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EXHIBIT C
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CREDIT AGREEMENT
among
UNIVERSAL AMERICAN FINANCIAL CORP.,
VARIOUS LENDING INSTITUTIONS,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
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Dated as of July 30, 1999
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$80,000,000
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CHASE SECURITIES INC.,
as Lead Arranger and Book Manager
THE BANK OF NEW YORK,
as Syndication Agent
DRESDNER BANK AG, NEW YORK
AND GRAND CAYMAN BRANCHES
as Documentation Agent
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CREDIT AGREEMENT, dated as of July 30, 1999, among UNIVERSAL
AMERICAN FINANCIAL CORP., a New York corporation (the "Borrower"), the lending
institutions listed from time to time on Annex I hereto (each a "Bank" and,
collectively, the "Banks"), and THE CHASE MANHATTAN BANK, as Administrative
Agent (the "Administrative Agent"). Unless otherwise defined herein, all
capitalized terms used herein and defined in Section 9 are used herein as so
defined.
W I T N E S S E T H :
WHEREAS, subject to and upon the terms and conditions set forth
herein, the Banks are willing to make available to the Borrower the credit
facilities provided for herein.
NOW, THEREFORE, IT IS AGREED:
SECTION 1. Amount and Terms of Credit.
1.01 Commitments. Subject to and upon the terms and conditions
herein set forth, each Bank severally agrees to make a loan or loans (each a
"Loan" and, collectively, the "Loans") to the Borrower, which Loans shall be
drawn, to the extent such Bank has a commitment under such Facility, under the
Term Loan Facility and the Revolving Loan Facility, respectively, as set forth
below:
(a) Each Loan under the Term Loan Facility (each, a "Term Loan" and,
collectively, the "Term Loans"):
(i) shall be incurred by the Borrower on the Initial Borrowing Date;
(ii) shall be denominated in U.S. Dollars;
(iii) may, except as hereinafter provided, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, provided that all Term Loans incurred as part
of the same Borrowing shall, unless otherwise specifically provided
herein, consist of Term Loans of the same Type;
(iv) shall not exceed for any Bank at the time of incurrence thereof
that aggregate principal amount which equals the Term Loan Commitment, if
any, of such Bank at such time; and
(v) once repaid, may not be reborrowed.
(b) Each Loan under the Revolving Loan Facility (each, a "Revolving
Loan" and, collectively, the "Revolving Loans"):
(i) may be incurred by the Borrower at any time and from time to
time after the Initial Borrowing Date and prior to the Revolving Loan
Maturity Date, it being understood that Revolving Loans may not be
incurred on the Initial Borrowing Date;
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(ii) shall be denominated in U.S. Dollars;
(iii) may, except as hereinafter provided, at the option of the
Borrower, be incurred and maintained as, and/or converted into, Base Rate
Loans or Eurodollar Loans, provided that all Revolving Loans incurred as
part of the same Borrowing shall, unless otherwise specifically provided
herein, consist of Revolving Loans of the same Type;
(iv) may be repaid and reborrowed in accordance with the provisions
hereof; and
(v) shall not exceed for any Bank at any time outstanding that
aggregate principal amount which, when added to the aggregate outstanding
principal amount of all other Revolving Loans made by such Bank at such
time, equals the Revolving Loan Commitment, if any, of such Bank at such
time.
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings.
The aggregate principal amount of each Borrowing hereunder shall not be less
than $1,000,000 and, if in excess thereof, shall be in an integral multiple of
$500,000; provided, however, that a Borrowing of Revolving Loans constituting
Base Rate Loans may be equal to the Total Unutilized Revolving Loan Commitment.
More than one Borrowing may be incurred on any day; provided that at no time
shall there be outstanding more than two Borrowings of Term Loans that are
Eurodollar Loans and five Borrowings of Revolving Loans that are Eurodollar
Loans.
1.03 Notice of Borrowing. (a) Whenever the Borrower desires to incur
Loans under any Facility, it shall give the Administrative Agent at its Notice
Office, prior to 12:00 Noon (New York time), at least three Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of each
Borrowing of Eurodollar Loans and at least one Business Day's prior written
notice (or telephonic notice promptly confirmed in writing) of each Borrowing of
Base Rate Loans to be incurred hereunder. Each such notice (each, a "Notice of
Borrowing") shall, except as expressly provided in Section 1.10, be irrevocable,
and, in the case of each written notice and each written confirmation of
telephonic notice, shall be in the form of Exhibit A hereto, appropriately
completed to specify (i) the Facility pursuant to which such Borrowing is to be
made, (ii) the aggregate principal amount of the Loans to be made pursuant to
such Borrowing, (iii) the date of such Borrowing (which shall be a Business Day)
and (iv) whether such Borrowing shall consist of Base Rate Loans or Eurodollar
Loans and, if Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall promptly give each Bank which is
required to make Loans in respect of the Facility specified in the respective
Notice of Borrowing written notice (or telephonic notice promptly confirmed in
writing) of each proposed Borrowing, of such Bank's proportionate share thereof
and of the other matters covered by the Notice of Borrowing.
(b) Without in any way limiting the obligation of the Borrower to
confirm in writing any notice it may give hereunder by telephone, the
Administrative Agent may act prior to receipt of written confirmation without
liability upon the basis of such telephonic notice, believed by the
Administrative Agent in good faith to be from an Authorized Officer of the
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Borrower. In each such case the Borrower hereby waives the right to dispute the
Administrative Agent's record of the terms of any such telephonic notice.
1.04 Disbursement of Funds. (a) Subject to the terms and conditions
herein set forth, no later than 11:00 A.M. (New York time) on the date specified
in each Notice of Borrowing, each Bank with a Commitment under the respective
Facility will make available its pro rata share of each Borrowing requested to
be made on such date in the manner provided below. All amounts shall be made
available to the Administrative Agent in immediately available funds,
denominated in U.S. Dollars, at the Payment Office and the Administrative Agent
will promptly make available to the Borrower by depositing to the Borrower's
account at the Payment Office the aggregate of the amounts so made available in
the type of funds received. Unless the Administrative Agent shall have been
notified by any Bank prior to the date of Borrowing that such Bank does not
intend to make available to the Administrative Agent its portion of the
Borrowing or Borrowings to be made on such date, the Administrative Agent may
assume that such Bank has made such amount available to the Administrative Agent
on such date of Borrowing, and the Administrative Agent, in reliance upon such
assumption, may (in its sole discretion and without any obligation to do so)
make available to the Borrower a corresponding amount. If such corresponding
amount is not in fact made available to the Administrative Agent by such Bank
and the Administrative Agent has made available same to the Borrower, the
Administrative Agent shall be entitled to recover such corresponding amount from
such Bank. If such Bank does not pay such corresponding amount forthwith upon
the Administrative Agent's demand therefor, the Administrative Agent shall
promptly notify the Borrower, and the Borrower shall immediately pay such
corresponding amount to the Administrative Agent. The Administrative Agent shall
also be entitled to recover from the Bank or the Borrower, as the case may be,
interest on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Administrative Agent to the
Borrower to the date such corresponding amount is recovered by the
Administrative Agent, at a rate per annum equal to (x) if paid by such Bank, the
overnight Federal Funds Effective Rate or (y) if paid by the Borrower, the then
applicable rate of interest, calculated in accordance with Section 1.08, for the
respective Loans.
(b) Nothing in this Section 1.04 shall be deemed to relieve any Bank
from its obligation to fulfill its commitments hereunder or to prejudice any
rights which the Borrower may have against any Bank as a result of any default
by such Bank hereunder.
1.05 Notes. (a) The Borrower's obligation to pay the principal of,
and interest on, all the Loans made to it by each Bank shall be evidenced (i) if
Term Loans, by a promissory note substantially in the form of Exhibit B-1 with
blanks appropriately completed in conformity herewith (each, a "Term Note" and,
collectively, the "Term Notes") and (ii) if Revolving Loans, by a promissory
note substantially in the form of Exhibit B-2 with blanks appropriately
completed in conformity herewith (each, a "Revolving Note" and, collectively,
the "Revolving Notes").
(b) The Term Note issued to each Bank that has a Term Loan
Commitment or outstanding Term Loans shall (i) be executed by the Borrower, (ii)
be payable to the order of such Bank or its registered assigns and be dated the
Initial Borrowing Date (or if issued thereafter, the date of issuance thereof),
(iii) be in a stated principal amount equal to the initial
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Term Loan Commitment of such Bank and be payable in the outstanding principal
amount of Term Loans evidenced thereby (or in the case of a new Term Note issued
pursuant to Section 11.04, the Term Loans evidenced thereby at the time of
issuance), (iv) mature on the Term Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 3.01, and mandatory
repayment and prepayment as provided in Section 3.02, and (vii) be entitled to
the benefits of this Agreement and the other Credit Documents.
(c) The Revolving Note issued to each Bank that has a Revolving Loan
Commitment shall (i) be executed by the Borrower, (ii) be payable to the order
of such Bank or its registered assigns and be dated the Initial Borrowing Date
(or if issued thereafter, the date of issuance thereof), (iii) be in a stated
principal amount equal to the Revolving Loan Commitment of such Bank and be
payable in the outstanding principal amount of the Revolving Loans evidenced
thereby, (iv) mature on the Revolving Loan Maturity Date, (v) bear interest as
provided in the appropriate clause of Section 1.08 in respect of the Base Rate
Loans and Eurodollar Loans, as the case may be, evidenced thereby, (vi) be
subject to voluntary prepayment as provided in Section 3.01, and mandatory
prepayment as provided in Section 3.02, and (vii) be entitled to the benefits of
this Agreement and the other Credit Documents.
(d) Each Bank will record on its internal records the amount of each
Loan made by it and each payment received in respect thereof and will prior to
any transfer of any of its Notes endorse on the reverse side thereof the
outstanding principal amount of the Loans evidenced thereby as of the date of
such transfer. Failure to make any such notation or any error in any such
notation shall not affect the Borrower's obligations in respect of such Loans.
1.06 Conversions. The Borrower shall have the option to convert on
any Business Day, all or a portion at least equal to $1,000,000 (and, if in
excess thereof, an integral multiple of $500,000) of the outstanding principal
amount of the Loans of one Type pursuant to a Facility into a Borrowing or
Borrowings of the other Type of Loan under such Facility; provided that (i) no
partial conversion of a Borrowing of Eurodollar Loans shall reduce the
outstanding principal amount of the Eurodollar Loans pursuant to such Borrowing
to less than $1,000,000, (ii) Base Rate Loans may only be converted into
Eurodollar Loans if no Default or Event of Default is in existence on the date
of such conversion, (iii) Borrowings of Eurodollar Loans resulting from this
Section 1.06 shall be limited in number as provided in Section 1.02, (iv)
Eurodollar Loans may only be converted into Base Rate Loans on the last day of
the Interest Period applicable thereto and (v) each such conversion shall be
made pro rata among the Loans of each Bank of the Type being converted. Each
such conversion shall be effected by the Borrower by giving the Administrative
Agent at its Notice Office, prior to 12:00 Noon (New York time), at least three
Business Days' (or one Business Day's in the case of a conversion into Base Rate
Loans) prior written notice (or telephonic notice promptly confirmed in writing)
(each a "Notice of Conversion") specifying the Loans to be so converted, the
Type of Loans to be converted into and, if such Loans are to be converted into a
Borrowing of Eurodollar Loans, the Interest Period to be initially applicable
thereto. The Administrative Agent shall give each Bank prompt notice of any such
proposed conversion affecting any of its Loans.
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1.07 Pro Rata Borrowings. All Loans under this Agreement shall be
made by the Banks pro rata on the basis of their Term Loan Commitments and
Revolving Loan Commitments, as the case may be. It is understood that no Bank
shall be responsible for any default by any other Bank in its obligation to make
Loans hereunder and that each Bank shall be obligated to make the Loans provided
to be made by it hereunder, regardless of the failure of any other Bank to
fulfill its commitments hereunder.
1.08 Interest. (a) The unpaid principal amount of each Base Rate
Loan shall bear interest from the date of the Borrowing thereof until the
earlier of (i) the maturity (whether by acceleration or otherwise) of such Base
Rate Loan and (ii) the conversion of such Base Rate Loan to a Eurodollar Loan
pursuant to Section 1.06, at a rate per annum which shall at all times be equal
to the Applicable Percentage then in effect for Base Rate Loans plus the Base
Rate in effect from time to time.
(b) The unpaid principal amount of each Eurodollar Loan shall bear
interest from the date of the Borrowing thereof until the earlier of (i) the
maturity (whether by acceleration or otherwise) of such Eurodollar Loan or (ii)
the conversion of such Eurodollar Loan to a Base Rate Loan pursuant to Section
1.06, at a rate per annum which shall at all times be equal to the Applicable
Percentage then in effect for Eurodollar Loans plus the relevant Eurodollar Rate
for the Interest Period applicable to such Eurodollar Loan.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall bear interest at a rate per annum equal to the Base Rate in effect from
time to time plus the sum of (i) 2% and (ii) the Applicable Percentage then in
effect for Base Rate Loans; provided that Eurodollar Loans shall bear interest
after maturity (whether by acceleration or otherwise) until the end of the
applicable Interest Period at a rate per annum equal to 2% in excess of the rate
of interest then applicable thereto.
(d) Interest shall accrue from and including the date of any
Borrowing to but excluding the date of any repayment thereof and shall be
payable (i) in respect of each Base Rate Loan, quarterly in arrears on the last
Business Day of each calendar quarter, (ii) in respect of each Eurodollar Loan,
on the last day of each Interest Period applicable thereto and, in the case of
an Interest Period of six months, on the date occurring three months after the
first day of such Interest Period and (iii) in respect of each Loan, on any
conversion or prepayment (on the amount so converted or prepaid), at maturity
(whether by acceleration or otherwise) and, after such maturity, on demand.
(e) All computations of interest hereunder shall be made in
accordance with Section 11.07(b) and (c).
(f) The Administrative Agent, upon determining the interest rate for
any Borrowing of Eurodollar Loans for any Interest Period, shall promptly notify
the Borrower and the Banks thereof.
1.09 Interest Periods. At the time the Borrower gives a Notice of
Borrowing or Notice of Conversion in respect of the making of, or conversion
into, a Borrowing of Eurodollar
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Loans (in the case of the initial Interest Period applicable thereto) or prior
to 12:00 Noon (New York time) on the third Business Day prior to the expiration
of an Interest Period applicable to a Borrowing of Eurodollar Loans, it shall
have the right to elect by giving the Administrative Agent written notice (or
telephonic notice promptly confirmed in writing) of the Interest Period to be
applicable to such Borrowing, which Interest Period shall, at the option of the
Borrower, be a one, two, three or six month period. Notwithstanding anything to
the contrary contained above:
(i) the initial Interest Period for any Borrowing of Eurodollar
Loans shall commence on the date of such Borrowing (including the date of
any conversion from a Borrowing of Base Rate Loans) and each Interest
Period occurring thereafter in respect of such Borrowing shall commence on
the day on which the next preceding Interest Period expires;
(ii) if any Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day
of such calendar month;
(iii) if any Interest Period would otherwise expire on a day which
is not a Business Day, such Interest Period shall expire on the next
succeeding Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such
Interest Period shall expire on the next preceding Business Day;
(iv) no Interest Period for a Borrowing under a Facility may be
elected if it would extend beyond the Maturity Date for such Facility;
(v) no Interest Period may be elected at any time when a Default or
Event of Default is then in existence; and
(vi) no Interest Period with respect to any Borrowing of Term Loans
may be elected that would extend beyond any date upon which a mandatory
repayment of Term Loans is required to be made under Section 3.02(i)(a)
if, after giving effect to the selection of such Interest Period, the
aggregate principal amount of Term Loans maintained as Eurodollar Loans
with Interest Periods ending after such date would exceed the aggregate
principal amount of Term Loans permitted to be outstanding after such
mandatory repayment.
If upon the expiration of any Interest Period, the Borrower has failed, or is
not permitted, to elect a new Interest Period to be applicable to the respective
Borrowing of Eurodollar Loans as provided above, the Borrower shall be deemed to
have elected to convert such Borrowing into a Borrowing of Base Rate Loans
effective as of the expiration date of such current Interest Period.
1.10 Increased Costs, Illegality, etc. (a) In the event that (x) in
the case of clause (i) below, the Administrative Agent or (y) in the case of
clauses (ii) and (iii) below, any Bank shall have determined (which
determination shall, absent manifest error, be final and conclusive and binding
upon all parties hereto):
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(i) on any date for determining the Eurodollar Rate for any Interest
Period, that, by reason of any changes arising after the Effective Date
affecting the interbank Eurodollar market, adequate and fair means do not
exist for ascertaining the applicable interest rate on the basis provided
for in the definition of Eurodollar Rate; or
(ii) at any time, that such Bank shall incur increased costs or
reductions in the amounts received or receivable hereunder with respect to
any Eurodollar Loans (other than any increased cost or reduction in the
amount received or receivable resulting from the imposition of or a change
in the rate of taxes or similar charges) because of (x) any change since
the Effective Date in any applicable law, governmental rule, regulation,
guideline, order or request (whether or not having the force of law), or
in the interpretation or administration thereof and including the
introduction of any new law or governmental rule, regulation, guideline,
order or request (such as, for example, but not limited to, a change in
official reserve requirements, but, in all events, excluding reserves
required under Regulation D to the extent included in the computation of
the Eurodollar Rate) and/or (y) other circumstances affecting the
interbank Eurodollar market or the position of such Bank in such market;
or
(iii) at any time, that the making or continuance of any Eurodollar
Loan has become unlawful due to the compliance by such Bank in good faith
with any change since the Effective Date in any law, governmental rule,
regulation, guideline or order, or the interpretation or application
thereof, or would conflict with any thereof not having the force of law
but with which such Bank customarily complies, or has become impracticable
as a result of a contingency occurring after the Effective Date which
materially adversely affects the interbank Eurodollar market;
then, and in any such event, such Bank (or the Administrative Agent in the case
of clause (i) above) shall (x) on such date and (y) within 10 Business Days of
the date on which such event no longer exists give notice (by telephone
confirmed in writing) to the Borrower and to the Administrative Agent of such
determination (which notice the Administrative Agent shall promptly transmit to
each of the other Banks). Thereafter (x) in the case of clause (i) above,
Eurodollar Loans shall no longer be available until such time as the
Administrative Agent notifies the Borrower and the Banks that the circumstances
giving rise to such notice by the Administrative Agent no longer exist, and any
Notice of Borrowing or Notice of Conversion given by the Borrower with respect
to Eurodollar Loans which have not yet been incurred shall be deemed rescinded
by the Borrower or, in the case of a Notice of Borrowing, shall, at the option
of the Borrower, be deemed converted into a Notice of Borrowing for Base Rate
Loans to be made on the date of Borrowing contained in such Notice of Borrowing,
(y) in the case of clause (ii) above, the Borrower shall pay to such Bank,
within 10 days of its receipt of written demand therefor, such additional
amounts (in the form of an increased rate of, or a different method of
calculating, interest or otherwise as such Bank shall determine) as shall be
required to compensate such Bank for such increased costs or reductions in
amounts receivable hereunder (a written notice as to the additional amounts owed
to such Bank, showing the basis for the calculation thereof, which basis shall
be reasonable and consistently applied, submitted to the Borrower by such Bank
shall, absent manifest error, be final and conclusive and binding upon all
parties hereto) and (z) in the case of clause (iii) above, the Borrower shall
take one of the actions
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specified in Section 1.10(b) as promptly as possible and, in any event, within
the time period required by applicable law.
(b) At any time that any Eurodollar Loan is affected by the
circumstances described in Section 1.10(a)(ii) or (iii), the Borrower may (and
in the case of a Eurodollar Loan affected pursuant to Section 1.10(a)(iii) the
Borrower shall) either (i) if the affected Eurodollar Loan is then being made
pursuant to a Borrowing, by giving the Administrative Agent telephonic notice
(confirmed promptly in writing) thereof on the same date that the Borrower was
notified by a Bank pursuant to Section 1.10(a)(ii) or (iii), cancel said
Borrowing, convert the related Notice of Borrowing into one requesting a
Borrowing of Base Rate Loans or require the affected Bank to make its requested
Loan as a Base Rate Loan, or (ii) if the affected Eurodollar Loan is then
outstanding, upon at least one Business Day's notice to the Administrative
Agent, require the affected Bank to convert each such affected Eurodollar Loan
into a Base Rate Loan, provided that if more than one Bank is affected at any
time, then all affected Banks must be treated in the same manner pursuant to
this Section 1.10(b).
(c) If any Bank shall have determined that after the Effective Date
the adoption or effectiveness of any applicable law, rule or regulation
regarding capital adequacy, or any change therein, or any change in the
interpretation or administration thereof by any Governmental Authority, central
bank or comparable agency charged by law with the interpretation or
administration thereof, or compliance by such Bank or its parent corporation
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such Governmental Authority, central bank or comparable
agency, in each case made subsequent to the Effective Date, has or would have
the effect of reducing the rate of return on such Bank's or its parent
corporation's capital or assets as a consequence of such Bank's commitments or
obligations hereunder to a level below that which such Bank or its parent
corporation could have achieved but for such adoption, effectiveness, change or
compliance (taking into consideration such Bank's or its parent corporation's
policies with respect to capital adequacy), then from time to time, the Borrower
shall within 10 days of its receipt of written demand by such Bank (with a copy
to the Administrative Agent), pay to such Bank such additional amount or amounts
as will compensate such Bank or its parent corporation for such reduction. Each
Bank, upon determining in good faith that any additional amounts will be payable
pursuant to this Section 1.10(c), will give prompt written notice thereof to the
Borrower, which notice shall set forth in reasonable detail the basis of the
calculation of such additional amounts, which basis must be reasonable and
consistently applied, although the failure to give any such notice shall not
release or diminish any of the Borrower's obligations to pay additional amounts
pursuant to this Section 1.10(c) upon the subsequent receipt of such notice.
(d) Notwithstanding anything in this Agreement to the contrary, (i)
to the extent that any notice required by this Section 1.10 is given by any Bank
more than 180 days after such Bank obtained actual knowledge of the occurrence
of the event giving rise to the additional costs of the type describe in this
Section 1.10, such Bank shall not be entitled to compensation under this Section
1.10 for any amounts incurred or accruing more than 180 days prior to the giving
of such notice to the Borrower.
1.11 Compensation. The Borrower shall compensate each Bank, upon its
written request (which request shall set forth the basis for requesting such
compensation), for all
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reasonable losses, expenses and liabilities (including, without limitation, any
loss, expense or liability incurred by reason of the liquidation or reemployment
of deposits or other funds required by such Bank to fund its Eurodollar Loans
but excluding any loss of anticipated profit with respect to such Loans) which
such Bank may sustain: (i) if for any reason (other than a default by such Bank
or the Administrative Agent) a Borrowing of Eurodollar Loans does not occur on a
date specified therefor in a Notice of Borrowing or Notice of Conversion
(whether or not withdrawn by the Borrower or deemed withdrawn pursuant to
Section 1.10(a)); (ii) if any repayment, prepayment or conversion of any of its
Eurodollar Loans occurs on a date which is not the last day of an Interest
Period applicable thereto; (iii) if any prepayment of any of its Eurodollar
Loans is not made on any date specified in a notice of prepayment given by the
Borrower; or (iv) as a consequence of (x) any other failure by the Borrower to
repay its Loans when required by the terms of this Agreement or (y) an election
made pursuant to Section 1.10(b). Calculation of all amounts payable to a Bank
under this Section 1.11 shall be made as though that Bank had actually funded
its relevant Eurodollar Loan through the purchase of a Eurodollar deposit
bearing interest at the Eurodollar Rate in an amount equal to the amount of that
Loan, having a maturity comparable to the relevant Interest Period and through
the transfer of such Eurodollar deposit from an offshore office of that Bank or
other bank to a domestic office of that Bank in the United States of America;
provided, however, that each Bank may fund each of its Eurodollar Loans in any
manner it sees fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this Section 1.11.
1.12 Change of Lending Office. Each Bank agrees that, upon the
occurrence of any event giving rise to the operation of Section 1.10(a)(ii) or
(iii) or Section 3.04 with respect to such Bank, it will, if requested by the
Borrower, use reasonable efforts (subject to overall policy considerations of
such Bank) to designate another lending office for any Loans affected by such
event; provided that such designation is made on such terms that, in the opinion
of such Bank, such Bank and its lending office suffer no economic, legal or
regulatory disadvantage, with the object of avoiding the consequence of the
event giving rise to the operation of any such Section. Nothing in this Section
1.12 shall affect or postpone any of the obligations of the Borrower or the
right of any Bank provided in Section 1.10 or 3.04.
1.13 Replacement of Banks. (x) If any Bank becomes a Defaulting Bank
or (y) upon the occurrence of any event giving rise to the operation of Section
1.10(a)(ii) or (iii), Section 1.10(c) or Section 3.04 with respect to any Bank
which results in such Bank charging to the Borrower increased costs in excess of
those being generally charged by the other Banks, the Borrower shall have the
right, if no Default or Event of Default then exists, to replace such Bank (the
"Replaced Bank") with one or more other banks or financial institutions, none of
whom shall constitute a Defaulting Bank at the time of such replacement
(collectively, the "Replacement Bank") reasonably acceptable to the
Administrative Agent, provided that (i) at the time of any replacement pursuant
to this Section 1.13, the Replacement Bank shall enter into one or more
Assignment and Assumption Agreements pursuant to Section 11.04(b) (and with all
fees payable pursuant to said Section 11.04(b) to be paid by the Replacement
Bank) pursuant to which the Replacement Bank shall acquire all of the
Commitments and outstanding Loans of the Replaced Bank and, in connection
therewith, shall pay to the Replaced Bank in respect thereof an amount equal to
(A) the principal of, and all accrued interest on, all outstanding Loans of the
Replaced Bank plus (B) all accrued, but theretofore unpaid, Fees owing to the
Replaced Bank pursuant to Section 2.01, and (ii) all obligations (including,
without limitation, all such amounts,
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if any, due and owing under Section 1.11) of the Borrower due and owing to the
Replaced Bank (other than those specifically described in clause (i) above in
respect of which the assignment purchase price has been, or is concurrently
being, paid) shall be paid in full to such Replaced Bank concurrently with such
replacement. Upon the execution of the respective Assignment and Assumption
Agreement, the payment of amounts referred to in clauses (i) and (ii) above,
recordation of the assignment on the Register by the Administrative Agent
pursuant to Section 6.13 and, if so requested by the Replacement Bank, delivery
to the Replacement Bank of the appropriate Note or Notes executed by the
Borrower, (x) the Replacement Bank shall become a Bank hereunder and the
Replaced Bank shall cease to constitute a Bank hereunder, except with respect to
indemnification provisions under this Agreement (including, without limitation,
Sections 1.10, 1.11, 3.04, 10.07 and 11.01), which shall survive as to such
Replaced Bank and (y) Annex I hereto shall be deemed modified to reflect the
changed Commitments (and/or outstanding Term Loans, as the case may be)
resulting from the assignment from the Replaced Bank to the Replacement Bank.
SECTION 2. Fees; Commitments.
2.01 Fees. (a) The Borrower shall pay to the Administrative Agent
for the account of each Bank a commitment fee (the "Commitment Fee") for the
period from the Effective Date to and including the date on which the Total
Revolving Loan Commitment has been terminated, computed at a rate for each day
equal to -1/2 of 1% per annum on the daily Unutilized Revolving Loan Commitment
of each such Bank. Accrued Commitment Fees shall be due and payable in arrears
on the last Business Day of each calendar quarter and the date upon which the
Total Revolving Loan Commitment is terminated.
(b) The Borrower shall pay to the Administrative Agent, for the
account of the Administrative Agent, when and as due, such fees as have been, or
are from time to time, separately agreed upon.
(c) All computations of Fees shall be made in accordance with
Section 11.07(b).
2.02 Mandatory Reductions of Commitments. (a) The Total Commitment
(and the Commitment of each Bank) shall terminate in its entirety at 5:00 p.m.
(New York time) on the Expiration Date unless the Initial Borrowing Date has
occurred on or before such date.
(b) The Total Term Loan Commitment shall terminate on the Initial
Borrowing Date, after giving effect to the incurrence of Term Loans on such
date.
(c) The Total Revolving Loan Commitment (and the Revolving Loan
Commitment of each Bank) shall terminate on the earlier of (i) the Revolving
Loan Maturity Date and (ii) the date on which a Change of Control occurs.
SECTION 3. Payments.
3.01 Voluntary Prepayments. The Borrower shall have the right to
prepay Loans, without premium or penalty (except for amounts payable pursuant to
Section 1.11), in whole or in part, from time to time on the following terms and
conditions: (i) the Borrower shall give the Administrative Agent at its Notice
Office written notice (or telephonic notice promptly
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confirmed in writing) of its intent to prepay the Loans, whether such Loans are
Term Loans or Revolving Loans, the amount of such prepayment and (in the case of
Eurodollar Loans) the specific Borrowing(s) pursuant to which such prepayment is
made, which notice shall be received by the Administrative Agent (x) in the case
of Base Rate Loans, no later than 12:00 Noon (New York time) one Business Day
prior to the date of such prepayment, or (y) in the case of Eurodollar Loans,
three Business Days prior to the date of such prepayment, which notice shall
promptly be transmitted by the Administrative Agent to each of the Banks; (ii)
each partial prepayment of any Borrowing shall be in an aggregate principal
amount of at least $1,000,000, provided that no partial prepayment of Eurodollar
Loans made pursuant to a Borrowing shall reduce the aggregate principal amount
of the Loans outstanding pursuant to such Borrowing to an amount less than
$1,000,000; (iii) each prepayment in respect of any Loans made pursuant to a
Borrowing shall be applied pro rata among such Loans; and (iv) each prepayment
of Term Loans pursuant to this Section 3.01 shall reduce the then remaining
Scheduled Repayments on a pro rata basis (based upon the then remaining
principal amount of each such Scheduled Repayment).
3.02 Mandatory Repayments and Prepayments.
(i) Requirements:
(a) On each date set forth below, the Borrower shall be required to
repay the principal amount of Term Loans as is set forth opposite such date
(each such repayment, as the same may be reduced pursuant to Sections 3.01
and/or 3.02(ii)(a), a "Scheduled Repayment"):
Scheduled Repayment Date Amount
------------------------ ------
July 31, 2000 $1,500,000
October 31, 2000 $1,850,000
January 31, 2001 $1,850,000
April 30, 2001 $1,850,000
July 31, 2001 $1,850,000
October 31, 2001 $2,625,000
January 31, 2002 $2,625,000
April 30, 2002 $2,625,000
July 31, 2002 $2,625,000
October 31, 2002 $2,825,000
January 31, 2003 $2,825,000
April 30, 2003 $2,825,000
July 31, 2003 $2,825,000
October 31, 2003 $3,050,000
January 31, 2004 $3,050,000
April 30, 2004 $3,050,000
July 31, 2004 $3,050,000
October 31, 2004 $3,250,000
January 31, 2005 $3,250,000
April 30, 2005 $3,250,000
July 31, 2005 $3,250,000
October 31, 2005 $3,525,000
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January 31, 2006 $3,525,000
April 30, 2006 $3,525,000
Term Loan Maturity Date $3,525,000
(b) Not later than the 120th day following the last day of each
Excess Cash Flow Period (beginning with the Excess Cash Flow Period ending
December 31, 2000), the Borrower will prepay the outstanding principal of the
Term Loans in an amount, if positive, equal to Excess Cash Flow (if any) for
such Excess Cash Flow Period; provided that the Borrower will not be required to
make any payment pursuant to this Section 3.02(i)(b) in respect of any Excess
Cash Flow Period if the ratio of Consolidated Indebtedness of the Borrower to
Consolidated Total Capital of the Borrower as of the last day of such Excess
Cash Flow Period was less than or equal to 0.20:1.00.
(c) Not later than one Business Day following the date of receipt
thereof by the Borrower and/or any of its Subsidiaries of the proceeds of any
Asset Sale, an amount equal to 100% of the Net Available Proceeds of such Asset
Sale shall be applied as a mandatory prepayment of principal of the outstanding
principal amount of the Term Loans; provided that with respect to Assets Sales
consummated in any fiscal year the aggregate sale proceeds from which do not
exceed 10% of the Consolidated Net Worth of the Borrower as of the first day of
such fiscal year, the Net Available Proceeds therefrom shall not be required to
be so applied on such date to the extent that no Default or Event of Default
then exists and the Borrower delivers a certificate to the Administrative Agent
on or prior to such date stating that such Net Available Proceeds shall within
180 days following the date of such Asset Sale be used to purchase assets used,
or to be used, in the business described in Section 7.01(a) (including, without
limitation, the equity interest of a Person engaged in any such business), which
certificate shall set forth the estimate of the proceeds to be so expended;
provided further, that (1) if all or any portion of such Net Available Proceeds
not so applied are not so used (or contractually committed to be used) within
such 180 day period, such remaining portion shall be applied on the last day of
such period as provided above in this Section 3.02(i)(c) (without regard to the
first proviso herein) and (2) if all or any portion of such Net Available
Proceeds are not required to be applied on the 180th day referred to in clause
(1) above because such amount is contractually committed to be used and
subsequent to such date such contract is terminated or expires without such
portion being so used, then such remaining portion shall be applied on the date
of such termination or expiration as provided in this Section 3.02(i)(c)
(without regard to the first proviso herein).
(d) Not later than the Business Day following the date of the
receipt thereof by the Borrower and/or any of its Subsidiaries, an amount equal
to 100% of the cash proceeds (net of underwriting discounts and commissions and
other reasonable fees and costs associated therewith) of the incurrence of
Indebtedness for borrowed money or evidenced by bonds, notes, debentures or
similar instruments by the Borrower and/or any of its Subsidiaries (other than
Indebtedness permitted by Section 7.04) as in effect on the Effective Date shall
be applied as a mandatory prepayment of the outstanding principal amount of the
Term Loans.
(e) Not later than the Business Day following the date of the
receipt thereof by the Borrower and/or any of its Subsidiaries, an amount equal
to 100% of the cash proceeds (net of underwriting discounts and commissions and
other reasonable fees and costs associated therewith) of the sale or issuance of
equity by, or cash capital contributions to, the Borrower or
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any Subsidiary of the Borrower (other than (i) any issuance of common stock by
the Borrower to the extent issued to the employees or agents of the Borrower or
its Subsidiaries, (ii) issuances of stock by Subsidiaries of the Borrower to the
Borrower or to Wholly-Owned Subsidiaries of the Borrower, and capital
contributions by the Borrower to its Subsidiaries and (iii) the first
$30,000,000 of net cash proceeds from equity issuances by the Borrower), shall
be applied as a mandatory prepayment of the outstanding principal amount of the
Term Loans.
(f) On the date on which any Change of Control occurs, the
outstanding principal amount of all Loans shall be due and payable in full.
(g) If on any date the outstanding principal amount of Revolving
Loans (after giving effect to all other repayments thereof on such date) exceeds
the Total Revolving Loan Commitment as then in effect, the Borrower shall repay
on such date the principal of the Revolving Loans in an amount equal to such
excess.
(ii) Application:
(a) Each mandatory prepayment of Term Loans pursuant to Section
3.02(i)(b), (c), (d) or (e) shall be applied to reduce the then remaining
Scheduled Repayments in inverse order of maturity.
(b) With respect to each prepayment of Loans required by this
Section 3.02, the Borrower may designate the Types of Loans which are to be
prepaid and the specific Borrowing(s) pursuant to which made; provided that (i)
the Borrower shall first so designate all Base Rate Loans and Eurodollar Loans
with Interest Periods ending on the date of repayment prior to designating any
other Eurodollar Loans; (ii) if any prepayment of Eurodollar Loans made pursuant
to a single Borrowing shall reduce the outstanding Loans made pursuant to such
Borrowing to an amount less than $1,000,000, such Borrowing shall be immediately
converted into Base Rate Loans; and (iii) each prepayment of any Loans made
pursuant to a Borrowing shall be applied pro rata among such Loans. In the
absence of a designation by the Borrower as described in the preceding sentence,
the Administrative Agent shall, subject to the above, make such designation in
its sole discretion with a view, but no obligation, to minimize breakage costs
owing under Section 1.11. Notwithstanding the foregoing provisions of this
Section 3.02, if at any time the mandatory prepayment of Term Loans pursuant to
Section 3.02(i)(b), (c), (d) or (e) would result, after giving effect to the
first sentence of this clause (b), in the Borrower incurring breakage costs
under Section 1.11 as a result of Eurodollar Loans being repaid other than on
the last day of an Interest Period applicable thereto (the "Affected Eurodollar
Loans"), then the Borrower may, if it so elects by notice to the Administrative
Agent, deposit a portion (up to 100%) of the amounts that otherwise would have
been paid in respect of the Affected Eurodollar Loans with the Administrative
Agent to be held as security for the obligations of the Borrower hereunder
pursuant to a cash collateral agreement to be entered into in form and substance
satisfactory to the Administrative Agent, with such cash collateral to be
released from such cash collateral account (and applied to repay the principal
amount of such Loans) upon each occurrence thereafter of the last day of an
Interest Period applicable to the relevant Eurodollar Loans (or such earlier
date or dates as shall be requested by the Borrower), with the amount to be so
released and applied on the last day of each Interest Period to be the amount of
the Loans to
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which such Interest Period applies (or, if less, the amount remaining in such
cash collateral account).
3.03 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments under this Agreement and the Notes shall be made
to the Administrative Agent for the ratable account of the Banks entitled
thereto, not later than 1:00 P.M. (New York time) on the date when due and shall
be made in immediately available funds and in lawful money of the United States
of America at the Payment Office, it being understood that written, telex or
facsimile notice by the Borrower to the Administrative Agent to make a payment
from the funds in the Borrower's account at the Payment Office shall constitute
the making of such payment to the extent of such funds held in such account. Any
payments under this Agreement which are made later than 1:00 P.M. (New York
time) shall be deemed to have been made on the next succeeding Business Day.
Whenever any payment to be made hereunder shall be stated to be due on a day
which is not a Business Day, the due date thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
shall be payable during such extension period at the applicable rate in effect
immediately prior to such extension.
3.04 Net Payments. (a) All payments made by the Borrower hereunder
or under any Note will be made without setoff, counterclaim or other defense.
Except as provided in Section 3.04(b), all such payments will be made free and
clear of, and without deduction or withholding for, any present or future taxes,
levies, imposts, duties, fees, assessments or other charges of whatever nature
now or hereafter imposed by any jurisdiction or by any political subdivision or
taxing authority thereof or therein with respect to such payments (but
excluding, except as provided in the second succeeding sentence, any tax imposed
on or measured by the net income or net profits of a Bank pursuant to the laws
of the jurisdiction in which it is organized or the jurisdiction in which the
principal office or applicable lending office of such Bank is located or any
subdivision thereof or therein) and all interest, penalties or similar
liabilities with respect to such non-excluded taxes, levies, imposts, duties,
fees, assessments or other charges (all such non-excluded taxes, levies,
imposts, duties, fees, assessments or other charges being referred to
collectively as "Taxes"). If any Taxes are so levied or imposed, the Borrower
agrees to pay the full amount of such Taxes, and such additional amounts as may
be necessary so that every payment of all amounts due under this Agreement or
under any Note, after withholding or deduction for or on account of any Taxes,
will not be less than the amount provided for herein or in such Note. If any
amounts are payable in respect of Taxes pursuant to the preceding sentence, the
Borrower agrees to reimburse each Bank, upon the written request of such Bank,
for taxes imposed on or measured by the net income or net profits of such Bank
pursuant to the laws of the jurisdiction in which such Bank is organized or in
which the principal office or applicable lending office of such Bank is located
or under the laws of any political subdivision or taxing authority of any such
jurisdiction in which such Bank is organized or in which the principal office or
applicable lending office of such Bank is located and for any withholding of
taxes as such Bank shall determine are payable by, or withheld from, such Bank,
in respect of such amounts so paid to or on behalf of such Bank pursuant to the
preceding sentence and in respect of any amounts paid to or on behalf of such
Bank pursuant to this sentence. The Borrower will furnish to the Administrative
Agent within 45 days after the date the payment of any Taxes is due pursuant to
applicable law certified copies of tax receipts, evidencing such payment by the
Borrower. The Borrower agrees to indemnify and hold
16
harmless each Bank, and reimburse such Bank upon its written request, for the
amount of any Taxes so levied or imposed and paid by such Bank.
(b) Each Bank that is not a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for U.S. Federal income tax purposes
agrees to deliver to the Borrower and the Administrative Agent on or prior to
the Effective Date, or in the case of a Bank that is an assignee or transferee
of an interest under this Agreement pursuant to Section 11.04(b) (unless the
respective Bank was already a Bank hereunder immediately prior to such
assignment or transfer), on the date of such assignment or transfer to such
Bank, (i) two accurate and complete original signed copies of Internal Revenue
Service Form 4224 or 1001 (or successor forms) certifying to such Bank's
entitlement as of such date to a complete exemption from United States
withholding tax with respect to payments to be made under this Agreement and
under any Note, or (ii) if the Bank is not a "bank" within the meaning of
Section 881(c)(3)(A) of the Code and cannot deliver either Internal Revenue
Service Form 1001 or 4224 pursuant to clause (i) above, (x) a certificate
substantially in the form of Exhibit E (any such certificate, a "Section
3.04(b)(ii) Certificate") and (y) two accurate and complete original signed
copies of Internal Revenue Service Form W-8 (or successor form) certifying to
such Bank's entitlement as of such date to a complete exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. In addition, each Bank agrees that from time
to time after the Effective Date, when a lapse in time or change in
circumstances renders the previous certification obsolete or inaccurate in any
material respect, it will deliver to the Borrower and the Administrative Agent
two new accurate and complete original signed copies of Internal Revenue Service
Form 4224 or 1001, or Form W-8 and a Section 3.04(b)(ii) Certificate, as the
case may be, and such other forms as may be required in order to confirm or
establish the entitlement of such Bank to a continued exemption from or
reduction in United States withholding tax with respect to payments under this
Agreement and any Note, or it shall immediately notify the Borrower and the
Administrative Agent of its inability to deliver any such Form or Certificate,
in which case such Bank shall not be required to deliver any such Form or
Certificate pursuant to this Section 3.04(b). Notwithstanding anything to the
contrary contained in Section 3.04(a), but subject to Section 11.04(b) and the
immediately succeeding sentence, (x) the Borrower shall be entitled, to the
extent it is required to do so by law, to deduct or withhold income or similar
taxes imposed by the United States (or any political subdivision or taxing
authority thereof or therein) from interest, Fees or other amounts payable
hereunder for the account of any Bank which is not a United States person (as
such term is defined in Section 7701(a)(30) of the Code) for U.S. Federal income
tax purposes to the extent that such Bank has not provided to the Borrower U.S.
Internal Revenue Service Forms that establish a complete exemption from such
deduction or withholding and (y) the Borrower shall not be obligated pursuant to
Section 3.04(a) hereof to gross-up payments to be made to a Bank in respect of
income or similar taxes imposed by the United States if (I) such Bank has not
provided to the Borrower the Internal Revenue Service Forms required to be
provided to the Borrower pursuant to this Section 3.04(b) or (II) in the case of
a payment, other than interest, to a Bank described in clause (ii) above, to the
extent that such Forms do not establish a complete exemption from withholding of
such taxes. Notwithstanding anything to the contrary contained in the preceding
sentence or elsewhere in this Section 3.04 and except as set forth in Section
11.04(b), the Borrower agrees to pay any additional amounts and to indemnify
each Bank in the manner set forth in Section 3.04(a) (without regard to the
identity of the jurisdiction requiring the deduction or withholding) in respect
of any Taxes deducted or withheld by it as described in the
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16
immediately preceding sentence as a result of any changes that are effective
after the Effective Date in any applicable law, treaty, governmental rule,
regulation, guideline or order, or in the interpretation thereof, relating to
the deducting or withholding of such Taxes.
(c) If the Borrower pays any additional amount under this Section
3.04 to a Lender and such Lender determines in its sole discretion that it has
actually received or realized in connection therewith any refund or any
reduction of, or credit against, its Tax liabilities in or with respect to the
taxable year in which the additional amount is paid (a "Tax Benefit"), such
Lender shall pay to the Borrower an amount that the Lender shall, in its sole
discretion, determine is equal to the net benefit, after tax, which was obtained
by the Lender in such year as a consequence of such Tax Benefit; provided,
however, that (i) any Lender may determine, in its sole discretion consistent
with the policies of such Bank, whether to seek a Tax Benefit; (ii) any Taxes
that are imposed on a Lender as a result of a disallowance or reduction
(including through the expiration of any tax credit carryover or carryback of
such Lender that otherwise would not have expired) of any Tax Benefit with
respect to which such Lender has made a payment to the Borrower pursuant to this
Section 3.04(c) shall be treated as a Tax for which the Borrower is obligated to
indemnify such Lender pursuant to this Section 4.04 without any exclusions or
defenses; and (iii) nothing in this Section 3.04(c) shall require the Lender to
disclose any confidential information to the Borrower (including, without
limitation, its tax returns).
SECTION 4. Conditions Precedent. The obligation of the Banks to make
Loans to the Borrower hereunder is subject, at the time of the making of each
such Loan (except as otherwise hereinafter indicated), to the satisfaction of
each of the following conditions:
4.01 Effectiveness; Notes. On or prior to the Initial Borrowing
Date, (i) the Effective Date shall have occurred, and (ii) there shall have been
delivered to the Administrative Agent for the account of each Bank the
appropriate Term Note and Revolving Note executed by the Borrower in the amount,
maturity and as otherwise provided herein.
4.02 No Default; Representations and Warranties. At the time of the
making of each Loan and also after giving effect thereto, (i) there shall exist
no Default or Event of Default and (ii) all representations and warranties
contained herein or in the other Credit Documents shall be true and correct in
all material respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of such Loan,
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all material
respects as of such earlier date.
4.03 Officer's Certificate. On the Initial Borrowing Date, the
Administrative Agent shall have received an officer's certificate dated such
date, signed by an appropriate officer of the Borrower, stating that all of the
applicable conditions set forth in Sections 4.02, 4.06, 4.07, 4.10, 4.14 and
4.21 exist as of such date.
4.04 Opinions of Counsel. On the Initial Borrowing Date, the
Administrative Agent shall have received an opinion, or opinions, in form and
substance reasonably satisfactory to the Administrative Agent, addressed to each
of the Banks and dated the Initial Borrowing Date, from (i) ▇▇▇▇, Weiss,
Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Borrower, which opinion shall cover
the matters contained in Exhibit C-1 hereto, (ii) Harnett ▇▇▇▇▇▇▇ & ▇▇▇▇▇
18
P.A., counsel to the Borrower, which opinion shall cover the matters contained
in Exhibit C-2 hereto, (iii) ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Borrower, which
opinion shall cover the matters contained in Exhibit C-3 hereto, and (iv) White
& Case LLP, special counsel to the Banks, which opinion shall cover the matters
contained in Exhibit C-4 hereto.
4.05 Corporate Proceedings. (a) On the Initial Borrowing Date, the
Banks shall have received from each Credit Party an officer's certificate, dated
the Initial Borrowing Date, signed by the President or any Vice President of
such Credit Party, and attested to by the Secretary or any Assistant Secretary
of such Credit Party, in the form of Exhibit D hereto with appropriate
insertions, together with (x) copies of the Certificate of Incorporation and
By-Laws of such Credit Party and (y) the resolutions of such Credit Party and
the other documents referred to in such certificate, and the foregoing shall be
reasonably satisfactory to the Administrative Agent.
(b) All corporate, tax and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement,
the other Credit Documents and the Transaction Documents shall be reasonably
satisfactory in form and substance to the Administrative Agent, and the
Administrative Agent shall have received all information and copies of all
certificates, documents and papers, including good standing certificates and any
other records of corporate proceedings and governmental approvals, if any, which
the Administrative Agent reasonably may have requested in connection therewith,
such documents and papers where appropriate to be certified by proper corporate
or governmental authorities.
4.06 Adverse Change, etc. The Administrative Agent shall not have
become aware of any facts or conditions not previously known or disclosed,
whether occurring prior to or after the Effective Date, and since December 31,
1998 nothing shall have occurred, in either case which, when taken as a whole,
the Administrative Agent shall reasonably determine (i) has, or is reasonably
likely to have, a material adverse effect on the rights or remedies of the Banks
or the Administrative Agent under this Agreement or any other Credit Document,
or on the ability of any Credit Party to perform its obligations hereunder or
thereunder, or (ii) has or is reasonably likely to have a Material Adverse
Effect.
4.07 Litigation. No actions, suits or proceedings shall be pending
or, to the knowledge of the Borrower, threatened (i) with respect to this
Agreement or any other Credit Document, the Transaction Documents or the
transactions contemplated hereby or thereby (including the Acquisition) or (ii)
which either the Administrative Agent or the Required Banks shall determine has,
or is reasonably likely to have, (x) a Material Adverse Effect or (y) a material
adverse effect on the rights or remedies of the Banks or the Administrative
Agent hereunder or under any other Credit Document or on the ability of any
Credit Party to perform its obligations hereunder or thereunder.
4.08 Subsidiary Guaranty. On the Initial Borrowing Date, each
Subsidiary Guarantor shall have duly authorized, executed and delivered a
Subsidiary Guaranty in the form of Exhibit F (as modified, amended or
supplemented from time to time in accordance with the terms hereof and thereof,
the "Subsidiary Guaranty"), and the Subsidiary Guaranty shall be in full force
and effect.
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4.09 Pledge Agreement. On or prior to the Initial Borrowing Date,
each Credit Party shall have duly authorized, executed and delivered a Pledge
Agreement substantially in the form of Exhibit G hereto (as modified, amended or
supplemented from time to time in accordance with the terms thereof and hereof,
the "Pledge Agreement"), which Pledge Agreement shall be in full force and
effect, and shall have delivered to the Collateral Agent, as pledgee thereunder:
(A) all of the Pledged Securities referred to therein (other than
the stock of American Pioneer), endorsed in blank or together with undated
stock powers executed in blank, as appropriate;
(B) executed copies of Financing Statements (Form UCC-1) in
appropriate form for filing under the UCC of each jurisdiction as may be
reasonably necessary to perfect the security interests purported to be
created by the Pledge Agreement;
(C) evidence of the completion of all recordings and filings of, or
with respect to, the Pledge Agreement (other than the filing of the UCC-1
Financing Statements referred to in (B) above) as may be necessary or, in
the reasonable opinion of the Collateral Agent, desirable to perfect the
security interests intended to be created thereunder; and
(D) evidence that all other actions necessary or, in the reasonable
opinion of the Collateral Agent, desirable to perfect and protect the
security interests purported to be created by the Pledge Agreement have
been taken or will be taken promptly after the Initial Borrowing Date.
4.10 Consummation of the Transaction. (a) Prior to or concurrently
with the incurrence of the Term Loans on the Initial Borrowing Date, the
Acquisition shall have been consummated in accordance with the Acquisition
Documents, which Acquisition Documents shall be in form and substance reasonably
satisfactory to the Administrative Agent, and all Legal Requirements, and each
of the conditions precedent to the consummation of the Acquisition (including,
without limitation, the accuracy in all material respects of the representations
and warranties contained in the Acquisition Agreement) shall have been satisfied
in all material respects, and not waived, except with the reasonable consent of
the Administrative Agent, to the reasonable satisfaction of the Administrative
Agent.
(b) Prior to or concurrently with the incurrence of the Term Loans
on the Initial Borrowing Date, the Refinancing shall have been consummated in
accordance with the Refinancing Documents, which Refinancing Documents shall be
in form and substance reasonably satisfactory to the Administrative Agent, and
all Legal Requirements, each of the conditions precedent to the consummation of
the Refinancing shall have been satisfied in all material respects and not
waived, except with the reasonable consent of the Administrative Agent, to the
reasonable satisfaction of the Administrative Agent, all commitments in
connection with the existing Indebtedness for borrowed money of the Borrower and
the Acquired Businesses shall have been terminated and all Liens securing the
Indebtedness refinanced pursuant to the Refinancing shall have been terminated
and released to the reasonable satisfaction of the Administrative Agent.
20
(c) Prior to or concurrently with the incurrence of the Term Loans
on the Initial Borrowing Date, the Borrower shall have received net cash
proceeds from the Equity Investment of at least $91,000,000, and all of the
documentation governing the terms of the Equity Investment shall be reasonably
satisfactory to the Administrative Agent (it being understood and agreed that if
the entire $94,000,000 of the Equity Investment has not been received by the
Borrower by the 45th day following the Initial Borrowing Date, an Event of
Default shall be deemed to exist as of such day).
4.11 Transaction Documents. On or before the Initial Borrowing Date,
there shall have been delivered to the Administrative Agent, true and correct
copies of the Transaction Documents as in effect on the Initial Borrowing Date,
and all terms of such Transaction Documents shall be reasonably satisfactory in
form and substance to the Administrative Agent. The representations and
warranties set forth in the Transaction Documents shall be true and correct in
all material respects as if made on and as of the Initial Borrowing Date, unless
stated to relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of such
earlier date. Concurrently with the incurrence of the Term Loans on the Initial
Borrowing Date, the Transaction shall have been consummated in substantial
compliance with the terms of the Transaction Documents and all Legal
Requirements.
4.12 Various Agreements. On or prior to the Initial Borrowing Date,
the Borrower shall have delivered to the Administrative Agent a list or schedule
of all of the documents listed below, which list or schedule shall be certified
as true and correct by an appropriate officer of the Borrower (and copies of any
of the documents set forth on such list or schedule shall have been made
available to the Administrative Agent or any Bank which has requested same):
(a) all Plans (and for each Plan that is required to file an annual
report on Internal Revenue Service Form 5500-series, a copy of the most recent
such report (including, to the extent required, the related financial and
actuarial statements and opinions and other supporting statements,
certifications, schedules and information), and for each Plan that is a
"single-employer plan," as defined in Section 4001(a)(15) of ERISA, the most
recently prepared actuarial valuation therefor shall have been made so
available) and any other "employee benefit plans," as defined in Section 3(3) of
ERISA, and any other material agreements, plans or arrangements, with or for the
benefit of current or former employees of the Borrower or any of its
Subsidiaries or any ERISA Affiliate (provided that the foregoing shall have been
made so available in the case of any multiemployer plan, as defined in
4001(a)(3) of ERISA, only to the extent that any document described therein is
in the possession of the Borrower or any of its Subsidiaries or any ERISA
Affiliate or reasonably available thereto from the sponsor or trustee of any
such plan) (collectively, the "Plan Documents");
(b) all material employment agreements (or the forms thereof), if
any, with respect to the senior management of the Borrower or any of its
Subsidiaries (collectively, the "Management Agreements");
(c) all agreements, if any, (or the forms thereof) entered or to be
entered into by the Borrower or any of its Subsidiaries governing the terms and
relative rights of its capital stock and any agreements (or the forms thereof)
entered or to be entered into by stockholders relating
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to any such entity with respect to its capital stock, but excluding agreements
with directors of any Subsidiaries of the Borrower relating to directors'
qualifying shares held by such directors (collectively, the "Stockholders
Agreements");
(d) all tax sharing, tax allocation and other similar agreements (or
the forms thereof) entered or to be entered into by the Borrower and/or any of
its Subsidiaries (collectively, the "Tax Sharing Agreements");
(e) all material agreements entered into between the Borrower and
any of its Subsidiaries and/or among or between any of the Borrower's
Subsidiaries relating to the allocation of expenses incurred by the Borrower or
any such Subsidiary (collectively, the "Shared Expenses Agreements");
(f) all material contracts of the Borrower or any of its
Subsidiaries that are to remain in effect after giving effect to the
consummation of the Transaction, including, without limitation, all management
and/or service contracts entered into or to be entered into between the Borrower
and its Subsidiaries and the Strategic Marketing Alliance Agreement
(collectively, the "Material Contracts"); and
(g) all material Reinsurance Agreements of the Borrower and each of
its Subsidiaries; all of which Plan Documents, Management Agreements,
Stockholders Agreements, Tax Sharing Agreements, Shared Expenses Agreements,
Material Contracts and Reinsurance Agreements shall be in form and substance
reasonably satisfactory to the Administrative Agent.
4.13 Financial Statements; Projections. Prior to the Initial
Borrowing Date, the Borrower shall have delivered or caused to be delivered to
the Administrative Agent with copies for each Bank:
(a) the audited Annual Statement of (i) each of the Borrower's
Subsidiaries which is a Regulated Insurance Company and (ii) each of the
Acquired Businesses which is a Regulated Insurance Company, in each case
for the fiscal year ended December 31, 1998, prepared in accordance with
SAP and as filed with the respective Applicable Insurance Regulatory
Authority, which Annual Statement shall be satisfactory in form and
substance to the Administrative Agent;
(b) the audited balance sheet of (i) the Borrower and its
Subsidiaries (on a consolidated basis) and (ii) the Acquired Businesses
(on a Combined basis), in each case for the fiscal year ended December 31,
1998, and the related statements of income, of stockholders' equity and of
cash flows, in each case prepared in accordance with GAAP;
(c) projected financial statements for the Borrower and its
Subsidiaries reflecting the projected financial condition, income and
expenses of the Borrower and its Subsidiaries after giving effect to the
Transaction and the other transactions contemplated hereby, which
projected financial statements shall be reasonably satisfactory in form
and substance to the Administrative Agent;
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(d) a closing funds flow statement in connection with the
Transaction, in form and substance reasonably satisfactory to the
Administrative Agent; and
(e) a pro forma balance sheet of Borrower, as of the Initial
Borrowing Date, after giving effect to the Transaction and the other
transactions contemplated hereby.
4.14 Approvals, etc. On the Initial Borrowing Date the following
approvals shall have been obtained to the satisfaction of the Administrative
Agent:
(i) all necessary and material governmental and third party
approvals, permits and licenses (including without limitation the approval
of (x) the respective Insurance Departments of the States of Florida, New
York, North Carolina, Pennsylvania and Texas and (y) the Applicable
Insurance Regulatory Authority of Canada) in connection with the
Transaction and this Agreement and the transactions contemplated by the
Transaction Documents and otherwise referred to herein or therein
(including without limitation the Acquisition and the pledge of stock of
the Subsidiaries of the Borrower), to the extent such approvals, consents,
permits and licenses are required to be obtained or made prior to the
Initial Borrowing Date, shall have been obtained and remain in full force
and effect, and all applicable waiting periods shall have expired, in each
case without any action being taken by any competent authority (including
any court having jurisdiction) which restrains, prevents or imposes, in
the reasonable judgment of the Required Banks or the Administrative Agent,
materially adverse conditions upon the consummation of the Transaction or
any such agreement or transaction;
(ii) the Form A filed by the Borrower with the respective Insurance
Departments of the States of Florida, New York, North Carolina,
Pennsylvania and Texas (and the equivalent form required to be filed in
Canada), together with the approval of such Insurance Department, or other
Applicable Insurance Regulatory Authority, of such Form A or equivalent
form (and all stipulations or conditions relating to such approval), which
approvals (and stipulations and conditions, if any) shall be reasonably
satisfactory to the Administrative Agent;
(iii) all necessary shareholder approvals in connection with the
Transaction shall have been obtained and remain in full force and effect;
(iv) all regulatory approvals in connection with the pledge of the
stock of each Regulated Insurance Company shall have been obtained and
remain in full force and effect; and
(v) the payment of management fees to the Borrower pursuant to
service contracts entered into between the Borrower and certain
Subsidiaries of the Borrower shall have been approved by each Applicable
Insurance Regulatory Authority.
4.15 Indebtedness. On the Initial Borrowing Date and after giving
effect to the consummation of the Transaction, the only Indebtedness for
borrowed money of the Borrower and its Subsidiaries, other than Indebtedness
permitted under Sections 7.04(c), (f) and (j), shall consist of the Indebtedness
incurred pursuant to the Credit Documents.
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4.16 Payment of Fees. On the Initial Borrowing Date, all costs, fees
and expenses (including, without limitation, legal fees and expenses), and all
other compensation contemplated by this Agreement or the other Credit Documents,
due to the Administrative Agent or any Banks shall have been paid to the extent
due.
4.17 Notice of Borrowing. The Administrative Agent shall have
received a Notice of Borrowing satisfying the requirements of Section 1.03 with
respect to all Borrowings of Loans.
4.18 Insurance Policies. On the Initial Borrowing Date, the
Administrative Agent shall have received evidence of insurance complying with
the requirements of Section 6.03 for the business and properties of the Borrower
and its Subsidiaries, in form and substance reasonably satisfactory to the
Administrative Agent.
4.19 Capital Structure. On or prior to the Initial Borrowing Date,
the corporate and capital structure (and all agreements related thereto) of the
Borrower and its Subsidiaries and all organizational documents of the Borrower
and its Subsidiaries shall be reasonably satisfactory to the Administrative
Agent.
4.20 Actuarial Reports. On or prior to the Initial Borrowing Date,
the Borrower shall have delivered, or shall have caused to be delivered, to the
Administrative Agent actuarial evaluation reports from ▇▇▇▇▇▇▇▇▇▇▇ and BAS
Actuarial Services regarding such firms' independent review of the insurance
reserves (other than life insurance reserves but including disability income
claim reserves and active life reserves) of PennLife, and after review of such
reports and other available information the Administrative Agent shall be
satisfied that all reserves and other similar amounts of each Acquired Business
are adequate in all material respects to cover the total amount of all
reasonably anticipated matured and unmatured benefits, dividends, claims and
other liabilities of each such Acquired Business under all insurance contracts
under which such Acquired Business has any liability.
4.21 Pre-Closing Restructuring Transactions. On or prior to the
Initial Borrowing Date, the conditions set forth on the annex entitled
Pre-Closing Restructuring Transactions attached to the Acquisition Agreement and
attached hereto as Annex X shall have been satisfied.
The acceptance of the benefits of the Loans on the Initial Borrowing
Date and on the date of each Loan thereafter shall constitute a representation
and warranty by the Borrower to each of the Banks that all of the applicable
conditions specified in this Section 4 exist or have been satisfied as of such
date. All of the certificates, legal opinions and other documents and papers
referred to in this Section 4, unless otherwise specified, shall be delivered to
the Administrative Agent at its Notice Office for the account of each of the
Banks.
SECTION 5. Representations, Warranties and Agreements. In order to
induce the Banks to enter into this Agreement and to make the Loans provided for
herein, the Borrower makes the following representations and warranties to, and
agreements with, the Banks, all of which shall survive the execution and
delivery of this Agreement and the making of the Loans (with the making of the
Loans being deemed to constitute a representation and warranty that the matters
specified in this Section 5 are true and correct in all material respects on and
as of the
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date of the making of the Loans (after giving effect to the consummation of the
Transaction on such date) unless such representation and warranty expressly
indicates that it is being made as of any other specific date in which case such
representation and warranty shall be true and correct in all material respects
as of such other specified date):
5.01 Corporate Status. The Borrower and each of its Subsidiaries (i)
is a duly organized and validly existing corporation in good standing (where
applicable) under the laws of the jurisdiction of its organization and has the
corporate or other organizational power and authority to own its property and
assets and to transact the business in which it is engaged and presently
proposes to engage and (ii) has been duly qualified and is authorized to do
business and is in good standing (where applicable) in all jurisdictions where
it is required to be so qualified, except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.
5.02 Corporate Power and Authority. Each Credit Party has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of the Transaction Documents to which it is a party and has taken all
necessary corporate action to authorize the execution, delivery and performance
of the Transaction Documents to which it is a party. Each Credit Party and each
of its Subsidiaries has duly executed and delivered each Transaction Document to
which it is a party and each such Transaction Document constitutes the legal,
valid and binding obligation of such Credit Party enforceable against such
Credit Party in accordance with its terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights generally and general
principles of equity regardless of whether enforcement is sought in a proceeding
in equity or at law.
5.03 No Contravention of Laws, Agreements or Organizational
Documents. Neither the execution, delivery and performance by any Credit Party
of the Transaction Documents to which it is a party nor compliance with the
terms and provisions thereof, nor the consummation of the transactions
contemplated therein (i) will contravene any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any Governmental
Authority, (ii) will conflict or be inconsistent with or result in any breach of
any of the terms, covenants, conditions or provisions of, or constitute a
default under, or (other than pursuant to the Pledge Agreement) result in the
creation or imposition of (or the obligation to create or impose) any Lien upon
any of the property or assets of the Borrower or any of its Subsidiaries
pursuant to the terms of, any indenture, mortgage, deed of trust, loan
agreement, credit agreement or any other material instrument to which the
Borrower or any of its Subsidiaries is a party or by which it or any of its
property or assets are bound or to which it may be subject or (iii) will violate
any provision of the Certificate of Incorporation or By-Laws of the Borrower or
any of its Subsidiaries.
5.04 Litigation and Contingent Liabilities. (a) There are no
actions, suits or proceedings pending or, to the knowledge of the Borrower,
threatened in writing involving the Borrower or any of its Subsidiaries
(including, without limitation, with respect to the Transaction, this Agreement
or any documentation executed in connection therewith or herewith) (i) which has
or is likely to have a Material Adverse Effect or (ii) that could reasonably be
expected to have a material adverse effect on the rights or remedies of the
Banks or on the ability
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of any Credit Party to perform its respective obligations to the Banks hereunder
and under the other Credit Documents to which it is, or will be, a party.
Additionally, there does not exist any judgment, order or injunction prohibiting
or imposing material adverse conditions upon the making of any Loan hereunder.
(b) Except as fully reflected in the financial statements described
in Section 5.11(b) (including the footnotes thereto), the Indebtedness incurred
under this Agreement and in connection with the Transaction and all obligations
incurred in the ordinary course of business since the date of the financial
statements described in Section 5.11(b), there were as of the Initial Borrowing
Date (and after giving effect to the Loans made on such date), no liabilities or
obligations with respect to the Borrower or any of its Subsidiaries of any
nature whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due), and the Borrower does not know of any basis for the
assertion against the Borrower or any of its Subsidiaries of any such liability
or obligation, which, in the case of any of the foregoing referred to in this
clause (b), either individually or in the aggregate, are or would be reasonably
likely to have a Material Adverse Effect.
5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of all
Term Loans shall be utilized solely to effect the Transaction and to pay costs
and expenses in connection therewith.
(b) The proceeds of all Revolving Loans shall be utilized for
general corporate and working capital purposes, it being understood that
Revolving Loans may not be utilized to effect the Transaction (but may be
utilized to pay costs and expenses in connection therewith).
(c) Neither the making of any Loan hereunder, nor the use of the
proceeds thereof, will violate or be inconsistent with the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System and
no part of the proceeds of any Loan will be used to purchase or carry any Margin
Stock or to extend credit for the purpose of purchasing or carrying any Margin
Stock.
5.06 Approvals. Except for filings and approvals made or obtained on
or prior to the Initial Borrowing Date, no order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic Governmental Authority is required to
authorize or is required prior to the Initial Borrowing Date in connection with
(i) the execution, delivery and performance of any Transaction Document or (ii)
the legality, validity, binding effect or enforceability of any Transaction
Document.
5.07 Investment Company Act. Neither the Borrower nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940,
as amended.
5.08 Public Utility Holding Company Act. Neither the Borrower nor
any of its Subsidiaries is a "holding company," or 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.
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5.09 True and Complete Disclosure; Projections and Assumptions. All
factual information (taken as a whole) heretofore or contemporaneously furnished
by or on behalf of the Borrower or any of its Subsidiaries to the Administrative
Agent or any Bank (including, without limitation, all information contained in
the Transaction Documents, but excluding the Projections and any other
projections) for purposes of or in connection with this Agreement or any
transaction contemplated herein is, and all other factual information (taken as
a whole) hereafter furnished by or on behalf of any such Persons in writing to
the Administrative Agent will be, true and accurate in all material respects on
the date as of which such information is dated and not incomplete by omitting to
state any material fact necessary to make such information (taken as a whole)
not misleading at such time in light of the circumstances under which such
information was provided. The Projections are based on good faith estimates and
assumptions believed by the Borrower to be reasonable and attainable at the time
made, it being recognized by the Banks that such Projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such Projections may differ from the projected results.
5.10 Consummation of Transaction. Prior to or concurrently with the
incurrence of the Term Loans on the Initial Borrowing Date, (i) the Transaction
has been consummated in accordance with the terms and conditions of the
Transaction Documents and all Legal Requirements and (ii) the Borrower is the
owner, directly or indirectly, of 100% of the outstanding capital stock of the
Acquired Businesses, free and clear of all Liens (other than Liens created
pursuant to the Pledge Agreement). All consents and approvals of, and filings
and registrations with, and all other actions in respect of, all governmental
agencies, authorities or instrumentalities required in order to consummate the
Transaction in accordance with the terms and conditions of the Transaction
Documents and all Legal Requirements have been, or prior to the time required,
will have been, obtained, given, filed or taken (with no concessions, agreements
or understandings having been made or entered into by the Borrower or any of its
Subsidiaries in connection therewith other than those disclosed to the Banks
prior to the Effective Date and found reasonably acceptable by the
Administrative Agent) and are or will be in full force and effect. All
applicable waiting periods with respect thereto have, or, prior to the time when
required, will have, expired without, in all such cases, any action being taken
by any competent authority which restrains, prevents, or imposes material
adverse conditions upon the consummation of the Transaction. Additionally, there
does not exist any judgment, order or injunction prohibiting or imposing
material adverse conditions upon the Transaction or the making of the Loans or
the performance by the Borrower and its Subsidiaries of their obligations under
the Transaction Documents.
5.11 Financial Condition; Financial Statements. (a) On and as of the
Initial Borrowing Date, on a pro forma basis after giving effect to the
Transaction and all Indebtedness incurred, and to be incurred, on or prior to
the Initial Borrowing Date, and Liens created, and to be created, on or prior to
the Initial Borrowing Date, in connection with this Agreement, with respect to
each of the Borrower (on a stand-alone basis) and the Borrower and its
Subsidiaries (on a consolidated basis) (x) the sum of the assets, at a fair
valuation, of each of the Borrower (on a stand-alone basis) and the Borrower and
its Subsidiaries (on a consolidated basis) will exceed their debts, (y) the
Borrower (on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) will not have incurred or intended to, or believe that they
will, incur debts beyond their ability to pay such debts as such debts mature
and (z) the Borrower
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(on a stand-alone basis) and the Borrower and its Subsidiaries (on a
consolidated basis) will have sufficient capital with which to conduct its or
their business. For purposes of this Section 5.11(a), "debt" means any liability
on a claim, and "claim" means (i) right to payment whether or not such a right
is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured; or (ii)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured
or unsecured.
(b) The financial statements and pro forma balance sheet (after
giving effect to the Transaction and the other transactions contemplated hereby)
delivered to the Administrative Agent pursuant to Section 4.13 present fairly in
all material respects the financial position of the respective Persons referred
to in such Section at the dates of said statements and the results of operations
for the periods covered thereby (or, in the case of the pro forma balance sheet,
present a good faith estimate of the consolidated pro forma financial condition
of the Borrower and its Subsidiaries as of the date thereof). All such financial
statements have been prepared in accordance with SAP or GAAP, as indicated in
Section 4.13, consistently applied except to the extent provided in the notes to
said financial statements.
(c) Since December 31, 1998, nothing has occurred which, when taken
as a whole, has or could reasonably be expected to have a Material Adverse
Effect.
5.12 Security Interests. On and after the Initial Borrowing Date,
the Pledge Agreement creates, as security for the Obligations, valid and
enforceable perfected security interests in and Liens on all of the Collateral
subject thereto, superior to and prior to the rights of all third persons
(except in the case of the stock of American Pioneer, which is subject to the
Lien of American Progressive) and subject to no other Liens other than Liens
permitted pursuant to Sections 7.03(a), (b), (f), (g) and (h), in favor of the
Collateral Agent for the benefit of the Banks. At all times on or after the
Initial Borrowing Date, the Borrower or the applicable Credit Party, as the case
may be, has good and marketable title to all Collateral free and clear of all
Liens (except as created pursuant to the Pledge Agreement). No filings or
recordings are required in order to perfect the security interests created under
the Pledge Agreement except for filings or recordings which shall have been
made, or provided for to the reasonable satisfaction of the Administrative
Agent, upon or prior to the Initial Borrowing Date.
5.13 Tax Returns and Payments. Except as set forth on Annex XI, the
Borrower and each of its Subsidiaries has filed all federal income tax returns
and all other material tax returns, domestic and foreign, required to be filed
by it and has paid all material taxes and assessments payable by it which have
become due, other than those not yet delinquent and except for those contested
in good faith and adequately disclosed and fully provided for in the financial
statements of the Borrower and each of its Subsidiaries in accordance with GAAP
or SAP, as the case may be. The Borrower and each of its Subsidiaries has paid,
or has provided adequate reserves (in the good faith judgment of the management
of such Person) for the payment of, all material federal, state and foreign
taxes applicable for all prior fiscal years and for the current fiscal year to
the date hereof. There is no material action, suit, proceeding, investigation,
audit or claim now pending or, to the knowledge of the Borrower or any of its
Subsidiaries, threatened by any authority regarding any taxes relating to the
Borrower or any of
28
its Subsidiaries. Neither the Borrower nor any of its Subsidiaries has entered
into an agreement or waiver or been requested to enter into an agreement or
waiver extending any statute of limitations relating to the payment or
collection of taxes of the Borrower or any of its Subsidiaries, or is aware of
any circumstances that would cause the taxable years or other taxable periods of
the Borrower or any of its Subsidiaries not to be subject to the normally
applicable statute of limitations.
5.14 Compliance with ERISA. (a) Annex IV sets forth each Plan; each
Plan (and each related trust, insurance contract or fund) is in substantial
compliance with its terms and with all applicable laws, including without
limitation ERISA and the Code; each Plan (and each related trust, if any) which
is intended to be qualified under Section 401(a) of the Code has received a
determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Sections 401(a) and 501(a) of the Code; no Reportable
Event has occurred; no Plan which is a multiemployer plan (as defined in Section
4001(a) (3) of ERISA) is insolvent or in reorganization; no Plan has an Unfunded
Current Liability; no Plan which is subject to Section 412 of the Code or
Section 302 of ERISA has an accumulated funding deficiency, within the meaning
of such sections of the Code or ERISA, or has applied for or received a waiver
of an accumulated funding deficiency or an extension of any amortization period,
within the meaning of Section 412 of the Code or Section 303 or 304 of ERISA;
all contributions required to be made with respect to a Plan have been timely
made except to the extent of any such contribution which, if not timely made,
would not result in a material liability to the Borrower, any Subsidiary of the
Borrower or any ERISA Affiliate; neither the Borrower nor any Subsidiary of the
Borrower nor any ERISA Affiliate has incurred any material liability (including
any indirect, contingent or secondary liability) to or on account of a Plan
pursuant to Section 409, 502(i), 502(1), 515, 4062, 4063, 4064, 4069, 4201, 4204
or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of the Code or expects to
incur any material amount of such liability under any of the foregoing sections
with respect to any Plan; to the Borrower's knowledge no condition exists which
presents a material risk to the Borrower or any Subsidiary of the Borrower or
any ERISA Affiliate of incurring a material amount of liability to or on account
of a Plan pursuant to the foregoing provisions of ERISA and the Code; no
proceedings have been instituted by the PBGC to terminate or appoint a trustee
to administer any Plan which is subject to Title IV of ERISA in a distress
termination; no action, suit, proceeding, hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any Plan
(other than routine claims for benefits or relating to qualified domestic
relations orders) is pending, expected or threatened; no Plan is a multiemployer
plan (as defined in Section 4001(a)(3) of ERISA); neither the Borrower nor any
Subsidiary of the Borrower nor any ERISA Affiliate has incurred any material
liability as a result of any group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) other than a multiemployer plan
described in Section 3(37) of ERISA which covers or has covered employees or
former employees of the Borrower, any Subsidiary of the Borrower or any ERISA
Affiliate having not been operated in compliance with the provisions of Part 6
of subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed
under the Code or ERISA on the assets of the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate exists or is likely to arise on account of any
Plan; and, except with respect to certain post-retirement health care
obligations, as disclosed on Annex XII, the Borrower and its Subsidiaries may
cease contributions to or terminate any employee benefit plan maintained by any
of them without incurring any material liability.
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5.15 Subsidiaries. (a) Annex V hereto lists each Subsidiary of the
Borrower (and the direct and indirect ownership interest of the Borrower
therein) and also identifies the owner thereof in each case existing on the
Initial Borrowing Date (after giving effect to the Transaction). All such
Subsidiaries are direct or indirect Wholly-Owned Subsidiaries of the Borrower.
(b) There are no restrictions on the Borrower or any of its
Subsidiaries which prohibit or otherwise restrict the transfer of cash or other
assets from any Subsidiary of the Borrower to the Borrower, other than
prohibitions or restrictions existing under or by reason of (i) this Agreement
or the other Credit Documents, (ii) Legal Requirements, (iii) customary
non-assignment provisions in contracts entered into in the ordinary course of
business and consistent with past practices, and (iv) purchase money obligations
for property acquired in the ordinary course of business, so long as such
obligations are permitted under this Agreement.
5.16 Intellectual Property, etc. The Borrower and each of its
Subsidiaries own or possess the right to use all material patents, trademarks,
servicemarks, trade names, copyrights, licenses and other rights, free from
burdensome restrictions, that are necessary for the operation of their
respective businesses as presently conducted and as proposed to be conducted.
5.17 Pollution and Other Regulations. The Borrower and each of its
Subsidiaries are in compliance with all laws and regulations relating to
pollution and environmental control, equal employment opportunity and employee
safety in all domestic and foreign jurisdictions in which the Borrower and each
of its Subsidiaries is presently doing business, and the Borrower will comply
and cause each of its Subsidiaries to comply with all such laws and regulations
which may be imposed in the future in jurisdictions in which the Borrower or
such Subsidiary may then be doing business; in each case other than those the
non-compliance with which could not reasonably be expected to have a Material
Adverse Effect.
5.18 Labor Relations; Collective Bargaining Agreements. (a) Set
forth on Annex VI is a list and description (including dates of termination) of
all collective bargaining and similar agreements between or applicable to the
Borrower or any of its Subsidiaries and any union, labor organization or other
bargaining agent in respect of the employees of the Borrower and/or any
Subsidiary on the Initial Borrowing Date.
(b) Neither the Borrower nor any of its Subsidiaries is engaged in
any unfair labor practice that is reasonably likely to have a Material Adverse
Effect. (i) There is no significant unfair labor practice complaint pending
against the Borrower or any of its Subsidiaries or threatened in writing against
any of them, before the National Labor Relations Board, and no significant
grievance or significant arbitration proceeding arising out of or under any
Collective Bargaining Agreement is now pending against the Borrower or any of
its Subsidiaries or threatened in writing against any of them, (ii) there is no
significant strike, labor dispute, slowdown or stoppage pending against the
Borrower or any of its Subsidiaries or threatened in writing against the
Borrower or any of its Subsidiaries and (iii) to the best knowledge of the
Borrower, no union representation question exists with respect to the employees
of the Borrower or any of its Subsidiaries, except (with respect to any matter
specified in clause (i), (ii) or (iii) above, either individually or in the
aggregate) such as could not reasonably be expected to have a Material Adverse
Effect.
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5.19 Capitalization. (a) On the Initial Borrowing Date, and after
giving effect to the Transaction and the other transactions contemplated hereby,
the authorized capital stock of the Borrower consists of (i) 80,000,000 shares
of common stock, $0.01 par value per share, 43,250,000 of which shall be issued
and outstanding and (ii) 7,930 shares of Series C Convertible Preferred Stock,
$1.00 par value per share, of which 7,930 shares designated as Series C-1 shall
be issued and outstanding. As of the Initial Borrowing Date, all such
outstanding shares of the Borrower have been duly and validly issued and are
fully paid and nonassessable. On the Initial Borrowing Date and after giving
effect to the Transaction and the other transactions contemplated hereby, the
Borrower does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock, except for options, warrants
and grants outstanding in the aggregate amounts set forth on Annex IX.
(b) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of American Exchange shall consist of 700,000 shares of common
stock, $1.00 par value per share, and all of the issued and outstanding shares
of such common stock are directly owned by the Borrower. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
American Exchange does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
(c) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of American Pioneer shall consist of 1,999,800 shares of common
stock, $2.50 par value per share, and all of the issued and outstanding shares
of such common stock are directly owned by the Borrower. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
American Pioneer does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
(d) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of American Progressive shall consist of 16,667 shares of common
stock, $150.00 par value per share, and all of the issued and outstanding shares
of such common stock are directly owned by the Borrower. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
American Progressive does not have outstanding any securities convertible into
or exchangeable for its capital stock or outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock.
(e) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of PFI shall consist of
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1,000 shares of common stock, $1.00 par value per share, and all of the issued
and outstanding shares of such common stock are directly owned by the Borrower.
All such outstanding shares have been duly and validly issued, are fully paid
and nonassessable. PFI does not have outstanding any securities convertible into
or exchangeable for its capital stock or outstanding any rights to subscribe for
or to purchase, or any options for the purchase of, or any agreements providing
for the issuance (contingent or otherwise) of, or any calls, commitments or
claims of any character relating to, its capital stock.
(f) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Canadian Holdco shall consist of an unlimited number of common
shares, of which 100,100 shares are issued and outstanding and registered in the
name of the Borrower. All such outstanding shares have been duly and validly
issued, are fully paid and nonassessable. Canadian Holdco does not have
outstanding any securities convertible into or exchangeable for its shares or
outstanding any rights to subscribe for or to purchase, or any options for the
purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its shares.
(g) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of PennLife shall consist of 50,000 shares of common stock,
$100.00 par value per share, and all of the issued and outstanding shares of
such common stock are directly owned by American Exchange. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
PennLife does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
(h) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Peninsular shall consist of 7,200,000 shares of common stock,
$2.25 par value per share, and all of the issued and outstanding shares of such
common stock are directly owned by American Exchange. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
Peninsular does not have outstanding any securities convertible into or
exchangeable for its capital stock or outstanding any rights to subscribe for or
to purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its capital stock.
(i) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital of PC-Canada consists of an unlimited number of common and preferred
shares, of which 100 common shares and 100 preferred shares are issued and
outstanding and registered in the name of Canadian Holdco. All such outstanding
shares have been duly and validly issued, are fully paid and nonassessable.
PC-Canada does not have outstanding any securities convertible into or
exchangeable for its shares or outstanding any rights to subscribe for or to
purchase, or any options for the purchase of, or any agreements providing for
the issuance (contingent or otherwise) of, or any calls, commitments or claims
of any character relating to, its shares.
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(j) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of ConLife shall consist of 50,000 shares of common stock, $60.00
par value per share, and all of the issued and outstanding shares of such common
stock are directly owned by American Exchange. All such outstanding shares have
been duly and validly issued, are fully paid and nonassessable. ConLife does not
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
(k) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Union Bankers shall consist of 1,360,000 shares of common
stock, $2.00 par value per share, and all of the issued and outstanding shares
of such common stock are directly owned by American Exchange. All such
outstanding shares have been duly and validly issued, are fully paid and
nonassessable. Union Bankers does not have outstanding any securities
convertible into or exchangeable for its capital stock or outstanding any rights
to subscribe for or to purchase, or any options for the purchase of, or any
agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
(l) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Marquette shall consist of 2,100,000 shares of common stock,
$1.00 par value per share, and all of the issued and outstanding shares of such
common stock are directly owned by Union Bankers. All such outstanding shares
have been duly and validly issued, are fully paid and nonassessable. Marquette
does not have outstanding any securities convertible into or exchangeable for
its capital stock or outstanding any rights to subscribe for or to purchase, or
any options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, its capital stock.
(m) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of WorldNet shall consist of 1000 shares of common stock, $1.00
par value per share, and all of the issued and outstanding shares of such common
stock are directly owned by the Borrower. All such outstanding shares have been
duly and validly issued, are fully paid and nonassessable. WorldNet does not
have outstanding any securities convertible into or exchangeable for its capital
stock or outstanding any rights to subscribe for or to purchase, or any options
for the purchase of, or any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
its capital stock.
(n) On the Initial Borrowing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of Quincy shall consist of 20,000,000 shares of common stock,
$1.00 par value per share, and all of the issued and outstanding shares of such
common stock are directly owned by the Borrower. All such outstanding shares
have been duly and validly issued, are fully paid and nonassessable. Quincy does
not have outstanding any securities convertible into or exchangeable for its
capital stock or outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any
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agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, its capital stock.
5.20 Representations and Warranties in Transaction Documents. All
representations and warranties set forth in the Transaction Documents were true
and correct in all material respects as of the time such representations and
warranties were made and shall be true and correct in all material respects as
of the Initial Borrowing Date as if such representations and warranties were
made on and as of such date, unless stated to relate to a specific earlier date,
in which case such representations and warranties shall be true and correct in
all material respects as of such earlier date.
5.21 Indebtedness. Annex III sets forth a true and complete list of
all Indebtedness outstanding under Sections 7.04(c) and (j) of the Borrower and
its Subsidiaries as of the Initial Borrowing Date (after giving effect to the
Transaction), in each case showing the aggregate principal amount thereof, the
name of the lender in respect thereof and the name of the respective borrower
and any other entity which has directly or indirectly guaranteed such
Indebtedness.
5.22 Compliance with Statutes, etc. The Borrower and each of its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, all Governmental
Authorities in respect of the conduct of its business and the ownership of its
property (including compliance with all applicable environmental laws), except
those the noncompliance with which could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
5.23 Insurance Licenses. Each Regulated Insurance Company has
obtained and maintains in full force and effect all licenses and permits from
all regulatory authorities necessary to operate in the jurisdictions in which
such Regulated Insurance Company operates, in each case other than such licenses
and permits the failure to obtain or maintain, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
5.24 Year 2000 Compliance. Any reprogramming required to permit the
proper functioning, in and following the year 2000, of (i) the Borrower's and
its Subsidiaries' computer systems and (ii) equipment containing embedded
microchips (including systems and equipment supplied by others or with which
Borrower's or its Subsidiaries' systems interface) and the testing of all such
systems and equipment, as so reprogrammed, will be completed by September 30,
1999. The cost to the Borrower and its Subsidiaries of such reprogramming and
testing and of the reasonably foreseeable consequences of year 2000 to the
Borrower and its Subsidiaries (including, without limitation, reprogramming
errors and the failure of others' systems or equipment) will not result in a
Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Borrower and its Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit the Borrower to conduct its business
without a Material Adverse Effect.
SECTION 6. Affirmative Covenants. The Borrower hereby covenants and
agrees that on the Initial Borrowing Date and thereafter, for so long as this
Agreement is in effect
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and until the Loans, together with interest, Fees and all other Obligations
incurred hereunder, are paid in full:
6.01 Information Covenants. The Borrower will furnish or cause to be
furnished to each Bank:
(a) Annual Financial Statements. (i) As soon as available and in any
event within 100 days after the close of each fiscal year of the Borrower,
(x) the consolidated balance sheet of the Borrower and its Subsidiaries,
in each case, as at the end of such fiscal year and the related
consolidated statements of income, of stockholders' equity and of cash
flows for such fiscal year and (y) the consolidating balance sheet of the
Borrower and each of its Subsidiaries as at the end of the fiscal year and
the related consolidating statements of income, of stockholders' equity
and of cash flows for such fiscal year; in each case prepared in
accordance with GAAP and setting forth comparative figures for the
preceding fiscal year, and, in the case of such consolidated statements,
examined by independent certified public accountants of recognized
national standing whose opinion shall not be qualified as to the scope of
audit or as to the status of the Borrower and its Subsidiaries as a going
concern, together with a certificate of such accounting firm stating that
in the course of its regular audit of the business of the Borrower and its
Subsidiaries, which audit was conducted in accordance with GAAP, such
accounting firm has obtained no knowledge of any Default or Event of
Default which has occurred and is continuing or, if in the opinion of such
accounting firm such a Default or Event of Default has occurred and is
continuing, a statement as to the nature thereof.
(ii) As soon as available and in any event within 90 days after the
close of each fiscal year of each Regulated Insurance Company, the Annual
Statement (prepared in accordance with SAP) for such fiscal year of such
Regulated Insurance Company, as filed with the Applicable Insurance
Regulatory Authority in compliance with the requirements thereof (or a
report containing equivalent information for any Regulated Insurance
Company not so required to file the foregoing with the Applicable
Insurance Regulatory Authority) together with the opinion thereon of the
Chief Financial Officer or other Authorized Officer of such Regulated
Insurance Company stating that such Annual Statement presents fairly in
all material respects the financial condition and results of operations of
such Regulated Insurance Company in accordance with SAP.
(iii) As soon as available and in any event within 90 days after the
close of each fiscal year of the Borrower, a copy of the "Statement of
Actuarial Opinion" and "Management Discussion and Analysis" for each
Regulated Insurance Company (prepared in accordance with SAP) for such
fiscal year and as filed with the Applicable Regulatory Insurance
Authority in compliance with the requirements thereof (or a report
containing equivalent information for any Regulated Insurance Company not
so required to file the foregoing with the Applicable Regulatory Insurance
Authority).
(b) Quarterly Financial Statements. (i) As soon as available and in
any event within 60 days after the close of each of the first three
quarterly accounting periods in each fiscal year of the Borrower, (x) the
consolidated balance sheet of the Borrower and its Subsidiaries at the end
of such fiscal quarter and the related consolidated statements of
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income, of stockholders' equity and of cash flows for such quarterly
period and for the elapsed portion of the fiscal year ended with the last
day of such quarterly period and (y) the consolidating balance sheet of
the Borrower and each of its Subsidiaries as at the end of such fiscal
quarter and the related consolidating statements of income, of
stockholders' equity and of cash flows for such quarterly period and for
the elapsed portion of the fiscal year ended with the last day of such
quarterly period; in each case setting forth comparative figures for the
related periods in the prior fiscal year, and all of which shall be
prepared in accordance with GAAP and certified by the Chief Financial
Officer or other Authorized Officer of the Borrower, as the case may be,
subject to changes resulting from normal year-end audit adjustments.
(ii) As soon as available and in any event within 90 days after the
close of each of the first three quarterly accounting periods in each
fiscal year of each Regulated Insurance Company, quarterly financial
statements (prepared in accordance with SAP) for such fiscal period of
such Regulated Insurance Company, as filed with the Applicable Insurance
Regulatory Authority, together with the opinion thereon of the Chief
Financial Officer or other Authorized Officer of such Regulated Insurance
Company stating that such financial statements present fairly in all
material respects the financial condition and results of operations of
such Regulated Insurance Company in accordance with SAP.
(c) Financial Plans, etc. No later than 120 days following the first
day of each fiscal year of the Borrower, copies of the annual financial
plan or budget for such fiscal year prepared by management of the Borrower
for its internal use and distributed to the Board of Directors of the
Borrower. Together with each delivery of financial statements pursuant to
Section 6.01(a)(ii) and (b)(ii), a comparison of the current year to date
financial results (other than in respect of the balance sheets included
therein) against the plans required to be submitted pursuant to this
clause (c) shall be presented.
(d) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Sections 6.01(a)(i) and (ii) and
(b)(i) and (ii), a certificate of the Chief Financial Officer or other
Authorized Officer of the Borrower to the effect that no Default or Event
of Default exists or, if any Default or Event of Default does exist,
specifying the nature and extent thereof, which certificate shall set
forth (x) the calculations required to establish whether the Borrower and
its Subsidiaries were in compliance with the provisions of Sections 7.10,
7.11, 7.12 and 7.13 as at the end of such fiscal year or quarter, as the
case may be, and (y) a summary of all outstanding litigation at the end of
such fiscal year or quarter and of all litigation settled during the
preceding fiscal quarter, in each case involving the Borrower or any of
its Subsidiaries, but only to the extent that any such litigation could
reasonably be expected to have a Material Adverse Effect.
(e) Notice of Default or Litigation. Promptly, and in any event
within five Business Days after the Borrower or any of its Subsidiaries
obtains knowledge thereof, (x) notice of the occurrence of any event which
constitutes a Default or Event of Default, which notice shall specify the
nature thereof, the period of existence thereof and what action the
Borrower proposes to take with respect thereto and (y) promptly after the
Borrower or any of its Subsidiaries obtains knowledge thereof, notice of
any outstanding
36
litigation or governmental or regulatory proceeding pending against the
Borrower or any of its Subsidiaries which could reasonably be expected to
have a Material Adverse Effect, or a material adverse effect on the
ability of any Credit Party to perform its respective obligations
hereunder or under any other Credit Document.
(f) Auditors' Reports. Promptly upon receipt thereof, a copy of (x)
each other report or "management letter" submitted to the Borrower or any
of its Subsidiaries by their independent accountants in connection with
any annual, interim or special audit made by them of the books of the
Borrower or any of its Subsidiaries and (y) each report submitted to the
Borrower or any of its Subsidiaries by any independent actuary with
respect to reserve adequacy.
(g) Reserve Adequacy Report. Promptly following a request from the
Administrative Agent or the Required Banks (which request may only be made
when an Event of Default has occurred and is continuing), a report
prepared by an independent actuarial consulting firm of recognized
professional standing reasonably satisfactory to the Administrative Agent
or the Required Banks, as the case may be, reviewing the adequacy of
reserves of each Regulated Insurance Company determined in accordance with
SAP, which firm shall be provided access to or copies of all reserve
analyses and valuations relating to the insurance business of each
Regulated Insurance Company in the possession of or available to the
Borrower or its Subsidiaries.
(h) Other Regulatory Statements and Reports. Promptly (A) after
receipt thereof, copies of all triennial examinations and risk adjusted
capital reports of any Regulated Insurance Company, delivered to such
Person by any Applicable Insurance Regulatory Authority, insurance
commission or similar regulatory authority, (B) after receipt thereof,
written notice of any assertion by any Applicable Insurance Regulatory
Authority or any governmental agency or agencies substituted therefor, as
to a violation of any Legal Requirement by any Regulated Insurance Company
which is likely to have a Material Adverse Effect, (C) after receipt
thereof, a copy of the final report to each Regulated Insurance Company
from the NAIC for each fiscal year, as to such Regulated Insurance
Company's compliance or noncompliance with each of the NAIC Tests, (D)
after receipt thereof, a copy of any notice of termination, cancellation
or recapture of any Reinsurance Agreement or Retrocession Agreement to
which a Regulated Insurance Company is a party to the extent such
termination or cancellation is likely to have a Material Adverse Effect,
(E) and in any event within ten Business Days after receipt thereof,
copies of any notice of actual suspension, termination or revocation of
any license of any Regulated Insurance Company by any Applicable Insurance
Regulatory Authority, including any request by an Applicable Insurance
Regulatory Authority which commits a Regulated Insurance Company to take
or refrain from taking any action or which otherwise affects the authority
of such Regulated Insurance Company to conduct its business, and (F) and
in any event within ten Business Days after the Borrower or any of its
Subsidiaries obtains knowledge thereof, notice of any actual changes in
the insurance laws enacted in any state in which any Regulated Insurance
Company is domiciled which could reasonably be expected to have a Material
Adverse Effect.
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(i) Other Information. Promptly upon filing thereof with
the SEC or transmission thereof, as the case may be, copies of any
final registrations and documents, and other reports specified in
Section 13 and 15(d) of the Exchange Act filed by the Borrower or
any of its Subsidiaries (other than any registration statement on
Form S-8) and copies of all financial statements and proxy
statements, and material notices and reports, as the Borrower or any
of its Subsidiaries shall send to analysts generally or the holders
of their capital stock in their capacity as such holders (in each
case to the extent not theretofore delivered to the Banks pursuant
to this Agreement) and, with reasonable promptness, such other
information or existing documents (financial or otherwise) as the
Administrative Agent or any Bank may reasonably request from time to
time.
6.02 Books, Records and Inspections. The Borrower will,
and will cause each of its Subsidiaries to, permit officers and designated
representatives of the Administrative Agent or any Bank to visit and inspect any
of the properties or assets of the Borrower and any of its Subsidiaries in
whomsoever's possession (but only to the extent the Borrower
or such Subsidiary has the right to do so to the extent in the possession of
another Person), and to examine the books of account of the Borrower and any of
its Subsidiaries and discuss the affairs, finances and accounts of the Borrower
and of any of its Subsidiaries with, and be advised as to the same by, its and
their officers and independent accountants and independent actuaries, if any,
all at such reasonable times and intervals, upon reasonable prior notice and to
such reasonable extent as the Administrative Agent or any Bank may request.
6.03 Insurance. The Borrower will, and will cause each
of its Subsidiaries to, at all times maintain in full force and effect insurance
in such amounts, covering such risks and liabilities and with such deductibles
or self-insured retentions as are in accordance with normal industry practice.
6.04 Payment of Taxes. The Borrower will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, all
material taxes, assessments and governmental charges or levies imposed upon it
or upon its income or profits, or upon any properties belonging to it, prior to
the date on which penalties attach thereto, and all lawful
claims (other than claims relating to the adjustment or settling, in the
ordinary course of business, of claims in respect of insurance policies or
reinsurance contracts) which, if unpaid, might become a Lien or charge upon any
properties of the Borrower or any of its Subsidiaries; provided that neither the
Borrower nor any Subsidiary shall be required to pay any such tax, assessment,
charge, levy or claim which is being contested in good faith and by proper
proceedings if it has maintained adequate reserves (in the good faith judgment
of the management of the Borrower) with respect thereto in accordance with GAAP.
6.05 Corporate Franchises. The Borrower will do, and
will cause each Subsidiary to do, or cause to be done, all things reasonably
necessary to preserve and keep in full force and effect its corporate existence,
rights and authority; provided that any transaction permitted by Section 7.02
will not constitute a breach of this Section 6.05.
6.06 Compliance with Statutes, etc. The Borrower will,
and will cause each Subsidiary to, comply with all applicable statutes,
regulations and orders of, and all applicable restrictions imposed by, all
Government Authorities, in respect of the conduct of its business and
38
the ownership of its property (including applicable statutes, regulations,
orders and restrictions relating to environmental standards and controls) other
than those the non-compliance with which could not reasonably be expected to
have a Material Adverse Effect.
6.07 ERISA. As soon as possible and, in any event,
within 10 Business Days after the Borrower, any Subsidiary of the Borrower or
any ERISA Affiliate knows or should reasonably know of the occurrence of any of
the following, the Borrower will deliver to each of the Banks a certificate of
the chief financial officer of the Borrower setting forth the full details as to
such occurrence and the action, if any, that the Borrower, such Subsidiary or
such ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by the Borrower, the
Subsidiary, the ERISA Affiliate, the PBGC, a Plan participant or the Plan
administrator with respect thereto: that a Reportable Event has occurred; that
an accumulated funding deficiency, within the meaning of Section 412 of the Code
or Section 302 of ERISA, has been incurred or an application may be or has been
made for a waiver or modification of the minimum funding standard (including any
required installment payments) or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA with respect to a Plan;
that any contribution required to be made with respect to a Plan has not been
timely made except to the extent that any such untimely contribution would not
result in a material liability to the Borrower, any Subsidiary of the Borrower
or any ERISA Affiliate; that a Plan has been or may be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA; that a Plan has an
Unfunded Current Liability; that proceedings may be or have been instituted to
terminate or appoint a trustee to administer a Plan which is subject to Title IV
of ERISA; that a proceeding has been instituted pursuant to Section 515 of ERISA
to collect a delinquent contribution to a Plan; that the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate will or may incur any material
amount of liability (including any indirect, contingent, or secondary liability)
to or on account of the termination of or withdrawal from a Plan under Section
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or with respect to a Plan
under Section 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or
502(i) or 502(l) of ERISA or with respect to a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) under Section 4980B
of the Code; or that the Borrower or any Subsidiary of the Borrower may incur
any material liability pursuant to any employee welfare benefit plan (as defined
in Section 3(1) of ERISA) that provides death, health or severance benefits to
retired employees or other former employees (other than as required by Section
601 of ERISA or applicable state law or as disclosed on Annex XII) or any Plan.
At the request of any Bank, the Borrower will promptly deliver to such Bank a
complete copy of the annual report (on Internal Revenue Service Form
5500-series) of each Plan (including, to the extent required, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service. In addition to any certificates or notices delivered
to the Banks pursuant to the first sentence hereof, if requested by the Banks,
copies of annual reports and any material notices received by the Borrower, any
Subsidiary of the Borrower or any ERISA Affiliate with respect to any Plan shall
be delivered to the Banks no later than 10 Business Days after the date such
notice has been received by the Borrower, the Subsidiary or the ERISA Affiliate,
as applicable.
6.08 Performance of Obligations. The Borrower will, and
will cause each of its Subsidiaries to, perform in all material respects all of
its obligations under the terms of each mortgage, indenture, security agreement,
other debt instrument and material contract by which it
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is bound or to which it is a party; provided, that the failure to pay any
Indebtedness shall not constitute a breach of this Section 6.08 unless it shall
give rise to an Event of Default under Section 8.04.
6.09 Good Repair. The Borrower will, and will cause each
of its Subsidiaries to, ensure that its material properties and equipment used
or useful in its business in whomsoever's possession they may be, are kept in
good repair, working order and condition, normal wear and tear excepted, and
that from time to time there are made in such properties and equipment all
needful and proper repairs, renewals, replacements, extensions, additions,
betterments and improvements thereto, to the extent and in the manner customary
for companies in similar businesses.
6.10 End of Fiscal Years; Fiscal Quarters. The Borrower
will, for financial reporting purposes, cause (i) each of its, and each of its
Subsidiaries', fiscal years to end on December 31 of each year and (ii) each of
its, and each of its Subsidiaries', fiscal quarters to end on March 31, June 30,
September 30 and December 31 of each year.
6.11 Foreign Subsidiaries Security. If following a
change in the relevant sections of the Code or the regulations, rules, rulings,
notices or other official pronouncements issued or promulgated thereunder,
counsel for the Borrower acceptable to the Administrative Agent and the Required
Banks does not within 30 days after a request from the Administrative Agent or
the Required Banks deliver evidence, in form and substance mutually satisfactory
to the Administrative Agent and the Borrower, with respect to any Foreign
Subsidiary which has not already had all of its stock pledged pursuant to the
Pledge Agreement that (i) a pledge (x) of 66-2/3% or more of the total combined
voting power of all classes of capital stock of such Foreign Subsidiary entitled
to vote, and (y) of any promissory note issued by such Foreign Subsidiary to the
Borrower or any of its Domestic Subsidiaries and (ii) the entering into by such
Foreign Subsidiary of a pledge agreement in substantially the form of the Pledge
Agreement, in any such case would cause the undistributed earnings of such
Foreign Subsidiary as determined for Federal income tax purposes to be treated
as a deemed dividend to such Foreign Subsidiary's United States parent for
Federal income tax purposes, then in the case of a failure to deliver the
evidence described in clause (i) above, that portion of such Foreign
Subsidiary's outstanding capital stock or any promissory notes so issued by such
Foreign Subsidiary, in each case not theretofore pledged pursuant to the Pledge
Agreement shall be pledged to the Collateral Agent for the benefit of the
Secured Creditors pursuant to the Pledge Agreement (or another pledge agreement
in substantially similar form, if needed), and in the case of a failure to
deliver the evidence described in clause (ii) above, such Foreign Subsidiary
shall execute and deliver the Pledge Agreement (or another pledge agreement in
substantially similar form, if needed), granting the Secured Creditors a
security interest in all of such Foreign Subsidiary's assets and securing the
Obligations of the Borrower under the Credit Documents and under any Interest
Rate Agreement or Other Hedging Agreement, to the extent that the entering into
such Pledge Agreement is permitted by the laws of the respective foreign
jurisdiction and with all documents delivered pursuant to this Section 6.11 to
be in form and substance reasonably satisfactory to the Administrative Agent and
the Required Banks.
6.12 Maintenance of Licenses and Permits. The Borrower
will, and will cause each of its Subsidiaries to, maintain all permits, licenses
and consents as may be required for the
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conduct of its business by any state, federal or local government agency or
instrumentality except where failure to maintain the same could not reasonably
be expected to have a Material Adverse Effect.
6.13 Register. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this Section
6.13, to maintain a register (the "Register") on which it will record the
Commitments from time to time of each of the Banks, the Loans made by each of
the Banks and each repayment in respect of the principal amount
of the Loans of each Bank. Failure to make any such recordation or any error in
such recordation shall not affect the obligations of the Borrower in respect of
such Loans. With respect to any Bank, the transfer of the Commitments of such
Bank and the rights to the principal of, and interest on, any Loan made pursuant
to such Commitments shall not be effective until such transfer is recorded on
the Register maintained by the Administrative Agent with respect to ownership of
such Commitments and Loans and prior to such recordation all amounts owing to
the transferor with respect to such Commitments and Loans shall remain owing to
the transferor. The registration of assignment or transfer of all or part of any
Commitments and Loans shall be recorded by the Administrative Agent on the
Register only upon the acceptance by the Administrative Agent of a properly
executed and delivered Assignment and Assumption Agreement pursuant to Section
11.04(b), together with all other items required to be delivered in accordance
with Section 11.04(b). Coincident with the delivery of such an Assignment and
Assumption Agreement to the Administrative Agent for acceptance and registration
of assignment or transfer of all or part of a Loan, or as soon thereafter as
practicable, the assigning or transferor Bank shall surrender the Note
evidencing such Loan, and thereupon one or more new Notes in the same aggregate
principal amount shall be issued to the assigning or transferor Bank and/or the
new Bank. The Borrower agrees to indemnify the Administrative Agent from and
against any and all losses, claims, damages and liabilities of whatsoever nature
which may be imposed on, asserted against or incurred by the Administrative
Agent in performing its duties under this Section 6.13 (but excluding any such
losses, liabilities, claims, damages or expenses to the extent incurred by
reason of the gross negligence or willful misconduct of the Administrative
Agent).
6.14 Surplus Notes. The Borrower will cause American
Exchange to issue to the Borrower, on the Initial Borrowing Date, one or more
surplus notes having an aggregate principal amount of $70,000,000, the terms and
provisions of which shall be reasonably satisfactory to the Administrative Agent
(the "Surplus Notes").
SECTION 7. Negative Covenants. The Borrower hereby
covenants and agrees that on the Initial Borrowing Date and thereafter, for so
long as this Agreement is in effect and until the Loans together with interest,
Fees and all other Obligations incurred hereunder, are paid in full:
7.01 Changes in Business. (a) The Borrower will not
permit any of its Subsidiaries to engage in any business other than the
businesses engaged in by the Borrower and its Subsidiaries as of the Initial
Borrowing Date (after giving effect to the Transaction) and activities related,
ancillary or complimentary thereto.
(b) The Borrower will engage in no business other than
(i) the ownership of the capital stock and other equity interests in its
Subsidiaries, (ii) the incurrence of Indebtedness
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permitted to be incurred by it under Section 7.04, (iii) acquisitions permitted
under Section 7.02(h) and (iv) the entering into and performing of its
obligations under the Transaction Documents.
7.02 Consolidation, Merger, Sale or Purchase of Assets.
The Borrower will not, and will not permit any of its Subsidiaries to, wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, or sell or otherwise dispose of any of its property or assets
(including the sale of capital stock of any of its Subsidiaries, but excluding
any sale or disposition of property or assets (including obsolete or worn out
property) in the ordinary course of business), or purchase, lease or otherwise
acquire (in one transaction or a series of related transactions) all or any part
of the property or assets of any Person (excluding any purchases, leases or
other acquisitions of property or assets in, and for use in, the ordinary course
of business) or agree to do any of the foregoing at any future time, except that
the following shall be permitted:
(a) The Transaction;
(b) Capital Expenditures by the Borrower and its
Subsidiaries to the extent permitted by Section 7.05;
(c) The investments, acquisitions and transfers or
dispositions of property permitted pursuant to Section 7.06;
(d) The merger or consolidation or liquidation of (i)
any Wholly-Owned Subsidiary of the Borrower with or into another
Wholly-Owned Subsidiary of the Borrower or (ii) any Non-Regulated
Company that is a Wholly-Owned Subsidiary of the Borrower with or
into the Borrower, so long as the Borrower is the surviving entity
following such merger, consolidation or liquidation;
(e) Any Regulated Insurance Company may enter into any
Insurance Contract, Reinsurance Agreement or Retrocession Agreement
in the ordinary course of business in accordance with its normal
underwriting, indemnity and retention policies, provided that no
Regulated Insurance Company shall enter into any Financial
Reinsurance Agreements;
(f) The Borrower or any of its Subsidiaries may enter
into leases of property or assets in the ordinary course of business
not otherwise in violation of this Agreement;
(g) Each of the Borrower and its Subsidiaries may sell
assets, provided that (w) each such sale shall be for an amount at
least equal to the fair market value thereof (as determined in good
faith by senior management of the Borrower), (x) no less than 80% of
the aggregate sale proceeds of each such sale are in the form of
cash and (y) the aggregate sale proceeds from all assets subject to
such sales pursuant to this clause (g) in any fiscal year shall not
exceed 20% of the Consolidated Net Worth of the Borrower as of the
first day of such fiscal year (it being understood and agreed that,
for purposes of this clause (y), the aggregate sale proceeds from a
sale by a Regulated Insurance Company of assets and related
liabilities by way of a Reinsurance Agreement or a Retrocession
Agreement shall be deemed to be the Surplus Increase (if positive)
to such Regulated Insurance Company as a result of such sale),
provided, further, that (i) on a pro forma
42
basis (the pro forma adjustments made by the Borrower pursuant to
this clause (i) shall be subject to the reasonable satisfaction of
the Administrative Agent) determined as if such asset sale had been
consummated on the date occurring twelve months prior to the last
day of the most recently ended fiscal quarter of the Borrower with
respect to any asset sale, the Borrower and its Subsidiaries would
have been in compliance with Sections 7.10 through 7.13 of this
Agreement as of, or for the relevant period ended on, the last day
of such fiscal quarter and (ii) on a pro forma basis (the pro forma
adjustments made by the Borrower pursuant to this clause (ii) shall
be subject to the reasonable satisfaction of the Administrative
Agent) determined as if such asset sale had been consummated, the
covenants contained in Sections 7.10 through 7.13 will continue to
be met for the twelve-month period following the last day of the
fiscal quarter ended after the date of the consummation of such
asset sale;
(h) So long as no Default or Event of Default then
exists or would result therefrom, the Borrower and its Subsidiaries
may acquire (including by means of a merger) assets or the capital
stock of any Person (any such acquisitions permitted by this clause
(h), a "Permitted Acquisition"), provided, that (i) such Person (or
the assets so acquired) was, immediately prior to such acquisition,
engaged (or used) primarily in the businesses permitted pursuant to
Section 7.01(a), (ii) each such acquisition shall be for an amount
not greater than the fair market value thereof (as determined in
good faith by the Board of Directors of the Borrower), (iii) the
only consideration paid by the Borrower and its Subsidiaries in
connection with any Permitted Acquisition shall be cash, common
stock of the Borrower issued in accordance with Section 7.14(a)(i)
and preferred stock of the Borrower issued in accordance with
Section 7.14(a)(ii), (iv) the aggregate amount of cash expended by
the Borrower and its Subsidiaries for Permitted Acquisitions shall
not exceed (A) during the period from the Initial Borrowing Date to
and including June 30, 2000, 10% of the Consolidated Net Worth of
the Borrower and its Subsidiaries as of Initial Borrowing Date and
(B) thereafter, during each successive period from July 1 of a given
year to and including June 30 of the immediately following calendar
year (each such period, a "Measurement Period"), 15% of the
Consolidated Net Worth of the Borrower and its Subsidiaries as of
the last day of the immediately preceding Measurement Period, (v)
the aggregate value of Borrower common stock and preferred stock
issued by the Borrower as consideration for Permitted Acquisitions
(valued in good faith by the Borrower) shall not exceed (A) during
the period from the Initial Borrowing Date to and including June 30,
2000, 25% of the Consolidated Net Worth of the Borrower and its
Subsidiaries as of the Initial Borrowing Date and (B) thereafter,
during each Measurement Period, 35% of the Consolidated Net Worth of
the Borrower and its Subsidiaries as of the last day of the
immediately preceding Measurement Period, (vi) on a pro forma basis
(the pro forma adjustments made by the Borrower pursuant to this
clause (vi) shall be subject to the reasonable satisfaction of the
Administrative Agent) determined as if such acquisition had been
consummated on the date occurring twelve months prior to the last
day of the most recently ended fiscal quarter of the Borrower, the
Borrower and its Subsidiaries would have been in compliance with
Sections 7.10 through 7.13 of this Agreement as of, or for the
relevant period ended on, the last day of such fiscal quarter, (vii)
on a pro forma basis (the pro forma adjustments made by the Borrower
pursuant to this clause (vii) shall be subject to the reasonable
satisfaction of the Administrative Agent) determined as if such
acquisition had been consummated, the
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42
covenants contained in Sections 7.10 through 7.13 will continue to
be met for the twelve-month period following the last day of the
fiscal quarter ended after the date of the consummation of such
acquisition and (viii) no such acquisition shall be consummated on a
"hostile" basis (i.e., without the consent of the Board of Directors
of the Person to be acquired); and
(i) Sales or other dispositions of assets from one
Regulated Insurance Company to another Regulated Insurance Company.
To the extent the Required Banks (or all the Banks to the extent required by
Section 11.12) waive the provisions of this Section 7.02 with respect to the
disposition of any Collateral, or any Collateral is disposed of as permitted by
this Section 7.02, (i) such Collateral in each case shall be sold free and clear
of the Liens in favor of the Secured Creditors created by the Pledge Agreement
and (ii) if such Collateral includes all of the capital stock of a Subsidiary,
such capital stock shall be released from the Pledge Agreement and such
Subsidiary shall be released from the Subsidiary Guaranty; and the
Administrative Agent and the Collateral Agent shall be authorized to take such
actions as the Administrative Agent or the Collateral Agent reasonably deems
appropriate in connection therewith.
7.03 Liens. The Borrower will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon or with respect to any property or assets of any kind (real or personal,
tangible or intangible) of the Borrower or any such Subsidiary whether now owned
or hereafter acquired, or sell any such property or assets subject to an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts receivable or notes with recourse to the
Borrower or any of its Subsidiaries) or assign any right to receive income, or
file or permit the filing of any financing statement under the UCC or any other
similar notice of Lien under any similar recording or notice statute relating to
any such property, except:
(a) Liens for taxes and other assessments not yet due or
being contested in good faith and by appropriate proceedings for
which adequate reserves (in the good faith judgment of the
management of the Borrower) have been established;
(b) Liens in respect of property or assets of any of the
Borrower's Subsidiaries imposed by law which were incurred in the
ordinary course of business, such as carriers', warehousemen's and
mechanics' Liens and other similar Liens arising in the ordinary
course of business, and (x) which do not in the aggregate materially
detract from the value of such property or assets or materially
impair the use thereof in the operation of the business of the
Borrower or any Subsidiary or (y) which are being contested in good
faith by appropriate proceedings, which proceedings have the effect
of preventing the forfeiture or sale of the property or asset
subject to such Lien;
(c) Liens created by this Agreement or the other Credit
Documents;
(d) Liens in existence on the Effective Date which are
listed, and the property subject thereto on the Effective Date
described, in Annex VII, without giving effect to
44
any extensions or renewals thereof (provided that the securities
subject to any such Lien may be replaced by other securities of no
greater principal amount);
(e) Liens arising from judgments, decrees or attachments
in circumstances not constituting an Event of Default under Section
8.09;
(f) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business in
connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of
tenders, statutory obligations, surety and appeal bonds, bids,
leases, government contracts, performance and return-of-money bonds,
Reinsurance Agreements, Retrocession Agreements and other similar
obligations incurred in the ordinary course of business (exclusive
of obligations in respect of the payment for borrowed money);
(g) Leases or subleases granted to others not
interfering in any material respect with the business of the
Borrower or any of its Subsidiaries and any interest or title of a
lessor under any lease not in violation of this Agreement;
(h) Easements, rights-of-way, restrictions, minor
defects or irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
ordinary conduct of the business of the Borrower or any of its
Subsidiaries;
(i) Liens arising from UCC financing statements
regarding leases not in violation of this Agreement;
(j) Liens on pledges or deposits of cash or securities
made by any Regulated Insurance Company as a condition to obtaining
or maintaining any licenses issued to it by any Applicable Insurance
Regulatory Authority;
(k) Liens arising pursuant to purchase money mortgages,
Capital Leases or security interests securing Indebtedness
representing the purchase price (or financing of the purchase price
within 90 days after the respective purchase) of assets acquired
after the Initial Borrowing Date, provided that (i) any such Liens
attach only to the assets so purchased, (ii) the Indebtedness
secured by any such Lien does not exceed 100%, nor is less than 80%,
of the lesser of the fair market value or the purchase price of the
property being purchased at the time of the incurrence of such
Indebtedness and (iii) the Indebtedness secured thereby is permitted
to be incurred pursuant to Section 7.04(b);
(l) Liens on property or assets acquired pursuant to a
Permitted Acquisition, or on property or assets of a Subsidiary of
the Borrower in existence at the time such Subsidiary is acquired
pursuant to a Permitted Acquisition, provided that (i) any
Indebtedness that is secured by such Liens is permitted to exist
under Section 7.04(g) and (ii) such Liens are not incurred in
connection with or in contemplation or anticipation of such
Permitted Acquisition and do not attach to any other asset of the
Borrower or any of its Subsidiaries; and
(m) Liens consisting of customary set-off rights or
bankers' liens on amounts on deposit and securing reimbursement
obligations in respect of letters of credit issued for
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44
the account of the Borrower or any of its Subsidiaries, whether
arising by contract or operation of law, to the extent incurred in
the ordinary course of business.
7.04 Indebtedness. The Borrower will not, and will not
permit any of its Subsidiaries to, contract, create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness incurred pursuant to this Agreement and
the other Credit Documents;
(b) Capitalized Lease Obligations and Indebtedness of
the Borrower and its Subsidiaries incurred pursuant to purchase
money Liens permitted under Section 7.03(k), provided, that (x) all
such Capitalized Lease Obligations are permitted under Section 7.05
and (y) the sum of (i) the aggregate Capitalized Lease Obligations
plus (ii) the aggregate principal amount of such purchase money
Indebtedness shall not exceed at any time outstanding an amount
equal to $5,000,000;
(c) Indebtedness in existence on the Effective Date
which is listed in Annex III, without giving effect to any
subsequent extension, renewal or refinancing thereof;
(d) Obligations of any Regulated Insurance Company with
respect to (i) letters of credit securing obligations under
Reinsurance Agreements entered into in the ordinary course of
business of any such Regulated Insurance Company, (ii) letters of
credit issued in lieu of deposits to satisfy Legal Requirements or
(iii) letters of credit or surety bonds issued in lieu of depositing
securities with any Applicable Insurance Regulatory Authority to
satisfy regulatory requirements; in any case to the extent (x) such
letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than 10 days following
receipt by the Borrower or such Subsidiary of notice of payment on
such letter of credit, (y) in the case of (i) and (ii), the
aggregate outstanding amount of such obligations does not exceed
$10,000,000 at any time and (z) in the case of (iii), the aggregate
outstanding amount of such obligations does not exceed $2,500,000 at
any time;
(e) Indebtedness under Interest Rate Agreements or Other
Hedging Agreements entered into in respect of the Obligations or
otherwise in the conduct of its business and not for speculative
purposes;
(f) Indebtedness of American Exchange owing to the
Borrower evidenced by the Surplus Notes;
(g) Indebtedness of the Borrower or a Wholly-Owned
Subsidiary of the Borrower acquired pursuant to a Permitted
Acquisition (or Indebtedness assumed at the time of a Permitted
Acquisition of an asset securing such Indebtedness), and any
refinancing of such Indebtedness so long as the principal amount
thereof is not increased, provided that (i) such Indebtedness was
not incurred in connection with or in contemplation of such
Permitted Acquisition, (ii) such Indebtedness does not constitute
Indebtedness for borrowed money, it being understood and agreed that
Capitalized Lease Obligations and purchase money Indebtedness shall
not constitute Indebtedness for borrowed money for purposes of this
clause (i), and (iii) at the time of such Permitted Acquisition,
such
46
Indebtedness does not exceed 10% of the total value of the assets of
the Subsidiary so acquired, or of the assets so acquired, as the
case may be;
(h) Indebtedness of the Borrower or any of its
Subsidiaries arising under letters of credit issued for the account
of any such Person in the ordinary course of business;
(i) Indebtedness constituting a loan from (i) any
Regulated Insurance Company to another Regulated Insurance Company,
(ii) any Regulated Insurance Company to the Borrower, (iii) any
Subsidiary Guarantor to another Subsidiary Guarantor, (iv) the
Borrower to any Subsidiary Guarantor or (v) the Borrower or any
Subsidiary Guarantor to any Regulated Insurance Company; and
(j) Other Indebtedness of the Borrower in an aggregate
outstanding principal amount not to exceed $15,000,000 at any time;
7.05 Capital Expenditures. (a) The Borrower will not
incur, and will not permit any of its Subsidiaries to incur, Capital
Expenditures, provided that the Borrower and its Subsidiaries may incur Capital
Expenditures so long as the aggregate amount so incurred by the Borrower and its
Subsidiaries (on a consolidated basis) during any fiscal year
does not exceed $2,000,000.
(b) Notwithstanding the foregoing, in the event that the
amount of Capital Expenditures permitted to be made by the Borrower and its
Subsidiaries pursuant to clause (a) above in any fiscal year is greater than the
amount of such Capital Expenditures actually made by the Borrower and its
Subsidiaries during such fiscal year (excluding Capital Expenditures made under
clause (c) below), such excess (the "Rollover Amount") may be carried forward
and utilized to make Capital Expenditures in the immediately succeeding fiscal
years.
(c) In addition to the Capital Expenditures permitted
above in this Section 7.05, the Borrower and its Subsidiaries may make Capital
Expenditures at any time with the net cash proceeds of Asset Sales and with the
net cash proceeds of any equity issuance by the Borrower (in each case to the
extent such proceeds are not required to be applied to
prepay the Term Loans pursuant to Section 3.02).
(d) In addition to the Capital Expenditures permitted
above in this Section 7.05, the Borrower and its Subsidiaries may make Permitted
Acquisitions.
7.06 Advances, Investments and Loans. The Borrower will
not, and will not permit any of its Subsidiaries to, lend money or credit or
make advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to,
any Person, except:
(a) The Transaction shall be permitted;
(b) The Borrower and its Subsidiaries which are not
Regulated Insurance Companies may invest in cash, Cash Equivalents
and Investment Grade Securities other than investments which are
Risk Derivatives (determined at the time of acquisition); provided
that any investment in Investment Grade Securities (other than U.S.
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46
Government Obligations) issued by any single Issuer shall not exceed
on the date such investment is made an amount which, when added to
all other investments by all Regulated Insurance Companies and the
Borrower in such Issuer and outstanding on such date, is equal to 5%
of Invested Assets at such time;
(c) The Borrower and its Subsidiaries may acquire and
hold receivables owing to them in the ordinary course of business
and payable or dischargeable in accordance with customary trade
terms;
(d) Loans and advances to employees for business-related
travel expenses, moving expenses and other similar expenses, in each
case incurred in the ordinary course of business;
(e) The transactions described in Section 7.02(d), (e)
and (h) shall be permitted;
(f) Regulated Insurance Companies may invest in (i)
cash, (ii) Cash Equivalents, (iii) Investment Grade Securities and
(iv) Non-Investment Grade Securities; provided that (A) no
investment will be made in (i) any debt securities which are
Non-Investment Grade Securities or (ii) any equity securities, at a
time when, or if after giving effect thereto, the aggregate
principal amount of all Non-Investment Grade Securities held by all
Regulated Insurance Companies plus the aggregate outstanding
investment made by all Regulated Insurance Companies in equity
securities (other than securities of Persons which are Affiliates of
the Borrower on the Effective Date) equals or exceeds or would equal
or exceed 10% of Invested Assets; (B) no investment will be made in
any real estate or loan secured by real estate (other than (I)
credit tenant loans (as defined by the NAIC on the Effective Date),
(II) those existing on the Effective Date (without giving effect to
any increase thereto) and (III) loans secured by owner-occupied real
estate, if made at a time when, and if after giving effect thereto,
the aggregate of all such investments in mortgage loans does not
exceed, and would not exceed, 5% of Invested Assets; and (C) no
investment (other than U.S. Government Obligations) in any single
Issuer shall exceed on the date such investment is made an amount
which, when added to all other investments by the Borrower and its
Subsidiaries in the same Issuer and outstanding on such date, is
equal to 5% of Invested Assets at such time;
(g) Any Regulated Insurance Company may make investments
in companies which are Wholly-Owned Subsidiaries of such Person (or
any other Subsidiary of such Person created or acquired in
accordance with Section 7.15) but only to the extent that any such
investment, at the time made, does not reduce Statutory Surplus of
such Regulated Insurance Company;
(h) Investments pursuant to commitments in effect as of
the Effective Date and described (as to matter and amount) on Annex
VIII;
(i) Investments acquired by the Borrower or any of its
Subsidiaries (x) in exchange for any other investment held by the
Borrower or any such Subsidiary in connection with or as a result of
a bankruptcy, workout, reorganization or recapitalization of the
issuer of such other investment, (y) as a result of a foreclosure by
the Borrower or
48
any of its Subsidiaries with respect to any secured investment or
other transfer of title with respect to any secured investment in
default or (z) in settlement of delinquent obligations of, and other
disputes with, customers and suppliers arising in the ordinary
course of business;
(j) Investments existing on the Effective Date which are
identified on Annex VIII;
(k) the Borrower may acquire and hold obligations of one
or more agents, officers or employees of the Borrower or its
Subsidiaries in connection with such agents', officers' or
employees' acquisition of shares of capital stock of the Borrower or
options to purchase shares of capital stock of the Borrower so long
as no cash is paid by the Borrower or any of its Subsidiaries in
connection with the acquisition of any such obligations and such
obligations do not exceed $2,500,000 in aggregate principal amount
outstanding at any time;
(l) Investments consisting of intercompany loans to the
extent permitted under Section 7.04(i);
(m) Investments by the Borrower in Subsidiary
Guarantors, and investments by Subsidiary Guarantors in other
Subsidiary Guarantors;
(n) Investments by the Borrower and Subsidiary
Guarantors in Regulated Insurance Companies;
(o) Investments consisting of prepaid expenses;
(p) Investments consisting of advances made by the
Borrower and its Subsidiaries to agents, which advances are either
(i) repayable and repaid within one year from the date of the making
of such advance or (ii) repayable within a time period longer than
one year from the date of the making of such advance, provided that
the aggregate outstanding amount of advances under this clause (ii)
shall not exceed $1,000,000 at any time; and
(q) Investments consisting of non-cash consideration
received in connection with a sale of assets pursuant to Section
7.02(g).
7.07 Modifications of Agreements, etc. The Borrower will
not, and will not permit any of its Subsidiaries to:
(a) amend or modify (or permit the amendment or
modification of) any of the terms or provision of the Acquisition
Documents in any manner adverse to the interests of the Borrower and
its Subsidiaries or the Banks;
(b) amend, modify or change in any manner materially
adverse to the interests of the Banks the Certificate of
Incorporation (including, without limitation, by the filing of any
certificate of designation) or By-Laws of the Borrower or any of its
Subsidiaries, or any other agreement entered into by the Borrower or
any of its Subsidiaries with respect
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to its capital stock, or enter into any new agreement with respect
to the capital stock of the Borrower (to the extent adverse to the
interests of the Banks) or any of its Subsidiaries;
(c) amend, modify or terminate (or permit the amendment,
modification or termination of) in any manner adverse to the interests of the
Borrower and its Subsidiaries or the Banks, the Tax Sharing Agreements; and/or
(d) amend, modify or terminate (or permit the amendment,
modification or termination of) in any manner materially adverse to the
interests of the Borrower and its Subsidiaries or the Banks, the Strategic
Marketing Alliance Agreement.
7.08 Dividends, etc. (a) The Borrower will not, and will
not permit any of its Subsidiaries to, declare or pay any dividends (other than
dividends payable solely in common stock of such Person) or return any capital
to, its stockholders or authorize or make any other distribution, payment or
delivery of property or cash to its stockholders as such, or redeem, retire,
purchase or otherwise acquire, directly or indirectly, for a consideration, any
shares of any class of its capital stock now or hereafter outstanding (or any
warrants for or options or stock appreciation rights in respect of any of such
shares), or set aside any funds for any of the foregoing purposes, or purchase
or otherwise acquire or permit any of its Subsidiaries to purchase or otherwise
acquire for consideration any shares of any class of the capital stock of the
Borrower or any of its Subsidiaries, as the case may be, now or hereafter
outstanding (or any options or warrants or stock appreciation rights issued by
such Person with respect to its capital stock) (all of the foregoing
"Dividends"), except that
(i) Any Subsidiary of the Borrower may pay cash
dividends to its parent if such parent is the Borrower or a
Wholly-Owned Subsidiary of the Borrower;
(ii) The Borrower may redeem or purchase its capital
stock solely with the cash proceeds of capital stock issued by the
Borrower after the Initial Borrowing Date, to the extent such
proceeds are not required to be applied to prepay the Term Loans
pursuant to Section 3.02;
(iii) The Borrower may redeem or purchase shares of its
capital stock or options to purchase its capital stock held by
former officers and employees of the Borrower or any of its
Subsidiaries following the termination of their employment, provided
that (x) at the time of any such redemption or purchase no Default
or Event of Default shall exist or result therefrom and (y) the
aggregate amount paid by the Borrower in respect of all such
redemptions and purchases shall not exceed $1,000,000 in any fiscal
year of the Borrower; and
(iv) The Borrower may pay regularly accruing dividends
on preferred stock issued in accordance with Section 7.14(a) through
the issuance of additional shares of such preferred stock, or by
accrual or accretion, but not in cash.
(b) The Borrower will not, and will not permit any of
its Subsidiaries to, create or otherwise cause or suffer to exist any
encumbrance or restriction which prohibits or otherwise restricts (i) the
ability of any Subsidiary to (A) pay dividends or make other distributions or
pay
50
any Indebtedness owed to the Borrower or any of its Subsidiaries, as applicable,
(B) make loans or advances to the Borrower or any Subsidiary, as applicable, (C)
transfer any of its properties or assets to the Borrower or any Subsidiary, as
applicable, or (D) guarantee the Obligations or (ii) the ability of the Borrower
or any Subsidiary of the Borrower to create, incur, assume or suffer to exist
any Lien upon its property or assets to secure the Obligations, other than
prohibitions or restrictions existing under or by reason of (I) this Agreement
and the other Credit Documents and (II) Legal Requirements.
7.09 Transactions with Affiliates . The Borrower will
not, and will not permit any Subsidiary to, enter into any transaction or series
of transactions with any Affiliate (excluding the Borrower or any Wholly-Owned
Subsidiary of the Borrower) other than on terms and conditions substantially as
favorable to the Borrower or such Subsidiary as would be obtainable by the
Borrower or such Subsidiary at the time in a comparable arm's-length transaction
with a Person other than an Affiliate.
7.10 Leverage Ratio. The Borrower will not permit the
ratio of (i) Consolidated Indebtedness of the Borrower to (ii) Consolidated
Total Capital of the Borrower at any time during any period set forth below to
be greater than the ratio set forth opposite such period below:
Period Ratio
------ -----
Initial Borrowing Date to
but excluding March 31, 2000 0.40:1.00
March 31, 2000 to
but excluding March 31, 2001 0.35:1.00
March 31, 2001 to
but excluding March 31, 2002 0.30:1.00
Thereafter 0.25:1.00
7.11 Interest Coverage Ratio. The Borrower will not
permit the Interest Coverage Ratio for any Test Period ending during a period
set forth below to be less than the ratio set forth opposite such period below:
Period Ratio
------ -----
September 30, 1999 to and including 1.50:1.00
December 31,
1999
January 1, 2000 to and including
December 31, 2.50:1.00
2000
Thereafter 3.00:1.00
7.12 Minimum Risk Based Capital. (a) The Borrower will
not permit the Risk Based Capital Ratio for any Regulated Insurance Company to
be less than 125%.
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(b) The Borrower will not permit the Risk Based Capital
Ratio for the Regulated Insurance Companies (determined on a Combined basis) to
be less than 150%.
7.13 Minimum Consolidated Net Worth. The Borrower will
not permit its Consolidated Net Worth to be less than (a) at any time from the
Initial Borrowing Date to, but excluding, September 30, 2000, $105,000,000, (b)
at any time thereafter to, but excluding, March 31, 2001, $140,000,000, (c) at
any time thereafter to, but excluding, March 31, 2002, $175,000,000 and (d) at
any time thereafter, the sum of (i) $175,000,000 plus (ii) an amount, if
positive, equal to 50% of the Borrower's Consolidated Net Income for the period
from April 1, 2002 through the last day of the then most recently ended fiscal
quarter.
7.14 Issuance of Stock. (a) The Borrower will not
directly or indirectly issue, sell, assign, pledge, or otherwise encumber or
dispose of any shares of its capital stock or other equity securities (or
warrants, rights or options to acquire shares or other equity securities),
except (i) the issuance of common stock (and warrants, options and other rights
to acquire common stock), so long as no Event of Default occurs under Section
8.10, and (ii) the issuance of preferred stock, so long as (x) no part of such
preferred stock is mandatorily redeemable (whether on a scheduled basis or as a
result of the occurrence of any event or circumstance) and (y) any dividends
associated with such preferred stock are solely payable in kind.
(b) The Borrower will not permit any of its Subsidiaries
directly or indirectly to issue, sell, assign, pledge, or otherwise encumber or
dispose of any shares of its capital stock or other equity securities (or
warrants, rights or options to acquire shares or other equity securities) of
such Subsidiary, except (i) to the Borrower or to a Wholly-Owned Subsidiary of
the Borrower, (ii) to qualify directors if required by applicable law and (iii)
pursuant to the Pledge Agreement.
7.15 Creation of Subsidiaries. The Borrower shall not
create or acquire any Subsidiary other than (i) Regulated Insurance Companies
which are direct or indirect Subsidiaries of the Borrower and all of the capital
stock of such Subsidiary owned by the Borrower is pledged pursuant to the Pledge
Agreement; and (ii) Non-Regulated Insurance Companies which are not Subsidiaries
of any Regulated Insurance Company, so long as (x) all of the capital stock of
such Subsidiary is pledged pursuant to the Pledge Agreement and (y) such new
Subsidiary executes a counterpart of the Subsidiary Guaranty and the Pledge
Agreement. In addition, at the request of the Administrative Agent, each new
Subsidiary that is required to execute any Credit Document shall execute and
deliver, or cause to be executed and delivered, all other relevant documentation
of the type described in Section 4 as such new Subsidiary would have had to
deliver if such new Subsidiary were a Credit Party on the Initial Borrowing
Date.
7.16 Partnership Agreements. The Borrower will not enter
into any partnership agreement as a general partner.
SECTION 8. Events of Default. Upon the occurrence of any
of the following specified events (each an "Event of Default"):
8.01 Payments. The Borrower shall (i) default in the
payment when due of any principal of the Loans, (ii) default, and such default
shall continue for five or more days, in the
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payment when due of any interest on the Loans or any Fees or (iii) default in
the prompt payment following notice or demand in respect of any other amounts
owing hereunder or under any other Credit Document; or
8.02 Representations, etc. Any representation, warranty
or statement made or deemed made by the Borrower or any other Credit Party
herein or in any other Credit Document or in any statement or certificate
delivered or required to be delivered pursuant hereto or thereto shall prove to
be untrue in any material respect on the date as of which made or deemed made;
or
8.03 Covenants. Any Credit Party shall (a) default in
the due performance or observance by it of any term, covenant or agreement
contained in Section 6.10 or 7, or (b) default in the due performance or
observance by it of any term, covenant or agreement (other than those referred
to in Section 8.01 or clause (a) of this Section 8.03) contained in this
Agreement and such default shall continue unremedied for a period of at least 30
days; or
8.04 Default Under Other Agreements. (a) The Borrower or
any of its Subsidiaries shall (i) default in any payment with respect to
Indebtedness (other than the Obligations), in excess of $3,000,000 individually
or in the aggregate, for the Borrower and its Subsidiaries, beyond the period of
grace, if any, provided in the instrument or agreement under which such
Indebtedness was created or (ii) default in the observance or performance of any
agreement or condition relating to any such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such
Indebtedness (or a trustee or agent on behalf of such holder or holders) to
cause any such Indebtedness to become due prior to its stated maturity; or (b)
any such Indebtedness of the Borrower or any of its Subsidiaries shall be
declared to be due and payable, or required to be prepaid other than by a
regularly scheduled required prepayment, prior to the stated maturity thereof;
or
8.05 Bankruptcy, etc. The Borrower or any of its
Subsidiaries shall commence a voluntary case concerning itself under Title 11 of
the United States Code entitled "Bankruptcy," as now or hereafter in effect, or
any successor thereto (the "Bankruptcy Code"); or an involuntary case is
commenced against the Borrower or any of its Subsidiaries and the petition is
not controverted within 10 days, or is not dismissed within 60 days, after
commencement of the case; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or any of its Subsidiaries; or the Borrower or any of its
Subsidiaries commences (including by way of applying for or consenting to the
appointment of, or the taking of possession by, a rehabilitator, receiver,
custodian, trustee, conservator or liquidator (collectively, a "conservator") of
itself or all or any substantial portion of its property) any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency, liquidation, rehabilitation, conservatorship or similar
law of any jurisdiction whether now or hereafter in effect relating to the
Borrower or any of its Subsidiaries; or any such proceeding is commenced against
the Borrower or any of its Subsidiaries and remains undismissed for a period of
60 days; or the Borrower or any of its Subsidiaries is adjudicated insolvent or
bankrupt; or any order of relief or other order approving any such case or
proceeding is entered; or (a) any Regulated Insurance Company which is engaged
in the business of underwriting insurance and/or reinsurance in the United
States suffers
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any appointment of any conservator or the like for it or any substantial part of
its property, or (b) the Borrower or any of its Subsidiaries (other than any
Regulated Insurance Company described in the immediately preceding clause (a))
suffers any appointment of any conservator or the like for it or any substantial
part of its property which continues undischarged or unstayed for a period of 60
days; or the Borrower or any of its Subsidiaries makes a general assignment for
the benefit of creditors; or any corporate action is taken by the Borrower or
any of its Subsidiaries for the purpose of effecting any of the foregoing; or
8.06 ERISA. (a) Any Plan shall fail to satisfy the
minimum funding standard required for any plan year or part thereof under
Section 412 of the Code or Section 302 of ERISA or a waiver of such standard or
extension of any amortization period is sought or granted under Section 412 of
the Code or Section 303 or 304 of ERISA, a Reportable Event shall have occurred,
any Plan which is subject to Title IV of ERISA shall have had or is likely to
have a trustee appointed by the PBGC to administer such Plan, any Plan which is
subject to Title IV of ERISA is, shall have been or is likely to be terminated
or to be the subject of termination proceedings under ERISA, any Plan shall have
an Unfunded Current Liability, a contribution required to be made with respect
to a Plan has not been timely made, the Borrower or any Subsidiary of the
Borrower or any ERISA Affiliate has incurred or is likely to incur any liability
to or on account of a Plan under Section 409, 502(i), 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Section 401(a)(29), 4971 or 4975 of
the Code or on account of a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B(g)(2) of the Code) under Section 4980B of the Code, or
the Borrower or any Subsidiary of the Borrower has incurred or is likely to
incur liabilities (other than as disclosed on Annex XII) pursuant to one or more
employee welfare benefit plans (as defined in Section 3(1) of ERISA) that
provide death, health or severance benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA or applicable state
law) or Plans; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or a liability or a
material risk of incurring a liability; and (c) such lien, security interest or
liability, individually and/or in the aggregate, has had, or could reasonably be
expected to have, a Material Adverse Effect; or
8.07 Subsidiary Guaranty. The Subsidiary Guaranty or any
provision thereof shall cease to be in full force and effect, or any Subsidiary
Guarantor or any Person acting by or on behalf of such Subsidiary Guarantor
shall deny or disaffirm such Subsidiary Guarantor's obligations under the
Subsidiary Guaranty or any Subsidiary Guarantor shall default in the due
performance or observance of any material term, covenant or agreement on its
part to be performed or observed pursuant to the Subsidiary Guaranty and such
default shall continue beyond any cure or grace period specifically applicable
thereto pursuant to the terms of such Subsidiary Guaranty; or
8.08 Pledge Agreement. The Pledge Agreement shall cease
to be in full force and effect, or shall cease to give the Collateral Agent the
Liens, rights, powers and privileges purported to be created thereby (including,
without limitation, a first priority perfected security interest in, and Lien
on, all of the Collateral subject thereto, in favor of the Collateral Agent,
superior to and prior to the rights of all third Persons and subject to no other
Liens, except Liens expressly permitted by the Pledge Agreement to be senior to
the Liens created by the Pledge Agreement), or any Credit Party shall default in
the due performance or observance of any
54
material term, covenant or agreement on its part to be performed or observed
pursuant to the Pledge Agreement and such default shall continue beyond any cure
or grace period specifically applicable thereto pursuant to the terms of such
Pledge Agreement; or
8.09 Judgments. One or more judgments or decrees shall
be entered against the Borrower or any of its Subsidiaries involving a
liability, net of undisputed reinsurance, of $3,000,000 or more in the case of
any one such judgment or decree or in the aggregate for all such judgments and
decrees for the Borrower and its Subsidiaries and any such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
8.10 Ownership. A Change of Control shall occur;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Administrative Agent shall, upon the written
request of the Required Banks, by written notice to the Borrower, take any or
all of the following actions, without prejudice to the rights of the
Administrative Agent or any Bank to enforce its claims against the Borrower or
any other Credit Party, except as otherwise specifically provided for in this
Agreement (provided that if an Event of Default specified in Section 8.05 shall
occur with respect to the Borrower, the result which would occur upon the giving
of written notice by the Administrative Agent as specified in clauses (i) and
(ii) below shall occur automatically without the giving of any such notice): (i)
declare the Total Commitment terminated, whereupon the Commitment of each Bank
shall forthwith terminate immediately; (ii) declare the principal of and any
accrued interest in respect of all Loans and all Obligations owing hereunder and
under the other Credit Documents to be, whereupon the same shall become,
forthwith due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower; and/or (iii)
enforce, as Collateral Agent (or direct the Collateral Agent to enforce), any or
all of the Liens and security interests created pursuant to the Pledge
Agreement. Any and all of the foregoing remedies and rights notwithstanding,
neither the Collateral Agent nor any Bank shall be entitled to vote, sell or in
any manner exercise control as to any Regulated Insurance Company the capital
stock of which is pledged pursuant to the Pledge Agreement without first making
all required filings with, and obtaining prior written approval from, the
Applicable Insurance Regulatory Authority.
SECTION 9. Definitions. As used herein, the following
terms shall have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the singular number
the plural and in the plural the singular:
"Acquisition" shall mean the acquisition by the Borrower
(directly or through American Exchange) of (a) the assets of PCFS and (b) 100%
of the equity interests in the Acquired Businesses.
"Acquired Businesses" shall mean (i) PFI, (ii) PennLife
and (iii) ConLife, (iv) Peninsular, (v) P-C Canada, (vi) Union Bankers and (vii)
Marquette.
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"Acquisition Agreement" shall mean the Purchase
Agreement, dated as of December 31, 1998, by and among the Borrower, PFG, PLAC,
PennLife, SFC, ConLife and the Seller.
"Acquisition Documents" shall mean the Acquisition
Agreement and all other agreements and documents relating to the Acquisition
including the Annexes and Exhibits to the Acquisition Agreement, in the form
delivered pursuant to Section 4.11 and as the same may be amended or modified
pursuant to the terms thereof and hereof.
"Adjusted Borrower Cash" shall mean, for any period, the
sum of (i) all cash and Cash Equivalents held by the Borrower as of the last day
of such period plus (ii) the portion (if any) of Consolidated Interest Expense
for such period which was paid from cash and Cash Equivalents held by the
Borrower as of the first day of such period or from the net proceeds of an
equity issuance made by the Borrower during such period; provided that (x) cash
and Cash Equivalents which represent the proceeds of borrowings made by the
Borrower or dividends paid to the Borrower (whether during or prior to such
period) shall not be counted as cash and Cash Equivalents held by the Borrower
for purposes of clause (i) and (ii) above and (y) in no event shall the
aggregate amount of Adjusted Borrower Cash exceed $7,000,000 (it being
understood and agreed that for purposes of this definition, Consolidated
Interest Expense and other expenses of the Borrower shall be deemed to be paid
first from dividends paid to the Borrower and second from other cash and Cash
Equivalents available to the Borrower).
"Administrative Agent" shall have the meaning provided
in the first paragraph of this Agreement and shall include any successor to the
Administrative Agent appointed pursuant to Section 10.09.
"Affected Eurodollar Loans" shall have the meaning
provided in Section 3.02(ii)(b).
"Affiliate" shall mean, with respect to any Person, any
other Person directly or indirectly controlling (including but not limited to
all directors and officers of such Person), controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control a
corporation if such Person possesses, directly or indirectly, the power (i) to
vote 10% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or cause the direction of the
management and policies of such corporation, whether through the ownership of
voting securities, by contract or otherwise.
"Agreement" shall mean this Credit Agreement, as the
same may be from time to time modified, amended and/or supplemented.
"American Exchange" shall mean American Exchange Life
Insurance Company, a Texas corporation.
"American Pioneer" shall mean American Pioneer Life
Insurance Company, a Florida corporation.
"American Progressive" shall mean American Progressive
Life and Health Insurance Company of New York, a New York corporation.
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"Annual Statement" shall mean the annual financial
statement required to be filed by any Regulated Insurance Company with the
Applicable Insurance Regulatory Authority.
"Applicable Insurance Regulatory Authority" shall mean,
when used with respect to any Regulated Insurance Company, the insurance
department or similar administrative authority or agency located in (x) each
state or other jurisdiction in which such Regulated Insurance Company is
domiciled or (y) to the extent asserting regulatory jurisdiction over
such Regulated Insurance Company, the insurance department, authority or agency
in each state or other jurisdiction in which such Regulated Insurance Company is
licensed, and shall include any Federal or national insurance regulatory
department, authority or agency that may be created and that asserts regulatory
jurisdiction over such Regulated Insurance Company.
"Applicable Percentage" shall mean (a) with respect to
Base Rate Loans, 2.50% and (ii) with respect to Eurodollar Loans, 3.50%.
"Approved Bank" shall have the meaning provided in the
definition of "Cash Equivalents."
"Approved Company" shall have the meaning provided in
the definition of "Cash Equivalents."
"Asset Sale" shall mean any sale, transfer or other
disposition effected on or after the Initial Borrowing Date by the Borrower or
any of its Subsidiaries of (i) any capital stock or equity securities of a
Subsidiary of the Borrower or (ii) any other asset, in each case to any Person
other than the Borrower or any of its Wholly-Owned Subsidiaries (other than
sales, transfers or other dispositions in the ordinary course of business).
"Assignment and Assumption Agreement" shall have the
meaning provided in Section 11.04(b).
"Authorized Officer" shall mean, as to any Person, any
senior officer of such Person designated as such in writing by such Person to,
and found acceptable by, the Administrative Agent.
"Bank" shall have the meaning provided in the first
paragraph of this Agreement.
"Bank Default" shall mean (i) the refusal (which has not
been retracted) of a Bank to make available its portion of any Borrowing or (ii)
a Bank having notified the Administrative Agent and/or the Borrower that it does
not intend to comply with its obligations under Section 1.01, in the case of
either clause (i) or (ii) above as a result of the
appointment of a receiver or conservator with respect to such Bank at the
direction or request of any regulatory agency or authority.
"Bankruptcy Code" shall have the meaning provided in
Section 8.05.
"Base Rate" at any time shall mean the higher of (x) the
rate which is 1/2 of 1% in excess of the Federal Funds Effective Rate as in
effect at such time and (y) the Prime Lending Rate as in effect at such time.
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"Base Rate Loan" shall mean each Loan bearing interest
at the rates provided in Section 1.08(a).
"Benchmark Statement" shall mean, as of any date, an
annual financial statement of the Regulated Insurance Companies as would be
prepared as of such date utilizing the identical format utilized by American
Exchange in preparing its December 31, 1998 Annual Statement filed with the
Insurance Department of the State of Texas, with each page, line
item and column of a Benchmark Statement to contain the same type of
information, computed in the same manner, as contained in the identically
numbered page, line item and column of such Annual Statement.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Borrower Cash Flow" shall mean, for any period, the sum
of (i) dividends paid by Regulated Insurance Companies during such period, (ii)
the aggregate amount of dividends which the Regulated Insurance Companies could
pay to the Borrower under applicable Legal Requirements as of the last day of
such period (without obtaining extraordinary dividend approval from any
Applicable Insurance Regulatory Authority, but taking into account dividends
previously paid during such period), (iii) tax sharing payments made by
Regulated Insurance Companies to the Borrower during such period (less cash
taxes paid by the Borrower during such period), (iv) payments during such period
of principal and interest on surplus notes issued by Regulated Insurance
Companies to the Borrower and (v) dividends and management fees paid by
Non-Regulated Companies to the Borrower during such period.
"Borrowing" shall mean the incurrence by the Borrower of
one Type of Loan pursuant to a single Facility from all of the Banks having
Commitments with respect to such Facility, on a pro rata basis on a given date
(or resulting from conversions on a given date), having in the case of
Eurodollar Loans the same Interest Period, provided that Base Rate Loans
incurred pursuant to Section 1.10(b) shall be considered part of any related
Borrowing of Eurodollar Loans.
"Business Day" shall mean (i) for all purposes other
than as covered by clause (ii) below, any day, excluding Saturday, Sunday and
any day which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close, and (ii) with respect to all notices and determinations in connection
with, and payments of principal and interest on, Eurodollar Loans, any day which
is a Business Day described in clause (i) and which is also a day for trading by
and between banks in U.S. dollar deposits in the interbank Eurodollar market.
"Canadian Holdco" shall mean UAFC (Canada) Inc., a
Canadian corporation.
"Capital Expenditures" shall mean expenditures (whether
paid in cash or accrued as liabilities and including in all events all amounts
expended or capitalized under Capital Leases but excluding any amount
representing capitalized interest) by the Borrower and its Subsidiaries that, in
conformity with GAAP, are or are required to be included in the property, plant
or equipment reflected in the consolidated balance sheet of the Borrower and its
Subsidiaries,
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provided that Capital Expenditures shall in any event include the purchase price
paid in connection with the acquisition of any Person (including through the
purchase of all of the capital stock or other ownership interests of such Person
or through merger or consolidation) to the extent allocable to property, plant
and equipment.
"Capital Lease" as applied to any Person, shall mean any
lease of any property (whether real, personal or mixed) by that Person as lessee
which, in conformity with GAAP, is, or is required to be, accounted for as a
capital lease on the balance sheet of that Person.
"Capitalized Lease Obligations" shall mean all
obligations under Capital Leases of the Borrower or any of its Subsidiaries in
each case taken at the amount thereof accounted for as liabilities in accordance
with GAAP.
"Capital Z" shall mean Capital Z Financial Services Fund
II, L.P., a Bermuda limited partnership.
"Cash Equivalents" shall mean (i) securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than one year from the date of acquisition, (ii) U.S. dollar
denominated time deposits, certificates of deposit and bankers acceptances of
(x) any FDIC insured bank, in amounts up to the FDIC insured limit, (y) any Bank
having capital and surplus in excess of $500,000,000 or the U.S. dollar
equivalent thereof or (z) any bank whose short-term commercial paper rating from
S&P is at least A-1 or the equivalent thereof or from ▇▇▇▇▇'▇ is at least P-1 or
the equivalent thereof (any such bank, an "Approved Bank"), in each case with
maturities of not more than one year from the date of acquisition, (iii)
commercial paper issued by any Bank or Approved Bank or by the parent company of
any Bank or Approved Bank and commercial paper issued by, or guaranteed by, any
industrial or financial company with a short-term commercial paper rating of at
least A-2 or the equivalent thereof by S&P or at least P-2 or the equivalent
thereof by Moody's (any such company, an "Approved Company"), or guaranteed by
any industrial company with a long term unsecured debt rating of at least A or
A2, or the equivalent of each thereof, from S&P or Moody's, as the case may be,
and in each case maturing within six months after the date of acquisition,
provided, however, that commercial paper rated A-2 or the equivalent thereof by
S&P or P-2 or the equivalent thereof by Moody's and held by the Borrower and all
Regulated Insurance Companies under this clause (iii) shall not exceed (x) for
any Issuer, 1% of Invested Assets, and (y) in the aggregate, 3% of Invested
Assets, (iv) commercial paper of any United States municipal, state or local
government rated at least A-1 or the equivalent thereof by S&P or at least P-1
or the equivalent thereof by Moody's and maturing within one year after the date
of acquisition, (v) any fund or funds investing solely in investments of the
type described in clauses (i) through (iv) above, and (vi) agreements to sell
and repurchase direct obligations of, or obligations that are fully guaranteed
as to principal and interest by, the U.S. Treasury, such agreements to be with
primary treasury dealers, to be evidenced by standard industry forms and to have
maturities of not more than six months from the date of commencement of the
repurchase transaction.
"Cash Proceeds" shall mean, with respect to any Asset
Sale, the aggregate cash payments (including any cash received by way of
deferred payment pursuant to a note receivable
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issued in connection with such Asset Sale, other than the portion of such
deferred payment constituting interest, but only as and when received) received
by the Borrower and/or any Subsidiary from such Asset Sale, provided that any
such proceeds received in currency other than U.S. dollars shall be converted
into U.S. dollars at the spot exchange rate for the currency in question on the
date of receipt by the Borrower and/or its Subsidiaries of such proceeds.
"Change of Control" shall mean (a) Capital Z and its
Affiliates collectively shall cease to own directly or indirectly at least 25%
of the Borrower's capital stock on a fully diluted basis, (b) Capital Z and its
Affiliates collectively shall cease to own directly or indirectly an amount of
the economic and voting interest in the Borrower's capital stock equal to at
least 51% of the amount of the economic and voting interest in the Borrower's
capital stock that was owned by Capital Z and its Affiliates collectively as of
the Initial Borrowing Date; (c) the Borrower shall cease to own directly or
indirectly (other than as a result of a transaction permitted under Section
7.02(d) hereof) 100% of the capital stock of American Exchange, American
Pioneer, American Progressive, WorldNet, PennLife, PC-Canada, ConLife or Union
Bankers; (d) any Person (together with its affiliates) shall own directly or
indirectly, on a fully diluted basis, more of the economic and voting interest
in the capital stock of the Borrower than that owned by Capital Z and its
Affiliates (collectively); or (e) a majority of the Board of Directors of the
Borrower shall cease to consist of Continuing Directors.
"Chase" shall mean The Chase Manhattan Bank.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement and any subsequent provisions of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Collateral" shall mean all of the Collateral as defined
in the Pledge Agreement.
"Collateral Agent" shall mean the Administrative Agent
acting as collateral agent for the Banks.
"Combined" shall mean, when used with reference to any
amount or financial statement, such amount as determined, or financial statement
as prepared, on a combined basis for all of the specified Persons and their
respective Subsidiaries; provided that any such amount or financial statement
determined or prepared for any specified Person and its Subsidiaries separately
shall be determined or prepared on a consolidated basis in accordance with GAAP
or SAP, as the case may be.
"Commitment" shall mean, with respect to each Bank, such
Bank's Term Loan Commitment and Revolving Loan Commitment.
"Commitment Fee" shall have the meaning provided in
Section 2.01(a).
"Company Action Level" shall mean "Company Action Level"
as defined by the NAIC from time to time and as applied in the context of the
Risk Based Capital Guidelines promulgated by the NAIC (or any term substituted
therefor by the NAIC).
60
"ConLife" shall mean Constitution Life Insurance
Company, a Texas corporation.
"Consolidated Indebtedness" shall mean, at any time and
as to any Person, the aggregate outstanding principal amount of all Indebtedness
for borrowed money of such Person and its Subsidiaries at such time determined
on a consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" shall mean, for any
period and as to any Person, total cash interest expense (including the interest
component in respect of Capital Lease Obligations in accordance with GAAP) of
such Person and its Subsidiaries during such period on a consolidated basis
including, without limitation, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance financing
and net costs under Interest Rate Agreements, but excluding however, any
amortization of deferred financing costs.
"Consolidated Net Income" shall mean, for any period,
the consolidated net after tax income of the Borrower and its Subsidiaries
determined in accordance with GAAP.
"Consolidated Net Worth" shall mean, with respect to any
Person, the Net Worth of such Person and its Subsidiaries determined on a
consolidated basis in accordance with GAAP after appropriate deduction for any
minority interests in Subsidiaries.
"Consolidated Total Capital" shall mean, at any time and
as to any Person, the sum of (i) Consolidated Indebtedness of such Person at
such time and (ii) Consolidated Net Worth of such Person at such time.
"Contingent Obligations" shall mean, as to any Person,
any obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (a) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (d) otherwise to assure or hold
harmless the owner of such primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation shall not include (x)
endorsements of instruments for deposit or collection in the ordinary course of
business or (y) obligations of any Regulated Insurance Company under Insurance
Contracts, Reinsurance Agreements or Retrocession Agreements. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
"Continuing Directors" shall mean the directors of the
Borrower on the Initial Borrowing Date and each other director if such
director's nomination for the election to the
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Board of Directors of the Borrower is recommended by a majority of the then
Continuing Directors.
"Credit Documents" shall mean this Agreement, the Notes,
the Subsidiary Guaranty and the Pledge Agreement.
"Credit Party" shall mean the Borrower and each
Subsidiary Guarantor.
"Default" shall mean any event, act or condition which
with notice or lapse of time, or both, would constitute an Event of Default.
"Defaulting Bank" shall mean any Bank with respect to
which a Bank Default is in effect.
"Dividends" shall have the meaning provided in Section
7.08.
"Domestic Subsidiary" shall mean each Subsidiary of the
Borrower which is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in
Section 11.10.
"Equity Investment" shall mean the issuance by the
Borrower of common stock on terms and conditions satisfactory to the
Administrative Agent, and the receipt by the Borrower in respect of such
issuance of at least $94,000,000, of which amount (i) no less than $78,000,000
will be issued to Capital Z and (ii) the remainder will be issued by the
Borrower to management of the Borrower and the Acquired Businesses, certain
agents of the Acquired Businesses and other investors; it being understood that
(a) such remainder referred to in clause (ii) above shall include, without
limitation, $4,000,000 of Series D Preferred Stock sold to Universal American
Financial Corporation, L.P prior to the consummation of the Transaction and (b)
in addition to the amounts referred to in clauses (i) and (ii) above, $1,375,000
of common stock will be issued to Capital Z and/or its Affiliates as fees in
connection with the Transaction.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the regulations
promulgated and rulings issued thereunder. Section references to ERISA are to
ERISA, as in effect at the date of this Agreement and any subsequent provisions
of ERISA, amendatory thereof, supplemental thereto or substituted
therefor.
"ERISA Affiliate" shall mean each person (as defined in
Section 3(9) of ERISA) which together with the Borrower or a Subsidiary of the
Borrower would be deemed to be a "single employer" within the meaning of Section
414(b),(c), (m) or (o) of the Code.
"Eurodollar Loan" shall mean each Loan bearing interest
at the rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean, in the case of any
Eurodollar Loan, with respect to each day during each Interest Period pertaining
to such Eurodollar Loan, the rate of interest determined on the basis of the
rate for deposits in Dollars for a period equal to such Interest Period
commencing on the first day of such Interest
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Period appearing on Page 3750 of the Dow ▇▇▇▇▇ Market Screen as of 11:00 A.M.,
London time, two Business Days prior to the commencement of such Interest
Period. In the event that such rate does not appear on Page 3750 of the Dow
▇▇▇▇▇ Market Screen (or otherwise on such service), the "Eurodollar Rate" for
the purposes of this paragraph shall be determined by reference to such other
publicly available service for displaying eurodollar rates as may be agreed upon
by the Administrative Agent and the Borrower or, in the absence of such
agreement, the "Eurodollar Rate" for the purposes of this paragraph shall
instead be the rate per annum notified to the Administrative Agent by Chase as
the rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New
York time, two Business Days prior to the beginning of such Interest Period, in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being conducted
for delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
"Event of Default" shall have the meaning provided in
Section 8.
"Excess Cash Flow" shall mean, for any Excess Cash Flow
Period, an amount equal to (i) 50% of the aggregate amount of dividends which
the Regulated Insurance Companies could pay under applicable Legal Requirements
as of the last day of such Excess Cash Flow Period (without obtaining
extraordinary dividend approval from any Applicable Insurance Regulatory
Authority), while still maintaining a Risk Based Capital Ratio for all Regulated
Insurance Companies (determined on a Combined basis) of at least 200% and
satisfying all Indebtedness obligations minus (ii) all voluntary prepayments of
Term Loans during such Excess Cash Flow Period.
"Excess Cash Flow Period" shall mean (i) the period from
the Initial Borrowing Date to the last day of the Borrower's fiscal year ending
December 31, 2000, and (ii) each fiscal year of the Borrower thereafter.
"Expiration Date" shall mean August 31, 1999.
"Facility" shall mean any of the credit facilities
established under this Agreement, i.e., the Term Loan Facility and the Revolving
Loan Facility.
"Federal Funds Effective Rate" shall mean for any
period, a fluctuating interest rate equal for each day during such period to the
weighted average of the rates on overnight Federal Funds transactions with
members of the Federal Reserve System arranged by Federal Funds brokers, as
published for such day (or, if such day is not a Business Day, for
the next preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by the
Administrative Agent from three Federal Funds brokers of recognized standing
selected by the Administrative Agent.
"Fees" shall mean all amounts payable pursuant to, or
referred to in, Section 2.01.
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"Financial Reinsurance Agreement" shall mean a
reinsurance agreement covering any transaction which is not, or would not be,
approved by the National Association of Insurance Commissioners.
"Foreign Subsidiary" shall mean each Subsidiary of the
Borrower that is incorporated under the laws of any jurisdiction other than the
United States of America, any State thereof or any territory thereof.
"GAAP" shall mean generally accepted accounting
principles in the United States of America; it being understood and agreed that
determinations in accordance with GAAP for purposes of Section 7, including
defined terms as used therein, are subject (to the extent provided therein) to
Section 11.07(a).
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Indebtedness" of any Person shall mean (i) all
indebtedness of such Person for borrowed money, (ii) the deferred purchase price
of assets or services which in accordance with GAAP would be shown on the
liability side of the balance sheet of such Person, (iii) the face amount of all
letters of credit issued for the account of such Person and,
without duplication, all drafts drawn thereunder, (iv) all Indebtedness of a
second Person secured by any Lien on any property owned by such first Person,
whether or not such Indebtedness has been assumed, (v) the principal portion of
all Capitalized Lease Obligations of such Person, (vi) all obligations of such
Person to pay a specified purchase price for goods or services whether or not
delivered or accepted, i.e., take-or-pay and similar obligations, (vii) all
obligations of such Person under Interest Rate Agreements and Other Hedging
Agreements and (viii) all Contingent Obligations of such Person; provided that
Indebtedness shall not include trade payables (including payables under
insurance contracts and reinsurance payables) and accrued expenses, in each case
arising in the ordinary course of business.
"Initial Borrowing Date" shall mean the date upon which
the Term Loans are initially incurred hereunder.
"Insurance Business" shall mean one or more aspects of
the business of selling, issuing or underwriting insurance or reinsurance.
"Insurance Contract" shall mean any insurance contract
or policy issued by a Regulated Insurance Company but shall not include any
Reinsurance Agreement or Retrocession Agreement.
"Interest Coverage Ratio" shall mean, for any period,
the ratio of (a) the sum of (i) Borrower Cash Flow for such period plus (ii) for
any period ending on or prior to December 31, 2000 only, Adjusted Borrower Cash
for such period to (b) Consolidated Interest Expense for such period.
"Interest Period" shall mean, with respect to any
Eurodollar Loan, the interest period applicable thereto, as determined pursuant
to Section 1.09.
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"Interest Rate Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedging agreement or other similar agreement or arrangement.
"Invested Assets" shall mean, at any date for the
Regulated Insurance Companies (on a consolidated basis), the total amount as
would be shown on line 11, page 2, column 4 of a Benchmark Statement for the
Regulated Insurance Companies (on a consolidated basis) prepared as of such
date.
"Investment Grade Securities" shall mean and include (i)
U.S. Government Obligations (other than Cash Equivalents), (ii) debt securities
or debt instruments with a rating of BBB- or higher by S&P, Baa3 or higher by
Moody's, Class (2) or higher by NAIC or the equivalent of such rating by S&P,
Moody's or NAIC, or if none of S&P, Moody's and NAIC shall then exist, the
equivalent of such rating by any other nationally recognized securities rating
agency, but excluding any debt securities or instruments constituting loans or
advances among the Borrower and its Wholly-Owned Subsidiaries, and (iii) any
fund investing exclusively in investments of the type described in clauses (i)
and (ii) which funds may also hold immaterial amounts of cash pending investment
and/or distribution.
"Issuer" shall mean any issuer of Investment Grade
Securities or Non-Investment Grade Securities acquired or proposed to be
acquired by the Borrower or any of its Subsidiaries pursuant to Section 7.06.
"Legal Requirements" shall mean all applicable laws,
rules and regulations made by any governmental body or regulatory authority
(including, without limitation, any Applicable Insurance Regulatory Authority)
having jurisdiction over the Borrower or a Subsidiary of the Borrower.
"Lien" shall mean any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any agreement to
give any of the foregoing, any conditional sale or other title retention
agreement or any lease in the nature thereof).
"Loan" shall have the meaning provided in Section 1.01.
"Management Agreements" shall have the meaning provided
in Section 4.12.
"Margin Stock" shall have the meaning provided in
Regulation U.
"Marquette" shall mean Marquette National Life Insurance
Company, a Texas corporation.
"Material Adverse Effect" shall mean a material adverse
effect on the business, operations, property, condition (financial or otherwise)
or prospects of the Borrower and its Subsidiaries taken as a whole after giving
effect to the Transaction; provided, however, that reserve strengthenings of
$20,000,000 and $15,000,000 by the Acquired Businesses in 1998, and a subsequent
charge of $5,000,000, shall not be deemed to have a Material Adverse Effect.
"Material Contracts" shall have the meaning provided in
Section 4.12.
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"Maturity Date" with respect to any Facility shall mean
either the Term Loan Maturity Date or the Revolving Loan Maturity Date, as the
case may be.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc. and
its successors.
"NAIC" shall mean the National Association of Insurance
Commissioners or any successor organization thereto.
"NAIC Tests" shall mean the ratios and other financial
measurements developed by the NAIC under its Insurance Regulatory Information
System, as in effect from time to time.
"Net Available Proceeds" shall mean (i) with respect to
any Asset Sale consummated by a Regulated Insurance Company, the Surplus
Increase with respect to such Regulated Insurance Company as a result of such
Asset Sale, (ii) with respect to any Asset Sale consummated by the Borrower or
any Non-Regulated Company which is not a Subsidiary of a Regulated Insurance
Company, the Net Cash Proceeds resulting therefrom and (iii) with respect to any
Asset Sale consummated by a Non-Regulated Company which is a Subsidiary of a
Regulated Insurance Company, an amount equal to the dividend that such Regulated
Insurance Company would be permitted to pay in accordance with the Legal
Requirements applicable to it as a result of the receipt by such Regulated
Insurance Company of a dividend from such Non-Regulated Insurance Company in an
amount equal to the Net Cash Proceeds resulting from such Asset Sale; in each
case as determined in good faith by the Borrower and certified in writing by the
Borrower to the Administrative Agent (showing the calculation thereof and
supporting assumptions) on or prior to the date on which the Borrower or any
Subsidiary is to receive the initial proceeds from such Asset Sale.
"Net Cash Proceeds" shall mean, with respect to any
Asset Sale, the Cash Proceeds resulting therefrom net of (a) cash expenses of
sale (including payment of principal, premium and interest on Indebtedness other
than the Loans required to be repaid as a result of such Asset Sale), (b)
incremental taxes paid or payable as a result thereof and (c) amounts provided
as a reserve, in accordance with GAAP, against any liabilities under any
indemnification obligations, purchase price adjustments or similar items
associated with such Asset Sale, in each case as determined in good faith by the
Borrower and certified in writing by the Borrower to the Administrative Agent
(showing the calculation thereof and supporting assumptions) on or prior to the
date on which the Borrower or any Subsidiary is to receive the initial proceeds
from such Asset Sale.
"Net Worth" shall mean, as to any Person, the sum of its
capital stock (including, without limitation, its preferred stock), capital in
excess of par or stated value of shares of its capital stock (including, without
limitation, its preferred stock), retained earnings and any other account which,
in accordance with GAAP, constitutes stockholders equity, but excluding (i) any
treasury stock and (ii) the effects of Financial Accounting Statement No. 115.
"Non-Defaulting Bank" shall mean any Bank other than a
Defaulting Bank.
"Non-Investment Grade Securities" shall mean debt and
equity securities and debt and equity instruments that do not constitute
Investment Grade Securities or Cash Equivalents (but excluding any debt or
equity securities or instruments constituting loans or advances among
66
the Borrower and its Wholly-Owned Subsidiaries), it being understood that for
the purposes of any determination under Section 7.06(f), the amounts, if any,
paid by such Regulated Insurance Company to purchase such equity securities or
warrants shall be included in the principal amounts of Non-Investment Grade
Securities.
"Non-Regulated Company" shall mean each Subsidiary of
the Borrower which is not a Regulated Insurance Company.
"Note" shall mean each Term Note and each Revolving
Note.
"Notice of Borrowing" shall have the meaning provided in
Section 1.03.
"Notice of Conversion" shall have the meaning provided
in Section 1.06.
"Notice Office" shall mean the office of the
Administrative Agent at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇, Telephone: (▇▇▇) ▇▇▇-▇▇▇▇, Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇,
or such other office as the Administrative Agent may designate to the Borrower
and the Banks from time to time.
"Obligations" shall mean all amounts, direct or
indirect, contingent or absolute, of every type or description, and at any time
existing, owing to the Administrative Agent, the Collateral Agent or any Bank
pursuant to the terms of this Agreement or any other Credit Document.
"Other Hedging Agreements" shall mean any foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against fluctuations in currency values.
"Payment Office" shall mean the office of the
Administrative Agent c/o The Loan and Agency Services Group, One Chase ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, Facsimile
No.: (▇▇▇) ▇▇▇-▇▇▇▇ or such other office as the Administrative Agent may
designate to the Borrower and the Banks from time to time.
"PC-Canada" shall mean PennCorp Life Insurance Company,
a Canadian corporation.
"PCFS" shall mean PennCorp Financial Services, Inc., a
Delaware corporation.
"Peninsular" shall mean Peninsular Life Insurance
Company, a North Carolina corporation.
"PennLife" shall mean Pennsylvania Life Insurance
Company, a Pennsylvania corporation.
"Permitted Acquisition" shall have the meaning provided
in Section 7.02(h).
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"Person" shall mean any individual, partnership, joint
venture, firm, corporation, limited liability company, association, trust or
other enterprise or any government or political subdivision or any agency,
department or instrumentality thereof.
"PFG" shall mean PennCorp Financial Group, Inc., a
Delaware corporation.
"PFI" shall mean PennCorp Financial, Inc., a Delaware
corporation.
"PLAC" shall mean Pacific Life and Accident Insurance
Company, a Texas corporation.
"Plan" shall mean any pension plan as defined in Section
3(2) of ERISA, which is maintained or contributed to by (or to which there is an
obligation to contribute of) the Borrower or a Subsidiary of the Borrower or an
ERISA Affiliate, and each such plan for the five year period immediately
following the latest date on which the Borrower, or a Subsidiary of the Borrower
or an ERISA Affiliate maintained, contributed to or had an obligation to
contribute to such plan.
"Plan Documents" shall have the meaning provided in
Section 4.12(a).
"Pledge Agreement" shall have the meaning provided in
Section 4.09.
"Pledged Securities" shall mean all the Pledged
Securities as defined in the Pledge Agreement.
"Pledged Notes" shall mean the Pledged Notes as defined
in the Pledge Agreement.
"Pledged Stock" shall mean the Pledged Stock as defined
in the Pledge Agreement.
"Prime Lending Rate" shall mean the rate of interest per
annum which Chase announces from time to time as its prime commercial lending
rate in effect at its principal office in New York City, the Prime Lending Rate
to change when and as such prime commercial lending rate changes. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Chase may make commercial loans
or other loans at rates of interest at, above or below the Prime Lending Rate.
"Projections" shall mean the financial projections set
forth on Annex XIII hereto.
"Quarterly Statement" shall mean the quarterly financial
statement required to be filed by any Regulated Insurance Company with the
Applicable Regulatory Insurance Authority.
"Quincy" shall mean Quincy Coverage Corporation, a New
York corporation.
"Refinancing" shall mean the refinancing of all existing
Indebtedness for borrowed money of the Borrower and the Acquired Businesses.
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"Refinancing Documents" shall mean the documents related
to the Refinancing.
"Register" shall have the meaning provided in Section
6.13.
"Regulated Insurance Company" shall mean any Subsidiary
of the Borrower, whether now owned or hereafter acquired, that is authorized or
admitted to carry on or transact Insurance Business in any jurisdiction and is
regulated by any Applicable Insurance Regulatory Authority.
"Regulation D" shall mean Regulation D of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing reserve requirements.
"Regulation U" shall mean Regulation U of the Board of
Governors of the Federal Reserve System as from time to time in effect and any
successor to all or a portion thereof establishing margin requirements.
"Reinsurance Agreement" shall mean any agreement,
contract, treaty or other arrangement whereby one or more insurers, as
reinsurers, assume liabilities under insurance policies or agreements issued by
another insurance or reinsurance company or companies.
"Replaced Bank" shall have the meaning provided in
Section 1.13.
"Replacement Bank" shall have the meaning provided in
Section 1.13.
"Reportable Event" shall mean an event described in
Section 4043(c) of ERISA with respect to a Plan other than those events as to
which the 30-day notice period is waived under subsection .22, .23, .25, .27, or
.28 of PBGC Regulation Section 4043.
"Required Banks" shall mean Non-Defaulting Banks the sum
of whose outstanding Term Loans and Revolving Loan Commitment (or, if after the
Total Revolving Loan Commitment has been terminated, outstanding Revolving
Loans) constitute a majority of the sum of (i) the total outstanding Term Loans
of Non-Defaulting Banks and (ii) the Total Revolving Loan Commitment less the
aggregate Revolving Loan Commitments of Defaulting Banks, if any, or, if after
the Total Revolving Loan Commitment has been terminated, the total outstanding
Revolving Loans of Non-Defaulting Banks)
"Retrocession Agreement" shall mean any agreement,
contract, treaty or other arrangement whereby one or more insurers or
reinsurers, as retrocessionaires, assume liabilities of reinsurers under a
Reinsurance Agreement or other retrocessionaires under another Retrocession
Agreement.
"Revolving Loan" shall have the meaning provided in
Section 1.01(b).
"Revolving Loan Commitment" shall mean, with respect to
each Bank, the amount set forth opposite such Bank's name in Annex I directly
below the column entitled "Revolving Loan Commitment," as the same may be
reduced from time to time or terminated pursuant to Sections 2.02 and/or 8.
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"Revolving Loan Facility" shall mean the Facility
evidenced by the Total Revolving Loan Commitment.
"Revolving Loan Maturity Date" shall mean July 31, 2004.
"Revolving Note" shall have the meaning provided in
Section 1.05(a).
"Risk Based Capital Ratio" shall mean, for any Regulated
Insurance Company, the ratio (expressed as a percentage), at any time, of the
Total Adjusted Capital of such Regulated Insurance Company to the Company Action
Level of such Regulated Insurance Company.
"Risk Derivatives" shall mean Z bonds, floaters/inverse
floaters, PAC II, PAC III, Ioettes, support bonds, Interest Only Investments,
Principal Only Investments residuals, inverse IO's, super floaters, any other
instruments with similar economic risk factors and any bonds backed in whole or
in part by any of the foregoing (including component or "kitchen sink" bonds).
"Rollover Amount" shall have the meaning provided in
Section 7.05(b).
"S&P" shall mean Standard & Poor's Ratings Group and its
successors.
"S&P Credit Rating" shall mean the rating level (it
being understood that a rating level shall include numerical modifiers and (+)
and (-) modifiers) assigned by S&P to the senior unsecured long-term debt of an
Issuer.
"S&P Equivalent Rating" shall mean, with respect to any
Investment Grade Security or Non-Investment Grade Security, the rating given
such security by S&P or the S&P equivalent rating of the rating given such
security by Moody's or NAIC, it being understood that if any such security is
rated by more than one of S&P, Moody's and NAIC and any of such ratings (or the
S&P equivalent of such ratings) differ, then the S&P Equivalent Rating for such
security shall be the lower or lowest, as the case may be, of such ratings (or
the S&P equivalent of such ratings).
"SAP" shall mean, with respect to any Regulated
Insurance Company, the accounting procedures and practices prescribed or
permitted by the Applicable Insurance Regulatory Authority of the state in which
such Regulated Insurance Company is domiciled; it being understood and agreed
that determinations in accordance with SAP for purposes of Section 7,
including defined terms as used therein, are subject (to the extent provided
therein) to Section 11.07(a).
"Scheduled Repayments" shall have the meaning provided
in Section 3.02(i)(a).
"SEC" shall mean the Securities and Exchange Commission
or any successor thereto.
"SEC Regulation D" shall mean Regulation D as
promulgated under the Securities Act of 1933, as amended, as the same may be in
effect from time to time.
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"Section 3.04(b)(ii) Certificate" shall have the meaning
provided in Section 3.04(b)(ii).
"Secured Creditors" shall have the meaning provided in
the Pledge Agreement.
"Seller" shall mean PennCorp Financial Services, Inc., a
Delaware corporation.
"SFC" shall mean Southwestern Financial Corporation, a
Delaware corporation.
"Shared Expenses Agreements" shall have the meaning
provided in Section 4.12.
"Statutory Surplus" shall mean, at any date for any
Regulated Insurance Company, (a) the total amount as would be shown on line 37,
page 3, column 1 of a Benchmark Statement for such Regulated Insurance Company
prepared as of such date.
"Stockholders Agreements" shall have the meaning
provided in Section 4.12.
"Strategic Marketing Alliance Agreement" shall mean that
certain General Agent's Contract, dated as of July 2, 1997, between American
Pioneer and American Pioneer Senior Health Division, Inc.
"Subsidiary" of any Person shall mean and include (i)
any corporation more than 50% of whose stock of any class or classes having by
the terms thereof ordinary voting power to elect a majority of the directors of
such corporation (irrespective of whether or not at the time stock of any class
or classes of such corporation shall have or might have voting power by reason
of the happening of any contingency) is at the time owned by such Person
directly or indirectly through Subsidiaries and (ii) any partnership,
association, joint venture or other entity in which such Person directly or
indirectly through Subsidiaries has more than a 50% equity or voting interest at
the time. Unless otherwise expressly provided, all references herein to
"Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Guarantor" shall mean each Domestic
Subsidiary of the Borrower which is a Non-Regulated Company; provided that the
Non-Regulated Companies listed on Annex XIV hereto shall not constitute
Subsidiary Guarantors and shall not be required to execute the Subsidiary
Guaranty, so long as the Net Worth of all such Non-Regulated Companies which
are not parties to the Subsidiary Guaranty, determined on a Combined basis in
accordance with GAAP, shall not exceed $2,000,000.00.
"Subsidiary Guaranty" shall have the meaning provided in
Section 4.08.
"Surplus Increase" shall mean, with respect to each
Asset Sale effected by a Regulated Insurance Company, the increase in Statutory
Surplus of such Regulated Insurance Company as a result of such Asset Sale.
"Surplus Note" shall have the meaning provided in
Section 6.14.
"Tax Benefit" shall have the meaning provided in Section
3.04(c).
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"Tax Sharing Agreements" shall have the meaning provided
in Section 4.12.
"Taxes" shall have the meaning provided in Section
3.04(a).
"Term Loan" shall have the meaning provided in Section
1.01(a).
"Term Loan Commitment" shall mean, with respect to each
Bank, the amount set forth opposite such Bank's name in Annex I directly below
the column entitled "Term Loan Commitment," as the same may be terminated
pursuant to Sections 2.02, 2.03 and/or 8.
"Term Loan Facility" shall mean the Facility evidenced
by the Total Term Loan Commitment.
"Term Loan Maturity Date" shall mean July 31, 2006.
"Term Note" shall have the meaning provided in Section
1.05(a).
"Test Period" shall mean (i) the two month period ending
September 30, 1999 (taken as one accounting period), (ii) the five month period
ending December 31, 1999 (taken as one accounting period), (iii) the fiscal
quarter ending March 31, 2000, (iv) the two fiscal quarter period ending June
30, 2000 (taken as one accounting period), (v) the three fiscal quarter period
ending September 30, 2000 (taken as one accounting period), and (vi) for any
determination made after September 30, 2000, the four consecutive fiscal
quarters of the Borrower ended on the last day of the most recently ended fiscal
quarter of the Borrower (taken as one accounting period).
"Total Adjusted Capital" shall mean "Total Adjusted
Capital" as defined by the NAIC as of December 31, 1997 and as applied in the
context of the Risk Based Capital Guidelines promulgated by the NAIC.
"Total Commitment" shall mean the sum of the Total Term
Loan Commitment and the Total Revolving Loan Commitment.
"Total Revolving Loan Commitment" shall mean the sum of
the Revolving Loan Commitments of each of the Banks.
"Total Term Loan Commitment" shall mean the sum of the
Term Loan Commitments of each of the Banks.
"Total Unutilized Revolving Loan Commitment" shall mean,
at any time, (i) the Total Revolving Loan Commitment at such time less (ii) the
sum of the aggregate principal amount of all Revolving Loans outstanding at such
time.
"Transaction" shall mean, collectively, (i) the
Acquisition, (ii) the Refinancing, (iii) the Equity Investment, (iv) the
incurrence by the Borrower of the Term Loans hereunder on the Initial Borrowing
Date and (v) the payment of fees and expenses in connection with the foregoing.
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"Transaction Documents" shall mean, collectively, (i)
the Acquisition Documents, (ii) the Refinancing Documents, (iii) the documents
and instruments governing the Equity Investment and (iv) the Credit Documents.
"Type" shall mean any type of Loan determined with
respect to the interest option applicable thereto, i.e., a Base Rate Loan or a
Eurodollar Loan.
"UCC" shall mean the Uniform Commercial Code, as the
same may be amended from time to time.
"Unfunded Current Liability" of any Plan shall mean the
amount, if any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with Statement of Financial Accounting Standards No. 87, based upon the
actuarial assumptions used by the Plan's actuary in the most recent annual
valuation of the Plan.
"Union Bankers" shall mean Union Bankers Insurance
Company, a Texas corporation.
"Unutilized Revolving Loan Commitment" with respect to
any Bank at any time shall mean such Bank's Revolving Loan Commitment at such
time less the aggregate outstanding principal amount of all Revolving Loans made
by such Bank at such time.
"U.S. Government Obligations" shall mean and include (A)
securities that are (x) direct obligations of the United States of America for
the timely payment of which its full faith and credit is pledged or (y)
obligations of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the timely payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt issued
by a bank (as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended), as custodian with respect to any such U.S. Government Obligation or a
specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt; provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the U.S. Government Obligation or the specific payment of principal of or
interest on the U.S. Government Obligation evidenced by such depository receipt
and (B) to the extent in each case having an S&P Equivalent Rating of AAA,
obligations issued or guaranteed by the Federal Home Loan Mortgage Corporation,
the Federal National Mortgage Association, the Government National Mortgage
Association, the Student Loan Marketing Association and the Federal Home Loan
Bank.
"Wholly-Owned Subsidiary" of any Person shall mean any
Subsidiary of such Person to the extent all of the capital stock or other
ownership interests in such Subsidiary, other than directors' or nominees'
qualifying shares, is owned directly or indirectly by such Person.
"WorldNet" shall mean WorldNet Services Corp., a Florida
corporation.
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"Written" or "in writing" shall mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
SECTION 10. The Administrative Agent.
10.01 Appointment. Each Bank hereby irrevocably
designates and appoints Chase as Administrative Agent (such term as used in this
Section 10 to include Chase acting as Collateral Agent) to act as specified
herein and in the other Credit Documents, and each such Bank hereby irrevocably
authorizes Chase, as the Administrative Agent for such Bank, to take such action
on its behalf under the provisions of this Agreement and the other Credit
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Administrative Agent by the terms of this Agreement and the
other Credit Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent agrees to act as such upon the
express conditions contained in this Section 10. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Administrative Agent shall not
have any duties or responsibilities, except those expressly set forth herein or
in the other Credit Documents, nor any fiduciary relationship with any Bank, and
no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or otherwise exist against the
Administrative Agent. The provisions of this Section 10 are solely for the
benefit of the Administrative Agent and the Banks, and no Credit Party shall
have any rights as a third party beneficiary of any of the provisions hereof. In
performing its functions and duties under this Agreement, the Administrative
Agent shall act solely as agent of the Banks and does not assume and shall not
be deemed to have assumed any obligation or relationship of agency or trust with
or for the Credit Party.
10.02 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement or any other Credit Document by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care except to the extent
otherwise required by Section 10.03.
10.03 Exculpatory Provisions. Neither the Administrative
Agent nor any of its officers, directors, employees, agents, attorneys-in-fact
or affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Banks for any recitals, statements,
representations or warranties made by the Borrower or any Subsidiary or any of
their respective officers contained in this Agreement, any other Credit Document
or in any certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in connection
with, this Agreement or any other Credit Document or for any failure of the
Borrower or any of its Subsidiaries or any of their respective officers to
perform its obligations hereunder or thereunder. The Administrative Agent shall
not be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower or any of its Subsidiaries. The Administrative Agent shall not be
responsible to any Bank for the effectiveness, genuineness, validity,
enforceability, collectibility or sufficiency of
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this Agreement or any Credit Document or for any representations, warranties,
recitals or statements made herein or therein or made in any written or oral
statement or in any financial or other statements, instruments, reports,
certificates or any other documents in connection herewith or therewith
furnished or made by the Administrative Agent to the Banks or by or on behalf of
the Borrower to the Administrative Agent or any Bank or be required to ascertain
or inquire as to the performance or observance of any of the terms, conditions,
provisions, covenants or agreements contained herein or therein or as to the use
of the proceeds of the Loans or of the existence or possible existence of any
Default or Event of Default.
10.04 Reliance by Administrative Agent. The
Administrative Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, facsimile transmission, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
Person or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to the Borrower), independent accountants and other
experts selected by the Administrative Agent. The Administrative Agent shall be
fully justified in failing or refusing to take any action under this Agreement
or any other Credit Document unless it shall first receive such advice or
concurrence of the Required Banks as it deems appropriate or it shall first be
indemnified to its satisfaction by the Banks against any and all liability and
expense which may be incurred by it by reason of taking or continuing to take
any such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Credit Documents in accordance with a request of the Required Banks, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Banks.
10.05 Notice of Default. The Administrative Agent shall
not be deemed to have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Administrative Agent has received notice
from a Bank or any other Credit Party referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default." In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall give prompt notice thereof to the Banks. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Banks, provided
that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the Banks.
10.06 Non-Reliance. Each Bank expressly acknowledges
that neither the Administrative Agent nor any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates have made any representations
or warranties to it and that no act by the Administrative Agent hereinafter
taken, including any review of the affairs of the Borrower or any of its
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Bank. Each Bank represents to the Administrative
Agent that it has, independently and without reliance upon the Administrative
Agent or any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into the
business, assets, operations, property, financial and other conditions,
prospects and creditworthiness of the Borrower and its Subsidiaries and made its
own decision to
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make its Loans hereunder and enter into this Agreement. Each Bank also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Agreement, and to make such investigation as it deems necessary to inform
itself as to the business, assets, operations, property, financial and other
conditions, prospects and creditworthiness of the Borrower and its Subsidiaries.
The Administrative Agent shall not have any duty or responsibility to provide
any Bank with any credit or other information concerning the business,
operations, assets, property, financial and other conditions, prospects or
creditworthiness of the Borrower or any Subsidiary which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
10.07 Indemnification. Each Bank agrees to indemnify the
Administrative Agent and the Collateral Agent in their respective capacities as
such ratably according to such Bank's respective Loans and Unutilized Revolving
Loan Commitment, from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, reasonable expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Obligations) be imposed on,
incurred by or asserted against the Administrative Agent in its capacity as such
in any way relating to or arising out of this Agreement or any other Credit
Document, or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted to be taken by
the Administrative Agent under or in connection with any of the foregoing, but
only to the extent that any of the foregoing is not paid by the Borrower or any
of its Subsidiaries, provided that no Bank shall be liable to the Administrative
Agent for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
resulting from the Administrative Agent's gross negligence or willful
misconduct. If any indemnity furnished to the Administrative Agent for any
purpose shall, in the opinion of the Administrative Agent, be insufficient or
become impaired, the Administrative Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against until such additional
indemnity is furnished. The agreements in this Section 10.07 shall survive the
payment of all Obligations.
10.08 The Administrative Agent in its Individual
Capacity. The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the Borrower and
its Subsidiaries as though not acting as Administrative Agent hereunder. With
respect to the Loans made by it and all Obligations owing to it, the
Administrative Agent shall have the same rights and powers under this Agreement
as any Bank and may exercise the same as though it were not the Administrative
Agent, and the terms "Bank" and "Banks" shall include the Administrative Agent
in its individual capacity.
10.09 Successor Administrative Agent. The Administrative
Agent may resign as the Administrative Agent upon 20 days' notice to the Banks
and the Borrower. Upon such resignation, the Required Banks shall, with the
consent of the Borrower (such consent not to be unreasonably withheld), appoint
from among the Banks a successor Administrative Agent for the Banks, whereupon
such successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall include such
successor agent effective upon its appointment, and the resigning Administrative
Agent's rights, powers and
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duties as the Administrative Agent shall be terminated, without any other or
further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement. After the retiring Administrative Agent's
resignation hereunder as the Administrative Agent, the provisions of this
Section 10 shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Administrative Agent under this Agreement.
SECTION 11. Miscellaneous.
11.01 Payment of Expenses, etc. The Borrower hereby
agree to: (i) whether or not the transactions herein contemplated are
consummated, pay all reasonable out-of-pocket costs and expenses of the
Administrative Agent in connection with the negotiation, preparation,
syndication, execution and delivery of the Credit Documents and the documents
and instruments referred to therein and any amendment, waiver or consent
relating thereto (including, without limitation, the reasonable fees and
disbursements of White & Case LLP); (ii) whether or not the transactions herein
contemplated are consummated, pay all reasonable out-of-pocket costs and
expenses of the Administrative Agent and each of the Banks in connection with
the enforcement of the Credit Documents and the documents and instruments
referred to therein (including, without limitation, the reasonable fees and
disbursements of counsel for the Administrative Agent and for each of the
Banks); (iii) pay and hold each of the Banks harmless from and against any and
all present and future stamp and other similar taxes with respect to the
foregoing matters and save each of the Banks harmless from and against any and
all liabilities with respect to or resulting from any delay or omission to pay
such taxes; and (iv) indemnify the Administrative Agent and each Bank, and their
respective officers, directors, employees, representatives and agents (each, an
"indemnified person") from and hold each of them harmless against any and all
losses, liabilities, claims, damages or expenses (collectively, "Claims")
incurred by any of them as a result of, or arising out of, or in any way related
to, or by reason of, any investigation, litigation or other proceeding (whether
or not the Administrative Agent or any Bank is a party thereto) related to the
entering into and/or performance of any Credit Document or other Transaction
Document or the use of the proceeds of any Loans hereunder or the Transaction or
the consummation of any other transactions contemplated in any Credit Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). No Bank shall be liable for any
damages arising from the use by others of information or other materials
obtained through electronic, telecommunications or other information
transmission systems.
11.02 Right of Setoff. In addition to any rights now or
hereafter granted under applicable law or otherwise, and not by way of
limitation of any such rights, upon the occurrence and continuance of an Event
of Default, each Bank is hereby authorized at any time or from time to time,
except to the extent prohibited by applicable law, without presentment, demand,
protest or other notice of any kind to any Credit Party or to any other Person,
any such notice being hereby expressly waived, to set off and to appropriate and
apply any and all deposits (general or special) and any other Indebtedness at
any time held or owing by such Bank (including, without limitation, by branches
and agencies of such Bank wherever located) to or for the credit or the account
of such Credit Party against and on account of the Obligations and liabilities
of such Credit Party to such Bank or any other Bank under this Agreement or
under any of the other
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Credit Documents, including, without limitation, all interests in Obligations of
such Credit Party purchased by such Bank or any other Bank pursuant to Section
11.06(b), and all other claims of any nature or description arising out of or
connected with this Agreement or any other Credit Document, irrespective of
whether or not such Bank shall have made any demand hereunder and although said
Obligations, liabilities or claims, or any of them, shall be contingent or
unmatured. Each Bank is hereby designated the agent of all other Banks for
purposes of effecting set off pursuant to this Section 11.02 and each Credit
Party hereby grants to each Bank for such Bank's own benefit and as agent for
all other Banks a continuing security interest in any and all deposits, accounts
or moneys of such Credit Party maintained from time to time with such Bank.
11.03 Notices. Except as otherwise expressly provided
herein, all notices and other communications provided for hereunder shall be in
writing (including telegraphic, telex, facsimile or cable communication) and
mailed, telegraphed, telexed, telecopied, cabled or delivered, if to any Credit
Party, at the address specified opposite its signature below; if to any Bank, at
its address specified for such Bank on Annex II hereto; or, at such other
address as shall be designated by any party in a written notice to the other
parties hereto. All such notices and communications shall be mailed,
telegraphed, telexed, telecopied, cabled, sent by overnight courier or delivered
by hand and shall be deemed to have been given on the date of receipt if
delivered by hand or overnight courier or sent by telecopy, telegraph, telex or
cable, or the date that is five Business Days after being deposited in the mail,
postage prepaid, in each case delivered, sent or mailed (properly addressed) to
such party as provided in this Section 11.03 or in accordance with the last
unrevoked notice from such party given in accordance with this Section 11.03;
provided that notices and communications to the Administrative Agent shall be
effective when received by the Administrative Agent.
11.04 Benefit of Agreement. (a) This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
successors and assigns of the parties hereto; provided, however, the Borrower
may not assign or transfer any of its rights or obligations hereunder without
the prior written consent of the Banks. Each Bank may at any time grant
participations in any of its rights hereunder or under any of its Notes to any
bank or other financial institution; provided that in the case of any such
participation, (i) such Bank's obligations under this Agreement shall remain
unchanged, (ii) such Bank shall remain solely responsible to the other parties
hereto for the performance of such obligations (iii) the participant shall agree
to be bound by the confidentiality provisions contained in Section 11.15 and
(iv) the participant shall not have any rights under this Agreement or any of
the other Credit Documents, including rights of consent, approval or waiver (the
participant's rights against such Bank in respect of such participation to be
those set forth in the agreement executed by such Bank in favor of the
participant relating thereto) and all amounts payable by the Borrower hereunder
shall be determined as if such Bank had not sold such participation, except that
the participant shall be entitled to receive the additional amounts under
Sections 1.10, 1.11 and 3.04 of this Agreement to, and only to, the extent that,
and in no greater amount than, such Bank would be entitled to such benefits if
the participation had not been entered into or sold; and provided further, that
no Bank shall transfer, grant or assign any participation under which the
participant shall have rights to approve any amendment to or waiver of this
Agreement or any other Credit Document except to the extent such amendment or
waiver would (i) extend any Scheduled Repayment or the final scheduled maturity
of any Loan or Note in which such participant is participating (it being
understood that any waiver of the application of any prepayment or the method of
application of
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any prepayment to the amortization of, the Loans shall not constitute an
extension of a Scheduled Repayment or the final scheduled maturity date), or
reduce the rate or extend the time of payment of interest thereon or Fees, or
reduce the principal amount thereof, or increase such participant's
participating interest in any Commitment or Loan over the amount thereof then in
effect (it being understood that a waiver of any Default or Event of Default or
of a mandatory reduction in the Total Commitment or of a mandatory repayment or
prepayment shall not constitute a change in the terms of any Commitment and that
an increase in any Commitment shall be permitted without the consent of any
participant if such participant's participation is not increased as a result
thereof), (ii) release all or any material portion of the Collateral (except as
expressly provided in the Credit Documents) or (iii) consent to the assignment
or transfer by the Borrower of any of its rights and obligations under this
Agreement or any other Credit Document except in accordance with the terms
hereof and thereof.
(b) Notwithstanding the foregoing, any Bank may assign
all or a portion of its rights and obligations hereunder to a bank or other
financial institution with the prior written consent of the Administrative
Agent, which consent shall not be unreasonably withheld or delayed. No
assignment of less than all of a Bank's rights and obligations hereunder
pursuant to the immediately preceding sentence shall, to the extent such
transaction represents an assignment to an institution other than one or more
Banks hereunder, be in an aggregate amount less than the minimum of $5,000,000
unless otherwise agreed to by the Administrative Agent and the Borrower in
writing. If any Bank so sells or assigns all or a part of its rights hereunder
or under the Notes, any reference in this Agreement or the Notes to such
assigning Bank shall thereafter refer to such Bank and to the respective
assignee to the extent of their respective interests and the respective assignee
shall have, to the extent of such assignment (unless otherwise provided
therein), the same rights, obligations and benefits as it would if it were such
assigning Bank. Each assignment pursuant to this Section 11.04(b) shall be
effected by the assigning Bank and the assignee Bank executing an Assignment and
Assumption Agreement substantially in the form of Exhibit H (appropriately
completed) (the "Assignment and Assumption Agreement"). At the time of any such
assignment, (i) Annex I shall be deemed to be amended to reflect the
Commitments, if any, and outstanding Loans of the respective assignee (which
shall result in a direct reduction to the Commitments, if any, and outstanding
Loans of the assigning Bank) and of the other Banks, (ii) if any such assignment
occurs after the Initial Borrowing Date, at the request of the assignor or the
assignee the Borrower will issue new Notes to the respective assignee and to the
assigning Bank in conformity with the requirements of Section 1.05, (iii) the
Administrative Agent shall receive from the assigning Bank and/or the assignee
Bank or financial institution at the time of each assignment the payment of a
nonrefundable assignment fee of $3,500 and (iv) the Administrative Agent shall
receive from the assignee Bank the Administrative Agent's administrative
questionnaire completed by such assignee Bank, provided that such transfer or
assignment will not be effective until recorded by the Administrative Agent on
the Register pursuant to Section 6.13 hereof. At the time of each assignment
pursuant to this Section 11.04(b) to a Person which is not already a Bank
hereunder and which is not a United States person (as such term is defined in
Section 7701(a)(30) of the Code) for Federal income tax purposes, the respective
assignee Bank shall provide to the Borrower and the Administrative Agent the
appropriate Internal Revenue Service forms (and, if applicable a Section
3.04(b)(ii) Certificate) described in Section 3.04(b). Each Bank and the
Borrower agrees to execute such documents (including, without limitation,
amendments to this Agreement and the other Credit Documents) as shall be
necessary to effect the foregoing. Promptly following any assignment
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pursuant to this Section 11.04(b), the assigning Bank shall promptly notify the
Borrower and the Administrative Agent thereof. Nothing in this Section 11.04
shall prevent or prohibit any Bank from pledging its Loans or Notes hereunder to
a Federal Reserve Bank in support of borrowings made by such Bank from such
Federal Reserve Bank.
(c) Notwithstanding any other provisions of this Section
11.04, no transfer or assignment of the interests or obligations of any Bank
hereunder or any grant of participations therein shall be permitted if such
transfer, assignment or grant would require the Borrower to file a registration
statement with the SEC or to qualify the Loans under the "Blue Sky" laws of any
state.
(d) Each Bank initially party to this Agreement hereby
represents, and each Person that becomes a Bank pursuant to an assignment
permitted by clause (b) above will upon its becoming party to this Agreement
represent, that it is a commercial lender, other financial institution or other
"accredited investor" (as defined in SEC Regulation D) which makes loans in the
ordinary course of its business or is acquiring the Loans without a view to
distribution of the Loans within the meaning of the federal securities laws, and
that it will make or acquire Loans for its own account in the ordinary course of
such business, provided that, subject to the preceding clauses (a) through (c),
the disposition of any promissory notes or other evidences of or interests in
Indebtedness held by such Bank shall at all times be within its exclusive
control.
11.05 No Waiver; Remedies Cumulative. No failure or
delay on the part of the Administrative Agent or any Bank in exercising any
right, power or privilege hereunder or under any other Credit Document and no
course of dealing between any Credit Party and the Administrative Agent or any
Bank shall operate as a waiver thereof; nor shall any single or partial exercise
of any right, power or privilege hereunder or under any other Credit Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder or thereunder. The rights and remedies
herein expressly provided are cumulative and not exclusive of any rights or
remedies which the Administrative Agent or any Bank would otherwise have. No
notice to or demand on the Borrower in any case shall entitle the Borrower to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of the rights of the Administrative Agent or the Banks to
any other or further action in any circumstances without notice or demand.
11.06 Payments Pro Rata. (a) The Administrative Agent
agrees that promptly after its receipt of each payment from or on behalf of the
Borrower in respect of any Obligations of the Borrower, it shall distribute such
payment to the Banks (other than any Bank that has consented in writing to waive
its pro rata share of such payment) pro rata based upon their respective shares,
if any, of the Obligations with respect to which such payment was received.
(b) Each of the Banks agrees that, if it should receive
any amount hereunder (whether by voluntary payment, by realization upon
security, by the exercise of the right of setoff or banker's lien, by
counterclaim or cross action, by the enforcement of any right under the Credit
Documents, or otherwise) which is applicable to the payment of the principal of,
or interest on, the Loans or Fees, of a sum which with respect to the related
sum or sums received by other Banks is in a greater proportion than the total of
such Obligation then owed and due to such Bank bears to the total of such
Obligation then owed and due to all of the Banks
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immediately prior to such receipt, then such Bank receiving such excess payment
shall purchase for cash without recourse or warranty from the other Banks an
interest in the Obligations of the Borrower to such Banks in such amount as
shall result in a proportional participation by all of the Banks in such amount,
provided that if all or any portion of such excess amount is thereafter
recovered from such Bank, such purchase shall be rescinded and the purchase
price restored to the extent of such recovery, but without interest.
(c) Notwithstanding anything to the contrary contained
herein, the provisions of the preceding Sections 11.06(a) and (b) shall be
subject to the express provisions of this Agreement which require, or permit,
differing payments to be made to Non-Defaulting Banks as opposed to Defaulting
Banks.
11.07 Calculations; Computations. (a) The financial
statements to be furnished to the Banks pursuant hereto shall be made and
prepared in accordance with GAAP or SAP, as the case may be, consistently
applied throughout the periods involved (except as set forth in the notes
thereto or as otherwise disclosed in writing by the Borrower to the Banks). In
addition, except as otherwise specifically provided herein, all computations
determining compliance with Section 7, including definitions used therein, shall
utilize accounting principles and policies in effect from time to time; provided
that (i) if any such accounting principle or policy (whether GAAP or SAP or
both) shall change after the Effective Date, the Borrower shall give reasonable
notice thereof to the Administrative Agent and each of the Banks and if within
30 days following such notice the Borrower, the Administrative Agent or the
Required Banks shall elect by giving written notice of such election to the
other parties hereto, such computations shall not give effect to such change
unless and until this Agreement shall be amended pursuant to Section 11.12 to
give effect to such change, and (ii) if at any time the computations determining
compliance with Section 7 utilize accounting principles different from those
utilized in the financial statements then being furnished to the Banks pursuant
to Section 6.01, such financial statements shall be accompanied by
reconciliation work-sheets.
(b) All computations of interest on Eurodollar Loans and
Fees hereunder shall be made on the actual number of days elapsed over a year of
360 days.
(c) All computations of interest on Base Rate Loans
hereunder shall be made on the actual number of days elapsed over a year of
365/366 days.
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH
AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL ACTION OR
PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH CREDIT PARTY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE
AFORESAID COURTS. EACH CREDIT PARTY HEREBY FURTHER IRREVOCABLY WAIVES ANY
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CLAIM THAT ANY SUCH COURTS LACK JURISDICTION OVER SUCH CREDIT PARTY, AND AGREES
NOT TO PLEAD OR CLAIM, IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS,
THAT ANY SUCH COURT LACKS JURISDICTION OVER SUCH CREDIT PARTY. EACH CREDIT PARTY
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE
AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO SUCH CREDIT PARTY
AT ITS ADDRESS FOR NOTICES PURSUANT TO SECTION 11.03, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. EACH CREDIT PARTY HEREBY IRREVOCABLY
WAIVES ANY OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES
AND AGREES NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING HEREUNDER OR UNDER
ANY OTHER CREDIT DOCUMENT THAT SERVICE OF PROCESS WAS IN ANY WAY INVALID OR
INEFFECTIVE. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT
OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE
LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST ANY CREDIT PARTY IN ANY OTHER
JURISDICTION.
(b) EACH CREDIT PARTY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF
THE AFORESAID ACTIONS OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER CREDIT DOCUMENT BROUGHT IN THE COURTS REFERRED TO IN
CLAUSE (A) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
11.09 Counterparts. This Agreement may be executed in
any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Administrative Agent.
11.10 Effectiveness. This Agreement shall become
effective on the date (the "Effective Date") on which the Borrower and each of
the Banks shall have signed a copy hereof (whether the same or different copies)
and shall have delivered the same to the Administrative Agent at the
Administrative Agent's Notice Office or, in the case of the Banks, shall have
given to the Administrative Agent telephonic (confirmed in writing), written,
telex or telecopy notice (actually received) at such office that the same has
been signed and mailed to it. The Administrative Agent will give the Borrower
and each Bank prompt written notice of the occurrence of the Effective Date.
11.11 Headings Descriptive. The headings of the several
sections and subsections of this Agreement are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Agreement.
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11.12 Amendment or Waiver. Neither this Agreement nor
any other Credit Document nor any terms hereof or thereof may be changed,
waived, discharged or terminated unless such change, waiver, discharge or
termination is in writing signed by the respective Credit Parties thereto and
the Required Banks, provided that no such change, waiver, discharge or
termination shall, without the consent of each Bank affected thereby (other than
a Defaulting Bank), (i) extend any Scheduled Repayment or the scheduled final
maturity of any Loan or Note (it being understood that any waiver of the
application of any prepayment or the method of application of any prepayment to
the amortization of the Loans shall not constitute an extension of any Scheduled
Repayment or the scheduled final maturity thereof), or reduce the rate, or
extend the time of payment, of interest thereon or Fees or reduce the principal
amount thereof, (ii) increase the Commitments of any Bank over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory reduction in the Total Commitment or
mandatory repayment or prepayment shall not constitute a change in the terms of
any Commitment of any Bank), (iii) release all or any material portion of the
Collateral (except as expressly provided in the Credit Documents), (iv) amend,
modify or waive any provision of this Section 11.12, (v) reduce any percentage
specified in, or otherwise modify, the definition of Required Banks or (vi)
consent to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement. No provision of Section 10 or any other
provision relating to the rights and/or obligations of the Administrative Agent
may be amended without the consent of the Administrative Agent.
11.13 Survival. All indemnities set forth herein
including, without limitation, in Section 1.10, 1.11, 3.04, 10.07 or 11.01 shall
survive the execution and delivery of this Agreement and the making of the
Loans, the repayment of the Obligations and the termination of the Total
Commitment.
11.14 Domicile of Loans. Subject to Section 11.04, each
Bank may transfer and carry its Loans at, to or for the account of any branch
office, subsidiary or affiliate of such Bank, provided that the Borrower shall
not be responsible for costs arising under Section 1.10 or 3.04 resulting from
any such transfer to the extent not otherwise applicable to such Bank prior to
such transfer.
11.15 Confidentiality. The Administrative Agent, the
Collateral Agent and each Bank shall hold all non-public information furnished
by or on behalf of the Borrower in connection with such Bank's evaluation of
whether to become a Bank hereunder or obtained by such Bank pursuant to the
requirements of this Agreement ("Confidential Information") in accordance with
its customary procedure for handling confidential information of this nature and
in accordance with safe and sound banking or lending practices; provided that
any Bank and/or its affiliates may disclose any such Confidential Information
(a) to their respective affiliates, directors, officers, employees, auditors or
counsel for purposes related to the Credit Documents and the transactions
contemplated thereby, provided that the Bank disclosing such confidential
information pursuant to this clause (a) shall remain liable for any
non-permitted disclosure of such information by any such employee, director,
agent, attorney, accountant or professional advisor, (b) as has become generally
available to the public other than as a result of disclosure in violation of
this Section 11.15, (c) as has become available to such Bank or any such
affiliate on a non-confidential basis from a source other than the Borrower and
its affiliates, provided that the source is not known by such Bank to be
prohibited from transmitting such information to
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such Bank by a contractual, legal or fiduciary obligation, (d) as may be
required or appropriate in any report, statement or testimony submitted to any
municipal, state or Federal regulatory body having or claiming to have
jurisdiction over such Bank and/or its affiliates, (e) as may be required or
appropriate in respect to any summons or subpoena or in connection with any
litigation or other judicial process (it being understood that, to the extent
reasonably practicable and legally permitted under the circumstances, the
Borrower shall be given prior notice and an opportunity to contest any proposed
disclosure pursuant to this clause (e)), (f) in order to comply with any law,
order, regulation or ruling applicable to such Bank and/or its affiliates, and
(g) to any permitted prospective or actual syndicate member or participant in
the Loans, provided that such prospective or actual syndicate member or
participant agrees with the respective assigning Bank to be bound by the
provisions of this Section 11.15. The provisions of this Section 11.15 shall
survive any termination of this Agreement.
11.16 WAIVER OF JURY TRIAL. EACH OF THE PARTIES TO THIS
AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
* * *
84
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Agreement to be duly executed and delivered as of
the date first above written.
Address:
Six International Drive, Suite 190 UNIVERSAL AMERICAN FINANCIAL CORP.
▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Chairman and CEO
THE CHASE MANHATTAN BANK,
Individually and as Administrative
Agent
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President
THE BANK OF NEW YORK,
Individually and as Syndication
Agent
By /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
Individually and as Documentation
Agent
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇
--------------------------------------
Title: Assistant Vice President
FLEET NATIONAL BANK
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Title: Vice President
SUPERIOR NATIONAL INSURANCE GROUP,
INC.
By /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------
Title: Chief Financial Officer
85
ANNEX I
LIST OF BANKS AND COMMITMENTS
Bank Term Loan Commitment Revolving Loan Commitment
---- -------------------- -------------------------
The Chase Manhattan Bank $ 21,875,000 3,125,000
The Bank of New York 17,500,000 2,500,000
Dresdner Bank AG, New York and Grand 17,500,000 2,500,000
Cayman Branches
Fleet National Bank 8,750,000 1,250,000
Superior National Insurance Group, Inc. 4,375,000 625,000
Total $70,000,000 $10,000,000
=========== ===========
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ANNEX II
BANK ADDRESSES
Bank Address
------------
The Chase Manhattan Bank ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel: (212) (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (212) (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
The Bank of New York ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dresdner Bank AG, New York ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
and Grand ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fleet National Bank ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Superior National Insurance Group, Inc. ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇
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TABLE OF CONTENTS
Page
----
SECTION 1. Amount and Terms of Credit.......................................... 1
1.01 Commitments...................................................... 1
1.02 Minimum Amount of Each Borrowing; Maximum Number of Borrowings... 2
1.03 Notice of Borrowing.............................................. 2
1.04 Disbursement of Funds............................................ 3
1.05 Notes............................................................ 3
1.06 Conversions...................................................... 4
1.07 Pro Rata Borrowings.............................................. 5
1.08 Interest......................................................... 5
1.09 Interest Periods................................................. 6
1.10 Increased Costs, Illegality, etc................................. 7
1.11 Compensation..................................................... 9
1.12 Change of Lending Office......................................... 9
1.13 Replacement of Banks............................................. 9
SECTION 2. Fees; Commitments................................................... 10
2.01 Fees............................................................. 10
2.02 Mandatory Reductions of Commitments.............................. 10
SECTION 3. Payments............................................................ 11
3.01 Voluntary Prepayments............................................ 11
3.02 Mandatory Repayments and Prepayments............................. 11
3.03 Method and Place of Payment...................................... 14
3.04 Net Payments..................................................... 14
SECTION 4. Conditions Precedent................................................ 16
4.01 Effectiveness; Notes............................................. 16
4.02 No Default; Representations and Warranties....................... 17
4.03 Officer's Certificate............................................ 17
4.04 Opinions of Counsel.............................................. 17
4.05 Corporate Proceedings............................................ 17
4.06 Adverse Change, etc.............................................. 17
4.07 Litigation....................................................... 18
4.08 Subsidiary Guaranty.............................................. 18
4.09 Pledge Agreement................................................. 18
4.10 Consummation of the Transaction.................................. 18
4.11 Transaction Documents............................................ 19
4.12 Various Agreements............................................... 19
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4.13 Financial Statements; Projections................................ 21
4.14 Approvals, etc................................................... 21
4.15 Indebtedness..................................................... 22
4.16 Payment of Fees.................................................. 22
4.17 Notice of Borrowing.............................................. 22
4.18 Insurance Policies............................................... 22
4.19 Capital Structure................................................ 22
4.20 Actuarial Reports................................................ 22
4.21 Pre-Closing Restructuring Transactions........................... 23
SECTION 5. Representations, Warranties and Agreements.......................... 23
5.01 Corporate Status................................................. 23
5.02 Corporate Power and Authority.................................... 23
5.03 No Contravention of Laws, Agreements or Organizational Documents. 24
5.04 Litigation and Contingent Liabilities............................ 24
5.05 Use of Proceeds; Margin Regulations.............................. 24
5.06 Approvals........................................................ 25
5.07 Investment Company Act........................................... 25
5.08 Public Utility Holding Company Act............................... 25
5.09 True and Complete Disclosure; Projections and Assumptions........ 25
5.10 Consummation of Transaction...................................... 25
5.11 Financial Condition; Financial Statements........................ 26
5.12 Security Interests............................................... 27
5.13 Tax Returns and Payments......................................... 27
5.14 Compliance with ERISA............................................ 27
5.15 Subsidiaries..................................................... 28
5.16 Intellectual Property, etc....................................... 28
5.17 Pollution and Other Regulations.................................. 29
5.18 Labor Relations; Collective Bargaining Agreements................ 29
5.19 Capitalization................................................... 29
5.20 Representations and Warranties in Transaction Documents.......... 32
5.21 Indebtedness..................................................... 33
5.22 Compliance with Statutes, etc.................................... 33
5.23 Insurance Licenses............................................... 33
5.24 Year 2000 Compliance............................................. 33
SECTION 6. Affirmative Covenants............................................... 33
6.01 Information Covenants............................................ 33
6.02 Books, Records and Inspections................................... 37
6.03 Insurance........................................................ 37
6.04 Payment of Taxes................................................. 37
6.05 Corporate Franchises............................................. 37
6.06 Compliance with Statutes, etc.................................... 37
6.07 ERISA............................................................ 37
89
6.08 Performance of Obligations....................................... 38
6.09 Good Repair...................................................... 38
6.10 End of Fiscal Years; Fiscal Quarters............................. 39
6.11 Foreign Subsidiaries Security.................................... 39
6.12 Maintenance of Licenses and Permits.............................. 39
6.13 Register......................................................... 40
6.14 Surplus Notes.................................................... 40
SECTION 7. Negative Covenants.................................................. 40
7.01 Changes in Business.............................................. 40
7.02 Consolidation, Merger, Sale or Purchase of Assets................ 41
7.03 Liens............................................................ 43
7.04 Indebtedness..................................................... 45
7.05 Capital Expenditures............................................. 46
7.06 Advances, Investments and Loans.................................. 46
7.07 Modifications of Agreements, etc................................. 48
7.08 Dividends, etc................................................... 49
7.09 Transactions with Affiliates .................................... 50
7.10 Leverage Ratio................................................... 50
7.11 Interest Coverage Ratio.......................................... 50
7.12 Minimum Risk Based Capital....................................... 51
7.13 Minimum Consolidated Net Worth................................... 51
7.14 Issuance of Stock................................................ 51
7.15 Creation of Subsidiaries......................................... 51
7.16 Partnership Agreements........................................... 52
SECTION 8. Events of Default................................................... 52
8.01 Payments......................................................... 52
8.02 Representations, etc............................................. 52
8.03 Covenants........................................................ 52
8.04 Default Under Other Agreements................................... 52
8.05 Bankruptcy, etc.................................................. 52
8.06 ERISA............................................................ 53
8.07 Subsidiary Guaranty.............................................. 53
8.08 Pledge Agreement................................................. 54
8.09 Judgments........................................................ 54
8.10 Ownership........................................................ 54
SECTION 9. Definitions......................................................... 55
SECTION 10. The Administrative Agent........................................... 73
10.01 Appointment..................................................... 73
10.02 Delegation of Duties............................................ 74
90
10.03 Exculpatory Provisions.......................................... 74
10.04 Reliance by Administrative Agent................................ 74
10.05 Notice of Default............................................... 75
10.06 Non-Reliance.................................................... 75
10.07 Indemnification................................................. 75
10.08 The Administrative Agent in its Individual Capacity............. 76
10.09 Successor Administrative Agent.................................. 76
SECTION 11. Miscellaneous...................................................... 76
11.01 Payment of Expenses, etc........................................ 76
11.02 Right of Setoff................................................. 77
11.03 Notices......................................................... 77
11.04 Benefit of Agreement............................................ 78
11.05 No Waiver; Remedies Cumulative.................................. 80
11.06 Payments Pro Rata............................................... 80
11.07 Calculations; Computations...................................... 81
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE................ 81
11.09 Counterparts.................................................... 82
11.10 Effectiveness................................................... 82
11.11 Headings Descriptive............................................ 82
11.12 Amendment or Waiver............................................. 82
11.13 Survival........................................................ 83
11.14 Domicile of Loans............................................... 83
11.15 Confidentiality................................................. 83
11.16 WAIVER OF JURY TRIAL............................................ 84
ANNEX I -- .................................................. List of Banks and Commitments
ANNEX II -- ..................................................................Bank Addresses
ANNEX III -- ...........................................................Existing Indebtedness
ANNEX IV -- ...................................................................Pension Plans
ANNEX V -- ....................................................................Subsidiaries
ANNEX VI -- ................................................Collective Bargaining Agreements
ANNEX VII -- ..................................................................Existing Liens
ANNEX VIII -- .................................................Existing Investment Commitments
ANNEX IX -- ..................................................................Capitalization
ANNEX X -- ..........................................Pre-Closing Restructuring Transactions
ANNEX XI -- ...............................................Past Due Tax Returns and Payments
ANNEX XII -- .........................................Post-Retirement Health Care Obligations
ANNEX XIII -- .....................................................................Projections
ANNEX XIV -- ................................................Excluded Non-Regulated Companies
EXHIBIT A -- .....................................................Form of Notice of Borrowing
EXHIBIT B-1 -- ...............................................................Form of Term Note
91
EXHIBIT B-2 -- ..........................................................Form of Revolving Note
EXHIBIT C-1 -- .....................Form of Opinion of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
EXHIBIT C-2 -- .................................Form of Opinion of Harnett ▇▇▇▇▇▇▇ & ▇▇▇▇▇ P.A.
EXHIBIT C-3 -- ..........................................Form of Opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
EXHIBIT C-4 -- .............................................Form of Opinion of White & Case LLP
EXHIBIT D -- ...................................................Form of Officer's Certificate
EXHIBIT E -- .........................................Form of Section 3.04(b)(ii) Certificate
EXHIBIT F -- .....................................................Form of Subsidiary Guaranty
EXHIBIT G -- ........................................................Form of Pledge Agreement
EXHIBIT H -- .....................................Form of Assignment and Assumption Agreement