Exhibit 10.1

FOURTH AMENDMENT TO CREDIT AGREEMENT

Dated as of October 19, 2004

with respect to that certain

CREDIT AGREEMENT

Dated as of March 3, 2003

among

SIERRA HEALTH SERVICES, INC.,

as Borrower,

and

Certain Subsidiaries of the Borrower from time to time party hereto,

as Guarantors,

BANK OF AMERICA, N.A.,

as Administrative Agent and L/C Issuer,

and

The Other Lenders Party Hereto

CALYON NEW YORK BRANCH

(formerly known as Credit Lyonnais New York Branch),

and

U.S. BANK NATIONAL ASSOCATION

,

as

Syndication Agents,

 

BANC OF AMERICA SECURITIES LLC,

CALYON NEW YORK BRANCH and

U.S. BANK NATIONAL ASSOCATION,

as

Joint Book Managers

BANC OF AMERICA SECURITIES LLC,

as

Sole Lead Arranger

FOURTH AMENDMENT TO CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered into as
of October 19, 2004 among (i) SIERRA HEALTH SERVICES, INC., a Nevada corporation
(the "Borrower"), (ii) the subsidiaries of the Borrower identified as Guarantors
on the signature pages hereto, (iii) the Lenders identified on the signature
pages hereto and (iv) BANK OF AMERICA, N.A., as Administrative Agent (the
"Administrative Agent"). All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed to such terms in the Credit Agreement
referred to below.

RECITALS

A. A Credit Agreement dated as of March 3, 2003 (as amended by that certain
First Amendment to Credit Agreement dated as of September 5, 2003, that certain
Second Amendment to Credit Agreement dated as of January 26, 2004, that certain
Third Amendment to Credit Agreement dated as of May 27, 2004, and as further
amended or modified, the "Credit Agreement") has been entered into by and among
the Borrower, the Guarantors party thereto (the "Guarantors"), the financial
institutions party thereto (the "Lenders") and the Administrative Agent.

B. The Borrower has requested that (i) the Lenders amend certain provisions of
the Credit Agreement by making certain modifications thereto and (ii) the
aggregate Commitments under the Credit Agreement be increased to $100,000,000
(which increase shall be provided by certain of the existing Lenders and New
Lenders (as defined herein) in accordance with the revised Schedule 2.01
attached hereto as Exhibit B).

C. The Lenders (including the New Lenders, as applicable) have agreed to the
requested amendments to the Credit Agreement and to the increase to the
Commitments on the terms and conditions hereinafter set forth.

AGREEMENT

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendments to Credit Agreement.

(a) Amendments to Section 1.01. The following defined terms and related
definitions are hereby amended as follows:

(i) The definition of "Aggregate Commitments" in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:

""Aggregate Commitments" means the Commitments of all the Lenders. The initial
amount of the Aggregate Commitments in effect on the Fourth Amendment Effective
Date is ONE HUNDRED MILLION DOLLARS ($100,000,000)."

(ii) The definition of "Applicable Rate" in Section 1.01 of the Credit Agreement
is hereby amended by deleting the pricing grid contained therein and replacing
it with the following:

 

 

 

Pricing Level

 

 

Consolidated Leverage Ratio

Eurodollar Rate Loans and Letter of Credit Fee

 

 

Base Rate Loans

 

 

 

Facility Fee

All-In Drawn Cost for Eurodollar Rate Loans

1

< 0.50 to 1.00

0.750%

0.000%

0.250%

1.000%

2

>

0.50 to 1.00 but < 1.00 to 1.00

1.200%

0.200%

0.300%

1.500%

3

>

1.00 to 1.00 but < 1.50 to 1.00

1.375%

0.375%

0.375%

1.750%

4

>

1.50 to 1.00 but < 2.00 to 1.00

1.625%

0.625%

0.375%

2.000%

5

>

2.00 to 1.00

2.000%

1.000%

0.500%

2.500%

(iii) The definition of "Applicable Rate" in Section 1.01 of the Credit
Agreement is hereby further amended by deleting the last sentence thereof and
replacing it with the following:

"Notwithstanding the foregoing, the Applicable Rate in effect from the Fourth
Amendment Effective Date through the first Business Day after the date on which
the Borrower delivers the required financial statements and Compliance
Certificate for the fiscal quarter ending December 31, 2004 shall be no less
than the Applicable Rate determined based upon Pricing Level 2."

(iv) The definition of "Audited Financial Statements" in Section 1.01 of the
Credit Agreement is hereby amended by deleting the reference therein to "2001"
and replacing it with a reference to "2003".

(v) The definition of "Consolidated EBITDA" in Section 1.01 of the Credit
Agreement is hereby amended by deleting the "and" before the "(v)" in clause (b)
and adding a new clause (b)(vi) at the end of such definition to read as
follows:

"and (vi) non-cash amortization of stock compensation expense."

(vi) The definition of "Eurodollar Rate" in Section 1.01 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:

""Eurodollar Rate" means, for any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the British Bankers Association LIBOR
Rate ("BBA LIBOR"), as published by Reuters (or other commercially available
source providing quotations of BBA LIBOR as designated by the Administrative
Agent from time to time) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period, for Dollar deposits (for
delivery on the first day of such Interest Period) with a term equivalent to
such Interest Period. If such rate is not available at such time for any reason,
then the "Eurodollar Rate" for such Interest Period shall be the rate per annum
determined by the Administrative Agent to be the rate at which deposits in
Dollars for delivery on the first day of such Interest Period in same day funds
in the approximate amount of the Eurodollar Rate Loan being made, continued or
converted by Bank of America and with a term equivalent to such Interest Period
would be offered by Bank of America's London Branch to major banks in the London
interbank eurodollar market at their request at approximately 11:00 a.m. (London
time) two Business Days prior to the commencement of such Interest Period."

(vii) The definition of "Excluded Property" in Section 1.01 of the Credit
Agreement is hereby amended by deleting the "and" before the "(f)" and adding a
new clause (g) at the end of such definition to read as follows:

"and (g) any equity investments listed on Schedule 6.13(c) (which equity
investments shall be limited to those listed on Schedule 6.13(c) prior to the
Fourth Amendment Effective Date)."

(viii) The definition of "Excluded Subsidiary" in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:

""Excluded Subsidiary" means (i) for so long as such Subsidiary is regulated by
the department of insurance or similar agency of any State, each Subsidiary
listed on Schedule 6.13(b) and any other Subsidiary created by the Borrower
after the Fourth Amendment Effective Date that is regulated by the department of
insurance or similar agency of any State and (ii) any Subsidiary of the Borrower
which has assets of less than 1% of the total assets of the Borrower and its
Subsidiaries as of the last day of the most recent fiscal year of the Borrower
for which the Borrower has delivered the Required Financial Information or has
revenues of less than 1% of the total revenues of the Borrower and it
Subsidiaries for the most recent fiscal year of the Borrower for which the
Borrower has delivered the Required Financial Information; provided, however,
the aggregate amount of assets for all Excluded Subsidiaries under this
clause (ii) shall not exceed 3% of the total assets of the Borrower and its
Subsidiaries as of the last day of the most recent fiscal year of the Borrower
for which the Borrower has delivered the Required Financial Information and the
aggregate amount of revenues for all Excluded Subsidiaries under this clause
(ii) shall not exceed 3% of the total revenues of the Borrower and its
Subsidiaries for the most recent fiscal year of the Borrower for which the
Borrower has delivered the Required Financial Information."

(ix) The definition of "Lenders" in Section 1.01 of the Credit Agreement is
hereby deleted in its entirety and replaced with the following:

""Lenders" means a collective reference to the Persons identified as "Lenders"
on the signature pages hereto, together with any Person that subsequently
becomes a Lender (i) in accordance with Section 2.13 hereof and (ii) by way of
assignment in accordance with the terms of Section 11.7, in each case together
with their respective successors, and "Lender" means any one of them."

(x) The definition of "Letter of Credit" in Section 1.01 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:

""Letter of Credit" means any standby letter of credit issued hereunder and
shall include the Existing Letter of Credit."

(xi) The definition of "Material Adverse Effect" in Section 1.01 of the Credit
Agreement is hereby amended by deleting the proviso therein in its entirety and
replacing it with the following:

"provided, however, the foregoing shall not include (a) the sale of certain
assets of CII, (b) the reclassification of the Borrower's workers' compensation
insurance operations as discontinued operations and (c) the phase out of the
Borrower's military contract business as a result of the expiration of its
existing TRICARE contract and its failure to win a new TRICARE contract in the
T-Nex bid process, in each case to the extent disclosed in the Borrower's Form
10-Q report filed with the SEC for the period ending June 30, 2004."

(xii) The definition of "Maturity Date" in Section 1.01 of the Credit Agreement
is hereby deleted in its entirety and replaced with the following:

""Maturity Date" means December 31, 2009."

(xiii) The definition of "Syndication Agent" in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:

""Syndication Agents" means Calyon New York Branch (formerly known as Credit
Lyonnais New York Branch) and U.S. Bank National Association."

(b) Further Amendments to Section 1.01. The following defined term and related
definition is hereby inserted into Section 1.01 of the Credit Agreement in
appropriate alphabetical order:

""Fourth Amendment Effective Date" means October 19, 2004, which is the
effective date of the Fourth Amendment to this Agreement."

(c) Amendment to Section 2.01. Section 2.01 of the Credit Agreement is hereby
amended by deleting both references therein to "2.01(a)" and replacing each with
a reference to "2.01".

(d) Amendment to Section 2.13. Section 2.13(a) of the Credit Agreement is hereby
amended by deleting the reference therein to "$125,000,000" and replacing it
with a reference to "$200,000,000."

(e) Amendment to Section 4.08. Section 4.08 of the Credit Agreement is hereby
deleted in its entirety.

(f) Amendment to Section 6.05. Section 6.05 of the Credit Agreement is hereby
amended by deleting each reference therein to "September 30, 2002" and replacing
it with "June 30, 2004".

(g) Amendment to Section 6.29. Section 6.29 of the Credit Agreement is hereby
deleted in its entirety.

(h) Amendment to Section 7.02. Section 7.02(k) of the Credit Agreement is hereby
deleted in its entirety.

(i) Further Amendment to Section 7.02. Section 7.02 of the Credit Agreement is
hereby amended by adding the following paragraph at the end thereof:

"In the event any "public side" Lender (i.e., any Lender that does not wish to
receive material non-public information with respect to the Borrower or its
securities) (a "Public Lender") becomes a party to this Agreement, then, upon
the Borrower's receipt of notice thereof, the Borrower agrees to develop with
the Administrative Agent and such Public Lender mutually satisfactory procedures
regarding the delivery to such Public Lender of information as required by
Section 6.01 of this Agreement."

(j) Amendment to Section 7.10. Section 7.10 of the Credit Agreement is hereby
amended by deleting the reference therein to "Syndication Agent" and replacing
it with a reference to "Syndication Agents".

(k) Amendment to Section 7.13. Section 7.13(a) of the Credit Agreement is hereby
amended by deleting the first parenthetical in its entirety and replacing it
with the following:

"(other than (A) Excluded Property and (B) the issued and outstanding Capital
Stock of any Non-Pledged Subsidiary (as defined below))"

(l) Further Amendment to Section 7.13. Section 7.13(a) of the Credit Agreement
is hereby further amended by deleting the fourth parenthetical in its entirety
and replacing it with the following:

"(other than any Non-Pledged Subsidiary)"

(m) Amendment to Section 7.15. Section 7.15(b) of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:

"(b) Consolidated Net Worth. At all times on and after the Third Amendment
Effective Date cause Consolidated Net Worth to be not less than the sum of (i)
$142,000,000 (representing 85% of Consolidated Net Worth as of June 30, 2004),
plus (ii) an amount equal to 50% of Consolidated Net Income (to the extent
positive) for each full fiscal quarter ending after June 30, 2004 (i.e., with no
deduction for a net loss in any such fiscal quarter), plus (iii) an amount equal
to 100% of the aggregate increases in Consolidated Net Worth after the Fourth
Amendment Effective Date by reason of the issuance and sale of Capital Stock or
other equity interests of the Borrower or any Subsidiary (other than issuances
to the Borrower or a Wholly Owned Subsidiary, issuances pursuant to employee
stock purchase plans and exercises of employee stock options), including upon
any conversion of debt securities of the Borrower into such Capital Stock or
other equity interest, minus (iv) any loss realized upon the sale or other
Disposition of CII or any assets owned directly or indirectly by CII, minus (v)
the amount paid by the Borrower after June 30, 2004 to repurchase the Borrower's
common stock in accordance with Section 8.06(e)."

(n) Amendment to Section 7.16. Section 7.16 of the Credit Agreement is hereby
amended by adding the following as a new clause (c):

"(c) On or before November 30, 2004, (or such later date as the Administrative
Agent may reasonably agree to in writing if the Credit Parties are diligently
pursuing such items in good faith) the Borrower will cause certificates of good
standing to be delivered to the Administrative Agent for each of (A) Behavioral
Healthcare Options, Inc. in Arizona, Illinois and Texas; (B) Sierra Health-Care
Options, Inc. in California, Indiana, Louisiana, Mississippi, Missouri and New
Jersey; and (C) Sierra Home Medical Products, Inc. in Arizona and California, in
each case certified as of a recent date by the appropriate Governmental
Authorities."

(o) Amendment to Section 8.06. Section 8.06(e)(y) of the Credit Agreement is
hereby deleted in its entirety. Section 8.06(e)(z) and the parenthetical
following such subsection are hereby deleted in their entirety and replaced with
the following:

"(y) Fiscal Year Cap. The aggregate amount paid to make such Restricted Payment,
together with the aggregate amount paid to make all other Restricted Payments
pursuant to this Section 8.06(e) and all Convertible Bond Repurchases pursuant
to Section 8.12 from and after the Fourth Amendment Effective Date and during
the same fiscal year:

(i) if upon giving effect to such Restricted Payment (as well as to any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Restricted Payment) the Consolidated Leverage Ratio would
be less than 1.25 to 1.00, shall be unlimited,

(ii) if upon giving effect to such Restricted Payment (as well as to any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Restricted Payment) (A) the Consolidated Leverage Ratio
would be equal to or greater than 1.25 to 1.00 but less than or equal to 1.75 to
1.00 and (B) there shall be at least $25,000,000 of remaining availability
existing under the Aggregate Commitments, shall not exceed $75,000,000,

(iii) if upon giving effect to such Restricted Payment (as well as to any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Restricted Payment) (A) the Consolidated Leverage Ratio
would be greater than 1.75 to 1.00 but less than or equal to 2.00 to 1.00 and
(B) there shall be at least $25,000,000 of remaining availability existing under
the Aggregate Commitments, shall not exceed $50,000,000, or

(iv) if upon giving effect to such Restricted Payment (as well as to any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Restricted Payment) the Consolidated Leverage Ratio would
be greater than 2.00 to 1.00, shall not be permitted,

(it being understood that if a Restricted Payment was permitted under this
Section 8.06(e) at the time of consummation, a Default shall not exist solely
because the Consolidated Leverage Ratio subsequently increases and the
applicable basket set forth in this clause (e) changes)."

(p) Amendment to Section 8.11. Section 8.11 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:

"8.11 Capital Expenditures.

During each fiscal year set forth below, permit Consolidated Capital
Expenditures in such fiscal year to exceed the amount set forth opposite such
fiscal year:

Fiscal Year

Amount

2004

$30,000,000

2005

$35,000,000

2006

$37,000,000

2007

$37,000,000

2008

$45,000,000

2009

$45,000,000

In addition, the Borrower shall be permitted to add to the amount set forth
above up to $5,000,000 for fiscal years 2004, 2005 and 2006, 2007, 2008 and 2009
of the unused amount available for Consolidated Capital Expenditures under this
Section 8.11 for the immediately preceding fiscal year (excluding any carry
forward available from any prior fiscal year); provided, however, that with
respect to any fiscal year, Consolidated Capital Expenditures made during such
fiscal year shall be deemed to be made first with respect to the applicable
limitation for such fiscal year and then with respect to any carry-forward from
the immediately preceding fiscal year."

(q) Amendment to Section 8.12. Section 8.12 of the Credit Agreement is hereby
deleted in its entirety and replaced with the following:

"8.12 Prepayment of Other Indebtedness, Etc.

Permit any Consolidated Party to:

(a) amend or modify any of the terms of any Indebtedness of such Consolidated
Party (other than Indebtedness under the Loan Documents) if such amendment or
modification would add or change any terms in a manner which considered in their
totality would be adverse to such Consolidated Party, or shorten the final
maturity or average life to maturity or require any payment to be made sooner
than originally scheduled or increase the interest rate applicable thereto, or

(b) (i) make (or give any notice with respect thereto) any voluntary, optional
or other non-scheduled payment or prepayment (whether or not mandatory, but
excluding any scheduled amortization or payment solely in Capital Stock of the
Borrower) in respect of any Indebtedness of such Consolidated Party (other than
Indebtedness under the Loan Documents), other than in the case of any
Disposition of any Property permitted hereunder, the prepayment of any
Indebtedness secured by a Lien on such Property, but only from the proceeds of
such Disposition, or (ii) make (or give any notice with respect thereto) any
cash payments in respect of any of the following: a redemption, acquisition for
value (including, without limitation, by way of depositing money or securities
with the trustee with respect thereto before due for the purpose of paying when
due), refund, refinance or exchange of any Indebtedness of such Consolidated
Party (other than Indebtedness under the Loan Documents); provided, however,
that so long as no Default or Event of Default shall have occurred and be
continuing, the Borrower may make payments with respect to:

(y) Indebtedness (but excluding any Convertible Bond Repurchase) in an aggregate
amount not to exceed $10,000,000 during the term of this Agreement; and

(z) subject to the proviso immediately following this clause (z), cash payments
made voluntarily to purchase, redeem or repurchase the Convertible Bonds (each
such purchase, redemption or repurchase being referred to herein as a
"Convertible Bond Repurchase") so long as, at the time of any such Convertible
Bond Repurchase the aggregate amount paid to make such Convertible Bond
Repurchase, together with the aggregate amount paid to make all other
Convertible Bond Repurchases pursuant to this Section 8.12 and all Restricted
Payments pursuant to Section 8.06(e) from and after the Fourth Amendment
Effective Date and during the same fiscal year:

(I) if upon giving effect to such Convertible Bond Repurchase (as well as to any
Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Convertible Bond Repurchase) the Consolidated Leverage
Ratio would be less than 1.25 to 1.00, shall be unlimited,

(II) if upon giving effect to such Convertible Bond Repurchase (as well as to
any Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Convertible Bond Repurchase) (A) the Consolidated Leverage
Ratio would be equal to or greater than 1.25 to 1.00 but less than or equal to
1.75 to 1.00 and (B) there shall be at least $25,000,000 of remaining
availability existing under the Aggregate Commitments, shall not exceed
$75,000,000,

(III) if upon giving effect to such Convertible Bond Repurchase (as well as to
any Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Convertible Bond Repurchase) (A) the Consolidated Leverage
Ratio would be greater than 1.75 to 1.00 but less than or equal to 2.00 to 1.00
and (B) there shall be at least $25,000,000 of remaining availability existing
under the Aggregate Commitments, shall not exceed $50,000,000, or

(IV) if upon giving effect to such Convertible Bond Repurchase (as well as to
any Indebtedness incurred in connection therewith) on a Pro Forma Basis (as
demonstrated by delivery to the Administrative Agent of a Pro Forma Compliance
Certificate if any additional Indebtedness is incurred by the Borrower in
connection with such Convertible Bond Repurchase) the Consolidated Leverage
Ratio would be greater than 2.00 to 1.00, shall not be permitted;

provided

further that, notwithstanding the foregoing clause (z), the Borrower shall not
make any cash payment in connection with a Convertible Bond Repurchase resulting
from a put of the Convertible Bonds on the March 15, 2008 put date pursuant to
the Convertible Bond Indenture."

(r) Amendment to Section 11.08. Section 11.08 is hereby amended by deleting the
second and third paragraphs therefrom.

(s) Amendments to Schedules to the Credit Agreement and Related Definitions and
Representations and Warranties.

(i) Each of Schedules 1.01, 2.01, 6.03, 6.13(a), 6.13(b), 6.13(c), 6.17,
6.20(a), 6.20(b), 6.20(c), 7.13(c), 8.01, 8.02, 8.03 and 11.02 to the Credit
Agreement is hereby deleted in its entirety and replaced with the corresponding
Schedule as set forth on Exhibit A hereto.

(ii) The definition of "Guarantors" in Section 1.01 of the Credit Agreement is
hereby amended by deleting the reference therein to "Closing Date" and replacing
it with a reference to "Fourth Amendment Effective Date".

(iii) Sections 6.05, 6.13, 6.20, 6.22, 6.23, 8.01, 8.02 and 8.03 of the Credit
Agreement are hereby amended by deleting each reference therein to "Closing
Date" and replacing it with a reference to "Fourth Amendment Effective Date".

2. Increase in the Aggregate Commitments and the Addition of New Lenders.

From and after the Fourth Amendment Effective Date, by execution of this
Amendment, each Person identified on the signature pages hereto as a New Lender
(a "New Lender") hereby acknowledges, agrees and confirms that such Person will
be deemed to be a party to the Credit Agreement as amended hereby and a "Lender"
for all purposes of the Credit Agreement as amended hereby and shall have all of
the obligations of a Lender thereunder as if it had executed the Credit
Agreement as amended hereby. Such Person hereby ratifies, as of the date hereof,
and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Lenders contained in the Credit Agreement as amended hereby
and in the other Loan Documents. Each of the Lenders (including the New Lenders)
acknowledges and agrees that its Commitment as of the Fourth Amendment Effective
Date is the amount set forth opposite such Person's name on Exhibit B attached
hereto.

The Borrower shall prepay any Revolving Loans outstanding on the Fourth
Amendment Effective Date (and pay any additional amounts required pursuant to
Section 3.05 of the Credit Agreement) to the extent necessary to keep the
outstanding Revolving Loans ratable with any revised Pro Rata Shares arising
from any nonratable increase in the Commitments pursuant to this Amendment.

3. Joinder of Additional Guarantors; Release of Certain Guarantors.

(a) As of the Fourth Amendment Effective Date and in lieu of executing a joinder
agreement as set forth in Section 7.12 of the Credit Agreement, each of the
Guarantors set forth on Exhibit A attached hereto that is not already a party to
the Credit Agreement (the "Additional Guarantors") hereby acknowledges, agrees
and confirms that, by its execution of this Amendment, such Additional Guarantor
shall be deemed to be a party to the Credit Agreement and a "Guarantor" for all
purposes of the Credit Agreement and the other Loan Documents, and shall have
all of the obligations of a Guarantor thereunder as if it had executed the
Credit Agreement and the other Loan Documents. Each Additional Guarantor hereby
ratifies, as of the date hereof, and agrees to be bound by, all of the terms,
provisions and conditions contained in the Loan Documents, including without
limitation (i) the guaranty provisions contained in Article IV of the Credit
Agreement, (ii) all of the representations and warranties of the Loan Parties
set forth in Article VI of the Credit Agreement and (iii) all of the affirmative
and negative covenants set forth in Articles VII and VIII of the Credit
Agreement. Without limiting the generality of the foregoing terms of this
paragraph (a), each Additional Guarantor hereby jointly and severally together
with the other Guarantors, guarantees to each Lender, the Administrative Agent
and the L/C Issuer as provided in the Credit Agreement the prompt payment and
performance of the Obligations of the Borrower in full when due (whether at
stated maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) strictly in accordance with the terms thereof
and agrees that if any of such Obligations are not paid or performed in full
when due (whether at stated maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise), each
Additional Guarantor will, jointly and severally together with the other
Guarantors, promptly pay and perform the same, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Obligations of the Borrower, the same will be promptly paid in
full when due (whether at extended maturity, as a mandatory prepayment, by
acceleration, as a mandatory cash collateralization or otherwise) in accordance
with the terms of such extension or renewal.

(b) Each Additional Guarantor acknowledges and confirms that it has received a
copy of the Credit Agreement and the schedules and exhibits thereto. The
information on the schedules to the Credit Agreement is hereby amended to
provide the information shown on the attached Exhibit A.

(c) The Borrower confirms that each of its obligations under the Credit
Agreement is, and upon the Additional Guarantors becoming a Guarantor, shall
continue to be, in full force and effect. The parties hereto confirm and agree
that immediately upon each of the Additional Guarantors becoming a Guarantor the
term "Obligations," as used in the Credit Agreement, shall include all
obligations of such Guarantor under the Credit Agreement and under each other
Loan Document.

(d) Each Additional Guarantor hereby agrees that upon becoming a Guarantor it
will assume all Obligations of a Guarantor as set forth in the Credit Agreement.

(e) Each of the Borrower and each of the Additional Guarantors agrees that at
any time and from time to time, upon the written request of the Administrative
Agent, it will execute and deliver such further documents and do such further
acts and things as the Administrative Agent may reasonably request in order to
effect the purposes of this Amendment.

4. Conditions Precedent to Effectiveness. The amendments to the Credit Agreement
set forth herein shall be deemed effective as of the date hereof (the "Fourth
Amendment Effective Date") when (and only when) each of the following conditions
precedent has been satisfied:

(a) The Administrative Agent shall have received (1) counterparts of this
Amendment, which shall have been duly executed on behalf of the Borrower, each
of the Guarantors (including the Additional Guarantors), the Lenders under the
Credit Agreement (including each of the New Lenders), and (2) in the case of
each New Lender that has requested a Revolving Note, a Revolving Note (in the
same (or substantially similar) form as originally executed) in favor of such
Lender reflecting such New Lender's Commitment.

(b) The Administrative Agent shall have received the following, each of which
shall be originals or facsimiles (followed promptly by originals) unless
otherwise specified, each properly executed by a Responsible Officer of the
signing Loan Party, each dated the Fourth Amendment Effective Date (or, in the
case of certificates of governmental officials, a recent date before the Fourth
Amendment Effective Date) and each in form and substance reasonably satisfactory
to the Administrative Agent and its legal counsel:

(i) copies of the Organization Documents of each Loan Party certified to be true
and complete as of a recent date by the appropriate Governmental Authority of
the state or other jurisdiction of its incorporation or organization, where
applicable, and certified by a secretary or assistant secretary of such Loan
Party to be true and correct as of the Fourth Amendment Effective Date;

(ii) such certificates of resolutions or other action, incumbency certificates
and/or other certificates of Responsible Officers of each Loan Party as the
Administrative Agent may reasonably require (A) approving this Amendment,
including the increase to the Aggregate Commitments, and (B) evidencing the
identity, authority and capacity of each Responsible Officer thereof authorized
to act as a Responsible Officer in connection with this Agreement and the other
Loan Documents to which such Loan Party is a party; and

(iii) such documents and certifications as the Administrative Agent may
reasonably require to evidence that each Loan Party is duly organized or formed,
and is validly existing, in good standing and qualified to engage in business in
(A) the jurisdiction of its incorporation or organization and (B) each
jurisdiction where its ownership, lease or operation of properties or the
conduct of its business requires such qualification, except to the extent that
failure to do so could not reasonably be expected to have a Material Adverse
Effect.

(c) Opinions of Counsel. The Administrative Agent shall have received, in each
case dated as of the Fourth Amendment Effective Date and in form and substance
reasonably satisfactory to the Administrative Agent: an opinion of (i) Morgan,
Lewis & Bockius, special counsel to the Borrower and the Guarantors, covering
enforceability of the Loan Documents, non-contravention of material agreements,
perfection of liens and other customary matters to be agreed upon; and (ii)
internal Nevada counsel to the Borrower and the Guarantors, covering certain
corporate matters and other matters to be agreed upon.

(d) Officer's Certificates. The Administrative Agent shall have received a
certificate or certificates executed by a Responsible Officer of the Borrower as
of the Fourth Amendment Effective Date, in form and substance satisfactory to
the Administrative Agent, stating that the conditions specified in
Sections 5.02(a) and (b) have been satisfied.

(e) Regulatory Compliance.

The Administrative Agent shall have received a certificate executed by a
Responsible Officer on behalf of each of the HMO Subsidiaries to the effect that
such Subsidiary is in material compliance with the requirements of all
applicable HMO Regulations and with all other Laws, except for such non
compliance as could not reasonably be expected to have a Material Adverse
Effect.

(f) Fees. Any fees required to be paid on or before the Fourth Amendment
Effective Date shall have been paid.

(g) Attorney Costs. Unless waived by the Administrative Agent, the Borrower
shall have paid all Attorney Costs of the Administrative Agent to the extent
invoiced prior to or on the Fourth Amendment Effective Date, plus such
additional amounts of Attorney Costs as shall constitute its reasonable estimate
of Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a final
settling of accounts between the Borrower and the Administrative Agent).

(h) Accuracy of Representations and Warranties. The representations and
warranties of the Borrower and each other Loan Party contained in Section 5
hereof shall be true and correct on and as of the Fourth Amendment Effective
Date.

(i) No Default. No Default shall exist and be continuing as of the Fourth
Amendment Effective Date.

(j) Board of Directors Approval. The Borrower shall have obtained approval from
its Board of Directors to enter into this Fourth Amendment to Credit Agreement
and the transactions related thereto.

(k) Temporary Repayment of Loans. The Borrower shall have repaid all outstanding
Loans as of the Fourth Amendment Effective Date immediately prior to (or
concurrently with) the effectiveness of this Amendment.

5. Representations and Warranties. Each of the Loan Parties hereby represents
and warrants that:

(a) It has taken all necessary action to authorize the execution, delivery and
performance of this Amendment.

(b) This Amendment has been duly executed and delivered by such Loan Party and
constitutes such Loan Party's legal, valid and binding obligation, enforceable
in accordance with its terms, except as such enforceability may be limited (x)
by general principles of equity and conflicts of laws (whether enforcement is
sought by proceedings in equity or at law) and (y) by bankruptcy,
reorganization, insolvency, moratorium or other laws of general application
relating to or affecting the enforcement, of creditors' rights.

(c) No consent, approval, authorization or order of, or filing, registration or
qualification with, any court or governmental authority or third party is
required in connection with the execution, delivery or performance by such Loan
Party of this Amendment (except for those which have been obtained on or prior
to the Fourth Amendment Effective Date).

(d) The execution and delivery of this Amendment does not diminish or reduce its
obligations under the Loan Documents (including, without limitation, in the case
of each Guarantor, such Guarantor's guaranty pursuant to Article IV of the
Credit Agreement) in any manner, except as specifically set forth herein.

(e) Such Loan Party has no claims, counterclaims, offsets, or defenses to the
Loan Documents and the performance of its obligations thereunder, or if such
Loan Party has any such claims, counterclaims, offsets, or defenses to the Loan
Documents or any transaction related to the Loan Documents, the same are hereby
waived, relinquished and released in consideration of the Lenders' execution and
delivery of this Amendment.

(f) No action, suit, investigation or proceeding is pending or, to the knowledge
of any Loan Party, threatened in any court or before any arbitrator or
governmental instrumentality that purports to affect any Loan Party or any
transaction contemplated by the Loan Documents, if such action, suit,
investigation or proceeding could reasonably be expected to have a Material
Adverse Effect.

(g) The representations and warranties contained in Article VI of the Credit
Agreement, as amended hereby are correct in all material respects on and as of
the date hereof as though made on and as of such date and after giving effect to
the amendments contained herein (except to the extent relating specifically to a
prior date).

(h) No Default or Event of Default exists on and as of the date hereof and after
giving effect to the amendments contained herein.

6. Ratification of Credit Agreement. Except as expressly modified and amended in
this Amendment, all of the terms, provisions and conditions of the Loan
Documents shall remain unchanged and in full force and effect. The term "this
Agreement" or "Credit Agreement" and all similar references as used in each of
the Loan Documents shall hereafter mean the Credit Agreement as amended by this
Amendment. Except as herein specifically agreed, the Credit Agreement is hereby
ratified and confirmed and shall remain in full force and effect according to
its terms.

7. Expenses. The Borrower agrees to pay all reasonable costs and expenses in
connection with the preparation, execution and delivery of this Amendment,
including without limitation the reasonable fees and expenses of Moore & Van
Allen PLLC, special counsel to the Administrative Agent.

8. Counterparts/Telecopy. This Amendment may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall constitute one and the same instrument. Delivery of
executed counterparts by telecopy shall be effective as an original.

9. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

10. Entirety. This Amendment and the other Loan Documents embody the entire
agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof. These Loan
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral agreements
of the parties. There are no oral agreements between the parties.

11. Acknowledgment of Guarantors. The Guarantors acknowledge and consent to all
of the terms and conditions of this Amendment and agree that this Amendment and
any documents executed in connection herewith do not operate to reduce or
discharge the Guarantors' obligations under the Credit Agreement or the other
Loan Documents.

12. Affirmation of Liens. Each Loan Party affirms the liens and security
interests created and granted by it in the Loan Documents (including, but not
limited to, the Security Agreement) and agrees that this Amendment shall in no
manner adversely affect or impair such liens and security interests.

 

 

[Signature pages to follow]

IN WITNESS WHEREOF, the parties hereto have caused this Amendment, to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.

BORROWER

:

SIERRA HEALTH SERVICES, INC.

     

By: /s/ Paul H. Palmer

 

Name: Paul H. Palmer

 

Title: Chief Financial Officer and Treasurer

   

GUARANTORS

:

BEHAVIORAL HEALTHCARE OPTIONS, INC.

     

By: /s/ Paul H. Palmer

 

Name: Paul H. Palmer

 

Title: Treasurer

     

CII FINANCIAL, INC.

     

By: /s/ David Sonenstein

 

Name: David Sonenstein

 

Title: Secretary

     

FAMILY HEALTHCARE SERVICES

     

By: /s/ Darren G. D. Sivertsen

 

Name: Darren G. D. Sivertsen

 

Title: President

     

FAMILY HOME HOSPICE, INC.

     

By: /s/ Darren G. D. Sivertsen

 

Name: Darren G. D. Sivertsen

 

Title: President

     

SIERRA NEVADA ADMINISTRATORS, INC.
(formerly known as Nevada Administrators, Inc.)

     

By: /s/ David Sonenstein

 

Name: David Sonenstein

 

Title: Secretary

     

SIERRA HEALTH HOLDINGS, INC.

     

By: /s/ Frank Collins

 

Name: Frank Collins

 

Title: President

     

SIERRA HEALTH-CARE OPTIONS, INC.

     

By: /s/ Darren G. D. Sivertsen

 

Name: Darren G. D. Sivertsen

 

Title: Secretary

     

SIERRA HOME MEDICAL PRODUCTS, INC.

     

By: /s/ Darren G. D. Sivertsen

 

Name: Darren G. D. Sivertsen

 

Title: President

     

SOUTHWEST MEDICAL ASSOCIATES, INC.

     

By: /s/ James Marcotte

 

Name: James Marcotte

 

Title: Treasurer

     

SOUTHWEST REALTY, INC.

     

By: /s/ Frank Collins

 

Name: Frank Collins

 

Title: Secretary

     

SIERRA FINANCIAL AGENCY, INC.

     

By: /s/ John Okita

 

Name: John Okita

 

Title: Chief Financial Officer

   

ADMINISTRATIVE AGENT:

BANK OF AMERICA, N.A.

, in its capacity as Administrative Agent      

By: /s/ Kevin L. Ahart

 

Name: Kevin L. Ahart

 

Title: Assistant Vice President

   

LENDERS

:

BANK OF AMERICA, N.A

., as a Lender and L/C Issuer      

By: /s/ Joseph L. Corah

 

Name: Joseph L. Corah

 

Title: Principal

     

U.S. BANK NATIONAL ASSOCIATION

     

By: /s/ Christian E. Stein III

 

Name: Christian E. Stein III

 

Title: Vice President

     

CALYON NEW YORK BRANCH
(formerly known as Credit Lyonnais New York Branch)

     

By: /s/ Charles Heidsieck

 

Name: Charles Heidsieck

 

Title: Managing Director

     

By: /s/ Douglas Weir

 

Name: Douglas Weir

 

Title: Director

   

NEW LENDER:

LEHMAN BROTHERS COMMERICAL PAPER INC.

     

By: /s/ Francis Chang

 

Name: Francis Chang

 

Title: Authorized Signatory

   

NEW LENDER:

GENERAL ELECTRIC CAPITAL CORPORATION

     

By: /s/ Brent Shepherd

 

Name: Brent Shepherd

 

Title: Duly Authorized Signatory