EXHIBIT 10.1
FOURTH AMENDMENT TO THE CREDIT AGREEMENT
(AMENDING AND RESTATING THE CREDIT AGREEMENT)
This FOURTH AMENDMENT dated as of October 26, 1998 (this "Fourth
Amendment") is between THE CENTRIS GROUP, INC., formerly known as US Facilities
Corporation (the "Borrower"), and FLEET NATIONAL BANK, a national banking
association formerly known as Shawmut Bank Connecticut, N.A. and Fleet National
Bank of Connecticut (the "Bank").
PRELIMINARY STATEMENTS. The Borrower and the Bank entered into a Credit
Agreement dated as of December 20, 1994, which agreement was amended by a First
Amendment to the Credit Agreement dated as of March 29, 1996, a Second Amendment
to the Credit Agreement dated as of July 1, 1996 and a Third Amendment to the
Credit Agreement dated as of September 30, 1998 (as so amended, the "Existing
Credit Agreement").
The Borrower has requested the Bank to further amend the Existing Credit
Agreement to, among other things, increase the Bank's Commitment, extend the
Revolving Loan Termination Date, lower the Applicable Margin for Eurodollar Rate
Loans and the amount of the commitment fee, defer the dates for certain
mandatory commitment reductions and remove the distinction between Revolving
Loans A and Revolving Loans B. The Bank has agreed to such request and the
parties therefore wish to amend and restate the existing Credit Agreement to
reflect their understandings.
Accordingly, the Borrower and the Bank agree as follows:
Section 1. Amendment and Restatement of the Existing Credit Agreement.
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The Existing Credit Agreement, including, without limitation, the schedules and
exhibits thereto, is hereby amended and restated in its entirety to read as set
forth in Exhibit A to Fourth Amendment attached hereto (as so amended and
-----------------------------
restated hereby, the "Credit Agreement"). Such amendment and restatement shall
be effective as of the date hereof, subject to the satisfaction of the
conditions precedent set forth in Section 2 of this Fourth Amendment.
Section 2. Conditions Precedent. The effectiveness of this Fourth
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Amendment is hereby subject to the satisfaction on a date to be mutually agreed
upon, but not later than October 26, 1998 (the "Closing Date"), of the following
conditions in a manner acceptable to the Bank and its counsel:
(a) the execution and delivery to the Bank by the Borrower of this Fourth
Amendment;
(b) the execution and delivery to the Bank of a Revolving Note for the
account of the Bank in the amount of its Commitment in exchange for the
promissory note issued under the Existing Credit Agreement;
(c) receipt by the Bank of a certificate of the Secretary or Assistant
Secretary of the Borrower, dated the Closing Date, attesting on behalf of
the Borrower to all corporate action taken by the Borrower, including
resolutions of its Board of Directors authorizing the execution, delivery
and performance of this Fourth Amendment, the Revolving Note and each other
document to be delivered pursuant to this Fourth Amendment;
(d) receipt by the Bank of a certificate of a Senior Officer of the
Borrower, dated the Closing Date, stating that:
(i) the representations and warranties contained in Article 5 of the
Credit Agreement are correct on and as of the date of such certificate
as though made on and as of such date (or, if such representation or
warranty is expressly stated to have been made as of a specific date,
as of such specific date);
(ii) no Event of Default or Default has occurred and is continuing or
would result from the signing of the Fourth Amendment to the Credit
Agreement or the transactions contemplated thereby; and
(iii) there has been no material adverse change in the financial
condition, operations, Properties, business or business prospects of
the Borrower and its Subsidiaries, since the date of the last audited
financial statements furnished to the Bank;
(e) receipt by the Bank of a certificate of a Senior Officer of the
Borrower, dated the Closing Date, substantially in the form of Exhibit B to
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Fourth Amendment, which certificate shall include information required to
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establish that the Borrower will be in compliance with the covenants set
forth in the Credit Agreement, after giving effect to the transactions
contemplated herein;
(f) receipt by the Bank of a certificate of good standing for the Borrower
as of a recent date by the Secretary of State of its jurisdiction of
incorporation and each state where the Borrower, by the nature of its
business, is required to qualify to do business, except where the failure
to be so qualified would not have a material adverse effect on the
financial condition, operations, Properties, business or, as far as the
Borrower can reasonably foresee, prospects of the Borrower and its
Subsidiaries, taken as a whole;
(g) receipt by the Bank of a certificate of good standing for USBENEFITS as
of a recent date by the Secretary of State of its jurisdiction of
incorporation and, if different, its principal place of business;
(h) receipt by the Bank of a certificate or similar instrument as of a
recent date from the appropriate tax authority in the State of California
and Delaware as to the payment by the Borrower of all taxes owed;
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(i) receipt by the Bank of a certificate of authority as of a recent date
from the Insurance Commissioner of Massachusetts certifying that USF RE is
duly licensed and in good standing with such Insurance Commissioner;
(j) receipt by the Bank of a favorable opinion of ▇.▇. ▇▇▇▇, Professional
Law Corporation, California counsel to the Borrower, dated the Closing
Date, in substantially the form set forth in Exhibit C to Fourth Amendment
-----------------------------
hereto;
(k) receipt by the Bank of a favorable opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇,
Massachusetts insurance counsel to the Borrower, dated the Closing Date, in
substantially the form set forth in Exhibit D to Fourth Amendment hereto;
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(l) receipt by the Bank of an acknowledgment and ratification of the Pledge
Agreement, dated the Closing Date, in substantially the form set forth in
Exhibit E to Fourth Amendment hereto;
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(m) receipt by the Bank of a copy of each consent, license, approval and
notice required in connection with the execution, delivery, performance,
validity and enforceability of this Fourth Amendment, the Revolving Note
and each other document and instrument required to be delivered in
connection herewith, if any;
(n) the provision of all information, documents, certificates and opinions
of counsel relating to the Borrower and its Subsidiaries, as the Bank may
reasonably request, all in form and substance satisfactory to the Bank and
its special counsel;
(o) payment to the Bank of an up-front fee of $151,125.00; and
(p) payment to Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to the Bank, of its
legal fees and disbursements.
Section 3. Representations and Warranties of the Borrower. The Borrower
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represents as follows:
(a) The execution, delivery and performance by the Borrower of this Fourth
Amendment have been duly authorized by all necessary corporate action and do not
and will not (i) require any consent or approval of its shareholders; (ii)
violate any provisions of its articles of incorporation or by-laws; (iii)
violate any provision of any law, rule, regulation (including without
limitation, Regulation U and X), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to and binding
upon the Borrower or any Subsidiary; (iv) result in a breach of or constitute a
default or require any consent under any indenture or loan or credit agreement
or any other material agreement, lease or instrument to which the Borrower or
any Subsidiary is a party or by which it or its Properties may be bound; or
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(v) result in, or require, the creation or imposition of any Lien upon or with
respect to any of the Properties now owned or hereafter acquired by the
Borrower.
(b) No authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, or any other Person,
including without limitation, the California or Massachusetts Insurance
Commissioner, is required to authorize, or is required in connection with the
execution, delivery and performance by the Borrower of, or the legality,
validity, binding effect or enforceability of, this Fourth Amendment except for
such approvals as have been obtained and are in full force and effect.
(c) This Fourth Amendment constitutes the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally and by general principles of equity.
(d) No actions, suits or proceedings or investigations (other than routine
examinations performed by insurance regulatory authorities) are pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary, or any Property of any of them before any court, governmental
agency or arbitrator, which if determined adversely to the Borrower or any
Subsidiary would in any one case or in the aggregate, materially adversely
affect the financial condition, operations, Properties, business or, to the
knowledge of the Borrower, prospects of the Borrower and its Subsidiaries taken
as a whole or the ability of the Borrower to perform its obligations under the
Credit Agreement, as amended by this Fourth Amendment.
(e) No information, exhibit or report furnished in writing by or on behalf
of the Borrower or any officer or director of the Borrower to the Bank in
connection with the negotiation of, or pursuant to the terms of, this Fourth
Amendment contained when made any material misstatement of fact or omitted to
state a material fact necessary to make the statements contained therein not
misleading.
Section 4. Effect on the Existing Credit Agreement. The execution,
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delivery and effectiveness of this Fourth Amendment shall not, except as
expressly provided herein, operate as a waiver of any right, power or remedy of
the Bank under the Existing Credit Agreement, nor constitute a waiver of any
provision of the Existing Credit Agreement.
Section 5. Costs, Expenses and Taxes. The Borrower agrees to pay on
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demand all costs and expenses of the Bank in connection with the preparation,
execution and delivery of this Fourth Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Bank with respect
thereto and with respect to advising the Bank as to its rights and
responsibilities hereunder and thereunder. In addition, the Borrower shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and
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delivery of this Fourth Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save the Bank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes.
Section 6. Execution in Counterparts. This Fourth Amendment may be
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executed in any number of counterparts, each of which when so executed and
delivered shall be deemed to be an original and all of which taken together
shall constitute but one and the same instrument.
Section 7. Integration. This Fourth Amendment to the Credit Agreement,
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together with Exhibit A to Fourth Amendment, as well as the schedules and
-----------------------------
exhibits thereto and hereto, including the Revolving Note, the Pledge Agreement
and the Acknowledgment and Ratification of the Pledge Agreement, comprise the
entire agreement between the parties hereto relating to the transactions
contemplated hereby and thereby, and supersede any and all prior oral or written
statements or agreements with respect to the loan and pledge transaction between
the parties hereto.
Section 8. Governing Law. This Fourth Amendment shall be governed by, and
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construed in accordance with, the laws of the State of Connecticut.
Section 9. Defined Terms. Until this Fourth Amendment shall become
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effective, capitalized terms used herein which are not expressly defined herein
shall have the meanings ascribed to them in the Existing Credit Agreement.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Fourth Amendment to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE CENTRIS GROUP, INC.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board, President
and Chief Executive Officer
FLEET NATIONAL BANK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
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EXHIBIT A TO FOURTH AMENDMENT
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-1-
CREDIT AGREEMENT
dated as of December 20, 1994
BETWEEN
THE CENTRIS GROUP, INC.
AND
FLEET NATIONAL BANK
AMENDED AND RESTATED AS OF OCTOBER 26, 1998
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS......................................1
Section 1.1. Definitions................................................1
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Section 1.2. Accounting Terms..........................................12
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Section 1.3. Rounding..................................................13
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Section 1.4. Exhibits and Schedules....................................13
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Section 1.5. References to "Borrower and its Subsidiaries".............13
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Section 1.6. Miscellaneous Terms.......................................13
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ARTICLE 2. THE CREDIT........................................................13
Section 2.1. The Revolving Loans.......................................13
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Section 2.2. The Revolving Note........................................14
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Section 2.3. Procedure for Borrowing...................................14
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Section 2.4. Termination or Optional Reduction of Commitment...........15
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Section 2.5. Mandatory Quarterly Reduction of Commitment...............16
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Section 2.6. Maturity of Revolving Loans...............................16
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Section 2.7. Optional Prepayments......................................16
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Section 2.8. Interest on the Revolving Loans...........................16
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Section 2.9. Fees......................................................17
----
Section 2.10. Payments Generally........................................17
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Section 2.11. Capital Adequacy..........................................18
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Section 2.12. Increased Costs...........................................18
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Section 2.13. Illegality................................................19
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Section 2.14. Payments to be Free of Deductions.........................19
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Section 2.15. Computations..............................................20
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Section 2.16. Obligations Absolute......................................20
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ARTICLE 3. SECURITY..........................................................21
Section 3.1. Pledge Agreement..........................................21
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Section 3.2. Further Assurances........................................21
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ARTICLE 4. CONDITIONS PRECEDENT..............................................21
Section 4.1. Documentary Conditions Precedent..........................21
--------------------------------
Section 4.2. Additional Conditions Precedent to Each Loan..............23
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Section 4.3. Deemed Representations....................................24
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ARTICLE 5. REPRESENTATIONS AND WARRANTIES....................................24
Section 5.1. Incorporation, Good Standing and Due Qualification........24
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Section 5.2. Corporate Power and Authority; No Conflicts...............24
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Section 5.3. Legally Enforceable Agreements............................25
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Section 5.4. Litigation...............................................25
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Section 5.5. Financial Statements.....................................25
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Section 5.6. Ownership and Liens......................................26
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Section 5.7. Taxes....................................................26
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Section 5.8. ERISA....................................................26
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Section 5.9. Subsidiaries and Ownership of Stock......................27
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Section 5.10. Credit Arrangements......................................27
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Section 5.11. Operation of Business....................................28
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Section 5.12. No Default on Outstanding Judgments or Orders............28
---------------------------------------------
Section 5.13. No Defaults on Other Agreements..........................28
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Section 5.14. Governmental Regulation..................................28
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Section 5.15. Consents and Approvals...................................28
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Section 5.16. Partnerships.............................................29
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Section 5.17. Environmental Protection.................................29
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Section 5.18. Copyrights, Patents, Trademarks, Etc.....................30
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Section 5.19. Compliance with Laws.....................................30
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Section 5.20. Events of Default........................................30
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Section 5.21. Use of Proceeds..........................................30
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Section 5.22. Continental Agreements...................................30
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ARTICLE 6. AFFIRMATIVE COVENANTS............................................30
Section 6.1. Maintenance of Existence and Domicile of Insurance
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Subsidiaries...........................................31
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Section 6.2. Conduct of Business......................................31
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Section 6.3. Maintenance of Properties................................31
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Section 6.4. Maintenance of Records...................................31
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Section 6.5. Maintenance of Insurance.................................31
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Section 6.6. Compliance with Laws.....................................31
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Section 6.7. Right of Inspection......................................31
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Section 6.8. Reporting Requirements...................................32
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(a) Annual GAAP Statements...................................32
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(b) Annual SAP Financial Statements..........................33
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(c) Quarterly GAAP Statements................................33
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(d) Quarterly SAP Statements.................................33
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(e) Annual/Quarterly Reports.................................34
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(f) Annual Forecasts.........................................34
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(g) Management Letters.......................................34
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(h) SEC Filings..............................................34
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(i) Notice of Litigation.....................................34
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(j) Notices of Default.......................................35
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(k) Actuarial Report Confirming Reserves.....................35
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(l) Other Filings............................................35
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(m) Additional Information...................................35
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Section 6.9. Certificates.............................................35
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(a) Officers' Certificate..................................36
---------------------
(b) Accountant's Certificate...............................36
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Section 6.10. Further Assurances.....................................36
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Section 6.11. Compliance with Agreements.............................36
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Section 6.12. Use of Proceeds........................................37
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Section 6.13. Continental Agreements.................................37
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ARTICLE 7. NEGATIVE COVENANTS..............................................37
Section 7.1. Debt...................................................37
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Section 7.2. Guaranties, Etc........................................37
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Section 7.3. Liens..................................................37
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Section 7.4. Investments............................................38
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Section 7.5. Mergers and Consolidations and Acquisitions of Assets..38
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Section 7.6. Sale of Assets.........................................39
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Section 7.7. Stock of Subsidiaries, Etc.............................39
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Section 7.8. Transactions with Affiliates...........................39
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Section 7.9. Capital Expenditures...................................39
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Section 7.10. Minimum Statutory Surplus..............................39
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Section 7.11. Minimum Consolidated GAAP Net Worth....................40
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Section 7.12. Maximum Premiums to Surplus............................40
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Section 7.13. [Reserved].............................................40
Section 7.14. Minimum Interest Coverage..............................40
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Section 7.15. Minimum Fixed Charge Coverage..........................40
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Section 7.16. Minimum Debt Service Coverage..........................41
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Section 7.17. Distributions..........................................41
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Section 7.18. Risk-Based Capital Ratio...............................41
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Section 7.19. Minimum ▇.▇.▇▇▇▇ Rating................................41
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Section 7.20. Continental Agreements.................................41
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ARTICLE 8. EVENTS OF DEFAULT...............................................41
Section 8.1. Events of Default......................................41
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Section 8.2. Remedies...............................................44
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ARTICLE 9. MISCELLANEOUS...................................................45
Section 9.1. Amendments and Waivers.................................45
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Section 9.2. Usury..................................................45
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Section 9.3. Expenses; Indemnities..................................45
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Section 9.4. Term; Survival.........................................46
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Section 9.5. Assignment; Participations.............................47
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Section 9.6. Notices................................................47
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Section 9.7. Setoff.................................................47
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Section 9.8. Jurisdiction; Immunities...............................48
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Section 9.9. Table of Contents; Headings............................48
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Section 9.10. Severability.............................................48
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Section 9.11. Counterparts.............................................48
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Section 9.12. Integration..............................................49
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Section 9.13. Governing Law............................................49
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Section 9.14. Confidentiality..........................................49
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Section 9.15. Authorization of Third Parties to Deliver Opinions, Etc..49
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Section 9.16. Borrower's Waivers.......................................49
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Section 9.17. State of Making and Substantial Performance..............50
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Schedule 1.1 Commitments and Lending Offices
Schedule 5.4 Litigation
Schedule 5.6 Liens
Schedule 5.9 Subsidiaries
Schedule 5.10 Credit Arrangements
Schedule 5.15 Consents and Approvals
Schedule 5.16 Partnerships
Schedule 7.2 Guaranties
Exhibit A Revolving Note
Exhibit B Notice of Borrowing
Exhibit C Officer's Certificate
Exhibit D-1 Form of Opinion of California Counsel to Borrower
Exhibit E Form of Opinion of Massachusetts Insurance Counsel to Borrower
Exhibit F Pledge Agreement
Exhibit G Form of Subordinated Debt Provisions
CREDIT AGREEMENT dated as of December 20, 1994 between US FACILITIES
CORPORATION, a Delaware corporation (the "Borrower"), and FLEET NATIONAL BANK,
formerly known as Shawmut Bank Connecticut, N.A. and Fleet National Bank of
Connecticut (the "Bank").
The Borrower desires that the Bank extend credit as provided herein, and
the Bank is prepared to extend such credit. Accordingly, the Borrower and the
Bank agree as follows:
ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS.
Section 1.1. Definitions. As used in this Agreement, the following terms
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have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa):
"Affiliate" means, as to any Person, any other Person which directly or
indirectly controls, or is under common control with, or is controlled by, such
Person. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
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event: (i) any Person which owns directly or indirectly 20% or more of the
securities having ordinary voting power for the election of directors or other
governing body of a corporation or 20% or more of the partnership or other
ownership interests of any other Person (other than as a limited partner of such
other Person) will be deemed to control such corporation or other Person; and
(ii) each corporate officer at or above the level of senior vice president of
the Person and each director of the Person shall be deemed to be an Affiliate of
the Person; provided, however, that each director and officer of the Bank shall
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constitute an Affiliate of the Bank.
"Agreement" means this Credit Agreement, as amended or supplemented from
time to time. References to Articles, Sections, Exhibits, Schedules and the
like refer to the Articles, Sections, Exhibits, Schedules and the like of this
Agreement unless otherwise indicated.
"A.M. Best Rating" means the most recent rating announced by A.M. Best (or
any successor thereto) or, if such rating is no longer announced by A.M. Best
(or its successor), the most recent rating announced by another rating agency
selected by the Bank.
"Applicable Interest Rate" means for any Revolving Loan, the Base Rate, CD
Rate, or Eurodollar Rate for such Revolving Loan, plus in each case the
Applicable Margin.
"Applicable Margin" means:
(a) with respect to Base Rate Loans, the rate per annum for each rating
level period set forth in the schedule below:
Applicable Margin
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Level I Period 0.50%
Level II Period 0.25%
(b) with respect to CD Rate Loans, the rate per annum for each rating
level period set forth in the schedule below:
Applicable Margin
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Level I Period 2.125%
Level II Period 1.875%
(c) with respect to Eurodollar Rate Loans, the rate per annum for each
rating level period set forth in the schedule below:
Applicable Margin
-----------------
Level I Period .875%
Level II Period .75%
Any change in the Applicable Margin by reason of a change in the A.M. Best
Rating shall become effective on the date of announcement or publication by the
rating agency of a change in such rating or, in the absence of such announcement
or publication, on the effective date of such changed rating.
"Assessment Rate" means, at any time, the average of the rates (rounded
upwards, if necessary, to the nearest 1/100 of 1%) then charged by the Federal
Deposit Insurance Corporation (or any successor) to the Bank for deposit
insurance for Dollar time deposits with the Bank as determined by the Bank.
"Available Dividends" at the end of any fiscal quarter means the portion of
Statutory Surplus of USF RE that is permitted by California and Massachusetts
laws and regulations to be distributed to shareholders.
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"Base Rate" means, for any Interest Period or any other period, a
fluctuating interest rate per annum as shall be in effect from time to time,
which rate per annum shall at all times be equal to the highest of (a) the rate
of interest announced publicly by the Bank in Hartford, Connecticut, from time
to time, as the Bank's base rate or prime rate, which does not necessarily
represent the lowest or best rate being charged to any customer, or (b) 1/2 of
1% per annum above the Federal Funds Effective Rate.
"Base Rate Loan" means a Revolving Loan which bears interest at the Base
Rate, plus the Applicable Margin.
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"Borrowing" means a borrowing consisting of a Revolving Loan from the Bank
under this Agreement.
"Business Day" means any day (other than a Saturday, Sunday or legal
holiday) on which commercial banks are not authorized or required to close in
Connecticut or California, except that, with respect to Borrowings, notices,
determinations and payments with respect to Eurodollar Rate Loans, such day
shall be a "Business Day" only if it is also a day for trading by and between
banks in the London interbank Eurodollar market.
"Capital Expenditures" means, for any period, the Dollar amount of gross
expenditures (including payments in respect of Capital Lease Obligations) made
for fixed assets, real property, plant and equipment, and all renewals,
improvements and replacements thereto (but not repairs thereof) incurred during
such period, all as determined in accordance with GAAP.
"Capital Lease" means any lease which has been or should be capitalized on
the books of the lessee in accordance with GAAP.
"Capital Lease Obligation" means the obligation of the lessee under a
Capital Lease. The amount of a Capital Lease Obligation at any date is the
amount at which the lessee's liability under the related Capital Lease would be
required to be shown on its balance sheet at such date in accordance with GAAP.
"CD Rate" means for the Interest Period for each CD Rate Loan comprising
part of the same Borrowing, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) determined by the Bank to be equal to the sum of:
(a) (x) the rate determined by the Bank to be its rate at or before 11:00 a.m.
(Connecticut time) one Business Day before the first day of such Interest Period
for the purchase at face value of certificates of deposit of the Bank in the
approximate amount of the relevant CD Rate Loan and having a maturity
approximately equal to such CD Interest Period, divided by (y) one (1) minus the
Reserve Requirement for each such CD Rate Loan for such Interest Period, plus
(b) the Assessment Rate in effect at the commencement of such Interest Period.
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"CD Rate Loan" means a Revolving Loan which bears interest at the CD Rate,
plus the Applicable Margin.
"Closing Date" means the date this Agreement has been executed by the
Borrower and the Bank.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means the commitment of the Bank to make Revolving Loans
hereunder as set forth in Schedule 1.1, as the same may be reduced from time to
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time pursuant to Sections 2.4 and 2.5.
"Commitment Period" means the period from and including the date hereof to
but not including the Revolving Loan Termination Date or such earlier date as
the Commitment shall terminate as provided herein.
"Consolidated GAAP Net Worth" means the sum of (a) the capital stock and
additional paid-in capital of the Borrower and its Subsidiaries on a
consolidated basis, plus (without duplication) (b) the amount of retained
earnings (or, in the case of a deficit, minus the deficit), minus (c) treasury
stock, plus or minus (d) any other account which is customarily added or
deducted in determining shareholders' equity, all of which shall be determined
on a consolidated basis in accordance with GAAP.
"Continental Agreements" means, collectively, (a) that certain Quota Share
Retrocession Agreement between The Continental Insurance Company (formerly
Harbor Insurance Company) and USF RE Insurance Company (formerly Massachusetts
Plate Glass Insurance Company) dated May 21, 1986, as amended through Amendment
▇▇. ▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇, ▇▇▇▇, (▇) that certain Management Agreement
No. 1 between USBENEFITS Insurance Services, Inc. and The Continental Insurance
Company effective as of January 1, 1993, and the addenda thereto; and (c) that
certain Management Agreement No. 2 between USBENEFITS Insurance Services, Inc.
and The Continental Assurance Company effective as of January 1, 1997.
"Debt" means, with respect to any Person: (a) indebtedness of such Person
for borrowed money; (b) indebtedness for the deferred purchase price of Property
or services (except trade payables in the ordinary course of business); (c)
Unfunded Vested Liabilities of such Person (if such Person is not the Borrower,
determined in a manner analogous to that of determining Unfunded Vested
Liabilities of the Borrower); (d) the face amount of any outstanding letters of
credit issued for the account of such Person; (e) obligations arising under
acceptance facilities; (f) guaranties, endorsements (other than for collection
in the ordinary course of business) and other contingent obligations to purchase
or to provide funds for payment of the obligations of another Person, to supply
funds to invest in any Person to cause such Person to maintain a minimum working
capital or net worth or otherwise assure the creditors of such Person against
loss; (g) obligations secured by any Lien on Property of such Person; and (h)
Capital Lease Obligations.
-4-
"Debt Service Coverage Ratio" at the end of any fiscal quarter means the
ratio of (a) the sum of (i) Available Dividends, plus (ii) total taxes paid by
USF RE to the Borrower pursuant to any intercorporate tax sharing agreement for
the immediately preceding four fiscal quarters (ending on such date), plus (iii)
the consolidating income before provision for income taxes of the Borrower and
all Subsidiaries, except the Insurance Subsidiaries (determined in accordance
with GAAP and eliminating intercompany balances and transactions, as applicable)
for the immediately preceding four fiscal quarters (ending on such date), minus
(iv) total taxes (determined in accordance with GAAP) paid by the Borrower on a
consolidated basis for the immediately preceding four fiscal quarters (ending on
such date), minus (v) Distributions by the Borrower for the immediately
preceding four fiscal quarters (ending on such date) to (b) the sum of (i) total
Interest Expense of the Borrower and its Subsidiaries on a consolidated basis
for the immediately succeeding four fiscal quarters (beginning on such date),
plus (ii) scheduled reductions of the Commitment for the immediately succeeding
four fiscal quarters (beginning on such date). For purposes of clause (b) above,
Interest Expense shall be calculated on the assumption that Base Rate Loans for
the full amount of the Commitment will be outstanding for the succeeding four
fiscal quarters and the A.M. Best Rating of USF RE on the date of the
certification required by Section 6.9(a) with respect to the fiscal quarter
being tested will remain in effect for the succeeding four fiscal quarters.
"Default" means any event which with the giving of notice or lapse of time,
or both, would become an Event of Default.
"Default Rate" means a rate per annum equal at all times to the lesser of
2% per annum above the Base Rate in effect from time to time or the highest rate
permitted by law.
"Distributions" means (a) dividends or other distributions in respect of
capital stock of a Person (except distributions in such stock) and (b) the
redemption or acquisition of such stock or of warrants, rights or other options
to purchase such stock (except when solely in exchange for such stock) unless
made, contemporaneously, from the net proceeds of a sale of such stock; in
either case valued at the greater of book or fair market value of the Property
being dividended, distributed or otherwise transferred as a Distribution.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, including any rules and regulations promulgated
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
-5-
"Eurodollar Rate" means, for the Interest Period for each Eurodollar Rate
Loan comprising part of the same Borrowing, an interest rate per annum equal to
(x) the rate quoted by the Bank at which deposits in Dollars are offered by
prime commercial banks to prime commercial banks in the London interbank
Eurodollar market two Business Days before the first day of such Interest Period
for a period equal to such Interest Period and in an amount equal to the
Borrowing, divided by (y) one (1) minus the Reserve Requirement for each such
Eurodollar Rate Loan for such Interest Period.
"Eurodollar Rate Loan" means a Revolving Loan which bears interest at the
Eurodollar Rate, plus the Applicable Margin.
----
"Event of Default" has the meaning given such term in Section 8.1.
"Federal Funds Effective Rate" at any time means a fluctuating interest
rate per annum equal to the weighted average of the rates on overnight Federal
Funds transactions with members of the Federal Reserve System arranged by
Federal Funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such transactions
received by the Agent from three (3) Federal Funds brokers of recognized
standing selected by the Agent.
"Financing Statements" means the UCC-1 financing statements signed by the
Borrower in connection with the security interests granted to the Bank pursuant
to the Pledge Agreement.
"Fixed Charges" means, for any period, the sum of (a) the Interest Expense,
plus (b) rental payments (other than the interest component of rental payments
under Capital Leases included in Interest Expense) under all leases of the
Borrower and its Subsidiaries, plus (c) principal payments of Debt owed by the
Borrower during such period.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, applied on a basis consistent with
those used in the preparation of the financial statements referred to in Section
5.5 (except for changes concurred in by the Borrower's independent public
accountants).
"GAAP EBIT" means, with respect to any Person, for any period, earnings of
such Person before interest and taxes and shall equal the sum of (a) net income
for such period, plus (b) Interest Expense for such period, plus (c) income tax
expense deducted in determining net income for such period, all of which shall
be determined in accordance with GAAP.
"Insurance Commissioner" means the Insurance Commissioner of the
Commonwealth of Massachusetts and/or the Division of Insurance of the
Commonwealth of Massachusetts as applicable (or, in lieu of the Commonwealth of
Massachusetts, the relevant state of domicile of USF RE at the relevant time).
-6-
"Insurance Subsidiary" means USF RE, USFIC and any other insurance company
Subsidiaries of Borrower hereafter owned or acquired.
"Interest Expense" means, for any period, the consolidated interest
expense, including the interest portion of rental payments under Capital Leases,
of the Borrower and its Subsidiaries, as determined on a consolidated basis in
accordance with GAAP.
"Interest Period" means (a) for each Eurodollar Rate Loan comprising part
of the same Borrowing, the period commencing on the date of such Eurodollar Rate
Loan or on the last day of the preceding Interest Period, as the case may be,
and ending on the numerically corresponding day of the last month of the period
selected by the Borrower pursuant to the following provisions: the duration of
each Eurodollar Rate Loan Interest Period shall be one, two, three or six
months, in each case as the Borrower may select, upon notice received by the
Bank not later than 11:00 a.m. (Connecticut time) on the third Business Day
prior to the first day of such Interest Period; (b) for each CD Rate Loan
comprising part of the same Borrowing, the period commencing on the date of such
CD Rate Loan or on the last day of the preceding Interest Period, as the case
may be, and ending on the last day of the period selected by the Borrower
pursuant to the following provisions: the duration of each CD Rate Loan shall
be 30, 60, 90 or 180 days, in each case as the Borrower may select, upon notice
received by the Bank not later than 11:00 a.m. (Connecticut time) on the first
Business Day prior to the first day of such Interest Period; and (c) for each
Base Rate Loan comprising part of the same Borrowing, the period commencing on
the date of such Base Rate Loan or on the last day of the preceding Interest
Period, as the case may be, pursuant to notice received by the Bank not later
than 11:00 a.m. (Connecticut time) on any Business Day selected by the Borrower
as the first day of such Interest Period, and ending on the 90th day after the
date of such Base Rate Loan or the last day of the preceding Interest Period, as
the case may be; provided, however, that:
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(i) all Eurodollar Rate Loans or CD Rate Loans comprising part of the
same Borrowing shall be of the same duration;
(ii) whenever the last day of any Interest Period would otherwise occur
on a day other than a Business Day, the last day of such Interest
Period shall be extended to occur on the next succeeding Business
Day; provided that, if such extension would cause the last day of
--------
such Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next
preceding Business Day; and
(iii) no Interest Period for any Revolving Loan shall extend beyond the
Revolving Loan Termination Date.
"Investment" means, with respect to any Person, any investment by or of
such Person, whether by means of purchase or other acquisition of capital stock
or other Securities of any
-7-
other Person or by means of loan, advance (other than advances to employees for
moving and travel expenses, drawing accounts and similar expenditures made in
the ordinary course of business), capital contribution or other debt or equity
participation or interest, in any other Person, including any partnership and
joint venture interests of such Person in any other Person.
"Investment Grade Securities" means any Securities having a fixed maturity
which have a rating by the NAIC of 1 or 2 or, if the NAIC rating categories in
effect on the Closing Date change, such other rating or ratings of such
Securities determined by the NAIC to be symbolic of investment grade quality.
"Lending Office" means, for each type of Revolving Loan, the lending office
of the Bank (or of an affiliate of the Bank) designated as such for such type of
Revolving Loan on Schedule 1.1 or such other office of the Bank (or of an
------------
affiliate of the Bank) as the Bank may from time to time specify to the Borrower
as the office through which its Revolving Loans of such type are to be made and
maintained.
"Level I Period" shall mean any period during which the A.M. Best Rating of
USF RE is below "A".
"Level II Period" shall mean any period during which (a) no Event of
Default has occurred and is continuing and (b) the A.M. Best Rating of USF RE is
at or above "A".
"Lien" means any lien (statutory or otherwise), security interest,
mortgage, deed of trust, priority, pledge, charge, conditional sale, title
retention agreement, financing lease or other encumbrance or similar right of
others, or any agreement to give any of the foregoing.
"Massachusetts Insurance Code" means chapter 175 of the General Laws of
Massachusetts.
"Multiemployer Plan" means a Plan defined as such in Section 3(37) of ERISA
to which contributions have been made by the Borrower or any ERISA Affiliate and
which is covered by Title IV of ERISA.
"NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing substantially similar advisory, coordination or other
like functions among insurance departments, insurance commissions and similar
governmental authorities of the various states of the United States of America
toward the promotion of uniformity in the practices of such governmental
authorities.
"Net Premiums Written" for any period means the combined net premiums of
USF RE, USFIC and any other Insurance Subsidiaries. On the respective annual
SAP Financial
-8-
Statements form for each Insurance Subsidiary for the year ended December 31,
1993, the net premiums appears on line 32, column (1) on page 7 thereof.
"Notice of Borrowing" means the certificate, in the form of Exhibit B
---------
hereto, to be delivered by the Borrower to the Bank pursuant to Sections 2.3 and
4.2(e) and shall include any accompanying certifications or documents.
"Obligations" means all indebtedness, obligations and liabilities of the
Borrower and its Subsidiaries, if any, to the Bank under this Agreement, the
Revolving Note or the Pledge Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Plan" means any employee benefit or other plan established or maintained,
or to which contributions have been made, by the Borrower or any ERISA Affiliate
and which is covered by Title IV of ERISA.
"Pledge Agreement" means the Pledge Agreement, in the form of Exhibit F
---------
hereto, duly executed by the Borrower.
"Prohibited Transaction" means any transaction set forth in Section 406 of
ERISA or Section 4975 of the Code for which there is no applicable statutory or
regulatory exemption (including a class exemption or an individual exemption).
"Property" means any interest of any kind in property or assets, whether
real, personal or mixed, and whether tangible or intangible.
"Regulations D, X and U" means Regulations D, X and U of the Board of
Governors of the Federal Reserve System, as amended or supplemented from time to
time.
"Regulatory Change" means any change after the date of this Agreement in
United States federal, state or foreign laws or regulations (including
Regulation D and the laws or regulations which designate any assessment rate
relating to certificates of deposit or otherwise (including the "Assessment
Rate" if applicable to any Revolving Loan)) or the adoption or making after such
date of any orders, rulings, interpretations, directives, guidelines or requests
applying to a class of banks including the Bank, of or under any United States
federal, state, or foreign laws or regulations (whether or not having the force
of law) by any court or governmental or monetary authority charged with the
interpretation or administration thereof.
-9-
"Reportable Event" means any of the events set forth in Section 4043(b) of
ERISA as to which events the PBGC by regulation has not waived the requirement
of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence
of such event, provided that a failure to meet the minimum funding standard of
--------
Section 412 of the Code or Section 302 of ERISA shall be a Reportable Event
regardless of any waivers given under Section 412(d) of the Code.
"Reserve Requirement" means for any Eurodollar Rate Loans for any quarterly
period (or, as the case may be, shorter period) as to which interest is payable
hereunder, the average maximum rate at which reserves (including any marginal,
supplemental or emergency reserves) are required to be maintained during such
period under Regulation D by member banks of the Federal Reserve System in
Boston, Massachusetts with deposits exceeding one billion Dollars against
"Eurocurrency liabilities" (as such term is used in Regulation D) or, in the
case of CD Rate Loans, nonpersonal Dollar time deposits in an amount of $100,000
or more. Without limiting the effect of the foregoing, the Reserve Requirement
shall reflect any other reserves required to be maintained by such member banks
by reason of any Regulatory Change against: (i) any category of liabilities
which includes deposits by references to which the Eurodollar Rate or CD Rate
for Eurodollar Rate Loans or CD Loans (as the case may be) is to be determined
as provided in the definition of "Eurodollar Rate" or "CD Rate", as applicable,
in this Article 1, or (ii) any category of extensions of credit or other assets
which include Eurodollar Rate Loans or CD Rate Loans (as the case may be).
"Revolving Loans" means any loan made by the Bank pursuant to Section 2.1.
Each Revolving Loan shall be a Base Rate Loan, a Eurodollar Rate Loan or a CD
Rate Loan.
"Revolving Loan Termination Date" means December 31, 2003. If such date is
not a Business Day, the Revolving Loan Termination Date shall be the next
preceding Business Day.
"Revolving Note" means a promissory note of the Borrower, in the form of
Exhibit A hereto, evidencing the Revolving Loans made by the Bank hereunder.
---------
"Risk-Based Capital Ratio" of any Person means, as at any date of
determination, the ratio of "Total Adjusted Capital" of such Person as at such
date to "Authorized Control Level RBC" of such Person as at such date, as such
terms are defined by the NAIC Risk-Based Capital (RBC) for Insurers Model Act,
as amended from time to time.
"SAP" means the statutory accounting practices permitted or prescribed by
the Insurance Commissioner for the preparation of annual statements and other
financial reports by insurance corporations of the same type as the Insurance
Subsidiary.
"SAP Financial Statements" means the financial statements which have been
submitted or are required to be submitted to the Insurance Commissioner.
-10-
"Securities" means any capital stock, share, voting trust certificate,
bonds, debentures, notes or other evidences of indebtedness, limited partnership
interests, or any warrant, option or other right to purchase or acquire any of
the foregoing.
"Senior Officer" means the (a) chief executive officer, (b) chief financial
officer, or (c) president of the Person designated.
"Statutory Net Income" means, for any period the combined net income of USF
RE, USFIC and all other Insurance Subsidiaries that appears, or should appear,
on the SAP Financial Statements. On the respective annual SAP Financial
Statements form for each Insurance Subsidiary for the year ended December 31,
1993, the net income amount appears on line 16, column (1) on page 4 thereof.
"Statutory Surplus" means, for any period, the surplus of USF RE that
appears, or should appear, on the SAP Financial Statements of USF RE. On the
annual SAP Financial Statements form prescribed for the year ended December 31,
1993, such amount appears on line 45, column (1) on page 3 thereof.
"Subordinated Debt" means unsecured Debt which does not permit any payment
or prepayment of the principal amount thereof prior to the payment in full of
the Obligations, but permits payment of interest on the principal amount thereof
so long as no Default or Event of Default has occurred and is continuing under
this Agreement and contains in the instrument evidencing such Debt or in the
agreement under which it is issued (which agreement shall be binding on all
holders of such Debt) subordination provisions substantially in the form of
Exhibit G hereto (without limitation as to further, not inconsistent,
---------
provisions, if so desired.)
"Subsidiary" means with respect to any Person, any corporation, partnership
or joint venture whether now existing or hereafter organized or acquired: (i)
in the case of a corporation, of which a majority of the securities having
ordinary voting power for the election of directors (other than securities
having such power only by reason of the happening of a contingency) are at the
time owned by such Person and/or one or more Subsidiaries of such Person or (ii)
in the case of a partnership or joint venture, in which such Person is a general
partner or joint venturer or of which a majority of the partnership or other
ownership interests are at the time owned by such Person and/or one or more of
its Subsidiaries. Unless the context otherwise requires, references in this
Agreement to "Subsidiary" or "Subsidiaries" shall be deemed to be references to
a Subsidiary or Subsidiaries of the Borrower or of a Subsidiary of the Borrower.
"Total Invested Assets" means, as at any date of determination, the
aggregate value of USF RE, USFIC and all other Insurance Subsidiaries'
portfolios of stocks, bonds, mortgage loans, real estate, policy loans and other
assets classified as invested assets under and valued in accordance with SAP as
at such date.
-11-
"Unfunded Vested Liabilities" means, with respect to any Plan, the amount
(if any) by which the present value of all vested benefits under the Plan
exceeds the fair market value of all Plan assets allocable to such benefits, as
determined on the most recent valuation date of the Plan and in accordance with
the provisions of ERISA for calculating the potential liability of the Borrower
or any ERISA Affiliate to the PBGC or the Plan under Title IV of ERISA.
"USBENEFITS" means USBENEFITS Insurance Services, Inc., a California
corporation, formerly known as USB Insurance Services, Inc., its successors and
assigns.
"USFIC" means USF Insurance Company, a Pennsylvania corporation, its
successors and assigns.
"USF RE" means USF RE INSURANCE COMPANY, a Massachusetts corporation, its
successors and assigns.
Section 1.2. Accounting Terms. All accounting terms not specifically
----------------
defined herein shall be construed in accordance with GAAP, applied on a
consistent basis, and all financial data required to be delivered hereunder
shall be prepared in accordance with GAAP, applied on a consistent basis; except
------
as otherwise specifically prescribed herein. In the event that GAAP changes
during the term of this Agreement such that the financial covenants contained in
Article 7 would then be calculated in a different manner or with different
components (a) the Borrower and the Bank agree to enter into good faith
negotiations to amend this Agreement in such respects as are necessary to
conform those covenants as criteria for evaluating the Borrower's financial
condition to substantially the same criteria as were effective prior to such
change in GAAP and (b) the Borrower shall be deemed to be in compliance with the
financial covenants contained in such Sections during the 60 days following any
such change in GAAP if and to the extent that the Borrower would have been in
compliance therewith under GAAP as in effect immediately prior to such change;
provided, however, if an amendment shall not be agreed upon within 60 days or
-------- -------
such longer period as shall be agreed to by the Bank, for purposes of
determining compliance with such covenants until such amendment shall be agreed
upon, such terms shall be construed in accordance with GAAP as in effect on the
Closing Date applied on a basis consistent with the application used in
preparing the financial statements for the year ended December 31, 1993 but
assuming that SFAS No. 115 had been adopted by the Borrower for such year.
Section 1.3. Rounding. Any financial ratios required to be maintained
--------
by Borrower pursuant to this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed in this
Agreement and rounding the result up or down to the nearest number (with a
round-up if there is no nearest number) to the number of places by which such
ratio is expressed in this Agreement.
Section 1.4. Exhibits and Schedules. All Exhibits and Schedules to this
----------------------
Agreement, either as originally existing or as the same may from time to time be
supplemented, modified or
-12-
amended, are incorporated herein by this reference. A matter disclosed on any
Schedule shall be deemed disclosed on all Schedules.
Section 1.5. References to "Borrower and its Subsidiaries". Any
---------------------------------------------
reference herein to "Borrower and its Subsidiaries" or the like shall refer
solely to Borrower during such times, if any, as Borrower shall have no
Subsidiaries.
Section 1.6. Miscellaneous Terms. The term "or" is disjunctive; the
-------------------
term "and" is conjunctive. The term "shall" is mandatory, the term "may" is
permissive. Masculine terms also apply to females; feminine terms also apply to
males. The term "including" is by way of example and not limitation.
ARTICLE 2. THE CREDIT.
Section 2.1. The Revolving Loans. (a) Subject to the terms and
-------------------
conditions of this Agreement, the Bank agrees to make revolving loans to the
Borrower (hereinafter collectively referred to as "Revolving Loans") from time
to time from and including the date hereof until the earlier of the Revolving
Loan Termination Date or the termination of the Commitment of the Bank, up to,
but not exceeding in the aggregate principal amount at any one time outstanding,
the amount of FIFTY MILLION AND NO/100 DOLLARS ($50,000,000.00).
(b) Each Borrowing under this Section 2.1 of (i) a Base Rate Loan shall be
in the principal amount of not less than $500,000 or any greater amount which is
an integral multiple thereof (ii) a Eurodollar Rate Loan shall be in the
principal amount of not less than $1,000,000 or any greater amount which is an
integral multiple thereof; or (iii) a CD Rate Loan shall be in the principal
amount of not less than $1,000,000 or any greater amount which is an integral
multiple thereof. During the Commitment Period and subject to the foregoing
limitations, the Borrower may borrow, repay and reborrow Revolving Loans, all in
accordance with the terms and conditions of this Agreement.
Section 2.2. The Revolving Note.
------------------
(a) The Revolving Loans of the Bank shall be evidenced by a single
promissory note in favor of the Bank in the form of Exhibit A and duly completed
---------
and executed by the Borrower.
(b) The Bank is authorized to record and, prior to any transfer of the
Revolving Note, endorse on a schedule forming a part thereof appropriate
notations evidencing the date, the type, the amount and the maturity of each
Revolving Loan made by it which is evidenced by such Revolving Note and the date
and amount of each payment of principal made by the Borrower with respect
thereto; provided, that failure to make any such endorsement or notation shall
--------
not affect the Obligations of the Borrower hereunder or under the Revolving
Note. The Bank is hereby irrevocably authorized by the Borrower to so endorse
the Revolving Note and to attach to and make a part of the Revolving Note a
continuation of any such schedule as and when required.
-13-
The Bank may, at its option, record and maintain such information in its
internal records rather than on such schedule.
Section 2.3. Procedure for Borrowing.
-----------------------
(a) The Borrower shall give the Bank a Notice of Borrowing, in the form of
Exhibit B hereto, prior to 11:00 a.m. (Connecticut time), on the date at least
---------
one (1) Business Day before a Borrowing of a Base Rate Loan, at least three (3)
Business Days before a Borrowing of a Eurodollar Rate Loan, and at least one (1)
Business Day before a Borrowing of a CD Rate Loan, specifying:
(i) the date of such Borrowing, which shall be a Business Day,
(ii) the principal amount of such Borrowing,
(iii) whether the Revolving Loan comprising such Borrowing is to be a
Base Rate Loan, a Eurodollar Rate Loan or a CD Rate Loan, and
(iv) if a Eurodollar Rate Loan, the Interest Period with respect to
such Borrowing.
(b) No Notice of Borrowing shall be revocable by the Borrower.
(c) It is understood that if the Borrower elects an Interest Period with
respect to a CD Rate Loan of 180 days or with respect to a Eurodollar Rate Loan
of six months, the CD Rate or Eurodollar Rate quoted to the Borrower one or two
Business Days preceding the first day of the Interest Period, as the case may
be, will be based on Bank's good faith estimate of its costs of funding such
Revolving Loan and that the actual interest rate for the Interest Period for
such Revolving Loan may vary from that quoted to reflect the Banks' actual costs
of funding on the date of the Revolving Loan.
(d) There shall be no more than four (4) Interest Periods relating to
Eurodollar Rate Loans or CD Rate Loans or any combination thereof outstanding
at any time.
(e) If the Bank makes a new Revolving Loan hereunder on a day on which the
Borrower is to repay an outstanding Revolving Loan from the Bank, the Bank shall
apply the proceeds of its new Revolving Loan to make such repayment and only an
amount equal to the excess (if any) of the amount being borrowed over the amount
being repaid shall be made available by the Bank to the Borrower.
(f) Notwithstanding anything to the contrary herein contained, if, upon the
expiration of any Interest Period applicable to any Borrowing of Revolving
Loans, the Borrower shall fail to give a new Notice of Borrowing as set forth in
this Section 2.3, the Borrower shall be deemed to
-14-
have given a new Notice of Borrowing of Base Rate Loans in principal amount
equal to the outstanding principal amount of such Revolving Loans, and the
proceeds of the new Borrowing shall be applied directly to repay such
outstanding principal amount on the day of such Borrowing.
Section 2.4. Termination or Optional Reduction of Commitment. The
-----------------------------------------------
Commitment with respect to Revolving Loans shall terminate on the Revolving Loan
Termination Date. Any Revolving Loans outstanding on the Revolving Loan
Termination Date (together with accrued interest thereon) shall be due and
payable on the Revolving Loan Termination Date (or such earlier date as provided
herein). No termination of the Commitment hereunder shall relieve the Borrower
of any of its outstanding Obligations to the Bank hereunder or otherwise. The
Borrower shall have the right, upon prior written notice of at least five (5)
Business Days to the Bank, to terminate or, from time to time, reduce the
Commitment, provided that (i) any such reduction of the Commitment shall be
--------
accompanied by the prepayment of the Revolving Note, together with accrued
interest thereon to the date of such prepayment and any amount due pursuant to
Section 2.7, to the extent, if any, that the aggregate unpaid principal amount
thereof then outstanding exceeds the Commitment as then reduced and (ii) any
such termination of the Commitment to make Revolving Loans shall be accompanied
by prepayment in full of the unpaid principal amount of the Revolving Note
together with accrued interest thereon to the date of such prepayment and any
amount due pursuant to Section 2.7. Any such partial reduction of the
Commitment shall be in an aggregate principal amount of $500,000 or any whole
multiple thereof and shall reduce permanently the Commitment then in effect
hereunder.
Section 2.5. Mandatory Quarterly Reduction of Commitment.
-------------------------------------------
(a) Commencing March 31, 2000 and continuing on each succeeding June 30,
September 30, December 31 and March 31 thereafter until the Revolving Loan
Termination Date, the Commitment of the Bank to make Revolving Loans shall be
reduced automatically by $2,500,000.
(b) On the effective date of each reduction of the Commitment of the Bank
pursuant to Section 2.5(a) the Borrower shall repay such principal amount
(together with accrued interest thereon and any amount due pursuant to Section
2.7(b)) of outstanding Revolving Loans, if any, as may be necessary so that
after such repayment, the aggregate unpaid principal amount of the Revolving
Loans does not exceed the Commitment as then reduced.
Section 2.6. Maturity of Revolving Loans. Each Revolving Loan shall
---------------------------
mature, and the principal amount thereof shall be due and payable, on the
Revolving Loan Termination Date.
-15-
Section 2.7. Optional Prepayments.
--------------------
(a) The Borrower may, upon at least one (1) Business Day's notice to the
Bank, prepay the Base Rate Loans, without premium or penalty, in whole at any
time or from time to time in part by paying the principal amount being prepaid
together with accrued interest thereon to the date of prepayment.
(b) The Borrower may, upon at least three (3) Business Days' notice to the
Bank, prepay the Eurodollar Rate Loans or the CD Rate Loans, in whole at any
time or from time to time in part, by paying the principal amount being prepaid
together with (i) accrued interest thereon to the date of prepayment and (ii) if
such prepayment occurs on a date that is not the last day of the Interest Period
applicable to such Revolving Loan, any amounts required to compensate the Bank
for any reasonable losses, costs or expenses (excluding any losses of
anticipated profit), as certified by the Bank (such certification setting forth
the basis for such compensation), which the Bank may reasonably incur as a
result of such prepayment, including without limitation, any loss, cost or
expense incurred by reason of funds liquidation or reemployment of deposits or
other funds acquired by the Bank to fund or maintain such Eurodollar Rate Loan
or CD Rate Loan and any administrative costs, expenses or charges of the Bank as
a result thereof.
Section 2.8. Interest on the Revolving Loans.
-------------------------------
(a) Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Base Rate Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day, plus the
Applicable Margin. Interest shall be payable on the last day of the Interest
Period applicable thereto. Such interest shall accrue from and including the
date of such Borrowing to but excluding the date of any repayment thereof and
shall be computed on the basis of a fraction, the numerator of which is the
actual number of days elapsed from the date of Borrowing and the denominator of
which is three hundred sixty (360). Overdue principal of and, to the extent
permitted by law, overdue interest on the Base Rate Loans shall bear interest
for each day until paid at a rate per annum equal to the Default Rate.
(b) Each Eurodollar Rate Loan shall bear interest on the unpaid principal
amount thereof, for each day from the date such Eurodollar Rate Loan is made
until it becomes due, at a rate per annum equal to the Eurodollar Rate for the
relevant Interest Period, plus the Applicable Margin. Interest shall be payable
on the last day of the Interest Period applicable thereto; provided, that if
--------
such Interest Period is longer than ninety (90) days, interest shall be payable
every 90 days and on the last day of such Interest Period. Such interest shall
accrue from and including the date of such Borrowing to but excluding the date
of any repayment thereof and shall be computed on the basis of a fraction, the
numerator of which is the actual number of days elapsed from the date of
Borrowing and the denominator of which is three hundred sixty (360). Overdue
principal of and, to the extent permitted by law, overdue interest on the
Eurodollar Rate Loans shall bear interest for each day until paid at a rate per
annum equal to the Default Rate.
-16-
(c) Each CD Rate Loan shall bear interest on the unpaid principal amount
thereof, for each day from the date such CD Rate Loan is made until it becomes
due, at a rate per annum equal to the CD Rate for the relevant Interest Period,
plus the Applicable Margin. Interest shall be payable on the last day of the
Interest Period applicable thereto. Such interest shall accrue from and
including the date of such Borrowing to but excluding the date of any repayment
thereof and shall be computed on the basis of a fraction, the numerator of which
is the actual number of days elapsed from the date of Borrowing and the
denominator of which is 360. Overdue principal of and, to the extent permitted
by law, overdue interest on CD Rate Loans shall bear interest for each day until
paid at a rate per annum equal to the Default Rate.
Section 2.9. Fees. The Borrower shall pay to the Bank a stand-by
----
commitment fee for the Commitment Period, payable in arrears, on the average
daily unused portion of the Bank's Commitment with respect to the Revolving
Loans, which stand-by commitment fee shall be payable quarterly on the first
Business Day of January, April, July and October of each year. Such fee shall
be payable at the rate of 1/4 of 1% per annum for the period from the Closing
Date and thereafter. The fee required by this Section shall not be refundable.
Section 2.10. Payments Generally. All payments under this Agreement
------------------
shall be made in Dollars in immediately available funds not later than 1:00 p.m.
(Connecticut time) on the due date (each such payment made after such time on
such due date to be deemed to have been made on the next succeeding Business
Day) to the Bank at its address set forth on the signature pages hereof or at
such other address as it may hereafter designate by notice to the Borrower for
the account of the Lending Office of the Bank specified by the Bank on Schedule
--------
1.1 hereto. The Borrower shall, at the time of making each payment under this
----------
Agreement, specify to the Bank the principal or other amount payable by the
Borrower under this Agreement to which such payment is to be applied (and in the
event that it fails to so specify, or if a Default or Event of Default has
occurred and is continuing, the Bank may apply such payment as it may elect in
its sole discretion). If the due date of any payment under this Agreement would
otherwise fall on a day which is not a Business Day, such date shall be extended
to the next succeeding Business Day and such extension of time shall in such
case be included in the computation of such payment; provided that, if such
--------
extension would cause the last day of an Interest Period to occur in the next
following calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day.
Section 2.11. Capital Adequacy. If after the date hereof, either (i)
----------------
the introduction of, or any change in, or in the interpretation or enforcement
of, any law, regulation, order, ruling, interpretation, directive, guideline or
request or (ii) the compliance with any order, ruling, interpretation,
directive, guideline or request from any central bank or other governmental
authority (whether or not having the force of law) issued, announced, published,
promulgated or made after the date hereof (including, in any event, any law,
regulation, order, ruling, interpretation, directive, guideline or request
contemplated by the report dated July, 1988 entitled "International Convergence
of Capital Measurement and Capital Standards" issued by the Basle Committee on
Banking Regulation and Supervisory Practices) affects or would affect the amount
-17-
of capital required or expected to be maintained by the Bank or any corporation
controlling the Bank and the Bank reasonably determines that the amount of such
required or expected capital is increased by or based upon the existence of the
Bank's Revolving Loans hereunder or the Bank's commitment to lend hereunder,
then, upon demand by the Bank, the Borrower shall be liable for, and shall pay
to the Bank, within thirty (30) days following demand from time to time by the
Bank, additional amounts sufficient to compensate the Bank in the light of such
circumstances for the effects of such law, regulation, order, ruling,
interpretation, directive, guideline or request, to the extent that the Bank
reasonably determines such increase in capital to be allocable to the existence
of the Bank's Revolving Loans hereunder or of the Bank's commitment to lend
hereunder. A certificate substantiating such amounts and identifying the event
giving rise thereto, submitted to the Borrower by the Bank, shall be conclusive,
absent manifest error. The Bank shall promptly notify the Borrower of any event
of which it has knowledge occurring after the date of this Agreement which will
entitle the Bank to compensation pursuant to this Section, and the Bank shall
take any reasonable action available to it consistent with its internal policy
and legal and regulatory restrictions (including the designation of a different
Lending Office, if any) that will avoid the need for, or reduce the amount of,
such compensation and will not in the reasonable judgment of the Bank be
otherwise disadvantageous to the Bank.
Section 2.12. Increased Costs. If after the date hereof, due to either
---------------
(i) the introduction of or any change in or in the interpretation or enforcement
of, any law, regulation, order, ruling, directive, guideline or request, or (ii)
the compliance with any order, ruling, directive, guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) issued, announced, published, promulgated or made after the date hereof,
there shall be any increase in the cost to the Bank of agreeing to make or
making, funding or maintaining Eurodollar Rate Loans, then the Borrower shall be
liable for, and shall from time to time, within thirty (30) days following a
demand by the Bank, pay to the Bank for the account of the Bank additional
amounts sufficient to compensate the Bank for such increased cost; provided,
--------
however, that before making any such demand, the Bank agrees to use reasonable
-------
efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different Lending Office if the making of such a
designation would allow the Bank or its Lending Office to continue to perform
its obligations to make Eurodollar Rate Loans or to continue to fund or maintain
Eurodollar Rate Loans and would not, in the reasonable judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate substantiating the amount
of such increased cost, submitted to the Borrower by the Bank, shall be
conclusive, absent manifest error.
Section 2.13. Illegality. Notwithstanding any other provision of this
----------
Agreement, if after the date hereof the introduction of, or any change in or in
the interpretation or enforcement of, any law, regulation, order, ruling,
directive, guideline or request shall make it unlawful, or any central bank or
other governmental authority shall assert that it is unlawful, for the Bank or
its Lending Office to perform its obligations hereunder to make Eurodollar Rate
Loans or to continue to fund or maintain Eurodollar Rate Loans hereunder, then,
on notice thereof by the Bank to the Borrower, (i) the obligation of the Bank to
make Eurodollar Rate Loans shall terminate (and the Bank shall make all of its
Revolving Loans as Base Rate Loans or CD Rate
-18-
Loans notwithstanding any election by the Borrower to have the Bank make
Eurodollar Rate Loans) and (ii) if legally permissible, at the end of the
current Interest Period for such Eurodollar Rate Loans, otherwise five Business
Days after such notice and demand, all Eurodollar Rate Loans of the Bank then
outstanding will automatically convert into Base Rate Loans; provided, however,
-------- -------
that before making any such demand, the Bank agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Lending Office if the making of such a designation would
allow the Bank or its Lending Office to continue to perform its obligations to
make Eurodollar Rate Loans and would not, in the judgment of the Bank, be
otherwise disadvantageous to the Bank. A certificate describing such
introduction or change in or in the interpretation or enforcement of such law,
regulation, order, ruling, directive, guideline or request, submitted to the
Borrower by the Bank, shall be conclusive evidence of such introduction, change,
interpretation or enforcement, absent manifest error. The Bank and the Borrower
agree to negotiate in good faith in order to agree upon a mutually acceptable
mechanism to provide that Eurodollar Rate Loans made by the Bank as to which the
foregoing conditions occur shall convert into Base Rate Loans.
Section 2.14. Payments to be Free of Deductions. All payments by the
---------------------------------
Borrower under this Agreement shall be made without setoff or counterclaim and
free and clear of, and without deduction for, any taxes (other than any taxes
imposed on or measured by the gross income or profits of the Bank), levies,
imposts, duties, charges, fees, deductions, withholdings, compulsory loans,
restrictions or conditions of any nature now or hereafter imposed or levied by
any country or any political subdivision thereof or taxing or other authority
therein unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrower with respect
to any amount payable by it hereunder, it will pay to the Bank, on the date on
which such amount becomes due and payable hereunder and in Dollars, such
additional amount as shall be necessary to enable the Bank to receive the same
net amount which it would have received on such due date had no such obligation
been imposed upon the Borrower. If the Bank is at any time, or any permitted
assignee of the Bank hereunder (an "Assignee"), is organized under the laws of
any jurisdiction other than the United States or any state or other political
subdivision thereof, the Bank or the Assignee shall deliver to the Borrower on
the date it becomes a party to this Agreement, and at such other times as may be
necessary in the determination of the Borrower in its reasonable discretion,
such certificates, documents or other evidence, properly completed and duly
executed by the Bank or the Assignee (including, without limitation, Internal
Revenue Service Form 1001 or Form 4224 or any other certificate or statement of
exemption required by Treasury Regulations Section 1.1441-4(a) or Section
1.1441-6(c) or any successor thereto) to establish that the Bank or the Assignee
is not subject to deduction or withholding of United States Federal Income Tax
under Section 1441 or 1442 of the Internal Revenue Code or otherwise (or under
any comparable provisions of any successor statute) with respect to any payments
to the Bank or the Assignee of principal, interest, fees or other amounts
payable hereunder. Borrower shall not be required to pay any additional amount
to the Bank or any Assignee under this Section 2.14 if the Bank or such Assignee
shall have failed to satisfy the requirements of the immediately preceding
sentence; provided that if the Bank or any Assignee shall have satisfied such
--------
requirements on the date it became a party to this
-19-
Agreement, nothing in this Section 2.14 shall relieve Borrower of its obligation
to pay any additional amounts pursuant to this Section 2.14 in the event that,
as a result of any change in applicable law, the Bank or such Assignee is no
longer properly entitled to deliver certificates, documents or other evidence at
a subsequent date establishing the fact that the Bank or the Assignee is not
subject to withholding as described in the immediately preceding sentence.
Section 2.15. Computations. All computations of interest and like
------------
payments hereunder on the Revolving Loans shall, in the absence of clearly
demonstrable error, be considered correct and binding on the Borrower and the
Bank, unless within thirty (30) Business Days after receipt of any notice by the
Bank of such outstanding amount, the Borrower notifies the Bank to the contrary.
Section 2.16. Obligations Absolute. The Obligations of the Borrower to
--------------------
make payments under this Agreement shall be unconditional and irrevocable, and
shall be paid strictly in accordance with the terms of this Agreement under all
circumstances, and irrespective of, the following circumstances:
(a) any lack of validity or enforceability of all or any portion of this
Agreement or any other agreement or any instrument relating hereto;
(b) any change in the time, manner or place of payment of, or in any other
term of, all or any of the Obligations of the Borrower;
(c) the existence of any claim, setoff, defense or other right that the
Borrower may have; or
(d) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, including without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower.
ARTICLE 3. SECURITY.
Section 3.1. Pledge Agreement. In order to secure payment when due of
----------------
the principal and interest under the Revolving Note and the other Obligations
under this Agreement, the Borrower agrees to deliver to the Bank on the Closing
Date the following:
(a the Pledge Agreement;
(b stock certificates representing all of the outstanding capital stock
of USF RE (with stock powers signed in blank); and
(c the Financing Statements.
-20-
Section 3.2. Further Assurances. At any time following the delivery of
------------------
the Pledge Agreement to the Bank, at the request of the Bank, the Borrower will
execute any certificate, instrument, statement or document and will procure any
such certificate, instrument, statement or document (and pay all connected
costs) which the Bank reasonably deems necessary to preserve the security
interests of the Bank contemplated hereby.
ARTICLE 4. CONDITIONS PRECEDENT.
Section 4.1. Documentary Conditions Precedent. The Commitment of the
--------------------------------
Bank to make Revolving Loans under this Agreement is subject to the condition
precedent that the Borrower shall have delivered the following, in form and
substance satisfactory to the Bank:
(a a Revolving Note for the account of the Bank duly executed by the
Borrower;
(b a certificate of the Secretary or Assistant Secretary of the Borrower,
dated the Closing Date, attesting on behalf of the Borrower to all
corporate action taken by the Borrower, including resolutions of its Board
of Directors authorizing the execution, delivery and performance of this
Agreement, the Revolving Note, the Pledge Agreement and each other document
to be delivered pursuant to this Agreement, and attesting to the names and
true signatures of the officers of the Borrower authorized to sign this
Agreement, the Revolving Note, the Pledge Agreement and the other documents
to be delivered by the Borrower under this Agreement;
(c a certificate of a Senior Officer of the Borrower, dated the Closing
Date, certifying on behalf of the Borrower that (i) the representations and
warranties in Article 5 are true, complete and correct in all material
respects on such date as though made on and as of such date, (ii) no event
has occurred and is continuing which constitutes a Default or Event of
Default, (iii) the Borrower has performed and complied with all agreements
and conditions contained in this Agreement which are required to be
performed or complied with by the Borrower at or before the Closing Date,
and (iv) there has been no material adverse change in the financial
condition, operations, Properties, business, or as far as the Borrower can
reasonably foresee, prospects of the Borrower and its Subsidiaries, if any,
taken as a whole, since September 30, 1997;
(d a certificate of a Senior Officer of the Borrower, substantially in
the form of Exhibit C, which certificate shall include information required
---------
to establish that the Borrower will be in compliance with the covenants set
forth in this Agreement, after giving effect to the transactions
contemplated herein;
(e a certificate of good standing for the Borrower as of a recent date by
the Secretary of State of its jurisdiction of incorporation and each state
where the Borrower, by the nature of its business, is required to qualify
to do business, except where the failure to be so
-21-
qualified would not have a material adverse effect on the financial
condition, operations, Properties, business or, as far as the Borrower can
reasonably foresee, prospects of the Borrower and its Subsidiaries, taken
as a whole;
(f a certificate of good standing for USBENEFITS as of a recent date by
the Secretary of State of its jurisdiction of incorporation and, if
different, its principal place of business;
(g a certificate or similar instrument from the appropriate tax authority
in the State of California as to the payment by the Borrower of all taxes
owed;
(h a certificate of authority from each Insurance Commissioner certifying
that USF RE is duly licensed and in good standing with each Insurance
Commissioner;
(i a favorable opinion of ▇.▇. ▇▇▇▇, Professional Law Corporation,
California counsel to the Borrower, dated the Closing Date, in
substantially the form set forth in Exhibit D hereto;
---------
(▇ ▇ favorable opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Massachusetts insurance
counsel to the Borrower, dated the Closing Date, in substantially the form
set forth in Exhibit E hereto;
---------
(k a Pledge Agreement in substantially the form set forth in Exhibit F,
---------
duly executed by the Borrower;
(l evidence that each consent, license, approval and notice required in
connection with the execution, delivery, performance, validity and
enforceability of this Agreement, the Pledge Agreement, and each other
document and instrument required to be delivered in connection herewith,
shall have been received or given and such consents, licenses, approvals
and notices shall be in full force and effect;
(m all corporate and legal proceedings and all instruments and agreements
in connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Bank and the Bank shall have
received any and all other information and documents with respect to the
Borrower which it may reasonably request;
(n payment to the Bank of the closing fee in the amount of $187,500.00;
and
(o payment to Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, special counsel to the Bank, of
its legal fees and disbursements (with appropriate detail) in accordance
with the letter between the Borrower and the Bank dated November 4, 1994.
Section 4.2. Additional Conditions Precedent to Each Loan. The
--------------------------------------------
obligation of the Bank to make the Revolving Loans pursuant to a Borrowing
(including the initial Borrowing), unless waived by the Bank, shall be subject
to the further conditions precedent that on the date of such Revolving Loan:
-22-
(a the representations and warranties contained in Article 5 of this
Agreement are true and correct in all material respects on and as of the
date of such Revolving Loan as though made on and as of such date (or, if
such representation or warranty is expressly stated to have been made as of
a specific date, as of such specific date);
(b the Borrower has performed and complied with and is in compliance with
all agreements and conditions contained in this Agreement which are
required to be performed or complied with by the Borrower;
(c there does not exist any Default or Event of Default under this
Agreement;
(d there has been no material adverse change in the financial condition,
operations, Properties, business or prospects of the Borrower and its
Subsidiaries, if any, taken as a whole, since the date of the last
Borrowing under this Agreement (or if no Borrowing has occurred, since the
date of this Agreement); and
(e the Bank shall have received a Notice of Borrowing in the form of
Exhibit B, except to the extent otherwise provided in Section 2.3(f).
---------
Section 4.3. Deemed Representations. Each Notice of Borrowing hereunder
----------------------
and acceptance by the Borrower of the proceeds of such Borrowing shall
constitute a representation and warranty that the statements contained in
Section 4.2(a) are true and correct both on the date of such Notice of Borrowing
and, unless the Borrower otherwise notifies the Bank prior to such Borrowing, as
of the date of such Borrowing.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES.
The Borrower hereby represents and warrants the following:
Section 5.1. Incorporation, Good Standing and Due Qualification. The
--------------------------------------------------
Borrower is duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of incorporation, has the power and authority to own
its assets and to transact the business in which it is now engaged, and is duly
qualified as a foreign corporation and in good standing under the laws of each
other jurisdiction in which such qualification is required, except where the
failure to be so qualified would not have a material adverse effect on the
financial condition, operations, Properties, business or, as far as the Borrower
can reasonably foresee, prospects of the Borrower and its Subsidiaries, taken as
a whole. The Borrower has all requisite power and authority to execute and
deliver and to perform all of its obligations under this Agreement, the
Revolving Note and the Pledge Agreement and the other writings contemplated
hereby.
-23-
Section 5.2. Corporate Power and Authority; No Conflicts. The execution,
-------------------------------------------
delivery and performance by the Borrower of this Agreement, the Revolving Note
and the Pledge Agreement have been duly authorized by all necessary corporate
action and do not and will not (a) require any consent or approval of its
shareholders; (b) violate any provisions of its articles of incorporation or by-
laws; (c) violate any provision of, or require any filing, registration, consent
or approval under, any law, rule, regulation (including without limitation,
Regulation U and X), order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to and binding upon the Borrower
or any Subsidiary; (d) result in a breach of or constitute a default or require
any consent under any indenture, mortgage or loan or credit agreement or any
other material agreement, lease or instrument to which the Borrower or any
Subsidiary is a party or by which it or its Properties may be bound; or (e)
result in, or require, the creation or imposition of any Lien upon or with
respect to any of the Properties now owned or hereafter acquired by the
Borrower, except as created by the Pledge Agreement.
Section 5.3. Legally Enforceable Agreements. This Agreement, the
------------------------------
Revolving Note and the Pledge Agreement constitute the legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms, except to the extent that such enforcement may be
limited by applicable bankruptcy, insolvency and other similar laws affecting
creditors' rights generally and by general principles of equity.
Section 5.4. Litigation. Except as disclosed on Schedule 5.4, there are
---------- ------------
no actions, suits or proceedings or investigations (other than routine
examinations performed by insurance regulatory authorities) pending or, as far
as the Borrower can reasonably foresee, threatened against or affecting the
Borrower or any Subsidiary, or any Property of any of them before any court,
governmental agency or arbitrator, which if determined adversely to the Borrower
or any Subsidiary would in any one case or in the aggregate, materially
adversely affect the financial condition, operations, Properties, business or,
as far as the Borrower can reasonably foresee, prospects of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under this Agreement, the Revolving Note or the Pledge Agreement.
Section 5.5. Financial Statements. The consolidated balance sheets of
--------------------
the Borrower and its Subsidiaries as of December 31, 1996 and December 31, 1997
and the related consolidated statements of income, stockholders' equity, and
cash flows of the Borrower and its Subsidiaries for the fiscal years then ended,
and the accompanying footnotes, together with the opinion thereon of KPMG Peat
Marwick, independent certified public accountants, and the unaudited interim
consolidated balance sheet of the Borrower and its Subsidiaries as at September
30, 1998 and the related consolidated statements of income, stockholders' equity
and cash flows for the nine-month period then ended, copies of which have been
furnished to the Bank, fairly present the financial condition of the Borrower
and its Subsidiaries, taken as a whole, as at such dates and the results of the
operations of the Borrower and its Subsidiaries, taken as a whole, for the
periods covered by such statements, all in accordance with GAAP consistently
applied (subject to year-end adjustments in the case of the interim financial
statements). There are no liabilities of the Borrower or any Subsidiary, fixed
or contingent, which are material but are not reflected in
-24-
the financial statements or in the notes thereto, other than liabilities arising
in the ordinary course of business since September 30, 1997 and other than this
Agreement and the Revolving Note. No written information, exhibit or report
furnished by the Borrower to the Bank in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state any
fact necessary to make the statements contained therein not materially
misleading. Since September 30, 1997, no event or circumstance has occurred that
would materially adversely affect the financial condition, operations,
Properties, business or, as far as the Borrower can reasonably foresee,
prospects of the Borrower and its Subsidiaries, taken as a whole, or the ability
of the Borrower to perform its obligations under this Agreement, the Revolving
Note or the Pledge Agreement.
Section 5.6. Ownership and Liens. Each of the Borrower and its
-------------------
Subsidiaries has good and valid title to, or valid leasehold interests in, its
material Properties and assets, real and personal, including the material
Properties and assets, and leasehold interests reflected in the financial
statements referred to in Section 5.5 (other than any Properties or assets
disposed of in the ordinary course of business), and none of the material
Properties and assets owned by the Borrower or its Subsidiaries, and none of its
leasehold interests is subject to any Lien, except as disclosed in such
financial statements or in Schedule 5.6, or as may be permitted hereunder.
------------
Section 5.7. Taxes. Each of the Borrower and its Subsidiaries has filed
-----
all federal and state tax returns and all other material local tax returns
required to be filed, has paid all due and payable taxes, assessments and
governmental charges and levies, including interest and penalties, imposed upon
it or upon its Properties, and has made adequate provision for the payment of
such taxes, assessments and other charges accruing but not yet due and payable,
except with respect to taxes which are being contested in good faith by the
Borrower or its Subsidiaries and for which the Borrower or its Subsidiaries has
established and maintains adequate reserves for payment. To the best knowledge
of Borrower, there is no tax assessment contemplated or proposed by any
governmental agency against Borrower or any of its Subsidiaries that would
materially adversely affect the financial condition, operations, Properties,
business or, as far as the Borrower can reasonably foresee, prospects of the
Borrower and its Subsidiaries, taken as a whole, or the ability of the Borrower
to perform its obligations under this Agreement, the Revolving Note or the
Pledge Agreement, other than, as of each date subsequent to the Closing Date,
such contemplated or proposed tax assessments with respect to which (i) Borrower
has promptly notified Bank in writing of its knowledge and (ii) Borrower or the
appropriate Subsidiary of Borrower has in good faith commenced, and thereafter
diligently pursued, appropriate proceedings in opposition to such assessment.
Section 5.8. ERISA. Each of the Borrower and its Subsidiaries is in
-----
compliance in all material respects with all applicable provisions of ERISA.
Within the three-year period prior to the date hereof, neither a Reportable
Event nor a Prohibited Transaction has occurred with respect to any Plan; no
notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstance exists which constitutes grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administer, a Plan, nor has the PBGC instituted any such proceedings;
neither the Borrower nor any ERISA
-25-
Affiliate has completely or partially withdrawn under Sections 4201 or 4204 of
ERISA from a Multiemployer Plan; each of the Borrower and its ERISA Affiliates
has met its minimum funding requirements under ERISA with respect to all of its
Plans and there are no Unfunded Vested Liabilities and neither the Borrower nor
any ERISA Affiliate has incurred any material liability to the PBGC under ERISA
other than for premium payments incurred in the normal course of operating the
Plans.
Section 5.9. Subsidiaries and Ownership of Stock.
-----------------------------------
(a) Schedule 5.9 correctly sets forth the names of all Subsidiaries of the
------------
Borrower. All of the outstanding shares of capital stock, or all of the units
of equity interest, as the case may be, of each Subsidiary are owned of record
and beneficially by the Borrower or a Subsidiary of the Borrower, as disclosed
on said Schedule; there are no outstanding options, warrants or other rights to
purchase capital stock of any such Subsidiary; and all such shares or equity
interests so owned are duly authorized, validly issued, fully paid, non-
assessable, and were issued in compliance with all applicable state and federal
securities and other laws, and are free and clear of all Liens, except as may be
permitted hereunder and except for restrictions imposed upon the sale of stock
of the Insurance Subsidiaries of the Borrower by the Insurance Commissioner or
other insurance regulatory authorities.
(b) Each Subsidiary of the Borrower is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, has the power and authority to own its assets and to transact the
business in which it is now engaged, and is duly qualified as a foreign
corporation and in good standing under the laws of each other jurisdiction in
which such qualification is required, except where the failure to be so
qualified would not materially adversely affect the financial condition,
operations, Properties, business or, as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries, taken as a whole, or
the ability of the Borrower to perform its obligations under this Agreement, the
Revolving Note or the Pledge Agreement.
(c) Each Subsidiary of Borrower is in compliance with all laws and other
requirements applicable to its business and has obtained all authorizations,
consents, approvals, orders, licenses, and permits from, and each Subsidiary has
accomplished all filings, registrations, and qualifications with, or obtained
exemptions from any of the foregoing from, any governmental or public agency
that are necessary for the transaction of its business, except where the failure
to be in such compliance, obtain such authorizations, consents, approvals,
orders, licenses, and permits, accomplish such filings, registrations, and
qualifications, or obtain such exemptions, would not materially adversely affect
the financial condition, operations, Properties, business or, as far as the
Borrower can reasonably foresee, prospects of the Borrower and its Subsidiaries,
taken as a whole, or the ability of the Borrower to perform its obligations
under this Agreement, the Revolving Note or the Pledge Agreement.
-26-
Section 5.10. Credit Arrangements. Schedule 5.10 is a complete and
------------------- -------------
correct list of all credit agreements, indentures, guaranties, Capital Leases,
mortgages, and other instruments, agreements and arrangements presently in
effect providing for or relating to extensions of credit (including agreements
and arrangements for the issuance of letters of credit or for acceptance
financing) in respect of which the Borrower or any of its Subsidiaries is in any
manner directly or contingently obligated, other than trade payables in the
ordinary course of business; and the maximum principal or face amounts of the
credit in question, which are outstanding and which can be outstanding, are
therein set forth and are correctly stated as of the date hereof, and all Liens
given or agreed to be given as security therefor are therein set forth and are
correctly described or indicated in such Schedule.
Section 5.11. Operation of Business. Each of the Borrower and its
---------------------
Subsidiaries possesses all licenses, permits and franchises, or rights thereto,
necessary to conduct its business as now conducted and as presently proposed to
be conducted, the absence of which would have a material adverse effect on the
financial condition, operations, Properties or business of the Borrower and its
Subsidiaries, taken as a whole, and neither the Borrower nor any of its
Subsidiaries is in violation in any material respect of any valid rights of
others with respect to any of the foregoing.
Section 5.12. No Default on Outstanding Judgments or Orders. Each of
---------------------------------------------
the Borrower and its Subsidiaries has satisfied all material judgments and
neither the Borrower nor any Subsidiary is in default with respect to any
judgment, writ, injunction, decree, rule or regulation of any court, arbitrator
or federal, state, municipal or other governmental authority, commission, board,
bureau, agency or instrumentality, domestic or foreign, which would, in any one
case or in the aggregate, materially adversely affect the financial condition,
operations, Properties, business or, as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries, taken as a whole, or
the ability of the Borrower to perform its obligations under this Agreement, the
Revolving Note or the Pledge Agreement.
Section 5.13. No Defaults on Other Agreements. Neither the Borrower nor
-------------------------------
any of its Subsidiaries is a party to any indenture, mortgage or loan or credit
agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which would have a material adverse effect on
the business, Properties, assets, operations, financial condition or, as far as
the Borrower can reasonably foresee, prospects of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower to carry out its
obligations under this Agreement, the Revolving Note or the Pledge Agreement.
Neither the Borrower nor any of its Subsidiaries is in default in any material
respect in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement or instrument material to its
business to which it is a party.
Section 5.14. Governmental Regulation. Neither the Borrower nor any of
-----------------------
its Subsidiaries is subject to regulation under the Investment Company Act of
1940, as amended, or any statute or regulation limiting its ability to incur
indebtedness for money borrowed as contemplated hereby.
-27-
Section 5.15. Consents and Approvals. No authorization, consent,
----------------------
approval, order, license or permit from, or filing, registration or
qualification with, or exemption by, any governmental or public body or
authority, or any subdivision thereof, or any other Person, including without
limitation, the Insurance Commissioner, is required to authorize, or is required
in connection with the execution, delivery and performance by the Borrower of,
or the legality, validity, binding effect or enforceability of, this Agreement,
the Revolving Note or the Pledge Agreement, except the consents, approvals or
other similar actions listed on Schedule 5.15 attached hereto. Schedule 5.15
------------- -------------
describes those consents, approvals or other similar actions which have been
duly and properly obtained or which may have to be obtained by the Bank in order
to enforce its rights under this Agreement, the Revolving Note or the Pledge
Agreement. Except as disclosed on said Schedule, such consents, approvals or
other similar actions have been obtained and have not been modified, amended,
rescinded or revoked, and are in full force and effect.
Section 5.16. Partnerships. Except as set forth in Schedule 5.16,
------------ -------------
neither the Borrower nor any of its Subsidiaries is a partner in any
partnership.
Section 5.17. Environmental Protection. Each of Borrower and its
------------------------
Subsidiaries has obtained all material permits, licenses and other
authorizations which are required under all environmental laws, including laws
relating to emissions, discharges, releases or threatened releases of
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment (including without limitation, ambient air,
surface water, ground water, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, except to the extent failure to have any such
permit, license or authorization would not reasonably be expected to have a
material adverse effect on the business, financial condition, operations,
Properties or, as far as the Borrower can reasonably foresee, prospects of the
Borrower and its Subsidiaries, taken as a whole. Each of the Borrower and its
Subsidiaries is in compliance with all terms and conditions of the required
permits, licenses and authorizations, and is also in compliance with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in the environmental laws or
contained in any regulation, code, plan, order, decree, judgment, injunction,
notice or demand letter issued, entered, promulgated or approved thereunder,
except to the extent failure to comply would not reasonably be expected to have
a material adverse effect on the business, financial condition, operations,
Properties or, as far as the Borrower can reasonably foresee, prospects of the
Borrower and its Subsidiaries, taken as a whole, or the ability of the Borrower
to carry out its obligations under this Agreement, the Revolving Note or the
Pledge Agreement. None of the Properties of the Borrower or its Subsidiaries,
either owned or leased, have been included or, as far as the Borrower can
reasonably foresee, proposed for inclusion on the National Priorities List
adopted pursuant to the Comprehensive Environmental Response Compensation and
Liability Act, as amended, or on any similar list or inventory of sites
requiring response or cleanup actions adopted by any other federal, state or
local agency.
-28-
Section 5.18. Copyrights, Patents, Trademarks, Etc. Each of the
------------------------------------
Borrower and its Subsidiaries is duly licensed or otherwise entitled to use all
patents, trademarks, service marks, trade names, and copyrighted materials which
are used in the operation of its business as presently conducted, except where
the failure to be so licensed or entitled would not have a materially adverse
effect on the financial condition, operations, Properties, business or, as far
as the Borrower can reasonably foresee, prospects of the Borrower and its
Subsidiaries, taken as a whole. No claim is pending or, as far as the Borrower
can reasonably foresee, threatened against the Borrower or any of its
Subsidiaries contesting the use of any such patents, trademarks, service marks,
trade names or copyrighted materials, nor does the Borrower know of any valid
basis for any such claims, other than claims which, if adversely determined,
would not have a material adverse effect on the financial condition, operations,
Properties, business or, as far as the Borrower can reasonably foresee,
prospects of the Borrower and its Subsidiaries, taken as a whole, or the ability
of the Borrower to carry out its obligations under this Agreement, the Revolving
Note or the Pledge Agreement.
Section 5.19. Compliance with Laws. Neither the Borrower nor any of its
--------------------
Subsidiaries is in violation of any laws, ordinances, rules or regulations,
applicable to it, of any federal, state or municipal governmental authorities,
instrumentalities or agencies, including without limitation, the United States
Occupational Safety and Health Act of 1970, as amended, except where such
violation would not have a material adverse effect on the financial condition,
operations, Properties, business or, as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries, taken as a whole, or
the ability of the Borrower to carry out its obligations under this Agreement,
the Revolving Note or the Pledge Agreement.
Section 5.20. Events of Default. No Default or Event of Default has
-----------------
occurred and is continuing.
Section 5.21. Use of Proceeds. The Borrower shall use the proceeds of
---------------
the Revolving Loans for general corporate purposes, including stock buybacks and
acquisition financing.
Section 5.22. Continental Agreements. The Continental Agreements are in
----------------------
full force and effect, no default exists under the Continental Agreements and no
event has occurred and no condition exists which, with the giving of notice or
the lapse of time or both, will constitute a default under the Continental
Agreements.
ARTICLE 6. AFFIRMATIVE COVENANTS
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
it shall, and shall cause each of its Subsidiaries to, unless the Bank otherwise
consents in writing:
-29-
Section 6.1. Maintenance of Existence and Domicile of Insurance
--------------------------------------------------
Subsidiaries. Preserve and maintain its corporate existence and good standing
------------
in the jurisdiction of its incorporation, and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is required
from time to time, except where failure to be so qualified would not have a
material adverse effect on the business, financial condition, operations,
Properties or, as far as the Borrower can reasonably foresee, prospects of the
Borrower and its Subsidiaries, taken as a whole; and preserve and maintain the
domicile of each of its Insurance Subsidiaries as in effect on the date hereof.
Section 6.2. Conduct of Business. Continue to engage in a business of
-------------------
the same general type as conducted by it on the date of this Agreement.
Section 6.3. Maintenance of Properties. Maintain, keep and preserve all
-------------------------
of its material Properties (tangible and intangible), necessary or useful in the
conduct of its business, in good working order and condition, ordinary wear and
tear excepted, except that the failure to maintain, preserve and protect a
------
particular item of depreciable Property that is not of significant value, either
intrinsically or to the operations of Borrower and its Subsidiaries, taken as a
whole, shall not constitute a violation of this covenant.
Section 6.4. Maintenance of Records. Keep accurate and complete records
----------------------
and books of account, in which complete entries will be made in accordance with
GAAP and SAP, reflecting all financial transactions of the Borrower and its
Subsidiaries.
Section 6.5. Maintenance of Insurance. Maintain insurance (subject to
------------------------
customary deductibles and retentions) with financially sound and reputable
insurance companies, in such amounts and with such coverages (including without
limitation public liability insurance, fire, hazard and extended coverage
insurance on all of its assets, necessary workers' compensation insurance and
all other coverages as are consistent with industry practice) as are maintained
by companies of established reputation engaged in similar businesses and
similarly situated.
Section 6.6. Compliance with Laws. Comply in all respects with all
--------------------
applicable laws, rules, regulations and orders, except where the failure to so
comply would not have a material adverse effect on the business, financial
condition, operations, Properties or, as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries taken as whole or the
ability of the Borrower to carry out its obligations under this Agreement, the
Revolving Note or the Pledge Agreement. Such compliance shall include, without
limitation, paying all taxes, assessments and governmental charges imposed upon
it or upon its Property (and all penalties and other costs, if any, related
thereto), unless contested in good faith by appropriate proceedings and for
which adequate reserves have been set aside.
Section 6.7. Right of Inspection. From time to time upon prior notice
-------------------
and in accordance with customary standards and practices within the banking
industry (including, without limitation, upon any Event of Default or whenever
the Bank may have reasonable cause to
-30-
believe that an Event of Default has occurred), the Borrower shall permit the
Bank or any agent or representative thereof, to examine and make copies and
abstracts from the records and books of account of, and visit the Properties of,
the Borrower and its Subsidiaries to discuss the affairs, finances and accounts
of the Borrower and any such Subsidiaries with any of their respective officers
and directors and the Borrower's independent accountants, and to make such
verification concerning the Borrower and its Subsidiaries as may be reasonable
under the circumstances, and upon reasonable request, furnish promptly to the
Bank true copies of all financial information made available to Senior Officers
of Borrower and its Subsidiaries; provided, that the Bank shall use reasonable
--------
efforts to not materially interfere with the business of the Borrower and its
Subsidiaries and to treat as confidential any and all information obtained
pursuant to this Section 6.7, except to the extent disclosure is required by any
law, regulation, order, ruling, directive, guideline or request from any central
bank or other government authority (whether or not having the force of law).
Section 6.8. Reporting Requirements. The Borrower shall, and shall
----------------------
cause each of its Subsidiaries, as applicable, to, furnish to the Bank:
(a Annual GAAP Statements. Within ninety (90) days following the end
----------------------
of Borrower's fiscal year (or such earlier date as the Borrower's Form 10-K
is filed with the Securities and Exchange Commission) copies of:
(i) the consolidated and consolidating balance sheets of the Borrower
and its Subsidiaries as at the close of such fiscal year, and
(ii) the consolidated and consolidating statements of income and
consolidated statements of stockholders' equity and cash flows,
in each case of the Borrower and its Subsidiaries for such fiscal
year,
in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP, all in
reasonable detail and accompanied by an opinion thereon of KPMG Peat
Marwick or other firm of independent public accountants of recognized
national standing selected by the Borrower and reasonably acceptable to the
Bank, to the effect that the consolidated financial statements have been
prepared in accordance with GAAP (except for changes in application in
which such accountants concur) and present fairly in all material respects
in accordance with GAAP the financial condition of the Borrower and its
Subsidiaries as of the end of such fiscal year and the results of its
operations for the fiscal year then ended and that the examination of such
accountants in connection with such consolidated financial statements has
been made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such other
auditing procedures as were considered necessary under the circumstances.
(b Annual SAP Financial Statements. As soon as available, and in any
-------------------------------
event within sixty (60) and one hundred and fifty (150) days, respectively,
following the end of each
-31-
Insurance Subsidiary's fiscal year (or such earlier date as such are filed
with the applicable insurance regulatory authority), copies of the
unaudited (if required to be filed with a regulatory authority) and audited
SAP Financial Statements for such Insurance Subsidiary, in each case
setting forth in comparative form the figures for the preceding fiscal year
and prepared in accordance with SAP, all in reasonable detail and
accompanied by an opinion thereon of KPMG Peat Marwick or other firm of
independent public accountants of recognized national standing selected by
the Borrower and reasonably acceptable to the Bank, to the effect that the
financial statements have been prepared in accordance with SAP (except for
changes in application in which such accountants concur) and present fairly
in all material respects in accordance with SAP the financial condition of
such Insurance Subsidiary as of the end of such fiscal year and the results
of its operations for the fiscal year then ended and that the examination
of such accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards and,
accordingly, included such tests of the accounting records and such other
auditing procedures as were considered necessary under the circumstances.
(c Quarterly GAAP Statements. As soon as available, and in any event
-------------------------
within forty-five (45) days after the end of each quarterly fiscal period
of the Borrower (other than the fourth fiscal quarter of any fiscal year),
copies of:
(i) the consolidated and consolidating balance sheets of Borrower and
its Subsidiaries as at the end of such fiscal quarter, and
(ii) the consolidated and consolidating statements of income and
consolidated statements of stockholders' equity and cash flows,
in each case of Borrower and its Subsidiaries for such fiscal
quarter and the portion of such fiscal year ended with such
fiscal quarter,
in each case setting forth in comparative form the figures for the
preceding fiscal year and prepared in accordance with GAAP all in
reasonable detail and certified as presenting fairly in accordance with
GAAP the financial condition of the Borrower and its Subsidiaries as of the
end of such period and the results of operations for such period by a
Senior Officer of such company, subject only to normal year-end accruals
and audit adjustments and the absence of footnotes.
(d Quarterly SAP Statements. As soon as available, and in any event
------------------------
within the time period required by the applicable regulatory authority,
copies of the unaudited SAP Financial Statements for each quarterly fiscal
period of each Insurance Subsidiary, in each case setting forth in
comparative form the figures for the preceding fiscal year and prepared in
accordance with SAP, all in reasonable detail and certified as presenting
fairly in accordance with SAP the financial condition of such Insurance
Subsidiary as of the end
-32-
of such period and results of operations for such period by a Senior
Officer of such Insurance Subsidiary, subject to normal year-end accruals
and audit adjustments.
(e Annual/Quarterly Reports. Concurrently with the delivery of the
------------------------
financial statements required pursuant to subsections (a), (b), (c) and (d)
of this Section, copies of all reports required to be filed with the
Insurance Commissioner in connection with the filing of such financial
statements.
(f Annual Forecasts. On or before March 1 of each year, a forecast of
----------------
the consolidated operations of the Borrower and its Subsidiaries and of the
Statutory Surplus of USF RE, in each case in form satisfactory to the Bank,
for the current fiscal year, together with a certificate of a Senior
Officer that such forecasts have been prepared in good faith and on
reasonable assumptions.
(g Management Letters. Promptly upon receipt thereof, copies of any
------------------
reports or management letters relating to the internal financial controls
and procedures delivered to the Borrower or any of its Subsidiaries by any
independent certified public accountant in connection with examination of
the financial statements of the Borrower or any such Subsidiary.
(h SEC Filings. Promptly after the same are available, copies of each
-----------
annual report, proxy or financial statement or other report or
communication sent to the stockholders of the Borrower and copies of all
annual, regular, periodic and special reports and registration statements
which the Borrower may file or be required to file with the Securities and
Exchange Commission under Sections 13 and 15(d) of the Securities and
Exchange Act of 1934.
(i Notice of Litigation. Promptly after the commencement thereof,
--------------------
notice of any action, suit and proceeding before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic
or foreign, against the Borrower or any of its Subsidiaries (A) not arising
out of an insurance policy issued by the Borrower or any of its
Subsidiaries, which, if determined adversely to the Borrower or such
Subsidiary, would have a material adverse effect on the financial
condition, operations, Properties, business or, as far as the Borrower can
reasonably foresee, prospects of the Borrower and its Subsidiaries, taken
as a whole, or the ability of the Borrower to carry out its obligations
under this Agreement, the Revolving Note or the Pledge Agreement, (B)
arising out of an insurance policy issued by any of the Subsidiaries of the
Borrower, which demands relief, net of reinsurance obtained by the Borrower
or its Subsidiaries with respect to such insurance policy, which, if
determined adversely to the Borrower or such Subsidiary would have a
material adverse effect on the financial condition, operations, Properties,
business or, as far as the Borrower can reasonably foresee, prospects of
the Borrower and its Subsidiaries, taken as a whole, or the ability of the
Borrower to carry out its obligations under this Agreement, the Revolving
Note or the
-33-
Pledge Agreement, or (C) commenced by any creditor or lessor under any
written credit agreement with respect to borrowed money or material lease
which asserts a default thereunder on the part of the Borrower or any of
its Subsidiaries.
(j) Notices of Default. As soon as practicable and in any event within
------------------
fifteen (15) days after the occurrence of each Default or Event of Default,
a written notice setting forth the details of such Default or Event of
Default and the action which is proposed to be taken by the Borrower with
respect thereto.
(k) Actuarial Report Confirming Reserves. As soon as available, and in
------------------------------------
any event within ninety (90) days after the close of each fiscal year of
the Borrower, a report confirming the adequacy of the SAP reserves of each
Insurance Subsidiary from an actuarial firm of recognized national standing
or the actuarial division of an accounting firm of recognized national
standing acceptable to the Bank.
(l) Other Filings. Promptly upon the filing thereof, copies of any
-------------
reports or other communications required to be filed with the Insurance
Commissioner in connection with the pledge by the Borrower of the Pledged
Collateral (as defined in and pursuant to the Pledge Agreement); and at any
time upon the reasonable request of the Bank, permit the Bank the
opportunity to review copies of all reports, including annual reports, and
notices which the Borrower or any Subsidiary files with or receives from
the PBGC or the U.S. Department of Labor under ERISA; and as soon as
practicable and in any event within fifteen (15) days after the Borrower or
any if its Subsidiaries knows or has reason to know that any Reportable
Event or Prohibited Transaction has occurred with respect to any Plan or
that the PBGC or the Borrower or any such Subsidiary has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Bank a certificate of a Senior Officer of the
Borrower setting forth details as to such Reportable Event or Prohibited
Transaction or Plan termination and the action the Borrower proposes to
take with respect thereto.
(m) Additional Information. Such additional information as the Bank may
----------------------
reasonably request concerning the Borrower and its Subsidiaries and for
that purpose all pertinent books, documents and vouchers relating to its
business, affairs and Properties, including investments as shall from time
to time be designated by the Bank.
Section 6.9. Certificates.
------------
(a) Officers' Certificate. Simultaneously with each delivery of
---------------------
financial statements pursuant to Section 6.8(a) and 6.8(c), the Borrower
shall deliver to the Bank a certificate of its Chief Financial Officer
which will
(i) certify on behalf of the Borrower that such officer has reviewed
the Agreement and the condition and transactions of the Borrower and
its Subsidiaries for the
-34-
period covered by such financial statements, and state that to the
best of his knowledge the Borrower has observed or performed all of
its covenants and other agreements, and satisfied every condition,
contained in this Agreement, the Revolving Note and the Pledge
Agreement, and no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof and the action which
is proposed to be taken with respect thereto, and
(ii) include information (with detailed calculations in the form set
out in Exhibit C) required to establish whether the Borrower was in
---------
compliance with the covenants set forth in this Agreement during the
period covered by the financial statements then being delivered.
(b) Accountant's Certificate. Simultaneously with each delivery of
------------------------
financial statements pursuant to Section 6.8(a), the Borrower will deliver
to the Bank a certificate of the independent certified public accountants
who certify such statements, stating whether, in the course of their audit
of the financial statements, they obtained any knowledge of a condition or
event which constitutes a Default or Event of Default and the nature
thereof.
Section 6.10. Further Assurances. The Borrower shall take all such
------------------
further actions and execute and file or record, at its own cost and expense, all
such further documents and instruments as the Bank may at any time reasonably
determine may be necessary or advisable; and shall do, execute, acknowledge,
deliver, record, file, re-file, record, register and re-register any and all
such further acts, deeds, conveyances, estoppel certificates, transfers,
certificates, assurances and other instruments as the Bank may reasonably
require from time to time in order to carry out more effectively the purposes of
this Agreement, the Revolving Note and the Pledge Agreement.
Section 6.11. Compliance with Agreements. Promptly and fully comply
--------------------------
with all contractual obligations under all agreements, mortgages, indentures,
leases and/or instruments to which any one or more of the Borrower and its
Subsidiaries is a party, whether such agreements, mortgages, indentures, leases
or instruments are with the Bank or another Person, except where such failure to
so comply would not have a material adverse effect on the business, financial
condition, operations, Properties or, as far as the Borrower can reasonably
foresee, prospects of the Borrower and its Subsidiaries taken as whole or the
ability of the Borrower to carry out its obligations under this Agreement, the
Revolving Note or the Pledge Agreement.
Section 6.12. Use of Proceeds. Use the proceeds of the Revolving Loans
---------------
only for the purposes described in Section 5.21.
Section 6.13. Continental Agreements. The Borrower shall keep, observe
----------------------
and perform, or cause to be kept, observed and performed, prior to the
expiration of the applicable grace period,
-35-
if any, all of the terms, covenants, provisions and agreements of the
Continental Agreements to be kept, observed and performed by USBENEFITS or USF
RE thereunder.
ARTICLE 7. NEGATIVE COVENANTS.
During the term of this Agreement, and until performance, payment and/or
satisfaction in full of the Obligations, the Borrower covenants and agrees that
Borrower shall not, and shall not permit its Subsidiaries to, unless the Bank
otherwise consents in writing:
Section 7.1. Debt. Create, incur, assume or suffer to exist any Debt,
----
except:
(a) Debt of the Borrower under this Agreement and the Revolving Note;
(b) Debt permitted under Section 7.2 hereof;
(c) Subordinated Debt of the Borrower; and
(d) Debt of USF RE in connection with reimbursement agreements for letters
of credit collateralizing reinsurance obligations of USF RE, provided
the aggregate amount of such Debt does not exceed $1,000,000.
Section 7.2. Guaranties, Etc. Assume, guarantee, endorse or otherwise
----------------
be or become directly or contingently responsible or liable (including, but not
limited to, an agreement to purchase any obligation, or to supply or advance any
funds, or an agreement to cause such Person to maintain a minimum working
capital or net worth or otherwise to assure the creditors of any Person against
loss) for the obligations of any Person, except guaranties by endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business and except as disclosed on Schedule 7.2 hereof.
------------
Section 7.3. Liens. Create, incur, assume or suffer to exist any Lien,
-----
upon or with respect to any of its Properties, now owned or hereafter acquired,
except:
(a) Liens for taxes or assessments or other government charges or levies if
not yet due and payable or if due and payable, if they are being contested
in good faith by appropriate proceedings and for which appropriate reserves
are maintained;
(b) Liens imposed by law, such as mechanic's, materialmen's, landlord's,
warehousemen's and carrier's Liens, and other similar Liens, securing
obligations incurred in the ordinary course of business which are not past
due for more than forty-five 45 days, or which are being contested in good
faith by appropriate proceedings and for which appropriate reserves have
been established;
-36-
(c) Liens under workers' compensation, unemployment insurance, social
security or similar legislation (other than ERISA);
(d) judgment and other similar Liens arising in connection with court
proceedings; provided that the execution or other enforcement of such Liens
--------
is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(e) easements, rights-of-way, restrictions and other similar encumbrances
which, in the aggregate, do not materially interfere with the occupation,
use and enjoyment by the Borrower or any of its Subsidiaries of the
Property or assets encumbered thereby in the normal course of its business
or materially impair the value of the Property subject thereto;
(f) Liens referred to in Schedule 5.6; and
(g) Liens consisting of pledges or deposits of Property to secure
performance in connection with operating leases made in the ordinary course
of business to which Borrower or a Subsidiary is a party as lessee,
provided the aggregate value of all such pledges and deposits in connection
--------
with any such lease does not at any time exceed 15% of the annual fixed
rentals payable under such lease.
Section 7.4. Investments. Permit the total consolidated Investment in
-----------
Investment Grade Securities of USF RE, USFIC and all other Insurance
Subsidiaries, as of the end of any fiscal quarter, to be less than ninety-five
percent (95%) of the aggregate amount of Total Invested Assets.
Section 7.5. Mergers and Consolidations and Acquisitions of Assets.
-----------------------------------------------------
Merge or consolidate with any Person (whether or not Borrower or any Subsidiary
is the surviving entity), or acquire all or substantially all of the assets or
any of the capital stock of any Person; provided that any Subsidiary (other than
--------
any Insurance Subsidiary) may merge into the Borrower or any other Subsidiary,
and the Borrower may merge with or acquire the assets of another Person if
(a) after giving effect to such transaction, (i) the Borrower is the
corporation which survives such merger or acquisition, and (ii) no Default
or Event of Default would exist, and
(b) the aggregate purchase price and other consideration paid or payable by
the Borrower for all such mergers and/or acquisitions shall not exceed
$15,000,000 in the aggregate during the term of this Agreement.
Section 7.6. Sale of Assets. Sell, lease or otherwise dispose of all or
--------------
substantially all of its assets, including through any reinsurance arrangements,
except in the ordinary course of business.
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Section 7.7. Stock of Subsidiaries, Etc. Pledge, assign, hypothecate,
--------------------------
transfer, convey, sell or otherwise dispose of, encumber or grant any security
interest in, or deliver to any other Person, any shares of capital stock of its
Subsidiaries, or permit any such Subsidiaries to issue any additional shares of
its capital stock to any Person other than the Borrower or any Subsidiaries,
except directors' qualifying shares and pursuant to the Pledge Agreement.
Section 7.8. Transactions with Affiliates. Enter into any transaction
----------------------------
of any kind with any Affiliate of the Borrower, or any Person that owns or holds
5% or more of the outstanding common stock of the Borrower, other than (a)
----------
transactions between or among Borrower and its wholly owned Subsidiaries or
between or among its wholly owned Subsidiaries or (b) transactions on terms at
least as favorable to the Borrower or its Subsidiaries as would be the case in
an arm's-length transaction between unrelated parties of equal bargaining power.
Section 7.9. Capital Expenditures. Make or permit to be made any
--------------------
Capital Expenditure in any fiscal year, or commit to make any Capital
Expenditure in any fiscal year, which when added to the aggregate Capital
Expenditures of the Borrower and its Subsidiaries theretofore made or committed
to be made in that fiscal year, would exceed $2,500,000. The Bank agrees to
consider any request of the Borrower to modify this covenant to the extent
necessary to permit it to buy or construct a building for its offices, it being
understood, however, that while the Bank shall be under no obligation whatsoever
to grant any such request, the Bank shall not unreasonably deny same.
Section 7.10. Minimum Statutory Surplus. As of the end of any fiscal
-------------------------
quarter, permit Statutory Surplus of USF RE to be less than an amount equal to
the sum of (a) $80,000,000 plus (b) 75% of any positive Statutory Net Income,
after dividends to the Borrower, for each fiscal quarter following the fiscal
quarter ending December 31, 1995, plus (c) any contributions to surplus made by
the Borrower to USF RE, from Revolving Loans or otherwise, during each fiscal
quarter following the fiscal quarter ending December 31, 1995.
Section 7.11. Minimum Consolidated GAAP Net Worth. As of the end of any
-----------------------------------
fiscal quarter, permit Consolidated GAAP Net Worth of the Borrower and its
Subsidiaries to be less than an amount equal to the sum of (a) $75,000,000, plus
(b) 50% of cumulative positive net income (as determined in accordance with
GAAP) for each fiscal quarter following the fiscal quarter ending December 31,
1995, plus (c) the amount of paid-in capital resulting from any issuance by the
Borrower of its capital stock after December 20, 1994.
Section 7.12. Maximum Premiums to Surplus. As of the end of each fiscal
---------------------------
quarter, permit the ratio of Net Premiums Written for the immediately preceding
four fiscal quarters (ending on such date) to Statutory Surplus at the end of
such fiscal quarter to be greater than the following: 3.0 to 1 at the end of the
first fiscal quarter of each year and 2.0 to 1 at the end of the second, third
and fourth fiscal quarters of each fiscal year.
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Section 7.13. [Reserved]
Section 7.14. Minimum Interest Coverage. As of the end of each fiscal
-------------------------
quarter during the periods set forth below, permit the ratio of (a) the sum of
(i) Available Dividends, minus dividends paid by USF RE to the Borrower for the
immediately preceding four fiscal quarters (ending on such date), plus (ii) an
amount equal to the aggregate consolidating GAAP EBIT of the Borrower and all
Subsidiaries (eliminating intercompany balances and transactions, as
applicable), except the Insurance Subsidiaries, for the immediately preceding
four fiscal quarters (ending on such date) to (b) Interest Expense for the
immediately succeeding four fiscal quarters (beginning on such date) to be less
than (i) 2.0 to 1 for the fiscal year ending December 31, 1995, and (ii) 3.0 to
1 for each fiscal year thereafter. For purposes of clause (b) above, Interest
Expense shall be calculated on the assumption that Base Rate Loans for the full
amount of the Commitment will be outstanding for the succeeding four fiscal
quarters and the A.M. Best Rating of USF RE on the date of the certification
required by Section 6.9(a) with respect to the fiscal quarter being tested will
remain in effect for the succeeding four fiscal quarters.
Section 7.15. Minimum Fixed Charge Coverage. As of the end of each
-----------------------------
fiscal quarter during the periods set forth below, permit the ratio of (a) the
sum of (i) Available Dividends, minus dividends paid by USF RE to the Borrower
for the immediately preceding four fiscal quarters (ending on such date), plus
(ii) an amount equal to the aggregate consolidating GAAP EBIT of the Borrower
and all Subsidiaries (eliminating intercompany balances and transactions, as
applicable), except Insurance Subsidiaries, for the immediately preceding four
fiscal quarters (ending on such date) to (b) Fixed Charges for the immediately
succeeding four fiscal quarters (beginning on such date) to be less than (i) 1.5
to 1 for the fiscal year ending December 31, 1995, and (ii) 1.7 to 1 for each
fiscal year thereafter. For purposes of clause (b) above, Interest Expense
shall be calculated on the assumption that Base Rate Loans for the full amount
of the Commitment will be outstanding for the succeeding four fiscal quarters
and the A.M. Best Rating of USF RE on the date of the certification required by
Section 6.9(a) with respect to the fiscal quarter being tested will remain in
effect for the succeeding four fiscal quarters.
Section 7.16. Minimum Debt Service Coverage. As of the end of each
-----------------------------
fiscal quarter, permit the Debt Service Coverage Ratio for the immediately
preceding four fiscal quarters (ending on such date) to be less than 1.5 to 1.0.
Section 7.17. Distributions. In any fiscal year make any Distributions
-------------
from net income of the Borrower (as determined in accordance with GAAP), other
than Distributions from time to time up to an aggregate amount not to exceed
33-1/3% of consolidated positive net income of the Borrower and its Subsidiaries
(determined in accordance with GAAP) for such fiscal year.
Section 7.18. Risk-Based Capital Ratio. As at any date, permit the
------------------------
Risk-Based Capital Ratio of USF RE as at such date to be less than 200%. In the
event of any change after the date of this Agreement in the NAIC Risk-Based
Capital (RBC) for Insurers Model Act or NAIC's interpretations thereof affecting
the calculation of the Risk-Based Capital Ratio, (a) the Borrower
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and the Bank agree to enter into good faith negotiations to amend this Agreement
in such respects as are necessary to conform this Section 7.18 as a measurement
of the sufficiency of USF RE's risk-based capital to substantially the same
measurement as was effective prior to such change and (b) the Borrower shall be
deemed to be in compliance with this Section 7.18 during the 60 days following
any such change if and to the extent that USF RE would have been in compliance
therewith under said Act and interpretations as in effect immediately prior to
such change; provided, however, if an amendment shall not be agreed upon within
-------- -------
60 days or such longer period as shall be agreed to by the Bank, for purposes of
determining compliance with this Section 7.18 until such amendment shall be
agreed upon, compliance shall be determined in accordance with said Act and
interpretations as in effect on the Closing Date.
Section 7.19. Minimum ▇.▇.▇▇▇▇ Rating. Permit the A.M. Best Rating of
-----------------------
USF RE to be less than "A-" at any time.
Section 7.20. Continental Agreements. Permit the cancellation,
----------------------
surrender, termination, amendment or modification of the Continental Agreements
or the expiration of the Continental Agreements unless, on or before the
expiration date thereof, a replacement agreement is entered into by the Borrower
and/or its Subsidiaries in form and content satisfactory to the Bank in the
exercise of the Bank's reasonable discretion.
ARTICLE 8. EVENTS OF DEFAULT.
Section 8.1. Events of Default. Any of the following events shall be an
-----------------
"Event of Default":
(a) the Borrower shall fail to pay any principal amount when due, whether
at stated maturity, by acceleration, by notice of prepayment or otherwise,
or Borrower shall fail to pay any premium or interest, or any fees or other
amounts payable hereunder, within five days after the date due;
(b) any written statement, representation or warranty made by the Borrower
in this Agreement, or the Revolving Note or the Pledge Agreement, or which
is contained in any certificate, document, financial or other written
statement furnished at any time under or in connection with this Agreement,
the Revolving Note or the Pledge Agreement shall prove to have been
incorrect in any material respect on or as of the date made;
(c) the Borrower shall (i) fail to perform or observe any term, covenant,
or agreement contained in Section 5.21, Section 6.8(i) or Article 7; or
(ii) fail to perform or observe any term, covenant, or agreement on its
part to be performed or observed (other than the obligations specifically
referred to elsewhere in this Section 8.1) in this Agreement (including
without limitation any such term, covenant or agreement contained in
Article 6 hereof), the Pledge Agreement or the Revolving Note and such
failure shall continue
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unremedied for 30 consecutive days. The Bank shall use reasonable efforts
to give the Borrower notice of any Default or Event of Default under this
Section 8.1(c); provided, however, that failure to give any such notice
-------- -------
shall not impair or otherwise adversely affect the Bank's rights and
remedies hereunder;
(d) the Borrower or any Subsidiary shall (i) fail to pay any indebtedness,
including but not limited to indebtedness for borrowed money (other than
the payment Obligations described in (a) above), of the Borrower or such
Subsidiary, as the case may be, or any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise); or (ii) fail to perform or observe any term, covenant
or condition on its part to be performed or observed under any agreement or
instrument relating to any such indebtedness, when required to be performed
or observed and such failure continues after any applicable notice and
grace period, if the effect of such failure to perform or observe is to
accelerate, or to permit the acceleration of the maturity of such
indebtedness, or (iii) any such indebtedness shall be declared to be due
and payable, or required to be prepaid (other than by a regularly scheduled
required prepayment), prior to the stated maturity thereof; provided,
--------
however, that it shall not be a Default or Event of Default under this
-------
Section 8.1(d) unless the aggregate principal amount of all such
indebtedness as described in clauses (i) through (iii) above shall exceed
$500,000;
(e) the Borrower or any Subsidiary (i) shall generally not, or be unable
to, or shall admit in writing its inability to, pay its debts as such debts
become due; or (ii) shall make an assignment for the benefit of creditors
or petition or apply to any tribunal for the appointment of a custodian,
receiver or trustee for it or a substantial part of its assets; or (iii)
shall commence any proceeding under any bankruptcy, insolvency,
reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or
any such proceeding shall have been commenced against it in which an
adjudication or appointment is made or order for relief is entered, or
which petition, application or proceeding remains undismissed for a period
of sixty (60) days or more; or (v) shall be the subject of any proceeding
under which its assets may be subject to seizure, forfeiture or divestiture
(other than a proceeding in respect of a Lien permitted under Section
7.3(a)); or (vi) by any act or omission shall indicate its consent to,
approval of or acquiescence in any such petition, application or proceeding
or order for relief or the appointment of a custodian, receiver or trustee
for all or any substantial part of its Property; or (vii) shall suffer any
such custodianship, receivership or trusteeship to continue undischarged
for a period of sixty (60) days or more;
(f) (A) the Insurance Commissioner of the Commonwealth of Massachusetts
shall apply for an order pursuant to Sections 180B, 180C or 180E or any
other section of the Massachusetts Insurance Code, directing the
rehabilitation, conservation or liquidation of USF RE, and any such
application shall not be dismissed or otherwise terminated during
-41-
a period of 60 consecutive days, or a court of competent jurisdiction shall
enter an order granting the relief sought; or (B) the Insurance
Commissioner of the Commonwealth of Massachusetts shall file a complaint or
petition pursuant to Section 6 of the Massachusetts Insurance Code seeking
the dissolution of USF RE, and such complaint or petition is not dismissed
or otherwise terminated for a period of 60 consecutive days, or a court of
competent jurisdiction shall order the dissolution of USF RE;
(g) one or more judgments, decrees or orders for the payment of money in
excess of $500,000 in the aggregate shall have been rendered against the
Borrower or any of its Subsidiaries (excluding judgments which are covered
by insurance other than self-insurance and excluding judgments rendered
against any Insurance Subsidiary which judgments have been both (i)
rendered in the ordinary course of business in connection with its
insurance and reinsurance obligations, and (ii) adequately reserved
against) and such judgments, decrees or orders shall continue unsatisfied
and in effect for a period of sixty (60) consecutive days without being
vacated, discharged, satisfied or stayed or bonded pending appeal;
(h) any of the following events shall occur or exist with respect to the
Borrower or any ERISA Affiliate: (i) any Prohibited Transaction involving
any Plan; (ii) any Reportable Event shall occur with respect to any Plan;
(iii) the filing under Section 4041 of ERISA of a notice of intent to
terminate any Plan or the termination of any Plan (other than in a
"standard termination" referred to in Section 4041 of ERISA); (iv) any
event or circumstance exists which would constitute grounds entitling the
PBGC to institute proceedings under Section 4042 of ERISA for the
termination of, or for the appointment of a trustee to administer any Plan,
or the institution by the PBGC of any such proceedings; (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer
Plan or the reorganization, insolvency or termination of any Multiemployer
Plan; and in each case above, such event or condition, together with all
other such events or conditions, if any, would in the reasonable opinion of
the Bank subject the Borrower to any tax, penalty or other liability to a
Plan, Multiemployer Plan, the PBGC or otherwise (or any combination
thereof) which in the aggregate exceed or may exceed $250,000;
(i) this Agreement, the Revolving Note or the Pledge Agreement shall at any
time after its execution and delivery and for any reason cease to be in
full force and effect or shall be declared null and void, or the validity
or enforceability thereof shall be contested by the Borrower or the
Borrower shall deny it has any further liability or obligation hereunder;
(j) any event occurs which gives the holder or holders of any Subordinated
Debt (or an agent or trustee on its or their behalf) the right to declare
such indebtedness due before the date on which it otherwise would become
due, or the right to require the issuer thereof to redeem or purchase, or
offer to redeem or purchase, all or any portions of any Subordinated Debt;
-42-
(k) any determination is made by a court of competent jurisdiction that
payment of principal or interest or both shall be made to the holder of any
Subordinated Debt which would not be permitted by this Agreement or that
any obligation with respect to Subordinated Debt is not subordinated in
accordance with its terms to the Obligations; or
(l) the Borrower shall be in default under the Pledge Agreement.
Section 8.2. Remedies. Without limiting any other rights or remedies of
--------
the Bank provided for elsewhere in this Agreement, the Revolving Note or the
Pledge Agreement, or by applicable law, or in equity, or otherwise, if any Event
of Default shall occur and be continuing, the Bank may by notice to the
Borrower, (i) declare the Commitment to be terminated, whereupon the same shall
forthwith terminate, (ii) declare all amounts owing under this Agreement and the
Revolving Note (whether or not such Obligations be contingent or unmatured) to
be forthwith due and payable, whereupon all such amounts shall become and be
forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided that, in the case of an Event of Default referred to in Section 8.1(e)
--------
and Section 8.1(f) above with respect to the Borrower, the Commitment shall be
immediately terminated, and all such amounts shall be immediately due and
payable without notice, presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrower. NOTWITHSTANDING
THE FOREGOING, THE BANK SHALL NOT SELL, VOTE OR IN ANY MANNER EXERCISE CONTROL
OVER THE PLEDGED COLLATERAL (AS DEFINED IN THE PLEDGE AGREEMENT) OF BORROWER
WITHOUT OBTAINING, TO THE EXTENT REQUIRED BY LAW, THE PRIOR APPROVAL (INCLUDING
ANY HEARING REQUIRED BY LAW) OF THE MASSACHUSETTS DIVISION OF INSURANCE.
ARTICLE 9. MISCELLANEOUS.
Section 9.1. Amendments and Waivers. No amendment or waiver of any
----------------------
provision of this Agreement, the Revolving Note or the Pledge Agreement nor
consent to any departure by the Borrower therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Bank and the
Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No failure on
the part of the Bank to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof or preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
Section 9.2. Usury. Anything herein to the contrary notwithstanding,
-----
the Obligations of the Borrower with respect to this Agreement and the Revolving
Note shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to the Bank limiting rates of interest which may be charged or
collected by the Bank.
-43-
Section 9.3. Expenses; Indemnities.
---------------------
(a) Unless otherwise agreed in writing, the Borrower shall reimburse the
Bank on demand for all reasonable costs, expenses and charges (including without
limitation, reasonable fees and charges of Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ LLP (with
appropriate detail) in accordance with the letter between the Borrower and the
Bank dated November 4, 1994) incurred by the Bank in connection with the
preparation, filing and recording of this Agreement, the Revolving Note or the
Pledge Agreement. The Borrower further agrees to pay the Bank on demand for all
reasonable costs, expenses and charges (including without limitation, reasonable
fees and charges of external legal counsel for the Bank and costs allocated by
the Bank's internal legal department) incurred by the Bank in connection with
the performance, modification and amendment of this Agreement, the Revolving
Note or the Pledge Agreement provided, however, that Borrower shall not be
-------- -------
liable for any such costs allocated by the Bank's internal legal department
arising prior to the date of the first Borrowing pursuant to a Notice of
Borrowing. The Borrower further agrees to pay on demand all reasonable costs
and expenses (including reasonable counsel fees and expenses), if any, in
connection with the enforcement, including without limitation, the enforcement
of judgments (whether through negotiations, legal proceedings or otherwise) of
this Agreement, the Revolving Note or the Pledge Agreement or any other document
to be delivered under this Agreement. Until paid, the amount of any cost,
expense or charge shall constitute, together with all accrued interest thereon,
part of the Obligations.
(b) The Borrower hereby agrees to indemnify the Bank upon demand at any
time, against any and all losses, costs or expenses which the Bank may at any
time or from time to time sustain or incur as a consequence of (i) any failure
by the Borrower to pay, punctually on the due date thereof, any amount payable
by the Borrower to the Bank or (ii) the acceleration, in accordance with the
terms of this Agreement, of the time of payment of any of the Obligations of the
Borrower. Such losses, costs or expenses may include, without limitation, (i)
any costs incurred by the Bank in carrying funds to cover any overdue principal,
overdue interest, or any other overdue sums payable by the Borrower to the Bank
or (ii) any losses incurred or sustained by the Bank in liquidating or
reemploying funds acquired by the Bank from third parties, except to the extent
caused by the Bank's gross negligence or willful misconduct.
(c) The Borrower agrees to indemnify the Bank and its directors, officers,
employees, agents and Affiliates from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, costs or expenses incurred by
any of them arising out of or by reason of any investigation or litigation or
other proceedings (including any threatened investigation or litigation or other
proceedings) relating to any transaction contemplated by this Agreement or the
Pledge Agreement, any actions or omissions of the Borrower or any Subsidiary or
any of their respective directors, officers, employees or agents in connection
with this Agreement, or any actual or proposed use by the Borrower or any
Subsidiary of the proceeds of the Revolving Loans, including without limitation,
the reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
-44-
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
(d) The Borrower agrees to indemnify the Bank and its directors, officers,
employees, agents and Affiliates from, and hold each of them harmless against,
any and all losses, liabilities, claims, damages, costs or expenses (including
without limitation, reasonable fees and disbursements of counsel, engineers or
similar professionals) which may be incurred by or asserted against the Bank or
any such party in connection with or arising out of or relating to (i) the
Bank's compliance with any environmental law with respect to the Properties or
operations of the Borrower or its Subsidiaries, (ii) any natural resource
damages, governmental fines or penalties or other amounts mandated by any
governmental authority, court order, demand or decree in connection with the
disposal by the Borrower or its Subsidiaries either on-site or off-site
(including leakage or seepage from any such site including third party treatment
facilities) of pollutants, contaminants or hazardous wastes and (iii) any
personal injury or property damage to third parties resulting from such
pollutants, contaminants or hazardous wastes.
Section 9.4. Term; Survival. This Agreement shall continue in full
--------------
force and effect as long as any Obligations are owing by the Borrower to the
Bank. No termination of this Agreement shall in any way affect or impair the
rights and obligations of the parties hereto relating to any transactions or
events prior to such termination date, and all warranties and representations of
the Borrower shall survive such termination. All representations and warranties
made hereunder and in any document, certificate, or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement, the Revolving Note or the Pledge Agreement. The obligations of
the Borrower under Sections 2.11, 2.12 and 9.3 shall survive the repayment of
the Revolving Loans and the termination of the Commitment.
Section 9.5. Assignment; Participations. This Agreement shall be
--------------------------
binding upon, and shall inure to the benefit of, the Borrower, the Bank and
their respective successors and assigns, except that the Borrower may not assign
or transfer its rights or obligations hereunder. Subject to the consent of the
Insurance Commissioner, if required, the Bank may sell participations in, or
upon ten (10) days' notice to the Borrower may assign all or any part of, any
Revolving Loan to another lender, in which event (a) in the case of an
assignment, the assignee shall have, to the extent of such assignment (unless
otherwise provided therein), the same rights, benefits and obligations as it
would have if it were the Bank hereunder; and (b) in the case of a
participation, the participant shall have no rights under this Agreement, the
Revolving Note or the Pledge Agreement. The agreement executed by the Bank in
favor of the participant shall not give the participant the right to require the
Bank to take or omit to take any action hereunder except action directly
relating to (i) the extension of a regularly scheduled payment date with respect
to any portion of the principal of or interest on any amount outstanding
hereunder allocated to such participant, (ii) the reduction of the principal
amount allocated to such participant or (iii) the reduction of the rate of
interest payable on such amount or any amount of fees payable hereunder to a
rate or amount, as the case may be, below that which the participant is entitled
to receive
-45-
under its agreement with the Bank. The Bank may furnish any information
concerning the Borrower in the possession of the Bank from time to time to
assignees and participants (including prospective assignees and participants);
provided that the Bank shall require any such prospective assignee or such
--------
participant (prospective or otherwise) to agree in writing to maintain the
confidentiality of such information.
Section 9.6. Notices. All notices, requests, demands and other
-------
communications provided for herein shall be in writing and shall be (i) hand
delivered; (ii) sent by certified, registered or express United States mail,
return receipt requested, or reputable next-day courier service; or (iii) given
by telex, telecopy, telegraph or similar means of electronic communication. All
such communications shall be effective upon the receipt thereof. Notices shall
be addressed to the Borrower and the Bank at their respective addresses set
forth on the signature pages of this Agreement, or to such other address as the
Borrower or the Bank shall theretofore have transmitted to the other party in
writing by any of the means specified in this Section.
Section 9.7. Setoff. The Borrower agrees that, in addition to (and
------
without limitation of) any right of setoff, banker's lien or counterclaim the
Bank may otherwise have, the Bank shall be entitled, at its option, to offset
balances (general or special, time or demand, provisional or final, and
regardless of whether such balances are then due to the Borrower) held by it for
the account of the Borrower at any of the Bank's offices, in Dollars or in any
other currency, against any amount payable by the Borrower under this Agreement,
the Revolving Note or the Pledge Agreement which is not paid when due, taking
into account any applicable grace period, in which case it shall promptly notify
the Borrower thereof; provided that the Bank's failure to give such notice shall
--------
not affect the validity thereof.
Section 9.8. Jurisdiction; Immunities.
------------------------
(a) The Borrower hereby irrevocably submits to the jurisdiction of any
Connecticut State or United States Federal court sitting in Connecticut over any
action or proceeding arising out of or relating to this Agreement, the Revolving
Note or the Pledge Agreement, and the Borrower hereby irrevocably agrees that
all claims in respect of such action or proceeding may be heard and determined
in such Connecticut State or Federal court. The Borrower irrevocably consents
to the service of any and all process in any such action or proceeding by the
mailing of copies of such process to the Borrower at its address specified in
Section 9.6. The Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. The Borrower
further waives any objection to venue in such State and any objection to an
action or proceeding in such State on the basis of forum non conveniens. The
Borrower further agrees that any action or proceeding brought against the Bank
shall be brought only in Connecticut State or United States Federal courts
sitting in Connecticut.
-46-
(b) Nothing in this Section shall affect the right of the Bank to serve
legal process in any other manner permitted by law or affect the right of the
Bank to bring any action or proceeding against the Borrower or its Property in
the courts of any other jurisdictions.
Section 9.9. Table of Contents; Headings. Any table of contents and the
---------------------------
headings and captions hereunder are for convenience only and shall not affect
the interpretation or construction of this Agreement.
Section 9.10. Severability. The provisions of this Agreement are
------------
intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without in any manner affecting the validity
or enforceability thereof in any other jurisdiction or the remaining provisions
hereof in any jurisdiction.
Section 9.11. Counterparts. This Agreement may be executed in any
------------
number of counterparts, all of which taken together shall constitute one and the
same instrument, and any party hereto may execute this Agreement by signing any
such counterpart.
Section 9.12. Integration. This Agreement, the Revolving Note or the
-----------
Pledge Agreement set forth the entire agreement between the parties hereto
relating to the transactions contemplated hereby and thereby and supersede any
prior oral or written statements or agreements with respect to such
transactions.
Section 9.13. Governing Law. This Agreement shall be governed by, and
-------------
interpreted and construed in accordance with, the laws of the State of
Connecticut except to the extent that the remedies under the Pledge Agreement in
respect of the Pledged Collateral are governed by the laws of the State of
California and the Commonwealth of Massachusetts.
Section 9.14. Confidentiality. Subject to the following sentence, the
---------------
Bank and any assignee of the Bank becoming a party to this Agreement agrees to
use its best efforts, consistent with its normal operating procedures, to retain
in confidence and not disclose without the prior written consent of the Borrower
any written information about the Borrower and its Subsidiaries obtained
pursuant to the requirements of this Agreement and identified in writing by the
Borrower as "non-public," except as permitted under Section 9.5 of this
Agreement. Notwithstanding the foregoing, the Bank (A) may disclose or
otherwise use such information to the extent that such information is required
in any application, report, statement or testimony submitted to any governmental
agency having or claiming to have jurisdiction over the Bank, (B) may disclose
or otherwise use such information to the extent that such information is
required in response to any summons or subpoena or in connection with any
litigation relating to the Revolving Loans, (C) may disclose or otherwise use
such information to the extent that such information is reasonably believed by
the Bank (after notification to the Borrower, unless such notification is
prohibited by law) to be required in order to comply with any law, order,
-47-
regulation, or ruling applicable to the Bank, and (D) may disclose or otherwise
use such information to the extent that such information becomes publicly
available.
Section 9.15. Authorization of Third Parties to Deliver Opinions, Etc.
--------------------------------------------------------
The Borrower hereby authorizes and directs each Person whose preparation or
delivery to the Bank of any opinion, report or other information is a condition
or covenant under this Agreement (including under Articles 5, 6 and 7) to so
prepare or deliver such opinion, report or other information for the benefit of
the Bank. The Borrower agrees to confirm such authorizations and directions
provided for in this Section 9.15 from time to time as may be requested by the
Bank.
Section 9.16. Borrower's Waivers. THE BORROWER ACKNOWLEDGES THAT IT HAS
------------------
BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION AND THIS
AGREEMENT AND THAT IT MAKES THE FOLLOWING WAIVERS KNOWINGLY AND VOLUNTARILY:
(a) THE BORROWER IRREVOCABLY WAIVES TRIAL BY JURY IN ANY COURT AND IN ANY
SUIT, ACTION OR PROCEEDING OR ANY MATTER ARISING IN CONNECTION WITH OR IN
ANY WAY RELATED TO THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, THE
REVOLVING NOTE, THE PLEDGE AGREEMENT OR ANY OF THE BORROWER'S DOCUMENTS
RELATED THERETO AND THE ENFORCEMENT OF ANY OF THE BANK'S RIGHTS AND
REMEDIES.
(b) THE BORROWER EXPRESSLY ACKNOWLEDGES THAT THIS AGREEMENT IS DELIVERED AS
PART OF A COMMERCIAL TRANSACTION AS SUCH TERM IS USED AND DEFINED IN
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES AND VOLUNTARILY AND
KNOWINGLY WAIVES ANY AND ALL RIGHTS WHICH ARE OR MAY BE CONFERRED UPON IT
UNDER CHAPTER 903a OF SAID STATUTES (OR ANY OTHER STATUTE AFFECTING
PREJUDGMENT REMEDIES) TO ANY NOTICE OR HEARING OR PRIOR COURT ORDER OR THE
POSTING OF ANY BOND PRIOR TO ANY PREJUDGMENT REMEDY WHICH THE BANK MAY USE.
THE BORROWER ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE
WITH RESPECT TO THIS TRANSACTION AND THE REVOLVING LOANS.
Section 9.17. State of Making and Substantial Performance. The parties
-------------------------------------------
hereto agree that this Agreement is being made and is to be substantially
performed in the State of Connecticut.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-48-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
US FACILITIES CORPORATION
By:
-------------------------------
Print Name:
Print Title: President
Address for Notices:
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Senior Vice President,
Chief Financial Officer and Treasurer
and
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Senior Vice President, General Counsel
and Secretary
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇.▇. ▇▇▇▇, Professional Law Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
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FLEET NATIONAL BANK
By:
---------------------------------------------------------
Name:
Title:
Address for Notices:
Financial Institutions Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Day, ▇▇▇▇▇ & ▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
-50-
SCHEDULE 1.1
COMMITMENTS AND LENDING OFFICES
-------------------------------
Percentage
Name and Address of Type of
of Bank Commitment Commitments Loans
----------------------------- --------------- ------------ ----------
Fleet National Bank, Revolving Loans 100% Base Rate
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ $50,000,000 Eurodollar
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ CD Rate
-1-
SCHEDULE 5.4
LITIGATION
----------
-1-
SCHEDULE 5.6
LIENS
-----
-1-
SCHEDULE 5.9
SUBSIDIARIES
------------
State of No. of
Name Incorporation Shares Owned Owner % Ownership
---- ------------- ------------ ----- -----------
USF RE INSURANCE Massachusetts 50,000 Borrower 100%
COMPANY
US Holdings, Inc. Delaware 1,000 USF RE 100%
USF Insurance Company Pennsylvania 150,000 US Holdings, Inc. 100%
USBenefits Insurance California 1,000 Borrower 100%
Services, Inc.
US Health Management California 1,000 USBenefits 100%
Corporation
US MedCare Review, Inc. Illinois 1,000 Borrower 100%
International Excess Re, British Virgin 999 USBenefits 99.9%
Limited Islands
Interra, Inc. Indiana 1,000 Borrower 100%
Interra Reinsurance Indiana 3,000 Interra, Inc. 100%
Group, Inc.
Centris Underwriting Indiana 1,000 Interra, Inc. 100%
Agencies, Inc.
Centris Risk Management, Indiana 1,000 Interra, Inc. 100%
Inc.
SCHEDULE 5.10
-1-
CREDIT ARRANGEMENTS
-------------------
-2-
SCHEDULE 5.15
CONSENTS AND APPROVALS
----------------------
-1-
SCHEDULE 5.16
PARTNERSHIPS
------------
-1-
SCHEDULE 7.2
GUARANTIES
----------
-1-
EXHIBIT A
REVOLVING NOTE
$50,000,000.00 Hartford, Connecticut
October 26, 1998
THE CENTRIS GROUP, INC., formerly known as US Facilities Corporation (the
"Borrower"), for value received, hereby unconditionally promises to pay to the
order of FLEET NATIONAL BANK, a national banking association, formerly known as
Shawmut Bank Connecticut, N.A. and Fleet National Bank of Connecticut (the
"Bank") at its office located at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
for the account of the appropriate Lending Office of the Bank, the principal sum
of FIFTY MILLION AND NO/100 Dollars ($50,000,000) or, if less, the unpaid
principal amount loaned by the Bank to the Borrower pursuant to the Agreement
referred to below, in lawful money of the United States of America and in
immediately available funds, on the date(s) and in the manner provided in said
Agreement. The Borrower also promises to pay interest on the unpaid principal
balance hereof, for the period such balance is outstanding, at said principal
office for the account of said Lending Office, in like money, at the rates of
interest, on the date(s) and in the manner provided in said Agreement; and to
pay interest on any overdue principal and interest at the Default Rate.
The date, type, amount and maturity date of each Revolving Loan made by the
Bank to the Borrower under the Agreement referred to below, and each payment of
principal thereof, shall be recorded by the Bank on its books and, prior to any
transfer of this Revolving Note (or, at the discretion of the Bank, at any other
time), endorsed by the Bank on the schedule attached hereto or any continuation
thereof or otherwise recorded and maintained in its internal records.
This is the Revolving Note referred to in that certain Credit Agreement (as
amended from time to time, the "Agreement") dated as of December 20, 1994 and
amended and restated by the Fourth Amendment to the Credit Agreement dated as of
October 26, 1998 between the Borrower and the Bank and evidences the Revolving
Loans made by the Bank thereunder and is secured by a Pledge Agreement as set
forth in the Agreement and is entitled to the benefits thereof. All terms not
defined herein shall have the meanings given to them in the Agreement.
The Agreement provides for the acceleration of the maturity of this
Revolving Note upon the occurrence of certain Events of Default and for
prepayments on the terms and conditions specified therein.
The Borrower waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Revolving Note.
-1-
No waiver of any right or remedy under this Revolving Note shall in any
event be effective unless the same shall be in writing and signed by the Bank
and the Borrower, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
In accordance with the provisions of the Agreement, the Borrower shall
reimburse the Bank on demand for all reasonable costs, expenses and charges
(including without limitation, reasonable fees and charges of external legal
counsel for the Bank and costs allocated by the Bank's internal legal
department) incurred by the Bank in connection with the preparation, performance
or enforcement of this Revolving Note.
This Revolving Note shall be binding on the Borrower and its permitted
successors and assigns and shall inure to the benefit of the Bank and its
permitted successors and assigns, provided that the Borrower may not delegate
--------
any obligations hereunder without the prior written consent of the Bank.
This Revolving Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of Connecticut.
THE BORROWER EXPRESSLY ACKNOWLEDGES THAT THE REVOLVING LOANS EVIDENCED HEREBY
ARE PART OF A COMMERCIAL TRANSACTION AS SUCH TERM IS USED AND DEFINED IN CHAPTER
903a OF THE CONNECTICUT GENERAL STATUTES AND HEREBY VOLUNTARILY AND KNOWINGLY
WAIVES ANY AND ALL RIGHTS WHICH ARE OR MAY BE CONFERRED UPON IT UNDER CHAPTER
903a OF SAID STATUTES (OR ANY OTHER STATUTE AFFECTING PREJUDGMENT REMEDIES) TO
ANY NOTICE OR HEARING OR PRIOR COURT ORDER OR THE POSTING OF ANY BOND PRIOR TO
ANY PREJUDGMENT REMEDY WHICH THE BANK MAY USE. THE BORROWER ACKNOWLEDGES THAT
IT HAS BEEN ADVISED BY COUNSEL OF ITS CHOICE WITH RESPECT TO THIS TRANSACTION
AND THE REVOLVING LOANS.
IN WITNESS WHEREOF, the undersigned has caused this Revolving Note to be
duly executed as of the day and year first above written.
THE CENTRIS GROUP, INC.
By:
-----------------------------------------
Print Name:
Print Title:
-2-
Schedule to
-----------
Revolving Note
--------------
REVOLVING LOANS AND PAYMENTS
----------------------------
Amount and Payments Unpaid
Type of Maturity Principal/ Principal Notation
Date Loan Date Interest Balance By
---- ---------- -------- -------- ------- ----
---- -------- ------- -------- -------- --------
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
---- ---- ------ ------- ------- ----
---- ---- ------ ------- -------
EXHIBIT B
Notice of Borrowing
-------------------
________, 19__
Fleet National Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Financial Institutions Group
Re: Credit Agreement dated as of December 20, 1994 (as amended, the
"Agreement") between The Centris Group, Inc., formerly known as US
Facilities Corporation (the "Borrower"), and Fleet National Bank,
formerly known as Shawmut Bank Connecticut, N.A. and Fleet National
Bank of Connecticut
Ladies and Gentlemen:
Pursuant to Section 2.3 of the Agreement, the undersigned Borrower hereby
gives you irrevocable notice that the Borrower requests a Revolving Loan under
the Agreement, and in that connection Borrower sets forth below the information
relating to such Revolving Loan:
Borrowing Date:
Aggregate Principal
Amount:
Type of Loan (Base
Rate, Eurodollar,
or CD Rate):
Interest Period:
As required by Section 4.2 of the Agreement, the undersigned officer on
behalf of the Borrower hereby certifies that:
(a) the representations and warranties contained in Article 5 of the
Agreement are true and correct in all material respects on and as of the date
hereof (or, if such representation or warranty is expressly stated to have been
made as of a specific date, as of such specific date);
(b) the Borrower has performed and complied with and is in compliance with
all of the terms, covenants and conditions of the Agreement;
(c) there does not exist any Default or Event of Default under the
Agreement; and
(d) each of the other conditions precedent set forth in Section 4.2 have
been satisfied and complied with.
All capitalized terms used in this notice not otherwise defined herein shall
have the same meaning as assigned to them in the Agreement.
THE CENTRIS GROUP, INC.
By:
-----------------------------------------
Print Name:
Print Title:
-2-
EXHIBIT C
OFFICER'S CERTIFICATE
THE CENTRIS GROUP, INC.
October 26, 1998
-
Pursuant to Section 6.9(a) of the Credit Agreement dated as of December 20,
1994 (the "Credit Agreement") between The Centris Group, Inc., formerly known
as US Facilities Corporation (the "Borrower"), and Fleet National Bank, formerly
known as Shawmut Bank Connecticut, N.A. and Fleet National Bank of Connecticut
(the "Bank"),
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ , DO HEREBY CERTIFY on behalf of the Borrower that:
1. I am the duly elected, qualified and acting Chief Financial Officer of
the Borrower; and
2. Attached hereto as Attachment 1 is a true and correct copy of the
consolidated and consolidating SAP and GAAP financial statements of
the Borrower and its Subsidiaries as of the close of the fiscal
[YEAR/QUARTER] ending __________, 199_; and
3. I have reviewed the Credit Agreement and the condition and
transactions of the Borrower and its Subsidiaries for the fiscal
[YEAR/QUARTER] ending _____, 199_, and to the best of my knowledge
the Borrower has observed and performed all of its covenants and
other agreements, and satisfied every condition contained in the
Credit Agreement and the Revolving Note, and I have not obtained
knowledge of any condition or event which constitutes a Default or
an Event of Default, except as set forth on Attachment 2 attached
hereto; and
4. Attached hereto as Attachment 3 is true and correct information (with
detailed calculations) establishing that the Borrower was in
compliance with the covenants set forth in the Credit Agreement during
the fiscal [YEAR/QUARTER] ending __________ ___, 199_.
Except as otherwise defined herein, terms used herein shall have the meanings
set forth in the Credit Agreement, pursuant to which this certificate is
delivered.
IN WITNESS WHEREOF, I have signed this certificate as of the date hereof on
behalf of
By:
-------------------------
Print Name:
Title: Chief Financial Officer
-2-
ATTACHMENT 2
to
Officer's Certificate
Financial Statements
--------------------
for the period ending
_____________ __, 199_
-1-
ATTACHMENT 2
to
Officer's Certificate
Defaults and Events of Default
------------------------------
Note: If a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action proposed to be taken by
the Borrower with respect thereto as required.
-1-
ATTACHMENT 3
to Officer's Certificate
Page 1 of 5
Computations and Information
Showing Compliance with
Sections 7.9 to 7.16, 7.18 and 7.19
of the
Credit Agreement
Except as otherwise defined herein, terms used herein shall have the meanings
set forth in the Credit Agreement.
SECTION 7.9. CAPITAL EXPENDITURES
--------------------
1. Aggregate Capital Expenditures actually made, or committed to be made,
during the fiscal year beginning [FILL IN DATE OF START OF FISCAL YEAR] = ________________
2. Line 1 does not exceed $2,500,000.
SECTION 7.10. MINIMUM STATUTORY SURPLUS
-------------------------
1. Statutory Surplus of USF RE as of the fiscal quarter ending ____ __, 199__ = ________________
2. Positive Statutory Net Income for each fiscal quarter following the
fiscal quarter ended December 31, 1995 was:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
2a. The sum of positive Statutory Net Income for each of the quarters set forth
in Line 2 above = ________________
2b. 75% of line 2a = ________________
3. Contributions to surplus made by Borrower to USF RE during each fiscal
quarter following the fiscal quarter ended December 31, 1995 were:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
3a. The sum of the contributions for each of the quarters
set forth in line 3 above = ________________
4. The sum of $80,000,000 and line 2b and line 3a = ________________
5. Line 1 is not less than line 4.
-1-
ATTACHMENT 3
to Officer's Certificate
Page 2 of 5
Section 7.11. MINIMUM CONSOLIDATED GAAP NET WORTH
-----------------------------------
1. Consolidated GAAP Net Worth as of the fiscal quarter ending
______________, 199__. = ________________
2. Consolidated positive net income (as determined in accordance with GAAP)
for each fiscal quarter following the fiscal quarter ended December 31, 1995
was:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
2a. The sum of the positive net income for each of the quarters
set forth in Line 2 above = ________________
2b. 50% of line 2a = ________________
3. Paid-in capital resulting from any issuance by the Borrower of its
capital stock = ________________
4. The sum of $75,000,000 and line 2b and line 3 = ________________
5. Line 1 is not less than line 4.
SECTION 7.12. MAXIMUM PREMIUMS TO SURPLUS
---------------------------
1. Aggregate Net Premiums Written by USF RE, USFIC and all other
Insurance Subsidiaries for the immediately preceding four fiscal quarters
(ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
2. Statutory Surplus of USF RE at the end of the fiscal quarter
ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ________________
3. The ratio of line 1 to line 2 = ___ : ___
4. The ratio in line 3 is not greater than 3.0 to 1 at the
end of the first fiscal quarter of each year and 2.0 to 1 at the end
of the second, third and fourth fiscal quarters of each fiscal year.
SECTION 7.13. [Reserved.]
-2-
ATTACHMENT 3
to Officer's Certificate
Page 3 of 5
SECTION 7.14. MINIMUM INTEREST COVERAGE.
-------------------------
1. Available Dividends minus dividends paid by USF RE to the Borrower for
the immediately preceding four fiscal quarters ending on [FILL IN ENDING DATE
FOR FISCAL QUARTER] = ________________
2. Consolidating GAAP EBIT of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]). = ________________
3. The sum of line 1 and line 2 = ________________
4. Interest Expense for the immediately following four fiscal
quarters (beginning on [FILL IN BEGINNING DATE FOR FOLLOWING FOUR FISCAL
QUARTERS]) = ________________
5. The ratio of line 3 to line 4 = ___ : ___
6. The ratio in line 5 is not less than 2.0 to 1.0 for the fiscal
year ending December 31, 1995 (3.0 to 1.0 for each fiscal year thereafter).
SECTION 7.15. MINIMUM FIXED CHARGE COVERAGE.
-----------------------------
1. Available Dividends minus dividends paid by USF RE to the Borrower for
the immediately preceding four fiscal quarters ending on [FILL IN ENDING DATE
FOR FISCAL QUARTER] = ________________
2. Consolidating GAAP EBIT of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
3. The sum of line 1 and line 2 = ________________
4. Fixed Charges for the immediately succeeding four fiscal quarters
(beginning on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
5. The ratio of line 3 to line 4 = ___ : ___
6. The ratio in line 5 is not less than 1.5 to 1.0 for the fiscal year
ending December 31, 1995 (1.7 to 1.0 for each fiscal year thereafter).
-3-
ATTACHMENT 3
to Officer's Certificate
Page 4 of 5
SECTION 7.16. MINIMUM DEBT SERVICE COVERAGE.
-----------------------------
1. Available Dividends of USF RE as of the end of the fiscal quarter
ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ________________
2. Total taxes paid by USF RE to the Borrower pursuant to any
intercorporate tax-sharing agreement for the immediately preceding
four fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
3. Consolidating income before taxes of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four fiscal
quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
4. Total taxes (based on GAAP) paid by the Borrower on a consolidated
basis for the immediately preceding four fiscal quarters (ending on [FILL IN
ENDING DATE FOR FISCAL QUARTER]) = ________________
5. Distributions by Borrower for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]). = ________________
6. The sum of line 1, line 2 and line 3 minus line 4 and line 5 = ________________
7. Total Interest Expense of the Borrower and its Subsidiaries on
a consolidated basis for the immediately succeeding four fiscal quarters
(beginning on [FILL IN THE BEGINNING DATE OF THE NEXT SUCCEEDING QUARTER]) = ________________
8. Total mandatory reductions of Commitment for the succeeding four
fiscal quarters (beginning on [FILL IN THE BEGINNING DATE OF THE NEXT
SUCCEEDING QUARTER]). = ________________
9. The sum of line 7 and line 8 = ________________
10. The ratio of line 6 to line 9 = ___ : ___
11. The ratio in line 10 is not less than 1.5 to 1.0.
SECTION 7.18. RISK-BASED CAPITAL RATIO.
------------------------
1. The Risk-Based Capital Ratio of USF RE as of the end of the
fiscal quarter ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ___ :
2. The ratio in line 1 is not less than 200%
-4-
ATTACHMENT 3
to Officer's Certificate
Page 5 of 5
SECTION 7.19. MINIMUM CREDIT RATINGS.
----------------------
1. The A.M. Best Rating of USF RE = ________________
2. The rating in line 1 is not less than "A-".
-5-
EXHIBIT D
(Description of Opinion of California Counsel to Borrower)
The opinion of ▇.▇. ▇▇▇▇, Professional Law Corporation, counsel to the
Borrower, which is called for by Section 4.1(i) of the Agreement, shall be dated
the Closing Date and addressed to the Bank, and shall be in form and substance
satisfactory to the Bank, and shall be to the effect that:
1. The Borrower, and each of its Subsidiaries (excluding USF RE INSURANCE
COMPANY), is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority (a) to own its assets and to transact the business
in which it is now engaged and (b) with respect to the Borrower (i) to enter
into and perform the Credit Agreement and the Pledge Agreement, (ii) to issue
and deliver the Revolving Note, (iii) to execute and deliver the documents and
certificates delivered in connection with the Credit Agreement, the Revolving
Note and the Pledge Agreement and (iv) to carry out the transactions
contemplated by the Credit Agreement, the Revolving Note and the Pledge
Agreement.
2. The Borrower and each of its Subsidiaries are each duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required, except where the failure
to be so qualified would not have a material adverse effect on the financial
condition, operations, Properties, business or prospects of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under the Credit Agreement, the Pledge Agreement or the Revolving
Note. The Borrower is the record and beneficial owner of all of the issued and
outstanding shares of capital stock of USF RE INSURANCE COMPANY, USBENEFITS
Insurance Services, Inc. and the other Subsidiaries, free and clear of any Lien,
and all such shares have been duly issued and are fully paid and non-assessable.
The certificates and/or other instruments or writings pledged to you and being
delivered to you pursuant to the Pledge Agreement represent all of the issued
and outstanding shares of capital stock of USF RE INSURANCE COMPANY.
3. The Credit Agreement, the Pledge Agreement and the Revolving Note have
been duly executed and delivered by duly authorized officers of the Borrower and
constitute the legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally and by general
principles of equity.
4. The execution, delivery and performance by the Borrower of the Credit
Agreement, the Pledge Agreement and the Revolving Note have been duly authorized
by all necessary corporate action and do not and will not: (a) require any
consent or approval of the shareholders of the Borrower; (b) violate any
provisions of the articles of incorporation or by-laws of the Borrower; (c)
violate any provision of any law, rule or regulation (including without
limitation, Regulation U and X of the Board of Governors of the Federal Reserve
System) or, to our knowledge, after due inquiry, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to and binding upon the Borrower or any of its Subsidiaries; (d)
result in a breach of or constitute a default or require any consent under any
loan or credit agreement or any other agreement, mortgage, indenture, lease or
instrument known to us, after due inquiry, to which the Borrower or any
Subsidiary is a party or by which the Properties of the Borrower or any of its
Subsidiaries may be bound or affected; or (e) result in, or require, the
creation or imposition of any Lien upon or with respect to any of the Properties
now owned or hereafter acquired by the Borrower or any of its Subsidiaries,
except as created by the Pledge Agreement.
5. To the best of our knowledge, based on our inquiry of the President
of the Borrower and our knowledge of those matters as to which this firm has
been engaged by the Borrower for legal consultation or representation, except as
described in Schedule 5.4 to the Credit Agreement, there are no actions, suits
or proceedings or investigations (other than routine examinations performed by
insurance regulatory authorities) pending or threatened against or affecting the
Borrower or any of its Subsidiaries, or any Property of any of them before any
court, governmental agency or arbitrator, which if determined adversely to the
Borrower or any of its Subsidiaries would in any one case or in the aggregate,
materially adversely affect the financial condition, operations, Properties,
business or prospects of the Borrower and its Subsidiaries, taken as a whole, or
the ability of the Borrower to perform its obligations under the Credit
Agreement, the Pledge Agreement or the Revolving Note.
6. Neither the Borrower nor any of its Subsidiaries is subject to
regulation under the Investment Company Act of 1940, as amended, or any statute
or regulation limiting its ability to incur indebtedness for money borrowed as
contemplated by the Credit Agreement.
7. No authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, or any other Person under
any law, act, rule, regulation or otherwise, including without limitation the
California Insurance Holding Company System Regulatory Act, as amended (the
"Act") and the California Insurance Code (the "Code"), is required to authorize,
or is required in connection with the execution, delivery and performance by the
Borrower of, or the legality, validity, binding effect or enforceability of, the
Credit Agreement, the Pledge Agreement or the Revolving Note, except the
authorizations, consents, approvals, orders,
licenses or permits described in Schedule 5.15 of the Credit Agreement which
have been obtained and are in full force and effect.
8. The utilization by the Borrower of the proceeds of a Borrowing to
contribute to the statutory surplus of USF RE INSURANCE COMPANY does not require
the further approval, consent or authorization of, or any registration or
filing, with the California Department of Insurance whether under the Act, the
Code or otherwise.
9. The Pledge Agreement creates for the benefit of the holder of the
Revolving Note a valid security interest in the Pledged Collateral (as defined
in the Pledge Agreement) by such Holder, such security interest will be duly
perfected and no other action is necessary to effect or preserve such security
interest (assuming the Pledged Shares are at all times in your possession)
except that it may be advisable to file duly executed financing statements in
the forms attached as Schedule A hereto in the jurisdiction in which the
Borrower's chief executive office is located and thereafter to file continuation
statements for such financing statements within six months prior to the
expiration of five years following the date of original filing.
The opinions expressed herein are limited to the laws of the State of
California and the federal laws of the United States of America.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person or entity without our consent.
-3-
EXHIBIT E
(Description of Opinion of Massachusetts Insurance Counsel to Borrower)
The opinion of ▇▇▇▇▇▇ & Dodge, Massachusetts insurance counsel to the
Borrower, which is called for by Section 4.1(k) of the Agreement, shall be dated
the Closing Date and addressed to the Bank, and shall be in form and substance
satisfactory to the Bank, and shall be to the effect that:
1. The execution, delivery and performance by the Borrower of the Credit
Agreement, the Pledge Agreement and the Revolving Note do not and will not
violate any provision of any law, rule or regulation or, to our knowledge, after
due inquiry, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to and binding upon the Borrower or any
of its Subsidiaries.
2. No authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, or any other Person under
any law, act, rule, regulation or otherwise, including without limitation the
[MASSACHUSETTS INSURANCE CODE (THE "CODE")] or [ANY APPLICABLE MASSACHUSETTS
HOLDING COMPANY ACT (THE "ACT")], is required to authorize, or is required in
connection with the execution, delivery and performance by the Borrower of, or
the legality, validity, binding effect or enforceability of, the Credit
Agreement, the Pledge Agreement or the Revolving Note.
3. The utilization by the Borrower of the proceeds of a Borrowing to
contribute to the statutory surplus of USF RE INSURANCE COMPANY does not require
the prior approval, consent or authorization of, or any registration or filing,
with the Massachusetts Department of Insurance whether under the Code, the Act
or otherwise.
4. USF RE INSURANCE COMPANY is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own its assets and to
transact the business in which it is now engaged.
The opinions expressed herein are limited to the laws of the Commonwealth
of Massachusetts.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person or entity without our consent.
EXHIBIT F
PLEDGE AGREEMENT
----------------
This PLEDGE AGREEMENT, dated as of December 20, 1994, is between US
FACILITIES CORPORATION, a Delaware corporation ("Pledgor"), and SHAWMUT BANK
CONNECTICUT, N.A., a national banking association ("Pledgee").
RECITALS:
---------
1. Pledgor owns, on and as of the date on which this Pledge Agreement is
executed and delivered, 100% of the issued and outstanding shares of the capital
stock of USF RE INSURANCE COMPANY, a Massachusetts corporation, all of which
shares (including any certificates and/or other tangible evidences thereof) are
more specifically described in Attachment A hereto.
------------
2. Pursuant to the Credit Agreement dated as of December 20, 1994 between
Pledgor and Pledgee (said Credit Agreement as currently in effect and as from
time to time amended, modified or supplemented being herein called the
"Financing Agreement"), Pledgee has agreed to make certain revolving loans to
Pledgor subject to certain conditions.
3. Pledgee is willing to extend such financing, but only on the condition,
among others, that Pledgor shall first have executed and delivered to Pledgee
this Pledge Agreement.
NOW, THEREFORE, in consideration of such financing and for other good and
valuable consideration, receipt of which is hereby acknowledged, Pledgor and
Pledgee agree as follows:
1. Pledge and Delivery. (a) To secure the prompt and complete payment and
-------------------
performance when due of the Obligations (as defined in Section 1(b) hereof),
Pledgor hereby pledges, assigns, delivers and transfers to Pledgee, and grants
Pledgee a continuing security interest in, all of the following property and
rights and interests in property (all such property, rights and interests being
hereinafter collectively called the "Pledged Collateral"):
(i) all issued and outstanding shares of the capital stock of USF RE
INSURANCE COMPANY described in Attachment A hereto, and any additional shares of
------------
the capital stock of any class or series of USF RE INSURANCE COMPANY which
Pledgor may at any time and from time to time hereafter purchase or otherwise
acquire, together with the
certificates and/or other instruments or writings representing them (such
shares, certificates and other writings being hereinafter collectively called
the "Pledged Shares");
(ii) (A) all shares and other securities and all warrants, rights and
options to acquire Pledged Shares (such shares, securities, warrants, rights and
options together with the certificates and/or other instruments or writings
representing them being hereinafter collectively called the "Additional Pledged
Securities") and (B) all money and other property, at any time and from time to
time received or receivable by or distributed or distributable to Pledgor from
the issuer of any or all of the Pledged Shares in exchange or substitution for
or otherwise in respect of any or all of the Pledged Shares or earlier-issued
Additional Pledged Securities (whether in the ordinary course of such issuer's
business or representing or resulting from cash or stock dividends, stock splits
or reclassifications, the recapitalization, reorganization, merger,
consolidation, disposition of assets, liquidation or dissolution of such issuer,
the exercise by Pledgor of warrants, rights or options, or any other action or
cause); and
(iii) all proceeds of any or all of the foregoing.
(b) As used herein, the term "Obligations" shall mean all indebtedness,
liabilities and obligations of any kind of Pledgor to Pledgee (whether directly
as principal or maker or indirectly as guarantor, surety, endorser or
otherwise), now or hereafter existing, due or to become due, howsoever incurred,
arising or evidenced, whether of principal or interest or payment or performance
under the Financing Agreement.
(c) Prior to or simultaneously with the execution and delivery hereof by
Pledgee, Pledgor shall have delivered to Pledgee, and Pledgee by written receipt
to Pledgor shall acknowledge its prior receipt of, the certificate(s) and/or
other instruments and documents evidencing all of the Pledged Shares, Additional
Pledged Securities and all other items of the Pledged Collateral then owned by
Pledgor. Pledgor agrees that it shall immediately deliver to Pledgee any and
all of the Pledged Shares, Additional Pledged Securities and other Pledged
Collateral (including any and all certificates and/or other instruments or
documents representing each item thereof) which it acquires in any way at any
time after such execution and delivery. Upon delivery to Pledgee, each item of
the Pledged Collateral shall be accompanied by, as appropriate, (i) undated,
duly executed stock powers endorsed by Pledgor either in blank or to Pledgee in
a manner which Pledgee deems satisfactory, and/or (ii) such other instruments or
documents as Pledgee shall reasonably request.
2. Pledgor's Representations, Warranties and Covenants. (a) Pledgor
---------------------------------------------------
represents and warrants that: (i) Pledgor has the right, power and authority to
execute, deliver and perform this Pledge Agreement and to pledge, assign,
deliver, transfer and grant a security interest in the Pledged Collateral; (ii)
this Pledge Agreement constitutes the legal, valid and binding obligation of
Pledgor, enforceable against Pledgor in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or
-3-
limiting creditors' rights generally and subject to the availability of
equitable remedies and any limitation that may restrict Pledgee from selling,
voting or exercising control over USF RE INSURANCE COMPANY without obtaining
approval of the Insurance Commissioner; (iii) Pledgor has good title to all of
the Pledged Shares and is the legal record and beneficial owner of each of the
Pledged Shares (and will have good title to and be the legal record and
beneficial owner of each other item of Pledged Collateral, including any
Additional Pledged Securities), free and clear of all encumbrances except
Pledgee's security interest hereunder; (iv) each of the Pledged Shares and
Additional Pledged Securities is, or will be when acquired by Pledgor and
pledged hereunder, duly and validly issued and fully paid and non-assessable,
and there are no restrictions on the transfer of any thereof other than such
restrictions as appear on the certificates or other instruments or writings
representing them, or as are referred to in clause (ii) above or otherwise may
be imposed under applicable law; (v) no action other than the delivery of each
item of the Pledged Collateral to, and its continued possession by, Pledgee or
any of its agents or nominees is necessary to maintain a perfected, first-
priority security interest in such item in favor of Pledgee; and (vi) no
authorizations, approvals or consents of, and no filings or registrations with,
any governmental or regulatory authority or agency are necessary for the
execution, delivery or performance by the Pledgor of this Agreement or for the
validity or enforceability hereof except as are referred to in clause (ii)
above.
(b) Pledgor covenants and agrees that it will at its expense (i) defend
both its own rights and interests and Pledgee's rights and security interest in
and to the Pledged Collateral against the claims and demands of all other
persons and (ii) execute and deliver to Pledgee such further conveyances,
agreements, assignments, instruments and other writings, and take such further
action, as Pledgee may request in order to obtain the full benefit of this
Pledge Agreement, the Pledged Collateral, and the rights, powers and remedies
granted to Pledgee hereunder. Pledgor further covenants and agrees that until
all Obligations have been satisfied and this Pledge Agreement has been
terminated, Pledgor will not without Pledgee's prior written consent sell,
assign, transfer, exchange or otherwise temporarily or permanently dispose of
any item of the Pledged Collateral, or offer or contract to do so, and will not
without such consent create, incur, assume or permit to exist any security
interest, pledge, claim or other charge or encumbrance on or with respect to any
such item other than the security interest granted to Pledgee hereunder.
3. Names in which Pledged Shares and Additional Pledged Securities May Be
----------------------------------------------------------------------
Registered. Subject to any required approval of the California Insurance
----------
Department or the Massachusetts Division of Insurance, at any time and from time
to time during the term of this Pledge Agreement, whether or not a Pledgor
Default (as defined in Section 9 hereof) is then continuing, Pledgee shall be
entitled to hold any or all of the Pledged Shares and Additional Pledged
Securities in its own name, the name(s) of one or more of its nominees or the
name of Pledgor endorsed or assigned in blank or in favor of Pledgee. With
respect to any of the Pledged Shares and/or Additional Pledged Securities which
Pledgee wishes to hold in its own name or the name of any nominee in accordance
with this Section 3, Pledgee (acting in its own name and
-4-
capacity or as Pledgor's attorney-in-fact pursuant to the power of attorney
granted to Pledgee in Section 5 hereof) may have such Pledged Shares and
Additional Pledged Securities registered accordingly on the books of the
issuer(s) thereof, and Pledgor shall cooperate fully with Pledgee in causing
such issuer(s) to effect such transfer and registration.
4. Voting Rights; Dividends, Etc. (a) So long as no Pledgor Default
------------------------------
shall have occurred and be continuing:
(i) Pledgor shall be entitled to exercise any and all voting and/or
consensual rights and powers accruing to an owner of the Pledged Shares and
Additional Pledged Securities for any purpose not inconsistent with (A) the
provisions of this Pledge Agreement and the Financing Agreement and applicable
insurance and other law and (B) the preservation of the value of and Pledgee's
security interest in the Pledged Collateral;
(ii) Pledgor shall be entitled to receive and retain all cash
dividends, interest and other cash distributions payable in respect of the
Pledged Collateral to the extent that such distributions are charged to, and as
of the date of payment thereof do not exceed, the retained earnings of the
issuer or other person making such distribution and do not exceed any
limitations imposed by the California Insurance Holding Company System
Regulatory Act, the California Insurance Code or the Massachusetts Insurance
Code; and
(iii) If any or all of the Pledged Shares and Additional Pledged
Securities shall have been registered in the name(s) of Pledgee and/or any of
its nominees, Pledgee shall execute and deliver to Pledgor, or cause to be so
executed and delivered, all such proxies, limited powers of attorney, dividend
orders and such other instruments and writings as Pledgor may reasonably request
to enable it, subject to the provisions of Section 4(b) hereof, to exercise the
rights and powers and to receive the distributions to which it is entitled under
the provisions of paragraphs (i) and (ii) of this Section 4(a).
(b) Upon the occurrence and during the continuance of a Pledgor Default,
all rights of Pledgor to exercise the voting and consensual rights and powers
described in paragraph (i) of Section 4(a) hereof and to receive the dividends,
interest and other cash distributions described in paragraph (ii) of such
Section shall cease, and all such rights shall thereupon become vested in
Pledgee; provided, however, that Pledgor may thereafter continue to exercise any
-------- -------
and all such voting and consensual rights and powers until such time as Pledgee
shall notify Pledgor in writing that Pledgee intends to assume and exercise the
same; and provided further that Pledgee shall not sell, vote or in any manner
-------- -------
exercise control over USF RE Insurance Company without obtaining, to the extent
required by law, including the provisions of Section 1215.2 of the California
Insurance Code, the prior approval (including any hearing required by law) of
the Massachusetts Division of Insurance and the California Department of
Insurance.
-5-
(c) Upon the occurrence and during the continuance of a Pledgor Default and
subject to compliance with any applicable rules and regulations of the
Massachusetts Division of Insurance and the California Department of Insurance,
including the provisions of Section 1215.2 of the California Insurance Code,
Pledgee may, in its own name and capacity or as Pledgor's attorney-in-fact,
collect, receive, endorse and deposit all Additional Pledged Securities, money,
cash proceeds, instruments and any and all other property which is or may at any
time become payable in respect of any or all of the Pledged Collateral and which
Pledgee is or may become entitled to receive under subsection (a) or (b) of this
Section 4. All such property so received by Pledgee may be retained by Pledgee
as additional Pledged Collateral, and (i) all money and other cash proceeds so
received may be applied by Pledgee to payment of the Obligations in such order
as Pledgee may elect, whether or not a Pledgor Default shall then be continuing,
and (ii) during the continuance of a Pledgor Default, all other property so
received may be sold or otherwise disposed of by Pledgee as provided in Section
10 hereof and the proceeds thereof applied as also provided in such Section.
Any and all money and other property received by Pledgor contrary to the
provisions of this Section 4 shall be held by Pledgor in trust for Pledgee,
shall be segregated by Pledgor from Pledgor's other funds and property and shall
promptly be delivered to Pledgee in exactly the form received by Pledgor, except
for any necessary endorsements.
5. Pledgee Appointed as Pledgor's Attorney-in-Fact. Pledgor hereby
-----------------------------------------------
appoints Pledgee as Pledgor's attorney-in-fact with full power in Pledgor's
place and stead, in Pledgor's name or its own name and at Pledgor's expense, to
execute, endorse and deliver any and all agreements, assignments, pledges,
instruments and any other writings, and to take any and all other actions, which
Pledgee may deem necessary or desirable to carry out the terms and effect the
purposes of this Pledge Agreement and to exercise fully its rights and remedies
hereunder. Pledgee may delegate any or all of such power to any of its
officers, directors, employees, agents, nominees, shareholders and other
representatives (hereinafter collectively called "Representatives") and to have
any such Representative(s) exercise any such delegated power as substitute(s)
for Pledgee. Pledgor hereby ratifies all that Pledgee and all such
Representatives shall lawfully do or cause to be done under this power of
attorney, which power is coupled with an interest and shall be irrevocable until
all Obligations have been satisfied and this Pledge Agreement has been
terminated.
6. Pledgee's Rights to Perform for Pledgor. If Pledgor shall at any time
---------------------------------------
fail to perform or comply with any of its covenants and agreements hereunder,
Pledgee may (but shall not be required or obligated to) take such action, in its
own name and capacity or as Pledgor's attorney-in-fact, as Pledgee shall deem
necessary or desirable to effect such performance or compliance.
7. Reasonable Care of Pledged Collateral. Pledgee shall be deemed to have
-------------------------------------
used reasonable care in the custody and preservation of the Pledged Collateral
in its possession to the extent it accords such Pledged Collateral treatment
which is substantially equal to that which Pledgee accords its own property of
like kind; provided, however, that Pledgee shall have no
-6-
obligation, regardless of whether it takes any such action with respect to its
own property, (i) to ascertain or take action with respect to calls, tenders,
conversions, exchanges, maturities or other matters involving or affecting any
item(s) of such Pledged Collateral (whether or not Pledgee has actual or
constructive knowledge of any such matters), unless reasonably requested by
Pledgor to do so, or (ii) to take action to preserve rights against prior or
other parties.
8. Limitation of Pledgee's Liability; Reimbursement of Expenses and
----------------------------------------------------------------
Indemnification. (a) Pledgor agrees that Pledgee shall have no obligation to
---------------
take, or refrain from taking, any action with respect to the Pledged Collateral
or Pledgor's rights and interests therein except with respect to (i) the
preservation and return of the Pledged Collateral in its possession as and to
the extent provided, respectively, in Sections 7 and 14 hereof and (ii) the
execution and delivery to Pledgor of certain instruments and other writings as
and when required under Section 4(a)(iii) hereof and other limitations imposed
by law. Pledgor further agrees that neither Pledgee nor any of its
Representatives shall have any liability to Pledgor, or to any person claiming
rights against Pledgee by, through or under Pledgor, in any way arising out of
or in connection with Pledgee's or any such Representative's administration of
this Pledge Agreement or its exercise of any of its rights, power and remedies
hereunder except for (i) Pledgee's or any such Representative's failure to take
as and when required any of the actions referenced in the first sentence of this
Section 8(a) or to account to Pledgor for those amounts of money and other
property -- and only for those amounts -- which it actually receives in
connection with such administration or exercise and which it is required to pay
over to Pledgor or apply to the Obligations under any other provision hereof,
(ii) its failure to exercise reasonable care as and to the extent required in
Section 7 hereof or (iii) its negligence or willful misconduct.
(b) Pledgor shall pay or reimburse Pledgee on demand for all costs and
expenses (including without limitation reasonable attorneys' fees and legal
expenses) paid or incurred by Pledgee in connection with (i) the administration
and any amendment of this Pledge Agreement, (ii) the custody or preservation of
the Pledged Collateral and any authorized collection from, disposition of or
other realization on any item(s) thereof, and (iii) the exercise and enforcement
of any of Pledgee's rights, powers and remedies hereunder, including without
limitation its right to perform Pledgor's covenants and agreements hereunder to
the extent Pledgor fails to do so. Pledgor further agrees to indemnify, defend
and hold harmless Pledgee, its Representatives, successors and assigns from and
against any and all liabilities, claims, actions, losses, damages, taxes,
penalties, fines, costs and expenses (including reasonable attorneys' fees and
legal expenses) which in any way arise out of or in connection with any of the
actions or matters with respect to which Pledgor has a payment or reimbursement
obligation under this Section; provided, however, that Pledgor shall have no
-------- -------
obligation to indemnify Pledgee or any such Representative, successor or assign
against any liabilities, claims, etc. resulting from such party's negligence or
willful misconduct or its failure to exercise reasonable care as and to the
extent required in Section 7 hereof. Until any reimbursement of costs or
expenses or any indemnity payment required under this Section is received by
Pledgee in cash or immediately available funds, the amount thereof shall bear
interest at the rate specified in the Financing Agreement for
-7-
delinquent payments, and such amount and such interest shall constitute part of
the Obligations secured by the Pledged Collateral.
9. Pledgor Defaults. The following shall constitute a "Pledgor Default":
----------------
(i) Pledgor fails to make payment when due or demanded, as applicable, on or
with respect to any indebtedness, obligation or liability which is then part of
the Obligations, or fails to perform or comply with any of its covenants or
agreements hereunder; (ii) any representation or warranty made by Pledgor herein
or in any statement, report or certificate furnished to Pledgee by Pledgor
hereunder proves to have been false or misleading in any material respect; or
(iii) an "Event of Default" occurs under the Financing Agreement.
10. Remedies. (a) If a Pledgor Default has occurred and is continuing,
--------
Pledgee may at any time and from time to time exercise any and all rights and
remedies available to it (i) hereunder and under the Financing Agreement and any
other agreement or instrument then in effect between Pledgor and Pledgee and
relating to the Obligations, including without limitation those rights and
remedies set out in subsections (b) through (f) of this Section 10, and (ii) as
a secured party under the Uniform Commercial Code as then in effect in the State
of Connecticut (the "Code") and under any other applicable law or rule of law or
equity. Should Pledgee elect to proceed by action at law or in equity to
foreclose its security interest in and sell any or all of the Pledged
Collateral, Pledgor waives (to the extent permitted by law) any rights it may
then have in connection therewith to require Pledgee to post bonds, sureties or
collateral security or to demand possession of any such Pledged Collateral
pending judgment therein.
(b) If a Pledgor default has occurred and is continuing, to the extent
permitted by the Insurance Commissioner and by applicable federal and state
securities laws, Pledgee may sell, assign, transfer, endorse and deliver all or,
from time to time any part, of the Pledged Collateral at public or private sale,
over the counter or at any broker's board or securities exchange, for cash, on
credit or in exchange for other property, for immediate or future delivery,
without advertisement or notice (except as provided in this subsection), and for
such price and on such terms as Pledgee deems appropriate, provided only that
--------
all aspects of any such disposition are commercially reasonable within the
requirements of Section 42a-9-504 of the Code, as defined and supplemented by
the standards and agreements set forth herein. Pledgor agrees that to the
extent notice of the time and place of any such public sale, or of the time
after which Pledgee intends to make any such private sale or other disposition,
is required under the Code, such notice shall be deemed commercially reasonable
if transmitted by any of the means described in the Financing Agreement not less
than 15 days prior thereto. Pledgee shall not be obligated to effect any sale
of any or all of the Pledged Collateral, whether or not notice thereof has been
given, and may adjourn any public or private sale from time to time by
announcement at the time and place fixed for such sale, and such sale may be
held without further notice at the time and place to which it was so adjourned.
-8-
(c) At any such private or public sale, to the extent permitted by the
Insurance Commissioner, Pledgee shall be entitled to bid for and/or purchase the
Pledged Collateral then being sold and may pay the price thereof by credit
against the Obligations then outstanding. Any purchaser of any item(s) of the
Pledged Collateral (including Pledgee) shall take such item(s) free from any
right or claim of Pledgor, and Pledgor hereby waives, to the extent permitted by
the Code and other applicable law, all rights of redemption and/or to any stay,
exemption or appraisal which Pledgor now has or may hereafter acquire.
(d) Pledgor agrees and acknowledges that requiring the issuer(s) of the
securities included in the Pledged Collateral to register such securities under
applicable provisions of federal and state securities laws would not be
practicable and therefore could not be deemed commercially reasonable. Pledgor
further agrees and acknowledges that in order to comply with applicable federal
and state securities laws without effecting such registration, Pledgee may be
required: (i) to sell or otherwise dispose of any or all of the Pledged
Collateral at one or more private rather than public sales and (ii) to limit the
prospective purchasers at such sale(s) to persons who will represent and agree
that they are purchasing the securities they intend to acquire for their own
account for investment and not with a view to the distribution or sale thereof,
and who will be compelled to accept stringent restrictions on their ability to
dispose of such securities. Accordingly, Pledgor agrees that: (i) Pledgee
shall not incur any liability to Pledgor by reason of the fact that the price
obtained for any or all the Pledged Collateral at such private sale(s) to
investors restricted as provided above may be less than the price which might be
obtained therefor at a public sale or unrestricted private sale and (iii) any
and all private sales shall be deemed commercially reasonable even if (A) the
amount received is less than the then-outstanding amount of the Obligations
and/or (B) even if Pledgee accepts the first offer received or does not offer
all or any part of the Pledged Collateral to more than one prospective
purchaser, unless the sale in question is conducted in bad faith or in a manner
manifestly unreasonable for sales of that type.
(e) In case of any sale by the Pledgee of any item(s) of the Pledged
Collateral on credit or for future delivery, such item(s) may be retained by the
Pledgee until the selling price is paid by the purchaser(s) thereof, but the
Pledgee shall incur no liability in case of failure of the purchaser to take up
and pay for such item(s). In case of any such failure, such item(s) may be sold
again upon notice, to the extent required by law, as provided in subsection (b)
of this Section 10.
(f) The proceeds of the sale or other disposition of the Pledged Collateral
shall be applied first, to that part of the Obligations consisting of Pledgee's
reasonable expenses (including without limitation reasonable attorneys' fees and
legal expenses) in preparing for disposition and disposing of the Pledged
Collateral and, to the extent not previously reimbursed by Pledgor, in
administering this Pledge Agreement and exercising and enforcing its rights,
powers and remedies hereunder, and second, to the satisfaction of the then
outstanding amount of Pledgor's indebtedness under the Financing Agreement and
of all other Obligations then
-9-
remaining unpaid. Pledgee shall account to Pledgor for any surplus and Pledgor
shall be liable to Pledgee for any deficiency.
11. Amendments, Etc. No provision of this Pledge Agreement may be
----------------
amended, modified, supplemented or waived, and no consent to any departure
therefrom by Pledgor may be given, except by a writing duly executed and
delivered by the parties hereto, and any such amendment, modification,
supplement or waiver shall be effective only as and to the extent provided
therein.
12. Cumulative Remedies; No Waivers by Pledgee. All rights, powers and
------------------------------------------
remedies of Pledgee (i) under this Pledge Agreement and the Financing Agreement
and under any other agreements, instruments and other writings now or hereafter
existing between Pledgor and Pledgee and relating to the Obligations, and (ii)
under the Code and other applicable law, are cumulative and except as otherwise
provided by law or in such agreements may be exercised concurrently or in any
order of succession. Pledgee's failure to exercise or delay in exercising any
of such rights, powers and remedies shall not constitute or imply a waiver
thereof, nor shall Pledgee's single or partial exercise of any such right, power
or remedy preclude its other or further exercise thereof, or the exercise of any
other right, power or remedy. Pledgee's cure of any Pledgor Default shall not
constitute a waiver thereof, and its waiver of one Pledgor Default shall not
constitute a waiver of any subsequent Pledgor Default.
13. Pledgor's Waivers. Pledgor agrees that until the Obligations are paid
-----------------
in full, Pledgee's security interest in the Pledged Collateral shall be absolute
and unconditional regardless of the existence or occurrence of, and expressly
waives any defense or discharge which might otherwise arise from, any of the
following:
(i) any lack of validity or enforceability of this Pledge Agreement,
the Financing Agreement or any other agreement or instrument relating hereto or
thereto or otherwise relating to the Obligations;
(ii) any change in the time, manner or place of payment of, or in any
other terms of, any or all of the Obligations, or any other amendment or waiver
of, or any consent to departure from, this Pledge Agreement or the Financing
Agreement or any other agreement, instrument or other writing now or hereafter
existing between Pledgor and Pledgee and relating to the Obligations;
(iii) any exchange, release or non-perfection of any other collateral,
or any release, amendment or waiver of, or consent to departure from any
guaranty, for any or all of the Obligations;
-10-
(iv) Pledgee's resort, during the continuation of a Pledgor Default,
to any or all of the Pledged Collateral for payment of all or part of the
Obligations prior to proceeding against any other collateral or any other party
primarily or secondarily liable for payment thereof; or
(v) to the extent permitted by law, any other circumstance which might
otherwise constitute a defense available to, or a discharge of, Pledgor in
respect of the Obligations or this Pledge Agreement.
14. Termination; Release of Pledged Collateral. This Agreement and the
------------------------------------------
security interest granted hereunder shall terminate on the date on which all
Obligations have been fully satisfied. Pledgee shall thereupon reassign and
redeliver (or cause to be reassigned and redelivered) to Pledgor or such
person(s) as Pledgor shall designate, against due execution and delivery by
Pledgor or such person(s) of a receipt therefor satisfactory to Pledgee in form
and substance, such items of the Pledged Collateral (if any) as are then held by
Pledgee or its Representatives, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse to or
warranty by Pledgee or any such Representative and at the expense of Pledgor.
15. Notices. All notices, requests, directions, consents, waivers and
-------
other communications hereunder shall be in writing and shall be transmitted by
the means and to the addresses from time to time specified in the Financing
Agreement.
16. Binding Agreement; Assignment. This Agreement shall be binding upon
-----------------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that Pledgor shall not assign or otherwise
-------- -------
transfer any of its obligations, rights or interests hereunder without the prior
written consent of Pledgee.
17. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of Connecticut, except to the
extent that the remedies hereunder in respect of the Pledged Collateral are
governed by the laws of the State of California and the Commonwealth of
Massachusetts. Wherever possible each provision of this Pledge Agreement shall
be construed in such manner as to be valid and enforceable under applicable law,
but if any provision hereof shall be deemed invalid or unenforceable to any
extent in any jurisdiction, such provision shall be ineffective only to the
extent of such invalidity or unenforceability without invalidating or rendering
unenforceable the remainder of such provision or any of the other provisions
hereof, and any such invalidity or unenforceability in one jurisdiction shall
not render such provision ineffective in any other jurisdiction.
18. Titles; Defined Terms; Counterparts. Section titles are for
-----------------------------------
convenience only and shall not define, limit, amplify, supplement or otherwise
modify or affect the substance or intent of this Pledge Agreement or any
provision hereof. Initial capitalized terms not defined herein shall have the
meanings ascribed to them in the Financing Agreement. This Pledge Agreement may
be executed in two or more counterparts, each of which shall when executed by
both parties
-11-
be deemed to be an original but all of which together shall constitute one and
the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
IN WITNESS WHEREOF, each of the parties hereto has caused this Pledge
Agreement to be duly executed by its respective authorized officer as of the
date first above written.
US FACILITIES CORPORATION
By:_________________________________________
Print Name:
Print Title:
SHAWMUT BANK CONNECTICUT, N.A.
By:_________________________________________
Print Name:
Print Title:
-13-
ATTACHMENT A
ISSUED AND OUTSTANDING SHARES
OF CAPITAL STOCK
----------------
Name No. of Shares
---- -------------
USF RE INSURANCE COMPANY 50,000
EXHIBIT G
FORM OF SUBORDINATED DEBT PROVISIONS
The holder hereof by acceptance of this instrument agrees that the
indebtedness evidenced by this instrument, and any renewals or extensions
hereof, shall at all times and in all respects be subordinate and junior in
right of payment to (i) the indebtedness of the Borrower evidenced by the
Revolving Note dated October 26, 1998 of the Borrower in the aggregate principal
amount of $50,000,000 issued under and pursuant to the Borrower's Credit
Agreement dated December 20, 1994, as amended, (ii) any other indebtedness for
money borrowed of the Borrower not expressed in the agreement or other
instrument which created such indebtedness to be subordinated or junior to any
other indebtedness of the Borrower and (iii) any and all extensions or renewals
of any such indebtedness in whole or in part. The indebtedness described in the
preceding clauses (i), (ii), and (iii) is hereinafter sometimes referred to as
"Superior Indebtedness". Without limiting the effect of the foregoing, the
holder hereof agrees as follows:
(1) in the event of any insolvency or bankruptcy proceedings, and any
receivership, liquidation, reorganization, arrangement or other
similar proceedings in connection therewith, relative to the Borrower
or to its creditors, as such, or to its property, and in the event of
any proceedings for voluntary liquidation, dissolution or other
winding-up of the Borrower, whether or not involving insolvency or
bankruptcy, then the holders of Superior Indebtedness shall be
entitled to receive payment in full of all principal, premium and
interest on all Superior Indebtedness before the holders of these
Subordinated Notes are entitled to receive any payment on account of
principal, premium or interest on these Subordinated Notes, and to
that end (but subject to the power of a court of competent
jurisdiction to make other equitable provisions reflecting the rights
conferred in these Subordinated Notes upon the Superior Indebtedness
and the holders thereof with respect to the subordinated indebtedness
represented by these Subordinated Notes and the holders thereof by a
lawful plan of reorganization under applicable bankruptcy law) the
holders of Superior Indebtedness shall be entitled to receive for
application in payment thereof any payment or distribution of any kind
or character, whether in cash or property or securities, which may be
payable or deliverable in any such proceedings in respect of these
Subordinated Notes, except securities which are subordinate and junior
in right of payment to the payment of all Superior Indebtedness then
outstanding;
(2) in the event that any of these Subordinated Notes or portion thereof
shall become due and payable before their expressed maturity for any
reason other than the mere passage of time (under circumstances when
the provisions of the foregoing paragraph (1) or the following
paragraph (3) shall not be applicable), the holders of the Superior
Indebtedness outstanding at the time such Subordinated Notes so
become due and payable because of such reason shall be entitled to
receive payment in full of all principal, premium and interest on all
Superior Indebtedness before the holders of these Subordinated Notes
are entitled to receive any payment on account of the principal,
premium or interest on the Subordinated Notes; provided, that nothing
herein shall prevent the holder of any Subordinated Note from seeking
any remedy allowed at law or at equity so long as any judgment or
decree obtained thereby makes provision for enforcing this clause;
(3) in the event that any default shall occur and be continuing with
respect to any Superior Indebtedness permitting the holders of such
Superior Indebtedness to accelerate the maturity thereof, no payment
or prepayment of any principal, premium or interest on account of and
no repurchase, redemption or other retirement (whether at the option
of the holder or otherwise) of these Subordinated Notes shall be made
during the continuance of such default; and
(4) in the event that, notwithstanding the foregoing paragraphs (1), (2)
and (3), any payment or distribution of assets of the Borrower of any
kind or character (whether in cash, property or securities) which is
prohibited by any one or more of such paragraphs shall be received by
the holders of these Subordinated Notes before all Superior
Indebtedness is paid in full, or provision made for such payment in
accordance with its terms, such payment or distribution shall be held
in trust for the benefit of, and shall be paid over or delivered to,
the holders of such Superior Indebtedness or their representative or
representatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing any of such Superior
Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Superior Indebtedness
remaining unpaid to the extent necessary to pay such Superior
Indebtedness in full in accordance with its terms, after giving effect
to any concurrent payment or distribution to the holders of such
Superior Indebtedness.
The Borrower agrees that if any default shall occur with respect to any
Superior Indebtedness permitting the holders of such Superior Indebtedness to
accelerate the maturity thereof, the Borrower will give prompt notice in writing
of such happening to all known holders of Superior Indebtedness and shall
certify to each such holder the names of the holders of the two largest
principal amounts of the Subordinated Notes outstanding [or "the name of the
Trustee" in the case of subordinated debt issued under a trust indenture] and
the names of the holders of the two largest principal amounts of each other
outstanding series of subordinated debt of the Borrower. The Borrower,
forthwith upon receipt of any notice with respect to a claimed default on
Superior Indebtedness received by it pursuant to this Section, shall send a copy
thereof by registered mail or by telegram to each holder of a Subordinated Note
at the time outstanding [or "to the Trustee" in the case of subordinated debt
issued under a trust indenture].
-2-
The Borrower agrees, for the benefit of the holders of Superior
Indebtedness, that in the event that any of these Subordinated Notes or portion
thereof shall become due and payable before their expressed maturity for any
reason other than the mere passage of time (a) the Borrower will give prompt
notice in writing of such happening to all known holders of Superior
Indebtedness and (b) any and all Superior Indebtedness shall forthwith become
immediately due and payable upon demand by the holder thereof, regardless of the
expressed maturity thereof.
No present or future holder of Superior Indebtedness shall be prejudiced in
its right to enforce subordination of the Subordinated Notes by any act or
failure to act on the part of the Borrower. The provisions of this Section are
solely for the purpose of defining the relative rights of the holders of
Superior Indebtedness on the one hand and the holders of the Subordinated Notes
on the other hand, and nothing herein shall impair as between the Borrower and
the holder of any Subordinated Note the obligation of the Borrower, which is
unconditional and absolute, to pay to the holders thereof the principal,
premium, if any, and interest thereon in accordance with its terms, nor shall
anything herein prevent the holder of a Subordinated Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon default
hereunder, subject to the rights, if any, under this Section of holders of
Superior Indebtedness to receive cash, property or securities, otherwise payable
or deliverable to holders of the Subordinated Notes.
-3-
EXHIBIT B TO FOURTH AMENDMENT
----------------------------
OFFICER'S CERTIFICATE
THE CENTRIS GROUP, INC.
October 26 1998
Pursuant to Section 2(e) of the Fourth Amendment dated as of October 26,
1998 between The Centris Group, Inc., formerly known as US Facilities
Corporation (the "Borrower") and Fleet National Bank, formerly known as Shawmut
Bank Connecticut, N.A. and Fleet National Bank of Connecticut (the "Bank"),
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, DO HEREBY CERTIFY on behalf of the Borrower that:
1. I am the duly elected, qualified and acting Chief Financial Officer of
the Borrower; and
2. Attached hereto as Attachment 1 is a true and correct copy of the
consolidated and consolidating SAP and GAAP financial statements of
the Borrower and its Subsidiaries as of the close of the fiscal
[YEAR/QUARTER] ending __________, 199_; and
3. I have reviewed the Fourth Amendment and the Credit Agreement and the
condition and transactions of the Borrower and its Subsidiaries for
the fiscal [YEAR/QUARTER] ending _____, 199_, and to the best of my
knowledge the Borrower has observed and performed all of its covenants
and other agreements, and satisfied every condition contained in the
Fourth Amendment, Credit Agreement and the Revolving Note, and I have
not obtained knowledge of any condition or event which constitutes a
Default or an Event of Default, except as set forth on Attachment 2
attached hereto; and
4. Attached hereto as Attachment 3 is true and correct information (with
detailed calculations) establishing that the Borrower was in
compliance with the covenants set forth in the Credit Agreement during
the fiscal [YEAR/QUARTER] ending __________ ___, 199_.
Except as otherwise defined herein, terms used herein shall have the meanings
set forth in the Credit Agreement, pursuant to which this certificate is
delivered.
IN WITNESS WHEREOF, I have signed this certificate as of the date hereof on
behalf of ___________________.
By:
-----------------------------------------
Print Name:
Title: Chief Financial Officer
ATTACHMENT 1
to
Officer's Certificate
Financial Statements
--------------------
for the period ending
_____________ __, 199_
ATTACHMENT 2
to
Officer's Certificate
Defaults and Events of Default
------------------------------
Note: If a Default or Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action proposed to be taken by
the Borrower with respect thereto as required.
ATTACHMENT 3
to Officer's Certificate
Page 1 of 5
Computations and Information
Showing Compliance with
Sections 7.9 to 7.16, 7.18 and 7.19
of the
Credit Agreement
Except as otherwise defined herein, terms used herein shall have the meanings
set forth in the Credit Agreement.
SECTION 7.9. CAPITAL EXPENDITURES
--------------------
1. Aggregate Capital Expenditures actually made, or committed to be made,
during the fiscal year beginning [FILL IN DATE OF START OF FISCAL YEAR] = ________________
2. Line 1 does not exceed $2,500,000.
SECTION 7.10. MINIMUM STATUTORY SURPLUS
-------------------------
1. Statutory Surplus of USF RE as of the fiscal quarter ending ____ __, 199__ = ________________
2. Positive Statutory Net Income for each fiscal quarter following the
fiscal quarter ended December 31, 1995 was:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
2a. The sum of positive Statutory Net Income for each of the quarters set forth
in Line 2 above = ________________
2b. 75% of line 2a = ________________
3. Contributions to surplus made by Borrower to USF RE during each fiscal
quarter following the fiscal quarter ended December 31, 1995 were:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
3a. The sum of the contributions for each of the quarters
set forth in line 3 above = ________________
4. The sum of $80,000,000 and line 2b and line 3a = ________________
5. Line 1 is not less than line 4.
ATTACHMENT 3
to Officer's Certificate
Page 2 of 5
Section 7.11. MINIMUM CONSOLIDATED GAAP NET WORTH
-----------------------------------
1. Consolidated GAAP Net Worth as of the fiscal quarter ending
______________, 199__. = ________________
2. Consolidated positive net income (as determined in accordance with GAAP)
for each fiscal quarter following the fiscal quarter ended December 31, 1995
was:
[INCLUDE DATA FOR EACH QUARTER, AS APPLICABLE]
2a. The sum of the positive net income for each of the quarters
set forth in Line 2 above = ________________
2b. 50% of line 2a = ________________
3. Paid-in capital resulting from any issuance by the Borrower of its
capital stock = ________________
4. The sum of $75,000,000 and line 2b and line 3 = ________________
5. Line 1 is not less than line 4.
SECTION 7.12. MAXIMUM PREMIUMS TO SURPLUS
---------------------------
1. Aggregate Net Premiums Written by USF RE, USFIC and all other
Insurance Subsidiaries for the immediately preceding four fiscal quarters
(ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
2. Statutory Surplus of USF RE at the end of the fiscal quarter
ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ________________
3. The ratio of line 1 to line 2 = ___ : ___
4. The ratio in line 3 is not greater than 3.0 to 1 at the
end of the first fiscal quarter of each year and 2.0 to 1 at the end
of the second, third and fourth fiscal quarters of each fiscal year.
SECTION 7.13. [Reserved.]
ATTACHMENT 3
to Officer's Certificate
Page 3 of 5
SECTION 7.14. MINIMUM INTEREST COVERAGE.
-------------------------
1. Available Dividends minus dividends paid by USF RE to the Borrower for
the immediately preceding four fiscal quarters ending on [FILL IN ENDING DATE
FOR FISCAL QUARTER] = ________________
2. Consolidating GAAP EBIT of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]). = ________________
3. The sum of line 1 and line 2 = ________________
4. Interest Expense for the immediately following four fiscal
quarters (beginning on [FILL IN BEGINNING DATE FOR FOLLOWING FOUR FISCAL
quarters]) = ________________
5. The ratio of line 3 to line 4 = ___ : ___
6. The ratio in line 5 is not less than 2.0 to 1.0 for the fiscal
year ending December 31, 1995 (3.0 to 1.0 for each fiscal year thereafter).
SECTION 7.15. MINIMUM FIXED CHARGE COVERAGE.
-----------------------------
1. Available Dividends minus dividends paid by USF RE to the Borrower for
the immediately preceding four fiscal quarters ending on [FILL IN ENDING DATE
FOR FISCAL QUARTER] = ________________
2. Consolidating GAAP EBIT of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
3. The sum of line 1 and line 2 = ________________
4. Fixed Charges for the immediately succeeding four fiscal quarters
(beginning on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
5. The ratio of line 3 to line 4 = ___ : ___
6. The ratio in line 5 is not less than 1.5 to 1.0 for the fiscal year
ending December 31, 1995 (1.7 to 1.0 for each fiscal year thereafter).
ATTACHMENT 3
to Officer's Certificate
Page 4 of 5
SECTION 7.16. MINIMUM DEBT SERVICE COVERAGE.
-----------------------------
1. Available Dividends of USF RE as of the end of the fiscal quarter
ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ________________
2. Total taxes paid by USF RE to the Borrower pursuant to any
intercorporate tax-sharing agreement for the immediately preceding
four fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
3. Consolidating income before taxes of the Borrower and Subsidiaries
(except Insurance Subsidiaries) for the immediately preceding four fiscal
quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]) = ________________
4. Total taxes (based on GAAP) paid by the Borrower on a consolidated
basis for the immediately preceding four fiscal quarters (ending on [FILL IN
ENDING DATE FOR FISCAL QUARTER]) = ________________
5. Distributions by Borrower for the immediately preceding four
fiscal quarters (ending on [FILL IN ENDING DATE FOR FISCAL QUARTER]). = ________________
6. The sum of line 1, line 2 and line 3 minus line 4 and line 5 = ________________
7. Total Interest Expense of the Borrower and its Subsidiaries on
a consolidated basis for the immediately succeeding four fiscal quarters
(beginning on [FILL IN THE BEGINNING DATE OF THE NEXT SUCCEEDING QUARTER]) = ________________
8. Total mandatory reductions of Commitment for the succeeding four
fiscal quarters (beginning on [FILL IN THE BEGINNING DATE OF THE NEXT
SUCCEEDING QUARTER]). = ________________
9. The sum of line 7 and line 8 = ________________
10. The ratio of line 6 to line 9 = ___ : ___
11. The ratio in line 10 is not less than 1.5 to 1.0.
SECTION 7.18. RISK-BASED CAPITAL RATIO.
------------------------
1. The Risk-Based Capital Ratio of USF RE as of the end of the
fiscal quarter ending on [FILL IN ENDING DATE FOR FISCAL QUARTER] = ___ : ___
2. The ratio in line 1 is not less than 200%
ATTACHMENT 3
to Officer's Certificate
Page 5 of 5
SECTION 7.19. MINIMUM CREDIT RATINGS.
----------------------
1. The A.M. Best Rating of USF RE = ________________
2. The rating in line 1 is not less than "A-".
EXHIBIT C TO FOURTH AMENDMENT
-----------------------------
(Description of Opinion of California Counsel to Borrower)
The opinion of [▇.▇. ▇▇▇▇, PROFESSIONAL LAW CORPORATION], counsel to the
Borrower, which is called for by Section 2(j) of the Fourth Amendment, shall be
dated the Closing Date and addressed to the Bank, and shall be in form and
substance satisfactory to the Bank, and shall be to the effect that:
1. The Borrower, and each of its Subsidiaries (excluding USF RE INSURANCE
COMPANY), is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite power and authority (a) to own its assets and to transact the business
in which it is now engaged and (b) with respect to the Borrower (i) to enter
into and perform the Fourth Amendment, (ii) to issue and deliver the Revolving
Note, (iii) to execute and deliver the documents and certificates delivered in
connection with the Fourth Amendment and the Revolving Note and (iv) to carry
out the transactions contemplated by the Fourth Amendment and the Revolving
Note.
2. The Borrower and each of its Subsidiaries are each duly qualified as a
foreign corporation and in good standing under the laws of each other
jurisdiction in which such qualification is required, except where the failure
to be so qualified would not have a material adverse effect on the financial
condition, operations, Properties, business or prospects of the Borrower and its
Subsidiaries, taken as a whole, or the ability of the Borrower to perform its
obligations under the Fourth Amendment or the Revolving Note. The Borrower is
the record and beneficial owner of all of the issued and outstanding shares of
capital stock of USF RE INSURANCE COMPANY, USBENEFITS Insurance Services, Inc.
and the other Subsidiaries, free and clear of any Lien, and all such shares have
been duly issued and are fully paid and non-assessable. The certificates and/or
other instruments or writings pledged to you and delivered to you pursuant to
the Pledge Agreement represent all of the issued and outstanding shares of
capital stock of USF RE INSURANCE COMPANY.
3. The Fourth Amendment and the Revolving Note have been duly executed and
delivered by duly authorized officers of the Borrower and constitute the legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms, except to the extent that such
enforcement may be limited by applicable bankruptcy, insolvency and other
similar laws affecting creditors' rights generally and by general principles of
equity.
4. The execution, delivery and performance by the Borrower of the Fourth
Amendment and the Revolving Note have been duly authorized by all necessary
corporate action and do not and will not: (a) require any consent or approval of
the shareholders of the Borrower; (b) violate any provisions of the articles of
incorporation or by-laws of the Borrower; (c) violate any provision of any law,
rule or regulation (including without limitation, Regulation U and X of the
Board of Governors of the Federal Reserve System) or, to our knowledge, after
due inquiry, order, writ, judgment, injunction, decree, determination or award
presently in effect having applicability to and binding upon the Borrower or any
of its Subsidiaries; (d) result in a breach of or constitute a default or
require any consent under any loan or credit agreement or any other agreement,
mortgage, indenture, lease or instrument known to us, after due inquiry, to
which the Borrower or any Subsidiary is a party or by which the Properties of
the Borrower or any of its Subsidiaries may be bound or affected; or (e) result
in, or require, the creation or imposition of any Lien upon or with respect to
any of the Properties now owned or hereafter acquired by the Borrower or any of
its Subsidiaries, except as created by the Pledge Agreement.
5. To the best of our knowledge, based on our inquiry of the President
of the Borrower and our knowledge of those matters as to which this firm has
been engaged by the Borrower for legal consultation or representation, except as
described in Schedule 5.4 to the Credit Agreement, there are no actions, suits
or proceedings or investigations (other than routine examinations performed by
insurance regulatory authorities) pending or threatened against or affecting the
Borrower or any of its Subsidiaries, or any Property of any of them before any
court, governmental agency or arbitrator, which if determined adversely to the
Borrower or any of its Subsidiaries would in any one case or in the aggregate,
materially adversely affect the financial condition, operations, Properties,
business or prospects of the Borrower and its Subsidiaries, taken as a whole, or
the ability of the Borrower to perform its obligations under the Fourth
Amendment or the Revolving Note.
6. Neither the Borrower nor any of its Subsidiaries is subject to
regulation under the Investment Company Act of 1940, as amended, or any statute
or regulation limiting its ability to incur indebtedness for money borrowed as
contemplated by the Fourth Amendment.
7. No authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, or any other Person under
any law, act, rule, regulation or otherwise, is required to authorize, or is
required in connection with the execution, delivery and performance by the
Borrower of, or the legality, validity, binding effect or enforceability of, the
Fourth Amendment or the Revolving Note, except the authorizations, consents,
approvals, orders, licenses or permits described in Schedule 5.15 of the Credit
Agreement which have been obtained and are in full force and effect.
8. The Pledge Agreement created for the benefit of the holder of the
Revolving Note a valid security interest in the Pledged Collateral (as defined
in the Pledge Agreement) by such Holder, such security interest has been duly
perfected and no other action is necessary to effect or preserve such security
interest (assuming the Pledged Shares are at all times in your possession)
except that it may be advisable to file duly executed continuation statements
with respect to financing statements filed in the jurisdiction in which the
Borrower's chief executive office is located within six months prior to the
expiration of five years following the date of original filing.
The opinions expressed herein are limited to the laws of the State of
California and the federal laws of the United States of America.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person or entity without our consent.
-3-
EXHIBIT D TO FOURTH AMENDMENT
-----------------------------
(Description of Opinion of Massachusetts Insurance Counsel to Borrower)
The opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇, Massachusetts insurance counsel to the
Borrower, which is called for by Section 2(l) of the Fourth Amendment, shall be
dated the Closing Date and addressed to the Bank, and shall be in form and
substance satisfactory to the Bank, and shall be to the effect that:
1. The execution, delivery and performance by the Borrower of the Fourth
Amendment and the Revolving Note do not and will not violate any provision of
any law, rule or regulation or, to our knowledge, after due inquiry, order,
writ, judgment, injunction, decree, determination or award presently in effect
having applicability to and binding upon the Borrower or any of its
Subsidiaries.
2. No authorization, consent, approval, order, license or permit from, or
filing, registration or qualification with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, or any other Person under
any law, act, rule, regulation or otherwise, including without limitation the
[MASSACHUSETTS INSURANCE CODE (THE "CODE")] or [ANY APPLICABLE MASSACHUSETTS
HOLDING COMPANY ACT (THE "ACT")], is required to authorize, or is required in
connection with the execution, delivery and performance by the Borrower of, or
the legality, validity, binding effect or enforceability of, the Fourth
Amendment or the Revolving Note.
3. USF RE INSURANCE COMPANY is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite power and authority to own its assets and to
transact the business in which it is now engaged.
The opinions expressed herein are limited to the laws of the Commonwealth
of Massachusetts.
The opinions expressed herein are solely for your benefit and may not be
relied upon by any other person or entity without our consent.
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EXHIBIT E TO FOURTH AMENDMENT
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ACKNOWLEDGMENT AND RATIFICATION
OF THE PLEDGE AGREEMENT
Reference is made to that certain Pledge Agreement dated as of December 20,
1994 between The Centris Group Inc., formerly known as US Facilities
Corporation, a Delaware corporation ("Pledgor"), and Fleet National Bank, a
national banking association formerly known as Shawmut Bank Connecticut, N.A.
and Fleet National Bank of Connecticut ("Pledgee").
1. To secure the prompt and complete payment and performance when due of
the Obligations (as defined below), Pledgor pledged, assigned, delivered and
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transferred to Pledgee, and granted Pledgee a continuing security interest in,
all of the following property and rights and interest in property (all such
property, rights and interests being hereinafter collectively called the
"Pledged Collateral"):
(i) all issued and outstanding shares of the capital stock of USF RE
INSURANCE COMPANY, and any additional shares of the capital stock of any
class or series of USF RE INSURANCE COMPANY which Pledgor may at any time
and from time to time purchase or otherwise acquire, together with the
certificates and/or other instruments or writings representing them (such
shares, certificates and other writings being hereinafter collectively
called the "Pledged Shares");
(ii) (A) all shares and other securities and all warrants, rights and
options to acquire Pledged Shares (such shares, securities, warrants,
rights and options together with the certificates and/or other instruments
or writings representing them being hereinafter collectively called the
"Additional Pledged Securities") and (B) all money and other property, at
any time and from time to time received or receivable by or distributed or
distributable to Pledgor from the issuer of any or all of the Pledged
Shares in exchange or substitution for or otherwise in respect of any or
all of the Pledged Shares or earlier-issued Additional Pledged Securities
(whether in the ordinary course of such issuer's business or representing
or resulting from cash or stock dividends, stock splits or
reclassifications, the recapitalization, reorganization, merger,
consolidation, disposition of assets, liquidation or dissolution of such
issuer, the exercise by Pledgor of warrants, rights or options, or any
other action or cause); and
(iii) all proceeds of any or all of the foregoing.
2. Under the Pledge Agreement, the term "Obligations" means all
indebtedness, liabilities and obligations of any kind of Pledgor to Pledgee
(whether directly as principal or maker or indirectly as guarantor, surety,
endorser or otherwise), now or hereafter existing, due or
to become due, howsoever incurred, arising or evidenced, whether of principal or
interest or payment or performance under the Credit Agreement dated as of
December 20, 1994 between Pledgor and Pledgee (said Credit Agreement as
currently in effect and as from time to time amended, modified or supplemented).
3. Pledgor and Pledgee have amended and restated such Credit Agreement
pursuant to the Fourth Amendment to the Credit Agreement dated October 26, 1998
between Pledgor and Pledgee (the "Fourth Amendment") which, among other things,
increases the Bank's Commitment to $50,000,000.
4. Pledgee has requested that Pledgor acknowledge that the Pledge
Agreement applies to the Credit Agreement as amended and restated by the Fourth
Amendment.
5. Accordingly, Pledgor acknowledges, ratifies and confirms the following:
A. The term "Obligations" referred to in the Pledge Agreement
includes all indebtedness, liabilities and obligations of any
kind of Pledgor to Pledgee arising under the Credit Agreement as
amended by the Fourth Amendment;
B. The Pledge Agreement remains in full force and effect; and
C. Pledgor hereby ratifies and confirms Pledgor's pledge,
assignment, delivery and transfer to Pledgee and grant to Pledgee
of a continuing security interest in the Pledged Collateral.
This Acknowledgment and Ratification of the Pledge Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any party hereto may execute this
Acknowledgment and Ratification by signing any such counterpart.
All capitalized terms used herein, but not defined herein shall have the
meanings described to them in the Pledge Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the undersigned has caused this Acknowledgment and
Ratification of the Pledge Agreement to be executed by its duly authorized
officer as of the date hereof.
Dated: October 26, 1998 THE CENTRIS GROUP, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman of the Board,
President and Chief Executive
Officer
ACCEPTED BY:
FLEET NATIONAL BANK
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President