EXHIBIT 10.1
________________________________________________________________________________
U.S. $75,000,000
CREDIT AGREEMENT
among
SCPIE HOLDINGS INC.,
as Borrower
and
THE FINANCIAL INSTITUTIONS NAMED HEREIN,
as Lenders
and
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent and Arranger
and
FIRST UNION NATIONAL BANK,
as Documentation Agent
May 25, 1999
________________________________________________________________________________
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS
1.1 Defined Terms............................................... 1
1.2 Accounting Terms............................................ 23
1.3 Other Definitional Provisions............................... 23
SECTION 2
AMOUNT AND TERMS OF LOANS; COMMITMENT AMOUNTS
2.1 Commitments................................................. 24
2.2 Optional Prepayments........................................ 27
2.3 Repayment................................................... 27
2.4 Conversion and Continuation Options......................... 28
2.5 Minimum Amounts of Advances................................. 29
2.6 Interest Rates and Payment Dates............................ 29
2.7 Computation of Interest and Fees............................ 29
2.8 Inability to Determine Interest Rate........................ 29
2.9 Pro Rata Treatment and Payments............................. 30
2.10 Illegality.................................................. 31
2.11 Increased Costs............................................. 31
2.12 Taxes....................................................... 32
2.13 Indemnity................................................... 34
2.14 Unused Commitment Fees...................................... 34
2.15 Agent's Fees................................................ 35
SECTION 3
REPRESENTATIONS AND WARRANTIES
3.1 Financial Condition......................................... 35
3.2 No Change................................................... 37
3.3 Corporate Existence; Compliance with Law.................... 37
3.4 Corporate Power; Authorization; Enforceable
Obligations................................................. 37
3.5 No Legal Bar................................................ 38
3.6 No Material Litigation...................................... 38
3.7 Ownership of Property; Liens; Condition of
Properties.................................................. 38
3.8 Taxes....................................................... 39
3.9 Federal Regulations......................................... 39
3.10 ERISA....................................................... 39
3.11 Investment Company Act...................................... 40
3.12 Material Agreements......................................... 40
3.13 Reinsurance................................................. 40
3.14 Policies of Insurance....................................... 40
3.15 Certain Business Practices.................................. 40
3.16 Insurance................................................... 40
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3.17 Licenses.................................................... 41
3.18 Subsidiaries................................................ 41
3.19 Purpose of Loans............................................ 41
3.20 Environmental Matters....................................... 41
3.21 Accuracy and Completeness of Information.................... 43
3.22 Permits, Etc................................................ 43
3.23 Assets...................................................... 44
3.24 Trade Relations............................................. 44
3.25 Compliance with Laws........................................ 44
3.26 Ranking of Loans............................................ 44
3.27 Executive Offices........................................... 45
3.28 Insolvency.................................................. 45
3.29 Labor Matters............................................... 45
3.30 Condemnation................................................ 45
3.31 Year 2000................................................... 45
SECTION 4
CONDITIONS PRECEDENT
4.1 Conditions to Closing Date................................... 45
4.2 Conditions to Each Loan...................................... 48
4.3 Determinations under Sections 4.1 and 4.2.................... 48
SECTION 5
AFFIRMATIVE COVENANTS
5.1 Financial Statements........................................ 49
5.2 Annual Statements........................................... 50
5.3 Certificates; Other Information............................. 51
5.4 Payment of Obligations...................................... 54
5.5 Conduct of Business and Maintenance of Existence............ 54
5.6 Maintenance of Property; Insurance.......................... 55
5.7 Inspection of Property; Books and Records;
Discussions................................................. 55
5.8 Environmental Laws.......................................... 55
5.9 Use of Proceeds............................................. 56
5.10 Compliance With Laws, Etc................................... 56
5.11 Permits..................................................... 57
5.12 Leases and Licenses......................................... 57
5.13 Notices..................................................... 58
5.14 Investments................................................. 58
5.15 Best Rating................................................. 58
5.16 Year 2000................................................... 58
SECTION 6
NEGATIVE COVENANTS
6.1 GAAP Financial Condition Covenants.......................... 58
6.2 SAP Financial Condition Covenants........................... 59
6.3 Limitation on Indebtedness.................................. 60
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6.4 Limitation on Liens......................................... 61
6.5 Limitation on Fundamental Changes........................... 62
6.6 Limitation on Disposition of Assets......................... 62
6.7 Limitation on Restricted Payments........................... 63
6.8 Unfunded Liabilities........................................ 63
6.9 Limitation on Investments, Loans and Advances............... 63
6.10 Management Fees............................................. 63
6.11 Transactions with Affiliates................................ 64
6.12 Fiscal Year................................................. 64
SECTION 7
EVENTS OF DEFAULT........................ 64
SECTION 8
THE AGENT
8.1 Appointment................................................. 68
8.2 Delegation of Duties........................................ 68
8.3 Exculpatory Provisions...................................... 68
8.4 Reliance by Agent........................................... 69
8.5 Notice of Default........................................... 69
8.6 Nonreliance on Agent and Other Lenders...................... 70
8.7 Indemnification............................................. 70
8.8 UBOC in Its Individual Capacity............................. 71
8.9 Successor Agent............................................. 71
SECTION 9
MISCELLANEOUS
9.1 Amendments and Waivers...................................... 72
9.2 Notices..................................................... 72
9.3 No Waiver; Cumulative Remedies.............................. 73
9.4 Survival of Representations and Warranties.................. 73
9.5 Payment of Expenses and Taxes............................... 73
9.6 Successors and Assigns; Participation; Purchasing Lenders... 74
9.7 Adjustments; Setoff......................................... 76
9.8 Counterparts................................................ 77
9.9 Severability................................................ 77
9.10 Integration................................................. 77
9.11 GOVERNING LAW............................................... 77
9.12 Alternative Dispute Resolution.............................. 77
9.13 Acknowledgements............................................ 79
9.14 Headings.................................................... 79
9.15 Conflict of Terms........................................... 79
9.16 Confidentiality............................................. 79
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Schedule 1 Commitments
Schedule 2 Addresses for Notices and Applicable
Lending Offices
Schedule 3.1(f) Indebtedness
Schedule 3.1(g) Liens
Schedule 3.12 Material Agreements
Schedule 3.13 Reinsurance
Schedule 3.16 Insurance
Schedule 3.17 Licenses
Exhibit A-1 Facility A Note
Exhibit A-2 Facility B Note
Exhibit B Assignment and Acceptance
Exhibit C Continuation Notice
Exhibit D Compliance Certificate
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CREDIT AGREEMENT
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This CREDIT AGREEMENT, dated as of May 25, 1999, is entered into by and
among (1) SCPIE HOLDINGS INC., a Delaware corporation (the "Borrower"), (2) each
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of UNION BANK OF CALIFORNIA, N.A., FIRST UNION NATIONAL BANK, DRESDNER BANK AG,
New York Branch and Grand Cayman Branch, and the other financial institutions
from time to time parties to this Agreement (together with their respective
successors and permitted assigns, the "Lenders"), (3) UNION BANK OF CALIFORNIA,
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N.A. ("UBOC"), as Administrative Agent (in such capacity, the "Agent") and
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Arranger for the Lenders hereunder, and (4) FIRST UNION NATIONAL BANK, as
Documentation Agent for the Lenders (in such capacity, the Documentation
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Agent").
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Recitals
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WHEREAS, the Borrower wishes to obtain commitments from the Lenders for pro
rata credit extensions under (1) a revolving credit facility in an aggregate
amount not to exceed $40,000,000 at any time outstanding, with the revolving
loans under such revolving credit facility to amortize at the end of three years
for a three-year period thereafter, and (2) a revolving credit facility in an
aggregate amount not to exceed $35,000,000 at any time outstanding, with the
revolving loans under such revolving credit facility to be repaid in full upon
the expiration of such revolving credit facility.
WHEREAS, the Lenders have agreed, on the terms and conditions herein set
forth, to extend credit to the Borrower for (a) the purpose of funding certain
acquisitions and (b) other general corporate purposes.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
SECTION 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
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have the following meanings:
"Accountants": Ernst & Young LLP, KPMG Peat Marwick LLP,
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PricewaterhouseCoopers LLP, Deloitte & Touche, LLP, Xxxxxx Xxxxxxxx LLP or such
other firm of independent certified public accountants of recognized national
standing as shall be selected by the Borrower and satisfactory to the Required
Lenders.
"Acquisition": each transaction, or any series of related
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transactions, consummated on or after the date of this Agreement, by which the
Borrower or any of its Subsidiaries (a) acquires all or substantially all of the
assets of any Person or of a division thereof or any line of business of any
Person, whether such acquisition is through the purchase of assets, by
assumption of insurance liability through reinsurance, by merger or otherwise,
or (b) acquires at least a majority of the Voting Power of a Person.
"Actuarial Report": an actuarial review and valuation statement of
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loss and loss adjustment expense reserve positions of each Insurance Subsidiary
of the Borrower as of December 31 of any fiscal year, with respect to the
insurance business of such Insurance Subsidiary in force, and covering such
other subjects as are customary in actuarial reviews and reasonably requested by
the Required Lenders, prepared by Xxxxxxxxxxx-Xxxxxx Xxxxxx, Xxxxxxxx and
Xxxxxxxxx, Inc., Xxxxxxx X. Xxxxxx, Inc. or another independent actuarial firm
acceptable to the Required Lenders, in accordance with reasonable actuarial
assumptions and procedures not inconsistent with the assumptions and procedures
previously employed by such Insurance Subsidiary.
"Advance": a borrowing hereunder consisting of Loans of the same Type
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made by the Lenders to the Borrower (or converted or continued by the Borrower)
on the same day, under the same facility (i.e., the Facility A Commitments or
the Facility B Commitments) and, in the case of LIBOR Loans, for the same
Interest Period.
"Affiliate": as to any Person, (a) any other Person which, directly
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or indirectly, is in control of, is controlled by, or is under common control
with, such Person or (b) any other Person which is a director, officer or
partner (or the equivalent of any of the foregoing) of (i) such Person or (ii)
any Person described in the preceding clause (a). For purposes of this
definition, "control" of a Person means the power, direct or indirect, either
(A) to vote 10% or more of the Voting Power of such Person or (B) to direct or
cause the direction of the management and policies of such Person, whether by
contract or otherwise.
"Agent": as defined in the preamble hereto, and any successor Agent
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appointed pursuant to Section 8.
"Agent's Fee Letter": the letter agreement entered into by the
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Borrower and the Agent concerning fees payable by the Borrower to the Agent for
its own account with respect to this Agreement.
"Agreement": this Agreement, as amended, waived, supplemented or
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otherwise modified from time to time.
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"Annual Statement": an annual financial statement of each Insurance
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Subsidiary of the Borrower as required to be filed with the Department (or
similar authority) of the jurisdiction of domicile of such Insurance Subsidiary,
together with all exhibits and schedules filed therewith, prepared in conformity
with SAP.
"Applicable Fee Rate": with respect to the unused commitment fees
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payable pursuant to Section 2.14, for each Pricing Period, the rate set forth
below for the applicable Commitments opposite the Applicable Pricing Level for
that Pricing Period:
Facility A Commitments
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Applicable
Pricing Level Rate
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I 0.375%
II 0.300%
III 0.250%
Facility B Commitments
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Applicable
Pricing Level Rate
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I 0.325%
II 0.250%
III 0.200%
"Applicable Lending Office": for any Lender, its offices for LIBOR
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Loans and Base Rate Loans specified on Schedule 2 or in the Assignment and
Acceptance pursuant to which it became a party hereto, as the case may be, any
of which offices may, upon 10 days' prior written notice to the Agent and the
Borrower, be changed by such Lender.
"Applicable LIBOR Rate Margin": with respect to the LIBOR Loans, for
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each Pricing Period, the interest rate margin set forth below opposite the
Applicable Pricing Level for that Pricing Period:
Applicable
Pricing Level Margin
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I 0.875%
II 0.750%
III 0.625%
"Applicable Pricing Level": for each Pricing Period, the pricing level
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set forth below opposite the ratio of Total Debt to Total Capitalization
achieved by the Borrower as of the
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last day of the fiscal quarter ended immediately preceding the first day of that
Pricing Period:
Applicable Ratio of Total Debt
Pricing Level to Total Capitalization
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I Equal to or greater than 0.20 to 1.00
II Equal to or greater than 0.10 to 1.00
but less than 0.20 to 1.00
III Less than 0.10 to 1.00
"Asset Disposition": the sale, sale and leaseback, transfer,
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conveyance, exchange, long-term lease accorded sales treatment under GAAP or
similar disposition of any of the Properties, businesses or assets of the
Borrower or any of its Subsidiaries, including by means of (a) a merger,
consolidation, amalgamation, joint venture or other substantive combination, (b)
the ceding or other transfer of existing insurance loss-reserve liabilities by
reinsurance and (c) the assignment of any lease, license or permit relating to
the Properties.
"Assignment and Acceptance": an Assignment and Acceptance in the form
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of Exhibit B to this Agreement.
"Available Dividend Amount": as of the last day of any fiscal quarter
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of the Borrower, with respect to the Insurance Subsidiaries of the Borrower, the
aggregate maximum amount of dividends permitted by the relevant Departments
under applicable Requirements of Law (without the necessity of any affirmative
approval or other action of such Departments involving the granting of
permission) to be paid directly or indirectly by such Insurance Subsidiaries to
the Borrower during the then current fiscal year (based on such Insurance
Subsidiaries' financial performance for the immediately preceding fiscal year
and without regard as to whether or not any dividends have actually been paid by
any of such Insurance Subsidiaries during the 12-month period ended on such day
or otherwise), excluding, however, the amount of such permitted dividends of any
such Insurance Subsidiary that are paid, or if not paid would be payable, to
another such Insurance Subsidiary.
"Base Rate": a fluctuating rate of interest per annum, as in effect
--------- --- -----
from time to time, at all times equal to the higher of the following: (a) the
Reference Rate in effect from time to time; and (b) the sum of the Federal Funds
Rate in effect from time to time plus 0.5% per annum.
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"Base Rate Loans": Loans the rate of interest applicable to which is
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based upon the Base Rate.
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"Xxxxxxx Hills Real Estate": the real property owned by the Borrower
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on the date of this Agreement and located at 0000 Xxxx Xxxxxxx Xxxxxxxxx,
Xxxxxxx Xxxxx, Xxxxxxxxxx and 000 Xxxxx Xxxxxxx Xxxxx, Xxxxxxx Xxxxx,
Xxxxxxxxxx.
"Borrower": as defined in the preamble hereto.
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"Borrower Affiliates": the Borrower and all of its Subsidiaries.
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"Borrowing Date": a date on which an Advance is made hereunder.
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"Business Day": a day other than a Saturday, Sunday or other day on
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which commercial banks in the State of California are authorized or required by
law to close and which, in the case of a LIBOR Loan, is a Eurodollar Business
Day.
"Capital Expenditures": for any Person(s) for any period, the
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aggregate of all expenditures which are made during such period (whether paid in
cash or accrued as liabilities), and all contractual commitments for such
expenditures which are entered into during such period (provided, however, that
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if any such commitment is included in one fiscal year, the actual payment in a
later fiscal year shall not be included in such later fiscal year), by such
Person(s) for property, plant or equipment and which would be reflected as
additions to property, plant or equipment on a balance sheet of such Person(s)
prepared in accordance with GAAP, including all such property, plant and
equipment held under capital leases but excluding (a) expenditures for Permitted
Acquisitions, (b) expenditures made by a Person before its acquisition by the
Borrower or any Subsidiary pursuant to a Permitted Acquisition and (c)
expenditures made with proceeds of condemnation awards or insurance.
"Capitalized Lease Obligations": obligations for the payment of rent
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for any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee. For purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"Capital Stock": any and all shares of capital stock of a
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corporation, or equivalent ownership interests in a Person other than a
corporation, and any and all warrants, options, rights to purchase, convertible
securities or other interests carrying the right to acquire any of the
foregoing.
"Cash Income Taxes": as of the last day of any fiscal quarter of the
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Borrower, for the Borrower and its Subsidiaries on a consolidated basis with
respect to the fiscal quarter of the Borrower then ended and the immediately
preceding three fiscal
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quarters, the sum of cash income taxes, if any, paid by the Borrower and its
Subsidiaries.
"Change of Control": (a) the acquisition by any Person (including any
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syndicate or group deemed to be a "Person" under Section 13(d)(3) or 14(d)(2) of
the Securities Exchange Act of 1934, as amended, or any successor provision to
either of the foregoing) of beneficial ownership, direct or indirect, of Capital
Stock of the Borrower entitling such Person to exercise 20% or more of the
Voting Power of the Borrower; (b) any consolidation of the Borrower with, or
merger of the Borrower into, any other Person, any merger of another Person into
the Borrower or any sale or transfer of all or substantially all of the assets
of the Borrower to another Person, other than (i) where the surviving
corporation is the Borrower, (ii) the then principal business of the Borrower is
substantially unchanged and (iii) the Borrower shall be in pro forma compliance
--- -----
with all provisions of this Agreement subsequent to such consolidation, merger,
sale or transfer; or (c) a majority of the seats (other than vacant seats) on
the Board of Directors of the Borrower are at any time occupied by persons who
were neither nominated by the Board of Directors of the Borrower nor appointed
by directors so nominated.
"Claim": any claim, cause of action, action, dispute or controversy
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between or among the Parties, whether sounding in contract, tort or otherwise,
which arises out of or relates to (a) any of the Loan Documents, (b) any
negotiations or communications relating to any of the Loan Documents, whether or
not incorporated into the Loan Documents or any indebtedness evidenced thereby,
or (c) any alleged agreements, promises, representations or transactions in
connection with any of the foregoing.
"Closing Date": the date on which all conditions set forth in Section
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4.1 are satisfied or waived and this Agreement becomes effective.
"Code": the Internal Revenue Code of 1986, as amended from time to
----
time, including regulations proposed and promulgated thereunder.
"Commitments": Facility A Commitments and/or Facility B Commitments.
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"Commonly Controlled Entity": as to any Person, an entity, whether or
--------------------------
not incorporated, which is under common control with such Person within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Person and which is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
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Responsible Officer substantially in the form of Exhibit D,
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with such changes as the Required Lenders may from time to time reasonably
request, for the purposes of monitoring the Borrower's compliance herewith.
"Continuation Notice": a request for continuation or conversion of a
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Loan as set forth in Section 2.4, substantially in the form of Exhibit C.
"Contractual Obligation": as to any Person, any provision of any
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security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Debt Service": as of the last day of any fiscal quarter of the
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Borrower, for the Borrower and its Subsidiaries on a consolidated basis, the sum
of (a) the amount of all principal on Total Debt which is scheduled to be paid
during the next succeeding four fiscal quarters, without duplication of previous
amounts and excluding principal of Facility B Loans scheduled to be paid to the
extent that the amount of such principal is then available to be borrowed under
the Facility A Commitment, and (b) Interest Expense which was paid, payable or
accrued during the four fiscal quarters ended on such day, without duplication
of previous amounts.
"Default": any of the events specified in Section 7, whether or not
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any requirement for the giving of notice, the lapse of time, or both, or any
other condition, has been satisfied.
"Department": with respect to any Insurance Subsidiary of the
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Borrower, the Governmental Authority of the jurisdiction of domicile of such
Insurance Subsidiary charged with regulating insurance companies.
"Documentation Agent": as defined in the preamble hereto.
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"Dollars" and "$": dollars in lawful currency of the United States.
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"Earnout Payment": with respect to any acquisition of assets or
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Capital Stock of any Person, any amount required to be paid in the future by the
acquiring Person based on the future performance of the business that is the
subject of such acquisition or on the future performance of the acquiring
Person, as consideration for such acquisition.
"EBITDA": for any Person for any fiscal period, net income (or net
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loss), plus the sum of (a) net interest expense, (b) income tax expense, (c)
depreciation expense, (d) amortization expense and (e) noncash writedowns or
writeoffs of assets, minus the sum of (y) net extraordinary gains included in
net
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income and (z) net gains on the sale of assets other than asset sales in the
ordinary course of business, in each case determined in accordance with GAAP for
such period.
"Environmental Laws": any and all federal, state, local or municipal
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laws, rules, orders, regulations, statutes, ordinances, codes, decrees,
requirements of any governmental authority or Requirements of Law (including
common law) regulating, relating to or imposing liability or standards of
conduct concerning protection of human health or the environment, as now or at
any time hereafter in effect.
"ERISA": the Employee Retirement Income Security Act of 1974, as
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amended from time to time, and any rule or regulation issued thereunder.
"ERISA Affiliate": as to any Person, each trade or business including
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such Person, whether or not incorporated, which together with such Person would
be treated as a single employer under Section 4001(a)(14) of ERISA.
"Eurodollar Business Day": any day on which banks are open for
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dealings in Dollar deposits in the London interbank market.
"Event of Default": any of the events specified in Section 7, but
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only to the extent that any requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been satisfied.
"Excluded Taxes": in the case of each Lender and the Agent, all taxes
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imposed on or by reference to its net income, and all franchise taxes, taxes on
doing business and taxes measured by capital or net worth imposed on it, by the
jurisdiction under the laws of which such Lender or the Agent (as the case may
be) is organized or any political subdivision thereof or by the jurisdiction of
such Lender's Applicable Lending Office or any political subdivision thereof;
and, in the case of each Lender, any taxes imposed by any Governmental Authority
arising as a consequence of the failure of such Lender to provide accurate
documentation required to be provided by such Lender pursuant to Section
2.12(b).
"Facility A Commitment": as defined in Section 2.1(a).
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"Facility A Expiration Date": May 27, 2002 or any earlier date on
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which the Facility A Commitments expire in accordance with the terms of this
Agreement (whether by acceleration or otherwise).
"Facility A Loan": as defined in Section 2.1(a).
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"Facility A Maturity Date": May 31, 2005 or any earlier date on which
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the Facility A Loans become due and payable in full, whether by acceleration or
otherwise.
"Facility B Commitment": as defined in Section 2.1(b).
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"Facility B Expiration Date": May 22, 2000 or any earlier date on
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which the Facility B Commitments expire in accordance with the terms hereof
(whether by acceleration or otherwise).
"Facility B Loan": as defined in Section 2.1(b).
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"Federal Funds Rate": for any period, a fluctuating interest rate per
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annum equal for each day during such period to the weighted average of the rates
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on overnight federal funds transactions with members of the Federal Reserve
System 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 that
is a Business Day, the average of the quotations for such day for such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it (expressed as a decimal and rounded upward to
the nearest 1/100th of 1%).
"Financial Statements": as defined in Section 3.1(a).
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"Fixed Charge Coverage Ratio": as of the last day of any fiscal
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quarter of the Borrower, for the period of four consecutive fiscal quarters then
ended (the "Measurement Period"), the ratio of (a) the aggregate of (i) the
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Available Dividend Amount of the Insurance Subsidiaries of the Borrower as of
the last day of the Measurement Period, plus (ii) aggregate EBITDA of the
Borrower's Subsidiaries other than its Insurance Subsidiaries for the
Measurement Period, plus (iii) the Net Tax Payments (whether positive or
negative) during the Measurement Period, minus (iv) the Net Overhead (whether
positive or negative) for the Measurement Period (to the extent not already
included in items (i), (ii) and (iii) above), minus (v) Earnout Payments paid or
accrued (for future payment) by the Borrower or any Subsidiary during the
Measurement Period, to (b) the sum of (i) Debt Service, (ii) cash dividends paid
by the Borrower to any shareholder, common or preferred, during the Measurement
Period and (iii) share repurchases and redemptions by the Borrower during the
Measurement Period, but excluding such share repurchases and redemptions to the
extent (A) made during the period from and including the date hereof to but
excluding the first anniversary of the date hereof and (B) that the price of the
same, when added to the price of previous share repurchases and redemptions by
the Borrower on or after the date of this Agreement, does not exceed
$15,000,000.
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"GAAP": generally accepted accounting principles in the United States
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in effect from time to time.
"Governmental Authority": any nation or government, any federal,
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state or other political subdivision thereof and any federal, state or local
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guarantee Obligation": as to any Person (the "guaranteeing person"),
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any obligation of (a) the guaranteeing person or (b) another Person (including
any bank under any letter of credit) which Person the guaranteeing person has
agreed to reimburse or indemnify for undertaking such obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
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"primary obligor") in any manner, whether directly or indirectly, including any
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obligation of the guaranteeing person, whether or not contingent, (i) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (ii) to advance or supply funds for the purchase or
payment of any such primary obligation or to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation or (iv) otherwise to assure or hold harmless the owner of any such
primary obligation against loss in respect thereof; provided, however, that the
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term Guarantee Obligation shall not include (1) amounts potentially owed on or
with respect to insurance policies or Reinsurance Agreements issued or sold in
the ordinary course of business, (2) premiums for any such policies, to the
extent attributable to a period after a particular date upon which Guaranteed
Obligations are being determined, or (3) endorsements of instruments for deposit
or collection in the ordinary course of business. The amount of any Guarantee
Obligation of any guaranteeing person shall be deemed to be the lesser of (A) an
amount equal to the stated or determinable amount of the primary obligation in
respect of which such Guarantee Obligation is made and (B) the maximum amount
for which such guaranteeing person may be liable pursuant to the terms of the
instrument embodying such Guarantee Obligation, unless such primary obligation
and the maximum amount for which such guaranteeing person may be liable are not
stated or determinable, in which case the amount of such Guarantee Obligation
shall be such guaranteeing person's maximum reasonably anticipated liability in
respect thereof as determined by the Borrower in good faith.
"Hazardous Substances": substances that are defined or listed in, or
--------------------
otherwise classified pursuant to, any applicable laws as "hazardous substances,"
"hazardous materials," "hazardous
-10-
wastes" or "toxic substances," or any other formulation intended to define, list
or classify substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, radioactivity, carcinogenicity, reproductive toxicity
or "EP toxicity," and petroleum and drilling fluids, produced waters and other
wastes associated with the exploration, development, or production of crude oil,
natural gas or geothermal energy.
"High Quality Securities": any or all of the following: U.S.
-----------------------
Government Securities; freely transferable commercial paper of any corporation
(other than the Borrower or any of its Affiliates) incorporated under the laws
of the United States of America or any state thereof, which commercial paper is
rated "P-1" or its equivalent by Xxxxx'x Investors Service, Inc., "A-1" or its
equivalent by Standard & Poor's Ratings Group or an equivalent rating by Fitch
Investors Services, Inc., Duff & Xxxxxx, Inc. or another rating agency
acceptable to the Required Lenders; certificates of deposit, time deposits or
repurchase agreements issued by any commercial bank organized under the laws of
the United States of America or of any political subdivision thereof, so long as
such bank (a) is a Lender, (b) has assets in excess of $1,000,000,000 or (c) has
been specifically approved in writing by the Required Lenders.
"Indebtedness": of any Person at any date, without duplication, (a)
------------
all indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade credit incurred to acquire
goods, supplies or services in the ordinary and normal course of business) or
which is evidenced by a note, bond, debenture or similar instrument, including
obligations under noncompete agreements, (b) all obligations of such Person
under Capitalized Lease Obligations, (c) all obligations of such Person in
respect of acceptances or surety bonds (other than surety bonds that have been
contracted for in the ordinary course of business and with respect to which the
underlying estimated incurred losses have been appropriately reserved for in
accordance with GAAP or SAP, as applicable) issued or created for the account of
such Person, (d) all liabilities secured by any Lien on any property owned by
such Person even though such Person has not assumed or otherwise become liable
for the payment thereof, (e) all obligations of such Person, whether absolute or
contingent, in respect of letters of credit opened for the account of such
Person, (f) all net obligations of such Person in respect of any Interest Rate
Agreement (it being understood that the amount of Indebtedness of such Person
under such Interest Rate Agreement as of any date shall be deemed to equal the
termination value payable by such Person if such Interest Rate Agreement were
terminated on such date) and (g) all Guarantee Obligations of such Person in
respect of any indebtedness, obligations or liabilities of any other Person of
the type referred to in clauses (a) through (f) of this definition.
-11-
"Insolvency": with respect to any Multiemployer Plan, the condition
----------
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insurance Code": as to any Insurance Subsidiary of the Borrower, the
--------------
insurance code or any similar statute or code in effect in the jurisdiction of
domicile of such Insurance Subsidiary, and any successor statute or code of
similar import, together with the regulations thereunder, as amended or
otherwise modified and in effect from time to time.
"Insurance Holding Company Systems Act": the California Insurance
-------------------------------------
Holding Company Systems Act, Calif. Insurance Code (S) 1215 et seq.
-- ----
"Insurance Policies": the policies purchased from insurance companies
------------------
by the Borrower or any of its Subsidiaries for its own account to insure against
its own liability and property loss (including casualty, liability and workers'
compensation insurance), other than Reinsurance Agreements.
"Insurance Subsidiary": as to any Person at any time of
--------------------
determination, a Subsidiary of such Person engaged in the insurance or
reinsurance business pursuant to a License duly issued with respect to such
Subsidiary.
"Interest Expense": as of the last day of any fiscal quarter of the
----------------
Borrower, for the Borrower and its Subsidiaries on a consolidated basis with
respect to the fiscal quarter of the Borrower then ended and the immediately
preceding three fiscal quarters, the amount of all interest on Total Debt (such
interest to be calculated in a manner which gives effect to any Interest Rate
Agreement in effect as of any date of determination) which was paid, payable
and/or accrued for such period (without duplication of previous amounts), plus,
----
during any period in which an Interest Rate Agreement is in effect, the
Applicable Cost of such Interest Rate Agreement for such period (as more
specifically reflected on the Borrower's financial statements prepared in
accordance with GAAP). As used herein, "Applicable Cost" means for any period,
---------------
with respect to an Interest Rate Agreement, that portion of the up-front cost of
such Interest Rate Agreement attributable to such period, assuming such up-front
cost were amortized equally over the term of such Interest Rate Agreement.
"Interest Payment Date": for Base Rate Loans, the last Business Day
---------------------
of each February, May, August and November to occur while the Loans are
outstanding, commencing with August 31, 1999; for each LIBOR Loan, the last day
of its applicable Interest Period and, if the Interest Period is three months or
longer, the date three months from the Borrowing Date; and for all Loans, the
day on which the Loans become due and payable in full and are paid or prepaid in
full.
-12-
"Interest Period": with respect to any LIBOR Loan:
---------------
(a) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such LIBOR Loan and ending
one, three or six months thereafter, as selected by the Borrower in its notice
of borrowing or its Continuation Notice, as the case may be, given with respect
thereto; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such LIBOR Loan and ending one,
three or six months thereafter, as selected by the Borrower by irrevocable
notice to the Agent not less than three Eurodollar Business Days prior to the
last day of the then current Interest Period with respect thereto;
provided, however, that, all of the foregoing provisions relating to Interest
-------- -------
Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Eurodollar Business Day, such Interest Period shall be extended to the
next succeeding Eurodollar Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month, in which
event such Interest Period shall end on the immediately preceding Eurodollar
Business Day;
(ii) any Interest Period that begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Eurodollar Business Day of a calendar month;
(iii) with respect to Facility A Loans, no Interest Period may
be selected that would end after a scheduled date for repayment of principal of
such Loans occurring on or after the first day of such Interest Period unless,
immediately after giving effect to such selection, the aggregate principal
amount of Facility A Loans that are Base Rate Loans or that have Interest
Periods expiring on or before such principal repayment date, when added to the
amount then available to be borrowed under the Facility A Commitment and the
Facility B Commitment and that would be available to be borrowed after such
principal repayment date, equals or exceeds the principal amount required to be
paid on such principal repayment date; and
(iv) the Borrower may not select any Interest Period (A) for
Facility A Loans that expires after the Facility A Maturity Date or (B) for
Facility B Loans that expires after the Facility B Maturity Date.
"Interest Rate Agreement": any interest rate protection agreement,
-----------------------
interest rate future, interest rate option,
-13-
interest rate swap, interest rate cap or other interest rate hedge or
arrangement under which the Borrower or any Subsidiary is a party or a
beneficiary.
"Investment Company Act": as defined in Section 3.11.
----------------------
"Investment Grade Securities": nonequity securities that are rated
---------------------------
"BBB-" or better by Standard & Poor's Ratings Group, "Baa3" or better by Xxxxx'x
Investors Service, Inc., "2" or better by the SVO, "BBB-" or better by Fitch
Investors Service, Inc., "BBB-" or better by Duff & Xxxxxx Inc., or an
equivalent rating by an equivalent rating agency selected by the Borrower and
acceptable to the Required Lenders.
"Investment Portfolio": the Securities and other investments held by
--------------------
the Borrower or any Subsidiary from time to time, excluding the Xxxxxxx Hills
Real Estate.
"IRIS Tests": the ratios and other financial measurements developed
----------
by the NAIC under its Insurance Regulatory Information System or, in lieu
thereof, any successor thereto, replacement thereof, substitute therefor or
other substantially similar guidelines intended to measure the financial
performance of companies in the insurance industry, as the same shall be in
effect from time to time.
"Lease Expense": for any period, the aggregate minimum rental
-------------
obligations payable in respect of such period under leases of real and/or
personal property (net of income from subleases thereof), whether or not such
obligations are reflected as liabilities or commitments on a consolidated
balance sheet or in the notes thereto, excluding, however, obligations under
Capitalized Lease Obligations.
"Lenders": as defined in the preamble hereto and Section 8.8 hereof.
-------
"LIBOR": for any Interest Period for any LIBOR Loan, the arithmetic
-----
mean (rounded upwards, if necessary, to the nearest 1/100th of 1%), as
determined by the Agent, of the respective rates per annum quoted by Telerate,
Inc. at page 3750 at approximately 11:00 a.m. London time (or as soon thereafter
as practicable) on the date 2 Eurodollar Business Days before the first day of
such Interest Period for the offering by lenders to leading banks in the London
interbank market of Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the LIBOR Loan to
be made by the Lenders for such Interest Period.
"LIBOR Adjusted Rate": with respect to each day during each Interest
-------------------
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
-14-
LIBOR
---------------------------------
1.00 - LIBOR Reserve Requirements
"LIBOR Loans": Loans the rate of interest applicable to which is
-----------
based upon LIBOR.
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan,
--------------------------
the aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including basic,
supplemental, marginal and emergency reserves under any regulations of the Board
of Governors of the Federal Reserve System or any other Governmental Authority
having jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as "Eurocurrency
Liabilities" in Regulation D of such Board) maintained by a member bank of the
Federal Reserve System.
"Licenses": as defined in Section 3.17.
--------
"Lien": any mortgage, pledge, charge, hypothecation, assignment,
----
deposit arrangement, encumbrance, lien (statutory or other), security interest
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including any conditional-sale or other title-retention agreement,
any Capitalized Lease Obligation having substantially the same economic effect
as any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable Requirement of Law of any jurisdiction in
respect of any of the foregoing).
"Loan Documents": this Agreement, the Notes, the Agent's Fee Letter
--------------
and any other agreement executed by the Borrower in connection therewith and
herewith, as such agreements and documents may be amended, supplemented and
otherwise modified from time to time in accordance with the terms hereof.
"Loans": Facility A Loans and/or Facility B Loans.
-----
"Margin Stock": as defined in Regulation U.
------------
"Material Adverse Effect": a material adverse effect on (a) the
-----------------------
business, operations, property, condition or prospects (financial or otherwise)
of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the
Borrower and its Subsidiaries, taken as a whole, to perform their obligations
under the Loan Documents or (c) the validity or enforceability of the Loan
Documents or the rights or remedies of the Agent or the Lenders hereunder or
thereunder.
"Material Agreements": as defined in Section 3.12.
-------------------
-15-
"Multiemployer Plan": a plan which is a multiemployer plan as defined
------------------
in Section 3(37) or Section 4001(a)(3) of ERISA.
"NAIC": the National Association of Insurance Commissioners, or any
----
successor thereto.
"Net Income": for any period, net income of the Borrower and its
----------
Subsidiaries for such period, determined on a consolidated basis in accordance
with GAAP.
"Net Overhead": for any period, the difference between (a) the
------------
aggregate of all operating costs and expenses of the Borrower (including for
rent, utilities, taxes and payroll) incurred or paid by the Borrower during such
period on behalf of its Insurance Subsidiaries, other than payments of interest
in respect of Indebtedness, minus (b) the aggregate of all management, servicing
and other administrative fees paid by the Borrower's Insurance Subsidiaries to
the Borrower during such period, including all amounts paid under service
agreements.
"Net Premiums Written": for any period, as to any Insurance
--------------------
Subsidiary of the Borrower, the total amount of premiums written after deducting
or adding premiums on business ceded to or assumed from others, as shown on line
32, column 4, Part 2B of page 9 of the Annual Statement of such Insurance
Subsidiary, or an amount determined in a consistent manner for any date other
than one as of which an Annual Statement of such Insurance Subsidiary is
available.
"Net Tax Payments": for any period, (a) the aggregate amount paid or
----------------
reasonably estimated to be paid to the Borrower by its Subsidiaries pursuant to
tax-sharing or tax-allocation agreements or arrangements in effect, in respect
of taxable income realized during such period, less (b) aggregate Tax Payments
paid or reasonably estimated to be paid by the Borrower in respect of taxable
income realized during such period.
"Non-Investment Grade Investments": all investments other than
--------------------------------
Investment Grade Securities and High Quality Securities.
"Note": as defined in Section 2.1(c).
----
"Obligations": the unpaid principal of and interest on (including
-----------
interest accruing after the maturity of the Loans and interest accruing on or
after the filing of any petition in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to the Borrower, whether
or not a claim for post-filing or post-petition interest is allowed in such
proceeding and whether or not at a default rate) the Notes, and all other
obligations and liabilities of the Borrower to the Agent and the Lenders,
whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter
-16-
incurred, which may arise under, out of, or in connection with, this Agreement,
the Notes, any other Loan Document or any other document made, delivered or
given in connection herewith or therewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including all reasonable fees and disbursements of counsel, and the allocated
reasonable cost of internal counsel, to the Agent or the Lenders that are
required to be paid by the Borrower pursuant to the terms of this Agreement) or
otherwise.
"Occupancy Agreements": as defined in Section 5.12.
--------------------
"Operating Leverage": as of the last day of any fiscal quarter of the
------------------
Borrower, the ratio of (a) the aggregate (without duplication) of all Net
Premiums Written of the Insurance Subsidiaries of the Borrower for the four
consecutive fiscal quarters ended on such day to (b) the aggregate (without
duplication) of all Policyholder Surplus of such Insurance Subsidiaries as of
such day.
"Participants": as defined in Section 9.6(b).
------------
"Parties": as defined in Section 9.12(a).
-------
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
----
to Subtitle A of Title IV of ERISA or any successor thereto.
"Permitted Acquisition": any Acquisition with respect to which all of
---------------------
the following conditions are met at the time thereof: (a) no Default has
occurred and is continuing or would be caused by such Acquisition, and the
Borrower has delivered to the Lenders a pro forma Compliance Certificate showing
--- -----
compliance as of the end of the most recently ended fiscal quarter (or, with
respect to Section 6.2(c), fiscal year) of the Borrower with the covenants
referred to in such certificate, as if such Acquisition had been made as of the
first day of the relevant compliance period (provided that such compliance shall
be determined by means of the Compliance Certificate referred to in clause (c)
below if the Borrower is required to deliver a Compliance Certificate pursuant
to clause (c) below in connection with such Acquisition); (b) each line of
business that is the subject of such Acquisition is medical malpractice
insurance, medical malpractice risk management, a line of business reasonably
related to medical malpractice insurance or medical malpractice risk management,
or a line of business reasonably related to the liability insurance or risk
management needs of healthcare industry professionals; (c) if the total
consideration for such Acquisition (including cash, stock and other property,
Indebtedness assumed and other consideration, all to the extent reasonably
determinable at the time of such Acquisition, but excluding any future Earnout
Payments) exceeds $25,000,000, the Borrower has delivered to the Lenders a pro
---
forma Compliance Certificate
-----
-17-
showing compliance as of the date of such Acquisition (or (i) with respect to
Sections 6.1(b) and (d) and 6.2(a), as of the end of the most recently ended
fiscal quarter of the Borrower or (ii) with respect to Section 6.2(c), as of the
end of the most recently ended fiscal year of the Borrower) with the covenants
referred to in such certificate, as if such Acquisition had been made as of the
first day of the relevant compliance period; (d) if the total consideration (as
described in clause (c) above) for such Acquisition exceeds the higher of (i)
15% of the consolidated Tangible Net Worth of the Borrower and its Subsidiaries,
as evidenced by the Compliance Certificate most recently delivered to the
Lenders pursuant to Section 5.3(a), and (ii) $60,000,000, the Borrower has
obtained the prior written approval of the Required Lenders; and (e) the total
consideration (as described in clause (c) above) for such Acquisition, when
added to the aggregate consideration (including Earnout Payments, to the extent
paid or accrued for future payment) for all previous Permitted Acquisitions on
or after the date of this Agreement, does not exceed $75,000,000.
"Person": any individual, firm, partnership, joint venture, limited
------
liability company, corporation, association, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"Plan": as to any Person, any plan (other than a Multiemployer Plan)
----
subject to Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code maintained for employees of such Person or any ERISA
Affiliate of such Person (and any such plan no longer maintained by such Person
or any of such Person's ERISA Affiliates to which such Person or any of such
Person's ERISA Affiliates has made or was required to make any contributions
within any of the five preceding years).
"Policyholder Surplus": as to any Insurance Subsidiary of the
--------------------
Borrower, as of any date the total amount of surplus as regards policyholders
shown on line 27, page 3, column 1 of the 1998 Annual Statement (or any similar
line, page and column reference in any subsequent Annual Statement), or an
amount determined in a consistent manner for any date other than the one as of
which an Annual Statement is prepared.
"Pricing Occurrence": with respect to any change in the ratio of
------------------
Total Debt to Total Capitalization which results in a change in the Applicable
Pricing Level, five Business Days following the date upon which the Borrower
delivers a compliance certificate evidencing such change as required by Section
5.3(a).
"Pricing Period": each period commencing on the date of a Pricing
--------------
Occurrence and ending on the next Pricing Occurrence to occur.
-18-
"Properties": all real and personal property owned, leased, used,
----------
occupied or operated, including under license or permit, by the Borrower or any
of its Subsidiaries.
"Purchasing Lenders": as defined in Section 9.6(c).
------------------
"Reference": a judicial reference conducted pursuant to this
---------
Agreement in accordance with the law of the State of California, as in effect at
the time the referee is selected pursuant to Section 9.12(a).
"Reference Rate": the annual rate of interest announced from time to
--------------
time by the Agent at its head office in San Francisco, California, as its
corporate reference rate (it being understood that such rate is a rate set by
the Agent based upon various factors including general economic and market
conditions, that such rate is used as a reference point for pricing certain
loans and that the Agent may price its loans at, above or below such rate).
"Register": as defined in Section 9.6(d).
--------
"Regulation D": Regulation D of the Board of Governors of the Federal
------------
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Regulation U": Regulation U of the Board of Governors of the Federal
------------
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"Reinsurance Agreement": any agreement, contract, treaty, certificate
---------------------
or other arrangement whereby any Insurance Subsidiary of the Borrower agrees (a)
to transfer, cede or retrocede to another insurer or reinsurer all or part of
the liability assumed by such Insurance Subsidiary under a policy or policies of
insurance issued by such Insurance Subsidiary or (b) to assume the liability of
another insurer or reinsurer under policies of insurance issued by such insurer
or reinsurer.
"Reorganization": with respect to any Multiemployer Plan, the
--------------
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b) of
----------------
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"Required Lenders": at any time when no Loans are outstanding,
----------------
Lenders having Commitments equal to at least 65% of the aggregate Commitments,
and at any time when Loans are outstanding, Lenders with outstanding Loans
having an unpaid
-19-
principal balance equal to at least 65% of the unpaid principal balance of all
Loans outstanding. Any Lender which has refused to make available any of its
Loans shall not be included in this calculation.
"Requirement of Law": as to any Person, the articles of incorporation
------------------
and bylaws or other organizational or governing documents of such Person, and
any law, treaty, rule, order, judgment or regulation of an arbitrator or a court
or any other Governmental Authority, in each case applicable to or binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Responsible Officer": the chief executive officer, the president or
-------------------
any senior vice president of the Borrower or, with respect to financial matters,
the chief financial officer or treasurer of the Borrower, as applicable.
"Restricted Payments": as defined in Section 6.7.
-------------------
"SAP": with respect to each Insurance Subsidiary of the Borrower, the
---
statutory accounting practices prescribed or permitted by the insurance
commissioner (or other similar authority) of the jurisdiction in which such
Insurance Subsidiary is domiciled for the preparation of Annual Statements and
other financial reports by insurance corporations of the same type as such
Insurance Subsidiary, as applied by such Insurance Subsidiary on a basis
consistent with prior periods.
"Securities": common and preferred stock, limited liability company
----------
interests, partnership units and participations, certificates of equity
contribution, other Capital Stock, notes, bonds, debentures, surplus debentures
or notes, trust receipts and other obligations, instruments or evidences of
indebtedness, including debt instruments of public and private issuers and tax-
exempt securities (including warrants, rights, put and call options, and other
options relating thereto or any combination thereof), guarantees of
indebtedness, choses in action, other property or interests commonly regarded as
securities or any form of interest or participation therein (whether
certificated or uncertificated) or any instruments convertible into any of the
foregoing.
"Single Employer Plan": any Plan which is covered by Title IV of
--------------------
ERISA, but which is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, that:
-------
(a) the present fair salable value of such Person's assets is in
excess of the total amount of the probable liability on such Person's
liabilities;
-20-
(b) such Person is able to pay its debts as they become due; and
(c) such Person does not have unreasonably small capital to carry
on such Person's business as theretofore operated and all businesses in which
such Person is about to engage.
"Stated Investment Policy": with respect to each Insurance Subsidiary
------------------------
of the Borrower, the stated investment policy of such Insurance Subsidiary as
established by the board of directors of such Insurance Subsidiary and delivered
to the Agent in accordance with Section 4.1(m), as any such stated investment
policy may be amended from time to time in accordance with this Agreement.
"Statutory Carrying Value": as to any investment by any Insurance
------------------------
Subsidiary of the Borrower, the value of such investment as determined in
accordance with SAP.
"Statutory Liabilities": as to each Insurance Subsidiary of the
---------------------
Borrower, as of any date, the total amount shown on line 21, page 3, column 1 of
the Annual Statement of such Insurance Subsidiary, or an amount determined in a
consistent manner for any date other than one as of which an Annual Statement of
such Insurance Subsidiary is available.
"Subsidiary": as to any Person at any time of determination, a
----------
corporation, limited liability company, partnership or other entity of which a
majority of the Voting Power is at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries
or Subsidiaries, or both, by such Person. Unless otherwise qualified, all
references to a "Subsidiary" or "Subsidiaries" in this Agreement shall refer to
a Subsidiary or Subsidiaries of the Borrower.
"SVO": the Securities Valuation Office of the NAIC, or any successor
---
thereto.
"Tangible Net Worth": for any Person at any time of determination,
------------------
the excess of total assets at such time over total liabilities at such time, in
each case as determined in accordance with generally accepted accounting
principles, excluding, however, from the determination of total assets all (a)
goodwill, organizational expenses, research and development expenses,
trademarks, trade names, copyrights, patents, patent applications and licenses
and other similar intangibles, and rights in any thereof, (b) prepaid expenses,
deferred acquisition costs, deferred charges and unamortized debt discount and
expense, (c) reserves carried and not deducted from assets, (d) treasury stock,
capital stock, obligations and other securities of, and capital contributions to
and investments in, any Subsidiary of
-21-
such Person, (e) securities that are not readily marketable, (f) cash held in a
sinking or other analogous fund established for the purpose of redemption,
retirement or prepayment of capital stock or Indebtedness, (g) unrealized gains
and losses on an investment portfolio reported pursuant to Statement 115 of the
Financial Accounting Standards Board and (h) any items not included in clauses
(a) through (g) above that are treated as intangibles in conformity with GAAP.
"Taxes": as defined in Section 2.12(a).
-----
"Tax Payments": for any period, the aggregate (without duplication)
------------
of all federal, state and local income, franchise and other taxes required to be
deducted from consolidated revenue of the Borrower and its Subsidiaries in
determining Net Income for such period.
"Termination Event": (a) a Reportable Event, (b) the institution of
-----------------
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (c) the appointment by the PBGC of a trustee to administer any Single
Employer Plan or (iv) the existence of any other event or condition that would
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment by the PBGC of a trustee to administer, any
Single Employer Plan.
"Total Capitalization": as of any date, the sum of (a) the amount of
--------------------
Total Debt of the Borrower and its Subsidiaries, on a consolidated basis as of
such date, and (b) the amount of Tangible Net Worth of the Borrower and its
Subsidiaries, on a consolidated basis as of such date.
"Total Debt": at any time, the aggregate Indebtedness (without
----------
duplication) of the Borrower and its Subsidiaries at such time, determined on a
consolidated basis in accordance with GAAP.
"Transferee": as defined in Section 9.6(f).
----------
"Type": as to any Loan, its nature as a Base Rate Loan or a LIBOR
----
Loan.
"UBOC": as defined in the preamble hereto.
----
"Voting Power": with respect to any Person, the Capital Stock of such
------------
Person, the holders of which are ordinarily, in the absence of contingencies,
entitled to vote for the election of directors (or persons performing similar
functions) of such Person, even if the right to so vote has been suspended by
the happening of such a contingency.
"Year 2000 Problem": the inability of computers, as well as embedded
-----------------
microchips in noncomputing devices, to properly
-22-
perform date-sensitive functions with respect to certain dates before and after
December 31, 1999.
1.2 Accounting Terms. Any accounting terms used in this Agreement that
----------------
are not specifically defined shall have the meanings customarily given them in
accordance with SAP, or if any such term has no customary meaning under SAP,
then such term shall have the meaning customarily given it in accordance with
GAAP; provided, however, that, in the event that changes in SAP shall be
-------- -------
mandated by applicable Governmental Authorities or the NAIC, or changes in GAAP
shall be mandated by the Financial Accounting Standards Board or any similar
accounting body of comparable standing, or any change in accounting practices
shall be recommended by the Accountants, and to the extent that such changes
would modify or could modify such accounting terms or the interpretation or
computation thereof, such changes shall be followed in defining such accounting
terms only from and after the date the Borrower, the Agent and the Lenders shall
have amended this Agreement to the extent necessary to reflect any such changes
in the financial covenants and other terms and conditions of this Credit
Agreement. References to amounts on particular exhibits, schedules, lines,
pages and columns of an Annual Statement are based on the format promulgated by
the NAIC for Annual Statements covering the fiscal year ended December 31, 1998.
If such format is changed in future years so that different information is
contained in such items or they no longer exist, it is understood that the
reference is to information consistent with that reported in the referenced item
in the Annual Statements covering the fiscal year ended December 31, 1998.
1.3 Other Definitional Provisions.
-----------------------------
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the same defined meanings when used in any other Loan
Document or any certificate or other document made or delivered pursuant hereto
or thereto.
(b) As used herein, in any other Loan Document or in any certificate
or other document made or delivered pursuant hereto or thereto, accounting terms
not defined in Section 1.1 and accounting terms partly defined in Section 1.1,
to the extent not defined, shall have the respective meanings given to them
under GAAP. Unless otherwise provided herein, all financial calculations made
with respect to the Borrower for the purpose of determining compliance with the
terms of this Agreement shall be made on a consolidated basis. If, after any
Permitted Acquisition is made by the Borrower or any Subsidiary, any calculation
is required to be made under the covenants of this Agreement (including Sections
6.1 and 6.2 and the defined terms utilized therein) in respect of any period
before the date of such Permitted Acquisition, such calculation shall be made on
a pro forma basis as if such Permitted Acquisition had been made on the
--- -----
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first day of such period; provided, however, that for the purpose of applying
-------- -------
the limitation set forth in clause (e) of the definition of "Permitted
Acquisition" in Section 1.1 to any contemplated Acquisition, any Earnout Payment
paid before the date of such contemplated Acquisition by a Person to be acquired
pursuant to such contemplated Acquisition, and any Earnout Payment paid before
(but not any paid after) the date of a previous Permitted Acquisition by a
Person acquired pursuant to such previous Permitted Acquisition, shall be
ignored.
(c) The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) References to agreements, other contractual instruments and other
documents include all subsequent amendments and other modifications to such
agreement and documents, but only to the extent such amendments and other
modifications are not prohibited by the terms of any Loan Document.
(f) In this Agreement, the words "include," "includes" and "including"
are deemed to be followed by the words "without limitation."
SECTION 2
AMOUNT AND TERMS OF LOANS; COMMITMENT AMOUNTS
2.1 Commitments.
-----------
(a) Each Lender agrees severally, on the terms and conditions
hereinafter set forth, to make loans (each a "Facility A Loan") to the Borrower
---------------
from time to time on any Business Day during the period from the Closing Date
until the Facility A Expiration Date, in an aggregate amount not to exceed at
any time outstanding the amount set forth opposite such Lender's name on
Schedule 1 under the caption "Facility A Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such Lender
in the Register as such Lender's "Facility A Commitment" (such amount, as the
same may be reduced from time to time pursuant to Section 2.1(g), herein called
such Lender's "Facility A Commitment"). Each Advance composed of Facility A
---------------------
Loans shall be in the aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Facility A Loans of the same
Type made on the same day by the Lenders ratably according to their respective
Facility A Commitments. Within the limits of each Lender's Facility A
-24-
Commitment, the Borrower may borrow under this Section 2.1(a), prepay pursuant
to Section 2.2 and reborrow under this Section 2.1(a).
(b) Each Lender agrees severally, on the terms and conditions
hereinafter set forth, to make loans (each a "Facility B Loan") to the Borrower
---------------
from time to time on any Business Day during the period from the Closing Date
until the Facility B Expiration Date, in an aggregate amount not to exceed at
any time outstanding the amount set forth opposite such Lender's name on
Schedule 1 under the caption "Facility B Commitment" or, if such Lender has
entered into one or more Assignments and Acceptances, set forth for such Lender
in the Register as such Lender's "Facility B Commitment" (such amount, as the
same may be reduced from time to time pursuant to Section 2.1(g), herein called
such Lender's "Facility B Commitment"). Each Advance composed of Facility B
---------------------
Loans shall be in the aggregate amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and shall consist of Facility B Loans of the same
Type made on the same day by the Lenders ratably according to their respective
Facility B Commitments. Within the limits of each Lender's Facility B
Commitment, the Borrower may borrow under this Section 2.1(b), prepay pursuant
to Section 2.2 and reborrow under this Section 2.1(b).
(c) The Loans made by each Lender to the Borrower shall be evidenced
by a promissory note of the Borrower substantially in the form of Exhibit A-1 or
A-2, as applicable (each a "Note"), with appropriate insertions therein as to
----
payee, date and principal amount, payable to the order of such Lender and
representing the obligation of the Borrower to pay the aggregate unpaid
principal amount of all Facility A Loans or Facility B Loans, as the case may
be, made by such Lender to the Borrower, with interest thereon as provided
herein. Each Lender is hereby authorized (but not required) to record the date
and amount of each payment or prepayment of principal of its Loans made to the
Borrower, each continuation thereof, each conversion of all or a portion thereof
to another Type and, in the case of LIBOR Loans, the length of each Interest
Period with respect thereto, in the books and records of such Lender, and any
such recordation made as part of such Lender's normal lending practices shall
constitute prima facie evidence of the accuracy of the information so recorded.
----- -----
The failure of any Lender to make any such recordation or notation in the books
and records of such Lender (or any error in such recordation or notation) shall
not affect the obligations of the Borrower hereunder or under the Notes.
(d) Each Advance shall be made upon the Borrower's giving the Agent
irrevocable written notice (which notice must be received by the Agent prior to
10:00 a.m., San Francisco time, one Business Day prior to the proposed Borrowing
Date or, if the Loans composing such Advance are requested to be made as LIBOR
Loans, three Eurodollar Business Days prior to the proposed
-25-
Borrowing Date) requesting that the Lenders make the Loans composing such
Advance on the proposed Borrowing Date and specifying (i) the aggregate amount
of such Advance, (ii) whether the Loans composing such Advance are to be
Facility A Loans or Facility B Loans, (iii) subject to Sections 2.8 and 2.10,
whether the Loans composing such Advance are to be LIBOR Loans or Base Rate
Loans and (iv) if the Loans composing such Advance are to be LIBOR Loans, the
initial Interest Period for such Loans. Upon receipt of any such notice (which
may request more than one Advance), the Agent shall promptly notify each Lender
thereof on the date of receipt of such notice. On the proposed borrowing date of
each Advance, not later than 11:00 a.m., San Francisco time, each Lender shall
make available to the Agent the amount of such Lender's pro rata share of such
Advance, in immediately available funds, by wiring such amount to such account
as the Agent shall specify. After the Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in Article 4, the Agent will
make such funds available to the Borrower by crediting the bank account
designated by the Borrower for such purpose and as to which the Borrower has
previously notified the Agent in writing.
(e) Neither the Agent nor any Lender shall be responsible for the
obligations or Commitments of any other Lender hereunder, nor will the failure
of any Lender to comply with the terms of this Agreement relieve any other
Lender or the Borrower of its obligations under this Agreement and the Notes.
Nothing herein shall be deemed to relieve any Lender from its obligation to
fulfill its Commitments hereunder or to prejudice any rights which the Borrower
may have against any Lender as a result of any default by such Lender hereunder.
(f) Unless the Agent receives notice from a Lender before the date of
an Advance that such Lender will not make available to the Agent such Lender's
ratable portion of such Advance, the Agent may assume that such Lender has made
such portion available to the Agent on the date of such Advance in accordance
with Section 2.1(d), 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 does not make such ratable portion available to the
Agent, such Lender and the Borrower agree severally to repay such corresponding
amount to the Agent forthwith on demand, 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 the Loans composing such Advance and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender repays
to the Agent such corresponding amount, such amount so repaid shall constitute
such Lender's Loan as part of such Advance for purposes of this Agreement.
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(g) The Borrower shall have the right, upon at least five Business
Days' prior irrevocable written notice to the Agent, to terminate in whole or
reduce ratably in part the unused portions of the Facility A Commitments and/or
the Facility B Commitments of the Lenders; provided, however, that each partial
-------- -------
reduction of the Facility A Commitments or the Facility B Commitments shall be
in the aggregate amount of $5,000,000 or an integral multiple of $1,000,000 in
excess thereof. The Agent shall promptly notify each Lender (by telecopy or by
telephone) of each requested reduction of the Facility A Commitments or the
Facility B Commitments.
(h) Upon each reduction of the Facility A Commitments and/or the
Facility B Commitments pursuant to Section 2.1(g), the Borrower shall (i) pay
the unused commitment fee, payable pursuant to Section 2.14, accrued on the
amount by which the Facility A Commitments and/or Facility B Commitments, as
applicable, are so reduced, through the date of such reduction, (ii) prepay the
amount, if any, by which (A) the aggregate unpaid principal amount of the
Facility A Loans exceeds the amount of the aggregate Facility A Commitments as
so reduced and/or (B) the aggregate unpaid principal amount of the Facility B
Loans exceeds the amount of the aggregate Facility B Commitments as so reduced,
as the case may be, together with accrued interest on the amount being prepaid
to the date of such prepayment, and (iii) compensate the Lenders for their
funding costs, if any, arising as a result of such payment, in accordance with
Section 2.13.
2.2 Optional Prepayments. The Borrower may, upon at least five Business
--------------------
Days' notice to the Agent stating the proposed date and aggregate principal
amount of a prepayment of Loans composing an Advance, and if such notice is
given the Borrower shall on such proposed date, prepay the outstanding principal
amount of the Loans composing an Advance in whole or ratably in part, without
premium or penalty, in the aggregate amount stated in such notice, together with
accrued interest to the date of such prepayment on the principal amount prepaid;
provided, however, that (i) each partial prepayment of an Advance shall be in an
-------- -------
aggregate principal amount that is an integral multiple of $1,000,000, (ii) any
prepayment of LIBOR Loans shall be subject to compliance with Section 2.13 and
(iii) any prepayment of Facility A Loans on or after the Facility A Expiration
Date shall be applied to the scheduled principal payments set forth in Section
2.3(a) in inverse order of maturity. Upon receipt of any such notice of
prepayment from the Borrower, the Agent shall promptly notify each Lender
thereof.
2.3 Repayment.
---------
(a) The Borrower shall repay the aggregate principal amount of the
Facility A Loans outstanding on the Facility A Expiration Date in 12
substantially equal quarterly installments. Such installments shall be due on
the last Business Day of each
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February, May, August and November, commencing on August 30, 2002 and ending on
the Facility A Maturity Date; provided, however, that the last such installment
-------- -------
shall be in the amount necessary to repay in full the unpaid principal amount of
the Facility A Loans.
(b) On the Facility B Expiration Date, the Borrower shall repay all of
the Facility B Loans then outstanding.
2.4 Conversion and Continuation Options.
-----------------------------------
(a) The Borrower may elect from time to time to convert LIBOR Loans to
Base Rate Loans, by the Borrower giving the Agent at least two Business Days'
prior irrevocable written notice of such election pursuant to a Continuation
Notice; provided, however, that any such conversion of LIBOR Loans may only be
-------- -------
made on the last day of an Interest Period with respect thereto. The Borrower
may elect from time to time to convert Base Rate Loans to LIBOR Loans, by the
Borrower giving the Agent at least three Eurodollar Business Days' prior
irrevocable written notice of such election pursuant to a Continuation Notice.
Any such notice of conversion to LIBOR Loans shall specify the length of the
initial Interest Period or Interest Periods therefor. Upon receipt of any such
notice, the Agent shall promptly notify each Lender thereof. All or any part of
outstanding LIBOR Loans and Base Rate Loans may be converted as provided herein;
provided, however, that (i) any such conversion may only be made if, after
-------- -------
giving effect thereto, Section 2.5 shall not have been contravened, (ii) no Base
Rate Loan may be converted into a LIBOR Loan after the date that is one month
prior to the Facility A Maturity Date and (iii) the Borrower shall not have the
right to elect to continue at the end of the applicable Interest Period, or to
convert to, a LIBOR Loan if a Default shall have occurred and be continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving notice
to the Agent, in accordance with the applicable provisions of the term "Interest
Period" set forth in Section 1.1, of the length of the next Interest Period to
be applicable to such LIBOR Loan; provided, however, that no LIBOR Loan may be
-------- -------
continued as such (i) if, after giving effect thereto, Section 2.5 would be
contravened, (ii) after the date that is one month prior to the Facility A
Maturity Date or (iii) if a Default shall have occurred and be continuing; and
further provided, however, that if the Borrower shall fail to give any required
------- -------- -------
notice with respect to the continuation of a LIBOR Loan as described above in
this Section or if such continuation is not permitted pursuant to the preceding
proviso, such Loan shall be automatically converted to a Base Rate Loan on the
last day of the then-expiring Interest Period therefor.
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2.5 Minimum Amounts of Advances. All borrowings, conversions and
---------------------------
continuations of Loans hereunder and all selections of Interest Periods
hereunder shall be in such amounts and be made pursuant to such elections so
that, after giving effect thereto, the aggregate principal amount of the Loans
composing each Advance shall be equal to $5,000,000 or a whole multiple of
$1,000,000 in excess thereof, and there shall not be more than ten Advances
outstanding.
2.6 Interest Rates and Payment Dates.
--------------------------------
(a) Each LIBOR Loan shall bear interest for each day during each
Interest Period with respect thereto at a rate per annum equal to the LIBOR
Adjusted Rate plus the Applicable LIBOR Rate Margin.
(b) Each Base Rate Loan shall bear interest at a rate per annum equal
to the Base Rate.
(c) If an Event of Default shall exist hereunder, all amounts
outstanding on the Notes shall bear interest at a rate per annum which is the
rate otherwise applicable (or, if not related to a Loan, the Base Rate) plus 2%
per annum, from the date of such Event of Default until the date such Event of
Default is cured or waived (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date; provided, however, that interest accruing pursuant to paragraph (c) of
-------- -------
this Section shall be payable on demand.
2.7 Computation of Interest and Fees. All interest on the Obligations
--------------------------------
and all fees payable hereunder shall be calculated on the basis of a 360-day
year for the actual days elapsed, including the first day but excluding the
last. Each determination of a rate applicable to interest or fees by the Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error.
2.8 Inability to Determine Interest Rate. In the event that prior to the
------------------------------------
first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest error) that, by reason
of circumstances affecting the relevant market, adequate and reasonable means do
not exist for ascertaining the LIBOR Adjusted Rate for such Interest Period; or
(b) the Agent shall have received notice from the Required Lenders
that they have determined that the LIBOR Adjusted Rate determined or to be
determined for such Interest Period will not adequately and fairly reflect the
cost to such
-29-
Lenders (as conclusively certified by such Lenders) of making or maintaining
their affected Loans during such Interest Period;
the Agent shall give telecopy or telephonic notice thereof to the Borrower and
the Lenders as soon as practicable thereafter. If such notice is given, (i) any
LIBOR Loans requested to be made on the first day of such Interest Period shall
be made as Base Rate Loans, (ii) Loans that were to have been converted on the
first day of such Interest Period to LIBOR Loans shall be continued as Base Rate
Loans and (iii) any outstanding LIBOR Loans shall be converted, on the first day
of such Interest Period, to Base Rate Loans. Until such notice has been
withdrawn by the Agent, no further LIBOR Loans shall be made or continued as
such, nor shall the Borrower have the right to convert Base Rate Loans to LIBOR
Loans.
2.9 Pro Rata Treatment and Payments. Each payment (including each
-------------------------------
prepayment) by the Borrower on account of principal of and interest on the
Facility A Loans or the Facility B Loans shall be made pro rata among the
Lenders according to the ratio that the Facility A Commitment or the Facility B
Commitment, as applicable, of each Lender bears to the aggregate of the Facility
A Commitments or the Facility B Commitments, as applicable, of all of the
Lenders. All payments (including prepayments) to be made by the Borrower
hereunder and under the Notes, whether on account of principal, interest, fees
or otherwise, shall be made without setoff or counterclaim and shall be made
prior to 10:00 a.m., San Francisco time, on the due date thereof to the Agent,
for the account of the Lenders, to such account as the Agent shall specify to
the Borrower in writing, in Dollars and in immediately available funds;
provided, however, that the Borrower hereby authorizes each Lender, if and to
-------- -------
the extent that any such payment is not made to the Agent when due hereunder, to
charge from time to time against any or all of the Borrower's accounts with such
Lender any payment so due. All payments due to the Lenders from the Borrower
hereunder shall be deemed paid when received by the Agent for distribution to
the Lenders. The Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment hereunder (other than
payments on the LIBOR Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day, and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
LIBOR Loan becomes due and payable on a day other than a Eurodollar Business
Day, the maturity thereof shall be extended to the next succeeding Eurodollar
Business Day (and interest shall continue to accrue thereon at the applicable
rate) unless the result of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made on the
immediately preceding Eurodollar Business Day.
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2.10 Illegality. Notwithstanding any other provision herein, if any change
----------
in any Requirement of Law or in the interpretation or application thereof shall
make it unlawful for any Lender or Applicable Lending Office to maintain LIBOR
Loans as contemplated by this Agreement, (a) the commitment of such Lender
hereunder to continue LIBOR Loans as such and convert Base Rate Loans to LIBOR
Loans shall forthwith be suspended during such period of illegality and (b) the
Loans of such Lender or Applicable Lending Office then outstanding as LIBOR
Loans, if any, shall be converted automatically to Base Rate Loans on the
respective last days of the then current Interest Periods with respect to such
Loans or within such earlier period as required by law. If any such conversion
of a LIBOR Loan occurs on a day which is not the last day of the then current
Interest Period with respect thereto, the Borrower shall pay to such Lender such
amounts, if any, as may be required pursuant to Section 2.13. To the extent
that a Lender's LIBOR Loans have been converted to Base Rate Loans pursuant to
this Section, all payments and prepayments of principal that otherwise would be
applied to such Lender's LIBOR Loans shall be applied instead to its Base Rate
Loans.
2.11 Increased Costs.
---------------
(a) In the event that any change in any Requirement of Law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law but, if not having
the force of law, generally applicable to and complied with by banks and
financial institutions of the same general type as such Lender in the relevant
jurisdiction) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against assets held by,
deposits or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender or Applicable Lending Office which is not otherwise included in the
determination of the LIBOR Adjusted Rate hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office any
other condition;
and the result of any of the foregoing is to increase the cost to such Lender or
Applicable Lending Office, by an amount which such Lender reasonably deems to be
material, of converting into, continuing or maintaining LIBOR Loans or to reduce
any amount receivable hereunder in respect thereof then, in any such case, the
Borrower shall immediately pay to the Agent, on behalf of such Lender or
Applicable Lending Office, upon the demand of the Agent at the request of such
Lender, any additional amounts necessary to compensate such Lender for such
increased cost or
-31-
reduced amount receivable. If any Lender or any Applicable Lending Office
becomes entitled to claim any additional amounts pursuant to this Section, it
shall promptly notify the Borrower, through the Agent, of the event by reason of
which it has become so entitled. A certificate as to any additional amounts
payable pursuant to this Section submitted by such Lender or Applicable Lending
Office, through the Agent, to the Borrower shall be conclusive evidence of the
accuracy of the information so recorded, absent manifest error. This covenant
shall survive the termination of this Agreement and the payment of the Notes and
all other amounts payable hereunder so long as notice of any such increased
costs and the basis therefor is given to the Borrower within 90 days after the
date of such termination.
(b) If, after the date of this Agreement, the introduction of or any
change in any Requirement of Law regarding capital adequacy, or any change in
the interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof, affects the amount of
capital required or expected to be maintained by any Lender or any corporation
controlling any Lender, and such Lender (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) determines that
the amount of capital maintained by such Lender or such corporation which is
attributable to or based upon the Loans or this Agreement must be increased as a
consequence of such introduction or change by an amount deemed by such Lender to
be material, then, upon demand of the Agent at the request of such Lender, the
Borrower shall immediately pay to the Agent on behalf of such Lender, additional
amounts sufficient to compensate such Lender or such corporation for the
increased costs to such Lender or corporation of such increased capital. Any
such demand shall be accompanied by a certificate of such Lender setting forth
in reasonable detail the computation of any such increased costs, which
certificate shall be conclusive, absent manifest error. This obligation of the
Borrower under this Section shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder in full so long
as notice of any such increased costs and the basis therefor is given to the
Borrower within 90 days after the date of such termination.
2.12 Taxes.
-----
(a) All payments made by the Borrower in respect of the Obligations
shall be made free and clear of, and except to the extent required by law,
without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority or any political subdivision or taxing
authority thereof or therein, other than Excluded Taxes (all such non-Excluded
Taxes being hereinafter called "Taxes"). If any Taxes are required to be
-----
-32-
withheld from any amounts payable to the Agent or any Lender in respect of the
Obligations, the amounts so payable to the Agent or such Lender shall be
increased to the extent necessary to yield to the Agent or such Lender (after
payment of all Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement and the other Loan
Documents; provided, however, that no increased amount shall be required to be
-------- -------
paid to the Agent or such Lender under this sentence except to the extent that
any change after the date hereof in any such withholding requirement will result
in an increase in the rate of such withholding from that in effect as of the
date hereof in respect of payments to the Agent or such Lender. The Agent or a
Lender, as the case may be, shall deliver to the Borrower a certificate setting
forth the amount of such Taxes, the calculation of such Taxes and an explanation
of the requirement therefor, all in reasonable detail, and such certificate
shall be conclusive, absent manifest error. Whenever any Taxes are payable by
the Borrower, as promptly as possible thereafter, the Borrower shall send to the
Agent, for its own account or for the account of such Lender, as the case may
be, a copy of an original official receipt received by the Borrower showing
payment thereof or such other evidence of payment reasonably satisfactory to the
Agent. If the Borrower fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Agent the required receipts or other
required documentary evidence, the Borrower shall indemnify the Agent and the
Lenders for any incremental taxes, interest or penalties (and related reasonable
fees and expenses of counsel) that may become payable by the Agent or any Lender
as a result of any such failure. The agreements in this Section shall survive
the termination of this Agreement and the payment of the Notes and all other
amounts payable hereunder.
(b) Each Lender (and each Person becoming a Lender pursuant to Section
9.6(c)) that is not organized under the laws of the United States of America or
a state thereof agrees that it will deliver to the Borrower and the Agent as
promptly as practicable and at such other times as may be necessary in the
determination of the Borrower or the Agent (i) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 or the successor
applicable form, as the case may be, and (ii) an Internal Revenue Service Form
W-8 or W-9 or the successor applicable form. Each such Lender also agrees to
deliver to the Borrower and the Agent two further copies of the said Form 1001
or 4224 and Form W-8 or W-9, or successor applicable forms or other manner or
certification, as the case may be, on or before the date that any such form
expires or becomes obsolete or after the occurrence of any event requiring a
change in the most recent form previously delivered by it to the Borrower and
the Agent, and such extensions or renewals thereof as may reasonably be
requested by the Borrower or the Agent, unless in any such case an event beyond
the control of such Lender (including any change in treaty, law or regulation)
has occurred prior to the date on
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which any such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advised the
Borrower and the Agent. Each such Lender shall certify (A) in the case of a Form
1001 or 4224, that it is entitled to receive payments under this Agreement
without deduction or withholding of any United States federal income taxes, and
(B) in the case of a Form W-8 or W-9, that it is entitled to an exemption from
United States backup withholding tax.
(c) The Borrower shall not be required to pay any additional amounts
to any Person in respect of United States withholding tax pursuant to Section
2.12(a) if the obligation to pay such additional amounts would not have arisen
but for a failure by such Person to comply with the requirements of Section
2.12(b) (including the accuracy of the certificate described in the final
sentence thereof).
(d) If any Lender or the Agent, as applicable, receives a refund
(whether by way of direct payment or by offset) of any tax for which a payment
has been made pursuant to this Section 2.12 which, in the reasonable good-faith
judgment of such Lender or Agent, as the case may be, is allocable to such
payment made under this Section 2.12, the amount of such refund (together with
any interest received thereon) shall be paid to the Borrower to the extent
payment has been made in full pursuant to this Section 2.12.
2.13 Indemnity. The Borrower agrees to indemnify each Lender for, to hold
---------
each Lender harmless from, and to pay each Lender on demand, the amount of any
liability, loss or expense arising from the reemployment of funds obtained by it
or from fees payable to terminate the deposits from which such funds were
obtained (including reasonable fees and expenses of counsel) which such Lender
may sustain or incur as a consequence of (a) default by the Borrower in payment
when due of the principal amount of or interest on any LIBOR Loan, (b) default
by the Borrower in making a borrowing of, conversion into or continuation of
LIBOR Loans after the Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (c) default by the Borrower in
making any prepayment after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (d) the making by the
Borrower of a prepayment or conversion of LIBOR Loans on a day which is not the
last day of an Interest Period with respect thereto. A Lender's certificate as
to such liability, loss or expense shall be deemed conclusive, absent manifest
error. This covenant shall survive the termination of this Agreement and the
payment of the Notes and all other amounts payable hereunder.
2.14 Unused Commitment Fees. The Borrower agrees to pay to the Agent for
----------------------
the account of the Lenders (a) an unused commitment
-34-
fee on the average daily unused portion of each Lender's Facility A Commitment,
for each Lender from the date on which such Lender becomes a party hereto until
the Facility A Expiration Date, at the Applicable Fee Rate, and (b) an unused
commitment fee on the average daily unused portion of each Lender's Facility B
Commitment, for each Lender from the date on which such Lender becomes a party
hereto until the Facility B Expiration Date, at the Applicable Fee Rate. Such
unused commitment fees shall be payable (i) quarterly in arrears on the last
Business Day of each February, May, August and November, commencing on August
31, 1999, (ii) with respect to the Facility A Commitments, on the Facility A
Expiration Date and (iii) with respect to the Facility B Commitments, on the
Facility B Expiration Date.
2.15 Agent's Fees. The Borrower agrees to pay to the Agent, as and when
------------
due, such amounts as are required to be paid by the Borrower under the Agent's
Fee Letter.
SECTION 3
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to make the Loans,
the Borrower hereby represents and warrants to the Agent and each Lender that:
3.1 Financial Condition.
-------------------
(a) The audited balance sheet of the Borrower and its Subsidiaries as
of December 31, 1998 and the related audited statements of operations, retained
earnings, stockholders' equity and cash flows for the fiscal year ended on such
date, each on a consolidated basis certified by the Accountants (together with
consolidating worksheet) and copies of all of which have heretofore been
furnished to the Agent, present fairly in all material respects the financial
condition of the Borrower and its Subsidiaries as of such date and the results
of their operations and their cash flows for the fiscal year then ended. All
such financial statements, including the related schedules and notes thereto
(the "Financial Statements"), have been prepared in accordance with GAAP or SAP,
--------------------
as applicable, applied consistently with the preceding fiscal year. Neither the
Borrower nor any of its Subsidiaries has any Guarantee Obligation, contingent
liability, liability for taxes, long-term lease or unusual forward or long-term
commitment, including any interest-rate or foreign-currency swap or exchange
transaction, which is not reflected in the foregoing statements or in the notes
thereto and which is material in relation to the financial condition of the
Borrower or any of its Subsidiaries at such dates. During the period from
December 31, 1998 to and including the Closing Date, there has been no sale,
transfer or other disposition by the Borrower or any of its Subsidiaries of any
part of its business or property, and no purchase or other acquisition of any
business
-35-
or property (including any Capital Stock of any other Person), other than sales
from and purchases into the Investment Portfolios of the Borrower and its
Subsidiaries, that is material in relation to the financial condition of the
Borrower or any of its Subsidiaries as of December 31, 1998.
(b) The Annual Statement (including the provisions made therein for
investments, valuation of investments, losses (reserves) and Statutory
Liabilities) of each Insurance Subsidiary of the Borrower covering its fiscal
year ended December 31, 1998 has been filed with the Department having
jurisdiction over such Insurance Subsidiary in compliance with the Insurance
Code and other Requirements of Law applicable to it. Such Annual Statements
fairly present in all material respects the financial position, results of
operations, changes in equity and changes in financial position of each such
Insurance Subsidiary as of and for the respective dates and periods indicated
therein in accordance with SAP, except as set forth in the notes thereto.
Except for liabilities and obligations disclosed or provided for in such Annual
Statements, including losses (reserves) and Statutory Liabilities (all of which
have been computed in accordance with SAP), no Insurance Subsidiary of the
Borrower had incurred, as of the respective dates of such Annual Statements, any
material liabilities or obligations (whether absolute or contingent or whether
due or to become due) that in conformity with SAP would have been required to be
or should be disclosed or provided for in such Annual Statements. All books of
account of each Insurance Subsidiary of the Borrower fully and fairly disclose
all of the material transactions, properties, assets, investments, liabilities
and obligations of the Borrower and such Insurance Subsidiaries, and all of such
books of account are in the possession of such Insurance Subsidiary and are
true, correct and complete in all material respects.
(c) The investments by each Insurance Subsidiary of the Borrower
reflected in its Annual Statement referred to in Section 3.1(b) comply in all
material respects with all applicable requirements of the Department and other
Governmental Authorities having jurisdiction over such Insurance Subsidiary.
(d) The amounts shown in the Annual Statements referred to in Section
3.1(b) for (i) aggregate losses (reserves) and loss adjustment expenses for
insurance policies and contracts (set forth in lines 1, 1A and 2, column 1, of
page 3 thereof), (ii) agents' balances and uncollected premiums (as set forth in
lines 10.1, 10.2 and 10.3, column 1 of page 2 thereof) and (iii) Statutory
Liabilities are in accordance with commonly accepted actuarial standards
consistently applied, are fairly stated in accordance with sound actuarial
principles, based on actuarial assumptions that are in accordance with or more
stringent than those called for in the insurance policies and contracts, and the
related reinsurance, co-insurance and similar contracts, of each Insurance
Subsidiary of the Borrower, based on
-36-
assumptions consistent with those of the preceding fiscal year, and meet the
requirements of the Department and any other Governmental Authorities having
jurisdiction over the reports of losses (reserves of) such Insurance Subsidiary.
Such losses (reserves) established by each such Insurance Subsidiary are, in the
judgment of the Borrower and such Insurance Subsidiary, adequate as of such date
for the payment by such Insurance Subsidiary of all incurred insurance losses,
claims and investigative expenses of such Insurance Subsidiary.
(e) Marketable securities and short-term investments reflected in the
Annual Statements referred to in Section 3.1(b) are valued at cost, amortized
cost or market value, as required by Requirements of Law.
(f) Schedule 3.1(f) lists all Indebtedness of the Borrower and its
Subsidiaries as of the Closing Date.
(g) Schedule 3.1(g) lists all Liens securing any Indebtedness of the
Borrower or any Subsidiary as of the Closing Date.
3.2 No Change. Since December 31, 1998 there has been no event or
---------
condition resulting in a Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of the Borrower and
----------------------------------------
its Subsidiaries (a) is duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization, (b) has the corporate or
comparable legal power and authority, and the legal right, to own, operate or
lease, as applicable, its Properties and to conduct the business in which it is
currently engaged and in which it proposes to be engaged after the Closing Date,
(c) is duly qualified as a foreign entity and in good standing under the laws of
each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, except where such failure
to qualify could not reasonably be expected to have a Material Adverse Effect,
and (d) is in compliance with all Requirements of Law except to the extent that
the failure to comply therewith could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable Obligations. The Borrower
-------------------------------------------------------
has the corporate power and authority, and the legal right, to make, deliver and
perform this Agreement and the other Loan Documents, to borrow hereunder and to
consummate the transactions contemplated hereunder, and has taken all necessary
corporate action to authorize (a) the borrowings on the terms and conditions of
this Agreement and the Notes and (b) the execution, delivery and performance of
this Agreement and the other Loan Documents. Except for informational filings
required to be made in the ordinary course of business which are not a condition
to the Borrower's performance under the Loan Documents,
-37-
no consent or authorization of, filing with or any other act by or in respect
of, any Governmental Authority or any other Person is required in connection
with the borrowings hereunder or in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, the Notes or the
other Loan Documents. Each of this Agreement, the Notes and the other Loan
Documents has been duly executed and delivered by the Borrower. This Agreement
and the Notes constitute, and the other Loan Documents when executed and
delivered will constitute, legal, valid and binding obligations of the Borrower
enforceable against it in accordance with their respective terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
3.5 No Legal Bar. The execution, delivery and performance of this
------------
Agreement, the Notes and the other Loan Documents, and the borrowings hereunder
and the use of the proceeds of the Loans, will not violate any Requirement of
Law or Contractual Obligation of the Borrower or any of its Subsidiaries, which
violation could reasonably be expected to have a Material Adverse Effect, and
will not result in, or require, the creation or imposition of any Lien on any of
its properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation, except pursuant to the Loan Documents or except as
otherwise permitted pursuant to Section 6.4.
3.6 No Material Litigation. No litigation, investigation or proceeding of
----------------------
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Borrower, threatened by or against the Borrower or any of its
Subsidiaries or against any of its or their properties or revenues which could
reasonably be expected to have a Material Adverse Effect or which concerns this
Agreement. Neither the Borrower nor any of its Subsidiaries has any material
contingent liabilities not provided for or referred to in the Financial
Statements and Annual Statements delivered pursuant to Sections 5.1 and 5.2.
3.7 Ownership of Property; Liens; Condition of Properties.
-----------------------------------------------------
(a) Each of the Borrower and its Subsidiaries has good title in fee
simple to, a valid leasehold interest in, or rights as a permittee or licensee
to, all of its real property, and good title to all of its other property which
is material to its business.
(b) All of the properties used or useful in the conduct of the
business of the Borrower or any of its Subsidiaries are in good repair, working
order and condition (reasonable wear and tear excepted) and suitable for use in
the operation of their respective businesses.
-38-
3.8 Taxes. Each of the Borrower and its Subsidiaries has filed or caused
-----
to be filed all tax returns which are required to be filed by it and has paid
all taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority (other than
any not yet delinquent or the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the Borrower
or such Subsidiary, as appropriate); and no tax Lien has been filed, and, except
as disclosed in the footnotes to the Financial Statements or the Annual
Statements of the Borrower's Insurance Subsidiaries, no claim is being asserted,
with respect to any such tax, fee or other charge which could reasonably be
expected to have a Material Adverse Effect if decided adversely to the Borrower
or its Subsidiaries.
3.9 Federal Regulations. No part of the proceeds of any Loans is intended
-------------------
to be or will be used, directly or indirectly, for the purpose of "purchasing"
or "carrying" any Margin Stock within the respective meanings of each of the
quoted terms under Regulation U or for any purpose which violates the provisions
of the Regulations of the Board of Governors of the Federal Reserve System. If
requested by the Agent, the Borrower will furnish to the Agent a statement to
the foregoing effect in conformity with the requirements of Form U-1 referred to
in Regulation U.
3.10 ERISA. No Reportable Event has occurred during the five-year period
-----
prior to the date on which this representation is made with respect to any Plan
which has resulted, or could reasonably be expected to result, in a Material
Adverse Effect. Each Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. The present value of all accrued
benefits under all Single Employer Plans maintained by the Borrower, any of its
Subsidiaries or any Commonly Controlled Entity (based on those assumptions used
to fund the Plans) did not, as of the last annual valuation date prior to the
date on which this representation is made, exceed by an amount which could
reasonably be expected to cause a Material Adverse Effect the value of the
assets of such Plans allocable to such accrued benefits. Neither the Borrower,
any of its Subsidiaries nor any Commonly Controlled Entity has had a complete or
partial withdrawal from any Multiemployer Plan which has resulted, or could
reasonably be expected to result, in a Material Adverse Effect. The present
value (determined using actuarial and other assumptions which are reasonable in
respect of the benefits provided and the employees participating) of the
liability of the Borrower, its Subsidiaries and each Commonly Controlled Entity
for post-retirement benefits (excluding benefits required by Section 4980B of
the Code) to be provided to their current and former employees under plans which
are welfare benefit plans (as defined in Section 3(a) of ERISA) does not, in the
aggregate,
-39-
exceed by an amount which could reasonably be expected to cause a Material
Adverse Effect the assets under all such plans allocable to such benefits.
3.11 Investment Company Act. Neither the Borrower nor any of its
----------------------
Subsidiaries is an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended (the "Investment Company Act").
----------------------
3.12 Material Agreements. Schedule 3.12 lists all contracts, agreements
-------------------
and commitments (the "Material Agreements") of the Borrower or any of its
-------------------
Subsidiaries in effect as of the Closing Date (excluding contracts entered into
in the ordinary course of business by the Borrower or any of its Subsidiaries),
whether written or oral, that (a) extend one (1) year or more and involve the
receipt or payment of more than $5,000,000, (b) relate to employment or labor
matters (except individual employment contracts) or (c) are material to the
business, property, assets, operations or condition, financial or otherwise, of
the Borrower or any of its Subsidiaries.
3.13 Reinsurance. Schedule 3.13 lists all Reinsurance Agreements in effect
-----------
as of the Closing Date. All Reinsurance Agreements are in full force and effect
to the respective dates set forth on such Schedule. None of the Insurance
Subsidiaries of the Borrower or, to the best knowledge of Borrower and each such
Insurance Subsidiaries, any other party to such agreements is in default in any
material respect as to any provision thereof, and no such agreement contains any
provision providing that the other party thereto may terminate such agreement by
reason of the transactions contemplated by the Loan Documents. To the best
knowledge of the Borrower and its Insurance Subsidiaries, there is no reason to
believe that the financial condition of any other party to any Reinsurance
Agreement is impaired, with the result that a default thereunder may reasonably
be anticipated.
3.14 Policies of Insurance. All policies of insurance (including all rates
---------------------
and premiums charged with respect thereto) issued by each Insurance Subsidiary
of the Borrower comply in form and substance in all material respects with all
Requirements of Law.
3.15 Certain Business Practices. The underwriting standards and ratings
--------------------------
used by each Insurance Subsidiary of the Borrower conform in all material
respects to all Requirements of Law.
3.16 Insurance. Schedule 3.16 sets forth a true and correct summary of all
---------
Insurance Policies in effect as of the Closing Date. The Borrower and each of
its Subsidiaries are adequately insured under the Insurance Policies, which
policies are issued by insurers of recognized responsibility. No notice of any
-40-
pending or threatened cancellation or increase in premium has been received by
the Borrower or any of its Subsidiaries with respect to any such Insurance
Policies. The Borrower and its Subsidiaries are in substantial compliance with
all material conditions contained in such Insurance Policies.
3.17 Licenses. Each Insurance Subsidiary of the Borrower maintains in full
--------
force and effect all licenses, permits and authorizations required by law in
each jurisdiction as are material to and necessary for the ownership, lease or
operation of property relating to, or the conduct of, the insurance or
reinsurance business by such Insurance Subsidiary in such jurisdiction
(collectively, the "Licenses"). No such License is subject to any proceeding
--------
relating to suspension, revocation or limitation of such License, and, to the
best knowledge of the Borrower, there is no sustainable basis for such
suspension, revocation or limitation, and no such suspension, revocation or
limitation has been threatened by any Governmental Authority. Schedule 3.17
lists all Licenses of each Insurance Subsidiary of the Borrower, and the lines
of insurance that each such Insurance Subsidiary is permitted to be engaged in,
as of the Closing Date. As of the Closing Date, no such Insurance Subsidiary
transacts any insurance business, directly or indirectly, in any jurisdiction
other than those listed on Schedule 3.17.
3.18 Subsidiaries. As of the Closing Date, the Borrower has no Insurance
------------
Subsidiary other than American Healthcare Indemnity Company, a Delaware
corporation, SCPIE Indemnity Company, a California corporation, and American
Healthcare Specialty Insurance Company, an Arkansas corporation, and no other
Subsidiary other than SCPIE Management Company, a California corporation, SCPIE
Insurance Services Inc., a California corporation, and SCPIE Management Services
Inc., a California corporation.
3.19 Purpose of Loans. The proceeds of the Loans are intended to be used
----------------
by the Borrower only to finance its general corporate expenditures, Permitted
Acquisitions by the Borrower or any Subsidiary, reasonable expenses of the
Borrower or any Subsidiary in respect of prospective Permitted Acquisitions and
the repurchase by the Borrower of outstanding shares thereof that are to be
retired immediately upon repurchase.
3.20 Environmental Matters.
---------------------
(a) To the Borrower's knowledge after reasonable inquiry, with respect
to the Properties of the Borrower and its Subsidiaries:
(i) Such Properties and all operations at such Properties are in
compliance in all material respects with all applicable Environmental Laws, and
there is no contamination at, under or about any of such Properties, or
violation of any
-41-
Environmental Law with respect to any of such Properties or the business
conducted at any of such Properties, which involves a matter or matters which
has caused or could reasonably be expected to cause a Material Adverse Effect.
(ii) Neither the Borrower nor any of its Subsidiaries has received
any notice of violation, alleged violation, noncompliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of such Properties or the business
conducted at any of such Properties which involves a matter or matters which has
caused, or could reasonably be expected to cause, a Material Adverse Effect, nor
does the Borrower have knowledge or reason to believe that any such notice will
be received or is being threatened except insofar as such notice or threatened
notice, or any aggregation thereof, does not involve a matter or matters that
could reasonably be expected to cause a Material Adverse Effect.
(iii) No judicial proceeding or governmental or administrative
action is pending or, to the knowledge of the Borrower, threatened under any
Environmental Law in which the Borrower or any of its Subsidiaries is named as a
party with respect to any of such Properties or the business conducted at any of
such Properties which involves a matter or matters which has caused, or could
reasonably be expected to cause, a Material Adverse Effect, nor are there any
consent decrees, other decrees, consent orders, administrative orders or other
orders, or other administrative or judicial requirements outstanding under any
Environmental Law with respect to any of such Properties or such business except
insofar as such proceeding, action, decree, order or other requirement, or any
aggregation thereof, could not reasonably be expected to cause a Material
Adverse Effect.
(b) To the Borrower's knowledge after reasonable inquiry:
(i) Neither the Borrower nor any of its Subsidiaries has
generated, used, transported, treated, stored, released or disposed of, or
suffered or permitted any other Person to generate, use, transport, treat,
store, release or dispose of, any Hazardous Substance on or with respect to any
of such Properties in violation of any law, which violation could reasonably be
expected to have a Material Adverse Effect.
(ii) There has not been any generation, use, transportation,
treatment, storage, release or disposal of any Hazardous Substance on or with
respect to any of such Properties which has created, or could reasonably be
expected to create, any liability under any Requirement of Law, which liability
could reasonably be expected to have a Material Adverse Effect or which would
require reporting to or notification of any Governmental Authority.
-42-
(iii) No asbestos, polychlorinated biphenyl or underground storage
tank is contained in or located at any of such Properties.
(iv) Any Hazardous Substance handled or dealt with in any way in
connection with any of such Properties has been and is being handled or dealt
with in all respects in compliance with Requirements of Law the violation of
which could reasonably be expected to have a Material Adverse Effect.
3.21 Accuracy and Completeness of Information. The documents furnished and
----------------------------------------
the statements made in writing to the Agent by the Borrower or any of its
Subsidiaries in connection with the negotiation, preparation or execution of
this Agreement or any of the other Loan Documents do not contain any untrue
statement of fact material to the creditworthiness of the Borrower or omit to
state any such material fact necessary in order to make the statements contained
therein not misleading in a material respect, in either case which has not been
corrected, supplemented or remedied by subsequent documents furnished or
statements made in writing to the Agent prior to the date hereof. The
projections and pro forma financial information contained in such materials are
--- -----
based upon good-faith estimates and assumptions believed by the Borrower and/or
each of its Subsidiaries to be reasonable at the time made and as of the date of
this Agreement, it being recognized that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
3.22 Permits, Etc. The Borrower and each of its Subsidiaries hold and
------------
maintain in full force and effect all permits, licenses, authorizations and
approvals (including all Licenses) as are material and required for each of them
lawfully to acquire, own, lease, control, manage or operate their respective
businesses. The Borrower and each of its Subsidiaries are in compliance in all
material respects with all such permits, licenses, authorizations, approvals and
Licenses. To the best knowledge of the Borrower, no condition exists or event
has occurred which, in itself or with the giving of notice or lapse of time or
both, would result in the suspension, revocation, impairment, forfeiture or
nonrenewal of any such permit, license, authorization or approval or License,
which suspension, revocation, impairment, forfeiture or nonrenewal could
reasonably be expected to have a Material Adverse Effect, and, there is no claim
that any of the foregoing is not in full force and effect. There are (a) no
judgments, decrees or orders issued or, to the Borrower's knowledge, threatened
by any Governmental Authority with respect to the Borrower or any of its
-43-
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect, (b) no complaints, petitions, filings or other proceedings pending or,
to the Borrower's knowledge, threatened before any Governmental Authority with
respect to the Borrower or any of its Subsidiaries which could reasonably be
expected to have a Material Adverse Effect and (c) no events that have occurred
that could reasonably be expected to result in the imposition of any financial
penalty by any Governmental Authority upon the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
3.23 Assets. The Borrower and each of its Subsidiaries possess adequate
------
assets, patents, patent applications, copyrights, trademarks, service marks and
trade names, or licenses thereto, to continue to conduct their respective
businesses as heretofore conducted, without any material conflict with the
rights of others, except to the extent that the failure to own or license such
property could not reasonably be expected to have a Material Adverse Effect.
3.24 Trade Relations. To the best knowledge of the Borrower, there exists
---------------
no actual or threatened termination, cancellation or limitation of, or
modification or change in, the business relationship of the Borrower or any of
its Subsidiaries with (a) any customer or any group of customers whose purchases
individually or in the aggregate are material to the business of the Borrower or
any of its Subsidiaries or (b) any insurance agent, agency or group of insurance
agents or agencies, the business relationship with which is individually or in
the aggregate material to the business of the Borrower or any of its
Subsidiaries. There exists no condition, fact or circumstance that could
reasonably be expected to have a Material Adverse Effect or prevent the Borrower
or any of its Subsidiaries from conducting its business after the consummation
of the transactions contemplated by this Agreement in substantially the same
manner in which it has heretofore been conducted.
3.25 Compliance with Laws. Neither the Borrower nor any of its
--------------------
Subsidiaries is in violation of any Requirement of Law, if the effect of such
violation, or cumulative effect of such violations, could reasonably be expected
to have a Material Adverse Effect, and, to the best of the Borrower's knowledge,
no such violation has been alleged, and the Borrower and each of its
Subsidiaries (a) have filed in a timely manner all reports, documents and other
materials required to be filed with any Governmental Authority, if the failure
to so file could reasonably be expected to have a Material Adverse Effect, and
the information contained in each of such filings is true, correct and complete
in all respects, and (b) have retained all records and documents required to be
retained pursuant to any Requirement of Law, if the failure to so retain such
records and documents could reasonably be expected to have a Material Adverse
Effect.
3.26 Ranking of Loans. This Agreement and the other Loan Documents to
----------------
which the Borrower is a party, when executed, and the Loans, when borrowed, are
and will be the direct and general obligations of the Borrower. The Borrower's
obligations
-44-
hereunder and thereunder rank and will rank at least pari passu in priority of
---- -----
payment to all other Indebtedness of the Borrower, except to the extent
otherwise permitted hereunder (including capitalized purchase-money debt
permitted hereunder).
3.27 Executive Offices. The location of the Borrower's executive office
-----------------
and principal place of business as of the Closing Date is 0000 Xxxxxxx Xxxx
Xxxx, Xxxxx 000 (Administration), Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000.
3.28 Insolvency. After giving effect to the funding of the Loans, the
----------
application of the proceeds of the Loans as provided herein and the payment of
all estimated legal, underwriting, investment banking, accounting and other fees
related hereto and thereto, the Borrower and each of its Subsidiaries will be
Solvent.
3.29 Labor Matters. As of the Closing Date, there are no strikes or other
-------------
labor disputes against the Borrower or any of its Subsidiaries pending or, to
the Borrower's knowledge, threatened against it or any of its Subsidiaries,
which could reasonably be expected to have a Material Adverse Effect.
3.30 Condemnation. No taking of any of the Properties or any part thereof
------------
through eminent domain, conveyance in lieu thereof, condemnation or similar
proceeding is pending or, to the knowledge of the Borrower, threatened by any
Governmental Authority which would reasonably be expected to have a Material
Adverse Effect.
3.31 Year 2000. On the basis of a comprehensive review and assessment of
---------
the systems and equipment of the Borrower and its Subsidiaries and inquiry made
of the material suppliers, vendors and customers of the Borrower and its
Subsidiaries, the Year 2000 Problem, including costs of remediation of the same,
will not result in a Material Adverse Effect. Each of the Borrower and its
Subsidiaries has developed a feasible contingency plan adequate to permit its
uninterrupted and unimpaired business operation in the event of a failure of any
of its own or a third party's systems or equipment due to the Year 2000 Problem,
including systems and equipment of vendors, customers and suppliers.
SECTION 4
CONDITIONS PRECEDENT
4.1 Conditions to Closing Date. The agreement of each Lender to make any
--------------------------
Loan requested to be made by it on the Closing Date and otherwise from time to
time to make Loans in accordance with the terms hereof is subject to the
satisfaction, immediately prior to or concurrently with the Closing Date (except
as otherwise expressly provided hereunder), of the following
-45-
conditions precedent, in form and substance reasonably satisfactory to the
Lenders:
(a) Credit Agreement and Notes. The Agent shall have received this
--------------------------
Agreement, executed and delivered by an officer of the Borrower as of the
Closing Date, with a counterpart for each Lender, and each Note for each Lender
executed and delivered by an officer of the Borrower.
(b) Incumbency Certificate. The Agent shall have received, with a
----------------------
counterpart for each Lender, an incumbency certificate of the Borrower, dated
the Closing Date, executed by its Secretary or Assistant Secretary.
(c) Corporate Proceedings. The Agent shall have received, with a
---------------------
counterpart for each Lender, a copy of the resolutions of the Board of Directors
of the Borrower authorizing (i) this Agreement, the Notes and the other Loan
Documents, and (ii) the borrowings contemplated hereunder, in each case
certified by the Secretary or an Assistant Secretary of the Borrower as of the
Closing Date, which certificate states that the resolutions thereby certified
have not been amended, modified, revoked or rescinded and are in full force and
effect.
(d) Organizational Documents. The Agent shall have received copies of
------------------------
the articles of incorporation and bylaws of the Borrower, as of the Closing
Date, certified as of the Closing Date as complete and correct copies thereof by
the Secretary or an Assistant Secretary of the Borrower.
(e) Costs. The Agent shall have received payment or evidence of
-----
payment by the Borrower of all costs, expenses and taxes (including those
payable pursuant to Section 9.5) accrued and unpaid and otherwise due and
payable on or before the Closing Date by the Borrower pursuant to this
Agreement.
(f) Fees. The Agent shall have received the fees to be paid on the
----
Closing Date pursuant to the Agent's Fee Letter.
(g) Good Standing Certificates. The Agent shall have received
--------------------------
certificates, each dated a recent date, of the appropriate Governmental
Authorities of the States of Delaware and California, certifying as to the
existence and good standing of, and the payment of taxes by, the Borrower in
such states and, as applicable, listing all charter documents of the Borrower on
file with such officials.
(h) No Default; Representations. No Default shall have occurred and
---------------------------
be continuing on the Closing Date or would occur after giving effect to the
making of the Loans, if any, requested to be made on the Closing Date, and the
representations and warranties contained in this Agreement, each other Loan
Document and each certificate or other writing delivered to the
-46-
Agent and/or the Lenders in satisfaction of the conditions set forth in this
Section prior to or on the Closing Date shall be correct in all material
respects on and as of the Closing Date, and the Agent shall have received, with
a counterpart for each Lender, a certificate of the Borrower to such effect,
dated as of the Closing Date and executed by a Responsible Officer.
(i) Operational Consents. The Agent shall have received copies of all
--------------------
material consents, licenses and approvals, in each case as required by law or
necessary for (i) the execution, delivery and performance by the Borrower, and
the validity and enforceability against the Borrower, of this Agreement and the
other Loan Documents, and (ii) the borrowings contemplated hereunder, together
with a certificate of a Responsible Officer, with a counterpart for each Lender,
certifying that such consents, licenses and approvals, if any, are in full force
and effect and are all of the material consents, licenses and approvals required
to be obtained by the Borrower or any Subsidiary on or before the consummation
of the transactions contemplated hereby.
(j) Insurance Proceedings. The Agent shall have received, with a
---------------------
counterpart for each Lender, a certificate of a Responsible Officer stating that
there are no material insurance regulatory proceedings pending or, to the best
of the Borrower's knowledge, threatened against the Borrower or any of its
Insurance Subsidiaries in any jurisdiction.
(k) Financial Condition Certificate. The Agent shall have received,
-------------------------------
with a counterpart for each Lender, a certificate, certified as accurate by a
Responsible Officer, stating that (i) to the best of the Borrower's knowledge,
the Borrower's material payables are current and not past-due except as set
forth therein and (ii) after giving effect to the Loans, the Borrower and the
Subsidiaries are Solvent.
(l) Actuarial Report. The Agent shall have received, with a
----------------
counterpart for each Lender, a copy of the Actuarial Report of each Insurance
Subsidiary of the Borrower as of December 31, 1998.
(m) Investment Portfolio. The Agent shall have received, with a
--------------------
counterpart for each Lender, (i) a copy of the Stated Investment Policy of each
Insurance Subsidiary of the Borrower as of the Closing Date and (ii) such
information necessary to disclose to the Lenders such Insurance Subsidiary's
Investment Portfolio as of the calendar month-end immediately preceding the
Closing Date, all of which information shall disclose that the makeup of such
Investment Portfolio is consistent with the Stated Investment Policy of such
Insurance Subsidiary, and no Material Adverse Change shall have occurred with
respect to such Investment Portfolio since the date of such disclosure.
-47-
(n) Legal Opinions. The Agent shall have received, with a counterpart
--------------
for each Lender, the executed legal opinion of counsel to the Borrower.
(o) Form U-1. The Agent shall have received, with a counterpart for
--------
each Lender, a completed and executed Federal Reserve Form U-1 with respect to
the Loans.
(p) Additional Proceedings. The Agent shall have received such other
----------------------
approvals, opinions and documents as any Lender, through the Agent, may
reasonably request, and all legal matters incident to the making of such Loans
shall be satisfactory to the Agent.
4.2 Conditions to Each Loan. The agreement of each Lender to make any
-----------------------
Loan requested to be made by it on the Closing Date and from time to time
requested to be made by it thereafter is subject to the satisfaction,
immediately prior to or concurrently with the making of such Loan, of the
following conditions precedent:
(a) Representations and Warranties; No Default. The following
------------------------------------------
statements shall be true, and the Borrower's acceptance of the proceeds of such
Loan shall be deemed to be a representation and warranty of the Borrower on the
date of such Loan that:
(i) The representations and warranties contained in this
Agreement, each other Loan Document and each certificate or other writing
delivered to the Lenders in connection herewith are correct on and as of the
date of such Loan in all material respects as though made on and as of such
date, except to the extent that such representations and warranties expressly
relate to an earlier date; and
(ii) No Default has occurred and is continuing or would result
from the making of the Loan to be made on such date.
(b) Legality. To the best of the Borrower's knowledge, the making of
--------
such Loan shall not contravene any Requirement of Law applicable to any Lender
or the Borrower or any of its Subsidiaries, which contravention could reasonably
be expected to have a Material Adverse Effect.
(c) Borrowing Notice. The Agent shall have received a borrowing
----------------
notice pursuant to the provisions of this Agreement from the Borrower.
4.3 Determinations under Sections 4.1 and 4.2. For purposes of
-----------------------------------------
determining compliance with the conditions specified in Sections 4.1 and 4.2,
each Lender shall be deemed to have consented to, approved or accepted, or to be
satisfied with, each document or other matter required thereunder to be
consented to, approved by or accepted by, or to be satisfactory to, such Lender
-48-
unless an officer of the Agent responsible for the transactions contemplated by
the Loan Documents and holding the position of Vice President or a more senior
position has received notice from such Lender before the Closing Date or
borrowing date, as applicable, specifying such Lender's objection thereto, and
either such objection has not been withdrawn by notice to the Agent to that
effect or, if applicable, such Lender has not made available to the Agent such
Lender's ratable portion of such borrowing.
SECTION 5
AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so long as
any Commitment or Note remains outstanding and unpaid or any other amount is
owing to any Lender or the Agent hereunder:
5.1 Financial Statements. The Borrower shall furnish to the Agent and the
--------------------
Lenders:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of (i) the audited consolidated
balance sheet of the Borrower and its Subsidiaries as of the end of such year
and the related audited statements of operations, retained earnings,
stockholders' equity and cash flows for such year, setting forth in each case in
comparative form the figures for the previous year, reported on without a "going
concern" or like qualification or exception, or other qualification arising out
of the scope of the audit, by the Accountants and (ii) the unaudited
consolidating balance sheet and consolidating worksheet as of the end of such
year and unaudited consolidating statements of operations and cash flow for such
year of the Borrower and each of its Subsidiaries; and
(b) as soon as available, but in any event not later than 50 days
after the end of each fiscal quarter of the Borrower, (i) the unaudited
consolidated balance sheet and consolidating worksheet of the Borrower and its
Subsidiaries as of the end of such quarter and the related unaudited statements
of operations, retained earnings, stockholders' equity and cash flows of the
Borrower and its Subsidiaries for such quarter and the portion of the fiscal
year through the end of such quarter, setting forth in each case in comparative
form the figures for the previous year, and (ii) the unaudited consolidating
balance sheet as of such quarter-end and the related unaudited consolidating
statements of operations and cash flows for the portion of the year through such
quarter-end of the Borrower and each of its Subsidiaries, certified by a
Responsible Officer as being fairly stated in all material respects (subject to
normal year-end audit adjustments).
-49-
All such financial statements shall be complete and correct in all material
respects and be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected therein and with prior
periods (except as approved by the Accountants or a Responsible Officer, as the
case may be, and disclosed therein).
5.2 Annual Statements. The Borrower shall furnish to the Agent, with
-----------------
sufficient copies for each Lender:
(a) as soon as available but in any event within 75 days after the end
of each fiscal year of each Insurance Subsidiary of the Borrower, a copy of the
Annual Statement of such Insurance Subsidiary for such fiscal year prepared in
accordance with SAP, certified by the chief financial officer or treasurer of
such Insurance Subsidiary as being complete and correct and presenting fairly in
accordance with SAP the financial position of such Insurance Subsidiary for such
fiscal year;
(b) if requested by the Required Lenders, as soon as available but in
any event within 45 days after delivery of each Annual Statement pursuant to
Section 5.2(a), a certification without material qualification by the
Accountants stating that such Annual Statement is complete and correct and
presents fairly in accordance with SAP the relevant Insurance Subsidiary's
financial position for such fiscal year;
(c) as soon as available but in any event within 50 days after the end
of each of the first three fiscal quarters of each fiscal year of each Insurance
Subsidiary of the Borrower, a copy of such Insurance Subsidiary's quarterly
statement for such fiscal quarter, all prepared in accordance with SAP and
accompanied by the certification by of a Responsible Officer of such Insurance
Subsidiary that all such financial statements are complete and correct and
present fairly in accordance with SAP such Insurance Subsidiary's financial
position for the periods then ended;
(d) within 90 days after the end of each fiscal year of each Insurance
Subsidiary of the Borrower, a copy of such Insurance Subsidiary's "Statement of
Actuarial Opinion" furnished to the Department having jurisdiction over such
Insurance Subsidiary (or equivalent information should such Department not
require such a statement) as to the adequacy of such Insurance Subsidiary's loss
reserves. Such opinion shall be in the format prescribed by the Insurance Code
applicable to such Insurance Subsidiary;
(e) within 90 days after the end of each fiscal year of the Borrower,
Actuarial Reports representing all Insurance Subsidiaries of the Borrower
prepared by an independent actuary acceptable to the Required Lenders; and
-50-
(f) as soon as practicable after filing with the Department but in any
event within 30 days of such filing, the management discussion and analysis of
each Insurance Subsidiary of the Borrower.
5.3 Certificates; Other Information. The Borrower shall furnish to the
-------------------------------
Agent, with sufficient copies for each Lender:
(a) concurrently with the delivery of financial statements referred to
in Sections 5.1(a) and 5.1(b), and at any other time no later than 30 days
following a written request of the Agent, a duly completed Compliance
Certificate, signed by the chief financial officer of the Borrower, containing,
among other things, a computation of, and showing compliance with, each of the
applicable financial ratios and financial restrictions contained in Section 6
and to the effect that, to the best of such officer's knowledge, as of such date
no Default has occurred and is continuing.
(b) within five Business Days after the same are filed, copies of all
financial statements and reports which the Borrower or any of its Subsidiaries
may make to, or file with, the Securities and Exchange Commission or any
successor Governmental Authority;
(c) promptly but in any event within five days after the Borrower's
receipt thereof, copies of all financial reports (including management letters),
if any, submitted to the Borrower by the Accountants in connection with any
annual or interim audit of the books thereof;
(d) as soon as available and in any event not later than January 1 of
each fiscal year of the Borrower, a copy of the annual operating budget and a
new business plan for the Borrower and each Insurance Subsidiary thereof for
such fiscal year;
(e) as soon as possible and in any event within five Business Days
after a Responsible Officer has knowledge of the occurrence of a Default or, in
the good-faith determination of a Responsible Officer, a Material Adverse
Effect, the written statement by a Responsible Officer setting forth the details
of such Default or Material Adverse Effect and the action which the Borrower
proposes to take with respect thereto;
(f) (i) as soon as possible and in any event within five days after
the Borrower knows or has reason to know that any Termination Event with respect
to any Plan has occurred, a statement of a Responsible Officer describing such
Termination Event and the action, if any, which the Borrower proposes to take
with respect thereto; (ii) promptly and in any event within five Business Days
after receipt thereof by the Borrower, any of its Subsidiaries or any of its or
their ERISA Affiliates from the PBGC, copies of each notice received by the
Borrower, any of its
-51-
Subsidiaries or any of its or their ERISA Affiliates of the PBGC's intention to
terminate any Plan or to have a trustee appointed to administer any Plan; (iii)
promptly and in any event within five Business Days after the filing thereof
with the Internal Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with respect to each Single
Employer Plan maintained for or covering employees of the Borrower or any of its
Subsidiaries, if the present value of the accrued benefits under such Plan
exceeds its assets by an amount which could cause a Material Adverse Effect; and
(iv) promptly and in any event within five Business Days after receipt thereof
by the Borrower, any of its Subsidiaries or any of its or their ERISA Affiliates
from a sponsor of a Multiemployer Plan or from the PBGC, a copy of each notice
received by the Borrower, any of its Subsidiaries or any of its ERISA Affiliates
concerning the imposition or amount of withdrawal liability under Section 4202
of ERISA or indicating that such Multiemployer Plan may enter reorganization
status under Section 4241 of ERISA;
(g) promptly after the commencement thereof but in any event not later
than fifteen Business Days after service of process with respect thereto on, or
the obtaining of knowledge thereof by, the Borrower, notice of each action, suit
or proceeding before any Governmental Authority or any arbitrator as to which
the Borrower has concluded, after having an opportunity to investigate and
evaluate the factual allegations and the applicable law, that such action, suit
or proceeding could reasonably to expected to cause a Material Adverse Effect;
(h) promptly upon receipt thereof, a copy of any reports of
examination, financial examination reports or market conduct examination reports
by any Governmental Authority with respect to any Insurance Subsidiary of the
Borrower relating to such Insurance Subsidiary's insurance business;
(i) promptly after the filing thereof but in any event not later than
five Business Days thereafter, copies of all filings made by the Borrower or any
of its Subsidiaries under the Insurance Holding Company Systems Act with any
Governmental Authority, including filings that seek approval of Governmental
Authorities with respect to transactions between the Borrower or any of its
Insurance Subsidiaries and any of their Affiliates;
(j) promptly after notice thereof but in any event not later than
three Business Days thereafter, notice of actual suspension, termination,
limitation or revocation of any material license of Borrower or any of its
Subsidiaries or any License of any of the Borrower's Insurance Subsidiaries by
any Governmental Authority or of receipt of notice from any Governmental
Authority notifying the Borrower, or any of its Subsidiaries or Insurance
Subsidiaries, of a hearing relating to such a suspension, termination,
limitation or revocation, including any request by a Governmental Authority that
commits the Borrower or any of its
-52-
Insurance Subsidiaries to take, or refrain from taking, any action or that
otherwise would have a Material Adverse Effect on the authority of the Borrower
or any of its Insurance Subsidiaries to conduct its business;
(k) within three Business Days of such notice, notice of any pending
or threatened inquiry, investigation or regulatory proceeding (other than
routine inquiries, investigations or reviews) by any Governmental Authority
concerning the business, practices or operations of the Borrower or any of its
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect;
(l) promptly after a Responsible Officer's becoming aware thereof,
notice of any material change in any Insurance Code governing the investment or
dividend practices of insurance companies domiciled in the jurisdiction in which
any Insurance Subsidiary of the Borrower is domiciled;
(m) promptly after receipt thereof, (i) notice of any change or
modification to any Reinsurance Agreement, whether entered into before or after
the Closing Date, including Reinsurance Agreements, if any, that are in a runoff
mode on the Closing Date, which change or modification could reasonably be
expected to have a Material Adverse Effect on the Borrower and its Insurance
Subsidiaries taken as a whole, (ii) notice of any written notice received by any
such Insurance Subsidiary of the Borrower of denial of coverage, litigation,
claim or arbitration arising out of any Reinsurance Agreement to which such
Insurance Subsidiary is a party, and (iii) such other financial, actuarial and
other information with respect to Reinsurance Agreements as the Agent may
reasonably request;
(n) promptly upon the dissemination thereof, each written
communication from the Borrower to its shareholders generally;
(o) within five Business Days of receipt of such notice by the
Borrower or any of its Subsidiaries, written notice of any cancellation or
material adverse change in any material Insurance Policy carried by the Borrower
or such Subsidiary, except to the extent a replacement Insurance Policy having
substantially the same terms has been obtained;
(p) promptly upon receipt after the end of each fiscal year of each
Insurance Subsidiary of the Borrower, a copy of the final report to such
Insurance Subsidiary from the NAIC as to such Insurance Subsidiary's status
under the IRIS Tests, together with (if not included therein) any response
required from such Insurance Subsidiary concerning deficiencies;
(q) within ten days of any directors' meeting at which a modification
is made in the Stated Investment Policy of any
-53-
Insurance Subsidiary of the Borrower, a written report setting forth in
reasonable detail the changes to the Stated Investment Policy of such Insurance
Subsidiary;
(r) promptly upon the Borrower's delivery of the same to any rating
agency (including A.M. Best & Company, Inc. and any other rating agency
contracted with by the Borrower or any Insurance Subsidiary thereof), a copy of
any information delivered by the Borrower to such rating agency during any
period in which the rating of the Borrower or any Insurance Subsidiary thereof
is under review by such rating agency, whether such review has positive,
developing or negative rating implications;
(s) promptly upon the Borrower's receipt of the same from any rating
agency (including A.M. Best & Company, Inc. and any other rating agency
contracted with by the Borrower or any Insurance Subsidiary thereof), a copy of
any notice of action taken by such rating agency that is adverse to the Borrower
or any Subsidiary;
(t) promptly upon request by the Agent or any Lender, copies of the
plans, timetables and budgets of the Borrower and each Subsidiary for addressing
the Year 2000 Problem (together with periodic updates thereof and of expenses
incurred with respect thereto), any third-party assessments of the year 2000
remediation efforts of the Borrower or any Subsidiary, any year 2000 contingency
plan of the Borrower or any Subsidiary and any estimates of the potential
litigation exposure (if any) of the Borrower or any Subsidiary to the Year 2000
Problem; and
(u) promptly upon request by any Lender, such additional financial and
other information as any Lender may from time to time reasonably request.
5.4 Payment of Obligations. The Borrower shall, and shall cause each of
----------------------
its Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity
or before they become delinquent, as the case may be, all its obligations of
whatever nature, except where the failure to so satisfy such obligations could
not reasonably be expected to have a Material Adverse Effect or except where the
amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP or SAP, as
applicable, with respect thereto have been provided on the books of the Borrower
or such Subsidiary, as applicable.
5.5 Conduct of Business and Maintenance of Existence. The Borrower shall,
------------------------------------------------
and shall cause each Subsidiary to, (a) engage only in business of the same
general type as conducted by the Borrower or such Subsidiary as of the Closing
Date and any additional lines of business reasonably related thereto, (b)
preserve, renew and keep in full force and effect its corporate existence, (c)
take all reasonable action to maintain all rights,
-54-
registrations, licenses (including the Licenses with respect to each Insurance
Subsidiary of the Borrower), privileges and franchises necessary or desirable in
the normal conduct of its business and (d) comply with all Obligations and
Requirements of Law (except that the foregoing shall not be construed as
limiting the rights of the Borrower and its Subsidiaries to make Permitted
Acquisitions otherwise permitted hereunder).
5.6 Maintenance of Property; Insurance. The Borrower and its Subsidiaries
----------------------------------
shall:
(a) maintain, and cause each of its Subsidiaries to maintain, such
Insurance Policies as may be required by law or as are customarily maintained by
prudent companies similarly situated;
(b) maintain fire and casualty insurance on its personal property and
leasehold improvements in such amounts as are consistent with sound business
practice; and
(c) keep all of their properties in reasonably good working order and
condition in the manner customary for companies of like size in similar
businesses and as may be required for the continued conduct of their respective
businesses, except to the extent that the failure to so keep any such property,
together with the failure to so keep all other such properties, could not
reasonably be expected to have a Material Adverse Effect.
5.7 Inspection of Property; Books and Records; Discussions. The Borrower
------------------------------------------------------
shall, and shall cause each of its Subsidiaries to, (a) keep proper books of
records and account in which full, true and correct entries in conformity with
GAAP, SAP and all Requirements of Law shall be made of all material dealings and
transactions in relation to its business and activities and (b) upon reasonable
notice and at such reasonable times during usual business hours, permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time and as often as may reasonably be desired and to discuss the business,
operations, properties and financial and other condition of the Borrower or any
of its Subsidiaries with officers of the Borrower and such Subsidiaries and with
the Accountants.
5.8 Environmental Laws. The Borrower shall, and shall cause each of the
------------------
Subsidiaries to:
(a) comply with, and ensure compliance by all tenants and subtenants,
if any, with, all applicable Environmental Laws and obtain and comply in all
material respects with any and all licenses, approvals, notifications,
registrations or permits required by applicable Environmental Laws;
-55-
(b) conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions, required under
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities regarding Environmental
Laws, except to the extent that the same are being contested in good faith by
appropriate proceedings; and
(c) defend, indemnify and hold harmless the Agent and the Lenders, and
their respective employees, agents, officers and directors, from and against any
and all claims, demands, penalties, fines, liabilities, settlements, damages,
costs and expenses of whatever kind or nature, known or unknown, contingent or
otherwise, arising out of, or in any way relating to the violation of,
noncompliance with or liability under, any Environmental Law applicable to the
operations of the Borrower, any of its Subsidiaries or the Borrower's or such
Subsidiary's interest in Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including attorneys' and consultants'
fees, investigation and laboratory fees, response costs, court costs and
litigation expenses, except to the extent that any of the foregoing arise out of
the gross negligence or willful misconduct of the party seeking indemnification
therefor. This indemnity shall continue in full force and effect and survive,
for a period of three years, the termination of this Agreement and payment of
the Notes.
5.9 Use of Proceeds. The Borrower shall use the proceeds of the Loans
---------------
only for the purposes set forth in Section 3.19, and (except as specifically
contemplated by Section 3.19) not for the purpose of purchasing or carrying any
Margin Stock.
5.10 Compliance With Laws, Etc. Except as set forth in Section 5.8
-------------------------
relating specifically to Environmental Laws, the Borrower shall comply, and
cause each of its Subsidiaries to comply, in all material respects with all
Requirements of Law (including the establishing of all insurance reserves
required to the established under SAP and all Requirements of Law relating to
the business of each Insurance Subsidiary of the Borrower), except where the
failure to comply could not reasonably be expected to have a Material Adverse
Effect, such compliance to include (a) paying before the same become delinquent
all taxes, assessments and governmental charges or levies imposed upon the
Borrower or any of its Subsidiaries or upon any income, profit or Property of
the Borrower or any of its Subsidiaries and (b) paying all lawful claims which
if unpaid might become a Lien upon any such Property; provided, however, that
-------- -------
the Borrower shall not be required to pay and discharge or cause to be paid and
discharged any such tax, assessment, charge, levy or claim so long as (i) the
validity or applicability thereof is being contested in good faith by
appropriate proceedings or the failure to pay such tax, assessment, charge, levy
or claim could not reasonably be expected to have a Material Adverse Effect and
-56-
(ii) the Borrower or the affected Subsidiary shall, to the extent required by
GAAP or SAP, as applicable, have set aside on its books adequate reserves with
respect thereto.
5.11 Permits. The Borrower shall (a) obtain, maintain and preserve, and
-------
cause each of its Subsidiaries to obtain, maintain and preserve, all permits,
licenses and consents required for the business of the Borrower or any of its
Subsidiaries (including the Licenses with respect to each Insurance Subsidiary
of the Borrower) which, if not so maintained, could reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect, (b) file, and
cause each Subsidiary of the Borrower to file, with Governmental Authorities
(including the Department having jurisdiction over each such Insurance
Subsidiary) all reports and other documents required to be filed under any
Requirement of Law (including the Insurance Code applicable to each such
Insurance Subsidiary) in connection with the transactions contemplated hereby
which, if not so filed, could reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect, and (c) maintain, and cause each such
Subsidiary to maintain, public records and files in accordance with all
Requirements of Law (including the Insurance Code and the rules and regulations
of the Department and other Governmental Authorities having jurisdiction over
each such Insurance Subsidiary) which, if not so filed, could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
5.12 Leases and Licenses. The Borrower shall, and shall cause each
-------------------
Subsidiary to, (a) perform and carry out all of the provisions of all of the
leases, licenses, permits and other occupancy agreements relating to real
property or real property interests (the "Occupancy Agreements") to be performed
--------------------
by the Borrower or any of its Subsidiaries, the nonperformance of which could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, (b) appear in and defend any action in which the validity of any
of the Occupancy Agreements relating to any real property or real property
interests is at issue and (c) commence and maintain any action or proceeding
necessary to establish or maintain the validity of any of such Occupancy
Agreements or to enforce the provisions thereof. The Borrower shall provide to
the Agent true, correct and complete copies of any information relating to any
of the Occupancy Agreements as the Agent may reasonably request in writing. The
Borrower agrees to provide (or cause to be provided) to the Agent at any time,
upon written demand, any further or additional form of assignment, encumbrance
or transfer documents as may be reasonably requested by the Agent and to deliver
(or cause to be delivered) to the Agent executed copies of any such assignment,
encumbrance or transfer documents. The Borrower shall immediately give notice
to the Lenders of any default by it or any of its Subsidiaries or, to the
knowledge of the Borrower, by any other party to an Occupancy Agreement, which
-57-
causes, or could reasonably be expected to cause, a Material Adverse Effect
under any of the Occupancy Agreements it or any of its Subsidiaries receives or
delivers. The Borrower shall not, and shall not permit any of its Subsidiaries
to, execute any new Occupancy Agreements without the prior written consent of
the Agent, which consent shall not be unreasonably withheld or delayed.
5.13 Notices. The Borrower shall provide to each Lender, within five
-------
Business Days following receipt by the Borrower, copies of all notices received
by the Borrower or any of its Subsidiaries (a) under any Material Agreement that
relate to any default, any claimed force majeure or any other material provision
thereof and (b) from the Internal Revenue Service or any other taxing authority
that relate to any dispute regarding deductions, audits or any other material
matter which could reasonably be expected to have a Material Adverse Effect.
5.14 Investments. The Borrower shall cause the assets of each of its
-----------
Insurance Subsidiaries to be invested at all times so as to be in full
compliance with such Insurance Subsidiary's Stated Investment Policy, except as
otherwise permitted by the Borrower's Board of Directors and such Insurance
Subsidiaries.
5.15 Best Rating. The Borrower shall cause each of its Insurance
-----------
Subsidiaries at all times to maintain a rating by A.M. Best & Company, Inc. of
"A-" or better.
5.16 Year 2000. The Borrower shall, and shall cause each Subsidiary to,
---------
take all action necessary to assure that the computer-based systems of the
Borrower and each Subsidiary are able to operate and effectively process data,
including dates, on and after January 1, 2000. At the request of the Agent, the
Borrower shall provide the Agent assurances reasonably acceptable thereto of the
year 2000 capability of the Borrower and each Subsidiary.
SECTION 6
NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so long as
any Commitment or Note remains outstanding and unpaid or any other amount is
owing to any Lender or the Agent hereunder:
6.1 GAAP Financial Condition Covenants. The Borrower shall not:
----------------------------------
(a) Maximum Debt Ratio. Permit the ratio of Total Debt to Total
------------------
Capitalization to exceed 0.35 to 1.00 at any time.
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(b) Minimum Fixed Charge Coverage Ratio. Permit the Fixed Charge
-----------------------------------
Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less
than (i) 2.00 to 1.00 for each such quarter ending on or after March 31, 1999
and on or before March 31, 2002 or (ii) 1.50 to 1.00 for each such quarter
ending after March 31, 2002.
(c) Minimum Tangible Net Worth. Permit the consolidated Tangible Net
--------------------------
Worth of the Borrower and its Subsidiaries as of the end of any fiscal quarter
of the Borrower to be less than the sum of (i) 90% of the consolidated Tangible
Net Worth of the Borrower and its Subsidiaries as of December 31, 1998 (i.e.,
----
$324,020,000), plus (ii) 100% of the aggregate amount of consolidated equity
raised by the Borrower and its Subsidiaries after December 31, 1998, plus (iii)
50% of the aggregate amount of consolidated profits (without deduction for any
losses) earned by the Borrower and its Subsidiaries after December 31, 1998,
minus (iv) the aggregate price (but not exceeding $15,000,000) paid by the
Borrower for its repurchase after the date hereof of outstanding shares of the
Borrower.
(d) Maximum Capital Expenditures. Make or commit to make, or permit
----------------------------
any Subsidiary to make or commit to make, any Capital Expenditure, except for
Capital Expenditures not exceeding $10,000,000 in the aggregate for the Borrower
and its Subsidiaries for each fiscal year of the Borrower.
6.2 SAP Financial Condition Covenants. The Borrower shall not:
---------------------------------
(a) Maximum Operating Leverage. Permit the Operating Leverage as of
--------------------------
the end of any fiscal quarter of the Borrower to exceed 1.50 to l.00.
(b) Minimum Policyholder Surplus. Permit the Policyholder Surplus of
----------------------------
any of the Borrower's Insurance Subsidiaries as of the end of any fiscal quarter
of the Borrower to be less than the sum of (i) 90% of such Insurance
Subsidiary's Policyholder Surplus as of December 31, 1998, plus (ii) 50% of the
aggregate amount of additions to such Insurance Subsidiary's Policyholder
Surplus (without deduction for any reductions) after December 31, 1998, minus
(iii) 100% of the aggregate amount of any dividend paid by such Insurance
Subsidiary to the Borrower after December 31, 1998, to the extent that the
proceeds of such dividend are invested by the Borrower in another Insurance
Subsidiary of the Borrower, plus (iv) 100% of the aggregate amount of any
investment by the Borrower in such Insurance Subsidiary after December 31, 1998,
to the extent that such investment is funded from a dividend made to the
Borrower by another Insurance Subsidiary of the Borrower, plus (v) 50% of the
aggregate amount of any other equity contributed to such Insurance Subsidiary
after December 31, 1998.
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(c) Minimum Total Adjusted Capital Ratio. Permit the ratio of Total
------------------------------------
Adjusted Capital to Authorized Control Level Risk Based Capital of any Insurance
Subsidiary of the Borrower as of the end of any fiscal year thereof to be less
than 4.00 to 1.00. For purposes of this Section, "Total Adjusted Capital" and
----------------------
"Authorized Control Level Risk Based Capital" shall have the meanings assigned
--------------------------------------------
to such terms under the NAIC Risk-Based Capital Model Act as promulgated by the
NAIC as of the date hereof.
(d) Maximum Non-Investment Grade Investments. Permit the aggregate
----------------------------------------
Non-Investment Grade Investments (excluding any investment of up to $20,000,000
in the Xxxxxxx Hills Real Estate) of the Borrower's Insurance Subsidiaries as of
the end of any fiscal quarter of the Borrower to be greater than an amount equal
to the lesser of (i) 10% of the aggregate value of the Investment Portfolios of
such Insurance Subsidiaries (as reported separately on their respective SAP
financial statements for such fiscal quarter) and (ii) 50% of the consolidated
capital and surplus of the Borrower and its Subsidiaries as of the end of such
fiscal quarter.
6.3 Limitation on Indebtedness. The Borrower shall not, and shall not
--------------------------
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness except for:
(a) Indebtedness created hereunder and under the other Loan Documents;
(b) Indebtedness of the Borrower listed in Schedule 3.1(f);
(c) Indebtedness (i) under any Interest Rate Agreement for bona fide
hedging purposes, (ii) in respect of any performance bond or letter of credit
(other than any referred to in Section 6.3(e)) issued for the account of the
Borrower or any Subsidiary in the ordinary course of business of the Borrower or
such Subsidiary and that has been adequately reserved for in accordance with
GAAP or SAP, as applicable, or (iii) for bank overdrafts that are incurred by
the Borrower or any Subsidiary in the ordinary course of business and that are
promptly repaid;
(d) Lease Expenses;
(e) Indebtedness in respect of letters of credit issued for the
account of any of the Borrower's Insurance Subsidiaries for reinsurance
purposes, provided that such Indebtedness (including any such Indebtedness
referred to in Section 6.3(b)) does not exceed $50,000,000 at any time
outstanding;
(f) Indebtedness that has been subordinated to the Obligations
pursuant to a subordination agreement in form and substance satisfactory to the
Required Lenders; and
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(g) not more than $20,000,000 of Indebtedness of the Borrower at any
time outstanding, in addition to the Indebtedness referred to above in this
Section 6.3.
6.4 Limitation on Liens. The Borrower shall not, and shall not permit any
-------------------
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien, or
enter into any agreement with any other Person not to create any Lien, upon any
of its property, assets or revenues, including any Capital Stock or other
Securities issued by any Subsidiary of the Borrower, whether now owned or
hereafter acquired, except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens for taxes not yet delinquent or which are being contested in
good faith by appropriate proceedings; provided, however, that adequate reserves
-------- -------
with respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as applicable, in conformity with GAAP;
(c) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are not overdue for a period of
more than 45 days or which are being contested in good faith by appropriate
proceedings;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(e) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, could not reasonably be expected to cause a Material Adverse Effect;
(g) Liens listed in Schedule 3.1(g), securing Indebtedness permitted
by Section 6.3(b), as renewed from time to time; provided, however, that no such
-------- -------
Lien is spread to cover any additional property after the Closing Date and that
the amount of Indebtedness secured thereby is not increased;
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(h) Liens securing reinsurance obligations of any Insurance Subsidiary
of the Borrower, but only if such Liens are incurred in the ordinary course of
business; and
(i) Liens on Investment Grade Securities of the Borrower or any
Subsidiary, securing Indebtedness permitted by Section 6.3(e).
6.5 Limitation on Fundamental Changes. The Borrower shall not, and shall
---------------------------------
not permit any of its Subsidiaries to, (a) amend its corporate charter or bylaws
in any way that could reasonably be expected to have a Material Adverse Effect,
(b) permit (to the extent within its control), vote for, or take any other
action to commence or acquiesce to, any bankruptcy or similar proceeding, (c)
enter into any merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), except that (i) the
Borrower and its Subsidiaries may make Permitted Acquisitions, (ii) a Subsidiary
of the Borrower may consolidate or merge with a wholly owned Subsidiary of the
Borrower if (A) immediately before and after giving effect to such consolidation
or merger, no Default shall or would exist, (B) the surviving entity shall be a
wholly owned Subsidiary and (C) any such consolidation or merger would not cause
any Governmental Authority to restrict the ability of any Insurance Subsidiary
of the Borrower to pay dividends or otherwise make distributions to the Borrower
or any of its Subsidiaries in any manner and (iii) in connection with any
Permitted Acquisition, the Borrower or any Subsidiary may merge with or into any
other Person if, after giving effect to the transactions involved in such
Permitted Acquisition, the surviving entity shall be the Borrower or a wholly
owned Subsidiary, (d) convey, sell, lease, assign, transfer or otherwise dispose
of all or substantially all of its property, business or assets or (e)
recapitalize.
6.6 Limitation on Disposition of Assets. The Borrower shall not, and
-----------------------------------
shall not permit any of its Subsidiaries to, make any Asset Disposition, except
that the Borrower and its Subsidiaries shall be permitted to (a) make Asset
Dispositions in the ordinary course of business, (b) sell or exchange used or
obsolete equipment outside of the ordinary course of business to the extent that
the proceeds of such sale are applied towards, or such equipment is exchanged
for, similar replacement equipment, (c) sell marketable securities, including
Margin Stock, liquid investments and other financial instruments, (d) make
transfers of loss reserves and related assets by reinsurance in an aggregate
amount not to exceed $25,000,000, (e) transfer loss reserves among Insurance
Subsidiaries of the Borrower pursuant to the Inter-Company Pooling Agreement
dated April 30, 1999 and effective as of January 1, 1999 (the "Pooling
-------
Agreement") among the Borrower's Insurance Subsidiaries as of the date of this
---------
Agreement or pursuant to a successor pooling agreement among the Borrower's
Insurance Subsidiaries at the time such successor agreement is entered into
(provided that any such successor
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agreement contains substantially the same terms and conditions as the Pooling
Agreement, other than in respect of the pooling percentages applicable to the
Borrower's Insurance Subsidiaries), (f) sell the Xxxxxxx Hills Real Estate and
(g) make other Asset Dispositions after December 31, 1998 for aggregate
consideration not to exceed $5,000,000.
6.7 Limitation on Restricted Payments. The Borrower shall not declare or
---------------------------------
pay any dividend in cash or in stock (other than a dividend payable solely in
shares of Capital Stock in the Borrower) on, or make any payment on account of,
or set apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of, any shares of any
class of Capital Stock of the Borrower or any warrants or options to purchase
any such Capital Stock, whether now or hereafter outstanding (the foregoing
being "Restricted Payments"); provided, however, that the Borrower may make a
------------------- -------- -------
Restricted Payment so long as no Default shall exist either prior to or as a
consequence of making such Restricted Payment.
6.8 Unfunded Liabilities. The Borrower shall not permit unfunded
--------------------
liabilities to exceed $1,000,000 in the aggregate at any time for any and all
Plans maintained for or covering employees of the Borrower.
6.9 Limitation on Investments, Loans and Advances. The Borrower shall
---------------------------------------------
not, and shall not permit any of its Subsidiaries to, make any advance, loan,
extension of credit or capital contribution to any Person, purchase any Capital
Stock or other Securities of any Person, make any Acquisition or make any other
investment in any Person (any of the foregoing, an "investment"), except:
----------
(a) investments in High Quality Securities, Investment Grade
Securities and Non-Investment Grade Investments (subject to Section 6.2(d));
(b) extensions of trade credit in the ordinary course of business;
(c) advances to employees of the Borrower for travel, entertainment
and relocation expenses in the ordinary course of business;
(d) Permitted Acquisitions; and
(e) secured or unsecured loans to any Person not in excess of $500,000
in the aggregate at any one time.
6.10 Management Fees. The Borrower shall not, and shall not permit any
---------------
Subsidiary to, pay any management fees for services rendered, except payments to
wholly owned Subsidiaries or to the Borrower.
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6.11 Transactions with Affiliates. The Borrower shall not, and shall not
----------------------------
permit any Subsidiary to, enter into any transaction, including any purchase,
sale, lease or exchange of property or the rendering of any service, on a basis
less favorable to the Borrower or such Subsidiary in any material respect than
if such transaction were not with an Affiliate of the Borrower, other than (a)
advances made to employees of the Borrower or any Subsidiary in the ordinary
course of business in connection with their employment, (b) transactions in
which the aggregate rental value, remuneration or other consideration (including
the value of a loan), together with the aggregate rental value, remuneration or
other consideration (including the value of a loan) of all such other
transactions consummated in the year during which such transaction is proposed
to be consummated, does not exceed $1,000,000, (c) management or other similar
agreements entered into among the Borrower and any Subsidiaries in the ordinary
course of business, (d) payments to officers or directors of the Borrower or any
Subsidiaries in the ordinary course of their employment or (e) dividends
otherwise permitted by this Agreement.
6.12 Fiscal Year. The Borrower shall not permit the fiscal year of the
-----------
Borrower or any of its Subsidiaries to end on a day other than December 31.
SECTION 7
EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Note when due;
the Borrower shall fail to pay any interest on any Note within three Business
Days after any such interest becomes due; or the Borrower shall fail to pay any
other amount payable hereunder within five Business Days after any such other
amount becomes due;
(b) Any representation or warranty made herein or in any other Loan
Document, or which is contained in any certificate, document or financial or
other statement furnished at any time under or in connection with this Agreement
or any other Loan Document, shall prove to have been incorrect in any material
respect when made;
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 5.2(e), 5.3(e), 5.4, 5.5, 5.9 or 5.15 or in any
provision of Section 6;
(d) The Borrower shall default in the observance or performance of any
other agreement contained in this Agreement or in any other Loan Document (other
than as provided in paragraphs
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(a) through (c) of this Section), and such default shall continue unremedied for
a period of thirty Business Days after the earlier of (i) receipt by Borrower of
notice thereof from the Agent to the Borrower and (ii) actual knowledge thereof
by a senior officer of the Borrower; or any provision of any Loan Document shall
at any time for any reason be declared null and void;
(e) The validity or enforceability of any Loan Document shall at any
time be contested by the Borrower or any of its Subsidiaries; or a proceeding
shall be commenced by the Borrower or any of its Subsidiaries or by any
Governmental Authority or other Person having jurisdiction over the Borrower,
seeking to establish the invalidity or unenforceability thereof; or the Borrower
or any of its Subsidiaries shall deny that it has any liability or obligation
purported to be created under any Loan Document;
(f) the Borrower or any Subsidiary shall fail to pay any principal of,
or interest or premium on, any Indebtedness of the Borrower or such Subsidiary
(as the case may be) that is outstanding in a principal amount of at least
$1,000,000 in the aggregate (but excluding Indebtedness outstanding hereunder),
when the same becomes due and payable (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise), and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Indebtedness; any other event shall occur or
condition shall exist under any agreement or instrument relating to any such
Indebtedness and shall continue after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of (with the giving of
notice or the lapse of time or both), the maturity of such Indebtedness; or any
such Indebtedness shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), before the
stated maturity thereof;
(g) (i) The Borrower or any Subsidiary shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it or any of its Subsidiaries, seeking to adjudicate it or any
of its Subsidiaries a bankrupt or insolvent or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or any of its Subsidiaries or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or any of its Subsidiaries or for all or any substantial
part of the assets of the Borrower or any of its Subsidiaries; (ii) the Borrower
or any of its Subsidiaries shall make a general assignment for the benefit of
its creditors; (iii) there shall be commenced against the Borrower or any of its
Subsidiaries any
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case, proceeding or other action of a nature referred to in clause (i) or (ii)
above which (A) results in the entry of an order for relief or any such
adjudication or appointment and (B) remains undismissed, undischarged, unstayed
or unbonded for a period of 60 days; (iv) there shall be commenced against the
Borrower or any of its Subsidiaries any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of the assets of the Borrower or any of its
Subsidiaries which results in the entry of an order for any such relief which
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; (v) the Borrower or any of its Subsidiaries
shall take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in clause (i), (ii), (iii) or
(iv) above; or (vi) the Borrower or any of its Subsidiaries shall generally not,
or shall be unable to, or shall admit in writing its inability to, pay its debts
as they become due or shall make a general assignment for the benefit of
creditors;
(h) (i) Any Person shall engage in any nonexempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan which would subject the Borrower or any of its Subsidiaries
to any tax, penalty, or other liabilities in the aggregate exceeding $1,000,000;
(ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA),
whether or not waived, shall exist with respect to any Plan; (iii) a Reportable
Event shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee could reasonably be expected to result
in the termination of such Plan for purposes of Title IV of ERISA; (iv) any
Single Employer Plan shall terminate for purposes of Title IV of ERISA (other
than a standard termination); or (v) the Borrower or any Commonly Controlled
Entity could reasonably be expected to incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan;
and in each case regarding clauses (ii) through (v) above, such event or
condition, together with all other such events or conditions, if any, could
reasonably be expected to cause a Material Adverse Effect;
(i) One or more judgments or decrees shall be entered against the
Borrower and/or any of its Subsidiaries aggregating in excess of $1,000,000, and
the portion of all such judgments or decrees in excess of $1,000,000 shall not
have been vacated, discharged, stayed or bonded pending appeal (or the bonding
requirement waived pending appeal) within thirty days from the entry thereof or
in any event five days before the date of any sale pursuant to such judgment or
decree, unless the payment of such judgment is covered in full by insurance as
to which the carrier has acknowledged liability in writing; or a nonmonetary
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judgment or order shall be entered against the Borrower or any of its
Subsidiaries that could reasonably be expected to have a Material Adverse
Effect, and either (i) enforcement proceedings shall have been commenced by any
Person upon such judgment (which has not been stayed pending appeal) or (ii)
there shall be any period of five 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;
(j) The Borrower shall cease to own 100% of the Capital Stock and
Voting Power of each of its Subsidiaries, or a Change of Control shall have
occurred;
(k) Any action or proceeding shall be instituted by any Governmental
Authority seeking to place any Subsidiary of the Borrower under supervision,
conservation or rehabilitation, or a receiver shall be appointed for such
Subsidiary;
(l) The Borrower or any of its Subsidiaries shall cease to be Solvent,
shall cease to conduct its business as now conducted or shall be enjoined,
restrained or in any way prevented by court order from conducting all or any
material part of its business affairs;
(m) Any change in any Insurance Code shall be made which affects the
dividend practices of any Insurance Subsidiary of the Borrower and that could
reasonably be expected to have a Material Adverse Effect on the Borrower or any
of its Insurance Subsidiaries;
(n) Any material change occurs in the status of any Reinsurance
Agreement of any Insurance Subsidiary of the Borrower that could reasonably be
expected to have a Material Adverse Effect on the Borrower or such Insurance
Subsidiary;
(o) Any permit, license, approval or authorization required for the
lawful ownership, lease, control, use, operation, management or maintenance of
the businesses of the Borrower or any of its Subsidiaries, including any License
with respect to an Insurance Subsidiary of the Borrower, the loss of which could
reasonably be expected to have a Material Adverse Effect, shall (i) be canceled,
terminated, rescinded, annulled, revoked, suspended, limited, amended or
otherwise modified or (ii) no longer be in full force and effect; or
(p) Any material provision of any Loan Document, after delivery
thereof pursuant to the provisions hereof, shall, for any reason other than an
act or omission by the Agent, cease to be valid or enforceable in accordance
with its terms, and such cessation could reasonably be expected to have a
Material Adverse Effect;
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then, and in any such event, (i) if such event is an Event of Default specified
in paragraph (g) above, automatically the Loans made to the Borrower hereunder
(with accrued interest thereon, including interest accrued after the filing of a
petition initiating any proceeding referred to in paragraph (g) above) and all
other Obligations shall immediately become due and payable, and (ii) if such
event is any other Event of Default, the Agent may with the consent of the
Required Lenders, and shall upon the request of the Required Lenders, in either
case by notice of default to the Borrower, declare the Loans (with accrued
interest thereon) and all other Obligations under this Agreement and the Notes
to be due and payable forthwith, whereupon the same shall immediately become due
and payable. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived by
the Borrower.
SECTION 8
THE AGENT
8.1 Appointment. Each Lender hereby irrevocably designates and appoints
-----------
UBOC as Agent of such Lender under this Agreement and the other Loan Documents,
and each Lender irrevocably authorizes UBOC as the Agent for such Lender, to
take such action on its behalf under the provisions of this Agreement and the
other Loan Documents and to exercise such powers and perform such duties as are
expressly delegated to the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Agent shall not have any duties or responsibilities, except those
expressly set forth herein, or any fiduciary relationship with any Lender, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist that bind the Agent in such capacity.
8.2 Delegation of Duties. The Agent may execute any of its duties under
--------------------
this Agreement and the other Loan Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by it with
reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
----------------------
directors, employees, agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (b)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the
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Borrower or any of its Subsidiaries or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate, report, statement or
other document referred to or provided for in, or received by the Agent under or
in connection with, this Agreement or any other Loan Document or for the value,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or the Notes or any other Loan Document or for any failure of the
Borrower. Except as to the receipt of principal, interest or fees hereunder, the
Agent shall not be under any obligation to any Lender to ascertain or to inquire
as to the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower or any of its Subsidiaries;
provided, however, that the Agent agrees to make such inquiries and inspections
-------- -------
as may reasonably be requested by any Lender.
8.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
-----------------
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation reasonably believed
by it to be genuine and correct and to have been signed, sent or made by the
proper Person or Persons and upon advice and statements of legal counsel
(including counsel to the Borrower), the Accountants and independent accountants
and other experts selected by the Agent. The Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement or any other Loan Document unless it shall first
receive such advice or concurrence of the Required Lenders or all Lenders, as it
deems appropriate, or unless it shall first be indemnified to its satisfaction
by the Lenders against any and all liability and expense (except those incurred
as a result of the Agent's gross negligence or willful misconduct) which may be
incurred by it by reason of taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting, or in refraining from
acting, under this Agreement and the Notes and the other Loan Documents in
accordance with a request of the Required Lenders or all Lenders, as may be
required, and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
8.5 Notice of Default. Neither the Agent nor any Lender shall be deemed
-----------------
to have knowledge or notice of the occurrence of any Default hereunder unless
such Person has received notice from the Agent, a Lender or the Borrower
referring to this Agreement, describing such Default and stating that such
notice is a "notice of default." In the event that the Agent or any Lender
receives such a notice, the Agent or such Lender, as the case may be,
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shall give notice thereof to the Agent and the Lenders. The Agent shall take
such action with respect to such Default as shall be reasonably directed by the
Required Lenders or all Lenders, as appropriate; provided, however, that unless
-------- -------
and until the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from taking such action,
with respect to such Default as it shall deem advisable in the best interests of
the Lenders.
8.6 Nonreliance on Agent and Other Lenders. Each Lender expressly
--------------------------------------
acknowledges that none of the Agent or any of its respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition, and creditworthiness of the Borrower and the
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents 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 analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition, and creditworthiness of the
Borrower and the Subsidiaries. The Agent agrees to promptly furnish to each
Lender a copy of all notices, reports and other documents received by it from
the Borrower; provided, however, that the Agent shall not have any duty or
-------- -------
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower or any of its
Subsidiaries which may otherwise come into the possession of the Agent or any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates
except such as may come into the possession of the employees of Agent then
having the responsibility for the administration of this Agreement.
8.7 Indemnification. The Lenders agree to indemnify the Agent in its
---------------
capacity as such (to the extent not reimbursed by the Borrower and without
limiting the obligation of such Persons to do so), ratably according to the
ratio that the Commitments of each Lender bear to all of the Commitments, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs (including the allocated cost of internal
counsel), expenses or disbursements of any kind
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whatsoever which may at any time (including at any time following the payment of
the Notes) be imposed on, incurred by or asserted against the Agent, in its
capacity as such, but not as a Lender hereunder, in any way relating to or
arising out of this Agreement, any of the other Loan Documents, any documents
contemplated by or referred to herein or therein, the transactions contemplated
hereby or thereby or any action taken or omitted by the Agent under or in
connection with any of the foregoing; provided, however, that no Lender shall be
-------- -------
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent they result from the Agent's gross negligence or willful
misconduct. The agreements in this Section shall survive the payment of the
Notes and all other amounts payable hereunder.
8.8 UBOC in Its Individual Capacity. UBOC and its Affiliates may make
-------------------------------
loans to, accept deposits from, and generally engage in any kind of business
with, the Borrower and the Subsidiaries as though UBOC were not the Agent
hereunder and under the other Loan Documents. With respect to the Commitments
of UBOC, the Loans made by UBOC and the Notes issued to UBOC, UBOC shall have
the same rights and powers under this Agreement and the other Loan Documents as
any other Lender, and UBOC may exercise the same as though it were not the
Agent. The terms "Lender" and "Lenders" shall include UBOC in its individual
------ -------
capacity.
8.9 Successor Agent. The Agent may resign as Agent upon 30 days' notice
---------------
to the Lenders, and the Required Lenders may at any time remove the Agent. If
the Agent shall be removed or shall resign as Agent under this Agreement and the
other Loan Documents, then the Required Lenders shall, with the Borrower's
consent (which consent shall not be unreasonably withheld or delayed and in any
event shall not be required if a Default has occurred and is continuing),
appoint from among the Lenders a successor agent for the Lenders, whereupon (a)
such successor agent shall succeed to the rights, powers and duties of the
Agent, (b) the term "Agent" shall mean such successor agent, effective upon its
appointment, and (c) the former Agent's rights, powers and duties as Agent shall
be terminated, in each case without any other or further act or deed on the part
of such former Agent, any of the other parties to this Agreement or any holders
of the Notes. After any retiring Agent's removal or resignation as Agent, the
provisions of this Section 8 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement and the
other Loan Documents.
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SECTION 9
MISCELLANEOUS
9.1 Amendments and Waivers. Neither this Agreement, any Note, any other
----------------------
Loan Document, nor any terms hereof or thereof may be amended, waived or
otherwise modified except in accordance with the provisions of this Section. No
amendment or waiver of any provision of any Loan Document, or consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same is in writing and signed by the Required Lenders and, in the case of any
such amendment, the Borrower, and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no such amendment, waiver or consent shall: (a)
-------- -------
reduce the amount or extend the maturity of any Note or any installment due
thereon, or reduce the rate or extend the time of payment of interest thereon,
or reduce the amount or extend the time of payment of any fee, indemnity or
reimbursement payable to any Lender, in each case without the written consent of
the Lender affected thereby; (b) (i) amend, modify or waive any provision of
this Section or reduce the percentage specified in, or otherwise modify the
definition of, Required Lenders, (ii) consent to the assignment or transfer by
the Borrower of any of its rights and obligations under any Loan Document, (iii)
release the Borrower from any material liability under any Loan Document, (iv)
amend, modify or waive, directly or indirectly, any of the provisions of Section
2.1(e), 2.3 or 2.9 or (v) amend, modify or waive any provision of any Loan
Document requiring the consent or approval of all Lenders, in each case without
the written consent of all of the Lenders; (c) amend, modify or waive any
provision of Section 8 without the written consent of the then Agent; or (d)
amend, modify or waive any provision of this Agreement requiring the consent or
approval of the Required Lenders, in each case without the written consent of
the Required Lenders. Any such amendment, waiver and consent shall apply
equally to each of the Lenders and shall be binding upon the Borrower, the
Lenders, the Agent and all future holders of the Notes. In the case of any
waiver, the Borrower, the Lenders and the Agent shall be restored to their
former position and rights hereunder and under the outstanding Notes and any
other Loan Documents, and any Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or other Default,
or impair any right consequent thereon.
9.2 Notices. All notices, requests, demands or other communications to or
-------
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or 3 days
after being deposited in the United States mail, certified and postage prepaid
and return receipt requested, or, in the case of telecopy notice, when received,
in each case addressed to the parties at their addresses as set forth on
Schedule 2 (or, in the
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case of the Borrower, on its signature page hereto) or in the Assignment and
Acceptance pursuant to which a Person becomes a party hereto, or to such other
address as may be hereafter notified by the respective parties hereto; provided,
--------
however, that any notice, request or demand to or upon the Agent or the Lenders
-------
pursuant to Section 2.1, 2.2, 2.3, 2.4, 2.8 or 2.11 or any notice to the
Borrower pursuant to Section 7 shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No failure to exercise and no delay
------------------------------
in exercising, on the part of the Agent or any Lender, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. The rights, remedies, powers and privileges herein
provided are cumulative and not exclusive of any rights, remedies, powers and
privileges provided by law.
9.4 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement (but shall not be deemed to be restated unless
otherwise expressly provided for).
9.5 Payment of Expenses and Taxes. The Borrower agrees, whether or not
-----------------------------
the transactions contemplated hereby are consummated, (a) to pay or reimburse
the Agent for all its reasonable costs and out-of-pocket expenses incurred in
connection with the preparation and execution of, and any amendment, waiver or
consent in respect of, this Agreement, the Notes and the other Loan Documents,
and any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby and
thereby, including the reasonable fees and disbursements of outside counsel to
the Agent and the allocated reasonable costs of internal counsel to the Agent
and each Lender, (b) after the occurrence and during the continuance of a
Default, to pay or reimburse the Agent and each Lender for all its reasonable
costs and out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the other Loan Documents and
any such other documents, in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
"workout" or in connection with any insolvency or bankruptcy proceeding,
including reasonable legal fees and disbursements of outside counsel to the
Agent and each Lender and the allocated reasonable cost of internal counsel to
the Agent and each Lender, (c) to pay, and indemnify and hold harmless each
Lender and the Agent from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes
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(but not including Excluded Taxes), if any, which may be payable or determined
to be payable in connection with the execution and delivery of, or consummation
or administration of any of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes, the other Loan Documents and any such other documents
and (d) to pay, and indemnify and hold harmless each Lender and the Agent from
and against, any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs (including the allocated reasonable
cost of internal counsel and the reasonable legal fees and disbursements of
outside counsel to the Lenders and the Agent), expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement, the Notes, the other Loan
Documents and any such other documents or the use of the proceeds of the Loans
(all the foregoing, collectively, the "indemnified liabilities"); provided,
----------------------- --------
however, that the Borrower shall have no obligation hereunder to the Agent or
-------
any Lender with respect to indemnified liabilities arising from the gross
negligence or willful misconduct of the Agent or such Lender or their agents or
attorneys-in-fact. The agreements in this Section shall survive repayment of the
Notes and all other amounts payable hereunder.
9.6 Successors and Assigns; Participation; Purchasing Lenders.
---------------------------------------------------------
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes and their
respective successors and assigns, except that the Borrower may not assign,
transfer or delegate any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Any Lender may at any time sell to one or more banks or other
entities ("Participants") participating interests in the rights of such Lender
------------
hereunder and under the other Loan Documents. A Participant shall have the
right to vote only on the extension of the regularly scheduled maturity of
principal or interest under a Note or the reduction of the principal amount or
rate of interest of a Note. In the event of any such sale by a Lender of a
participating interest to a Participant, such Lender's obligations under this
Agreement to the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance thereof, such Lender
shall remain the holder of its Note for all purposes under this Agreement and
the other Loan Documents, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents.
(c) Any Lender may at any time sell to any of its Affiliates, to any
Lender or any Affiliate thereof, or to one or
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more additional lenders or financial institutions that are approved by the
Borrower, such approval not to be unreasonably withheld or delayed and in any
event not to be required in the case of any such sale to a Lender or an
Affiliate thereof or if an Event of Default has occurred and is continuing
("Purchasing Lenders"), all or any part of its rights and obligations under
------------------
this Agreement, the Notes and the other Loan Documents pursuant to an Assignment
and Acceptance substantially in the form of Exhibit B, executed by such
Purchasing Lender and such transferor Lender, and delivered to the Agent for its
acceptance and recording in the Register, accompanied (except in the case of an
assignment by a Lender to an Affiliate thereof) by a $3,000 processing fee;
provided, however, that any such sale must result in the Purchasing Lender
-------- -------
having an interest of at least $5,000,000 in aggregate amount of obligations
under this Agreement and the other Loan Documents. Upon such execution and
delivery, from and after the transfer effective date determined pursuant to such
assignment document, (i) the Purchasing Lender thereunder shall be a party
hereto and, to the extent provided in the Assignment and Acceptance, have the
rights and obligations of a Lender hereunder (including the obligation to comply
with Section 2.12(b)) with a Facility A Commitment and a Facility B Commitment
as set forth therein, and (ii) the transferor Lender thereunder shall, to the
extent of such assigned portion and as provided in the Assignment and
Acceptance, be released from its obligations under this Agreement and the other
Loan Documents (and, in the case of an Assignment and Acceptance covering all or
the remaining portion of a transferor Lender's rights and obligations under this
Agreement, such transferor Lender shall cease to be a party hereto). Any such
Assignment and Acceptance shall be deemed to amend this Agreement to the extent,
and only to the extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Commitment percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement and the other Loan
Documents. The Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for the surrendered Notes, appropriately completed new Notes
to the order of such Purchasing Lender and transferor Lender.
(d) The Agent shall maintain at its address referred to in Section
9.2 a copy of each Assignment and Acceptance delivered to it and a register (the
"Register") for the recordation of the names and addresses of the Lenders and
---------
the Commitments of, and principal amounts of the Loan owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence
of manifest error, and the Borrower, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as the owner of the Loans recorded
therein for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any
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reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by a
transferor Lender and Purchasing Lender (and, in the case of a Purchasing Lender
that is not then a Lender or an Affiliate thereof, by the Borrower and the
Agent), together with the processing fee referred to in Section 9.6(c), the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii) on the
effective date determined pursuant thereto, record the information contained
therein in the Register and give notice of such acceptance and recordation to
the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to any
Participant and any Purchasing Lender (each, a "Transferee"), and to any
----------
prospective Transferee, any and all financial information in such Lender's
possession concerning the Borrower and its Subsidiaries and Affiliates which has
been delivered to such Lender by or on behalf of the Borrower pursuant to this
Agreement or any other Loan Document or which has been delivered to such Lender
by or on behalf of the Borrower in connection with such Lender's credit
evaluation of the Borrower and its Subsidiaries and Affiliates prior to becoming
a party to this Agreement; provided, however, that such Transferee or
-------- -------
prospective Transferee agrees to maintain the confidentiality of such
information in accordance with the provisions of Section 9.16.
(g) Nothing herein shall prohibit any Lender from pledging or
assigning any of its rights under its Notes to any Federal Reserve Bank in
accordance with any Requirement of Law.
9.7 Adjustments; Setoff.
-------------------
(a) If any Lender (a "benefited Lender") shall at any time receive
----------------
any payment of all or part of its Loans, or interest thereon, or fees (whether
voluntarily or involuntarily, by setoff, pursuant to events or proceedings of
the nature referred to in Section 7(g) or 8.8, or otherwise), in a greater
proportion than any such payment to any other Lender, if any, in respect of such
other Lender's Loans, or interest thereon, or fees, such benefited Lender shall
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or fees, as shall be necessary to cause such benefited Lender to
share the excess payment ratably with each of the Lenders; provided, however,
-------- -------
that if all or any portion of such excess payment is thereafter recovered from
such benefited Lender, such purchase shall be rescinded, and the purchase price
and benefits returned, to the extent of such recovery, but without interest.
The Borrower agrees that each Lender so purchasing a portion of another Lender's
Loans may exercise all rights of payment (including rights of setoff) with
respect to such portion as fully as if such Lender were the direct holder of
such portion.
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(b) Subject to Section 9.7(a), in addition to any rights and remedies
of the Lenders provided by law, with the prior consent of the Agent, each Lender
shall have the right, exercisable upon the occurrence and during the continuance
of an Event of Default and acceleration of the Obligations pursuant to Section
7, without prior notice to the Borrower, any such notice being expressly waived
by the Borrower to the extent permitted by applicable law, to set off,
appropriate and apply against any such Obligations any and all deposits (general
or special, time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof or bank controlling
such Lender to or for the credit or the account of the Borrower. Each Lender
agrees promptly to notify the Borrower after any such setoff and application
made by such Lender; provided, however, that the failure to give such notice
-------- -------
shall not affect the validity of such setoff and application.
9.8 Counterparts. This Agreement may be executed by one or more of the
------------
parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
9.9 Severability. 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, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.10 Integration. This Agreement, together with the other Loan Documents,
-----------
represents the entire agreement of the Borrower, the Agent and the Lenders with
respect to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Agent or any Lender relative to the subject
matter hereof not expressly set forth or referred to herein, in the other Loan
Documents or in the related fee letters referred to herein.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
CALIFORNIA (WITHOUT REFERENCE TO ITS CHOICE-OF-LAW RULES).
9.12 Alternative Dispute Resolution.
------------------------------
(a) Claims Subject to Judicial Reference; Selection of Referee. All
----------------------------------------------------------
Claims, including any and all questions of law or fact relating thereto, shall,
at the written request of the
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Borrower or the Agent (together the "Parties," provided that, in the case of any
-------
Claim not involving the Borrower, the affected Lender(s) shall be considered
"Parties" hereunder), be determined by Reference. The Parties shall select a
single neutral referee, who shall be a retired state or federal court judge with
at least five years of judicial experience in civil matters. In the event that
the Parties cannot agree upon a referee, the referee shall be appointed by a
court having jurisdiction over the same. The Borrower, on the one hand, and the
Lenders (taken as a whole), on the other hand, shall bear equally the fees and
expenses of the referee unless the referee provides otherwise in the statement
of decision; provided, however, that if the Borrower is not a party to the
-------- -------
relevant Claim, then the Parties to such Claim shall bear such fees and expenses
equally among themselves unless the referee provides otherwise in the statement
of decision.
(b) WAIVER OF JURY TRIAL. IN CONNECTION WITH A REFERENCE OR ANY
--------------------
OTHER ACTION OR PROCEEDING, WHETHER BROUGHT IN STATE OR FEDERAL COURT, THE
PARTIES HEREBY EXPRESSLY, INTENTIONALLY AND DELIBERATELY WAIVE ANY RIGHT THEY
MAY OTHERWISE HAVE TO TRIAL BY JURY OF ANY CLAIM.
(c) Conduct of Reference. Except as provided in this Agreement, any
--------------------
Reference shall be conducted pursuant to the law of the State of California.
The referee shall determine all issues relating to the applicability,
interpretation, legality and enforceability of this Agreement and the other Loan
Documents.
(d) Provisional Remedies, Self-Help and Foreclosure. No provision of
-----------------------------------------------
this Agreement shall limit the right of any Party (i) to exercise self-help
remedies, including setoff, (ii) to foreclose against or sell any collateral, by
power of sale or otherwise, or (iii) to obtain or oppose provisional or
ancillary remedies from a court of competent jurisdiction before, after or
during the pendency of a Reference. The exercise of, or opposition to, any such
remedy does not waive the right of any Party to Reference pursuant to this
Agreement.
(e) Limitation on Damages. In the event that punitive damages are
---------------------
permitted under the law of the State of California, the amount thereof shall not
exceed a sum equal to three times the amount of actual damages as determined by
the referee.
(f) Severability. In the event that any provision of any Loan
------------
Document is found to be illegal or unenforceable, the remainder of such Loan
Document shall remain in full force and effect.
(g) Miscellaneous. In the event that multiple claims are asserted,
-------------
some of which are found not subject to the provisions of this Section 9.12, the
Parties agree to stay the proceedings of the claims not subject to this Section
9.12 until
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all other claims are resolved in accordance with this Section 9.12. In the event
that claims are asserted against multiple parties, some of whom are not subject
to this Section 9.12, the Parties agree to sever the claims subject to this
Section 9.12 and resolve them in accordance with this Section 9.12. In the event
of any challenge to the legality or enforceability of this Section 9.12, the
prevailing Party shall be entitled to recover the costs and expenses, including
reasonable attorneys' fees, incurred by it in connection therewith.
9.13 Acknowledgements. The Borrower hereby acknowledges that:
----------------
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Agent nor any Lender has any fiduciary relationship
to the Borrower solely by virtue of any of the Loan Documents, and the
relationship pursuant to the Loan Documents between the Agent and the Lenders,
on one hand, and the Borrower, on the other hand, is solely that of creditor and
debtor; and
(c) no joint venture exists among the Lenders or among the Borrower
and the Lenders.
9.14 Headings. Section headings herein are included for convenience of
--------
reference only and shall not constitute a part of this Agreement for any other
purpose.
9.15 Conflict of Terms. Except as otherwise provided in this Agreement or
-----------------
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provision contained in this Agreement shall govern and control.
9.16 Confidentiality. The Lenders shall take normal and reasonable
---------------
precautions to maintain the confidentiality of all nonpublic information
obtained pursuant to the requirements of this Agreement which has been
identified as such by the Borrower but may, in any event, make disclosures (a)
reasonably required by any bona fide transferee, assignee or participant in
connection with the contemplated transfer or assignment of any of the Loans or
participation therein, (b) as required or requested by any Governmental
Authority or representative thereof or as required pursuant to legal process,
(c) to its attorneys and accountants, (d) as required by law or (e) in
connection with litigation involving any Lender; provided, however, that (i)
-------- -------
such transferee, assignee or participant agrees to comply with the provisions of
this Section unless specifically prohibited by applicable law or court order,
(ii) each Lender shall use its
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best efforts to notify the Borrower of any requirement or request by any
Governmental Authority or representative thereof (other than any such request in
connection with an examination of such Lender by such Governmental Authority)
and any requirement pursuant to legal process of or for disclosure of such
information (other than in connection with litigation between any Subsidiary of
the Borrower and any Lender) and (iii) in no event shall any Lender be obligated
or required to return any materials furnished by the Borrower or any of its
Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
SCPIE HOLDINGS INC.
By: /s/ Xxxxxxx X. Xx
----------------------------------------
Name: Xxxxxxx X. Xx
---------------------------------------
Title: Senior Vice President & CFO
--------------------------------------
Address for Notices:
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 000 (Administration)
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent, as
Arranger and as a Lender
By:
----------------------------------------
Xxxxxx X. Xxxxx
Vice President
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best efforts to notify the Borrower of any requirement or request by any
Governmental Authority or representative thereof (other than any such request in
connection with an examination of such Lender by such Governmental Authority)
and any requirement pursuant to legal process of or for disclosure of such
information (other than in connection with litigation between any Subsidiary of
the Borrower and any Lender) and (iii) in no event shall any Lender be obligated
or required to return any materials furnished by the Borrower or any of its
Subsidiaries.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
SCPIE HOLDINGS INC.
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Address for Notices:
0000 Xxxxxxx Xxxx Xxxx
Xxxxx 000 (Administration)
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent, as
Arranger and as a Lender
By: /s/ Xxxxxx X. Xxxxx
----------------------------------------
Xxxxxx X. Xxxxx
Vice President
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FIRST UNION NATIONAL BANK,
as Documentation Agent and
as a Lender
By: /s/ Xxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxx X. Xxxxxxxxx
---------------------------------------
Title: Senior Vice President
--------------------------------------
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By:
----------------------------------------
Xxxxx X. Xxxxxxx
Vice President
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
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FIRST UNION NATIONAL BANK,
as Documentation Agent and
as a Lender
By:
----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
DRESDNER BANK AG, New York Branch
and Grand Cayman Branch
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------
Xxxxx X. Xxxxxxx
Vice President
By: /s/ Xxxxx Xxxxx
----------------------------------------
Name: Xxxxx Xxxxx
---------------------------------------
Title: Assistant Vice President
--------------------------------------
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