EXHIBIT 4
FIFTH AMENDMENT TO CREDIT AGREEMENT
This Fifth Amendment to Credit Agreement (the "Amendment") is made as
of this 21st day of March, 2002 by and among AMERICAN MEDICAL SECURITY GROUP,
INC. ("AMS"), the Lenders who are a party to the Credit Agreement from time to
time (the "Lenders") and LASALLE BANK NATIONAL ASSOCIATION, as Agent and Swing
Line Lender (the "Agent").
W I T N E S S E T H
WHEREAS, AMS, the Agent and the Lenders, including First Union National
Bank, N.A. ("First Union") are parties to that certain Credit Agreement, dated
as of March 24, 2000, as amended pursuant to that certain First Amendment to
Credit Agreement, dated as of July 18, 2000, as further amended pursuant to that
certain Second Amendment to Credit Agreement, dated as of November 10, 2000, as
further amended pursuant to that certain Third Amendment to Credit Agreement,
dated as of January 29, 2001, and as further amended pursuant to that certain
Fourth Amendment to Credit Agreement, dated as of April 27, 2001 (collectively,
the "Credit Agreement");
WHEREAS, immediately prior to the execution hereof and as a condition
precedent hereto, First Union and Bank of America, N.A. ("Bank of America") have
entered into that certain Assignment Agreement, pursuant to which First Union
has agreed to sell, assign and transfer to Bank of America, and Bank of America
has agreed to purchase, accept and assume from First Union, all of First Union's
percentage interest and outstanding rights and obligations under the Credit
Agreement, as more particularly set forth therein (the "Assignment Agreement");
WHEREAS, as a result of the Assignment Agreement, Bank of America shall
have the rights and obligations of a Lender under the Loan Documents to the
extent of the rights and obligations assigned to Bank of America under the
Assignment Agreement, and First Union shall contemporaneously therewith
relinquish its rights and be released from its corresponding obligations as a
Lender under the Loan Documents and thereafter shall cease to be a Lender under
the Credit Agreement; and
WHEREAS, the parties desire to amend the Credit Agreement, as more
fully set forth herein;
NOW, THEREFORE, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the adequacy of which is
hereby acknowledged, and subject to the terms and conditions hereof, the parties
hereto agree as follows:
SECTION 1. DEFINITIONS. Unless otherwise defined herein, all
capitalized terms shall have the meaning given to them in the Credit Agreement.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT.
2.1 Article I of the Credit Agreement is hereby amended by inserting the
following definitions in their appropriate alphabetical order:
""Debtor Relief Laws" means the Bankruptcy Code of the United
States of America, and all other liquidation, conservatorship,
bankruptcy, assignment for the benefit of creditors, moratorium,
rearrangement, receivership, insolvency, reorganization, or similar
debtor relief laws of the United States of America (including any
Federal, state or local equivalents) or other applicable jurisdictions
from time to time in effect and affecting the rights of creditors
generally."
""Purchase Agreement" means that certain Stock Purchase
Agreement dated as of March 19, 2002 among Seller, Cobalt Corporation
and AMS."
""Repurchase" means that certain repurchase by AMS of
approximately one million four hundred thousand (1,400,000) shares of
its capital stock from Blue Cross & Blue Shield United of Wisconsin, a
Wholly-Owned Subsidiary of Cobalt Corporation, for an aggregate
purchase price not in excess of $18,200,000, after receipt of all
necessary and required consents and approvals."
""Seller Group" means collectively, Blue Cross & Blue Shield
United of Wisconsin and Cobalt Corporation."
""Special Dividend" means that certain special dividend of up
to $20,000,000 which Holdings shall cause UWLIC to declare and pay
directly to AMS, after receipt of all necessary and required consents
and approvals, including, without limitation, the consent of the
Wisconsin Department of Insurance, which funds shall be applied by AMS
to effect the Repurchase and cover any costs related thereto."
2.2 Article I of the Credit Agreement is hereby amended by deleting the
definition of "Applicable Margin" in its entirety and inserting the following in
its stead:
""Applicable Margin" means, with respect to Eurodollar
Advances at any time, 3.00% per annum (unless a Default or an Unmatured
Default has occurred that is continuing)."
2.3 Article I of the Credit Agreement is hereby amended by deleting the
definition of "Non-Use Fee Rate" in its entirety and inserting the following in
its stead:
""Non-Use Fee Rate" means, at any time, 0.50% per annum on the
unused amount of the Aggregate Commitment."
2.4 Section 2.8(a) of the Credit Agreement is hereby deleted in its
entirety and amended by inserting the following in its stead:
"2.8. Mandatory Commitment Reductions. (a) The Aggregate
Commitment shall be automatically and permanently reduced to the following
amounts on the following dates:
Date Availability Reduction Aggregate Commitment
---------------------- ---------------------- --------------------
March 24, 2003 $10,000,000 $20,157,772
March 24, 2004 $10,000,000 $10,157,772
March 24, 2005 $10,157,772 $0"
2.5 Section 2.11 of the Credit Agreement is hereby amended by deleting the
reference to "$10,000,000" and inserting "$5,000,000" in its stead.
2.6 Section 2.14 of the Credit Agreement is hereby deleted in its
entirety and amended by inserting the following in its stead:
"2.14. Rates Applicable After Default. Notwithstanding
anything to the contrary contained in Section 2.9 or 2.10, during the
continuance of a Default or Unmatured Default the Required Lenders may,
at their option, by notice to AMS (which notice may be revoked at the
option of the Required Lenders notwithstanding any provision of Section
8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that no Advance may be made as, converted into or
continued as a Eurodollar Advance. During the continuance of a Default
the Required Lenders may, at their option, by notice to AMS (which
notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.2 requiring unanimous
consent of the Lenders to changes in interest rates), declare that each
Loan shall bear interest at the higher of the Eurodollar Rate or the
Floating Rate then in effect, plus the applicable margin then in effect
from time to time, plus 2.00% per annum; provided, that during the
continuance of a Default under Section 7.6 or 7.7, the interest rate
set forth above shall be applicable to all Loans without any election
or action on the part of the Agent or any Lender."
2.7 Section 3.1 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"3.1. Yield Protection. If, on or after the Initial Closing
Date, any Lender determines that the adoption of or change in any law
or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
change in the interpretation or administration thereof by any
governmental or quasi-governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender or applicable Lending Installation
with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(a) subjects any Lender or any applicable
Lending Installation to any Taxes, or
changes the basis of taxation of payments
(other than with respect to Excluded Taxes)
to any Lender in respect of its Eurodollar
Loans, or
(b) imposes or increases or deems applicable any
reserve, assessment, insurance charge,
special deposit or similar requirement
against assets of, deposits with or for the
account of, or credit extended by, any
Lender or any applicable Lending
Installation (other than reserves and
assessments taken into account in
determining the interest rate applicable to
Eurodollar Advances), or
(c) imposes any other condition the result of
which is to increase the cost to any Lender
or any applicable Lending Installation of
agreeing to make or making, funding or
maintaining its Eurodollar Loans or reduces
any amount receivable by any Lender or any
applicable Lending Installation in
connection with its Eurodollar Loans, or
requires any Lender or any applicable
Lending Installation to make any payment
calculated by reference to the amount of
Eurodollar Loans held or interest received
by it, by an amount deemed material by such
Lender,
and the result of any of the foregoing is to increase the cost to such
Lender or applicable Lending Installation of making, funding or
maintaining its Eurodollar Loans or Commitment or to reduce the return
received by such Lender or applicable Lending Installation in
connection with such Eurodollar Loans or Commitment, then, within 15
days of demand by such Lender, AMS shall pay such Lender such
additional amount or amounts as will compensate such Lender for such
increased cost or reduction in amount received."
2.8 Section 3.2 of the Credit Agreement is hereby amended by deleting the
second sentence thereof and inserting the following in its stead:
""Change" means (a) any change after the Initial Closing Date
in or change in the interpretation of the Risk-Based Capital Guidelines
or (b) any adoption of or change in or change in the interpretation of
any other law, governmental or quasi-governmental rule, regulation,
policy, guideline, interpretation, or directive (whether or not having
the force of law) after the date of this Agreement which affects the
amount of capital required or expected to be maintained by any Lender
or any Lending Installation or any corporation controlling any Lender."
2.9 Section 3.5 of the Credit Agreement is hereby amended by deleting
subsection (c) thereof and inserting the following in its stead:
"(c) AMS hereby agrees to indemnify the Agent and each Lender
for the full amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed on amounts payable under
this Section 3.5) paid by the Agent or such Lender and any liability
(including penalties, interest and expenses) arising therefrom or with
respect thereto, in each case whether or not such Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant
Governmental Authority. Payments due under this indemnification shall
be made within 30 days of the date the Agent or such Lender makes
demand therefor pursuant to Section 3.6."
2.10 Section 4.2 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"4.2. Each Advance and Swing Line Loan. The Lenders shall not
be required to make any Advance (other than an Advance that, after
giving effect thereto and to the application of the proceeds thereof,
does not increase the aggregate amount of outstanding Advances) and the
Swing Line Lender shall not be required to make any Swing Line Loan,
unless on the applicable Borrowing Date:
(a) There exists no Default or Unmatured Default.
(b) The representations and warranties contained
in the Loan Documents are true and correct
as of such Borrowing Date except to the
extent any such representation or warranty
is stated to relate solely to an earlier
date, in which case such representation or
warranty shall have been true and correct on
and as of such earlier date.
(c) All legal matters incident to the making of
such Advance or Swing Line Loan shall be
satisfactory to the Lenders and their
counsel.
Each Borrowing Notice and/or Conversion/Continuation Notice
with respect to each such Advance and each request for a Swing Line
Loan shall constitute a representation and warranty by AMS that the
conditions contained in Section 4.2(a) and (b) have been satisfied. Any
Lender may require a duly completed compliance certificate in
substantially the form of Exhibit A as a condition to making an
Advance."
2.11 Section 6.10 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"6.10 Dividends. AMS will not, nor will it permit any
Subsidiary to, declare or pay any dividends or make any distributions
on its capital stock (other than dividends payable in its own capital
stock) or redeem, repurchase or otherwise acquire or retire any of its
capital stock at any time outstanding, except that (i) any Subsidiary
may declare and pay dividends to a Wholly-Owned Subsidiary or to AMS,
and (ii) AMS may repurchase its outstanding stock, provided that any
such repurchases shall not exceed $28,400,000 in the aggregate; and
provided further, that such $28,400,000 includes up to $18,200,000 that
shall be used solely to consummate the Repurchase."
2.12 Section 6.19.5 of the Credit Agreement is hereby deleted in its entirety
and amended by inserting the following in its stead:
"6.19.5 Statutory Capital and Surplus. AMS will at all times
cause UWLIC to maintain a Statutory Capital and Surplus of not less
than the sum of (a) $128,000,000, plus (b) 50% of the positive
Statutory Net Income earned by UWLIC in each Fiscal Quarter ending
after December 31, 2001 and on or prior to the date of determination
(excluding changes in unrealized gain/loss)."
2.13 Article VI of the Credit Agreement is amended by inserting new Sections
6.29 and 6.30 after Section 6.28 as follows:
"6.29 Repurchase. Prior to effecting the Repurchase, AMS shall
obtain, or cause to be obtained, all necessary and required consents,
approvals, resolutions and documentation in connection with the
Repurchase (including, without limitation, the consent of the Wisconsin
Department of Insurance to the Special Dividend), and, AMS shall
provide evidence of such consents and approvals to the Agent, together
with copies of all required resolutions and documents with respect
thereto, all of which shall be reasonably acceptable to the Agent and
its counsel. Immediately upon receipt of such necessary and required
consents, approvals, resolutions and documentation, AMS shall cause the
Special Dividend to be declared and paid, and, immediately upon receipt
of the proceeds of the Special Dividend, AMS shall apply such proceeds
to effect the Repurchase and any costs related thereto.
"6.30 Purchase Agreement Remedies. In the event of any breach
of the representations and warranties of the Seller Group contained in
the Purchase Agreement with respect to the shares of stock of AMS which
are the subject of the Repurchase, which breach could reasonably be
expected to give rise to a Material Adverse Effect, AMS covenants and
agrees to diligently pursue all of the rights and remedies available to
it under the Purchase Agreement or otherwise with respect to such
breach."
2.14 Section 7.3 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"7.3. The breach by AMS of any of the terms or provisions of
Section 6.1, Section 6.2, Section 6.4 or Sections 6.10 through 6.27."
2.15 Section 7.4 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"7.4. The breach by AMS (other than a breach which constitutes
a Default under another Section of this Article VII) of any of the
terms or provisions of any Loan Document which is not remedied within
twenty (20) days after the earlier of (i) the receipt by AMS of notice
thereof from Agent or any Lender or (ii) having obtained knowledge
thereof."
2.16 Section 7.5 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"7.5. Failure of AMS or any of its Subsidiaries to make any
payment when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) in respect of any Indebtedness
aggregating in excess of $1,500,000 ("Material Indebtedness"); or the
default by AMS or any of its Subsidiaries in the performance (beyond
the applicable grace period with respect thereto, if any) of any term,
provision or condition contained in any agreement under which any such
Material Indebtedness was created or is governed, or any other event
shall occur or condition exist, the effect of which default or event is
to cause, or to permit the holder or holders of such Material
Indebtedness to cause, such Material Indebtedness to become due prior
to its stated maturity; or any Material Indebtedness of AMS or any of
its Subsidiaries shall be declared to be due and payable or required to
be prepaid or repurchased (other than by a regularly scheduled payment)
prior to the stated maturity thereof; or AMS or any of its Subsidiaries
becomes unable, or admits in writing its inability or fails generally
to pay its debts as they become due."
2.17 Section 7.6 of the Credit Agreement is hereby deleted in its entirety and
amended by inserting the following in its stead:
"7.6. AMS or any of its Subsidiaries shall (a) have an order
for relief entered with respect to it under any Debtor Relief Laws as
now or hereafter in effect, (b) make an assignment for the benefit of
creditors, (c) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or
similar official for it or any Substantial Portion of its Property, (d)
institute (or consent to the institution of) any proceeding seeking an
order for relief under any Debtor Relief Laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors or fail
to file an answer or other pleading denying the material allegations of
any such proceeding filed against it, (e) take any corporate or
partnership action to authorize or effect any of the foregoing actions
set forth in this Section 7.6 or (f) fail to contest in good faith any
appointment or proceeding described in Section 7.7."
2.18 Section 12.2.1 of the Credit Agreement is hereby amended by deleting the
first sentence thereof and inserting the following in its stead:
"Any Lender may, in the ordinary course of its business and in
accordance with applicable law, at any time sell to one or more banks
or other entities ("Participants") participating interests in any Loan
owing to such Lender, any Note held by such Lender, any Commitment of
such Lender or any other interest, right and/or obligation of such
Lender under the Loan Documents."
SECTION 3. WAIVER OF CERTAIN COVENANT DEFAULTS. The Agent, on behalf of itself
and the Lenders, waives any Default which may occur due solely to a breach by
AMS of Section 6.16 of the Credit Agreement solely in connection with the
Repurchase; provided, however, that such waiver shall not constitute a future
waiver of any Default under such Section or of any other provision of the Credit
Agreement which, in any case, is not in connection with the Repurchase.
SECTION 4. RELEASE OF COLLATERAL ASSIGNMENT. Contemporaneously with the
effectiveness of this Amendment, the Agent, at the direction and with the
consent of the Lenders hereby terminates that certain Collateral Assignment and
Security Agreement dated as of November 10, 2000 (the "Assignment") made by AMS
in favor of the Agent for the benefit of the Lenders, with respect to Account
No. ▇▇-▇▇▇▇▇▇▇ and all funds contained therein.
SECTION 5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is
expressly conditioned upon satisfaction of the following conditions precedent:
5.1 The Agent shall have received copies of this Amendment duly executed and
delivered by AMS and each of the Lenders.
5.2 The Agent shall have received a duly executed copy of the Stock
Purchase Agreement dated as of March 19, 2002, by and among Blue Cross & Blue
Shield United of Wisconsin, Cobalt Corporation and AMS, executed and delivered
in connection with the Repurchase, together with any and all agreements,
instruments and other documents executed and/or delivered in connection
therewith.
5.3 The Agent shall have received, for the benefit of the Agent and the
Lenders, an amendment fee of $226,183 due and payable and deemed fully earned on
the date hereof.
5.4 The Agent shall have received a $3,500 processing assignment fee due and
payable by AMS to the Agent pursuant to Section 12.3.2 of the Credit Agreement.
5.5 The Agent and the Lenders shall have received copies of the Assignment
Agreement duly executed by Bank of America, N.A. and First Union, including
evidence that, contemporaneously with the execution of the Assignment Agreement,
(i) First Union shall have returned the Revolving Note in favor of First Union
to AMS and (ii) Bank of America, N.A. shall have received a Revolving Note in
favor of Bank of America, N.A. duly executed by AMS.
5.6 The Agent and the Lenders shall have received such other documents,
certificates and assurances as they shall reasonably request.
SECTION 6. REAFFIRMATION OF AMS. AMS hereby represents and warrants to the Agent
and the Lenders that (i) the representations and warranties set forth in the
Loan Documents are true and correct on and as of the date hereof, except to the
extent (a) that any such representations and warranties relate to a specific
date, or (b) changes thereto are a result of transactions for which the Agent
and the Lenders have granted their consent; (ii) each of Holdings and AMS is on
the date hereof in compliance with all of the terms and provisions set forth in
the Loan Documents to which it is a party, in each case (and to the extent
applicable), as hereby amended; and (iii) both before and after giving effect to
this Amendment, there exists no Default or Unmatured Default.
SECTION 7. FULL FORCE AND EFFECT. Except as herein amended, the Credit Agreement
and all other Loan Documents shall remain in full force and effect.
SECTION 8. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
SECTION 9. GOVERNING LAW. This Amendment shall be construed in accordance with
the internal laws (and not the law of conflicts) of the State of Illinois, but
giving effect to federal laws applicable to national banks.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on
the day and year specified above.
AMERICAN MEDICAL SECURITY GROUP, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
LASALLE BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Assistant Vice President
BANK OF AMERICA, N.A.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Principal
ASSOCIATED BANK GREEN BAY, NATIONAL
ASSOCIATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Senior Vice President
ACKNOWLEDGMENT AND AGREEMENT OF HOLDINGS
The undersigned, AMERICAN MEDICAL SECURITY HOLDINGS, INC., hereby
ratifies and reaffirms (a) that certain Guaranty dated March 24, 2000 (the
"Guaranty") made by the undersigned in favor of the Agent and the Lenders and
(b) that certain Stock Pledge Agreement dated March 24, 2000 (the "Pledge
Agreement") between the undersigned and the Agent and each of the terms and
provisions (including, without limitation, the representations and warranties)
contained therein, and agrees that each of the Guaranty and the Pledge Agreement
continues in full force and effect following the execution and delivery of the
foregoing Amendment. The undersigned represents and warrants to the Agent and
the Lenders that each of the Guaranty and the Pledge Agreement was, on the date
of the execution and delivery thereof, and continues to be, the valid and
binding obligation of the undersigned enforceable in accordance with its terms
and that the undersigned has no claims or defenses to the enforcement of the
rights and remedies of the Agent and the Lenders under the Guaranty or the
Pledge Agreement, and further that it is in compliance with all of the terms and
provisions set forth in each of the Loan Documents to which it is a party.
IN WITNESS WHEREOF, this Acknowledgment and Agreement of Holdings has
been duly authorized as of this 21st day of March, 2002.
AMERICAN MEDICAL SECURITY HOLDINGS, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Title: Chief Financial Officer