulatory counsel to
the Puerto Rico Subsidiaries satisfactory to the Agent, and in
form and substance satisfactory to the Agent, in respect of the
Puerto Rico Subsidiaries and such pledge.
(xiv) Certified copies of the resolutions of the Board of
Directors of each of FPA, PFI, Family First, Medical Group and
Pharmacy approving each PFI Consideration Collateral Document, FPA
Document and other document to be delivered hereunder or thereunder to
which it is or is to be a party, and of all documents evidencing other
necessary corporate action and governmental and other third party
approvals and consents, if any, with respect each such PFI
Consideration Collateral Document, FPA Document and other document.
(xv) A certificate of the Secretary or an Assistant Secretary
of each of FPA, PFI, Family First, Medical Group and Pharmacy
certifying the names and true signatures of the officers of such party
authorized to sign each PFI Consideration Collateral Document and FPA
Document to which it is or is to be party and the other documents to
be by it delivered hereunder and thereunder.
(xvi) Legal opinions from (i) counsel to the Borrower and (ii)
counsel to FPA, to the extent requested by the Agent and in each case
in form and substance satisfactory to the Agent.
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13
SECTION 6. COVENANTS. The Borrower agrees to comply with the
following covenants for so long as any obligation under any Loan Document shall
remain unpaid:
(a) ADDITIONAL AMOUNT PAYMENT. (i) Promptly upon the
determination of the Additional Amount (as defined in the PFI Stock
Purchase Agreement) in accordance with Section 1.3.1.4 of the PFI Stock
Purchase Agreement, but in no event later than the Settlement Date (as
defined in the PFI Stock Purchase Agreement), the Borrower shall deliver to
the Agent a certificate, signed by the Borrower's chief executive officer
or chief financial officer, setting forth the Additional Amount as so
determined (together with the calculations, in reasonable detail, made to
determine such amount) and indicating whether such amount is payable to the
Borrower pursuant to the penultimate sentence of Section 1.3.1.4 of the PFI
Stock Purchase Agreement.
(ii) Not later than the Business Day immediately
following the Borrower's receipt of the Additional Amount, if payable
to the Borrower pursuant to Section 1.3.1.4 of the PFI Stock Purchase
Agreement, the Borrower shall pay such amount to the Agent (in the
manner specified in Section 2.14 of the Credit Agreement) for
application in the manner provided for Net Cash Proceeds in Section
2.10(a)(ii)(A) of the Credit Agreement.
(b) SUBSEQUENT PAYMENTS. (i) Not later than the first
anniversary of the Effective Closing Date (as defined in Section 1.3.1.3 of
the PFI Stock Purchase Agreement), the Borrower shall deliver the Agent a
certificate, signed by the Borrower's chief executive officer or chief
financial officer, setting forth the amount of the Subsequent Payment (as
defined in Section 1.3.1.3 of the PFI Stock Purchase Agreement) payable to
the Borrower on such first anniversary, as determined in accordance with
said Section 1.3.1.3 (the "First Anniversary Subsequent Payment"), together
with the calculations, in reasonable detail, made to determine such amount.
(ii) Not later than the Business Day immediately
following the Borrower's receipt of the First Anniversary Subsequent
Payment, the Borrower shall pay such amount to the Agent (in the
manner specified in Section 2.14 of the Credit Agreement) for
application in the manner provided for Net Cash Proceeds in Section
2.10(a)(ii)(A) of the Credit Agreement.
(iii) Not later than the second anniversary of the
Effective Closing Date, the Borrower shall deliver the Agent a
certificate, signed by the Borrower's chief executive officer or chief
financial officer, setting forth the amount of the Subsequent Payment
payable to the Borrower on such second anniversary, as determined in
accordance with Section 1.3.1.3 of the PFI Stock Purchase Agreement
(the "Second Anniversary Subsequent Payment"),
<PAGE>
14
together with the calculations, in reasonable detail, made to
determine such amount.
(iv) Not later than the Business Day immediately
following the Borrower's receipt of the Second Anniversary Subsequent
Payment, the Borrower shall pay such amount to the Agent (in the
manner specified in Section 2.14 of the Credit Agreement) for
application in the manner provided for Net Cash Proceeds in Section
2.10(a)(ii)(A) of the Credit Agreement.
(c) FPA DOCUMENT; GEORGIA/ALABAMA BREAKUP FEE AGREEMENT
PAYMENTS. (i) All amounts of cash paid to the Borrower from time to
time under the FPA Note or any other FPA Document (other than any amount
covered by the provisions of subsection (a) or (b) of this Section 6)
shall, not later than the Business Day immediately following the Borrower's
receipt thereof, be paid by the Borrower to the Agent (in the manner
specified in Section 2.14 of the Credit Agreement) for application in the
manner provided for Net Cash Proceeds in Section 2.10(a)(ii)(A) of the
Credit Agreement.
(ii) All amounts of cash paid to the Borrower from time
to time under the agreement under Section 7.3(a) of the Stock Purchase
Agreement dated as of May 3, 1996 (the "Georgia/Alabama Purchase
Agreement") between Health Partners of Alabama, Inc. ("Health
Partners") and the Borrower and terms of such agreement applicable to
the implementation or construction of said Section 7.3(a) (the
"Georgia/Alabama Breakup Fee Agreement") shall, not later than the
Business Day immediately following the Borrower's receipt thereof, be
paid by the Borrower to the Agent (in the manner specified in Section
2.14 of the Credit Agreement) for application in the manner provided
for Net Cash Proceeds in Section 2.10(a)(ii)(A) of the Credit
Agreement.
(d) SEGREGATION OF PAYMENTS; PAYMENTS UPON EVENT OF DEFAULT.
(i) All amounts referred to in subsections (a), (b) and (c) of this
Section 6 that are received by the Borrower shall be received in trust for
the benefit of the Agent and segregated from the other property and funds
of the Borrower until paid over to the Agent as required hereunder.
(ii) Upon the occurrence and during the continuance of an Event
of Default, all rights of the Borrower to receive amounts that it
would otherwise be authorized to receive under subsections (a), (b)
and (c) of this Section 6 shall automatically cease, and all such
rights shall thereupon become vested in the Agent, which shall
thereupon have the sole right to receive such amounts,
<PAGE>
15
for application in the manner provided for Net Cash Proceeds in
Section 2.10(a)(ii)(A) of the Credit Agreement.
(e) AMENDMENTS TO FPA DOCUMENTS; EXERCISE OF RIGHTS AND
REMEDIES UNDER FPA DOCUMENTS; DEFAULTS UNDER FPA DOCUMENTS. (i) Except
a permitted under the PFI Consideration Pledge Agreement, the Borrower
shall not amend, supplement or otherwise modify, or agree to any waiver or
grant any consent under, any FPA Document or the Georgia/Alabama Breakup
Fee Agreement without the prior written consent of the Agent.
(ii) The Borrower shall not (A) exercise any remedy upon the
occurrence of a default under any of the FPA Documents or any right of
setoff against any party to any FPA Document or against Health
Partners in respect of the Georgia/Alabama Breakup Fee Agreement or
(B) exercise any of its rights under any FPA Document to acquire, or
cause the filing of a registration statement in respect of, any shares
of FPA Stock, unless, in either case, both (1) the Borrower shall have
given the Agent prior notice of the proposed exercise and the date
proposed therefor (which notice shall be not later than five Business
Days prior to the proposed exercise or, if a notice period is not
practicable given the circumstances of the proposed exercise, such
later notice as shall be the earliest practicable given such
circumstances) and (2) the Agent shall not have advised the Borrower
prior to the proposed date of such exercise that the Agent has
determined that the proposed exercise would materially and
detrimentally affect the rights, remedies, privileges or interests of
the Agent, Issuing Bank or Lenders in respect of the Collateral
covered by the PFI Consideration Pledge Agreement or the value of such
Collateral or in respect of the Georgia/Alabama Breakup Fee Agreement.
(iii) Promptly following the occurrence of any default
under any FPA Document or upon any termination by Health Partners of
the Georgia/Alabama Purchase Agreement, the Borrower shall give the
Agent written notice thereof.
(f) AVOIDANCE OF DEFENSES, ETC. The Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement or
arrangement, engage in any act or omission or otherwise conduct its affairs
in any manner if the effect thereof in any case would give rise to or
permit any validly asserted defense, counterclaim, setoff or right of
recoupment in favor of FPA or any other party to any FPA Document (other
than the Borrower), or in favor of Health Partners, respectively, in
respect of any amount payable under the terms of any FPA Document or the
Georgia/Alabama Breakup Fee Agreement, respectively (in each case without
regard to any such defense, counterclaim, setoff or right of recoupment) .
<PAGE>
16
SECTION 7. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same agreement.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER:
PHYSICIAN CORPORATION OF AMERICA
By:
-------------------------------------------
Name:
Title:
THE LENDERS AND ISSUING BANK:
CITIBANK, N.A., as Lender and as Issuing Bank
By:
-------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
-------------------------------------------
Name:
Title:
NATIONSBANK OF TENNESSEE
By:
-------------------------------------------
Name:
Title:
<PAGE>
18
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
By:
-------------------------------------------
Name:
Title:
SUNTRUST BANK, MIAMI, N.A.
By:
-------------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
-------------------------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.1.5
EXECUTION COPY
FIFTH AMENDMENT AND WAIVER AGREEMENT
FIFTH AMENDMENT AND WAIVER AGREEMENT dated as of November 25, 1996
(this "Amendment") among Physician Corporation of America (the "Borrower"), the
banks listed on the signature pages hereof (the "Lenders"), Citibank, N.A., as
issuing bank (the "Issuing Bank"), and Citibank, N.A., as agent for the Lenders
and Issuing Bank (the "Agent").
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Revolving Credit Agreement dated as of October 27, 1994,
as amended by an Amendment to Credit Agreement and Consent to Acquisition dated
as of September 22, 1995, by a Second Amendment to Credit Agreement dated as of
March 29, 1996, by a Third Amendment to Credit Agreement dated as of April 5,
1996 and by a Fourth Amendment and Consent Agreement dated as of June 10, 1996
(such Revolving Credit Agreement, as so amended and as further amended,
supplemented or otherwise modified and in effect from time to time being the
"Credit Agreement"). Capitalized terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined; and capitalized
terms defined in Section 2 hereof are used elsewhere herein as so defined
(without regard to the conditions to effectiveness in Section 6 hereof).
2. As at the end of the Borrower's Fiscal Quarter ending September
30, 1996, and on each date since then, the Borrower has been in default of the
covenant set forth in Section 6.03(a) of the Credit Agreement (relating to the
Borrower's Consolidated Net Worth). As at the end of the Borrower's Fiscal
Quarter ending September 30, 1996, the Borrower was in default of the covenants
set forth in Section 6.03(c) of the Credit Agreement (relating to the Borrower's
Consolidated Funded Debt/Capitalization Ratio) and Section 6.03(d) of the Credit
Agreement (relating to the Borrower's Fixed Charge Coverage Ratio). As at
September 30, 1996, the Borrower was in default of the covenant set forth in
Section 6.03(e) of the Credit Agreement (relating to the Consolidated EBITDA of
the Borrower and its Subsidiaries) for the month of September 1996. Before the
date hereof and after the Second Amendment Effective Date, events occurred (the
"PCIC Events") such that the Borrower and PCIC determined that PCIC did not
have adequate capital reserves and PCIC recorded a $100 million charge against
earnings as a result, as reported in the Borrower's press release of November 4,
1996. The PCIC Events constituted a Material Adverse Change, giving rise to an
Event of Default under Section 7.01(m) of the Credit Agreement.
<PAGE>
2
3. The Borrower has entered into an Agreement and Plan of Merger
dated as of November 2, 1996 (the "Merger Agreement") with Sierra Health
Services, Inc. ("Sierra") and Sierra Acquisition Corp., a wholly owned
subsidiary of Sierra ("Sierra Sub"). The Merger Agreement contemplates that on
or before March 31, 1997 the Borrower will merge into Sierra Sub, with Sierra
Sub being the surviving corporation, on the terms provided for in the Merger
Agreement (the "Merger"). It is the intention of the Borrower and the Lenders
that concurrently with or before the closing of the Merger, the Borrower will
pay the Obligations in full.
4. The Borrower has requested that the Issuing Bank and the Lenders
waive the Defaults and Events of Default described in paragraph 2 above and
agree to certain amendments to the Credit Agreement, in each case on the terms
and subject to the conditions hereof. The Issuing Bank and the Lenders are
willing to grant such waivers and agree to such amendments, in each case on the
terms and subject to the conditions hereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties hereto agree as follows:
SECTION 1. WAIVERS. (a) The Issuing Bank and the Lenders hereby
waive any Default or Event of Default arising solely from the Borrower's failure
to be in compliance with Section 6.03(a) of the Credit Agreement on any date
during the period from June 30, 1996 to the Fifth Amendment Effective Date (as
defined in Section 6 below).
(b) The Issuing Bank and the Lenders hereby waive any Default or
Event of Default arising solely from the Borrower's failure to be in compliance
with Section 6.03(c) of the Credit Agreement as at the end of the Borrower's
Fiscal Quarter ending September 30, 1996.
(c) The Issuing Bank and the Lenders hereby waive any Default or
Event of Default arising solely from the Borrower's failure to be in compliance
with Section 6.03(d) of the Credit Agreement as at the end of the Borrower's
Fiscal Quarter ending September 30, 1996.
(d) The Issuing Bank and the Lenders hereby waive any Default or
Event of Default arising solely from the Borrower's failure to be in compliance
with Section 6.03(e) of the Credit Agreement for the month of September 1996.
(e) The Issuing Bank and the Lenders hereby waive any Default or
Event of Default comprised solely of the occurrence, consisting of the PCIC
Events, of a Material Adverse Change after the Second Amendment Effective Date
and before the Fifth Amendment Effective Date.
<PAGE>
3
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT. (a) (i) The
definition of "Loan Documents" set forth in Section 1.01 of the Credit Agreement
is hereby amended in its entirety so as to read in full as follows:
"'LOAN DOCUMENTS' means this Agreement, the Notes, the Fee
Letter, the Second Amendment, the Borrower Pledge Agreement
(including, without limitation, the Amendment to Borrower Pledge
Agreement delivered pursuant to the Fourth Amendment), each of the
Guaranties, Security Agreements and other documents delivered by the
Borrower or any of its Subsidiaries pursuant to Section 6 of the
Second Amendment, the Fourth Amendment, the PFI Consideration Pledge
Agreement (including, without limitation, the Amendment to Borrower
Security Agreement delivered pursuant to the Fifth Amendment), the PFI
Consideration Consent Agreement and the Fifth Amendment, in each case
as amended, supplemented or otherwise modified from time to time."
(ii) The definition of "Termination Date" set forth in Section 1.01
of the Credit Agreement is hereby amended in its entirety so as to read in
full as follows:
"'TERMINATION DATE' means (x) the date that is the earliest to
occur of any date specified as the Fifth Amendment Termination Date in
clauses (i), (ii), (iii), (ix) and (x) of the definition of 'Fifth
Amendment Termination Date' set forth in Section 1.01 or (y) such
earlier date of declaration of the Advances, the Notes, all interest
thereon and all other amounts payable hereunder to be forthwith due
and payable pursuant to Section 7.01 hereof or otherwise."
(b) Section 1.01 of the Credit Agreement is hereby amended by the
addition of the following definitions thereto:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FIFTH AMENDMENT" means the Fifth Amendment and Waiver Agreement dated
as of November 25, 1996 among the Borrower, the Lenders parties thereto,
the Issuing Bank and the Agent.
"FIFTH AMENDMENT EFFECTIVE DATE" has the meaning set forth in Section
6 of the Fifth Amendment.
"FIFTH AMENDMENT TERMINATION DATE" means the earliest to occur of the
following:
<PAGE>
4
(i) the date on which the Merger Agreement is terminated;
(ii) December 31, 1996, if the conditions of Section 7 of
the Fifth Amendment have not been satisfied in full on or before
December 31, 1996;
(iii) the date on which the commitment under the Refinancing
Commitment (after delivery thereof to the Borrower) expires or
terminates;
(iv) December 16, 1996, if on or before such date the
Borrower shall not have delivered to the Agent a certificate, duly
executed by the Borrower's Chief Executive Officer or Chief Financial
Officer, certifying that drafts of the Proxy Statement and S-4 have
been filed for review by the Securities and Exchange Commission;
(v) December 23, 1996, if on or before such date the
Borrower shall not have delivered to the Agent a certificate, duly
executed by the Borrower's Chief Executive Officer or Chief Financial
Officer, certifying that each of the Borrower and Sierra has filed or
caused to be filed a premerger notification report in respect of the
Merger under the HSR Act;
(vi) December 30, 1996, if on or before such date the
Borrower shall not have delivered to the Agent a certificate, duly
executed by the Borrower's Chief Executive Officer or Chief Financial
Officer, certifying that each of the Borrower and Sierra has made or
caused to be made, all necessary filings seeking any State Approval
required for the Merger;
(vii) February 17, 1997, if on or before such date the
Borrower shall not have delivered to the Agent a certificate, duly
executed by the Borrower's Chief Executive Officer or Chief Financial
Officer, certifying that the S-4 has become effective under the
Exchange Act;
(viii) February 24, 1997, if on or before such date the
Borrower shall not have delivered to the Agent a certificate, duly
executed by the Borrower's Chief Executive Officer or Chief Financial
Officer, certifying that the Proxy Statement has been dispatched for
delivery to the stockholders of the Borrower and shareholders of
Sierra;
(ix) the date on which the Merger closes;
(x) March 31, 1997.
<PAGE>
5
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"MERGER" has the meaning set forth in Preliminary Statement 3 to the
Fifth Amendment.
"MERGER AGREEMENT" has the meaning set forth in Preliminary Statement
3 to the Fifth Amendment.
"PROXY" has the meaning set forth in the Merger Agreement.
"REFINANCING COMMITMENT" has the meaning set forth in Section 7 of the
Fifth Amendment.
"REFINANCING PROVIDER" has the meaning set forth in Section 7 of the
Fifth Amendment.
"S-4" has the meaning set forth in the Merger Agreement.
"SIERRA" has the meaning set forth in Preliminary Statement 3 to the
Fifth Amendment.
"STATE APPROVAL" has the meaning set forth in the Merger Agreement.
(c) Section 2.07(b) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(b) DEFAULT INTEREST. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest (i) on
the unpaid principal amount of each Advance owing to each Lender, payable
in arrears on such dates when interest is otherwise payable under the terms
applicable to such Advance, as the case may be, and on demand by the Agent,
at a rate per annum equal at all times to 2% per annum above the rate per
annum otherwise required to be paid on such Advance under the terms
applicable to such Advance and (ii) to the fullest extent permitted by law,
on the unpaid amount of all interest, fees and other amounts payable
hereunder that is not paid when due, payable in arrears on demand by the
Agent and on the date such amount shall be paid in full, at a rate per
annum equal at all times to 2% per annum above the rate payable on Base
Rate Advances pursuant to Section 2.07(a) above (determined without regard
to whether or not any Base Rate Advances are outstanding) from time to
time; PROVIDED, HOWEVER, that on and after the Fifth Amendment Termination
Date, the Borrower shall pay interest on the unpaid principal amount of
each Advance owing to each Lender and, to the fullest extent
<PAGE>
6
permitted by law, on the unpaid amount of all interest, fees and other
amounts payable hereunder, payable in arrears on demand by the Agent and on
the date such amount shall be paid in full, at a rate per annum equal at
all times to 2% per annum above the Base Rate in effect from time to time
(computed on the basis of a year of 360 days for the actual number of days
(including the first day but excluding the last day) occurring during the
period for which such interest is payable)."
(d) Section 6.03(a) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(a) NET WORTH. Permit the Consolidated Net Worth of the Borrower and
its Subsidiaries on any date of determination after September 30, 1996 to
be less than the sum of (A) $116,000,000 PLUS (B) an amount equal to 75% of
the aggregate amount of the Consolidated Net Income of the Borrower and its
Subsidiaries for each calendar month ending after October 1, 1996 but
before such date of determination (the amount such Consolidated Net Income
to be computed without regard to any net loss in any month)."
(e) Section 6.03(c) of the Credit Agreement is hereby deleted in its
entirety.
(f) Section 6.03(d) of the Credit Agreement is hereby deleted in its
entirety.
(g) Section 6.03(e) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(e) EBITDA. (i) Permit, as at the end of any calendar month ending
after October 1, 1996, the Consolidated EBITDA of the Borrower and its
Subsidiaries for such calendar month to be less than an amount that allows
the Interest Coverage Ratio for such calendar month to be 3.50 to 1.00 or
greater."
(h) Section 6.03(f) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(f) COVENANT CALCULATIONS. For purposes of any covenant in this
Section 6.03, calculations of financial position or results as at the end
of any period shall be made as at the closing of the financial records for
such period and in any event without any adjustment or restatement of such
position or results for such period or any earlier period after, in any
case, the closing of such records therefor. Without limiting the
foregoing, for purposes of the covenants in this Section 6.03 on and after
September 30, 1996, calculations shall not take account of any adjustment
or
<PAGE>
7
restatement of the charge against earnings recorded by the Borrower in
respect of its Fiscal Quarter ended September 30, 1996 that may be made
after the date of the Fifth Amendment as a result of differences between
the final report of William M. Mercer, Incorporated evaluating the unpaid
loss and loss adjustment expense liabilities of PCIC as at September 30,
1996 and the draft of such report that was issued prior to the date of the
Fifth Amendment."
(i) Section 7.01(s) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(s) the Borrower shall fail to comply with any obligation in Section
8(b) of the Second Amendment, in Section 6 of the Fourth Amendment or in
Section 8 of the Fifth Amendment; or any date specified as the Fifth
Amendment Termination Date in clauses (iv) through (viii) of the definition
of 'Fifth Amendment Termination Date' set forth in Section 1.01 shall
occur; or"
(j) The address for notices to the Agent under Section 9.02 of the
Credit Agreement is hereby changed to the following sole address:
599 Lexington Avenue
New York, New York 10022
Attention: Ms. Ruth E. Ford
SECTION 3. ADDITIONAL AMENDMENT TO CREDIT AGREEMENT. Section
2.10(a)(i) of the Credit Agreement is hereby deleted in its entirety.
SECTION 4. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants as follows:
(a) All representations and warranties of the Borrower contained in
the Credit Agreement, both before and after giving effect to Sections 2 and
3 hereof, are true in all material respects (except for any such
representation or warranty (or portion thereof) that is qualified by
reference to a specific materiality standard, in which case such
representation or warranty is true in all respects).
(b) Without limiting the representations and warranties made in
subsection (a) above or in the Credit Agreement, no authorization, consent,
approval or other action by, and no notice to or filing with, any HMO
Regulator or Insurance Regulator is required for, and no HMO Event,
Insurance Event or violation of the HMO Regulations or Insurance
Regulations would result from, the due execution, delivery or performance
by the Borrower or any Loan Party of this Amendment or any of the Loan
Documents and other documents to be delivered in connection herewith.
<PAGE>
8
SECTION 5. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and
after the date hereof, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein", or words of like import referring
to the Credit Agreement, and each reference to the Credit Agreement in the other
Loan Documents, shall mean and be a reference to the Credit Agreement as amended
hereby.
(b) Except as specifically amended under Sections 2 and 3 hereof or
modified by the waivers under Section 1 hereof, each of the Credit Agreement and
each other Loan Document shall remain in full force and effect and is hereby
ratified and confirmed.
(c) The Borrower acknowledges and agrees that, except to the extent
specifically amended under Sections 2 and 3 hereof or modified by the waivers
under Section 1 hereof, it is obligated to comply with each and every term,
covenant, agreement and condition applicable to it under the Credit Agreement or
the other Loan Documents. The execution, delivery and effectiveness of this
Amendment shall not otherwise operate as a waiver of any right, remedy or
privilege of any Lender, the Issuing Bank or the Agent under the Credit
Agreement or any other Loan Document, any and all of which rights, remedies and
privileges are reserved.
SECTION 6. CONDITIONS OF EFFECTIVENESS OF SECTIONS 1 AND 2. Sections
1 and 2 of this Amendment shall become effective, subject to the satisfaction of
the following conditions precedent, as of the date (the "Fifth Amendment
Effective Date") when all such conditions shall first have been satisfied:
(a) The Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Issuing Bank and each Lender and a
counterpart of the Consent of Guarantor attached hereto duly executed by
the Guarantor.
(b) The Agent shall have received on or before the Fifth Amendment
Effective Date the following, each dated such date (unless otherwise
specified), in form and substance satisfactory to the Agent, the Issuing
Bank and the Majority Lenders (unless otherwise specified) and in
sufficient copies for the Agent, Issuing Bank and each Lender:
(i) A certificate, duly executed by the Borrower's Chief
Executive Officer or Chief Financial Officer, certifying that (i) on
such date, after giving effect to Sections 1 and 2 hereof, no Default
or Event of Default has occurred and is continuing (ii) on such date
no event or circumstance has occurred that will cause the occurrence
of the Fifth Amendment Termination Date and (iii) the representations
and warranties set forth in Section 4 hereof are true on and as of
such date.
<PAGE>
9
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower and each other Loan Party approving each
Loan Document to which it is or is to be a party in connection
herewith, and of all documents evidencing other necessary corporate
action and governmental and other third party approvals and consents,
if any, with respect each such Loan Document.
(iii) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying the
names and true signatures of the officers of the Borrower and such
other Loan Party authorized to sign this Amendment and each other Loan
Document which they are or are to be parties and the other documents
to be delivered hereunder and thereunder.
(iv) An Amendment to Borrower Security Agreement, duly
executed by the Borrower, in substantially the form of Exhibit A
hereto (the "Borrower Security Agreement Amendment"), providing for
the grant of a first priority security interest under the Borrower
Security Agreement in the Borrower's right, title and interest in and
to the provisions (the "Sierra Breakup Fee Agreements") pertaining to
(A) the Sierra Termination Fee (as defined in Merger Agreement) under
Section 8.4(b) of the Merger Agreement and (B) the $3,000,000 payment
contemplated under Section 7.5(c) of the Merger Agreement, and in each
case the proceeds thereof, together with:
(A) acknowledgment copies or stamped receipt copies of
proper financing statements, duly filed on or before the date of
such Security Agreement under the Uniform Commercial Code of all
jurisdictions that the Agent may deem necessary or desirable in
order to perfect and protect the first priority liens and
security interests created under the Borrower Security Agreement
as a result of such Borrower Security Agreement Amendment,
covering the Collateral comprised of the Borrower's right, title
and interest in and to the Sierra Breakup Fee Agreements and
related Collateral or other evidence satisfactory to the Agent
that arrangements have been made with a reputable filing service
for such filing of such financing statements,
(B) evidence of the completion of all other recordings and
filings of or with respect to such Borrower Security Agreement
Amendment that the Agent may deem necessary or desirable in order
to perfect and protect the Liens arising thereunder,
(C) a copy, certified by the Borrower to be true and
complete, of the Merger Agreement as in effect on the Fifth
Amendment Effective Date, together with a consent to the
assignment
<PAGE>
10
of the Sierra Breakup Fee Agreements, in substantially the form
of Exhibit B hereto, duly executed by Sierra, Sierra Sub and the
Borrower, and
(D) evidence that all other action that the Agent may deem
necessary or desirable in order to perfect and protect the first
priority liens and security interests created under the Borrower
Security Agreement as a result of such Borrower Security
Agreement Amendment has been taken.
(v) A legal opinion from Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quintal, P.A., counsel to the Borrower, as to this Amendment
and the Credit Agreement, as amended hereby, and the documents
delivered in connection herewith and the security interest provided
for under the Borrower Security Agreement Amendment, in form and
substance satisfactory to the Agent.
(c) The Borrower shall have paid to the Agent, in immediately
available funds for the rateable account of the Lenders, a fee in the
amount of 0.25% of the aggregate amount of the Advances and Letter of
Credit Liability outstanding on the date hereof.
(d) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement (including those relating to
this Amendment) to the extent that request for such payment has been made
to the Borrower.
SECTION 7. CONDITIONS OF EFFECTIVENESS OF SECTION 3. Section 3 of
this Amendment shall become effective, subject to the condition precedent that
Sections 1 and 2 hereof shall have become effective and subject to the
satisfaction of the following conditions precedent, as of the date (the
"Amortization Amendment Effective Date") when all such conditions shall first
have been satisfied:
(a) The Borrower shall have entered into a commitment letter or other
agreement with one or more lenders providing for the commitment of such
lender or lenders to provide financing to the Borrower that will be
sufficient to enable the Borrower to pay all Obligations in full
(including, without limitation, replacement and termination of any
outstanding Letter of Credit) at or before the Effective Time (as defined
in the Merger Agreement) of the Merger.
(b) The Borrower shall have provided to the Agent a copy, certified
to be true and complete by the Borrower's Chief Executive Officer or Chief
Financial Officer, of the commitment letter or other agreement referred to
in Section 7(a)
<PAGE>
11
above, and the Agent shall have notified the Borrower in writing that the
Majority Lenders have approved the terms of such letter or agreement
(including, without limitation, the lender or lenders thereunder (each
being a "Refinancing Provider"), whereupon such letter or agreement shall
constitute the "Refinancing Commitment" for purposes hereof.
(c) The Agent shall have received from the Borrower a certificate,
dated the Amortization Amendment Effective Date and duly executed by the
Borrower's Chief Executive Officer or Chief Financial Officer, certifying
that (i) on such date no Default or Event of Default has occurred and is
continuing (ii) on such date no event or circumstance has occurred that
will cause the occurrence of the Fifth Amendment Termination Date and (iii)
the representations and warranties set forth in Section 4 hereof are true
on and as of such date.
(d) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement (including those relating to
this Amendment) to the extent that request for such payment has been made
to the Borrower.
SECTION 8. COVENANTS. The Borrower agrees to comply with the
following covenants for so long as any obligation under any Loan Document shall
remain unpaid:
(a) SIERRA BREAKUP FEE AGREEMENT PAYMENTS. The Borrower shall cause
all amounts of cash that become payable to the Borrower from time to time
under the Sierra Breakup Fee Agreements to be paid directly to the Agent
for application FIRST, to pay accrued unpaid fees and expenses of the
Agent, the Issuing Bank and the Lenders payable under the Credit Agreement
or hereunder; SECOND, rateably to pay unpaid accrued interest on the
Advances; THIRD, to pay unpaid reimbursement obligations and accrued
interest under, and thereafter to cash collateralize remaining outstanding
Letter of Credit Liability under, any outstanding Letter of Credit; and
THEREAFTER rateably to pay unpaid principal of the Advances.
(b) SEGREGATION OF PAYMENTS; PAYMENTS UPON EVENT OF DEFAULT. (i)
All amounts referred to in subsection (a) of this Section 8 that are
received by the Borrower shall be received in trust for the benefit of the
Agent and segregated from the other property and funds of the Borrower
until paid over to the Agent as required hereunder.
(c) AMENDMENTS TO MERGER AGREEMENT AND REFINANCING COMMITMENT.
Notwithstanding any provision of Section 7(d) of the Borrower Security
Agreement to the contrary, the Borrower shall not amend, supplement or
otherwise modify, or agree to any waiver or grant any consent under, (i)
Articles 6 or 7 or Sections 8.3 or 8.4(b) of the Merger Agreement or any
provision defining terms used in such Articles
<PAGE>
12
or Sections or (ii) the Refinancing Commitment, unless, in any case, both
(1) the Borrower shall have given the Agent written notice thereof prior to
the effective date of the proposed amendment, supplement, modification,
waiver or consent, as the case may be, and (2) (A) if such notice from the
Borrower is received by the Agent more than 10 days prior to such effective
date, the Agent shall not have notified the Borrower prior to such
effective date that the Majority Lenders (acting in their sole and absolute
discretion) have determined that the proposed amendment, supplement,
modification, waiver or consent, as the case may be, would materially and
detrimentally affect the rights, remedies, privileges or interests of the
Agent, Issuing Bank or Lenders under or in respect of the Obligations or
the Sierra Breakup Fee Agreements or this Amendment or the other Loan
Documents or (B) if such notice from the Borrower is received by the Agent
10 or fewer days prior to such effective date, the Agent shall have
notified the Borrower prior to such effective date that the Majority
Lenders (acting in their sole and absolute discretion) have determined that
the proposed amendment, supplement, modification, waiver or consent, as the
case may be, would not materially and detrimentally affect the rights,
remedies, privileges or interests of the Agent, Issuing Bank or Lenders
under or in respect of the Obligations or the Sierra Breakup Fee Agreements
or this Amendment or the other Loan Documents.
(d) AVOIDANCE OF DEFENSES, ETC. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any agreement or arrangement,
engage in any act or omission or otherwise conduct its affairs in any
manner if the effect thereof in any case would give rise to or permit any
validly asserted defense, counterclaim, setoff or right of recoupment (i)
in favor of Sierra in respect of any amount payable under the Sierra
Breakup Fee Agreements (without regard to any such defense, counterclaim,
setoff or right of recoupment) or (ii) in favor of any Refinancing Provider
in respect of the Refinancing Commitment.
(e) NOTICES RELATING TO MERGER AGREEMENT AND REFINANCING COMMITMENT.
(i) The Borrower will notify the Agent promptly upon, and in any event not
later than the next day following, any of the following:
(A) the termination of the Merger Agreement or the
Borrower's receipt or dispatch of any notice of such termination;
(B) the expiration or termination of the commitment under
the Refinancing Commitment or the Borrower's receipt or dispatch
of any notice of such termination;
<PAGE>
13
(C) the termination of the waiting period in respect of the
Merger under HSR Act or the extension of such period or request
for additional information in respect of the Merger under the HSR
Act;
(D) the Borrower's or Sierra's receipt of notice of denial
of any request of the Borrower or Sierra for any State Approval
for the Merger; or
(E) the dispatch of any notice by the Borrower to Sierra of
the occurrence of any change or event having a Material Adverse
Effect, as such term is defined in the Merger Agreement.
(ii) The Borrower will provide the following to the Agent, in
each case certified to be true and complete by the Borrower's Chief
Executive Officer or Chief Financial Officer (which certification
shall be to best knowledge, in the case of any document not prepared
by or on behalf of the Borrower or any of its Subsidiaries):
(A) a copy of the Proxy Statement, upon dispatch thereof to
the stockholders of the Borrower and shareholders of Sierra;
(B) a copy of the S-4, upon its effectiveness under the
Exchange Act; and
(C) a copy of each application by the Borrower or Sierra
seeking any State Approval for the Merger, upon the filing of
such application with the relevant government or regulatory
authority.
(f) TERMINATION FEE. In the event that the Obligations have not been
or are not paid in full (including, without limitation, replacement and
termination of any outstanding Letter of Credit) on or before the Fifth
Amendment Termination Date, then on the Fifth Amendment Termination Date,
the Borrower shall pay the to the Agent, in immediately available funds for
the ratable account of the Lenders, a fee in the amount of 1.00% of the
aggregate amount of the Advances and Letter of Credit Liability outstanding
on the Fifth Amendment Termination Date (after giving effect to any payment
of such Advances or reduction in Letter of Credit Liability made on such
date). Without limiting any provision of any Loan Document, such fee shall
be payable in addition to interest at the default rate under the Credit
Agreement and all other amounts payable under the Loan Documents.
SECTION 9. SUPERIOR PROPOSAL. In the event of the occurrence of
all of (i) the Borrower's determination to terminate the Merger Agreement upon
receipt of a "superior
<PAGE>
14
proposal" (as defined in Section 8.2(d) of the Merger Agreement) pursuant to
Section 8.2(b) of the Merger Agreement, (ii) the Borrower's entry, in connection
with such "superior proposal", into a commitment letter or other agreement with
one or more lenders or other sources of financing providing for the commitment
of such lenders or sources to provide financing to the Borrower that will be
sufficient to enable the Borrower to pay all Obligations in full (including,
without limitation, replacement and termination of any outstanding Letter of
Credit) before March 31, 1997 (an "Alternate Refinancing Commitment") and (iii)
the Agent's receipt of confirmation from all of the Lenders and the Issuing Bank
that they find the terms of such Alternate Refinancing Commitment and lenders or
other sources of financing thereunder to be satisfactory (in the sole and
absolute discretion of the Lenders and Issuing Bank), then the definition of the
Fifth Amendment Termination Date shall be modified to the extent that the
Borrower, all of the Lenders, the Issuing Bank and the Agent agree (in the sole
and absolute discretion of such parties) is appropriate to accommodate the
timing of the transactions contemplated in such "superior proposal" and
Alternative Refinancing Commitment.
SECTION 10. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same agreement.
SECTION 11. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
15
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER:
PHYSICIAN CORPORATION OF AMERICA
By:
----------------------------
Name:
Title:
THE LENDERS AND ISSUING BANK:
CITIBANK, N.A., as Lender and as Issuing Bank
By:
----------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
----------------------------------------
Name:
Title:
NATIONSBANK OF TENNESSEE
By:
----------------------------------------
Name:
Title:
<PAGE>
16
BOATMEN'S FIRST NATIONAL BANK OF KANSAS CITY
By:
----------------------------------------
Name:
Title:
SUNTRUST BANK, MIAMI, N.A.
By:
----------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
----------------------------------------
Name:
Title:
<PAGE>
CONSENT OF GUARANTOR
The undersigned, as Guarantor under that certain Guaranty dated as of
March 29, 1996 (the "Guaranty") made in favor of the lenders parties to the
Revolving Credit Agreement referred to in the foregoing Fifth Amendment and
Waiver Agreement, the Issuing Bank and the Agent (in each case as defined in
such Revolving Credit Agreement), hereby consents to such Fifth Amendment and
Waiver Agreement (and to all prior amendments, waivers, consents and other
modifications to or under such Revolving Credit Agreement) and confirms and
agrees that notwithstanding such Fifth Amendment and Waiver Agreement (or any
prior such amendment, waiver, consent or other modification) the Guaranty is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects.
PCA SOLUTIONS, INC.
By
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
to
Fifth Amendment and Waiver Agreement
dated as of November 25, 1996
Form of Borrower Security Agreement Amendment
<PAGE>
EXHIBIT B
to
Fifth Amendment and Waiver Agreement
dated as of November 25, 1996
Form of Consent to Assignment of Sierra Breakup Fee Agreements
<PAGE>
EXHIBIT 10.1.6
EXECUTION COPY
SIXTH AMENDMENT AND WAIVER AGREEMENT
SIXTH AMENDMENT AND WAIVER AGREEMENT dated as of January 8, 1997 (this
"Amendment") among Physician Corporation of America (the "Borrower"), the banks
listed on the signature pages hereof (the "Lenders"), Citibank, N.A., as issuing
bank (the "Issuing Bank"), and Citibank, N.A., as agent for the Lenders and
Issuing Bank (the "Agent").
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Revolving Credit Agreement dated as of October 27, 1994,
as amended by an Amendment to Credit Agreement and Consent to Acquisition dated
as of September 22, 1995, by a Second Amendment to Credit Agreement dated as of
March 29, 1996, by a Third Amendment to Credit Agreement dated as of April 5,
1996, by a Fourth Amendment and Consent Agreement dated as of June 10, 1996 and
by a Fifth Amendment and Waiver Agreement dated as of November 25, 1996 (the
"Fifth Amendment"; such Revolving Credit Agreement, as so amended and as further
amended, supplemented or otherwise modified and in effect from time to time
being the "Credit Agreement"). Capitalized terms defined in the Credit
Agreement and not otherwise defined herein are used herein as therein defined;
and capitalized terms defined in Sections 1 and 2 hereof are used elsewhere
herein as so defined (without regard to the conditions to effectiveness in
Sections 5 and 6 hereof).
2. Pursuant to the Credit Agreement, as a result of the amendments
provided for in the Fifth Amendment, the Termination Date occurred on December
31, 1996 because of the Borrower's failure to have entered into the Refinancing
Commitment and otherwise to have satisfied the conditions provided for in
Section 7 of the Fifth Amendment as of such date. Accordingly, all Obligations
became due and payable in full on December 31, 1996, including the termination
fee payable on the Fifth Amendment Termination Date as provided in Section 8(f)
of the Fifth Amendment. The Borrower has not paid the Obligations in full.
Accordingly, interest on all Obligations has been accruing from December 31,
1996 at the default rate as provided in Section 2.07(b) of the Credit Agreement.
3. The Borrower has requested that the Issuing Bank and the Lenders
(i) waive the occurrence of the Termination Date and Fifth Amendment Termination
Date, the Borrower's failure to pay the Obligations in full on December 31, 1996
and the requirement that the Borrower pay interest accruing on the Obligations
at the default rate from December 31, 1996 and (ii) extend the deadline for
satisfaction of the conditions of Section 7 of the Fifth Amendment and modify
the requirements as to what will constitute the Refinancing
<PAGE>
2
Commitment to be provided pursuant to such Section 7, in each on the terms and
subject to the conditions hereof.
4. The Borrower proposes to effect the above waivers and
modifications subject to either one of two alternative sets of terms and
conditions and otherwise as provided herein. Under one alternative (the
"Principal Paydown Alternative") the Borrower proposes (i) to borrow from Sierra
the principal amount of $16,750,000 pursuant to a promissory note and related
documents providing for such borrowing (collectively, the "Sierra Subordinated
Note") to be subordinated to the Obligations and secured by liens junior to the
liens securing the Obligations, in each case on terms satisfactory to the
Lenders, the Issuing Bank and the Agent, (ii) pay over the proceeds of the
borrowing under the Sierra Note for application toward the installment of
principal of the Revolving Advances that became payable on December 31, 1996
under Section 2.10(a)(i) of the Credit Agreement and (iii) give effect to such
other terms as are provided for in Section 1 hereof.
5. Under the alternative set of terms and conditions (the "Pricing
Increase Alternative"), the Borrower proposes to (i) increase the interest rates
payable under the Credit Agreement and the termination fee provided for in
Section 8(f) of the Fifth Amendment and (ii) give effect to such other terms as
are provided for in Section 2 hereof.
6. The Issuing Bank and the Lenders are willing to agree to either
of the alternative sets of waivers and modifications requested by the Borrower,
in each case on the terms and subject to the conditions hereof.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties hereto agree as follows:
SECTION 1. PRINCIPAL PAYDOWN ALTERNATIVE WAIVERS AND AMENDMENTS.
(a) PRINCIPAL PAYDOWN ALTERNATIVE WAIVERS. (i) The Issuing Bank and the
Lenders hereby waive (A) any occurrence of the Termination Date or Fifth
Amendment Termination Date prior to the Sixth Amendment A Effective Date (as
defined in Section 5 below) resulting solely from the Borrower's failure to
satisfy the conditions of Section 7 of the Fifth Amendment, (B) any failure of
the Borrower to make any payment that became payable solely as a result of any
such occurrence and (C) any requirement that the Borrower pay interest at the
default rate under Section 2.07(b) of the Credit Agreement accruing for the
period from December 31, 1996 until the Sixth Amendment A Effective Date on
Obligations that became due and payable solely as a result of any such
occurrence.
(ii) The Issuing Bank and the Lenders hereby waive the Borrower's
compliance with the covenants of Section 6.02(a) and 6.02(c) of the Credit
Agreement to the extent that such covenant would otherwise be violated by
the Borrower creating, incurring or suffering to exist the Debt evidenced
by the Sierra Note or liens
<PAGE>
3
securing such Debt, provided that the Debt under the Sierra Note is
subordinate to the Obligations and the liens securing such Debt are junior
to the liens securing the Obligations, in each case on terms and pursuant
to documentation that has been approved by the Agent, all of the Lenders
and the Issuing Bank in their sole and absolute discretion.
(b) PRINCIPAL PAYDOWN ALTERNATIVE AMENDMENTS. (i) (A) The
definition of Applicable Base Rate Margin" set forth in Section 1.01 of the
Credit Agreement is hereby amended in its entirety so as to read in full as
follows:
"'APPLICABLE BASE RATE MARGIN' means, at all times after
December 31, 1996, 0.00%."
(B) Clause (ii) of the definition of "Fifth Amendment
Termination Date" set forth in Section 1.01 of the Credit Agreement is
hereby amended in its entirety so as to read in full as follows:
"(ii) February 17, 1997, if the conditions of Section 7
of the Fifth Amendment have not been satisfied in full on or
before such date;"
(C) Clause (iii) of the definition of "Fifth Amendment
Termination Date" set forth in Section 1.01 of the Credit Agreement is
hereby amended in its entirety so as to read in full as follows:
"(iii) any date on which (A) the commitment under the
Refinancing Commitment (after delivery thereof to the Borrower)
expires or terminates or (B) funds subject to the escrow
arrangement under the Refinancing Commitment are released to any
party other than the Agent for the benefit of itself, the Issuing
Bank and the Lenders;"
(D) The definition of "Loan Documents" set forth in Section 1.01
of the Credit Agreement is hereby amended in its entirety so as to
read in full as follows:
"'LOAN DOCUMENTS' means this Agreement, the Notes, the Fee
Letter, the Second Amendment, the Borrower Pledge Agreement
(including, without limitation, the Amendment to Borrower Pledge
Agreement delivered pursuant to the Fourth Amendment), each of
the Guaranties, Security Agreements and other documents delivered
by the Borrower or any of its Subsidiaries pursuant to Section 6
of the Second Amendment, the Fourth Amendment, the PFI
Consideration Pledge
<PAGE>
4
Agreement (including, without limitation, the Amendment to
Borrower Security Agreement delivered pursuant to the Fifth
Amendment), the PFI Consideration Consent Agreement, the Fifth
Amendment, the Sixth Amendment and any document delivered by the
Borrower for the benefit of the Lenders, Issuing Bank or Agent in
connection with the Sierra Subordinated Note, in each case as
amended, supplemented or otherwise modified from time to time."
(E) The definition of "Refinancing Commitment" set forth in
Section 1.01 of the Credit Agreement (and including, without
limitation, for purposes of Sections 7, 8 and 9 of the Fifth
Amendment) is hereby amended in its entirety so as to read in full as
follows:
"'REFINANCING COMMITMENT' means, collectively, one or more
commitment letters or agreements and, individually, each such
letter or agreement, that satisfy all of the following
requirements: (i) each such letter or agreement has been provided
or entered into by parties (other than the Borrower) satisfactory
to the Majority Lenders in their sole and absolute discretion;
(ii) each such letter or agreement has terms that have been
approved by the Majority Lenders in their sole and absolute
discretion; and (iii) such letters or agreements collectively
provide for (A) a commitment to provide financing by one or more
lenders satisfactory to the Majority Lenders in their sole and
absolute discretion or (B) funds to be held in escrow and
disbursed by an escrow agent and on terms in each case
satisfactory to the Majority Lenders in their sole and absolute
discretion, which financing and/or funds shall collectively be
sufficient to enable the Borrower to pay all Obligations in full
(including, without limitation, replacement and termination of
any outstanding Letter of Credit) at or before the Effective Time
(as defined in the Merger Agreement) of the Merger."
(F) The definition of "Refinancing Provider" set forth in
Section 1.01 of the Credit Agreement (and including, without
limitation, for purposes of Sections 7, 8 and 9 of the Fifth
Amendment) is hereby amended in its entirety so as to read in full as
follows:
"'REFINANCING PROVIDER' (i) any lender party to a commitment
to provide financing under any commitment letter or agreement
comprising the Refinancing Commitment and (ii) any Person acting
as escrow agent and any Person (other than the Borrower)
otherwise party to an escrow arrangement arising under the
Refinancing Commitment."
<PAGE>
5
(ii) Section 1.01 of the Credit Agreement is hereby amended by the
addition of the following definitions thereto:
"SIXTH AMENDMENT" means the Sixth Amendment and Waiver Agreement
dated as of January 8, 1997 among the Borrower, the Lenders parties
thereto, the Issuing Bank and the Agent.
"SIERRA SUBORDINATED NOTE" has the meaning set forth in
Preliminary Statement 4 of the Sixth Amendment.
"SIERRA SUBORDINATED NOTE DOCUMENT" has the meaning set forth in
Section 5 of the Sixth Amendment.
(iii) Section 6.02 of the Credit Agreement is hereby amended by
the addition of a new subsection (q) thereto, to read as follows:
"(q) MODIFICATIONS TO SIERRA NOTE DOCUMENTS. Amend, supplement
or otherwise modify the Sierra Subordinated Note or any other Sierra
Subordinated Note Document, unless, in any case, both (1) the Borrower
shall have given the Agent written notice thereof prior to the
effective date of the proposed amendment, supplement or modification,
as the case may be, and (2) the Agent shall have notified the Borrower
prior to such effective date that the Majority Lenders (acting in
their sole and absolute discretion) have determined that the proposed
amendment, supplement or modification, as the case may be, would not
materially and detrimentally affect the rights, remedies, privileges
or interests of the Agent, Issuing Bank or Lenders under or in respect
of the Obligations or the Sierra Subordinated Note Documents or this
Agreement or the other Loan Documents."
(iv) Subsections (a) and (b) of Section 7 of the Fifth Amendment are
hereby amended in their entirety so as to read in full as a single
subsection (a), as follows:
"(a) The Borrower shall have received or entered into one or more
commitment letters and agreements that individually and collectively
satisfy the requirements, of and collectively comprise, the
Refinancing Commitment; and the Borrower shall have provided copies
thereof, certified to be true and complete by the Borrower's Chief
Executive Officer or Chief Financial Officer, to the Agent."
(v) Clause (B) of Section 8(e) of the Fifth Amendment is hereby
amended in its entirety so as to read in full as follows:
<PAGE>
6
"(B) the expiration or termination of the commitment under the
Refinancing Commitment or any disbursement of funds under any escrow
arrangement provided for under the Refinancing Commitment or the
Borrower's receipt or dispatch of any notice of such termination or
disbursement;"
SECTION 2. PRICING INCREASE ALTERNATIVE WAIVERS AND AMENDMENTS.
(a) PRICING INCREASE ALTERNATIVE WAIVERS. The Issuing Bank and the Lenders
hereby waive (i) any occurrence of the Termination Date or Fifth Amendment
Termination Date prior to the Sixth Amendment B Effective Date (as defined in
Section 6 below) resulting solely from the Borrower's failure to satisfy the
conditions of Section 7 of the Fifth Amendment, (ii) any failure of the Borrower
to make any payment that became payable solely as a result of any such
occurrence and (iii) any requirement that the Borrower pay interest at the
default rate under Section 2.07(b) of the Credit Agreement accruing for the
period from December 31, 1996 until the Sixth Amendment B Effective Date on
Obligations that became due and payable solely as a result of any such
occurrence.
(b) PRICING INCREASE ALTERNATIVE AMENDMENTS. (i) (A) The
definition of Applicable Base Rate Margin" set forth in Section 1.01 of the
Credit Agreement is hereby amended in its entirety so as to read in full as
follows:
"'APPLICABLE BASE RATE MARGIN' means, at all times after
December 31, 1996, 2.00%."
(B) Clause (ii) of the definition of "Fifth Amendment
Termination Date" set forth in Section 1.01 of the Credit Agreement is
hereby amended in its entirety so as to read in full as follows:
"(ii) February 17, 1997, if the conditions of Section 7
of the Fifth Amendment have not been satisfied in full on or
before such date;"
(C) Clause (iii) of the definition of "Fifth Amendment
Termination Date" set forth in Section 1.01 of the Credit Agreement is
hereby amended in its entirety so as to read in full as follows:
"(iii) any date on which (A) the commitment under the
Refinancing Commitment (after delivery thereof to the Borrower)
expires or terminates or (B) funds subject to the escrow
arrangement under the Refinancing Commitment are released to any
party other than the Agent for the benefit of itself, the Issuing
Bank and the Lenders;"
<PAGE>
7
(D) The definition of "Loan Documents" set forth in Section 1.01
of the Credit Agreement is hereby amended in its entirety so as to
read in full as follows:
"'LOAN DOCUMENTS' means this Agreement, the Notes, the Fee
Letter, the Second Amendment, the Borrower Pledge Agreement
(including, without limitation, the Amendment to Borrower Pledge
Agreement delivered pursuant to the Fourth Amendment), each of
the Guaranties, Security Agreements and other documents delivered
by the Borrower or any of its Subsidiaries pursuant to Section 6
of the Second Amendment, the Fourth Amendment, the PFI
Consideration Pledge Agreement (including, without limitation,
the Amendment to Borrower Security Agreement delivered pursuant
to the Fifth Amendment), the PFI Consideration Consent Agreement,
the Fifth Amendment and the Sixth Amendment, in each case as
amended, supplemented or otherwise modified from time to time."
(E) The definition of "Refinancing Commitment" set forth in
Section 1.01 of the Credit Agreement (and including, without
limitation, for purposes of Sections 7, 8 and 9 of the Fifth
Amendment) is hereby amended in its entirety so as to read in full as
follows:
"'REFINANCING COMMITMENT' means, collectively, one or more
commitment letters or agreements and, individually, each such
letter or agreement, that satisfy all of the following
requirements: (i) each such letter or agreement has been provided
or entered into by parties (other than the Borrower) satisfactory
to the Majority Lenders in their sole and absolute discretion;
(ii) each such letter or agreement has terms that have been
approved by the Majority Lenders in their sole and absolute
discretion; and (iii) such letters or agreements collectively
provide for (A) a commitment to provide financing by one or more
lenders satisfactory to the Majority Lenders in their sole and
absolute discretion or (B) funds to be held in escrow and
disbursed by an escrow agent and on terms in each case
satisfactory to the Majority Lenders in their sole and absolute
discretion, which financing and/or funds shall collectively be
sufficient to enable the Borrower to pay all Obligations in full
(including, without limitation, replacement and termination of
any outstanding Letter of Credit) at or before the Effective Time
(as defined in the Merger Agreement) of the Merger."
(F) The definition of "Refinancing Provider" set forth in
Section 1.01 of the Credit Agreement (and including, without
limitation, for purposes
<PAGE>
8
of Sections 7, 8 and 9 of the Fifth Amendment) is hereby amended in
its entirety so as to read in full as follows:
"'REFINANCING PROVIDER' (i) any lender party to a commitment
to provide financing under any commitment letter or agreement
comprising the Refinancing Commitment and (ii) any Person acting
as escrow agent and any Person (other than the Borrower)
otherwise party to an escrow arrangement arising under the
Refinancing Commitment."
(ii) Section 1.01 of the Credit Agreement is hereby amended by the
addition of the following definition thereto:
"SIXTH AMENDMENT" means the Sixth Amendment and Waiver Agreement
dated as of January 8, 1997 among the Borrower, the Lenders parties
thereto, the Issuing Bank and the Agent.
(iii)Section 2.07 (b) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(b) DEFAULT INTEREST. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on
the unpaid principal amount of each Advance owing to each Lender and,
to the fullest extent permitted by law, on the unpaid amount of all
interest, fees and other amounts payable hereunder and under the other
Loan Documents, payable in arrears on demand by the Agent and on the
date such amount shall be paid in full, at a rate per annum equal at
all times to 4% per annum above the Base Rate in effect from time to
time (computed on the basis of a year of 360 days for the actual
number of days (including the first day but excluding the last day)
occurring during the period for which such interest is payable)."
(iv) Subsections (a) and (b) of Section 7 of the Fifth Amendment are
hereby amended in their entirety so as to read in full as a single
subsection (a), as follows:
"(a) The Borrower shall have received or entered into one or more
commitment letters and agreements that individually and collectively
satisfy the requirements, of and collectively comprise, the
Refinancing Commitment; and the Borrower shall have provided copies
thereof, certified to be true and complete by the Borrower's Chief
Executive Officer or Chief Financial Officer, to the Agent."
(v) Clause (B) of Section 8(e) of the Fifth Amendment is hereby
amended in its entirety so as to read in full as follows:
<PAGE>
9
"(B) the expiration or termination of the commitment under the
Refinancing Commitment or any disbursement of funds under any escrow
arrangement provided for under the Refinancing Commitment or the
Borrower's receipt or dispatch of any notice of such termination or
disbursement;"
(vi) Section 8(f) of Fifth Amendment is hereby amended in its entirety
so as to read in full as follows:
"(f) TERMINATION FEE. In the event that the Obligations have not
been or are not paid in full (including, without limitation,
replacement and termination of any outstanding Letter of Credit) on or
before the Fifth Amendment Termination Date, then on the Fifth
Amendment Termination Date, the Borrower shall pay the to the Agent,
in immediately available funds for the ratable account of the Lenders,
a fee in the amount of 2.00% of the aggregate amount of the Advances
and Letter of Credit Liability outstanding on the Fifth Amendment
Termination Date (after giving effect to any payment of such Advances
or reduction in Letter of Credit Liability made on such date).
Without limiting any provision of any Loan Document, such fee shall be
payable in addition to interest at the default rate under the Credit
Agreement and all other amounts payable under the Loan Documents."
SECTION 3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants as follows:
(a) All representations and warranties of the Borrower contained in
the Credit Agreement, both before and after giving effect to Sections 1 and
2 hereof, are true in all material respects (except for any such
representation or warranty (or portion thereof) that is qualified by
reference to a specific materiality standard, in which case such
representation or warranty is true in all respects).
(b) Without limiting the representations and warranties made in
subsection (a) above or in the Credit Agreement, no authorization, consent,
approval or other action by, and no notice to or filing with, any HMO
Regulator or Insurance Regulator is required for, and no HMO Event,
Insurance Event or violation of the HMO Regulations or Insurance
Regulations would result from, the due execution, delivery or performance
by the Borrower or any Loan Party of this Amendment or any of the Loan
Documents and other documents to be delivered in connection herewith.
SECTION 4. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and
after the date hereof, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof", "herein", or words of like import referring
to the Credit Agreement,
<PAGE>
10
and each reference to the Credit Agreement in the other Loan Documents, shall
mean and be a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended under Section 1(b) or 2(b) hereof,
as the case may be, or modified by the waiver under Section 1(a) or 2(a) hereof,
as the case may be, each of the Credit Agreement and each other Loan Document
shall remain in full force and effect and is hereby ratified and confirmed.
(c) The Borrower acknowledges and agrees that, except to the extent
specifically amended under Section 1(b) or 2(b) hereof, as the case may be, or
modified by the waiver under Section 1(a) or 2(a) hereof, as the case may be,
it is obligated to comply with each and every term, covenant, agreement and
condition applicable to it under the Credit Agreement or the other Loan
Documents. The execution, delivery and effectiveness of this Amendment shall
not otherwise operate as a waiver of any right, remedy or privilege of any
Lender, the Issuing Bank or the Agent under the Credit Agreement or any other
Loan Document, any and all of which rights, remedies and privileges are
reserved.
SECTION 5. CONDITIONS OF EFFECTIVENESS OF PRINCIPAL PAYDOWN
ALTERNATIVE UNDER SECTION 1. Section 1 of this Amendment shall become effective
(to the exclusion of Section 2 hereof), subject to the satisfaction on or before
January 10, 1997 of the following conditions precedent, as of the date, if any
(the "Sixth Amendment A Effective Date"), when all such conditions shall first
have been so satisfied:
(a) The Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Issuing Bank and each Lender and a
counterpart of the Consent of Guarantor attached hereto duly executed by
the Guarantor.
(b) The Agent shall have received on or before the Sixth Amendment A
Effective Date the following, each dated such date (unless otherwise
specified), in form and substance satisfactory to the Agent, the Issuing
Bank and the Majority Lenders (unless otherwise specified) and in
sufficient copies for the Agent, Issuing Bank and each Lender:
(i) A certificate, duly executed by the Borrower's Chief
Executive Officer or Chief Financial Officer, certifying that (i) on
such date, after giving effect to Section 1 hereof, no Default or
Event of Default has occurred and is continuing (ii) on such date,
after giving effect to Section 1 hereof, no event or circumstance has
occurred that will cause the occurrence of the Fifth Amendment
Termination Date and (iii) the representations and warranties set
forth in Section 3 hereof are true on and as of such date.
<PAGE>
11
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Amendment, and of all
documents evidencing other necessary corporate action and governmental
and other third party approvals and consents, if any, with respect
each such Loan Document.
(iii)A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the officers
of the Borrower authorized to sign this Amendment.
(iv) A legal opinion from Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quintal, P.A., counsel to the Borrower, as to this Amendment
and the Credit Agreement, as amended hereby, in form and substance
satisfactory to the Agent.
(v) A legal opinion from Morgan, Lewis & Bockius, counsel to
Sierra, in form and substance satisfactory to the Agent, as to the
authorization, execution and delivery by, and enforceability against,
Sierra of Sierra Subordinated Note Documents and as to such other
matters as the Agent may reasonably request.
(c) The Agent shall have received copies, certified by the Borrower's
Chief Executive Officer or Chief Financial Officer to be true and complete
as of the Sixth Amendment A Effective Date, of the Sierra Subordinated Note
and each document delivered in connection therewith, including, without
limitation a subordination agreement for the benefit of the Lenders, the
Issuing Bank and the Lenders and each document providing for the creation
or perfection of any lien to secure the Sierra Subordinated Note (all such
documents, together with the Sierra Subordinated Note, as the same may be
amended, supplemented or otherwise modified and in effect from time to
time, being the "Sierra Subordinated Note Documents"), and the Agent shall
have advised the Borrower that the terms of each Sierra Subordinated Note
Document are satisfactory to all of the Lenders and the Issuing Bank, in
their sole and absolute discretion.
(d) The Borrower shall have paid to the Agent, in immediately
available funds (i) the sum of $16,750,000, as the proceeds of the Sierra
Subordinated Note, for application toward the installment of principal that
became due on December 31, 1996 under Section 2.10(a)(i) of the Credit
Agreement, plus (ii) the unpaid interest accrued on such principal.
(e) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement to the extent that request for
such payment has been made to the Borrower.
<PAGE>
12
(f) Section 2 hereof shall not have become effective.
SECTION 6. CONDITIONS OF EFFECTIVENESS OF PRICING INCREASE
ALTERNATIVE UNDER SECTION 2. Section 2 of this Amendment shall become effective
(to the exclusion of Section 1 hereof), subject to the satisfaction on or before
January 10, 1997 of the following conditions precedent, as of the date, if any
(the "Sixth Amendment B Effective Date"), when all such conditions shall first
have been so satisfied:
(a) The Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Issuing Bank and each Lender and a
counterpart of the Consent of Guarantor attached hereto duly executed by
the Guarantor.
(b) The Agent shall have received on or before the Sixth Amendment B
Effective Date the following, each dated such date (unless otherwise
specified), in form and substance satisfactory to the Agent, the Issuing
Bank and the Majority Lenders (unless otherwise specified) and in
sufficient copies for the Agent, Issuing Bank and each Lender:
(i) A certificate, duly executed by the Borrower's Chief
Executive Officer or Chief Financial Officer, certifying that (i) on
such date, after giving effect to Section 2 hereof, no Default or
Event of Default has occurred and is continuing (ii) on such date,
after giving effect to Section 2 hereof, no event or circumstance has
occurred that will cause the occurrence of the Fifth Amendment
Termination Date and (iii) the representations and warranties set
forth in Section 3 hereof are true on and as of such date.
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Amendment, and of all
documents evidencing other necessary corporate action and governmental
and other third party approvals and consents, if any, with respect
each such Loan Document.
(iii)A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the officers
of the Borrower authorized to sign this Amendment.
(iv) A legal opinion from Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quintal, P.A., counsel to the Borrower, as to this Amendment
and the Credit Agreement, as amended hereby, in form and substance
satisfactory to the Agent.
(c) The Borrower shall have paid to the Agent, in immediately
available funds for the rateable account of the Lenders, a fee in the
amount of 0.50% of the
<PAGE>
13
aggregate amount of the Advances and Letter of Credit Liability outstanding
on the date hereof.
(d) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement to the extent that request for
such payment has been made to the Borrower.
(e) Section 1 hereof shall not have become effective.
SECTION 7. CONVERSION TO BASE RATE ADVANCES. The Borrower agrees
that no Advance may be Converted into or continued as a Eurodollar Advance after
the date hereof, notwithstanding any provision of the Credit Agreement to the
contrary.
SECTION 8. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same agreement.
SECTION 9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
14
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER:
PHYSICIAN CORPORATION OF AMERICA
By:
-----------------------------
Name:
Title:
THE LENDERS AND ISSUING BANK:
CITIBANK, N.A., as Lender and as Issuing Bank
By:
------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
------------------------------------------
Name:
Title:
NATIONSBANK OF TENNESSEE
By:
------------------------------------------
Name:
Title:
<PAGE>
15
BOATMEN'S NATIONAL BANK (formerly known as
Boatmen's First National Bank of Kansas City)
By:
------------------------------------------
Name:
Title:
SUNTRUST BANK, MIAMI, N.A.
By:
------------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
------------------------------------------
Name:
Title:
<PAGE>
CONSENT OF GUARANTOR
The undersigned, as Guarantor under that certain Guaranty dated as of
March 29, 1996 (the "Guaranty") made in favor of the lenders parties to the
Revolving Credit Agreement referred to in the foregoing Sixth Amendment and
Waiver Agreement, the Issuing Bank and the Agent (in each case as defined in
such Revolving Credit Agreement), hereby consents to such Sixth Amendment and
Waiver Agreement (and to all prior amendments, waivers, consents and other
modifications to or under such Revolving Credit Agreement) and confirms and
agrees that notwithstanding such Sixth Amendment and Waiver Agreement (or any
prior such amendment, waiver, consent or other modification) the Guaranty is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects.
PCA SOLUTIONS, INC.
By
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT 10.1.7
EXECUTION COPY
SEVENTH AMENDMENT TO CREDIT AGREEMENT
SEVENTH AMENDMENT TO CREDIT AGREEMENT dated as of February 14, 1997
(this "Amendment") among Physician Corporation of America (the "Borrower"), the
banks listed on the signature pages hereof (the "Lenders"), Citibank, N.A., as
issuing bank (the "Issuing Bank"), and Citibank, N.A., as agent for the Lenders
and Issuing Bank (the "Agent").
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Issuing Bank and the Agent are
parties to that certain Revolving Credit Agreement dated as of October 27, 1994,
as amended by an Amendment to Credit Agreement and Consent to Acquisition dated
as of September 22, 1995, by a Second Amendment to Credit Agreement dated as of
March 29, 1996, by a Third Amendment to Credit Agreement dated as of April 5,
1996, by a Fourth Amendment and Consent Agreement dated as of June 10, 1996, by
a Fifth Amendment and Waiver Agreement dated as of November 25, 1996 and by a
Sixth Amendment and Waiver Agreement dated as of January 8, 1997 (such Revolving
Credit Agreement, as so amended and as further amended, supplemented or
otherwise modified and in effect from time to time being the "Credit
Agreement"). Capitalized terms defined in the Credit Agreement and not
otherwise defined herein are used herein as therein defined; and capitalized
terms defined in Section 1 hereof are used elsewhere herein as so defined
(without regard to the conditions to effectiveness in Section 4 hereof).
2. The Borrower has requested that the Issuing Bank and the Lenders
amend the Credit Agreement to extend the dates comprising certain components of
the Fifth Amendment Termination Date, due to delays that the Borrower expects
will be incurred in connection with the transactions leading up to the closing
of the Merger, in each case on the terms and subject to the conditions hereof.
The Borrower has determined that it will be unable to provide one or more
commitment letters or agreements that will satisfy the requirements for the
Refinancing Commitment specified in the Credit Agreement. As a result, the
Borrower has further requested that the Issuing Bank and Lenders amend the
Credit Agreement so as to eliminate failure to deliver the Refinancing
Commitment as an event that would trigger the Fifth Amendment Termination Date,
on and subject to the terms hereof.
3. The Issuing Bank and the Lenders are willing to agree to such
amendments requested by the Borrower, in each case on the terms and subject to
the conditions hereof.
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. (a) (i) The
definition of "Applicable Base Rate Margin" set forth in Section 1.01 of the
Credit Agreement is hereby amended in its entirety so as to read in full as
follows:
"'APPLICABLE BASE RATE MARGIN' means, at all times on and after
February 17, 1997, 1.00%."
(ii) Clause (ii) of the definition of "Fifth Amendment Termination
Date" set forth in Section 1.01 of the Credit Agreement is hereby deleted
in its entirety; and Section 3 of the Fifth Amendment is deemed effective
notwithstanding the Borrower's failure to satisfy the conditions of Section
7 of the Fifth Amendment in full.
(iii) Clause (vii) of the definition of "Fifth Amendment Termination
Date" set forth in Section 1.01 of the Credit Agreement is hereby amended
by changing the date February 17, 1997 appearing therein to March 20, 1997.
(iv) Clause (viii) of the definition of "Fifth Amendment Termination
Date" set forth in Section 1.01 of the Credit Agreement is hereby amended
by changing the date February 24, 1997 appearing therein to March 24, 1997.
(v) Clause (x) of the definition of "Fifth Amendment Termination
Date" set forth in Section 1.01 of the Credit Agreement is hereby amended
in its entirety so as to read in full as "April 30, 1997".
(vi) The definition of "Loan Documents" set forth in Section 1.01 of
the Credit Agreement is hereby amended in its entirety so as to read in
full as follows:
"'LOAN DOCUMENTS' means this Agreement, the Notes, the Fee
Letter, the Second Amendment, the Borrower Pledge Agreement
(including, without limitation, the Amendment to Borrower Pledge
Agreement delivered pursuant to the Fourth Amendment), each of the
Guaranties, Security Agreements and other documents delivered by the
Borrower or any of its Subsidiaries pursuant to Section 6 of the
Second Amendment, the Fourth Amendment, the PFI Consideration Pledge
Agreement (including, without limitation, the Amendment to Borrower
Security Agreement delivered pursuant to the Fifth Amendment), the PFI
Consideration Consent Agreement, the Fifth Amendment, the Sixth
Amendment, the Seventh Amendment and any document delivered by the
Borrower for the benefit of the Lenders, Issuing
<PAGE>
3
Bank or Agent in connection with the Sierra Subordinated Note, in each
case as amended, supplemented or otherwise modified from time to
time."
(b) Section 1.01 of the Credit Agreement is hereby amended by the addition
of the following definition thereto:
"SEVENTH AMENDMENT" means the Seventh Amendment to Credit Agreement
dated as of February 14, 1997 among the Borrower, the Lenders parties
thereto, the Issuing Bank and the Agent.
(c) Section 2.07(b) of the Credit Agreement is hereby amended in its
entirety so as to read in full as follows:
"(b) DEFAULT INTEREST. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on the
unpaid principal amount of each Advance owing to each Lender and, to the
fullest extent permitted by law, on the unpaid amount of all interest, fees
and other amounts payable hereunder and under the other Loan Documents,
payable in arrears on demand by the Agent and on the date such amount shall
be paid in full, at a rate per annum equal at all times to 3% per annum
above the Base Rate in effect from time to time (computed on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) occurring during the period for which such interest
is payable)."
SECTION 2. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants as follows:
(a) All representations and warranties of the Borrower contained in
the Credit Agreement, both before and after giving effect to Section 1
hereof, are true in all material respects (except for any such
representation or warranty (or portion thereof) that is qualified by
reference to a specific materiality standard, in which case such
representation or warranty is true in all respects).
(b) Without limiting the representations and warranties made in
subsection (a) above or in the Credit Agreement, no authorization, consent,
approval or other action by, and no notice to or filing with, any HMO
Regulator or Insurance Regulator is required for, and no HMO Event,
Insurance Event or violation of the HMO Regulations or Insurance
Regulations would result from, the due execution, delivery or performance
by the Borrower or any Loan Party of this Amendment or any of the Loan
Documents and other documents to be delivered in connection herewith.
SECTION 3. REFERENCE TO AND EFFECT ON LOAN DOCUMENTS. (a) On and
after the date hereof, each reference in the Credit Agreement to "this
Agreement",
<PAGE>
4
"hereunder", "hereof", "herein", or words of like import referring to the Credit
Agreement, and each reference to the Credit Agreement in the other Loan
Documents, shall mean and be a reference to the Credit Agreement as amended
hereby.
(b) Except as specifically amended under Section 1 hereof, each of
the Credit Agreement and each other Loan Document shall remain in full force and
effect and is hereby ratified and confirmed.
(c) The Borrower acknowledges and agrees that, except to the extent
specifically amended under Section 1 hereof, it is obligated to comply with each
and every term, covenant, agreement and condition applicable to it under the
Credit Agreement or the other Loan Documents. The execution, delivery and
effectiveness of this Amendment shall not otherwise operate as a waiver of any
right, remedy or privilege of any Lender, the Issuing Bank or the Agent under
the Credit Agreement or any other Loan Document, any and all of which rights,
remedies and privileges are reserved.
SECTION 4. CONDITIONS OF EFFECTIVENESS. Section 1 of this Amendment
shall become effective as of February 17, 1997, if and only if all of the
following conditions precedent are satisfied on or before February 18, 1997:
(a) The Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Issuing Bank and each Lender and a
counterpart of the Consent of Guarantor attached hereto duly executed by
the Guarantor.
(b) The Borrower shall have furnished to the Lenders, Issuing Bank
and Agent copies of a bank commitment letter and highly confident letters
that are substantially in conformity with the description of such letters
set forth under the heading "Modification of Takeout Commitment" in the
letter dated February 10, 1997 from Clifford Donnelly of the Borrower to
the Lenders.
(c) The Agent shall have received on or before February 18, 1997 the
following, each dated such date (unless otherwise specified), in form and
substance satisfactory to the Agent, the Issuing Bank and the Majority
Lenders (unless otherwise specified) and in sufficient copies for the
Agent, Issuing Bank and each Lender:
(i) A certificate, duly executed by the Borrower's Chief
Executive Officer or Chief Financial Officer, certifying that (i) on
such date, after giving effect to Section 1 hereof, no Default or
Event of Default has occurred and is continuing (ii) on such date,
after giving effect to Section 1 hereof, no event or circumstance has
occurred that will cause the occurrence of the Fifth Amendment
Termination Date and (iii) the representations and warranties set
forth in Section 2 hereof are true on and as of such date.
<PAGE>
5
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower approving this Amendment, and of all
documents evidencing other necessary corporate action and governmental
and other third party approvals and consents, if any, with respect
each such Loan Document.
(iii)A certificate of the Secretary or an Assistant Secretary of
the Borrower certifying the names and true signatures of the officers
of the Borrower authorized to sign this Amendment.
(iv) A legal opinion from Greenberg, Traurig, Hoffman, Lipoff,
Rosen & Quintal, P.A., counsel to the Borrower, as to this Amendment
and the Credit Agreement, as amended hereby, in form and substance
satisfactory to the Agent.
(d) The Borrower shall have paid to the Agent, in immediately
available funds for the rateable account of the Lenders, a fee in the
amount of 1.00% of the aggregate amount of the Advances and Letter of
Credit Liability outstanding on the date hereof.
(e) The Borrower shall have paid all amounts accrued and payable
under Section 9.04 of the Credit Agreement to the extent that request for
such payment has been made to the Borrower.
SECTION 5. COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto on separate counterparts,
each of which, when so executed and delivered, shall be an original, but all
such counterparts shall together constitute one and the same agreement.
SECTION 6. PARTIAL FEE REBATE. In the event that the Borrower
pays all of the Obligations in full on or before April 30, 1997 (including,
without limitation, replacement and termination of any outstanding Letter of
Credit), then one-half of the aggregate amount of the fee paid pursuant to
Section 4(d) of this Amendment shall be rebated, by application thereof rateably
as a credit against the outstanding Advances and Letter of Credit Liability.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective officers thereunto duly
authorized, as of the date first above written.
THE BORROWER:
PHYSICIAN CORPORATION OF AMERICA
By:
-----------------------------
Name:
Title:
THE LENDERS AND ISSUING BANK:
CITIBANK, N.A., as Lender and as Issuing Bank
By:
------------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:
------------------------------------------
Name:
Title:
NATIONSBANK OF TENNESSEE
By:
------------------------------------------
Name:
Title:
<PAGE>
7
BOATMEN'S NATIONAL BANK (formerly known as
Boatmen's First National Bank of Kansas City)
By:
------------------------------------------
Name:
Title:
SUNTRUST BANK, MIAMI, N.A.
By:
------------------------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By:
------------------------------------------
Name:
Title:
<PAGE>
CONSENT OF GUARANTOR
The undersigned, as Guarantor under that certain Guaranty dated as of
March 29, 1996 (the "Guaranty") made in favor of the lenders parties to the
Revolving Credit Agreement referred to in the foregoing Seventh Amendment to
Credit Agreement, the Issuing Bank and the Agent (in each case as defined in
such Revolving Credit Agreement), hereby consents to such Seventh Amendment to
Credit Agreement (and to all prior amendments, waivers, consents and other
modifications to or under such Revolving Credit Agreement) and confirms and
agrees that notwithstanding such Seventh Amendment to Credit Agreement (or any
prior such amendment, waiver, consent or other modification) the Guaranty is,
and shall continue to be, in full force and effect and is hereby ratified and
confirmed in all respects.
PCA SOLUTIONS, INC.
By
--------------------------------------
Name:
Title:
<PAGE>
Exhibit 10.1.8
March 20, 1997
BY TELECOPIER AND OVERNIGHT COURIER
- -----------------------------------
To: Physician Corporation of America
5835 Blue Lagoon Drive, Suite 400
Miami, Florida 33126
Attention: Chief Financial Officer
Attention: General Counsel
$200,000,000 REVOLVING CREDIT AGREEMENT DATED AS OF OCTOBER 27, 1994
---------------------------------------------------------------------
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement dated as of
October 27, 1994 among Physician Corporation of America (the "Borrower"), the
Lenders parties thereto, Citibank, N.A., as Issuing Bank, and Citibank, N.A., as
Agent (the "Agent") for the Lenders and Issuing Bank, as amended by an Amendment
to Credit Agreement and Consent to Acquisition dated as of September 22, 1995,
by a Second Amendment to Credit Agreement dated as of March 29, 1996, by a Third
Amendment to Credit Agreement dated as of April 5, 1996, by a Fourth Amendment
and Consent Agreement dated as of June 10, 1996, by a Fifth Amendment and Waiver
Agreement dated as of November 25, 1996, by a Sixth Amendment and Waiver
Agreement dated as of January 8, 1997 and by a Seventh Amendment to Credit
Agreement dated as of February 14, 1997 (such Revolving Credit Agreement, as so
amended and as further amended, supplemented or otherwise modified and in effect
from time to time being the "Credit Agreement"; capitalized terms defined
therein and not otherwise defined herein being used herein as therein defined).
This notice is to confirm that, as discussed more fully below, (i)
Events of Default under the Credit Agreement have occurred and are continuing,
(ii) the Fifth Amendment Termination Date occurred on March 1, 1997 and (iii)
the Termination Date occurred on March 1, 1997.
Such Events of Default include those arising from the recent actions
of the Florida Department of Insurance (the "DOI"). On February 25, 1997, the
DOI commenced proceedings for the appointment of a receiver for PCA Property &
Casualty Insurance Company ("PCIC") on grounds, among others, that PCIC is
insolvent for purposes of relevant Insurance Regulations. This event (i)
constituted a Material Adverse Change, giving rise to an Event of Default under
Section 7.01(m) of the Credit Agreement and (ii) constituted an Insurance Event
not susceptible of a cure, giving rise to an Event of Default under Section
7.01(o) of the Credit Agreement. This event also constituted a proceeding
described in Section 7.01(e) of the Credit Agreement and the entry on February
25, 1997 of the court's order granting relief in such proceeding gave rise to an
Event of Default under Section 7.01(e) of the Credit Agreement. The Borrower
has also notified the Lenders and Agent that additional charges against earnings
relating to PCIC (going beyond the $100 million charge addressed in the Fifth
Amendment and the $80 million charge addressed in the
<PAGE>
2
Waiver Agreement dated as of February 21, 1997) may be recorded by the
Borrower upon completion of the review process relating to PCIC's
capitalization that the Borrower is conducting with its advisors. The
outcome of this review process, and circumstances determined to exist as a
result of it, could give rise to additional Events of Default.
As a result of the occurrence and continuance of the Events of Default
described above, interest on the Obligations has been accruing since February
25, 1997 at the default rate of 3% per annum above the Base Rate in effect from
time to time, as provided in Section 2.07(b) of the Credit Agreement. Please
consider this notice a demand, pursuant to Section 2.07(b), that such interest
accruing from time to time (including, without limitation, interest accruing at
such rate since March 1, 1997 on the fee referred to in the following paragraph)
be paid when interest is otherwise scheduled to be paid under Section 2.07(a)(i)
of the Credit Agreement (except to the extent such interest is otherwise paid or
payable earlier concurrently with any payment of principal of the Obligations).
In the Borrower's complaint against Sierra filed in case No. 97-0671
in the United States District Court for the Southern District of Florida and in
other announcements, the Borrower announced that the Merger Agreement was
terminated by Sierra on March 1, 1997. Accordingly, under clause (i) of the
definition of Fifth Amendment Termination Date, the Fifth Amendment Termination
Date occurred on March 1, 1997. As a result of this occurrence, a fee in the
amount of 1% of the aggregate amount of the Advances and Letter of Credit
Liability became payable on March 1, 1997, pursuant to Section 8(f) of the Fifth
Amendment. As indicated above, interest at the default rate has been accruing
on the amount of this fee since March 1, 1997. Further as a result of such
termination of the Merger Agreement, (i) the Termination Date occurred under
clause (i) of the definition of Termination Date and (ii) the outstanding
principal amount of the Advances, and all unpaid interest accrued thereon,
became due and payable in full on March 1, 1997, pursuant to Sections 2.06 and
2.07 of the Credit Agreement.
Please be advised that the above notice of defaults and of the
occurrence of the Fifth Amendment Termination Date and Termination Date, and any
forbearance of the Lenders, Issuing Bank and Agent in respect thereof do not and
shall not constitute a waiver in respect thereof or any waiver or modification
of any term of the Credit Agreement or any other Loan Document, and do not and
shall not constitute a waiver of any right, remedy or privilege of any Lender,
the Issuing Bank or the Agent in respect of such defaults or occurrences or any
other default or occurrence under any Loan Document or otherwise.
Any past or ongoing discussions of any potential waiver or
modification of the terms of the Loan Documents in respect of the above defaults
and occurrences or otherwise shall not be effective or otherwise construed as
any waiver of any right, remedy or privilege
<PAGE>
3
of any Lender, the Issuing Bank or the Agent unless the terms thereof are
agreed to in writing in accordance with the terms of the Credit Agreement.
Very truly yours,
Citibank, N.A., as Agent for the
Lenders and Issuing Bank
By: /s/ Ruth E. Ford
--------------------------------------
Name: Ruth E. Ford
Title: Vice President
cc: Fernando Alonso
Lenders and Issuing Bank
Douglas Young
<PAGE>
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CREDIT AND SHARE PLEDGE AGREEMENT
DATED AS OF JANUARY 10, 1997
BETWEEN
PHYSICIAN CORPORATION OF AMERICA,
AS BORROWER
AND
SIERRA HEALTH SERVICES, INC.,
AS LENDER
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- --------------------------------------------------------------------------------
<PAGE>
THE INDEBTEDNESS AND SECURITY INTERESTS PROVIDED FOR OR EVIDENCED BY THIS
AGREEMENT IS SUBORDINATED TO THE PRIOR PAYMENT IN FULL OF THE OBLIGATIONS (AS
DEFINED IN THE SUBORDINATION AGREEMENT HEREUNDER REFERRED TO) AND TO THE
SECURITY INTERESTS SECURING THE OBLIGATIONS, PURSUANT TO, AND TO THE EXTENT
PROVIDED IN, THE SUBORDINATION AGREEMENT DATED AS OF JANUARY 10, 1997 AMONG
PHYSICIAN CORPORATION OF AMERICA, SIERRA HEALTH SERVICES, INC. AND CITIBANK
N.A., AS AGENT IN FAVOR OF THE LENDERS, ISSUING BANK AND AGENT PARTIES TO THE
REVOLVING CREDIT AGREEMENT DATED AS OF OCTOBER 27, 1994, AS AMENDED, AMONG
PHYSICIAN CORPORATION OF AMERICA, THE LENDERS PARTIES THERETO, CITIBANK, N.A.,
AS ISSUING BANK, AND CITIBANK, N.A., AS AGENT FOR SUCH LENDERS AND ISSUING BANK.
CREDIT AND SHARE PLEDGE AGREEMENT, dated as of
January 10, 1997 (as amended, supplemented or otherwise
modified, renewed or replaced from time to time, the "Credit
Agreement"), between PHYSICIAN CORPORATION OF AMERICA, a
Delaware corporation ("Borrower"), and SIERRA HEALTH
SERVICES, INC., a Nevada corporation ("Lender").
INTRODUCTORY STATEMENT
All terms not otherwise defined above or in this Introductory
Statement are as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested that the Lender make available a sixteen
million seven hundred fifty thousand dollar ($16,750,000) secured loan which
will be used to make a mandatory prepayment of principal pursuant to
Section 2.10(a)(i) of the Citibank Facility.
To provide assurance for the repayment of the Loan and other
Obligations of the Borrower hereunder, the Borrower will provide or will cause
to be provided to the Lender (as more fully described herein) a pledge of the
Pledged Securities pursuant to the Article 6 hereof.
As a condition precedent to Citibank's consent to the transactions
contemplated herein, Citibank is requiring that the Lender enter into a
Subordination Agreement in the form of Exhibit C attached hereto and Lender is
willing to so enter into such a Subordination Agreement.
<PAGE>
Subject to the terms and conditions set forth herein, the Lender is
willing to make Loans to the Borrower.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, all
Section references herein shall be deemed to correspond with Sections herein,
the following terms shall have the meanings indicated and all terms defined in
the UCC and not otherwise defined herein shall have the respective meanings
accorded to them therein. Unless the context otherwise requires, any of the
following terms may be used in the singular or the plural, depending on the
reference:
"AFFILIATE" shall mean any Person which, directly or indirectly, is
controlled by or is under common control with another Person. For purposes of
this definition, a Person shall be deemed to be "controlled by" another Person
if such latter Person possesses, directly or indirectly, power either to direct
or cause the direction of the management and policies of such controlled Person
whether by contract or otherwise.
"APPLICABLE LAW" shall mean all provisions of statutes, rules,
regulations and orders of the United States, any state or local governmental
authority, or any other governmental bodies or regulatory agencies applicable to
the Person in question, and all orders and decrees of all courts and arbitrators
in proceedings or actions in which the Person in question is a party.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or
other day on which banks are required or permitted to close in the State of
New York.
"CITIBANK ACKNOWLEDGMENT" shall mean the letter agreement
substantially in the form of Exhibit B hereto, to be delivered by the Borrower
to the Lender in accordance with Section 4.1(d).
"CITIBANK FACILITY" shall mean that certain Revolving Credit Agreement
dated as of October 27, 1994 by and between the Borrower; the Lenders set forth
therein; Citibank, N.A., as Agent ("Citibank"); Nationsbank of Tennessee and
First Union National Bank of North Carolina, as Co-Agents; Citibank, as Issuing
Bank; and Citicorp Securities, Inc., as Arranger, as amended by an
<PAGE>
Amendment to Credit Agreement and Consent dated as of September 22, 1995, by a
Second Amendment to Credit Agreement dated as of March 29, 1996, by a Third
Amendment to Credit Agreement dated as of April 5, 1996, by a Fourth Amendment
and Consent Agreement dated as of June 10, 1996, by a Fifth Amendment and Waiver
Agreement dated as of November 25, 1996 and by a Sixth Amendment and Waiver
Agreement dated as of January 8, 1997.
"DOLLARS" and "$" shall mean lawful money of the United States of
America.
"EVENT OF DEFAULT" shall have the meaning given such term in
Section 6.3 hereof.
"LIEN" shall mean any mortgage, copyright mortgage, pledge, security
interest, encumbrance, lien or charge of any kind whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction or the agreement to grant a
security interest at a future date).
"LOAN" shall mean the Loan made hereunder in accordance with the
provisions of Section 2.1.
"MATURITY DATE" shall mean the date on which the Loan shall become due
and payable in accordance with the provisions of Section 2.5(a).
"MERGER AGREEMENT" shall mean the Agreement and Plan of Merger dated
as of November 2, 1996 among Lender, Sierra Acquisition, Inc. and Borrower.
"OBLIGATIONS" shall mean the obligation of the Borrower to make due
and punctual payment of principal of and interest on the Loan and all other
monetary obligations of the Borrower to the Lender under this Credit Agreement
or the Note.
"PERSON" shall mean any natural person, corporation, division of a
corporation, partnership, trust, joint venture, association, company, estate,
unincorporated organization or government or any agency or political subdivision
thereof.
"PLEDGED SECURITIES" shall mean all of the issued and outstanding
capital stock directly or indirectly owned or controlled by the Borrower, as
listed on Schedule 3.5.
<PAGE>
"SUBSIDIARY" shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the Voting
Stock or other ownership interests having ordinary voting power for the election
of directors (or the equivalent) is, at the time as of which any determination
is being made, owned or controlled by such Person or one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York on the date of execution of this Credit Agreement.
"VOTING STOCK" shall mean the capital stock of an entity having
ordinary voting power under ordinary circumstances to vote in the election of
directors of such entity.
2. THE LOAN
SECTION 2.1. LOAN; MAKING OF THE LOAN.
The Lender agrees, upon the terms and subject to the conditions
hereof, to make a Loan to the Borrower in the principal amount of sixteen
million seven hundred fifty thousand dollars ($16,750,000) on the date on which
this Credit Agreement is fully executed. Subject to the satisfaction of the
conditions set forth in Section 4.1, the Lender shall disburse the Loan by
depositing the Loan proceeds directly into an account designated by Citibank in
writing for the purpose of making the mandatory prepayment of principal and the
payment of fees as described in the Introductory Statement of this Credit
Agreement.
SECTION 2.2. NOTE.
The Loan made by the Lender hereunder shall be evidenced by a single
promissory note substantially in the form of Exhibit A hereto (the"NOTE") in the
principal amount of the Loan payable to the order of the Lender, duly executed
by the Borrower and dated the date on which the Loan is disbursed by Lender.
SECTION 2.3. INTEREST ON NOTE.
Interest on the Loan shall be payable at the rate of ten percent (10%)
per annum (computed on the basis of the actual
<PAGE>
number of days elapsed over a year of 360 days). Interest shall be payable on
the Maturity Date. Anything in this Credit Agreement or the Note to the
contrary notwithstanding, the interest rate on the Loan shall in no event be in
excess of the maximum permitted by Applicable Law.
SECTION 2.4. DEFAULT INTEREST.
If the Borrower shall default in the timely payment of the principal
of, or interest on the Loan due hereunder, or the payment of any other amount
becoming due hereunder after written notification from the Lender to the
Borrower of such amount, the Borrower shall on demand from time to time pay
interest, to the extent permitted by law, on the Loan and overdue amounts
outstanding up to the date of actual payment of such defaulted amount (after as
well as before judgment) at 5% in excess of the interest rate then in effect.
SECTION 2.5. REPAYMENT OF LOAN.
(a) The Borrower shall repay to Lender the principal of the Loan,
together with all accrued and unpaid interest due thereon and all other amounts
due under this Credit Agreement and the Note, on or before the fifth Business
Day following demand by Lender (the "Maturity Date").
(b) The Borrower shall have the right at its option at any time and
from time to time to prepay the Loan, in whole or in part, upon at least two
Business Days' prior written notice. All prepayments under this Section 2.5(b)
shall be accompanied by accrued but unpaid interest on the principal amount
being prepaid to the date of (but not including) prepayment.
SECTION 2.6. MANNER OF PAYMENTS.
All payments by the Borrower hereunder and under the Note shall be
made in Dollars in Federal or other immediately available funds at such place as
Lender shall notify Borrower no later than 1:00 p.m., New York City time, on the
date on which such payment shall be due.
SECTION 2.7. INTEREST ADJUSTMENTS.
If the provisions of this Credit Agreement or the Note would at any
time require payment by the Borrower to the Lender of any amount of interest in
excess of the maximum amount then permitted by Applicable Law, the interest
payments to the Lender
<PAGE>
shall be reduced to the extent necessary so that the Lender shall not receive
interest in excess of such maximum amount.
3. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Credit Agreement and
to make the Loan provided for herein, the Borrower makes the following
representations and warranties to, and agreements with, the Lender, all of which
shall survive the execution and delivery of this Credit Agreement, the issuance
of the Note and the making of the Loan:
SECTION 3.1. CORPORATE EXISTENCE AND POWER.
The Borrower and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is in good standing as a foreign corporation
in all jurisdictions where the nature of its properties or business so requires
and where the failure to be in good standing as a foreign corporation would give
rise to a material liability. The Borrower and each of its Subsidiaries has the
corporate power and authority to own its respective properties and carry on its
respective businesses as now being conducted, and, in the case of the Borrower,
to execute, deliver and perform its obligations under this Credit Agreement and
the Note and other documents contemplated hereby to which it is or will be a
party as provided herein and to grant to the Lender, a security interest in the
Pledged Securities as contemplated by Article 6 hereof.
<PAGE>
SECTION 3.2. CORPORATE AUTHORITY AND NO VIOLATION.
(a) The execution, delivery and performance of this Credit Agreement,
the Loan hereunder, the execution and delivery of the Note and the grant to the
Lender of the security interest in the Pledged Securities as contemplated herein
(i) have been duly authorized by all necessary corporate action on the part of
the Borrower, (ii) will not constitute a violation by the Borrower of any
provision of Applicable Law, any order of any court or other agency of the
United States or any state thereof applicable to the Borrower or any of its
Subsidiaries or any of their respective properties or assets, (iii) will not
violate any provision of the Certificate of Incorporation or By-Laws of the
Borrower or any of its Subsidiaries, or any material provision of any indenture,
agreement, bond, note or other similar instrument to which the Borrower or any
of its Subsidiaries is a party or by which the Borrower or any of its
Subsidiaries or their respective properties or assets are bound, (iv) will not
be in conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under or create any right to terminate any such
indenture, agreement, bond, note or other instrument, and (v) will not result in
the creation or imposition of any Lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Borrower or any of its
Subsidiaries other than pursuant to this Credit Agreement.
(b) Except as provided in the Citibank Facility and as described on
Schedule 3.2, there are no restrictions on the transfer of any of the Pledged
Securities other than as a result of this Credit Agreement or applicable
securities laws and the regulations promulgated thereunder.
SECTION 3.3. GOVERNMENTAL APPROVAL.
All authorizations, approvals, registrations or filings with any
governmental or public regulatory body or authority of the United States or any
state thereof required for the execution, delivery and performance by the
Borrower of this Credit Agreement have been duly obtained or made, or duly
applied for and are in full force and effect, and if any such further
authorizations, approvals, registrations or filings should hereafter become
necessary, the Borrower will use their best efforts to obtain or make all such
authorizations, approvals, registrations or filings.
SECTION 3.4. BINDING AGREEMENTS.
<PAGE>
This Credit Agreement and the Note when executed will constitute the
legal, valid and binding obligations of the Borrower, enforceable in accordance
with their respective terms, subject, as to the enforcement of remedies, to
applicable bankruptcy, insolvency and similar laws affecting creditors' rights
generally and to general principles of equity.
<PAGE>
SECTION 3.5. OWNERSHIP OF PLEDGED SECURITIES, ETC.
Annexed hereto as Schedule 3.5 is a correct and complete list as of
the date hereof, of each of Borrower's Subsidiaries showing, as to each, its
name, classes of capital stock outstanding, the par value of each such class,
the number of shares of each such class owned by Borrower and the percentage of
the outstanding shares of each such class owned by Borrower.
SECTION 3.6. SECURITY INTEREST; OTHER SECURITY.
This Credit Agreement when executed and delivered and, upon the making
of the Loan hereunder, will create and grant to the Lender (upon delivery of the
Pledged Securities to the Lender) a valid and perfected security interest in the
Pledged Securities subject only to the security interest created pursuant to the
Citibank Facility.
SECTION 3.7. PLEDGED SECURITIES.
All of the Pledged Securities are duly authorized, validly issued and
fully paid, and are owned and held by the Borrower, free and clear of any Liens,
encumbrances, or security interests whatsoever other than those created pursuant
to the Citibank Facility and this Credit Agreement. Except as described on
Schedule 3.2, as provided in the Citibank Facility and this Credit Agreement or
applicable securities laws there are no restrictions on the transfer of the
Pledged Securities. Except as set forth on Schedule 3.7, there are no
outstanding rights, warrants, options, or agreements to purchase or otherwise
acquire any shares of the stock or securities or obligations of any kind
convertible into any shares of capital stock of the issuers of the Pledged
Securities.
SECTION 3.8. MERGER AGREEMENT.
The representations and warranties set forth in Section 3.1 of the
Merger Agreement are true and complete in all material respects and the Borrower
is in full compliance with the covenants set forth in Section 4.1 of the Merger
Agreement.
SECTION 3.9. COMPLIANCE WITH LAWS.
Neither the Borrower nor any of its Subsidiaries are in violation of
any Applicable Law except for such violations in the aggregate which would not
have a material adverse effect on their business condition (financial or
otherwise) taken as a whole.
<PAGE>
4. CONDITIONS OF LENDING
SECTION 4.1. CONDITIONS PRECEDENT TO LOAN.
The obligation of the Lender to make the Loan is subject to the
following conditions precedent:
(a) CORPORATE DOCUMENTS. At the time of the making of the Loan, the
Lender shall have received:
(i) a copy of the certificate of incorporation of the Borrower
and each of its Subsidiaries, certified as of a recent date by the
Secretary of State of such Person's jurisdiction of incorporation;
(ii) a certificate of such Secretary of State, dated as of a
recent date as to the good standing of and payment of taxes by the
Borrower and each of its Subsidiaries, which lists the charter
documents on file in the office of such Secretary of State;
(iii) a certificate dated as of a recent date as to the good
standing of the Borrower and each of its Subsidiaries issued by the
Secretary of State of each jurisdiction in which such Person is
qualified as a foreign corporation; and
(iv) a certificate of the Secretary of the Borrower, dated the
date on which the Loan is disbursed and certifying (A) that attached
thereto is a true and complete copy of the by-laws of the Borrower as
in effect on the date of such certification, (B) that attached thereto
is a true and complete copy of resolutions adopted by the Board of
Directors of the Borrower authorizing (to the extent applicable) the
Loan hereunder, the execution, delivery and performance in accordance
with their respective terms of this Credit Agreement, the Note and all
other documents required or contemplated hereunder or thereunder and
that such resolutions have not been amended, rescinded or supplemented
and are currently in effect, (C) that the certificate of incorporation
of the Borrower has not been amended since the date of the last
amendment thereto indicated on the certificate of the Secretary of
State furnished pursuant to clause (i) above except to the extent
specified in such Secretary's certificate and (D) as to the incumbency
and specimen signature of
<PAGE>
each officer of the Borrower executing (as applicable) this Credit
Agreement, the Note or any other document delivered by it in
connection herewith or therewith (such certificate to contain a
certification by another officer of the Borrower as to the incumbency
and signature of the officer signing the certificate referred to in
this clause (iv)); and
(v) such additional supporting documents as the Lender or its
counsel may reasonably request.
(b) NOTE. The Lender shall have received the Note duly executed by
the Borrower.
(c) OPINIONS OF COUNSEL. The Lender shall have received the written
opinions dated the date hereof and addressed to the Lender in form and substance
satisfactory to Morgan, Lewis & Bockius LLP, of Greenberg, Trauwick, Hoffman,
Lipoff, Rosen & Quentel, P.A. and internal legal counsel to the Borrower.
(d) CITIBANK ACKNOWLEDGMENT. On or prior to the date hereof, the
Lender shall have received the fully executed Citibank Acknowledgment.
(e) REQUIRED CONSENTS AND APPROVALS. The Lender shall be satisfied
that all required consents and approvals have been obtained with respect to the
transactions contemplated hereby from all Governmental Authorities with
jurisdiction over the business and activities of the Borrower and its
Subsidiaries as of the date hereof, and from any other entity whose consent or
approval the Lender in its reasonable discretion deems necessary to consummate
the transactions contemplated hereby.
(f) COMPLIANCE WITH LAWS. The Lender shall be satisfied that the
transactions contemplated hereby will not violate any provision of Applicable
Law, or any order of any court or other agency of the United States or any state
thereof, applicable to any of the Borrower or any of its Subsidiaries (as of the
date hereof) or any of their respective properties or assets.
5. COVENANTS
From the date hereof and for so long as any amount remains outstanding
under the Note or any Obligations remain unpaid or unsatisfied, Borrower agrees
that it will comply with
<PAGE>
each of the covenants set forth in Article VI of the Citibank Facility as in
effect on the date hereof (without giving effect to any subsequent amendment or
modification) and each such covenant is hereby incorporated herein by reference
as if set forth in full and the same shall be deemed to inure hereunder to the
benefit of Lender.
<PAGE>
6. PLEDGE
SECTION 6.1. PLEDGE.
As security for the Obligations, the Borrower hereby pledges,
hypothecates, assigns, transfers, sets over and delivers unto the Lender, a
security interest in all Pledged Securities now owned or hereafter acquired by
it subordinate only to the security interest therein created pursuant to the
Citibank Facility. Upon the termination of the security interest in the Pledged
Securities created pursuant to the Citibank Facility, the Borrower shall cause
Citibank to deliver to the Lender definitive instruments representing all
Pledged Securities, accompanied by executed undated stock powers, duly endorsed
or executed in blank by the Borrower, and such other instruments or documents as
the Lender or its counsel shall reasonably request.
SECTION 6.2. COVENANT.
Borrower covenants that as the sole stockholder of each of its
Subsidiaries it will not take any action to allow any additional shares of
common stock, preferred stock or other equity securities of any of its
respective Subsidiaries or any securities convertible or exchangeable into
common or preferred stock of such Subsidiaries to be issued, or grant any
options or warrants, unless such securities are pledged to the Lender as
security for the Obligations.
SECTION 6.3. REGISTRATION IN NOMINEE NAME; DENOMINATIONS.
Upon the occurrence of a default in the payment of any principal of or
interest on the Note or other amounts payable by the Borrower hereunder, when
and as the same shall become due and payable (an "Event of Default"), the Lender
shall have the right (in its sole and absolute discretion) to hold the
certificates representing any Pledged Securities (a) in its own name or in the
name of its nominee or (b) in the name of the Borrower, endorsed or assigned in
blank or in favor of the Lender. The Borrower shall have the right to exchange
the certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Credit Agreement.
SECTION 6.4. VOTING RIGHTS; DIVIDENDS; ETC.
<PAGE>
(a) The Borrower shall be entitled to exercise any and all voting
and/or consensual rights and powers accruing to owners of the Pledged Securities
or any part thereof for any purpose not inconsistent with the terms hereof, at
all times, except as expressly provided in (c) below.
(b) Any dividends or distributions of any kind whatsoever (other, so
long as an Event of Default is not continuing, than cash) received by Borrower,
whether resulting from a subdivision, combination, or reclassification of the
outstanding capital stock of the issuer or received in exchange for Pledged
Securities or any part thereof or as a result of any merger, consolidation,
acquisition, or other exchange of assets to which the issuer may be a party, or
otherwise, shall be and become part of the Pledged Securities pledged hereunder
and shall immediately be delivered to the Lender, subject to the Borrower's
obligations under the Citibank Facility, to be held subject to the terms hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default and notice from the Lender of the transfer of such rights to the Lender,
(i) all rights of the Borrower to exercise the voting and/or consensual rights
and powers which it is entitled to exercise pursuant to this Section shall
cease, and all such rights shall thereupon become vested in the Lender, which
shall have the sole and exclusive right and authority to exercise such voting
and/or consensual rights and (ii) all cash dividends, interest and other cash
payments and distributions relating to the Pledged Securities shall be delivered
to the Lender to be held as Collateral for the Obligations; provided, however,
that to the extent any governmental consents or filings are required for the
exercise by the Lender of any of the foregoing rights and powers, the Lender
shall refrain from exercising such rights or powers until the making of such
required filings, the receipt of such approval and the expiration of all related
waiting periods.
SECTION 6.5. REMEDIES UPON DEFAULT.
(a) If an Event of Default shall have occurred and be continuing, the
Lender may sell the Pledged Securities, or any part thereof, at public or
private sale or at any broker's board or on any securities exchange, for cash,
upon credit or for future delivery as the Lender shall deem appropriate subject
to the terms hereof or as otherwise provided in the UCC. The Lender shall be
authorized at any such sale (if it deems it advisable to do so) to restrict to
the full extent permitted by Applicable Law
<PAGE>
the prospective bidders or purchasers to Persons who will represent and agree
that they are purchasing the Pledged Securities for their own account for
investment and not with a view to the distribution or sale thereof, and upon
consummation of any such sale the Lender shall have the right to assign,
transfer, and deliver to the purchaser or purchasers thereof the Pledged
Securities so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from any claim or right on the part of the
Borrower. The Lender shall give ten (10) days' written notice of its intention
to make any such public or private sale, or sale at any broker's board or on any
such securities exchange, or of any other disposition of the Pledged Securities.
Such notice, in the case of public sale, shall state the time and place for such
sale and, in the case of sale at a broker's board or on a securities exchange,
shall state the board or exchange at which such sale is to be made and the day
on which the Pledged Securities, or portion thereof, will first be offered for
sale at such board or exchange. Any such public sale shall be held at such time
or times within ordinary business hours and at such place or places as the
Lender may fix and shall state in the notice of such sale. At any such sale,
the Pledged Securities, or portion thereof, to be sold may be sold in one lot as
an entirety or in separate parcels, as the Lender may (in its sole and absolute
discretion) determine. The Lender shall not be obligated to make any sale of
the Pledged Securities if it shall determine not to do so, regardless of the
fact that notice of sale of the Pledged Securities may have been given. The
Lender may, without notice or publication, adjourn any public or private sale or
cause the same to be adjourned from time to time by announcement at the time and
place fixed for sale, and such sale may, without further notice, be made at the
time and place to which the same was so adjourned. In case the sale of all or
any part of the Pledged Securities is made on credit or for future delivery, the
Pledged Securities so sold shall be retained by the Lender until the sale price
is paid by the purchaser or purchasers thereof, but the Lender shall not incur
any liability in case any such purchaser or purchasers shall fail to take up and
pay for the Pledged Securities so sold and, in case of any such failure, such
Pledged Securities may be sold again upon like notice. At any sale or sales
made pursuant to this Section 6.5, the Lender may bid for or purchase, free from
any claim or right of whatever kind, including any equity of redemption, of the
Borrower, any such demand, notice, claim, right or equity being hereby expressly
waived and released, any or all of the Pledged Securities offered for sale, and
may make any payment on the account thereof by using any claim for moneys then
due and payable to the Lender by the Borrower as a credit
<PAGE>
against the purchase price; and the Borrower, upon compliance with the terms of
sale, may hold, retain and dispose of the Pledged Securities without further
accountability therefor to the Borrower or any third party. The Lender shall in
any such sale make no representations or warranties with respect to the Pledged
Securities or any part thereof, and shall not be chargeable with any of the
obligations or liabilities of the Borrower with respect thereto. The Borrower
hereby agrees (i) it will indemnify and hold the Lender harmless from and
against any and all claims with respect to the Pledged Securities asserted
before the taking of actual possession or control of the Pledged Securities by
the Lender pursuant to this Credit Agreement or arising out of any act of, or
omission to act on the part of, any party prior to such taking of actual
possession or control by the Lender (whether asserted before or after such
taking of possession or control), or arising out of any act on the part of the
Borrower, its agents or Affiliates before or after the commencement of such
actual possession or control by the Lender and (ii) the Lender shall have no
liability or obligation arising out of any such claim. As an alternative to
exercising the power of sale herein conferred upon it, the Lender may proceed by
a suit or suits at law or in equity to foreclose upon the Pledged Securities
under this Credit Agreement and to sell the Pledged Securities, or any portion
thereof, pursuant to a judgment or decree of a court or courts having competent
jurisdiction.
(b) If the Lender shall determine that in order to exercise its right
to sell all or any of the Pledged Securities, and to have the Pledged Securities
or the portion thereof sold, the Pledged Securities shall be registered under
the provisions of the Securities Act of 1933, as amended (the "Securities Act")
the Borrower agrees, at its own expense, (i) to execute and deliver, and to use
its best efforts to cause each corporation whose securities are to be sold and
their directors and officers to execute and deliver, all such instruments and
documents, and to use its best efforts to do or cause to be done all other such
acts and things, as may be necessary or, in the opinion of the Lender, advisable
to register such securities under the provisions of the Securities Act and to
use its best efforts to cause the registration statement relating thereto to
become effective and to remain effective for such period as prospectuses are
required by law to be furnished, and to make or to cause to be made all
amendments and supplements thereto and to the related prospectus which, in the
opinion of the Lender, are necessary or advisable, all in conformity with the
requirements of the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder; provided, that the Lender shall
furnish to the Borrower such information which the Borrower may reasonably
request and as shall be required in connection therewith, (ii) to use its best
efforts to cause the corporation whose securities are to be sold to agree to
make, and to make available to its security holders as soon as practicable, an
earnings statement (which need not be audited) covering a period of at least 12
months, beginning with the first month after the effective date of any such
registration statement, which
<PAGE>
earning statement will satisfy the provisions of Section 11(a) of the Securities
Act, (iii) to use its best efforts to qualify such securities under state Blue
Sky or securities laws and to obtain the approval of any governmental
authorities for the sale of such securities, as requested by the Lender;
provided, that the Lender shall furnish to the Borrower such information which
the may reasonably request and as shall be required in connection therewith, and
(iv) to indemnify and hold harmless the Lender and any underwriters (or any
person controlling any of the foregoing) from and against any loss, liability,
claim, damage and expense (and reasonable counsel fees incurred in connection
therewith) under the Securities Act or otherwise insofar as such loss,
liability, claim, damage or expense arises out of or is based upon any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement or prospectus or in any preliminary prospectus or any
amendment or supplement thereto, or arises out of or is based upon any omission
or alleged omission to state therein a material fact required to be stated or
necessary to make the statements therein not misleading, such indemnification to
remain operative regardless of any investigation made by or on behalf of the
Lender, or any underwriters (or any person controlling any of the foregoing),
Borrower shall not be liable in any case to the extent that any such loss,
liability, claim, damage or expense arises out of or is based on an untrue
statement or alleged untrue statement or an omission or an alleged omission made
in reliance upon and in conformity with written information furnished to such
corporation by the Lender, or any underwriter expressly for use in such
registration statement or prospectus.
SECTION 6.6. LENDER APPOINTED ATTORNEY-IN-FACT.
Upon the occurrence of an Event of Default and during the continuance
of an Event of Default, Borrower hereby appoints the Lender its attorney-in-fact
for the purpose of carrying out the provisions of this Section 6 and the pledge
of the Pledged Securities hereunder and taking any action and executing any
instrument which the Lender may deem necessary or advisable to accomplish the
purposes hereof, which appointment is irrevocable and coupled with an interest.
Without limiting the generality of the foregoing, the Lender shall have the
right and power, upon the occurrence and continuance of an Event of Default, to
receive, endorse and collect all checks and other orders for the payment of
money made payable to the Borrower representing any dividend or other
distribution payable in respect of the Pledged Securities or any part thereof
and to give full discharge for the same.
SECTION 6.7. APPLICATION OF PROCEEDS OF SALE AND CASH.
The proceeds of sale of the Pledged Securities sold pursuant to
Section 6.5 hereof shall be applied by the Lender as follows:
(i) to the payment of all out-of-pocket costs and expenses paid
or incurred by the Lender in connection with such sale, including,
without limitation, all court costs and the fees and expenses of
counsel for the Lender in connection therewith, and the payment of
<PAGE>
all out-of-pocket costs and expenses paid or incurred by the Lender in
enforcing this Credit Agreement, in realizing or protecting any
collateral and in enforcing or collecting any Obligations thereof,
including, without limitation, court costs and the attorney's fees and
expenses incurred by the Lender in connection therewith; and
(ii) to the payment in full of the Obligations in such order as
determined by the Lender.
Any amounts remaining after such indefeasible payment in full shall be remitted
to the Borrower, or as a court of competent jurisdiction may otherwise direct.
SECTION 6.8. SECURITIES ACT, ETC.
In view of the position of the Borrower in relation to the Pledged
Securities, or because of other present or future circumstances, a question may
arise under the Securities Act or any similar statute hereafter enacted
analogous in purpose or effect (such Act and any such similar statute as from
time to time in effect being hereinafter called the "Federal Securities Laws"),
with respect to any disposition of the Pledged Securities permitted hereunder,
Borrower understands that compliance with the Federal Securities Laws may very
strictly limit the course of conduct of the Lender if the Lender were to attempt
to dispose of all or any part of the Pledged Securities, and may also limit the
extent to which or the manner in which any subsequent transferee of any Pledged
Securities may dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Lender in any attempt to dispose of
all or any part of the Pledged Securities under applicable Blue Sky or other
state securities laws, or similar laws analogous in purpose or effect. Under
Applicable Law, in the absence of an agreement to the contrary, the Lender may
be held to have certain general duties and obligations to the Borrower to make
some effort towards obtaining a fair price even though the Obligations may be
discharged or reduced by the proceeds of a sale at a lesser price. Borrower
waives to the fullest extent permitted by Applicable Law any such general duty
or obligation to it, and the Borrower will not attempt to hold the Lender
responsible for selling all or any part of the Pledged Securities at an
inadequate price, even if the Lender shall accept the first offer received or
does not approach more than one possible purchaser. Without limiting the
generality of the foregoing, the provisions of this Section 6.8 would apply if,
for example, the Lender were
<PAGE>
to place all or any part of the Pledged Securities for private placement by an
investment banking firm, or if such investment banking firm purchased all or any
part of the Pledged Securities for its own account, or if the Lender placed all
or any part of the Pledged Securities privately with a purchaser or purchasers.
SECTION 6.9. CONTINUATION AND REINSTATEMENT.
Borrower further agrees that its pledge hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by Lender upon the bankruptcy or reorganization of
Borrower or otherwise.
SECTION 6.10. TERMINATION.
The pledge referenced herein shall terminate when all of the
Obligations shall have been indefeasibly fully paid at which time the Lender
shall assign and deliver to the Borrower, or to such Person or Persons as the
Borrower shall designate, against receipt, such of the Pledged Securities (if
any) as shall not have been sold or otherwise applied by the Lender pursuant to
the terms hereof and shall still be held by it hereunder, together with
appropriate instruments of reassignment and release. Any such reassignment
shall be free and clear of all Liens, arising by, under or through the Lender
but shall otherwise be without recourse upon or warranty by the Lender and at
the expense of the Borrower.
7. MISCELLANEOUS
SECTION 7.1. NOTICES.
Notices and other communications provided for herein shall be in
writing and shall be delivered or mailed (or in the case of telegraphic
communication, if by telegram, delivered to the telegraph company and, if by
telex, graphic scanning or other telegraphic or facsimile communications
equipment of the sending party hereto, delivered by such equipment) addressed,
if to the Lender, to it at 2724 North Tenaya Way, Las Vegas, Nevada 89128,
Attn: Frank Collins, Esq., facsimile no.: 702-242-1532, with a copy to Morgan,
Lewis & Bockius LLP, 101 Park Avenue, New York, New York 10178, Attn: Stephen P.
Farrell, facsimile no.: 212- 309-6273, or if to Borrower at 5835 Blue Lagoon
Drive, Miami, Florida, Attn: Cliff Donnelly facsimile no.: 305-265-2959 or such
<PAGE>
other address as such party may from time to time designate by giving written
notice to the other parties hereunder. All notices and other communications
given to any party hereto in accordance with the provisions of this Credit
Agreement shall be deemed to have been given on the fifth Business Day after the
date when sent by registered or certified mail, postage prepaid, return receipt
requested, if by mail, or when delivered to the telegraph company, charges
prepaid, if by telegram, or upon receipt by such party, if by any telegraphic or
facsimile communications equipment, in each case addressed to such party as
provided in this Section 7.1 or in accordance with the latest unrevoked written
direction from such party.
SECTION 7.2. SURVIVAL OF AGREEMENT, REPRESENTATIONS AND WARRANTIES,
ETC.
All warranties, representations and covenants made by the Borrower
herein or in any certificate or other instrument delivered by it or on its
behalf in connection with this Credit Agreement shall be considered to have been
relied upon by the Lender and, except for any terminations, amendments,
modifications or waivers thereof in accordance with the terms hereof, shall
survive the making of the Loan herein contemplated and the execution and
delivery to the Lender of the Note regardless of any investigation made by the
Lender and shall continue in full force and effect so long as any amount due or
to become due hereunder is outstanding and unpaid. All statements in any such
certificate or other instrument shall constitute representations and warranties
by the Borrower hereunder.
SECTION 7.3. SUCCESSORS AND ASSIGNS.
Whenever in this Credit Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such party (PROVIDED, HOWEVER, that the Borrower may not assign its
rights hereunder without the prior written consent of the Lender), and all
covenants, promises and agreements by or on behalf of the Borrower which are
contained in this Credit Agreement shall inure to the benefit of the successors
and assigns of the Lender.
SECTION 7.4. EXPENSES; DOCUMENTARY TAXES.
Whether or not the transactions hereby contemplated shall be
consummated, the Borrower agrees to pay all out-of-pocket expenses incurred by
the Lender in connection with the transactions hereby contemplated and the
preparation,
<PAGE>
execution, delivery, waiver or modification and administration of this Credit
Agreement and any other documentation contemplated hereby, the Note and the
making of the Loan, including but not limited to any internally allocated audit
costs, the fees and disbursements of Morgan, Lewis & Bockius LLP, counsel for
the Lender, and any other counsel that the Lender shall retain, fees and
expenses of technical or other consultants engaged by the Lender to the extent
previously approved by the Borrower. Such payments shall be made on the date of
execution of this Credit Agreement and thereafter on demand. In addition, the
Borrower agrees to pay all reasonable out-of-pocket expenses incurred by the
Lender in the enforcement or protection of the rights of the Lender in
connection with this Credit Agreement or the Note, and with respect to any
action which may be instituted by any Person against the Lender in respect of
the foregoing, or as a result of any transaction, action or non-action arising
from the foregoing, including but not limited to the fees and disbursements of
any counsel for the Lender. Such payments shall be made on demand after the
date of execution of this Credit Agreement. The Borrower agrees that it shall
indemnify the Lender from and hold it harmless against any documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Credit Agreement or the Note. The obligations of
the Borrower under this Section 7.4 shall survive the termination of this Credit
Agreement and/or the payment of the Loan.
SECTION 7.5. INDEMNIFICATION OF LENDER.
The Borrower agrees (a) to indemnify and hold harmless the Lender (to
the full extent permitted by law) from and against any and all claims, demands,
losses, judgments and liabilities (including liabilities for penalties) of
whatsoever nature, and (b) to pay to the Lender an amount equal to the amount of
all costs and expenses, including legal fees and disbursements, and with regard
to both (a) and (b) growing out of or resulting from any litigation or other
proceedings relating to the Pledged Securities, the making of the Loan, any
attempt to audit, inspect, protect or sell the Pledged Securities, or the
administration and enforcement or exercise of any right or remedy granted to the
Lender hereunder but excluding therefrom all costs arising out of or resulting
from the gross negligence or willful misconduct of the Lender. The foregoing
indemnity agreement includes any costs incurred by the Lender in connection with
any action or proceeding which may be instituted in respect of the foregoing by
the Lender, or by any other Person either against the Lender or in connection
with which any officer or employee of
<PAGE>
the Lender is called as a witness or deponent, including, but not limited to,
the fees and disbursements of Morgan, Lewis & Bockius LLP, counsel to the
Lender, and any out-of-pocket costs incurred by the Lender in appearing as a
witness or in otherwise complying with legal process served upon them. In no
event shall the Lender be liable to the Borrower for any matter or thing in
connection with this Credit Agreement other than to make the Loan.
Whenever the provisions of this Credit Agreement provide that, if the
Borrower shall fail to do any act or thing which it has covenanted to do
hereunder or any representation or warranty of the Borrower shall be breached,
the Lender may (but shall not be obligated to) perform the same or cause it to
be done or remedy any such breach and if the Lender does the same or causes it
to be done, there shall be added to the Obligations hereunder the cost or
expense incurred by the Lender in so doing, and any and all amounts expended by
the Lender in taking any such action shall be repayable to it upon its demand
therefor and shall bear interest at 5% in excess of the interest rate in effect
from the date advanced to the date of repayment.
All indemnities contained in this Section 7.5 shall survive the
expiration or earlier termination of this Credit Agreement.
SECTION 7.6. CHOICE OF LAW.
THIS CREDIT AGREEMENT AND THE NOTE SHALL IN ALL RESPECTS BE CONSTRUED
IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND,
IN THE CASE OF PROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAW OF THE
UNITED STATES OF AMERICA.
SECTION 7.7. WAIVER OF JURY TRIAL.
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED,
THE BORROWER HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS
PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN
RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR
OTHERWISE. THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY THE LENDER
THAT THE
<PAGE>
PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE
LENDER HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS CREDIT
AGREEMENT. THE LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 7.7 WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE BORROWER TO
THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
SECTION 7.8. NO WAIVER.
No failure on the part of the Lender or to exercise, and no delay in
exercising, any right, power or remedy hereunder or under the Note shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. All remedies hereunder are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 7.9. EXTENSION OF PAYMENT DATE.
Should any payment of principal of or interest on the Note or any
other amount due hereunder become due and payable on a day other than a Business
Day, the due date of such payment thereof shall be extended to the next
succeeding Business Day and, in the case of principal, interest shall be payable
thereon at the rate herein specified during such extension.
SECTION 7.10. AMENDMENTS, ETC.
No modification, amendment or waiver of any provision of this Credit
Agreement, and no consent to any departure by the Borrower herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Borrower shall entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstances.
SECTION 7.11. SEVERABILITY.
Any provision of this Credit Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
<PAGE>
SECTION 7.12. ENTIRE AGREEMENT.
This Credit Agreement shall supersede all prior discussions and
agreements between the parties with respect to the subject matter hereof and
thereof, and contains the sole and entire agreement between the parties hereto
with respect to the subject matter hereof and thereof and Lender shall have no
obligation to make any additional loans or provide any additional funds to
Borrower other than as provided herein.
SECTION 7.13. HEADINGS.
Section headings used herein and the Table of Contents are for
convenience only and are not to affect the construction of or be taken into
consideration in interpreting this Credit Agreement.
<PAGE>
SECTION 7.14. EXECUTION IN COUNTERPARTS.
This Credit Agreement may be executed in any number of counterparts,
each of which shall constitute an original, but all of which taken together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed as of the day and the year first written.
BORROWER:
PHYSICIAN CORPORATION
OF AMERICA
By
-------------------------------
Name:
Title:
LENDER:
SIERRA HEALTH SERVICES, INC.
By
-------------------------------
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTE
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED TO THE PRIOR
PAYMENT IN FULL OF THE OBLIGATIONS (AS DEFINED IN THE SUBORDINATION AGREEMENT
HEREUNDER REFERRED TO) AND TO THE SECURITY INTERESTS SECURING THE OBLIGATIONS,
PURSUANT TO, AND TO THE EXTENT PROVIDED IN, THE SUBORDINATION AGREEMENT DATED AS
OF JANUARY __, 1997 AMONG PHYSICIAN CORPORATION OF AMERICA, SIERRA HEALTH
SERVICES, INC. AND CITIBANK, N.A., AS AGENT IN FAVOR OF THE LENDERS, ISSUING
BANK AND AGENT PARTIES TO THE REVOLVING CREDIT AGREEMENT DATED AS OF OCTOBER 27,
1994, AS AMENDED, AMONG PHYSICIAN CORPORATION OF AMERICA, THE LENDERS PARTIES
THERETO, CITIBANK, N.A., AS ISSUING BANK, AND CITIBANK, N.A., AS AGENT FOR SUCH
LENDERS AND ISSUING BANK.
NOTE
$16,750,000 New York, New York
January 10, 1997
FOR VALUE RECEIVED, the undersigned, PHYSICIAN CORPORATION OF AMERICA,
a Delaware corporation (the "Borrower"), hereby promises to pay, upon demand, to
the order of SIERRA HEALTH SERVICES, INC. (the "Lender"), the principal sum of
SIXTEEN MILLION SEVEN HUNDRED FIFTY THOUSAND Dollars ($16,750,000]) in lawful
money of the United States of America in immediately available funds together
with interest from the date hereof on the principal amount hereof from time to
time outstanding, in like funds, at said office, at a rate of ten percent (10%)
per annum.
The Borrower promises to pay interest, on demand, on any overdue
principal and, to the extent permitted by law, overdue interest from their due
dates at a rate of five percent (5%) per annum in excess of the rate otherwise
in effect.
The Borrower hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The nonexercise by the holder of any of its
rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
This Note is the Note referred to in the Credit and Share Pledge
Agreement dated as of January 10, 1997 (the "Agreement") between Borrower and
Lender, which, among other things, contains provisions for optional and
mandatory payment of the principal hereof and for the amendment or waiver of
certain provisions of the Agreement, all upon the terms and conditions therein
specified. This Note shall be construed in accordance with and governed by the
laws of the State of New York and any applicable laws of the United States of
America.
PHYSICIAN CORPORATION
OF AMERICA
By: Clifford W. Donnelly
----------------------------
Name: Clifford W. Donnelly
Title: S.V.P.
<PAGE>
EXHIBIT B
FORM OF CITIBANK ACKNOWLEDGMENT
PHYSICIAN CORPORATION OF AMERICA
January __, 1997
Citibank N.A.
399 Park Avenue
New York, New York 10043
Attn: Credit Department
Re: Borrower Pledge Agreement
-------------------------
Dear Gentleman/Mesdames:
We refer to the Borrower Pledge Agreement dated as of March 29, 1996, as amended
(the "Borrower Pledge Agreement"), made by Physician Corporation of America
("PCA") to Citibank N.A., as agent ("Agent") for the lenders from time to time
parties to the Credit Agreement (as hereinafter defined), pursuant which we
have pledged, among other things, the capital stock of our subsidiaries (as more
particularly described on Schedule A attached hereto) and any additional shares
of any class of stock issued by such subsidiaries or any securities convertible
into such shares, acquired by purchase, stock dividend, distribution of capital
or otherwise (the "Pledged Securities"), as security for the obligations of PCA
pursuant to that certain Revolving Credit Agreement dated as of October 27, 1994
by and between PCA; the Lenders; the Agent; Nationsbank of Tennessee and First
Union National Bank of North Carolina, as Co-Agents; Citibank, as Issuing Bank;
and Citicorp Securities, Inc., as Arranger, as amended (the "Credit Agreement").
As you are aware, we have entered into a Credit and Share Pledge Agreement,
dated as of January 10, 1997 (the "Sierra Credit Agreement"), with Sierra Health
Services, Inc. ("Sierra") pursuant to which we have pledged the Pledged
Securities to Sierra, subject to your prior rights under the Borrower Pledge
Agreement, as security for PCA indebtedness to Sierra pursuant to the Sierra
Credit Agreement.
We hereby irrevocably and unconditionally instruct you that, upon payment in
full of all payment obligations of PCA under the Credit Agreement and any
document referred to therein and upon satisfaction in full of all other
obligations under the Credit Agreement, any document referred to therein and the
Borrower Pledge Agreement, unless you receive written notification from Sierra
to the contrary (in which case these instructions shall have no further effect),
you shall deliver the Pledged Securities to Sierra at 2724 North Tenaya Way,
Las Vegas, Nevada 89128, Attention: Frank Collins, Esq. whose written receipt
therefore shall be conclusive evidence of such delivery and shall discharge your
obligations to us under the Borrower Pledge Agreement or otherwise, with respect
to the redelivery of the Pledged Securities.
Kindly acknowledge your receipt of this notice and that you are currently
holding the Stock certificates listed on Schedule A hereto, and indicate your
<PAGE>
acceptance of these instructions by signing in the manner hereinafter provided.
Very truly yours,
Physician Corporation of America
By:
-----------------------
Name:
Title:
Acknowledged and Accepted
on January , 1997
--
By: Citibank, N.A., as Agent
By:_____________________
Name:
Title:
<PAGE>
SCHEDULE 3.2
Those laws and regulations of the States of Florida and Texas, and
the Commonwealth of Puerto Rico, which regulate insurance companies and health
maintenance organizations require the consent or approval of insurance and/or
health regulatory authorities under certain circumstances for the exercise of
the rights and remedies provided in Section 6 hereof or by the UCC and those
that may be exercised upon an Event of Default. For example, Sections 628.461
and 628.4615 of the Florida Insurance Statutes and Section 541.255 of the
Florida Health Maintenance Organization Act require prior approval by the
Florida Department of Insurance for a change of ownership or control of a
Florida-domiciled insurance company or health maintenance organization,
respectively.
In addition, to the extent that the attempt to exercise or to
enforce rights and remedies provided in the Section 6 or the UCC occurs in the
context of a judicial or administrative proceeding, or during the pendency of a
bankruptcy or insolvency proceeding, notice to and the authorization, consent or
approval of the tribunal would or may be necessary.
<PAGE>
SCHEDULE 3.5
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
STOCK NUMBER OF PERCENTAGE OF
STOCK ISSUER CLASS OF CERTIFICATE PAR SHARES OUTSTANDING SHARES
------------ STOCK NO(S) VALUE --------- ------------------
----- ----------- -----
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PCA Solutions, Common 1 $ 1.00 92 100%
Inc.
- ----------------------------------------------------------------------------------------------------------------------
PCA Property and Common 1 $ 1.00 1,800,000 100%
Casualty Insurance
Company
----------------------------------------------------------------------------------------------------------------------
PCA Health Plans Common 1 $ 0.01 10,000 100%
of Florida, Inc.
Preferred 2 thru 5 $ 0.01 17,500 100%
Series A
Preferred 6 thru 8 $ 0.01 80,000 100%
- ----------------------------------------------------------------------------------------------------------------------
PCA Health Plans Common 1 $ 0.01 100,000 100%
of Texas, Inc.
(f/k/a Texas Health Preferred 1 $ 1.00 30,000 100%
Plans, Inc.) Series A
Preferred 2 $ 1.00 30,000 100%
Series B
- ----------------------------------------------------------------------------------------------------------------------
PCA Family Common 1 $10.00 40 100%
Health Plan, Inc.
Preferred 1 thru 7 $ 0.01 255,500 100%
Series A
- ----------------------------------------------------------------------------------------------------------------------
PCA Health Plans Common C1 $ 5.00 28,500 99.9%
of Puerto Rico,
Inc.
- ----------------------------------------------------------------------------------------------------------------------
PCA Insurance Common C1 $ 6.00 133,336 100%
Group of
Puerto Rico, Inc.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.1. LOAN; MAKING OF THE LOAN. . . . . . . . . . . . . . . . . . 4
SECTION 2.2. NOTE. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.3. INTEREST ON NOTE. . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.4. DEFAULT INTEREST. . . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.5. REPAYMENT OF LOAN.. . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.6. MANNER OF PAYMENTS. . . . . . . . . . . . . . . . . . . . . 5
SECTION 2.7. INTEREST ADJUSTMENTS. . . . . . . . . . . . . . . . . . . . 5
3. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.1. CORPORATE EXISTENCE AND POWER.. . . . . . . . . . . . . . . 5
SECTION 3.2. CORPORATE AUTHORITY AND NO VIOLATION. . . . . . . . . . . . 6
SECTION 3.3. GOVERNMENTAL APPROVAL.. . . . . . . . . . . . . . . . . . . 6
SECTION 3.4. BINDING AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.5. OWNERSHIP OF PLEDGED SECURITIES, ETC. . . . . . . . . . . . 7
SECTION 3.6. SECURITY INTEREST; OTHER SECURITY.. . . . . . . . . . . . . 7
SECTION 3.7. PLEDGED SECURITIES. . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.8. MERGER AGREEMENT. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3.9. COMPLIANCE WITH LAWS. . . . . . . . . . . . . . . . . . . . 7
4. CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 4.1. CONDITIONS PRECEDENT TO LOAN. . . . . . . . . . . . . . . . 8
5. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6. PLEDGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 6.1. PLEDGE. . . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 6.2. COVENANT. . . . . . . . . . . . . . . . . . . . . . . . . .10
SECTION 6.3. REGISTRATION IN NOMINEE NAME; DENOMINATIONS.. . . . . . . .10
SECTION 6.4. VOTING RIGHTS; DIVIDENDS; ETC.. . . . . . . . . . . . . . .10
SECTION 6.5. REMEDIES UPON DEFAULT.. . . . . . . . . . . . . . . . . . .11
SECTION 6.6. LENDER APPOINTED ATTORNEY-IN-FACT.. . . . . . . . . . . . .13
SECTION 6.7. APPLICATION OF PROCEEDS OF SALE AND CASH. . . . . . . . . .14
SECTION 6.8. SECURITIES ACT, ETC.. . . . . . . . . . . . . . . . . . . .14
SECTION 6.9. CONTINUATION AND REINSTATEMENT. . . . . . . . . . . . . . .15
SECTION 6.10. TERMINATION.. . . . . . . . . . . . . . . . . . . . . . . .15
7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.1. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.2. SURVIVAL OF AGREEMENT, REPRESENTATIONS
AND WARRANTIES, ETC.. . . . . . . . . . . . . . . . . . . .16
SECTION 7.3. SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . .16
SECTION 7.4. EXPENSES; DOCUMENTARY TAXES.. . . . . . . . . . . . . . . .16
SECTION 7.5. INDEMNIFICATION OF LENDER.. . . . . . . . . . . . . . . . .17
SECTION 7.6. CHOICE OF LAW.. . . . . . . . . . . . . . . . . . . . . . .17
SECTION 7.7. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . . . . . . .18
SECTION 7.8. NO WAIVER.. . . . . . . . . . . . . . . . . . . . . . . . .18
SECTION 7.9. EXTENSION OF PAYMENT DATE . . . . . . . . . . . . . . . . .18
SECTION 7.10. AMENDMENTS, ETC. . . . . . . . . . . . . . . . . . . . . .18
SECTION 7.11. SEVERABILITY.. . . . . . . . . . . . . . . . . . . . . . .19
<PAGE>
SECTION 7.12. ENTIRE AGREEMENT.. . . . . . . . . . . . . . . . . . . . .19
SECTION 7.13. HEADINGS.. . . . . . . . . . . . . . . . . . . . . . . . .19
SECTION 7.14. EXECUTION IN COUNTERPARTS. . . . . . . . . . . . . . . . .20
ii
<PAGE>
Schedules
- ---------
3.2 Certain Restrictions
3.5 Pledged Securities
Exhibits
- --------
A Form of Note
B Form of Citibank Acknowledgment
iii
<PAGE>
EXHIBIT 11.1
PHYSICIAN CORPORATION OF AMERICA
COMPUTATION OF EARNINGS PER SHARE
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
-------------- ------------- -----------
Net (loss) earnings $(277,685,000) $(24,596,000) $52,547,000
-------------- ------------- -----------
-------------- ------------- -----------
Number of common shares and
common share equivalents:
Primary........................ 38,757,660 39,969,520 40,474,615
-------------- ------------- -----------
-------------- ------------- -----------
Fully diluted.................. 38,757,660 39,969,520 40,528,878
-------------- ------------- -----------
-------------- ------------- -----------
Net (loss) earnings per common and
common equivalent share......... $(7.16) $(0.62) $1.30
-------------- ------------- -----------
-------------- ------------- -----------
Net (loss) earnings per common and
common equivalent share assuming
full dilution................... $(7.16) $(0.62) $1.30
-------------- ------------- -----------
-------------- ------------- -----------
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
________________________________
PHYSICIAN CORPORATION OF AMERICA
a Delaware Corporation
________________________________
|
|
----------------------------------------------------------------------------------------------------------------
| | | | |
PCA Health Plans | PCA Health Plans | Association Employers QuestCare, Inc.
of Texas, Inc. | of Florida, Inc. |-- MGA, Inc. an Alabama Corporation
a Texas Corporation | a Florida Corporation | a Florida Corporation 4-11-91 63-092858
2-27-67 48-1032349 | 3-22-90 65-0187919 | 9-11-86 59-2739281
| | |
| PCA Options, Inc. | PCA Property & Casualty
| a Florida Corporation |-- Insurance Company
| 11-15-96 65-0235154 | a Florida Corporation
| | 12-12-86 59-2751695
| | 2-16-95
| |
| | PCA Life
PCA Military |-- Insurance Company
Programs, Inc. | a Florida Corporation
a Florida Corporation | 9-30-93 65-0424536
6-24-94 65-6500631 |
| | PCA Life Insurance
PCA Homestead, Inc. |-- Company of Texas, Inc.
a Florida Corporation a Texas Corporation
5-18-94 65-0495042 11-93 74-2687002
<CAPTION>
________________________________
PHYSICIAN CORPORATION OF AMERICA
a Delaware Corporation
________________________________
|
|
--------------------------------------------------------------------------------------------
| | |
| PCA Development Corp. PCA Solutions, Inc.
| a Delaware Corporation a Florida Corporation
| 4-20-94 APPLIED FOR 11-1-85 59-2632447
| 10-17-94
| |
| Hallmark Re Ltd.
| a Bermuda Corporation
| 3-31-94 N-A
|
|
|
|
|
|
|
- - - - - - - - - - - - - - - -
Physician Corporation
of America
an unincorporated Puerto Rican
operating subdivision
- - - - - - - - - - - - - - - -
|
-------------------------------
| |
| |
PCA Health Plans of PCA Insurance Group
Puerto Rico, Inc. of Puerto Rico, Inc.
A Puerto Rico Corporation A Puerto Rico Corporation
12-8-83 660406894 9-27-69 65-0291866
12-3-81
4-3-95
<CAPTION>
________________________________
PHYSICIAN CORPORATION OF AMERICA
a Delaware Corporation
________________________________
|
|
--------------------------------------------------------------------------------------------
| | |
| Century Vision PCA Provider
| Optical, Inc. Organization, Inc.
| a Florida Corporation a Texas Corporation
| 2-4-85 59-2555995 4-28-88 74-2588887
| 4-91 (AMENDED) 12-31-96
|
|
|
|
|
|
|
PCA Family
Health Plan, Inc.
a Florida Corporation
5-8-84 59-2483336
1-1-95
|
-------------------------------
| |
| |
Family Health Plan Family Health Plan
Insurance Company Administrators, Inc.
a Florida Corporation a Florida Corporation
5-3-91 65-8252958 5-7-91 65-8262061
</TABLE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Physician Corporation of America:
We consent to incorporation by reference in the registration statements No.
33-48153, No. 33-65174 and No. 33-98406 on Form S-8 of Physician Corporation of
America of our report dated April 14, 1997, relating to the consolidated balance
sheets of Physician Corporation of America and subsidiaries as of December 31,
1996 and 1995 and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the years in the
three-year period ended December 31, 1996 and the financial statement schedule
listed in Item 14(a) which appears in the December 31, 1996 annual report on
Form 10-K/A1 of Physician Corporation of America.
Our report dated April 14, 1997, contains an explanatory paragraph that
states that the Company is seeking alternatives to meet its obligations to its
credit facility lenders, has submitted a corrective plan to the State of Florida
Department of Insurance (DOI) to show cause why the DOI should not place the
Company's workers' compensation insurance subsidiary under state rehabilitation,
has suffered significant recent losses and has a deficiency in equity, which
raise substantial doubt about its ability to continue as a going concern. The
consolidated financial statements and financial statement schedule do not
include any adjustments that might result from the outcome of these
uncertainties.
KPMG Peat Marwick LLP
Miami, Florida
April 14, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 134,011
<SECURITIES> 130,788
<RECEIVABLES> 92,454
<ALLOWANCES> 52,351
<INVENTORY> 373
<CURRENT-ASSETS> 554,402
<PP&E> 73,714
<DEPRECIATION> 21,582
<TOTAL-ASSETS> 1,354,987
<CURRENT-LIABILITIES> 669,746
<BONDS> 10,344
0
0
<COMMON> 388
<OTHER-SE> (65,220)
<TOTAL-LIABILITY-AND-EQUITY> 1,354,987
<SALES> 1,428,347
<TOTAL-REVENUES> 1,454,308
<CGS> 1,265,735
<TOTAL-COSTS> 1,763,672
<OTHER-EXPENSES> 2,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,738
<INCOME-PRETAX> (312,966)
<INCOME-TAX> (35,281)
<INCOME-CONTINUING> (277,685)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (277,685)
<EPS-PRIMARY> (7.16)
<EPS-DILUTED> (7.16)
</TABLE>
<PAGE>
Exhibit 99
IN THE CIRCUIT COURT OF THE
SECOND JUDICIAL CIRCUIT, IN
AND FOR LEON COUNTY, FLORIDA
STATE OF FLORIDA, ex rel., ) CIVIL ACTION NO.: 97-997
The Department of Insurance,
) FLA. BAR NO.: 0221791
Relator, 0980188
) 0347108
vs.
)
PCA PROPERTY & CASUALTY
INSURANCE COMPANY, a )
Florida corporation,
)
Respondent.
VERIFIED PETITION FOR ORDER TO SHOW CAUSE,
INJUNCTION AND NOTICE OF AUTOMATIC STAY
-----------------------------------------------
The State of Florida, ex. rel., the Department of Insurance (herein
"Department"), by counsel, applies to the Court for the entry of an Order to
Show Cause on the appointment of receiver for purposes of rehabilitation and
giving notice of automatic stay, and as grounds therefor says:
1. PCA PROPERTY & CASUALTY INSURANCE COMPANY, (herein "Respondent") is
a Florida corporation with its principal place of business at 260 Wekiva
Springs Road, Suite 200, Longwood, Florida 32779, and is a domestic insurer
authorized to transact an insurance business in this state.
2. This Court has jurisdiction of this matter pursuant to Section
631.021, Florida Statutes. That section further provides
1
<PAGE>
that venue of a delinquency proceeding against a domestic insurer shall be in
the Circuit Court of Leon County.
3. Under Section 631.031, Florida Statutes, the Department is
empowered to apply to this Court for an Order directing the Respondent to
show cause why the Department should not be appointed Receiver of the
Respondent for the purposes of rehabilitation or liquidation under any of the
grounds set out in Sections 631.051, or 631.061 Florida Statutes. Section
631.031, Florida Statutes, further provides on the return of such order to
show cause, and after full hearing, the court shall either grant or deny the
application together with such other relief as the nature of the case and the
interests of the policyholders, creditors, stockholders, members,
subscribers, or public may require.
4. The Department has found that grounds exist pursuant to Sections
631.051 and 631.061, Florida Statutes, for the entry of an Order to Show
Cause why the Department should not be appointed the Receiver of Respondent
for purposes of rehabilitation. Respondent is impaired or insolvent within
the meaning of the provisions of Section 631.061, Florida Statutes, and has
admitted to being insolvent as set out herein and in "Exhibit A" attached
hereto and incorporated herein by reference.
5. The Respondent has been found by the Department to be in such a
condition and has used such methods and practices in the conduct of its
business to render its further transaction of
2
<PAGE>
insurance business presently and prospectively hazardous to its
policyholders, creditors and the public as set forth in Section 631.051 (3),
Florida Statutes.
6. Respondent filed a sworn quarterly financial statement with the
Department as of September 30, 1996. In that sworn statement Respondent
admitted to be impaired and insolvent, indicating a negative surplus of
($48,313,549.00). In order to attempt to work with Respondent in an attempt
to resolve this admitted insolvency, the Department placed Respondent under
Administrative Supervision pursuant to Section 624.81, Florida Statues in
November, 1996. A copy of that Order is attached hereto as "Exhibit B" and
incorporated herein by reference. The efforts by Respondent to cure this
insolvency have failed. On February 20, 1997, Respondent's parent issued a
press release, which it corrected on February 21, 1997 (see Composite
"Exhibit C" attached hereto and incorporated herein by reference). In the
initial release, Respondent's parent admitted that preliminary reports from
its actuaries were causing it "to take an additional fourth quarter charge of
approximately $60,000,000.00 against its worker's compensation subsidiary."
That "subsidiary" is the Respondent. The subsequent release reported on
February 21, 1997, corrected and adjusted this figure to $80,000,000.00.
This indicates that the prior negative position reported in Respondent's
sworn financial statement as of September 30, 1996, has deteriorated in the
fourth
3
<PAGE>
quarter of 1996 by an additional $80,000,000.00. This, by Respondent's own
publicly stated admission, would further reduce Respondent's surplus, as of
December 31, 1996, to approximately a negative ($128,313,549.00). The
Department anticipates that the final numbers may show the actual deficiency
to be even greater than admitted by Respondent at this time.
7. Section 624.418 (3), Florida Statues, provides that the "insolvency
or impairment of an insurer constitutes an immediate serious danger to the
public health, safety, or welfare." Because of the extent of the financial
impairment or insolvency of the Respondent, the Department has determined
that the use of Administrative Supervision for a continued period of time is
insufficient to cure the financial problems of the Respondent. Respondent's
further transaction of insurance business is presently and prospectively
hazardous to its policyholders, creditors, and the public. The Department
believes that the authority to rehabilitate an insolvent insurer granted to
it under Chapter 631, Florida Statutes, would better assist the Respondent
and protect its policyholders, creditors, and the public in attempting to
correct the financial problems of the Respondent.
8. In order to maintain the status quo and assist the Department in
obtaining additional documentation regarding the financial condition of the
Respondent, the Department recommends that the Agreement for Supervision
remain in full force and effect
4
<PAGE>
until superseded by the Department's appointment as Receiver of Respondent.
9. Section 631.041 (1), Florida Statutes, provides that the
Department's petition for an order to show cause operates as an automatic
stay of judicial and administrative actions against the insurer and its
assets. Notice of the automatic stay should be contained within the order to
show cause.
10. A receivership is an in rem action. The assets of the estate are
within the constructive possession and control of the Court. In order to
provide the Court with tools to safeguard those assets, Sections 631.041 (3)
and (4), Florida Statutes, authorize this court to enter certain injunctions
to preserve the remaining assets of the insurer. Section 631.021, Florida
Statutes, further provides the Court with the authority to make all necessary
or proper orders to carry out the purposes of this chapter. The stated
purpose of Chapter 631, Florida Statutes, is contained in Section 631.001
(4), Florida Statutes, specifically that purpose is to protect the interests
of the insureds, creditors and the public generally.
WHEREFORE, the Department respectfully moves the Court for an Order:
11. Directing the Respondent to appear before this Court on a short day
certain and show good cause, if any, as to why the Department should not be
appointed Receiver of Respondent for
5
<PAGE>
purposes of rehabilitation under the provisions of Chapter 631, Florida
Statutes.
12. Directing that the Administrative Supervision of Respondent shall
continue until further Order of the Court or the Department's appointment as
Receiver of Respondent.
13. Giving notice of the automatic stay provisions of Section
631.041(1), Florida Statutes.
14. Granting such other relief as the Court deems appropriate.
AND FURTHER, at hearing or on consent of Respondent, if this Court
determines that a receiver should be appointed, that the Court enter an order
appointing the Department of Insurance as Receiver for Respondent for
purposes of rehabilitation, and authorizing and directing that the Receiver:
15. Conduct the business of Respondent and take all steps as the Court
may direct toward the removal of the causes and conditions which have made
the order of rehabilitation necessary.
16. Take immediate possession of all Respondent's property, assets and
estate, and all other property of Respondent of every kind whatsoever and
wheresoever located belonging to or in the possession of Respondent or its
officers, directors, employees or agents, including but not limited to all
offices maintained by Respondent, rights of action, books, papers, data
processing records, evidences of debt, bank accounts, savings accounts,
certificates of deposit, stocks, bonds, debentures and other
6
<PAGE>
securities, mortgages, furniture, fixtures, office supplies and equipment,
and all real property of the Respondent wherever situate, and to administer
such assets as is required in order to comply with the directions contained
in this Order, and to hold all other assets pending further order of this
Court.
17. Proceed to collect any and all debts economically feasible to
collect due and owing Respondent, including but not limited to funds or
premiums held by agents of Respondent under agency contracts or otherwise.
18. Appoint one or more special agents and employ legal counsel,
actuaries, accountants, clerks, consultants and assistants as it deems
necessary and to fix and to pay the reasonable compensation and reasonable
expenses thereof and all reasonable expenses of taking possession of the
insurer, subject to approval by this Court at the time the Receiver accounts
to the Court for such expenditures and compensation.
19. Reimburse employees, from the funds of this receivership, for their
actual necessary and reasonable expenses incurred while traveling on the
business of this receivership.
20. Commence and maintain all legal actions necessary for the conduct
of the rehabilitation proceeding.
21. Not defend legal actions wherein Respondent or the Receiver is a
party defendant, commenced either prior to or subsequent to this order,
without authorization of this Court.
7
<PAGE>
Except, however, in actions where Respondent is a nominal party, as in
certain foreclosure actions and the action does not effect a claim against or
adversely affect the assets of Respondent, the Receiver may file appropriate
pleadings in its discretion.
22. Deposit funds and maintain bank accounts in accordance with Section
631.221, Florida Statutes.
23. Take possession of all Respondent's securities on deposit with the
Treasurer of Florida and liquidate or reinvest as much of the same as may be
necessary, in its judgment, to best benefit the estate or to pay expenses as
set forth above.
24. Apply to this Court for further instructions in the discharge of
its duties.
AND FURTHER:
25. Pursuant to Section 631.391, Florida Statutes, any officer, director,
manager, trustee, attorney, agent, actuary, broker, employee, adjuster, or
affiliate of Respondent and any other person who possesses or possessed any
executive authority over or who exercises, or exercised, any control over any
segment of Respondent's affairs or its affiliates shall fully cooperate with the
Receiver under Chapter 631, Florida Statutes, or any investigation incidental to
this proceeding. All attorneys employed by Respondent as of this date shall,
within 10 days notice of this Order, report to the Receiver on the name, company
claim number and status of each file they are handling on behalf of the
Respondent.
8
<PAGE>
Said report shall also include an accounting of any funds received from or on
behalf of the Respondent. All attorneys employed by Respondent are hereby
advised that pursuant to Section 631.011(15), Florida Statutes, a claim based
on mere possession does not create a secured claim and all attorneys employed
by Respondent, pursuant to IN RE THE RECEIVERSHIP OF SYNDICATE TWO, INC., 538
So.2d 945 (Fla. 1st DCA 1989), who are in possession of litigation files or
other material, documents or records belonging to or relating to work
performed by the attorney on behalf of Respondent shall deliver such
litigation files, material, documents or records intact and without purging
to the Receiver, on request, notwithstanding any claim of a retaining lien
which, if otherwise valid, shall not be extinguished by such delivery of
documents.
26. All persons who have in their possession, custody or control,
assets of the Respondent of any kind whatsoever and wherever situate,
including but not limited to, monies, books or records, and personal or real
property, are directed to deliver forthwith upon demand such assets or books
and records to the Receiver.
27. Title to all property, real or personal, all contracts, rights of
action and all books and records of Respondent, wherever located within or
without this state, is vested by operation of law in the Receiver, pursuant
to Section 631.141(2), Florida Statutes.
28. Upon request by the Receiver, any company providing
9
<PAGE>
telephonic services to the Respondent shall provide a reference of calls from
the number presently assigned to the Respondent to any such number designated
by the Receiver or perform any other changes necessary to the conduct of the
receivership.
29. Any entity furnishing water, electric, telephone, sewage, garbage
or trash removal services to Respondent shall maintain such service and
transfer any such accounts to the Receiver as of the date of the order of
rehabilitation unless instructed to the contrary by the Receiver.
30. The United States Postal Service is directed to provide any
information requested by the Receiver regarding the Respondent and to handle
future deliveries of Respondent's mail as directed by the Receiver.
31. All policies of insurance or similar contracts of coverage issued
or assumed by the Respondent (hereinafter referred to as "contracts") shall
remain in full force and effect until further Order of this Court, except
where canceled in the normal course of business or upon the normal expiration
date thereof. Any contract cancellations initiated by insureds shall be
prospective only.
32. Any bank, savings and loan association, other financial institution,
or any other entity or person, which has on deposit or in its possession,
custody or control any funds, accounts and any other assets of the Respondent
shall immediately transfer title, custody and control of all such funds,
accounts or assets to the
10
<PAGE>
Receiver, and is hereby instructed that the Receiver has absolute control
over such accounts and other assets, and that the Receiver may change the
name of such accounts and other assets, withdraw them from such bank, savings
and loan association or other financial institution, or take any lesser
action necessary for the proper conduct of the receivership.
33. No bank, savings and loan association, other financial institution,
or any other person or entity shall exercise any form of set-off, alleged
set-off, lien, or any form of self-help whatsoever or refuse to transfer any
funds or assets to the Receiver's control without the permission of this
Court.
34. Pursuant to Sections 631.041(3) and (4), Florida Statutes (1989), all
persons, firms, corporations and associations within the jurisdiction of this
Court, including, but not limited to Respondent, its officers, directors,
trustees, agents, affiliates, and employees are enjoined and restrained from the
further transaction of the insurance business of Respondent without written
permission of the Receiver; from doing, through acts of commission or omission,
or permitting to be done any action which might waste or otherwise dispose of
the books, records and assets of, or directly or indirectly relating to, the
Respondent; from denying the Receiver access to the books, records, and assets
of, or directly or indirectly relating to, the Respondent; from in any manner
interfering with the Receiver or the conduct of these proceedings;
11
<PAGE>
from the removal, concealment or other disposition of the property, books,
records, and accounts of, or directly or indirectly relating to, the
Respondent; from the commencement or prosecution of any actions against the
Respondent, the Receiver, or the agents or employees of the Receiver in their
representative capacities, or the obtaining of preferences, judgments, writs
of attachment or garnishment or other liens; and from the making of any levy
or execution against Respondent or its property or assets. Employees of
affiliate corporations are hereby enjoined and restrained from doing, through
acts of commission or omission, or permitting to be done any action which
might waste or dispose of the books, records and assets of, or directly or
indirectly relating to, the Respondent; from denying the Receiver access to
the books, records, and assets of, or directly or indirectly relating to, the
Respondent, including the books, records, and assets of the affiliate
corporation; from in any manner interfering with the Receiver or the conduct
of these proceedings; from the removal, concealment or other disposition of
the property, books, records, and accounts of, or directly or indirectly
relating to, the Respondent; from the commencement or prosecution of any
actions, service of process, or subpoena against the Respondent, the
Receiver, or the agents or employees of the Receiver in their representative
capacities, or the obtaining of preferences, judgments, writs of attachment
or garnishment or other liens; and
12
<PAGE>
from the making of any levy or execution against Respondent or its
property or assets.
NOTICE OF AUTOMATIC STAY
------------------------
35. Notice is hereby given that, pursuant to Section 631.041(1),
Florida Statutes, the filing of the Department's petition for consent order
herein operates as an automatic stay applicable to all persons and entities,
other than the Receiver, which shall be permanent and survive the entry of
this order, and which prohibits:
a. The commencement or continuation of judicial, administrative
or other action or proceeding against the insurer or against its assets or
any part thereof;
b. The enforcement of judgment against the insurer or an
affiliate obtained either before or after the commencement of the delinquency
proceeding;
c. Any act to obtain possession of property of the insurer;
d. Any act to create, perfect or enforce a lien against property
of the insurer, except a secured claim as defined in Section 631.011(15),
Florida Statutes;
e. Any action to collect assess or recover a claim against the
insurer, except claims as provided for under Chapter 631;
13
<PAGE>
f. The set-off or offset of any debt owing to the insurer except
offsets as provided in Section 631.281, Florida Statutes.
36. This Court retains jurisdiction of this cause for the purpose of
granting such other and further relief as from time to time shall be deemed
appropriate.
STATE OF FLORIDA
COUNTY OF LEON
Before me, the undersigned authority, personally appeared WAYNE A.
JOHNSON who was sworn and says the foregoing petition is true.
/s/ WAYNE A. JOHNSON
-----------------------------
WAYNE A. JOHNSON
Sworn to and subscribed before me this 24th day of February, 1997, by
Wayne A. Johnson.
/s/ Pamela Burleson Mills
NOTARY PUBLIC
Personally known OR produced Identification
--------- -------
Type of Identification produced
----------------------------
DATED this 24th day of February, 1997.
----
FLORIDA DEPARTMENT OF INSURANCE
DIVISION OF REHABILITATION AND
LIQUIDATION
[seal] Post Office Box 110
Tallahassee, Florida 32302
(904) 922-3179
By /s/ DENNIS K. THREADGILL
---------------------------
DENNIS K. THREADGILL
ROBIN WESTCOTT and
MICHAEL L. BERRY
ATTORNEYS FOR DEPARTMENT
14
