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EXHIBIT 10.3
AMENDMENT NO. 3 AND CONSENT
Dated as of September 1, 1999
To the banks, financial institutions and
other institutional lenders (collectively,
the "BANKS") party to the Credit Agreement
referred to below, to Citibank, N.A., as
administrative agent (the "AGENT") for the
Banks, to SunTrust Bank, Nashville, N.A., as
the swing line bank, and to NationsBank,
N.A., as documentation agent
Ladies and Gentlemen:
We refer to the Second Amended and Restated Revolving Credit
Agreement dated as of April 2, 1998, as amended by Amendment No.1 and Consent
thereto dated as of September 22, 1998 and Amendment No. 2 and Consent thereto
dated as of March 10, 1999 (such Credit Agreement, as so amended, the "CREDIT
AGREEMENT") among the undersigned and you. Capitalized terms not otherwise
defined in this Amendment No. 3 and Consent have the same meanings as specified
in the Credit Agreement.
It is hereby agreed by you and us as follows:
The Credit Agreement is, effective as of the effective date of
this Amendment No. 3 and Consent, hereby amended as follows:
(a) Section 1.01 is amended by adding thereto in the correct
alphabetical order the following definitions:
"`Securities Repurchase Amount' means, at any time,
$35,000,000 plus, after the issuance of any Series B Zero
Coupon Convertible Subordinated Notes, 50% of the gross
proceeds received by the Borrower from the issuance of such
Series B Zero Coupon Convertible Subordinated Notes.
"`Series A Zero Coupon Convertible Subordinated Notes'
means the Series A Zero Coupon Convertible Subordinated Notes
issued by the Borrower for aggregate gross proceeds received
by the Borrower of not less than $100,000,000 and having the
terms and conditions set forth on Exhibit H hereto, which
shall include terms stating that such Series A Zero Coupon
Convertible Subordinated Notes shall have no requirement for
cash payments at any time that any Notes remain unpaid or any
Letter of Credit is outstanding or any Bank shall have a
Commitment under the Credit Agreement."
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"`Series B Zero Coupon Convertible Subordinated Notes'
means the Series B Zero Coupon Convertible Subordinated Notes
issued by the Borrower for aggregate gross proceeds received
by the Borrower not in excess of $100,000,000 and having the
terms and conditions set forth on Exhibit H hereto, which
shall include terms stating that such Series B Zero Coupon
Convertible Subordinated Notes shall have no requirement for
cash payments at any time that any Notes remain unpaid or any
Letter of Credit is outstanding or any Bank shall have a
Commitment under the Credit Agreement."
"`Zero Coupon Convertible Subordinated Notes' means,
collectively, the Series A Zero Coupon Convertible
Subordinated Notes and the Series B Zero Coupon Convertible
Subordinated Notes."
(b) The definition of "Debt" in Section 1.01 is amended by
adding at the end thereof a new sentence to read as follows:
"The obligations of the Borrower and its subsidiaries
under the Zero Coupon Convertible Subordinated Notes shall
be deemed not to be Debt."
(c) The definition of "EBITDA" in Section 1.01 is amended by
adding at the end thereof (a) new clause (xiv) to read as follows:
"plus (xiv) to the extent deducted in the calculation of Net
Income for such period, the aggregate amount of any reduction
in Net Income attributable to the charge-off of any intangible
assets in existence at or prior to June 30, 1999 made in
accordance with generally accepted accounting principles."
(d) The definition of "Applicable Eurodollar Rate Margin" in
Section 1.01 is amended by deleting such in its entirety and
substituting therefor the following:
"`Applicable Eurodollar Rate Margin' means, for the initial
Effective Period (as defined below), the percentage set forth
in the chart below based on the Consolidated Debt/EBITDA Ratio
of the Borrower and its Subsidiaries for the period ended June
30, 1999 (calculated taking into account the Debt repaid or
otherwise satisfied in full with the proceeds of the Zero
Coupon Convertible Subordinated Notes) and thereafter, for
each subsequent Effective Period, 1.3500% per annum; provided,
however, that if the Borrower, for a subsequent Effective
Period shall have satisfied the Consolidated Debt/EBITDA Ratio
test indicated in the table below, the Applicable Eurodollar
Rate Margin for the Effective Period as to which such test is
satisfied shall be the percentage rate per annum set forth
opposite the appropriate test for the Commitment in the table
below.
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Applicable Eurodollar
"Consolidated Rate Margin for
Debt/EBITDA Ratio Advances
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Greater than 3.50 to 1.00 1.3500%
Less than or equal to 3.50 to 1.00 but greater
than 3.00 to 1.00 1.1750%
Less than or equal to 3.00 to 1.00 but greater
than 2.50 to 1.00 1.0000%
Less than or equal to 2.50 to 1.00 but greater
than 2.00 to 1.00 0.8000%
Less than or equal to 2.00 to 1.00 0.7000%"
The Applicable Eurodollar Rate Margin shall be determined by
the Agent each quarter on the basis of quarterly certified
Consolidated financial statements and a schedule evidencing
financial covenant compliance delivered to the Banks pursuant
to Section 6.04(b). The "Effective Period" with respect to the
Applicable Eurodollar Rate Margin shall be the period
commencing on the date of effectiveness of Amendment No. 3 and
Consent to this Agreement and ending on the fifth Business Day
after the Quarterly Delivery for such quarter (commencing with
the fiscal quarter ended September 30, 1999) and each period
thereafter commencing the fifth Business Day after the
Quarterly Delivery for the then most recent fiscal quarter and
ending on the fifth Business Day of the Quarterly Delivery for
the then immediately following fiscal quarter. Notwithstanding
the foregoing, the Applicable Eurodollar Rate Margin shall be
deemed to be 1.3500% per annum in respect of Advances made on
any day as of which the deliveries required to calculate the
Applicable Eurodollar Rate Margin shall not have been made."
(e) The definition of "Applicable Letter of Credit Fee Rate"
in Section 1.01 is amended by deleting such in its entirety and
substituting therefor the following:
"`Applicable Letter of Credit Fee Rate' means, for the initial
Effective Period (as defined below), the percentage set forth
in the chart below based on the Consolidated Debt/EBITDA Ratio
of the Borrower and its Subsidiaries for the period ended June
30, 1999 (calculated taking into account the Debt repaid or
otherwise satisfied in full with the proceeds of the Zero
Coupon Convertible Subordinated Notes) and thereafter, for
each subsequent Effective Period, 1.2250% per annum; provided,
however, that if the Borrower, for a subsequent Effective
Period shall have satisfied the Consolidated Debt/EBITDA Ratio
test indicated in the table below, the Applicable Letter of
Credit Fee Rate for the Effective Period as to which such test
is satisfied shall be the percentage rate per annum set forth
opposite the appropriate test for the Commitment in the table
below.
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Applicable
"Consolidated Letter of Credit
Debt/EBITDA Ratio Fee Rate
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Greater than 3.50 to 1.00 1.2250%
Less than or equal to 3.50 to 1.00 but greater 1.0500%
than 3.00 to 1.00
Less than or equal to 3.00 to 1.00 but greater 0.8750%
than 2.50 to 1.00
Less than or equal to 2.50 to 1.00 but greater 0.6750%
than 2.00 to 1.00
Less than or equal to 2.00 to 1.00 0.5750%"
The Applicable Letter of Credit Fee Rate shall be determined
by the Agent each quarter on the basis of quarterly certified
Consolidated financial statements and a schedule evidencing
financial covenant compliance delivered to the Banks pursuant
to Section 6.04(b). The "Effective Period" with respect to the
Applicable Letter of Credit Fee Rate shall be the period
commencing on the date of effectiveness of Amendment No. 3 and
Consent to this Agreement and ending on the fifth Business Day
after the Quarterly Delivery for such quarter (commencing with
the fiscal quarter ended September 30, 1999) and each period
thereafter commencing the fifth Business Day after the
Quarterly Delivery for the then most recent fiscal quarter and
ending on the fifth Business Day of the Quarterly Delivery for
the then immediately following fiscal quarter. Notwithstanding
the foregoing, the Applicable Letter of Credit Fee Rate shall
be deemed to be 1.2250% per annum in respect of Advances made
on any day as of which the deliveries required to calculate
the Applicable Eurodollar Rate Margin shall not have been
made.
(f) The definition of "Applicable Utilization Fee Rate" in
Section 1.01 is deleted in its entirety.
(g) The definition of "Total Liabilities" in Section 1.01 is
amended by adding at the end thereof a new sentence to read as follows:
"The obligations of the Borrower and its subsidiaries
under the Zero Coupon Convertible Subordinated Notes
shall be deemed not to be Total Liabilities."
(h) Section 3.01 is amended by deleting the figure
"$50,000,000" in the fifth line thereof and substituting therefor the
figure "$75,000,000".
(i) Section 6.02(e)(i)(C) is amended by deleting clauses (1),
(2) and (3) therein and replacing such clauses with the phrase "the
Securities Repurchase Amount".
(j) Section 6.02(f)(iv) is amended by adding immediately after
the phrase "aggregate amount" therein the parenthetical "(together with
the aggregate amount of capital investments made pursuant to clause
(v)).
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(k) Section 6.02(f)(viii) is amended by deleting clauses (1),
(2) and (3) therein and replacing such clauses with the phrase "the
Securities Repurchase Amount".
(l) Section 6.02(f) is amended by adding at the end thereof a
new clause (x) to read as follows:
"(x) the Borrower and its Subsidiaries may make
investments consisting of notes receivables financing sale
or other disposition of assets permitted hereunder in an
aggregate amount not to exceed $45,000,000."
(m) Section 6.02(f)(v) is amended by deleting the figure
"$15,000,000" therein and replacing such figure with the phrase
(together with the aggregate amount of capital investments made
pursuant to clause (iv)) $50,000,000.
(n) Section 6.2(j) is amended by adding immediately after each
reference therein (prior to the proviso contained therein) to "Debt"
the phrase "or the Zero Coupon Convertible Subordinated Notes".
(o) Section 6.02(j)(vii) is amended by deleting clauses (1),
(2) and (3) therein and replacing such clauses with the phrase "the
Securities Repurchase Amount".
(p) Section 6.03(a) is amended by deleting such in its
entirety and substituting therefor the following:
"(a) Consolidated Net Worth. Permit at any date of
determination the Consolidated Net Worth of the Borrower and
its Subsidiaries to be less than $683,000,000, plus (i)(A) 80%
of the net proceeds received from the issuance, sale or
disposition of the Borrower's Securities (common, preferred or
special), securities converted into or exchanged for
Securities, and any rights, options, warrants and similar
instruments from December 31, 1997 to such date of
determination minus (B)(x) the aggregate amount not in excess
of $6,500,000 paid to acquire shares of Common Stock of the
Borrower and (y) after the issuance of the Series B Zero
Coupon Convertible Subordinated Notes, the aggregate amount
not in excess of $78,500,000 paid to acquire shares of Common
Stock of the Borrower plus (ii) 50% of positive Consolidated
Net Income (if any) earned from December 31, 1997 through such
date of determination (without regard for net losses)."
(q) Section 6.03(c) is amended by deleting clause (y) therein
and replacing such clause with the following clauses:
"(y) for each such period ending thereafter but prior to
March 31, 2000, 3.75 to 1.00 and (z) for each period
thereafter, 3.50 to 1.00.
(r) Section 7.01(j) is amended by deleting the figure "5%"
therein and replacing such figure with the figure "10%".
(s) Section 7.01(o) is amended in full to read "[Intentionally
Omitted]."
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(t) The Credit Agreement is hereby amended by adding thereto
Exhibit H to read as set forth in Schedule I hereto.
Notwithstanding the provisions of Section 7.01(j), the
Majority Banks hereby consent to the termination of the Service Agreements
listed on Schedule II hereto.
This Amendment No. 3 and Consent shall become effective as of
the date first above written when, and only when, (i) the Agent shall have
received by 5:00 pm (New York City time) on September 1, 1999, counterparts of
this Amendment No. 3 and Consent executed by the undersigned, the Issuing Bank
and the Majority Banks or, as to any of the Banks, advice satisfactory to the
Agent that such Bank has executed this Amendment No. 3 and Consent (all such
Banks that shall have so executed this Amendment No. 3 and Consent being the
"APPROVING BANKS"), (ii) the Agent shall have received no later than the date of
the issuance of the Series A Zero Coupon Convertible Subordinated Notes, for the
ratable account of each Approving Bank, a consent fee of of one percent of each
such Approving Bank's Commitment (which fee the Agent will distribute to such
Approving Banks no later than the first Business Day after the date this
Amendment No. 3 and Consent becomes effective), (iii) the consent attached
hereto executed by each Guarantor and (iv) the Borrower shall have, prior to
December 1, 1999, (A) issued the Series A Zero Coupon Convertible Subordinated
Notes for net cash proceeds of not less than $92,000,000 and (B) applied at
least $92,000,000 of such net cash proceeds to prepay Advances under the Credit
Agreement. This Amendment No. 3 and Consent is subject to the provisions of
Section 9.01 of the Credit Agreement.
On and after the effectiveness of this Amendment No. 3 and
Consent, each reference in the Credit Agreement to "this Agreement",
"hereunder", "hereof" or words of like import referring to the Credit Agreement,
and each reference in the Notes and each of the other Loan Documents to "the
Credit Agreement", "thereunder", "thereof" or words of like import referring to
the Credit Agreement, shall mean and be a reference to the Credit Agreement, as
amended by this Amendment No. 3 and Consent.
The Credit Agreement, the Notes and each of the other Loan
Documents, as specifically amended by this Amendment No. 3 and Consent, are and
shall continue to be in full force and effect and are hereby in all respects
ratified and confirmed. The execution, delivery and effectiveness of this
Amendment No. 3 and Consent shall not, except as expressly provided herein,
operate as a waiver of any right, power or remedy of any Bank or the Agent under
any of the Loan Documents, nor constitute a waiver of any provision of any of
the Loan Documents.
If you agree to the terms and provisions hereof, please
evidence such agreement by executing and telecopying one signature page to ▇▇▇▇▇
▇▇▇▇▇▇▇ at Citibank, N.A. (Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇) and returning at least
three counterparts of this Amendment No. 3 and Consent to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ at
Shearman & Sterling, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (Telecopier
No. (▇▇▇) ▇▇▇-▇▇▇▇).
This Amendment No. 3 and Consent may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of a signature page to this Amendment No. 3 and Consent by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment No. 3 and Consent.
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This Amendment No. 3 and Consent shall be governed by, and
construed in accordance with, the laws of the State of New York.
Very truly yours,
PHYCOR, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Executive Vice President and
Chief Financial Officer
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Agreed as of the date first above written:
CITIBANK, N.A.,
as Agent, as an Issuing Bank and as Bank
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Title: Vice President
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BANK OF AMERICA, N.A.
as Documentation Agent
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Managing Director
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AMSOUTH BANK
By /s/ ▇▇▇▇▇ ▇. Wind
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Title: Vice President
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BANK OF AMERICA, N.A.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Managing Director
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BANKERS TRUST COMPANY
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Title: Principal
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▇▇
▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By /s/ ▇. ▇. ▇▇▇▇▇
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Title: Vice President
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CREDIT LYONNAIS NEW YORK BRANCH
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Vice President
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FIRST AMERICAN NATIONAL BANK
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Senior Vice President
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THE FIRST NATIONAL BANK OF CHICAGO
By /s/ ▇▇▇▇ ▇. Back
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Title: Assistant Vice President
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FIRST UNION NATIONAL BANK
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Director
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FLEET NATIONAL BANK
By /s/ ▇▇▇▇ ▇. ▇▇▇
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Title: Assistant Vice President
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MELLON BANK, N.A.
By /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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Title: Vice President
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COOPERATIEVE CENTRALE RAIFFEISEN
BOERENLEENBANK B.A., "RABOBANK NEDERLAND",
NEW YORK BRANCH
By /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Title: Vice President
By /s/ ▇▇▇ ▇▇▇▇▇
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Title: Senior Credit Officer
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SUNTRUST, NASHVILLE, N.A.
as Swing Line Bank
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Vice President
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