EXHIBIT 10.34
CREDIT AGREEMENT
Dated as of October 27, 2000
between
MERCURY GENERAL CORPORATION
and
BANK OF AMERICA, N.A.
TABLE OF CONTENTS
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Page
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ARTICLE I.DEFINITIONS AND ACCOUNTING TERMS................................................................. 1
1.01 Defined Terms............................................................. 1
1.02 Other Interpretive Provisions............................................. 11
1.03 Accounting Terms.......................................................... 12
1.04 Rounding.................................................................. 12
1.05 References to Agreements and Laws......................................... 12
ARTICLE II.THE COMMITMENT AND LOAN......................................................................... 12
2.01 Loans..................................................................... 12
2.02 Borrowings, Conversions and Continuations of Loans........................ 12
2.03 Prepayments............................................................... 14
2.04 Reduction or Termination of Commitment.................................... 14
2.05 Repayment of Loans........................................................ 14
2.06 Interest.................................................................. 14
2.07 Fees...................................................................... 15
2.08 Computation of Interest and Fees.......................................... 15
2.09 Evidence of Debt.......................................................... 15
2.10 Payments Generally........................................................ 15
2.11 Extension of Maturity Date................................................ 16
ARTICLE III.TAXES, YIELD PROTECTION AND ILLEGALITY......................................................... 16
3.01 Taxes..................................................................... 16
3.02 Illegality................................................................ 17
3.03 Inability to Determine Eurodollar Rate.................................... 17
3.04 Increased Cost and Reduced Return; Capital Adequacy....................... 18
3.05 Funding Losses............................................................ 18
3.06 Requests for Compensation................................................. 19
3.07 Survival.................................................................. 19
ARTICLE IV.CONDITIONS PRECEDENT TO LOANS................................................................... 19
4.01 Conditions of Initial Loan................................................ 19
4.02 Conditions to all Loans................................................... 20
ARTICLE V.REPRESENTATIONS AND WARRANTIES................................................................... 21
5.01 Existence, Qualification and Power; Compliance with Laws.................. 21
5.02 Authorization; No Contravention........................................... 21
5.03 Governmental Authorization................................................ 21
5.04 Binding Effect............................................................ 21
5.05 Financial Statements; No Material Adverse Effect.......................... 21
5.06 Litigation................................................................ 22
5.07 No Default................................................................ 22
5.08 Ownership of Property; Liens.............................................. 22
5.09 Environmental Compliance.................................................. 22
(i)
5.10 Insurance................................................................. 22
5.11 Taxes..................................................................... 22
5.12 ERISA Compliance.......................................................... 23
5.13 Subsidiaries.............................................................. 23
5.14 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act............................................................... 23
5.15 Licenses, Franchises, Etc................................................. 24
5.16 Labor Relations........................................................... 24
5.17 Burdensome Obligations.................................................... 24
5.18 Disclosure................................................................ 24
ARTICLE VI.AFFIRMATIVE COVENANTS........................................................................... 24
6.01 Financial Statements...................................................... 24
6.02 Certificates; Other Information........................................... 25
6.03 Notices.................................................................. 26
6.04 Payment of Obligations.................................................... 26
6.05 Preservation of Existence, Etc............................................ 26
6.06 Maintenance of Properties................................................. 27
6.07 Maintenance of Insurance.................................................. 27
6.08 Compliance with Laws...................................................... 27
6.09 Books and Records......................................................... 27
6.10 Inspection Rights......................................................... 27
6.11 Compliance with ERISA..................................................... 27
6.12 Use of Proceeds........................................................... 27
ARTICLE VII.NEGATIVE COVENANTS............................................................................. 27
7.01 Liens..................................................................... 28
7.02 Indebtedness............................................................. 29
7.03 Mergers, Acquisitions and Dispositions.................................... 29
7.04 Change in Nature of Business.............................................. 29
7.05 Transactions with Affiliates.............................................. 29
7.06 Burdensome Agreements..................................................... 30
7.07 Use of Proceeds........................................................... 30
7.08 ERISA..................................................................... 30
7.09 Fiscal Year............................................................... 30
7.10 Issuance of Stock by Subsidiaries......................................... 30
7.11 Reinsurance Agreements.................................................... 30
7.12 Articles of Incorporation and Bylaws...................................... 30
7.13 Financial Covenants....................................................... 31
ARTICLE XXXX.XXXXXX OF DEFAULT AND REMEDIES................................................................ 31
8.01 Events of Default......................................................... 31
8.02 Remedies Upon Event of Default............................................ 33
ARTICLE IX.MISCELLANEOUS................................................................................... 33
9.01 Amendments; Etc........................................................... 33
(ii)
9.02 Notices and Other Communications; Facsimile Copies........................ 33
9.03 No Waiver; Cumulative Remedies............................................ 34
9.04 Attorney Costs, Expenses and Taxes........................................ 34
9.05 Indemnification by the Borrower........................................... 35
9.06 Payments Set Aside........................................................ 35
9.07 Successors and Assigns.................................................... 35
9.08 Confidentiality........................................................... 37
9.09 Set-Off................................................................... 37
9.10 Interest Rate Limitation.................................................. 38
9.11 Counterparts.............................................................. 38
9.12 Integration............................................................... 38
9.13 Survival of Representations and Warranties................................ 38
9.14 Severability.............................................................. 38
9.15 Governing Law............................................................. 38
9.16 Waiver of Right to Trial by Jury.......................................... 39
9.17 ENTIRE AGREEMENT.......................................................... 39
(iii)
SCHEDULES
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5.06 Litigation
5.13 Subsidiaries
7.01 Existing Liens
7.02 Existing Indebtedness
9.02 Lending Office, Addresses for Notices
EXHIBITS
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Form of
A Loan Notice
B Note
C Compliance Certificate
D Opinion of Counsel
(iv)
CREDIT AGREEMENT
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This CREDIT AGREEMENT ("Agreement") is entered into as of October 27, 2000,
by and between MERCURY GENERAL CORPORATION, a California corporation (the
"Borrower"), and BANK OF AMERICA, N.A., a national banking association (the
"Lender").
The Borrower has requested that the Lender provide a revolving credit
facility, and the Lender is willing to do so on the terms and conditions set
forth herein.
In consideration of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:
ARTICLE 1.
DEFINITIONS AND ACCOUNTING TERMS
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1.01 Defined Terms. As used in this Agreement, the following terms shall
have the meanings set forth below:
"Acquisition" means, with respect to any Person, the purchase or other
acquisition by such Person, by any means whatsoever (including by devise,
bequest, gift, through a dividend or otherwise and whether in a single
transaction or in a series of related transactions), of (i) the capital stock
of, or other equity securities of, any other Person if, immediately thereafter,
such other Person would be either a Subsidiary of such Person or otherwise under
the control of such Person, (ii) any business, going concern or division or
segment thereof, or (iii) the property of any other Person other than in the
ordinary course of business, provided, however that no acquisition of all or
substantially all of the assets of such other Person shall be deemed to be in
the ordinary course of business.
"Adjusted Net Worth" means, at any date of determination, the sum of all
amounts which would be included under shareholders' equity on a consolidated
balance sheet of the Borrower and its Subsidiaries determined in accordance with
GAAP (without adjusting the value of securities held by the Borrower or its
Subsidiaries to market value as contemplated under FASB 115 for securities
designated as "available for sale").
"Affiliate" means, as to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. A Person shall be deemed to be "controlled by" any
other Person if such other Person possesses, directly or indirectly, power (a)
to vote 5% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managing general partners; or (b)
to direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"Agreement" means this Credit Agreement.
"Annual Statements" has the meaning set forth in Section 5.05(c).
"Applicable Insurance Code" means, with respect to any Insurance
Subsidiary, the insurance code of any jurisdiction where such Insurance
Subsidiary is domiciled or is conducting an insurance business, as
in effect from time to time and including any successor code or statute thereto,
together with the regulations issued thereunder.
"Applicable Insurance Regulatory Authority" means, with respect to any
Insurance Subsidiary, the insurance department or similar Governmental Authority
located in the jurisdiction in which such Insurance Subsidiary is domiciled and,
to the extent that it has any regulatory authority over such Insurance
Subsidiary, in each other jurisdiction in which such Insurance Subsidiary is
licensed.
"Applicable Rate" means the following percentages per annum (expressed in
basis points):
====================================================
Commitment Eurodollar Rate + Base Rate +
Fee
====================================================
12.5 75 0
====================================================
"Attorney Costs" means and includes all fees and disbursements of any law
firm or other external counsel and the allocated cost of internal legal services
and all disbursements of internal counsel.
"Audited Financial Statements" means the audited consolidated balance sheet
of the Borrower and its Subsidiaries for the fiscal year ended December 31,
1999, and the related consolidated statements of income and cash flows for such
fiscal year of the Borrower.
"Base Rate" means for any day a fluctuating rate per annum equal to the
higher of (a) the Federal Funds Rate plus 1/2 of 1% and (b) the rate of interest
in effect for such day as publicly announced from time to time by the Lender as
its "prime rate." Such rate is a rate set by the Lender based upon various
factors including the Lender's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in such rate announced by the Lender shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Base Rate Loan" means a Loan which bears interest based on the Base Rate.
"Borrower" has the meaning set forth in the
introductory paragraph hereto.
"Business Day" means any day other than a Saturday, Sunday, or other day on
which commercial banks are authorized to close under the Laws of, or are in fact
closed in, the state where the Lending Office is located and, if such day
relates to any Eurodollar Rate Loan, means any such day on which dealings in
Dollar deposits are conducted by and between banks in the offshore London
interbank market.
"Capital Lease Obligations" means, with respect to any Person, the
obligations of such Person with respect to leases which, in accordance with
GAAP, are required to be capitalized on the financial statements of such Person.
"Change of Control" means, with respect to the Borrower, an event or series
of events by which:
(a) any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but excluding any
employee benefit plan of the Borrower or its
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Subsidiaries, or any Person acting in its capacity as trustee, agent or
other fiduciary or administrator of any such plan), other than Xxxxxx
Xxxxxx or Xxxxxx Xxxxxx, becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except
that a person shall be deemed to have "beneficial ownership" of all
securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of 20% or more of the voting securities of the Borrower; or
(b) during any period of 12 consecutive months, a majority of the
members of the board of directors of the Borrower cease to be composed of
individuals (i) who were members of that board on the first day of such
period, (ii) whose election or nomination to that board was approved by
individuals referred to in clause (i) above constituting at the time of
such election or nomination at least a majority of that board or (iii)
whose election or nomination to that board was approved by individuals
referred to in clauses (i) and (ii) above constituting at the time of such
election or nomination at least a majority of that board.
"Closing Date" means the first date all the conditions precedent in Section
4.01 are satisfied by the Borrower or waived by the Lender.
"Code" means the Internal Revenue Code of 1986.
"Commitment" means the obligation of the Lender to make Loans to the
Borrower in an aggregate principal amount at any one time not to exceed
$30,000,000, as such amount may be reduced or adjusted from time to time in
accordance with this Agreement.
"Compliance Certificate" means a certificate substantially in the form of
Exhibit C.
"Contractual Obligation" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound.
"Debtor Relief Laws" means the Bankruptcy Code of the United States of
America, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally.
"Default" means any event that, with the giving of any notice, the passage
of time, or both, would be an Event of Default.
"Default Rate" means an interest rate equal to (a) the Base Rate plus (b)
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the Applicable Rate, if any, applicable to Base Rate Loans plus (c) 2% per
----
annum; provided, however, that with respect to a Eurodollar Rate Loan, the
Default Rate shall be an interest rate equal to the interest rate (including any
Applicable Rate) otherwise applicable to such Loan plus 2% per annum, in each
case to the fullest extent permitted by applicable Laws.
"Disposition" means, with respect to any Person, any sale, ceding,
assignment, transfer or other disposition by such Person, by any means, of (a)
any Operating Entity, or (b) any other property of such Person, provided,
however, that the term "Disposition" shall not include any sale, ceding,
assignment,
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transfer or other disposition by a Person that is a corporation (i) to a
wholly-owned Subsidiary of that Person or (ii) as a dividend to that Person's
shareholders.
"Dollar" and "$" means lawful money of the United States of America.
"EBITDA" means, for any period, Net Income of the Borrower and its
Non-Insurance Subsidiaries for such period, determined on a consolidated basis
in accordance with GAAP, plus the sum of, without duplication, (i) Interest
----
Expense, (ii) provision for income taxes of the Borrower and its Non-Insurance
Subsidiaries and (iii) depreciation, amortization and other non-cash charges of
the Borrower and its Non-Insurance Subsidiaries, each to the extent deducted in
determining such Net Income for such period.
"Environmental Laws" means all Laws relating to environmental, health,
safety and land use matters applicable to any property.
"ERISA" means the Employee Retirement Income Security Act of 1974 and any
regulations issued pursuant thereto.
"ERISA Affiliate" means any trade or business (whether or not incorporated)
under common control with the Borrower within the meaning of Section 414(b) or
(c) of the Code (and Sections 414(m) and (o) of the Code for purposes of
provisions relating to Section 412 of the Code).
"ERISA Event" means (a) a Reportable Event with respect to a Pension Plan;
(b) a withdrawal by the Borrower or any ERISA Affiliate from a Pension Plan
subject to Section 4063 of ERISA during a plan year in which it was a
substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation
of operations that is treated as such a withdrawal under Section 4062(e) of
ERISA; (c) a complete or partial withdrawal by the Borrower or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is
in reorganization; (d) the filing of a notice of intent to terminate, the
treatment of a Plan amendment as a termination under Sections 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to terminate a Pension
Plan or Multiemployer Plan; (e) an event or condition which might reasonably be
expected to constitute grounds under Section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Pension Plan or
Multiemployer Plan; or (f) the imposition of any liability under Title IV of
ERISA, other than PBGC premiums due but not delinquent under Section 4007 of
ERISA, upon the Borrower or any ERISA Affiliate.
"Eurodollar Base Rate" has the meaning set forth in the definition of
Eurodollar Rate.
"Eurodollar Rate" means for any Interest Period with respect to any
Eurodollar Rate Loan, a rate per annum determined by the Lender pursuant to the
following formula:
Eurodollar Rate = Eurodollar Base Rate
-------------------------------
1.00 - Eurodollar Reserve Percentage
Where,
"Eurodollar Base Rate" means, for such Interest Period:
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(a) the rate per annum equal to the rate determined by the Lender to
be the offered rate that appears on the page of the Telerate screen (or any
successor) that displays an average British Bankers Association Interest
Settlement Rate for deposits in Dollars (for delivery on the first day of
such Interest Period) with a term equivalent to such Interest Period,
determined as of approximately 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, or
(b) if the rate referenced in the preceding subsection (a) does not
appear on such page or service or such page or service shall cease to be
available, the rate per annum equal to the rate determined by the Lender to
be the offered rate on such other page or other service that displays an
average British Bankers Association Interest Settlement Rate for deposits
in Dollars (for delivery on the first day of such Interest Period) with a
term equivalent to such Interest Period, determined as of approximately
11:00 a.m. (London time) two Business Days prior to the first day of such
Interest Period, or
(c) if the rates referenced in the preceding subsections (a) and (b)
are not available, the rate per annum determined by the Lender as the rate
of interest (rounded upward to the next 1/100th of 1%) at which deposits in
Dollars for delivery on the first day of such Interest Period in same day
funds in the approximate amount of the Eurodollar Rate Loan being made,
continued or converted and with a term equivalent to such Interest Period
would be offered by the Lender's London Branch to major banks in the
offshore Dollar market at their request at approximately 11:00 a.m. (London
time) two Business Days prior to the first day of such Interest Period.
"Eurodollar Reserve Percentage" means, for any day during any Interest
Period, the reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day applicable to the Lender under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect to
Eurocurrency funding (currently referred to as "Eurocurrency liabilities"). The
Eurodollar Rate for each outstanding Eurodollar Rate Loan shall be adjusted
automatically as of the effective date of any change in the Eurodollar Reserve
Percentage.
"Eurodollar Rate Loan" means a Loan bearing interest based on the
Eurodollar Rate.
"Event of Default" means any of the events or circumstances specified in
Article VIII; provided that any requirement expressly set forth therein for the
giving of notice, the lapse of time or any other condition has been satisfied.
"Existing Credit Agreement" means that certain Revolving Credit Agreement
dated as of October 30, 1998, as amended, modified and/or restated prior to the
date hereof, among the Borrower, the lenders party thereto and certain agents,
including The Bank of New York.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards to the nearest 1/100 of 1%) equal to the weighted average of the rates
on overnight Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers on such day, as published by the
Federal Reserve Bank on the Business Day next succeeding such day; provided that
(a) if such day is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if no such rate is so
published
5
on such next succeeding Business Day, the Federal Funds Rate for such day shall
be the average rate charged to the Lender on such day on such transactions as
determined by the Lender.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or such other principles as may be
approved by a significant segment of the accounting profession, that are
applicable to the circumstances as of the date of determination, consistently
applied. If at any time any change in GAAP would affect the computation of any
financial ratio or requirement set forth in any Loan Document, and either the
Borrower or the Lender shall so request, the Lender and the Borrower shall
negotiate in good faith to amend such ratio or requirement to preserve the
original intent thereof in light of such change in GAAP (subject to the approval
of the Lender), provided that, until so amended, (a) such ratio or requirement
shall continue to be computed in accordance with GAAP prior to such change
therein and (b) the Borrower shall provide to the Lender financial statements
and other documents required under this Agreement or as reasonably requested
hereunder setting forth a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government, including any
Applicable Insurance Regulatory Authority, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Guaranty Obligation" means, as to any Person, any (a) any obligation,
contingent or otherwise, of such Person guarantying or having the economic
effect of guarantying any Indebtedness or other obligation payable or
performable by another Person (the "primary obligor") in any manner, whether
directly or indirectly, and including any obligation of such Person, direct or
indirect, (i) to purchase or pay (or advance or supply funds for the purchase or
payment of) such Indebtedness or other obligation, (ii) to purchase or lease
property, securities or services for the purpose of assuring the obligee in
respect of such Indebtedness or other obligation of the payment or performance
of such Indebtedness or other obligation, (iii) to maintain working capital,
equity capital or any other financial statement condition or liquidity of the
primary obligor so as to enable the primary obligor to pay such Indebtedness or
other obligation, or (iv) entered into for the purpose of assuring in any other
manner the obligees in respect of such Indebtedness or other obligation of the
payment or performance thereof or to protect such obligees against loss in
respect thereof (in whole or in part), or (b) any Lien on any assets of such
Person securing any Indebtedness or other obligation of any other Person,
whether or not such Indebtedness or other obligation is assumed by such Person;
provided, however, that the term "Guaranty Obligation" shall not include (x)
amounts potentially owed on or with respect to insurance policies issued or sold
in the ordinary course of business, (y) premiums for any such policies, to the
extent attributable for a period after a particular date upon which Guaranty
Obligations are being determined, or (z) endorsements of instruments for
deposit or collection in the ordinary course of business. The amount of any
Guaranty Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation, or portion thereof, in
respect of which such Guaranty Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by the guarantying Person in good faith.
"Indebtedness" means, as to any Person, at a particular time, all items
which constitute, without duplication, (a) indebtedness for borrowed money or
the deferred purchase price of property (other than trade
6
payables and accrued expenses incurred in the ordinary course of business and
not more than 90 days past due), (b) indebtedness evidenced by notes, bonds,
debentures or similar instruments, (c) obligations with respect to any
conditional sale or title retention agreement, (d) indebtedness arising under
acceptance facilities and the amount available to be drawn under all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder to the extent such Person shall not have reimbursed the
issuer in respect of the issuer's payment of such drafts, (e) all liabilities
secured by any Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment thereof (other than
carriers', warehousemen's, mechanics', repairmen's or other like non-consensual
statutory Liens arising in the ordinary course of business), (f) Capital Lease
Obligations and (g) Guaranty Obligations; provided that, for purposes of this
definition, (i) "Indebtedness" shall not include obligations in respect of
interest rate caps, collars, swaps or other similar agreements, and (ii)
Indebtedness under clauses (c) or (e) shall be taken at the lesser of the
principal amount of such Indebtedness and the value of the property subject to
the Lien referred to therein.
"Indemnified Liabilities" has the meaning set forth in Section 9.05.
"Indemnitees" has the meaning set forth in Section 9.05.
"Insurance Subsidiary" means each Subsidiary of the Borrower set forth on
Schedule 5.13 under the heading "Insurance Subsidiaries."
"Interest Coverage Ratio" means, at any date of determination, the ratio of
(i) the sum of (x) EBITDA of the Borrower and its Non-Insurance Subsidiaries for
the immediately preceding four fiscal quarters of the Borrower plus (y) the
----
greater of (1) 10% of Statutory Surplus of the Insurance Subsidiaries at such
date of determination and (2) Statutory Net Income of the Insurance Subsidiaries
for the immediately preceding four fiscal quarters of the Borrower to (ii)
Interest Expense for the immediately preceding four fiscal quarters of the
Borrower.
"Interest Expense" means, for any period, the sum of, without duplication,
all interest and commitment fees (adjusted to give effect to all interest rate
swap, cap or other interest rate hedging agreements and fees and expenses paid
in connection with the same, all as determined in accordance with GAAP), paid or
accrued in respect of all Indebtedness of the Borrower and its Subsidiaries,
determined on a consolidated basis in accordance with GAAP during such period.
"Interest Payment Date" means, (a) as to any Loan other than a Base Rate
Loan, the last day of each Interest Period applicable to such Loan; provided,
however, that if any Interest Period for a Eurodollar Rate Loan exceeds three
months, the respective dates that fall every three months after the beginning of
such Interest Period shall also be Interest Payment Dates; and (b) as to any
Base Rate Loan, the last Business Day of each March, June, September and
December and the Maturity Date.
"Interest Period" means as to each Eurodollar Rate Loan, the period
commencing on the date such Eurodollar Rate Loan is disbursed or converted to or
continued as a Eurodollar Rate Loan and ending on the date one, two, three or
six months thereafter, as selected by the Borrower in its Loan Notice; provided
that:
(i) any Interest Period that would otherwise end on a day that is
not a Business Day shall be extended to the next succeeding Business Day
unless such Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Business Day;
7
(ii) any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall end on
the last Business Day of the calendar month at the end of such Interest
Period; and
(iii) no Interest Period shall extend beyond the scheduled Maturity
Date.
"IRS" means the United States Internal Revenue Service.
"Laws" means, collectively, all applicable international, foreign, Federal,
state and local statutes, treaties, rules, guidelines, regulations, ordinances,
codes and administrative or judicial precedents or authorities, including the
interpretation or administration thereof by any Governmental Authority charged
with the enforcement, interpretation or administration thereof, and all
applicable administrative orders, directed duties, requests, licenses,
authorizations and permits of any Governmental Authority.
"Lending Office" means the office or offices of the Lender described as
such on Schedule 9.02, or such other office or offices as the Lender may from
time to time notify the Borrower.
"Leverage Ratio" means, as of any date, the ratio of (a) consolidated
Indebtedness of the Borrower and its Subsidiaries on such date, to (b) the sum
of (i) consolidated Indebtedness of the Borrower and its Subsidiaries on such
date, plus (ii) Adjusted Net Worth on such date.
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"Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge, preference,
priority or other security interest or preferential arrangement of any kind or
nature whatsoever (including any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing of any financing statement under the
Uniform Commercial Code or comparable Laws of any jurisdiction), including the
interest of a purchaser of accounts receivable.
"Loan" has the meaning set forth in Section 2.01.
"Loan Documents" means this Agreement, any Note, each Loan Notice and each
Compliance Certificate.
"Loan Notice" means a notice of (a) a borrowing of a Loan, (b) a conversion
of a Loan from one Type to the other, or (c) a continuation of a Loan as the
same Type, pursuant to Section 2.02(a), which, if in writing, shall be
substantially in the form of Exhibit A.
"Material Adverse Effect" means (a) a material adverse change in, or a
material adverse effect upon, the operations, business, properties, condition
(financial or otherwise) or prospects of the Borrower or the Borrower and its
Subsidiaries taken as a whole; (b) a material impairment of the ability of the
Borrower to perform its obligations under any Loan Document to which it is a
party; or (c) a material adverse effect upon the legality, validity, binding
effect or enforceability against the Borrower of any Loan Document to which it
is a party.
8
"Maturity Date" means (a) October 26, 2001, or such later date to
which the tenor of the Commitment may be extended in accordance with the terms
hereof, or (b) such earlier date upon which the Commitment may be terminated in
accordance with the terms hereof.
"Multiemployer Plan" means any employee benefit plan of the type
described in Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate makes or is obligated to make contributions, or during the preceding
three calendar years, has made or been obligated to make contributions.
"NAIC" means the National Association of Insurance Commissions, or any
association or Governmental Authority successor to the functions thereof.
"Net Income" means, for any period, for the Borrower and its
Subsidiaries on a consolidated basis, the net income of the Borrower and its
Subsidiaries from continuing operations after extraordinary items (excluding
gains or losses from Dispositions of assets) for that period.
"Non-Insurance Subsidiary" means each Subsidiary of the Borrower set
forth on Schedule 4.1 under the heading "Non-Insurance Subsidiaries."
"Note" means a promissory note made by the Borrower in favor of the
Lender evidencing Loans made by the Lender, substantially in the form of Exhibit
B.
"Obligations" means all advances to, and debts, liabilities,
obligations, covenants and duties of, the Borrower arising under any Loan
Document, whether direct or indirect (including those acquired by assumption),
absolute or contingent, due or to become due, now existing or hereafter arising
and including interest that accrues after the commencement by or against the
Borrower of any proceeding under any Debtor Relief Laws naming the Borrower as
the debtor in such proceeding.
"Operating Entity" means (a) any Person, (b) any business or operating
unit of any Person that is, or could be, operated separately and apart from the
other businesses and operations of such Person, or (c) any other line of
business or business segment.
"Organization Documents" means, (a) with respect to any corporation,
the certificate or articles of incorporation and the bylaws; (b) with respect to
any limited liability company, the articles of formation and operating
agreement; and (c) with respect to any partnership, joint venture, trust or
other form of business entity, the partnership, joint venture or other
applicable agreement of formation and any agreement, instrument, filing or
notice with respect thereto filed in connection with its formation with the
secretary of state or other department in the state of its formation, in each
case as amended from time to time.
"Outstanding Amount" means, with respect to Loans on any date, the
aggregate outstanding principal amount thereof after giving effect to any
borrowings and prepayments or repayments of Loans occurring on such date.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means any "employee pension benefit plan" (as such term
is defined in Section 3(2) of ERISA), other than a Multiemployer Plan, that is
subject to Title IV of ERISA and is sponsored or maintained by the Borrower or
any ERISA Affiliate or to which the Borrower or any ERISA Affiliate
9
contributes or has an obligation to contribute, or in the case of a multiple
employer plan (as described in Section 4064(a) of ERISA) has made contributions
at any time during the immediately preceding five plan years.
"Person" means any individual, trustee, corporation, general
partnership, limited partnership, limited liability company, joint stock
company, trust, unincorporated organization, bank, business association, firm,
joint venture or Governmental Authority.
"Plan" means any "employee benefit plan" (as such term is defined in
Section 3(3) of ERISA) established by the Borrower or any ERISA Affiliate.
"Reinsurance Agreement" means any agreement, contract, treaty,
certificate or other arrangement under which any Insurance Subsidiary agrees to
transfer or cede to another insurer all or part of the liabilities assumed, or
the assets held, by such Insurance Subsidiary under one or more policies of
insurance (including, without limitation, any agreement, contract, treaty,
certificate or other arrangement that is treated as such by any Applicable
Insurance Regulatory Authority of such Insurance Subsidiary).
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA, other than events for which the 30 day notice period has been
waived.
"Reporting Insurance Subsidiary" means on any date, each Insurance
Subsidiary which, as of the end of the fiscal quarter immediately preceding such
date, (a) had a Statutory Surplus of at least 5% of consolidated Statutory
Surplus of the Insurance Subsidiaries at the end of such fiscal quarter or (b)
accounted for at least 5% of consolidated net premiums written by the Insurance
Subsidiaries for the four fiscal quarters immediately preceding such date.
"Responsible Officer" means the chairman of the board and chief
executive officer, president, chief financial officer, treasurer, assistant
treasurer or secretary of the Borrower. Any document or certificate hereunder
that is signed by a Responsible Officer of the Borrower shall be conclusively
presumed to have been authorized by all necessary corporate, partnership and/or
other action on the part of the Borrower and such Responsible Officer shall be
conclusively presumed to have acted on behalf of the Borrower.
"Restricted Payment" means any dividend or other distribution (whether
in cash, securities or other property) with respect to any capital stock of the
Borrower or any Subsidiary, or any payment (whether in cash, securities or other
property), including any sinking fund or similar deposit on account of the
purchase, redemption, retirement, acquisition, cancellation or termination of
any such capital stock or of any option, warrant or other right to acquire any
such capital stock.
"SAP" means, with respect to each Insurance Subsidiary, statutory
accounting principles in effect from time to time prescribed or permitted by the
Applicable Insurance Regulatory Authority in the preparation of the financial
statements of such Subsidiary.
"Statutory Net Income" means, with respect to the Insurance
Subsidiaries for any period, the consolidated statutory net income of the
Insurance Subsidiaries for such period computed in accordance with SAP and
consistent with that reported on line 16, page 4, column 1 of the Summary of
Operations Statement in the Annual Statement.
10
"Statutory Capital and Surplus" means, at any date, the combined
statutory capital and surplus of the Insurance Subsidiaries determined as of
such date in accordance with SAP.
"Statutory Surplus" means, with respect to the Insurance Subsidiaries
at any date of determination, the consolidated statutory surplus of the
Insurance Subsidiaries on such date computed in accordance with SAP and
consistent with that reported on line 27, page 3, column 1 of the Liabilities,
Surplus and Other Funds Statement in the Annual Statement.
"Subsidiary" of a Person means a corporation, partnership, joint
venture, limited liability company or other business entity of which a majority
of the shares of securities or other interests having ordinary voting power for
the election of directors or other governing body (other than securities or
interests having such power only by reason of the happening of a contingency)
are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both,
by such Person. Unless otherwise specified, all references herein to a
"Subsidiary" or to "Subsidiaries" shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Threshold Amount" means $5,000,000.
"Type" means, with respect to a Loan, its character as a Base Rate
Loan or a Eurodollar Rate Loan.
"Unfunded Pension Liability" means the excess of a Pension Plan's
benefit liabilities under Section 4001(a)(16) of ERISA, over the current value
of that Pension Plan's assets, determined in accordance with the assumptions
used for funding the Pension Plan pursuant to Section 412 of the Code for the
applicable plan year.
1.02 Other Interpretive Provisions.
(a) The meanings of defined terms are equally applicable to
the singular and plural forms of the defined terms.
(b) (i) The words "herein" and "hereunder" and words of
similar import when used in any Loan Document shall refer to such Loan
Document as a whole and not to any particular provision thereof.
(ii) Unless otherwise specified herein, Article, Section,
Exhibit and Schedule references are to this Agreement.
(iii) The term "including" is by way of example and not
limitation.
(iv) The term "documents" includes any and all
instruments, documents, agreements, certificates, notices,
reports, financial statements and other writings, however
evidenced.
(c) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including;" the words "to" and "until" each mean "to but excluding;"
and the word "through" means "to and including."
11
(d) Section headings herein and the other Loan Documents are
included for convenience of reference only and shall not affect the
interpretation of this Agreement or any other Loan Document.
1.03 Accounting Terms. All accounting terms not specifically or
completely defined herein shall be construed in conformity with,
and all financial data required to be submitted pursuant to this
Agreement shall be prepared in conformity with, (a) GAAP applied on
a consistent basis, as in effect from time to time, applied in a
manner consistent with that used in preparing the Audited Financial
Statements or (b) to the extent such terms apply solely to one or
more Insurance Subsidiaries, SAP applied on a consistent basis, as
in effect from time to time, applied in a manner consistent with
that used in preparation of the Annual Statements, except as
otherwise specifically prescribed herein.
1.04 Rounding. Any financial ratios required to be maintained by the
Borrower pursuant to this Agreement shall be calculated by dividing
the appropriate component by the other component, carrying the
result to one place more than the number of places by which such
ratio is expressed in this Agreement and rounding the result up or
down to the nearest number (with a round-up if there is no nearest
number).
1.05 References to Agreements and Laws. Unless otherwise expressly
provided herein, (a) references to agreements (including the Loan
Documents) and other contractual instruments shall be deemed to
include all subsequent amendments, restatements, extensions,
supplements and other modifications thereto, but only to the extent
that such amendments, restatements, extensions, supplements and
other modifications are not prohibited by any Loan Document; and
(b) references to any Law shall include all statutory and
regulatory provisions consolidating, amending, replacing,
supplementing or interpreting such Law.
ARTICLE II.
THE COMMITMENT AND LOAN
-----------------------
2.01 Loans. Subject to the terms and conditions set forth herein, the
Lender agrees to make loans (each such loan, a "Loan") to the
Borrower from time to time on any Business Day during the period
from the Closing Date to the Maturity Date, in an aggregate amount
not to exceed at any time outstanding the amount of the Commitment.
Within the limits of the Commitment, and subject to the other terms
and conditions hereof, the Borrower may borrow under this Section
2.01, prepay under Section 2.03, and reborrow under this Section
2.01. A Loan may be a Base Rate Loan or a Eurodollar Rate Loan, as
further provided herein.
2.02 Borrowings, Conversions and Continuations of Loans.
(a) Each borrowing, each conversion of a Loan from one Type to
the other, and each continuation of a Loan as the same Type shall be made
upon the Borrower's irrevocable notice to the Lender, which may be given
by telephone. Each such notice must be received by the Lender not later
than noon, Dallas time (i) two Business Days prior to the requested date
of any borrowing of, conversion to or continuation of a Eurodollar Rate
Loan or of any conversion of a Eurodollar Rate Loan to a Base Rate Loan,
and (ii) on the requested date of any borrowing of a Base Rate Loan.
12
Notwithstanding anything to the contrary contained herein, but subject to
the provisions of Section 9.02(d), any such telephonic notice may be given
by a Responsible Officer of the Borrower or by an individual who has been
authorized in writing to do so by a Responsible Officer of the Borrower.
Each such telephonic notice must be confirmed promptly by delivery to the
Lender of a written Loan Notice, appropriately completed and signed by a
Responsible Officer of the Borrower. Each borrowing of, conversion to or
continuation of a Eurodollar Rate Loan shall be in a principal amount of
$250,000 or a whole multiple of $50,000 in excess thereof. Each borrowing
of or conversion to a Base Rate Loan shall be in a principal amount of
$100,000 or a whole multiple of $50,000 in excess thereof. Each Loan Notice
(whether telephonic or written) shall specify (i) whether the Borrower is
requesting a borrowing, a conversion of a Loan from one Type to the other,
or a continuation of a Loan as the same Type, (ii) the requested date of
the borrowing, conversion or continuation, as the case may be (which shall
be a Business Day), (iii) the principal amount of the Loan to be borrowed,
converted or continued, (iv) the Type of Loan to be borrowed or to which an
existing Loan is to be converted, and (v) if applicable, the duration of
the Interest Period with respect thereto. If the Borrower fails to specify
a Type of Loan in a Loan Notice or if the Borrower fails to give a timely
notice requesting a conversion or continuation, then the applicable Loan
shall be made or continued as, or converted to, a Base Rate Loan. Any such
automatic conversion to a Base Rate Loan shall be effective as of the last
day of the Interest Period then in effect with respect to the applicable
Eurodollar Rate Loan. If the Borrower requests a borrowing of, conversion
to, or continuation of a Eurodollar Rate Loan in any such Loan Notice, but
fails to specify an Interest Period, it will be deemed to have specified an
Interest Period of one month.
(b) Upon satisfaction of the applicable conditions set forth in
Section 4.02 (and, if a borrowing is the initial Loan, Section 4.01), the
Lender shall make the proceeds of each Loan available to the Borrower
either by (i) crediting the account of the Borrower on the books of the
Lender with the amount of such proceeds or (ii) wire transfer of such
proceeds, in each case in accordance with instructions provided to the
Lender by the Borrower.
(c) Except as otherwise provided herein, a Eurodollar Rate Loan may
be continued or converted only on the last day of the Interest Period for
such Eurodollar Rate Loan. During the existence of a Default or Event of
Default, no Loan may be requested as, converted to or continued as
Eurodollar Rate Loans without the consent of the Lender, and the Lender may
demand that any or all of the then outstanding Eurodollar Rate Loans be
converted immediately to Base Rate Loans.
(d) The Lender shall promptly notify the Borrower of the interest
rate applicable to any Eurodollar Rate Loan upon determination of such
interest rate. The determination of the Eurodollar Rate by the Lender shall
be conclusive in the absence of manifest error. The Lender shall notify the
Borrower of any change in the Lender's prime rate used in determining the
Base Rate promptly following the public announcement of such change.
(e) After giving effect to all borrowings, all conversions of Loans
from one Type to the other, and all continuations of Loans as the same
Type, there shall not be more than five Interest Periods in effect.
2.03 Prepayments.
(a) The Borrower may, upon notice to the Lender, at any time or from
time to time voluntarily prepay any Loan in whole or in part without
premium or penalty; provided that (i) such
13
notice must be received by the Lender not later than noon, Dallas time, (A)
two Business Days prior to any date of prepayment of a Eurodollar Rate
Loan, and (B) on the date of prepayment of a Base Rate Loan; and (ii) any
prepayment of any Loan shall be in a principal amount of $3,000,000 or a
whole multiple of $1,000,000 in excess thereof. Each such notice shall
specify the date and amount of such prepayment and the Type(s) of Loan(s)
to be prepaid. If such notice is given by the Borrower, the Borrower shall
make such prepayment and the payment amount specified in such notice shall
be due and payable on the date specified therein. Any prepayment of a
Eurodollar Rate Loan shall be accompanied by all accrued interest thereon,
together with any additional amounts required pursuant to Section 3.05.
(b) If for any reason the Outstanding Amount of all Loans at any
time exceeds the Commitment then in effect, the Borrower shall immediately
prepay Loans in an aggregate amount equal to such excess.
2.04 Reduction or Termination of Commitment. The Borrower may, upon notice
to the Lender, terminate the Commitment, or permanently reduce the
Commitment to an amount not less than the then Outstanding Amount of
all Loans; provided that (i) any such notice shall be received by the
Lender not later than noon, Dallas time, five Business Days prior to
the date of termination or reduction, and (ii) any such partial
reduction shall be in an aggregate amount of $3,000,000 or any whole
multiple of $1,000,000 in excess thereof. Once reduced in accordance
with this Section, the Commitment may not be increased. All
commitment fees accrued until the effective date of any termination
of the Commitment shall be paid on the effective date of such
termination.
2.05 Repayment of Loans. The Borrower shall repay to the Lender on the
Maturity Date the aggregate principal amount of Loans outstanding on
such date.
2.06 Interest.
(a) Subject to the provisions of subsection (b) below, (i) each
Eurodollar Rate Loan shall bear interest on the outstanding principal
amount thereof for each Interest Period at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii)
each Base Rate Loan shall bear interest on the outstanding principal amount
thereof from the applicable borrowing date at a rate per annum equal to the
Base Rate plus the Applicable Rate.
(b) While any Event of Default exists or after acceleration, the
Borrower shall pay interest on the principal amount of all outstanding
Obligations (including past due interest) at a fluctuating rate per annum
at all times equal to the Default Rate to the fullest extent permitted by
applicable law. Accrued and unpaid interest on past due amounts (including
interest on past due interest) shall be due and payable upon demand.
(c) Interest on each Loan shall be due and payable in arrears on
each Interest Payment Date applicable thereto and at such other times as
may be specified herein. Interest hereunder shall be due and payable in
accordance with the terms hereof before and after judgment, and before and
after the commencement of any proceeding under any Debtor Relief Law.
14
2.07 Fees. In addition to any other fees payable pursuant to this
Agreement:
(a) Commitment Fee. The Borrower shall pay to the Lender a
--------------
commitment fee equal to the Applicable Rate times the actual daily amount
by which the Commitment exceeds the Outstanding Amount of Loans. The
commitment fee shall accrue at all times from the Closing Date until the
Maturity Date and shall be due and payable quarterly in arrears on the last
Business Day of each March, June, September and December, commencing with
the first such date to occur after the Closing Date, and on the Maturity
Date. The commitment fee shall be calculated quarterly in arrears, and if
there is any change in the Applicable Rate during any quarter, the actual
daily amount shall be computed and multiplied by the Applicable Rate
separately for each period during such quarter that such Applicable Rate
was in effect. The commitment fee shall accrue at all times, including at
any time during which one or more of the conditions in Article IV is not
met.
(b) Arrangement Fee. On the Closing Date, the Borrower shall pay a
---------------
non-refundable and fully-earned arrangement fee in the amount of $35,000 to
Lender.
2.08 Computation of Interest and Fees. Computation of interest on Base
Rate Loans shall be calculated on the basis of a year of 365 or 366
days, as the case may be, and the actual number of days elapsed.
Computation of all other types of interest and all fees shall be
calculated on the basis of a year of 360 days and the actual number
of days elapsed which results in a higher yield to the Lender than a
method based on a year of 365 or 366 days. Interest shall accrue on
each Loan for the day on which the Loan is made, and shall not accrue
on a Loan, or any portion thereof, for the day on which the Loan or
such portion is paid, provided that any Loan that is repaid on the
same day on which it is made shall bear interest for one day.
2.09 Evidence of Debt. The Loans made by the Lender shall be evidenced by
one or more accounts or records maintained by the Lender in the
ordinary course of business. The accounts or records maintained by
the Lender shall be conclusive absent manifest error of the amount of
the Loans made by the Lender to the Borrower and the interest and
payments thereon. Any failure so to record or any error in doing so
shall not, however, limit or otherwise affect the obligation of the
Borrower hereunder to pay any amount owing with respect to the Loans.
Upon the request of the Lender, the Loans may be evidenced by a Note,
in addition to such accounts or records. The Lender may attach
schedules to its Note and endorse thereon the date, Type (if
applicable), amount and maturity of the Loans and payments with
respect thereto.
2.10 Payments Generally.
(a) All payments to be made by the Borrower shall be made without
condition or deduction for any counterclaim, defense, recoupment or setoff.
Except as otherwise expressly provided herein, all payments by the Borrower
hereunder shall be made to the Lender at the applicable Lending Office in
Dollars and in immediately available funds not later than 2:00 p.m., Dallas
time, on the date specified herein. All payments received by the Lender
after 2:00 p.m., Dallas time, shall be deemed received on the next
succeeding Business Day and any applicable interest or fee shall continue
to accrue.
15
(b) Subject to the definition of "Interest Period," if any payment
to be made by the Borrower shall come due on a day other than a Business
Day, payment shall be made on the next following Business Day, and such
extension of time shall be reflected in computing interest or fees, as the
case may be.
(c) Nothing herein shall be deemed to obligate the Lender to obtain
the funds for any Loan in any particular place or manner or to constitute a
representation by the Lender that it has obtained or will obtain the funds
for any Loan in any particular place or manner.
2.11 Extension of Maturity Date.
(a) Not earlier than 60 days prior to, nor later than 30 days prior
to, the existing Maturity Date, the Borrower may, upon notice to the
Lender, request an extension of the existing Maturity Date. Within 15 days
of delivery of such notice (but not earlier than 30 days prior to the
existing Maturity Date), the Lender shall notify the Borrower whether or
not it consents to such extension (which consent may be given or withheld
in the Lender's sole and absolute discretion). If the Lender fails to
respond within the above time period, it shall be deemed not to have
consented to such extension.
(b) If the Lender consents to such extension, the Maturity Date
shall be extended to a date 364 days from the existing Maturity Date,
effective as of the existing Maturity Date (the "Extension Effective
Date"). As a condition precedent to such extension, the Borrower shall
deliver to the Lender a certificate dated as of the Extension Effective
Date signed by a Responsible Office of the Borrower (i) certifying and
attaching the resolutions adopted by the Borrower approving or consenting
to such extension and, (ii) certifying that, before and after giving effect
to such extension, the representations and warranties contained in Article
V are true and correct on and as of the Extension Effective Date and no
Default or Event of Default exists.
ARTICLE III.
TAXES, YIELD PROTECTION AND ILLEGALITY
--------------------------------------
3.01 Taxes.
(a) Any and all payments by the Borrower to or for the account of
the Lender under any Loan Document shall be made free and clear of and
without deduction for any and all present or future taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges,
and all liabilities with respect thereto, excluding taxes imposed on or
measured by the Lender's net income, and franchise taxes imposed on it (in
lieu of net income taxes), by the jurisdiction (or any political
subdivision thereof) under the Laws of which the Lender is organized or
maintains a lending office (all such non-excluded taxes, duties, levies,
imposts, deductions, assessments, fees, withholdings or similar charges,
and liabilities being hereinafter referred to as "Taxes"). If the Borrower
shall be required by any Laws to deduct any Taxes from or in respect of any
sum payable under any Loan Document to the Lender, (i) the sum payable
shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable
under this Section), the Lender receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with
16
applicable Laws, and (iv) within 30 days after the date of such payment,
the Borrower shall furnish to the Lender the original or a certified copy
of a receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp, court or documentary taxes and any other excise or property
taxes or charges or similar levies which arise from any payment made under
any Loan Document or from the execution, delivery, performance, enforcement
or registration of, or otherwise with respect to, any Loan Document
(hereinafter referred to as "Other Taxes").
(c) If the Borrower shall be required to deduct or pay any Taxes or
Other Taxes from or in respect of any sum payable under any Loan Document
to the Lender, the Borrower shall also pay to the Lender, at the time
interest is paid, such additional amount that the Lender specifies as
necessary to preserve the after-tax yield (after factoring in all taxes,
including taxes imposed on or measured by net income) the Lender would have
received if such Taxes or Other Taxes had not been imposed.
(d) The Borrower agrees to indemnify the Lender for (i) the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed
or asserted by any jurisdiction on amounts payable under this Section) paid
by the Lender, (ii) amounts payable under Section 3.01(c) and (iii) any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, in each case whether or not such Taxes or Other Taxes
were correctly or legally imposed or asserted by the relevant Governmental
Authority. Payment under this subsection (d) shall be made within 30 days
after the date the Lender makes a demand therefor.
3.02 Illegality. If the Lender determines that any Law has made it
unlawful, or that any Governmental Authority has asserted that it is
unlawful, for the Lender or its Lending Office to make, maintain or
fund Eurodollar Rate Loans, or materially restricts the authority of
the Lender to purchase or sell, or to take deposits of, Dollars in
the applicable offshore Dollar market, or to determine or charge
interest rates based upon the Eurodollar Rate, then, on notice
thereof by the Lender to the Borrower, any obligation of the Lender
to make or continue Eurodollar Rate Loans or to convert Base Rate
Loans to Eurodollar Rate Loans shall be suspended until the Lender
notifies the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the
Borrower shall, upon demand from the Lender, prepay or, if
applicable, convert all Eurodollar Rate Loans to Base Rate Loans,
either on the last day of the Interest Period thereof, if the Lender
may lawfully continue to maintain such Eurodollar Rate Loans to such
day, or immediately, if the Lender may not lawfully continue to
maintain such Eurodollar Rate Loans. Upon any such prepayment or
conversion, the Borrower shall also pay interest on the amount so
prepaid or converted. The Lender agrees to designate a different
Lending Office if such designation will avoid the need for such
notice and will not, in the good faith judgment of the Lender,
otherwise be materially disadvantageous to the Lender.
3.03 Inability to Determine Eurodollar Rate. If the Lender determines in
connection with any request for a Eurodollar Rate Loan or a
conversion to or continuation thereof that (a) Dollar deposits are
not being offered to banks in the applicable offshore Dollar market
for the applicable amount and Interest Period of such Eurodollar Rate
Loan, (b) adequate and reasonable means do not exist for determining
the Eurodollar Base Rate for such Eurodollar Rate Loan, or (c) the
Eurodollar Base Rate for such Eurodollar Rate Loan does not
17
adequately and fairly reflect the cost to the Lender of funding such
Eurodollar Rate Loan, the Lender will promptly notify the Borrower.
Thereafter, the obligation of the Lender to make or maintain
Eurodollar Rate Loans shall be suspended until the Lender revokes
such notice. Upon receipt of such notice, the Borrower may revoke any
pending request for a borrowing, conversion or continuation of a
Eurodollar Rate Loan or, failing that, will be deemed to have
converted such request into a request for a borrowing of a Base Rate
Loan in the amount specified therein.
3.04 Increased Cost and Reduced Return; Capital Adequacy.
(a) If the Lender determines that as a result of the introduction of
or any change in or in the interpretation of any Law, or the Lender's
compliance therewith, there shall be any increase in the cost to the Lender
of agreeing to make or making, funding or maintaining Eurodollar Rate
Loans, or a reduction in the amount received or receivable by the Lender in
connection with any of the foregoing (excluding for purposes of this
subsection (a) any such increased costs or reduction in amount resulting
from (i) Taxes or Other Taxes (as to which Section 3.01 shall govern), (ii)
changes in the basis of taxation of overall net income or overall gross
income by the United States or any foreign jurisdiction or any political
subdivision of either thereof under the Laws of which the Lender is
organized or has its Lending Office, and (iii) reserve requirements
utilized in the determination of the Eurodollar Rate), then from time to
time upon demand of the Lender, the Borrower shall pay to the Lender such
additional amounts as will compensate the Lender for such increased cost or
reduction.
(b) If the Lender determines that the introduction of any Law
regarding capital adequacy or any change therein or in the interpretation
thereof, or compliance by the Lender (or its Lending Office) therewith, has
the effect of reducing the rate of return on the capital of the Lender or
any corporation controlling the Lender as a consequence of the Lender's
obligations hereunder (taking into consideration its policies with respect
to capital adequacy and the Lender's desired return on capital), then from
time to time upon demand of the Lender, the Borrower shall pay to the
Lender such additional amounts as will compensate the Lender for such
reduction.
3.05 Funding Losses. Upon demand of the Lender from time to time, the
Borrower shall promptly compensate the Lender for and hold the Lender
harmless from any loss, cost or expense incurred by it as a result
of:
(a) any continuation, conversion, payment or prepayment of any Loan
other than a Base Rate Loan on a day other than the last day of the
Interest Period for such Loan (whether voluntary, mandatory, automatic, by
reason of acceleration, or otherwise); or
(b) any failure by the Borrower (for a reason other than the failure
of the Lender to make a Loan) to prepay, borrow, continue or convert any
Loan other than a Base Rate Loan on the date or in the amount notified by
the Borrower, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained by
it to maintain such Loan or from fees payable to terminate the deposits
from which such funds were obtained. The Borrower shall also pay any
customary administrative fees charged by the Lender in connection with the
foregoing.
18
For purposes of calculating amounts payable by the Borrower to the Lender under
this Section 3.05, the Lender shall be deemed to have funded each Eurodollar
Rate Loan at the Eurodollar Base Rate used in determining the Eurodollar Rate
for such Loan by a matching deposit or other borrowing in the offshore London
interbank market for a comparable amount and for a comparable period, whether or
not such Eurodollar Rate Loan was in fact so funded.
3.06 Requests for Compensation. A certificate of the Lender claiming
compensation under this Article III and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in
the absence of clearly demonstrable error. In determining such
amount, the Lender may use any reasonable averaging and attribution
methods.
3.07 Survival. All of the Borrower's obligations under this Article III
shall survive termination of the Commitment and payment in full of
all the other Obligations.
ARTICLE IV.
CONDITIONS PRECEDENT TO LOANS
-----------------------------
4.01 Conditions of Initial Loan. The obligation of the Lender to make its
initial Loan hereunder is subject to satisfaction of the following
conditions precedent:
(a) The Lender's receipt of the following, each of which shall be
originals or facsimiles (followed promptly by originals) unless otherwise
specified, each properly executed by a Responsible Officer of the Borrower,
each dated the Closing Date (or, in the case of certificates of
governmental officials, a recent date before the Closing Date) and each in
form and substance satisfactory to the Lender and its legal counsel:
(i) executed counterparts of this Agreement, sufficient in
number for distribution to the Lender and the Borrower;
(ii) if requested by the Lender, a Note executed by the
Borrower in favor of the Lender, in a principal amount equal to the
amount of the Commitment;
(iii) such certificates of resolutions or other action,
incumbency certificates and/or other certificates of Responsible
Officers of the Borrower as the Lender may require to establish the
identities of and verify the authority and capacity of each
Responsible Officer thereof authorized to act as a Responsible
Officer in connection with this Agreement and the other Loan
Documents to which the Borrower is a party;
(iv) such evidence as the Lender may reasonably require to
verify that the Borrower is duly organized or formed, validly
existing, in good standing and qualified to engage in business in
each jurisdiction in which it is required to be qualified to engage
in business, including certified copies of the Borrower's
Organization Documents, certificates of good standing and/or
qualification to engage in business;
19
(v) a certificate signed by a Responsible Officer of the
Borrower certifying (A) that the conditions specified in Sections
4.02(a) and (b) have been satisfied and (B) that there has been no
event or circumstance since the date of the Audited Financial
Statements which has or could be reasonably expected to have a
Material Adverse Effect;
(vi) an opinion of counsel to the Borrower substantially in
the form of Exhibit D;
(vii) evidence that the Existing Credit Agreement has been or
concurrently with the initial Loan will be terminated and all
Indebtedness outstanding thereunder has been or concurrently with the
initial Loan will be repaid in full; and
(viii) such other assurances, certificates, documents, consents
or opinions as the Lender reasonably may require.
(b) Any fees required to be paid on or before the Closing Date shall
have been paid.
(c) The Borrower shall have paid all Attorney Costs of the Lender to
the extent invoiced prior to or on the Closing Date, plus such additional
amounts of Attorney Costs as shall constitute its reasonable estimate of
Attorney Costs incurred or to be incurred by it through the closing
proceedings (provided that such estimate shall not thereafter preclude a
final settling of accounts between the Borrower and the Lender).
4.02 Conditions to all Loans. The obligation of the Lender to honor any
Loan Notice (other than a Loan Notice requesting only a conversion of
a Loan to the other Type, or a continuation of a Loan as the same
Type, but subject to Section 2.2(c)) is subject to the following
conditions precedent:
(a) The representations and warranties of the Borrower contained in
Article V, or which are contained in any document furnished at any time
under or in connection herewith or therewith, shall be true and correct on
and as of the date of such Loan, except to the extent that such
representations and warranties specifically refer to an earlier date, in
which case they shall be true and correct as of such earlier date.
(b) No Default or Event of Default shall exist, or would result from
such proposed Loan.
(c) The Lender shall have received a Loan Notice in accordance with
the requirements hereof.
(d) The Lender shall have received, in form and substance
satisfactory to it, such other assurances, certificates, documents or
consents related to the foregoing as the Lender reasonably may require.
Each Loan Notice (other than a Loan Notice requesting only a conversion of a
Loan to the other Type or a continuation of a Loan as the same Type) submitted
by the Borrower shall be deemed to be a representation and warranty that the
conditions specified in Sections 4.02(a) and (b) have been satisfied on and as
of the date of the applicable Loan.
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ARTICLE V.
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants to the Lender that:
5.01 Existence, Qualification and Power; Compliance with Laws. Each of the
Borrower and its Subsidiaries (a) is an entity duly organized or
formed, validly existing and in good standing under the Laws of the
jurisdiction of its incorporation or organization, (b) has all
requisite power and authority and all governmental licenses,
authorizations, consents and approvals to own its assets, carry on
its business and, in the case of the Borrower, to execute, deliver,
and perform its obligations under the Loan Documents, (c) is duly
qualified and is licensed and in good standing under the Laws of each
jurisdiction where its ownership, lease or operation of properties or
the conduct of its business requires such qualification or license,
and (d) is in compliance with all Laws, except in each case referred
to in clause (c) or this clause (d), to the extent that failure to do
so could not reasonably be expected to have a Material Adverse
Effect.
5.02 Authorization; No Contravention. The execution, delivery and
performance by the Borrower of each Loan Document have been duly
authorized by all necessary corporate or other organizational action,
and do not and will not (a) contravene the terms of any of the
Borrower's Organization Documents; (b) conflict with or result in any
breach or contravention of, or the creation of any Lien under, any
Contractual Obligation to which it is a party or any order,
injunction, writ or decree of any Governmental Authority to which it
or its property is subject; or (c) violate any Law, including any
Applicable Insurance Code.
5.03 Governmental Authorization. Except for information filings required
to be made in the ordinary course of business which are not a
condition to the validity or enforceability of the Loan Documents
against the Borrower or the Borrower's performance under the Loan
Documents, no approval, consent, exemption, authorization, or other
action by, or notice to, or filing with, any Governmental Authority
is necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Borrower of this
Agreement or any other Loan Document.
5.04 Binding Effect. This Agreement has been, and each other Loan
Document, when delivered hereunder, will have been duly executed and
delivered by the Borrower. This Agreement constitutes, and each other
Loan Document when so delivered will constitute, a legal, valid and
binding obligation of the Borrower, enforceable against the Borrower
in accordance with its terms, except as such enforceability may be
limited by applicable Debtor Relief Laws and by general principles of
equity, regardless of whether enforcement is sought in an action at
law or in equity, and the discretion of the court before which any
action or proceeding therefor may be brought.
5.05 Financial Statements; No Material Adverse Effect.
(a) The Audited Financial Statements heretofore delivered to the
Lender (i) were prepared in accordance with GAAP consistently applied
throughout the period covered thereby, except as otherwise expressly noted
therein; (ii) fairly present the financial condition of the
21
Borrower and its Subsidiaries as of the date thereof and their results of
operations for the period covered thereby in accordance with GAAP
consistently applied throughout the period covered thereby, except as
otherwise expressly noted therein; and (iii) show all material indebtedness
and other liabilities, direct or contingent, of the Borrower and its
Subsidiaries as of the date thereof, including liabilities for taxes,
material commitments and Indebtedness in accordance with GAAP consistently
applied throughout the period covered thereby.
(b) Since the date of the Audited Financial Statements, there has
been no event or circumstance that has or could reasonably be expected to
have a Material Adverse Effect.
(c) The consolidated Annual Statements dated as of December 31, 1999
of each of Mercury Casualty Company, California Automobile Insurance
Company, Mercury Indemnity Company of Georgia, and Mercury Insurance
Company of Illinois and the consolidated Annual Statements dated as of
December 31, 1999 of each of American Mercury Insurance Company and
American Mercury Lloyd's Insurance Company (together with the related notes
and schedules thereto, the "Annual Statements") heretofore delivered to the
Lender, fairly present the financial condition and results of operations of
the Insurance Subsidiaries included therein as of the date thereof and for
the period covered thereby and have been prepared in accordance with SAP.
5.06 Litigation. Except as specifically disclosed in Schedule 5.06, there
are no actions, suits, proceedings, claims or disputes pending or, to
the knowledge of the Borrower after due and diligent investigation,
threatened or contemplated, at law, in equity, in arbitration or
before any Governmental Authority, by or against the Borrower or any
of its Subsidiaries or against any of their properties or revenues
which (a) purport to affect or pertain to this Agreement or any other
Loan Document, or any of the transactions contemplated hereby, or (b)
if determined adversely, could reasonably be expected to have a
Material Adverse Effect.
5.07 No Default. Neither the Borrower nor any Subsidiary is in default
under or with respect to any Contractual Obligation which could be
reasonably expected to have a Material Adverse Effect. No Default or
Event of Default has occurred and is continuing or would result from
the consummation of the transactions contemplated by this Agreement
or any other Loan Document.
5.08 Ownership of Property; Liens. The Borrower and each Subsidiary has
good record and marketable title to, or valid leasehold interests in,
all tangible and intangible property necessary or used in the
ordinary conduct of its business, except for such defects in title as
would not, individually or in the aggregate, have a Material Adverse
Effect. The property of the Borrower and its Subsidiaries is subject
to no Liens, other than Liens permitted by Section 7.01.
5.09 Environmental Compliance. The Borrower has reasonably concluded that
existing Environmental Laws and claims alleging potential liability
or responsibility for violation of any Environmental Laws will not,
individually or in the aggregate, have a Material Adverse Effect.
5.10 Insurance. The properties of the Borrower and its Subsidiaries are
insured with financially sound and reputable insurance companies not
Affiliates of the Borrower, in such amounts,
22
with such deductibles and covering such risks as are customarily
carried by companies engaged in similar businesses and owning similar
properties in localities where the Borrower or its Subsidiaries
operate.
5.11 Taxes. The Borrower and its Subsidiaries have filed all Federal,
state and other material tax returns and reports required to be
filed, and have paid all Federal, state and other material taxes,
assessments, fees and other governmental charges levied or imposed
upon them or their properties, income or assets otherwise due and
payable, except those which are being contested in good faith by
appropriate proceedings and for which adequate reserves have been
provided in accordance with GAAP. There is no proposed tax assessment
against the Borrower or any Subsidiary that would, if made, have a
Material Adverse Effect.
5.12 ERISA Compliance.
(a) Each Plan that is intended to qualify under Section 401(a) of
the Code has received a favorable determination letter from the IRS or an
application for such a letter is currently being processed by the IRS with
respect thereto and, to the best knowledge of the Borrower, nothing has
occurred which would prevent, or cause the loss of, such qualification. The
Borrower and each ERISA Affiliate have made all required contributions to
each Plan subject to Section 412 of the Code, and no application for a
funding waiver or an extension of any amortization period pursuant to
Section 412 of the Code has been made with respect to any Plan.
(b) There are no pending or, to the best knowledge of the Borrower,
threatened claims, actions or lawsuits, or action by any Governmental
Authority, with respect to any Plan that could be reasonably be expected to
have a Material Adverse Effect. There has been no prohibited transaction or
violation of the fiduciary responsibility rules with respect to any Plan
that has resulted or could be reasonably expected to result in a Material
Adverse Effect.
(c) Except for events or conditions that have not resulted in or
could not reasonably be expected to result in a Material Adverse Effect, (i) no
ERISA Event has occurred or is reasonably expected to occur; (ii) no Pension
Plan has any Unfunded Pension Liability; (iii) neither the Borrower nor any
ERISA Affiliate has incurred, or reasonably expects to incur, any liability
under Title IV of ERISA with respect to any Pension Plan (other than premiums
due and not delinquent under Section 4007 of ERISA); (iv) neither the Borrower
nor any ERISA Affiliate has incurred, or reasonably expects to incur, any
liability (and no event has occurred which, with the giving of notice under
Section 4219 of ERISA, would result in such liability) under Sections 4201 or
4243 of ERISA with respect to a Multiemployer Plan; and (v) neither the Borrower
nor any ERISA Affiliate has engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA.
5.13 Subsidiaries. As of the Closing Date, the Borrower has no
Subsidiaries other than the Insurance Subsidiaries and the Non-
Insurance Subsidiaries set forth on Schedule 5.13.
5.14 Margin Regulations; Investment Company Act; Public Utility Holding
Company Act.
(a) The Borrower is not engaged and will not engage, principally or
as one of its important activities, in the business of purchasing or
carrying margin stock (within the meaning of Regulation U issued by the
Board), or extending credit for the purpose of purchasing or carrying
margin stock.
23
(b) None of the Borrower, any Person controlling the Borrower, or
any Subsidiary (i) is a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, or (ii) is or is required to be
registered as an "investment company" under the Investment Company Act of
1940.
5.15 Licenses, Franchises, Etc. Each of the Borrower and its Subsidiaries
possesses or has the right to use all licenses, franchises,
copyrights, trademarks, servicemarks, patents, trade names, service
names, and other rights as are material and necessary for the conduct
of its business, and with respect to which it is in compliance, with
no known conflict with the valid rights of others which could
reasonably be expected to have a Material Adverse Effect. No event
has occurred which permits or, to the best knowledge of the Borrower,
after notice or the lapse of time or both, or any other condition,
could reasonably be expected to permit, the revocation or termination
of any such license, franchise, copyright, trademark, servicemark,
patent, trade name, service name, or other right which revocation or
termination could reasonably be expected to have a Material Adverse
Effect.
5.16 Labor Relations. There are no material controversies pending between
the Borrower or any of its Subsidiaries and any of their respective
employees that could reasonably be expected to have a Material
Adverse Effect.
5.17 Burdensome Obligations. Neither the Borrower nor any of its
Subsidiaries is a party to or bound by any license, franchise, or
Contractual Obligation, or subject to any restriction which, in the
opinion of the management of the Borrower or such Subsidiary, is so
unusual or burdensome, in the context of its business, as in the
foreseeable future might materially and adversely affect or impair
the revenue or cash flows of the Borrower or such Subsidiary or the
ability of the Borrower to perform its obligations under the Loan
Documents. The Borrower does not presently anticipate that future
expenditures by the Borrower or any of its Subsidiaries needed to
meet the provisions of federal or state statutes, orders, rules or
regulations will be so burdensome as to be reasonably expected to
have a Material Adverse Effect.
5.18 Disclosure. No representation or warranty made by the Borrower in any
Loan Document and no certificate or report furnished to the Lender by
or on behalf of the Borrower in connection with any Loan Document
contains any untrue statement of a material fact or, to the best
knowledge of the Borrower, omits any material fact required to be
stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE VI.
AFFIRMATIVE COVENANTS
---------------------
So long as the Commitment shall be in effect, or any Loan or other
Obligation shall remain unpaid or unsatisfied, the Borrower shall, and shall
(except in the case of the covenants set forth in Sections 6.01, 6.02, 6.03 and
6.12) cause each Subsidiary to:
24
6.01 Financial Statements. Deliver to the Lender, in form and detail
satisfactory to the Lender:
(a) as soon as available, but in any event within 105 days after the
end of each fiscal year of the Borrower, a copy of the Borrower's 10-K for
such fiscal year and a consolidated balance sheet of the Borrower and its
Subsidiaries as at the end of such fiscal year, and the related
consolidated statements of income and cash flows for such fiscal year,
setting forth in each case in comparative form the figures for the previous
fiscal year, prepared in accordance with GAAP and in reasonable detail,
audited and accompanied by a report and opinion of a "big 5" firm or other
independent certified public accountants of nationally recognized standing
reasonably acceptable to the Lender, which report and opinion shall not be
subject to any qualifications or exceptions as to the scope of the audit
nor to any qualifications and exceptions not reasonably acceptable to the
Lender;
(b) as soon as available, but in any event within 60 days after the
end of each of the first three fiscal quarters of each fiscal year of the
Borrower, a copy of the Borrower's 10-Q for such fiscal quarter and a
consolidated balance sheet of the Borrower and its Subsidiaries as at the
end of such fiscal quarter, and the related consolidated statements of
income and cash flows for such fiscal quarter and for the portion of the
Borrower's fiscal year then ended, setting forth in each case in
comparative form the figures for the corresponding fiscal quarter of the
previous fiscal year and the corresponding portion of the previous fiscal
year, all in reasonable detail and certified by a Responsible Officer of
the Borrower as fairly presenting the financial condition, results of
operations and cash flows of the Borrower and its Subsidiaries in
accordance with GAAP, subject only to normal year-end audit adjustments and
the absence of footnotes; and
(c) As soon as practicable after the filing thereof but in any case
not later than 105 days after the close of each fiscal year of the Borrower
and 60 days after the close of each fiscal quarter of the Borrower, copies
of the annual and quarterly statutory statements filed by the Borrower or
any Reporting Insurance Subsidiary with the department of insurance of the
state of domicile of each Reporting Insurance Subsidiary or any other
Governmental Authority.
6.02 Certificates; Other Information. Deliver to the Lender, in form and
detail satisfactory to the Lender:
(a) after request by the Lender therefor, concurrently with the
delivery of the financial statements referred to in Section 6.01(a), a
certificate of its independent certified public accountants certifying such
financial statements and stating that in making the examination necessary
therefor no knowledge was obtained of any Default or Event of Default under
Section 7.13 hereof or, if any such Default or Event of Default shall
exist, stating the nature of such Default or Event of Default;
(b) concurrently with the delivery of the financial statements
referred to in Sections 6.01(a) and (b), a duly completed Compliance
Certificate signed by a Responsible Officer of the Borrower;
(c) promptly after any request by the Lender, copies of any detailed
audit reports, management letters or recommendations submitted to the board
of directors (or the audit committee of the board of directors) of the
Borrower by independent accountants in connection with the accounts or
books of the Borrower or any Subsidiary, or any audit of any of them;
25
(d) promptly after the same are available, copies of each annual
report, proxy or financial statement or other report or communication sent
to the stockholders of the Borrower generally, and copies of all annual,
regular, periodic and special reports and registration statements which the
Borrower may file or be required to file with the Securities and Exchange
Commission under Section 13 or 15(d) of the Securities Exchange Act of
1934, and not otherwise required to be delivered to the Lender pursuant
hereto; and
(e) promptly, such additional information regarding the business,
financial or corporate affairs of the Borrower or any Subsidiary as the
Lender may from time to time request.
6.03 Notices. Within 10 days after the Borrower obtains knowledge thereof,
notify the Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any matter that has resulted or, if decided adversely to the
Borrower or any Subsidiary, could reasonably be expected to result in a
Material Adverse Effect, including (i) breach or non-performance of, or
default under, a Contractual Obligation of the Borrower or any Subsidiary;
(ii) any dispute, litigation, investigation, proceeding or suspension
between the Borrower or any Subsidiary and any Governmental Authority; or
(iii) the commencement of, or any material development in, any litigation
or proceeding affecting the Borrower or any Subsidiary pursuant to any
applicable Environmental Laws;
(c) of any litigation, investigation or proceeding affecting the
Borrower or any Subsidiary which, if decided adversely to the Borrower or
any Subsidiary, could reasonably be expected to have a Material Adverse
Effect, or in which injunctive relief or similar relief is sought, which
relief, if granted, could be reasonably expected to have a Material Adverse
Effect;
(d) of any material change in accounting policies or financial
reporting practices by the Borrower or any Subsidiary; and
(e) of the occurrence of any ERISA Event;
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer of the Borrower setting forth details of the occurrence
referred to therein and stating what action the Borrower has taken and proposes
to take with respect thereto. Each notice pursuant to Section 6.03(a) shall
describe with particularity any and all provisions of this Agreement or other
Loan Document that have been breached.
6.04 Payment of Obligations. Pay and discharge as the same shall become
due and payable, all its obligations and liabilities, including (a)
all tax liabilities, assessments and governmental charges or levies
upon it or its properties or assets, unless the same are being
contested in good faith by appropriate proceedings and adequate
reserves in accordance with GAAP are being maintained by the Borrower
or such Subsidiary; (b) all lawful claims which, if unpaid, would by
law become a Lien upon its property, other than Liens permitted by
Section 7.01; and (c) all Indebtedness, as and when due and payable,
but subject to any subordination provisions contained in any
instrument or agreement evidencing such Indebtedness.
26
6.05 Preservation of Existence, Etc. Preserve, renew and maintain in full
force and effect its legal existence and good standing under the Laws
of the jurisdiction of its organization, except in a transaction
permitted by Section 7.03 or which could not reasonably be expected
to have a Material Adverse Effect; take all reasonable action to
maintain all rights, privileges, permits, licenses and franchises
necessary or desirable in the normal conduct of its business, except
in a transaction permitted by Section 7.03 or which could not
reasonably be expected to have a Material Adverse Effect; and
preserve or renew all of its registered patents, trademarks, trade
names and service marks, the non-preservation of which could
reasonably be expected to have a Material Adverse Effect.
6.06 Maintenance of Properties. (a) Maintain, preserve and protect all of
its material properties and equipment necessary in the operation of
its business in good working order and condition, ordinary wear and
tear excepted and (b) make all necessary repairs thereto and renewals
and replacements thereof except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect.
6.07 Maintenance of Insurance. Maintain with financially sound and
reputable insurance companies not Affiliates of the Borrower,
insurance with respect to its properties and business against loss or
damage of the kinds customarily insured against by Persons engaged in
the same or similar business, of such types and in such amounts as
are customarily carried under similar circumstances by such other
Persons.
6.08 Compliance with Laws. Comply in all material respects with the
requirements of all Laws applicable to it or to its business or
property, except in such instances in which (i) such requirement of
Law is being contested in good faith or a bona fide dispute exists
with respect thereto; or (ii) the failure to comply therewith could
not be reasonably expected to have a Material Adverse Effect.
6.09 Books and Records. (a) Maintain proper books of record and account,
in which full, true and correct entries in conformity with GAAP (or
SAP in the case of any Insurance Subsidiary) consistently applied
shall be made of all financial transactions and matters involving the
assets and business of the Borrower or such Subsidiary, as the case
may be; and (b) maintain such books of record and account in material
conformity with all applicable requirements of any Governmental
Authority having regulatory jurisdiction over the Borrower or such
Subsidiary, as the case may be.
6.10 Inspection Rights. Permit representatives and independent contractors
of the Lender to visit and inspect any of its properties, to examine
its corporate, financial and operating records, and make copies
thereof or abstracts therefrom, and to discuss its affairs, finances
and accounts with its directors, officers, and independent public
accountants, all at the expense of the Borrower and at such
reasonable times during normal business hours and as often as may be
reasonably desired, upon reasonable advance notice to the Borrower;
provided, however, that when an Event of Default exists the Lender
(or any of its representatives or independent contractors) may do any
of the foregoing at the expense of the Borrower at any time during
normal business hours and without advance notice.
27
6.11 Compliance with ERISA. Do, and cause each of its ERISA Affiliates to
do, each of the following: (a) maintain each Plan in compliance in
all material respects with the applicable provisions of ERISA, the
Code and other Federal or state law; (b) cause each Plan which is
qualified under Section 401(a) of the Code to maintain such
qualification; and (c) make all required contributions to any Plan
subject to Section 412 of the Code.
6.12 Use of Proceeds. Use the proceeds of the Loans first to repay
Indebtedness owing under the Existing Credit Agreement and then for
working capital and other general corporate purposes not in
contravention of any Law or of any Loan Document.
ARTICLE VII.
NEGATIVE COVENANTS
------------------
So long as the Commitment shall be in effect, or any Loan or other
Obligation shall remain unpaid or unsatisfied, the Borrower shall not, directly
or indirectly:
7.01 Liens. Create, incur, assume or suffer to exist, or permit any
Subsidiary to create, incur, assume or suffer to exist, any Lien upon
any of its property, assets or revenues, whether now owned or
hereafter acquired, other than the following:
(a) Liens, if any, pursuant to any Loan Document;
(b) Liens existing on the date hereof and listed on Schedule 7.01
and any renewals or extensions thereof, provided that the property covered
thereby is not increased and any renewal or extension of the obligations
secured or benefitted thereby is permitted by Section 7.02(a);
(c) Liens for taxes not yet due or which are being contested in good
faith and by appropriate proceedings, if adequate reserves with respect
thereto are maintained on the books of the applicable Person in accordance
with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
which are not overdue for a period of more than 30 days or which are being
contested in good faith and by appropriate proceedings, if adequate
reserves with respect thereto are maintained on the books of the applicable
Person;
(e) pledges or deposits in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other
social security legislation, other than any Lien imposed by ERISA;
(f) deposits to secure the performance of bids, trade contracts
(other than for borrowed money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances affecting real property which, in the aggregate, are not
substantial in amount, and which do not in any case materially detract from
the value of the property subject thereto or materially interfere with the
ordinary conduct of the business of the applicable Person;
28
(h) Liens securing judgments for the payment of money in an
aggregate amount not in excess of the Threshold Amount (except to the
extent covered by independent third-party insurance as to which the insurer
has acknowledged in writing its obligation to cover), unless any such
judgment remains undischarged for a period of more than 30 consecutive days
during which execution is not effectively stayed;
(i) Liens on real property owned by any Subsidiary on the date
hereof or acquired by any Subsidiary after the date hereof securing
Indebtedness permitted by Section 7.02(b) that was or is incurred in
connection with the acquisition of such real property, provided that each
such Lien is limited to the real property so acquired;
(j) Liens on personal property owned by the Borrower or any
Subsidiary on the date hereof or acquired by the Borrower or any Subsidiary
after the date hereof securing Indebtedness permitted by Section 7.02(c)
that was or is incurred in connection with the acquisition of such personal
property, provided that each such Lien is limited to the personal property
so acquired; and
(k) Banker's Liens arising in the ordinary course of business.
7.02 Indebtedness. Permit any Subsidiary to create, incur, assume or
suffer to exist any Indebtedness, except:
(a) Indebtedness outstanding on the date hereof and listed on
Schedule 7.02 and any refinancings, refundings, renewals or extensions
thereof; provided that the amount of such Indebtedness is not increased at
the time of such refinancing, refunding, renewal or extension except by an
amount equal to a reasonable premium or other reasonable amount paid, and
fees and expenses reasonably incurred, in connection with such refinancing
and by an amount equal to any existing commitments unutilized thereunder;
(b) Indebtedness, including Capital Lease Obligations, secured by
Liens permitted by Section 7.01(i) in an aggregate outstanding amount not
to exceed $25,000,000 at any time;
(c) Indebtedness, including Capital Lease Obligations, secured by
Liens permitted by Section 7.01(j) in an aggregate outstanding amount not
to exceed $25,000,000 at any time; and
(d) Indebtedness incurred by any Subsidiary in the ordinary course
of business that is owed to Borrower or any Subsidiary.
7.03 Mergers, Acquisitions and Dispositions. Consolidate or merge into or
with any Person, or make any Acquisition or Disposition, or enter
into any binding agreement to do any of the foregoing which is not
contingent on obtaining the consent of the Lender, or permit any
Subsidiary of the Borrower to do any of the foregoing, except that
(a) a Subsidiary of the Borrower may consolidate and merge with
another wholly-owned Subsidiary of the Borrower, if (i) immediately
before and after giving effect thereto no Default or Event of Default
shall or would exist and (ii) any such consolidation or merger would
not cause any Applicable Insurance Regulatory Authority to restrict
the ability of any Insurance Subsidiary to make Restricted Payments,
and (b) the Borrower may make Acquisitions and Dispositions, if (i)
the aggregate consolidated amount of any capital stock or property so
29
acquired in any calendar year (determined on the basis of the fair
market value of any capital stock or property acquired), or the
aggregate consolidated amount of any assets sold, leased or otherwise
disposed of in any calendar year (determined on the basis of the fair
market value of any assets so sold, leased or disposed of) would not
exceed 15% of the combined Statutory Capital and Surplus of the
Insurance Subsidiaries as of the end of the immediately preceding
calendar year, (ii) an Event of Default would not exist before or
after giving effect thereto and (iii) any such Acquisition or
Disposition would not cause any Applicable Insurance Regulatory
Authority to restrict the ability of any Insurance Subsidiary to make
Restricted Payments, provided, however, that the foregoing shall not
limit Dispositions of investment securities as part of the management
of a securities portfolio of the Borrower or any of its Subsidiaries.
7.04 Change in Nature of Business. Engage, or permit any Subsidiary to
engage, in any material line of business substantially different from
those lines of business conducted by the Borrower and its Subsidiaries
on the date hereof.
7.05 Transactions with Affiliates. Enter into, or permit any Subsidiary to
enter into, any transaction of any kind with any Affiliate of the
Borrower on a basis less favorable to the Borrower or such Subsidiary
in any material respect than if such transaction were not with an
Affiliate of the Borrower other than (a) advances made to employees of
the Borrower or any Subsidiary in the ordinary course of business in
connection with their employment, (b) transactions in which the
aggregate rental value, remuneration or other consideration (including
the value of a loan) together with the aggregate rental value,
remuneration or other consideration (including the value of a loan) of
all such other transactions consummated in the year during which such
transaction is proposed to be consummated, does not exceed $5,000,000,
(c) management or similar agreements entered into among the Borrower
and any Subsidiary in the ordinary course of business, (d)
transactions effected pursuant to the agreement dated October 7, 1985,
by and among the Borrower, Xxxxxx Xxxxxx and Xxxxxx Xxxxxx with
respect to the ownership by Xxxxxx Xxxxxx and Xxxxxx Xxxxxx of the
Borrower's common stock, (e) payments to officers or directors of the
Borrower or any Subsidiary in the ordinary course of their employment,
(f) dividends otherwise permitted by this Agreement or (g) the
provision by the Borrower to its Subsidiaries of funds for use in
connection with the business, operations and general corporate
purposes of such Subsidiaries.
7.06 Burdensome Agreements. Enter into, or permit any Subsidiary to enter
into, any Contractual Obligation that limits the ability (a) of any
Subsidiary to make Restricted Payments to the Borrower or to otherwise
transfer property to the Borrower or (b) of the Borrower or any
Subsidiary to create, incur, assume or suffer to exist Liens on
property of such Person.
7.07 Use of Proceeds. Use the proceeds of any Loan, whether directly or
indirectly, and whether immediately, incidentally or ultimately, to
purchase or carry margin stock (within the meaning of Regulation U of
the Board), other than any shares of outstanding stock of the Borrower
that are returned to the status of authorized and unissued shares and
retired, or to extend credit to others for the purpose of purchasing
or carrying margin stock or to refund indebtedness originally incurred
for such purpose.
30
7.08 ERISA. At any time engage, or permit any ERISA Affiliate to engage, in
a transaction which could be subject to Section 4069 or 4212(c) of
ERISA, or permit any Plan to (a) engage in any non-exempt "prohibited
transaction" (as defined in Section 4975 of the Code); (b) fail to
comply with ERISA or any other applicable Laws; or (c) incur any
material "accumulated funding deficiency" (as defined in Section 302
of ERISA), which, with respect to each event listed above, could be
reasonably expected to have a Material Adverse Effect.
7.09 Fiscal Year. Change, or permit any Subsidiary to change, its fiscal
year from that in effect on the date hereof.
7.10 Issuance of Stock by Subsidiaries. Permit any Subsidiary to issue,
directly or indirectly, any additional capital stock or other equity
interests other than to Borrower or a wholly-owned Subsidiary.
7.11 Reinsurance Agreements. Permit any Insurance Subsidiary to enter into
a treaty to cede any of its obligations to any reinsurer that could
reasonably be expected to have a Material Adverse Effect.
7.12 Articles of Incorporation and Bylaws. Amend or otherwise modify its
articles of incorporation or bylaws in any way which would adversely
affect the interests of the Lender under any of the Loan Documents, or
permit any of its Subsidiaries so to do.
7.13 Financial Covenants.
(a) Adjusted Net Worth. Permit Adjusted Net Worth at any time to be
------------------
less than the sum of (a) $700,000,000, plus (b) an amount equal to 50% of
the consolidated Net Income of the Borrower and its Subsidiaries for each
fiscal quarter ending after September 30, 2000 (with no deduction for a net
loss in any such fiscal quarter).
(b) Interest Coverage Ratio. Permit the Interest Coverage Ratio as of
-----------------------
the end of any fiscal quarter of the Borrower to be less than 4.0 to 1.0.
(c) Leverage Ratio. Permit the Leverage Ratio at any time to be
--------------
greater than .25 to 1.0.
(d) Statutory Surplus. Permit Statutory Surplus at any time to be
-----------------
less than $600,000,000.
ARTICLE VIII.
EVENTS OF DEFAULT AND REMEDIES
------------------------------
8.01 Events of Default. Any of the following events shall
constitute an Event of Default:
(a) Non-Payment. The Borrower fails to pay (i) when and as
-----------
required to be paid herein, any amount of principal of any Loan, or (ii)
within three days after the same becomes due, any
31
interest on any Loan, or any commitment or other fee due hereunder, or (iii)
within five days after the same becomes due, any other amount payable
hereunder or under any other Loan Document; or
(b) Specific Covenants. The Borrower fails to perform or observe
------------------
any term, covenant or agreement contained in any of Section 6.10 or 6.12 or
Article VII; or
(c) Other Defaults. The Borrower fails to perform or observe any
--------------
other covenant or agreement (not specified in subsection (a) or (b) above)
contained in any Loan Document on its part to be performed or observed and
such failure continues for 30 days; or
(d) Representations and Warranties. Any representation or
------------------------------
warranty made or deemed made by the Borrower herein, in any other Loan
Document, or in any document delivered in connection herewith or therewith
proves to have been incorrect in any material respect when made or deemed
made; or
(e) Cross-Default. The Borrower or any Subsidiary (i) fails to
-------------
make any payment when due (whether by scheduled maturity, required
prepayment, acceleration, demand, or otherwise) in respect of any
Indebtedness (other than the Indebtedness hereunder) having an aggregate
principal amount (including undrawn committed or available amounts and
including amounts owing to all creditors under any combined or syndicated
credit arrangement) of more than the Threshold Amount, or (ii) fails to
observe or perform any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event occurs, the effect of
which default or other event is to cause, or to permit the holder or
holders of such Indebtedness or the beneficiary or beneficiaries of such
Guaranty Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to be demanded or to become due or to
be repurchased or redeemed (automatically or otherwise) prior to its stated
maturity, or such Guaranty Obligation to become payable or cash collateral
in respect thereof to be demanded; or
(f) Insolvency Proceedings, Etc. The Borrower or any Subsidiary
----------------------------
institutes or consents to the institution of any proceeding under any
Debtor Relief Law, or makes an assignment for the benefit of creditors; or
applies for or consents to the appointment of any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer for it
or for all or any material part of its property; or any receiver, trustee,
custodian, conservator, liquidator, rehabilitator or similar officer is
appointed without the application or consent of such Person and the
appointment continues undischarged or unstayed for 60 calendar days; or any
proceeding under any Debtor Relief Law relating to any such Person or to
all or any part of its property is instituted without the consent of such
Person and continues undismissed or unstayed for 60 calendar days, or an
order for relief is entered in any such proceeding; or
(g) Inability to Pay Debts; Attachment. (i) The Borrower or any
----------------------------------
Subsidiary becomes unable or admits in writing its inability or fails
generally to pay its debts as they become due, or (ii) any writ or warrant
of attachment or execution or similar process is issued or levied against
all or any material part of the property of any such Person and is not
released, vacated or fully bonded within 30 days after its issue or levy;
or
(h) Judgments. There is entered against the Borrower or any
---------
Subsidiary (i) a final judgment or order for the payment of money in an
aggregate amount exceeding the Threshold
32
Amount (to the extent not covered by independent third-party insurance as
to which the insurer does not dispute coverage), or (ii) any non-monetary
final judgment that has, or would reasonably be expected to have, a
Material Adverse Effect and, in the case of either clause (i) or clause
(ii) preceding, (A) enforcement proceedings are commenced by any creditor
upon such judgment or order, or (B) there is a period of 10 consecutive
Business Days during which a stay of enforcement of such judgment, by
reason of a pending appeal or otherwise, is not in effect; or
(i) Licenses and Permits. Any license, franchise, permit, right,
--------------------
approval or agreement of the Borrower or any Subsidiary to own or operate
any Operating Entity owned or operated by the Borrower or such Subsidiary
(i) is not renewed, or is suspended or revoked and (ii) the non-renewal,
suspension or revocation thereof would have a Material Adverse Effect; or
(j) ERISA. (i) An ERISA Event occurs with respect to a Pension
-----
Plan or Multiemployer Plan which has resulted or could reasonably be
expected to result in liability of the Borrower under Title IV of ERISA to
the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in
excess of the Threshold Amount, or (ii) the Borrower or any ERISA Affiliate
fails to pay when due, after the expiration of any applicable grace period,
any installment payment with respect to its withdrawal liability under
Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in
excess of the Threshold Amount; or
(k) Invalidity of Loan Documents. Any Loan Document, at any time
----------------------------
after its execution and delivery and for any reason other than the
agreement of the Lender or satisfaction in full of all the Obligations,
ceases to be in full force and effect, or is declared by a court of
competent jurisdiction to be null and void, invalid or unenforceable in any
respect; or the Borrower denies that it has any or further liability or
obligation under any Loan Document, or purports to revoke, terminate or
rescind any Loan Document; or
(l) Change of Control. There occurs any Change of Control.
-----------------
8.02 Remedies Upon Event of Default. If any Event of Default occurs,
the Lender may
(a) declare the commitment of the Lender to make Loans to be
terminated, whereupon such commitment shall be terminated;
(b) declare the unpaid principal amount of all outstanding Loans,
all interest accrued and unpaid thereon, and all other Obligations owing or
payable hereunder or under any other Loan Document to be immediately due
and payable, without presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower; and
(c) exercise all rights and remedies available to it under the
Loan Documents or applicable law; provided, however, that upon the
occurrence of any event specified in subsection (f) of Section 8.01, the
obligation of the Lender to make Loans shall automatically terminate, the
unpaid principal amount of all outstanding Loans and all interest and other
Obligations as aforesaid shall automatically become due and payable without
further act of the Lender.
ARTICLE IX.
MISCELLANEOUS
-------------
33
9.01 Amendments; Etc. No amendment or waiver of any provision of this
Agreement or any other Loan Document, and no consent to any departure by the
Borrower therefrom, shall be effective unless in writing signed by the Lender
and the Borrower and each such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
9.02 Notices and Other Communications; Facsimile Copies.
(a) General. Unless otherwise expressly provided herein, all
-------
notices and other communications provided for hereunder shall be in writing
(including by facsimile transmission) and mailed, faxed or delivered, to
the address, facsimile number or (subject to subsection (c) below)
electronic mail address specified for notices on Schedule 9.02; or to such
other address as shall be designated by either party in a notice to the
other party. All such notices and other communications shall be deemed to
be given or made upon the earlier to occur of (i) actual receipt by the
intended recipient and (ii) (A) if delivered by hand or by courier, when
signed for by the intended recipient; (B) if delivered by mail, four
Business Days after deposit in the mails, postage prepaid; (C) if delivered
by facsimile, when sent and receipt has been confirmed by telephone; and
(D) if delivered by electronic mail (which form of delivery is subject to
the provisions of subsection (c) below), when delivered; provided, however,
that notices and other communications to the Lender pursuant to Article II
shall not be effective until actually received by such Person. Any notice
or other communication permitted to be given, made or confirmed by
telephone hereunder shall be given, made or confirmed by means of a
telephone call to the intended recipient at the number specified on
Schedule 9.02, it being understood and agreed that a voicemail message
shall in no event be effective as a notice, communication or confirmation
hereunder.
(b) Effectiveness of Facsimile Documents and Signatures. Loan
---------------------------------------------------
Documents may be transmitted and/or signed by facsimile. The effectiveness
of any such documents and signatures shall, subject to applicable Law, have
the same force and effect as manually-signed originals and shall be binding
on the Borrower and the Lender. The Lender may also require that any such
documents and signatures be confirmed by a manually-signed original
thereof; provided, however, that the failure to request or deliver the same
shall not limit the effectiveness of any facsimile document or signature.
(c) Limited Use of Electronic Mail. Electronic mail and internet
------------------------------
and intranet websites may be used only to distribute routine
communications, such as financial statements and other information, and to
distribute Loan Documents for execution by the parties thereto, and may not
be used for any other purpose.
(d) Reliance by Lender. The Lender shall be entitled to rely and
------------------
act upon any notices (including telephonic Loan Notices) purportedly given
by or on behalf of the Borrower even if (i) such notices were not made in a
manner specified herein, were incomplete or were not preceded or followed
by any other form of notice specified herein, or (ii) the terms thereof, as
understood by the recipient, varied from any confirmation thereof. The
Borrower shall indemnify the Lender, its Affiliates, and their respective
officers, directors, employees, agents and attorneys-in-fact from all
losses, costs, expenses and liabilities resulting from the reliance by such
Person on each notice purportedly given by or on behalf of the Borrower.
All telephonic notices to and other communications with the Lender may be
recorded by the Lender, and the Borrower hereby consents to such recording.
34
9.03 No Waiver; Cumulative Remedies. No failure by the Lender to
exercise, and no delay by any such Person in exercising, any right, remedy,
power or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and privileges
herein or therein provided are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
9.04 Attorney Costs, Expenses and Taxes. The Borrower agrees (a) to
pay or reimburse the Lender for all costs and expenses incurred in connection
with the development, preparation, negotiation and execution of this Agreement
and the other Loan Documents and any amendment, waiver, consent or other
modification of the provisions hereof and thereof (whether or not the
transactions contemplated hereby or thereby are consummated), and the
consummation and administration of the transactions contemplated hereby and
thereby, including all Attorney Costs, and (b) to pay or reimburse the Lender
for all costs and expenses incurred in connection with the enforcement,
attempted enforcement, or preservation of any rights or remedies under this
Agreement or the other Loan Documents (including all such costs and expenses
incurred during any "workout" or restructuring in respect of the Obligations and
during any legal proceeding, including any proceeding under any Debtor Relief
Law), including all Attorney Costs. The foregoing costs and expenses shall
include all search, filing, recording, title insurance and appraisal charges and
fees and taxes related thereto, and other out-of-pocket expenses incurred by the
Lender and the cost of independent public accountants and other outside experts
retained by the Lender. Any amount payable to Lender under this Section shall
bear interest from the second Business Day following the date of demand for
payment at the Default Rate. The agreements in this Section shall survive
termination of the Commitment and repayment of all the other Obligations.
9.05 Indemnification by the Borrower. Whether or not the transactions
contemplated hereby are consummated, the Borrower agrees to indemnify, save and
hold harmless the Lender, its Affiliates, and their respective directors,
officers, employees, counsel, agents and attorneys-in-fact (collectively the
"Indemnitees") from and against: (a) any and all claims, demands, actions or
causes of action that are asserted against any Indemnitee by any Person relating
directly or indirectly to a claim, demand, action or cause of action that such
Person asserts or may assert against the Borrower, any Affiliate of the Borrower
or any of their respective officers or directors; (b) any and all claims,
demands, actions or causes of action that may at any time be asserted or imposed
against any Indemnitee, arising out of or relating to, the Loan Documents, any
predecessor loan documents, the Commitment, the use or contemplated use of the
proceeds of any Loan, or the relationship of the Borrower and the Lender under
this Agreement or any other Loan Document; (c) any administrative or
investigative proceeding by any Governmental Authority arising out of or related
to a claim, demand, action or cause of action described in subsection (a) or (b)
above; and (d) any and all liabilities (including liabilities under
indemnities), losses, costs or expenses (including Attorney Costs) that any
Indemnitee suffers or incurs as a result of the assertion of any foregoing
claim, demand, action, cause of action or proceeding, or as a result of the
preparation of any defense in connection with any foregoing claim, demand,
action, cause of action or proceeding, in all cases, whether or not arising out
of the negligence of an Indemnitee, and whether or not an Indemnitee is a party
to such claim, demand, action, cause of action or proceeding (all the foregoing,
collectively, the "Indemnified Liabilities"); provided that no Indemnitee shall
be entitled to indemnification for any claim caused by its own gross negligence
or willful misconduct or for any loss asserted against it by another Indemnitee.
The agreements in this Section shall survive the termination of the Commitment
and repayment of all the other Obligations.
35
9.06 Payments Set Aside. To the extent that the Borrower makes a
payment to the Lender, or the Lender exercises its right of set-off, and such
payment or the proceeds of such set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside or required
(including pursuant to any settlement entered into by the Lender in its
discretion) to be repaid to a trustee, receiver or any other party, in
connection with any proceeding under any Debtor Relief Law or otherwise, then to
the extent of such recovery, the obligation or part thereof originally intended
to be satisfied shall be revived and continued in full force and effect as if
such payment had not been made or such set-off had not occurred.
9.07 Successors and Assigns.
(a) The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns permitted hereby, except that the Borrower may
not assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of the Lender (and any
attempted assignment or transfer by the Borrower without such consent
shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the
parties hereto, their respective successors and assigns permitted
hereby and, to the extent expressly contemplated hereby, the
Indemnitees) any legal or equitable right, remedy or claim under or by
reason of this Agreement.
(b) The Lender may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under this Agreement
(including all or a portion of the Commitment and the Loans at the
time owing to it) pursuant to documentation acceptable to the Lender
and the assignee. From and after the effective date specified in such
documentation, such Eligible Assignee shall be a party hereto and, to
the extent of the interest assigned by the Lender, have the rights and
obligations of the Lender under this Agreement, and the Lender shall,
to the extent of the interest so assigned, be released from its
obligations under this Agreement (and, in the case of an assignment of
all of the Lender's rights and obligations under this Agreement, shall
cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 3.07, 9.04 and 9.05). Upon request, the Borrower
(at its expense) shall execute and deliver new or replacement Notes to
the Lender and the assignee, and shall execute and deliver any other
documents reasonably necessary or appropriate to give effect to such
assignment and to provide for the administration of this Agreement
after giving effect thereto.
(c) The Lender may, without the consent of, or notice to, the
Borrower (unless such sale is to an insurance company, in which case
the consent of the Borrower thereto, as more fully prescribed in
Section 9.07(f), shall be required but shall not be unreasonably
withheld or delayed), sell participations to one or more banks or
other entities (a "Participant") in all or a portion of the Lender's
rights and/or obligations under this Agreement (including all or a
portion of its Commitment and/or the outstanding Loans owing to it);
provided that (i) the Lender's obligations under this Agreement shall
remain unchanged, (ii) the Lender shall remain solely responsible to
the Borrower for the performance of such obligations and (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. Any agreement or instrument pursuant to which the Lender
sells such a participation may (at the sole discretion of the Lender)
provide that the Lender will not, without the consent of the
Participant, agree to certain types of amendments, waivers or other
modifications of the Loan Documents. Subject to subsection (d) of this
Section, the Borrower agrees that each Participant shall be entitled
to the benefits of Sections 3.01, 3.04 and 3.05 to the same extent as
if it were the Lender and had acquired its interest by assignment
pursuant to subsection (b) of this Section. To the extent
36
permitted by law, each Participant also shall be entitled to the
benefits of Section 9.09 as though it were the Lender.
(d) A Participant shall not be entitled to receive any greater
payment under Section 3.01, 3.04, or 3.05 than the Lender would have
been entitled to receive with respect to the participation sold to
such Participant, unless the sale of the participation to such
Participant is made with the Borrower's prior written consent. A
Participant that is a "foreign corporation, partnership or trust"
within the meaning of the Code shall not be entitled to the benefits
of Section 3.01 unless the Borrower is notified of the participation
sold to such Participant and such Participant agrees, for the benefit
of the Borrower, to provide to the Lender such tax forms prescribed by
the IRS as are necessary or desirable to establish an exemption from,
or reduction of, U.S. withholding tax.
(e) The Lender may at any time pledge or assign a security
interest in all or any portion of its rights under this Agreement
(including under the Note, if any) to secure obligations of the
Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank; provided that no such pledge or assignment shall
release the Lender from any of its obligations hereunder or substitute
any such pledgee or assignee for the Lender as a party hereto.
(f) If the consent of the Borrower to an Eligible Assignee is
required hereunder, the Borrower shall be deemed to have given its
consent five Business Days after the date notice thereof has been
delivered by the Lender unless such consent is expressly refused by
the Borrower prior to such fifth Business Day.
(g) As used herein, the following terms have the following
meanings:
"Eligible Assignee" means (a) an Affiliate of the Lender; (c) an
Approved Fund; and (d) any other Person (other than a natural
Person) approved by the Borrower (such approval not to be
unreasonably withheld or delayed); provided that no such approval
shall be required if (x) such Person is taking delivery of an
assignment in connection with physical settlement of a credit
derivatives transaction or (y) an Event of Default has occurred
and is continuing.
"Fund" means any Person (other than a natural Person) that is (or
will be) engaged in making, purchasing, holding or otherwise
investing in commercial loans and similar extensions of credit in
the ordinary course of its business.
"Approved Fund" means any Fund that is administered or managed by
(a) the Lender or (b) an Affiliate of the Lender.
9.08 Confidentiality. The Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and other advisors (it being
understood that the Persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential); (b) to the extent requested by any regulatory
authority; (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process; (d) to any other party to this Agreement;
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder; (f) subject to an agreement containing provisions substantially the
same as those of this Section, to (i) any assignee of or participant in, or any
prospective assignee of or participant in, any of its rights or obligations
under this Agreement or (ii) any direct or indirect contractual
37
counterparty or prospective counterparty (or such contractual counterparty's or
prospective counterparty's professional advisor) to any credit derivative
transaction relating to obligations of the Borrower; (g) with the consent of the
Borrower; (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
the Lender on a nonconfidential basis from a source other than the Borrower; or
(i) to any nationally recognized rating agency that requires access to
information about the Lender's or its Affiliates' investment portfolio in
connection with ratings issued with respect to the Lender or its Affiliates. For
the purposes of this Section, "Information" means all information received from
the Borrower relating to the Borrower or its business, other than any such
information that is available to the Lender on a nonconfidential basis prior to
disclosure by the Borrower; provided that, in the case of information received
from the Borrower after the date hereof, such information is clearly identified
in writing at the time of delivery as confidential. Any Person required to
maintain the confidentiality of Information as provided in this Section shall be
considered to have complied with its obligation to do so if such Person has
exercised the same degree of care to maintain the confidentiality of such
Information as such Person would accord to its own confidential information.
9.09 Set-Off. In addition to any rights and remedies of the Lender provided
by law, upon the occurrence and during the continuance of any Event of Default,
the Lender is authorized at any time and from time to time, without prior notice
to the Borrower, any such notice being waived by the Borrower to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held by, and other
indebtedness at any time owing by, the Lender to or for the credit or the
account of the Borrower against any and all Obligations owing to the Lender, now
or hereafter existing, irrespective of whether or not the Lender shall have made
demand under this Agreement or any other Loan Document and although such
Obligations may be contingent or unmatured. The Lender agrees promptly to notify
the Borrower after any such set-off and application made by the Lender;
provided, however, that the failure to give such notice shall not affect the
validity of such set-off and application.
9.10 Interest Rate Limitation. Notwithstanding anything to the contrary
contained in any Loan Document, the interest paid or agreed to be paid under the
Loan Documents shall not exceed the maximum rate of non-usurious interest
permitted by applicable Law (the "Maximum Rate"). If the Lender shall receive
interest in an amount that exceeds the Maximum Rate, the excess interest shall
be applied to the principal of the Loans or, if it exceeds such unpaid
principal, refunded to the Borrower. In determining whether the interest
contracted for, charged, or received by the Lender exceeds the Maximum Rate, the
Lender may, to the extent permitted by applicable Law, (a) characterize any
payment that is not principal as an expense, fee, or premium rather than
interest, (b) exclude voluntary prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or unequal parts the total
amount of interest throughout the contemplated term of the Obligations. Chapter
346 of the Texas Finance Code (which governs certain revolving credit accounts)
shall not apply to the transactions contemplated by the Loan Documents.
9.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary for each party hereto to execute the same counterpart.
9.12 Integration. This Agreement, together with the other Loan Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and thereof and supersedes all prior agreements, written or oral,
on such subject matter. In the event of any conflict between the provisions of
this Agreement and those of any other Loan Document, the provisions of this
Agreement shall control; provided that the inclusion of supplemental rights or
remedies in favor of the Lender in any other Loan Document shall not be
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deemed a conflict with this Agreement. Each Loan Document was drafted with the
joint participation of the respective parties thereto and shall be construed
neither against nor in favor of any party, but rather in accordance with the
fair meaning thereof.
9.13 Survival of Representations and Warranties. All representations and
warranties made hereunder and in any other Loan Document or other document
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by the Lender,
regardless of any investigation made by the Lender or on its behalf and
notwithstanding that the Lender may have had notice or knowledge of any Default
or Event of Default at the time of any Loan, and shall continue in full force
and effect as long as any Loan or any other Obligation shall remain unpaid or
unsatisfied.
9.14 Severability. Any provision of this Agreement and the other Loan
Documents to which the Borrower is a party that is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.15 Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF TEXAS APPLICABLE TO AGREEMENTS MADE AND TO BE
PERFORMED ENTIRELY WITHIN SUCH STATE; PROVIDED THAT THE LENDER SHALL RETAIN
ALL RIGHTS ARISING UNDER FEDERAL LAW.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR
ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF TEXAS
SITTING IN DALLAS COUNTY OR OF THE UNITED STATES FOR THE NORTHERN DISTRICT
OF SUCH STATE, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE
BORROWER AND THE LENDER EACH CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. THE BORROWER
AND THE LENDER EACH IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY
ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF ANY LOAN DOCUMENT
OR OTHER DOCUMENT RELATED THERETO. THE BORROWER AND THE LENDER EACH WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH MAY BE
MADE BY ANY OTHER MEANS PERMITTED BY THE LAW OF SUCH STATE.
9.16 Waiver of Right to Trial by Jury. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION ARISING UNDER ANY LOAN DOCUMENT OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH
RESPECT TO ANY LOAN DOCUMENT, OR THE TRANSACTIONS RELATED THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER FOUNDED IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY
39
COURT TRIAL WITHOUT A JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE SIGNATORIES HERETO TO THE WAIVER OF THEIR RIGHT
TO TRIAL BY JURY.
9.17 ENTIRE AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BANK OF AMERICA, N.A.
By /s/ Xxxx X. X'Xxxxx
--------------------------------
Name: Xxxx X. X'Xxxxx
Title: Managing Director
MERCURY GENERAL CORPORATION
By /s/ Xxxxxxx Xxxxxxx
--------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Chief Financial Officer
Signature Page To Credit Agreement
