Exhibit 10.4
SECOND AMENDMENT TO THE HOLDINGS GUARANTY
SECOND AMENDMENT TO THE HOLDINGS GUARANTY (the "Amendment"), dated as of
November 5, 2001, among TRENWICK GROUP LTD., a company organized under the laws
of Bermuda ("Holdings") and the Banks party to the Credit Agreement referred to
below. Unless otherwise defined herein, capitalized terms used herein and
defined in the Holdings Guaranty referred to below are used herein as so
defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Trenwick America Corporation, a Delaware corporation (the
"Borrower"), Trenwick Holdings Ltd., a company organized under the laws of the
United Kingdom (the "Account Party"), the lending institutions from time to time
party thereto (each a "Bank" and, collectively, the "Banks"), First Union
National Bank, as Syndication Agent (the "Syndication Agent"), Fleet National
Bank, as Documentation Agent (the "Documentation Agent"), and JPMorgan Chase
Bank (f/k/a The Chase Manhattan Bank), as Administrative Agent (the
"Administrative Agent"), are party to a Credit Agreement, dated as of November
24, 1999 and amended and restated as of September 27, 2000 (as the same has been
amended, modified or supplemented to, but not including, the date hereof, the
"Credit Agreement");
WHEREAS, Holdings and the Administrative Agent entered into a Holdings
Guaranty, dated as of September 27, 2000 (as the same has been amended, modified
or supplemented to, but not including, the date hereof, the "Holdings Guaranty")
in order to induce the Banks to make Loans to the Borrower and issue Letters of
Credit for the account of the Account Party and Guaranteed Creditors (and
Lending Affiliates thereof) to enter into Interest Rate Protection Agreements
and Other Hedging Agreements with the Borrower and/or the Account Party; and
WHEREAS, subject to the terms and conditions set forth below, the parties
hereto wish to amend the Holdings Guaranty as provided herein;
NOW, THEREFORE, it is agreed;
A. Amendments and Consents
1. Section 4.04(i) of the Holdings Guaranty is hereby amended by deleting
the amount "$50,000,000" appearing in said Section and inserting the amount
"$25,000,000" in lieu thereof.
2. Section 4.13 of the Holdings Guaranty is hereby amended to read in its
entirety as follows:
"4.13 Interest Coverage Ratio. Holdings will not permit the Interest
Coverage Ratio for any Test Period ending during a period set forth below
to be less than the ratio set forth opposite such period below:
Period Ratio
------ -----
Fiscal Year ending 12/31/00 2.50:1.00
Fiscal Quarter ending 9/30/01 2.75:1.00
Fiscal Quarter ending 12/31/01 1.50:1.00
Fiscal Quarter ending 3/31/02 2.00:1.00
Thereafter 2.50:1.00"
3. Section 4.14 of the Holdings Guaranty is hereby amended to read in its
entirety as follows:
"4.14. Minimum Risk Based Capital. (a) Holdings will not permit the
Risk Based Capital Ratio for Trenwick America Reinsurance Corporation to be
less than 325%.
(b) Holdings will not permit the Risk Based Capital Ratio for any
Regulated Insurance Company which is a Domestic Subsidiary (other than
Trenwick America Reinsurance Corporation) to be less than 300%; provided
that, during the period from the Amendment Effective Date through December
31, 2002 the Risk Based Capital Ratio for Chartwell Insurance Company shall
not be less than 225%."
4. Section 4.16 of the Holdings Guaranty is hereby amended by inserting the
following text immediately preceding the period at the end of said Section ";
provided that during the period from the Amendment Effective Date to the
Quarterly Compliance Date, Holdings will not permit its Consolidated Tangible
Net Worth at any time to be less than the sum of (i) $425,000,000, plus (ii) 50%
of Consolidated Net Income (if positive) from and after October 1, 2001 to the
last day of the most recently ended fiscal quarter.
5. The definition of the term "Applicable Commitment Fee Percentage"
contained in Schedule I to the Holdings Guaranty is hereby amended by (i)
inserting the phrase "Category F Period" immediately below the phrase "Category
E Period" in the column "Applicable Period" appearing therein and (ii) inserting
the percentage "0.500%" immediately below the percentage "0.500%" in the column
"Applicable Commitment Fee Percentage" appearing therein.
6. The definition of the term "Applicable Credit Rating" contained in
Schedule I to the Holdings Guaranty is hereby amended by deleting the text
"BBB-/Baa3" appearing therein and inserting the text "BB+/Ba1" in lieu thereof.
-2-
7. The definition of the term "Applicable Margin" contained in Schedule I
to the Holdings Guaranty is hereby amended to read in its entirety as follows:
"Applicable Margin" shall mean, for any day, the rate per annum set
forth below opposite the Applicable Period then in effect:
Applicable Margin
-----------------
Applicable Period Eurodollar Loans Base Rate Loans
----------------- ---------------- ---------------
Category A Period 1.10% 0.00%
Category B Period 1.30% 0.05%
Category C Period 1.50% 0.25%
Category D Period 2.00% 0.75%
Category E Period 2.50% 1.25%
Category F Period 3.25% 2.00%
; provided that, solely for the purpose of the Term Loans, the Applicable
Margin shall be increased by the rate per annum set forth below during the
period set forth opposite such rate per annum:
Period Percentage
July 1, 2002 through September 30, 2002 0.50%
October 1, 2002 through December 31, 2002 1.00%
January 1, 2003 through March 31, 2003 1.50%
April 1, 2003 and thereafter 2.00%."
8. The definition of the term "Applicable Period" contained in Schedule I
to the Holdings Guaranty is hereby amended to read in its entirety as follows:
"Applicable Period" shall mean, at any time, the period set forth
below then in effect:
Applicable Period Criteria
----------------- --------
Category A Period The Applicable Credit Rating is A-/A3 or above.
Category B Period The Applicable Credit Rating is BBB+/Baa1.
Category C Period The Applicable Credit Rating is BBB/Baa2.
Category D Period The Applicable Credit Rating is BBB-/Baa3.
Category E Period The Applicable Credit Rating is BB+/Ba1
-3-
Applicable Period Criteria
----------------- --------
Category F Period None of a Category A Period, a Category B
Period, a Category C Period, a Category D
Period nor a Category E Period is in effect
at such time.
Notwithstanding anything to the contrary set forth above, if
neither Rating Agency rates the unsecured senior debt of the Borrower,
then the Applicable Period shall be a Category F Period."
9. The definition of the term "Holdings Cash Flow" contained in Schedule I
to the Holdings Guaranty is hereby amended to read in its entirety as follows:
"Holdings Cash Flow" shall mean, for any period, the sum of (i) for
each Specified Regulated Insurance Company, the aggregate amount of
ordinary dividends which such Specified Regulated Insurance Company could
pay to its parent corporation under Legal Requirements as of the last day
of such period (determined as if (x) such Specified Regulated Insurance
Company had not paid any ordinary dividends during such period and (y) each
Subsidiary of such Specified Regulated Insurance Company which is a
Regulated Insurance Company had paid dividends to its parent corporation
during such period in an amount equal to the maximum amount of dividends
payable by such Subsidiary during such period under applicable Legal
Requirements) plus the aggregate amount of any extraordinary dividends
actually paid by such Specified Regulated Insurance Company to its parent
corporation during such period, (ii) for each Specified Foreign or
Non-Regulated Company, (x) the greater of (A) zero and (B) the EBITDA of
such Specified Foreign or Non-Regulated Company for such period, minus (y)
the amount of capital contributions and intercompany loans made by
Holdings, the Borrower or any Specified Regulated Insurance Company to such
Specified Foreign or Non-Regulated Company on or after October 1, 2001,
(iii) tax sharing payments made by Regulated Insurance Companies which are
Domestic Subsidiaries directly to Holdings or any Specified Non-Regulated
Company during such period (less cash taxes paid by Holdings during such
period), and (iv) payments during such period of principal and interest on
surplus notes issued by Regulated Insurance Companies which are Domestic
Subsidiaries to Holdings or any Specified Non-Regulated Company."
10. The definition of the term "Trust Preferred Securities Purchase"
contained in Schedule I to the Holdings Guaranty is hereby amended to read in
its entirety as follows:
"Trust Preferred Securities Purchase" shall mean the purchase by one
or more Subsidiaries of Holdings of approximately $23,700,000 of face value
Trust Preferred Securities for approximately $18,000,000 in cash during the
fiscal quarter ending December 31, 2000, and the fiscal quarter ending
March 31, 2001.
11. Schedule I to the Holdings Guaranty is hereby amended by inserting the
following definition in the appropriate alphabetical order:
-4-
"Quarterly Compliance Date" shall mean the earlier of (i) May 15, 2002
and (ii) the date on which Holdings delivers to each Bank the compliance
certificate for the fiscal quarter ending March 31, 2002, in accordance
with Section 3.01(d) of the Holdings Guaranty."
B. Miscellaneous Provisions
1. In order to induce the Banks to enter into this Amendment, Holdings
hereby represents and warrants that (i) the representations and warranties of
Holdings contained in the Holdings Guaranty are true and correct in all material
respects on and as of the Amendment Effective Date (as defined below) (except
with respect to any representations and warranties limited by their terms to a
specific date, which shall be true and correct in all material respects as of
such date), and (ii) there exists no Default or Event of Default under the
Credit Agreement on the Amendment Effective Date, in each case after giving
effect to this Amendment.
2. This Amendment is limited as specified and shall not constitute an
amendment, modification, acceptance or waiver of any other provision of the
Holdings Guaranty or any other Credit Document.
3. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
4. This Amendment shall become effective on the date (the "Amendment
Effective Date") when (i) Holdings and the Required Banks shall have signed a
counterpart hereof (whether the same or different counterparts) and shall have
delivered (including by way of telecopier) the same to the Administrative Agent
and (ii) the Borrower, the Account Party and the Required Banks have consented
to the Second Amendment and Waiver to the Credit Agreement, dated November 5,
2001.
5. From and after the Amendment Effective Date, all references in the
Holdings Guaranty and in the other Credit Documents shall be deemed to be
referenced to the Holdings Guaranty as modified hereby.
* * *
-5-
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly
executed and delivered as of the date first above written.
TRENWICK GROUP LTD.
By: /s/ Xxxxxxx X. Xxxx
-------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer
[Bank Signature Pages Omitted]
