<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1994
------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transaction period from ____________ to ____________
Commission File Number 1-10540
------------------
Foundation Health Corporation
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 68-0014772
- - - ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3400 Data Drive, Rancho Cordova, CA 95670
- - - ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
(916) 631-5000
- - - ----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of January 31, 1995:
Common Stock, $0.01 par value 56,959,308
- - - ----------------------------- ----------------
Class Number of Shares
<PAGE>
FOUNDATION HEALTH CORPORATION
INDEX TO FORM 10-Q
PAGE
Part I - Financial Information
Item 1 - Financial Statements
Consolidated Balance Sheets - December 31, 1994 and
June 30, 1994 3
Consolidated Statements of Operations for the Quarters
and Six Months Ended December 31, 1994 and 1993 4
Condensed Consolidated Statements of Cash Flows for the
Six Months Ended December 31, 1994 and 1993 5
Notes to Consolidated Financial Statements 6 - 12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 19
Part II - Other Information
Item 1 - Legal Proceedings 20
Item 4 - Submission of Matters to a Vote of Security Holders 21
Item 6 - Exhibits and Reports on Form 8-K 23
Signature 24
Index to Exhibits 25
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FOUNDATION HEALTH CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31, June 30,
------------ ----------
1994 1994
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 210,530 $ 165,209
Investments 554,365 600,363
Amounts receivable under government contracts 70,369 136,188
Reinsurance receivable 117,213 122,046
Premium and patient receivables 96,446 93,127
Property and equipment, net 189,969 143,088
Goodwill and other intangible assets, net 422,097 105,535
Deferred income taxes 40,238 44,534
Other assets 117,681 88,418
------------ ----------
$ 1,818,908 $1,498,508
------------ ----------
------------ ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Reserves for claims, losses and loss adjustment expenses $ 660,686 $ 615,742
Notes payable and capital leases 164,802 170,108
Amounts payable under government contracts 37,456 50,953
Accrued dividends to policyholders 21,557 30,026
Other liabilities 273,523 209,236
------------ ----------
1,158,024 1,076,065
------------ ----------
Stockholders' Equity:
Common stock and additional paid in capital 544,084 264,976
Retained earnings 169,184 194,800
Net unrealized holding losses, net of tax effect (16,654) --
Common stock held in treasury, at cost (35,730) (37,333)
------------ ----------
660,884 422,443
------------ ----------
$ 1,818,908 $1,498,508
------------ ----------
------------ ----------
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
FOUNDATION HEALTH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Quarter Ended December 31, Six Months Ended December 31,
------------------------- -----------------------------
1994 1993 1994 1993
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Commercial premiums $ 401,788 $ 318,692 $ 792,577 $ 623,343
Government contracts 45,969 197,060 93,947 426,693
Specialty services revenue 127,079 101,771 257,337 171,725
Patient service revenue, net 10,715 10,021 19,964 19,542
Investment and other income 12,998 9,949 29,099 17,518
---------- ---------- ---------- ----------
598,549 637,493 1,192,924 1,258,821
---------- ---------- ---------- ----------
Expenses:
Commercial health care services 312,953 245,598 622,597 487,717
Government contracts health care services 17,236 43,395 29,489 100,192
Government contracts subcontractor costs 15,437 102,042 42,643 229,239
Specialty services costs 108,807 100,660 223,188 166,354
Patient service costs 8,607 8,878 17,256 17,107
Selling, general and administrative 74,393 78,740 146,483 150,264
Amortization and depreciation 10,186 7,155 18,093 13,648
Interest expense 2,953 3,360 5,860 6,768
Acquisition and restructuring costs 124,822 -- 124,822 --
---------- ---------- ---------- ----------
675,394 589,828 1,230,431 1,171,289
---------- ---------- ---------- ----------
Income (loss) before income taxes and minority interest (76,845) 47,665 (37,507) 87,532
Provision for (benefit from) income taxes (28,070) 18,456 (14,153) 34,227
Minority interest 492 1,891 2,262 3,689
---------- ---------- ---------- ----------
Net income (loss) $ (49,267) $ 27,318 $ (25,616) $ 49,616
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per share $ (0.90) $ 0.56 $ (0.49) $ 1.03
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares outstanding 54,755,405 48,517,392 52,200,075 48,070,346
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
FOUNDATION HEALTH CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Six Months Ended December 31,
-----------------------------
1994 1993
----------- -----------
(Unaudited)
<S> <C> <C>
Net cash provided by operating activities $ 147,419 $ 112,333
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment (47,862) (24,179)
Purchases of available for sale investments (379,502) --
Sales/maturities of available for sale investments 407,176 --
Purchases of held to maturity investments (27,883) --
Maturities of held to maturity investments 65,160 --
Purchases of short-term investments -- (187,500)
Sales/maturities of short-term investments -- 248,273
Purchases of fixed maturity investments -- (470,399)
Sales/maturities of fixed maturity investments -- 350,399
(Increase) decrease in goodwill and intangibles (65,483) --
Increase in other assets (18,162) (3,108)
Acquisition of businesses (30,735) (51,961)
----------- -----------
Net cash used for investing activities (97,291) (138,475)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable and capital leases (34,549) (17,048)
Proceeds from notes payable and capital leases, plus
accrued interest 23,048 443
Proceeds from issuance of common stock 5,940 392
Proceeds from exercise of stock options 498 3,273
Tax benefits related to stock options exercised 256 1,545
Purchase of treasury stock -- (27,429)
----------- -----------
Net cash used for financing activities (4,807) (38,824)
----------- -----------
Net decrease in cash and cash equivalents 45,321 (64,966)
Cash and cash equivalents, beginning of period 165,209 185,664
----------- -----------
Cash and cash equivalents, end of period $ 210,530 $ 120,698
----------- -----------
----------- -----------
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Interest paid $ 7,392 $ 7,056
----------- -----------
----------- -----------
Income taxes paid $ 23,959 $ 30,705
----------- -----------
----------- -----------
Noncash investing and financing activities:
Assumption of stock options $ -- $ 367
----------- -----------
----------- -----------
Unrealized holding gains (losses) $ (7,635) $ --
----------- -----------
----------- -----------
Capital lease obligations $ -- $ 2,360
----------- -----------
----------- -----------
Dividends declared, not paid $ -- $ 2,000
----------- -----------
----------- -----------
Acquisition of businesses:
Assets acquired $ 373,422 $ 498,863
Liabilities assumed (48,515) (425,621)
Issuance of notes payable (9,600) --
Issuance of common stock (274,017) --
----------- -----------
Cash paid 41,290 73,242
Fees and expenses 6,553 --
Less cash acquired (17,108) (21,281)
----------- -----------
Net cash paid $ 30,735 $ 51,961
----------- -----------
----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
FOUNDATION HEALTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited consolidated financial
statements include all adjustments (which, other than the acquisitions accounted
for as pooling of interests, as discussed below, consist only of normal
recurring adjustments) necessary for a fair presentation of the consolidated
financial position of Foundation Health Corporation (the "Company") and the
consolidated results of its operations and its cash flows for the interim
periods presented. Although the Company believes that the disclosures in these
financial statements are adequate to make the information presented not
misleading, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission ("SEC"). Results of operations for
the interim periods are not necessarily indicative of results to be expected for
the full year. For further information, refer to the consolidated financial
statements and footnotes thereto incorporated by reference in the Company's
Annual Report on Form 10-K for the year ended June 30, 1994 and the restated
Statements of Operations contained in the Current Report on Form 8-K filed with
the SEC on January 5, 1995.
Certain reclassifications have been made to prior year financial statements to
conform to current period presentation.
NOTE 2 - BUSINESS ACQUISITIONS
PURCHASE TRANSACTIONS
The following acquisitions have been accounted for under the purchase method of
accounting and, accordingly, the operations of the acquired companies have been
included in the Company's consolidated financial statements from their
respective dates of acquisition.
On July 1, 1994, the Company acquired all the outstanding common stock of The
Noetics Group and all of the assets of Reviewco for aggregate consideration
consisting of the issuance of 378,358 shares of the Company's common stock
valued at $16 million, the placing in escrow of 118,236 shares valued at $5
million and cash of $16 million. The release of the escrow shares is subject to
the attainment of certain profitability targets by Reviewco. The purchase price
resulted in goodwill of $27,773,000. The Noetics Group provides workers'
compensation third party administration services for self-funded employers.
Reviewco operates a medical bill review and cost-containment business for the
workers' compensation industry.
6
<PAGE>
On November 10, 1994, the Company acquired all the outstanding common stock of
Southern Colorado Health Plan, Inc., a 7,100 member HMO based in
Pueblo, Colorado and its parent corporation for consideration consisting of
241,672 shares of the Company's common stock valued at $8,900,000. The purchase
price resulted in goodwill of $6,755,000.
On November 15, 1994, the Company acquired all the outstanding common stock of
Community Medical Plan, Inc. ("CMP") and certain affiliated medical centers for
aggregate consideration of $34.6 million, consisting of $25 million in cash and
the issuance of promissory notes aggregating $9.6 million due November 15, 1995.
CMP serves approximately 25,000 Medicaid beneficiaries in Florida. The purchase
price resulted in goodwill of $34,443,000.
On November 1, 1994, the Company issued 13,124,027 shares of its common stock in
exchange for all the outstanding common stock of Thomas-Davis Medical Centers,
P.C. ("TDMC") (which included TDMC's ownership of 60.5% of the outstanding
common stock of Intergroup Healthcare Corporation ("Intergroup")) and 7,577,336
shares for the purchase of the remaining 39.5% of the outstanding common stock
of Intergroup (the "Intergroup Minority Interest"). The TDMC acquisition was
accounted for as a pooling of interests. The purchase of the Intergroup
Minority Interest, which was accounted for as a purchase, was valued at
$249,109,000 and resulted in goodwill of $207,371,000. See "Pooling
Transactions" below for a description of TDMC and Intergroup. The unaudited
proforma combined total revenues, net income (loss) and earnings (loss) per
share of the Company and the Intergroup Minority Interest, assuming the Company
had acquired the Intergroup Minority Interest on July 1, 1993, are as follows
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
Proforma Quarter Proforma Six Months
Ended December 31, Ended December 31,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Revenues $598,549 $637,493 $1,192,924 $1,258,821
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Net Income (loss) $(49,051) $ 29,277 $ (24,459) $ 53,656
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Earnings (loss) Per Share $ (0.86) $ 0.53 $ (0.43) $ 0.98
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
This unaudited proforma information reflects the elimination of the Intergroup
Minority Interest and the amortization of goodwill related to the purchase of
the Intergroup Minority Interest.
7
<PAGE>
The unaudited proforma results of operations are not necessarily indicative of
the combined results that would have occurred had the acquisition taken place on
July 1, 1993, nor are they necessarily indicative of results that may occur in
the future.
POOLING TRANSACTIONS
On October 31, 1994, 6,862,051 shares of the Company's common stock were issued
in exchange for all the outstanding common stock of CareFlorida Health Systems,
Inc. ("CareFlorida"). This acquisition was accounted for as a pooling of
interests. At the date of acquisition, CareFlorida had 58,000 HMO members and
provided managed care services through its preferred provider organization
("PPO") to 85,000 eligible individuals covered by other funding arrangements.
As described above at "Purchase Transactions," on November 1, 1994, 20,701,363
shares of the Company's common stock were issued in exchange for all the
outstanding common stock of Intergroup and TDMC, its majority stockholder.
In addition, all outstanding Intergroup options were exchanged for options to
purchase 500,290 shares of the Company's common stock. TDMC employs
approximately 190 physicians who provide health care services to patients in
Arizona through 15 primary care centers, five urgent care centers, two
behavioral health centers and one surgery center. Intergroup is a managed
health care company which arranges for the delivery of a comprehensive range of
medical services. At the date of acquisition, these services were provided to
approximately 379,000 eligible individuals mostly in Arizona and Utah, primarily
through Intergroup's HMO and indemnity insurance subsidiaries. In addition,
Intergroup provided managed care services through its Utah PPO to approximately
104,000 individuals covered by other funding arrangements, and provided third
party administrative services to approximately 18,000 individuals in Arizona.
In connection with the acquisitions of TDMC, Intergroup and CareFlorida, the
Company charged $124.8 million to operations during the quarter ended December
31, 1994 for acquisition and restructuring costs. These one-time costs
include $67.5 million in transaction costs which the Company is obligated
to pay as a result of the acquisitions and $57.3 million relating to the
integration and restructuring of the combined entities. The integration and
restructuring costs consist primarily of (i) the write-off of obsolete and
duplicate computer hardware and software, (ii) costs associated with terminating
leases of duplicate facilities and (iii) severance and other personnel related
costs. At December 31, 1994 the liability for unpaid acquisition and
restructuring costs was $64.1 million.
In accordance with the pooling of interests method of accounting the Company's
consolidated financial statements and notes thereto have been restated to
include the results of TDMC (including its 60.5% interest in Intergroup) and
CareFlorida for all periods presented.
8
<PAGE>
Separate and combined results of the Company ("FHC"), CareFlorida and TDMC for
the periods prior to consummation of the acquisitions are (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended Quarter Ended
December 31, 1993 December 31, 1993 September 30, 1994
----------------- ----------------- ------------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Total Revenues:
FHC $490,327 $ 971,641 $405,908
TDMC 110,462 213,114 147,294
CareFlorida 40,493 79,897 45,241
Reclassifications (3,789) (5,831) (4,068)
-------- ---------- --------
Combined $637,493 $1,258,821 $594,375
-------- ---------- --------
-------- ---------- --------
Net Income:
FHC $ 24,326 $ 43,536 $ 19,941
TDMC 1,308 2,666 2,021
CareFlorida 1,684 3,414 1,689
-------- ---------- --------
Combined $ 27,318 $ 49,616 $ 23,651
-------- ---------- --------
-------- ---------- --------
</TABLE>
Certain reclassifications are required to conform the separate results of TDMC
and CareFlorida to FHC's presentation.
NOTE 3 - INVESTMENTS
Investments comprised the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1994 June 30, 1994
----------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C>
Available for sale $504,117
Held to maturity 50,248
Short-term investments -- $ 25,094
Fixed maturities -- 575,269
-------- --------
$554,365 $600,363
-------- --------
-------- --------
</TABLE>
9
<PAGE>
Effective July 1, 1994, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." The adoption of SFAS No. 115 did not have a material effect
on the Company's consolidated financial position or results of operations.
During the quarter and six months ended December 31, 1994 the separate
component of stockholders' equity representing net unrealized holding losses
on investments available for sale increased by $7.8 million and $7.6 million,
net of tax effect.
For purposes of calculating realized gains and losses on sales of investments
available for sale, the amortized cost of each investment sold is used.
As a result of the second quarter acquisitions described in Note 2, investments
of acquired companies with an amortized cost of approximately $46.1 million have
been reclassified at December 31, 1994 from held to maturity to available for
sale. This reclassification was necessary to conform to the Company's current
investment policy and strategy regarding acceptable interest rate risk.
This change in classification did not result in a material change in the
net unrealized holding losses.
As of December 31, 1994, the amortized cost, fair value, unrealized holding
gains and unrealized holding losses of the Company's debt and equity investments
classified as available for sale and held to maturity are as follows (in
thousands):
10
<PAGE>
<TABLE>
<CAPTION>
AVAILABLE FOR SALE INVESTMENTS:
At Fair Value At Amortized Cost
----------------------------------------------- -----------------------------------------------
Years to Maturity Years to Maturity
----------------------------------------------- -----------------------------------------------
Less Than One to Five Over Five to Over Ten Less Than One to Five Over Five to Over Ten
One Year Years Ten Years Years One Year Years Ten Years Years
--------- ---------- ------------ -------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and agencies $ 4,189 $ 86,974 $ 12,805 $ 289 $ 4,201 $ 90,600 $ 13,308 $ 289
Obligations of states and
other political
subdivisions 48,160 102,117 130,213 67,583 48,391 104,502 139,064 70,733
Corporate securities 1,028 3,564 3,437 803 1,047 3,631 3,514 803
Equity securities 3,576 3,976
Other debt securities 39,379 39,379
-------- -------- -------- -------- ------- -------- -------- -------
Total Available for
Sale at Fair Value: $ 96,332 $192,655 $146,455 $ 68,675 $96,994 $198,733 $155,886 $71,825
-------- -------- -------- -------- ------- -------- -------- -------
-------- -------- -------- -------- ------- -------- -------- -------
<CAPTION>
HELD TO MATURITY INVESTMENTS:
At Fair Value At Amortized Cost
----------------------------------------------- -----------------------------------------------
Years to Maturity Years to Maturity
----------------------------------------------- -----------------------------------------------
Less Than One to Five Over Five to Over Ten Less Than One to Five Over Five to Over Ten
One Year Years Ten Years Years One Year Years Ten Years Years
--------- ---------- ------------ -------- ---------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and agencies $ 5,041 $ 6,006 $ 715 $ 0 $ 5,098 $ 6,211 $ 768 $ 0
Obligations of states and
other political
subdivisions 13,402 7,577 6,066 4,175 13,443 7,740 6,378 4,490
Corporate securities 300 760 401 201 302 747 399 198
Other debt securities 4,374 100 4,374 100
-------- -------- -------- -------- ------- -------- -------- -------
Total Held to Maturity
at Fair Value: $ 23,117 $ 14,343 $ 7,282 $ 4,376 $23,217 $ 14,698 $ 7,645 $ 4,688
-------- -------- -------- -------- ------- -------- -------- -------
-------- -------- -------- -------- ------- -------- -------- -------
<CAPTION>
GROSS UNREALIZED HOLDING GAINS AND LOSSES:
Available for Sale Held to Maturity
----------------------------------------------- ------------------------------------------------
Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized
Amortized Holding Holding Fair Amortized Holding Holding Fair
Cost Gains Losses Value Cost Gains Losses Value
--------- ---------- ---------- -------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. government and agencies $108,398 $ 10 $ 4,149 $104,259 $12,077 $ 5 $ 319 $11,763
Obligations of states and
other political
subdivisions 362,690 5 14,622 348,073 32,051 35 866 31,220
Corporate securities 8,995 6 169 8,832 1,646 18 3 1,661
Equity securities 3,976 4 406 3,574 0
Other debt securities 39,379 39,379 4,474 4,474
-------- -------- -------- -------- ------- -------- -------- -------
Total $523,438 $ 25 $ 19,346 $504,117 $50,248 $ 58 $ 1,188 $49,118
-------- -------- -------- -------- ------- -------- -------- -------
-------- -------- -------- -------- ------- -------- -------- -------
</TABLE>
11
<PAGE>
NOTE 4 - CAPITAL STOCK
On November 15, 1994, the Company's stockholders approved amendments to the 1990
Stock Option Plan (the "1990 Plan") which increased the number of shares
available for the granting of options from 3,025,000 to 5,525,000, and added
technical changes to conform the 1990 Plan to the deductibility
requirements of Section 162(m) of the Internal Revenue Code.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company operates an integrated multi-state managed care organization. The
Company's operations are focused on its commercial HMO and PPO operations,
government-sponsored managed care programs, and specialty services operations.
Commercial HMO and PPO operations are characterized by the assumption of
underwriting risk in return for premium revenue. Government-sponsored managed
care programs consist of contractual services to state and federal government
programs such as CHAMPUS and Medicaid in which the Company receives revenues for
administrative and management services and, under certain of the contracts, also
accepts financial responsibility for health care costs. Specialty services
consists both of operations in which the Company assumes underwriting risk in
return for premium revenue, including managed care workers' compensation
insurance, and behavioral health, dental and vision HMO products, and operations
in which the Company provides administrative services only, including certain
of the behavioral health and pharmacy benefits management programs, workers'
compensation third party administration and bill review services.
The Company consummated the following acquisitions of complementary businesses
during the six months ended December 31, 1994 to increase its geographic
and product diversity:
Date of Type of
Acquisition Nature of Business Consideration Consideration
- - - ----------- ------------------ ------------- -------------
PURCHASE TRANSACTIONS
July 1994 Workers' compensation medical $37 million Cash plus stock
bill review and third-party
administration
November 1994 Colorado managed care $8.9 million Stock
company
November 1994 Florida-Medicaid managed care $34.6 million Cash plus
company promissory note
November 1994 39.5% minority interest in $249.1 million Stock
Arizona and Utah-based managed
care company ("Intergroup
Healthcare Corporation")
POOLING TRANSACTIONS
October 1994 Florida-managed care Company
("CareFlorida Health Systems, $226.4 million Exchange of
Inc.") Stock
November 1994 Arizona professional medical $438.9 million Exchange of
corporation ("Thomas- Davis Stock
Medical Centers, P.C.") and
its 60.5% interest in Intergroup
Healthcare Corporation
13
<PAGE>
The Company's consolidated financial information has been restated to include
the accounts of CareFlorida Health Systems, Inc. ("CareFlorida") and Thomas-
Davis Medical Centers, P.C.("TDMC") and its 60.5% interest in Intergroup
Healthcare Corporation ("Intergroup"), for all periods presented, as these
acquisitions were each accounted for as a pooling of interests.
In connection with the acquisitions of TDMC, Intergroup and CareFlorida, the
Company charged $124.8 million to operations during the quarter ended December
31, 1994 for acquisition and restructuring costs. These one-time
costs include $67.5 million in transaction costs that the Company is obligated
to pay as a result of the acquisitions and $57.3 million relating to the
integration and restructuring of the combined entities. The integration and
restructuring costs consist primarily of (i) the write-off of obsolete and
duplicate computer hardware and software, (ii) costs associated with terminating
leases of duplicate facilities and (iii) severance and other personnel related
costs.
The Company's CHAMPUS Reform Initiative Contract ("CRI Contract") expired
January 31, 1994 with a wind-down and termination period after expiration.
During this wind-down period the Company is being reimbursed by the government
for administrative expenses incurred plus a negotiated fixed fee. The
Department of Defense has requested bids for reprocurement of the follow-on
contract which is currently scheduled to be awarded in March 1995 with health
care services to commence October 1995. Although the Company has submitted a
response to the rebid, there can be no assurance that the Company will be the
successful bidder for the follow-on contract, or if the Company is the
successful bidder, what the level of profitability, if any, of the follow-on
contract will be.
In September 1994, the Company was awarded a contract to establish a managed
care program for 230,000 eligible beneficiaries of CHAMPUS in Oregon and
Washington ("the Oregon/Washington Contract"). Implementation of the contract
commenced in September 1994 with health care services scheduled to begin
March 1, 1995. The contract has a term of up to five years, and is subject to
adjustments to reflect recent reductions in coverage for eligible beneficiaries
under the contract.
The Company's profitability depends in large part on accurately predicting and
controlling health care expenditures, effectively managing utilization of
health care services and negotiating favorable provider contracts. Changes in
health care practices, inflation, new technologies and numerous other factors
affecting the delivery and cost of health care, including proposed
health care reforms and legislative initiatives, may adversely affect the
Company's ability to predict and control health care costs and claims. Pressures
by large employer groups for premium rate decreases and continued intense
competition for enrollees may affect the Company's operating results, including
resulting in higher medical loss ratios. In addition, changes in federal or
state government health care policies or practices could result in the gain or
loss of significant government contracts, e.g., Medicaid or CHAMPUS, which could
have a material effect on the Company's operating results.
14
<PAGE>
RESULTS OF OPERATIONS
Total revenues decreased by $38.9 million, or 6.1%, for the quarter ended
December 31, 1994 and by $65.9 million, or 5.2%, for the six months ended
December 31, 1994 over the same periods in fiscal year 1994 primarily as a
result of the expiration of the CRI Contract. Commercial premiums for the
quarter ended December 31, 1994 increased $83.1 million, or 26.1%, over the
comparable period in fiscal year 1994 due primarily to a greater than 241,000
member increase in commercial enrollment from over 836,000 at December 31, 1993
to 1,077,000 at December 31, 1994. The second quarter increase in commercial
premiums was consistent with increases experienced in the first quarter to yield
a year-to-date increase over the six months ended December 31, 1993 of $169.2
million, or 27.1%, which is attributable primarily to increases in enrollment
and to $46.2 million in premiums related to Gem Insurance Company ("Gem") which
was purchased by Intergroup effective January 1994. The HMO medical loss ratio
(medical HMO health care services expenses as a percentage of medical HMO
premiums) increased from 77.1% for the quarter ended December 31, 1993 to 77.6%
for the quarter ended December 31, 1994, which is due to continuing competition
for enrollees which has resulted in lower premium increases than in the past as
well as an increase in the proportion of products with a higher medical loss
ratio, such as Medicare. Commercial health care services expenses for the
quarter ended December 31, 1994 increased by $67.4 million, or 27.4%, over the
comparable prior year period primarily as a result of increased enrollment in
the medical HMO, higher pharmacy costs and higher payments to capitated
providers. These commercial health care trends are consistent for the six
months ended December 31, 1994 and resulted in an HMO medical loss ratio of
78.9% compared to 78.2% for the comparable prior period.
Government contracts revenue is impacted by semi-annual bid price adjustments,
annual price increases, risk sharing provisions and various other price
adjustments under the CHAMPUS contracts. Government contracts revenue
decreased by $151.1 million, or 76.7%, for the quarter ended December 31, 1994
over the prior year quarter as a result of the expiration of the CRI Contract
effective January 31, 1994, offset in part by the net effect of revenues
generated by the expansion of the Company's New Orleans Contract to cover the
Base Realignment and Closure
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areas of Alexandria, Louisiana and the areas of Austin and Forth Worth, Texas
(the "BRAC expanison") which commenced May 1, 1993 and implementation revenues
related to the Oregon/Washington Contract. The expiration of the CRI Contract
also contributed to the decrease in government contracts revenue for the six
months ended December 31, 1994 over the prior year period of $332.7 million,
or 78.0%.
Total CHAMPUS expenses decreased by $86.6 million, or 84.9%, and $186.6 million,
or 81.4%, for the quarter and six months ended December 31, 1994 over the
comparable prior year periods. The decrease in total CHAMPUS expenses for the
period was due to the expiration of the CRI contract offset in part by
expenses under the BRAC expansion and the implementation of the
Oregon/Washington Contract.
Specialty services revenue increased by $25.3 million, or 24.9%, for the quarter
ended December 31, 1994 and by $85.6 million, or 49.9%, for the six months ended
December 31, 1994 over the comparable periods in fiscal year 1994. This
increase was primarily attributable to workers' compensation insurance premiums
generated by California Compensation Insurance Company, the Company's workers'
compensation insurance subsidiary ("CalComp") which totaled $74.4 million and
$117.9 million for the quarter and five months (commencing August 1, 1993, the
date of acquisition) ended December 31, 1993 and $89.5 million and $185.0
million for the quarter and six months ended December 31, 1994. The increase
in CalComp premiums was a result of strong enrollment growth as well as a
reduction in premiums ceded to reinsurers offset in part by a 16% mandatory
reduction in premiums for policies effective October 1, 1994. Specialty
services costs, which includes healthcare and administrative costs, increased
$8.2 million, or 8.2%, for the quarter ended December 31, 1994 and $56.9
million, or 34.2%, for the six months ended December 31, 1994 over the
comparable prior year periods primarily as a result of the inclusion of
$5.8 million and $47.4 million, respectively, of operating costs associated
with CalComp. Effective January 1, 1995, the minimum rate law that governed
workers' compensation insurance rates in California has been repealed. As a
result, management believes competition will result in further workers'
compensation premium reductions and that margins for CalComp are likely to be
reduced.
Selling, general and administrative ("SG&A") expenses decreased by $4.3 million,
or 5.5%, for the quarter ended December 31, 1994 and by $3.8 million, or 2.5%,
for the six months ended December 31, 1994 over the same periods in fiscal year
1994. The decrease in SG&A expenses is due to the expiration of the CRI
Contract offset in part by increased SG&A expenses related to Gem which was
purchased effective January 1994. SG&A expenses as a percentage
of total revenues (the "SG&A ratio") were 12.4% and 12.3% for the quarter and
six months ended December 31, 1994 and 12.4% and 11.9% for the comparable prior
periods. The increase in the SG&A ratio is primarily due to the purchase of Gem
which has a higher SG&A ratio and a lower medical loss ratio than the Company's
medical HMO business.
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In connection with the acquisitions of TDMC, Intergroup and CareFlorida, the
Company charged $124.8 million to operations during the quarter and six months
ended December 31, 1994 for acquisition and restructuring costs. These one-time
costs include $67.5 million in transaction costs which the Company is obligated
to pay as a result of the acquisitions, and $57.3 million relating to the
integration and restructuring of the combined entities. The integration and
restructuring costs consist primarily of (i) the write-off of obsolete and
duplicate computer hardware and software, (ii) costs associated with terminating
leases of duplicate facilities and (iii) severance and other personnel related
costs.
The Company's income before income taxes and minority interest and before the
one-time acquisition, integration and restructuring costs increased $312,000 or
0.7% and decreased $217,000, or 0.2%, and increased as a percentage of total
revenues from 7.5% to 8.0% and from 7.0% to 7.3% for the quarter and six months
ended December 31, 1994 over the same periods in fiscal year 1994. These
increases resulted from the increased profitability of the specialty services
operations, primarily CalComp. After the one-time charge, income before
income taxes and minority interest decreased $124.5 million, or 261.2% for the
quarter ended December 31, 1994 and decreased $125.0 million, or 142.8%, for the
six months ended December 31, 1994 as compared to the comparable periods in
fiscal year 1994.
The provisions for income taxes of $18.5 million and benefits from income taxes
of $28.1 million for the quarters ended December 31, 1993 and December 31, 1994
and $34.2 million and $14.2 million for the six months ended December 31, 1993
and 1994 reflect taxes at the applicable statutory rates. The effective tax
rates for the quarters ended December 31, 1993 and 1994 were 39% and 37% and for
the six months ended December 31, 1993 and 1994 were 39% and 38%. The decrease
in the effective tax rates resulted from the lower tax rate associated with
CalComp, due to its significant investment in tax-exempt instruments as well as
its exemption from state income taxes. The effective tax rate in fiscal year
1995 reflects approximately $15.0 million of acquisition and restructuring costs
which are not deductible for tax purposes.
Net income before the one-time acquisition and restructuring costs and related
tax effects increased by $2.8 million, or 10.2%, and increased as a percentage
of total revenues from 4.3% to 5.0% for the quarter ended December 31, 1994 and
increased by $4.1 million or 8.4%, and increased as a percentage of total
revenues from 3.9% to 4.5% for the six months ended December 31, 1994 over the
same periods in fiscal year 1994. After the one-time charge and related tax
effects, net income decreased by $76.6 million, or 280.3%, and decreased as a
percentage of total revenues from 4.3% to (8.2%) for the quarter ended December
31, 1994 and decreased by $75.2 million or 151.6%, and decreased as a percentage
of total revenues from 3.9% to (2.1%) for the six months ended December 31, 1994
over the same periods in fiscal year 1994.
17
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities was $147.4 million for the six months
ended December 31, 1994 as compared to $112.3 million for the comparable period
in fiscal year 1994 due primarily to the Company's profitable operations during
the period.
Excess operating cash has been invested in investment grade securities. The
Company expects capital expenditures for the remainder of fiscal year 1995 to
approximate $55.3 million, consisting primarily of $29.3 million for the
purchase of computer hardware and system software, $22 million for construction
of primary care medical facilities and $4 million for other capital
expenditures. The net costs of operating and managing the medical facilities for
the remainder of fiscal year 1995 will approximate $15 million and will be
offset in part by health care cost savings realized by the California HMO.
In addition, the Company has start-up HMO and workers' compensation operations
in a number of states outside California and in the United Kingdom. These
operations have required and will continue to require significant cash
expenditures related to start-up expenses in creating the infrastructure for
operations at each location, hiring and training personnel and establishing
minimum statutory capital requirements. Within the next several months, the
Company will contribute an additional $35 million to CalComp to meet regulatory
and rating agency requirements. The Company paid $25 million in cash
for the acquisition of CMP on November 15, 1994 and issued promissory notes
aggregating $9.6 million for the balance of the purchase price to be paid
November 15, 1995. During the quarter ended December 31, 1994, the Company
increased its $50 million line of credit to $300 million, as described below,
to assist in funding the construction and operation of the medical facilities
and the Company's other start-up operations.
The Company has a $300 million unsecured revolving credit agreement with
Citicorp USA, Inc. as Administrative Agent for the lenders thereto (the "Credit
Agreement") which expires December 5, 1999. The Credit Agreement contains
customary terms, events of default and affirmative and negative covenants
(including financial covenants related to net worth, fixed charge coverage ratio
and total debt to total capitalization ratio). Principal amounts outstanding
under the Credit Agreement bear interest, at the Company's option, at either
Citibank's base rate or the Eurodollar rate plus a margin depending upon the
Company's public debt rating or level of total debt to total capitalization.
Any interest payments are due quarterly and principal is due at maturity. No
amounts have been drawn on the Credit Agreement. However, the Company may borrow
all or part of the $35 million it intends to contribute to CalComp under the
Credit Agreement.
Management of the Company continually evaluates opportunities to expand the
Company's commercial and specialty services operations; however, the Company
currently has no material commitments for future use of its current or expected
levels of available cash resources except as described above. The Company's
expansion options may include additional acquisitions and internal development
of new products and programs which, individually or in the aggregate, could be
material to the Company's cash position.
The Company has a stock repurchase program to acquire from time to time the
Company's outstanding common stock in the open market. As of December 31, 1994
the Company had
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repurchased a total of 1,445,500 shares and is authorized to purchase up to 5.7
million additional shares at prices deemed appropriate by management and subject
to market conditions and other relevant factors.
In June 1993, the Company issued $125 million of Senior Notes due June 1, 2003
(the "Senior Notes"). The Senior Notes bear interest at 7 3/4% which is due
semi-annually on December 1 and June 1. The Senior Notes are general unsecured
obligations of the Company, will rank PARI PASSU with all future unsecured and
unsubordinated indebtedness of the Company and are effectively subordinated to
creditors of the Company's subsidiaries. The indenture contains certain
covenants that, among other things, (i) restrict the ability of the Company and
its Restricted Subsidiaries (as defined) to (a) pay dividends and make other
distributions and certain investments, (b) grant liens on their assets, (c)
enter into or permit certain sale and lease-back transactions or (d) engage in
certain mergers, consolidations and sales of assets, and (ii) restrict the
ability of the Company's Restricted Subsidiaries to incur additional
indebtedness or issue shares of preferred stock.
Certain of the Company's subsidiaries must comply with minimum capital
requirements under applicable state HMO and insurance laws and regulations and
certain subsidiaries must maintain ratios of current assets to current
liabilities of 1:1 pursuant to certain government contracts. The Company
believes it is in material compliance with these contractual and regulatory
requirements.
19
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of its business, the Company is a party to claims
and legal actions by enrollees, providers and others. The Company also
undergoes governmental audits with respect to its government contracts and
with respect to operations of its HMO, insurance and third party
administrator subsidiaries. After consulting with legal counsel, the
Company is of the opinion that any liability that may ultimately be
incurred as a result of these claims, legal actions or audits will not have
a material adverse effect on the consolidated financial position or results
of operations of the Company.
On April 8, 1994 the U.S. District Court for the Southern District of
California remanded the federal action filed against DentiCare of
California, Inc. ("DentiCare"), the Company and others to a California
Superior Court. The second amended complaint alleges violations of the
California Business and Professions Code Section 17200, fraud and breach of
contract. The complaint seeks unquantified damages. The proceeding is in
the initial pleading stages. The Company intends to defend this matter
vigorously.
The Company and the State of California Attorney General's office are
negotiating an amicable settlement of the investigation against DentiCare
regarding the arrangement of certain dental services to Medicaid
beneficiaries. The Company expects to conclude this matter with no
material effect on the Company's consolidated financial position or
results of operations.
The Company and the Internal Revenue Service ("IRS") ratified the
settlement regarding the field examination of the Company's tax returns for
the fiscal years ended June 30, 1987, 1988 and 1989, including the
Company's treatment of certain intangible assets. The IRS adjustments were
not material to the Company's consolidated financial position or results of
operations.
See "Government Regulations" and "Legal Proceedings" in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1994 for
further description of audits and legal proceedings to which the Company
and certain of its subsidiaries are subject.
20
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Special Meeting of Stockholders was held on October 31, 1994
to approve several matters. The matters voted upon and the vote obtained
with respect to each matter was as follows:
(i) Approval of the merger of Thomas-Davis Medical Centers, P.C. and
Intergroup Healthcare Corporation with and into Foundation Health
Corporation pursuant to Agreements and Plans of Merger and the transactions
contemplated thereby:
FOR 20,710,820
AGAINST 104,085
ABSTAIN 70,189
BROKER NON-VOTE 0
(ii) Approval of the merger of FHC Acquisition Corporation with and into
CareFlorida Health Systems, Inc. ("CareFlorida") pursuant to an Agreement
and Plan of Reorganization among Foundation Health Corporation and
CareFlorida and others and the transactions contemplated thereby:
FOR 20,706,336
AGAINST 108,343
ABSTAIN 70,415
BROKER NON-VOTE 0
(iii) Failure to approve an amendment to Restated Certificate of
Incorporation of Foundation Health Corporation to increase the number of
authorized shares of common stock from 100 million to 200 million and the
number of authorized shares of preferred stock from 1 million to 10
million:
FOR 11,655,361
AGAINST 9,144,930
ABSTAIN 74,803
BROKER NON-VOTE 0
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The Company's Annual Meeting of Stockholders was held on November 15, 1994.
The matters voted upon and the vote obtained with respect to each matter is
as follows:
(i) Election of Directors:
Name Votes For Votes Withheld
---- --------- --------------
Daniel D. Crowley 24,696,144 48,246
Robert Anderson 24,695,961 48,429
David A. Boggs 24,696,144 48,246
Jeffrey L. Elder 24,696,144 48,246
Earl B. Fowler 24,695,961 48,429
Richard W. Hanselman 24,696,144 48,246
Frank A. Olson 24,696,112 48,278
Richard Stegemeier 24,696,144 48,246
Steven D. Tough 24,696,144 48,246
Raymond S. Troubh 24,696,009 48,381
(ii) Approval of amendments to Foundation Health Corporation's 1990 Stock
Option Plan (Restated and amended effective April 21, 1994):
FOR 12,676,650
AGAINST 8,249,634
ABSTAIN 155,634
BROKER NON-VOTE 3,662,912
(iii) Approval of Foundation Health Corporation's Executive Incentive Plan:
FOR 23,620,859
AGAINST 768,131
ABSTAIN 158,683
BROKER NON-VOTE 196,717
(iv) Ratification of Appointment of Deloitte & Touche LLP as Foundation
Health Corporation's independent auditors for the fiscal year ended
June 30, 1995:
FOR 24,644,782
AGAINST 53,768
ABSTAIN 45,840
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 - Restated Certificate of Incorporation of Foundation Health
Corporation
11 - Earnings Per Share Computation
10.97 - $300 million Revolving Credit Agreement dated as of December
5, 1994 among Foundation Health Corporation, as Borrower,
Citicorp USA, Inc., as Administrative Agent, Wells Fargo
Bank, N.A. and Nationsbank of Texas, N.A., as Co-agents and
Citicorp Securities, Inc., as Arranger, and the Other Banks
and Financial Institutions Parties Thereto.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by Foundation Health
Corporation during the quarter ended December 31, 1994.
23
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FOUNDATION HEALTH CORPORATION
Date: By:
-------------------- -------------------------------------------------
Jeffrey L. Elder
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
24
<PAGE>
FOUNDATION HEALTH CORPORATION
INDEX TO EXHIBITS
EXHIBIT NO. PAGE
3.1 Restated Certificate of Incorporation of
Foundation Health Corporation
10.97 $300 million Revolving Credit Agreement dated as of
December 5, 1994 Among Foundation Health Corporation,
as Borrower, Citicorp USA, Inc., as Administrative
Agent, Wells Fargo Bank, N.A. and Nationsbank of Texas, N.A.,
as Co-agents and Citicorp Securities, Inc., as Arranger, and
the Other Banks and Financial Institutions Parties Thereto
11 Earnings Per Share Computation
27 Financial Data Schedule
25
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
FOUNDATION HEALTH CORPORATION
FOUNDATION HEALTH CORPORATION, a corporation organized and existing
under the laws of the State of Delaware (the "Corporation") hereby certifies as
follows:
FIRST: The name of the Corporation is Foundation Health Corporation
(originally incorporated under the name "Americare Health Corporation").
SECOND: The original Certificate of Incorporation of the Corporation
was filed with the Secretary of State of the State of Delaware on January 13,
1984.
THIRD: A Restated Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on July 11, 1990.
FOURTH: A Certificate of Amendment of the Corporation was filed with
the Secretary of State of the State of Delaware on October 15, 1992.
FIFTH: A Certificate of Correction of the Corporation was filed with
the Secretary of State of the State of Delaware on October 28, 1994.
SIXTH: Pursuant to section 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates but does not further amend the provisions of the Certificate of
Incorporation of the Corporation as heretofore amended or supplemented and there
is no discrepancy between those provisions and the provisions of this Restated
Certificate.
SEVENTH: The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated to read in its entirety as
follows:
ARTICLE I
NAME. The name of the Corporation is Foundation Health Corporation.
ARTICLE II
ADDRESS. The address of the Corporation's registered office in this
State is Corporation Trust Center, 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801. The name
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of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
BUSINESS. The nature of the business to be conducted by the
Corporation is to engage in any lawful act or activity for which a corporation
may be organized under the General Corporation Law of the State of Delaware (the
"Delaware Law").
ARTICLE IV
A. AUTHORIZED SHARES OF CAPITAL STOCK.
The total number of shares of all classes of stock which the
Corporation shall be authorized to issue shall be one hundred one million
(101,000,000), of which one million (1,000,000) shares, $1.00 par value, shall
be preferred stock and one hundred million (100,000,000) shares, $.01 par value,
shall be common stock.
B. PREFERRED STOCK.
The preferred stock may be issued from time to time in one or more
series. The holders of shares of preferred stock shall not be entitled to vote
as a separate class on any proposed amendment of the Corporation's Certificate
of Incorporation which would increase or decrease (but not below the number of
shares thereof then outstanding) the aggregate number of authorized shares of
preferred stock, to the end that, irrespective of the provisions of paragraph
(b)(2) of section 242 of the Delaware Law or of any other provision of law, the
number of authorized shares of preferred stock may be increased or decreased
(but not below the number of shares thereof then outstanding) by the affirmative
vote of the holders of stock of the Corporation representing a majority of the
total number of votes eligible to be cast regarding such proposed amendment.
The Board of Directors is hereby expressly vested with authority to fix by
resolution or resolutions the designations and the powers, preferences and
relative, participating, optional or other special rights (including voting
rights), and the qualifications, limitations or restrictions of the preferred
stock, to fix the number of shares constituting any such series, and to increase
or decrease the number of shares of any such series (but not below the number of
shares thereof then outstanding). In case the number of shares of any such
series shall be so decreased, the shares constituting such decrease shall resume
the status which they had prior to the adoption of the resolution or resolutions
originally fixing the number of shares of such series.
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C. VOTING RIGHTS.
A holder of common stock shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders for each share of common stock
held of record by such holder as of the record date for such meeting, except
that in any election of directors of the Corporation, each holder of common
stock shall be entitled to as many votes as shall equal (i) the number of votes
which (except for this provision as to cumulative voting) such holder would be
entitled to cast for the election of directors with respect to such holder's
shares of common stock multiplied by (ii) the number of directors to be elected
in such election, and such holder may cast all of such votes for a single
candidate or may distribute them among the number of candidates to be voted for,
or for any two or more of them as such holder may see fit. In any election of
directors, the candidates receiving the highest number of affirmative votes of
the shares entitled to be voted for them up to the number of directors to be
elected by such shares are elected; and votes against a candidate, and votes
withheld, shall have no legal effect. The holders of each series of preferred
stock shall have such voting rights, if any, as shall be provided for in the
resolution or resolutions of the Board of Directors establishing such series.
ARTICLE V
STOCKHOLDER MEETINGS. No action required or permitted to be taken at
any annual or special meeting of the stockholders of the Corporation may be
taken without a meeting and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied. Special
meetings of the stockholders of the Corporation may be called only by the
Chairman of the Board of Directors or the President of the Corporation or by a
resolution adopted by the affirmative vote of a majority of the Board of
Directors.
ARTICLE VI
BOARD OF DIRECTORS.
A. The affairs of the Corporation shall be managed by a Board of
Directors consisting of not less than nine persons. The exact number of
directors of the Corporation, at or in excess of such minimum number, shall be
fixed by, or in the manner provided in, the By-laws of the Corporation. That
number of directors that constitutes thirty-three and one-third percent
(33-1/3%) of the authorized number of directors shall be persons that are not
officers of the Corporation, that are not related to any of the Corporation's
officers, that do not represent concentrated or family holdings of the
Corporation's shares, and that, in the view of the Board of Directors, are free
of any relationship that would interfere with the exercise of independent
judgment (each such person being hereinafter
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called an "independent director"). If the application of the foregoing
percentage does not produce a whole number, then the requisite number of
independent directors shall be the next higher whole number of directors as is
at least thirty-three and one-third percent (33-1/3%) of the total authorized
number of directors. The directors to be elected by the holders of common stock
shall not be divided into classes, and there shall be an election of all
directors at each annual meeting of stockholders. A quorum for the transaction
of business of the Board of Directors shall require the presence of at least a
majority of the total number of directors.
B. Subject to the rights of the holders of any series of preferred
stock then outstanding, vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by holders of common
stock may be filled by a majority vote of the directors then in office, although
less than a quorum, or by a sole remaining director.
C. All of the powers of the Corporation, insofar as the same may be
lawfully vested by this Restated Certificate of Incorporation in the Board of
Directors, are hereby conferred upon the Board of Directors of the Corporation.
The Corporation may in its By-laws confer powers upon its Board of Directors in
addition to the foregoing and in addition to the powers and authorities
expressly conferred upon them by the Delaware Law. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter, amend or repeal the By-laws of the
Corporation, without any action on the part of the stockholders, by the
affirmative vote of a majority of the entire Board of Directors. The By-laws
may also be altered, amended or repealed by the affirmative vote of the holders
of shares representing at least a majority of the shares of common stock then
outstanding.
D. The Board of Directors shall designate an Audit Committee, a
Compensation Committee and a Nominating Committee. The Compensation Committee
shall perform the committee function under all employee compensation and benefit
plans and other arrangements (including, without limitation, any stock option
plans) that require or provide for a committee function. All authorized
committees, except the Nominating Committee, shall be comprised of at least
three directors. All members of the Audit Committee, and, if any, of the
Finance Committee, shall be independent directors. No employee or former
employee of the Corporation, except Earl B. Fowler, may be a member of the
Compensation Committee, and the Compensation Committee shall be constituted with
a majority of independent directors. The Nominating Committee shall be
comprised of at least five members. A majority of the Nominating Committee
shall be comprised of the company's Chief Executive Officer and independent
directors.
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ARTICLE VII
SPECIAL VOTING REQUIREMENTS. Notwithstanding any other provision of
this Restated Certificate of Incorporation, and in addition to any other
requirements of applicable law,
A. Neither Section C of Article IV, nor Section A, nor Section
B, nor Section D of Article VI, nor this Article VII, of this Restated
Certificate of Incorporation may be amended, altered, changed or
repealed unless such amendment, alteration, change or repeal shall
have been approved and adopted by the affirmative vote of the holders
of not less than eighty percent (80%) of the shares of common stock
then outstanding; and
B. The Corporation shall not engage in any transaction
involving a transfer of the Corporation's assets to another entity, or
involving any merger or other combination of the Corporation with or
into another entity, as a result of which proportionate stockholdings
in the successor or surviving entity are substantially the same as
those in the Corporation immediately preceding such transaction, if
the certificate of incorporation, articles of incorporation or charter
of that successor or surviving entity does not contain provisions
identical to those in Section C of Article IV, Sections A, B, and D of
Article VI, and this Article VII, of this Restated Certificate of
Incorporation, or in any other transaction the purpose or effect of
which is to evade the eighty percent (80%) voting requirement set
forth above in this Article VII, unless such transaction shall first
have been approved and adopted by the affirmative vote of the holders
of not less than eighty percent (80%) of the total number of shares of
common stock then outstanding.
ARTICLE VIII
A. LIMITATION OF LIABILITY OF DIRECTORS.
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this Section shall not eliminate or
limit the liability of a director (1) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (2) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (3) under section 174 of the Delaware Law, or (4) for any transaction from
which the director derived an improper personal benefit.
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<PAGE>
B. FUTURE AMENDMENTS.
In addition to the provisions of Section A of this Article VIII, if
Delaware law is amended hereafter to authorize or permit corporate action
further limiting or eliminating the personal liability of a director to the
Corporation or its stockholders, then the liability of each director of the
Corporation shall be further limited or eliminated to the fullest extent
permitted by any such future amendment of the law of the State of Delaware.
C. REPEAL OR MODIFICATION.
Any repeal or modification of this Article VIII or any provision hereof
shall not increase the personal liability of any director of the Corporation for
any act or occurrence taking place prior to such repeal or modification, or
otherwise adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification.
ARTICLE IX
INDEMNIFICATION.
A. The Corporation shall, to the fullest extent permitted by the
Delaware Law, indemnify any person (the "Indemnitee") who is or was involved in
any manner (including, without limitation, as a party or a witness) in any
threatened, pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including,
without limitation, any action, suit or proceeding brought by or in the right of
the Corporation to procure a judgment in its favor) (a "Proceeding") by reason
of the fact that the Indemnitee is or was a director or officer of the
Corporation, or is or was serving another entity in such capacity at the request
of the Corporation, against all expenses and liabilities actually and reasonably
incurred by the Indemnitee in connection with the defense or settlement of such
Proceeding (including attorneys' fees).
B. The right to indemnification conferred by this Article IX shall
be presumed to have been relied upon by the Indemnitee and shall be enforceable
as a contract right. The Corporation may enter into contracts to provide
individual Indemnitees with specific rights of indemnification to the fullest
extent permitted by the Delaware Law and may create trust funds, grant security
interests, obtain letters of credit or use other means to ensure the payment of
such amounts as may be necessary to effect the rights provided in this Article
IX or in any such contract. Upon making a request for indemnification, the
Indemnitee shall be presumed to be entitled to indemnification under this
Article IX and the Corporation shall have the burden of proof to overcome that
presumption in reaching any contrary determination. Such indemnification shall
-6-
<PAGE>
include the right to receive reimbursement in advance of any expenses incurred
by the Indemnitee in connection with any Proceeding, consistent with the
provisions of the Delaware Law.
C. The Corporation may, to the extent authorized from time to time
by the Board of Directors, grant rights to indemnification, and rights to be
paid by the Corporation the expenses incurred in defending any Proceeding in
advance of its final disposition, to any other employee or agent of the
Corporation to the fullest extent of the provisions of this Article IX with
respect to the indemnification and advancement of expenses of directors and
officers of the Corporation.
D. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article IX shall, unless otherwise provided when
authorized or ratified, continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee. The Corporation may
maintain insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation, partnership, joint
venture or other enterprise against any expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person against such
expense, liability or loss under the Delaware Law.
E. Any repeal or modification of the foregoing provisions of this
Article IX shall not adversely affect any right or protection of any director or
any Indemnitee existing at the time of such repeal or modification.
EIGHTH: This Restated Certificate of Incorporation was duly adopted
by the Board of Directors of the Corporation pursuant to section 245 of the
General Corporation Law of the State of Delaware. No vote of the Corporation's
stockholders was required as this Restated Certificate of Incorporation restates
and integrates but does not further amend the provisions of the Certificate of
Incorporation of the Corporation as heretofore amended or supplemented and there
is no discrepancy between those provisions and the provisions of this Restated
Certificate.
-7-
<PAGE>
IN WITNESS WHEREOF, said Corporation has caused this certificate to
be executed by its Chairman, President and Chief Executive Officer, Daniel D.
Crowley, and attested by its Secretary, Allen J. Marabito, this _____ day of
November, 1994.
By___________________________
Daniel D. Crowley
Chairman, President and
Chief Executive Officer
Attest:
___________________________
Allen J. Marabito,
Secretary
<PAGE>
$300,000,000
REVOLVING CREDIT AGREEMENT
DATED AS OF DECEMBER 5, 1994
AMONG
FOUNDATION HEALTH CORPORATION,
AS BORROWER,
CITICORP USA, INC.,
AS ADMINISTRATIVE AGENT,
and
WELLS FARGO BANK, N. A.
and
NATIONSBANK OF TEXAS, N.A.,
AS CO-AGENTS,
and
CITICORP SECURITIES, INC.,
AS ARRANGER,
and
THE OTHER BANKS AND
FINANCIAL INSTITUTIONS
PARTIES HERETO
<PAGE>
T A B L E O F C O N T E N T S
SECTION PAGE
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.01. Certain Defined Terms......................................... 1
1.02. Computation of Time Periods................................... 21
1.03. Accounting Terms.............................................. 21
1.04. References.................................................... 22
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
2.01. The Revolving Advances........................................ 22
2.02. Making the Advances........................................... 22
2.03. The Auction Advances.......................................... 24
2.04. Fees.......................................................... 28
2.05. Termination or Reduction of the Commitments................... 28
2.06. Repayment of Revolving Advances............................... 28
2.07. Interest on Revolving Advances................................ 28
2.08. Additional Interest on Eurodollar Rate Advances............... 29
2.09. Interest Rate and Facility Fee Determination.................. 29
2.10. Prepayments of Revolving Advances............................. 31
2.11. Notice of Conversion/Continuation............................. 31
2.12. Increased Costs............................................... 31
2.13. Illegality.................................................... 32
2.14. Payments and Computations..................................... 33
2.15. Taxes......................................................... 34
2.16. Sharing of Payments, Etc...................................... 35
2.17. Use of Proceeds............................................... 36
ARTICLE III
CONDITIONS OF BORROWING
3.01. Conditions Precedent to the Initial Advances.................. 36
3.02. Conditions Precedent to Each Revolving Borrowing.............. 37
3.03. Conditions Precedent to Each Auction Borrowing................ 37
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
<PAGE>
4.01. Representations and Warranties of the Borrower................ 38
ARTICLE V
COVENANTS OF THE BORROWER
5.01. Affirmative Covenants......................................... 42
5.02. Negative Covenants............................................ 45
5.03. Financial Covenants........................................... 49
5.04. Reporting Requirements........................................ 49
5.05. Acquisitions.................................................. 51
ARTICLE VI
EVENTS OF DEFAULT
6.01. Events of Default............................................. 52
ARTICLE VII
THE AGENT, THE CO-AGENTS AND THE ARRANGER
7.01. Authorization and Action...................................... 55
7.02. Agent's Reliance, Etc......................................... 55
7.03. CUSA and Affiliates........................................... 56
7.04. Lender Credit Decision........................................ 56
7.05. Indemnification............................................... 56
7.06. Successor Agent............................................... 57
7.07. The Co-Agents and the Arranger................................ 57
ARTICLE VIII
MISCELLANEOUS
8.01. Amendments, Etc............................................... 57
8.02. Notices, Etc.................................................. 58
8.03. No Waiver; Remedies........................................... 58
8.04. Costs, Expenses and Indemnities............................... 58
8.05. Right of Set-off.............................................. 59
8.06. Binding Effect................................................ 60
8.07. Assignments and Participations................................ 60
8.08. Severability of Provisions.................................... 63
8.09. Independence of Provisions.................................... 63
8.10. Headings...................................................... 63
8.11. Execution in Counterparts..................................... 63
8.12. Confidentiality............................................... 63
ii
<PAGE>
8.13. Consent to Jurisdiction....................................... 64
8.14. GOVERNING LAW................................................. 64
8.15. WAIVER OF JURY TRIAL.......................................... 64
iii
<PAGE>
SCHEDULES TO REVOLVING CREDIT AGREEMENT
Schedule 1 - Lending Offices, Addresses, Etc.
Schedule 2 - Subsidiaries
EXHIBITS TO REVOLVING CREDIT AGREEMENT
Exhibit A - Assignment and Acceptance
Exhibit B-1- Form of Revolving Note
Exhibit B-2- Form of Auction Note
Exhibit C-1- Notice of Revolving Borrowing
Exhibit C-2- Notice of Auction Borrowing
Exhibit D - Notice of Conversion/Continuation
Exhibit E - Form of Borrower Counsel's Opinion
Exhibit F - Form of Opinion of Shearman & Sterling
iv
<PAGE>
REVOLVING CREDIT AGREEMENT
Revolving Credit Agreement, dated as of December 5, 1994, among
Foundation Health Corporation, a Delaware corporation (the "Borrower"), the
banks (the "Banks") listed on the signature pages hereof and the Lenders (as
defined below) from time to time party hereto, Citicorp USA, Inc. ("CUSA"), as
administrative agent (the "Agent") for the Lenders, 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").
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement
(as hereinafter defined), the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"ACQUISITION" means the purchase of capital stock (or options,
warrants or similar instruments convertible into capital stock) of, or
merger with, purchase of assets of, purchase of convertible debt of, a
Person not an Affiliate of the Borrower or one of its Subsidiaries on the
date of determination, or any combination thereof, in each case involving
a purchase in connection with which the acquiring Person owns 50% or more
of the equity interest of such Person after giving effect to such
purchase, substantially all of such Person's assets, or a line of business
or business of such Person, but excluding purchases of inventory,
equipment and supplies in the ordinary course of business.
"ADVANCE" means an Auction Advance or a Revolving Advance.
"AFFILIATE" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control
with such Person. The term "control" means the possession, directly or
indirectly, of the power, whether or not exercised, to direct or cause the
direction of the management or policies of any Person, whether through
ownership of voting securities, by contract or otherwise.
"AGENT" has the meaning specified in the introduction to this
Agreement.
"AGREEMENT" means this Revolving Credit Agreement, as hereinafter
amended, modified and supplemented from time to time.
"APPLICABLE LENDING OFFICE" means, with respect to each Lender,
such Lender's Domestic Lending Office in the case of a Base Rate Advance
and such Lender's Eurodollar Lending Office in the case of a Eurodollar
Rate Advance and, in
<PAGE>
the case of an Auction Advance, the office of such Lender notified by such
Lender to the Agent as its Applicable Lending Office with respect to such
Auction Advance.
"APPLICABLE EURODOLLAR MARGIN" means, as of any date of
determination, a percentage per annum determined by reference to (i) the
Public Debt Rating in effect on such date and (ii) the Total Debt/Total
Capitalization Ratio of the Borrower as set forth below; PROVIDED,
HOWEVER, that if the Public Debt Rating and Total Debt/Total
Capitalization Ratio of the Borrower as of any date of determination shall
result in different percentage rates per annum being applicable in
accordance with the table below, the Applicable Eurodollar Margin shall be
the lowest of the two percentage rates associated with such tests:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Public Debt Rating Total Debt/Total Applicable Eurodollar
S&P/Moody's Capitalization Ratio Margin
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
<S> <C> <C>
LEVEL 1
A- / or above Less than 0.15 to 1.00 .225%
--------------------------------------------------------------------------------------
LEVEL 2
Below A- but Greater than or equal to 0.15 to
equal to or above BBB+ 1.00 but less than 0.25 to 1.00 .250%
--------------------------------------------------------------------------------------
LEVEL 3
Below BBB+ but Greater than or equal to 0.25 to
equal to or above BBB- 1.00 but less than 0.40 to 1.00 .325%
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
"APPLICABLE PERCENTAGE" means, as of any date of determination, a
percentage per annum determined by reference to (i) the Public Debt Rating
in effect on such date and (ii) the Total Debt/Total Capitalization Ratio
of the Borrower as set forth below; PROVIDED, HOWEVER, that if the
Borrower's Public Debt Rating and Total Debt/Total Capitalization Ratio as
of any date of determination shall result in different percentage rates per
annum being applicable in accordance with the table below, the Applicable
Percentage shall be the lowest of the two percentage rates associated with
such tests:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
Public Debt Rating Total Debt/Total Applicable Percentage
S&P/Moody's Capitalization Ratio
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
<S> <C> <C>
LEVEL 1
A- / or above Less than 0.15 to 1.00 .125%
--------------------------------------------------------------------------------------
LEVEL 2
Below A- but Greater than or equal to 0.15 to
equal to or above BBB+ 1.00 but less than 0.25 to 1.00 .150%
--------------------------------------------------------------------------------------
LEVEL 3
Below BBB+ but equal to or Greater than or equal to 0.25 to
above BBB- 1.00 but less than 0.40 to 1.00 .175%
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit A hereto.
"AUCTION ADVANCE" means an advance by a Lender to the Borrower as
part of an Auction Borrowing resulting from the auction bidding procedure
described in Section 2.03.
"AUCTION BORROWING" means a borrowing consisting of simultaneous
Auction Advances from each of the Lenders whose offer to make one or more
Auction Advances as part of such Borrowing has been accepted by the
Borrower under the Auction bidding procedure described in Section 2.03.
"AUCTION NOTE" means a promissory note of the Borrower payable to
the order of any Lender, in substantially the form of Exhibit B-2 hereto,
evidencing the indebtedness of the Borrower to such Lender resulting from
an Auction Advance made by such Lender.
"AUCTION REDUCTION" has the meaning ascribed thereto in Section
2.01.
"BANKS" has the meaning specified in the introduction to this
Agreement.
"BASE RATE" means, for any period, a fluctuating interest rate per
annum as shall be in effect from time to time which rate per annum shall
at all times be equal to the highest of:
(a) the rate of interest announced publicly by Citibank,
N.A. ("Citibank") in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/4 of one percent or,
if there is no nearest 1/4 of one percent, to the next higher 1/4 of
one percent) of (i) 1/2 of one percent per annum PLUS (ii) the
rate per annum obtained by dividing (A) the latest three-week moving
average of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United
States money market banks, such three-week moving average (adjusted
to the basis of a year of 360 days) being determined weekly on each
Monday (or, if any such day is not a Business Day, on the next
succeeding Business Day) for the three-week period ending on the
previous Friday by the Agent on the basis of such rates reported by
certificate of deposit dealers to and published by the Federal
Reserve Bank of New York or, if such publication shall be suspended
or terminated, on the basis of quotations for such rates received by
the Agent from three New York certificate of deposit dealers of
recognized standing selected by the Agent, by (B) a percentage
3
<PAGE>
equal to 100% MINUS the average of the daily percentages specified
during such three-week period by the Board of Governors of the
Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement) for
the Agent in respect of liabilities consisting of or including
(among other liabilities) three-month U.S. dollar nonpersonal time
deposits in the United States, PLUS (iii) the average during such
three-week period of the annual assessment rates estimated by the
Agent for determining the then current annual assessment payable by
the Agent to the Federal Deposit Insurance Corporation (or any
successor) for insuring U.S. dollar deposits of the Agent in the
United States; and
(c) 1/2 of one percent above the Federal Funds Rate.
Each change in the fluctuating interest rate hereunder shall take effect
simultaneously with the corresponding change in the Base Rate.
"BASE RATE ADVANCE" means a Revolving Advance which bears interest
as provided in Section 2.07(a)(i).
"BOARD OF DIRECTORS" of any corporation means the Board of
Directors of such corporation or a duly constituted committee thereof
having authority over matters to which the action proposed to be taken or
authorized relates.
"BORROWER" has the meaning specified in the introduction to this
Agreement.
"BORROWING" means an Auction Borrowing or a Revolving Borrowing.
"BUSINESS DAY" means a day of the year on which banks are not
required or authorized to close in New York City or San Francisco,
California and, if the applicable Business Day relates to any Eurodollar
Rate Advances, a day on which dealings in dollar deposits are carried on
in the London interbank market.
"CAPITAL LEASE" means any lease of property which, in accordance
with generally accepted accounting principles, should be capitalized on
the lessee's balance sheet or disclosed in a footnote thereto as a
capitalized lease.
"CAPITAL LEASE OBLIGATION" means, with respect to any lease of
property which, in accordance with generally accepted accounting
principles, should be capitalized on the lessee's balance sheet or for
which the amount of the assets and liabilities thereunder, if so
capitalized, should be disclosed in a note to such balance sheet, the
amount of the liability which should be so capitalized or disclosed as a
capitalized lease obligation.
4
<PAGE>
"CASH EQUIVALENTS" means (i) United States dollar denominated
certificates of deposit, banker's acceptances and secured repurchase
agreements entered into with domestic and foreign financial institutions
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 one year from the date of acquisition; (ii)
United States Treasury bills, notes, bonds, and securities issued by an
agency of the United States government and having a maturity within five
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 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 five years from the date of
acquisition; and (iv) United States dollar denominated money market funds
that invest only in "eligible securities" as defined by Rule 2a-7 under
the Investment Company Act of 1940 and otherwise comply with the
provisions of such Rule 2a-7 as to quality, maturity and diversification
standards. For purposes of the foregoing "BBB" and "MIG-1" shall have the
meanings assigned to such ratings by Standard & Poor's Corporation and
Moody's Investors Service, respectively, as of the date hereof and the
comparable rating terms utilized by any other Nationally Recognized
Statistical Rating Organization.
"CHANGE OF CONTROL" means an event or series of events by which:
(i) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, provided that in no event
shall an existing Borrower employee stock ownership plan or any other
Borrower employee benefit plan which may hereafter be established by the
Borrower be deemed a "person" or part of a "group") is or becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly of 50% or more of the Borrower's then
outstanding voting stock, otherwise than through a transaction consummated
with the prior approval of the Borrower's Board of Directors, a majority
of whose members are Continuing Directors (as defined below); or (ii)
during any period of two consecutive calendar years, individuals who, on
the date hereof, constitute the Borrower's Board of Directors (together
with any new director whose election by the Borrower's Board of Directors
or whose nomination for election by the Borrower's stockholders was
approved by a vote of at least a majority of the directors then still in
office who either were directors on the date hereof or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the directors then in office. For the
purposes of the foregoing, the term "Continuing Directors" means, as of
the date of any such approval, (1) individuals who, on the date hereof,
are members of the Borrower's Board of Directors and (2) any new director
whose election by the Borrower's Board of Directors or whose nomination
for election by the Borrower's stockholders is approved by a vote of at
least a majority of the directors then still in office who either
5
<PAGE>
are directors on the date hereof or whose election or nomination for
election was previously so approved.
"CUSA" means Citicorp USA, Inc.
"CODE" means the Internal Revenue Code of 1986, as amended from
time to time.
"COMMITMENT" has the meaning specified in Section 2.01 hereof.
"COMMON STOCK" means, with respect to the Borrower, the common
stock, par value $0.01 per share, of the Borrower.
"CONSOLIDATED", "CONSOLIDATING" and similar derivatives of each
such word refers to the consolidation of accounts in accordance with
generally accepted accounting principles.
"CONSOLIDATED NET TANGIBLE ASSETS" of any Person means, as of any
date, the sum of the Total Assets of such Person and its subsidiaries on a
Consolidated basis at such date, after deducting therefrom (i) all
liabilities of such Person and its Subsidiaries, (ii) all assets of such
Person and its Subsidiaries that would be classified as intangibles under
generally accepted accounting principles (including, without limitation,
goodwill, organizational expenses, trademarks, trade names, copyrights,
patents, licenses and any rights in any thereof) and (iii) all reserves,
intercompany items or unamortized debt discount and expense not otherwise
included in (i), each such item determined in accordance with generally
accepted accounting principles.
"CONVERT", "CONVERSION" and "CONVERTED" each refer to a
conversion of Advances of one Type into Advances of another Type pursuant
to Section 2.11 or as is otherwise provided for herein.
"DEBT" of any Person means, without duplication, (i) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services (including, without limitation, all
obligations, contingent or otherwise, of such Person in connection with
letter of credit facilities, acceptance facilities or other similar
facilities and in connection with any agreement to purchase, redeem,
exchange, convert or otherwise acquire for value any capital stock of such
Person or any warrants, rights or options to acquire such capital stock,
now or hereafter outstanding), excluding payables for goods or services
incurred in the ordinary course of business and not overdue for a period
of ninety days or more and deferred compensation arrangements with
officers, directors and employees, (ii) all obligations of such Person
evidenced by bonds, notes, debentures or other similar instruments, (iii)
all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person
(even though
6
<PAGE>
the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such
property), (iv) all Capital Lease Obligations of such Person, (v) all
obligations, contingent or otherwise, of such Person in connection with
interest rate exchange agreements, foreign exchange rate agreements and
similar agreements (provided that the obligations under such agreements
shall be recorded on a net basis and marked to market on a current basis),
(vi) all Debt of another Person secured by (or for which the holder of
such Debt has an existing right, contingent or otherwise, to be secured
by) any lien, security interest or other charge or encumbrance upon or in
property (including, without limitation, accounts and contract rights)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt, (vii) all Guaranteed Debt and (viii)
if an ERISA Event shall have occurred with respect to any Plan, the
Insufficiency (if any) of such Plan (or, in the case of a Plan with
respect to which an ERISA Event described in clause (iii) through (vi) of
the definition of ERISA Event shall have occurred, the liability related
thereto).
"DEFAULT" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"DOMESTIC LENDING OFFICE" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule 1 hereto or in the Assignment and Acceptance pursuant
to which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank organized under
the laws of the United States, or any State thereof, and having a combined
capital and surplus of at least $400,000,000; (ii) a savings and loan
association or savings bank organized under the laws of the United States,
or any State thereof, and having a combined capital and surplus of at
least $400,000,000; (iii) a commercial bank organized under the laws of
any other country which is a member of the Organization for Economic
Cooperation and Development (the "OECD"), or a political subdivision of
any such country, and having a combined capital and surplus of at least
$400,000,000, provided that such bank is acting through a branch or agency
located in the United States; (iv) a commercial finance company or finance
subsidiary of a corporation organized under the laws of the United States
or any state thereof, and having a Consolidated Net Worth of at least
$400,000,000; (v) any Bank or Lender and any Affiliate of a Bank or
Lender; (vi) any "qualified institutional buyer" as defined in Rule
144A(a)(1) of the rules and regulations prescribed by the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended;
and (vii) any other Person mutually acceptable to the Borrower and the
Agent.
"ENVIRONMENTAL LAW" means any and all statutes, laws, regulations,
ordinances, rules, judgments, orders, decrees, permits, concessions,
grants,
7
<PAGE>
franchises, licenses, agreements or other governmental restrictions of any
federal, state or local governmental authority within the United States or
any state or territory thereof and which relate to the environment or the
release of any materials into the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"ERISA AFFILIATE" means any Person that for the purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower within the meaning of Section 414 of the
Code and the regulations promulgated and rulings issued thereunder.
"ERISA EVENT" means (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, unless the 30-day notice
requirement with respect thereto has been waived by the PBGC; (ii) the
provision by the administrator of any Plan of a notice of intent to
terminate such Plan, pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section
4041(e) of ERISA); (iii) the cessation of operations at a facility in the
circumstances described in Section 4068(f) of ERISA; (iv) the withdrawal
by the Borrower or an ERISA Affiliate from a Multiple Employer Plan during
a plan year for which it was a substantial employer, as defined in Section
4001(a)(2) of ERISA; (v) the failure by the Borrower or any ERISA
Affiliate to make a payment to a Plan required under Section 302(f)(l) of
ERISA, which Section imposes a lien for failure to make required payments;
(vi) the adoption of an amendment to a Plan requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (vii) the
institution by the PBGC of proceedings to terminate a Plan, pursuant to
Section 4042 of ERISA, or the occurrence of any event or condition which
might constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, a Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term
in Regulation D of the Board of Governors of the Federal Reserve System,
as in effect from time to time.
"EURODOLLAR LENDING OFFICE" means, with respect to each Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule 1 hereto or in the Assignment and Acceptance
pursuant to which it became a Lender (or, if no such office is specified,
its Domestic Lending Office), or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Agent.
8
<PAGE>
"EURODOLLAR RATE" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Borrowing,
an interest rate per annum equal to the rate (rounded upward to the
nearest whole multiple of 1/16 of 1% per annum, if such rate is not such a
multiple) per annum at which deposits in U.S. dollars are offered by the
principal office of the Agent to prime banks in the London interbank
market at 11:00 A.M. (London time) two Business Days before the first day
of such Interest Period in an amount substantially equal to the Agent's
Eurodollar Rate Advance comprising part of such Revolving Borrowing and
for a period equal to such Interest Period.
"EURODOLLAR RATE ADVANCE" means a Revolving Advance which bears
interest as provided in Section 2.07(a)(ii).
"EURODOLLAR RATE RESERVE PERCENTAGE" of any Lender for any
Interest Period for any Eurodollar Rate Advance means the reserve
percentage applicable during such Interest Period (or if more than one
such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for such Lender with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities having a term equal to
such Interest Period.
"EVENTS OF DEFAULT" has the meaning specified in Section 6.01.
"EXEMPT ACQUISITION" means, at any date of determination, any
Acquisition by the Borrower and its Subsidiaries of Persons and/or assets
involved (or to be used) in connection with or related to the Borrower's
and its Subsidiaries' existing or related lines of business; PROVIDED,
THAT (i) the aggregate amount of consideration paid by the Borrower or
any of its Subsidiaries in connection with other Exempt Acquisitions in
the twelve-month period (or shorter period of time as may have elapsed
since the date hereof) immediately preceding such Acquisition PLUS the
amount to be paid with respect to such Acquisition at the date of
determination does not exceed the greater of (A) $50,000,000 and (B) 5% of
the Borrower's Consolidated Net Worth as at the end of the Borrower's
Fiscal Quarter ended most recently before the consummation of such
Acquisition, (ii) any Acquisition involving a merger to which the Borrower
is a party must provide that the Borrower is the surviving corporation in
such merger and (iii) immediately before and after giving effect to the
consummation of each such Acquisition, no Default has occurred and is
continuing or will exist.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System
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arranged by Federal funds brokers, as published for such day (or, if such
day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day which is a Business Day, the average of the quotations for such
day on such transactions received by the Agent from three Federal funds
brokers of recognized standing selected by it.
"FISCAL QUARTER" means, with respect to any Person, a fiscal
quarter of such Person.
"FISCAL YEAR" means, with respect to any Person, a fiscal year of
such Person.
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person as
at the end of any period, the ratio of (i) such Person's Consolidated Net
Income (the amount of such Consolidated Net Income, in the case of the
Borrower, to be calculated by adding back thereto (to the extent deducted
therefrom) up to $125,000,000 of restructuring charges incurred by the
Borrower in the Borrower's 1995 Fiscal Year) PLUS Interest Expense
PLUS Tax Expense PLUS Operating Lease Rentals, in each case for such
period, to (ii) such Person's Fixed Charges for such period.
"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 voluntary prepayments
of principal not required under the loan documents relating to such Debt)
PLUS (iv) the aggregate amount of all cash dividends paid by the
Borrower during such period.
"FUNDED DEBT" means (i) Debt under this Agreement with respect to
Revolving Advances and Auction Advances and (ii) all other Debt which
matures more than one year from the date of creation or matures within one
year from such date but is renewable or extendible, at the option of the
debtor, to a date more than one year from such date or is outstanding
under a revolving credit or similar agreement which obligates the lender
or lenders to extend credit during a period of more than one year from
such date.
"GUARANTEED DEBT" of any Person means all Debt referred to in
clause (i), (ii), (iii), (iv) or (v) of the definition of "Debt" in this
Section 1.01 guaranteed directly or indirectly in any manner by such
Person, or in effect guaranteed directly or indirectly by such Person
through an agreement (i) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (ii) to purchase,
sell or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make payment
of such Debt or to assure the holder of such Debt against loss, (iii) to
supply funds to, or in any other manner invest in,
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the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are
rendered) or (iv) otherwise to assure a creditor against loss.
"HAZARDOUS MATERIALS" means any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or
toxic substances, infectious wastes, or related or similar materials,
asbestos or any material containing asbestos, or any other substance or
material as so defined and regulated by any Federal, state or local
environmental law, ordinance, rule or regulation, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.),
the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections
1801, ET SEQ.), RCRA, and the regulations adopted and publications
promulgated pursuant thereto.
"HMO" means a health maintenance organization doing business as
such (or required to qualify or to be licensed as such) under HMO
Regulations.
"HMO EVENT" means material non-compliance by the Borrower or any
of its Material Subsidiaries with any of the terms and provisions of the
HMO Regulations pertaining to fiscal soundness, solvency or financial
condition; or the assertion in writing, after the date hereof, by an HMO
Regulator that it intends to take administrative action against the
Borrower or any of its Material Subsidiaries to revoke or modify any
material contract of insurance, license, charter or permit, or to enforce
the fiscal soundness, solvency or financial provisions or requirements of
the
HMO Regulations against any of such entities as a result of any material
non-compliance therewith.
"HMO REGULATIONS" means all laws, regulations, directives and
administrative orders applicable under federal or state law to HMO's as
such.
"HMO REGULATOR" means any Person charged with the administration,
oversight or enforcement of an HMO Regulation.
"HMO SUBSIDIARY" means any Subsidiary of the Borrower that is an
HMO at the time of determination.
"INSUFFICIENCY" means, with respect to any Plan, the amount, if
any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"INSURANCE COMPANY" means an organization licensed under the
Insurance Regulations to conduct insurance operations (or an organization
required to be licensed as such).
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"INSURANCE REGULATION" means any law, regulation, rule, directive
or order applicable to an Insurance Company as such.
"INSURANCE REGULATOR" means any Person charged with the
administration, oversight or enforcement of any Insurance Regulation.
"INSURANCE SUBSIDIARY" means any Subsidiary of the Borrower that
is an Insurance Company at the time of determination.
"INTEREST EXPENSE" of any Person for any period means the
aggregate amount of interest paid, accrued or scheduled to be paid or
accrued in respect of any Debt (including the interest portion of rentals
under Capital Leases) and all but the principal component of payments in
respect of conditional sales, equipment trust or other title retention
agreements or under a Capital Lease paid, accrued or scheduled to be paid
or accrued by such Person during such period, in each case determined in
accordance with generally accepted accounting principles and excluding
periodic maintenance, insurance, taxes and similar charges not properly
characterized as interest expense under generally accepted accounting
principles.
"INTEREST PERIOD" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Borrowing, the period commencing on
the date of such Eurodollar Rate Advance or the date of Conversion of any
Base Rate Advance into such Eurodollar Rate Advance or the date of
continuation of any Eurodollar Rate Advance as an Eurodollar Rate Advance
and ending on the last day of the period selected by the Borrower pursuant
to the provisions below, and thereafter, each subsequent period commencing
on the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each such Interest Period shall be 1,
2, 3, 4, or 6 months, in each case as the Borrower may select in a Notice
of Revolving Borrowing and/or a Notice of Conversion/Continuation for such
Eurodollar Rate Advance; PROVIDED, HOWEVER, that:
(i) the Borrower may not select any Interest Period which
ends after the Termination Date;
(ii) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving
Borrowing shall be of the same duration;
(iii) whenever the last day of any Interest Period would
otherwise occur on a day other than a Business Day, the last day of
such Interest Period shall be extended to occur on the next
succeeding Business Day, PROVIDED, HOWEVER, that if such
extension would cause the last day of such Interest
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Period to occur in the next following calendar month, the last day
of such Interest Period shall occur on the next preceding Business
Day; and
(iv) the Borrower may not have more than twelve Eurodollar
Rate Borrowings outstanding at any given time.
"INVESTMENT" means, with respect to any Person, (i) any amount
paid by such Person, directly or indirectly, or any transfer of property
by such Person, directly or indirectly (such amount to be the fair market
value of such property at the time of transfer), to any other Person for
capital stock of, or as a capital contribution to any other Person, or for
all or substantially all of the assets of such Person or a line of
business or businesses owned by such Person, and (ii) any direct or
indirect loan or advance to any other Person.
"IRS" means the Internal Revenue Service or any successor thereto.
"LEASEHOLDS" means all of the right, title and interest of the
Borrower or any of its Subsidiaries in, to and under any leases, licenses
or other agreements granting rights to enter, occupy or use any land,
improvements or fixtures (to the extent interests arise therein under the
real property law of the jurisdiction where located).
"LENDERS" means the Banks listed on the signature pages hereto and
each Eligible Assignee that becomes a party hereto pursuant to Section
8.07.
"LOAN DOCUMENTS" means this Agreement and the Notes, in each case
as amended, supplemented or otherwise modified from time to time.
"MAJORITY LENDERS" means at any time Lenders owed more than
66-2/3% of the then aggregate unpaid principal amount of the Revolving
Advances owing to Lenders, or, if no such principal amount is then
outstanding, Lenders having more than 66-2/3% of the Commitments.
"MATERIAL ADVERSE CHANGE" means a material adverse change in the
business, condition (financial or otherwise) or in the results of
operations of the Borrower and its Subsidiaries taken as a whole.
"MATERIAL ADVERSE EFFECT" means, when referring to the taking of
an action or the omission to take an action, that such action, if taken,
or omission, would have a material adverse effect on the business,
condition (financial or otherwise) or results of operations of the
Borrower and its Subsidiaries taken as a whole.
"MATERIAL SUBSIDIARY" means each Subsidiary that (i) for the most
recent Fiscal Year of the Borrower, accounted for more than 5% of the
Consolidated revenues of the Borrower or (ii) as at the end of such fiscal
year, was the owner, directly or
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indirectly, of more than 5% of the Consolidated assets of the Borrower,
all as shown on its Consolidated financial statements for such Fiscal
Year, PROVIDED that in the case of a Subsidiary acquired during a Fiscal
Year, clause (i) shall not be applicable until the following Fiscal Year
and clause (ii) shall be determined on a pro forma basis in the case of
such Subsidiary, giving effect to such acquisition as if it occurred at
the end of such Fiscal Year.
"MOODY'S" means Moody's Investor Service, Inc.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions, such plan being maintained pursuant to one or more
collective bargaining agreements.
"MULTIPLE EMPLOYER PLAN" means a single employer plan, as defined
in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of
the Borrower or an ERISA Affiliate and at least one Person other than the
Borrower and its ERISA Affiliates or (ii) was so maintained and in respect
of which the Borrower or any ERISA Affiliate could have liability under
Section 4064 or 4069 of ERISA in the event such plan has been or were to
be terminated.
"NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATION" means
Moody's, S&P, Duff & Phelps Inc., Fitch Investors Service Inc.,
International Bank Center of Atlanta or Thompson Bank Watch, Inc.
"NET CASH PROCEEDS" means, with respect to any sale of equity, the
cash proceeds thereof (including, without limitation, all deferred cash
proceeds) received by the Borrower, net of (i) brokerage and underwriting
commissions and other fees and expenses related thereto and (ii) provision
for all taxes payable as a result of such sale.
"NET INCOME" means, for any period, net income (or loss) after
taxes and extraordinary items determined in accordance with generally
accepted accounting principles, and, to the extent not deducted therefrom,
net income (or loss) after taxes and extraordinary items determined in
accordance with generally accepted accounting principles associated with
the portion of capital stock of any Subsidiary that is not owned, directly
or indirectly, by the Borrower.
"NET WORTH" of any Person on any date of determination means an
amount equal to the excess of Total Assets over Total Liabilities of such
Person.
"NOTES" means the Auction Notes and the Revolving Notes.
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"NOTICE OF AUCTION BORROWING" has the meaning ascribed thereto in
Section 2.03 hereof.
"NOTICE OF REVOLVING BORROWING" has the meaning ascribed thereto
in Section 2.02 hereof.
"NOTICE OF CONVERSION/CONTINUATION" means a written notice,
substantially in the form of Exhibit D hereto, delivered in accordance
with, and within the period specified in, Section 2.11 hereof, wherein the
Borrower elects to Convert or continue Revolving Advances and/or elects an
Interest Period and Type for such Converted or continued Revolving
Advances.
"OBLIGATIONS" means all obligations of the Borrower now or
hereafter existing under the Loan Documents, whether for principal,
interest, fees, expenses, indemnification or otherwise, including without
limitation, all amounts accruing during a proceeding under the United
States Bankruptcy Code and the amounts payable to Agent pursuant to the
letter agreement referred to in Section 2.03(b).
"OPERATING LEASE" means any noncancellable lease of property
having a term more than one year (real, personal or mixed) which lease
does not constitute a Capital Lease.
"OPERATING LEASE RENTALS" means all rents and other amounts paid
or accrued by the Borrower and its Subsidiaries under and with respect to
Operating Leases during and for the relevant period, but excluding
periodic maintenance, insurance, taxes and similar charges not properly
characterized as rent under generally accepted accounting principles.
"OTHER TAXES" has the meaning specified in Section 2.15.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PERMITTED ACQUISITIONS" means Acquisitions by the Borrower and
its Subsidiaries of Persons and/or assets involved (or to be used) in
connection with or related to the Borrower's and its Subsidiaries'
existing or related lines of business PROVIDED, that (i) any Acquisition
involving a merger to which the Borrower is a party must provide that the
Borrower is the surviving corporation in such merger, (ii) immediately
before and after giving effect to the consummation of each Acquisition, no
Default has occurred and is continuing or will exist; and (iii) the
Borrower shall have complied with the requirements of Section 5.05 if
applicable.
"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
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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 five 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; and (v) obligations of any
foreign government or authority of any 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 five years from
the date of acquisition. 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 "A" or better by a Nationally Recognized Statistical Rating
Organization, and (b) at no time may more than 5% of the aggregate of all
Investments under clauses (i), (ii), (iii), (iv) and (v) 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 any single Person). 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.
"PERMITTED LIEN" means any of the following:
(i) liens for taxes, assessments or governmental charges or
levies not yet due and payable;
(ii) inchoate liens imposed by law but not yet having
attached to any property, such as materialmen's, mechanics',
carriers', worker's, employees' and repairmen's liens and other
similar liens arising in the ordinary course of the Borrower's or
any of its Subsidiaries' business securing obligations which are not
overdue for a period of more than ninety (90) days;
(iii) liens imposed by law which have attached to property but
which (1) secure obligations which do not exceed $250,000 in the
aggregate for all such liens described in this clause (iii), and (2)
which in all cases are being
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contested in good faith and for which adequate reserves have been
made in accordance with generally accepted accounting principles;
(iv) pledges or deposits to secure obligations under
workmen's compensation laws or similar legislation or to secure
public or statutory obligations of the Borrower or any of its
Subsidiaries or security deposits (on customary terms) to secure
performance under Leaseholds and under other contracts entered into
in the ordinary course;
(v) purchase money liens or purchase money security
interests upon or in any property; PROVIDED, HOWEVER, that no
lien or security interest referred to in this clause (v) shall
extend to or cover any property other than the related property
being acquired or leased (as the case may be) or shall have been
incurred in connection with any Acquisition or at the request or
instigation of the Borrower or any of its Subsidiaries; and
PROVIDED, FURTHER, the Indebtedness or other obligation secured
by such purchase money liens or purchase money security interests
shall not, in any event, encumber any capital stock of the Borrower
or any of the Borrower's Subsidiaries;
(vi) liens and interests of the lessor of the type
customarily arising under any lease or agreement to lease with
respect to property located on the premises covered by such lease;
(vii) liens existing on the date hereof;
(viii)any lien or security interest on property or assets
acquired by the Borrower or its Subsidiaries after the date hereof,
PROVIDED, THAT, such lien or security interest existed on the
date such property or assets were acquired and was not incurred at
the request or instigation of the Borrower or any of its
Subsidiaries and PROVIDED, FURTHER, that such lien or security
interest shall not, in any event, encumber any capital stock of the
Borrower or any of the Borrower's Subsidiaries;
(ix) liens on the property or assets of any Subsidiary of the
Borrower granted in favor of any HMO Subsidiary or Insurance
Subsidiary to secure intercompany loans or advances made by such HMO
Subsidiary or Insurance Subsidiary to finance construction of new
facilities, where such liens are granted in order to enable such HMO
Subsidiary or Insurance Subsidiary to maintain compliance with, or
to preserve the level of its tangible net equity for purposes of,
the HMO Regulations or Insurance Regulations;
(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 of 10% of Borrower's Consolidated
Net Tangible Assets; and
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(xi) any liens granted in connection with the refinancing or
extension of any of the indebtedness underlying the liens permitted
under clauses (i) through (x) above; PROVIDED that such liens
replace or renew such permitted liens but do not extend them to
other property.
"PERSON" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political
subdivision or agency thereof.
"PLAN" means a Single Employer Plan or a Multiple Employer Plan.
"PREFERRED STOCK" of any Person means the capital stock of such
Person of any class or classes (however designated) that ranks prior, as
to the payment of dividends or as to the distribution of assets upon any
voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of capital stock of any other class of such Person.
"PUBLIC DEBT RATING" means, as of any date, the lowest rating that
has been most recently announced by either S&P or Moody's, as the case may
be, for any class of long-term senior unsecured debt issued by the
Borrower. For purposes of the foregoing, (a) if no Public Debt Rating
shall be available from either S&P or Moody's, the Applicable Eurodollar
Margin and the Applicable Percentage will be set by reference to the Total
Debt/Total Capitalization Ratio of the Borrower so long as the Agent shall
have received the financial statements and schedule to be delivered by the
Borrower pursuant to Section 5.04(a), and if the Agent shall not have
received such financial statements and schedule, in accordance with Level
3 under the definition of "APPLICABLE EURODOLLAR MARGIN" or "APPLICABLE
PERCENTAGE", as the case may be; (b) if only one of S&P and Moody's shall
have in effect a Public Debt Rating, the Applicable Eurodollar Margin and
the Applicable Percentage shall be determined by reference to the
available rating; (c) if the ratings established by S&P and Moody's shall
fall within different levels, the Applicable Eurodollar Margin and the
Applicable Percentage shall be based upon the lower rating; (d) if any
rating established by S&P or Moody's shall be changed, such change shall
be effective as of the date on which such change is first announced
publicly by the rating agency making such change; and (e) if S&P or
Moody's shall change the basis on which ratings are established, each
reference to the Public Debt Rating announced by S&P or Moody's, as the
case may be, shall refer to the then equivalent rating by S&P or Moody's,
as the case may be.
"PUBLIC NOTES" means the promissory notes issued by the Borrower
pursuant to, and as described in, the indenture referred to in the
Borrower's registration statement on Form S-3 (registration statement
number 33-61684), and on Form T-1 (registration statement number
22-24210), in each case as amended, supplemented and modified from time to
time.
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"RCRA" means the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 ET SEQ. (1976) and the regulations adopted pursuant thereto,
as amended from time to time.
"REAL PROPERTY" means all of the right, title and interest of the
Borrower and any of its Subsidiaries in and to land, improvements and
fixtures (to the extent interests therein arise under the real property
law of the jurisdiction where located).
"REGISTER" has the meaning specified in Section 8.07(c).
"RESPONSIBLE OFFICER" means, with respect to any certificate,
report or notice to be delivered or given hereunder, unless the context
otherwise requires, the president, chief executive officer or chief
financial officer or other officer who in the normal performance of his or
her operational duties would have knowledge of the subject matter relating
to such certificate, report or notice.
"REVOLVING ADVANCE" means an advance by a lender to the Borrower
as part of a Revolving Borrowing and refers to a Base Rate Advance or a
Eurodollar Advance, each of which shall be a "TYPE" of Revolving
Advance.
"REVOLVING BORROWING" means a borrowing consisting of simultaneous
Revolving Advances of the same Type made by each of the Lenders pursuant
to Section 2.01.
"REVOLVING NOTE" means a promissory note of the Borrower payable
to the order of any Lender, in substantially the form of Exhibit B-1
hereto, evidencing the aggregate indebtedness of the Borrower to such
Lender resulting from the Revolving Advances made by such Lender.
"SINGLE-EMPLOYER PLAN" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, which (i) is maintained for employees of the
Borrower or an ERISA Affiliate and no Person other than the Borrower and
its ERISA Affiliates or (ii) was so maintained and in respect of which the
Borrower or an ERISA Affiliate could have liability under Section 4069 of
ERISA in the event such plan has been or were to be terminated.
"S&P" means Standard & Poor's Corporation.
"SOLVENT" means, with respect to any Person on a particular date,
that on such date (i) the fair value of the property of such Person is
greater than the total amount of liabilities, including, without
limitation, contingent liabilities, of such Person, (ii) the present fair
salable value of the assets of such Person is not less than the amount
that will be required to pay the probable liability of such Person on its
debts as they become absolute and matured, (iii) such Person is able to
pay its debts and other
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liabilities, contingent obligations and other commitments as they mature
in the normal course of business, (iv) such Person does not intend to, and
does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, (v) such
Person is not engaged in a business or a transaction, and is not about to
engage in a business or a transaction, for which such Person's property
would constitute unreasonably small capital after giving due consideration
to the prevailing practice in the industry in which such Person is
engaged, and (vi) such Person is solvent under all applicable HMO
Regulations. In computing the amount of contingent liabilities at any
time, it is intended that such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual
or matured liability.
"SUBSIDIARY" of any Person means any corporation, partnership,
joint venture, trust or estate of which (or in which) more than 50% of:
(i) the outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such
corporation (irrespective of whether or not at the time capital
stock of any other class or classes of such corporation shall or
might have voting power upon the occurrence of any contingency),
(ii) the interest in the capital or profits of such
partnership or joint venture, or
(iii) the beneficial interest of such trust or estate,
is at the time directly or indirectly owned by such Person, by such Person
and one or more of its other Subsidiaries, or by one or more of such
Person's other Subsidiaries.
"TAX EXPENSE" of any Person for any period means the aggregate
amount of taxes (other than sales or use taxes) paid or accrued by such
Person during such period, determined in accordance with generally
accepted accounting principles.
"TERMINATION DATE" means December 5, 1999 or such earlier date of
termination in whole of the Commitments pursuant to Section 6.01 hereof or
otherwise.
"TOTAL ASSETS" of any Person means all property, whether real,
personal, tangible, intangible or otherwise, that, in accordance with
generally accepted accounting principles, should be included in
determining total assets as shown on the assets portion of a balance sheet
of such Person.
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"TOTAL CAPITALIZATION" of any Person, as of the date of
determination, means the sum of such Person's Funded Debt plus Net Worth.
"TOTAL DEBT/TOTAL CAPITALIZATION RATIO" of any Person means, at
any date of determination, the ratio that such Person's Funded Debt at
such date of determination bears to such Person's Total Capitalization.
"TOTAL LIABILITIES" of any Person at any date means all
obligations that, in accordance with generally accepted accounting
principles, would be included in determining total liabilities as shown on
the liabilities side of a balance sheet of such Person at such date.
"WELFARE PLAN" means a welfare plan, as defined in Section 3(1) of
ERISA, which section covers plans, funds and programs providing (among
other things) medical, surgical, or hospital care or benefits, or benefits
in the event of sickness, accident, disability, death or unemployment,
together with plans which provide worker's compensation, unemployment
compensation or disability insurance benefits.
"WITHDRAWAL LIABILITY" has the meaning given such term under Part
I of Subtitle E of Title IV of ERISA.
SECTION 1.02. COMPUTATION OF TIME PERIODS. In this Agreement in
the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each means "to but excluding".
SECTION 1.03. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with United States
generally accepted accounting principles consistently applied and consistent
with those applied in the preparation of the financial statements referred to in
Section 4.01(f). If any changes in accounting principles from those used in the
preparation of the financial statements referred to in Section 4.01(f) are
hereafter occasioned by promulgation of rules, regulations, pronouncements or
opinions by or are otherwise required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or successors
thereto or agencies with similar functions), and any of such changes results in
a change in the method of calculation of, or affects the results of such
calculation of, any of the financial covenants, standards or terms found herein,
then the parties hereto agree to enter into and diligently pursue negotiations
in order to amend such financial covenants, standards or terms so as to
equitably reflect such changes, with the desired result that the criteria for
evaluating the Borrower's financial condition and results of operations shall be
the same after such changes as if such changes had not been made; PROVIDED,
HOWEVER, that if the parties, after such negotiations, cannot reach agreement
on amendments to such financial covenants, standards or terms, then the
Borrower's compliance or noncompliance therewith shall be determined as if such
changes in accounting principles had not occurred.
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SECTION 1.04. REFERENCES. Unless otherwise indicated, all
references to Sections, subparagraphs, subsections, headings, Exhibits and
Schedules made herein are references to the Sections, subparagraphs,
subsections, headings, Exhibits and Schedules hereof or hereto.
SECTION 1.05. FAS 115. In calculating the Borrower's
Consolidated Net Worth for the first three Fiscal Quarters of the Borrower's
Fiscal Year (including, without limitation, for the purposes of Section
5.03(a)), fluctuations (both positive and negative) resulting from the Borrower
marking to market (the "Mark-to-Market Effect") its Investments as required by
FAS 115 shall not be taken into account. The Mark-to-Market Effect shall be
fully reflected in calculating the Borrower's Consolidated Net Worth as at the
end of the Borrower's fourth Fiscal Quarter in each Fiscal Year.
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. THE REVOLVING ADVANCES. Each Lender severally
agrees, on the terms and conditions hereinafter set forth, to make Revolving
Advances to the Borrower from time to time on any Business Day during the period
from the date hereof until the Termination Date in an aggregate amount not to
exceed at any time outstanding the amount set forth opposite such Lender's name
on the signature pages hereof or, if such Lender has entered into an Assignment
and Acceptance, set forth for such Lender in the Register maintained by the
Agent pursuant to Section 8.07(c), as such amount may be reduced pursuant to
Section 2.05 (such Lender's "Commitment"); PROVIDED that the aggregate amount
of the Commitments of the Lenders shall be deemed used from time to time to the
extent of the aggregate amount of the Auction Advances then outstanding and such
deemed use of the aggregate amount of the Commitments shall be allocated among
the Lenders ratably according to their respective Commitments (such deemed use
of the aggregate amount of the Commitments being an "Auction Reduction"). Each
Revolving Borrowing shall be in an aggregate amount not less than $5,000,000 or
an integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate
amount equal to the amount by which the aggregate amount of a proposed Auction
Borrowing requested by the Borrower exceeds the aggregate amount of Auction
Advances offered to be made by the Lenders and accepted by the Borrower in
respect of such Auction Borrowing, if such Auction Borrowing is made on the same
date as such Revolving Borrowing) and shall consist of Revolving Advances of the
same Type made on the same day by the Lenders ratably according to their
respective Commitments. Within the limits of each Lender's Commitment, the
Borrower may from time to time borrow under this Section 2.01, prepay pursuant
to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. MAKING THE ADVANCES. (a) Each Revolving Borrowing
shall be made on notice, given not later than 1:00 P.M. (New York City time) on
the third Business Day prior to the date of the proposed Revolving Borrowing in
the case of a
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Revolving Advance consisting of Eurodollar Rate Advances, or the first Business
Day prior to the date of the proposed Revolving Borrowing in the case of a
Revolving Borrowing consisting of Base Rate advances, by the Borrower to the
Agent, which shall give to each Lender prompt notice thereof by facsimile or
telex. Each such notice of a Revolving Borrowing (a "Notice of Revolving
Borrowing") shall be by facsimile or telex, confirmed immediately in writing, in
substantially the form of Exhibit C-1 hereto, specifying therein the requested
(i) date of such Borrowing, (ii) Type of Advances comprising such Revolving
Borrowing, (iii) aggregate amount of such Revolving Borrowing, and (iv) in the
case of a Revolving Borrowing consisting of Eurodollar Rate Advances, initial
Interest Period for each such Advance. Each Lender shall, before 1:00 P.M. (New
York City time) on the date of such Revolving Borrowing, make available for the
account of its Applicable Lending Office to the Agent at its address referred to
in Section 8.02, in same day funds, such Lender's ratable portion of such
Revolving Borrowing. Upon the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article III, the Agent
will make such funds available to the Borrower at the Agent's aforesaid address.
(b) Anything in subsection (a) above to the contrary
notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for
any Revolving Borrowing if the aggregate amount of such Borrowing is less
than $1,000,000 multiplied by the number of Lenders;
(ii) if any Lender shall, at least one Business Day before
the date of any requested Revolving Borrowing, notify the Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other
governmental authority asserts that it is unlawful, for such Lender or its
Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or to fund or maintain Eurodollar Rate Advances
hereunder, the right of the Borrower to select Eurodollar Rate Advances
for such Revolving Borrowing or any subsequent Revolving Borrowing shall
be suspended until such Lender shall notify the Agent that the
circumstances causing such suspension no longer exist, and each Revolving
Advance comprising such Revolving Borrowing shall be a Base Rate Advance;
and
(iii) if the Majority Lenders shall, at least one Business Day
before the date of any requested Revolving Borrowing, notify the Agent
that the Eurodollar Rate for Eurodollar Rate Advances comprising such
Revolving Borrowing will not adequately reflect the cost to such Majority
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Revolving Borrowing, the right of the Borrower to select
Eurodollar Rate Advances for such Revolving Borrowing or any subsequent
Revolving Borrowing shall be suspended until the Agent shall notify the
Borrower and the Lenders that the circumstances causing such suspension no
longer exist, and each Revolving Advance comprising such Revolving
Borrowing shall be a Base Rate Advance.
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(c) Each Notice of Revolving Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Revolving Borrowing which the
related Notice of Revolving Borrowing specifies is to be comprised of Eurodollar
Rate Advances, the Borrower shall indemnify each Lender against any loss
(excluding loss of anticipated profits), cost or expense incurred by such Lender
as a result of any failure to fulfill on or before the date specified in such
Notice of Revolving Borrowing for such Revolving Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender to fund the Revolving Advance to
be made by such Lender as part of such Revolving Borrowing when such Revolving
Advance, as a result of such failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender
prior to the date of any Revolving Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, the interest rate applicable at the time to Revolving
Advances comprising such Revolving Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the Agent such
corresponding amount, such amount so repaid shall constitute such Lender's
Advance as part of such Revolving Borrowing for purposes of this Agreement.
(e) The failure of any Lender to make the Revolving Advance to be
made by it as part of any Revolving Borrowing shall not relieve any other Lender
of its obligation, if any, hereunder to make its Revolving Advance on the date
of such Borrowing, but no Lender shall be responsible for the failure of any
other Lender to make the Revolving Advance to be made by such other Lender on
the date of any Revolving Borrowing. Any Lender that fails to make a Revolving
Advance on the occasion of any Borrowing with respect to which all conditions to
lending have been satisfied in accordance with the terms of this Agreement shall
be in breach of this Agreement.
SECTION 2.03. THE AUCTION ADVANCES. (a) Each Lender severally
agrees that the Borrower may make Auction Borrowings under this Section 2.03
from time to time on any Business Day during the period from the date hereof
until the date occurring 30 days prior to the Termination Date in the manner set
forth below; PROVIDED that, following the making of each Auction Borrowing the
aggregate amount of the Advances then outstanding shall not exceed the aggregate
amount of the Commitments of the Lenders (computed without regard to any Auction
Reduction).
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(i) The Borrower may request an Auction Borrowing under
this Section 2.03 by delivering to the Agent, by facsimile or telex,
confirmed immediately in writing, a notice of an Auction Borrowing (a
"Notice of Auction Borrowing"), in substantially the form of Exhibit C-2
hereto, specifying the date and aggregate amount of the proposed Auction
Borrowing, the maturity date for repayment of each Auction Advance to be
made as part of such Auction Borrowing (which maturity date may not be
earlier than the date occurring 30 days after the date of such Auction
Borrowing or later than the earlier to occur of (i) 180 days after the
date of such Auction Borrowing and (ii) the Termination Date), the
interest payment date or dates relating thereto, and any other terms to be
applicable to such Auction Borrowing, not later than 10:00 A.M. (New York
City time) (A) at least one Business Day prior to the date of the proposed
Auction Borrowing, if the Borrower shall specify in the Notice of Auction
Borrowing that the rates of interest to be offered by the Lenders shall be
fixed rates per annum and (B) at least four Business Days prior to the
date of the proposed Auction Borrowing, if the Borrower shall instead
specify in the Notice of Auction Borrowing the basis to be used by the
Lenders in determining the rates of interest to be offered by them. The
Agent shall in turn promptly notify each Lender of each request for an
Auction Borrowing received by it from the Borrower by sending such Lender
a copy of the related Notice of Auction Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects
to do so, irrevocably offer to make one or more Auction Advances to the
Borrower as part of such proposed Auction Borrowing at a rate or rates of
interest specified by such Lender in its sole discretion, by notifying the
Agent (which shall give prompt notice thereof to the Borrower), before
10:00 A.M. (New York City time) (A) on the date of such proposed Auction
Borrowing, in the case of a Notice of Auction Borrowing delivered pursuant
to clause (A) of paragraph (i) above and (B) three Business Days before
the date of such proposed Auction Borrowing, in the case of a Notice of
Auction Borrowing delivered pursuant to clause (B) of paragraph (i) above,
of the minimum amount and maximum amount of each Auction Advance which
such Lender would be willing to make as part of such proposed Auction
Borrowing (which amounts may, subject to the proviso to the first sentence
of this Section 2.03(a), exceed such Lender's Commitment), the rate or
rates of interest therefor and such Lender's Applicable Lending Office
with respect to such Auction Advance; PROVIDED that if the Agent in its
capacity as a Lender shall, in its sole discretion, elect to make any such
offer, it shall notify the Borrower of such offer before 9:00 A.M. (New
York City time) on the date on which notice of such election is to be
given to the Agent by the other Lenders. If any Lender shall elect not to
make such an offer, such Lender shall so notify the Agent, before 10:00
A.M. (New York City time) on the date on which notice of such election is
to be given to the Agent by the other Lenders, and such Lender shall not
be obligated to, and shall not, make any Auction Advance as part of such
Auction Borrowing; PROVIDED that the failure by any Lender to give such
notice shall not cause such Lender to be obligated to make any Auction
Advance as part of such proposed Auction Borrowing.
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(iii) The Borrower shall, in turn, (A) before 11:00 A.M. (New
York City time) on the date of such proposed Auction Borrowing, in the
case of a Notice of Auction Borrowing delivered pursuant to clause (A) of
paragraph (i) above and (B) before 1:00 P.M. (New York City time) three
Business Days before the date of such proposed Auction Borrowing, in the
case of a Notice of Auction Borrowing delivered pursuant to clause (B) of
paragraph (i) above, either:
(x) cancel such Auction Borrowing by giving the Agent
notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its sole
discretion, by giving notice to the Agent of the amount of each
Auction Advance (which amount shall be equal to or greater than the
minimum amount, and equal to or less than the maximum amount,
notified to the Borrower by the Agent on behalf of such Lender for
such Auction Advance pursuant to paragraph (ii) above) to be made by
each Lender as part of such Auction Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii) above by
giving the Agent notice to that effect.
(iv) If the Borrower notifies the Agent that such Auction
Borrowing is cancelled pursuant to paragraph (iii)(x) above, the Agent
shall give prompt notice thereof to the Lenders and such Auction Borrowing
shall not be made.
(v) If the Borrower accepts one or more of the offers made
by any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent
shall in turn promptly notify (A) each Lender that has made an offer as
described in paragraph (ii) above, of the date and aggregate amount of
such Auction Borrowing and whether or not any offer or offers made by such
Lender pursuant to paragraph (ii) above have been accepted by the
Borrower, (B) each Lender that is to make an Auction Advance as part of
such Auction Borrowing, of the amount of each Auction Advance to be made
by such Lender as part of such Auction Borrowing, and (C) each Lender that
is to make an Auction Advance as part of such Auction Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make an Auction Advance as part of such Auction Borrowing
shall, before 12:00 noon (New York City time) on the date of such Auction
Borrowing specified in the notice received from the Agent pursuant to
clause (A) of the preceding sentence or any later time when such Lender
shall have received notice from the Agent pursuant to clause (C) of the
preceding sentence, make available for the account of its Applicable
Lending Office to the Agent at its address referred to in Section 8.02
such Lender's portion of such Auction Borrowing, in same day funds. Upon
fulfillment of the applicable conditions set forth in Article III and
after receipt by the Agent of such funds, the Agent will make such funds
available to the Borrower at the Agent's aforesaid address. Promptly
after each
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Auction Borrowing the Agent will notify each Lender of the amount of the
Auction Borrowing, the consequent Auction Reduction and the dates upon
which such Auction Reduction commenced and will terminate.
(b) Each Auction Borrowing shall be in an aggregate amount not
less than $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each Auction Borrowing, the Borrower and each
Lender shall be in compliance with the limitations set forth in the PROVISO to
the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, PROVIDED that an Auction Borrowing shall not be made within
three Business Days of the date of any other Auction Borrowing.
(d) The Borrower shall repay to the Agent for the account of each
Lender which has made an Auction Advance on the maturity date of each Auction
Advance (such maturity date being that specified by the Borrower for repayment
of such Auction Advance in the related Notice of Auction Borrowing delivered
pursuant to subsection (a)(i) above and provided in the Auction Note evidencing
such Auction Advance), the then unpaid principal amount of such Auction Advance.
The Borrower shall have no right to prepay any principal amount of any Auction
Advance unless, and then only on the terms, specified by the Borrower for such
Auction Advance in the related Notice of Auction Borrowing delivered pursuant to
subsection (a)(i) above and set forth in the Auction Note evidencing such
Auction Advance.
(e) The Borrower shall pay interest on the unpaid principal amount
of each Auction Advance from the date of such Auction Advance to the date the
principal amount of such Auction Advance is repaid in full, at the rate of
interest for such Auction Advance specified by the Lender making such Auction
Advance in its notice with respect thereto delivered pursuant to subsection
(a)(ii) above, payable on the interest payment date or dates specified by the
Borrower for such Auction Advance in the related Notice of Auction Borrowing
delivered pursuant to subsection (a)(i) above, as provided in the Auction Note
evidencing such Auction Advance. Upon the occurrence and during the continuance
of an Event of Default under Section 6.01(a), the Borrower shall pay interest on
the amount of unpaid principal of and interest on each Auction Advance owing to
a Lender, payable in arrears on the date or dates interest is payable thereon,
at a rate per annum equal at all times to 2% per annum above the rate per annum
required to be paid on such Auction Advance under the terms of the Auction Note
evidencing such Auction Advance unless otherwise agreed in such Auction Note.
(f) The indebtedness of the Borrower resulting from each Auction
Advance made to the Borrower as part of an Auction Borrowing shall be evidenced
by a separate
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Auction Note of the Borrower payable to the order of the Lender making such
Auction Advance.
SECTION 2.04. FEES. (a) FACILITY FEE. The Borrower agrees to
pay to the Agent for the account of each Lender a facility fee on the aggregate
amount of such Lender's Commitment from the date hereof in the case of each Bank
and from the effective date specified in the Assignment and Acceptance pursuant
to which it became a Lender in the case of each other Lender until the
Termination Date, at a rate per annum equal to the Applicable Percentage in
effect from time to time, payable in arrears on the last day of each September,
December, March and June during the term of such Lender's Commitment, commencing
December 31, 1994, and on the Termination Date.
(b) FEES. The Borrower agrees to pay to CUSA the fees and other
consideration in such amounts and payable at such times as are specified in the
letter agreement dated December 5, 1994 between the Borrower and CUSA.
SECTION 2.05. TERMINATION OR REDUCTION OF THE COMMITMENTS. The
Borrower shall have the right, upon at least five Business Days' notice to the
Agent, to terminate in whole or reduce ratably in part the unused portions of
the respective Commitments of the Lenders, PROVIDED that the aggregate amount
of the Commitments of the Lenders shall not be reduced to an amount which is
less than the aggregate principal amount of the Auction Advances then
outstanding and PROVIDED, FURTHER, that each partial reduction shall be in
the aggregate amount of $1,000,000 or an integral $1,000,000 multiple in excess
thereof.
SECTION 2.06. REPAYMENT OF REVOLVING ADVANCES. The Borrower
shall repay to the Agent for the ratable account of the Lenders on the
Termination Date the principal amount of each Revolving Advance made by each
Lender in accordance with the Revolving Note to the order of such Lender.
SECTION 2.07. INTEREST ON REVOLVING ADVANCES. (a) SCHEDULED
INTEREST. The Borrower shall pay interest on the unpaid principal amount of
each Revolving Advance made by each Lender from the date of such Revolving
Advance until such principal amount shall be paid in full, at the following
rates per annum:
(i) BASE RATE ADVANCES. During such periods as such
Revolving Advance is a Base Rate Advance, a rate per annum equal at all
times to the Base Rate in effect from time to time, payable quarterly in
arrears on the last day of each September, December, March, and June
during such periods and on the date such Base Rate Advance shall be
Converted or paid in full.
(ii) EURODOLLAR RATE ADVANCES. During such periods as such
Revolving Advance is a Eurodollar Rate Advance, a rate per annum equal at
all times during each Interest Period for such Revolving Advance to the
sum of (x) the
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Eurodollar Rate for such Interest Period for such Revolving Advance PLUS
(y) the Applicable Eurodollar Margin in effect from time to time, payable
in arrears on the last day of such Interest Period and, if such Interest
Period has a duration of more than three months, on each day which occurs
during such Interest Period every three months from the first day of such
Interest Period. On the last day of each Interest Period, the unpaid
principal balance thereof shall automatically become and bear interest as
a Base Rate Advance, except to the extent that the Borrower has elected to
pay interest on all or any portion of such amount for a new Interest
Period commencing on such day in accordance with Section 2.11 and by
timely delivering a Notice of Conversion/Continuation pursuant to Section
2.11.
(b) DEFAULT INTEREST. The Borrower shall pay interest on the
unpaid principal amount of each Revolving Advance that is not paid when due and
on the unpaid amount of all interest, fees and other amounts payable hereunder
that is not paid when due, payable on demand, at a rate per annum equal at all
times to (i) in the case of any amount of principal, the greater of (x) 2% per
annum above the rate per annum required to be paid on such Revolving Advance
immediately prior to the date on which such amount became due and (y) 2% per
annum above the Base Rate in effect from time to time and (ii) in the case of
all other amounts, 2% per annum above the Base Rate in effect from time to time.
SECTION 2.08. ADDITIONAL INTEREST ON EURODOLLAR RATE ADVANCES.
The Borrower shall pay to each Lender, so long as such Lender shall be required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance of such Lender, from the date of such
Revolving Advance until such principal amount is paid in full, at an interest
rate per annum equal at all times to the remainder obtained by subtracting (i)
the Eurodollar Rate for the Interest Period for such Revolving Advance from (ii)
the rate obtained by dividing such Eurodollar Rate by a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage of such Lender for such Interest
Period, payable on each date on which interest is payable on such Revolving
Advance. Such additional interest shall be determined by such Lender and
notified to the Borrower through the Agent and any such determination shall be
conclusive and binding for all purposes absent manifest error.
SECTION 2.09. INTEREST RATE AND FACILITY FEE DETERMINATION. (a)
The Agent shall give prompt notice to the Borrower and the Lenders of the
applicable interest rate determined by the Agent for purposes of Section
2.07(a)(i) or (ii), which shall be binding on the Borrower and Lenders absent
manifest error. Without limiting the generality of the foregoing, the Agent
shall, from time to time, determine the Applicable Eurodollar Margin and
Applicable Percentage in accordance with the definitions thereof based upon the
financial statements delivered by the Borrower pursuant to Section 5.04(a)
hereof and on such other evidence of the Borrower's Public Debt Rating and the
Total Debt/Total Capitalization Ratio as the Agent deems appropriate. In the
event that the Agent determines (whether because of revision or modification of
the Borrower's financial statements, revision
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or modification of a certification previously delivered by the Borrower, or
otherwise) that the Applicable Eurodollar Margin and/or Applicable Percentage
charged for all or a portion of a prior period was lower than should have been
charged with reference to the Borrower's actual Public Debt Rating and Total
Debt/Total Capitalization Ratio for such prior period, THEN, the Borrower
shall, on demand by the Agent, immediately pay to the Agent, for the ratable
benefit of the Lenders, (i) an amount equal to the difference between the amount
that the Borrower actually paid in interest and fees hereunder for such prior
period and the amount that the Borrower would have paid in interest and fees
hereunder had the Borrower actually been charged such higher Applicable
Eurodollar Rate Margin and/or Applicable Percentage that the Agent so determines
should have been charged, together with (ii) interest on the amount specified in
(i) accruing from the date on which such higher Applicable Eurodollar Rate
Margin and/or Applicable Percentage should have been charged as so determined by
the Agent until the date on which such amount specified in (i) is so paid, at
the rate of 2.00% per annum above the Base Rate in effect from time to time.
(b) If, with respect to any Eurodollar Rate Advances, the
Majority Lenders notify the Agent that the Eurodollar Rate for any Interest
Period for such Advances will not adequately reflect the cost to such Majority
Lenders of making, funding or maintaining their respective Eurodollar Rate
Advances for such Interest Period, the Agent shall forthwith so notify the
Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert
Revolving Advances into, Eurodollar Rate Advances shall be suspended until
the Agent shall notify the Borrower and the Lenders that the circumstances
causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Agent will forthwith so notify the Borrower and the Lenders and such Advances
will automatically, on the last day of the then existing Interest Period
therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount of
Revolving Advances comprising any Revolving Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $1,000,000 multiplied by the
number of lenders, such Revolving Advances shall, if they are Eurodollar Rate
Advances, automatically Convert into Base Rate Advances, and on and after such
date the right of the Borrower to Convert such Revolving Advances into
Eurodollar Advances shall terminate.
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SECTION 2.10. PREPAYMENTS OF REVOLVING ADVANCES. The Borrower
may, upon at least one Business Day's notice to the Agent in the case of Base
Rate Advances, and three Business Days' notice to the Agent in the case of
Eurodollar Rate Advances, stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amounts of the Advances comprising part of the same
Revolving Borrowing in whole or ratably in part, together with accrued interest
to the date of such prepayment on the principal amount prepaid; PROVIDED,
HOWEVER, that (x) each partial prepayment shall be in an aggregate principal
amount not less than $1,000,000 and in $100,000 integral multiples thereof and
(y) in the case of any such prepayment of a Eurodollar Rate Advance, the
Borrower shall be obligated to reimburse the Lenders in respect thereof pursuant
to Section 8.04(c).
SECTION 2.11. NOTICE OF CONVERSION/CONTINUATION. (a) The
Borrower may on any Business Day, upon delivery of a Notice of
Conversion/Continuation given to the Agent not later than 12:00 P.M. (New York
City time) on the third Business Day prior to the date of the proposed
Conversion or continuation and subject to the other provisions hereof, continue
Eurodollar Rate Advances comprising part of the same Revolving Borrowing as
Eurodollar Rate Advances with the duration of the Interest Periods therefor to
be specified in the Notice of Conversion/Continuation or Convert all Revolving
Advances of one Type comprising part of the same Revolving Borrowing into
Revolving Advances of another Type; PROVIDED, HOWEVER, that any Conversion
of Eurodollar Rate Advances into Base Rate Advances shall be made on, and only
on, the last day of the Interest Period for such Eurodollar Rate Advances, any
Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in an
amount not less than the minimum amount specified in Section 2.02(b) and no
Conversion of Base Rate Advances into Eurodollar Advances shall result in more
separate Eurodollar Rate Borrowings than permitted under the definition of
Interest Period in Section 1.01; PROVIDED, FURTHER, that if an Event of
Default has occurred and is continuing, the Borrower may not Convert any Base
Rate Advance into a Eurodollar Rate Advance and may not continue any Eurodollar
Rate Advance as a Eurodollar Rate Advance and each such Eurodollar Rate Advance
shall automatically Convert to a Base Rate Advance on the last day of the
Interest Period for such Eurodollar Rate Advance. Each such Notice of a
Conversion/Continuation shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the Revolving Advances to be Converted,
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
Interest Period for each such Revolving Advance and (iv) the Eurodollar Rate
Advances to be continued as Eurodollar Rate Advances and the duration of the
Interest Periods therefor.
SECTION 2.12. INCREASED COSTS. (a) If, due to either (i) the
introduction of or any change (other than any change by way of imposition or
increase of reserve requirements, in the case of Eurodollar Rate Advances,
included in the Eurodollar Rate Reserve Percentage) in or in the interpretation
of any law or regulation or (ii) the compliance with any guideline or request
hereafter adopted, promulgated or made by any central bank or other governmental
authority (whether or not having the force of law), there shall be any increase
in the cost to any Lender of agreeing to make or making, funding or maintaining
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Eurodollar Rate Advances, then the Borrower shall from time to time, upon demand
by such Lender (with a copy of such demand to the Agent), pay to the Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law, but in each case
promulgated or made after the date hereof) affects or would affect the amount of
capital required or expected to be maintained by such Lender or any corporation
controlling such Lender and that the amount of such capital is increased by or
based upon the existence of such Lender's commitment to lend hereunder and other
commitments of this type or upon the Advances, then, upon demand by such Lender
(with a copy of such demand to the Agent), the Borrower shall immediately pay to
the Agent for the account of such Lender, from time to time as specified by such
Lender, additional amounts sufficient to compensate such Lender or such
corporation in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend hereunder or upon the Advances. A
certificate as to such amounts submitted to the Borrower and the Agent by such
Lender shall be conclusive and binding for all purposes, absent manifest error.
(c) Without affecting its rights under Section 2.12(a) or 2.12(b)
or any other provision of this Agreement, each Lender agrees that if there is
any increase in any cost to or reduction in any amount receivable by such Lender
with respect to which the Borrower would be obligated to compensate such Lender
pursuant to Sections 2.12(a) or 2.12(b), such Lender shall use reasonable
efforts to select an alternative Applicable Lending Office which would not
result in any such increase in any cost to or reduction in any amount receivable
by such Lender; PROVIDED, HOWEVER, that no Lender shall be obligated to
select an alternative Applicable Lending Office if such Lender determines that
(i) as a result of such selection such Lender would be in violation of any
applicable law, regulation, treaty, or guideline, or would incur additional
costs or expenses or (ii) such selection would be inadvisable for regulatory
reasons or inconsistent with the interests of such Lender.
SECTION 2.13. ILLEGALITY. Notwithstanding any other provision of
this Agreement, if any Lender shall notify the Agent that the introduction of or
any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or to fund or maintain
Eurodollar Rate Advances hereunder, (i) the obligation of the Lenders to make,
or to Convert Revolving Advances into, Eurodollar Rate Advances shall be
suspended until the Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist and (ii) the Borrower
shall forthwith prepay in full all Eurodollar Rate Advances of all Lenders then
outstanding, together with interest accrued thereon, unless the Borrower, within
five Business Days of notice from the Agent, Converts all Eurodollar
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Rate Advances of all Lenders then outstanding into Base Rate Advances in
accordance with Section 2.11.
SECTION 2.14. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall
make each payment hereunder and under the Notes not later than 1:00 P.M. (New
York City time) on the day when due in U.S. dollars to the Agent at its address
referred to in Section 8.02 in same day funds. The Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal or interest or facility fees ratably (other than amounts payable
pursuant to Sections 2.03(b), 2.08, 2.12, 2.15 and 8.04(c)) to the Lenders for
the account of their respective Applicable Lending Offices, and like funds
relating to the payment of any other amount payable to any Lender to such Lender
for the account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 8.07(d), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under any
Note held by such Lender and after expiration of any grace period specified
herein or therein, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be
made by the Agent on the basis of a year of 365 or 366 days, as the case may be,
and all computations of interest based on the Eurodollar Rate or the Federal
Funds rate and of facility fees shall be made by the Agent on the basis of a
year of 360 days, in each case for the actual number of days (including the
first day but excluding the last day) occurring in the period for which such
interest or facility fees are payable. Each determination by the Agent of an
interest rate hereunder shall be conclusive and binding for all purposes, absent
manifest error.
(d) Whenever any payment hereunder or under the Notes shall be
stated to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day, and such extension of time shall in such
case be included in the computation of payment of interest or facility fee, as
the case may be; PROVIDED, HOWEVER, that if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances to be made in
the next following calendar month, such payment shall be made on the next
preceding Business Day.
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(e) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment in full to the
Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.15. TAXES. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.14,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, EXCLUDING, in the case of each Lender and the Agent, taxes
imposed on its income, and franchise taxes imposed on it, as a result of a
former, present or future connection between the Lender or the Agent (as the
case may be) and the jurisdiction of the governmental authority imposing such
tax or any political subdivision or taxing authority thereof, other than any
such connection arising solely from such Lender or Agent having executed,
delivered, made Advances under or received a payment under, or enforced, this
Agreement or the Notes (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "Taxes"). If the Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any Note to any Lender or
the Agent, (i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.15) such Lender or the Agent (as
the case may be) receives an amount equal to the sum it would have received had
no such deductions been made (and the receipt of such sum shall be deemed to
satisfy the Borrower's relevant principal, interest and other payment
obligations subject to such deductions), (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law. Without affecting its rights under this Section 2.15 or any other
provision of this Agreement, each Lender agrees that if the Borrower is making
any increased payment pursuant to subclause (i) of the preceding sentence, such
Lender shall use reasonable efforts to select an alternative Applicable Lending
Office which would not require the Borrower to make such increased payments;
PROVIDED, HOWEVER, that no Lender shall be obligated to select an
alternative Applicable Lending Office if such Lender determines that (i) as a
result of such selection such Lender would be in violation of any applicable
law, regulation, treaty, or guideline, or would incur additional out of pocket
costs or expenses or (ii) such selection would be inadvisable for regulatory
reasons or inconsistent with the interests of such Lender.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which
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arise from any payment made hereunder or under the Notes or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement or the
Notes (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.15) paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Taxes or Other Taxes were correctly or legally
asserted.
(d) Within 30 days after request by the Agent, the Borrower will
furnish to the Agent, at its address referred to in Section 8.02, the original
or a certified copy of a receipt evidencing payment thereof.
(e) Each Lender organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or
any successor form prescribed by the Internal Revenue Service, certifying that
such Lender is entitled to benefits under an income tax treaty to which the
United States is a party which reduces the rate of withholding tax on payments
of interest or certifying that the income receivable pursuant to this Agreement
is effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Lender at the time such Lender first becomes
a party to this Agreement indicates a United States interest withholding tax
rate in excess of zero, withholding tax at such rate shall be considered
excluded from "Taxes" as defined in Section 2.15(a). Any Lender who, after
having furnished either such Internal Revenue Service form to the Borrower,
thereafter cannot certify as provided in such form, shall promptly notify the
Borrower of such fact.
(f) Without prejudice to the survival of any other agreement of
the Borrower hereunder, the agreements and obligations of the Borrower contained
in this Section 2.15 shall survive the payment in full of the Obligations.
SECTION 2.16. SHARING OF PAYMENTS, ETC. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Advances owing to it (other
than pursuant to Section 2.03(d), 2.03(e), 2.08, 2.12, 2.15 and 8.04(c)) in
excess of its ratable share of payments on account of the Advances, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances owing to them, as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; PROVIDED, HOWEVER, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender,
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such purchase from each Lender shall be rescinded and such Lender shall repay to
the purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.16 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.17. USE OF PROCEEDS. The proceeds of the Advances
shall be used by the Borrower for general working capital and other corporate
purposes, including Permitted Acquisitions and the construction of healthcare
facilities.
ARTICLE III
CONDITIONS OF BORROWING
SECTION 3.01. CONDITIONS PRECEDENT TO THE INITIAL ADVANCES. The
obligation of each Lender to make its initial Advance is subject to the
condition precedent that the Agent shall have received on or before the day of
the initial Borrowing the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Notes) in sufficient copies for
each Lender:
(a) The Revolving Notes payable to the order of the Lenders,
respectively.
(b) Certified copies of the resolutions of the Board of Directors
of the Borrower approving this Agreement and the Notes, and of all
documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Agreement and the Notes.
(c) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the Notes and the other
documents to be delivered hereunder.
(d) A favorable opinion of Pillsbury Madison & Sutro, counsel for
the Borrower, substantially in the form of Exhibit E hereto and as to such
other matters as any Lender through the Agent may reasonably request.
(e) A favorable opinion of Shearman & Sterling, counsel for the
Agent, substantially in the form of Exhibit F hereto.
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SECTION 3.02. CONDITIONS PRECEDENT TO EACH REVOLVING BORROWING.
The obligation of each Lender to make a Revolving Advance on the occasion of
each Revolving Borrowing (including the initial Revolving Borrowing) shall be
subject to the further conditions precedent that on the date of such Revolving
Borrowing (a) the following statements shall be true (and each of the giving of
the applicable Notice of Revolving Borrowing and the acceptance by the Borrower
of the proceeds of such Revolving Borrowing shall constitute a representation
and warranty by the Borrower that on the date of such Revolving Borrowing such
statements are true):
(i) The representations and warranties contained in Section 4.01
are correct on and as of the date of such Revolving Borrowing, before and
after giving effect to such Revolving Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result from
such Revolving Borrowing or from the application of the proceeds
therefrom, which constitutes an Event of Default or Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request in connection
with the satisfaction of the conditions set forth in clauses (i) and (ii) above.
SECTION 3.03. CONDITIONS PRECEDENT TO EACH AUCTION BORROWING.
The obligation of each Lender which is to make an Auction Advance on the
occasion of an Auction Borrowing (including the initial Auction Borrowing) to
make such Auction Advance as part of such Auction Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Auction Borrowing with respect thereto, (ii) on or before
the date of such Auction Borrowing, but prior to such Auction Borrowing, the
Agent shall have received an Auction Note payable to the order of such Lender
for each of the one or more Auction Advances to be made by such Lender as part
of such Auction Borrowing, in a principal amount equal to the principal amount
of the Auction Advance to be evidenced thereby and otherwise on such terms as
were agreed to for such Auction Advance in accordance with Section 2.03, and
(iii) on the date of such Auction Borrowing the following statements shall be
true (and each of the giving of the applicable Notice of Auction Borrowing and
the acceptance by the Borrower of the proceeds of such Auction Borrowing shall
constitute a representation and warranty by the Borrower that on the date of
such Auction Borrowing such statements are true):
(a) The representations and warranties contained in Section 4.01
are correct on and as of the date of such Auction Borrowing, before and
after giving effect to such Auction Borrowing and to the application of
the proceeds therefrom, as though made on and as of such date,
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(b) No event has occurred and is continuing, or would result from
such Auction Borrowing or from the application of the proceeds therefrom,
which constitutes an Event of Default or Default, and
(c) No event has occurred and no circumstance exists as a result of
which the information concerning the Borrower that has been provided to
the Agent and each Lender by the Borrower in connection herewith would
include an untrue statement of a material fact or omit to state any
material fact or any fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER.
The Borrower represents and warrants as follows:
(a) DUE INCORPORATION, ETC. Each of the Borrower and its
Material Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own
or lease and operate its properties and to carry on its business as now
conducted and as proposed to be conducted. Each of the Borrower and its
Material Subsidiaries is duly qualified or licensed to do business as a
foreign corporation in good standing in all jurisdictions in which it owns
or leases assets and property or in which the conduct of its business
requires it to so qualify or be licensed, except where the failure to so
qualify or be licensed would not have a Material Adverse Effect.
(b) DUE AUTHORIZATION AND EXECUTION, ETC. The execution,
delivery and performance by the Borrower of each Loan Document to which it
is or will be a party, and the consummation of the transactions
contemplated thereby, are within the Borrower's corporate powers, have
been duly authorized by all necessary corporate action, do not contravene
(i) the Borrower's certificate of incorporation or by-laws, or (ii) any
law, rule, regulation (including, without limitation, Regulation G, T, W
and X of the Board of Governors of the Federal Reserve System and the HMO
Regulations), order, writ, judgment, injunction, decree, determination or
award or any material contractual restriction binding on or affecting the
Borrower or its Subsidiaries or any of their respective properties, and do
not result in or require the creation of any lien, security interest or
other charge or encumbrance upon or with respect to any of the Borrower's
or its Subsidiaries' properties. Neither the Borrower nor any of its
Subsidiaries is in default under any such law, rule, regulation, order,
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writ, judgment, injunction, decree, determination, award or restriction,
in any respect which is likely to have a Material Adverse Effect.
(c) GOVERNMENT CONSENTS. No authorization, consent, approval or
other action by, and no notice to or filing with, any governmental
authority or regulatory body (including, without limitation, HMO
Regulators) is required for the due execution, delivery or performance by
the Borrower of any Loan Document.
(d) LEGAL, VALID AND BINDING NATURE. Each of this Agreement and
each of the other Loan Documents when executed and delivered hereunder
will be, the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower and in accordance with its terms, subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally.
(e) SUBSIDIARIES. Set forth on Schedule 2 hereto, as
supplemented in writing to the Agent upon its request from time to time,
is a complete and accurate list of all Material Subsidiaries of the
Borrower, indicating (as to each such Subsidiary) the jurisdiction of its
incorporation, the number of shares of each class of capital stock
outstanding on the date hereof and, to the extent that such outstanding
shares are not publicly owned, the direct owner of the outstanding shares
of each such class owned. Except as set forth on Schedule 2 hereto, as
supplemented in writing by the Borrower from time to time, there are no
outstanding options, warrants, rights of conversion or purchase, or
similar rights to acquire capital stock of any Material Subsidiary that
have been granted by the Borrower or one of its Subsidiaries, and all of
the outstanding capital stock of all Material Subsidiaries owned by the
Borrower or one of its Subsidiaries has been validly issued, is fully paid
and nonassessable and is owned by the Borrower or its Subsidiaries free
and clear of (i) all liens, security interests and other charges or
encumbrances and (ii) any restrictions on the ability to vote or alienate
such capital stock. Except for the effect of any transaction permitted by
Section 5.02(e), the Borrower or a wholly owned subsidiary of the Borrower
owns 100% of the issued and outstanding capital stock of each of
Foundation Health, a California Health Plan, California Compensation
Insurance Company and Intergroup Prepaid Health Services of Arizona, in
each case free and clear of (i) all liens, security interests and other
charges or encumbrances and (ii) any restrictions on the ability to vote
or alienate such capital stock.
(f) FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. The
Consolidated balance sheet of the Borrower and its Subsidiaries, dated as
of June 30, 1994, and the related Consolidated statements of operations,
stockholders' equity and cash flows of the Borrower and its Subsidiaries
for the fiscal period then ended, fairly present the Consolidated
financial condition of the Borrower and its Subsidiaries as at such date
and the Consolidated results of the operations of the Borrower and its
Subsidiaries for the periods ended on such date, all in accordance with
generally accepted accounting
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principles consistently applied, and since June 30, 1994, there has been
no Material Adverse Change.
(g) ABSENCE OF LITIGATION; LITIGATION DESCRIPTION. No judgment,
order, decree, injunction or other restraint affecting the Borrower or any
Subsidiary has been rendered or imposed by any court, governmental agency
or arbitrator, and no actions, suits, investigations, litigation or
proceedings are pending or, to the knowledge of the Borrower, threatened
against or affecting the Borrower or any of its Subsidiaries or the
properties of the Borrower or any of its Subsidiaries before any court,
arbitrator or governmental agency, department, commission, board, bureau
or instrumentality, domestic or foreign, in either case (i) that would
have a Material Adverse Effect or (ii) which purports to affect the
legality, validity or enforceability of this Agreement or any other Loan
Document.
(h) ABSENCE OF LIENS AND ENCUMBRANCES. There are no mortgages,
deeds of trust, trust deeds, open-end mortgages, leasehold mortgages,
leasehold deeds of trust, open-end leasehold mortgages, pledges, liens,
security interests or other charges or encumbrances (including liens or
retained security titles of conditional vendors) of any nature whatsoever
on any properties or assets of the Borrower or its Subsidiaries
(including, without limitation, the Real Property and Leaseholds) other
than Permitted Liens.
(i) SOLVENCY. The Borrower is and after receipt and application
of the Advances in accordance with the terms of this Agreement, will be,
Solvent.
(j) PAYMENT OF TAXES. The Borrower and each of its Subsidiaries
have filed or caused to be filed, or obtained extensions for filing, all
tax returns (Federal, state, local and foreign) required to be filed and
paid all amounts of taxes shown thereon to be due, including interest and
penalties, except (i) for such taxes as are being contested in good faith
and by proper proceedings and with respect to which reserves, in
accordance with generally accepted accounting principles, are being
maintained by the Borrower or any such Subsidiary, as the case may be, or
(ii) where the failure to file such returns or pay such taxes would not
have a Material Adverse Effect.
(k) ACCURACY OF INFORMATION GIVEN TO LENDERS. No written
information, exhibit or report furnished by the Borrower or any of its
Subsidiaries to the Agent or any Lender, when taken as a whole with all
other written information, exhibits and reports furnished by the Borrower
or any of its Subsidiaries to the Agent or any Lender, contains any untrue
statement of a material fact or omits to state any material fact or any
fact necessary to make the statements contained therein, in light of the
circumstances under which such information, exhibit, report or other
written information is or is to be used, not misleading. It is understood
by the Agent and the Lenders that all of the estimates and assumptions on
which any projections and
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forecasts are based may not prove to be correct and that actual future
financial performance may vary from that projected.
(l) NOT A PURPOSE CREDIT. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U issued by the Board of
Governors of the Federal Reserve System), and no proceeds of any Revolving
Advance will be used to purchase or carry any margin stock or to extend
credit to others for the purpose of purchasing or carrying any margin
stock.
(m) INVESTMENT COMPANY ACT. The Borrower is not an "investment
company", or a company "controlled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
(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.
(o) CASUALTIES. Neither the businesses nor the properties of
the Borrower or any of its Subsidiaries are affected by any fire,
explosion, accident, strike, lockout or other material labor dispute,
drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (whether or not covered by insurance) that would
have a Material Adverse Effect.
(p) ERISA. (i) No ERISA Event has occurred or is reasonably
expected to occur with respect to any Plan.
(ii) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) with respect to each Plan, copies
of which have been filed with the IRS and furnished to the Agent, is
complete and accurate and fairly presents the funding status of such
Plan, and since the date of such Schedule B there has been no
material adverse change in such funding status.
(iii) Neither the Borrower nor any ERISA Affiliate has
incurred, or is reasonably expected to incur, any Withdrawal
Liability to any Multiemployer Plan.
(iv) Neither the Borrower nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated,
within the meaning of Title IV of ERISA, and no Multiemployer Plan
is reasonably expected to be in reorganization or to be terminated
within the meaning of Title IV of ERISA.
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(q) ENVIRONMENTAL MATTERS. Except where the failure of any of
the following to be true and correct would not have a Material Adverse
Effect (i) the Real Property and the Leaseholds and the operations
conducted thereon do not violate any applicable Environmental Law or any
restrictive covenant or deed restriction (recorded or otherwise); (ii)
without limitation of clause (i) above, the Real Property and the
Leaseholds and the operations conducted thereon by the Borrower or any of
its Subsidiaries or, to the Borrower's knowledge, any current or prior
owner, lessor or operator of such Real Property, Leasehold or operation,
are not in violation of any Environmental Law, or subject to any existing,
pending or threatened investigation, inquiry or proceeding by any
governmental authority or to any remedial obligations under any
Environmental Law; (iii) all notices, permits, licenses or similar
authorizations, if any, required to be obtained or filed in connection
with the use of the Real Property or the Leaseholds, including, without
limitation, past, to the best of Borrower's knowledge, or present
treatment, storage, disposal or release of any Hazardous Materials or
solid waste into the environment, have been obtained or filed; (iv) to the
Borrower's knowledge, all Hazardous Materials or solid waste generated at
the Real Property or the Leaseholds have in the past been, and shall
continue to be, transported, treated and disposed of only by carriers
maintaining valid permits under all applicable Environmental Laws and only
at treatment, storage and disposal facilities maintaining valid permits
under applicable Environmental Laws, which carriers and facilities have
been and are, to the Borrower's knowledge, operating in compliance with
such permits; (v) the Borrower and its Subsidiaries have no material
contingent liability in connection with any release of any Hazardous
Materials or solid waste into the environment; and (vi) the use which the
Borrower or any of its Subsidiaries makes or intends to make of the Real
Property and the Leaseholds will not result in the unlawful or
unauthorized disposal or other release of any Hazardous Materials or solid
waste on or to the Real Property or the Leaseholds.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. AFFIRMATIVE COVENANTS. So long as any obligation
hereunder or under any Loan Document shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will, unless the Majority Lenders
shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS. Perform and promptly comply and cause
each of its Subsidiaries to perform and promptly comply with, and cause
all property of the Borrower and each such Subsidiary to be maintained,
used and operated in accordance with, all present and future laws,
ordinances, rules, regulations, orders and requirements (including,
without limitation, the HMO Regulations, Insurance Regulations, and
Environmental Law) of every duly constituted governmental or
quasi-governmental authority or agency applicable to the Borrower, any
such
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Subsidiary or any of their properties, except where the failure to comply
therewith would not have a Material Adverse Effect.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain,
and cause each of its Material Subsidiaries to preserve and maintain, its
corporate existence, corporate rights (charter and statutory), and
corporate franchises; PROVIDED, HOWEVER, that neither the Borrower nor
any of its Material Subsidiaries shall be required to preserve and
maintain any corporate franchise if the failure to preserve and maintain
such franchise, whether individually or together with all other franchises
which have not been preserved or maintained from and after the date
hereof, would not have a Material Adverse Effect.
(c) ACCESS AND VISITATION RIGHTS. Upon reasonable notice and at
any reasonable time during normal business hours and from time to time,
permit the Agent or any of the Lenders or any agents or representatives
thereof to examine and make copies of and abstracts from the records and
books of account of, and visit the properties of, the Borrower and any of
its Subsidiaries, and to discuss the affairs, finances and accounts of the
Borrower and any of its Subsidiaries.
(d) KEEPING OF BOOKS. Keep proper books of record and account
for the Borrower and each of its Subsidiaries and such other proper books
of record and account for the Borrower and its Consolidated Subsidiaries
as are necessary in order to prepare the periodic financial statements of
the Borrower and its Consolidated Subsidiaries required by the terms
hereof or by any applicable law, all in accordance with generally accepted
accounting principles consistently applied.
(e) PAYMENT OF TAXES, ETC. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, before the same shall become
delinquent, all taxes, assessments and governmental charges or levies
imposed upon it or upon its property, except where the failure to pay and
discharge such amounts could not, in the aggregate, reasonably be expected
to have a Material Adverse Effect; PROVIDED, HOWEVER, that neither the
Borrower nor any such Subsidiary shall be required to pay or discharge any
such tax, assessment, charge or levy that is being contested in good faith
and by proper proceedings and with respect to which reserves, in
accordance with generally accepted accounting principles, are being
maintained by the Borrower or such Subsidiary, as the case may be.
(f) MAINTENANCE OF PROPERTIES, ETC. Maintain and preserve, and
cause each of its Material Subsidiaries to maintain and preserve, all of
its properties in accordance with good business practices and in good
working order and condition, ordinary wear and tear excepted, except where
the failure to so maintain and preserve would not have a Material Adverse
Effect.
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(g) PLAN CONTRIBUTION. Make, and cause each Subsidiary to make,
when due, all contributions required by law to be made to all Plans,
except where the failure to make such contributions would not have a
Material Adverse Effect.
(h) MAINTENANCE OF INSURANCE. Maintain, and cause each of its
Subsidiaries to maintain, insurance (including, without limitation,
liability, hazard and casualty insurance) with responsible and reputable
insurance companies or associations having a rating of A or better from
Best's in such amounts and covering such risks as is then customarily
carried by similarly situated companies conducting business similar to
that conducted by the Borrower and its Subsidiaries. The Borrower shall
be deemed to be in compliance with the requirements of the foregoing if it
insures through a captive Insurance Subsidiary, PROVIDED, that each
re-insurer to which coverage is ceded by such captive Insurance Subsidiary
has the ratings specified above and the level of self-insurance retained
by the Borrower is substantially similar to the level the Borrower would
have maintained under the previous sentence. The Borrower may self insure
for workers' compensation liabilities if such self-insurance is approved
by the Borrower's board of directors and is conducted in compliance with
all applicable law.
(i) EMPLOYMENT OF TECHNOLOGY, DISPOSAL OF HAZARDOUS WASTE, ETC.
Except where the failure to comply with any of the following would not
have a Material Adverse Effect (i) employ, and cause each of its Material
Subsidiaries to employ, in connection with its use of the Real Property
and Leaseholds, appropriate technology to maintain compliance with all
material Environmental Laws, (ii) obtain and maintain, and cause each of
its Material Subsidiaries to obtain and maintain, any and all material
permits required by applicable Environmental Law in connection with the
operations of the Borrower or any of its Material Subsidiaries, (iii)
dispose of, and cause each of its Material Subsidiaries to dispose of, any
and all Hazardous Materials (including infectious wastes) generated by the
Borrower or any Material Subsidiary only at facilities and with carriers
maintaining valid permits under RCRA and any applicable Environmental Law,
(iv) use best efforts to obtain, and cause each of its Material
Subsidiaries to use its best efforts to obtain, certificates of disposal
from all contractors employed by the Borrower or any of its Material
Subsidiaries in connection with the transport or disposal of any Hazardous
Materials generated at the Premises and (v) establish and maintain a
system to assure and monitor continued compliance with all applicable
Environmental Law.
(j) MAINTENANCE OF ACCREDITATION, ETC. Preserve and maintain,
and cause each of its Material Subsidiaries to preserve and maintain, all
licenses, permits, authorizations and qualifications required under the
HMO Regulations or the Insurance Regulations in connection with the
ownership or operation of HMO's or Insurance Companies, as applicable,
except where the failure to do so would not have a Material Adverse
Effect.
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SECTION 5.02. NEGATIVE COVENANTS. So long as any obligation
hereunder or under any Loan Document shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will not, without the written
consent of the Majority Lenders:
(a) LIENS, ETC/NEGATIVE PLEDGE. (i) Create or suffer to exist,
or permit any of its Subsidiaries to create or suffer to exist, any lien,
security interest or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any kind (including,
without limitation, any lien imposed pursuant to Section 107(f) of the
Superfund Reauthorization Act of 1986 or any similar Environmental Law),
or any other type of preferential arrangement, upon or with respect to any
of its properties of any character (including, without limitation,
accounts), whether now owned or hereafter acquired, or assign any right to
receive income, or sign or file, or permit any of its Subsidiaries to sign
or file, under the Uniform Commercial Code or any comparable statute of
any jurisdiction a financing statement which names the Borrower or any of
its Subsidiaries as debtor, or permit any of its Subsidiaries to sign any
security agreement authorizing any secured party thereunder to file such
financing statement (EXCLUDING, HOWEVER, Permitted Liens from the
operation of the foregoing restrictions).
(ii) Agree, or permit any of its Subsidiaries to agree, with any
Person not to take any action prohibited by Section 5.02(a)(i), except
with respect to (A) such negative promises contained (on the date hereof)
in any document relating to existing Debt, leaseholds and material
contracts of the Borrower or any such Subsidiary and (B) such negative
promises made by a Subsidiary prior to the date on which such Subsidiary
became a Subsidiary of the Borrower; PROVIDED, that such promises were
not made at the instigation of the Borrower or such Subsidiary and
PROVIDED, FURTHER, that such promises were not made in anticipation of
such Subsidiary becoming a Subsidiary of the Borrower.
(b) DIVIDENDS, ETC. Declare or make, or permit any of its
Subsidiaries to declare or make, any dividend payment or other
distribution of assets, properties, cash, rights, obligations or
securities on account of any shares of any class of capital stock of the
Borrower or any of its Subsidiaries or purchase, redeem or otherwise
acquire for value (or permit any of its Subsidiaries to do so) any shares
of any class of capital stock of the Borrower or any of its Subsidiaries
or any warrants, rights or options to acquire any such shares, now or
hereafter outstanding, except that (i) the Borrower may pay dividends in
the form of its capital stock, (ii) any wholly owned Subsidiary may pay
non-cash dividends or make non-cash distributions to the Borrower or to
another wholly owned Subsidiary and (iii) the Borrower and its
Subsidiaries may declare and make cash dividend payments to their
respective stockholders and purchase, redeem or otherwise acquire shares
of their capital stock or warrants, rights or options to acquire such
shares for cash PROVIDED, that the aggregate amount of such dividends
declared and paid and the aggregate purchase price paid in connection with
such purchases, redemptions or other acquisitions shall
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not (excluding dividends paid pursuant to the immediately succeeding
PROVISO), in the case of the Borrower, exceed the sum of (a) 50% of the
cumulative Consolidated Net Income of the Borrower for all full Fiscal
Years of the Borrower, commencing with and including the Borrower's 1994
Fiscal Year (the amount of such consolidated Net Income to be calculated
by adding back thereto (to the extent deducted therefrom) up to
$125,000,000 of any restructuring charges incurred by the Borrower in the
Borrower's 1995 Fiscal Year) PLUS (b) on any date of determination
after the end of the Borrower's 1995 Fiscal Year, $25,000,000; PROVIDED,
HOWEVER, that the Borrower may in addition declare and make cash
dividend payments to its stockholders and purchase, redeem or otherwise
acquire shares of its capital stock or warrants, rights of options to
acquire shares of its capital stock for cash in an amount equal to 50% of
the Net Cash Proceeds received by the Borrower from the issuance of its
Common Stock or in connection with other capital contributions after the
date hereof in each case within the 180-day period preceding such date of
determination; and PROVIDED, FURTHER, that immediately before and
after giving effect thereto, no Default or Event of Default shall have
occurred and be continuing or exist.
(c) LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS
AFFECTING SUBSIDIARIES. Suffer to exist, or permit any Subsidiary to
suffer to exist, any encumbrance or restriction (other than pursuant to
law, regulation or order) on the ability of any Subsidiary (i) to pay,
directly or indirectly, dividends or make any other distributions in
respect of its capital stock or pay any Indebtedness or other obligation
owed to the Borrower or any other Subsidiary; (ii) to make loans or
advances to the Borrower or any Subsidiary; or (iii) to transfer any of
its property or assets to the Borrower or any Subsidiary, except any
encumbrance or restriction (a) pursuant to any agreement in effect on the
date hereof, (b) pursuant to an agreement entered into by such Subsidiary
prior to the date on which such Subsidiary was acquired by the Borrower
and not entered into in anticipation of becoming a Subsidiary, or (c)
pursuant to an agreement effecting a renewal, extension, refinancing or
refunding of Indebtedness incurred pursuant to an agreement referred to in
clause (a) or (b) above; PROVIDED, HOWEVER, that the provisions
contained in such renewal, extension, refinancing or refunding agreement
relating to such encumbrance or restriction are no more restrictive in any
material respect than the provisions contained in the agreement the
subject thereof.
(d) MERGERS, ETC. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in
a series of transactions) all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all
of the assets of, any Person, or permit any of its Subsidiaries to do so,
except that (i) any Subsidiary of the Borrower may merge into the Borrower
or another Subsidiary of the Borrower PROVIDED, that (A) after giving
effect thereto, no Default shall exist and (B) immediately before and
after giving effect to such merger each party thereto is Solvent, and (ii)
the Borrower or any its Subsidiaries may make the Permitted Acquisitions.
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(e) SALES, TRANSFERS, ETC. OF ASSETS. Sell, lease, transfer or
otherwise dispose of, or permit any of its Material Subsidiaries to sell,
lease, transfer or otherwise dispose of, any assets (including, without
limitation, any portion of assets constituting the business of a division,
branch or other unit operation), except for (A) sales in the ordinary
course of business consistent with past practices; (B) sales and
dispositions of worn out, surplus or obsolete assets; (C) sales or
transfers of property during any Fiscal Year of the Borrower the aggregate
value of which (determined by the greater of the book value thereof or the
sales or transfer price thereof) does not exceed 10% of the Borrower's
Consolidated Total Assets (determined as at the end of the Fiscal Quarter
of the Borrower immediately preceding such sale or transfer); and (D)
sales or transfers of property from any Material Subsidiary to the
Borrower or any other Subsidiary of the Borrower PROVIDED, that in the
case of any sale or transfer from a Material Subsidiary to a Subsidiary of
the Borrower, such sale or transfer would not cause such transferring
Material Subsidiary to cease being a Material Subsidiary unless each
transferee Subsidiary thereby becomes (or is) a Material Subsidiary.
(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 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) loans to
employees in connection with housing relocations, (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 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) $25,000,000 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; and (viii) Investments not otherwise
permitted by clauses (i) through (vii) hereof not in excess of $10,000,000
at any time.
(g) CHANGE IN BUSINESS. Make, or permit any of its Material
Subsidiaries to make, any material change in the nature of their
respective businesses.
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(h) ACCOUNTING CHANGES. Make or permit, or permit any of its
Subsidiaries to make or permit, any significant change in accounting
policies or reporting practices, except for any such change required or
permitted by generally accepted accounting principles.
(i) PLAN TERMINATIONS. Terminate, or permit any ERISA Affiliate
to terminate, any Plan so as to result in liability of the Borrower or any
ERISA Affiliate to the PBGC in excess of 5% of the Borrower's Consolidated
Net Worth, or permit to exist any event or condition which reasonably
presents a material risk of a termination by the PBGC of any Plan with
respect to which the Borrower or any ERISA Affiliate would, in the event
of such termination, incur liability to the PBGC in excess of 5% of the
Borrower's Consolidated Net Worth.
(j) EMPLOYEE BENEFIT COSTS AND LIABILITIES. Create or suffer to
exist, or permit any ERISA Affiliate to create or suffer to exist, (i) any
Insufficiency with respect to a Plan or any Withdrawal Liability with
respect to a Multiemployer Plan if, immediately after giving effect to
such Insufficiency or Withdrawal Liability, the aggregate amount of
Insufficiencies and Withdrawal Liabilities of all Plans and Multiemployer
Plans, respectively, of the Borrower and its ERISA Affiliates exceeds 5%
of the Borrower's Consolidated Net Worth or (ii) any liability with
respect to Welfare Plans if, immediately after giving effect to such
liability, the aggregate annualized cost (including, without limitation,
the cost of insurance premiums) with respect to such plans of the Borrower
and its ERISA Affiliates in any Fiscal Year of the Borrower would exceed
5% of the Borrower's Consolidated Net Worth.
(k) PREPAYMENTS OF PUBLIC NOTES. Prepay, redeem, defease
(whether actually or in substance) or purchase in any manner (or deposit
or set aside funds for the purpose of any of the foregoing), make any
payment in respect of principal of or make any payment in respect of
interest (other than regularly scheduled interest payments) on, or permit
any of its Subsidiaries to prepay, redeem, defease or purchase in any
manner, make any payment in respect of principal of or make any payment in
respect of interest on, the Public Notes; PROVIDED, that the Borrower
may prepay, redeem, defease or purchase the Public Notes so long as (i)
the aggregate amount paid or (set aside) by the Borrower to so prepay,
redeem, defease or purchase the Public Notes does not exceed the lesser of
the fair market value and 102% of the face amount of such Public Notes to
be prepaid, redeemed, defeased or purchased, together with any unpaid
interest thereon accrued as of the date of such prepayment, redemption,
defeasance or purchase, and (ii) there shall be no Default or Event of
Default before or after giving effect to such prepayment, redemption,
defeasance or purchase.
(l) LIMITATION ON SUBSIDIARY INDEBTEDNESS AND PREFERRED STOCK.
Permit any of its Subsidiaries to create or suffer to exist any Debt
(including any Guaranteed Debt) of such Subsidiary, or issue any Preferred
Stock of such Subsidiary, other than
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(i) Debt and Preferred Stock existing on the date hereof or the date on
which such Subsidiary becomes a Subsidiary, (ii) Debt owed to the Borrower
or any of its Subsidiaries and (iii) other Debt of such Subsidiaries
PROVIDED, that the aggregate outstanding principal balance of Debt under
this subclause (iii) does not, at any time, exceed $65,000,000.
SECTION 5.03. FINANCIAL COVENANTS. So long as any obligation
hereunder or under any Loan Document shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will not, without the written
consent of the Majority Lenders:
(a) NET WORTH. Permit, at any time, its Consolidated Net Worth
to be below 90% of the Borrower's Consolidated Net Worth on December 31,
1994 PLUS 50% of its cumulative Consolidated Net Income for each
Fiscal Quarter ending after December 31, 1994 (the amount of such Net
Income to be computed without regard to any net loss in any Fiscal
Quarter) PLUS 100% of accumulated Net Cash Proceeds of issuances of the
Borrower's Common Stock after the date hereof.
(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
------------- -------
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
March 31, 1996 5.0 to 1.0
June 30, 1996 and each Fiscal Quarter thereafter 6.0 to 1.0
(c) TOTAL DEBT/TOTAL CAPITALIZATION RATIO. Permit, as of the
end of any Fiscal Quarter of the Borrower, the Borrower's Consolidated
Total Debt/Total Capitalization Ratio to be greater than 0.40 to 1:00.
SECTION 5.04. REPORTING REQUIREMENTS. So long as any obligation
hereunder or under any Loan Document shall remain unpaid or any Lender shall
have any Commitment hereunder, the Borrower will furnish to each Lender the
following:
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(a) As soon as available and in any event within 45 days after the
end of each Fiscal Quarter, Consolidated balance sheets of the Borrower
and its Subsidiaries as of the end of such Fiscal Quarter and Consolidated
statements of operations, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for the period commencing at the end of the
previous Fiscal Year and ending with the end of such Fiscal Quarter,
certified by the chief financial officer of the Borrower, together with
(i) a certificate of said officer stating that, to his or her knowledge,
no Default has occurred and is continuing or, if a Default has occurred
and is continuing, a statement as to the nature thereof and the action
that the Borrower has taken or proposes to take with respect thereto, and
(ii) a schedule in form satisfactory to the Agent of the computations used
by the Borrower in determining compliance with the covenants contained in
Section 5.03 and in sufficient detail for determining the Applicable
Eurodollar Margin and Applicable Percentage in accordance with the
definition of such terms set forth in Section 1.01.
(b) As soon as available and in any event within 120 days after
the end of each Fiscal Year, a copy of the annual audit report for such
year for the Borrower, including therein a Consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such Fiscal Year and
Consolidated statements of operations, stockholders' equity and cash flows
of the Borrower and its Subsidiaries for such Fiscal Year certified by
nationally recognized public accountants, together with a certificate of
such accounting firm stating that in the course of the regular audit of
the business of the Borrower, which audit was conducted by such accounting
firm in accordance with generally accepted auditing standards, such
accounting firm has obtained no knowledge that a Default has occurred and
is continuing, or, if, in the opinion of such accounting firm, a Default
has occurred and is continuing, a statement as to the nature thereof.
(c) As soon as possible and in any event within five days after
the occurrence of each Default of which a Responsible Officer of the
Borrower or any of its Subsidiaries obtains knowledge, a statement of such
Responsible Officer setting forth details of such Default and the action
which the Borrower or such Subsidiary has taken and proposes to take with
respect thereto.
(d) Promptly after any material change in accounting policies or
reporting practices, notice and a description in reasonable detail of such
change.
(e) Promptly and in any event within 10 days after the
commencement thereof, notice of all actions, suits and proceedings before
any court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Borrower or any of its
Subsidiaries, of the type described in Section 4.01(g).
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(f) Promptly and in any event within 10 days after the sending or
filing thereof, copies of all proxy statements, financial statements, and
reports that the Borrower sends to its stockholders generally or the
Borrower or any of its Subsidiaries files with the Securities and Exchange
Commission.
(g) Promptly following the receipt thereof, copies of each notice
regarding the loss or threatened loss by any Material Subsidiary or
Insurance Subsidiary of its accreditation, licensing or certification by
any HMO Regulator or any Insurance Regulator.
(h) Promptly and in any event within 10 days after the occurrence
of any event giving rise to a Material Adverse Effect.
(i) Such other information respecting the condition (financial or
otherwise), operations, business, assets and prospects of the Borrower or
any of its Subsidiaries as any Lender may from time to time reasonably
request.
SECTION 5.05. ACQUISITIONS. Prior to consummating any Permitted
Acquisition other than an Exempt Acquisition, the Borrower shall have delivered
to the Agent (in sufficient copies for each Lender) the following:
(i) At least 15 days' prior written notice of the Borrower's
intention to consummate or enter into a Permitted Acquisition, together
with a brief summary of the substantive terms thereof;
(ii) At least 10 days prior to the consummation of such Permitted
Acquisition, a certified copy of the executed purchase contract relating
to such Permitted Acquisition; and
(iii) An officer's certificate, executed by the president or chief
financial officer of the Borrower, dated the date of consummation of such
Permitted Acquisition, certifying that immediately before and after giving
effect to such Permitted Acquisition (A) no Default has occurred and is
continuing or will exist and (B) that the Borrower will be in compliance
on a pro forma basis with each of the financial ratios specified in
Section 5.03 as of the end of the Fiscal Quarter immediately preceding
such Acquisition for the twelve-month period preceding such Fiscal Quarter
end, together with a reasonably detailed worksheet setting forth the
calculation of such ratios.
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ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. EVENTS OF DEFAULT. If any of the following events
(each an "Event of Default" and collectively "Events of Default") shall occur
and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance or
Note when the same becomes due and payable; or shall fail to pay any
interest on any Advance or Note or any fees or other amounts payable under
any Loan Document or hereunder (including, without limitation, amounts
payable to the Agent under the letter agreement referred to in Section
2.04(b)) within two Business Days after the same becomes due and payable;
or
(b) Any representation or warranty made by the Borrower under or
in connection with any Loan Document shall prove to have been incorrect in
any material respect when made or deemed to have been made; or
(c) (i) The Borrower shall fail to perform or observe any term,
covenant or agreement contained in Section 5.03 or (ii) the Borrower shall
fail to perform or observe any other term, covenant or agreement contained
in this Agreement or in any other Loan Document on its part to be
performed or observed if such failure shall remain unremedied for 30 days
after written notice thereof shall have been given to the Borrower by the
Agent or any Lender; or
(d) The Borrower or any of its Subsidiaries shall fail to pay any
Debt in a principal payment amount (whether singly or in the aggregate)
equal to or in excess of $10,000,000 (but excluding Debt outstanding under
this Agreement or the Notes) of the Borrower or such Subsidiary, as the
case may be, when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise (and
inclusive of principal, interest, fees and penalties)), and such failure
shall continue after the applicable grace period, if any, specified in the
agreements or instruments relating to such Debt; or any other event shall
occur or condition shall exist under any agreements or instruments
relating to any such Debt and shall continue after the applicable grace
period (which grace period, if shorter than 30 days, shall be deemed
extended to 30 days for purposes of this subsection (d) if (i) such Debt
was assumed in connection with an Acquisition and is in an aggregate
principal amount of not in excess of $20,000,000, (ii) not more than 90
days have elapsed since the consummation of such Acquisition and (iii) the
Borrower shall have segregated cash in an amount sufficient to pay the
principal amount of such Debt plus interest and premium, if any, then due
thereon within such 30 day period), if any, specified in such agreements
or instruments, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or any such
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Debt shall be declared to be due and payable, or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
(e) The Borrower, any of its Material Subsidiaries or two or more
of the Borrower's Subsidiaries in any twelve-month period shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment
for the benefit of creditors; or any proceeding shall be instituted by or
against the Borrower or any of its Subsidiaries seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its
debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar official for it or
for any substantial part of its property, and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days,
or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment
of a receiver, trustee, custodian or similar official for, it or for any
substantial part of its property) shall occur; or the Borrower or any of
its Subsidiaries shall take any corporate action to authorize any of the
actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in an aggregate
amount in excess of $10,000,000 (less any payments made in respect
thereof) shall be rendered against the Borrower or any of its
Subsidiaries, and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 60 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal, statutory bond or
otherwise, shall not be in effect; or
(g) Any non-monetary judgment or order shall be rendered against
the Borrower or any of its Subsidiaries that has a Material Adverse
Effect, and either (i) enforcement proceedings shall have been commenced
by any Person upon such judgment or order or (ii) there shall be any
period of 60 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not
be in effect; or
(h) The obligation of the Borrower to repay the Advances or to pay
any interest, fee, expense, premium or other amount owing hereunder or
under any other Loan Document shall for any reason cease to be valid and
binding on the Borrower or the Borrower shall so state in writing; or
(i) Any ERISA Event with respect to a Plan shall have occurred
and, 30 days after notice thereof shall have been given to the Borrower by
the Agent, (i) such ERISA Event shall still exist and (ii) the sum
(determined as of the date of occurrence
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of such ERISA Event) of the Insufficiency of such Plan and the
Insufficiency of any and all other Plans with respect to which an ERISA
Event shall have occurred and then exist (or in the case of a Plan with
respect to which an ERISA Event described in clause (iii) through (vi) of
the definition of ERISA Event shall have occurred and then exist, the
liability related thereto) is equal to or greater than 5% of the
Borrower's Consolidated Net Worth; or
(j) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan in an amount that, when aggregated
with all other amounts required to be paid to Multiemployer Plans by the
Borrower and its ERISA Affiliates as Withdrawal Liability (determined as
of the date of such notification), exceeds 5% of the Borrower's
Consolidated Net Worth; or
(k) The Borrower or any ERISA Affiliate shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of Title IV of
ERISA, if as a result of such reorganization or termination the aggregate
annual contributions of the Borrower and its ERISA Affiliates to all
Multiemployer Plans that are then in reorganization or being terminated
have been or will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan year of each such
Multiemployer Plan immediately preceding the plan year in which the
reorganization or termination occurs by an amount exceeding 5% of the
Borrower's Consolidated Net Worth; or
(l) Any proceeding shall be instituted against the Borrower or any
of its Subsidiaries which is likely (taking into account the probability
of an adverse determination and the exhaustion of all appeals) to have a
Material Adverse Effect; or
(m) A Change in Control shall have occurred; or
(n) An HMO Event which, if unremedied, is reasonably likely to
have a Material Adverse Effect shall have occurred and remain unremedied
for thirty days after the occurrence thereof (or such lesser period of
time, if any, as the HMO Regulator administering the HMO Regulations shall
have imposed for the cure of such HMO Event; it being understood that if
the Borrower reaches a written agreement with such HMO Regulator during
such thirty-day (or shorter) period which cures (or provides a means for
the cure of) such HMO Event to such HMO Regulator's satisfaction, then no
Event of Default shall exist under this subsection (n));
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Majority Lenders by notice to the Borrower declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Majority Lenders by notice to the Borrower declare the Notes,
the Advances, all interest thereon and all other amounts payable
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under this Agreement to be forthwith due and payable, whereupon the Notes, the
Advances, all such interest and all such amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by the Borrower; PROVIDED,
HOWEVER, that in the case of any Event of Default referred to in subsection
(e) above, the obligation of each Lender to make Advances shall automatically
terminate and the Advances, all such interest and all such amounts shall
automatically become, and be, due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Borrower.
ARTICLE VII
THE AGENT, THE CO-AGENTS AND THE ARRANGER
SECTION 7.01. AUTHORIZATION AND ACTION. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Loan Documents as are delegated
to the Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto. As to any matters not expressly provided for
by the Loan Documents (including, without limitation, enforcement or collection
of the Notes), the Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Majority Lenders, and such instructions shall be binding
upon all Lenders and all holders of Notes; PROVIDED, HOWEVER, that the Agent
shall not be required to take any action which exposes the Agent to personal
liability or which is contrary to any Loan Document or applicable law. The
Agent agrees to give to each Lender prompt notice of each notice given to it by
the Borrower pursuant to the terms of this Agreement.
SECTION 7.02. AGENT'S RELIANCE, ETC. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with any Loan
Document, except for its or their own gross negligence or willful misconduct.
Without limitation of the generality of the foregoing, the Agent and its
Affiliates: (i) may treat the Lender which made any Advance or the holder of
any Note as the holder of the Debt resulting from such Advance or the holder of
such Note until the Agent receives and accepts an Assignment and Acceptance
entered into by a Lender, as assignor, and an Eligible Assignee, as assignee, as
provided in Section 8.07 or until the Agent receives written notice of the
assignment or transfer of such Note signed by the payee thereof and in form
satisfactory to the Agent; (ii) may consult with legal counsel (including
counsel for the Borrower), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (iii) makes no warranty or representation (whether
written or oral) to any Lender and shall not be responsible to any Lender for
any statements, warranties or representations made in or in connection with any
Loan Document; (iv) shall not have any duty to ascertain or to inquire
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as to the performance or observance of any of the terms, covenants or conditions
of any Loan Document on the part of the Borrower or to inspect the property
(including the books and records) of the Borrower or any of its Subsidiaries;
(v) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with, any Loan Document or any other
instrument or document furnished pursuant thereto; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telegram,
cable, facsimile or telex) believed by it to be genuine and signed or sent by
the proper party or parties.
SECTION 7.03. CUSA AND AFFILIATES. With respect to its
Commitment and the Advances made by it and the Notes issued to it, CUSA shall
have the same rights and powers under the Loan Documents as any other Lender and
may exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include CUSA in its
individual capacity. CUSA and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, and generally engage in any kind
of business with, the Borrower, any of its Subsidiaries and any Person who may
do business with or own securities of the Borrower or any such Subsidiary, all
as if CUSA were not the Agent and without any duty to account therefor to the
Lenders.
SECTION 7.04. LENDER CREDIT DECISION. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01(f) and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
SECTION 7.05. INDEMNIFICATION. The Lenders agree to indemnify
the Agent (to the extent not reimbursed by the Borrower), ratably according to
the respective principal amounts of the Revolving Advances then owing to each of
them (or if no Revolving Advances are at the time outstanding or if any
Revolving Advances are then owing to Persons which are not Lenders, ratably
according to the respective amounts of their Commitments), from and against any
and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
in any way relating to or arising out of the Loan Documents or any action taken
or omitted by the Agent under any Loan Document, PROVIDED that no Lender shall
be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent's gross negligence or willful misconduct. Without limitation of
the foregoing, each Lender agrees to reimburse the Agent promptly upon
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demand for its ratable share of any out-of-pocket expenses (including counsel
fees) incurred by the Agent in connection with the preparation, execution,
delivery, administration, modification, amendment or enforcement (whether
through negotiations, legal proceedings or otherwise) of, or legal advice in
respect of rights or responsibilities under, the Loan Documents, or any of them,
to the extent that the Agent is not reimbursed for such expenses by the
Borrower.
SECTION 7.06. SUCCESSOR AGENT. The Agent may resign at any time
as Agent under the Loan Documents by giving not less than 30 days' written
notice thereof to the Lenders and the Borrower and may be removed as Agent under
the Loan Documents at any time with or without cause by the Majority Lenders.
Upon any such resignation or removal, the Majority Lenders shall have the right
to appoint a successor Agent under the Loan Documents; PROVIDED, HOWEVER,
that such successor Agent shall be reasonably acceptable to the Borrower. If no
successor Agent shall have been so appointed by the Majority Lenders, and shall
have accepted such appointment, within 45 days after the retiring Agent's giving
of notice of resignation or the Majority Lenders' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Lenders, appoint a successor
Agent, which shall be a commercial bank organized under the laws of the United
States of America or of any State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the acceptance of any appointment as
Agent under the Loan Documents by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring Agent shall be discharged
from its duties and obligations under the Loan Documents. After any retiring
Agent's resignation or removal as Agent under the Loan Documents, the provisions
of this Article VII shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under the Loan Documents.
SECTION 7.07. THE CO-AGENTS AND THE ARRANGER. The Co-Agents and
the Arranger shall have no duties or responsibilities in such capacities under
this Agreement and the other Loan Documents and shall incur no liability
hereunder or thereunder in such capacities.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or any other Loan Document, nor consent to any
departure by the Borrower or any Subsidiary therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Majority Lenders
(or, with respect to the other Loan Documents (unless otherwise provided for
therein) by the Agent with the written consent of the Majority Lenders), and
then such amendment, waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given and shall bind all
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Lenders; PROVIDED, HOWEVER, that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (a)
waive any of the conditions specified in Article III, (b) increase the
Commitments of the Lenders or subject the Lenders to any additional monetary
obligations, (c) reduce the principal of, or interest on, the Revolving Advances
or the Revolving Notes or any fees or other amounts payable hereunder, (d)
postpone any date fixed for any payment of principal of, or interest on, the
Revolving Advances or the Revolving Notes or any fees or other amounts payable
hereunder, (e) change the percentage of the Commitments or of the aggregate
unpaid principal amount of the Revolving Advances or the Revolving Notes, or the
number or percentage of Lenders which shall be required for the Lenders or any
of them to take any action hereunder, or (f) amend this Section 8.01; and
PROVIDED, FURTHER, that (g) no amendment, waiver or consent shall, unless in
writing and signed by the Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Agent under this Agreement.
SECTION 8.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telex, cable
or facsimile communication) and mailed, telegraphed, telexed, cabled or
delivered, if to the Borrower, at its address at 3400 Data Drive, Rancho
Cordova, California 95670, Attention: Chief Financial Officer; if to any Bank,
at its Lending Office specified on the signature pages hereto; if to any other
Lender, at its Lending Office specified in the Assignment and Acceptance
pursuant to which it became a Lender; and if to the Agent, at its address at 399
Park Avenue, New York, New York 10043, Attention: Credit Department, with a
copy to Citicorp North America, Inc., 2001 Ross Avenue, Suite 1400, Dallas,
Texas 75201, Attention: Carol Comeaux; or, as to each party, at such other
address as shall be designated by such party in a written notice to the other
parties. All such notices and communications shall, when mailed, telegraphed,
telexed, cabled, or sent by facsimile be effective when deposited in the mails,
delivered to the telegraph company, confirmed by telex answerback, delivered to
the cable company, or confirmed received, respectively, except that notices and
communications to the Agent pursuant to Article II or to the Agent pursuant to
Article VII shall not be effective until received by the Agent.
SECTION 8.03. NO WAIVER; REMEDIES. No failure on the part of any
Lender or the Agent to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 8.04. COSTS, EXPENSES AND INDEMNITIES. (a) The Borrower
agrees to pay on demand all costs and expenses in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents and the other documents to be delivered hereunder and
thereunder (excluding costs associated with an assignment pursuant to Section
8.07 hereof which are to be paid by the Assignor and Assignee as stated in such
Section 8.07), including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel for the Agent (including local counsel,
domestic or
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foreign) with respect thereto and with respect to advising the Agent as to its
rights and responsibilities under the Loan Documents in response to a request by
the Borrower for any action to be taken by the Agent or any Lender thereunder,
and all costs and expenses, if any (including, without limitation, reasonable
counsel fees and expenses), of the Agent and any Lender in connection with the
enforcement (whether through negotiations, legal proceedings or otherwise) of
any Loan Document or any other document to be delivered hereunder or thereunder.
(b) The Borrower agrees to indemnify and hold harmless the Agent
and each Lender and each of their respective directors, officers, employees,
agents and affiliates (each being an "Indemnified Party") from and against any
and all claims, damages, losses, liabilities and expenses (including, without
limitation, reasonable fees and disbursements of counsel) that may be incurred
by or asserted against such Indemnified Party (i) in connection with the
investigation of, preparation for or defense of any pending or threatened claim
or any action or proceeding (A) arising out of or relating to the transactions
described in the Loan Documents or any transaction or proposed transaction in
which any proceeds of any Advances are applied or proposed to be applied,
directly or indirectly, by the Borrower, whether or not such Indemnified Party
is a party to such transaction and whether or not the transactions contemplated
herein are consummated, or (B) arising out of or relating to the Borrower's
entering into the Loan Documents, or to any actions or omissions of the Borrower
or any of its Subsidiaries or Affiliates or any of their respective directors,
officers, employees or agents in connection therewith, or (ii) as a result of
any compliance by the Borrower, or failure by the Borrower to comply, with the
HMO Regulations, the securities law of the United States and each state or any
Environmental Laws. The obligations of the Borrower under this Section 8.04(b)
shall survive repayment of the Advances.
(c) If any payment of principal, or conversion of, of any
Eurodollar Rate Advance is made to or for the account of a Lender other than on
the last day of the Interest Period for such Revolving Advance, as a result of a
prepayment pursuant to Section 2.10, acceleration of the maturity of the Notes
pursuant to Section 6.01 or for any other reason whatsoever, the Borrower shall,
upon demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender any amounts required to compensate such
Lender for any additional losses, costs or expenses which it may reasonably
incur as a result of such payment, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender to fund or maintain such Advance.
SECTION 8.05. RIGHT OF SET-OFF. Upon (i) the occurrence and
during the continuance of any Event of Default under this Agreement and (ii) the
making of the request or the granting of the consent specified by Section 6.01
to authorize the Agent to declare the Notes and the Advances due and payable
pursuant to the provisions of Section 6.01, each Lender and each of its
Affiliates is hereby authorized at any time and from time to time, to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any
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time owing by such Lender or such Affiliate to or for the credit or the account
of the Borrower or any of its Subsidiaries against any and all of the
obligations of the Borrower now or hereafter existing under any Loan Document,
irrespective of whether or not such Lender shall have made any demand under such
Loan Document and although such obligations may be unmatured; PROVIDED,
HOWEVER, that the exercise of any such rights against an HMO Subsidiary or
Insurance Subsidiary (or their respective Subsidiaries) shall be subject to
compliance with applicable HMO Regulations and Insurance Regulations. Each
Lender agrees promptly to notify the Borrower after any such set-off and
application made by such Lender, PROVIDED that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Lender and its Affiliates may have.
SECTION 8.06. BINDING EFFECT. This Agreement shall become
effective when it shall have been executed by the Borrower, the Agent and each
Bank, and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent, each Bank and each Lender and their respective successors
and assigns, except that the Borrower shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Lenders.
SECTION 8.07. ASSIGNMENTS AND PARTICIPATIONS. (a) Each Lender
may, and if demanded by the Borrower (following a demand by such Lender pursuant
to Section 2.12 or during a period when the Borrower is making the increased
payments contemplated by Section 2.15(a) or making indemnification for taxes
under Section 2.15(c), upon at least 20 Business Days' notice to such Lender and
the Agent) will, assign to one or more banks or other entities all or a portion
of its rights and obligations as a Lender under this Agreement (other than in
respect of the Auction Advances) and the Revolving Notes (including, without
limitation, all or a portion of its Commitment, the Revolving Advances owing to
it and the Revolving Note or Notes held by it in respect of the Revolving
Advances); PROVIDED, HOWEVER, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all of the assigning Lender's rights
and obligations under this Agreement and the Revolving Notes , (ii) the
aggregate amount of the Commitment and/or Revolving Advances of the assigning
Lender being assigned pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to such assignment) shall in
no event be less than $10,000,000 and shall be an integral multiple of
$1,000,000 in excess thereof, (iii) each such assignment shall be to an Eligible
Assignee approved by the Borrower (which approval shall not be unreasonably
withheld), (iv) each such assignment made as a result of a demand by the
Borrower pursuant to this Section 8.07(a) shall be arranged by the Borrower (at
its expense, including, without limitation, payment of the processing and
recordation fee referred to in subclause (vi) hereof) after consultation with
the Agent, shall be to an Eligible Assignee acceptable to the Majority Lenders
and shall be either an assignment of all of the rights and obligations of the
assigning Lender under this Agreement (other than in respect of the Auction
Advances) or an assignment of a portion of such rights and obligations made
concurrently with another such assignment or other such assignments which
together cover
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all of the rights and obligations of the assigning Lender under this Agreement
(other than in respect of the Auction Advances), (v) no Lender shall be
obligated to make any such assignment as a result of a demand made by the
Borrower pursuant to this Section 8.07(a) unless and until such Lender shall
have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Revolving Advances owing to such Lender,
together with accrued interest thereon to the date of payment of such principal
amount and all other amounts payable to such Lender under this Agreement (other
than in respect of the Auction Advances) and the Revolving Notes, (vi) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Revolving Note or Notes subject to such assignment and a processing and
recordation fee of $2,500 and (vii) all other costs and expenses relating to
each such assignment shall be borne by the parties thereto. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations under the Loan
Documents have been assigned to it pursuant to such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder and thereunder and (y) the
Lender assignor thereunder shall, to the extent that rights and obligations
under the Loan Documents have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released from its obligations under
the Loan Documents (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of an assigning Lender's rights and obligations
under this Agreement and Revolving Notes, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty (whether written or oral) and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
any Loan Document or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of any Loan Document or any other instrument
or document furnished pursuant hereto or thereto; (ii) such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or the performance or observance by
the Borrower of any of its obligations under any Loan Document or any other
instrument or document furnished pursuant hereto or thereto; (iii) such assignee
confirms that it has received a copy of each of the Loan Documents, together
with copies of the financial statements referred to in Section 4.01(f) and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
assigning Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement or any other Loan
Document; (v) such assignee confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such action as agent
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on its behalf and to exercise such powers under this Agreement and the other
Loan Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement and the Revolving Notes are
required to be performed by it as a Lender.
(c) The Agent shall maintain at its address referred to in Section
8.02 a copy of each Assignment and Acceptance delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Advances owing to, each Lender
from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Note or Notes subject to such assignment,
the Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit A hereto and the assignee has been approved by
the Borrower pursuant to Section 8.07(a), (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register, and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Revolving Note
or Notes, a new Revolving Note to the order of such Eligible Assignee in an
amount equal to the Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Commitment hereunder, a
new Revolving Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Revolving Note or Notes shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Revolving Note or Notes, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be in substantially the form
of Exhibit C-1 hereto.
(e) Each Lender may assign to one or more banks or other entities
any Auction Note or Auction Notes held by it.
(f) Each Lender may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under the
Loan Documents (including, without limitation, all or a portion of its
Commitment, the Advances owing to it and the Note or Notes held by it);
PROVIDED, HOWEVER, that (i) such Lender's obligations under the Loan
Documents (including, without limitation, its Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
the Loan Documents, and (iv) the Borrower,
62
<PAGE>
the Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under the
Loan Documents, PROVIDED, FURTHER, that, to the extent of any such
participation (unless otherwise stated therein and subject to the preceding
PROVISO), the assignee or purchaser of such participation shall, to the
fullest extent permitted by law, have the same rights and benefits hereunder as
it would have if it were a Lender hereunder; and PROVIDED, FURTHER, that
each such participation shall be granted pursuant to an agreement providing that
the purchaser thereof shall not have the right to consent or object to any
action by the selling Lender (who shall retain such right) other than an action
which would (i) reduce principal of or interest on any Advance or fees in which
such purchaser has an interest, or (ii) postpone any date fixed for payment of
principal of or interest on any such Advance or such fees.
(g) Notwithstanding any term or provision of this Section 8.07 or
this Agreement expressly or impliedly to the contrary, each Lender may assign,
as collateral or otherwise, any or all of its rights (including, without
limitation, rights to payments of principal and/or interest hereunder or under
the Notes) hereunder and the other Loan Documents to any Federal Reserve Bank or
any Affiliate of such Lender without notice to or the consent of the Borrower,
any other Lender or the Agent.
SECTION 8.08. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8.09. INDEPENDENCE OF PROVISIONS. All agreements and
covenants hereunder and under the Loan Documents shall be given independent
effect such that if a particular action or condition is prohibited by the terms
of any such agreement or covenant, the fact that such action or condition would
be permitted within the limitations of another agreement or covenant shall not
be construed as allowing such action to be taken or condition to exist.
SECTION 8.10. HEADINGS. Article and Section headings in this
Agreement are included for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
SECTION 8.11. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.12. CONFIDENTIALITY. Each Lender and the Agent agrees
that it will not disclose to any third party any proprietary and confidential
information provided to it by the Borrower; PROVIDED, THAT, the foregoing
will not (i) restrict the ability of the Agent,
63
<PAGE>
the Lenders and any loan participants from freely exchanging such information
among themselves (and their respective employees, attorneys, agents and
advisors), (ii) restrict the ability to disclose such information to a
prospective Eligible Assignee or participant, PROVIDED, THAT, such Eligible
Assignee or participant executes a confidentiality agreement with the selling
Lender agreeing to be bound by the terms hereof prior to disclosure of such
information to such Eligible Assignee or participant or (iii) prohibit the
disclosure of such information to the extent such information (a) is or becomes
publicly available, (b) becomes available on a non-confidential basis from a
Person who has no obligation to keep such information confidential or (c) is
required to be disclosed pursuant to court order, subpoena, other legal process,
regulatory request or otherwise by law.
SECTION 8.13. CONSENT TO JURISDICTION. (a) The Borrower hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in the City of New York, New York County, in any action or proceeding
arising out of or relating to this Agreement or any other Loan Document, and the
Borrower hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New York State court or such
Federal court. The Borrower hereby irrevocably waives, to the fullest extent it
may effectively do so, the defense of an inconvenient forum to the maintenance
of such action or proceeding. The Borrower hereby irrevocably consents to the
service of copies of the summons and complaint and any other process which may
be served in any such action or proceeding by certified mail, return receipt
requested, or by delivering of a copy of such process to the Borrower at its
address specified in Section 8.02 or by any other method permitted by law. The
Borrower agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
by any other manner provided by law.
(b) Nothing in this Section 8.13 shall affect the right of any
Lender, the Agent or the Borrower to serve legal process in any other manner
permitted by law or affect the right of any Lender or the Agent to bring any
action or proceeding against the Borrower or its property in the courts of other
jurisdictions.
SECTION 8.14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
SECTION 8.15. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE LOAN DOCUMENTS, THE ADVANCES OR THE NOTES, OR THE ACTIONS OF THE
AGENT OR ANY LENDER IN CONNECTION WITH THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT THEREOF.
64
<PAGE>
IN WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE BORROWER:
FOUNDATION HEALTH CORPORATION
By: /s/ Jeffrey L. Elder
------------------------------------
Name: Jeffrey L. Elder
Title: Senior Vice President-
Chief Financial Officer
THE AGENT:
CITICORP USA, INC.
By: /s/ Barbara A. Cohen
------------------------------------
Name: Barbara A. Cohen
Title: Vice President
THE BANKS:
Commitment: $35,000,000 CITICORP USA, INC.
By: /s/ Barbara A. Cohen
------------------------------------
Name: Barbara A. Cohen
Title: Vice President
Commitment: $30,000,000 NATIONSBANK OF TEXAS, N.A.
By: /s/ Brad W. DeSpain
------------------------------------
Name: Brad W. DeSpain
Title: Vice President
65
<PAGE>
Commitment: $30,000,000 WELLS FARGO BANK, N.A.
By: /s/ Daniel S. Silmore
------------------------------------
Name: Daniel S. Silmore
Title: Assistant Vice President
Commitment: $27,500,000 BANK OF AMERICA, N.T. & S.A.
By: /s/ Wyatt R. Ritchie
------------------------------------
Name: Wyatt R. Ritchie
Title: Vice President
Commitment: $27,500,000 THE CHASE MANHATTAN BANK, N.A.
By: /s/ Michael K. Bayley
------------------------------------
Name: Michael K. Bayley
Title: Vice President
Commitment: $27,500,000 CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By: /s/ Alain Papiasse
------------------------------------
Name: Alain Papiasse
Title: Authorized Signature
Commitment: $27,500,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD.
By: /s/ Y. Kamisawa
------------------------------------
Name: Yutaka Kamisawa
Title: Deputy General Manager
66
<PAGE>
Commitment: $22,500,000 THE BANK OF NOVA SCOTIA
By: /s/ A. Pendergast
------------------------------------
Name: A. Pendergast
Title: Account Officer
By: /s/ J. Quick
------------------------------------
Name: John Quick
Title: Officer
Commitment: $22,500,000 THE FUJI BANK, LIMITED
By:
------------------------------------
Name:
Title:
Commitment: $20,000,000 THE BANK OF CALIFORNIA, N.A.
By: /s/ Jennifer L. Banks
------------------------------------
Name: Jennifer L. Banks
Title: Vice President
67
<PAGE>
Commitment: $20,000,000 COOPERATIEVE CENTRALE
RAIFFEISEN-BOERENLEENBANK B.A., "RABOBANK
NEDERLAND",
NEW YORK BRANCH
By: /s/ W. P. C. Kodde
------------------------------------
Name: W. Pieter C. Kodde
Title: Vice President
By: /s/ W. Jeffrey Vollack
------------------------------------
Name: W. Jeffrey Vollack
Title: Vice President
Commitment: $10,000,000 THE NIPPON CREDIT BANK LTD., LOS ANGELES
AGENCY
By: /s/ Bernardo E. Correa-Henschke
------------------------------------
Name: Bernardo E. Correa-Henschke
Title: Vice President & Manager
- - - --------------------------------
Total Commitments: $300,000,000
68
<PAGE>
FOUNDATION HEALTH CORPORATION
EXHIBIT 11
EARNINGS PER SHARE COMPUTATION
UTILIZING THE TREASURY STOCK METHOD
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended
Quarter Ended December 31, December 31,
-------------------------- --------------------------
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Proceeds upon exercise of options outstanding $ 55,100 $ 57,847
----------- -----------
----------- -----------
Average market price of common stock $ 33.86 $ 26.39
----------- -----------
----------- -----------
Weighted average common shares outstanding 54,755,405 47,652,435
Issued shares - exercise of options 3,057,378
Shares assumed to be repurchased with (2,192,421)
proceeds from exercise
----------- ----------- ----------- -----------
Shares used in computation (A) 54,755,405 48,517,392 52,200,075 48,070,346
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income for the quarter (B) $ (49,267) $ 27,318 $ (25,616) $ 49,616
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Earnings per share (B) / (A) $ (0.90) $ 0.56 $ (0.49) $ 1.03
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the Form 10-Q
filed by Foundation Health Corporation for the Quarter Ended December 31, 1994
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 210,530
<SECURITIES> 554,365
<RECEIVABLES> 284,028
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 189,969 <F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,818,908
<CURRENT-LIABILITIES> 0
<BONDS> 164,802
<COMMON> 569
0
0
<OTHER-SE> 660,315
<TOTAL-LIABILITY-AND-EQUITY> 1,818,908
<SALES> 585,551
<TOTAL-REVENUES> 598,549
<CGS> 0
<TOTAL-COSTS> 547,619
<OTHER-EXPENSES> 124,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,953
<INCOME-PRETAX> (76,845)
<INCOME-TAX> (28,070)
<INCOME-CONTINUING> (49,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,267)
<EPS-PRIMARY> (0.90)
<EPS-DILUTED> 0
<FN>
<F1> NET PP&E
</FN>
</TABLE>
