--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CREDIT AGREEMENT
among
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
VARIOUS LENDING INSTITUTIONS,
and
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
-----------------------------
Dated as of December 10, 1998
-----------------------------
$125,000,000
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CHASE SECURITIES INC.,
AS LEAD ARRANGER AND BOOK MANAGER
TABLE OF CONTENTS
PAGE
SECTION 1. Amount and Terms of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.01 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings. . . . . . . . 2
1.03 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.04 Disbursement of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.05 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.06 Conversions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.07 Pro Rata Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.08 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.09 Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.10 Increased Costs, Illegality, etc. . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.12 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.13 Replacement of Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2. Fees; Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.01 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
2.02 Voluntary Reduction of Commitments. . . . . . . . . . . . . . . . . . . . . .10
2.03 Mandatory Reductions of Commitments . . . . . . . . . . . . . . . . . . . . .10
SECTION 3. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.01 Voluntary Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
3.02 Mandatory Repayments and Prepayments. . . . . . . . . . . . . . . . . . . . .11
3.03 Method and Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . .13
3.04 Net Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 4. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.01 Effectiveness; Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.02 No Default; Representations and Warranties. . . . . . . . . . . . . . . . . .16
4.03 Officer's Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.04 Opinions of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.05 Corporate Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
4.06 Existing Reinsurance Agreements . . . . . . . . . . . . . . . . . . . . . . .16
4.07 Adverse Change, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.08 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.09 Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
4.10 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
-i-
4.11 Consummation of the Transaction . . . . . . . . . . . . . . . . . . . . . . .18
4.12 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.13 Various Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
4.14 Financial Statements; Projections . . . . . . . . . . . . . . . . . . . . . .19
4.15 Approvals, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
4.16 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.17 Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.18 Notice of Borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.19 Insurance Policies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.20 Trust Preferred Note Documents. . . . . . . . . . . . . . . . . . . . . . . .21
4.21 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
4.22 Surplus Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 5. Representations, Warranties and Agreements. . . . . . . . . . . . . . . . . .22
5.01 Corporate Status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
5.02 Corporate Power and Authority . . . . . . . . . . . . . . . . . . . . . . . .22
5.03 No Contravention of Laws, Agreements or Organizational Documents. . . . . . .22
5.04 Litigation and Contingent Liabilities . . . . . . . . . . . . . . . . . . . .23
5.05 Use of Proceeds; Margin Regulations . . . . . . . . . . . . . . . . . . . . .23
5.06 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.07 Investment Company Act. . . . . . . . . . . . . . . . . . . . . . . . . . . .23
5.08 Public Utility Holding Company Act. . . . . . . . . . . . . . . . . . . . . .24
5.09 True and Complete Disclosure; Projections and Assumptions . . . . . . . . . .24
5.10 Consummation of Transaction . . . . . . . . . . . . . . . . . . . . . . . . .24
5.11 Financial Condition; Financial Statements . . . . . . . . . . . . . . . . . .24
5.12 Security Interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.13 Tax Returns and Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.14 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
5.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
5.16 Intellectual Property, etc. . . . . . . . . . . . . . . . . . . . . . . . . .27
5.17 Pollution and Other Regulations . . . . . . . . . . . . . . . . . . . . . . .27
5.18 Labor Relations; Collective Bargaining Agreements . . . . . . . . . . . . . .27
5.19 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28
5.21 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
5.22 Compliance with Statutes, etc . . . . . . . . . . . . . . . . . . . . . . . .30
5.23 Insurance Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
5.24 Year 2000 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
SECTION 6. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.01 Information Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
6.02 Books, Records and Inspections. . . . . . . . . . . . . . . . . . . . . . . .34
6.03 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
6.04 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
6.05 Corporate Franchises. . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
-ii-
6.06 Compliance with Statutes, etc . . . . . . . . . . . . . . . . . . . . . . . .34
6.07 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
6.08 Performance of Obligations. . . . . . . . . . . . . . . . . . . . . . . . . .35
6.09 Good Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
6.10 End of Fiscal Years; Fiscal Quarters. . . . . . . . . . . . . . . . . . . . .36
6.11 Loan Ratings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
6.12 Maintenance of Licenses and Permits . . . . . . . . . . . . . . . . . . . . .36
6.13 Register. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
6.14 Foreign Subsidiaries Security . . . . . . . . . . . . . . . . . . . . . . . .37
6.15 Acquisition of CCIC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 7. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
7.01 Changes in Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc. . . . . . . . . . . .38
7.03 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
7.04 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
7.05 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
7.06 Advances, Investments and Loans . . . . . . . . . . . . . . . . . . . . . . .42
7.07 Prepayments of Indebtedness, Modifications of Agreements, etc . . . . . . . .44
7.08 Dividends, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
7.09 Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . .45
7.10 Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.11 Interest Coverage Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . .45
7.12 Minimum Combined Statutory Surplus. . . . . . . . . . . . . . . . . . . . . .46
7.13 Minimum Risk-Based Capital. . . . . . . . . . . . . . . . . . . . . . . . . .46
7.14 Issuance of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.15 Creation of Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . .46
7.16 Partnership Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . .47
SECTION 8. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.01 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.02 Representations, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.03 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.04 Default Under Other Agreements. . . . . . . . . . . . . . . . . . . . . . . .47
8.05 Bankruptcy, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
8.06 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48
8.07 Subsidiary Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.08 Pledge Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.09 Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.10 A.M. Best Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
8.11 Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
-iii-
SECTION 9. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50
SECTION 10. The Administrative Agent . . . . . . . . . . . . . . . . . . . . . . . . . .68
10.01 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
10.02 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
10.03 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . .68
10.04 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . . .69
10.05 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
10.06 Non-Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69
10.07 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
10.08 The Administrative Agent in its Individual Capacity. . . . . . . . . . . . .70
10.09 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . . .71
SECTION 11. Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
11.01 Payment of Expenses, etc . . . . . . . . . . . . . . . . . . . . . . . . . .71
11.02 Right of Setoff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71
11.03 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
11.04 Benefit of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
11.05 No Waiver; Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . .74
11.06 Payments Pro Rata. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
11.07 Calculations; Computations . . . . . . . . . . . . . . . . . . . . . . . . .75
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE . . . . . . . . . . . . . .75
11.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
11.10 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
11.11 Headings Descriptive . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
11.12 Amendment or Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
11.13 Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
11.14 Domicile of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
11.15 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77
11.16 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . .78
11.17 Trust Preferred Note Documents . . . . . . . . . . . . . . . . . . . . . . .78
-iv-
ANNEX I -- List of Banks and Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Existing Indebtedness
ANNEX IV -- Plans
ANNEX V -- Subsidiaries
ANNEX VI -- Collective Bargaining Agreements
ANNEX VII -- Existing Liens
ANNEX VIII -- Existing Investment Commitments
ANNEX IX -- Capitalization
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B-1 -- Form of Term Note
EXHIBIT B-2 -- Form of Revolving Note
EXHIBIT C-1 -- Form of Opinion of Xxxxxxx & XxXxxxxx
EXHIBIT C-2 -- Form of Opinion of White & Case
EXHIBIT D -- Form of Officer's Certificate
EXHIBIT E -- Form of Section 3.04(b)(ii) Certificate
EXHIBIT F -- Form of Subsidiary Guaranty
EXHIBIT G -- Form of Pledge Agreement
EXHIBIT H -- Form of Assignment and Assumption Agreement
-v-
CREDIT AGREEMENT, dated as of December 10, 1998, among SUPERIOR
NATIONAL INSURANCE GROUP, INC., a Delaware corporation (the "Borrower"), the
lending institutions listed from time to time on Annex I hereto (each a "Bank"
and, collectively, the "Banks"), and THE CHASE MANHATTAN BANK, as Administrative
Agent (the "Administrative Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 9 are used herein as so
defined.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. AMOUNT AND TERMS OF CREDIT.
1.01 COMMITMENTS. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each a
"Loan" and, collectively, the "Loans") to the Borrower, which Loans shall be
drawn, to the extent such Bank has a commitment under such Facility, under the
Term Loan Facility and the Revolving Loan Facility, respectively, as set forth
below:
(a) Each Loan under the Term Loan Facility (each, a "Term Loan"
and, collectively, the "Term Loans"):
(i) shall be incurred by the Borrower on the Initial
Borrowing Date;
(ii) shall be denominated in U.S. Dollars;
(iii) may, except as hereinafter provided, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base
Rate Loans or Eurodollar Loans, PROVIDED, that (x) all Term Loans made
as part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Term Loans of the same Type and (y)
incurrences of, or conversions into, Eurodollar Loans may not be
effected prior to the Syndication Date;
(iv) shall not exceed for any Bank at the time of incurrence
thereof that aggregate principal amount which equals the Term Loan
Commitment, if any, of such Bank at such time; and
(v) once repaid, may not be reborrowed.
(b) Each Loan under the Revolving Loan Facility (each, a
"Revolving Loan" and, collectively, the "Revolving Loans"):
(i) may be incurred by the Borrower at any time and from time
to time after the Initial Borrowing Date and prior to the Revolving Loan
Maturity Date;
(ii) shall be denominated in U.S. Dollars;
(iii) may, except as hereinafter provided, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base
Rate Loans or Eurodollar Loans, PROVIDED, that (x) all Revolving Loans
made as part of the same Borrowing shall, unless otherwise specifically
provided herein, consist of Revolving Loans of the same Type and (y)
incurrences of, or conversions into, Eurodollar Loans may not be
effected prior to the Syndication Date;
(iv) may be repaid and reborrowed in accordance with the
provisions hereof; and
(v) shall not exceed for any Bank at any time outstanding
that aggregate principal amount which equals the Revolving Loan
Commitment, if any, of such Bank at such time.
1.02 MINIMUM AMOUNT OF EACH BORROWING; MAXIMUM NUMBER OF
BORROWINGS. The aggregate principal amount of each Borrowing hereunder shall
not be less than $1,000,000 and, if in excess thereof, shall be in an integral
multiple of $500,000. More than one Borrowing may be incurred on any day;
PROVIDED that at no time shall there be outstanding more than five Borrowings of
Eurodollar Loans.
1.03 NOTICE OF BORROWING. (a) Whenever the Borrower desires to
incur Loans under any Facility, it shall give the Administrative Agent at its
Notice Office, prior to 12:00 Noon (New York time), at least three Business
Days' prior written notice (or telephonic notice promptly confirmed in writing)
of each Borrowing of Eurodollar Loans and at least one Business Day's prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Base Rate Loans to be incurred hereunder. Each such notice (each,
a "Notice of Borrowing") shall, except as expressly provided in Section 1.10, be
irrevocable, and, in the case of each written notice and each written
confirmation of telephonic notice, shall be in the form of Exhibit A hereto,
appropriately completed to specify (i) the Facility pursuant to which such
Borrowing is to be made, (ii) the aggregate principal amount of the Loans to be
made pursuant to such Borrowing, (iii) the date of such Borrowing (which shall
be a Business Day) and (iv) whether such Borrowing shall consist of Base Rate
Loans or, to the extent permitted hereunder, Eurodollar Loans and, if Eurodollar
Loans, the Interest Period to be initially applicable thereto. The
Administrative Agent shall promptly give each Bank which is required to make
Loans of the Facility specified in the respective Notice of Borrowing written
notice (or telephonic notice promptly confirmed in writing) of each proposed
Borrowing, of such Bank's proportionate share thereof and of the other matters
covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower
to confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice,
-2-
believed by the Administrative Agent in good faith to be from an Authorized
Officer of the Borrower. In each such case the Borrower hereby waives the
right to dispute the Administrative Agent's record of the terms of any such
telephonic notice.
1.04 DISBURSEMENT OF FUNDS. (a) Subject to the terms and
conditions herein set forth, no later than 11:00 A.M. (New York time) on the
date specified in each Notice of Borrowing, each Bank with a Commitment under
the respective Facility will make available its PRO RATA share of each Borrowing
requested to be made on such date in the manner provided below. All amounts
shall be made available to the Administrative Agent in immediately available
funds, denominated in U.S. Dollars, at the Payment Office and the Administrative
Agent will promptly make available to the Borrower by depositing to the
Borrower's account at the Payment Office the aggregate of the amounts so made
available in the type of funds received. Unless the Administrative Agent shall
have been notified by any Bank prior to the date of Borrowing that such Bank
does not intend to make available to the Administrative Agent its portion of the
Borrowing or Borrowings to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative Agent
on such date of Borrowing, and the Administrative Agent, in reliance upon such
assumption, may (in its sole discretion and without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative Agent by such Bank
and the Administrative Agent has made available same to the Borrower, the
Administrative Agent shall be entitled to recover such corresponding amount from
such Bank. If such Bank does not pay such corresponding amount forthwith upon
the Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent. The Administrative Agent
shall also be entitled to recover from the Bank or the Borrower, as the case may
be, interest on such corresponding amount in respect of each day from the date
such corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then
applicable rate of interest, calculated in accordance with Section 1.08, for the
respective Loans.
(b) Nothing in this Section 1.04 shall be deemed to relieve any
Bank from its obligation to fulfill its commitments hereunder or to prejudice
any rights which the Borrower may have against any Bank as a result of any
default by such Bank hereunder.
1.05 NOTES. (a) The Borrower's obligation to pay the principal
of, and interest on, all the Loans made to it by each Bank shall be evidenced
(i) if Term Loans, by a promissory note substantially in the form of Exhibit B-1
with blanks appropriately completed in conformity herewith (each, a "Term Note"
and, collectively, the "Term Notes") and (ii) if Revolving Loans, by a
promissory note substantially in the form of Exhibit B-2 with blanks
appropriately completed in conformity herewith (each, a "Revolving Note" and,
collectively, the "Revolving Notes").
-3-
(b) The Term Note issued to each Bank that has a Term Loan
Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii)
be payable to the order of such Bank or its registered assigns and be dated the
Initial Borrowing Date (or if issued thereafter, the date of issuance thereof),
(iii) be in a stated principal amount equal to the initial Term Loan Commitment
of such Bank and be payable in the principal amount of Term Loans evidenced
thereby (or in the case of a new Term Note issued pursuant to Section 11.04, the
Term Loans evidenced thereby at the time of issuance), (iv) mature on the Term
Loan Maturity Date, (v) bear interest as provided in the appropriate clause of
Section 1.08 in respect of the Base Rate Loans and Eurodollar Loans, as the case
may be, evidenced thereby, (vi) be subject to voluntary prepayment as provided
in Section 3.01, and mandatory repayment and prepayment as provided in Section
3.02, and (vii) be entitled to the benefits of this Agreement and the other
Credit Documents.
(c) The Revolving Note issued to each Bank that has a Revolving
Loan Commitment shall (i) be executed by the Borrower, (ii) be payable to the
order of such Bank or its registered assigns and be dated the Initial Borrowing
Date (or if issued thereafter, the date of issuance thereof), (iii) be in a
stated principal amount equal to the Revolving Loan Commitment of such Bank and
be payable in the principal amount of the Revolving Loans evidenced thereby,
(iv) mature on the Revolving Loan Maturity Date, (v) bear interest as provided
in the appropriate clause of Section 1.08 in respect of the Base Rate Loans and
Eurodollar Loans, as the case may be, evidenced thereby, (vi) be subject to
voluntary prepayment as provided in Section 3.01, and mandatory prepayment as
provided in Section 3.02, and (vii) be entitled to the benefits of this
Agreement and the other Credit Documents.
(d) Each Bank will record on its internal records the amount of
each Loan made by it and each payment in respect thereof and will prior to any
transfer of any of its Notes endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. Failure to make any such notation
or any error in any such notation shall not affect the Borrower's obligations in
respect of such Loans.
1.06 CONVERSIONS. The Borrower shall have the option to convert
on any Business Day occurring after the Syndication Date, all or a portion at
least equal to $1,000,000 (and, if in excess thereof, an integral multiple of
$500,000) of the outstanding principal amount of the Loans of one Type pursuant
to a Facility into a Borrowing or Borrowings of the other Type of Loan under
such Facility; PROVIDED that (i) no partial conversion of a Borrowing of
Eurodollar Loans shall reduce the outstanding principal amount of the Eurodollar
Loans pursuant to such Borrowing to less than $1,000,000, (ii) Base Rate Loans
may only be converted into Eurodollar Loans if no Default or Event of Default is
in existence on the date of the conversion, (iii) Borrowings of Eurodollar Loans
resulting from this Section 1.06 shall be limited in number as provided in
Section 1.02, (iv) Eurodollar Loans may only be converted into Base Rate Loans
on the last day of the Interest Period applicable thereto and (v) each such
conversion shall be made PRO RATA among the Loans of each Bank of the Type being
converted. Each such conversion shall be effected by the Borrower by giving the
Administrative Agent at its Notice Office, prior to 12:00 Noon (New York time),
at least three Business Days' (or one Business Day's in the case of a conversion
into Base Rate Loans) prior written notice (or telephonic notice
-4-
promptly confirmed in writing) (each a "Notice of Conversion") specifying the
Loans to be so converted, the Type of Loans to be converted into and, if to
be converted into a Borrowing of Eurodollar Loans, the Interest Period to be
initially applicable thereto. The Administrative Agent shall give each Bank
prompt notice of any such proposed conversion affecting any of its Loans.
1.07 PRO RATA BORROWINGS. All Loans under this Agreement shall
be made by the Banks PRO RATA on the basis of their Term Loan Commitments and
Revolving Loan Commitments, as the case may be. It is understood that no Bank
shall be responsible for any default by any other Bank in its obligation to make
Loans hereunder and that each Bank shall be obligated to make the Loans provided
to be made by it hereunder, regardless of the failure of any other Bank to
fulfill its commitments hereunder.
1.08 INTEREST. (a) The unpaid principal amount of each Base
Rate Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be the
Applicable Percentage then in effect for Base Rate Loans plus the Base Rate in
effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall
bear interest from the date of the Borrowing thereof until the earlier of (i)
the maturity (whether by acceleration or otherwise) of such Eurodollar Loan or
(ii) the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to
Section 1.06, at a rate per annum which shall at all times be the Applicable
Percentage then in effect for Eurodollar Loans plus the relevant Eurodollar Rate
for the Interest Period applicable to such Eurodollar Loan.
(c) Overdue principal and, to the extent permitted by law,
overdue interest in respect of each Loan and any other overdue amount payable
hereunder shall bear interest at a rate per annum equal to the greater of (x)
the Base Rate in effect from time to time plus the sum of (i) 2% and (ii) the
Applicable Percentage then in effect for Base Rate Loans and (y) the rate which
is 2% in excess of the rate then borne by such Loan.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each calendar quarter, (ii) in respect of each Eurodollar Loan,
on the last day of each Interest Period applicable thereto and, in the case of
an Interest Period of six months, on the date occurring three months after the
first day of such Interest Period and (iii) in respect of each Loan, on any
conversion or prepayment (on the amount so converted or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b) and (c).
-5-
(f) The Administrative Agent, upon determining the interest rate
for any Borrowing of Eurodollar Loans for any Interest Period, shall promptly
notify the Borrower and the Banks thereof.
1.09 INTEREST PERIODS. At the time the Borrower gives a Notice
of Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar Loans (in the case of the initial Interest
Period applicable thereto) or prior to 12:00 Noon (New York time) on the third
Business Day prior to the expiration of an Interest Period applicable to a
Borrowing of Eurodollar Loans, it shall have the right to elect by giving the
Administrative Agent written notice (or telephonic notice promptly confirmed in
writing) of the Interest Period to be applicable to such Borrowing, which
Interest Period shall, at the option of the Borrower, be a one, two, three or
six month period. Notwithstanding anything to the contrary contained above:
(i) the initial Interest Period for any Borrowing of
Eurodollar Loans shall commence on the date of such Borrowing (including
the date of any conversion from a Borrowing of Base Rate Loans) and each
Interest Period occurring thereafter in respect of such Borrowing shall
commence on the day on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month;
(iii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, PROVIDED that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of
the month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period for a Borrowing under a Facility may
be elected if it would extend beyond the Maturity Date for such
Facility;
(v) no Interest Period may be elected at any time when a
Default or Event of Default is then in existence; and
(vi) no Interest Period with respect to any Borrowing of Term
Loans may be elected that would extend beyond any date upon which a
mandatory repayment of Term Loans is required to be made under Section
3.02(i)(a) if, after giving effect to the selection of such Interest
Period, the aggregate principal amount of Term Loans maintained as
Eurodollar Loans with Interest Periods ending after such date would
exceed the aggregate principal amount of Term Loans permitted to be
outstanding after such mandatory repayment.
If upon the expiration of any Interest Period, the Borrower has failed, or is
not permitted, to elect a new Interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as
-6-
provided above, the Borrower shall be deemed to have elected to convert such
Borrowing into a Borrowing of Base Rate Loans effective as of the expiration
date of such current Interest Period.
1.10 INCREASED COSTS, ILLEGALITY, ETC. (a) In the event that
(x) in the case of clause (i) below, the Administrative Agent or (y) in the case
of clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
(i) on any date for determining the Eurodollar Rate for any
Interest Period, that, by reason of any changes arising after the
Effective Date affecting the interbank Eurodollar market, adequate and
fair means do not exist for ascertaining the applicable interest rate on
the basis provided for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs
or reductions in the amounts received or receivable hereunder in an
amount which such Bank deems material with respect to any Eurodollar
Loans (other than any increased cost or reduction in the amount received
or receivable resulting from the imposition of or a change in the rate
of taxes or similar charges) because of (x) any change since the
Effective Date in any applicable law, governmental rule, regulation,
guideline, order or request (whether or not having the force of law), or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline,
order or request (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Eurodollar Rate) and/or (y) other circumstances affecting the
interbank Eurodollar market or the position of such Bank in such market;
or
(iii) at any time, that the making or continuance of any
Eurodollar Loan has become unlawful by compliance by such Bank in good
faith with any change since the Effective Date in any law, governmental
rule, regulation, guideline or order, or the interpretation or
application thereof, or would conflict with any thereof not having the
force of law but with which such Bank customarily complies, or has
become impracticable as a result of a contingency occurring after the
Effective Date which materially adversely affects the interbank
Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within 10 Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower or, in the case of a Notice of Borrowing, shall, at the option
of the Borrower, be deemed converted into a Notice of Borrowing for Base Rate
Loans to
-7-
be made on the date of Borrowing contained in such Notice of Borrowing, (y)
in the case of clause (ii) above, the Borrower shall pay to such Bank, upon
written demand therefor, such additional amounts (in the form of an increased
rate of, or a different method of calculating, interest or otherwise as such
Bank shall determine) as shall be required to compensate such Bank for such
increased costs or reductions in amounts receivable hereunder (a written
notice as to the additional amounts owed to such Bank, showing the basis for
the calculation thereof, which basis shall be reasonable and consistently
applied, submitted to the Borrower by such Bank shall, absent manifest error,
be final and conclusive and binding upon all parties hereto) and (z) in the
case of clause (iii) above, the Borrower shall take one of the actions
specified in Section 1.10(b) as promptly as possible and, in any event,
within the time period required by law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, by giving the Administrative Agent telephonic notice
(confirmed promptly in writing) thereof on the same date that the Borrower was
notified by a Bank pursuant to Section 1.10(a)(ii) or (iii), cancel said
Borrowing, convert the related Notice of Borrowing into one requesting a
Borrowing of Base Rate Loans or require the affected Bank to make its requested
Loan as a Base Rate Loan, or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least one Business Day's notice to the Administrative
Agent, require the affected Bank to convert each such affected Eurodollar Loan
into a Base Rate Loan, PROVIDED that if more than one Bank is affected at any
time, then all affected Banks must be treated the same pursuant to this Section
1.10(b).
(c) If any Bank shall have determined that after the Effective
Date the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged by law with the interpretation or
administration thereof, or compliance by such Bank or its parent corporation
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, in
each case made subsequent to the Effective Date, has or would have the effect of
reducing the rate of return on such Bank's or its parent corporation's capital
or assets as a consequence of such Bank's commitments or obligations hereunder
to a level below that which such Bank or its parent corporation could have
achieved but for such adoption, effectiveness, change or compliance (taking into
consideration such Bank's or its parent corporation's policies with respect to
capital adequacy), then from time to time, upon demand by such Bank (with a copy
to the Administrative Agent), the Borrower shall pay to such Bank such
additional amount or amounts as will compensate such Bank or its parent
corporation for such reduction. Each Bank, upon determining in good faith that
any additional amounts will be payable pursuant to this Section 1.10(c), will
give prompt written notice thereof to the Borrower, which notice shall set forth
the basis of the calculation of such additional amounts, which basis must be
reasonable and consistently applied, although the failure to give any such
notice shall not release or diminish any of the Borrower's obligations to pay
additional amounts pursuant to this Section 1.10(c) upon the subsequent receipt
of such notice.
-8-
(d) Notwithstanding anything in this Agreement to the contrary,
to the extent any notice required by this Section 1.10 is given by any Bank more
than 90 days after such Bank obtained, or reasonably should have obtained,
knowledge of the occurrence of the event giving rise to the additional costs of
the type described in this Section 1.10, such Bank shall not be entitled to
compensation under this Section 1.10 for any amounts incurred or accruing more
than 90 days prior to such notice to the Borrower.
1.11 COMPENSATION. The Borrower shall compensate each Bank,
upon its written request (which request shall set forth the basis for requesting
such compensation), for all reasonable losses, expenses and liabilities
(including, without limitation, any loss, expense or liability incurred by
reason of the liquidation or reemployment of deposits or other funds required by
such Bank to fund its Eurodollar Loans but excluding any loss of anticipated
profit with respect to such Loans) which such Bank may sustain: (i) if for any
reason (other than a default by such Bank or the Administrative Agent) a
Borrowing of Eurodollar Loans does not occur on a date specified therefor in a
Notice of Borrowing or Notice of Conversion (whether or not withdrawn by the
Borrower or deemed withdrawn pursuant to Section 1.10(a)); (ii) if any
repayment, prepayment or conversion of any of its Eurodollar Loans occurs on a
date which is not the last day of an Interest Period applicable thereto; (iii)
if any prepayment of any of its Eurodollar Loans is not made on any date
specified in a notice of prepayment given by the Borrower; or (iv) as a
consequence of (x) any other failure by the Borrower to repay its Loans when
required by the terms of this Agreement or (y) an election made pursuant to
Section 1.10(b). Calculation of all amounts payable to a Bank under this
Section 1.11 shall be made as though that Bank had actually funded its relevant
Eurodollar Loan through the purchase of a Eurodollar deposit bearing interest at
the Eurodollar Rate in an amount equal to the amount of that Loan, having a
maturity comparable to the relevant Interest Period and through the transfer of
such Eurodollar deposit from an offshore office of that Bank or other bank to a
domestic office of that Bank in the United States of America; PROVIDED, HOWEVER,
that each Bank may fund each of its Eurodollar Loans in any manner it sees fit
and the foregoing assumption shall be utilized only for the calculation of
amounts payable under this Section 1.11.
1.12 CHANGE OF LENDING OFFICE. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii) or 3.04 with respect to such Bank, it will, if requested by the Borrower,
use reasonable efforts (subject to overall policy considerations of such Bank)
to designate another lending office for any Loans affected by such event;
PROVIDED that such designation is made on such terms that, in the opinion of
such Bank, such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Bank provided in Section 1.10 or 3.04.
1.13 REPLACEMENT OF BANKS. (x) If any Bank becomes a Defaulting
Bank or (y) upon the occurrence of any event giving rise to the operation of
Section 1.10(a)(ii) or (iii), Section 1.10(c) or Section 3.04 with respect to
any Bank which results in such Bank charging to the Borrower increased costs in
excess of those being generally charged by the other Banks, the Borrower shall
have the right, if no Default or Event of Default, then exists, to replace such
Bank
-9-
(the "Replaced Bank") with one or more other banks or financial institutions,
none of whom shall constitute a Defaulting Bank at the time of such
replacement (collectively, the "Replacement Bank") reasonably acceptable to
the Administrative Agent, PROVIDED that (i) at the time of any replacement
pursuant to this Section 1.13, the Replacement Bank shall enter into one or
more Assignment and Assumption Agreements pursuant to Section 11.04(b) (and
with all fees payable pursuant to said Section 11.04(b) to be paid by the
Replacement Bank) pursuant to which the Replacement Bank shall acquire all of
the Commitments and outstanding Loans of the Replaced Bank and, in connection
therewith, shall pay to the Replaced Bank in respect thereof an amount equal
to (A) the principal of, and all accrued interest on, all outstanding Loans
of the Replaced Bank, (B) all accrued, but theretofore unpaid, Fees owing to
the Replaced Bank pursuant to Section 2.01, and (ii) all obligations
(including, without limitation, all such amounts, if any, due and owing under
Section 1.11) of the Borrower due and owing to the Replaced Bank (other than
those specifically described in clause (i) above in respect of which the
assignment purchase price has been, or is concurrently being, paid) shall be
paid in full to such Replaced Bank concurrently with such replacement. Upon
the execution of the respective Assignment and Assumption Agreement, the
payment of amounts referred to in clauses (i) and (ii) above, recordation of
the assignment on the Register by the Administrative Agent pursuant to
Section 6.13 and, if so requested by the Replacement Bank, delivery to the
Replacement Bank of the appropriate Note or Notes executed by the Borrower,
(x) the Replacement Bank shall become a Bank hereunder and the Replaced Bank
shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without
limitation, Sections 1.10, 1.11, 3.04, 10.07 and 11.01), which shall survive
as to such Replaced Bank and (y) Annex I hereto shall be deemed modified to
reflect the changed Commitments (and/or outstanding Term Loans, as the case
may be) resulting from the assignment from the Replaced Bank to the
Replacement Bank.
SECTION 2. FEES; COMMITMENTS.
2.01 FEES. (a) The Borrower shall pay to the Administrative
Agent for the account of each Bank a commitment fee (the "Commitment Fee") for
the period from the Effective Date to but not including the date on which the
Total Revolving Loan Commitment has been terminated, computed at a rate for each
day equal to 1/2 of 1% per annum on the daily Unutilized Revolving Loan
Commitment of each such Bank. Accrued Commitment Fees shall be due and payable
in arrears on the last Business Day of each calendar quarter and the date upon
which the Total Revolving Loan Commitment is terminated.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the Administrative Agent, when and as due, such fees as have been, or
are from time to time, separately agreed upon.
(c) All computations of Fees shall be made in accordance with
Section 11.07(b).
2.02 VOLUNTARY REDUCTION OF COMMITMENTS. Upon at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) given by the Borrower to the Administrative Agent at its Notice Office
(which notice the Administrative Agent shall
-10-
promptly transmit to each of the Banks), the Borrower shall have the right,
without premium or penalty, to terminate or partially reduce the Total
Unutilized Revolving Loan Commitment, PROVIDED that any such partial
reductions shall be in the amount of at least $1,000,000.
2.03 MANDATORY REDUCTIONS OF COMMITMENTS. (a) The Total
Commitment (and the Commitment of each Bank) shall terminate in its entirety at
5:00 p.m. (New York time) on the Expiration Date unless the Initial Borrowing
Date has occurred on or before such date.
(b) The Total Term Loan Commitment shall terminate on the
Initial Borrowing Date, after giving effect to the incurrence of Term Loans on
such date.
(c) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the earlier of (i) the Revolving
Loan Maturity Date and (ii) the date on which a Change of Control occurs.
(d) On each date upon which a mandatory prepayment of Term Loans
pursuant to Section 3.02(i)(b), (c) or (d) is required and exceeds in amount the
aggregate principal amount of Term Loans then outstanding or would be required
if an unlimited amount of Term Loans were then outstanding, the Total Revolving
Loan Commitment shall be permanently reduced by the amount by which the amount
required to be applied pursuant to said Sections (determined as if an unlimited
amount of Term Loans were actually outstanding) exceeds the aggregate principal
amount of Term Loans then outstanding.
(e) Each partial reduction of the Total Revolving Loan
Commitment pursuant to this Section 2.03 shall apply proportionately to the
Revolving Loan Commitment of each Bank with such a Commitment.
SECTION 3. PAYMENTS.
3.01 VOLUNTARY PREPAYMENTS. The Borrower shall have the right
to prepay Loans, without premium or penalty (except for amounts payable pursuant
to Section 1.11), in whole or in part, from time to time on the following terms
and conditions: (i) the Borrower shall give the Administrative Agent at its
Notice Office written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay the Loans, whether such Loans are Term Loans or
Revolving Loans, the amount of such prepayment and (in the case of Eurodollar
Loans) the specific Borrowing(s) pursuant to which made, which notice shall be
received by the Administrative Agent (x) in the case of Base Rate Loans, no
later than 12:00 Noon (New York time) one Business Day prior to the date of such
prepayment, or (y) in the case of Eurodollar Loans, three Business Days prior to
the date of such prepayment, which notice shall promptly be transmitted by the
Administrative Agent to each of the Banks; (ii) each partial prepayment of any
Borrowing shall be in an aggregate principal amount of at least $1,000,000,
PROVIDED that no partial prepayment of Eurodollar Loans made pursuant to a
Borrowing shall reduce the aggregate principal amount of the Loans outstanding
pursuant to such Borrowing to an amount less than $1,000,000; (iii) each
prepayment in respect of any Loans made pursuant to a Borrowing shall be applied
PRO RATA among such Loans; and (iv) each prepayment of Term Loans pursuant to
this
-11-
Section 3.01 shall reduce the then remaining Scheduled Repayments on a PRO
RATA basis (based upon the then remaining principal amount of each such
Scheduled Repayment).
3.02 MANDATORY REPAYMENTS AND PREPAYMENTS.
(i) Requirements:
(a) On each date set forth below, the Borrower shall be required
to repay the principal amount of Term Loans as is set forth opposite such date
(each such repayment, as the same may be reduced pursuant to Section 2.03, 3.01
and/or 3.02(ii)(a), a "Scheduled Repayment"):
Scheduled Repayment Date Amount
------------------------ ------
June 30, 2000 $10,000,000
December 31, 2000 $10,000,000
June 30, 2001 $10,000,000
December 31, 2001 $10,000,000
June 30, 2002 $10,000,000
December 31, 2002 $10,000,000
June 30, 2003 $12,500,000
December 31, 2003 $12,500,000
June 30, 2004 $12,500,000
Term Loan Maturity Date $12,500,000
(b) Subject to Section 3.02(i)(f), on the date of receipt
thereof by the Borrower and/or any of its Subsidiaries of the proceeds of any
Asset Sale (other than the sale of BIC to Centre Solutions Holdings (Delaware)
Limited, but no later than December 31, 1998), an amount equal to 100% of the
Net Available Proceeds of such Asset Sale shall be applied as a mandatory
prepayment of principal of the then outstanding Term Loans.
(c) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries, an amount equal to 100% of the proceeds (net of
underwriting discounts and commissions and other reasonable fees and costs
associated therewith) of the incurrence of Indebtedness by the Borrower and/or
any of its Subsidiaries (other than Indebtedness permitted by Section 7.04 as in
effect on the Effective Date) shall be applied to the prepayment of the
outstanding principal amount of the Term Loans.
-12-
(d) On the date of the receipt thereof by the Borrower and/or
any of its Subsidiaries, an amount equal to 100% of the proceeds (net of
underwriting discounts and commissions and other reasonable fees and costs
associated therewith) of the sale or issuance of equity by, or cash capital
contributions to, the Borrower or any Subsidiary of the Borrower (other than (i)
any issuance of common stock by the Borrower to the extent issued to the
employees or claims consultants of the Borrower or its Subsidiaries and (ii)
issuances of stock by Subsidiaries of the Borrower to the Borrower on to Wholly
Owned Subsidiaries of the Borrower, and capital contributions by the Borrower to
its Subsidiaries), shall be applied as a mandatory prepayment of the outstanding
principal amount of the then outstanding Term Loans.
(e) On the date on which any Change of Control occurs, the
outstanding principal amount of all Term Loans shall be due and payable in full.
(f) To the extent that (x) funds for any prepayment otherwise
required to be made pursuant to the terms of Section 3.02(i)(b) are only
available to the Borrower through dividend payments to the Borrower from one or
more Regulated Insurance Companies, (y) such dividend payments cannot be made at
such time within the ordinary dividend-paying capacity of such Regulated
Insurance Company or Companies and, accordingly, require specific affirmative
regulatory approval for the payment of extraordinary dividends and (z) the
Borrower has used reasonable efforts (including without limitation due written
application or request) to obtain such approval for the payment of extraordinary
dividends and such approval cannot be obtained by such Regulated Insurance
Company, upon certification by the Borrower to the Administrative Agent (which
shall promptly deliver a copy of such certification to the Banks) to such effect
(together with, in the case of an application or request for regulatory
approval, copies of all documents submitted, and all written responses received,
in connection therewith), the Borrower shall not, to such extent, be required to
make such prepayment for so long as such dividend payments may not, for such
reasons, be made.
(g) If on any date the outstanding principal amount of Revolving
Loans (after giving effect to all other repayments thereof on such date) exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower shall repay
on such date the principal of the Revolving Loans in an amount equal to such
excess.
(ii) Application:
(a) Each mandatory prepayment of Term Loans pursuant to Section
3.02(i)(b), (c) and (d) shall be applied to reduce the then remaining Scheduled
Repayments on a PRO RATA basis (based upon the then remaining principal amount
of each such Scheduled Repayment).
(b) With respect to each prepayment of Loans required by this
Section 3.02, the Borrower may designate the Types of Loans which are to be
prepaid and the specific Borrowing(s) pursuant to which made; PROVIDED that (i)
the Borrower shall first so designate all Base Rate Loans and Eurodollar Loans
with Interest Periods ending on the date of repayment prior to designating any
other Eurodollar Loans; (ii) if any prepayment of Eurodollar Loans made pursuant
to a single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than $1,000,000, such Borrowing shall be immediately
converted
-13-
into Base Rate Loans; and (iii) each prepayment of any Loans made pursuant to
a Borrowing shall be applied PRO RATA among such Loans. In the absence of a
designation by the Borrower as described in the preceding sentence, the
Administrative Agent shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage
costs owing under Section 1.11.
3.03 METHOD AND PLACE OF PAYMENT. Except as otherwise
specifically provided herein, all payments under this Agreement and the Notes
shall be made to the Administrative Agent for the ratable account of the Banks
entitled thereto, not later than 1:00 P.M. (New York time) on the date when due
and shall be made in immediately available funds and in lawful money of the
United States of America at the Payment Office, it being understood that
written, telex or facsimile notice by the Borrower to the Administrative Agent
to make a payment from the funds in the Borrower's account at the Payment Office
shall constitute the making of such payment to the extent of such funds held in
such account. Any payments under this Agreement which are made later than 1:00
P.M. (New York time) shall be deemed to have been made on the next succeeding
Business Day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day and, with respect to payments of principal,
interest shall be payable during such extension at the applicable rate in effect
immediately prior to such extension.
3.04 NET PAYMENTS. (a) All payments made by the Borrower
hereunder or under any Note will be made without setoff, counterclaim or other
defense. Except as provided in Section 3.04(b), all such payments will be made
free and clear of, and without deduction or withholding for, any present or
future taxes, levies, imposts, duties, fees, assessments or other charges of
whatever nature now or hereafter imposed by any jurisdiction or by any political
subdivision or taxing authority thereof or therein with respect to such payments
(but excluding, except as provided in the second succeeding sentence, any tax
imposed on or measured by the net income or net profits of a Bank pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Bank is located
or any subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Note, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note. If any
amounts are payable in respect of Taxes pursuant to the preceding sentence, the
Borrower agrees to reimburse each Bank, upon the written request of such Bank,
for taxes imposed on or measured by the net income or net profits of such Bank
pursuant to the laws of the jurisdiction in which such Bank is organized or in
which the principal office or applicable lending office of such Bank is located
or under the laws of any political subdivision or taxing authority of any such
jurisdiction in which such Bank is organized or in which the principal office or
applicable lending office of such Bank is located and for any withholding of
taxes as such Bank shall determine are payable by, or withheld from, such Bank,
in respect of such amounts so paid to or on behalf of such Bank pursuant to the
preceding sentence and in respect
-14-
of any amounts paid to or on behalf of such Bank pursuant to this sentence.
The Borrower will furnish to the Administrative Agent within 45 days after
the date the payment of any Taxes is due pursuant to applicable law certified
copies of tax receipts evidencing such payment by the Borrower. The Borrower
agrees to indemnify and hold harmless each Bank, and reimburse such Bank upon
its written request, for the amount of any Taxes so levied or imposed and
paid by such Bank.
(b) Each Bank that is not a United States person (as such term
is defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax
purposes agrees to deliver to the Borrower and the Administrative Agent on or
prior to the Effective Date, or in the case of a Bank that is an assignee or
transferee of an interest under this Agreement pursuant to Section 11.04(b)
(unless the respective Bank was already a Bank hereunder immediately prior to
such assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement to a complete exemption from United States withholding tax with
respect to payments to be made under this Agreement and under any Note, or (ii)
if the Bank is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and cannot deliver either Internal Revenue Service Form 1001 or 4224
pursuant to clause (i) above, (x) a certificate substantially in the form of
Exhibit E (any such certificate, a "Section 3.04(b)(ii) Certificate") and
(y) two accurate and complete original signed copies of Internal Revenue Service
Form W-8 (or successor form) certifying to such Bank's entitlement to a complete
exemption from United States withholding tax with respect to payments of
interest to be made under this Agreement and under any Note. In addition, each
Bank agrees that from time to time after the Effective Date, when a lapse in
time or change in circumstances renders the previous certification obsolete or
inaccurate in any material respect, it will deliver to the Borrower and the
Administrative Agent two new accurate and complete original signed copies of
Internal Revenue Service Form 4224 or 1001, or Form W-8 and a Section
3.04(b)(ii) Certificate, as the case may be, and such other forms as may be
required in order to confirm or establish the entitlement of such Bank to a
continued exemption from or reduction in United States withholding tax with
respect to payments under this Agreement and any Note, or it shall immediately
notify the Borrower and the Administrative Agent of its inability to deliver any
such Form or Certificate, in which case such Bank shall not be required to
deliver any such Form or Certificate pursuant to this Section 3.04(b).
Notwithstanding anything to the contrary contained in Section 3.04(a), but
subject to Section 11.04(b) and the immediately succeeding sentence, (x) the
Borrower shall be entitled, to the extent it is required to do so by law, to
deduct or withhold income or similar taxes imposed by the United States (or any
political subdivision or taxing authority thereof or therein) from interest,
Fees or other amounts payable hereunder for the account of any Bank which is not
a United States person (as such term is defined in Section 7701(a)(30) of the
Code) for U.S. Federal income tax purposes to the extent that such Bank has not
provided to the Borrower U.S. Internal Revenue Service Forms that establish a
complete exemption from such deduction or withholding and (y) the Borrower shall
not be obligated pursuant to Section 3.04(a) hereof to gross-up payments to be
made to a Bank in respect of income or similar taxes imposed by the United
States if (I) such Bank has not provided to the Borrower the Internal Revenue
Service Forms required to be provided to the Borrower pursuant to this Section
3.04(b) or (II) in the case of a payment, other than interest, to a Bank
described in clause (ii) above, to the extent that such
-15-
Forms do not establish a complete exemption from withholding of such taxes.
Notwithstanding anything to the contrary contained in the preceding sentence
or elsewhere in this Section 3.04 and except as set forth in Section
11.04(b), the Borrower agrees to pay any additional amounts and to indemnify
each Bank in the manner set forth in Section 3.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in
respect of any Taxes deducted or withheld by it as described in the
immediately preceding sentence as a result of any changes after the Effective
Date in any applicable law, treaty, governmental rule, regulation, guideline
or order, or in the interpretation thereof, relating to the deducting or
withholding of such Taxes.
SECTION 4. CONDITIONS PRECEDENT. The obligation of the Banks to
make Loans to the Borrower hereunder is subject, at the time of the making of
each such Loan (except as otherwise hereinafter indicated), to the satisfaction
of each of the following conditions:
4.01 EFFECTIVENESS; NOTES. On or prior to the Initial Borrowing
Date, (i) the Effective Date shall have occurred, and (ii) there shall have been
delivered to the Administrative Agent for the account of each Bank the
appropriate Term Note and Revolving Note executed by the Borrower in the amount,
maturity and as otherwise provided herein.
4.02 NO DEFAULT; REPRESENTATIONS AND WARRANTIES. At the time of
the making of each Loan and also after giving effect thereto, (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of such Loan,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.
4.03 OFFICER'S CERTIFICATE. On the Initial Borrowing Date, the
Administrative Agent shall have received an officer's certificate dated such
date, signed by an appropriate officer of the Borrower, stating that all of the
applicable conditions set forth in Sections 4.02, 4.06, 4.07, 4.08, 4.11, 4.15
and 4.22 exist as of such date.
4.04 OPINIONS OF COUNSEL. On the Initial Borrowing Date, the
Administrative Agent shall have received an opinion, or opinions, in form and
substance reasonably satisfactory to the Administrative Agent, addressed to each
of the Banks and dated the Initial Borrowing Date, from (i) Xxxxxxx & XxXxxxxx,
counsel to the Borrower, which opinion shall cover the matters contained in
Exhibit C-1 hereto, and (ii) White & Case, special counsel to the Banks, which
opinion shall cover the matters contained in Exhibit C-2 hereto.
4.05 CORPORATE PROCEEDINGS. (a) On the Initial Borrowing
Date, the Banks shall have received from each Credit Party an officer's
certificate, dated the Initial Borrowing Date, signed by the President or any
Vice President of such Credit Party, and attested to by the Secretary or any
Assistant Secretary of such Credit Party, in the form of Exhibit D hereto
with appropriate insertions, together with (x) copies of the Certificate of
Incorporation and By-Laws of such Credit Party and (y) the resolutions of
such Credit Party and the other documents referred
-16-
to in such certificate, and the foregoing shall be reasonably satisfactory to
the Administrative Agent.
(b) All corporate, tax and legal proceedings and all instruments
and agreements in connection with the transactions contemplated by this
Agreement, the other Credit Documents and the Transaction Documents shall be
reasonably satisfactory in form and substance to the Administrative Agent, and
the Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Administrative Agent reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by proper corporate
or governmental authorities.
4.06 EXISTING REINSURANCE AGREEMENTS. Each of the parties
thereto shall have entered into the respective Existing Reinsurance Agreements,
and all agreements evidencing, governing or relating to the Existing Reinsurance
Agreements (the "Existing Reinsurance Agreement Documents") shall have been
delivered to the Banks and shall be in form and substance satisfactory to the
Banks.
4.07 ADVERSE CHANGE, ETC. Neither the Administrative Agent nor
the Required Banks shall have become aware of any facts or conditions not
previously known or disclosed, whether occurring prior to or after the Effective
Date, and since December 31, 1997 nothing shall have occurred, which, when taken
as a whole, the Administrative Agent shall reasonably determine (i) has, or is
reasonably likely to have, a material adverse effect on the rights or remedies
of the Banks or the Administrative Agent under this Agreement or any other
Credit Document, or on the ability of any Credit Party to perform its
obligations to them, or (ii) has or is reasonably likely to have a Material
Adverse Effect.
4.08 LITIGATION. No actions, suits or proceedings shall be
pending or, to the knowledge of the Borrower, threatened against the Borrower
(i) with respect to this Agreement or any other Credit Document, the Transaction
Documents or the transactions contemplated hereby or thereby (including the
Acquisition) or (ii) which either the Administrative Agent or the Required Banks
shall determine has, or is reasonably likely to have, (x) a Material Adverse
Effect or (y) a material adverse effect on the rights or remedies of the Banks
or the Administrative Agent hereunder or under any other Credit Document or on
the ability of the any Credit Party to perform its obligations to them hereunder
or under any other Credit Documents.
4.09 SUBSIDIARY GUARANTY. On the Initial Borrowing Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit F (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
4.10 PLEDGE AGREEMENT. On or prior to the Initial Borrowing
Date, each Credit Party shall have duly authorized, executed and delivered a
Pledge Agreement substantially in the form of Exhibit G hereto (as modified,
amended or supplemented from time to time in accordance with the terms thereof
and hereof, the "Pledge Agreement"), which Pledge
-17-
Agreement shall be in full force and effect, and shall have delivered to the
Collateral Agent, as pledgee thereunder:
(A) all of the Pledged Securities referred to therein, endorsed
in blank or together with undated stock powers executed in blank, as
appropriate;
(B) executed copies of Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
reasonably necessary to perfect the security interests purported to be
created by the Pledge Agreement;
(C) evidence of the completion of all recordings and filings of,
or with respect to, the Pledge Agreement (other than the filing of the
UCC-1 Financing Statements referred to in (B) above) as may be necessary
or, in the reasonable opinion of the Collateral Agent, desirable to
perfect the security interests intended to be created thereunder; and
(D) evidence that all other actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and
protect the security interests purported to be created by the Pledge
Agreement have been taken or will be taken promptly after the Initial
Borrowing Date.
4.11 CONSUMMATION OF THE TRANSACTION. (a) On the Initial
Borrowing Date, the Acquisition shall have been consummated in accordance with
the Acquisition Documents, which Acquisition Documents shall be in form and
substance reasonably satisfactory to the Administrative Agent, and all
applicable laws, and each of the conditions precedent to the consummation of the
Acquisition (including, without limitation, the accuracy in all material
respects of the representations and warranties contained in the Acquisition
Agreement) shall have been satisfied and not waived except with the consent of
the Administrative Agent and the Required Banks to the satisfaction of the
Administrative Agent and the Required Banks. Notwithstanding the foregoing, the
Borrower shall not be required to acquire CCIC on or prior to the Initial
Borrowing Date, but shall be required to purchase CCIC in accordance with
Section 6.15.
(b) The Borrower shall have received net cash proceeds (and
shall have used such proceeds to make payments owing in connection with the
Transaction) from the issuance by the Borrower of at least $200,000,000 of
common stock (the "Equity Financing") consisting of (x) at least $94,000,000 to
be issued to (i) Capital Z Financial Services Fund II, L.P., (ii) Capital Z
Financial Services Private Fund II, L.P., (iii) Insurance Partners Offshore
(Bermuda), L.P. and (iv) Insurance Partners, L.P. and (y) not more than
$109,600,000 to be issued through a rights offering to existing shareholders,
option holders and warrant holders, the terms and conditions of which shall be
reasonably satisfactory to the Administrative Agent.
4.12 TRANSACTION DOCUMENTS. On or before the Initial Borrowing
Date, there shall have been delivered to the Administrative Agent, with copies
for the Banks, true and correct copies of the Transaction Documents and all
terms of such Transaction Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent and the Required Banks. The
representations and warranties set forth in the Transaction Documents shall be
true
-18-
and correct in all material respects as if made on and as of the Initial
Borrowing Date, unless stated to relate to a specific earlier date, in which
case such representations and warranties shall be true and correct in all
material respects as of such earlier date. Concurrently with the incurrence
of the Term Loans on the Initial Borrowing Date, the Transaction shall have
been consummated in substantial compliance with the terms of the Transaction
Documents and all Legal Requirements. Notwithstanding the foregoing, the
Borrower shall not be required to acquire CCIC on or prior to the Initial
Borrowing Date, but shall be required to purchase CCIC in accordance with
Section 6.15.
4.13 VARIOUS AGREEMENTS. On or prior to the Initial Borrowing
Date, there shall have been made available to the Administrative Agent (and
copies thereof shall have been made available to the Banks requesting same)
copies, certified as true and correct by an appropriate officer of the Borrower,
of:
(a) all Plans (and for each Plan that is required to file an
annual report on Internal Revenue Service Form 5500-series, a copy of the most
recent such report (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information), and for each Plan that is a "single
employer plan," as defined in Section 4001(a)(15) of ERISA, the most recently
prepared actuarial valuation therefor) and any other "employee benefit plans,"
as defined in Section 3(3) of ERISA, and any other material agreements, plans or
arrangements, with or for the benefit of current or former employees of the
Borrower or any of its Subsidiaries or any ERISA Affiliate (provided that the
foregoing shall apply in the case of any multiemployer plan, as defined in
4001(a)(3) of ERISA, only to the extent that any document described therein is
in the possession of the Borrower or any of its Subsidiaries or any ERISA
Affiliate or reasonably available thereto from the sponsor or trustee of any
such plan) (collectively, the "Plan Documents");
(b) all material employment agreements (or the forms thereof),
if any, with respect to the senior management of the Borrower or any of its
Subsidiaries including, without limitation, BIG and its Subsidiaries
(collectively, the "Management Agreements");
(c) all agreements, if any, (or the forms thereof) entered or to
be entered into by the Borrower or any of its Subsidiaries governing the terms
and relative rights of its capital stock and any agreements (or the forms
thereof) entered or to be entered into by stockholders relating to any such
entity with respect to its capital stock, but excluding agreements with
directors of any Subsidiaries of the Borrower relating to directors' qualifying
shares held by such directors (collectively, the "Stockholders Agreements");
(d) all tax sharing, tax allocation and other similar agreements
(or the forms thereof) entered or to be entered into by the Borrower and/or any
of its Subsidiaries (collectively, the "Tax Sharing Agreements");
(e) all material agreements entered into between the Borrower
and any of its Subsidiaries and/or among or between any of the Borrower's
Subsidiaries relating to the allocation of expenses incurred by the Borrower or
any such Subsidiary (collectively, the "Shared Expenses Agreements");
-19-
(f) all material contracts of the Borrower or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material Contracts"); and
(g) all material Reinsurance Agreements of the Borrower and each
of its Subsidiaries;
all of which Plan Documents, Management Agreements, Stockholders Agreements, Tax
Sharing Agreements, Shared Expenses Agreements, Material Contracts and
Reinsurance Agreements shall be in form and substance reasonably satisfactory to
the Administrative Agent and the Required Banks.
4.14 FINANCIAL STATEMENTS; PROJECTIONS. Prior to the Initial
Borrowing Date, the Borrower shall have delivered or caused to be delivered to
the Administrative Agent with copies for each Bank:
(a)(i) the audited Annual Statement of each of SNIC, SPCC,
CalComp, CBIC and CCIC for the fiscal year ended December 31, 1997, prepared in
accordance with SAP and as filed with the respective Applicable Insurance
Regulatory Authority, which Annual Statements shall be satisfactory in form and
substance to the Administrative Agent and (ii) the unaudited Quarterly Statement
of each of SNIC, SPCC, CalComp, CBIC and CCIC for the quarter ended
September 30, 1998, prepared in accordance with SAP and as filed with the
respective Applicable Insurance Regulatory Authority, which Quarterly Statements
shall be satisfactory in form and substance to the Administrative Agent;
(b)(i) the audited consolidated balance sheet of each of the
Borrower and BIG for the fiscal year ended December 31, 1997, and the related
consolidated statements of income, of stockholder's equity and of cash flows, in
each case prepared in accordance with GAAP and (ii) the unaudited consolidated
balance sheet of each of the Borrower and BIG for the fiscal quarter ended
September 30, 1998, and the related consolidated statements of income, of
stockholders' equity and of cash flows, in each case prepared in accordance with
GAAP;
(c) projected financial statements for the Borrower and its
Subsidiaries reflecting the projected financial condition, income and expenses
of the Borrower and its Subsidiaries after giving effect to the Transaction and
the other transactions contemplated hereby, which projected financial statements
shall be the same in all material respects as the projected financial statements
set forth in Section 10 of the Confidential Information Memorandum dated
November, 1998 delivered to the Banks in connection with this Agreement;
(d) a closing funds flow statement in connection with the
Transaction, in form and substance satisfactory to the Administrative Agent; and
(e) a PRO FORMA balance sheet of Borrower, as of the Initial
Borrowing Date, after giving effect to the Transaction and the other
transactions contemplated hereby.
-20-
4.15 APPROVALS, ETC. On the Initial Borrowing Date the
following approvals shall have been obtained to the satisfaction of the Banks:
(i) all necessary and material governmental and third party
approvals, permits and licenses in connection with the Transaction and
the transactions contemplated by the Transaction Documents and otherwise
referred to herein or therein (including without limitation the approval
of the respective Departments of Insurance of the States of California
and Delaware), to the extent such approvals, consents, permits and
licenses are required to be obtained or made prior to the Initial
Borrowing Date, shall have been obtained and remain in full force and
effect, and all applicable waiting periods shall have expired, in each
case without any action being taken by any competent authority
(including any court having jurisdiction) which restrains, prevents or
imposes, in the reasonable judgment of the Required Banks or the
Administrative Agent, materially adverse conditions upon the
consummation of the Transaction or any such agreement or transaction;
(ii) the Form A filed by the Borrower with the Insurance
Department of the States of California and Delaware, together with the
approval of such Insurance Departments of each such Form A (and all
stipulations or conditions relating to such approval), which approvals
(and stipulations and conditions, if any) shall be reasonably
satisfactory to the Administrative Agent;
(iii) all necessary shareholder approvals in connection with
the Transaction shall have been obtained and remain in full force and
effect; and
(iv) all regulatory approvals in connection with the pledge of
the stock of each Regulated Insurance Company shall have been obtained
and remain in full force and effect.
4.16 INDEBTEDNESS. On the Initial Borrowing Date and after
giving effect to the consummation of the Transaction, the only Indebtedness of
the Borrower and its Subsidiaries shall consist of (a) the Indebtedness incurred
pursuant to the Credit Documents and (b) Indebtedness listed on Annex III.
4.17 PAYMENT OF FEES. On the Initial Borrowing Date, all costs,
fees and expenses (including, without limitation, legal fees and expenses), and
all other compensation contemplated by this Agreement or the other Credit
Documents, due to the Administrative Agent or any Banks shall have been paid to
the extent due.
4.18 NOTICE OF BORROWING. The Administrative Agent shall have
received a Notice of Borrowing satisfying the requirements of Section 1.03 with
respect to all Borrowings of Loans.
4.19 INSURANCE POLICIES. On the Initial Borrowing Date, the
Administrative Agent shall have received evidence of insurance complying with
the requirements of Section 6.03 for
-21-
the business and properties of the Borrower and its Subsidiaries, in form and
substance reasonably satisfactory to the Administrative Agent.
4.20 TRUST PREFERRED NOTE DOCUMENTS. The Trust Preferred
Note Documents shall have been amended in a manner satisfactory to the
Administrative Agent or a waiver in form and substance satisfactory to the
Administrative Agent shall have been granted by the holders of the Trust
Preferred Notes.
4.21 REPORTS. The Borrower shall have delivered, or shall
have caused to be delivered, to the Administrative Agent and the Banks (a) a
letter of Xxxxxxxxxxx, dated May 5, 1998, relating to the reserve position of
BIG and (b) a Xxxxxxxx and Xxxxxxxxx report, dated as of March 4, 1998, in
respect of the reserve position of BIG and its Subsidiaries.
4.22 SURPLUS CONTRIBUTION. On the Initial Borrowing Date, an
amount of at least $23,500,000 shall have been contributed to CalComp, CCIC
(to the extent acquired on or prior to the Initial Borrowing Date) and/or
CBIC.
The acceptance of the benefits of the Loans on the Initial
Borrowing Date and on the date of each Loan thereafter shall constitute a
representation and warranty by the Borrower to each of the Banks that all of
the applicable conditions specified in this Section 4 exist or have been
satisfied as of such date. All of the certificates, legal opinions and other
documents and papers referred to in this Section 4, unless otherwise
specified, shall be delivered to the Administrative Agent at its Notice
Office for the account of each of the Banks.
SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. In
order to induce the Banks to enter into this Agreement and to make the Loans
provided for herein, the Borrower makes the following representations and
warranties to, and agreements with, the Banks, all of which shall survive the
execution and delivery of this Agreement and the making of the Loans (with
the making of the Loans being deemed to constitute a representation and
warranty that the matters specified in this Section 5 are true and correct in
all material respects on and as of the date of the making of the Loans (after
giving effect to the consummation of the Transaction on such date) unless
such representation and warranty expressly indicates that it is being made as
of any other specific date in which case such representation and warranty
shall be true and correct in all material respects as of such other specified
date):
5.01 CORPORATE STATUS. The Borrower and each of its
Subsidiaries (i) is a duly organized and validly existing corporation in good
standing under the laws of the jurisdiction of its organization and has the
corporate or other organizational power and authority to own its property and
assets and to transact the business in which it is engaged and presently
proposes to engage and (ii) has been duly qualified and is authorized to do
business and is in good standing in all jurisdictions where it is required to
be so qualified and where the failure to be so qualified would have a
Material Adverse Effect.
5.02 CORPORATE POWER AND AUTHORITY. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Transaction Documents to which it is a party and has taken all
necessary corporate action to authorize the
-22-
execution, delivery and performance of the Transaction Documents to which it
is a party. Each Credit Party and each of its Subsidiaries has duly executed
and delivered each Transaction Document to which it is a party and each such
Transaction Document constitutes the legal, valid and binding obligation of
such Credit Party enforceable against such Credit Party in accordance with
its terms, except to the extent that enforceability thereof may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally and general principles of equity regardless of
whether enforcement is sought in a proceeding in equity or at law.
5.03 NO CONTRAVENTION OF LAWS, AGREEMENTS OR ORGANIZATIONAL
DOCUMENTS. Neither the execution, delivery and performance by any Credit
Party of the Transaction Documents to which it is a party nor compliance with
the terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or (other than pursuant to the Pledge
Agreement) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of the Borrower
or any of its Subsidiaries pursuant to the terms of any indenture, mortgage,
deed of trust, loan agreement, credit agreement or any other material
instrument to which the Borrower or any of its Subsidiaries is a party or by
which it or any of its property or assets are bound or to which it may be
subject or (iii) will violate any provision of the Certificate of
Incorporation or By-Laws of the Borrower or any of its Subsidiaries.
5.04 LITIGATION AND CONTINGENT LIABILITIES. (a) There are
no actions, suits or proceedings pending or threatened in writing involving
the Borrower or any of its Subsidiaries (including, without limitation, with
respect to the Transaction, this Agreement or any documentation executed in
connection therewith or herewith) (i) which has or is likely to have a
Material Adverse Effect or (ii) that could reasonably be expected to have a
material adverse effect on the rights or remedies of the Banks or on the
ability of any Credit Party to perform its respective obligations to the
Banks hereunder and under the other Credit Documents to which it is, or will
be, a party. Additionally, there does not exist any judgment, order or
injunction prohibiting or imposing material adverse conditions upon the
making of any Loan hereunder.
(b) Except as fully reflected in the financial statements
described in Section 5.11(b) (including the footnotes thereto), the
Indebtedness incurred under this Agreement and all obligations incurred in
the ordinary course of business since the date of the financial statements
described in Section 5.11(b), there were as of the Initial Borrowing Date
(and after giving effect to the Loans made on such date), no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due), and the Borrower does not know of any basis for the
assertion against the Borrower or any of its Subsidiaries of any such
liability or obligation, which, in the case of any of the foregoing referred
to in this clause (b), either individually or in the aggregate, are or would
be reasonably likely to have a Material Adverse Effect.
-23-
5.05 USE OF PROCEEDS; MARGIN REGULATIONS. (a) The proceeds
of all Term Loans shall be utilized solely to effect the Transaction and to
pay costs and expenses in connection therewith.
(b) The proceeds of all Revolving Loans shall be utilized for
general corporate and working capital purposes.
(c) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System
and no part of the proceeds of any Loan will be used to purchase or carry any
Margin Stock or to extend credit for the purpose of purchasing or carrying
any Margin Stock.
5.06 APPROVALS. Except for filings and approvals made or
obtained on or prior to the Initial Borrowing Date, no order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any foreign or domestic governmental or
public body or authority, or any subdivision thereof, is required to
authorize or is required prior to the Initial Borrowing Date in connection
with (i) the execution, delivery and performance of any Transaction Document
or (ii) the legality, validity, binding effect or enforceability of any
Transaction Document.
5.07 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.
5.08 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Borrower nor any of its Subsidiaries is a "holding company," or a "subsidiary
company" of a "holding company," or an "affiliate" of a "holding company" or
of a "subsidiary company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
5.09 TRUE AND COMPLETE DISCLOSURE; PROJECTIONS AND
ASSUMPTIONS. All factual information (taken as a whole) heretofore or
contemporaneously furnished by or on behalf of the Borrower or any of its
Subsidiaries to the Administrative Agent or any Bank (including, without
limitation, all information contained in the Transaction Documents) for
purposes of or in connection with this Agreement or any transaction
contemplated herein is, and all other factual information (taken as a whole)
hereafter furnished by or on behalf of any such Persons in writing to the
Administrative Agent will be, true and accurate in all material respects on
the date as of which such information is dated and not incomplete by omitting
to state any material fact necessary to make such information (taken as a
whole) not misleading at such time in light of the circumstances under which
such information was provided. The Projections contained in such materials
are based on good faith estimates and assumptions believed by the Borrower to
be reasonable and attainable at the time made, it being recognized by the
Banks 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.
-24-
5.10 CONSUMMATION OF TRANSACTION. As of the Initial
Borrowing Date, (i) the Transaction has been consummated in accordance with,
in all material respects, the terms and conditions of the Transaction
Documents and all applicable laws and (ii) the Borrower is the direct or
indirect owner of 100% of the outstanding capital stock of BIG, SNIC, SPCC,
CalComp and CBIC, free and clear of all Liens (other than Liens created
pursuant to the Pledge Agreement). All material consents and approvals of,
and material filings and registrations with, and all other material actions
in respect of, all governmental agencies, authorities or instrumentalities
required in order to consummate the Transaction in accordance with the terms
and conditions of the Transaction Documents and all applicable laws have
been, or prior to the time required, will have been, obtained, given, filed
or taken (with no concessions, agreements or understandings having been made
or entered into by the Borrower or any of its Subsidiaries in connection
therewith other than those disclosed to the Banks prior to the Effective Date
and found reasonably acceptable by the Administrative Agent) and are or will
be in full force and effect. All applicable waiting periods with respect
thereto have, or, prior to the time when required, will have, expired
without, in all such cases, any action being taken by any competent authority
which restrains, prevents, or imposes material adverse conditions upon the
consummation of the Transaction. Additionally, there does not exist any
judgment, order, or injunction prohibiting or imposing material adverse
conditions upon the Transaction or the making of the Loans or the performance
by the Borrower and its Subsidiaries of their obligations under the
Transaction Documents.
5.11 FINANCIAL CONDITION; FINANCIAL STATEMENTS. (a) On and
as of the Initial Borrowing Date, on a PRO FORMA basis after giving effect to
the Transaction and all Indebtedness incurred, and to be incurred, on or
prior to the Initial Borrowing Date, and Liens created, and to be created, on
or prior to the Initial Borrowing Date, in connection with this Agreement,
with respect to each of the Borrower (on a stand-alone basis) and the
Borrower and its Subsidiaries (on a consolidated basis) (x) the sum of the
assets, at a fair valuation, of each of the Borrower (on a stand-alone basis)
and the Borrower and its Subsidiaries (on a consolidated basis) will exceed
their debts, (y) the Borrower (on a stand-alone basis) and the Borrower and
its Subsidiaries (on a consolidated basis) will not have incurred nor
intended to, or believe that they will, incur debts beyond their ability to
pay such debts as such debts mature and (z) the Borrower (on a stand-alone
basis), and the Borrower and its Subsidiaries (on a consolidated basis) will
have sufficient capital with which to conduct their business. For purposes
of this Section 5.11(a), "debt" means any liability on a claim, and "claim"
means (i) right to payment whether or not such a right is reduced to
judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured; or (ii) right
to an equitable remedy for breach of performance if such breach gives rise to
a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed,
secured or unsecured.
(b) The financial statements and PRO FORMA balance sheet
(after giving effect to the Transaction and the other transactions
contemplated hereby) delivered to the Administrative Agent pursuant to
Section 4.14 present fairly in all material respects the financial position
of the respective Persons referred to in such Sections at the dates of said
statements and the results of operations for the periods covered thereby (or,
in the case of the PRO FORMA balance sheet, present
-25-
a good faith estimate of the consolidated PRO FORMA financial condition of
each of the Borrower and its Subsidiaries and the Borrower and its
Subsidiaries at the date thereof). All such financial statements have been
prepared in accordance with SAP or GAAP, as indicated in Section 4.14,
consistently applied except to the extent provided in the notes to said
financial statements.
(c) Since December 31, 1997, nothing has occurred which, when
taken as a whole, has or is reasonably likely to have a Material Adverse
Effect.
5.12 SECURITY INTERESTS. On and after the Initial Borrowing
Date, the Pledge Agreement creates, as security for the Obligations, valid
and enforceable perfected security interests in and Liens on all of the
Collateral subject thereto, superior to and prior to the rights of all third
persons and subject to no other Liens other than Liens permitted pursuant to
Sections 7.03(a), (b), (f), (g) and (h), in favor of the Collateral Agent for
the benefit of the Banks. At all times on or after the Initial Borrowing
Date, the Borrower has good and marketable title to all Collateral free and
clear of all Liens (except as created pursuant to the Pledge Agreement). No
filings or recordings are required in order to perfect the security interests
created under the Pledge Agreement except for filings or recordings which
shall have been made, or provided for to the reasonable satisfaction of the
Administrative Agent, upon or prior to the Initial Borrowing Date.
5.13 TAX RETURNS AND PAYMENTS. The Borrower and each of its
Subsidiaries has filed all federal income tax returns and all other tax
returns, domestic and foreign, required to be filed by it and has paid all
material taxes and assessments payable by it which have become due, other
than those not yet delinquent and except for those contested in good faith.
The Borrower and each of its Subsidiaries has paid, or has provided adequate
reserves (in the good faith judgment of the management of such Person) for
the payment of, all federal, state and foreign income taxes applicable for
all prior fiscal years and for the current fiscal year to the date hereof.
There is no material action, suit, proceeding, investigation, audit, or claim
now pending or, to the knowledge of the Borrower or any of its Subsidiaries,
threatened by any authority regarding any taxes relating to the Borrower or
any of its Subsidiaries. Neither the Borrower nor any of its Subsidiaries
has entered into an agreement or waiver or been requested to enter into an
agreement or waiver extending any statute of limitations relating to the
payment or collection of taxes of the Borrower or any of its Subsidiaries, or
is aware of any circumstances that would cause the taxable years or other
taxable periods of the Borrower or any of its Subsidiaries not to be subject
to the normally applicable statute of limitations.
5.14 COMPLIANCE WITH ERISA. (a) Annex IV sets forth each Plan;
each Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a) (3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the
-26-
meaning of such sections of the Code or ERISA, in excess of $10,000, or has
applied for or received a waiver of an accumulated funding deficiency or an
extension of any amortization period, within the meaning of Section 412 of
the Code or Section 303 of 304 of ERISA; all contributions required to be
made with respect to a Plan have been timely made except to the extent of any
such contribution which, if not timely made, would not result in a material
liability to the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate; neither the Borrower nor any Subsidiary of the Borrower nor any
ERISA Affiliate has incurred any material liability (including any indirect,
contingent or secondary liability) to or on account of a Plan pursuant to
Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204, or 4212
of ERISA or Section 401(a) (29), 4971 or 4975 of the Code or expects to incur
any material amount of such liability under any of the foregoing sections
with respect to any Plan; no condition exists which presents a material risk
to the Borrower or any Subsidiary of the Borrower or any ERISA Affiliate of
incurring a material amount of liability to or on account of a Plan pursuant
to the foregoing provisions of ERISA and the Code; no proceedings have been
instituted by the PBGC to terminate or appoint a trustee to administer any
Plan which is subject to Title IV of ERISA in a distress termination; no
action, suit, proceeding, hearing, audit or investigation with respect to the
administration, operation or the investment of assets of any Plan (other than
routine claims for benefits or relating to qualified domestic relations
orders) is pending, expected or threatened; no Plan is a multiemployer plan
(as defined in Section 4001(a)(3) of ERISA); neither the Borrower nor any
Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material
liability as a result of any group health plan (as defined in Section 607(1)
of ERISA or Section 4980B(g)(2) of the Code) other than a multiemployer plan
described in Section 3(37) of ERISA which covers or has covered employees or
former employees of the Borrower, any Subsidiary of the Borrower, or any
ERISA Affiliate having not been operated in compliance with the provisions of
Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code; no
lien imposed under the Code or ERISA on the assets of the Borrower or any
Subsidiary of the Borrower or any ERISA Affiliate exists or is likely to
arise on account of any Plan; and the Borrower and its Subsidiaries may cease
contributions to or terminate any employee benefit plan maintained by any of
them without incurring any material liability.
5.15 SUBSIDIARIES. (a) Annex V hereto lists each Subsidiary
of the Borrower (and the direct and indirect ownership interest of the
Borrower therein) and also identifies the owner thereof in each case existing
on the Initial Borrowing Date (after giving effect to the Transaction). All
such Subsidiaries are direct or indirect Wholly-Owned Subsidiaries of the
Borrower.
(b) There are no restrictions on the Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or
other assets from any Subsidiary of the Borrower to the Borrower, other than
prohibitions or restrictions existing under or by reason of (i) this
Agreement or the other Credit Documents, (ii) Legal Requirements, (iii)
customary non-assignment provisions in contracts entered into in the ordinary
course of business and consistent with past practices, and (iv) purchase
money obligations for property acquired in the ordinary course of business,
so long as such obligations are permitted under this Agreement.
-27-
5.16 INTELLECTUAL PROPERTY, ETC. The Borrower and each of
its Subsidiaries have obtained all material patents, trademarks,
servicemarks, trade names, copyrights, licenses and other rights, free from
burdensome restrictions, that are necessary for the operation of their
respective businesses as presently conducted and as proposed to be conducted.
5.17 POLLUTION AND OTHER REGULATIONS. The Borrower and each
of its Subsidiaries are in compliance with all laws and regulations relating
to pollution and environmental control, equal employment opportunity and
employee safety in all domestic and foreign jurisdictions in which the
Borrower and each of its Subsidiaries is presently doing business, and the
Borrower will comply and cause each of its Subsidiaries to comply with all
such laws and regulations which may be imposed in the future in jurisdictions
in which the Borrower or such Subsidiary may then be doing business; in each
case other than those the non-compliance with which would not have a Material
Adverse Effect.
5.18 LABOR RELATIONS; COLLECTIVE BARGAINING AGREEMENTS. (a)
Set forth on Annex VI is a list and description (including dates of
termination) of all Collective Bargaining Agreements between or applicable to
the Borrower or any of its Subsidiaries and any union, labor organization or
other bargaining agent in respect of the employees of the Borrower and/or any
Subsidiary on the Initial Borrowing Date.
(b) Neither the Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice that is reasonably likely to have a
Material Adverse Effect. There is (i) no significant unfair labor practice
complaint pending against the Borrower or any of its Subsidiaries or
threatened in writing against any of them, before the National Labor
Relations Board, and no significant grievance or significant arbitration
proceeding arising out of or under any Collective Bargaining Agreement is now
pending against the Borrower or any of its Subsidiaries or threatened in
writing against any of them, (ii) no significant strike, labor dispute,
slowdown or stoppage is pending against the Borrower or any of its
Subsidiaries or threatened in writing against the Borrower or any of its
Subsidiaries and (iii) to the best knowledge of the Borrower and the
Borrower, no union representation question exists with respect to the
employees of the Borrower or any of its Subsidiaries, except (with respect to
any matter specified in clause (i), (ii) or (iii) above, either individually
or in the aggregate) such as is not reasonably likely to have a Material
Adverse Effect.
5.19 CAPITALIZATION. (a) On the Initial Borrowing Date, and
after giving effect to the Transaction and the other transactions
contemplated hereby, the authorized capital stock of the Borrower consists of
40,000,000 shares of common stock, $.01 par value per share, 17,905,382 of
which shall be issued and outstanding. As of the Initial Borrowing Date, all
such outstanding shares of the Borrower have been duly and validly issued and
are fully paid and nonassessable. Neither the Borrower nor any of its
Subsidiaries has outstanding any securities convertible into or exchangeable
for its capital stock or outstanding any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock except, in the case of
the Borrower, for options, warrants and grants outstanding in the aggregate
amounts set forth on Annex IX.
-28-
(b) On the Initial Borrowing Date and after giving effect to
the Transaction and the other transactions contemplated hereby, the
authorized capital stock of BIG shall consist of 10,000 shares of common
stock, $0.01 par value per share, and all of the issued and outstanding
shares of such common stock are owned by the Borrower. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
BIG does not have outstanding any securities convertible into or exchangeable
for its capital stock or outstanding any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock.
(c) On the Initial Borrowing Date, and after giving effect to
the Transaction and the other transactions contemplated hereby, the
authorized capital stock of SNIC consists of 40,000 shares of common stock,
$75.00 par value per share, 40,000 of which shall be issued and outstanding.
As of the Initial Borrowing Date, all such outstanding shares of SNIC have
been duly and validly issued and are fully paid and nonassessable. SNIC does
not have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
(d) On the Initial Borrowing Date, and after giving effect to
the Transaction and the other transactions contemplated hereby, the
authorized capital stock of SPCC consists of 1,000,000 shares of common
stock, $50.00 par value, 31,000 of which shall be issued and outstanding. As
of the Initial Borrowing Date, all such outstanding shares of SPCC have been
duly and validly issued and are fully paid and nonassessable. SPCC does not
have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
(e) On the Initial Borrowing Date and after giving effect to
the Transaction and the other transactions contemplated hereby, the
authorized capital stock of CalComp shall consist of 2,000,000 shares of
common stock, $3.00 par value per share, and all of the issued and
outstanding shares of such common stock are owned by BIG. All such
outstanding shares have been duly and validly issued, are fully paid and
nonassessable. CalComp does not have outstanding any securities convertible
into or exchangeable for its capital stock or outstanding any rights to
subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
(f) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of CBIC shall consist of 100,000 shares of common stock, $100.00
par value per share, and all of the issued and outstanding shares of such common
stock are owned by BIG. All such outstanding shares have been duly and validly
issued, are fully paid and nonassessable. CBIC does not have outstanding
-29-
any securities convertible into or exchangeable for its capital stock or
outstanding any rights to subscribe for or to purchase, or any options for
the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating
to, its capital stock.
(g) On the date on which the closing of the Borrower's
acquisition of CCIC is consummated pursuant to Section 6.15, and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized capital stock of CCIC shall consist of 10,000 shares of common
stock, $500 par value per share, and all of the issued and outstanding shares
of such common stock shall be owned by BIG. All such outstanding shares have
been duly and validly issued, are fully paid and nonassessable. CCIC does
not have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
5.20 REPRESENTATIONS AND WARRANTIES IN TRANSACTION DOCUMENTS.
All representations and warranties set forth in the Transaction Documents
were true and correct in all material respects as of the time such
representations and warranties were made and shall be true and correct in all
material respects as of the Initial Borrowing Date as if such representations
and warranties were made on and as of such date, unless stated to relate to a
specific earlier date, in which case such representations and warranties
shall be true and correct in all material respects as of such earlier date.
5.21 INDEBTEDNESS. Annex III sets forth a true and complete
list of all Indebtedness of the Borrower and its Subsidiaries as of the
Initial Borrowing Date (other than the Indebtedness incurred pursuant to the
Credit Documents) which has been reviewed and approved by the Banks (after
giving effect to the Transaction), in each case showing the aggregate
principal amount thereof, the name of the lender in respect thereof and the
name of the respective borrower and any other entity which has directly or
indirectly guaranteed such Indebtedness.
5.22 COMPLIANCE WITH STATUTES, ETC. The Borrower and each of
its Subsidiaries is in compliance with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and
the ownership of its property (including compliance with all applicable
environmental laws), except such noncompliances as would not, in the
aggregate, have a Material Adverse Effect.
5.23 INSURANCE LICENSES. Each Regulated Insurance Company
has obtained and maintains in full force and effect all licenses and permits
from all regulatory authorities necessary to operate in the jurisdictions in
which such Regulated Insurance Company operates, in each case other than such
licenses and permits the failure to obtain or maintain, individually or in
the aggregate, is not reasonably likely to have a Material Adverse Effect.
5.24 YEAR 2000 COMPLIANCE. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of (i) the
Borrower's and its Subsidiaries' computer
-30-
systems and (ii) equipment containing embedded microchips (including systems
and equipment supplied by others or with which Borrower's or its
Subsidiaries' systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by March 31, 1999. The cost
to the Borrower and its Subsidiaries of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 to the Borrower and its
Subsidiaries (including, without limitation, reprogramming errors and the
failure of others' systems or equipment) will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in
the preceding sentence as may be necessary, the computer and management
information systems of the Borrower and its Subsidiaries are and, with
ordinary course upgrading and maintenance, will continue for the term of this
Agreement to be, sufficient to permit the Borrower to conduct its business
without a Material Adverse Effect.
Notwithstanding anything to the contrary contained herein, no
Bank shall have any claim against the Borrower for a breach of representation
or warranty contained in this Section 5 after the date on which the Total
Commitment has been terminated and all principal, interest and other amounts
owing hereunder and under the other Credit Documents have been irrevocably
repaid in full.
SECTION 6. AFFIRMATIVE COVENANTS. The Borrower hereby
covenants and agrees that on the Initial Borrowing Date and thereafter, for
so long as this Agreement is in effect and until the Loans, together with
interest, Fees and all other Obligations incurred hereunder, are paid in full:
6.01 INFORMATION COVENANTS. The Borrower will furnish or
cause to be furnished to each Bank:
(a) ANNUAL FINANCIAL STATEMENTS. (i) As soon as available and
in any event within 100 days after the close of each fiscal year of the
Borrower, (x) the consolidated balance sheet of the Borrower and its
Subsidiaries, in each case, as at the end of such fiscal year and the
related consolidated statements of income, of stockholder's equity and
of cash flows for such fiscal year and (y) the consolidating balance
sheet of the Borrower and each of its Subsidiaries as at the end of the
fiscal year and the related consolidating statements of income, of
stockholders' equity and of cash flows for such fiscal year; in each
case prepared in accordance with GAAP and setting forth comparative
figures for the preceding fiscal year, and, in the case of such
consolidated statements, examined by independent certified public
accountants of recognized national standing whose opinion shall not be
qualified as to the scope of audit or as to the status of the Borrower
and its Subsidiaries as a going concern, together with a certificate of
such accounting firm stating that in the course of its regular audit of
the business of the Borrower and its Subsidiaries, which audit was
conducted in accordance with GAAP, such accounting firm has obtained no
knowledge of any Default or Event of Default which has occurred and is
continuing or, if in the opinion of such accounting firm such a Default
or Event of Default has occurred and is continuing, a statement as to
the nature thereof.
-31-
(ii) As soon as available and in any event within 100 days
after the close of each fiscal year of each Regulated Insurance Company,
the Annual Statement (prepared in accordance with SAP) for such fiscal
year of such Regulated Insurance Company, each on a consolidated basis
and, in addition, on a stand alone basis in the case of SNIC, SPCC,
CalComp, CBIC and CCIC (to the extent acquired in accordance with
Section 6.15), as filed with the Applicable Insurance Regulatory
Authority in compliance with the requirements thereof (or a report
containing equivalent information for any Regulated Insurance Company
not so required to file the foregoing with the Applicable Insurance
Regulatory Authority) together with the opinion thereon of the Chief
Financial Officer or other Authorized Officer of such Regulated
Insurance Company stating that such Annual Statement presents fairly in
all material respects the financial condition and results of operations
of such Regulated Insurance Company in accordance with SAP.
(iii) As soon as available and in any event within 100 days
after the close of each fiscal year of the Borrower, a copy of the
"Statement of Actuarial Opinion" and "Management Discussion and
Analysis" for each Regulated Insurance Company (prepared in accordance
with SAP) for such fiscal year and as filed with the Applicable
Regulatory Insurance Authority in compliance with the requirements
thereof (or a report containing equivalent information for any Regulated
Insurance Company not so required to file the foregoing with the
Applicable Regulatory Insurance Authority).
(b) QUARTERLY FINANCIAL STATEMENTS. (i) As soon as available
and in any event within 45 days after the close of each of the first
three quarterly accounting periods in each fiscal year of the Borrower,
(x) the consolidated balance sheet of the Borrower and its Subsidiaries,
each as at the end of such fiscal quarter and the related consolidated
statements of income, of stockholder's equity and of cash flows for such
quarterly period and for the elapsed portion of the fiscal year ended
with the last day of such quarterly period and (y) the consolidating
balance sheet of the Borrower and each of its Subsidiaries as at the end
of such fiscal quarter and the related consolidating statements of
income, of stockholders' equity and of cash flows for such quarterly
period and for the elapsed portion of the fiscal year ended with the
last day of such quarterly period; in each case setting forth
comparative figures for the related periods in the prior fiscal year,
and all of which shall be prepared in accordance with GAAP and certified
by the Chief Financial Officer or other Authorized Officer of the
Borrower, as the case may be, subject to changes resulting from normal
year-end audit adjustments.
(ii) As soon as available and in any event within 45 days
after the close of each of the first three quarterly accounting periods
in each fiscal year of each Regulated Insurance Company, quarterly
financial statements (prepared in accordance with SAP) for such fiscal
period of such Regulated Insurance Company, each on a consolidated basis
and, in addition, on a stand alone basis in the case of SNIC, SPCC,
CalComp, SBIC and CCIC (to the extent acquired in accordance with
Section 6.15), as filed with the Applicable Insurance Regulatory
Authority together with the opinion thereon of the Chief Financial
Officer or other Authorized Officer of such Regulated Insurance Company
stating that such financial statements present fairly in all material
respects the financial
-32-
condition and results of operations of such Regulated Insurance Company
in accordance with SAP.
(c) FINANCIAL PLANS, ETC. No later than 60 days following the
first day of each fiscal year of the Borrower, copies of the annual
financial plan or budget for such fiscal year prepared by management of
the Borrower for its internal use and distributed to the Board of
Directors of the Borrower. Together with each delivery of financial
statements pursuant to Section 6.01(a)(ii) and (b)(ii), a comparison of
the current year to date financial results (other than in respect of the
balance sheets included therein) against the plans required to be
submitted pursuant to this clause (c) shall be presented.
(d) OFFICER'S CERTIFICATES. At the time of the delivery of the
financial statements provided for in Sections 6.01(a)(i) and (ii) and
(b)(i) and (ii), a certificate of the Chief Financial Officer or other
Authorized Officer of the Borrower to the effect that no Default or
Event of Default exists or, if any Default or Event of Default does
exist, specifying the nature and extent thereof, which certificate shall
set forth (x) the calculations required to establish whether the
Borrower and its Subsidiaries were in compliance with the provisions of
Sections 6.11, 7.10, 7.11, 7.12 and 7.13 as at the end of such fiscal
year or quarter, as the case may be, and (y) a summary of all
outstanding litigation at the end of such fiscal year or quarter and of
all litigation settled during the preceding fiscal quarter, in each case
involving the Borrower or any of its Subsidiaries, but only to the
extent that any such litigation (i) arises outside the ordinary course
of business of the Borrower and its Subsidiaries or (ii) could have a
Material Adverse Effect.
(e) NOTICE OF DEFAULT OR LITIGATION. Promptly, and in any event
within three Business Days after the Borrower or any of its Subsidiaries
obtains knowledge thereof, (x) notice of the occurrence of any event
which constitutes a Default or Event of Default, which notice shall
specify the nature thereof, the period of existence thereof and what
action the Borrower proposes to take with respect thereto and (y)
promptly after the Borrower or any of its Subsidiaries obtains knowledge
thereof, notice of any outstanding litigation or governmental or
regulatory proceeding pending against the Borrower or any of its
Subsidiaries which could have a Material Adverse Effect, or a material
adverse effect on the ability of any Credit Party to perform its
respective obligations hereunder or under any other Credit Document.
(f) AUDITORS' REPORTS. Promptly upon receipt thereof, a copy of
(x) each other report or "management letter" submitted to the Borrower
or any of its Subsidiaries by their independent accountants in
connection with any annual, interim or special audit made by them of the
books of the Borrower or any of its Subsidiaries and (y) each report
submitted to the Borrower or any of its Subsidiaries by any independent
actuary to the extent that such report, in the good faith opinion of the
Borrower, identifies a condition, situation or event that has or is
reasonably likely to have a Material Adverse Effect.
(g) RESERVE ADEQUACY REPORT. Promptly following a request from
the Administrative Agent or the Required Banks (which request may only
be made when an
-33-
Event of Default has occurred and is continuing), a report prepared by
an independent actuarial consulting firm of recognized professional
standing reasonably satisfactory to the Administrative Agent and the
Required Banks reviewing the adequacy of reserves of each Regulated
Insurance Company determined in accordance with SAP, which firm shall
be provided access to or copies of all reserve analyses and valuations
relating to the insurance business of each Regulated Insurance Company
in the possession of or available to the Borrower or its Subsidiaries.
(h) OTHER REGULATORY STATEMENTS AND REPORTS. Promptly (A) after
receipt thereof, copies of all triennial examinations and risk adjusted
capital reports of any Regulated Insurance Company, delivered to such
Person by any Applicable Insurance Regulatory Authority, insurance
commission or similar regulatory authority, (B) after receipt thereof,
written notice of any assertion by any Applicable Insurance Regulatory
Authority or any governmental agency or agencies substituted therefor,
as to a violation of any Legal Requirement by any Regulated Insurance
Company which is likely to have a Material Adverse Effect, (C) after
receipt thereof, a copy of the final report to each Regulated Insurance
Company from the NAIC for each fiscal year, as to such Regulated
Insurance Company's compliance or noncompliance with each of the NAIC
Tests, (D) after receipt thereof, a copy of any notice of termination,
cancellation or recapture of any Reinsurance Agreement or Retrocession
Agreement to which a Regulated Insurance Company is a party to the
extent such termination or cancellation is likely to have a Material
Adverse Effect, (E) and in any event within ten Business Days after
receipt thereof, copies of any notice of actual suspension, termination
or revocation of any license of any Regulated Insurance Company by any
Applicable Insurance Regulatory Authority, including any request by an
Applicable Insurance Regulatory Authority which commits a Regulated
Insurance Company to take or refrain from taking any action or which
otherwise affects the authority of such Regulated Insurance Company to
conduct its business, and (F) and in any event within ten Business Days
after the Borrower or any of its Subsidiaries obtains knowledge thereof,
notice of any actual changes in the insurance laws enacted in any state
in which any Regulated Insurance Company is domiciled which could have a
Material Adverse Effect.
(i) AGING REPORTS. Within 90 days following the Initial
Borrowing Date, an aged accounts receivable report in respect of the
assets transferred pursuant to the Asset Restructuring Transaction.
(j) OTHER INFORMATION. Promptly upon transmission thereof,
copies of any final filings and final registrations with, and reports
to, the SEC by the Borrower or any of its Subsidiaries (other than any
registration statement on Form S-8) and copies of all financial
statements, proxy statements, notices and reports as the Borrower or any
of its Subsidiaries shall send to analysts generally or the holders of
their capital stock or of the Trust Preferred Notes in their capacity as
such holders (in each case to the extent not theretofore delivered to
the Banks pursuant to this Agreement) and, with reasonable promptness,
such other information or existing documents (financial or otherwise) as
the Administrative Agent or any Bank may reasonably request from time to
time.
-34-
6.02 BOOKS, RECORDS AND INSPECTIONS. The Borrower will, and
will cause each of its Subsidiaries to, permit officers and designated
representatives of the Administrative Agent or any Bank to visit and inspect any
of the properties or assets of the Borrower and any of its Subsidiaries in
whomsoever's possession (but only to the extent the Borrower or such Subsidiary
has the right to do so to the extent in the possession of another Person), and
to examine the books of account of the Borrower and any of its Subsidiaries and
discuss the affairs, finances and accounts of the Borrower and of any of its
Subsidiaries with, and be advised as to the same by, its and their officers and
independent accountants and independent actuaries, if any, all at such
reasonable times and intervals, upon reasonable prior notice and to such
reasonable extent as the Administrative Agent or any Bank may request.
6.03 INSURANCE. The Borrower will, and will cause each of its
Subsidiaries to, at all times maintain in full force and effect insurance in
such amounts, covering such risks and liabilities and with such deductibles or
self-insured retentions as are in accordance with normal industry practice.
6.04 PAYMENT OF TAXES. The Borrower will pay and discharge, and
will cause each of its Subsidiaries to pay and discharge, all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on which
penalties attach thereto, and all lawful claims (other than claims relating to
the adjustment or settling, in the ordinary course of business, of claims in
respect of insurance policies or reinsurance contracts) which, if unpaid, might
become a Lien or charge upon any properties of the Borrower or any of its
Subsidiaries; PROVIDED that neither the Borrower nor any Subsidiary shall be
required to pay any such tax, assessment, charge, levy or claim which is being
contested in good faith and by proper proceedings if it has maintained adequate
reserves (in the good faith judgment of the management of the Borrower) with
respect thereto in accordance with GAAP.
6.05 CORPORATE FRANCHISES. The Borrower will do, and will cause
each Subsidiary to do, or cause to be done, all things reasonably necessary to
preserve and keep in full force and effect its corporate existence, rights and
authority; PROVIDED that any transaction permitted by Section 7.02 will not
constitute a breach of this Section 6.05.
6.06 COMPLIANCE WITH STATUTES, ETC. The Borrower will, and will
cause each Subsidiary to, comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all governmental bodies,
domestic or foreign, in respect of the conduct of its business and the ownership
of its property (including applicable statutes, regulations, orders and
restrictions relating to environmental standards and controls) other than those
the non-compliance with which would not have a Material Adverse Effect.
6.07 ERISA. As soon as possible and, in any event, within 10
Business Days after the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate knows or has reason to know of the occurrence of any of the following,
the Borrower will deliver to each of the Banks a certificate of the chief
financial officer of the Borrower setting forth the full details as to such
occurrence and the action, if any, that the Borrower, such Subsidiary or such
ERISA Affiliate is
-35-
required or proposes to take, together with any notices required or proposed
to be given to or filed with or by the Borrower, the Subsidiary, the ERISA
Affiliate, the PBGC, a Plan participant or the Plan administrator with
respect thereto: that a Reportable Event has occurred; that an accumulated
funding deficiency, within the meaning of Section 412 of the Code or Section
302 of ERISA, in excess of $10,000 has been incurred or an application may be
or has been made for a waiver or modification of the minimum funding standard
(including any required installment payments) or an extension of any
amortization period under Section 412 of the Code or Section 303 or 304 of
ERISA with respect to a Plan; that any contribution required to be made with
respect to a Plan has not been timely made except to the extent that any such
untimely contribution would not result in a material liability to the
Borrower, any Subsidiary of the Borrower or any ERISA Affiliate; that a Plan
has been or may be terminated, reorganized, partitioned or declared insolvent
under Title IV of ERISA; that a Plan has an Unfunded Current Liability; that
proceedings may be or have been instituted to terminate or appoint a trustee
to administer a Plan which is subject to Title IV of ERISA; that a proceeding
has been instituted pursuant to Section 515 of ERISA to collect a delinquent
contribution to a Plan; that the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate will or may incur any material amount of liability
(including any indirect, contingent, or secondary liability) to or on account
of the termination of or withdrawal from a Plan under Section 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan under
Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i)
or 502(1) of ERISA or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section
4980B of the Code; or that the Borrower or any Subsidiary of the Borrower may
incur any material liability pursuant to any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) that provides death, health or
severance benefits to retired employees or other former employees (other than
as required by Section 601 of ERISA or appicable state law) or any Plan. At
the request of any Bank, the Borrower will promptly deliver to such Bank a
complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed
with the Internal Revenue Service. In addition to any certificates or
notices delivered to the Banks pursuant to the first sentence hereof, if
requested by the Banks, copies of annual reports and any material notices
received by the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate with respect to any Plan shall be delivered to the Banks no later
than 10 Business Days after the date such notice has been received by the
Borrower, the Subsidiary or the ERISA Affiliate, as applicable.
6.08 PERFORMANCE OF OBLIGATIONS. The Borrower will, and will
cause each of its Subsidiaries to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture, security agreement,
other debt instrument and material contract by which it is bound or to which it
is a party.
6.09 GOOD REPAIR. The Borrower will, and will cause each of its
Subsidiaries to, ensure that its material properties and equipment used or
useful in its business in whomsoever's possession they may be, are kept in good
repair, working order and condition, normal wear and tear excepted, and that
from time to time there are made in such properties and equipment all needful
and proper repairs, renewals, replacements, extensions, additions, betterments
and
-36-
improvements thereto, to the extent and in the manner customary for companies
in similar businesses.
6.10 END OF FISCAL YEARS; FISCAL QUARTERS. The Borrower
will, for financial reporting purposes, cause (i) each of its, and each of
its Subsidiaries', fiscal years to end on December 31 of each year and (ii)
each of its, and each of its Subsidiaries', fiscal quarters to end on March
31, June 30, September 30 and December 31 of each year.
6.11 LOAN RATINGS. No later than 90 days following the
Initial Borrowing Date, the Borrower will ensure that the Loans are rated by
Xxxxx'x and S&P.
6.12 MAINTENANCE OF LICENSES AND PERMITS. The Borrower will,
and will cause each of its Subsidiaries 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 except where failure to
maintain the same could not reasonably be expected to have a Material Adverse
Effect.
6.13 REGISTER. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this
Section 6.13, to maintain a register (the "Register") on which it will record
the Commitments from time to time of each of the Banks, the Loans made by
each of the Banks and each repayment in respect of the principal amount of
the Loans of each Bank. Failure to make any such recordation, or any error
in such recordation shall not affect the obligations of the Borrower in
respect of such Loans. With respect to any Bank, the transfer of the
Commitments of such Bank and the rights to the principal of, and interest on,
any Loan made pursuant to such Commitments shall not be effective until such
transfer is recorded on the Register maintained by the Administrative Agent
with respect to ownership of such Commitments and Loans and prior to such
recordation all amounts owing to the transferor with respect to such
Commitments and Loans shall remain owing to the transferor. The registration
of assignment or transfer of all or part of any Commitments and Loans shall
be recorded by the Administrative Agent on the Register only upon the
acceptance by the Administrative Agent of a properly executed and delivered
Assignment and Assumption Agreement pursuant to Section 11.04(b). Coincident
with the delivery of such an Assignment and Assumption Agreement to the
Administrative Agent for acceptance and registration of assignment or
transfer of all or part of a Loan, or as soon thereafter as practicable, the
assigning or transferor Bank shall surrender the Note evidencing such Loan,
and thereupon one or more new Notes in the same aggregate principal amount
shall be issued to the assigning or transferor Bank and/or the new Bank. The
Borrower agrees to indemnify the Administrative Agent from and against any
and all losses, claims, damages and liabilities of whatsoever nature which
may be imposed on, asserted against or incurred by the Administrative Agent
in performing its duties under this Section 6.13 (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Administrative
Agent).
6.14 FOREIGN SUBSIDIARIES SECURITY. If following a change in
the relevant sections of the Code or the regulations, rules, rulings, notices or
other official pronouncements issued or promulgated thereunder, counsel for the
Borrower acceptable to the Administrative Agent and
-37-
the Required Banks does not within 30 days after a request from the
Administrative Agent or the Required Banks deliver evidence, in form and
substance mutually satisfactory to the Administrative Agent and the Borrower,
with respect to any Foreign Subsidiary which has not already had all of its
stock pledged pursuant to the Pledge Agreement that (i) a pledge (x) of
66-2/3% or more of the total combined voting power of all classes of capital
stock of such Foreign Subsidiary entitled to vote, and (y) of any promissory
note issued by such Foreign Subsidiary to the Borrower or any of its Domestic
Subsidiaries and (ii) the entering into by such Foreign Subsidiary of a
pledge agreement in substantially the form of the Pledge Agreement, in any
such case would cause the undistributed earnings of such Foreign Subsidiary
as determined for Federal income tax purposes to be treated as a deemed
dividend to such Foreign Subsidiary's United States parent for Federal income
tax purposes, then in the case of a failure to deliver the evidence described
in clause (i) above, that portion of such Foreign Subsidiary's outstanding
capital stock or any promissory notes so issued by such Foreign Subsidiary,
in each case not theretofore pledged pursuant to the Pledge Agreement shall
be pledged to the Collateral Agent for the benefit of the Secured Creditors
pursuant to the Pledge Agreement (or another pledge agreement in
substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) above, such Foreign Subsidiary
shall execute and deliver the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), granting the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of the Borrower under the Credit Documents and under any Interest
Rate Agreement or Other Hedging Agreement, to the extent that the entering
into such Pledge Agreement is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 6.14
to be in form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks.
6.15 ACQUISITION OF CCIC. As soon as possible after
obtaining the approval of the Department of Insurance of the State of New
York, the Borrower shall become the direct or indirect owner of 100% of the
outstanding capital stock of CCIC, free and clear of all Liens (other than
Liens created pursuant to the Pledge Agreement). In the event that the
Borrower has not acquired CCIC on or before December 31, 1999, then the
Borrower shall acquire, or shall cause its Subsidiaries to acquire, such
licenses, charters, approvals and other assets necessary so that the Borrower
and its Subsidiaries can engage in the type business in which CCIC is
currently engaged.
SECTION 7. NEGATIVE COVENANTS. The Borrower hereby covenants
and agrees that on the Initial Borrowing Date and thereafter, for so long as
this Agreement is in effect and until the Loans together with interest, Fees
and all other Obligations incurred hereunder, are paid in full:
7.01 CHANGES IN BUSINESS. (a) The Borrower will not permit
any of its Subsidiaries to engage in any business other than the business the
Borrower's Subsidiaries are engaged in as of the Initial Borrowing Date
(after giving effect to the Transaction) and activities related thereto.
-38-
(b) The Borrower will engage in no business other than (i)
the ownership of the capital stock and other equity interests in its
Subsidiaries, (ii) the incurrence of Indebtedness permitted to be incurred by
it under Section 7.04, (iii) acquisitions permitted under Section 7.02(i),
(iv) the entering into and performing of its obligations under the
Transaction Documents and (v) the making of investments in accordance with
the provisions of Section 7.06(b).
7.02 CONSOLIDATION, MERGER, SALE OR PURCHASE OF ASSETS, ETC.
The Borrower will not, and will not permit any of its Subsidiaries to, wind
up, liquidate or dissolve its affairs, or enter into any transaction of
merger or consolidation, or sell or otherwise dispose of any of its property
or assets (including the sale of capital stock of any of its Subsidiaries,
but excluding any sale or disposition of property or assets in the ordinary
course of business), or purchase, lease or otherwise acquire (in one
transaction or a series of related transactions) all or any part of the
property or assets of any Person (excluding any purchases, leases or other
acquisitions of property or assets in, and for use in, the ordinary course of
business) or agree to do any of the foregoing at any future time, except that
the following shall be permitted:
(a) The Transaction;
(b) Capital Expenditures by the Borrower and its Subsidiaries to
the extent permitted by Section 7.05;
(c) The investments, acquisitions and transfers or dispositions
of property permitted pursuant to Section 7.06;
(d) The merger or consolidation or liquidation of any
Wholly-Owned Subsidiary of the Borrower with or into another Wholly-Owned
Subsidiary of the Borrower, PROVIDED that no Subsidiary may merge,
consolidate or liquidate with or into SNCHC or any of its Subsidiaries;
(e) Any Regulated Insurance Company may enter into any Insurance
Contract, Reinsurance Agreement or Retrocession Agreement in the
ordinary course of business in accordance with its normal underwriting,
indemnity and retention policies, PROVIDED that, except as provided
below, no Regulated Insurance Company shall enter into any Financial
Reinsurance Agreements after the Initial Borrowing Date, PROVIDED
FURTHER, that Regulated Insurance Companies may enter into Financial
Reinsurance Agreements constituting loss portfolio transfers and/or
retrospective aggregate excess of loss reinsurance contracts so long as
(i) the aggregate annual premiums associated with such Financial
Reinsurance Agreements entered into by all Regulated Insurance Companies
shall not exceed $10,000,000 and (ii) such Financial Reinsurance
Agreements do not meet the conditions for reinsurance accounting as
provided in FASB 113 solely because they relate to losses incurred in
prior years;
(f) The Borrower or any of its Subsidiaries may enter into
leases of property or assets in the ordinary course of business not
otherwise in violation of this Agreement;
-39-
(g) each of the Borrower and its Subsidiaries may sell assets
(including, without limitation, the capital stock of BIC acquired
pursuant to the Acquisition), PROVIDED that (w) each such sale shall be
for an amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the Borrower), (x) each
such sale results in consideration in the form of cash, (y) the
aggregate sale proceeds from all assets subject to such sales pursuant
to this clause (g) in any fiscal year shall not exceed 10% of the
Consolidated Net Worth of the Borrower as of the first day of such
fiscal year provided that (i) on a PRO FORMA basis (the PRO FORMA
adjustments made by the Borrower pursuant to this clause (i) shall be
subject to the reasonable satisfaction of the Administrative Agent)
determined as if such asset sale had been consummated on the date
occurring twelve months prior to the last day of the most recently ended
fiscal quarter of the Borrower with respect to any asset sale, the
Borrower and its Subsidiaries would have been in compliance with
Sections 7.10 through 7.13 of this Agreement as of, or for the relevant
period ended on, the last day of such fiscal quarter and (ii) on a PRO
FORMA basis (the PRO FORMA adjustments made by the Borrower pursuant to
this clause (ii) shall be subject to the reasonable satisfaction of the
Administrative Agent) determined as if such asset sale had been
consummated, the covenants contained in Sections 7.10 through 7.13 will
continue to be met for the twelve-month period following the last day of
the fiscal quarter ended after the date of the consummation of such
asset sale and (z) to the extent required by Section 3.02(i)(b), the Net
Available Proceeds therefrom are applied to repay Loans as provided in
Section 3.02(i)(b);
(h) the Asset Restructuring Transaction; and
(i) so long as no Default or Event of Default then exists or
would result therefrom, the Borrower and its Subsidiaries may acquire
assets or the capital stock of any Person (any such acquisitions
permitted by this clause (i), a "Permitted Acquisition"), PROVIDED, that
(i) such Person (or the assets so acquired) was, immediately prior to
such acquisition, engaged (or used) primarily in the businesses
permitted pursuant to Section 7.01(a), (ii) each such acquisition shall
be for an amount not greater than the fair market value thereof (as
determined in good faith by the Board of Directors of the Borrower),
(iii) the aggregate amount expended by the Borrower and its Subsidiaries
for Permitted Acquisitions shall not in any fiscal year exceed 10% of
the Consolidated Net Worth of the Borrower and its Subsidiaries as of
the first day of such fiscal year, (iv) on a PRO FORMA basis (the PRO
FORMA adjustments made by the Borrower pursuant to this clause (iv)
shall be subject to the reasonable satisfaction of the Administrative
Agent) determined as if such acquisition had been consummated on the
date occurring twelve months prior to the last day of the most recently
ended fiscal quarter of the Borrower, the Borrower and its Subsidiaries
would have been in compliance with Sections 7.10 through 7.13 of this
Agreement as of, or for the relevant period ended on, the last day of
such fiscal quarter, (v) on a PRO FORMA basis (the PRO FORMA adjustments
made by the Borrower pursuant to this clause (v) shall be subject to the
reasonable satisfaction of the Administrative Agent) determined as if
such acquisition had been consummated, the covenants contained in
Sections 7.10 through 7.13 will continue to be met for the twelve-month
period following the last day of the fiscal quarter ended after the date
of the consummation of such
-40-
acquisition and (vi) no such acquisition shall be consummated on a
"hostile" basis (I.E., without the consent of the Board of Directors of
the Person to be acquired).
To the extent the Required Banks (or all the Banks to the extent required by
Section 11.12) waive the provisions of this Section 7.02 with respect to the
disposition of any Collateral, or any Collateral is disposed of as permitted
by this Section 7.02, (i) such Collateral in each case shall be sold free and
clear of the Liens in favor of the Secured Creditors created by the Pledge
Agreement and (ii) if such Collateral includes all of the capital stock of a
Subsidiary, such capital stock shall be released from the Pledge Agreement
and such Subsidiary shall be released from the Subsidiary Guaranty; and the
Administrative Agent and the Collateral Agent shall be authorized to take
such actions as the Administrative Agent or the Collateral Agent reasonably
deems appropriate in connection therewith.
7.03 LIENS. The Borrower will not, and will not permit any
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any property or assets of any kind (real or personal,
tangible or intangible) of the Borrower or any such Subsidiary whether now
owned or hereafter acquired, or sell any such property or assets subject to
an understanding or agreement, contingent or otherwise, to repurchase such
property or assets (including sales of accounts receivable or notes with
recourse to the Borrower or any of its Subsidiaries) or assign any right to
receive income, or file or permit the filing of any financing statement under
the UCC or any other similar notice of Lien under any similar recording or
notice statute relating to any such property, except:
(a) Liens for taxes not yet due or Liens for taxes being
contested in good faith and by appropriate proceedings for which
adequate reserves (in the good faith judgment of the management of the
Borrower) have been established;
(b) Liens in respect of property or assets of any of the
Borrower's Subsidiaries imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary course
of business, and (x) which do not in the aggregate materially detract
from the value of such property or assets or materially impair the use
thereof in the operation of the business of the Borrower or any
Subsidiary or (y) which are being contested in good faith by appropriate
proceedings, which proceedings have the effect of preventing the
forfeiture or sale of the property or asset subject to such Lien;
(c) Liens created by this Agreement or the other Credit
Documents;
(d) Liens in existence on the Effective Date which (x) have been
reviewed and approved by the Banks and are listed, and the property
subject thereto on the Effective Date described, in Annex VII, without
giving effect to any extensions or renewals thereof (provided that (i)
the securities subject to any such Lien may be replaced by other
securities of no greater principal amount and (ii) no such extension or
renewal will increase the obligations secured thereby or result in any
such Lien attaching to any additional property) or (y) are otherwise
permitted under this Section 7.03;
-41-
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.09;
(f) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance and other types of social
security, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government
contracts, performance and return-of-money bonds, Reinsurance
Agreements, Retrocession Agreements and other similar obligations
incurred in the ordinary course of business (exclusive of obligations in
respect of the payment for borrowed money);
(g) Leases or subleases granted to others not interfering in any
material respect with the business of the Borrower or any of its
Subsidiaries and any interest or title of a lessor under any lease not
in violation of this Agreement;
(h) Easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances not
interfering in any material respect with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries;
(i) Liens arising from UCC financing statements regarding leases
not in violation of this Agreement;
(j) Liens on pledges or deposits of cash or securities made by
any Regulated Insurance Company as a condition to obtaining or
maintaining any licenses issued to it by any Applicable Insurance
Regulatory Authority; and
(k) Liens on assets which are subject to the Asset Restructuring
Transaction.
7.04 INDEBTEDNESS. The Borrower will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and the
other Credit Documents;
(b) Capitalized Lease Obligations of the Borrower and its
Subsidiaries, provided that the aggregate Capitalized Lease Obligations
under all Capital Leases shall not exceed $15,000,000 at any time;
(c) Indebtedness in existence on the Effective Date which has
been reviewed and approved by the Banks and is listed in Annex III
(including the Trust Preferred Notes), without giving effect to any
subsequent extension, renewal or refinancing thereof;
(d) Obligations of any Regulated Insurance Company with respect
to (i) letters of credit securing obligations under Reinsurance
Agreements entered into in the ordinary course of business of any such
Regulated Insurance Company, (ii) letters of credit issued in lieu of
deposits to satisfy Legal Requirements or (iii) letters of credit or
surety bonds
-42-
issued in lieu of depositing securities with any Applicable
Insurance Regulatory Authority to satisfy regulatory requirements in
connection with worker's compensation insurance; in any case to the
extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than 10 days
following receipt by the Borrower or such Subsidiary of notice of
payment on such letter of credit;
(e) Indebtedness of the Borrower under Interest Rate Agreements
entered into in respect of the Obligations;
(f) Indebtedness under reimbursement obligations in respect of
letters of credit issued to guaranty or support the payment of
performance bonds, workers' compensation claims, insurance claims and
contested appeals and compliance with operations and regulatory
obligations incurred in the ordinary course of business, in an aggregate
principal amount not to exceed $10,000,000; and
(g) Indebtedness owing pursuant to the Reverse Repurchase
Program in an aggregate principal amount not to exceed $20,000,000 at
any time and which shall remain outstanding for no more than 90 days at
any time; and
(h) Other unsecured Indebtedness of the Borrower and its
Subsidiaries not to exceed $5,000,000 in the aggregate principal amount
outstanding at any time.
7.05 CAPITAL EXPENDITURES. The Borrower will not incur, and will not
permit any of its Subsidiaries to incur, Capital Expenditures, PROVIDED that
the Borrower and its Subsidiaries may incur Capital Expenditures so long as
the aggregate amount so incurred by the Borrower and its Subsidiaries (on a
consolidated basis) during any fiscal year does not exceed $5,000,000.
7.06 ADVANCES, INVESTMENTS AND LOANS. The Borrower will not,
and will not permit any of its Subsidiaries to, lend money or credit or make
advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except:
(a) The Transaction shall be permitted;
(b) The Borrower and its Subsidiaries which are not Regulated
Insurance Companies may invest in cash, Cash Equivalents, open-ended
mutual funds and Investment Grade Securities other than investments
which are Risk Derivatives (determined at the time of acquisition);
PROVIDED that (i) investments in open-ended mutual funds shall not
exceed $5,000,000 in the aggregate and (ii) any investment in Investment
Grade Securities (other than U.S. Government Obligations) issued by any
single Issuer shall not exceed on the date such investment is made an
amount which, when added to all other investments by all Regulated
Insurance Companies and the Borrower in such Issuer and outstanding on
such date, is equal to 5% of Invested Assets at such time;
-43-
(c) The Borrower and its Subsidiaries may acquire and hold
receivables owing to them in the ordinary course of business and payable
or dischargeable in accordance with customary trade terms;
(d) Loans and advances to employees for business-related travel
expenses, moving expenses and other similar expenses, in each case
incurred in the ordinary course of business;
(e) The transactions described in Section 7.02(d), (e) and (i)
shall be permitted;
(f) Regulated Insurance Companies may invest in (i) cash, (ii)
Cash Equivalents, (iii) Investment Grade Securities and
(iv) Non-Investment Grade Securities; PROVIDED that (A) no investment
will be made in (i) any debt securities which are Non-Investment Grade
Securities or (ii) any equity securities, at a time when, or if after
giving effect thereto, the aggregate principal amount of all
Non-Investment Grade Securities held by all Regulated Insurance Companies
plus the aggregate outstanding investment made by all Regulated
Insurance Companies in equity securities (other than securities of
Persons which are Affiliates of the Borrower on the Effective Date)
equals or exceeds or would equal or exceed 10% of Invested Assets; (B)
no investment will be made in any real estate or loan secured by real
estate (other than (I) credit tenant loans (as defined by the NAIC on
the Effective Date), (II) those existing on the Effective Date (without
giving effect to any increase thereto) and (III) loans secured by
owner-occupied real estate, if made at a time when, and if after giving
effect thereto, the aggregate of all such investments in mortgage loans
does not exceed, and would not exceed, 1% of Invested Assets); and (C) no
investment (other than U.S. Government Obligations) in any single Issuer
shall exceed on the date such investment is made an amount which, when
added to all other investments by the Borrower and its Subsidiaries in
the same Issuer and outstanding on such date, is equal to 5% of Invested
Assets at such time;
(g) Any Regulated Insurance Company may make investments in
companies which are Wholly-Owned Subsidiaries of such Person (or any
other Subsidiary of such Person created or acquired in accordance with
Section 7.15) but only to the extent that any such investment, at the
time made, does not reduce Statutory Surplus of such Regulated Insurance
Company;
(h) The Borrower and its Subsidiaries may make investments
pursuant to commitments in effect as of the Effective Date and described
(as to matter and amount) on Annex VIII;
(i) Investments acquired by the Borrower or any of its
Subsidiaries (x) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of a
bankruptcy, workout, reorganization or recapitalization of the issuer of
such other investment or (y) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
-44-
(j) Any Regulated Insurance Company may make (i) policy loans in
the ordinary course of business and (ii) agent debit balances in the
ordinary course of business;
(k) Investments existing on the Effective Date which have been
reviewed and approved by the Banks and are identified on Annex VIII;
(l) The Borrower may make Employee Participation Loans, provided
that the aggregate principal amount of such loans does not exceed
$10,400,000; and
(m) Investments existing in connection with the Reverse
Repurchase Program; PROVIDED that (i) the aggregate amount of such
investments shall not exceed $20,000,000 at any time and (ii) each such
investment shall remain outstanding for no more than 90 days.
7.07 PREPAYMENTS OF INDEBTEDNESS, MODIFICATIONS OF AGREEMENTS,
ETC. The Borrower will not, and will not permit any of its Subsidiaries to:
(a) make (or give any notice in respect thereof) any voluntary
or optional payment or prepayment or redemption or acquisition for value
of (including, without limitation, by way of depositing with the trustee
with respect thereto money or securities before due for the purpose of
payment when due) or exchange of, any Trust Preferred Notes;
(b) amend or modify (or permit the amendment or modification of)
in any manner adverse to the interests of the Banks any of the terms or
provisions of the Acquisition Documents, the Existing Reinsurance
Agreement Documents, the Asset Restructuring Transaction documents, or
the Trust Preferred Note Documents;
(c) amend, modify or change in any manner adverse to the
interests of the Banks the Certificate of Incorporation (including,
without limitation, by the filing of any certificate of designation) or
By-Laws of the Borrower or any of its Subsidiaries, or any other
agreement entered into by the Borrower or any of its Subsidiaries with
respect to its capital stock, or enter into any new agreement with
respect to the capital stock of the Borrower (to the extent adverse to
the interests of the Banks) or any of its Subsidiaries; and/or
(d) amend, modify or terminate (or permit the amendment,
modification or termination of) in any manner adverse to the interests
of the Banks the Tax Sharing Agreements.
7.08 DIVIDENDS, ETC. (a) The Borrower will not, and will not
permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock of such Person) or return any capital
to, its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock now or hereafter outstanding (or any
warrants for or options or stock
-45-
appreciation rights in respect of any of such shares), or set aside any funds
for any of the foregoing purposes, or purchase or otherwise acquire or permit
any of its Subsidiaries to purchase or otherwise acquire for consideration
any shares of any class of the capital stock of the Borrower or any of its
Subsidiaries, as the case may be, now or hereafter outstanding (or any
options or warrants or stock appreciation rights issued by such Person with
respect to its capital stock) (all of the foregoing "Dividends"), except that
any Subsidiary of the Borrower may pay cash dividends to its parent if such
parent is the Borrower or a Wholly-Owned Subsidiary of the Borrower.
(b) The Borrower will not, and will not permit any of its
Subsidiaries to, create or otherwise cause or suffer to exist any encumbrance or
restriction which prohibits or otherwise restricts (i) the ability of any
Subsidiary to (A) pay dividends or make other distributions or pay any
Indebtedness owed to the Borrower or any of its Subsidiaries, as applicable, (B)
make loans or advances to the Borrower or any Subsidiary, as applicable, (C)
transfer any of its properties or assets to the Borrower or any Subsidiary, as
applicable, or (D) guarantee the Obligations or (ii) the ability of the Borrower
or any Subsidiary of the Borrower to create, incur, assume or suffer to exist
any Lien upon its property or assets to secure the Obligations, other than
prohibitions or restrictions existing under or by reason of (I) this Agreement,
the other Credit Documents and the Trust Preferred Note Documents and (II) Legal
Requirements.
7.09 TRANSACTIONS WITH RELATED PARTIES. The Borrower will not,
and will not permit any Subsidiary to, enter into any transaction or series of
transactions with any Related Party (excluding the Borrower or any Wholly-Owned
Subsidiary of the Borrower) other than in the ordinary course of business and on
terms and conditions substantially as favorable to the Borrower or such
Subsidiary as would be obtainable by the Borrower or such Subsidiary at the time
in a comparable arm's-length transaction with a Person other than a Related
Party.
7.10 LEVERAGE RATIO. The Borrower will not permit the ratio of
(i) Consolidated Indebtedness of the Borrower to (ii) Consolidated Total Capital
of the Borrower at any time during any period set forth below to be greater than
the ratio set forth opposite such period below:
Period Ratio
------ -----
Initial Borrowing Date
to and including December 31, 2000 0.30:1.00
January 1, 2001
to and including December 31, 2001 0.25:1.00
January 1, 2002 and thereafter 0.20:1.00
7.11 INTEREST COVERAGE RATIO. The Borrower 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:
-46-
Period Ratio
------ -----
Initial Borrowing Date
to and including December 31, 2000 2.50:1.00
January 1, 2001
to and including December 31, 2001 2.75:1.00
January 1, 2002 and thereafter 3.00:1.00
7.12 MINIMUM COMBINED STATUTORY SURPLUS. The Borrower shall not
permit the Regulated Insurance Companies, collectively, on a combined basis, to
have Statutory Surplus at any time of less than the minimum combined Statutory
Surplus of (a) at any time prior to December 31, 1999, $285,000,000, and (b) at
any time after December 31, 1999, the sum of (i) $285,000,000 and (ii) an
amount, if positive, equal to 50% of the net income of all Regulated Insurance
Companies (determined on a combined basis, in accordance with SAP) for the
period from January 1, 1999 through the last day of the then most recently ended
fiscal quarter.
7.13 MINIMUM RISK-BASED CAPITAL. (a) The Borrower will not
permit the Risk-Based Capital for any Regulated Insurance Company to be less
than 225%.
(b) The Borrower will not permit the Risk-Based Capital for all
Regulated Insurance Companies (collectively, on a combined basis) to be less
than 275%.
7.14 ISSUANCE OF STOCK. (a) The Borrower will not directly or
indirectly issue, sell, assign, pledge, or otherwise encumber or dispose of any
shares of its capital stock or other equity securities (or warrants, rights or
options to acquire shares or other equity securities), except (i) the issuance
of common stock (and warrants, options and other rights to acquire common
stock), so long as no Event of Default occurs under Section 8.11, and (ii) the
issuance of preferred stock, so long as (x) no part of the preferred stock is
mandatorily redeemable until after the tenth anniversary of the Initial
Borrowing Date, (y) any dividends associated with such preferred stock are
solely payable in kind and (z) the aggregate amount of such preferred stock
issued after the Initial Borrowing Date does not exceed $75,000,000.
(b) The Borrower will not permit any of its Subsidiaries
directly or indirectly to issue, sell, assign, pledge, or otherwise encumber or
dispose of any shares of its capital stock or other equity securities (or
warrants, rights or options to acquire shares or other equity securities) of
such Subsidiary, except (i) to the Borrower or to a Wholly-Owned Subsidiary of
the Borrower, (ii) to qualify directors if required by applicable law and (iii)
pursuant to the Pledge Agreement.
7.15 CREATION OF SUBSIDIARIES. The Borrower shall not create or
acquire any Subsidiary other than (i) Regulated Insurance Companies which are
direct Subsidiaries of the Borrower or of a Subsidiary Guarantor and all of the
capital stock of such Subsidiary owned by the Borrower or such Subsidiary
Guarantor is pledged pursuant to the Pledge Agreement; and (ii) Non-Regulated
Insurance Companies which are not Subsidiaries of any Regulated Insurance
Company, so long as (x) all of the capital stock of such Subsidiary is pledged
pursuant to the
-47-
Pledge Agreement and (y) such new Subsidiary executes a counterpart of the
Subsidiary Guaranty and the Pledge Agreement. In addition, at the request of
the Administrative Agent, each new Subsidiary that is required to execute any
Credit Document shall execute and deliver, or cause to be executed and
delivered, all other relevant documentation of the type described in Section
4 as such new Subsidiary would have had to deliver if such new Subsidiary
were a Credit Party on the Initial Borrowing Date.
7.16 PARTNERSHIP AGREEMENTS. The Borrower will not enter into
any partnership agreement as a general partner.
SECTION 8. EVENTS OF DEFAULT. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
8.01 PAYMENTS. The Borrower shall (i) default in the payment
when due of any principal of the Loans, (ii) default, and such default shall
continue for two or more days, in the payment when due of any interest on the
Loans or any Fees or (iii) default in the prompt payment following notice or
demand in respect of any other amounts owing hereunder or under any other Credit
Document; or
8.02 REPRESENTATIONS, ETC. Any representation, warranty or
statement made or deemed made by the Borrower or any other Credit Party herein
or in any other Credit Document or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto shall prove to be untrue in
any material respect on the date as of which made or deemed made; or
8.03 COVENANTS. Any Credit Party shall (a) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 6.10 or 7, or (b) default in the due performance or observance by it of
any term, covenant or agreement (other than those referred to in Section 8.01 or
clause (a) of this Section 8.03) contained in this Agreement and such default
shall continue unremedied for a period of at least 30 days; or
8.04 DEFAULT UNDER OTHER AGREEMENTS. (a) The Borrower or any
of its Subsidiaries shall (i) default in any payment with respect to
Indebtedness (other than the Obligations, but including the Trust Preferred
Notes) in excess of $2,500,000 individually or in the aggregate, for the
Borrower and its Subsidiaries, beyond the period of grace, if any, provided in
the instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to any such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause (determined without regard to whether
any notice of acceleration, or any lapse of time prior to the effectiveness of
any notice of acceleration, is required), any such Indebtedness to become due
prior to its stated maturity; or (b) any Indebtedness of the Borrower or any of
its Subsidiaries of the type referred to in clause (a) above shall be declared
to be due and payable, or required to be prepaid other than by a regularly
scheduled required prepayment, prior to the stated maturity thereof; or
-48-
8.05 BANKRUPTCY, ETC. The Borrower or any of its
Subsidiaries shall commence a voluntary case concerning itself under Title 11
of the United States Code entitled "Bankruptcy," as now or hereafter in
effect, or any successor thereto (the "Bankruptcy Code"); or an involuntary
case is commenced against the Borrower or any of its Subsidiaries and the
petition is not controverted within 10 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially
all of the property of the Borrower or any of its Subsidiaries; or the
Borrower or any of its Subsidiaries commences (including by way of applying
for or consenting to the appointment of, or the taking of possession by, a
rehabilitator, receiver, custodian, trustee, conservator or liquidator
(collectively, a "conservator") of itself or all or any substantial portion
of its property) any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency, liquidation,
rehabilitation, conservatorship or similar law of any jurisdiction whether
now or hereafter in effect relating to the Borrower or any of its
Subsidiaries; or any such proceeding is commenced against (a) any Regulated
Insurance Company which is engaged in the business of underwriting insurance
and/or reinsurance in the United States, or (b) the Borrower or any of its
Subsidiaries (other than (x) any Regulated Insurance Company described in the
immediately preceding clause (a) or (y) any dissolution or liquidation
proceeding commenced against a Non-Regulated Subsidiary (i) the assets of
which do not exceed an aggregate amount of $100,000 and (ii) in connection
with the winding-up of such Subsidiary) to the extent such proceeding is
consented to by such Person, and in the case of either clause (a) or (b)
remains undismissed for a period of 60 days; or the Borrower or any of its
Subsidiaries is adjudicated insolvent or bankrupt; or any order of relief or
other order approving any such case or proceeding is entered; or (a) any
Regulated Insurance Company which is engaged in the business of underwriting
insurance and/or reinsurance in the United States suffers any appointment of
any conservator or the like for it or any substantial part of its property,
or (b) the Borrower or any of its Subsidiaries (other than any Regulated
Insurance Company described in the immediately preceding clause (a)) suffers
any appointment of any conservator or the like for it or any substantial part
of its property which continues undischarged or unstayed for a period of 60
days; or the Borrower or any of its Subsidiaries makes a general assignment
for the benefit of creditors; or any corporate action is taken by the
Borrower or any of its Subsidiaries for the purpose of effecting any of the
foregoing; or
8.06 ERISA. (a) Any Plan shall fail to satisfy the minimum
funding standard required for any plan year or part thereof under Section 412 of
the Code or Section 302 of ERISA or a waiver of such standard or extension of
any amortization period is sought or granted under Section 412 of the Code or
Section 303 or 304 of ERISA, a Reportable Event shall have occurred, any Plan
which is subject to Title IV of ERISA shall have had or is likely to have a
trustee appointed by the PBGC to administer such Plan, any Plan which is subject
to Title IV of ERISA is, shall have been or is likely to be terminated or to be
the subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made with respect to a
Plan has not been timely made, the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate has incurred or is likely to incur any liability to or on
account of a Plan under Section 409, 502(i), 502(1), 515, 4062, 4063, 4064,
4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the
Code or on account of a group health plan (as defined in Section 607(1) of ERISA
or Section 4980B(g)(2) of the Code)
-49-
under Section 4980B of the Code, or the Borrower or any Subsidiary of the
Borrower has incurred or is likely to incur liabilities pursuant to one or
more employee welfare benefit plans (as defined in Section 3(1) of ERISA)
that provide death, health or severance benefits to retired employees or
other former employees (other than as required by Section 601 of ERISA or
applicable state law) or Plans; (b) there shall result from any such event or
events the imposition of a lien, the granting of a security interest, or a
liability or a material risk of incurring a liability; and (c) such lien,
security interest or liability, individually and/or in the aggregate, in the
opinion of the Required Banks, has had, or could reasonably be expected to
have, a Material Adverse Effect; or
8.07 SUBSIDIARY GUARANTY. The Subsidiary Guaranty or any
provision thereof shall cease to be in full force and effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under the
Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due
performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to the Subsidiary Guaranty; or
8.08 PLEDGE AGREEMENT. The Pledge Agreement shall cease to be
in full force and effect, or shall cease to give the Collateral Agent the Liens,
rights, powers and privileges purported to be created thereby (including,
without limitation, a first priority perfected security interest in, and Lien
on, all of the Collateral subject thereto, in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons and subject to no other
Liens), or any Credit Party shall default in the due performance or observance
of any term, covenant or agreement on its part to be performed or observed
pursuant to the Pledge Agreement; or
8.09 JUDGMENTS. One or more judgments or decrees shall be
entered against the Borrower or any of its Subsidiaries involving a liability,
net of undisputed reinsurance, of $2,500,000 or more in the case of any one such
judgment or decree or in the aggregate for all such judgments and decrees for
the Borrower and its Subsidiaries and any such judgments or decrees shall not
have been vacated, discharged, stayed or bonded pending appeal within 60 days
from the entry thereof; or
8.10 A.M. BEST RATINGS. Any Regulated Insurance Company shall
fail to maintain an A.M. Best rating of at least B; or
8.11 OWNERSHIP. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of
Default shall then be continuing, the Administrative Agent shall, upon the
written request of the Required Banks, by written notice to the Borrower,
take any or all of the following actions, without prejudice to the rights of
the Administrative Agent or any Bank to enforce its claims against the
Borrower or any other Credit Party, except as otherwise specifically provided
for in this Agreement (PROVIDED that if an Event of Default specified in
Section 8.05 shall occur with respect to the Borrower, the result which would
occur upon the giving of written notice by the Administrative Agent as
specified in clauses (i) and (ii) below shall occur automatically without the
giving of any such notice): (i) declare the Total Commitment terminated,
whereupon the Commitment of each Bank
-50-
shall forthwith terminate immediately; (ii) declare the principal of and any
accrued interest in respect of all Loans and all Obligations owing hereunder
and under the other Credit Documents to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; and/or
(iii) enforce, as Collateral Agent (or direct the Collateral Agent to
enforce), any or all of the Liens and security interests created pursuant to
the Pledge Agreement. Any and all remedies and rights notwithstanding, in
the event of a default and acceleration of the Obligations hereunder, neither
the Collateral Agent nor any Bank shall vote, sell, or in any manner exercise
control as to any Regulated Insurance Company pledged as Collateral without
first filing for and obtaining written prior approval pursuant to California
Insurance Code Section 1215.2.
SECTION 9. DEFINITIONS. As used herein, the following terms
shall have the meanings herein specified unless the context otherwise requires.
Defined terms in this Agreement shall include in the singular number the plural
and in the plural the singular:
"Acquisition" shall mean the acquisition by the Borrower of 100%
of the equity interests of BIG from Foundation Health Corporation ("FHC"), a
wholly owned subsidiary of Foundation Health Systems, Inc.
"Acquisition Agreement" shall mean the Purchase Agreement, dated
as of May 5, 1998, by and between the Borrower and FHC.
"Acquisition Documents" shall mean the Acquisition Agreement
and all other agreements and documents relating to the Acquisition including
the Annexes and Exhibits to the Acquisition Agreement, in the form delivered
pursuant to Section 4.11 and as the same may be amended or modified pursuant
to the terms thereof and hereof.
"Administrative Agent" shall have the meaning provided in the
first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 10.09.
"Affiliate" shall mean, with respect to any Person, any other
Person directly or indirectly controlling (including but not limited to all
directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or indirectly, the
power (i) to vote 10% or more of the securities having ordinary voting power
for the election of directors of such corporation or (ii) to direct or cause
the direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as the same may be
from time to time modified, amended and/or supplemented.
"Annual Statement" shall mean the annual financial statement
required to be filed by any Regulated Insurance Company with the Applicable
Insurance Regulatory Authority.
-51-
"Applicable Insurance Regulatory Authority" shall mean, when
used with respect to any Regulated Insurance Company, the insurance
department or similar administrative authority or agency located in (x) each
state in which such Regulated Insurance Company is domiciled or (y) to the
extent asserting regulatory jurisdiction over such Regulated Insurance
Company, the insurance department, authority or agency in each state in which
such Regulated Insurance Company is licensed, and shall include any Federal
insurance regulatory department, authority or agency that may be created and
that asserts regulatory jurisdiction over such Regulated Insurance Company.
"Applicable Percentage" shall mean (a) with respect to Base Rate
Loans, 2% and (ii) with respect to Eurodollar Loans, 3%.
"Approved Bank" shall have the meaning provided in the definition
of "Cash Equivalents."
"Approved Company" shall have the meaning provided in the
definition of "Cash Equivalents".
"Asset Sale" shall mean any sale, transfer or other disposition
effected on or after the Initial Borrowing Date by the Borrower or any of its
Subsidiaries of (i) any capital stock or equity securities of a Subsidiary of
the Borrower or (ii) any other asset, in each case to any Person other than the
Borrower or any of its Wholly-Owned Subsidiaries (other than sales, transfers or
other dispositions in the ordinary course of business).
"Asset Restructuring Transaction" shall mean the sale of agent
balances, retro receivables and due and accrued investment income by CalComp,
CCIC and CBIC (together with a related sale/leaseback transaction not to
exceed $18,500,000), provided that such transaction may only be consummated
if (i) the documentation governing such transaction has been submitted to,
and determined to be in form and substance satisfactory to, the
Administrative Agent, (ii) such transaction is permitted under the terms of
the Trust Preferred Note Documents and (iii) the Banks shall have received an
opinion from Xxxxxxx & XxXxxxxx, counsel to the Borrower, that such
transaction is permitted under the terms of the Trust Preferred Note
Documents.
"Assignment and Assumption Agreement" shall have the meaning
provided in Section 11.04(b).
"Associates" shall mean each of (i) Capital Z Financial
Services Fund II, L.P., (ii) Capital Z Financial Services Private Fund II,
L.P., (iii) Insurance Partners Offshore (Bermuda), L.P. and (iv) Insurance
Partners, L.P., and any person or entity that controls, is under common
control with, or is controlled by Insurance Partners or such persons or
entities, and all individuals who are officers, directors or control persons
of any such entities, including Insurance Partners; PROVIDED, HOWEVER, that
International Insurance Investors, LP or its limited partners shall not be
deemed Associates hereunder.
-52-
"Authorized Control Level" shall mean "Authorized Control
Level" as defined by the NAIC from time to time and as applied in the context
of the Risk Based Capital Guidelines promulgated by the NAIC (or any term
substituted therefor by the NAIC).
"Authorized Officer" shall mean any senior officer of the
Borrower designated as such in writing by the Borrower to, and found
acceptable by, the Administrative Agent.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not been
retracted) of a Bank to make available its portion of any Borrowing or (ii) a
Bank having notified the Administrative Agent and/or the Borrower that it
does not intend to comply with the obligations under Section 1.01, in the
case of either clause (i) or (ii) above as a result of the appointment of a
receiver or conservator with respect to such Bank at the direction or request
of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in Section
8.05.
"Base Rate" at any time shall mean the higher of (x) the rate
which is 1/2 of 1% in excess of the Federal Funds Effective Rate and (y) the
Prime Lending Rate as in effect from time to time.
"Base Rate Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(a).
"Benchmark Statement" shall mean, as of any date, an annual
financial statement of the Regulated Insurance Companies as would be prepared
as of such date utilizing the identical format utilized by SNIC in preparing
its December 31, 1997 Annual Statement filed with the Insurance Department of
the State of California, with each page, line item and column of a Benchmark
Statement to contain the same type of information, computed in the same
manner, as contained in the identically numbered page, line item and column
of such Annual Statement.
"BIC" shall means Business Insurance Company, a New York stock
insurance company.
"BIG" shall mean Business Insurance Group, Inc., a Delaware
insurance holding company.
"Borrower" shall have the meaning provided in the first paragraph
of this Agreement.
"Borrowing" shall mean the incurrence of one Type of Loan
pursuant to a single Facility by the Borrower from all of the Banks having
Commitments with respect to such Facility, on a PRO RATA basis on a given
date (or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period, PROVIDED that Base Rate Loans
-53-
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other than as
covered by clause (ii) below, any day, excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close, and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day
which is a Business Day described in clause (i) and which is also a day for
trading by and between banks in U.S. dollar deposits in the interbank
Eurodollar market.
"CalComp" shall mean California Compensation Insurance
Company, a California stock insurance company.
"Capital Expenditures" shall mean expenditures (whether paid
in cash or accrued as liabilities and including in all events all amounts
expended or capitalized under Capital Leases but excluding any amount
representing capitalized interest) by the Borrower and its Subsidiaries that,
in conformity with GAAP, are or are required to be included in the property,
plant or equipment reflected in the consolidated balance sheet of the
Borrower and its Subsidiaries, PROVIDED that Capital Expenditures shall in
any event include the purchase price paid in connection with the acquisition
of any Person (including through the purchase of all of the capital stock or
other ownership interests of such Person or through merger or consolidation)
to the extent allocable to property, plant and equipment.
"Capitalized Lease Obligations" shall mean all obligations
under Capital Leases of the Borrower or any of its Subsidiaries in each case
taken at the amount thereof accounted for as liabilities in accordance with
GAAP.
"Capital Lease" as applied to any Person, shall mean any lease
of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is, or is required to be, accounted for as a
capital lease on the balance sheet of that Person.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (PROVIDED that the full faith and
credit of the United States of America is pledged in support thereof) having
maturities of not more than one year from the date of acquisition, (ii) U.S.
dollar denominated time deposits, certificates of deposit and bankers
acceptances of (x) any FDIC insured bank, in amounts up to the FDIC insured
limit, (y) any Bank having capital and surplus in excess of $500,000,000 or
the U.S. dollar equivalent thereof or (z) any bank whose short-term
commercial paper rating from S&P is at least A-1 or the equivalent thereof or
from Xxxxx'x is at least P-1 or the equivalent thereof (any such bank, an
"Approved Bank"), in each case with maturities of not more than one year from
the date of acquisition, (iii) commercial paper issued by any Bank or
Approved Bank or by the parent company of any Bank or Approved Bank and
commercial paper issued by, or guaranteed by, any industrial or financial
company with a short-term commercial paper rating of at least A-2 or the
equivalent thereof by S&P or at least P-2 or the equivalent thereof by
Moody's (any such company, an "Approved Company"), or guaranteed
-54-
by any industrial company with a long term unsecured debt rating of at least
A or A2, or the equivalent of each thereof, from S&P or Moody's, as the case
may be, and in each case maturing within six months after the date of
acquisition, PROVIDED, HOWEVER, that commercial paper rated A-2 or the
equivalent thereof by S&P or P-2 or the equivalent thereof by Moody's and
held by the Borrower and all Regulated Insurance Companies under this clause
(iii) shall not exceed (x) for any Issuer, 1% of Invested Assets, and (y) in
the aggregate, 3% of Invested Assets, (iv) commercial paper of any United
States municipal, state or local government rated at least A-1 or the
equivalent thereof by S&P or at least P-1 or the equivalent thereof by
Moody's and maturing within one year after the date of acquisition, (v) any
fund or funds investing solely in investments of the type described in
clauses (i) through (iv) above, and (vi) agreements to sell and repurchase
direct obligations of, or obligations that are fully guaranteed as to
principal and interest by, the U.S. Treasury, such agreements to be with
primary treasury dealers, to be evidenced by standard industry forms and to
have maturities of not more than six months from the date of commencement of
the repurchase transaction.
"Cash Proceeds" shall mean, with respect to any Asset Sale,
the aggregate cash payments (including any cash received by way of deferred
payment pursuant to a note receivable issued in connection with such Asset
Sale, other than the portion of such deferred payment constituting interest,
but only as and when received) received by the Borrower and/or any Subsidiary
from such Asset Sale, PROVIDED that any such proceeds received in currency
other than U.S. dollars shall be converted into U.S. dollars at the spot
exchange rate for the currency in question on the date of receipt by the
Borrower and/or its Subsidiaries of such proceeds.
"CBIC" shall mean Combined Benefits Insurance Company, a
California stock insurance company.
"CCIC" shall mean Commercial Compensation Insurance Company, a
California stock insurance company.
"Change of Control" shall mean (a) Insurance Partners and its
Associates collectively shall cease to own directly or indirectly an amount
of the economic and voting interest in the Borrower's capital stock equal to
at least 70% of the amount of the economic and voting interest in the
Borrower's capital stock that was owned by Insurance Partners and its
Associates collectively as of the Initial Borrowing Date; (b) the Borrower
shall cease to own directly or indirectly (other than as a result of a
transaction permitted under Section 7.02(d) hereof) 100% of the capital stock
of SPIG, BIG, SNIC, SPCC, CalComp, CBIC or, to the extent acquired by the
Borrower pursuant to Section 6.15, CCIC; (c) any Person other than Insurance
Partners and Centre Solutions (Bermuda) Limited (together with their
respective Affiliates) shall own directly or indirectly 20% or more on a
fully diluted basis of the economic and voting interest in the capital stock
of the Borrower; (d) a majority of the Board of Directors of the Borrower
shall cease to consist of Continuing Directors; or (e) any "Change of
Control" as such term is defined in the Trust Preferred Note Documents or any
successor or similar provision shall occur.
"Chase" shall mean The Chase Manhattan Bank.
-55-
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at
the date of this Agreement and any subsequent provisions of the Code,
amendatory thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined in the
Pledge Agreement.
"Collateral Agent" shall mean the Administrative Agent acting as
collateral agent for the Banks.
"Commitment" shall mean, with respect to each Bank, such Bank's
Term Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in Section
2.01(a).
"Consolidated Indebtedness" shall mean, at any time and as to
any Person, all Indebtedness for borrowed money of such Person and its
Subsidiaries at such time determined on a consolidated basis in accordance
with GAAP, but, in the case of the Borrower and its Subsidiaries, excluding
the Trust Preferred Notes and including (i) any Residual Indemnity
Liabilities outstanding subsequent to April 30, 1999 and (ii) all obligations
under the Reverse Repurchase Program.
"Consolidated Interest Expense" shall mean, for any period and
as to any Person, total interest expense (including that attributable to
Capital Leases in accordance with GAAP and all interest paid on the Trust
Preferred Notes) of such Person and its Subsidiaries on a consolidated basis
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing and net costs under Interest Rate Agreements, but excluding
however, (i) any amortization of deferred financing costs.
"Consolidated Net Worth" shall mean, with respect to any
Person, the Net Worth of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP after appropriate deduction for
any minority interests in Subsidiaries.
"Consolidated Total Capital" shall mean, at any time and as to
any Person, (i) the sum of Consolidated Indebtedness of such Person at such
time, (ii) Consolidated Net Worth of such Person at such time and (iii) in
the case of the Borrower, to the extent not included in (i) or (ii) above,
the Trust Preferred Notes at such time.
"Contingent Obligations" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of
-56-
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) 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
(d) otherwise to assure or hold harmless the owner of such primary obligation
against loss in respect thereof; PROVIDED, HOWEVER, that the term Contingent
Obligation shall not include (x) endorsements of instruments for deposit or
collection in the ordinary course of business or (y) obligations of any
Regulated Insurance Company under Insurance Contracts, Reinsurance Agreements
or Retrocession Agreements. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determinable amount of the
primary obligation in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated liability
in respect thereof (assuming such Person is required to perform thereunder)
as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the
Borrower on the Initial Borrowing Date and each other director if such
director's nomination for the election to the Board of Directors of the
Borrower is recommended by a majority of the then Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes, the
Subsidiary Guaranty and the Pledge Agreement.
"Credit Party" shall mean the Borrower and each Subsidiary
Guarantor.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to which a
Bank Default is in effect.
"Dividends" shall have the meaning provided in Section 7.08.
"Domestic Subsidiary" shall mean each Subsidiary of the Borrower
which is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section
11.10.
"Employee Participation Loans" shall mean the loans by the
Borrower to employees, officers and claims consultants of the Borrower and
its Subsidiaries in an aggregate principal amount not to exceed $10,400,000
the proceeds of which are used to purchase common stock of the Borrower in
connection with the November, 1998 registered offering of such stock to fund
the Acquisition.
"Equity Financing" shall have the meaning provided in Section
4.11(b).
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended from time to time and the regulations promulgated and
rulings issued thereunder.
-57-
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of
the Borrower would be deemed to be a "single employer" within the meaning of
Section 414(b),(c), (m) or (o) of the Code.
"Eurodollar Loans" shall mean each Loan bearing interest at the
rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest
Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the
nearest 1/100 of 1%) of the offered quotation to first-class banks in the
interbank Eurodollar market by Chase for U.S. dollar deposits of amounts in
same day funds comparable to the outstanding principal amount of the
Eurodollar Loan of Chase for which an interest rate is then being determined
with maturities comparable to the Interest Period to be applicable to such
Eurodollar Loan, determined as of 10:00 A.M. (New York time) on the date
which is two Business Days prior to the commencement of such Interest Period
divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii)
a percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section 8.
"Existing Reinsurance Agreements" shall mean (a) the Workers'
Compensation Quota Share Reinsurance Contract, effective May 1, 1998, between
the Borrower, various Subsidiaries of the Borrower and United States Life
Insurance Company, and (b) the Aggregate Excess of Loss Reinsurance
Agreement, dated as of September 3, 1998, between BIG, various Subsidiaries
of BIG and Inter-Ocean Reinsurance Company Ltd., in each case as amended,
modified or supplemented from time to time in accordance with the terms
thereof and hereof.
"Existing Reinsurance Agreement Documents" shall have the meaning
provided in Section 4.06.
"Expiration Date" shall mean December 31, 1998.
"Facility" shall mean any of the credit facilities established
under this Agreement, I.E., the Term Loan Facility and the Revolving Loan
Facility.
"FASB 113" shall mean the Statement of Financial Accounting
Standards No. 113, as the same may be revised, replaced, or supplemented from
time to time.
-58-
"Federal Funds Effective Rate" shall mean for any period, a
fluctuating interest rate equal for each day during such period to the
weighted average of the rates 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 which is a Business Day, the average of
the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or referred to
in, Section 2.01.
"FHC" shall mean Foundation Health Corporation, a wholly owned
subsidiary of Foundation Health Systems, Inc.
"Financial Reinsurance Agreement" shall mean a reinsurance
agreement covering any transaction in which any Regulated Insurance Company
cedes business that does not meet the conditions for reinsurance accounting
as provided by the Financial Accounting Standards Board in FASB 113.
"Foreign Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated under the laws of any jurisdiction other than
the United States of America, any State thereof, or any territory thereof.
"GAAP" shall mean generally accepted accounting principles in
the United States of America; it being understood and agreed that
determinations in accordance with GAAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein)
to Section 11.07(a).
"Governmental Authority" shall mean 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.
"Indebtedness" of any Person shall mean (i) all indebtedness
of such Person for borrowed money, (ii) the deferred purchase price of assets
or services which in accordance with GAAP would be shown on the liability
side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder, (iv) all Indebtedness of a second
Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed, (v) all Capitalized Lease
Obligations of such Person, (vi) all obligations of such Person to pay a
specified purchase price for goods or services whether or not delivered or
accepted, I.E., take-or-pay and similar obligations, (vii) all obligations of
such Person under Interest Rate Agreements and Other Hedging Agreements,
(viii) all Contingent Obligations of such Person and (ix) all obligations of
such Person under the Reverse Repurchase Program; PROVIDED that Indebtedness
shall not include trade payables (including payables under insurance
contracts and reinsurance payables) and accrued expenses, in each case
arising in the ordinary course of business.
-59-
"Initial Borrowing Date" shall mean the date upon which the
Term Loans are initially incurred hereunder.
"Insurance Business" shall mean one or more aspects of the
business of selling, issuing or underwriting insurance or reinsurance.
"Insurance Contract" shall mean any insurance contract or
policy issued by a Regulated Insurance Company but shall not include any
Reinsurance Agreement or Retrocession Agreement.
"Insurance Partners" shall mean Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P.
"Interest Coverage Ratio" shall mean, for any period, the
ratio of Statutory EBIT for such period to Consolidated Interest Expense of
the Borrower for such period.
"Interest Period" shall mean, with respect to any Eurodollar
Loan, the interest period applicable thereto, as determined pursuant to
Section 1.09.
"Interest Rate Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Invested Assets" shall mean, at any date for the Regulated
Insurance Companies (on a consolidated basis), the total amount as would be
shown on line 9, page 2, column 1 of a Benchmark Statement for the Regulated
Insurance Companies (on a consolidated basis) prepared as of such date.
"Investment Grade Securities" shall mean and include (i) U.S.
Government Obligations (other than Cash Equivalents), (ii) debt securities
or debt instruments with a rating of BBB- or higher by S&P, Baa3 or higher by
Moody's, Class (2) or higher by NAIC or the equivalent of such rating by S&P,
Moody's or NAIC, or if none of S&P, Moody's and NAIC shall then exist, the
equivalent of such rating by any other nationally recognized securities
rating agency, but excluding any debt securities or instruments constituting
loans or advances among the Borrower and its Wholly-Owned Subsidiaries, and
(iii) any fund investing exclusively in investments of the type described in
clauses (i) and (ii) which funds may also hold immaterial amounts of cash
pending investment and/or distribution.
"Issuer" shall mean any issuer of Investment Grade Securities
or Non-Investment Grade Securities acquired or proposed to be acquired by
the Borrower or any of its Subsidiaries pursuant to Section 7.06.
"Legal Requirements" shall mean all applicable laws, rules and
regulations made by any governmental body or regulatory authority (including,
without limitation, any Applicable Insurance Regulatory Authority) having
jurisdiction over the Borrower or a Subsidiary of the Borrower.
-60-
"Lien" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to give any
of the foregoing, any conditional sale or other title retention agreement or
any lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Management Agreements" shall have the meaning provided in
Section 4.13.
"Margin Stock" shall have the meaning provided in Regulation U.
"Master Repurchase Agreement" shall mean the Master Repurchase
Agreement, dated as of February 8, 1995, between SNIC and Xxxxxxx Xxxxx
Government Securities Inc. and/or Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated.
"Material Adverse Effect" shall mean a material adverse effect on
the business, operations, property, condition (financial or otherwise), material
agreements, contracts, contingent liabilities or prospects of the Borrower and
its Subsidiaries taken as a whole after giving effect to the Transaction.
"Material Contracts" shall have the meaning provided in Section
4.13.
"Maturity Date" with respect to any Facility shall mean either
the Term Loan Maturity Date or the Revolving Loan Maturity Date, as the case may
be.
"Moody's" shall mean Xxxxx'x Investors Service, Inc. and its
successors.
"NAIC" shall mean the National Association of Insurance
Commissioners or any successor organization thereto.
"NAIC Tests" shall mean the ratios and other financial
measurements developed by the NAIC under its Insurance Regulatory Information
System, as in effect from time to time.
"Net Available Proceeds" shall mean (i) with respect to any Asset
Sale consummated by a Regulated Insurance Company, the Surplus Increase with
respect to such Regulated Insurance Company as a result of such Asset Sale, (ii)
with respect to any Asset Sale consummated by the Borrower or any Non-Regulated
Insurance Company which is not a Subsidiary of a Regulated Insurance Company,
the Net Cash Proceeds resulting therefrom and (iii) with respect to any Asset
Sale consummated by a Non-Regulated Insurance Company which is a Subsidiary of a
Regulated Insurance Company, an amount equal to the dividend that such Regulated
Insurance Company would be permitted to pay in accordance with the Legal
Requirements applicable to it as a result of the receipt by such Regulated
Insurance Company of a dividend from such Non-Regulated Insurance Company in an
amount equal to the Net Cash Proceeds resulting from such Asset Sale; in each
case as determined in good faith by the Borrower and certified in writing by the
Borrower to the Administrative Agent (showing the calculation thereof and
supporting assumptions) on or prior to the date on which the Borrower or any
Subsidiary is to receive the initial proceeds from such Asset Sale.
-61-
"Net Cash Proceeds" shall mean, with respect to any Asset Sale,
the Cash Proceeds resulting therefrom net of (a) cash expenses of sale
(including payment of principal, premium and interest on Indebtedness other than
the Loans required to be repaid as a result of such Asset Sale) and (b)
incremental income taxes paid or payable as a result thereof, in each case as
determined in good faith by the Borrower and certified in writing by the
Borrower to the Administrative Agent (showing the calculation thereof and
supporting assumptions) on or prior to the date on which the Borrower or any
Subsidiary is to receive the initial proceeds from such Asset Sale.
"Net Worth" shall mean, as to any Person, the sum of its capital
stock (including, without limitation, its preferred stock), capital in excess of
par or stated value of shares of its capital stock (including, without
limitation, its preferred stock), retained earnings and any other account which,
in accordance with GAAP, constitutes stockholders equity, but excluding (i) any
treasury stock and (ii) the effects of Financial Accounting Statement No. 115.
"Non-Defaulting Bank" shall mean any Bank other than a Defaulting
Bank.
"Non-Investment Grade Securities" shall mean debt and equity
securities and debt and equity instruments that do not constitute Investment
Grade Securities or Cash Equivalents (but excluding any debt or equity
securities or instruments constituting loans or advances among the Borrower and
its Wholly-Owned Subsidiaries), it being understood that for the purposes of any
determination under Section 7.06(f), the amounts, if any, paid by such Regulated
Insurance Company to purchase such equity securities or warrants shall be
included in the principal amounts of Non-Investment Grade Securities.
"Non-Regulated Company" shall mean each Subsidiary of the
Borrower which is not a Regulated Insurance Company.
"Note" shall mean each Term Note and each Revolving Note.
"Notice of Borrowing" shall have the meaning provided in Section
1.03.
"Notice of Conversion" shall have the meaning provided in Section
1.06.
"Notice Office" shall mean the office of the Administrative Agent
at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000; Attn: Xxxxxxx Xxxxx, Telephone:
(000) 000-0000, Fax: (000) 000-0000, or such other office as the Administrative
Agent may designate to the Borrower and the Banks from time to time.
"Obligations" shall mean all amounts, direct or indirect,
contingent or absolute, of every type or description, and at any time existing,
owing to the Administrative Agent, the Collateral Agent or any Bank pursuant to
the terms of this Agreement or any other Credit Document.
-62-
"Other Hedging Agreements" shall mean any foreign exchange
contracts, currency swap agreements or other similar agreements or arrangements
designed to protect against fluctuations in currency values.
"Payment Office" shall mean the office of the Administrative
Agent c/o The Loan and Agency Services Group, One Chase Xxxxxxxxx Xxxxx, 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxx Xxxxxxx, Facsimile No.: (212)
552-7490 or such other office as the Administrative Agent may designate to the
Borrower and the Banks from time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Permitted Acquisition" shall have the meaning provided in
Section 7.02(i).
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any pension plan as defined in Section 3(2) of
ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Plan Documents" shall have the meaning provided in Section
4.13(a).
"Pledge Agreement" shall have the meaning provided in Section
4.10.
"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate which Chase announces
from time to time as its prime commercial lending rate, the Prime Lending Rate
to change when and as such prime commercial lending rate changes. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Chase may make commercial loans
or other loans at rates of interest at, above or below the Prime Lending Rate.
"Quarterly Statement" shall mean the quarterly financial
statement required to be filed by any Regulated Insurance Company with the
Applicable Regulatory Insurance Authority.
"Register" shall have the meaning provided in Section 6.13.
"Regulated Insurance Company" shall mean any Subsidiary of the
Borrower, whether now owned or hereafter acquired, that is authorized or
admitted to carry on or transact Insurance Business in any jurisdiction and is
regulated by any Applicable Insurance Regulatory Authority.
-63-
"Regulation D" shall mean Regulation D of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of Governors
of the Federal Reserve System as from time to time in effect and any successor
to all or a portion thereof establishing margin requirements.
"Reinsurance Agreement" shall mean any agreement, contract,
treaty or other arrangement whereby one or more insurers, as reinsurers, assume
liabilities under insurance policies or agreements issued by another insurance
or reinsurance company or companies.
"Related Parties" shall mean any Affiliate, any Associate, Centre
Reinsurance (Bermuda) Limited and Insurance Partners.
"Replaced Bank" shall have the meaning provided in Section 1.13.
"Replacement Bank" shall have the meaning provided in Section
1.13.
"Reportable Event" shall mean an event described in Section
4043(c) of ERISA with respect to a Plan other than those events as to which the
30-day notice period is waived under subsection .13, .14, .16, .18, .19 or .20
of PBGC Regulation Section 2615.
"Required Banks" shall mean Non-Defaulting Banks the sum of whose
outstanding Term Loans and Revolving Loan Commitment (or, if after the Total
Revolving Loan Commitment has been terminated, outstanding Revolving Loans)
constitute 66 2/3% or more of the sum of (i) the total outstanding Term Loans of
Non-Defaulting Banks and (ii) the Total Revolving Loan Commitment less the
aggregate Revolving Loan Commitments of Defaulting Banks, if any, or, if after
the Total Revolving Loan Commitment has been terminated, the total outstanding
Revolving Loans of Non-Defaulting Banks)
"Residual Indemnity Liabilities" shall mean the dollar amount of
any accounts receivable of CalComp or CBIC (or CCIC to the extent acquired in
accordance with Section 6.15) transferred pursuant to the Asset Restructuring
Transaction which are not paid prior to April 30, 1999 and with respect to which
the Borrower is liable pursuant to the Support Agreement entered into by the
Borrower in connection with the Asset Restructuring Transaction, which
indemnifies the purchaser of the accounts receivable for up to 80% of the face
value of such accounts receivable.
"Retrocession Agreement" shall mean any agreement, contract,
treaty or other arrangement whereby one or more insurers or reinsurers, as
retrocessionaires, assume liabilities of reinsurers under a Reinsurance
Agreement or other retrocessionaires under another Retrocession Agreement.
"Reverse Repurchase Program" shall mean the reverse repurchase
program entered into pursuant to the Master Repurchase Agreement.
-64-
"Revolving Loan" shall have the meaning provided in Section
1.01(b).
"Revolving Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Revolving Loan Commitment," as the same may be reduced from
time to time or terminated pursuant to Sections 2.02, 2.03 and/or 8.
"Revolving Loan Facility" shall mean the Facility evidenced by
the Total Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean December 10, 2003.
"Revolving Note" shall have the meaning provided in Section
1.05(a).
"Risk-Based Capital" shall mean for any Subsidiary listed in
Section 7.14, the ratio (expressed as a percentage), at any time, of the Total
Adjusted Capital of such Subsidiary to the Authorized Control Level of such
Subsidiary.
"Risk Derivatives" shall mean Z bonds, floaters/inverse floaters,
PAC II, PAC III, Ioettes, support bonds, Interest Only Investments, Principal
Only Investments residuals, inverse IO's, super floaters, any other instruments
with similar economic risk factors and any bonds backed in whole or in part by
any of the foregoing (including component or "kitchen sink" bonds).
"S&P" shall mean Standard & Poor's Ratings Group and its
successors.
"S&P Credit Rating" shall mean the rating level (it being
understood that a rating level shall include numerical modifiers and (+) and (-)
modifiers) assigned by S&P to the senior unsecured long-term debt of an Issuer.
"S&P Equivalent Rating" shall mean, with respect to any
Investment Grade Security or Non-Investment Grade Security, the rating given
such security by S&P or the S&P equivalent rating of the rating given such
security by Moody's or NAIC, it being understood that if any such security is
rated by more than one of S&P, Moody's and NAIC and any of such ratings (or the
S&P equivalent of such ratings) differ, then the S&P Equivalent Rating for such
security shall be the lower or lowest, as the case may be, of such ratings (or
the S&P equivalent of such ratings).
"SAP" shall mean, with respect to any Regulated Insurance
Company, the accounting procedures and practices prescribed or permitted by the
Applicable Insurance Regulatory Authority of the state in which such Regulated
Insurance Company is domiciled; it being understood and agreed that
determinations in accordance with SAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 11.07(a).
"Scheduled Repayments" shall have the meaning provided in Section
3.02(i)(a).
-65-
"SEC" shall mean the Securities and Exchange Commission or any
successor thereto.
"SEC Regulation D" shall mean Regulation D as promulgated under
the Securities Act of 1933, as amended, as the same may be in effect from time
to time.
"Section 3.04(b)(ii) Certificate" shall have the meaning provided
in Section 3.04(b)(ii).
"Secured Creditors" shall have the meaning provided in the Pledge
Agreement.
"Shared Expenses Agreements" shall have the meaning provided in
Section 4.13.
"SNCHC" shall mean Superior National Capital Holding Company, a
Nevada corporation.
"SNIC" shall mean Superior National Insurance Company, a
California corporation.
"SPCC" shall mean Superior Pacific Casualty Company, a California
corporation.
"SPIG" shall mean Superior Pacific Insurance Group, a Delaware
corporation.
"Statutory Earnings" shall mean, for any period, for any
Regulated Insurance Company, (i) the total amount as would be shown on line 16,
page 4, column 1 of a Benchmark Statement for such Regulated Insurance Company
(I.E., net gain from operations, after taxes but before unrealized capital gains
and losses) prepared for such period less (ii) the undistributed earnings of
Subsidiaries of such Regulated Insurance Company to the extent included in such
total amount.
"Statutory EBIT" shall mean, for any period, the sum (without
duplication) of the net income before dividends to policyholders and before
federal and foreign income taxes as same would be shown on line 14(b), page 4,
column 1 of a Benchmark Statement of each Regulated Insurance Company, in each
case for such period as determined on a consolidated basis in accordance with
SAP.
"Statutory Surplus" shall mean, at any date for any Regulated
Insurance Company, the total amount as would be shown on line 25, page 3, column
1 of a Benchmark Statement for such Regulated Insurance Company prepared as of
such date.
"Stockholders Agreements" shall have the meaning provided in
Section 4.13.
"Subsidiary" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes having by the
terms thereof ordinary voting power to elect a majority of the directors of such
corporation (irrespective of whether or not at the time stock of any class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time owned by such Person directly
or indirectly
-66-
through Subsidiaries and (ii) any partnership, association, joint venture or
other entity in which such Person directly or indirectly through Subsidiaries
has more than a 50% equity or voting interest at the time. Unless otherwise
expressly provided, all references herein to "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean each Subsidiary of the Borrower
which is a Non-Regulated Company, except Non-Regulated Company Subsidiaries of
any Regulated Insurance Company.
"Subsidiary Guaranty" shall have the meaning provided in Section
4.09.
"Surplus Increase" shall mean, with respect to each Asset Sale
effected by a Regulated Insurance Company, the increase in Statutory Surplus of
such Regulated Insurance Company as a result of such Asset Sale.
"Syndication Date" shall mean the earlier of (x) the date which
is 90 days after the Initial Borrowing Date and (y) the date upon which the
Administrative Agent determines in its sole discretion (and notifies the
Borrower) that the primary syndication (and the resulting addition of Banks
pursuant to Section 11.04) has been completed.
"Tax Sharing Agreements" shall have the meaning provided in
Section 4.13.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Term Loan" shall have the meaning provided in Section 1.01(a).
"Term Loan Commitment" shall mean, with respect to each Bank,
the amount set forth opposite such Bank's name in Annex I directly below the
column entitled "Term Loan Commitment," as the same may be terminated
pursuant to Sections 2.02, 2.03 and/or 8.
"Term Loan Facility" shall mean the Facility evidenced by the
Total Term Loan Commitment.
"Term Loan Maturity Date" shall mean December 10, 2004.
"Term Note" shall have the meaning provided in Section 1.05(a).
"Test Period" shall mean (i) for any determination made on and
prior to September 30, 1999, the period from January 1, 1999 to the last day of
the fiscal quarter of the Borrower then last ended, PROVIDED that the first Test
Period shall end on March 31, 1999, and (ii) for any determination made
thereafter, the four consecutive fiscal quarters of the Borrower ended on the
last day of the most recently ended fiscal quarter of the Borrower (taken as one
accounting period).
"Total Adjusted Capital" shall mean "Total Adjusted Capital" as
defined by the NAIC as of December 31, 1997 and as applied in the context of the
Risk Based Capital Guidelines promulgated by the NAIC.
-67-
"Total Commitment" shall mean the sum of the Total Term Loan
Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of the
Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the Term Loan
Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean, at any
time, (i) the Total Revolving Loan Commitment at such time less (ii) the sum of
the aggregate principal amount of all Revolving Loans outstanding at such time.
"Transaction" shall mean, collectively, (i) the Acquisition, (ii)
the Equity Financing, (iii) the incurrence by the Borrower of the Term Loans
hereunder on the Initial Borrowing Date and (iv) the payment of fees and
expenses in connection with the foregoing.
"Transaction Documents" shall mean, collectively, (i) the
Acquisition Documents, (ii) the documents and instruments governing the Equity
Financing and (iii) the Credit Documents.
"Trust Preferred Note Documents" shall mean the Trust Preferred
Notes, the Trust Preferred Note Indenture and all other documents and
instruments entered into in connection with the Trust Preferred Note Indenture.
"Trust Preferred Note Indenture" shall mean the Senior
Subordinated Indenture, dated as of December 3, 1997, between the Borrower and
Wilmington Trust Company, as Trustee.
"Trust Preferred Notes" shall mean the Borrower's 10 3/4% Senior
Subordinated Notes due December 1, 2017, issued pursuant to the Trust Preferred
Note Indenture.
"Type" shall mean any type of Loan determined with respect to the
interest option applicable thereto, I.E., a Base Rate Loan or a Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code.
"Unfunded Current Liability" of any Plan shall mean the amount,
if any, by which the actuarial present value of the accumulated plan benefits
under the Plan as of the close of its most recent plan year exceeds the fair
market value of the assets allocable thereto, each determined in accordance with
Statement of Financial Accounting Standards No. 87, based upon the actuarial
assumptions used by the Plan's actuary in the most recent annual valuation of
the Plan.
"Unutilized Revolving Loan Commitment" with respect to any Bank
at any time shall mean such Bank's Revolving Loan Commitment at such time LESS
the aggregate outstanding principal amount of all Revolving Loans made by such
Bank.
-68-
"U.S. Government Obligations" shall mean and include (A)
securities that are (x) direct obligations of the United States of America for
the timely payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended), as custodian with respect to any such U.S. Government Obligation or a
specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt; PROVIDED that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository receipt
and (B) to the extent in each case having an S&P Equivalent Rating of AAA,
obligations issued or guaranteed by the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association, the Government National Mortgage
Association, the Student Loan Marketing Association and the Federal Home Loan
Bank.
"Wholly-Owned Subsidiary" of any Person shall mean any Subsidiary
of such Person to the extent all of the capital stock or other ownership
interests in such Subsidiary, other than directors' or nominees' qualifying
shares, is owned directly or indirectly by such Person.
"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
SECTION 10. The Administrative Agent.
10.01 APPOINTMENT. Each Bank hereby irrevocably designates and
appoints Chase as Administrative Agent (such term as used in this Section 10 to
include Chase acting as Collateral Agent) to act as specified herein and in the
other Credit Documents, and each such Bank hereby irrevocably authorizes Chase
as the Administrative Agent for such Bank, to take such action on its behalf
under the provisions of this Agreement and the other Credit Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and the other Credit
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent agrees to act as such upon the express conditions
contained in this Section 10. Notwithstanding any provision to the contrary
elsewhere in this Agreement, the Administrative Agent shall not have any duties
or responsibilities, except those expressly set forth herein or in the other
Credit Documents, nor any fiduciary relationship with any Bank, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or otherwise exist against the Administrative Agent.
The provisions of this Section 10 are solely for the benefit of the
Administrative Agent and the Banks, and no Credit Party shall have any rights as
a third party beneficiary of any of the provisions hereof. In performing its
functions and duties
-69-
under this Agreement, the Administrative Agent shall act solely as agent of
the Banks and does not assume and shall not be deemed to have assumed any
obligation or relationship of agency or trust with or for the Credit Party.
10.02 DELEGATION OF DUTIES. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document
by or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 10.03.
10.03 EXCULPATORY PROVISIONS. Neither the Administrative
Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action lawfully
taken or omitted to be taken by it or such Person under or in connection with
this Agreement (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Banks for
any recitals, statements, representations or warranties made by the Borrower
or any Subsidiary or any of their respective officers contained in this
Agreement, any other Credit Document or in any certificate, report, statement
or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, this Agreement or any other
Credit Document or for any failure of the Borrower or any of its Subsidiaries
or any of their respective officers to perform its obligations hereunder or
thereunder. The Administrative Agent shall not be under any obligation to
any Bank to ascertain or to inquire as to the observance or performance of
any of the agreements contained in, or conditions of, this Agreement, or to
inspect the properties, books or records of the Borrower or any of its
Subsidiaries. The Administrative Agent shall not be responsible to any Bank
for the effectiveness, genuineness, validity, enforceability, collectibility
or sufficiency of this Agreement or any Credit Document or for any
representations, warranties, recitals or statements made herein or therein or
made in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents in
connection herewith or therewith furnished or made by the Administrative
Agent to the Banks or by or on behalf of the Borrower to the Administrative
Agent or any Bank or be required to ascertain or inquire as to the
performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained herein or therein or as to the use of the
proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
10.04 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative
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, facsimile transmission, telex or teletype
message, statement, order or other document or conversation 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,
without limitation, counsel to the Borrower), independent accountants and
other experts selected by the Administrative Agent. The Administrative Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Credit Document unless it shall first receive such
advice or concurrence of the Required Banks as it deems appropriate or it
shall first be indemnified to its satisfaction by
-70-
the Banks against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the other Credit Documents
in accordance with a request of the Required Banks, and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Banks.
10.05 NOTICE OF DEFAULT. The Administrative Agent shall not
be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Administrative Agent has received
notice from a Bank or any other Credit Party referring to this Agreement,
describing such Default or Event of Default and stating that such notice is a
"notice of default." In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give prompt notice thereof to
the Banks. The Administrative Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the
Required Banks, PROVIDED that unless and until the Administrative Agent shall
have received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Default or Event of Default as it shall deem advisable in the
best interests of the Banks.
10.06 NON-RELIANCE. Each Bank expressly acknowledges that
neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by the Administrative
Agent hereinafter 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 Administrative Agent to any Bank. Each Bank represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, assets, operations, property, financial and
other conditions, prospects and creditworthiness of the Borrower and its
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Bank also represents that it will, independently
and without reliance upon the Administrative Agent or any other Bank, 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 to make such
investigation as it deems necessary to inform itself as to the business,
assets, operations, property, financial and other conditions, prospects and
creditworthiness of the Borrower and its Subsidiaries. The Administrative
Agent shall not have any duty or responsibility to provide any Bank with any
credit or other information concerning the business, operations, assets,
property, financial and other conditions, prospects or creditworthiness of
the Borrower or any Subsidiary which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
10.07 INDEMNIFICATION. Each Bank agrees to indemnify the
Administrative Agent and the Collateral Agent in its respective capacities as
such ratably according to such Bank's respective Loans and Unutilized Revolving
Loan Commitment, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
-71-
limitation, at any time following the payment of the Obligations) be imposed
on, incurred by or asserted against the Administrative Agent in its capacity
as such in any way relating to or arising out of this Agreement or any other
Credit Document, or any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action taken or omitted to be
taken by the Administrative Agent under or in connection with any of the
foregoing, but only to the extent that any of the foregoing is not paid by
the Borrower or any of its Subsidiaries, PROVIDED that no Bank shall be
liable to the Administrative Agent for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Administrative
Agent's gross negligence or willful misconduct. If any indemnity furnished
to the Administrative Agent for any purpose shall, in the opinion of the
Administrative Agent, be insufficient or become impaired, the Administrative
Agent may call for additional indemnity and cease, or not commence, to do the
acts indemnified against until such additional indemnity is furnished. The
agreements in this Section 10.07 shall survive the payment of all Obligations.
10.08 THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower
and its Subsidiaries as though not acting as Administrative Agent hereunder.
With respect to the Loans made by it and all Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this
Agreement as any Bank and may exercise the same as though it were not the
Administrative Agent, and the terms "Bank" and "Banks" shall include the
Administrative Agent in its individual capacity.
10.09 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative
Agent may resign as the Administrative Agent upon 20 days' notice to the
Banks and the Borrower. Upon such resignation, the Required Banks shall, with
the consent of the Borrower (such consent not to be unreasonably withheld),
appoint from among the Banks a successor Administrative Agent for the Banks,
whereupon such successor agent shall succeed to the rights, powers and duties
of the Administrative Agent, and the term "Administrative Agent" shall
include such successor agent effective upon its appointment, and the
resigning Administrative Agent's rights, powers and duties as the
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement. After the retiring Administrative Agent's resignation
hereunder as the Administrative Agent, the provisions of this Section 10
shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Administrative Agent under this Agreement.
SECTION 11. MISCELLANEOUS.
11.01 PAYMENT OF EXPENSES, ETC. The Borrower hereby agree
to: (i) whether or not the transactions herein contemplated are consummated,
pay all reasonable out-of-pocket costs and expenses of the Administrative
Agent in connection with the negotiation, preparation, syndication, execution
and delivery of the Credit Documents and the documents and instruments
referred to therein and any amendment, waiver or consent relating thereto
(including, without limitation, the reasonable fees and disbursements of
White & Case); (ii) whether or not the
-72-
transactions herein contemplated are consummated, pay all reasonable
out-of-pocket costs and expenses of the Administrative Agent and each of the
Banks in connection with the enforcement of the Credit Documents and the
documents and instruments referred to therein (including, without limitation,
the reasonable fees and disbursements of counsel for the Administrative Agent
and for each of the Banks); (iii) pay and hold each of the Banks harmless
from and against any and all present and future stamp and other similar taxes
with respect to the foregoing matters and save each of the Banks harmless
from and against any and all liabilities with respect to or resulting from
any delay or omission to pay such taxes; and (iv) indemnify the
Administrative Agent and each Bank, and their respective officers, directors,
employees, representatives and agents (each, an "indemnified person") from
and hold each of them harmless against any and all losses, liabilities,
claims, damages or expenses (collectively, "Claims") incurred by any of them
as a result of, or arising out of, or in any way related to, or by reason of,
any investigation, litigation or other proceeding (whether or not the
Administrative Agent or any Bank is a party thereto) related to the entering
into and/or performance of any Credit Document or other Transaction Document
or the use of the proceeds of any Loans hereunder or the Transaction or the
consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of
counsel incurred in connection with any such investigation, litigation or
other proceeding (but excluding any such losses, liabilities, claims, damages
or expenses to the extent incurred by reason of the gross negligence or
willful misconduct of the Person to be indemnified).
11.02 RIGHT OF SETOFF. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and continuance of an
Event of Default, each Bank is hereby authorized at any time or from time to
time, without presentment, demand, protest or other notice of any kind to any
Credit Party or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and apply any and all deposits (general
or special) and any other Indebtedness at any time held or owing by such Bank
(including, without limitation, by branches and agencies of such Bank
wherever located) to or for the credit or the account of such Credit Party
against and on account of the Obligations and liabilities of such Credit
Party to such Bank or any other Bank under this Agreement or under any of the
other Credit Documents, including, without limitation, all interests in
Obligations of such Credit Party purchased by such Bank or any other Bank
pursuant to Section 11.06(b), and all other claims of any nature or
description arising out of or connected with this Agreement or any other
Credit Document, irrespective of whether or not such Bank shall have made any
demand hereunder and although said Obligations, liabilities or claims, or any
of them, shall be contingent or unmatured. Each Bank is hereby designated
the agent of all other Banks for purposes of effecting set off pursuant to
this Section 11.02 and each Credit Party hereby grants to each Bank for such
Bank's own benefit and as agent for all other Banks a continuing security
interest in any and all deposits, accounts or moneys of such Credit Party
maintained from time to time with such Bank.
11.03 NOTICES. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, facsimile or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered, if to any Credit Party,
at the address specified opposite its signature below; if to any
-73-
Bank, at its address specified for such Bank on Annex II hereto; or, at such
other address as shall be designated by any party in a written notice to the
other parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, cabled or sent by overnight courier and
shall be effective when received.
11.04 BENEFIT OF AGREEMENT. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, no Credit
Party may assign or transfer any of its rights or obligations hereunder
without the prior written consent of the Banks. Each Bank may at any time
grant participations in any of its rights hereunder or under any of its Notes
to any bank or other financial institution; PROVIDED that in the case of any
such participation, the participant shall not have any rights under this
Agreement or any of the other Credit Documents, including rights of consent,
approval or waiver (the participant's rights against such Bank in respect of
such participation to be those set forth in the agreement executed by such
Bank in favor of the participant relating thereto) and all amounts payable by
the Borrower hereunder shall be determined as if such Bank had not sold such
participation, except that the participant shall be entitled to receive the
additional amounts under Sections 1.10, 1.11 and 3.04 of this Agreement to,
and only to, the extent that such Bank would be entitled to such benefits if
the participation had not been entered into or sold; and PROVIDED FURTHER,
that no Bank shall transfer, grant or assign any participation under which
the participant shall have rights to approve any amendment to or waiver of
this Agreement or any other Credit Document except to the extent such
amendment or waiver would (i) extend any Scheduled Repayment or the final
scheduled maturity of any Loan or Note in which such participant is
participating (it being understood that any waiver of the application of any
prepayment or the method of application of any prepayment to the amortization
of, the Loans shall not constitute an extension of a Scheduled Repayment or
the final scheduled maturity date), or reduce the rate or extend the time of
payment of interest thereon or Fees, or reduce the principal amount thereof,
or increase such participant's participating interest in any Commitment or
Loan over the amount thereof then in effect (it being understood that a
waiver of any Default or Event of Default or of a mandatory reduction in the
Total Commitment or of a mandatory repayment or prepayment shall not
constitute a change in the terms of any Commitment and that an increase in
any Commitment shall be permitted without the consent of any participant if
such participant's participation is not increased as a result thereof), (ii)
release all or any material portion of the Collateral (except as expressly
provided in the Credit Documents) or (iii) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement or any other Credit Document except in accordance with the terms
hereof and thereof.
(b) Notwithstanding the foregoing, any Bank may assign all or a
portion of its rights and obligations hereunder to a bank or other financial
institution with the prior written consent of the Administrative Agent, which
consent shall not be unreasonably withheld. No assignment of less than all of a
Bank's rights and obligations hereunder pursuant to the immediately preceding
sentence shall, to the extent such transaction represents an assignment to an
institution other than one or more Banks hereunder, be in an aggregate amount
less than the minimum of $5,000,000 unless otherwise agreed to by the
Administrative Agent and the Borrower in writing. If any Bank so sells or
assigns all or a part of its rights hereunder or under
-74-
the Notes, any reference in this Agreement or the Notes to such assigning
Bank shall thereafter refer to such Bank and to the respective assignee to
the extent of their respective interests and the respective assignee shall
have, to the extent of such assignment (unless otherwise provided therein),
the same rights and benefits as it would if it were such assigning Bank.
Each assignment pursuant to this Section 11.04(b) shall be effected by the
assigning Bank and the assignee Bank executing an Assignment and Assumption
Agreement substantially in the form of Exhibit H (appropriately completed)
(the "Assignment and Assumption Agreement"). At the time of any such
assignment, (i) Annex I shall be deemed to be amended to reflect the
Commitments, if any, and outstanding Loans of the respective assignee (which
shall result in a direct reduction to the Commitments, if any, and
outstanding Loans of the assigning Bank) and of the other Banks, (ii) if any
such assignment occurs after the Initial Borrowing Date, at the request of
the assignor or the assignee the Borrower will issue new Notes to the
respective assignee and to the assigning Bank in conformity with the
requirements of Section 1.05, (iii) the Administrative Agent shall receive
from the assigning Bank and/or the assignee Bank or financial institution at
the time of each assignment the payment of a nonrefundable assignment fee of
$3,500 and (iv) the Administrative Agent shall receive from the assignee Bank
the Administrative Agent's administrative questionnaire completed by such
assignee Bank, PROVIDED that such transfer or assignment will not be
effective until recorded by the Administrative Agent on the Register pursuant
to Section 6.13 hereof. At the time of each assignment pursuant to this
Section 11.04(b) to a Person which is not already a Bank hereunder and which
is not a United States person (as such term is defined in Section 7701(a)(30)
of the Code) for Federal income tax purposes, the respective assignee Bank
shall provide to the Borrower and the Administrative Agent the appropriate
Internal Revenue Service forms (and, if applicable a Section 3.04(b)(ii)
Certificate) described in Section 3.04(b). Each Bank and the Borrower agrees
to execute such documents (including, without limitation, amendments to this
Agreement and the other Credit Documents) as shall be necessary to effect the
foregoing. Promptly following any assignment pursuant to this Section
11.04(b), the assigning Bank shall promptly notify the Borrower and the
Administrative Agent thereof. Nothing in this Section 11.04 shall prevent or
prohibit any Bank from pledging its Loans or Notes hereunder to a Federal
Reserve Bank in support of borrowings made by such Bank from such Federal
Reserve Bank.
(c) Notwithstanding any other provisions of this Section
11.04, no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a
registration statement with the SEC or to qualify the Loans under the "Blue
Sky" laws of any State.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that becomes a Bank pursuant to an assignment
permitted by clause (b) above will upon its becoming party to this Agreement
represent, that it is a commercial lender, other financial institution or other
"accredited investor" (as defined in SEC Regulation D) which makes loans in the
ordinary course of its business or is acquiring the Loans without a view to
distribution of the Loans within the meaning of the federal securities laws, and
that it will make or acquire Loans for its own account in the ordinary course of
such business, PROVIDED that, subject to the
-75-
preceding clauses (a) through (c), the disposition of any promissory notes or
other evidences of or interests in Indebtedness held by such Bank shall at
all times be within its exclusive control.
11.05 NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on
the part of the Administrative Agent or any Bank in exercising any right,
power or privilege hereunder or under any other Credit Document and no course
of dealing between any Credit Party and the Administrative Agent or any Bank
shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Administrative Agent or any Bank would otherwise have. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Administrative Agent or the Banks to
any other or further action in any circumstances without notice or demand.
11.06 PAYMENTS PRO RATA. (a) The Administrative Agent
agrees that promptly after its receipt of each payment from or on behalf of
the Borrower in respect of any Obligations of the Borrower, it shall
distribute such payment to the Banks (other than any Bank that has consented
in writing to waive its PRO RATA share of such payment) PRO RATA based upon
their respective shares, if any, of the Obligations with respect to which
such payment was received.
(b) Each of the Banks agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security,
by the exercise of the right of setoff or banker's lien, by counterclaim or
cross action, by the enforcement of any right under the Credit Documents, or
otherwise) which is applicable to the payment of the principal of, or
interest on, the Loans or Fees, of a sum which with respect to the related
sum or sums received by other Banks is in a greater proportion than the total
of such Obligation then owed and due to such Bank bears to the total of such
Obligation then owed and due to all of the Banks immediately prior to such
receipt, then such Bank receiving such excess payment shall purchase for cash
without recourse or warranty from the other Banks an interest in the
Obligations of the Borrower to such Banks in such amount as shall result in a
proportional participation by all of the Banks in such amount, PROVIDED that
if all or any portion of such excess amount is thereafter recovered from such
Bank, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained
herein, the provisions of the preceding Sections 11.06(a) and (b) shall be
subject to the express provisions of this Agreement which require, or permit,
differing payments to be made to Non-Defaulting Banks as opposed to
Defaulting Banks.
11.07 CALCULATIONS; COMPUTATIONS. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with GAAP or SAP, as the case may be, consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Banks).
In addition,
-76-
except as otherwise specifically provided herein, all computations
determining compliance with Section 7, including definitions used therein,
shall utilize accounting principles and policies in effect from time to time;
PROVIDED that (i) if any such accounting principle or policy (whether GAAP or
SAP or both) shall change after the Effective Date, the Borrower shall give
reasonable notice thereof to the Administrative Agent and each of the Banks
and if within 30 days following such notice the Borrower, the Administrative
Agent or the Required Banks shall elect by giving written notice of such
election to the other parties hereto, such computations shall not give effect
to such change unless and until this Agreement shall be amended pursuant to
Section 11.12 to give effect to such change, and (ii) if at any time the
computations determining compliance with Section 7 utilize accounting
principles different from those utilized in the financial statements then
being furnished to the Banks pursuant to Section 6.01, such financial
statements shall be accompanied by reconciliation work-sheets.
(b) All computations of interest on Eurodollar Loans and Fees
hereunder shall be made on the actual number of days elapsed over a year of
360 days.
(c) All computations of interest on Base Rate Loans hereunder
shall be made on the actual number of days elapsed over a year of 365/366
days.
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE. (a)
THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN
DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH
CREDIT PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH CREDIT PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY
SUCH COURTS LACK JURISDICTION OVER SUCH CREDIT PARTY, AND AGREES NOT TO PLEAD OR
CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH
COURT LACKS JURISDICTION OVER SUCH CREDIT PARTY. EACH CREDIT PARTY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED
COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH CREDIT PARTY AT ITS
ADDRESS FOR NOTICES PURSUANT TO SECTION 11.03, SUCH SERVICE TO BECOME EFFECTIVE
30 DAYS AFTER SUCH MAILING. EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING HEREUNDER OR UNDER ANY OTHER
CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY
-77-
INVALID OR INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST ANY CREDIT PARTY IN ANY OTHER JURISDICTION.
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE
AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
11.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all of which shall together constitute one and the same
instrument. A set of counterparts executed by all the parties hereto shall be
lodged with the Borrower and the Administrative Agent.
11.10 EFFECTIVENESS. This Agreement shall become effective
on the date (the "Effective Date") on which the Borrower and each of the
Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Administrative Agent at the
Administrative Agent's Notice Office or, in the case of the Banks, shall have
given to the Administrative Agent telephonic (confirmed in writing), written,
telex or telecopy notice (actually received) at such office that the same has
been signed and mailed to it. The Administrative Agent will give the
Borrower and each Bank prompt written notice of the occurrence of the
Effective Date.
11.11 HEADINGS DESCRIPTIVE. The headings of the several
sections and subsections of this Agreement are inserted for convenience only
and shall not in any way affect the meaning or construction of any provision
of this Agreement.
11.12 AMENDMENT OR WAIVER. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination
is in writing signed by the respective Credit Parties thereto and the
Required Banks, PROVIDED that no such change, waiver, discharge or
termination shall, without the consent of each Bank affected thereby (other
than a Defaulting Bank), (i) extend any Scheduled Repayment or the scheduled
final maturity of any Loan or Note (it being understood that any waiver of
the application of any prepayment or the method of application of any
prepayment to the amortization of the Loans shall not constitute an extension
of any Scheduled Repayment or the scheduled final maturity thereof), or
reduce the rate or extend the time of payment of interest thereon or Fees or
reduce the principal amount thereof, (ii) increase the Commitments of any
Bank over the amount thereof then in effect (it being
-78-
understood that a waiver of any Default or Event of Default or of a mandatory
reduction in the Total Commitment or mandatory repayment or prepayment shall
not constitute a change in the terms of any Commitment of any Bank), (iii)
release all or any material portion of the Collateral (except as expressly
provided in the Credit Documents), (iv) amend, modify or waive any provision
of this Section 11.12, (v) reduce any percentage specified in, or otherwise
modify, the definition of Required Banks or (vi) consent to the assignment or
transfer by the Borrower of any of its rights and obligations under this
Agreement. No provision of Section 10 or any other provision relating to the
rights and/or obligations of the Administrative Agent may be amended without
the consent of the Administrative Agent.
11.13 SURVIVAL. All indemnities set forth herein including,
without limitation, in Section 1.10, 1.11, 3.04, 10.07 or 11.01 shall survive
the execution and delivery of this Agreement and the making of the Loans, the
repayment of the Obligations and the termination of the Total Commitment.
11.14 DOMICILE OF LOANS. Subject to Section 11.04, each Bank
may transfer and carry its Loans at, to or for the account of any branch
office, subsidiary or affiliate of such Bank, PROVIDED that the Borrower
shall not be responsible for costs arising under Section 1.10 or 3.04
resulting from any such transfer to the extent not otherwise applicable to
such Bank prior to such transfer.
11.15 CONFIDENTIALITY. Each Bank shall hold all non-public
information furnished by or on behalf of the Borrower in connection with such
Bank's evaluation of whether to become a Bank hereunder or obtained by such
Bank pursuant to the requirements of this Agreement ("Confidential Information")
in accordance with its customary procedure for handling confidential information
of this nature and in accordance with safe and sound banking or lending
practices; PROVIDED that any Bank and/or its affiliates may disclose any such
Confidential Information (a) to their respective affiliates, directors,
officers, employees, auditors or counsel for purposes related to the
Transaction, PROVIDED that the Bank disclosing such confidential information
pursuant to this clause (a) shall remain liable for any non-permitted disclosure
of such information by any such employee, director, agent, attorney, accountant
or professional advisor, (b) as has become generally available to the public
other than as a result of disclosure in violation of this Section 11.15, (c) as
has become available to such Bank or any such affiliate on a non-confidential
basis from a source other than the Borrower and its affiliates, provided that
the source is not known by such Bank to be prohibited from transmitting such
information to such Bank by a contractual, legal or fiduciary obligation, (d) as
may be required or appropriate in any report, statement or testimony submitted
to any municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Bank and/or its affiliates, (e) as may be required or
appropriate in respect to any summons or subpoena or in connection with any
litigation or other judicial process (it being understood that, to the extent
reasonably practicable under the circumstances, the Borrower shall be given
prior notice and an opportunity to contest any proposed disclosure pursuant to
this clause (e)), (f) in order to comply with any law, order, regulation or
ruling applicable to such Bank and/or its affiliates, and (g) to any permitted
prospective or actual syndicate member or participant in the Loans, provided
that such prospective or actual syndicate member or participant agrees with the
respective assigning Bank
-79-
to be bound by the provisions of this Section 11.15. The provisions of this
Section 11.15 shall survive any termination of this Agreement.
11.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
11.17 TRUST PREFERRED NOTE DOCUMENTS. All Obligations shall be
senior in right of payment to the Trust Preferred Notes and shall constitute
"Senior Indebtedness" for all purposes of the Trust Preferred Note Documents.
* * *
-80-
IN WITNESS WHEREOF, each of the parties hereto has caused a
counterpart of this Agreement to be duly executed and delivered as of the date
first above written.
ADDRESS:
00000 Xxxxxx Xxxx SUPERIOR NATIONAL INSURANCE
Xxxxxxxxx, XX 00000 GROUP, INC.
Tel: (000) 000-0000
Fax: (000) 000-0000
Attention: J. Xxxxx Xxxxxx By /s/ J. XXXXX XXXXXX
-------------------------------
Title: Executive Vice President &
Chief Financial Officer
ADDRESS: THE CHASE MANHATTAN BANK,
000 Xxxx Xxxxxx Individually and as Administrative Agent
Xxx Xxxx, Xxx Xxxx 00000
By /s/ XXXXXXXX XXXXXXX, XX.
---------------------------------------
Name: Xxxxxxxx Xxxxxxx, Xx.
Title: Vice President
DRESDNER BANK AG NEW YORK BRANCH AND
GRAND CAYMAN BRANCH
By: /s/ XXXXX X. XXXXXXX
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Vice President
By: /s/ XXXXX XXXXX
--------------------------------
Name: Xxxxx Xxxxx
Title: Associate
THE BANK OF NEW YORK
By: /s/ XXXXXXXX X. BOLKIND
--------------------------------
Name: Xxxxxxxx X. Bolkind
Title: Vice President
FIRST UNION NATIONAL BANK
By: /s/ XXXX X. XXXXXXXXX
--------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Senior Vice President
LASALLE NATIONAL BANK
By: /s/ XXXXX X. XXXXX
--------------------------------
Name: Xxxxx X. Xxxxx
Title: First Vice President
IMPERIAL BANK
By: /s/ XXXXX X. XX
--------------------------------
Name: Xxxxx X. Xx
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.
By: /s/ XXXXX X. FOTHENGILL
--------------------------------
Name: Xxxxx X. Fothengill
Title: Vice President
