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EXHIBIT 10(13)
[EXECUTION COUNTERPART]
$130,000,000
CREDIT AGREEMENT
Dated as of September 30, 1997
among
CNA SURETY CORPORATION,
THE LENDERS PARTY HERETO,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS...............................................................................1
ARTICLE II
THE FACILITY............................................................................ 20
2.1 The Facility......................................................................................20
2.1.1 Description of Facility...........................................................................20
2.1.2 Facility Amount...................................................................................21
2.1.3 Availability of Facility..........................................................................21
2.2 Ratable Advances..................................................................................21
2.2.1 Ratable Advances..................................................................................21
2.2.2 Ratable Advance Rate Options......................................................................21
2.2.3 Method of Selecting Types and Interest Periods for Ratable Advances...............................21
2.2.4 Conversion and Continuation of Outstanding Ratable Advances.......................................22
2.3 Competitive Bid Advances..........................................................................22
2.3.1 Competitive Bid Option............................................................................22
2.3.2 Competitive Bid Quote Request.....................................................................23
2.3.3 Invitation for Competitive Bid Quotes.............................................................23
2.3.4 Submission and Contents of Competitive Bid Quotes.................................................24
2.3.5 Notice to Borrower................................................................................25
2.3.6 Acceptance and Notice by Borrower.................................................................26
2.3.7 Allocation by Administrative Agent................................................................26
2.4 Availability of Funds.............................................................................27
2.5 Facility Fee; Reductions in Aggregate Commitment..................................................27
2.6 Minimum Amount of Each Advance; Limit on Interest Periods.........................................27
2.7 Optional Principal Payments.......................................................................27
2.8 Mandatory Prepayments.............................................................................28
2.9 Interest Rate, etc................................................................................28
2.10 Rates Applicable After Default....................................................................28
2.11 Method of Payment.................................................................................28
2.12 Telephonic Notices................................................................................29
2.13 Interest Payment Dates; Interest and Fee Basis....................................................29
2.14 Notification of Advances, Interest Rates, Prepayments and Commitment Reductions...................30
2.15 Lending Installations.............................................................................30
2.16 Non-Receipt of Funds by the Administrative Agent..................................................30
2.17 Taxes.............................................................................................31
2.18 Evidence of Debt..................................................................................32
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ARTICLE III
CHANGE IN CIRCUMSTANCES..................................................................33
3.1 Yield Protection..................................................................................33
3.2 Changes in Capital Adequacy Regulations...........................................................34
3.3 Availability of Types of Advances.................................................................34
3.4 Funding Indemnification...........................................................................35
3.5 Lender Statements; Survival of Indemnity..........................................................35
3.6 Right to Substitute Lender........................................................................35
ARTICLE IV
CONDITIONS PRECEDENT.....................................................................36
4.1 Initial Advance...................................................................................36
4.2 Each Advance......................................................................................39
ARTICLE V
REPRESENTATIONS AND WARRANTIES...........................................................39
5.1 Corporate Existence and Standing..................................................................39
5.2 Authorization and Validity........................................................................39
5.3 Compliance with Laws and Contracts................................................................40
5.4 Governmental Consents.............................................................................40
5.5 Financial Statements..............................................................................41
5.6 Material Adverse Change...........................................................................41
5.7 Taxes.............................................................................................42
5.8 Litigation and Contingent Obligations.............................................................42
5.9 Capitalization....................................................................................42
5.10 ERISA.............................................................................................42
5.11 Default...........................................................................................43
5.12 Federal Reserve Regulations.......................................................................43
5.13 Investment Company................................................................................43
5.14 Reorganization Documents..........................................................................43
5.15 Disclosure........................................................................................44
5.16 Properties........................................................................................44
5.17 Liens.............................................................................................44
5.18 Restrictive Agreements............................................................................45
ARTICLE VI
COVENANTS................................................................................45
6.1 Financial Reporting...............................................................................45
6.2 Use of Proceeds...................................................................................47
6.3 Certain Notices...................................................................................47
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6.4 Conduct of Business...............................................................................48
6.5 Taxes.............................................................................................48
6.6 Insurance.........................................................................................49
6.7 Compliance with Laws..............................................................................49
6.8 Maintenance of Properties.........................................................................49
6.9 Inspection........................................................................................49
6.10 Merger............................................................................................49
6.11 Sale of Assets....................................................................................50
6.12 Liens.............................................................................................50
6.13 Indebtedness......................................................................................51
6.14 Consolidated Capitalization.......................................................................51
6.15 Insurance Company Surplus.........................................................................51
6.16 Maximum Statutory Net Written Premiums............................................................51
6.17 Investments, Loans, Advances, Guarantees and Acquisitions.........................................51
6.18 Transactions with Affiliates......................................................................52
6.19 Restrictive Agreements............................................................................53
6.20 Leases............................................................................................53
6.21 Sale and Leaseback................................................................................53
6.22 Fiscal Year.......................................................................................53
ARTICLE VII
DEFAULTS.................................................................................54
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES...........................................56
8.1 Acceleration......................................................................................56
8.2 Amendments........................................................................................56
8.3 Preservation of Rights............................................................................57
ARTICLE IX
GENERAL PROVISIONS.......................................................................57
9.1 Survival of Representations.......................................................................57
9.2 Headings..........................................................................................57
9.3 Entire Agreement..................................................................................57
9.4 Several Obligations; Benefits of this Agreement...................................................58
9.5 Expenses; Indemnification; Damage Waiver..........................................................58
9.6 Numbers of Documents..............................................................................59
9.7 Accounting........................................................................................59
9.8 Severability of Provisions........................................................................59
9.9 Nonliability of Lenders...........................................................................59
9.10 Governing Law.....................................................................................60
9.11 Jurisdiction; Consent to Service of Process.......................................................60
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9.12 Confidentiality...................................................................................60
9.13 Waiver of Jury Trial..............................................................................61
9.14 Disclosure........................................................................................61
9.15 Counterparts......................................................................................61
ARTICLE X
THE ADMINISTRATIVE AGENT.................................................................61
10.1 Appointment.......................................................................................61
10.2 Powers............................................................................................62
10.3 General Immunity..................................................................................62
10.4 No Responsibility for Loans, Recitals, etc........................................................62
10.5 Action on Instructions of Lenders.................................................................62
10.6 Employment of Administrative Agents and Counsel...................................................63
10.7 Reliance on Documents; Counsel....................................................................63
10.8 Administrative Agent's Reimbursement and Indemnification..........................................63
10.9 Notice of Default.................................................................................64
10.10 Rights as a Lender................................................................................64
10.11 Lender Credit Decision............................................................................64
10.12 Successor Administrative Agent....................................................................64
ARTICLE XI
SETOFF; RATABLE PAYMENTS.................................................................65
11.1 Setoff............................................................................................65
11.2 Ratable Payments..................................................................................66
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS........................................66
12.1 Successors and Assigns............................................................................66
12.2 Participations....................................................................................67
12.2.1 Permitted Participants; Effect....................................................................67
12.2.2 Voting Rights.....................................................................................67
12.2.3 Benefit of Setoff.................................................................................67
12.3.1 Permitted Assignments.............................................................................67
12.3.2 Register..........................................................................................68
12.3.3 Effect; Effective Date............................................................................68
12.4 Dissemination of Information......................................................................69
12.5 Tax Treatment.....................................................................................69
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ARTICLE XIII
NOTICES..................................................................................69
13.1 Giving Notice.....................................................................................69
13.2 Change of Address.................................................................................70
Exhibit "A" - Competitive Bid Quote Request
Exhibit "B" - Invitation for Competitive Bid Quotes
Exhibit "C" - Competitive Bid Quote
Exhibit "D" - Opinion of the Counsel to the Borrower
Exhibit "E" - Compliance Certificate
Exhibit "F" - Assignment and Acceptance
Schedule 1 - Commitments
Schedule 5.3 - Approvals and Consents
Schedule 5.7 - Tax Matters
Schedule 5.8 - Litigation
Schedule 5.9 - Capitalization and Subsidiaries
Schedule 5.17 - Liens
Schedule 5.18 - Restrictive Agreements
Schedule 6.13 - Existing Indebtedness
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CREDIT AGREEMENT dated as of September 30, 1997 between CNA Surety
Corporation, the Lenders and The Chase Manhattan Bank, as administrative agent.
R E C I T A L S:
A. The Borrower has requested the Lenders to make loans to it from time
to time in an aggregate principal amount up to but not exceeding $130,000,000,
the proceeds of which the Borrower will use (a) to refinance, contemporaneously
with (and after giving effect to) the Merger, existing indebtedness of Capsure
Holdings, (b) to make certain capital contributions to Western and USA, each a
Subsidiary of the Borrower (after giving effect to the Merger), and (c) for the
general corporate purposes of the Borrower and its Subsidiaries.
B. The Lenders are willing to make such loans on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings herein contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower, the
Lenders, and the Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Lender for the relevant Absolute Rate Interest Period, the rate of
interest per annum (rounded to the nearest 1/100 of 1%) offered by such Lender
and accepted by the Borrower.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Lenders to the Borrower at the same time and for the same Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance, a period of not less than seven and not more than 360 days commencing
on a Business Day selected by the
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Borrower pursuant to this Agreement. If such Absolute Rate Interest Period would
end on a day which is not a Business Day, such Absolute Rate Interest Period
shall end on the next succeeding Business Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.
"Administrative Agent" means The Chase Manhattan Bank in its capacity
as administrative agent for the Lenders pursuant to Article X, and not in its
individual capacity as a Lender, and any successor Administrative Agent
appointed pursuant to Article X.
"Administrative Questionnaire" means an Administrative Questionnaire in
a form supplied by the Administrative Agent.
"Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Loans made by some or all of the Lenders to the Borrower
on the same Borrowing Date, of the same Type (or on the same interest basis in
the case of Competitive Bid Advances) and, when applicable, for the same
Interest Period and includes a Competitive Bid Advance.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of stock, by contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of all
the Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement Accounting Principles" means generally accepted accounting
principles as in effect from time to time, applied in a manner consistent with
those used in preparing the financial statements referred to in Section 5.5(a);
provided, however, that for purposes of all computations required to be made
with respect to compliance by the Borrower with Section 6.14, such term shall
mean generally accepted accounting principles as in effect on the date hereof,
applied in a manner consistent with those used in preparing the financial
statements referred to in Section 5.5.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (a) the Prime Rate for
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such day and (b) the sum of the Federal Funds Effective Rate for such day plus
1/2% per annum.
"Annual Statement" means the annual statutory financial statement of
any Insurance Subsidiary required to be filed with the insurance commissioner
(or similar authority) of its jurisdiction of incorporation, which statement
shall be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing annual statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith.
"Applicable Eurodollar Margin" and "Applicable Facility Fee Percentage"
mean, respectively, the applicable rates per annum set forth in the table below
under the captions "Applicable Eurodollar Margin" and "Applicable Facility Fee
Percentage", as the case may be, set forth opposite the applicable Consolidated
Capitalization Ratio as at the last day of the most recently ended fiscal
quarter of the Borrower for which financial statements have been delivered
pursuant to Section 6.1(a) or 6.1(b), as the case may be, together with the
related compliance certificate for such fiscal quarter or fiscal year, as the
case may be, required by Section 6.1(c), provided that if, on any day, either
Western or USA has a claims paying ability rating from A.M. Best & Company,
Inc., of less than "A-" (or if such rating is no longer published by A.M. Best &
Company, Inc., from another rating agency acceptable to the Administrative
Agent), or either Western or USA does not have such a rating, the applicable
rates set forth in the table below under the caption (i) "Applicable Eurodollar
Margin" shall be increased by 0.10% per annum and (ii) "Applicable Facility Fee
Percentage" shall be increased by 0.025% per annum.
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Applicable Applicable
Range of Consolidated Eurodollar Facility Fee
Capitalization Ratio Margin Percentage
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Less than 0.15 to 1.0 0.16% 0.09%
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Greater than or equal to 0.15 to 0.20% 0.10%
1.0 and less than or equal to 0.35
to 1.0
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Greater than 0.35 to 1.0 0.275% 0.125%
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From and including the initial Borrowing Date to but excluding the fifth
Business Day following the date of receipt of the first financial statements
delivered pursuant to Section 6.1(a) or 6.1(b), as the case may be, together
with the related compliance certificate for such fiscal quarter or fiscal year,
as the case may be, required by Section 6.1(c), the "Applicable Eurodollar
Margin" and the "Applicable Facility Fee Percentage" shall be determined in
accordance with the certificate delivered pursuant to Section 4.1(e). The
"Applicable Eurodollar Margin" and the "Applicable Facility Fee Percentage"
shall be adjusted on the fifth Business Day following the date of receipt of the
relevant financial statements pursuant to Section 6.1(a) or 6.1(b), as the case
may be, and the related compliance certificate for such fiscal quarter or fiscal
year, as the case may be, required by Section 6.01(c). In the event the
financial statements for any fiscal quarter or fiscal year or the certificate
required by Section 6.1(c) are not delivered when due and such financial
statements and/or certificate are not delivered prior to the date upon which
such becomes a Default, then, effective upon such Default, during the period
from the date upon which such financial statements were required to be delivered
until one Business Day following the date upon which they actually are
delivered, the Applicable Eurodollar Margin and the Applicable Facility Fee
Percentage shall be the highest rates provided for in the above table; provided
that, notwithstanding the foregoing, the Applicable Eurodollar Margin and the
Applicable Facility Fee Percentage shall be the highest rate set forth in the
above table for any period during which a Default or Unmatured Default shall
have occurred and be continuing.
"Article" means an article of this Agreement unless another document is
specifically referenced.
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"Assignment and Acceptance" is defined in Section 12.3.1.
"Authorized Officer" means any of the Chief Executive Officer, the
President, the Chief Financial Officer, the Chief Operations Officer, any Vice
President or the Secretary of the Borrower, acting singly.
"Borrower" means CNA Surety Corporation, a Delaware corporation, and
its successors and assigns.
"Borrowing Date" means a date on which an Advance is made hereunder.
"Business Day" means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in New York for the conduct of substantially all
of their commercial lending activities and on which dealings in United States
dollars are carried on in the London interbank market and (b) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in New York for the conduct of substantially all of their commercial
lending activities.
"Capitalized Lease" of a Person means any lease of Property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person prepared in accordance with
Agreement Accounting Principles.
"Capsure Credit Agreement" means the Amended and Restated Credit
Agreement dated as of May 22, 1996 between Capsure Financial Group, Inc.,
Capsure Holdings, the lenders party thereto and Chase (formerly known as
Chemical Bank), as administrative agent, as amended.
"Capsure Holdings" means Capsure Holdings Corp., a Delaware
corporation.
"CCC Surety Operations" means the combined surety businesses of (a)
Continental Casualty and its Affiliates and (b) Continental Insurance and its
Affiliates.
"Change" means (a) any change after the date of this Agreement in the
Risk-Based Capital Guidelines for banks or (b) any adoption of or change in any
other law, governmental or
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quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender.
"Change in Control" means (a) the Continental Casualty Pool and the
Continental Insurance Pool shall cease to own, in the aggregate (directly or
indirectly), beneficially and of record free and clear of all Liens, other
encumbrances, or voting agreements, restrictions or trusts of any kind, at least
51% of the outstanding shares of capital stock of the Borrower on a fully
diluted basis and shares representing the right to elect a majority of the
directors of the Borrower, (b) the Continental Casualty Pool shall cease to own
(directly or indirectly) beneficially and of record, free and clear of all
Liens, other encumbrances, or voting agreements, restrictions or trusts of any
kind, at least 46% of the outstanding shares of capital stock of the Borrower on
a fully diluted basis and shares representing the right to elect a majority of
the directors of the Borrower or (c) after giving effect to the Merger, the
Borrower shall cease to own, directly or indirectly, beneficially and of record,
free and clear of all Liens, other encumbrances, or voting agreements,
restrictions or trusts of any kind, 100% of the outstanding shares of capital
stock (on a fully diluted basis) of each Significant Subsidiary.
"Chase" means The Chase Manhattan Bank in its individual capacity, and
its successors.
"Closing Date" means September 30, 1997.
"Closing Transactions" is defined in Section 4.1(e).
"CNA Financial" means CNA Financial Corporation, a Delaware
corporation.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its name on Schedule 1
hereto or in the Assignment and Acceptance relating to any assignment that has
become effective pursuant to Section 12.3.2, as such amount may be modified from
time to time pursuant to the terms hereof.
"Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid
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Loans made by some or all of the Lenders to the Borrower at the same time and
for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.3.6.
"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute
Rate Loan, or both, as the case may be.
"Competitive Bid Margin" means the margin above or below the applicable
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded to the nearest 1/100 of 1%) to be added or subtracted from
such Eurodollar Base Rate.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in
the form of Exhibit "C" hereto completed and delivered by a Lender to the
Administrative Agent in accordance with Section 2.3.4.
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "A" hereto completed and delivered by the
Borrower to the Administrative Agent in accordance with Section 2.3.2.
"Consolidated" or "consolidated", when used in connection with any
calculation, means a calculation to be determined on a consolidated basis for
the Borrower and its Subsidiaries in accordance with Agreement Accounting
Principles, or SAP, as applicable.
"Consolidated Capitalization Ratio" means, as at any date of
determination, the ratio of (a) consolidated Indebtedness of the Borrower and
its Subsidiaries as at such date to (b) the sum of (i) consolidated Indebtedness
of the Borrower and its Subsidiaries as at such date plus (ii) Consolidated Net
Worth as at such date.
"Consolidated Net Worth" means, at any date of determination, the
amount of consolidated common and preferred shareholders' equity of the Borrower
and its Subsidiaries, determined as at such date in accordance with Agreement
Accounting Principles; provided, however, that unrealized appreciation and
depreciation of securities which are classified as available for sale and are
subject to FASB 115 shall be excluded when computing Consolidated Net Worth.
"Continental Casualty" means Continental Casualty Company, an Illinois
insurance company.
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"Continental Casualty Pool" means Continental Casualty, American
Casualty Company of Reading, Pennsylvania, CNA Casualty of California, CNA
Lloyd's of Texas, Columbia Casualty Company, National Fire Insurance Company of
Hartford, Transcontinental Insurance Company, Transportation Insurance Company
and Valley Forge Insurance Company.
"Continental Insurance" means The Continental Insurance Company, a New
Hampshire insurance company.
"Continental Insurance Pool" means Continental Insurance, Boston Old
Colony Insurance Company, The Buckeye Union Insurance Company, Commercial
Insurance Company of Newark, New Jersey, Continental Lloyd's Insurance Company,
The Continental Insurance Company of New Jersey, The Continental Insurance
Company of Puerto Rico, Continental Reinsurance Corporation, The Fidelity and
Casualty Company of New York, Firemen's Insurance Company of Newark, New Jersey,
First Insurance Company of Hawaii Ltd., The Glens Falls Insurance Company,
Kansas City Fire and Marine Insurance Company, The Mayflower Insurance Company,
Ltd., National-Ben Franklin Insurance Company of Illinois, Niagara Fire
Insurance Company and Pacific Insurance Company.
"Contingent Obligation" of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the financial obligation or liability of any other
Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person, or otherwise assures any creditor of
such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take-or-pay contract or application for a Letter of
Credit, but excluding (a) the endorsement of instruments for deposit or
collection in the ordinary course of business and (b) obligations incurred by
any Insurance Subsidiary in the ordinary course of its financial guaranty or
other business.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower or any of its Subsidiaries, are
treated as a single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.2.4.
"Default" means an event described in Article VII.
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"Environmental Laws" means federal, state or local environmental,
health and safety statutes, regulations, ordinances, codes, rules, orders,
decrees, directives and standards relating to the protection of the environment
or to emissions, releases or discharges of any toxic or hazardous waste,
substance or chemical or any pollutant, contaminant, chemical or other substance
or the clean-up or remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means a Eurodollar Bid Rate Advance or a
Eurodollar Ratable Advance, or both, as the case may be.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Eurodollar Interest Period, the rate appearing on Page 3750 of the
Dow ▇▇▇▇▇ Markets Service (or on any successor or substitute page of such
Service, or any successor to or substitute for such Service, providing rate
quotations comparable to those currently provided on such page of such Service,
as determined by the Administrative Agent from time to time for purposes of
providing quotations of interest rates applicable to dollar deposits in the
London interbank market) at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Eurodollar Interest Period, as the rate
for dollar deposits with a maturity comparable to such Eurodollar Interest
Period. In the event that such rate is not available at such time for any
reason, then the "Eurodollar Base Rate" with respect to such Eurodollar Advance
for such Eurodollar Interest Period shall be the rate at which dollar deposits
of $5,000,000 and for a maturity comparable to such Eurodollar Interest Period
are offered by the principal London office of Chase in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Eurodollar Interest Period.
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan
made by a given Lender for the relevant Eurodollar Interest Period, the sum of
(a) the Eurodollar Base Rate and (b) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which
bears interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Loan" means a Loan which bears interest at the
Eurodollar Bid Rate.
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"Eurodollar Interest Period" means, with respect to a Eurodollar
Ratable Advance or a Eurodollar Bid Rate Advance, a period of one, two, three or
six months commencing on a Business Day selected by the Borrower pursuant to
this Agreement. Such Eurodollar Interest Period shall end on (but exclude) the
day which corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such next,
second, third or sixth succeeding month. If a Eurodollar Interest Period would
otherwise end on a day which is not a Business Day, such Eurodollar Interest
Period shall end on the next succeeding Business Day, provided, however, that if
said next succeeding Business Day falls in a new month, such Eurodollar Interest
Period shall end on the immediately preceding Business Day.
"Eurodollar Loan" means a Eurodollar Ratable Loan or Eurodollar Bid
Rate Loan, or both, as the case may be.
"Eurodollar Ratable Advance" means an Advance which bears interest at a
Eurodollar Rate requested by the Borrower pursuant to Section 2.2.3.
"Eurodollar Ratable Loan" means a Loan requested by the Borrower
pursuant to Section 2.2.3 which bears interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Ratable Advance
for the relevant Eurodollar Interest Period, the sum of (a) the quotient of (i)
the Eurodollar Base Rate applicable to such Eurodollar Interest Period, divided
by (ii) one minus the Reserve Requirement (expressed as a decimal) applicable to
such Eurodollar Interest Period (such quotient being rounded, if necessary, to
the next higher multiple of 1/16 of 1%), plus (b) the Applicable Eurodollar
Margin.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11 a.m. (New York
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
"Financial Statements" is defined in Section 5.5.
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"Floating Rate Advance" means an Advance which bears interest at the
Alternate Base Rate.
"Floating Rate Loan" means a Ratable Loan which bears interest at the
Alternate Base Rate.
"Governmental Authority" means the federal government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government including, without limitation, any board of insurance, insurance
department or insurance commissioner.
"Indebtedness" of a Person means, without duplication, such Person's
(a) obligations for borrowed money, (b) obligations representing the deferred
purchase price of Property or services (excluding accounts payable arising in
the ordinary course of such Person's business payable on terms customary in the
trade), (c) obligations, whether or not assumed, secured by Liens or payable out
of the proceeds or production from Property now or hereafter owned or acquired
by such Person, (d) obligations which are evidenced by notes, acceptances, or
similar instruments, (e) Capitalized Lease Obligations, (f) net Rate Hedging
Obligations (other than Rate Hedging Obligations, if any, entered into in
respect of the Loans or any portion thereof) and (g) Contingent Obligations, (h)
obligations for which such Person is obligated pursuant to or in respect of a
Letter of Credit and (i) repurchase obligations or liabilities of such Person
with respect to accounts, notes receivable or securities sold by such Person
(but excluding the obligations of any Insurance Subsidiary in respect of the
repurchase of securities pursuant to repurchase agreements or the lending of
securities pursuant to securities lending arrangements, in each case, entered
into in the ordinary course of business).
"Information Memorandum" means the Confidential Information Memorandum
dated April 1997 with respect to the credit facilities provided herein.
"Insurance Subsidiary" means any Subsidiary of the Borrower which is
engaged in any insurance business.
"Interest Period" means a Eurodollar Interest Period or an Absolute
Rate Interest Period.
"Invitation for Competitive Bid Quotes" means an Invitation for
Competitive Bid Quotes substantially in the form of Exhibit "B" hereto,
completed and delivered by the Administrative Agent to the Lenders in accordance
with Section 2.3.3.
18
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"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the
Administrative Agent, any office, branch, subsidiary or affiliate of such Lender
or the Administrative Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"License" means any license, certificate of authority, permit or other
authorization which is required to be obtained from the Governmental Authority
in connection with the operation, ownership or transaction of insurance
business.
"Lien" means any security interest, lien (statutory or other),
mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including, without limitation, the interest of a
vendor or lessor under any conditional sale, Capitalized Lease or other title
retention agreement). The term "Lien" shall not include the rights of purchasers
of any securities in such securities arising under repurchase agreements or
similar rights in respect of securities lending arrangements, in each case
entered into by the Borrower or any Subsidiary in the ordinary course of
business.
"Loan" means, with respect to a Lender, such Lender's portion of any
Advance and "Loans" means, with respect to the Lenders, the aggregate of all
Advances.
"Loan Documents" means this Agreement and the other documents and
agreements contemplated hereby and executed by the Borrower in favor of the
Administrative Agent or any Lender.
"Margin Stock" has the meaning assigned to that term under Regulation
U.
"Material Adverse Effect" means a material adverse effect on (a) the
business, Property, condition (financial or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole, (b) the ability of the Borrower
to perform its obligations under the Loan Documents, or (c) the validity or
enforceability of any of the Loan Documents or the rights or remedies of the
Administrative Agent or the Lenders thereunder.
19
-13-
"Merger" means the merger of Surety Acquisition with and into Capsure
Holdings.
"Moody's" means ▇▇▇▇▇'▇ Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Borrower or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.
"NAIC" means the National Association of Insurance Commissioners or any
successor thereto, or in lieu thereof, any other association, agency or other
organization performing advisory, coordination or other like functions among
insurance departments, insurance commissions and similar Governmental
Authorities of the various states of the United States of America toward the
promotion of uniformity in the practices of such Governmental Authorities.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lenders
or to any Lender, the Administrative Agent or any indemnified party hereunder
arising under any of the Loan Documents.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"PBGC" means the Pension Benefit Guaranty Corporation, or any successor
thereto.
"Permitted Investments" means:
(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America,
any agency thereof, the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation, the Governmental National Mortgage
Association, the Student Loan Market Association, the Federal Home Loan Bank
or the Federal Farm Credit Bank, in each case maturing within three years
from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
20
-14-
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof which
has a combined capital and surplus and undivided profits of not less than
$500,000,000;
(d) fully collateralized repurchase agreements and securities lending
arrangements with a term of not more than 30 days for securities described
in clause (a) above and entered into with (i) a financial institution
satisfying the criteria described in clause (c) above or (ii) a "registered
broker or dealer" within the meaning of Section 7 of the Securities Exchange
Act of 1934 which has total stockholders' equity in excess of $750,000,000;
and
(e) bonds, debentures, notes and other similar securities of any Person
organized under the laws of the United States of America or any state
thereof having, at the date of acquisition, a rating of BBB- or higher from
S&P or Baa3 or higher by Moody's, in each case maturing within three years
from the date of acquisition thereof.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization, or
any government or political subdivision or any agency, department or
instrumentality thereof.
"Plan" means an employee pension benefit plan, as defined in Section
3(2) of ERISA, maintained, sponsored or contributed to by the Borrower or any of
its Subsidiaries or, with respect to such a plan that is subject to Title IV of
ERISA, by any member of the Controlled Group.
"Prepayment Percentage" is defined in Section 2.8.
"Prime Rate" means the rate of interest per annum publicly announced
from time to time by Chase as its prime rate in effect at its principal office
in New York City; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"pro-rata" means, when used with respect to a Lender, and any described
aggregate or total amount, an amount equal to such Lender's pro-rata share or
portion based on its percentage
21
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of the Aggregate Commitment or if the Aggregate Commitment has been terminated,
its percentage of the aggregate principal amount of outstanding Advances.
"Purchasers" is defined in Section 12.3.1.
"Quarterly Statement" means the quarterly statutory financial statement
of any Insurance Subsidiary required to be filed with the insurance commissioner
(or similar authority) of its jurisdiction of incorporation, which statement
shall be in the form required by such Insurance Subsidiary's jurisdiction of
incorporation or, if no specific form is so required, in the form of financial
statements recommended by the NAIC to be used for filing quarterly statutory
financial statements and shall contain the type of information recommended by
the NAIC to be disclosed therein, together with all exhibits or schedules filed
therewith.
"Ratable Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Ratable Loans made by the Lenders to the
Borrower at the same time, of the same Type and for the same Interest Period.
"Ratable Borrowing Notice" is defined in Section 2.2.3.
"Ratable Loan" means a Loan made by a Lender pursuant to Section 2.2
hereof.
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (b) any and all
cancellations, buybacks, reversals, terminations or assignments of any of the
foregoing.
"Register" is defined in Section 12.3.2.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor thereto
or other regulation or official interpretation of said Board of Governors
relating to reserve requirements applicable to depositary institutions.
22
-16-
"Regulation G" means Regulation G of the Board of Governors of the
Federal Reserve System as from time to time in effect shall include and any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by Persons other than banks,
brokers and dealers for the purpose of purchasing or carrying margin stocks
applicable to such Persons.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to the
extension of credit by banks for the purpose of purchasing or carrying margin
stocks applicable to such Persons.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System as from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by the specified lenders for the
purpose of purchasing or carrying margin stocks applicable to such Persons.
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Reorganization Agreement" means that certain Reorganization Agreement
dated as of December 19, 1996 among Capsure Holdings, Continental Casualty, the
Borrower, Surety Acquisition and certain Affiliates of Continental Casualty.
"Reorganization Documents" means the Reorganization Agreement, the
certificate of merger executed pursuant thereto and the other documents,
certificates and agreements delivered in connection with the Merger.
"Reportable Event" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.
23
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"Required Lenders" means Lenders in the aggregate having at least
66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66-2/3% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to a Eurodollar Interest
Period, the maximum aggregate reserve requirement (including all basic,
supplemental, marginal and other reserves) which is imposed under Regulation D
on Eurocurrency liabilities.
"Risk-Based Capital Guidelines" means (a) the risk-based capital
guidelines in effect in the United States on the date of this Agreement and (b)
the corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards" and
any amendments to such regulations adopted prior to the date of this Agreement.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies.
"SAP" means, with respect to any Insurance Subsidiary, the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) from time to time in the jurisdiction of incorporation
of such Insurance Subsidiary for the preparation of annual statements and other
financial reports by insurance companies of the same type as such Insurance
Subsidiary; provided, however, that for purposes of all computations required to
be made with respect to compliance by the Borrower with Section 6.15, such term
shall mean SAP (as defined above) as in effect on the date hereof, applied in a
manner consistent with those used in preparing the financial statements referred
to in Section 5.5.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Significant Insurance Subsidiary" means any Significant Subsidiary
which is an Insurance Subsidiary.
"Significant Subsidiary" means Western, USA and any other Subsidiary
(i) the value of the total assets of which exceeds 5% of the value of the total
assets of the Borrower and its Subsidiaries on a consolidated basis as of the
end of the most recently completed fiscal year or (ii) the consolidated income
(before income taxes, extraordinary items and the cumulative effect of any
change in Agreement Accounting
24
-18-
Principles) of which exceeds 5% of such income of the Borrower and its
Subsidiaries on a consolidated basis for the most recently completed fiscal
year.
"Single Employer Plan" means a Plan subject to Title IV of ERISA
maintained by the Borrower or any member of the Controlled Group for employees
of the Borrower or any member of the Controlled Group, other than a
Multiemployer Plan.
"Statutory Net Written Premiums" means, for any period, the net
premiums written of the Insurance Subsidiaries (on a combined basis) during such
period, determined in accordance with SAP.
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any partnership, association, joint venture or similar business organization
more than 50% of the ownership interests having ordinary voting power of which
shall at the time be so owned or controlled. Unless otherwise expressly
provided, all references herein to a "Subsidiary" shall mean a Subsidiary of the
Borrower.
"Substantial Portion" means, with respect to the Property of the
Borrower and its Subsidiaries, Property which represents more than 10% of the
consolidated assets of the Borrower and its Subsidiaries as would be shown in
the consolidated financial statements of the Borrower and its Subsidiaries as at
the beginning of the twelve-month period ending with the month in which such
determination is made.
"Surety Acquisition" means Surety Acquisition Company, a Delaware
corporation and a Wholly-Owned Subsidiary of the Borrower.
"Surplus as Regards Policyholders" means, with respect to any Insurance
Subsidiary at any time, the surplus as regards policyholders of such Insurance
Subsidiary at such time, as determined in accordance with SAP.
"Termination Date" means (a) September 30, 2002, or (b) such earlier
date on which the obligations of the Lenders to make Loans hereunder are
terminated pursuant to the terms of this Agreement.
"Termination Event" means, with respect to a Plan which is subject to
Title IV of ERISA, (a) a Reportable Event, (b) the withdrawal of the Borrower or
any other member of the Controlled
25
-19-
Group from such Plan during a plan year in which the Borrower or any other
member of the Controlled Group was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA or was deemed such under Section 4068(f) of ERISA,
(c) the termination of such Plan, the filing of a notice of intent to terminate
such Plan or the treatment of an amendment of such Plan as a termination under
Section 4041 of ERISA or (d) the institution by the PBGC of proceedings to
terminate such Plan, in each case which could reasonably be expected to have a
Material Adverse Effect.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating
Rate Advance, Eurodollar Advance or Absolute Rate Advance.
"Unfunded Liabilities" means the amount (if any) by which the present
value of all vested and unvested accrued benefits under a Single Employer Plan
exceeds the fair market value of assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plans using the
PBGC actuarial assumptions utilized for purposes of determining the current
liability for purposes of such valuation.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"USA" means Universal Surety of America, a Texas insurance company.
"Western" means Western Surety Company, a South Dakota insurance
company.
"Wholly-Owned Subsidiary" of a Person means (a) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (b) any partnership, association, joint venture
or similar business organization 100% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Wholly-Owned
Subsidiary" shall mean a Wholly-Owned Subsidiary of the Borrower.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms. The words "herein", "hereof" and
words of similar import as used in this Agreement shall refer to this Agreement
as a whole and not to any particular provision in this Agreement. References to
26
-20-
"Articles", "Sections", "subsections", "paragraphs", "Exhibits" and "Schedules"
in this Agreement shall refer to Sections, subsections, paragraphs, Exhibits and
Schedules of this Agreement unless otherwise expressly provided. References to
Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such persons. All references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations.
ARTICLE II
THE FACILITY
2.1. The Facility.
2.1.1. Description of Facility. The Lenders hereby establish in favor
of the Borrower a revolving credit facility pursuant to which, and upon the
terms and subject to the conditions herein set out:
(a) each Lender severally agrees to make Ratable Loans to the
Borrower in accordance with Section 2.2 in amounts not to exceed in the
aggregate at any one time outstanding the amount of its Commitment less the
amount of such Lender's pro-rata share of the outstanding principal amount
of all Competitive Bid Advances (regardless of which Lender or Lenders made
such Competitive Bid Advances) exclusive of Competitive Bid Advances being
repaid substantially contemporaneously with the making of any such Ratable
Loans; and
(b) each Lender may, in its sole discretion, make bids to make
Competitive Bid Loans to the Borrower, and make such Loans, in accordance
with Section 2.3.
2.1.2. Facility Amount. In no event may the aggregate principal amount
of all outstanding Advances (including both the Ratable Advances and the
Competitive Bid Advances) at any time exceed the Aggregate Commitment.
2.1.3. Availability of Facility. Subject to the terms of this
Agreement, from and including the date hereof to, but not including the
Termination Date the Borrower may borrow, repay and reborrow Advances hereunder.
All outstanding Advances and all other unpaid Obligations shall be due and
payable in full by the Borrower on the Termination Date.
27
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2.2. Ratable Advances.
2.2.1. Ratable Advances. Each Ratable Advance hereunder shall consist
of borrowings made from the several Lenders ratably in proportion to the amounts
of their respective Commitments.
2.2.2. Ratable Advance Rate Options. The Ratable Advances may be
Floating Rate Advances or Eurodollar Ratable Advances, or a combination thereof,
selected by the Borrower in accordance with Section 2.2.3 or 2.2.4. No Ratable
Advance may mature after, or have an Interest Period which extends beyond, the
Termination Date.
2.2.3. Method of Selecting Types and Interest Periods for Ratable
Advances. The Borrower shall select the Type of each Ratable Advance and, in the
case of each Eurodollar Ratable Advance, the Eurodollar Interest Period
applicable to such Ratable Advance from time to time. The Borrower shall give
the Administrative Agent irrevocable notice (a "Ratable Borrowing Notice") not
later than 11:00 a.m. (New York time) on the Borrowing Date of each Floating
Rate Advance and three Business Days before the Borrowing Date for each
Eurodollar Ratable Advance. A Ratable Borrowing Notice shall specify:
(a) the Borrowing Date, which shall be a Business Day, of such
Ratable Advance;
(b) the aggregate amount of such Ratable Advance, which, when
added to all outstanding Ratable Advances and Competitive Bid Advances and
after giving effect to the repayment of any such outstanding Advances out of
the proceeds of the requested Ratable Advance, shall not exceed the
Aggregate Commitment;
(c) the Type of Advance selected; and
(d) in the case of each Eurodollar Ratable Advance, the Eurodollar
Interest Period applicable thereto (which may not end after the Termination
Date).
2.2.4. Conversion and Continuation of Outstanding Ratable Advances.
Floating Rate Advances shall continue as Floating Rate Advances unless and until
such Floating Rate Advances are converted into Eurodollar Ratable Advances. Each
Eurodollar Ratable Advance shall continue as a Eurodollar Ratable Advance until
the end of the then applicable Eurodollar Interest Period therefor, at which
time such Eurodollar Ratable Advance shall be automatically converted into a
Floating Rate Advance unless the Borrower shall have given the Administrative
Agent a
28
-22-
Conversion/Continuation Notice requesting that, at the end of such Eurodollar
Interest Period, such Eurodollar Ratable Advance continue as a Eurodollar
Ratable Advance for the same or another Eurodollar Interest Period. Subject to
the terms of Section 2.6, the Borrower may elect from time to time to convert
all or any part of a Ratable Advance of any Type into any other Type or Types of
Ratable Advances; provided that any conversion of any Eurodollar Ratable Advance
shall be made on, and only on, the last day of the Eurodollar Interest Period
applicable thereto. The Borrower shall give the Administrative Agent irrevocable
notice (a "Conversion/Continuation Notice") of each conversion of a Ratable
Advance or continuation of a Eurodollar Ratable Advance not later than 11:00
a.m. (New York time) at least three Business Days, in the case of a conversion
into or continuation of a Eurodollar Ratable Advance, prior to the date of the
requested conversion or continuation, specifying:
(a) the requested date, which shall be a Business Day, of such
conversion or continuation;
(b) the aggregate amount and Type of Ratable Advance which is to
be converted or continued; and
(c) the amount and Type(s) of Ratable Advance(s) into which such
Ratable Advance is to be converted or continued and, in the case of a
conversion into or continuation of an Eurodollar Ratable Advance, the
duration of the Eurodollar Interest Period applicable thereto.
2.3. Competitive Bid Advances.
2.3.1. Competitive Bid Option. In addition to Ratable Advances
pursuant to Section 2.2, but subject to the terms and conditions of this
Agreement (including, without limitation, the limitation set forth in
Section 2.1.2 as to the maximum aggregate principal amount of all outstanding
Advances hereunder), prior to the Termination Date the Borrower may, as set
forth in this Section 2.3, request the Lenders to make offers to make
Competitive Bid Advances to the Borrower. Each Lender may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.3.
2.3.2. Competitive Bid Quote Request. When the Borrower wishes to
request offers to make Competitive Bid Loans under this Section 2.3, it shall
transmit to the Administrative Agent by telecopy a Competitive Bid Quote Request
substantially in the form of Exhibit "A" hereto so as to be received no later
than (a) 11:00 a.m. (New York time) at least four Business Days prior to the
Borrowing Date proposed therein, in the case of a Eurodollar Auction or (b)
10:00 a.m. (New York time) at least one
29
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Business Day prior to the Borrowing Date proposed therein, in the case of an
Absolute Rate Auction specifying:
(a) the proposed Borrowing Date, which shall be a Business Day,
for the proposed Competitive Bid Advance;
(b) the aggregate principal amount of such Competitive Bid
Advance;
(c) whether the Competitive Bid Quotes requested are to set forth
a Eurodollar Bid Rate, an Absolute Rate, or both; and
(d) the Interest Period applicable thereto (which may not end
after the Termination Date).
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period in a single Competitive Bid Quote Request. No Competitive Bid
Quote Request shall be given within 5 Business Days (or such other number of
days as the Borrower and the Administrative Agent may agree) of any other
Competitive Bid Quote Request. A Competitive Bid Quote Request that does not
conform substantially to the format of Exhibit "A" hereto shall be rejected, and
the Administrative Agent shall promptly notify the Borrower of such rejection by
telecopy.
2.3.3. Invitation for Competitive Bid Quotes. Promptly and in any
event before the close of business on the same Business Day of receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2,
the Administrative Agent shall send to each of the Lenders by telex or telecopy
an Invitation for Competitive Bid Quotes substantially in the form of Exhibit
"B" hereto, which shall constitute an invitation by the Borrower to each Lender
to submit Competitive Bid Quotes offering to make the Competitive Bid Loans to
which such Competitive Bid Quote Request relates in accordance with this
Section 2.3.
2.3.4. Submission and Contents of Competitive Bid Quotes.
(a) Each Lender may, in its sole discretion, submit a Competitive
Bid Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each Competitive Bid
Quote must comply with the requirements of this Section 2.3.4 and must be
submitted to the Administrative Agent by telex or telecopy at its offices
specified in or pursuant to Article XIII not later than (i) 10:00 a.m. (New
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-24-
York time) at least three Business Days prior to the proposed Borrowing
Date, in the case of a Eurodollar Auction or (ii) 10:00 a.m. (New York time)
on the proposed Borrowing Date, in the case of an Absolute Rate Auction (or,
in either case upon reasonable prior notice to the Lenders, such other time
and date as the Borrower and the Administrative Agent may agree); provided
that Competitive Bid Quotes submitted by Chase may only be submitted if the
Administrative Agent or Chase notifies the Borrower of the terms of the
offer or offers contained therein not later than 15 minutes prior to the
latest time at which the relevant Competitive Bid Quotes must be submitted
by the other Lenders. Subject to Articles IV and VIII, any Competitive Bid
Quote so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Borrower.
(b) Each Competitive Bid Quote shall be in substantially the form
of Exhibit "C" hereto and shall in any case specify:
(i) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Invitation for Competitive Bid Quotes;
(ii) the principal amount of the Competitive Bid Loan for
which each such offer is being made, which principal amount (A) may be
greater than, less than or equal to the Commitment of the quoting
Lender, (B) must be at least $10,000,000 and an integral multiple of
$1,000,000, and (C) may not exceed the principal amount of Competitive
Bid Loans for which offers were requested;
(iii) in the case of a Eurodollar Auction, the Competitive
Bid Margin offered for each such Competitive Bid Loan;
(iv) the minimum amount, if any, of the Competitive Bid Loan
which may be accepted by the Borrower;
(v) in the case of an Absolute Rate Auction, the Absolute
Rate offered for each such Competitive Bid Loan; and
(vi) the identity of the quoting Lender.
(c) The Administrative Agent shall reject any Competitive Bid
Quote that:
(i) is not substantially in the form of Exhibit "C" hereto
or does not specify all of the information required by Section
2.3.4(b);
31
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(ii) contains qualifying, conditional or similar language,
other than any such language contained in Exhibit "C" hereto;
(iii) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bid Quotes; or
(iv) arrives after the time set forth in Section 2.3.4(a).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.4(c), then the Administrative Agent shall promptly notify the relevant
Lender of such rejection.
2.3.5. Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (a) of any Competitive Bid Quote submitted by a
Lender that is in accordance with Section 2.3.4 and (b) of any Competitive Bid
Quote that amends, modifies or is otherwise inconsistent with a previous
Competitive Bid Quote submitted by such Lender with respect to the same
Competitive Bid Quote Request. Any such subsequent Competitive Bid Quote shall
be disregarded by the Administrative Agent unless such subsequent Competitive
Bid Quote specifically states that it is submitted solely to correct a manifest
error in such former Competitive Bid Quote. The Administrative Agent's notice to
the Borrower shall specify the aggregate principal amount of Competitive Bid
Loans for which offers have been received for each Interest Period specified in
the related Competitive Bid Quote Request and the respective principal amounts
and Eurodollar Bid Rates or Absolute Rates, as the case may be, so offered.
2.3.6. Acceptance and Notice by Borrower. Not later than (a) 11:00
a.m. (New York time) at least three Business Days prior to the proposed
Borrowing Date, in the case of a Eurodollar Auction or (b) 11:00 a.m. (New York
time) on the proposed Borrowing Date, in the case of an Absolute Rate Auction
(or, in either case upon reasonable prior notice to the Lenders, such other
time and date as the Borrower and the Administrative Agent may agree), the
Borrower shall notify the Administrative Agent of its acceptance or rejection
of the offers so notified to it pursuant to Section 2.3.5; provided, however,
that the failure by the Borrower to give such notice to the Administrative
Agent shall be deemed to be a rejection of all such offers. In the case of
acceptance, such notice (a "Competitive Bid Borrowing Notice") shall specify
the aggregate principal amount of offers for each Interest Period that are
accepted. The Borrower may accept any Competitive Bid Quote in whole or in part
(subject to the terms of Section 2.3.4(b)(iv)); provided that:
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(a) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request,
(b) acceptance of offers may only be made on the basis of
ascending Eurodollar Bid Rates or Absolute Rates, as the case may be,
and
(c) the Borrower may not accept any offer that is described
in Section 2.3.4(c) or that otherwise fails to comply with the
requirements of this Agreement.
2.3.7. Allocation by Administrative Agent. If offers are made by two
or more Lenders with the same Eurodollar Bid Rates or Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in
respect of which offers are accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Lenders as
nearly as possible (in such multiples, not greater than $1,000,000, as the
Administrative Agent may deem appropriate) in proportion to the aggregate
principal amount of such offers; provided, however, that no Lender shall be
allocated a portion of any Competitive Bid Advance which is less than the
minimum amount which such Lender has indicated that it is willing to accept.
Allocations by the Administrative Agent of the amounts of Competitive Bid Loans
shall be conclusive in the absence of manifest error. The Administrative Agent
shall promptly, but in any event on the same Business Day, notify each Lender
of its receipt of a Competitive Bid Borrowing Notice and the aggregate
principal amount of such Competitive Bid Advance allocated to each
participating Lender.
2.4. Availability of Funds. Not later than noon (New York time) on
each Borrowing Date, each Lender (or in the case of a Competitive Bid Advance,
each Lender making a portion of such Advance) shall make available its Loan or
Loans, in funds immediately available in New York City to the Administrative
Agent at its address specified pursuant to Article XIII. The Administrative
Agent will make the funds so received from the Lenders available to the Borrower
at the Administrative Agent's aforesaid address.
2.5. Facility Fee; Reductions in Aggregate Commitment. The Borrower
agrees to pay to the Administrative Agent for the ratable account of each Lender
a facility fee equal to the Applicable Facility Fee Percentage times such
Lender's Commitment from the date hereof to and including the Termination Date
applicable to such Lender, payable in arrears on each Payment Date hereafter and
on the Termination Date. The Borrower may permanently reduce the Aggregate
Commitment in whole, or in
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part ratably among the Lenders, in integral multiples of $10,000,000, upon at
least three Business Days' written notice to the Administrative Agent, which
notice shall specify the amount of any such reduction; provided, however, that
the amount of the Aggregate Commitment may not be reduced below the aggregate
principal amount of the outstanding Advances. All accrued facility fees shall be
payable on the effective date of any termination of the obligations of the
Lenders to make Loans hereunder.
2.6. Minimum Amount of Each Advance; Limit on Interest Periods. Each
Eurodollar Ratable Advance shall be in the minimum amount of $10,000,000 (and in
multiples of $1,000,000 if in excess thereof). Each Floating Rate Advance shall
be in the minimum amount of $5,000,000 (and in multiples of $1,000,000 if in
excess thereof); provided, however, that any Floating Rate Advance may be in the
amount of the unused Aggregate Commitment. No more than twelve Eurodollar
Interest Periods for Eurodollar Ratable Advances may be outstanding at any one
time.
2.7. Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium, all outstanding Advances (other than
Competitive Bid Advances, which may not be voluntarily prepaid), or, in a
minimum aggregate amount of $10,000,000 or any integral multiple of $5,000,000
in excess thereof, any portion of the outstanding Advances (other than
Competitive Bid Advances) upon three Business Days' prior notice to the
Administrative Agent. Any prepayment of a Eurodollar Advance prior to the last
day of the applicable Eurodollar Interest Period shall be subject to the
indemnity provisions of Section 3.4.
2.8. Mandatory Prepayments. If at any time the aggregate principal
balance of the Loans exceeds the Aggregate Commitment, the Borrower shall repay
immediately its then outstanding Loans in such amount as may be necessary to
eliminate such excess.
2.9. Interest Rate, etc. Each Floating Rate Advance shall bear
interest at the Floating Rate on the outstanding principal amount thereof for
each day from and including the date such Advance is made or is converted from a
Ratable Eurodollar Advance into a Floating Rate Advance pursuant to Section
2.2.4 to but excluding the date it becomes due or is converted into a Eurodollar
Ratable Advance pursuant to Section 2.2.4 hereof, at a rate per annum equal to
the Floating Rate for such day. Each Eurodollar Advance and Absolute Rate
Advance shall bear interest from and including the first day of the Interest
Period applicable thereto to (but not including) the last day of such Eurodollar
Interest Period at the interest rate
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determined as applicable to such Eurodollar Advance or Absolute Rate Advance.
2.10. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.2.3 or 2.2.4, no Advance may be made as,
converted into or continued as a Eurodollar Ratable Advance (except with the
consent of the Required Lenders) when any Default or Unmatured Default has
occurred and is continuing. During the continuance of a Default, the Required
Lenders may, at their option, by notice to the Borrower (which notice may be
revoked at the option of the Required Lenders notwithstanding any provision of
Section 8.2 requiring unanimous consent of the Lenders to changes in interest
rates), declare that (a) each Eurodollar Advance and Absolute Rate Advance shall
bear interest for the remainder of the applicable Interest Period at a rate per
annum equal to the Alternate Base Rate plus 2% per annum and (b) each Floating
Rate Advance shall bear interest at a rate per annum equal to the Alternate Base
Rate plus 2% per annum.
2.11. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Administrative Agent at the Administrative Agent's
address specified pursuant to Article XIII, or at any other Lending Installation
of the Administrative Agent specified in writing by the Administrative Agent to
the Borrower, by 1:00 p.m. (New York time) on the date when due. Each payment by
the Borrower on account of principal or interest on the Loans shall be applied
ratably among the Lenders by the Administrative Agent according to the
respective outstanding principal amounts of the Loans then due and owing to the
Lenders. Each payment delivered to the Administrative Agent for the account of
any Lender shall be delivered promptly by the Administrative Agent to such
Lender in the same type of funds that the Administrative Agent received at its
address specified pursuant to Article XIII or at any Lending Installation
specified in a notice received by the Administrative Agent from such Lender. The
Administrative Agent is hereby authorized to charge the account of the Borrower
maintained with Chase for each payment of principal, interest and fees as it
becomes due hereunder.
2.12. Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Administrative Agent to extend, convert or continue Advances, effect
selections of Types of Advances, submit Competitive Bid Quotes and to transfer
funds based on telephonic notices made by any person or persons the
Administrative Agent or any Lender in good faith believes to be acting on
behalf of the Borrower. The Borrower agrees to deliver promptly to the
Administrative Agent a written confirmation, if such confirmation is
requested by the Administrative Agent or any
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Lender, of each telephonic notice signed by an Authorized Officer. If the
written confirmation differs in any material respect from the action taken by
the Administrative Agent and the Lenders, the records of the Administrative
Agent and the Lenders shall govern absent manifest error.
2.13. Interest Payment Dates; Interest and Fee Basis. Interest
accrued on each Floating Rate Advance shall be payable on each Payment Date,
commencing with the first such date to occur after the date hereof, on any date
on which a Floating Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity. Interest accrued on that portion of the outstanding
principal amount of any Floating Rate Advance converted into a Eurodollar
Ratable Advance on a day other than a Payment Date shall be payable on the date
of conversion. Interest accrued on each Eurodollar Advance or Absolute Rate
Advance shall be payable on the last day of its applicable Interest Period, on
any date on which the Eurodollar Advance or Absolute Rate Advance is prepaid,
whether by acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Advance or Absolute Rate Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Facility fees shall be calculated for
actual days elapsed on the basis of a 360-day year. All interest shall be
calculated for actual days elapsed on the basis of a 360-day year, except that
interest computed by reference to the Alternate Base Rate at times when the
Alternate Base Rate is based on the Prime Rate shall be calculated on a 365 or
366-day year basis, as applicable. Interest shall be payable for the day an
Advance is made but not for the day of any payment on the amount paid if payment
is received prior to 1:00 p.m. (New York time) at the place of payment. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.14. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Administrative Agent
will notify each Lender of the contents of each Aggregate Commitment reduction
notice, Ratable Borrowing Notice, Conversion/Continuation Notice, Invitation for
Competitive Quotes and repayment notice received by it hereunder. The
Administrative Agent will notify each Lender of the interest rate applicable to
each Eurodollar Advance promptly upon determination of such interest rate and
will give each Lender prompt notice of each change in the Alternate Base Rate.
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2.15. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change its Lending
Installation from time to time. All terms of this Agreement shall apply to any
such Lending Installation and any promissory notes issued to a Lender hereunder
shall be deemed held by such Lender for the benefit of such Lending
Installation. Each Lender may, by written or telecopy notice to the
Administrative Agent and the Borrower, designate a Lending Installation through
which Loans will be made by it and for whose account Loan payments are to be
made.
2.16. Non-Receipt of Funds by the Administrative Agent. Unless the
Borrower or a Lender, as the case may be, notifies the Administrative Agent
prior to the date on which it is scheduled to make payment to the Administrative
Agent of (a) in the case of a Lender, the proceeds of a Loan or (b) in the case
of the Borrower, a payment of principal, interest or fees to the Administrative
Agent for the account of the Lenders, that it does not intend to make such
payment, the Administrative Agent may assume that such payment has been made.
The Administrative Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon such
assumption. If such Lender or the Borrower, as the case may be, has not in fact
made such payment to the Administrative Agent, the recipient of such payment
shall, on demand by the Administrative Agent, repay to the Administrative Agent
the amount so made available together with interest thereon in respect of each
day during the period commencing on the date such amount was so made available
by the Administrative Agent until the date the Administrative Agent recovers
such amount at a rate per annum equal to (a) in the case of payment by a Lender,
the Federal Funds Effective Rate for such day or (b) in the case of payment by
the Borrower, the interest rate applicable to the relevant Loan.
2.17. Taxes. (a) Any payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding taxes upon the overall net income of any Lender or
applicable Lending Installation imposed by the jurisdiction in which such Lender
or Lending Installation is incorporated or has its principal place of business.
If any such non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to be withheld
from any amounts payable to the Administrative Agent or any Lender hereunder,
the amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or such
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Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in or
pursuant to this Agreement; provided, however, that the Borrower shall not be
required to increase any such amounts payable to any Lender that is not
organized under the laws of the U.S. or a state thereof if such Lender fails to
comply with the requirements of paragraph (b) of this subsection 2.17. Whenever
any Non-Excluded Taxes are payable by the Borrower, as promptly as practicable
thereafter the Borrower shall send to the Administrative Agent for its own
account or for the account of such Lender, as the case may be, a certified copy
of an original official receipt received by the Borrower showing payment
thereof. If the Borrower fails to pay any Non-Excluded Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent the
required receipts or other required documentary evidence, the Borrower shall
indemnify the Administrative Agent and the Lenders for any incremental taxes,
interest or penalties that may become payable by any Administrative Agent or
any Lender as a result of any such failure. The agreements in this subsection
2.17 shall survive the termination of this Agreement and the payment of all
other amounts payable hereunder.
(b) At least five Business Days prior to the first date on which
interest or fees are payable hereunder for the account of any Lender, each
Lender that is not organized under the laws of the United States of America or a
state thereof agrees that it will deliver to each of the Borrower and the
Administrative Agent two duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, certifying in either case that such Lender is
entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or 4224 further undertakes to deliver to each of the
Borrower and the Administrative Agent two additional copies of such form (or a
successor form) on or before the date that such form expires (currently, three
successive calendar years for Form 1001 and one calendar year for Form 4224) or
becomes obsolete or after the occurrence of any event requiring a change in the
most recent forms so delivered by it, and such amendments thereto or extensions
or renewals thereof as may be reasonably requested by the Borrower or the
Administrative Agent, in each case certifying that such Lender is entitled to
receive payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless any change in treaty, law or
regulation (and not a change in the Lender's business, operations or place of
business or incorporation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms inapplicable
or which would prevent such Lender from duly completing and delivering any such
form with respect to it and such Lender advises the Borrower and the
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Administrative Agent that it is not capable of receiving payments without any
deduction or withholding of United States federal income tax.
(c) Any stamp, documentary or similar taxes or charges payable or ruled
payable by any Governmental Authority in respect of the Loan Documents shall be
paid by the Borrower, together with interest and penalties, if any.
2.18. Evidence of Debt. (a) Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
the Borrower to such Lender resulting from each Advance made by such Lender,
including the amounts of principal and interest payable and paid to such Lender
from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Advance made hereunder, the Type thereof and the
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Administrative Agent
hereunder for the account of the Lenders and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph
(a) or (b) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Advances in accordance with the terms of this Agreement.
(d) Any Lender may request that Advances made by it be evidenced by a
promissory note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a promissory note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Advances evidenced by
such promissory note and interest thereon shall at all times (including after
assignment pursuant to Section 12.3) be represented by one or more promissory
notes (payable to the order of each Lender holding a portion of such Advances
or, if such promissory note is a registered note, to such Lender and its
registered assigns).
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ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If, after the date hereof, the adoption of or
any change in any law or any governmental or quasi-governmental rule,
regulation, policy, guideline or directive (whether or not having the force of
law), or any change in the interpretation or administration thereof, or the
compliance of any Lender therewith,
(a) subjects any Lender or any applicable Lending Installation to
any tax, duty, charge or withholding on or from payments due from the
Borrower (excluding taxation of the overall net income of any Lender or
applicable Lending Installation imposed by the jurisdiction in which such
Lender or Lending Installation is incorporated or has its principal place of
business), or changes the basis of taxation of principal, interest or any
other payments to any Lender or Lending Installation in respect of its
Eurodollar Loans or other amounts due it hereunder with respect to its
Eurodollar Loans, or
(b) with respect to Eurodollar Loans, imposes or increases or
deems applicable any reserve, assessment, insurance charge, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending Installation
(other than reserves and assessments taken into account in determining the
interest rate applicable to Eurodollar Advances), or
(c) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of making,
funding or maintaining Eurodollar Loans or reduces any amount receivable by
any Lender or any applicable Lending Installation in connection with
Eurodollar Loans, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of
Eurodollar Loans held or interest received by it in respect thereof,
and, in the case of any of Section 3.1(a), (b) or (c), the Lender shall in good
faith determine the amount of such increased expense incurred or reduction in
amount received to be material, then, within 15 days of demand by such Lender,
the Borrower shall pay such Lender that portion of such increased expense
incurred or reduction in an amount received (other than any such expense or
reduction for which the Lenders are also entitled to compensation pursuant to
Section 2.17(a)) which such Lender
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determines is attributable to making, funding and maintaining its Loans and its
Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines
in good faith that the amount of capital required or expected to be maintained
by such Lender, any Lending Installation of such Lender or any corporation
controlling such Lender is increased by an amount deemed material by such Lender
as a result of a Change, then, within 15 days of demand by such Lender, the
Borrower shall pay such Lender the amount necessary to compensate for any
shortfall in the rate of return on the portion of such increased capital which
such Lender determines is attributable to this Agreement, its Loans or its
obligation to make Loans hereunder (after taking into account such Lender's
policies as to capital adequacy).
3.3. Availability of Types of Advances. If any Lender determines in
good faith that maintenance of any of its Eurodollar Loans at a suitable Lending
Installation would violate any applicable law, rule, regulation or directive,
whether or not having the force of law, the Administrative Agent shall suspend
the availability of the affected Type of Advance and require any Eurodollar
Advances to be repaid or converted into a Floating Rate Advance within five days
after Borrower's receipt of notice by such Lender; or if the Required Lenders
determine that (a) deposits of a type or maturity appropriate to match fund
Eurodollar Advances are not available, or (b) the interest rate applicable to a
Type of Advance does not accurately or fairly reflect the cost of making or
maintaining such Advance, then the Administrative Agent shall suspend the
availability of the affected Type of Advance and require any Eurodollar Advances
of the affected Type to be repaid.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Eurodollar Interest
Period, whether because of acceleration, prepayment or otherwise, or a
Eurodollar Advance is not made, continued or converted on the date specified by
the Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Eurodollar Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of the
Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver a
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written statement of such Lender to the Borrower (with a copy to the
Administrative Agent) as to the amount due, if any, under Section 3.1, 3.2 or
3.4. Such written statement shall set forth in reasonable detail the
calculations upon which such Lender determined such amount and shall be final,
conclusive and binding on the Borrower in the absence of manifest error.
Determination of amounts payable under such Sections in connection with a
Eurodollar Loan shall be calculated as though each Lender funded its Eurodollar
Loan through the purchase of a deposit of the type and maturity corresponding to
the deposit used as a reference in determining the Eurodollar Rate applicable to
such Loan, whether in fact that is the case or not. Unless otherwise provided
herein, the amount specified in the written statement of any Lender shall be
payable on demand after receipt by the Borrower of the written statement. The
obligations of the Borrower under Sections 3.1, 3.2 and 3.4 shall survive
payment of the Obligations and termination of this Agreement.
3.6. Right to Substitute Lender. Any Lender claiming any additional
amounts payable pursuant to Section 3.1 or 3.2 or unable to make a Type of
Advance available in accordance with Section 3.3, shall, so long as no Default
or Unmatured Default has occurred and is continuing, upon the written request of
the Borrower delivered to such Lender and the Administrative Agent, assign,
pursuant to and in accordance with the provisions of Section 12.3, all of its
rights and obligations under this Agreement and under the Loan Documents to
another Lender or to a commercial bank, other financial institution, commercial
finance company or other institutional lender selected by the Borrower and
reasonably acceptable to the Administrative Agent that has agreed not to claim
any additional amounts under Section 3.1 or 3.2 with respect to some or all of
the taxes or regulatory changes that gave rise to such assigning Lender's claim
for such compensation, or that has agreed to make the Type of Advance available
that was not made available from such assigning Lender, in consideration for (a)
the payment by such assignee to such assigning Lender of the principal of, and
interest accrued and unpaid to the date of such assignment on, the Loans held by
such assigning Lender, (b) the payment by the Borrower to such assigning Lender
of any and all other amounts owing to such assigning Lender under any provision
of this Agreement accrued and unpaid to the date of such assignment and (c) the
Borrower's release of such assigning Lender from any further obligation or
liability under this Agreement and the Loan Documents. Notwithstanding anything
to the contrary contained in this Section 3.6, in no event shall the replacement
of any Lender result in a decrease or reallocation of the Aggregate Commitments
without the prior written consent of each of the remaining Lenders.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. The Lenders shall not be required to
make the initial Advance hereunder unless the Borrower has furnished to the
Administrative Agent with sufficient copies for the Lenders the following and
the other conditions set forth below have been satisfied, in each case on or
before October 15, 1997:
(a) Executed originals of this Agreement and each of the
other Loan Documents, which shall be in full force and effect,
together with all schedules, exhibits, documents and financial
statements required to be delivered pursuant hereto.
(b) Copies of the articles of incorporation of the Borrower,
together with all amendments thereto, and a certificate of good
standing, both certified by the appropriate governmental officer in
its jurisdiction of incorporation.
(c) Copies, certified by the Secretary or an Assistant
Secretary of the Borrower, of its by-laws and Board of Directors'
resolutions authorizing the execution, delivery and performance of
the Loan Documents by the Borrower.
(d) An incumbency certificate, executed by the Secretary or
an Assistant Secretary of the Borrower, which shall
identify by name and title and bear the signature of the officers of
the Borrower authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Administrative Agent
and the Lenders shall be entitled to rely until informed of any change
in writing by the Borrower.
(e) A certificate dated the initial Borrowing Date and
signed by an Authorized Officer of the Borrower, in form and substance
satisfactory to the Administrative Agent, to the effect that: (i) on
the initial Borrowing Date (both before and after giving effect
to the consummation of the Merger and the making of the Loans
hereunder), each of the representations and warranties set forth in
Article V of this Agreement is true and correct and no Default or
Unmatured Default has occurred and is continuing; (ii) no injunction or
temporary restraining order which would prohibit the making of the
Loans, the consummation of the
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Merger, or the consummation of any of the transactions contemplated
hereby or by the Reorganization Documents (collectively the "Closing
Transactions"), or other litigation which could reasonably be expected
to have a Material Adverse Effect is pending or, to the best of such
Person's knowledge, threatened; (iii) contemporaneously with the
initial Advance, all outstanding indebtedness for money borrowed of
Capsure Holdings and its Subsidiaries under the Capsure Credit
Agreement is being repaid in full; and (iv) there has occurred no
material adverse change in Capsure Holdings' consolidated financial
condition and operations as reflected in Capsure Holdings' consolidated
financial statements as of December 31, 1996. Such certificate shall
also set forth the Consolidated Capitalization Ratio as of the initial
Borrowing Date (after giving effect to the consummation of the Merger
and the making of the Loans hereunder); provided that, in calculating
the Consolidated Capitalization Ratio for purposes of this Section
4.1(e), the Consolidated Net Worth of the Borrower and its Subsidiaries
may be based on the pro forma balance sheet referred to in Section 5.5,
so long as such Authorized Officer certifies that no event or change
has occurred that could reasonably be expected to have a material
effect on the stockholders' equity set forth on such balance sheet.
(f) A certificate dated the initial Borrowing Date
and signed by a senior officer of CNA Financial, in form and substance
satisfactory to the Administrative Agent, to the effect that there has
occurred no material adverse change in the consolidated financial
condition and operations of the CCC Surety Operations as reflected in
the consolidated financial statements of the CCC Surety Operations as
of December 31, 1996.
(g) A written opinion of the Borrower's counsel,
addressed to the Lenders, in substantially the form of Exhibit "D"
hereto.
(h) A copy of the Reorganization Documents and any
amendments, supplements and modifications thereto certified as true and
complete by an Authorized Officer of the Borrower together with
evidence satisfactory to the Administrative Agent that the Merger is
being consummated substantially contemporaneously with the making of
the initial Advance.
(i) Either evidence of termination of the Capsure
Credit Agreement and repayment of all Indebtedness outstanding
thereunder or a bank payoff letter in form and substance acceptable to
the Administrative Agent from the
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agent for the lenders under the Capsure Credit Agreement together with
releases of any Liens securing such agreement.
(j) A copy of each reinsurance agreement to which any
of the Borrower's Insurance Subsidiaries is a party, certified as true
and complete by an Authorized Officer of the Borrower.
(k) The Administrative Agent shall have received all
fees and other amounts due and payable on or prior to the Closing Date,
including, to the extent invoiced, reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the
Borrower hereunder.
(l) Such other documents as any Lender or the
Administrative Agent may have reasonably requested.
4.2. Each Advance. The Lenders shall not be required to make
any Advance unless on the applicable Borrowing Date:
(a) There exists no Default or Unmatured Default and
none would result from such Advance; and
(b) The representations and warranties contained in
Article V are true and correct as of such Borrowing Date.
Each Ratable Borrowing Notice and Competitive Bid Quote Request with
respect to each such Advance shall constitute a representation and warranty by
the Borrower that the conditions contained in Sections 4.2(a) and (b) have been
satisfied. Any Lender may require a duly completed compliance certificate in
substantially the form of Exhibit "E" hereto as a condition to making an
Advance.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lenders that:
5.1. Corporate Existence and Standing. Each of the Borrower
and each Significant Subsidiary is a corporation duly incorporated, validly
existing and in good standing (if applicable) under the laws of its respective
jurisdiction of incorporation and is duly qualified and in good standing (if
applicable) as a foreign corporation and is duly authorized to conduct its
business in each jurisdiction in which its business is conducted and in which
the failure to be so qualified or
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authorized may reasonably be expected to have a Material Adverse Effect.
5.2. Authorization and Validity. The Borrower has all
requisite power and authority (corporate and otherwise) and legal right to
execute and deliver each of the Loan Documents and the Reorganization Documents
and to perform its obligations thereunder. The execution and delivery by the
Borrower of the Loan Documents and the Reorganization Documents and the
performance of its obligations thereunder have been duly authorized by proper
corporate proceedings and the Loan Documents and the Reorganization Documents
constitute legal, valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors' rights generally.
5.3. Compliance with Laws and Contracts. The Borrower and its
Subsidiaries have complied with all applicable statutes, rules, regulations,
orders, judgments, decrees and restrictions, including without limitation all
Environmental Laws, of any Governmental Authority having jurisdiction over the
conduct of their respective businesses or the ownership of their respective
Properties, except where the failure to so comply could not reasonably be
expected to have a Material Adverse Effect. Neither the execution and delivery
by the Borrower of the Loan Documents or the Reorganization Documents, the
application of the proceeds of the Loans, the consummation of the Closing
Transactions or any other transaction contemplated in the Loan Documents or the
Reorganization Documents, nor compliance with the provisions of the Loan
Documents or the Reorganization Documents will, or at the relevant time did, (a)
violate any law, rule, regulation (including Regulations G, U or X), order,
writ, judgment, injunction, decree or award binding on the Borrower or any
Subsidiary or the Borrower's or any Subsidiary's charter, articles or
certificate of incorporation or by-laws, (b) violate the provisions of or
require the approval or consent of any party to any indenture, instrument or
agreement to which the Borrower or any Subsidiary is a party or is subject, or
by which it or its Property is bound, or conflict with or constitute a default
thereunder, or result in the creation or imposition of any Lien (other than
Liens permitted by, the Loan Documents) in, of or on the Property of the
Borrower or any Subsidiary pursuant to the terms of any such indenture,
instrument or agreement, or (c) require any consent of the stockholders of any
Person, except for approvals or consents which have been obtained at or before
the time of the initial Advance and are disclosed on Schedule 5.3 and except for
any violation of, or failure to obtain an approval or consent required under,
any such indenture, instrument or agreement which could not reasonably be
expected to have a Material Adverse Effect.
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5.4. Governmental Consents. Except for any of the following
which have been (or will have been prior to the "Effective Time" as defined in
the Reorganization Agreement) entered, taken, obtained, filed or made and which
remain in full force and effect or which if not entered, taken, obtained or
filed could not reasonably be expected to have a Material Adverse Effect, no
order, consent, approval, qualification, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of, any court, Governmental Authority, any securities exchange or
other Person is or at the relevant time was required to authorize, or is or at
the relevant time was required in connection with the execution, delivery,
consummation or performance of, or the legality, validity, binding effect or
enforceability of, any of the Loan Documents or the Reorganization Documents,
the application of the proceeds of the Loans or the consummation of the Merger
or any other transaction contemplated in the Loan Documents or the
Reorganization Documents. The applicable waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, with respect
to the Merger has expired or terminated.
5.5. Financial Statements. The Borrower has heretofore
furnished to each of the Lenders (a) the December 31, 1996 and December 31, 1995
audited statements of certain assets and liabilities and the December 31, 1996,
December 31, 1995 and December 31, 1994 audited statements of certain revenues
and direct operating expenses of the CCC Surety Operations, (b) the December 31,
1996, December 31, 1995 and December 31, 1994 audited consolidated financial
statements of Capsure Holdings and its Subsidiaries, (c) the June 30, 1997
unaudited quarterly statement of certain assets and liabilities and the related
statement of certain revenues and direct operating expenses of the CCC Surety
Operations and (d) the June 30, 1997 unaudited quarterly financial statement of
Capsure Holdings and its Subsidiaries (collectively, the "Financial
Statements"). As of the date of this Agreement after giving effect to the
Closing Transactions, to the best of the Borrower's knowledge the unaudited pro
forma consolidated balance sheet of the Borrower and its Subsidiaries and the
related pro forma statement of consolidated operations included in the proxy
statement relating to the Merger filed with the Securities and Exchange
Commission pursuant to Section 14(a) of the Securities Exchange Act of 1934 and
heretofore furnished to each of the Lenders fairly represents the Borrower's and
the Subsidiaries' pro forma financial condition and results of operations on a
consolidated basis in accordance with Agreement Accounting Principles and/or SAP
(as labeled), consistently applied, in each case as if the Merger had been
consummated on the date set forth in the notes to such pro forma financial
statements. Each of the Financial Statements was prepared in accordance with
Agreement Accounting Principles or
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SAP, as applicable, and fairly presents the consolidated (statutory, if
applicable) financial condition and operations of the respective entities at
such dates and the consolidated results of their operations for the respective
periods then ended (except, in the case of such unaudited statements, for normal
year-end audit adjustments).
5.6. Material Adverse Change. No material adverse change in
the business, condition (financial or otherwise), operations, performance or
Properties of the Borrower and its Subsidiaries taken as a whole has occurred
since December 31, 1996.
5.7. Taxes. The Borrower and its Subsidiaries have filed or
caused to be filed or properly filed for extensions on a timely basis and in
correct form all United States federal and applicable material foreign, state
and local tax returns and all other material tax returns which are required to
be filed and have paid all material taxes due pursuant to said returns or
pursuant to any assessment received by the Borrower or any Subsidiary, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided in accordance with Agreement Accounting
Principles, except as set forth in Schedule 5.7, and as to which no Lien exists.
There are no pending audits or, to the best of the Borrower's knowledge,
investigations regarding the Borrower's or its Subsidiaries' federal, foreign,
state or local tax returns which may reasonably be expected to have Material
Adverse Effect. No claims are being asserted with respect to any such taxes
which could reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of any taxes or other governmental charges are in accordance with
Agreement Accounting Principles.
5.8. Litigation and Contingent Obligations. Except as
disclosed on Schedule 5.8, there is no litigation, arbitration, proceeding,
inquiry or governmental investigation (including, without limitation, by any
insurance regulatory authority) pending or, to the knowledge of any of their
officers, threatened against or affecting the Borrower or any Subsidiary or any
of their respective properties which could reasonably be expected to have a
Material Adverse Effect or which seeks to prevent, enjoin or unduly delay the
making of the Loans or Advances under this Agreement.
5.9. Capitalization. Schedule 5.9 hereto contains (a) an
accurate description of the Borrower's capitalization and (b) an accurate list
of all of the Subsidiaries as of the date of this Agreement but giving effect to
the Closing Transactions, setting forth their respective jurisdictions of
incorporation and
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the percentage of their capital stock owned by the Borrower or other
Subsidiaries.
5.10. ERISA. Neither the Borrower nor any other member of the
Controlled Group maintains, or is obligated to contribute to, any Multiemployer
Plan or has incurred, or is reasonably expected to incur, any withdrawal
liability to any Multiemployer Plan. Each Plan complies in all material respects
with all applicable requirements of law and regulations, except where
noncompliance would not have a Material Adverse Effect. Neither the Borrower nor
any member of the Controlled Group has, with respect to any Plan, failed to make
any material contribution or pay any material amount required under Section 412
of the Code or Section 302 of ERISA or the terms of such Plan. The Borrower has
not engaged in any prohibited transaction (as defined in Section 4975 of the
Code or Section 406 of ERISA) in connection with any Plan which may reasonably
be expected to have a Material Adverse Effect. Within the last five years
neither the Borrower nor any member of the Controlled Group has engaged in a
transaction which resulted in a Single Employer Plan with an Unfunded Liability
being transferred out of the Controlled Group. No Termination Event has occurred
or is reasonably expected to occur with respect to any Plan which is subject to
Title IV of ERISA.
5.11. Default. No Default or Unmatured Default has occurred
and is continuing.
5.12. Federal Reserve Regulations. Neither the Borrower nor
any Subsidiary is engaged, directly or indirectly, principally, or as one of its
important activities, in the business of extending, or arranging for the
extension of, credit for the purpose of purchasing or carrying Margin Stock.
Neither the making of any Loan hereunder, the use of the proceeds thereof, nor
any other aspect of the financing of the Acquisition, will violate or be
inconsistent with the provisions of Regulation G, Regulation U or Regulation X.
5.13. Investment Company. Neither the Borrower nor any
Subsidiary is, or after giving effect to any Advance will be, an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or 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.
5.14. Reorganization Documents.
The Borrower has delivered to each of the Lenders true, complete and correct
copies of the Reorganization Documents (including all schedules,
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exhibits, annexes, amendments, supplements, modifications, and all other
material documents delivered pursuant thereto or in connection therewith). The
Reorganization Documents as originally executed and delivered by the parties
thereto are in full force and effect and have not been amended, waived,
supplemented or modified without the consent of the Required Lenders. Each of
the representations and warranties of the Borrower (and, to the Borrower's
knowledge, of Capsure Holdings) therein is true and correct in all material
aspects as of the date hereof. Neither the Borrower nor, to the Borrower's
knowledge, any other party thereto is in material default in the performance of
or compliance with any provisions thereof. The Merger has become effective in
accordance with the terms of the Reorganization Documents and in accordance with
applicable laws and regulations.
5.15. Disclosure. None of the (a) information, exhibits or
reports (including, without limitation, the Information Memorandum) furnished or
to be furnished by the Borrower or any Subsidiary to the Administrative Agent or
to any Lender in connection with the negotiation of the Loan Documents, or (b)
representations or warranties of the Borrower contained in this Agreement, the
other Loan Documents, the Reorganization Documents or any other document,
certificate or written statement furnished to the Administrative Agent or the
Lenders by or on behalf of the Borrower or any Subsidiary for use in connection
with the transactions contemplated by this Agreement or the Reorganization
Documents, as the case may be, contained, contains or will contain any untrue
statement of a material fact or omitted, omits or will omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading in light of the circumstances in which the same were made. The pro
forma financial information contained in such materials is based upon good faith
estimates and assumptions believed by the Borrower to be reasonable at the time
made. There is no fact known to the Borrower (other than matters of a general
economic nature) that has had or could reasonably be expected to have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated by this Agreement.
5.16. Properties. (a) Each of the Borrower and its
Subsidiaries has good title to, or valid leasehold interests in, all its real
and personal property material to its business, except for minor defects in
title that do not interfere with its ability to conduct its business as
currently conducted or to utilize such properties for their intended purposes.
(b) Each of the Borrower and its Subsidiaries owns, or is
licensed to use, all trademarks, tradenames, copyrights,
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patents and other intellectual property material to its business, and the use
thereof by the Borrower and its Subsidiaries does not infringe upon the rights
of any other Person, except for any such infringements that, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
5.17. Liens. Schedule 5.17 attached hereto is a complete and
correct list, as of the date of this Agreement, of each Lien securing
Indebtedness of any Person and covering any Property of the Borrower or any of
its Subsidiaries, and the aggregate Indebtedness secured (or that may be
secured) by each such Lien and the Property covered by each such Lien is
correctly described in said Schedule 5.17.
5.18. Restrictive Agreements. Except as set forth on Schedule
5.18 hereto, neither the Borrower nor any of its Subsidiaries is party to any
agreement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets, or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to undertake or assume Contingent Obligations of the
Borrower or any other Subsidiary.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders
shall otherwise consent in writing:
6.1. Financial Reporting. The Borrower will furnish to the
Lenders:
(a) As soon as practicable and in any event within
120 days after the close of each of its fiscal years, an audit report
which is not qualified as to going concern or access or in any other
material respect and which is certified by independent certified public
accountants, acceptable to the Lenders, prepared in accordance with
Agreement Accounting Principles on a consolidated basis for itself and
its Subsidiaries, including balance sheets as of the end of such period
and related income and cash flow statements accompanied by a
certificate of said accountants that, in the course of the examination
necessary for their certification of the foregoing, they have obtained
no knowledge of any Default or Unmatured Default, or if, in the
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opinion of such accountants, any Default or Unmatured Default shall
exist, stating the nature and status thereof.
(b) As soon as practicable and in any event within 75
days after the close of each quarterly period (other than the fourth
quarterly period) of each of its fiscal years, for itself and its
Subsidiaries, a consolidated unaudited balance sheet as at the close of
each such period and consolidated income and cash flow statements for
the period from the beginning of such fiscal year to the end of such
quarter, all certified by its chief financial officer.
(c) Together with the financial statements required
by clauses (a) and (b), a compliance certificate in substantially the
form of Exhibit "E" hereto signed by the chief financial officer of the
Borrower showing the calculations necessary to determine compliance
with the financial covenants contained in this Agreement and stating
that no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
(d) Upon the earlier of (i) ten days after the
regulatory filing date or (ii) 75 days after the close of each of the
first three fiscal quarters of each fiscal year of each Significant
Insurance Subsidiary, copies of the Quarterly Statement of such
Insurance Subsidiary, certified by such officers as shall be required
by SAP of such Significant Insurance Subsidiary, all such statements to
be prepared in accordance with SAP consistently applied through the
period reflected herein.
(e) Upon the earlier of (i) fifteen days after the
regulatory filing date or (ii) 90 days after the close of each fiscal
year of each Significant Insurance Subsidiary, copies of the Annual
Statement of such Significant Insurance Subsidiary and the related
management discussion and analysis for such fiscal year, as certified
by such officers as shall be required by SAP for such Significant
Insurance Subsidiary and prepared on the NAIC annual statement blanks
(or such other form as shall be required by the jurisdiction of
incorporation of each such Significant Insurance Subsidiary), all such
statements to be prepared in accordance with SAP consistently applied
throughout the periods reflected therein.
(f) As soon as available and only to the extent such
an audited statement is required to be prepared by any Governmental
Authority, a copy of the audited Annual Statement of each Significant
Insurance Subsidiary for the
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preceding year, as certified by such officers as shall be required by
SAP for such Significant Insurance Subsidiary and prepared on the NAIC
annual statement blanks (or such other form as shall be required by the
jurisdiction of incorporation of each such Significant Insurance
Subsidiary), all such statements to be prepared in accordance with SAP
consistently applied throughout the periods reflected therein and to be
certified by independent certified public accountants of recognized
national standing reasonably acceptable to the Administrative Agent.
(g) Within 150 days after the close of each of its
fiscal years, annual statutory statements for the Borrower's Insurance
Subsidiaries on a consolidated or combined basis, certified by such
officers as shall be required by SAP, such statements to be prepared in
accordance with SAP consistently applied throughout the periods
reflected therein.
(h) As soon as possible and in any event within 20
days after the Borrower knows that any Termination Event has occurred
with respect to any Plan, a statement, signed by the chief financial
officer of the Borrower, describing said Termination Event and the
action which the Borrower proposes to take with respect thereto.
(i) Promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or other regular
reports which the Borrower or any of its Significant Insurance
Subsidiaries files with the Securities and Exchange Commission or any
securities exchange.
(j) Such other information (including, without
limitation, non-financial information) as the Administrative Agent or
any Lender may from time to time reasonably request.
6.2. Use of Proceeds. The Borrower will, and will cause each
Subsidiary to, use the proceeds of the Advances for general corporate purposes
(including, without limitation, to refinance existing Indebtedness of Capsure
Holdings as of the Effective Date). The Borrower will not, nor will it permit
any Subsidiary to, use any of the proceeds of the Advances to purchase or carry
any "margin stock" (as defined in Regulation U).
6.3. Certain Notices. The Borrower will give prompt notice in
writing to the Administrative Agent and the Lenders of (a) the occurrence of any
Default or Unmatured Default, (b) any other development, financial or otherwise,
relating specifically to the Borrower which could reasonably be
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expected to have a Material Adverse Effect, (c) the receipt of any notice from
any Governmental Authority of the expiration without renewal, revocation or
suspension of, or the institution of any proceedings to revoke or suspend, any
License now or hereafter held by any Significant Insurance Subsidiary which is
required to conduct insurance business in compliance with all applicable laws
and regulations, other than such expiration, revocation or suspension which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, (d) the receipt of any notice from any Governmental
Authority of the institution of any disciplinary proceedings against or in
respect of any Significant Insurance Subsidiary, or the issuance of any order,
the taking of any action or any request for an extraordinary audit for cause by
any Governmental Authority which, if adversely determined, could reasonably be
expected to have a Material Adverse Effect or (e) any judicial or administrative
order limiting or controlling the insurance business of any Significant
Insurance Subsidiary (and not the insurance industry generally) which has been
issued or adopted and which could reasonably be expected to have a Material
Adverse Effect.
6.4. Conduct of Business. The Borrower will, and will cause
each Significant Subsidiary to, do all things necessary (if applicable) to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted except where such failure to remain in good standing or to maintain
such authority may not reasonably be expected to have a Material Adverse Effect.
The Borrower will cause each Significant Insurance Subsidiary to (a) carry on or
otherwise be associated with the business of a licensed insurance carrier and
(b) do all things necessary to renew, extend and continue in effect all Licenses
which may at any time and from time to time be necessary for such Significant
Insurance Subsidiary to operate its insurance business in compliance with all
applicable laws and regulations; provided, however, that any such Significant
Insurance Subsidiary may withdraw from one or more states as an admitted
insurer, change the state of its domicile or fail to keep in effect any License
if such withdrawal, change or failure is in the best interests of the Borrower
and such Significant Insurance Subsidiary and could not reasonably be expected
to have a Material Adverse Effect.
6.5. Taxes. The Borrower will, and will cause each Subsidiary
to, pay when due all material taxes, assessments and governmental charges and
levies upon it or its income, profits or Property, except those which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves have been set aside. The Borrower will, and
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will cause each Subsidiary to, pay all other obligations, that, if not paid,
could result in a Material Adverse Effect before the same shall become
delinquent or in default, except those which are being contested in good faith
by appropriate proceedings and with respect to which adequate reserves have been
set aside.
6.6. Insurance. The Borrower will, and will cause each
Significant Subsidiary to, maintain with financially sound and reputable
insurance companies insurance on all or substantially all of its Property, or
shall maintain self-insurance, in such amounts and covering such risks as is
consistent with sound business practice for Persons in substantially the same
industry as the Borrower or such Subsidiary, and the Borrower will furnish to
any Lender upon request full information as to the insurance carried.
6.7. Compliance with Laws. The Borrower will, and will cause
each Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, except
where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
6.8. Maintenance of Properties. The Borrower will, and will
cause each Significant Subsidiary to, do all things necessary to maintain,
preserve, protect and keep its Property in good repair, working order and
condition, and make all necessary and proper repairs, renewals and replacements
so that its business carried on in connection therewith may be properly
conducted at all times, except where the failure to so maintain, preserve,
protect and repair could not reasonably be expected to have a Material Adverse
Effect.
6.9. Inspection. The Borrower will, and will cause each
Subsidiary to, permit the Administrative Agent and the Lenders (coordinated
through the Administrative Agent), by their respective representatives and
agents, to inspect any of the Property, corporate books and financial records of
the Borrower and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Borrower and each Subsidiary, and to
discuss the affairs, finances and accounts of the Borrower and each Subsidiary
with, and to be advised as to the same by, their respective officers upon
reasonable notice and at such reasonable times and intervals as the Lenders may
designate.
6.10. Merger. The Borrower will not, nor will it permit any
Significant Subsidiary to, merge or consolidate with or into any other Person,
except that (a) a Significant Subsidiary may merge into the Borrower or a
Wholly-Owned Subsidiary and (b) the Borrower or any Significant Subsidiary may
55
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merge or consolidate with any other Person, provided that the Borrower or such
Significant Subsidiary shall be the continuing or surviving corporation and,
prior to and after giving effect to such merger or consolidation, no Default or
Unmatured Default shall exist.
6.11. Sale of Assets. The Borrower will not, nor will it
permit any Subsidiary to, lease, sell or otherwise dispose of a Substantial
Portion of its Property to any other Person(s) in any twelve month period;
provided, however, that Insurance Subsidiaries shall be permitted to sell assets
for fair market value in arms length transactions (as determined, in
transactions out of the ordinary course of business, by the Board of Directors
of the selling Insurance Subsidiary acting in good faith).
6.12. Liens. The Borrower will not, nor will it permit any
Subsidiary to, create, incur, or suffer to exist any Lien in or on the Property
of the Borrower or any of its Subsidiaries, except:
(a) Liens for taxes, assessments or governmental charges or
levies on its Property if the same shall not at the time be delinquent or
thereafter can be paid without penalty, or are being contested in good faith and
by appropriate proceedings and for which adequate reserves in accordance with
Agreement Accounting Principles shall have been set aside on its books;
(b) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings and for which
adequate reserves shall have been set aside on its books;
(c) Liens arising out of pledges or deposits under worker's
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation, including, without
limitation, statutory deposits under applicable insurance laws;
(d) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character and which do not in
any material way affect the marketability of the same or interfere with the use
thereof in the business of the Borrower or the Subsidiaries;
(e) Liens existing on the date hereof and described in
Schedule 5.17 hereto;
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(f) Liens upon the Property of Insurance Subsidiaries incurred
in the ordinary course of their business; and
(g) Other Liens securing Indebtedness for borrowed money not
exceeding at any time $5,000,000 in aggregate principal amount.
6.13. Indebtedness. The Borrower will not, and will not permit
any Subsidiary to, create, incur, assume or permit to exist any Indebtedness,
except:
(a) Indebtedness created hereunder;
(b) Indebtedness existing on the date hereof and set forth in
Schedule 6.13;
(c) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(d) Contingent Obligations (i) of the Borrower with respect to
obligations or liabilities of any Subsidiary and (ii) of any Subsidiary
with respect to obligations or liabilities of the Borrower or any other
Subsidiary; and
(e) other unsecured Indebtedness in an aggregate principal
amount not exceeding $5,000,000 at any time outstanding.
6.14. Consolidated Capitalization. The Borrower will maintain
at all times a Consolidated Capitalization Ratio of not greater than 0.40 to
1.0.
6.15. Insurance Company Surplus. The Borrower shall cause the
combined Surplus as Regards Policyholders of its Insurance Subsidiaries to be at
all times at least equal to $100,000,000.
6.16. Maximum Statutory Net Written Premiums. The Borrower
will not permit the ratio of (a) Statutory Net Written Premiums during any
period of four consecutive fiscal quarters to (b) the combined Surplus as
Regards Policyholders of its Insurance Subsidiaries to exceed 3.0 to 1.0.
6.17. Investments, Loans, Advances, Guarantees and
Acquisitions. (a) The Borrower will not, and will not permit any of its
Subsidiaries to, purchase, hold or acquire (including pursuant to any merger
with any Person that was not a wholly owned Subsidiary prior to such merger) any
capital stock, evidences of indebtedness or other securities (including any
option, warrant or other right to acquire any of the foregoing) of, make or
permit to exist any loans or advances to, undertake
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or assume any Contingent Obligations of, or make or permit to exist any
investment or any other interest in, any other Person, or purchase or otherwise
acquire (in one transaction or a series of transactions) any assets of any other
Person constituting a business unit, except:
(i) Permitted Investments;
(ii) investments of Insurance Subsidiaries not prohibited
by Section 6.17(b);
(iii) investments by the Borrower existing on the date hereof
in the capital stock of its Subsidiaries;
(iv) loans or advances made by the Borrower to any Subsidiary
and made by any Subsidiary to the Borrower or any other Subsidiary;
(v) Contingent Obligations constituting Indebtedness
permitted by Section 6.13; and
(vi) equity investments in Persons other than the Borrower
and its Affiliates in an aggregate amount up to but not exceeding
$15,000,000.
(b) The Borrower will not permit any of its Insurance
Subsidiaries to make any investment if, on the date on which such investment is
made and after giving effect thereto, the aggregate value of investments (other
than equity investments) held by such Insurance Subsidiary that are rated lower
than "2", or that are not rated, by the NAIC would exceed 15% of the value of
the total invested assets. As used in this Section 6.17(b), the "value" of an
investment refers to the value of such investment that would be shown on the
most recent Annual Statement or Quarterly Statement, as the case may be, of the
relevant Insurance Subsidiary prepared in accordance with SAP.
6.18. Transactions with Affiliates. The Borrower will not, and
will not permit any of its Subsidiaries to, sell, lease or otherwise transfer
any property or assets to, or purchase, lease or otherwise acquire any property
or assets from, or otherwise engage in any other transactions with, any of its
Affiliates, except (a) in the ordinary course of business at prices and on terms
and conditions not less favorable to the Borrower or such Subsidiary than could
be obtained on an arm's-length basis from unrelated third parties and (b)
transactions between or among the Borrower and its Wholly-Owned Subsidiaries not
involving any other Affiliate.
6.19. Restrictive Agreements. The Borrower will not, and will
not permit any of its Subsidiaries to, directly or
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indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon (a) the
ability of the Borrower or any Subsidiary to create, incur or permit to exist
any Lien upon any of its property or assets, or (b) the ability of any
Subsidiary to pay dividends or other distributions with respect to any shares of
its capital stock or to make or repay loans or advances to the Borrower or any
other Subsidiary or to undertake or assume Contingent Obligations of the
Borrower or any other Subsidiary; provided that (i) the foregoing shall not
apply to restrictions and conditions imposed by law or by this Agreement, (ii)
the foregoing shall not apply to restrictions and conditions existing on the
date hereof identified on Schedule 5.18 (but shall apply to any extension or
renewal of, or any amendment or modification expanding the scope of, any such
restriction or condition), (iii) the foregoing shall not apply to customary
restrictions and conditions contained in agreements relating to the sale of a
Subsidiary pending such sale, provided such restrictions and conditions apply
only to the Subsidiary that is to be sold and such sale is permitted hereunder,
(iv) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness and (v) clause (a) of the foregoing shall not
apply to customary provisions in leases and other contracts restricting the
assignment thereof.
6.20. Leases. The Borrower will not permit the aggregate
amount of fixed and contingent rentals payable by the Borrower and its
Subsidiaries, determined on a consolidated basis in accordance with Agreement
Accounting Principles, with respect to leases of real and personal property to
exceed $10,000,000 for any fiscal year of the Borrower.
6.21. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement with any Person
providing for the leasing by the Borrower or any Subsidiary of real or personal
property which has been or is to be sold or transferred by the Borrower or such
Subsidiary to such Person.
6.22. Fiscal Year. The Borrower will not permit the last day
of its fiscal year to end on a day other than December 31st.
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ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
7.1. Any representation or warranty made or deemed made by or
on behalf of the Borrower or any of its Subsidiaries to the Lenders or the
Administrative Agent in this Agreement or in any other certificate, financial
statement or other document delivered pursuant to the provisions hereof shall be
false or misleading in any material respect on the date as of which made or
deemed made.
7.2. Nonpayment of principal of any Loan when due; or
nonpayment of interest upon any Loan or of any facility fee or other obligations
under any of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or
provisions of Section 6.2, Section 6.3(a) or Sections 6.10 through 6.21,
inclusive.
7.4. The breach by the Borrower (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after
written notice from the Administrative Agent or any Lender.
7.5. Failure of the Borrower or any of its Subsidiaries to pay
when due any Indebtedness (other than the Loans) or any amount under any
agreement with respect to Rate Hedging Obligations providing for termination or
liquidation payments (for purposes of this Section 7.5, "Hedging Indebtedness")
in excess of, singly or in the aggregate for the Borrower and all such
Subsidiaries, $5,000,000; or the default by the Borrower or any of its
Subsidiaries in the performance of any term, provision or condition contained in
any agreement under which any such Indebtedness or Hedging Indebtedness was
created or is governed, or any other event shall occur or condition exist, the
effect of which is to cause, or to permit the holder or holders of such
Indebtedness or Hedging Indebtedness to cause, such Indebtedness or such Hedging
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness or Hedging Indebtedness of the Borrower or any Subsidiary shall be
declared to be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof.
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7.6. The Borrower or any of its Significant Subsidiaries shall
(a) have an order for relief entered with respect to it under the Federal
bankruptcy laws as now or hereafter in effect, (b) make an assignment for the
benefit of creditors, (c) apply for, seek, consent to, or acquiesce in, the
appointment of a receiver, custodian, trustee, examiner, liquidator or similar
official for it or any substantial part of its Property, (d) institute any
proceeding seeking an order for relief under the Federal bankruptcy laws as now
or hereafter in effect or seeking to adjudicate it a bankrupt or insolvent, or
seeking dissolution, winding up, liquidation, rehabilitation, supervision,
reorganization, arrangement, adjustment or composition of it or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors or fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (e) take any corporate
action to authorize or effect any of the foregoing actions set forth in this
Section 7.6 or (f) fail to contest in good faith any appointment or proceeding
described in Section 7.7 or (g) become unable to pay, not pay, or admit in
writing its inability to pay, its debts generally as they become due.
7.7. Without the application, approval or consent of the
Borrower or any of its Significant Subsidiaries, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for the Borrower or any of its
Subsidiaries or any Substantial Portion of its Property, or a proceeding
described in Section 7.6(d) shall be instituted against the Borrower or any of
its Significant Subsidiaries and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of thirty consecutive
days.
7.8. The Borrower or any of its Subsidiaries shall fail within
thirty days to pay, bond or otherwise discharge any judgment or order for the
payment of money, either singly or in the aggregate, in excess of $5,000,000,
which is not stayed on appeal or otherwise being appropriately contested in good
faith.
7.9. The Borrower shall terminate, or the PBGC shall institute
proceedings under Title IV of ERISA to terminate, or to impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer, any Single Employer Plan having Unfunded
Liabilities in excess of $5,000,000.
7.10. Any Change in Control shall occur.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or
7.7 occurs with respect to the Borrower, the obligations of the Lenders to make
Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without any election or action on the part of
the Administrative Agent or any Lender. If any other Default occurs, the
Required Lenders (or the Administrative Agent with the consent of the Required
Lenders) may terminate or suspend the obligations of the Lenders to make Loans
hereunder, or declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Borrower hereby
expressly waives.
8.2. Amendments. Subject to the provisions of this Article
VIII, the Required Lenders (or the Administrative Agent with the consent in
writing of the Required Lenders) and the Borrower may enter into agreements
supplemental hereto for the purpose of adding or modifying any provisions to the
Loan Documents or changing in any manner the rights of the Lenders or the
Borrower hereunder or thereunder or waiving any Default hereunder or thereunder;
provided, however, that no such supplemental agreement shall, without the
consent of each Lender:
(a) extend the Termination Date or the final maturity
of any Loan or reduce the principal amount thereof or reduce the rate
or extend the time of payment of any interest or any fee payable
hereunder;
(b) reduce the percentage specified in the
definition of Required Lenders;
(c) increase the amount of the Aggregate Commitment
or the Commitment of any Lender hereunder;
(d) permit the Borrower to assign its rights under
this Agreement; or
(e) amend this Section 8.2.
No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent. The Administrative Agent may waive payment of the fee required under
Section 12.3.1 without obtaining the consent of any other party to this
Agreement.
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8.3. Preservation of Rights. No delay or omission of the
Lenders or the Administrative Agent to exercise any right under the Loan
Documents shall impair such right or be construed to be a waiver of any Default
or Unmatured Default or an acquiescence therein, and the making of a Loan
notwithstanding the existence of a Default or Unmatured Default or the inability
of the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Administrative Agent and the Lenders until the Obligations have
been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Borrower contained in this Agreement shall survive the making
of the Loans herein contemplated.
9.2. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Loan Documents.
9.3. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Borrower, the Administrative Agent and the
Lenders and supersede all prior agreements and understandings among the
Borrower, the Administrative Agent and the Lenders relating to the subject
matter thereof other than the Commitment Letter and that certain fee letter
agreement in each case by and between the Borrower and Chase.
9.4. Several Obligations; Benefits of this Agreement. The
respective obligations of the Lenders hereunder are several and not joint and no
Lender shall be the partner or agent of any other (except to the extent to which
the Administrative Agent is authorized to act as such). The failure of any
Lender to perform any of its obligations hereunder shall not relieve any other
Lender from any of its obligations hereunder. This Agreement shall not be
construed so as to confer
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any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
9.5. Expenses; Indemnification; Damage Waiver.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses incurred by the Administrative Agent and its Affiliates, including the
reasonable fees, charges and disbursements of counsel for the Administrative
Agent, in connection with the syndication of the credit facilities provided for
herein, the preparation and administration of this Agreement or any amendments,
modifications or waivers of the provisions hereof (whether or not the
transactions contemplated hereby or thereby shall be consummated) and (ii) all
out-of-pocket expenses incurred by the Administrative Agent or any Lender,
including the fees, charges and disbursements of any counsel for the
Administrative Agent or any Lender, in connection with the enforcement or
protection of its rights in connection with this Agreement, including its rights
under this Section, or in connection with the Loans made hereunder, including
all such out-of-pocket expenses incurred during any workout, restructuring or
negotiations in respect of such Loans.
(b) The Borrower shall indemnify the Administrative Agent and
each Lender, and each Related Party of any of the foregoing Persons (each such
Person being called an "Indemnitee") against, and hold each Indemnitee harmless
from, any and all losses, claims, damages, liabilities and related expenses,
including the fees, charges and disbursements of any counsel for any Indemnitee,
incurred by or asserted against any Indemnitee arising out of, in connection
with, or as a result of (i) the execution or delivery of this Agreement or any
agreement or instrument contemplated hereby, the performance by the parties
hereto of their respective obligations hereunder or the consummation of the
Closing Transactions or any other transactions contemplated hereby, (ii) any
Loan or the use of the proceeds therefrom or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) To the extent permitted by applicable law, the Borrower
shall not assert, and hereby waives, any claim against any Indemnitee, on any
theory of liability, for special, indirect, consequential or punitive damages
(as opposed to direct
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or actual damages) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Closing
Transactions, any Loan or the use of the proceeds thereof.
(d) All amounts due under this Section shall be payable
promptly after written demand therefor.
(e) The obligations of the Borrower under this Section 9.5
shall survive the termination of this Agreement.
9.6. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Administrative Agent
with sufficient counterparts so that the Administrative Agent may furnish one to
each of the Lenders.
9.7. Accounting. Except as provided to the contrary herein,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with Agreement Accounting
Principles.
9.8. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.9. Nonliability of Lenders. The relationship between the
Borrower and the Lenders and the Administrative Agent shall be solely that of
borrower and lender. Neither the Administrative Agent nor any Lender shall have
any fiduciary responsibilities to the Borrower. Neither the Administrative Agent
nor any Lender undertakes any responsibility to the Borrower to review or inform
the Borrower of any matter in connection with any phase of the Borrower's
business or operations.
9.10. Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of New York.
9.11. Jurisdiction; Consent to Service of Process.
(a) The Borrower hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States
▇▇
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that the Administrative Agent or any Lender may otherwise have
to bring any action or proceeding relating to this Agreement against the
Borrower or its properties in the courts of any jurisdiction.
(b) The Borrower hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any court
referred to in paragraph (a) of this Section. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action or proceeding in any such
court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 13.1. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
9.12. Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Borrower pursuant to this
Agreement in confidence and for use in connection with this Agreement, including
without limitation, for use in connection with its rights and remedies
hereunder, except for disclosure (a) to other Lenders and their respective
Affiliates, (b) to legal counsel, accountants, and other professional advisors
to that Lender, (c) to regulatory officials, (d) as requested pursuant to or as
required by law, regulation, or legal process, (e) in connection with any legal
proceeding to which that Lender is a party, and (f) permitted by Section 12.4.
9.13. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
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CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
9.14. Disclosure. Each Lender hereby (a) acknowledges and
agrees that Chase and/or its Affiliates from time to time may hold other
investments in, make other loans to or have other relationships with the
Borrower and its Subsidiaries, including, without limitation, in connection with
any interest rate hedging instruments or agreements or swap transactions, and
(b) to the extent that any such liability would not exist but for Chase's status
as Administrative Agent hereunder, waives any liability of Chase or such
Affiliate to any Lender arising out of or resulting from such investments, loans
or other relationships other than liabilities arising out of the gross
negligence or willful misconduct of Chase or its Affiliates.
9.15. Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one
agreement, and any of the parties hereto may execute this Agreement by signing
any such counterpart. This Agreement shall be effective when it has been
executed by the Borrower, the Administrative Agent and the Lenders.
ARTICLE X
THE ADMINISTRATIVE AGENT
10.1. Appointment. The Chase Manhattan Bank is hereby
appointed administrative agent for the Lenders hereunder and under each other
Loan Document, and each of the Lenders irrevocably authorizes the Administrative
Agent to act as the agent of such Lender. The Administrative Agent agrees to act
as such upon the express conditions contained in this Article X. The
Administrative Agent shall not have a fiduciary relationship in respect of the
Borrower or any Lender by reason of this Agreement or any other Loan Document.
10.2. Powers. The Administrative Agent shall have and may
exercise such powers under the Loan Documents as are specifically delegated to
the Administrative Agent by the terms of each thereof, together with such powers
as are reasonably incidental thereto. The Administrative Agent shall have no
implied duties to the Lenders, or any obligation to the Lenders to take any
action thereunder, except any action specifically
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provided by the Loan Documents to be taken by the Administrative Agent.
10.3. General Immunity. Neither the Administrative Agent nor
any of its directors, officers, agents or employees shall be liable to the
Borrower or any Lender for any action taken or omitted to be taken by it or them
hereunder or under any other Loan Document or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
10.4. No Responsibility for Loans, Recitals, etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(a) any statement, warranty or representation made in connection with any Loan
Document or any borrowing hereunder; (b) the performance or observance of any of
the covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (c) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered to the Administrative Agent and
not waived at closing; or (d) the validity, enforceability, effectiveness,
sufficiency or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith. The Administrative Agent shall have
no duty to disclose to the Lenders information that is not required to be
furnished by the Borrower to the Administrative Agent at such time, but is
voluntarily furnished by the Borrower to the Administrative Agent (either in its
capacity as Administrative Agent or in its individual capacity) and which is not
otherwise expressly required by this Agreement to be delivered by the
Administrative Agent to the Lenders.
10.5. Action on Instructions of Lenders. The Administrative
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder and under any other Loan Document in accordance with written
instructions signed by the Required Lenders (or, to the extent required by
Section 8.2, by all the Lenders), and such instructions and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders. The
Administrative Agent shall be fully justified in failing or refusing to take any
action hereunder and under any other Loan Document unless it shall first be
indemnified to its satisfaction by the Lenders pro-rata against any and all
liability, cost and expense that it may incur by reason of taking or continuing
to take any such action.
10.6. Employment of Administrative Agents and Counsel. The
Administrative Agent may execute any of its duties as Administrative Agent
hereunder and under any other Loan Document by or through employees, agents, and
attorneys-in-fact
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and shall not be answerable to the Lenders, except as to money or securities
received by it or its authorized agents, for the default or misconduct of any
such agents or attorneys-in-fact selected by it with reasonable care. The
Administrative Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties hereunder and
under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Lenders agree that
the Administrative Agent shall be entitled to rely upon any notice, consent,
certificate, affidavit, letter, telegram, statement, paper or document believed
by it to be genuine and correct and to have been signed or sent by the proper
person or persons, and, in respect to legal matters, upon the opinion of counsel
selected by the Administrative Agent, which counsel may be employees of the
Administrative Agent.
10.8. Administrative Agent's Reimbursement and
Indemnification. The Lenders agree to reimburse and indemnify the Administrative
Agent ratably in proportion to their respective Commitments (or, if the
Commitments have been terminated, in proportion to their Commitments immediately
prior to such termination) (a) for any amounts not reimbursed by the Borrower
for which the Administrative Agent is entitled to reimbursement by the Borrower
under the Loan Documents, (b) to the extent not reimbursed by the Borrower, for
any other expenses incurred by the Administrative Agent on behalf of the
Lenders, in connection with the preparation, execution, delivery, administration
and enforcement of the Loan Documents and (c) to the extent not reimbursed by
the Borrower, for any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind and
nature whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Loan Documents
or any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Administrative Agent as finally determined by a court of
competent jurisdiction. The obligations of the Lenders under this Section 10.8
shall survive payment of the Obligations and termination of this Agreement.
10.9. Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Unmatured
Default hereunder unless the Administrative Agent has received written notice
from a Lender or the Borrower referring to this Agreement describing such
Default or Unmatured Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives
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such a notice, the Administrative Agent shall give prompt notice thereof to the
Lenders.
10.10. Rights as a Lender. In the event the Administrative
Agent is a Lender, the Administrative Agent shall have the same rights and
powers hereunder and under any other Loan Document as any Lender and may
exercise the same as though it were not the Administrative Agent, and the term
"Lender" or "Lenders" shall, at any time when the Administrative Agent is a
Lender, unless the context otherwise indicates, include the Administrative Agent
in its individual capacity. The Administrative Agent may accept deposits from,
lend money to, and generally engage in any kind of trust, debt, equity or other
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrower or any of its Subsidiaries in which the
Borrower or such Subsidiary is not restricted hereby from engaging with any
other Person. The Administrative Agent, in its individual capacity, is not
obligated to remain a Lender.
10.11. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements prepared by the Borrower and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.12. Successor Administrative Agent. The Administrative
Agent may resign at any time by giving written notice thereof to the Lenders and
the Borrower, such resignation to be effective upon the appointment of a
successor Administrative Agent or, if no successor Administrative Agent has been
appointed, thirty days after the retiring Administrative Agent gives notice of
its intention to resign. Upon any such resignation and with the consent of the
Borrower (so long as no Default is then pending), which consent shall not be
unreasonably withheld or delayed, the Required Lenders shall have the right to
appoint, on behalf of the Borrower and the Lenders, a successor Administrative
Agent. If no successor Administrative Agent shall have been so appointed by the
Required Lenders and shall have accepted such appointment within thirty days
after the resigning Administrative Agent's giving notice of its intent to
resign, then the resigning Administrative Agent may appoint, on behalf of the
Borrower and the Lenders, a successor Administrative Agent. If the
Administrative Agent has resigned and no successor
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Administrative Agent has been appointed, the Lenders may perform all the duties
of the Administrative Agent hereunder and the Borrower shall make all payments
in respect of the Obligations to the applicable Lenders and for all other
purposes shall deal directly with the Lenders. No successor Administrative
Agent shall be deemed to be appointed hereunder until such successor
Administrative Agent has accepted the appointment. Any such successor
Administrative Agent shall be a Lender or another commercial bank having
capital and retained earnings of at least $500,000,000. Upon the acceptance of
any appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
resigning Administrative Agent. Upon the effectiveness of the resignation of
the Administrative Agent, the resigning Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents. After the effectiveness of the resignation of an Administrative
Agent, the provisions of this Article X shall continue in effect for the
benefit of such Administrative Agent in respect of any actions taken or omitted
to be taken by it while it was acting as the Administrative Agent hereunder and
under the other Loan Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Default occurs, any and all deposits (including all
account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender to
or for the credit or account of the Borrower may be offset and applied toward
the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. Except for payments received from the
Administrative Agent pursuant to Section 2.11, if any Lender, whether by setoff
or otherwise, has payment made to it upon its Loans (other than payments
received pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than its
ratable share of such Loans, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after such
purchase each Lender will hold its ratable proportion of Loans. If any Lender,
whether in connection with setoff or amounts which might be subject to setoff or
otherwise, receives collateral or other protection for
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its Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to their
Loans. In case any such payment is disturbed by legal process, or otherwise,
appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Borrower
and the Lenders and their respective successors and assigns, except that (a) the
Borrower shall not have the right to assign its rights or obligations under the
Loan Documents and (b) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (b) of the immediately preceding
sentence, any Lender may at any time, without the consent of the Borrower or the
Administrative Agent, assign all or any portion of its rights under this
Agreement and any promissory note issued to it hereunder to a Federal Reserve
Bank; provided, however, that no such assignment to a Federal Reserve Bank shall
release the transferor Lender from its obligations hereunder.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any promissory note issued hereunder
held by such Lender, any Commitment of such Lender or any other interest of such
Lender under the Loan Documents. In the event of any such sale by a Lender of
participating interests to a Participant, such Lender's obligations under the
Loan Documents shall remain unchanged, such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
such Lender shall remain the holder of any such note for all purposes under the
Loan Documents, all amounts payable by the Borrower under this Agreement shall
be determined as if such Lender had not sold such participating interests, and
the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the
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Loan Documents other than any amendment, modification or waiver with respect to
any Loan or Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable with
respect to any such Loan or Commitment, postpones any date fixed for any
regularly-scheduled payment of principal of, or interest or fees on, any such
Loan or Commitment, or extends the Termination Date.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in Section 11.1
in respect of its participating interest in amounts owing under the Loan
Documents to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under the Loan Documents; provided that each
Lender shall retain the right of setoff provided in Section 11.1 with respect to
the amount of participating interests sold to each Participant. Each
Participant, by exercising the right of setoff provided in Section 11.1, agrees
to share with each Lender, any amount received pursuant to the exercise of its
right of setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities ("Purchasers") all or any part of its
rights and obligations under the Loan Documents; provided, however, that in the
case of a partial assignment to an entity which is not a Lender or an Affiliate
of a Lender, such assignment shall be in a minimum amount of $10,000,000 (or
such lesser amount as the Borrower and the Administrative Agent may approve with
respect to any specific proposed assignment). Such assignment shall be
substantially in the form of Exhibit "F" hereto or any other form as may be
agreed to by the parties thereto and approved by the Agent (in each case, an
"Assignment and Acceptance"). The consent of the Borrower and the Administrative
Agent (which consent shall not be unreasonably withheld or delayed) shall be
required prior to an assignment becoming effective with respect to a Purchaser
which is not a Lender or an Affiliate thereof; provided, however, that the
consent of the Borrower shall not be required if, on the date of such
assignment, a Default shall have occurred and be continuing. The parties to each
assignment shall deliver to the Administrative Agent a processing and
recordation fee of $3,500 and, if the assignee is not a Lender, an
Administrative Questionnaire.
12.3.2. Register. The Administrative Agent, acting for this
purpose as an agent of the Borrower, shall maintain at one of its offices in The
City of New York a copy of each
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Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive, and
the Borrower, the Administrative Agent, the Lenders may treat each Person whose
name is recorded in the Register pursuant to the terms hereof as a Lender
hereunder for all purposes of this Agreement, notwithstanding notice to the
contrary. The Register shall be available for inspection by the Borrower and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
12.3.3. Effect; Effective Date. Upon its receipt of a duly
completed Assignment and Acceptance executed by an assigning Lender and an
assignee, the assignee's completed Administrative Questionnaire (unless the
assignee shall already be a Lender hereunder), the processing and recordation
fee referred to in Section 12.3.1 and any written consent to such assignment
required by Section 12.3.1, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph. On and after
the effective date of such assignment, such Purchaser shall for all purposes be
a Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and the
transferor Lender shall be released with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser without any further
consent or action by the Borrower, the Lenders or the Administrative Agent.
12.4. Dissemination of Information. The Borrower authorizes
each Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries; provided that each Transferee and prospective Transferee agrees to
be bound by Section 9.12 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.17.
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ARTICLE XIII
NOTICES
13.1. Giving Notice.
Except as otherwise permitted by Section 2.12 with respect to borrowing
notices, all notices and other communications provided to any party hereto under
this Agreement or any other Loan Document shall be in writing, by facsimile,
first class U.S. mail or overnight courier and addressed or delivered to such
party at (i) in the case of the Borrower or the Administrative Agent, its
address set forth below its signature hereto or (ii) in the case of a Lender, at
the address set forth in its Administrative Questionnaire, or at such other
address as may be designated by such party in a notice to the other parties. Any
notice, if personally delivered or mailed (properly addressed with postage
prepaid), shall be deemed given three (3) Business Days after deposit in the
U.S. mail; any notice, if transmitted by telecopy, shall be deemed given when
transmitted; and any notice given by courier shall be deemed given when received
by the addressee.
13.2. Change of Address.
The Borrower, the Administrative Agent and any Lender may each change the
address for service of notice upon it by a notice in writing to the other
parties hereto.
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IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative
Agent have executed this Agreement as of the date first above written.
CNA SURETY CORPORATION
By ???
--------------------------------
Title:
Address for Notices:
CNA Surety Corporation
CNA Plaza, 13S
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
▇▇
- ▇▇ -
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ BANK,
individually and as
Administrative Agent,
By:/s/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Vice President
Address for Notices:
The Chase Manhattan Bank
Loan and Agency Services
One Chase ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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THE FIRST NATIONAL BANK OF CHICAGO
By: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Title: First Vice President
BANK OF MONTREAL
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Title: Director
THE BANK OF NEW YORK
By: ???
--------------------------------
Title: Vice President
FLEET BANK, NATIONAL ASSOCIATION
By: ▇▇▇▇▇▇▇ Chararreg ▇▇▇▇▇
--------------------------------
Title: Vice President
MELLON BANK, N.A.
By: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
--------------------------------
Title: Officer
78
EXHIBIT "A"
COMPETITIVE BID QUOTE REQUEST
(Section 2.3.2)
________________, 19__
To: The Chase Manhattan Bank, as agent (the "Administrative Agent")
From: CNA Surety Corporation ("Borrower")
Re: Credit Agreement dated as of September 30, 1997, among the Borrower,
the Lenders party thereto and The Chase Manhattan Bank, as
Administrative Agent (the "Agreement")
We hereby give notice pursuant to Section 2.3.2 of the Agreement
that we request Competitive Bid Quotes for the following proposed Competitive
Bid Advance(s):
Borrowing Date: , 19
---------------
Principal Amount: $ [1]
-----------
Interest Period: [2]
-----------
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate].
Upon acceptance by the undersigned of any or all of the Competitive Bid
Advances offered by Lenders in response to this request, the undersigned shall
be deemed to affirm as of such date the representations and warranties made in
the Agreement to the extent specified in Section 4.2(b) thereof. Capitalized
terms used herein have the meanings assigned to them in the Agreement.
CNA SURETY CORPORATION
By:
---------------------------------
Title:
------------------------------
------------------------------------
1 Amount must be at least $10,000,000 and an integral multiple of $1,000,000.
2 One, two, three or six months (Eurodollar Auction) or at least seven
and up to 360 days (Absolute Rate Auction), subject to the provisions
of the definitions of Eurodollar Interest Period and Absolute Rate
Interest Period.
79
EXHIBIT "B"
INVITATION FOR COMPETITIVE BID QUOTES
(Section 2.3.3)
___________________, 19_____
To: [Name of Lender]
Re: Invitation for Competitive Bid Quotes to CNA Financial Corporation
(the "Borrower")
Pursuant to Section 2.3.3 of the Credit Agreement dated as of September
30, 1997 (the "Agreement") among the Borrower, the Lenders parties thereto and
the undersigned, as Administrative Agent, we are pleased on behalf of the
Borrower to invite you to submit Competitive Bid Quotes to the Borrower for the
following proposed Competitive Bid Advance(s):
Borrowing Date: , 19
--------------
Principal Amount: $
--------------
Interest Period:
--------------
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.3.4 of
the Agreement and the foregoing terms in which the Competitive Bid Quote Request
was made. Capitalized terms used herein have the meanings assigned to them in
the Agreement.
Please respond to this invitation by no later than 10:00 a.m. New York
time on , 19 .
------------- -----
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:
--------------------------------
Authorized Officer
80
EXHIBIT "C"
COMPETITIVE BID QUOTE
(Section 2.3.4)
________________, 19___
To: The Chase Manhattan Bank, as Administrative Agent
Attn:
Re: Competitive Bid Quote to CNA Surety Corporation (the "Borrower")
In response to your invitation on behalf of the Borrower dated
___________, 19__, we hereby make the following Competitive Bid Quote pursuant
to Section 2.3.4 of the Credit Agreement hereinafter referred to and on the
following terms:
1. Quoting Lender:
2. Person to contact at Quoting Lender:
3. Borrowing Date:_____________, 19__1
4. We hereby offer to make Competitive Bid Loan(s) in
the following principal amounts, for the following
Interest Periods and at the following rates:
Principal Interest [Competitive [Absolute Minimum
Amount2 Period3 Bid Margin4] Rate5] Amount6
------- ------- ------------ ------ -------
$
----------------------------------------
1 As specified in the related Invitation.
2 Principal amount bid for each Interest Period may not exceed principal
amount requested. Bids must be made for $10,000,000 and an integral
multiple of $1,000,000.
3 One, two, three or six months or at least seven and up to 360 days, as
specified in the related Invitation.
4 Competitive Bid Margin over or under the Eurodollar Base Rate determined
for the applicable Interest Period. Specify percentage (rounded to the
nearest 1/100 of 1%) and specify whether "PLUS" or "MINUS".
5 Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).
6 Specify minimum amount which the Borrower may accept (see Section 2.3.4
(b)(iv)).
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We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of September 30, 1997 among the Borrower, the Lenders party
thereto and yourself, as Administrative Agent irrevocably obligates us to make
the Competitive Bid Loan(s) for which any offer(s) are accepted, in whole or in
part.
Very truly yours,
[NAME OF LENDER]
Dated:_____________, 19__ By:______________________
Authorized Officer
82
EXHIBIT "D"
[Opinion of Counsel to the Borrower]
September 30, 1997
The Chase Manhattan Bank,
as Administrative Agent
and
Each of the Financial Institutions
identified on Schedule I hereto
Ladies/Gentlemen:
I am counsel for Continental Casualty Company, and in such
capacity, am representing CNA Surety Corporation (the "Borrower") in connection
with its execution and delivery of a Credit Agreement dated as of September 30,
1997 (the "Agreement") among the Borrower, the Lenders named therein and The
Chase Manhattan Bank, as Administrative Agent for the Lenders, providing for
Advances in an aggregate principal amount not exceeding $130,000,000 at any one
time outstanding. All capitalized terms used in this opinion and not otherwise
defined shall have the meanings attributed to them in the Agreement. This
opinion is being delivered to the addressees at the request of the Borrower
pursuant to Section 4.1(g) of the Agreement.
I have examined originals, or copies certified or otherwise
identified to my satisfaction, of such corporate records, agreements,
instruments and documents of the Borrower and its Subsidiaries and certificates
and other statements of public officials and corporate officers, and have made
such other investigation of fact and law, as I have deemed necessary in
connection with the opinions set forth herein. In my examination, I have assumed
the genuineness of all documents submitted to me as originals and the conformity
to originals of all documents submitted to me as copies.
Based upon the foregoing, and subject to the comments and
exceptions hereinafter set forth, I am of the opinion that:
1. The Borrower and each Significant Subsidiary are
corporations duly incorporated, validly existing and in good standing under the
laws of their respective states of incorporation. The Borrower has all requisite
power and authority to conduct its business in each jurisdiction in which its
business is conducted.
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2. The execution and delivery of the Loan Documents by the
Borrower and the performance by the Borrower of the Obligations have been duly
authorized by all necessary corporate action and proceedings on the part of the
Borrower and will not:
(a) require any consent of the Borrower's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or any of its
Subsidiaries or the Borrower's articles of incorporation or by-laws or
any material indenture, instrument or agreement known to me and binding
upon the Borrower or any of its Subsidiaries; or
(c) result in, or require, the creation or imposition of any
Lien pursuant to the provisions of any material indenture, instrument
or agreement binding upon the Borrower or any of its Subsidiaries.
3. The Loan Documents have been duly executed and delivered by
the Borrower and constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms except to the
extent the enforcement thereof may be limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors' rights generally and
subject also to the availability of equitable remedies if equitable remedies are
sought.
4. To my knowledge after due inquiry, there is no action,
suit, proceeding, governmental investigation or arbitration pending or
threatened against the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental or administrative body, agency or official which
(a) challenges the validity, or seeks to enjoin the performance of, the Loan
Documents or Reorganization Documents or the consummation of any of the Closing
Transactions or (b) could reasonably be expected to have a Material Adverse
Effect.
5. No approval, authorization, consent, adjudication or order
of any Governmental Authority, which has not been obtained by the Borrower or
any of its Subsidiaries, is required to be obtained by the Borrower or any of
its Subsidiaries in connection with the execution and delivery of the Loan
Documents, the borrowings under the Agreement, the Merger, or in connection with
the payment by the Borrower of the Obligations.
6. The Merger has become effective in accordance with the
terms of the Reorganization Documents and in compliance with applicable law.
84
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This opinion is limited to the law of the State of New York,
the General Corporation Law of the State of Delaware and the federal laws of the
United States of America.
This opinion may be relied on by any party that becomes a
Participant, Lender or Administrative Agent under the Agreement after the date
hereof pursuant to the Agreement.
Very truly yours,
85
SCHEDULE I
THE CHASE MANHATTAN BANK
THE FIRST NATIONAL BANK OF CHICAGO
BANK OF MONTREAL
THE BANK OF NEW YORK
FLEET BANK, NATIONAL ASSOCIATION
MELLON BANK, N.A.
86
EXHIBIT "E"
COMPLIANCE CERTIFICATE
To: The Lenders parties to the Credit Agreement Described Below
This Compliance Certificate is furnished pursuant to that
certain Credit Agreement dated as of September 30, 1997 (as amended, modified,
renewed or extended from time to time, the "Agreement") among the Borrower, the
lenders party thereto, The Chase Manhattan Bank, as Administrative Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Compliance Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected_______________of the Borrower;
2. I have reviewed the terms of the Agreement and I have made,
or have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower and its Subsidiaries during the
accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes a Default or Unmatured Default during or at the end of the
accounting period covered by the attached financial statements or as of the date
of this Certificate, except as set forth below; and
4. Schedule I attached hereto sets forth financial data and
computations evidencing the Borrower's compliance with certain covenants of the
Agreement, all of which data and computations are true, complete and correct.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrower has taken, is taking, or
proposes to take with respect to each such condition or event:
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
87
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The foregoing certifications, together with the computations
set forth in Schedule I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this_____ day of________ ,
19___.
____________________________
88
SCHEDULE I TO COMPLIANCE CERTIFICATE
Schedule of Compliance as of ________ __, ____ with
Provisions of Sections 6.14, 6.15 and 6.16 of
the Agreement
1. Section 6.14 - Consolidated Capitalization Ratio
A. Consolidated Indebtedness of
the Borrower and its Subsidiaries $__________
B. Consolidated Capitalization
(i) Consolidated Indebtedness of the
Borrower and its
Subsidiaries $__________
(ii) Consolidated Net Worth $__________
(iii) Sum of (i) and (ii) $__________
C. Ratio of A to B _______:1.0
D. Permitted Ratio Not greater than 0.40:1.0
Complies________________ Does Not Comply______________
2. Section 6.15 - Insurance Company Surplus as Regards Policyholders
A. Surplus as Regards Policyholders
of Insurance Subsidiaries $__________
B. Minimum Combined Surplus as
Regards Policyholders per Covenant $100,000,000
Complies_______________ Does Not Comply_______________
3. Section 6.13 - Combined Ratio of Net Written Premiums
to Capital and Surplus
A. Net Written Premiums $___________
B. Capital and Surplus $___________
C. Ratio of A to B ________:1.0
D. Permitted Ratio Not more than 3.0:1.0
Complies_______________ Does Not Comply_______________
89
EXHIBIT "F"
[FORM OF ASSIGNMENT AND ACCEPTANCE]
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of
September 30, 1997 (as amended and in effect on the date hereof, the "Credit
Agreement"), among CNA Surety Corporation, the Lenders named therein and The
Chase Manhattan Bank, as Administrative Agent for the Lenders. Terms defined in
the Credit Agreement are used herein with the same meanings.
The Assignor named on the reverse hereof hereby sells and
assigns, without recourse, to the Assignee named on the reverse hereof, and the
Assignee hereby purchases and assumes, without recourse, from the Assignor,
effective as of the Assignment Date set forth on the reverse hereof, the
interests set forth on the reverse hereof (the "Assigned Interest") in the
Assignor's rights and obligations under the Credit Agreement, including, without
limitation, the interests set forth on the reverse hereof in the Commitment of
the Assignor on the Assignment Date and Competitive Bid Loans and Ratable Loans
owing to the Assignor which are outstanding on the Assignment Date, but
excluding accrued interest and fees to and excluding the Assignment Date. The
Assignee hereby acknowledges receipt of a copy of the Credit Agreement. From and
after the Assignment Date (i) the Assignee shall be a party to and be bound by
the provisions of the Credit Agreement and, to the extent of the Assigned
Interest, have the rights and obligations of a Lender thereunder and (ii) the
Assignor shall, to the extent of the Assigned Interest, relinquish its rights
and be released from its obligations under the Credit Agreement.
This Assignment and Acceptance is being delivered to the
Administrative Agent together with (i) if the Assignee is not organized under
the laws of the United States of America, any documentation required to be
delivered by the Assignee pursuant to Section 2.17(b) of the Credit Agreement,
duly completed and executed by the Assignee, and (ii) if the Assignee is not
already a Lender under the Credit Agreement, an Administrative Questionnaire in
the form supplied by the Administrative Agent, duly completed by the Assignee.
The [Assignee/Assignor] shall pay the fee payable to the Administrative Agent
pursuant to Section 12.3.2 of the Credit Agreement.
This Assignment and Acceptance shall be governed by and
construed in accordance with the laws of the State of New York.
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Date of Assignment:
Legal Name of Assignor:
Legal Name of Assignee:
Assignee's Address for Notices:
Effective Date of Assignment
("Assignment Date")1:
Percentage
Principal Amount Assigned
Assigned (and (set forth, to at
identifying least 8 decimals, as a
information as to percentage of the
individual aggregate Commitments
Competitive of all Lenders
Facility Bid Loans) thereunder)
________ _________________ _______________________
Commitment Assigned: $ %
Ratable Loans:
Competitive Bid Loans:
The terms set forth above and on the reverse side hereof are hereby agreed to:
[NAME OF ASSIGNOR], as Assignor
By:__________________________________
Name:
Title:
[NAME OF ASSIGNEE], as Assignee
By:__________________________________
Name:
Title:
______________________________
1 Must be at least five Business Days after execution hereof by all required
parties.
91
- 3 -
The undersigned hereby consent to the within assignment:2
CNA SURETY CORPORATION THE CHASE MANHATTAN BANK,
as Administrative Agent,
By:_________________________ By:_________________________
Name: Name:
Title: Title:
____________________
1 Consents to be incuded to the extent required by Section 9.04 (b) of the
Credit Agreement.
92
SCHEDULE 1
COMMITMENTS
Lender Commitment
______ __________
THE CHASE MANHATTAN BANK $25,000,000
THE FIRST NATIONAL BANK OF CHICAGO $22,000,000
BANK OF MONTREAL $20,750,000
THE BANK OF NEW YORK $20,750,000
FLEET BANK, NATIONAL ASSOCIATION $20,750,000
MELLON BANK, N.A. $20,750,000
93
SCHEDULE 5.3
APPROVALS AND CONSENTS
The Merger required the approval of the stockholders of Capsure Holdings. Such
approval was obtained at the special meeting of stockholders held on September
23, 1997.
94
SCHEDULE 5.7
TAX MATTERS
None
95
SCHEDULE 5.8
LITIGATION
None
96
SCHEDULE 5.9
CAPITALIZATION AND SUBSIDIARIES
(a) CNA Surety Corporation Capitalization
The following table sets forth the consolidated capitalization of CNA
Surety Corporation as of June 30, 1997 on a pro-forma basis, adjusted to
give effect to the merger with Capsure Holdings and issuance of debt on
September 30, 1997 (in millions of dollars).
As reported As reported PRO-FORMA
CCC Surety Adjusted
Capsure Operations CNA Surety
------- ---------- ----------
Long-term Debt:
Revolving credit facility due March 31, 2003 54.0
Revolving credit facility due September 30, 2002 105.0
----- ----- -----
Total long-term debt 54.0 0.0 105.0
Stockholders' Equity:
Preferred stock
(CNA Surety: $0.01 par value; authorized 20,000,000;
issued and outstanding - 0 -)
Common stock 0.8
(CNA Surety; $0.01 par value; authorized 100,000,000;
issued and outstanding 43,880,708) 0.4
Additional paid-in capital 118.6 244.9
Retained earnings 9.8 0.0
Net unrealized gain on securities 0.3 0.0
----- ----- -----
Total stockholders equity 129.5 0.0 254.3
----- ----- -----
Total Capitalization 183.5 0.0 350.3
----- ----- -----
(b) CNA Surety Corporation Subsidiaries
State of % of Capital
Company Incorporation Stock Owned
---------------------------------------- ------------- -----------
Capsure Holdings Corp. Delaware 100%
Capital Dredge & Dock Corp. Ohio 100%
Capsure Financial Group, Inc. Oklahoma 100%
NI Acquisition Corp. Texas 100%
Nucorp Management Company Ohio 100%
Nucorp Properties, Inc. Ohio 100%
Pin Oak Petroleum, Inc. Texas 100%
SI Acquisition Corp. Texas 100%
SMCI Incorporated Mississippi 100%
Surety Bonding Company of America South Dakota 100%
Surewest Financial Corp. Delaware 100%
▇▇▇▇ ▇▇▇▇ Insurance, Inc. Florida 100%
Universal Surety Holding Corp. Texas 100%
Universal Surety of America Texas 100%
Western Surety Company South Dakota 100%
97
SCHEDULE 5.17
LIENS
None
98
SCHEDULE 5.18
RESTRICTIVE AGREEMENTS
None
99
SCHEDULE 6.13
EXISTING INDEBTEDNESS
1. Closing cash dividend to Capsure stockholders of $10.6 million. See
attached News Release.
2. Obligations under Employment Agreement as follows:
a. Employment Agreement as of the 30th day of September, 1995, by and
between Capsure Holdings Corp. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
b. Employment Agreement as of the 30th day of September, 1995, by and
between Caspsure Holdings Corp. and ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇.
Upon the closing of the merger to form CNA Survey Corporation, the
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ employment contracts grant the employee the right,
at the employee's option, to have the Company make an option payment in
cash to the employee equal to the excess of the fair market value of the
employee's unexercised Capsure Options over the Capsure Options exercise
price. The cash payment for Capsure Options under the ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇▇ employee agreements would be approximately $3.6 million.