1
Exhibit 10.1
================================================================================
$20,000,000
CREDIT AGREEMENT
dated as of December 16, 1997
between
CENTRAL RESERVE LIFE CORPORATION
as Borrower
and
STRATEGIC ACQUISITION PARTNERS, LLC
as Lender
================================================================================
2
THE FOLLOWING TABLE OF CONTENTS HAS BEEN INSERTED FOR CONVENIENCE ONLY AND DOES
NOT CONSTITUTE A PART OF THIS AGREEMENT.
TABLE OF CONTENTS
PAGE
----
SECTION I DEFINITIONS AND ACCOUNTING TERMS....................................................................... 1
1.1 Certain Defined Terms.............................................................................. 1
1.2 Other Definitional Provisions...................................................................... 6
1.3 Accounting and Financial Determinations............................................................ 6
SECTION II THE COMMITMENT....................................................................................... 7
2.1 Commitment......................................................................................... 7
2.2 Borrowing Procedures............................................................................... 7
2.3 Repayment of Loan.................................................................................. 7
SECTION III NOTE EVIDENCING LOANS .............................................................................. 7
3.1 Note............................................................................................... 7
3.2 Recordation of Loan and Payments................................................................... 7
SECTION IV INTEREST, FEES, ETC. ................................................................................ 8
4.1 Loan Interest Rate................................................................................. 8
4.2 Default Interest Rate.............................................................................. 8
4.3 Interest Payment Dates............................................................................. 8
4.4 Fees............................................................................................... 8
4.5 Computation of Interest............................................................................ 8
SECTION V PAYMENTS AND PREPAYMENTS ............................................................................. 9
5.1 Voluntary Prepayments.............................................................................. 9
5.2 Mandatory Prepayments.............................................................................. 9
5.3 Making of Payments................................................................................. 9
5.4 Due Date Extension................................................................................. 9
5.5 Use of Proceeds.................................................................................... 10
SECTION VI SECURITY............................................................................................. 10
6.1 Collateral Documents............................................................................... 10
6.2 Further Assurances................................................................................. 10
SECTION VII REPRESENTATIONS AND WARRANTIES...................................................................... 10
7.1 Representations and Warranties..................................................................... 10
7.1.1 Ownership, No Liens, etc................................................................ 11
7.1.2 No Default or Event of Default.......................................................... 11
7.1.3 Proceeds................................................................................ 11
7.1.4 Securities Laws......................................................................... 11
7.1.5 Margin Regulations...................................................................... 11
7.1.6 Incorporation by Reference.............................................................. 11
7.1.7 Other Agreements........................................................................ 12
SECTION VIII CONDITIONS PRECEDENT............................................................................... 12
3
8.1 Condition Precedent to Loan........................................................................ 12
8.2 Additional Deliveries.............................................................................. 15
SECTION IX COVENANTS AND OTHER AGREEMENTS....................................................................... 15
9.1 Affirmative Covenants.............................................................................. 15
(c) Books, Records and Inspections............................................... 16
(d) Pension Plans and Welfare Plans.............................................. 16
9.2 Negative Covenants................................................................................. 19
SECTION X EVENTS OF DEFAULT..................................................................................... 21
10.1 Events of Default................................................................................. 21
10.2 Remedies.......................................................................................... 23
SECTION XI MISCELLANEOUS........................................................................................ 23
11.1 Amendments, Etc................................................................................... 23
11.2 Notices, Etc...................................................................................... 23
11.3 No Waiver; Remedies............................................................................... 23
11.4 Successors and Assigns............................................................................ 24
11.5 Costs, Expenses, and Taxes........................................................................ 24
11.6 Right of Setoff................................................................................... 25
11.7 Governing Law..................................................................................... 25
11.8 Severability of Provisions........................................................................ 25
11.9 Headings.......................................................................................... 25
11.10 Submission to Jurisdiction; Waiver of Venue; Service of Process.................................. 25
11.11 WAIVER OF JURY TRIAL............................................................................. 26
ii
4
EXHIBITS AND SCHEDULES
EXHIBITS
EXHIBIT A Form of Note
EXHIBIT B Form of Surplus Note
EXHIBIT C Form of Opinion of Xxxxxx & Xxxxxxx, counsel to the
Borrower and its Subsidiaries
EXHIBIT D Form of Pledge Agreement
EXHIBIT E Business Plan
SCHEDULES
SCHEDULE 7.1.6 Representations and Warranties
SCHEDULE 7.1.7 Other Agreements
iii
5
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 16, 1997, is made
by and between CENTRAL RESERVE LIFE CORPORATION, an Ohio corporation (the
"Borrower"), and STRATEGIC ACQUISITION PARTNERS, LLC, a Nevada limited liability
company (together with its successors and assigns, the "Lender"). Capitalized
terms used herein and not otherwise defined herein shall have the respective
meanings provided in the Purchase Agreement (as hereinafter defined).
RECITALS
WHEREAS, Borrower desires that Lender extend financing to
Borrower pursuant to the terms of this Agreement;
WHEREAS, Lender is willing to extend financing to Borrower
pursuant to the terms of this Agreement for the purposes specified herein; and
WHEREAS, Borrower and Lender have entered into that certain
Stock Purchase Agreement, dated as of November 26, 1997 (the "Purchase
Agreement"), whereby Lender will purchase 5,000,000 shares of common stock,
without par value, of Borrower;
NOW, THEREFORE, in consideration of the mutual agreements
contained herein, and subject to the terms and conditions hereof, the parties
hereto agree as follows:
SECTION I DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 CERTAIN DEFINED TERMS. As used in this Agreement,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined):
"Adjusted Capital" means, as to any Borrower Insurance
Subsidiary, as of any date, the total amount shown on line 27, page 23, column 1
of the Annual Statement of such Borrower Insurance Subsidiary, or an amount
determined in a consistent manner for any date other than one as of which an
Annual Statement is prepared.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, owns, holds, controls, is controlled by or is under
common control with such Person (including all beneficial control as a trustee,
guardian or other fiduciary). A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or
-1-
6
indirectly, power (a) to vote 5% or more of the securities having ordinary
voting power for the election of directors or managing general partners; or (b)
to direct or cause the direction of the management and policies of such Person
whether through the ownership of voting securities, membership interests, by
contract or otherwise.
"Agreement" means this Credit Agreement, as the same may
hereafter be amended or modified from time to time in whole or in part.
"ANB" means American National Bank and Trust Company of
Chicago, or any successor thereto.
"ANB Credit Agreement" means that certain Credit Agreement,
dated as of December 16, 1997, by and between ANB and Lender, as the same may be
amended or modified from time to time in whole or in part.
"ANB Prime Rate" means, for any day, the rate per annum
announced from time to time by ANB as its "prime commercial rate" or equivalent
rate of interest. The prime commercial rate is a rate set by ANB based upon
various factors including ANB's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the prime rate announced by ANB shall take effect at the opening of business
on the date specified in the public announcement of such change.
"Annual Statement" means, as to any Borrower Insurance
Subsidiary, the annual financial statement of such Borrower Insurance Subsidiary
as required to be filed with the applicable Department, together with all
exhibits or schedules filed therewith, prepared in conformity with SAP.
References to amounts on particular exhibits, schedules, lines, pages and
columns of the Annual Statement are based on the format promulgated by the NAIC
for 1996 Life, Accident and Health Insurance Company Annual Statements. 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 1996
Annual Statement of such Borrower Insurance Subsidiary.
"Applicable Insurance Code" means, as to any Borrower
Insurance Subsidiary, the insurance code of any state where such Borrower
Insurance Subsidiary is domiciled or doing insurance business and any successor
statute of similar import, together with the regulations thereunder, as amended
or otherwise modified and in effect from time to time. References to sections of
the
-2-
7
Applicable Insurance Code shall be construed to also refer to successor
sections.
"Authorized Officer" means any one of the following officers
of Borrower: chief executive officer or chief financial officer.
"Borrower" - see PREAMBLE.
"Borrower Subsidiary" means any Company Subsidiary as defined
under the Purchase Agreement.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in Chicago, Illinois or Cleveland, Ohio are
authorized or required by law to close.
"Closing Date" means the date on which all conditions
precedent set forth in SECTION VIII are satisfied or waived by Lender and the
Loan is made under this Agreement.
"Collateral" mean all of the collateral security described or
provided for in SECTION 6.1 together with all property and/or rights on or in
which a Lien is now or hereafter granted by any Person to Lender (or to any
agent, trustee or other party acting on behalf of Lender) to secure the
Liabilities.
"Commitment" - see SECTION 2.1.
"Company Material Adverse Effect" has the meaning provided in
the Purchase Agreement; provided that for purposes of this Agreement, Company
Material Adverse Effect shall also include any change, event, action, condition
or effect which individually or in the aggregate adversely affects the
perfection or priority of any Lien granted under any of the Related Documents.
"CRL" means Central Reserve Life Insurance Company, an Ohio
insurance company.
"Default" means any event which if it continues uncured would,
with lapse of time or notice, or both, constitute an Event of Default.
"Department" means, with respect to any Borrower Insurance
Subsidiary, the Governmental Authority of such Borrower Insurance Subsidiary's
state of domicile with whom such Borrower Insurance Subsidiary is required to
file its Annual Statement.
"Dollars" and the sign "$" means lawful money of the United
States of America.
-3-
8
"Effective Date" means the date of this Agreement as set forth
in the Preamble.
"Event of Default" means any of the events described in
SECTION 10.1.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by any of the
foregoing.
"Borrower Insurance Subsidiary" means any Borrower Subsidiary
that is authorized or admitted to carry on or transact one or more aspects of
the business of selling, issuing or underwriting insurance or reinsurance.
"Interest Payment Date" means the last Business Day of each
calendar month.
"Lender" - see PREAMBLE.
"Liabilities" means all obligations of Borrower to Lender
howsoever created, arising or evidenced, whether direct or indirect, joint or
several, absolute or contingent, or now or hereafter existing, or due or to
become due, which arise out of or in connection with this Agreement, the Note or
any other Related Document.
"Lien" means any security interest, mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), claim or other priority or preferential arrangement of any kind or
nature whatsoever.
"Loan" - see SECTION 2.1.
"NAIC" means the National Association of Insurance
Commissioners, or any successor organization.
"Note" - see SECTION 3.1.
"Official Bodies" means any governmental or political
subdivision or any agency, authority, bureau, commission, department or
instrumentality of either or any court or arbitrator.
"Permitted Encumbrance(s)" shall have the meaning provided in
the Purchase Agreement and shall include the Liens listed on Schedule 4.10(c) of
the Purchase Agreement.
-4-
9
"Person" means any individual, sole proprietorship,
partnership, limited liability company, limited liability partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Pledge Agreement" - see SECTION 6.1.
"Proxy Statement" shall have the meaning provided in the
Purchase Agreement.
"Purchase Agreement" - see third recital.
"Reference Department" means the State of Ohio.
"Reinsurance Agreements" means any agreement, contract,
treaty, certificate or other arrangement (including any Surplus Relief
Reinsurance Agreement) by which any Borrower Insurance Subsidiary agrees to
transfer or cede to another insurer all or part of the liability assumed or
assets held by it under a policy or policies of insurance or under a reinsurance
agreement assumed by it. Reinsurance Agreements shall include, but not be
limited to, any agreement, contract, treaty, certificate or other arrangement
(including any Surplus Relief Reinsurance Agreement) which is treated as such by
the applicable Department or Reference Department.
"Related Documents" means the Note, the Pledge Agreement, and
any and all other documents or instruments furnished or required to be furnished
in connection with any of the foregoing, as the same may be amended or modified
in accordance with this Agreement.
"Reportable Event" shall have the meaning assigned to such
term in ERISA.
"Surplus Note" means the surplus note of CRL dated December
16, 1997 in the original principal amount of $14,000,000, substantially in the
form attached hereto as EXHIBIT B.
"Surplus Relief Reinsurance Agreements" means any agreement
whereby any insurance company assumes or cedes business under a reinsurance
agreement that would be considered a "financing-type" reinsurance agreement as
determined in accordance with the Statement of Financial Accounting Standards
113 or any successor thereto.
-5-
10
"Termination Date" means the earlier of (a) April 1, 1998 and
(b) the date of termination in whole of the Commitment or the Loan pursuant to
SECTION 5.1, 5.2 or 10.2; provided that (i) if the Closing of the transactions
contemplated by the Purchase Agreement has not occurred prior to Xxxxx 0, 0000,
(xx) the Purchase Agreement has not been terminated pursuant to Section 13(e)
thereof, and (iii) an Event of Default does not exist under this Agreement, the
Termination Date shall be extended to May 1, 1998 without any further action
being required by the parties.
"U.C.C." means the Uniform Commercial Code or comparable
statute or any successor statute thereto, as in effect from time to time in the
relevant jurisdiction.
. SECTION I.2 OTHER DEFINITIONAL PROVISIONS
(a) All terms defined in this Agreement shall have the
above-defined meanings when used in any certificate, report or other document
made or delivered pursuant to this Agreement, unless the context therein shall
clearly otherwise require.
(b) The words "hereof," "herein," "hereunder" and similar
terms when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement.
(c) The words "amended or modified" when used in this
Agreement shall mean with respect to this Agreement or any Related Document,
this Agreement or Related Document as from time to time, in whole or in part,
amended, modified, supplemented, restated, refinanced, refunded or renewed.
(d) In the computation of periods of time in this Agreement
from a specified date to a later specified date, the word "from" shall mean
"from and including" and the words "to" and "until" each means "to but
excluding."
(e) This Agreement and the Related Documents are the result of
negotiations among and have been reviewed by counsel to Lender and Borrower, and
are the products of all parties. Accordingly, to the extent permitted by
applicable law, it is agreed that they shall not be construed against Lender
merely because of Lender's involvement in their preparation.
SECTION 1.3 ACCOUNTING AND FINANCIAL DETERMINATIONS. For
purposes of this Agreement, unless otherwise specified, all accounting terms
used herein shall be interpreted, all accounting determinations and computations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with GAAP or SAP, as the case may be,
-6-
11
applied in the preparation of the financial statements referred to in Section
4.5 of the Purchase Agreement.
SECTION II THE COMMITMENT
SECTION 2.1 COMMITMENT. Subject to the terms and conditions
hereof, on the Closing Date, Lender agrees to make a loan (herein called the
"Loan") to Borrower in an aggregate principal amount not to exceed $20,000,000
(or such reduced amount as may be fixed pursuant to SECTIONS 5.1 or 10.2). The
Loan to Borrower shall be disbursed in accordance with SECTION 2.2 and once
repaid may not thereafter be reborrowed. The foregoing commitment of Lender is
herein called its "Commitment."
SECTION 2.2 BORROWING PROCEDURES. Any Authorized Officer of
Borrower may request the Loan prior to the Termination Date in Dollars on any
Business Day by giving Lender telephonic or facsimile notice (which notice shall
be irrevocable once given and shall be promptly confirmed in writing if given
telephonically) on the date of the proposed borrowing. Subject to satisfaction
of the applicable conditions precedent set forth in SECTION 8 hereof, Lender
shall make the proceeds of the Loan available to Borrower by causing an amount
of same day funds equal to the principal amount of the Loan to be credited to
the account of Borrower at a bank designated by Borrower.
SECTION 2.3 REPAYMENT OF LOAN. Subject to the provisions of
SECTIONS 5.2 and 10.1, the Loans shall be payable (and Borrower agrees to pay
such Loans) in full in immediately available funds on the Termination Date.
SECTION III NOTE EVIDENCING LOANS
SECTION 3.1 NOTE. The Loan of Lender shall be evidenced by a
promissory note (herein called the "Note") substantially in the form set forth
in EXHIBIT A, with appropriate insertions, payable to the order of Lender in a
principal amount equal to $20,000,000.
SECTION 3.2 RECORDATION OF LOAN AND PAYMENTS. The date and
amount of the Loan made by Lender and of each repayment of principal thereon
received by Lender shall be recorded by Lender in its records, or at its option
on a schedule attached to the Note. The aggregate unpaid principal amount so
recorded shall be conclusive evidence of the principal amount owing and unpaid
on the Note, in the absence of manifest error. The failure to so record or any
error in so recording any such amount shall not, however, limit or otherwise
affect the obligations of Borrower
-7-
12
hereunder or under the Note to repay the principal amount of the Loan together
with all interest accrued thereon.
SECTION IV INTEREST, FEES, ETC.
SECTION 4.1 LOAN INTEREST RATE. Prior to the occurrence of an
Event of Default, with respect to the Loan, Borrower hereby promises to pay
interest on the unpaid principal amount thereof for the period commencing on the
date such Loan is made until such Loan is paid in full at a rate per annum equal
to the ANB Prime Rate as in effect from time to time.
SECTION 4.2 DEFAULT INTEREST RATE. Upon the occurrence of an
Event of Default, Borrower hereby promises to pay interest on the unpaid
principal amount of the Loan for the period commencing on the date such Event of
Default occurs until the Loan is paid in full (or such Event of Default is
waived in writing by Lender) at a rate per annum equal to the sum of: (a) the
interest rate effective on the day of such Default, changing as and when such
interest rate changes but never to fall below the interest rate effective on the
day of the Event of Default, PLUS (b) five percent (5%) per annum.
SECTION 4.3 INTEREST PAYMENT DATES. Accrued interest on the
Loan shall be paid on each Interest Payment Date, commencing with the first of
such dates to occur after the Closing Date. After maturity (whether by
acceleration, required prepayment or otherwise), accrued interest on Loan shall
be payable on demand.
SECTION 4.4 FEES. Borrower agrees to pay Lender the following
nonrefundable fees at the times set forth below:
(a) On the Closing Date, a loan commitment fee equal to
$50,000; and
(b) On the date CRL and Reassurance Company of Hannover enter
into and fund the Reinsurance Agreement as contemplated by SECTION
8.1(P), a fee (in addition to the fee set forth in CLAUSE (A) above) in
the amount of $150,000.
SECTION 4.5 COMPUTATION OF INTEREST. All interest on the Loan
shall be computed for the actual number of days elapsed on the basis of a
360-day year.
-8-
13
SECTION V PAYMENTS AND PREPAYMENTS
SECTION 5.1 VOLUNTARY PREPAYMENTS. Borrower may from time to
time prepay the Loan in whole or in part, PROVIDED THAT (a) each partial
prepayment of the Loan shall be in a principal amount of $100,000 or an integral
multiple thereof, and (b) any prepayment of the entire principal amount of the
Loan shall include accrued interest to the date of prepayment.
SECTION 5.2 MANDATORY PREPAYMENTS. Borrower shall make
mandatory repayments of the Loan as follows:
(a) If the Purchase Agreement shall be terminated by Borrower
pursuant to Section 13.1(e) thereof (i.e., acceptance of a Superior
Proposal as provided in the Purchase Agreement), Borrower shall,
immediately on demand, repay the Loan (including interest accrued
thereon) and any other Liabilities in full in immediately available
funds; and
(b) Concurrently with the Closing under the Purchase
Agreement, Borrower shall, immediately on demand, repay the Loan
(including interest accrued thereon) and any other Liabilities in full
in immediately available funds.
SECTION 5.3 MAKING OF PAYMENTS. Except as otherwise provided,
all payments in respect of the Loan shall be made by Borrower to Lender in
immediately available funds. All such payments shall be made to Lender at its
account at:
ABA No.: 000-000-000
Account No.:5300048437
American National Bank and Trust Company of Chicago
00 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Reference: Strategic Acquisition Partners, LLC
or as otherwise directed by Lender, not later than 12:30 P.M., Chicago time, on
the date due; and funds received after that hour shall be deemed to have been
received by Lender on the next following Business Day.
SECTION 5.4 DUE DATE EXTENSION. If any payment provided for
hereunder falls due on a day which is not a Business Day, then such due date
shall be extended to the next following Business Day (except as provided in the
last sentence of SECTION 4.3), and additional interest shall accrue and be
payable for the period of such extension.
-9-
14
SECTION 5.5 USE OF PROCEEDS. The proceeds of the Loans shall
be used by Borrower as follows: (a) $6,000,000 to refinance the indebtedness of
Borrower owed to Huntington Bank, to establish an interest reserve for Borrower
which shall be used solely to pay interest accrued on the Loan and to pay the
fees and expenses of Borrower as set forth in this Agreement; and (b)
$14,000,000 to be used to invest in the surplus of CRL, which investment shall
be evidenced by the Surplus Note. Borrower will not, directly or indirectly, use
any part of such proceeds for the purpose of purchasing or carrying any margin
stock within the meaning of Regulation G or Regulation U of the Board of
Governors of the Federal Reserve System or to extend credit to any Person for
the purpose of purchasing or carrying any such margin stock.
SECTION VI SECURITY
SECTION 6.1 COLLATERAL DOCUMENTS. On the Closing Date,
Borrower will execute and deliver to Lender, a pledge agreement, substantially
in the form of EXHIBIT C (herein, as the same may be amended or modified, called
the "Pledge Agreement"), covering, among other things, all of the issued and
outstanding capital stock of CRL and the Surplus Note.
SECTION 6.2 FURTHER ASSURANCES. Borrower agrees that upon
request of Lender (a) Borrower shall promptly deliver or cause to be delivered
to Lender, in due form for transfer, all chattel paper, instruments, securities
and documents of title, if any, at any time representing all or any of the
Collateral, and (b) Borrower shall forthwith execute and deliver or cause to be
executed and delivered to Lender, in due form for filing or recording (and pay
the cost of filing or recording the same in all public offices deemed necessary
by Lender), such further assignment agreements, security agreements, pledge
agreements, instruments, consents, waivers, financing statements, stock or bond
powers, searches, releases, and other documents, and do such other acts and
things, all as Lender may from time to time reasonably request to establish and
maintain to the satisfaction of Lender a valid perfected Lien on all Collateral
(free of all other Liens other than Permitted Encumbrances) to secure payment of
the Liabilities, in each case, subject to any applicable insurance laws of the
State of Ohio.
SECTION VII REPRESENTATIONS AND WARRANTIES
-10-
15
SECTION 7.1 REPRESENTATIONS AND WARRANTIES. To induce Lender
to enter into this Agreement and make the Loan hereunder, Borrower represents
and warrants to Lender as set forth in this SECTION 7.
SECTION 7.1.1 OWNERSHIP, NO LIENS, ETC. Borrower is the legal
and beneficial owner of the Collateral free and clear of any Lien, security
interest, charge or encumbrance except for the security interest created by this
Agreement and Permitted Encumbrances. No effective financing statement or other
document similar in effect covering all or any part of the Collateral is on file
in any recording office, except such as may have been filed by Borrower relating
to this Agreement and Permitted Encumbrances.
SECTION 7.1.2 NO DEFAULT OR EVENT OF DEFAULT. No Default or
Event of Default has occurred and is continuing with respect to Borrower and no
violation or material breach of any provision has occurred and is continuing
under the Purchase Agreement.
SECTION 7.1.3 PROCEEDS. The proceeds of the Loans will be
used by Borrower as follows: (a) $6,000,000 to refinance the indebtedness of
Borrower owed to Huntington Bank, to establish an interest reserve for Borrower
which shall be used solely to pay interest accrued on the Loan and to pay the
fees and expenses of Borrower as set forth in this Agreement; and (b)
$14,000,000 to be used to invest in the surplus of CRL, which investment shall
be evidenced by the Surplus Note.
SECTION 7.1.4 SECURITIES LAWS. Neither Borrower nor, to the
best of Borrower's knowledge, any of its Affiliates, nor anyone acting on behalf
of any such Person, has directly or indirectly offered any interest in the Loan
or any other Liabilities for sale to, or solicited any offer to acquire any such
interest from, or has sold any such interest to, any Person that would subject
the making of the Loan or any other Liabilities to registration under the
Securities Act.
SECTION 7.1.5 MARGIN REGULATIONS. Neither Borrower nor any
Borrower Subsidiary is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulation G or Regulation U
promulgated by the Federal Reserve Board).
SECTION 7.1.6 INCORPORATION BY REFERENCE. Except as set forth
on SCHEDULE 7.1.6, Borrower agrees that the representations and warranties of
Borrower set forth in Article IV of the Purchase Agreement shall be incorporated
by reference in this Agreement in their entirety as if fully set forth herein
with
-11-
16
the same effect as if applied to this Agreement. All capitalized terms set
forth in Article IV of the Purchase Agreement shall have the same meanings when
used in this Purchase Agreement; PROVIDED that for purposes of this Agreement,
to the extent set forth in the Purchase Agreement, (a) the term "Company" shall
be deemed to refer to Borrower under this Agreement, (b) the term "Company
Subsidiaries" shall be deemed to refer to Borrower Subsidiaries under this
Agreement, (c) the term "Company Insurance Subsidiary" shall be deemed to refer
to Borrower Insurance Subsidiary under this Agreement, (d) the term "Purchaser"
shall be deemed to refer to Lender under this Agreement, (e) the term
"Agreement" shall be deemed to refer to this Agreement, (f) the term "Closing
Date" shall be deemed to refer to the Closing Date as defined in this Agreement.
Such representations and warranties shall not be affected in any manner by the
termination of the Purchase Agreement.
SECTION 7.1.7 OTHER AGREEMENTS. Except as set forth on
SCHEDULE 7.1.7, neither Borrower nor any Borrower Subsidiary is a party to any
indenture, loan, or credit agreement, or to any lease or other agreement or
instrument, or subject to any charter or corporate restriction which could have
a Company Material Adverse Effect, or adversely affect the ability of Borrower
or any Borrower Subsidiary to carry out its respective obligations under this
Agreement or any Related Document. Neither Borrower nor any Borrower Subsidiary
is in default in any respect in the performance, observance, or fulfillment of
any of the obligations, covenants, or conditions contained in any agreement or
instrument material to its business.
SECTION VIII CONDITIONS PRECEDENT
SECTION 8.1 CONDITION PRECEDENT TO LOAN. The obligation of
Lender to make the Loan to Borrower is subject to the condition precedent that
Lender shall have received on or before the day of such Loan each of the
following, in form and substance satisfactory to Lender and its counsel:
(a) NOTE. The Note duly executed by Borrower;
(b) PLEDGE AGREEMENT. The Pledge Agreement duly executed by
Borrower together with (i) all share certificates and the surplus note
under such Pledge Agreement and (ii) appropriate stock powers for such
shares executed in blank;
(c) FINANCING STATEMENTS. (i) financing statements (UCC-1) to
be filed under the U.C.C. of all jurisdictions necessary or, in the
opinion of Lender or its counsel, desirable to perfect the security
interest
-12-
17
created by the Pledge Agreement; and (ii) certified copies of
Requests for Information (Form UCC-11) identifying all of the
financing statements on file with respect to Borrower and each
Borrower Subsidiary in all jurisdictions referred to under
clause (i) herein, indicating that no party claims an interest
in any of the Collateral;
(d) CERTIFICATE OF BORROWER. A certificate dated as of the
Closing Date of the Secretary of Borrower certifying: (i) a copy of the
articles of incorporation of Borrower and CRL as theretofore amended;
(ii) a copy of the bylaws of Borrower and CRL, as theretofore amended;
(iii) copies of all corporate action taken by Borrower and CRL,
including resolutions of Borrower's and CRL's Board of Directors, and
their respective shareholders (if required) authorizing the execution,
delivery, and performance of this Agreement and the Related Documents
and authorizing the borrowing by each of the Authorized Officers; and
(iv) the names and true signatures of the officers of Borrower and CRL
authorized to sign this Agreement and the Related Documents to which it
is a party;
(e) CERTIFIED CHARTER AND GOOD STANDING. A certificate of the
due formation, valid existence and good standing of Borrower and CRL in
its state of incorporation, issued by the appropriate authorities of
such jurisdictions;
(f) OPINIONS OF COUNSEL FOR BORROWER. Favorable opinions of
Xxxxxx & Xxxxxxx and Xxxx Xxxxxxxx, counsel for Borrower and the
Borrower Subsidiaries, in substantially the form of EXHIBIT D and as to
such other matters as Lender may reasonably request;
(g) PURCHASE AGREEMENT. The Purchase Agreement shall be in
full force and effect;
(h) REPAYMENT AND TERMINATION OF HUNTINGTON BANK LOANS. Lender
shall have received a pay-off letter in form and substance satisfactory
to it from Huntington Bank confirming that all amounts outstanding with
respect to its loans to Borrower have been or on the Closing Date will
be paid in full and all commitments to make additional loans or
financial accommodations to Borrower shall have been terminated, [and
evidence satisfactory to Lender that all liens securing Borrower's
obligations to Huntington Bank shall have been or on the Closing Date
will be released;
-13-
18
(i) PAYMENT OF FEES AND EXPENSES. Executed direction letter of
Borrower to Lender directing Lender to pay the fees and expenses
provided for herein from the proceeds of the Loan;
(j) CONSENTS. Certified copies of each material consent,
license and approval (including, without limitation, any insurance
commission approvals) required in connection with the execution,
delivery, performance, validity and enforceability of this Agreement
and the Related Documents; such consents, licenses and approvals shall
be in full force and effect, shall be satisfactory in form and
substance to Lender and shall be all of the material consents required
to be obtained or made on or before the consummation of the financing
contemplated by this Agreement;
(k) A certificate of an Authorized Officer of Borrower that
(a) there are no material insurance regulatory proceedings pending or
threatened against any Borrower Insurance Subsidiary and (b) as to the
matters set forth in SECTION 8.2(A);
(l) REMOVAL AND APPOINTMENT OF DIRECTORS. Evidence
satisfactory to Lender that Borrower shall have received the
resignation of three (3) of its directors and duly elected three (3)
persons nominated by Lender to serve on the board of directors of
Borrower;
(m) SCHEDULES AND EXHIBITS. Schedules and Exhibits
satisfactory to Lender;
(n) REINSURANCE AGREEMENT. Evidence satisfactory to Lender
that CRL and Reassurance Company of Hannover shall have entered into a
Reinsurance Agreement on terms satisfactory to Lender by which CRL will
transfer or cede at least $10,000,000 of liability;
(o) XXXXXX WARRANT. Borrower shall have executed and delivered
to Xxxxx Xxxxxx and his designees shall have received a warrant,
substantially in the form of Exhibit A to the Purchase Agreement,
entitling Xx. Xxxxxx and such designees to purchase (in the aggregate)
800,000 shares of Borrower's common stock at an exercise price of $6.00
per share;
(p) CONTRACT MODIFICATIONS. Evidence satisfactory to Lender
that (i) the employee contract modifications set forth in the
Integration Agreement shall have been completed and
-14-
19
(ii) Borrower has complied with Section 9.2 of the Purchase Agreement;
(q) ANB FINANCING. Lender and ANB shall have entered into the
ANB Credit Agreement and Lender shall be permitted to borrow at least
$20,000,000 thereunder;
(r) Lender shall have received such other approvals, opinions,
or documents as Lender may reasonably request.
SECTION 8.2 ADDITIONAL DELIVERIES. The obligation of Lender
to make the Loan shall be subject to the further conditions precedent that on
the date of such Loan:
(a) The following statements shall be true and correct and
Lender shall have received a certificate signed by an Authorized
Officer of Borrower dated the date of the Loan, stating that:
(i) The representations and warranties contained in
SECTION 7 of this Agreement and ARTICLE IV of the Purchase
Agreement are true and correct on and as of the date of such
Loan as though made on and as of such date; and
(ii) No Default or Event of Default has occurred and
is continuing, or would result from the borrowing of such
Loan;
(b) Lender shall have received such other approvals, opinions,
or documents as Lender may reasonably request.
SECTION IX COVENANTS AND OTHER AGREEMENTS
-------------------------------
SECTION 9.1 AFFIRMATIVE COVENANTS. Borrower agrees that, on
and after the Closing Date until the termination or expiration of the Commitment
and for so long thereafter as any of the Liabilities remain unpaid or
outstanding, Borrower will, except as permitted by the Purchase Agreement:
(a) INSURANCE. Maintain with responsible insurance companies,
insurance with respect to its properties and business against such
casualties and contingencies and of such types and in such amounts as
is customary in the case of similar businesses.
-15-
20
(b) TAXES AND LIABILITIES.
(i) Pay, and cause each Borrower Subsidiary to pay, when due
all of their respective Taxes and other material liabilities, except as
contested in good faith and by appropriate proceedings with respect to
which reserves have been established, and are being maintained, in
accordance with GAAP; and
(ii) cause each Borrower Insurance Subsidiary to continue to
qualify as life insurance companies under Section 816 of the Code;
. (c) BOOKS, RECORDS AND INSPECTIONS
(i) Maintain, and cause each Borrower Subsidiary to maintain,
books and records which are complete and correct in all material
respects;
(ii) permit, and cause each of Borrower Subsidiary to permit,
access at reasonable times by Lender to its books and records;
(iii) permit, and cause each Borrower Subsidiary to permit,
Lender to inspect at reasonable times its properties and operations;
and
(iv) permit, and cause each Borrower Subsidiary to permit,
Lender to discuss its business, operations and financial condition with
its directors, officers and accounts.
(d) PENSION PLANS AND WELFARE PLANS. Except as otherwise
required by the Purchase Agreement, maintain, and cause each Borrower
Subsidiary to maintain, each Pension Plan and Welfare Plan sponsored by
it or any Borrower Subsidiary as to which it may have any liability, in
compliance in all material respects with all applicable requirements of
law.
(e) COMPLIANCE WITH LAWS. Comply, and cause each Borrower
Subsidiary to comply in all material respects, with all federal, state
and local laws, rules and regulations related to its businesses
including, without limitation, the various Applicable Insurance Codes.
(f) MAINTENANCE OF PERMITS. Maintain, and cause each Borrower
Subsidiary to maintain, all permits, licenses and consents as may be
required for the conduct of its business by any state, federal or local
government agency or instrumentality including, without limitation, the
insurance
-16-
21
licenses, except where such failure to maintain could not reasonably be
expected to have a Company Material Adverse Effect.
(g) ENVIRONMENTAL COMPLIANCE. Maintain, and cause each
Borrower Subsidiary to maintain, (a) all necessary permits, approvals,
certificates, licenses and other authorizations relating to
environmental matters in effect and use and operate all of its
facilities and properties in compliance with all Environmental Laws,
and (b) appropriate procedures for the handling of all hazardous
materials in material compliance with all applicable Environmental
Laws, and comply with such procedures at all times;
(h) INSURANCE HOLDING COMPANY FILINGS. Provide Lender with
copies of all material Insurance Holding Company System Act filings
with Governmental Authorities by Borrower or any Borrower Subsidiary
not later than five (5) Business Days after such filings are made,
including, without limitation, filings which seek approval of
Governmental Authorities with respect to transactions between Borrower
and its Affiliates to the extent permitted hereunder;
(i) INSURANCE LICENSES. Within five (5) Business Days of its
receipt of notice, give Lender written notice of actual suspension,
termination or revocation of any insurance license or restriction
thereon (material to the Borrower Insurance Subsidiaries taken as a
whole) of any of Borrower Insurance Subsidiaries by any Governmental
Authority or of receipt of notice from any Governmental Authority
notifying any Borrower Insurance Subsidiary of a hearing (which is not
withdrawn within ten (10) days) relating to such a suspension,
termination, revocation or restriction, including any request by a
Governmental Authority which commits any Borrower Insurance Subsidiary
to take, or refrain from taking, any action or which otherwise
materially and adversely affects the authority of any such Borrower
Insurance Subsidiary to conduct its business;
(j) INSURANCE PROCEEDINGS. Within three (3) Business Days of
its receipt of such notice, give the Lender written notice of any
pending or threatened investigation or regulatory proceeding by any
Governmental Authority concerning the business, practices or operations
of any Borrower Insurance Subsidiary, including any agent or managing
general
-17-
22
agent thereof which could have a Company Material Adverse Effect;
(k) CHANGES IN APPLICABLE INSURANCE CODE. Promptly, upon
knowledge of Borrower, give Lender written notice of any actual or
proposed material changes in any Applicable Insurance Code which could
have a Company Material Adverse Effect;
(l) REINSURANCE AGREEMENTS.
(i) Promptly give Lender written notice of any material change
or modification to any Reinsurance Agreements or Surplus Relief
Reinsurance Agreements whether entered into before or, if consented to
by Lender, after the Closing Date including Reinsurance Agreements, if
any, which are in a runoff mode on the Closing Date;
(ii) promptly give Lender written notice of any notice
received by any Borrower Insurance Subsidiary of any material denial of
coverage, litigation or arbitration arising out of any material Surplus
Relief Reinsurance Agreement or any material Reinsurance Agreement to
which any Borrower Insurance Subsidiary is a party; and
(iii) promptly give Lender such other financial, actuarial and
other information with respect to Surplus Relief Reinsurance Agreements
and Reinsurance Agreements as Borrower may reasonably request;
(m) ACTUARIAL IMPLEMENTATION. Within 30 days of the Closing
Date, fully implement (i) the actuarial recommendations previously
submitted to Borrower by Xxxxxxxx & Xxxxxxxxx including, without
limitation, rating actions and pricing adjustments on new products and
(ii) a surcharge on business currently underwritten at a loss as
previously recommended by Milliman & Xxxxxxxxx;
(n) TAX FILINGS; PAYMENT OF TAXES. At the time of filing
thereof, copies of all tax returns hereafter filed with any
Governmental Authority;
(o) REPORTS TO OTHER CREDITORS. Promptly after the furnishing
thereof, copies of any statement or report furnished to any other party
pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to Lender pursuant
to any other clause of this SECTION 9;
-18-
23
(p) BUSINESS PLAN. Commence implementation of the business
plan attached hereto as EXHIBIT E (the "Business Plan") in accordance
with the timelines provided therein. Borrower shall provide Lender with
such information regarding the progress of any of the foregoing upon
its request;
(q) NOTICE OF LITIGATION. Promptly after the commencement
thereof, notify Lender of all actions, suits, and proceedings before
any court or governmental department, commission, board, bureau,
agency, or instrumentality, domestic or foreign, to which Borrower or
any Borrower Subsidiary is a party, which, if determined adversely to
Borrower or such Borrower Subsidiary, could have a Company Material
Adverse Effect;
(r) NOTICE OF DEFAULTS AND EVENTS OF DEFAULT. As soon as
possible and in any event within five (5) days after the occurrence of
each Default or Event of Default, a written notice setting forth the
details of such Default or Event of Default and the action which is
proposed to be taken by Borrower with respect thereto;
(s) ISSUANCE OF ADDITIONAL WARRANTS AND APPROVAL. As promptly
as practicable after the date of this Agreement, the Borrower shall
prepare and file with Commission a proxy statement (which may be the
Proxy Statement) relating to a meeting of the Company's stockholders to
be held in connection with the issuance of additional warrants,
substantially in the form of Exhibit A to the Purchase Agreement, to
Xxxxx Xxxxxx and his designees entitling Xx. Xxxxxx and such designees
to purchase (in the aggregate) 200,000 shares of Borrower's common
stock at an exercise price of $6.00 per share. Such proxy statement
shall include the recommendation of the board of directors of the
Borrower approving such issuance. In the event that the Borrower's
shareholders do not approve the issuance of such warrant, as promptly
as practicable after such shareholder vote, the Borrower agrees to
solicit an appropriate waiver from the Nasdaq National Market System to
permit the issuance of such warrants;
(t) GENERAL INFORMATION. Such other information respecting the
condition or operations, financial or otherwise, of Borrower or any
Borrower Subsidiary as Lender may from time to time reasonably request
including, without limitation, policy loss rates, claims information
(including inventories and other statistical information), new business
placement rates and other operating statistics.
-19-
24
SECTION 9.2 NEGATIVE COVENANTS. Except as set forth in the
last sentence hereof, Borrower agrees that, on and after the Effective Date
until the termination or expiration of the Commitment and for so long thereafter
as any of the Liabilities remain unpaid or outstanding, Borrower will:
(a) DEBT. Not, and not permit any Borrower Subsidiary to,
incur or at any time be liable with respect to any indebtedness
(contingent or otherwise);
(b) LIENS. Not, and not permit any Borrower Subsidiary to,
create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except for Permitted Encumbrances;
(c) TRANSACTIONS WITH AFFILIATES. Not, and not permit any
Borrower Subsidiary to, enter into, or cause, suffer or permit to exist
any arrangement, Reinsurance Agreement, Surplus Relief Reinsurance
Agreement or contract with any of its Affiliates.
(d) BUSINESS ACTIVITIES. Not, and not permit any Borrower
Subsidiary to, fundamentally change the type of business in which it is
engaged as of the Closing Date;
(e) INVESTMENTS. Not, and not permit any Borrower Subsidiary
to, make any investment (whether by means of share purchase, capital
contribution, loan, time deposit or otherwise) in any Real Estate or
real estate business or related Person, except for the Real Estate
representing Borrower's home office located at 00000 Xxxxxxxx Xxxx,
Xxxxxxxxxxxx, Xxxx 00000, and no investments in any debt or equity
securities which are rated below investment-grade by Standard and
Poor's Rating Agency or Xxxxx'x Investors Service, Inc. or any
successor thereto; and
(f) INCORPORATION BY REFERENCE. Comply with the covenants and
other agreements set forth in Article VI and Article VII of the
Purchase Agreement and the terms and provisions set forth therein shall
be incorporated by reference in this Agreement in their entirety as if
fully set forth herein with the same effect as if applied to this
Agreement. All capitalized terms set forth in Article VI and Article
VII of the Purchase Agreement shall have the same meanings when used in
this Agreement; PROVIDED that for purposes of this Agreement, to the
extent set forth in the Purchase Agreement, (a) the term "Company"
shall be deemed to refer to Borrower under this Agreement, (b) the term
"Company Subsidiaries" shall be deemed to refer to Borrower
Subsidiaries under this Agreement, (c) the term "Company Insurance
Subsidiary" shall be deemed to refer to Borrower Insurance Subsidiary
under this Agreement, (d) the term "Purchaser" shall be deemed to refer
to Lender under this Agreement, (e) the term "Agreement" shall be
deemed to refer to this Agreement, and (f) the term
-20-
25
"Closing Date" shall be deemed to refer to the Closing Date as
defined in this Agreement.
Notwithstanding the foregoing to the contrary, nothing contained in
this SECTION 9.2 shall prohibit any act or omission of Borrower which would be
allowed by the terms of the Purchase Agreement or required to implement the
Business Plan.
SECTION X EVENTS OF DEFAULT
---------------------------
SECTION 10.1 EVENTS OF DEFAULT. If any of the following events
("Events of Default") shall occur:
(a) Borrower shall fail to pay the principal of, or interest
on, the Note or any of the other Liabilities as and when due and
payable;
(b) Any representation or warranty made or deemed made by
Borrower or any Borrower Subsidiary in this Agreement or any Related
Document or which is contained in any certificate, document, opinion,
or financial or other statement furnished at any time under or in
connection with this Agreement or any Related Document shall prove to
have been incorrect in any material respect on the date originally
made;
(c) Default in the payment when due (subject to any applicable
grace period), whether by acceleration or otherwise, of any
indebtedness of Borrower or any Borrower Subsidiary in an amount in
excess of $100,000; or default in the performance or observance of any
obligation or condition with respect to any such indebtedness if the
effect of such default is to accelerate or could result in the
acceleration of the maturity of any such indebtedness or to permit the
holder or holders thereof, or any trustee or agent for such holders, to
cause such indebtedness to become due and payable prior to its
expressed maturity.
(d) Borrower shall fail to perform or observe in any material
respect any term, covenant or agreement contained in SECTIONS
9.2(A)-(E) of this Agreement;
(e) Borrower or any Borrower Subsidiary shall fail to perform
or observe any other term, covenant, or agreement contained in this
Agreement or any Related Document (other than the Note and those
Sections referenced in the foregoing CLAUSE (C)) to which it is a party
on its part to be performed or observed, which failure is not cured
within ten (10) days after notice thereof by Lender to Borrower;
-21-
26
(f) Borrower or any Borrower Subsidiary (i) shall generally
not, or shall be unable to, or shall admit in writing its inability to
pay its debts as such debts become due; or (ii) shall make an
assignment for the benefits of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver, or trustee for
it or a substantial part of its assets; or (iii) shall commence any
proceeding under any bankruptcy, reorganization, arrangements,
readjustment of debt, dissolution, or liquidation law or statute of any
jurisdiction, whether now or hereafter in effect; or (iv) shall have
any such petition or application filed or any such proceeding commenced
against it in which an order for relief is entered or adjudication or
appointment is made and which remains undismissed for a period of
thirty (30) days or more; or (v) by any act or omission shall indicate
its consent to, approval of, or acquiescence in any such petition,
application, or proceeding, or order for relief, or the appointment of
a custodian, receiver, or trustee for all or any substantial part of
its properties; or (vi) shall suffer any such custodianship,
receivership, or trusteeship to continue undischarged for a period of
thirty (30) days or more;
(g) This Agreement or any Related Document, as the case may
be, shall at any time after their execution and delivery for any reason
cease: (i) to create a valid and perfected first priority security
interest in and to the Collateral covered thereby or (ii) to be in full
force and effect or shall be declared null and void, or the validity or
enforceability thereof shall be contested by Borrower or any Borrower
Subsidiary, or Borrower or any Borrower Subsidiary shall deny it has
any further liability or obligation under or shall fail to perform any
of its obligations under any of the foregoing in any material respect;
(h) One or more final judgments or decrees shall be entered
against Borrower or any Borrower Subsidiary involving, individually or
in the aggregate, a liability
-22-
27
(other than a liability of a Borrower Insurance Subsidiary in
the ordinary course of business) of $100,000 or more, and all
such judgments or decrees shall not have been vacated,
satisfied, discharged or stayed or bonded pending appeal
within ten (10) consecutive days from the entry thereof.
SECTION 10.2 REMEDIES. If any Event of Default described in
SECTION 10(F) shall occur and be continuing, the Commitment shall immediately
terminate (if it has not theretofore terminated) and all Liabilities of Borrower
shall become immediately due and payable, all without presentment, demand,
protest or notice of any kind; and, in the case of any other Event of Default,
Lender may declare the Commitment to be terminated (if it has not theretofore
terminated) and all Liabilities with respect to Borrower to be due and payable,
whereupon the Commitment shall immediately terminate (if it has not theretofore
terminated) and all Liabilities with respect to Borrower shall become
immediately due and payable, all without presentment, demand, protest or notice
of any kind. Lender shall promptly advise Borrower of any such declaration, but
failure to do so shall not impair the effect of such declaration.
SECTION XI MISCELLANEOUS
------------------------
SECTION 11.1 AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of this Agreement or any Related
Document to which Borrower is a party, nor consent to any departure by Borrower
from this Agreement or any Related Document to which it is a party, shall in any
event be effective unless the same shall be in writing and signed by Lender, and
then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 11.2 NOTICES, ETC. All notices and other
communications provided for under this Agreement and under the other Related
Documents to which Borrower is a party shall be in writing (including
telegraphic or facsimile communication) and mailed or telecommunicated or
delivered, if to Borrower or Lender at the addresses set forth in the Purchase
Agreement, or, as to each party, at such other address as shall be designated by
such party in a written notice to the other party complying as to delivery with
the terms of this SECTION 11.2. All such notices and communications shall, when
mailed or telecommunicated, be effective when deposited in the mails,
transmitted by facsimile or delivered to the telegraph company, respectively,
addressed as aforesaid, except that notices to Lender pursuant to the
-23-
28
provisions of SECTION 2 shall not be effective until received by Lender.
SECTION 11.3 NO WAIVER; REMEDIES. No failure on the part of
Lender to exercise, and no delay in exercising, any right, power, or remedy
under this Agreement or any Related Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under this Agreement or
any Related Document preclude any other or further exercise thereof or the
exercise of any other right. The remedies provided in the this Agreement and the
Related Documents are cumulative and not exclusive of any remedies provided by
law.
SECTION 11.4 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that Borrower may not assign or
transfer any of its rights under this Agreement or any Related Document to which
Borrower is a party without the prior written consent of Lender.
SECTION 11.5 COSTS, EXPENSES, AND TAXES. Borrower agrees to
pay on demand all reasonable costs and expenses in connection with the
preparation, execution, delivery, filing, recording, and administration of any
of this Agreement, the Related Documents and the ANB Credit Agreement and the
documents and instruments executed and delivered in connection therewith,
including, without limitation, the reasonable fees and expenses of counsel for
Lender and ANB, and local counsel who may be retained by said counsel, with
respect thereto and with respect to advising Lender and ANB as to its rights and
responsibilities under this Agreement, any of the Related Documents, or the ANB
Credit Agreement, as the case may be, and all costs and expenses, if any, in
connection with the enforcement of this Agreement or any of the Related
Documents. In addition, Borrower shall pay any and all stamp and other taxes and
fees payable or determined to be payable in connection with the execution,
delivery, filing, and recording of this Agreement, any of the Related Documents,
the ANB Credit Agreement and the other documents to be delivered under this
Agreement, any Related Document or the ANB Credit Agreement, and agrees to save
Lender harmless from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes and fees.
Notwithstanding anything contained in the foregoing to the contrary, Borrower
shall not be responsible or liable for the payment of (a) any cost or expenses
of Borrower under the ANB Credit Agreement (but only as amended or modified with
the consent of the Borrower, which consent shall not be unreasonably withheld or
delayed) resulting from any event of default of Lender thereunder unless such
event of default results from or arises out of Borrower's Default under this
Agreement or (b) the commitment fee payable by Lender to ANB under the ANB
-24-
29
Credit Agreement; provided that Borrower has paid all fees and expenses then due
and payable under this Agreement (including, without limitation, under SECTION
4.4).
SECTION 11.6 RIGHT OF SETOFF. Upon the occurrence of any Event
of Default, Lender is hereby authorized at any time and from time to time,
without notice to Borrower (any such notice being expressly waived by Borrower),
to set off and apply any and all amounts at any time held and other indebtedness
at any time owing by Lender to or for the credit or the account of Borrower
against any and all of the obligations of Borrower now or hereafter existing
under this Agreement, the Note or any other Related Document, irrespective of
whether or not Lender shall have made any demand under this Agreement, the Note
or such other Related Document and although such obligations may be unmatured.
Lender agrees promptly to notify Borrower after any such setoff and application,
provided that the failure to give such notice shall not affect the validity of
such setoff and application. The rights of Lender under this SECTION 11.6 are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Lender may have.
SECTION 11.7 GOVERNING LAW. This Agreement, the Note and
the other Related Documents shall be governed by, and construed in accordance
with, the laws of the State of Illinois (without giving effect to any conflict
of law principles).
SECTION 11.8 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any Related Document 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 of this Agreement or such Related Document or affecting the validity
or enforceability of such provision in any other jurisdiction.
SECTION 11.9 HEADINGS. Section headings in this Agreement and
the Related Documents are included in this Agreement and such Related Documents
for the convenience of reference only and shall not constitute a part of this
Agreement or the applicable Related Documents for any other purpose.
SECTION 11.10 SUBMISSION TO JURISDICTION; WAIVER OF VENUE;
SERVICE OF PROCESS. Borrower, on behalf of itself and each Borrower Subsidiary
(a) hereby irrevocably submits to the jurisdiction of any Illinois State or
Federal court sitting in Chicago, Illinois over any action or proceeding arising
out of or relating to this Agreement or the Related Documents, and Borrower
hereby irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such Illinois State or Federal court
and (b) agrees not to institute any legal
-25-
30
action or proceeding against Lender or the directors, officers, employees,
agents or property of any thereof, arising out of or relating to this Agreement,
in any court other than as hereinabove specified in this SECTION 11.10.
Borrower, on behalf of itself and each Borrower Subsidiary, hereby irrevocably
waives, to the fullest extent permitted by law, any objection it may now or
hereafter have to the laying of venue in any action or proceeding (whether
brought by Borrower, any Borrower Subsidiary, Lender or otherwise) in any court
hereinabove specified in this SECTION 11.10 as well as any right it may now or
hereafter have, to remove any such action or proceeding, once commenced, to
another court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower on
behalf of itself and each Borrower Subsidiary agrees that a final judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 11.11 WAIVER OF JURY TRIAL. BORROWER AND LENDER
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT, ANY RELATED DOCUMENT OR UNDER ANY OTHER DOCUMENT OR AGREEMENT
DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR
THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS
AGREEMENT, AND AGREE THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY; THIS PROVISION IS A MATERIAL
INDUCEMENT FOR LENDER ENTERING INTO THIS AGREEMENT.
-26-
31
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
CENTRAL RESERVE LIFE CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
------------------------------
Title: CFO
-----------------------------
STRATEGIC ACQUISITION PARTNERS, LLC
By: /s/ Xxx Xxxxx
-------------------------------
Name: Xxx Xxxxx
-----------------------------
Title: Manager
----------------------------
-27-
