EXHIBIT 10 (b)
AMENDMENT NO. 1 TO CREDIT AGREEMENT AND WAIVER
This Amendment and Waiver (this "Amendment") is entered into as of March
23, 1999 by and among Fund American Enterprises Holdings, Inc., a Delaware
corporation (the "Borrower"), The First National Bank of Chicago,
individually and as agent ("Agent"), and the other financial institutions
signatory hereto (the "Lenders").
RECITALS
A. The Borrower, the Agent and the Lenders are party to that certain
$35,000,000 Second Amended and Restated Credit Agreement dated as of February
24, 1999 (the "Credit Agreement"). Unless otherwise specified herein,
capitalized terms used in this Amendment shall have the meanings ascribed to
them by the Credit Agreement.
B. The Borrower, the Agent and the undersigned Lenders wish to amend the
Credit Agreement and waive certain provisions thereof on the terms and
conditions set forth below.
Now, therefore, in consideration of the mutual execution hereof and
other good and valuable consideration, the parties hereto agree as follows:
1. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement shall be
amended as follows:
(a) SCHEDULE 5.8 Upon the Effective Date (as defined below),
Schedule 5.8 shall be amended in its entirety and replaced with
Schedule 5.8 attached hereto.
(b) SCHEDULE 5.10 Effective as of February 24, 1999, Schedule
5.10, is amended in its entirety and replaced with Schedule 5.10
attached hereto.
(c) SCHEDULE 5.16 Upon the Effective Date, Schedule 5.16 shall
be amended in its entirety and replaced with Schedule 5.16 attached
hereto.
(d) SECTION 6.15(e) Upon the Effective Date, Section 6.15(e)
shall be amended in its entirety and replaced with the following:
"(e) other Investments by the Borrower in any Person which is
a Subsidiary as of the date hereof, so long as no Default or
Unmatured Default has occurred and is continuing or would occur
after giving effect to such Investment; PROVIDED, however, that the
aggregate amount of Investments in SOMSC pursuant to this CLAUSE (e)
after December 31, 1998 (when taken together with the aggregate
amount of loans made to SOMSC pursuant to SECTION 6.15(f) after
December 31, 1998) do not exceed the amount of net proceeds
received from dividends, transfers, loans or other distributions
from SOMSC after December 31, 1998
(less the aggregate amount of Investments made by the Borrower
under SECTION 6.15(g) after December 31, 1998 to the extent such
Investments under SECTION 6.15(g) are made from net proceeds
traceable to dividends, sales, transfers or other distributions of
equity interests in SOMSC after December 31, 1998 and are not held
by SOMSC or SOMSC's Subsidiaries;"
(e) SECTION 6.15(f) Upon the Effective Date, Section 6.15(f)
shall be amended in its entirety and replaced with the following:
"(f) loans made by (x) the Borrower to any Wholly-Owned
Subsidiary and (y) any Wholly-Owned Subsidiary to a Wholly-Owned
Subsidiary or the Borrower so long as, in all cases, no Default or
Unmatured Default has occurred and is continuing or would occur
after giving effect to such loan; PROVIDED, however, that the
aggregate amount of loans to SOMSC pursuant to this CLAUSE (f)
after December 31, 1998 (when taken together with the aggregate
amount of Investments made in SOMSC pursuant to SECTION 6.15(e)
after December 31, 1998) do not exceed the amount of net proceeds
received from dividends, transfers, loans or other distributions
from SOMSC after December 31, 1998 (less the aggregate amount of
Investments made by the Borrower under SECTION 6.15(g) after
December 31, 1998 to the extent such Investments under SECTION
6.15(g) are made from net proceeds traceable to dividends, sales,
transfers or other distributions of equity interests in SOMSC after
December 31, 1998 and are not held by SOMSC or SOMSC's
Subsidiaries;"
2. CONSENT AND WAIVER. The Lenders hereby (a) waive any breach of
SECTION 6.4 of the Credit Agreement arising solely out of the sale by the
Borrower's Subsidiary, Source One Mortgage Services Corporation ("SOMSC"), of
substantially all of its business pursuant to that certain Asset Purchase
Agreement by and among SOMSC, the Borrower and Citicorp Mortgage, Inc., dated
as of March 23, 1999 (as it may be amended or otherwise modified, the
"Purchase Agreement"), and the resulting failure of such Subsidiary to carry
on and conduct its business in substantially the same manner and in
substantially the same fields of business as it conducted on February 24,
1999, (b) waive any breach of SECTION 6.22(b) of the Credit Agreement to and
including July 31, 1999 arising solely out of the Unfunded Liability of
certain Subsidiaries of the Borrower exceeding $500,000 as disclosed on
SCHEDULE 5.10 attached hereto (the "Excess Unfunded Liability") and (c) waive
any Default or Unmatured Default under SECTIONS 7.1, 7.3, 7.4 and 7.5 of the
Credit Agreement which has heretofore arisen as a result of the Purchase
Agreement, the Contingent Obligations of the Borrower related thereto, any
Funded Indebtedness of SOMSC which shall be declared to be due and payable or
required to be repaid (other than by a regularly scheduled payment) prior to
its stated maturity resulting from consummation of the Purchase Agreement, or
the Excess Unfunded Liability.
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3. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower
represents and warrants that:
(a) The execution, delivery and performance by the Borrower of
this Amendment has been duly authorized by all necessary corporate
action and that this Amendment is a legal, valid and binding obligation
of the Borrower enforceable against the Borrower in accordance with its
terms, except as the enforcement thereof may be subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally;
(b) After giving effect to this Amendment, each of the
representations and warranties contained in the Credit Agreement is true
and correct in all material respects on and as of the date hereof as if
made on the date hereof; and
(c) After giving effect to this Amendment, no Default or
Unmatured Default has occurred and is continuing.
4. EFFECTIVE DATE. This Amendment shall become effective upon the
execution and delivery hereof by the Borrower, the Agent and the Required
Lenders (without respect to whether it has been executed and delivered by all
the Lenders); provided that SECTIONS 1 and 2 hereof shall not become
effective until the date (the "Effective Date") when the following additional
conditions have also been satisfied:
(a) delivery of a copy, certified by the Secretary or Assistant
Secretary of the Borrower, of the fully executed Purchase Agreement with
all schedules (as may be requested by the Agent) and amendments thereto;
(b) a certificate, executed by the Secretary or Assistant
Secretary of the Borrower, certifying the consummation of the
transactions contemplated by the Purchase Agreement on the "Closing
Date" (as defined in the Purchase Agreement);
(c) a certificate, executed by the Secretary or Assistant
Secretary of the Borrower, certifying (i) an attached copy of the
Borrower's Board of Directors' resolutions authorizing its execution,
delivery and performance under the Purchase Agreement and (ii) that
there has been no amendments, supplements or modifications to the
Articles of Incorporation, Bylaws or certificate of incumbency delivered
to the Agent on February 24, 1999;
(d) evidence satisfactory to the Agent that all credit
arrangements of SOMSC and its Subsidiaries related to Funded
Indebtedness of SOMSC and its Subsidiaries have been either (i)
terminated and all Indebtedness, liabilities and obligations outstanding
thereunder shall have been paid in full and all liens thereunder
released or (ii) assumed by Citicorp Mortgage, Inc. pursuant to the
Purchase Agreement; and
(e) such other documents as the Agent, any Lender or their
counsel may have reasonably requested.
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In the event the Effective Date has not occurred on or before June 30,
1999, SECTIONS 1(a), (b), (d) AND (e) and 2 hereof shall not become
operative and shall be of no force or effect.
5. REFERENCE TO AND EFFECT UPON THE CREDIT AGREEMENT.
(a) Except as specifically amended above, the Credit Agreement
and the other Loan Documents shall remain in full force and effect
and are hereby ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of the
Agent or any Lender under the Credit Agreement or any Loan
Document, nor constitute a waiver of any provision of the Credit
Agreement or any Loan Document, except as specifically set forth
herein. Upon the effectiveness of this Amendment, each reference in
the Credit Agreement to "this Agreement", "hereunder", "hereof",
"herein" or words of similar import shall mean and be a reference
to the Credit Agreement as amended hereby.
6. COSTS AND EXPENSES. The Borrower hereby affirms its obligations
under Section 9.7 of the Credit Agreement to reimburse the Agent for all
reasonable costs, internal charges and out-of-pocket expenses paid or
incurred by the Agent in connection with the preparation, negotiation,
execution and delivery of this Amendment, including but not limited to the
attorneys' fees and time charges of attorneys for the Agent with respect
thereto.
7. CHOICE OF LAW. THIS AMENDMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION, 735 ILCS SECTION
105/5-1 ET SEQ, BUT OTHERWISE WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS.
8. HEADINGS. Section headings in this Amendment are included herein
for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
9. COUNTERPARTS. This Amendment may be executed in any number of
counterparts, each of which when so executed shall be deemed an original but
all such counterparts shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of
the date and year first above written.
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
By:
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Name:
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Title:
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THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
By:
---------------------------------
Print Name:
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Title:
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Address: 000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxx
First Vice President
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
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FLEET NATIONAL BANK
By:
---------------------------------
Print Name:
-----------------------------
Title:
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Address: Xxx Xxxxxxx Xxxxxx-XXXXX00X
Xxxxxx, XX 00000-0000
Attn: Xxxxx X. Xxxxxxxxx
Vice President
Fax No.: (000) 000-0000
Tel. No.: (000) 000-0000
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FIRST UNION NATIONAL BANK
By:
---------------------------------
Print Name:
-----------------------------
Title:
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Address: 0000 Xxxxxxxx Xxxxxx, XX0000
Xxxxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx XxXxxxxxxxx
Fax No.: 000-000-0000
Tel. No.: 000-000-0000
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XXXXXXXX XXXX XX,
Xxx Xxxx and/or Cayman Islands Branch
By:
---------------------------------
Print Name:
-----------------------------
Title:
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By:
---------------------------------
Print Name:
-----------------------------
Title:
------------------------------
Address: 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxx
Fax No.: 000-000-0000
Tel. No.: 000-000-0000
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ABN AMRO BANK N.V.
By:
---------------------------------
Print Name:
-----------------------------
Title:
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By:
---------------------------------
Print Name:
-----------------------------
Title:
------------------------------
Address: 000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxxxx
Fax No.: 000-000-0000
Tel. No.: 000-000-0000
Fund American Enterprises Holdings, Inc.
Schedule 5.8
To Credit Agreement
MATERIAL CONTINGENT OBLIGATIONS
Guaranty by Fund American Enterprises Holdings, Inc. (the "Company") of a
$15,000,000 term loan, dated as of October 23, 1995, by and between Xxxx X.
Xxxxx, as borrower, and First National Bank of Chicago, as agent. The term
loan is due December 31, 1999. The guaranty is provided pursuant to Xx.
Xxxxx'x employment contract and is recourse to Xx. Xxxxx'x net worth.
Guaranty dated February 28, 1997, in connection with Source One Mortgage
Services Corporation's ("Source One") February 28, 1997 sale of approximately
$17.0 billion of mortgage servicing rights to Chemical Mortgage Company
("Chemical") whereby the company made certain collection, payment and
performance guarantees to Chemical for a period of no more than ten years.
The aggregate amount of the Company's obligation is initially limited to
$20,000,000 and amortizes down to $15,000,000 as mortgage loans serviced
under the related servicing agreements are repaid. During 1998, the Company
permitted Chemical to include an
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additional $2.9 billion of mortgage servicing rights that it purchased from
Source One during 1998 to be included in the guaranty, however, the inclusion
of the 1998 servicing rights sold did not serve to change the maximum amount
of the guaranty or the original term of the guaranty.
Stock Purchase Agreement dated as of October 19, 1998 by and between the
Company, Valley Insurance Company ("VIC") and Executive Risk Indemnity Inc.
("ERII") providing for the sale of all the outstanding capital stock of
Valley National Insurance Company ("VNIC") to ERII following the reinsurance
cession of all the insurance business of VNIC to VIC and Charter Indemnity
Company ("CIC") (the "VNIC Sale Agreement"). In conjunction with the VNIC
Sale Agreement, the Company and ERII entered into a Keep Well Agreement dated
as of October 19, 1998 whereby the Company has agreed to maintain the
shareholder's equity of Valley Group, Inc. ("VGI") at predetermined levels
(initially set at $60,000,000). In conjunction with the VGI Sale Agreement
(as defined below), The Company and VIC intend to amend the VNIC Sale
Agreement and Keep Well Agreement prior to closing to, among other items,
remove the obligation to maintain the shareholder's equity of VGI at
predetermined levels. The VNIC Sale Agreement and Keep Well Agreement are
subject to the receipt of regulatory approval.
Stock Acquisition Agreement dated as of February 10, 1999 by and between the
Company, and Unitrin, Inc. ("Unitrin") providing for the sale of all the
outstanding capital stock of VGI to Unitrin (the "VGI Sale Agreement"). In
conjunction with the VGI Sale Agreement the Company has agreed to guarantee
the Closing Date Loss and Loss Adjustment Expense Reserves of VGI's insurance
subsidiaries (the "Reserves") for a period of four years. The Company is
obligated to pay Unitrin an amount equal to 90% of the amount by which the
Reserves develop unfavorably to the extent that such unfavorable development
exceeds $500,000. Conversely, the Company is entitled to receive from Unitrin
an amount equal to 90% of the amount by which the Reserves develop favorably
to the extent that such favorable development exceeds $500,000. The Company's
exposure to the Reserves is limited to $50,000,000. The VGI Sale Agreement is
subject to the receipt of regulatory approval.
The Company has guaranteed the obligations of Source One (including but not
limited to indemnity obligations) under that certain Asset Purchase Agreement
dated as of March 23, 1999 by and among Source One as Seller, the Company as
Parent and Citicorp Mortgage, Inc. as Purchaser. Such Asset Purchase
Agreement provides for the sale by Source One to Citicorp Mortgage, Inc. of a
significant portion of the assets and liabilities of Source One (other than
the stock of Financial Security Assurance Holdings Ltd. held by Source One).
There is currently no litigation, arbitration, proceeding, inquiry or
governmental investigation pending or threatened against or affecting the
Borrower or any Subsidiary of the Borrower (outside of those in the ordinary
course of the insurance and mortgage banking businesses) which could
reasonably be expected to have a Material Adverse Effect upon the Borrower.
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Fund American Enterprises Holdings, Inc.
Schedule 5.16
To Credit Agreement
INDEBTEDNESS
FUND AMERICAN ENTERPRISES HOLDINGS, INC.
Guaranty by Fund American Enterprises Holdings, Inc. (the "Company") of a
$15,000,000 term loan, dated as of October 23, 1995, by and between Xxxx X.
Xxxxx, as borrower, and First National Bank of Chicago, as agent. The term
loan is due December 31, 1999. The guaranty is provided pursuant to Xx.
Xxxxx'x employment contract and is recourse to Xx. Xxxxx'x net worth.
Guaranty dated February 28, 1997, in connection with Source One Mortgage
Services Corporation's ("Source One") February 28, 1997 sale of approximately
$17.0 billion of mortgage servicing rights to Chemical Mortgage Company
("Chemical") whereby the company made certain collection, payment and
performance guarantees to Chemical for a period of no more than ten years.
The aggregate amount of the Company's obligation is initially limited to
$20,000,000 and amortizes down to $15,000,000 as mortgage loans serviced
under the related servicing agreements are repaid. During 1998, the Company
permitted Chemical to include an additional $2.9 billion of mortgage
servicing rights that it purchased from Source One during 1998 to be included
in the guaranty, however, the inclusion of the 1998 servicing rights sold did
not serve to change the maximum amount of the guaranty or the original term
of the guaranty.
Stock Purchase Agreement dated as of October 19, 1998 by and between the
Company, Valley Insurance Company ("VIC") and Executive Risk Indemnity Inc.
("ERII") providing for the sale of all the outstanding capital stock of
Valley National Insurance Company ("VNIC") to ERII following the reinsurance
cession of all the insurance business of VNIC to VIC and Charter Indemnity
Company ("CIC") (the "VNIC Sale Agreement"). In conjunction with the VNIC
Sale Agreement, the Company and ERII entered into a Keep Well Agreement dated
as of October 19, 1998 whereby the Company has agreed to maintain the
shareholder's equity of Valley Group, Inc. ("VGI") at predetermined levels
(initially set at $60,000,000). In conjunction with the VGI Sale Agreement
(as defined below), The Company and VIC intend to amend the VNIC Sale
Agreement and Keep Well Agreement prior to closing to, among other items,
remove the obligation to maintain the shareholder's equity of VGI at
predetermined levels. The VNIC Sale Agreement and Keep Well Agreement are
subject to the receipt of regulatory approval.
Stock Acquisition Agreement dated as of February 10, 1999 by and between the
Company, and Unitrin, Inc. ("Unitrin") providing for the sale of all the
outstanding capital stock of VGI to Unitrin (the "VGI Sale Agreement"). In
conjunction with the VGI Sale Agreement the Company has agreed to guarantee
the Closing Date Loss and Loss Adjustment Expense Reserves of VGI's insurance
subsidiaries (the "Reserves") for a period of four years. The Company is
obligated to pay Unitrin an amount equal to 90% of the amount by which the
Reserves develop unfavorably to the extent that such unfavorable development
exceeds $500,000. Conversely, the Company is entitled to receive from Unitrin
an amount equal to 90% of the amount by which the Reserves develop favorably
to the extent that such favorable development exceeds $500,000. The Company's
exposure to the Reserves is limited to $50,000,000. The VGI Sale Agreement is
subject to the receipt of regulatory approval.
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The Company has guaranteed the obligations of Source One (including but not
limited to indemnity obligations) under that certain Asset Purchase Agreement
dated as of March 23, 1999 by and among Source One as Seller, the Company as
Parent and Citicorp Mortgage, Inc. as Purchaser. Such Asset Purchase
Agreement provides for the sale by Source One to Citicorp Mortgage, Inc. of a
significant portion of the assets and liabilities of Source One (other than
the stock of Financial Security Assurance Holdings Ltd. held by Source One).
FUND AMERICAN ENTERPRISES HOLDINGS, INC. (cont.)
Creditor Various
Subject matter of debt/lease Medium Term Notes
Date of note/lease January 27, 1993
Unpaid principal balance $1,000,000
Maturity date 2003
Interest rate 7.86%
Date to which interest has been paid November 1, 1998
Creditor Various
Subject matter of debt/lease Medium Term Notes
Date of note/lease February 4, 1993
Unpaid principal balance $10,000,000
Maturity date 2008
Interest rate 7.8%
Date to which interest has been paid November 1, 1998
Creditor Various
Subject matter of debt/lease Medium Term Notes
Date of note/lease February 10, 1993
Unpaid principal balance $4,000,000
Maturity date 2000
Interest rate 7.39%
Date to which interest has been paid November 1, 1998
Creditor Various
Subject matter of debt/lease Medium Term Notes
Date of note/lease February 3, 1993
Unpaid principal balance $101,250,000
Maturity date 2003
Interest rate 7.75%
Date to which interest has been paid February 1, 1999
Creditor(s) AT&T Capital Corporation
Subject matter of debt Telephone and video equipment
Date of note Feb. 1, 1996
Original amount of note $174,038
Unpaid principal balance $53,271.10
Maturity date Feb. 1999, Feb. 2001
Interest rate n/a
Monthly payment $3,450.47
Date to which interest has been paid n/a
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FOLKSAMERICA HOLDING COMPANY, INC.
Creditor Swedbank
Subject matter of debt/lease Financing
Date of note/lease July 14, 1996 (date of refinancing)
Unpaid principal balance $55,553,118
Maturity date 2005*
Interest rate LIBOR + .55%
* to be refinanced in conjunction with the Folksamerica Credit Agreement
Folksamerica has obtained two Letters of Credit in the amount of
approximately $7.4 million which inure to the benefit of Folksamerica
Reinsurance Company as beneficiary as a result of unauthorized reinsurance
and an intercompany tax sharing agreement in the ordinary course of business.
Folksamerica Reinsurance Company has issued a Letter of Credit in the amount
of approximately $2.6 million in the ordinary course of its reinsurance
business.
Folksamerica $100,000,000 Credit Agreement, dated as of February 24, 1999,
among Folksamerica, the lenders named therein and First Chicago, as agent.
VALLEY GROUP, INC.
Valley Group $15,000,000 Third Amended and Restated Credit Agreement, dated
as of February 24, 1999, among Valley Group, the lenders named therein and
First Chicago, as agent.
VALLEY INSURANCE COMPANY
Creditor IBM IBM IBM
Subject matter of IBM Equip. IBM Equip. IBM Equip.
debt/lease
AS400/Model 530 AS400/Model 320 AS400/Model 320
Date of note/lease 10/01/97 03/01/96 03/01/96
Original amount of note $617,724.00 $340,000.00 $127,797.61
Unpaid principal balance $442,100.00 $20,504.00 $8,074.00
Maturity Date Feb. 1, 2001 Mar. 1, 1999 Mar. 1, 1999
Interest Rate 4.51% 5.90% 8.19%
Monthly Payment $18,654.00 $10,328.06 $4,078.75
Date to which interest/
lease has been paid Dec. 31, 1998 Dec. 31, 1998 Dec. 31, 1998
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CHARTER GENERAL AGENCY, INC.
Creditor(s) Skandia U.S. Holdings, Inc.
Subject matter of debt Payable under the terms of the Stock Purchase
Agreement Skandia U.S. Holdings, Inc.
Date of note Sept. 30, 1996
Original amount of note $3,174,956
Unpaid principal balance $1,058,319
Maturity date Sept. 30, 1999
Interest rate 6.5%
Monthly payment $1,058,319 due 9/30/99
Date to which interest
has been paid Sept. 30, 1998
CHARTER GROUP, INC.
Creditor(s) AT&T Capital Corporation
Subject matter of debt IBM Equip. - Lease AS400
Date of note June 1, 1998
Original amount of note $455,370
Unpaid principal balance $363,971
Maturity date June 1, 2001
Interest rate n/a
Monthly payment $14,373
Date to which interest has n/a
been paid
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