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EXHIBIT 10.7
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CREDIT AGREEMENT
among
SUPERIOR NATIONAL INSURANCE GROUP, INC.,
SNTL ACQUISITION CORP.,
VARIOUS LENDING INSTITUTIONS,
and
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT
-----------------------------
Dated as of April 11, 1997
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$44,000,000
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TABLE OF CONTENTS
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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................................................................... 4
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.............................................................. 10
SECTION 2. Fees; Commitments........................................................................ 10
2.01 Fees ............................................................................... 10
2.02 Voluntary Reduction of Commitments.................................................... 11
2.03 Mandatory Termination of Commitments.................................................. 11
SECTION 3. Payments................................................................................. 11
3.01 Voluntary Prepayments................................................................. 11
3.02 Mandatory Prepayments................................................................. 12
3.03 Method and Place of Payment........................................................... 14
3.04 Net Payments.......................................................................... 14
SECTION 4. Conditions Precedent..................................................................... 17
4.01 Effectiveness; Notes.................................................................. 17
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 1996 Loan............................................................................. 18
4.07 Reinsurance Pooling Agreement......................................................... 18
4.08 Adverse Change, etc................................................................... 18
(i)
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4.09 Litigation............................................................................ 18
4.10 Pledge Agreement...................................................................... 19
4.11 Consummation of the Transaction....................................................... 19
4.12 Transaction Documents................................................................. 21
4.13 Various Agreements.................................................................... 21
4.14 Financial Statements; Projections..................................................... 23
4.15 Approvals, etc........................................................................ 23
4.16 Indebtedness.......................................................................... 24
4.17 Payment of Fees....................................................................... 24
4.18 Notice of Borrowing................................................................... 24
4.19 Insurance Policies.................................................................... 24
4.20 Existing Preferred Stock; Warrants.................................................... 25
4.21 Reports............................................................................... 25
4.22 Consolidated Net Worth of the Borrower................................................ 25
4.23 Reserve Increase...................................................................... 25
4.24 Independent Auditor's Opinion......................................................... 25
4.25 Capital Contribution.................................................................. 25
4.26 Ownership............................................................................. 25
SECTION 5. Representations, Warranties and Agreements............................................... 26
5.01 Corporate Status...................................................................... 26
5.02 Corporate Power and Authority......................................................... 26
5.03 No Contravention of Laws, Agreements or Organizational
Documents...................................................................... 27
5.04 Litigation and Contingent Liabilities................................................. 27
5.05 Use of Proceeds; Margin Regulations................................................... 28
5.06 Approvals............................................................................. 28
5.07 Investment Company Act................................................................ 28
5.08 Public Utility Holding Company Act.................................................... 28
5.09 True and Complete Disclosure; Projections and Assumptions............................. 28
5.10 Consummation of Transaction........................................................... 29
5.11 Financial Condition; Financial Statements............................................. 29
5.12 Security Interests.................................................................... 30
5.13 Tax Returns and Payments.............................................................. 30
5.14 Compliance with ERISA................................................................. 31
5.15 Subsidiaries.......................................................................... 32
5.16 Intellectual Property, etc............................................................ 32
5.17 Pollution and Other Regulations....................................................... 32
5.18 Labor Relations; Collective Bargaining Agreements..................................... 33
(ii)
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5.19 Capitalization........................................................................ 33
5.20 Representations and Warranties in Transaction Documents............................... 34
5.21 Indebtedness.......................................................................... 34
5.22 Compliance with Statutes, etc......................................................... 34
5.23 Insurance Licenses.................................................................... 35
5.24 Conduct of Business................................................................... 35
SECTION 6. Affirmative Covenants.................................................................... 35
6.01 Information Covenants................................................................. 35
6.02 Books, Records and Inspections........................................................ 40
6.03 Insurance............................................................................. 40
6.04 Payment of Taxes...................................................................... 40
6.05 Corporate Franchises.................................................................. 40
6.06 Compliance with Statutes, etc......................................................... 40
6.07 ERISA ............................................................................... 41
6.08 Performance of Obligations............................................................ 42
6.09 Good Repair........................................................................... 42
6.10 End of Fiscal Years; Fiscal Quarters.................................................. 42
6.11 Reserve Requirements For Certain Subsidiaries......................................... 42
6.12 Maintenance of Licenses and Permits................................................... 42
6.13 Maintenance of Corporate Separateness................................................. 42
6.14 Register.............................................................................. 43
6.15 Reincorporation Merger................................................................ 43
6.16 Further Opinion of Counsel............................................................ 44
6.17 Superior Bermuda Securities........................................................... 44
6.18 Foreign Subsidiaries Security......................................................... 44
SECTION 7. Negative Covenants....................................................................... 45
7.01 Changes in Business................................................................... 45
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc................................ 45
7.03 Liens ............................................................................... 47
7.04 Indebtedness.......................................................................... 49
7.05 Capital Expenditures.................................................................. 50
7.06 Advances, Investments and Loans....................................................... 50
7.07 Prepayments of Indebtedness, Modifications of Agreements, etc......................... 52
7.08 Dividends, etc........................................................................ 53
7.09 Transactions with Related Parties..................................................... 54
7.10 Transactions with Superior Bermuda.................................................... 54
7.11 Leverage Ratios....................................................................... 55
(iii)
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7.12 Fixed Charge Coverage Ratio........................................................... 55
7.13 Interest Coverage Ratio............................................................... 55
7.14 Minimum Adjusted Consolidated Surplus................................................. 55
7.15 Minimum Risk-Based Capital............................................................ 56
7.16 Operating Leverage Ratio.............................................................. 56
7.17 Issuance of Stock..................................................................... 56
7.18 Creation of Subsidiaries.............................................................. 56
7.19 Partnership Agreements................................................................ 56
7.20 Transfers to SNIG..................................................................... 56
SECTION 8. Events of Default........................................................................ 57
8.01 Payments.............................................................................. 57
8.02 Representations, etc.................................................................. 57
8.03 Covenants............................................................................. 57
8.04 Default Under Other Agreements........................................................ 57
8.05 Bankruptcy, etc....................................................................... 58
8.06 ERISA ............................................................................... 59
8.07 Pledge Agreement...................................................................... 59
8.08 Judgments............................................................................. 59
8.09 A.M. Best Ratings..................................................................... 60
8.10 Guaranties............................................................................ 60
8.11 Reserve Adequacy...................................................................... 60
8.12 Existing Preferred Stock Documents.................................................... 60
8.13 Ownership............................................................................. 60
SECTION 9. Definitions.............................................................................. 61
SECTION 10. The Administrative Agent................................................................ 85
10.01 Appointment.......................................................................... 85
10.02 Delegation of Duties................................................................. 86
10.03 Exculpatory Provisions............................................................... 86
10.04 Reliance by Administrative Agent..................................................... 87
10.05 Notice of Default.................................................................... 87
10.06 Non-Reliance......................................................................... 87
10.07 Indemnification...................................................................... 88
10.08 The Administrative Agent in its Individual Capacity.................................. 88
10.09 Successor Administrative Agent....................................................... 89
SECTION 11. Miscellaneous........................................................................... 89
(iv)
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11.01 Payment of Expenses, etc............................................................. 89
11.02 Right of Setoff...................................................................... 90
11.03 Notices.............................................................................. 90
11.04 Benefit of Agreement................................................................. 91
11.05 No Waiver; Remedies Cumulative....................................................... 93
11.06 Payments Pro Rata.................................................................... 93
11.07 Calculations; Computations........................................................... 94
11.08 GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE.......................................................................... 94
11.09 Counterparts......................................................................... 95
11.10 Effectiveness........................................................................ 96
11.11 Headings Descriptive................................................................. 96
11.12 Amendment or Waiver.................................................................. 96
11.13 Survival............................................................................. 96
11.14 Domicile of Loans.................................................................... 97
11.15 Confidentiality...................................................................... 97
11.16 WAIVER OF JURY TRIAL................................................................. 98
11.17 Subordinated Debt Agreement.......................................................... 98
11.18 Acquisition.......................................................................... 98
11.19 Reincorporation Merger............................................................... 99
SECTION 12. SNIG Guaranty...........................................................................101
12.01 The Guaranty.........................................................................101
12.02 Bankruptcy...........................................................................101
12.03 Nature of Liability..................................................................102
12.04 Independent Obligation...............................................................102
12.05 Authorization........................................................................102
12.06 Reliance.............................................................................103
12.07 Subordination........................................................................103
12.08 Waiver...............................................................................104
12.09 Nature of Liability..................................................................105
ANNEX I -- List of Banks and Commitments
ANNEX II -- Bank Addresses
ANNEX III -- Existing Indebtedness
ANNEX IV -- Plans
ANNEX V -- Subsidiaries
ANNEX VI -- Collective Bargaining Agreements
ANNEX VII -- Existing Liens
(v)
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ANNEX VIII -- Existing Investment Commitments
ANNEX IX -- Capitalization
EXHIBIT A -- Form of Notice of Borrowing
EXHIBIT B -- Form of Note
EXHIBIT C-1 -- Form of Opinion of ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
EXHIBIT C-2 -- Form of Opinion of White & Case
EXHIBIT D -- Form of Officer's Certificate
EXHIBIT E -- Form of Section 3.04(b)(ii) Certificate
EXHIBIT F -- Form of Pledge Agreement
EXHIBIT G -- Form of Assignment and Assumption Agreement
EXHIBIT H -- Assumption Acknowledgment
EXHIBIT I -- SNIG Assumption Acknowledgment
EXHIBIT J -- Form of Further Opinion of Counsel
(vi)
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CREDIT AGREEMENT, dated as of April 11, 1997, among SUPERIOR
NATIONAL INSURANCE GROUP, INC., a California corporation ("SNIG"), SNTL
ACQUISITION CORP., a Delaware 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
facility 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:
(i) shall be made pursuant to a single drawing, which shall be
on the Closing Date;
(ii) shall be denominated in U.S. Dollars;
(iii) shall be initially incurred and maintained as Base Rate
Loans and, after the Syndication Date, may be converted into and
maintained as Eurodollar Loans and/or Base Rate Loans, provided that
(x) all Loans made by all Banks pursuant to the same Borrowing shall,
unless otherwise specifically provided herein, consist entirely of
Loans of the same Type and (y) incurrences of, or conversions into,
Eurodollar Loans may not be effected prior to the Syndication Date; and
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(iv) shall not exceed in aggregate principal amount for any
Bank at the time of incurrence thereof the Commitment of such Bank as
in effect on such date.
Once repaid, Loans borrowed hereunder may not be reborrowed.
1.02 Minimum Amount of Each Borrowing; Maximum Number of
Borrowings. The aggregate principal amount of each Borrowing hereunder shall not
be less than $5,000,000 and, if in excess thereof, shall be in an integral
multiple of $1,000,000. More than one Borrowing may be incurred on any day;
provided that at no time shall there be outstanding more than five Borrowings of
Eurodollar Loans.
1.03 Notice of Borrowing. (a) In connection with its
incurrence of Loans on the Closing Date, the Borrower 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) if any of the Loans are to be initially incurred
as Eurodollar Loans or at least one Business Day's prior written notice (or
telephonic notice promptly confirmed in writing) if all Loans are to be
initially incurred as Base Rate Loans. Such notice (the "Notice of Borrowing"),
except as otherwise expressly provided in Section 1.10, shall be irrevocable,
and, in the case of a written notice and a confirmation of telephonic notice,
shall be in the form of Exhibit A hereto, appropriately completed to specify (i)
the aggregate principal amount of the Loans to be made pursuant to such
Borrowing, (ii) the date of such Borrowing (which shall be a Business Day) and
(iii) whether the respective Borrowings 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
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
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.
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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
Closing Date, each Bank will make available to the Administrative Agent its pro
rata share of each Borrowing requested to be made on such date in the manner
provided below.
(b) Each Bank shall make available all amounts it is to fund
on the Closing Date under each Borrowing in U.S. dollars and immediately
available funds to the Administrative Agent at the Administrative Agent's
Payment Office and the Administrative Agent will make available to the Borrower
by depositing to its account at the Administrative Agent's 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
Closing Date 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 the Closing Date, 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.
(c) 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 by
a promissory note substantially in the form of Exhibit B with blanks
appropriately completed in conformity herewith (each a "Note" and collectively
the "Notes").
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(b) The Note issued to each Bank shall (i) be executed by the
Borrower, (ii) be payable to the order of such Bank and be dated the Closing
Date, (iii) be in a stated principal amount equal to the Loans made by such Bank
on the Closing Date (or in the case of a new Note issued pursuant to Section
11.04, the Loans evidenced thereby at the time of issuance), (iv) mature on the
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 as provided in Section 3.02 and (vii) be
entitled to the benefits of this Agreement and the other Credit Documents.
(c) Each Bank will record on its internal records the amount
of each Loan made by it and each payment in respect thereof and will prior to
any transfer of its Note endorse on the reverse side thereof the outstanding
principal amount of Loans evidenced thereby. 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 occurring after the Syndication Date, all or a
portion at least equal to $5,000,000 (and, if in excess thereof, an integral
multiple of $1,000,000) of the outstanding principal amount of the Loans of one
Type into a Borrowing or Borrowings of the other Type of Loan; 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 $5,000,000, (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 the 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 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.
1.07 Pro Rata Borrowings. All Loans under this Agreement shall
be loaned by the Banks pro rata on the basis of their Commitments. It is
understood that
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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 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 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 greater of (x)
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 and (y) the rate which
is 2% in excess of the rate then borne by such Loan.
(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).
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(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 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 may be elected if it would extend
beyond the Maturity Date;
(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 Loans
may be elected that would extend beyond any date upon which a mandatory
prepayment of the Loans is required to be made under Section 3.02(i)(a)
if, after
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giving effect to the selection of such Interest Period, the aggregate
principal amount of Loans maintained as Eurodollar Loans with Interest
Periods ending after such date would exceed the aggregate principal
amount of Loans permitted to be outstanding after such mandatory
prepayment.
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):
(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 in an amount
which such Bank deems material 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 by 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
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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, upon
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 specified in
Section 1.10(b) as promptly as possible and, in any event, within the time
period required by 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
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Rate Loan, provided that if more than one Bank is affected at any time, then all
affected Banks must be treated the same 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 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, upon demand by such Bank (with a copy
to the Administrative Agent), the Borrower shall 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
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, to the extent any notice required by this Section 1.10 is given by any
Bank more than 90 days after such Bank obtained, or reasonably should have
obtained, knowledge of the occurrence of the event giving rise to the additional
costs of the type described 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 90 days prior to 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 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
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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 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.
SECTION 2. Fees; Commitments.
2.01 Fees. (a) The Borrower agrees to pay the Administrative
Agent a commitment fee (the "Commitment Fee") for the account of each Bank for
the period (if any) from and including the Effective Date to and including the
earlier of the Closing Date and the date the Total Commitment has been
terminated (the "Termination Date"), computed at a rate for each day equal to
3/8 of 1% per annum of the Total Commitment. Accrued Commitment Fees (if any)
shall be due and payable on the earlier of the Closing Date and the Termination
Date.
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(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 Voluntary Reduction of Commitments. Upon at least three
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) given by the Borrower prior to the Closing Date to the Administrative
Agent at its Notice Office (which notice the Administrative Agent shall promptly
transmit to each of the Banks), the Borrower shall have the right, without
premium or penalty, to terminate, in whole or in part, the Total Commitment,
provided that partial reductions of the Total Commitment pursuant to this
Section 2.02 shall be in the amount of at least $1,000,000. Each reduction of
the Total Commitment pursuant to this Section 2.02 shall apply to reduce the
Scheduled Repayments in inverse order of maturity.
2.03 Mandatory Termination of Commitments. (a) The Total
Commitment (and the Commitment of each Bank) shall be terminated at 5:00 p.m.
(New York time) on the Expiration Date unless the Closing Date has occurred on
or before such date.
(b) The Total Commitment shall be terminated on the Closing
Date, after giving effect to the incurrence of Loans on such date. Any portion
of the Total Commitment terminated pursuant to this Section 2.03(b) which
exceeds the aggregate principal amount of Loans incurred on the Closing Date
shall apply to reduce the Scheduled Repayments in inverse order of maturity.
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 confirmed in
writing) of its intent to prepay the Loans, the amount of such prepayment and
(in the case of Eurodollar Loans) the specific Borrowing(s) pursuant to which
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,
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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 $5,000,000; (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 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 Prepayments.
(i) Requirements:
(a) On each date set forth below, the Borrower shall be
required to repay the principal amount of Loans as is set forth opposite such
date (each such repayment, as the same may be reduced pursuant to Section 2.02,
2.03, 3.01 and/or 3.02(ii)(a), a "Scheduled Repayment"):
Scheduled Repayment Date Amount
------------------------ ------
October 11, 1997 $3,650,000
April 11, 1998 3,650,000
October 11, 1998 3,650,000
April 11, 1999 3,650,000
October 11, 1999 3,650,000
April 11, 2000 3,650,000
October 11, 2000 3,650,000
April 11, 2001 3,650,000
October 11, 2001 3,650,000
April 11, 2002 3,650,000
October 11, 2002 3,650,000
April 11, 2003 3,850,000
(b) Subject to Section 3.02(i)(f), on the date of receipt
thereof by SNIG 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 repayment of principal of the then outstanding
Loans; provided that, to the extent that no Default or Event of Default exists
at the time of the consummation of any Asset Sale, the Net Available Proceeds
therefrom shall not be required to be so applied, provided further, that the
aggregate amount of Net Available Proceeds not applied to
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repay the Loans pursuant to the immediately preceding proviso shall not exceed
$4,000,000 in the aggregate after the Closing Date.
(c) On the date of the receipt thereof by SNIG and/or any of
its Subsidiaries, an amount equal to 100% of the proceeds (net of underwriting
discounts and commissions and other reasonable fees and costs associated
therewith) of the incurrence of Indebtedness by SNIG and/or any of its
Subsidiaries (other than Indebtedness permitted by Section 7.04 as in effect on
the Effective Date) shall be applied to the pre-payment of the outstanding
principal amount of the Loans.
(d) On the date of the receipt thereof by SNIG and/or any of
its Subsidiaries, an amount equal to 100% of the 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) SNIG, the Borrower or any Subsidiary of the Borrower (other than any
issuance of common stock by SNIG to the extent (i) issued (x) in connection with
employee equity incentives pursuant to plans approved by SNIG's Board of
Directors, (y) to the employees of SNIG, the Borrower or its Subsidiaries and/or
(z) in connection with outstanding warrants to buy common stock in an aggregate
amount not to exceed $1,000,000, and (ii) issued in exchange for, or the
proceeds of which are used to redeem or repurchase, the Existing Preferred
Stock) shall be applied as a mandatory repayment of the outstanding principal
amount of the then outstanding Loans.
(e) On the date on which any Change of Control occurs, the
outstanding principal amount of all Loans shall be due and payable in full.
(f) To the extent that (x) funds for any prepayment otherwise
required to be made pursuant to the terms of Section 3.02(i)(b) are only
available to the Borrower through dividend payments to the Borrower from one or
more Regulated Insurance Companies, (y) such dividend payments cannot be made at
such time within the ordinary dividend-paying capacity of such Regulated
Insurance Company or Companies and, accordingly, require specific affirmative
regulatory approval for the payment of extraordinary dividends and (z) after due
written application or request, such approval for the payment of extraordinary
dividends cannot be obtained by such Regulated Insurance Company, then SNIG, the
Borrower and their Subsidiaries will not be permitted to enter into the
respective Asset Sale as described in Section 3.02(i)(b).
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(ii) Application:
(a) Each mandatory prepayment of Loans pursuant to Section
3.02(i)(b), (c) and (d) shall be applied to reduce the then remaining Scheduled
Repayments on a pro rata basis (based upon the then remaining principal amount
of each such Scheduled Repayment).
(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 $5,000,000, 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.
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 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,
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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 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 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)
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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 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 immediately preceding sentence as a result of any changes after
the Effective Date in any applicable law, treaty, govern-
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mental rule, regulation, guideline or order, or in the interpretation thereof,
relating to the deducting or withholding of such Taxes.
SECTION 4. Conditions Precedent. The obligation of the Banks to
make Loans to the Borrower hereunder on the Closing Date is subject to the
satisfaction of each of the following conditions at such time:
4.01 Effectiveness; Notes. On or prior to the Closing 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 Note or
Notes 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 the Loans 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 Closing 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.
4.03 Officer's Certificate. On the Closing Date, the
Administrative Agent shall have received a 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, 4.08, 4.09, 4.15, 4.22 and
4.23 exist as of such date.
4.04 Opinions of Counsel. On the Closing 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 Closing Date, from (i) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to SNIG
and the Borrower, which opinion shall cover the matters contained in Exhibit C-1
hereto, and (ii) White & Case, special counsel to the Banks, which opinion shall
cover the matters contained in Exhibit C-2 hereto.
4.05 Corporate Proceedings. (a) On the Closing Date, the Banks
shall have received from each Credit Party a certificate, dated the Closing
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 (x) with
copies of the Certificate of Incorporation and By-Laws of such Credit Party and
(y) the resolutions of such Credit
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Party and the other documents referred to in such certificate, and the foregoing
shall be reasonably satisfactory to the Administrative Agent.
(b) All corporate 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 1996 Loan. On the Closing Date, the 1996 Loan shall have
been completed in accordance with the 1996 Loan Documents and in a manner
satisfactory to the Administrative Agent, and the Banks shall have received a
copy of the 1996 Loan Documents.
4.07 Reinsurance Pooling Agreement. SNIG and the Borrower
shall have entered into the Reinsurance Pooling Agreement, a copy of which shall
have been delivered to the Banks, and such Reinsurance Pooling Agreement shall
be in form and substance satisfactory to the Banks.
4.08 Adverse Change, etc. Neither the Administrative Agent nor
the Required Banks shall 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, 1996 nothing shall have occurred, 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 to them, or (ii) has or is reasonably likely to have a Material
Adverse Effect.
4.09 Litigation. No actions, suits or proceedings shall be
pending or, to the knowledge of SNIG and/or the Borrower, threatened against the
Borrower (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
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under any other Credit Document or on the ability of the any Credit Party to
perform its obligations to them hereunder or under any other Credit Documents.
4.10 Pledge Agreement. On or prior to the Closing Date, SNIG
and the Borrower and each of their Subsidiaries (other than any Regulated
Insurance Company) shall have duly authorized, executed and delivered a Pledge
Agreement substantially in the form of Exhibit F 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, 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 Closing
Date.
4.11 Consummation of the Transaction. (a) On the Closing 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 applicable laws, 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
and not waived except with the consent of the Administrative Agent and the
Required Banks to the satisfaction of the Administrative Agent and the Required
Banks.
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(b) On the Closing Date, the Redemption shall have been
consummated in accordance with the Redemption Documents, which Redemption
Documents shall be in form and substance reasonably satisfactory to the
Administrative Agent, and all applicable laws, and each of the conditions
precedent to the consummation of the Redemption shall have been satisfied and
not waived except with the consent of the Administrative Agent and the Required
Banks to the satisfaction of the Administrative Agent and the Required Banks.
(c)(i) On the Closing Date, the total commitments in respect
of the Indebtedness to be Refinanced shall have been terminated, and all loans
and notes with respect thereto shall have been repaid in full, together with
interest thereon, all letters of credit issued thereunder shall have been
terminated and all other amounts (including premiums) owing pursuant to the
Indebtedness to be Refinanced shall have been repaid in full and all documents
in respect of the Indebtedness to be Refinanced and all guarantees with respect
thereto shall have been terminated (except as to indemnification provisions,
which may survive) and be of no further force and effect.
(ii) On the Closing Date, the creditors in respect of the
Indebtedness to be Refinanced shall have terminated and released all security
interests and Liens on the assets owned by SNIG and its Subsidiaries and Pac Rim
and its Subsidiaries. The Administrative Agent shall have received such releases
of security interests in and Liens on the assets owned by SNIG and its
Subsidiaries and Pac Rim and its Subsidiaries as may have been requested by the
Administrative Agent, which releases shall be in form and substance reasonably
satisfactory to the Administrative Agent and Required Banks. Without limiting
the foregoing, there shall have been delivered (i) proper termination statements
(Form UCC-3 or the appropriate equivalent) for filing under the UCC of each
jurisdiction where a financing statement (Form UCC-1 or the appropriate
equivalent) was filed with respect to SNIG or any of its Subsidiaries or Pac Rim
or any of its Subsidiaries in connection with the security interests created
with respect to the Indebtedness to be Refinanced and the documentation related
thereto, (ii) termination or reassignment of any security interest in, or Lien
on, any patents, trademarks, copyrights, or similar interests of SNIG or any of
its Subsidiaries or Pac Rim or any of its Subsidiaries on which filings have
been made, (iii) terminations of all mortgages, leasehold mortgages, deeds of
trust and leasehold deeds of trust created with respect to property of SNIG or
any of its Subsidiaries or Pac Rim or any of its Subsidiaries, in each case, to
secure the obligations in respect of the Indebtedness to be Refinanced, all of
which shall be in form and substance reasonably satisfactory to the
Administrative Agent and Required Banks, and (iv) all collateral owned by SNIG
or any of its Subsidiaries or Pac Rim or any of its Subsidiaries in the
possession of any of the creditors in respect of the Indebtedness to be
Refinanced or any collateral agent or trustee under any related
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security document shall have been returned to SNIG or such Subsidiary or Pac Rim
or any of its Subsidiaries.
4.12 Transaction Documents. On or before the Closing Date, there
shall have been delivered to the Administrative Agent, with copies for the
Banks, true and correct copies of the Transaction Documents and all terms of
such Transaction Documents shall be reasonably satisfactory in form and
substance to the Administrative Agent and the Required Banks. 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 Closing
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 Loans
on the Closing Date, the Transaction shall have been consummated in substantial
compliance with the terms of the Transaction Documents and all Legal
Requirements.
4.13 Various Agreements. On or prior to the Closing Date, there
shall have been made available to the Administrative Agent (and copies thereof
shall have been made available to the Banks requesting same) copies, certified
as true and correct by an appropriate officer of the Borrower, of:
(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) 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
SNIG or any of its Subsidiaries or any ERISA Affiliate (provided that
the foregoing shall apply 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 SNIG or any Subsidiary of
SNIG 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 SNIG or any of its
Subsidiaries including, without limitation, Pac Rim and its
Subsidiaries (collectively, the "Management Agreements");
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(c) all employment or compensation agreements providing for
annual compensation of $100,000 or more (or the forms thereof) entered
or to be entered into by SNIG or any of its Subsidiaries (collectively,
the "Employment Agreements");
(d) all agreements, if any, (or the forms thereof) entered or
to be entered into by SNIG 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 to any such entity with respect to its capital stock, but
excluding agreements with directors of any Subsidiaries of SNIG
relating to directors' qualifying shares held by such directors
(collectively, the "Stockholders Agreements");
(e) all tax sharing, tax allocation and other similar
agreements (or the forms thereof) entered or to be entered into by SNIG
and/or any of its Subsidiaries (including the Borrower, SNIC and PRACO)
(collectively, the "Tax Sharing Agreements");
(f) all material agreements entered into between SNIG and any
of its Subsidiaries and/or among or between any of SNIG's Subsidiaries
relating to the allocation of expenses incurred by SNIG or any such
Subsidiary (collectively, the "Shared Expenses Agreements");
(g) all Existing Preferred Stock Documents (including, without
limitation, the Subordinated Debt Documents, the Liability Assumption
Agreement and the Warrant Documents), together with all agreements,
documents and instruments entered into in connection with the amendment
of such Existing Preferred Stock Documents on the Closing Date as
required by Section 4.20;
(h) all agreements evidencing, governing or relating to the
Reinsurance Pooling Agreement (the "Reinsurance Pooling Agreement
Documents");
(i) all 1996 Loan Documents;
(j) all material contracts and licenses of SNIG or any of its
Subsidiaries (including the Borrower, Pac Rim and each of their
Subsidiaries) that are to remain in effect after giving effect to the
consummation of the Transaction (collectively, the "Material
Contracts"); and
(k) all Reinsurance Agreements of SNIG and each of its
Subsidiaries;
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all of which Plan Documents, Management Agreements, Employment Agreements,
Stockholders Agreements, Tax Sharing Agreements, Shared Expenses Agreements,
Existing Preferred Stock Documents, Reinsurance Pooling Agreement Documents,
1996 Loan Documents, Material Contracts and Reinsurance Agreements shall be in
form and substance reasonably satisfactory to the Administrative Agent and the
Required Banks.
4.14 Financial Statements; Projections. Prior to the Closing 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 each of SNIC and PRACO for
the fiscal year ended December 31, 1996, prepared in accordance with
SAP and as filed with the Insurance Department of the State of
California, which Annual Statement shall be satisfactory in form and
substance to the Administrative Agent and the Banks;
(b) the audited consolidated balance sheet of each of SNIG and
Pac Rim for the fiscal year ended December 31, 1996, and the related
consolidated statements of income, of stockholder's equity and of cash
flows, in each case prepared in accordance with GAAP;
(c) projected financial statements for the Borrower and its
Subsidiaries, updating the projections, dated February 14, 1997, of
such Persons previously delivered to the Administrative Agent
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
updates shall be satisfactory in form and substance to the
Administrative Agent and the Banks; and
(d) a closing funds flow statement in connection with the
Transaction, in form and substance satisfactory to the Administrative
Agent.
4.15 Approvals, etc. On the Closing Date the following approvals shall
have been obtained to the satisfaction of the Banks:
(i) all necessary and material governmental and third party
approvals, permits and licenses in connection with the Transaction and
the transactions contemplated by the Transaction Documents and
otherwise referred to herein or therein (including without limitation
the approval of the Department of Insurance of the State of
California), to the extent such approvals, consents, permits and
licenses are required to be obtained or made prior to the Closing Date,
shall
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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) all necessary shareholder approvals in connection with the
Acquisition and Indebtedness to be incurred pursuant to this Agreement
shall have been obtained and remain in full force and effect; and
(iii) all regulatory approvals in connection with the pledge of
the stock of SNIC and PRACO shall have been obtained and remain in full
force and effect.
4.16 Indebtedness. On the Closing Date and after giving effect
to the consummation of the Transaction and the other transactions contemplated
hereby, (a) the only Indebtedness of the Borrower and its Subsidiaries shall
consist of the Indebtedness incurred pursuant to the Credit Documents and (b)
the only Indebtedness of SNIG and its Subsidiaries shall consist of (i)
Indebtedness incurred pursuant to the Credit Documents, (ii) Indebtedness owing
in connection with the 1996 Loan, (iii) Indebtedness owing in an amount not to
exceed $500,000, (iv) Indebtedness owing in connection with the Subordinated
Debt, (v) liabilities existing pursuant to the Liability Assumption Agreement
and (vi) Indebtedness owing in connection with the Reverse Repurchase Program in
an amount not to exceed $7,500,000.
4.17 Payment of Fees. On the Closing 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.
4.18 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 on the Closing Date.
4.19 Insurance Policies. On the Closing Date, the
Administrative Agent shall have received evidence of insurance complying with
the requirements of Section 6.03 for the business and properties of SNIG and its
Subsidiaries, in form and substance reasonably satisfactory to the
Administrative Agent.
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4.20 Existing Preferred Stock; Warrants. The Existing
Preferred Stock Documents shall have been amended in a manner satisfactory to
the Administrative Agent or a waiver shall have been issued by the relevant
parties therein.
4.21 Reports. The Borrower shall have delivered, or shall have
caused to be delivered, to the Administrative Agent and the Banks (a) all
changes and updates, if any, made to the actuarial valuation reports of
▇▇▇▇▇▇▇▇▇▇▇, dated August 16, 1996 provided in connection with the insurance
operations of SNIG, (b) all subsequent actuarial valuation reports provided in
connection with the insurance businesses of SNIG, (c) the most recent
independent actuarial valuation report provided in connection with Pac Rim, (d)
the independent actuarial valuation report, dated March 27, 1996 provided in
connection with Superior Bermuda and (e) the actuarial valuation report of
▇▇▇▇▇▇▇▇▇▇▇ in connection with Pac Rim, provided to SNIG on August 19, 1996,
which changes and reports shall be satisfactory in form and substance to the
Administrative Agent and the Banks.
4.22 Consolidated Net Worth of the Borrower. On the Closing
Date and after giving effect to the consummation of the Transaction, the
Consolidated Net Worth of the Borrower shall be at least $85,000,000.
4.23 Reserve Increase. A reserve increase in an amount equal
to at least $12,000,000 shall have been taken at PRACO and not reversed, based
on the books of business as of December 31, 1996, prior to the Closing Date.
4.24 Independent Auditor's Opinion. On the Closing Date, the
Banks shall have received an independent auditor's opinion, in form and
substance reasonably satisfactory to the Administrative Agent, addressed to the
Banks, indicating a Tax Net Operating Loss Carry Forward at SNIG of at least
$80,000,000 at December 31, 1995.
4.25 Capital Contribution. On the Closing Date, SNIG and/or
its Subsidiaries shall have made a capital contribution to PRACO (the "Capital
Contribution") in an aggregate amount of at least $10,000,000.
4.26 Ownership. On or prior to the Closing Date, the Borrower
shall be a direct Wholly-Owned Subsidiary of SNIG and all assets currently owned
by SNIG shall have been transferred to the Borrower except (i) all capital stock
of the Borrower and SNCHC, (ii) the Reinsurance Recoverables and (iii) its
general partnership interest in SNAC.
The acceptance of the benefits of the Loans on the Closing
Date shall constitute a representation and warranty by the Borrower to each of
the Banks that all
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of the 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, each of SNIG and 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 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
specific date in which case such representation and warranty shall be true and
correct in all material respects as of such specified date):
5.01 Corporate Status. SNIG and each of its Subsidiaries (i)
is a duly organized and validly existing corporation in good standing 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 in all jurisdictions where it is required to be so qualified and where
the failure to be so qualified would 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.
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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 court or
governmental instrumentality, (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 SNIG 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 SNIG
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 SNIG or any of its
Subsidiaries.
5.04 Litigation and Contingent Liabilities. (a) There are no
actions, suits or proceedings pending or threatened in writing involving SNIG,
the Borrower or any of their respective 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
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 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 Closing Date (and after giving effect to
the Loans made on such date), no liabilities or obligations with respect to SNIG
or any of its Subsidiaries of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether or not due), and SNIG does not know of any
basis for the assertion against SNIG 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.
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5.05 Use of Proceeds; Margin Regulations. (a) The proceeds of
all Loans shall be utilized solely to effect the Transaction and to pay costs
and expenses in connection therewith.
(b) Neither the making of any Loan hereunder, nor the use of
the proceeds thereof, will violate or be inconsistent with the provisions of
Regulation G, 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 Closing Date, no order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any foreign or domestic governmental or public body or authority,
or any subdivision thereof, is required to authorize or is required prior to the
Closing 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 SNIG 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 SNIG 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.
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 SNIG or any of its Subsidiaries
to the Administrative Agent or any Bank (including, without limitation, all
information contained in the Transaction Documents) 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
contained in such materials are based on good faith estimates and assumptions
believed by SNIG and the Borrower to be reasonable and attainable at the time
made, it being recognized by the
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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. As of the Closing Date, (i)
the Transaction has been consummated in accordance with, in all material
respects, the terms and conditions of the Transaction Documents and all
applicable laws and (ii) SNIG is the direct owner of 100% of the outstanding
capital stock of the Borrower, and the Borrower is the direct owner of 100% of
the outstanding capital stock of SNIC and PRACO, in each case free and clear of
all Liens (other than Liens created pursuant to the Pledge Agreement in the case
of the capital stock of the Borrower, SNIC and PRACO). All material consents and
approvals of, and material filings and registrations with, and all other
material 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 applicable
laws 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 SNIG 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 SNIG and its Subsidiaries of their
obligations under the Transaction Documents.
5.11 Financial Condition; Financial Statements. (a) On and as
of the Closing 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 Closing
Date, and Liens created, and to be created, on or prior to the Closing Date, in
connection with this Agreement, with respect to each of SNIG and its
Subsidiaries (on a consolidated basis) and of the Borrower (on a stand-alone
basis) (x) the sum of the assets, at a fair valuation, of each of SNIG and its
Subsidiaries (on a consolidated basis) and the Borrower (on a stand-alone basis)
will exceed their debts, (y) the Borrower (on a stand-alone basis) and SNIG and
its Subsidiaries (on a consolidated basis) will not have incurred nor intended
to, or believe that they will, incur debts beyond their ability to pay such
debts as such debts mature and (z) the Borrower (on a stand-alone basis), and
SNIG and its Subsidiaries (on a consolidated basis) will have sufficient capital
with which to conduct their business. For purposes of this Section 5.11(a),
"debt" means
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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 (after giving
effect to the Transaction and the other transactions contemplated hereby)
balance sheet delivered to the Administrative Agent pursuant to Section 4.14
present fairly in all material respects the financial position of the respective
Persons referred to in such Sections 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 each of SNIG and its Subsidiaries and the Borrower
and its Subsidiaries at the date thereof). All such financial statements have
been prepared in accordance with SAP or GAAP, as indicated in Section 4.14,
consistently applied except to the extent provided in the notes to said
financial statements.
(c) Since December 31, 1996, nothing has occurred which, when
taken as a whole, has or is reasonably likely to have a Material Adverse Effect.
5.12 Security Interests. On and after the Closing 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 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 Closing Date, the Borrower 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
Closing Date.
5.13 Tax Returns and Payments. SNIG and each of its
Subsidiaries has filed all federal income tax returns and all other 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. SNIG 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 federal,
state and foreign income taxes applicable for all prior fiscal years and for the
current fiscal year to the date hereof. There is no material action,
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suit, proceeding, investigation, audit, or claim now pending or, to the
knowledge of SNIG or any of its Subsidiaries, threatened by any authority
regarding any taxes relating to SNIG or any of its Subsidiaries. Neither SNIG
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 SNIG or any of its
Subsidiaries, or is aware of any circumstances that would cause the taxable
years or other taxable periods of SNIG 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 multi-employer 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, in excess of $10,000, 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 of 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 SNIG, any Subsidiary of SNIG or any ERISA Affiliate; neither SNIG nor any
Subsidiary of SNIG 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; no condition exists which presents
a material risk to SNIG or any Subsidiary of SNIG 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 SNIG nor any Subsidiary of SNIG nor any
ERISA Affiliate has incurred any material liability as a result of any group
health plan
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(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 SNIG, any Subsidiary of SNIG, 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 SNIG or any Subsidiary of
SNIG or any ERISA Affiliate exists or is likely to arise on account of any Plan;
and SNIG and its Subsidiaries may cease contributions to or terminate any
employee benefit plan maintained by any of them without incurring any material
liability.
5.15 Subsidiaries. (a) Annex V hereto lists each Subsidiary of
SNIG (and the direct and indirect ownership interest of SNIG therein) and also
identifies the owner thereof in each case existing on the Closing Date (after
giving effect to the Transaction). All such Subsidiaries are direct or indirect
Wholly-Owned Subsidiaries of SNIG.
(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. SNIG and each of its
Subsidiaries have obtained 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. SNIG 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 SNIG and each of its
Subsidiaries is presently doing business, and SNIG 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 SNIG or such Subsidiary may then
be doing business; in each case other than those the non-compliance with which
would not have a Material Adverse Effect.
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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 Agreements between or applicable to SNIG or any of
its Subsidiaries and any union, labor organization or other bargaining agent in
respect of the employees of SNIG and/or any Subsidiary on the Closing Date.
(b) Neither SNIG nor any of its Subsidiaries is engaged in any
unfair labor practice that is reasonably likely to have a Material Adverse
Effect. There is (i) no significant unfair labor practice complaint pending
against SNIG 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 SNIG or any of its Subsidiaries or
threatened in writing against any of them, (ii) no significant strike, labor
dispute, slowdown or stoppage is pending against SNIG or any of its Subsidiaries
or threatened in writing against SNIG or any of its Subsidiaries and (iii) to
the best knowledge of SNIG and the Borrower, no union representation question
exists with respect to the employees of SNIG 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 is not reasonably likely to have a
Material Adverse Effect.
5.19 Capitalization. (a) On the Closing Date, and after giving
effect to the Transaction and the other transactions contemplated hereby, the
authorized capital stock of SNIG consists of 25,000,000 shares of common stock,
$.01 par value per share, 5,837,144 of which shall be issued and outstanding
(assuming no exercise of options or warrants between March 1, 1997 and the
Closing Date). As of the Closing Date, all such outstanding shares of SNIG have
been duly and validly issued and are fully paid and nonassessable. Neither SNIG
nor any of its Subsidiaries has 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, in the case of SNIG, for
options, warrants and grants outstanding in the aggregate amounts set forth on
Annex IX.
(b) On the Closing Date and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of the Borrower shall consist of 10,000 shares of common stock,
$0.01 par value per share, and all of the issued and outstanding shares of such
common stock are owned by SNIG. All such outstanding shares have been duly and
validly issued, are fully paid and nonassessable. 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
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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 Closing Date, and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of SNIC consists of 40,000 shares of common stock, $75.00 par
value per share, 40,000 of which shall be issued and outstanding. As of the
Closing Date, all such outstanding shares of SNIC have been duly and validly
issued and are fully paid and nonassessable. SNIC 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 Closing Date, and after giving effect to the
Transaction and the other transactions contemplated hereby, the authorized
capital stock of PRACO consists of 1,000,000 shares of common stock, no par
value, 31,000 of which shall be issued and outstanding. As of the Closing Date,
all such outstanding shares of PRACO have been duly and validly issued and are
fully paid and nonassessable. PRACO 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.
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 Closing 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 of SNIG and its Subsidiaries as of the Closing Date
which has been reviewed and approved by the Banks (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. SNIG and each of its
Subsidiaries is in compliance with all applicable statutes, regulations and
orders of, and all appli-
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cable restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property
(including compliance with all applicable environmental laws), except such
noncompliances as would not, in the aggregate, 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,
is not reasonably likely to have a Material Adverse Effect.
5.24 Conduct of Business. Prior to the Closing Date, the
Borrower has conducted no business other than that related to the Transaction.
Notwithstanding anything to the contrary contained herein, no
Bank shall have any claim against the Borrower for a breach of representation or
warranty contained in this Section 5 after the date on which the Total
Commitment has been terminated and all principal, interest and other amounts
owing hereunder and under the other Credit Documents have been irrevocably
repaid in full.
SECTION 6. Affirmative Covenants. SNIG and the Borrower hereby
covenant and agree that on the Closing 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:
6.01 Information Covenants. SNIG will furnish to each Bank:
(a) Annual Financial Statements. (i) As soon as available and
in any event within 90 days after the close of each fiscal year of each
of SNIG and the Borrower, (x) the consolidated balance sheet of SNIG
and its Subsidiaries and the Borrower and its Subsidiaries, in each
case, as at the end of such fiscal year and the related consolidated
statements of income, of stockholder's equity and of cash flows for
such fiscal year and (y) the consolidating balance sheet of SNIG 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
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scope of audit or as to the status of SNIG and its Subsidiaries or 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 120 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, each on a
consolidated basis and, in addition, on a stand alone basis in the case
of SNIC and PRACO, 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 45 days after the close of each of the first
three quarterly accounting periods in each fiscal year of each of SNIG
and the Borrower, (x) the consolidated balance sheet of SNIG and its
Subsidiaries and the Borrower and its Subsidiaries, each as at the end
of such fiscal quarter and the related consolidated statements of
income, of stockholder's 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 SNIG and each of its Subsidiaries as at the end of such fiscal
quarter and the
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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 SNIG or 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 45 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, each on a consolidated
basis and, in addition, on a stand alone basis in the case of SNIC and
PRACO, 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 60 days following the
first day of each fiscal year of SNIG, 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 SNIG 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 SNIG and its
Subsidiaries were in compliance with the provisions of Sections 6.11,
7.11, 7.12, 7.13, 7.14, 7.15 and 7.16 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 SNIG, the Borrower or any of their respective
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Subsidiaries, but only to the extent that any such litigation (i)
arises outside the ordinary course of business of SNIG and its
Subsidiaries or (ii) could have a Material Adverse Effect.
(e) Notice of Default or Litigation. Promptly, and in any
event within three Business Days after SNIG 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 SNIG or any of its Subsidiaries obtains knowledge
thereof, notice of any outstanding litigation or governmental or
regulatory proceeding pending against SNIG or any of its Subsidiaries
which could 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 SNIG 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
SNIG or any of its Subsidiaries and (y) each report submitted to SNIG
or any of its Subsidiaries by any independent actuary to the extent
that such report, in the good faith opinion of SNIG, identifies a
condition, situation or event that has or is reasonably likely to have
a Material Adverse Effect.
(g) Reserve Adequacy Report. No later than April 1 of each
year, a report prepared by an independent actuarial consulting firm of
recognized professional standing reasonably satisfactory to the
Administrative Agent and the Required Banks 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
SNIG or its Subsidiaries.
(h) Other Regulatory Statements and Reports. Promptly (A)
after their becoming available, copies of any statutory financial
statements (including all exhibits and schedules thereto) that SNIG,
the Borrower or any Regulated Insurance Company periodically files with
the Applicable Insurance Regulatory Authority of the state in which it
is domiciled and, to the extent materially different from the financial
statements filed in such state of domicile, any other state in which it
is deemed to be commercially domiciled or any governmental
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agency or agencies substituted therefor, (B) after receipt thereof,
copies of all regular and periodic reports of reviews or examinations
(including, without limitation, 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, (C) 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,
(D) 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, (E) after receipt thereof, a copy of any rating
analysis by any rating agency (including, without limitation, A.M.
Best) for each Regulated Insurance Company for each fiscal year, (F)
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, (G) and in any event not later than seven days after
the making of any such filing, copies of all insurance holding company
system act filings with governmental authorities by a Regulated
Insurance Company, including, without limitation, filings which seek
approval of governmental authorities with respect to transactions
between any of the Regulated Insurance Companies and any of their
respective Affiliates, (H) and in any event within three 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 (I) and in any event within seven
Business Days after SNIG, the Borrower or any of their 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 have a Material Adverse Effect.
(i) Other Information. Promptly upon transmission thereof,
copies of any filings and registrations with, and reports to, the SEC
by SNIG or any of its Subsidiaries (other than any registration
statement on Form S-8) and copies of all financial statements, proxy
statements, notices and reports as SNIG or any of its Subsidiaries
shall send to analysts generally or the holders of their capital stock
or of the Subordinated Debt in their capacity as such holders (in each
case
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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. SNIG 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 SNIG and any of its Subsidiaries in whomsoever's possession (but
only to the extent SNIG 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
SNIG and any of its Subsidiaries and discuss the affairs, finances and accounts
of SNIG 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. SNIG 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. SNIG will pay and discharge, and will
cause each of its Subsidiaries to pay and discharge, all 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 SNIG or any of its Subsidiaries; provided that
neither SNIG 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. SNIG 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. SNIG will, and will cause
each Subsidiary to, comply with all applicable statutes, regulations and orders
of, and all
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applicable restrictions imposed by, all governmental bodies, domestic or
foreign, in respect of the conduct of its business and 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 would not have a Material Adverse Effect.
6.07 ERISA. As soon as possible and, in any event, within 10
Business Days after SNIG, any Subsidiary of SNIG or any ERISA Affiliate knows or
has reason to know of the occurrence of any of the following, SNIG will deliver
to each of the Banks a certificate of the chief financial officer of SNIG
setting forth the full details as to such occurrence and the action, if any,
that SNIG, 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 SNIG, 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, in excess of $10,000 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 SNIG, any Subsidiary of SNIG 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 SNIG, any Subsidiary of SNIG
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 SNIG or any Subsidiary of SNIG 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 any Plan. At the request of any Bank, SNIG 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
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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 SNIG, any Subsidiary of SNIG 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 SNIG, the
Subsidiary or the ERISA Affiliate, as applicable.
6.08 Performance of Obligations. SNIG 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 is bound or to which it
is a party.
6.09 Good Repair. SNIG 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. SNIG 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 Reserve Requirements For Certain Subsidiaries. SNIG will
cause each Regulated Insurance Company to maintain reserves above the Minimum
Reserve Level for such Regulated Insurance Company.
6.12 Maintenance of Licenses and Permits. SNIG will, and will
cause each of its Subsidiaries to, maintain all permits, licenses and consents
as may be required for the 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 Maintenance of Corporate Separateness. SNIG will, and
will cause each of its Subsidiaries to, satisfy customary corporate formalities,
including the maintenance of corporate records. Neither the Borrower nor any
Subsidiary of the Borrower shall make any payment to a creditor of SNIG in
respect of any liability of SNIG, and
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no bank account of SNIG shall be commingled with any bank account of the
Borrower or any Subsidiary of the Borrower. Any financial statements distributed
to any creditors of SNIG shall, to the extent permitted by GAAP, clearly
establish the corporate separateness of SNIG from the Borrower and each of the
Borrower's Subsidiaries. Finally, neither SNIG nor any of its Subsidiaries shall
take any action, or conduct its affairs in a manner, which is likely to result
in the corporate existence of SNIG on the one hand and of the Borrower or any
Subsidiary of the Borrower on the other hand being ignored, or in the assets and
liabilities of the Borrower or any Subsidiary of the Borrower being
substantively consolidated with those of SNIG in a bankruptcy, reorganization or
other insolvency proceeding.
6.14 Register. The Borrower hereby designates the
Administrative Agent to serve as its agent, solely for purposes of this Section
6.14, 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 SNIG and 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). 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 6.14 (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).
6.15 Reincorporation Merger. On the closing date, immediately
following the consummation of the Acquisition, SNIG and the Borrower shall cause
the
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Reincorporation Merger to be consummated in accordance with Section 11.19, and
all aspects thereof (including, without limitation, regulatory, financial,
accounting and tax aspects) shall be satisfactory to the Required Banks and in
compliance with the terms of this Agreement, the Reincorporation Merger
Documents and all applicable laws. No later than the Closing Date, the Articles
of Merger with respect to the Reincorporation Merger shall have been filed to
the satisfaction of the Administrative Agent with the Secretary of State of the
State of Delaware.
6.16 Further Opinion of Counsel. On the Closing Date, SNIG and
the Borrower shall deliver to the Administrative Agent opinions, addressed to
the Administrative Agent in each of the Banks and dated the Closing Date from
(i) ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Credit Parties, which opinion shall cover
such matters incident to the Reincorporation Merger and as contained in Exhibit
J and (ii) local counsel to the Credit Parties reasonably satisfactory to the
Administrative Agent, which opinions shall cover such matters incident to the
Reincorporation Merger and as the Administrative Agent or the Required Banks may
reasonably require shall be in form and substance reasonably satisfactory to the
Administrative Agent and the Required Banks.
6.17 Superior Bermuda Securities. No later than 30 days after
the Closing Date, the Borrower shall take all actions necessary or, in the
reasonable opinion of the Collateral Agent, desirable to perfect and protect the
security interest of the Collateral Agent in the stock of Superior Bermuda as
listed on Annex B to the Pledge Agreement.
6.18 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 SNIG
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
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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
6.18 to be in form and substance reasonably satisfactory to the Administrative
Agent and the Required Banks.
SECTION 7. Negative Covenants. SNIG and the Borrower hereby
covenant and agree that on the Closing 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) SNIG will not permit any of its
Subsidiaries to engage in any business other than the issuance of workers
compensation insurance and activities related thereto.
(b) SNIG will engage in no business other than (i) the
ownership of the capital stock of the Borrower and SNCHC, (ii) its general
partnership interest in SNAC, (iii) the incurrence of Indebtedness permitted to
be incurred by it under Section 7.04 and (iv) entering into and performing its
obligations under the Transaction Documents.
(c) SNCHC will engage in no business other than its general
partnership interest in SNAC.
7.02 Consolidation, Merger, Sale or Purchase of Assets, etc.
SNIG 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 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
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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 any
Wholly-Owned Subsidiary of the Borrower with or into another
Wholly-Owned Subsidiary of the Borrower, provided that neither PRACO
nor any of its Subsidiaries may merge, consolidate or liquidate into
SNIC or any of its Subsidiaries;
(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) each such sale results in
consideration in the form of cash, (y) the aggregate sale proceeds from
all assets subject to such sales pursuant to this clause (g) in any
fiscal year shall not exceed 10% of the Consolidated Net Worth of the
Borrower as of the first day of such fiscal year provided that (i) on a
pro forma basis (the pro forma adjustments made by the Borrower
pursuant to this clause (i) shall be subject to the reasonable
satisfaction of the 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, SNIG and its Subsidiaries would have been in
compliance with Sections 7.11 through 7.16 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 SNIG
pursuant to
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this clause (ii) shall be subject to the reasonable satisfaction of the
Agent) determined as if such asset sale had been consummated, the
covenants contained in Sections 7.11 through 7.16 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 and
(z) to the extent required by Section 3.02(i)(b), the Net Available
Proceeds therefrom are applied to repay Loans as provided in Section
3.02(i)(b);
(h) SNIG may reincorporate in Delaware by merging with a newly
formed Delaware corporation ("Holdings"), with Holdings to be the
surviving corporation of such merger (the "Reincorporation Merger"),
provided that (i) Holdings shall have no assets (other than nominal
capital) or liabilities prior to such merger, (ii) Holdings shall be
renamed Superior National Insurance Group, Inc. immediately following
such merger and (iii) Holdings shall execute and deliver to the
Administrative Agent an assumption acknowledgment (the "SNIG Assumption
Acknowledgment") substantially in the form of Exhibit I; and
(i) the sale, transfer or disposition of any property of PRACO
located in Florida, Texas, Alabama or Georgia in an amount not to
exceed $1,000,000.
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 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. SNIG 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 SNIG
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:
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(a) Liens for taxes not yet due or Liens for taxes 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 (x) have
been reviewed and approved by the Banks and are listed, and the
property subject thereto on the Effective Date described, in Annex VII,
without giving effect to any extensions or renewals thereof (provided
that (i) the securities subject to any such Lien may be replaced by
other securities of no greater principal amount and (ii) no such
extension or renewal will increase the obligations secured thereby or
result in any such Lien attaching to any additional property) or (y)
are otherwise permitted under this Section 7.03;
(e) Liens arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default under Section 8.08;
(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;
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(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; and
(k) Liens created under the 1996 Loan Documents.
7.04 Indebtedness. SNIG 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 of the Borrower and its
Subsidiaries, provided that the aggregate Capitalized Lease Obligations
under all Capital Leases shall not exceed $1,000,000 at any time;
(c) Indebtedness in existence on the Effective Date which has
been reviewed and approved by the Banks and is listed in Annex III
(including the Subordinated Debt, Indebtedness pursuant to the 1996
Loan, Indebtedness owing pursuant to the Liability Assumption
Agreement), 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 the
California Department of Insurance to satisfy regulatory requirements
in connection with worker's compensation insurance; 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)
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in the case of (i) and (ii), the aggregate outstanding amount of such
obligations does not exceed $1,000,000 at any time and (z) in the case
of (iii), the aggregate outstanding amount of such obligations does not
exceed $10,000,000 at any time;
(e) Indebtedness of the Borrower under Interest Rate
Agreements entered into in respect of the Obligations;
(f) Indebtedness under reimbursement obligations in respect of
letters of credit issued to guaranty or support the payment of
performance bonds, workers' compensation claims, insurance claims and
contested appeals and compliance with operational and regulatory
obligations incurred in the ordinary course of business, in an
aggregate principal amount not to exceed $1,000,000;
(g) Indebtedness owing pursuant to the Reverse Repurchase
Program in an aggregate principal amount not to exceed $7,500,000 at
any one time and which shall remain outstanding for no longer than 30
days at a time;
(h) the guarantee by SNIG of indebtedness incurred by the
management of SNIG and owing to Imperial Bank, in an aggregate
principal amount not to exceed $750,000, so long as the proceeds of
such indebtedness are used by such management to purchase capital stock
of SNIG; and
(i) Indebtedness of Superior Bermuda incurred in connection
with the Superior Loan.
7.05 Capital Expenditures. SNIG 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 ending on a date set forth below does
not exceed the amount set forth opposite such date below:
Fiscal Year Ending Amount
------------------ ------
December 31, 1997 $1,000,000
Thereafter $1,500,000
7.06 Advances, Investments and Loans. SNIG will not, and will
not permit any of its Subsidiaries to, lend money or credit or make advances to
any Person,
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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) SNIG 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. 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 4% 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 (i)
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 5% 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
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exceed, and would not exceed, 1% 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 all Regulated Insurance
Companies in the same issuer and outstanding on such date, is equal to
2% 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 7.18) but only to the extent that any such investment, at the
time made, does not reduce Statutory Surplus of such Regulated
Insurance Company;
(h) Any Regulated Insurance Company may make 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 or (y) as a result of a foreclosure by the
Borrower or any of its Subsidiaries with respect to any secured
investment or other transfer of title with respect to any secured
investment in default;
(j) Any Regulated Insurance Company may make (i) policy loans
in the ordinary course of business; and (ii) agent debit balances in
the ordinary course of business;
(k) Investments existing in connection with the Reverse
Repurchase Program; provided that (i) the aggregate amount of such
investments shall not exceed $7,500,000 at any time and (ii) each such
investment shall remain outstanding for no more than 30 days; and
(l) Investments existing on the Effective Date which have been
reviewed and approved by the Banks and are identified on Annex VIII.
7.07 Prepayments of Indebtedness, Modifications of Agreements,
etc. SNIG will not, and will not permit any of its Subsidiaries to:
(a) make (or give any notice in respect thereof) any voluntary
or optional payment or prepayment or redemption or acquisition for
value of
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(including, without limitation, by way of depositing with the trustee
with respect thereto money or securities before due for the purpose of
paying when due) or exchange of, any Subordinated Debt or any
Indebtedness outstanding pursuant to the 1996 Loan;
(b) amend or modify (or permit the amendment or modification
of) any of the terms or provisions of the Acquisition Documents, the
Redemption Documents, the Existing Preferred Stock Documents or the
1996 Loan
Documents;
(c) amend, modify or change in any manner 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 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;
(d) amend, modify or terminate (or permit the amendment,
modification or termination of) the Reinsurance Pooling Agreement;
and/or
(e) amend, modify or terminate (or permit the amendment,
modification or termination of) the Tax Sharing Agreements.
7.08 Dividends, etc. (a) SNIG 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 SNIG, the Borrower
or any other Subsidiary, 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;
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(ii) the Borrower may pay cash dividends to SNIG at the time
of, and in an amount equal to, interest payments on the Subordinated
Debt so long as no Default or Event of Default exists or would exist
immediately after giving effect thereto; and
(iii) the Borrower may pay cash dividends to SNIG from time to
time to enable SNIG to pay operating expenses arising in the ordinary
course of business and which are then due and payable (but excluding
interest payments on Subordinated Debt), provided that (x) SNIG
promptly uses the proceeds of any such dividends to pay such costs and
expenses, (y) the aggregate amount of such dividends in any fiscal year
of the Borrower shall not exceed $250,000 and (z) no Default or Event
of Default exists or would exist immediately after giving effect
thereto.
(b) SNIG 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 any Indebtedness owed to SNIG
or any of its Subsidiaries, (B) make loans or advances to SNIG or any
Subsidiary, (C) transfer any of its properties or assets to SNIG or any
Subsidiary or (D) guarantee the Obligations or (ii) the ability of SNIG or any
Subsidiary of SNIG 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, the other Credit
Documents and the Subordinated Debt Documents and (II) Legal Requirements.
7.09 Transactions with Related Parties. SNIG will not, and
will not permit any Subsidiary to, enter into any transaction or series of
transactions with any Related Party (excluding SNIG or any Wholly-Owned
Subsidiary of SNIG) other than in the ordinary course of business and on terms
and conditions substantially as favorable to SNIG or such Subsidiary as would be
obtainable by SNIG or such Subsidiary at the time in a comparable arm's-length
transaction with a Person other than a Related Party.
7.10 Transactions with Superior Bermuda. The Borrower will
not, and will not permit any of its Subsidiaries (other than Superior Bermuda)
to enter into any transactions or series of transactions with Superior Bermuda
provided that this restriction shall not apply to (x) the ability of the
Borrower to collect management and/or investment fees from Superior Bermuda and
(y) the ability of SNIC to make a loan to Superior Bermuda (the "Superior Loan")
to repay its reinsurance obligations to SNIC, provided that, (i) Superior
Bermuda is unable to otherwise make such repayments and (ii) such a loan shall
only be permitted after Superior Bermuda has used all amounts transferred to it
with the proceeds of the 1996 Loan.
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7.11 Leverage Ratios. (a) 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:
Period Ratio
------ -----
Closing Date to and including
December 31, 1998 0.37:1.00
Thereafter 0.30:1.00
(b) SNIG will not permit the ratio of (i) Consolidated
Indebtedness of SNIG to (ii) Consolidated Total Capital of SNIG at any time
during any period set forth below to be greater than the ratio set forth
opposite such period:
Period Ratio
------ -----
Closing Date to and including
December 31, 1998 0.65:1.00
Thereafter 0.50:1.00
7.12 Fixed Charge Coverage Ratio. SNIG and the Borrower
will not permit the Fixed Charge Coverage Ratio for any Test Period to be less
than 1.50:1.00.
7.13 Interest Coverage Ratio. SNIG and the Borrower will
not permit the Interest Coverage Ratio for any Test Period to be less than
3.00:1.
7.14 Minimum Adjusted Consolidated Surplus. (a) SNIG and the
Borrower shall not permit PRACO and SNIC, collectively, on a combined basis, to
have during any period set forth below a Statutory Surplus of less than the
amount set forth opposite such period below:
Period Amount
------ ------
Closing Date to and
including December 31, 1999 $ 78,000,000
Thereafter $114,000,000
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7.15 Minimum Risk-Based Capital. SNIG and the Borrower
will not permit the Risk-Based Capital for any Subsidiary listed below to be
less than the percentage set forth below opposite such Subsidiary:
Subsidiary Percentage
---------- ----------
SNIC 375%
PRACO 275%
7.16 Operating Leverage Ratio. SNIG and the Borrower will not
permit the ratio of (i) Net Premiums Written for any Test Period to (ii)
Statutory Surplus as of the last day of such Test Period for PRACO and SNIC,
collectively on a combined basis, to be greater than 2.50:1.00.
7.17 Issuance of Stock. SNIG 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 SNIG, the Borrower or another
Wholly-Owned Subsidiary of the Borrower, (ii) to qualify directors if required
by applicable law and (iii) pursuant to the Pledge Agreement.
7.18 Creation of Subsidiaries. Neither SNIG nor the Borrower
shall create or acquire any Subsidiary other than (i) Regulated Insurance
Companies which are direct 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 and all of the capital stock of such
Subsidiary owned by the Borrower is pledged pursuant to the Pledge Agreement.
7.19 Partnership Agreements. SNIG will not enter into any
partnership agreement as a general partner (other than that partnership
agreement establishing its general partnership interest in SNAC).
7.20 Transfers to SNIG. The Borrower will not and will not
permit its Subsidiaries to transfer cash or other assets to or for the benefit
of SNIG or any of its creditors or stockholders (in such capacity), except as
permitted under Section 7.08.
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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 two or more days, in the 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 SNIG or 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, 6.13 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) SNIG, the Borrower or
any of their respective Subsidiaries shall (i) default in any payment with
respect to Indebtedness (other than the Obligations) in excess of $1,000,000
individually or in the aggregate, for SNIG, the Borrower and their respective
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 (determined without regard to whether any notice of
acceleration, or any lapse of time prior to the effectiveness of any notice of
acceleration, is required), any such Indebtedness to become due prior to its
stated maturity; or (b) any such Indebtedness of SNIG, the Borrower or any of
their respective 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
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8.05 Bankruptcy, etc. SNIG, the Borrower or any of their
respective 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 SNIG, the Borrower or any of their respective 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 SNIG, the Borrower or any of their respective Subsidiaries;
or SNIG, the Borrower or any of their respective 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 SNIG, the Borrower
or any of their respective Subsidiaries; or any such proceeding is commenced
against (a) any Regulated Insurance Company which is engaged in the business of
underwriting insurance and/or reinsurance in the United States, or (b) SNIG, the
Borrower or any of their respective Subsidiaries (other than (x) any Regulated
Insurance Company described in the immediately preceding clause (a) or (y) any
dissolution or liquidation proceeding commenced against a Non-Regulated
Subsidiary (i) the assets of which do not exceed an aggregate amount of $100,000
and (ii) in connection with the winding-up of such Subsidiary) to the extent
such proceeding is consented to by such Person, and in the case of either clause
(a) or (b) remains undismissed for a period of 60 days; or SNIG, the Borrower or
any of their respective 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 any
appointment of any conservator or the like for it or any substantial part of its
property, or (b) SNIG, the Borrower or any of their respective 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 SNIG, the Borrower or any of their
respective Subsidiaries makes a general assignment for the benefit of creditors;
or any corporate action is taken by SNIG, the Borrower or any of their
respective Subsidiaries for the purpose of effecting any of the foregoing; or
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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 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,
in the opinion of the Required Banks, has had, or could reasonably be expected
to have, a Material Adverse Effect; or
8.07 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), or the Borrower shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or observed pursuant
to the Pledge Agreement; or
8.08 Judgments. One or more judgments or decrees shall be
entered against SNIG, the Borrower or any of their respective Subsidiaries
involving a liability, net of undisputed reinsurance, of $1,000,000 or more in
the case of any one such judgment or decree or in the aggregate for all such
judgments and decrees for SNIG, the Borrower and their 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
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8.09 A.M. Best Ratings. SNIC shall fail to maintain an A.M.
Best rating of at least B+, or PRACO shall fail to maintain an A.M. Best rating
of at least B to the extent PRACO receives a stand alone A.M. Best rating; or
8.10 Guaranties. The Guaranties or any provision thereof shall
cease to be in full force and effect, or any Guarantor or any Person acting by
or on behalf of such Guarantor shall deny or disaffirm such Guarantor's
obligations under any Guaranty or any Guarantor shall default in the due
performance or observance of any term, covenant or agreement on its part to be
performed or observed pursuant to any Guaranty; or
8.11 Reserve Adequacy. At the time of the delivery of any
reserve adequacy report pursuant to Section 6.01(g), any Regulated Insurance
Company shall have reserves of less than the higher of (a) the low end of the
adequacy range set forth in such report, if a range is provided therein, and (b)
95% of the lower of (1) the mid-point of the adequacy range set forth in such
report, if a range is provided therein and (2) the adequacy point estimate set
forth in such report, if any (the higher of (a) and (b) for any such Regulated
Insurance Company, the "Minimum Reserve Level" for such Regulated Insurance
Company); provided that if at the time of the delivery of any such report any
Regulated Insurance Company does not have reserves as provided above, no Default
or Event of Default shall occur under this Section 8.11 until the 60th day after
the delivery of such report and then only if such Regulated Insurance Company
failed to comply with the foregoing requirement within such 60-day period; or
8.12 Existing Preferred Stock Documents. Centre Re and/or any
of its affiliates shall cease to hold all of the Existing Preferred Stock; or
8.13 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
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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 remedies and rights notwithstanding, in the event of a default and
acceleration of the Obligations hereunder, neither the Collateral Agent nor any
Bank shall vote, sell, or in any manner exercise control as to any Regulated
Insurance Company pledged as Collateral without first filing for and obtaining
written prior approval pursuant to California Insurance Code Section 1215.2.
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 merger of the Borrower with and
into Pac Rim pursuant to which Pac Rim shall be the surviving corporation, shall
become the Borrower and shall be renamed Superior Pacific Holding Corporation
("Superior Pacific").
"Acquisition Agreement" shall mean the Amended and Restated
Agreement and Plan of Merger, dated as of February 17, 1997, by and among SNIG,
the Borrower and Pac Rim.
"Acquisition Documents" shall mean the Acquisition Agreement
and all other agreements and documents relating to the Acquisition including the
Exhibits to the Acquisition Agreement, in the form delivered pursuant to Section
4.12 and as the same may be amended or modified pursuant to the terms thereof
and hereof.
"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.
"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 5% or more of the securities having ordinary voting power for the election
of directors of such corporation or (ii) to direct or
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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.
"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 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 in which such Regulated Insurance
Company is licensed, and shall include any Federal insurance regulatory
department, authority or agency that may be created and that asserts regulatory
jurisdiction over such Regulated Insurance Company.
"Applicable Percentage" shall mean, with respect to Base Rate
Loans or Eurodollar Loans, as the case may be, (i) from the Closing Date to and
including the date on which the Section 6.01(a)(i) Financials in respect of the
fiscal year ending December 31, 1997, are delivered to the Banks, 1.00% and
2.00%, respectively, and (ii) thereafter, from the date of receipt of Section
6.01(a)(i) Financials for each fiscal year and a certificate of an Authorized
Officer of the Borrower setting forth the Fixed Charge Coverage Ratio for such
fiscal year, until the delivery of Section 6.01(a)(i) Financials for the
immediately succeeding fiscal year, the applicable percentage set forth below
based upon the Fixed Charge Coverage Ratio for such fiscal year:
Fixed Charge Eurodollar Base Rate
Coverage Ratio Loans Loans
-------------- ----- -----
1.75:1 but 2.00:1 but 2.25:1 but 2.50:1 1.25% .25%
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provided that (A) if any Section 6.01(a)(i) Financials for any fiscal year are
not delivered to the Banks on or prior to May 15 of the following year (the
"Late Section 6.01(a)(i) Financials") and such Late Section 6.01(a)(i)
Financials establish that the Applicable Percentages would have been increased
as provided above on the delivery date of such Financials, then the Applicable
Percentages shall be so increased retroactively to such May 15th and (B) if the
Borrower shall have made any interest payment during the period prior to the
actual date of delivery of such Late Section 6.01(a)(i) Financials based upon
the lower Applicable Percentage in effect prior to such delivery, the Borrower
shall pay as additional interest an amount which equals the difference between
the amount of interest which would otherwise have been paid if the Late Section
6.01(a)(i) Financials were delivered on May 15 and the amount of such interest
so paid, which supplemental interest payment shall be due and payable on the
Business Day following the date of delivery of the Late Section 6.01(a)(i)
Financials.
"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 Closing Date by SNIG or any of its
Subsidiaries of (i) any capital stock or equity securities of a Subsidiary of
SNIG or (ii) any other asset, in each case to any Person other than the Borrower
or any of its Wholly-Owned Subsidiaries (other than (x) sales, transfers or
other dispositions in the ordinary course of business and/or (y) the sale,
transfer or disposition of any property of PRACO located in, or business
operations related to, Florida, Georgia or Texas in an amount not to exceed
$1,000,000).
"Associates" shall mean each of CentreLine Reinsurance
Limited, Centre Reinsurance Limited, International Insurance Investors, L.P.,
International Insurance Advisors, Inc. and any person or entity that controls,
is under common control with, or is controlled by Insurance Partners or such
persons or entities, and all individuals who are officers, directors or control
persons of any such entities, including Insurance Partners.
"Assumption Acknowledgment" shall have the meaning provided in
Section 11.18(i).
"Authorized Control Level" shall mean "Authorized Control
Level" as defined by the NAIC from time to time and as applied in the context of
the Risk Based
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Capital Guidelines promulgated by the NAIC (or any term substituted therefor by
the NAIC).
"Authorized Officer" shall mean any senior officer of SNIG or
the Borrower designated as such in writing by SNIG or the Borrower to, and found
acceptable by, the Administrative Agent.
"Bank" shall have the meaning provided in the first paragraph
of this Agreement.
"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 and (y) the
Prime Lending Rate as in effect from time to time.
"Base Rate Loans" 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 SNIC in preparing its
December 31, 1996 Annual Statement filed with the Insurance Department of the
State of California, 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; provided that following the consummation of the
Acquisition, the "Borrower" shall mean Pac Rim (to be renamed "Superior Pacific
Holding Corporation") as the surviving corporation of the Acquisition.
"Borrowing" shall mean the incurrence of one Type of Loan
hereunder by the Borrower from all of the Banks having Commitments on a pro rata
basis on the Closing 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
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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.
"Capital Contribution" shall have the meaning provided in
Section 4.25.
"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 SNIG 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 SNIG and its
Subsidiaries, 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.
"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
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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 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 SNIG 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 SNIG and/or its Subsidiaries of
such proceeds.
"CentreLine Reinsurance Limited" shall mean CentreLine
Reinsurance Limited, a Bermuda corporation.
"Centre Reinsurance" shall mean Centre Reinsurance (Bermuda)
Limited, a Bermuda corporation.
"Change of Control" shall mean (a) Insurance Partners and its
Associates collectively shall cease to own directly or indirectly at least 35%
on a fully diluted basis of the economic and voting interest in the capital
stock of SNIG; (b) SNIG shall cease to own directly 100% on a fully diluted
basis of the economic and voting interest in the Borrower's capital stock; (c)
the Borrower shall cease to own directly 100% on a fully diluted basis of the
economic and voting interest in the capital stock of PRACO or
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SNIC; (d) any Person other than Insurance Partners and Centre Reinsurance shall
own directly or indirectly 20% or more on a fully diluted basis of the economic
and voting interest in the capital stock of SNIG; (e) a majority of the Board of
Directors of SNIG shall cease to consist of Continuing Directors; or (f) any
"Change of Control" as such term is defined in the Subordinated Debt Documents,
or any successor or similar provision shall occur.
"Chase" shall mean The Chase Manhattan Bank.
"Closing Date" shall mean the date upon which the Loans are
incurred hereunder.
"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.
"Commitment" shall mean, with respect to each Bank, the amount
set forth opposite such Bank's name on Annex I hereto, as the same may be
reduced or terminated pursuant to Sections 2.02, 2.03 and/or 8.
"Commitment Fee" shall have the meaning provided in Section
2.01(a).
"Consolidated Indebtedness" shall mean, at any time and as to
any Person, 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 interest expense (including that attributable to Capital
Leases in accordance with GAAP) of such Person and its Subsidiaries 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, (i) any amortization of
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deferred financing costs and (ii) any interest expense with respect to the 1996
Loan Agreement.
"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 Consolidated Indebtedness of such Person and 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 SNIG on the
Effective Date and each other director if such director's nomination for the
election to the Board of Directors of SNIG is recommended by a majority of the
then Continuing Directors.
"Convertible Debt" shall mean the Series A Convertible
Debentures issued by Pac Rim.
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"Credit Documents" shall mean this Agreement, the Notes, the
Pledge Agreement, the Assumption Acknowledgment and the SNIG Assumption
Acknowledgment.
"Credit Party" shall mean SNIG, the Borrower and each of the
other parties to the Pledge Agreement.
"Default" shall mean any event, act or condition which with
notice or lapse of time, or both, would constitute an Event of Default.
"Dividends" shall have the meaning provided in Section 7.08.
"Domestic Subsidiary" shall mean each Subsidiary of SNIG which
is not a Foreign Subsidiary.
"Effective Date" shall have the meaning provided in Section
11.10.
"Employment Agreements" shall have the meaning provided in
Section 4.13.
"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 Loans" shall mean each Loan bearing interest at
the rates provided in Section 1.08(b).
"Eurodollar Rate" shall mean, with respect to each Interest
Period for a Eurodollar Loan, (i) the arithmetic average (rounded to the nearest
1/100 of 1%) of the offered quotation to first-class banks in the interbank
Eurodollar market by Chase for U.S. dollar deposits of amounts in same day funds
comparable to the outstanding principal amount of the Eurodollar Loan of Chase
for which an interest rate is then being determined with maturities comparable
to the Interest Period to be applicable to such Eurodollar Loan, determined as
of 10:00 A.M. (New York time) on the date
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which is two Business Days prior to the commencement of such Interest Period
divided (and rounded upward to the next whole multiple of 1/16 of 1%) by (ii) a
percentage equal to 100% minus the then stated maximum rate of all reserve
requirements (including, without limitation, any marginal, emergency,
supplemental, special or other reserves) applicable to any member bank of the
Federal Reserve System in respect of Eurocurrency liabilities as defined in
Regulation D (or any successor category of liabilities under Regulation D).
"Event of Default" shall have the meaning provided in Section
8.
"Existing Preferred Stock" shall mean the 9.7% preferred stock
of SNAC issued to Centre Reinsurance.
"Existing Preferred Stock Documents" shall mean all documents
evidencing, governing or relating to the Existing Preferred Stock, including,
without limitation, the Subordinated Debt Documents, the Warrant Documents and
the Liability Assumption Agreement.
"Expiration Date" shall mean April 30, 1997.
"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.
"Financial Reinsurance Agreement" shall mean a reinsurance
agreement covering any transaction in which any Regulated Insurance Company
cedes business that does not meet the conditions for reinsurance accounting as
provided by the Financial Accounting Standards Board in Statement of Financial
Accounting Standards No. 113, as the same may be revised, replaced, or
supplemented from time to time.
"Fixed Charge Coverage Ratio" shall mean, for any period
(including, without limitation, any Test Period), the ratio of (a) the sum of
(i) Statutory EBIT for
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such period and (ii) investment income of the Borrower for such period to (b)
Fixed Charges for such period.
"Fixed Charges" shall mean, for any period (including, without
limitation, any Test Period), the sum of (a) all interest payments on the Loans
and all Scheduled Repayments made during such period plus (b) consolidated
provision for current taxes of SNIG determined in accordance with GAAP plus (c)
cash expenses of the Borrower and SNIG (excluding expenses relating to the
Transaction to the extent paid with the proceeds of Loans) for such period,
determined in accordance with GAAP, plus (d) all dividends paid by the Borrower
to SNIG to make all SNIG's interest and principal payments on the Subordinated
Debt.
"Foreign Subsidiary" shall mean each Subsidiary of SNIG 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.
"Guaranteed Creditors" shall mean and include the
Administrative Agent, the Banks and each party (other than any Credit Party)
party to an Interest Rate Agreement or Other Hedging Agreement to the extent
such party constitutes a Secured Creditor under the Pledge Agreement.
"Guaranteed Obligations" shall mean (i) the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of the principal and interest on each Note issued by the Borrower to each Bank,
and Loans made, under this Agreement together with all the other obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) and liabilities (including, without
limitation, indemnities, fees and interest thereon) of SNIG and/or the Borrower
to such Bank now existing or hereafter incurred under, arising out of or in
connection with this Agreement or any other Credit Document and the due
performance and compliance with all the terms, conditions and agreements
contained in the Credit Documents by SNIG and the Borrower and (ii) the full and
prompt
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payment when due (whether by acceleration or otherwise) of all obligations
(including obligations which, but for the automatic stay under Section 362(a) of
the Bankruptcy Code, would become due) of SNIG and/or the Borrower owing under
any such Interest Rate Agreement or Other Hedging Agreement entered into by SNIG
or any of its Subsidiaries with any Bank or any affiliate thereof (even if such
Bank subsequently ceases to be a Bank under this Agreement for any reason) so
long as such Bank or affiliate participates in such Interest Rate Agreement or
Other Hedging Agreement, and their subsequent assigns, if any, whether now in
existence or hereafter arising, and the due performance and compliance with all
terms, conditions and agreements contained therein.
"Guarantor" shall mean SNIG.
"Guaranty" shall mean the SNIG Guaranty as described in
Section 12.
"Holdings" shall have the meaning provided in Section 7.02(h).
"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) 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 (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.
"Indebtedness to be Refinanced" shall mean, collectively, the
Indebtedness of SNIG incurred pursuant to the term loan agreement with Imperial
Bank, dated June 28, 1994, as amended, in the original principal amount of
$10,000,000.
"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.
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"Insurance Partners" shall mean Insurance Partners, L.P. and
Insurance Partners Offshore (Bermuda), L.P.
"Interest Coverage Ratio" shall mean, for any period, the
ratio of Statutory EBIT for such period to Consolidated Interest Expense of the
Borrower 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.
"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.
"International Insurance Advisors, Inc." shall mean
International Insurance Advisors, Inc., a Delaware corporation.
"International Insurance Investors, L.P.", shall mean
International Insurance Investors, L.P., a Bermuda limited partnership.
"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 10A, page 2, column 1 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 SNIG 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.
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"Late Section 6.01(a)(i) Financials" shall have the meaning
provided in the definition of "Applicable Percentage."
"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 SNIG or a Subsidiary of SNIG.
"Liability Assumption Agreement" shall mean the Liability
Assumption Agreement, dated as of June 30, 1994, between SNIG and SNAC, as
amended, modified or supplemented from time to time in accordance with the terms
hereof and thereof.
"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 4.13.
"Margin Stock" shall have the meaning provided in Regulation
U.
"Master Repurchase Agreement" shall mean the Master Repurchase
Agreement, dated as of February 8, 1995, between SNIC and ▇▇▇▇▇▇▇ ▇▇▇▇▇
Government Securities Inc. and/or ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated.
"Material Adverse Effect" shall mean a material adverse effect
on the business, operations, results of operation, assets, liabilities,
condition (financial or otherwise) or prospects of SNIG and its Subsidiaries
taken as a whole or the Borrower and its subsidiaries taken as a whole after
giving effect to the Transaction.
"Material Contracts" shall have the meaning provided in
Section 4.13.
"Maturity Date" shall mean the date six years from the Closing
Date.
"Minimum Reserve Level" shall have the meaning provided in
Section 8.11.
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"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc. and its
successors.
"Moody's Credit Rating" shall mean the rating level (it being
understood that a rating level shall include numerical modifiers and (+) and (-)
modifiers) assigned by Moody's to the senior unsecured long-term debt of an
Issuer.
"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 SNIG, the Borrower or any
Non-Regulated Insurance 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 Insurance 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) and (b)
incremental income taxes paid or payable as a result thereof, 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 Premiums Written" shall mean, or any period, for any
Person, determined in accordance with SAP, the aggregate amount of premiums
written by such
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Person and its Subsidiaries during such period, as same would be shown on line
32, page 7, column 1 of the Benchmark Statement for such Person covering such
period; provided that solely in determining the Net Premiums Written (i) for the
Test Period ended June 30, 1997, such aggregate amount of premiums written for
such period shall be multiplied by 4, (ii) for the Test Period ended September
30, 1997, such aggregate amount of premiums written for such period shall be
multiplied by 2 and (iii) for the Test Period ended December 31, 1997, such
aggregate amount of premiums written for such period shall be multiplied by 4/3.
"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.
"New Notes" shall have the meaning provided in Section
11.18(iv).
"1996 Loan" shall mean the incurrence of Indebtedness by SNIG
pursuant to the 1996 Loan Documents.
"1996 Loan Agreement" shall mean the Credit Agreement, dated
as of November 12, 1996, between SNIG and Chase.
"1996 Loan Documents" shall mean the 1996 Loan Agreement and
all other documents evidencing, governing or related to the 1996 Loan
(including, without limitation, the Put Agreement, Security Agreement and Asset
Transfer Agreement referred to in the 1996 Loan Agreement).
"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 SNIG 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 SNIG
which is not a Regulated Insurance Company.
"Note" shall have the meaning provided in Section 1.05.
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"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 ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ 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.
"Pac Rim" shall mean Pac Rim Holding Corporation, a Delaware
corporation.
"Pac Rim Warrants" shall mean the Series 1, Series 2 and
Series 3 Warrants issued by Pac Rim.
"Payment Office" shall mean the office of the Administrative
Agent at ▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or such other office
as the Administrative Agent may designate to the Borrower and the Banks from
time to time.
"PBGC" shall mean the Pension Benefit Guaranty Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"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) SNIG or a Subsidiary of SNIG or an ERISA Affiliate,
and each such plan for the five year period immediately following the latest
date on which SNIG, or a Subsidiary of SNIG or an ERISA Affiliate maintained,
contributed to or had an obligation to contribute to such plan.
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"Plan Documents" shall have the meaning provided in Section
4.13(a).
"Pledge Agreement" shall have the meaning provided in Section
4.10.
"Pledged Securities" shall mean all the Pledged Securities as
defined in the Pledge Agreement.
"PRACO" shall mean the Pacific Rim Assurance Company, a
California corporation (to be renamed "Superior Pacific Casualty Company"
following the consummation of the Acquisition ).
"Prime Lending Rate" shall mean the rate which Chase announces
from time to time as its prime commercial lending rate, 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.
"Quarterly Statement" shall mean the quarterly financial
statement required to be filed by any Regulated Insurance Company with the
Applicable Regulatory Insurance Authority.
"Rating Agencies" shall mean S&P and Moody's.
"Redemption" shall mean the purchase and cancellation of the
Pac Rim Warrants and the purchase and redemption of the Convertible Debt.
"Redemption Documents" shall mean each of the agreements,
documents and instruments entered into in connection with the Redemption.
"Refinancing" shall mean the refinancing and repayment in full
of all amounts outstanding under, and the termination in full of all commitments
and letters of credit in respect of the Indebtedness to be Refinanced.
"Refinancing Documents" shall mean each of the agreements,
documents and instruments entered into in connection with the Refinancing.
"Register" shall have the meaning provided in Section 6.14.
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"Regulated Insurance Company" shall mean any Subsidiary of
SNIG, 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.
"Reincorporation Merger" shall have the meaning provided in
Section 7.02(h).
"Reincorporation Merger Documents" shall mean the certificate
of merger and all other agreements and documents related to the Reincorporation
Merger.
"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.
"Reinsurance Pooling Agreement" shall mean (i) a management
expense agreement between SNIG (or an Affiliate of SNIG) and the Borrower or
(ii) such other equivalent management expense arrangement.
"Reinsurance Pooling Agreement Documents" shall have the
meaning provided in Section 4.13(h).
"Reinsurance Recoverables" shall mean the reinsurance
recoverables owing by Centre Reinsurance to the Borrower and/or SNIC, which
reinsurance recoverables are subject to the 1996 Loan Documents.
"Related Parties" shall mean any Affiliate, any Associate,
Centre Reinsurance and Insurance Partners.
"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
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period is waived under subsection .13, .14, .16, .18, .19 or .20 of PBGC
Regulation Section 2615.
"Required Banks" shall mean Banks whose Loans constitute at
least 66-2/3% of the aggregate principal amount of Loans outstanding at such
time.
"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.
"Reverse Repurchase Program" shall mean reverse repurchase
program entered into pursuant to the Master Repurchase Agreement.
"Risk-Based Capital" shall mean for any Subsidiary listed in
Section 7.15, the ratio (expressed as a percentage), at any time, of the Total
Adjusted Capital of such Subsidiary to the Authorized Control Level of such
Subsidiary.
"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).
"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
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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.
"Section 6.01(a)(i) Financials" shall mean the financial
statements delivered pursuant to Section 6.01(a)(i).
"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.
"Shared Expenses Agreements" shall have the meaning provided
in Section 4.13.
"SNAC" shall mean Superior National Capital, L.P., a Bermuda
limited partnership.
"SNCHC" shall mean Superior National Capital Holding
Corporation, a Nevada corporation.
"SNIC" shall mean Superior National Insurance Company, a
California corporation.
"SNIG" shall have the meaning provided in the first paragraph
of this Agreement, provided that following the Reincorporation Merger, "SNIG"
shall mean the surviving corporation of the Reincorporation Merger.
"SNIG Assumption Acknowledgment" shall have the meaning
provided in Section 7.02(h).
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"Statutory Earnings" shall mean, for any period, for any
Regulated Insurance Company, (i) the total amount as would be shown on line 16,
page 4, column 1 of a Benchmark Statement for such Regulated Insurance Company
(i.e., net gain from operations, after taxes but before realized capital gains
and losses) prepared for such period less (ii) the undistributed earnings of
Subsidiaries of such Regulated Insurance Company to the extent included in such
total amount.
"Statutory EBIT" shall mean, for any period, the sum of the
net income before dividends to policyholders and before federal and foreign
income taxes as same would be shown on line 14(b), page 4, column 1 of a
Benchmark Statement of each of PRACO and SNIC, in each case for such period as
determined on a consolidated basis in accordance with SAP.
"Statutory Surplus" shall mean, at any date for any Regulated
Insurance Company, the total amount as would be shown on line 25, 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 4.13.
"Stock Purchase Agreement" shall mean the Amended and Restated
Stock Purchase Agreement among SNIG, Insurance Partners and various other
signatories, dated as of September 17, 1996, as amended and restated as of
February 17, 1997.
"Subordinated Debt" shall mean the Indebtedness of SNIG owing
to SNAC pursuant to the Subordinated Debt Documents, as amended, modified or
supplemented in accordance with the terms thereof and hereof.
"Subordinated Debt Agreement" shall mean the Loan Agreement,
dated as of June 30, 1994, between SNIG and SNAC, as amended, modified or
supplemented in accordance with the terms thereof and hereof.
"Subordinated Debt Documents" shall mean the Subordinated Debt
Agreement and all other agreements, documents and instruments governing,
evidencing or relating to the issuance of Subordinated Debt.
"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)
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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.
"Superior Bermuda" shall mean Superior Bermuda (Ltd.), a
Bermuda corporation.
"Superior Loan" shall have the meaning provided in Section
7.10.
"Superior Pacific" shall have the meaning provided in the
definition of Acquisition.
"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.
"Syndication Date" shall mean the earlier of (x) the date
which is 90 days after the Closing Date or (y) the date upon which the
Administrative Agent determines in its sole discretion (and notifies the
Borrower) that the primary syndication (and the resulting addition of Banks
pursuant to Section 11.04) has been completed.
"Tax Net Operating Loss Carry Forward" shall mean the sum of
the net operating loss carry over, net capital loss carry over and net
unrealized built-in loss, as determined for United States federal income tax
purposes, to which SNIG or the Borrower is entitled under the Code on the
Closing Date.
"Tax Sharing Agreements" shall have the meaning provided in
Section 4.13.
"Taxes" shall have the meaning provided in Section 3.04(a).
"Termination Date" shall have the meaning provided in Section
2.01.
"Test Period" shall mean (i) for any determination made on and
prior to December 31, 1997, the period from April 1, 1997 to the last day of the
fiscal quarter of the Borrower, SNIC and PRACO, as the case may be, then last
ended, provided that the first Test Period shall end on June 30, 1997, and (ii)
for any determination made thereafter, the four consecutive fiscal quarters of
the Borrower, SNIC and PRACO, as
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the case may be, ended on the last day of the most recently ended fiscal quarter
of the Borrower, SNIC and PRACO, as the case may be (taken as one accounting
period).
"Total Adjusted Capital" shall mean "Total Adjusted Capital"
as defined by the NAIC as of December 31, 1996 and as applied in the context of
the Risk Based Capital Guidelines promulgated by the NAIC.
"Total Commitment" shall mean the sum of the Commitments of
each Bank.
"Transaction" shall mean, collectively, (i) the Acquisition,
(ii) the Reincorporation Merger, (iii) the Redemption, (iv) the Refinancing, (v)
the Capital Contribution, (vi) the incurrence by the Borrower of Loans hereunder
on the Closing Date and (vii) the payment of fees and expenses in connection
with the foregoing.
"Transaction Documents" shall mean, collectively, (i) the
Acquisition Documents, (ii) the Redemption Documents, (iii) the Refinancing
Documents 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.
"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.
"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
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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.
"Warrant Documents" shall mean all documents and agreements
evidencing, governing and related to the Warrants.
"Warrants" shall mean the Common Stock Purchase Warrants
issued by SNIG, dated June 30, 1994.
"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.
"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,
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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 SNIG 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 SNIG 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 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.
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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 SNIG or 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 SNIG 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 credit-
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worthiness of SNIG and its Subsidiaries and made its own decision to 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 its respective capacities as
such ratably according to such Bank's respective Loans and unutilized
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 SNIG 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 solely 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 SNIG 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
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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 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. SNIG and 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); (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
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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).
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,
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 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 or sent by overnight courier and shall be effective
when received.
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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, no Credit Party
may 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, 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 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 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 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 or SNIG 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. 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 here-
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under, 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 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 G (appropriately completed). 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
Closing 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 and (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 $3,000, provided that such transfer or
assignment will not be effective until recorded by the Administrative Agent on
the Register pursuant to Section 6.14 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 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.
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(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 immediately prior to such receipt, then
such Bank receiving such excess payment shall purchase for cash without
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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.
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 SNIG or 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
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FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH CREDIT PARTY HEREBY FURTHER
IRREVOCABLY WAIVES ANY 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.
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11.10 Effectiveness. This Agreement shall become effective on
the date (the "Effective Date") on which SNIG, 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 SNIG, 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.
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, (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 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 SNIG or 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.
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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. 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 Transaction, 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 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
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.
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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.
11.17 Subordinated Debt Agreement. All Obligations shall be
senior in right of payment to the Loan under and as defined in the Subordinated
Debt Agreement and shall constitute "Senior Indebtedness" for all purposes of
the Subordinated Debt Agreement.
11.18 Acquisition. Notwithstanding anything to the contrary
contained in this Agreement or in any other Credit Document, at the time of the
Acquisition the following conditions shall have been satisfied (it being
understood and agreed that all documents and instruments listed below shall be
executed and delivered into an escrow arrangement satisfactory to the
Administrative Agent on the Effective Date (before the incurrence of the Loans
on such date) pending consummation of the Acquisition):
(i) Superior Pacific shall have duly authorized, executed and
delivered to the Administrative Agent an assumption acknowledgment in
the form of Exhibit H attached hereto (the "Assumption
Acknowledgment"), pursuant to which Superior Pacific shall assume all
of the Borrower's rights, obligations and liabilities under this
Agreement, the Notes and the Pledge Agreement and shall become the
"Borrower" for all purposes of this Agreement and the other Credit
Documents;
(ii) all steps shall have been taken, to the satisfaction of the
Administrative Agent in its sole discretion, to preserve and protect
the security interests created in the assets of the Borrower pursuant
to this Agreement and the Pledge Agreement in favor of the Collateral
Agent;
(iii) the Borrower shall have delivered or caused to be delivered to
the Administrative Agent such other documents or instruments as the
Administrative Agent may reasonably require in connection with the
Acquisition;
(iv) Superior Pacific shall have executed and delivered new Notes
(the "New Notes") substantially in the form executed by the Borrower
pursuant to Section 1.05 which shall replace the original Notes
delivered by SNTL Acquisition Corp.;
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(v) Superior Pacific shall have executed and delivered to the
Administrative Agent a certificate signed by an appropriate officer of
the Superior Pacific stating that all of the applicable conditions set
forth in Sections 4.02, 4.08, 4.09 and 4.15 exist as of such date;
(vi) Superior Pacific shall have executed and delivered to the
Administrative Agent a certificate signed by the chairman, a vice
chairman, the president or any vice-president of Superior Pacific, and
attested to by the secretary or any assistant secretary of Superior
Pacific, in the form of Exhibit D with appropriate insertions, together
with copies of the Certificate of Incorporation and By-Laws of Superior
Pacific and the resolutions of Superior Pacific referred to in such
certificate and all of the foregoing (including each such Certificate
of Incorporation and By-Laws) shall be satisfactory to the
Administrative Agent or the Required Banks;
(vii) the Administrative Agent or the Required Banks shall have
received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates
and any other records of corporate proceedings and governmental
approvals, if any, which the Administrative Agent or the Required Banks
reasonably may have requested in connection therewith, such documents
and papers, where appropriate, to be certified by proper corporate or
governmental authorities; and
(viii) the ownership and capital structure (including, without
limitation, the terms of any capital stock, options, warrants or other
securities issued by Superior Pacific or any of its Subsidiaries) and
management of Superior Pacific and its Subsidiaries shall be in form
and substance reasonably satisfactory to the Administrative Agent or
the Required Banks.
Upon the Acquisition, Superior Pacific shall succeed to, and be substituted for,
and may exercise every right and power of, the Borrower under this Agreement and
the Notes with the same effect as if Superior Pacific had been named as the
Borrower herein.
11.19 Reincorporation Merger. Notwithstanding anything to the
contrary contained in this Agreement or in any other Credit Document, SNIG
shall, as required by Section 6.15, on the Closing Date, immediately following
the Acquisition, consummate the Reincorporation Merger, at the time of which
Reincorporation Merger the following conditions shall have been satisfied (it
being understood and agreed that all documents and instruments listed below
shall be executed and delivered into an escrow arrangement satisfactory to the
Administrative Agent on the Closing Date
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(before the incurrence of the initial Loan on such date) pending consummation of
the Reincorporation Merger):
(i) the Administrative Agent shall have received copies of the
documents and instruments of transfer in connection with the
Reincorporation Merger, certified as true and correct by an officer of
SNIG, which documents and instruments shall be satisfactory in form and
substance to the Banks;
(ii) Holdings shall have duly authorized, executed and delivered to
the Administrative Agent the Reincorporation Merger Documents which
shall include the SNIG Assumption Acknowledgment, pursuant to which
Holdings shall assume all of SNIG's rights, obligations and liabilities
under this Agreement and shall become "SNIG" for all purposes of this
Agreement and the other Credit Documents;
(iii) Holdings shall have delivered to the Administrative Agent
opinions substantially in the form of Exhibit J attached hereto, of
counsel ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ covering such matters relating to the
Reincorporation Merger as the Administrative Agent may reasonably
require;
(iv) SNIG shall have delivered or caused to be delivered to the
Administrative Agent such other documents or instruments as the
Administrative Agent may reasonably require in connection with the
Reincorporation Merger;
(v) Holdings shall have executed and delivered to the
Administrative Agent a certificate signed by an appropriate officer of
SNIG stating that all of the applicable conditions set forth in
Sections 4.02, 4.08, 4.09 and 4.15 exist as of such date;
(vi) Holdings shall have executed and delivered to the
Administrative Agent a certificate signed by the chairman, a vice
chairman, the president or any vice-president of Holdings, and attested
to by the secretary or any assistant secretary of Holdings, in the form
of Exhibit D with appropriate insertions, together with copies of the
Certificate of Incorporation and By-Laws of Holdings and the
resolutions of Holdings referred to in such certificate and all of the
foregoing (including each such Certificate of Incorporation and
By-Laws) shall be satisfactory to the Administrative Agent or the
Required Banks; and
(vii) the Administrative Agent or the Required Banks shall have
received all information and copies of all certificates, documents and
papers, including good standing certificates, bring-down certificates
and any other records of corporate
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proceedings and governmental approvals, if any, which the
Administrative Agent or the Required Banks reasonably may have
requested in connection therewith, such documents and papers, where
appropriate, to be certified by proper corporate or governmental
authorities.
Upon the Reincorporation Merger, Holdings shall succeed to, and be substituted
for, and may exercise every right and power of, SNIG under this Agreement with
the same effect as if Holdings had been named as SNIG herein.
SECTION 12. SNIG Guaranty.
12.01 The Guaranty. In order to induce the Banks to enter into
this Agreement and to extend credit hereunder and in recognition of the direct
benefits to be received by SNIG from the proceeds of the Loans, SNIG hereby
agrees with the Banks as follows: SNIG hereby unconditionally and irrevocably
guarantees as primary obligor and not merely as surety the full and prompt
payment when due, whether upon maturity, acceleration or otherwise, of any and
all of the Guaranteed Obligations of the Borrower to the Guaranteed Creditors.
If any or all of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors becomes due and payable hereunder, SNIG unconditionally promises to
pay such indebtedness to the Administrative Agent and/or the Banks, or order, on
demand, together with any and all expenses which may be incurred by the
Administrative Agent or the Banks in collecting any of the Guaranteed
Obligations. If claim is ever made upon any Guaranteed Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event SNIG
agrees that any such judgment, decree, order, settlement or compromise shall be
binding upon SNIG, notwithstanding any revocation of this Guaranty or other
instrument evidencing any liability of the Borrower, and SNIG shall be and
remain liable to the aforesaid payees hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by any such payee.
12.02 Bankruptcy. Additionally, SNIG unconditionally and
irrevocably guarantees the payment of any and all of the Guaranteed Obligations
of the Borrower to the Guaranteed Creditors whether or not due or payable by the
Borrower upon the occurrence of any of the events specified in Section 8.05 with
respect to the Borrower
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or any of its Subsidiaries, and unconditionally, promises to pay such
indebtedness to the Guaranteed Creditors, or order, on demand, in lawful money
of the United States.
12.03 Nature of Liability. The liability of SNIG hereunder is
exclusive and independent of any security for or other guaranty of the
Guaranteed Obligations of the Borrower whether executed by SNIG, any other
guarantor or by any other party, and the liability of SNIG hereunder is not
affected or impaired by (a) any direction as to application of payment by the
Borrower or by any other party, or (b) any other continuing or other guaranty,
undertaking or maximum liability of a guarantor or of any other party as to the
Guaranteed Obligations of the Borrower, or (c) any payment on or in reduction of
any such other guaranty or undertaking, or (d) any dissolution, termination or
increase, decrease or change in personnel by the Borrower.
12.04 Independent Obligation. The obligations of SNIG
hereunder are independent of the obligations of any other guarantor, any other
party or the Borrower, and a separate action or actions may be brought and
prosecuted against SNIG whether or not action is brought against any other
guarantor, any other party or the Borrower and whether or not any other
guarantor, any other party or the Borrower be joined in any such action or
actions. SNIG waives, to the full extent permitted by law, the benefit of any
statute of limitations affecting its liability hereunder or the enforcement
thereof. Any payment by the Borrower or other circumstance which operates to
toll any statute of limitations as to the Borrower shall operate to toll the
statute of limitations as to SNIG.
12.05 Authorization. SNIG authorizes the Guaranteed Creditors
without notice or demand (except as shall be required by applicable statute and
cannot be waived), and without affecting or impairing its liability hereunder,
from time to time to:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations (including any increase or
decrease in the rate of interest thereon), any security therefor, or
any liability incurred directly or indirectly in respect thereof, and
the Guaranty herein made shall apply to the Guaranteed Obligations as
so changed, extended, renewed or altered;
(b) take and hold security for the payment of the Guaranteed
Obligations and sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or
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any liabilities (including any of those hereunder) incurred directly or
indirectly in respect thereof or hereof, and/or any offset
thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) release or substitute any one or more endorsers,
guarantors, the Borrower or other obligors;
(e) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
its creditors other than the Guaranteed Creditors;
(f) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Guaranteed
Creditors regardless of what liability or liabilities of SNIG or the
Borrower remain unpaid;
(g) consent to or waive any breach of, or any act, omission or
default under, this Agreement or any of the instruments or agreements
referred to herein, or otherwise amend, modify or supplement this
Agreement or any of such other instruments or agreements; and/or
(h) take any other action which would, under otherwise
applicable principles of common law, give rise to a legal or equitable
discharge of SNIG from its liabilities under this Guaranty.
12.06 Reliance. It is not necessary for any Guaranteed
Creditor to inquire into the capacity or powers of the Borrower or the officers,
directors, partners or agents acting or purporting to act on their behalf, and
any Guaranteed Obligations made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
12.07 Subordination. Any of the indebtedness of the Borrower
relating to the Guaranteed Obligations now or hereafter owing to SNIG is hereby
subordinated to the Guaranteed Obligations of the Borrower owing to the
Guaranteed Creditors; and if the Administrative Agent so requests at a time when
an Event of Default exists, all such indebtedness relating to the Guaranteed
Obligations of the Borrower to SNIG shall be collected, enforced and received by
SNIG for the benefit of the Guaranteed Creditors and be paid over to the
Administrative Agent on behalf of the Guaranteed Creditors on
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account of the Guaranteed Obligations of the Borrower to the Guaranteed
Creditors, but without affecting or impairing in any manner the liability of
SNIG under the other provisions of this Guaranty. Prior to the transfer by SNIG
of any note or negotiable instrument evidencing any of the indebtedness relating
to the Guaranteed Obligations of the Borrower to SNIG, SNIG shall ▇▇▇▇ such note
or negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, SNIG hereby
agrees with the Guaranteed Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under Section 509 of the Bankruptcy Code or otherwise)
until all Guaranteed Obligations have been irrevocably paid in full in cash.
12.08 Waiver. (a) SNIG waives any right (except as shall be
required by applicable statute and cannot be waived) to require any Guaranteed
Creditor to (i) proceed against the Borrower, any other guarantor or any other
party, (ii) proceed against or exhaust any security held from the Borrower, any
other guarantor or any other party or (iii) pursue any other remedy in any
Guaranteed Creditor's power whatsoever. SNIG waives any defense based on or
arising out of any defense of the Borrower, any other guarantor or any other
party, other than payment in full of the Guaranteed Obligations, based on or
arising out of the disability of the Borrower, any other guarantor or any other
party, or the validity, legality or unenforceability of the Guaranteed
Obligations or any part thereof from any cause, or the cessation from any cause
of the liability of the Borrower other than payment in full of the Guaranteed
Obligations. The Guaranteed Creditors may, at their election, foreclose on any
security held by the Administrative Agent, the Collateral Agent or any other
Guaranteed Creditor by one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable (to the extent such
sale is permitted by applicable law), or exercise any other right or remedy the
Guaranteed Creditors may have against the Borrower or any other party, or any
security, without affecting or impairing in any way the liability of SNIG
hereunder except to the extent the Guaranteed Obligations have been paid. SNIG
waives any defense arising out of any such election by the Guaranteed Creditors,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of SNIG against the
Borrower or any other party or any security.
(b) SNIG waives all presentments, demands for performance,
protests and notices, including without limitation notices of nonperformance,
notices of protest, notices of dishonor, notices of acceptance of this Guaranty,
and notices of the existence, creation or incurring of new or additional
Guaranteed Obligations. SNIG assumes all responsibility for being and keeping
itself informed of the Borrower's financial condition and assets, and of all
other circumstances bearing upon the risk of non-payment of the Guaranteed
Obligations and the nature, scope and extent of the risks
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which SNIG assumes and incurs hereunder, and agrees that the Administrative
Agent and the Banks shall have no duty to advise SNIG of information known to
them regarding such circumstances or risks.
(c) SNIG hereby acknowledges and affirms that it understands
that to the extent the Guaranteed Obligations are secured by real property
located in the State of California, SNIG shall be liable for the full amount of
its liability hereunder notwithstanding foreclosure on such real property by
trustee sale or any other reason impairing SNIG's or any secured creditor's
right to proceed against the Borrower or any other guarantor of the Guaranteed
Obligations.
(d) SNIG hereby waives, to the fullest extent permitted by
applicable law, all rights and benefits under Sections 580a, 580b, 580d and 726
of the California Code of Civil Procedure. SNIG hereby further waives, to the
fullest extent permitted by applicable law, without limiting the generality of
the foregoing or any other provision hereof, all rights and benefits which might
otherwise be available to SNIG under Sections 2787 through 2855, inclusive, 2899
and 3433 of the California Civil Code.
(e) SNIG further understands, is aware and hereby acknowledges
that if the Guaranteed Creditors elect to nonjudicially foreclose on any real
property security located in the State of California any right of subrogation of
SNIG against any Credit Party may be impaired or extinguished and that as a
result of such impairment or extinguishment of subrogation rights, SNIG may have
a defense to a deficiency judgment arising out of the operation of Section 580d
of the California Code of Civil Procedure and related principles of estoppel.
SNIG waives all rights and defenses arising out of an election of remedies by
the Banks, even though that election of remedies, such as a nonjudicial
foreclosure with respect to security for a guaranteed obligation, has destroyed
the guarantor's rights of subrogation and reimbursement against the principal by
the operation of Section 580d of the Code of Civil Procedure or otherwise.
12.09 Nature of Liability. It is the desire and intent of SNIG
and the Guaranteed Creditors that this Guaranty shall be enforced against SNIG
to the fullest extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. If, however, and to the extent
that, the obligations of SNIG under this Guaranty shall be adjudicated to be
invalid or unenforceable for any reason (including, without limitation, because
of any applicable state or federal law relating to fraudulent conveyances or
transfers), then the amount of the Guaranteed Obligations of SNIG shall be
deemed to be reduced and SNIG shall pay the maximum amount of the Guaranteed
Obligations which would be permissible under applicable law.
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* * *
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.
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Address:
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ SUPERIOR NATIONAL INSURANCE
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ GROUP, INC.
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: CFO
26601 Agoura Road SNTL ACQUISITION CORP.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: J. ▇▇▇▇▇ ▇▇▇▇▇▇ By /s/ J. ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Title: CFO
▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ BANK,
Individually and as
Administrative Agent
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇, ▇▇▇ ▇▇▇▇ Branch
and Grand Cayman Branch
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Asst. Vice President
By /s/ ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Asst. Treasurer
▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇, N.A.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
118
THE FIRST NATIONAL BANK OF BOSTON
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------
Title: Managing Director
119
SANWA BANK CALIFORNIA
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Title: Vice President
120
IMPERIAL BANK
By /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: Vice President
121
ANNEX I
LIST OF BANKS AND COMMITMENTS
Bank Commitments
----------------
The Chase Manhattan
Bank $ 9,000,000
Dresdner Bank AG, New York Branch and
Grand Cayman Branch 7,500,000
Union Bank of California,
N.A. 7,500,000
The First National Bank of Boston 7,500,000
Sanwa Bank California 7,500,000
Imperial Bank 5,000,000
Total: $ 44,000,000.00
===============
122
ANNEX II
BANK ADDRESSES
Bank Address
------------
The Chase Manhattan Bank
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopier No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Dresdner Bank AG, New York Branch and
Grand Cayman Branch
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Union Bank of California, N.A.
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The First National Bank of Boston
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Sanwa Bank California
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ANNEX II
Page 2
Imperial Bank
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EXHIBIT A
FORM OF NOTICE OF BORROWING
[Date]
The Chase Manhattan Bank,
as Administrative Agent for the Banks
party to the Credit Agreement referred
to below
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Attention: _____________
Ladies and Gentlemen:
The undersigned, [SNTL Acquisition Corp.] [Superior Pacific
Holding Corporation], a Delaware corporation (the "Borrower"), refers to the
Credit Agreement, dated as of April 11, 1997 (as amended, modified or
supplemented from time to time, the "Credit Agreement," the terms defined
therein being used herein as therein defined), among Superior National
Insurance Group, Inc., the undersigned, certain Banks from time to time party
thereto, and you, as Administrative Agent for such Banks, and hereby gives you
notice, irrevocably pursuant to Section 1.03(a) of the Credit Agreement, that
the undersigned hereby requests a Borrowing under the Credit Agreement, and in
that connection sets forth below the information relating to such Borrowing
(the "Proposed Borrowing") as required by Section 1.03(a) of the Credit
Agreement.
(i) The Business Day of the Proposed Borrowing is _________, 199_.1/
____________________
1/ Shall be a Business Day at least one Business Day in the case of
Base Rate Loans and three Business Days in the case of
Eurodollar Loans, in each case, after the date hereof.
125
(ii) The aggregate principal amount of the Proposed Borrowing is
$______.
(iii) The Proposed Borrowing is to consist of [Base Rate Loans]
[Eurodollar Loans].
[(iv) The initial Interest Period for the Proposed Borrowing is ____
month(s).]2/
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Borrowing:
(A) the representations and warranties contained in the
Credit Agreement or in the other Credit Documents are and will be true
and correct in all material respects, both before and after giving
effect to the Proposed Borrowing and to the application of the
proceeds thereof, as though 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; and
(B) no Default or Event of Default has occurred and is
continuing, or would result from such Proposed Borrowing or from the
application of the proceeds thereof.
Very truly yours,
[SNTL ACQUISITION CORP.]
[SUPERIOR PACIFIC HOLDING CORPORATION]
By
---------------------------
Title:
____________________
2/ To be included for a Proposed Borrowing of Eurodollar Loans.
-2-
126
EXHIBIT B
FORM OF NOTE
$________________ New York, New York
April 11, 1997
FOR VALUE RECEIVED, [SNTL ACQUISITION CORP.] [SUPERIOR
PACIFIC HOLDING CORPORATION], a Delaware corporation (the "Borrower"), hereby
promises to pay to the order of _________________________ or its registered
assigns (the "Bank"), in lawful money of the United States of America in
immediately available funds, at the Administrative Agent's Payment Office (as
defined in the Agreement referred to below) initially located at ▇▇▇ ▇▇▇▇▇
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the Agreement referred to below) the principal sum of _______________ DOLLARS
($_____) or, if less, the then unpaid principal amount of all Loans (as defined
in the Agreement) made by the Bank pursuant to the Agreement.
The Borrower also promises to pay interest on the unpaid
principal amount hereof in like money at said office from the date hereof until
paid at the rates and at the times provided in Section 1.08 of the Agreement.
This Note is one of the Notes referred to in the Credit
Agreement, dated as of April 11, 1997, among Superior National Insurance Group,
Inc., the Borrower, the financial institutions from time to time party thereto
(including the Bank), and The Chase Manhattan Bank, as Administrative Agent (as
amended, modified or supplemented from time to time, the "Agreement") and is
entitled to the benefits thereof and of the other Credit Documents (as defined
in the Agreement). This Note is secured by and entitled to the benefits of the
Pledge Agreement (as defined in the Agreement). As provided in the Agreement,
this Note is subject to voluntary prepayment and mandatory repayment, in whole
or in part.
In case an Event of Default (as defined in the Agreement)
shall occur and be continuing, the principal of and accrued interest on this
Note may become or be
127
EXHIBIT B
Page 2
declared to be due and payable in the manner and with the effect provided in
the Agreement.
The Borrower hereby waives presentment, demand, protest or
notice of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE
GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
[SNTL ACQUISITION CORP.]
[SUPERIOR PACIFIC HOLDING
CORPORATION]
By_____________________________
Title:
128
EXHIBIT C-2
Form of Opinion of White & Case
Special Counsel to the Banks
To: The Administrative Agent, the Collateral Agent and
various lending institutions (collectively, the
"Banks") party to the Credit Agreement referred to
below
re: Credit Agreement, dated as of April 11, 1997 (the
"Credit Agreement"), among Superior National Insurance Group,
Inc. ("SNIG"), SNTL Acquisition Corp. (the "Borrower")
and the Banks
Ladies and Gentlemen:
We have acted as special counsel to the Banks party to the
Credit Agreement in connection with the execution and delivery of the Credit
Agreement. This opinion is delivered to you pursuant to Section 4.04(ii) of
the Credit Agreement. Terms used herein which are defined in the Credit
Agreement shall have the respective meanings set forth in the Credit Agreement
unless otherwise defined herein.
In connection with this opinion, we have examined the
originals, or certified, conformed or reproduction copies, of all records,
agreements, instruments and documents as we have deemed relevant or necessary
as the basis for the opinions hereinafter expressed. In stating our opinion,
we have assumed the genuineness of all signatures on original or certified
copies, the authenticity of documents submitted to us as originals and the
conformity to original or certified copies of all copies submitted to us as
certified or reproduction copies.
129
EXHIBIT C-1
Page 2
We have also assumed, for purposes of the opinions expressed
herein, that the parties to the Credit Agreement have the corporate power and
authority to enter into and perform the Credit Agreement and that the Credit
Agreement has been duly authorized, executed and delivered by each such party.
Based upon the foregoing, and subject to the limitations set
forth herein, we are of the opinion that the Credit Agreement constitutes the
legal, valid and binding obligation of SNIG and the Borrower enforceable in
accordance with its terms except to the extent that enforcement may be limited
by applicable bankruptcy, insolvency, reorganization or other similar laws
affecting creditors' rights generally and by equity principles (regardless of
whether enforcement is sought in equity or at law).
We have not been requested to render and, with your
permission, we express no opinion as to the applicability to the obligations of
each of SNIG and the Borrower under the Credit Agreement of Section 548 of the
Bankruptcy Code and Article 10 of the New York Debtor & Creditor Law relating
to fraudulent transfers and obligations. We understand, without independent
verification, that the Banks have satisfied themselves on the basis of, among
other things, the financial information furnished to the Banks and their
knowledge of the credit facilities available to each of SNIG and the Borrower
that neither SNIG nor the Borrower is insolvent and that neither SNIG nor the
Borrower will be rendered insolvent by the transactions contemplated by the
Credit Agreement and that, after giving effect to such transactions, neither
SNIG nor the Borrower will be left with unreasonably small capital with which
to engage in its anticipated business and that neither SNIG nor the Borrower
will have intended to incur, or will have believed it has incurred, debts
beyond its ability to pay as such debts mature.
This opinion is limited to the federal law of the United
States of America and the law of the State of New York.
Very truly yours,
130
EXHIBIT D
FORM OF OFFICERS' CERTIFICATE
I, the undersigned, [President/Vice President] of [Name of
Credit Party], a corporation organized and existing under the laws of the State
of ____________ (the "Company"), do hereby certify on behalf of the Company
that:
1. This Certificate is furnished pursuant to Section
4.05(a) of the Credit Agreement, dated as of April 11, 1997, among Superior
National Insurance Group, Inc., SNTL Acquisition Corp., The Chase Manhattan
Bank, as Administrative Agent, and the financial institutions from time to time
party thereto (such Credit Agreement, as in effect on the date of this
Certificate, being herein called the "Credit Agreement"). Unless otherwise
defined herein, capitalized terms used in this Certificate shall have the
meanings set forth in the Credit Agreement.
2. The following named individuals are elected officers
of the Company, each holds the office of the Company set forth opposite his
name and has held such office since __________, 19__.1/ The signature written
opposite the name and title of each such officer is his correct signature.
Name2/ Office Signature
----- ------ ---------
______________________ ______________________ ______________________
______________________ ______________________ ______________________
______________________ ______________________ ______________________
____________________
1/ Insert a date prior to the time of any corporate action
relating to the Transaction Documents or related documentation.
2/ Include name, office and signature of each officer who will
sign any Transaction Document, including the officer who will
sign the certification at the end of this Certificate.
131
3. Attached hereto as Exhibit A is a certified copy of
the [Certificate of Incorporation] [insert name of analogous organizational
document] of the Company as filed in the [Office of the Secretary of State of
the State of Delaware] [insert name of analogous office] on ___________, 19__,
together with all amendments thereto adopted through the date hereof.
4. Attached hereto as Exhibit B is a true and correct
copy of the By-Laws of the Company which were duly adopted, are in full force
and effect on the date hereof, and have been in effect since _____________,
19__.
5. Attached hereto as Exhibit C is a true and correct
copy of resolutions which were duly adopted on __________, 19__ [by unanimous
written consent of the Board of Directors of the Company] [by a meeting of the
Board of Directors of the Company at which a quorum was present and acting
throughout], and said resolutions have not been rescinded, amended or modified.
Except as attached hereto as Exhibit C, no resolutions have been adopted by the
Board of Directors of the Company which deal with the execution, delivery or
performance of any of the Transaction Documents or other documents to which the
Company is party.
[6. Attached hereto as Exhibit D are true and correct
copies of all the Acquisition Documents.
7. Attached hereto as Exhibit E are true and correct
copies of all the Redemption Documents.
8. Attached hereto as Exhibit F are true and correct
copies of all the Refinancing Documents.]3/
[6. On the date hereof, all of the conditions set forth
in Sections 4.02, 4.06, 4.07 4.08, 4.09, 4.15, 4.22 and 4.23 of the Credit
Agreement have been satisfied.
7. Attached hereto as Exhibit D are true and correct
copies of all Plan Documents of SNIG and its Subsidiaries.
8. Attached hereto as Exhibit E are true and correct
copies of all Management Agreements of SNIG and its Subsidiaries.
9. Attached hereto as Exhibit F are true and correct
copies of all Employment Agreements of SNIG and its Subsidiaries.
____________________
3/ To be included in the Officers' Certificate for SNIG only.
132
EXHIBIT D
Page 3
10. Attached hereto as Exhibit G are true and correct
copies of all Stockholders Agreements with respect to the capital stock of SNIG
and its Subsidiaries.
11. Attached hereto as Exhibit H are true and correct
copies of all Tax Sharing Agreements entered into by SNIG or any of its
Subsidiaries.
12. Attached hereto as Exhibit I are true and correct
copies of all Shared Expenses Agreements entered into by SNIG or any of its
Subsidiaries.
13. Attached hereto as Exhibit J are true and correct
copies of all Existing Preferred Stock Documents.
14. Attached hereto as Exhibit K are true and correct
copies of all the Reinsurance Pooling Agreement Documents.
15. Attached hereto as Exhibit L are true and correct
copies of all the 1996 Loan Documents.
16. Attached hereto as Exhibit M are true and correct
copies of all Material Contracts.
17. Attached hereto as Exhibit N are true and correct
copies of all Reinsurance Agreements of SNIG and its Subsidiaries.]4/
[6] [9] [18]. On the date hereof, all representations and
warranties contained in the [Credit Agreement and in the]5/ other Credit
Documents are true and correct in all material respects with the same effect as
though such representations and warranties had been made on the date hereof,
both before and after giving effect to the incurrence of Loans on the date
hereof and the application of the proceeds thereof, unless stated to relate to
a specific earlier date, in which case such representations and warranties were
true and correct in all material respects as of such earlier date.
____________________
4/ To be included in the Officers' Certificate for the Borrower only.
5/ To be included in the Officer's Certificate for SNIG and the Borrower
only.
133
EXHIBIT D
Page 4
[7] [10] [19]. On the date hereof, no Default or Event of
Default has occurred and is continuing or would result from the Borrowing to
occur on the date hereof or from the application of the proceeds thereof.
[8] [11] [20]. There is no proceeding for the dissolution
or liquidation of the Company or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day
of April, 1997.
[Credit Party]
____________________________
Name:
Title:
134
EXHIBIT D
Page 5
I, the undersigned, [Secretary/Assistant Secretary] of the Company, do hereby
certify that:
1. [name of Person making above certifications] is the duly
elected and qualified [President/Vice President] of the Company and the
signature above is his genuine signature.
2. The certifications made by [name of Person making above
certifications] in Items 2, 3, 4, 5 and [8] [11] [20] above are true and
correct.
IN WITNESS WHEREOF, I have hereunto set my hand this 11th day
of April, 1997.
[Name of the Credit Party]
____________________________
Name:
Title:
135
EXHIBIT E
FORM OF SECTION 3.04(b)(ii) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of
April 11, 1997, among Superior National Insurance Group, Inc., SNTL Acquisition
Corp., the financial institutions from time to time party thereto and The Chase
Manhattan Bank, as Administrative Agent (as amended, modified or supplemented
from time to time, the "Credit Agreement"). Pursuant to the provisions of
Section 3.04(b)(ii) of the Credit Agreement, the undersigned hereby certifies
that it is not a "bank" as such term is used in Section 881(c)(3)(A) of the
Internal Revenue Code of 1986, as amended.
[NAME OF BANK]
By___________________________
Title:
Date: _________________, _____