EXHIBIT 10.42

 

SECOND AMENDMENT TO 364-DAY CREDIT AGREEMENT

 

THIS SECOND AMENDMENT TO 364-DAY CREDIT AGREEMENT (this “Amendment”), dated as
of June 25, 2003, is entered into among HEALTH NET, INC., a Delaware corporation
(the “Borrower”), the Lenders identified on the signature pages hereto (the
“Existing Lenders”), the Lenders identified on the signature pages hereto as the
new Lenders (the “New Lenders”), and BANK OF AMERICA, N.A., as administrative
agent for the Lenders (in such capacity, the “Administrative Agent”). Terms used
but not otherwise defined herein shall have the meanings provided in the Credit
Agreement described below.

 

W I T N E S S E T H

 

WHEREAS, the Borrower, the Lenders party thereto, and the Administrative Agent
entered into that certain 364-Day Credit Agreement dated as of June 28, 2001, as
amended by that certain First Amendment to 364-Day Credit Agreement dated as of
June 27, 2002 (the “Existing Credit Agreement”);

 

WHEREAS, the Borrower has requested to extend the Commitment Termination Date
for an additional 364 day period, and the Existing Lenders have agreed to extend
their respective Commitments and amend the Existing Credit Agreement in
accordance with such request and as provided herein; and

 

WHEREAS, the Borrower, the Existing Lenders and the New Lenders have agreed that
the New Lenders shall become parties to the Existing Credit Agreement (as
amended hereby).

 

NOW, THEREFORE, in consideration of the agreements hereinafter set forth, and
for other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:

 

PART 1

DEFINITIONS

 

SUBPART 1.1 Certain Definitions. Unless otherwise defined herein or the context
otherwise requires, the following terms used in this Amendment, including its
preamble and recitals, have the following meanings:

 

“Amended Credit Agreement” means the Existing Credit Agreement as amended
hereby.

 

“Amendment No. 2 Effective Date” is defined in Subpart 3.1.

 

SUBPART 1.2 Other Definitions. Unless otherwise defined herein or the context
otherwise requires, terms used in this Amendment, including its preamble and
recitals, have the meanings provided in the Existing Credit Agreement.

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PART 2

AMENDMENTS TO EXISTING CREDIT AGREEMENT

 

Effective on (and subject to the occurrence of) the Amendment No. 2 Effective
Date, the Existing Credit, Agreement is hereby amended in accordance with this
Part 2.

 

SUBPART 2.1 Designation of Documentation Agents. Fleet National Bank and
Citigroup USA are hereby designated as Co-Documentation Agents for the Lenders
under the Existing Credit Agreement.

 

SUBPART 2.2 Amendments to Section 1.01. The definition of “Commitment
Termination Date” set forth in Section 1.01 of the Existing Credit Agreement is
hereby amended in its entirety to read as follows:

 

“Commitment Termination Date” shall mean the date 364 days following June 25,
2003.

 

SUBPART 2.3 Amendments to Section 1.01. The definition of “Maturity Date” set
forth in Section 1.01 of the Existing Credit Agreement is hereby amended in its
entirety to read as follows:

 

“Maturity Date” means the date one year following the Commitment Termination
Date.

 

SUBPART 2.4 Amendments to Section 2.13. Section 2.13(a) and (b) of the Existing
Credit Agreement are hereby amended in their entireties to read as follows:

 

Section 2.13 Interest.

 

(a) The Loans comprising each ABR Borrowing shall bear interest at a rate per
annum equal to the Alternate Base Rate; provided, however, ABR Loans outstanding
on or following the Commitment Termination Date shall bear interest at a rate
per annum equal to the Alternate Base Rate plus .25%.

 

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at a rate
per annum equal to the LIBO Rate for the Interest Period in effect for such
Borrowing plus the Applicable Rate; provided, however, Eurodollar Loans
outstanding on or following the Commitment Termination Date shall bear interest
at a rate per annum equal to the LIBO Rate for the Interest Period in effect for
such Borrowing plus the Applicable Rate plus .25%

 

SUBPART 2.5 Amendments to Section 2.18. The penultimate sentence in Section
2.18(a) of the Existing Credit Agreement is hereby amended and restated as
follows:

 

“If any payment hereunder shall be due on a day that is not a Business Day, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing interest, interest thereon shall be payable for
the period of such extension; provided, however, that if the Maturity Date is
not a Business Day, the date for payment shall be on the preceding Business
Day.”

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SUBPART 2.6 Amendments to Section 3.16. A new Section 3.16 is hereby added to
the Existing Credit Agreement to read as follows:

 

Section 3.16 Tax Shelter Regulations.

 

Borrower does not intend to treat the Loans and related transactions as being a
“reportable transaction” (within the meaning of Treasury Regulation Section
1.6011-4). In the event Borrower determines to take any action inconsistent with
such intention, it will promptly notify the Administrative Agent thereof. If
Borrower so notifies Administrative Agent, Borrower acknowledges that one or
more of the Lenders may treat its Loans as part of a transaction that is subject
to Treasury Regulation Section 301.6112-1, and such Lender or Lenders, as
applicable, will maintain the lists and other records required by such Treasury
Regulation.

 

SUBPART 2.7 Amendments to Section 5.01.

 

(a) The language “(with copies for each Lender)” in the introductory paragraph
is hereby deleted and replaced with “(for further distribution to each Lender)”;

 

(b) the word “and” at the end of clause (f) is hereby deleted;

 

(c) the period at the end of clause (g) is hereby deleted and replaced with “;
and”; and

 

(d) a new clause (h) is hereby added to Section 5.01 of the Existing Credit
Agreement to read as follows:

 

(h) promptly after Borrower has notified Administrative Agent of any intention
by Borrower to treat the Loans and related transactions as being a “reportable
transaction” (within the meaning of Treasury Regulation Section 1.6011-4), a
duly completed copy of IRS Form 8886 or any successor form.

 

SUBPART 2.8 Amendments to Section 9.12. Section 9.12 of the Existing Credit
Agreement is hereby amended in its entirety to read as follows:

 

Section 9.12 Confidentiality.

 

Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ and its Approved Funds’
directors, officers, employees and agents, including accountants, legal counsel
and other advisors, on a need to know basis (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such Information and instructed to keep such Information confidential
in accordance with the terms hereof), (b) to the extent requested by any
regulatory authority, (c) to the extent, and only to the extent, required by
applicable laws or regulations or by any subpoena or similar legal process,
provided that the Person required to disclose such information shall take
reasonable efforts (at Borrower’s expense) to ensure that any Information so
disclosed shall be afforded confidential treatment, (d) to any other party to
this Agreement, (e) to the extent that such confidential Information is directly
relevant to the subject matter thereof, in connection

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with the exercise of any remedies hereunder or any suit, action or proceeding
relating to this Agreement or the enforcement of rights hereunder, (f) subject
to an agreement containing provisions substantially the same as those of this
Section, to any assignee of or Participant in, or any prospective assignee of or
Participant in, any of its rights or obligations under this Agreement, (g) with
the consent of the Borrower or (h) to the extent such Information (i) becomes
publicly available other than as a result of a breach of this Section or (ii)
becomes available to the Administrative Agent or any Lender on a nonconfidential
basis from a source other than the Borrower who is not, to the knowledge of the
Administrative Agent or such Lender, under an obligation of confidentiality to
Borrower with respect to such Information. For the purposes of this Section,
“Information” means all information received from or on behalf of the Borrower
or any Subsidiary relating to the Borrower, any Subsidiary or any of their
respective businesses or assets, other than any such information that is
available to the Administrative Agent or any Lender on a nonconfidential basis
prior to disclosure by the Borrower; provided that, in the case of information
received from or on behalf of the Borrower or any Subsidiary after the date
hereof, such information is clearly identified at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information. Notwithstanding anything herein to the
contrary, “Information” shall not include, and the Borrower, the Administrative
Agent and each Lender may disclose to any and all Persons, without limitation of
any kind, any information with respect to the “tax treatment” and “tax
structure” (in each case, within the meaning of Treasury Regulation Section
1.6011-4) of the transactions contemplated hereby and all materials of any kind
(including opinions or other tax analyses) that are provided to the Borrower,
the Administrative Agent or such Lender relating to such tax treatment and tax
structure; provided that with respect to any document or similar item that in
either case contains information concerning the tax treatment or tax structure
of the transaction as well as other information, this sentence shall only apply
to such portions of the document or similar item that relate to the tax
treatment or tax structure of the Loans and transactions contemplated hereby.

 

SUBPART 2.9 Amendments to Schedule 2.01. Schedule 2.01 of the Existing Credit
Agreement is hereby replaced with Schedule 2.01 attached hereto.

 

PART 3

CONDITIONS TO EFFECTIVENESS

 

SUBPART 3.1 Amendment No. 2 Effective Date. This Amendment shall be and become
effective as of the date hereof (the “Amendment No. 2 Effective Date”) when all
of the conditions set forth in this Part 3 shall have been satisfied, and
thereafter this Amendment shall be known, and may be referred to, as the
“Amendment”.

 

SUBPART 3.2 Execution of Counterparts of Amendment. The Administrative Agent
shall have received counterparts (or other evidence of execution, including
telephonic message, satisfactory to the Administrative Agent) of this Amendment,
which collectively shall have been duly executed on behalf of each of the
Borrower, the Existing Lenders, the New Lenders and the Administrative Agent.

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SUBPART 3.3 Fees and Expenses. The Borrower has paid all fees and expenses
incurred in connection with the negotiation, preparation, execution and delivery
of this Amendment and the other transactions contemplated herein including,
without limitation, the reasonable legal fees and expenses of Moore & Van Allen
PLLC, counsel to the Administrative Agent.

 

SUBPART 3.4 Other Items. The Administrative Agent shall have received such other
documents, agreements or information which may be reasonably requested by the
Administrative Agent.

 

PART 4

JOINDER OF NEW LENDERS

 

From and after the Amendment No. 2 Effective Date, each of the New Lenders shall
be a party to and be bound by the provisions of the Existing Credit Agreement
(as amended hereby) and shall have the rights and obligations of a Lender
thereunder.

 

Each New Lender (i) confirms that it has received a copy of the Existing Credit
Agreement and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Amendment; (ii)
agrees that it will, independently and without reliance upon the Administrative
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 the Existing Credit Agreement (as amended
hereby); (iii) appoints and authorizes the Administrative Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
the Existing Credit Agreement (as amended hereby) as are delegated to the
Administrative Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (iv) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Existing Credit Agreement (as amended hereby) are required to be
performed by it as a Lender; and (v) which is not a United States person shall
have attached all forms required under Section 2.17(f) of the Existing Credit
Agreement.

 

PART 5

MISCELLANEOUS

 

SUBPART 5.1 Representations and Warranties. The Borrower hereby represents and
warrants to the Administrative Agent, the Existing Lenders and the New Lenders
that, after giving effect to this Amendment, (a) no Default or Event of Default
exists under the Credit Agreement and (b) the representations and warranties set
forth in Section 3 of the Existing Credit Agreement are, subject to the
limitations set forth therein, true and correct in all material respects as of
the date hereof (except for those which expressly relate to an earlier date).

 

SUBPART 5.2 Reaffirmation of Obligations. The Borrower hereby ratifies the
Credit Agreement and acknowledges and reaffirms (a) that it is bound by all
terms of the Credit Agreement applicable to it and (b) that it is responsible
for the observance and full performance of its respective obligations under the
Credit Agreement.

 

SUBPART 5.3 Cross-References. References in this Amendment to any Part or
Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.

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SUBPART 5.4 Instrument Pursuant to Existing Credit Agreement. This Amendment is
executed pursuant to the Existing Credit Agreement and shall (unless otherwise
expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Existing Credit Agreement.

 

SUBPART 5.5 References in Other Credit Documents. At such time as this Amendment
shall become effective pursuant to the terms of Subpart 3.1, all references to
the “Credit Agreement” shall be deemed to refer to the Credit Agreement as
amended by this Amendment.

 

SUBPART 5.6 Counterparts/Telecopy. This Amendment may be executed by the parties
hereto in several counterparts, each of which shall be deemed to be an original
and all of which shall constitute together but one and the same agreement.
Delivery of executed counterparts of the Amendment by telecopy shall be
effective as an original and shall constitute a representation that an original
shall be delivered.

 

SUBPART 5.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING
SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT
EXCLUDING ALL OTHER CHOICE OF LAW AND CONFLICTS OF LAW RULES).

 

SUBPART 5.8 Successors and Assigns. This Amendment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.

 

SUBPART 5.9 General. Except as amended hereby, the Existing Credit Agreement and
all other credit documents shall continue in full force and effect.

 

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment to the
364-Day Credit Agreement as of the date first above written.

 

BORROWER:   HEALTH NET, INC.,        

a Delaware corporation

       

By:

 

/s/ Wisdom Lu

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Name:

 

Wisdom Lu

       

Title:

 

TREASURER

ADMINISTRATIVE AGENT:   BANK OF AMERICA, N.A.        

By:

 

/s/ Kevin L. Ahart

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Name:

 

Kevin L. Ahart

       

Title:

 

Assistant Vice President

EXISTING LENDERS:   BANK OF AMERICA, N.A.        

By:

 

/s/ Joseph L. Corah

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Name:

 

Joseph L. Corah

       

Title:

 

Principal

JPMORGAN CHASE BANK (formerly known as The Chase Manhattan Bank)        

By:

 

/s/ Dawn Lee Lum

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Name:

 

Dawn Lee Lum

       

Title:

 

Vice President

                FLEET NATIONAL BANK        

By:

 

/s/ Judi N. Cyr

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Name:

 

Judi N. Cyr

       

Title:

 

Senior Vice President

        THE BANK OF NOVA SCOTIA        

By:

 

/s/ R.P. Reynolds

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Name:

 

R.P. Reynolds

       

Title:

 

Director

    CITICORP USA, INC.        

By:

 

[ILLEGIBLE]

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Name:

 

[ILLEGIBLE]

       

Title:

 

Vice President

 

HEALTH NET, INC.

SECOND AMENDMENT

 

7

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    SUMITOMO MITSUI BANKING CORPORATION        

By:

 

/s/ AL GALLUZZO

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Name:

 

AL GALLUZZO

       

Title:

 

SENIOR VICE PRESIDENT

        THE BANK OF NEW YORK        

By:

 

/s/ Rebecca K. Levine

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Name:

 

Rebecca K. Levine

       

Title:

 

Vice President

        WELLS FARGO BANK, N.A.        

By:

 

[ILLEGIBLE]

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Name:

           

Title:

            UNION BANK OF CALIFORNIA, N.A.        

By:

 

/s/ ROBERT LEEPER

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Name:

 

ROBERT LEEPER

       

Title:

 

SVP

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    NEW LENDERS:   BANK OF THE WEST        

By:

 

/s/ William R. Murray

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Name:

 

William R. Murray

       

Title:

 

Vice President

        MORGAN STANLEY BANK        

By:

 

/s/ Jaap L. Tonckens

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Name:

 

Jaap L. Tonckens

       

Title:

 

Vice President

           

Morgan Stanley Bank

        UBS AG, CAYMAN ISLANDS BRANCH        

By:

 

/s/ Patricia O’Kicki

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Name:

 

Patricia O’Kicki

       

Title:

 

Director

       

By:

 

/s/ Wilfred V. Saint

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Name:

 

Wilfred V. Saint

       

Title:

 

Associate Director

           

Banking Products

           

Services, US

 

HEALTH NET, INC.

SECOND AMENDMENT

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SCHEDULE 2.01

 

COMMITMENTS

(364-Day Credit Agreement)

 

Lender

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   Commitment Amount

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   Commitment Percentage

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Bank of America, N.A.

   $ 23,500,000    13.428571429 %

JPMorgan Chase Bank

   $ 23,500,000    13.428571429 %

Fleet National Bank

   $ 23,000,000    13.142857143 %

Citicorp USA, Inc.

   $ 22,500,000    12.857142857 %

The Bank of Nova Scotia

   $ 15,000,000    8.571428571 %

Sumitomo Mitsui Banking Corporation

   $ 7,500,000    4.285714286 %

The Bank of New York

   $ 10,000,000    5.714285714 %

Wells Fargo Bank

   $ 10,000,000    5.714285714 %

Union Bank of California, N.A.

   $ 10,000,000    5.714285714 %

Bank of the West

   $ 10,000,000    5.714285714 %

Morgan Stanley

   $ 10,000,000    5.714285714 %

UBS Warburg

   $ 10,000,000    5.714285714 %     

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Total:

   $ 175,000,000    100.000000000 %     

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