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Exhibit 99.3
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made and
entered into as of June 6, 2001 by and among HCC INSURANCE HOLDINGS, INC., a
Delaware corporation (the "Borrower"); each of the Lenders which is a party to
the Loan Agreement (as defined below) (individually, a "Lender" and,
collectively, the "Lenders"), XXXXX FARGO BANK TEXAS, NATIONAL ASSOCIATION,
Administrative Agent for the Lenders and Lead Arranger (in such capacity,
together with its successors in such capacity, the "Agent"), FIRST UNION
NATIONAL BANK, as Syndication Agent, BANK OF AMERICA, N.A., as Documentation
Agent, and THE BANK OF NEW YORK, as Senior Managing Agent.
RECITALS
A. The Borrower, the Lenders and the Agent executed and delivered that
certain Loan Agreement dated as of December 17, 1999. Said Loan Agreement, as
heretofore amended, is herein called the "Loan Agreement". Any capitalized term
used in this Amendment and not otherwise defined shall have the meaning ascribed
to it in the Loan Agreement.
B. The Borrower, the Lenders and the Agent desire to amend the Loan
Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, representations and warranties herein set forth, and further good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Lenders and the Agent do hereby agree as
follows:
SECTION 1. Amendments to Loan Agreement. Effective as of the date
hereof, the Loan Agreement is hereby amended as follows:
(a) The definition of "Margin Percentage" set forth in Section 1.1 of
the Loan Agreement is hereby amended to read in its entirety as follows:
Margin Percentage means (i) on any day prior to July 1, 2001,
0.750% and (ii) on and after July 1, 2001, the applicable per annum
percentage set forth at the appropriate intersection in the table shown
below, based on the Debt to Capitalization Ratio as of the last day of
the most recently ended fiscal quarter of Borrower calculated by Agent
as soon as practicable after receipt by Agent of all financial reports
required under this Agreement with respect to such fiscal quarter
(including a Compliance Certificate) (provided, however, that if the
Margin Percentage is increased as a result of the reported Debt to
Capitalization Ratio, such increase shall be retroactive to the date
that Borrower was obligated to deliver such financial reports to Agent
pursuant to the terms of this Agreement and provided further, however,
that if the Margin Percentage is decreased as a result of the reported
Debt to Capitalization Ratio, and such financial reports are delivered
to Agent not more than ten (10) calendar days after the date required
to be delivered pursuant to the terms of this Agreement, such decrease
shall be retroactive to the date that Borrower was obligated to deliver
such financial reports to Agent pursuant to the terms of this
Agreement):
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Debt to
Capitalization Ratio Margin Percentage
Greater than or equal to
0.250 to 1.000 1.150
Greater than or equal to
0.175 to 1.00 but less
than 0.250 to 1.000 0.950
Less than 0.175 to 1.000 0.750
(b) The definition of "Permitted Dividends" set forth in Section 1.1 of
the Loan Agreement is hereby amended to read in its entirety as follows:
Permitted Dividends means (i) dividends or distributions by a
Subsidiary of Borrower to Borrower (or to another Subsidiary of
Borrower) or redemption by a Subsidiary of any of its stock held by
Borrower (or by another Subsidiary of Borrower), (ii) dividends paid in
stock and stock splits and (iii) so long as no Default or Event of
Default shall have occurred and be continuing (or would result
therefrom), dividends or distributions by Borrower not exceeding, in
the aggregate in any applicable fiscal year, $35,000,000. The dividends
and distributions otherwise permitted under this definition shall be
subject to the provisions of Section 8.15 hereof.
(c) Section 2.2(a) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(a) [INTENTIONALLY LEFT BLANK]
(d) Section 2.3(a) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(a) Borrower shall pay to Agent for the account of each
Revolving Loan Lender revolving loan commitment fees for the period
from June 6, 2001 to and including the Revolving Loan Termination Date
at 0.15% per annum. Such revolving loan commitment fees shall be
computed (on the basis of the actual number of days elapsed in a year
composed of 365 or 366 days, as the case may be) on each day and shall
be based on the excess of (x) the aggregate amount of each Revolving
Loan Lender's Commitment for such day over (y) the aggregate unpaid
principal balance of such Lender's Note on such day. Accrued revolving
loan commitment fees under this provision shall be payable in arrears
on the Quarterly Dates prior to the Revolving Loan Termination Date and
on the Revolving Loan Termination Date.
(e) Section 7.2(h) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(h) within sixty (60) days after the end of each fiscal year,
projections of the consolidated financial statements of Borrower and
its Subsidiaries for the following fiscal year
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(f) Section 7.3(a)(ii) of the Loan Agreement is hereby amended to read
in its entirety as follows:
(ii) Debt to Capitalization Ratio - a Debt to Capitalization
Ratio of not greater than 30% at all times.
(g) Section 7.3(b) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(b) Borrower will cause each of its Insurance Company
Subsidiaries to maintain a Risk Based Capital Ratio of not less than
200% as of the last day of each fiscal year. In addition, Borrower will
cause the Insurance Company Subsidiaries to maintain, on a consolidated
basis, a statutory surplus of not less than $300,000,000 at all times.
(h) Section 8.1(vii) of the Loan Agreement is hereby amended to read in
its entirety as follows:
(vii) any unsecured Indebtedness of Borrower not to exceed, in
the aggregate at any one time outstanding, $100,000,000 (to be
increased on a dollar-for-dollar basis by any decrease of the
Commitments from time to time from the levels in effect as of May 1,
2001); provided, however, that $100,000,000 of such availability for
borrowings shall be restricted to public debt offerings by Borrower;
and
(i) A new subsection (viii) is hereby added to Section 8.1, such new
subsection to read in its entirety as follows:
(viii) any unsecured Indebtedness owing by a Subsidiary of
Borrower to Borrower.
(j) Section 8.5 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.5 Disposition of Assets. Sell, convey or lease all or any
part of its assets, except as permitted by Section 8.4 hereof and
except for (a) sales of Inventory in the ordinary course of business,
(b) transfers resulting from casualty or condemnation of property, (c)
intercompany sales or transfers of goods, (d) any sale or other
transfer of any property or assets not otherwise permitted hereunder
provided that the net proceeds of all such sales and transfers shall
not exceed, in the aggregate during any fiscal year of Borrower, five
percent (5%) of the tangible assets of Borrower and its Subsidiaries,
on a consolidated basis and determined in accordance with GAAP, (e)
licenses or sublicenses of intellectual property and general
intangibles and licenses, leases or subleases of other Property in the
ordinary course of business and which do not materially interfere with
the business or operation of any Obligor and which does not otherwise
have a Material Adverse Effect, (f) sales/leaseback transactions
(provided that Borrower and its Subsidiaries shall not, in the
aggregate, consummate more than three (3) sales/leasebacks with respect
to Property owned by Borrower or its Subsidiaries as of the Effective
Date), and (g) sales of any investment assets (including, without
limitation, stocks, bonds, cash equivalents, etc.) in the ordinary
course of business. Prior to consummation of any single
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disposition providing for aggregate consideration in excess of
$25,000,000, Borrower shall certify to Agent that no Default can
reasonably be expected to arise by reason of such transaction. This
Section shall be subject to the limitations set forth in Section 8.15
hereof.
(k) Section 8.6 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.6 Redemption, Dividends and Distributions. At any time: (a)
redeem, retire or otherwise acquire, directly or indirectly, any equity
interest in Borrower other than stock repurchases not exceeding, in the
aggregate and on a cumulative basis from and after the Effective Date,
$100,000,000 or (b) make any distributions of any Property or cash to
the owner of any of the equity interests in Borrower or any of its
Subsidiaries other than Permitted Dividends.
(l) Section 8.12 of the Loan Agreement is hereby amended to read in its
entirety as follows:
8.12 Acquisitions. Without the prior written consent of the
Majority Lenders, acquire any real Property or any material personal
Property (including any acquisition of equity interests in another
Person other than an Obligor or, subject to the provisions of Section
8.15 hereof, any other Subsidiary of Borrower as of the Effective Date)
after the Effective Date from any Person other than an Obligor if the
aggregate cash consideration for transactions would exceed twelve and
one-half percent (12-1/2%) of the tangible assets of Borrower and its
Subsidiaries, on a consolidated basis and determined in accordance with
GAAP, in any fiscal year or if the aggregate consideration (cash or
otherwise) for transactions would exceed twenty-five percent (25%) of
the tangible assets of Borrower and its Subsidiaries, on a consolidated
basis and determined in accordance with GAAP, in any fiscal year. Each
such acquisition shall be subject to the provisions of Section 8.7
hereof. Notwithstanding anything to the contrary set forth in this
Section, neither the Borrower nor any of its Subsidiaries may acquire
any additional equity interests in and to the Second Tier Insurance
Company Subsidiaries without the prior written consent of the Majority
Lenders.
SECTION 2. Reduction of Commitments. The Commitments of the respective
Lenders are hereby reduced to the amounts set forth on Exhibit A hereto.
SECTION 3. Amendment Fee. No part of this Amendment shall become
effective until the Borrower shall have delivered to the Agent payment to each
Lender of a fee equal to 0.075% of such Lender's Commitment, as amended hereby.
SECTION 4. Ratification. Except as expressly amended by this Amendment,
the Loan Agreement and the other Loan Documents shall remain in full force and
effect. None of the rights, title and interests existing and to exist under the
Loan Agreement are hereby released, diminished or impaired, and the Borrower
hereby reaffirms all covenants, representations and warranties in the Loan
Agreement (except such representations and warranties which are, by their
express terms, limited to a prior date).
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SECTION 5. Expenses. The Borrower shall pay to the Agent all reasonable
fees and expenses of its respective legal counsel (pursuant to Section 11.3 of
the Loan Agreement) incurred in connection with the execution of this Amendment.
SECTION 6. New Lenders. From and after the date hereof, Citicorp USA
and Southwest Bank of Texas, N.A. shall constitute "Lenders" under the Loan
Agreement and, by their execution hereof, Citicorp USA and Southwest Bank of
Texas, N.A. acknowledge and agree to the obligations arising therefrom.
SECTION 7. Certifications. The Borrower hereby certifies that (a) no
material adverse change in the assets, liabilities, financial condition,
business or affairs of the Borrower has occurred since December 31, 2000 and (b)
no uncured Default or uncured Event of Default has occurred and is continuing or
will occur as a result of this Amendment.
SECTION 8. Waiver/Consent. The Agent and the Lenders hereby waive any
Default or Event of Default which may exist as a result of the Borrower's
failure to comply with Section 8.1(vii) of the Loan Agreement for all periods
prior to the date of this Amendment. The waiver granted herein is given solely
for the express purpose stated herein and is not a waiver of any other provision
of the Loan Agreement or for any other period.
SECTION 9. Miscellaneous. This Amendment (a) shall be binding upon and
inure to the benefit of the Borrower, the Lenders and the Agent and their
respective successors, assigns, receivers and trustees; (b) may be modified or
amended only by a writing signed by the required parties; (c) shall be governed
by and construed in accordance with the laws of the State of Texas and the
United States of America; (d) may be executed in several counterparts by the
parties hereto on separate counterparts, and each counterpart, when so executed
and delivered, shall constitute an original agreement, and all such separate
counterparts shall constitute but one and the same agreement and (e) together
with the other Loan Documents, embodies the entire agreement and understanding
between the parties with respect to the subject matter hereof and supersedes all
prior agreements, consents and understandings relating to such subject matter.
The headings herein shall be accorded no significance in interpreting this
Amendment.
NOTICE PURSUANT TO TEX. BUS. & COMM. CODE SECTION 26.02
THE LOAN AGREEMENT, AS AMENDED BY THIS AMENDMENT, AND ALL OTHER LOAN
DOCUMENTS EXECUTED BY ANY OF THE PARTIES PRIOR HERETO OR SUBSTANTIALLY
CONCURRENTLY HEREWITH CONSTITUTE A WRITTEN LOAN AGREEMENT WHICH REPRESENTS THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have caused
this Amendment to be signed by their respective duly authorized officers,
effective as of the date first above written.
Exhibit A -- Reduced Commitments
HCC INSURANCE HOLDINGS, INC.,
a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx, Xx.
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Xxxxxx X. Xxxxx, Xx., Senior Vice
President and Chief Financial
Officer
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XXXXX FARGO BANK TEXAS, NATIONAL
ASSOCIATION, as Administrative Agent and Lead
Arranger and as a Lender
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
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Title: Vice President
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FIRST UNION NATIONAL BANK,
as Syndication Agent and as a Lender
By: /s/ Xxxxxx X. Xxxxxx
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Name: Xxxxxx X. Xxxxxx
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Title: Director
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BANK OF AMERICA, N.A.,
as Documentation Agent and as a Lender
By: /s/ Xxxxxx X. Xxxx
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Name: Xxxxxx X. Xxxx
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Title: Vice President
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THE BANK OF NEW YORK,
as Senior Managing Agent and as a Lender
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
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Title: Vice President
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CITICORP USA
By: /s/ Xxxxxxx X. Xxxxxxxx
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Name: Xxxxxxx X. Xxxxxxxx
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Title: Vice President
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XXXXXXXXX XXXX XX XXXXX, N.A.
By: /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxxx X. Xxxxxxx
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Title: Senior Vice President
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The undersigned hereby join in this Amendment to evidence their consent
to execution by Borrower of this Amendment, to confirm that each Loan Document
now or previously executed by the undersigned applies and shall continue to
apply to the Loan Agreement, as amended hereby, to acknowledge that without such
consent and confirmation, Lenders would not execute this Amendment and to join
in the notice pursuant to Tex. Bus. & Comm. Code Section 26.02 set forth above.
AVEMCO CORPORATION, a Delaware corporation,
NORTH AMERICAN SPECIAL RISK ASSOCIATES,
INC., an Illinois corporation, LDG
REINSURANCE CORPORATION, a Massachusetts
corporation, HCC EMPLOYER SERVICES, INC., an
Alabama corporation, HCC EMPLOYEE BENEFITS,
INC., a Delaware corporation, HCC AVIATION
INSURANCE GROUP, INC., a Texas corporation,
HCC BENEFITS CORPORATION, a Delaware
corporation, HCC INTERMEDIARIES, INC., a
Texas corporation, HCC INTERMEDIATE
HOLDINGS, INC., a Delaware corporation, THE
CENTRIS GROUP, INC., a Delaware corporation,
U.S. BENEFITS INSURANCE SERVICES, INC., a
California corporation, and U.S. HOLDINGS,
INC., a Delaware corporation
By: /s/ Xxxxxx X. Xxxxx, Xx.
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Name: Xxxxxx X. Xxxxx, Xx.
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Title: Senior Vice President
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Xxxxx Fargo Bank Texas, National Association.....................................................$45,000,000
First Union National Bank........................................................................$40,000,000
Bank of America, N.A.............................................................................$40,000,000
The Bank of New York.............................................................................$35,000,000
Citicorp USA.....................................................................................$25,000,000
Southwest Bank of Texas, N.A.....................................................................$15,000,000
EXHIBIT A
