CREDIT AGREEMENT
among
PENN-AMERICA GROUP, INC.,
THE LENDERS NAMED HEREIN,
and
FIRST UNION NATIONAL BANK,
as Agent
$25,000,000 Senior Credit Facility
Arranged by
FIRST UNION CAPITAL MARKETS A
division of Wheat First Securities, Inc.
Dated as of September 28, 1998
TABLE OF CONTENTS
Page
RECITALS.......................................................................1
ARTICLE I
DEFINITIONS
1.1 Defined Terms.........................................................1
1.2 Accounting Terms.....................................................21
1.3 Other Terms; Construction............................................21
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments..........................................................22
2.2 Borrowings...........................................................22
2.3 Disbursements; Funding Reliance; Domicile of Loans...................23
2.4 Notes................................................................24
2.5 Termination and Reduction of Commitments.............................24
2.6 Mandatory Payments and Prepayments...................................25
2.7 Voluntary Prepayments................................................26
2.8 Interest.............................................................26
2.9 Fees.................................................................28
2.10 Interest Periods.....................................................29
2.11 Conversions and Continuations........................................30
2.12 Method of Payments; Computations.....................................31
2.13 Recovery of Payments.................................................32
2.14 Use of Proceeds......................................................32
2.15 Pro Rata Treatment...................................................32
2.16 Increased Costs; Change in Circumstances; Illegality; etc............33
2.17 Taxes ............................................................35
2.18 Compensation.........................................................37
ARTICLE III
LETTERS OF CREDIT
3.1 Issuance.............................................................38
3.2 Notices..............................................................39
3.3 Participations.......................................................39
3.4 Reimbursement........................................................39
3.5 Payment by Loans.....................................................40
3.6 Payment to Lenders...................................................40
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3.7 Obligations Absolute.................................................41
3.8 Cash Collateral Account..............................................42
3.9 Effectiveness........................................................43
ARTICLE IV
CONDITIONS OF BORROWING
4.1 Conditions of Initial Borrowing......................................43
4.2 Conditions of All Borrowings.........................................46
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Corporate Organization and Power.....................................47
5.2 Authorization; Enforceability........................................47
5.3 No Violation.........................................................48
5.4 Governmental and Third-Party Authorization; Permits..................48
5.5 Litigation...........................................................49
5.6 Taxes................................................................49
5.7 Subsidiaries.........................................................49
5.8 Full Disclosure......................................................49
5.9 Margin Regulations...................................................50
5.10 No Material Adverse Change...........................................50
5.11 Financial Matters....................................................50
5.12 Ownership of Properties..............................................52
5.13 ERISA ............................................................52
5.14 Environmental Matters................................................52
5.15 Compliance With Laws.................................................53
5.16 Regulated Industries.................................................53
5.17 Insurance............................................................54
5.18 Material Contracts...................................................54
5.19 Reinsurance Agreements...............................................54
5.20 Labor Relations......................................................54
5.21 Year 2000 Compatibility..............................................55
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1 Financial Statements.................................................55
6.2 Statutory Financial Statements.......................................56
6.3 Other Business and Financial Information.............................57
6.4 Corporate Existence; Franchises; Maintenance of Properties...........60
6.5 Compliance with Laws.................................................60
6.6 Payment of Obligations...............................................60
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6.7 Insurance............................................................60
6.8 Maintenance of Books and Records; Inspection.........................60
6.9 Permitted Acquisitions...............................................61
6.10 Year 2000 Compatibility..............................................62
6.11 Deposit Relationship.................................................62
6.12 Further Assurances...................................................62
ARTICLE VII
FINANCIAL COVENANTS
7.1 Leverage Ratio.......................................................63
7.2 Consolidated Net Worth...............................................63
7.3 Fixed Charge Coverage Ratio..........................................63
7.4 Risk-Based Capital Ratio.............................................63
7.5 Combined Net Premiums to Capital Ratio...............................63
7.6 Statutory Surplus....................................................64
ARTICLE VIII
NEGATIVE COVENANTS
8.1 Merger; Consolidation................................................64
8.2 Indebtedness.........................................................64
8.3 Liens................................................................66
8.4 Disposition of Assets................................................67
8.5 Investments..........................................................68
8.6 Restricted Payments..................................................69
8.7 Transactions with Affiliates.........................................70
8.8 Lines of Business....................................................70
8.9 Certain Amendments...................................................70
8.10 Limitation on Certain Restrictions...................................71
8.11 No Other Negative Pledges............................................71
8.12 Fiscal Year..........................................................71
8.13 Accounting Changes...................................................71
8.14 Reinsurance Agreements...............................................71
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default....................................................73
9.2 Remedies: Termination of Commitments, Acceleration, etc..............75
9.3 Remedies: Set-Off....................................................76
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ARTICLE X
THE AGENT
10.1 Appointment..........................................................76
10.2 Nature of Duties.....................................................76
10.3 Exculpatory Provisions...............................................77
10.4 Reliance by Agent....................................................77
10.5 Non-Reliance on Agent and Other Lenders..............................78
10.6 Notice of Default....................................................78
10.7 Indemnification......................................................78
10.8 The Agent in its Individual Capacity.................................79
10.9 Successor Agent......................................................79
10.10 Issuing Lender.......................................................80
ARTICLE XI
MISCELLANEOUS
11.1 Fees and Expenses....................................................80
11.2 Indemnification......................................................80
11.3 Governing Law; Consent to Jurisdiction...............................82
11.4 Arbitration; Preservation and Limitation of Remedies.................83
11.5 Notices..............................................................84
11.6 Amendments, Waivers, etc.............................................84
11.7 Assignments, Participations..........................................85
11.8 No Waiver............................................................88
11.9 Successors and Assigns...............................................88
11.10 Survival.............................................................88
11.11 Severability.........................................................88
11.12 Construction.........................................................88
11.13 Confidentiality......................................................89
11.14 Counterparts; Effectiveness..........................................89
11.15 Disclosure of Information............................................89
11.16 Entire Agreement.....................................................89
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EXHIBITS
Exhibit A Form of Note
Exhibit B-1 Form of Notice of Borrowing
Exhibit B-2 Form of Notice of Conversion/Continuation
Exhibit B-3 Form of Letter of Credit Notice
Exhibit C Form of Compliance Certificate
Exhibit D Form of Assignment and Acceptance
Exhibit E Form of Opinion of Xxxx Xxxxx Xxxx & XxXxxx LLP
Exhibit F Form of Financial Condition Certificate
SCHEDULES
Schedule 5.4 Consents and Approvals
Schedule 5.7 Subsidiaries
Schedule 5.18 Material Contracts
Schedule 5.19 Reinsurance Agreements
Schedule 8.2 Indebtedness
Schedule 8.3 Liens
Schedule 8.5 Investments
Schedule 8.7 Transactions with Affiliates
Schedule 8.8 Lines of Business
Draft No. 6
9/25/98
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 28th day of September, 1998 (this
"Agreement"), is made among PENN-AMERICA GROUP, INC., a Pennsylvania corporation
with its principal offices in Hatboro, Pennsylvania (the "Borrower"), the banks
and financial institutions listed on the signature pages hereto or that become
parties hereto after the date hereof (collectively, the "Lenders"), and FIRST
UNION NATIONAL BANK ("First Union"), as agent for the Lenders (in such capacity,
the "Agent").
RECITALS
A. The Borrower has requested that the Lenders make available to the
Borrower a revolving credit facility in the aggregate principal amount of
$25,000,000. The Borrower will use the proceeds of this facility for working
capital and general corporate purposes, all as more fully described herein.
B. The Lenders are willing to make available to the Borrower the credit
facility described herein subject to and on the terms and conditions set forth
in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements herein contained, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Agreement, in addition to the terms
defined elsewhere herein, the following terms shall have the meanings set forth
below (such meanings to be equally applicable to the singular and plural forms
thereof):
"Account Designation Letter" shall mean a letter from the Borrower to the
Agent, duly completed and signed by an Authorized Officer and in form and
substance satisfactory to the Agent, listing any one or more accounts to which
the Borrower may from time to time request the Agent to forward the proceeds of
any Loans made hereunder.
"Acquisition" shall mean any transaction or series of related transactions,
consummated on or after the date hereof, by which the Borrower directly, or
indirectly through one or more
Subsidiaries, (i) acquires any going business, or all or substantially all of
the assets, of any Person, whether through purchase of assets, merger or
otherwise, or (ii) acquires securities or other ownership interests of any
Person having at least a majority of combined voting power of the then
outstanding securities or other ownership interests of such Person.
"Acquisition Amount" shall mean, with respect to any Acquisition, the sum
(without duplication) of (i) the amount of cash paid by the Borrower and its
Subsidiaries in connection with such Acquisition, (ii) the Fair Market Value of
all Capital Stock of the Borrower issued or given in connection with such
Acquisition, (iii) the amount (determined by using the face amount or the amount
payable at maturity, whichever is greater) of all Indebtedness incurred, assumed
or acquired by the Borrower and its Subsidiaries in connection with such
Acquisition, (iv) all additional purchase price amounts in connection with such
Acquisition in the form of earnouts and other contingent obligations that should
be recorded as a liability on the balance sheet of the Borrower and its
Subsidiaries or expensed, in either event in accordance with GAAP, Regulation
S-X under the Securities Act of 1933, as amended, or any other rule or
regulation of the Securities and Exchange Commission, (v) all amounts paid in
respect of covenants not to compete, consulting agreements and other affiliated
contracts in connection with such Acquisition, (vi) the amount of all
transaction fees and expenses (including, without limitation, legal, accounting
and finders' fees and expenses) incurred by the Borrower and its Subsidiaries in
connection with such Acquisition and (vii) the aggregate fair market value of
all other consideration given by the Borrower and its Subsidiaries in connection
with such Acquisition.
"Adjusted Base Rate" shall mean, at any time with respect to any Base Rate
Loan, a rate per annum equal to the Base Rate as in effect at such time plus the
Applicable Margin Percentage for Base Rate Loans as in effect at such time.
"Adjusted LIBOR Rate" shall mean, at any time with respect to any LIBOR
Loan, a rate per annum equal to the LIBOR Rate as in effect at such time plus
the Applicable Margin Percentage for LIBOR Loans as in effect at such time.
"Affiliate" shall mean, as to any Person, each other Person that directly,
or indirectly through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person or is a director or
officer of such Person. For purposes of this definition, with respect to any
Person "control" shall mean (i) the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise, or
(ii) the beneficial ownership of securities or other ownership interests of such
Person having 10% or more of the combined voting power of the then outstanding
securities or other ownership interests of such Person ordinarily (and apart
from rights accruing under special circumstances) having the right to vote in
the election of directors or other governing body of such Person.
"Agent" shall mean First Union, in its capacity as Agent appointed under
Article X, and its successors and permitted assigns in such capacity.
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"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented in accordance with its terms from time to time.
"Annual Statement" shall mean, with respect to any Insurance Subsidiary for
any fiscal year, the annual financial statements of such Insurance Subsidiary as
required to be filed with the Insurance Regulatory Authority of its jurisdiction
of domicile and in accordance with the laws of such jurisdiction, together with
all exhibits, schedules, certificates and actuarial opinions required to be
filed or delivered therewith.
"Applicable Margin Percentage" shall mean, at any time from and after the
Closing Date, the applicable percentage (a) to be added to the Base Rate
pursuant to Section 2.8 for purposes of determining the Adjusted Base Rate, (b)
to be added to the LIBOR Rate pursuant to Section 2.8 for purposes of
determining the Adjusted LIBOR Rate, and (c) to be used in calculating the
commitment fee payable pursuant to Section 2.9(b), in each case as determined
under the following matrix with reference to the Leverage Ratio:
Applicable Margin
Applicable Margin Applicable Margin Percentage for
Percentage for Percentage for Unutilized
Leverage Ratio Base Rate Loans LIBOR Loans Commitments Fee
-------------- --------------- ----------- ---------------
Greater than or equal to .30 to 1.0 0.50% 1.50% 0.325%
Greater than or equal to .25 to 1.0 but
less than .30 to 1.0 0.25% 1.25% 0.275%
Greater than or equal to .20 to 1.0 but
less than .25 to 1.0 0.00% 1.00% 0.225%
Less than .20 to 1.0 0.00% 0.75% 0.200%
On each Adjustment Date (as hereinafter defined), the Applicable Margin
Percentage for all Loans and the commitment fee payable pursuant to Section
2.9(b) shall be adjusted effective as of such date (based upon the calculation
of the Leverage Ratio as of the last day of the fiscal period to which such
Adjustment Date relates) in accordance with the above matrix; provided, however,
that, notwithstanding the foregoing or anything else herein to the contrary, if
at any time the Borrower shall have failed to deliver the financial statements
and a Compliance Certificate as required by Section 6.1(a) or Section 6.1(b), as
the case may be, and Section 6.3(a), then at the election of the Required
Lenders, at all times from and including the date on which such statements and
Compliance Certificate are required to have been delivered (or the date of
occurrence of such Default or Event of Default, as the case may be) to the date
on which the same shall have been delivered (or such Default or Event of Default
cured or waived, as the case may be), each Applicable Margin Percentage shall be
determined in accordance with the above matrix as if the Leverage Ratio were
greater than or equal to 0.30 : 1.0 (notwithstanding the actual Leverage Ratio).
For purposes of this definition, "Adjustment Date"
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shall mean, with respect to any fiscal period of the Borrower beginning with the
fiscal quarter ending September 30, 1998, the fifth (5th) day (or, if such day
is not a Business Day, on the next succeeding Business Day) after delivery by
the Borrower in accordance with Section 6.1(a) or Section 6.1(b), as the case
may be, of (i) financial statements as of the end of and for such fiscal period
and (ii) a duly completed Compliance Certificate with respect to such fiscal
period. Until the first Adjustment Date, each Applicable Margin Percentage shall
be determined in accordance with the above matrix based upon the Leverage Ratio
as set forth in the pro forma Covenant Compliance Worksheet required to be
delivered pursuant to Section 4.1(k).
"Asset Disposition" shall mean any sale, assignment, transfer or other
disposition by the Borrower or any of its Subsidiaries to any other Person
(other than to the Borrower or to a Wholly Owned Subsidiary), whether in one
transaction or in a series of related transactions, of any of its assets,
business units or other properties (including any interests in property, whether
tangible or intangible, and including Capital Stock of Subsidiaries), excluding
(i) sales of investment assets in the ordinary course of business, (ii) sales
and licenses of inventory and other assets in the ordinary course of business,
and (iii) the sale or exchange of used or obsolete equipment to the extent the
proceeds of such sale are applied towards, or such equipment is exchanged for,
similar replacement equipment.
"Assignee" shall have the meaning given to such term in Section 11.7(a).
"Assignment and Acceptance" shall mean an Assignment and Acceptance entered
into between a Lender and an Assignee and accepted by the Agent and the
Borrower, in substantially the form of Exhibit D.
"Authorized Officer" shall mean, with respect to any action specified
herein, any officer of the Borrower duly authorized by resolution of the board
of directors of the Borrower to take such action on its behalf, and whose
signature and incumbency shall have been certified to the Agent by the secretary
or an assistant secretary of the Borrower.
"Available Dividend Amount" shall mean, with respect to any Insurance
Subsidiary for any period of four consecutive fiscal quarters, the aggregate
maximum amount of dividends that is or, if such period were a fiscal year, would
be permitted by the Insurance Regulatory Authority of its jurisdiction of
domicile, under applicable Requirements of Law (without the necessity of any
consent, approval or other action of such Insurance Regulatory Authority
involving the granting of permission or the exercise of discretion by such
Insurance Regulatory Authority), to be paid by such Insurance Subsidiary to the
Borrower or another Subsidiary of the Borrower in respect of such four-quarter
period as if such period were a fiscal year (whether or not any such dividends
are actually paid).
"Bankruptcy Code" shall mean 11 U.S.C. xx.xx. 101 et seq., as amended from
time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum interest rate
publicly announced from time to time by First Union in Charlotte, North
Carolina, to be its prime rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of
4
business on the date of any such change in such prime rate, and (ii) the Federal
Funds Rate plus 0.5% per annum, as adjusted to conform to changes as of the
opening of business on the date of any such change in the Federal Funds Rate.
"Base Rate Loan" shall mean, at any time, any Loan that bears interest at
such time at the Adjusted Base Rate.
"Borrower Margin Stock" shall mean shares of capital stock of the Borrower
that are held by the Borrower or any of its Subsidiaries and that constitute
Margin Stock.
"Borrowing" shall mean the incurrence by the Borrower (including as a
result of conversions and continuations of outstanding Loans pursuant to Section
2.11) on a single date of a group of Loans of a single Type and, in the case of
LIBOR Loans, as to which a single Interest Period is in effect.
"Borrowing Date" shall mean, with respect to any Borrowing, the date upon
which such Borrowing is made.
"Business Day" shall mean (i) any day other than a Saturday or Sunday, a
legal holiday or a day on which commercial banks in Charlotte, North Carolina or
Philadelphia, Pennsylvania are required by law to be closed and (ii) in respect
of any determination relevant to a LIBOR Loan, any such day that is also a day
on which tradings are conducted in the London interbank Eurodollar market.
"Capital Stock" shall mean (i) with respect to any Person that is a
corporation, any and all shares, interests or equivalents in capital stock
(whether voting or nonvoting, and whether common or preferred) of such
corporation, and (ii) with respect to any Person that is not a corporation, any
and all partnership, membership, limited liability company or other equity
interests of such Person; and in each case, any and all warrants, rights or
options to purchase any of the foregoing.
"Cash Collateral Account" shall have the meaning given to such term in
Section 3.8.
"Cash Equivalents" shall mean (i) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within 90 days from the date of acquisition, (ii) commercial paper
issued by any Person organized under the laws of the United States of America,
maturing within 90 days from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent thereof by
Standard & Poor's or at least P-1 or the equivalent thereof by Moody's, (iii)
time deposits and certificates of deposit maturing within 90 days from the date
of issuance and issued by a bank or trust company organized under the laws of
the United States of America or any state thereof that has combined capital and
surplus of at least $500,000,000 and that has (or is a subsidiary of a bank
holding company that has) a long-term unsecured debt rating of at least A or the
equivalent thereof by Standard & Poor's or at least A2 or the equivalent thereof
by Moody's, (iv) repurchase obligations with a term not exceeding seven (7) days
with respect to underlying securities of the types described in clause (i)
5
above entered into with any bank or trust company meeting the qualifications
specified in clause (iii) above, and (v) money market funds at least 95% of the
assets of which are continuously invested in securities of the type described in
clause (i) above.
"Closing Date" shall mean the first date (which may be prior to or
concurrent with the date of the initial Borrowing hereunder) upon which the
conditions set forth in Section 4.1 are satisfied or waived as provided herein.
"CMOs" shall mean any security or certificate representing any interest or
participation in a pool of Mortgage Backed Securities (it being understood that
Mortgage Backed Securities themselves are not CMOs).
"Combined Net Cash Flow" means, for any period, (i) the aggregate Net
Income of the non-Insurance Subsidiaries for such period, plus (ii) the sum of
depreciation expense, amortization (whether positive or negative) of intangible
assets and other non-cash expenses, losses and charges reducing income, in each
case to the extent taken into account in the calculation of such Net Income for
such period, minus (iii) the sum of capital expenditures and all non-cash gains
and other non-cash items taken into account in determining such Net Income for
such period, plus (iv) any increase during such period in deferred taxes, minus
(v) any decrease during such period in deferred taxes. For purposes of this
definition, "non-Insurance Subsidiaries" shall not include any Subsidiary of an
Insurance Subsidiary.
"Combined Net Premiums to Capital Ratio" shall mean, as of the last day of
any fiscal quarter, the ratio of (i) Combined Net Written Premiums for the four
fiscal quarters ending on such date, to (ii) the Combined Statutory Capital and
Surplus as of such date.
"Combined Net Written Premiums" shall mean, for any period, the aggregate
Net Written Premiums for all Insurance Subsidiaries for such period.
"Combined Statutory and Capital Surplus" shall mean, at any time, the
aggregate (without duplication) of Statutory and Capital Surplus of each
Insurance Subsidiary at such time, after eliminating the effect thereupon of any
transactions among the Insurance Subsidiaries.
"Commitment" shall mean, with respect to any Lender at any time, the amount
set forth opposite such Lender's name on its signature page hereto under the
caption "Commitment" or, if such Lender has entered into one or more Assignment
and Acceptances, the amount set forth for such Lender at such time in the
Register maintained by the Agent pursuant to Section 11.7(b) as such Lender's
"Commitment," as such amount may be reduced at or prior to such time pursuant to
the terms hereof.
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of Exhibit C, together with a Covenant Compliance
Worksheet.
"Consolidated Indebtedness" shall mean, as of the last day of any
fiscal quarter, the aggregate of all Indebtedness (whether or not reflected on
the Borrower's or any Subsidiary's
6
balance sheet) of the Borrower and its Subsidiaries as of such date, determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any period, the sum
(without duplication) of (i) total interest expense of the Borrower and its
Subsidiaries for such period in respect of Consolidated Indebtedness of the
Borrower and its Subsidiaries (including, without limitation, all such interest
expense accrued or capitalized during such period, whether or not actually paid
during such period), determined on a consolidated basis in accordance with GAAP,
(ii) all net amounts payable under or in respect of Hedge Agreements, to the
extent paid or accrued by the Borrower and its Subsidiaries during such period,
and (iii) all commitment fees and other ongoing fees in respect of Consolidated
Indebtedness (including the commitment fee provided for under Section 2.9(b) and
the fees provided for under the Fee Letter) paid, accrued or capitalized by the
Borrower and its Subsidiaries during such period.
"Consolidated Net Income" shall mean, for any period, net income (or loss)
for the Borrower and its Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP.
"Consolidated Net Worth" shall mean, as of any date of determination, the
net worth of the Borrower and its Subsidiaries as of such date, determined on a
consolidated basis in accordance with GAAP but (i) excluding any Disqualified
Capital Stock and (ii) without regard to the requirements of Statement of
Financial Accounting Standards No. 115 issued by the Financial Accounting
Standards Board of the American Institute of Certified Public Accountants.
"Contingent Obligation" shall mean, with respect to any Person, any direct
or indirect liability of such Person with respect to any Indebtedness, liability
or other obligation (the "primary obligation") of another Person (the "primary
obligor"), whether or not contingent, (a) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition 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 in respect thereof to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner of any
such primary obligation against loss or failure or inability to perform in
respect thereof; provided, however, that, with respect to the Borrower and its
Subsidiaries, the term Contingent Obligation shall not include (y) endorsements
for collection or deposit in the ordinary course of business or (z) obligations
entered into by an Insurance Subsidiary in the ordinary course of its business
under insurance policies or contracts issued by it or to which it is a party,
including reinsurance agreements (and security posted by any such Insurance
Subsidiary in the ordinary course of its business to secure obligations
thereunder).
"Covenant Compliance Worksheet" shall mean a fully completed worksheet in
the form of Attachment A to Exhibit C.
7
"Credit Documents" shall mean this Agreement, the Notes, the Letters of
Credit, the Fee Letter, any Hedge Agreement to which the Borrower and any Lender
are parties and that is permitted or required to be entered into by the Borrower
hereunder, and all other agreements, instruments, documents and certificates now
or hereafter executed and delivered to the Agent or any Lender by or on behalf
of the Borrower or any of its Subsidiaries with respect to this Agreement and
the transactions contemplated hereby, in each case as amended, modified,
supplemented or restated from time to time.
"Debt Issuance" shall mean the issuance or sale by the Borrower or any of
its Subsidiaries of any debt securities, whether in a public offering of such
securities or otherwise.
"Debt Service" shall mean, for any period, the aggregate (without
duplication) of all principal and Consolidated Interest Expense paid or accrued
by the Borrower and its Subsidiaries during such period in respect of
Indebtedness (including, without limitation, the Loans).
"Default" shall mean any event or condition that, with the passage of time
or giving of notice, or both, would constitute an Event of Default.
"Disqualified Capital Stock" shall mean, with respect to any Person, any
Capital Stock of such Person that, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable), or upon the
happening of any event or otherwise, (i) matures or is mandatorily redeemable or
subject to any mandatory repurchase requirement, pursuant to a sinking fund
obligation or otherwise, (ii) is redeemable or subject to any mandatory
repurchase requirement at the sole option of the holder thereof, or (iii) is
convertible into or exchangeable for (whether at the option of the issuer or the
holder thereof) (a) debt securities or (b) any Capital Stock referred to in (i)
or (ii) above, in each case under (i), (ii) or (iii) above at any time on or
prior to the first anniversary of the Maturity Date; provided, however, that
only the portion of Capital Stock that so matures or is mandatorily redeemable,
is so redeemable at the option of the holder thereof, or is so convertible or
exchangeable on or prior to such date shall be deemed to be Disqualified Capital
Stock.
"Dollars" or "$" shall mean dollars of the United States of America.
"Duff & Xxxxxx" shall mean Duff & Xxxxxx Rating Co., its successors and
assigns.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade or business,
whether or not incorporated) that would be deemed to be under "common control"
with, or a member of the same "controlled group" as, the Borrower or any of its
Subsidiaries, within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean any of the following with respect to a Plan or
Multiemployer Plan, as applicable: (i) a Reportable Event with respect to a Plan
or a Multiemployer Plan, (ii) a
8
complete or partial withdrawal by the Borrower or any ERISA Affiliate from a
Multiemployer Plan that results in liability under Section 4201 or 4204 of
ERISA, or the receipt by the Borrower or any ERISA Affiliate of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA, (iii) the distribution by the Borrower or any
ERISA Affiliate under Section 4041 or 4041A of ERISA of a notice of intent to
terminate any Plan or the taking of any action to terminate any Plan, (iv) the
commencement of proceedings by the PBGC under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Borrower or any ERISA Affiliate of a notice from any
Multiemployer Plan that such action has been taken by the PBGC with respect to
such Multiemployer Plan, (v) the institution of a proceeding by any fiduciary of
any Multiemployer Plan against the Borrower or any ERISA Affiliate to enforce
Section 515 of ERISA, which is not dismissed within thirty (30) days, (vi) the
imposition upon the Borrower or any ERISA Affiliate of any liability under Title
IV of ERISA, other than for PBGC premiums due but not delinquent under Section
4007 of ERISA, or the imposition or threatened imposition of any Lien upon any
assets of the Borrower or any ERISA Affiliate as a result of any alleged failure
to comply with the Internal Revenue Code or ERISA in respect of any Plan, (vii)
the engaging in or otherwise becoming liable for a nonexempt Prohibited
Transaction by the Borrower or any ERISA Affiliate, (viii) a violation of the
applicable requirements of Section 404 or 405 of ERISA or the exclusive benefit
rule under Section 401(a) of the Internal Revenue Code by any fiduciary of any
Plan for which the Borrower or any of its ERISA Affiliates may be directly or
indirectly liable or (ix) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Internal Revenue Code or Section 307 of
ERISA, would result in the loss of tax-exempt status of the trust of which such
Plan is a part if the Borrower or an ERISA Affiliate fails to timely provide
security to such Plan in accordance with the provisions of such sections.
"Eligible Assignee" shall mean (i) a commercial bank organized under the
laws of the United States or any state thereof and having total assets in excess
of $1,000,000,000, (ii) a commercial bank organized under the laws of any other
country that is a member of the Organization for Economic Cooperation and
Development or any successor thereto (the "OECD") or a political subdivision of
any such country and having total assets in excess of $1,000,000,000, provided
that such bank or other financial institution is acting through a branch or
agency located in the United States, in the country under the laws of which it
is organized or in another country that is also a member of the OECD, (iii) the
central bank of any country that is a member of the OECD, (iv) a finance company
or other financial institution or fund that is (A) engaged in making, purchasing
or otherwise investing in loans in the ordinary course of its business, (B) has
total assets in excess of $500,000,000, and (C) is not, and does not have a
substantial interest in, an insurance company unless otherwise agreed to by the
Borrower, (v) any Affiliate of an existing Lender or (vi) any other Person
approved by the Required Lenders, which approval shall not be unreasonably
withheld.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, accusations,
allegations, notices of noncompliance or violation, investigations (other than
internal reports prepared by any Person in the ordinary course of its business
and not in response to any third party action or request of any kind) or
proceedings relating in any way to any actual or alleged violation of or
liability under
9
any Environmental Law or relating to any permit issued, or any approval given,
under any such Environmental Law (collectively, "Claims"), including, without
limitation, (i) any and all Claims by Governmental Authorities for enforcement,
cleanup, removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Substances or arising from alleged
injury or threat of injury to human health or the environment, but excluding
normal claims in the ordinary course of business pursuant to insurance policies
written by an Insurance Subsidiary, the loss reserves for which are reflected in
such Insurance Subsidiary's most recent Annual or Quarterly Statements.
"Environmental Laws" shall mean any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals, rules of
common law and orders of courts or Governmental Authorities, relating to the
protection of human health or occupational safety or the environment, now or
hereafter in effect and in each case as amended from time to time, including,
without limitation, requirements pertaining to the manufacture, processing,
distribution, use, treatment, storage, disposal, transportation, handling,
reporting, licensing, permitting, investigation or remediation of Hazardous
Substances.
"Event of Default" shall have the meaning given to such term in Section
9.1.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time, and any successor statute, and all rules and regulations from
time to time promulgated thereunder.
"Fair Market Value" shall mean, with respect to any Capital Stock of the
Borrower given in connection with an Acquisition, the value given to such
Capital Stock for purposes of such Acquisition by the parties thereto, as
determined in good faith pursuant to the relevant acquisition agreement or
otherwise in connection with such Acquisition.
"Federal Funds Rate" shall mean, for any period, a fluctuating per annum
interest rate (rounded upwards, if necessary, to the nearest 1/100 of one
percentage point) 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 that is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"Fee Letter" shall mean the amended and restated fee letter from First
Union to the Borrower, dated September 25, 1998, relating to certain fees
payable by the Borrower in respect of the transactions contemplated by this
Agreement, as amended, modified or supplemented from time to time.
10
"Financial Condition Certificate" shall mean a fully completed and duly
executed certificate, substantially in the form of Exhibit F, together with the
attachments thereto.
"Financial Officer" shall mean, with respect to the Borrower, the chief
financial officer, vice president - finance, principal accounting officer or
treasurer of the Borrower.
"Fixed Charge Coverage Ratio" shall mean, as of the last day of any period
of four consecutive fiscal quarters (the "Measurement Period"), the ratio of:
(i) the sum (without duplication) of (w) the Available Dividend Amount
for the Measurement Period for the Insurance Subsidiaries, other than each
Insurance Subsidiary that is a Subsidiary of another Insurance Subsidiary,
plus (x) the Net Tax Sharing Payments with respect to the Measurement
Period, plus (y) the Combined Net Cash Flow (whether positive or negative)
of the non-Insurance Subsidiaries for the Measurement Period, minus (z)
Holding Company Expenses accrued during such Measurement Period, to
(ii) the aggregate of (x) the Debt Service with respect to the Loans
and all other Consolidated Indebtedness reasonably determined by the
Borrower (and as set forth in the relevant Covenant Compliance Worksheet)
to be required to be paid or accrued by the Borrower during the period of
four consecutive fiscal quarters immediately following the Measurement
Period (the "Pro Forma Period"), based on the amount of the Loans and other
Consolidated Indebtedness outstanding at the beginning of such period and
assuming that the rates in effect at the beginning of such period, taking
into account the benefit and costs of any Hedge Agreement with respect to
the Loans, will remain in effect throughout such period, plus (y) dividends
reasonably estimated by the Borrower (and as set forth in the relevant
Covenant Compliance Worksheet) to be required to be incurred or paid by the
Borrower during the Pro Forma Period (based upon the most recent quarterly
dividend rate), plus (z) stock repurchases by the Borrower occurring during
the Measurement Period;
provided that, the stock repurchases referred to in subclause (z) of clause (ii)
above shall not include the first $10,000,000 of such repurchases occurring
between June 30, 1998 and September 30, 1999.
"GAAP" shall mean generally accepted accounting principles, as set forth in
the statements, opinions and pronouncements of the Accounting Principles Board,
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained, as in effect
from time to time (subject to the provisions of Section 1.2).
"Governmental Authority" shall mean any nation or government, any state or
other political subdivision thereof and any central bank thereof, any municipal,
local, city or county government, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing
11
and exercising executive legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Gross Written Premiums" shall mean, with respect to any Insurance
Subsidiary at any time, the amount of premiums written (after deducting or
adding premiums on business ceded to or assumed from others) as shown on line
32, page 9, Part 2B, sum of columns 1, 2a and 2b, of the Annual Statement of
such Insurance Subsidiary, or the amount determined in a consistent manner for
any date other than a date as of which an Annual Statement of such Insurance
Subsidiary is prepared.
"Hazardous Substances" shall mean any substances or materials (i) that are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any applicable Environmental Law, (ii)
that are defined by any applicable Environmental Law as toxic, explosive,
corrosive, ignitable, infectious, radioactive, mutagenic or otherwise hazardous,
(iii) the presence of which require investigation or response under any
applicable Environmental Law, (iv) that constitute a nuisance, trespass or
health or safety hazard to Persons or neighboring properties, (v) that consist
of underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance, or (vi) that contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or wastes, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign currency rate swap,
cap, collar, option, hedge, forward rate or other similar agreement or
arrangement designed to protect against fluctuations in interest rates or
currency exchange rates.
"Holding Company Expenses" shall mean, for any period, the aggregate of the
following expenses incurred or paid by the Borrower during such period: all
operating costs and expenses of the Borrower, including rent, utilities,
professional fees, taxes (without duplication for taxes included in the
determination of Net Tax Sharing Payments) and payroll expenses.
"Hybrid Equity Issuance" shall mean the issuance, sale or other disposition
by the Borrower or any of its Subsidiaries of trust preferred securities or any
other security or instrument representing, convertible into or exchangeable for
a similar interest in the Borrower or any of its Subsidiaries.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness and obligations of such Person for borrowed
money or in respect of loans or advances of any kind, (ii) all obligations of
such Person evidenced by notes, bonds, debentures or similar instruments, (iii)
all reimbursement obligations of such Person with respect to surety bonds,
letters of credit and bankers' acceptances (in each case, whether or not drawn
or matured and in the stated amount thereof), (iv) all obligations of such
Person to pay the deferred purchase price of property or services, (v) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person, (vi) all
obligations of such Person as lessee under leases that are or are required to
be, in accordance with GAAP, recorded as capital leases, to the extent such
obligations are required to be so
12
recorded, (vii) all Disqualified Capital Stock issued by such Person, with the
amount of Indebtedness represented by such Disqualified Capital Stock being
equal to the greater of its voluntary or involuntary liquidation preference and
its maximum fixed repurchase price, but excluding accrued dividends, if any (for
purposes hereof, the "maximum fixed repurchase price" of any Disqualified
Capital Stock that does not have a fixed repurchase price shall be calculated in
accordance with the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which Indebtedness
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock, such fair market value shall be determined reasonably and in good
faith by the board of directors or other governing body of the issuer of such
Disqualified Capital Stock), (viii) the net termination obligations of such
Person under any Hedge Agreements, calculated as of any date as if such
agreement or arrangement were terminated as of such date, (ix) all Contingent
Obligations of such Person and (x) all indebtedness referred to in clauses (i)
through (ix) above secured by any Lien on any property or asset owned or held by
such Person regardless of whether the indebtedness secured thereby shall have
been assumed by such Person or is nonrecourse to the credit of such Person.
"Insurance Regulatory Authority" shall mean, with respect to any Insurance
Subsidiary, the insurance department or similar Governmental Authority charged
with regulating insurance companies or insurance holding companies, in its
jurisdiction of domicile and, to the extent that it has regulatory authority
over such Insurance Subsidiary, in each other jurisdiction in which such
Insurance Subsidiary conducts business or is licensed to conduct business.
"Insurance Subsidiary" shall mean any Subsidiary of the Borrower the
ability of which to pay dividends is regulated by an Insurance Regulatory
Authority or that is otherwise required to be regulated thereby in accordance
with the applicable Requirements of Law of its jurisdiction of domicile, and
shall mean and include, without limitation, PAIC and PSIC.
"Interest Period" shall have the meaning given to such term in Section
2.10.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute, and all rules and
regulations from time to time promulgated thereunder.
"Invested Assets" shall mean, as to any Insurance Subsidiary, as of any
date, the total amount shown on page 2, column 4, line 9 of the Annual Statement
of the Insurance Subsidiary, or an amount determined in a consistent manner for
any date other than one as of which an Annual Statement is prepared.
"Investment Grade Securities" shall mean (i) non-equity securities (other
than those issued by an Affiliate of the Borrower and other than CMOs and
REMICs) or preferred equity securities that, if rated by the NAIC, are rated
"NAIC 2 (or the equivalent thereof) or better by the NAIC, or, if not rated by
the NAIC, are rated "BBB" (or the equivalent thereof) or higher by Standard &
Poor's, "Baa3" (or the equivalent thereof) or higher by Moody's, or "BBB" (or
the equivalent thereof) or higher by Duff & Xxxxxx, (ii) municipal bonds that,
if rated by the NAIC, are rated "NAIC 2 (or the equivalent thereof) or better by
the NAIC, or if not rated by the NAIC,
13
are rated "SP-2" (or the equivalent thereof) or higher by Standard & Poor's
"Baa3" or "MIG4" (or the equivalent thereof) or higher by Moody's, or "BBB" (or
the equivalent thereof) or higher by Duff & Xxxxxx, and (iii) Permitted CMOs and
Mortgage Backed Securities that, if rated by the NAIC, are rated "NAIC 2" (or
the equivalent thereof) or higher by Standard & Poor's, "Baa3" (or the
equivalent thereof) or higher by Moody's, or "BBB" (or the equivalent thereof)
or higher by Duff & Xxxxxx (or, in the case of clauses (i), (ii) and (iii)
above, in the event all such rating agencies cease to publish investment
ratings, carrying an equivalent rating of a nationally recognized rating
agency).
"Issuing Lender" shall mean First Union in its capacity as issuer of the
Letters of Credit, and its successors in such capacity.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at such
time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, with respect to each LIBOR Loan comprising part of
the same Borrowing for any Interest Period, an interest rate per annum obtained
by dividing (i) (y) the rate of interest appearing on Telerate Page 3750 (or any
successor page) or (z) if no such rate is available, the rate of interest
determined by the Agent to be the rate or the arithmetic mean of rates (rounded
upward, if necessary, to the nearest 1/16 of one percentage point) at which
Dollar deposits in immediately available funds are offered by First Union to
first-tier banks in the London interbank Eurodollar market, in each case under
(y) and (z) above at approximately 11:00 a.m., London time, two (2) Business
Days prior to the first day of such Interest Period for a period substantially
equal to such Interest Period and in an amount substantially equal to the amount
of First Union's LIBOR Loan comprising part of such Borrowing, by (ii) the
amount equal to 1.00 minus the Reserve Requirement (expressed as a decimal) for
such Interest Period.
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that becomes a "Lender" hereunder pursuant to
Section 11.7, and their respective successors and permitted assigns.
"Lending Office" shall mean, with respect to any Lender, the office of such
Lender designated as its "Lending Office" on its signature page hereto or in an
Assignment and Acceptance, or such other office as may be otherwise designated
in writing from time to time by such Lender to the Borrower and the Agent. A
Lender may designate separate Lending Offices as provided in the foregoing
sentence for the purposes of making or maintaining different Types of Loans,
and, with respect to LIBOR Loans, such office may be a domestic or foreign
branch or Affiliate of such Lender.
"Letter of Credit Exposure" shall mean, with respect to any Lender at any
time, such Lender's ratable share (based on the proportion that its Commitment
bears to the aggregate Commitments at such time) of the sum of (i) the aggregate
Stated Amount of all Letters of Credit outstanding at such time and (ii) the
aggregate amount of all Reimbursement Obligations outstanding at such time.
"Letter of Credit Notice" shall have the meaning given to such term in
Section 3.2.
14
"Letters of Credit" shall have the meaning given to such term in Section
3.1.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter, the
ratio of (i) Consolidated Indebtedness as of such date to (ii) the sum of
Consolidated Indebtedness and Consolidated Net Worth as of such date.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment, security
interest, lien (statutory or otherwise), preference, priority, charge or other
encumbrance of any nature, whether voluntary or involuntary, including, without
limitation, the interest of any vendor or lessor under any conditional sale
agreement, title retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the foregoing.
"Loans" shall have the meaning given to such term in Section 2.1.
"Margin Stock" shall have the meaning given to such term in Regulation U.
"Material Adverse Change" shall mean a material adverse change in the
condition (financial or otherwise), operations, prospects, business, properties
or assets of the Borrower and its Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean a material adverse effect upon (i) the
condition (financial or otherwise), operations, prospects, business, properties
or assets of the Borrower and its Subsidiaries, taken as a whole, (ii) the
ability of the Borrower or any Subsidiary to perform its obligations under this
Agreement or any of the other Credit Documents to which it is a party or (iii)
the legality, validity or enforceability of this Agreement or any of the other
Credit Documents or the rights and remedies of the Agent and the Lenders
hereunder and thereunder.
"Material Contract" shall have the meaning given to such term in Section
5.18.
"Material Insurance Subsidiary" shall mean any Insurance Subsidiary that is
a Material Subsidiary.
"Material Subsidiary" shall mean each of (i) PAIC, (ii) PSIC, (iii) at the
relevant time of determination, any Subsidiary having (after the elimination of
intercompany accounts) (y) in the case of a non-Insurance Subsidiary, (A) assets
constituting at least ten percent (10%) of the total assets of the Borrower and
its Subsidiaries on a consolidated basis, (B) revenues for the four quarters
most recently ended constituting at least ten percent (10%) of the total
revenues of the Borrower and its Subsidiaries on a consolidated basis, or (C)
Net Income for the four quarters most recently ended constituting at least ten
percent (10%) of the Consolidated Net Income of the Borrower and its
Subsidiaries, in each case determined in accordance with GAAP as of the date of
the GAAP financial statements of the Borrower and all its Subsidiaries most
recently delivered under Section 6.1 prior to such time (or, with regard to
determinations at any time prior to the initial delivery of financial statements
under Section 6.1, as of the date of the most recent financial statements
referred to in Section 5.11(a)), or (z) in the case of an Insurance Subsidiary,
(A) assets constituting at least ten percent (10%) of the aggregate assets of
all
15
Insurance Subsidiaries, or (B) Gross Written Premiums for the four quarters
most recently ended constituting at least ten percent (10%) of the aggregate
Gross Written Premiums (without duplication) of all Insurance Subsidiaries, in
each case determined in accordance with SAP as of the date of the statutory
financial statements most recently delivered under Section 6.2 prior to such
time (or, with regard to determinations at any time prior to the initial
delivery of financial statements under Section 6.2, as of the date of the most
recent financial statements referred to in Section 5.11(e)) and (iv) any
Subsidiary that has one of the foregoing as a Subsidiary.
"Maturity Date" shall mean June 30, 2004.
"Moody's" shall mean Xxxxx'x Investors Service, Inc., its successors and
assigns.
"Mortgage Backed Securities" shall mean investment securities representing
any undivided interest or participation in, or which are secured by, a pool of
loans secured by mortgages or deeds of trust.
"Multiemployer Plan" shall mean any "multiemployer plan" within the meaning
of Section 4001(a)(3) of ERISA to which the Borrower or any ERISA Affiliate
makes, is making or is obligated to make contributions or has made or been
obligated to make contributions.
"NAIC" shall mean the National Association of Insurance Commissioners and
any successor thereto.
"Net Amount Recoverable from Reinsurers" shall mean, as to any Insurance
Subsidiary, as of any time, the amount as shown on Schedule F - Part 3, column
13 of the Annual Statement of such Insurance Subsidiary, or an amount determined
in a consistent manner as of any date other than one as of which an Annual
Statement is prepared.
"Net Cash Proceeds" shall mean, in the case of any Hybrid Equity Issuance
or Debt Issuance, the aggregate cash payments received by the Borrower and its
Subsidiaries less reasonable and customary fees and expenses (including
underwriting discounts and commissions) incurred by the Borrower and its
Subsidiaries in connection therewith.
"Net Income" shall mean, with respect to any Person for any period, the net
income (or loss), after extraordinary items, taxes, and all other items of
expenses and income of such Person for such period, determined in accordance
with GAAP.
"Net Tax Sharing Payments" shall mean, for any period, (i) the aggregate
(without duplication) of all payments made or to be made to the Borrower by its
Subsidiaries pursuant to tax sharing or tax allocation agreements or
arrangements or otherwise in respect of taxable income realized during such
period, minus (ii) the aggregate (without duplication) of all foreign, federal,
state or local income, franchise and other tax payments made or to be made by
the Borrower in respect of taxable income realized during such period and any
payments made or to be made by the Borrower during such period pursuant to such
tax sharing or tax allocation agreement or arrangement. For purposes of the
Fixed Charge Coverage Ratio, if the amount in
16
clause (ii) exceeds the amount in clause (i) hereof, the result shall be
expressed as a negative amount.
"Net Written Premiums" shall mean, with respect to any Insurance Subsidiary
at any time, the amount of premiums written (after deducting or adding premiums
on business ceded to or assumed from others) as shown on line 32, page 9, Part
2B, column 4 of the Annual Statement of such Insurance Subsidiary, or the amount
determined in a consistent manner for any date other than a date as of which an
Annual Statement of such Insurance Subsidiary is prepared.
"Notes" shall mean the promissory notes of the Borrower in substantially
the form of Exhibit A, together with any amendments, modifications and
supplements thereto, substitutions therefor and restatements thereof.
"Notice of Borrowing" shall have the meaning given to such term in Section
2.2(b).
"Notice of Conversion/Continuation" shall have the meaning given to such
term in Section 2.11(b).
"Obligations" shall mean all principal of and interest (including, to the
greatest extent permitted by applicable law, post-petition interest) on the
Loans, all Reimbursement Obligations and all fees, expenses, indemnities and
other obligations owing, due or payable at any time by the Borrower to the
Agent, any Lender, the Issuing Lender or any other Person entitled thereto,
under this Agreement or any of the other Credit Documents.
"PAC I" shall mean a planned amortization class bond which is a tranche or
class of CMO or REMIC that is retired according to a predetermined amortization
schedule independent of the prepayment rate on the underlying collateral and
which has the highest level of protection within the pool against prepayment or
extension.
"PAIC" shall mean Penn-America Insurance Company, a Pennsylvania insurance
company.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
"PSIC" shall mean Penn-Star Insurance Company, a Pennsylvania insurance
company.
"Participant" shall have the meaning given to such term in Section 11.7(d).
"Permitted Acquisition" shall mean (a) any Acquisition with respect to
which all of the following conditions are satisfied: (i) each business acquired
shall be within the permitted lines of business described in Section 8.8, (ii)
any Capital Stock given as consideration in connection therewith shall be
Capital Stock of the Borrower, (iii) in the case of an Acquisition involving the
acquisition of control of Capital Stock of any Person, immediately after giving
effect to such Acquisition such Person (or the surviving Person, if the
Acquisition is effected through a merger or consolidation) shall be the Borrower
or a Wholly Owned Subsidiary, and (iv) all of the conditions and requirements of
Sections 6.9 applicable to such Acquisition are satisfied; or
17
(b) any other Acquisition to which the Required Lenders (or the Agent on their
behalf) shall have given their prior written consent (which consent may be in
their sole discretion and may be given subject to such additional terms and
conditions as the Required Lenders shall establish) and with respect to which
all of the conditions and requirements set forth in this definition and in
Section 6.9, and in or pursuant to any such consent, have been satisfied or
waived in writing by the Required Lenders (or the Agent on their behalf).
"Permitted CMOs and Mortgage Backed Securities" shall mean (i) mortgage
participation certificates issued by the Federal Home Loan Mortgage Corporation,
(ii) mortgage backed securities issued by the Federal National Mortgage
Association, (iii) securities guaranteed by the Government National Mortgage
Association, and (iv) other securities and certificates representing
participations in any CMO or REMIC which are PAC I's or which have comparable
priority in respect of the repayment thereof.
"Permitted Liens" shall have the meaning given to such term in Section 8.3.
"Person" shall mean any corporation, association, joint venture,
partnership, limited liability company, organization, business, individual,
trust, government or agency or political subdivision thereof or any other legal
entity.
"Plan" shall mean any "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA that is subject to the provisions of Title IV of ERISA
(other than a Multiemployer Plan) and to which the Borrower or any ERISA
Affiliate may have any liability.
"Pro Forma Balance Sheet" shall have the meaning given to such term in
Section 5.11(b).
"Prohibited Transaction" shall mean any transaction described in (i)
Section 406 of ERISA that is not exempt by reason of Section 408 of ERISA or by
reason of a Department of Labor prohibited transaction individual or class
exemption or (ii) Section 4975(c) of the Internal Revenue Code that is not
exempt by reason of Section 4975(c)(2) or 4975(d) of the Internal Revenue Code.
"Projections" shall have the meaning given to such term in Section 5.11(c).
"Quarterly Statement" shall mean, with respect to any Insurance Subsidiary
for any fiscal quarter, the quarterly financial statements of such Insurance
Subsidiary as required to be filed with the Insurance Regulatory Authority of
its jurisdiction of domicile, together with all exhibits, schedules,
certificates and actuarial opinions required to be filed or delivered therewith.
"REMIC" shall mean a real estate mortgage investment conduit.
"Register" shall have the meaning given to such term in Section 11.7(b).
"Regulations D, T, U and X" shall mean Regulations D, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
18
"Reimbursement Obligation" shall have the meaning given to such term in
Section 3.4.
"Reinsurance Agreement" shall mean any agreement, contract, treaty,
certificate or other arrangement whereby any Insurance Subsidiary agrees to
transfer, cede or retrocede to another insurer or reinsurer all or part of the
liability assumed or assets held by such Insurance Subsidiary under a policy or
policies of insurance issued by such Insurance Subsidiary or under a reinsurance
agreement assumed by such Insurance Subsidiary.
"Reinsurance Premiums Ceded" shall mean, for any Insurance Subsidiary, for
any period, the amount as shown on Schedule F -Part 3, column 1 of the Annual
Statement of such Insurance Subsidiary, or an amount determined in a manner
consistent for any period other than one for which an Annual Statement is
prepared.
"Reportable Event" shall mean (i) any "reportable event" within the meaning
of Section 4043(c) of ERISA for which the 30-day notice under Section 4043(a) of
ERISA has not been waived by the PBGC (including any failure to meet the minimum
funding standard of, or timely make any required installment under, Section 412
of the Internal Revenue Code or Section 302 of ERISA, regardless of the issuance
of any waivers in accordance with Section 412(d) of the Internal Revenue Code),
(ii) any such "reportable event" subject to advance notice to the PBGC under
Section 4043(b)(3) of ERISA, (iii) any application for a funding waiver or an
extension of any amortization period pursuant to Section 412 of the Internal
Revenue Code, and (iv) a cessation of operations described in Section 4062(e) of
ERISA.
"Required Lenders" shall mean the Lenders holding outstanding Loans and
Unutilized Commitments (or, after the termination of the Commitments,
outstanding Loans and Letter of Credit Exposure) representing more than
sixty-six and two-thirds percent (66-2/3%) of the aggregate at such time of all
outstanding Loans and Unutilized Commitments (or, after the termination of the
Commitments, the aggregate at such time of all outstanding Loans and Letter of
Credit Exposure).
"Requirement of Law" shall mean, with respect to any Person, the charter,
articles or certificate of organization or incorporation and bylaws or other
organizational or governing documents of such Person, and any statute, law,
treaty, rule, regulation, order, decree, writ, injunction or determination of
any arbitrator or court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject or otherwise pertaining to any or all of the
transactions contemplated by this Agreement and the other Credit Documents.
"Reserve Requirement" shall mean, with respect to any Interest Period, the
reserve percentage (expressed as a decimal) in effect from time to time during
such Interest Period, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without limitation,
basic, supplemental, marginal and emergency reserves) applicable to First Union
under Regulation D with respect to "Eurocurrency liabilities" within the meaning
of Regulation D, or under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
19
"Responsible Officer" shall mean, with respect to the Borrower, the
president, the chief executive officer, the chief financial officer, any
executive officer, or any other Financial Officer of the Borrower, and any other
officer or similar official thereof responsible for the administration of the
obligations of the Borrower in respect of this Agreement.
"Standard & Poor's" shall mean Standard & Poor's Rating Services, a
division of XxXxxx-Xxxx Companies, its successors and assigns.
"SAP" shall mean, with respect to any Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the relevant Insurance
Regulatory Authority of its state of domicile, consistently applied and
maintained and in conformity with those used in the preparation of the most
recent statutory financial statements described in Section 5.11(e).
"Stated Amount" shall mean, with respect to any Letter of Credit at any
time, the aggregate amount available to be drawn thereunder at such time
(regardless of whether any conditions for drawing could then be met).
"Statutory Capital and Surplus" shall mean, as to any Insurance Subsidiary,
as of any date, the sum (without duplication) of the total amounts shown (i)
with respect to an Insurance Subsidiary not legally domiciled in the United
States, the shareholders' equity of such Insurance Subsidiary as determined in
accordance with GAAP (without regard to the requirements of Statement of
Financial Accounting Standards No. 115 issued by the Financial Accounting
Standards Board), and (ii) with respect to any other Insurance Subsidiary, on
line 25, column 1, page 3 of the Annual Statement of such Insurance Subsidiary,
or the sum of amounts determined in a consistent manner for any date other than
one as of which an Annual Statement is prepared.
"Subordinated Indebtedness" shall have the meaning given to such term in
Section 8.2.
"Subsidiary" shall mean, with respect to any Person, any corporation or
other Person of which more than fifty percent (50%) of the outstanding Capital
Stock having ordinary voting power to elect a majority of the board of
directors, board of managers or other governing body of such Person, is at the
time, directly or indirectly, owned or controlled by such Person and/or one or
more of its other Subsidiaries or a combination thereof (irrespective of
whether, at the time, securities of any other class or classes of any such
corporation or other Person shall or might have voting power by reason of the
happening of any contingency). When used without reference to a parent entity,
the term "Subsidiary" shall be deemed to refer to a Subsidiary of the Borrower.
"Surplus Relief Reinsurance Agreement" shall mean any agreement or other
arrangement whereby any Insurance Subsidiary cedes business under a reinsurance
agreement that would not be considered a transaction that indemnifies an insurer
against loss or liability relating to insurance risk, as determined in
accordance with Statement of Financial Accounting Standards No. 113 ("FAS 113")
issued by the Financial Accounting Standards Board (without regard to the
effective date of FAS 113).
20
"Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitments pursuant to Section 2.5 or Section 9.2.
"Type" shall have the meaning given to such term in Section 2.2(a).
"Unfunded Pension Liability" shall mean, with respect to any Plan or
Multiemployer Plan, the excess of its benefit liabilities under Section
4001(a)(16) of ERISA over the current value of its assets, determined in
accordance with the applicable assumptions used for funding under Section 412 of
the Internal Revenue Code for the applicable plan year.
"Unutilized Commitment" shall mean, with respect to any Lender at any time,
such Lender's Commitment at such time less the sum of (i) the aggregate
principal amount of all Loans made by such Lender that are outstanding at such
time and (ii) such Lender's Letter of Credit Exposure at such time.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding Capital Stock of such Subsidiary is owned, directly
or indirectly, by such Person.
1.2 Accounting Terms. Except as specifically provided otherwise in this
Agreement, all accounting terms used herein that are not specifically defined
shall have the meanings customarily given them in accordance with GAAP (or, to
the extent that such terms apply solely to any Insurance Subsidiary or if
otherwise expressly required, SAP). Notwithstanding anything to the contrary in
this Agreement, for purposes of calculation of the financial covenants set forth
in Article VII, all accounting determinations and computations hereunder shall
be made in accordance with GAAP as in effect as of the date of this Agreement
applied on a basis consistent with the application used in preparing the most
recent financial statements of the Borrower referred to in Section 5.11(a). In
the event that any changes in GAAP after such date are required to be applied to
the Borrower and would affect the computation of the financial covenants
contained in Article VII, such changes shall be followed only from and after the
date this Agreement shall have been amended to take into account any such
changes. References to amounts on particular exhibits, schedules, lines, pages
and columns of any Annual Statement or Quarterly Statement are based on the
format promulgated by the NAIC for the 1997 Annual Statements and Quarterly
Statements. In the event such format is changed in future years so that
different information is contained in such items or they no longer exist, or if
the Annual Statement or Quarterly Statement is replaced by the NAIC or by any
Insurance Regulatory Authority after the date hereof such that different forms
of financial statements are required to be furnished by the Insurance
Subsidiaries in lieu thereof, such references shall be to information consistent
with that reported in the referenced item in the 1997 Annual Statements or
Quarterly Statements, as the case may be.
1.3 Other Terms; Construction. Unless otherwise specified or unless the
context otherwise requires, all references herein to sections, annexes,
schedules and exhibits are references to sections, annexes, schedules and
exhibits in and to this Agreement, and all terms defined in this Agreement shall
have the defined meanings when used in any other Credit Document or any
certificate or other document made or delivered pursuant hereto. All
21
references herein to the Lenders or any of them shall be deemed to include the
Issuing Lender unless specifically provided otherwise or unless the context
otherwise requires.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
2.1 Commitments. Each Lender severally agrees, subject to and on the terms
and conditions of this Agreement, to make loans (each, a "Loan," and
collectively, the "Loans") to the Borrower, from time to time on any Business
Day during the period from and including the Closing Date to but not including
the Termination Date, in an aggregate principal amount at any time outstanding
not greater than the excess, if any, of its Commitment at such time over its
Letter of Credit Exposure at such time, provided that no Borrowing of Loans
shall be made if, immediately after giving effect thereto, the sum of (y) the
aggregate principal amount of Loans outstanding at such time and (z) the
aggregate Letter of Credit Exposure of all Lenders at such time would exceed the
aggregate Commitments at such time. Subject to and on the terms and conditions
of this Agreement, the Borrower may borrow, repay and reborrow Loans.
2.2 Borrowings. (a) The Loans shall, at the option of the Borrower and
subject to the terms and conditions of this Agreement, be either Base Rate Loans
or LIBOR Loans (each, a "Type" of Loan), provided that all Loans comprising the
same Borrowing shall, unless otherwise specifically provided herein, be of the
same Type; provided further that the foregoing proviso shall not prevent
multiple Borrowings, respectively having different Types, from being made on the
same Business Day, subject to the terms of clause (iii) of Section 2.10.
(b) In order to make a Borrowing (other than Borrowings involving
continuations or conversions of outstanding Loans, which shall be made pursuant
to Section 2.11), the Borrower will give the Agent written notice not later than
11:00 a.m., Charlotte time, three (3) Business Days prior to each Borrowing to
be comprised of LIBOR Loans and one (1) Business Day prior to each Borrowing to
be comprised of Base Rate Loans; provided, however, that requests for the
Borrowing of any Loans to be made on the Closing Date may, at the discretion of
the Agent, be given later than the times specified hereinabove. Each such notice
(each, a "Notice of Borrowing") shall be irrevocable, shall be given in the form
of Exhibit B-1 and shall specify (1) the aggregate principal amount and initial
Type of the Loans to be made pursuant to such Borrowing, (2) in the case of a
Borrowing of LIBOR Loans, the initial Interest Period to be applicable thereto,
and (3) the requested date of such Borrowing (the "Borrowing Date"), which shall
be a Business Day. Upon its receipt of a Notice of Borrowing, the Agent will
promptly notify each Lender of the proposed Borrowing. Notwithstanding anything
to the contrary contained herein:
(i) the aggregate principal amount of each Borrowing comprised of Base
Rate Loans shall not be less than $1,000,000 or, if greater, an integral
multiple of $500,000 in excess thereof (or, if less, in the amount of the
aggregate Unutilized Commitments), and the aggregate principal amount of
each Borrowing comprised of LIBOR Loans shall not be less than $1,000,000
or, if greater, an integral multiple of $500,000 in excess thereof;
22
(ii) if the Borrower shall have failed to designate the Type of Loans
comprising a Borrowing, the Borrower shall be deemed to have requested a
Borrowing comprised of Base Rate Loans; and
(iii) if the Borrower shall have failed to select the duration of the
Interest Period to be applicable to any Borrowing of LIBOR Loans, then the
Borrower shall be deemed to have selected an Interest Period with a
duration of one month.
(c) Not later than 1:00 p.m., Charlotte time, on the requested Borrowing
Date, each Lender will make available to the Agent at its office referred to in
Section 11.5 (or at such other location as the Agent may designate) an amount,
in Dollars and in immediately available funds, equal to the amount of the Loan
to be made by such Lender. To the extent the Lenders have made such amounts
available to the Agent as provided hereinabove, the Agent will make the
aggregate of such amounts available to the Borrower in accordance with Section
2.3(a) and in like funds as received by the Agent.
2.3 Disbursements; Funding Reliance; Domicile of Loans. (a) The Borrower
hereby authorizes the Agent to disburse the proceeds of each Borrowing in
accordance with the terms of any written instructions from any of the Authorized
Officers, provided that the Agent shall not be obligated under any circumstances
to forward amounts to any account not listed in an Account Designation Letter.
The Borrower may at any time deliver to the Agent an Account Designation Letter
listing any additional accounts or deleting any accounts listed in a previous
Account Designation Letter.
(b) Unless the Agent has received, prior to 1:00 p.m., Charlotte time, on
the relevant Borrowing Date, written notice from a Lender that such Lender will
not make available to the Agent such Lender's ratable portion of the relevant
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent in immediately available funds on such Borrowing Date in accordance
with the applicable provisions of Section 2.2, and the Agent may, in reliance
upon such assumption, but shall not be obligated to, make a corresponding amount
available to the Borrower on such Borrowing Date. If and to the extent that such
Lender shall not have made such portion available to the Agent, and the Agent
shall have made such corresponding amount available to the Borrower, such
Lender, on the one hand, and the Borrower, on the other, severally agree to pay
to the Agent forthwith on demand such corresponding amount, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, (i) in the case of
such Lender, at the Federal Funds Rate, and (ii) in the case of the Borrower, at
the rate of interest applicable at such time to the Type of Loans comprising
such Borrowing, as determined under the provisions of Section 2.8. If such
Lender shall repay to the Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement. The failure of any Lender to make any Loan required to be made by it
as part of any Borrowing shall not relieve any other Lender of its obligation,
if any, hereunder to make its Loan as part of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Loan to be
made by such other Lender as part of any Borrowing.
23
(c) Each Lender may, at its option, make and maintain any Loan at, to or
for the account of any of its Lending Offices, provided that any exercise of
such option shall not affect the obligation of the Borrower to repay such Loan
to or for the account of such Lender in accordance with the terms of this
Agreement.
2.4 Notes. (a) The Loans made by each Lender shall be evidenced by a Note
appropriately completed in substantially the form of Exhibit A.
(b) Each Note issued to a Lender shall (i) be executed by the Borrower,
(ii) be payable to the order of such Lender, (iii) be dated as of the Closing
Date (or, in the case of a Note issued after the Closing Date, dated the
effective date of the applicable Assignment and Acceptance), (iv) be in a stated
principal amount equal to such Lender's Commitment, (v) bear interest in
accordance with the provisions of Section 2.8, as the same may be applicable
from time to time to the Loans made by such Lender, and (vi) be entitled to all
of the benefits of this Agreement and the other Credit Documents and subject to
the provisions hereof and thereof.
(c) Each Lender will record on its internal records the amount and Type of
each Loan made by it and each payment received by it in respect thereof and
will, in the event of any transfer of any of its Notes, either endorse on the
reverse side thereof or on a schedule attached thereto (or any continuation
thereof) the outstanding principal amount and Type of the Loans evidenced
thereby as of the date of transfer or provide such information on a schedule to
the Assignment and Acceptance relating to such transfer; provided, however, that
the failure of any Lender to make any such recordation or provide any such
information, or any error therein, shall not affect the Borrower's obligations
under this Agreement or the Notes.
2.5 Termination and Reduction of Commitments. (a) The Commitments shall be
automatically and permanently terminated on the Termination Date (or on
September 30, 1998, but only if the Closing Date shall not have occurred on or
prior to such date).
(b) On each date set forth below, the Commitments shall be automatically
and permanently reduced by the amount set forth below opposite such date:
Date Amount
December 31, 2000 $2,500,000
June 30, 2001 $2,500,000
December 31, 2001 $3,000,000
June 30, 2002 $3,000,000
December 31, 2002 $3,000,000
June 30, 2003 $3,000,000
December 31, 2003 $4,000,000
June 30, 2004 $4,000,000
(c) The Commitments shall, on the day two (2) Business Days after the
receipt of Net Cash Proceeds therefor, be automatically and permanently reduced
by the amount of the Net Cash Proceeds with respect to any Asset Disposition,
Hybrid Equity Issuance or Debt Issuance.
24
Promptly upon (and in any event not later than two (2) Business Days after) its
receipt of such Net Cash Proceeds, the Borrower will deliver to the Agent a
certificate signed by a Financial Officer of the Borrower in form and substance
satisfactory to the Agent and setting forth the calculation of such Net Cash
Proceeds. Such certificate shall be accompanied by any required prepayment
pursuant to Section 2.6(b) or Section 2.6(c). Notwithstanding the foregoing,
nothing in this subsection shall be deemed to permit any Asset Disposition not
expressly permitted under Section 8.4.
(d) At any time and from time to time after the date hereof, upon not less
than three (3) Business Days' prior written notice to the Agent, the Borrower
may terminate in whole or reduce in part the aggregate Unutilized Commitments,
provided that any such partial reduction shall be in an aggregate amount of not
less than $1,000,000 or, if greater, an integral multiple thereof. The amount of
any termination or reduction made under this subsection (d) may not thereafter
be reinstated.
(e) Each reduction of the Commitments pursuant to this Section shall be
applied ratably among the Lenders according to their respective Commitments.
Each reduction of the Commitments pursuant to subsections (c) or (d) shall be
applied to reduce the scheduled reductions of the Commitments set forth in
subsection (b) in the inverse order of maturity.
2.6 Mandatory Payments and Prepayments. (a) Except to the extent due or
paid sooner pursuant to the provisions of this Agreement, the aggregate
outstanding principal of the Loans shall be due and payable in full on the
Maturity Date.
(b) In the event that, at any time, the sum of (y) the aggregate principal
amount of Loans outstanding at such time and (z) the aggregate Letter of Credit
Exposure of all Lenders at such time shall exceed the aggregate Commitments at
such time (after giving effect to any concurrent termination or reduction
thereof), the Borrower will immediately prepay first, the outstanding principal
amount of the Loans in the amount of such excess and next, the amount of any
outstanding Reimbursement Obligations; provided that, to the extent such excess
amount is greater than the aggregate principal amount of Loans and Reimbursement
Obligations outstanding immediately prior to the application of such prepayment,
the amount so prepaid shall be retained by the Agent and held in the Cash
Collateral Account as cover for Letter of Credit Exposure, as more particularly
described in Section 3.8, and thereupon such cash shall be deemed to reduce the
aggregate Letter of Credit Exposure by an equivalent amount.
(c) If a Default or an Event of Default has occurred and is continuing at
such time, promptly upon (and in any event not later than two (2) Business Days
after) its receipt of Net Cash Proceeds for any Asset Disposition, Hybrid Equity
Issuance or Debt Issuance, the Borrower will prepay first, the outstanding
principal amount of the Loans and next, the amount of any outstanding
Reimbursement Obligations in an amount equal to 100% of the Net Cash Proceeds
from such Asset Disposition, Hybrid Equity Issuance or Debt Issuance; provided
that, to the extent such prepayment amount is greater than the aggregate
principal amount of Loans and Reimbursement Obligations outstanding immediately
prior to the application of such prepayment, the amount so prepaid shall be
retained by the Agent and held in the Cash Collateral Account as cover for
Letter of Credit Exposure, as more particularly described in Section 3.8,
25
and thereupon such cash shall be deemed to reduce the aggregate Letter of Credit
Exposure by an equivalent amount.
(d) Each prepayment of the Loans made pursuant to subsections (b) and (c)
above shall be applied (i) first, to reduce the outstanding principal amount of
the Loans, and (ii) second, to the extent of any excess remaining after
application as provided in clause (i) above, to pay any outstanding
Reimbursement Obligations, and shall be applied first to prepay all Base Rate
Loans before any LIBOR Loans are prepaid. Each payment or prepayment pursuant to
the provisions of this Section shall be applied ratably among the Lenders
holding the Loans being prepaid, in proportion to the principal amount held by
each.
(e) Each payment or prepayment of a LIBOR Loan made pursuant to the
provisions of this Section on a day other than the last day of the Interest
Period applicable thereto shall be made together with all amounts required under
Section 2.18 to be paid as a consequence thereof.
2.7 Voluntary Prepayments. (a) At any time and from time to time, the
Borrower shall have the right to prepay the Loans, in whole or in part, without
premium or penalty (except as provided in clause (iii) below), upon written
notice given to the Agent not later than 11:00 a.m., Charlotte time, three (3)
Business Days prior to each intended prepayment of LIBOR Loans and one (1)
Business Day prior to each intended prepayment of Base Rate Loans, provided that
(i) each partial prepayment shall be in an aggregate principal amount of not
less than $1,000,000 or, if greater, an integral multiple of $500,000 in excess
thereof, (ii) no partial prepayment of LIBOR Loans made pursuant to any single
Borrowing shall reduce the aggregate outstanding principal amount of the
remaining LIBOR Loans under such Borrowing to less than $1,000,000 or to any
greater amount not an integral multiple of $500,000 in excess thereof, and (iii)
unless made together with all amounts required under Section 2.18 to be paid as
a consequence of such prepayment, a prepayment of a LIBOR Loan may be made only
on the last day of the Interest Period applicable thereto. Each such notice
shall specify the proposed date of such prepayment and the aggregate principal
amount and Type of the Loans to be prepaid (and, in the case of LIBOR Loans, the
Interest Period of the Borrowing pursuant to which made), and shall be
irrevocable and shall bind the Borrower to make such prepayment on the terms
specified therein. Loans prepaid pursuant to this subsection (a) may be
reborrowed, subject to the terms and conditions of this Agreement.
(b) Each prepayment of the Loans made pursuant to subsection (a) above
shall be applied ratably among the Lenders holding the Loans being prepaid, in
proportion to the principal amount held by each.
2.8 Interest. (a) The Borrower will pay interest in respect of the unpaid
principal amount of each Loan, from the date of Borrowing thereof until such
principal amount shall be paid in full, (i) at the Adjusted Base Rate, as in
effect from time to time during such periods as such Loan is a Base Rate Loan,
and (ii) at the Adjusted LIBOR Rate, as in effect from time to time during such
periods as such Loan is a LIBOR Loan.
(b) Upon the occurrence and during the continuance of an Event of Default
as the result of failure by the Borrower to pay any principal of or interest on
any Loan, any fees or other
26
amount hereunder when due (whether at maturity, pursuant to acceleration or
otherwise), and (at the election of the Required Lenders) upon the occurrence
and during the continuance of any other Event of Default, all outstanding
principal amounts of the Loans and, to the greatest extent permitted by
applicable law, all interest accrued on the Loans and all other accrued and
outstanding fees and other amounts hereunder, shall bear interest at a rate per
annum equal to the interest rate applicable from time to time thereafter to such
Loans (whether the Adjusted Base Rate or the Adjusted LIBOR Rate) plus 2% (or,
in the case of fees and other amounts, at the Adjusted Base Rate plus 2%), and,
in each case, such default interest shall be payable on demand. To the greatest
extent permitted by applicable law, interest shall continue to accrue after the
filing by or against the Borrower of any petition seeking any relief in
bankruptcy or under any law pertaining to insolvency or debtor relief.
(c) Accrued (and theretofore unpaid) interest shall be payable as follows:
(i) in respect of each Base Rate Loan (including any Base Rate Loan or
portion thereof paid or prepaid pursuant to the provisions of Section 2.6,
except as provided hereinbelow), in arrears on the last Business Day of
each calendar quarter, beginning with the first such day to occur after the
Closing Date; provided, that in the event the Loans are repaid or prepaid
in full and the Commitments have been terminated, then accrued interest in
respect of all Base Rate Loans shall be payable together with such
repayment or prepayment on the date thereof;
(ii) in respect of each LIBOR Loan (including any LIBOR Loan or
portion thereof paid or prepaid pursuant to the provisions of Section 2.6,
except as provided hereinbelow), in arrears (y) on the last Business Day of
the Interest Period applicable thereto (subject to the provisions of clause
(iv) in Section 2.10) and (z) in addition, in the case of a LIBOR Loan with
an Interest Period having a duration of six months, on each date on which
interest would have been payable under clause (y) above had successive
Interest Periods of three months' duration been applicable to such LIBOR
Loan; provided, that in the event all LIBOR Loans made pursuant to a single
Borrowing are repaid or prepaid in full, then accrued interest in respect
of such LIBOR Loans shall be payable together with such repayment or
prepayment on the date thereof; and
(iii) in respect of any Loan, at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(d) Nothing contained in this Agreement or in any other Credit Document
shall be deemed to establish or require the payment of interest to any Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable for the account of any Lender on any interest payment date
would exceed the maximum amount permitted by applicable law to be charged by
such Lender, the amount of interest payable for its account on such interest
payment date shall be automatically reduced to such maximum permissible amount.
In the event of any such reduction affecting any Lender, if from time to time
thereafter the amount of interest payable for the account of such Lender on any
interest payment date would be less than the maximum amount permitted by
applicable law to be charged by such Lender, then the amount of interest payable
for its account on such subsequent interest payment date shall be
27
automatically increased to such maximum permissible amount, provided that at no
time shall the aggregate amount by which interest paid for the account of any
Lender has been increased pursuant to this sentence exceed the aggregate amount
by which interest paid for its account has theretofore been reduced pursuant to
the previous sentence.
(e) The Agent shall promptly notify the Borrower and the Lenders upon
determining the interest rate for each Borrowing of LIBOR Loans after its
receipt of the relevant Notice of Borrowing or Notice of
Conversion/Continuation, and upon each change in the Base Rate; provided,
however, that the failure of the Agent to provide the Borrower or the Lenders
with any such notice shall neither affect any obligations of the Borrower or the
Lenders hereunder nor result in any liability on the part of the Agent to the
Borrower or any Lender. Each such determination (including each determination of
the Reserve Requirement) shall, absent manifest error, be conclusive and binding
on all parties hereto.
2.9 Fees. The Borrower agrees to pay:
(a) To First Union, for its own account, on the date of its execution of
this Agreement, the fees described in paragraphs (1) and (2) of the Fee Letter,
in the amounts set forth therein as due and payable on such date and to the
extent not theretofore paid to First Union;
(b) To the Agent, for the account of each Lender, a commitment fee for each
calendar quarter (or portion thereof) for the period from the date of this
Agreement to the Termination Date, at a per annum rate equal to the Applicable
Margin Percentage in effect for such fee from time to time during such quarter,
on such Lender's ratable share (based on the proportion that its Commitment
bears to the aggregate Commitments) of the average daily aggregate Unutilized
Commitments, payable in arrears (i) on the last Business Day of each calendar
quarter, beginning with the first such day to occur after the Closing Date, and
(ii) on the Termination Date;
(c) To the Agent, for the account of each Lender, a letter of credit fee
for each calendar quarter (or portion thereof) in respect of all Letters of
Credit outstanding during such quarter, at a per annum rate equal to the
Applicable Margin Percentage in effect from time to time during such quarter for
Loans that are maintained as LIBOR Loans, on such Lender's ratable share (based
on the proportion that its Commitment bears to the aggregate Commitments) of the
daily average aggregate Stated Amount of such Letters of Credit, payable in
arrears (i) on the last Business Day of each calendar quarter, beginning with
the first such day to occur after the Closing Date, and (ii) on the later of the
Termination Date and the date of termination of the last outstanding Letter of
Credit;
(d) To the Issuing Lender, for its own account, the facing fee described in
the Fee Letter, on the terms, in the amounts and at the times set forth therein;
(e) To the Issuing Lender, for its own account, such commissions, issuance
fees, transfer fees and other fees and charges incurred in connection with the
issuance and administration of each Letter of Credit as are customarily charged
from time to time by the Issuing Lender for the performance of such services in
connection with similar letters of credit,
28
or as may be otherwise agreed to by the Issuing Lender, but without duplication
of amounts payable under subsection (d) above; and
(f) If, at any time, there is a Lender other than First Union or any
Affiliate thereof, to the Agent, for its own account, the annual administrative
fee, in the amount and at the times agreed to at such time by the Borrower and
the Agent.
2.10 Interest Periods. Concurrently with the giving of a Notice of
Borrowing or Notice of Conversion/Continuation in respect of any Borrowing
comprised of Base Rate Loans to be converted into, or LIBOR Loans to be
continued as, LIBOR Loans, the Borrower shall have the right to elect, pursuant
to such notice, the interest period (each, an "Interest Period") to be
applicable to such LIBOR Loans, which Interest Period shall, at the option of
the Borrower, be a one, two, three or six-month period; provided, however, that:
(i) all LIBOR Loans comprising a single Borrowing shall at all times
have the same Interest Period;
(ii) the initial Interest Period for any LIBOR Loan shall commence on
the date of the Borrowing of such LIBOR Loan (including the date of any
continuation of, or conversion into, such LIBOR Loan), and each successive
Interest Period applicable to such LIBOR Loan shall commence on the day on
which the next preceding Interest Period applicable thereto expires;
(iii) LIBOR Loans may not be outstanding under more than five (5)
separate Interest Periods at any one time (for which purpose Interest
Periods shall be deemed to be separate even if they are coterminous);
(iv) if any Interest Period otherwise would expire on a day that is
not a Business Day, such Interest Period shall expire on the next
succeeding Business Day unless such next succeeding Business Day falls in
another calendar month, in which case such Interest Period shall expire on
the next preceding Business Day;
(v) the Borrower may not select any Interest Period that begins prior
to the Closing Date or that expires after the Maturity Date;
(vi) no Interest Period may be selected that would end after a
scheduled date for repayment of principal of the Loans occurring on or
after the first day of such Interest Period unless, immediately after
giving effect to such selection, the aggregate principal amount of Loans
that are Base Rate Loans or that have Interest Periods expiring on or
before such principal repayment date equals or exceeds the principal amount
required to be paid on such principal repayment date;
(vii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month during which such
Interest Period would otherwise expire, such Interest Period shall expire
on the last Business Day of such calendar month; and
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(viii) if, upon the expiration of any Interest Period applicable to a
Borrowing of LIBOR Loans, the Borrower shall have failed to elect a new
Interest Period to be applicable to such LIBOR Loans, then the Borrower
shall be deemed to have elected to convert such LIBOR Loans into Base Rate
Loans as of the expiration of the then current Interest Period applicable
thereto.
2.11 Conversions and Continuations. (a) The Borrower shall have the right,
on any Business Day occurring on or after the Closing Date, to elect (i) to
convert all or a portion of the outstanding principal amount of any Base Rate
Loans into LIBOR Loans, or to convert any LIBOR Loans the Interest Periods for
which end on the same day into Base Rate Loans, or (ii) to continue all or a
portion of the outstanding principal amount of any LIBOR Loans the Interest
Periods for which end on the same day for an additional Interest Period,
provided that (x) any such conversion of LIBOR Loans into Base Rate Loans shall
involve an aggregate principal amount of not less than $1,000,000 or, if
greater, an integral multiple of $500,000 in excess thereof; any such conversion
of Base Rate Loans into, or continuation of, LIBOR Loans shall involve an
aggregate principal amount of not less than $1,000,000 or, if greater, an
integral multiple of $500,000 in excess thereof; and no partial conversion of
LIBOR Loans made pursuant to a single Borrowing shall reduce the outstanding
principal amount of such LIBOR Loans to less than $1,000,000 or to any greater
amount not an integral multiple of $500,000 in excess thereof, (y) except as
otherwise provided in Section 2.16(d), LIBOR Loans may be converted into Base
Rate Loans only on the last day of the Interest Period applicable thereto (and,
in any event, if a LIBOR Loan is converted into a Base Rate Loan on any day
other than the last day of the Interest Period applicable thereto, the Borrower
will pay, upon such conversion, all amounts required under Section 2.18 to be
paid as a consequence thereof), and (z) no conversion of Base Rate Loans into
LIBOR Loans or continuation of LIBOR Loans shall be permitted during the
continuance of a Default or Event of Default.
(b) The Borrower shall make each such election by giving the Agent written
notice not later than 11:00 a.m., Charlotte time, three (3) Business Days prior
to the intended effective date of any conversion of Base Rate Loans into, or
continuation of, LIBOR Loans and one (1) Business Day prior to the intended
effective date of any conversion of LIBOR Loans into Base Rate Loans. Each such
notice (each, a "Notice of Conversion/Continuation") shall be irrevocable, shall
be given in the form of Exhibit B-2 and shall specify (x) the date of such
conversion or continuation (which shall be a Business Day), (y) in the case of a
conversion into, or a continuation of, LIBOR Loans, the Interest Period to be
applicable thereto, and (z) the aggregate amount and Type of the Loans being
converted or continued. Upon the receipt of a Notice of Conversion/Continuation,
the Agent will promptly notify each Lender of the proposed conversion or
continuation. In the event that the Borrower shall fail to deliver a Notice of
Conversion/Continuation as provided herein with respect to any outstanding LIBOR
Loans, such LIBOR Loans shall automatically be converted to Base Rate Loans upon
the expiration of the then current Interest Period applicable thereto (unless
repaid pursuant to the terms hereof). In the event the Borrower shall have
failed to select in a Notice of Conversion/Continuation the duration of the
Interest Period to be applicable to any conversion into, or continuation of,
LIBOR Loans, then the Borrower shall be deemed to have selected an Interest
Period with a duration of one month.
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2.12 Method of Payments; Computations. (a) All payments by the Borrower
hereunder shall be made without setoff, counterclaim or other defense, in
Dollars and in immediately available funds to the Agent, for the account of the
Lenders entitled to such payment (except as otherwise expressly provided herein
as to payments required to be made directly to the Issuing Lender and the
Lenders) at its office referred to in Section 11.5, prior to 12:00 noon,
Charlotte time, on the date payment is due. Any payment made as required
hereinabove, but after 12:00 noon, Charlotte time, shall be deemed to have been
made on the next succeeding Business Day. If any payment falls due on a day that
is not a Business Day, then such due date shall be extended to the next
succeeding Business Day (except that in the case of LIBOR Loans to which the
provisions of clause (iv) in Section 2.10 are applicable, such due date shall be
the next preceding Business Day), and such extension of time shall then be
included in the computation of payment of interest, fees or other applicable
amounts.
(b) The Agent will distribute to the Lenders like amounts relating to
payments made to the Agent for the account of the Lenders as follows: (i) if the
payment is received by 12:00 noon, Charlotte time, in immediately available
funds, the Agent will make available to each relevant Lender on the same date,
by wire transfer of immediately available funds, such Lender's ratable share of
such payment (based on the percentage that the amount of the relevant payment
owing to such Lender bears to the total amount of such payment owing to all of
the relevant Lenders), and (ii) if such payment is received after 12:00 noon,
Charlotte time, or in other than immediately available funds, the Agent will
make available to each such Lender its ratable share of such payment by wire
transfer of immediately available funds on the next succeeding Business Day (or
in the case of uncollected funds, as soon as practicable after collected). If
the Agent shall not have made a required distribution to the appropriate Lenders
as required hereinabove after receiving a payment for the account of such
Lenders, the Agent will pay to each such Lender, on demand, its ratable share of
such payment with interest thereon at the Federal Funds Rate for each day from
the date such amount was required to be disbursed by the Agent until the date
repaid to such Lender. The Agent will distribute to the Issuing Lender like
amounts relating to payments made to the Agent for the account of the Issuing
Lender in the same manner, and subject to the same terms and conditions, as set
forth hereinabove with respect to distributions of amounts to the Lenders.
(c) Unless the Agent shall have received written notice from the Borrower
prior to the date on which any payment is due to any Lender hereunder that such
payment will not be made in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date, and the Agent may, in
reliance on such assumption, but shall not be obligated to, cause to be
distributed to such Lender on such due date an amount equal to the amount then
due to such Lender. If and to the extent the Borrower shall not have so made
such payment in full to the Agent, and without limiting the obligation of the
Borrower to make such payment in accordance with the terms hereof, such Lender
shall repay to the Agent forthwith on demand such amount so distributed to such
Lender, together with interest thereon for each day from the date such amount is
so distributed to such Lender until the date repaid to the Agent, at the Federal
Funds Rate.
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(d) All computations of interest and fees hereunder (including computations
of the Reserve Requirement) shall be made on the basis of a year consisting of
365 or 366 days, as the case may be (in the case of interest on Base Rate Loans
and the facing fee described in Section 2.9(d)), or 360 days (in all other
instances), and the actual number of days (including the first day, but
excluding the last day) elapsed.
2.13 Recovery of Payments. (a) The Borrower agrees that to the extent the
Borrower makes a payment or payments to or for the account of the Agent, any
Lender or the Issuing Lender, which payment or payments or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy, insolvency or similar state or federal law, common law or equitable
cause, then, to the extent of such payment or repayment, the Obligation intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been received.
(b) If any amounts distributed by the Agent to any Lender are subsequently
returned or repaid by the Agent to the Borrower or its representative or
successor in interest, whether by court order or by settlement approved by the
Lender in question, such Lender will, promptly upon receipt of notice thereof
from the Agent, pay the Agent such amount. If any such amounts are recovered by
the Agent from the Borrower or its representative or successor in interest, the
Agent will redistribute such amounts to the Lenders on the same basis as such
amounts were originally distributed.
2.14 Use of Proceeds. The proceeds of the Loans shall be used for working
capital and general corporate purposes and in accordance with the terms and
provisions of this Agreement (including to finance Permitted Acquisitions in
accordance with the terms and provisions of this Agreement, including, without
limitation, the provisions set forth in Section 6.9).
2.15 Pro Rata Treatment. (a) All fundings, continuations and conversions of
Loans shall be made by the Lenders pro rata on the basis of their respective
Commitments (in the case of the initial funding of Loans pursuant to Section
2.2) or on the basis of their respective outstanding Loans (in the case of
continuations and conversions of Loans pursuant to Section 2.11, and
additionally in all cases in the event the Commitments have expired or have been
terminated), as the case may be from time to time. All payments on account of
principal of or interest on any Loans, fees or any other Obligations owing to or
for the account of any one or more Lenders shall be apportioned ratably among
such Lenders in proportion to the amounts of such principal, interest, fees or
other Obligations owed to them respectively.
(b) Each Lender agrees that if it shall receive any amount hereunder
(whether by voluntary payment, realization upon security, exercise of the right
of setoff or banker's lien, counterclaim or cross action, or otherwise, other
than pursuant to or Section 11.7) applicable to the payment of any of the
Obligations that exceeds its ratable share (according to the proportion of (i)
the amount of such Obligations due and payable to such Lender at such time to
(ii) the aggregate amount of such Obligations due and payable to all Lenders at
such time) of payments on account of such Obligations then or therewith obtained
by all the Lenders to which such payments are required to have been made, such
Lender shall forthwith purchase from the other Lenders such participations in
such Obligations as shall be necessary to cause such purchasing
32
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each such
other Lender shall be rescinded and each such other Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery, together
with an amount equal to such other Lender's ratable share (according to the
proportion of (i) the amount of such other Lender's required repayment to (ii)
the total amount so recovered from the purchasing Lender) of any interest or
other amount paid or payable by the purchasing Lender in respect of the total
amount so recovered. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to the provisions of this subsection
may, to the fullest extent permitted by law, exercise any and all rights of
payment (including, without limitation, setoff, banker's lien or counterclaim)
with respect to such participation as fully as if such participant were a direct
creditor of the Borrower in the amount of such participation. If under any
applicable bankruptcy, insolvency or similar law, any Lender receives a secured
claim in lieu of a setoff to which this subsection applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured claim
in a manner consistent with the rights of the Lenders entitled under this
subsection to share in the benefits of any recovery on such secured claim.
2.16 Increased Costs; Change in Circumstances; Illegality; etc. (a) If, at
any time after the date hereof and from time to time, the introduction of or any
change in any applicable law, rule or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof, or compliance by any Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject such Lender to any tax or other charge, or
change the basis of taxation of payments to such Lender, in respect of any of
its LIBOR Loans or any other amounts payable hereunder or its obligation to
make, fund or maintain any LIBOR Loans (other than any change in the rate or
basis of tax on the overall net income of such Lender or its applicable Lending
Office), (ii) impose, modify or deem applicable any reserve, special deposit or
similar requirement (other than as a result of any change in the Reserve
Requirement) against assets of, deposits with or for the account of, or credit
extended by, such Lender or its applicable Lending Office, or (iii) impose on
such Lender or its applicable Lending Office any other condition, and the result
of any of the foregoing shall be to increase the cost to such Lender of making
or maintaining any LIBOR Loans or issuing or participating in Letters of Credit
or to reduce the amount of any sum received or receivable by such Lender
hereunder (including in respect of Letters of Credit), the Borrower will,
promptly upon demand therefor by such Lender, pay to such Lender such additional
amounts as shall compensate such Lender for such increase in costs or reduction
in return.
(b) If, at any time after the date hereof and from time to time, any Lender
shall have reasonably determined that the introduction of or any change in any
applicable law, rule or regulation regarding capital adequacy or in the
interpretation or administration thereof by any Governmental Authority charged
with the interpretation or administration thereof, or compliance by such Lender
with any guideline or request from any such Governmental Authority (whether or
not having the force of law), has or would have the effect, as a consequence of
such Lender's Commitment, Loans or issuance of or participations in Letters of
Credit hereunder, of reducing the rate of return on the capital of such Lender
or any Person controlling such Lender to a level
33
below that which such Lender or controlling Person could have achieved but for
such introduction, change or compliance (taking into account such Lender's or
controlling Person's policies with respect to capital adequacy), the Borrower
will, promptly upon demand therefor by such Lender therefor, pay to such Lender
such additional amounts as will compensate such Lender or controlling Person for
such reduction in return.
(c) If, on or prior to the first day of any Interest Period, (y) the Agent
shall have determined that adequate and reasonable means do not exist for
ascertaining the applicable LIBOR Rate for such Interest Period or (z) the Agent
shall have received written notice from the Required Lenders of their
determination that the rate of interest referred to in the definition of "LIBOR
Rate" upon the basis of which the Adjusted LIBOR Rate for LIBOR Loans for such
Interest Period is to be determined will not adequately and fairly reflect the
cost to such Lenders of making or maintaining LIBOR Loans during such Interest
Period, the Agent will forthwith so notify the Borrower and the Lenders. Upon
such notice, (i) all then outstanding LIBOR Loans shall automatically, on the
expiration date of the respective Interest Periods applicable thereto (unless
then repaid in full), be converted into Base Rate Loans, (ii) the obligation of
the Lenders to make, to convert Base Rate Loans into, or to continue, LIBOR
Loans shall be suspended (including pursuant to the Borrowing to which such
Interest Period applies), and (iii) any Notice of Borrowing or Notice of
Conversion/Continuation given at any time thereafter with respect to LIBOR Loans
shall be deemed to be a request for Base Rate Loans, in each case until the
Agent or the Required Lenders, as the case may be, shall have determined that
the circumstances giving rise to such suspension no longer exist (and the
Required Lenders, if making such determination, shall have so notified the
Agent), and the Agent shall have so notified the Borrower and the Lenders.
(d) Notwithstanding any other provision in this Agreement, if, at any time
after the date hereof and from time to time, any Lender shall have determined in
good faith that the introduction of or any change in any applicable law, rule or
regulation or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance with any guideline or request from any such Governmental
Authority (whether or not having the force of law), has or would have the effect
of making it unlawful for such Lender to make or to continue to make or maintain
LIBOR Loans, such Lender will forthwith so notify the Agent and the Borrower.
Upon such notice, (i) each of such Lender's then outstanding LIBOR Loans shall
automatically, on the expiration date of the respective Interest Period
applicable thereto (or, to the extent any such LIBOR Loan may not lawfully be
maintained as a LIBOR Loan until such expiration date, upon such notice), be
converted into a Base Rate Loan, (ii) the obligation of such Lender to make, to
convert Base Rate Loans into, or to continue, LIBOR Loans shall be suspended
(including pursuant to any Borrowing for which the Agent has received a Notice
of Borrowing but for which the Borrowing Date has not arrived), and (iii) any
Notice of Borrowing or Notice of Conversion/Continuation given at any time
thereafter with respect to LIBOR Loans shall, as to such Lender, be deemed to be
a request for a Base Rate Loan, in each case until such Lender shall have
reasonably determined that the circumstances giving rise to such suspension no
longer exist and shall have so notified the Agent, and the Agent shall have so
notified the Borrower (and the Lenders and Agent shall act with reasonable
promptness in giving such notices).
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(e) Determinations by the Agent or any Lender for purposes of this Section
of any increased costs, reduction in return, market contingencies, illegality or
any other matter shall, absent manifest error, be conclusive, provided that such
determinations are made in good faith and documented in reasonable detail in a
certificate to the Borrower. Each Lender, upon determining that any amounts will
be payable pursuant to this Section 2.16, will give prompt written notice
thereof to the Borrower, 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 2.16; provided, however, that if any Lender has
intentionally or unreasonably withheld or delayed such notice, such Lender shall
not be entitled to receive additional amounts pursuant to this Section 2.16 for
periods occurring prior to the 180th day before the giving of such notice. Each
Lender agrees that in making the determinations and giving notices described in
this Section 2.16, such Lender shall not discriminate against the Borrower
compared with borrowers under credit facilities of similar sizes. Nothing in
this Section shall require or be construed to require the Borrower to pay any
interest, fees, costs or other amounts in excess of that permitted by applicable
law.
2.17 Taxes. (a) Any and all payments by the Borrower hereunder or under any
Note shall be made, in accordance with the terms hereof and thereof, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, other than net income and franchise taxes imposed on the Agent or any
Lender by the United States or by the jurisdiction under the laws of which the
Agent or such Lender, as the case may be, is organized or in which its principal
office or (in the case of a Lender) its applicable Lending Office is located, or
any political subdivision or taxing authority thereof (all such nonexcluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to the Agent or any Lender, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section), the Agent or such
Lender, as the case may be, receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower will make such
deductions, (iii) the Borrower will pay the full amount deducted to the relevant
taxation authority or other authority in accordance with applicable law and (iv)
the Borrower will deliver to the Agent or such Lender, as the case may be,
evidence of such payment.
(b) The Borrower will indemnify the Agent and each Lender for the full
amount of Taxes (including, without limitation, any Taxes imposed by any
jurisdiction on amounts payable under this Section) paid by the Agent or such
Lender, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
were correctly or legally asserted. This indemnification shall be made within 30
days from the date the Agent or such Lender, as the case may be, makes written
demand therefor.
(c) Each of the Agent and the Lenders agrees that if it subsequently
recovers, or receives a permanent net tax benefit with respect to, any amount of
Taxes (i) previously paid by it and as to which it has been indemnified by or on
behalf of the Borrower or (ii) previously deducted by the Borrower (including,
without limitation, any Taxes deducted from any additional sums payable under
clause (i) of subsection (a) above), the Agent or such Lender, as
35
the case may be, shall reimburse the Borrower to the extent of the amount of any
such recovery or permanent net tax benefit (but only to the extent of indemnity
payments made, or additional amounts paid, by or on behalf of the Borrower under
this Section with respect to the Taxes giving rise to such recovery or tax
benefit, together with the amount recovered by the Agent or such Lender as
interest attributable to the amount to be reimbursed to the Borrower hereunder);
provided, however, that the Borrower, upon the request of the Agent or such
Lender, agrees to repay to the Agent or such Lender, as the case may be, the
amount paid over to the Borrower (together with any penalties, interest or other
charges), in the event the Agent or such Lender is required to repay such amount
and/or such penalties, interest or other charges, as the case may be, to the
relevant taxing authority or other Governmental Authority. The determination by
the Agent or any Lender of the amount of any such recovery or permanent net tax
benefit shall be, in the absence of manifest error, be conclusive and binding,
provided such determination is made in good faith and documented in reasonable
detail in a certificate to the Borrower.
(d) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender") and claims exemption from United States withholding tax
pursuant to the Internal Revenue Code, such Non-U.S. Lender will deliver to each
of the Agent and the Borrower, on or prior to the Closing Date (or, in the case
of a Non-U.S. Lender that becomes a party to this Agreement as a result of an
assignment after the Closing Date, on the effective date of such assignment),
(i) in the case of a Non-U.S. Lender that is a "bank" for purposes of Section
881(c)(3)(A) of the Internal Revenue Code, a properly completed Internal Revenue
Service Form 4224 or 1001, as applicable (or successor forms), certifying that
such Non-U.S. Lender is entitled to an exemption from or a reduction of
withholding or deduction for or on account of United States federal income taxes
in connection with payments under this Agreement or any of the Notes, together
with a properly completed Internal Revenue Service Form W-8 or W-9, as
applicable (or successor forms), and (ii) in the case of a Non-U.S. Lender that
is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal Revenue
Code, a certificate in form and substance reasonably satisfactory to the Agent
and the Borrower and to the effect that (x) such Non-U.S. Lender is not a "bank"
for purposes of Section 881(c)(3)(A) of the Internal Revenue Code, is not
subject to regulatory or other legal requirements as a bank in any jurisdiction,
and has not been treated as a bank for purposes of any tax, securities law or
other filing or submission made to any governmental authority, any application
made to a rating agency or qualification for any exemption from any tax,
securities law or other legal requirements, (y) is not a 10-percent shareholder
for purposes of Section 881(c)(3)(B) of the Internal Revenue Code and (z) is not
a controlled foreign corporation receiving interest from a related person for
purposes of Section 881(c)(3)(C) of the Internal Revenue Code, together with a
properly completed Internal Revenue Service Form W-8 or W-9, as applicable (or
successor forms). Each such Non-U.S. Lender further agrees to deliver to each of
the Agent and the Borrower an additional copy of each such relevant form on or
before the date that such form expires or becomes obsolete or after the
occurrence of any event (including a change in its applicable Lending Office)
requiring a change in the most recent forms so delivered by it, in each case
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States federal
income taxes in connection with payments under this Agreement or any of the
Notes, unless an event (including, without limitation, any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required, which event renders all such forms
36
inapplicable or the exemption to which such forms relate unavailable and such
Non-U.S. Lender notifies the Agent and the Borrower that it is not entitled to
receive payments without deduction or withholding of United States federal
income taxes. Each such Non-U.S. Lender will promptly notify the Agent and the
Borrower of any changes in circumstances that would modify or render invalid any
claimed exemption or reduction.
(e) If any Lender is entitled to a reduction in (and not a complete
exemption from) the applicable withholding tax, the Borrower and the Agent may
withhold from any interest payment to such Lender an amount equivalent to the
applicable withholding tax after taking into account such reduction. If any of
the forms or other documentation required under subsection (d) above are not
delivered to the Agent as therein required or if a Non-U.S. Lender is not
entitled to receive payments without deduction or withholding, then the Borrower
and the Agent may withhold from any interest payment to such Lender not
providing such forms or other documentation an amount equivalent to the
applicable withholding tax.
2.18 Compensation. The Borrower will compensate each Lender upon demand for
all 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 Lender to fund or maintain LIBOR Loans)
that such Lender may incur or sustain (i) if for any reason (other than a
default by such Lender) a Borrowing or continuation of, or conversion into, a
LIBOR Loan does not occur on a date specified therefor in a Notice of Borrowing
or Notice of Conversion/Continuation, (ii) if any repayment, prepayment or
conversion of any LIBOR Loan occurs on a date other than the last day of an
Interest Period applicable thereto (including as a consequence of acceleration
of the maturity of the Loans pursuant to Section 9.2), (iii) if any prepayment
of any LIBOR Loan is not made on any date specified in a notice of prepayment
given by the Borrower or (iv) as a consequence of any other failure by the
Borrower to make any payments with respect to any LIBOR Loan when due hereunder.
Calculation of all amounts payable to a Lender under this Section shall be made
as though such Lender had actually funded its relevant LIBOR Loan through the
purchase of a Eurodollar deposit bearing interest at the LIBOR Rate in an amount
equal to the amount of such LIBOR Loan, having a maturity comparable to the
relevant Interest Period; provided, however, that each Lender may fund its LIBOR
Loans in any manner it sees fit and the foregoing assumption shall be utilized
only for the calculation of amounts payable under this Section. Determinations
by any Lender for purposes of this Section of any such losses, expenses or
liabilities shall, absent manifest error, be conclusive, provided that such
determinations are made in good faith and documented in reasonable detail in a
certificate delivered to the Borrower.
ARTICLE III
LETTERS OF CREDIT
3.1 Issuance. Subject to and upon the terms and conditions herein set
forth, so long as no Default or Event of Default has occurred and is continuing,
the Issuing Lender will, at any time and from time to time on and after the
Closing Date and prior to the earlier of (i) the seventh day prior to the
Maturity Date and (ii) the Termination Date, and upon request by the Borrower
37
in accordance with the provisions of Section 3.2, issue for the account of PAIC
one or more irrevocable standby letters of credit denominated in Dollars and in
a form customarily used or otherwise approved by the Issuing Lender (together
with all amendments, modifications and supplements thereto, substitutions
therefor and renewals and restatements thereof, collectively, the "Letters of
Credit"). The Stated Amount of each Letter of Credit shall not be less than such
amount as may be reasonably acceptable to the Issuing Lender. Notwithstanding
the foregoing:
(a) No Letter of Credit shall be issued the Stated Amount upon issuance of
which (i) when added to the aggregate Letter of Credit Exposure of the Lenders
at such time, would exceed $1,000,000 or (ii) when added to the sum of (y) the
aggregate Letter of Credit Exposure of all Lenders at such time and (z) the
aggregate principal amount of all Loans then outstanding, would exceed the
aggregate Commitments at such time;
(b) No Letter of Credit shall be issued that by its terms expires later
than the seventh day prior to the Maturity Date or, in any event, more than one
(1) year after its date of issuance; provided, however, that a Letter of Credit
may, if requested by the Borrower, provide by its terms, and on terms acceptable
to the Issuing Lender, for renewal for successive periods of one year or less
(but not beyond the seventh day prior to the Maturity Date), unless and until
the Issuing Lender shall have delivered a notice of nonrenewal to the
beneficiary of such Letter of Credit; and
(c) The Issuing Lender shall be under no obligation to issue any Letter of
Credit if, at the time of such proposed issuance, (i) any order, judgment or
decree of any Governmental Authority or arbitrator shall purport by its terms to
enjoin or restrain the Issuing Lender from issuing such Letter of Credit, or any
Requirement of Law applicable to the Issuing Lender or any request or directive
(whether or not having the force of law) from any Governmental Authority with
jurisdiction over the Issuing Lender shall prohibit, or request that the Issuing
Lender refrain from, the issuance of letters of credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Lender with respect to
such Letter of Credit any restriction or reserve or capital requirement (for
which the Issuing Lender is not otherwise compensated) not in effect on the
Closing Date, or any unreimbursed loss, cost or expense that was not applicable,
in effect or known to the Issuing Lender as of the Closing Date and that the
Issuing Lender in good xxxxx xxxxx material to it, or (ii) the Issuing Lender
shall have actual knowledge, or shall have received notice from any Lender,
prior to the issuance of such Letter of Credit that one or more of the
conditions specified in Sections 4.1 (if applicable) or 4.2 are not then
satisfied and/or have not been waived in writing as required herein or that the
issuance of such Letter of Credit would violate the provisions of subsection (a)
above.
3.2 Notices. Whenever PAIC desires the issuance of a Letter of Credit, the
Borrower will give the Issuing Lender written notice with a copy to the Agent
not later than 11:00 a.m., Charlotte time, three (3) Business Days (or such
shorter period as is acceptable to the Issuing Lender in its sole discretion in
any given case) prior to the requested date of issuance thereof. Each such
notice (each, a "Letter of Credit Notice") shall be irrevocable, shall be given
in the form of Exhibit B-3 and shall specify (i) the requested date of issuance,
which shall be a Business Day, (ii) the requested Stated Amount and expiry date
of the Letter of Credit, and (iii) the name and address of the requested
beneficiary or beneficiaries of the Letter of Credit.
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The Borrower will also complete (and if requested by the Issuing Lender, the
Borrower will cause PAIC to complete jointly with the Borrower) any application
procedures and documents required by the Issuing Lender in connection with the
issuance of any Letter of Credit. Upon its issuance of any Letter of Credit, the
Issuing Lender will promptly notify the Agent of such issuance, and the Agent
will give prompt notice thereof to each Lender.
3.3 Participations. Immediately upon the issuance of any Letter of Credit,
the Issuing Lender shall be deemed to have sold and transferred to each Lender,
and each Lender shall be deemed irrevocably and unconditionally to have
purchased and received from the Issuing Lender, without recourse or warranty, an
undivided interest and participation, pro rata (based on the percentage of the
aggregate Commitments represented by such Lender's Commitment), in such Letter
of Credit, each drawing made thereunder and the obligations of the Borrower
under this Agreement with respect thereto and any security therefor or guaranty
pertaining thereto; provided, however, that the fee relating to Letters of
Credit described in Section 2.9(d) shall be payable directly to the Issuing
Lender as provided therein, and the Lenders shall have no right to receive any
portion thereof. Upon any change in the Commitments of any of the Lenders
pursuant to Section 11.7(a), with respect to all outstanding Letters of Credit
and Reimbursement Obligations there shall be an automatic adjustment to the
participations pursuant to this Section to reflect the new pro rata shares of
the assigning Lender and the Assignee.
3.4 Reimbursement. The Borrower hereby agrees to reimburse the Issuing
Lender by making payment to the Agent, for the account of the Issuing Lender, in
immediately available funds, for any payment made by the Issuing Lender under
any Letter of Credit (each such amount so paid until reimbursed, together with
interest thereon payable as provided hereinbelow, a "Reimbursement Obligation")
immediately after, and in any event within one (1) Business Day after its
receipt of notice of, such payment (provided that any such Reimbursement
Obligation shall be deemed timely satisfied (but nevertheless subject to the
payment of interest thereon as provided hereinbelow) if satisfied pursuant to a
Borrowing of Loans made on or prior to the next Business Day following the date
of the Borrower's receipt of notice of such payment), together with interest on
the amount so paid by the Issuing Lender, to the extent not reimbursed prior to
1:00 p.m., Charlotte time, on the date of such payment or disbursement, for the
period from the date of the respective payment to the date the Reimbursement
Obligation created thereby is satisfied, at the Adjusted Base Rate applicable to
Loans as in effect from time to time during such period, such interest also to
be payable on demand. The Issuing Lender will provide the Agent and the Borrower
with prompt notice of any payment or disbursement made under any Letter of
Credit, although the failure to give, or any delay in giving, any such notice
shall not release, diminish or otherwise affect the Borrower's obligations under
this Section or any other provision of this Agreement. The Agent will promptly
pay to the Issuing Lender any such amounts received by it under this Section.
3.5 Payment by Loans. In the event that the Issuing Lender makes any
payment under any Letter of Credit and the Borrower shall not have timely
satisfied in full its Reimbursement Obligation to the Issuing Lender pursuant to
Section 3.4, and to the extent that any amounts then held in the Cash Collateral
Account established pursuant to Section 3.8 shall be insufficient to satisfy
such Reimbursement Obligation in full, the Issuing Lender will promptly notify
the Agent, and the Agent will promptly notify each Lender, of such failure. If
39
the Agent gives such notice prior to 11:00 a.m., Charlotte time, on any Business
Day, each Lender will make available to the Agent, for the account of the
Issuing Lender, its pro rata share (based on the percentage of the aggregate
Commitments represented by such Lender's Commitment) of the amount of such
payment on such Business Day in immediately available funds. If the Agent gives
such notice after 11:00 a.m., Charlotte time, on any Business Day, each such
Lender shall make its pro rata share of such amount available to the Agent on
the next succeeding Business Day. If and to the extent any Lender shall not have
so made its pro rata share of the amount of such payment available to the Agent,
such Lender agrees to pay to the Agent, for the account of the Issuing Lender,
forthwith on demand such amount, together with interest thereon at the Federal
Funds Rate for each day from such date until the date such amount is paid to the
Agent. The failure of any Lender to make available to the Agent its pro rata
share of any payment under any Letter of Credit shall not relieve any other
Lender of its obligation hereunder to make available to the Agent its pro rata
share of any payment under any Letter of Credit on the date required, as
specified above, but no Lender shall be responsible for the failure of any other
Lender to make available to the Agent such other Lender's pro rata share of any
such payment. Each such payment by a Lender under this Section of its pro rata
share of an amount paid by the Issuing Lender shall constitute a Loan by such
Lender (the Borrower being deemed to have given a timely Notice of Borrowing
therefor) and shall be treated as such for all purposes of this Agreement;
provided that for purposes of determining the aggregate Unutilized Commitments
immediately prior to giving effect to the application of the proceeds of such
Loans, the Reimbursement Obligation being satisfied thereby shall be deemed not
to be outstanding at such time.
3.6 Payment to Lenders. Whenever the Issuing Lender receives a payment in
respect of a Reimbursement Obligation as to which the Agent has received, for
the account of the Issuing Lender, any payments from the Lenders pursuant to
Section 3.5, the Issuing Lender will promptly pay to the Agent, and the Agent
will promptly pay to each Lender that has paid its pro rata share thereof, in
immediately available funds, an amount equal to such Lender's ratable share
(based on the proportionate amount funded by such Lender to the aggregate amount
funded by all Lenders) of such Reimbursement Obligation.
3.7 Obligations Absolute. The Reimbursement Obligations of the Borrower,
and the obligations of the Lenders under Section 3.5 to make payments to the
Agent, for the account of the Issuing Lender, with respect to Letters of Credit,
shall be irrevocable, shall remain in effect until the Issuing Lender shall have
no further obligations to make any payments or disbursements under any
circumstances with respect to any Letter of Credit, and, except to the extent
resulting from any gross negligence or willful misconduct on the part of the
Issuing Lender, shall be absolute and unconditional, shall not be subject to
counterclaim, setoff or other defense or any other qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement under all circumstances, including, without limitation, any of the
following circumstances:
(a) Any lack of validity or enforceability of this Agreement, any of the
other Credit Documents or any documents or instruments relating to any Letter of
Credit;
40
(b) Any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations in respect of any Letter of Credit or any
other amendment, modification or waiver of or any consent to departure from any
Letter of Credit or any documents or instruments relating thereto, in each case
whether or not the Borrower has notice or knowledge thereof;
(c) The existence of any claim, setoff, defense or other right that the
Borrower may have at any time against a beneficiary named in a Letter of Credit,
any transferee of any Letter of Credit (or any Person for whom any such
transferee may be acting), the Agent, the Issuing Lender, any Lender or other
Person, whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated hereby or any unrelated transactions (including any
underlying transaction between PAIC and the beneficiary named in any such Letter
of Credit);
(d) Any draft, certificate or any other document presented under the Letter
of Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect
(provided that such draft, certificate or other document appears on its face to
comply with the terms of such Letter of Credit), any errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
telecopier or otherwise, or any errors in translation or in interpretation of
technical terms;
(e) Any defense based upon the failure of any drawing under a Letter of
Credit to conform to the terms of the Letter of Credit (provided that any draft,
certificate or other document presented pursuant to such Letter of Credit
appears on its face to comply with the terms thereof), any nonapplication or
misapplication by the beneficiary or any transferee of the proceeds of such
drawing or any other act or omission of such beneficiary or transferee in
connection with such Letter of Credit;
(f) The exchange, release, surrender or impairment of any security for the
Obligations;
(g) The occurrence of any Default or Event of Default; or
(h) Any other circumstance or event whatsoever, including, without
limitation, any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor.
Any action taken or omitted to be taken by the Issuing Lender under or in
connection with any Letter of Credit, if taken or omitted in the absence of
gross negligence or willful misconduct, shall be binding upon the Borrower and
each Lender and shall not create or result in any liability of the Issuing
Lender to the Borrower or any Lender. It is expressly understood and agreed
that, for purposes of determining whether a wrongful payment under a Letter of
Credit resulted from the Issuing Lender's gross negligence or willful
misconduct, (i) the Issuing Lender's acceptance of documents that appear on
their face to comply with the terms of such Letter of Credit, without
responsibility for further investigation, regardless of any notice or
information to the contrary, (ii) the Issuing Lender's exclusive reliance on the
documents presented to it under such Letter of Credit as to any and all matters
set forth therein, including the amount of any draft presented
41
under such Letter of Credit, whether or not the amount due to the beneficiary
thereunder equals the amount of such draft and whether or not any document
presented pursuant to such Letter of Credit proves to be insufficient in any
respect (so long as such document appears on its face to comply with the terms
of such Letter of Credit), and whether or not any other statement or any other
document presented pursuant to such Letter of Credit proves to be forged or
invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever, and (iii) any noncompliance in any immaterial respect of the
documents presented under such Letter of Credit with the terms thereof shall, in
each case, be deemed not to constitute gross negligence or willful misconduct of
the Issuing Lender.
3.8 Cash Collateral Account. At any time and from time to time (i) after
the occurrence and during the continuance of an Event of Default, the Agent, at
the direction or with the consent of the Required Lenders, may require the
Borrower to deliver to the Agent such additional amount of cash as is equal to
the aggregate Stated Amount of all Letters of Credit at any time outstanding
(whether or not any beneficiary under any Letter of Credit shall have drawn or
be entitled at such time to draw thereunder) and (ii) in the event of a
prepayment under Section 2.6(b), or to the extent any amount of a required
prepayment under Section 2.6(c) remains after prepayment of all outstanding
Loans and Reimbursement Obligations , as contemplated by such subsections, the
Agent will retain such amount as may then be required to be retained, such
amounts in each case under clauses (i) and (ii) above to be held by the Agent in
a cash collateral account (the "Cash Collateral Account"). The Borrower hereby
grants to the Agent, for the benefit of the Issuing Lender and the Lenders, a
Lien upon and security interest in the Cash Collateral Account and all amounts
held therein from time to time as security for Letter of Credit Exposure, and
for application to the Borrower's Reimbursement Obligations as and when the same
shall arise. The Agent shall have exclusive dominion and control, including the
exclusive right of withdrawal, over such account. Other than any interest on the
investment of such amounts in Cash Equivalents, which investments shall be made
at the direction of the Borrower (unless a Default or Event of Default shall
have occurred and be continuing, in which case the determination as to
investments shall be made at the option and in the discretion of the Agent),
amounts in the Cash Collateral Account shall not bear interest. Interest and
profits, if any, on such investments shall accumulate in such account. In the
event of a drawing, and subsequent payment by the Issuing Lender, under any
Letter of Credit at any time during which any amounts are held in the Cash
Collateral Account, the Agent will deliver to the Issuing Lender an amount equal
to the Reimbursement Obligation created as a result of such payment (or, if the
amounts so held are less than such Reimbursement Obligation, all of such
amounts) to reimburse the Issuing Lender therefor. Any amounts remaining in the
Cash Collateral Account after the expiration of all Letters of Credit and
reimbursement in full of the Issuing Lender for all of its obligations
thereunder shall be held by the Agent, for the benefit of the Borrower, to be
applied against the Obligations in such order and manner as the Borrower (so
long as no Default or Event of Default has occurred and is continuing, and
otherwise the Agent) may direct. If the Borrower is required to provide cash
collateral pursuant to Section 2.6(b), such amount (to the extent not applied as
aforesaid) shall be returned to the Borrower on demand, provided that after
giving effect to such return (i) the sum of (y) the aggregate principal amount
of all Loans outstanding at such time and (z) the aggregate Letter of Credit
Exposure of all Lenders at such time would not exceed the aggregate Commitments
at such time and (ii) no Default or Event of Default shall have occurred and be
continuing at such time. If the Borrower is required to
42
provide cash collateral as a result of an Event of Default, such amount (to the
extent not applied as aforesaid) shall be returned to the Borrower within three
(3) Business Days after all Events of Default have been cured or waived.
3.9 Effectiveness. Notwithstanding any termination of the Commitments or
repayment of the Loans, or both, the obligations of the Borrower under this
Article shall remain in full force and effect until the Issuing Lender and the
Lenders shall have no further obligations to make any payments or disbursements
under any circumstances with respect to any Letter of Credit.
ARTICLE IV
CONDITIONS OF BORROWING
4.1 Conditions of Initial Borrowing. The obligation of each Lender to make
Loans in connection with the initial Borrowing hereunder, and the obligation of
the Issuing Lender to issue Letters of Credit hereunder on the Closing Date, is
subject to the satisfaction of the following conditions precedent:
(a) The Agent shall have received the following, each dated as of the
Closing Date (unless otherwise specified) and, except for the Notes, in
sufficient copies for each Lender:
(i) A Note for each Lender that is a party hereto as of the Closing
Date, in the amount of such Lender's Commitment, each duly completed in
accordance with the relevant provisions of Section 2.4 and executed by the
Borrower;
(ii) the favorable opinion of Xxxx Xxxxx Xxxx & XxXxxx LLP, special
counsel to the Borrower, in substantially the form of Exhibit E, addressed
to the Agent and the Lenders and addressing such other matters as the Agent
or any Lender may reasonably request.
(b) The Agent shall have received a certificate, signed by the president,
the chief executive officer or the chief financial officer of the Borrower, in
form and substance satisfactory to the Agent, certifying that (i) all
representations and warranties of the Borrower contained in this Agreement and
the other Credit Documents are true and correct as of the Closing Date, both
immediately before and after giving effect to the consummation of the
transactions contemplated hereby, the making of the initial Loans hereunder and
the application of the proceeds thereof, (ii) no Default or Event of Default has
occurred and is continuing, both immediately before and after giving effect to
the consummation of the transactions contemplated hereby, the making of the
initial Loans hereunder and the application of the proceeds thereof, (iii) there
are no insurance regulatory proceedings pending or, to such individual's
knowledge, threatened against any of the Insurance Subsidiaries in any
jurisdiction that, if adversely determined, would be reasonably likely to have a
Material
43
Adverse Effect; (iv) both immediately before and after giving effect to the
consummation of the transactions contemplated hereby, the making of the initial
Loans hereunder and the application of the proceeds thereof, no Material Adverse
Change has occurred since December 31, 1997, and there exists no event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change, and (v) all conditions to the initial extensions of
credit hereunder set forth in this Section and in Section 4.2 have been
satisfied or waived as required hereunder.
(c) The Agent shall have received a certificate of the secretary or an
assistant secretary of the Borrower, in form and substance satisfactory to the
Agent, certifying (i) that attached thereto is a true and complete copy of the
articles or certificate of incorporation and all amendments thereto of the
Borrower, certified as of a recent date by the Secretary of State (or comparable
Governmental Authority) of its jurisdiction of organization, and that the same
has not been amended since the date of such certification, (ii) that attached
thereto is a true and complete copy of the bylaws of the Borrower, as then in
effect and as in effect at all times from the date on which the resolutions
referred to in clause (iii) below were adopted to and including the date of such
certificate, and (iii) that attached thereto is a true and complete copy of
resolutions adopted by the board of directors of the Borrower authorizing the
execution, delivery and performance of this Agreement and the other Credit
Documents to which it is a party, and as to the incumbency and genuineness of
the signature of each officer of the Borrower executing this Agreement or any of
such other Credit Documents, and attaching all such copies of the documents
described above.
(d) The Agent shall have received (i) a certificate as of a recent date of
the good standing of each of the Borrower and its Material Subsidiaries under
the laws of its jurisdiction of organization, from the Secretary of State (or
comparable Governmental Authority) of such jurisdiction; and (ii) as to each
Material Insurance Subsidiary, a certificate of compliance as of a recent date,
issued by the Insurance Regulatory Authority of its jurisdiction of legal
domicile and any other jurisdiction in which such Insurance Subsidiary is
reasonably likely to be commercially domiciled as defined under the laws and
regulations of such jurisdiction.
(e) All legal matters, documentation, and corporate or other proceedings
incident to the transactions contemplated hereby shall be satisfactory in form
and substance to the Agent; all approvals, permits and consents of any
Governmental Authorities (including, without limitation, all relevant Insurance
Regulatory Authorities) or other Persons required in connection with the
execution and delivery of this Agreement and the other Credit Documents and the
consummation of the transactions contemplated hereby and thereby shall have been
obtained, without the imposition of conditions that are not acceptable to the
Agent, and all related filings, if any, shall have been made, and all such
approvals, permits, consents and filings shall be in full force and effect and
the Agent shall have received such copies thereof as it shall have requested;
all applicable waiting periods shall have expired without any adverse action
being taken by any Governmental Authority having jurisdiction; and no action,
proceeding, investigation, regulation or legislation shall have been instituted,
threatened or proposed before, and no order, injunction or decree shall have
been entered by, any court or other Governmental Authority, in each case to
enjoin, restrain or prohibit, to obtain substantial damages in respect of, or
that is otherwise related to or arises out of, this Agreement, any of the other
Credit Documents or the consummation of the transactions contemplated hereby or
thereby, or that, in the opinion of the Agent, could reasonably be expected to
have a Material Adverse Effect.
44
(f) The Agent shall have received certified reports from an independent
search service satisfactory to it listing any judgment or tax lien filing or
Uniform Commercial Code financing statement that names the Borrower or any
Material Subsidiary as debtor, and the results thereof shall be satisfactory to
the Agent.
(g) Since December 31, 1997, both immediately before and after giving
effect to the consummation of the transactions contemplated by this Agreement,
there shall not have occurred any Material Adverse Change or any event,
condition or state of facts that could reasonably be expected to result in a
Material Adverse Change.
(h) The Borrower shall have paid (i) to First Union, the unpaid balance of
the fees described in paragraphs (1) and (2) of the Fee Letter, and (ii) all
other fees and expenses of the Agent and the Lenders required hereunder or under
any other Credit Document to be paid on or prior to the Closing Date (including
fees and expenses of counsel) in connection with this Agreement and the
transactions contemplated hereby.
(i) The Agent shall have received the financial statements as described in
Sections 5.11(a) and 5.11(e), all of which shall be in form and substance
satisfactory to the Agent.
(j) The Agent shall have received a Financial Condition Certificate,
together with the Pro Forma Balance Sheet and the Projections as described in
Sections 5.11(b) and 5.11(c), all of which shall be in form and substance
satisfactory to the Agent.
(k) The Agent shall have received a Covenant Compliance Worksheet, duly
completed and certified by the chief financial officer of the Borrower and in
form and substance satisfactory to the Agent, demonstrating the Borrower's
compliance with the financial covenants set forth in Sections 7.1 through 7.6,
determined on a pro forma basis as of June 30, 1998 after giving effect to the
making of the initial Loans hereunder and the consummation of the transactions
contemplated hereby.
(l) The Agent shall be satisfied with the certification with respect to an
actuarial review and valuation statement of, and opinion as to the adequacy of,
each Insurance Subsidiary's loss and loss adjustment expense reserve positions
as of December 31, 1997, with respect to the insurance business then in force,
prepared and given by an independent actuarial firm acceptable to the Agent; and
such certification and opinion shall not differ in any material and negative
respect from any such materials previously delivered to the Agent.
(m) The Agent shall have received satisfactory confirmation from A.M. Best
& Company that PAIC's current rating is "A-" or better.
(n) The Consolidated Net Worth of the Borrower shall not be less than
$90,000,000 as of the Closing Date.
(o) The Agent shall have received a Federal Reserve Form U-1 for each
Lender, duly executed by an Authorized Officer of the Borrower, the statements
made in which shall be such,
45
in the opinion of the Agent, as to permit the transactions contemplated by this
Agreement in accordance with Regulation U.
(p) The Agent shall have received an Account Designation Letter, together
with written instructions from an Authorized Officer, including wire transfer
information, directing the payment of the proceeds of the initial Loans to be
made hereunder.
(q) The Agent shall have received the Fee Letter.
(r) The Agent and each Lender shall have received such other documents,
certificates, opinions and instruments in connection with the transactions
contemplated hereby as it shall have reasonably requested.
4.2 Conditions of All Borrowings. The obligation of each Lender to make any
Loans hereunder, including the initial Loans, and the obligation of the Issuing
Lender to issue any Letters of Credit hereunder, is subject to the satisfaction
of the following conditions precedent on the relevant Borrowing Date or date of
issuance:
(a) The Agent shall have received a Notice of Borrowing in accordance with
Section 2.2(b), or (together with the Issuing Lender) a Letter of Credit Notice
in accordance with Section 3.2, as applicable;
(b) Each of the representations and warranties contained in Article V and
in the other Credit Documents shall be true and correct on and as of such
Borrowing Date (including the Closing Date, in the case of the initial Loans
made hereunder) or date of issuance with the same effect as if made on and as of
such date, both immediately before and after giving effect to the Loans to be
made or Letter of Credit to be issued on such date (except to the extent any
such representation or warranty is expressly stated to have been made as of a
specific date, in which case such representation or warranty shall be true and
correct in all material respects as of such date); and
(c) No Default or Event of Default shall have occurred and be continuing on
such date, both immediately before and after giving effect to the Loans to be
made or Letter of Credit to be issued on such date.
Each giving of a Notice of Borrowing or a Letter of Credit Notice, and the
consummation of each Borrowing or issuance of a Letter of Credit, shall be
deemed to constitute a representation by the Borrower that the statements
contained in subsections (b) and (c) above are true, both as of the date of such
notice or request and as of the relevant Borrowing Date or date of issuance.
46
ARTICLE V
REPRESENTATIONS AND WARRANTIES
To induce the Agent and the Lenders to enter into this Agreement and to
induce the Lenders to extend the credit contemplated hereby, the Borrower
represents and warrants to the Agent and the Lenders as follows:
5.1 Corporate Organization and Power. Each of the Borrower and its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, (ii) has the
full corporate power and authority to execute, deliver and perform the Credit
Documents to which it is or will be a party, to own and hold its property and to
engage in its business as presently conducted, and (iii) is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the nature of its business or the ownership of its properties requires it
to be so qualified, except where the failure to be so qualified would not,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.
5.2 Authorization; Enforceability. Each of the Borrower and its
Subsidiaries has taken, or on the Closing Date will have taken, all necessary
corporate action to execute, deliver and perform each of the Credit Documents to
which it is or will be a party, and has, or on the Closing Date (or any later
date of execution and delivery) will have, validly executed and delivered each
of the Credit Documents to which it is or will be a party. This Agreement
constitutes, and each of the other Credit Documents upon execution and delivery
will constitute, the legal, valid and binding obligation of each of the Borrower
and its Subsidiaries that is a party hereto or thereto, enforceable against it
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally, by general equitable principles or by
principles of good faith and fair dealing.
5.3 No Violation. The execution, delivery and performance by each of the
Borrower and its Subsidiaries of this Agreement and each of the other Credit
Documents to which it is or will be a party, and compliance by it with the terms
hereof and thereof, do not and will not (i) violate any provision of its
articles or certificate of incorporation or bylaws or contravene any other
Requirement of Law applicable to it, (ii) conflict with, result in a breach of
or constitute (with notice, lapse of time or both) a default under any
indenture, agreement or other instrument to which it is a party, by which it or
any of its properties is bound or to which it is subject, or (iii) except to the
Agent for the benefit of the Issuing Lender and the Lenders, result in or
require the creation or imposition of any Lien upon any of its properties or
assets. No Subsidiary is a party to any agreement or instrument or otherwise
subject to any restriction or encumbrance that restricts or limits its ability
to make dividend payments or other distributions in respect of its Capital
Stock, to repay Indebtedness owed to the Borrower or any other Subsidiary, to
make loans or advances to the Borrower or any other Subsidiary, or to transfer
any of its assets or properties to the Borrower or any other Subsidiary, in each
case other than such restrictions or encumbrances existing under or by reason of
the Credit Documents or applicable Requirements of Law.
47
5.4 Governmental and Third-Party Authorization; Permits. (a) No consent,
approval, authorization or other action by, notice to, or registration or filing
with, any Governmental Authority or other Person is or will be required as a
condition to or otherwise in connection with the due execution, delivery and
performance by each of the Borrower and its Subsidiaries of this Agreement or
any of the other Credit Documents to which it is or will be a party or the
legality, validity or enforceability hereof or thereof, other than (i) consents,
authorizations and filings that have been (or on or prior to the Closing Date
will have been) made or obtained and that are (or on the Closing Date will be)
in full force and effect, which consents, authorizations and filings are listed
on Schedule 5.4, and (ii) consents and filings the failure to obtain or make
which would not, individually or in the aggregate, have a Material Adverse
Effect.
(b) Each of the Borrower and its Subsidiaries has, and is in good standing
with respect to, all governmental approvals, licenses, permits and
authorizations necessary to conduct its business as presently conducted and to
own or lease and operate its properties, except for those the failure to obtain
which would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect.
(c) Schedule 5.4 lists with respect to each Material Insurance Subsidiary,
as of the Closing Date, all of the jurisdictions in which such Material
Insurance Subsidiary holds licenses (including, without limitation, licenses or
certificates of authority from relevant Insurance Regulatory Authorities),
permits or authorizations to transact insurance and reinsurance business
(collectively, the "Licenses"), and indicates the line or lines of insurance in
which each such Material Insurance Subsidiary is permitted to be engaged with
respect to each License therein listed. To the knowledge of the Borrower, (i) no
such License is the subject of a proceeding for suspension, revocation or
limitation or any similar proceedings; (ii) there is no sustainable basis for
such a suspension, revocation or limitation; and (iii) no such suspension,
revocation or limitation is threatened by any relevant Insurance Regulatory
Authority. No Material Insurance Subsidiary transacts any insurance business,
directly or indirectly, in any jurisdiction other than those listed on Schedule
5.4, where such business requires any license, permit or other authorization of
an Insurance Regulatory Authority of such jurisdiction.
5.5 Litigation. There are no actions, investigations, suits or proceedings
pending or, to the knowledge of the Borrower, threatened, at law, in equity or
in arbitration, before any court, other Governmental Authority or other Person,
(i) against or affecting the Borrower, any of its Subsidiaries or any of their
respective properties that would, if adversely determined, be reasonably likely
to have a Material Adverse Effect, other than actions, investigations, suits or
proceedings arising in the ordinary course of business of the Insurance
Subsidiaries for which reserves have been prudently estimated and set aside in
accordance with sound and standard industry practices; or (ii) with respect to
this Agreement or any of the other Credit Documents.
5.6 Taxes. Each of the Borrower and its Subsidiaries has timely filed all
federal, state and local tax returns and reports required to be filed by it and
has paid all taxes, assessments, fees and other charges levied upon it or upon
its properties that are shown thereon as due and payable, other than those that
are being contested in good faith and by proper proceedings and for which
adequate reserves have been established in accordance with GAAP. Such returns
48
accurately reflect in all material respects all liability for taxes of the
Borrower and its Subsidiaries for the periods covered thereby. There is no
ongoing audit or examination or, to the knowledge of the Borrower, other
investigation by any Governmental Authority of the tax liability of the Borrower
or any of its Subsidiaries, and there is no unresolved claim by any Governmental
Authority concerning the tax liability of the Borrower or any of its
Subsidiaries for any period for which tax returns have been or were required to
have been filed, other than claims for which adequate reserves have been
established in accordance with GAAP. Neither the Borrower nor any of its
Subsidiaries has waived or extended or has been requested to waive or extend the
statute of limitations relating to the payment of any taxes.
5.7 Subsidiaries. Schedule 5.7 sets forth a list, as of the Closing Date,
of all of the Subsidiaries of the Borrower and, as to each such Subsidiary, the
percentage ownership (direct and indirect) of the Borrower in each class of its
capital stock and each direct owner thereof and indicates in each case whether
such Subsidiary is a Material Subsidiary. Except for the shares of capital stock
expressly indicated on Schedule 5.7, there are no shares of capital stock,
warrants, rights, options or other equity securities, or other Capital Stock of
any Subsidiary of the Borrower outstanding or reserved for any purpose. All
outstanding shares of capital stock of each Subsidiary of the Borrower are duly
and validly issued, fully paid and nonassessable.
5.8 Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Agent or any Lender in writing by or on
behalf of the Borrower or any of its Subsidiaries for purposes of or in
connection with this Agreement and the transactions contemplated hereby is, and
all other such factual information hereafter furnished to the Agent or any
Lender in writing by or on behalf of the Borrower or any of its Subsidiaries
will be, true and accurate in all material respects on the date as of which such
information is dated or certified (or, if such information has been amended or
supplemented, on the date as of which any such amendment or supplement is dated
or certified) and not made incomplete by omitting to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which such information was provided, not misleading.
5.9 Margin Regulations. Neither the Borrower nor any of its Subsidiaries is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Loans will be used, directly or indirectly, to purchase or carry
any Margin Stock, to extend credit for such purpose or for any other purpose
that would violate or be inconsistent with Regulations T, U or X or any
provision of the Exchange Act.
5.10 No Material Adverse Change. There has been no Material Adverse Change
since December 31, 1997, and there exists no event, condition or state of facts
that could reasonably be expected to result in a Material Adverse Change.
5.11 Financial Matters. (a) The Borrower has heretofore furnished to the
Agent copies of (i) the audited consolidated balance sheets of the Borrower and
its Subsidiaries as of December 31, 1997, 1996, and 1995, and the related
statements of income, cash flows and stockholders' equity for the fiscal years
then ended, together with the opinion of KPMG Peat Marwick LLP thereon, and (ii)
the unaudited consolidated balance sheet of the Borrower and its
49
Subsidiaries as of June 30, 1998, and the related statements of income, cash
flows and stockholders' equity for the six-month period then ended. Such
financial statements have been prepared in accordance with GAAP (subject, with
respect to the unaudited financial statements, to the absence of notes required
by GAAP and to normal year-end adjustments) and present fairly the financial
condition of the Borrower and its Subsidiaries on a consolidated basis as of the
respective dates thereof and the consolidated results of operations of the
Borrower and its Subsidiaries for the respective periods then ended. Except as
fully reflected in (x) the most recent financial statements referred to above
and the notes thereto, (y) the financial statements previously delivered
pursuant to Section 6.1, or (z) any Form 8-K filed by the Borrower with the
Securities and Exchange Commission and previously delivered by the Borrower to
Lenders, there are no material liabilities or obligations with respect to the
Borrower or any of its Subsidiaries of any nature whatsoever (whether absolute,
contingent or otherwise and whether or not due).
(b) The unaudited pro forma balance sheet of the Borrower as of June 30,
1998, a copy of which has heretofore been delivered to the Agent, gives pro
forma effect to the consummation of the initial extensions of credit made under
this Agreement, and the payment of transaction fees and expenses related to the
foregoing, all as if such events had occurred on such date (the "Pro Forma
Balance Sheet"). The Pro Forma Balance Sheet has been prepared in accordance
with GAAP (subject to the absence of footnotes required by GAAP and subject to
normal year-end adjustments) and, subject to stated assumptions made in good
faith and having a reasonable basis set forth therein, presents fairly the
financial condition of the Borrower on an unaudited pro forma basis as of the
date set forth therein after giving effect to the consummation of the
transactions described above.
(c) The Borrower has prepared, and has heretofore furnished to the Agent a
copy of, annual projected balance sheets and statements of income and cash flows
of the Borrower for the five-year period beginning with the year ended December
31, 1998, giving effect to the initial extensions of credit made under this
Agreement and the payment of transaction fees and expenses related to the
foregoing (the "Projections"). In the opinion of management of the Borrower, the
assumptions used in the preparation of the Projections were fair, complete and
reasonable when made and continue to be fair, complete and reasonable as of the
date hereof. The Projections have been prepared in good faith by the executive
and financial personnel of the Borrower, are complete and represent a reasonable
estimate of the future performance and financial condition of the Borrower,
subject to the uncertainties and approximations inherent in any projections.
(d) Each of the Borrower and its Subsidiaries, after giving effect to the
consummation of the transactions contemplated hereby, (i) has capital sufficient
to carry on its businesses as conducted and as proposed to be conducted, (ii)
has assets with a fair saleable value, determined on a going concern basis, (y)
not less than the amount required to pay the probable liability on its existing
debts as they become absolute and matured and (z) greater than the total amount
of its liabilities (including identified contingent liabilities, valued at the
amount that can reasonably be expected to become absolute and matured), and
(iii) does not intend to, and does not believe that it will, incur debts or
liabilities beyond its ability to pay such debts and liabilities as they mature.
50
(e) The Borrower has heretofore furnished to the Agent copies of (i) the
Annual Statements of each of its Insurance Subsidiaries as of December 31, 1997,
1996 and 1995, and for the fiscal years then ended, and (ii) the Quarterly
Statements of each of its Insurance Subsidiaries as of June 30, 1998, and the
six-month period then ended, each as filed with the relevant Insurance
Regulatory Authority. Such financial statements (including, without limitation,
the provisions made therein for investments and the valuation thereof, reserves,
policy and contract claims and statutory liabilities) have been prepared in
accordance with SAP (except as may be reflected in the notes thereto and
subject, with respect to the Quarterly Statements, to the absence of notes
required by SAP and to normal year-end adjustments), were in compliance with
applicable Requirements of Law when filed and present fairly the financial
condition of the respective Insurance Subsidiaries covered thereby as of the
respective dates thereof and the results of operations, changes in capital and
surplus and cash flow of the respective Insurance Subsidiaries covered thereby
for the respective periods then ended. Except for liabilities and obligations
disclosed or provided for (x) in the Quarterly Statements referred to above
(including, without limitation, reserves, policy and contract claims and
statutory liabilities), (y) the financial statements previously delivered
pursuant to Section 6.2, or (z) any Form 8-K filed by the Borrower with the
Securities and Exchange Commission and previously delivered by the Borrower to
the Lenders, there are no material liabilities or obligations of any nature
whatsoever (whether absolute, contingent or otherwise and whether or not due)
that, in accordance with SAP, would have been required to have been disclosed or
provided for in statutory financial statements. All books of account of each
Insurance Subsidiary fully and fairly disclose all of its material transactions,
properties, assets, investments, liabilities and obligations, are in its
possession and are true, correct and complete in all material respects.
5.12 Ownership of Properties. Each of the Borrower and its Subsidiaries (i)
has good and marketable title to all real property owned by it, (ii) holds
interests as lessee under valid leases in full force and effect with respect to
all material leased real and personal property used in connection with its
business, (iii) possesses or has rights to use licenses, patents, copyrights,
trademarks, service marks, trade names and other assets sufficient to enable it
to continue to conduct its business substantially as heretofore conducted and
without any material conflict with the rights of others, and (iv) has good title
to all of its other properties and assets reflected in the most recent financial
statements referred to in Section 5.11(a) (except as sold or otherwise disposed
of since the date thereof in the ordinary course of business), in each case
under (i), (ii), (iii) and (iv) above free and clear of all Liens other than
Permitted Liens.
5.13 ERISA. (a) Each of the Borrower and its ERISA Affiliates is in
compliance in all material respects with the applicable provisions of ERISA, and
each Plan is and has been administered in compliance in all material respects
with all applicable Requirements of Law, including, without limitation, the
applicable provisions of ERISA and the Internal Revenue Code. No ERISA Event (i)
has occurred within the five-year period prior to the Closing Date, (ii) has
occurred and is continuing, or (iii) to the knowledge of the Borrower, is
reasonably expected to occur with respect to any Plan. No Plan has any Unfunded
Pension Liability as of the most recent annual valuation date applicable
thereto, and neither the Borrower nor any ERISA Affiliate has engaged in a
transaction that could be subject to Section 4069 or 4212(c) of ERISA.
51
(b) Neither the Borrower nor any ERISA Affiliate has had a complete or
partial withdrawal from any Multiemployer Plan, and neither the Borrower nor any
ERISA Affiliate would become subject to any liability under ERISA if the
Borrower or any ERISA Affiliate were to withdraw completely from all
Multiemployer Plans as of the most recent valuation date. No Multiemployer Plan
is in "reorganization" or is "insolvent" within the meaning of such terms under
ERISA.
5.14 Environmental Matters. (a) No Hazardous Substances are or have been
generated, used, located, released, treated, disposed of or stored by the
Borrower or any of its Subsidiaries or, to the knowledge of the Borrower, by any
other Person (including any predecessor in interest) or otherwise, in, on or
under any portion of any real property, leased or owned, of the Borrower or any
of its Subsidiaries, except in material compliance with all applicable
Environmental Laws, and no portion of any such real property or, to the
knowledge of the Borrower, any other real property at any time leased, owned or
operated by the Borrower or any of its Subsidiaries, has been contaminated by
any Hazardous Substance; and no portion of any real property, leased or owned,
of the Borrower or any of its Subsidiaries has been or is presently the subject
of an environmental audit, assessment or remedial action.
(b) No portion of any real property, leased or owned, of the Borrower or
any of its Subsidiaries has been used by the Borrower or any of its Subsidiaries
or, to the knowledge of the Borrower, by any other Person, as or for a mine, a
landfill, a dump or other disposal facility, a gasoline service station, or
(other than for petroleum substances stored in the ordinary course of business)
a petroleum products storage facility; no portion of such real property or any
other real property at any time leased, owned or operated by the Borrower or any
of its Subsidiaries has, pursuant to any Environmental Law, been placed on the
"National Priorities List" or "CERCLIS List" (or any similar federal, state or
local list) of sites subject to possible environmental problems; and there are
not and have never been any underground storage tanks situated on any real
property, leased or owned, of the Borrower or any of its Subsidiaries.
(c) All activities and operations of the Borrower and its Subsidiaries are
in compliance with the requirements of all applicable Environmental Laws, except
to the extent the failure so to comply, individually or in the aggregate, would
not be reasonably likely to have a Material Adverse Effect. Each of the Borrower
and its Subsidiaries has obtained all licenses and permits under Environmental
Laws necessary to its respective operations; all such licenses and permits are
being maintained in good standing; and each of the Borrower and its Subsidiaries
is in compliance with all terms and conditions of such licenses and permits,
except for such licenses and permits the failure to obtain, maintain or comply
with which would not be reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect. Neither the Borrower nor any of its Subsidiaries
is involved in any suit, action or proceeding, or has received any notice,
complaint or other request for information from any Governmental Authority or
other Person, with respect to any actual or alleged Environmental Claims that,
if adversely determined, would be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect; and, to the knowledge of the
Borrower, there are no threatened actions, suits, proceedings or investigations
with respect to any such Environmental Claims, nor any basis therefor.
52
5.15 Compliance With Laws. Each of the Borrower and its Subsidiaries has
timely filed all material reports, documents and other materials required to be
filed by it under all applicable Requirements of Law with any Governmental
Authority, has retained all material records and documents required to be
retained by it under all applicable Requirements of Law, and is otherwise in
compliance with all applicable Requirements of Law in respect of the conduct of
its business and the ownership and operation of its properties, except for such
Requirements of Law the failure to comply with which, individually or in the
aggregate, would not be reasonably likely to have a Material Adverse Effect.
5.16 Regulated Industries. Neither the Borrower nor any of its Subsidiaries
is (i) an "investment company," a company "controlled" by an "investment
company," or an "investment advisor," within the meaning of the Investment
Company Act of 1940, as amended, or (ii) a "holding company," 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.
5.17 Insurance. The assets, properties and business of the Borrower and its
Subsidiaries are insured against such hazards and liabilities, under such
coverages and in such amounts, as are customarily maintained by prudent
companies similarly situated and under policies issued by insurers of recognized
responsibility.
5.18 Material Contracts. Schedule 5.18 lists, as of the Closing Date, each
"material contract" (within the meaning of Item 601(b)(10) of Regulation S-K
under the Exchange Act) (other than Reinsurance Agreements) to which the
Borrower or any of its Subsidiaries is a party, by which any of them or their
respective properties is bound or to which any of them is subject (collectively,
"Material Contracts"), and also indicates the parties, subject matter and term
thereof. As of the Closing Date, (i) each Material Contract is in full force and
effect and is enforceable by the Borrower or the Subsidiary that is a party
thereto in accordance with its terms, and (ii) neither the Borrower nor any of
its Subsidiaries (nor, to the knowledge of the Borrower, any other party
thereto) is in breach of or default under any Material Contract in any material
respect or has given notice of termination or cancellation of any Material
Contract.
5.19 Reinsurance Agreements. (a) Except as set forth on Schedule F to the
Annual Statements for the Insurance Subsidiaries for the fiscal year ending
December 31, 1997, there are no material liabilities outstanding as of the
Closing Date under any Reinsurance Agreement. Each Reinsurance Agreement is in
full force and effect; none of the Insurance Subsidiaries or, to the knowledge
of the Borrower, any other party thereto, is in breach of or default under any
such contract; and the Borrower has no reason to believe that the financial
condition of any other party to any such contract is impaired such that a
default thereunder by such party could reasonably be anticipated. Each
Reinsurance Agreement is qualified under all applicable Requirements of Law to
receive the statutory credit assigned to such Reinsurance Agreement in the
relevant Annual Statement or Quarterly Statement at the time prepared. Each
Person to whom any of the Insurance Subsidiaries has ceded any material
liability pursuant to any Reinsurance Agreement on the Closing Date either has
(i) a rating of "A-" or better by A.M. Best & Company, (ii) a claims paying
ability rating of "A-" or better by Standard and Poor's or Xxxxx'x, (iii)
provided collateral in favor of the applicable Insurance Subsidiary of the type
and in an amount described
53
in Schedule 5.19, or (iv) (x) an aggregate amount of Net Amount Recoverable from
Reinsurers for the Insurance Subsidiaries attributable to it (collectively with
all other such Persons not described in clauses (i), (ii) and (iii) above) that
is less than $1,500,000 as of the end of the most recent fiscal year, and (y) an
aggregate amount or Reinsurance Premiums Ceded by the Insurance Subsidiaries for
the current fiscal year (or portion thereof) to it (collectively with all other
such Persons not described in clauses (i), (ii) and (iii) above) that is less
than $1,500,000.
(b) As of the Closing Date, no Insurance Subsidiary is a party to any
Surplus Relief Reinsurance Agreement.
5.20 Labor Relations. Neither the Borrower nor any of its Subsidiaries is
engaged in any unfair labor practice within the meaning of the National Labor
Relations Act of 1947, as amended. There is (i) no unfair labor practice
complaint before the National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining agreement, pending
or, to the knowledge of the Borrower, threatened, against the Borrower or any of
its Subsidiaries, (ii) no strike, lock-out, slowdown, stoppage, walkout or other
labor dispute pending or, to the knowledge of the Borrower, threatened, against
the Borrower or any of its Subsidiaries, and (iii) to the knowledge of the
Borrower, no petition for certification or union election or union organizing
activities taking place with respect to the Borrower or any of its Subsidiaries.
5.21 Year 2000 Compatibility. The Borrower will use commercially reasonably
efforts to ensure that any reprogramming required to permit the proper
functioning, before, on and after January 1, 2000, of (i) the Borrower's and its
Subsidiaries' computer-based systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which the
Borrower's or any of its Subsidiaries' systems interface), and the testing of
all such systems and equipment, as so reprogrammed, will be completed by June
30, 1999. To the knowledge of the Borrower, after reasonable investigation, the
cost to the Borrower and its Subsidiaries of such reprogramming and testing and
of the reasonably foreseeable consequences of the 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
Material Adverse Effect. To the knowledge of the Borrower, after reasonable
investigation, 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 and its Subsidiaries to conduct their respective businesses
without a Material Adverse Effect.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and
54
interest with respect to the Loans and all Reimbursement Obligations together
with all other amounts then due and owing hereunder:
6.1 Financial Statements. The Borrower will deliver to each Lender:
(a) As soon as available and in any event within fifty-five (55) days after
the end of each of the first three fiscal quarters of each fiscal year,
beginning with the fiscal quarter ending September 30, 1998, unaudited
consolidated and consolidating balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal quarter and unaudited consolidated
statements of income, cash flows and stockholders' equity for the Borrower and
its Subsidiaries for the fiscal quarter then ended and for that portion of the
fiscal year then ended, in each case setting forth comparative consolidated
figures as of the end of and for the corresponding period in the preceding
fiscal year, all in reasonable detail and prepared in accordance with GAAP
(subject to the absence of notes required by GAAP and subject to normal year-end
adjustments) applied on a basis consistent with that of the preceding quarter or
containing disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles and
practices during such quarter; and
(b) As soon as available and in any event within one hundred (100) days
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1998, (i) an audited consolidated balance sheet of the Borrower and
its Subsidiaries as of the end of such fiscal year and audited consolidated
statements of income, cash flows and stockholders' equity for the Borrower and
its Subsidiaries for the fiscal year then ended, including the notes thereto, in
each case setting forth comparative figures as of the end of and for the
preceding fiscal year together with comparative projected figures for the fiscal
year then ended, all in reasonable detail and certified by the independent
certified public accounting firm regularly retained by the Borrower or another
independent certified public accounting firm of recognized national standing
reasonably acceptable to the Required Lenders, together with (y) a report
thereon by such accountants that is not qualified as to going concern or scope
of audit and to the effect that such financial statements present fairly the
consolidated financial condition and results of operations of the Borrower and
its Subsidiaries as of the dates and for the periods indicated in accordance
with GAAP applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial condition or results of
operations of any change in the application of accounting principles and
practices during such year, and (z) a report by such accountants to the effect
that, based on and in connection with their examination of the financial
statements of the Borrower and its Subsidiaries, they obtained no knowledge of
the occurrence or existence of any Default or Event of Default relating to
accounting or financial reporting matters, or a statement specifying the nature
and period of existence of any such Default or Event of Default disclosed by
their audit; provided, however, that such accountants shall not be liable by
reason of the failure to obtain knowledge of any Default or Event of Default
that would not be disclosed or revealed in the course of their audit
examination, and (ii) an unaudited consolidating balance sheet of the Borrower
and its Subsidiaries as of the end of such fiscal year and unaudited
consolidating statements of income for the Borrower and its Subsidiaries for the
fiscal year then ended, all in reasonable detail.
55
6.2 Statutory Financial Statements. The Borrower will deliver to each
Lender:
(a) As soon as available and in any event within fifty-five (55) days after
the end of each of the first three fiscal quarters of each fiscal year,
beginning with the first fiscal quarter ending after the date hereof, a
Quarterly Statement of each Insurance Subsidiary as of the end of such fiscal
quarter and for that portion of the fiscal year then ended, in the form filed
with the relevant Insurance Regulatory Authority, prepared in accordance with
SAP;
(b) As soon as available and in any event within seventy (70) days after
the end of each fiscal year, beginning with the fiscal year ended December 31,
1998, an Annual Statement of each Insurance Subsidiary as of the end of such
fiscal year and for the fiscal year then ended, in the form filed with the
relevant Insurance Regulatory Authority, prepared in accordance with SAP; and
(c) As soon as available and in any event within one hundred thirty-one
(131) days after the end of each fiscal year, beginning with the fiscal year
ended December 31, 1998, the combined Annual Statement of the Insurance
Subsidiary as of the end of such fiscal year and for the fiscal year then ended,
in the form filed with the relevant Insurance Regulatory Authority, prepared in
accordance with SAP.
6.3 Other Business and Financial Information. The Borrower will deliver to
each Lender:
(a) Concurrently with each delivery of the financial statements described
in Sections 6.1 and 6.2, a Compliance Certificate in the form of Exhibit C-1 (in
the case of the financial statements described in Section 6.1) or Exhibit C-2
(in the case of the financial statements described in Section 6.2) with respect
to the period covered by the financial statements then being delivered, executed
by a Financial Officer of the Borrower, together in each case with a Covenant
Compliance Worksheet reflecting the computation of the respective financial
covenants set forth in the Worksheets as of the last day of the period covered
by such financial statements;
(b) As soon as available and in any event prior to December 15 of each
fiscal year, beginning with the fiscal year ending December 31, 1998, (i)
consolidated projections showing the actual results for the most recent fiscal
year and the pro forma results for the next five (5) successive years prepared
in accordance with GAAP for the Borrower and its Subsidiaries, including (x)
projected income statements, (y) projected stockholder equity (including book
value and maximum debt calculation analyses), and (z) projected balance sheets;
and (ii) combined and combining projections showing the actual results for the
most recent fiscal year and the pro forma results for the next five (5)
successive years prepared in accordance with SAP for the Insurance Subsidiaries,
including (x) a combined statutory balance sheet, (y) combined and combining
statutory income statements, and (z) projected statutory surplus (including
maximum dividend calculations, A.M. Best & Company coverage and performance
ratios), together with a certificate of a Financial Officer of the Borrower to
the effect that all such projections have been prepared in good faith and are
reasonable estimates of the financial position and results of operations of the
Borrower and its Subsidiaries for the period covered
56
thereby; and as soon as available from time to time thereafter, any
modifications or revisions to or restatements of such projections;
(c) Promptly upon filing with the relevant Insurance Regulatory Authority
and in any event within one hundred (100) days after the end of each fiscal
year, beginning with the fiscal year ended December 31, 1998, a copy of each
Insurance Subsidiary's "Statement of Actuarial Opinion" (or equivalent
information should the relevant Insurance Regulatory Authority not require such
a statement) as to the adequacy of such Insurance Subsidiary's loss reserves for
such fiscal year, together with a copy of its management discussion and analysis
in connection therewith, each in the format prescribed by the applicable
insurance laws of such Insurance Subsidiary's jurisdiction of domicile;
(d) As soon as available and in any event within one hundred (100) days
after the end of each fiscal year, a certification with respect to an actuarial
review of the liabilities and other items of each Insurance Subsidiary as of the
end of such fiscal year, prepared at the Borrower's expense, by an actuary or a
firm of actuaries reasonably acceptable to the Agent, such certification to be
in form and substance reasonably acceptable to the Required Lenders;
(e) Promptly upon receipt thereof, copies of any "management letter"
submitted to the Borrower or any of its Subsidiaries by its certified public
accountants in connection with each annual, interim or special audit, and
promptly upon completion thereof, any response reports from the Borrower or any
such Subsidiary in respect thereof;
(f) Promptly upon the sending, filing or receipt thereof, copies of (i) all
financial statements, reports, notices and proxy statements that the Borrower or
any of its Subsidiaries shall send or make available generally to its
shareholders, (ii) all regular, periodic and special reports, registration
statements and prospectuses (other than on Form S-8) that the Borrower or any of
its Subsidiaries shall render to or file with the Securities and Exchange
Commission, the National Association of Securities Dealers, Inc. or any national
securities exchange, and (iii) all press releases and other statements made
available generally by the Borrower or any of its Subsidiaries to the public
concerning material developments in the business of the Borrower or any of its
Subsidiaries; (iv) all significant reports on examination, financial examination
reports or market conduct examination reports by the NAIC or any Insurance
Regulatory Authority or other Governmental Authority with respect to any
Insurance Subsidiary's insurance business; (v) all significant filings made
under applicable state insurance holding company acts by the Borrower or any of
its Subsidiaries, including, without limitation, filings seeking approval of
transactions with Affiliates; and (vi) all material information sent to A.M.
Best & Company.
(g) Promptly upon (and in any event within five (5) Business Days after)
any Responsible Officer of the Borrower obtaining knowledge thereof, written
notice of any of the following:
(i) the occurrence of any Default or Event of Default, together with a
written statement of a Responsible Officer of the Borrower specifying the
nature of such Default or Event of Default, the period of existence thereof
and the action that the Borrower has taken and proposes to take with
respect thereto;
57
(ii) the institution or threatened institution of any action, suit,
investigation or proceeding against or affecting the Borrower or any of its
Subsidiaries, including any such investigation or proceeding by any
Governmental Authority (other than routine periodic inquiries,
investigations or reviews), that would, if adversely determined, be
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect, and any material development in any litigation or other
proceeding previously reported pursuant to Section 5.5 or this subsection;
(iii) the receipt by the Borrower or any of its Subsidiaries from any
Governmental Authority of (y) any notice asserting any failure by the
Borrower or any of its Subsidiaries to be in compliance with applicable
Requirements of Law or that threatens the taking of any action against the
Borrower or such Subsidiary or sets forth circumstances that, if taken or
adversely determined, would be reasonably likely to have a Material Adverse
Effect, or (z) any notice of any actual or threatened suspension,
limitation or revocation of, failure to renew, or imposition of any
restraining order, escrow or impoundment of funds in connection with, any
license, permit, accreditation or authorization of the Borrower or any of
its Subsidiaries, where such action would be reasonably likely to have a
Material Adverse Effect;
(iv) the occurrence of any ERISA Event, together with (x) a written
statement of a Responsible Officer of the Borrower specifying the details
of such ERISA Event and the action that the Borrower has taken and proposes
to take with respect thereto, (y) a copy of any notice with respect to such
ERISA Event that may be required to be filed with the PBGC and (z) a copy
of any notice delivered by the PBGC to the Borrower or such ERISA Affiliate
with respect to such ERISA Event;
(v) the occurrence of any material default under, or any proposed or
threatened termination or cancellation of, any Material Contract or other
material contract or agreement to which the Borrower or any of its
Subsidiaries is a party, the termination or cancellation of which would be
reasonably likely to have a Material Adverse Effect;
(vi) the occurrence of any of the following: (x) the assertion of any
Environmental Claim against or affecting the Borrower, any of its
Subsidiaries or any of their respective real property, leased or owned; (y)
the receipt by the Borrower or any of its Subsidiaries of notice of any
alleged violation of or noncompliance with any Environmental Laws; or (z)
the taking of any remedial action by the Borrower, any of its Subsidiaries
or any other Person in response to the actual or alleged generation,
storage, release, disposal or discharge of any Hazardous Substances on, to,
upon or from any real property leased or owned by the Borrower or any of
its Subsidiaries; but in each case under clauses (x), (y) and (z) above,
only to the extent the same would be reasonably likely to have a Material
Adverse Effect;
(vii) the occurrence of any actual changes in any insurance statute or
regulation governing the investment or dividend practices of any Insurance
Subsidiary that would be reasonably likely to have a Material Adverse
Effect; and
58
(viii) any other matter or event that has, or would be reasonably
likely to have, a Material Adverse Effect, together with a written
statement of a Responsible Officer of the Borrower setting forth the nature
and period of existence thereof and the action that the Borrower has taken
and proposes to take with respect thereto;
(h) Promptly, notice of (i) the occurrence of any material amendment or
modification to any Reinsurance Agreement (whether entered into before or after
the Closing Date), including any such agreements that are in a runoff mode on
the Closing Date, which amendment or modification would be reasonably likely to
have a Material Adverse Effect, or (ii) the receipt by the Borrower or any of
its Subsidiaries of any written notice of any denial of coverage, litigation,
claim or arbitration arising out of any Reinsurance Agreement to which it is a
party which would be reasonably likely to have a Material Adverse Effect; and
(i) As promptly as reasonably possible, such other information about the
business, condition (financial or otherwise), operations or properties of the
Borrower or any of its Subsidiaries (including any Plan and any information
required to be filed under ERISA) as the Agent or any Lender may from time to
time reasonably request.
6.4 Corporate Existence; Franchises; Maintenance of Properties. The
Borrower will, and will cause each of its Subsidiaries to, (i) maintain and
preserve in full force and effect its corporate existence, except as expressly
permitted otherwise by Section 8.1, (ii) obtain, maintain and preserve in full
force and effect all other rights, franchises, licenses, permits,
certifications, approvals and authorizations required by Governmental
Authorities and necessary to the ownership, occupation or use of its properties
or the conduct of its business, except to the extent the failure to do so would
not be reasonably likely to have a Material Adverse Effect, and (iii) keep all
material properties in good working order and condition (normal wear and tear
excepted) and from time to time make all necessary repairs to and renewals and
replacements of such properties, except to the extent that any of such
properties are obsolete or are being replaced.
6.5 Compliance with Laws. The Borrower will, and will cause each of its
Subsidiaries to, comply in all respects with all Requirements of Law applicable
in respect of the conduct of its business and the ownership and operation of its
properties, except to the extent the failure so to comply would not be
reasonably likely to have a Material Adverse Effect.
6.6 Payment of Obligations. The Borrower will, and will cause each of its
Subsidiaries to, (i) pay all liabilities and obligations as and when due
(subject to any applicable subordination provisions), except to the extent
failure to do so would not be reasonably likely to have a Material Adverse
Effect, and (ii) pay and discharge all taxes, assessments and governmental
charges or levies imposed upon it, upon its income or profits or upon any of its
properties, prior to the date on which penalties would attach thereto, and all
lawful claims that, if unpaid, might become a Lien upon any of the properties of
the Borrower or any of its Subsidiaries; provided, however, that neither the
Borrower nor any of its Subsidiaries shall be required to pay any such tax,
assessment, charge, levy or claim that is being contested in good
59
faith and by proper proceedings and as to which the Borrower or such Subsidiary
is maintaining adequate reserves with respect thereto in accordance with GAAP.
6.7 Insurance. The Borrower will, and will cause each of its Subsidiaries
to, maintain with financially sound and reputable insurance companies insurance
with respect to its assets, properties and business, against such hazards and
liabilities, of such types and in such amounts, as is customarily maintained by
companies in the same or similar businesses similarly situated.
6.8 Maintenance of Books and Records; Inspection. The Borrower will, and
will cause each of its Subsidiaries to, (i) maintain adequate books, accounts
and records, in which full, true and correct entries shall be made of all
financial transactions in relation to its business and properties, and prepare
all financial statements required under this Agreement, in each case in
accordance with GAAP and in compliance with the requirements of any Governmental
Authority having jurisdiction over it, and (ii) permit employees or agents of
the Agent or any Lender to inspect its properties and examine or audit its
books, records, working papers and accounts and make copies and memoranda of
them, and to discuss its affairs, finances and accounts with its officers and
employees and, upon notice to the Borrower, the independent public accountants
and actuarial firms of the Borrower and its Subsidiaries (and by this provision
the Borrower authorizes such accountants and actuarial firms to discuss the
finances and affairs of the Borrower and its Subsidiaries), all at such times
and from time to time, upon reasonable notice and during business hours, as may
be reasonably requested.
6.9 Permitted Acquisitions. (a) Subject to the provisions of subsection (b)
below and the requirements contained in the definition of Permitted Acquisition,
and subject to the other terms and conditions of this Agreement, the Borrower
may from time to time on or after the Closing Date effect Permitted
Acquisitions, provided that, with respect to each Permitted Acquisition:
(i) no Default or Event of Default shall have occurred and be
continuing at the time of the consummation of such Permitted Acquisition or
would exist immediately after giving effect thereto; and
(ii) the Acquisition Amount with respect thereto (regardless of the
form of consideration) (y) shall not exceed $15,000,000, and (z) together
with the aggregate of the Acquisition Amounts (regardless of the form of
consideration) for all other Permitted Acquisitions consummated during the
same fiscal quarter or the period of three consecutive fiscal quarters
immediately prior thereto, shall not exceed $20,000,000.
(b) Not less than five (5) Business Days prior to the consummation of any
Permitted Acquisition with respect to which the Acquisition Amount exceeds
$5,000,000 the Borrower shall have delivered to the Agent and each Lender the
following:
(i) a reasonably detailed description of the material terms of such
Permitted Acquisition (including, without limitation, the purchase price
and method and structure of payment) and of each Person or business that is
the subject of such Permitted Acquisition (each, a "Target");
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(ii) historical financial statements of the Target (or, if there are
two or more Targets that are the subject of such Permitted Acquisition and
that are part of the same consolidated group, consolidated historical
financial statements for all such Targets) for the two (2) most recent
fiscal years available and, if available, for any interim periods since the
most recent fiscal year-end; and
(iii) a certificate, in form and substance reasonably satisfactory to
the Agent, executed by a Financial Officer of the Borrower setting forth
the Acquisition Amount and further to the effect that, to the best of such
individual's knowledge, (x) the consummation of such Permitted Acquisition
will not result in a violation of any provision of this Section, and after
giving effect to such Permitted Acquisition and any Borrowings made in
connection therewith, the Borrower will be in compliance with the financial
covenants contained in Sections 7.1 through 7.6, such compliance determined
with regard to calculations made on a pro forma basis in accordance with
GAAP as if each Target had been consolidated with the Borrower for those
periods applicable to such covenants (such calculations to be attached to
the certificate), (y) the Borrower believes in good faith that it will
continue to comply with such financial covenants for a period of one year
following the date of the consummation of such Permitted Acquisition, and
(z) after giving effect to such Permitted Acquisition and any Borrowings in
connection therewith, the Borrower believes in good faith that it will have
sufficient availability under the Commitments to meet its ongoing working
capital requirements.
(c) As soon as reasonably practicable after the consummation of any
Permitted Acquisition, the Borrower will deliver to the Agent and each Lender a
copy of the fully executed acquisition agreement (including schedules and
exhibits thereto) and other material documents and closing papers delivered in
connection therewith.
(d) The consummation of each Permitted Acquisition shall be deemed to be a
representation and warranty by the Borrower that (except as shall have been
approved in writing by the Required Lenders) all conditions thereto set forth in
this Section and in the description furnished under clause (i) of subsection (b)
above have been satisfied, that the same is permitted in accordance with the
terms of this Agreement, and that the matters certified to by the Financial
Officer of the Borrower in the certificate referred to in clause (iii) of
subsection (b) above are, to the best of such individual's knowledge, true and
correct in all material respects as of the date such certificate is given, which
representation and warranty shall be deemed to be a representation and warranty
as of the date thereof for all purposes hereunder, including, without
limitation, for purposes of Sections 4.2 and 9.1.
6.10 Year 2000 Compatibility. The Borrower will, and will cause each of its
Subsidiaries to, use commercially reasonable efforts to take all action
necessary to ensure that its computer-based systems are able to operate and
effectively process data including dates on and after January 1, 2000. At the
request of the Agent or the Required Lenders, the Borrower will provide
reasonable assurance of its Year 2000 compatibility.
61
6.11 Deposit Relationship. The Borrower will maintain a deposit account
with First Union at all -------------------- times.
6.12 Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, make, execute, endorse, acknowledge and deliver any amendments,
modifications or supplements hereto and restatements hereof and any other
agreements, instruments or documents, and take any and all such other actions,
as may from time to time be reasonably requested by the Agent or the Required
Lenders to effect, confirm or further assure or protect and preserve the
interests, rights and remedies of the Agent and the Lenders under this Agreement
and the other Credit Documents.
ARTICLE VII
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
7.1 Leverage Ratio. The Borrower will not permit the Leverage Ratio to
exceed 0.35 : 1.0 at any -------------- time.
7.2 Consolidated Net Worth. The Borrower will not permit Consolidated Net
Worth as of the last day of any fiscal quarter, beginning with the fiscal
quarter ending September 30, 1998, to be less than the sum of (i) 85% of
Consolidated Net Worth as of June 30, 1998 plus (ii) 50% of the aggregate of
Consolidated Net Income for each fiscal quarter ending after June 30, 1998
(provided that Consolidated Net Income for any such fiscal quarter shall be
taken into account for purposes of this calculation only if positive) plus (iii)
75% of the aggregate amount of all increases in the stated capital and
additional paid-in capital accounts of the Borrower and its Subsidiaries, as
determined on a consolidated basis in accordance with GAAP, resulting from the
issuance of equity securities (including pursuant to the exercise of options,
rights or warrants or pursuant to the conversion of convertible securities) or
other Capital Stock after June 30, 1998 minus (iv) the amount (up to a maximum
of $10,000,000) of stock repurchases by the Borrower occurring between June 30,
1998 and September 30, 1999.
7.3 Fixed Charge Coverage Ratio. The Borrower will not permit the Fixed
Charge Coverage Ratio as of the last day of any fiscal quarter, beginning with
the fiscal quarter ending September 30, 1998, to be less than 1.25 : 1.0.
7.4 Risk-Based Capital Ratio. The Borrower will not permit "total adjusted
capital" (within the meaning of the Risk-Based Capital for Insurers Model Act as
promulgated by the NAIC as of the date hereof (the "Model Act")), as of the last
day of any fiscal year, beginning with the fiscal year ending December 31, 1998,
of (i) PAIC or any Material Insurance Subsidiary (other than a Subsidiary of an
Insurance Subsidiary) to be less than 150% of the applicable
62
"Company Action Level RBC" (within the meaning of the Model Act) as of such
date, or (ii) any other Material Insurance Subsidiary to be less than 100% of
the applicable "Company Action Level RBC as of such date.
7.5 Combined Net Premiums to Capital Ratio. The Borrower will not permit
the Combined Net Premiums to Capital Ratio, as of the last day of any fiscal
quarter, beginning with the fiscal quarter ending September 30, 1998, to be
greater than 2.25 : 1.0.
7.6 Statutory Surplus. The Borrower will not permit the Combined Statutory
Capital and Surplus of the Insurance Subsidiaries, as of the last day of any
fiscal quarter, beginning with the fiscal quarter ending September 30, 1998, to
be less than the greater of (i) 90% of Combined Statutory and Capital Surplus as
of June 30, 1998 or (ii) $78,000,000, plus 50% of the aggregate (without
duplication) of the increases in the stated capital and additional paid-in
capital accounts of the Insurance Subsidiaries occurring after June 30, 1998, as
determined in each case in accordance with SAP.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitments, the termination or expiration of all Letters of Credit and the
payment in full of all principal and interest with respect to the Loans and all
Reimbursement Obligations together with all other amounts then due and owing
hereunder:
8.1 Merger; Consolidation. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, liquidate, wind up or dissolve, or enter into
any consolidation, merger or other combination, or agree to do any of the
foregoing; provided, however, that:
(i) the Borrower may merge or consolidate with another Person so long
as (x) the Borrower is the surviving entity, (y) unless such other Person
is a Wholly Owned Subsidiary immediately prior to giving effect thereto,
such merger or consolidation shall constitute a Permitted Acquisition and
the applicable conditions and requirements of Section 6.9 shall be
satisfied, and (z) immediately after giving effect thereto, no Default or
Event of Default would exist; and
(ii) any Subsidiary may merge or consolidate with another Person so
long as (x) the surviving entity is the Borrower or a Subsidiary, (y)
unless such other Person is a Wholly Owned Subsidiary immediately prior to
giving effect thereto, such merger or consolidation shall constitute a
Permitted Acquisition and the applicable conditions and requirements of
Section 6.9 shall be satisfied, and (z) immediately after giving effect
thereto, no Default or Event of Default would exist.
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8.2 Indebtedness. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, create, incur, assume or suffer to exist any
Indebtedness other than:
(i) Indebtedness incurred under this Agreement (including, without
limitation, reimbursement obligations with respect to Letters of Credit)
and the Notes;
(ii) Indebtedness existing on the Closing Date and described in
Schedule 8.2;
(iii) accrued expenses (including salaries, accrued vacation and other
compensation), current trade or other accounts payable and other current
liabilities arising in the ordinary course of business and not incurred
through the borrowing of money, provided that the same shall be paid when
due except to the extent being contested in good faith and by appropriate
proceedings;
(iv) loans and advances by the Borrower or any Subsidiary to any other
Subsidiary or by any Subsidiary to the Borrower, provided that any such
loan or advance if payable by the Borrower is subordinated in right and
time of payment to the Obligations;
(v) unsecured Indebtedness of the Borrower that is expressly
subordinated and made junior in right and time of payment to the
Obligations and that is evidenced by one or more written agreements or
instruments having terms, conditions and provisions (including, without
limitation, provisions relating to principal amount, maturity, covenants,
defaults, interest, and subordination) satisfactory in form and substance
to the Required Lenders in their sole discretion and which shall provide,
at a minimum and without limitation, that such Indebtedness (a) shall
mature by its terms no earlier than the second anniversary of the Maturity
Date, (b) shall not require any scheduled payment of principal prior to the
first anniversary of the Maturity Date, (c) shall have covenants and
undertakings that, taken as a whole, are materially less restrictive than
those contained herein, and (d) shall bear interest at an overall rate not
exceeding ten percent (10%) per annum and, to the extent payable only in
cash, at a rate not exceeding ten percent (10%) per annum (the Indebtedness
described hereinabove, "Subordinated Indebtedness"); provided that, as
further conditions to the issuance of any Subordinated Indebtedness, (1)
immediately after giving effect to the issuance of such Subordinated
Indebtedness, no Default or Event of Default shall exist, (2) all
agreements and instruments evidencing or governing such Subordinated
Indebtedness shall have been approved in writing by the Required Lenders
(or the Agent on their behalf), and (3) prior to or concurrently with the
issuance of such Subordinated Indebtedness, the Borrower shall have
delivered to each Lender a certificate, signed by a Financial Officer of
the Borrower, satisfactory in form and substance to the Required Lenders
and to the effect that, after giving effect to the incurrence of such
Subordinated Indebtedness, the Borrower is in compliance with the financial
covenants set forth in Sections 7.1 through 7.6, such compliance being
determined with regard to calculations made on a pro forma basis in
accordance with GAAP as of the last day of the fiscal quarter then most
recently ended and as if such Subordinated Indebtedness had been incurred
on the first day of the period applicable to such covenants (such
calculations to be attached to such certificate); and provided further
64
that the Net Cash Proceeds from the issuance of such Subordinated
Indebtedness shall be applied to prepay the Loans in accordance with, and
to the extent required under, the provisions of Section 2.6(c);
(vi) purchase money Indebtedness of the Borrower and its Subsidiaries
incurred solely to finance the payment of all or part of the purchase price
of any equipment, real property or other fixed assets acquired in the
ordinary course of business, including Indebtedness in respect of capital
lease obligations, and any renewals, refinancings or replacements thereof
(subject to the limitations on the principal amount thereof set forth in
this clause (vi)), which Indebtedness shall not exceed $8,000,000 in
aggregate principal amount outstanding at any time; and
(vii) other unsecured Indebtedness not exceeding $5,000,000 in
aggregate principal amount outstanding at any time.
8.3 Liens. The Borrower will not, and will not permit or cause any of its
Subsidiaries to, directly or indirectly, make, create, incur, assume or suffer
to exist, any Lien upon or with respect to any part of its property or assets,
whether now owned or hereafter acquired, or file or permit the filing of, or
permit to remain in effect, any financing statement or other similar notice of
any Lien with respect to any such property, asset, income or profits under the
Uniform Commercial Code of any state or under any similar recording or notice
statute, or agree to do any of the foregoing, other than the following
(collectively, "Permitted Liens"):
(i) Liens in existence on the Closing Date and set forth on Schedule
8.3;
(ii) Liens imposed by law, such as Liens of carriers, warehousemen,
mechanics, materialmen and landlords, and other similar Liens incurred in
the ordinary course of business for sums not constituting borrowed money
that are not overdue for a period of more than thirty (30) days or that are
being contested in good faith by appropriate proceedings and for which
adequate reserves have been established in accordance with GAAP (if so
required);
(iii) Liens (other than any Lien imposed by ERISA, the creation or
incurrence of which would result in an Event of Default under Section
9.1(j)) incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure the performance of letters
of credit, bids, tenders, statutory obligations, surety and appeal bonds,
leases, government contracts and other similar obligations (other than
obligations for borrowed money) entered into in the ordinary course of
business;
(iv) Liens for taxes, assessments or other governmental charges or
statutory obligations that are not delinquent or remain payable without any
penalty or that are being contested in good faith by appropriate
proceedings and for which adequate reserves have been established in
accordance with GAAP (if so required);
65
(v) Liens securing the purchase money Indebtedness permitted under
clause (vi) of Section 8.2, provided that any such Lien (a) shall attach to
such property concurrently with or within ten (10) days after the
acquisition thereof by the Borrower or such Subsidiary, (b) shall not
exceed the lesser of (y) the fair market value of such property or (z) the
cost thereof to the Borrower or such Subsidiary and (c) shall not encumber
any other property of the Borrower or any of its Subsidiaries;
(vi) any attachment or judgment Lien not constituting an Event of
Default under Section 9.1(h) that is being contested in good faith by
appropriate proceedings and for which adequate reserves have been
established in accordance with GAAP (if so required);
(vii) Liens arising from the filing, for notice purposes only, of
financing statements in respect of true leases;
(viii) Liens on Borrower Margin Stock, to the extent the fair market
value thereof exceeds 25% of the fair market value of the assets of the
Borrower and its Subsidiaries (including Borrower Margin Stock);
(ix) with respect to any real property occupied by the Borrower or any
of its Subsidiaries, all easements, rights of way, licenses and similar
encumbrances on title that do not materially impair the use of such
property for its intended purposes; and
(x) other Liens securing obligations of the Borrower and its
Subsidiaries not exceeding $1,000,000 in aggregate amount outstanding at
any time.
8.4 Disposition of Assets. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, sell, assign, lease as lessor, convey,
transfer or otherwise dispose of (whether in one or a series of transactions)
all or any portion of its assets, business or properties (including, without
limitation, any Capital Stock of any Subsidiary), or enter into any arrangement
with any Person providing for the lease by the Borrower or any Subsidiary as
lessee of any asset that has been sold or transferred by the Borrower or such
Subsidiary to such Person, or agree to do any of the foregoing, except for:
(i) sales of inventory and licenses or leases of intellectual property
and other assets, in each case in the ordinary course of business;
(ii) the sale or exchange of used or obsolete equipment to the extent
(y) the proceeds of such sale are applied towards, or such equipment is
exchanged for, replacement equipment or (z) such equipment is no longer
necessary for the operations of the Borrower or its applicable Subsidiary
in the ordinary course of business;
(iii) the sale or other disposition by the Borrower and its
Subsidiaries of any Borrower Margin Stock to the extent the fair market
value thereof exceeds 25% of the fair market value of the assets of the
Borrower and its Subsidiaries (including Borrower Margin Stock), provided
that fair value is received in exchange therefor;
66
(iv) the sale, lease or other disposition of assets by a Subsidiary of
the Borrower to the Borrower or to a Subsidiary if, immediately after
giving effect thereto, no Default or Event of Default would exist;
(v) sales of investment assets in the ordinary course of business; and
(vi) the sale by the Borrower and its Subsidiaries of (x) the capital
stock or all or any portion of the assets, business or properties of a
Subsidiary that is not a Material Subsidiary; (y) any asset or group of
assets of an Insurance Subsidiary constituting less than (A) in any single
transaction or series of related transactions, ten percent (10%) of
Combined Statutory Capital and Surplus as of the last day of the fiscal
quarter ending on or immediately prior to the date of such sale, and (B)
during the term of this Agreement, in the aggregate with all such other
sales pursuant to this clause (vi), thirty percent (30%) of Combined
Statutory Capital and Surplus as of the end of the immediately preceding
fiscal quarter; and (z) any asset or group of assets of a non-Insurance
Subsidiary constituting less than (A) in any single transaction or series
of related transactions, ten percent (10%) of the total assets of the
Borrower and its Subsidiaries on a consolidated basis, determined in
accordance with GAAP as of the last day of the fiscal quarter ending on or
immediately prior to the date of such sale, and (B) during the term of this
Agreement, in the aggregate with all such other sales pursuant to this
clause (vi), thirty percent (30%) of the total assets of the Borrower and
its Subsidiaries on a consolidated basis, determined in accordance with
GAAP as of the end of the immediately preceding fiscal quarter; provided in
the case of any sale pursuant to this clause (vi) that (A) the Net Cash
Proceeds from such sales are delivered to the Agent promptly upon (and in
any event not later than ten (10) Business Days after) receipt thereof for
application in prepayment of the Loans in accordance with, and to the
extent required under, the provisions of Section 2.6(b) or 2.6(c) and (B)
immediately after giving effect thereto, no Default or Event of Default
would exist.
8.5 Investments. The Borrower will not, and will not permit or cause any of
its Subsidiaries to, directly or indirectly, purchase, own, invest in or
otherwise acquire any Capital Stock, evidence of indebtedness or other
obligation or security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit to, or any
investment in cash or by delivery of property in, any other Person, or purchase
or otherwise acquire (whether in one or a series of related transactions) any
portion of the assets, business or properties of another Person (including
pursuant to an Acquisition), or create or acquire any Subsidiary, or become a
partner or joint venturer in any partnership or joint venture (collectively,
"Investments"), or make a commitment or otherwise agree to do any of the
foregoing, other than:
(i) Cash Equivalents;
(ii) Investments consisting of purchases and acquisitions of
inventory, supplies, materials and equipment or licenses or leases of
intellectual property and other assets, in each case in the ordinary course
of business,
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(iii) Investments consisting of loans and advances to employees for
reasonable travel, relocation and business expenses in the ordinary course
of business, extensions of trade credit in the ordinary course of business,
and prepaid expenses incurred in the ordinary course of business;
(iv) without duplication, Investments consisting of intercompany
Indebtedness permitted under clause (iv) of Section 8.2;
(v) Investments existing on the Closing Date and described in Schedule
8.5;
(vi) Investments consisting of the making of capital contributions or
the purchase of Capital Stock (a) by the Borrower or any Subsidiary in any
other Wholly Owned Subsidiary and (b) by any Subsidiary in the Borrower;
(vii) Permitted Acquisitions; and
(viii) other Investments by Insurance Subsidiaries to the extent
permitted under applicable Requirements of Law and in compliance with the
following restrictions:
(a) Investments of each Insurance Subsidiary shall be in
compliance at all times with the applicable Insurance Code and with
all applicable insurance laws and regulations of any other relevant
jurisdictions relating to investments by such Insurance Subsidiary;
(b) the aggregate Investments (other than Investments consisting
of publicly-traded common stock ) of any Insurance Subsidiary in
non-Investment Grade Securities shall constitute at all times no more
than five percent (5%) of Invested Assets (other than publicly-traded
common stock) of such Insurance Subsidiary;
(c) the aggregate Investments, at any time, of any Insurance
Subsidiary consisting of equity securities (including, without
limitation, common and preferred stock, whether or not
publicly-traded) shall not be greater than one-third (1/3) of the
Statutory Capital and Surplus of such Insurance Subsidiary at such
time; and
(d) with respect to Investments in securities other than those
issued or unconditionally guaranteed by the United States Government,
the aggregate Investments of any Insurance Subsidiary in the
securities of any single issuer shall constitute at all times no more
than five percent (5%) of Invested Assets of such Insurance
Subsidiary.
8.6 Restricted Payments. (a) The Borrower will not, and will not permit or
cause any of its Subsidiaries to, directly or indirectly, declare or make any
dividend payment, or make any other distribution of cash, property or assets, in
respect of any of its Capital Stock or any warrants, rights or options to
acquire its Capital Stock, or purchase, redeem, retire or otherwise
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acquire for value any shares of its Capital Stock or any warrants, rights or
options to acquire its Capital Stock, or set aside funds for any of the
foregoing, except that:
(i) the Borrower may declare and make dividend payments or other
distributions to holders of its common stock, in cash or in shares of its
common stock, and may purchase, redeem, retire or otherwise acquire shares
of its Capital Stock, in cash or in-kind, in each case provided that,
immediately after giving effect thereto, no Default or Event of Default
would exist; and
(ii) each Wholly Owned Subsidiary of the Borrower may declare and make
dividend payments or other distributions to the Borrower or another Wholly
Owned Subsidiary of the Borrower, to the extent not prohibited under
applicable Requirements of Law.
(b) The Borrower will not, and will not permit or cause any of its
Subsidiaries to, make (or give any notice in respect of) any voluntary or
optional payment or prepayment of principal on any Subordinated Indebtedness, or
directly or indirectly make any redemption (including pursuant to any change of
control provision), retirement, defeasance or other acquisition for value of any
Subordinated Indebtedness, or make any deposit or otherwise set aside funds for
any of the foregoing purposes.
8.7 Transactions with Affiliates. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, enter into any transaction
(including, without limitation, any purchase, sale, lease or exchange of
property or the rendering of any service) with any officer, director,
stockholder or other Affiliate of the Borrower or any Subsidiary, except in the
ordinary course of its business and upon fair and reasonable terms that are no
less favorable to it than would obtain in a comparable arm's length transaction
with a Person other than an Affiliate of the Borrower or such Subsidiary;
provided, however, that nothing contained in this Section shall prohibit:
(i) transactions described on Schedule 8.7 or otherwise expressly
permitted under this Agreement; and
(ii) the payment by the Borrower of reasonable and customary fees to
members of its board of directors.
8.8 Lines of Business. The Borrower will not, and will not permit or cause
any of its Subsidiaries to, engage in any business other than (i) the lines of
business engaged in by it on the date hereof and businesses and activities
reasonably related thereto or (ii) in the case of an Insurance Subsidiary, the
sale of any of the insurance products within the lines of business described in
Schedule 8.8.
8.9 Certain Amendments. The Borrower will not, and will not permit or cause
any of its Subsidiaries to, (i) amend, modify or waive, or permit the amendment,
modification or waiver of, any provision of any agreement or instrument
evidencing or governing any Subordinated Indebtedness, the effect of which would
be to (a) increase the principal amount due thereunder, (b) shorten or
accelerate the time of payment of any amount due thereunder, (c) increase the
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applicable interest rate or amount of any fees or costs due thereunder, (d)
amend any of the subordination provisions thereunder (including any of the
definitions relating thereto), (e) make any covenant therein more restrictive or
add any new covenant, or (f) otherwise materially and adversely affect the
Lenders, or breach or otherwise violate any of the subordination provisions
applicable thereto, including, without limitation, restrictions against payment
of principal and interest thereon, or (ii) amend, modify or change any provision
of its articles or certificate of incorporation or bylaws, or the terms of any
class or series of its Capital Stock, other than in a manner that could not
reasonably be expected to adversely affect the Lenders.
8.10 Limitation on Certain Restrictions. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any restriction or
encumbrance on (i) the ability of the Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Credit Documents or (ii)
the ability of any Subsidiary of the Borrower to make any dividend payments or
other distributions in respect of its Capital Stock, to repay Indebtedness owed
to the Borrower or any other Subsidiary, to make loans or advances to the
Borrower or any other Subsidiary, or to transfer any of its assets or properties
to the Borrower or any other Subsidiary, in each case other than such
restrictions or encumbrances existing under or by reason of the Credit Documents
or applicable Requirements of Law.
8.11 No Other Negative Pledges. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, directly or indirectly, enter into or
suffer to exist any agreement or restriction that prohibits or conditions the
creation, incurrence or assumption of any Lien upon or with respect to any part
of its property or assets, whether now owned or hereafter acquired, or agree to
do any of the foregoing, other than as set forth in (i) this Agreement, (ii) any
agreement or instrument creating a Permitted Lien (but only to the extent such
agreement or restriction applies to the assets subject to such Permitted Lien),
and (iii) operating leases of real or personal property entered into by the
Borrower or any of its Subsidiaries as lessee in the ordinary course of
business.
8.12 Fiscal Year. The Borrower will not, and will not permit or cause any
of its Subsidiaries to, change the ending date of its fiscal year to a date
other than December 31.
8.13 Accounting Changes. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, make or permit any material change in its
accounting policies or reporting practices, except as may be required by GAAP or
SAP.
8.14 Best Rating. The Borrower will not permit or cause the rating by A.M.
Best & Company of (i) PAIC or (ii) any pooling arrangement in which PAIC is a
participant to be lower than "A-" at any time.
8.15 Reinsurance Agreements. The Borrower will not, and will not permit or
cause any of its Insurance Subsidiaries to do any of the following:
(i) be or become a party to any Reinsurance Agreement (whether in
effect as of the Closing Date or at any time thereafter) with any reinsurer
that both (1) is not rated
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"A-" or better by A.M. Best & Company and (2) does not have a claims paying
ability rating of "A-" or better by Standard & Poor's or Xxxxx'x (any such
reinsurer, a "Rating Deficient Reinsurer") unless such Rating Deficient
Reinsurer has either (x) provided a letter of credit issued by a United
States bank having a long term senior debt rating of "A" or better by
Standard & Poor's and Xxxxx'x, in favor of the Borrower or the applicable
Insurance Subsidiary in an amount equal to or greater than the obligations
transferred pursuant to such Reinsurance Agreement, (y) placed the assets
transferred by the Insurance Subsidiary pursuant to such Reinsurance
Agreement in a trust with a fiduciary and under terms, including investment
restrictions consistent with this Agreement, satisfactory to the Agent, or
(z) otherwise provided collateral in favor of the Borrower or the
applicable Insurance Subsidiary in form and amount satisfactory to the
Required Lenders; provided, however, that any Insurance Subsidiary may
remain a party to a Reinsurance Agreement -------- ------- with a Rating
Deficient Reinsurer that has not provided the collateral of the type
described in clauses (x), (y) and (z) above (all such Ratings Deficient
Reinsurers, collectively, the "Non-Approved Reinursers") provided that (A)
as of the end of each fiscal year, the aggregate amount of the Net Amount
-------- Recoverable from Reinsurers for the Insurance Subsidiaries
attributable to all Non-Approved Reinsurers as of such year end is not
greater than $1,500,000, and (y) for each fiscal year (or portion thereof)
ending with each fiscal quarter thereof, the aggregate amount of
Reinsurance Premiums Ceded by the Insurance Subsidiaries during such fiscal
year (or portion thereof) to all Non-Approved Reinsurers as of each such
quarter ended is not greater than $1,500,000;
(ii) enter into any Reinsurance Agreements, or make any amendment or
modification to or waiver of any Reinsurance Agreements, that would,
individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect; or
(iii) be or become a party to any Surplus Relief Reinsurance Agreement
if the increase in Combined Statutory and Capital Surplus as a result of or
arising from such Surplus Relief Reinsurance Agreement, when added to the
increase in Combined Statutory and Capital Surplus as a result of or
arising from all other Surplus Relief Reinsurance Agreements theretofore
entered into by any Insurance Subsidiary, net of any surplus relief
recaptured in respect of such Surplus Relief Reinsurance Agreements,
exceeds ten percent (10%) of Combined Statutory and Capital Surplus as of
the most recent fiscal year end.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of or interest on any
Loan, any Reimbursement Obligation, any fee or any other Obligation when due;
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(b) The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of Sections 2.14, 6.1, 6.2,
6.3(g), 6.8, 6.9 or in Article VII or Article VIII;
(c) The Borrower or any of its Subsidiaries shall fail to observe, perform
or comply with any condition, covenant or agreement contained in this Agreement
or any of the other Credit Documents other than those enumerated in subsections
(a) and (b) above, and such failure (i) is deemed by the terms of the relevant
Credit Document to constitute an Event of Default or (ii) shall continue
unremedied for any grace period specifically applicable thereto or, if no such
grace period is applicable, for a period of thirty (30) days after the earlier
of (y) the date on which a Responsible Officer of the Borrower acquires
knowledge thereof and (z) the date on which written notice thereof is delivered
by the Agent or any Lender to the Borrower;
(d) Any representation or warranty made or deemed made by or on behalf of
the Borrower or any of its Subsidiaries in this Agreement, any of the other
Credit Documents or in any certificate, instrument, report or other document
furnished in connection herewith or therewith or in connection with the
transactions contemplated hereby or thereby shall prove to have been false or
misleading in any material respect as of the time made, deemed made or
furnished;
(e) The Borrower or any of its Subsidiaries shall (i) fail to pay when due
(whether by scheduled maturity, acceleration or otherwise and after giving
effect to any applicable grace period) any principal of or interest on any
Indebtedness (other than the Indebtedness incurred pursuant to this Agreement)
having an aggregate principal amount of at least $5,000,000 or (ii) fail to
observe, perform or comply with any condition, covenant or agreement contained
in any agreement or instrument evidencing or relating to any such Indebtedness,
or any other event shall occur or condition exist in respect thereof, and the
effect of such failure, event or condition is to cause, or permit the holder or
holders of such Indebtedness (or a trustee or agent on its or their behalf) to
cause (with the giving of notice, lapse of time, or both), such Indebtedness to
become due, or to be prepaid, redeemed, purchased or defeased, prior to its
stated maturity;
(f) The Borrower or any of its Subsidiaries shall (i) file a voluntary
petition or commence a voluntary case seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to controvert in a timely and appropriate manner, any
petition or case of the type described in subsection (g) below, (iii) apply for
or consent to the appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of itself or all or a substantial part of
its properties or assets, (iv) fail generally, or admit in writing its
inability, to pay its debts generally as they become due, (v) make a general
assignment for the benefit of creditors or (vi) take any corporate action to
authorize or approve any of the foregoing;
(g) Any involuntary petition or case shall be filed or commenced against
the Borrower or any of its Subsidiaries seeking liquidation, winding-up,
reorganization, dissolution, arrangement, readjustment of debts, the appointment
of a custodian, trustee, receiver or similar
72
official for it or all or a substantial part of its properties or any other
relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, and such petition or case
shall continue undismissed and unstayed for a period of sixty (60) days; or an
order, judgment or decree approving or ordering any of the foregoing shall be
entered in any such proceeding;
(h) Any one or more money judgments, writs or warrants of attachment,
executions or similar processes involving an aggregate amount (exclusive of
amounts fully bonded or covered by insurance as to which the surety or insurer,
as the case may be, has acknowledged its liability in writing) in excess of
$1,000,000 shall be entered or filed against the Borrower or any of its
Subsidiaries or any of their respective properties and the same shall not be
dismissed, stayed or discharged for a period of thirty (30) days or in any event
later than five days prior to the date of any proposed sale thereunder;
(i) Any ERISA Event or any other event or condition shall occur or exist
with respect to any Plan or Multiemployer Plan and, as a result thereof,
together with all other ERISA Events and other events or conditions then
existing, the Borrower and its ERISA Affiliates have incurred or would be
reasonably likely to incur liability to any one or more Plans or Multiemployer
Plans or to the PBGC (or to any combination thereof) in excess of $1,000,000;
(j) Any one or more licenses, permits, accreditations or authorizations of
the Borrower or any of its Subsidiaries shall be suspended, limited or
terminated or shall not be renewed, or any other action shall be taken, by any
Governmental Authority in response to any alleged failure by the Borrower or any
of its Subsidiaries to be in compliance with applicable Requirements of Law, and
such action, individually or in the aggregate, has or would be reasonably likely
to have a Material Adverse Effect;
(k) Any one or more Environmental Claims shall have been asserted against
the Borrower or any of its Subsidiaries; the Borrower and its Subsidiaries have
incurred or would be reasonably likely to incur liability as a result thereof;
and such liability, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect; or
(l) Any of the following shall occur: (i) any Person or group of Persons
acting in concert as a partnership or other group, other than Penn Independent
Corporation or a group comprised solely of such Persons, shall, as a result of a
tender or exchange offer, open market purchases, privately negotiated purchases
or otherwise, have become, after the date hereof, the "beneficial owner" (within
the meaning of such term under Rule 13d-3 under the Exchange Act) of securities
of the Borrower representing 20% or more of the combined voting power of the
then outstanding securities of the Borrower ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in the election
of directors; or (ii) the Board of Directors of the Borrower shall cease to
consist of a majority of the individuals who constituted the Board of Directors
as of the date hereof or who shall have become a member thereof subsequent to
the date hereof after having been nominated, or otherwise approved in writing,
by at least a majority of individuals who constituted the Board of Directors of
the Borrower as of the date hereof (or their replacements approved as herein
required).
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9.2 Remedies: Termination of Commitments, Acceleration, etc. Upon and at
any time after the occurrence and during the continuance of any Event of
Default, the Agent shall at the direction, or may with the consent, of the
Required Lenders, take any or all of the following actions at the same or
different times:
(a) Declare the Commitments and the Issuing Lender's obligation to issue
Letters of Credit, to be terminated, whereupon the same shall terminate
(provided that, upon the occurrence of an Event of Default pursuant to Section
9.1(f) or Section 9.1(g), the Commitments and the Issuing Lender's obligation to
issue Letters of Credit shall automatically be terminated);
(b) Declare all or any part of the outstanding principal amount of the
Loans to be immediately due and payable, whereupon the principal amount so
declared to be immediately due and payable, together with all interest accrued
thereon and all other amounts payable under this Agreement, the Notes and the
other Credit Documents, shall become immediately due and payable without
presentment, demand, protest, notice of intent to accelerate or other notice or
legal process of any kind, all of which are hereby knowingly and expressly
waived by the Borrower (provided that, upon the occurrence of an Event of
Default pursuant to Section 9.1(f) or Section 9.1(g), all of the outstanding
principal amount of the Loans and all other amounts described in this subsection
(b) shall automatically become immediately due and payable without presentment,
demand, protest, notice of intent to accelerate or other notice or legal process
of any kind, all of which are hereby knowingly and expressly waived by the
Borrower);
(c) Direct the Borrower to deposit (and the Borrower hereby agrees,
forthwith upon receipt of notice of such direction from the Agent, to deposit)
with the Agent from time to time such additional amount of cash as is equal to
the aggregate Stated Amount of all Letters of Credit then outstanding (whether
or not any beneficiary under any Letter of Credit shall have drawn or be
entitled at such time to draw thereunder), such amount to be held by the Agent
in the Cash Collateral Account as security for the Letter of Credit Exposure as
described in Section 3.8;
(d) Take any and all action necessary to obtain, at the Borrower's expense
and as soon as reasonably possible, with respect to each Insurance Subsidiary, a
current actuarial review and valuation statement of, and opinion as to the
adequacy of, such Insurance Subsidiary's loss and loss adjustment expense
reserve positions with respect to the insurance business then in force, and
covering such other subjects as are customary in actuarial reviews and as may be
requested by the Required Lenders, prepared by an independent actuarial firm
acceptable to the Required Lenders in accordance with reasonable actuarial
assumptions and procedures (the Borrower hereby agreeing to cooperate in
connection therewith); and
(e) Exercise all rights and remedies available to it under this Agreement,
the other Credit Documents and applicable law.
9.3 Remedies: Set-Off. In addition to all other rights and remedies
available under the Credit Documents or applicable law or otherwise, upon and at
any time after the occurrence and during the continuance of any Event of
Default, each Lender may, and each is hereby authorized by the Borrower, at any
such time and from time to time, to the fullest extent permitted by applicable
law, without presentment, demand, protest or other notice of any kind,
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all of which are hereby knowingly and expressly waived by the Borrower, to set
off and to apply any and all deposits (general or special, time or demand,
provisional or final but specifically excluding deposits in trust accounts) and
any other property at any time held (including at any branches or agencies,
wherever located), and any other indebtedness at any time owing, by such Lender
to or for the credit or the account of the Borrower against any or all of the
Obligations to such Lender now or hereafter existing, whether or not such
Obligations may be contingent or unmatured, the Borrower hereby granting to each
Lender a continuing security interest in and Lien upon all such deposits and
other property as security for such Obligations. Each Lender agrees promptly to
notify the Borrower and the Agent after any such set-off and application;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
ARTICLE X
THE AGENT
10.1 Appointment. Each Lender hereby irrevocably appoints and authorizes
First Union to act as Agent hereunder and under the other Credit Documents and
to take such actions as agent on its behalf hereunder and under the other Credit
Documents, and to exercise such powers and to perform such duties, as are
specifically delegated to the Agent by the terms hereof or thereof, together
with such other powers and duties as are reasonably incidental thereto.
10.2 Nature of Duties. The Agent shall have no duties or responsibilities
other than those expressly set forth in this Agreement and the other Credit
Documents. The Agent shall not have, by reason of this Agreement or any other
Credit Document, a fiduciary relationship in respect of any Lender; and nothing
in this Agreement or any other Credit Document, express or implied, is intended
to or shall be so construed as to impose upon the Agent any obligations or
liabilities in respect of this Agreement or any other Credit Document except as
expressly set forth herein or therein. The 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 not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact that it selects with reasonable care. The
Agent shall be entitled to consult with legal counsel, independent public
accountants and other experts selected by it with respect to all matters
pertaining to this Agreement and the other Credit Documents and its duties
hereunder and thereunder and shall not be liable for any action taken or omitted
to be taken in good faith by it in accordance with the advice of such counsel,
accountants or experts. The Lenders hereby acknowledge that the Agent shall not
be under any duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement or any other Credit Document unless
it shall be requested in writing to do so by the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders).
10.3 Exculpatory Provisions. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action taken or omitted to be taken by it or such Person under or
in connection with the Credit Documents, except for its or such Person's own
gross negligence or willful misconduct, (ii) responsible in
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any manner to any Lender for any recitals, statements, information,
representations or warranties herein or in any other Credit Document or in any
document, instrument, certificate, report or other writing delivered in
connection herewith or therewith, for the execution, effectiveness, genuineness,
validity, enforceability or sufficiency of this Agreement or any other Credit
Document, or for the financial condition of the Borrower, its Subsidiaries or
any other Person, or (iii) required to ascertain or make any inquiry concerning
the performance or observance of any of the terms, provisions or conditions of
this Agreement or any other Credit Document or the existence or possible
existence of any Default or Event of Default, or to inspect the properties,
books or records of the Borrower or any of its Subsidiaries.
10.4 Reliance by Agent. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any notice, statement, consent or other
communication (including, without limitation, any thereof by telephone,
telecopy, telex, telegram or cable) believed by it in good faith to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons. The Agent may deem and treat each Lender as the owner of its interest
hereunder for all purposes hereof unless and until a written notice of the
assignment, negotiation or transfer thereof shall have been given to the Agent
in accordance with the provisions of this Agreement. The Agent shall be entitled
to refrain from taking or omitting to take any action in connection with this
Agreement or any other Credit Document (i) if such action or omission would, in
the reasonable opinion of the Agent, violate any applicable law or any provision
of this Agreement or any other Credit Document or (ii) unless and until it shall
have received such advice or concurrence of the Required Lenders (or, where a
higher percentage of the Lenders is expressly required hereunder, such Lenders)
as it deems appropriate or it shall first have been indemnified to its
satisfaction by the Lenders against any and all liability and expense (other
than liability and expense arising from its own gross negligence or willful
misconduct) that may be incurred by it by reason of taking, continuing to take
or omitting to take any such action. Without limiting the foregoing, no Lender
shall have any right of action whatsoever against the Agent as a result of the
Agent's acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Lenders (or, where
a higher percentage of the Lenders is expressly required hereunder, such
Lenders), and such instructions and any action taken or failure to act pursuant
thereto shall be binding upon all of the Lenders (including all subsequent
Lenders).
10.5 Non-Reliance on Agent and Other Lenders. Each Lender expressly
acknowledges that neither the Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates has made any representation
or warranty to it and that no act by the Agent or any such Person hereinafter
taken, including any review of the affairs of the Borrower and its Subsidiaries,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that (i) it has, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, properties, financial
and other condition and creditworthiness of the Borrower and its Subsidiaries
and made its own decision to enter into this Agreement and extend credit to the
Borrower hereunder, and (ii) it will, independently and without reliance upon
the Agent or any other Lender and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action hereunder and under
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the other Credit Documents and to make such investigation as it deems necessary
to inform itself as to the business, prospects, operations, properties,
financial and other condition and creditworthiness of the Borrower and its
Subsidiaries. Except as expressly provided in this Agreement and the other
Credit Documents, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any credit or
other information concerning the business, prospects, operations, properties,
financial or other condition or creditworthiness of the Borrower, its
Subsidiaries or any other Person that may at any time come into the possession
of the Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.6 Notice of Default. The Agent shall not be deemed to have knowledge or
notice of the occurrence of any Default or Event of Default unless the Agent
shall have received written notice from the Borrower or a Lender 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 Agent receives such
a notice, the Agent will give notice thereof to the Lenders as soon as
reasonably practicable; provided, however, that if any such notice has also been
furnished to the Lenders, the Agent shall have no obligation to notify the
Lenders with respect thereto. The Agent shall (subject to Sections 10.4 and
11.6) take such action with respect to such Default or Event of Default as shall
reasonably be directed by the Required Lenders; provided that, unless and until
the Agent shall have received such directions, the Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable in the best
interests of the Lenders except to the extent that this Agreement expressly
requires that such action be taken, or not be taken, only with the consent or
upon the authorization of the Required Lenders or all of the Lenders.
10.7 Indemnification. To the extent the Agent is not reimbursed by or on
behalf of the Borrower, and without limiting the obligation of the Borrower to
do so, the Lenders agree (i) to indemnify the Agent and its officers, directors,
employees, agents, attorneys-in-fact and Affiliates, ratably in proportion to
their respective percentages as used in determining the Required Lenders as of
the date of determination, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including, without limitation, attorneys' fees and expenses) or
disbursements of any kind or nature whatsoever that may at any time (including,
without limitation, at any time following the repayment in full of the Loans and
the termination of the Commitments) be imposed on, incurred by or asserted
against the Agent 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 thereby or any action taken or omitted
by the Agent under or in connection with any of the foregoing, and (ii) to
reimburse the Agent upon demand, ratably in proportion to their respective
percentages as used in determining the Required Lenders as of the date of
determination, for any expenses incurred by the Agent in connection with the
preparation, negotiation, execution, delivery, administration, amendment,
modification, waiver or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement or any of the other Credit Documents
(including, without limitation, reasonable attorneys' fees and expenses and
compensation of agents and employees paid for services rendered on behalf of the
Lenders); provided, however, that no Lender shall be liable for any portion of
such liabilities, obligations,
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losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements to the extent resulting from the gross negligence or willful
misconduct of the party to be indemnified.
10.8 The Agent in its Individual Capacity. With respect to its Commitment,
the Loans made by it, the Letters of Credit issued or participated in by it and
the Note or Notes issued to it, the Agent in its individual capacity and not as
Agent shall have the same rights and powers under the Credit Documents as any
other Lender and may exercise the same as though it were not performing the
agency duties specified herein; and the terms "Lenders," "Required Lenders,"
"holders of Notes" and any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, make investments in, and
generally engage in any kind of banking, trust, financial advisory or other
business with the Borrower, any of its Subsidiaries or any of their respective
Affiliates as if the Agent were not performing the agency duties specified
herein, and may accept fees and other consideration from any of them for
services in connection with this Agreement and otherwise without having to
account for the same to the Lenders.
10.9 Successor Agent. The Agent may resign at any time by giving ten (10)
days' prior written notice to the Borrower and the Lenders. Upon any such notice
of resignation, the Required Lenders will, with the prior written consent of the
Borrower (which consent shall not be unreasonably withheld), appoint from among
the Lenders a successor to the Agent (provided that the Borrower's consent shall
not be required in the event a Default or Event of Default shall have occurred
and be continuing). If no successor to the Agent shall have been so appointed by
the Required Lenders and shall have accepted such appointment within such
ten-day period, then the retiring Agent may, on behalf of the Lenders and after
consulting with the Lenders and the Borrower, appoint a successor Agent from
among the Lenders. Upon the acceptance of any appointment as Agent by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder and under the other Credit Documents. After any retiring Agent's
resignation as Agent, the provisions of this Article shall inure to its benefit
as to any actions taken or omitted to be taken by it while it was Agent. If no
successor to the Agent has accepted appointment as Agent by the thirtieth (30th)
day following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective, and the Lenders shall
thereafter perform all of the duties of the Agent hereunder and under the other
Credit Documents until such time, if any, as the Required Lenders appoint a
successor Agent as provided for hereinabove.
10.10 Issuing Lender. The provisions of this Article (other than Section
10.9) shall apply to the Issuing Lender mutatis mutandis to the same extent as
such provisions apply to the Agent.
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ARTICLE XI
MISCELLANEOUS
11.1 Fees and Expenses. The Borrower agrees (i) whether or not the
transactions contemplated by this Agreement shall be consummated, to pay upon
demand all reasonable out-of-pocket costs and expenses of the Agent (including,
without limitation, the reasonable fees and expenses of counsel to the Agent) in
connection with the Agent's due diligence investigation in connection with, and
the preparation, negotiation, execution, delivery and syndication of, this
Agreement and the other Credit Documents, and any amendment, modification or
waiver hereof or thereof or consent with respect hereto or thereto, (ii) to pay
upon demand all reasonable out-of-pocket costs and expenses of the Agent and
each Lender (including, without limitation, reasonable attorneys' fees and
expenses) in connection with (y) any refinancing or restructuring of the credit
arrangement provided under this Agreement, whether in the nature of a
"work-out," in any insolvency or bankruptcy proceeding or otherwise and whether
or not consummated, and (z) the enforcement, attempted enforcement or
preservation of any rights or remedies under this Agreement or any of the other
Credit Documents, whether in any action, suit or proceeding (including any
bankruptcy or insolvency proceeding) or otherwise, and (iii) to pay and hold the
Agent and each Lender harmless from and against all liability for any
intangibles, documentary, stamp or other similar taxes, fees and excises, if
any, including any interest and penalties, and any finder's or brokerage fees,
commissions and expenses (other than any fees, commissions or expenses of
finders or brokers engaged by the Agent or any Lender), that may be payable in
connection with the transactions contemplated by this Agreement and the other
Credit Documents.
11.2 Indemnification. (a) The Borrower agrees, whether or not the
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold the Agent and each Lender and each of their respective directors,
officers, employees, agents and Affiliates (each, an "Indemnified Person")
harmless from and against any and all claims, losses, damages, obligations,
liabilities, penalties, costs and expenses (including, without limitation,
reasonable attorneys' fees and expenses) of any kind or nature whatsoever,
whether direct, indirect or consequential (collectively, "Indemnified Costs"),
that may at any time be imposed on, incurred by or asserted against any such
Indemnified Person as a result of, arising from or in any way relating to the
preparation, execution, performance or enforcement of this Agreement or any of
the other Credit Documents, any of the transactions contemplated herein or
therein or any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of any Loans or Letters of Credit
(including, without limitation, in connection with the actual or alleged
generation, presence, discharge or release of any Hazardous Substances on, into
or from, or the transportation of Hazardous Substances to or from, any real
property at any time owned or leased by the Borrower or any of its Subsidiaries,
any other Environmental Claims or any violation of or liability under any
Environmental Law), or any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, related to any of
the foregoing, and in any case whether or not such Indemnified Person is a party
to any such action, proceeding or suit or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such
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Indemnified Person. All of the foregoing Indemnified Costs of any Indemnified
Person shall be paid or reimbursed by the Borrower in accordance with this
Section 11.2, as and when incurred and upon demand.
(b) Promptly upon becoming aware of circumstances that may give rise to an
indemnification obligation under this Agreement, the Indemnified Person shall
give written notice thereof to the Borrower; provided, however, the failure of
any Indemnified Person to so notify the Borrower shall not relieve the Borrower
of any indemnification obligation hereunder except to the extent the Borrower
demonstrates that the defense of any claim or demand giving rise to
indemnification obligations hereunder is materially prejudiced by the failure to
give such notice. With respect to any claim in which the Borrower has expressly
acknowledged in writing (with reference to this Section 11.2) its obligations to
indemnify the Indemnified Persons hereunder, such Indemnified Persons shall give
the Borrower the sole and complete opportunity to direct and manage all events,
including litigation, from which such an indemnification obligations may arise
(x) the Borrower provides to the Indemnified Person evidence acceptable to such
Indemnified Persons that the Borrower will have the financial resources to
defend the claim and to fulfill its indemnification obligations hereunder, (y)
the Borrower conducts the defense of the claim actively and diligently with
counsel reasonably satisfactory to such Indemnified Persons, and (z) if the
Borrower is a party to the proceeding, joint representation would not be
inappropriate. The Indemnified Person shall cooperate fully with the Borrower in
responding to and defending against all claims of any nature giving rise to an
indemnification obligation provided that all out-of-pocket expenses incurred by
the Indemnified Person shall be paid by the Borrower. If the Borrower assumes
the defense of a proceeding with respect to any Indemnified Person, (i) no
compromise or settlement of such claims may be effected by the Borrower without
the Indemnified Person's consent unless (A) there is no finding or admission of
any violation of law or any violation of the rights of any Person and no effect
on any other claims that may be made against the Indemnified Person, and (B) the
sole relief provided is monetary damages that are paid in full by the Borrower;
and (ii) the Indemnified Person will have no liability with respect to any
compromise or settlement of such claims effected without its consent. The terms
of this Section shall not preclude the Indemnified Person from retaining its own
counsel to represent it, but the fees and expenses of such counsel shall be
solely the responsibility of the Indemnified Person and shall not be covered by
the foregoing indemnity.
(c) If (i) notice is given to the Borrower of the commencement of any
proceeding and the Borrower does not, within ten days after the Indemnified
Person's notice is given, give notice to the Indemnified Person of its election
to assume the defense of such proceeding, (ii) any of the conditions set forth
in clause (x)-(z) of Section 11.2(b) become unsatisfied, or (iii) an Indemnified
Person determines in good faith that there is a reasonable probability that a
proceeding may adversely affect it other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person will (upon further notice to the Borrower) have the right to
undertake the defense, compromise or settlement of such claim, provided that the
Borrower will reimburse the Indemnified Person promptly and periodically for the
costs of defending against the claim (including reasonable attorneys' fees and
expenses) and the Borrower will remain responsible for any indemnifiable amounts
arising from or related to such claim to the fullest extent provided in this
Section 11.2. The Borrower may elect to participate in such proceedings,
negotiations or defense at any time at its own expense.
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11.3 Governing Law; Consent to Jurisdiction. THIS AGREEMENT AND THE OTHER
CREDIT DOCUMENTS HAVE BEEN EXECUTED, DELIVERED AND ACCEPTED IN, AND SHALL BE
DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NORTH
CAROLINA (WITHOUT REGARD TO THE CONFLICTS OF LAW PROVISIONS THEREOF); PROVIDED
THAT EACH LETTER OF CREDIT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO
SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR
DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE, AS IN EFFECT FROM TIME
TO TIME (THE "UNIFORM CUSTOMS"), AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM
CUSTOMS, THE LAWS OF THE STATE OF NORTH CAROLINA (WITHOUT REGARD TO THE
CONFLICTS OF LAW PROVISIONS THEREOF). THE BORROWER HEREBY CONSENTS TO THE
NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH
CAROLINA OR ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE
OF NORTH CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE
OTHER CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT
OR ANY OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE AGENT OR
ANY LENDER OR THE BORROWER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING
OUT OF, OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT OR ANY LENDER OR THE
BORROWER. THE BORROWER IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE
RIGHT OF APPEAL) BY ANY JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER
WAIVES ANY OBJECTION THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER
VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE
BORROWER CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED
MAIL DIRECTED TO IT AT ITS ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID
AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE
LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE
AGENT OR ANY LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST THE BORROWER IN
THE COURTS OF ANY OTHER JURISDICTION.
11.4 Arbitration; Preservation and Limitation of Remedies. (a) Upon demand
of any party hereto, whether made before or after institution of any judicial
proceeding, any dispute, claim or controversy arising out of, connected with or
relating to this Agreement or any other
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Credit Document ("Disputes") between or among the Borrower, its Subsidiaries,
the Agent and the Lenders, or any of them, shall be resolved by binding
arbitration as provided herein. Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include, without limitation, tort claims, counterclaims, claims brought as
class actions, claims arising from documents executed in the future, disputes as
to whether a matter is subject to arbitration, or claims arising out of or
connected with the transactions contemplated by this Agreement and the other
Credit Documents. Arbitration shall be conducted under and governed by the
Commercial Financial Disputes Arbitration Rules (the "Arbitration Rules") of the
American Arbitration Association (the "AAA"), as in effect from time to time,
and the Federal Arbitration Act, Title 9 of the U.S. Code, as amended. All
arbitration hearings shall be conducted in the Borough of Manhattan, in the City
of New York, State of New York. A hearing shall begin within ninety (90) days of
demand for arbitration and all hearings shall be concluded within 120 days of
demand for arbitration. These time limitations may not be extended unless a
party shows cause for extension and then for no more than a total of sixty (60)
days. The expedited procedures set forth in Rule 51 et seq. of the Arbitration
Rules shall be applicable to claims of less than $1,000,000. All applicable
statutes of limitation shall apply to any Dispute. A judgment upon the award may
be entered in any court having jurisdiction. The panel from which all
arbitrators are selected shall be comprised of licensed attorneys selected from
the Commercial Financial Dispute Arbitration Panel of the AAA. The single
arbitrator selected for expedited procedure shall be a retired judge from the
highest court of general jurisdiction, state or federal, of the state where the
hearing will be conducted. Notwithstanding the foregoing, this arbitration
provision does not apply to Disputes under or related to any Hedge Agreement
that is a Credit Document. The parties do not waive applicable federal or state
substantive law except as provided herein.
(b) Notwithstanding the preceding binding arbitration provisions, the
parties hereto agree to preserve, without diminution, certain remedies that any
party hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Any party hereto shall have the right to proceed in any court
of proper jurisdiction or by self-help to exercise or prosecute the following
remedies, as applicable: (i) all rights of self-help, including peaceful
occupation of real property and collection of rents, set-off, and peaceful
possession of personal property; (ii) obtaining provisional or ancillary
remedies, including injunctive relief, sequestration, garnishment, attachment,
appointment of a receiver and filing an involuntary bankruptcy proceeding; and
(iii) when applicable, a judgment by confession of judgment. Any claim or
controversy with regard to any party's entitlement to such remedies is a
Dispute. Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by a party in a
Dispute. The parties hereto agree that no party shall have a remedy of punitive
or exemplary damages against any other party in any Dispute, and each party
hereby waives any right or claim to punitive or exemplary damages that it has
now or that may arise in the future in connection with any Dispute, whether such
Dispute is resolved by arbitration or judicially. The parties acknowledge that
by agreeing to binding arbitration they have irrevocably waived any right they
may have to a jury trial with regard to a Dispute.
11.5 Notices. All notices and other communications provided for hereunder
shall be in writing (including telegraphic, telex, facsimile transmission or
cable communication) and
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mailed, telegraphed, telexed, telecopied, cabled or delivered to the party to be
notified at the following addresses:
(a) if to the Borrower, to 000 Xxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxx
00000 Attention: Xxxxxxxx Xxxxxxx, Telecopy No. (000) 000-0000, with a copy
to Penn-America Group, Inc., Attention: Xxxxxxx Xxxxxxxx, Telecopy No.
(000) 000-0000;
(b) if to the Agent, (i) if, at such time, there is a Lender other
than First Union or any Affiliate thereof, to First Union National Bank,
Xxx Xxxxx Xxxxx Xxxxxx, XX-0, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxx
Xxxxxxxx 00000-0000, Attention: Syndication Agency Services, Telecopy No.
(000) 000-0000; and (ii) otherwise, (A) for a Notice of Borrowing, a Notice
of Conversion/Continuation and a Letter of Credit Notice, to First Union,
at the address for the Lending Office set forth on its signature page
hereto, and (B) for all other notices, to First Union, at the address for
notices as a Lender set forth on its signature page hereto; and
(c) if to any Lender, to it at the address set forth on its signature
page hereto (or if to any Lender not a party hereto as of the date hereof,
at the address set forth in its Assignment and Acceptance);
or in each case, to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and communications
shall be deemed to have been given (i) if mailed as provided above by any method
other than overnight delivery service, on the third Business Day after deposit
in the mails, (ii) if mailed by overnight delivery service, telegraphed,
telexed, telecopied or cabled, when delivered for overnight delivery, delivered
to the telegraph company, confirmed by telex answerback, transmitted by
telecopier or delivered to the cable company, respectively, or (iii) if
delivered by hand, upon delivery; provided that notices and communications to
the Agent shall not be effective until received by the Agent.
11.6 Amendments, Waivers, etc. No amendment, modification, waiver or
discharge or termination of, or consent to any departure by the Agent, the
Issuing Lender or ainy Lender from, any provision of this Agreement or any other
Credit Document shall be effective unless in a writing signed by the Borrower,
and then the same shall be effective only in the specific instance and for the
specific purpose for which given. No amendment, modification, waiver or
discharge or termination of, or consent to any departure by the Borrower from,
any provision of this Agreement or any other Credit Document, shall be effective
unless in a writing signed by the Required Lenders (or by the Agent at the
direction or with the consent of the Required Lenders), and then the same shall
be effective only in the specific instance and for the specific purpose for
which given; provided, however, that no such amendment, modification, waiver,
discharge, termination or consent shall:
(a) unless agreed to by each Lender directly affected thereby, (i) reduce
or forgive the principal amount of any Loan, reduce the rate of or forgive any
interest thereon, or reduce or forgive any fees or other Obligations (other than
fees payable to the Agent for its own account), or (ii) extend the Maturity Date
or any other date (including any scheduled date for the mandatory reduction or
termination of any Commitments) fixed for the payment of any principal
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of or interest on any Loan (other than additional interest payable under Section
2.8(b) at the election of the Required Lenders, as provided therein), any fees
(other than fees payable to the Agent for its own account) or any other
Obligations or extend the expiry date of any Letter of Credit beyond the seventh
day prior to the Maturity Date;
(b) unless agreed to by all of the Lenders, (i) increase or extend any
Commitment of any Lender (it being understood that a waiver of any Event of
Default, if agreed to by the requisite Lenders hereunder, shall not constitute
such an increase), (ii) change the percentage of the aggregate Commitments or of
the aggregate unpaid principal amount of the Loans, or the number or percentage
of Lenders, that shall be required for the Lenders or any of them to take or
approve, or direct the Agent to take, any action hereunder (including as set
forth in the definition of "Required Lenders"), or (iii) change any provision of
Section 2.15 or this Section; and
(c) unless agreed to by the Issuing Lender or the Agent in addition to the
Lenders required as provided hereinabove to take such action, affect the
respective rights or obligations of the Issuing Lender or the Agent, as
applicable, hereunder or under any of the other Credit Documents;
and provided further that the Fee Letter and any Hedge Agreement to which any
Lender is a party may be amended or modified, and any rights thereunder waived,
in a writing signed by the parties thereto.
11.7 Assignments, Participations. (a) Each Lender may assign to one or more
other Eligible Assignees (each, an "Assignee") all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the outstanding Loans made by it, the Note or Notes
held by it and its participations in Letters of Credit); provided, however, that
(i) any such assignment (other than an assignment to a Lender or an Affiliate of
a Lender) shall not be made without the prior written consent of the Agent and
the Borrower (to be evidenced by its counterexecution of the relevant Assignment
and Acceptance), which consent shall not be unreasonably withheld (provided that
the Borrower's consent shall not be required in the event a Default or Event of
Default shall have occurred and be continuing), (ii) each such assignment shall
be of a uniform, and not varying, percentage of all of the assigning Lender's
rights and obligations under this Agreement, (iii) except in the case of an
assignment to a Lender or an Affiliate of a Lender, no such assignment shall be
in an aggregate principal amount (determined as of the date of the Assignment
and Acceptance with respect to such assignment) less than $2,500,000 determined
by combining the amount of the assigning Lender's outstanding Loans, Letter of
Credit Exposure and Unutilized Commitment being assigned pursuant to such
assignment (or, if less, the entire Commitment of the assigning Lender), and
(iv) the parties to each such assignment will execute and deliver to the Agent,
for its acceptance and recording in the Register, an Assignment and Acceptance,
together with any Note or Notes subject to such assignment, and will pay a
nonrefundable processing fee of $3,000 to the Agent for its own account. Upon
such execution, delivery, acceptance and recording of the Assignment and
Acceptance, from and after the effective date specified therein, which effective
date shall be at least five Business Days after the execution thereof (unless
the Agent shall otherwise agree), (A) the Assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and
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Acceptance, shall have the rights and obligations of the assigning Lender
hereunder with respect thereto and (B) the assigning Lender shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights (other than rights under the
provisions of this Agreement and the other Credit Documents relating to
indemnification or payment of fees, costs and expenses, to the extent such
rights relate to the time prior to the effective date of such Assignment and
Acceptance) and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto). The terms and provisions of each
Assignment and Acceptance shall, upon the effectiveness thereof, be incorporated
into and made a part of this Agreement, and the covenants, agreements and
obligations of each Lender set forth therein shall be deemed made to and for the
benefit of the Agent and the other parties hereto as if set forth at length
herein.
(b) The Agent will maintain at its address for notices referred to herein a
copy of each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the Agent
and the Lenders may treat each Person whose name is recorded in the Register as
a Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrower and each Lender at any reasonable time
and from time to time upon reasonable prior notice.
(c) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an Assignee and, if required, counterexecuted by the
Borrower, together with the Note or Notes subject to such assignment and the
processing fee referred to in subsection (a) above, the Agent will (i) accept
such Assignment and Acceptance, (ii) on the effective date thereof, record the
information contained therein in the Register and (iii) give notice thereof to
the Borrower and the Lenders. Within five (5) Business Days after its receipt of
such notice, the Borrower, at its own expense, will execute and deliver to the
Agent, in exchange for the surrendered Note or Notes, a new Note or Notes to the
order of the Assignee (and, if the assigning Lender has retained any portion of
its rights and obligations hereunder, to the order of the assigning Lender),
prepared in accordance with the provisions of Section 2.4 as necessary to
reflect, after giving effect to the assignment, the Commitments of the Assignee
and (to the extent of any retained interests) the assigning Lender, dated the
date of the replaced Note or Notes and otherwise in substantially the form of
Exhibit A. The Agent will return canceled Notes to the Borrower.
(d) Each Lender may, without the consent of the Borrower, the Agent or any
other Lender, sell to one or more other Persons (each, a "Participant")
participations in any portion comprising less than all of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Commitment, the outstanding Loans made by it, the Note or Notes held by it
and its participations in Letters of Credit); provided, however, that (i) such
Lender's obligations under this Agreement shall remain unchanged and such Lender
shall remain solely responsible for the performance of such obligations, (ii) no
Lender shall sell any participation
85
that, when taken together with all other participations, if any, sold by such
Lender, covers all of such Lender's rights and obligations under this Agreement,
(iii) the Borrower, the Agent and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement, and no Lender shall permit any Participant to
have any voting rights or any right to control the vote of such Lender with
respect to any amendment, modification, waiver, consent or other action
hereunder or under any other Credit Document (except as to actions that would
(x) reduce or forgive the principal amount of any Loan, reduce the rate of or
forgive any interest thereon, or reduce or forgive any fees or other
Obligations, (y) extend the Maturity Date or any other date fixed for the
payment of any principal of or interest on any Loan, any fees or any other
Obligations, or (z) increase or extend any Commitment of any Lender), and (iv)
no Participant shall have any rights under this Agreement or any of the other
Credit Documents, each Participant's rights against the granting Lender in
respect of any participation to be those set forth in the participation
agreement, and all amounts payable by the Borrower hereunder shall be determined
as if such Lender had not granted such participation. Notwithstanding the
foregoing, each Participant shall have the rights of a Lender for purposes of
Sections 2.16(a), 2.16(b), 2.17, 2.18 and 9.3, and shall be entitled to the
benefits thereto, to the extent that the Lender granting such participation
would be entitled to such benefits if the participation had not been made,
provided that no Participant shall be entitled to receive any greater amount
pursuant to any of such Sections than the Lender granting such participation
would have been entitled to receive in respect of the amount of the
participation made by such Lender to such Participant had such participation not
been made.
(e) Nothing in this Agreement shall be construed to prohibit any Lender
from pledging or assigning all or any portion of its rights and interest
hereunder or under any Note to any Federal Reserve Bank as security for
borrowings therefrom; provided, however, that no such pledge or assignment shall
release a Lender from any of its obligations hereunder.
(f) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section,
disclose to the Assignee or Participant or proposed Assignee or Participant any
information relating to the Borrower and its Subsidiaries furnished to it by or
on behalf of any other party hereto, provided that such Assignee or Participant
or proposed Assignee or Participant agrees in writing to keep such information
confidential to the same extent required of the Lenders under Section 11.13.
11.8 No Waiver. The rights and remedies of the Agent and the Lenders
expressly set forth in this Agreement and the other Credit Documents are
cumulative and in addition to, and not exclusive of, all other rights and
remedies available at law, in equity or otherwise. No failure or delay on the
part of the Agent or any Lender in exercising any right, power or privilege
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further exercise thereof or
the exercise of any other right, power or privilege or be construed to be a
waiver of any Default or Event of Default. No course of dealing between any of
the Borrower and the Agent or the Lenders or their agents or employees shall be
effective to amend, modify or discharge any provision of this Agreement or any
other Credit Document or to constitute a waiver of any Default or Event of
Default. No notice to or demand upon 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 right of the Agent or any Lender to
86
exercise any right or remedy or take any other or further action in any
circumstances without notice or demand.
11.9 Successors and Assigns. This Agreement shall be binding upon, inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto, and all references herein to any party shall be deemed to
include its successors and assigns; provided, however, that (i) the Borrower
shall not sell, assign or transfer any of its rights, interests, duties or
obligations under this Agreement without the prior written consent of all of the
Lenders and (ii) any Assignees and Participants shall have such rights and
obligations with respect to this Agreement and the other Credit Documents as are
provided for under and pursuant to the provisions of Section 11.7.
11.10 Survival. All representations, warranties and agreements made by or
on behalf of the Borrower or any of its Subsidiaries in this Agreement and in
the other Credit Documents shall survive the execution and delivery hereof or
thereof, the making and repayment of the Loans and the issuance and repayment of
the Letters of Credit. In addition, notwithstanding anything herein or under
applicable law to the contrary, the provisions of this Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, including, without limitation, the provisions of Sections 2.16(a),
2.16(b), 2.17, 2.18, 10.7, 11.1 and 11.2, shall survive the payment in full of
all Loans and Letters of Credit, the termination of the Commitments and all
Letters of Credit, and any termination of this Agreement or any of the other
Credit Documents.
11.11 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under the applicable law of any jurisdiction, such
provision shall be ineffective only to the extent of such prohibition or
invalidity and only in such jurisdiction, without prohibiting or invalidating
such provision in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
11.12 Construction. The headings of the various articles, sections and
subsections of this Agreement have been inserted for convenience only and shall
not in any way affect the meaning or construction of any of the provisions
hereof. Except as otherwise expressly provided herein and in the other Credit
Documents, in the event of any inconsistency or conflict between any provision
of this Agreement and any provision of any of the other Credit Documents, the
provision of this Agreement shall control.
11.13 Confidentiality. Each Lender agrees to keep confidential, pursuant to
its customary procedures for handling confidential information of a similar
nature and in accordance with safe and sound banking practices, all nonpublic
information provided to it by or on behalf of the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Credit Document;
provided, however, that any Lender may disclose such information (i) to its
directors, employees, agents, auditors, counsel and other professional advisors
that such Lender has reasonably determined need to know such information, (ii)
at the demand or request of any bank regulatory authority, court or other
Governmental Authority having or asserting jurisdiction over such Lender, as may
be required pursuant to subpoena or other legal process, or otherwise in order
to comply with any applicable Requirement of Law, (iii) in connection with any
87
proceeding to enforce its rights hereunder or under any other Credit Document or
any other litigation or proceeding related hereto or to which it is a party,
(iv) to the Agent or any other Lender, (v) to the extent the same has become
publicly available other than as a result of a breach of this Agreement and (vi)
pursuant to and in accordance with the provisions of Section 11.7(f).
11.14 Counterparts; Effectiveness. This Agreement may be executed in any
number of counterparts and by 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. This Agreement
shall become effective upon the execution of a counterpart hereof by each of the
parties hereto and receipt by the Agent and the Borrower of written or
telephonic notification of such execution and authorization of delivery thereof.
11.15 Disclosure of Information. The Borrower agrees and consents to the
Agent's disclosure of information relating to this transaction to Gold Sheets
and other similar bank trade publications. Such information will consist of deal
terms and other information customarily found in such publications.
11.16 Entire Agreement. THIS AGREEMENT AND THE OTHER DOCUMENTS AND
INSTRUMENTS EXECUTED AND DELIVERED IN CONNECTION HEREWITH (A) EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN THE PARTIES HERETO AND THERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF, (B) SUPERSEDE ANY AND ALL PRIOR
AGREEMENTS AND UNDERSTANDINGS OF SUCH PERSONS, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF AND THEREOF, INCLUDING, WITHOUT LIMITATION, THE COMMITMENT
LETTER FROM FIRST UNION TO THE BORROWER DATED JULY 17, 1998 BUT SPECIFICALLY
EXCLUDING THE FEE LETTER, AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED
OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
88
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first above written.
PENN-AMERICA GROUP, INC.
By:/s/ Xxx X Xxxxxxxx
Title: President
----------------------------------
(signatures continued)
89
FIRST UNION NATIONAL BANK, as Agent
and as a Lender
By: __________________________________
Commitment:
$25,000,000 Title: _______________________________
Instructions for wire
transfers to the Agent:
First Union National Bank
ABA Routing Xx. 000000000
Xxxxxxxxx, Xxxxx Xxxxxxxx
Account Number: 465906 0000000
Reference: Penn-America Group, Inc.
Attention: Xxxxxx Xxxxx
Address for notices as a Lender:
First Union National Bank
Financial Institutions Group
0000 Xxxxxxxx Xxxxxx, XX0000
Philadelphia, Pennsylvania 19101-4819
Attention: Xxxxxx XxXxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Lending Office:
First Union National Bank
One First Union Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
90
EXHIBIT A
Borrower's Taxpayer Identification No. 00-0000000
FORM OF NOTE
$___________ ____________, 1998
Charlotte, North Carolina
FOR VALUE RECEIVED, PENN-AMERICA GROUP, INC., a Pennsylvania corporation
(the "Borrower"), hereby promises to pay to the order of
______________________________ (the "Lender"), at the offices of First
Union National Bank (the "Agent") located at One First Union Center, 301 South
College Street, Charlotte, North Carolina (or at such other place or places as
the Agent may designate), at the times and in the manner provided in the Credit
Agreement, dated as of _______________, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), among the Borrower, the
Lenders from time to time parties thereto, and First Union National Bank, as
Agent, the principal sum of
__________________________ DOLLARS ($___________), or such lesser amount as
may constitute the unpaid principal amount of the Loans made by the Lender,
under the terms and conditions of this promissory note (this "Note") and the
Credit Agreement. The defined terms in the Credit Agreement are used herein with
the same meaning. The Borrower also unconditionally promises to pay interest on
the aggregate unpaid principal amount of this Note at the rates applicable
thereto from time to time as provided in the Credit Agreement.
This Note is one of a series of Notes referred to in the Credit Agreement
and is issued to evidence the Loans made by the Lender pursuant to the Credit
Agreement. All of the terms, conditions and covenants of the Credit Agreement
are expressly made a part of this Note by reference in the same manner and with
the same effect as if set forth herein at length, and any holder of this Note is
entitled to the benefits of and remedies provided in the Credit Agreement and
the other Credit Documents. Reference is made to the Credit Agreement for
provisions relating to the interest rate, maturity, payment, prepayment and
acceleration of this Note.
In the event of an acceleration of the maturity of this Note, this Note
shall become immediately due and payable, without presentation, demand, protest
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
This Note shall be governed by and construed in accordance with the
internal laws and judicial decisions of the State of North Carolina. The
Borrower hereby submits to the nonexclusive jurisdiction and venue of the
federal and state courts located in Mecklenburg County, North Carolina, although
the Lender shall not be limited to bringing an action in such courts.
IN WITNESS WHEREOF, the Borrower has caused this Note to be executed by its
duly authorized corporate officer as of the day and year first above written.
PENN-AMERICA GROUP, INC.
By: __________________________________
Title: _______________________________
EXHIBIT B-1
FORM OF
NOTICE OF BORROWING
[Date]
First Union National Bank
One First Unioin Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
Ladies and Gentlemen:
The undersigned, PENN-AMERICA GROUP, INC. (the "Borrower"), refers to the
Credit Agreement, dated as of _________________, 1998, among the Borrower,
certain banks and other financial institutions from time to time parties thereto
(the "Lenders"), and you, as Agent for the Lenders (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), and, pursuant to Section 2.2(b)
of the Credit Agreement, hereby gives you, as Agent, irrevocable notice that the
Borrower requests a Borrowing of Loans under the Credit Agreement, and to that
end sets forth below the information relating to such Borrowing (the "Proposed
Borrowing") as required by Section 2.2(b) of the Credit Agreement:
(i) The aggregate principal amount of the Proposed Borrowing is
$_______________.1
(ii) The Loans comprising the Proposed Borrowing shall be
initially made as [Base Rate Loans] [LIBOR Loans].2
[(iii) The initial Interest Period for the LIBOR Loans comprising
the Proposed Borrowing shall be [one/two/three/six months].]3
(iv) The Proposed Borrowing is requested to be made on
__________________ (the "Borrowing Date").4
1 Amount of Proposed Borrowing must comply with Section 2.2(b) of the Credit
Agreement.
2 Select the applicable Typr of Loans
3 Include this clause in the case of a Proposed Borrowing comprised of LIBOR
Loans, and select the applicable Interest Period.
The Borrower hereby certifies that the following statements are true on and as
of the date hereof and will be true on and as of the Borrowing Date:
A. Each of the representations and warranties contained in Article V
of the Credit Agreement and in the other Credit Documents is and will be
true and correct on and as of each such date, with the same effect as if
made on and as of each such date, both immediately before and after giving
effect to the Proposed Borrowing and to the application of the proceeds
therefrom (except to the extent any such representation or warranty is
expressly stated to have been made as of a specific date, in which case
such representation or warranty shall be true and correct as of such date);
B. No Default or Event of Default has occurred and is continuing or
would result from the Proposed Borrowing or from the application of the
proceeds therefrom; and
C. After giving effect to the Proposed Borrowing, the sum of (i) the
aggregate principal amount of Loans outstanding, and (ii) the aggregate
Letter of Credit Exposure of all Lenders, will not exceed the aggregate
Credit Commitment
Very truly yours,
PENN-AMERICA GROUP, INC.
By: ___________________________________
Title: __________________________________
4 Shall be a Business Day at least one Business Day after the date hereof (in
the case of Base Rate Loans) or at least three Business Days after the date
hereof (in the case of LIBOR Loans).
EXHIBIT B-2
FORM OF
NOTICE OF CONVERSION/CONTINUATION
[Date]
First Union National Bank
One First Unioin Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
Ladies and Gentlemen:
The undersigned, PENN-AMERICA GROUP, INC. (the "Borrower"), refers to the
Credit Agreement, dated as of _______________, 1998, among the Borrower, certain
banks and other financial institutions from time to time parties thereto (the
"Lenders"), and you, as Agent for the Lenders (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), and, pursuant to Section 2.11(b)
of the Credit Agreement, hereby gives you, as Agent, irrevocable notice that the
Borrower requests a [conversion] [continuation]1 of Loans under the Credit
Agreement, and to that end sets forth below the information relating to such
[conversion] [continuation] (the "Proposed [Conversion] [Continuation]") as
required by Section 2.11(b) of the Credit Agreement:
(i) The Proposed [Conversion] [Continuation] is requested to be made
on _______________.2
(ii) The Proposed [Conversion] [Continuation] involves $____________3
in aggregate principal amount of Loans made pursuant to a Borrowing on
________________,4 which Loans are presently maintained as
________________________
1 Insert "conversion" or "continuation" throughout the notice, as applicable.
2 Shall be a Business Day at least one Business Day after the date hereof (in
the case of any conversion of LIBOR Loans into Base Rate Loans) or at least
three Business Days after the date hereof (in the case of any conversion of
Base Rate Loans into, or continuation of, LIBOR Loans), and additionally,
in the case of any conversion of LIBOR Loans into Base Rate Loans, or
continuation of LIBOR Loans, shall be the last day of the Interest Period
applicable to such LIBOR Loans.
3 Amount of Proposed Conversion or Continuation must comply with Section
2.11(a) of the Credit Agreement.
4 Insert the applicable Borrowing Date for the Loans being converted or
continued.
[Base Rate] [LIBOR] Loans and are proposed hereby to be [converted into
Base Rate Loans] [converted into LIBOR Loans] [continued as LIBOR Loans].5
[(iii) The initial Interest Period for the Loans being [converted
into] [continued as] LIBOR Loans pursuant to the Proposed [Conversion]
[Continuation] shall be [one/two/three/six months].]6
The Borrower hereby certifies that the following statement is true both on
and as of the date hereof and on and as of the effective date of the Proposed
[Conversion] [Continuation]: no Default or Event of Default has or will have
occurred and is continuing or would result from the Proposed [Conversion]
[Continuation].
Very truly yours,
PENN-AMERICA GROUP, INC.
By: ___________________________________
Title: __________________________________
5 Complete with the applicable bracketed language.
6 Include this clause in the case of a Proposed Conversion or Continuation
involving a conversion of Base Rate Loans into, or continuation of, LIBOR
Loans, and select the applicable Interest Period.
EXHIBIT B-3
FORM OF
LETTER OF CREDIT NOTICE
[Date]
First Union National Bank
One First Unioin Center, 5th Floor
000 Xxxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxxxx Xxxxx
Ladies and Gentlemen:
The undersigned, PENN-AMERICA GROUP, INC. (the "Borrower"), refers to the
Credit Agreement, dated as of ___________________, 1998, among the Borrower,
certain banks and other financial institutions from time to time parties thereto
(the "Lenders"), and you, as Agent for the Lenders (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), and, pursuant to Section 3.2 of
the Credit Agreement, hereby gives you, as Issuing Lender, irrevocable notice
that the Borrower requests the issuance of a Letter of Credit for the account of
PAIC under the Credit Agreement, and to that end sets forth below the
information relating to such Letter of Credit (the "Requested Letter of Credit")
as required by Section 3.2 of the Credit Agreement:
(i) The Requested Letter of Credit is to be issued for the account of
Penn-America Insurance Company, a Wholly Owned Subsidiary of the Borrower.
(ii) The Business Day on which the Requested Letter of Credit is
requested to be issued is _______________.1
(iii) The Stated Amount of the Requested Letter of Credit is
$____________.
(iv) The expiry date of the Requested Letter of Credit is
____________. [The undersigned requests that the expiry date of the
Requested Letter of Credit be subject to extension, on such terms and
conditions acceptable to the Issuing Lender, for successive periods of one
year or less until such time as the Issuing Lender shall
1 Shall be at least three Business Days (or such shorter period as is
acceptable to the Issuing Lender in any given case) after the date hereof.
have delivered a notice of nonrenewal to the beneficiary of such Requested
Letter of Credit provided that no Requested Letter of Credit shall be
renewed for a term that would expire beyond the seventh day prior to the
Maturity Date.]2.
(v) The name and address of the beneficiary of the Requested Letter of
Credit is ------------.
The undersigned agrees to complete all application procedures and documents
required by you in connection with the Requested Letter of Credit.
The undersigned hereby certifies that the following statements are true on
the date hereof and will be true on the date of issuance of the Requested Letter
of Credit:
A. Each of the representations and warranties contained in Article V
of the Credit Agreement and in the other Credit Documents is and will be
true and correct on and as of each such date, with the same effect as if
made on and as of each such date, both immediately before and after giving
effect to the issuance of the Requested Letter of Credit (except to the
extent any such representation or warranty is expressly stated to have been
made as of a specific date, in which case such representation or warranty
shall be true and correct as of such date);
B. No Default or Event of Default has occurred and is continuing or
would result from the issuance of the Requested Letter of Credit; and
C. After giving effect to the issuance of the Requested Letter of
Credit, the sum of (i) the aggregate principal amount of Loans outstanding,
and (ii) the aggregate Letter of Credit Exposure of all Lenders, will not
exceed the aggregate Commitments.
Very truly yours,
PENN-AMERICA GROUP, INC.
By: ___________________________________
Title: ________________________________
2 Include this clause in case of an "evergreen" Letter of Credit.
EXHIBIT C-1
FORM OF
COMPLIANCE CERTIFICATE
(GAAP)
THIS CERTIFICATE is given pursuant to Section 6.3(a) of the Credit
Agreement, dated as of _______________, 1998 (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), among PENN-AMERICA GROUP, INC.
(the "Borrower"), certain banks and other financial institutions from time to
time parties thereto (the "Lenders"), and First Union National Bank, as Agent
for the Lenders.
The undersigned hereby certifies that:
1. [He][She] is the duly elected [chief financial officer][vice president,
finance] [principal accounting officer] [treasurer] of the Borrower.
2. Enclosed with this Certificate are copies of the financial statements of
the Borrower and its Subsidiaries as of _____________, and for the
[________-month period] [year] then ended, required to be delivered under
Section [6.1(a)][6.1(b)] of the Credit Agreement. Such financial statements have
been prepared in accordance with GAAP [(subject to the absence of notes required
by GAAP and subject to normal year-end adjustments)]1 and fairly present the
financial condition of the Borrower and its Subsidiaries on a consolidated basis
as of the date indicated and the results of operation of the Borrower and its
Subsidiaries on a consolidated basis for the period covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and the
undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate. [, except as set forth below.
1 Insert in the case of quarterly statements.
Describe here or in a separate attachment any exceptions to paragraph 4 above by
listing, in reasonable detail, the nature of the Default or Event of Default,
the period during which it existed and the action that the Borrower has taken or
proposes to take with respect thereto.]
5. Attached to this Certificate as Attachment A is a Covenant Compliance
Worksheet reflecting the computation of the financial covenants subject to GAAP
set forth in Sections 7.1, 7.2 and 7.3 of the Credit Agreement as of the last
day of the period covered by the financial statements enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of -------------, ----.
PENN-AMERICA GROUP, INC.
By: _________________________________
Name: _________________________________
Title: _________________________________
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
A. Leverage Ratio (Section 7.1 of the Credit Agreement)
(shall not exceed 0.35:1.00)
(1) Consolidated Indebtedness as of the date
of determination
(a) Indebtedness set forth on the
Borrower's consolidated balance
sheet $______________
(b) Other Indebtedness of the
Borrower or any Subsidiary
(Please list separately)
PAIC $______________
PSIC $______________
(list any others) $______________
(c) Consolidated Indebtedness of the
Borrower (sum of Lines 1(a) and 1(b)) $
===========
(2) Sum of Consolidated Indebtedness and
Consolidated Net Worth as of the date of
determination
(a) Consolidated Indebtedness
(from Line 1(c) above) $______________
(b) Consolidated Net Worth
(from balance sheet, exclusive of
Disqualified Capital Stock) $______________
(c) Sum of Lines 2(a) and 2(b) $
===========
(3) Leverage Ratio:
Divide Line 1(c) by Line 2(c) ===========
i
B. Consolidated Net Worth (Section 7.2 of the Credit Agreement)
(line 1 may not be less than line 3)
(1) Actual Consolidated Net Worth (as of date of determination) $
=========
(2) Base for calculating required Consolidated Net Worth
(a) 85% of Consolidated Net Worth as of 6/30/98 $__________
(b) 50% of aggregate of Consolidated Net Income for each fiscal
quarter ending after 6/30/98 (Consolidated Net Income for any
such quarter
included only if positive) $__________
(c) 75% of aggregate increases from
issuance of equity securities $__________
(d) Stock repurchases occurring between
6/30/98 and 9/30/992 $__________
(3) Required Consolidated Net Worth:
(Line 2(a) plus Line 2(b) plus
Line 2(c) minus Line 2(d)) $
=========
ii
C. Fixed Charge Coverage Ratio (Section 7.3 of the Credit Agreement)
(shall not be less than 1.25 : 1.0)
(1) Available coverage as of the last day of any period of four consecutive
fiscal quarters (the "Measurement Period"):
(a) Available Dividend Amount for the
Measurement Period (list by
Insurance Subsidiary other than
Subsidiaries of Insurance
Subsidiaries):
(i) PAIC $__________
(ii) Other (list separately) $__________
(iii) Total $__________
(b) Net Tax Sharing Payments with respect
to the Measurement Period
(i) Tax Payments received by Borrower $__________
(ii) Tax Payments to be received by
Borrower $__________
(iii) Tax Payments made by Borrower $__________
(iv) Tax Payments to be made by Borrower $__________
(v) Net Payments (the sum of Lines 1(b)
(i) and 1(b)(ii) minus Lines 1(b)
(iii) and 1(b)(iv) $__________
iii
(c) Combined Net Cash Flow of
non-Insurance Subsidiaries for the
Measurement Period (attach detail) $__________
(d) Holding Company Expenses accrued
during the Measurement Period $__________
(e) Available coverage: add Lines
1(a)(iii), 1(b)(v) and 1(c), and
subtract Line 1(d) $
==========
(2) Fixed Charges:
(a) Debt Service for the period of four consecutive fiscal
quarters immediately following the Measurement Period (the
"Pro Forma
Period")
(i) Debt Service on the Loans $__________
(ii) Debt Service on other consolidated
Indebtedness $__________
(iii) Total Debt Service (add Lines
2(a)(i) and 2(a)(ii)) $__________
(b) Dividends to shareholders of the Borrower for the Pro Forma
Period (based upon the most recent
quarterly rate) $__________
(c) Stock purchases for the Measurement Period (net of stock
repurchases occurring between 6/30/98 and 9/30/99 in the
amount
of _________3) $__________
1 Not to exceed $10,000,000.
iv
(d) Fixed Charges:
Add Lines 2(a)(iii), 2(b) and 2(c) $
===========
(3) Fixed Charge Coverage Ratio:
Divide Line 1(e) by Line 2(d) ===========
v
EXHIBIT C-2
FORM OF
COMPLIANCE CERTIFICATE
(SAP)
THIS CERTIFICATE is given pursuant to Section 6.3(a) of the Credit
Agreement, dated as of ___________________ (as amended, modified, supplemented
or restated from time to time, the "Credit Agreement," the terms defined therein
being used herein as therein defined), among PENN-AMERICA GROUP, INC. (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders") and First Union National Bank, as Agent for the
Lenders. Capitalized terms used herein without definition shall have the
meanings given to them in the Credit Agreement.
The undersigned hereby certifies that:
1. [He] [She] is the duly elected [chief financial officer][vice president,
finance] [principal accounting officer] [treasurer] of the Borrower.
2. Enclosed with this Certificate are copies of the statutory financial
statements of each Insurance Subsidiary as of ______________, and for the
[_________________-month period] [year] then ended, required to be delivered
under Section [6.2(a)] [6.2(b)] [6.2(c)] of the Credit Agreement. Such statutory
financial statements have been prepared in accordance with Statutory Accounting
Principles and fairly present the financial condition of each Insurance
Subsidiary as of the date indicated and the results of operations, changes in
capital and surplus and cash flow of each Insurance Subsidiary for the period
covered thereby.
3. The undersigned has reviewed the terms of the Credit Agreement and has
made, or caused to be made under the supervision of the undersigned, a review in
reasonable detail of the transactions and condition of the Borrower and its
Subsidiaries during the accounting period covered by such financial statements.
4. The examination described in paragraph 3 above did not disclose, and the
undersigned has no knowledge of the existence of, any Default or Event of
Default during or at the end of the accounting period covered by such financial
statements or as of the date of this Certificate. [, except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 4
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
5. Attached to this Certificate as Attachment A is a Covenant Compliance
Worksheet reflecting the computation of the financial covenants subject to SAP
set forth in Sections 7.4, 7.5
i
and 7.6 of the Credit Agreement as of the last day of the period covered by the
financial statements enclosed herewith.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the ______ day of ------------, ------.
PENN-AMERICA GROUP, INC.
By: ____________________________________
Name: ____________________________________
Title: ____________________________________
ii
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
A. Risk-Based Capital Ratio (Section 7.4 of the Credit Agreement)
(1) PAIC
(a) Applicable Company Action Level
RBC4 $
===========
(b) Minimum total adjusted capital1 the as of the
date of determination (multiply Line 1 by 1.50) $
===========
(c) Total adjusted capital as of the
determination date $
===========
(2) [Each other Material Insurance Subsidiary
(excluding Subsidiaries of Insurance
Subsidiaries)] [Repeat Lines 2(a)-(c) as
needed]
(a) Applicable Company Action Level RBC $
===========
(b) Minimum total adjusted capital the as of the
date of determination (multiply Line 1 by 1.50) $
===========
(c) Total adjusted capital as of the
determination date $
===========
(1) "Company Action Level RBC" and "total adjusted capital" have the meanings
given to such terms in the Risk-Based Capital for Insurers Model Act.
(3) [Other Material Insurance
Subsidiaries] [Repeat Lines 3(a)-(c)
as needed]
(a) Applicable Company Action Level RBC $
===========
(b) Minimum total adjusted capital the as of the
date of determination (multiply Line 1 by 1.00) $
===========
(c) Total adjusted capital as of the
determination date $
===========
2
B. Combined Net Premiums to Capital Ratio
(Section 7.5 of the Credit Agreement)
(not to exceed 2.25:1.00)
(1) Combined Net Written Premiums for the period of four
consecutive fiscal quarters then ending
(a) PAIC $__________
(b) PSIC $__________
(c) Other Insurance Subsidiaries $__________
(d) Total (sum of Lines 1(a)-1(c)) $
===========
(2) Combined Statutory Capital and Surplus (excluding
Subsidiaries of Insurance Subsidiaries) as of the date
of determination
(a) PAIC $__________
(b) Other Insurance Subsidiaries $__________
(c) Total (sum of Lines 2(a)-2(b)) $
===========
(3) Combined Net Premiums to Capital Ratio:
Divide Line (1)(d) by Line (2)(c) $
===========
3
C. Statutory Capital and Surplus
(Section 7.6 of the Credit Agreement)
(1) Combined Statutory Capital and Surplus as
of the date of determination $
===========
(2) Minimum Combined Statutory Capital and
Surplus
(a) 90% of the combined Statutory
Capital and Surplus as of 6/30/98 $
===========
(b) $78,000,000 plus 50% of
aggregate increases in capital
for the Insurance Subsidiaries
occurring after June 30, 1998 $
===========
(c) Greater of Lines 2(a) and 2(b) $
===========
4
EXHIBIT D
FORM OF
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is
made this _____ day of ____________, ____, by and between
_________________________ (the "Assignor") and ________________________ (the
"Assignee"). Reference is made to the Credit Agreement, dated as of
_______________, 1998 (as amended, modified or supplemented from time to time,
the "Credit Agreement"), among PENN-AMERICA GROUP, INC. (the "Borrower"),
certain banks and other financial institutions from time to time parties thereto
(the "Lenders"), and First Union National Bank, as Agent for the Lenders (the
"Agent"). Unless otherwise defined herein, capitalized terms used herein without
definition shall have the meanings given to them in the Credit Agreement.
The Assignor and the Assignee hereby agree as follows:
1. Assignment and Assumption. Subject to the terms and conditions
hereof, the Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, without recourse to the Assignor
and, except as expressly provided herein, without representation or warranty by
the Assignor, the interest as of the Effective Date (as hereinafter defined) in
and to all of the Assignor's rights and obligations under the Credit Agreement
and the other Credit Documents (in its capacity as a Lender thereunder)
represented by the percentage interest specified under the heading "Assigned
Share" in Item 4 of Annex I (such assigned interest, the "Assigned Share"),
including, without limitation, the Assigned Share of all rights and obligations
of the Assignor with respect to its Commitment, Letter of Credit Exposure, Note
and Loans.
2. The Assignor. The Assignor (i) represents and warrants that it is
the legal and beneficial owner of the interest being assigned by it hereunder,
that such interest is free and clear of any adverse claim, and that as of the
date hereof the amount of its Commitment and outstanding Loans (and Letter of
Credit Exposure, if applicable) is as set forth in Item 4 of Annex I, (ii)
except as set forth in clause (i) above, makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with the Credit Agreement, any other
Credit Document or any other instrument or document furnished pursuant thereto
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Agreement, any other Credit Document or any other
instrument or document furnished pursuant thereto, and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or any of its Subsidiaries or the
performance or observance by the Borrower or any of its Subsidiaries of any of
their respective obligations under the Credit Agreement, any other Credit
Document or any other instrument or document furnished pursuant thereto.
3. The Assignee. The Assignee (i) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance, (ii) confirms
that it has received a copy of the Credit Agreement, together with copies of the
financial statements most recently required to have been delivered under
Sections 6.1 and 6.2 of the Credit Agreement and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Acceptance, (iii) agrees that it
will, independently and without reliance upon the Agent, the Assignor or any
other Lender, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under the Credit Agreement, (iv) confirms that it is an
Eligible Assignee, (v) appoints and authorizes the Agent to take such actions as
agent on its behalf under the Credit Agreement and the other Credit Documents,
and to exercise such powers and to perform such duties, as are specifically
delegated to the Agent by the terms thereof, together with such other powers and
duties as are reasonably incidental thereto, and (vi) agrees that it will
perform in accordance with their respective terms all of the obligations that by
the terms of the Credit Agreement are required to be performed by it as a
Lender. [To the extent legally entitled to do so, the Assignee will deliver to
the Agent, as and when required to be delivered under the Credit Agreement, duly
completed and executed originals of the applicable tax withholding forms
described in Section 2.17(d) of the Credit Agreement].1
4. Effective Date. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto, shall be delivered to each of the Agent
and the Borrower (and also to the Agent, the processing fee referred to in
Section 11.7(a) of the Credit Agreement). The effective date of this Assignment
and Acceptance (the "Effective Date") shall be the date designated as the
Effective Date in Item 5 of Annex I. As of the Effective Date, (y) the Assignee
shall be a party to the Credit Agreement and, to the extent provided in this
Assignment and Acceptance, shall have the rights and obligations of a Lender
thereunder and under the other Credit Documents, and (z) the Assignor shall, to
the extent provided in this Assignment and Acceptance, relinquish its rights
(other than rights under the provisions of the Credit Agreement and the other
Credit Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the Effective
Date) and be released from its obligations under the Credit Agreement and the
other Credit Documents.
5. Payments; Settlement. On or prior to the Effective Date, in
consideration of the sale and assignment provided for herein and as a condition
to the effectiveness of this Assignment and Acceptance, the Assignee will pay to
the Assignor an amount (to be confirmed between the Assignor and the Assignee)
that represents the Assigned Share of the principal amount of the Loans made by
the Assignor and outstanding on the Effective Date (together, if and to the
extent the Assignor and the Assignee so elect, with the Assigned Share of any
related accrued but unpaid interest, fees and other amounts). From and after the
Effective Date, the Agent will make all payments required to be made by it under
the Credit Agreement in respect of the interest assigned hereunder (including,
without limitation, all payments of principal, interest and fees in respect of
------------------
1 Insert if the Assignee is organized under the laws of a jurisdiction
outside the United States.
the Assigned Share of the Assignor's Commitment and Loans assigned hereunder)
directly to the Assignee. The Assignor and the Assignee shall be responsible for
making between themselves all appropriate adjustments in payments due under the
Credit Agreement in respect of the period prior to the Effective Date. All
payments required to be made hereunder or in connection herewith shall be made
in Dollars by wire transfer of immediately available funds to the appropriate
party at its address for payments designated in Annex I.
6. Governing Law. This Assignment and Acceptance shall be governed by,
and construed in accordance with, the internal laws of the State of North
Carolina (without regard to the conflicts of laws principles thereof).
7. Entire Agreement. This Assignment and Acceptance, together with the
Credit Agreement and the other Credit Documents, embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings of the parties, verbal or written, relating to the subject matter
hereof.
8. Successors and Assigns. This Assignment and Acceptance shall be
binding upon, inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
9. Counterparts. This Assignment and Acceptance may be executed in any
number of counterparts and by 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.
3
IN WITNESS WHEREOF, the parties have caused this Assignment and
Acceptance to be executed by their duly authorized officers as of the date first
above written.
ASSIGNOR:
--------------------------------
By: ___________________________________
Title: __________________________________
ASSIGNEE:
--------------------------------
By: ___________________________________
Title: __________________________________
Accepted this _______ day of ______________, 19___:
FIRST UNION NATIONAL BANK, as Agent
By: ___________________________________
Title: __________________________________
Consented and agreed to:
PENN-AMERICA GROUP, INC.
By: ___________________________________
Title: __________________________________
4
ANNEX I
1. Borrower: Penn-America Group, Inc.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of _________________, 1998, among
Penn-America Group, Inc., certain Lenders from time to time parties
thereto, and First Union National Bank, as Agent.
3. Date of Assignment and Acceptance: ________________, 19___.
4. Amounts:
Aggregate
Amount of for Assignor
Aggregate Assigned Assigned (after assignment)
for Assignor Share2 Share
(a) Commitment $_________ _____% $________ $___________
(b) Loans3 $_________ _____% $________ $___________
(c) Letter of Credit Exposure $_________ _____% $________ $___________
5. Effective Date: ___________________, 19___. (4)
6. Addresses for Payments:
Assignor: _________________________________
=================================
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Reference: __________________
(2) Percentage taken up to a ten decimal places, if necessary.
(3) Insert amounts outstanding as of the date of the Assignment and Acceptance.
(4) Shall be a date not less than five Business Days after the date of the
Assignment and Acceptence.
Assignee: _________________________________
=================================
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Reference: __________________
7. Addresses for Notices:
Assignor: _________________________________
=================================
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
Assignee: _________________________________
=================================
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
8. Lending Office of Assignee:
=================================
---------------------------------
Attention: ___________________
Telephone: __________________
Telecopy: ___________________
2
EXHIBIT F
FORM OF
FINANCIAL CONDITION CERTIFICATE
THIS FINANCIAL CONDITION CERTIFICATE is delivered pursuant to Section
4.1(j) of the Credit Agreement, dated as of September ___, 1998 (the "Credit
Agreement"), among PENN-AMERICA GROUP, INC., a Pennsylvania corporation (the
"Borrower"), certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), and First Union National Bank, as Agent.
Capitalized terms used herein without definition shall have the meanings given
to such terms in the Credit Agreement.
The undersigned hereby certifies for and on behalf of the Borrower as
follows:
1. Capacity. The undersigned is, and at all pertinent times mentioned
herein has been, the duly qualified and acting chief financial officer of the
Borrower, and in such capacity has responsibility for the management of the
Borrower's financial affairs and for the preparation of the Borrower's financial
statements. The undersigned has, together with other officers of the Borrower,
acted on behalf of the Borrower in connection with the negotiation and
consummation of the Credit Agreement and the consummation of the transactions
contemplated thereby.
2. Procedures. For purposes of this Certificate, the undersigned has,
as of or prior to the date hereof, undertaken the following activities in
connection herewith:
2.1 The undersigned has carefully reviewed the following:
(a) the contents of this Certificate;
(b) the Credit Agreement (including the exhibits and
schedules thereto);
(c) the audited consolidated and unaudited consolidating
balance sheets of the Borrower and its Subsidiaries as
of December 31, 1995, 1996 and 1997, and the related
consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Borrower and
its Subsidiaries for the fiscal years then ended, each
certified by KPMG Peat Marwick LLP;
(d) the unaudited consolidated and consolidating balance
sheets of the Borrower and its Subsidiaries as of June
30, 1998, and the related consolidated and
consolidating statements of income, stockholders'
equity and cash flows of the Borrower and its
Subsidiaries for the six-month period then ended; and
2.2 Additionally, in preparation for the consummation of the
transactions contemplated by the Credit Agreement, the undersigned has prepared
or supervised the preparation of and has reviewed (i) an unaudited consolidated
balance sheet of the Borrower as of June 30, 1998, a copy of which balance sheet
(together with the supporting detail and underlying assumptions) is attached
hereto as Annex A (the "Pro Forma Balance Sheet"), and (ii) annual projected
balance sheets and statements of income and cash flows of the Borrower on a
consolidated basis for the five-year period ending December 31, 2002, copies of
which projected financial statements (together with the supporting detail and
underlying assumptions) are attached hereto as Annex B (the "Projections").
2.3 The undersigned, together with the other officers and personnel of
the Borrower who were involved in the preparation of the Pro Forma Balance Sheet
and the Projections, have relied on historical financial and other information
and upon information with respect to sales, costs and other data obtained in
discussions with executive officers of the Borrower and other officers and
supervisory personnel directly responsible for the various operations involved.
The undersigned has reexamined the Pro Forma Balance Sheet and the Projections
as of the date hereof, and has considered the continuing reasonableness of the
assumptions set forth therein and the effect thereon of any changes since the
date of preparation thereof on the financial condition set forth and the results
projected therein.
2.4 The undersigned has made inquiries of certain other officers and
personnel of the Borrower with responsibility for financial and accounting
matters regarding (i) whether the unaudited financial statements described in
paragraph 2.1(d) above and the Pro Forma Balance Sheet are in conformity with
GAAP applied on a basis consistent with that of the audited financial statements
described in paragraph 2.1(c) above (subject to the absence of footnotes
required by GAAP and subject to normal year-end adjustments), and whether notes
omitted from such unaudited financial statements and the Pro Forma Balance Sheet
would have disclosed any new information that would be necessary to make the
statements contained therein not misleading, and (ii) whether such persons were
aware of any events or conditions that, as of the date hereof, would cause the
statements made in paragraph 3 below to be untrue.
2.5 With respect to any contingent liabilities of the Borrower on a pro
forma basis after giving effect to the transactions contemplated by the Credit
Agreement, the undersigned:
(a) has inquired of certain officers and other personnel of
the Borrower who have responsibility for the legal,
financial and accounting affairs of the Borrower, as to
the existence and estimated amounts of all contingent
liabilities known to them;
(b) has confirmed with senior accounting officers of the
Borrower that, to the best of such officers' knowledge,
(i) all appropriate items have been included in
contingent liabilities made known to the undersigned in
the course of the inquiry of the undersigned in
connection herewith, and (ii) the amounts relating
thereto were the maximum estimated amounts of liability
reasonably likely to result therefrom as of the date
hereof, and
(c) confirms that, to the best of his knowledge, all
material contingent liabilities that may arise from any
pending litigation, asserted claims and assessments,
guarantees, uninsured risks, and other relevant
contingencies and circumstances have been considered in
making the certification set forth herein, and with
respect to each such contingent liability the maximum
estimated amount of liability with respect thereto was
used in making such certification.
2.6 The undersigned has conferred with counsel to the Borrower for the
purpose of discussing the meaning of the contents of this Certificate.
3. Certifications. Based on the foregoing, the undersigned hereby
certifies as follows:
3.1 The Pro Forma Balance Sheet attached hereto as Annex A gives pro
forma effect to the consummation of the transactions contemplated by the Credit
Agreement, all as if such events had occurred on June 30, 1998. The Pro Forma
Balance Sheet has been prepared in accordance with GAAP (subject to the absence
of footnotes required by GAAP and subject to normal year-end adjustments) and,
subject to stated assumptions made in good faith and having a reasonable basis
set forth therein, presents fairly the financial condition of the Borrower and
its Subsidiaries on an unaudited pro forma consolidated basis as of the date set
forth therein after giving effect to the consummation of the transactions
contemplated by the Credit Agreement as described above.
3.2 The Projections attached hereto as Annex B give effect to the
consummation of the transactions contemplated by the Credit Agreement. In the
opinion of the undersigned, the assumptions used in the preparation of the
Projections were fair, complete and reasonable when made and continue to be
fair, complete and reasonable as of the date hereof. The Projections have been
prepared in good faith by the executive and financial personnel of the Borrower,
are complete and represent a reasonable estimate of the future performance and
financial condition of the Borrower and its Subsidiaries, subject to the
uncertainties and approximations inherent in any projections.
3.3 After giving effect to the transactions contemplated by the Credit
Agreement, all material accounts and other liabilities of the Borrower and its
Subsidiaries are current and not past due.
3.4 Neither the Borrower nor any Subsidiary is insolvent now, and the
incurrence by the Borrower and each Subsidiary of its liabilities and
obligations pursuant to the Credit Agreement and the other Credit Documents will
not render it insolvent. The undersigned understands that, in this context, (i)
"insolvent" means that the present fair saleable value of assets is less than
the amount that will be required to be paid on or in respect of the existing
debts as such debts mature, (ii) "fair value" of assets means the aggregate
amount that could be realized
within a reasonable time, either through collection or sale of such assets at
the regular market value as an ongoing business, conceiving of the latter as the
amount that could be obtained for the property in question within such period by
a capable and diligent seller from an interested buyer who is willing to
purchase under ordinary selling conditions, and (iii) "debts" includes any legal
liability, whether matured or unmatured, liquidated or unliquidated, absolute,
fixed or contingent, including any guaranty or other contingent obligation. The
foregoing is supported by an analysis of the Pro Forma Balance Sheet. A
valuation of the Borrower and its Subsidiaries, on the basis thereof and with
reasonable allowance for error, would reflect the net worth of the Borrower and
its Subsidiaries (on a consolidated basis) in the aggregate (excess of fair
value of assets over liabilities) as not less than $90,000,000.
3.5 The undersigned reasonably believes that, by the incurrence of its
liabilities and obligations pursuant to the Credit Agreement and the other
Credit Documents neither the Borrower nor any Subsidiary will incur debts beyond
its ability to pay as they mature (taking into account the timing and amounts of
cash to be payable on or in respect of its debts). The foregoing conclusion is
based in part on the Projections, which demonstrate that the cash flow of the
Borrower and its Subsidiaries, after taking into account all anticipated uses of
cash of each such Person, will at all times be sufficient to pay all amounts on
or in respect of Indebtedness of each such Person when such amounts are required
to be paid (including without limitation scheduled payments pursuant to the
Credit Agreement). The undersigned has concluded that the realization of current
assets in the ordinary course of business should be sufficient to pay recurring
current debt, short-term debt and long-term debt as such debts mature, that the
cash flow (including earnings plus non-cash charges to earnings) should be
sufficient to provide cash necessary to repay loans made under the Credit
Agreement and other long-term indebtedness as such debt matures, and that the
Borrower should have sufficient availability under the Credit Agreement to
satisfy its working capital and short-term liquidity requirements.
3.6 After giving effect to the consummation of the transactions
contemplated by the Credit Agreement, the assets of the Borrower and each
Subsidiary do not constitute "unreasonably small capital" (within the meaning of
Section 548(a) of the Bankruptcy Code, 11 U.S.C. Section 548(a)) for such Person
to carry on its business as now conducted and as proposed to be conducted,
taking into account the particular capital requirements of the business
conducted and to be conducted by it and the availability of capital in respect
thereof (with reference to, without limitation, the Projections and the
Borrower's available credit capacity).
3.7 Neither the Borrower nor any Subsidiary has executed the Credit
Agreement or any other documents mentioned therein, or made any transfer or
incurred any obligations thereunder, with intent to hinder, delay or defraud
either present or future creditors of such Person.
3.8 The statements made herein by the undersigned are based upon the
personal knowledge of the undersigned, or upon reports and other information
given to the undersigned by supervisory personnel of the Borrower having
responsibility for the reports and information given, and who in the opinion of
the undersigned are reliable and entitled to be relied upon. The statements made
herein are made in good faith and, to the best of the knowledge and belief of
the undersigned, and subject to the assumptions set forth in Annexes A and B,
are reasonable in all material respects.
3.9 The undersigned understands that the Lenders have performed their
own review and analysis of the financial condition of the Borrower, but that the
Lenders are relying on the foregoing statements in connection with the extension
of credit to the Borrower pursuant to the Credit Agreement.
Executed this ___ day of September, 1998.
-----------------------------------------
Chief Financial Officer
PENN-AMERICA GROUP, INC.
FINANCIAL CONDITION CERTIFICATE
ANNEX A
PENN-AMERICA GROUP, INC.
Pro Forma Balance Sheet
[see attached]
FINANCIAL CONDITION CERTIFICATE
ANNEX B
PENN-AMERICA GROUP, INC.
Projections
[see attached]
Penn-America Group, Inc
Governmental and Third Party
Authorization Permits
Schedule 5.4a
NONE
ADMISSION APPLICATINO STATUS
LAST REVISION: February 22, 1999
==========================================================================================================
PENN-AMERICA
==========================================================================================================
SURPLUS APP
STATE ADMITTED LINES DIFF * NOTES
----------------------------------------------------------------------------------------------------------
Alabama 5/14/96
----------------------------------------------------------------------------------------------------------
Alaska 6/7/96
----------------------------------------------------------------------------------------------------------
Arizona 4/1/96
----------------------------------------------------------------------------------------------------------
Arkansas 5/18/95 2
----------------------------------------------------------------------------------------------------------
California 00/00/83
----------------------------------------------------------------------------------------------------------
Colorado 1/17/95
----------------------------------------------------------------------------------------------------------
Connecticut 10/31/89 3 App. received; Filing window 3/31 to 10/31
----------------------------------------------------------------------------------------------------------
Delaware 4/5/79
----------------------------------------------------------------------------------------------------------
DC X 2
----------------------------------------------------------------------------------------------------------
Florida X 3+
----------------------------------------------------------------------------------------------------------
Xxxxxxx X 2
----------------------------------------------------------------------------------------------------------
Hawaii 4/15/97
----------------------------------------------------------------------------------------------------------
Idaho 1/8/96
----------------------------------------------------------------------------------------------------------
Illinois 10/10/97
----------------------------------------------------------------------------------------------------------
Indiana 12/31/97
----------------------------------------------------------------------------------------------------------
Iowa 11/17/97
----------------------------------------------------------------------------------------------------------
Kansas 1/31/97
----------------------------------------------------------------------------------------------------------
Kentucky 1/19/95
----------------------------------------------------------------------------------------------------------
Louisiana X 2+
----------------------------------------------------------------------------------------------------------
Maine X 2+
----------------------------------------------------------------------------------------------------------
Maryland X App. received
----------------------------------------------------------------------------------------------------------
Massachusetts X 3+
----------------------------------------------------------------------------------------------------------
Michigan 10/13/95
----------------------------------------------------------------------------------------------------------
Minnesota 5/3/91
----------------------------------------------------------------------------------------------------------
Mississippi 11/1/98 1
----------------------------------------------------------------------------------------------------------
Missouri X
----------------------------------------------------------------------------------------------------------
Montana 11/3/97
----------------------------------------------------------------------------------------------------------
Nebraska X
----------------------------------------------------------------------------------------------------------
Nevada 10/26/95
----------------------------------------------------------------------------------------------------------
N. Hampshire 9/1/94 3
----------------------------------------------------------------------------------------------------------
N. Jersey X 3
----------------------------------------------------------------------------------------------------------
N. Mexico 7/3/95 3 Admission app filed 6/26/98
----------------------------------------------------------------------------------------------------------
N. York 5/24/95
----------------------------------------------------------------------------------------------------------
N. Carolina X 2 Admission app filed 4/2/98 - Not expecting intial review
until 8/98; Initial review to be completed by January, 1999
----------------------------------------------------------------------------------------------------------
N. Dakota X
----------------------------------------------------------------------------------------------------------
Ohio X
----------------------------------------------------------------------------------------------------------
Oklahoma X App. received
----------------------------------------------------------------------------------------------------------
Oregon X
----------------------------------------------------------------------------------------------------------
Pennsylvania X
----------------------------------------------------------------------------------------------------------
Rhode Island X 2
----------------------------------------------------------------------------------------------------------
S. Carolina X 2
----------------------------------------------------------------------------------------------------------
S. Dakota X
----------------------------------------------------------------------------------------------------------
Tennessee 9/18/98 2 App filed 6/2/98
----------------------------------------------------------------------------------------------------------
Texas X 3
----------------------------------------------------------------------------------------------------------
Utah 1/15/98
----------------------------------------------------------------------------------------------------------
Vermont X 3+
----------------------------------------------------------------------------------------------------------
Virginia X 3+ App. received
----------------------------------------------------------------------------------------------------------
Washington X
----------------------------------------------------------------------------------------------------------
W. Virginia X 2 App. received
----------------------------------------------------------------------------------------------------------
Wisconsin 6/28/96
----------------------------------------------------------------------------------------------------------
Wyoming X 1 App. received
----------------------------------------------------------------------------------------------------------
Totals 30 21
==========================================================================================================
Notes:
1) "X" indicates that the state has been addmitted or approved for
more than five years
2) * Application difficulty: Range of 1 to 3 (3 being the most
difficult)
ADMISSION APPLICATION STATUS
Last Revision: February 22, 1999
=================================================================================================================================
Penn-Star
=================================================================================================================================
SURPLUS APP SEASONING
STATE ADMITTED LINES DIFF REQ'S. NOTES
------------------------------------------------------------------------------------------------------------------------------
Alabama App.received; No deadline - but now is good time for them
------------------------------------------------------------------------------------------------------------------------------
Alaska
------------------------------------------------------------------------------------------------------------------------------
Arizona 8/18/97 App. filed 5/28/97; S/L approval received
------------------------------------------------------------------------------------------------------------------------------
Arkansas 2 3 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
California 11/18/97 App. filed 4/4/97
------------------------------------------------------------------------------------------------------------------------------
Colorado S/L app filing window 3/1 to7/1
------------------------------------------------------------------------------------------------------------------------------
Connecticut 3 App. received; Filing window 3/31 to 10/31.
Plan to file 2nd Qtr. '98
------------------------------------------------------------------------------------------------------------------------------
Delaware
------------------------------------------------------------------------------------------------------------------------------
DC 2 2 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
Florida 3+ 3 yrs
------------------------------------------------------------------------------------------------------------------------------
Georgia 7/1/98 2 0 yrs
------------------------------------------------------------------------------------------------------------------------------
Hawaii
------------------------------------------------------------------------------------------------------------------------------
Idaho
------------------------------------------------------------------------------------------------------------------------------
Illinois 10/10/97
------------------------------------------------------------------------------------------------------------------------------
Indiana 5/19/98
------------------------------------------------------------------------------------------------------------------------------
Iowa App. withdrawn 11/6 Requested Surplus Lines app.
------------------------------------------------------------------------------------------------------------------------------
Kansas 5/19/98
------------------------------------------------------------------------------------------------------------------------------
Kentucky 6/18/98 2+
------------------------------------------------------------------------------------------------------------------------------
Louisiana App. received
------------------------------------------------------------------------------------------------------------------------------
Maine 2 0 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
Maryland 5/22/98
------------------------------------------------------------------------------------------------------------------------------
Massachusetts 3+ 5 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
Michigan
------------------------------------------------------------------------------------------------------------------------------
Minnesota App. ordered 3/18; Had moratorium, currently lifted.
Aprox. 6-9 mo. process.
------------------------------------------------------------------------------------------------------------------------------
Mississippi 11/1/98 1 2 yrs
------------------------------------------------------------------------------------------------------------------------------
Missouri
------------------------------------------------------------------------------------------------------------------------------
Montana 9/25/98
------------------------------------------------------------------------------------------------------------------------------
Nebraska No deadline - aprox 6 mo. process
------------------------------------------------------------------------------------------------------------------------------
Nevada Application tentatively approved 12/28/98
------------------------------------------------------------------------------------------------------------------------------
N. Hampshire 3 5 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
N. Jersey 3 3 yrs - flexible App. received
------------------------------------------------------------------------------------------------------------------------------
N. Mexico 2/17/99 3 3 yrs S/L app. tentatively approved 2/17/99
------------------------------------------------------------------------------------------------------------------------------
N. York
------------------------------------------------------------------------------------------------------------------------------
N. Carolina 12/31/97 2 3 yrs
------------------------------------------------------------------------------------------------------------------------------
N. Dakota App received; Window between 4/1 and 6/30
------------------------------------------------------------------------------------------------------------------------------
Ohio App received; Deadline was 6/30 - Admission committee decided to
complete app by 1/98.
------------------------------------------------------------------------------------------------------------------------------
Oklahoma 3/10/98
------------------------------------------------------------------------------------------------------------------------------
Oregon
------------------------------------------------------------------------------------------------------------------------------
Pennsylvania 2/1/97
------------------------------------------------------------------------------------------------------------------------------
Xxxxx Xxxxxx 0 App. received
------------------------------------------------------------------------------------------------------------------------------
S. Carolina 12/15/98 2 0 yrs
------------------------------------------------------------------------------------------------------------------------------
S. Dakota App. received
------------------------------------------------------------------------------------------------------------------------------
Tennessee 5/1/98 2
------------------------------------------------------------------------------------------------------------------------------
Texas 3 0 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
Utah App. received
------------------------------------------------------------------------------------------------------------------------------
Vermont 3+ App. received
------------------------------------------------------------------------------------------------------------------------------
Virginia 9/17/98 3
------------------------------------------------------------------------------------------------------------------------------
Washington 8/28/97
------------------------------------------------------------------------------------------------------------------------------
W. Virginia 2 5 yrs App. received; No deadline, aprox. 1 1/2 year process
------------------------------------------------------------------------------------------------------------------------------
Wisconsin
------------------------------------------------------------------------------------------------------------------------------
Wyoming 2 2 yrs App. received
------------------------------------------------------------------------------------------------------------------------------
Totals 9 8
==============================================================================================================================
Notes:
1) * Application difficulty: Range of 1 to 3 (3 being the most difficult)
Penn-America Group, Inc.
List of Subsidiary
Schedule 5.7
Penn-America Group, Inc
Owns 100%
Penn-America Insurance Co
Owns 100%
Penn-Star Insurance Co
Schedule 5.18
Material Contracts
Borrower and/or its Subsidiaries are parties to the following material
contracts:
(1) Amended Agency Agreement between Penn-America Insurance Company and
Carnegie General Agency, effective March 1, 1998 (1), providing for general
agency services from Carnegie to Penn-America;
(2) Amended Cost Sharing Agreement between Penn-America Group, Inc. and Penn
Independent Corporation, effective January 1, 1998, regarding the sharing
of certain operating and employment costs;
(3) Amended Investment Advisory Agreement between and among Penn-America
Insurance Company, Penn-Star Insurance Company and Xxxx Xxxxxx Associates,
L.P., effective September 1, 1997, providing for investment advisory
services from Xxxx Xxxxxx to Penn-America and Penn-Star;
(4) Investment Management Agreement between and among Penn-America Insurance
Company, Penn-Star Insurance Company and General Re-New England Asset
Management, Inc., effective April 15, 1997, providing for investment
advisory services from New England to Penn-America and Penn-Star;
(5) Lease Agreement between Penn-America Group, Inc. and Xxxxx Xxxxxxxx and
Xxxxxx-Xxxxxx Xxxxxxxx, effective June 30, 1995 through June 30, 2000,
providing for the lease of office space by Penn-America from Xxxxx Xxxxxxxx
and Xxxxxx-Xxxxxx Xxxxxxxx.
(1) Unless otherwise indicated, all material contracts are
continuously effective unless terminated in writing by either
party to the agreement.
Penn-America Group, Inc.
Liens In Existence
Schedule 8.3
NONE
Penn-America Group, Inc.
Investment (per Credit Agreement)
Schedule 8.5
NONE
Penn-America Group, Inc.
Reinsurance Agreements
(Per Credit Agreement)
Schedule 5.19
NONE
Penn-America Group, Inc.
Indebtedness
Schedule 8.2
Capital Lease as of 8/31/98
Asset 2,084,272.00
Obligation 2,122,172.00
Penn-America Group, Inc.
Transactions with Affiliates
Schedule 8.7
NONE
Penn-America Group, Inc.
Lines of Business
Schedule 8.8
Fire
Allied Lines
Commercial Multi Peril
Inland marine
Other Liability - Occurrence
Product Liability - Occurrence
Private Passenger Auto Liability
Commercial Auto Liability
Auto Physical Damage
Penn-America Group Inc.
Transactions with Affiliates
Schedule 8.7
NONE
Penn-America Group, Inc
Lines of Business
Schedule 8.8
Fire
Allied Lines
Commercial Multi Peril
Inland marine
Other Liability - Occurrence
Product Liability - Occurrence
Private Passenger Auto Liability
Commercial Auto Liability
Auto Physical Damage
