RESTATED REVOLVING CREDIT AGREEMENT
dated as of
July 10, 1996
between
AMWEST INSURANCE GROUP, INC.
("Borrower")
and
UNION BANK OF CALIFORNIA, N.A.
( "Bank" )
$17,500,000
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Page(s)
SECTION 1.1 Definitions 1
SECTION 1.2 Accounting Terms and Determinations 12
SECTION 1.3 Computation of Time Periods 13
SECTION 1.4 Construction 13
SECTION 1.5 Exhibits and Schedules 13
SECTION 1.6 No Presumption Against Any Party 13
SECTION 1.7 Independence of Provisions 13
ARTICLE II
THE CREDIT
SECTION 2.1 The Revolving Commitment 14
SECTION 2.2 Payment of Excess Obligations 14
SECTION 2.3 Interest Rates 14
SECTION 2.4 Notice of Borrowing Requirements 15
SECTION 2.5 Conversion or Continuation Requirements 16
SECTION 2.6 Eurodollar Costs 17
SECTION 2.7 Special Eurodollar Circumstances 18
SECTION 2.8 Revolving Note; Statements of Obligations 18
SECTION 2.9 Holidays 19
SECTION 2.10 Time and Place of Payments 19
SECTION 2.11 Fees 19
SECTION 2.12 Mandatory Commitment Reductions 20
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 3.1 Due Organization 20
SECTION 3.2 Requisite Power 21
SECTION 3.3 Binding Agreements 21
SECTION 3.4 No Conflict 21
SECTION 3.5 Litigation 21
SECTION 3.6 Consents 22
SECTION 3.7 Financial Statements and Condition 22
SECTION 3.8 Use of Loans Proceeds 22
SECTION 3.9 Regulation U 22
SECTION 3.10 Tax Returns 22
SECTION 3.11 Trademarks, Licenses, etc 23
SECTION 3.12 Burdensome Agreements, etc 23
SECTION 3.13 Title and Liens 23
SECTION 3.14 Other Information 23
SECTION 3.15 Existing Defaults 23
SECTION 3.16 Leases 24
SECTION 3.17 Casualty 24
SECTION 3.18 Investment Company Act 24
SECTION 3.19 Public Utility Holding Company Act 24
SECTION 3.20 Disclosure 24
SECTION 3.21 Location of Chief Executive Office 24
SECTION 3.22 No Default 25
SECTION 3.23 No Pension Fund Irregularities 25
SECTION 3.24 Compliance With Law 25
ARTICLE IV
CONDITIONS TO LOANS
SECTION 4.1 Conditions Precedent to the Loans 26
ARTICLE V
AFFIRMATIVE COVENANTS
SECTION 5.1 Accounting Records 27
SECTION 5.2 Financial Statements and Reports 27
SECTION 5.3 Corporate Existence 30
SECTION 5.4 Compliance With Law 30
SECTION 5.5 Insurance 31
SECTION 5.6 Properties 31
SECTION 5.7 Taxes and Other Liabilities 31
SECTION 5.8 Tax Returns 31
SECTION 5.9 Fixed Charge Coverage Ratio 31
SECTION 5.10 (Intentionally Deleted) 32
SECTION 5.11 Tangible Net Worth 32
SECTION 5.12 Net Profit 32
SECTION 5.13 Policyholders' Surplus 32
SECTION 5.14 Operating Leverage Ratio 32
SECTION 5.15 A.M. Best Rating 32
SECTION 5.16 Investment Portfolio Quality 32
SECTION 5.17 Pension Plan Funding 32
SECTION 5.18 Reinsurance Contract 33
SECTION 5.19 Storage and Protection of Data 33
ARTICLE VI
NEGATIVE COVENANTS
SECTION 6.1 Mergers, Consolidations 34
SECTION 6.2 Sale of Assets 34
SECTION 6.3 Liens 34
SECTION 6.4 Contingent Obligations 35
SECTION 6.5 Conduct of Business 35
SECTION 6.6 Transactions with Shareholders 36
SECTION 6.7 Restrictive Agreements 36
SECTION 6.8 Debt 36
SECTION 6.9 Dividends 36
SECTION 6.10 Leases 37
SECTION 6.11 Stock 37
SECTION 6.12 Prepayment and Repayment of Debt 37
SECTION 6.13 Sale-Leasebacks 37
SECTION 6.14 Misrepresentations 37
SECTION 6.15 Partnerships 37
SECTION 6.16 Subsidiaries Debt and Liens 37
SECTION 6.17 Changes in Location of Chief Executive Office 38
SECTION 6.18 Loss Reserves 38
SECTION 6.19 Surplus Note 38
SECTION 6.20 Capitalized Expenditures 38
SECTION 6.21 Acquisitions 38
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 Events of Default 39
SECTION 7.2 Remedies 41
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Waivers, Modifications in Writing 41
SECTION 8.2 Failure or Delay 42
SECTION 8.3 Notices, etc 42
SECTION 8.4 Costs and Expenses 42
SECTION 8.5 Sale of Participation 43
SECTION 8.6 Headings 43
SECTION 8.7 Execution in Counterparts 43
SECTION 8.8 Binding Effect; Assignment 43
SECTION 8.9 Severability of Provisions 43
SECTION 8.10 Publicity 44
SECTION 8.11 Complete Agreement 44
SECTION 8.12 Governing Law and Venue 44
SECTION 8.13 Dispute Resolution 44
EXHIBITS AND SCHEDULES
Schedule 1 Reserved
Schedule 2 Permitted Liens
Schedule 3 Contingent Obligations
Schedule 4 Permitted Debt
Schedule 5 Permitted Partnerships
Schedule 6 Litigation
Exhibit 1 Surplus Note
Exhibit 2 Notice of Borrowing
Exhibit 3 Notice of Continuation or Conversion
Exhibit 4 Compliance Certificate
RESTATED REVOLVING CREDIT AGREEMENT
This RESTATED REVOLVING CREDIT AGREEMENT, dated as of July 10,
1996, is entered into between Borrower and Bank.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
SECTION 1.1 Definitions. The following terms, as used herein, shall
have the following meanings:
"Affiliate" means, with respect to any designated Person, any Person
that, directly or indirectly, controls, is controlled by or is under common
control with such designated Person; and, for purposes of the foregoing
"control" (including "controlled by" and "under common control with") with
respect to any Person shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through the ownership of voting securities, by contract or
otherwise. An "Affiliate" of Borrower shall not include ▇▇▇▇▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇.
"Agreement" means this Revolving Credit Agreement, together with any
concurrent or subsequent rider, amendment, schedule or exhibit to this Revolving
Credit Agreement.
"Applicable Base Rate Margin" and "Applicable Eurodollar Rate Margin"
means the percentage per annum set forth in the table below opposite the
Interest Coverage for the most recently ended four fiscal quarters for which
Financial Statements have been delivered to Bank pursuant to Sections 5.2(a) or
5.2(b) and the Interest Rate Leverage Ratio as of the end of such the last
quarter or, if the respective percentages per annum set forth opposite such
Interest Coverage and such Interest Rate Leverage Ratio are different, the
higher of such percentages per annum.
Interest Rate Applicable
Applicable Applicable
Leverage Ratio Base Lending Rate Eurodollar Lending
Margin Margin
.30 less than x .50% 2.00%
.25 less than x less than .30 .25% 1.75%
.20 less than x less than .25 .00% 1.50%
.15 less than x less than .20 .00% 1.25%
x less than .15 .00% 1.00%
"ASIC" means Amwest Surety Insurance Company, a Subsidiary of
the Borrower.
"Asset" means any interest of a Person in any kind of property
or asset, whether real, personal, or mixed real and personal, and whether
tangible or intangible.
"Bank" means Union Bank of California, N.A., successor
in interest to Union Bank, a California banking corporation. "Bank" or
"Union Bank" when referred to in this agreement shall mean Union
Bank of California, N. A.
"Bank Expenses" means all costs or expenses paid or advanced
by Bank which are required to be paid by Borrower under this Agreement and all
other documents executed in connection herewith; taxes and insurance premiums of
every nature and kind of Borrower paid by Bank; appraisal, filing, recording,
documentation, publication and search fees paid or incurred by Bank to correct
any default or enforce any provision of this Agreement and all other documents
executed in connection herewith; to the extent reimbursable under Section 8.4,
costs and expenses of suit or arbitration proceeding incurred by Bank in
enforcing or defending this Agreement, or any portion hereof, and reasonable
attorneys' fees and expenses incurred by Bank in structuring, drafting,
reviewing, amending, terminating, enforcing, defending or concerning this
Agreement and all other documents executed in connection herewith, whether or
not suit is brought, such attorneys' fees to include the reasonable estimate of
the allocated costs and expense of Bank's legal counsel and professional staff.
All Bank Expenses paid or incurred by Bank shall be considered to be, and shall
become a part of the Obligations, are payable, except as otherwise provided
herein, within 10 days after demand, and if not reimbursed, shall immediately
thereafter bear interest, together with all other amounts to be paid by Borrower
pursuant hereto at the Base Rate.
"Bank's Fees" means the Revolving Commitment Fee.
"Bankruptcy Code" means The Bankruptcy Reform Act of 1978
(Pub. L. No. 95-598; 11 U.S.C. Section 101-1330), as amended or supplemented
from time to time, or any successor statute, and any and all rules and
regulations issued or promulgated in connection therewith.
"Base Rate" means the sum of the Reference Rate Plus the
Applicable Base Rate Margin.
"Base Rate Borrowing" means any Borrowing designated by
Borrower as bearing the Base Rate pursuant to Section 2.3(a) or 2.5(a) .
"Base LIBOR" means the offered quotation, if any, to
first-class banks in the Eurodollar market by Bank for U.S. Dollar deposits of
amounts in funds comparable to the principal amount of the Eurodollar Rate
Borrowing for which the Eurodollar Rate is being determined with maturities
comparable to the Interest Period for which such Eurodollar Rate will apply as
of approximately 10:00 a.m., California time, two (2) Eurodollar Business Days
prior to the commencement of such Interest Period.
"Borrower" means AMWEST INSURANCE GROUP, INC.
"Business Day" means a borrowing pursuant to the terms of
Section 2.1 consisting of Revolving Loans made by Bank to Borrower.
"Business Day" means any day other than a Saturday, a Sunday,
or a day on which commercial banks in the City of Los Angeles, California are
authorized or required by law or executive order or decree to close.
"Cash Equivalents" means, when used in connection with any
Person, that Person's Investment in:
(a) Government Securities due within one year after the date
of determination;
(b) Readily marketable direct obligations of any State of the
United States of America or any political subdivision of any such State given on
the date of such investment a credit rating of at least A by Moody's Investments
Service, Inc. or A by Standard & Poor's Corporation, in each case due within one
year from the date of determination;
(c) Certificates of deposit issued by, bank deposits in,
eurodollar deposits through, bankers' acceptances of, and reverse repurchase
agreements covering Government Securities ("Qualified Bank Deposits") executed
by, the Bank or any other bank, savings and loan or savings bank doing business
in and incorporated under the Laws of the United States of America or any State
thereof and having on the date of such Investment combined capital, surplus and
undivided profits of at least $250,000,000 ("Qualified Domestic Institutions"),
in each case due within one year after the date of determination;
(d) Qualified Bank Deposits executed by, any branch or office
located in the United States of America of a bank incorporated under the Laws of
any jurisdiction outside the United States of America having on the date of such
Investment combined capital, surplus and undivided profits of at least
$500,000,000 ("Qualified Foreign Institution"), in each case due within one year
after the date of determination;
(e) Readily marketable commercial paper of corporations doing
business in and incorporated under the Laws of the United States of America or
any State thereof given on the date of such Investment the highest or second
highest credit rating by ▇▇▇▇▇'▇ Investors Service, Inc. and Standard & Poor's
Corporation, in each case due within 270 days after the date of the
determination;
(f) Money Market Funds investing in securities otherwise
constituting Cash Equivalents;
Provided that, the portion of Qualified Bank Deposits not executed by a
Qualified Domestic Institution, or Qualified Foreign Institution, which are
insured by the Federal Deposit Insurance Corporation, the Federal Savings and
Loan Insurance Corporation or the Securities Investor Protection Corporation
shall be considered Cash Equivalents.
"Capitalized Expenditures" means, when used in connection with
any Person, any expenditure by such Person that, in conformity with GAAP, has
been or should be included in the furniture equipment and improvements reflected
in the Person's balance sheet, excluding, however, any Investment.
"Capital Surplus" means the "surplus as regards policyholders"
of ASIC and its Subsidiaries as set forth in the consolidated statements of ASIC
and its Subsidiaries as filed with the California Department of Insurance.
"Closing Date" means July 10, 1996.
"Commitment Reduction" means, for each applicable Revolving
Commitment Reduction Date, that amount expressed in Dollars indicated in the
table in Section 2.12 opposite the applicable Revolving Commitment Reduction
Date.
"Contingent Obligation" means, as to any Person, any (a)
direct or indirect guarantee of Indebtedness of, or other obligation performable
by, any other Person, including any endorsement (other than for collection or
deposit in the ordinary course of business), co-making or sale with recourse of
the obligations of any other Person or (b) assurance given to an obligee with
respect to the performance of an obligation by, or the financial condition of,
any other Person, whether direct, indirect or contingent, including any purchase
or repurchase agreement covering such obligation or any collateral security
therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item to such other Person, or any
"keep-well", "take-or-pay" or "through put" or any other arrangement of whatever
nature having the effect of assuring or holding harmless any obligee against
loss with respect to any obligation of such other Person. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the related primary obligation (unless the Contingent
Obligation is limited by its terms to a lesser amount, in which case to the
extent of such amount) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by the Person in good
faith, provided however, Contingent Obligation shall not include surety bonds
and other insurance products issued by the Borrower or any of its subsidiaries
in the ordinary course of Borrower or its Subsidiaries business.
"Credit Document(s)" means each of the following documents,
instruments, and agreements individually or collectively, as the context
requires:
(i) the Revolving Note; and
(ii) such other documents, instruments,and agreements
as Bank may reasonably request in connection with the transactions contemplated
hereunder.
"Daily Balances" means the amount determined by taking the
amount of the obligations owed under the Revolving Loans at the beginning of a
given day, adding any new obligations advanced or incurred on such date, and
subtracting any payments or collections which are deemed to be paid on that date
under the provisions of this Agreement.
"Debt" means the outstanding aggregate principal balance of
the Revolving Loans plus all of Borrower's consolidated Capitalized Lease
Obligations and any indebtedness heretofore or hereafter created, issued,
guaranteed, incurred or assumed by Borrower (directly or indirectly) for or in
respect of money borrowed or for or in respect of the deferred purchase price of
property or services purchased (other than trade accounts payable arising in the
ordinary course of business).
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Dollars" or "$" means lawful currency of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and unless the context otherwise requires,
the regulations thereunder.
"ERISA Affiliate" means the Borrower and all members of a
controlled group of corporations and all trades or businesses (irrespective of
whether incorporated) under common control that, together with the Borrower, are
treated as a single employer under subsection (b), (c), (m) or (o) of Section
414 of the Internal Revenue Code or the regulations promulgated thereunder.
"ERISA Group" means Borrower and all members of a controlled
group of corporations and all trades or businesses (whether or not incorporated)
under common control which, together with such Borrower are treated as a single
employer under Section 414 of the Internal Revenue Code.
"Eurodollar Business Day" means any Business Day on which
major commercial banks are open for international business (including dealings
in Dollar deposits) in Los Angeles, California and London, England.
"Eurodollar Rate" means, with respect to a Eurodollar Rate
Borrowing, the rate per annum (rounded upwards if necessary to the nearest whole
one-hundredth of one percent (.01%)), determined as the sum of: (a) the quotient
of:
(i) Base LIBOR for the relevant Interest Period; divided by
(ii) the number (expressed as a decimal) equal to one hundred percent
(100%) in the LIBOR Reserve Percentage; plus (b) the Applicable Eurodollar Rate
Margin. The Eurodollar Rate shall be adjusted automatically on the effective
date of any change in the LIBOR Reserve Percentage, such adjustment to affect
any Eurodollar Rate Borrowings outstanding on such effective date to the extent
such change is applied retroactively to eurocurrency funding of a member bank in
the Federal Reserve System. Each determination of a eurodollar Rate by Bank,
including, but not limited to, any determination as to the applicability or
allocability of reserves to eurocurrency liabilities or as to the amount of such
reserves, shall be conclusive and final in the absence of manifest error.
"Eurodollar Rate Borrowing" means any Borrowing designated by
Borrower as bearing the Eurodollar Rate pursuant to Sections 2.3(a) or 2.5(a).
"Event of Default" has the meaning set forth in Section7.1.
"Financial Statement(s)" means, with respect to any accounting
period of any Person, statements of operations and of cash flows of such Person
for such period, and balance sheets of such Person as of the end of such period,
setting forth in each case in comparative form figures for the corresponding
period in the preceding fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding annual audit, all prepared in
reasonable detail and in accordance with GAAP. "Financial Statement(s)" shall
include the notes and schedules thereto.
"Fiscal Year" shall mean the calendar year.
"Funds Held as Collateral" means, as of any date of
determination, the amount that should, in accordance with GAAP, be reflected in
a consolidated balance sheet of Borrower and its Subsidiaries on that date,
prepared consistently with the consolidated balance sheet of Borrower and its
Subsidiaries for the Fiscal Year of Borrower and identified as "funds held as
collateral."
"GAAP" means generally accepted accounting principles in the
United States of America, consistently applied, which are in effect as of the
date of their application.
"Government Securities" means readily marketable direct full
faith and credit obligations of the United States of America or obligations
unconditionally guaranteed or backed by the full faith and credit of the United
States of America.
"Insolvency Proceeding" means any proceeding commenced by or
against any Person, under any provision of the Bankruptcy Code, or under any
other bankruptcy or insolvency law, including, but not limited to, assignments
for the benefit of creditors, formal or informal moratoriums, compositions, or
extensions with some or all creditors.
"Interest Coverage" means Cash Operating Income divided by
interest expense for the Borrower and its Subsidiaries on a consolidated basis.
Cash Operating Income equals pre-tax income plus interest expense, plus
amortization of bond premiums, less accretion of bond discounts, less gain on
sale of investments, plus loss on sale of investments, plus depreciation and
amortization expense.
"Interest Rate Leverage Ratio" means (as it pertains to the
interest rate determination) total liabilities divided by total assets for the
Borrower and its Subsidiaries on a consolidated basis.
"Interest Payment Date" means July 31, 1996 and the last day
of every month thereafter or, with respect to Eurodollar Rate Borrowings, the
last day of the Interest Period applicable to each outstanding Eurodollar Rate
Borrowing unless the Interest Period is greater than three months in which case
interest is payable at the end of each three month period during such period and
at the end of the Interest Period.
"Interest Period" means, with respect to each Eurodollar Rate
Borrowing, the period commencing on the date of such Eurodollar Rate Borrowing
and ending one (1), two (2), three (3), six (6) or more (with Bank's prior
written consent) months thereafter, as Borrower may elect pursuant to the
applicable Notice of Borrowing or Notice of Conversion or Continuation;
provided, however, that:
(a) any Interest Period which would otherwise end on a day
which is not a Eurodollar Business Day shall be extended to the next succeeding
Eurodollar Business Day unless such Eurodollar Business Day falls in another
calendar month in which case such Interest Period shall end on the next
preceding Eurodollar Business Day; and
(b) any Interest Period which begins on the last Eurodollar
Business Day of the calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Eurodollar Business Day of the calendar month in
which it would have ended if there were a numerically corresponding day in such
calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as supplemented and amended from time to time, or any successor statute,
and any and all regulations and . rules promulgated thereunder.
"Invested Assets" means, as of any date of determination, the
amount that should, in accordance with GAAP be reflected in a consolidated
balance sheet of Borrower and its Subsidiaries on that date, prepared
consistently with the consolidated balance sheet of Borrower and its
Subsidiaries for the Fiscal Year of Borrower and identified as "investments."
"Investment" means, as applied to any Person, any direct or
indirect purchase or other acquisition by that Person of, or beneficial interest
in, stock or other securities of any other Person, or any direct or indirect
loan, advance (other than advances to employees for moving, travel, and payroll
expenses, drawing accounts and similar expenditures in the ordinary and usual
course of business) or capital contribution by that Person to any other Person,
including all indebtedness and accounts receivable due from that other Person
which are not current assets or did not arise from sales to that other Person in
the ordinary and usual course of business. The amount of any Investment shall be
the original cost of such Investment plus the cost of all additions thereto,
without any adjustments, except as permitted by generally accepted accounting
principles, for increases or decreases in value, or write-ups, write-downs or
write-offs with respect to such Investment.
"Investment Income" means the "investment income," determined
in accordance with GAAP, for the twelve (12) month period immediately preceding
the applicable fiscal quarter end.
"Lending Office" means Bank's office located at its address
set forth on the signature pages hereof, or such other office of Bank as it may
hereafter designate as its Lending Office by notice to Borrower.
"Leverage Ratio" means the ratio of (a) funded Debt to Union
Bank to (b) Tangible Net Worth, measured as of the last day of each fiscal
quarter.
"LIBOR Reserve Percentage" means, as of the date of
determination thereof, the percentage (rounded upward to the nearest
one-hundredth of one percent (.01%)), as determined by Bank in accordance with
its usual procedures (which determination shall be conclusive in the absence of
manifest error), representing the actual, aggregate incremental reserve
requirement of the Bank as prescribed by the Board of Governors of the Federal
Reserve System with respect to new nonpersonal time deposits in the form of
eurocurrency (currently referred to as "eurocurrency liabilities") in an amount
equal to the particular Loan and for a time period comparable to the number of
days in the applicable Interest Period.
"Lien" means any mortgage, deed of trust, pledge, security
interest, assignment, conditional sale or other title retention agreement, lien,
charge or encumbrance of any kind.
"Liquidity Ratio" means the ratio of (a) Cash plus Cash
Equivalents plus Invested Assets plus accrued Investment Income to (b) Total
Liabilities less the long term portion of Debt to the Bank hereunder and other
long term liabilities of the Borrower and its Subsidiaries determined as of the
last day of each fiscal quarter.
"Mandatory Commitment Reductions" means, as of the date of
determination, the aggregate amount of the Commitment Reduction required.
"Material Adverse Change" means a material adverse change in
(i) the business, Assets, condition (financial or otherwise) or results of
operations of Borrower and its Subsidiaries taken as a whole, (ii) the ability
of Borrower to perform its obligations under this Agreement (including, without
limitation, repayment of the Obligations as they come due) or (iii) the validity
or enforceability of this Agreement, the Credit Documents, or the rights or
remedies of Bank hereunder and thereunder.
"Maturity Date" means September 30, 2001.
"Multiemployer Plan" means a "multiemployer plan" as defined
in ss. 4001(a) (3) of ERISA, Section 414 of the Code, or Section 3(37) of ERISA
to which any member of the ERISA Group is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions, including for these purposes any Person which ceased to be a
member of the ERISA Group during such five year period.
"Net Profit" means a net profit of Borrower, pursuant to GAAP,
on a consolidated basis, for each fiscal year excluding any gains or (losses)
related to "accounting changes".
"Net Written Premiums" means the net premiums written by ASIC
and its Subsidiaries as set forth in the annual consolidated statement of ASIC
and its Subsidiaries filed with the California Department of Insurance.
"Notice of Borrowing" means an irrevocable notice from
Borrower to Bank of Borrower's request for a Borrowing pursuant to the terms of
Section 2.4(b), substantially in the form of Exhibit 3.
"Notice of Conversion or Continuation" means a written notice
given pursuant to the terms of Section 2.5(b), substantially in the form of
Exhibit 4.
"Obligations" mean any and all indebtedness, liabilities, and
obligations of Borrower owing to Bank and to its successors and assigns,
previously, now, or hereafter incurred, and howsoever evidenced, whether direct
or indirect, absolute or contingent, joint or several, liquidated or
unliquidated, voluntary or involuntary, due or not due, legal or equitable,
whether incurred before, during, or after any Insolvency Proceeding, and whether
recovery thereof is or becomes barred by a statute of limitations or is or
becomes otherwise unenforceable or unallowable as claims in any Insolvency
Proceeding, together with all interest thereupon (including all interest
accruing during the pendency of an Insolvency Proceeding), and all Bank
Expenses. The Obligations shall include, without limiting the generality of the
foregoing, all principal and interest owing under the Revolving Loans, all
Bank's Fees, all Bank Expenses, any other fees and expenses due hereunder, and
all other indebtedness evidenced by this Agreement and the Revolving Note.
"Operating Leverage Ratio" means Net Written Premiums over the
most recent four quarters divided by Capital Surplus as of the most recent
quarterly ending date.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" is defined in Section 6.3.
"Person" means and includes natural persons, corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts, or other organizations, irrespective of whether they are legal
entities, and governments and agencies and political subdivisions thereof.
"Plan" means an "employee benefit plan" as defined in Section
3(3) of ERISA in which any personnel of either Borrower or an ERISA Affiliate
participate or from which any such personnel may derive a benefit, excluding any
Multiemployer Plan, but including any plan either established or maintained by
such Borrower or any ERISA Affiliate or to which such Person contributes under
the laws of any foreign country.
"Prohibited Transaction" means a transaction that is
prohibited under Section 4975 of the Internal Revenue Code or Section 406 or 407
of ERISA and not exempt under Section 4975 of the Internal Revenue Code or
Section 408 of ERISA.
"Reference Rate" means the rate of interest announced by Bank
at its corporate headquarters as its reference rate and which serves as the
basis upon which effective rates of interest are calculated for those loans
making reference thereto. The Reference Rate is determined by Bank from time to
time as a means of pricing credit extensions to some customers and is neither
directly tied to some external rate of interest or index nor necessarily the
lowest rate of interest charged by Bank at any given time for any particular
class of customers or credit extensions.
"Reportable Event" means a reportable event described in
Section 4043 of ERISA, a withdrawal from a Plan described in Section 4063 of
ERISA, or a substantial cessation of operations described in Section 4062(e) or
ERISA.
"Responsible Officer" means the president or chief financial
officer, or any other Person designated by the president or chief financial
officer in a writing delivered to Bank.
"Revolving Commitment" means subject to Section 2.12,
Seventeen Million Five Hundred Thousand Dollars ($17,500,000); provided that on
each Revolving Commitment Reduction Date, the Revolving Commitment in effect
immediately prior to such date shall be reduced by the Commitment Reduction for
that date.
"Revolving Commitment Fee" has the meaning set forth in
Section 2.11.
"Revolving Commitment Reduction Date" means each of the dates
set forth in the table in Section 2.12.
"Revolving Commitment Reduction Payment" means a payment in an
amount which is necessary in order to reduce the aggregate outstanding principal
balance of the Revolving Loans to the amount of the Revolving Commitment as
reduced on the applicable Revolving Commitment Reduction Date by the Commitment
Reduction in effect on such date, plus all accrued interest on such amount.
"Revolving Loans" means the revolving loans made by Bank to
Borrower pursuant to the terms of Section 2.1.
"Revolving Note" means that certain Revolving Note, dated as
of even date herewith, executed by Borrower to the order of Bank, in the
principal amount of Seventeen Million Five Hundred Thousand Dollars
($17,500,000), and any replacements, substitution, renewals, refinancings or
restatements thereof.
"Subsidiary" means any corporation (whether now existing or
hereafter organized or acquired) of which a Person or one or more Subsidiaries
of such Person at the time owns or controls directly or indirectly more than 50%
of the shares of stock having general voting power under ordinary circumstances
to elect a majority of the board of directors, managers or trustees of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of any
contingency).
"Surplus Note" means that certain $10,000,000 Certificate of
Contribution issued by Amwest Surety Insurance Company to Borrower, a copy of
which is attached hereto as Exhibit 1, either as originally executed or as the
same may from time to time be supplemented, modified, amended, renewed, extended
or supplanted.
"Tangible Net Worth" means stockholders' equity of Borrower
and its Subsidiaries as determined in accordance with GAAP consistently applied
but excluding the effect of FASB 115, increased by debt subordinated to Bank and
decreased by the following: licenses, trademarks, trade names, goodwill,
subscription lists, organization expenses and other intangible assets (but
"intangible assets" shall exclude deferred policy acquisition costs), as
determined in accordance with GAAP.
"Total Liabilities"means total liabilities as defined by GAAP.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all benefits under
such Plan exceeds (ii) the fair market value of all Plan assets allocable to
such benefits (excluding any accrued but unpaid contributions), all determined
as of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or an appointed trustee under Title IV of ERISA.
SECTION 1.2 Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP; provided, however, that if the Borrower notifies the Bank
that the Borrower wishes to amend any covenant in Article V or VI to eliminate
the effect of any change in GAAP or an adverse ruling with respect to Prop 103
on the operation of such covenant, then the Borrower's compliance with such
covenant shall be determined on the basis of GAAP in effect immediately before
the relevant change in GAAP became effective or without giving effect to such
ruling as the case may be until either such notice is withdrawn or such covenant
is amended in a manner satisfactory to the Borrower and the Bank.
SECTION 1.3 Computation of Time Periods. In this Agreement,
with respect to the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including" and the words
"to" and "until" each mean "to but excluding." Periods of days referred to in
this Agreement shall be counted in calendar days unless otherwise stated.
SECTION 1.4 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the singular and to
the singular include the plural, references to any gender include any other
gender, the part includes the whole, the term: "including" is not limiting, and
the term "or" has, except where otherwise indicated, the inclusive meaning
represented by the phrase "and/or." References in this Agreement to
"determination" by Bank include good faith estimates by Bank (in the case of
quantitative determinations), and good faith beliefs by Bank (in the case of
qualitative determinations). The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this Agreement as a
whole and not to any particular provision of this Agreement. Article, section,
subsection, clause, exhibit and schedule references are to this Agreement,
unless otherwise specified. Any reference in this Agreement or any of the Credit
Documents to this Agreement or any of the Credit Documents includes any and all
permitted alterations, amendments, changes, extensions, modifications, renewals,
or supplements thereto or thereof, as applicable.
SECTION 1.5 Exhibits and Schedules. All of the exhibits and
schedules attached hereto shall be deemed incorporated herein by reference.
SECTION 1.6 No Presumption Against Any Party. Neither this
Agreement, any of the Credit Documents, any other document, agreement, or
instrument entered into in connection herewith, nor any uncertainty or ambiguity
herein or therein shall be construed or resolved using any presumption against
any party hereto, whether under any rule of construction or otherwise. On the
contrary, this Agreement, the Credit Documents, and the other documents,
instruments, and agreements entered into in connection herewith have been
reviewed by each of the parties and their counsel and shall be construed and
interpreted according to the ordinary meanings of the words used so as to
accomplish fairly the purposes and intentions of all parties hereto.
SECTION 1.7 Independence of Provisions. All agreements and
covenants hereunder, under the Credit Documents, and the other documents,
instruments, and agreements entered into in connection herewith shall be given
independent effect such that if a particular action or condition is prohibited
by the terms of any such agreement or covenant, the fact that such action or
condition would be permitted within the limitations of another agreement or
covenant shall not be construed as allowing such action to be taken or condition
to exist.
ARTICLE II
THE CREDIT
SECTION 2.1 The Revolving Commitment.
(a) Revolving Loans. Subject to the terms and conditions
hereof, Bank agrees to make Revolving Loans to Borrower, pursuant to this
Section 2.1, from the Closing Date to but not including the Maturity Date, in an
aggregate principal amount not to exceed the amount of the Revolving Commitment
then in effect. Provided that no Default or Event of Default has occurred and is
continuing, Borrower may borrow, and reborrow such sum in increments of One
Hundred Thousand Dollars ($100,000) upon notice in accordance with the
provisions of Section 2.4.
(b) Payments of Principal and Interest. All interest on all
Revolving Loans, as calculated in accordance with Section 2.3, shall be payable,
in arrears, on each and every Interest Payment Date. All outstanding principal
of and all accrued but unpaid interest on all Revolving Loans shall be due and
payable on the Maturity Date.
(c) Prepayments. The Revolving Loans may be prepaid at any
time without penalty or premium (except as provided in Section 2.6) upon three
(3) Eurodollar Business Days' prior written notice, in the case of Eurodollar
Rate Borrowings, and upon one (1) Business Day's prior written notice, in the
case of Base Rate Borrowings, to Bank. All prepayments shall be in increments of
One Hundred Thousand Dollars ($100,000).
SECTION 2.2 Payment of Excess Obligations. Any
and all Revolving Loans and financial accommodations made,
extended, or arranged by Bank to or for the benefit of Borrower pursuant to this
Agreement shall be added to and be deemed part of the Obligations when made or
extended. If, at any time and for any reason, the amount of the Obligations
exceeds the Revolving Commitment then in effect, then Borrower, upon Bank's
election and demand, shall immediately pay to Bank in immediately available
funds, the amount of such excess.
SECTION 2.3 Interest Rates. The unpaid principal balance of
the Revolving Loans shall bear interest at the applicable rate per annum
provided below:
(a) Revolving Loan. Borrower shall from time to time
designate one or both of the following two options to apply to all or any
portion of the unpaid principal balance of the Revolving Loans: (1) the Base
Rate; or (2) the Eurodollar Rate.
(b) Post Maturity Rate. If all or any portion of the principal
amount of any Revolving Loan made under this Agreement shall not be paid when
due (whether at the stated maturity, by acceleration, or otherwise), such
overdue principal amount, and to the extent permitted by law overdue interest
thereon, shall bear interest at a rate of two percent (2%) (200 basis points)
greater than the interest rate with respect to such Revolving Loan, effective on
the day following the date of nonpayment and continuing until such amounts are
paid in full.
(c) Computation of Interest. All computations of interest with
respect to Eurodollar Rate Borrowings, shall be calculated on the basis of a
year of three hundred sixty (360) days for the actual days elapsed in such
period. All computations of interest with respect to Base Rate Borrowings shall
be calculated on the basis of a year of three hundred sixty (360). In the event
that the Reference Rate announced is, from time to time, changed, adjustment in
the rate of interest payable hereunder on all outstanding Base Rate Borrowings
shall be made as of 12:01 a.m. (California time) on the effective date of the
change in the Reference Rate. Interest shall accrue from the first day of the
making of a Revolving Loan to the date of repayment of such Revolving Loan in
accordance with the provisions of this Agreement; provided, however, if a
Revolving Loan is repaid on the same day on which it is made, then one (1) day's
interest shall be paid on that Revolving Loan. Any and all interest not paid
when due shall thereafter be deemed to be a Revolving Loan made under Section
2.1 and shall bear interest thereafter as provided for in Sections 2.3(a) and
(b).
SECTION 2.4 Notice of Borrowing Requirements.
(a) Each Base Rate Borrowing shall be made on a Business Day
and each Eurodollar Rate Borrowing shall be made on a Eurodollar Business Day.
(b) Each Borrowing shall be made upon telephonic notice given
by a Responsible Officer of Borrower, followed by a Notice of Borrowing in the
form of Exhibit 3, given by telex, telecopy, facsimile, or personal service,
delivered to Bank at both of the addresses set forth in the Notice of Borrowing.
If for a Base Rate Borrowing, Bank shall be given such telephonic notice no
later than 11:00 a.m., California time, one (1) Business Day prior to the day on
which such Borrowing is to be made, and, if for a Eurodollar Rate Borrowing,
Bank shall be given such telephonic notice no later than 11:00 a.m., California
time, three (3) Eurodollar Business Days prior to the day on which such
Borrowing is to be made, and such notice shall state the amount thereof (subject
to the provisions of Section 2.1(a) plus the appropriate Interest Period
thereof.
(c) Bank shall not incur any liability to Borrower in acting
upon any telephonic notice which Bank believes in good faith to have been given
by a Responsible Officer of Borrower, or for otherwise acting in good faith
under this Section 2.4, and in making any Revolving Loans pursuant to telephonic
notice.
SECTION 2.5 Conversion or Continuation Requirements.
(a) Borrower shall have the option to:
(i) convert, at any time, all or any part of the outstanding Revolving
Loans, in integral multiples of One Hundred Thousand Dollars ($100,000), from a
Revolving Loan bearing interest at one of the interest rate options available
pursuant to Section 2.3(a) to another; or (ii) upon the expiration of any
Interest Period applicable to a Eurodollar Rate Borrowing, to continue all or
any portion of a Eurodollar Rate Borrowing as a Eurodollar Rate Borrowing, with
the succeeding Interest Period(s) of such continued Eurodollar Rate Borrowing
commencing on the expiration date of the Interest Period previously applicable
thereto; provided, however, that a Eurodollar Rate Borrowing may only become a
Base Rate Borrowing or be continued as a Eurodollar Rate Borrowing on the
expiration date of the Interest Period applicable thereto; provided further,
however, that no outstanding Revolving Loan may be continued as, or be converted
into, a Eurodollar Rate Borrowing in the event that, on the earlier of the date
of the delivery of the Notice of Conversion or Continuation or the telephonic
notice in respect thereof, any Default or Event of Default has occurred and is
continuing; provided further, however, that if Borrower fails to deliver the
appropriate Notice of Conversion or Continuation or the telephonic notice in
respect thereof pursuant to the required notice period before the expiration of
the Interest Period of a Eurodollar Rate Borrowing, such Eurodollar Rate
Borrowing shall automatically be converted to a Base Rate Borrowing, upon the
expiration of the applicable Interest Period.
(b) Borrower shall give telephonic notice of any proposed
continuation or conversion pursuant to this Section 2.5 followed by a Notice of
Conversion or Continuation, given by telex, telecopy, facsimile, or personal
service, delivered to Bank at both of the addresses set forth in the Notice of
Conversion or Continuation, in the form of Exhibit 4. Such telephonic notice
shall be given no later than 11:00 a.m., California time, on the Business Day
which is the proposed conversion date (in the case of a conversion to a Base
Rate Borrowing) and no later than 11:00 a.m. California time, one (1) Business
Day in advance of the proposed conversion date (in the case of a conversion of a
Eurodollar Rate Borrowing to a Base Rate Borrowing), three (3) Eurodollar
Business Days in advance of the proposed conversion or continuation date (in the
case of a conversion to, or a continuation of, a Eurodollar Rate Borrowing). If
such Notice of Conversion or Continuation is received by Bank not later than
11:00 a.m., California time, on a Eurodollar Business Day, such day shall be
treated as the first Eurodollar Business Day of the required notice period. In
any other event, such notice will be treated as having been received at the
opening of business of the next Eurodollar Business Day. A Notice of Conversion
or Continuation shall specify: (1) the proposed conversion or continuation date
(which shall be a Business Day or a Eurodollar Business Day, as applicable);
(2) the amount of the Revolving Loan to be converted or continued; (3) the
nature of the proposed conversion or continuation; and (4) in the case of a
conversion to or continuation of a Eurodollar Rate Borrowing, the requested
Interest Period.
(c) Bank shall incur no liability to Borrower in acting upon
any telephonic notice referred to above which Bank believes in good faith to
have been given by a Responsible Officer on behalf of Borrower or for otherwise
acting in good faith under this Section 2.5 and in conversion or continuation by
Bank in accordance with this Agreement pursuant to any telephonic notice. Any
Notice of Conversion or Continuation (or telephonic notice in respect thereof)
shall be irrevocable and Borrower shall be bound to convert or continue in
accordance therewith.
SECTION 2.6 Eurodollar Costs. Borrower shall reimburse Bank
for any increase in Bank's costs (which shall include, but not be limited to,
taxes, other than taxes imposed on or measured by the overall net income of Bank
(including franchise taxes) fees or charges), or any loss or expense (including,
without limitation, any loss or expense incurred by reason of the liquidation or
re-employment of deposits or other funds acquired by Bank to fund or maintain
outstanding the principal amount of the Revolving Loans) incurred by it directly
or indirectly resulting from the making of any Eurodollar Rate Borrowing due to:
(a) the modification, adoption, or enactment of any law, regulation or treaty or
the interpretation thereof by any governmental or other authority (whether or
not having the force of law) which becomes effective after the date hereof; (b)
the modification or new application of any law, regulation or treaty or the
interpretation thereof by any governmental or other authority (whether or not
having the force of law) which becomes effective after the date hereof; (c)
compliance by Bank with any request or directive (whether or not having the
force of law) of any monetary or fiscal agency or authority which becomes
effective after the date hereof; (d) violations by Borrower of the terms of this
Agreement; or (e) any prepayment of a Eurodollar Rate Borrowing at any time
prior to the end of the applicable Interest Period.
The amount of such costs, losses, or expenses shall be
determined solely by Bank based upon the assumption that Bank funded one hundred
percent (100%) of each Eurodollar Rate Borrowing in the Eurodollar market. In
attributing Bank's general costs relating to its eurocurrency operations to any
transaction under this Agreement or averaging any costs over a period of time,
Bank may use any reasonable attribution or averaging methods which it deems
appropriate and practical. Bank shall notify Borrower of the amount due Bank
pursuant to this Section 2.6 in respect of any Eurodollar Rate Borrowing as soon
as practicable but in any event within forty-five (45) days after the last day
of the Interest Period of such Eurodollar Rate Borrowing, and Borrower shall pay
to Bank the amount due within fifteen (15) days of its receipt of such notice. A
certificate as to the amounts payable and calculations made pursuant to the
foregoing sentence together with whatever detail is reasonably available to Bank
shall be submitted by Bank to Borrower. Such determination shall if not objected
to within ten (10) days be conclusive and binding upon Borrower in the absence
of manifest error. If Bank claims increased costs, loss, or expenses pursuant to
this Section 2.6, then Bank, if requested by Borrower, shall use reasonable
efforts to take such steps that Borrower reasonably request, as wculd eliminate
or reduce the amount of such increased costs, losses, or expenses, so long as
taking such steps would not, in the judgment of Bank, otherwise be
disadvantageous to Bank. Any recovery by Bank or its Lending Office of amounts
previously borne by Borrower pursuant to this Section 2.6 shall be promptly
remitted, without interest (unless Bank received interest on such recovered
amounts), to Borrower by Bank.
SECTION 2.7 Special Eurodollar Circumstances. In the event
that after the date hereof any change in circumstances or any law, regulation,
treaty or directive, or any change therein or in the interpretation or
application thereof, shall at any time in the reasonable opinion of Bank make it
unlawful or impractical for Bank to fund or maintain a Eurodollar Rate Borrowing
in the eurodollar market or to continue such funding or maintaining, or to
determine or charge interest rates based upon any appropriate Eurodollar Rate,
Bank shall give notice of such circumstances to Borrower and (i) in the case of
any Eurodollar Rate Borrowing which is outstanding, Borrower shall, if requested
by Bank, prepay such Eurodollar Rate Borrowing on or before the date specified
in such request, together with interest accrued thereon, and the date so
specified shall be deemed to be the last day of the Interest Period of that
Eurodollar Rate Borrowing, and concurrent with any such prepayment, Bank shall
make a Base Rate Borrowing to Borrower in the principal amount equal to the
principal amount of the Eurodollar Rate Borrowings so prepaid, and (ii) Bank
shall not be obligated to make any further Eurodollar Rate Borrowings until Bank
determines that it would no longer be unlawful or impractical to do so.
SECTION 2.8 Revolving Note; Statements of Obligations. The
Revolving Loans and Borrower's obligation to repay the same shall be evidenced
by the Revolving Note, this Agreement and the books and records of Bank and all
advances on and payments of principal or interest with respect to the Revolving
Loans shall be evidenced by notations made by Bank on such books and records
showing the date and amount of each such payment of principal or interest. Bank
shall render monthly statements of the Obligations to Borrower, including
statements of all principal and interest owing on the Revolving Loans, and all
Bank's Fees and Bank Expenses owing, and such statements shall be presumed to be
correct and accurate and constitute an account stated between Borrower and Bank
unless, within thirty (30) days after receipt thereof by Borrower, Borrower
delivers to Bank, by registered or certified mail, at Bank's Lending Office,
written objection thereof specifying the error or errors, if any, contained in
any such statement.
SECTION 2.9 Holidays. Any principal or interest in respect of
the Revolving Loans (other than in respect of a Eurodollar Rate Borrowing) which
would otherwise become due on a day other than a Business Day, shall instead
become due on the next succeeding Business Day and such adjustment shall be
reflected in the computation of interest; provided, however, that in the event
that such due date shall, subsequent to the specification thereof by Bank, for
any reason no longer constitute a Business Day, Bank may change such specified
due date in accordance with this Section 2.9.
SECTION 2.10 Time and Place of Payments.
(a) All payments due hereunder shall be made available to Bank in
immediately available Dollars, not later than 12:00 p.m., Los Angeles
time, on the day of payment, to the following address:
UNION BANK OF CALIFORNIA, N.A.
Investment Banking Note Center #192
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Telefacsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
(b) Without limitation of Bank's rights of setoff granted and acknowledged
hereby by Borrower, Bank shall have the right to charge any account maintained
by Borrower with Bank for the amount of any payment due or past due hereunder.
SECTION 2.11 Fees. Borrower shall pay to Bank a commitment fee
(the "Revolving Commitment Fee") in an amount equal to 0.375% per annum on the
unused commitment amount payable quarterly. The Revolving Commitment Fee shall
begin to accrue on the Closing Date and shall be due and payable on the last day
of each calendar quarter and shall be computed in the same manner as interest on
a Base Rate Borrowing pursuant to Section 2.3(c). Borrower shall also pay a
closing fee of $37,500.
SECTION 2.12 Mandatory Commitment Reductions. The
RevolvingCommitment shall be reduced annually, commencing September 30, 1996
in accordance with this Section 2.12.
On each Revolving Commitment Reduction Date, the Revolving
Commitment shall be reduced by the amount of the applicable Commitment
Reduction. The reduction shall be accomplished to the extent necessary, by the
payment of a Revolving Commitment Reduction Payment.
Revolving Commitment
Commitment Reduction Date Reduction
September 30, 1996 $2,500,000
September 30, 1997 3,000,000
September 30, 1998 3,000,000
September 30, 1999 3,000,000
September 30, 2000 3,000,000
September 30, 2001 3,000,000
(the Revolving Commitment
shall be reduced to Zero
Dollars ($0) on September 30, 2001)
Borrower shall have the right to voluntarily reduce the Revolving
Commitment at any time in minimum reductions of no less than $500,000.
Any-Voluntary reduction of the Commitment or Revolving
Commitment Reduction Payment shall permanently reduce the Revolving Commitment.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BORROWER
In order to induce Bank to enter into this Agreement, Borrower
makes the following representations and warranties which shall be true and
correct in all material respects as of the Closing Date, and each time a
Revolving Loan is made hereunder, such representations and warranties to survive
the execution and delivery of this Agreement and the making of the Revolving
Loans.
SECTION 3.1 Due Organization. Borrower is a duly organized and
validly existing corporation in good standing under the laws of the State of
Delaware and is duly qualified or licensed and in good standing as a foreign
corporation authorized to do business in all jurisdictions where its failure to
do so would have a material adverse effect on its business. Each of Borrower's
Subsidiaries is a duly organized and validly existing corporation in good
standing under the laws of the state of its incorporation and is duly qualified
or licensed and in good standing as a foreign corporation authorized to do
business in all jurisdictions where its failure to do so would have a material
adverse effect on the business of Borrower and its Subsidiaries taken as a
whole.
SECTION 3.2 Requisite Power. Each of Borrower and its
Subsidiaries has all requisite corporate power and all domestic governmental
licenses, authorizations, consents, and approvals necessary to own and operate
its properties and to carry on its business as now conducted and as proposed to
be conducted. Borrower has all requisite corporate power to borrow the sums
provided for in this Agreement, to execute and deliver this Agreement, and to
carry out the transactions contemplated hereby and thereby. The execution,
delivery, and performance of this Agreement have been duly authorized by
Borrower's Board of Directors and do not require any consent or approval of the
shareholders of Borrower.
SECTION 3.3 Binding Agreements. This Agreement has been duly
executed and delivered by Borrower, and constitutes the legal, valid, and
binding obligation of Borrower enforceable against Borrower in accordance with
its terms, except as the enforceability thereof may be affected by: (a)
bankruptcy, insolvency, moratorium, or similar laws affecting the enforcement of
creditors' rights generally; and (b) the limitation of certain remedies by
equitable principles of general applicability.
SECTION 3.4 No Conflict. The execution or delivery of and
performance of this Agreement do not and will not violate the articles of
incorporation or by-laws of, or any provision of law or regulation (including,
without limitation, Regulations U and X of the Federal Reserve Board), or any
order, writ, judgment, or decree of any domestic governmental authority, court,
arbitration board or tribunal binding on Borrower, or any of its Subsidiaries or
result in the breach of, constitute a default under, contravene any provisions
of, or result in the creation of any Lien (other than Permitted Liens) upon any
of the property or assets owned by Borrower or any of its Subsidiaries pursuant
to any contractual obligation to which Borrower or any of its Subsidiaries or
any of the properties owned by them are bound.
SECTION 3.5 Litigation. Other than as set forth on Schedule 6,
attached hereto and incorporated herein by this reference, as of the Closing
Date, there is no litigation, investigation, or proceeding in any court or
before any arbitrator or regulatory commission, board, administrative agency, or
other governmental authority pending, or threatened, against or affecting
Borrower or any of Borrower's Subsidiaries or any of their properties (other
than proceedings in the ordinary course of business to the extent they concern
the coverage under surety bonds or other products issued by the Borrower or any
Subsidiary of Borrower) which: (a) may adversely affect the ability of Borrower
or its Subsidiaries to perform their respective obligations under this
Agreement; (b) involves the application for issuance of an injunction, writ,
restraining order, or other order (other than for the payment of money) of any
re materially adverse to Borrower and its Subsidiaries taken as a whole, which
such injunction, writ, restraining, or other order (other than for the payment
of money) been issued and remains in force and effect; or involves litigation or
proceedings as to which there is a reasonable possibility of an adverse
determination that would a material adverse effect upon the business,
operations, condition, financial or otherwise, of Borrower and its subsidiaries
taken as a whole.
SECTION 3.6 Consents. Other than such as may previously been
obtained, no consent, license, permit, oval, or authorization of, exemption by,
notice to, report or registration, filing or declaration with, any domestic,
governmental authority, or agency is required in section with the execution,
delivery of or performance of payment obligations by Borrower under this
Agreement.
SECTION 3.7 Financial Statements and Condition. The audited
consolidated balance sheet of Borrower dated as of December 31, 1995, and the
related statements of operations, in stockholders' equity and cash flows for the
fiscal ended on such date, certified by KPMG Peat Marwick, a of which has been
delivered to Bank, does fairly present consolidated financial condition of
Borrower and its subsidiaries as of such date and the results of their
operations for the period then ended. All of the aforementioned financial
statements have been prepared in accordance with generally accepted accounting
principles provided on a consistent basis (unless specifically disclosed
otherwise in the notes to such financial statements) of the Closing Date, there
has been no material adverse generally in the financial condition of Borrower
and its subsidiaries taken as a whole, since the preparation of the
aforementioned financial statements.
SECTION 3.8 Use of Loans Proceeds. The proceeds on the
Revolving Loan provided for hereunder shall be used by Borrower to provide
working capital for Borrower, including the making acquisitions except as
limited hereunder.
SECTION 3.9 Regulation U. Borrower, its Subsidiaries are not
engaged principally, in the business of extending, or arranging for the
extension of, credit for the purpose of "purchasing" or "carrying" any margin
stock or securities (within the meaning of Regulations G, T, U or X of the
Federal Reserve Board) as now or from time to time in effect.
SECTION 3.10 Tax Returns. All tax returns required to have
been filed by Borrower and Borrower's Subsidiaries in any jurisdiction have been
filed; all material taxes, assessments, fees and other governmental charges upon
Borrower and Borrower's Subsidiaries or upon any of their respective properties,
incomes, or franchises, which are due and payable have been paid, or are being
contested in good faith or adequate reserves have been provided for payment
thereof.
SECTION 3.11 Trademarks, Licenses, etc. Borrower and each of
its Subsidiaries that has commenced operations is possessed of all licenses,
trademarks, trademark rights, trade names, trade name rights, copyrights,
permits, franchises and agreements material to the Borrower and its Subsidiaries
taken as whole which are required in order for them to conduct their business
and to operate their properties as now conducted without known conflict with the
rights of others.
SECTION 3.12 Burdensome Aqreements, etc. Borrower and its
Subsidiaries are not, individually or in combination, party to any unusual or
unduly burdensome agreement or undertaking which materially and adversely
affects Borrower's and/or its Subsidiaries' businesses or properties, assets,
operations or condition, financial or otherwise, taken as a whole.
SECTION 3.13 Title and Liens. Except for Permitted Liens, all
of the properties and assets of Borrower and each of its Subsidiaries are free
from all Liens, of any nature whatsoever. Borrower and its Subsidiaries have
good and marketable title to all of the properties and assets reflected in
Borrower's or such Subsidiaries' books and records as being owned by them.
SECTION 3.14 Other Information. Borrower has furnished and/or
may furnish to Bank certain written financial information concerning Borrower
and its Subsidiaries, including written estimates and projections of Borrower's
results of operations and financial position for and as at the end of certain
future periods. There are no statements or conclusions therein which, at the
time provided, are based upon or include misleading information or fail to take
into account material information regarding the matters covered therein.
Borrower has no reason to believe that any of the statements or conclusions
included therein are not true and correct in all material respects at the time
provided. Notwithstanding the foregoing, as to estimates, projections and other
materials relating to future results of operations or financial condition,
Borrower is only representing that such materials have been prepared in good
faith based upon reasonable assumptions and using historical financial
information prepared in accordance with GAAP.
SECTION 3.15 Existing Defaults. As of the Closing Date,
neither Borrower nor any of its Subsidiaries is in material default under any
term of any mortgage, deed of trust, indenture, or any other agreement to which
it is a party or by which it or any of its properties may be bound that is
material to the Borrower and its Subsidiaries taken as a whole. Neither Borrower
nor any of its Subsidiaries is in violation of any law, ordinance, rule or
regulation to which it or any of its properties is subject, the failure to
comply with which would have a material adverse effect on the business or
properties of Borrower and its Subsidiaries taken as a whole.
SECTION 3.16 Leases. Borrower and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all the leases which are
material to the business of Borrower and its Subsidiaries taken as a whole, to
which it is or they are a party or under which it is or they are operating and
all such leases are valid and subsisting with no material default by Borrower or
its Subsidiaries existing under any of them.
SECTION 3.17 Casualty. As of the Closing Date, neither the
business nor the properties or operations of Borrower or any of its Subsidiaries
are presently affected by any fire, explosion, strike, lockout or other labor
dispute, act of God or other casualty (whether or not covered by insurance),
which materially and adversely affects the businesses, properties or operations
of Borrower and its Subsidiaries taken as a whole.
SECTION 3.18 Investment Company Act. Borrower is not, nor is
any of its Subsidiaries, and immediately after the application by Borrower of
the proceeds of the Loan none of such Persons will be, an "investment company"
required to register under the Investment Company Act of 1940, as amended.
SECTION 3.19 Public Utility Holding Company Act. Borrower is
not, nor is any of its Subsidiaries: (i) a "holding company" nor a "subsidiary
company" or "affiliate" of a "holding company" or of a "subsidiary company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended; or (ii) subject to any state law or regulation regulating
public utilities or similar entities.
SECTION 3.20 Disclosure. At the time provided, no
representation or warranty of Borrower contained in this Agreement and no
representation of Borrower or any of its Subsidiaries contained in any other
written document, certificate, or statement furnished to Bank by or on behalf of
Borrower for use in connection with the transactions contemplated by this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained herein or
therein not misleading. There is no fact known to Borrower which materially
adversely affects or is reasonably likely to materially adversely affect, the
business (present or prospective), operations, property, assets or condition
(financial or otherwise) of Borrower and its Subsidiaries, taken as a whole,
which has not been disclosed herein or in such other documents, certificates,
and statements furnished to Bank on or before the Closing Date hereof for use in
connection with the transactions contemplated hereby.
SECTION 3.21 Location of Chief Executive Office. The chief
executive office of Borrower and its Subsidiaries is located at ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
SECTION 3.22 No Default. No Event of Default has occurred.
SECTION 3.23 No Pension Fund Irregularities. With respect to
each Plan, Borrower represents and warrants that, except to the extent that such
is not material to the Borrower and its Subsidiaries taken as a whole:
(a) As of the Closing Date, each Plan is either a valid,
existing and qualified Plan under Sections 401(a) and 501(a) of the IRC or the
Borrower has taken or will promptly take all necessary actions in order to
ensure that each Plan will be valid, existing and qualified under Sections
401(a) and 501(a) of the IRC as soon as is reasonably possible.
(b) Neither Borrower nor any Subsidiary of Borrower nor any
Plan is in violation of or will violate any of the provisions of ERISA or any of
the qualification requirements of Section 401(a) or 501(a) of the IRC.
(c) No Prohibited Transaction or Reportable Event has occurred
or will occur with respect to any Plan, nor has any Plan been the subject of or
will be the subject of a waiver of the minimum funding standard under Section
412 of the IRC.
(d) No notice of intent to terminate a Plan has been filed
under Section 4041 of ERISA, nor has any Plan been terminated under Section 4041
of ERISA.
(e) The PBGC has not instituted proceedings to terminate, or
appoint a trustee to administer, a Plan and no event has occurred or condition
exists which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of, a trustee to administer any Plan.
(f) Neither Borrower nor any Subsidiary would be liable for
any amount pursuant to Section 4062, 4063 or 4064 of ERISA if all Plans
terminated as of the most recent valuation dates of such Plans.
SECTION 3.24 Compliance With Law. Borrower and its
Subsidiaries are materially in compliance with all applicable laws, rules,
regulations, including, without limitation, those promulgated by the California
Department of Corporations and the California Department of Insurance.
ARTICLE IV
CONDITIONS TO LOANS
SECTION 4.1 Conditions Precedent to the Loans. The obligation
of Bank to make the Loans hereunder is subject to the fulfillment, to the
satisfaction of Bank and its counsel, of each of the following conditions on or
before the Closing Date:
(a) Borrower shall have executed and delivered to Bank this
Agreement and the Revolving Note;
(b) Bank shall have received a good standing certificate for
Borrower dated within thirty (30) days of the Closing Date, issued by the
Secretary of State of California and the Secretary of State of Delaware;
(c) Bank shall have received certificates of good standing as
a foreign corporation for Borrower, dated within thirty (30) days of the Closing
Date, issued by the Secretary of State or Department of Insurance, as
appropriate, of the states in which Borrower's failure to be duly qualified or
licensed would have a material adverse effect on the business of Borrower taken
as a whole;
(d) Bank shall have received certified copies of Borrower's
articles of incorporation;
(e) Bank shall have received copies of the by-laws of Borrower
certified by its Secretary or Assistant Secretary;
(f) Bank shall have received signature and incumbency
certificates respecting the officers executing this Agreement;
(g) Bank shall have received an officers' certificate from
Borrower, dated as of the Closing Date, duly executed by the President or a Vice
President and a Secretary or an Assistant Secretary of Borrower, certifying that
no Event of Default has occurred and is continuing;
(h) Bank shall have received a certificate from the Secretary
or an Assistant Secretary of Borrower attesting to the resolution of Borrower's
Board of Directors authorizing the execution and delivery of this Agreement and
authorizing specific officers to execute same;
(i) Bank shall have received full payment of any fees agreed
to, as well as full payment of Bank's reasonable costs and expenses (including
the fees and expenses of Bank's counsel) incurred in connection with the
preparation, negotiation, execution, and delivery of this Agreement;
(j) the representations and warranties of Borrower set
forth in Article III of this Agreement shall be true and correct;
(k) no Material Adverse Change shall have occurred since March
31, 1996 in the business, operations or financial condition of Borrower and its
Subsidiaries, taken as a whole;
(1) Bank shall have received such other instruments,
agreements and documents as Bank may reasonably request; and
(m) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall be in form and substance
reasonably satisfactory to Bank and its counsel.
ARTICLE V
AFFIRMATIVE COVENANTS
Borrower covenants that so long as the Loans shall remain
unpaid Borrower shall comply with and fulfill each and all of the following
covenants:
SECTION 5.1 Accounting Records. Borrower shall, and shall
cause each of its Subsidiaries to, maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any time during usual business hours
that do not unreasonably interfere with the conduct of such business, to
inspect, audit and examine such books and inspect any of their properties and
shall furnish Bank with all reasonable information regarding their business or
finances promptly upon Bank's request.
SECTION 5.2 Financial Statements and Reports. Borrower will
furnish or cause to be furnished to Bank:
(a) within sixty (60) days after the close of each of the
first three (3) quarterly accounting periods of Borrower in each fiscal year:
(i) consolidated statements of changes in stockholders' equity and consolidated
statement of cash flows of Borrower and its Subsidiaries for such quarterly
period, each setting forth in comparative form, if applicable, the corresponding
figures for the corresponding periods of the previous fiscal year; (ii)
consolidated statements of operations of Borrower and its Subsidiaries for such
quarterly period, each setting forth in comparative form, if applicable, the
corresponding figures for the corresponding periods of the previous fiscal year;
and (iii) consolidated balance sheets of Borrower and its Subsidiaries as of the
end of such quarterly period, each setting forth in comparative form, if
applicable, the corresponding figures for the most recent fiscal year end, all
in reasonable detail, subject to year-end audit adjustments and certified by the
chief financial officer of Borrower to have been prepared in accordance with
generally accepted accounting principles consistently applied;
(b) within ninety (90) days after the close of each fiscal
year of Borrower a copy of the annual audit report for such year for Borrower
and its Subsidiaries including therein: (i) consolidated statements of changes
in stockholders' equity and consolidated statements of cash flows of Borrower
and its Subsidiaries for such fiscal year; (ii) consolidated statements of
operations of Borrower and its Subsidiaries for such fiscal year; and (iii)
consolidated balance sheets of Borrower and its Subsidiaries as of the end of
such fiscal year, each setting forth in comparative form, if applicable, the
corresponding figures for the previous year, all in reasonable detail; the
consolidated income statements and balance sheet to be audited by independent,
nationally recognized, certified public accountants, and certified, without a
"going concern" qualification or other qualification or exception or any
qualification arising out of the scope of the audit, by such accountants to have
been prepared in accordance with generally accepted accounting principles,
consistently applied, together with certificates of such accounting firm to
Bank, stating that, in the ordinary and usual course of the regular audit(s) of
the businesses of Borrower and its Subsidiaries which audit(s) was (were)
conducted by such accounting firm in accordance with generally accepted auditing
standards, and, if requested by Bank within 150 days after the close of each
fiscal year of Borrower, Borrower shall, at Borrower's expense, cause such
accounting firm to provide to Bank in a timely manner a certificate of such
accounting firm stating that such accounting firm has obtained no knowledge that
an Event of Default has occurred and is continuing, or if, in the opinion of
such accounting firm, an Event of Default has occurred and is continuing, a
statement as to the nature thereof;
(c) contemporaneously with each quarterly and year-end
financial report required by the foregoing clauses (a) and (b), a certificate in
the form of Exhibit 5 of the chief financial officer of Borrower stating that he
has individually reviewed the provisions of this Agreement, and that a review of
the activities of Borrower and its Subsidiaries during such year or quarterly
period, as the case may be, has been made by or under such individual's
supervision, with a view to determining whether Borrower and its Subsidiaries
have fulfilled all of their obligations under this Agreement, and that Borrower
and its Subsidiaries have observed and performed each undertaking contained in
this Agreement and that no Event of Default has occurred and is continuing, or
if any Event of Default has occurred and is continuing, specifying the nature
thereof;
(d) promptly after sending or making available or filing of
the same, copies of all reports regarding financial condition, proxy statements,
notices, and financial statements that Borrower, and its Subsidiaries sends or
makes available to stockholders and all regular and periodic reports and all
filings and registration statements, including, without limitation, all reports
on Forms 8-K, 10-Q, and 10-K, under the Exchange Act and all final prospectuses
filed pursuant to Rule 424(b) under the Securities Act of 1933, that Borrower or
its Subsidiaries files with the Securities and Exchange Commission or any
successor thereto, or any other securities exchange;
(e) notice, as soon as possible and in any event within five
(5) days after Borrower has knowledge of (i) the occurrence of an Event of
Default, or (ii) any event of default as defined in any evidence of Debt of
Borrower or its Subsidiaries for borrowed money or under any agreement,
indenture or other instrument under which such Debt has been issued,
irrespective of whether such Debt is accelerated or such default waived. In
either event, Borrower shall also supply Bank with a statement from Borrower's
chief financial officer setting forth the details of such Event of Default or
event of default with respect to other Debt, and the action which Borrower
proposes to take with respect thereto;
(f) within sixty (60) days after the end of each of the first
three (3) quarterly accounting periods of Borrower in each fiscal year and
within ninety (90) days after the end of each of Borrower's fiscal years, a
report in the form of Exhibit 5 in form satisfactory to Bank, indicating
Borrower's financial status as measured by and Borrower's compliance with the
quantitative financial covenants set forth in Sections 5.9, 5.10, 5.11, 5.12,
5.13, 5.14, 5.15 and 5.16 hereof and containing sufficient detail as to explain
the calculation of such financial covenants, which report shall be certified as
true and correct by the chief financial officer of Borrower;
(g) as soon as available, any final written report or letter
to management pertaining to material items in respect of Borrower's or any of
its Subsidiaries' internal control matters submitted to any such Person by its
independent accountants in connection with each annual or interim special audit
of the financial condition of Borrower and its Subsidiaries;
(h) prompt written notice of any condition or event which has
resulted or might reasonably result in (i) a Material Adverse Change in the
financial condition of Borrower or any of its Subsidiaries taken as a whole; or
(ii) a breach of or noncompliance with any term, condition or covenant contained
in this Agreement;
(i) prompt written notice of any claims, proceedings or
disputes against Borrower and/or any of its Subsidiaries (other than proceedings
in the ordinary course of business to the extent they concern the coverage under
surety bonds or other insurance products issued by the Borrower or any
Subsidiary of Borrower) which, if adversely determined, would have a material
adverse effect on the business, properties or condition (financial or otherwise)
of Borrower and its Subsidiaries taken as a whole or any material labor
controversy which could result in a strike against Borrower or any of its
Subsidiaries, or any proposal by any public authority to acquire any of the
material part of the assets or business of Borrower or any of its Subsidiaries;
(j) as soon as the same is available, copies of all quarterly
and annual statutory statements filed by Borrower or any of its Subsidiaries
with the California Department of Corporations, the California Department of
Insurance or any other state or federal agency, instrumentality or governmental
body;
(k) As soon as practicable, and in any event within 30 days
after the commencement of each fiscal year, a projection for that fiscal year
and the two subsequent fiscal years, including projected consolidated and
consolidating balance sheets and statements of income and cash flow of Borrower
and its Subsidiaries, all in reasonable detail;
(1) within sixty (60) days after the close of each of the
first three (3) quarterly accounting periods of Borrower in each fiscal year and
within ninety (90) days after the close of each fiscal year of Borrower: (i)
unconsolidated statement of cash flows of Borrower for such period (statement of
cash flows to be supplied annually only); (ii) unconsolidated statements of
operations of Borrower for such period; and (iii) unconsolidated balance sheets
as of the end of such period, all in reasonable detail, subject to yearly audit
adjustments and certified by the chief financial officer of Borrower to have
been prepared in accordance with generally accepted accounting principles
consistently applied; and
(m) promptly, such other information in such form as the Bank
may reasonably request concerning the business or condition (financial or
otherwise) of Borrower or its Subsidiaries.
SECTION 5.3 Corporate Existence. Borrower shall, and shall
cause each of its Subsidiaries to preserve and maintain its corporate existence
unless all material and all of its rights, privileges, licenses, permits and
franchises necessary or desirable in the ordinary and usual course of its
business including, without limitation, all materially necessary permits,
authorizations and licenses required by the California Department of
Corporations and California Department of Insurance.
SECTION 5.4 Compliance With Law. Borrower shall, and shall
cause all of its Subsidiaries to in all material respects comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental agency, including, without limitation, those of the California
Department of Corporations and the California Department of Insurance.
SECTION 5.5 Insurance. Borrower shall, and shall cause each of
its Subsidiaries to, maintain and keep in force self insurance and insurance of
the types, with such deductibles, including but not limited to fire, public
liability, property damage, and workmen's compensation insurance in amounts
similar to the amounts carried by others in like industries, and Borrower shall,
from time to time, deliver to Bank, as Bank may request, schedules and
certificates setting forth all insurance then in effect.
SECTION 5.6 Properties. Borrower shall, and shall cause each
of its Subsidiaries to, keep in reasonably good repair and condition those
material properties and assets useful or necessary to its business and, from
time to time, to make necessary repairs, renewals, and replacements thereto and
thereof so that such properties and assets shall be fully and efficiently
preserved and maintained.
SECTION 5.7 Taxes and Other Liabilities. Borrower shall, and
shall cause each of its Subsidiaries to, pay and discharge prior to delinquency
all material taxes, assessments, and governmental charges or levies against any
material properties owned by it, and all material claims which if unpaid might
become a Lien, except such as it may in good faith and by appropriate
proceedings diligently contest or as to which a bona fide dispute may arise if
Borrower or the Subsidiary is diligently attempting to resolve such dispute by
appropriate actions; provided, however, that provision must be made by Borrower
or the Subsidiary to the satisfaction of Bank, for prompt payment thereof in the
event that a final and non-appealable determination is made in such proceeding
by the judge or similar official that Borrower or the Subsidiary must satisfy
such obligation.
SECTION 5.8 Tax Returns. At the request of Bank, Borrower
shall furnish Bank with copies of all federal income tax returns which are filed
after the Closing Date by Borrower.
SECTION 5.9 Fixed-Charge Coverage Ratio. The term" Fixed
Charge Coverage Ratio" shall mean, "the ratio of (a) the sum of (i) the amount
of cash, cash equivalents and investments of the borrower, on a non-consolidated
basis, as of the end of such fiscal quarter plus (ii) the estimated interest
expense related to the $10 million Capital Surplus Note over the subsequent four
(4) consecutive quarters plus (iii) the maximum dividends allowable for Amwest
(domicilied in Nebraska) and Condor (domiciled in California), determined on a
combined statutory basis for the four (4) consecutive fiscal quarters ending on
such day, or (2) 10% of the statutory surplus of the most recently ended fiscal
quarter, plus (iv) cash received from stock options exercised for the four (4)
previous consecutive fiscal quarters, plus (v) unused amounts available to be
drawn under this Agreement, to (b) the sum of (i) aggregate payments of
principal and interest on all Debt of the Borrower and its Subsidiaries required
to be paid during the following four (4) consecutive fiscal quarters, plus (ii)
the total amount of common stock dividends to be paid over the next four (4)
consecutive fiscal quarters, plus (iii) the total amount of common share
repurchases over the next four (4) consecutive fiscal quarters, plus (iv) total
capital expenditures incurred by Borrower (inclusive of permitted acquisition
payments made) over the next four (4) consecutive fiscal quarters."
Borrower shall maintain minimum Fixed Charge Coverage Ratio of 1.1:1.0.
SECTION 5.10 Section 5.10 is intentionally deleted in
this Restated Revolving Credit Agreement.
SECTION 5.11 Tangible Net Worth. Borrower shall maintain a
minimum of 90% of the Tangible Net Worth as reported in its March 31, 1996
financial statement. The minimum Tangible Net Worth shall increase each fiscal
year thereafter by 50% of Borrower's net income. Minimum Tangible Net Worth
shall also be increased each fiscal year by the dollar amount of any initial
public offering of securities.
SECTION 5.12 Net Profit. On a consolidated GAAP basis,
Borrower and its Subsidiaries shall earn a Net Profit for each fiscal year
during the term of this Agreement.
SECTION 5.13 Policyholders' Surplus. On a consolidated
statutory basis, ASIC and its Subsidiaries shall maintain Capital Surplus of at
least 90% of the Capital Surplus as reported as of March 31, 1996.
SECTION 5.14 Operating Leverage Ratio. On a consolidated
statutory basis, ASIC and its Subsidiaries shall not permit the Operating
Leverage Ratio to exceed 3.0:1.0 as of the last day of each fiscal quarter
during the term of this Agreement.
SECTION 5.15 A.M. Best Rating. ASIC shall at all times d
uring the term of this Agreement maintain an A.M. Best rating of A- or better.
Should A.M. Best cease to exist then any other acknowledged
rating agency shall be substituted with an equivalent rating being required.
SECTION 5.16 Investment Portfolio Ouality. On a consolidated
basis, ASIC and its Subsidiaries, shall at all times during the term of this
Agreement maintain an average fixed income portfolio rating of A as determined
by the Borrower's investment advisors who shall use in their calculation the
individual bond ratings supplied by reputable rating agencies.
SECTION 5.17 Pension Plan Funding. Borrower shall furnish to
Bank:
(a) Promptly and in any event within thirty (30) days after
the occurrence of a Reportable Event with respect to a Plan, a copy of any
materials required to be filed with the PBGC with respect to such Reportable
Event (whether or not Borrower or a Subsidiary of Borrower is required to
provide the PBGC with notice of such Reportable Event within thirty (30) days of
its occurrence or at some later time) and a statement of the chief financial
officer of Borrower setting forth the details concerning such Reportable Event
and the action which Borrower or the Subsidiary of Borrower proposes to take
with respect thereto;
(b) At least ten (10) days prior to the filing of a notice of
intent to terminate by an administrator of a Plan, a copy of such notice;
(c) Promptly and in no event more than ten (10) days after
receipt thereof by Borrower or any Subsidiary of Borrower, a copy of a notice
received by Borrower or any Subsidiary of Borrower or any administrator of any
Plan that the PBGC has instituted proceedings to terminate any Plan or to
appoint a trustee to administer the Plan;
(d) Promptly and in no event more than ten (10) days after the
filing thereof with the Internal Revenue Service, copies of each annual report
for each Plan and the actuarial statements and certified financing statements
for the Plan filed therewith;
(e) Promptly and in any event within three (3) days after
Borrower knows or has reason to know of any event or condition which might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of, a trustee to administer, any Plan, a statement of the chief
financial officer of Borrower describing such event or condition; and
(f) Promptly and in no event more than ten (10) days after
receipt thereof by Borrower or any Subsidiary of Borrower, each notice received
by.Borrower or any Subsidiary of Borrower concerning the imposition of any
withdrawal liability under Section 4202 of ERISA.
SECTION 5.18 Reinsurance Contract. Borrower shall maintain in
full force and effect participation reinsurance contracts with major reinsurers,
similar in substance to those reinsurance contracts in place on the date of this
Agreement.
SECTION 5.19 Storage and Protection of Data. Borrower shall,
and shall cause each of its Subsidiaries to, take all actions customary in the
insurance business (including, but not limited to, data dumps and off-site data
records and storage periodically updated) to adequately maintain, store, secure
and protect all data, records and files, the loss of which would materially
adversely affect the operations and business of Borrower and/or any of its
Subsidiaries.
ARTICLE VI
NEGATIVE COVENANTS
Borrower covenants that so long as any of the Loans shall
remain unpaid Borrower shall comply with and fulfill each and all of the
following covenants:
SECTION 6.1 Mergers, Consolidations. Borrower shall not, nor
shall it permit any of its Subsidiaries, to change its or their name without
notification to Bank, materially change the nature of its or their business,
sell (whether in any one transaction or a series of transactions) all or
substantially all of the assets of the Borrower and its Subsidiaries on a
consolidated basis, enter into any merger, consolidation, reorganization or
recapitalization, or reclassify its capital stock. Notwithstanding the first
sentence of this Section 6.1, nothing contained in this Agreement shall be
construed to prevent any merger or consolidation which occurs solely between
Subsidiaries of Borrower or any reorganization, recapitalization or
reclassification of the capital stock of any Subsidiary which occurs in
connection therewith.
SECTION 6.2 Sale of Assets. Notwithstanding anything to the
contrary contained in this Agreement, except in the ordinary course of business,
Borrower will not, and will not permit any of its Subsidiaries to sell, assign,
transfer, convey or otherwise dispose of their assets, whether now owned or
hereafter acquired, including the stock of either Subsidiary of Borrower.
SECTION 6.3 Liens. Borrower shall not, nor shall it permit any
Subsidiary to, mortgage, pledge, grant, or permit to exist any Lien upon or with
respect to any of its properties or assets of any kind, including, without
limitation, the stock of any of its Subsidiaries, now owned or hereafter
acquired, or any income or profits therefrom, except: (i) the Liens reflected on
Schedule 2, attached hereto and incorporated herein by this reference; (ii)
warehouseman's, mechanic's, landlord's, tax, assessments, other governmental
charges and other like liens arising in the ordinary course of business securing
obligations that are not incurred in connection with the obtaining of any
advance or credit and which are either not overdue or are being contested and
provided for in accordance with Section 5.7 hereof; (iii) Liens (other than any
Lien imposed by ERISA) incurred or deposits made in the ordinary course of
business in connection with surety and appeal bonds, leases, government
contracts, performance and return-of-money bonds and other similar obligations
(exclusive of obligations for the payment of borrowed money); (iv) first trust
deed mortgages securing conforming real estate loans requiring substantially
equal monthly payments amortizing over a period of no less than fifteen (15)
years; (v) purchase money security interests in personal property; (vi)
easements, rights of way, restrictions, and other similar charges or
encumbrances on real property not interfering with the ordinary conduct of the
business of Borrower or any of its Subsidiaries; (vii) judgment liens in
existence less than thirty (30) days after the entry thereof or with respect to
which execution has been stayed or the payment of which is covered in full by
insurance (subject to customary deductibles); and (viii) banker's liens arising
in the ordinary and usual course of Borrower's or its Subsidiaries' business
(ix) Liens existing on property of any Person at the time such Person becomes a
Subsidiary and not incurred in contemplation thereof; (x) Liens existing on
property at the time of the acquisition thereof and not incurred in
contemplation thereof, including without limitation Liens on property acquired
by foreclosure on junior mortgages or deeds of trust; (xi) renewals, extensions
or other modifications of the liens under clauses (i), (ix) and (x), provided
the principal amount of the obligations secured thereby does not exceed the
amount set forth on Schedule 2 (in the case of clause (i)) or the amount
outstanding at the time such Person becomes a Subsidiary or of such acquisition
(in the case of clauses (ix) and (x), respectively, as applicable; (xii) Liens
securing Debt in an amount not to exceed $500,000 at any time outstanding and
permitted by Section 6.8; and (xiii) Liens incidental to the conduct of the
business of the Borrower and its Subsidiaries or the ownership of their property
that were not incurred in connection with borrowed money and that, in the
aggregate, do not materially detract from the value of the property or impair
the use thereof and that, in any event, do not secure obligations aggregating in
excess of $500,000 (the items described in clauses (i) through (xiii) of this
Section 6.3 are collectively referred to herein as the "Permitted Liens").
SECTION 6.4 Contingent Obiigations. Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly, create or
become or be liable with respect to any material Contingent Obligation except
that Borrower and its Subsidiaries may remain liable for any preexisting
Contingent Obligation set forth on Schedule 3, attached hereto and incorporated
herein by this reference and any amendments, renewals, extensions or other
modifications thereof provided that the amount thereof does not exceed the
amount set forth on such Schedule. Notwithstanding anything contained in this
Section 6.4, Borrower and its Subsidiaries may amend and/or replace reinsurance
agreements in the ordinary course of business.
SECTION 6.5 Conduct of Business. Borrower will not, and
Borrower will not permit its Subsidiaries to, engage in any business other than
the businesses in which Borrower and its Subsidiaries are engaged as of the date
hereof and businesses reasonably related thereto.
SECTION 6.6 Transactions with Shareholders. Borrower
will not, and will not
permit any of its Subsidiaries to, directly or indirectly, enter into or permit
to exist any transaction (including, without limitation, the purchase, sale,
lease or exchange of any property or the rendering of any service) with any
holder of five percent (5%) or more of any class of equity securities of
Borrower or with any Subsidiaries or of any such holder, on terms that are
materially less favorable to Borrower or such Subsidiary than those which might
be obtained at the time from Persons who are not such a holder or Subsidiary or,
if such transaction is not one in which terms could be obtained from such other
Person, on terms that are not negotiated in good faith on an arm's length basis.
The foregoing shall not prohibit (i) any transaction between the Borrower and
its Subsidiaries or between its Subsidiaries, (ii) the payment of directors'
fees, and (iii) subject to Section 6.8, Investments by the Borrower or any
Subsidiary thereof in a Subsidiary of the Borrower or another such Subsidiary.
SECTION 6.7 Restrictive Agreements. Borrower will not, and
will not permit any of its Subsidiaries to, enter into any agreement which
restricts the ability of such Subsidiary to make payments to Borrower by way of
dividends, advances, or reimbursements or otherwise, other than as specifically
authorized, permitted or required pursuant to this Agreement or as required by
applicable insurance laws, insurance regulators or other governmental authority.
SECTION 6.8 Debt. Borrower shall not, nor shall it permit any
of its Subsidiaries to, incur, create, assume, or permit to exist any Debt,
excluding only the following: the Revolving Loans; loans or advances made to its
Subsidiaries; travel, relocation and entertainment advances to employees; loans
to employees not exceeding Twenty Thousand Dollars ($20,000) each or One Hundred
Thousand Dollars ($100,000) in the aggregate; conforming real estate loans
secured by real property, provided such real estate loans are secured by a first
trust deed mortgage requiring substantially equal monthly payments amortizing
over a period no less than fifteen (15) years; purchase money Debt; and the Debt
described on Schedule 4, attached hereto and incorporated herein by this
reference and renewals, refinancings, extensions or other modifications thereof
provided the principal amount thereof does not exceed the amount set forth on
such Schedule; Debt of any Person existing at the time such Person becomes a
Subsidiary and not incurred in contemplation thereof; Debt assumed in connection
with the acquisition of property, including without limitation Debt secured by
property acquired by foreclosure on junior mortgages or deeds of trust;
Contingent Obligations not prohibited by Section 6.4; performance, surety and
other bonds issued by the Borrower and its Subsidiaries in the ordinary course
of their business; and secured or unsecured Debt in an amount not to exceed
$500,000 at any time outstanding.
SECTION 6.9 Dividends. Dividends shall be permitted during any
given fiscal year in an amount set forth below opposite the applicable Tangible
Net Worth of Borrower as of the end of the immediately preceding fiscal year, as
reported in the financial statements for such fiscal year delivered to the Bank,
if at the time of the payment of the dividend there has not occurred or is not
continuing an Event of Default.
Maximum Annual Consolidated
Dividend _____ Tangible Net Worth_______
$1,700,000 x greater than or = 48,700,000
1,820,000 x greater than or = 54,500,000
1,975,000 x greater than or = 61,400,000
2,125,000 x greater than or = 69,500,000
2,250,000 x greater than or = 71,500,000
SECTION 6.10 Leases. Borrower shall not, nor shall it permit
any of its Subsidiaries to incur obligations under leases other than in the
ordinary and usual course of their business consistent with past practices.
SECTION 6.11 Stock. Borrower may redeem, purchase, retire or
otherwise acquire any shares of any class of capital stock of Borrower, but any
such acquisitions shall reduce the annual payment limitation in Section 6.21,
except that transactions under Borrowers employee stock option plans shall not
be counted towards the annual limitation.
SECTION 6.12 Prepayment and Repayment of Debt. Borrower shall
not, nor shall it permit any of its Subsidiaries to, make any optional
prepayment with respect to any Debt for borrowed money, or any Debt secured by
any Permitted Lien, or enter into or modify any Debt agreement in a way which
would be materially adverse to the interests of Bank or as a result of which the
terms of payment of any of the foregoing Debt are accelerated except, that: (a)
Borrower shall be entitled to the benefit of its rights respecting the Revolving
Loans provided for in this Agreement; and (b) Subsidiaries of Borrower may
prepay Debt owed to Borrower.
SECTION 6.13 Sale-Leaseback$. Borrower shall not, nor shall it
permit any of its Subsidiaries to, enter into any sale-leaseback transaction.
SECTION 6.14 Misrepresentations. Borrower shall not, nor shall
it permit any of its Subsidiaries to, furnish Bank any certificate or other
document that contains any untrue statement of material fact or that fails to
state a material fact necessary to make it not misleading in light of the
circumstances under which it was furnished.
SECTION 6.15 Partnerships. Borrower and its Subsidiaries may
become a general or limited partner in any partnership or a joint venturer in
any joint venture, but if a monetary investment, other than an investment in the
ordinary course of business, is required then such investment shall reduce the
annual limitation in Section 6.21. Investments must be in full compliance with
Borrower's internal investment guideline parameters as authorized by Borrower's
Board of Directors. Set forth on Schedule 5, attached hereto and incorporated
herein by this reference are current partnership or joint venture investments.
SECTION 6.16 Subsidiaries Debt and Liens. Borrower shall not,
except for Permitted Liens, directly or indirectly, sell, assign, pledge or
otherwise transfer any Debt of or claim against a Subsidiary and will not permit
a Subsidiary to sell, assign, pledge or otherwise transfer any Debt or claim
against Borrower or any other Subsidiary.
SECTION 6.17 Changes in Location of Chief Executive Office.
Borrower shall not, nor shall it permit any of its Subsidiaries to, relocate
their respective chief executive offices without first giving Bank thirty (30)
days prior written notice of any proposed relocation.
SECTION 6.18 Loss Reserves. Borrower shall not sell any of its
loss reserves without prior written approval of Bank.
SECTION 6.19 Surplus Note. Borrower shall not during the term
of this Agreement, directly or indirectly sell, assign, transfer, discount,
pledge, encumber, convey, grant an option on or otherwise dispose of that
certain Surplus Note held by Borrower.
SECTION 6.20 Capitalized Expenditures. Borrower, on a
consolidated basis, shall not expend more than One Million Dollars ($1,000,000)
per fiscal year on Capitalized Expenditures (other than expenditures subject to
Section 6.21). To the extent that less than One Million Dollars ($1,000,000) is
used, the unused portion may be added to the limitation applicable to the
immediately following fiscal year but may not be added to any year thereafter.
The amount carried over shall be applied first.
SECTION 6.21 Acquisitions. Borrower, on a consolidated basis,
shall not make any acquisitions of stock representing a controlling interest or
all or substantially all assets of (or a division of) any entities that are not
in the same or similar kind of business as Borrower, nor shall any acquisitions
in any fiscal year require annual payments of more than Two Million Dollars
($2,000,000) in any such fiscal year; provided however that aggregate annual
amount of permitted acquistions hereunder shall be reduced by the Capital
Expenditures used by Borrower under Section 6.20 above. To the extent that less
than the aggregate annual amount of permitted acquisitions less Capital
Expenditures is used, the unused portion may be added to the limitation
applicable to the immediately following fiscal year but may not be added to any
year thereafter. The amount carried over shall be applied first.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.1 Events of Default. The occurrence of any of the
following events, acts, or occurrences shall constitute an event of default (an
"Event of Default") hereunder:
(a) Borrower shall fail to pay within ten (10) days of the
date when due any amount owing hereunder in respect of principal, and/or
interest on the Loans or any other amounts payable in connection herewith;
(b) Borrower shall default in any respect in the performance
or observance of any term, covenant, condition or agreement on its part to be
performed or observed under Sections 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.15
and/or 5.16 hereof; or
(c) Borrower or any of its Subsidiaries shall fail to observe
or perform any other term, covenant, condition, agreement, or obligation to be
observed or performed by it under this Agreement and such failure shall not be
cured or remedied within thirty (30) days following notice by Bank to Borrower
of such occurrence; or
(d) Borrower or any of its Subsidiaries shall default (as
principal or guarantor or other surety) in the payment when due (subject to any
applicable notice or grace period), whether at stated maturity or otherwise in
an amount in excess of $1,500,000, of any monetary obligation (howsoever
designated) on any Debt, whether such indebtedness now exists or shall hereafter
be created and such default shall not be cured and remedied within thirty (30)
days of the date of occurrence of such default; or
(e) An event of default (with respect to the Borrower or any
of its Subsidiaries) as defined in any mortgage, indenture or instrument under
which there may be issued, or by which there may be secured or evidenced, any
Debt of, or guaranteed by, Borrower or any of its Subsidiaries, whether such
Debt now exists or shall hereafter be created, shall occur and shall permit such
Debt to become due and payable prior to its stated maturity or due date, and
such event of default shall not be cured and remedied within thirty (30) days of
the date of occurrence of such event of default; or
(f) Any financial statement, representation, warranty or
certification made or furnished by Borrower or any of its Subsidiaries in any
statement, document, letter or other writing or instrument furnished or
delivered to Bank pursuant to or in connection with this Agreement, or as an
inducement to Bank to enter into this Agreement, shall at any time prove to have
been materially false, incorrect, or incomplete when made or effective or
reaffirmed, as the case may be; or
(g) Borrower or any of its Subsidiaries shall suffer a final
judgment or judgments for payment of money aggregating in excess of Two Hundred
Fifty Thousand Dollars ($250,000) (net of insurance) and shall not discharge the
same within a period of thirty (30) days unless, pending further proceedings,
execution has not been commenced or if commenced, has been effectively stayed or
bonded against;
(h) A judgment creditor of Borrower or any of its Subsidiaries
shall obtain possession of any material portion of the properties or assets of
Borrower or any of its Subsidiaries by any means, including, without limitation,
levy, distraint, replevin or self-help; or
(i) Borrower or any of its Subsidiaries shall institute a
voluntary case seeking liquidation or reorganization under Chapter 7 or Chapter
11, respectively, of the Bankruptcy Code; or Borrower, or any of its
Subsidiaries shall file a petition, answer or complaint or shall otherwise
institute any similar proceeding under any other applicable federal or state
law, or shall consent thereto; or Borrower, or any of its Subsidiaries shall
apply for, or by consent or acquiescence there shall be an appointment of, a
receiver, liquidator, sequestrator, trustee or other officer with similar
powers, of Borrower or any such Subsidiary; or any conservatorship or similar
proceeding is commenced by or brought on behalf of the California Department of
Insurance with respect to any insurance Subsidiary of Borrower; or Borrower or
any of its Subsidiaries shall make a general assignment for the benefit of
creditors; or if an involuntary case shall be commenced seeking the liquidation
or reorganization of Borrower or any of its Subsidiaries under Chapter 7 or
Chapter 11, respectively, of the United States Bankruptcy Code or any similar
proceeding shall be commenced against Borrower or any such Subsidiary under any
other applicable federal or state law and (a) Borrower or any of its
Subsidiaries consents to the institution of the involuntary case, (b) the
petition commencing the involuntary case is not timely controverted, (c) the
petition commencing the involuntary case is not dismissed within sixty (60) days
of its filing, (d) an interim trustee is appointed to take possession of all or
a portion of the property, and/or to operate all or any portion of the business
of Borrower or any of its Subsidiaries, or (e) an order for relief shall have
been issued or entered therein; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver, liquidator,
sequestrator, trustee or other officer having similar powers of Borrower or any
of its Subsidiaries or of all or a portion of its property, shall have been
entered and, within forty-five (45) days from the date of entry, is not vacated,
discharged, or bonded against; or any other similar relief shall be granted
against Borrower, or any of its Subsidiaries under any applicable federal or
state law and, within forty-five (45) days from the date of entry, is not
vacated, discharged, or bonded against; or
(j) Borrower or any of its Subsidiaries shall generally fail
to pay, or admit in writing its inability to pay, its debts as they become due.
SECTION 7.2 Remedies. Upon the occurrence of an Event of
Default:
(a) If such Event of Default arises under clause (i) of
Section 7.1 hereof, then all principal, accrued interest, and any other sums
then owing by Borrower under and in connection herewith shall become and be
immediately due and payable and Bank's obligation to make advances on the
Revolving Loan (and Bank's obligation to continue/convert any Loan pursuant to
Section 2.5 hereinabove) shall cease, without presentment, demand, protest or
notice of any kind all of which are hereby expressly waived by the Borrower; and
(b) In the case of any other Event of Default, Bank's
obligation to make advances on the Revolving Loan (and Bank's obligation to
continue/convert any Loan pursuant to Section 2.5 hereinabove) shall cease and
Bank may declare all principal, interest, and other sums then owing by Borrower
under and in connection herewith to be forthwith due and payable, whereupon all
such sums shall become and be immediately due and payable without presentment,
demand, protest or notice of any kind, all of which are hereby expressly waived
by Borrower. Promptly following the making of any such declaration, Bank shall
give notice thereof to Borrower but failure to do so or any delay in so doing
shall not impair the effect of such declaration; and
(c) In addition to any acceleration of the Debt owing to Bank
by Borrower hereunder as provided for in clauses (a) and (b) above, Bank shall
have all rights and remedies available at law, in equity, and otherwise.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 Waivers, Modifications in Writing. The remedies
provided for herein are cumulative and are not exclusive of any remedies that
may be available to Bank at law, in equity, or otherwise. No amendment,
modification, supplement, termination, or waiver of or to any provision of this
Agreement, nor consent to any departure by Borrower therefrom, shall be
effective unless the same shall be in writing and signed by Bank. Any waiver of
any provision of this Agreement, and any consent to any departure by Borrower
from the terms of any provisions therefrom, shall be effective only in the
specific instance and for the specific purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.
SECTION 8.2 Failure or Delay. No failure or delay on the part
of Bank in the exercise of any power, right, remedy or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right, remedy, or privilege preclude other or
further exercise of any other power, right, remedy, or privilege.
SECTION 8.3 Notices, etc. All notices, demands, instructions,
and other communications required or permitted to be given to or made upon any
party hereto shall be in writing and (except for financial statements and other
related informational documents to be furnished pursuant hereto which may be
sent by first-class mail, postage prepaid) shall be personally delivered or sent
by registered or certified mail, postage prepaid, return receipt requested, or
by prepaid telex, TWX, telecopy or telegram (with messenger delivery specified)
and shall be deemed to be given for purposes of this Agreement on the day that
such writing is received by the intended recipient thereof. Unless otherwise
specified in a notice sent or delivered in accordance with the foregoing
provisions of this Section 8.3, notices, demands, instructions and other
communications in writing shall be given to or made upon the respective parties
hereto at their respective addresses (or to their respective telex, TWX or
telecopier numbers) as follows:
If to Bank: Union Bank of California, N.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, V.P.
With a Copy to: Union Bank of California, N.A.
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▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Legal Department
If to Borrower: Amwest Insurance Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇. V.P.
SECTION 8.4 Costs and Expenses. Borrower agrees to pay: (a)
all reasonable out-of-pocket costs and expenses of Bank incurred or expended in
connection with the negotiation, preparation, printing, reproduction, execution,
and delivery of this Agreement, any amendments or modifications of (or
supplements to) any of the foregoing and any and all other agreements or
documents furnished in connection with the execution and delivery of this
Agreement, including the reasonable fees and out-of-pocket expenses of
Buchalter, Nemer, Fields & Younger, a Professional Corporation, special counsel
to Bank, or any other counsel to Bank; (b) all costs and expenses (including,
without limitation, all attorneys' fees and expenses), if any, incurred or
expended by Bank after an Event of Default in connection with the enforcement of
this Agreement or any other agreements or documents furnished pursuant hereto or
in connection herewith or therewith, whether or not suit is brought with respect
thereto; and (c) all stamp, transfer, and other taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement.
SECTION 8.5 Sale of Participation. Bank shall be entitled to
sell participation interests in the Loans to Persons not party to this Agreement
without being required to so advise Borrower so long as Bank is entitled to
represent the interests of such Persons. Except as otherwise expressly agreed in
writing by Borrower, Bank shall not, by reason of the sale of any participation
interest, be relieved of any of its obligations hereunder.
SECTION 8.6 Headings. Article and Section headings used in
this Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 8.7 Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties on separate
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original and all of which counterparts, taken together, shall
constitute but one and the same Agreement.
SECTION 8.8 Binding Effect; Assignment. This Agreement shall
be binding upon, and inure to the benefit of, Borrower and Bank, and their
respective successors and assigns; provided, however, that Borrower may not
assign its rights hereunder or in connection herewith or any interest herein
(voluntarily, by operation of law, or otherwise) without the prior written
consent of Bank. This Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement and each of
their respective successors and assigns.
SECTION 8.9 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
SECTION 8.10 Publicity. Except for filings with regulatory
bodies in the ordinary course of business, any publicity release, advertisement,
filing, public statement, or announcement made by or at the behest of Borrower
or any Subsidiary of Borrower regarding this Agreement or the financing provided
hereunder which makes reference to Bank or describes the financing provided by
Bank, shall be first reviewed by Bank and must be reasonably satisfactory to
Bank.
SECTION 8.11 Complete Agreement. This Agreement, together with
the exhibits to this Agreement, is intended by the parties as a final expression
of their agreement and is intended as a complete statement of the terms and
conditions of their agreement.
SECTION 8.12 Governing Law and Venue. This Agreement shall be
deemed to have been made in the State of California and the validity of this
Agreement, the construction, interpretation, and enforcement thereof, and the
rights of the parties thereto shall be determined under, governed by, and
construed in accordance with the internal laws of the State of California,
without regard to principles of conflicts of law. The parties agree that all
arbitrations brought pursuant to Section 8.13 hereof shall be held only in the
County of Los Angeles, State of California or, at the sole option of Bank, in
any other venue in which Bank, shall initiate such arbitration.
SECTION 8.13 Dispute Resolution.
(a) Mandatory Arbitration. Any controversy or claim between or
among the parties arising out of or relating to (i) this Agreement, any Credit
Documents, or any other document, instrument, or agreement executed in
conjunction herewith (collectively, the "Subject Documents"), (ii) any
negotiations, correspondence, or communications, whether or not incorporated or
integrated into the Subject Documents, relating to the Subject Documents or any
indebtedness evidenced thereby or (iii) the administration or management of the
Revolving Note and the other Subject Documents evidenced thereby, and with
respect to (i),
(ii) and (iii) also including any such controversy or claim based on or
arising out of an alleged tort, shall be determined by arbitration in accordance
with Title 9 of the U.S. Code and the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"); provided, however, that unless
Bank and all parties to the Subject Documents consent to such submission, this
Section shall not apply to the extent that (i) such claims or controversy
involves enforcement of any Subject Documents with respect to obligations which
are incurred primarily for personal, family, or household use or (ii) any
Subject Documents or any other obligations to Bank described in or covered by
any of the Subject Documents are secured by real property. All statutes of
limitations and waivers which would otherwise be applicable shall apply to any
arbitration proceeding under this subsection (a).
Judgment upon the award rendered may be entered in any court having
jurisdiction.
(b) Judicial Reference. If any such claim or controversy is
not determined by arbitration as provided and limited in subsection (a) but
becomes the subject of a judicial action, then all matters of fact and law in
such judicial action shall at the election of any party hereto be referred to a
referee in accordance with California Code of civil Procedure Sections 638 et
seq. for determination in accordance with applicable law. If such an election is
made, then the parties shall designate to the court a referee or referees
selected under the auspices of the AAA in the same manner as arbitrators are
selected in AAA sponsored proceedings. The presiding referee of the panel, or
the referee if there is a single referee, shall be an experienced attorney
actively engaged in the practice of commercial finance law or a retired judge.
Judgment upon the award rendered by such referee or referees shall be entered in
the court in which such proceeding was commenced in accordance with California
Code of Civil Procedure Sections 644 and 645. IN CONNECTION WITH ANY SUCH
JUDICIAL REFERENCE, THE PARTIES HERETO HEREBY EXPRESSLY, DELIBERATELY, AND
INTENTIONALLY WAIVE ANY RIGHT THEY MAY OTHERWISE HAVE TO TRIAL BY JURY OF SUCH
CLAIM OR CONTROVERSY, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, UNLESS
SUCH CLAIM OR CONTROVERSY INVOLVES THE ENFORCEMENT OF ANY SUBJECT DOCUMENT WITH
RESPECT TO OBLIGATIONS WHICH ARE INCURRED PRIMARILY FOR PERSONAL, FAMILY, OR
HOUSEHOLD USE.
(c) Provisional Remedies, Self Help and Foreclosure. No
provision of, or the exercise of any rights under, subsection (a) shall limit
the right of any party to exercise self-help remedies such as setoff, to
foreclose against any real or personal property collateral, or to obtain
provisional or ancillary remedies, including but not limited to, injunctive
relief or the appointment of a receiver from a court having jurisdiction before,
during, or after the pendency of any arbitration. At Bank's option, foreclosure
under a deed of trust or mortgage may be accomplished either by exercise of
power of sale under the deed of trust or mortgage or by judicial foreclosure.
The institution and maintenance of an action for judicial relief or pursuit of
provisional or ancillary remedies or exercise of self-help remedies shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration. The parties agree that the
submission of any controversy or claim to arbitration under subsection (a), or
to a referee under subsection (b); the granting or entry of any award in
connection with such submission; or, the exercise of any provisional or
self-help remedy, including foreclosure of collateral, under this subparagraph 3
shall not be deemed to be an "action" under Section 726 of the California Code
of Civil Procedure or any other similar law or regulation.
(d) Miscellaneous. In connection with any claim or controversy
governed by this Section, the party whom the arbitrator or referee determines is
the prevailing party shall be entitled to have the other party or parties pay
the expenses of the prevailing party, but subject to the award of the arbitrator
or referee, each party shall pay an equal share of the arbitrator's or referee's
fees. In this regard the arbitrator or referee shall have the power to award
recovery to such prevailing party of all costs and fees (including attorneys'
fees and a reasonable allocation for the costs of in-house counsel and staff),
administrative fees, arbitrator's or referee's fees, and court costs, all as
determined by the arbitrator or referee, as the case may be. Any decision or
award by the arbitrator shall be in writing and include a brief summary of the
supporting evidence and applicable law. Any arbitration hereunder shall be
conducted in Los Angeles, California. The provisions of this Section shall
survive any termination, amendment or expiration of the Subject Documents, or
any of them, unless Bank and all other parties thereto otherwise expressly agree
in writing. In any arbitration or other proceeding held pursuant to this
Section, all oral and written communications between or among the parties hereto
[remainder of this page intentionally left blank]
shall be deemed privileged for all purposes as if the parties had proceeded
judicially.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.
UNION BANK OF CALIFORNIA, N.A.
By:
Title:
AMWEST INSURANCE GROUP, INC.
a Delaware corporation
By:
Title:
REVOLVING NOTE
$17,500,000 Los Angeles,
California
July 10, 1996
FOR VALUE RECEIVED, AMWEST INSURANCE GROUP, INC., a Delaware
corporation ("Borrower") hereby promises to pay to the order of UNION BANK OF
CALIFORNIA, N. A., a California banking corporation ("Bank"), the principal sum
of Seventeen Million Five Hundred Thousand Dollars ($17,500,000), or such lesser
sum as shall equal the aggregate outstanding principal amount of the Revolving
Loans made by Bank to Borrower pursuant to the Restated Revolving Credit
Agreement referred to below, on or before the Maturity Date specified in the
Restated Revolving Credit Agreement. Borrower further promises to pay interest
on the aggregate outstanding principal amount of the Revolving Loans at the
rates provided in the Restated Revolving Credit Agreement. All computations of
interest shall be in accordance with the provisions of the Restated Revolving
Credit Agreement.
If the Revolving Loans remain unpaid after maturity (whether
by acceleration or otherwise), Borrower shall pay interest on the aggregate
outstanding balance of the Revolving Loans at a per annum rate equal to two
percent (2%) greater than the interest rate otherwise in effect with respect
thereto.
Borrower shall make all payments hereunder in lawful money of
the United States of America and in immediately available funds to Bank's office
located at 192 Commercial Loan Center, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, attention: Department 77723 Supervisor, telefacsimile number:
▇▇▇-▇▇▇-▇▇▇▇.
Borrower hereby authorizes Bank to record in its books and
records or on the back of this Revolving Note the date, amount and interest rate
of each Revolving Loan (and, in the case of each Eurodollar Lending Rate
Borrowing, the Interest Period applicable thereto) and of each payment or
prepayment of principal made by Borrower, and agrees that all such notations
shall constitute prima facie evidence of the matters noted.
This Revolving Note is the Revolving Note referred to in that
certain Restated Revolving Credit Agreement dated as of July 10, 1996 by and
between Borrower and Bank (as at any time amended, supplemented, or otherwise
modified or restated, the "Agreement"), and is governed by the terms thereof.
Initially capitalized terms used herein which are not otherwise defined have the
meanings assigned to such terms in the Agreement.
[SIGNATURE BLOCK ON NEXT PAGE]
This Revolving Note shall be governed by and construed in
accordance with the internal laws of the State of California without regard to
principles of conflicts of laws.
AMWEST INSURANCE GROUP, INC.
By:
Name:
Title:
NOTICE OF BORROWING
(Revolving Loan)
To: UNION BANK OF CALIFORNIA, N.A.
Investment Banking Note Center #192
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Attn:
Pursuant to that certain Restated Revolving Credit Agreement,
as of July 10, 1996 ( the "Agreement"), between Amwest Insurance Group, Inc., a
Delaware corporation ("Borrower"), on the one hand, and Union Bank of
California, N.A. on the other hand, this Notice of Borrowing represents
Borrower's request for a borrowing pursuant to Section 2.4 of the Agreement:
$__________ Reference Rate Borrowing; and
$__________ Eurodollar Rate Borrowing
with an interest Period of
months and expiring on , 19
Total: $__________
Borrower requests that the above extension of credit be made
available on , 19 .
The undersigned officer certifies that, as of the date of the
requested borrowing;
(i) the representations and warranties of Borrower contained
in the Agreement are true and correct in all material respects on and as of such
date, except to the extent such representations and warranties expressly relate
solely to an earlier date;
(ii) no Event of Default or Default has occurred and is
continuing under the Agreement or will result from the proposed borrowing;
(iii) Borrower has satisfied all conditions under the
Agreement to be performed or satisfied by it on or before such date.
Exhibit 2
Each capitalized term contained in this Notice of Borrowing
and not separately defined herein shall have the meaning ascribed thereto in the
Agreement.
Dated: 19 .
AMWEST INSURANCE GROUP, INC.
a California corporation
By:
Title:
By:
Title:
Exhibit 2
NOTICE OF CONVERSION/CONTINUATION
(Revolving Loan)
To: UNION BANK OF CALIFORNIA, N.A.
Investment Banking Note Center #192
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Attn:
Pursuant to that certain Restated Revolving Credit Agreement,
dated as of July 10, 1996 (the "Agreement"), between Amwest Insurance Group,
Inc., a Delaware corporation ("Borrower"), on the one hand, and Union Bank of
California, N.A., on the other hand, this Notice of Conversion/Continuation
represents Borrower's request pursuant to Section 2.5 of the Agreement to:
(a) Convert $_________ in principal amount of
Reference Rate Borrowings on , 19 to a Eurodollar
Rate Borrowing with an Interest Period of [months]
and expiring on 19 ;
(b) Convert $ in principal amount Eurodollar
Rate Borrowings on , 19 , to a Reference
Rate Borrowing;
(c)Continue as Eurodollar Rate Borrowings
$_______________ in principal amount of presently
outstanding Eurodollar Rate Borrowings, commencing on
, 19 , with an Interest Period of [months]
and expiring on , 19 .
Exhibit 3
Each capitalized term contained in this Request for
Conversion/Continuation and not separately defined herein shall have the meaning
ascribed thereto in the Agreement.
Dated: , 19--
AMWEST INSURANCE GROUP, INC.
a California corporation
By:
Title:
By:
Title:
EXHIBIT 3
COMPLIANCE CERTIFICATE
To: Union Bank of California, N.A.
Reference is made to the Restated Revolving Credit Agreement dated as of
July 10, 1996, between AMWEST INSURANCE GROUP, INC., a Delaware corporation
("Borrower"), and UNION BANK OF CALIFORNIA, N.A. (the "Restated Revolving Credit
Agreement"). Terms defined in the Restated Revolving Credit Agreement and not
otherwise defined in this Compliance Certificate ("Certificate") shall have the
meanings defined for them in the Restated Revolving Credit Agreement. This
Certificate is delivered in accordance with Sections 5.2(c) and 5.2(f) of the
Restated Revolving Credit Agreement.
I. COMPLIANCE WITH FINANCIAL COVENANTS.
Through the fiscal quarter ending . Computations showing compliance
with Sections 5.9, 5.11, 5.12, 5.13, 5.14, 5.15, and 5.16 of the Loan Agreement
are as follows:
A. 5.9; Fixed-Charqe Coveraqe Ratio. The Fixed-Charge
Coverage Ratio, as computed in accordance with Section 5.9 of the Restated
Revolving Credit Agreement, is : 1.0.
COVENANT REQUIREMENT - Cannot be less than 1.1:1.0.
B. 5.11; Tanqible Net Worth. Tangible Net Worth as
computed in accordance with Section 1.1 and 5.11 of the
Restated Revolving Credit Agreement is .
COVENANT REQUIREMENT - Minimum Tangible Net Worth must be
greater than 90% of consolidated Tangible Net Worth at March
31, 1996, plus 50% of Borrower's net income. Minimum
Tangible Net Worth shall also be increased each fiscal year
by the dollar amount of any initial public offering of
securities.
C. 5.12; Net Profit. Net Profit as computed in accordance with
Section 1.1 and 5.12 of the Restated Revolving Credit Agreement is
.
EXHIBIT 4
COVENANT REQUIREMENT - Must be > 0 on an annual basis.
D. 5.13; Policyholders' Surplus. Policyholders Surplus as computed
in accordance with Section 1.1 and 5.13 of the Restated Revolving Credit
Agreement is :
COVENANT REQUIREMENT - must be > 90% of Capital Surplus as of March 31,
1996.
E. 5.14; Operating Leverage Ratio. Operating Leverage Ratio as
computed in accordance with Sections 1.1 and 5.14 of the Restated Revolving
Credit Agreement is : 1.0.
COVENANT REQUIREMENT -Cannot exceed 3.0:1.0.
In the above computation, the Operating Leverage Ratio is computed as
follows:
Net Written Premiums (over the most recent four quarters) Capital
Surplus (as of the most recent quarterly ending date)
F. 5.15; A.M. Best Rating. A.M. Best Rating as discussed in
Section 5.15 of the Restated Revolving Credit Agreement is
COVENANT REQUIREMENT - Must maintain an A.M. Best rating of A- or
better.
G. 5.16; Investment Portfolio Quality. Investment Portfolio Quality
as discussed in Section 5.16 of the Restated Revolving Credit Agreement is
COVENANT REQUIREMENT - Must maintain an average fixed income portfolio
rating of A.
II.PERFORMANCE OF OBLIGATIONS.
A review of the activities of Borrower and its Subsidiaries during the
fiscal period covered by the attached financial statements has been made under
my supervision with a view to determining whether during such fiscal period
Borrower an dits Subsidiaries performed and observed all their respective
obligations under the Restated Resolving Credit Agreement. Except as described
in an attached document or in an earlier Certificate, Borrower and its
Subsidiaries performed and observed each covenant contained in the Restated
Revolving Credit Agreement applicable to it, and no Default or Event of Default
has occurred during such
EXHIBIT 4
fiscal period which had not been previously waived by Bank nor is such a Default
or Event of Default continuing.
IN WITNESS WHEREOF, as a Senior Officer of Borrower, I
have signed this Certificate as of the day of
, 19--
BY:
Printed Name and Title
EXHIBIT 4