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CREDIT AGREEMENT
between
VESTA INSURANCE GROUP, INC.
and
THE BANK
$15,000,000 Revolving Credit Facility
Dated as of September 30, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I-DEFINITIONS...................................................... 1
1.1 Defined Terms................................................... 1
1.2 Accounting Terms................................................ 10
1.3 Other Terms; Construction....................................... 11
ARTICLE II-AMOUNT AND TERMS OF THE LOANS................................... 11
2.1 Commitment; Loans............................................... 11
2.2 Borrowings...................................................... 11
2.3 Note............................................................ 11
2.4 Security........................................................ 12
2.5 Termination and Reduction of Commitment......................... 12
2.6 Mandatory and Voluntary Payments and Prepayments................ 12
2.7 Interest........................................................ 13
2.8 Method of Payments; Computations................................ 13
2.9 Recovery of Payments............................................ 14
2.10 Use of Proceeds................................................. 14
2.11 Increased Costs; Change in Circumstances; Illegality; etc....... 14
2.12 Taxes........................................................... 15
ARTICLE III-CONDITIONS OF BORROWING........................................ 16
3.1 Conditions to Effectiveness of this Agreement................... 16
3.2 Conditions to All Loans......................................... 18
ARTICLE IV-REPRESENTATIONS AND WARRANTIES.................................. 18
4.1 Corporate Organization and Power................................ 18
4.2 Authorization; Enforceability................................... 19
4.3 No Violation.................................................... 19
4.4 Governmental Authorization; Permits............................. 19
4.5 Litigation...................................................... 20
4.6 Taxes........................................................... 20
4.7 Subsidiaries.................................................... 20
4.8 Full Disclosure................................................. 20
4.9 Margin Regulations.............................................. 21
4.10 No Material Adverse Change...................................... 21
4.11 Financial Matters............................................... 21
4.12 Ownership of Properties......................................... 22
4.13 ERISA........................................................... 22
4.14 Environmental Matters........................................... 22
4.15 Compliance With Laws............................................ 23
4.16 Regulated Industries............................................ 23
4.17 Insurance....................................................... 23
ARTICLE V-AFFIRMATIVE COVENANTS............................................ 24
i
5.1 GAAP Financial Statements....................................... 24
5.2 Statutory Financial Statements.................................. 25
5.3 Other Business and Financial Information........................ 26
5.4 Corporate Existence; Franchises; Maintenance of Properties...... 28
5.5 Compliance with Laws............................................ 28
5.6 Payment of Obligations.......................................... 28
5.7 Insurance....................................................... 28
5.8 Maintenance of Books and Records; Inspection.................... 28
5.9 Subsidiary Dividends............................................ 29
5.10 Further Assurances.............................................. 29
ARTICLE VI-FINANCIAL COVENANTS............................................. 29
6.1 Statutory Consolidated Net Income............................... 29
6.2 Consolidated Net Income......................................... 30
6.3 Statutory Surplus............................................... 30
6.4 Risk-Based Capital.............................................. 30
ARTICLE VII-NEGATIVE COVENANTS............................................. 31
7.1 Merger; Consolidation........................................... 31
7.2 Indebtedness.................................................... 31
7.3 Liens........................................................... 31
7.4 Disposition of Assets........................................... 33
7.5 Transactions with Affiliates.................................... 34
7.6 Lines of Business............................................... 34
7.7 Fiscal Year..................................................... 34
7.8 Accounting Changes.............................................. 35
7.9 Dividends....................................................... 35
ARTICLE VIII-EVENTS OF DEFAULT............................................. 35
8.1 Events of Default............................................... 35
8.2 Remedies; Termination of Commitment, Acceleration, etc.......... 37
8.3 Remedies; Set-Off............................................... 38
ARTICLE IX-MISCELLANEOUS................................................... 38
9.1 Fees and Expenses............................................... 38
9.2 Indemnification................................................. 39
9.3 Governing Law; Consent to Jurisdiction.......................... 39
9.4 Arbitration; Preservation and Limitation of Remedies............ 39
9.5 Notices......................................................... 40
9.6 Amendments, Waivers, etc........................................ 41
9.7 Participations.................................................. 41
9.8 No Waiver....................................................... 41
9.9 Successors and Assigns.......................................... 42
9.10 Survival........................................................ 42
9.11 Severability.................................................... 42
9.12 Construction.................................................... 42
9.13 Confidentiality................................................. 42
ii
9.14 Reliance by Lender.............................................. 43
9.15 Counterparts.................................................... 43
9.16 Entire Agreement................................................ 43
iii
iv
EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Pledge Agreement
Exhibit C Form of Notice of Borrowing
Exhibit D-1 Form of Compliance Certificate (for Section 5.1)
Exhibit D-2 Form of Compliance Certificate (for Section 5.2)
Exhibit E Form of Opinion
SCHEDULES
Schedule 4.3 Subsidiaries Subject to Restrictions or Encumbrance
Schedule 4.4(a) Approval or Consent for Credit Agreement
Schedule 4.4(b) Governmental Approvals, Etc.
Schedule 4.5 Litigation Against Borrower
Schedule 4.6 Taxes
Schedule 4.7 Subsidiaries
Schedule 4.11(a) Financial Statements Exceptions
Schedule 4.11(b) Exceptions Regarding Historical Statutory Statements
Schedule 4.15 Compliance with Law Exceptions
Schedule 7.3 Existing Liens
[others]
v
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 30th day of September, 1999 (this
"Agreement"), is made between VESTA INSURANCE GROUP, INC., a Delaware
corporation with its principal offices in Birmingham, Alabama (the "Borrower")
and THE BANK, an Alabama banking corporation (the "Lender").
R E C I T A L S
The Borrower and certain banks and other financial institutions are parties
to an Amended and Restated Credit Agreement that was amended and restated as of
April 8, 1997, as further amended on April 14, 1999 (the "Existing Facility"),
providing for the availability to the Borrower of a revolving credit facility in
the aggregate principal amount of $200,000,000 on the terms and subject to the
conditions set forth therein. The Borrower has requested that the Lender
provide to the Borrower a revolving credit facility of $15,000,000 for the
purpose of refinancing the Existing Facility and providing a source of ongoing
working capital for the Borrower, all on the terms and subject to the conditions
hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the mutual provisions, covenants and
agreements herein contained, the parties DO HEREBY AGREE as follows:
ARTICLE I
DEFINITIONS
I.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
Lender, duly completed and signed by an Authorized Officer of the Borrower and
in form and substance satisfactory to the Lender, listing any one or more
accounts to which the Borrower may from time to time request the Lender to
forward the proceeds of any Loans made hereunder.
"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
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contract or otherwise, or (ii) the beneficial ownership of securities or other
ownership interests of such Person having 25% 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.
"Agreement" shall mean this Credit Agreement, as amended, modified or
supplemented 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.
"Authorized Officer" shall mean any officer of the Borrower authorized by
resolution of the board of directors of the Borrower to take the action
specified herein with respect to such officer and whose signature and incumbency
shall have been certified to the Lender by the secretary or an assistant
secretary of the Borrower.
"Bankruptcy Code" shall mean 11 U.S.C. (S)(S) 101 et seq., as amended from
time to time, and any successor statute.
"Base Rate" shall mean 2% per annum above the rate from time to time paid
by the Lender on the Certificate of Deposit.
"Birmingham Investment Group" shall mean that certain limited liability
company organized under the laws of Delaware under the name "Birmingham
Investment Group, L.L.C."
"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 on a single date of a
Loan.
"Borrowing Date" shall mean, with respect to any Borrowing, the date upon
which such Borrowing is made.
"Business Day" shall mean any day other than a Saturday or Sunday, a legal
holiday or a day on which commercial banks in Birmingham, Alabama, are required
by law to be closed.
"Certificate of Deposit" shall mean the Certificate of Deposit purchased by
the Borrower from the Lender in the amount of the Commitment in which the Lender
shall have a security interest pursuant to the Pledge Agreement.
"Commitment" shall have the meaning given to such term in Section 2.1.
2
"Compliance Certificate" shall mean a fully completed and duly executed
certificate in the form of Exhibit D-1 or D-2 in such form and detail as will
demonstrate compliance with the provisions of Article VI.
"Consolidated Group" shall have the meaning given to such term in the
Consolidated Tax Allocation Agreement.
"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 Generally Accepted Accounting Principles.
"Consolidated Tax Allocation Agreement" shall mean that certain
Consolidated Tax Allocation Agreement dated June 28, 1995, among the Borrower
and the Subsidiaries listed on Exhibit A thereto, without giving effect to any
amendments thereto after the date thereof.
"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, (i) to purchase, repurchase or otherwise
acquire such primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or provide funds (A) for the payment or
discharge of any such primary obligation or (B) 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, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary obligation
of the ability of the primary obligor in respect thereof to make payment of such
primary obligation or (iv) 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 D-1 or Exhibit D-2, as applicable, in such
form and detail as will demonstrate compliance with the provisions of Article
VI.
"Credit Documents" shall mean this Agreement, the Note, the Pledge
Agreement, and all other agreements, instruments, documents and certificates now
or hereafter executed and delivered to the 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.
"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.
"Dollars" or "$" shall mean dollars of the United States of America.
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"Effective Date" shall mean the date and year first above written.
"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 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.
"Environmental Claims" shall mean any and all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, 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 Environmental Law or 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.
4
"Environmental Laws" shall mean any and all federal, state and local laws,
statutes, ordinances, rules, regulations, permits, licenses, approvals,
interpretations, 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
8.1.
"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.
"Federal Reserve Board" shall mean the Board of Governors of the Federal
Reserve System or any successor thereto.
"$5,000,000 Credit Agreement" shall mean the Credit Agreement of even date
herewith between the Borrower and The Banc Corporation.
"Generally Accepted Accounting Principles" 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 (or,
to the extent not so set forth in such statements, opinions and pronouncements,
as generally followed by entities similar in size to the Borrower and engaged in
generally similar lines of business), consistently applied and maintained and in
conformity with those used in the preparation of the most recent financial
statements of the Borrower referred to in Section 4.11(a).
"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.
"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 Environmental Law, (ii) that are
defined by any Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous, (iii) the presence of
which require investigation or response under any 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 hazardous 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.
"Historical Statutory Statements" shall have the meaning given to such term
in Section 4.11(b).
5
"Income Tax Benefits" shall mean an amount equal to 100% of the portion of
the federal or state income tax benefits received on a quarterly basis by the
Borrower that, pursuant to the Consolidated Tax Allocation Agreement, may be
retained by the Borrower and not paid over to any other member of the
Consolidated Group.
"Indebtedness" shall mean, with respect to any Person (without
duplication), (i) all indebtedness of such Person for borrowed money or in
respect of loans or advances, (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 should be, in accordance with Generally Accepted
Accounting Principles, recorded as capital leases, to the extent such
obligations are required to be so recorded, (vii) all obligations of such Person
to purchase, redeem, retire, defease or otherwise make any payment in respect of
any capital stock or other equity securities that, by their stated terms (or by
the terms of any equity securities issuable upon conversion thereof or in
exchange therefor), or upon the occurrence of any event, mature or are
mandatorily redeemable, or are redeemable at the option of the holder thereof,
in whole or in part, at any time prior to the Maturity Date, (viii) all
Contingent Obligations of such Person and (ix) all indebtedness referred to in
clauses (i) through (viii) 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, and with respect to the Borrower and its Subsidiaries shall
include, without limitation (but without duplication), the Junior Subordinated
Debentures, the beneficial interests of the Trust in the Junior Subordinated
Debentures, and the Borrower's guarantee to the holders of the Trust Securities
of all of the Trust's obligations under the Trust Securities.
"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 state
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 state of domicile.
"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.
"Junior Subordinated Debentures" shall mean the Borrower's 8.525% Junior
Subordinated Deferrable Interest Debentures due January 15, 2027, issued
pursuant to the Indenture, dated as of January 31, 1997, between the Borrower
and The National Bank of North Carolina, as Debenture Trustee, as amended,
modified or supplemented from time to time.
"Lender" shall mean The Bank and its successors and assigns.
6
"Licenses" shall have the meaning given to such term in Section 4.4(c).
"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, business, properties or
financial prospects of the Borrower or 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, business, properties or
financial prospects of the Borrower or the Borrower and its Subsidiaries, taken
as a whole, (ii) the ability of the Borrower to perform its obligations under
this Agreement or any of the other Credit Documents or (iii) the legality,
validity or enforceability of this Agreement or any of the other Credit
Documents or the rights and remedies of the Lender hereunder and thereunder.
"Maturity Date" shall mean September 29, 2001.
"Moody's" shall mean Xxxxx'x Investors Service, Inc., its successors and
assigns.
"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.
"Note" shall mean the promissory note of the Borrower in substantially the
form of Exhibit A, together with any amendments, modifications and supplements
thereto, substitutions therefore and restatements thereof.
"Notice of Borrowing" shall have the meaning given to such term in Section
2.2(a).
"Obligations" shall mean all principal of and interest (including, to the
greatest extent permitted by law, post-petition interest) on the Loans and all
fees, expenses, indemnities and other obligations owing, due or payable at any
time by the Borrower to the Lender or any other Person entitled thereto, under
this Agreement or any of the other Credit Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
successor thereto.
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"Participant" shall have the meaning given to such term in Section 9.7(a).
"Permitted Liens" shall have the meaning given to such term in Section 7.3.
"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.
"Pledge Agreement" shall mean the Pledge Agreement (for Certificates of
Deposit) in the form attached hereto and marked Exhibit B, as amended and
---------
supplemented from time to time.
"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.
"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.
"Regulations D, G, T, U and X" shall mean Regulations D, G, T, U and X,
respectively, of the Federal Reserve Board, and any successor regulations.
"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.
"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.
"Significant Subsidiary" shall mean, at the relevant time of determination,
any Subsidiary of the Borrower having (after the elimination of intercompany
accounts) (i) assets constituting at least 10% of the
8
total assets of the Borrower and its Subsidiaries on a consolidated basis, (ii)
revenues constituting at least 10% of the total revenues of the Borrower and its
Subsidiaries on a consolidated basis, or (iii) net earnings constituting at
least 10% of the total net earnings of the Borrower and its Subsidiaries on a
consolidated basis, in each case as determined as of the date of the financial
statements of the Borrower and its Subsidiaries most recently delivered under
Section 5.1 prior to such time (or, with regard to determinations at any time
prior to the initial delivery of financial statements under Section 5.1, as of
the date of the most recent financial statements referred to in Section
4.11(a)).
"Standard & Poor's" shall mean Standard & Poor's Ratings Services, a
division of The XxXxxx-Xxxx Companies, its successors and assigns.
"Statutory Accounting Principles" 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 Historical Financial Statements.
"Statutory Consolidated Net Income" shall mean, for any period, net income
(or loss) for the VFIC and the other Insurance Subsidiaries for such period,
determined on a consolidated basis in accordance with Statutory Accounting
Principles.
"Statutory Surplus" shall mean the total amount reported on line 27, page
3, column 1 of the Annual Statement, or an amount determined in a consistent
manner in accordance with Statutory Accounting Principles for any date other
than one as of which an Annual Statement is prepared. Notwithstanding the
foregoing, if the format of the Annual Statement is changed in future years so
that different information is contained in such line or such line no longer
exists, it is understood that the foregoing shall refer to information
consistent with that reported on the referenced line in the 1998 Annual
Statement.
"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, in the case of a corporation, or of the ownership or beneficial
interests, in the case of a Person not a corporation, is at the time, directly
or indirectly, owned or controlled by such Person and 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.
"Termination Date" shall mean the Maturity Date or such earlier date of
termination of the Commitment pursuant to Section 2.5 or Section 8.2.
"Transaction Expenses" shall mean all costs and expenses of, and fees
payable to, the Lender that are required to be reimbursed or paid by the
Borrower pursuant to Section 9.1 of the Credit Agreement.
"Trust" shall mean Vesta Capital Trust I, a Delaware statutory business
trust.
"Trust Securities" shall mean the 8.525% Capital Securities issued by the
Trust and representing preferred beneficial interests in the Trust.
9
"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 Code for the applicable plan year.
"Unutilized Commitment" shall mean, at any time, (i) the Commitment at such
time less (ii) the aggregate principal amount of Loans outstanding at such time.
"VFIC" shall mean Vesta Fire Insurance Corporation, an Alabama corporation.
"Wholly Owned" shall mean, with respect to any Subsidiary of any Person,
that 100% of the outstanding capital stock or other ownership interests of such
Subsidiary is owned, directly or indirectly, by such Person.
I.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, and all financial computations
hereunder shall be made, in accordance with Generally Accepted Accounting
Principles (or, to the extent that such terms apply solely to any Insurance
Subsidiary or if otherwise expressly required, Statutory Accounting Principles).
Notwithstanding the foregoing, in the event that any changes in Generally
Accepted Accounting Principles or Statutory Accounting Principles after the date
hereof are required to be applied to the transactions described herein and would
affect the computation of the financial covenants contained in Sections 6.1
through 6.4, as applicable, 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 an Annual Statement or Quarterly Statement are based on the
format promulgated by the NAIC for the 1995 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 1995 Annual Statements or
Quarterly Statements, as the case may be.
I.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.
ARTICLE II
AMOUNT AND TERMS OF THE LOANS
II.1 Commitment; Loans. The Lender 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 Effective Date to but not including
10
the Termination Date, in an aggregate principal amount at any time outstanding
not exceeding $15,000,000 (as such amount may be permanently reduced in
accordance with Section 2.5(b) the "Commitment"), provided that no Borrowing of
Loans shall be made if, immediately after giving effect thereto, the aggregate
principal amount of Loans outstanding at such time would exceed the Commitment.
Subject to and on the terms and conditions of this Agreement, the Borrower may
borrow, repay and reborrow Loans.
II.2 Borrowings. (a) In order to make a Borrowing, the Borrower will
give the Lender written notice not later than 10:00 a.m., Birmingham time, one
(1) Business Day prior to each Borrowing; provided, however, that a request for
a Borrowing to be made on the Effective Date may, at the discretion of the
Lender, be given later than the time specified therefor as set forth
hereinabove. Each such notice (each, a "Notice of Borrowing") shall be
irrevocable, shall be given in the form of Exhibit C and shall specify (i) the
aggregate principal amount of the Loans to be made pursuant to such Borrowing,
and (ii) the requested Borrowing Date, which shall be a Business Day.
Notwithstanding anything to the contrary contained herein, the aggregate
principal amount of each Borrowing 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 Unutilized Commitment).
(b) Not later than noon, Birmingham time, on the requested Borrowing
Date, the Lender will make the requested amount available to the Borrower
subject to the provisions of subsection (a) hereof and Section 2.1.
(c) The Borrower hereby authorizes the Lender 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 Lender 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 Lender
an Account Designation Letter listing any additional accounts or deleting any
accounts listed in a previous Account Designation Letter.
II.3 Note. (a) The Loan shall be evidenced by a Note appropriately
completed in substantially the form of Exhibit A.
(b) The Note shall (i) be executed by the Borrower, (ii) be payable to
the order of the Lender, (iii) be dated as of the Effective Date, (iv) be in a
stated principal amount equal to the Commitment, (v) bear interest in accordance
with the provisions of Section 2.7, as the same may be applicable to the Loans
made by the Lender from time to time, 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) The Lender will record on its internal records the amount of each
Loan made by it and each payment received by it in respect thereof and will, in
the event of any transfer of the Note, either endorse on the reverse side
thereof or on a schedule attached thereto (or any continuation thereof) the
outstanding principal amount of the Loans evidenced thereby as of the date of
transfer or provide such information on a schedule to the documents relating to
such transfer; provided, however, that the failure of the 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.
II.4 Security. The Borrower shall purchase a Certificate of Deposit
from the Lender in the minimum amount of the Commitment, which Certificate of
Deposit will mature on the Maturity Date and will be pledged to the Lender as
security for the Loans pursuant to the Pledge Agreement.
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II.5 Termination and Reduction of Commitment. (a) The Commitment shall
be automatically and permanently terminated on the Maturity Date unless sooner
terminated pursuant to subsection (b) below or Section 8.2.
(b) At any time and from time to time after the date hereof, upon not
less than five (5) Business Days' prior written notice to the Lender, the
Borrower, without premium or penalty, may terminate in whole or reduce in part
the Unutilized Commitment, 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 (b) may not thereafter be reinstated. Upon such permanent reduction,
the Certificate of Deposit will be reduced in an equal amount without penalty
for early withdrawal.
II.6 Mandatory and Voluntary Payments and Prepayments. (a) Except to
the extent due or made sooner pursuant to the provisions of this Agreement, the
Borrower will repay the aggregate outstanding principal amount of the Loans in
full on the Maturity Date.
(b) In the event that, at any time, the aggregate principal amount of
Loans outstanding at such time shall exceed the Commitment at such time (after
giving effect to any concurrent termination or reduction thereof), the Borrower
will immediately prepay the outstanding principal amount of the Loans in the
amount of such excess.
(c) 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, upon
written notice to the Lender given not later than noon, Birmingham time, one (1)
Business Day prior to each intended prepayment of Loans, provided that 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.
Each such notice shall specify the proposed date of such prepayment and the
aggregate principal amount of the Loan to be prepaid and shall be irrevocable
and shall bind the Borrower to make such prepayment on the terms specified
therein. Amounts prepaid pursuant to this subsection (c) may be reborrowed,
subject to the terms and conditions of this Agreement.
II.7 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, at the Base Rate.
(b) Any principal amounts of the Loans not paid when due and, to the
greatest extent permitted by law, all interest accrued on the Loans and all
other fees and amounts hereunder not paid when due (whether at maturity,
pursuant to acceleration or otherwise), shall bear interest at a rate per annum
equal to the Base Rate plus 3% per annum and such default interest shall be
payable on demand. To the greatest extent permitted by 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 arrears on the last Business Day of each calendar month;
provided, that in the event the Loan is repaid or prepaid in full and the
Commitment has been terminated,
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then accrued interest in respect of the Loan shall be payable together with
such repayment or prepayment on the date thereof, and
(ii) 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 the Lender at
a rate in excess of the maximum rate permitted by applicable law. If the amount
of interest payable on any interest payment date would exceed the maximum amount
permitted by applicable law to be charged by the Lender, the amount of interest
payable on such interest payment date shall be automatically reduced to such
maximum permissible amount. In the event of any such reduction affecting the
Lender, if from time to time thereafter the amount of interest payable for the
account of the Lender on any interest payment date would be less than the
maximum amount permitted by applicable law to be charged by the Lender, then the
amount of interest payable for its account on such subsequent interest payment
date shall be automatically increased to such maximum permissible amount,
provided that at no time shall the aggregate amount by which interest paid for
the account of the 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.
II.8 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 Lender at its office referred
to in Section 9.5, prior to 11:00 a.m., Birmingham time, on the date payment is
due. Any payment made as required hereinabove, but after 11:00 a.m., Birmingham
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, and such extension of
time shall then be included in the computation of payment of interest, fees or
other applicable amounts.
(b) The Lender may, but shall not be obligated to, debit the amount of
any such payment not made as and when required hereunder to any ordinary deposit
account of the Borrower with the Lender (with prompt notice to the Lender and
the Borrower); provided, however, that the failure to give such notice shall not
affect the validity of such debit by the Lender.
(c) All computations of interest and fees hereunder shall be made on the
basis of a year consisting of 360 days and the actual number of days (including
the first day, but excluding the last day) elapsed.
II.9 Recovery of Payments. The Borrower agrees that to the extent the
Borrower makes a payment or payments to or for the account of the 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.
II.10 Use of Proceeds. The proceeds of the Loans shall be used first to
repay the Borrower's Obligations under the Existing Facility and then to provide
a source of ongoing working capital for the Borrower.
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II.11 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 the Lender with any
guideline or request from any such Governmental Authority (whether or not having
the force of law), shall (i) subject the Lender to any tax or other charge, or
change the basis of taxation of payments to the Lender, (ii) impose, modify or
deem applicable any reserve, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by, the
Lender, or (iii) impose on the Lender any other condition affecting its Loans,
and the result of any of the foregoing shall be to increase the cost to the
Lender of making or maintaining any Loans or to reduce the amount of any sum
received or receivable by the Lender hereunder, the Borrower will, promptly upon
demand therefor by the Lender, pay to the Lender such additional amounts,
excluding amounts in respect of income, franchise and excise taxes as shall
compensate the Lender for such increase in costs or reduction in return.
(b) If, at any time after the date hereof and from time to time, the
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 the 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
the Lender's Commitment or Loans hereunder, of reducing the rate of return on
the capital of the Lender or any Person controlling the Lender to a level below
that which the Lender or controlling Person could have achieved but for such
introduction, change or compliance (taking into account the Lender's or
controlling Person's policies with respect to capital adequacy), the Borrower
will, promptly upon demand therefor by the Lender therefor, pay to the Lender
such additional amounts, excluding amounts in respect of income, franchise and
excise taxes, as will compensate the Lender or controlling Person for such
reduction in return.
(c) Determinations by the Lender for purposes of this Section 2.11 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. No failure by the Lender at any time to
demand payment of any amounts payable under this Section 2.11 shall constitute a
waiver of its right to demand payment of any additional amounts arising at any
subsequent time. Nothing in this Section 2.11 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.
II.12 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, excise and franchise taxes imposed on
the Lender by the United States or by the jurisdiction under the laws of which
the Lender, as the case may be, is organized or in which its principal office is
located, or any political subdivision or taxing authority thereof (all such non-
excluded 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 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
2.12), the 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)
14
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 Lender evidence of such payment.
(b) The Borrower will indemnify the Lender for the full amount of Taxes
(including, without limitation, any Taxes imposed by any jurisdiction on amounts
payable under this Section 2.12) paid by the Lender 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 Lender, makes
written demand therefor.
(c) The Lender 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 Lender 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 2.12 with respect to the Taxes giving rise to
such recovery or tax benefit); provided, however, that the Borrower, upon the
request of the Lender, agrees to repay to the Lender the amount paid over to the
Borrower (together with any penalties, interest or other charges), in the event
the Lender is required to repay such amount to the relevant taxing authority or
other Governmental Authority. The determination by the Lender of the amount of
any such recovery or permanent net tax benefit shall, in the absence of manifest
error, be conclusive and binding.
ARTICLE III
CONDITIONS OF BORROWING
III.1 Conditions to Effectiveness of this Agreement. The effectiveness
of this Agreement is subject to the satisfaction of the following conditions
precedent:
(a) The Lender shall have received the following, each dated the
Effective Date (unless otherwise specified):
(i) the Note in the amount of the Commitment and duly completed
and executed by the Borrower;
(ii) the Pledge Agreement pledging the Certificate of Deposit
executed by the Borrower;
(iii) the Certificate of Deposit;
(iv) a certificate, signed by the chief executive officer, vice
president--finance or treasurer of the Borrower, in form and substance
satisfactory to the Lender, certifying that (A) all representations and
warranties of the Borrower contained in this Agreement and the other Credit
Documents are true and correct as of the Effective Date, both immediately
before and after giving effect to the consummation of the transactions
contemplated by this Agreement, the making of any Loans hereunder on the
Effective Date
15
and the application of the proceeds thereof, (B) 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 by this
Agreement, the making of any Loans hereunder on the Effective Date and the
application of the proceeds thereof, (C) 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 Adverse Effect,
and (D) both immediately before and after giving effect to the consummation
of the transactions contemplated by this Agreement, no Material Adverse
Change has occurred since December 31, 1998, and there exists no event,
condition or state of facts that could reasonably be expected to result in
a Material Adverse Change;
(v) a certificate of the secretary or an assistant secretary of the
Borrower, in form and substance satisfactory to the Lender, certifying (A)
to the effect that attached thereto is a true and complete copy of the
Borrower's certificate of incorporation, certified as of a recent date by
the Secretary of State of Delaware, and that the same has not been amended
since the date of such certification, and attaching such copy, (B) to the
effect that attached thereto is a true and complete copy of the Borrower's
bylaws, as then in effect and as in effect at all times from the date on
which the resolutions referred to in clause (C) below were adopted to and
including the date of such certificate, and attaching such copy), and (C)
that attached thereto is a true and complete copy of resolutions adopted by
the Borrower's board of directors authorizing the execution, delivery and
performance of this Agreement and the other Credit Documents to which it is
a party, and attaching such copy; and
(vi) a favorable opinion of an attorney or firm of attorneys duly
licensed to practice law in the jurisdiction the laws of which are
applicable to the legal matters in question and who is not an employee of
the Borrower or an Affiliate of the Borrower and addressed to the Lender,
in substantially the form of Exhibit E and addressing such other matters as
the Lender may reasonably request.
(b) The Borrower shall have purchased a Certificate of Deposit issued by
the Lender in the amount of the Commitment and which matures on the Maturity
Date and pledged it to the Lender pursuant to the Pledge Agreement.
(c) The Lender shall have received (i) a certificate as of a recent date
of the good standing of the Borrower under the laws of the State of Delaware,
from the Secretary of State of Delaware, (ii) a certificate as of a recent date
of the qualification of the Borrower to conduct business as a foreign
corporation, from the Secretary of State of Alabama, and (iii) a certificate as
of a recent date of the good standing of the Borrower, from the Department of
Revenue of the State of Alabama.
(d) All legal matters, documentation and corporate or other proceedings
incident to the transactions contemplated hereby shall be reasonably acceptable
to the Lender; 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 consummation of the transactions contemplated
hereby shall have been obtained (without the imposition of conditions that are
not reasonably acceptable to the Lender), and all related filings, if any, shall
have
16
been made, and all such approvals, permits, consents and filings shall be in
full force and effect and the Lender shall have received such copies thereof as
it shall have reasonably 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 or the consummation of the transactions contemplated hereby,
or that, in the reasonable opinion of the Lender, would otherwise be reasonably
likely to have a Material Adverse Effect.
(e) Since December 31, 1998, 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.
(f) The Borrower shall have paid all fees and expenses of the Lender
required hereunder or under any other Credit Document to be paid on or prior to
the Effective Date (including reasonable fees and expenses of the Lender's
counsel) in connection with this Agreement and the transactions contemplated
hereby.
(g) Each of the representations and warranties contained in Article IV
and in the other Credit Documents shall be true and correct on and as of the
Effective Date with the same effect as if made on and as of 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 as of such date).
(h) No Default or Event of Default shall have occurred and be
continuing.
(i) The Lender shall have received such other documents, certificates,
opinions and instruments as it shall have reasonably requested.
III.2 Conditions to All Loans. The obligation of the Lender to make any
Loans hereunder is subject to the satisfaction of the following conditions
precedent on the relevant Borrowing Date:
(a) The Lender shall have received a Notice of Borrowing in
accordance with Section 2.2;
(b) Each of the representations and warranties contained in Article
IV and in the other Credit Documents shall be true and correct on and as of
the relevant Borrowing Date 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 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 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 on such date.
17
Each giving of a Notice of Borrowing, and the consummation of each
Borrowing, 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the to enter into this Agreement and to induce the Lender to
extend the credit contemplated hereby, the Borrower represents and warrants to
the Lender as follows:
IV.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.
IV.2 Authorization; Enforceability. The Borrower has 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 Effective 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 by the Borrower will constitute, the legal, valid and binding
obligation of the Borrower, 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 or by general equitable principles.
IV.3 No Violation. Except as set forth in Schedule 4.3 attached hereto,
the execution, delivery and performance by the Borrower of this Agreement and
each of the other Credit Documents, and compliance by it with the terms hereof
and thereof, do not and will not (i) violate any provision of its 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 material 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) result in or require the creation or
imposition of any Lien upon any of its properties or assets. Except as set
forth on Schedule 4.3 attached hereto, no Subsidiary is subject to any
restriction or encumbrance on its ability to make dividend payments or other
distributions in respect of its capital stock, 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.
IV.4 Governmental Authorization; Permits. (a) Except as set forth on
Schedule 4.4(a) attached hereto, 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
18
connection with the due execution, delivery and performance by the Borrower of
this Agreement or any of the other Credit Documents or the legality, validity or
enforceability hereof or thereof.
(b) Except as set forth in Schedule 4.4(b) attached hereto, 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 (collectively, the "Licenses") 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. To the knowledge of the Borrower, except as
set forth on Schedule 4.4(b), (i) no 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, that, in each instance under (i), (ii) and (iii)
above, would be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect.
(c) Upon written request, Borrower will provide with respect to each
Insurance Subsidiary a list of all of the jurisdictions in which such 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"), indicating the line or lines of insurance in
which each such Insurance Subsidiary is permitted to be engaged with respect to
each License therein listed, and attaching copies of all Licenses in the States
of Alabama, Hawaii, Indiana, Ohio and Texas.
IV.5 Litigation. Except as set forth on Schedule 4.5, 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, or (ii) with respect to this Agreement or any of the other Credit
Documents.
IV.6 Taxes. Except as set forth in Schedule 4.6 attached hereto, 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 Generally Accepted Accounting Principles.
Such returns accurately reflect in all material respects all liability for taxes
of the Borrower and its Subsidiaries for the periods covered thereby. Except as
set forth in Schedule 4.6 attached hereto, there is no ongoing material 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 or any material 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 Generally Accepted Accounting Principles. Except
as set forth in Schedule 4.6 attached hereto, 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 material taxes.
IV.7 Subsidiaries. Schedule 4.7 sets forth a list, as of the Effective
Date, of all of the Subsidiaries of the Borrower and, as to each such
Subsidiary, the percentage ownership (direct and
19
indirect) of the Borrower in each class of its capital stock and each direct
owner thereof. All of the issued and outstanding shares of capital stock of VFIC
are directly owned and held by the Borrower.
IV.8 Full Disclosure. All factual information heretofore or
contemporaneously furnished to the 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 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
materially 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 materially misleading.
IV.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 (except for purchases by the Borrower of
outstanding shares of its capital stock made in compliance with the applicable
provisions of Regulations G, T, U and X), to extend credit for such purpose or
for any other purpose that would violate or be inconsistent with Regulations G,
T, U or X or any provision of the Exchange Act.
IV.10 No Material Adverse Change. Except as set forth in the Borrower's
filings with the Securities and Exchange Commission prior to the date of this
Agreement, there has been no Material Adverse Change since December 31, 1998,
and there exists no event, condition or state of facts that could reasonably be
expected to result in a Material Adverse Change.
IV.11 Financial Matters. (a) The Borrower has heretofore furnished to
the Lender copies of (i) the audited consolidated balance sheets of the Borrower
and its Subsidiaries as of December 31, 1998, 1997, and 1996, and the related
statements of income, stockholders' equity and cash flows for the fiscal years
then ended, together with the opinion of KPMG Peat Marwick thereon or
PricewaterhouseCoopers, and (ii) the unaudited consolidated balance sheet of the
Borrower and its Subsidiaries as of June 30, 1999, and the related statements of
income, stockholders' equity and cash flows for the nine-month period then
ended. Except as set forth in Schedule 4.11(a) attached hereto, such financial
statements have been prepared in accordance with Generally Accepted Accounting
Principles (subject, with respect to the unaudited financial statements, to the
absence of notes required by Generally Accepted Accounting Principles and to
normal year-end audit 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 the most recent financial statements referred to above and the notes thereto,
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 Borrower has heretofore furnished to the Lender copies of the
Annual Statements of each of the Insurance Subsidiaries as of December 31, 1998,
1997, 1996 and 1995, and for the fiscal years then ended, each as filed with the
relevant Insurance Regulatory Authority (collectively, the "Historical Statutory
Statements"). Except as set forth in Schedule 4.11(b) attached hereto, the
Historical Statutory Statements (including, without limitation, the provisions
made therein for investments and the valuation
20
thereof, reserves, policy and contract claims and statutory liabilities) have
been prepared in accordance with Statutory Accounting Principles (except as may
be reflected in the notes thereto and subject, with respect to the Quarterly
Statements, to the absence of notes required by Statutory Accounting Principles
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 in the Historical Statutory Statements (including, without limitation,
reserves, policy and contract claims and statutory liabilities), no Insurance
Subsidiary had, as of the date of its respective Historical Statutory
Statements, any material liabilities or obligations of any nature whatsoever
(whether absolute, contingent or otherwise and whether or not due) that, in
accordance with Statutory Accounting Principles, would have been required to
have been disclosed or provided for in such Historical Statutory 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.
(c) Each of the Borrower and its Subsidiaries, after giving effect to
the consummation of the transactions contemplated hereby, (i) will have capital
sufficient to carry on its businesses as conducted and as proposed to be
conducted, (ii) will have assets with a fair saleable value, determined on a
going concern basis, (A) not less than the amount required to pay the probable
liability on its existing debts as they become absolute and matured and (B)
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) will not intend to, and will not believe
that it will, incur debts or liabilities beyond its ability to pay such debts
and liabilities as they mature.
IV.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, and (iii) has good title to all of its other material
properties and assets reflected in the most recent financial statements referred
to in Section 4.11(a) (except as sold or otherwise disposed of since the date
thereof in the ordinary course of business), in each case under (i), (ii) and
(iii) above free and clear of all Liens other than Permitted Liens.
IV.13 ERISA. 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 has occurred and is continuing or, to the knowledge of the
Borrower, is reasonably expected to occur with respect to any Plan, in either
case that would be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect. No Plan has any Unfunded Pension Liability, 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, in either instance where
the same would be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate is
required to contribute to or has, or has at any time had, any liability to a
Multiemployer Plan.
IV.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 or otherwise, in, on or under any portion of any real
21
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, to the knowledge of the Borrower, is presently the
subject of an environmental audit, assessment or remedial action.
(b) To the knowledge of the Borrower, (i) no portion of any real
property, leased or owned, of the Borrower or any of its Subsidiaries has been
used 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, (ii) 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 (iii) there are not and have never been any
underground storage tanks situated on any real property, leased or owned, by 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. 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.
IV.15 Compliance With Laws. Except as set forth in Schedule 4.15 attached
hereto, 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.
IV.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.
IV.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. No notice of any pending or threatened cancellation or material
premium increase has been
22
received by the Borrower or any of its Subsidiaries with respect to any such
policies, and the Borrower and each of its Subsidiaries are in substantial
compliance with all conditions contained therein.
ARTICLE V
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
V.1 GAAP Financial Statements. The Borrower will deliver to the Lender:
(a) As soon as available and in any event within sixty (60) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the fiscal quarter ended September 30, 1999, unaudited consolidated and
consolidating balance sheets of the Borrower and its Subsidiaries as of the end
of such fiscal quarter and unaudited consolidated and consolidating statements
of income, stockholders' equity and cash flows 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 prepared in accordance with Generally Accepted Accounting
Principles (subject to the absence of notes required by Generally Accepted
Accounting Principles and subject to normal year-end audit 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 120 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1999, (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,
stockholders' equity and cash flows for the Borrower and its Subsidiaries for
the fiscal year then ended, including the applicable notes, in each case setting
forth comparative figures as of the end of and for the preceding fiscal year,
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 Lender, 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 generally accepted accounting principles applied on a basis
consistent with that of the preceding year or containing disclosure of the
effect on the financial position 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
23
unaudited consolidating statements of income, stockholders' equity and cash
flows for the Borrower and its Subsidiaries for the fiscal year then ended, all
in reasonable detail.
V.2 Statutory Financial Statements. The Borrower will deliver to the
Lender:
(a) As soon as available and in any event within fifty (50) days after the
end of each of the first three fiscal quarters of each fiscal year, beginning
with the fiscal quarter ending September 30, 1999, 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 Statutory Accounting
Principles 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 sixty-five (65) days
after the end of each fiscal year, beginning with the fiscal year ending
December 31, 1999, 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
Statutory Accounting Principles 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;
(c) As soon as available and in any event within 135 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1999, an
unaudited consolidated balance sheet of the Borrower and its Insurance
Subsidiaries as of the end of such fiscal year and unaudited consolidated
statements of income, stockholders' equity and cash flows for the Borrower and
its Insurance Subsidiaries for the fiscal year then ended, in each case setting
forth comparative consolidated figures as of the end of and for the preceding
fiscal year, all prepared in accordance with Statutory Accounting Principles
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
(d) As soon as available and in any event within 155 days after the end of
each fiscal year, beginning with the fiscal year ended December 31, 1999 (but
only if and to the extent required by the applicable Insurance Regulatory
Authority with regard to any Insurance Subsidiary), a certification by the
independent certified public accounting firm referred to in Section 5.1(b) as to
the Annual Statement of each such Insurance Subsidiary as of the end of such
fiscal year and for the fiscal year then ended, together with 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 such Insurance Subsidiary as of
the date and for the period indicated in accordance with statutory accounting
principles applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial position or results of
operations of any change in the application of accounting principles and
practices during such year.
V.3 Other Business and Financial Information. The Borrower will deliver
to the Lender:
(a) Concurrently with each delivery of the financial statements described
in Sections 5.1 and 5.2, a Compliance Certificate in the form of Exhibit D-1 (in
the case of the financial statements described
24
in Section 5.1) or Exhibit D-2 (in the case of the financial statements
described in Section 5.2) with respect to the period covered by the financial
statements then being delivered, executed by the chief financial officer, vice
president--finance or treasurer of the Borrower, together, in the case of the
financial statements described in Section 5.1, with a Covenant Compliance
Worksheet reflecting the computation of the financial covenants set forth in
Sections 6.1, 6.2 and 6.3 as of the last day of the period covered by such
financial statements, and in the case of the financial statements described in
Section 5.2, with a Covenant Compliance Worksheet reflecting the computation of
the financial covenants set forth in Section 6.4 as of the last day of the
period covered by such financial statements;
(b) Promptly upon filing with the relevant Insurance Regulatory Authority
and in any event within ninety (90) days after the end of each fiscal year,
beginning with the fiscal year ended December 31, 1999, 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;
(c) 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 reports (other than earnings press releases) on Form
10-Q, Form 10-K or Form 8-K (or their successor forms) or registration
statements and prospectuses (other than on Form S-8 or its successor form) 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, (iii) all reports on Form A
or Form B (or their successor forms) that any Insurance Subsidiary shall file
with any Insurance Regulatory Authority, (iv) all significant reports on
examination or similar significant reports, 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, and (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;
(d) Promptly upon (and in any event within five (5) Business Days after)
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 the chief executive officer,
chief financial officer or vice president--finance 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,
(ii) the institution or written 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 Insurance Regulatory
Authority or other 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
25
litigation or other proceeding previously reported pursuant to
Section 4.5 or this Section 5.3(d)(ii);
(iii) the receipt by the Borrower or any of its
Subsidiaries from any Insurance Regulatory Authority or other
Governmental Authority of (i) any written 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 (ii) 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 (i)
a written statement of the chief executive officer, chief
financial officer or vice president--finance 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,
(ii) a copy of any notice with respect to such ERISA Event that
may be required to be filed with the PBGC and (iii) 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 decrease in (y) the rating
given by either Standard & Poor's or Xxxxx'x with respect to the
Borrower's senior publicly traded Indebtedness or (z) the rating
given to any Insurance Subsidiary by A.M. Best & Company; and
(vi) any other matter or event that has, or would be
reasonably likely to have, a Material Adverse Effect, together
with a written statement of the chief executive officer, chief
financial officer or vice president--finance 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,
(e Within five (5) Business Days after request therefor by the Lender, if
theretofore prepared and delivered to the Borrower, or within ninety (90) days
after request therefor by the Lender from time to time (but not more than once
per year), if not theretofore prepared and delivered to the Borrower, in either
case at the Borrower's expense, 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 the end of such year with respect to
the insurance business then in force, and covering such other subjects as are
customary in actuarial reviews, prepared by PricewaterhouseCoopers or another
independent actuarial firm reasonably acceptable to the Lender, together with a
favorable review letter thereon by the Borrower's regularly retained independent
certified public accountants, all in form and substance satisfactory to the
Lender; and
(f 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 as the Lender may from time to time
reasonably request.
26
V.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 7.1, (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.
V.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.
V.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 faith and by
proper proceedings and as to which the Borrower or such Subsidiary is
maintaining adequate reserves with respect thereto in accordance with Generally
Accepted Accounting Principles.
V.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; provided that
the Borrower and its Subsidiaries may self-insure against risks consistent with
customary industry practices for companies in the same or similar businesses, of
similar size and with similar risk parameters.
V.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 Generally Accepted Accounting Principles or Statutory Accounting
Principles, as applicable, and in compliance with the requirements of any
Governmental Authority having jurisdiction over it, and (ii) permit employees or
agents of the 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 of the
Borrower and its Subsidiaries (and by this provision the Borrower authorizes
such accountants 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.
27
V.9 Subsidiary Dividends. The Borrower will take all action necessary
to cause its Subsidiaries to make such dividends, distributions or other
payments to the Borrower as shall be necessary for the Borrower to make payments
of the principal of and interest on the Loans in accordance with the terms of
this Agreement. In the event the approval of any Governmental Authority or
other Person is required in order for any such Subsidiary to make any such
dividends, distributions or other payments to the Borrower, or for the Borrower
to make any such principal or interest payments, the Borrower will forthwith
exercise its best efforts and take all reasonable actions permitted by law and
necessary to obtain such approval.
V.10 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 Lender to effect,
confirm or further assure or protect and preserve the interests, rights and
remedies of the Lender under this Agreement and the other Credit Documents.
ARTICLE VI
FINANCIAL COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
VI.1 Statutory Consolidated Net Income. The Borrower will not permit
cumulative Statutory Consolidated Net Income for any fiscal quarter then ending
to be less than the following amounts for the cumulative period corresponding
thereto, with dollars expressed in millions (calculated cumulatively for the
period commencing on September 30, 1999, and ending June 30, 2000, and for each
four fiscal quarter period ending thereafter):
Fiscal First Second Third Fourth
Year Quarter Quarter Quarter Quarter
------ ------- ------- ------- -------
1999 $ N/A $ N/A $ N/A $ 4.0
2000 11.0 18.0 25.0 28.0
2001 26.5 25.0 23.5 N/A
VI.2 Consolidated Net Income. The Borrower will not permit cumulative
Consolidated Net Income for any fiscal quarter then ending to be less than the
following amounts for the cumulative period corresponding thereto, with dollars
expressed in millions (calculated cumulatively for the period commencing on
September 30, 1999, and ending on June 30, 2000, and for each four fiscal
quarter period ending thereafter):
28
Fiscal First Second Third Fourth
Year Quarter Quarter Quarter Quarter
------ ------- ------- ------- -------
1999 $ N/A $ N/A $ N/A $ 1.0
2000 3.7 6.4 9.1 10.8
2001 10.6 10.3 10.1 N/A
VI.3 Statutory Surplus. The Borrower will not permit Consolidated
Statutory Surplus for any fiscal quarter then ending to be less than the
following amounts for the period corresponding thereto, with dollars expressed
in millions (it being understood that any adjustments to Consolidated Statutory
Surplus required to be made by any Department of Insurance in an aggregate
amount not in excess of $25,000,000 shall not be taken into account in
-----
determining the Borrower's compliance with this section and that the amount by
which any such adjustments for such fiscal year exceed $25,000,000 shall be so
taken into account):
Fiscal First Second Third Fourth
Year Quarter Quarter Quarter Quarter
------ ------- ------- ------- -------
1999 $ N/A $ N/A $ N/A $ 239
2000 246 253 260 267
2001 272 278 283 N/A
VI.4 Risk-Based Capital. 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")) of VFIC at any
time from and after the Effective Date to be less than 150% of the applicable
"Company Action Level RBC" (within the meaning of the Model Act) for VFIC at
such time.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, until the termination of the
Commitment and the payment in full of all principal and interest with respect to
the Loans together with all other amounts then due and owing hereunder:
VII.1 Merger; Consolidation. The Borrower will not, and will not permit
or cause any of its Significant 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 the Borrower or any Significant
Subsidiary may merge into or consolidate with any other Person so long as (i)
the surviving corporation is the Borrower or a Wholly Owned Subsidiary (and in
any event, if the Borrower is a party to such merger or consolidation, the
surviving corporation shall be the Borrower) and (ii) immediately after giving
effect thereto, no Default or Event of Default would exist.
VII.2 Indebtedness. The Borrower will not create, incur, assume or
suffer to exist, and will not permit or cause any of its Subsidiaries to create,
incur, or knowingly assume or suffer to exist, any Indebt-
29
edness that ranks senior in any respect to the Indebtedness under this Agreement
(or any portion thereof) as to payment or performance or as to dividends or
distributions upon bankruptcy, insolvency, liquidation or winding-up.
VII.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, or 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 the
following (collectively, "Permitted Liens"):
(i) Liens in favor of the Lender;
(ii) Liens arising in connection with the $5,000,000
Credit Agreement;
(iii) Liens in existence on the Effective Date and set
forth on Schedule 7.3;
(iv) 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 Generally
Accepted Accounting Principles;
(v) Liens (other than any Lien imposed by ERISA, the
creation or incurrence of which would result in an Event of
Default under Section 8.1(i)) 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;
(vi) 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 Generally
Accepted Accounting Principles;
(vii) Liens in connection with pledges and deposits made
pursuant to statutory and regulatory requirements of Insurance
Regulatory Authorities by an Insurance Subsidiary in the ordinary
course of its business, for the purpose of securing regulatory
capital or satisfying other financial responsibility
requirements;
(viii) Liens upon cash and United States government and
agency securities of the Borrower and its Subsidiaries, securing
obligations incurred in connection with reverse repurchase
transactions and other similar investment management transactions
of such types and in such amounts as are customary for companies
similar to the Borrower in size and lines of business and that
are entered into by the Borrower and its Subsidiaries in the
ordinary course of business;
30
(ix) Purchase money Liens upon real or personal property
used by the Borrower or any of its Subsidiaries in the ordinary
course of its business, securing Indebtedness incurred solely to
pay all or a portion of the purchase price thereof (including in
connection with capital leases, and including mortgages or deeds
of trust upon real property and improvements thereon), provided
that the aggregate principal amount at any time outstanding of
all Indebtedness secured by such Liens does not exceed an amount
equal to 5% of the value of the total assets of the Borrower and
its Subsidiaries at such time, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles as of
the date of the financial statements of the Borrower and its
Subsidiaries most recently delivered under Section 5.1 prior to
such time (or, with regard to determinations at any time prior to
the initial delivery of financial statements under Section 5.1,
as of the date of the most recent financial statements referred
to in Section 4.11(a)), and provided further that any such Lien
(i) shall attach to such property concurrently with or within ten
(10) days after the acquisition thereof by the Borrower or such
Subsidiary, (ii) 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 (iii) shall not encumber any
other property of the Borrower or any of its Subsidiaries;
(x) 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);
(xi) Any attachment or judgment Lien not constituting an
Event of Default under Section 8.1(h) that is being contested in
good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with Generally
Accepted Accounting Principles;
(xii) 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
(xiii) Liens in favor of the trustee or agent under any
agreement or indenture relating to Indebtedness of the Borrower
and its Subsidiaries permitted under this Agreement, covering
sums required to be deposited with such trustee or agent
thereunder.
VII.4 Disposition of Assets. The Borrower will not, and will not permit
or cause any of its Subsidiaries to, sell, assign, lease, convey, transfer or
otherwise dispose of (whether in one or a series of transactions) all or any
portion of its assets, business or properties, 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 Investments by the Insurance Subsidiaries
in the ordinary course of business;
(ii) the sale or exchange of used or obsolete equipment
to the extent (A) the proceeds of such sale are applied towards,
or such equipment is exchanged for, similar
31
replacement equipment or (B) 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, lease or other disposition of assets by a
Subsidiary of the Borrower to the Borrower or to another Wholly
Owned Subsidiary, to the extent permitted by applicable
Requirements of Law and each relevant Insurance Regulatory
Authority, provided that (A) immediately after giving effect
thereto, no Default or Event of Default would exist, (B) in no
event shall the Borrower contribute, sell or otherwise transfer, or
permit VFIC to issue or sell, any of the capital stock of VFIC to
any other Subsidiary, and (C) such sale or disposition would not
adversely affect the ability of any Insurance Subsidiary party
thereto to pay dividends or otherwise make distributions to its
parent;
(iv) the sale or other disposition 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; and
(v) the sale or disposition of assets outside the
ordinary course of business, provided that (A) the net proceeds
from any such sale or disposition do not exceed an amount equal to
the least of the following: (1) 10% of the total assets of the
Borrower and its Subsidiaries on a consolidated basis, (2) 10% of
the total revenues of the Borrower and its Subsidiaries on a
consolidated basis, and (3) 10% of the total net earnings of the
Borrower and its Subsidiaries on a consolidated basis, in each case
as determined as of the date of the financial statements of the
Borrower and its Subsidiaries most recently delivered under Section
5.1 prior to such time (or, with regard to determinations at any
time prior to the initial delivery of financial statements under
Section 5.1, as of the date of the most recent financial statements
referred to in Section 4.11(a)), (B) immediately after giving
effect thereto, the Borrower would be in compliance with the
provisions of Section 6.2, such compliance determined on a pro
forma basis in accordance with Generally Accepted Accounting
Principles as if such sale or disposition had been consummated on
the last day of the then most recently ended fiscal quarter, (C)
immediately after giving effect thereto, no Default or Event of
Default would exist, and (D) in no event shall the Borrower or any
of its Subsidiaries sell or otherwise dispose of any of the capital
stock or other ownership interests of VFIC or any other Significant
Subsidiary.
VII.5 Transactions with Affiliates. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, enter into any transaction 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 between and among the Borrower and its
Wholly Owned Subsidiaries;
32
(ii) transactions under incentive compensation plans,
stock option plans and other employee benefit plans, and loans and
advances from the Borrower or any of its Subsidiaries to its
officers, in each case that have been approved by the board of
directors of the Borrower or any of its Subsidiaries; and
(iii) the payment by the Borrower of reasonable and
customary fees to members of its board of directors.
VII.6 Lines of Business. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, engage to any substantial degree in any
business other than the lines of property and casualty insurance business and
other businesses engaged in by the Borrower and its Subsidiaries on the date
hereof or a business reasonably related thereto.
VII.7 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 unless (i) the Borrower shall have given the Lender
written notice of its intention to change such ending date at least sixty (60)
days prior to the effective date thereof and (ii) prior to such effective date
this Agreement shall have been amended to make any changes in the financial
covenants and other terms and conditions to the extent necessary, in the
reasonable determination of the Lender, to reflect the new fiscal year ending
date.
VII.8 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 or
permitted by Generally Accepted Accounting Principles or Statutory Accounting
Principles, as applicable.
VII.9 Dividends. The Borrower will not pay any dividends on account of
its equity securities while a Default or an Event of Default has occurred and is
continuing both immediately before and after giving effect to the payment of
such dividends.
ARTICLE VIII
EVENTS OF DEFAULT
VIII.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 (i) any principal payable under the
terms of the Note, or (ii) not later than five Business Days of the date when
due any interest or any fee or any other Obligation due under the Note or this
Agreement;
(b An "Event of Default" (as defined therein) shall occur under the
$5,000,000 Credit Agreement;
(c The Borrower shall fail to observe, perform or comply with any
condition, covenant or agreement contained in any of Sections 2.11, 5.3(d)(i) or
5.4(i), Article VI, or Sections 7.1 through 7.4, inclusive, or Section 7.9;
33
(d 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 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 Borrower acquires
knowledge thereof;
(e Any material 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;
(f 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 $500,000; 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;
(g The Borrower or any of its Significant 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;
(h Any involuntary petition or case shall be filed or commenced
against the Borrower or any of its Significant Subsidiaries seeking liquidation,
winding-up, reorganization, dissolution, arrangement, readjustment of debts, the
appointment of a custodian, trustee, receiver or similar 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;
34
(i 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 (i) the same is not
dismissed, stayed or discharged within sixty (60) days or is not otherwise being
appropriately contested in good faith and in a manner reasonably satisfactory to
the Lender, or (ii) the same is not dismissed, stayed or discharged within five
(5) days prior to any proposed sale of assets of the Borrower or any Subsidiary
pursuant thereto, or (iii) any action shall be legally taken by a judgment
creditor to levy upon assets of the Borrower or any Subsidiary to enforce the
same;
(j Any ERISA Event shall occur or exist with respect to any Plan or
Multiemployer Plan and, as a result thereof, together with all other ERISA
Events then existing, there shall exist a reasonable likelihood of liability to
any one or more Plans or Multiemployer Plans or to the PBGC (or to any
combination thereof) in excess of $500,000 with respect to the Borrower or any
ERISA Affiliate;
(k Any Insurance Regulatory Authority or other Governmental Authority
having jurisdiction shall issue any order of conservation, supervision,
rehabilitation or liquidation or any other order of similar effect in respect of
any Insurance Subsidiary, and such action, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect;
(l 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, would be reasonably likely to
have a Material Adverse Effect; or
(m Any of the following shall occur: (i) any Person or group of
Persons acting in concert as a partnership or other group (other than the
Birmingham Investment Group) 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 30% 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 on matters, other than the
election of directors, submitted to holders of the Borrower's common stock; (ii)
the Board of Directors of the Borrower shall cease to consist of a majority of
the individuals who constituted the Board of Directors of the Borrower 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); or (iii) the Borrower shall cease to own directly 100% of the issued
and outstanding capital stock of VFIC or its successor by merger or
consolidation as permitted hereunder (including, without limitation, as a result
of the contribution, sale or transfer by the Borrower, or the issuance or sale
by VFIC, of any capital stock of VFIC to any one or more other Subsidiaries of
the Borrower).
VIII.2 Remedies; Termination of Commitment, Acceleration, etc. Upon and
at any time after the occurrence and during the continuance of any Event of
Default, the Lender may take any or all of the following actions at the same or
different times:
35
(a Declare the Commitment to be terminated, whereupon the
same shall terminate provided that, upon the occurrence of an Event
of Default pursuant to Section 8.1(a), 8.1(b), 8.1(c), 8.1(g) or
Section 8.1(h), the Commitment 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 8.1(c),
8.1(g) or Section 8.1(h), 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); and
(c Exercise all rights and remedies available to it under
this Agreement, the other Credit Documents and applicable law.
VIII.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, the Lender may, and 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, 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) 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
the Lender to or for the credit or the account of the Borrower against any or
all of the Obligations to the 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. The Lender agrees to
notify the Borrower promptly 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 IX
MISCELLANEOUS
IX.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 Lender (including,
without limitation, the reasonable fees and expenses of counsel to the Lender)
in connection with the preparation, negotiation, execution and delivery 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
36
Lender (including, without limitation, the reasonable fees and expenses of
counsel to the Lender) in connection with (A) 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 (B) 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
harmless the Lender 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 Lender), that may be payable in connection with the transactions
contemplated by this Agreement and the other Credit Documents.
IX.2 Indemnification. The Borrower agrees, whether or not the
transactions contemplated by this Agreement shall be consummated, to indemnify
and hold harmless the Lender and each of their respective directors, officers,
employees, agents and Affiliates (each, an "Indemnified Person") 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 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 Indemnified Person. All of the foregoing Indemnified Costs of
any Indemnified Person shall be paid or reimbursed by the Borrower, as and when
incurred and upon demand.
IX.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, ALABAMA AND SHALL BE GOVERNED BY AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ALABAMA (WITHOUT REGARD
TO THE CONFLICTS OF LAW PROVISIONS THEREOF). THE BORROWER HEREBY CONSENTS TO
THE NONEXCLUSIVE JURISDICTION OF ANY STATE COURT WITHIN JEFFERSON COUNTY,
ALABAMA OR ANY FEDERAL COURT LOCATED WITHIN THE NORTHERN DISTRICT OF THE STATE
OF ALABAMA 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 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 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
37
OR IMPROPER VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING.
NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF ANY PARTY TO BRING ANY ACTION
OR PROCEEDING AGAINST ANY OTHER PARTY IN THE COURTS OF ANY OTHER JURISDICTION.
IX.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 Credit Document ("Disputes")
between the Borrower and the Lender, 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, 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 Title 9 of the U.S. Code, as amended. All arbitration hearings shall be
conducted in Birmingham, Alabama. 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 include only licensed
attorneys. 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.
(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. 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.
IX.5 Notices. All notices and other communications provided for
hereunder shall be in writing (including telegraphic, telex, facsimile
transmission or cable communication) and mailed, telegraphed, telexed,
telecopied, cabled or delivered to the party to be notified at the following
addresses:
(a if to the Borrower, to Vesta Insurance Group, Inc.,
0000 Xxxxx Xxx Xxxxx, Xxxxxxxxxx, Xxxxxxx 00000, Attention: Xxxxxx
X. Xxxxx, III, Telecopy No. (000) 000-0000, with a copy to Vesta
Insurance Group, Inc., 0000 Xxxxx Xxx Xxxxx, Xxxxxxxxxx, Xxxxxxx
00000, Attention: Xxxxxx X. Xxxxxxxx, Telecopy No. (000) 000-0000;
38
(b if to The Bank, 00 Xxxxx 00xx Xxxxxx, Xxxxxxxxxx,
Xxxxxxx 00000-0000, Attention: Xxxxx X. Xxxxxx, Xx., Telecopy No.
(000) 000-0000; and
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 Lender shall not be effective until received by the Lender.
IX.6 Amendments, Waivers, etc. No amendment, modification, waiver or
discharge of 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 Lender and then the same shall be effective
only in the specific instance and for the specific purpose for which given.
IX.7 Participations.
(a) The Lender may, without the consent of the Borrower, sell to one or
more other Persons with its principal place of business in the United States
(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 and
the Note or Notes held by it); provided, however, that (i) the Lender's
obligations under this Agreement shall remain unchanged and the Lender shall
remain solely responsible for the performance of such obligations, (ii) any such
participation shall be in an amount of not less than $1,000,000, but the Lender
shall not sell any participation that, when taken together with all other
participations, if any, sold by the Lender, covers all of the Lender's rights
and obligations under this Agreement, (iii) the Borrower shall continue to deal
solely and directly with the Lender in connection with the Lender's rights and
obligations under this Agreement, and the Lender shall not permit any
Participant to have any voting rights or any right to control the vote of the
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 (A) reduce or forgive the principal amount of, or rate of interest on, any
Loan, or reduce or forgive any fees or other Obligations, (B) extend any date
(including the Maturity Date) fixed for the payment of any principal of or
interest on any Loan, any fees or any other Obligations, or (C) increase any
Commitment of the 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 the 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 the Lender had not granted such
participation.
(b) Nothing in this Agreement shall be construed to prohibit the 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 the Lender from any of its obligations hereunder.
(c) The Lender may, in connection with any assignment or participation
or proposed assignment or participation pursuant to this Section, disclose to
the Participant or proposed Participant any
39
information relating to the Borrower and its Subsidiaries furnished to it by or
on behalf of any other party hereto, provided that such Participant or proposed
Participant agrees in writing to keep such information confidential to the same
extent required of the Lender under Section 9.13.
IX.8 No Waiver. The rights and remedies of the Lender 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 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 any 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 Lender or
its 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 Lender to exercise any right or remedy or take any other or further
action in any circumstances without notice or demand.
IX.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 the Borrower shall
not sell, assign or transfer any of its rights, interests, duties or obligations
under this Agreement or any other Credit Document without the prior written
consent of the Lender.
IX.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 and the making and repayment of the Loans. 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 shall survive the payment in full of the Loans, the
termination of the Commitment and any termination of this Agreement or any of
the other Credit Documents.
IX.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.
IX.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.
IX.13 Confidentiality. The 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 the Lender may disclose such information (i) to its
directors, employees and agents and to its auditors,
40
counsel and other professional advisors, (ii) at the demand or request of any
bank regulatory authority, court or other Governmental Authority having or
asserting jurisdiction over the 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 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, (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
9.7.
IX.14 Reliance by Lender. The Lender 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.
IX.15 Counterparts. 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 Lender and the Borrower of written or
telephonic notification of such execution and authorization of delivery thereof.
IX.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 THE LENDER TO THE BORROWER, DATED JUNE 27, 1999, AND (C) MAY NOT BE
AMENDED, SUPPLEMENTED, CONTRADICTED OR OTHERWISE MODIFIED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
41
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.
VESTA INSURANCE GROUP, INC.
By /s/ Xxxxx X. Xxxx
-------------------------------------
Its Executive Vice President and CFO
---------------------------------
THE BANK
By /s/ Xxxxxx XxXxxx
-------------------------------------
Its President and CEO
---------------------------------
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