Exhibit 10.43
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CREDIT AND SECURITY AGREEMENT
(U.S. $13,000,000)
Dated as of December 23, 2003
among
CERES GROUP, INC.
as Borrower
THE SUBSIDIARIES OF THE BORROWER WHICH ARE SIGNATORIES HERETO
as Subsidiary Guarantors
and
NATIONAL CITY BANK
THE CIT GROUP/EQUIPMENT FINANCING, INC.
as Lenders
and
NATIONAL CITY BANK
as Agent
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TABLE OF CONTENTS
Section Page
SECTION 1 DEFINITIONS; ACCOUNTING TERMS; GOVERNANCE PROVISIONS................1
1.1 CERTAIN DEFINED TERMS............................................1
1.2 ACCOUNTING TERMS; CALCULATIONS...................................1
1.3 CONSTRUCTION OF TERMS GENERALLY..................................1
SECTION 2 STATEMENT OF TERMS..................................................1
2.1 TERM FACILITY....................................................1
2.2 FUNDING OF TERM LOANS............................................3
2.3 RATE CONVERSION AND RATE CONTINUATION............................3
2.4 INTEREST ON LOANS................................................5
2.5 FEES.............................................................5
2.6 PAYMENTS AND COMPUTATIONS........................................5
2.7 LIBOR RATE LOANS.................................................6
2.8 PRO RATA TREATMENT OF LENDERS....................................7
SECTION 3 CONDITIONS OF LENDING...............................................7
3.1 CONDITIONS PRECEDENT TO CLOSING..................................7
3.2 CONDITIONS PRECEDENT TO RATE CONTINUATION/CONVERSION REQUESTS....7
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS............8
4.1 GRANT OF SECURITY INTEREST.......................................8
4.2 PERFECTION.......................................................9
4.3 CHANGES AFFECTING PERFECTION.....................................9
4.4 PROTECTION OF COLLATERAL; REIMBURSEMENT..........................9
4.5 EXAMINATION AND INSPECTION.......................................9
4.6 INTENTIONALLY DELETED...........................................10
4.7 STATUS OF COLLATERAL............................................10
4.8 REINSTATEMENT...................................................10
4.9 FURTHER ASSURANCES..............................................10
4.10 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL........10
SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO COLLATERAL...11
5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL........................11
5.2 TITLE TO COLLATERAL; LIENS; TRANSFERS...........................11
5.3 LIEN PERFECTION AND PRIORITY....................................11
5.4 COVENANTS REGARDING LIEN WAIVERS................................12
5.5 REPRESENTATIONS AND WARRANTIES REGARDING PLEDGED COLLATERAL.....12
5.6 COVENANTS REGARDING PLEDGED COLLATERAL..........................12
5.7 MAINTENANCE OF INSURANCE WITH RESPECT TO COLLATERAL.............13
SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES.............................14
6.1 EXISTENCE.......................................................14
6.2 AUTHORIZATION...................................................14
6.3 ENFORCEABILITY..................................................14
6.4 LITIGATION; PROCEEDINGS.........................................14
6.5 TAXES...........................................................14
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6.6 TITLE...........................................................15
6.7 CONSENTS; APPROVALS.............................................15
6.8 LAWFUL OPERATIONS...............................................15
6.9 ENVIRONMENTAL COMPLIANCE........................................15
6.10 ENVIRONMENTAL LAWS AND PERMITS.................................15
6.11 ERISA..........................................................16
6.12 NO DEFAULTS; LABOR DISPUTES....................................16
6.13 FINANCIAL STATEMENTS...........................................16
6.14 INTELLECTUAL PROPERTY..........................................17
6.15 STRUCTURE; CAPITALIZATION......................................17
6.16 INSURANCE......................................................17
6.17 VALUE; SOLVENCY................................................17
6.18 INVESTMENT COMPANY ACT STATUS..................................17
6.19 REGULATION U/REGULATION X COMPLIANCE...........................17
6.20 INSURANCE LICENSES.............................................17
6.21 FULL DISCLOSURE................................................18
SECTION 7 COVENANTS OF THE BORROWER..........................................18
7.1 REPORTING AND NOTICE COVENANTS..................................18
7.2 AFFIRMATIVE COVENANTS...........................................21
7.3 NEGATIVE COVENANTS..............................................24
7.4 FINANCIAL COVENANTS.............................................32
SECTION 8 EVENTS OF DEFAULT..................................................33
8.1 PAYMENT.........................................................33
8.2 REPRESENTATIONS AND WARRANTIES..................................33
8.3 VIOLATION OF CERTAIN COVENANTS..................................33
8.4 VIOLATION OF FINANCIAL COVENANTS................................33
8.5 CROSS-DEFAULT...................................................33
8.6 CHANGE IN CONTROL...............................................34
8.7 TERMINATION OF EXISTENCE........................................34
8.8 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT;
SECURITY........................................................34
8.9 ERISA...........................................................34
8.10 JUDGMENTS......................................................34
8.11 FINANCIAL IMPAIRMENT...........................................34
SECTION 9 REMEDIES...........................................................35
9.1 ACCELERATION; TERMINATION.......................................35
9.2 AUTOMATIC ACCELERATION AND TERMINATION..........................35
9.3 GENERAL RIGHTS AND REMEDIES OF AGENT AND THE LENDERS............35
9.4 ADDITIONAL REMEDIES.............................................35
9.5 SET-OFF.........................................................37
9.6 ACTIONS IN RESPECT OF PLEDGED COLLATERAL........................37
9.7 PRIVATE SALE....................................................38
9.8 AUTHORITY TO EXECUTE TRANSFERS..................................38
9.9 REMEDIES CUMULATIVE.............................................38
9.10 APPOINTMENT OF ATTORNEY-IN-FACT................................38
9.11 LIMITATIONS ON REMEDIES IMPOSED BY INSURANCE LAWS..............39
SECTION 10 SUBSIDIARY GUARANTY...............................................39
10.1 GUARANTEED OBLIGATIONS.........................................39
10.2 MAXIMUM LIABILITY..............................................39
10.3 GUARANTY UNCONDITIONAL.........................................39
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10.4 DISCHARGE; REINSTATEMENT.......................................40
10.5 WAIVER.........................................................40
10.6 STAY OF ACCELERATION...........................................40
10.7 SUBROGATION AND CONTRIBUTION RIGHTS............................41
SECTION 11 THE AGENT.........................................................41
11.1 THE AGENT......................................................41
11.2 NATURE OF APPOINTMENT..........................................41
11.3 AGENT AS LENDER; OTHER TRANSACTIONS............................41
11.4 INSTRUCTIONS FROM LENDERS......................................42
11.5 LENDER'S DILIGENCE.............................................42
11.6 NO IMPLIED REPRESENTATIONS.....................................42
11.7 SUB-AGENTS.....................................................42
11.8 AGENT'S DILIGENCE..............................................42
11.9 NOTICE OF DEFAULT..............................................42
11.10 AGENT'S LIABILITY.............................................43
11.11 AGENT'S INDEMNITY.............................................43
11.12 RESIGNATION OF AGENT..........................................43
SECTION 12 INDEMNITIES.......................................................44
12.1 INCREASED COSTS................................................44
12.2 RISK-BASED CAPITAL.............................................44
12.3 TAXES..........................................................44
12.4 LOSSES.........................................................46
12.5 INDEMNIFICATION FOR REQUESTS...................................47
12.6 GENERAL INDEMNITY..............................................47
12.7 ENVIRONMENTAL INDEMNITY........................................47
12.8 CERTIFICATE FOR INDEMNIFICATION................................48
SECTION 13 GENERAL...........................................................48
13.1 AMENDMENTS AND WAIVERS.........................................48
13.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT........................48
13.3 CUMULATIVE PROVISIONS..........................................49
13.4 BINDING EFFECT.................................................49
13.5 COSTS AND EXPENSES.............................................49
13.6 SURVIVAL OF PROVISIONS.........................................50
13.7 CAPTIONS.......................................................50
13.8 SHARING OF INFORMATION; CONFIDENTIALITY........................50
13.9 INTEREST RATE LIMITATION.......................................50
13.10 LIMITATION OF LIABILITY.......................................51
13.11 ILLEGALITY....................................................51
13.12 NOTICES.......................................................51
13.13 GOVERNING LAW.................................................52
13.14 ENTIRE AGREEMENT..............................................52
13.15 JURY TRIAL WAIVER.............................................52
13.16 JURISDICTION..................................................52
13.17 VENUE; INCONVENIENT FORUM.....................................53
13.18 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE.............53
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EXHIBITS AND SCHEDULES
Exhibit A-1 (Form of Term Note A)
Exhibit A-2 (Form of Term Note B)
Exhibit B (Form of Rate Conversion/Continuation Request)
Exhibit C (Form of Stock Pledge - Borrower with respect to Subsidiaries)
Annex I Definitions
Annex II Closing Condition
Annex III Disclosure Schedule
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CREDIT AND SECURITY AGREEMENT
Dated as of December 23, 2003
CERES GROUP, INC., a Delaware corporation, as the Borrower,
CERES ADMINISTRATORS, LLC, a Delaware limited liability company, CERES HEALTH
CARE, INC., a Delaware corporation, CONTINENTAL GENERAL CORPORATION, a Nebraska
corporation, and WESTERN RESERVE ADMINISTRATIVE SERVICES, INC., an Ohio
corporation, as Subsidiary Guarantors, NATIONAL CITY BANK and THE CIT
GROUP/EQUIPMENT FINANCING, INC., as Lenders, and NATIONAL CITY BANK, as Agent
for the Lenders under this Agreement, hereby agree as follows:
SECTION 1 DEFINITIONS; ACCOUNTING TERMS; GOVERNANCE PROVISIONS.
1.1 CERTAIN DEFINED TERMS.
Certain capitalized terms used in this Agreement and not
otherwise defined herein are defined on Annex I attached hereto and incorporated
herein by reference.
1.2 ACCOUNTING TERMS; CALCULATIONS.
All accounting and financial terms not specifically defined
herein shall be construed in accordance with GAAP as in effect from time to
time, except that such terms shall be construed in accordance with SAP as to
provisions relating to SAP. The financial statements to be furnished to the
Lenders pursuant hereto shall be made and prepared in accordance with SAP or
GAAP, as the case may be, consistently applied throughout the periods involved,
except as set forth in the notes thereto or as otherwise disclosed in writing by
the Borrower to the Agent and, in each case, consented to by the Agent.
1.3 CONSTRUCTION OF TERMS GENERALLY.
The definitions of terms in this Agreement shall apply equally
to the singular and plural forms of the terms defined. The words "include,"
"includes," and "including," shall be deemed to be followed by the phrase
"without limitation." The word "will" shall be construed to have the same
meaning as the word "shall." Unless the context otherwise requires, (a) any
definition of or reference to any agreement, instrument or other document herein
shall be construed as referring to such agreement, instrument, or other document
as from time to time amended, supplemented or otherwise modified, (b) any
reference herein to any Person shall be construed to include such Person's
successors and assigns, (c) the words "herein," "hereof," and "hereunder," and
words of similar import, shall be construed to refer to this Agreement in its
entirety and not any particular provision hereof, and (d) for the purpose of
computing periods of time from a specified date to a later specified date, the
word "from" means "from and including" and the words "to" and "until" each mean
"to but excluding".
SECTION 2 STATEMENT OF TERMS.
2.1 TERM FACILITY.
(a) TERM LOANS.
Subject to the terms and conditions of this Agreement, on
the Closing Date, each Lender severally agrees to make a loan on a term basis
(collectively, the "Term Loans") to the Borrower, which Term Loans will be
incurred in the entire amount of the Commitment in respect of each Lender. The
Term Loans may be comprised of one or more Borrowings, which the Borrower may
incur and maintain as, or may elect from time to time by
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delivery to the Agent of a Rate Conversion/Continuation Request as, Prime Rate
Borrowings or LIBOR Rate Borrowings. Each Borrowing shall be: (i) if a Prime
Rate Borrowing, in an aggregate amount of not less than One Hundred Thousand
Dollars ($100,000), and (ii) if a LIBOR Rate Borrowing, in an aggregate amount
of not less than Five Hundred Thousand Dollars ($500,000) or an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess thereof. The
Borrower may not have more than six (6) LIBOR Rate Borrowings outstanding at any
one time.
(b) TERM NOTES; LOAN ACCOUNT.
The Term Loans shall be evidenced by the Term Notes in the
form of Exhibit A-1 and Exhibit A-2 hereto. The Term Notes shall mature on the
respective Term Loan Maturity Dates and shall bear interest as provided in this
Agreement. The Term Loans may also be evidenced by each Lender's records of
disbursements and repayments ("Loan Accounts"), which records shall be, absent
manifest error, prima facie evidence of the Obligations of the Borrower in
respect of the Term Loans. Entries in such records shall not be a condition to
the Borrower's obligation to repay the Term Loans. Amounts repaid by the
Borrower in respect of the Term Loans may not be reborrowed.
(c) TERM LOAN A AND TERM LOAN B.
(i) Term Loan A shall be repaid in thirteen (13) quarterly
installments, commencing March 1, 2004, and continuing on the
first Business Day of each succeeding June, September,
December and March thereafter. From March 1, 2004 through
December 1, 2005, each payment shall be in the principal
amount of Two Hundred Fifty Thousand Dollars ($250,000). From
March 1, 2006 through December 1, 2006, each payment shall be
in the principal amount of Three Hundred Seventy Five Thousand
Dollars ($375,000). On March 1, 2007 the final payment shall
be in the principal amount of Five Hundred Thousand Dollars
($500,000), with any remaining principal balance payable in
full on March 1, 2007.
(ii) Term Loan B shall be repaid in eighteen (18)
quarterly installments, commencing March 1, 2004, and
continuing on the first Business Day of each succeeding June,
September, December and March thereafter. From March 1, 2004
through December 1, 2004, each payment shall be in the
principal amount of Three Hundred Twelve Thousand Five Hundred
Dollars ($312,500). From March 1, 2005 through December 1,
2006, each payment shall be in the principal amount of Three
Hundred Seventy Five Thousand Dollars ($375,000). From March
1, 2007 through December 1, 2007, each payment shall be in the
principal amount of Five Hundred Sixty Two Thousand Five
Hundred Dollars ($562,500). From March 1, 2008 through June 1,
2008 each payment shall be in the principal amount of One
Million Two Hundred Fifty Thousand Dollars ($1,250,000), with
any remaining principal balance payable in full on June 1,
2008.
(iii) Term Loan A and Term Loan B may be any combination
of Prime Rate Borrowings and LIBOR Rate Borrowings from time
to time. Borrower shall notify Agent at least three Business
Days prior to the Closing Date whether the Borrowings will be
Prime Rate Borrowings or LIBOR Rate Borrowings, or a
combination thereof. The Lenders, at the request of Borrower,
provided no Event of Default exists hereunder and subject to
the applicable notice and other provisions hereof, shall
convert a Prime Rate Borrowing to a LIBOR Rate Borrowing at
any time and shall convert a LIBOR Rate Borrowing to a Prime
Rate Borrowing or shall continue a LIBOR Rate Borrowing at the
end of any Interest Period.
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(iv) For each Borrowing comprised of a Prime Rate
Borrowing, Borrower shall pay interest on the unpaid principal
amount thereof outstanding from time to time from the date
thereof until paid, payable (A) quarterly commencing March 1,
2004, and continuing on the first Business Day of each
succeeding June, September, December and March and (B) on the
date such Prime Rate Borrowings shall be converted or paid in
full (whether at maturity, by reason of acceleration or
otherwise) at a rate per annum which shall be the Prime Rate
from time to time in effect plus the Applicable Margin. Any
change in such rate resulting from a change in the Prime Rate
shall be effective immediately from and after such change in
the Prime Rate. For each Borrowing comprised of a LIBOR Rate
Borrowing, Borrower shall pay interest on the unpaid principal
amount thereof outstanding from time to time at a rate per
annum equal to the London Interbank Offered Rate plus the
Applicable Margin, payable (X) on the last day of each
Interest Period and (Y) on the date such LIBOR Rate Borrowing
shall be converted to Prime Rate Borrowings or paid in full
(whether at maturity, by reason of acceleration or otherwise).
The Agent shall give prompt notice to each of the Lenders and
the Borrower of the applicable interest rate determined by the
Agent for purposes of LIBOR Rate Borrowings.
(v) The Borrower shall have the right at any time or from
time to time to prepay (on a pro rata basis for each Lender)
all or any part of the principal amount of the Borrowings then
outstanding. Borrower shall give Agent written notice of
prepayment of any Prime Rate Borrowings by not later than
11:00 A.M. (Columbus, Ohio time) on the Business Day such
prepayment is to be made and written notice of the prepayment
of any LIBOR Rate Borrowings not later than 1:00 P.M.
(Columbus, Ohio time) three Business Days before the Business
Day on which such prepayment is to be made. Prepayments
aggregating more than $2,000,000 made prior to the first
anniversary of the Closing Date shall be accompanied by a
prepayment fee equal to two percent (2%) of the principal
amount so prepaid. In addition, Borrower shall immediately pay
to Agent, for the account of the Lenders, the amount of any
additional reasonable costs or expenses incurred by Agent or
the Lenders in connection with the prepayment, upon Borrower's
receipt of a written statement from Agent. Each prepayment of
a LIBOR Rate Borrowing shall be in the aggregate principal sum
of not less than Five Hundred Thousand Dollars ($500,000).
Each prepayment of principal shall be applied to the principal
installments due in connection with the Term Notes pro rata
among all of their respective remaining maturities.
2.2 FUNDING OF TERM LOANS.
Each Lender shall, before the close of business on the Closing
Date, make available to the Agent, in immediately available funds, that portion
of the Term Loans equal to such Lender's Commitment. Upon the Agent's receipt of
the funds representing the Term Loans and subject to the terms of this Agreement
and the fulfillment of the conditions set forth in Section 3 of this Agreement,
the Agent will make such funds available to the Borrower, in immediately
available finds, by wire transfer or intrabank transfer to such account of the
Borrower as the Agent and the Borrower shall have agreed.
2.3 RATE CONVERSION AND RATE CONTINUATION.
The Borrower shall have the right to convert or continue all
or a portion of the Borrowings into, or continue all or any portion of the
Borrowings as, LIBOR Rate Borrowings or Prime Rate Borrowings, as the case may
be, upon request delivered by the Borrower to the Agent not later than 11:00
a.m. Columbus, Ohio time as follows: (a) on the Business Day that the Borrower
desires to convert all or a portion of a LIBOR Rate Borrowing into a Prime Rate
3
Borrowing, (b) three Business Days prior to the Business Day on which the
Borrower desires to convert a Prime Rate Borrowing into a LIBOR Rate Borrowing,
and (c) three Business Days prior to the Business Day on which the Borrower
desires to continue a LIBOR Rate Borrowing for an additional Interest Period;
provided, however, that each such Rate Conversion or Rate Continuation shall be
subject to the following:
(i) if less than all of the outstanding principal amount
of a Borrowing is converted or continued, the aggregate
principal amount of such Borrowings converted or continued
shall be: (A) in the case of LIBOR Rate Borrowings, not less
than Five Hundred Thousand Dollars ($500,000), or an integral
multiple of One Hundred Thousand Dollars ($100,000) in excess
thereof and (B) in the case of Prime Rate Borrowings, not less
than One Hundred Thousand Dollars ($100,000);
(ii) each Rate Conversion or Rate Continuation shall be
effected as if each Lender were applying the proceeds of the
Borrowings resulting from such Rate Conversion or Rate
Continuation to the Borrowings being converted or continued,
as the case may be, and the accrued interest on any such
Borrowings (or portion thereof) being converted or continued
shall be paid to the Agent on behalf of each Lender by the
Borrower at the time of such Rate Conversion or Rate
Continuation;
(iii) LIBOR Rate Borrowings shall not be converted or
continued at a time other than the end of the Interest Period
applicable thereto unless the Borrower shall pay, upon demand,
any amounts due to the Agent pursuant to Section 12.4 of this
Agreement;
(iv) Borrowings may not be converted into or continued as
LIBOR Rate Borrowings if the Interest Period will expire on or
after the applicable Term Loan Maturity Date;
(v) after and during the continuance of a Potential
Default, and after the occurrence of an Event of Default which
is continuing and has not been waived in accordance herewith,
Borrowings may not be converted into or continued as LIBOR
Rate Borrowings; and
(vi) Borrowings that cannot be converted into or continued
as LIBOR Rate Borrowings by reason of this Section shall be
automatically converted at the end of the Interest Period into
Prime Rate Borrowings.
Each such request for conversion or continuation (a "Rate Conversion/
Continuation Request") shall be a written or telephonic notice (in the case of a
telephonic notice, promptly confirmed in writing if requested by the Agent).
Each written Rate Conversion/Continuation Request or written confirmation
thereof shall be substantially in the form of Exhibit B attached hereto, signed
by the Borrower and transmitted to the Agent by telecopier. Each written and
telephonic Rate Conversion/Continuation Request and each confirmation thereof
shall specify: (A) the amount of the Borrowing that the Borrower requests be
converted or continued, (B) the Type of Borrowings into which such Borrowings
are to be converted or continued, and (C) if such notice requests a Rate
Conversion, the date of the Rate Conversion (which shall be a Business Day). The
Agent may rely on such telephonic Rate Conversion/Continuation Request to the
same extent that the Agent may rely on a written Rate Conversion/Continuation
Request. Each Rate Conversion/Continuation Request, whether telephonic or
written, shall be irrevocable and binding on the Borrower and subject the
Borrower to the indemnification provisions of Section 12 of this Agreement. The
Borrower shall bear all risks related to giving any Rate Conversion/Continuation
Request telephonically.
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2.4 INTEREST ON LOANS.
(a) INTEREST RATE; DEFAULT INTEREST.
The Borrower shall pay interest on the unpaid principal
amount of each Term Loan from the date such Term Loan is advanced until
the principal amount thereof shall have been paid in full as provided in
Section 2.1(c). If any principal, interest or fees due under this
Agreement shall not be paid when due or if any amounts due under any
Term Note shall not be paid at maturity, whether such maturity occurs by
acceleration or otherwise, or if there shall otherwise occur an Event of
Default which is continuing and has not been waived then, at the
election of the Lenders, (a) the principal of each outstanding Term Loan
and, to the extent permitted by Law, the unpaid interest thereon shall
bear interest, payable on demand, at a rate per annum equal at all times
to 2% per annum in excess of the interest rate otherwise then payable.
(b) FAILURE OF BORROWER TO ELECT.
If the Borrower shall not have given notice in accordance
with Section 2.3 of this Agreement to continue any LIBOR Rate Borrowings
into a subsequent Interest Period (and shall not have otherwise
delivered a Rate Conversion/Continuation Request), then, at the end of
the Interest Period applicable to such LIBOR Rate Borrowings (unless
such LIBOR Rate Borrowings are repaid pursuant to the terms hereof), the
Borrower shall be deemed to have converted such LIBOR Rate Borrowings to
Prime Rate Borrowings.
2.5 FEES.
The Borrower agrees to pay to each Lender an origination fee
of one percent (1%) of such Lender's Commitment, payable on the Closing Date.
All fees shall be paid in immediately available funds to the Agent for
distribution to the Lenders. Once paid, to the extent permitted by applicable
Law and absent manifest error on the part of the Agent, none of such fees shall
be refundable under any circumstances.
2.6 PAYMENTS AND COMPUTATIONS.
(a) PAYMENTS.
The Borrower shall make all payments to be made under this
Agreement with respect to the Obligations hereunder not later than 12:00
noon (Columbus, Ohio time) on the day when due, in immediately available
funds, without setoff, counterclaim, defense or deduction of any kind,
to the Agent for distribution to the Lenders and application thereof by
the Lenders. Payments received after 12:00 noon (Columbus, Ohio time)
shall be deemed to have been received on the next succeeding Business
Day. After receipt of any such payment, the Agent will cause to be
distributed on the day of such receipt like funds relating to such
payment to each of the Lenders. At the time of the Borrower's making any
non-scheduled payment hereunder, the Borrower shall specify to the Agent
the Obligations of the Borrower to which such payment is to be applied
(which, in the case of prepayments of principal, shall be pro-rata among
the Lenders). If the Borrower does not specify an application for such
payment or if an Event of Default has occurred and is continuing which
has not been waived, the Agent may distribute such payment to the
Lenders for application to such Obligations as the Lenders shall have
directed; provided, however, the Agent will use reasonable efforts to
avoid an application of a payment which causes early prepayment of a
LIBOR Rate Borrowing prior to expiration of its Interest Period.
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(b) AUTHORIZATION TO CHARGE BANKING ACCOUNTS.
If and to the extent any payment owed by the Borrower to
any Lender is not made when due, the Borrower hereby authorizes the
Agent or such Lender to charge from time to time against any or all of
the accounts of the Borrower with the Agent or such Lender any amount so
due. Notice of any such charge shall be given promptly to the Borrower
by the Agent or such Lender, as the case may be.
(c) COMPUTATIONS OF INTEREST AND FEES.
All computations of interest shall be made by the Agent on
the basis of a year of 360 days in each case for the actual number of
days elapsed (commencing on the day such Borrowing was advanced but
excluding the day such Borrowing shall be paid in full). Each
determination by the Agent of interest, fees or other amounts of
compensation due hereunder shall be rebuttably presumed to be correct.
Whenever any payment hereunder or under the Term Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made
on the next succeeding Business Day. Any such extension or reduction of
time shall in such case be included in the computation of payment of
interest, fees or other compensation, as the case may be.
2.7 LIBOR RATE LOANS.
(a) UNASCERTAINABLE RATE; ILLEGALITY; INCREASED COSTS.
In the event that (x) in the case of clause (i) below, the
Agent or (y) in the case of clauses (ii) and (iii) below, any Lender,
shall have determined on a reasonable basis (which determination shall,
absent manifest error, be final and conclusive and binding upon all
parties hereto):
(i) on any date for determining the LIBOR Rate for LIBOR
Rate Borrowings that, by reason of any changes arising after
the Closing Date affecting the London interbank eurocurrency
market, adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the
definition of the "London Interbank Offered Rate"; or
(ii) at any time, that such Lender shall incur increased
costs or reductions in the amounts received or receivable
hereunder in an amount which such Lender deems material with
respect to any LIBOR Rate Borrowings (other than any increased
cost or reduction resulting from the imposition of or a change
in the rate of taxes or similar charges) because of any change
since the Closing Date in any applicable Law, governmental
rule, regulation, guideline, order or request (whether or not
having the force of Law), or in the interpretation or
administration thereof and including the introduction of any
new Law or governmental rule, regulation, guideline, order or
request (such as, for example, a change in official reserve
requirements, but, in all events, excluding reserves
includable in the "London Interbank Offered Rate" pursuant to
the definition thereof); or
(iii) at any time, that the making or continuance of any
LIBOR Rate Borrowing denominated in Dollars has become
unlawful by compliance by such Lender in good faith with any
change since the Closing Date in any Law, governmental rule,
regulation, guideline or order, or the interpretation or
application thereof, or would conflict with any thereof not
having the force of Law but with which such Lender customarily
complies;
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THEN, such Lender (or the Agent in the case of clause (i) above) shall:
(x) on such date and (y) within 10 Business Days of the date on which
such event no longer exists, give notice (by telephone confirmed in
writing) to the Borrower and to the Agent of such determination (which
notice the Agent shall promptly transmit to each Lender). Thereafter
(A) in the case of clause (i) above, LIBOR Rate Borrowings shall no
longer be available until such time as the Agent notifies the Borrower
and the Lenders that the circumstances giving rise to such notice no
longer exist, and any Rate Conversion/Continuation Request given by the
Borrower with respect to LIBOR Rate Borrowings which have not yet been
incurred or converted shall be deemed rescinded by the Borrower, (B) in
the case of clause (ii) above, the Borrower shall pay to such Lender,
upon written demand therefor, such additional amounts (in the form of
an increased rate of, or a different method of calculating, interest or
otherwise as such Lender shall determine) as shall be required to
compensate such Lender for such increased costs or reductions in
amounts receivable hereunder (a written notice as to the additional
amounts owed to such Lender, showing the basis for the calculation
thereof, by such Lender shall, absent manifest error, be final and
conclusive and binding upon all parties hereto) and (C) in the case of
clause (iii) above, the Borrower shall take one of the actions
specified in Section 2.7(b) hereof as promptly as possible and, in any
event, within the time period required by Law.
(b) CANCELLATION OF REQUESTS; CONVERSION OF OUTSTANDINGS.
At any time that any LIBOR Rate Borrowing is affected by
the circumstances described in Section 2.7(a)(ii) or Section 2.7(a)(iii)
above, the Borrower may upon at least one Business Day's notice to the
Agent, require the affected Lender to convert each such LIBOR Rate
Borrowing into a Prime Rate Borrowing, with such conversion to be
effective on the last day of the Interest Period, if the affected Lender
may lawfully continue to maintain and fund such Borrowing until such
last day, or immediately, if the affected Lender is not legally
permitted to maintain and fund such Borrowing until such last day;
provided, that if more than one Lender is affected at any time, then all
affected Lenders must be treated the same pursuant to this Section
2.7(b).
2.8 PRO RATA TREATMENT OF LENDERS.
If, on any date on which any payment is due to the Lenders,
the Borrower fails to make such payments in full, each such payment actually
made shall be allocated among the Lenders ratably in accordance with each
Lender's Ratable Portion.
SECTION 3 CONDITIONS OF LENDING.
3.1 CONDITIONS PRECEDENT TO CLOSING
The effectiveness of this Agreement and the obligation of the
Lenders to make the Term Loans are subject to the conditions precedent that the
conditions set forth in Annex II, attached hereto and incorporated herein by
reference shall have been satisfied, as determined by the Agent, in its sole
discretion, on or before the Closing Date and the Agent shall have received on
or before the Closing Date the documents and deliveries set forth on Annex II.
3.2 CONDITIONS PRECEDENT TO RATE CONTINUATION/CONVERSION REQUESTS.
The obligation of the Lenders to accept a Rate Conversion/Rate
Continuation Request are subject to the conditions precedent that, as of the
date of such Rate Continuation/Conversion Request, and before and after giving
effect thereto:
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(a) REPRESENTATION BRINGDOWN.
The representations and warranties contained in Sections
5.1, 5.2, 5.3 and 5.5 of this Agreement are true and correct in all
material respects on and as of such date with the same effect as though
made on and as of such date, except to the extent such representations
and warranties expressly relate to an earlier date; and
(b) NO DEFAULT; COMPLIANCE WITH TERMS.
The Borrower shall be in compliance in all material
respects with all other terms and provisions set forth herein and in
each other Loan Document on its part to be observed or performed, and at
the time of and immediately after such date, no Potential Default or
Event of Default shall have occurred and be continuing; and
(c) NO MATERIAL ADVERSE CHANGE.
There shall have been no event which has had, or could
reasonably be expected to have, a Material Adverse Effect; and
(d) OTHER DELIVERIES.
The Agent shall have received such other approvals or
documents as the Agent may reasonably request consistent with the terms
of this Agreement.
Each Rate Continuation/Conversion Request shall constitute a representation and
warranty by the Borrower that on such date, the statements in clauses (a)
through (c) above are true and correct as of such date and that the actions
required under clause (d) have in fact been taken as of such date.
SECTION 4 SECURITY INTEREST IN COLLATERAL; COLLATERAL REQUIREMENTS.
4.1 GRANT OF SECURITY INTEREST.
To secure the prompt payment and performance of the Secured
Obligations, the Borrower hereby grants, and each Subsidiary Guarantor hereby
grants, to the Agent, for itself in its capacity as Agent and for the benefit of
the Lenders (including the Agent in its capacity as a Lender), a continuing
security interest in and to and a pledge of all of the following assets of the
Borrower and such Subsidiary Guarantor, whether now owned or existing or
hereafter acquired or arising and wheresoever located: (a) all Equipment and
fixtures, (b) all Pledged Collateral, (c) all accessions to, substitutions for,
and all replacements, products and Proceeds of the above-referenced property
including, but not limited to, proceeds of insurance policies insuring such
property, and proceeds of any insurance, indemnity, warranty or guaranty payable
to the Borrower or such Subsidiary Guarantor and (d) all books, records, and
other property (including, but not limited to, files, printouts, software,
magnetic media, and other materials and records) pertaining to any such
above-referenced property; provided, however, that the foregoing grant of a
security interest and pledge shall not include a security interest in or pledge
of Excluded Property and provided, further, that if and when the prohibition
which prevents the granting by the Borrower or such Subsidiary Guarantor to the
Agent of a security interest in such Excluded Property is removed or otherwise
terminated, the Agent will be deemed to have, and at all times from and after
the date hereof to have had, a security interest in and pledge of such Excluded
Property, as the case may be, and that, notwithstanding anything set forth
herein to the contrary, the Agent will be deemed to have, and at all times from
and after the date hereof to have had, a security interest in and pledge of the
proceeds of such Excluded Property.
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4.2 PERFECTION.
The Borrower and each Subsidiary Guarantor shall execute such
financing statements provided for by applicable Law, and otherwise take such
other action and execute such assignments or other instruments or documents, in
each case as the Agent may reasonably request, to evidence, perfect or record
the Agent's security interest in the Collateral or to enable the Agent to
exercise and enforce its rights and remedies under this Agreement with respect
to any Collateral. The Borrower and each Subsidiary Guarantor hereby authorizes
the Agent on behalf of the Agent and the Lenders to execute and file any such
financing statement or continuation statement on the Borrower's or such
Subsidiary Guarantor's behalf. The parties acknowledge that a carbon,
photographic, or other reproduction of this Agreement shall be sufficient as a
financing statement to the extent permitted by Law.
4.3 CHANGES AFFECTING PERFECTION.
Neither the Borrower nor any Subsidiary Guarantor shall,
without giving the Agent at least twenty (20) days prior notice thereof: (a)
make any change in any location where Equipment of the Borrower or such
Subsidiary Guarantor is maintained, or locate any of such Equipment at any new
locations, (b) change its state of incorporation, or (c) make any change in its
name or type of entity (i.e., corporation, limited liability company, limited
partnership, etc.).
4.4 PROTECTION OF COLLATERAL; REIMBURSEMENT.
All reasonable insurance expenses and expenses of protecting,
storing, warehousing, insuring, handling, maintaining, and shipping any
Collateral, any and all excise, property, sales, use, or other taxes imposed by
any federal, state, or local authority on any of the Collateral, or in respect
of the sale thereof, or otherwise in respect of the Borrower's or each
Subsidiary Guarantor's business operations which, if unpaid, could result in the
imposition of any Lien upon the Collateral, shall be borne and paid by the
Borrower or such Subsidiary Guarantor, as the case may be, subject to the
provisions of Section 7.2(i). If the Borrower or such Subsidiary Guarantor fails
to pay any portion thereof promptly when due, except as may otherwise be
permitted under this Agreement or under any of the other Loan Documents, the
Agent, at its option, may, but shall not be required to, pay the same, provided
such amount remains unpaid for ten (10) Business Days after the Agent has
notified the Borrower of such failure. All sums so paid or incurred by the Agent
for any of the foregoing and any and all other sums for which the Borrower or
any Subsidiary Guarantor may become liable under this Agreement and all costs
and expenses (including reasonable attorneys' fees and paralegals' fees, legal
expenses, and court costs, expenses and other charges related thereto) which the
Agent may incur in enforcing or protecting its Liens on or rights and interests
in the Collateral or any of its rights or remedies under this Agreement or any
other agreement between the parties to this Agreement or in respect of any of
the transactions to be had under this Agreement shall be repayable on demand.
Unless otherwise provided by Law, the Agent shall not be liable or responsible
in any way for the safekeeping of any of the Collateral or for any loss or
damage thereto or for any diminution in the value thereof, or for any act or
default of any warehouseman, carrier, forwarding agency, or other Person
whomsoever.
4.5 EXAMINATION AND INSPECTION.
During regular business hours and after reasonable notice to
the Borrower, the Agent (by any of its officers, employees, agents,
representatives, or designees) shall have the right, at the Borrower's expense,
to inspect the Collateral and to conduct an examination of all books, records,
journals, orders, receipts, or other correspondence related thereto (and to make
extracts or copies thereof as the Agent may request) and to inspect the premises
upon which any of the Collateral is located for the purpose of verifying the
quantity, value, and condition of, or any other matter relating to, the
Collateral.
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4.6 INTENTIONALLY DELETED.
4.7 STATUS OF COLLATERAL.
The Borrower agrees to advise the Agent promptly upon becoming
aware of: (a) any event which, singly or in the aggregate, could reasonably be
expected to have a material and adverse effect on the value of the Collateral,
or (b) any event which, singly or in the aggregate, could reasonably be expected
to materially adversely effect the validity of the security interests granted to
the Agent herein.
4.8 REINSTATEMENT.
The provisions of this Section 4 shall remain in full force
and effect and continue to be effective in respect of the Borrower and each
Subsidiary Guarantor should any petition be filed by or against the Borrower or
such Subsidiary Guarantor for liquidation or reorganization, should the Borrower
or such Subsidiary Guarantor become insolvent or make an assignment for the
benefit of creditors or should a receiver or trustee be appointed for all or any
part of the Borrower's or such Subsidiary Guarantor's assets or should any other
Financial Impairment relating to the Borrower or such Subsidiary Guarantor
occur, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable Law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference", "fraudulent conveyance", or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall, to the extent permitted by applicable Law, be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
4.9 FURTHER ASSURANCES.
The Borrower and each Subsidiary Guarantor will, at the
expense of the Borrower, make, execute, endorse, acknowledge, file and/or
deliver to the Agent from time to time such conveyances, financing statements,
transfer endorsements, powers of attorney, certificates, and other assurances or
instruments and take such further steps relating to the Collateral covered by
this Agreement and the other Loan Documents as the Agent may reasonably require.
4.10 TERMINATION OF SECURITY INTEREST; RELEASE OF COLLATERAL.
(a) PAYMENT IN FULL OF THE SECURED OBLIGATIONS.
Upon the payment in full of all of the Secured Obligations:
(a) the security interests granted to the Agent under this Agreement and under
any other Loan Documents shall terminate, (b) all rights to the Collateral shall
revert to the Borrower or the Subsidiary Guarantors, (c) the Agent will, at the
Borrower's expense, execute and deliver all documents as the Borrower may
reasonably request to evidence the termination of such security interests and
the release of such Collateral, and (d) this Agreement and all of the other Loan
Documents will be terminated, and the Borrower will have no further liabilities
or obligations thereunder (except any liabilities and/or obligations which under
the terms of this Agreement or any Loan Document survive termination thereof).
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(b) PARTIAL RELEASES.
Each of the Lenders hereby irrevocably authorize the Agent, at
its option and in its discretion, to release any Lien granted to or held by the
Agent upon any property covered by this Agreement or the other Loan Documents
which: (i) constitutes property being sold or disposed of if the Borrower
certifies to the Agent that the sale or disposition is made in compliance with
the provisions of this Agreement (and the Agent may rely in good faith
conclusively on any such certificate, without further inquiry), (ii) constitutes
property leased to the Borrower or a Subsidiary Guarantor under a lease which
has expired or been terminated in a transaction permitted under this Agreement
or is about to expire and which has not been, and is not intended by the
Borrower or such Subsidiary Guarantor, as the case may be, to be renewed or
extended, or (iii) constitutes property covered by Liens with lien priority
superior to those Liens in favor or for the benefit of the Lenders or
constitutes property as to which the Lenders have otherwise consented in writing
to the sale thereof or such transfer is permitted under this Agreement.
SECTION 5 REPRESENTATIONS, WARRANTIES AND COVENANTS RELATING TO
COLLATERAL.
5.1 GENERAL REPRESENTATIONS AS TO COLLATERAL.
The Borrower and each of the Subsidiary Guarantors represent
that the Disclosure Schedule sets forth: (a) the place of incorporation of the
Borrower and each of the Subsidiary Guarantors, (b) all locations at which any
Collateral of the Borrower and each of the Subsidiary Guarantors are located,
(c) the locations of the Borrower's and each of its Subsidiary Guarantor's
registered offices, other offices and places of business during the two (2)
years prior to the Closing Date, and (d) all trade names, assumed names,
fictitious names and other names used by the Borrower and each of the Subsidiary
Guarantors during the two (2) years prior to the Closing Date.
5.2 TITLE TO COLLATERAL; LIENS; TRANSFERS.
The Borrower and each of the Subsidiary Guarantors have good
and indefeasible title to and ownership of the Collateral, free and clear of all
Liens, except for Liens permitted under Section 7.3(d). Except as permitted by
Section 7.3(d) or 7.3(a) hereof or as otherwise provided herein or in any other
Loan Document, the Borrower and the Subsidiary Guarantors shall not encumber,
pledge, mortgage, grant a security interest in, assign, sell, lease or otherwise
dispose of or transfer, whether by sale, merger, consolidation, liquidation,
dissolution or otherwise, any of the Collateral.
5.3 LIEN PERFECTION AND PRIORITY.
From and after the Closing Date, by reason of the filing of
financing statements, assignments of financing statements and termination
statements in all requisite governmental offices, this Agreement and the other
Loan Documents will create and constitute a valid and perfected first priority
security interest (except as permitted by this Agreement or the other Loan
Documents) in and Lien on that portion of the Collateral which can be perfected
by such filing and by the execution and delivery of this Agreement and the other
Loan Documents, which security interest will be enforceable against the Borrower
and the Subsidiary Guarantors as security for payment of all Secured
Obligations. From and after the Closing Date, by reason of the delivery to the
Agent of all Collateral consisting of Certificated Securities, in each case
properly endorsed for transfer to the Agent or in blank, this Agreement and the
other Loan Documents will create and constitute a valid and perfected first
priority security interest in and Lien (except as permitted by this Agreement or
the other Loan Documents) on that portion of the Collateral which can be
perfected by such possession and endorsement and by the execution and
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delivery of this Agreement and the other Loan Documents, which security interest
will be enforceable against the Borrower and the Subsidiary Guarantors as
security for payment of all Secured Obligations.
5.4 COVENANTS REGARDING LIEN WAIVERS.
The Borrower and each of the Subsidiary Guarantors will not
create, permit or suffer to exist, and will defend the Collateral against and
take such other action as is necessary to remove, any Lien, claim or right, in
or to the Collateral, other than the Liens permitted by Section 7.3(d) of this
Agreement, and will defend the right, title and interest of the Agent in and to
any of the Borrower's or such Subsidiary Guarantors' rights to the Collateral
and in and to the Proceeds and products thereof against the claims and demands
of all Persons whomsoever.
5.5 REPRESENTATIONS AND WARRANTIES REGARDING PLEDGED COLLATERAL.
With respect to the Pledged Collateral: (a) the Borrower and
each Subsidiary Guarantor is the record and beneficial owner of the Pledged
Collateral pledged by it hereunder constituting Certificated Securities, (b) the
Pledged Stock and Pledged LLC Interests pledged hereunder constitutes that
percentage of the issued and outstanding equity of all classes of each issuer
thereof as set forth on the Disclosure Schedule; (c) all of the Pledged Stock
and Pledged LLC Interests have been duly and validly issued and are fully paid
and nonassessable; (d) all Pledged Stock and Pledged LLC Interests of the
Borrower and any Subsidiary Guarantor as of the Closing Date are listed on the
Disclosure Schedule; (e) all Pledged Collateral and, if applicable, any
Additional Pledged Collateral, consisting of Certificated Securities has been
delivered to the Agent in accordance with Section 5.6; and (f) other than the
Pledged LLC Interests that constitute General Intangibles, there is no Pledged
Collateral other than that represented by Certificated Securities in the
possession of the Agent.
5.6 COVENANTS REGARDING PLEDGED COLLATERAL.
(a) DELIVERY AND MAINTENANCE OF PLEDGED COLLATERAL.
The Borrower and each Subsidiary Guarantor will deliver to
the Agent all certificates representing or evidencing any Pledged
Collateral (including Additional Pledged Collateral), whether now
arising or hereafter acquired, in suitable form for transfer by delivery
or, as applicable, accompanied by the Borrower's or such Subsidiary
Guarantor's endorsement, where necessary, or duly executed instruments
of transfer or assignment in blank, all in form and substance
satisfactory to the Agent, together, in respect of any such Pledged
Collateral, with a Pledge and Security Agreement, duly executed and
substantially in the form of Exhibit C, or such other documentation
acceptable to the Agent. The Agent shall have the right, at any time
after an Event of Default in its discretion and without notice to the
Borrower or any Subsidiary Guarantor, to transfer to or to register in
its name or in the name of its nominees any or all of the Pledged
Collateral.
(b) PAYMENT OF DIVIDENDS AND DISTRIBUTIONS.
Except as provided in Section 9, the Borrower or the
applicable Subsidiary Guarantor shall be entitled to receive all
dividends paid in respect of the Pledged Collateral (other than
liquidating dividends). Any sums paid upon or in respect of any of the
Pledged Collateral upon the liquidation or dissolution of any issuer of
any of the Pledged Collateral, any distribution of capital made on or in
respect of any of the Pledged Collateral or any property distributed
upon or with respect to any of the Pledged Collateral pursuant to the
recapitalization or reclassification of the capital of any issuer of
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Pledged Collateral or pursuant to the reorganization thereof shall,
unless otherwise subject to a perfected security interest in favor of
the Agent, be delivered to the Agent to be held by it hereunder as
additional collateral security for the Secured Obligations. If any sums
of money or property so paid or distributed in respect of any of the
Pledged Collateral shall be received by the Borrower or such Subsidiary
Guarantor as a result of a liquidation or dissolution of the Borrower or
any such Subsidiary Guarantor, the Borrower or such Subsidiary Guarantor
shall, until such money or property is paid or delivered to the Agent,
hold such money or property in trust for the Agent, segregated from
other funds of the Borrower and of such Subsidiary Guarantor, as
additional security for the Obligations.
(c) VOTING RIGHTS.
Except as provided in Section 9, the Borrower or the
applicable Subsidiary Guarantor will be entitled to exercise all voting,
consent and corporate rights with respect to the Pledged Collateral.
(d) CONSENT TO PLEDGE OF PLEDGED COLLATERAL.
In the case of a Subsidiary Guarantor which is an issuer
of Pledged Collateral, such Subsidiary Guarantor agrees to be bound by
the terms of this Agreement relating to the Pledged Collateral issued by
it and will comply with such terms insofar as such terms are applicable
to it. In the case of the Borrower or each Subsidiary Guarantor which is
a member or issuer of an LLC, the Borrower or such Subsidiary Guarantor
hereby consents to the extent required by the applicable LLC Agreement
to the pledge by the Borrower or each other Subsidiary Guarantor,
pursuant to the terms hereof, of the Pledged LLC Interests in such LLC
and to the transfer of such Pledged LLC Interests to the Agent or its
nominee and, upon the occurrence of an Event of Default which is
continuing and has not been waived to the substitution of the Agent or
its nominee as a substituted member of the LLC with all the rights,
powers and duties of a member of the LLC in question.
(e) AMENDMENTS.
None of the Borrower or any Subsidiary Guarantor will
agree to any amendment of an LLC Agreement that in any way adversely
affects the perfection of the security interest of the Agent in the
Pledged LLC Interests, including electing to treat the membership
interest of the Borrower or such Subsidiary Guarantor as a security
under Section 8-103 of the UCC.
5.7 MAINTENANCE OF INSURANCE WITH RESPECT TO COLLATERAL.
The Borrower and each of the Subsidiary Guarantors will
maintain with financially sound and reputable companies, insurance policies: (a)
insuring the tangible Collateral against loss by fire, explosion, theft and such
other casualties as are usually insured against by companies engaged in the same
or similar businesses, (b) insuring the Borrower and such Subsidiary Guarantor
against liability for personal injury and property damage relating to such
tangible Collateral, such policies to be in such form and in such amounts and
coverage as are usual for companies engaged in the same or similar businesses as
the Borrower, with losses payable to the Borrower or such Subsidiary Guarantor,
as the case may be, and the Agent as their respective interests may appear, and
(c) naming the Agent as additional insured and loss payee with respect to such
insurance. All insurance with respect to the tangible Collateral shall provide
that 30 days notice shall be provided to the Agent in the event of a
cancellation, prior to the expiration thereof.
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SECTION 6 GENERAL REPRESENTATIONS AND WARRANTIES.
The Borrower and each Subsidiary Guarantor represent and
warrant to the Agent and the Lenders as follows:
6.1 EXISTENCE.
The Disclosure Schedule sets forth a list of the Borrower and
the Subsidiary Guarantors and all of their Subsidiaries. The Borrower and each
Subsidiary is duly organized, validly existing and in good standing under the
Laws of their respective states of incorporation and organization. Neither the
Borrower nor any of the Subsidiary Guarantors has any Subsidiaries other than as
listed in the Disclosure Schedule. The Borrower and each Subsidiary are duly
qualified or licensed to transact business in their respective jurisdictions of
organization and in each additional jurisdiction where such qualification or
licensure is necessary, except where failure to do so will not have a Material
Adverse Effect.
6.2 AUTHORIZATION.
The execution, delivery and performance of this Agreement and
the other Loan Documents to which the Borrower or each Subsidiary Guarantor is a
party: (a) are within the Borrower's or such Subsidiary Guarantor's corporate or
organizational powers, (b) have been duly authorized, and are not in
contravention of Law or the terms of the Borrower's or such Subsidiary
Guarantor's Charter Documents or of any indenture or other document or
instrument evidencing borrowed money or any other agreement or undertaking to
which the Borrower or such Subsidiary Guarantor is a party or by which it or its
property is bound.
6.3 ENFORCEABILITY.
This Agreement and the other Loan Documents constitute the
legal, valid and binding obligations of the Borrower and each Subsidiary
Guarantor, enforceable against the Borrower and such Subsidiary Guarantor in
accordance with the terms thereof, subject to any applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws affecting the enforcement
of creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.4 LITIGATION; PROCEEDINGS.
As of the Closing Date, except as set forth in the Disclosure
Schedule, there are no actions, suits, investigations or proceedings, and no
orders, writs, injunctions, judgments or decrees, now pending, existing or, to
the knowledge of the Borrower or any of the Subsidiary Guarantors, threatened
against any of the Borrower or any of its Subsidiaries affecting any property of
the Borrower, any Subsidiary, this Agreement or any other Loan Document, whether
at law, in equity or otherwise, before any court, board, commission, agency or
instrumentality of any federal, state, local or foreign government or of any
agency or subdivision thereof, or before any arbitrator or panel of arbitrators
which could, singly or in the aggregate, reasonably be expected to result in a
Material Adverse Effect.
6.5 TAXES.
The Borrower and each of the Subsidiaries have filed all
federal, state and local tax returns which are required to be filed by any of
them, and, except to the extent permitted by Section 7.2(i) of this Agreement,
have paid all taxes and assessments due as shown on such returns, including
interest, penalties and fees, except in each case for such failures to file or
pay that could not reasonably be expected to have a Material Adverse Effect.
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6.6 TITLE.
The Borrower, and each of the Subsidiaries, have good title to
all personal property assets reflected in, and good and marketable title to all
real property assets reflected in, the financial statements referred to in
Section 6.13 of this Agreement (other than the Third Party Intellectual
Property) and in the consolidated financial statements delivered from time to
time pursuant to Section 7.1 of this Agreement, except in each case for Liens
permitted under this Agreement and such imperfections in title that do not
materially and adversely affect the value of such properties, taken as a whole.
All the assets comprising the Collateral are free of all Liens other than those
in favor of the Agent and those otherwise disclosed in the Disclosure Schedule
or permitted by Section 7.3(d) of this Agreement.
6.7 CONSENTS; APPROVALS.
No action, consent or approval of, registration or filing with
or any other action by any governmental authority or other Person is or will be
required in connection with the transactions contemplated by this Agreement and
the other Loan Documents, except such as have been made or obtained and are in
full force and effect and except for the filings required to create or perfect
the Liens in favor of the Agent that are contemplated hereby and except for
consents and approvals contemplated by Section 9.11.
6.8 LAWFUL OPERATIONS.
The operations of the Borrower and each of the Subsidiaries
are in compliance with applicable requirements imposed by Law, except to the
extent any such noncompliance, when taken singly or with all other such
noncompliance, has not resulted, and could not reasonably be expected to result,
in a Material Adverse Effect.
6.9 ENVIRONMENTAL COMPLIANCE.
Each parcel of real property owned or leased by the Borrower
or any Subsidiary (collectively, "Properties") is in compliance with
Environmental Laws except for any noncompliance, when taken singly or with all
other such noncompliance, has not resulted, and could not reasonably be expected
to result, in a Material Adverse Effect. With respect to each of the Properties,
(a) there is no pending or, to the knowledge of the Borrower or the Subsidiary
Guarantors, threatened Environmental Claim against the Borrower or any
Subsidiaries, or any other environmental condition with respect to any Property
which Environmental Claim or condition, when taken singly or with all other such
Environmental Claims or conditions, has resulted, and could reasonably be
expected to result, in a Material Adverse Effect and (b) the Borrower and the
Subsidiaries are in compliance with all Environmental Permits, except to the
extent any such noncompliance, when taken singly or together with all other
instances of such noncompliance, has not resulted, and could not reasonably be
expected to result, in a Material Adverse Effect. No Property is listed or
proposed for listing on the National Priorities List pursuant to CERCLA, on the
CERCLIS or on any similar federal or state list of sites requiring investigation
or clean-up.
6.10 ENVIRONMENTAL LAWS AND PERMITS.
Without limiting the representations made above, to the
knowledge of the Borrower or the Subsidiary Guarantors, there are no
circumstances with respect to any Property or the operations of the Borrower or
any Subsidiaries thereof that could reasonably be expected to: (i) form the
basis of a material Environmental Claim against any or all of the Borrower or
any Subsidiaries thereof, or (ii) cause any Property owned, leased or funded by
the Borrower or any Subsidiaries thereof to be subject to any material
restrictions on ownership, occupancy, use or transferability under any
applicable Environmental Law.
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6.11 ERISA.
The Disclosure Schedule sets forth a list of all of the
material Employee Benefit Plans as of the Closing Date (other then "welfare
plans" as defined in Section 3(1) of ERISA), maintained by the Borrower and its
Subsidiaries. Each Employee Benefit Plan which is intended to qualify under
Section 401 of the Code does so qualify, and any trust created thereunder is
exempt from tax under the provision of Section 501 of the Code, except where
such failures in the aggregate would not have a Material Adverse Effect. No
Accumulated Funding Deficiency exists in respect of any Employee Benefit Plan
that is subject to Code Section 412 and no Reportable Event has occurred in
respect of any Employee Benefit Plan that is subject to Title IV of ERISA which
is continuing and which, when taken singly or with all other such Reportable
Events or Accumulated Funding Deficiencies, has resulted, or could reasonably be
expected to result, in a Material Adverse Effect. No "prohibited transactions"
(as defined in Section 406 of ERISA or Section 4975 of the Code), have occurred
which, when taken singly or with all other such "prohibited transactions," has
resulted, or could reasonably be expected to result, in a Material Adverse
Effect. Neither the Borrower, nor any of the Subsidiaries, nor any ERISA
Affiliate, has: (i) had an obligation to contribute to any Multiemployer Plan or
(ii) incurred or reasonably expects to incur any liability for the withdrawal
from such a Multiemployer Plan which withdrawal liability, when taken singly or
with all other such withdrawal liabilities, has resulted, or could reasonably be
expected to result, in a Material Adverse Effect.
6.12 NO DEFAULTS; LABOR DISPUTES.
Neither the Borrower nor any Subsidiary Guarantor is in
Default under or with respect to any Material Business Agreements or Material
License Agreement in any respect which could reasonably expected to have a
Material Adverse Effect. Neither the Borrower, nor any of the Subsidiaries, is a
party to any labor dispute (including any strike, slowdown, walkout or other
concerted interruptions by its employees, but excluding grievance disputes)
which could, individually or in the aggregate, be reasonably expected to result
in a Material Adverse Effect. There are no material strikes, slow downs,
walkouts or other concerted interruptions of operations by employees of any of
the Borrower or any of the Subsidiaries whether or not relating to any labor
contracts.
6.13 FINANCIAL STATEMENTS.
The Borrower has furnished to the Agent complete and correct
copies of (i) the audited balance sheets of the Borrower and its consolidated
Subsidiaries for the fiscal year ended December 31, 2002, and (ii) the
unaudited balance sheets of the Borrower and its consolidated Subsidiaries for
the fiscal quarters ended March 31, June 30, and September 30, 2003, and (iii)
the related statements of operations, stockholder's equity, and cash flows, and,
as applicable, changes in financial position or cash flows for such period, and
the notes to such financial statements, and (iv) the audited Annual Statements
of Central Reserve Life Insurance Company and Continental General Insurance
Company for the fiscal year ended December 31, 2002, as filed with the
Applicable Insurance Regulatory Authority and (v) the unaudited Quarterly
Statements of Central Reserve Life Insurance Company and Continental General
Insurance Company for the fiscal quarter ended March 31, June 30 and September
30, 2003, as filed with the Applicable Insurance Regulatory Authority. All such
financial statements: (a) have been prepared in accordance with SAP or GAAP,
applied on a consistent basis (except as stated therein), and (b) fairly present
in all material respects the financial condition of the Borrower and its
consolidated Subsidiaries and Central Reserve Life Insurance Company and
Continental General Insurance Company, as the case may be, as of the respective
dates thereof and the results of operations for the respective fiscal periods
then ended. There has been no Material Adverse Effect since the September 30,
2003 financial statements.
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6.14 INTELLECTUAL PROPERTY.
The Borrower and its Subsidiaries owns or has the legal and
valid right to use all Intellectual Property material to the operation of their
business, taken as a whole, as presently conducted, free of any restrictions
which could reasonably be expected to have a Material Adverse Effect.
6.15 STRUCTURE; CAPITALIZATION.
The Disclosure Schedule sets forth the record and beneficial
ownership of all issued and outstanding common shares and membership interest of
the Subsidiaries, and the authorized, issued and outstanding capital stock of
the Borrower and each of the Subsidiaries. There are no options, warrants or
other rights to acquire any of the capital stock of the Subsidiary Guarantors.
6.16 INSURANCE.
The insurance policies maintained by the Borrower and each
Subsidiary as of the Closing Date comply with the requirements of Section 5.7 of
this Agreement. As of the Closing Date, the Borrower has delivered or caused to
be delivered to the Agent certificates, reflecting, in reasonable detail, the
Borrower's and its Subsidiaries' insurance coverage required under this
Agreement.
6.17 VALUE; SOLVENCY.
The Borrower and each Subsidiary Guarantor have received fair
consideration and reasonably equivalent value for the obligations and
liabilities it has incurred to the Lenders hereunder. After giving effect to the
transactions contemplated hereby, the Borrower and each Subsidiary Guarantor is
Solvent.
6.18 INVESTMENT COMPANY ACT STATUS.
Neither the Borrower nor any Subsidiary is an "investment
company", or a "promoter" or "principal underwriter" for an "investment company"
(as such term is defined in the Investment Company Act of 1940, as amended (15
U.S.C. ss. 80(a)(1), et seq.)
6.19 REGULATION U/REGULATION X COMPLIANCE.
The proceeds of Term Loans will be used only for the purposes
contemplated by Section 7.2(g) hereof. No part of the proceeds of the Term Loans
will be used, directly or indirectly, to purchase or carry any "margin stock",
as that term is defined in Regulation U and Regulation X of the Board of
Governors of the Federal Reserve System or for a purpose which violates any
applicable Law, rule, or regulation including, without limitation, the
provisions of Regulation U or X of the Board of Governors of the Federal Reserve
System, as amended.
6.20 INSURANCE LICENSES.
Each Regulated Insurance Company has obtained and maintains in
full force and effect all licenses and permits from all regulatory authorities
necessary to operate in the jurisdictions in which such Regulated Insurance
Company operates, in each case other than such licenses and permits the failure
to obtain or maintain, individually or in the aggregate, is not reasonably
likely to have a Material Adverse Effect.
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6.21 FULL DISCLOSURE.
None of the written information, exhibits or reports furnished
by the Borrower or its Subsidiaries to the Agent or the Lenders omits to state
any fact necessary to make the statements contained therein not materially
misleading in respect of the Borrower and its Subsidiaries, taken as whole, in
light of the circumstances and purposes for which such information was provided.
SECTION 7 COVENANTS OF THE BORROWER.
So long as any of the Secured Obligations hereunder remain
outstanding, the Borrower will comply, and will cause each of the Subsidiaries
thereof to comply, with the following provisions:
7.1 REPORTING AND NOTICE COVENANTS.
(a) QUARTERLY FINANCIAL STATEMENTS.
The Borrower shall furnish to the Agent and each Lender:
(i) as soon as practicable and in any event within sixty
(60) days after the end of each fiscal quarter of the Borrower
and its Subsidiaries unaudited consolidated balance sheets of
the Borrower and its consolidated Subsidiaries as of the end
of that fiscal quarter and the related statements of
operations, stockholders' equity and cash flows for such
fiscal quarter each prepared on an comparative basis with the
comparable period during the prior year and in accordance with
GAAP, all in reasonable detail and certified, subject to
normal year-end audit adjustments, by a Responsible Officer of
the Borrower; provided that such requirement for the
furnishing of such quarterly financial statements may be
fulfilled by the furnishing the quarterly report of the
Borrower on Form 10-Q which includes such financial
statements, as filed with the Securities and Exchange
Commission, for the applicable fiscal quarter; and
(ii) as soon as available and in any event within sixty
(60) days after the end of each fiscal quarter of each
Regulated Insurance Company, Quarterly Statements (prepared in
accordance with SAP) for such fiscal period of such Regulated
Insurance Company, as filed with the Applicable Insurance
Regulatory Authority, certified by a Responsible Officer of
such Regulated Insurance Company.
(b) ANNUAL FINANCIAL STATEMENTS.
The Borrower shall furnish to the Agent and each Lender:
(i) as soon as practicable and in any event within ninety
(90) days after the end of each fiscal year of the Borrower
and its consolidated Subsidiaries, a complete copy of the
annual audit report of the Borrower and its consolidated
Subsidiaries (including, without limitation, all consolidated
financial statements of the Borrower and notes thereto) for
that fiscal year: (i) prepared on a comparative basis with the
prior year and in accordance with GAAP, (ii) audited and
certified (without qualification as to GAAP), by independent
public accountants of recognized national standing, and (iii)
accompanied by the accountants' management report and any
management letters relating thereto, if any, and an opinion of
such accountants, which opinion shall be unqualified as to
scope and shall (A) state that such accountants audited such
consolidated financial
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statements in accordance with GAAP, that such accountants
believe that such audit provides a reasonable basis for their
opinion, and that in their opinion such consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Borrower and its
consolidated Subsidiaries as at the end of such fiscal year
and the consolidated results of their operations and cash
flows for such fiscal year in conformity with GAAP, and (B)
contain such statements as are customarily included in
unqualified reports of independent accountants in conformity
with the recommendations and requirements of the American
Institute of Certified Public Accountants (or any successor
organization); provided that such requirement for the
furnishing of such annual financial statements may be
fulfilled by the furnishing the annual report of the Borrower
on Form 10-K which includes such financial statements, as
filed with the Securities and Exchange Commission, for the
applicable fiscal year;
(ii) as soon as available and in any event within seventy
five (75) days after the end of each fiscal year of each
Regulated Insurance Company, the Annual Statement (prepared in
accordance with SAP) for such fiscal year of such Regulated
Insurance Company, as filed with the Applicable Insurance
Regulatory Authority in compliance with the requirements
thereof (or a report containing equivalent information for any
Regulated Insurance Company not so required to file the
foregoing with the Applicable Insurance Regulatory Authority);
certified by a Responsible Officer of such Regulated Insurance
Company; and
(iii) as soon as available and in any event within 100
days after the end of each fiscal year of the Borrower, a copy
of the "Statement of Actuarial Opinion" and "Management
Discussion and Analysis" for each Regulated Insurance Company
(prepared in accordance with SAP) for such fiscal year and as
filed with the Applicable Regulatory Insurance Authority in
compliance with the requirements thereof (or a report
containing equivalent information for any Regulated Insurance
Company not so required to file the foregoing with the
Applicable Regulatory Insurance Authority).
(c) OFFICER'S CERTIFICATE.
The Borrower shall furnish to the Agent and each Lender
concurrently with the financial statements delivered in connection
herewith, a certificate of a Responsible Officer of the Borrower or the
Regulated Insurance Company, in his or her capacity as a Responsible
Officer, setting forth, in the case of the Borrower, the computations
necessary to determine whether the Borrower and its consolidated
Subsidiaries are in compliance with Section 7.4 of this Agreement and,
in the case of the Borrower and each Regulated Insurance Company,
certifying that: (A) those financial statements fairly present in all
material respects the financial condition and results of operations of
the appropriate entity in accordance with GAAP or SAP, as the case may
be, subject in the case of interim financial statements, to routine
year-end audit adjustments and (B) in the case of the Borrower, that no
Potential Default or Event of Default then exists or, if any Potential
Default or Event of Default does exist, a brief description of the
Potential Default or Event of Default and the Borrower's intentions in
respect thereof.
(d) COMPANY REPORTS.
The Borrower shall deliver, or shall cause its
Subsidiaries to deliver, as applicable, to the Agent and each Lender, no
later than the date of the sending or filing thereof, copies of all
proxy statements, financial statements and reports that the Borrower
sends to its stockholders generally, and copies of all regular, periodic
and special reports
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on Form 10-K, 10-Q or 8-K (or successor forms), and all registration
statements on Form ▇-▇, ▇-▇ or S-3 (or successor forms),
and amendments thereto, that the Borrower or any Subsidiary files with
the Securities and Exchange Commission (or any foreign national or
provincial securities commission) or any governmental authority that may
be substituted therefor, or with any national securities exchange.
(e) OTHER INFORMATION.
The Borrower shall furnish to the Agent and each Lender,
promptly upon the Agent's written request, such other information about
the financial condition, properties and operations of the Borrower and
the Subsidiaries and any of their Employee Benefit Plans as the Agent or
any Lender may from time to time reasonably request.
(f) NOTICES.
The Borrower will cause the Responsible Officer of the
Borrower to give the Agent and each Lender prompt written notice
whenever (and in any event within ten (10) Business Days after): (i) the
Borrower or any Subsidiary receives notice from any court, agency or
other governmental authority of any alleged non-compliance with any Law
or order which could reasonably be expected to have or result in a
Material Adverse Effect, (ii) the Internal Revenue Service or any other
federal, state or local taxing authority shall allege any default by the
Borrower or a Subsidiary in the payment of any tax material in amount or
shall threaten or make any assessment in respect thereof which could
reasonably be expected to have or result in a Material Adverse Effect,
(iii) any litigation or proceeding shall be brought against the Borrower
or a Subsidiary before any court or administrative agency which could
reasonably be expected to have or result in a Material Adverse Effect,
(iv) any material adverse change or development in connection with any
such litigation proceeding, (v) such Responsible Officer reasonably
believes a Material Adverse Effect has occurred, which notice shall
include a description of (A) the facts relating to such event and (B) if
such Responsible Officer reasonably believes that such event is likely
to cause the Borrower to no longer be in compliance with Section 7.4
hereof within the twelve (12) months following the date of such notice,
a description in reasonable detail of such non-compliance and any steps
Borrower then plans to take to prevent or remedy such non-compliance or
(vi) such Responsible Officer reasonably believes that any Potential
Default or Event of Default has occurred or that any other
representation or warranty made herein shall for any reason have ceased
to be true and complete in any material respect.
(g) NOTICE OF DEFAULT UNDER ERISA.
If the Borrower receives notice from any ERISA Regulator,
or otherwise have actual knowledge, that a Default under ERISA exists
with respect to any Employee Benefit Plan, the Borrower shall notify the
Agent and each Lender of the occurrence of such Default under ERISA,
within ten (10) Business Days after receiving such notice or obtaining
such knowledge.
(h) ENVIRONMENTAL REPORTING.
The Borrower shall promptly deliver to the Agent and each
Lender, and in any event within fifteen (15) Business Days after receipt
or transmittal by the Borrower or the Subsidiaries, copies of all
material communications with any government or governmental agency or
any other Person relating to Environmental Laws or Environmental Claims
which could reasonably be expected to result in a Material Adverse
Effect.
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(i) RESERVE ADEQUACY REPORT.
Promptly following a request from the Agent or the Lenders
(which request may only be made once a year, unless an Event of Default
has occurred and is continuing), a report prepared by an independent
actuarial consulting firm of recognized professional standing,
reasonably satisfactory to the Agent, reviewing the adequacy of reserves
of each Regulated Insurance Company determined in accordance with SAP,
which firm shall be provided access to or copies of all reserve analyses
and valuations relating to the insurance business of each Regulated
Insurance Company in the possession of or available to the Borrower or
its Subsidiaries; provided, however, that no such report may be
requested to any Regulated Insurance Company if the last "Statement of
Actuarial Opinion" with respect to such company delivered pursuant to
Section 7.1(b)(iii) was prepared by an independent actuarial firm of
recognized professional standing.
(j) OTHER REGULATORY STATEMENTS AND REPORTS.
Promptly (A) after receipt thereof, copies of all
triennial examinations and risk adjusted capital reports of any
Regulated Insurance Company, delivered to such Person by any Applicable
Insurance Regulatory Authority, insurance commission or similar
regulatory authority, (B) after receipt thereof, written notice of any
assertion by any Applicable Insurance Regulatory Authority or any
governmental agency or agencies substituted therefor, as to a violation
of any Legal Requirement by any Regulated Insurance Company which is
likely to have a Material Adverse Effect, (C) after receipt thereof, a
copy of the final report to each Regulated Insurance Company from the
NAIC for each fiscal year, as to such Regulated Insurance Company's
compliance or noncompliance with each of the NAIC Tests, (D) after
receipt thereof, a copy of any notice of termination, cancellation or
recapture of any Reinsurance Agreement or Retrocession Agreement to
which a Regulated Insurance Company is a party to the extent such
termination or cancellation is reasonably likely to have a Material
Adverse Effect, (E) and in any event within ten Business Days after
receipt thereof, copies of any notice of actual suspension, termination
or revocation of any license of any Regulated Insurance Company by any
Applicable Insurance Regulatory Authority, including any request by an
Applicable Insurance Regulatory Authority which commits a Regulated
Insurance Company to take or refrain from taking any action or which
otherwise affects the authority of such Regulated Insurance Company to
conduct its business, in each case if such matter is reasonably likely
to have a Material Adverse Effect, and (F) and in any event within ten
Business Days after the Borrower or any of its Subsidiaries obtains
knowledge thereof, notice of any actual changes in the insurance Laws
enacted in any state in which any Regulated Insurance Company is
domiciled which would reasonably be expected to have a Material Adverse
Effect.
7.2 AFFIRMATIVE COVENANTS.
(a) CORPORATE EXISTENCE.
Subject to the right of the Borrower or its Subsidiaries
to engage in mergers, consolidations, asset transfers, liquidations or
other transactions permitted by Section 7.3(a), the Borrower shall, and
shall cause each of its Subsidiary Guarantors and Regulated Insurance
Companies to, at all times maintain its corporate and organizational
existence, rights and franchises, maintain its good standing in the
jurisdiction of its incorporation and organization, and qualify as a
foreign corporation in each jurisdiction where failure to qualify could
reasonably be expected to result in a Material Adverse Effect.
21
(b) FINANCIAL RECORDS.
The Borrower shall maintain at all times true and complete
financial records with respect to the Borrower and its Subsidiaries in
accordance with SAP or GAAP, as appropriate, consistently applied except
for changes permitted by GAAP or SAP, as the case may be, and, without
limiting the generality of the foregoing, make appropriate accruals to
reserves for estimated and contingent losses and liabilities as required
under SAP or GAAP, as appropriate.
(c) FINANCIAL EXAMINATIONS AND REVIEW.
The Borrower shall, at the Borrower's expense, upon
reasonable prior written notice from the Agent or any Lender, permit,
and shall cause each of its Subsidiaries to permit, the Agent or such
Lender, as the case may be, during normal business hours (i) to examine,
with the guidance and supervision of the Borrower, the Borrower's
financial records and to make copies of and extracts from such records
and (ii) to consult with the Borrower's and Subsidiaries' officers,
directors, accountants, actuaries, trustees and plan administrators, as
the case may be, in respect of the Borrower's and Subsidiaries'
financial condition, each of which parties is hereby authorized by the
Borrower to make such information available to the Agent or such Lender,
as the case may be; provided, however, that subject to the following
proviso, the aggregate number of such examinations shall not exceed two
(2) in any calendar year and shall not include any audit of collateral
which is provided for in this Agreement; provided, further, however,
that during any period commencing upon the occurrence of an Event of
Default and continuing for one year after the waiver (if any), of such
Event of Default, the Agent and the Lenders may exercise such access and
other rights at any time the Agent or any Lender reasonably deems such
action necessary.
(d) COMPLIANCE WITH LAW.
The Borrower will comply, and will cause each of its
Subsidiaries to comply, in all respects with all applicable provisions
of all Laws (whether statutory, administrative, judicial or other and
whether federal, state or local), every lawful governmental order and
all permits and licenses; provided, however, that any alleged
noncompliance shall not be deemed to be a violation of this Section
7.2(d) so long as such noncompliance by the Borrower or such
Subsidiaries has not resulted or would not reasonably be expected to
result in a Material Adverse Effect.
(e) COMPLIANCE WITH ENVIRONMENTAL LAWS.
The Borrower will use and operate its facilities and
properties, and cause each of its Subsidiaries to use and operate its
respective facilities and properties, in such a manner that no remedial
or similar obligation shall arise under any Environmental Law, including
any clean-up obligations, which when taken singly or with all other such
obligations, has resulted or could reasonably be expected to result in a
Material Adverse Effect; provided, however, that no such claim or
remedial or similar obligation need be satisfied if it is being
contested in good faith by appropriate proceedings promptly instituted
and diligently conducted and if appropriate reserves or other
appropriate provision, if any, as shall be required by SAP or GAAP have
been made on the books of the Borrower or the Subsidiaries, as the case
may be. The Borrower will keep, and will cause each of its Subsidiaries
to keep, all necessary Environmental Permits in effect and remain in
compliance therewith, and handle all Hazardous Materials in compliance
with all applicable Environmental Laws, except to the extent that any
such lack of effectiveness or non-compliance, when taken singly or with
all other instances lack of effectiveness or non-compliance, has not
resulted and could not reasonably be expected
22
to result in a Material Adverse Effect. Neither the Borrower shall
suffer to exist, and shall not permit any of its Subsidiaries
to suffer to exist, an environmental condition which, when
taken singly or with all other such conditions, has resulted or could
reasonably be expected to result in a Material Adverse Effect. The
Borrower shall not suffer or permit the aggregate of all liabilities or
claims against the Borrower or any Subsidiaries thereof for any
noncompliance with Environmental Laws, Environmental Claim,
environmental condition, remedial or similar obligations under
Environmental Laws, or lack of effectiveness of Environmental Permits
which, when taken singly or together with all other such noncompliance,
Environmental Claims, environmental conditions, remedial or similar
obligations, and lack of effectiveness, has resulted or could reasonably
be expected to result in a Material Adverse Effect.
(f) PROPERTIES.
Subject to Section 7.3(a), the Borrower shall maintain,
and shall cause each of its Subsidiaries to maintain, , all assets
necessary to its continuing operations in all material respects of the
Borrower and its Subsidiaries, taken as a whole, in good working order
and condition, ordinary wear and tear excepted.
(g) USE OF PROCEEDS.
The proceeds of the Term Loans shall be used to refinance
the Borrower's existing bank Indebtedness, to purchase shares of the
minority stockholders of ▇▇▇▇▇▇.▇▇▇, Inc. and for other general
corporate purposes.
(h) COMPLIANCE WITH TERMS OF ALL MATERIAL CONTRACTS.
The Borrower shall perform and observe, and shall cause
each of its Subsidiaries to perform and observe, material terms and
provisions of its Material Business Agreements and the Material License
Agreements to which it is a party except those which are subject to a
good faith dispute and those that could not reasonably be expected to
result in a Material Adverse Effect.
(i) TAXES.
The Borrower will pay and discharge, and will cause each
of its Subsidiaries to pay and discharge, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
profits, or upon any properties belonging to it, prior to the date on
which penalties attach thereto, and all lawful claims (other than claims
relating to the adjustment or settling, in the ordinary course of
business, of claims in respect of insurance policies or reinsurance
contracts) which, if unpaid, could reasonably be expected to result in a
Material Adverse Effect; provided that neither the Borrower nor any
Subsidiary shall be required to pay any such tax, assessment, charge,
levy or claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves (in the good faith
judgment of the management of the Borrower) with respect thereto in
accordance with GAAP.
(j) INSURANCE.
The Borrower shall, on the Closing Date and within fifteen
(15) Business Days of the request by the Agent thereafter, provide
evidence satisfactory to the Agent that the Borrower has insurance as
required by Section 5.7 hereof, with the Agent listed as loss payee and
additional insured (as applicable).
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(k) SUBSIDIARIES TO JOIN IN SUBSIDIARY GUARANTY AND PLEDGE.
If, at any time after the date hereof, the Borrower or any
Subsidiary Guarantor creates or acquires any new direct or indirect
wholly-owned Non-Regulated Subsidiary that is not a Subsidiary of a
Regulated Insurance Company, the Borrower shall (x) notify the Agent
promptly in writing of such event, identifying the Subsidiary in
question and (y) if requested by the Lenders, cause such Subsidiary to
execute and deliver to the Agent for the benefit of the Lenders, within
thirty (30) days after the occurrence of such event (A) a joinder
supplement, in form and substance reasonably satisfactory to the Agent
and the Lenders, to this Agreement pursuant to which such Subsidiary
joins in this Agreement as a Subsidiary Guarantor hereunder and (B) such
evidence of the authority of such Subsidiary to execute and deliver such
documents as the Agent shall reasonably request and (z) cause the
Borrower or any applicable Subsidiary thereof to execute a supplement
hereto, in form and substance reasonably satisfactory to the Agent and
the Lenders pursuant to which the stock or membership interest of such
Subsidiary is pledged to the Agent to secure the Secured Obligations.
(l) HEDGE AGREEMENTS.
The Borrower may enter into Hedge Agreements or
replacements therefore in order to provide protection to the Borrower
and its Subsidiaries from fluctuations and other changes in interest
rates, provided (i) the notional amount is acceptable to the Agent, and
(ii) such arrangements do not expose the Borrower to predominantly
speculative risks unrelated to the amount of Indebtedness intended to be
subject to coverage on a notional basis under all such Hedge Agreements.
7.3 NEGATIVE COVENANTS.
(a) CONSOLIDATION, MERGER, SALE AND PURCHASE OF ASSETS.
Neither the Borrower shall, nor permit any Subsidiary to,
(i) liquidate or dissolve, or merge or consolidate with or into, or
enter into any agreement to merge or consolidate with or into, any other
Person or otherwise be a party to any merger or consolidation; (ii)
purchase or otherwise acquire all or substantially all of the assets and
business of another Person; or (iii) lease as lessor, sell,
sell-leaseback, license or otherwise transfer (whether in one
transaction or a series of transactions) any of its assets (whether now
owned or hereafter acquired); provided, however:
(A) that the Borrower or any Subsidiary may sell or
otherwise dispose of property that is obsolete, worn out,
unnecessary or no longer used or useful in the Borrower's or
such Subsidiary's business or that is sold or otherwise
disposed of in the ordinary course of business;
(B) any Subsidiary of the Borrower may merge or
consolidate with or into, or dispose of its assets to (and, if
it so chooses, liquidate thereafter), the Borrower or any
other Wholly-Owned Subsidiary ;
(C) the Borrower may merge or consolidate with or into
another Person so long as such merger or consolidation does
not result in a Change of Control;
(D) the Borrower and its Subsidiaries shall be permitted
to make advances, investments and loans permitted by Section
7.3(e);
24
(E) the Borrower or any of its Subsidiaries may enter into
leases of property or assets in the ordinary course of
business not otherwise in violation of this Agreement;
(F) the Borrower and its Subsidiaries may sell or exchange
specific items of Equipment, so long as the purpose of each
such sale or exchange is to acquire (and results within 180
days of such sale or exchange in the acquisition of)
replacement items of Equipment which are, in the reasonable
business judgment of the Borrower and its Subsidiaries, the
functional equivalent of the item of Equipment so sold or
exchanged;
(G) any Regulated Insurance Company may enter into any
Insurance Contract, Reinsurance Agreement or Retrocession
Agreement in the ordinary course of business in accordance
with its normal underwriting, indemnity and retention
policies, provided, however, that no Regulated Insurance
Company shall enter into any Financial Reinsurance Agreements;
(H) each of the Borrower or its Subsidiaries may sell
assets; provided that (w) each such sale shall be for an
amount at least equal to the fair market value thereof (as
determined in good faith by senior management of the
Borrower), (x) each such sale results in consideration in the
form of cash, (y) the aggregate sale proceeds from all assets
subject to such sales pursuant to this clause (H) in any
fiscal year shall not exceed 10% of the Consolidated Net Worth
of the Borrower as of the first day of such fiscal year
provided that (i) on a pro forma basis (the pro forma
adjustments made by the Borrower pursuant to this clause (i)
shall be subject to the reasonable satisfaction of the Agent)
determined as if such asset sale had been consummated on the
date occurring twelve (12) months prior to the last day of the
most recently ended fiscal quarter of the Borrower with
respect to any asset sale, the Borrower and its Subsidiaries
would have been in compliance with Section 7.4 of this
Agreement as of, or for the relevant period ended on, the last
day of such fiscal quarter and (ii) on a pro forma basis (the
pro forma adjustments made by the Borrower pursuant to this
clause (ii) shall be subject to the reasonable satisfaction of
the Agent) determined as if such asset sale had been
consummated the covenants contained in Section 7.4 will
continue to be met for the twelve-month period following the
last day of the fiscal quarter ended after the date of the
consummation of such asset sale;
(I) so long as no Potential Default or Event of Default
then exists or would result therefrom, the Borrower or its
Subsidiaries may acquire assets or the capital stock of any
Person (any such acquisition permitted by this clause (I), a
"Permitted Acquisition"), provided that (i) such Person (or
the assets so acquired) was, immediately prior to such
acquisition, engaged (or used) primarily in the Insurance
Business, (ii) each such acquisition shall be for an amount
not greater than the fair market value thereof (as determined
in good faith by the board of directors of the Borrower),
(iii) the aggregate amount expended by the Borrower and its
Subsidiaries for the Permitted Acquisitions (after giving
effect to any reinsurance or similar arrangement) shall not in
any fiscal year exceed 10% of the Consolidated Net Worth of
the Borrower and its Subsidiaries as of the first day of such
fiscal year, (iv) on a pro forma basis (the pro forma
adjustments made by the Borrower pursuant to this clause (iv)
shall be subject to the reasonable satisfaction of the Agent)
determined as if such acquisition had been consummated on the
date occurring twelve (12) months prior to the last day of the
most recently ended fiscal quarter of the Borrower, the
Borrower and its Subsidiaries would have been in compliance
with Section 7.4 of this Agreement as of, or for the relevant
period ended on, the last day of such fiscal quarter, (v) on a
pro forma basis (the pro
25
forma adjustments made by the Borrower pursuant to this
clause (v) shall be subject to the reasonable satisfaction
of the Agent) determined as if such acquisition had
been consummated, the covenants contained in
Section 7.4 will continue to be met for the twelve-month
period following the last day of the fiscal quarter ended
after the date of the consummation of such acquisition, and
(vi) no such acquisition shall be consummated on a "hostile"
basis (i.e., without the consent of the board of directors of
the Person to be acquired);
(J) the Borrower or any of its Subsidiaries may sell
assets so long as (x) the Borrower or such Subsidiary
immediately leases such assets back, and (y) the aggregate
amount of such assets sold in any fiscal year does not exceed
$4,000,000;
(K) the Borrower and its Subsidiaries may make capital
expenditures during any fiscal year that do not exceed
$4,000,000 in the aggregate; and
(L) the Borrower and its Subsidiaries may sell all of the
stock, or all or substantially all of the assets, of the
Non-Regulated Subsidiaries that are not Subsidiary Guarantors;
provided that (x) such sale shall be for an amount at least
equal to the fair market value thereof (as determined in good
faith by senior management of the Borrower), and (y) each such
sale results in consideration in the form of cash.
(b) CREDIT EXTENSIONS.
Neither the Borrower shall, nor permit any Subsidiary
to loan any money to, assume any Indebtedness of or any other
obligation of, or undertake any Guaranty Obligations with respect to
the Indebtedness of, any other Person, except:
(A) the Borrower or any Regulated Insurance Company or
Subsidiary Guarantor may make Intercompany Loans to the
Subsidiary Guarantors for working capital and ordinary
corporate purposes;
(B) each Subsidiary Guarantor may make Intercompany
Payments to the Borrower;
(C) each Subsidiary Guarantor may undertake Guaranty
Obligations to pay Guaranteed Obligations hereunder as
provided by Section 10 hereof;
(D) Borrower and the Subsidiaries may make loans and
advances to employees for business-related travel expenses,
moving expenses and other similar expenses, in each case
incurred in the ordinary course of business; and
(E) any Regulated Insurance Company may make (i) policy
loans in the ordinary course of business and (ii) agent debit
balances in the ordinary course of business.
(c) INDEBTEDNESS.
The Borrower shall not, nor permit any Subsidiaries
thereof to, create, assume, incur, suffer to exist or have outstanding
at any time any Indebtedness or other debt of any kind or be or become
a Guarantor of or otherwise undertake or assume any Guaranty Obligation
with respect to any Indebtedness of any other Person; except, that this
Section 7.3(c) shall not prohibit:
26
(i) the Secured Obligations;
(ii) ordinary course trade accounts payable or customer
deposits;
(iii) the Indebtedness on the Disclosure Schedule;
(iv) Indebtedness in respect of currency or interest rate
swaps or similar transactions entered into in the ordinary
course of business and not for speculative purposes;
(v) Indebtedness secured by a Lien permitted by Section
7.3(d) hereof;
(vi) Indebtedness permitted by Sections 7.3(b) and 7.3(e)
hereof;
(vii) Indebtedness of any Subsidiary to the Borrower or
any Subsidiary Guarantor;
(viii) any Indebtedness extending the maturity of,
refunding or refinancing (but not increasing), in whole or in
part, any of the Indebtedness permitted under this Section
7.3(c);
(ix) Indebtedness of any Subsidiary Guarantor consisting
of its obligation to pay Guaranteed Obligations hereunder as
provided by Section 10 of this Agreement;
(x) Obligations of any Regulated Insurance Company with
respect to (i) letters of credit securing obligations under
Reinsurance Agreements entered into in the ordinary course of
business, (ii) letters of credit issued in lieu of deposits to
satisfy Legal Requirements or (iii) letters of credit or
surety bonds issued in lieu of depositing securities with any
Applicable Insurance Regulatory Authority to satisfy
regulatory requirements in connection with life and health
insurance and annuity contracts; in any case to the extent (x)
such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than 10
days following receipt by the Borrower or such Subsidiary of
notice of payment on such letter of credit, (y) in the case of
(i) and (ii), the aggregate outstanding amount of such
obligations does not exceed $5,000,000 at any time and (z) in
the case of (iii), the aggregate outstanding amount of such
obligations does not exceed $5,000,000 at any time;
(x) Capitalized Lease Obligations of the Borrower and its
Subsidiaries; provided that the aggregate Capitalized Lease
Obligations under all Capitalized Leases shall not exceed
$5,000,000 at any time;
(xi) Permitted Subordinated Indebtedness; and
(xii) other Indebtedness not otherwise permitted in
clauses (i) through (xi) above incurred by Borrower and its
Subsidiaries not exceeding $4,000,000 at any one time
outstanding.
(d) LIENS.
The Borrower shall not, nor permit any Subsidiary
Guarantor to, acquire or hold any property which would constitute
Collateral hereunder subject to any Lien, or suffer or permit any
property which constitute Collateral hereunder now owned or
27
hereafter acquired by it to be or become encumbered by a Lien;
provided, however, that this Subsection shall not prohibit:
(A) any lien for a tax, assessment or government charge or
levy for taxes, assessments or charges not yet due and payable
or not yet required to be paid;
(B) any mechanic's, materialman's, carrier's, landlord's,
warehouseman's or similar common law or statutory lien
incurred in the ordinary course of business for amounts that
are not yet due and payable or which are being diligently
contested in good faith;
(C) any Lien which arises in connection with judgments or
attachments (1) the occurrence of which does not constitute an
Event of Default, and (2) the execution or other enforcement
of such Lien is effectively stayed and the claims secured
thereby are being actively contested in good faith and by
appropriate proceedings;
(D) any Lien in favor of the Agent created pursuant to the
Loan Documents for the ratable benefit of the Lenders;
(E) any operating lease entered into by the Borrower as
lessee;
(F) Liens securing the replacement, extension or renewal
of any Indebtedness permitted to be refinanced by Section
7.3(c) hereof so long as such Lien is upon and limited to the
same property previously subject thereto;
(G) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance
and other types of social security, or to secure the
performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds, Reinsurance Agreements,
Retrocession Agreements and other similar obligations incurred
in the ordinary course of business (exclusive of obligations
in respect of the payment for borrowed money);
(H) Liens on pledges or deposits of cash or securities
made by any Regulated Insurance Company as a condition to
obtaining or maintaining any licenses issued to it by any
Applicable Insurance Regulatory Authority;
(I) Liens placed upon assets used in the ordinary course
of business of the Borrower or any of its Subsidiaries at the
time of acquisition thereof by the Borrower or any such
Subsidiary or within ninety (90) days thereafter to secure
Indebtedness incurred to pay all or a portion of the purchase
price thereof, provided that (x) the aggregate outstanding
principal amount of all Indebtedness secured by Liens
permitted by this clause (I) shall not at any time exceed
$5,000,000 and (y) in all events, the Lien encumbering the
assets so acquired does not encumber any other asset (other
than proceeds thereof) of the Borrower or such Subsidiary;
(J) any existing Lien disclosed in the Disclosure Schedule
and accepted by the Lenders; or
28
(K) other Liens not otherwise permitted by clauses (A)
through (J) above, provided that the aggregate obligations
secured thereby do not exceed $2,000,000 at any time.
(e) INVESTMENTS.
The Borrower shall not, nor permit any of its
Subsidiaries to, (i) make or hold any investment in any common stocks,
bonds or securities of any Person, or make any further capital
contribution to any Person, other than in Subsidiaries, including
without limitation, purchases of the stock of ▇▇▇▇▇▇.▇▇▇, Inc., and the
capital contributions therein outstanding as of the Closing Date, or
(ii) be or become a party to any joint venture or other partnership
that is not a Subsidiary; provided, however that the following shall be
permitted:
(A) the transactions described in Section 7.3(b) and
Section 7.3(c) shall be permitted;
(B) the Borrower and its Subsidiaries which are not
Regulated Insurance Companies may invest in cash, Cash
Equivalents and Investment Grade Securities other than
investments which are Risk Derivatives (determined at the time
of acquisition); provided, that any investment in Investment
Grade Securities (other than U.S. Government Obligations)
issued by any single Issuer shall not exceed on the date such
investment is made an amount which, when added to all other
investments by all Regulated Insurance Companies and the
Borrower in such Issuer and outstanding on such date, is equal
to 5% of Invested Assets at such time;
(C) Regulated Insurance Companies may invest in (i) cash,
(ii) Cash Equivalents, (iii) Investment Grade Securities and
(iv) Non-Investment Grade Securities, provided that (A) no
investment will be made in (i) any debt securities which are
Non-Investment Grade Securities or (ii) any equity securities,
at a time when, or if after giving effect thereto, the
aggregate principal amount of all Non-Investment Grade
Securities held by all Regulated Insurance Companies plus the
aggregate outstanding investment made by all Regulated
Insurance Companies in equity securities (other than
securities of Persons which are Affiliates of the Borrower on
the Closing Date) equals or exceeds or would equal or exceed
10% of Invested Assets; (B) no investment will be made in any
real estate or loan secured by real estate (other than (I)
credit tenant loans (as defined by the NAIC), (II) those
existing on the Closing Date and described on the Disclosure
Schedule (without giving effect to any increase thereto) (III)
loans secured by owner-occupied real estate, if made at a time
when, and if after giving effect thereto, the aggregate of all
such investments in mortgage loans does not exceed, and would
not exceed, 5% of Invested Assets; and (C) no investment
(other than U.S. Government Obligations) in any single Issuer
shall exceed on the date such investment is made an amount
which, when added to all other investments by the Borrower and
its Subsidiaries in the same Issuer and outstanding on such
date, is equal to 5% of Invested Assets at such time;
(D) any Regulated Insurance Company may make investments
in companies which are Wholly-Owned Subsidiaries of such
Person but only to the extent that any such investment, at the
time made, does not reduce Statutory Surplus of such Regulated
Insurance Company;
29
(E) any Regulated Insurance Company may make investments
pursuant to commitments in effect as of the Closing Date and
described (as to matter and amount) on the Disclosure
Schedule;
(F) Investments acquired by the Borrower or any of its
Subsidiaries (x) in exchange for any other investment held by
the Borrower or any such Subsidiary in connection with or as a
result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other investment or (y)
as a result of a foreclosure by the Borrower or any of its
Subsidiaries with respect to any secured investment or other
transfer of title with respect to any secured investment in
default; and
(G) Investments existing on the Closing Date which are
identified on the Disclosure Schedule.
(f) DIVIDENDS; MANAGEMENT FEE.
The Borrower shall not make or pay or commit itself to
make or pay, nor permit any of its Subsidiaries to make or pay or commit
to make or pay, any Distributions to its shareholders or members or any
management fee to any Affiliate; provided, however, that the following
shall be permitted: (A) a Subsidiary may declare and pay cash dividends
to its respective parent, if such parent is the Borrower, a Wholly-Owned
Subsidiary of the Borrower or ▇▇▇▇▇▇.▇▇▇, Inc., (B) ▇▇▇▇▇▇.▇▇▇ may
declare and pay cash dividends to its shareholders, (C) the Subsidiaries
may pay management fees to the Borrower or any Subsidiary, including,
without limitation, those listed on the Disclosure Schedule, and (D)
Borrower shall be permitted to redeem, retire, purchase or otherwise
acquire, directly or indirectly, for a consideration, any shares of any
class of its capital stock now or hereafter outstanding (or any warrants
for or options or stock appreciation rights in respect of any such
shares), or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of capital stock of
the Borrower now or thereafter outstanding (or any options or warrants
or stock appreciation rights), provided that all such purchases or
acquisitions in any calendar year shall not exceed $2,000,000 in the
aggregate.
(g) CHANGE IN NATURE OF BUSINESS.
The Borrower shall not, nor permit any Subsidiaries to,
make any material change in the nature of the business of the Borrower
and its Subsidiaries, taken as a whole, as carried on at the date
hereof; provided, however, that operation of complementary lines or
business shall not be deemed to be a change in the nature of business.
(h) CHARTER AMENDMENTS.
The Borrower shall not amend any of its Charter Documents
nor permit amendment of the Charter Documents of any of its Subsidiaries
if such amendment would conflict with or cause a Potential Default under
this Agreement.
(i) COMPLIANCE WITH ERISA.
The Borrower shall not, nor permit any Subsidiaries to:
(i) engage in any transaction which could reasonably be expected to
subject any such Person to either a civil penalty assessed pursuant to
section 502(i) of ERISA or a tax imposed by section 4975 of the Code,
terminate or withdraw from any Employee Benefit Plan (other than a
Multiemployer Plan) or take any other action which could reasonably be
expected to
30
result in any liability of the Borrower or any Subsidiary to
the PBGC, to the Department of Labor or to a trustee appointed under
section 4042(b) or (c) of ERISA, incur any liability to the PBGC on
account of a withdrawal from or a termination of an Employee Benefit
Plan under section 4063 or 4064 of ERISA, incur any liability for
post-retirement benefits under any and all welfare benefit plans (as
defined in section 3(1) of ERISA) other than as required by applicable
statute, fail to make full payment when due of all amounts which, under
the provisions of any Employee Benefit Plan or applicable Law, the
Borrower or any Subsidiary is required to pay as contributions thereto,
or permit to exist any Accumulated Funding Deficiency, whether or not
waived, with respect to any Employee Benefit Plan (other than a
Multiemployer Plan); provided, however, that such engagement,
termination, withdrawal, action, incurrence, failure or permitting shall
not be deemed to have violated this clause (i) unless any such
engagement, termination, withdrawal, action, incurrence, failure or
permitting has resulted or could reasonably be expected to result in a
Material Adverse Effect; (ii) at any time permit the termination of any
defined benefit pension plan intended to be qualified under section
401(a) and 501(a) of the Code; provided, however, that such termination
shall not be deemed to have violated this clause (ii) unless the payment
by the Borrower or any Subsidiary of any amount as a result of such
termination has resulted or could reasonably be expected to result in a
Material Adverse Effect; or (iii) if the Borrower becomes obligated
under a Multiemployer Plan, effect a complete or partial withdrawal such
that the Borrower or the Subsidiaries incur withdrawal liability under
Title IV of ERISA with respect to Multiemployer Plans or otherwise have
liability under Title IV of ERISA; provided, however, that the
incurrence of such liability shall not be deemed to be a violation of
this clause (iii) unless the amount of the payment has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(j) REGULATION U COMPLIANCE.
The Borrower shall not use any portion of the proceeds of
the Term Loans for the purpose of purchasing or carrying any margin
stock, as that term is defined in Regulations U and X of the Board of
Governors of the Federal Reserve System, or for any other purpose in
violation of any requirement of Law or of the terms and conditions of
this Agreement.
(k) ACCOUNTING CHANGES.
The Borrower will not, nor permit any of its Subsidiaries
to, make or permit any change in its accounting policies or financial
reporting practices and procedures, except as required or permitted by
SAP or GAAP or as required by applicable Law.
(l) ARM'S-LENGTH TRANSACTIONS.
Except as set forth on the Disclosure Schedule, the
Borrower will not, nor permit any of its Subsidiaries to, enter into or
permit to exist any transaction (including any transaction involving the
investment, purchase, sale, lease, transfer or exchange of any property
or the rendering of any service) with any Affiliate (other than the
Borrower or a Subsidiary) except in the ordinary course of the business
and upon fair and reasonable terms not less favorable to the Borrower or
such Subsidiaries than would be usual and customary in transactions with
persons who are not such Affiliates.
31
7.4 FINANCIAL COVENANTS.
(a) MINIMUM CONSOLIDATED FIXED CHARGE COVERAGE RATIO.
The Borrower shall not permit the Consolidated Fixed
Charge Coverage Ratio as of the end of any fiscal quarter to be less
than 1.15 to 1.00, in each case, for the Testing Period ending as of
such fiscal quarter end.
(b) MINIMUM LEVERAGE RATIO.
The Borrower shall not permit the Consolidated Leverage
Ratio of the Borrower and its consolidated Subsidiaries as of the end of
any fiscal quarter to be greater than .20 to 1.00.
(c) MINIMUM RISK BASED CAPITAL RATIO.
The Borrower shall not permit the Risk-Based Capital Ratio
for (i) Central Reserve Life Insurance Company to be less than 275% or
(ii) Continental General Insurance Company to be less than 250%, in each
case, determined at the end of each fiscal year of the Borrower.
(d) MINIMUM CONSOLIDATED TANGIBLE NET WORTH.
The Borrower shall not permit the Consolidated Tangible
Net Worth of the Borrower and its consolidated Subsidiaries to be less
than the amounts set forth opposite the periods below, measured at the
end of each fiscal quarter, unless otherwise indicated:
Period Amount
------ ------
Closing Date $142,500,000
Thereafter through $142,500,000
December 31, 2004 plus 75% of Consolidated
Positive Net Earnings for
the last six months of
fiscal year 2003
Thereafter through 2004 requirement
December 31, 2005 plus 75% of Consolidated
Positive Net Earnings for
the fiscal year 2004
Thereafter through 2005 requirement
December 31, 2006 plus 75% of Consolidated
Positive Net Earnings for
the fiscal year 2005
Thereafter through 2006 requirement
December 31, 2007 plus 75% of Consolidated
Positive Net Earnings for
the fiscal year 2006
32
Thereafter 2007 requirement
plus 75% of Consolidated
Positive Net Earnings for
the fiscal year 2007
SECTION 8 EVENTS OF DEFAULT.
The occurrence of any one or more of the following events
shall constitute an "Event of Default" hereunder:
8.1 PAYMENT.
Failure by the Borrower to (i) make payment of principal on
the Term Loans when due, (ii) make payment of interest on the Term Loans when
due, which failure continues for three (3) Business Days after such required
date of payment, or (iii) to pay any other Obligation (other than the payment of
principal and interest on the Term Loans) when required to be paid hereunder to
the extent such failure is not remedied within three (3) Business Days after
notice of failure to pay any such Obligation has been delivered to the Borrower;
or
8.2 REPRESENTATIONS AND WARRANTIES.
Any warranty or representation made or deemed made by the
Borrower or any Subsidiary Guarantor in this Agreement, any other Loan Document
or any certificate, document or financial or other written statement furnished
at any time in compliance with this Agreement shall prove to have been false or
inaccurate in any material respect when made or deemed made; or
8.3 VIOLATION OF CERTAIN COVENANTS.
Failure by the Borrower or any Subsidiary Guarantor to
perform, keep or observe any other term, provision, condition or covenant
contained in this Agreement (other than those provisions, terms or conditions
referenced in Sections 8.1, 8.2, and 8.4 of this Agreement) or any other Loan
Document and such failure shall continue without remedy for a period of thirty
(30) days; or
8.4 VIOLATION OF FINANCIAL COVENANTS.
Failure by the Borrower to perform, keep, or observe any other
term, provision, condition or covenant contained in Section 7.4; or
8.5 CROSS-DEFAULT.
(i) Failure by the Borrower or any Subsidiary to make any
payment on any Indebtedness having a principal amount in excess of $2,500,000 or
more, when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise), or (ii) the occurrence
of any other event or the existence of any condition under any agreement or
instrument relating to any such Indebtedness, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Indebtedness, or (iii) the declaration of any such Indebtedness to be due
and payable, or the requiring of any such Indebtedness to be prepaid or
repurchased (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof; or
33
8.6 CHANGE IN CONTROL.
The occurrence of any Change in Control; or
8.7 TERMINATION OF EXISTENCE.
The dissolution or termination of existence of the Borrower or
any Subsidiary Guarantor unless permitted under Section 7.3(a); or
8.8 FAILURE OF ENFORCEABILITY OF THIS AGREEMENT, CREDIT DOCUMENT;
SECURITY.
If: (a) any material covenant, agreement or any Secured
Obligation of the Borrower or any Subsidiary Guarantor contained in or evidenced
by this Agreement or any of the other Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms, or (b) the Borrower or any Subsidiary Guarantor shall deny or disaffirm
its obligations under this Agreement or any of the other Loan Documents or any
of the Liens granted in connection therewith, or (c) any Liens in favor of the
Agent or the Lenders granted in this Agreement or any of the other Loan
Documents shall be determined to be void, voidable or invalid, or are not
otherwise given the priority contemplated by this Agreement, or (d) any
perfected Liens granted in favor of the Agent or the Lenders shall be determined
to be unperfected, or (e) any Subsidiary Guarantor shall revoke or permit a
payment default under such Subsidiary Guarantor's Subsidiary Guaranty; or
8.9 ERISA.
If: (a) the Borrower, its Subsidiaries, or any of their ERISA
Affiliates or any other Person institutes any steps to terminate an Employee
Benefit Plan which is subject to Title IV of ERISA and, as a result of such
termination, the Borrower or its Subsidiary, is required to make or could
reasonably be expected to be required to make, a contribution to such Employee
Benefit Plan the payment of which (i) when taken together with all like
termination payments either has resulted in, or could reasonably be expected to
result in, a Material Adverse Effect or (b) the Borrower, such Subsidiary or
such ERISA Affiliate fails to make a contribution to any Employee Benefit Plan
which failure would be sufficient to give rise to a Lien under Section 302(f) of
ERISA on the assets of the Borrower or any Subsidiary; or
8.10 JUDGMENTS.
Any money judgment, writ or warrant of attachment or similar
process involving an amount, when aggregated with all such money judgment, writ
or warrant of attachment or similar process outstanding at such time, in excess
of $2,500,000, to the extent not insured by an insurance carrier which has
acknowledged coverage in the amount of the claim without any material
reservation of rights or which has been ordered by a court of competent
jurisdiction to pay such claim, is entered or filed against any or all of the
Borrower or any Subsidiary or against any of their respective assets and is not
released, satisfied, discharged, vacated, fully bonded or stayed within thirty
(30) days after such judgment, writ or warrant of attachment or similar
proceeding is entered; or
8.11 FINANCIAL IMPAIRMENT.
The Financial Impairment of the Borrower and any Subsidiary
Guarantor that accounts for at least 10% of the consolidated assets of the
Borrower and its Subsidiaries.
34
SECTION 9 REMEDIES.
9.1 ACCELERATION; TERMINATION.
Upon the occurrence of an Event of Default, the Agent may,
and, at the written request of the Lenders, shall, without presentment, demand
or notice of any kind all of which are hereby expressly waived by the Borrower,
declare all of the Obligations immediately due and payable, anything in the
Notes or other evidence of the Obligations or in any of the other Loan Documents
to the contrary notwithstanding. In the circumstance that the Lenders have
requested the Agent to take the foregoing actions, the Agent shall follow any
specific instructions of the Lenders as to the actions to be taken to the extent
not within the sole discretion of the Agent.
9.2 AUTOMATIC ACCELERATION AND TERMINATION.
If any Event of Default referred to in Section 8.11 above
shall occur, all of the Obligations then owing to the Agent or the Lenders shall
thereupon become and thereafter be immediately due and payable in full, all
without any presentment, demand or notice of any kind, which are hereby waived
by the Borrower.
9.3 GENERAL RIGHTS AND REMEDIES OF AGENT AND THE LENDERS.
With respect to the Collateral, the Agent shall have all of
the rights and remedies of a secured party under the UCC or under other
applicable Law. The Agent and the Lenders shall have all other legal and
equitable rights to which each may be entitled, all of which rights and remedies
shall be cumulative, and none of which shall be exclusive, to the extent
permitted by Law, in addition to any other rights or remedies contained in this
Agreement or in any of the other Loan Documents. Each Lender hereby expressly
agrees that it will not take or cause to be taken, in respect of the Term Loans
or the other Obligations or the Collateral, any action or remedy that is
independent from the actions or remedies taken or to be taken by the Agent or
the other Lender, except for any actions taken by any Lender necessary to
preserve its rights in connection with any Event of Default described in Section
8.11.
9.4 ADDITIONAL REMEDIES.
After the Obligations shall have been declared by the Agent to
be or shall have otherwise hereunder become immediately due and payable, the
Agent may, in its sole discretion, and, upon direction of the Lenders, shall,
exercise the following rights and remedies to the extent permitted by applicable
Law and in addition to any other right or remedy provided for in this Agreement:
(A) POSSESSION OF COLLATERAL.
The Agent shall have the right to take immediate
possession of the Collateral and all Proceeds relating to such
Collateral and: (i) require the Borrower and each of the Subsidiary
Guarantors, at the Borrower's expense, to assemble the Collateral and
make it available to the Agent at such facilities of the Borrower and
the Subsidiary Guarantor as the Agent shall designate or (ii) enter any
of the premises of the Borrower or the Subsidiary Guarantors or wherever
any Collateral shall be located and to keep and store the same on such
premises until sold. If the premises on which the Collateral are located
is owned or leased by the Borrower or the Subsidiary Guarantor, then the
Borrower or such Subsidiary Guarantor shall not charge the Agent for
storage of such Collateral on such premises.
35
(b) FORECLOSURE OF LIENS.
The Agent shall have the right to foreclose the Liens
created under this Agreement and each of the other Loan Documents or
under any other agreement relating to the Collateral.
(c) DISPOSITION OF COLLATERAL.
The Agent shall have the right to sell or to otherwise
dispose of all or any Collateral in its then condition, or after any
further processing thereof, at public or private sale or sales,
wholesale dispositions, or sales pursuant to one or more contracts, with
such notice as may be required by Law, in lots or in bulk, for cash or
on credit, all as the Agent, in its discretion, may deem advisable. The
Borrower and each Subsidiary Guarantor acknowledges and covenants that
ten (10) days written notice to the Borrower or such Subsidiary
Guarantor of any public or private sale or other disposition of
Collateral shall be reasonable notice thereof, and such sale shall be at
the Borrower's or such Subsidiary Guarantor's premises or at such other
locations where the Collateral then is located, or as otherwise
determined by the Agent. The Agent shall have the right to conduct such
sales on the Borrower's or the Subsidiary Guarantors' premises, without
charge therefor, and such sales may be adjourned from time to time in
accordance with applicable Law without further requirement of notice to
the Borrower or such Subsidiary Guarantor. Each Lender shall have the
right to bid or credit bid any such sale on its own behalf.
(d) APPLICATION OF COLLATERAL; APPLICATION OF LIQUIDATION
PROCEEDS.
The Agent, with or without proceeding with sale or
foreclosure or demanding payment of the Obligations, shall, without
notice, at any time, appropriate and apply to the Secured Obligations
any and all Collateral of the Borrower and the Subsidiary Guarantors in
the possession of the Agent or the Lenders as follows. All monies
received by the Agent or any Lender from the exercise of remedies under
this Agreement or the other Loan Documents unless otherwise required by
the terms of the other Loan Documents or by applicable Law, shall be
applied as follows:
(i) First, to the payment of all reasonable expenses
incurred by the Agent and the Lenders in connection with
the exercise of such remedies, including, without
limitation, all reasonable costs and expenses of
collection, reasonable documented attorneys' fees, court
costs and any foreclosure expenses;
(ii) Second, to the payment pro rata of interest then
accrued on the outstanding Term Loans;
(iii) Third, to the payment pro rata of the principal
balance then owing on the outstanding Term Loans in such
order as the Agent may choose in its sole discretion;
(iv) Fourth, to the payment pro rata of any fees then
accrued and payable to the Agent or any Lender under this
Agreement;
(v) Finally, any remaining surplus, after all of the Term
Loans have been paid in full and the Lenders have been
paid, to the Borrower or to whomsoever shall be lawfully
entitled thereto.
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9.5 SET-OFF.
If any Event of Default shall occur which is continuing and
has not been waived, each Lender thereof shall have the right (in addition to
such other rights as it may have by operation of Law or otherwise) at any time
to set off against and to appropriate to and apply toward the payment of the
Obligations, and all other liabilities under this Agreement and the other Loan
Documents then owing to it, whether or not the same shall then have matured, any
and all deposit (general or special) and any other Indebtedness at any time held
or owing by such Lender or each Affiliate thereof to or for the credit or
account of the Borrower, all without notice to or demand upon the Borrower or
any other Person, all such notices and demands being hereby expressly waived.
9.6 ACTIONS IN RESPECT OF PLEDGED COLLATERAL.
(a) VOTING; DIVIDENDS.
Upon the occurrence of an Event of Default which is
continuing and which has not been waived, upon notice by the Agent to
the Borrower or any applicable Subsidiary Guarantor, (i) the Agent shall
have the right to receive any and all dividends, payments or other
Proceeds paid in respect of the Pledged Collateral and make application
thereof to the Secured Obligations in the order set forth in Section
9.4(d) of this Agreement, and (ii) the Agent or its nominee may exercise
(A) all voting, consent, corporate and other rights pertaining to the
Pledged Collateral at any meeting of shareholders or members of the
relevant issuer or issuers and (B) any and all rights of conversion,
exchange and subscription and any other rights, privileges or options
pertaining to the Pledged Collateral (including the right to exchange at
its discretion any and all of the Pledged Collateral upon the merger,
consolidation, reorganization, recapitalization or other fundamental
change in the corporate structure of any issuer of Pledged Collateral,
the right to deposit and deliver any and all of the Pledged Collateral
with any committee, depositary, transfer agent, registrar or other
designated agency upon such terms and conditions as the Agent may
determine), all without liability except to account for property
actually received by it, but the Agent shall have no duty to the
Borrower or any Subsidiary Guarantor to exercise any such right,
privilege or option and shall not be responsible for any failure to do
so or delay in so doing.
(b) DELIVERY OF PROXIES.
In order to permit the Agent to exercise the voting and
other rights which it may be entitled to exercise pursuant hereto and to
receive all dividends and other distributions which it may be entitled
to receive hereunder, (i) upon the occurrence of an Event of Default
which is continuing and which has not been waived, the Borrower and each
Subsidiary Guarantor shall promptly execute and deliver (or cause to be
executed and delivered) to the Agent all such proxies, dividend payment
orders and other instruments as the Agent may from time to time
reasonably request and (ii) without limiting the effect of clause (i)
above, the Borrower or such Subsidiary Guarantor hereby grants to the
Agent an irrevocable proxy to vote all or any part of the Pledged
Collateral and to exercise all other rights, powers, privileges and
remedies to which a holder of the Pledged Collateral would be entitled
(including giving or withholding written consents of shareholders or
members calling special meetings of shareholders or members, as the case
may be, and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any
transfer of any Pledged Collateral on the record books of the issuer
thereof) by any other Person (including the issuer of such Pledged
Collateral or any officer or agent thereof) during the continuance of an
Event of Default which has not been waived and which proxy shall only
terminate upon the payment in full of the Secured Obligations.
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(c) AUTHORIZATION TO ISSUERS.
The Borrower and each Subsidiary Guarantor hereby
expressly authorizes and instructs each issuer of any Pledged Collateral
pledged hereunder to (i) comply with any instruction received by it from
the Agent in writing that (A) states that an Event of Default has
occurred and is continuing and (B) is otherwise in accordance with the
terms of this Agreement, without any other or further instructions from
the Borrower or such Subsidiary Guarantor, and the Borrower and each
Subsidiary Guarantor agrees that such issuer shall be fully protected in
so complying and (ii) unless otherwise expressly permitted hereby, pay
any dividends or other payments with respect to the Pledged Collateral
directly to the Agent.
9.7 PRIVATE SALE.
The Borrower and each Subsidiary Guarantor recognize that the
Agent may be unable to effect a public sale of any or all the Pledged Collateral
by reason of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise or may determine that a public sale is
impracticable or not commercially reasonable and, accordingly, may resort to one
or more private sales thereof to a restricted group of purchasers which will be
obliged to agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or resale
thereof. The Borrower and each Subsidiary Guarantor acknowledge and agree that
any such private sale may result in prices and other terms less favorable than
if such sale were a public sale and, notwithstanding such circumstances, agrees
that any such private sale shall be deemed to have been made in a commercially
reasonable manner. The Agent shall be under no obligation to delay a sale of any
of the Pledged Collateral for the period of time necessary to permit the issuer
thereof to register such securities for public sale under the Securities Act, or
under applicable state securities laws, even if such issuer would agree to do
so.
9.8 AUTHORITY TO EXECUTE TRANSFERS.
Without limitation of any authorization granted to the Agent
hereunder, the Borrower and each Subsidiary Guarantor also hereby authorizes the
Agent, upon the occurrence of an Event of Default which is continuing and has
not been waived, to execute, in connection with the exercise by the Agent of its
remedies hereunder, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
9.9 REMEDIES CUMULATIVE.
The above-stated remedies are not intended to be exhaustive
and the full or partial exercise of any of such remedies shall not preclude the
full or partial exercise of any other remedy by the Agent under this Agreement,
under any Loan Document, or at equity or under Law.
9.10 APPOINTMENT OF ATTORNEY-IN-FACT.
The Agent shall hereby have the right, and the Borrower and
each Subsidiary Guarantor hereby irrevocably make, constitute, and appoint the
Agent (and all officers, employees, or Agents designated by the Agent) as its
true and lawful attorney-in-fact and Agent, with full power of substitution,
from time to time but only to the extent following the occurrence of an Event of
Default which is continuing and has not been waived: (a) to effectuate, in the
Borrower's or such Subsidiary Guarantor's name, the Borrower's or such
Subsidiary Guarantor's obligations under this Agreement, (b) in the Borrower's,
such Subsidiary Guarantor's, or Agent's name: (i) to exercise all of the
Borrower's or such Subsidiary Guarantor's rights and remedies with respect to
the Collateral, (ii) if permitted by applicable Law, to sell or assign the
Collateral
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upon such terms, for such amounts, and at such time or times as the Agent deems
advisable, (iii) to take control, in any manner, of any item of payment or
Proceeds relating to any Collateral, (iv) to do all acts and things reasonably
necessary, in the Agent's good faith discretion, to fulfill the Borrower's or
such Subsidiary Guarantor's obligations under this Agreement, (v) to endorse the
name of the Borrower or such Subsidiary Guarantor upon any of the items of
payment or Proceeds relating to any Collateral, (vi) to use the information
recorded on or contained in any data processing equipment and computer hardware
and software relating to the Collateral to which the Borrower or such Subsidiary
Guarantor has access, and (vii) to make and adjust claims under such policies of
insurance insuring the Collateral, receive and endorse the name of the Borrower
or such Subsidiary Guarantor on any check, draft, instrument or other item of
payment for the proceeds of such policies of insurance insuring the Collateral,
and make all determinations and decisions with respect to such policies of
insurance. The Borrower and each Subsidiary Guarantor hereby ratifies all that
said attorneys shall lawfully do or cause to be done by virtue hereof. This
power of attorney is a power coupled with an interest and shall be irrevocable.
9.11 LIMITATIONS ON REMEDIES IMPOSED BY INSURANCE LAWS.
Notwithstanding the provisions of this Section 9, any exercise
of ownership, voting, transfer or other rights with respect to Pledged
Collateral constituting capital stock or other direct or indirect interests in a
Regulated Insurance Company shall be subject, to the extent required by law, to
the obtaining of any prior consent of any insurance regulatory authority having
jurisdiction over such Regulated Insurance Company.
SECTION 10 SUBSIDIARY GUARANTY.
10.1 GUARANTEED OBLIGATIONS.
To induce the Lenders to make the Term Loans, and in
consideration thereof, each of the Subsidiary Guarantors hereby unconditionally
and irrevocably: (a) guarantees, jointly and severally, to the Agent and the
Lenders the due and punctual payment in immediately available funds, of all of
the Secured Obligations (whether by acceleration or otherwise) and (b) agrees,
jointly and severally, to pay any and all expenses which may be incurred by the
Agent in enforcing its rights with respect to such Secured Obligations on behalf
of the Lenders (collectively, the "Guaranteed Obligations").
10.2 MAXIMUM LIABILITY.
Solely in the event it is necessary for the enforceability of
the Subsidiary Guaranty, the maximum liability of the Subsidiary Guarantor under
its Subsidiary Guaranty for Guaranteed Obligations shall be the greatest amount
which, after taking into consideration all other valid and enforceable debts and
liabilities of the Subsidiary Guarantor, an applicable court has determined
(after any appeals) would not render the Subsidiary Guarantor insolvent at the
date legally relevant for such determination, unable to pay its debts as they
become due, inadequately capitalized for the business which it intends to
conduct (in all such cases, within the meaning of Section 548 of the Bankruptcy
Code, 11 U.S.C. ss. 101, et. seq., or any other similar state Law), or unable to
pay a judgment rendered upon a claim that is the subject of an action or
proceeding pending at the time when the obligations of this Subsidiary Guaranty
are incurred or increased.
10.3 GUARANTY UNCONDITIONAL.
The obligations of the Subsidiary Guarantors under this
Subsidiary Guaranty shall be joint and several, irrevocable, unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by (i) any extension,
39
renewal, settlement, compromise, waiver or release in respect of any Obligation
under this Agreement or any Loan Document by operation of Law or otherwise; (ii)
any modification or amendment of or supplement to this Agreement or any Loan
Document; (ii) any modification, amendment, waiver, release, non-perfection or
invalidity of any direct or indirect security, or of any guarantee or other
liability of any third party, of the Guaranteed Obligations; (iii) any change in
the corporate existence, structure, or ownership of, or any Financial
Impairment, other similar proceeding affecting the Borrower, any Subsidiary
Guarantor or its assets or any resulting release or discharge of any of the
Obligations of the Subsidiary Guarantors contained in this Agreement or any Loan
Document; (iv) the existence of any claim, set-off or other rights which the
Subsidiary Guarantor may have at any time against the Agent, any Lender or any
other Person, whether or not arising in connection with this Agreement or any
Loan Document, (v) any invalidity or unenforceability relating to or against the
Borrower or its Subsidiary for any reason of this Agreement or any Loan Document
or any provision of applicable Law purporting to prohibit the payment by the
Borrower under this Agreement or any Loan Document; or (vi) to the extent
permitted by applicable Law, any other act or omission to act or delay of any
kind by the Subsidiary Guarantor, the Agent, any Lender or any other Person or
any other circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the Guaranteed
Obligations.
10.4 DISCHARGE; REINSTATEMENT.
The Guaranteed Obligations of each Subsidiary Guarantor shall
remain in full force and effect until the Secured Obligations shall have been
paid in full. If at any time any payment of any amount payable by Subsidiary
Guarantor under this Section 10, any other section of this Agreement or other
Loan Document is rescinded or must be otherwise restored or returned upon the
insolvency, Bankruptcy or reorganization of any Subsidiary Guarantor or
otherwise, the other Subsidiary Guarantor's obligations under this Section 10
with respect to such payment shall be reinstated at such time as though such
payment had become due but had not been made at such time. This Section 10 shall
survive the termination of this Agreement until the payment in full of all
amounts payable under this Agreement and any Loan Documents.
10.5 WAIVER.
No Subsidiary Guarantor shall be entitled to enforce any
remedy which the Agent or any Lender now has or may hereafter have against the
Borrower, any endorser or any Guarantor or other Subsidiary Guarantor in respect
of all or any part of the Guaranteed Obligations paid by the Subsidiary
Guarantor until all of the Secured Obligations are terminated. Each Subsidiary
Guarantor hereby waives any benefit of, and any right to participate in, any
security or collateral given to the Agent for the benefit of the Lenders to
secure payment of the Guaranteed Obligations or any other liability of the
Borrower or any Subsidiary Guarantor to the Agent or any Lender. Each Subsidiary
Guarantor also waives all setoffs and counterclaims and all presentments,
demands for performance, notices of nonperformance, protests, notices of
protest, notices of dishonor, and notices of acceptance of this Subsidiary
Guaranty. Each Subsidiary Guarantor further waives all notices of the existence,
creation or incurring of additional Secured Obligations, and also waives all
notices that the principal amount, or any portion thereof, and/or any interest
on any instrument or document evidencing all or any part of the Guaranteed
Obligations is due, notices of any and all proceedings to collect all or any
part of the Guaranteed Obligations, and, to the extent permitted by Law, notices
of exchange, sale, surrender or other handling of any Collateral given to the
Agent for the benefit of the Agent and the Lenders.
10.6 STAY OF ACCELERATION.
If acceleration of the time for payment of any amount payable
by any Subsidiary Guarantor under this Agreement or other Loan Document in
respect of a Guaranteed Obligation
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is stayed upon the insolvency, Bankruptcy or reorganization of any Subsidiary
Guarantor all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable by the other Subsidiary Guarantors
hereunder forthwith on demand by the Agent.
10.7 SUBROGATION AND CONTRIBUTION RIGHTS.
In addition to all rights of indemnity and subrogation that
the Subsidiary Guarantors may have under applicable Law, the Borrower agrees
that the Borrower will indemnify such Subsidiary Guarantor for the full amount
of any payment made thereby pursuant to this Section with respect to the
Guaranteed Obligations and such Subsidiary Guarantor shall be subrogated to the
rights of the Person to whom payment is made to the extent of such payment;
provided, however, that such Subsidiary Guarantor shall not enforce its rights
to any payment by way of indemnity or subrogation until all of the Secured
Obligations shall have been finally paid in full and may not under applicable
insolvency laws be required to be repaid by the Lenders. If any Subsidiary
Guarantor makes a payment in respect of the Guaranteed Obligations, it shall be
subrogated to the rights, if any, of the payees against the other Subsidiary
Guarantors with respect to such payment. No Subsidiary Guarantor shall enforce
any rights to any contribution payments from other Subsidiary Guarantors by way
of subrogation or by exercising its right of contribution until all of the
Secured Obligations shall have been finally paid in full and may not under
applicable insolvency Laws be required to be repaid by the Lenders.
SECTION 11 THE AGENT.
11.1 THE AGENT.
Each Lender irrevocably appoints the Agent to act as Agent
under this Agreement and the other Loan Documents for the benefit of such Lender
with full authority to take such actions, and to exercise such powers, on behalf
of such Lender in respect of this Agreement and the other Loan Documents as are
herein and therein respectively delegated to the Agent or as are reasonably
incidental to those delegated powers. The Agent in such capacity shall be deemed
to be an independent contractor of the Lenders. Each of the Lenders expressly
agrees that, without first obtaining the prior written consent of the Agent or
the other Lender, such Lender shall not take or cause to be taken, in respect of
the Secured Obligations hereunder or the Collateral, any enforcement or remedial
action that is independent from the actions or remedies taken or to be taken by
the Agent, except for any actions taken by any Lender which are necessary to
preserve its rights in connection with any Event of Default described in Section
8.11 of this Agreement.
11.2 NATURE OF APPOINTMENT.
The Agent shall not have any fiduciary relationship with any
Lender by reason of this Agreement and the other Loan Documents. The Agent shall
not have any duty or responsibility whatsoever to any Lender except those
expressly set forth in this Agreement and the other Loan Documents. Without
limiting the generality of the foregoing, each Lender acknowledges that the
Agent is acting as such solely as a convenience to the Lenders and not as a
manager of the Commitments or the Obligations evidenced by the Term Notes. This
Section 11 does not confer any rights upon the Borrower or anyone else (except
the Lenders), whether as a third party beneficiary or otherwise.
11.3 AGENT AS LENDER; OTHER TRANSACTIONS.
The Agent's rights as a Lender under this Agreement and the
other Loan Documents shall not be affected by serving as the Agent. The Agent
and its Affiliates may generally transact any banking, financial, trust,
advisory or other business with the Borrower and its Subsidiaries without notice
to the Lenders, without accounting to the Lenders and without
41
prejudice to the Agent's rights as a Lender under this Agreement and the other
Loan Documents except as may be expressly required under this Agreement.
11.4 INSTRUCTIONS FROM LENDERS.
The Agent shall not be required to exercise any discretion or
take any action as to matters not expressly provided for by this Agreement and
the other Loan Documents (including, without limitation, collection and
enforcement actions in respect of any Secured Obligations and any Collateral
therefor) except as may be reasonably requested of it in writing by the Lenders;
provided, however, that the Agent shall not be required to act (or omit any act)
if, in its judgment, any such action or omission might expose the Agent to
personal liability or might be contrary to this Agreement, any Loan Document or
any applicable Law.
11.5 LENDER'S DILIGENCE.
Each Lender represents and warrants that it has made its
decision to enter into this Agreement and the other Loan Documents and agrees
that it will make its own decision as to taking or not taking future actions in
respect of this Agreement and the other Loan Documents; in each case without
reliance on the Agent or any other Lender and on the basis of its independent
credit analysis and its independent examination of and inquiry into such
documents and other matters as it deems relevant and material.
11.6 NO IMPLIED REPRESENTATIONS.
The Agent shall not be liable for any representation,
warranty, agreement or obligation of any kind of any other party to this
Agreement or anyone else, whether made or implied by the Borrower or any
Subsidiary Guarantor in this Agreement or any Loan Document or by a Lender in
any notice or other communication or by anyone else or otherwise.
11.7 SUB-AGENTS.
The Agent may employ agents and shall not be liable (except as
to money or property received by it or its agents) for any negligence or willful
misconduct of any such agent selected by it with reasonable care.
11.8 AGENT'S DILIGENCE.
The Agent shall not be required: (a) to keep itself informed
as to anyone's compliance with any provision of this Agreement or any Loan
Document, (b) to make any inquiry into the properties, financial condition or
operation of the Borrower and its Subsidiaries or any other matter relating to
this Agreement or any Loan Document, (c) to report to any Lender any information
(other than which this Agreement or any Loan Document expressly requires to be
so reported) that the Agent or any of its Affiliates may have or acquire in
respect of the properties, business or financial condition of the Borrower and
its Subsidiaries or any other matter relating to this Agreement or any Loan
Document or (d) to inquire into the validity, effectiveness or genuineness of
this Agreement or any Loan Document.
11.9 NOTICE OF DEFAULT.
The Agent shall not be deemed to have knowledge of any
Potential Default or Event of Default unless and until it shall have received a
written notice describing such Potential Default or Event of Default and citing
the relevant provision of this Agreement or any Loan Document. The Agent shall
give each Lender reasonably prompt notice of any such written notice.
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11.10 AGENT'S LIABILITY.
Neither the Agent (acting in its capacity as Agent), nor any
directors, officers, employees, attorneys, and other agents acting for the
Agent, as the case may be, in such capacities respectively, shall be liable for
any action or omission on their respective parts except for gross negligence or
willful misconduct. Without limitation of the generality of the foregoing, the
Agent: (a) may treat the payee of any Term Note as the holder thereof until the
Agent receives a fully executed copy of any assignment with respect thereto,
signed by such payee and in form satisfactory to the Agent; (b) may consult with
legal counsel, independent public accountants and other experts selected by it
and shall not be liable for any action taken or omitted to be taken in good
faith by it in accordance with the advice of such counsel, accountants or
experts which have been selected by the Agent with reasonable care; (c) makes no
warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations made in or in
connection with this Agreement or any other Loan Document, including, without
limitation, the truth of the statements made in any certificate delivered by the
Borrower hereunder, the Agent being entitled to rely conclusively upon such
certificates; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or any other Loan Document or to inspect the property (including the
books and records) of the Borrower; (e) shall not be responsible to any Lender
for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, or collateral covered by any agreement
or any other Loan Document and (f) shall incur no liability under or in respect
of this Agreement or any other Loan Document by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, telecopy,
cable or telex) believed by it in good faith to be genuine and correct and
signed or sent by the proper party or parties.
Neither the Agent nor any of directors, officers, employees or
agents thereof shall have any responsibility to the Borrower or any Subsidiary
Guarantor on account of the failure of or delay in performance or breach by any
Lender of any of its obligations hereunder or to any Lender on account of the
failure of or delay in performance or breach by any other Lender or the Borrower
or any Subsidiary Guarantor of any of their respective obligations hereunder or
under any Loan Document or in connection herewith or therewith. The Lenders each
hereby acknowledge that the Agent shall be under no duty to take any
discretionary action permitted to be taken by it pursuant to the provisions of
this Agreement or any other Loan Document unless it shall be requested in
writing to do so by the Lenders.
11.11 AGENT'S INDEMNITY.
The Lenders shall indemnify the Agent, in its capacity as
Agent (to the extent the Agent is not reimbursed by the Borrower), from and
against: (a) any loss or liability (other than any caused by the Agent's gross
negligence or willful misconduct) incurred by the Agent as such in respect of
this Agreement or any Loan Document and (b) any out-of-pocket expenses incurred
in defending itself or otherwise related to this Agreement or any Loan Document
(other than any caused by the Agent's gross negligence or willful misconduct)
including, without limitation, reasonable fees and disbursements of legal
counsel of its own selection (including, without limitation, the reasonable
interdepartmental charges of its salaried attorneys) in the defense of any claim
against it or in the prosecution of its rights and remedies as the Agent (other
than the loss, liability or costs incurred by the Agent in the defense of any
claim against it by the Lenders arising in connection with its actions in its
capacity as Agent); provided, however, that each Lender shall be liable for only
its pro rata share of the whole loss or liability.
11.12 RESIGNATION OF AGENT.
The Agent may resign as Agent for any reason effective twenty
(20) Business Days after giving notice thereof to the Lenders and the Borrower.
If the Agent shall resign as
43
Agent, then the retiring Agent may appoint a successor Agent reasonably
acceptable to the Lenders and the Borrower, provided that The CIT
Group/Equipment Financing, Inc. shall be deemed an acceptable successor Agent by
the parties hereto so long as The CIT Group/Equipment Financing, Inc. is a
Lender at the time of such appointment. Upon appointment and acceptance of such
appointment as "Agent," the successor Agent shall succeed to the rights, powers
and duties of the Agent, and the term "Agent" shall mean such successor Agent,
effective upon its appointment and acceptance, and the former Agent's rights,
powers and duties as Agent shall be terminated, without any other or further act
or deed on the part of such former Agent or any of the parties to this
Agreement. After any retiring Agent's resignation hereunder as Agent, the
provisions of Section 11.11 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Agent under this Agreement.
SECTION 12 INDEMNITIES.
12.1 INCREASED COSTS.
If, after the Closing Date, (a) the introduction of any Law,
rule or regulation or any change therein, (b) any change in the interpretation
or administration of any Law, rule or regulation by any central bank or other
governmental authority or (b) the compliance by any Lender with any guideline,
request or directive from any central bank or other governmental authority
(whether or not having the force of Law) shall increase the cost to any Lender
(other than any increase in the cost of the overhead of such Lender) of agreeing
to make or making, funding or maintaining Term Loans to the Borrower, then the
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to indemnify such Lender for such increased cost.
12.2 RISK-BASED CAPITAL.
If any Lender shall have determined that after the Closing
Date, the adoption of any applicable Law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged by Law with the interpretation or administration thereof, or
compliance by such Lender or the parent corporation thereof with any request or
directive regarding capital adequacy (whether or not having the force of Law) of
any such authority, central bank, or comparable agency, in each case made
subsequent to the Closing Date, has or would have the effect of reducing by an
amount reasonably deemed by such Lender to be material to the rate of return on
the capital or assets of such Lender or the parent corporation thereof as a
consequence of the commitments or obligations of such Lender under this
Agreement to a level below that which such Lender or the parent corporation
could have achieved but for such adoption, effectiveness, change or compliance
(taking into consideration policies of such Lender or the parent corporation
with respect to capital adequacy), then from time to time, within 15 days after
demand by such Lender (with a copy to the Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender or the
parent corporation for such reduction. Each Lender, upon determining in good
faith that any additional amounts will be payable, which such Lender reasonably
determines is attributable to this Agreement, pursuant to this Section 12.2,
will give prompt written demand therefor.
12.3 TAXES.
(a) TAXES; WITHHOLDING.
Any and all payments by the Borrower hereunder shall be
made free and clear of and without deduction for any and all present or
future taxes, levies, imposts,
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deductions, charges or withholdings, and all liabilities with respect
thereto, excluding, in the case of each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the United States (or any
state or municipality located therein) the jurisdiction under the Laws
of which such Lender is organized or is doing business, or any political
subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by Law to
deduct any Taxes from or in respect of any sum payable hereunder or
under any Term Note: (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section
12.3) such 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 and (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable Law. All such Taxes shall be paid by the
Borrower prior to the date on which penalties attach thereto or interest
accrues thereon.
(b) STAMP TAXES.
The Borrower agrees to pay, and will indemnify each Lender
and the Agent for, any present or future stamp or documentary taxes or
any other excise or property taxes, charges or similar levies which
arise from any payment made hereunder or under the Term Notes or from
the execution, delivery or registration of, or otherwise with respect
to, this Agreement or the Term Notes ("Other Taxes").
(c) OTHER TAXES.
The Borrower will indemnify each Lender and the Agent for
the full amount of Taxes or Other Taxes paid by such Lender or the Agent
and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally asserted. Any indemnification payment
shall be made within thirty (30) days from the date such Lender or the
Agent makes written demand therefor.
(d) REQUEST FOR REFUND.
At the reasonable request of the Borrower, each Lender or
the Agent shall apply at the Borrower's expense for a refund in respect
of Taxes or Other Taxes previously paid by the Borrower if in the
opinion of such Lender or the Agent there is a reasonable basis for such
refund. Notwithstanding the foregoing, none of the Lenders or the Agent
shall be obligated to pursue such refund if, in its sole good faith
judgment, such action would be disadvantageous to it, but shall be
required to cooperate in good faith with the Borrower if the Borrower
should choose to pursue such refund. If any Lender or the Agent
subsequently receives from a taxing authority a refund (whether by way
of direct refund, credit, offset or otherwise) of any Tax for which the
Borrower has indemnified the Lender pursuant to this Section, such
Lender or the Agent shall within thirty (30) days after receipt of such
refund, and to the extent permitted by applicable Law, pay to the
Borrower the net amount of any such recovery after deducting taxes and
expenses attributable thereto.
(e) NON-U.S. LENDERS
(i) Each Lender that is not incorporated under the laws of
the United States of America or a state thereof (each a "Non-U.S.
Lender") agrees that it will, not more than ten Business Days after the
date on which it becomes a party to this Agreement (but in any event
before a payment is due to it hereunder), (i) deliver to the Agent and
the
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Borrower two duly completed copies of United States Internal Revenue
Service Form W-8BEN or W-8ECI or successor forms, certifying in either
case that such Lender is entitled to receive payments hereunder or under
any Term Note, as the case may be, without deduction or withholding of
any United States federal income taxes, or (ii) deliver to the Agent and
the Borrower a United States Internal Revenue Service Form W-8IMY or
successor form together with the applicable accompanying duly completed
copies of United States Internal Revenue Service applicable Forms W-8 or
W-9 or successor forms, as the case may be, and certify that it is
entitled to an exemption from United States withholding tax. Each
Non-U.S. Lender further undertakes to deliver to each of the Borrower
and the Agent renewals or additional copies of such form (or any
amendment thereto or successor form) (x) on or before the date that such
form expires or becomes obsolete, (y) after the occurrence of any event
requiring a change in the most recent forms so delivered by it and (z)
from time to time upon reasonable request by the Borrower or the Agent.
All forms or amendments described in the preceding sentence shall
certify that such Lender is entitled to receive payments hereunder or
under any Term Note, as the case may be, without deduction or
withholding of any United States federal income taxes, unless an event
(including without limitation any change in treaty, law or regulation)
has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which
would prevent such Lender from duly completing and delivering any such
form or amendment with respect to it and such Lender advises the
Borrower and the Agent that it is not capable of receiving payments
without any deduction or withholding of United States federal income
tax.
(ii) For any period during which a Non-U.S. Lender has
failed to provide the Borrower with an appropriate form pursuant to
clause (i) above (unless such failure is due to a change in treaty, law
or regulation, or any change in the interpretation or administration
thereof by any governmental authority, occurring subsequent to the date
on which a form originally was required to be provided), the Borrower
shall not gross up the payments as provided under Section 12.3(a) with
respect to such Non-U.S. Lender, and such Non-U.S. Lender shall not be
entitled to indemnification under Section 12.3(c) with respect to Taxes
imposed by the United States.
(iii) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments hereunder or under
any Term Note, as the case may be, pursuant to the law of any relevant
jurisdiction or any treaty shall deliver to the Borrower (with a copy to
the Agent), at the time or times prescribed by applicable law, such
properly completed and executed documentation prescribed by applicable
law as will permit such payments to be made without withholding or at a
reduced rate.
(f) SURVIVAL OF PROVISION.
Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and liabilities of the
Borrower, each Lender and the Agent contained in this Section shall
survive the payment in full of the Secured Obligations.
12.4 LOSSES.
If any payment of principal of, or Rate Conversion or Rate
Continuation of, any LIBOR Rate Borrowing is not paid when due or is made on a
day other than on the last day of an Interest Period, as a result of a payment,
or Rate Conversion or Rate Continuation or acceleration of the maturity of the
Term Notes or for any other reason, the Borrower shall, upon demand by any
Lender (with a copy of such demand to the Agent), pay to the Agent for the
account of such Lender any amounts required to compensate such Lender for any
additional losses, costs or expenses which it may reasonably incur as a result
of such payment or Rate Conversion or Rate
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Continuation, including, without limitation, any loss, cost or expense incurred
by reason of the liquidation or reemployment of deposits or other funds acquired
by such Lender to fund or maintain such Term Loan.
12.5 INDEMNIFICATION FOR REQUESTS.
Whenever the Borrower: (a) shall revoke any Rate
Conversion/Continuation Request involving any LIBOR Rate Borrowing, (b) shall
for any other reason fail to borrow pursuant to any such Rate
Conversion/Continuation Request or otherwise comply therewith, (c) shall fail to
fulfill, on or before the date specified in any such request, the applicable
conditions set forth in Section 3 of this Agreement or (d) shall fail to honor
any prepayment notice with respect to LIBOR Rate Borrowings, then, in each case
on any Lender's demand, the Borrower shall indemnify each Lender and the Agent
against any loss, cost or expense incurred by such Lender or the Agent as a
result of any such failure by the Borrower, including, without limitation, any
loss, cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such Lender or the Agent to fund the LIBOR
Rate Borrowing.
12.6 GENERAL INDEMNITY.
The Borrower and each Subsidiary Guarantor shall jointly and
severally indemnify and hold harmless the Agent and each Lender, and the
respective directors, officers, employees and Affiliates thereof, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses and disbursements of any kind or
nature whatsoever including, without limitation, reasonable fees and
disbursements of counsel and settlements costs, which may be imposed on,
incurred by, or asserted against any of them in connection with any
investigative, administrative or judicial proceeding (whether any of them is or
is not designated as a party thereto) directly or indirectly relating to or
arising out of this Agreement or any other Loan Document, the transactions
contemplated thereby, or any actual or proposed use of Proceeds hereunder or
thereunder, except that neither the Agent nor any Lender, nor any such
directors, officers, employees and Affiliates thereof shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
12.7 ENVIRONMENTAL INDEMNITY.
The Borrower and each Subsidiary Guarantor shall, at its sole
cost and expense, jointly and severally indemnify, defend and save harmless the
Agent, each Lender, and each of their respective officers, directors, employees,
agents, representatives and contractors and any subsequent owner of the
Collateral who purchases Collateral through the Lender or pursuant to any
enforcement action by the Lender, from and against any and all damages, losses,
liabilities, obligations, penalties, claims, litigations, demands, defenses,
judgments, suits, actions, proceedings, costs, disbursements and/or expenses
(including, without limitation, reasonable attorneys' and experts' fees,
expenses and disbursements) of any kind or nature whatsoever which may at any
time be imposed upon, incurred by or asserted against any of such indemnified
Persons directly or indirectly relating to, resulting from or arising out of:
(i) Environmental Claims against the Borrower or such Subsidiary Guarantor, (ii)
a material misrepresentation or inaccuracy in any representation or warranty
contained in this Agreement relating to any environmental matters or (iii) a
breach or failure to perform any covenant made by the Borrower in this Agreement
with respect to environmental matters which continues uncured after the
expiration of any applicable grace period. The Borrower will pay any such sums
five (5) days after demand by the Agent, together with interest on such amount
accruing from and after the expiration of such period at the default rate of
interest hereunder.
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12.8 CERTIFICATE FOR INDEMNIFICATION.
Each demand by the Agent or a Lender for payment pursuant to
this Section 12 shall be accompanied by a certificate setting forth the reason
for the payment, the amount to be paid, and the computations and assumptions in
determining the amount, which certificate shall, absent manifest error, be
presumed to be correct. In determining the amount of any such payment
thereunder, the Agent and each Lender may use reasonable averaging and
attribution methods, so long as such methods are set forth in the certificate
referred to in the preceding sentence. The failure to give any such notice shall
not release or diminish any of the Borrower's obligations to pay additional
amounts pursuant to this Section 12 upon the subsequent receipt of such notice.
SECTION 13 GENERAL.
This Agreement and the other Loan Documents shall be governed by the
following provisions:
13.1 AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Agreement or
the Term Notes or any other Loan Document, nor consent to any departure
therefrom, shall be effective unless the same shall be in writing and signed by
the Requisite Lenders, and, any amendment, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
13.2 GENERAL APPOINTMENT AS ATTORNEY-IN-FACT.
The Borrower and each Subsidiary Guarantor hereby irrevocably
constitute and appoint the Agent and any officer or agent thereof, with full
power of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Borrower and such
Subsidiary Guarantor and in the name of the Borrower and such Subsidiary
Guarantor or in its own name, from time to time following the occurrence of an
Event of Default which is continuing (unless waived in accordance herewith), in
the Agent's reasonable discretion, for the purpose of carrying out the terms of
this Agreement, without notice (except as specifically provided herein) to or
assent by the Borrower, to take to the extent permitted by Law any and all
appropriate action and to execute any and all documents and instruments which
may be necessary or desirable to accomplish the purposes of this Agreement,
including, without limiting the generality of the foregoing, the power and
right, on behalf of the Borrower and such Subsidiary Guarantor, to do the
following: (a) to pay or discharge taxes, liens, security interests or other
encumbrances levied or placed on or threatened against the Collateral, to effect
any repairs or any insurance, called for by the terms of this Agreement and to
pay all or any part of the premiums therefor and the costs thereof, and
otherwise to itself perform or comply with, or otherwise cause performance or
compliance with, any of the covenants or other agreements of the Borrower and
such Subsidiary Guarantor contained in this Agreement which the Borrower or such
Subsidiary Guarantor has failed to perform or with which the Borrower or such
Subsidiary Guarantor has not complied; (b) to enforce any right in respect of
any Collateral; (c) to defend any suit, action or proceeding brought against the
Borrower or such Subsidiary Guarantor with respect to any Collateral; (d) to
settle, compromise or adjust any suit, action or proceeding described above and,
in connection therewith, to give such discharges or releases as the Agent may
deem appropriate; (e) to sell, transfer, pledge, make any agreement with respect
to or otherwise deal with any of the Collateral generally as fully and
completely as though the Agent were the absolute owner thereof for all purposes;
and (f) to do, at the Agent's option and the Borrower's expense, at any time, or
from time to time, all acts and things which the Agent reasonably deems
necessary to protect, preserve or realize upon the Collateral and the Agent's
security interest therein, in order to effect the intent of this Agreement, all
as fully and effectively
48
as the Borrower or such Subsidiary Guarantor might do. The Borrower and each
Subsidiary Guarantor hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(a) AGENT NOT LIABLE.
The powers conferred on the Agent hereunder are solely to
protect its interests in the Collateral and shall not impose any duty
upon it to exercise any such powers. The Agent shall be accountable only
for amounts that it actually receives as a result of the exercise of
such powers and neither it nor any of its officers, directors, employees
or agents shall be responsible to the Borrower for any act or failure to
act, except for its own gross negligence or willful misconduct.
(b) PERFORMANCE BY AGENT OF THE BORROWER'S OBLIGATIONS.
If the Borrower or any Subsidiary Guarantor fails to
perform or comply with any of its agreements contained herein and an
Event of Default shall have occurred which is continuing and has not
been waived, and the Agent shall itself perform or comply, or otherwise
cause performance or compliance, with such agreement, the reasonable
expenses of the Agent incurred in connection with such performance or
compliance, together with interest thereon at the highest rate of
interest that would from time to time apply to any Type of Borrowing,
shall be payable by the Borrower to the Agent on demand.
13.3 CUMULATIVE PROVISIONS.
Each right, power or privilege specified or referred to in
this Agreement is in addition to and not in limitation of any other rights,
powers and privileges that the Agent and the Lenders may otherwise have or
acquire by operation of Law, by other contract or otherwise.
13.4 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit
of the Borrower, the Subsidiary Guarantors, the Agent, the Lenders and their
respective successors and assigns, except that neither the Borrower nor the
Subsidiary Guarantors shall have the right to assign their rights hereunder or
any interest herein without the prior written consent of the Lenders.
13.5 COSTS AND EXPENSES.
The Borrower agrees to pay on demand (a) all reasonable costs
and expenses of: the Agent (including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel) in connection with the preparation,
execution, delivery, administration, modification, amendment and waiver of this
Agreement or the other Loan Documents (b) the Agent and the Lenders (including,
without limitation, the reasonable fees and out-of-pocket expenses of counsel)
in connection with the enforcement of, the exercise of remedies under, or the
preservation of rights and remedies under this Agreement or any of the other
Loan Documents (including any collection, bankruptcy or other enforcement
proceedings arising with respect to the Borrower, this Agreement, or any Event
of Default under this Agreement); provided, however, that if there is a material
conflict of interest between the Agent and the other Lenders, the Lenders who
are not acting in the capacity as the Agent shall be entitled to reimbursement
for not more than one counsel representing all such Lenders.
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13.6 SURVIVAL OF PROVISIONS.
All representations and warranties made in or pursuant to this
Agreement shall survive the execution and delivery of this Agreement. The
provisions of Section 12 of this Agreement shall survive the payment of the
Secured Obligations and any other Indebtedness owed by the Borrower hereunder
and the termination of this Agreement (whether by acceleration or otherwise).
13.7 CAPTIONS.
The several captions to different Sections and the respective
subsections thereof are inserted for convenience only and shall be ignored in
interpreting the provisions of this Agreement.
13.8 SHARING OF INFORMATION; CONFIDENTIALITY.
(a) The Agent and each Lender shall have the right to furnish
to its Affiliates, its accountants, its employees, its officers, its directors,
its legal counsel, potential participants, and to any governmental agency having
jurisdiction, information concerning the business, financial condition, and
property of the Borrower, the amount of the Term Loans of the Borrower
hereunder, and the terms, conditions and other provisions applicable to the
respective parts thereof.
(b) Each Lender shall hold all non-public information
furnished by or on behalf of the Borrower in connection with such Lender's
evaluation of whether to become a lender hereunder or obtained by such Lender
pursuant to the requirements of this Agreement ("Confidential Information") in
accordance with its customary procedure for handling confidential information of
this nature and in accordance with safe and sound banking or lending practices;
provided that any Lender and/or its Affiliates may disclose any such
Confidential Information (a) to their respective affiliates, directors,
officers, employees, auditors or counsel for purposes related to this Agreement,
provided that the Lender disclosing such confidential information pursuant to
this clause (a) shall remain liable for any non-permitted disclosure of such
information by any such employee, director, agent, attorney, accountant or
professional advisor, (b) as has become generally available to the public other
than as a result of disclosure in violation of this Section 13.8(b), (c) as has
become available to such Lender or any such Affiliate on a non-confidential
basis from a source other than the Borrower and its Affiliates, provided that
the source is not known by such Lender to be prohibited from transmitting such
information to such Lender by a contractual, legal or fiduciary obligation, (d)
as may be required or appropriate in any report, statement or testimony
submitted to any municipal, state or Federal regulatory body having or claiming
to have jurisdiction over such Lender and/or its Affiliates, (e) as may be
required or appropriate in respect to any summons or subpoena or in connection
with any litigation or other judicial process (it being understood that, to the
extent reasonably practicable under the circumstances, the Borrower shall be
given prior notice and an opportunity to contest any proposed disclosure
pursuant to this clause (e)), (f) in order to comply with any law, order,
regulation or ruling applicable to such Lender and/or its Affiliates, and (g) to
any permitted prospective or actual syndicate member or participant in the Term
Loans, provided that such prospective or actual syndicate member or participant
agrees with the respective assigning Lender to be bound by the provisions of
this Section 13.8(b). The provisions of this Section 13.8(b) shall survive any
termination of this Agreement.
13.9 INTEREST RATE LIMITATION.
Notwithstanding anything herein to the contrary, if at any
time the applicable interest rate, together with all fees and charges that are
treated as interest under applicable Law as provided for herein or in any other
document executed in connection herewith, or otherwise
50
contracted for, charged, taken, received or reserved by any Lender shall exceed
the maximum lawful rate that may be contracted for, charged, taken, received or
reserved by the Lender in accordance with applicable Law (the "Maximum Lawful
Rate"), then so long as the Maximum Lawful Rate would be so exceeded, the rate
of interest and all such charges payable, contracted for, charged, taken,
received or reserved in respect of the Term Loans shall be equal to the Maximum
Lawful Rate; provided, that, if any time thereafter the applicable interest
rate, together with all fees and charges that are treated as interest under
applicable Law as provided for herein or in any other document executed in
connection herewith, or otherwise contracted for, charged, taken, received or
reserved by the Lenders shall be less than the Maximum Lawful Rate, the Borrower
shall continue to pay such interest and fees hereunder at the Maximum Lawful
Rate until such time as the total interest received by the Agent for the benefit
of the Lenders is equal to the total interest and fees that would have been
received had the interest rate payable hereunder been (but for the operation of
this Section 13.9) the interest rate payable since the Closing Date as otherwise
provided in this Agreement. Thereafter, interest payable hereunder shall be paid
at the rate(s) of interest and the charges provided in Section 2.4 of this
Agreement, unless and until the rate of interest again exceeds the Maximum
Lawful Rate, and at that time this Section 13.9 shall again apply. In no event
shall the total interest, together with all fees and charges that are treated
like interest, received by any Lender pursuant to the terms hereof exceed the
amount which such Lender could lawfully have received had the interest and such
fees and charges due hereunder been calculated for the full term hereof at the
Maximum Lawful Rate. If, notwithstanding the provisions of this Section 13.9, a
court of competent jurisdiction shall finally determine that a Lender or has
received interest, or fees and charges that are treated like interest, hereunder
in excess of the Maximum Lawful Rate, the Agent shall, to the extent permitted
by applicable Law, promptly apply such excess to the principal amounts owing to
such Lender and thereafter shall refund any excess to the Borrower or as a court
of competent jurisdiction may otherwise order.
13.10 LIMITATION OF LIABILITY.
To the extent permitted by applicable Law, no claim may be
made by the Borrower, any of the Subsidiary Guarantors, the Agent, any Lender or
any other Person against the Agent, Lenders, or the Affiliates, directors,
officers, employees, agents, attorneys and consultants of any of them, for any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Agent, the Borrower, each Subsidiary
Guarantor and the Lenders hereby waive, release and agree not to ▇▇▇ upon any
claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.
13.11 ILLEGALITY.
If any provision in this Agreement or any other Loan Document
shall for any reason be or become illegal, void or unenforceable, that
illegality, voidness or unenforceability shall not affect any other provision.
13.12 NOTICES.
All notices, requests, demands and other communications
provided for hereunder shall be in writing and shall be given solely: (a) by
hand delivery or by overnight courier delivery service, with all charges paid,
(b) by facsimile transmission, if confirmed same day in writing by first class
mail mailed, or (c) by registered or certified mail, postage prepaid and
addressed to the parties. For the purposes of this Agreement, such notices shall
be deemed to be given and received: (i) if by hand or by overnight courier
service, upon actual receipt, (ii) if by facsimile transmission, upon receipt of
machine-generated confirmation of such transmission (and provided the
above-stated written confirmation is sent) or (iii) if by registered or
certified
51
mail, upon the first to occur of actual receipt or the expiration of 48 hours
after deposit with the U.S. Postal Service; provided, however, that notices from
the Borrower to Agent or, the Lenders pursuant to any of the provisions hereof,
shall not be effective until actually received. Notices or other communications
hereunder shall be addressed, at the address specified on the signature pages of
this Agreement.
13.13 GOVERNING LAW.
This Agreement and the other Loan Documents and the respective
rights and obligations of the parties hereto shall be governed by and construed
in accordance with the internal Laws of the State of Ohio (without giving effect
to the conflict of laws rules thereof and except to the extent perfection of the
Agent's security interests and Liens and the effect thereof are otherwise
governed pursuant to the UCC or the applicable Law of any foreign jurisdiction).
13.14 ENTIRE AGREEMENT.
This Agreement and the other Loan Documents referred to in or
otherwise contemplated by this Agreement set forth the entire agreement of the
parties as to the transactions contemplated by this Agreement.
13.15 JURY TRIAL WAIVER.
THE BORROWER, EACH OF THE SUBSIDIARY GUARANTORS, THE AGENT,
AND EACH OF THE LENDERS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING
ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG ANY OR ALL
OF THEM, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.
13.16 JURISDICTION.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY OHIO STATE COURT OR FEDERAL COURT OF THE UNITED STATED OF
AMERICA SITTING IN FRANKLIN COUNTY, OHIO, AND ANY APPELLATE COURT FROM ANY
THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR ANY LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY
AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN ANY SUCH OHIO STATE OR, TO THE EXTENT PERMITTED BY LAW, IN
SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE
HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, THE REVOLVING
CREDIT NOTES OR ANY LOAN DOCUMENT IN THE COURTS OF ANY JURISDICTION.
52
13.17 VENUE; INCONVENIENT FORUM.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO
SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
REVOLVING CREDIT NOTES OR ANY OTHER LOAN DOCUMENT IN ANY OHIO STATE OR FEDERAL
COURT SITTING IN OHIO. EACH OF THE PARTIES HERETO HEREBY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE
OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. THE BORROWER AND EACH SUBSIDIARY
GUARANTOR CONFIRM THAT THE FOREGOING WAIVERS ARE INFORMED AND FREELY MADE.
13.18 EXECUTION IN COUNTERPARTS; EXECUTION BY FACSIMILE.
This Agreement may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. Delivery of an executed counterpart
hereof by facsimile shall be effective as manual delivery of such counterpart;
provided, however, that, each party hereto will promptly thereafter deliver
counterpart originals of such counterpart facsimiles delivered by or on behalf
of such party.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers or Agents thereunto duly authorized, as of
the date first above written.
BORROWER
CERES GROUP, INC., AS THE BORROWER
------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
Bank One Plaza
▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
54
SUBSIDIARY GUARANTORS
CERES ADMINISTRATORS, LLC, AS A
SUBSIDIARY GUARANTOR
------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
c/o Ceres Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
Bank One Plaza
▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ 853-7036
55
CERES HEALTH CARE, INC., AS A
SUBSIDIARY GUARANTOR
------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
c/o Ceres Group, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
Bank One Plaza
▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
56
CONTINENTAL GENERAL CORPORATION,
AS A SUBSIDIARY GUARANTOR
------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
Bank One Plaza
▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
57
WESTERN RESERVE ADMINISTRATIVE SERVICES, INC.,
AS A SUBSIDIARY GUARANTOR
------------------------------------------
By: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Chief Financial Officer
Address for notices:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Sidley ▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇ LLP
Bank One Plaza
▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
58
ADMINISTRATIVE AGENT
NATIONAL CITY BANK, as Agent
------------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President
Address for Notices:
National City Bank, as Agent
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
59
LENDERS:
NATIONAL CITY BANK, as a Lender
------------------------------------------
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: Vice President
Address for Notices:
National City Bank, as a Lender
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Lending Office:
National City Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
60
THE CIT GROUP/EQUIPMENT FINANCING, INC.,
as a Lender
------------------------------------
By: ▇▇▇▇ ▇▇▇▇▇▇▇
Its: Executive Vice President
Address for Notices:
The CIT Group/Equipment Financing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
The CIT Group/Equipment Financing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Lending Office:
The CIT Group/Equipment Financing, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
61
ANNEX I
DEFINITIONS
As used in this Agreement, the following terms shall have the
following meanings (such meanings to be equally applicable to both the singular
and plural forms of the terms defined):
"ACCUMULATED FUNDING DEFICIENCY" has the meaning ascribed
thereto in section 302(a)(2) of ERISA.
"ADDITIONAL PLEDGED COLLATERAL" means all shares of, and
limited liability company interests in, and all securities convertible
into, and warrants, options and other rights to purchase or otherwise
acquire, stock of, either (i) any Person, other than a Regulated
Insurance Company, that, after the Closing Date, becomes a Subsidiary
of the Borrower, or (ii) any issuer of Pledged Stock, or any LLC that
is acquired by the Borrower or any Subsidiary Guarantor after the
Closing Date; all certificates or other instruments representing any of
the foregoing; and all interest, cash, instruments and other property
or Proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
foregoing.
"AFFILIATE" means, with respect to a specified Person, any
other Person: (a) which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common
control with such Person ("control" meaning the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise), (b) which beneficially
owns or holds with power to vote ten percent (10%) or more of any class
of the voting stock or similar interest of such Person, (c) ten percent
(10%) or more of the voting stock or similar interest of which other
Person is beneficially owned or held by such Person, or (d) who is an
executive officer or director of such Person or of such other Person.
"AGENT" means National City Bank, in its capacity as Agent for
the Lenders.
"AGREEMENT" means this Credit and Security Agreement and any
amendment, supplement or modification, if any, to this Credit and
Security Agreement.
"ANNUAL STATEMENT" means the annual financial statement
required to be filed by any Regulated Insurance Company with the
Applicable Insurance Regulatory Authority.
"APPLICABLE INSURANCE REGULATORY AUTHORITY" means, when used
with respect to any Regulated Insurance Company, the insurance
department or similar administrative authority or agency located in the
state in which such Regulated Insurance Company is domiciled.
"APPLICABLE MARGIN" means, with respect to Borrowings under
Term Loan A, .50% for Prime Rate Borrowings and 3.25% for LIBOR Rate
Borrowings from the Closing Date until maturity, and with respect to
Borrowings under Term Loan B, 1.25% for Prime Rate Borrowings and 4.0%
for LIBOR Rate Borrowings from the Closing Date through the first
anniversary of the Closing Date, and 1.0% for Prime Rate Borrowings and
3.75% for LIBOR Rate Borrowings thereafter until maturity.
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"APPROVED BANK" shall have the meaning provided in the
definition of "Cash Equivalents."
"APPROVED COMPANY" shall have the meaning provided in the
definition of "Cash Equivalents".
"BENCHMARK STATEMENT" shall mean, as of any date, an annual
financial statement of a Regulated Insurance Companies as would be
prepared as of such date utilizing substantially the same format
utilized by such company in preparing its December 31, 2002 Annual
Statement filed with the Applicable Insurance Regulatory Authority with
respect to such company, with each page, line item and column of a
Benchmark Statement to contain the same type of information, computed
in the same manner, as contained in the identically numbered page, line
item and column of such Annual Statement, except for such changes as
may be required by Law or such Applicable Insurance Regulatory
Authority.
"BORROWER" means Ceres Group, Inc.
"BORROWING" means a group of loans of a single Type made by
the Lenders or as to which a single Interest Period is in effect, i.e.,
any group of loans made by the Lenders of a different Type, or made on
a different date shall be considered to comprise a different Borrowing.
"BUSINESS DAY" means: (i) a day of the year on which the Agent
is not required or authorized to close in Columbus, Ohio and (ii) if
the applicable Business Day relates to LIBOR Rate Borrowings, a day of
the year which is a Business Day described in clause (i) above and
which is also a day on which dealings in Dollar deposits are carried on
in the London interbank market and banks are open for business in
London.
"CAPITALIZED LEASE OBLIGATIONS" means all obligations under
Capitalized Leases of a Person in each case taken into account in the
amount thereof accounted for as liabilities identified as "capitalized
lease obligations" (or any similar words) on a consolidated balance
sheet of such Person and its Subsidiaries, as determined on a
consolidated basis in accordance with GAAP.
"CAPITALIZED LEASES" means, in respect of any Person, any
lease of property imposing obligations on such Person, as lessee of
such property, which are required in accordance with GAAP to be
capitalized on a balance sheet of such Person.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. Section 9601 et
seq.
"CERTIFICATED SECURITIES" means "certificated security" as
defined in the UCC.
"CASH EQUIVALENTS" means (i) securities issued or directly and
fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided, that the full faith and
credit of the United States of America is pledged in support thereof)
having maturities of not more than one year from the date of
acquisition, (ii) Dollar denominated time deposits, certificates of
deposit and bankers acceptances of (x) any FDIC insured bank, in
amounts up to the FDIC insured limit, (y) the Agent or any bank having
capital and surplus in excess of $500,000,000 or the Dollar equivalent
thereof or (z) the Agent or any bank whose short-term commercial paper
rating from S&P is at least A-1 or the equivalent thereof or from
▇▇▇▇▇'▇ is at least P-1 or the equivalent
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thereof (any such bank, an "Approved Bank"), in each case with
maturities of not more than one year from the date of acquisition,
(iii) commercial paper issued by any Bank or Approved Bank or by the
parent company of the Agent or any Approved Bank and commercial paper
issued by, or guaranteed by, any industrial or financial company with a
short-term commercial paper rating of at least A-l or the equivalent
thereof by S&P or at least P-1 or the equivalent thereof by Moody's
(any such company, an "Approved Company"), or guaranteed by any
industrial company with a long term unsecured debt rating of at least A
or A2 or the equivalent of each thereof, from S&P or Moody's, as the
case may be, and in each case maturing within one year after the date
of acquisition, (iv) commercial paper of any United States municipal,
state or local government rated at least A-1 or the equivalent thereof
by S&P or at least P-1 or the equivalent thereof by Moody's and
maturing within one year after the date of acquisition, (v) any fund or
funds investing solely in investments of the type described in clauses
(i) through (iv) above, and (vi) agreements to sell and repurchase
direct obligations of, or obligations that are fully guaranteed as to
principal and interest by, the U.S. Treasury, such agreements to be
with primary treasury dealers, to be evidenced by standard industry
forms and to have maturities of not more than one year from the date of
commencement of the repurchase transaction.
"CHANGE IN CONTROL" shall mean (a) any Person (together with
its Affiliates) other than Insurance Partners and its Affiliates
(collectively), shall own directly or indirectly 50% or more on a fully
diluted basis of the voting or economic equity interests of the
Borrower; or (b) a majority of the Board of Directors of the Borrower
shall cease to consist of Continuing Directors.
"CHARTER DOCUMENTS" means, as to any Person (other than a
natural person), the charter, certificate or articles of incorporation,
by-laws, regulations, general or limited partnership agreement,
certificate of limited partnership, certificate of formation, operating
agreement, or other similar organizational or governing documents of
such Person.
"CLOSING DATE" means December 23, 2003.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means the assets of the Borrower and the
Subsidiary Guarantors described in Section 4.1 in which a security
interest or Lien is granted to the Agent for the benefit of the Lenders
pursuant to Section 4.1 hereof to secure repayment of the Secured
Obligations and expressly excludes any Excluded Property except to the
extent provided in the definition thereof.
"COMMITMENT" means, with respect to National City Bank and
Term Loan A, $4,000,000 and, with respect to The CIT Group/Equipment
Financing, Inc. and Term Loan B, $9,000,000.
"CONFIDENTIALITY" has the meaning specified in Section 13.8(b)
of this Agreement.
"CONSOLIDATED AMORTIZATION EXPENSE" means, with respect to a
Person, for any period, all amortization expenses of the Borrower and
its Non-Regulated Subsidiaries during such period, as determined on a
consolidated basis in accordance with GAAP.
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"CONSOLIDATED DEPRECIATION EXPENSE" means, with respect to a
Person, for any period, all depreciation expenses of the Borrower and
its Non-Regulated Subsidiaries during such period, as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED EBIT" means, for any period, the Consolidated
Net Income for such period (including available dividends) plus (a) the
sum (without duplication) of the amounts taken into account for the
period in determining such Consolidated Net Income of (i) Consolidated
Interest Expense of the Borrower and its Non-Regulated Subsidiaries for
such period, (ii) Consolidated Income Tax Expense for the Borrower and
its Non-Regulated Subsidiaries for such period, (iii) amortization or
write-off of deferred financing costs of the Borrower and its
Non-Regulated Subsidiaries for such period, (iv) extraordinary and
other non-recurring non-cash losses and charges of the Borrower and its
Non-Regulated Subsidiaries for such period, and (v) losses on sales of
assets (other than sales of inventory in the ordinary course of
business) of the Borrower and its Non-Regulated Subsidiaries for such
period ; less (b) gains on sales of assets (other than sales of
inventory in the ordinary course of business) and other extraordinary
or non recurring gains of the Borrower and its Non-Regulated
Subsidiaries, all as determined in accordance with GAAP.
"CONSOLIDATED EBITDA" means, for any period, Consolidated EBIT
plus (a) the sum (without duplication) of the amounts taken into
account for such period in determining such Consolidated EBIT of (i)
Consolidated Depreciation Expense of the Borrower and its Non-Regulated
Subsidiaries for such period, (ii) Consolidated Amortization Expense of
the Borrower and its Non-Regulated Subsidiaries for such period, and
(iii) Consolidated Non-Cash Expenses of the Borrower and its
Non-Regulated Subsidiaries for such period, all as determined in
accordance with GAAP.
"CONSOLIDATED FIXED CHARGE COVERAGE RATIO" means, with respect
to the Borrower, for any Testing Period, the ratio of: (x) the
Consolidated EBITDA for such period to (y) the Consolidated Fixed
Charges for such Testing Period, as determined on a consolidated basis
in accordance with GAAP.
"CONSOLIDATED FIXED CHARGES" means, with respect to a Person,
for any period of determination, the sum, without duplication, of: (a)
the Consolidated Interest Expense of such Person and its consolidated
Subsidiaries for such period, plus (b) all scheduled principal payments
(including the principal payment portion of any scheduled Capitalized
Lease rental payments) of such Person and its consolidated Subsidiaries
made during such period.
"CONSOLIDATED INCOME TAX EXPENSE" means, with respect to a
Person, for any period, all taxes (based on the net income of such
Person and its consolidated Subsidiaries for such period) during such
period (including, without limitation, any additions to such taxes and
any penalties and interest with respect thereto and net of any tax
refunds received during such period), all as determined on a
consolidated basis in accordance with GAAP.
"CONSOLIDATED INDEBTEDNESS" shall mean, at any time and as to
any Person, all Indebtedness for Borrowed Money of such Person and it
Subsidiaries at such time determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED INTEREST EXPENSE" means, with respect to a
Person, for any period, (a) the net amount of interest expense of such
Person and its consolidated Subsidiaries for such period on the
aggregate outstanding principal amount of the Indebtedness of such
Person and its consolidated Subsidiaries paid in cash during such
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period plus (b) the interest payment portion of any Capitalized Lease
rental payment of such Person and its consolidated Subsidiaries made
during such period, all as determined on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED LEVERAGE RATIO" means, with respect to a Person,
the ratio of (x) the Consolidated Indebtedness of such Person and its
consolidated Subsidiaries for such period to (y) the Consolidated Total
Capital of such Person and its consolidated Subsidiaries, as determined
on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the sum of
(i) the net income (or loss) of the Borrower and its consolidated
Non-Regulated Subsidiaries for such period (without giving effect to
dividends from its Subsidiaries that are Regulated Insurance
Companies), determined in accordance with GAAP, and (ii) the dividends
paid by the Subsidiaries that are Regulated Insurance Companies during
such period, together with the amount of dividends that are available
for payment by each Regulated Insurance Company as of the last day of
such period under the dividend limitations imposed by the Applicable
Insurance Regulatory Authority.
"CONSOLIDATED NON-CASH EXPENSES" means, with respect to a
Person, for any period, the non-cash expenses of such Person and its
consolidated Subsidiaries for such period (for the purposes of this
definition, excluding any capitalized interest and deferred taxes), all
as determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED POSITIVE NET EARNINGS" means with respect to a
Person, for any period the consolidated net after tax income of such
Person and its consolidated Subsidiaries determined on a consolidated
basis in accordance with GAAP; provided that in the event the
consolidated net after tax income is a negative number, for purposes of
Section 7.4(d), consolidated net after tax income shall be deemed to be
zero.
"CONSOLIDATED TANGIBLE NET WORTH" means, with respect to any
Person, the Net Worth of such Person and its consolidated Subsidiaries
determined in accordance with GAAP after appropriate deduction for any
minority interests in Subsidiaries and goodwill.
"CONSOLIDATED TOTAL CAPITAL" means, at any time and as to any
Person, (i) the sum of Consolidated Indebtedness of such Person at such
time, and (ii) Consolidated Tangible Net Worth of such Person at such
time.
"CONTINUING DIRECTORS" shall mean the directors of the
Borrower on the Closing Date and each other director if such director's
nomination for the election to the Board of Directors of the Borrower
is recommended by a majority of the then Continuing Directors.
"DEFAULT UNDER ERISA" means: (a) the occurrence or existence
of a material Accumulated Funding Deficiency in respect of any Employee
Benefit Plan within the scope of Section 302(a) of ERISA, or (b) any
failure by Borrower or any Subsidiary to make a full and timely payment
of premiums required by Section 4001 of ERISA in respect of any
Employee Benefit Plan which could reasonably be expected to result in a
Material Adverse Effect, or (c) the occurrence or existence of any
material liability under Section 4062, 4063, 4064, 4069, 4201, 4217 or
4243 of ERISA in respect of any Employee Benefit Plan, or (d) the
occurrence or existence of any material breach of any other Law or
regulation in respect of any such Employee Benefit Plan which could
reasonably be expected to have or result in a Material Adverse Effect,
or (e) the
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institution or existence of any action for the forcible termination
of any such Employee Benefit Plan which is within the scope of
Section 4001(a)(3) or (15) of ERISA.
"DISCLOSURE SCHEDULE" means the schedule which is attached
hereto as Annex III and is incorporated into this Agreement, which
schedule with respect to Section 5.1 and 5.5, shall be amended from
time to time as necessary by the Borrower in connection with Section
3.2(a).
"DISTRIBUTION" means a payment made, liability incurred or
other consideration (other than any stock dividend or stock split
payable solely in capital stock of the Borrower) given by the Borrower
for the purchase, acquisition, redemption or retirement of any capital
stock (whether added to treasury or otherwise) of the Borrower or as a
dividend, return of capital or other distribution in respect of the
capital stock of the Borrower.
"DOLLARS" and the sign "$" each means lawful money of the
United States.
"EMPLOYEE BENEFIT PLAN" means an "employee benefit plan" as
defined in Section 3(3) of ERISA of the Borrower or any of its ERISA
Affiliates which is subject to Title IV of ERISA including any
"multiemployer plan" as defined in Section 4001(a)(3) of ERISA or any
"pension plan" as defined in Section 3(2) of ERISA or any "welfare
plan" as defined in Section 3(1) of ERISA of the Borrower or any
Subsidiary.
"ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, claims,
complaints, liens, notices of non-compliance, investigations,
proceedings, consent orders or consent agreements relating in any way
to any Environmental Law or any Environmental Permit, instituted by any
Person, including, without limitation, (a) by governmental or
regulatory authorities for enforcement, cleanup, removal, response,
remedial or other actions or damages pursuant to any applicable
Environmental Law or (b) by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from
alleged injury or threat of injury to health or the environment.
"ENVIRONMENTAL LAWS" means any federal, state or local law,
regulation, ordinance, or order pertaining to the protection of the
environment and the health and safety of the public, including (but not
limited to) CERCLA, RCRA, the Hazardous Materials Transportation Act,
49 USC Section 1801 et seq., the Federal Water Pollution Control Act
(33 USC Section 1251 et seq.), and the Toxic Substances Control Act (15
USC Section 2601 et seq.) and all similar state, regional or local
laws, treaties, regulations, statutes or ordinances, common law, civil
laws, or any case precedents, rulings, requirements, directives or
requests having the force of Law of any foreign or domestic
governmental authority, agency or tribunal, and all foreign equivalents
thereof, as the same have been or hereafter may be amended, and any and
all analogous future Laws, treaties, regulations, statutes or
ordinances, common law, civil laws, or any case precedents, rulings,
requirements, directives or requests having the force of Law of any
foreign or domestic governmental authority, agency and which govern:
(a) the existence, cleanup and/or remedy of contamination on property;
(b) the emission or discharge of Hazardous Materials into the
environment; (c) the control of hazardous wastes; (d) the use,
generation, transport, treatment, storage, disposal, removal or
recovery of Hazardous Materials; or (e) the maintenance and development
of wetlands.
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"ENVIRONMENTAL PERMITS" means all permits, approvals,
certificates, notifications, identification numbers, licenses and other
authorizations required under any applicable Environmental Laws or
necessary for the conduct of business.
"EQUIPMENT" means "equipment" as defined in the UCC.
"ERISA" means the Employee Retirement Income Security Act of
1974 (Public Law 93-406), as amended, and in the event of any amendment
affecting any section thereof referred to in this Agreement, that
reference shall be a reference to that section as amended,
supplemented, replaced or otherwise modified.
"ERISA AFFILIATE" means, with respect to any Person, any other
Person that is under common control with such Person within the meaning
of Section 4001(a)(14) of ERISA, or is a member of a group which
includes such Person and which is treated as a single employer under
Sections 414(b) or (c) of the Code. In addition, for provisions of this
Agreement that relate to Section 412 of the Code, the term "ERISA
Affiliate" of any Person shall mean any other Person aggregated with
such Person under Sections 414(b), (c), (m) or (o) of the Code.
"ERISA REGULATOR" means any governmental agency (such as the
Department of Labor, the Internal Revenue Service and the Pension
Benefit Guaranty Corporation) having any regulatory authority over any
Employee Benefit Plan.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"EUROCURRENCY RESERVE PERCENTAGE" means, for any Interest
Period in respect of any LIBOR Rate Borrowing, as of any date of
determination, the aggregate of the then stated maximum reserve
percentages (including any marginal, special, emergency or supplemental
reserves), expressed as a decimal, applicable to such Interest Period
(if more than one such percentage is applicable, the daily average of
such percentages for those days in such Interest Period during which
any such percentages shall be so applicable) by the Board of Governors
of the Federal Reserve System, any successor thereto, or any other
banking authority, domestic or foreign, to which the Agent or any
Lender may be subject in respect to eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of the
Federal Reserve Board) or in respect of any other category of
liabilities including deposits by reference to which the interest rate
on LIBOR Rate Borrowings is determined or any category of extension of
credit or other assets that include the LIBOR Rate Borrowings. For
purposes hereof, such reserve requirements shall include, without
limitation, those imposed under Regulation D of the Federal Reserve
Board and the LIBOR Rate Borrowings shall be deemed to constitute
Eurocurrency Liabilities subject to such reserve requirements without
benefit of credits for proration, exceptions or offsets which may be
available from time to time to any Lender under said Regulation D.
"EVENT OF DEFAULT" has the meaning specified in Section 8 of
this Agreement.
"EXCLUDED PROPERTY" means Equipment owned by the Borrower or
any Subsidiary Guarantor on the date hereof that is subject to a
purchase money Lien or a Capitalized Lease Obligation (in each case as
otherwise permitted by this Agreement) if the contract or other
agreement in which such Lien is granted (or in the documentation
providing for such Capitalized Lease Obligation) validly prohibits the
creation of any
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other Lien on such Equipment other than the following: (a) the
right to receive any payment of money (including, without limitation,
general intangibles for money due or to become due); and (b) any
proceeds, products, offspring, accessions, rents, profits, income,
benefits, substitutions or replacements of such Equipment.
"FINANCIAL IMPAIRMENT" means, in respect of a Person, the
distressed economic condition of such Person manifested by any one or
more of the following events:
(a) the Person generally ceases or is generally
unable or admits in writing its inability, generally, to make
timely payment upon the Person's debts, obligations, or
liabilities as they mature or come due;
(b) the assignment by the Person for the benefit of
creditors;
(c) the voluntary institution by the Person of, or
the consent granted by the Person to the involuntary
institution of (whether by petition, complaint, application,
default, answer (including, without limitation, an answer or
any other permissible or required responsive pleading
admitting: (i) the jurisdiction of the forum or (ii) any
material allegations of the petition, complaint, application,
or other writing to which such answer serves as a responsive
pleading thereto), or otherwise) of any bankruptcy,
insolvency, reorganization, arrangement, readjustment of debt,
dissolution, liquidation, receivership, trusteeship, or
similar proceeding pursuant to or purporting to be pursuant to
any bankruptcy, insolvency, reorganization, arrangement,
readjustment of debt, dissolution, liquidation, receivership,
trusteeship, or similar Law of any jurisdiction, in each case
with respect to such Person;
(d) the voluntary application by the Person for or
consent granted by the Person to the involuntary appointment
of any receiver, trustee, or similar officer (i) for the
Person or (ii) of or for all or any substantial part of the
Person's property; or
(e) the commencement or filing against a Person,
without such Person's application, approval or consent, of an
involuntary proceeding or an involuntary petition seeking: (a)
liquidation, reorganization or other relief in respect of such
Person, its debts or all or a substantial part of its assets
under any federal, state or foreign bankruptcy, insolvency,
receivership, or similar Law now or hereafter in effect or (b)
the appointment of a receiver, trustee, custodian,
sequestrator, conservator (including with respect to any
Regulated Insurance Company) or similar official for such
Person or for a substantial part of its assets, and, in any
such case, either (i) such proceeding or petition shall
continue undismissed for sixty (60) days or (ii) an order or
decree approving or ordering any of the foregoing shall be
entered.
"FINANCIAL REINSURANCE AGREEMENT" means a Reinsurance
Agreement covering any transaction in which any Regulated Insurance
Company cedes business that does not meet the conditions for
reinsurance accounting as provided by the Financial Accounting
Standards Board in Statement of Financial Accounting Standards No. 113,
as the same may be revised, replaced, or supplemented from time to
time.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"GENERAL INTANGIBLE" means "general intangible" as defined in
the UCC.
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"GUARANTEED OBLIGATIONS" has the meaning specified in Section
10.1 of this Agreement.
"GUARANTOR" means a Person who pledges his credit or property
in any manner for the payment or other performance of Indebtedness,
agreements or other obligation of another Person including, without
limitation, any guarantor (whether of collection or payment), any
obligor in respect of a standby letter of credit or surety bond issued
for the account of another Person, any surety, any co-maker, any
endorser, and any Person who agrees conditionally or otherwise to make
any loan, purchase or investment in order thereby to enable another
Person to prevent or correct a default of any kind.
"GUARANTY" means the obligation of a Guarantor.
"GUARANTY OBLIGATIONS" means, with respect to any Person,
without duplication, any obligation of such Person guaranteeing any
Indebtedness (`primary Indebtedness") of any other Person (the `primary
obligor') in any manner, whether directly or indirectly, including,
without limitation, any obligation of such Person, whether contingent
or not contingent, (a) to purchase any such primary Indebtedness or any
property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such
primary Indebtedness or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise maintain the net worth or
solvency of the primary obligor, (c) to purchase property, securities
or services primarily for the purpose of assuring the owner of any such
primary Indebtedness of the ability of the primary obligor to make
payment of such primary Indebtedness, or (d) otherwise to assure or
hold harmless the owner of such primary Indebtedness against loss in
respect thereof; provided, however, that the term "Guaranty
Obligations" shall not include 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 primary Indebtedness in respect of which
such Guaranty Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof (assuming
such Person is required to perform thereunder) as determined by such
Person in good faith.
"HAZARDOUS MATERIAL" means: (a) any asbestos or other material
composed of or containing asbestos which is, or may become, even if
properly managed, friable, (b) petroleum and any petroleum product,
including crude oil or any fraction thereof, and natural gas or
synthetic natural gas liquids or mixtures thereof, (c) any hazardous,
toxic or dangerous waste, substance or material defined as such in (or
for purposes of) CERCLA or RCRA, any so-called "Superfund" or
"Superlien" law, or any other applicable Environmental Laws, and (d)
any other substance whose generation, handling, transportation,
treatment or disposal is regulated pursuant to any Environmental Laws.
"HEDGE AGREEMENT" means any interest rate swap agreement, any
interest rate cap agreement, any interest rate collar agreement, or
similar agreement or arrangement designed to protect against
fluctuations in interest rates.
"INDEBTEDNESS" means, with respect to any Person, without
duplication, (a) Indebtedness for Borrowed Money, (b) obligations to
pay the deferred purchase price of property or services, (c)
obligations as lessee under leases which shall have been or should be,
in accordance with GAAP, recorded as Capitalized Leases, (d) all
obligations of such Person as an account party in respect of letters of
credit or banker's acceptances, (e) liabilities in respect of unfunded
vested benefits under plans covered by Title IV of ERISA, (f)
obligations secured by any Lien (other than with respect to workers'
compensation) on the properties or assets of the Person, (g)
obligations of such Person in
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respect of currency or interest rate swap or comparable transactions
and (h) obligations under direct or indirect Guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (a) through (g) above.
"INDEBTEDNESS FOR BORROWED MONEY" means, with respect to any
Person, without duplication, all obligations of such Person for money
borrowed including, without limitation, all Capitalized Leases, drafts
accepted representing extensions of credit, obligations evidenced by
bonds, debentures, notes or other similar instruments, and all
Guaranties of such obligations.
"INSURANCE BUSINESS" shall mean one or more aspects of the
business of selling, issuing, administering or underwriting insurance
or reinsurance.
"INSURANCE CONTRACT" shall mean any insurance contract or
policy issued by a Regulated Insurance Company but shall not include
any Reinsurance Agreement or Retrocession Agreement.
"INSURANCE PARTNERS" means Insurance Partners, LP and
Insurance Partners Offshore (Bermuda), L.P.
"INTELLECTUAL PROPERTY" means all inventions, designs,
patents, and applications therefor, trademarks, service marks, trade
names, and registrations and applications therefor, copyrights, any
registrations therefor, and any licenses thereof, whether now owned or
existing or hereafter arising or acquired.
"INTERCOMPANY LOANS" means loans by the Borrower to the
Subsidiary Guarantors permitted pursuant to Section 7.3(b) of this
Agreement.
"INTERCOMPANY PAYMENTS" means, with respect to a Subsidiary
Guarantor, all amounts transferred by such Subsidiary Guarantor to the
Borrower whether constituting repayment of Intercompany Loans by the
Borrower to such Subsidiary Guarantor, payment in connection with the
Subsidiary Guaranty of such Subsidiary Guarantor, or payment of
consolidated tax liabilities attributable to the income of such
Subsidiary Guarantor or payments made by Subsidiaries to the Borrower
or Subsidiary Guarantor in connection with management services
agreements.
"INTEREST PERIOD" means, for each LIBOR Rate Borrowing, the
period commencing on the date of such LIBOR Rate Borrowing or the date
of the Rate Conversion or Rate Continuation of any Term Borrowing into
such LIBOR Rate Borrowing and ending on the numerically corresponding
day of the period selected by the Borrower pursuant to the provisions
hereof and each subsequent period commencing on the last day of the
immediately preceding Interest Period in respect of such LIBOR Rate
Borrowing and ending on the last day of the period selected by the
Borrower pursuant to the provisions hereof; provided, however, that the
duration of each such Interest Period shall be one, two or three
months, in each case as the Borrower may select by delivery to the
Agent of a Rate Conversion\Continuation Request in accordance with
Section 2.3 of this Agreement and; provided, further, that:
(i) the Interest Period for each LIBOR Rate Borrowing
comprising part of the same Borrowing shall be of the same
duration;
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(ii) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day; provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the immediately
preceding Business Day;
(iii) if the Interest Period commences on a Business
Day for which there is no numerical equivalent in the calendar
month in which the Interest Period is to end, such Interest
Period shall end on the last Business Day of that calendar
month; and
(iv) no Interest Period may end on a date later than
the Term Loan Maturity Date.
"INVESTMENT GRADE SECURITIES" shall mean and include (i) U. S.
Government Obligations (other than Cash Equivalents), (ii) debt
securities or debt instruments with a rating of BBB- or higher by S&P,
Baa3 or higher by ▇▇▇▇▇'▇, Class (2) or higher by NAIC or the
equivalent of such rating by S&P, ▇▇▇▇▇'▇ or NAIC, or if none of S&P,
▇▇▇▇▇'▇ and NAIC shall then exist, the equivalent of such rating by any
other nationally recognized securities rating agency, but excluding any
debt securities or instruments constituting loans or advances among the
Borrower and its Wholly-Owned Subsidiaries, and (iii) any fund
investing exclusively in investments of the type described in clauses
(i) and (ii) which funds may also hold cash pending investment and/or
distribution.
"INVESTED ASSETS" means, at any date for the Regulated
Insurance Companies (on a consolidated basis), the total amount as
would be shown on line 11, page 2, column 4 of a Benchmark Statement
for the Regulated Insurance Companies (on a consolidated basis)
prepared as of such date.
"ISSUER" shall mean any issuer of Investment Grade Securities
or Non-Investment Grade Securities acquired or proposed to be acquired
by the Borrower or any of its Subsidiaries pursuant to this Agreement.
"LAW" means any law, treaty, regulation, statute or ordinance,
common law, civil law, or any case precedent, ruling, requirement,
directive or request having the force of law of any foreign or domestic
governmental authority, agency or tribunal.
"LEGAL REQUIREMENT" means all applicable Laws, rules and
regulations made by any governmental body or regulatory authority
(including, without limitation, any Applicable Insurance Regulatory
Authority) having jurisdiction over a Regulated Insurance Company.
"LENDERS" means National City Bank and the CIT Group/Equipment
Financing Inc., together with their respective successors and assigns.
"LIBOR RATE BORROWING" means a Borrowing bearing interest as
provided in Section 2.1(c)(iv).
"LIEN" shall mean any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title
retention agreement or any lease in the nature thereof).
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"LLC" means each limited liability company in which the
Borrower or a Subsidiary Guarantor has an interest, including those set
forth on the Disclosure Schedule.
"LLC AGREEMENT" means each operating agreement governing an
LLC, as each such agreement has heretofore been and may hereafter be
amended, restated, supplemented or otherwise modified.
"LOAN ACCOUNT" has the meaning set forth in Section 2.1(b).
"LOAN DOCUMENTS" means this Agreement, any note, security
agreement, or other lien instrument, reimbursement agreement, financial
statement, audit report, notice, Hedge Agreement, cash management
agreement, officer's certificate or other writing of any kind which is
now or hereafter required to be delivered by or on behalf of the
Borrower to the Agent, the Lenders (or any of their respective
Affiliates) in connection with this Agreement, including, without
limitation, the Term Notes.
"LONDON INTERBANK OFFERED RATE" means, for any Interest Period
with respect to a LIBOR Rate Borrowing, the quotient (rounded upwards,
if necessary, to the nearest one sixteenth of one percent (1/16th of
1%) of: (x) the per annum rate of interest, determined by the Agent in
accordance with its usual procedures (which determination shall be
conclusive absent manifest error) as of approximately 11:00 a.m.
(London time) two Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Rate Borrowing, appearing on page 3750
of the Dow ▇▇▇▇▇ Telerate Screen (or any successor or substitute page
of such Service, or any successor to or substitute for such Service
providing rate quotations comparable to those currently provided on
such page of such Service, as determined by the Agent from time to time
for purposes of providing quotations of interest rates applicable to
deposits in Dollars or in the London interbank market) as the rate in
the London interbank market for deposits in Dollars in immediately
available funds with a maturity comparable to such Interest Period
divided by (y) a number equal to 1.00 minus the Eurocurrency Reserve
Percentage. In the event that such rate quotation is not available for
any reason, then the rate (for purposes of clause (x) hereof) shall be
the rate, determined by the Agent as of approximately 11:00 a.m.
(London time) two Business Days prior to the beginning of such Interest
Period pertaining to such LIBOR Rate Borrowing, to be the average
(rounded upwards, if necessary, to the nearest one sixteenth of one
percent (1/16th of 1%)) of the per annum rates at which deposits in
Dollars in immediately available funds in an amount comparable to such
LIBOR Rate Borrowing and with a maturity comparable to such Interest
Period are offered to the prime banks by leading banks in the London
interbank market. The London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the
Eurocurrency Reserve Percentage.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on:
(a) the business, properties, operations or condition (financial or
otherwise) of the Borrower, Central Reserve Life Insurance Company,
Continental General Insurance Company, and the Subsidiary Guarantors,
taken as a whole, (b) the Collateral, taken as a whole, or (c) the
Borrower's ability to repay the Secured Obligations, (d) the Agent's
security interest and lien on any of the Collateral or the priority
thereof, or (e) the legality, validity or enforceability of this
Agreement, the other Loan Documents or the Lien created hereby or
thereby.
"MATERIAL BUSINESS AGREEMENT" means each agreement of the
Borrower (not including Material License Agreements) the termination of
which could reasonably be expected to result in a Material Adverse
Effect.
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"MATERIAL LICENSE AGREEMENT" means each license agreement of
the Borrower or any Subsidiary Guarantor in respect of Third Party
Intellectual Property set forth on the Disclosure Schedule as being a
license agreement the termination of which could reasonably be expected
to result in a Material Adverse Effect.
"MAXIMUM LAWFUL RATE" has the meaning specified in Section
13.9 of this Agreement.
"MULTIEMPLOYER PLAN" means any Employee Benefit Plan which is
a "multiemployer plan" as such term is defined in section 4001(a)(3) of
ERISA.
"NAIC" means the National Association of Insurance
Commissioners or any successor organization thereto.
"NAIC TESTS" means the ratios and other financial measurements
developed by the NAIC under its Insurance Regulatory Information
System, as in effect from time to time.
"NET WORTH" means capital stock (including, without
limitation, its preferred stock), capital in excess of par or stated
value of shares of its capital stock (including, without limitation,
its preferred stock), retained earnings and any other account which, in
accordance with GAAP, constitutes stockholders equity, but excluding
(i) any treasury stock and (ii) the effects of Financial Accounting
Statement No. 115.
"NON-INVESTMENT GRADE SECURITIES" shall mean debt and equity
securities and debt and equity instruments that do not constitute
Investment Grade Securities or Cash Equivalents (but excluding any debt
or equity securities or instruments constituting loans or advances
among the Borrower and its Wholly-Owned Subsidiaries), it being
understood that for the purposes of any determination under Section
7.3(e)(C), the amounts, if any, paid by such Regulated Insurance
Company to purchase such equity securities or warrants shall be
included in the principal amounts of Non-Investment Grade Securities.
"NON-REGULATED SUBSIDIARY" means a Subsidiary of the Borrower
that is not a Regulated Insurance Company.
"OBLIGATIONS" means the present and future obligations the
Borrower to the Lenders under this Agreement or any other Loan Document
including without limitation (a) the outstanding principal and accrued
interest (including interest accruing after a petition for relief under
the federal bankruptcy laws has been filed) in respect of any Term
Loans advanced to the Borrower by the Lenders, (b) all fees owing to
the Lenders or the Agent under this Agreement and the other Loan
Documents, (c) any amounts owing the Subsidiary Guarantors with respect
to their guaranty of the Guaranteed Obligations owing by the Borrower
to the Lenders, (d) any costs and expenses reimbursable to the Lenders
or the Agent pursuant to Section 13.5 of this Agreement; and (e) Taxes,
Other Taxes, compensation, indemnification obligations or other amounts
owing by the Borrower to the Agent or the Lenders under this Agreement,
the Term Notes or any Loan Document.
"OTHER TAXES" has the meaning specified in Section 12.3(c) of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any
other governmental authority succeeding to any of its functions.
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"PERMITTED ACQUISITIONS" has the meaning specified in Section
7.3(a)(I) of this Agreement.
"PERMITTED SUBORDINATED INDEBTEDNESS" means Indebtedness or
trust preferred stock of the Borrower or a Subsidiary the payment of
which is subordinated to the payment of the Secured Obligations in
writing in a manner reasonably acceptable to the Agent.
"PERSON" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"PLEDGED COLLATERAL" means, collectively, the Pledged Stock,
the Pledged LLC Interests, all certificates or other instruments
representing any of the foregoing, all Security Entitlements of the
Borrower or any Subsidiary Guarantor in respect of any of the
foregoing, as defined in Article 8 of the UCC, all dividends, interest
distributions, cash, warrants, rights, instruments and other property
or Proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the
foregoing.
"PLEDGED LLC INTERESTS" means all of the Borrower's or any
Subsidiary Guarantor's right, title and interest as a member of any
LLCs listed on the Disclosure Schedule, and all of such Borrower's or
Subsidiary Guarantor's right, title and interest in, to and under any
LLC Agreement to which it is a party.
"PLEDGED STOCK" means the shares of capital stock owned by the
Borrower and each Subsidiary Guarantor listed on the Disclosure
Schedule.
"POTENTIAL DEFAULT" means an event, condition or thing which
with the lapse of any applicable grace period or with the giving of
notice or both, would constitute an Event of Default referred to in
Section 8 of this Agreement and which has not been appropriately waived
in writing in accordance with this Agreement or fully corrected, prior
to becoming an actual Event of Default.
"PRIME RATE" means the rate of interest which is announced
from time to time by National City Bank as its "prime rate" of
interest, such rate to be adjusted automatically, without notice, as of
the opening of business the effective date of any change to such rate,
it being agreed that such rate is not necessarily the lowest rate of
interest then available from National City Bank on fluctuating rate
loans.
"PRIME RATE BORROWING" means a Borrowing bearing interest as
provided in Section 2.1(d)(iv).
"PROCEEDS" means "proceeds" as defined in the UCC.
"PROPERTIES" has the meaning specified in Section 6.9 of this
Agreement.
"QUARTERLY STATEMENT" means the quarterly financial statement
required to be filed by any Regulated Insurance Company with the
Applicable Regulatory Insurance Authority.
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"RATABLE PORTION" means, in respect of any Lender, the
quotient (expressed as a percentage) obtained at any time by dividing:
(x) the sum of the outstanding principal balance of the Term Note
payable to such Lender by (y) the sum of the aggregate amount of the
outstanding principal balance of the Term Notes payable to all of the
Lenders.
"RATE CONTINUATION" means a continuation pursuant to Section
2.3 of this Agreement of LIBOR Rate Borrowings as LIBOR Rate Borrowings
having an Interest Period of the same duration.
"RATE CONVERSION" means a conversion pursuant to Section 2.3
of this Agreement of Borrowings of one Type into Borrowings of another
Type.
"RATE CONVERSION/CONTINUATION REQUEST" has the meaning
specified in Section 2.3 of this Agreement.
"RCRA" means the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.
"REGULATED INSURANCE COMPANY" means any Subsidiary of the
Borrower, whether now owned or hereafter acquired, that is authorized
or admitted to carry on or transact Insurance Business in any
jurisdiction and is regulated by any Applicable Insurance Regulatory
Authority.
"REINSURANCE AGREEMENT" means any agreement, contract, treaty
or other arrangement whereby one or more insurers, as reinsurers,
assume liabilities under insurance policies or agreements issued by
another insurance or reinsurance company or companies.
"REPORTABLE EVENT" means any of the events set forth in
Section 4043 of ERISA excluding those events for which the requirement
of notice has been waived by the PBGC.
"RESPONSIBLE OFFICER" means, with respect to a Person, the
Chief Executive Officer, President or Chief Financial Officer thereof.
"RETROCESSION AGREEMENT" shall mean any agreement, contract,
treaty or other arrangement whereby one or more insurers or reinsurers,
as retrocessionaires, assume liabilities of reinsurers under a
Reinsurance Agreement or other retrocessionaires under another
Retrocession Agreement.
"REQUISITE LENDERS" means, as of any date (i) the holders of
at least 51% of the aggregate outstanding amount of Term Loan A and
(ii) the holders of at least 51% of the aggregate outstanding principal
amount of Term Loan B.
"RISK-BASED CAPITAL RATIO" means for any Person, the ratio
(expressed as a percentage), at any time, of the Total Adjusted Capital
(as defined by the NAIC) of such Person to the Authorized Control Level
Risk Based Capital of such Person (as defined by the NAIC).
"RISK DERIVATIVES" shall mean Z bonds, floaters/inverse
floaters, PAC II, PAC III, Ioettes, support bonds, Interest Only
Investments, Principal Only Investments residuals, inverse IO's, super
floaters, any other instruments with similar economic risk factors and
any bonds backed in whole or in part by any of the foregoing (including
component or "kitchen sink" bonds).
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"SAP" means, with respect to any Regulated Insurance Company,
the accounting procedures and practices prescribed or permitted by the
Applicable Insurance Regulatory Authority of the state in which such
Regulated Insurance Company is domiciled.
"SECURED OBLIGATIONS" means the Obligations (including the
Obligations of each Subsidiary Guarantor to pay the Guaranteed
Obligations).
"SECURITIES ACT' means the Securities Act of 1933, as amended
from time to time.
"SECURITY ENTITLEMENT" means "security entitlement" as defined
in the UCC.
"SOLVENT" means, with respect to any Person, as of any date of
determination, that: (a) the fair value of the property of the Person
as of such date is greater than the total amount of the liabilities
(including contingent liabilities computed at the amount that, in light
of all the facts and circumstances existing as of such date, represents
the amount that can reasonably be expected to become an actual or
matured liability) of the Person, (b) the present fair salable value of
the assets of the Person as of such date is not less than the amount
that will be required to pay the probable liabilities of the Person on
its debts as they become absolute and matured, (c) the Person is able
to pay all liabilities of the Person as those liabilities mature, and
(d) the Person does not have unreasonably small capital for the
business in which it is engaged or for any business or transaction in
which it is about to engage. The determination of whether a Person is
Solvent shall take into account all such Person's assets and
liabilities regardless of whether, or the amount at which, any such
asset or liability is included on a balance sheet of such Person
prepared in accordance with GAAP, including assets such as contingent
contribution or subrogation rights, business prospects, distribution
channels and goodwill. In computing the amount of contingent or
unrealized assets or contingent or unliquidated liabilities at any
time, such assets and liabilities will be computed at the amounts
which, in light of all the facts and circumstances existing at such
time, represent the amount that reasonably can be expected to become
realized assets or matured liabilities, as the case may be. In
computing the amount that would be required to pay a Person's probable
liability on its existing debts as they become absolute and matured,
reasonable valuation techniques, including a present value analysis,
shall be applied using such rates over such periods as are appropriate
under the circumstances, and it is understood that, in appropriate
circumstances, the present value of contingent liabilities may be zero.
"STATUTORY SURPLUS" mean, at any date for any Regulated
Insurance Company, (a) the total amount as would be shown on line 38,
page 3, column 1 of a Benchmark Statement for such Regulated Insurance
Company prepared as of such date.
"SUBSIDIARY" means, in respect of a corporate Person, a
corporation or other business entity the shares constituting a majority
of the outstanding capital stock (or other form of ownership) or
constituting a majority of the voting power in any election of
directors (or shares constituting both majorities) of which are (or
upon the exercise of any outstanding warrants, options or other rights
would be) owned directly or indirectly at the time in question by such
Person or another subsidiary of such Person or any combination of the
foregoing.
"SUBSIDIARY GUARANTORS" means Ceres Administrators, LLC, a
Delaware limited liability company, Ceres Health Care, Inc., a Delaware
corporation, Continental General Corporation, a Nebraska corporation,
and Western Reserve Administrative Services, Inc., an Ohio corporation.
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"SUBSIDIARY GUARANTY" means the joint and several obligation
of each Subsidiary Guarantor to pay the Secured Obligations of the
Borrower pursuant to Section 10 of this Agreement.
"TERM LOAN A" means the term loan in the principal amount of
$4,000,000 made by National City Bank to the Borrower.
"TERM LOAN B" means the term loan in the principal amount of
$9,000,000 made by The CIT Group/Equipment Financing, Inc. to the
Borrower.
"TERM LOAN MATURITY DATE" means March 1, 2007, in the case of
Term Loan A, and June 1, 2008, in the case of Term Loan B.
"TERM LOANS" means Term Loan A and Term Loan B, and "Term
Loan" means any one of them.
"TERM NOTE" means, with respect to each Lender, the promissory
note of the Borrower payable to the order of such Lender, in
substantially the form of Exhibit A-1 and Exhibit A-2 hereto, and in
the original principal amount of the Commitment of such Lender,
evidencing the aggregate Indebtedness of the Borrower to such Lender
resulting from the Term Loan made by such Lender to the Borrower.
"TESTING PERIOD" means, for any determination a single period
consisting of the four consecutive fiscal quarters of the Borrower and
its consolidated Subsidiaries ended on the last day of the most
recently ended fiscal quarter.
"THIRD PARTY INTELLECTUAL PROPERTY" means any Intellectual
Property not owned by the Borrower or the Subsidiary Guarantors.
"TYPE" means, when used in respect of any Borrowing, a LIBOR
Rate Borrowing or a Prime Rate Borrowing.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the State of Ohio; provided, however, that in the event
that, by reason of mandatory provisions of Law, any or all of the
attachment, perfection or priority of the Agent's and the Lenders'
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than the State of
Ohio, the term "UCC" shall mean the Uniform Commercial Code as from
time to time in effect in such other jurisdiction for purposes of the
provisions hereof relating to such attachment, perfection or priority
and for the purposes of definitions related to such provisions;
provided, further, that if the UCC is amended after the date hereof,
such amendment will not be given effect for the purposes of this
Agreement if and to the extent the result of such amendment would be to
limit or eliminate any item of Collateral.
"U.S. GOVERNMENT OBLIGATIONS" shall mean and include (A)
securities that are (x) direct obligations of the United States of
America for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the timely payment of which is unconditionally guaranteed as a full
faith and credit obligation by the United States of America, which, in
either case, are not callable or redeemable at the option of the issuer
thereof and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act), as custodian
with respect to any such U.S. Government Obligation or a specific
payment of principal of or interest on any such
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U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided, however, that (except
as required by Law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the
U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository
receipt and (B) to the extent in each case having an S&P Equivalent
Rating of AAA, obligations issued or guaranteed by the Federal Home
Loan Mortgage Corporation, the Federal National Mortgage Association,
the Government National Mortgage Association, the Student Loan
Marketing Association and the Federal Home Loan Bank.
"WHOLLY-OWNED SUBSIDIARY" means, in respect of any Person, a
Subsidiary of such Person in which such Person owns all of the
outstanding capital stock (or other form of ownership) and controls all
of the voting power in any election of directors or otherwise.
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ANNEX II
TO
CREDIT AND SECURITY AGREEMENT
CONDITIONS PRECEDENT TO CLOSING
[refer to actual Conditions Precedent Annex II attached hereto]
AIV-1
ANNEX III
TO
CREDIT AND SECURITY AGREEMENT
DISCLOSURE SCHEDULE
[refer to actual Disclosure Schedule attached hereto]
AVII-1