FOURTH AMENDMENT TO
CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT is made and dated as of March
26, 1999 (the "FOURTH Amendment") among FOUNDATION HEALTH SYSTEMS, INC. (the
"COMPANY"), the Banks party to the Credit Agreement referred to below, and BANK
OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, a national banking
association, as Administrative Agent (the "AGENT"), and amends that certain
Credit Agreement dated as of July 8, 1997, as amended by that certain First
Amendment and Waiver to Credit Agreement (the "FIRST AMENDMENT") dated as of
April 6, 1998, that certain Second Amendment to Credit Agreement (the "SECOND
AMENDMENT") dated as of July 31, 1998 and that certain Third Amendment (the
"THIRD AMENDMENT") dated as of November 6, 1998 (as further amended or modified
from time to time, the "CREDIT AGREEMENT").
RECITALS
WHEREAS, the Company has requested the Agent and the Banks to amend
certain provisions of the Credit Agreement, and the Agent and the Banks are
willing to do so, on the terms and conditions specified herein;
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. TERMS. All terms used herein shall have the same meanings as in
the Credit Agreement unless otherwise defined herein.
2. AMENDMENT. The Credit Agreement is hereby amended as follows:
2.1 AMENDMENTS TO SECTION 1.01.
(a) The definition of the term "Adjusted EBITDA" in Section
1.01 of the Credit Agreement is hereby amended by inserting ", any Specified
Credits (calculated on a pre-tax basis)" after the words "any Specified Charges"
in the fourth line thereof.
(b) The definition of the term "Net Cash Flow" in Section 1.01
of the Credit Agreement is hereby amended by inserting ", any Specified Credits
(calculated on a net of tax basis)" prior to the words "extraordinary gains" in
the third line thereof.
(c) The definition of the term "Net Worth" in Section 1.01 of
the Credit Agreement is hereby amended and restated in its entirety to read as
follows:
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"NET WORTH" of the Company on any day of determination means
an amount equal to the excess of Total Assets over Total Liabilities.
(d) There shall be added to Section 1.01 of the Credit
Agreement, in appropriate alphabetical sequence, a new definition of the term
"Specified Credits" reading in its entirety as follows:
"SPECIFIED CREDITS" means the gains (net of costs and expenses
of sale) realized from the sale of those assets set forth on Part 3 of
Schedule 1.01 hereof.
2.2 AMENDMENT TO SCHEDULE 1.01.
(a) Schedule 1.01 of the Credit Agreement is hereby amended
and restated to read in its entirety as set forth on Schedule 1.01 hereto.
2.3 AMENDMENTS TO SECTION 2.09.
(a) The first sentence of Clause (e) of Section 2.09 of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:
"Subject to Section 3.04, until the aggregate
Commitments shall have permanently been reduced to an amount not in
excess of $750,000,000, the Company shall ratably prepay Committed
Loans by an amount equal to (A) 100% of the net cash proceeds from the
sale of its assets described on Schedule 2.09 (without giving effect to
clause (ii) below) and (B) 50% of net cash proceeds from all other
asset sales except for (i) the Workers Compensation Disposition and
(ii) asset sales generating aggregate net proceeds up to $10,000,000 in
any fiscal year."
(b) Section 2.09 of the Credit Agreement is hereby amended by
adding the following subsection (f) thereto:
"(f) Subject to Section 3.04, until the aggregate
Commitments shall have permanently been reduced to an amount not in
excess of $750,000,000, at any time that the Company's Senior Unsecured
Debt Rating shall not be at or above BBB - by S&P or at or above Baa3
by Moody's, the Company shall ratably prepay Committed Loans by an
amount equal to 100% of the net proceeds from any issuance by the
Company of equity securities after December 31, 1998 (other than any
equity securities issued in connection with an Acquisition). Such
prepayment shall be made on the next Interest Payment Date for Offshore
Rate Committed Loans (or, if there shall be no Offshore Rate Committed
Loans outstanding, on the next Interest Payment Date for Base Rate
Committed Loans) occurring after completion of such issuance. The
Company shall give the Administrative Agent not less than one Business
Day's notice of such prepayment, and such notice of prepayment shall
specify the date and amount of such prepayment and the Type(s) of
Committed Loans to be prepaid. The Administrative Agent will promptly
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notify each Bank of its receipt of any such notice, and of such Bank's
Pro Rata Share of such prepayment. If such notice is given by the
Company, the Company shall make such prepayment and the payment amount
specified in such notice shall be due and payable on the date specified
therein, together with, in the case of Offshore Rate Committed Loans
only, accrued interest to each such date on the amount prepaid and any
amounts required pursuant to Section 3.04. On the date such prepayment
is required to be made, the aggregate Commitments shall automatically
and permanently be reduced by the amount of the required prepayment."
2.4 ADDITION OF SCHEDULE 2.09.
(a) There shall be added to the Credit Agreement a new
Schedule 2.09 reading in its entirety as set forth on Schedule 2.09 hereto.
2.5 AMENDMENTS TO SECTION 7.12.
(a) Clause (c) of Section 7.12 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:
"(c) its Net Worth to be less than the sum of (w) 85%
of Net Worth as of December 31, 1998 PLUS (x) 50% of the net income of
the Company and its Subsidiaries (without giving effect to losses) for
each fiscal quarter ending on or after March 31, 1999 ."
3. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Agent and the Banks that, on and as of the date hereof, and
after giving effect to this Fourth Amendment:
3.1 AUTHORIZATION. The execution, delivery and performance by
the Company of this Fourth Amendment has been duly authorized by all necessary
corporate action, and this Fourth Amendment has been duly executed and delivered
by the Company.
3.2 BINDING OBLIGATION. This Fourth Amendment constitutes the
legal, valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, or similar laws affecting the enforcement of creditors'
rights generally or by equitable principles relating to enforceability.
3.3 NO LEGAL OBSTACLE TO AMENDMENT. The execution, delivery
and performance of this Fourth Amendment will not (a) contravene the
Organization Documents of the Company; (b) constitute a breach or default under
any contractual restriction or violate or contravene any law or governmental
regulation or court decree or order binding on or affecting the Company which
individually or in the aggregate does or could reasonably be expected to
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have a Material Adverse Effect; or (c) result in, or require the creation or
imposition of, any Lien on any of the Company's properties. No approval or
authorization of any governmental authority is required to permit the
execution, delivery or performance by the Company of this Fourth Amendment,
or the transactions contemplated hereby.
3.4 INCORPORATION OF CERTAIN REPRESENTATIONS. After giving
effect to the terms of this Fourth Amendment, the representations and warranties
of the Company set forth in Article V of the Credit Agreement are true and
correct in all respects on and as of the date hereof as though made on and as of
the date hereof, except as to such representations made as of an earlier
specified date.
3.5 DEFAULT. No Default or Event of Default under the Credit
Agreement has occurred and is continuing.
4. CONDITIONS, EFFECTIVENESS. The effectiveness of this Fourth
Amendment shall be subject to the compliance by the Company with its agreements
herein contained, and to the delivery of the following to Agent in form and
substance satisfactory to Agent of the following on or before March 31, 1999:
4.1 AUTHORIZED SIGNATORIES. A certificate, signed by the
Secretary or an Assistant Secretary of the Company and dated the date of this
Fourth Amendment, as to the incumbency of the person or persons authorized to
execute and deliver this Fourth Amendment and any instrument or agreement
required hereunder on behalf of the Company.
4.2 FEES. Payment to the Administrative Agent, for the pro
rata benefit of each Bank that executed and returned the approval letter dated
March 16, 1999 from the Agent to the Banks (the "Approval Letter") on or before
3:00 p.m., Pacific time, on March 26, 1999 and that thereafter executed this
Fourth Amendment prior to March 31, 1999, of an amendment fee in an amount equal
to .25% of the aggregate amount of the Commitments held by the Banks that have
so executed the Approval Letter and this Fourth Amendment; and payment of all
other fees and expenses of the Arrangers in connection with this Fourth
Amendment (including, without limitation, the reasonable fees and expenses of
the counsel to the Arrangers).
4.3 OTHER EVIDENCE. Such other evidence with respect to the
Company or any other person as the Agent or any Bank may reasonably request to
establish the consummation of the transactions contemplated hereby, the taking
of all corporate action in connection with this Fourth Amendment and the Credit
Agreement and the compliance with the conditions set forth herein.
5. CONDITION SUBSEQUENT. On or before May 30, 1999, the Company
shall deliver to the Agent a certificate, signed by the Secretary or an
Assistant Secretary of the Company as to the resolutions of the Company's board
of directors authorizing or ratifying the transactions contemplated by the
Fourth Amendment, which certificate shall be in form and substance
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satisfactory to the Agent. If the Company shall fail to deliver such a
certificate by May 30, 1999, then this Fourth Amendment shall cease to be
effective as of such date.
6. MISCELLANEOUS.
6.1 EFFECTIVENESS OF THE CREDIT AGREEMENT AND THE NOTES.
Except as hereby expressly amended, the Credit Agreement and the Notes shall
each remain in full force and effect, and are hereby ratified and confirmed in
all respects on and as of the date hereof.
6.2 WAIVERS. This Fourth Amendment is limited solely to the
matters expressly set forth herein and is specific in time and in intent and
does not constitute, nor should it be construed as, a waiver or amendment of any
other term or condition, right, power or privilege under the Credit Agreement or
under any agreement, contract, indenture, document or instrument mentioned
therein; nor does it preclude or prejudice any rights of the Agent or the Banks
thereunder, or any exercise thereof or the exercise of any other right, power or
privilege, nor shall it require the Majority Banks to agree to an amendment,
waiver or consent for a similar transaction or on a future occasion, nor shall
any future waiver of any right, power, privilege or default hereunder, or under
any agreement, contract, indenture, document or instrument mentioned in the
Credit Agreement, constitute a waiver of any other right, power, privilege or
default of the same or of any other term or provision.
6.3 COUNTERPARTS. This Fourth Amendment may be executed in any
number of counterparts, and all of such counterparts taken together shall be
deemed to constitute one and the same instrument. This Fourth Amendment shall
become effective when the Company, the Agent and the Majority Banks shall have
signed a copy hereof and the same shall have been delivered to the Agent.
6.4 GOVERNING LAW. This Fourth Amendment shall be governed by
and construed in accordance with the laws of the State of California.
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed and delivered as of the date first written above.
FOUNDATION HEALTH SYSTEMS, INC.
By: /s/ signature
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BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION, as Administrative Agent
By: /s/ signature
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[Balance of signatures not included with this copy]
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