1
EXHIBIT 10.50
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REVOLVING CREDIT AGREEMENT
DATED AS OF NOVEMBER 13, 1998
AMONG
GAINSCO, INC.,
GAINSCO SERVICE CORP.
AND
BANK ONE, TEXAS, NATIONAL ASSOCIATION
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REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT (this "AGREEMENT") is entered into as
of the 13th day of November, 1998 by and between GAINSCO, INC., a Texas
corporation ("GAINSCO"), and GAINSCO SERVICE CORP., a Texas corporation ("GSC")
(each a "BORROWER" and collectively, "BORROWERS"), and BANK ONE, TEXAS,
NATIONAL ASSOCIATION, a national banking association ("LENDER").
W I T N E S S E T H:
Borrowers have requested that Lender provide Borrowers with a
revolving credit facility to fund operating capital and for other lawful
general corporate purposes.
Lender is willing to provide such a facility to Borrowers upon the
terms and subject to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and for other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITION OF TERMS
1.1. DEFINITIONS. As used in this Agreement, all exhibits and
schedules hereto and in any note, certificate, report, or other Loan Documents
made or delivered pursuant to this Agreement, the following terms have the
respective meanings assigned to them in this SECTION 1 or in the Section or
recital referred to below:
"ACQUIRED COMPANIES" means National Specialty Lines, Inc., De La Torre
Insurance Adjusters, Inc. and Lalande Financial Group, Inc.
"ACQUISITION/SALE CAP" has the meaning set forth in SECTION 7.8.
"ADJUSTED EURODOLLAR RATE" means, with respect to any Interest Period,
an interest rate per annum (rounded upwards, if necessary, to the next 1/16th
of 1%) equal to the quotient of (a) the Eurodollar Rate with respect to such
Interest Period, divided by (b) the remainder of 1.00 minus the Eurodollar
Reserve Requirement in effect on such date.
"ADVANCE" means (a) the disbursement by Lender of a sum or sums lent
to any Borrower pursuant to this Agreement, (b) the conversion of a Borrowing
from one type of Borrowing to another type of Borrowing pursuant to SECTION
2.13, and (c) the continuation of a Eurodollar Borrowing to a new Interest
Period pursuant to SECTION 2.13.
"ADVANCE DATE" has the meaning set forth in SECTION 2.2(a).
"AFFILIATE" of any Person means any other Person directly or
indirectly, controlling, controlled by, or under common control with, such
Person.
REVOLVING CREDIT AGREEMENT - PAGE 1
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(GAINSCO/Bank One)
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"AGREEMENT" means this Revolving Credit Agreement, including the
SCHEDULES and EXHIBITS hereto, as the same may be renewed, extended, amended,
or modified from time-to-time.
"APPLICABLE MARGIN" means, at the time of determination thereof, the
interest margin over the Base Rate or the Adjusted Eurodollar Rate, as the case
may be, as follows:
APPLICABLE MARGIN APPLICABLE MARGIN
BASE RATE EURODOLLAR
BORROWINGS BORROWINGS
----------------- -----------------
-0-% 1.75%
"APS" means Agents Processing Systems, Inc., a Texas corporation.
"BASE RATE" means the variable rate of interest established from
time-to-time by Lender as its general reference rate of interest (which rate of
interest may not be the lowest, best or most favorable rate charged by Lender
on loans to its customers). Each change in the Base Rate shall become effective
without prior notice to Borrowers automatically as of the opening of business
on the date of such change in the Base Rate.
"BASE RATE BORROWING" means any portion of the Principal Debt with
respect to which the interest rate is calculated by reference to the Base Rate.
"BORROWING" means a Eurodollar Borrowing or a Base Rate Borrowing.
"BUSINESS DAY" means (a) for all purposes, any day other than a
Saturday, Sunday, or day on which national banks are authorized to be closed
under the laws of the State of Texas, and (b) for purposes of any Eurodollar
Borrowing, a day that satisfies the requirements of CLAUSE (A) and is a day
when commercial banks are open for domestic or international business in
London.
"CAPITAL EXPENDITURES" means expenditures by any Person that, in
conformity with GAAP, are or are required to be included in the property, plant
or equipment reflected in the balance sheet of such Person.
"CAPITAL LEASE" means, for any Person, any capital lease or sublease
that has been (or under GAAP should be) capitalized on a balance sheet of such
Person.
"CASH EQUIVALENT INVESTMENT" means any Investment (a) in direct
obligations of the United States of America or any agency thereof, or
obligations fully guaranteed by the United States of America or any agency
thereof, (b) commercial paper rated in the highest grade by two (2) or more
national credit rating agencies and maturing not more than 180 days from the
date of creation thereof, (c) publicly traded bonds rated BBB- or higher by
Standard & Poor's Rating Service and Baa3 or higher by ▇▇▇▇▇'▇ Investors
Services, Inc. and (d) time deposits with, and certificates of deposit and
bankers' acceptances issued by, commercial banks in the United States,
provided, however, that any time deposits, certificates of deposit or bankers'
acceptances
REVOLVING CREDIT AGREEMENT - PAGE 2
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(GAINSCO/Bank One)
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in excess of $100,000 may only be with, or issued by, Lender or any United
States bank having unimpaired capital and surplus aggregating at least
$1,000,000,000.00.
"CASH INTEREST EXPENSE" means (without duplication), for the Companies
for any period, total interest expense in respect of Indebtedness actually paid
or that is payable during such period, including, without limitation, all
commissions, discounts, and other fees and charges with respect to letters of
credit, but excluding interest expense not payable in cash, all as determined
in accordance with GAAP.
"CHANGE IN CONTROL" means after the date of this Agreement any person
or group of persons (within the meaning of Section 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
relating to such sections) shall, without first obtaining the written consent
of Lender, have acquired beneficial ownership (within the meaning of Rules
13d-3 and 13d-5 promulgated by the Commission pursuant to the Exchange Act),
directly or indirectly, of 25% or more, on a fully diluted basis, of the
outstanding shares of Common Stock.
"CLOSING DATE" means November 13, 1998.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated and rulings issued thereunder.
"COLLATERAL" has the meaning set forth in SECTION 3.
"COLLATERAL DOCUMENTS" means all security agreements, pledge
agreements, guaranty agreements, and other agreements or documents executed or
delivered to secure repayment of the Obligation or any part thereof.
"COMMITMENT USAGE" means, as of any date, the Principal Debt.
"COMMON STOCK" means the common stock of GAINSCO, $.10 par value per
share.
"COMPANIES" means Borrowers, the Insurance Subsidiaries and the
Grantor Subsidiaries and "COMPANY" means any one of the Companies.
"COMPANY ACTION LEVEL RISK-BASED CAPITAL" means, as to any Insurance
Subsidiary, the greater of such Insurance Subsidiary's Company Action Level
Risk-Based Capital (i) as defined in the Risk-Based Capital for Insurers Model
Act adopted by the NAIC and (ii) as determined by any applicable Insurance
Regulatory Authority.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
of EXHIBIT A, executed by an authorized officer of each Borrower, stating that
a review of the activities of the Companies during the subject period has been
made under such Person's supervision and that the Companies have performed each
and every obligation and covenant contained herein and the other Loan Documents
and are not in default under any of the same or, if any such default shall have
occurred, then specifying the nature and status thereof, and setting forth a
computation in
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(GAINSCO/Bank One)
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reasonable detail as of the end of the period covered by such statements, of
compliance with SECTIONS 7.15 through 7.22.
"CONSOLIDATED NET INCOME" means, for GAINSCO and its Subsidiaries
determined on a consolidated basis, for any period, consolidated net earnings
(after income taxes) determined in accordance with GAAP.
"CONSOLIDATED NET WORTH" means, as of any date, the total
shareholder's equity of GAINSCO and its Subsidiaries determined on a
consolidated basis in accordance with GAAP but excluding net unrealized capital
gains.
"CONSOLIDATED REVENUE" means, for GAINSCO and its Subsidiaries
determined on a consolidated basis, for any period, the total revenues of such
companies determined in accordance with GAAP but excluding net realized capital
gains.
"CONSTITUENT DOCUMENTS" means, with respect to any Person, its
articles or certificate of incorporation, bylaws, partnership agreements,
organizational documents, limited liability company agreements, trust
agreement, or such other document as may govern such Person's formation,
organization, and management.
"CONTRACT RATE" means (a) with respect to a Base Rate Borrowing, the
Base Rate plus the Applicable Margin, and (b) with respect to a Eurodollar
Borrowing, the Adjusted Eurodollar Rate plus the Applicable Margin.
"CURRENT DATE" means a date within 15 days prior to the Closing Date.
"DEBTOR LAWS" means all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization,
or similar laws from time-to-time in effect affecting the rights of creditors
generally.
"DIVIDENDS" means, with respect to any Stock issued by any Person, (a)
the retirement, redemption, purchase, or other acquisition for value of such
Stock by such Person, (b) the declaration or payment of any dividend or
distribution on or with respect to such Stock by such Person, and (c) any other
payment by such Person with respect to such Stock.
"EBITDA" means (without duplication), for any Person for any period,
the sum of (a) net income after taxes, (b) Cash Interest Expense for such
period, (c) Federal, state and local income taxes deducted in determining such
net income, (d) amortization of goodwill and other intangibles (including,
without limitation, deferred financing costs and debt discount) deducted in
determining such net income and (e) depreciation, depletion and obsolescence of
property, in each case, determined in accordance with GAAP.
"ENVIRONMENTAL LAWS" means any Legal Requirements pertaining to air,
emissions, water discharge, noise emissions, solid or liquid waste disposal,
hazardous waste or materials, industrial hygiene, or other environmental,
health, or safety matters or conditions on, under or about real property or any
portion thereof, and similar laws of any Governmental Authority
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having jurisdiction over real property as such Legal Requirements may be
amended or supplemented from time-to-time, and regulations promulgated and
rulings issued pursuant to such laws.
"EQUITY ISSUANCE" means the issuance or sale by any Company of any
Stock, or any options, warrants, or other rights to subscribe for or otherwise
acquire Stock, of such Company.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and published interpretations thereunder.
"ERISA AFFILIATE" means any Subsidiary or trade or business (whether
or not incorporated) which is a member of a group of which any Company is a
member and which is under common control with any Company within the meaning of
Section 414 of the Code.
"EURODOLLAR BORROWING" means any portion of the Principal Debt with
respect to which the interest rate is calculated by reference to the Adjusted
Eurodollar Rate for a particular Interest Period.
"EURODOLLAR RATE" means, for any Eurodollar Borrowing for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of one percent) equal to the rate as shown on the display
designated as "British Bankers Interest Settlement Rates" on the Telerate
System ("TELERATE"), Page 3750 or 3740, or such other page or pages as may
replace such pages on Telerate for the purpose of displaying such rate as the
London interbank offered rate for deposits in Dollars at approximately 11:00
a.m. (London time) two (2) Business Days prior to the first (1st) day of such
Interest Period for a term comparable to such Interest Period. If for any
reason such rate is not available, then such rate shall be the rate
independently determined by Lender from an alternate, substantially similar
independent source available to Lender or shall be calculated by Lender by a
substantially similar methodology as that theretofore used to determine such
rate in Telerate.
"EURODOLLAR RESERVE REQUIREMENT" means, on any day, that percentage
(expressed as a decimal fraction) that is in effect on such day, as provided by
the Board of Governors of the Federal Reserve System (or any successor
governmental body) applied for determining the maximum reserve requirements
(including, without limitation, basic, supplemental, marginal and emergency
reserves) under Regulation D with respect to "Eurocurrency liabilities" as
currently defined in Regulation D, or under any similar or successor regulation
with respect to Eurocurrency liabilities or Eurocurrency funding. Each
determination by Lender of the Eurodollar Reserve Requirement shall, in the
absence of manifest error, be conclusive and binding.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.1.
"FIXED CHARGES COVERAGE RATIO" means the ratio of (a) the sum of (1)
the greater of (A) the Statutory Earnings of GAIC for the four fiscal quarters
ending on the date of determination or (B) 10% of the Statutory Surplus of GAIC
at the end of its fiscal quarter ending on the date of determination, (2) the
EBITDA of all Subsidiaries of GAINSCO that are not Insurance
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Subsidiaries for the four fiscal quarters ending on the date of determination,
(3) GAINSCO's revenues, excluding Dividends received from Subsidiaries, for the
four fiscal quarters ending on the date of determination, and (4) tax sharing
payments received by GAINSCO for the four fiscal quarters ending on the date of
determination minus GAINSCO's expenses and taxes for such four fiscal quarters
to (b) the sum of (A) the projected Cash Interest Expense for the four fiscal
quarters following the date of determination and (B) the scheduled reduction in
the Commitment for the four fiscal quarters following the date of
determination.
"FUNDING LOSS" has the meaning set forth in SECTION 2.15(E).
"GAAP" means those generally accepted accounting principles and
practices, applied on a consistent basis, which are recognized as such by the
American Institute of Certified Public Accountants acting through its
Accounting Principles Board and the Financial Accounting Standards Board and/or
their respective successors and which are applicable in the circumstances as of
the date in question.
"GAIC" means General Agents Insurance Company of America, Inc., an
Oklahoma insurance company.
"GAPFC" means General Agents Premium Finance Company, a Texas
corporation.
"GAINSCO" has the meaning set forth in the first paragraph of this
Agreement.
"GAINSCO PLEDGE AGREEMENT" means the Pledge Agreement by GAINSCO dated
the Closing Date whereby GAINSCO grants to Lender a security interest in, among
other collateral security, all of the issued and outstanding capital stock of
GSC, APS, GAIC, GAPFC and RRA.
"GAINSCO SECURITY AGREEMENT" means the Security Agreement by GAINSCO
dated the Closing Date whereby GAINSCO grants to Lender a security interest in
substantially all of its assets.
"GCMIC" means GAINSCO County Mutual Insurance Company, a Texas mutual
insurance company.
"GOVERNMENTAL AUTHORITY" means, with respect to any Person, any
government (or any political subdivision or jurisdiction thereof), court,
bureau, agency, or other governmental authority having jurisdiction over such
Person or any of its business, operations, or properties. With respect to
Insurance Subsidiaries, Governmental Authority shall include such Insurance
Subsidiaries' Insurance Regulatory Authorities.
"GOVERNMENTAL AUTHORIZATION" means any approval, consent, license,
permit, waiver, or other authorization issued, granted, given, or otherwise
made available by or under the authority of any Governmental Authority or
pursuant to any Legal Requirement.
"GRANTOR SUBSIDIARIES" means the following wholly owned subsidiaries
of GAINSCO: APS, RRA, GAPFC, MGAPFC and the Acquired Companies.
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"GSC" has the meaning set forth in the first paragraph of this
Agreement.
"GSC PLEDGE AGREEMENT" means the Pledge Agreement by GSC dated the
Closing Date whereby GSC grants to Lender a security interest in, among other
things, all of the issued and outstanding capital stock of MGAPFC.
"GSC SECURITY AGREEMENT" means the Security Agreement dated the
Closing Date whereby GSC grants to Lender a security interest in substantially
all of its assets.
"GUARANTY" of any Person means any contract or understanding of such
Person pursuant to which such Person guarantees, or in effect guarantees, any
Indebtedness of any other Person (the "PRIMARY OBLIGOR") in any manner, whether
directly or indirectly, including agreements to assure the holder of the
Indebtedness of the Primary Obligor against loss in respect thereof; provided
that "Guaranty" shall not include endorsements, in the ordinary course of
business, of negotiable instruments or documents for deposit or collection.
"HAZARDOUS MATERIAL" means any hazardous, toxic, or dangerous waste,
substance, or material defined as such in or for the purpose of any
Environmental Law.
"INDEBTEDNESS" means, for any Person, all Liabilities of such Person,
excluding accounts payable, deferred taxes, deferred liabilities, and accrued
expenses in each case incurred in the ordinary course of business and the
payment of which is not past-due (unless payment is being contested in good
faith by appropriate proceedings diligently conducted and for which adequate
reserves are maintained in accordance with GAAP).
"INSURANCE REGULATORY AUTHORITY" means each insurance department or
similar administrative authority or agency which regulates any Insurance
Subsidiary.
"INSURANCE SUBSIDIARIES" means each Subsidiary of Borrowers that is an
operating insurance company including, without limitation, GAIC, MGAIC and
GCMIC.
"INTANGIBLE ASSETS" of any Person means those assets of such Person
which are (a) deferred assets, other than prepaid insurance and prepaid taxes,
(b) patents, copyrights, trademarks, tradenames, franchises, goodwill,
experimental expenses, and other similar assets which would be classified as
intangible assets on a balance sheet of such Person, (c) unamortized debt
discount and expense, and (d) assets located, and notes and receivables due
from obligors domiciled, outside of the United States of America.
"INTANGIBLE RIGHTS" means, for any Person, any permits, franchises,
licenses, patents, trademarks, trade names, intellectual property rights,
technology, know-how, and processes of such Person.
"INTEREST PERIOD" means, with respect to a Eurodollar Borrowing, a
period commencing:
(a) on the Advance Date thereof; or
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(GAINSCO/Bank One)
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(b) on the conversion date pertaining to such Eurodollar
Borrowing, if such Eurodollar Borrowing is made pursuant to a
conversion as described in SECTION 2.13; or
(c) on the last day of the preceding Interest Period in the case
of a rollover to a successive Interest Period;
(d) and ending one (1) month, two (2) months or three (3) months
thereafter, as Borrowers shall elect in accordance with SECTION 2.12
or SECTION 2.13, provided that:
(i) any Interest Period that would otherwise end on a day
which is not a Business Day shall be extended to the next
succeeding Business Day, unless such Business Day falls in
another calendar month in which case such Interest Period shall
end on the next preceding Business Day;
(ii) any Interest Period that begins on the last Business
Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month or at the
end of such Interest Period) shall, subject to clause (i) above,
end on the last Business Day of a calendar month; and
(iii) if the Interest Period for any Eurodollar Borrowing
would otherwise end after the final maturity date of the Note,
then such Interest Period shall end on the final maturity date
of the Note.
"INVESTMENT" in any Person means any investment, whether by means of
Stock purchase, loan, advance, extension of credit, capital contribution, or
otherwise, in or to such Person, the Guaranty of any Indebtedness of such
Person, or the subordination of any claim against such Person to other
Indebtedness of such Person.
"LALANDE ACQUISITION" means the acquisition by GAINSCO of the capital
stock of the Acquired Companies pursuant to the Purchase Agreement.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multi-national, or other administrative order,
constitution, law, ordinance, regulation, statute, or treaty as in effect on
the date in question.
"LIABILITIES" means (without duplication), with respect to any Person,
all indebtedness, obligations, and liabilities of such Person, including
without limitation (a) all "liabilities" which would be reflected on a balance
sheet of such Person, (b) all obligations of such Person in respect of any
Guaranty, letter of credit, or bankers' acceptance, (c) all obligations of such
Person in respect of any Capital Lease, (d) all obligations, indebtedness, and
liabilities secured by any lien or any security interest on any property or
assets of such Person, and (e) any obligation to redeem or repurchase any of
such Person's Stock.
"LICENSES" has the meaning set forth in SECTION 5.26.
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"LIEN" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, conditional sale or title retention arrangement, or any other
interest in property designed to secure the repayment of Indebtedness, whether
arising by agreement or under any statute or law, or otherwise.
"LOAN DOCUMENTS" means this Agreement, the Note, the Collateral
Documents, and any agreements, documents (and with respect to this Agreement,
and such other agreements and documents, any renewals, extensions, amendments,
or supplements thereto), or certificates at any time executed or delivered
pursuant to the terms of this Agreement.
"MANAGEMENT AGREEMENT" means the Management Contract dated October 12,
1992 between GSC and GCMIC, as the same may be amended, extended or otherwise
modified.
"MATERIAL ADVERSE EFFECT" means any material adverse changes in, or
effect upon, (a) the validity, performance or enforceability of any Loan
Documents, (b) the financial condition or business operations of any Company,
or (c) the ability of any Company to fulfill its obligations under the Loan
Documents.
"MAXIMUM RATE" means the highest non-usurious rate of interest (if
any) permitted from day to day by applicable law. Lender hereby notifies and
discloses to Borrowers that, for purposes of Tex. Rev. Civ. Stat. ▇▇▇. art.
5069-1D.001 (codified in the Texas Finance Code ss. 303.001), as it may from
time to time be amended, the "applicable ceiling" shall be the "weekly ceiling"
from time to time in effect as limited by article 5069-1D.009 (codified in the
Texas Finance Code ss. 303.305); provided, however, that to the extent
permitted by applicable law, Lender reserves the right to change the
"applicable ceiling" from time to time by further notice and disclosure to
Borrowers.
"MGAIC" means MGA Insurance Company, a Texas insurance company.
"MGAPFC" means MGA Premium Finance Company, a Texas corporation.
"MULTI-EMPLOYER PLAN" means a multi-employer plan as defined in
Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of the Code to which any
Company or any ERISA Affiliate is making, or has made, or is accruing, or has
accrued, an obligation to make contributions.
"NAIC" means the National Association of Insurance Commissioners.
"NET AMOUNT RECOVERABLE FROM REINSURERS" means, with respect to any
Insurance Subsidiary, as of any date of determination, the total dollar amount
set forth on Schedule F, Part 3, column 13 of the Statutory Statement of such
Insurance Subsidiary. In making such determination with respect to MGAIC,
amounts payable as of December 31, 1997 by the Arkansas Automobile Insurance
Plan, the California Auto Assigned Risk Plan, the Commercial Auto Insurance
Procedure of Louisiana, the Commercial Auto Insurance Procedure of Mississippi
and the Pennsylvania Pooled Commercial Assignment Procedure shall be excluded.
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"NOTE" means the Promissory Note executed by Borrowers and delivered
pursuant to the terms of this Agreement, together with any renewals,
extensions, or modifications thereof.
"NOTICE OF BORROWING" means a notice in the form of EXHIBIT C attached
hereto.
"OBLIGATION" means all present and future Indebtedness, obligations,
and Liabilities and all renewals and extensions thereof, or any part thereof,
now or hereafter owed to Lender by Borrowers, whether arising pursuant to any
of the Loan Documents, or otherwise, and all modifications, amendments,
renewals, extensions, and restatements thereof, together with all interest
accruing thereon and costs, expenses, and attorneys' fees incurred in the
enforcement or collection thereof.
"OTHER TAXES" has the meaning set forth in SECTION 2.16.
"PBGC" means the Pension Benefit Guaranty Corporation, and any
successor to all or any of the Pension Benefit Guaranty Corporation's functions
under ERISA.
"PERSON" shall include an individual, corporation, joint venture,
general or limited partnership, trust, unincorporated organization, or
government, or any agency or political subdivision thereof.
"PERMITTED LIENS" means (a) Liens in favor of Lender to secure the
Obligation, (b) pledges or deposits made to secure payment of worker's
compensation (or to participate in any fund in connection with worker's
compensation), unemployment insurance, pensions, or social security programs,
(c) Liens imposed by mandatory provisions of law such as for materialmen's,
mechanic's, warehousemen's, and other like Liens arising in the ordinary course
of a Company's business, securing Indebtedness whose payment is not yet due,
(d) Liens for taxes imposed upon a Person or upon such Person's income,
profits, or property, if the same are not yet due and payable or if the same
are being contested in good faith and for which adequate reserves are
maintained in accordance with GAAP, (e) good faith deposits in connection with
leases, real estate bids or contracts (other than contracts involving the
borrowing of money), pledges or deposits to secure (or in lieu of) surety,
stay, appeal, or customs bonds and deposits to secure the payment of taxes,
assessments, customs, duties, or other similar charges, (f) encumbrances
consisting of zoning restrictions, easements, or other restrictions on the use
of real property, provided that such encumbrances do not impair the use of such
property for the uses intended, and none of which is violated by existing or
proposed structures or land use, (g) deposits of any Insurance Subsidiary
required to be maintained with Insurance Regulatory Authorities, or with
trustees designated by such Insurance Regulatory Authorities, in either case in
the ordinary course of business, (h) deposits of any Insurance Subsidiary
required by reinsurance agreements permitted by the terms hereof entered into
in the ordinary course of business, (i) Liens described on EXHIBIT E, and Liens
resulting from the refinancing of the related Indebtedness secured thereby,
provided that the Indebtedness secured thereby shall not be increased and the
Liens shall not cover additional assets of any Company and (j) Liens securing
the payment of purchase money financings of equipment incurred in the ordinary
course of business.
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"PLAN" means an employee benefit plan or other plan maintained by any
Company or any ERISA Affiliate and which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Code, as
amended.
"POTENTIAL DEFAULT" means the occurrence of any event which with
passage of time or giving of notice or both would become an Event of Default.
"PRINCIPAL DEBT" means, as of any date, the sum of the outstanding
principal balance of all outstanding Borrowings hereunder as of such date.
"PURCHASE AGREEMENT" means, collectively, (a) the Stock Purchase
Agreement dated August 17, 1998 among GAINSCO, ▇▇▇▇▇▇ De ▇▇ ▇▇▇▇▇, ▇▇▇▇ De la
▇▇▇▇▇, National Specialty Lines, Inc., De La Torre Insurance Adjusters, Inc.
and Lalande Financial Group, Inc., (b) the Stock Purchase Agreement dated
August 17, 1998 among GAINSCO, Inc., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, National Specialty
Lines, Inc. and Lalande Financial Group, Inc., (c) the Stock Purchase Agreement
dated August 17, 1998 among GAINSCO, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, National Specialty
Lines, Inc. and Lalande Financial Group, Inc. and (d) the Stock Purchase
Agreement dated August 17, 1998 among GAINSCO, Inc., ▇▇▇▇▇ ▇▇▇▇▇▇▇, National
Specialty Lines, Inc. and Lalande Financial Group, Inc.
"REINSURANCE AGREEMENT" means any agreement, contract, treaty or other
arrangement (other than Surplus Relief Reinsurance) whereby other insurers
assume insurance from any Insurance Subsidiary or any Subsidiary of such
Insurance Subsidiary.
"REPORTABLE EVENT" has the meaning assigned to that term in Title IV
of ERISA, but shall not include an event with respect to which the PBGC has
waived the reporting requirement by regulation.
"REPRESENTATIVES" means representatives, officers, directors,
employees, attorneys, and agents.
"REVOLVING CREDIT COMMITMENT" means the following amounts during the
indicated periods:
AMOUNT OF
REVOLVING CREDIT
PERIOD COMMITMENT
------ ----------
Closing Date through 12/31/99 $18,000,000
1/1/2000 through 3/31/2000 17,500,000
4/1/2000 through 6/30/2000 17,000,000
7/1/2000 through 9/30/2000 16,500,000
10/1/2000 through 12/31/2000 16,000,000
1/1/2001 through 3/31/2001 15,500,000
4/1/2001 through 6/30/2001 15,000,000
7/1/2001 through 9/30/2001 14,500,000
10/1/2001 through 12/31/2001 14,000,000
REVOLVING CREDIT AGREEMENT - PAGE 11
--------------------------
(GAINSCO/Bank One)
13
1/1/2002 through 3/31/2002 13,500,000
4/1/2002 through 6/30/2002 13,000,000
7/1/2002 through 9/30/2002 12,500,000
10/1/2002 through 12/31/2002 12,000,000
1/1/2003 through 3/31/2003 11,500,000
4/1/2003 through 6/30/2003 11,000,000
7/1/2003 through 9/30/2003 10,500,000
as the same may be decreased by Borrowers pursuant to SECTION 2.1 or terminated
by Lender pursuant to SECTION 8.2.
"RRA" means Risk Retention Administrators, Inc., a Nevada corporation.
"SAP" means, when used with respect to an insurance company, statutory
accounting practices prescribed or permitted by the insurance laws or
regulations or insurance commissioner (or other similar authority) in the
jurisdiction of the incorporation of such insurance company for the preparation
of financial statements and other financial reports by insurance corporations
of the type of such insurance company applied on a basis consistent with those
reflected in the financial statements furnished to Lender prior to the Closing
Date. If SAP is changed in any jurisdiction, the appropriate company affected
thereby may change its practices in accordance with such change.
"SOLVENT" means, as to a Person, that (a) the aggregate fair market
value of its assets exceeds its Liabilities, (b) such Person is able to pay and
is paying its Liabilities as they mature, and (c) it does not have unreasonably
small capital to conduct its businesses.
"STATUTORY EARNINGS" means, for any Insurance Subsidiary, for any
period, the net income from operations after federal income taxes for such
period, determined in conformity with SAP.
"STATUTORY STATEMENT" means, as to any Insurance Subsidiary, a
statement of the condition and affairs of such Insurance Subsidiary, prepared
in accordance with statutory accounting practices required or permitted by the
its applicable Insurance Regulatory Authority, and filed with such Insurance
Regulatory Authority.
"STATUTORY SURPLUS" means, for any Insurance Subsidiary, on any date
of determination thereof, the aggregate amount of surplus as regards
policyholders of such Insurance Subsidiary (determined in accordance with SAP).
"STOCK" means all shares, options, warrants, general or limited
partnership interests, membership interests, or other ownership interests
(regardless of how designated) of or in a corporation, partnership, limited
liability company, trust, or other entity, whether voting or nonvoting,
including common stock, preferred stock, or any other "equity security" (as
such term is defined in Rule 3a11-1 of the General Rules and Regulations
promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended).
REVOLVING CREDIT AGREEMENT - PAGE 12
--------------------------
(GAINSCO/Bank One)
14
"SURPLUS DEBENTURE" means the Surplus Debenture dated December 16,
1996 in the stated principal amount of $2,600,000 payable by GCMIC to GSC.
"SURPLUS RELIEF" means, for any Insurance Subsidiary, the resulting
after tax increase in Statutory Surplus of such Insurance Subsidiary resulting
from entering into a Financial Reinsurance Agreement. As used herein,
"Financial Reinsurance Agreement" means a reinsurance agreement covering any
transaction in which any Insurance Subsidiary cedes business that does not meet
the conditions for reinsurance accounting as provided by the Financial
Accounting Standards Board in Statement of Financial Accounting Standards No.
113, as the same may be revised, replaced, or supplemented from time to time.
"SUBSIDIARY" means any corporation of which more than fifty percent
(50%) (in number of votes) of the issued and outstanding Stock having ordinary
voting power for the election of at least a majority of the directors is owned
or controlled, directly or indirectly, by GAINSCO, any Subsidiary of GAINSCO,
or any combination thereof. For purposes of this Agreement, Subsidiary shall
include GCMIC.
"SUBSIDIARY SECURITY AGREEMENTS" means the Security Agreements dated
the Closing Date whereby each Grantor Subsidiary grants to Lender a security
interest in the collateral security described therein.
"TAXES" has the meaning set forth in SECTION 2.16.
"TERMINATION DATE" means the first to occur of (a) November 1, 2003,
(b) the date Lender's commitment to fund Advances hereunder is terminated
pursuant to SECTION 8.2, or (c) the date that Lender's commitment to fund
Advances hereunder is reduced to zero pursuant to SECTION 2.1.
"TOTAL ADJUSTED CAPITAL" means, as to any Insurance Subsidiary, the
lesser of such Insurance Subsidiary's Total Adjusted Capital (i) as defined in
the Risk-Based Capital for Insurance Model Act adopted by the NAIC and (ii) as
determined by any applicable Insurance Regulatory Authority.
"TOTAL CAPITALIZATION" means, at any date, the sum (without
duplication) of Total Debt plus Consolidated Net Worth.
"TOTAL DEBT" means, as at any date, the sum for GAINSCO and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP) of all Indebtedness.
"UNUSED COMMITMENT" means, as of any date, (a) the Revolving Credit
Commitment, minus (b) the Commitment Usage.
1.2. ACCOUNTING TERMS. As used in this Agreement, and in any
certificate, report, or other document made or delivered pursuant to this
Agreement, accounting terms not defined in SECTION 1.1, and accounting terms
partly defined in SECTION 1.1 to the extent not defined, have, as
REVOLVING CREDIT AGREEMENT - PAGE 13
--------------------------
(GAINSCO/Bank One)
15
of any date, the respective meanings given to them under GAAP or SAP, as
applicable, and all references to balance sheets or other financial statements
means such statements, prepared in accordance with GAAP or SAP, as applicable,
as of such date.
1.3. RULES OF CONSTRUCTION. When used in this Agreement: (a) "or" is
not exclusive; (b) a reference to a law includes any amendment or modification
to such law; (c) a reference to a Person includes its permitted successors and
permitted assigns; (d) except as provided otherwise, all references to the
singular shall include the plural and vice versa; (e) except as provided in
this Agreement, a reference to an agreement, instrument, or document shall
include such agreement, instrument, or document as the same may be amended,
modified, renewed, extended, restated, or supplemented from time to time in
accordance with its terms and as permitted by the Loan Documents; (f) all
references to SECTIONS, SCHEDULES, or EXHIBITS shall be to Sections, Schedules,
or Exhibits of this Agreement, unless otherwise indicated; (g) all EXHIBITS to
this Agreement shall be incorporated into this Agreement; (h) the words
"include," "includes," and "including" shall be deemed to be followed by the
phrase "without limitation;" and (i) except as otherwise provided herein, in
the computation of time from a specified date to a later specified date, the
word "from" means "from and including" and words "to" and "until" each mean "to
but excluding."
1.4. JOINT AND SEVERAL.
(a) All representations contained herein shall be deemed
individually made by each Borrower, and each of the covenants,
agreements, and obligations set forth herein shall be deemed to be
the joint and several covenants, agreements, and obligations of each
Borrower. Any notice, request, consent, report, or other information
or agreement delivered to Lender by any Borrower shall be deemed to
be ratified by, consented to, and also delivered by each other
Borrower. Each Borrower recognizes and agrees that each covenant and
agreement of a "Borrower" and "Borrowers" in this Agreement and in
any other Loan Document shall create a joint and several obligation
of such entities, which may be enforced against such entities jointly
or against each entity separately.
(b) Each Borrower hereby irrevocably and unconditionally agrees:
(i) that it is jointly and severally liable to Lender for the full
and prompt payment of the Obligation and the performance by each
other Borrower of its obligations hereunder in accordance with the
terms hereof; (ii) to fully and promptly perform all of its
obligations hereunder with respect to the Obligation; and (iii) as a
primary obligation to indemnify Lender on demand for and against any
loss incurred by Lender as a result of any of the obligations of any
one or more of Borrowers being or becoming void, voidable,
unenforceable, or ineffective for any reason whatsoever, whether or
not known to Lender or any Person, the amount of such loss being the
amount which Lender would otherwise have been entitled to recover
from any one or more Borrowers.
2. THE REVOLVING CREDIT LOAN
2.1. THE REVOLVING CREDIT COMMITMENT. Subject to the terms and
conditions of this Agreement, Lender agrees to extend to Borrowers, from the
date hereof through the Termination
REVOLVING CREDIT AGREEMENT - PAGE 14
--------------------------
(GAINSCO/Bank One)
16
Date, a revolving line of credit which shall not exceed at any one time
outstanding the then-current Revolving Credit Commitment. Within the limits of
this SECTION 2.1, during such period, Borrowers may borrow, repay, and reborrow
the Unused Commitment in accordance with this Agreement. Borrowers shall have
the right, upon three (3) Business Days' prior written notice to Lender, to
permanently reduce the unutilized portion of the Revolving Credit Commitment;
provided that if any such reduction does not reduce the Revolving Credit
Commitment to $0.00, then any partial reduction shall be in the minimum amount
of $1,000,000.00 or a greater integral multiple of $500,000.00.
2.2. MANNER OF BORROWING.
(a) NOTICE OF BORROWING. Borrowers may request an Advance by
submitting to Lender a Notice of Borrowing (in writing or by
telephone followed by written notice within one (1) Business Day),
which is irrevocable and binding on Borrowers. Each Notice of
Borrowing must be received by Lender no later than 10:00 a.m.
(Dallas, Texas time) on the third (3rd) Business Day before the date
on which funds are requested (the "ADVANCE DATE") for any Advance
that will be a Eurodollar Borrowing or no later than 10:00 a.m.
(Dallas, Texas time) on the Advance Date for any Advance that will be
a Base Rate Borrowing.
(b) MINIMUM ADVANCES. Each Advance under the Revolving Credit
Commitment shall be in an amount of $250,000.00 or a greater integral
multiple of $50,000.00.
(c) FUNDING. Subject to the terms and conditions in this
Agreement, by not later than 2:00 p.m., Dallas, Texas time, on the
date specified in the Notice of Borrowing, Lender shall make
available to Borrowers, at Lender's offices in Dallas, Texas, the
amount of a requested Advance under the Revolving Credit Commitment
in immediately available funds.
2.3. COMMITMENT FEES.
(a) UNUSED FEE. Borrowers agree to pay to Lender a commitment
fee equal to one-quarter of one percent (0.25%) per annum on the
daily Unused Commitment. Such commitment fee shall be payable
quarterly in arrears on the last day of each March, June, September,
and December during the term hereof, commencing on December 31, 1998,
and continuing regularly thereafter so long as the Revolving Credit
Commitment is in effect, and on the Termination Date.
(b) GENERALLY. Borrowers acknowledge that the commitment fees
payable hereunder are bona fide commitment fees and are intended as
reasonable compensation to Lender for committing to make funds
available to Borrowers as described herein and for no other purposes.
REVOLVING CREDIT AGREEMENT - PAGE 15
--------------------------
(GAINSCO/Bank One)
17
2.4. NOTE. The Principal Debt shall be evidenced by the Note in the
form of EXHIBIT B, properly completed, executed by Borrowers, which Note shall
be (a) dated the date hereof, (b) in the amount of $18,000,000.00, and (c)
payable to the order of Lender.
2.5. INTEREST AND PRINCIPAL PAYMENTS.
(a) INTEREST PAYMENTS. Accrued interest on each Eurodollar
Borrowing shall be due and payable on the last day of its respective
Interest Period. Accrued interest on each Base Rate Borrowing shall
be due and payable on the last day of each March, June, September,
and December during the term hereof, commencing on December 31, 1998,
with a final scheduled interest payment on all Borrowings on the
Termination Date; provided, however, that accrued interest on each
Base Rate Borrowing shall also be due and payable upon conversion of
such Base Rate Borrowing to a Eurodollar Borrowing pursuant to
SECTION 2.13.
(b) PRINCIPAL PAYMENTS. The unpaid Principal Debt shall be due
and payable on the Termination Date.
(c) OPTIONAL PREPAYMENTS. Borrowers shall have the right, from
time-to-time, to prepay the unpaid Principal Debt, in whole or in
part, without premium or penalty (except for any Funding Loss), upon
the payment of accrued interest on the amount prepaid to and
including the date of payment; provided, however, that partial
prepayments of principal shall be in an amount equal to $100,000.00
or a greater integral multiple of $50,000.00 (or, if less, the unpaid
Principal Debt).
(d) MANDATORY PREPAYMENTS. If on any date the unpaid Principal
Debt exceeds the then applicable Revolving Credit Commitment,
Borrowers shall, as promptly as practicable but in no event later
than the next Business Day, prepay a sufficient amount of the
aggregate principal amount of the Principal Debt to bring the unpaid
Principal Amount within the then applicable Revolving Credit
Commitment.
2.6. MANNER AND APPLICATION OF PAYMENTS. All payments and prepayments
by Borrowers on account of principal, interest, and fees hereunder shall be
made in immediately available funds. All such payments shall be made to Lender
at its principal office in Dallas, Texas, not later than 12:00 noon, Dallas,
Texas time, on the date due and funds received after that hour shall be deemed
to have been received by Lender on the next following Business Day. If any
payment is scheduled to become due and payable on a day which is not a Business
Day, then such payment shall instead become due and payable on the immediately
following Business Day and interest on the principal portion of such payment
shall be payable at the then applicable rate during such extension. All
payments made on the Note shall be applied first to accrued interest and then
to principal (in the inverse order of maturity in the case of prepayments).
2.7. INTEREST OPTIONS. Except where specifically otherwise provided,
Borrowings bear interest at an annual rate equal to the lesser of either (a)
the sum of (i) the Base Rate or the Adjusted Eurodollar Rate (in each case as
designated or deemed designated by Borrowers), as the case may be, plus (ii)
the Applicable Margin, or (b) the Maximum Rate. Each change in the
REVOLVING CREDIT AGREEMENT - PAGE 16
--------------------------
(GAINSCO/Bank One)
18
Base Rate and the Maximum Rate is effective, without notice to Borrowers or any
other Person, upon the effective date of change.
2.8. QUOTATION OF RATES. A responsible officer of Borrowers may call
Lender before delivering a Notice of Borrowing to receive an indication of the
interest rates then in effect, but the indicated rates do not bind Lender or
affect the interest rate that is actually in effect when Borrowers deliver a
Notice of Borrowing.
2.9. DEFAULT RATE. If permitted by law, all past-due principal of and
accrued interest on the Note bears interest from maturity (stated or by
acceleration) at the lesser of (a) the Maximum Rate or (b) a rate per annum
equal to the sum of (i) two percent (2.0%) plus (ii) the Base Rate for Base
Rate Borrowings in effect from time to time plus (iii) the Applicable Margin
for Base Rate Borrowings, until paid, regardless whether payment is made before
or after entry of a judgment.
2.10. INTEREST RECAPTURE. If the Contract Rate applicable to any
Borrowing exceeds the Maximum Rate, then the interest rate on that Borrowing is
limited to the Maximum Rate, but any subsequent reductions in the Contract Rate
shall not reduce the interest rate thereon below the Maximum Rate until the
total amount of accrued interest equals the amount of interest that would have
accrued if Contract Rate had always been in effect. If at maturity (stated or
by acceleration) the total interest paid or accrued is less than the interest
that would have accrued if the Contract Rates had always been in effect, then,
at that time and to the extent permitted by law, Borrowers shall pay an amount
equal to the difference between (a) the lesser of the amount of interest that
would have accrued if the Contract Rates had always been in effect and the
amount of interest that would have accrued if the Maximum Rate had always been
in effect, and (b) the amount of interest actually paid or accrued on the Note.
2.11. INTEREST CALCULATIONS.
(a) Interest shall be calculated on the basis of actual number
of days (including the first day but excluding the last day) elapsed
but computed as if each calendar year consisted of 360 days (unless
the calculation would result in an interest rate greater than the
Maximum Rate, in which event interest will be calculated on the basis
of a year of 365 or 366 days, as the case may be). All interest rate
determinations and calculations by Lender are conclusive and binding
absent manifest error.
(b) The provisions of this Agreement relating to calculation of
the Base Rate and the Eurodollar Rate are included only for the
purpose of determining the rate of interest or other amounts to be
paid under this Agreement that are based upon those rates. Lender may
fund and maintain its funding of all or any part of each Borrowing as
it selects.
2.12. SELECTION OF INTEREST OPTION. On making a Notice of Borrowing
under SECTION 2.2(a), Borrowers shall advise Lender as to whether the Advance
shall be (a) a Eurodollar Borrowing, in which case Borrowers shall specify the
applicable Interest Period therefor, or (b) a Base Rate Borrowing.
Notwithstanding anything to the contrary contained
REVOLVING CREDIT AGREEMENT - PAGE 17
--------------------------
(GAINSCO/Bank One)
19
herein, (a) no more than three (3) Interest Periods shall be in effect at any
one time with respect to Eurodollar Borrowings, (b) Borrowers shall have no
right to request a Eurodollar Borrowing if the interest rate applicable thereto
would exceed the Maximum Rate in effect on the first day of the Interest Period
applicable to such Borrowing, and (c) each Eurodollar Borrowing shall be in the
amount of $250,000.00 or a greater integral multiple of $50,000.00.
2.13. ROLLOVERS AND CONVERSIONS. Borrowers may (a) convert a
Eurodollar Borrowing on the last day of the applicable Interest Period to a
Base Rate Borrowing, (b) convert a Base Rate Borrowing at any time to a
Eurodollar Borrowing, and (c) elect a new Interest Period for a Eurodollar
Borrowing, by giving a Notice of Borrowing to Lender no later than 10:00 a.m.
on the third (3rd) Business Day before the conversion date or the last day of
the Interest Period, as the case may be (for conversion to a Eurodollar
Borrowing or election of a new Interest Period), and no later than 10:00 a.m.
one (1) Business Day before the last day of the Interest Period (for conversion
to an Base Rate Borrowing); provided that each Eurodollar Borrowing shall be in
the amount of $250,000.00 or a greater integral multiple of $50,000.00. Absent
Borrowers' Notice of Borrowing, a Eurodollar Borrowing shall be deemed
converted to a Base Rate Borrowing effective when the applicable Interest
Period expires.
2.14. BOOKING BORROWINGS. To the extent permitted by law, Lender may
make, carry, or transfer its Borrowings at, to, or for the account of any of
its branch offices or the office of any of its Affiliates. However, no
Affiliate is entitled to receive any greater payment under SECTION 2.15(b) than
Lender would have been entitled to receive with respect to those Borrowings.
Lender agrees that it will use its reasonable efforts (consistent with its
internal policies and applicable law) to make, carry, maintain, or transfer its
Borrowings with its Affiliates or branch offices in an effort to eliminate or
reduce to the extent possible the aggregate amounts due to it under SECTIONS
2.15(b) and 2.15(c) if, in its reasonable judgment, such efforts will not be
disadvantageous to it.
2.15. SPECIAL PROVISIONS FOR EURODOLLAR BORROWINGS.
(a) BASIS UNAVAILABLE OR INADEQUACY OF EURODOLLAR LOAN PRICING.
If with respect to an Interest Period for any Eurodollar Borrowing,
(a) Lender determines that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in Dollars (in the
applicable amounts) are not being offered to or by Lender in the
interbank eurodollar market for such Interest Period, or (b) Lender
determines that the Eurodollar Rate as determined by Lender will not
adequately and fairly reflect the cost to Lender of maintaining or
funding the Eurodollar Borrowing for such Interest Period, then
Lender shall forthwith give notice thereof to Borrowers, whereupon
until Lender notifies Borrowers that the circumstances giving rise to
such suspension no longer exist, (i) the obligation of Lender to make
Eurodollar Borrowings shall be suspended, and (ii) Borrowers shall
either (A) repay in full the then-outstanding principal amount of the
Eurodollar Borrowings, together with accrued interest thereon on the
last day of the then current Interest Period applicable to such
Eurodollar Borrowings, or (B) convert such Eurodollar Borrowings to
Base Rate Borrowings in accordance with SECTION 2.13 on the last day
of the then-current Interest Period applicable to each such
Eurodollar Borrowing.
REVOLVING CREDIT AGREEMENT - PAGE 18
--------------------------
(GAINSCO/Bank One)
20
(b) ILLEGALITY. If, after the date of this Agreement, the
adoption of any applicable law, rule, or regulation, or any change
therein, or any change in the interpretation or administration
thereof by any Governmental Authority, central bank, or comparable
agency charged with the interpretation or administration thereof, or
compliance by Lender with any request or directive (whether or not
having the force of law) of any such authority, central bank, or
comparable agency shall make it unlawful or impossible for Lender to
make, maintain or fund Eurodollar Borrowings, then Lender shall so
notify Borrowers. Before giving any notice pursuant to this SECTION,
Lender shall designate a different Eurodollar lending office if such
designation will avoid the need for giving such notice and will not
be otherwise disadvantageous to any non-trivial extent to Lender (as
determined in good faith by Lender). Upon receipt of such notice,
Borrowers shall either (i) repay in full the then outstanding
principal amount of all Eurodollar Borrowings, together with accrued
interest thereon, or (ii) convert each Eurodollar Borrowing to a Base
Rate Borrowing, on either (A) the last day of the then-current
Interest Period applicable to such Eurodollar Borrowing if Lender may
lawfully continue to maintain and fund such Eurodollar Borrowing to
such day or (B) immediately if Lender may not lawfully continue to
fund and maintain such Eurodollar Borrowing to such day, provided
that Borrowers shall be liable for any Funding Loss arising pursuant
to such conversion.
(c) INCREASED COSTS FOR EURODOLLAR BORROWINGS. If any
Governmental Authority, central bank, or other comparable authority,
shall at any time impose, modify, or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System but excluding any reserve requirement
included in the Eurodollar Reserve Requirement), special deposit, or
similar requirement against assets of, deposits with, or for the
account of, or credit extended by, Lender, or shall impose on Lender
(or its Eurodollar lending office) or the interbank eurodollar market
any other condition affecting its Eurodollar Borrowings, the Note, or
its obligation to make Eurodollar Borrowings; and the result of any
of the foregoing is to increase the cost to Lender of making or
maintaining Eurodollar Borrowings, or to reduce the amount of any sum
received or receivable by Lender under this Agreement, or under the
Note, by an amount deemed by Lender to be material, then, within five
(5) days after demand by Lender, Borrowers shall pay to Lender such
additional amount or amounts as will compensate Lender for such
increased cost or reduction. Lender will promptly notify Borrowers of
any event of which it has knowledge, occurring after the date hereof,
which will entitle Lender to compensation pursuant to this SECTION.
No failure by Lender to immediately demand payment of any additional
amounts payable hereunder shall constitute a waiver of Lender's right
to demand payment of such amounts at any subsequent time. A
certificate of Lender claiming compensation under this SECTION and
setting forth the additional amount or amounts to be paid to it
hereunder, together with a description in reasonable detail of the
manner in which such amounts have been calculated, shall be delivered
by Lender to Borrower within one hundred eighty (180) days after the
incurrence thereof and shall be conclusive in the absence of manifest
error. If Lender demands compensation under this Section, then
Borrowers may at any time, upon at least five (5) Business Days'
prior notice to such Lender, either convert such
REVOLVING CREDIT AGREEMENT - PAGE 19
--------------------------
(GAINSCO/Bank One)
21
Eurodollar Borrowings to Base Rate Borrowings in accordance with the
provisions of this Agreement; provided, however, that Borrowers shall
be liable for any Funding Loss arising pursuant to such actions.
(d) EFFECT ON BASE RATE BORROWINGS. If notice has been given
pursuant to SECTION 2.15(a) or SECTION 2.15(b) requiring that
Eurodollar Borrowings to be repaid or converted, then unless and
until Lender notifies Borrowers that the circumstances giving rise to
such repayment no longer apply, all Borrowings shall be Base Rate
Borrowings. If Lender notifies Borrowers that the circumstances
giving rise to such repayment no longer apply, then Borrowers may
thereafter select Borrowings to be Eurodollar Borrowings in
accordance with SECTION 2.12 and SECTION 2.13.
(e) FUNDING LOSSES. Borrowers shall jointly and severally
indemnify Lender against any loss or reasonable expense (such loss or
expense is referred to herein as a "FUNDING LOSS," such term
including, but not limited to, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating
or reemploying deposits from third parties acquired to effect or
maintain such Borrowing or any part thereof as a Eurodollar
Borrowing) with respect to Eurodollar Borrowings which Lender may
sustain or incur as a consequence of (i) any failure by Borrowers to
fulfill on the date of any Borrowing hereunder the applicable
conditions set forth in SECTION 4, (ii) any failure by Borrowers to
borrow hereunder or to convert Borrowings hereunder after a
Conversion Notice has been given, (iii) any payment, prepayment, or
conversion of a Eurodollar Borrowing required or permitted by any
other provisions of this Agreement, including, without limitation,
payments made due to the acceleration of the maturity of the
Borrowings pursuant to SECTION 8.2, or otherwise made on a date other
than the last day of the applicable Interest Period, (iv) any default
in the payment or prepayment of the principal amount of any
Eurodollar Borrowing or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by notice of
prepayment or otherwise), or (v) the occurrence of a Potential
Default or an Event of Default. The term "FUNDING LOSS" includes,
without limitation, an amount equal to the excess, if any, as
determined by Lender of (A) its cost of obtaining the funds for the
Borrowing being paid, prepaid, or converted or not borrowed or
converted (based on the Adjusted Eurodollar Rate applicable thereto)
for the period from the date of such payment, prepayment, or
conversion or failure to borrow or convert to the last day of the
Interest Period for such Borrowing (or, in the case of a failure to
borrow or convert, the Interest Period for the Borrowing which would
have commenced on the date of such failure to borrow or convert) over
(B) the amount of interest (as estimated by Lender) that would be
realized by Lender in reemploying the funds so paid, prepaid or
converted or not borrowed or converted for such period or Interest
Period, as the case may be. A certificate of Lender setting forth any
amount or amounts which Lender is entitled to receive pursuant to
this SECTION 2.15(e), together with a description in reasonable
detail of the manner in which such amounts have been calculated,
shall be delivered to Borrowers and shall be conclusive, absent
manifest error. Borrowers shall pay to Lender the amount shown as due
on any certificate within five (5) days after its receipt of the
same. Notwithstanding the foregoing, in no event shall Lender be
permitted to receive any compensation
REVOLVING CREDIT AGREEMENT - PAGE 20
--------------------------
(GAINSCO/Bank One)
22
hereunder constituting interest in excess of the Maximum Rate.
Without prejudice to the survival of any other obligations of
Borrowers hereunder, the obligations of Borrowers under this SECTION
2.15(e) shall survive the termination of this Agreement and/or the
payment or assignment of the Note.
2.16. TAXES.
(a) Any and all payments by Borrowers hereunder or under the
Note shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions,
charges, or withholdings, and all liabilities with respect thereto
(hereinafter referred to as "TAXES"), excluding taxes imposed on
Lender's income, and franchise taxes imposed on Lender, by the
jurisdiction under the laws of which Lender is organized or is or
should be qualified to do business or any political subdivision
thereof and, taxes imposed on Lender's income, and franchise taxes
imposed on Lender by the jurisdiction of Lender's lending office or
any political subdivision thereof. If Borrowers shall be required by
law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Note to Lender, then (i) the sum payable shall
be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this SECTION 2.16) Lender receives an amount equal to
the sum it would have received had no such deductions been made, (ii)
Borrowers shall make such deductions, and (iii) Borrowers shall pay
the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, Borrowers agree to pay any present or future
stamp or documentary taxes or any other excise or property taxes,
charges, or similar levies which arise from any payment made
hereunder or under the Loan Documents or from the execution,
delivery, or registration of, or otherwise with respect to, this
Agreement or the other Loan Documents (hereinafter referred to as
"OTHER TAXES").
(c) Borrowers shall indemnify Lender for the full amount of
Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 2.16) paid by Lender or any liability (including penalties
and interest) arising therefrom or with respect thereto, whether or
not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within five (5) days from the date
Lender makes written demand therefor.
(d) Within thirty (30) days after the date of any payment of
Taxes, Borrowers shall furnish to Lender, at its address referred to
in SECTION 9.4, the original or a certified copy of a receipt
evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement of
Borrowers hereunder, the agreements and obligations of Borrowers
contained in this SECTION 2.16 shall survive the payment in full of
principal and interest hereunder and under the other Loan Documents.
REVOLVING CREDIT AGREEMENT - PAGE 21
--------------------------
(GAINSCO/Bank One)
23
3. COLLATERAL
To secure the payment and performance of the Obligation, the Borrowers
and the Grantor Subsidiaries shall grant to Lender a perfected, first priority
(except for Permitted Liens) Lien in all assets of such companies, including
capital stock of certain Subsidiaries, accounts receivable, inventory,
equipment, general intangibles of such companies (the "COLLATERAL"), as
described in the Collateral Documents.
4. CONDITIONS PRECEDENT
4.1. INITIAL ADVANCE. The obligation of Lender to make the initial
Advance hereunder is subject to the conditions precedent that, on or before the
date of such Advance, (a) Borrowers shall have paid to Lender all fees to be
received by Lender pursuant to this Agreement or any other Loan Document and
(b) Lender shall have received duly executed copies of each of the following
documents, each dated as of the date of such Advance, and each in form and
substance satisfactory to Lender.
(a) Articles of Incorporation. A copy of the articles of
incorporation, and all amendments thereto, of each Borrower's and the
other Companies, accompanied by certificates that such copy is
correct and complete issued by (i) the appropriate governmental
official of the state of its organization bearing a Current Date and
(ii) the secretary of each such corporation dated as of the Closing
Date.
(b) Bylaws. A copy of the bylaws, and all amendments thereto, of
each of Borrowers and the other Companies, accompanied by a
certificate that each such copy is correct and complete, dated the
Closing Date, executed by the secretary of each such corporation.
(c) Good Standing and Authority. Certificates of the appropriate
governmental officials of such jurisdictions as Lender may request,
each bearing a Current Date, to the effect that Borrowers and the
other Companies are in good standing with respect to payment of
franchise and similar Taxes and are duly qualified to transact
business therein, accompanied by the certificate of the secretary of
each such corporation, dated the Closing Date, that such certificates
are true and correct.
(d) Incumbency. A certificate of incumbency of all officers of
Borrowers and the other Companies who will be authorized to execute
or attest any of the Loan Documents on behalf of such companies,
dated the Closing Date, executed by their respective presidents and
secretaries.
(e) Resolutions. A copy of resolutions approving the Loan
Documents and authorizing the transactions contemplated in this
Agreement, duly adopted by the boards of directors of Borrowers and
the other Companies who are party to any Loan Documents, accompanied
by a certificate of the secretary of each such company dated the
Closing Date, that such copy is a true and correct copy of
resolutions duly adopted at a meeting of, or by unanimous written
consent of, the board of directors of such company
REVOLVING CREDIT AGREEMENT - PAGE 22
--------------------------
(GAINSCO/Bank One)
24
and that such resolutions have not been amended, modified, or revoked
in any respect, and are in full force and effect as of the Closing
Date.
(f) Opinion of Counsel. The opinion of Shannon, Gracey, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇, L.L.P., counsel to Borrowers and the other Companies,
satisfactory in form and substance to Lender.
(g) Note. The Note, duly executed by Borrowers, properly
completed, dated the Closing Date.
(h) GAINSCO Pledge Agreement. The GAINSCO Pledge Agreement, duly
executed by GAINSCO.
(i) GSC Pledge Agreement. The GSC Pledge Agreement, duly
executed by GSC.
(j) Stock Certificates. Stock certificates evidencing all of the
shares of capital stock pledged to Lender pursuant to the GAINSCO
Pledge Agreement and the GSC Pledge Agreement, together with stock
powers executed in blank by the respective owners thereof.
(k) GAINSCO Security Agreement. The GAINSCO Security Agreement,
duly executed by GAINSCO.
(l) GSC Security Agreement. The GAINSCO Security Agreement, duly
executed by GSC.
(m) Subsidiary Security Agreements. The Subsidiary Security
Agreements, executed by each Grantor Subsidiary.
(n) Confirmations of Pledge. Confirmations of Pledge executed by
each of GSC, APS, GAIC, GAPFC, RRA, MGAPFC and the Acquired
Companies.
(o) Surplus Debenture. The Surplus Debenture, indorsed to the
order of Lender.
(p) Financing Statements. Evidence that Uniform Commercial Code
financing statements in proper form executed by all proper parties
have been filed in all necessary filing offices.
(q) Priority. Evidence that the Lien of Lender in the Collateral
is of first priority.
(r) Regulatory Approvals. Evidence that all consents, licenses
and approvals of Governmental Authorities required in connection with
the execution, delivery, performance, validity and enforceability of
this Agreement and, each of the other Loan
REVOLVING CREDIT AGREEMENT - PAGE 23
--------------------------
(GAINSCO/Bank One)
25
Documents have been obtained, including, without limitation, any
necessary approvals for the consummation of the transactions provided
for in the Purchase Agreement.
(s) Termination of Existing Facility. Evidence that GAINSCO's
existing revolving credit facility with Lender has been terminated.
(t) Compliance Certificate. A Compliance Certificate completed
on a pro forma basis as of September 30, 1998.
(u) Other Documents. Such other documents, opinions,
certificates, agreements, instruments, and evidences as Lender may
reasonably request.
4.2. ALL ADVANCES. The obligation of Lender to make any Advance under
this Agreement (including the initial Advance) shall be subject to the
conditions precedent that, as of the date of such Advance and after giving
effect thereto: (a) there exists no Potential Default or Event of Default; (b)
no change that would cause a Material Adverse Effect has occurred since the
date of the financial statements referenced in SECTION 5.6; (c) Lender shall
have received from Borrowers a Notice of Borrowing dated as of the date of such
Advance and all of the statements contained in such Notice of Borrowing shall
be true and correct; (d) the representations and warranties contained in each
of the Loan Documents shall be true in all respects as though made on the date
of such Advance; and (e) the Maximum Rate exceeds the Contract Rate.
5. REPRESENTATIONS AND WARRANTIES
To induce Lender to make Advances hereunder, Borrowers represent and
warrant to Lender that:
5.1. ORGANIZATION AND GOOD STANDING. Each Company is duly organized,
validly existing, and in good standing under the laws of the state of its
incorporation or formation, is duly qualified and is in good standing in all
states in which it is doing business (except where the failure to be so
qualified and maintain good standing could not have a Material Adverse Effect),
has the power and authority to own its properties and assets and to transact
the business in which it is engaged in each jurisdiction in which it operates,
and is or will be qualified in those states wherein it proposes to transact
business in the future (except where the failure to be so qualified could not
have a Material Adverse Effect).
5.2. AUTHORIZATION AND POWER. Each Company has full power and
authority to execute, deliver, and perform the Loan Documents to be executed by
such Person, all of which has been duly authorized by all proper and necessary
action.
5.3. NO CONFLICTS OR CONSENTS. Neither the execution and delivery of
the Loan Documents, nor the consummation of any of the transactions therein
contemplated, nor compliance with the terms and provisions thereof, will
contravene or materially conflict with any Legal Requirement to which any
Company is subject, any Governmental Authorization applicable to any Company,
any indenture, loan agreement, mortgage, deed of trust, or other agreement or
instrument binding on any Company, or any provision of the Constituent
REVOLVING CREDIT AGREEMENT - PAGE 24
--------------------------
(GAINSCO/Bank One)
26
Documents of any Company. No consent, approval, authorization, or order of any
court, Governmental Authority, stockholder, or third party is required in
connection with the execution, delivery, or performance by any Company of any
of the Loan Documents.
5.4. ENFORCEABLE OBLIGATIONS. The Loan Documents have been duly
executed and delivered by each Company, as appropriate, and are the legal and
binding obligations of each Company, as appropriate, enforceable in accordance
with their respective terms, except as limited by Debtor Laws.
5.5. NO LIENS. Except for the Permitted Liens, all of the properties
and assets of each Company are free and clear of all Liens and other adverse
claims of any nature, and each Company has good and indefeasible title to such
properties and assets.
5.6. FINANCIAL CONDITION. Borrowers have delivered to Lender copies of
the financial statements of the Companies as of December 31, 1997 and June 30,
1998; such financial statements are true and correct, fairly represent the
financial condition of the Companies as of such date, and have been prepared in
accordance with GAAP or SAP, as applicable; as of the date hereof, there are no
obligations, Liabilities, or Indebtedness (including contingent and indirect
Liabilities) of the Companies which are material and are not reflected in such
financial statements; no Material Adverse Effect has occurred since the date of
such financial statements.
5.7. FULL DISCLOSURE. There is no fact known to any Borrower that such
Borrower has not disclosed to Lender which could have a Material Adverse
Effect. No certificate or statement delivered by any Borrower to Lender in
connection with this Agreement contains any untrue statement of a material fact
or omits to state any material fact necessary to keep the statements contained
herein or therein from being misleading.
5.8. NO POTENTIAL DEFAULT. No event has occurred and is continuing
which constitutes a Potential Default or an Event of Default.
5.9. MATERIAL AGREEMENTS. No Company is in default in any material
respect under any contract or agreement to which it is a party or by which any
of its properties is bound, except where such default could not have a Material
Adverse Effect.
5.10. NO LITIGATION. Except as disclosed on SCHEDULE 5.10, there are
no actions, suits, or legal, equitable, arbitration, or administrative
proceedings pending, or to the knowledge of any Borrower threatened, against
any Company that could, if adversely determined, have a Material Adverse
Effect.
5.11. USE OF PROCEEDS; MARGIN STOCK. The proceeds of each Advance will
be used by each Borrower solely for the purposes specified in the preamble.
None of such proceeds will be used for the purpose of purchasing or carrying
any "margin stock" as defined in Regulations G, T, U, or X of the Board of
Governors of the Federal Reserve System or for any other purpose which might
constitute this transaction a "purpose credit" within the meaning of such
Regulations. If requested by Lender, then Borrowers shall furnish to Lender a
statement in conformity with the requirements of the Federal Reserve Form U-1
referred to in said Regulation
REVOLVING CREDIT AGREEMENT - PAGE 25
--------------------------
(GAINSCO/Bank One)
27
U to the foregoing effect. No part of the proceeds of any Advance will be used
for any purpose which violates, or is inconsistent with, the provisions of
Regulation X.
5.12. TAXES. All tax returns required to be filed by each Company in
any jurisdiction have been filed and all taxes (including mortgage recording
taxes), assessments, fees, and other governmental charges upon each Company or
upon any of its properties, income, or franchises have been paid except for
taxes being contested in good faith by appropriate proceedings diligently
projected and for which adequate reserves are maintained in accordance with
GAAP. To the best of each Borrower's knowledge, there is no proposed tax
assessment against any Company, and all tax Liabilities of each Company are
adequately provided for. No income tax liability of any Company has been
asserted by the Internal Revenue Service for taxes in excess of those already
paid.
5.13. PRINCIPAL OFFICE, ETC. The principal office, chief executive
office, and principal place of business of each Company are set forth on
EXHIBIT D. Each Company maintains its principal records and books at such
address.
5.14. COMPLIANCE WITH LAW.
(a) Except as disclosed on SCHEDULE 5.14-1: (i) each Company is
in compliance with its respective Constituent Documents and all Legal
Requirements which are applicable to it or to the conduct or
operation of its business or the ownership or use of any of its
assets, except where such non-compliance could not have a Material
Adverse Effect; and (ii) no Company has received any notice or other
communication from any Governmental Authority or other Person of any
event or circumstance that could constitute a violation of, or
failure to comply with, any Legal Requirement.
Except as disclosed on SCHEDULE 5.14-1: (i) each Company is in
compliance with all of the terms and requirements of each
Governmental Authorization held by such Person, except where such
non-compliance could not have a Material Adverse Effect; (ii) no
Company has received any notice or other communication from any
Governmental Authority or other Person of any event or circumstance
which could constitute a violation of, or failure to comply with, any
term or requirement of any Governmental Authorization, or of any
actual or potential revocation, withdrawal, cancellation, or
termination of, or material modification to, any Governmental
Authorization; (iii) all applications required to have been filed for
the renewal of any required Governmental Authorizations have been
duly filed on a timely basis with the appropriate Governmental
Authorities, and all other filings required to have been made with
respect to such Governmental Authorizations have been duly made on a
timely basis with the appropriate Governmental Authorities; (iv) upon
consummation of the transactions contemplated hereby, each Company
will lawfully hold all such Governmental Authorizations; and (v) none
of the Governmental Authorizations of any Company will terminate upon
consummation of the transactions contemplated hereby.
(b) Set forth on SCHEDULE 5.14-2 is a list of each of the
Governmental Authorizations of each Company: (i) necessary to permit
each such Person to lawfully
REVOLVING CREDIT AGREEMENT - PAGE 26
--------------------------
(GAINSCO/Bank One)
28
conduct and operate its respective business in the manner it
currently conducts and operates such business and to permit such
Person to own and use its assets in the manner in which it currently
owns and uses such assets; and (ii) necessary to permit each such
Person, upon a consummation of the transactions contemplated hereby,
to lawfully conduct and operate its business and to permit each such
Person to own and use its assets.
5.15. SUBSIDIARIES. Set forth on EXHIBIT D hereto is a complete and
accurate list of all Subsidiaries of GAINSCO as of the date hereof, showing as
of such date (as to each such Subsidiary) the jurisdiction of its
incorporation, the owner of the outstanding Stock of such Subsidiary, and the
jurisdictions in which such Subsidiary is qualified to do business as a foreign
corporation. To the extent applicable, all of the outstanding Stock of all
Subsidiaries has been validly issued, is fully paid and nonassessable, and is
owned by GAINSCO or a Subsidiary free and clear of all Liens.
5.16. CASUALTIES. Neither the business nor the properties of any
Company are affected by any environmental hazard, fire, explosion, accident,
strike, lockout, or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God, or other casualty (whether or not covered by insurance),
which could have a Material Adverse Effect.
5.17. SUFFICIENCY OF CAPITAL. Each Company is, and after consummation
of this Agreement and after giving effect to all Indebtedness incurred and
Liens created by the Companies in connection herewith will be, Solvent;
provided, however, that no representation or warranty is made in this SECTION
5.17 with respect to APS or RRA.
5.18. COLLATERAL DOCUMENTS; DESCRIPTION AND LOCATION OF ASSETS. The
Collateral Documents contain a description of all of the Collateral sufficient
to grant to Lender perfected Liens therein pursuant to applicable law. Upon the
filing by Lender of all Collateral Documents to be filed or recorded, Lender
will have a perfected first priority Lien in the Collateral subject only to
Permitted Liens. All assets of the Companies are located at the addresses
listed on EXHIBIT D hereto except for inventory that is, in the ordinary course
of the Companies' business, in transit. No material asset of any Company will
be kept at any other address.
5.19. CORPORATE NAME. No Company has, during the preceding five (5)
years, (a) used any other corporate name or tradename, or (b) been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person.
5.20. LEASES. Except as set forth on SCHEDULE 5.20, no Company is the
lessee of any real or personal property.
5.21. ERISA. Each Company and each ERISA Affiliate has fulfilled its
obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, and has not incurred any
liability to the PBGC or a Plan under Title IV of ERISA.
5.22. LABOR MATTERS. There are no controversies pending between any
Company and any of their employees which could have a Material Adverse Effect.
REVOLVING CREDIT AGREEMENT - PAGE 27
--------------------------
(GAINSCO/Bank One)
29
5.23. MATERIAL CONTRACTS. Except for the Excess Casualty Reinsurance
Contract (effective January 1, 1995) and the Employment Agreement dated August
17, 1998 between National Specialty Lines, Inc., GAINSCO and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, no
Company is a party to any contract, the breach, violation, or termination of
which could result in a Material Adverse Effect.
5.24. PERMITS, FRANCHISES, INTELLECTUAL PROPERTY, AND OTHER
INTANGIBLE RIGHTS. Each Company owns, holds, and has the lawful right to use,
all material Intangible Rights used in or necessary for the conduct of its
business as currently conducted or proposed to be conducted.
5.25. FULL DISCLOSURE OF RIGHTS AND CLAIMS. Except as disclosed on
SCHEDULE 5.10, no claims are pending, or, to the best of any Borrower's
knowledge, threatened, that any Company is infringing or otherwise adversely
affecting the Intangible Rights of any other Person. The consummation of the
transactions contemplated by the Loan Documents will not impair the ownership
of, or rights with respect to, any material Intangible Rights of any Company.
5.26. INSURANCE LICENSES. SCHEDULE 5.26 attached hereto lists all of
the jurisdictions in which any Insurance Subsidiary holds active licenses
(including, without limitation, licenses or certificates of authority from
applicable insurance departments), permits or authorizations to transact
insurance business (collectively, the "LICENSES"). No such License is the
subject of a proceeding for suspension or revocation or any similar
proceedings, there is no sustainable basis known to Borrower or its Insurance
Subsidiaries for such a suspension or revocation, and to Borrower or such
Insurance Subsidiary's knowledge no such suspension or revocation has been
threatened by any licensing authority. SCHEDULE 5.26 indicates the line or
lines of insurance which each Insurance Subsidiary is permitted to engage in
with respect to each License therein listed. No Insurance Subsidiary transacts
any insurance business, directly or indirectly, in any state in a manner or to
an extent which would require it to be licensed in such state under the Laws of
such state, other than as specified on SCHEDULE 5.26 hereto.
5.27. YEAR 2000 COMPLIANCE.
(a) All devices, systems, machinery, information technology,
computer software and hardware, and other date sensitive technology
(jointly and severally, the "Systems") necessary for Borrowers or any
other Company to carry on its business as presently conducted and as
contemplated to be conducted in the future are Year 2000 Compliant or
will be Year 2000 Compliant within a period of time calculated to
result in no material disruption of any of Borrowers' or any other
Company's business operations. For purposes of these provisions,
"Year 2000 Complaint" means that such Systems are designed to be used
prior to, during and after the Gregorian calendar year 2000 A.D. and
will operate during each such time period without error relating to
date data, specifically including any error relating to, or the
product of, date data which represents or references different
centuries or more than one century. For purposes of the first
sentence of this subsection (a) a "material disruption" is a
disruption that could result in a decrease of $500,000 or more in the
aggregate revenue of GAINSCO and its Subsidiaries.
(b) Borrowers and each other Company has: (1) undertaken a
detailed inventory, review and assessment of all areas within its
business and operations that
REVOLVING CREDIT AGREEMENT - PAGE 28
--------------------------
(GAINSCO/Bank One)
30
could be adversely affected by the failure of any of them to be Year
2000 Compliant on a timely basis; (2) developed a detailed plan and
time line for becoming Year 2000 Compliant on a timely basis; and (3)
to date, implemented that plan in accordance with that timetable in
all material respects.
(c) Borrowers and each other Company has, or will within 30 days
after the Closing Date, made written inquiry of each of its key
suppliers, vendors, and customers, and has, or will within 30 days
after the Closing Date, obtained in writing confirmations for all
such persons, as to whether such persons have initiated programs to
become Year 2000 Compliant and on the basis of such confirmations,
Borrowers reasonably believe that all such persons will be or become
so compliant. For purposes hereof, "key suppliers, vendors and
customers" refers to those suppliers, vendors and customers of
Borrowers and the other Companies whose business failure would, with
reasonable probability, result in a material adverse change in the
business, properties, condition (financial or otherwise), or
prospects of Borrowers or any other Company. For purposes of this
paragraph, Lender, as a lender of funds under the terms of the
Agreement, confirms to Borrowers that Lender has initiated its own
corporate-wide Year 2000 program with respect to its lending
activities.
(d) The fair market value of all property pledged to Lender as
Collateral to secure the Obligation is not and shall not be less than
currently anticipated or subject to substantial deterioration in
value because of the failure of such Collateral to be Year 2000
Compliant.
5.28. REPRESENTATIONS AND WARRANTIES. Each Notice of Borrowing shall
constitute, without the necessity of specifically containing a written
statement, a representation and warranty by Borrowers that no Potential Default
or Event of Default exists and that all representations and warranties
contained in this SECTION 5 or in any other Loan Document are true and correct
on and as of the date the requested Advance is to be made.
5.29. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties by Borrowers herein shall survive delivery of the Note and the
making of each Advance, and any investigation at any time made by or on behalf
of Lender shall not diminish Lender's right to rely thereon.
6. AFFIRMATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrowers agree that (unless Lender
shall otherwise consent in writing):
6.1. FINANCIAL STATEMENTS, REPORTS, AND DOCUMENTS. Borrowers shall
deliver to Lender each of the following:
(a) as soon as available and in any event within 45 days after
the end of each of the first three quarterly fiscal periods of each
fiscal year of GAINSCO, consolidated and consolidating statements of
income, shareholders' equity and cash flows of
REVOLVING CREDIT AGREEMENT - PAGE 29
--------------------------
(GAINSCO/Bank One)
31
GAINSCO and its Subsidiaries, together with separate statements for
GAINSCO only, for such period and for the period from the beginning
of the respective fiscal year to the end of such period, and the
related consolidated and consolidating balance sheet of GAINSCO and
its Subsidiaries as at the end of such period, setting forth in each
case in comparative form the corresponding consolidated figures for
the corresponding periods in the preceding fiscal year (except that,
in the case of balance sheet, such comparison shall be to the last
day of the prior fiscal year), in each case in accordance with
generally accepted accounting principles, consistently applied, as at
the end of, and for, such period (subject to normal year-end audit
adjustments);
(b) as soon as available and in any event within 90 days after
the end of each fiscal year of GAINSCO, consolidated and
consolidating statements of income, shareholders' equity and cash
flows of GAINSCO and its Subsidiaries, together with separate
statements for GAINSCO only, for such fiscal year and the related
consolidated and consolidating balance sheet of GAINSCO and its
Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding consolidated figures for
the preceding fiscal year, and accompanied by an opinion thereon of
independent certified public accountants of recognized national
standing, which opinion shall state that said consolidated financial
statements present fairly, in all material respects, the consolidated
financial position and results of operations of GAINSCO and its
Subsidiaries as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles, and a
statement of such accountants to the effect that, in making the
examination necessary for their opinion, nothing came to their
attention that caused them to believe that the Borrowers were not in
compliance with SECTIONS 7.15 through 7.22 hereof, insofar as such
Sections relate to accounting matters, in each case in accordance
with generally accepted accounting principles, consistently applied,
as at the end of, and for, such fiscal year;
(c) promptly after filing with the applicable Insurance
Regulatory Authority and in any event within 45 days after the end of
each of the first three quarterly fiscal periods of each fiscal year
of each Insurance Subsidiary, the quarterly Statutory Statement of
such Insurance Subsidiary for such quarterly fiscal period, together
with the opinion thereon of a senior financial officer of such
Insurance Subsidiary stating that such Statutory Statement presents
fairly, in all material respects, the financial position of such
Insurance Subsidiary for such quarterly fiscal period in accordance
with SAP required or permitted by its Insurance Regulatory Authority;
(d) promptly after filing with the applicable Insurance
Regulatory Authority and in any event within 60 days after the end of
each fiscal year of each Insurance Subsidiary, the annual Statutory
Statement of such Insurance Subsidiary for such year, together with
(i) the opinion thereon of a senior financial officer of such
Insurance Subsidiary stating that said annual Statutory Statement
presents fairly, in all material respects, the financial position of
such Insurance Subsidiary for such fiscal year in accordance with
statutory accounting practices required or permitted by the Insurance
Regulatory Authority and (ii) with respect to each Insurance
Subsidiary, a certificate of
REVOLVING CREDIT AGREEMENT - PAGE 30
--------------------------
(GAINSCO/Bank One)
32
the chief actuary of such Insurance Subsidiary, affirming the
adequacy of reserves taken by such Insurance Subsidiary, in respect
of future policyholder benefits as at the end of such fiscal year (as
shown on such financial statements);
(e) within 150 days after the end of each fiscal year of each
Insurance Subsidiary, the report of independent certified public
accountants of recognized national standing) on the annual Statutory
Statements delivered pursuant to SECTION 6.1(d) hereof;
(f) contemporaneously with the delivery of the financial
statements required by SECTION 6.1(a) and 6.1(b), a Compliance
Certificate;
(g) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that
GAINSCO shall have filed with the Securities and Exchange Commission
(or any governmental agency substituted therefor) or any national
securities exchange;
(h) promptly upon the mailing thereof to the shareholders of any
Company generally, copies of all financial statements, reports and
proxy statements so mailed;
(i) promptly after each Insurance Subsidiary receives the
results of a triennial examination by its Insurance Regulatory
Authority of its financial condition and operations and/or any of its
Subsidiaries, a copy thereof;
(j) promptly following the delivery or receipt by any Insurance
Subsidiary or any of their respective Subsidiaries, copies of (a)
each material registration, filing or submission made by or on behalf
of any Insurance Subsidiary with any Insurance Regulatory Authority,
except for policy form filings, (b) each material examination and/or
audit report or other similar report submitted to any Insurance
Subsidiary by any Insurance Regulatory Authority, (c) all material
information which Lender may from time to time request with respect
to the nature or status of any material deficiencies or violations
reflected in any examination report or other similar report and (d)
each material report, order, direction, instruction, approval,
authorization, license or other notice which Borrowers or any
Insurance Subsidiary may at any time receive from any Insurance
Regulatory Authority.
(k) as soon as available, and in any event within 90 days after
the end of each fiscal year of GAINSCO, projected balance sheets and
income statements, such balance sheets and income statements to be
prepared on a quarterly basis for the succeeding fiscal year of
GAINSCO and its Subsidiaries, on a consolidated and consolidating
basis and prepared using methods consistent with the preparation of
GAINSCO's financial statements required pursuant to SECTION 6.1(a),
disclosing all assumptions made with respect to general economic,
financial, and market conditions utilized in preparation of such
projected financial statements and certified by an authorized officer
of Borrowers to be (i) based upon reasonable estimates and
assumptions all of which are fair in light of current conditions,
(ii) prepared on the basis of the assumption stated therein, and
(iii) reflective of such Person's estimates of the results of
operations and other information projected therein. Such
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(GAINSCO/Bank One)
33
projected financial statements shall include an updated statutory
projected balance sheet and income statement for GAIC.
(l) as soon as available and in any event within 45 days after
the last day of each fiscal quarter (except the last) of each fiscal
year of each Insurance Subsidiary, a certificate signed by an
authorized officer of such Insurance Subsidiary stating the Net
Amount Recoverable from Reinsurers as of such quarter end and each
such reinsurer's rating with A.M. Best Company, Inc. or claims paying
rating with Standard & Poors.
(m) as soon as available and in any event within 60 days after
the close of each fiscal year of each Insurance Subsidiary, a
certificate signed by an authorized officer of such Insurance
Subsidiary stating the Net Amount Recoverable from Reinsurers as of
such year end and each such reinsurer's rating with A.M. Best
Company, Inc. or claims paying rating with Standard & Poors.
6.2. ACTUARIAL VALUATIONS. Borrowers shall deliver to Lender, as soon
as available and in any event within 120 days after the end of each fiscal year
of GAINSCO, a report by an independent actuarial consulting firm of recognized
national standing reviewing the adequacy of loss and loss adjustment expense
reserves as at the end of the last fiscal year of each Insurance Subsidiary,
determined in accordance with SAP, and stating an estimated amount of minimum
reserves, it being agreed that in each case such independent firm will be
provided access to or copies of all relevant valuations relating to the
insurance business of each such Insurance Subsidiary in the possession of or
available to the Borrowers or their Subsidiaries.
6.3. OTHER INFORMATION. Such other information concerning the
business, properties or financial condition of any Company as Lender shall
reasonably request including audit reports, registration statements, or other
reports or notices provided to shareholders of GAINSCO and, if applicable,
filed with the Securities and Exchange Commission.
6.4. PAYMENT OF TAXES AND OTHER INDEBTEDNESS. Borrowers shall, and
shall cause each of the other Companies to, pay and discharge (a) all taxes,
assessments, and governmental charges or levies imposed upon it or upon its
income or profits, or upon any property belonging to it, before delinquent, (b)
all lawful claims (including claims for labor, materials, and supplies), which,
if unpaid, might give rise to a Lien upon any of its property, and (c) all of
its other Indebtedness, except as prohibited under the Loan Documents;
provided, however, that the Companies shall not be required to pay any such
tax, assessment, charge, or levy if and so long as the amount, applicability,
or validity thereof shall currently be contested in good faith by appropriate
proceedings and appropriate accruals and appropriate reserves have been
established in accordance with GAAP.
6.5. MAINTENANCE OF EXISTENCE AND RIGHTS; CONDUCT OF BUSINESS.
Borrowers shall, and shall cause each of the other Companies to, preserve and
maintain its existence and all of its rights, privileges, and franchises
(including Intangible Rights) necessary in the normal conduct of its business,
and conduct its business in an orderly and efficient manner consistent with
good business practices and in accordance with all Legal Requirements of any
Governmental
REVOLVING CREDIT AGREEMENT - PAGE 32
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(GAINSCO/Bank One)
34
Authority, except where the failure to so preserve or maintain could not have a
Material Adverse Effect.
6.6. NOTICE OF DEFAULT. Borrowers shall furnish to Lender,
immediately upon becoming aware of the existence of any condition or event
which constitutes a Potential Default or an Event of Default, written notice
specifying the nature and period of existence thereof and the action which
Borrowers are taking or proposes to take with respect thereto.
6.7. OTHER NOTICES. Borrowers shall, and shall cause each of the
other Companies to, promptly notify Lender of (a) any material adverse change
in its financial condition or its business, (b) any default under any material
agreement, contract, or other instrument to which it is a party or by which any
of its properties are bound, or any acceleration of the maturity of any
Indebtedness owing by any Company, (c) any material adverse claim against or
affecting any Company or any of its properties, and (d) the commencement of,
and any material determination in, any litigation with any third party (other
than lawsuits arising in the ordinary course of an Insurance Subsidiary's
business initiated against an insured to which such Insurance Subsidiary is
also named as a defendant under a state direct action statute) or any
proceeding before any Governmental Authority affecting any Company.
6.8. OPERATIONS AND PROPERTIES. Borrowers shall, and shall cause each
of the other Companies to, (a) act prudently and in accordance with customary
industry standards in managing and operating its assets and properties, and (b)
keep in good working order and condition, ordinary wear and tear excepted, all
of its assets and properties which are necessary to the conduct of its
business.
6.9. BOOKS AND RECORDS; ACCESS. Borrowers shall, and shall cause each
of the other Companies to, give any representative of Lender access upon
reasonable notice and during all business hours to, and permit such
representative to examine, copy, or make excerpts from, any and all books,
records, and documents in the possession of any Company and relating to its
affairs, and to inspect any of the properties of any Company. Borrowers shall,
and shall cause each of the other Companies to, maintain complete and accurate
books and records of its transactions in accordance with good accounting
practices.
6.10. COMPLIANCE WITH LAW. Borrowers shall, and shall cause each of
the other Companies to, comply with all applicable Legal Requirements of any
Governmental Authority, a breach of which could have a Material Adverse Effect.
6.11. INSURANCE. Borrowers shall, and shall cause each of the other
Companies to, keep all insurable property, real and personal, adequately
insured at all times in such amounts and against such risks as are customary
for Persons in similar businesses operating in the same vicinity, specifically
to include a policy of hazard, casualty, fire, and extended coverage insurance
covering all assets, business interruption insurance (where feasible),
liability insurance, and worker's compensation insurance, in every case under a
policy with a financially sound and reputable insurance company and with only
such deductibles as are customary, and all to contain a mortgagee or loss payee
clause naming Lender as its interest may appear.
REVOLVING CREDIT AGREEMENT - PAGE 33
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(GAINSCO/Bank One)
35
6.12. AUTHORIZATIONS AND APPROVALS. Borrowers shall, and shall cause
each of the other Companies to, promptly obtain, from time to time at its own
expense, all Governmental Authorizations as may be required to enable it to
comply with its obligations hereunder and under the other Loan Documents.
6.13. FURTHER ASSURANCES. Borrowers shall, and shall cause each of
the other Companies to, make, execute, and deliver or file or cause the same to
be done, all such notices, additional agreements, mortgages, assignments,
financing statements, or other assurances, and take any and all such other
action, as Lender may, from time to time, deem reasonably necessary or proper
in connection with any of the Loan Documents, the obligations of any Company
thereunder.
6.14. INDEMNITY BY BORROWERS. Borrowers shall indemnify, defend, and
hold harmless Lender and its Representatives (individually, an "INDEMNITEE" and
collectively, the "INDEMNITEES") from and against any and all loss, liability,
obligation, damage, penalty, judgment, claim, deficiency, and expense
(including interest, penalties, attorneys' fees, and amounts paid in
settlement) to which any Indemnitee may become subject arising out of this
Agreement and the other Loan Documents other than those which arise by reason
of the gross negligence or willful misconduct of Lender, BUT SPECIFICALLY
INCLUDING ANY LOSS, LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM,
DEFICIENCY, OR EXPENSE ARISING OUT OF THE SOLE OR CONCURRENT NEGLIGENCE OF
LENDER OR ANY OF ITS REPRESENTATIVES. Borrowers shall also indemnify, protect,
and hold each Indemnitee harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
proceedings, costs, expenses (including without limitation all reasonable
attorneys' fees and legal expenses whether or not suit is brought), and
disbursements of any kind or nature whatsoever which may at any time be imposed
on, incurred by, or asserted against such Indemnitee, with respect to or as a
direct or indirect result of the violation by any Company of any Environmental
Law; or with respect to or as a direct or indirect result of any Company's use,
generation, manufacture, production, storage, release, threatened release,
discharge, disposal, or presence of a Hazardous Material on, under, from, or
about real property. The provisions of and undertakings and indemnifications
set forth in this SECTION 6.14 shall survive (a) the satisfaction and payment
of the Obligation and termination of this Agreement, and (b) the release of any
Liens held by Lender on real property or the extinguishment of such Liens by
foreclosure or action in lieu thereof; provided, however, that the
indemnification set forth herein shall not extend to any act or omission by
Lender with respect to any property subsequent to Lender becoming the owner of
such property and with respect to which property such claim, loss, damage,
liability, fine, penalty, charge, proceeding, order, judgment, action, or
requirement arises subsequent to the acquisition of title thereto by Lender.
6.15. ERISA COMPLIANCE. Borrowers shall, and shall cause each of the
other Companies and each ERISA Affiliate to: (a) at all times, make prompt
payment of all contributions required under all Plans and required to meet the
minimum funding standards set forth in ERISA with respect to its Plan; (b)
within thirty (30) days after the filing thereof, furnish to Lender copies of
each annual report/return (Form 5500 series), as well as all schedules and
REVOLVING CREDIT AGREEMENT - PAGE 34
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(GAINSCO/Bank One)
36
attachments required to be filed with the Department of Labor and/or the
Internal Revenue Service pursuant to ERISA, and the regulations promulgated
thereunder, in connection with each of its Plans for each Plan year; (c) notify
Lender immediately of any fact including but not limited to, any Reportable
Event arising in connection with any of its Plans, which might constitute
grounds for termination thereof by the PBGC or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan,
together with a statement, if requested by Lender, as to the reason therefor
and the action, if any, proposed to be taken with respect thereto; and (d)
furnish to Lender upon its request, such additional information concerning any
of its Plans as may be reasonably requested.
6.16. YEAR 2000 COMPLIANCE.
(a) Borrowers shall furnish such additional information,
statements and other reports with respect to Borrowers' and the other
Companies activities, course of action and progress towards becoming
Year 2000 Compliant as Lender may request from time to time.
(b) In the event of any change in circumstances that causes or
will likely cause any of Borrowers' or any other Companies'
representations and warranties with respect to its being or becoming
Year 2000 Compliant to no longer be true (hereinafter, referred to as
a "CHANGE IN CIRCUMSTANCES") then Borrowers shall promptly, and in
any event within ten (10) days of receipt of information regarding a
Change in Circumstances, provide Lender with written notice (the
"NOTICE") that describes in reasonable detail the Change in
Circumstances and how much Change in Circumstances caused or will
likely cause Borrowers' or any other Company's representations and
warranties with respect to being or becoming Year 2000 Compliant to
no longer be true. Borrowers shall, within ten (10) days of a
request, also provide Lender with any additional information Lender
requests of Borrowers in connection with the Notice and/or Change in
Circumstances.
(c) Borrowers shall give any representative of Lender access
during all business hours to permit such representative to inspect
any of the properties and Systems of Borrower or any Subsidiary, and
to project test the Systems to determine if they are Year 2000
Compliant in an integrated environment, all at the sole cost and
expense of Lender.
6.17. REAL ESTATE COLLATERAL. Borrowers shall, and shall cause each
of the Grantor Subsidiaries to, promptly after the acquisition thereof, grant
to Lender a first priority deed of trust or mortgage lien on any parcel of real
property acquired by it having a market value of $1,000,000 or more, with the
documents and agreements governing such transaction to be satisfactory in form
and substance to Lender.
7. NEGATIVE COVENANTS
So long as Lender has any commitment to make Advances hereunder, and
until payment in full of the Obligation, Borrowers agree that (unless Lender
shall otherwise consent in writing):
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(GAINSCO/Bank One)
37
7.1. LIMITATION ON INDEBTEDNESS. Borrowers shall not, and shall not
permit any of the other Companies to, incur, guarantee, or otherwise be or
become, directly or indirectly, liable in respect of any Indebtedness, except
(a) Indebtedness arising out of this Agreement, (b) other Indebtedness the
existence of which does not result in any violation of any covenant contained
in this Agreement, including without limitation SECTIONS 7.16 or 7.17.
7.2. NEGATIVE PLEDGE. Borrowers shall not, and shall not permit any
of the other Companies to, create, incur, permit, or suffer to exist any Lien
upon any of its property or assets, now owned or hereafter acquired, except for
(a) Permitted Liens and (b) Liens securing the Obligation.
7.3. NEGATIVE PLEDGE AGREEMENTS. Borrowers shall not, and shall not
permit any of the other Companies to, enter into any agreement (excluding this
Agreement or any other Loan Documents) prohibiting the creation or assumption
of any Lien upon any of its property, revenues, or assets, whether now owned or
hereafter acquired, or the ability of any Subsidiary to make any payments,
directly or indirectly, to Borrowers by way of Dividends, advances, repayments
of loans, repayments of expenses, accruals, or otherwise.
7.4. RESTRICTIONS ON DIVIDENDS. GAINSCO shall not declare or make, or
incur any liability to make, any Dividend if an Event of Default then exists or
would exist after giving effect thereto. Borrowers shall not, and shall permit
any of the other Companies to, declare or make, or incur any liability to make,
any Dividend except to a Borrower.
7.5. LIMITATION ON INVESTMENTS. Borrowers shall not, and shall not
permit any of the other Companies to, make or have outstanding any Investments
in any Person, except for (a) the Companies' ownership of Stock of
Subsidiaries, (b) Cash Equivalent Investments and such other "cash equivalent"
investments as Lender may from time to time approve in writing, (c) advances to
employees and third parties not to exceed $100,000 in the aggregate at any time
outstanding, (d) advances by any Company to another Company, (e) acquisitions
of assets, including Stock, in the property and casualty insurance business
provided that the total consideration paid or contracted to be paid for such
acquisitions in any fiscal year of GAINSCO does not exceed the Acquisition/Sale
Cap, (f) Investments by any Insurance Subsidiary permitted by applicable law
made in the ordinary course of its business and (g) the Lalande Acquisition. No
Company shall make any earn-out or similar payment with respect to any
acquisition at any time that an Event of Default or Potential Default exists or
would result from such payment.
7.6. CERTAIN TRANSACTIONS. Borrowers shall not, and shall not permit
any of the other Companies to, enter into any transaction with, or pay any
management fees to, any Affiliate; provided, however, that (a) the Companies
may enter into transactions with (i) any other Company, and (ii) with
Affiliates (other than the Companies) upon terms not less favorable to the
Companies than would be obtainable at the time in comparable, arms-length
transactions with Persons other than Affiliates and (b) any Subsidiary of
GAINSCO may pay management and other fees to either Borrower.
7.7. MANAGEMENT AGREEMENT. Borrowers shall not permit to occur any
amendment or other modification to the Management Agreement.
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(GAINSCO/Bank One)
38
7.8. LIMITATION ON SALE OF PROPERTIES. Borrowers shall not, and shall
not permit any of the other Companies to (a) sell, assign, exchange, lease, or
otherwise dispose of any of its properties, rights, assets, or business,
whether now owned or hereafter acquired, except in the ordinary course of its
business and for a fair consideration, or (b) sell, assign, or discount any
accounts receivable, except that Borrowers and any Insurance Subsidiary may
sell its assets for cash to the extent that the proceeds from all such sales in
any fiscal year of GAINSCO do not exceed the lesser of (x) 10% of Consolidated
Net Worth as of the date of determination or (y) 10% of Consolidated Revenue
for such year (the "ACQUISITION/SALE CAP").
7.9. ACQUISITIONS; SUBSIDIARIES. Borrowers shall not, and shall not
permit any of the other Companies to, (a) form, incorporate, acquire, or make
any Investment in any Subsidiary, except the Subsidiaries listed on EXHIBIT D
or (b) acquire all or substantially all of the assets or Stock of any class of
any other Person, except for Investments permitted under SECTION 7.5.
7.10. LIQUIDATION, MERGERS, CONSOLIDATIONS, AND DISPOSITIONS OF
SUBSTANTIAL ASSETS. Borrowers shall not, and shall not permit any of the other
Companies to, dissolve or liquidate, or become a party to any merger or
consolidation, or acquire by purchase, lease, or otherwise all or substantially
all of the assets or Stock of any Person, or sell, transfer, lease, or
otherwise dispose of all or any substantial part of its property or assets or
business; except that.
(a) any Subsidiary of GAINSCO may be merged or consolidated with
or into either Borrower (provided that such Borrower shall be the
continuing or surviving corporation) or with any one or more
Subsidiaries of GAINSCO;
(b) any Subsidiary of GAINSCO may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary
liquidation or otherwise) to GAINSCO or any Subsidiary of GAINSCO;
(c) any Insurance Subsidiary may enter into any Reinsurance
Agreement in the ordinary course of business in accordance with its
normal underwriting, indemnity and retention policies, provided that
no Insurance Subsidiary shall enter into any transaction resulting in
Surplus Relief;
(d) sales of assets permitted by SECTION 7.8; and
(e) the sale of the capital stock or assets of APS for fair
consideration.
7.11. LINES OF BUSINESS; RECEIVABLES POLICY. Borrowers shall not, and
shall not permit any of the other Companies to, directly or indirectly, engage
in any business other than its existing business, or discontinue any of its
material existing lines of business. Borrowers shall not, and shall not permit
any of the other Companies to, make any material change in its credit and
collection policy, which change would materially impair the collectibility of
its receivables, or rescind, cancel, or modify any receivable, except in the
ordinary course of business.
7.12. FISCAL YEAR. Borrowers shall not, and shall not permit any of
the other Companies to, change its fiscal year or method of accounting.
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(GAINSCO/Bank One)
39
7.13. SURPLUS DEBENTURE. GSC shall not at any time amend, modify,
cancel, terminate or discharge, or waive compliance with, or fail to enforce,
the terms of the Surplus Debenture.
7.14. SALE AND LEASEBACK. Borrowers shall not, and shall not permit
any of the other Companies to, enter into any arrangement with any Person
pursuant to which any Company will lease, as lessee, any property which it
owned as of the date hereof and which it sold, transferred, or otherwise
disposed of to such other Person.
7.15. MINIMUM CONSOLIDATED NET WORTH. Borrowers shall not permit
Consolidated Net Worth, as of the last day of any fiscal quarter of GAINSCO, to
be less than the sum of (a) $85,000,000.00, plus (b) an amount equal to the sum
of fifty percent (50%) of Consolidated Net Income for each prior fiscal quarter
beginning with the quarter ending December 31, 1998 through the last day of the
fiscal quarter ending prior to or on the determination date. In making such
determination, (1) the amount determined pursuant to clause (b) shall be equal
to zero for any quarter for which there is a net loss and (2) the amounts
included in net income (determined in accordance with GAAP) resulting from
changes in accounting principles to the extent that such changes increase
intangibles shall not be included in net income for purposes of this
subsection.
7.16. FIXED CHARGES COVERAGE RATIO. Borrowers shall not, as of the
last day of any fiscal quarter of GAINSCO, permit the Fixed Charges Coverage
Ratio of GAINSCO to be less than 1.5 to 1.0 at any fiscal quarter end through
December 31, 2001 or 1.6 to 1.0 at any fiscal quarter end thereafter.
7.17. LEVERAGE RATIO. Borrowers shall not permit, as of the last day
of any fiscal quarter of GAINSCO, the ratio of (a) Total Debt to (b) Total
Capitalization to exceed 0.2 to 1.0.
7.18. RISK-BASED CAPITAL RATIO. Borrowers shall not permit the ratio
of the Total Adjusted Capital of GAIC or MGAIC at the end of any fiscal year to
the Company Action Level Risk-Based Capital of such Insurance Subsidiary on
such date to be less than 2.25 to 1.0.
7.19. MINIMUM STATUTORY SURPLUS. Borrowers shall not permit the
Statutory Surplus of GAIC to be less than (i) $67,000,000 as of the end of any
of GAIC's first three fiscal quarters in each fiscal year or (ii) $69,000,000
as of the end of any of its fiscal years.
7.20. CAPITAL EXPENDITURES. Borrowers shall not permit the Capital
Expenditures of GAINSCO and its Subsidiaries to exceed $1,000,000 in the
aggregate during any fiscal year.
7.21. MINIMUM STATUTORY EARNINGS. Borrowers shall not permit the
Statutory Earnings of GAIC to be less than (a) $2,250,000 for its fiscal year
ending December 31, 1999, (b) $4,500,000 for its fiscal year ending December
31, 2000, (c) $5,500,000 for its fiscal year ending December 31, 2001 and (d)
$6,000,000 for any fiscal year thereafter.
7.22. AMOUNT RECOVERABLE FROM REINSURERS. Borrowers will not permit,
with respect to any Insurance Subsidiary at the end of any of its fiscal
quarters, the Net Amount Recoverable from Reinsurers from reinsurers rated
below A- by either Standard & Poor's Rating Service or
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(GAINSCO/Bank One)
40
A.M. Best Company, Inc., the payment of which is not secured in a manner and to
an extent acceptable to such Insurance Subsidiary's Insurance Regulatory
Authority, to exceed 5% of the Statutory Surplus of such Insurance Subsidiary
on such date. In making such determination, amounts recoverable under Quota
Share Reinsurance Treaty attaching January 1, 1993 among GAIC, MGAIC and GCMIC
shall be excluded. Any reinsurer whose rating is downgraded below the rating
set forth above during a treaty year will be replaced at renewal if such
downgrading results in the noncompliance by Borrowers with this SECTION 7.22.
8. EVENTS OF DEFAULT
8.1. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any one
or more of the following events (herein collectively called "EVENTS OF
DEFAULT") shall occur and be continuing:
(a) any Borrower shall fail to pay when due any installment of
principal or interest on the Principal Debt or any part thereof; or
(b) any representation or warranty made under this Agreement, or
any of the other Loan Documents, shall prove to be untrue or
inaccurate in any material respect as of the date on which such
representation or warranty is made or deemed to have been made; or
(c) default shall occur in the performance of (i) any of the
covenants or agreements of either Borrower contained in SECTION 6.1
and SECTION 7, or (ii) any other covenants or agreements of any
Company contained herein or in any of the other Loan Documents and,
in the case of (II), such failure shall continue for fifteen (15)
days; or
(d) an Event of Default shall occur under any Collateral
Document (as such term is defined in such Collateral Document); or
(e) default shall occur in the payment of any material
Indebtedness (other than the Obligation) of any Company or default
shall occur in respect of any note or credit agreement relating to
any such Indebtedness and such default shall continue for more than
the period of grace, if any, specified therein; or
(f) any of the Loan Documents shall cease to be legal, valid,
and binding agreements enforceable against the Person executing the
same in accordance with its terms, shall be terminated, become or be
declared ineffective or inoperative or cease to provide the
respective liens, security interests, rights, titles, interests,
remedies, powers, or privileges intended to be provided thereby; or
any Borrower or Grantor Subsidiary shall deny that such Company has
any further liability or obligation under any of the Loan Documents;
or
(g) any Company shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian, intervenor, or
liquidator of itself or of all or a substantial part of such
Company's assets, (ii) file a voluntary petition in bankruptcy, admit
in writing that such Company is unable to pay such Company's debts as
they become due, or
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(GAINSCO/Bank One)
41
generally not pay such Company's debts as they become due, (iii) make
a general assignment for the benefit of creditors, (iv) file a
petition or answer seeking reorganization of an arrangement with
creditors or to take advantage of any bankruptcy or insolvency laws,
(v) file an answer admitting the material allegations of, or consent
to, or default in answering, a petition filed against such Company in
any bankruptcy, reorganization, or insolvency proceeding, or (vi)
take corporate or partnership action for the purpose of effecting any
of the foregoing; or
(h) an involuntary proceeding shall be commenced against any
Company seeking bankruptcy or reorganization of such Company or the
appointment of a receiver, custodian, trustee, liquidator, or other
similar official of such Company, or all or substantially all of such
Company's assets, and such proceeding shall not have been dismissed
within sixty (60) days of the filing thereof; or an order, order for
relief, judgment, or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a
petition or complaint seeking reorganization of any Company or
appointing a receiver, custodian, trustee, liquidator, or other
similar official of such Company, or of all or substantially all of
such Company's assets; or
(i) any final judgment(s) for the payment of money in excess of
the sum of $100,000.00 in the aggregate shall be rendered against any
Company and such judgment(s) shall not be satisfied or discharged, or
the enforcement thereof stayed by appropriate proceedings, at least
ten (10) days prior to the date on which any of such Person's assets
could be lawfully sold to satisfy such judgment; or
(j) GCMIC shall fail to make a scheduled payment on the Surplus
Debenture in accordance with the terms thereof; or
(k) (i) Any Governmental Authority shall issue any order of
conservation, supervision or any other order of like effect relating
to either Borrower or any Insurance Subsidiary, (ii) any License
shall be revoked, the revocation of which could cause a Material
Adverse Effect, or (iii) any insurance commissioner or any other
insurance regulator of any state intervenes or takes any formal steps
towards intervening in the management of the business or operations
of either Borrower or any Insurance Subsidiary or either Borrower or
any Insurance Subsidiary facilitates or takes any affirmative action
with the intention of facilitating such intervention; or
(l) a reserve adequacy report delivered pursuant to SECTION 6.2
indicates that the GAINSCO and its Insurance Subsidiaries shall have
reserves (net of reinsurance) of less than the higher of (a) the low
end of the adequacy range set forth in such report, if a range is
provided therein, and (b) 95% of the lower of (1) the midpoint of the
adequacy range set forth in such report, if a range is provided
therein and (2) the adequacy point estimate set forth in such report,
if any; provided that if at the time of the delivery of any such
report GAINSCO and its Insurance Subsidiaries do not have reserves as
provided above, no Event of Default shall occur under this SECTION
until the 60th day after the
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(GAINSCO/Bank One)
42
delivery of such report and then only if GAINSCO and its Insurance
Subsidiaries have failed to comply with the foregoing requirement
within such 60-day period; or
(m) a Change in Control shall occur.
8.2. REMEDIES UPON EVENT OF DEFAULT. If any Event of Default shall
occur and be continuing, then Lender may, without notice, exercise any one or
more of the following rights and remedies, and any other remedies provided in
any of the Loan Documents, as Lender in its sole discretion may deem necessary
or appropriate: (a) terminate Lender's commitment to lend hereunder, (b)
declare the Obligation or any part thereof to be forthwith due and payable,
whereupon the same shall forthwith become due and payable without presentment,
demand, protest, notice of default, notice of acceleration or of intention to
accelerate, or other notice of any kind, all of which Borrowers hereby
expressly waive, anything contained herein or in the Note to the contrary
notwithstanding, (c) reduce any claim to judgment, or (d) without notice of
default or demand, pursue and enforce any of Lender's rights and remedies under
the Loan Documents, or otherwise provided under or pursuant to any applicable
law or agreement; provided, however, if any Event of Default specified in
SECTIONS 8.1(G) or (H) shall occur, then the Obligation shall thereupon become
due and payable concurrently therewith, and Lender's obligation to lend shall
immediately terminate hereunder, without any further action by Lender and
without presentment, demand, protest, notice of default, notice of acceleration
or of intention to accelerate, or other notice of any kind, all of which
Borrowers hereby expressly waive.
8.3. PERFORMANCE BY LENDER. If any Company fails to perform any
covenant, duty, or agreement contained in any of the Loan Documents, then
Lender may perform or attempt to perform such covenant, duty, or agreement on
behalf of such Company. In such event, Borrowers shall, at the request of
Lender, promptly pay any amount expended by Lender in such performance or
attempted performance to Lender at its principal office in Dallas, Texas
together with interest thereon at the Maximum Rate from the date of such
expenditure until paid. Notwithstanding the foregoing, it is expressly
understood that Lender shall not assume any liability or responsibility for the
performance of any duties of any Company hereunder or under any of the Loan
Documents and none of the covenants or other provisions contained in this
Agreement shall, or shall be deemed to, give Lender the right or power to
exercise control over the management and affairs of any Company.
8.4. ORDER OF APPLICATION.
(a) NO DEFAULT. If no Event of Default exists, then except as
specifically provided in the Loan Documents, any payments shall be
applied to the Obligation in the order and manner as Borrowers
direct.
(b) DEFAULT. If an Event of Default exists, then any payment
(including proceeds from the exercise of any rights and remedies in
the Collateral) shall be applied in the following order:
(i) to all fees and expenses which Lender has not been paid
or reimbursed in accordance with the Loan Documents;
REVOLVING CREDIT AGREEMENT - PAGE 41
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(GAINSCO/Bank One)
43
(ii) to accrued interest on the Principal Debt; and
(iii) to the remaining Obligation in the order and manner
as Lender deems appropriate.
9. MISCELLANEOUS
9.1. ACCOUNTING REPORTS. All financial reports or projections
furnished by any Person to Lender pursuant to this Agreement shall be prepared
in such form and such detail as shall be satisfactory to Lender, shall be
prepared on the same basis as those prepared by such Person in prior years,
and, where applicable, shall be the same financial reports and projections as
those furnished to such Person's officers and directors.
9.2. WAIVER. No failure to exercise, and no delay in exercising, on
the part of Lender, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of Lender under
the Loan Documents shall be in addition to all other rights provided by law. No
modification or waiver of any provision of any Loan Document, nor consent to
departure therefrom, shall be effective unless in writing and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar, or other instances without such notice
or demand.
9.3. PAYMENT OF EXPENSES. Borrowers agree to pay Lender on demand all
out-of-pocket costs and expenses of Lender (including, without limitation, the
reasonable attorneys' fees of Lender's counsel) incurred in connection with the
preservation and enforcement of Lender's rights under the Loan Documents, and
all reasonable costs and expenses of Lender (including without limitation the
reasonable fees and expenses of Lender's counsel) in connection with the
negotiation, preparation, execution, delivery, and administration of the Loan
Documents.
9.4. NOTICES. Any communications required or permitted to be given by
any of the Loan Documents must be (a) in writing and personally delivered or
mailed by prepaid certified or registered mail, or (b) made by facsimile
transmission delivered or transmitted, to the party to whom such notice of
communication is directed, to the address of such party shown opposite its name
on the signature pages hereof. Any such communication shall be deemed to have
been given (whether actually received or not) on the day it is personally
delivered or, if transmitted by facsimile transmission, on the day that such
communication is transmitted as aforesaid subject to telephone confirmation of
receipt; provided, however, that any notice received by Lender after 10:00 a.m.
Dallas, Texas time on any day from Borrowers pursuant to SECTION 2.2 (with
respect to a Notice of Borrowing) shall be deemed for the purposes of such
SECTION to have been given by Borrowers on the next succeeding day, or if
mailed, on the fifth (5th) day after it is marked as aforesaid. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to this SECTION 9.4.
9.5. GOVERNING LAW. THIS AGREEMENT HAS BEEN PREPARED, IS BEING
EXECUTED AND DELIVERED, AND IS INTENDED TO BE PERFORMED IN THE STATE OF TEXAS
AND THE SUBSTANTIVE LAWS OF
REVOLVING CREDIT AGREEMENT - PAGE 42
--------------------------
(GAINSCO/Bank One)
44
SUCH STATE AND THE APPLICABLE FEDERAL LAWS OF THE UNITED STATES OF AMERICA
SHALL GOVERN THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF
THIS AGREEMENT AND ALL OF THE OTHER LOAN DOCUMENTS.
9.6. CHOICE OF FORUM; CONSENT TO SERVICE OF PROCESS AND JURISDICTION.
Any suit, action, or proceeding against Borrowers with respect to this
Agreement, the Note, or other Loan Documents, or any judgment entered by any
court in respect thereof, may be brought in the courts of the State of Texas,
County of Dallas, or in the United States courts located in the State of Texas
as Lender in its sole discretion may elect and Borrowers hereby irrevocably
submit to the nonexclusive jurisdiction of such courts for the purpose of any
such suit, action, or proceeding. Borrowers hereby irrevocably consent to the
service of process in any suit, action, or proceeding in said court by the
mailing thereof by Lender by registered or certified mail, postage prepaid, to
each Borrower's address shown opposite its name on the signature pages hereof.
Nothing herein or in any of the other Loan Documents shall affect the right of
Lender to serve process in any other manner permitted by law or shall limit the
right of Lender to bring any action or proceeding against Borrowers or with
respect to any of its property in courts in other jurisdiction. Borrowers
hereby irrevocably waive any objections which it may now or hereafter have to
the laying of venue of any suit, action, or proceeding arising out of or
relating to this Agreement, the Note, or any other Loan Documents brought in
the courts located in the State of Texas, County of Dallas, and hereby further
irrevocably waive any claim that any such suit, action, or proceeding brought
in any such court has been brought in any inconvenient forum. Any action or
proceeding by any Borrower against Lender shall be brought only in a court
located in Dallas County, Texas.
9.7. INVALID PROVISIONS. Any provision of any Loan Document held by a
court of competent jurisdiction to be illegal, invalid or unenforceable and
shall not invalidate the remaining provisions of such Loan Document which shall
remain in full force and the effect thereof shall be confined to the provision
held invalid or illegal.
9.8. MAXIMUM INTEREST RATE. Regardless of any provision contained in
any of the Loan Documents, Lender shall never be entitled to receive, collect,
or apply as interest (whether termed interest herein or deemed to be interest
by operation of law or judicial determination) on the Note any amount in excess
of interest calculated at the Maximum Rate, and, in the event that any Lender
ever receives, collects, or applies as interest any such excess, then the
amount which would be excessive interest shall be deemed to be a partial
prepayment of principal and treated hereunder as such; and, if the principal
amount of the Obligation is paid in full, then any remaining excess shall
forthwith be paid to Borrowers. In determining whether or not the interest paid
or payable under any specific contingency exceeds interest calculated at the
Maximum Rate, Borrowers and Lender shall, to the maximum extent permitted under
applicable law: (a) characterize any non-principal payment as an expense, fee,
or premium rather than as interest; (b) exclude voluntary prepayments and the
effects thereof; and (c) amortize, prorate, allocate, and spread, in equal
parts, the total amount of interest throughout the entire contemplated term of
the Note; provided that, if the Note is paid and performed in full prior to the
end of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds interest calculated at the Maximum
Rate, then Lender shall refund to
REVOLVING CREDIT AGREEMENT - PAGE 43
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(GAINSCO/Bank One)
45
Borrowers the amount of such excess or credit the amount of such excess against
the principal amount of the Note and, in such event, Lender shall not be
subject to any penalties provided by any laws for contracting for, charging,
taking, reserving, or receiving interest in excess of interest calculated at
the Maximum Rate.
9.9. NON-LIABILITY OF LENDER. The relationship between the Companies
and Lender is, and shall at all times remain, solely that of borrower and
lender and Lender has no fiduciary or other special relationship with any
Company.
9.10. SET-OFF. If an Event of Default shall have occurred and be
continuing Lender is hereby authorized at any time and from time to time,
without notice to Borrowers (any such notice being hereby expressly waived by
Borrowers), to set-off and apply any and all deposits (general, special time,
demand, provisional, or final) at any time held and other indebtedness at any
time owing by Lender to or for the credit or the account of either Borrower
against any and all of the Obligation, irrespective of whether or not Lender
shall have made any demand under such Loan Documents and although such
Obligation may be unmatured. Lender agrees promptly to notify Borrowers after
any such set-off and application; provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights and
remedies of Lender hereunder are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which Lender may have.
9.11. SUCCESSORS AND ASSIGNS. The Loan Documents shall be binding
upon and inure to the benefit of Borrowers and Lender and their respective
successors, assigns, and legal representatives; provided, however, that
Borrowers may not, without the prior written consent of Lender, assign any
rights, powers, duties, or obligations thereunder. Lender reserves the right to
sell all or a portion of its interest in the Loan Documents, and Lender shall
have the right to disclose any information in its possession regarding any
Company, or any assets pledged to Lender in connection herewith to any
potential transferee of the Note or any part thereof.
9.12. TEXAS FINANCE CODE. Borrowers and Lender hereby agree that the
provisions of Chapter 346 of the Texas Finance Code, as amended (regulating
certain revolving credit loans and revolving tri-party accounts), shall not
apply to the Loan Documents.
9.13. HEADINGS. SECTION headings are for convenience of reference
only and shall in no way affect the interpretation of this Agreement.
9.14. SURVIVAL. All representations and warranties made by Borrowers
herein shall survive delivery of the Note and the making of the Loan.
9.15. PARTICIPATIONS. Lender shall have the right to enter into
participation agreements with other banks with respect to the Note, and grant
participations in the rate of other loan documents but such participation shall
not affect the rights and duties of such Lender hereunder vis-a-vis Borrowers.
Each actual or proposed participant shall be entitled to receive all
information received by Lender regarding the creditworthiness of Borrowers,
including, without limitation, information required to be disclosed to a
participant pursuant to Banking Circular 181
REVOLVING CREDIT AGREEMENT - PAGE 44
--------------------------
(GAINSCO/Bank One)
46
(Rev., August 2, 1984), issued by the Comptroller of the Currency (whether the
actual or proposed participant is subject to the circular or not).
9.16. NO THIRD PARTY BENEFICIARY. The parties do not intend the
benefits of this Agreement to inure to any third party, nor shall any Loan
Document or any course of conduct by any party hereto be construed to make or
render Lender or any of its officers, directors, agents, or employees liable
(a) to any materialman, supplier, contractor, subcontractor, purchaser, or
lessee of any property owned by any Borrower, or (b) for debts or claims
accruing to any such Persons against any Borrower.
9.17. WAIVER OF JURY TRIAL. BORROWERS AND LENDER HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) BETWEEN OR AMONG BORROWERS AND LENDER ARISING OUT OF OR IN ANY WAY
RELATED TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, OR ANY RELATIONSHIP BETWEEN
LENDER AND BORROWERS. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO
PROVIDE THE FINANCING DESCRIBED HEREIN.
9.18. CAPITAL ADEQUACY. If, after the date hereof, Lender shall have
determined that either (a) the adoption of any applicable law, rule,
regulation, or guideline regarding capital adequacy, or any change therein, or
any change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation
or administration thereof, or (b) compliance by Lender (or any lending office
of Lender) with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank, or comparable
agency, has or would have the effect of reducing the rate of return on Lender's
capital as a consequence of its or Borrowers' obligations hereunder to a level
below that which Lender could have achieved but for such adoption, change, or
compliance (taking into consideration Lender's policies with respect to capital
adequacy) by an amount deemed by Lender to be material, then from time-to-time,
within ten (10) days after demand by Lender, Borrowers shall pay to Lender such
additional amount or amounts as will adequately compensate Lender for such
reduction. Lender will promptly notify Borrowers of any event of which it has
actual knowledge, occurring after the date thereof, which will entitle Lender
to compensation pursuant to this SECTION 9.18. A certificate of Lender claiming
compensation under this SECTION 9.18 and setting forth the additional amount or
amounts to be paid to it hereunder, together with the description of the manner
in which such amounts have been calculated, shall be conclusive in the absence
of manifest error. In determining such amount, Lender may use any reasonable
averaging and attribution methods.
9.19. MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same agreement, and any of the parties hereto may execute this Agreement by
signing any such counterpart.
REVOLVING CREDIT AGREEMENT - PAGE 45
--------------------------
(GAINSCO/Bank One)
47
9.20. ARBITRATION. LENDER AND BORROWERS AGREE THAT UPON THE WRITTEN
DEMAND OF ANY OF THEM, WHETHER MADE BEFORE OR AFTER THE INSTITUTION OF ANY
LEGAL PROCEEDINGS, BUT PRIOR TO THE RENDERING OF ANY JUDGMENT IN THAT
PROCEEDING, ALL DISPUTES, CLAIMS AND CONTROVERSIES BETWEEN THEM, WHETHER
INDIVIDUAL, JOINT, OR CLASS IN NATURE, ARISING FROM THIS AGREEMENT, ANY LOAN
DOCUMENT OR OTHERWISE, INCLUDING WITHOUT LIMITATION CONTRACT DISPUTES AND TORT
CLAIMS, SHALL BE RESOLVED BY BINDING ARBITRATION PURSUANT TO THE COMMERCIAL
RULES OF THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). ANY ARBITRATION
PROCEEDING HELD PURSUANT TO THIS ARBITRATION PROVISION SHALL BE CONDUCTED IN
THE CITY NEAREST THE BORROWERS' ADDRESS HAVING AN AAA REGIONAL OFFICE, OR AT
ANY OTHER PLACE SELECTED BY MUTUAL AGREEMENT OF THE PARTIES. NO ACT TO TAKE OR
DISPOSE OF ANY COLLATERAL SHALL CONSTITUTE A WAIVER OF THIS ARBITRATION
PROVISION OR BE PROHIBITED BY THIS ARBITRATION PROVISION. THIS ARBITRATION
PROVISION SHALL NOT LIMIT THE RIGHT OF EITHER PARTY DURING ANY DISPUTE, CLAIM
OR CONTROVERSY TO SEEK, USE AND EMPLOY ANCILLARY, OR PRELIMINARY RIGHTS AND/OR
REMEDIES, JUDICIAL OR OTHERWISE, FOR THE PURPOSES OF REALIZING UPON,
PRESERVING, PROTECTING, FORECLOSING UPON OR PROCEEDING UNDER FORCIBLE ENTRY AND
DETAINER FOR POSSESSION OF, ANY REAL OR PERSONAL PROPERTY, AND ANY SUCH ACTION
SHALL NOT BE DEEMED AN ELECTION OF REMEDIES. SUCH REMEDIES INCLUDE, WITHOUT
LIMITATION, OBTAINING INJUNCTIVE RELIEF OR A TEMPORARY RESTRAINING ORDER,
INVOKING A POWER OF SALE UNDER ANY DEED OF TRUST OR MORTGAGE, OBTAINING A WRIT
OF ATTACHMENT OR IMPOSITION OF A RECEIVERSHIP, OR EXERCISING ANY RIGHTS
RELATING TO PERSONAL PROPERTY, INCLUDING EXERCISING THE RIGHT OF SET-OFF, OR
TAKING OR DISPOSING OF SUCH PROPERTY WITH OR WITHOUT JUDICIAL PROCESS PURSUANT
TO THE UNIFORM COMMERCIAL CODE. ANY DISPUTES, CLAIMS OR CONTROVERSIES
CONCERNING THE LAWFULNESS OR REASONABLENESS OF AN ACT, OR EXERCISE OF ANY RIGHT
OR REMEDY CONCERNING ANY COLLATERAL, INCLUDING ANY CLAIM TO RESCIND, REFORM OR
OTHERWISE MODIFY ANY AGREEMENT RELATING TO THE COLLATERAL, SHALL ALSO BE
ARBITRATED; PROVIDED, HOWEVER, THAT NO ARBITRATOR SHALL HAVE THE RIGHT OR THE
POWER TO ENJOIN OR RESTRAIN ANY ACT OF EITHER PARTY. JUDGMENT UPON ANY AWARD
RENDERED BY ANY ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE
STATUTE OF LIMITATIONS, ESTOPPEL, WAIVER, LACHES AND SIMILAR DOCTRINES WHICH
WOULD OTHERWISE BE APPLICABLE IN AN ACTION BROUGHT BY A PARTY SHALL BE
APPLICABLE IN ANY ARBITRATION PROCEEDING, AND THE COMMENCEMENT OF AN
ARBITRATION PROCEEDING SHALL BE DEEMED THE COMMENCEMENT OF ANY ACTION FOR THESE
PURPOSES. THE FEDERAL ARBITRATION ACT (TITLE 9 OF THE UNITED STATES CODE) SHALL
APPLY TO THE CONSTRUCTION, INTERPRETATION AND ENFORCEMENT OF THIS ARBITRATION
PROVISION.
9.21. ENTIRETY. THIS AGREEMENT, THE NOTE, AND THE OTHER LOAN
DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE
PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO. THE
PROVISIONS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH ANY BORROWER
IS A PARTY MAY BE AMENDED OR WAIVED ONLY BY AN INSTRUMENT IN WRITING SIGNED BY
THE PARTIES HERETO.
REVOLVING CREDIT AGREEMENT - PAGE 46
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(GAINSCO/Bank One)
48
9.22. CONFIDENTIALITY. Lender agrees to keep confidential any
information furnished or made available to it by any Company pursuant to this
Agreement that is marked confidential; provided that nothing herein shall
prevent Lender from disclosing such information (a) to any Affiliate of Lender,
or any officer, director, employee, agent, or advisor of Lender or any
Affiliate of Lender, (b) to any other Person if reasonably incidental to the
administration of the credit facility provided herein, (c) as required by any
Legal Requirement, (d) upon the order of any court or administrative agency,
(e) upon the request or demand of any Governmental Authority, (f) that is or
becomes available to the public or that otherwise becomes available to Lender
other than as a result of a disclosure by Lender prohibited by this Agreement,
(g) in connection with any litigation to which Lender or any of its Affiliates
may be a party, (h) to the extent necessary in connection with the exercise of
any remedy under this Agreement or any other Loan Document, and (i) subject to
provisions substantially similar to those contained in this SECTION, to any
actual or proposed participant or assignee.
[SIGNATURE PAGE FOLLOWS]
REVOLVING CREDIT AGREEMENT - PAGE 47
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(GAINSCO/Bank One)
49
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the day and year first above written.
Addresses for Notice: BORROWERS:
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GAINSCO, INC.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President and
Chief Executive Officer
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ GAINSCO SERVICE CORP.
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Senior Vice President and
Chief Financial Officer
LENDER:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, 4th Floor BANK ONE, TEXAS, NATIONAL ASSOCIATION
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Vice President
REVOLVING CREDIT AGREEMENT - PAGE 48
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(GAINSCO/Bank One)