SECOND AMENDMENT AGREEMENT
Second Amendment Agreement, dated as of June 28, 1996 (this
"Amendment"), among Foundation Health Corporation, a Delaware corporation
(the "Borrower"), the lenders (the "Lenders") listed on the signature pages
hereof and Citicorp USA, Inc. ("CUSA"), as administrative agent (the
"Agent") for the Lenders.
PRELIMINARY STATEMENTS:
1. The Borrower, the Lenders, the Agent, Wells Fargo Bank,
N.A. and NationsBank of Texas, N.A., as co-agents (the "Co-Agents") for the
Lenders, and Citicorp Securities, Inc., as arranger (the "Arranger"), have
entered into a Revolving Credit Agreement, dated as of December 5, 1994, as
amended by a First Amendment Agreement dated as of August 1, 1995 (such
credit agreement, as it may be amended and in effect from time to time,
being referred to herein as the "Credit Agreement"; terms defined therein and
not otherwise defined herein being used herein as therein defined).
2. The Borrower, the Lenders and the Agent wish to amend the
Credit Agreement to (i) amend the definitions of "Applicable Eurodollar
Margin," "Applicable Percentage," "Cash Equivalents," Exempt Acquisition,"
"Fixed Charges," "Permitted Investments," "Permitted Liens" and "Public Debt
Rating" contained in Section 1.01 of the Credit Agreement; (ii) amend Section
4.01(a) of the Credit Agreement regarding prohibited securities transactions;
(iii) amend Section 5.02(f) of the Credit Agreement regarding Investments in
other Persons; (iv) amend Section 5.03(b) of the Credit Agreement regarding
Fixed Charge Coverage Ratio; and (v) memorialize certain matters with respect
to Lenders, their Commitments and the Co-Agents.
NOW, THEREFORE, in consideration of the premises set forth above
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement
is, effective as of June 28, 1996 (the "Amendment Effective Date") and
subject to the satisfaction of the conditions precedent set forth in Section
2 hereof, hereby amended as follows:
(a) The table set forth below the definition of "APPLICABLE
EURODOLLAR MARGIN" is hereby amended in full to read as follows:
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Public Debt Rating Total Debt/Total Applicable Eurodollar
S&P/Moody's Capitalization Ratio Margin
------------------ ----------------------- ---------------------
LEVEL 1
A-/or above Less than 0.15 to 1.00 .200%
LEVEL 2
Below A- but equal Greater than or equal
to or above BBB+ to 0.15 to 1.00 but
less than 0.25 to 1.00 .225%
LEVEL 3
Equal to BBB Greater than or equal
to 0.25 to 1.00 but
less than 0.35 to 1.00 .250%
LEVEL 4
Equal to BBB- Greater than or equal
to 0.35 to 1.00 but less
than 0.40 to 1.00 .325%
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(b) The table set forth below the definition of "APPLICABLE
PERCENTAGE" is hereby amended in full to read as follows:
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Public Debt Rating Total Debt/Total Applicable Percentage
S&P/Moody's Capitalization Ratio
------------------ ----------------------- ---------------------
LEVEL 1
A-/ or above Less than 0.15 to 1.00 .100%
LEVEL 2
Below A- but equal Greater than or equal
to or above BBB+ to 0.15 to 1.00 but less
than 0.25 to 1.00 .125%
LEVEL 3
Equal to BBB Greater than or equal to
0.25 to 1.00 but less
than 0.35 to 1.00 .150%
LEVEL 4
Equal to BBB- Greater than or equal
to 0.35 to 1.00 but less
than 0.40 to 1.00 .175%
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(c) Clauses (ii) and (iii) of the definition of "Cash
Equivalents" appearing in Section 1.01 of the Credit Agreement are hereby
amended in full to read as follows.
" (ii) United States Treasury bills, notes, bonds, and securities
issued by an agency of the United States government and having a maturity
within seven years from the date of acquisition, (iii) tax-exempt
securities having a long-term rating at the time of acquisition equivalent
to BBB or higher by any
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Nationally Recognized Statistical Rating Organization or short-term
rating equivalent to MIG-1 by any Nationally Recognized Statistical
Rating Organization, or that are supported by a credit agreement from an
institution whose long- or short-term ratings are as set forth above,
and in each case which have a maturity within seven years from the date
of acquisition; and"
(d) The definition of "Exempt Acquisition" appearing in Section 1.01 of
the Credit Agreement is hereby amended by deleting the reference to
"$50,000,000" and replacing it with "$100,000,000."
(e) The definition of "Fixed Charges" appearing in Section 1.01 of the
Credit Agreement is hereby amended in full to read as follows:
"FIXED CHARGES" means, for any period and without duplication, the sum
of (i) Interest Expense and fees paid on, and amortization of debt
discount in respect of, all Debt (including the interest portion of
rentals under Capital Leases during such period) PLUS (ii) Operating
Lease Rentals paid during such period PLUS (iii) the aggregate principal
amount of all Debt (including the principal portion of rentals under
Capital Leases) paid during such period (excluding (a) voluntary
prepayments of principal not required under the loan documents relating
to such Debt, (b) any contingent portion of the deferred purchase price
incurred in connection with any Acquisition and (c) the principal
portion of any one-time repayments of Indebtedness required to be made
as a result of a change of control in connection with any Acquisition)
PLUS (iv) the aggregate amount of all cash dividends paid by the
Borrower during such period."
(f) The definition of "Permitted Investments" appearing in Section 1.01
of the Credit Agreement is hereby amended in full to read as follows:
""PERMITTED INVESTMENTS" means (i) Cash Equivalents; (ii) commercial
paper issued by companies incorporated in the United States and having a
short-term rating at the time of acquisition equivalent to A-1 or higher
by any Nationally Recognized Statistical Rating Organization and
maturing within 270 days from the date of acquisition; (iii) bonds and
notes issued by companies incorporated in the United States and having a
long-term rating at the time of acquisition equivalent to BBB or higher
by any Nationally Recognized Statistical Rating Organization and having
a maturity within seven years from the date of acquisition; (iv) auction
rate preferred stock issued by companies incorporated in the United
States and having a long-term rating at the time of acquisition
equivalent to BBB or higher by any Nationally Recognized Statistical
Rating Organization; (v) obligations of any foreign government or
authority of any
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country in which the Borrower or its Subsidiaries conducts business,
which obligations have a rating at the time of acquisition equivalent to
A or higher by any Nationally Recognized Statistical Rating Organization
and which mature within seven years from the date of acquisition; (vi)
publicly traded common and preferred stock issued by companies
incorporated in the United States and which at the time of acquisition
either (a) has outstanding a series of bonds or notes which have a
long-term rating equivalent to BBB or higher by any Nationally
Recognized Statistical Rating Organization or (b)(i) is in the same or a
related line of business as the Borrower or any of its Material
Subsidiaries; (ii) has been subject to the requirements of Section 12 or
15(d) of the Securities Exchange Act of 1934 and has filed all the
material required to be filed pursuant to Sections 13, 14 or 15(d)
thereof for the preceding twelve calendar months; and (iii) has not, nor
has any of its consolidated subsidiaries, since the end of the last
fiscal year for which certified financial statements were included in a
report filed pursuant to the Securities Exchange Act of 1934, (A) failed
to pay any dividend or sinking fund installment on preferred stock or
(B) defaulted on any Indebtedness which could, with the giving of notice
or lapse of time or both, result in an amount equal to or greater than
10% of the consolidated net income of such company, as reported in the
most recent certified financial statements included in a report filed
pursuant to the Securities Exchange Act of 1934, becoming due and
payable; PROVIDED, that no more than 4.9% of any class of outstanding
equity securities of any company that is subject to the reporting
requirements of the Securities Exchange Act of 1934 may be held by the
Borrower and its Subsidiaries at any one time; and (vii) other
Investments not otherwise described above acquired as a result of a
Permitted Investment, Permitted Acquisition or Exempt Acquisition so
long as such Investment was an Investment of the acquired company on the
date such company was acquired by the Borrower or any of its
Subsidiaries and was not made at the request or instigation of the
Borrower or any of its Subsidiaries. Notwithstanding the foregoing, (a)
any Subsidiary licensed in any jurisdiction to transact life, accident,
health, disability or workers' compensation insurance business may make
Investments otherwise permitted under clauses (i), (ii), (iii), and (v)
above having maturity dates later than those specified under such
clauses so long as any such Investment by any such Subsidiary is rated
at the time of acquisition "BBB" or better by a Nationally Recognized
Statistical Rating Organization, (b) at no time may more than 5% of the
aggregate of all Investments under clauses (i), (ii), (iii), (iv), (v),
(vi) and (vii) represent the securities of any single Person other than
the United States Federal Government or agencies thereof or issuers
whose obligations are guaranteed by the United States Federal Government
or an agency thereof (provided that Investments in the securities of
mutual funds shall not be so limited as long as the mutual fund does not
invest more than 5% of its assets in the securities of
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any single Person), (c) at no time may more than 15% of the aggregate of
all Investment under clauses (i), (ii), (iii), (iv), (v), (vi), and (vii)
represent Investments under clause (vi), (d) at no time may more than 5%
of the aggregate of all Investments under clauses (i), (ii), (iii), (iv),
(v), (vi), and (vii) represent Investments under clause (vii), and (e)
any Investment permitted by clause (vii) and not otherwise permitted by
clauses (i), (ii), (iii), (iv), (v) or (vi) shall be disposed of within
one (1) year of the date that such company was acquired by the Borrower
or such Subsidiary. For purposes of the foregoing, "A", "A-1" and "BBB"
shall have the meanings assigned to such terms by S&P as of the date
hereof and the comparable rating terms utilized by any other Nationally
Recognized Statistical Rating Organization."
(g) Clause (x) of the definition of "Permitted Liens" appearing in Section
1.01 of the Credit Agreement is hereby amended in full to read as follows:
"(x) liens on the property or assets of Subsidiaries of the Borrower not
otherwise described in clauses (i) through (ix) above securing obligations
not in excess, at any time, of $65,000,000; and"
(h) The definition of "Public Debt Rating" appearing in Section 1.01 of
the Credit Agreement is hereby amended by deleting the reference to "Level
3" and replacing it with "Level 4."
(i) Section 4.01(n) of the Credit Agreement is hereby amended in full to
read as follows:
"(n) PROHIBITED SECURITIES TRANSACTIONS. No proceeds of any Revolving
Advance will be used by the Borrower or any of its Subsidiaries to
acquire any equity security of a class which is registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, other than
Permitted Investments; PROVIDED, HOWEVER, that proceeds of Revolving
Advances may be used by the Borrower to acquire shares of Common Stock
for aggregate consideration of not to exceed $40,000,000 during the
Covered Period."
(j) Subsection (f) of Section 5.02 of the Credit Agreement is hereby
amended in full to read as follows:
"(f) INVESTMENTS IN OTHER PERSONS. After the date hereof, 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
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otherwise Invest in or acquire, any other Person (whether through merger,
consolidation, combination or otherwise), except for (i) Permitted
Investments, (ii) loans or advances by a Subsidiary of the Borrower to the
Borrower, by the Borrower to any Subsidiary of the Borrower or by any
Subsidiary of the Borrower to another Subsidiary of the Borrower, (iii)
Permitted Acquisitions, (iv) employee loans and advances, (v) capital
contributions by the Borrower to a Subsidiary of the Borrower or by any
Subsidiary of the Borrower; (vi) Investments in any Person whose business
is connected or related to the Borrower's (including its Subsidiaries')
existing or related line of business, PROVIDED, the aggregate amount of
Investments under this subclause (vi) made after the date hereof and
outstanding at any time does not exceed (A) for Investments made prior to
the end of the Borrower's 1995 Fiscal Year, $50,000,000 and (B) for
Investments made after the end of the Borrower's 1995 Fiscal Year, a sum
equal to (1) $50,000,000 plus (2) $50,000,000 multiplied by the number of
the Borrower's Fiscal Years that have commenced since the end of the
Borrower's 1995 Fiscal Year; (vii) tax-advantaged Investments (whether
through debt, equity, partnership interests or otherwise) in low-income
housing not aggregating in excess of $10,000,000 at any time; (viii)
Investments not otherwise permitted by clauses (i) through (vii) hereof
not in excess of $10,000,000 at any time; and (ix) loans, advances,
guarantees or Investments which arise in connection with the sale,
transfer or other disposition of any business, shares of capital stock or
assets of any Subsidiary or affiliated company or otherwise permitted by
Section 5.02(e) hereof as part of the consideration for such sale,
transfer or disposition."
(k) Subsection (b) of Section 5.03 of the Credit Agreement is hereby
amended in full to read as follows:
"(b) FIXED CHARGE COVERAGE RATIO. Permit, as at the end of any Fiscal
Quarter of the Borrower listed below, the Consolidated Fixed Charge
Coverage Ratio of the Borrower and its Subsidiaries for the four-Fiscal
Quarter period ending on the last day of such Fiscal Quarter to be less
than the minimum ratio set forth opposite such Fiscal Quarter:
Minimum
Fiscal Quarter Ratio
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December 31, 1994 3.0 to 1.0
March 31, 1995 3.0 to 1.0
June 30, 1995 3.0 to 1.0
September 30, 1995 3.0 to 1.0
December 31, 1995 4.0 to 1.0
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March 31, 1996 4.0 to 1.0
June 30, 1996 4.5 to 1.0
September 30, 1996 4.5 to 1.0
December 31, 1996 and each Fiscal
Quarter thereafter 5.0 to 1.0"
(l) Section 2.01 of the Credit Agreement is hereby amended by deleting
the reference to "the signature pages hereof" appearing in the first sentence
thereof and replacing it with "the signature pages of that certain Second
Amendment Agreement, dated as of June 28, 1996 among the Borrower, the
Lenders and the Agent."
(m) The Preamble to the Credit Agreement is hereby amended by deleting
the reference to "Wells Fargo Bank, N.A." and replacing it with "Bank of
America, N.T. & S.A.", and Bank of America, N.T. & S.A. shall be a Co-Agent
under the Credit Agreement as of the Amendment Effective Date.
SECTION 2. CONDITIONS OF EFFECTIVENESS. This Amendment shall become
effective as of the Amendment Effective Date if, on or prior to that date,
(i) the Agent shall have received counterparts of this Amendment duly
executed by the Borrower, the Majority Lenders and the Agent, together with
such other documents or information as the Agent may reasonably request; (ii)
the Agent shall have received (a) confirmatory letters from Wells Fargo Bank,
N.A., and The Nippon Credit Bank Ltd. (the "Departing Banks") acknowledging
the cancellation of their respective Commitments under the Credit Agreement
effectuated by this Amendment and (b) payment from the Borrower, for the
account of the Departing Banks, in immediately available funds, of (x) all
accrued facility and other fees and interest accrued or owed to the Departing
Banks to the Amendment Effective Date and (y) the principal balance of all
Advances owed to the Departing Banks, together with any prepayment premium due
thereon pursuant to the Credit Agreement; and (iii) duly executed Revolving
Notes, dated as of a date specified by the Agent, payable to the order of
each Lender, in the amount of such Lender's Commitment (as in effect
immediately after the Amendment Effective Date) in exchange for which each
Lender shall return the Revolving Note issued to it pursuant to the Credit
Agreement to the Borrower marked "cancelled and exchanged for replacement
note".
SECTION 3. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT. (a)
Upon the effectiveness of this Amendment, on and after the date hereof, each
reference in the Credit Agreement to "this Agreement," "hereunder," "hereof"
or words of like import referring to the Credit Agreement, shall mean and be
a reference to the Credit Agreement as amended hereby.
(b) Except as specifically amended above, the Credit Agreement is
and shall continue to be in full force and effect and is hereby ratified and
confirmed in all respects.
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(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of any Lender or
the Agent under the Credit Agreement, nor constitute a waiver of any
provision of the Credit Agreement. Each of The Sanwa Bank, Limited, The
Dai-Ichi Kangyo Bank, Limited, and The Sumitomo Bank Limited, shall be a
Lender under the Credit Agreement, as amended hereby.
SECTION 4. FEES, COSTS AND EXPENSES. The Borrower agrees to pay on
demand all reasonable costs and expenses of the Agent incurred in connection
with the preparation, execution, delivery, administration, modification and
amendment of this Amendment and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and
out-of-pocket expenses of the Agent's legal counsel. The Borrower further
agrees to pay on demand all costs and expenses of the Agent and the Lenders
(including, without limitation, reasonable fees and expenses of the Agent's
legal counsel) in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Amendment and other
documents to be delivered under this Amendment.
SECTION 5. EXECUTION OF COUNTERPARTS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
SECTION 6. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE BORROWER:
FOUNDATION HEALTH CORPORATION
By:
--------------------------
Name:
Title:
THE AGENT:
CITICORP USA, INC.
By:
--------------------------
Name:
Title:
THE LENDERS:
$35,000,000 CITICORP USA, INC.
By:
--------------------------
Name:
Title:
$30,000,000 NATIONSBANK OF TEXAS, N.A.
By:
--------------------------
Name:
Title:
10
$30,000,000 BANK OF AMERICA N.T. & S.A.
By:
--------------------------
Name:
Title:
$27,500,000 THE CHASE MANHATTAN BANK N.A.
By:
--------------------------
Name:
Title:
$25,000,000 UNION BANK OF CALIFORNIA N.A.
By:
--------------------------
Name:
Title:
$22,500,000 THE BANK OF NOVA SCOTIA
By:
--------------------------
Name:
Title:
11
$22,500,000 THE DAI-ICHI KANGYO BANK, LIMITED
SAN FRANCISCO AGENCY
By:
--------------------------
Name:
Title:
$22,500,000 THE FUJI BANK LIMITED
By:
--------------------------
Name:
Title:
$20,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A.
"RABOBANK NEDERLAND",
NEW YORK BRANCH
By:
--------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
$20,000,000 THE SUMITOMO BANK, LIMITED,
SAN FRANCISCO AGENCY
By:
-------------------------
Name:
Title:
12
$15,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By:
-------------------------
Name:
Title:
$15,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By:
-------------------------
Name:
Title:
$15,000,000 THE SANWA BANK, LIMITED
By:
-------------------------
Name:
Title:
- ---------------
$300,000,000