EXHIBIT 10.15
U.S. $20,000,000
CREDIT AGREEMENT
between
PIEDMONT MANAGEMENT COMPANY, INC.
as Borrower
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
as Lender
December 29, 1994
TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . 1
1.2. Accounting Terms . . . . . . . . . . . . . . . . 23
1.3. Other Terms; Construction. . . . . . . . . . . . 23
ARTICLE II
TERM LOAN
2.1. Term Loan. . . . . . . . . . . . . . . . . . . . 24
2.2. Term Note. . . . . . . . . . . . . . . . . . . . 24
2.3. Scheduled Repayment of Term Loan. . . . . . . . . 24
2.4. Mandatory Prepayment of Term Loan. . . . . . . . 25
2.5. Voluntary Prepayment of Term Loan. . . . . . . . 26
2.6. Interest; Application of Payments . . . . . . . . 26
ARTICLE III
INTEREST; ADDITIONAL PROVISIONS
3.1. Interest . . . . . . . . . . . . . . . . . . . . 26
3.2. Interest Periods. . . . . . . . . . . . . . . . . 28
3.3. Conversions and Continuations . . . . . . . . . . 29
3.4. Method, Application of Payments; Computations . . 30
3.5. Recovery of Payments . . . . . . . . . . . . . . 31
3.6. Use of Proceeds . . . . . . . . . . . . . . . . . 31
3.7. Increased Costs; Change in Circumstances;
Illegality; etc . . . . . . . . . . . . . . . . . 31
3.8. Taxes . . . . . . . . . . . . . . . . . . . . . . 33
3.9. Compensation . . . . . . . . . . . . . . . . . . 34
ARTICLE IV
CLOSING; CONDITIONS OF CLOSING AND BORROWING
4.1. Closing. . . . . . . . . . . . . . . . . . . . . 34
4.2. Conditions of Closing . . . . . . . . . . . . . . 34
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1. Corporate Existence and Power . . . . . . . . . . 40
5.2. Authorization; Enforceability. . . . . . . . . . 40
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5.3. No Violation. . . . . . . . . . . . . . . . . . . 40
5.4. Governmental Authorization; Permits. . . . . . . 41
5.5. Litigation. . . . . . . . . . . . . . . . . . . . 41
5.6. Taxes. . . . . . . . . . . . . . . . . . . . . . 42
5.7. Subsidiaries and Ownership of Securities. . . . . 42
5.8. Full Disclosure. . . . . . . . . . . . . . . . . 43
5.9. Margin Regulations. . . . . . . . . . . . . . . . 43
5.10. Financial Matters. . . . . . . . . . . . . . . . 44
5.11. Ownership of Properties. . . . . . . . . . . . . 46
5.12. Employee Plans. . . . . . . . . . . . . . . . . . 46
5.13. Solvency. . . . . . . . . . . . . . . . . . . . . 48
5.14. Environmental Matters. . . . . . . . . . . . . . 48
5.15. Trade Relations. . . . . . . . . . . . . . . . . 49
5.16. Labor Relations. . . . . . . . . . . . . . . . . 49
5.17. Proprietary Rights. . . . . . . . . . . . . . . . 50
5.18. Compliance With Laws. . . . . . . . . . . . . . . 50
5.19. Regulated Industries. . . . . . . . . . . . . . . 51
5.20. Collateral. . . . . . . . . . . . . . . . . . . . 51
5.21. Certain Contracts. . . . . . . . . . . . . . . . 51
5.22. Reinsurance . . . . . . . . . . . . . . . . . . . 51
5.23. No Burdensome Restrictions . . . . . . . . . . . 52
5.24. Carried Insurance . . . . . . . . . . . . . . . . 52
5.25. Issued Policies . . . . . . . . . . . . . . . . . 53
5.26. Certain Relationships . . . . . . . . . . . . . . 53
5.27. Indebtedness . . . . . . . . . . . . . . . . . . 53
5.28. Investment Advisory Subsidiaries . . . . . . . . 54
5.29. Mutual Funds . . . . . . . . . . . . . . . . . . 54
5.30. Broker-Dealer Subsidiary . . . . . . . . . . . . 55
5.31. Lines of Business . . . . . . . . . . . . . . . . 56
ARTICLE VI
AFFIRMATIVE COVENANTS
6.1. Financial Statements. . . . . . . . . . . . . . . 56
6.2. Statutory Financial Statements. . . . . . . . . . 58
6.3. Other Business and Financial Information. . . . . 59
6.4. Notice of Certain Events. . . . . . . . . . . . . 61
6.5. Corporate Existence; Franchises; Maintenance of
Properties; etc. . . . . . . . . . . . . . . . . 63
6.6. Compliance with Laws . . . . . . . . . . . . . . 63
6.7. Performance of Obligations . . . . . . . . . . . 63
6.8. Payment of Taxes. . . . . . . . . . . . . . . . . 63
6.9. Insurance. . . . . . . . . . . . . . . . . . . . 64
6.10. Maintenance of Books and Records; Inspection. . . 64
6.11. Dividends . . . . . . . . . . . . . . . . . . . . 64
6.12. Compliance with Investment Policies . . . . . . . 65
6.13. Reinsurance . . . . . . . . . . . . . . . . . . . 65
6.14. Further Assurances . . . . . . . . . . . . . . . 65
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ARTICLE VII
NEGATIVE COVENANTS
7.1. Statutory Surplus . . . . . . . . . . . . . . . . 65
7.2. Earned Surplus . . . . . . . . . . . . . . . . . 66
7.3. Consolidated Indebtedness to Total
Capitalization Ratio . . . . . . . . . . . . . . 66
7.4. Operating Leverage Ratio . . . . . . . . . . . . 66
7.5. Net Worth . . . . . . . . . . . . . . . . . . . . 66
7.6. Fixed Charge Coverage Ratio . . . . . . . . . . . 66
7.7. Lexington Management Earnings . . . . . . . . . . 66
7.8. RECO Earnings . . . . . . . . . . . . . . . . . . 66
7.9. Borrower Overhead . . . . . . . . . . . . . . . . 66
7.10. Risk-Based Capital Ratio . . . . . . . . . . . . 66
7.11. Capital Expenditures and Investments . . . . . . 66
7.12. Merger, Consolidation . . . . . . . . . . . . . . 67
7.13. Indebtedness . . . . . . . . . . . . . . . . . . 67
7.14. Liens . . . . . . . . . . . . . . . . . . . . . . 68
7.15. Investments . . . . . . . . . . . . . . . . . . . 68
7.16. Transactions with Affiliates . . . . . . . . . . 70
7.17. Restricted Payments . . . . . . . . . . . . . . . 70
7.18. Certain Amendments, etc . . . . . . . . . . . . . 71
7.19. Limitation on Certain Restrictions . . . . . . . 71
7.20. Compliance of Employee Plans. . . . . . . . . . . 72
7.21. New Business . . . . . . . . . . . . . . . . . . 72
7.22. Fiscal Year . . . . . . . . . . . . . . . . . . . 72
7.23. Accounting Changes. . . . . . . . . . . . . . . . 72
7.24. Change of Location or Name. . . . . . . . . . . . 72
7.25. Reinsurance Agreements. . . . . . . . . . . . . . 73
7.26. Hazardous Substances . . . . . . . . . . . . . . 73
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. . . . . . . . . . . . . . . . 74
8.2. Remedies: Acceleration, etc. . . . . . . . . . . 78
8.3. Remedies: Set-Off. . . . . . . . . . . . . . . . 79
ARTICLE IX
MISCELLANEOUS
9.1. Survival . . . . . . . . . . . . . . . . . . . . 79
9.2. Governing Law; Consent to Jurisdiction. . . . . . 79
9.3. Waiver of Jury Trial . . . . . . . . . . . . . . 80
9.4. Notice . . . . . . . . . . . . . . . . . . . . . 81
9.5. Fees and Expenses. . . . . . . . . . . . . . . . 82
9.6. Indemnification . . . . . . . . . . . . . . . . . 82
9.7. Waivers by the Borrower . . . . . . . . . . . . . 83
9.8. Amendments, Waivers, etc . . . . . . . . . . . . 83
9.9. No Waiver. . . . . . . . . . . . . . . . . . . . 83
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9.10. Participations . . . . . . . . . . . . . . . . . 84
9.11. Successors and Assigns. . . . . . . . . . . . . . 84
9.12. Severability. . . . . . . . . . . . . . . . . . . 85
9.13. Construction. . . . . . . . . . . . . . . . . . . 85
9.14. Injunctive Relief . . . . . . . . . . . . . . . . 85
9.15. Counterparts . . . . . . . . . . . . . . . . . . 85
9.16. Entire Agreement . . . . . . . . . . . . . . . . 85
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CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 29th day of December,
1994 (this "Agreement"), is made between PIEDMONT MANAGEMENT
COMPANY INC., a Delaware corporation with its principal offices
in New York, New York (the "Borrower"), and FIRST UNION NATIONAL
BANK OF NORTH CAROLINA, a national banking association with its
principal offices in Charlotte, North Carolina (the "Lender").
RECITALS
A. The Borrower has requested that the Lender make a Term
Loan in the original principal amount of $20,000,000, the
proceeds of which will be used by the Borrower to make an equity
capital contribution to its wholly owned insurance subsidiary,
The Reinsurance Corporation of New York ("RECO"), to repay
certain indebtedness and to pay certain costs and expenses in
connection with such loan.
B. As a condition to making such Term Loan, the Lender is
requiring that the repayment of all obligations hereunder be
guaranteed by Lexington Management Corporation, a wholly owned
subsidiary of the Borrower ("Lexington Management"), and that
such Term Loan be secured by a pledge of all of the outstanding
capital stock of RECO and Lexington Management and certain other
securities.
C. The Lender is willing to make such Term Loan on the
terms and conditions set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual provisions,
covenants and agreements herein contained, the Borrower and the
Lender hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. For purposes of this Agreement, in
addition to the terms defined elsewhere herein, the following
terms shall have the meanings set forth below:
"Actuarial Report" shall mean, with respect to any Insurance
Subsidiary for any period, an actuarial review and valuation
statement of, and opinion as to the adequacy of, such Insurance
Subsidiary's loss and loss adjustment expense reserve positions
as of the end of such period with respect to the insurance
business then in force, and covering such other subjects as are
customary in actuarial reviews and as may be reasonably requested
by the Lender, prepared by an independent actuarial firm
reasonably acceptable to the Lender in accordance with reasonable
actuarial assumptions and procedures not inconsistent with the
assumptions and procedures previously employed.
"Adjusted Base Rate" shall mean, at any time with respect to
any Tranche, a rate per annum equal to the Base Rate as in effect
at such time plus 0.5 percentage points.
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"Adjusted LIBOR Rate" shall mean, at any time with respect
to any Tranche, a rate per annum equal to the LIBOR Rate as in
effect at such time plus 2.50 percentage points.
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"Advisers Act" shall mean the Investment Advisers Act of
1940, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Affiliate" shall mean, as to any Person, each other Person
that directly, or indirectly through one or more intermediaries,
owns or controls, is controlled by or under common control with,
such Person or is a director or officer of such Person. For
purposes of this definition, with respect to any Person "control"
shall mean the possession, direct or indirect, of the power to
direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or
otherwise; provided that, in any event, any Person directly or
indirectly owning 20 percent or more of the securities having
ordinary voting power for the election of directors or other
governing body of a corporation or 20 percent 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.
"Agreement" shall mean this Credit Agreement, together with
any amendments, modifications and supplements hereto and
restatements hereof, in whole or in part.
"Annual Statement" shall mean, with respect to any Insurance
Subsidiary for any fiscal year, the annual financial statements
of such Insurance Subsidiary as required to be filed with the
Department of its state of domicile, together with all exhibits,
schedules, certificates and actuarial opinions required to be
filed or delivered therewith.
"Authorized Officer" shall mean the president or chief
financial officer of the Borrower or any other officer of the
Borrower
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authorized by resolution of the board of directors of the
Borrower to engage in the activity specified herein with respect
to such officer and whose signature and incumbency shall have
been certified to the Lender.
"Available Dividend Amount" shall mean, with respect to RECO
for any fiscal year, the maximum amount of dividends permitted by
the New York Department under applicable Requirements of Law
(without the necessity of any approval or other action of the New
York Department) to be paid by RECO with respect to such fiscal
year (whether or not any such dividends are actually paid).
"Bankruptcy Code" shall mean 11 U.S.C. Sec.Sec. 101 et seq., as
amended from time to time, and any successor statute.
"Base Rate" shall mean the higher of (i) the per annum
interest rate publicly announced from time to time by the Lender
from its principal office in Charlotte, North Carolina, to be its
prime or base rate (which may not necessarily be its best lending
rate), as adjusted to conform to changes as of the opening of
business on the date of any such change in such prime or base
rate, or (ii) 0.5 percentage points in excess of the Federal
Funds Rate, as adjusted to conform to changes as of the opening
of business on the date of any such change in the Federal Funds
Rate.
"Base Rate Tranche" shall mean, at any time, any Tranche
that bears interest at such time at the Adjusted Base Rate.
"Borrower" shall mean Piedmont Management Company Inc., a
Delaware corporation, and its successors and assigns.
"Borrower Overhead" shall mean, for any period, the
aggregate of all operating costs and expenses of the Borrower
(including, without limitation, for rent, utilities, payroll and
payroll taxes) incurred or paid by the Borrower during such
period, other than (i) payments of interest in respect of
Indebtedness and (ii) Tax Payments.
"Broker-Dealer Subsidiary" shall mean any Subsidiary of the
Borrower that is or is required to be registered as a "broker"
or a "dealer" under the Exchange Act.
"Business Day" shall mean (i) any day other than a Saturday
or Sunday, a legal holiday or a day on which commercial banks in
Charlotte, North Carolina are required by law to be closed and
(ii) in respect of any determination relevant to a LIBOR Tranche,
any such day that is also a day on which tradings are conducted
in the London interbank Eurodollar market.
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"Capital Expenditures" shall mean, with respect to the
Borrower and its Subsidiaries for any fiscal year, the aggregate
expenditures (including payments in respect of liabilities
incurred) of the Borrower and its Subsidiaries during such fiscal
year (less the amount of any trade-in allowance included therein)
to acquire or construct equipment, fixed assets, real property or
improvements and other capital assets (including, without
limitation, Capital Lease Obligations), other than expenditures
for replacements and substitutions therefor made with the
proceeds of insurance.
"Capital Lease" shall mean, with respect to the Borrower and
its Subsidiaries, any lease of any property by the Borrower or
any of its Subsidiaries as lessee that, in accordance with
Generally Accepted Accounting Principles, is required to be
classified and accounted for as a capital lease on its balance
sheet.
"Capital Lease Obligation" shall mean, with respect to the
Borrower and its Subsidiaries for any fiscal year, the aggregate
payments of the Borrower and its Subsidiaries during such fiscal
year in respect of Capital Leases.
"Cash Equivalents" shall mean (i) securities issued or
unconditionally guaranteed by the United States of America or any
agency or instrumentality thereof, backed by the full faith and
credit of the United States of America and maturing within one
year from the date of acquisition, (ii) securities issued by any
state of the United States of America or any political
subdivision or public instrumentality thereof, maturing within
one year from the date of acquisition and, at the time of
acquisition, having the highest rating obtainable from either
Standard & Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc.,
(iii) commercial paper issued by any Person organized under the
laws of the United States of America, maturing no more than one
year from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 or the equivalent
thereof by Standard & Poor's Corporation or at least P-1 or the
equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc., (iv) time
deposits and certificates of deposit that are insured by the
Federal Deposit Insurance Corporation (the "FDIC") or any
successor instrumentality of the government of the United States
of America up to the applicable limit on insurance granted by the
FDIC or such other instrumentality with respect to such
instruments (it being understood that the amount invested in such
instrument may not exceed the limit on such insurance), maturing
within one year from the date of issuance and issued by a bank or
trust company organized under the laws of the United States of
America or any state thereof and having combined capital and
surplus of at least $500,000,000 and (v) money market funds
substantially all of whose assets are comprised of securities of
the types described in clauses (i) through (iv) above.
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"Change of Control" shall mean the occurrence of either of
the following: (i) the ▇▇▇▇▇▇▇▇▇▇ Family shall cease to own
shares of capital stock of the Borrower representing in the
aggregate a majority of the voting power of all classes of
capital stock of the Borrower; (ii) any Person or group of
Persons acting in concert as a partnership or other group (a
"Group of Persons") shall, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or
otherwise, have become, after the date hereof, the "beneficial
owner" (within the meaning of such term under Rule 13d-3 under
the Exchange Act) of securities of the Borrower representing 25%
or more of the combined voting power of the then outstanding
securities of the Borrower ordinarily (and apart from rights
accruing under special circumstances) having the right to vote in
the election of directors; or (iii) the Board of Directors of the
Borrower shall cease to consist of a majority of the individuals
who constituted the Board of Directors as of the date hereof or
who shall have become a member thereof subsequent to the date
hereof after having been nominated, or otherwise approved in
writing, by at least a majority of individuals who constituted
the Board of Directors of the Borrower as of the date hereof (or
their replacements approved as herein required) or by the
▇▇▇▇▇▇▇▇▇▇ Family.
"Closing" shall have the meaning given to such term in
Section 4.1.
"Closing Date" shall mean the date referred to in
Section 4.1.
"Collateral" shall mean and include all of the "Collateral"
(as defined in the Pledge and Security Agreement) and all other
property and interests in property of the Borrower and its
Subsidiaries, whether now owned or hereafter acquired, that shall
from time to time be pledged as direct or indirect security for
the Obligations, in each case pursuant to any one or more of the
Loan Documents.
"Combined Net Cash Flow" shall mean, for any fiscal year,
the aggregate Earnings Before Taxes of the Non-Insurance
Subsidiaries for such fiscal year, plus the sum of the following
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items of the Non-Insurance Subsidiaries for such fiscal year to
the extent taken into account in the calculation of such Net
Income for such fiscal year: (i) depreciation expense,
(ii) amortization of intangible assets and (iii) other non-cash
expenses, losses and charges reducing income, minus the sum of
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the following items of the Non-Insurance Subsidiaries for such
fiscal year: (i) Capital Expenditures permitted to be made
hereunder, (ii) principal payments on Indebtedness permitted
hereunder owed by any of the Non-Insurance Subsidiaries and
(iii) all non-cash gains and other non-cash items taken into
account in determining such Net Income for such fiscal year, plus
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any increase during such fiscal year in
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deferred taxes, minus any decrease during such fiscal year in
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deferred taxes.
"Compliance Certificate" shall mean a fully completed
certificate in substantially the form of Exhibit C.
"Consolidated Indebtedness" shall mean, at any time, the
aggregate Indebtedness (without duplication) of the Borrower and
its Subsidiaries at such time, determined on a consolidated basis
in accordance with Generally Accepted Accounting Principles.
"Consolidated Net Income" shall mean, for any period, Net
Income for the Borrower and its Subsidiaries for such period,
determined on a consolidated basis.
"Consolidated Net Worth" shall mean, at any time, the net
worth of the Borrower and its Subsidiaries at such time,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles but without regard to the
requirements of FASB 115.
"Consolidated Net Written Premiums" shall mean, at any time,
the aggregate (without duplication) of the Net Written Premiums
of the Insurance Subsidiaries at such time.
"Contingent Obligation" shall mean, with respect to any
Person, any direct or indirect liability of such Person with
respect to any Indebtedness, lease, dividend, guaranty, letter of
credit or other obligation (the "primary obligation") of another
Person (the "primary obligor"), whether or not contingent, (a) to
purchase, repurchase or otherwise acquire such primary obligation
or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or
discharge of any such primary obligation or (ii) to maintain
working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance
sheet item, level of income or financial condition of the primary
obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such
primary obligation of the ability of the primary obligor in
respect thereof to make payment of such primary obligation or
(d) otherwise to assure or hold harmless the owner of any such
primary obligation against loss or failure or inability to
perform in respect thereof; provided, however, that neither
(i) obligations entered into in the ordinary course of an
Insurance Subsidiary's business under insurance policies or
contracts issued by it or to which it is a party, including
Reinsurance Agreements (and security posted by any such Insurance
Subsidiary in the ordinary course of its business to secure
obligations thereunder), nor (ii) endorsements of instruments or
items of payment for deposit or collection in the ordinary course
of business, shall be deemed to be Contingent Obligations of the
Borrower or any of its
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Subsidiaries for purposes of this Agreement. The amount of any
Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated
liability in respect thereof.
"Covenant Compliance Worksheet" shall mean a fully completed
worksheet in the form of Attachment A to Exhibit C.
"Cumulative Statutory Earnings Before Taxes" shall mean,
with respect to RECO for any subject fiscal year, the aggregate
of the Statutory Earnings Before Taxes of RECO for each of the
fiscal years of RECO commencing with the fiscal year ending
December 31, 1995 and ending with and including such subject
fiscal year.
"Debt Service" shall mean, for any period, the aggregate
(without duplication) of all principal and interest paid by the
Borrower and its Subsidiaries during such period in respect of
Indebtedness (including, without limitation, the Term Loan).
"Default" shall mean any event or condition that, with the
passage of time or giving of notice, or both, would constitute an
Event of Default.
"Department" shall mean, with respect to any Insurance
Subsidiary, the Department of Insurance or such other
Governmental Authority of its state of domicile charged with
regulating insurance companies or insurance holding companies.
"Dollars" or "$" shall mean dollars of the United States of
America.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor
statute, and all rules and regulations from time to time
promulgated thereunder.
"ERISA Affiliate" shall mean any Person (including any trade
or business, whether or not incorporated) that would be deemed to
be under "common control" with, or a member of the same
"controlled group" as, the Borrower or any of its Subsidiaries,
within the meaning of Sections 414(b), (c), (m) or (o) of the
Internal Revenue Code or Section 4001 of ERISA.
"ERISA Event" shall mean (i) a Reportable Event with respect
to a Qualified Plan or a Multiemployer Plan, (ii) a complete or
partial withdrawal by the Borrower, any of its Subsidiaries or
any ERISA Affiliate from a Multiemployer Plan, where such
withdrawal would be reasonably likely to have a Material Adverse
Effect, (iii)
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the filing by the Borrower, any of its Subsidiaries or any ERISA
Affiliate of a notice of intent to terminate, the treatment of a
plan amendment as a termination under Section 4041 or 4041A of
ERISA, or the commencement of proceedings by the PBGC to
terminate a Qualified Plan (other than a standard termination) or
Multiemployer Plan subject to Title IV of ERISA, (iv) a failure
to make required contributions to a Qualified Plan or
Multiemployer Plan which has resulted in or could result in the
imposition of any Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code, (v) the adoption of an
amendment to a Qualified Plan requiring the provision of security
to such plan pursuant to Section 307 of ERISA, (vi) the
imposition upon the Borrower, any of its Subsidiaries or any
ERISA Affiliate of any material liability under Title IV of
ERISA, other than for PBGC premiums due but not delinquent under
Section 4007 of ERISA, (vii) an application for a funding waiver
of a material amount or an extension of any amortization period
pursuant to Section 412 of the Code with respect to any Qualified
Plan, (viii) the engaging in or otherwise becoming liable for a
nonexempt Prohibited Transaction by the Borrower, any of its
Subsidiaries or any ERISA Affiliate, where such Prohibited
Transaction would be reasonably likely to have a Material Adverse
Effect, or (ix) a violation of the applicable requirements of
Section 404 or 405 of ERISA or the exclusive benefit rule under
Section 401(a) of the Code by any fiduciary of any Qualified Plan
for which the Borrower or any of its Subsidiaries may be directly
or indirectly liable, where such violation would be reasonably
likely to have a Material Adverse Effect.
"Earned Surplus" shall mean, with respect to RECO at any
time, earned surplus of RECO calculated in accordance with the
requirements of Section 4105 of the New York Insurance Law.
"Earnings Before Taxes" shall mean, with respect to a Person
for any period, the sum of the Net Income of such Person for such
period plus income tax expense of such Person for such period,
----
determined in accordance with Generally Accepted Accounting
Principles.
"Employee Plan" shall mean any "employee benefit plan"
within the meaning of Section 3(3) of ERISA that the Borrower,
any of its Subsidiaries or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to and
that covers any employee or former employee of the Borrower, any
of its Subsidiaries or any ERISA Affiliate with respect to such
employee's relationship with any of the foregoing, in each case
including, without limitation, all profit-sharing plans, bonus
plans, incentive compensation plans, deferred compensation plans,
retirement plans, stock option plans, stock purchase plans and
health, life and disability benefit plans.
-8-
"Environmental Claims" shall mean any and all
administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or
violation, investigations (other than internal reports prepared
by the Borrower or any Subsidiary of the Borrower solely in the
ordinary course of its business and not in response to any third
party action or request of any kind) or proceedings relating in
any way to any Environmental Law or any permit issued, or any
approval given, under any such Environmental Law (collectively,
"Claims"), including, without limitation, (i) any and all Claims
by Governmental Authorities for enforcement, cleanup, removal,
response, remedial or other actions or damages pursuant to any
applicable Environmental Law and (ii) any and all Claims by any
third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from
Hazardous Substances or arising from alleged injury or threat of
injury to human health or the environment.
"Environmental Laws" shall mean, collectively, any and all
federal, state and local laws, statutes, ordinances, rules,
regulations, permits, licenses, approvals, interpretations, rules
of common law and orders of courts or Governmental Authorities,
relating to the protection of human health or the environment,
now or hereafter in effect and in each case as amended from time
to time, including, without limitation, requirements pertaining
to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation, handling, reporting,
licensing, permitting, investigation or remediation of Hazardous
Substances, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sec. 9601 et seq. ("CERCLA"), the Hazardous Material
Transportation Act, 49 U.S.C. Sec. 1801 et seq., the Solid Waste
Disposal Act, 42 U.S.C. Sec. 6901 et seq., the Federal Water
Pollution Control Act, 33 U.S.C. Sec. 1251 et seq., the Clean Air
Act, 42 U.S.C. Sec. 7401 et seq., the Toxic Substances Control Act,
15 U.S.C. Sec. 2601 et seq., the Safe Drinking Water Act, 42 U.S.C.
Sec. 300 et seq., and the Occupational Safety and Health Act, 29
U.S.C. Sec. 651 et seq., as such laws have been amended or
supplemented and any analogous future federal, or present or
future applicable state or local, statutes and the rules and
regulations promulgated thereunder.
"Event of Default" shall have the meaning given to such term
in Section 8.1.
"Excess Cash Flow" shall mean, for any fiscal year (the
"Subject Year"), the excess of (i) the aggregate of the following
items: (A) the lesser of the Statutory Earnings Before Taxes of
RECO (if positive) for the fiscal year immediately preceding the
Subject Year or the Available Dividend Amount of RECO
(calculated, for
-9-
purposes of this definition only, with respect to, and as of the
last day of, the fiscal year immediately preceding the Subject
Year, and without taking into account any unpaid amounts carried
forward from prior years); plus (B) the Combined Net Cash Flow
----
(if positive) of the Non-Insurance Subsidiaries for the Subject
Year, (C) all tax refunds received during the Subject Year by the
Borrower or any of its Subsidiaries from any Governmental
Authority to the extent not already included in items (A) or (B),
and (D) all monies received by the Borrower during the Subject
Year from any source, including investment income of the
Borrower, to the extent not already included in items (A), (B) or
(C) and other than any Excluded Items, including, without
limitation, to the extent not already included in items (A), (B)
or (C), dividends from its Subsidiaries, guaranty fees, amounts
received under the Tax Sharing Agreement and any other agreement
with any of its Subsidiaries (including any amounts due or
required to be paid to the Borrower under the Tax Sharing
Agreement or any such other agreement, whether or not actually
paid) (provided, that such aggregate amount shall not include any
tax refund received by the Borrower and its Subsidiaries with
respect to the application of NOLs arising in the fiscal year
ending December 31, 1994) over (ii) the sum of the following
items for the Subject Year: (A) Debt Service, (B) Borrower
Overhead and (C) Tax Payments.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time, and regulations promulgated
and rulings issued thereunder.
"Excluded Items" shall mean, for any fiscal year, (i) Net
Cash Proceeds or any capital contributions, (ii) proceeds from
the repayment of advances previously made by the Borrower to any
of its Subsidiaries in the ordinary course of business and
(iii) proceeds from the sale of Investments (other than
Investments in any of its Subsidiaries or in the Navigators Stock
and other than Investments made or held by the Non-Insurance
Subsidiaries) held by the Borrower in the ordinary course of its
business to the extent reinvested in similar assets or assets of
similar or better investment quality.
"Federal Funds Rate" shall mean, for any period, a
fluctuating per annum interest rate expressed as a percentage
equal for each day during such period 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 Richmond, or if such rate is not so published for any day that
is a Business Day, the average of the quotations for such day on
such transactions received by the Lender from three federal funds
brokers of recognized standing selected by the Lender.
-10-
"Federal Reserve Board" shall mean the Board of Governors of
the Federal Reserve System or any successor thereto.
"Fixed Charge Coverage Ratio" shall mean, as of the last day
of any period of four consecutive fiscal quarters of the Borrower
(the "Measurement Period"), the ratio of (i) the aggregate
(without duplication) of (A) the Available Dividend Amount of
RECO, determined with respect to, and as of the last day of the
Measurement Period, plus (B) the Earnings Before Taxes of
----
Lexington Management for the Measurement Period, plus (C) the
----
aggregate payments paid or to be paid to the Borrower by its
Insurance Subsidiaries pursuant to the Tax Sharing Agreement or
other tax sharing or allocation agreements or arrangements in
effect in respect of taxable income realized during the
Measurement Period, to (ii) the sum of: (A) Projected Debt
Service for the four consecutive fiscal quarters following the
Measurement Period plus (B) Borrower Overhead for the Measurement
----
Period, plus (C) Tax Payments for the Measurement Period.
----
"Generally Accepted Accounting Principles" shall mean
generally accepted accounting principles, as set forth in the
opinions and pronouncements of the Accounting Pronouncements
Board and the American Institute of Certified Public Accountants
and the statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable
stature and authority within the accounting profession) or in
such other statements by such entities as may be in general use
by significant segments of the accounting profession,
consistently applied and maintained and as applicable to the
facts and circumstances on the date of determination.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof and
any central bank thereof, any municipal, local, city or county
government, and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or
controlled, through stock or capital ownership or otherwise, by
any of the foregoing (including, without limitation, the NASD and
any applicable Department).
"Guaranty" shall mean the Guaranty, dated as of the Closing
Date, made by Lexington Management in favor of the Lender, in
form and substance satisfactory to the Lender, together with any
amendments, modifications and supplements thereto and
restatements thereof, in whole or in part.
"Hazardous Substances" shall mean any substances or
materials (i) that are or become defined as hazardous wastes,
hazardous substances, pollutants, contaminants or toxic
substances under any Environmental Law, (ii) that are defined or
classified by any
-11-
Environmental Law as toxic, explosive, corrosive, ignitable,
infectious, radioactive, mutagenic or otherwise hazardous and are
or become regulated by any Governmental Authority, (iii) the
presence of which require investigation, response or remediation
under any Environmental Law, (iv) that constitute a nuisance or a
trespass or pose a health or safety hazard to Persons or
neighboring properties, (v) that consist of underground or
aboveground storage tanks, whether empty, filled or partially
filled with any substance or (vi) that contain, without
limitation, asbestos, polychlorinated biphenyls, urea
formaldehyde foam insulation, petroleum hydrocarbons, petroleum
derived substances or wastes, crude oil, nuclear fuel, natural
gas or synthetic gas.
"Hedge Agreement" shall mean any interest or foreign
currency rate swap, cap, collar, option, hedge, forward rate or
other similar agreement or arrangement designed to protect
against fluctuations in interest rates or currency exchange
rates.
"Historical Financial Statements" shall have the meaning
given to such term in Section 5.10(a).
"Historical Statutory Statements" shall have the meaning
given to such term in Section 5.10(d).
"IRIS Tests" shall mean the ratios and other financial
measurements developed by the NAIC under its Insurance Regulatory
Information System or, in lieu thereof, any successor or other
substantially similar guidelines intended to measure the
financial performance of companies in the property and casualty
insurance industry, as the same shall be in effect from time to
time.
"Indebtedness" shall mean, with respect to any Person,
without duplication, (i) all indebtedness of such Person for
borrowed money, (ii) all reimbursement obligations of such Person
with respect to surety bonds, letters of credit and bankers'
acceptances (in each case, whether or not matured and in the
stated amount thereof), (iii) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments,
(iv) all obligations of such Person to pay the deferred purchase
price of property or services that, in accordance with Generally
Accepted Accounting Principles, would be required to be shown on
a balance sheet of such Person as a liability, (v) all
indebtedness created or arising under any conditional sale or
other title retention agreement with respect to property acquired
by such Person (even though the rights and remedies of the seller
or lender under such agreement in the event of a default are
limited to repossession or sale of such property), (vi) all
Capital Lease Obligations of such Person, (vii) all obligations
of such Person to purchase, redeem, retire, defease or otherwise
make any payment in respect of any capital stock or other equity
securities that, by their stated terms (or by the terms of any
equity securities issuable upon conversion thereof
-12-
or in exchange therefor), or upon the occurrence of any event,
mature or are mandatorily redeemable, or are redeemable at the
option of the holder thereof, in whole or in part, (viii) the net
termination obligations of such Person under Hedge Agreements,
calculated as of any date as if such Hedge Agreements were
terminated as of such date, (ix) all indebtedness referred to in
clauses (i) through (viii) above secured by any Lien on any
property or asset owned or held by such Person regardless of
whether the indebtedness secured thereby shall have been assumed
by such Person or is nonrecourse to the credit of such Person,
and in an amount not to exceed the fair market value of the
property of such Person securing such indebtedness, and (x) any
Contingent Obligation of such Person, but specifically excluding
from the foregoing trade payables and accrued expenses arising or
incurred in the ordinary course of business.
"Insurance Code" shall mean, with respect to any Insurance
Subsidiary, the insurance code of any state where such Insurance
Subsidiary is domiciled or conducting business, as amended from
time to time, and any successor statute, together with all rules
and regulations from time to time promulgated thereunder.
"Insurance Holding Company System Regulatory Act" shall mean
the New York Insurance Holding Company System Regulatory Act,
Sections 1501 to 1510, 1601 to 1612 and 1701 to 1716 of the New
York Insurance Law, as amended from time to time, and any
successor statute, together with all rules and regulations from
time to time promulgated thereunder.
"Insurance Licenses" shall have the meaning given to such
term in Section 5.4(c).
"Insurance Subsidiary" shall mean any Subsidiary of the
Borrower the ability of which to pay dividends is regulated by a
Department or other Governmental Authority or that is otherwise
required to be regulated thereby in accordance with the
applicable Requirements of Law of its state of domicile,
including, without limitation, RECO and ReCor Insurance Company
Inc.
"Interest Period" shall have the meaning given to such term
in Section 3.2.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time, and any successor statute,
and all rules and regulations from time to time promulgated
thereunder.
"Investment Advisory Subsidiary" shall mean any Subsidiary
of the Borrower that is or is required to be registered as an
"investment adviser" under the Advisers Act.
-13-
"Investment Company Act" shall mean the Investment Company
Act of 1940, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
"Investment Company Management Agreements" shall mean all
agreements between an Investment Advisory Subsidiary and a Mutual
Fund of such Investment Advisory Subsidiary.
"Investment Grade Securities" shall mean non-equity
securities that are rated "BBB-" (or the then equivalent grade)
or better by Standard & Poor's Corporation, Fitch Investor
Services, Inc. or Duff & ▇▇▇▇▇▇ Credit Rating Company, "Baa3" (or
the then equivalent grade) or better by ▇▇▇▇▇'▇ Investors
Service, Inc., "2" or better by the NAIC, or an equivalent rating
by an equivalent rating agency selected by the Lender.
"Investments" shall have the meaning given to such term in
Section 7.11.
"Lexington Management" shall mean Lexington Management
Corporation, a Delaware corporation, and its successors and
assigns.
"LIBOR Tranche" shall mean, at any time, any Tranche that
bears interest at such time at the Adjusted LIBOR Rate.
"LIBOR Rate" shall mean, for any Interest Period, an
interest rate per annum (rounded upwards, if necessary, to the
next higher 1/100 of one percentage point) obtained by dividing
(a) the rate of interest determined by the Lender to be the rate
for deposits in Dollars for the applicable Interest Period which
appears on the Telerate Page 3750 at approximately 11:00 a.m.
London time, two (2) Business Days prior to the first date of the
applicable Interest Period, or if such rate is not available, the
rate per annum at which, in the opinion of the Lender, Dollars in
the amount of $5,000,000 are being offered to leading reference
banks for settlement in the London interbank market at
approximately 11:00 a.m. London time, two (2) Business Days prior
to the first date of the applicable Interest Period, by (b) the
percentage equal to one hundred percent (expressed as a decimal
fraction) minus the Reserve Requirement for such Interest Period;
provided, however, that with regard to any LIBOR Loan covered by
any Hedge Agreement between the Borrower and the Lender (or any
Affiliate of the Lender), the definition and calculation of LIBOR
Rate under this Loan Agreement shall be consistent with the
definition and calculation of LIBOR Rate pursuant to such Hedge
Agreement, and in the event of any inconsistency between this
Loan Agreement and such Hedge Agreement, the terms of such Hedge
Agreement shall control. The LIBOR Rate shall be adjusted as of
the first day of each Interest Period to reflect the LIBOR Rate
as of such day. Each calculation by the
-14-
Lender of the applicable LIBOR Rate shall be conclusive and
binding for all purposes, absent bad faith or manifest error.
"License" shall mean, with respect to any Person, any
license (including without limitation, any license or certificate
of authority from any applicable Governmental Authority), permit,
authorization, registration or consent (whether, federal, state,
local, foreign or otherwise) that is required by such Person to
conduct its business as now conducted and as proposed to be
conducted and to own or lease or operate its properties.
"Lien" shall mean any mortgage, pledge, hypothecation,
assignment, security interest, lien (statutory or otherwise) or
other encumbrance of any nature, whether voluntary or
involuntary, including, without limitation, the interest of any
vendor or lessor under any conditional sale agreement, title
retention agreement, capital lease or any other lease or
arrangement having substantially the same effect as any of the
foregoing, and the filing of any financing statement or similar
statement or notice under the applicable Uniform Commercial Code
or comparable recording statute of any jurisdiction securing or
purporting to secure any Indebtedness.
"Loan Documents" shall mean and collectively refer to this
Agreement, the Term Note, the Pledge and Security Agreement, the
Guaranty, any Hedge Agreement entered into by the Borrower in
respect of the Obligations (but only so long as such Hedge
Agreement is entered into with the Lender as counterparty) and
any and all other agreements, certificates, instruments and
documents, heretofore, now or hereafter executed by or in behalf
of the Borrower or any of its Subsidiaries and delivered to the
Lender with respect to any of the foregoing or with respect to
the transactions contemplated hereby or thereby, and in each
case, together with any amendments, modifications and supplements
thereto and restatements thereof, in whole or in part.
"Margin Stock" shall have the meaning given to such term in
Regulation U of the Federal Reserve Board, as in effect from time
to time, and any successor regulation thereto.
"Material Adverse Change" shall mean any material adverse
change in the condition (financial or otherwise), operations,
business, properties or prospects of the Borrower and its
Subsidiaries, taken as a whole.
"Material Adverse Effect" shall mean a material adverse
effect upon (i) the condition (financial or otherwise),
operations, business, properties or prospects of the Borrower and
its Subsidiaries, taken as a whole, (ii) the ability of the
Borrower or any of its Subsidiaries to perform under any Loan
Document to which it is a party, (iii) the legality, validity or
enforceability of any Loan
-15-
Document or (iv) the perfection or priority of the Liens granted
to the Lender under the Loan Documents or the rights and remedies
of the Lender under the Loan Documents; except, in the case of
clauses (iii) and (iv) above, to the extent any such effect is
caused by any act or omission on the part of the Lender.
"Material Asset" shall have the meaning given to such term
in Section 7.12.
"Multiemployer Plan" shall mean any "multiemployer plan"
within the meaning of Section 4001(a)(3) of ERISA to which the
Borrower, any of its Subsidiaries or any ERISA Affiliate makes,
is making or is obligated to make contributions or has, within
the preceding five (5) years, made or been obligated to make
contributions.
"Mutual Fund" shall mean, with respect to any Person, any
"investment company" (as such term is defined in the Investment
Company Act) that is managed, administered, sponsored or
distributed by such Person.
"NAIC" shall mean the National Association of Insurance
Commissioners and any successor thereto.
"Navigators Stock" shall mean the 440,700 shares of common
stock of The Navigators Group, Inc., a Delaware corporation, held
by the Borrower on the Closing Date.
"NASD" shall mean the National Association of Securities
Dealers, Inc., or any successor thereto.
"Net Cash Proceeds" shall mean, with respect to the issuance
and sale by the Borrower of any capital stock or other equity
securities of the Borrower or the sale of any assets of the
Borrower, the amount of cash payments received net of reasonable
accounting, legal and recording expenses, selling and brokerage
commissions and discounts and underwriting fees and other
reasonable fees and expenses incurred in connection with such
issuance or sale (but only to the extent that the amounts so
deducted are paid to a Person not an Affiliate of the Borrower).
"Net Income" shall mean, with respect to any Person for any
period, the net income (or loss) of such Person for such period,
determined in accordance with Generally Accepted Accounting
Principles.
"Net Written Premiums" shall mean, with respect to any
Insurance Subsidiary at any time, the amount of premiums written
(after deducting or adding premiums on business ceded to or
assumed from others) as shown on line 32, page 8, Part IIB,
column 4 of the Annual Statement of such Insurance Subsidiary, or
the amount
-16-
determined in a consistent manner for any date other than a date
as of which an Annual Statement of such Insurance Subsidiary is
prepared.
"New York Department" shall mean the New York State
Department of Insurance.
"NOLs" shall have the meaning given to such term in Section
5.6(c).
"Non-Insurance Subsidiary" shall mean any Subsidiary of the
Borrower other than an Insurance Subsidiary.
"Notice of Conversion/Continuation" shall have the meaning
given to such term in Section 3.3.
"Obligations" shall mean all indebtedness, liabilities and
obligations owing, due or payable from the Borrower to the Lender
or any other Person entitled thereto, of any kind or nature,
under this Agreement or any of the other Loan Documents, direct
or indirect, absolute or contingent, primary or secondary, now
existing or hereafter arising and however acquired (including
those acquired by assignment), including, without limitation, all
principal of and interest (including, to the greatest extent
permitted by law, post-petition interest) on the Loan and all
fees, expenses and other amounts payable by the Borrower under
this Agreement or any of the other Loan Documents.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
and any successor thereto.
"Pension Plan" shall mean any "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (other than a
Multiemployer Plan subject to the provisions of Title IV of
ERISA) and to which the Borrower, any of its Subsidiaries or any
ERISA Affiliate may have any liability.
"Permitted Liens" shall mean any of the following types of
Liens:
(a) Liens created by the Loan Documents;
(b) Liens set forth on Schedule 1.1(a);
(c) Liens for current taxes, assessments or other
governmental charges that are not delinquent or remain payable
without any penalty, or to the extent that the nonpayment thereof
is permitted by Section 6.8;
(d) Liens of carriers, warehousemen, mechanics,
materialmen, landlords and vendors, or other similar liens,
imposed by mandatory
-17-
provisions of law and incurred in the ordinary course of
business; provided that any such lien is removed within thirty
(30) days after its assertion, unless such lien is being
contested in good faith with diligence by appropriate proceedings
and with respect to which the Borrower and its Subsidiaries have
established funded reserves satisfactory to the Lender in its
reasonable discretion;
(e) Liens with respect to personal property only incurred
in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of
governmental insurance or benefits, or liens arising from good
faith deposits in connection with bids, tenders, statutory
obligations, leases and contracts (other than for borrowed funds)
entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(f) Easements, rights-of-way, restrictions and other
encumbrances in the ordinary course of business or other minor
defects or irregularities in title or other similar encumbrances
on realty owned or leased by the Borrower or any of its
Subsidiaries not interfering in any material respect with such
realty;
(g) Liens arising from judgments, decrees or attachments
not constituting an Event of Default under Section 8.1(m);
provided that such lien is removed within thirty (30) days after
its assertion, unless such lien is being contested in good faith
with diligence by appropriate proceedings and with respect to
which the Borrower and its Subsidiaries have established funded
reserves satisfactory to the Lender in its reasonable discretion;
and
(h) Any other Liens that the Lender may approve in writing
from time to time.
"Person" shall mean any corporation, association, joint
venture, partnership, limited liability company, organization,
business, individual, trust, government or agency or political
subdivision thereof or any other legal entity.
"Pledge and Security Agreement" shall mean the Pledge and
Security Agreement, dated as of the date hereof, between the
Borrower and the Lender, in the form and substance satisfactory
to the Lender, together with any amendments, modifications and
supplements thereto and restatements thereof, in whole or in
part.
"Premium Adjustment Provision" shall have the meaning given
to such term in Section 5.22.
"Prohibited Transaction" shall mean any transaction
described in (i) Section 406 of ERISA that is not exempt by
reason of Section 408 of ERISA or by reason of a Department of
Labor prohibited transaction individual or class exemption or
-18-
(ii) Section 4975(c) of the Code that is not exempt by reason of
Section 4975(c)(2) or 4975(d) of the Code or by reason of a
Department of Labor prohibited transaction individual or class
exemption.
"Projected Debt Service" shall mean, for any fiscal year, an
amount equal to the aggregate (without duplication) of all
scheduled principal and interest reasonably estimated by the
Borrower (and as set forth in the relevant Covenant Compliance
Worksheet) to be required to be paid by the Borrower and its
Subsidiaries during such fiscal year in respect of Indebtedness
(including, without limitation, the Term Loan), based on interest
rates in effect and being paid as of the date of determination.
"Projections" shall have the meaning given to such term in
Section 5.10(b).
"Qualified Plan" shall mean any Pension Plan that is
intended to be tax-qualified under Section 401(a) of the Internal
Revenue Code, and the trust created thereunder that is intended
to be tax-exempt under Section 501(a) of the Internal Revenue
Code, and that the Borrower, any of its Subsidiaries or any ERISA
Affiliate sponsors or maintains or to which it makes or is
obligated to make contributions, or, in the case of a "multiple
employer plan" within the meaning of Section 4064(a) of ERISA,
has made contributions at any time during the immediately
preceding five-plan year period, but excluding any Multiemployer
Plan.
"Quarterly Statement" shall mean, with respect to any
Insurance Subsidiary for any fiscal quarter, the quarterly
financial statements of such Insurance Subsidiary as required to
be filed with the Department of its state of domicile, together
with all exhibits, schedules, certificates and actuarial opinions
required to be filed or delivered therewith.
"RECO" shall mean The Reinsurance Corporation of New York, a
New York corporation, and its successors and assigns.
"Regulation D" shall mean Regulation D of the Federal
Reserve Board or any successor or other regulation relating to
reserve requirements applicable to member banks of the Federal
Reserve System.
"Reinsurance Agreement" shall mean any agreement, contract,
treaty, certificate or other arrangement whereby an Insurance
Subsidiary agrees to transfer, cede or retrocede to another
insurer or reinsurer all or part of the liability assumed by such
an Insurance Subsidiary under a policy or policies of insurance
issued by such an Insurance Subsidiary.
-19-
"Reinsurance Plan" shall mean the reinsurance plan of RECO
provided to the Lender on or prior to the Closing Date pursuant
to Section 4.2.3(c), together with all changes to such plan of
which the Lender receives notice pursuant to Section 6.4(i).
"Reportable Event" shall mean (i) a "reportable event"
within the meaning of Section 4043(b) of ERISA for which the 30-
day notice has not been waived by the PBGC, (ii) a withdrawal
from a plan described in Section 4063 of ERISA or (iii) a
cessation of operations described in Section 4062(e) of ERISA.
"Requirement of Law" shall mean, with respect to any Person,
any statute, law, treaty, rule, regulation, order, decree, writ,
injunction or determination of any arbitrator or court or other
Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person
or any of its property is subject, or otherwise pertaining to any
or all of the transactions contemplated by this Agreement and the
other Loan Documents and the Transactions.
"Reserve Requirement" shall mean, with respect to any
Interest Period, the reserve percentage (expressed as a decimal)
applicable two (2) Business Days before the first day of such
Interest Period determined by the Lender to be in effect on such
day, as provided by the Federal Reserve Board, applied for
determining the maximum reserve requirements (including, without
limitation, basic, supplemental, marginal and emergency reserves)
applicable to the Lender under Regulation D with respect to
"Eurocurrency liabilities" within the meaning of Regulation D, or
under any similar or successor regulation with respect to
Eurocurrency liabilities or Eurocurrency funding.
"▇▇▇▇▇▇▇▇▇▇ Family" shall mean the descendants of ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇., their spouses, trusts established by or for the
benefit of such descendants, corporations controlled by such
descendants and charitable organizations established by such
descendants.
"Risk-Based Capital" shall mean, with respect to RECO at any
time, the risk-based capital of RECO determined in accordance
with the NAIC Risk-Based Capital Model Act in the form as
proposed by the NAIC as of the date hereof.
"SEC Documents" shall have the meaning given such term in
Section 4.2.3(e).
"SIPA" shall mean the Securities Investor Protection Act of
1970, as amended from time to time, and the regulations
promulgated and rulings issued thereunder.
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"SIPC" shall mean the Securities Investor Protection
Corporation established under the SIPA, or any successor thereto.
"Solvent" shall mean, with respect to any Person at any
time, that such Person (i) has capital sufficient to carry on its
business as presently conducted and as then proposed to be
conducted, (ii) has assets with a fair saleable value at such
time (A) not less than the amount required to pay the probable
liability on its then existing debts as they become absolute and
matured and (B) greater than the total amount of its liabilities
(including identified contingent liabilities) at such time, and
(iii) does not then intend to, and does not then believe that it
will, incur debts or liabilities beyond its ability to pay such
debts and liabilities as they mature; and, in the case of an
Insurance Subsidiary, shall mean in addition that such Insurance
Subsidiary, at such time, satisfies the minimum capital
requirements of each relevant Department.
"Statutory Accounting Principles" shall mean, with respect
to any Insurance Subsidiary, the statutory accounting practices
prescribed or permitted by the relevant Department, consistently
applied and maintained and as applicable to the facts and
circumstances on the date of determination.
"Statutory Earnings Before Taxes" shall mean, with respect
to RECO for any subject fiscal year, the amount shown on line
14B, page 4, column 1 of the Annual Statement of RECO for such
fiscal year.
"Statutory Liabilities" shall mean, with respect to any
Insurance Subsidiary at any time, the amount shown on line 21,
page 3, column 1 of the Annual Statement of such Insurance
Subsidiary, or the amount determined in a consistent manner for
any date other than a date as of which an Annual Statement of
such Insurance Subsidiary is prepared.
"Statutory Net Income" shall mean, with respect to RECO for
any period, the amount shown on line 16, page 4, column 1 of the
Annual Statement of RECO for such period, or the amount
determined in a consistent manner for any period other than a
period for which an Annual Statement of RECO is prepared.
"Statutory Surplus" shall mean, with respect to RECO at any
time, the amount shown on line 25, page 3, column 1 of the Annual
Statement of RECO, or the amount determined in a consistent
manner for any date other than a date as of which an Annual
Statement of RECO is prepared.
"Subsidiary" shall mean, with respect to any Person, any
corporation or other Person of which more than fifty percent
(50%) of the outstanding capital stock having ordinary voting
power to
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elect a majority of the board of directors, in the case of a
corporation, or of the ownership or beneficial interests, in the
case of a Person not a corporation, is at the time, directly or
indirectly, owned or controlled by such Person and one or more of
its other Subsidiaries or a combination thereof (irrespective of
whether, at the time, securities of any other class or classes of
any such corporation or other Person shall or might have voting
power by reason of the happening of any contingency). When used
without reference to a parent entity, the term "Subsidiary" shall
be deemed to refer to a Subsidiary of the Borrower.
"Surviving Indebtedness" shall have the meaning given to
such term in Section 4.2.4(a).
"Tax Payments" shall mean, for any period, the aggregate
(without duplication) of all federal, state and local income,
franchise and other taxes required to be deducted from
consolidated revenue of the Borrower and its Subsidiaries in
determining Consolidated Net Income for such period.
"Tax Sharing Agreement" shall mean the Tax Sharing Agreement
between the Borrower and RECO dated September 4, 1980, the
Agreement to Apportion Federal Income Tax Liability Resulting
from inclusion within a Consolidated Federal Return between the
Borrower and Lexington Funds Distributor, Inc. dated August 19,
1993 and the Agreement to Apportion Federal Income Tax Liability
Resulting from inclusion within a Consolidated Federal Income Tax
Return among the Borrower, Lexington Management, Piedmont Capital
Corporation and Manlex Corporation dated May 17, 1985 without
regard to any amendments, modifications or supplements thereto or
restatements thereof other than those approved by the Lender
pursuant to the terms hereof.
"Term Loan" shall have the meaning given to such term in
Section 2.1.
"Term Note" shall mean the promissory note of the Borrower
in substantially the form of Exhibit A, executed and delivered to
the Lender pursuant to Section 2.2, together with any amendments,
modifications and supplements thereto and restatements thereof,
in whole or in part.
"Tranche" shall mean any portion of the outstanding
principal amount of the Term Loan.
"Unfunded Pension Liabilities" shall mean the excess of a
Pension Plan's accrued benefits, within the meaning of
Section 3(23) of ERISA, over the current value of its assets,
within the meaning of Section 3(26) of ERISA.
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"Uniform Commercial Code" shall mean the Uniform Commercial
Code of the State of North Carolina, as amended from time to
time, unless in any particular instance the Uniform Commercial
Code of another state is applicable, in which case such term
shall mean the Uniform Commercial Code of such state.
"Withdrawal Liabilities" shall mean, as of any determination
date, the aggregate amount of the liabilities, if any, pursuant
to Section 4201 of ERISA, if the Borrower, each of its
Subsidiaries and each ERISA Affiliate made a complete withdrawal
from all Multiemployer Plans, and any increase in contributions
pursuant to Section 4243 of ERISA.
1.2. Accounting Terms. Except as specifically provided
otherwise in this Agreement, all accounting terms used herein
that are not specifically defined shall have the meanings
customarily given them in accordance with Generally Accepted
Accounting Principles (or, to the extent that such terms apply
solely to any Insurance Subsidiary or if otherwise expressly
required, Statutory Accounting Principles) as then in effect.
Notwithstanding the foregoing, in the event that any changes in
Generally Accepted Accounting Principles or Statutory Accounting
Principles after the date hereof are required to be applied to
the transactions described herein and would materially affect the
computation of the financial covenants contained in Sections 7.1
through 7.11, as applicable, such changes shall be followed only
from and after the date this Agreement shall have been amended to
take into account any such changes. References to amounts on
particular exhibits, schedules, lines, pages and columns of any
Annual Statement or Quarterly Statement are based on the format
promulgated by the NAIC for the 1993 Annual Statements and
Quarterly Statements. In the event such format is changed in
future years so that different information is contained in such
items or they no longer exist, or if the Annual Statement or
Quarterly Statement is replaced by the NAIC or by any Department
after the date hereof such that different forms of financial
statements are required to be furnished by the Insurance
Subsidiaries in lieu thereof, such references shall be to
information consistent with that reported in the referenced item
in the 1993 Annual Statements or Quarterly Statements, as the
case may be.
1.3. Other Terms; Construction. Unless otherwise specified
or unless the context otherwise requires, (i) words in the
singular include the plural and words in the plural include the
singular, (ii) the words "herein," "hereof," "hereunder" and
similar terms shall, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this
Agreement, (iii) all terms used herein without definition shall
have the meanings accorded to them by the Uniform Commercial Code
to the extent the same are used or defined therein, (iv) all
references herein to sections, annexes, schedules and exhibits
are references
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to sections, annexes, schedules and exhibits in and to this
Agreement and (v) all terms defined herein shall have the defined
meanings when used in any other Loan Document or any certificate
or other document made or delivered pursuant hereto unless
otherwise defined therein.
ARTICLE II
TERM LOAN
2.1. Term Loan. The Lender agrees, subject to and on the
terms and conditions of this Agreement, to make a term loan (the
"Term Loan") to the Borrower in the original principal amount of
$20,000,000. The Lender will make the proceeds of the Term Loan
available at its office referred to in Section 9.4, for the
account of the Borrower, in Dollars and in immediately available
funds, prior to 2:00 p.m., Charlotte time, on the Closing Date.
To the extent repaid, the Term Loan may not be reborrowed.
2.2. Term Note. The Term Loan shall be evidenced by a Term
Note appropriately completed in substantially the form of
Exhibit A. The Term Note shall (i) be executed by the Borrower,
(ii) be dated as of the Closing Date, (iii) bear interest in
accordance with the provisions of Section 3.1 and (iv) be
entitled to all of the benefits of this Agreement and the other
Loan Documents and subject to the provisions hereof and thereof.
2.3. Scheduled Repayment of Term Loan. (a) Except to the
extent due or made sooner pursuant to the terms and conditions of
this Agreement, including pursuant to Sections 2.4 and 2.5, the
Borrower will repay the outstanding principal amount of the Term
Loan in the amounts and on the dates set forth below:
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Date Principal Payment
---- -----------------
July 1, 1995 $500,000
October 1, 1995 $550,000
January 1, 1996 $800,000
April 1, 1996 $900,000
July 1, 1996 $900,000
October 1, 1996 $950,000
January 1, 1997 $950,000
April 1, 1997 $950,000
July 1, 1997 $950,000
October 1, 1997 $950,000
January 1, 1998 $950,000
April 1, 1998 $950,000
July 1, 1998 $950,000
October 1, 1998 $950,000
January 1, 1999 $950,000
April 1, 1999 $950,000
July 1, 1999 $950,000
October 1, 1999 $950,000
January 1, 2000 $1,000,000
April 1, 2000 $1,000,000
July 1, 2000 $1,000,000
October 1, 2000 $1,000,000
; provided, however, that if any of the foregoing payment dates
is not a Business Day, then such payment shall be due on the
Business Day next preceding such date.
(b) Notwithstanding any other provision in this Agreement,
the then outstanding principal amount of the Term Loan shall be
due and payable in full on October 1, 2000.
2.4. Mandatory Prepayment of Term Loan. (a) Promptly upon
its receipt thereof, but in any event not later than two (2)
Business Days after the date thereof, the Borrower will make a
mandatory prepayment of the outstanding principal amount of the
Term Loan (i) in an amount equal to the Net Cash Proceeds from
the issuance, sale or other disposition of its capital stock or
other equity securities or of any rights, warrants or options to
purchase or acquire any shares of its capital stock or other
equity securities, other than the issuance of up to 1,500,000
shares of common stock of the Borrower (and options or other
rights to purchase such shares) pursuant to an Employee Plan and
(ii) in an amount equal to any income tax refund received by the
Borrower with respect to the application of NOLs arising in the
fiscal year ending December 31, 1994.
(b) Concurrently with the delivery pursuant to
Section 6.1(b) of its annual financial statements after the end
of each fiscal
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year, beginning with the fiscal year ending December 31, 1995,
but in any event not later than ninety (90) days after the last
day of each such fiscal year, the Borrower will make a mandatory
principal prepayment of the outstanding principal amount of the
Term Loan in an amount equal to 75 percent of Excess Cash Flow,
if any, for such fiscal year.
2.5. Voluntary Prepayment of Term Loan. The Borrower shall
have the right from time to time to prepay the Term Loan, in
whole or in part, without premium or penalty (except as provided
in clause (ii) below), upon written notice to the Lender prior to
11:00 a.m., Charlotte time, at least three (3) Business Days'
prior to each intended prepayment, provided that (i) each
voluntary partial prepayment shall be in an aggregate principal
amount of no less than $500,000 or, if greater, shall be in an
integral multiple of $100,000 in excess thereof, and (ii) unless
made together with all amounts required under Section 3.9 to be
paid as a consequence of such prepayment, a prepayment of a LIBOR
Tranche may be made only on the last day of the Interest Period
applicable thereto. Each such notice shall specify the proposed
date of such prepayment, the principal amount thereof and whether
the portion of the Term Loan to be prepaid is a Base Rate Tranche
or a LIBOR Tranche, and shall be irrevocable and shall bind the
Borrower to make such prepayment on the terms specified therein.
2.6. Interest; Application of Payments. (a) Each payment
or prepayment of the Term Loan made pursuant to Sections 2.3, 2.4
or 2.5 (i) shall be made together with accrued interest to the
date of such payment on the principal amount so paid and
(ii) shall be subject to the provisions of Section 3.4.
(b) Each prepayment of the Term Loan made pursuant to
Sections 2.4 or 2.5 shall be applied to reduce the scheduled
principal payments on the Term Loan in the inverse order of
maturity.
ARTICLE III
INTEREST; ADDITIONAL PROVISIONS
3.1. Interest. (a) As of the Closing, the Term Loan shall
be comprised entirely of one Base Rate Tranche. After the
Closing, the Borrower shall have the option, subject to the terms
and conditions of this Agreement, from time to time to cause the
Term Loan to be comprised of one or more Base Rate Tranches or
one or more LIBOR Tranches, or a combination thereof. Any
portion of the outstanding principal amount of the Term Loan not
comprised at any time of one or more LIBOR Tranches shall be
comprised at such time of Base Rate Tranches.
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(b) The Borrower will pay interest to the Lender in respect
of each Tranche comprising the unpaid principal amount of the
Term Loan, from the Closing Date until such principal amount
shall be paid in full, (i) in respect of each Base Rate Tranche,
at the Adjusted Base Rate as in effect from time to time during
such periods as such Tranche is a Base Rate Tranche, and (ii) in
respect of each LIBOR Tranche, at the Adjusted LIBOR Rate as in
effect from time to time during such periods as such Tranche is a
LIBOR Tranche.
(c) Any principal amount of the Term Loan not paid when due
and, to the greatest extent permitted by law, all interest
accrued on the Term Loan and all other fees and amounts hereunder
or under any other Loan Document not paid when due (whether at
maturity, pursuant to acceleration or otherwise), shall bear
interest at a rate per annum equal to the interest rate
applicable from time to time thereafter to the Term Loan (whether
the Adjusted Base Rate or the Adjusted LIBOR Rate) plus two
percentage points (or, in the case of fees and other amounts, at
the Base Rate plus two and one-half percentage points), and, in
each case, such default interest shall be payable on demand. To
the greatest extent permitted by law, interest shall continue to
accrue after the filing by or against the Borrower of any
petition seeking any relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, whether state, federal
or foreign.
(d) Accrued (and theretofore unpaid) interest shall be
payable (i) in respect of each Base Rate Tranche, in arrears
(y) on the first day of each January, April, July and October,
(except that if any such day is not a Business Day, interest
shall be due on the Business Day next preceding such day)
beginning with April 1, 1995, and (z) on the date all or any
portion of the outstanding principal amount of such Base Rate
Tranche shall be converted (but only on the amount so converted)
into a LIBOR Tranche pursuant to Section 3.3, (ii) in respect of
each LIBOR Tranche, in arrears on the last Business Day of the
Interest Period applicable thereto (subject to the provisions of
clause (ii) in Section 3.2) and (iii) in respect of any Tranche,
on the date of any repayment or prepayment (in respect of the
amount so repaid or prepaid), at maturity (whether pursuant to
acceleration or otherwise) and, after maturity, on demand.
(e) Nothing contained in this Agreement or in any other
Loan Document shall be deemed to establish or require the payment
of interest to the Lender at a rate in excess of the maximum rate
permitted by applicable law. If the amount of interest payable
on any interest payment date would exceed the maximum amount
permitted by applicable law then to be charged by the Lender, the
amount of interest payable on such interest payment date shall be
automatically reduced to such maximum permissible amount, and any
amounts collected in excess of the permissible amount that would
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otherwise represent interest shall be deemed a voluntary
prepayment of principal on the Term Loan made pursuant to
Section 2.5.
(f) The Lender shall promptly notify the Borrower upon
determining the interest rate for each Interest Period after its
receipt of the relevant Notice of Conversion/Continuation;
provided, however, that the failure of the Lender to provide the
Borrower with any such notice shall neither affect any
obligations of the Borrower hereunder nor result in any liability
on the part of the Lender to the Borrower. Each such
determination (including each determination of the Reserve
Requirement in connection with any LIBOR Tranche) shall, absent
manifest error, be final and conclusive and binding on the
parties hereto.
3.2. Interest Periods. Concurrently with the giving of any
Notice of Conversion/Continuation in respect of any LIBOR
Tranche, the Borrower shall have the right to elect, pursuant to
such notice, the interest period (each, an "Interest Period") to
be applicable to such LIBOR Tranche, which Interest Period shall,
at the option of the Borrower, be a one, two or three-month
period; provided, however, that:
(i) the initial Interest Period for any LIBOR Tranche
shall commence on the date of the continuation of or
conversion into such LIBOR Tranche, and each successive
Interest Period applicable to such LIBOR Tranche shall
commence on the day on which the next preceding Interest
Period applicable thereto expires;
(ii) if any Interest Period otherwise would expire on a
day that is not a Business Day, such Interest Period shall
expire on the next succeeding Business Day unless such next
succeeding Business Day falls in another calendar month, in
which case such Interest Period shall expire on the next
preceding Business Day;
(iii) if any Interest Period begins on a day for which
there is no numerically corresponding day in the calendar
month during which such Interest Period would otherwise
expire, such Interest Period shall expire on the last
Business Day of such calendar month;
(iv) the Borrower may not select any Interest Period
that expires after October 1, 2000;
(v) no LIBOR Tranche may be incurred prior to the
fourth (4th) Business Day after the Closing Date;
(vi) no Interest Period shall extend beyond the date of
any scheduled repayment or other mandatory prepayment of
principal on the Term Loan unless, immediately after giving
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effect to such repayment or prepayment, the aggregate
principal amount of all LIBOR Tranches having Interest
Periods ending after the date of such scheduled repayment or
mandatory prepayment shall be equal to or less than the
principal amount of the Term Loan then outstanding;
(vii) LIBOR Tranches may not be outstanding under more
than three (3) separate Interest Periods at any one time;
and
(viii) if, upon the expiration of any Interest Period
applicable to a LIBOR Tranche, the Borrower shall have
failed to elect a new Interest Period to be applicable to
such LIBOR Tranche, then the Borrower shall be deemed to
have elected to convert such LIBOR Tranche into a Base Rate
Tranche as of the expiration of the then current Interest
Period applicable thereto.
3.3. Conversions and Continuations. (a) The Borrower shall
have the right, on any Business Day occurring on or after the
fourth (4th) day after the Closing Date, to elect (i) to convert
all or a portion of the outstanding principal amount of any Base
Rate Tranche into a LIBOR Tranche, or to convert any LIBOR
Tranche into a Base Rate Tranche, or (ii) to continue all or a
portion of the outstanding principal amount of any LIBOR Tranche
for an additional Interest Period, provided that (x) any such
conversion or continuation of a LIBOR Tranche shall involve a
principal amount of not less than $2,000,000 or, if greater, an
integral multiple of $500,000 in excess thereof, (y) except as
otherwise provided in Section 3.7(d), a LIBOR Tranche may be
converted into a Base Rate Tranche only on the last day of the
Interest Period applicable thereto (and, in any event, if a LIBOR
Tranche is converted into a Base Rate Tranche on any day other
than the last day of the Interest Period applicable thereto, the
Borrower will pay, upon such conversion, all amounts required
under Section 3.9 to be paid as a consequence thereof) and (z) no
conversion of a Base Rate Tranche into a LIBOR Tranche or
continuation of a LIBOR Tranche shall be permitted during the
continuance of a Default or Event of Default.
(b) The Borrower shall make each such election by
delivering written notice to the Lender prior to 11:00 a.m.,
Charlotte time, at least three (3) Business Days prior to the
effective date of any conversion of a Base Rate Tranche into, or
continuation of, a LIBOR Tranche and at least one (1) Business
Day prior to the effective date of any conversion of a LIBOR
Tranche into a Base Rate Tranche. Each such notice (each, a
"Notice of Conversion/Continuation") shall be irrevocable, shall
be given in the form of Exhibit B, shall be executed by an
Authorized Officer of the Borrower and shall be appropriately
completed to specify (x) the date of such conversion or
continuation, (y) in the case of a conversion into, or a
continuation of, a LIBOR Tranche, the Interest Period to be
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applicable thereto and (z) the aggregate amount and type (Base
Rate or LIBOR) of the Tranche being converted or continued. In
the event that the Borrower shall fail to deliver a Notice of
Conversion/Continuation as provided herein with respect to any
outstanding LIBOR Tranche, such LIBOR Tranche shall automatically
be converted to a Base Rate Tranche upon the expiration of the
then current Interest Period applicable thereto.
3.4. Method, Application of Payments; Computations. (a)
All payments by the Borrower hereunder shall be made without
setoff, counterclaim or other defense, in Dollars and in
immediately available funds to the Lender at its office referred
to in Section 9.4, prior to 2:00 p.m., Charlotte time, on the
date payment is due. Any payment made as required hereinabove,
but after 2:00 p.m., Charlotte time, shall be deemed to have been
made on the next succeeding Business Day. If any payment falls
due on a day that is not a Business Day, then such due date shall
be extended to the next succeeding Business Day (except that in
the case of LIBOR Tranches to which the provisions of clause (ii)
in Section 3.2 are applicable, such due date shall be the next
preceding Business Day), and such extension of time shall then be
included in the computation of payment of interest, fees or other
applicable amounts. All wire transfers to the Lender shall be
sent to
First Union National Bank of North Carolina, Charlotte,
North Carolina, ABA Routing #▇▇▇▇▇▇▇▇▇, Ledger 465906
0001801, Attention: ▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇, Re: Piedmont
Management Company Inc.
unless otherwise instructed by the Lender.
(b) With respect to each payment hereunder, except as
specifically provided otherwise herein or in any of the other
Loan Documents, the Borrower may designate by written notice to
the Lender prior to or concurrently with such payment the
specific Tranches that are to be repaid or prepaid; provided
that, unless made together with all amounts required under
Section 3.9 to be paid as a consequence thereof, a prepayment of
a LIBOR Tranche may be made only on the last day of the Interest
Period applicable thereto. In the absence of any such
designation by the Borrower, the Lender shall, subject to the
foregoing, make such designation in its sole discretion.
(c) All computations of interest and fees hereunder
(including computations of the Reserve Requirement) shall be made
on the basis of a year consisting of 360 days and the actual
number of days (including the first day, but excluding the last
day) elapsed.
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(d) The Lender will record on its internal records the
outstanding principal amount of the Term Loan, the amount of each
payment received by it in respect of the Term Loan and the amount
of each Tranche thereof outstanding from time to time, and the
information so recorded shall, absent manifest error, be
conclusive; provided, however, that the failure of the Lender to
make any such recordation or provide any such information, or any
error in such recordation or information, shall not affect the
Borrower's obligations in respect of the Term Loan.
3.5. Recovery of Payments. The Borrower agrees that to the
extent the Borrower makes a payment or payments to or for the
account of the Lender, which payment or payments or any part
thereof are subsequently invalidated, declared to be fraudulent
or preferential, set aside or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or
similar state or federal law, common law or equitable cause,
then, to the extent of such payment or repayment, the Obligation
intended to be satisfied shall, to the extent permitted by
applicable law, be revived and continued in full force and effect
as if such payment had not been received.
3.6. Use of Proceeds. The proceeds of the Term Loan shall
be used solely to make an equity capital contribution to RECO of
at least $17,500,000, to repay certain indebtedness and to pay or
reimburse reasonable fees, costs and expenses in connection with
the closing of the Transactions that have been approved by the
Lender for payment or reimbursement.
3.7. Increased Costs; Change in Circumstances; Illegality;
etc. (a) If the adoption or modification after the Closing Date
of any applicable law, rule or regulation, or any change after
the Closing Date in the interpretation or administration thereof
by any Governmental Authority or central bank (whether or not
having the force of law) charged with the interpretation,
administration or compliance of the Lender with any of such
requirements, shall increase the costs to the Lender of agreeing
to make, making, funding or maintaining any LIBOR Tranche or
reduce the yield or rate of return of the Lender on any LIBOR
Tranche to a level below that which the Lender could have
achieved but for the adoption or modification of any such
requirements (other than as a result of any change in the Reserve
Requirement) or the interpretation or administration thereof, the
Borrower will, within fifteen (15) days after delivery to the
Borrower by the Lender of written demand therefor, pay to the
Lender such additional amounts as shall compensate the Lender for
such increase in costs or reduction in return. Such written
demand shall reflect the basis for calculation of the additional
amounts owed.
(b) If, at any time, the Lender shall have determined that
the adoption or modification after the Closing Date of any
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applicable federal, state or local law, rule or regulation
regarding the Lender's required level of capital (including any
allocation of capital requirements or conditions, but excluding
federal, state or local income tax liability), or any change
after the Closing Date in any interpretation or administration
thereof by any Governmental Authority (whether or not having the
force of law) charged with the interpretation, administration or
compliance of the Lender with any of such requirements, has or
would have the effect of reducing the rate of return on the
Lender's capital as a consequence of the Term Loan or any Tranche
thereof to a level below that which the Lender could have
achieved but for such adoption, modification, implementation or
interpretation (taking into account the Lender's policies with
respect to capital adequacy), the Borrower will, within fifteen
(15) days after delivery to the Borrower by the Lender of written
demand therefor, pay to the Lender such additional amounts as
will compensate the Lender for such reduction in return. Such
written demand shall reflect the basis for calculation of the
additional amounts owed.
(c) If, on or prior to the first day of any Interest
Period, (i) the Lender shall have determined that Dollar deposits
in the amount of the relevant LIBOR Tranche are not generally
available in the London interbank Eurodollar market or that the
rate at which such Dollar deposits are being offered will not
adequately and fairly reflect the cost to the Lender of making or
maintaining the LIBOR Tranche during such Interest Period or
(ii) the Lender shall have determined that adequate and
reasonable means do not exist for ascertaining the applicable
LIBOR Rate for such Interest Period, the Lender will forthwith so
notify the Borrower, whereupon the obligation of the Lender to
make, to convert Base Rate Tranches into, or to continue (after
the expiration of the then-current Interest Period), LIBOR
Tranches shall be suspended (including in respect of the LIBOR
Tranche to which such Interest Period applies), and any Notice of
Conversion/Continuation given at any time thereafter with respect
to LIBOR Tranches shall be deemed to be a request for Base Rate
Tranches, until the Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and
shall have so notified the Borrower.
(d) Notwithstanding any other provision in this Agreement,
if, at any time after the Closing Date, the Lender shall have
determined that the adoption or modification of any applicable
law, rule or regulation, or any interpretation or administration
thereof by any Governmental Authority or central bank (whether or
not having the force of law) charged with the interpretation,
administration or compliance of the Lender with any of such
requirements, has or would have the effect of making it unlawful
for the Lender to honor its obligation to make LIBOR Tranches or
to continue to make or maintain LIBOR Tranches, the Lender will
forthwith so notify the Borrower, whereupon (i) each LIBOR
Tranche shall automatically, on the expiration date of the
respective Interest Period applicable thereto or, to the extent
any such LIBOR
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Tranche may not lawfully be maintained as a LIBOR Tranche until
such expiration date, upon such notice, be converted into a Base
Rate Tranche and (ii) the obligation of the Lender to make, to
convert Base Rate Tranches into, or to continue, LIBOR Tranches
shall be suspended (including in respect of the LIBOR Tranche to
which such Interest Period applies), and any Notice of
Conversion/Continuation given at any time thereafter with respect
to LIBOR Tranches shall be deemed to be a request for Base Rate
Tranches, until the Lender shall have determined that the
circumstances giving rise to such suspension no longer exist and
shall have so notified the Borrower.
(e) Determinations by the Lender for purposes of this
Section 3.7 of any increased costs, reduction in return, market
contingencies, illegality or any other matter shall, absent
manifest error, be conclusive, provided that such determinations
are made in good faith. No failure by the Lender to demand
payment of any amounts payable under this Section 3.7 shall
constitute a waiver of its right to demand payment of any
additional amounts arising at any subsequent time. Nothing in
this Section 3.7 shall be construed or so operate as to require
the Borrower to pay any interest, fees, costs or charges in
excess of that permitted by applicable law.
3.8. Taxes. (a) Any and all payments by the Borrower
hereunder shall be made, in accordance with the terms hereof and
thereof, free and clear of and without deduction for any and all
present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, other
than net income and franchise taxes imposed on the Lender by the
United States or by the jurisdiction under the laws of which the
Lender is organized or in which its principal office or
applicable lending office is located or any political subdivision
or taxing authority thereof (all such nonexcluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable hereunder to the Lender, (i) the sum payable shall be
increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums
payable under this Section 3.8), the Lender receives an amount
equal to the sum it would have received had no such deductions
been made, (ii) the Borrower will make such deductions and
(iii) the Borrower will pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law.
(b) The Borrower will indemnify the Lender for the full
amount of Taxes (including, without limitation, any Taxes imposed
by any jurisdiction on amounts payable under this Section 3.8)
paid by the Lender, and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto,
whether or not
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such Taxes were correctly or legally asserted. This
indemnification shall be made within 30 days from the date the
Lender makes written demand therefor. Within thirty (30) days
after the date of any payment of Taxes pursuant to this
Section 3.8, the Borrower will furnish to the Lender the original
or a certified copy of a receipt evidencing payment thereof.
3.9. Compensation. The Borrower will compensate the Lender,
upon its written request (which request shall set forth the basis
for requesting such compensation), for all losses, expenses and
liabilities that the Lender may sustain (i) if for any reason a
conversion of or into a LIBOR Tranche does not occur on a date
specified therefor in a Notice of Conversion/Continuation,
(ii) if any repayment, prepayment or conversion of any LIBOR
Tranche occurs on a date other than the last day of an Interest
Period applicable thereto, (iii) if any prepayment of any
principal portion of any LIBOR Tranche is not made on any date
specified in a notice of prepayment given by the Borrower or
(iv) as a consequence of the acceleration of any Interest Period
of any LIBOR Tranche as a consequence of acceleration of the
maturity of the Term Loan pursuant to Section 8.2. Such
compensation shall include, without limitation, any loss, expense
or liability incurred by reason of the liquidation or
reemployment of deposits or other funds required by the Lender to
fund any LIBOR Tranche. Calculation of all amounts payable to
the Lender under this Section shall be made as though the Lender
had actually funded the relevant LIBOR Tranche through the
purchase of a Eurodollar deposit bearing interest at the LIBOR
Rate in an amount equal to the amount of such LIBOR Tranche and
having a maturity comparable to the relevant Interest Period;
provided, however, that the Lender may fund each LIBOR Tranche in
any manner it sees fit and the foregoing assumption shall be
utilized only for the calculation of amounts payable under this
Section.
ARTICLE IV
CLOSING; CONDITIONS OF CLOSING AND BORROWING
4.1. Closing. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A., 1900 Independence Center,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or at such
other place as the parties hereto shall mutually agree (the
"Closing Date"), at 10:00 a.m. on December 29, 1994, or at such
other time as the parties hereto shall mutually agree. The
parties agree that the Term Loan has been and shall be made in
North Carolina and that the Loan Documents were prepared and
executed in North Carolina.
4.2. Conditions of Closing. The obligation of the Lender to
close this financing and to make the Term Loan hereunder on the
Closing
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Date are subject to the satisfaction of the following conditions
precedent:
4.2.1 Executed Loan Documents. (a) Original copies, in
quantities designated by the Lender, of this Agreement and the
Pledge and Security Agreement, and an original Term Note, shall
have been duly authorized, executed and delivered to the Lender
by the Borrower, and each such Loan Document shall be in full
force and effect and no Default or Event of Default shall exist
thereunder. The Lender shall also have received all certificates
for the capital stock of RECO and Lexington Management being
pledged under the Pledge and Security Agreement, executed undated
irrevocable stock powers for each such certificate, and the
certificates evidencing the Navigators Stock, together with
undated irrevocable stock powers for each such certificate duly
executed, by the Borrower in blank with a Medallion signature
guarantee.
(b) Original copies, in quantities designated by the
Lender, of the Guaranty shall have been duly authorized, executed
and delivered to the Lender by Lexington Management, and the
Guaranty shall be in full force and effect and no Default shall
exist thereunder.
(c) All Uniform Commercial Code financing statements and
all other filings or recordations, and all other actions,
necessary to perfect the security interests of the Lender in the
Collateral shall have been filed or taken, and the Lender shall
have received assurances in a form acceptable to it that such
security interests constitute valid and perfected first-priority
security interests therein, subject only to Permitted Liens.
4.2.2 Certificates, etc. The Lender shall have received
the following, each in form and substance satisfactory to the
Lender:
(a) A certificate dated as of the Closing Date from the
president or chief financial officer of the Borrower, to the
effect that all representations and warranties of the Borrower
contained in this Agreement and the other Loan Documents are
true, correct and complete as of the Closing Date; that the
Borrower is not in violation of any of the covenants contained in
this Agreement and the other Loan Documents; that there are no
material regulatory proceedings, including insurance regulatory
proceedings, pending or, to such individual's knowledge,
threatened against any of the Subsidiaries in any jurisdiction;
that, after giving effect to the transactions contemplated by
this Agreement and the other Loan Documents, no Default or Event
of Default has occurred and is continuing; and that the Borrower
has satisfied each of the closing conditions set forth in this
Article IV;
(b) A certificate dated as of the Closing Date of the
secretary or an assistant secretary of each of the Borrower, and
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Lexington Management, certifying: (i) that attached thereto is a
true and complete copy of the articles or certificate of
incorporation and all amendments thereto of such person,
certified as of a recent date by the appropriate Governmental
Authority in its jurisdiction of incorporation and that such
articles have not been amended since such date; (ii) that
attached thereto is a true and complete copy of the bylaws of
such Person as in effect on the date of such certification;
(iii) that attached thereto is a true and complete copy of
resolutions adopted by the Board of Directors of such Person,
authorizing the execution, delivery and performance of the Loan
Documents to which it is a party, if any; and (iv) as to the
incumbency and genuineness of the signature of each officer of
such Person executing the Loan Documents to which it is a party,
if any;
(c) A certificate dated as of the Closing Date of the
Secretary or Assistant Secretary of RECO, certifying: (i) that
attached thereto are true and complete copies of the articles of
incorporation and all amendments thereto and the bylaws of RECO
as in effect on the date of such certification;
(d) Certificates as of a recent date of the good standing
of each of the Borrower, RECO and Lexington Management under the
laws of its jurisdiction of organization; and
(e) A certificate of compliance for RECO issued by the New
York Department within thirty (30) days prior to the Closing
Date.
4.2.3 Other Documents. The Lender shall have received the
following, each in form and substance satisfactory to the Lender:
(a) A completed Form U-1 of the Federal Reserve Board;
(b) The favorable opinion of the law firm of ▇▇▇▇▇ ▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to the Borrower, dated as of the Closing Date
and addressed to the Lender as to the matters as the Lender may
reasonably request;
(c) The reinsurance plan of RECO as in effect on the
Closing Date;
(d) As to the Historical Financial Statements of the
Borrower and its Subsidiaries and the Historical Statutory
Statements of each of the Insurance Subsidiaries, in each case as
of the end of its most recent fiscal year, a report thereon of
the relevant independent certified public accountants, containing
an unqualified opinion of such accountants;
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(e) Copies of each of the following documents as filed by
the Borrower with the Securities and Exchange Commission:
(i) Annual Report on Form 10-K for the fiscal year
ended December 31, 1993;
(ii) Quarterly Report on Form 10-Q for the period ended
March 31, 1994;
(iii) Quarterly Report on Form 10-Q for the period ended
June 30, 1994;
(iv) Quarterly Report on Form 10-Q for the period ended
September 30, 1994;
(v) any Current Reports on Form 8-K filed since
January 1, 1994;
(vi) 1993 Annual Report to Stockholders;
(vii) definitive proxy statement for the annual meeting
of stockholders held on May 26, 1994;
(collectively, the "SEC Documents").
(f) A schedule of the investment portfolio of RECO as of
September 30, 1994, and no material adverse change shall have
occurred with respect to such investment portfolio since
September 30, 1994;
(g) The results of UCC searches of all filings made against
the Borrower under the Uniform Commercial Code as in effect in
the states in which any of the Collateral being pledged as of the
Closing Date is located or whose laws govern the perfection and
validity of the Lender's security interest therein, which search
results shall indicate, among other things, that the Collateral
being pledged by the Borrower as of the Closing Date is free and
clear of any Liens other than Permitted Liens;
(h) Copies of the Actuarial Report of RECO for the fiscal
year ended December 31, 1993;
(i) The Projections;
(j) Business plans of RECO and Lexington Management for the
fiscal year ending December 31, 1995;
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(k) True and complete copies of the following, including
all amendments thereto, as in full force and effect on the
Closing Date:
(i) the Tax Sharing Agreements;
(ii) the current Form ADV of each Investment Advisory
Subsidiary;
(iii) the current Form BD and most recent FOCUS
report of each Broker-Dealer Subsidiary; and
(iv) the current prospectus and most recent Form N-SAR
of each Mutual Fund of an Investment Advisory Subsidiary;
(l) All other documents, certificates and instruments
required hereunder and under the other Loan Documents to be
delivered to the Lender as a condition to the Closing, including,
without limitation, the Historical Financial Statements and the
Historical Statutory Statements.
4.2.4 Certain Transactions. The Lender shall have received
the following, each in form and substance satisfactory to the
Lender:
(a) Evidence that any Indebtedness of the Borrower and its
Subsidiaries, other than Indebtedness listed with the consent of
the Lender on Schedule 5.28 as outstanding as of the Closing Date
(collectively, "Surviving Indebtedness"), including, without
limitation, all Indebtedness under the Credit Agreement dated
December 8, 1986 between the Borrower and ▇▇▇▇▇▇ Guaranty Trust
Company of New York and the $2 million unsecured line of credit
with ▇▇▇▇▇▇ Guaranty Trust Company of New York, has been paid,
satisfied or extinguished in full and that all Liens securing
such Indebtedness have been released and terminated, including
the execution and delivery to the Lender of payoff and release
letters and any required Uniform Commercial Code termination
statements in form suitable for filing;
(b) Evidence that RECO has secured a property catastrophe
reinsurance policy in form and substance satisfactory to the
Lender from a reinsurer acceptable to the Lender providing $5
million of coverage for catastrophe losses in excess of $5
million;
(c) Concurrently with the making of the Term Loan, the
balance of the facility fee required under the terms of the
commitment letter from the Lender to the Borrower, dated December
20, 1994, to be paid to the Lender at the Closing;
(d) Concurrently with the making of the Term Loan, evidence
of payment by the Borrower of the fees and expenses of the
Lender's special counsel incurred in connection with the
transactions contemplated hereby;
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(e) Concurrently with the making of the Term Loan, evidence
that at least $17,500,000 of the remaining proceeds of the Term
Loan shall have been used to make an equity capital contribution
to RECO.
4.2.5 Consents; No Adverse Change; etc.
(a) All approvals, permits, authorizations and consents of
any and all Governmental Authorities (including, without
limitation, all relevant Departments) or other Persons required
in connection with the execution, delivery and performance of
this Agreement and the other Loan Documents shall have been
obtained and shall be in full force and effect, each in form and
substance satisfactory to the Lender, and the Lender shall have
received copies thereof, and all applicable waiting periods shall
have expired without any adverse action being taken by any
Governmental Authority having jurisdiction; provided, however,
that the approval of all relevant Departments may be required
prior to any foreclosure or other transfer, but not the pledge,
under the Pledge and Security Agreement of any Collateral
constituting the stock of any Insurance Subsidiary.
(b) No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed,
before any court or other Governmental Authority, to enjoin,
restrain or prohibit, or to obtain substantial damages in respect
of, or that is otherwise related to or arises out of, this
Agreement or any of the other Loan Documents or that, in the
Lender's opinion, would be reasonably likely to have a Material
Adverse Effect or would otherwise make it inadvisable for the
Lender to consummate the transactions contemplated hereby.
(c) Since September 30, 1994, there shall not have occurred
any Material Adverse Change or any event, condition or state of
facts that could reasonably be expected to have a Material
Adverse Effect.
(d) The Lender shall have completed its due diligence
review of the facilities, books and records of the Borrower and
its Subsidiaries, and the results thereof shall have been
satisfactory to the Lender.
(e) Each of the representations and warranties made by the
Borrower contained in Article V shall be true and correct on and
as of the Closing Date, except to the extent any such
representation or warranty relates solely to a prior date.
(f) No Default or Event of Default shall have occurred or
be continuing or shall have resulted from the making of the Term
Loan or the application of the proceeds therefrom.
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(g) The Lender shall have received copies of all other
documents, certificates, opinions, instruments and other evidence
as the Lender may reasonably request, each in form and substance
satisfactory to the Lender.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement
and to make the Loan, the Borrower represents and warrants to the
Lender as follows:
5.1. Corporate Existence and Power. Each of the Borrower
and its Subsidiaries (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its incorporation, (ii) has the full corporate power and
authority to execute, deliver and perform the Loan Documents to
which it is or will be a party, to own and hold its property and
to engage in its business as presently conducted and (iii) is
duly qualified to do business as a foreign corporation and is in
good standing in each jurisdiction where the nature of its
business or the ownership of its properties requires it to be so
qualified.
5.2. Authorization; Enforceability. Each of the Borrower
and its Subsidiaries has taken all necessary corporate action to
execute, deliver and perform, and validly executed and delivered,
each of the Loan Documents to which it is to be a party. Each of
this Agreement and the other Loan Documents constitutes the
legal, valid and binding obligation of each of the Borrower and
its Subsidiaries to the extent a party hereto or thereto,
enforceable against it in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general equitable principles.
5.3. No Violation. The execution, delivery and performance
by each of the Borrower and its Subsidiaries of the Loan
Documents to which it is a party, and compliance by it therewith,
do not and will not (i) violate any provision of its articles or
certificate of incorporation or bylaws, (ii) contravene any
applicable Requirement of Law (including, without limitations,
Regulations G, T, U and X of the Federal Reserve Board),
(iii) conflict with, result in a breach of or constitute (with
notice, lapse of time or both) a default under any indenture,
loan agreement, mortgage, deed of trust, lease or other agreement
or instrument to which it is a party, by which it or any of its
properties is bound or to which it may be subject, (iv) result in
or require the creation or imposition of any Lien upon any of its
properties, other than Liens created pursuant to the Loan
Documents, or (v) require the approval
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or consent of any Person not a Governmental Authority, other than
such approvals and consents as have been obtained as required and
the approval of all relevant Departments with respect to any
foreclosure or other transfer, but not the pledge, under the
Pledge and Security Agreement of any Collateral constituting
stock of any Insurance Subsidiary and such approvals described in
Section 22 of the Pledge and Security Agreement.
5.4. Governmental Authorization; Permits. (a) No consent,
approval, authorization, exemption or other action by, notice to,
or filing with, any Governmental Authority is required in
connection with (i) the due execution, delivery and performance
by each of the Borrower and its Subsidiaries of this Agreement or
any of the other Loan Documents to which it is a party or the
legality, validity or enforceability hereof or thereof, other
than the approval of all relevant Departments with respect to any
foreclosure or other transfer, but not the pledge, under the
Pledge and Security Agreement of any Collateral constituting
stock of any Insurance Subsidiary, or (ii) the perfection and
maintenance (including maintenance of priority) of the Liens
created pursuant to the Loan Documents, in each case other than
filings specifically contemplated by the Loan Documents and other
than such filings as have been obtained and are set forth in
Schedule 5.4.
(b) Each of the Borrower and its Subsidiaries has, and is
in good standing with respect to, all requisite Licenses. None
of such Licenses contains any term, condition or limitation more
burdensome than such as are generally applicable to Persons
engaged in the same or similar business.
(c) Each of the Insurance Subsidiaries holds licenses
(including, without limitation, licenses or certificates of
authority from relevant Departments), permits or authorizations
necessary to transact insurance and reinsurance business in all
jurisdictions in which such Insurance Subsidiary transacts such
business (collectively, the "Insurance Licenses"). To the
knowledge of the Borrower, (x) no such Insurance License is the
subject of a proceeding for suspension, revocation or limitation
or any similar proceedings, (y) there is no sustainable basis for
such a suspension, revocation or limitation, and (z) no such
suspension, revocation or limitation is threatened by any
relevant Department. No Insurance Subsidiary transacts any
insurance business, directly or indirectly, in any jurisdiction,
other than one in which it has an Insurance License, where such
business requires any license, permit or other authorization of a
Department or other Governmental Authority of such jurisdiction.
5.5. Litigation. There are no actions, investigations,
suits or proceedings pending or, to the knowledge of the
Borrower, threatened, at law, in equity or in arbitration, before
any court, other Governmental Authority or other Person,
(i) against or
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affecting the Borrower or any of its Subsidiaries or any of their
respective properties seeking damages in excess of $50,000 (other
than claims made in the ordinary course of business pursuant to
written policies) or that would otherwise, if adversely
determined, be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect, or (ii) with
respect to this Agreement or any of the other Loan Documents.
5.6. Taxes. (a) Each of the Borrower and its Subsidiaries
has timely filed all tax returns and reports required to be filed
by it and has paid all taxes, assessments, fees and other charges
levied upon it or upon its properties that are shown thereon as
due and payable (including, without limitation, all required
withholding taxes, social security taxes and other similar
payroll taxes), other than those that are being contested in good
faith and by proper proceedings and for which adequate reserves
have been established in accordance with Generally Accepted
Accounting Principles. Such returns accurately reflect in all
material respects all liability for taxes of the Borrower and its
Subsidiaries for the periods covered thereby. There is no
action, suit, audit, investigation, assessment, claim or
proceeding pending or, to the knowledge of the Borrower,
threatened, regarding any taxes relating to the Borrower or any
of its Subsidiaries.
(b) The consolidated federal income tax returns of the
Borrower have been examined by the Internal Revenue Service for
all periods to and including December 31, 1992; and all
deficiencies asserted as a result of such examinations (or as a
result of any examination of such returns for earlier fiscal
years) have been paid or finally settled.
(c) The Borrower paid federal income taxes of at least
$3,390,000 million in respect to income realized in the fiscal
year ended December 31, 1993 and as of the Closing Date has not
received any refund with respect thereto. Net Operating Losses
("NOLs") under Section 172(b)(1)(A) of the Internal Revenue Code
arising with respect to the fiscal year ending December 31, 1994
may be carried back to offset income realized in the fiscal year
ended December 31, 1993. The Borrower estimates in good faith
that such application of such NOLs would entitle the Borrower to
a federal income tax refund of at least $3,390,000. The Borrower
shall take such action as is necessary to obtain such a refund as
soon as is practicable.
5.7. Subsidiaries and Ownership of Securities. (a) Part I
of Schedule 5.7 sets forth a list, both (i) as of the date hereof
and (ii) as of the Closing Date, of all of the Subsidiaries of
the Borrower and, as to each such Subsidiary, the jurisdiction of
its incorporation, the percentage ownership (direct and indirect)
of the Borrower in each class of its capital stock, and each
direct owner thereof. Except for the shares of capital stock
expressly
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indicated on Schedule 5.7, there are no shares of capital stock
or warrants, rights, options or other equity securities of any
Subsidiary of the Borrower outstanding or reserved for any
purpose. All outstanding shares of capital stock of each
Subsidiary of the Borrower are duly and validly issued, fully
paid and nonassessable and not subject to any preemptive rights,
warrants, options or similar rights or restrictions in favor of
third parties or any contractual or other restrictions upon
transfer. Each Person indicated on Schedule 5.7 as the direct
owner of the outstanding shares of capital stock of any
Subsidiary of the Borrower is, or as of the Closing Date will be,
the sole legal, record and beneficial owner of, and has, or as of
the Closing Date will have, good and valid title to, all such
capital stock, free and clear of all Liens other than the
security interest created in favor of the Lender under the Pledge
and Security Agreement. Neither the Borrower nor any of its
Subsidiaries is a partner or joint venturer in any partnership or
joint venture.
(b) Part II of Schedule 5.7 sets forth the following
information with respect to equity securities held by the
Borrower other than securities issued by Subsidiaries of the
Borrower: the issuer thereof, the class of such security, the
number of shares or ownership interest evidenced thereby, the
percentage of economic ownership and voting control evidenced
thereby (which may be based on the number of outstanding
securities most recently publicly announced by such issuer) and
any restrictions on the transfer thereof.
5.8. Full Disclosure. All factual information heretofore or
contemporaneously furnished to the Lender in writing by or on
behalf of the Borrower or any of its Subsidiaries (including,
without limitation, all information contained in the Loan
Documents and the SEC Documents) for purposes of or in connection
with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby is, and all other
such factual information hereafter furnished to the Lender in
writing by or on behalf of the Borrower or any of its
Subsidiaries will be, true and accurate in all material respects
on the date as of which such information is dated or certified
(or, if such information has been amended or supplemented, on the
date as of which any such amendment or supplement is dated or
certified) and not made incomplete by omitting to state a
material fact necessary to make the statements contained therein,
taken as a whole together with all other such information in
light of the circumstances under which such information was
provided, not misleading.
5.9. Margin Regulations. Neither the Borrower nor any of
its Subsidiaries is engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock. No
proceeds of the Term Loan will be used, directly or indirectly,
to purchase or carry any Margin Stock, to extend credit for such
purpose or for
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any other purpose that would violate Regulations G, U, T or X of
the Federal Reserve Board, as in effect from time to time, and
any successor regulations thereto, or for any purpose that would
violate any provision of the Exchange Act.
5.10. Financial Matters. (a) The Borrower has heretofore
furnished to the Lender copies of (i) the audited consolidated
balance sheets of the Borrower and its Subsidiaries as of
December 31, 1991, 1992, and 1993, and the related statements of
income and cash flows for the fiscal years then ended, and
(ii) the unaudited consolidated balance sheet of the Borrower and
its Subsidiaries as of September 30, 1994, and the related
statements of income and cash flows for the nine-month period
then ended (collectively, the "Historical Financial Statements").
The Historical Financial Statements have been prepared in
accordance with Generally Accepted Accounting Principles
(subject, with respect to the unaudited Historical Financial
Statements, to the absence of notes required by Generally
Accepted Accounting Principles and to normal year-end audit
adjustments) and present fairly the financial position of the
Borrower and its Subsidiaries on a consolidated basis as of the
respective dates thereof and the consolidated results of
operations of the Borrower and its Subsidiaries for the
respective periods then ended. Except as fully reflected in the
most recent Historical Financial Statements and the notes
thereto, as of the Closing Date there will be no material
liabilities or obligations with respect to the Borrower or any of
its Subsidiaries of any nature whatsoever (whether absolute,
contingent or otherwise and whether or not due). Since the date
of the most recent audited Historical Financial Statements, there
has been no Material Adverse Change, and, to the knowledge of the
Borrower, no Material Adverse Change is threatened or reasonably
likely to occur (it being understood that the other transactions
contemplated by the Loan Documents do not, as such, constitute a
Material Adverse Change). The Borrower has not directly or
indirectly declared, ordered, paid, made or set apart any amounts
or property for any dividend, share acquisition or other
distribution, or agreed to do so.
(b) The Borrower has prepared, and has heretofore
furnished to the Lender copies of, annual projected statements of
income of RECO and Lexington Management for the four-year period
beginning January 1, 1994, giving effect to the Transactions (the
"Projections"). In the opinion of the Borrower's management, the
assumptions used in preparation of the Projections were
reasonable when made as of the Closing Date and continue to be
reasonable. The Projections have been prepared in good faith by
the executive and financial personnel of the Borrower in light of
the historical financial performance of the Borrower and the
financial and operating condition of the Borrower at the time
prepared and represent a reasonable estimate of the future
performance and financial condition of the Borrower and its
Subsidiaries, subject
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to the uncertainties and approximations inherent in any
projections.
(c) The Borrower has heretofore furnished to the Lender
copies of (i) the Annual Statement of RECO as of December 31,
1993, and for the fiscal year then ended, each as filed with the
relevant Department, and (ii) the Quarterly Statement of RECO as
of March 31, 1994, June 30, 1994, and September 30, 1994, and for
the three-month, six-month and nine-month periods then ended,
each as filed with the relevant Department (collectively, the
"Historical Statutory Statements"). The Historical Statutory
Statements (including, without limitation, the provisions made
therein for investments and the valuation thereof, reserves,
policy and contract claims and Statutory Liabilities) have been
prepared in accordance with Statutory Accounting Principles
(except as may be reflected in the notes thereto and subject,
with respect to the Quarterly Statements, to the absence of notes
required by Statutory Accounting Principles and to normal year-
end audit adjustments), were in compliance with applicable
Requirements of Law when filed and present fairly the financial
position of the respective Insurance Subsidiaries covered thereby
as of the respective dates thereof and the results of operations,
changes in capital and surplus and cash flow of the respective
Insurance Subsidiaries covered thereby for the respective periods
then ended. Except for liabilities and obligations disclosed or
provided for in the Historical Statutory Statements (including,
without limitation, reserves, policy and contract claims and
Statutory Liabilities), no Insurance Subsidiary had, as of the
date of its respective Historical Statutory Statements, any
liabilities or obligations of any nature whatsoever (whether
absolute, contingent or otherwise and whether or not due) that,
in accordance with Statutory Accounting Principles, would have
been required to have been disclosed or provided for in such
Historical Statutory Statements. All books of account of each
Insurance Subsidiary fully and fairly disclose all of its
transactions, properties, assets, investments, liabilities and
obligations, are in its possession and are true, correct and
complete in all material respects.
(d) The investments of each of the Insurance Subsidiaries
reflected in its most recently filed Annual Statement and
Quarterly Statement comply in all material respects with all
applicable requirements of the relevant Department and of any
other Governmental Authority having jurisdiction over the
investment of its funds. The amounts shown in the most recently
filed Annual Statement and Quarterly Statement for each of the
Insurance Subsidiaries for reserves, policy and contract claims,
agents' balances and uncollected premiums and Statutory
Liabilities were computed in accordance with commonly accepted
actuarial standards consistently applied, were fairly stated in
accordance with sound actuarial principles, were based on
actuarial assumptions that were in accordance with or more
stringent than those called for in the
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insurance policies and contracts and in the related reinsurance,
co-insurance or similar contracts of such Insurance Subsidiaries,
were computed on the basis of assumptions consistent with those
of the preceding fiscal year, and meet the requirements of each
relevant Department and of any other Governmental Authority
having jurisdiction. Such reserves as established by each
Insurance Subsidiary were, in the judgment of the Borrower,
adequate as of such date for the payment by such Insurance
Subsidiary of all of its insurance benefits, losses, claims and
investigative expenses. Marketable securities and short-term
investments reflected in each Insurance Subsidiary's most
recently filed Annual Statement and Quarterly Statement are
valued at cost, amortized cost or market value, as required by
applicable Requirements of Law.
(e) The Earned Surplus of RECO as of September 30, 1994
was $16,015,969.
5.11. Ownership of Properties. (a) Each of the Borrower
and its Subsidiaries has good and marketable title to all real
property owned by it, holds interests as lessee under valid
leases in full force and effect with respect to all leased real
and material personal property used in connection with its
business, and has good title to all of its other properties and
assets (except as sold or otherwise disposed of since the date
thereof in the ordinary course of business), in each case free
and clear of all Liens other than Permitted Liens.
(b) Other than (i) financing statements evidencing true
leases of equipment that have been filed solely for notice
purposes and (ii) financing statements in favor of the Lender, no
financing statement that names the Borrower or any of its
Subsidiaries as debtor has been filed and is still in effect, and
neither the Borrower nor any of its Subsidiaries has signed any
other financing statement or any security agreement authorizing
any secured party thereunder to file any such financing
statement.
5.12. Employee Plans. (a) Each Employee Plan is in
compliance in all material respects with all applicable
Requirements of Law, including, without limitation, the
applicable provisions of ERISA and the Internal Revenue Code
(including provisions therein relating to the filing of reports
in respect of such Employee Plan, which reports are true and
correct in all material respects as of the date filed).
(b) Each Qualified Plan is and always has been so
qualified and either has an Internal Revenue Service favorable
determination letter or the remedial amendment period under
Section 401(b) of the Internal Revenue Code within which such a
determination may be applied for has not yet expired, and the
trusts created thereunder are exempt from tax under the
provisions of Section 501 of the Internal Revenue Code, and, to
the knowledge of the Borrower,
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nothing has occurred that would cause the loss of such
qualification or tax-exempt status.
(c) None of the Qualified Plans subject to Title IV of
ERISA has any Unfunded Pension Liability.
(d) No Employee Plan provides medical or other welfare
benefits or extends coverage relating to such benefits beyond the
date of a participant's termination of employment, except (i) to
the extent required by Section 4980B of the Internal Revenue Code
and at the sole expense of the participant or the beneficiary of
the participant to the fullest extent permissible under Section
4980B of the Internal Revenue Code and (ii) except for such
Employee Plans the cost of the provision of benefits under which
is accounted for under Statement of Financial Accounting
Standards No. 106 in the most-recent audited Historical Financial
Statements. Each of the Borrower, its Subsidiaries and each
ERISA Affiliate has complied in all material respects with the
notice and continuation coverage requirements of Section 4980B of
the Internal Revenue Code.
(e) No ERISA Event has occurred or, to the knowledge of
the Borrower, is reasonably expected to occur with respect to any
Pension Plan.
(f) There are no material pending or, to the knowledge of
the Borrower, threatened claims, actions or proceedings against
or with respect to any Employee Plan by the Internal Revenue
Service, Department of Labor, Equal Opportunity Employment
Commission or any participant, beneficiary or other Person
involving any aspect of any Employee Plan or its assets or any
fiduciary with respect to any Employee Plan (other than routine
benefit claims), nor are there any facts or circumstances that
could reasonably be expected to form the basis for any such
claim, action or proceeding.
(g) Neither the Borrower nor any of its Subsidiaries, nor
any ERISA Affiliate, has incurred or, to the knowledge of the
Borrower, reasonably expects to incur any liability (and no event
has occurred that, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 or
4243 of ERISA with respect to a Multiemployer Plan.
(h) There is no material outstanding penalty, interest or
excise tax under the Internal Revenue Code or ERISA with respect
to any Employee Plan.
(i) With respect to each Pension Plan, (i) all required
contributions and payments have been made (including any employee
election contributions described in Section 401(k) of the
Internal Revenue Code) and (ii) all benefits due thereunder have
been paid.
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(j) All Employee Plans can be amended or terminated at any
time by the Borrower, any Subsidiary or any ERISA Affiliate, as
applicable, without material obligation or liability for any
benefits other than those accrued thereunder as of the date of
any such amendment or termination.
5.13. Solvency. On the date hereof and on the Closing Date,
both before and after giving effect to the consummation of the
transactions contemplated hereby, the Borrower and each of its
Subsidiaries is and will be Solvent.
5.14. Environmental Matters. (a) To the extent any of the
following may likely have a Material Adverse Effect: (i) no
Hazardous Substances are or have been generated, used, released,
treated, disposed of or stored, or otherwise located, in, on or
under any portion of any real property, leased or owned, of the
Borrower or any of its Subsidiaries, and no portion of any such
real property or any other real property at any time leased,
owned or operated by the Borrower or any of its Subsidiaries,
including, without limitation, the soil and groundwater located
thereon and thereunder, has been contaminated by any Hazardous
Substance; (ii) no improvements on any portion of any real
property, leased or owned, of the Borrower or any of its
Subsidiaries contain any asbestos or substances containing
asbestos; (iii) no portion of any real property, leased or owned,
of the Borrower or any of its Subsidiaries has been the subject
of an environmental audit, assessment or remedial action; and
(iv) to the knowledge of the Borrower, the foregoing statements
are true and correct with respect to all of the real property
adjoining any portion of any real property, leased or owned, of
the Borrower or any of its Subsidiaries.
(b) To the knowledge of the Borrower, (i) no portion of
any real property, leased or owned, of the Borrower or any of its
Subsidiaries has been used as or for a mine, a landfill, a dump
or other disposal facility, a gasoline service station, or (other
than for petroleum substances stored in the ordinary course of
business) a petroleum products storage facility, and (ii) no
portion of such real property or any other real property at any
time leased, owned or operated by the Borrower or any of its
Subsidiaries has, pursuant to any Environmental Law, been placed
on the "National Priorities List" or "CERCLIS List" (or any
similar federal, state or local list) of sites subject to
possible environmental problems.
(c) There are no underground storage tanks situated on any
real property, leased or owned, of the Borrower or any of its
Subsidiaries, and to the knowledge of the Borrower, no
underground storage tanks have ever been situated thereon.
(d) All activities and operations of the Borrower and its
Subsidiaries are in material compliance with the requirements of
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all applicable Environmental Laws, and each of the Borrower and
its Subsidiaries has timely filed all reports required to be
filed, has acquired all necessary certificates, approvals and
permits, and has generated and maintained in all material
respects all required data, documentation and records required
under all Environmental Laws, except where the failure to do so,
in each case and in the aggregate, would not be likely to have a
Material Adverse Effect.
(e) Neither the Borrower nor any of its Subsidiaries has
ever sent any Hazardous Substance to a site that, pursuant to any
Environmental Law, (i) has been placed on the "National
Priorities List" or "CERCLIS List" (or any similar federal, state
or local list) of sites subject to possible environmental
problems, or (2) is subject to any claim, administrative order or
other request to take "response," "removal," "corrective" or
"remedial" action, within the meaning of applicable Environmental
Laws, or to pay for or contribute to the costs of cleaning up the
site.
(f) Neither the Borrower nor any of its Subsidiaries is
involved in any suit, action or proceeding, or has received any
notice, complaint or other request for information from any
Governmental Authority or other Person with respect to, any
actual or alleged Environmental Claims, the adverse resolution of
which would likely have a Material Adverse Effect; and, to the
knowledge of the Borrower, there are no such threatened actions,
suits, proceedings or investigations with respect to
Environmental Claims.
5.15. Trade Relations. There exists (i) no actual or, to
the knowledge of the Borrower, threatened termination,
cancellation or limitation of, or any adverse modification of or
change in, the business relationship of the Borrower or any of
its Subsidiaries with any of its customers or any group of its
customers whose purchases, individually or in the aggregate, are
material to its business, or with any insurance agent or
insurance agency or group of insurance agents or insurance
agencies whose business relationship is, individually or in the
aggregate, material to its business, and (ii) no condition or
state of facts or circumstances that would materially adversely
affect the Borrower or any of its Subsidiaries or its business or
prevent it from conducting its business after the consummation of
the Transactions in substantially the same manner in which it has
heretofore been conducted.
5.16. Labor Relations. Neither the Borrower nor any of its
Subsidiaries is engaged in any unfair labor practice within the
meaning of the National Labor Relations Act of 1947, as amended.
There is (i) no unfair labor practice complaint before the
National Labor Relations Board, or grievance or arbitration
proceeding arising out of or under any collective bargaining
agreement, pending or, to the knowledge of the Borrower,
threatened against the Borrower or any of its Subsidiaries,
(ii) no strike, lock-out,
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slowdown, stoppage, walkout or other labor dispute pending or, to
the knowledge of the Borrower, threatened against the Borrower or
any of its Subsidiaries and (iii) to the knowledge of the
Borrower, no petition for certification or union election or
union organizing activities with respect to the Borrower or any
of its Subsidiaries. Neither the Borrower nor any of its
Subsidiaries is a party to any employment agreement with any of
its employees, other than agreements with 14 employees providing
for the payment of severance ranging from 6 to 30 months of
salary following termination of employment within 18 months after
a change in control of the Borrower.
5.17. Proprietary Rights. (a) Each of the Borrower and its
Subsidiaries owns, or has the legal right to use pursuant to a
valid license in full force and effect or otherwise, all patents,
patent applications, copyrights, copyright applications,
trademarks, trademark applications, service marks, trade names,
processes and formulae, whether not registered or qualified
(collectively, "Proprietary Rights"), necessary for the conduct
of its business as presently conducted and as presently proposed
to be conducted, without any known conflict with any Proprietary
Right held by any other Person that, or the failure to obtain
which, as the case may be, would (i) preclude the Borrower or any
of its Subsidiaries from offering or selling any service or
product currently offered or sold by it, or from using any
Proprietary Right currently used by it in the geographic area and
in the manner in which it currently offers or sells such product
or service or (ii) otherwise materially interfere with the
ability of the Borrower or any of its Subsidiaries to conduct its
business as presently conducted and as presently proposed to be
conducted.
(b) No claim has been made or, to the knowledge of the
Borrower, has been threatened or is reasonably likely to be made,
that the use by the Borrower or any of its Subsidiaries of any
Proprietary Right presently used in the conduct of its business
does or may violate or infringe the rights of any other Person,
or otherwise contesting the validity, enforceability, use or
ownership of any such Proprietary Right. The consummation of the
transactions contemplated hereby will not impair the ownership by
the Borrower or any of its Subsidiaries of, or the license or
other right of the Borrower or any of its Subsidiaries to use,
any such Proprietary Right.
5.18. Compliance With Laws. Each of the Borrower and its
Subsidiaries has timely filed all reports, documents and other
materials required to be filed by it with any Governmental
Authority, has retained all records and documents required to be
retained by it and is otherwise in compliance with all applicable
Requirements of Law in respect of the conduct of its business and
the ownership and operation of its properties, except for such
Requirements of Law the failure to comply with which,
individually
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or in the aggregate, would not be reasonably likely to have a
Material Adverse Effect.
5.19. Regulated Industries. Neither the Borrower nor any of
its Subsidiaries is (i) an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or (ii) a "holding
company," a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
5.20. Collateral. The provisions of the Pledge and Security
Agreement are effective to create in favor of the Lender, upon
(i) the making of the Term Loan hereunder and (ii) the possession
by the Lender of certificates evidencing the Pledged Investments
(as defined in the Pledge and Security Agreement), a valid and
enforceable first priority perfected security interest in and
Lien upon all right, title and interest of the Borrower in the
Collateral described therein, subject to no other Liens. No
filings or recordations are required in order to perfect the
security interest in and Lien upon the Collateral created in
favor of the Lender under the Pledge and Security Agreement.
5.21. Certain Contracts. Schedule 5.21 lists, both (a) as
of the date hereof and (b) as of the Closing Date and immediately
after giving effect to the Acquisition, each contract, agreement
or commitment, written or oral, to which the Borrower or any of
its Subsidiaries is a party, by which any of them or their
respective properties is bound or to which any of them is subject
(other than as may be disclosed on another schedule to this
Agreement or elsewhere herein and other than insurance policies
written by any of the Insurance Subsidiaries in the ordinary
course of business) and that (i) relates to employment or labor
matters (other than the Employee Plans and severance agreements
described in Section 5.16), (ii) involves aggregate consideration
payable to or by any party thereto of $100,000 or more (other
than policies of insurance written by any of the Insurance
Subsidiaries in the ordinary course of its business and the
Reinsurance Agreements listed in Schedule 5.22), or (iii) is
otherwise material to the business, condition (financial or
otherwise), operations, performance or properties of the Borrower
or any of its Subsidiaries, and also indicates the parties,
subject matter and term thereof. Each such contract is in full
force and effect; neither the Borrower nor any of its
Subsidiaries or, to the knowledge of the Borrower, any other
party thereto, is in default under any such contract; and the
Borrower has no reason to believe that the financial condition of
any other party to any such contract is impaired such that a
default thereunder by such party could reasonably be anticipated.
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5.22. Reinsurance. Schedule 5.22 lists, both (a) as of the
date hereof and (b) as of the Closing Date, each Reinsurance
Agreement under which any of the Insurance Subsidiaries has ceded
liability, indicates the other parties thereto and the term
thereof and also designates those Reinsurance Agreements
containing any provision requiring or permitting any increase in
premiums thereunder as a result of losses incurred with respect
to policies ceded (a "Premium Adjustment Provision"). Each such
Reinsurance Agreement is in full force and effect; neither the
Borrower nor any of its Insurance Subsidiaries or, to the
knowledge of the Borrower, any other party thereto, is in default
under any such contract; and the Borrower has no reason to
believe that the financial condition of any other party to any
such contract is impaired such that a default thereunder by such
party could reasonably be anticipated. Each such Reinsurance
Agreement is qualified under all applicable Requirements of Law
to receive the statutory credit assigned to such Reinsurance
Agreement in the relevant Annual Statement or Quarterly Statement
at the time prepared. Each Person to whom the Borrower or any of
its Subsidiaries has ceded any liability pursuant to any
Reinsurance Agreement has a rating of "A-" or better by A.M. Best
& Company. Schedule 5.22 also lists separately, both (a) as of
the date hereof and (b) as of the Closing Date and immediately
after giving effect to the Acquisition, each Reinsurance
Agreement no longer in force to which any of the Insurance
Subsidiaries was a party and under which, to the knowledge of the
Borrower, any material benefits or liabilities remain
outstanding. RECO is conducting its business in all material
respects in accordance with the Reinsurance Plan.
5.23. No Burdensome Restrictions. There exists no
restriction or encumbrance on (i) the ability of the Borrower and
its Subsidiaries to perform and comply with their respective
obligations under the Loan Documents, (ii) the creation or
assumption of any Lien upon the assets or properties of the
Borrower or any of its Subsidiaries as security, directly or
indirectly, for the Obligations, or (iii) the ability of any
Subsidiary of the Borrower to make any dividend payments or other
distributions in respect of its capital stock or any other
interest or participation in its profits owned by the Borrower or
any other Subsidiary of the Borrower, or to make loans or
advances thereto, in each case other than such restrictions or
encumbrances in effect on the Closing Date or existing under or
by reason of (x) applicable law, (y) this Agreement and the other
Loan Documents and (z) customary provisions restricting
subletting or assignment of any lease governing a leasehold
interest of the Borrower or any of its Subsidiaries; and neither
the Borrower nor any of its Subsidiaries is a party to or bound
by any other restriction, encumbrance or obligation, whether
pursuant to its articles or certificate of incorporation, bylaws,
contract or any applicable Requirement of Law, that could
reasonably be expected to have a Material Adverse Effect.
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5.24. Carried Insurance. The assets, properties and
business of the Borrower and its Subsidiaries are insured against
such hazards and liabilities, under such coverages and in such
amounts, as are customarily maintained by prudent companies
similarly situated and under policies issued by insurers of
recognized responsibility. No notice of any pending or
threatened cancellation or premium increase has been received by
the Borrower or any of its Subsidiaries with respect to any such
policies. The Borrower and each of its Subsidiaries are in
substantial compliance with all conditions contained in such
policies.
5.25. Issued Policies. Except with respect to any terms
specifically negotiated with policyholders, all policies of
insurance issued by the Insurance Subsidiaries as now in force
are, to the extent required under applicable law, on forms
approved by the relevant Governmental Authorities in the
jurisdictions where issued, or have been filed with, and not
objected to by, such Governmental Authorities within the period
provided for objection. None of the terms embraced by the
exception set forth in the preceding sentence adversely affects,
or could reasonably be expected to adversely affect, the
enforceability of any such policies or jeopardizes, or could
reasonably be expected to jeopardize, the License of an Insurance
Subsidiary in any jurisdiction. Any rates for premiums required
to be filed with or approved by any Governmental Authority have
been so filed or approved, and such premiums charged by each
Insurance Subsidiary conform thereto in all respects.
5.26. Certain Relationships. Except as set forth on
Schedule 5.26, no officer, director or Affiliate of the Borrower
or any of its Subsidiaries (i) owns, directly or indirectly, any
interest in (other than less than 1 percent stock holdings for
investment purposes in securities of publicly held and traded
companies), or is an officer, director or employee of, any Person
that is, or is engaged in business as, a material competitor,
lessor, lessee, supplier, agent or customer of, or lender to or
borrower from (in each case to any material extent), the Borrower
or any of its Subsidiaries, (ii) owns, directly or indirectly, in
whole or in part, any real or personal property, tangible or
intangible, that is material to the Borrower or any of its
Subsidiaries in the conduct of its business, or (iii) is a party
to any material contract or agreement, written or oral, with the
Borrower or any of its Subsidiaries, or has any cause of action
or other claim (including claims for the repayment of
indebtedness) against, or owes any amount to, the Borrower or any
of its Subsidiaries, except under the Employment Agreements and
except for ordinary claims for accrued benefits under Employee
Plans and similar matters.
5.27. Indebtedness. Schedule 5.27 sets forth, both (i) as
of the date hereof and (ii) as of the Closing Date, a complete
and accurate list of all Indebtedness of the Borrower or any of
its
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Subsidiaries (other than the Indebtedness incurred pursuant to
this Agreement and the other Loan Documents), describes the
agreement, note or other instrument evidencing such Indebtedness
and lists the parties thereto, and indicates the principal amount
outstanding thereunder, the scheduled maturity thereof and the
existence of any Liens in respect thereof. The Borrower has
heretofore delivered true and complete copies of all such
agreements, notes and other instruments to the Lender.
5.28. Investment Advisory Subsidiaries. Each Investment
Advisory Subsidiary is duly registered as an "investment adviser"
under the Advisers Act, is duly registered as an investment
adviser in each jurisdiction in which the conduct of its business
requires it to so registered or be licensed, and is in
compliance, in all material respects, with all federal and state
laws, rules and regulations relating to registration as an
investment adviser. Each of the Investment Advisory Subsidiaries
has filed all registrations, reports, statements, notices and
other filings (including, without limitation, Form ADV), and all
amendments and supplements to any of the foregoing, required to
be filed with any applicable Governmental Authority, in each case
copies of the most recent form of which have been delivered to
the Lenders prior to the Closing Date; all such registrations,
reports, statements, notices and filings comply, in all material
respects, with the requirements of the Investment Company Act,
the Advisers Act and any other applicable federal and state law,
rule or regulation, and the information set forth therein is
complete and correct in all material respects. Neither any
Investment Advisory Subsidiary or any of its Subsidiaries nor any
"affiliated person" (as defined in the Investment Company Act) or
any "associated person" (as defined in the Advisers Act) thereof
(i) is ineligible pursuant to Section 9(a) of the Investment
Company Act to serve as an investment adviser (or in any other
capacity contemplated by the Investment Company Act) to a
registered investment company or (ii) has engaged in any type of
conduct specified in Section 9(b) of the Investment Company Act
or Section 203(e) of the Advisers Act at any time prior to the
Closing Date that could reasonably be expected to result in any
action by the Securities and Exchange Commission or any other
applicable Governmental Authority to enjoin, prohibit, censure or
disqualify any Investment Advisory Subsidiary or any of its
Subsidiaries or its Affiliates from acting as an investment
adviser to any investment company registered under the Investment
Company Act or to any other client. The descriptions of the
Investment Company Management Agreements in the current
prospectuses of the Mutual Funds of the Investment Advisory
Subsidiaries are true and accurate in all material respects and
are not made incomplete by omitting to state a material fact
necessary to make such description, in light of the circumstances
under which such description was made, not misleading.
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5.29. Mutual Funds. Each Mutual Fund of each Investment
Advisory Subsidiary is duly registered as an "investment company"
under the Investment Company Act and is in compliance with all
federal and state laws, rules and regulations relating to
registration as an investment company, except to the extent that
the failure to comply with any such state laws, rules or
regulations, either individually or in the aggregate, could not
be reasonably expected to have a Material Adverse Effect; the
securities of each such Mutual Fund have been duly registered for
offer and sale under the Securities Act of 1933, as amended, and
under the "blue sky" laws of each jurisdiction in which the
securities of such Mutual Fund are or are intended to be sold,
except, in the case of any such jurisdiction where such
registration is not required or the failure to so register,
either individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect. Each Mutual Fund of
each Investment Advisory Subsidiary has filed all registrations,
reports, statements, notices and other filings (including,
without limitation, Form N-SAR), and all amendments and
supplements to any of the foregoing, required to be filed with
any applicable Governmental Authority, in each case copies of the
most recent form of which have been delivered to the Lender prior
to the Closing Date, provided that the Borrower shall not be
required to deliver copies of any such registrations, reports,
statements, notices and other filings that have been filed within
five Business Days prior to the Closing Date so long as they
deliver to the Lender the immediately preceding form thereof; all
such registrations, reports, statements, notices and filings
comply, in all material respects, with the requirements of the
Investment Company Act, the Advisers Act and any other applicable
federal and state law, rule or regulation, and the information
set forth therein is complete and correct in all material
respects. There are no actions, investigations, suits or
proceedings pending or, to the knowledge of the Borrower,
threatened, at law, in equity or in arbitration, before any
court, or other Governmental Authority or other Person against or
affecting any of the Mutual Funds or any of their respective
properties that would be reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect.
5.30. Broker-Dealer Subsidiary. Each Broker-Dealer
Subsidiary is duly registered as a "broker" and a "dealer" under
the Exchange Act, is duly registered or licensed as a "broker"
and a "dealer" in each jurisdiction in which the conduct of its
business requires it to so register or be licensed, and is in
compliance, in all material respects, with all federal and state
laws, rules and regulations relating to registration and
licensing as a "broker" and a "dealer" thereunder (including,
without limitation, all applicable net capital requirements).
Each Broker-Dealer Subsidiary is a member in good standing of the
SIPC, the NASD and each other national securities exchange of
which it is currently or has within the last two calendar years
been a member, except, in
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the case of any national securities exchange (other than the
NASD) for which the failure to be a member, either individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. Each Broker-Dealer Subsidiary has filed
all registrations, reports, statements, notices and other filings
(including, without limitation, Form BD), and all amendments and
supplements to any of the foregoing, required to be filed with
any applicable Governmental Authority, in each case copies of the
most recent form of which have been delivered to the Lender prior
to the Closing Date; all such registrations, reports, statements,
notices and filings comply, in all material respects, with the
requirements of the Exchange Act and the NASD and any other
applicable federal and state law, rule or regulation, and the
information set forth therein is complete and correct in all
material respects. Neither any Broker-Dealer Subsidiary or any
of its Subsidiaries, nor any "associated person" (as defined in
the Exchange Act), thereof, has engaged in the type of conduct
specified in Section 15(b) of the Exchange Act at any time prior
to the Closing Date that could reasonably be expected to result
in any action by the Securities and Exchange Commission or any
other applicable Governmental Authority to suspend, revoke,
prohibit or terminate the registration of any Broker-Dealer
Subsidiary or any of its Subsidiaries or its Affiliates as a
"broker" or a "dealer" under the Exchange Act or any other
applicable federal or state law, rule or regulation.
5.31. Lines of Business. Schedule 5.31 sets forth a
complete statement of each line of business conducted as of the
date thereof by the Borrower and its Subsidiaries (the "Existing
Lines of Business") and since the date thereof, neither the
Borrower nor any of its Subsidiaries has engaged in any business
other than the Existing Lines of Business. Schedule 5.31
identifies the Subsidiaries of the Borrower that are Investment
Advisory Subsidiaries and Broker-Dealer Subsidiaries and lists
the Mutual Funds of the Investment Advisory Subsidiaries.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of
the Obligations shall remain unpaid, unless the Lender shall have
consented in writing:
6.1. Financial Statements. The Borrower will deliver to the
Lender:
(a) As soon as practicable and in any event within forty-
five (45) days after the end of each of the first three fiscal
quarters of each fiscal year, beginning with the fiscal quarter
ending March 31, 1995, unaudited consolidated and consolidating
balance sheets
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of the Borrower and its Subsidiaries and an unaudited balance
sheet of Lexington Management as of the end of such fiscal
quarter and unaudited consolidated and consolidating statements
of income, retained earnings and cash flows for the Borrower and
its Subsidiaries and unaudited statements of income, retained
earnings and cash flows of Lexington Management for the fiscal
quarter then ended and for that portion of the fiscal year then
ended, in each case setting forth comparative figures for the
corresponding period in the preceding fiscal year, all prepared
in accordance with Generally Accepted Accounting Principles
(subject to the absence of notes required by Generally Accepted
Accounting Principles and subject to normal year-end audit
adjustments) applied on a basis consistent with that of the
preceding quarter or containing disclosure of the effect on the
financial position or results of operations of any change in the
application of accounting principles and practices during the
quarter; and
(b) As soon as practicable and in any event within ninety
(90) days after the end of each fiscal year, beginning with the
current fiscal year, (i) an audited consolidated balance sheet of
the Borrower and its Subsidiaries and an audited balance sheet of
Lexington Management as of the end of such fiscal year and
audited consolidated statements of income, retained earnings and
cash flows for the Borrower and its Subsidiaries and audited
statements of income, retained earnings and cash flows of
Lexington Management for the fiscal year then ended, including
the notes to each, in each case setting forth comparative figures
for the preceding fiscal year, certified by Coopers & ▇▇▇▇▇▇▇ or
another independent certified public accounting firm reasonably
acceptable to the Lender, together with (y) a report thereon by
such accountants that is not qualified as to going concern or
scope of audit and to the effect that such financial statements
present fairly the consolidated financial position and results of
operations of the Borrower and its Subsidiaries, or Lexington
Management, as the case may be, as of the dates and for the
periods indicated in accordance with Generally Accepted
Accounting Principles applied on a basis consistent with that of
the preceding year or containing disclosure of the effect on the
financial position or results of operations of any change in the
application of accounting principles and practices during the
year and (z) a report by such accountants to the effect that,
based on and in connection with their examination of the
financial statements of the Borrower and its Subsidiaries, they
obtained no knowledge of the occurrence or existence of any
Default or Event of Default, or a statement specifying the nature
and period of existence of any such Default or Event of Default
disclosed by their audit; provided, however, that such
accountants shall not be liable by reason of the failure to
obtain knowledge of any Default or Event of Default that would
not be disclosed or revealed in the course of their audit
examination, and (ii) an unaudited consolidating balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal
year and unaudited
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consolidating statements of income, retained earnings and cash
flows for the Borrower and its Subsidiaries for the fiscal year
then ended, all in reasonable detail.
6.2. Statutory Financial Statements. The Borrower will
deliver to the Lender:
(a) As soon as practicable and in any event within forty-
five (45) days after the end of each of the first three fiscal
quarters of each fiscal year, beginning with the fiscal quarter
ending March 31, 1995, a Quarterly Statement of each Insurance
Subsidiary as of the end of such fiscal quarter and for that
portion of the fiscal year then ended, in the form filed with the
relevant Department, prepared in accordance with Statutory
Accounting Principles applied on a basis consistent with that of
the preceding quarter or containing disclosure of the effect on
the financial position or results of operations of any change in
the application of accounting principles and practices during the
quarter; and
(b) As soon as practicable and in any event within sixty
(60) days after the end of each fiscal year, beginning with the
current fiscal year, (i) an Annual Statement of each Insurance
Subsidiary as of the end of such fiscal year and for the fiscal
year then ended, in the form filed with the relevant Department,
prepared in accordance with Statutory Accounting Principles
applied on a basis consistent with that of the preceding year or
containing disclosure of the effect on the financial position or
results of operations of any change in the application of
accounting principles and practices during the year, and (ii) the
combined Annual Statements of all of the Insurance Subsidiaries
(containing consolidated and consolidating financial information)
as of the end of such fiscal year and for the fiscal year then
ended, prepared in accordance with Statutory Accounting
Principles applied on a basis consistent with that of the
preceding year or containing disclosure of the effect on the
financial position or results of operations of any change in the
application of accounting principles and practices during the
year; and
(c) As soon as practicable and in any event within ninety
(90) days after request therefor by the Lender, a certification
as to the most recent Annual Statement of any Insurance
Subsidiary by the Borrower's independent certified public
accounting firm referred to in Section 6.1(b), together with a
report thereon by such accountants that is not qualified as to
going concern or scope of audit and to the effect that such
Annual Statement presents fairly the financial position and
results of operations of such Insurance Subsidiary as of the date
and for the period indicated in accordance with Statutory
Accounting Principles applied on a basis consistent with that of
the preceding year or containing disclosure of the effect on the
financial position or results of operations of
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any change in the application of accounting principles and
practices during the year.
6.3. Other Business and Financial Information. The Borrower
will deliver to the Lender:
(a) Concurrently with each delivery of the financial
statements described in Sections 6.1, 6.2(a) and 6.2(b), a
Compliance Certificate with respect to the period covered by the
financial statements then being delivered and in the form set
forth in Exhibit C appropriate for such financial statements,
executed by the chief financial officer of the Borrower
(together, in the case of the financial statements described in
Section 6.2(a) and 6.2(b), with a Covenant Compliance Worksheet
reflecting the computation of the financial covenants set forth
in Sections 7.1 through 7.11 and Section 7.15 as of the last day
of the period covered by such financial statements);
(b) Promptly upon filing with the relevant Department and
in any event within ninety (90) days after the end of each fiscal
year, beginning with the current fiscal year, a copy of each
Insurance Subsidiary's "Statement of Actuarial Opinion" (or
equivalent information should the relevant Department not require
such a statement) as to the adequacy of such Insurance
Subsidiary's loss reserves for such fiscal year, together with a
copy of its Management Discussion and Analysis in connection
therewith, each in the format prescribed by the applicable
Insurance Code;
(c) As soon as practicable and in any event within one
hundred fifty (150) days after the end of each fiscal year,
beginning with the current fiscal year, an Actuarial Report with
respect to each Insurance Subsidiary as of the end of such fiscal
year;
(d) As soon as practicable and in any event within thirty
(30) days prior to the end of each fiscal year, beginning with
the fiscal year ending December 31, 1996, new business plans and
a consolidated and consolidating operating budget for the
Borrower and its Subsidiaries for the succeeding fiscal year and
projected financial statements for the Borrower and its
Subsidiaries for a six-year period from the first day of the
succeeding fiscal year, consisting of consolidated and
consolidating balance sheets, statements of income and cash
flows, together with a certificate of the president or chief
financial officer of the Borrower to the effect that such budgets
and financial projections have been prepared in good faith and
are reasonable estimates (subject to the uncertainties and
approximations inherent in any projections) of the financial
position and results of operations of the Borrower and its
Subsidiaries for the period covered thereby, all in form and
substance satisfactory to the Lender;
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(e) Promptly upon (and in any event within three (3)
Business Days after) receipt thereof, a copy of each final report
to each Insurance Subsidiary from the NAIC as to such Insurance
Subsidiary's status under the relevant IRIS Tests;
(f) Promptly upon (and in any event within three (3)
Business Days after) receipt of any regulatory examination of any
Insurance Subsidiary prepared by any Department;
(g) Promptly upon (and in any event within three (3)
Business Days after) receipt or completion thereof, copies of any
"management letter" or other significant report or other
communication submitted to the Borrower or any of its
Subsidiaries by its certified public accountants, and any
response reports from the Borrower or any such Subsidiary in
respect thereof, in connection with each annual, interim or
special audit;
(h) Promptly upon (and in any event within three (3)
Business Days after) the sending, filing or receipt thereof,
copies of (i) all financial statements, reports, notices and
proxy statements that the Borrower, any of its Subsidiaries or
any Mutual Fund of any Investment Advisory Subsidiary shall send
or make available generally to its public shareholders or file
with the Securities and Exchange Commission, (ii) all regular,
periodic and special reports, registration statements and
prospectuses, including all amendments thereto, that the Borrower
or any of its Subsidiaries shall render to or file with the
Securities and Exchange Commission, the NASD or any national
securities exchange (including, with respect to any Broker-Dealer
Subsidiary each Form BD and each FOCUS report filed by such
Broker-Dealer Subsidiary, and with respect to each Investment
Advisory Subsidiary each Form ADV filed by such Investment
Advisory Subsidiary), (iii) all reports on examination or similar
reports, financial examination reports or market conduct
examination reports by the NAIC or any Department or other
Governmental Authority with respect to any Insurance Subsidiary's
insurance business, (iv) all Insurance Holding Company Systems
Act filings with Governmental Authorities made by the Borrower or
any of its Subsidiaries, including, without limitation, filings
seeking approval of transactions with Affiliates, and (v) all
press releases and other statements that the Borrower or any of
its Subsidiaries shall make available generally to the public
concerning developments in the business of the Borrower or any of
its Subsidiaries, other than press releases or statements issued
in the ordinary course of business;
(i) Promptly at the end of each fiscal quarter of the
Borrower, a report containing current information about each of
the Investment Advisory Subsidiaries and their respective assets
under management during such fiscal quarter, such report to be in
a form approved by the Lender;
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(j) Within thirty (30) days after the filing thereof with
the Internal Revenue Service, copies of each annual report on
Form 5500 required to be filed under ERISA in connection with
each Employee Plan; and
(k) Promptly, such other information about the business,
condition (financial or otherwise), operations or properties of
the Borrower or any of its Subsidiaries as the Lender may from
time to time reasonably request.
6.4. Notice of Certain Events. The Borrower will promptly,
but in no event later than five (5) Business Days after any
executive officer of the Borrower obtains knowledge thereof, give
written notice to the Lender of:
(a) The occurrence of any Default or Event of Default,
together with a written statement of the president or chief
financial officer of the Borrower specifying the nature of such
Default or Event of Default, the period of existence thereof and
the action that each of the Borrower and its Subsidiaries has
taken and proposes to take with respect thereto;
(b) The institution or threatened institution of any
action, suit, investigation or proceeding of the type described
in Section 5.5, including, in each instance, any such
investigation or proceeding by any Department, other Governmental
Authority or other Person (other than routine periodic inquiries,
investigations or reviews), together with copies of any filings,
communications, reports or other information relating thereto
made available to the Borrower or any of its Subsidiaries (other
than any such filings, communications, reports or information,
the provision of which to the Lender would waive any valid
attorney/client privilege);
(c) The receipt by the Borrower, any of its Subsidiaries or
any of the Mutual Funds of any Investment Advisory Subsidiary
from any Governmental Authority of a notice of violation or
noncompliance by any such Person that, if established, would be
reasonably likely to have a Material Adverse Effect, or a notice
of any actual or threatened suspension, termination, limitation
or revocation of any material license, permit or authorization
(including, without limitation, any License) of the Borrower, any
of its Subsidiaries or any of the Mutual Funds of any Investment
Advisory Subsidiary, together with a copy of such notice and any
other information relating thereto made available to the Borrower
or any of its Subsidiaries (other than any such information, the
provision of which to the Lender would waive any valid
attorney/client privilege);
(d) The occurrence of any actual or proposed material
changes in any Insurance Code governing the investment or
dividend practices of any of the Insurance Subsidiaries;
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(e) The occurrence of any proposed or actual amendment or
modification to any Reinsurance Agreement (whether entered into
before or after the Closing Date), including any Reinsurance
Agreements that are in a runoff mode on the Closing Date, which
amendment or modification could reasonably be expected to have a
Material Adverse Effect, or the receipt by the Borrower or any of
its Subsidiaries of any written notice of denial of coverage,
litigation, claim or arbitration arising out of any Reinsurance
Agreement to which it is a party or any cancellation or material
adverse change in any material insurance policy carried by it;
(f) The occurrence of any ERISA Event with respect to the
Borrower or any of its ERISA Affiliates, together with (i) a
written statement of the president or chief financial officer of
the Borrower specifying the details of such ERISA Event and the
action that the Borrower or such ERISA Affiliate has taken or
proposes to take with respect thereto, (ii) a copy of any notice
with respect to such ERISA Event that may be required to be filed
with the PBGC and (iii) any notice delivered by the PBGC to the
Borrower or such ERISA Affiliate with respect to such ERISA
Event;
(g) The occurrence of any of the following to the extent
that, individually or in the aggregate, such occurrence would be
likely to have a Material Adverse Effect, together with a
reasonably detailed description thereof and copies of any
filings, communications, reports or other information relating
thereto made available to the Borrower or any of its
Subsidiaries: (i) the taking of any remedial action by the
Borrower, any of its Subsidiaries or any other Person in response
to the actual or alleged generation, storage, release, disposal
or discharge of any Hazardous Substances on, to, upon or from any
of the real property, leased or owned, of the Borrower or any of
its Subsidiaries; (ii) any pending or threatened Environmental
Claim against or affecting the Borrower, any of its Subsidiaries
or any of their respective real property, leased or owned; or
(iii) any other condition or occurrence on or arising from or
with respect to any real property, leased or owned, of the
Borrower or any of its Subsidiaries, that (x) results in
noncompliance by the Borrower or any of its Subsidiaries with any
applicable Environmental Law, (y) could reasonably be anticipated
to form the basis of an Environmental Claim against the Borrower,
any of its Subsidiaries or any of their respective real property,
leased or owned, or (z) could reasonably be anticipated to cause
any of such real property, or any interest therein (including
leaseholds), to be subject to any restrictions on ownership,
occupancy, use or transfer under any Environmental Law;
(h) The occurrence of any proposed or actual amendment or
modification to any of the Investment Company Agreements;
(i) The occurrence of any material change to the
Reinsurance Plan; and
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(j) Any other matter or event that has, or would be
reasonably likely to have, a Material Adverse Effect, together
with a written statement of the president or chief financial
officer of the Borrower setting forth the nature and period of
existence thereof and the action that each of the Borrower and
its Subsidiaries has taken and proposes to take with respect
thereto.
6.5. Corporate Existence; Franchises; Maintenance of
Properties; etc. The Borrower will, and will cause each of its
Subsidiaries to:
(a) Maintain and preserve in full force and effect its
corporate existence provided, however, that any Subsidiary of the
Borrower may merge or consolidate with any other Subsidiary of
the Borrower or with the Borrower and the corporate existence of
any Subsidiary other than RECO and Lexington Management may be
terminated;
(b) Obtain, maintain and preserve in full force and effect
all other rights, franchises, licenses, permits, certifications,
approvals and authorizations (including, without limitation,
Licenses) required by Governmental Authorities and necessary to
the ownership, occupation or use of its properties or the conduct
of its business; and
(c) Keep all properties useful to its business in good
working order and condition (normal wear and tear excepted) and
from time to time make all necessary repairs to and renewals and
replacements of such properties, except to the extent that any of
such properties are obsolete or are being replaced.
6.6. Compliance with Laws. The Borrower will, and will
cause each of its Subsidiaries to, comply in all material
respects with all Requirements of Law applicable in respect of
the conduct of its business and the ownership and operation of
its properties.
6.7. Performance of Obligations. The Borrower will, and
will cause each of its Subsidiaries to, pay all Indebtedness as
and when due (subject to any applicable subordination
provisions), pay all other obligations in accordance with their
respective terms or customary trade practices (except to the
extent being contested in good faith and by proper proceedings
and for which adequate reserves have been established in
accordance with Generally Accepted Accounting Principles), and
otherwise comply with and perform in all material respects all
contracts, agreements and instruments to which it is a party.
6.8. Payment of Taxes. The Borrower will, and will cause
each of its Subsidiaries to, pay and discharge (i) all taxes,
assessments and governmental charges or levies imposed upon it,
upon its income or profits or upon any of its properties, prior
to the date on which penalties would attach thereto, and (ii) all
lawful claims
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that, if unpaid, might become a Lien upon any of the properties
of the Borrower or any of its Subsidiaries; provided, however,
that neither the Borrower nor any of its Subsidiaries shall be
required to pay any such tax, assessment, charge, levy or claim
that is being contested in good faith and by proper proceedings
and as to which the Borrower or such Subsidiary is maintaining
adequate reserves with respect thereto in accordance with
Generally Accepted Accounting Principles, unless and until any
tax lien notice has become effective with respect thereto or
until any Lien resulting therefrom attaches to its properties and
becomes enforceable against its other creditors.
6.9. Insurance. The Borrower will, and will cause each of
its Subsidiaries to, maintain with responsible insurance
companies insurance with respect to its assets, properties and
business, against such hazards and liabilities, of such types and
in such amounts, as is customarily maintained by prudent
companies similarly situated (including all coverages in effect
as of the date hereof), and in any event as may be required by
applicable Requirements of Law and as shall be reasonably
satisfactory to the Lender.
6.10. Maintenance of Books and Records; Inspection. The
Borrower will, and will cause each of its Subsidiaries to:
(a) Maintain adequate books, accounts and records, in
which full, true and correct entries shall be made of all
financial transactions in relation to its business and
properties, and prepare all financial statements required under
this Agreement, in each case in accordance with Generally
Accepted Accounting Principles or Statutory Accounting
Principles, as applicable, and in compliance with the
requirements of any Governmental Authority having jurisdiction
over it; and
(b) Permit employees or agents of the Lender to inspect
its properties and examine or audit its books, records, working
papers and accounts and make copies and memoranda of them, and to
discuss its affairs, finances and accounts with its officers and
employees and, upon notice to the Borrower, the independent
public accountants of the Borrower and its Subsidiaries (and by
this provision the Borrower authorizes such accountants to
discuss the finances and affairs of the Borrower and its
Subsidiaries), all at such times and from time to time during
business hours as may be reasonably requested.
6.11. Dividends. The Borrower will take all action
necessary to cause its Subsidiaries to make such dividends,
distributions or other payments to the Borrower as shall be
necessary for the Borrower to make payments of the principal of
and interest on the Term Loan in accordance with this Agreement,
including scheduled repayments and mandatory prepayments required
under Section 2.3 and
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Section 2.4, respectively. In the event the approval of any
Governmental Authority or other Person is required in order for
any such Subsidiary to make any such dividends, distributions or
other payments to the Borrower, or for the Borrower to make any
such principal or interest payments to the Lender, the Borrower
will forthwith exercise its best efforts and take all actions
permitted by law and necessary to obtain such approval.
6.12. Compliance with Investment Policies. The Borrower
will take all action necessary to cause each of the Mutual Funds
of each of its Investment Advisory Subsidiaries to comply, in all
material respects, with all applicable investment policies and
restrictions set forth in (i) any applicable federal and state
securities laws, rules and regulations and (ii) its most recent
prospectus filed with Securities and Exchange Commission and its
most recent statement of additional information, if any, required
under the Investment Company Act or under any applicable state
laws, rules or regulations.
6.13. Reinsurance. The Borrower will cause RECO to maintain
in force, and to renew or extend, all Reinsurance Agreements,
including the excess of loss coverage required under Section
4.2.4(b), in effect on the Closing Date or as amended, modified,
substituted or terminated with the consent of the Lender, which
consent shall not be unreasonably withheld, for as long as the
Term Loan remains outstanding.
6.14. Further Assurances. The Borrower will, and will cause
each of its Subsidiaries to, make, execute, endorse, acknowledge
and deliver to the Lender any amendments, modifications or
supplements hereto or restatements hereof and any other
agreements, instruments, financing statements, certificates or
other documents, and take any and all such other actions, as may
from time to time be reasonably requested by the Lender to
perfect and maintain the validity and priority of the Liens
granted pursuant to the Loan Documents and to effect, confirm or
further assure or protect and preserve the interests, rights and
remedies of the Lender under this Agreement and the other Loan
Documents as they exist on the date hereof.
ARTICLE VII
NEGATIVE COVENANTS
The Borrower covenants and agrees that, so long as any of
the Obligations shall remain unpaid, unless the Lender shall have
consented in writing:
7.1. Statutory Surplus. The Borrower will not permit the
Statutory Surplus of RECO to be less than $90,000,000 at any
time.
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7.2. Earned Surplus. The Borrower will not permit the
Earned Surplus of RECO to be less than $10,000,000 at any time.
7.3. Consolidated Indebtedness to Total Capitalization
Ratio. The Borrower will not permit the ratio of
(i) Consolidated Indebtedness to (ii) the sum of Consolidated
Indebtedness and Consolidated Net Worth to be greater than 0.25
to 1.0 at any time from and after the Closing Date.
7.4. Operating Leverage Ratio. The Borrower will not permit
the ratio of Consolidated Net Written Premiums to Statutory
Surplus of RECO to be greater than 2.0 to 1.0 (or any lower ratio
required under any applicable Requirement of Law) at any time
from and after the Closing Date.
7.5. Net Worth. The Borrower will not permit its
Consolidated Net Worth to be less than $110,000,000 at any time.
7.6. Fixed Charge Coverage Ratio. The Borrower will not
permit the Fixed Charge Coverage Ratio, as of the last day of any
fiscal quarter of the Borrower, to be less than 1.5 to 1.0 as of
the last day of any fiscal quarter of the Borrower, beginning
with the fiscal quarter ending March 31, 1995.
7.7. Lexington Management Earnings. The Borrower will not
permit the Earnings Before Taxes of Lexington Management to be
less than $4,000,000 for any fiscal year, beginning with the
fiscal year ending December 31, 1994.
7.8. RECO Earnings. The Borrower will not permit the
Cumulative Statutory Earnings Before Taxes of RECO to be less
than the following amounts for the following fiscal years ending
December 31: 1995, $3,000,000; 1996, $6,000,000; 1997,
$9,000,000; 1998, $12,000,000; 1999, $15,000,000.
7.9. Borrower Overhead. The Borrower will not permit
Borrower Overhead to exceed the following amounts for the
following fiscal years ending December 31: 1995, $2,000,000;
1996, $2,060,000; 1997, $2,121,800; 1998, $2,185,454; 1999,
$2,251,018.
7.10. Risk-Based Capital Ratio. The Borrower will not
permit Risk-Based Capital of RECO at any time from and after the
Closing Date to be less than 130 percent of the "Company Action
Level" for RECO at such time within the meaning of the NAIC Risk-
Based Capital Model Act in the form as proposed by the NAIC as of
the date hereof.
7.11. Capital Expenditures and Investments. The
Borrower will not, and will not permit or cause any of its
Subsidiaries to, make any Capital Expenditure or Investment in
any Subsidiary (other than the
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equity capital contribution contemplated by Section 4.2.4(e)) if,
after giving effect to such Capital Expenditure, the aggregate
amount of all Capital Expenditures and Investments made by the
Borrower and its Subsidiaries shall exceed $500,000 for the
fiscal year ending December 31, 1995 and $300,000 for any fiscal
year thereafter.
7.12. Merger, Consolidation. The Borrower will not, and
will not permit or cause any of its Subsidiaries to, liquidate,
wind up or dissolve, enter into any consolidation, merger or
other combination (except that any Subsidiary of the Borrower may
merge or consolidate with any other Subsidiary of the Borrower or
with the Borrower and that any Subsidiary other than RECO or
Lexington Management may liquidate, windup or dissolve), or
directly or indirectly sell, assign, lease, convey, transfer or
otherwise dispose of, whether in one or a series of transactions,
any Material Assets, or enter into any arrangement with any
Person providing for the lease by the Borrower or any of its
Subsidiaries as lessee of any asset that has been sold or
transferred by the Borrower or such Subsidiary to such Person, or
agree to do any of the foregoing. For purposes of this
Agreement, "Material Asset" shall mean (i) any asset or line of
business of the Borrower or any of its Subsidiaries that is
material to its business, operations or condition (financial or
otherwise), including, without limitation, as to an Insurance
Subsidiary at any time, any insurance product line to which
greater than five percent (5%) of such Insurance Subsidiary's Net
Written Premiums for the prior fiscal year are attributable, and
(ii) any capital stock or other securities of any Subsidiary of
the Borrower.
7.13. Indebtedness. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, create, incur, assume
or suffer to exist any Indebtedness other than:
(i) Indebtedness incurred pursuant to this Agreement
and the other Loan Documents;
(ii) Indebtedness under letters of credit issued by the
Lender for the benefit of the Insurance Subsidiaries in the
ordinary course of their business to secure insurance
obligations;
(iii) Indebtedness of the Borrower under any Hedge
Agreement covering any of the Obligations in form and
substance satisfactory to the Lender, provided that the
notional amount of all such Hedge Agreements at any time
shall not exceed the outstanding principal amount of the
Term Loan at such time; and
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(iv) Indebtedness of the Borrower under any Hedge
Agreements permitted under the final clause of Section
7.15(i).
7.14. Liens. The Borrower will not, and will not permit or
cause any of its Subsidiaries to, directly or indirectly, make,
create, incur, assume or suffer to exist, or enter into or suffer
to exist any agreement or restriction that prohibits or
conditions the creation, incurrence or assumption of, any Lien
upon or with respect to any part of its property or assets,
whether now owned or hereafter acquired, or agree to do any of
the foregoing, other than Permitted Liens.
7.15. Investments. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, directly or
indirectly, create, organize or acquire any Subsidiary or
otherwise purchase, own, invest in or otherwise acquire any
capital stock, evidence of indebtedness or other obligation or
security or any interest whatsoever in any other Person, or make
or permit to exist any loans, advances or extensions of credit
to, or any investment in cash or by delivery of property in, any
other Person, or become a partner or joint venturer in any
partnership or joint venture, or (other than in the ordinary
course of business) acquire any of the assets or properties of
any Person (collectively, "Investments"), or make a commitment or
otherwise agree to do any of the foregoing, other than:
(i) Cash Equivalents and, as to the Borrower, the
Investment in the Navigators Stock existing on the Closing
Date and any additional stock thereof distributed in respect
thereto, any Hedge Agreement entered into by the Borrower in
respect of the Obligations, and any Hedge Agreement to
protect against bona fide risks regarding currency exchange
rate fluctuations consistent with the Borrower's past
practices;
(ii) prepaid expenses incurred, and loans and advances
to employees for reasonable travel and business expenses
made, in the ordinary course of business;
(iii) without duplication, Investments permitted as
Indebtedness under Section 7.9;
(iv) accounts receivable owing to the Borrower or any
of its Subsidiaries created in the ordinary course of
business and payable in accordance with customary terms
prevailing in the industry;
(v) Investments in corporations that are Subsidiaries
as of the Closing Date;
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(vi) Investments by the Borrower and its Subsidiaries
(other than the Insurance Subsidiaries) in money market
mutual fund shares and shares of other mutual funds invested
in marketable fixed income, equity and other securities not
to exceed in the aggregate $5,000,000 at any time;
(vii) other Investments by any of the Insurance
Subsidiaries in debt securities and common and preferred
stocks in compliance with the following restrictions (for
purposes of the following, valuations of Investments in
equity securities shall be made on the basis of cost):
(a) All Investments of each Insurance Subsidiary
shall be in compliance at all times with the
applicable Insurance Code and with all applicable
insurance laws and regulations of any other relevant
jurisdictions relating to investments by such
Insurance Subsidiary;
(b) The aggregate Investments of the Insurance
Sub-sidiaries in Investment Grade Securities rated
"A-", or the then equivalent grade, or better by any
of the rating agencies listed definition of
"Investment Grade Securities" shall constitute at
all times no less than ninety percent (90%) of
aggregate Investments of the Insurance Subsidiaries
in debt securities;
(c) The aggregate Investments of the Insurance
Subsidiaries in Investment Grade Securities rated
lower than "A-" or the then equivalent grade by any
of the rating agencies listed in the definition of
"Investment Grade Securities" shall constitute at
all times no more than five percent (5%) of
aggregate Investments of the Insurance Subsidiaries
in debt securities;
(d) The aggregate cost of Investments of the
Insurance Subsidiaries in common and preferred
stocks shall constitute at all times no more than
seventy-five percent (75%) of Statutory Surplus;
(e) The aggregate Investments of the Insurance
Subsidiaries in debt securities, not rated "A" or
better by any of the rating agencies listed in the
definition of "Investment Grade Securities," of a
single issuer and its Affiliates (other than
obligations of the type described in clause (i) of
the definition of "Cash Equivalents") shall
constitute at all times no more than two percent
(2%) of Statutory Surplus;
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(f) The aggregate Investments of the Insurance
Subsidiaries in debt securities of any single issuer
and its Affiliates (other than obligations of the
type described in clause (i) of the definition of
"Cash Equivalents") shall constitute at all times no
more than four percent (4%) of Statutory Surplus;
(g) The aggregate cost of Investments of the
Insurance Subsidiaries in any single equity security
shall constitute at all times no more than two
percent (2%) of Statutory Surplus, other than
Investment as of the Closing Date in the stock of
The Navigators Group, Inc., Continental National
Corporation and ReCor Insurance Company, Inc. and
any additional stock thereof distributed in respect
thereto;
(h) No Insurance Subsidiary shall make any
Investment or continue to maintain any Investment in
real property, including without limitation, fee
title, short and long-term leases (other than leases
of facilities occupied by such Insurance Subsidiary
as of the Closing Date and any replacement
facilities), Investments in partnerships, limited
partnerships, joint ventures or other organizations
primarily engaged in investing in real property,
real property mortgage loans or loans made to fund
the development of real property; and
(viii) Investments in Subsidiaries of the Borrower to the
extent permitted by Section 7.11.
7.16. Transactions with Affiliates. Except for transactions
otherwise permitted hereunder or described in Schedule 5.27, the
Borrower will not, and will not permit or cause any of its
Subsidiaries to, enter into any transaction with any officer,
director, stockholder or other Affiliate of the Borrower or any
Subsidiary, except in the ordinary course of and pursuant to the
reasonable requirements of its business and upon fair and
reasonable terms that are no less favorable to it than would
obtain in a comparable arm's length transaction with a Person
other than an Affiliate of the Borrower or such Subsidiary.
7.17. Restricted Payments. (a) The Borrower will not, and
will not permit or cause any of its Subsidiaries to, directly or
indirectly, declare or make any dividend payment, or make any
other distribution of cash, property or assets, in respect of any
of its capital stock or any warrants, rights or options to
acquire its capital stock, or purchase, redeem, retire or
otherwise acquire for value any shares of its capital stock or
any warrants, rights or options to acquire its capital stock, or
set aside funds for any of the foregoing, except that:
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(i) the Borrower may declare and make dividend
payments or other distributions payable solely in its common
stock; and
(ii) each Subsidiary may declare and make dividend
payments or other distributions to its shareholders to the
extent permitted under applicable Requirements of Law and,
as to the Insurance Subsidiaries, by each relevant
Department.
(b) The Borrower will not, and will not permit or cause
any
of its Subsidiaries to, make (or give any notice in respect of)
any voluntary or optional payment or prepayment on any of the
Surviving Indebtedness, or, directly or indirectly, make any
redemption (including pursuant to any change of control
provision), retirement, defeasance or other acquisition for value
of any of the Surviving Indebtedness, or make any deposit or
otherwise set aside funds for any of the foregoing purposes.
7.18. Certain Amendments, etc. The Borrower will not, and
will not permit or cause any of its Subsidiaries to, (i) amend,
modify, waive or terminate, or permit the amendment,
modification, waiver or termination of, any provision of any of
the any agreement, note or other instrument evidencing any
Surviving Indebtedness not reasonably expected to affect the
Lender adversely, (ii) amend, modify or change its articles or
certificate of incorporation or bylaws, or any other agreement
entered into by it, in each case with respect to its capital
stock or other equity securities, other than amendments to
Employee Plans permitted hereunder and other than any immaterial
amendments, modifications or changes that could not reasonably be
expected to affect the Lender adversely, (iii) enter into any new
agreement with respect to its capital stock or other equity
securities other than Employee Plans permitted hereunder and
ancillary agreements relating thereto, or (iv) issue, sell or
otherwise dispose of any new shares of its capital stock, any
warrants, rights or options to acquire its capital stock or other
equity securities, provided that the Borrower may issue, sell or
otherwise dispose of any new shares of its capital stock or any
warrants, rights or options to acquire its capital stock or other
equity securities so long as an amount equal to the Net Cash
Proceeds received in connection therewith is delivered to the
Lender as a prepayment of principal on the Term Loan in
accordance with the provisions of Section 2.3 and provided
further that any Subsidiary the securities of which are directly
pledged to the Lender under the Pledge and Security Agreement may
issue additional shares of its capital stock or other equity
securities to the Borrower so long as such securities are,
promptly upon the issuance thereof, pledged to the Lender
pursuant to the Pledge and Security Agreement.
7.19. Limitation on Certain Restrictions. The Borrower will
not, and will not permit or cause any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to
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exist or become effective any restriction or encumbrance on
(i) the ability of the Borrower and its Subsidiaries to perform
and comply with their respective obligations under the Loan
Documents, (ii) the creation or assumption of any Lien upon the
assets or properties of the Borrower or any of its Subsidiaries
as security, directly or indirectly, for the Obligations, or
(iii) the ability of any Subsidiary of the Borrower to make any
dividend payments or other distributions in respect of its
capital stock or any other interest or participation in its
profits owned by the Borrower or any other Subsidiary of the
Borrower, or to make loans or advances thereto, in each case
other than such restrictions or encumbrances in effect on the
Closing Date or existing under or by reason of (x) applicable
law, (y) this Agreement and the other Loan Documents and
(z) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Borrower or any
of its Subsidiaries.
7.20. Compliance of Employee Plans. The Borrower will not,
and will not permit or cause any of its Subsidiaries or any ERISA
Affiliate to, directly or indirectly, (i) take or fail to take
any action that could reasonably be expected to result in a
material liability of the Borrower, any Subsidiary or any ERISA
Affiliate to the PBGC or to a Multiemployer Plan, (ii) terminate
any Pension Plan subject to Title IV of ERISA so as to result in
a material liability of the Borrower, any Subsidiary or any ERISA
Affiliate, (iii) permit to exist any ERISA Event, or any other
event or condition, that presents the risk of a material
liability of the Borrower or any ERISA Affiliate, (iv) enter into
any new Employee Plan or amend or modify any existing Employee
Plan (other than in the ordinary course of business consistent
with past practice) where such new Employee Plan or amendment or
modification could reasonably be expected to result in a material
liability of the Borrower, any Subsidiary or any ERISA Affiliate
and (v) operate any Employee Plan in a manner such that the
Borrower, any Subsidiary or any ERISA Affiliate will incur a
material tax liability under Section 4980B of the Internal
Revenue Code or a material liability to any "qualified
beneficiary" for failure to comply with Section 4980B of the
Internal Revenue Code.
7.21. New Business. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, engage in any
business other than the Existing Lines of Business in which it is
engaged on the date hereof.
7.22. Fiscal Year. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, change the ending
date of its fiscal year to a date other than December 31.
7.23. Accounting Changes. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, make or permit
any change in its accounting policies or reporting practices,
except as
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may be required by Generally Accepted Accounting Principles or
Statutory Accounting Principles, as applicable.
7.24. Change of Location or Name. The Borrower will not,
and will not permit or cause any of its Subsidiaries to, change
(i) the location of its chief executive office, principal place
of business or records concerning its business and financial
affairs, change its corporate name or the trade or fictitious
name under which it conducts its business, in each case without
having given the Lender at least thirty (30) days' prior written
notice and having taken any and all action requested by the
Lender to preserve and maintain the Lender's Liens in and upon
the Collateral as valid first priority perfected Liens, subject
only to Permitted Liens.
7.25. Reinsurance Agreements. The Borrower will not, and
will not permit or cause any of its Insurance Subsidiaries
to, (i) be or become a party to any Reinsurance Agreement
(whether in effect as of the date hereof or at any time
hereafter), other than pool reinsurance not directly placed by
any Insurance Subsidiary, with any reinsurer not rated "A-" or
better by A.M. Best & Company, (ii) renew or extend the term of
any of the Reinsurance Agreements designated on Schedule 5.22 as
containing any Premium Adjustment Provision or (iii) enter into
any new Reinsurance Agreement containing any Premium Adjustment
Provision; provided, however, that the reinsurance coverage
required to be obtained pursuant to Section 4.2.4(b) may be
maintained with Renaissance Reinsurance Ltd. which reinsurance
must be replaced, upon twenty (20) Business Days' notice from the
Lender to the Borrower at any time at which Renaissance
Reinsurance Ltd. is not rated "A-" or better by A.M. Best &
Company, with a reinsurer rated "A-" or better by A.M. Best &
Company or another reinsurer acceptable to the Lender.
7.26. Hazardous Substances. The Borrower will not, and will
not permit or cause any of its Subsidiaries to, permit any
Hazardous Substances, the removal of which is required or the
maintenance of which is restricted, prohibited or penalized by
any Governmental Authority, to be unlawfully brought on to or
located on any real property owned or leased by the Borrower or
any of its Subsidiaries, except in full compliance with all
applicable Environmental Laws or where such action would not
likely result in a Material Adverse Effect; and if any such
Hazardous Substance is brought or found located thereon in
violation of any applicable law, it shall be immediately removed,
with proper disposal, and all required environmental cleanup
procedures shall be diligently undertaken pursuant to all such
Environmental Laws, except where failure to do so would not
likely result in a Material Adverse Effect; and the Borrower will
permit the Lender to inspect any such real property, conduct
tests thereon and inspect all books, records and correspondence
pertaining thereto and, at the request of the Lender and at the
Borrower's expense, will cause to be prepared and delivered to
the Lender a report of a qualified environmental
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engineer, satisfactory in form and substance to the Lender, that
such removal and cleanup has been completed, and such other and
further assurances relating thereto, in form and substance
satisfactory to the Lender, as the Lender may request.
ARTICLE VIII
EVENTS OF DEFAULT
8.1. Events of Default. The occurrence of any one or more
of the following events shall constitute an "Event of Default":
(a) The Borrower shall fail to pay any principal of the
Term Loan when due or to pay any interest on the Term Loan or any
fees or any other Obligations within three (3) Business Days
after such payment is due;
(b) The Borrower shall fail to observe, perform or comply
with any term, condition or covenant contained in Sections 3.6,
6.1, 6.2, 6.3, 6.4, 6.5(a), 6.13 or in Article VII;
(c) The Borrower shall fail to observe, perform or comply
with any term, condition or covenant contained in this Agreement
other than those enumerated in subsection (a) or (b) above, and
such failure shall continue unremedied for a period of ten (10)
Business Days after the Borrower acquires knowledge thereof;
provided, however, that, except with respect to any of the
provisions of Article V or Sections 6.5(b) or 6.13, the Borrower
shall be entitled to a period of thirty (30) days to remedy any
such failure if the Borrower demonstrates to the Lender that the
failure can be remedied in such period, the Borrower is acting
diligently to remedy such failure and the Borrower is pursuing
such remedy to completion;
(d) The Borrower or any of its Subsidiaries shall fail to
observe, perform or comply with any term, condition or covenant
contained in any of the Loan Documents other than this Agreement,
and such failure shall continue unremedied for any grace period
specifically applicable thereto or, if no such grace period is
applicable, for a period of five (5) Business Days after the
Borrower acquires knowledge thereof; provided, however, that, in
the event no such grace period is specifically applicable
thereto, the Borrower shall be entitled to a period of thirty
(30) days to remedy any such failure if the Borrower demonstrates
to the Lender that the failure can be remedied in such period,
the Borrower is acting diligently to remedy such failure and the
Borrower is pursuing such remedy to completion;
(e) Any representation or warranty made in writing by or
on behalf of any the Borrower or any of its Subsidiaries in this
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Agreement, any of the other Loan Documents or in any certificate,
instrument or document delivered in connection herewith or
therewith, or in connection with the transactions contemplated
hereby or thereby, shall prove to have been false or incorrect in
any material respect at the time as of which such representation
or warranty was made;
(f) The Borrower or any of its Subsidiaries shall fail to
pay when due, whether by scheduled maturity, acceleration or
otherwise (taking into account any applicable grace period), any
principal of, interest on or other amount payable in respect of
any Indebtedness (other than the Indebtedness incurred pursuant
to this Agreement) having an aggregate principal amount of at
least $50,000; any other default or event of default shall occur
under the terms of any agreement or instrument pursuant to which
the Borrower or any of its Subsidiaries has incurred any such
Indebtedness, the effect of which default or event of default is
to accelerate, or permit acceleration of (after any applicable
grace period, notice or lapse of time), the maturity of at least
$50,000 in principal amount of such Indebtedness; or any such
Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable or required to be prepaid or
redeemed (other than pursuant to a regular schedule therefor),
purchased or defeased, or an offer to prepay, redeem, purchase or
defease shall be required to be made, in each case prior to the
stated maturity thereof;
(g) Any Department or other Governmental Authority having
jurisdiction shall institute any action or proceeding seeking to
place any Insurance Subsidiary under supervision, conservation or
rehabilitation, or to appoint a receiver therefor;
(h) Any applicable Governmental Authority shall issue any
order of conservation, supervision, rehabilitation or liquidation
or any other order of similar effect in respect of any Investment
Advisory Subsidiary; or there shall be any involuntary
termination or suspension (which suspension continues for a
period of ten Business Days) or any voluntary termination or
suspension (which suspension continues for a period of ten (10)
Business Days) arising out of a regulatory proceeding or
investigation of any Investment Advisory Subsidiary's federal or
state licenses or registrations to act as an investment adviser;
or any Investment Advisory Subsidiary shall be enjoined, barred
or prohibited from acting as an investment adviser to any
investment company registered under the Investment Company Act or
to any other client;
(i) SIPC makes an application for a decree adjudicating
that the customers of any Broker-Dealer Subsidiary are in need of
protection under SIPA and the failure of such Broker-Dealer
Subsidiary to obtain the dismissal of such application within 30
days;
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(j) The Borrower or any of its Subsidiaries shall (i) file
a voluntary petition or commence a voluntary case seeking
liquidation, reorganization, dissolution, arrangement,
readjustment of debts or any other relief under the Bankruptcy
Code or under any other applicable bankruptcy, insolvency or
similar law now or hereafter in effect, (ii) consent to the
appointment of or taking possession by a custodian, trustee,
receiver or similar official for or of all or a substantial part
of its properties (or any of the Collateral), (iii) fail
generally to pay its debts as they become due or admit in writing
its inability to pay its debts generally as they become due,
(iv) make a general assignment for the benefit of creditors or
(v) take any corporate action to authorize or approve any of the
actions described above;
(k) Any involuntary petition or case shall be filed or
commenced against the Borrower or any of its Subsidiaries seeking
liquidation, reorganization, dissolution, arrangement,
readjustment of debts, the appointment of a custodian, trustee,
receiver or similar official for it or all or a substantial part
of its properties (or any of the Collateral) or any other relief
under the Bankruptcy Code or under any other applicable
bankruptcy, insolvency or similar law now or hereafter in effect,
which petition or case is not dismissed, bonded or discharged
within sixty (60) days of the date of filing; or an order for
relief (including, without limitation, the appointment of a
custodian, trustee, receiver or similar official) shall be
entered in any such proceeding, which order is not immediately
stayed or made subject to other similar relief;
(l) The Borrower or any of its Subsidiaries shall
(i) cease to be Solvent or (ii) be enjoined, restrained or in any
way prevented by order of court or any other Governmental
Authority from conducting all or any material part of its
business affairs;
(m) Any one or more judgments, writs or warrants of
attachment, execution or similar process involving an aggregate
amount (not reimbursed or reimbursable by an insurer that has
acknowledged its liability in writing) in excess of $50,000 shall
be entered or filed against the Borrower or any of its
Subsidiaries or any of their respective properties, and all such
judgments and processes shall not be dismissed, vacated, stayed,
discharged or bonded for a period of thirty (30) days or in any
event later than five (5) days prior to the date of any proposed
sale thereunder, and, if bonded, such bond (or a replacement
bond) shall not continue in effect at all times until such
judgment is dismissed or discharged;
(n) Any Lien, levy or assessment, or notice thereof, shall
be filed of record with respect to all or any portion of the
assets of the Borrower or any of its Subsidiaries by the United
States, or any department, agency or instrumentality thereof, or
by any other Governmental Authority, including, without
limitation, the PBGC;
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such Lien, levy or assessment, taken together with all other
Liens, levies or assessments then of record with respect to the
assets of the Borrower and its Subsidiaries, taken as a whole,
exceeds $50,000; and such Lien, levy or assessment shall be
executed upon or shall not be paid, dismissed, vacated, stayed,
released, bonded or discharged within thirty (30) days after the
same becomes a Lien or, in the case of a Lien involving ad
valorem taxes, prior to the last day when payment may be made
without penalty;
(o) Any Loan Document, at any time after execution and
delivery thereof, shall for any reason cease to be a legal, valid
and binding obligation of the Borrower or any of its Subsidiaries
to the extent a party thereto, enforceable against it in
accordance with its terms, or to give the Lender the rights,
powers and remedies purported to be created thereby, including,
without limitation, a valid, first priority perfected security
interest in and Lien upon all of the Collateral purported to be
covered thereby, subject only to Permitted Liens, in each case
unless any such cessation is due to any act or failure to act on
the part of the Lender;
(p) Lexington Management or any Person acting on behalf of
Lexington Management shall deny or disaffirm its obligations
under the Guaranty;
(q) The occurrence of any of the following events: (i) the
Borrower, any Subsidiary or any ERISA Affiliate shall fail to pay
when due, after expiration of any applicable grace period, any
installment payment with respect to its Withdrawal Liabilities
under a Multiemployer Plan; (ii) the failure of the Borrower, any
Subsidiary or any ERISA Affiliate to satisfy its contribution
requirements under Section 412(c)(11) of the Internal Revenue
Code, whether or not it has sought a waiver under Section 412(d)
of the Internal Revenue Code; (iii) notice of intent to terminate
any Pension Plan having Unfunded Pension Liabilities shall be
filed under Title IV of ERISA; (iv) the institution by the PBGC
of proceedings under Title IV of ERISA to terminate any Pension
Plan; (v) the institution by a fiduciary of any Employee Plan of
proceedings against the Borrower, any Subsidiary or any ERISA
Affiliate to enforce Section 515 of ERISA to collect
contributions; (vi) loss of qualification of a Qualified Plan; or
(vii) the existence of any condition that would permit the PBGC
under Section 4042 of ERISA to obtain a decree adjudicating that
any Pension Plan or Plans having Unfunded Pension Liabilities
must be terminated, which events would, individually or in the
aggregate, be reasonably likely to have a Material Adverse
Effect;
(r) Any one or more Licenses, (including without
limitation, Insurance Licenses) now or hereafter held by the
Borrower or any of its Subsidiaries shall be terminated,
suspended or revoked or shall not be renewed, which terminations,
suspensions, revocations or
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failures to renew would, individually or in the aggregate, be
reasonably likely to have a Material Adverse Effect;
(s) The occurrence of any one or more changes in any of
the Insurance Codes governing the dividend practices of any of
the Insurance Subsidiaries, which changes would, individually or
in the aggregate, be reasonably likely to have a Material Adverse
Effect upon the Borrower or any Insurance Subsidiary;
(t) The occurrence of any one or more changes in the
status of any of the Reinsurance Agreements of any of the
Insurance Subsidiaries, which changes would, individually or in
the aggregate, be reasonably likely to have a Material Adverse
Effect upon the Borrower or any Insurance Subsidiary;
(u) Prior to December 31, 1997, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall
have ceased to be employed by the Borrower or to continue to
perform his current duties as President and Chief Executive
Officer of the Borrower (other than as a result of death or
disability) and such cessation shall continue for a period of ten
(10) Business Days, and in the event that ▇▇. ▇▇▇▇▇▇▇▇▇ shall
have ceased to be an employee of the Borrower prior to December
31, 1997 as a result of his death or disability, the Borrower
shall have failed to hire or appoint a replacement for ▇▇.
▇▇▇▇▇▇▇▇▇, satisfactory to the Lender, within six (6) months
after the cessation of his employment;
(v) Any Mutual Fund of an Investment Advisory Subsidiary
(i) incurs any Indebtedness other than accrued expenses and trade
payables and other current liabilities arising in the ordinary
course of business and not incurred through the borrowing of
money or (ii) makes any Investment in any derivative security or
enters into any Hedge Agreement in either case for the purpose of
speculation or trading; provided, however, that an Investment in
a derivative security or the entering into a Hedge Agreement
shall not be deemed to be for the purpose of speculation or
trading if such derivative security or Hedge Agreement protects
against a financial risk of Investments then held by such Mutual
Fund regardless of whether such derivative security or Hedge
Agreement is later traded, sold or otherwise disposed of; or
(w) The occurrence of a Change of Control.
8.2. Remedies: Acceleration, etc. Upon and at any time
after the occurrence and during the continuance of any Event of
Default, the Lender may take any or all of the following actions
at the same or different times:
(a) Declare all or any part of the outstanding principal
amount of the Term Loan, all unpaid interest accrued thereon, and
all other amounts payable under this Agreement, the Term Note and
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the other Loan Documents to be immediately due and payable,
whereupon such outstanding principal amount, accrued interest and
other such amounts shall become immediately due and payable
without presentment, demand, protest, notice of intent to
accelerate or other notice or legal process of any kind, all of
which are hereby knowingly and expressly waived by the Borrower
(provided that, upon the occurrence of an Event of Default
pursuant to Section 8.1(h) with respect to Lexington Management,
Sections 8.1(j) or (k) with respect to the Borrower, all of such
outstanding principal amount, accrued interest and other such
amounts shall automatically become immediately due and payable);
and
(b) Exercise all rights and remedies available to it under
this Agreement, the other Loan Documents and applicable law.
8.3. Remedies: Set-Off. In addition to all other rights
and remedies available under the Loan Documents or applicable law
or otherwise, upon and at any time after the occurrence and
during the continuance of any Event of Default, the Lender and
each of its Affiliates may, and each is hereby authorized by the
Borrower, at any such time and from time to time, to the fullest
extent permitted by applicable law, without presentment, demand,
protest or other notice of any kind, all of which are hereby
knowingly and expressly waived by the Borrower, to set off and to
apply any and all deposits (general or special, time or demand,
provisional or final) and any other property at any time held,
and any other indebtedness at any time owing, by the Lender or
any of its Affiliates to or for the credit or the account of the
Borrower against any or all of the Obligations now or hereafter
existing, whether or not such Obligations may be contingent or
unmatured, the Borrower hereby granting to the Lender a
continuing security interest in and Lien upon all such deposits
and other property as security for such Obligations. The Lender
agrees promptly to notify the Borrower after any such set-off and
application; provided, however, that the failure to give such
notice shall not affect the validity of such set-off and
application.
ARTICLE IX
MISCELLANEOUS
9.1. Survival. All representations, warranties, covenants
and agreements made by or on behalf of the Borrower or any of its
Subsidiaries in this Agreement and in each of the other Loan
Documents shall survive the execution and delivery hereof or
thereof and the making and repayment of the Term Loan. In
addition, notwithstanding anything herein or under applicable law
to the contrary, the provisions of Annex 1 and the provisions of
-------
this Agreement and the other Loan Documents relating to
indemnification or payment of fees, costs and expenses,
including,
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without limitation, the provisions of Sections 3.7(a), 3.7(b),
3.8, 3.9, 9.5 and 9.6, shall survive any termination or
cancellation of this Agreement or any of the other Loan
Documents.
9.2. Governing Law; Consent to Jurisdiction. THIS
AGREEMENT HAS BEEN EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL
BE DEEMED TO HAVE BEEN MADE IN, NORTH CAROLINA AND SHALL BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO
CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS
PART OF THE CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE COURT
WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR ANY FEDERAL COURT
LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF
THE OTHER LOAN DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
PROCEEDING TO WHICH THE LENDER OR THE BORROWER IS A PARTY,
INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN
CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING,
STATEMENT (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR
THE BORROWER. THE BORROWER IRREVOCABLY AGREES TO BE BOUND
(SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY JUDGMENT
RENDERED OR RELIEF GRANTED THEREBY AND FURTHER, TO THE EXTENT
PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY HAVE BASED ON
LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
--------------------
THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS, TO
THE EXTENT PERMITTED BY LAW, THAT ALL SERVICE OF PROCESS BE MADE
BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS ADDRESS SET
FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID AND PROPERLY ADDRESSED. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER TO BRING ANY
ACTION OR PROCEEDING AGAINST THE BORROWER IN THE COURTS OF ANY
OTHER JURISDICTION.
9.3. Waiver of Jury Trial. THE BORROWER AND, BY ITS
ACCEPTANCE OF THE BENEFITS HEREOF, THE LENDER, HEREBY WAIVE, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, THEIR RESPECTIVE RIGHTS
TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS, OR BASED UPON, ARISING OUT OF, OR IN CONNECTION WITH
ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER ORAL
OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. The scope
of this waiver is intended to be all-encompassing of any and all
disputes that may be filed in any court and that relate to the
subject matter of this transaction, including, without
limitation, contract claims, tort claims, breach of duty claims
and all other common law and statutory claims. Each of the
Borrower and, by its acceptance of the benefits hereof, the
Lender, (i) acknowledges that this waiver is a material
inducement to enter into a business relationship,
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that it has relied on this waiver in entering into this Agreement
or accepting the benefits hereof, as the case may be, and that it
will continue to rely on this waiver in its related future
dealings with the other parties hereto, and (ii) further warrants
and represents that it has reviewed this waiver with its legal
counsel and that, based upon such review, it knowingly and
voluntarily waives its jury trial rights to the extent permitted
by applicable law. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, MODIFICATIONS OR
SUPPLEMENTS TO OR RESTATEMENTS OF THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS. IN THE EVENT OF LITIGATION, THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT. IN
THE EVENT THAT THE WAIVER OF JURY TRIAL HEREIN SHALL BE
DETERMINED TO BE INVALID OR UNENFORCEABLE AS A MATTER OF LAW WITH
RESPECT TO ANY PARTY, THE PROVISIONS OF ANNEX 1 SHALL GOVERN AS
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TO THE MATTERS SET FORTH THEREIN WITH RESPECT TO SUCH PARTY.
9.4. Notice. All notices and other communications provided
for hereunder shall be in writing (including telegraphic, telex,
facsimile transmission or cable communication) and mailed,
telegraphed, telexed, telecopied, cabled or delivered to the
party to be notified at the following addresses:
If to the Borrower: Piedmont Management Company Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender: First Union National Bank
of North Carolina
Specialized Industries/Financial
Institutions Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇-▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as any party may designate for itself by
like notice to all other parties hereto. All such notices and
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communications shall be deemed to have been given (i) if mailed
as provided above by any method other than overnight delivery
service, on the fifth Business Day after deposit in the mails,
(ii) if mailed by overnight delivery service, telegraphed,
telexed or telecopied, when delivered for overnight delivery,
delivered to the telegraph company, confirmed by telex answerback
or transmitted by telecopier, respectively, or (iii) if delivered
by hand, upon delivery.
9.5. Fees and Expenses. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Borrower
hereby agrees:
(a) to pay or reimburse upon demand all reasonable costs
and expenses (including, without limitation, reasonable
attorneys' fees and expenses) incurred or paid by the Lender in
connection with (i) the examination, review and due diligence
investigation in connection with, the preparation, negotiation,
execution and delivery of, and any amendment, modification or
waiver of or consent with respect to, this Agreement and the
other Loan Documents, (ii) the engagement of appraisers,
actuaries, consultants, auditors, financial advisers or similar
Persons by the Lender at any time, whether before or after the
Closing, to render opinions concerning the financial condition of
the Borrower and its Subsidiaries and the value of the
Collateral, (iii) any attempt to inspect, verify, protect,
collect, sell, liquidate or otherwise dispose of the Collateral
or any other assets of the Borrower and its Subsidiaries,
(iv) the creation, perfection and maintenance of the perfection
of the Lender's Liens in the Collateral, including, without
limitation, Lien search fees and filing and recording fees, taxes
and expenses, (v) any refinancing or restructuring of the credit
arrangement provided under this Agreement, whether in the nature
of a "work-out," in any insolvency or bankruptcy proceeding or
otherwise and (vi) any attempt to enforce or preserve any rights
of the Lender against the Borrower or any other Person that may
be obligated to the Lender by virtue of this Agreement or any of
the other Loan Documents;
(b) to pay and hold the Lender harmless from and against
all liability for any intangibles, documentary, stamp or other
similar taxes, fees and excises, if any, including any interest
and penalties, that may be payable in connection with the
transactions contemplated by this Agreement and the other Loan
Documents; and
(c) to pay and hold the Lender harmless from and against
all finder's or brokerage fees, commissions and expenses that may
be payable in connection with the transactions contemplated by
this Agreement and the other Loan Documents, other than any fees,
commissions or expenses of finders or brokers engaged by the
Lender.
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9.6. Indemnification. From and at all times after the date
of this Agreement, and in addition to the fees, costs and
expenses payable under Section 9.5 and all of the Lender's other
rights and remedies, the Borrower agrees to indemnify and hold
harmless the Lender and each of its directors, officers,
employees, agents and Affiliates (each, an "Indemnified Person")
against any and all claims, losses, damages, liabilities, costs
and expenses of any kind or nature whatsoever, including, without
limitation, reasonable attorneys' fees and expenses
(collectively, "Indemnified Costs"), incurred by or asserted
against any such Indemnified Person from and after the date
hereof, whether direct, indirect or consequential, as a result of
or arising from or in any way relating to any action, suit or
proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, arising from or in
connection with the negotiation, preparation, execution,
performance or enforcement of this Agreement, any of the other
Loan Documents or any of the Transaction Documents, the exercise
of any right or remedy hereunder or thereunder or any of the
Transactions, including, without limitation, the actual or
alleged generation, presence or release of any Hazardous
Substances on or from, or the transportation of Hazardous
Substances to or from, any real property owned or leased by the
Borrower or any of its Subsidiaries, and all other Environmental
Claims, in any case whether or not any such Indemnified Person is
a party to any such action, suit or proceeding or a subject of
any such inquiry or investigation; provided, however, that no
Indemnified Person shall have the right to be indemnified
hereunder for any Indemnified Costs to the extent resulting from
the gross negligence or willful misconduct of such Indemnified
Person as finally determined by a court of competent jurisdiction
and not subject to any appeal or pursuant to arbitration as set
forth in Annex 1. All of the foregoing Indemnified Costs of any
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Indemnified Person shall be paid or reimbursed by the Borrower,
as and when incurred and upon demand, and shall be additional
Obligations hereunder.
9.7. Waivers by the Borrower. Except as otherwise provided
for in this Agreement or any of the other Loan Documents, the
Borrower, to the extent permitted by law, waives (i) presentment,
demand and protest and notice of presentment, protest, default,
nonpayment, maturity and all other notices, (ii) notice prior to
taking possession or control of the Collateral or any bond or
security that might be required by any court prior to allowing
the Lender to exercise any of its rights and remedies under this
Agreement or any of the other Loan Documents and (iii) the
benefit of all valuation, appraisement and exemption laws.
9.8. Amendments, Waivers, etc. No amendment, modification,
waiver, discharge or termination of, or consent to any departure
by the Borrower from, any provision of this Agreement or any
other Loan Document, shall be effective unless in a writing
signed by the
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Lender, and then the same shall be effective only in the specific
instance and for the specific purpose for which given.
9.9. No Waiver. The rights and remedies of the Lender
expressly set forth in this Agreement and the other Loan
Documents are cumulative and in addition to, and not exclusive
of, all other rights and remedies available at law, in equity or
otherwise. No delay or failure to take action on the part of the
Lender in exercising any right, power or privilege shall operate
as a waiver thereof, nor shall any single or partial exercise of
any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or
privilege or be construed to be a waiver of any Default or Event
of Default. No course of dealing between any of the Borrower and
the Lender or their agents or employees shall be effective to
change, modify or discharge any provision of this Agreement or
any other Loan Document or to constitute a waiver of any Default
or Event of Default. No notice to or demand upon the Borrower in
any case shall entitle the Borrower to any other or further
notice or demand in similar or other circumstances or constitute
a waiver of the right of the Lender to exercise any right or
remedy or take any other or further action in any circumstances
without notice or demand.
9.10. Participations. The Lender may sell to one or more
other Persons (each, a "Participant") participations in any
portion of its rights and obligations under this Agreement,
provided that (i) the Lender's obligations under this Agreement
shall remain unchanged and the Lender shall remain solely
responsible for the performance of such obligations, (ii) the
Borrower shall continue to deal solely and directly with the
Lender in connection with the Lender's rights and obligations
under this Agreement and (iii) no Participant shall have any
rights under this Agreement or any of the other Loan Documents,
each Participant's rights against the Lender in respect of any
participation to be those set forth in the participation
agreement, and all amounts payable by the Borrower hereunder
shall be determined as if the Lender had not granted such
participation. Notwithstanding the foregoing, each Participant
shall have the rights of the Lender for purposes of
Sections 3.7(a), 3.7(b), 3.8, 3.9 and, to the extent permitted by
law Section 8.3, and shall be entitled to the benefits thereto,
to the extent that the Lender would be entitled to such benefits
if the participation had not been made, provided that, in the
case of Section 3.8, such Participant shall have complied with
the requirements of such Section as if it were directly subject
thereto, and provided further that no Participant shall be
entitled to receive any greater amount pursuant to this Agreement
than the Lender would have been entitled to receive in respect of
the amount of the participation made by the Lender to such
Participant had such participation not been made. The Lender
may, in connection with any participation or proposed
participation pursuant to this
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Section, disclose to the Participant or proposed Participant any
information relating to the Borrower and its Subsidiaries
furnished to it by or on behalf of any other party hereto.
9.11. Successors and Assigns. The provisions of this
Agreement shall be binding upon, inure to the benefit of and be
enforceable by the respective successors and assigns of the
Borrower and the Lender, and all references herein or in any
other Loan Document to any party shall be deemed to include its
successors and assigns; provided, however, that the Borrower
shall not sell, assign or transfer any of its rights, interests,
duties or obligations under this Agreement and, if the Term Loan
has not been accelerated pursuant to Section 8.2(b), that the
Lender may not sell, assign or transfer any of its rights,
interests, duties or obligations (other than participations
permitted under Section 9.10) without the consent of the
Borrower, which consent will not be unreasonably withheld.
9.12. Severability. To the extent any provision of this
Agreement is prohibited by or invalid under the applicable law of
any jurisdiction, such provision shall be ineffective only to the
extent of such prohibition or invalidity and only in any such
jurisdiction, without prohibiting or invalidating such provision
in any other jurisdiction or the remaining provisions of this
Agreement in any jurisdiction.
9.13. Construction. The headings of the various sections
and subsections of this Agreement have been inserted for
convenience only and shall not in any way affect the meaning or
construction of any of the provisions hereof. The provisions of
Annex 1, the exhibits and schedules hereto and the other Loan
-------
Documents are incorporated in this Agreement by this reference.
Except as otherwise provided herein and in the other Loan
Documents, in the event of any inconsistency or conflict between
any provision of this Agreement and any provision of any of the
other Loan Documents, the provision of this Agreement shall
control.
9.14. Injunctive Relief. The Borrower recognizes that in
the event the Borrower fails to perform, observe or discharge any
of its obligations or liabilities under this Agreement, any
remedy of law may prove to be inadequate relief to the Lender.
The Borrower therefore agrees that the Lender, if the Lender so
requests, shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual
damages.
9.15. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed and
delivered shall be an original, but all of which shall together
constitute one and the same instrument.
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9.16. Entire Agreement. THIS AGREEMENT AND THE OTHER
DOCUMENTS AND INSTRUMENTS EXECUTED AND DELIVERED
CONTEMPORANEOUSLY HEREWITH (A) EMBODY THE ENTIRE AGREEMENT AND
UNDERSTANDING BETWEEN THE PARTIES HERETO RELATING TO THE SUBJECT
MATTER HEREOF, (B) SUPERSEDE ANY AND ALL PRIOR AGREEMENTS AND
UNDERSTANDINGS OF THE PARTIES, ORAL OR WRITTEN, RELATING TO THE
SUBJECT MATTER HEREOF, INCLUDING THE PROVISIONS OF THE COMMITMENT
LETTER FROM THE LENDER TO THE BORROWER, DATED DECEMBER 20, 1994
(OTHER THAN THE PROVISIONS THEREOF RELATING TO THE PAYMENT OF
FEES), AND (C) MAY NOT BE AMENDED, SUPPLEMENTED, CONTRADICTED OR
OTHERWISE MODIFIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized corporate
officers as of the date first above written.
PIEDMONT MANAGEMENT COMPANY INC.
By: ________________________________
ATTEST: Title: _____________________________
______________________________
___________ Secretary
[CORPORATE SEAL]
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
By: ________________________________
Title: _____________________________
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