EXHIBIT 10.9
________________________________________________________________________________
________________________________________________________________________________
CREDIT AGREEMENT
Among
STANCORP FINANCIAL GROUP, INC.
and
U.S. BANK NATIONAL ASSOCIATION
Dated as of June 30, 2000
$100,000,000
_______________________________________________________________________________
_______________________________________________________________________________
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS............................................. 1
Section 1.1 Defined Terms............................................................ 1
Section 1.2 Accounting Terms and Calculations........................................ 8
Section 1.3 Computation of Time Periods.............................................. 8
Section 1.4 Other Definitional Terms................................................. 8
ARTICLE II TERMS OF LENDING............................................................ 9
Section 2.1 The Commitment........................................................... 9
Section 2.2 Advance Options.......................................................... 9
Section 2.3 Borrowing Procedures..................................................... 9
Section 2.4 Continuation or Conversion of Loan....................................... 9
Section 2.5 The Note................................................................. 10
Section 2.6 Funding Losses........................................................... 10
Section 2.7 Letters of Credit........................................................ 10
ARTICLE III INTEREST AND FEES.......................................................... 12
Section 3.1 Interest................................................................. 12
Section 3.2 Facility Fee............................................................. 12
Section 3.3 Computation.............................................................. 12
Section 3.4 Payment Dates............................................................ 13
Section 3.5 Account Deductions....................................................... 13
ARTICLE IV PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND FUNDING OF THE BANK....................................... 13
Section 4.1 Repayment................................................................ 13
Section 4.2 Prepayments.............................................................. 13
Section 4.3 Payments................................................................. 13
Section 4.4 Optional Reduction or Termination of Commitment.......................... 14
ARTICLE V ADDITIONAL PROVISIONS RELATING TO LOAN AND
LETTERS OF CREDIT............................................................ 14
Section 5.1 Increased Costs.......................................................... 14
Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or Inadequate;
Impracticability......................................................... 15
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Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful......................... 15
Section 5.4 Discretion of the Bank as to Manner of Funding........................... 16
Section 5.5 Claims for Increased Costs............................................... 16
ARTICLE VI CONDITIONS PRECEDENT........................................................ 16
Section 6.1 Conditions of Initial Advance............................................ 16
Section 6.2 Conditions Precedent to all Advances..................................... 17
ARTICLE VII REPRESENTATIONS AND WARRANTIES............................................. 17
Section 7.1 Organization, Standing, Etc............................................... 17
Section 7.2 Authorization and Validity................................................ 18
Section 7.3 No Conflict; No Default................................................... 18
Section 7.4 Government Consent........................................................ 18
Section 7.5 Financial Statements and Condition........................................ 18
Section 7.6 Litigation and Contingent Liabilities..................................... 19
Section 7.7 Compliance................................................................ 19
Section 7.9 ERISA..................................................................... 19
Section 7.10 Regulation U.............................................................. 19
Section 7.11 Ownership of Property..................................................... 20
Section 7.12 Taxes..................................................................... 20
Section 7.13 Trademarks, Patents....................................................... 20
Section 7.14 Investment Company Act.................................................... 20
Section 7.15 Public Utility Holding Company Act........................................ 20
Section 7.16 Subsidiaries.............................................................. 20
Section 7.17 Partnerships and Joint Ventures........................................... 21
ARTICLE VIII AFFIRMATIVE COVENANTS...................................................... 21
Section 8.1 Financial Statements and Reports.......................................... 21
Section 8.2 Corporate Existence....................................................... 23
Section 8.3 Insurance................................................................. 23
Section 8.4 Payment of Taxes and Claims............................................... 24
Section 8.5 Inspection................................................................ 24
Section 8.6 Maintenance of Properties................................................. 24
Section 8.7 Books and Records......................................................... 24
Section 8.8 Compliance................................................................ 24
Section 8.9 ERISA..................................................................... 24
Section 8.10 Environmental Matters..................................................... 24
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ARTICLE IX NEGATIVE COVENANTS........................................................... 25
Section 9.1 Merger.................................................................... 25
Section 9.2 Sale of Assets............................................................ 25
Section 9.3 Plans..................................................................... 25
Section 9.4 Change in Nature of Business.............................................. 25
Section 9.5 Subsidiaries.............................................................. 26
Section 9.6 Other Agreements.......................................................... 26
Section 9.7 Funded Debt............................................................... 26
Section 9.8 Unconditional Purchase Obligations........................................ 26
Section 9.9 Transactions with Related Parties......................................... 26
Section 9.10 Use of Proceeds............................................................ 27
Section 9.11 Borrower's Equity.......................................................... 27
Section 9.12 SMI's Tangible Net Worth................................................... 27
Section 9.13 SIC's Claims Paying Ability Rating......................................... 27
ARTICLE X EVENTS OF DEFAULT AND REMEDIES................................................. 27
Section 10.1 Events of Default.......................................................... 27
Section 10.2 Remedies................................................................... 29
Section 10.3 Letters of Credit.......................................................... 29
Section 10.4 Offset..................................................................... 30
ARTICLE XI ARBITRATION................................................................... 30
Section 11.1 Arbitration of Claims...................................................... 30
Section 11.2 Arbitrators................................................................ 30
Section 11.3 Other Remedies............................................................. 30
Section 11.4 Non-Waiver; Governing Provision............................................ 31
ARTICLE XII MISCELLANEOUS................................................................ 31
Section 12.1 Waiver and Amendment....................................................... 31
Section 12.2 Amendments, Etc............................................................ 31
Section 12.3 Assignments and Participations............................................. 31
Section 12.4 Costs, Expenses and Taxes.................................................. 33
Section 12.5 Notices.................................................................... 33
Section 12.6 Successors................................................................. 34
Section 12.7 Severability............................................................... 34
Section 12.8 Subsidiary References...................................................... 34
Section 12.9 Captions................................................................... 34
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Section 12.10 Entire Agreement.......................................................... 34
Section 12.11 Counterparts.............................................................. 34
Section 12.12 Governing Law............................................................. 34
Section 12.13 Consent to Jurisdiction................................................... 35
Section 12.14 Waiver of Jury Trial...................................................... 35
Section 12.15 Confidentiality........................................................... 35
Section 12.16 Disclosure................................................................ 36
EXHIBITS:
Exhibit A: Promissory Note
Exhibit B: Subsidiary Guaranty
Exhibit C: Compliance Certificate
Exhibit D: Opinion of Counsel to the Borrower
Exhibit E: Material Actions, Suits, and Proceedings (Section 7.6)
Exhibit F: Material Contingent Liabilities (Section 7.6)
Exhibit G: Subsidiaries (Section 7.16)
Exhibit H: Partnerships and Joint Ventures (Section 7.17)
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated and effective as of June 30, 2000, is made by
and among StanCorp Financial Group, Inc., an Oregon corporation (the "Borrower")
and U.S. BANK NATIONAL ASSOCIATION, a national banking association ("Bank").
Standard Insurance Company, Borrower and Bank are parties to an agreement
entitled Credit Agreement dated as of June 30, 1999 which provides in part for
the extension by Bank to Borrower of up to $100,000,000 in credit facilities
(the "Prior Credit Agreement").
Borrower and Bank now wish to amend and restate the Prior Credit
Agreement.
Now, therefore, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, Borrower and Bank agree as follows:
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS
Section 1.1 Defined Terms.
In addition to the terms defined elsewhere in this Agreement, the
following terms shall have the following respective meanings (and such meanings
shall be equally applicable to both the singular and plural form of the terms
defined, as the context may require):
"Advance": The portion of the outstanding Loan bearing interest at an
identical rate for an identical Interest Period, provided that all Federal Funds
Rate Advances shall be deemed a single Advance. An Advance may be a "LIBOR
Advance" or "Federal Funds Rate Advance" (each, a "type" of Advance).
"Adverse Event": The occurrence of any event that could have material
adverse effect on the business, operations, property, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as whole,
or on the ability of the Borrower to perform its obligations under the Loan
Documents.
"Agreement": This Credit Agreement, as it may be amended, modified,
supplemented, restated or replaced from time to time.
"Applicable Margin": The percentages set forth below, calculated based on
SIC's Claims Paying Ability Rating:
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Federal Funds Rate
Rating: LIBOR Advances Advances
A.M. Best "A" or better and
Standard and Poor's "
A+" or better 0.40% 0.50%
A.M. Best less than "A" or
Standard and Poor's less
than A+ 0.50% 0.60%
The Applicable Margin shall initially be 0.40% for LIBOR advances and 0.50% for
Reference Rate Advances.
"Business Day": Any day (other than a Saturday, Sunday or legal holiday in
the State of Oregon) on which national banks are permitted to be open in
Portland, Oregon and, with respect to LIBOR Advances, a day on which dealings in
Dollars may be carried on by the banks in the interbank LIBOR market.
"Capitalized Lease": Any lease which is or should be capitalized on the
books of the lessee in accordance with GAAP.
"Claims Paying Ability Rating ": SIC's ability to pay claims as determined
by the ratings of A.M. Best Company, Inc. and Standard and Poor's Rating Group,
or if either or both of such companies cease to provide ratings of SIC's ability
to pay claims, the ratings of SIC's ability to pay claims as determined by a
substitute rating company or companies of recognized standing selected by Bank.
If A.M. Best Company, Inc., Standard and Poor's Rating Group, or other rating
companies selected by Bank to determine SIC's ability to pay claims materially
change its current or future system of ratings, Bank shall determine the new
rating or ratings which most nearly correspond to the ratings set forth herein
and shall notify the Borrower of such determination in writing, at which time
such determination(s) shall become effective and this Agreement shall be deemed
modified to reflect such determination(s).
"Code": The Internal Revenue Code of 1986, as amended, or any successor
statute, together with regulations thereunder.
"Commitment": One hundred million dollars ($100,000,000) as such amount
may be reduced from time to time pursuant to Section 4.4 or Section 10.2, or the
Bank's commitment to make Loans and issue Letters of Credit hereunder, as the
context may require.
"Compliance Certificate": A certificate in the form of Exhibit C, duly
completed and signed by an authorized officer of the Borrower.
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"Default": Any event which, with the giving of notice to the Borrower or
lapse of time, or both, would constitute an Event of Default.
"Department". The governmental agency or authority of the state of
domicile of an insurance company primarily responsible for regulating the
insurance company.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended,
and any successor statute, together with regulations thereunder.
"ERISA Affiliate": Any trade or business (whether or not incorporated)
that is a member of a group of which the Borrower is a member and which is
treated as a single employer under Section 414 of the Code.
"Event of Default": Any event described in Section 10.1.
"Executive Officer": The chief executive officer, president, chief
financial officer, Assistant Vice President, Controller, and Treasurer.
"Expiry Date": 364 days after the date of this Agreement.
"Facility Fee". Shall have the meaning set forth in Section 3.2.
"Federal Funds Rate": The daily opening rate of interest on overnight
federal funds transactions (a) as such rate appears on Telerate Page 5
(designated as such) of the on-line service provided by Bridge Telerate, Inc. or
such page as may replace Page 5 of that service for the purpose of displaying
opening federal funds rates, or (b) the rate determined by Bank based on such
other published service of general application as shall be selected by Bank for
such purpose, or (c) if Bridge Telerate, Inc. or such other service does not
report such rates or such rates do not, in the judgment of Bank, accurately
reflect the rates of interest applicable to Bank in the relevant markets, the
rate shall be determined by Bank based on opening rates of interest offered to
Bank for overnight deposits in the federal funds market. If such rate is not
provided for any day (e.g., weekend or holiday), such rate for such day shall be
the rate for the next preceding day on which such rate was provided.
"Federal Funds Rate Advance": An Advance designated as such in a notice of
borrowing under Section 2.3 or a notice of continuation or conversion under
Section 2.4.
"Federal Reserve Board": The Board of Governors of the Federal Reserve
System or a successor thereto.
"Funded Debt": Without duplication, the following obligations, contingent
or otherwise, of Borrower and its Subsidiaries (whether or not classified as
liabilities upon the obligor's balance sheet, whether originally incurred or
later assumed, and whether or not incurred as a general partner or joint
venturer of a partnership or joint venture): (a) obligations under this
Agreement;
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(b) Indebtedness for borrowed money; (c) "surplus notes" as set forth in
Borrower's financial statements prepared in accordance with SAP; (d) any
obligations as lessee under any Capitalized Lease or synthetic lease; (e)
obligations secured by any mortgage, pledge, security interest, lien, charge or
other encumbrance existing on property owned or acquired and whether or not the
obligation secured is the obligation of the owner or another party; (f) all
guaranties, endorsements and other contingent obligations in respect to
Indebtedness of others, including agreements to maintain net worth or working
capital of, or provide funds to satisfy any other financial test applicable to
any other Person; and (g) undertakings or agreements to reimburse or indemnify
issuers of letters of credit; but in any event excluding: (v) obligations in
which the creditor's only recourse is to the property which secures the
obligation; and (w) obligations of partnerships or joint ventures where the
recourse of the creditor on the obligation is limited to assets of the
partnership or joint venture; (x) obligations arising on account of the
endorsement of negotiable instruments for deposit or collection (or similar
transactions) in the ordinary course of business; (y) obligations of Borrower or
any wholly owned Subsidiary to another wholly owned Subsidiary or the Borrower;
and (z) extensions, renewals, or refinancings of obligations under paragraphs
(v), (w), (x), and (y) so long as such obligations are in an amount not greater
than the amount of the obligation being extended, renewed or refinanced.
"GAAP": Generally accepted accounting principles consistently applied.
"Guarantors": SIC and SMI.
"Guaranty": A guaranty in the form of Exhibit B, duly completed and signed
by authorized officers of the Guarantors.
"Indebtedness": Funded Debt (without regard to the exclusions contained in
the definition of such term) plus, without duplication, all obligations,
contingent or otherwise, which in accordance with GAAP should be classified upon
the obligor's balance sheet as liabilities, but in any event including the
following (whether or not they should be classified as liabilities upon such
balance sheet): (a) any obligation on account of deposits or advances; and (b)
any obligation for the deferred purchase price of any property or services,
except Trade Accounts Payable. For all purposes of this Agreement, the
Indebtedness of any Person shall include the Indebtedness of any partnership or
joint venture in which such Person is a general partner or a joint venturer.
"Interest Period" For any LIBOR Advance, the period commencing on the
borrowing date of such LIBOR Advance or the date a Federal Funds Rate Advance is
converted into such LIBOR Advance, or the last day of the preceding Interest
Period for such LIBOR Advance, as the case may be, and ending on the numerically
corresponding day one, two, three, six, or nine months thereafter, as selected
by the Borrower pursuant to Section 2.3 or Section 2.4; provided, that:
(i) any Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day unless
such next succeeding Business Day
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falls in another calendar month, in which case such Interest Period shall
end on the next preceding Business Day;
(ii) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of the calendar month at the
end of such Interest Period;
(iii) no Interest Period shall commence on or after the Expiry Date;
and
(iv) no Interest Period shall extend more than six months beyond the
Expiry Date.
"Letters of Credit": Shall have the meaning set forth in Section 2.7.
"Letter of Credit Agreements": Shall have the meaning set forth in Section
2.7.
"Letter of Credit Obligations": Shall mean the aggregate amount of all
possible drawings under all outstanding Letters of Credit plus all amounts drawn
under any Letter of Credit and not reimbursed by the Borrower under the
applicable Letter of Credit Agreement.
"LIBOR Advance": An Advance designated as such in a notice of borrowing
under Section 2.3 or a notice of continuation or conversion under Section 2.4.
"LIBOR Interbank Rate": The offered rate for deposits in United States
Dollars (rounded upwards, if necessary, to the nearest 1/16 of 1%), for delivery
of such deposits on the first day of an Interest Period of a LIBOR Advance, for
the number of days comprised therein, which appears on Telerate Page 3750 as of
11:00 a.m., London time, on the day that is two Banking Days preceding the first
day of the Interest Period of such LIBOR Advance or the rate determined by the
Bank at such time based on such other published service of general application
as shall be selected by the Bank for such purpose. If Telerate Page 3750 or such
other service does not report such rates or such rates do not, in the judgment
of the Bank, accurately reflect the rates of interest applicable to the Bank in
the relevant markets, the rate for such Interest Period shall be determined by
the Bank based on rates offered to the Bank for United States Dollar deposits in
the interbank LIBOR market. "Telerate Page 3750" means the display designated as
3750 on the service provided by Bridge Telerate, Inc. or such other page as may
replace such page of that service for the purpose of displaying London interbank
offered rates of major banks for United States Dollar deposits.
"LIBOR Rate (Reserve Adjusted)": A rate per annum (rounded upward, if
necessary, to the nearest 1/16th of 1%) calculated for the Interest Period of a
LIBOR Advance in accordance with the following formula:
ERRA = LIBOR Interbank Rate
1.00 - ERR
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In such formula, "ERR" means "LIBOR Reserve Rate" and "ERRA" means "LIBOR Rate
(Reserve Adjusted)", in each instance determined by the Bank for the applicable
Interest Period. The Bank's determination of all such rates for any Interest
Period shall be conclusive in the absence of manifest error.
"LIBOR Reserve Rate": A percentage equal to the daily average during such
Interest Period of the aggregate maximum reserve requirements (including all
basic, supplemental, marginal and other reserves), as specified under Regulation
D of the Federal Reserve Board, or any other applicable regulation that
prescribes reserve requirements applicable to Eurocurrency liabilities (as
presently defined in Regulation D) or applicable to extensions of credit by the
Bank or the rate of interest on which is determined with regard to rates
applicable to Eurocurrency liabilities. Without limiting the generality of the
foregoing, the Eurocurrency Reserve Requirement shall reflect any reserves
required to be maintained by the Bank against (i) any category of liabilities
that includes deposits by reference to which the LIBOR Rate is to be determined,
or (ii) any category of extensions of credit or other assets that includes LIBOR
Advances.
"Lien": Any security interest, mortgage, pledge, lien, hypothecation,
judgment lien or similar legal process, charge, encumbrance, title retention
agreement or analogous instrument or device (including, without limitation, the
interest of the lessors under Capitalized Leases and the interest of a vendor
under any conditional sale or other title retention agreement).
"Loan": Shall have the meaning set forth in Section 2.1.
"Loan Documents": This Agreement, the Note, the Guaranty, each Letter of
Credit Agreement, and each other instrument, document, guaranty, security
agreement, mortgage, or other agreement executed and delivered by the Borrower
or any guarantor or party granting security interests in connection with this
Agreement, the Loan or any collateral for the Loan.
"NAIC Standards": Accounting standards of the National Association of
Insurance Commissioners for life and health insurers, as such standards may be
amended from time to time.
"Note": A note in the form of Exhibit A, duly completed and signed by
authorized officer(s) of the Borrower.
"Payment Date": The Termination Date, or date of any other termination of
the Commitment, plus (a) the last day of each Interest Period and, in the case
of an Interest Period of more than three months, on the date(s) occurring every
three months after the first day of the Interest Period, for each LIBOR Advance;
(b) the last day of each month for each Federal Funds Rate Advance; and (c) the
last day of each calendar quarter for any fees including, without limitation,
Facility Fees.
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"PBGC": The Pension Benefit Guaranty Corporation, established pursuant to
Subtitle A of Title IV of ERISA, and any successor thereto or to the functions
thereof.
"Person": Any natural person, corporation, partnership, joint venture,
firm, association, trust, unincorporated organization, government or
governmental agency or political subdivision or any other entity, whether acting
in an individual, fiduciary or other capacity.
"Plan": An employee benefit plan or other plan, maintained for employees
of the Borrower or of any ERISA Affiliate, and subject to Title IV of ERISA or
Section 412 of the Code.
"Prior Credit Agreement": A credit agreement entitled Credit Agreement
dated as of June 30, 1999 among Borrower and Bank.
"Related Party": Any Person (other than a Subsidiary): (a) which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, the Borrower, (b) which beneficially owns or
holds 5% or more of the equity interest of the Borrower; or (c) 5% or more of
the equity interest of which is beneficially owned or held by the Borrower or a
Subsidiary. The term "control" means 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.
"Reportable Event": A reportable event as defined in Section 4043 of ERISA
and the regulations issued under such Section, with respect to a Plan,
excluding, however, such events as to which the PBGC by regulation has waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided that a failure to meet the minimum
funding standard of Section 412 of the Code and Section 302 of ERISA shall be a
reportable event regardless of the issuance of any such waivers in accordance
with Section 412(d) of the Code.
"SAP" means, as to any insurance company, accounting practices prescribed
or permitted by statutes of the state of its domicile or by rules of the
Department, or to the extent statutes and the Department fail to prescribe or
address such practices, NAIC Standards.
"SIC": Standard Insurance Company, a Subsidiary of Borrower.
"SMI": StanCorp Mortgage Investors, LLC, a Subsidiary of Borrower.
"SREI": StanCorp Real Estate Investors, LLC, a Subsidiary of Borrower.
"Subsidiary": Any Person of which or in which the Borrower or its other
Subsidiaries own directly or indirectly 50% or more of: (a) the combined voting
power of all classes of stock having general voting power under ordinary
circumstances to elect a majority of the board of directors of such Person, if
it is a corporation, (b) the capital interest or profit interest of such
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Person, if it is a partnership, joint venture or similar entity, or (c) the
beneficial interest of such Person, if it is a trust, association or other
unincorporated organization.
"Tangible Net Worth": As of any date of determination, the sum of the
amounts set forth on the balance sheet of the Borrower on a consolidated or
non-consolidated basis (as indicated), as the sum of the common stock, preferred
stock, additional paid-in capital and retained earnings of the Borrower
(excluding treasury stock), less the book value of all assets of the Borrower
(and, if consolidated, its Subsidiaries) that would be treated as intangibles
under GAAP, including, without limitation, all such items as goodwill,
trademarks, trade names, service marks, copyrights, patents, licenses,
unamortized debt discount and unamortized deferred charges.
"Termination Date": The earliest of (a) with respect to LIBOR Advances
outstanding on the Expiry Date, the last day of the Interest Period, (b) with
respect to Federal Funds Rate Advances outstanding on the Expiry Date, the
Expiry Date, or (c) the date on which the Commitment is terminated pursuant to
Section 4.4 or Section 10.2 hereof.
"Trade Accounts Payable": The trade accounts payable of any Person with a
maturity of not greater than 90 days incurred in the ordinary course of such
Person's business.
Section 1.2 Accounting Terms and Calculations.
Except as may be expressly provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder (including, without limitation, determination of compliance with
financial ratios and restrictions in Articles VIII and IX hereof) shall be made
in accordance with GAAP as in effect on the date of application thereof. Any
reference to "consolidated" financial terms shall be deemed to refer to those
financial terms as applied to the Borrower and its Subsidiaries, as applicable,
in accordance with GAAP.
Section 1.3 Computation of Time Periods.
In this Agreement, in the computation of a period of time from a specified
date to a later specified date, unless otherwise stated the word "from" means
"from and including" and the word "to" or "until" each means "to but excluding."
Section 1.4 Other Definitional Terms.
The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement. References to Sections, Exhibits,
schedules and like references are to this Agreement unless otherwise expressly
provided.
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ARTICLE II TERMS OF LENDING
Section 2.1 The Commitment.
Subject to the terms and conditions hereof and in reliance upon the
warranties of the Borrower herein, Bank shall make loans (the "Loan") to the
Borrower from time to time from the date hereof until the Expiry Date, during
which period the Borrower may repay and reborrow in accordance with the
provisions hereof, provided, that the unpaid principal amount of the Loan plus
the Letter of Credit Obligations shall not at any time exceed the Commitment.
Section 2.2 Advance Options.
The Loan shall be constituted of LIBOR Advances and Federal Funds Rate
Advances, as shall be selected by the Borrower, except as otherwise provided
herein. Any combination of types of Advances may be outstanding at the same
time, except that the total of outstanding LIBOR Advances shall not exceed five
(5) at any one time. Each LIBOR Advance shall be in a minimum amount of $500,000
and in an integral multiple of $100,000 if above such amount. Each Federal Funds
Rate Advance shall be in a minimum amount of $500,000 and in an integral
multiple of $100,000 if above such amount.
Section 2.3 Borrowing Procedures.
(a) Request by Borrower Any request by the Borrower for a Loan shall be in
writing, or by telephone promptly confirmed in writing, and must be given
so as to be received by the Bank not later than:
(i) 4:00 p.m., Portland time, on the date of the requested
Loan, if the Loan is a Federal Funds Rate Advance; or
(ii) 12:00 noon, Portland time, two Business days prior to the
date of the requested Loan, if the Loan is, or includes, a LIBOR
Advance.
Each request for a Loan shall specify (i) the borrowing date (which shall
be a Business Day), (ii) the amount of such Loan and the type or types of
Advances comprising such Loan, and (iii) if such Loan includes LIBOR
Advances, the initial Interest Periods for such Advances.
Section 2.4 Continuation or Conversion of Loan.
The Borrower may elect to (i) continue any outstanding LIBOR Advance from
one Interest Period into a subsequent Interest Period to begin on the last day
of the earlier Interest Period, or (ii) convert any outstanding Advance into
another type of Advance (on the last day of an Interest Period only, in the
instance of a LIBOR Advance), by giving the Bank notice in writing, or by
telephone promptly confirmed in writing, given so as to be received by the Bank
not later than:
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(a) 4:00 p.m., Portland time, on the date of the requested
continuation or conversion, if the continuing or converted Advance shall
be a Federal Funds Rate Advance; or
(b) 12:00 noon, Portland time, two Business days prior to the date
of the requested continuation or conversion, if the continuing or
converted Advance shall be a LIBOR Advance.
Each notice of continuation or conversion of an Advance shall specify (i) the
effective date of the continuation or conversion date (which shall be a Business
Day), (ii) the amount and the type or types of Advances following such
continuation or conversion (subject to the limitation on amount set forth in
Section 2.2), and (iii) for continuation as, or conversion into, LIBOR Advances,
the Interest Periods for such Advances. Absent timely notice of continuation or
conversion, each LIBOR Advance shall automatically convert into a Federal Funds
Rate Advance on the last day of an applicable Interest Period, unless paid in
full on such last day. No Advance shall be continued as, or converted into, a
LIBOR Advance if the shortest Interest Period for such Advance may not transpire
prior to the Termination Date or if a Default or Event of Default shall exist.
Section 2.5 The Note.
The Loan shall be evidenced by the Note in the amount of the Commitment
originally in effect and dated as of the date of this Agreement. The Bank shall
enter in its records the amount of the Loan and each Advance, the rate of
interest borne by each Advance and the payments made on the Loan, and such
records shall be deemed conclusive evidence of the subject matter thereof,
absent manifest error.
Section 2.6 Funding Losses.
The Borrower will indemnify the Bank upon demand against any loss or
expense which the Bank may sustain or incur (including, without limitation, any
loss or expense sustained or incurred in obtaining, liquidating or employing
deposits or other funds acquired to effect, fund, or maintain any Advance) as a
consequence of (i) any failure of the Borrower to make any payment when due of
any amount due hereunder or under the Note, (ii) any failure of the Borrower to
borrow, continue or convert an Advance on a date specified therefor in a notice
thereof, or (iii) any payment (including, without limitation, any payment
pursuant to Section 4.2 or 10.2), prepayment or conversion of any LIBOR Advance
on a date other than the last day of the Interest Period for such Advance.
Determinations by the Bank for purposes of this Section 2.6 of the amount
required to indemnify the Bank shall be conclusive in the absence of manifest
error.
Section 2.7 Letters of Credit
(a) Letters of Credit. Subject to the terms and conditions of this
Agreement, the Borrower may, in addition to requesting Loans, request that
the Bank issue letters of
10
credit for the account of the Borrower, by making such request to the Bank
(such letters of credit as any of them may be amended, supplemented,
extended or confirmed from time to time, being herein collectively called
the `Letters of Credit'). The Bank may, at its discretion, elect to issue
or decline to issue any requested Letter of Credit.
(b) Additional Provisions. The following additional provisions shall apply
to each Letter of Credit:
(i) No Letter of Credit may be issued if after giving effect
thereto the Letter of Credit Obligations shall exceed $10,000,000 or
if the sum of (a) the outstanding principal amount of the Loan plus
(B) the Letter of Credit Obligations would exceed the Commitment.
(ii) No Letter of Credit shall be issued on or after the
Expiry Date. No Letter of Credit shall be issued which expires or
which permits presentment of drafts or other documents for payment
later than six months after the Expiry Date.
(iii) Upon receipt from the beneficiary of any Letter of
Credit of any demand for payment thereunder, Bank shall promptly
notify the Borrower as to the amount to be paid as a result of such
demand and the payment date.
(iv) The Borrower shall be irrevocably and unconditionally
obligated forthwith to reimburse the Bank for any amount paid by the
Bank upon any drawing under any Letter of Credit, without
presentment, demand, protest or other formalities of any kind, all
of which are hereby waived. Such reimbursement may, subject to
satisfaction of the conditions in Article VI hereof and to the
available Commitment (after adjustment in the same to reflect the
elimination of the corresponding Letter of Credit Obligation), be
made by the making of a Loan.
(v) The Borrower will pay to Bank a letter of credit fee
with respect to each Letter of Credit equal to an amount, calculated
on the basis of face amount of each Letter of Credit, in each case
for the period from and including the date of issuance of such
Letter of Credit to and including the date of expiration or
termination thereof at a rate equal to the 0.50% per annum, but in
no event less than $350, such fee to be due and payable in advance
on the date of the issuance thereof, and shall be adjusted for any
cancellation or reduction in the face amount of the Letter of
Credit. All fees hereunder shall be computed on the basis of a year
of 360 days and paid for the actual number of days elapsed.
(vi) The issuance by the Bank of each Letter of Credit shall,
in addition to the discretionary nature of this facility, be subject
to the conditions precedent that the Borrower shall have executed
and delivered such applications and other instruments and agreements
relating to such Letter of Credit as the Bank shall have reasonably
requested and are not inconsistent with the terms of this
11
Agreement (the `Letter of Credit Agreements'). In the event of a
conflict between the terms of this Agreement and the terms of any
Letter of Credit Agreement (including the charging of any fees other
than normal and customary reimbursable expenses), the terms hereof
shall control.
(c) Indemnification: Release. Borrower hereby indemnifies and holds
harmless the Bank from and against any and all claims and damages, losses,
liabilities, costs or expenses which the Bank may incur (or which may be claimed
against the Bank by any Person whatsoever), in connection with the execution and
delivery of any Letter of Credit or transfer of or payment or failure to pay
under any Letter of Credit; provided that the Borrower shall not be required to
indemnify any party seeking indemnification for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent, caused by
(i) the willful misconduct or gross negligence of the party seeking
indemnification, or (ii) by the failure by the party seeking indemnification to
pay under any Letter of Credit after the presentation to it of a request
required to be paid under applicable law.
ARTICLE III INTEREST AND FEES
Section 3.1 Interest.
(a) LIBOR Advances. The unpaid principal amount of each LIBOR
Advance shall bear interest prior to maturity at a rate per annum equal to
the LIBOR Rate (Reserve Adjusted) in effect for each Interest Period for
such LIBOR Advance plus the Applicable Margin.
(b) Federal Funds Rate Advances. The unpaid principal amount of each
Federal Funds Rate Advance shall bear interest prior to maturity at a rate
per annum equal to the Federal Funds Rate plus the Applicable Margin. The
interest rate on Advances which bear interest at a rate tied to the
Federal Funds Rate shall be determined and adjusted daily.
(c) Interest After Maturity. Any amount of the Loan not paid when
due, whether at the date scheduled therefor or earlier upon acceleration,
shall bear interest until paid in full at a rate per annum equal to 2.00%
in excess of the rate applicable to the unpaid principal amount
immediately before it became due.
Section 3.2 Facility Fee.
On the applicable Payment Date, the Borrower shall pay to the Bank a
non-refundable fee (the "Facility Fee") in an amount determined by applying a
rate of 0.075% per annum to the daily amount of the Commitment for the quarter
then ended.
12
Section 3.3 Computation.
Interest and the Facility Fee shall be computed on the basis of actual
days elapsed and a year of 360 days.
13
Section 3.4 Payment Dates.
Accrued interest under Section 3.1(a), and (b) and Facility Fee under
Section 3.2 shall be payable on the Payment Dates for the applicable types of
Advances and for fees. Accrued interest under Section 3.1(c) shall be payable on
demand.
Section 3.5 Account Deductions.
Without limiting its set-off rights, Lender may at its option deduct
amounts due from Borrower hereunder on account of accrued interest and fees from
Borrower's account #1-536-9086-7160 carried with Lender.
ARTICLE IV
PAYMENTS, PREPAYMENTS, REDUCTION OR TERMINATION
OF THE CREDIT AND FUNDING OF THE BANK
Section 4.1 Repayment.
Principal of the Loan, together with all accrued and unpaid interest
thereon, shall be due and payable on any Termination Dat
Section 4.2 Prepayments.
(a) Optional. The Borrower may, upon at least 2 Business Days' prior
written or telephonic notice received by the Bank, prepay the Loan, in
whole or in part. Any such prepayment must be accompanied by accrued and
unpaid interest on the amount prepaid. Each partial prepayment shall be in
an amount of $100,000 or an integral multiple thereof.
(b) Funding Indemnity. All prepayments, whether or not following the
occurrence of an Event of Default, shall be subject to the provisions of
Section 2.6 hereof.
Section 4.3 Payments.
Payments and prepayments of principal of, and interest on, the Note and
all fees, expenses and other obligations under the Loan Documents shall be made
without set-off or counterclaim in immediately available funds not later than
4:00 p.m., Portland time, on the dates due at the main office of the Bank in
Portland, Oregon. Funds received on any day after such time shall be deemed to
have been received on the next Business Day. Subject to the definition of the
term "Interest Period", whenever any payment to be made hereunder or on the Note
shall be stated to be due on a day which is not a Business Day, such payment
shall be made on the next succeeding Business Day and such extension of time
shall be included in the computation of any interest or fees.
14
Section 4.4 Optional Reduction or Termination of Commitment.
The Borrower may, at any time, upon no less than 5 Business Days prior
written or telephonic notice received by the Bank, reduce the Commitment, with
any such reduction in a minimum amount of $1,000,000 or an integral multiple
thereof. Upon any reduction in the Commitment pursuant to this Section 4.4, the
Borrower shall pay to the Bank the amount, if any, by which the unpaid principal
amount of outstanding Loan plus the Letter of Credit Obligations exceeds the
Commitment as so reduced. Amounts so paid cannot be reborrowed. The Borrower
may, at any time, upon not less than five (5) Business Days prior written notice
to the Bank, terminate the Commitment in its entirety. Upon termination of the
Commitment pursuant to this Section, the Borrower shall pay to the Bank the full
amount of the outstanding Loan, all accrued and unpaid interest thereon, all
unpaid Commitment Fees accrued to the date of such termination and all other
unpaid obligations of the Borrower to the Bank hereunder. All payments described
in this Section are subject to the provisions of Section 2.6. Notwithstanding
the foregoing, the Commitment may not be reduced to an amount below outstanding
Letter of Credit Obligations, or terminated, if Letters of Credit are
outstanding.
ARTICLE V
ADDITIONAL PROVISIONS RELATING TO LOAN AND LETTERS OF CREDIT
Section 5.1 Increased Costs.
If, as a result of any law, rule, regulation, treaty or directive, or any
change therein or in the interpretation or administration thereof, or compliance
by the Bank with any request or directive (whether or not having the force of
law) from any court, central bank, governmental authority, agency or
instrumentality, or comparable agency:
(a) any tax, duty or other charge with respect to the Loan, the Note
or the Commitment is imposed, modified or deemed applicable, or the basis
of taxation of payments to the Bank of interest or principal of the Loan
or of the Facility Fees (other than taxes imposed on the overall net
income of the Bank) is changed;
(b) any reserve, special deposit, special assessment or similar
requirement against assets of, deposits with or for the account of, or
credit extended by, the Bank is imposed, modified or deemed applicable;
(c) any increase in the amount of capital required or expected to be
maintained by the Bank or any Person controlling the Bank is imposed,
modified or deemed applicable; or
(d) any other condition affecting this Agreement or the Commitment
is imposed on the Bank or the relevant funding markets;
15
and the Bank determines that, by reason thereof, the cost to the Bank of making
or maintaining the Loan, issuing or participating in the Letters of Credit or
extending the Commitment is increased, or the amount of any sum receivable by
the Bank hereunder or under the Note in respect of any Loan or Letters of Credit
is reduced;
then, the Borrower shall pay to the Bank upon demand such additional amount or
amounts as will compensate the Bank (or the controlling Person in the instance
of (c) above) for such additional costs or reduction (provided that the Bank has
not been compensated for such additional cost or reduction in the calculation of
the LIBOR Reserve Rate). Determinations by the Bank for purposes of this Section
5.1 of the additional amounts required to compensate the Bank shall be
conclusive in the absence of manifest error. In determining such amounts, the
Bank may use any reasonable averaging, attribution and allocation methods.
Section 5.2 Deposits Unavailable or Interest Rate Unascertainable or
Inadequate; Impracticability.
If the Bank in good faith determines (which determination shall be
conclusive and binding on the parties hereto) that:
(a) deposits of the necessary amount for the relevant Interest
Period for any LIBOR Advance are not available to the Bank in the relevant
markets or that, by reason of circumstances affecting such market,
adequate and reasonable means do not exist for ascertaining the LIBOR Rate
for such Interest Period;
(b) the LIBOR Rate (Reserve Adjusted) will not adequately and fairly
reflect the cost to the Bank of making or funding the LIBOR Advance for a
relevant Interest Period; or
(c) the making or funding of LIBOR Advances has become impracticable
as a result of any event occurring after the date of this Agreement which,
in the opinion of the Bank, materially and adversely affects such Advances
or the Bank's Commitment to make such Advances or the relevant market;
the Bank shall promptly give notice of such determination to the Borrower,
and (i) any notice of a new LIBOR Advance previously given by the Borrower
and not yet borrowed or converted shall be deemed to be a notice to make a
Federal Funds Rate Advance, and (ii) the Borrower shall be obligated to
either prepay in full any outstanding LIBOR Advances, without premium or
penalty, on the last day of the current Interest Period with respect
thereto or convert any such LIBOR Advance to a Federal Funds Rate Advance
on such last day.
Section 5.3 Changes in Law Rendering LIBOR Advances Unlawful.
16
If at any time due to the adoption of any law, rule, regulation, treaty or
directive, or any change therein or in the interpretation or administration
thereof by any court, central bank, governmental authority, agency or
instrumentality, or comparable agency charged with the interpretation or
administration thereof, or for any other reason arising subsequent to the date
of this Agreement, it shall become unlawful or impossible for the Bank to make
or fund any LIBOR Advance, the obligation of the Bank to provide such Advance
shall, upon the happening of such event, forthwith be suspended for the duration
of such illegality or impossibility. If any such event shall make it unlawful or
impossible for the Bank to continue any LIBOR Advance previously made by it
hereunder, the Bank shall, upon the happening of such event, notify the Borrower
thereof in writing, and the Borrower shall, at the time notified by the Bank,
either convert each such unlawful Advance to a Federal Funds Rate Advance or
repay such Advance in full, together with accrued interest thereon, subject to
the provisions of Section 2.6.
Section 5.4 Discretion of the Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Bank
shall be entitled to fund and maintain its funding of all or any part of the
Loan in any manner it elects; it being understood, however, that for purposes of
this Agreement, all determinations hereunder shall be made as if the Bank had
actually funded and maintained each LIBOR Advance during the Interest Period for
such Advance through the purchase of deposits having a term corresponding to
such Interest Period and bearing an interest rate equal to the LIBOR Rate for
such Interest Period (whether or not the Bank shall have granted any
participations in such Advances).
Section 5.5 Claims for Increased Costs.
The Bank shall not be entitled to compensation under this Article V for
any increased costs incurred with respect to any date unless the Bank shall have
notified the Borrower of such increased costs not more than 180 days after the
date on which the Bank became aware of such increased costs.
ARTICLE VI CONDITIONS PRECEDENT
Section 6.1 Conditions of Initial Advance.
The obligation of the Bank to make the initial Advance hereunder shall be
subject to the satisfaction of the conditions precedent, in addition to the
applicable conditions precedent set forth in Section 6.2 below, that the Bank
shall have received all of the following, in form and substance satisfactory to
the Bank, each duly executed and certified or dated the date of the initial Loan
or such other date as is satisfactory to the Bank:
(a) The Note
(b) The Guaranty
17
(c) A copy of the corporate resolution of the Borrower authorizing
the execution, delivery and performance of the Loan Documents, certified
by the Secretary or an Assistant Secretary of the Borrower.
(d) A copy of the corporate resolutions of the Guarantors
authorizing the execution, delivery and performance of the Guaranty,
certified by the Secretary or an Assistant Secretary of Guarantors.
(e) An incumbency certificate showing the names and titles, and
bearing the signatures of, the officers of the Borrower authorized to
execute the Loan Documents and to request Loan hereunder, certified by the
Secretary or an Assistant Secretary of the Borrower.
(f) Incumbency certificates showing the names and titles, and
bearing the signatures of, the officers of the Guarantors authorized to
execute the Guaranty, certified by the Secretary or an Assistant Secretary
of the Guarantors.
(g) A status certificate for the Borrower and each Guarantor in the
jurisdiction of its incorporation, certified by the appropriate
governmental officials.
(h) Copies of the Articles or Certificate of Incorporation and the
By-Laws of the Borrower and each Guarantor with all amendments thereto,
certified by the Secretary or an Assistant Secretary of the Borrower.
(i) An opinion of counsel to the Borrower, addressed to the Bank, in
substantially the form of Exhibit D.
(j) Payment of the Facility Fees as provided in Section 3.2 and the
expenses of the Bank as provided in Section 12.4 hereof.
Section 6.2 Conditions Precedent to all Advances.
The obligation of the Bank to make any Advance hereunder (including the
initial Advance) shall be subject to the satisfaction of the following
conditions precedent (and each request for an Advance shall be deemed a
representation and warranty by the Borrower that the following have been
satisfied):
(a) Before and after giving effect to such Advance, the
representation and warranties contained in Article VII shall be true and
correct in all material respects, as though made on the date of such
Advance (except to the extent such representation or warranty expressly
relates to an earlier date).
(b) Before and after giving effect to such Advance, no Default or
Event of Default shall have occurred and be continuing.
18
ARTICLE VII REPRESENTATIONS AND WARRANTIES
To induce the Bank to enter into this Agreement, and to make the Loan and
issue Letters of Credit hereunder, the Borrower represents and warrants to the
Bank:
Section 7.1 Organization, Standing, Etc.
The Borrower and each of the corporate Subsidiaries are corporations duly
incorporated and validly existing and if applicable in good standing under the
laws of the jurisdiction of their respective incorporation and have all
requisite corporate power and authority to carry on their respective businesses
as now conducted, to enter into the Loan Documents and to perform its
obligations under the Loan Documents. The Borrower and each of the Subsidiaries
are duly qualified and in good standing as a foreign corporation in each
jurisdiction in which the failure to qualify could reasonably be expected to
have an Adverse Effect.
Section 7.2 Authorization and Validity.
The execution, delivery and performance by the Borrower of the Loan
Documents have been duly authorized by all necessary corporate action by the
Borrower, and the Loan Documents constitute the legal, valid and binding
obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms, subject to limitations as to enforceability which might
result from bankruptcy, insolvency, moratorium and other similar laws affecting
creditors' rights generally and subject to limitations on the availability of
equitable remedies.
Section 7.3 No Conflict; No Default.
The execution, delivery and performance by the Borrower of the Loan
Documents will not (a) violate any provision of any law, statute, rule or
regulation or any order, writ, judgment, injunction, decree, determination or
award of any court, governmental agency or arbitrator presently in effect having
applicability to the Borrower, (b) violate or contravene any provisions of the
Articles (or Certificate) of Incorporation or by-laws of the Borrower, or (c)
result in a breach of or constitute a default under any indenture, loan or
credit agreement or any other agreement, lease or instrument to which the
Borrower is a party or by which it or any of its properties may be bound or
result in the creation of any Lien on any asset of the Borrower or any
Subsidiary. Neither the Borrower nor any Subsidiary is in default under or in
violation of any such law, statute, rule or regulation, order, writ, judgment,
injunction, decree, determination or award or any such indenture, loan or credit
agreement or other agreement, lease or instrument in any case in which the
consequences of such default or violation could reasonably be expected to result
in an Adverse Event.
19
Section 7.4 Government Consent.
No order, consent, approval, license, authorization or validation of, or
filing, recording or registration with, or exemption by, any governmental or
public body or authority is required on the part of the Borrower to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding effect or enforceability of, the Loan Documents.
Section 7.5 Financial Statements and Condition.
The Borrower's audited consolidated financial statements and its unaudited
consolidated financial statements as heretofore furnished to the Bank have been
prepared in accordance with GAAP or in accordance with SAP on a consistent basis
and fairly present the financial condition of the Borrower and its Subsidiaries
as at such dates and the results of their operations and changes in financial
position for the respective periods then ended, subject, in the case of interim
financial statements, to the absence of footnotes and year-end adjustments. As
of the dates of such financial statements, neither the Borrower nor any
Subsidiary had any material obligation, contingent liability, liability for
taxes or long-term lease obligation which is not reflected in such financial
statements or in the Note thereto. Since the dates of the most recent of such
financial statements, no Adverse Event has occurred.
Section 7.6 Litigation and Contingent Liabilities.
Except as described in Exhibit E, there are no actions, suits or
proceedings pending or, to the knowledge of the Borrower, threatened against or
affecting the Borrower or any Subsidiary or any of their properties before any
court or arbitrator, or any governmental department, board, agency or other
instrumentality which, if determined adversely to the Borrower or any
Subsidiary, could reasonably be expected to result in an Adverse Event. Except
as described in Exhibit F, neither the Borrower nor any Subsidiary has any
contingent liabilities which are material to the Borrower and the Subsidiaries
as a consolidated enterprise.
Section 7.7 Compliance.
The Borrower and the Subsidiaries are in material compliance with all
statutes and governmental rules and regulations applicable to them.
Section 7.8 Environmental, Health and Safety Laws.
There does not exist any violation by the Borrower or any Subsidiary of
any applicable federal, state or local law, rule or regulation or order of any
government, governmental department, board, agency or other instrumentality
relating to environmental, pollution, health or safety matters which will or
could reasonably be expected to impose a material liability on the Borrower or a
Subsidiary or which would or could reasonably be expected to require a material
expenditure by the Borrower or such Subsidiary to cure. Neither the Borrower nor
any Subsidiary has received any notice to the effect that any part of its
operations or properties is not in material compliance with any such law, rule,
regulation or order or notice that it or its property is
20
the subject of any governmental investigation evaluating whether any remedial
action is needed to respond to any release of any toxic or hazardous waste or
substance into the environment, the consequences of which non-compliance or
remedial action could reasonably be expected to result in an Adverse Event.
Section 7.9 ERISA.
Each Plan complies with all material applicable requirements of ERISA and
the Code and with all material applicable rulings and regulations issued under
the provisions of ERISA and the Code setting forth those requirements. No
Reportable Event, other than a Reportable Event for which the reporting
requirements have been waived by regulations of the PBGC, has occurred and is
continuing with respect to any Plan. All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would permit the institution of proceedings to terminate any
Plan under Section 4042 of ERISA. The current value of the Plans' benefits
guaranteed under Title IV or ERISA does not exceed the current value of the
Plans' assets allocable to such benefits.
Section 7.10 Regulation U.
Neither the Borrower nor any Subsidiary is engaged in the business of
extending credit for the purpose of purchasing or carrying margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve System)
and no part of the proceeds of the Loan will be used to purchase or carry margin
stock or for any other purpose which would violate any of the margin
requirements of the Board of Governors of the Federal Reserve System.
Section 7.11 Ownership of Property.
Each of the Borrower and the Subsidiaries has good and marketable title to
its real properties and good and sufficient title to or right to use its other
properties, including all properties and assets referred to as owned by the
Borrower and its Subsidiaries in the audited financial statements of the
Borrower referred to in Section 7.5 (other than property disposed of since the
date of such financial statements in the ordinary course of business).
Section 7.12 Taxes.
Each of the Borrower and the Subsidiaries has filed all federal, state and
local tax returns required to be filed and has paid or made provision for the
payment of all taxes due and payable pursuant to such returns and pursuant to
any assessments made against it or any of its property and all other taxes, fees
and other charges imposed on it or any of its property by any governmental
authority (other than taxes, fees or charges the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in accordance with GAAP have been provided on the
books of the Borrower). No tax Liens have been filed and no material claims are
being asserted with respect to any such taxes, fees or charges. The charges,
accruals and reserves on the books of the Borrower in respect of taxes and other
governmental charges are adequate
21
Section 7.13 Trademarks, Patents.
Each of the Borrower and the Subsidiaries possesses or has the right to
use all of the patents, trademarks, trade names, service marks and copyrights,
and applications therefor, and all technology, know-how, processes, methods and
designs which are material to the conduct of its business, without known
conflict with the rights of others.
Section 7.14 Investment Company Act.
Neither the Borrower nor any Subsidiary is an "investment company" or a
company "controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended.
Section 7.15 Public Utility Holding Company Act.
Neither the Borrower nor any Subsidiary is a "holding company" or a
"subsidiary company" of a holding company or an "affiliate" of a holding company
or of a subsidiary company of a holding company within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
Section 7.16 Subsidiaries.
Exhibit G sets forth as of the date of this Agreement a list of all
Subsidiaries and the number and percentage of the shares of each class of
capital stock owned beneficially or of record by the Borrower or any Subsidiary
therein, and the jurisdiction of incorporation of each Subsidiary.
Section 7.17 Partnerships and Joint Ventures.
Exhibit H sets forth as of the date of this Agreement a list of all
partnerships or joint ventures in which the Borrower or any Subsidiary is a
partner (limited or general) or joint venturer.
ARTICLE VIII AFFIRMATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan and all
other liabilities and obligations of the Borrower to the Bank hereunder and
under the Note have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will do, and will cause each Subsidiary (except
in the instance of Section 8.1) to do, all of the following:
Section 8.1 Financial Statements and Reports.
Furnish to Bank:
22
(a) As soon as available and in any event within 120 days after the
end of each fiscal year of the Borrower, the consolidated annual audit
reports of the Borrower (and its Subsidiaries) and SMI prepared on a
consolidated basis and in conformity with GAAP, consisting of at least
statements of income, cash flow, changes in financial position and
stockholders' equity, and a consolidated balance sheet as at the end of
such year, setting forth in each case in comparative form corresponding
figures from the previous annual audit, certified without qualification by
independent certified public accountants of recognized standing selected
by the Borrower and reasonably acceptable to the Bank, together with any
management letters, management reports or other supplementary comments or
reports to the Borrower or its board of directors furnished by such
accountants, and a statement by the accounting firm performing such audit
stating that it has reviewed this Agreement and that in performing its
examination nothing came to its attention that caused it to believe that
any Default or Event of Default exists, or, if such Default or Event of
Default exists, describing its nature.
(b) As soon as available and in any event within 120 days after the
end of each fiscal year of Borrower, the unaudited annual financial
statements of SIC prepared in conformity with SAP and the unaudited annual
financial statements of SREI prepared in conformity with GAAP, each
certified by the Borrower's chief financial officer or controller,
consisting of at least statements of income, cash flow, changes in
financial position and stockholders' equity, and a balance sheet as at the
end of such year setting forth in each case in comparative form
corresponding figures from the previous annual financial statements.
(c) As soon as available and in any event within 45 days after the
end of each of the first three fiscal quarters of each fiscal year of
Borrower, the unaudited financial statements of SIC prepared in conformity
with SAP and the unaudited financial statements of SMI and SREI prepared
in conformity with GAAP (except for the absence of footnotes and subject
to year-end audit adjustments), each certified by the Borrower's chief
financial officer or controller, consisting of at least statements of
income, cash flow, changes in financial position and stockholders' equity
for such quarter and for the period from the beginning of such fiscal year
to the end of such quarter, and a balance sheet as at the end of such
quarter.
(d) Together with the financial statements furnished by the Borrower
under Sections 8.1(a) and 8.1(c), a Compliance Certificate in
substantially the form of Exhibit C signed by the chief financial officer
or controller of the Borrower.
(e) As soon as available and in any event within 45 days after the
end of each quarter, Borrower's internal Monthly Investment Division
Report describing investments and returns on investments made by Borrower
and its Subsidiaries, as such report may be amended or modified from time
to time, signed by Borrower's chief financial officer or controller.
23
(f) Immediately upon an Executive Officer of Borrower becoming aware
thereof, notice of any change in SIC's Claims Paying Ability Rating.
(g) Immediately upon an Executive Officer of Borrower becoming aware
of any Default or Event of Default, a notice describing the nature thereof
and what action the Borrower proposes to take with respect thereto.
(h) Immediately upon an Executive Officer of Borrower becoming aware
of the occurrence, with respect to any Plan, of any Reportable Event
(other than a Reportable Event for which the reporting requirements have
been waived by PBGC regulations) or any "prohibited transaction" (as
defined in Section 4975 of the Code), a notice specifying the nature
thereof and what action the Borrower proposes to take with respect
thereto, and, when received, copies of any notice from PBGC of intention
to terminate or have a trustee appointed for any Plan.
(i) Promptly upon the mailing or filing thereof, copies of all
financial statements, reports and proxy statements mailed to the
Borrower's stockholders, and copies of all registration statements,
periodic reports and other documents, including any actuary's opinion,
filed by Borrower or any of its Subsidiaries with the Department.
(j) Immediately upon an Executive Officer of Borrower becoming aware
of the occurrence thereof, notice of the institution of any litigation,
arbitration or governmental proceeding, or the rendering of a judgment or
decision in such litigation or proceeding, which could reasonably be
expected to result in an Adverse Event, and the steps being taken by the
Person(s) affected by such proceeding.
(k) Immediately upon an Executive Officer of Borrower becoming aware
of the occurrence thereof, notice of any violation as to any environmental
matter by the Borrower or any Subsidiary and of the commencement of any
judicial or administrative proceeding relating to health, safety or
environmental matters (i) in which an adverse determination or result
could reasonably be expected to result in the revocation of or have a
material adverse effect on any operating permits, air emission permits,
water discharge permits, hazardous waste permits or other permits held by
the Borrower or any Subsidiary which are material to the operations of the
Borrower or such Subsidiary, or (ii) which will or reasonably could be
expected to impose a material liability on the Borrower or such Subsidiary
to any Person or which will require a material expenditure by the Borrower
or such Subsidiary to cure any alleged problem or violation.
(l) From time to time, such other information regarding the
business, operation and financial condition of the Borrower and the
Subsidiaries as the Bank may reasonably request.
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Section 8.2 Corporate Existence.
Subject to Section 9.1 in the instance of Borrower and each Subsidiary,
maintain its corporate existence under the laws of its jurisdiction of
incorporation and its qualification to transact business in each jurisdiction in
which the failure to qualify could reasonably be expected to have an Adverse
Effect.
Section 8.3 Insurance.
Maintain with financially sound and reputable insurance companies such
insurance as may be required by law and such other insurance in such amounts and
against such hazards as is customary in the case of reputable corporations
engaged in the same or similar business and similarly situated.
25
Section 8.4 Payment of Taxes and Claims.
File all tax returns and reports which are required by law to be filed by
it and pay before they become delinquent all taxes, assessments and governmental
charges and levies imposed upon it or its property and all claims or demands of
any kind (including, without limitation, those of suppliers, mechanics,
carriers, warehouses, landlords and other like Persons) which, if unpaid, might
result in the creation of a Lien upon its property; provided that the foregoing
items need not be paid if they are being contested in good faith by appropriate
proceedings, and as long as the Borrower's or such Subsidiary's title to its
property is not materially adversely affected, its use of such property in the
ordinary course of its business is not materially interfered with and adequate
reserves with respect thereto have been set aside on the Borrower's or such
Subsidiary's books in accordance with GAAP.
Section 8.5 Inspection.
Permit any Person designated by the Bank to visit and inspect any of its
properties, corporate books and financial records, to examine and to make copies
of its books of accounts and other financial records, and to discuss the
affairs, finances and accounts of the Borrower and the Subsidiaries with, and to
be advised as to the same by, its officers, all at such reasonable times and
intervals as the Bank may designate.
Section 8.6 Maintenance of Properties.
Maintain its properties used or useful in the conduct of its business in
good condition, repair and working order, and supplied with all necessary
equipment, and make repairs, renewals, replacements, betterments and
improvements thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
Section 8.7 Books and Records.
Keep adequate and proper records and books of account in which full and
correct entries will be made of its dealings, business and affairs.
Section 8.8 Compliance.
Comply in all material respects with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject.
Section 8.9 ERISA.
Maintain each Plan in compliance with all material applicable requirements
of ERISA and of the Code and with all material applicable rulings and
regulations issued under the provisions of ERISA and of the Code.
26
Section 8.10 Environmental Matters.
Observe and comply with all laws, rules, regulations and orders of any
government or government agency relating to health, safety, pollution, hazardous
materials or other environmental matters to the extent non-compliance could
result in a material liability or otherwise constitute an Adverse Event.
ARTICLE IX NEGATIVE COVENANTS
From the date of this Agreement and thereafter until the Loan and all
other liabilities and obligations of the Borrower to the Bank hereunder and
under the Note have been paid in full, unless the Bank shall otherwise expressly
consent in writing, the Borrower will not, and will not permit any Subsidiary
to, do any of the following:
Section 9.1 Merger.
Merge or consolidate or enter into any analogous reorganization or
transaction with any Person; provided, however, (a) any wholly-owned Subsidiary
(except SIC) may be merged with or liquidated into the Borrower (if the Borrower
is the surviving corporation) or SIC (if SIC is the surviving corporation) or
any other wholly-owned Subsidiary; and (b) the Borrower or any Subsidiary may
merge or consolidate with any other Person so long as (i) (A) the Borrower or
such Subsidiary shall be the continuing or surviving Person or (B) in the case
of a merger with a Subsidiary, the acquired Person is, as a result of the merger
transaction, a wholly owned Subsidiary of the Borrower, and (ii) immediately
before and after giving effect to such merger, there shall be no Default or
Event of Default.
Section 9.2 Sale of Assets.
Sell, transfer, lease or otherwise convey all or any substantial part of
its assets except for sales or other transfers by a wholly-owned Subsidiary to
the Borrower or another wholly-owned Subsidiary.
Section 9.3 Plans.
Permit any condition to exist in connection with any Plan which might
constitute grounds for the PBGC to institute proceedings to have such Plan
terminated or a trustee appointed to administer such Plan, permit any Plan to
terminate under any circumstances which would cause the lien provided for in
Section 4068 of ERISA to attach to any property, revenue or asset of the
Borrower or any Subsidiary.
27
Section 9.4 Change in Nature of Business.
Make any material change in the nature of the business of the Borrower and
its Subsidiaries, taken as a whole, carried on at the date hereof.
28
Section 9.5 Subsidiaries.
Take any action or permit any Subsidiary to take any action, which would
result in either (a) Borrower's direct or indirect ownership interest in SIC or
SMI to be less than 100%, or (b) the Borrower's or the Subsidiary's direct
ownership interest in any other Subsidiary now owned or hereafter acquired to be
less than 50%.
Section 9.6 Other Agreements.
Enter into any agreement, bond, note or other instrument with or for the
benefit of any Person other than the Bank which would: (a) prohibit the Borrower
or any Subsidiary from granting, or otherwise limit the ability of the Borrower
or such Subsidiary to grant, to the Bank any Lien on any assets or properties of
the Borrower or such Subsidiary (other than prohibitions or limitations (i)
existing on the date of this Agreement, (ii) affecting the assets of any Person
acquired after the date of this Agreement, and existing on the date of the
acquisition of the Person, (iii) existing under, or by reason of, applicable
law, or (iv) constituting an encumbrance or restriction on any property or
assets in an agreement relating to the acquisition of such property or asset
that is otherwise permitted by the terms of this Agreement; or (b) be violated
or breached by the Borrower's performance of its obligations under the Loan
Documents.
Section 9.7 Funded Debt.
Incur, create, issue, assume or suffer to exist Funded Debt in excess of
$200,000,000 outstanding at any time.
Section 9.8 Unconditional Purchase Obligations.
Enter into or be a party to any contract for the purchase or lease of
materials, supplies or other property or services involving payments of more
than $25,000,000 if such contract requires that payment be made by it regardless
of whether or not delivery is ever made of such materials, supplies or other
property or services.
Section 9.9 Transactions with Related Parties.
Enter into or be a party to any transaction or arrangement, including,
without limitation, the purchase, sale, lease or exchange of property or the
rendering of any service, with any Related Party, except in the ordinary course
of and pursuant to the reasonable requirements of the Borrower's or the
applicable Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or such Subsidiary than would obtain in a comparable
arm's-length transaction with a Person not a Related Party.
29
Section 9.10 Use of Proceeds.
Permit any proceeds of the Loan to be used, either directly or indirectly,
for the purpose, whether immediate, incidental or ultimate, of "purchasing or
carrying any margin stock" within the meaning of Regulation U of the Federal
Reserve Board, as amended from time to time, and furnish to the Bank, upon its
request, a statement in conformity with the requirements of Federal Reserve Form
U-1 referred to in Regulation U.
Section 9.11 Borrower's Equity.
Permit the stockholder's equity of the Borrower and its Subsidiaries on a
consolidated basis determined in accordance with GAAP as of the last day of any
fiscal quarter to be less than $700,000,000, but excluding the effect of other
comprehensive income included in or excluded from stockholder's equity on
account of Statement No. 130 of the Financial Accounting Standards Board and
similar accounting rules.
Section 9.12 SMI's Tangible Net Worth.
Permit the Tangible Net Worth of SMI as of the last day of any fiscal
quarter to be less than $5,000,000.
Section 9.13 SIC's Claims Paying Ability Rating.
Cause SIC to maintain a Claims Paying Ability Rating from A.M. Best of A-
or better and maintain a Claims Paying Ability Rating from Standard and Poor's
of A or better.
ARTICLE X EVENTS OF DEFAULT AND REMEDIES
Section 10.1 Events of Default.
The occurrence of any one or more of the following events shall constitute
an Event of Default:
(a) The Borrower shall fail to make when due, whether by
acceleration or otherwise, any payment of principal or any payment of
interest on the Note or any fee or other amount required to be made to the
Bank pursuant to the Loan Documents within three business days of the due
date thereof;
(b) Any representation or warranty made or deemed to have been made
by or on behalf of the Borrower or any Subsidiary in the Loan Documents or
on behalf of the Borrower or any Subsidiary in any certificate, statement,
report or other writing furnished by or on behalf of the Borrower to the
Bank pursuant to the Loan Documents or any other instrument, document or
agreement shall prove to have been false or misleading in any
30
material respect on the date as of which the facts set forth are stated or
certified or deemed to have been stated or certified;
(c) The Borrower shall fail to comply with Section 8.2 hereof or any
Section of Article IX hereof;
(d) The Borrower shall fail to comply with any agreement, covenant,
condition, provision or term contained in the Loan Documents except the
inadvertent failure to list less than $1,000,000 in contingent obligations
in a Compliance Certificate required by Section 8.1(d) (and such failure
shall not constitute an Event of Default under any of the other provisions
of this Section 10.1) and such failure to comply shall continue for 30
calendar days after notice thereof to the Borrower by the Bank;
(e) The Borrower or any Subsidiary shall become insolvent or shall
generally not pay its debts as they mature or shall apply for, shall
consent to, or shall acquiesce in the appointment of a custodian, trustee
or receiver of the Borrower or such Subsidiary or for a substantial part
of the property thereof or, in the absence of such application, consent or
acquiescence, a custodian, trustee or receiver shall be appointed for the
Borrower or a Subsidiary or for a substantial part of the property thereof
and shall not be discharged within 45 days;
(f) Any bankruptcy, reorganization, debt arrangement or other
proceedings under any bankruptcy or insolvency law shall be instituted by
or against the Borrower or a Subsidiary, and, if instituted against the
Borrower or a Subsidiary, shall have been consented to or acquiesced in by
the Borrower or such Subsidiary, or shall remain undismissed for 45 days,
or an order for relief shall have been entered against the Borrower or
such Subsidiary, or the Borrower or any Subsidiary shall take any
corporate action to approve institution of, or acquiescence in, such a
proceeding;
(g) Any dissolution or liquidation proceeding shall be instituted by
or against the Borrower or a Subsidiary and, if instituted against the
Borrower or such Subsidiary, shall be consented to or acquiesced in by the
Borrower or such Subsidiary or shall remain for 45 days undismissed, or
the Borrower or any Subsidiary shall take any corporate action to approve
institution of, or acquiescence in, such a proceeding;
(h) A judgment or judgments for the payment of money in excess of
the sum of $10,000,000 in the aggregate shall be rendered against the
Borrower or a Subsidiary and the Borrower or such Subsidiary shall not
discharge the same or provide for its discharge in accordance with its
terms, or procure a stay of execution thereof, prior to any execution on
such judgments by such judgment creditor, within 30 days from the date of
entry thereof, and within said period of 30 days, or such longer period
during which execution of such judgment shall be stayed, appeal therefrom
and cause the execution thereof to be stayed during such appeal;
31
(i) The initiation by the Borrower, any ERISA Affiliate or the PBGC
of steps to terminate any Plan other than a termination under Section
4041(b) of ERISA by the Borrower or ERISA Affiliate;
(j) The maturity of any Indebtedness of the Borrower in excess of
$1,000,000 (other than Indebtedness under this Agreement) or a Subsidiary
shall be accelerated, or the Borrower or a Subsidiary shall fail to pay
any such Indebtedness when due or, in the case of such Indebtedness
payable on demand, when demanded, or any event shall occur or condition
shall exist and shall continue for more than the period of grace, if any,
applicable thereto and shall have the effect of causing, or permitting
(any required notice having been given and grace period having expired)
the holder of any such Indebtedness or any trustee or other Person acting
on behalf of such holder to cause, such Indebtedness to become due prior
to its stated maturity or to realize upon any collateral given as security
therefor; or
(k) Either SIC or SMI shall cease to be a wholly owned Subsidiary of
Borrower.
Section 10.2 Remedies.
If (a) any Event of Default described in Sections 10.1(e), (f) or (g)
shall occur with respect to the Borrower, the Commitment shall automatically
terminate and the outstanding unpaid principal balance of the Note, the accrued
interest thereon and all other obligations of the Borrower to the Bank under the
Loan Documents shall automatically become immediately due and payable; or (b)
any other Event of Default shall occur and be continuing, which event shall
continue for 10 days after written notice from Bank to Borrower, then the Bank
may take any or all of the following actions: (i) declare the Commitment
terminated, whereupon the Commitment shall terminate, (ii) declare that the
outstanding unpaid principal balance of the Note, the accrued and unpaid
interest thereon and all other obligations of the Borrower to the Bank under the
Loan Documents to be forthwith due and payable, whereupon the Note, all accrued
and unpaid interest thereon and all such obligations shall immediately become
due and payable, in each case without demand or notice of any kind, all of which
are hereby expressly waived, anything in this Agreement or in the Note to the
contrary notwithstanding, (iii) exercise all rights and remedies under any other
instrument, document or agreement between the Borrower and the Bank, and (iv)
enforce all rights and remedies under any applicable law.
Section 10.3 Letters of Credit.
In addition to the foregoing remedies, if any Event of Default described
in Section 10.1(e), (f) or (g) shall have occurred, or if any other Event of
Default shall have occurred and the Bank shall have declared that the principal
balance of the Note is due and payable, the Borrower shall pay to the Bank an
amount equal to the all Letter of Credit Obligations. Such payment shall be in
immediately available funds or in similar cash collateral acceptable to the Bank
and shall be pledged to the Bank. Such amount shall be held by the Bank in a
cash collateral account until the outstanding Letters of Credit are terminated
without payment or are paid and Letter of Credit
32
Obligations with respect thereto are payable. In the event the Borrower defaults
in the payment of any Letter of Credit Obligations, the proceeds of the cash
collateral account shall be applied to the payment thereof. The Borrower
acknowledges and agrees that the Bank would not have an adequate remedy at law
for failure by the Borrower to pay immediately to the Bank the amount provided
under this Section 10.3, and that the Bank shall have the right to require the
Borrower to perform specifically such undertaking whether or not any of the
Letter of Credit Obligations are due and payable. Upon the failure of the
Borrower to make any payment required under this Section, the Bank may proceed
to use all remedies available at law or equity to enforce the obligation of the
Borrower to pay or reimburse the Bank. The balance of any payment due under this
Section shall bear interest payable on demand until paid in full at a per annum
rate equal to the Federal Funds Rate plus 3.00%.
Section 10.4 Offset.
In addition to the remedies set forth in Section 10.2, upon the occurrence
of any Event of Default or at any time thereafter while such Event of Default
continues, the Bank may offset any and all balances, credits, deposits (general
or special, time or demand, provisional or final), accounts or monies of the
Borrower then or thereafter with the Bank, or any obligations of the Bank
against the Indebtedness then owed by the Borrower to such Bank.
ARTICLE XI ARBITRATION
Section 11.1 Arbitration of Claims.
Notwithstanding Sections 12.13 and 12.14 of this Agreement, Borrower, any
Guarantor or Bank may require that any and all disputes, claims, counterclaims,
and defenses, including those based on or arising from any alleged tort
("Claims") relating in any way to this Agreement, the Loan, any of the Loan
Documents, or any transaction of which this Agreement is a part (each a
"Credit"), be settled by binding arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and Title 9 of the
U.S. Code. All Claims will be subject to the statutes of limitation applicable
if they were litigated.
Section 11.2 Arbitrators.
If each party's Claim is less than $100,000, one neutral arbitrator will
decide all issues; if any party's claim is $100,000 or more three neutral
arbitrators will decide all issues. All arbitrators will be active Oregon State
Bar members in good standing. All arbitration hearings will be held in Portland,
Oregon. In addition to all other powers, the arbitrator(s) shall have the
exclusive right to determine all issues of arbitrability. Judgment on any
arbitration award may be entered in and enforced by any court with jurisdiction.
33
Section 11.3 Other Remedies.
Each party has the right before, during, and after any arbitration to
exercise any number of the following remedies, in any order or concurrently; (a)
setoff; (b) self-help repossession; (c) judicial or non-judicial foreclosure
against real or personal property collateral; and (d) provisional remedies,
including injunction, appointment of receiver, attachment, claim and delivery
and replevin.
34
Section 11.4 Non-Waiver; Governing Provision.
The institution of any judicial proceeding relating to any Credit shall
not be a waiver of the right to submit any Claim to arbitration. The provision
of this Article shall govern the arbitration of all matters described herein
notwithstanding any contrary provision of any Note or any Loan Document.
ARTICLE XII MISCELLANEOUS
Section 12.1 Waiver and Amendment.
No failure on the part of the Bank to exercise and no delay in exercising
any power or right hereunder or under any other Loan Document shall operate as a
waiver thereof; nor shall any single or partial exercise of any power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. The remedies herein and in any other instrument, document or
agreement delivered or to be delivered to the Bank hereunder or in connection
herewith are cumulative and not exclusive of any remedies provided by law. No
notice to or demand on the Borrower not required hereunder or under the Note
shall in any event entitle the Borrower to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the right of the
Bank or the holder of the Note to any other or further action in any
circumstances without notice or demand. Borrower and SIC hereby waive and
discharge any and all defenses, claims, counterclaims and offsets which either
or both may have against Bank and which have arisen or accrued through the date
of this Agreement.
Section 12.2 Amendments, Etc.
No amendment or waiver of any provision of this Agreement, nor consent to
any departure by the Borrower therefrom, shall in any event be effective unless
the same shall be in writing and signed by the Borrower and the Bank and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
Section 12.3 Assignments and Participations.
(a) Assignments. With the prior written consent of the Borrower, the
Bank shall have the right, subject to the further provisions of this
Section 12.3, to sell or assign all or any part of the Loan, Note, and
other rights and obligations under this Agreement and related documents
(such transfer, and "Assignment") to any commercial lender, other
financial institution or other entity (an "Assignee"). Upon such
Assignment becoming effective as provided in Section 12.3(b), the Bank
shall be relieved from its obligations hereunder to the extent assumed and
undertaken by the Assignee, and to such extent the Assignee shall have the
rights and obligations of the Bank hereunder. Notwithstanding the
foregoing, unless otherwise consented to by the Borrower and the Bank,
each Assignment shall be in the initial principal amount of not less than
$10,000,000 in the aggregate for all Loan and Commitments assigned, or an
integral multiple of $10,000,000
35
if above such amount. Each Assignment shall be documented by an agreement
between the Bank and the Assignee (an "Assignment and Assumption
Agreement") in form and substance satisfactory to the Bank.
(b) Effectiveness of Assignments. An Assignment shall become
effective hereunder when the Borrower shall have been given notice of the
Assignment. Upon the Assignment becoming effective, if requested by the
Bank, the Borrower shall make appropriate arrangements so that a new Note
is issued to the Bank and the Assignee.
(c) Participations. With the prior written consent of the Borrower,
the Bank shall have the right, subject to the further provisions of this
Section 12.3, to grant or sell a participation in all or any part of the
Loan and Note (a "Participation") to any commercial lender, other
financial institution or other entity (a "Participant"). The Borrower
agrees that if amounts outstanding under this Agreement and the Note are
due and unpaid, or shall have been declared or shall have become due and
payable upon the occurrence of an Event of Default, each Participant shall
be deemed to have the right of setoff in respect of its Participation in
amounts owing under this Agreement and any Note to the same extent as if
the amount of its Participation were owing directly to it as a Bank under
this Agreement or the Note. The Borrower also agrees that each Participant
shall be entitled to the benefits of Article V with respect to its
Participation, provided, that no Participant shall be entitled to receive
and greater amount pursuant to such Sections than the transferor Bank
would have been entitled to receive in respect of the amount of the
Participation transferred by such transferor Bank to such Participant had
no such transfer occurred.
(d) Limitation of Rights of any Assignee or Participant.
Notwithstanding anything in the foregoing to the contrary, except in the
instance of an Assignment that has become effective as provided in Section
12.3(b), (i) no Assignee or Participant shall have any direct rights
hereunder, (ii) the Borrower shall deal solely with the Bank and shall not
be obligated to extend any rights or make any payment to, or seek any
consent of the Assignee or Participant, (iii) no Assignment or
Participation shall relieve the Bank from any of its other obligations
hereunder and the Bank shall remain solely responsible for the performance
hereof, the (iv) no Assignee or Participant shall be entitled to require
the Bank to take or omit to take any action hereunder, except that the
Bank may agree with such Assignee or Participant that the Bank will not,
without such Assignee's or Participant's consent, take any action which
would, in the case of any principal, interest or fee in which the Assignee
or Participant has an ownership or beneficial interest: (w) extend the
final maturity of the Loan or extend the Termination Date, (x) reduce the
interest rate on the Loan, or (y) forgive any principal of, or interest
on, the Loan or any fees.
(e) Tax Matters. The Bank shall not be permitted to enter into any
Assignment or Participation with any Assignee or Participant who is not a
United States Person unless such Assignee or Participant represents and
warrants to such Bank that, as at the date of
36
such Assignment or Participation, it is entitled to receive interest
payments without withholding or deduction of any taxes and such Assignee
or Participant executes and delivers to the Bank on or before the date of
execution and delivery of documentation of such Participation or
Assignment, a United States Internal Revenue Service Form 1001 or 4224, or
any successor to either of such forms, as appropriate, properly completed
and claiming complete exemption from withholding and deduction of all
Federal Income Taxes. A "United States Person" means any citizen, national
or resident of the United States, any corporation or other entity created
or organized in or under the laws of the United States or any political
subdivision hereof or any estate or trust, in each case that is not
subject to withholding of United States Federal income taxes or other
taxes on payment of interest, principal of fees hereunder.
(f) Information. The Bank may furnish any information concerning the
Borrower in the possession of such Bank from time to time to Assignees and
Participants and potential Assignees and Participants.
(g) Federal Reserve Bank. Nothing herein stated shall limit the
right of the Bank to assign any interest herein and in the Note to a
Federal Reserve Bank.
Section 12.4 Costs, Expenses and Taxes.
The Borrower agrees, whether or not any Loan is made hereunder, to pay on
demand all costs and expenses of the following persons (including the reasonable
fees and expenses of counsel and paralegals for such persons who may be
employees of such persons), incurred in connection with the following matters:
(i) the Bank in connection with the preparation, execution and delivery of the
Loan Documents and the preparation, negotiation and execution of any and all
amendments to each thereof and (ii) the Bank in connection with the enforcement
of the Loan Documents. The Borrower agrees to pay, and save the Bank harmless
from all liability for, any stamp or other taxes which may be payable with
respect to the execution or delivery of the Loan Documents. The Borrower agrees
to indemnify and hold the Bank harmless from any loss or expense which may arise
or be created by the acceptance of telephonic or other instructions for making
the Loan or disbursing the proceeds thereof. The obligations of the Borrower
under this Section 13.4 shall survive any termination of this Agreement.
Section 12.5 Notices.
Except when telephonic notice is expressly authorized by this Agreement,
any notice or other communication to any party in connection with this Agreement
shall be in writing and shall be sent by manual delivery, telegram, telex,
facsimile transmission, overnight courier or United States mail (postage
prepaid) addressed to such party at the address specified on the signature page
hereof, or at such other address as such party shall have specified to the other
party hereto in writing. All periods of notice shall be measured from the date
of delivery thereof if manually delivered, from the date of sending thereof if
sent by telegram, telex or facsimile transmission, from the first Business Day
after the date of sending if sent by overnight courier, or upon receipt
37
if mailed; provided, however, that any notice to the Bank under Article II or
Section 4.4 hereof shall be deemed to have been given only when received by the
Bank.
38
Section 12.6 Successors.
This Agreement shall be binding upon the Borrower and the Bank and their
respective successors and permitted assigns, and shall inure to the benefit of
the Borrower and the Bank and the successors and permitted assigns of the Bank.
The Borrower shall not assign its rights or duties hereunder without the written
consent of the Bank, except as expressly permitted herein.
Section 12.7 Severability.
Any provision of the Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
Section 12.8 Subsidiary References.
The provisions of this Agreement relating to Subsidiaries shall apply only
during such times as the Borrower has one or more Subsidiaries.
Section 12.9 Captions.
The captions or headings herein and any table of contents hereto are for
convenience only and in no way define, limit or describe the scope or intent of
any provision of this Agreement.
Section 12.10 Entire Agreement.
The Loan Documents embody the entire agreement and understanding between
the Borrower and the Bank with respect to the subject matter hereof and thereof.
This Agreement supersedes all prior agreements and understandings relating to
the subject matter hereof.
Section 12.11 Counterparts.
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one and the same instrument, and either of the
parties hereto may execute this Agreement by signing any such counterpart.
Section 12.12 Governing Law.
THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF OREGON, WITHOUT
GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO
FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANK.
39
Section 12.13 Consent to Jurisdiction.
WITHOUT LIMITING ARTICLE XI, AT THE OPTION OF THE BANK, THIS AGREEMENT AND
THE NOTE MAY BE ENFORCED IN ANY FEDERAL COURT OR OREGON STATE COURT SITTING IN
PORTLAND, OREGON; AND THE BORROWER CONSENTS TO THE JURISDICTION AND VENUE OF ANY
SUCH COURT AND WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT.
IN THE EVENT THE BORROWER COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE
UNDER ANY TORT OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE
RELATIONSHIP CREATED BY THIS AGREEMENT, THE BANK AT ITS OPTION SHALL BE ENTITLED
TO HAVE THE CASE TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES
ABOVE-DESCRIBED, OR IF SUCH TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE
LAW, TO HAVE SUCH CASE DISMISSED WITHOUT PREJUDICE.
Section 12.14 Waiver of Jury Trial.
WITHOUT LIMITING ARTICLE XI, THE BORROWER WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS (a) UNDER THIS
AGREEMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR (b) ARISING FROM
ANY BANKING RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREES
THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY.
Section 12.15 Confidentiality.
Bank agrees to hold any confidential information that it may receive from
Borrower pursuant to this Agreement in confidence, except for disclosure: (a) to
legal counsel and accountants for Bank; (b) to other professional advisors to
Bank, provided that the recipient has accepted such information subject to a
confidentiality agreement substantially similar to this Section; (c) to
regulatory officials having jurisdiction over that Bank; and (d) as required by
law or legal process or in connection with any legal proceeding to which that
Bank and Borrower or any of its Subsidiaries are adverse parties. For purposes
of the foregoing, "confidential information" shall mean any information
respecting Borrower or its Subsidiaries reasonably considered by Borrower to be
confidential, other than (i) information previously filed with any governmental
agency and available to the public, (ii) information previously published in any
public medium from a source other than, directly or indirectly, that Bank, and
(iii) information previously disclosed by Borrower or its Subsidiaries to any
Person not associated with Borrower without a confidentiality agreement or
obligation substantially similar to this Section. Nothing in this Section shall
be construed to create or give rise to any fiduciary duty on the part of Bank to
Borrower or any other Person.
40
Section 12.16 Disclosure.
Under Oregon law, most agreements, promises and commitments made by
lenders after October 3, 1989, concerning loans and other credit extensions
which are not for personal, family or household purposes or secured solely by
the borrower's residence must be in writing, express consideration and be signed
by the lender to be enforceable.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above.
STANCORP FINANCIAL GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------
Title: Assistant Vice President, Controller & Treasurer
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇-▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, CPA
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
U.S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------
Title: Vice President
Oregon Commercial Banking
4th Floor
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
41
EXHIBIT A
PROMISSORY NOTE
$100,000,000 June 30, 2000
FOR VALUE RECEIVED, the undersigned StanCorp Financial Group, Inc. , an
Oregon corporation (the "Borrower"), promises to pay to the order of U.S. BANK
NATIONAL ASSOCIATION (the "Bank"), on the due date or dates determined under the
Credit Agreement hereinafter referred to, the principal sum of ONE HUNDRED
MILLION DOLLARS ($100,000,000.00), or if less, the then unpaid principal amount
of the Loan (as such terms are defined in the Credit Agreement) as may be
borrowed by the Borrower from the Bank under the Credit Agreement. All Loans and
all payments of principal shall be recorded by the holder in its records which
records shall be conclusive evidence of the subject matter thereof, absent
manifest error.
The Borrower further promises to pay to the order of the Bank interest on
the aggregate unpaid principal amount hereof from time to time outstanding from
the date hereof until paid in full at the rates per annum which shall be
determined in accordance with the provisions of the Credit Agreement. Accrued
interest shall be payable on the dates specified in the Credit Agreement.
All payments of principal and interest under this Note shall be made in
lawful money of the United States of America in immediately available funds at
the Bank's office at Corporate Loan Servicing (PL-7), ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, or at such other place as may be designated by the Bank
to the Borrower in writing.
This Note is the Note referred to in, and evidences indebtedness incurred
under, a Credit Agreement dated as of June 30, 2000 (herein, as it may be
amended, modified or supplemented from time to time, called the "Credit
Agreement") among the Borrower and the Bank to which Credit Agreement reference
is made for a statement of the terms and provisions thereof, including those
under which the Borrower is permitted and required to make prepayments and
repayments of principal of such indebtedness and under which such indebtedness
may be declared to be immediately due and payable.
All parties hereto, whether as makers, endorsers or otherwise, severally
waive presentment, demand, protest and notice of dishonor in connection with
this Note.
This Note is made under and governed by the internal laws of the State of
Oregon.
STANCORP FINANCIAL GROUP, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------
Title: AVP, Controller & Treasurer
------------------------------
1
EXHIBIT B
SUBSIDIARY GUARANTY
GUARANTY, dated as of June 30, 2000 (as amended, modified or supplemented
from time to time, this "Guaranty"), made by each of the undersigned (each, a
"Guarantor" and, collectively, the "Guarantors"). Except as otherwise defined
herein, terms used herein and defined in the Credit Agreement (as defined below)
shall be used herein as therein defined.
W I T N E S S E T H:
WHEREAS, StanCorp Financial Group, Inc. (the "Borrower") and U.S. Bank
National Association (the "Bank"), have entered into a Credit Agreement, dated
as of June 30, 2000 providing for the making of Loans and the issuance of
Letters of Credit as contemplated therein (as used herein, the term "Credit
Agreement" means the Credit Agreement described above in this paragraph, as the
same may be amended, modified, extended, renewed, replaced or supplemented from
time to time, and including any agreement extending the maturity of, refinancing
or restructuring all or any portion of the Indebtedness under such agreement or
any successor agreement).
WHEREAS, each Guarantor is a Subsidiary of the Borrower and each Guarantor
and the Borrower are operated as one consolidated business entity and are
directly dependent upon each other for and in connection with their respective
financial resources;
WHEREAS, it is a condition to the making of Loans and the issuance of
Letters of Credit under the Credit Agreement that each Guarantor shall have
executed and delivered this Guaranty; and
WHEREAS, each Guarantor will obtain direct and indirect economic, financial
and other benefits from the incurrence of Loans by the Borrower and the issuance
of Letters of Credit under the Credit Agreement and, accordingly, desires to
execute this Guaranty in order to satisfy the conditions described in the
preceding paragraph and to induce the Bank to make Loans and issue Letters of
Credit for the account of the Borrower;
NOW, THEREFORE, in consideration of the foregoing and other benefits
accruing to each Guarantor, the receipt and sufficiency of which are hereby
acknowledged, each Guarantor hereby makes the following representations and
warranties to the Bank and hereby covenants and agrees with the Bank as follows:
1. As used herein, the term "Guaranteed Obligations" means (x) the
principal of and interest on the Note issued by, and the Loan made to, the
Borrower under the Credit Agreement and all Letter of Credit Obligations and (y)
all other obligations (including obligations which, but for the automatic stay
under Section 362(a) of the Bankruptcy Code, would become due) and
2
liabilities owing by the Borrower to the Bank under the Credit Agreement
(including, without limitation, indemnities, fees and interest thereon) whether
now existing or hereafter incurred under, arising out of or in connection with
the Credit Agreement or any other Loan Document and the due performance and
compliance with the terms of the Loan Documents by the Borrower.
2. Notwithstanding any other term or provision of this Guaranty, the
liability of (a) Standard Insurance Company hereunder shall be limited to the
amount of Guaranteed Obligations in existence on the date an Event of Default
occurs which is not subsequently cured, less twenty million dollars
($20,000,000), plus interest thereon from such date until paid at the highest
rate of interest which any outstanding Advance under the Note bears, as such
rate may vary from time to time, and (b) StanCorp Mortgage Investors, LLC
hereunder shall be unlimited.
3. Each Guarantor, jointly and severally, irrevocably and unconditionally
guarantees to the Bank the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of the Guaranteed Obligations to
the extent provided herein. Each Guarantor understands, agrees and confirms that
the Bank may enforce this Guaranty against each Guarantor without proceeding
against any other Guarantor, the Borrower, against any security for the
Guaranteed Obligations, or under any other guaranty covering all or a portion of
the Guaranteed Obligations.
4. Additionally, each Guarantor, jointly and severally, unconditionally and
irrevocably, guarantees to the extent provided herein the payment of any and all
Guaranteed Obligations of the Borrower to the Bank whether or not due or payable
by the Borrower upon the occurrence in respect of the Borrower of an Event of
Default, and unconditionally and irrevocably, jointly and severally, promises to
pay such Guaranteed Obligations to the Bank, on order, or on demand, in lawful
money of the United States.
5. The liability of each Guarantor hereunder is exclusive and independent
of any security for or other guaranty of the Guaranteed Obligations of the
Borrower whether executed by such Guarantor, any other Guarantor, any other
guarantor or by any other party, and the liability of each Guarantor hereunder
shall not be affected or impaired by (a) any direction as to application of
payment by the Borrower or by any other party, (b) any other continuing or other
guaranty, undertaking or maximum liability of a guarantor or of any other party
as to the Guaranteed Obligations of the Borrower, (c) any payment on or in
reduction of any such other guaranty or undertaking, (d) any termination of, or
increase, decrease or change in, personnel by the Borrower or (e) any payment
made to Bank on the Guaranteed Obligations which Bank repays the Borrower
pursuant to court order in any bankruptcy, reorganization, arrangement,
moratorium or other debtor relief proceeding, and each Guarantor waives any
right to the deferral or modification of its obligations hereunder by reason of
any such proceeding.
6. The obligations of each Guarantor hereunder are independent of the
obligations of any other Guarantor, any other guarantor or the Borrower, and a
separate action or actions may be brought and prosecuted against each Guarantor
whether or not action is brought against any
3
other Guarantor, any other guarantor or the Borrower and whether or not any
other Guarantor, any other guarantor of the Borrower or the Borrower be joined
in any such action or actions. Each Guarantor waives, to the fullest extent
permitted by law, the benefit of any statute of limitations affecting its
liability hereunder or the enforcement thereof. Any payment by the Borrower or
other circumstance which operates to toll any statute of limitations as to the
Borrower shall operate to toll the statute of limitations as to each Guarantor.
7. Each Guarantor hereby waives (to the fullest extent permitted by
applicable law) notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and waives promptness, diligence, presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by the Bank against, and any other
notice to, any party liable thereon (including such Guarantor or any other
Guarantor or guarantor or the Borrower).
8. Bank may at any time and from time to time without the consent of, or
notice to, any Guarantor, without incurring responsibility to such Guarantor,
without impairing or releasing the obligations of such Guarantor hereunder, upon
or without any terms or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or change or
extend the time of payment of, renew, increase, accelerate or alter, any of
the Guaranteed Obligations, any security therefor, or any liability
incurred directly or indirectly in respect thereof, and the guaranty herein
made shall apply to the Guaranteed Obligations as so changed, extended,
renewed or altered;
(b) sell, exchange, release, surrender, realize upon or otherwise deal
with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or howsoever securing, the Guaranteed
Obligations or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the Borrower,
any Guarantor or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations, any security
therefor or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and may subordinate
the payment of all or any part thereof to the payment of any liability
(whether due or not) of the Borrower to creditors of the Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Bank regardless of what
liabilities of the Borrower remain unpaid;
4
(f) consent to or waive any breach of, or any act, omission or default
under the Loan Documents or any of the instruments or agreements referred
to therein, or otherwise amend, modify or supplement the Loan Documents or
any of such other instruments or agreements; and/or
(g) act or fail to act in any manner referred to in this Guaranty which
may deprive such Guarantor of its right to subrogation against the Borrower
to recover full indemnity for any payments made pursuant to this Guaranty.
9. No invalidity, irregularity or unenforceability of all or any part of
the Guaranteed Obligations or of any security therefor shall affect, impair or
be a defense to this Guaranty, and this Guaranty shall be primary, absolute and
unconditional notwithstanding the occurrence of any event or the existence of
any other circumstances which might constitute a legal or equitable discharge of
a surety or guarantor except payment in full of the Guaranteed Obligations.
10. This Guaranty is a continuing one and all liabilities to which it
applies or may apply under the terms hereof shall be conclusively presumed to
have been created in reliance hereon. No failure or delay on the part of Bank in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
expressly specified are cumulative and not exclusive of any rights or remedies
which the Bank would otherwise have. No notice to or demand on any Guarantor in
any case shall entitle such Guarantor to any other further notice or demand in
similar or other circumstances or constitute a waiver of the rights of Bank to
any other or further action in any circumstances without notice or demand. It is
not necessary for Bank to inquire into the capacity or powers of the Borrower or
any of its Subsidiaries or the officers, directors, partners or agents acting or
purporting to act on its behalf, and any indebtedness made or created in
reliance upon the professed exercise of such powers shall be guaranteed
hereunder.
11. Any indebtedness of the Borrower now or hereafter held by any Guarantor
is hereby subordinated to the indebtedness of the Borrower to the Bank; and such
indebtedness of the Borrower to any Guarantor, if the Bank, after an Event of
Default has occurred and is continuing, so requests, shall be collected,
enforced and received by such Guarantor as trustee for the Bank and be paid over
to the Bank on account of the indebtedness of the Borrower to the Bank, but
without affecting or impairing in any manner the liability of such Guarantor
under the other provisions of this Guaranty. Prior to the transfer by any
Guarantor of any note or negotiable instrument evidencing any indebtedness of
the Borrower to such Guarantor, such Guarantor shall ▇▇▇▇ such note or
negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Bank that it will not exercise any right of subrogation
which it may at any time otherwise have as a result of this Guaranty (whether
contractual, under Section 509 of the Bankruptcy Code or otherwise) until all
Guaranteed Obligations have been irrevocably paid in full in cash.
5
12. (a) Each Guarantor waives any right (except as shall be required by
applicable statute or law and cannot be waived) to require the Bank to: (i)
proceed against the Borrower, any other Guarantor, any other guarantor of the
Borrower or any other party; (ii) proceed against or exhaust any security held
from the Borrower, any other Guarantor, any other guarantor of the Borrower or
any other party; or (iii) pursue any other remedy in the Bank's power
whatsoever. Each Guarantor waives any (to the fullest extent permitted by
applicable law) defense based on or arising out of any defense of the Borrower,
any other Guarantor, any other guarantor of the Borrower or any other party
other than payment in full of the Guaranteed Obligations, including, without
limitation, any defense based on or arising out of the disability of the
Borrower, any other Guarantor, any other guarantor of the Borrower or any other
party, or the unenforceability of the Guaranteed Obligations or any part thereof
from any cause, or the cessation from any cause of the liability of the Borrower
other than payment in full of the Guaranteed Obligations. The Bank may, at its
election, foreclose on any security held by the Bank by one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable (to the extent such sale is permitted by applicable law), or exercise
any other right or remedy the Bank may have against the Borrower or any other
party, or any security, without affecting or impairing in any way the liability
of any Guarantor hereunder except to the extent the Guaranteed Obligations have
been paid in full. Each Guarantor waives any defense arising out of any such
election by the Bank, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of such
Guarantor against the Borrower or any other party or any security.
(b) Each Guarantor waives (to the fullest extent permitted by
applicable law) all presentments, demands for performance, protests and notices,
including, without limitation, notices of nonperformance, notices of protest,
notices of dishonor, notices of acceptance of this Guaranty, and notices of the
existence, creation or incurring of new or additional indebtedness. Each
Guarantor assumes all responsibility for being and keeping itself informed of
the Borrower's financial condition and assets, and of all other circumstances
bearing upon the risk of nonpayment of the Guaranteed Obligations and the
nature, scope and extent of the risks which such Guarantor assumes and incurs
hereunder, and agrees that the Bank shall have no duty to advise any Guarantor
of information known to them regarding such circumstances or risks.
13. In order to induce the Bank to make Loans and issue Letters of Credit
pursuant to the Credit Agreement, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor and each of its Subsidiaries (i) is a duly organized
and validly existing corporation and is (if applicable) in good standing
under the laws of the jurisdiction of its organization, and has the
corporate power and authority to own its property and assets and to
transact the business in which it is engaged and presently proposes to
engage and (ii) is duly qualified and is authorized to do business and is
in good standing in all jurisdictions where it is required to be so
qualified, except for failures to be so qualified which, individually or in
the aggregate could not reasonably be expected to have a material adverse
effect on the business, assets, liabilities, operations,
6
properties, condition (financial or otherwise) or prospects of such
Guarantor or such Guarantor and its Subsidiaries taken as a whole.
(b) Such Guarantor has the corporate power and authority to execute,
deliver and carry out the terms and provisions of this Guaranty and each
other Loan Document to which it is a party and has taken all necessary
corporate action to authorize the execution, delivery and performance by it
of each such Loan Document. Such Guarantor has duly executed and delivered
this Guaranty and each other Loan Document to which it is a party and each
such Loan Document constitutes the legal, valid and binding obligation of
such Guarantor enforceable in accordance with its terms, except to the
extent that the enforceability hereof or thereof may be limited by
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
by equitable principles (regardless of whether enforcement is sought in
equity or at law).
(c) Neither the execution, delivery or performance by such Guarantor
of this Guaranty or any other Loan Document to which it is a party, nor
compliance by it with the terms and provisions hereof or thereof (i) will
contravene any applicable provision of any law, statute, rule or
regulation, or any order, writ, injunction or decree of any court or
governmental instrumentality, (ii) will conflict or be inconsistent with or
result in any breach of, any of the terms, covenants, conditions or
provisions of, or constitute a default under, or (other than in favor of
the Bank) result in the creation or imposition of (or the obligation to
create or impose) any Lien upon any of the property or assets of such
Guarantor or any of its Subsidiaries pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement, credit agreement or any
other agreement or other instrument to which such Guarantor or any of its
Subsidiaries is a party or by which it or any of its property or assets is
bound or to which it may be subject or (iii) will violate any provision of
the articles or certificate of incorporation or by-laws or other governing
instrument) of such Guarantor or any of its Subsidiaries.
(d) No order, consent, approval, license, authorization or validation
of, or filing, recording or registration with (except as have been obtained
or made prior to the initial Advance and are in full force and effect), or
exemption by, any governmental or public body or authority, or any
subdivision thereof, is required to authorize, or is required in connection
with, (i) the execution, delivery and performance of this Guaranty or any
other Loan Document to which such Guarantor is a party, or (ii) the
legality, validity, binding effect or enforceability of this Guaranty or
any other Loan Document to which such Guarantor is a party.
(e) There are no actions, suits or proceedings pending or, to the best
knowledge of the Guarantor, threatened (i) with respect to this Guaranty,
(ii) with respect to any Indebtedness of the Guarantor or any of its
Subsidiaries, (iii) that could reasonably be expected to have a material
adverse effect on the business, assets, liabilities, operations,
properties, condition (financial or otherwise) or prospects of such
Guarantor or
7
such Guarantor and its Subsidiaries taken as a whole, or (iv) that could
have a material adverse effect on the rights or remedies of the Bank or on
the ability of such Guarantor to perform its respective obligations to the
Bank hereunder and under the other Loan Documents to which it is a party.
14. Each Guarantor covenants and agrees that on and after the date hereof
and until the termination of the Commitment and when no Note or Letter of Credit
remains outstanding and all Guaranteed Obligations have been paid in full, such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in the Credit Agreement, and so that
no Default or Event of Default, is caused by the actions of such Guarantor or
any of its Subsidiaries.
15. The Guarantors hereby jointly and severally agree to pay all reasonable
out-of-pocket costs and expenses of the Bank in connection with the enforcement
of this Guaranty and any amendment, waiver or consent relating hereto
(including, without limitation, the reasonable fees and disbursements of counsel
(including in-house counsel) employed by the Bank at trial and on appeal).
16. This Guaranty shall be binding upon each Guarantor and its successors
and assigns and shall inure to the benefit of the Bank and its successors and
assigns.
17. Neither this Guaranty nor any provision hereof may be changed, waived,
discharged or terminated except with the written consent of each Guarantor
directly affected thereby and the Bank.
18. Each Guarantor acknowledges that an executed (or conformed) copy of
each of the Loan Documents has been made available to its principal executive
officers and such officers are familiar with the contents thereof.
19. In addition to any rights now or hereafter granted under applicable law
and not by way of limitation of any such rights, upon the occurrence and during
the continuance of an Event of Default (such term to mean and include any "Event
of Default" as defined in the Credit Agreement continuing after any applicable
grace period and shall in any event, include, without limitation, any payment
default on any of the Guaranteed Obligations after giving effect to any grace
period applicable thereto), the Bank is hereby authorized at any time or from
time to time, without notice to any Guarantor or to any other Person, any such
notice being expressly waived, to set off and to appropriate and apply any and
all deposits (general or special) and any other indebtedness at any time held or
owing by the Bank to or for the credit or the account of such Guarantor, against
and on account of the obligations and liabilities of such Guarantor to the Bank
under this Guaranty, irrespective of whether or not the Bank shall have made any
demand hereunder and although said obligations, liabilities, deposits or claims,
or any of them, shall be contingent or unmatured.
8
20. All notices, requests, demands or other communications pursuant hereto
shall be deemed to have been duly given or made when delivered to the Person to
which such notice, request, demand or other communication is required or
permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of the Bank, as provided in the Credit Agreement, and (ii) in
the case of any Guarantor, at its address set forth opposite its signature
below; or in any case at such other address as any of the Persons listed above
may hereafter notify the others in writing.
21. If claim is ever made upon the Bank for repayment or recovery of any
amount or amounts received in payment or on account of any of the Guaranteed
Obligations and the Bank repays all or part of said amount by reason of (i) any
judgment, decree or order of any court or administrative body having
jurisdiction over such payee or any of its property or (ii) any settlement or
compromise of any such claim effected by the Bank with any such claimant
(including the Borrower), then and in such event each Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon
such Guarantor, notwithstanding any revocation hereof or the cancellation of any
Note or other instrument evidencing any liability of the Borrower, and such
Guarantor shall be and remain liable to the aforesaid payees hereunder for the
amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.
22. Any acknowledgment or new promise, whether by payment of principal or
interest or otherwise and whether by the Borrower or other Persons liable in
respect of the Guaranteed Obligations (including any Guarantor), with respect to
any of the Guaranteed Obligations shall, if the statute of limitations in favor
of any Guarantor against the Bank shall have commenced to run, toll the running
of such statute of limitations, and if the period of such statute of limitations
shall have expired, prevent the operation of such statute of limitations.
23. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE CREDITORS AND
OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAW OF THE STATE OF OREGON. Any legal action or proceeding with respect
to this Guaranty or any other Loan Document to which such Guarantor is a party
may be brought in the courts of the State of Oregon or of the United States of
America for the District of Oregon, and by execution and delivery of this
Guaranty, each Guarantor hereby irrevocably accepts for itself and in respect of
its property, generally and unconditionally, the exclusive jurisdiction of the
aforesaid courts. Each Guarantor hereby further irrevocably waives any claim
that any such courts lack jurisdiction over such Guarantor, and agrees not to
plead or claim, in any legal action or proceeding with respect to this Guaranty
or any other Loan Document to which such Guarantor is a party brought in any of
the aforesaid courts, that any such court lacks jurisdiction over such
Guarantor.
(b) Each Guarantor hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Guaranty or any other Loan
Document brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in
9
any such court that such action or proceeding brought in any such court has been
brought in an inconvenient forum.
24. This Guaranty may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument.
25. Guarantor or Bank may require that any and all disputes, claims,
counterclaims, and defenses including those based on or arising from any alleged
torts relating in any way to this Guaranty be settled by binding arbitration in
accordance with Article XI of the Credit Agreement.
26. WITHOUT LIMITING PARAGRAPH 25 ABOVE, EACH GUARANTOR HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
27. All payments made by any Guarantor hereunder will be made without
setoff, counterclaim or other defense.
28. (a) It is the desire and intent of each Guarantor and the Bank that
this Guaranty shall be enforced against each Guarantor to the fullest extent
permissible under the laws and public policies applied in each jurisdiction in
which enforcement is sought.
(b) If, however, and to the extent, that the obligations of any
Guarantor under this Guaranty shall be adjudicated to be invalid or
unenforceable for any reason (including, without limitation, because of any
applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of the Guaranteed Obligations of such Guarantor (but
not the Guaranteed Obligations of any other Guarantor unless such other
Guarantor or Guarantors are individually subject to the circumstances covered by
this Section 28) shall be deemed to be reduced and the affected Guarantor shall
pay the maximum amount of the Guaranteed Obligations which would be permissible
under applicable law.
29. If litigation or arbitration is commenced to enforce or construe any
term of this Guaranty, the prevailing party shall be entitled to recover from
the other party all costs thereof, including but not limited to such sums as the
court or arbitrator(s) may adjudge reasonable as attorney fees at trial, in any
appellate proceeding, proceeding under the bankruptcy code or receivership and
post-judgment attorney fees incurred in enforcing any judgment.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be executed
and delivered as of the date first above written.
10
STANDARD INSURANCE COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice-President & CFO
Address: ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
STANCORP MORTGAGE INVESTORS, LLC
By: Standard Management, Inc.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President, Standard Management, Inc.
Address: ▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
ACCEPTED AND AGREED TO:
U.S. BANK NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
Title: Vice President, Oregon Commercial Banking
Address: 4th Floor
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
11
EXHIBIT C
Compliance Certificate
This Compliance Certificate is executed and delivered by StanCorp Financial
Group, Inc. ("Borrower") to U.S. Bank National Association ("Bank") pursuant to
the requirements of the Credit Agreement dated as of June 30, 1999 between
Borrower and Bank ("Credit Agreement"). Any capitalized terms used herein and
not defined herein shall have the meanings given to such terms in the Credit
Agreement. This Compliance Certificate covers Borrower's fiscal quarter ended
March 31, 2000.
1. FINANCIAL COVENANTS. Attached are the calculations showing whether
Borrower was in compliance with Sections 9.7, 9.11 and 9.12 of the Credit
Agreement as of the end of the fiscal period covered by this Compliance
Certificate. Each such calculation is derived from the books and records of
Borrower and correctly reflects whether Borrower is in compliance with the
applicable sections of the Credit Agreement.
2. CONTINGENT LIABILITIES. There were no material contingent obligations
required to be disclosed by Section 8.1(e) of the Credit Agreement, except as
included in the financial covenants above.
3. DEFAULTS. A review of the activities of Borrower during the fiscal
period covered by this Compliance Certificate has been made under the
supervision of the undersigned with a view to determining whether during such
fiscal period Borrower performed and observed all of its obligations under the
Credit Agreement. To the best knowledge of the undersigned after reasonable
investigation, all covenants and conditions of Borrower have been performed and
observed during such fiscal period and no Default has occurred and is continuing
under the Credit Agreement.
4. ADVERSE EVENTS. To the best knowledge of the undersigned after
reasonable investigation, no Adverse Event has occurred with regard to
Borrower's business, assets, operations or condition, financial or otherwise,
since the last Compliance Certificate was delivered.
5. DATE. This Compliance Certificate is executed on June 26, 2000.
Borrower: StanCorp Financial Group, Inc.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Asst. Vice President, Controller &
-----------------------------------
Treasurer
---------
EXHIBIT D
Opinion of Counsel to the Borrower
August 10, 2000
US Bank National Association
▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
RE: Opinion of Counsel
Ladies and Gentlemen:
I act as counsel to StanCorp Financial Group, Inc. (the "Borrower"), and I
am delivering to you this opinion of counsel upon which you may rely in
connection with a Credit Agreement dated as of June 30, 2000, entered into among
the Borrower and US Bank National Association (the "Credit Agreement") and the
transactions and other loan documents described herein. Unless otherwise defined
herein, capitalized terms used herein shall have the respective meanings
assigned to such terms in the Credit Agreement.
In so acting, I, as counsel for the Borrower, have made such factual
inquiries, and have examined or caused to be examined such questions of law as I
have considered necessary or appropriate for the purposes of this opinion and,
upon the basis of such inquires and examinations, I advise you that, in my
opinion:
1) The Borrower is a corporation duly organized, and validly existing
under the laws of the State of Oregon, and it is duly qualified and in
good standing as a foreign corporation in all jurisdictions in which
its respective present operations or properties require such
qualification.
2) The Borrower has full corporate power and authority to own and operate
its properties and assets, carry on its business as presently
conducted, and enter into and perform its obligations under the Loan
Documents to which it is a party.
3) The execution and delivery of the Loan Documents to which the Borrower
is a party, the performance by the Borrower of its obligations
thereunder, and
the borrowing by the Borrower under the Credit Agreement, have been
duly authorized by all necessary corporate action and all said Loan
Documents have been executed and delivered on behalf of the Borrower
and constitute valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms.
4) There is no provision in the Borrower's Articles of Incorporation or
Bylaws nor any provision in any indenture, mortgage, contract, or
agreement to which the Borrower is a party, or by which it or its
properties may be bound, nor any law, statute, rule, or regulation,
nor any writ, order, or decision of any court or governmental
instrumentality binding on the Borrower which would be contravened by
the execution and delivery of the Loan Documents to which the Borrower
is a party, nor do any of the foregoing prohibit the Borrower's
performance of any term, provision, condition, covenant, or any other
obligation of the Borrower contained therein.
5) There are no actions, suits, or proceedings pending, or to the best of
my knowledge after due inquiry, threatened against or affecting the
Borrower before any court or arbitrator or by or before any
administrative agency, governmental authority, which, if adversely
determined, could constitute an Adverse Event.
6) I further advise you that to date no claims or charges have been
asserted against the Borrower
7) Neither the making nor performance of the Loan Documents nor the
borrowing(s) under the Credit Agreement requires the consent or
approval of any governmental instrumentality.
8) The Borrower is not a "holding company", a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as
amended.
9) The Borrower is not an "investment company" or a company "controlled"
by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended.
10) The Borrower is not engaged in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U of the Board of Governors of the Federal Reserve
System), and, to the best of my knowledge after due inquiry, no part
of the proceeds of any loan under the Credit Agreement will be used to
purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Vice President, General Counsel and
Corporate Secretary
EXHIBIT E
Material Actions, Suits, and Proceedings (Section 7.6)
As of June 30, 2000, there is no material litigation.
EXHIBIT F
Material Contingent Liabilities (Section 7.6)
As of June 30, 2000, there are no material contingent liabilities.
EXHIBIT G
Subsidiaries (Section 7.16)
STANCORP FINANCIAL GROUP, INC.
(AS OF JUNE 30, 2000)
COMPANY NAME INCORPORATION OWNERSHIP DIRECT PARENT/EQUITY OWNER
LOCATION PERCENTAGE
-------------------------------------------------------------------------------
Standard Insurance Oregon 100% StanCorp Financial Group, Inc.
Company
-------------------------------------------------------------------------------
Standard Management, Oregon 100% StanCorp Financial Group, Inc.
Inc.
-------------------------------------------------------------------------------
StanCorp Mortgage Oregon 99% StanCorp Financial Group, Inc.
Investors, LLC (1)
-------------------------------------------------------------------------------
StanCorp Real Estate Oregon 99% StanCorp Financial Group, Inc.
Investors, LLC (1)
-------------------------------------------------------------------------------
StanCorp Investment Oregon 100% StanCorp Financial Group, Inc.
Advisors, Inc.
-------------------------------------------------------------------------------
Standard Life Oregon 100% StanCorp Financial Group, Inc.
Insurance Company of
New York
-------------------------------------------------------------------------------
400 Health Club, Inc. Oregon 100% Standard Management, Inc.
-------------------------------------------------------------------------------
Standard Assigned Oregon 100% Standard Management, Inc.
Benefits, Inc.
-------------------------------------------------------------------------------
StanWest Equities, Inc. Oregon 100% Standard Management, Inc.
-------------------------------------------------------------------------------
Entities are corporations unless otherwise noted: (1) = Limited Liability
Company
EXHIBIT H
Partnerships and Joint Ventures (Section 7.17)
STANCORP FINANCIAL GROUP, INC.
(AS OF JUNE 30, 2000)
COMPANY NAME INCORPORATION OWNERSHIP DIRECT PARENT/EQUITY OWNER
LOCATION PERCENTAGE
--------------------------------------------------------------------------------
Alder House, LP (2) Oregon 33% Standard Insurance Company
--------------------------------------------------------------------------------
Gold/▇▇▇▇ ▇▇▇▇▇ Oregon 19.8% Standard Insurance Company
Building, LP (2)
--------------------------------------------------------------------------------
Oregon Equity Fund, Oregon 24.8% Standard Insurance Company
LP (2)
--------------------------------------------------------------------------------
Oregon Equity Fund Oregon 29.1% Standard Insurance Company
II, LP (2)
--------------------------------------------------------------------------------
Oregon Equity Fund Oregon 19.2% Standard Insurance Company
III, LP (2)
--------------------------------------------------------------------------------
Canyon Park Washington 75% Standard Insurance Company
Development (2)
--------------------------------------------------------------------------------
Hillsboro Hotel Washington 21.6% Standard Insurance Company
Association (2)
--------------------------------------------------------------------------------
Portland West CYM, Washington 20.3% Standard Insurance Company
LLC (1)
--------------------------------------------------------------------------------
Entities are corporations unless otherwise noted: (1) = Limited Liability
Company; (2) = Limited Partnership