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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 21, 1997
SUMMIT HOLDING SOUTHEAST, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 0-21933 59-3409855
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
2310 A-Z PARK ROAD
LAKELAND, FLORIDA 33801
(Address of principal executive offices, including zip code)
(941) 665-6060
(Registrant's telephone number, including area code)
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The following exhibit is filed as part of this Form 8-K:
Exhibit Description
1.1 Underwriting Agreement between the Company, Raymond
James & Associates, Inc. and ABN AMRO Chicago
Corporation, as representatives of the several
underwriters.
10.1 Credit Agreement among Summit Holding Southeast,
Inc., the Lenders named therein, and First Union
National Bank of North Carolina, as Agent, dated as
of May 28, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SUMMIT HOLDING SOUTHEAST, INC.
(REGISTRANT)
/s/ William B. Bull
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William B. Bull
Chairman of the Board and
Chief Executive Officer
Date: June 20, 1997
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EXHIBIT INDEX
Exhibit Description
1.1 Underwriting Agreement between the Company, Raymond
James & Associates, Inc. and ABN AMRO Chicago
Corporation, as representatives of the several
underwriters.
10.1 Credit Agreement among Summit Holding Southeast,
Inc., the Lenders named therein, and First Union
National Bank of North Carolina, as Agent, dated as
of May 28, 1997.
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EXHIBIT 1.1
SUMMIT HOLDING SOUTHEAST, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
May 21, 1997
RAYMOND JAMES & ASSOCIATES, INC.
ABN AMRO CHICAGO CORPORATION
as Representatives of the Several
Underwriters (the "Representatives")
c/o Raymond James & Associates, Inc.
880 Carillon Parkway
St. Petersburg, FL 33716
Dear Sirs:
Subject to the terms and conditions stated herein, Summit Holding
Southeast, Inc., a Florida corporation (the "Company"), proposes to issue and
sell shares of its common stock, par value $.01 per share ("Common Stock"), in
connection with the Amended Plan of Conversion and Recapitalization (the "Plan")
of Employers Self Insurers Fund ("ESIF"), pursuant to which ESIF will
simultaneously convert from a Florida group self-insurance fund to a Florida
stock insurance company under the name Bridgefield Employers Insurance Company
("Bridgefield") and become a wholly owned subsidiary of the Company (the
"Conversion"). Pursuant to the Plan, the Company proposes: (1) to issue to
Eligible Policyholders (as defined in the Plan) of ESIF shares of Series A
Preferred Stock, par value $10 per share (the "Preferred Stock"), in partial
exchange for their membership interests in ESIF; (2) to offer to issue and sell
shares of Common Stock to Eligible Policyholders, as well as to certain
directors, officers and employees of the Company and its subsidiaries (the
"Management Group"), pursuant to nontransferable subscription rights (the
"Subscription Offering")(such persons and entities have subscribed for 938,987
shares in the Subscription Offering); and (3) to issue and sell shares of Common
Stock not subscribed and paid for pursuant to the Subscription Offering, a total
of 4,061,013 shares ("Firm Shares") to the Underwriters named in Schedule I (the
"Underwriters"), as provided in this Agreement (the "Public Offering").
Furthermore, at the election of the Underwriters and subject to the terms and
conditions stated herein, the Company proposes to sell to the Underwriters up to
750,000 additional shares of Common Stock (the "Optional Shares"). The Firm
Shares and the Optional Shares that the Underwriters elect to purchase pursuant
to Section 2 hereof are collectively called the "Shares." As used in this
Agreement, unless the context requires otherwise, the term "subsidiaries" refers
to ESIF and its subsidiaries, whether before or after the Company's acquisition
of the Common Stock of ESIF in connection with the Conversion.
1. REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to, and agrees with, each of the Underwriters that:
(i) A registration statement on Form S-1 (File No. 333-16499)
with respect to the Preferred Stock and Common Stock, including a
prospectus subject to completion, has been filed by the Company with
the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), and one or more
amendments, including one or more post-effective amendments, to such
registration statement may have been so filed. After the execution of
this Agreement, the Company will file with the Commission, if such
registration
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statement, as it may have been amended, has become effective under the
Act and information has been omitted therefrom (or from any
post-effective amendment thereto) in accordance with Rule 430A under the
Act, a prospectus in the form most recently included in an amendment to
such registration statement (or, if no such amendment shall have been
filed, in such registration statement) with such changes or insertions
as are required by Rule 430A or permitted by Rule 424(b) under the Act
and as have been provided to and approved by the Underwriters. As used
in this Agreement, the term "Registration Statement" means such
registration statement, as amended at the time when it (or the most
recent post-effective amendment thereto) was or is declared effective,
including all financial statement schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under
the Act and included in the Prospectus (as hereinafter defined); the
term "Preliminary Prospectus" means each prospectus subject to
completion included in such Registration Statement or any amendment or
post-effective amendment thereto (including the prospectus subject to
completion, if any, included in the Registration Statement (or the most
recent post-effective amendment thereto) at the time it was or is
declared effective); and the term "Prospectus" means the prospectus
first filed with the Commission pursuant to Rule 424(b) under the Act
or, if no prospectus is required to be so filed, such term means the
prospectus included in the Registration Statement. For purposes of the
following representations and warranties, to the extent reference is
made to the Prospectus and at the relevant time the Prospectus is not
yet in existence, such reference shall be deemed to be to the most
recent Preliminary Prospectus.
(ii) No order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus has been issued and no
proceeding for that purpose has been instituted or threatened by the
Commission or the securities authority of any state or other
jurisdiction. No stop order suspending the effectiveness of the
Registration Statement or any part thereof has been issued and no
proceeding for that purpose has been instituted or, to the knowledge of
the Company, threatened or contemplated by the Commission or the
securities authority of any state or other jurisdiction.
(iii) When any Preliminary Prospectus was filed with the
Commission it (A) contained all statements required to be stated
therein in accordance with, and complied in all material respects with
the requirements of, the Act and the rules and regulations of the
Commission thereunder, and (B) did not include any untrue statement of
a material fact or omit to state any material fact necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading. When the Registration Statement
or any amendment thereto was or is declared effective, and at each Time
of Delivery (as hereinafter defined), it (A) contained or will contain
all statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of, the Act and the rules and regulations of the Commission thereunder,
and (B) did not or will not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading. When the Prospectus or any amendment
or supplement thereto is filed with the Commission pursuant to Rule
424(b) (or, if the Prospectus or such amendment or supplement is not
required to be so filed, when the Registration Statement or the
amendment thereto containing such amendment or supplement to the
Prospectus was or is declared effective) and at each Time of Delivery,
the Prospectus, as amended or supplemented at any such time, (A)
contained or will contain all statements required to be stated therein
in accordance with, and complied or will comply in all material
respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder, and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
The foregoing provisions of this paragraph (iii) do not apply to
statements or omissions made in any Preliminary Prospectus, the
Registration Statement or any amendment thereto or the Prospectus or
any amendment or supplement thereto in reliance upon and in
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conformity with written information furnished to the Company by any of
the Underwriters specifically for use therein.
(iv) The descriptions in the Registration Statement and the
Prospectus of statutes, legal and governmental proceedings or contracts
and other documents are accurate and fairly present the information
required to be shown; and there are no statutes or legal or governmental
proceedings required to be described in the Registration Statement or
the Prospectus that are not described as required and no contracts or
documents of a character that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described and filed as required.
(v) The Company and its subsidiaries each has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has full power
and authority (corporate and other) to own or lease its properties and
conduct its business as described in the Prospectus. The Company has
full power and authority (corporate and other) to enter into this
Agreement and to perform its obligations hereunder. The Company and each
of its subsidiaries is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, except where the failure
to so qualify would not have a material adverse effect on the financial
position, results of operations or business of the Company (a "Material
Adverse Effect").
(vi) The Company's authorized, issued and outstanding capital
stock is as set forth in the Prospectus under the caption
"Capitalization." All of the issued shares of capital stock of the
Company and each of its subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and the Common Stock
conforms to the description of the Common Stock contained in the
Prospectus. None of the issued shares of capital stock of the Company
and its subsidiaries each has been issued or is owned or held in
violation of any preemptive rights of shareholders, and no person or
entity has any preemptive or other rights to subscribe for any of the
Shares.
(vii) The Plan has been duly adopted by the required vote of
ESIF's Board of Trustees and policyholders and is in compliance with the
insurance laws of the State of Florida applicable to the reorganization
of group self-insurance funds into stock property and casualty insurance
companies. The Department of Insurance of the State of Florida (the
"Florida DOI") has approved the Conversion. The Conversion will become
effective upon the satisfaction of certain conditions identified in the
Plan and upon the Board of Trustees of ESIF declaring the Plan
effective. Other than the conditions to effectiveness set forth in the
Plan, no other approvals are required to be obtained under the Florida
Insurance Code for the effectiveness of the Plan. Prior to or
contemporaneously with each Time of Delivery (as hereinafter defined),
each of the actions required to occur prior to the effectiveness of the
Plan pursuant to the Plan will have occurred.
(viii) The Company does not own, directly or indirectly, any
capital stock or other equity securities of any other corporation or any
ownership interest in any partnership, joint venture or other entity or
association other than those listed on Exhibit 21.1 to the Registration
Statement.
(ix) Except as disclosed in the Prospectus, there are no
outstanding (A) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (B) warrants,
rights or options to subscribe for or purchase from the Company any such
capital stock or any such convertible or exchangeable securities or
obligations, or (C) obligations of the Company to issue any shares of
capital stock, any such convertible or exchangeable securities or
obligations, or any such warrants, rights or options.
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(x) Since the date of the most recent audited financial
statements included in the Prospectus, neither the Company nor any of
its subsidiaries has sustained any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or
not covered by insurance, or from any labor dispute or court or
governmental action, order or decree, otherwise than as disclosed in or
contemplated by the Prospectus.
(xi) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, (A) the Company
has not incurred any liabilities or obligations, direct or contingent,
or entered into any transactions, not in the ordinary course of
business, that are material to the Company, (B) the Company has not
purchased any of its outstanding capital stock or declared, paid or
otherwise made any dividend or distribution of any kind on its capital
stock, (C) there has not been any change in the capital stock, or any
material increase or decrease in the long-term debt or short-term debt
of the Company, and (D) there has not been any material adverse change,
or any development involving a prospective material adverse change, in
or affecting the financial position, results of operations or business
of the Company, in each case other than as disclosed in or contemplated
by the Prospectus.
(xii) The Shares to be issued and sold by the Company have
been duly authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the Common Stock
contained in the Prospectus; and the certificates evidencing the Shares
will comply with all applicable requirements of Florida law.
(xiii) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities registered pursuant
to the Registration Statement (unless any such right has been exercised
or effectively waived) or any securities being registered pursuant to
any other registration statement filed by the Company under the Act.
(xiv) All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times duly registered
under the Act or exempt from the registration requirements of the Act
and were duly registered or the subject of an available exemption from
the registration requirements of the applicable state securities or blue
sky laws.
(xv) The Company and its subsidiaries each is not, nor with
the giving of notice or passage of time or both would be, in violation
of its Certificate of Incorporation or Bylaws or in default under any
indenture, mortgage, deed of trust, loan agreement, lease, or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or to which any of their respective properties or assets is
subject, which default would have a Material Adverse Effect.
(xvi) Subject to the satisfaction of the conditions to the
effectiveness of the Conversion set forth in the Plan, the issue and
sale of the Shares to be issued and sold by the Company and the
performance of this Agreement and the consummation of the transactions
herein contemplated will not conflict with, or (with or without the
giving of notice or the passage of time or both) result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease or
other agreement or instrument to which the Company or any of its
subsidiaries is a party or to which its properties or assets is subject,
nor will such action conflict with or violate any provision of the
Certificate of Incorporation or Bylaws of the Company or any statute,
rule or regulation (assuming compliance with all applicable state
securities or blue sky laws) or any order, judgment or decree of any
court
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or governmental agency or body having jurisdiction over the Company or
any of its properties or assets.
(xvii) The Company and its subsidiaries each has good title to
all personal property owned by it free and clear of all liens, security
interests, pledges, charges, encumbrances, mortgages, and defects,
except such as are disclosed in the Prospectus or such as do not
materially and adversely affect the value of such property and do not
interfere with the use made or proposed to be made of such property by
the Company; and any real property and buildings held under lease by the
Company are held under valid, subsisting and enforceable leases, with
such exceptions as are disclosed in the Prospectus or are not material
and do not interfere with the use made or proposed to be made of such
property and buildings by the Company.
(xviii) No consent, approval, authorization, order or
declaration of or from, or registration, qualification or filing with,
any court or governmental agency or body is required for the sale of the
Shares or the consummation of the transactions contemplated by this
Agreement, except: (1) the approval by the Florida DOI of the Plan,
ESIF's Certificate of Incorporation and by-laws, and ESIF's application
to convert to a stock insurance company, and (2) the registration of the
Shares under the Act and as may be required by the National Association
of Securities Dealers, Inc. or under state securities or blue sky laws
in connection with the offer, sale and distribution of the Shares by the
Underwriters.
(xix) Other than as disclosed in the Prospectus, there is no
litigation, arbitration, claim, proceeding (formal or informal) or
investigation pending or, to the knowledge of the Company, threatened
(or any basis therefor) in which the Company is a party or of which any
of its properties or assets is the subject which, if determined
adversely to the Company, would individually or in the aggregate have a
Material Adverse Effect. The Company is not in violation of, or in
default with respect to, any statute, rule, regulation, order, judgment
or decree, except as described in the Prospectus or such as do not and
will not individually or in the aggregate have a Material Adverse
Effect.
(xx) Ernst & Young LLP and Brinton & Mendez, who have
certified certain financial statements of ESIF and its subsidiaries for
the fiscal years ended March 31, 1994, 1995 and 1996, and Ernst & Young
LLP who has certified certain financial statements of Summit Holding
Corporation and its subsidiaries (collectively, "SHC") for the fiscal
years ended December 31, 1993, 1994 and 1995 are, and were at all times,
during the periods covered by their reports included in the Registration
Statement and the Prospectus, independent public accountants as required
by the Act and the rules and regulations of the Commission thereunder.
(xxi) The financial statements and schedules (including the
related notes) of ESIF and SHC and their respective subsidiaries
included in the Registration Statement, the Prospectus or any
Preliminary Prospectus were prepared in accordance with generally
accepted accounting principles consistently applied (or, if not
consistently applied, as applied on the basis stated in such financial
statements and schedules or the related notes thereto) throughout the
periods involved and fairly present the financial position and results
of operations of ESIF and SHC and their respective subsidiaries at the
dates and for the periods presented. The selected financial data set
forth under the caption "Selected Financial Data" in the Prospectus
fairly present, on the basis stated in the Prospectus, the information
included therein.
(xxii) This Agreement has been duly authorized, executed and
delivered by the Company.
(xxiii) None of the Company, any of its subsidiaries, or, to the
knowledge of the Company, their respective officers, directors or
affiliates, has (A) taken, directly or indirectly, any action designed
to cause or result in, or that has constituted or might reasonably be
expected to
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constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares
or (B) since the filing of the Registration Statement (1) sold, bid for,
purchased or paid anyone any compensation for soliciting purchases of
the Shares or (2) paid or agreed to pay to any person any compensation
for soliciting another to purchase any other securities of the Company.
(xxiv) The Company has obtained for the benefit of the Company
and the Underwriters from each of the directors and executive officers
of the Company a written agreement that for a period of 180 days from
the date of the Conversion, such director or executive officer will not,
without the prior written consent of Raymond James & Associates, Inc. on
behalf of the Underwriters, offer, pledge, sell, contract to sell, grant
any option for the sale of, or otherwise dispose of (or announce any
offer, pledge, sale, grant of an option to purchase, or other
disposition), directly or indirectly, any shares of Common Stock or
securities convertible into, exercisable, or exchangeable for, shares of
Common Stock.
(xxv) Neither the Company nor any of its subsidiaries, nor, to
the knowledge of the Company or any of its subsidiaries, any other
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or any of its subsidiaries has, directly
or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political
activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended; or made any bribe, rebate,
payoff, influence payment kickback or other payment, unlawful under the
laws of the United States or any foreign jurisdiction.
(xxvi) The Company and its subsidiaries each is in compliance
in all material respects with all foreign, federal, state, and local
laws, ordinances, rules, and regulations (collectively, "Laws"), and the
Company and its subsidiaries each has all licenses, permits, and
authorizations necessary to operate under all Laws, except where the
failure to have such license, permit, or authorization would not
(individually or in the aggregate with respect to all such failures)
have a Material Adverse Effect and are in compliance in all material
respects with all terms and conditions of such licenses, permits, and
authorizations; neither the Company nor any of its subsidiaries has
authorized, conducted, or has knowledge of the generation,
transportation, storage, use, treatment, disposal or release of any
hazardous substance, hazardous waste, hazardous material, hazardous
constituent, toxic substance, pollutant, contaminant, petroleum product,
natural gas, liquefied gas or synthetic gas defined or regulated under
any environmental law; and there is no pending or, to the knowledge of
the Company and each of its subsidiaries, threatened claim, litigation
or any administrative agency proceeding, nor has the Company or any of
its subsidiaries received any written or oral notice from any
governmental entity or third party, that: (A) alleges a violation of any
Laws by the Company or any of its subsidiaries; (B) alleges the Company
or any of its subsidiaries is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss.
9602 et seq. or any state superfund law; or (C) alleges possible
contamination of the environment by the Company or any of its
subsidiaries.
(xxvii) The Company owns or has the right to use all patents,
patent applications, trademarks, trademark applications, trade names,
service marks, copyrights, franchises, trade secrets, proprietary or
other confidential information and intangible properties and assets
(collectively, "Intellectual Property Rights") necessary to conduct its
business as presently conducted and as described in the Prospectus, and
as the Prospectus indicates the Company proposes to conduct its
business, except where the failure to own or have such rights would not
have a Material Adverse Effect; and to the knowledge of the Company, the
Company has not infringed and is not infringing, and the Company has not
received notice of infringement with respect to, asserted Intellectual
Property Rights of others and there is no infringement by others
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of Intellectual Property Rights of the Company, in either case which
might result in a Material Adverse Effect.
(xxviii) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such
amounts as management of the Company deems prudent and in the best
interests of the Company and its shareholders; and the Company has no
reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue
its business at a comparable cost, except as disclosed in the
Prospectus.
(xxix) The Company and its subsidiaries each makes and keeps
accurate books and records reflecting its assets and maintains internal
accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's authorization,
(B) transactions are recorded as necessary to permit preparation of the
Company's financial statements in accordance with generally accepted
accounting principles and to maintain accountability for the assets of
the Company, (C) access to the assets of the Company is permitted only
in accordance with management's authorization, and (D) the recorded
accountability for assets of the Company is compared with existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(xxx) The Company and its subsidiaries each has filed all
foreign, federal, state and local tax returns that are required to be
filed by it and has paid all taxes shown as due on such returns as well
as all other taxes, assessments and governmental charges that are due
and payable; and no deficiency with respect to any such return has been
assessed or, to the knowledge of the Company, proposed.
(xxxi) The Company is not and will not become as a result of
the transactions contemplated hereby, and does not intend to conduct its
business in a manner that would cause it to become, an "investment
company" or a company "controlled" by an "investment company" within the
meaning of the Investment Company Act of 1940.
(xxxii) The Company and its subsidiaries each has complied with
all provisions of Section 517.075, Florida Statutes, relating to doing
business with the Government of Cuba and certain other persons and
entities.
(xxxiii) As of the date of this Agreement, the Company is not
required to be licensed as an insurance company in any state. ESIF, U.S.
Employers Insurance, Inc. and Bridgefield Casualty Insurance Company
(together, the "Insurance subsidiaries") are the only subsidiaries of
the Company that are insurance companies. Each of the Insurance
subsidiaries holds all licenses, certificates and permits from insurance
departments and all other governmental authorities (collectively, the
"Insurance Licenses") necessary or desirable to conduct its business as
presently conducted or the Company presently contemplates it will
conduct its business in the future. Each of the Insurance subsidiaries
has fulfilled and performed all material obligations necessary to
maintain its Insurance Licenses, and no event or events have occurred
which would result in the impairment, modification, termination, or
revocation of such Insurance Licenses. The Company and the Insurance
subsidiaries each have filed all material reports, registrations and
statements, together with any amendments required to be made with
respect thereto, that they were required to file with any state
insurance commission, agency or authority. As of their respective dates,
such reports, registrations and statements complied in all material
respects with all the laws, statutes, rules, and regulations of each
such jurisdiction, including, without limitation, those rules and
regulations promulgated by the applicable insurance commission, agency,
or authority in any such state.
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(xxxiv) Except as set forth in the Prospectus, no loss
experience has occurred that would require or make it necessary or
appropriate for the Company to change, alter, modify or amend the
Company's methodology or assumptions relating to losses.
(xxxv) All reinsurance treaties, contracts, agreements, and
arrangements to which the Company or any of its subsidiaries is a party
and as to which any of them reported recoverables, premiums due or
other amounts in its financial statements are in full force and effect
and neither the Company nor any of the Insurance subsidiaries is in
violation of, or in default in the performance, observance or
fulfillment of, any material obligation, agreement, covenant or
condition contained therein, which violation or default would,
singularly or in the aggregate, have a Material Adverse Effect on the
condition (financial or other), business, properties, net worth or
results of operations of the Company and the Insurance subsidiaries
taken as a whole. Neither the Company nor any of the Insurance
subsidiaries has any reason to believe that any other party to such
treaties, contracts, agreements or arrangements will not or cannot
perform in any material respect its duties or obligations under such
treaty, contract, agreement, or arrangement, except where the failure
to perform would not have a Material Adverse Effect on the condition
(financial or other), business, properties, net worth or results of
operations of the Company and its subsidiaries taken as a whole.
2. PURCHASE AND SALE OF SHARES. Subject to the terms and
conditions herein set forth, (a) the Company agrees to sell to each of the
Underwriters, and each of the Underwriters agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $10.23 per share, the number
of the Firm Shares set forth opposite the name of each Underwriter on Schedule
I.
The Company hereby grants to the Underwriters the right to purchase at
their election in whole or in part up to 750,000 Optional Shares at the purchase
price per share set forth in clause (a) in the paragraph above for the sole
purpose of covering over-allotments in the sale of Firm Shares. If the option
granted hereby is exercised in part, then the respective number of Optional
Shares to be purchased by each of the Underwriters shall be determined by
multiplying the total number of Optional Shares as to which such election shall
have been exercised by the Underwriters by a fraction, the numerator of which is
the maximum number of Optional Shares such Underwriter is entitled to purchase
as set forth opposite the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of Optional Shares that all
Underwriters are entitled to purchase hereunder (with the resulting number to be
adjusted by the Underwriters so as to eliminate fractional shares). Any such
election to purchase Optional Shares may be exercised by written notice from the
Underwriters to the Company, given one time within a period of 30 calendar days
after the date of this Agreement and setting forth the aggregate number of
Optional Shares to be purchased and the date on which such Optional Shares are
to be delivered, which date shall not be less than three or more than ten
business days after such notice is given, as determined by the Underwriters, but
in no event earlier than the First Time of Delivery. The Company shall furnish
or cause to be furnished to the Underwriters the certificates, letters, and
opinions, and to satisfy all conditions, set forth in Section 7 hereof at the
Subsequent Time of Delivery (as such term is defined in Section 4, below).
3. OFFERING BY THE UNDERWRITERS. Upon the authorization by the
Underwriters of the release of the Shares, the several Underwriters propose to
offer the Shares for sale upon the terms and conditions disclosed in the
Prospectus.
4. DELIVERY OF SHARES; CLOSING. Certificates in definitive form
for the Shares to be purchased by each Underwriter hereunder, and in such
denominations and registered in such names as Raymond James & Associates, Inc.
may request upon at least 48 hours prior notice to the Company, shall be
delivered by or on behalf of the Company to the Underwriters for the respective
account of each such Underwriter, against payment by such Underwriter on its
behalf as provided herein. Payment shall be made (i) with respect to the
purchase price for the Firm Shares and any Optional Shares purchased from the
Company if any Optional Shares are purchased hereunder, to the Company by
official bank check or
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<PAGE> 9
checks payable to the order of, or by wire transfer to the account of, the
Company, in same day available funds against delivery of the certificates for
the Firm Shares or Optional Shares purchased from the Company, as the case may
be. The closing of the sale and purchase of the Shares shall be held at the
offices of Raymond James & Associates, Inc., 880 Carillon Parkway, St.
Petersburg, Florida 33716, except that physical delivery of certificates for the
Shares shall be made at the office of ChaseMellon Shareholder Services, L.L.C.,
120 Broadway, 13th Floor, New York, New York 10271, or at such other location
designated by Raymond James & Associates, Inc. The time and date of such
delivery and payment shall be, with respect to the Firm Shares, at 10:00 a.m.,
local time, on the third (or if the Firm Shares are priced as contemplated by
Rule 15c6-1(c) of the Commission, after 4:30 p.m., Washington, D.C. time, the
fourth) full business day after this Agreement is executed or at such other time
and date as the Underwriters and the Company may agree upon in writing, and,
with respect to the Optional Shares, 10:00 a.m., local time, on the date
specified by the Underwriters in the written notice given by the Underwriters of
the Underwriters' election to purchase all or part of such Optional Shares, or
at such other time and date as the Underwriters and the Company may agree upon
in writing. Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery," and such time and date for delivery of any
Optional Shares, if not the First Time of Delivery, is herein called the
"Subsequent Time of Delivery," and each such time and date for delivery is
herein called a "Time of Delivery." The Company will make certificates for the
Shares available for checking and packaging at least 24 hours prior to each Time
of Delivery at the office of The Depository Trust Company, 55 Water Street, New
York, New York 10041 or at such other location in New York, New York specified
by the Underwriters in writing at least 48 hours prior to such Time of Delivery.
5. COVENANTS.
(A) COVENANTS OF THE COMPANY. The Company covenants and agrees
with each of the Underwriters:
(i) If required by the rules and regulations of the
Commission, the Company will file the Prospectus with the Commission
pursuant to and in accordance with subparagraph (1) (or, if applicable
and if consented to by the Underwriters, subparagraph (4)) of Rule
424(b) not later than the earlier of (A) the second business day
following the execution and delivery of this Agreement or (B) the fifth
business day after the date on which a post-effective amendment to the
Registration Statement is declared effective. The Company will advise
the Underwriters promptly of any such filing.
(ii) The Company will not file with the Commission the
Prospectus or the amendment referred to in the second sentence of
Section 1(i) hereof, any amendment or supplement to the Prospectus or
any amendment to the Registration Statement unless the Underwriters have
received a reasonable period of time to review any such proposed
amendment or supplement and consented to the filing thereof, such
consent not to be unreasonably delayed or withheld. The Company will use
its best efforts to cause any such amendment to the Registration
Statement to be declared effective as promptly as possible. Upon the
reasonable request of the Underwriters or counsel for the Underwriters,
the Company will promptly prepare and file with the Commission, in
accordance with the rules and regulations of the Commission, any
amendments to the Registration Statement or amendments or supplements to
the Prospectus that may be necessary or advisable in connection with the
distribution of the Shares by the several Underwriters and will use its
best efforts to cause any such amendment to the Registration Statement
to be declared effective as promptly as possible. If required, the
Company will file any amendment or supplement to the Prospectus with the
Commission in the manner and within the time period required by Rule
424(b) under the Act. The Company will advise the Underwriters, promptly
after receiving notice thereof, of the time when any amendment to the
Registration Statement has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed and
will provide evidence to the Underwriters of each such filing or
effectiveness.
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<PAGE> 10
(iii) The Company will advise the Underwriters promptly after
receiving notice or obtaining knowledge of (A) the issuance by the
Commission of any stop order suspending the effectiveness of the
Registration Statement or any part thereof or any order preventing or
suspending the use of any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto (B) the suspension of the
qualification of the Shares for offer or sale in any jurisdiction or of
the initiation or threatening of any proceeding for any such purpose, or
(C) any request made by the Commission or any securities authority of
any other jurisdiction for amending the Registration Statement, for
amending or supplementing the Prospectus or for additional information.
The Company will use its best efforts to prevent the issuance of any
such stop order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(iv) If during the period when the delivery of a prospectus
relating to the Shares is required under the Act, any events have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading, or if for any reason it is necessary during such
same period to amend or supplement the Prospectus to comply with the Act
or the rules and regulations thereunder, the Company will promptly
notify the Underwriters and upon their request (but at the Company's
expense) prepare and file with the Commission an amendment or supplement
to the Prospectus that corrects such statement or omission or effects
such compliance and will furnish without charge to each Underwriter and
to any dealer in securities as many copies of such amended or
supplemented Prospectus as the Underwriters may from time to time
reasonably request. If an Underwriter is required to deliver a
prospectus relating to the Shares at any time after the period when
delivery of a prospectus is required under the Act, upon request of the
Underwriters but at the expense of the Underwriters, the Company will
prepare and deliver to the Underwriters as many copies as the
Underwriters may request of an amended or supplemented Prospectus
complying with Section 10(a)(3) of the Act. Neither the Underwriters'
consent to, nor the Underwriters' delivery of, any such amendment or
supplement shall constitute a waiver of any of the conditions set forth
in Section 7.
(v) The Company promptly from time to time will take such
action as the Underwriters may reasonably request to qualify the Shares
for offering and sale under the securities or blue sky laws of such
jurisdictions as the Underwriters may request and will continue such
qualification in effect for as long as may be necessary to complete the
distribution of the Shares, provided that in connection therewith the
Company shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction.
(vi) The Company will promptly provide the Underwriters,
without charge, (A) two manually executed copies of the Registration
Statement as originally filed with the Commission and of each amendment
thereto, (B) for each other Underwriter a conformed copy of the
Registration Statement as originally filed and of each amendment
thereto, without exhibits, and (C) so long as a prospectus relating to
the Shares is required to be delivered under the Act, as many copies of
each Preliminary Prospectus or the Prospectus or any amendment or
supplement thereto as the Underwriters may reasonably request.
(vii) As soon as practicable, but in any event not later than
the 45th day following the end of the fiscal quarter in which occurs the
first anniversary of the effective date of the Registration Statement
(except such date shall be the 90th day rather than the 45th day if such
quarter is then the fourth fiscal quarter of the Company's fiscal year)
after the effective date of the Registration Statement, the Company will
make generally available to its security holders an earnings statement
of the Company covering a period of at least 12 months beginning after
the
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<PAGE> 11
effective date of the Registration Statement (which need not be audited)
complying with Section 11(a) of the Act and the rules and regulations
thereunder.
(viii) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Conversion, the Company will not, without the prior written consent of
Raymond James & Associates, Inc., offer, pledge, issue, sell, contract
to sell, grant any option for the sale of, or otherwise dispose of (or
announce any offer, pledge, sale, grant of an option to purchase or
other disposition), directly or indirectly, any shares of Common Stock
or securities convertible into, exercisable or exchangeable for, shares
of Common Stock, except (a) as provided in Section 2 and except for the
issuance of Common Stock upon the exercise of stock options or warrants
outstanding on the date of this Agreement to the extent that such stock
options or warrants were issued pursuant to plans or agreements which
are disclosed in the Prospectus, (b) the grant of options to employees
or directors under existing stock option plans and the issuance of
Common Stock upon the exercise thereof, or (c) as otherwise disclosed or
contemplated by the Prospectus.
(ix) During a period of five years from the effective date of
the Registration Statement, the Company will furnish to the
Underwriters, without charge, (A) copies of all reports or other
communications (financial or other) furnished to shareholders generally,
(B) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or the National
Association of Securities Dealers, Inc. or any national securities
exchange upon which trading in shares of the Common Stock is listed or
reported, and (C) such additional information concerning the business
and financial condition of the Company as the Underwriters may
reasonably request subject to appropriate confidentiality provisions
with respect to material non-public information.
(x) The Company will not (A) take, directly or indirectly,
prior to the termination of the underwriting syndicate contemplated by
this Agreement, any action designed to cause or to result in, or that
might reasonably be expected to constitute, the stabilization or
manipulation of the price of any security of the Company to facilitate
the sale or resale of any of the Shares, (B) sell, bid for, purchase or
pay anyone any compensation for soliciting purchases of, the Shares, or
(C) pay or agree to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.
(xi) The Company will apply the net proceeds from the
offering in the manner set forth under "Use of Proceeds" in the
Prospectus.
(xii) The Company will use its best efforts to cause the
Shares to be listed on the Nasdaq National Market at each Time of
Delivery and maintain such listing on a continuous basis for at least
one year from the date hereof.
(xiii) If at any time during the period beginning on the date
the Registration Statement becomes effective and ending on the later of
(A) the date 25 days after such effective date (or if the Underwriter's
option granted pursuant to Section 2 hereof has not been exercised by
such date, then 35 days after such effective date) and (B) the date that
is the earlier of (1) the date on which the Company first files with the
Commission a Quarterly Report on Form 10-Q after such effective date and
(2) the date on which the Company first issues a quarterly financial
report to shareholders after such effective date, any rumor, publication
or event relating to or affecting the Company shall occur as a result of
which in the reasonable opinion of the Underwriters the market price of
the Common Stock has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates an
amendment of or supplement to the Prospectus), the Company will, after
written notice from the Underwriters advising the Company to the effect
set forth above, forthwith prepare, consult with the Underwriters
concerning the substance of, and consult with Company counsel to
determine
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<PAGE> 12
whether or not it is advisable, under the circumstances, to disseminate
a press release or other public statement, reasonably satisfactory to
the Underwriters, responding to or commenting on such rumor, publication
or event.
6. EXPENSES. The Company will pay all costs and expenses incident
to the performance of its respective obligations under this Agreement, whether
or not the transactions contemplated hereby are consummated or this Agreement is
terminated pursuant to Section 10 hereof, including, without limitation, all
costs and expenses incident to (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the registration of the
Shares under the Act and all other expenses in connection with the preparation,
printing and, if applicable, filing of the Registration Statement (including all
amendments thereto), any Preliminary Prospectus, the Prospectus and any
amendments and supplements thereto, and any blue sky memoranda; (ii) the
delivery of copies of the foregoing documents and this Agreement to the
Underwriters; (iii) the filing fees of the Commission and the National
Association of Securities Dealers, Inc. relating to the Shares; (iv) the
preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including transfer agent's and registrar's fees; (v) the
qualification of the Shares for offering and sale under state securities and
blue sky laws, including filing fees and the reasonable fees and disbursements
of counsel for the Underwriters relating thereto; (vi) any listing of the Shares
on the Nasdaq National Market and (vii) any expenses for travel, lodging and
meals incurred by the Company and any of its officers, directors and employees
in connection with any meetings with prospective investors in the Shares.
7. CONDITIONS OF THE UNDERWRITERS' OBLIGATIONS. The several
obligations of the Underwriters hereunder to purchase and pay for the Shares to
be delivered at each Time of Delivery shall be subject, in their discretion, to
the accuracy of the representations and warranties of the Company contained
herein as of the date hereof and as of such Time of Delivery, to the accuracy of
the statements of Company officers made pursuant to the provisions hereof, to
the performance by the Company of their respective covenants and agreements
hereunder, and to the following additional conditions precedent:
(a) If the registration statement as amended to date has not become
effective prior to the execution of this Agreement, such registration statement
shall have been declared effective not later than 5:30 p.m., St. Petersburg
time, on the date of this Agreement or such later date and/or time as shall have
been consented to by the Underwriters in writing. If required, the Prospectus
and any amendment or supplement thereto shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period prescribed
for such filing and in accordance with Section 5(a) of this Agreement; no stop
order suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued and no proceedings for that purpose shall have
been instituted, or to the knowledge of the Company and the Underwriters,
threatened or contemplated by the Commission; and all requests for additional
information on the part of the Commission shall have been complied with to the
reasonable satisfaction of the Underwriters.
(b) Holland & Knight LLP, counsel for the Underwriters, shall have
furnished to the Underwriters such opinion or opinions, dated such Time of
Delivery, with respect to the incorporation of the Company, the validity of the
Shares being delivered at such Time of Delivery, the Registration Statement, the
Prospectus, and other related matters as the Underwriters may reasonably
request, and the Company shall have furnished to such counsel such documents as
such counsel or the Underwriters request prior to such Time of Delivery for the
purpose of enabling them to pass upon such matters.
(c) The Underwriters shall have received an opinion, dated at each
Time of Delivery, of Alston & Bird LLP, to the effect that:
(i) The Company and each of its subsidiaries is duly
qualified to transact business as a foreign corporation and is in good
standing under the laws of each other jurisdiction other than Florida in
which it owns or leases property, or conducts any business, so as to
require such qualification, except where the failure to so qualify would
not have a Material Adverse Effect.
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<PAGE> 13
(ii) The Company has no subsidiaries other than those listed
on Exhibit 21.1 to the Registration Statement and, to the knowledge of
such counsel, does not have any ownership interest in any partnership,
joint venture, or other entity or association.
(iii) Except as disclosed in the Prospectus, to the knowledge
of such counsel there are no outstanding (A) securities or obligations
of the Company convertible into or exchangeable for any capital stock of
the Company, (B) warrants, rights or options to subscribe for or
purchase from the Company any such capital stock or any such convertible
or exchangeable securities or obligations, or (C) obligations of the
Company to issue any shares of capital stock, any such convertible or
exchangeable securities or obligations, or any such warrants, rights, or
options.
(iv) Except as disclosed in the Prospectus, to the knowledge
of such counsel there are no contracts, agreements, or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the Act with
respect to any securities of the Company owned or to be owned by such
person or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement (or any
such right has been effectively exercised or waived) or in any
securities being registered pursuant to any other registration statement
filed by the Company under the Act.
(v) All offers and sales of the Company's capital stock
prior to the date hereof were at all relevant times duly registered
under the Act or exempt from the registration requirements of the Act.
(vi) The Company is not, nor with the giving of notice or
passage of time or both, will it be, in violation of its Articles of
Incorporation or Bylaws or in default under any indenture, mortgage,
deed of trust, loan agreement, lease, or other agreement or instrument
to which the Company is a party or to which any of its properties or
assets is subject and which in each instance is an exhibit to the
Registration Statement.
(vii) The issue and sale of the Shares being issued at such
Time of Delivery and the performance of this Agreement and the
consummation of the transactions herein contemplated will not conflict
with, or (with or without the giving of notice or the passage of time or
both) result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any material indenture, mortgage,
deed of trust, loan agreement, lease, or other agreement or instrument
known to such counsel to which the Company is party or to which any of
its properties or assets is subject, nor will such action conflict with
or violate any provision of the Articles of Incorporation or Bylaws of
the Company or any federal statute, rule or regulation normally
applicable to the transactions of the type herein contemplated, or to
the knowledge of such counsel, any other statute, rule or regulation
(assuming compliance with all applicable state securities or blue sky
laws) or, to the extent known to such counsel, any order, judgment, or
decree of any court or governmental agency or body having jurisdiction
over the Company or any of its properties or assets (it being understood
that such counsel need not express any opinion with regard to insurance
regulatory matters or, under this paragraph, compliance with federal
securities laws).
(viii) No consent, approval, authorization, order, or
declaration of or from, or registration, qualification or filing with,
any federal court or governmental agency or body, or to the knowledge of
such counsel, any other court or governmental agency or body, is
required for the issue and sale of the Shares or the consummation of the
transactions contemplated by this Agreement, except such as have been
obtained under the Act and the rules and regulations thereunder and such
as may be required by the National Association of Insurance Dealers,
Inc. or under state securities or blue sky laws in connection with the
offer, sale, and distribution of the
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<PAGE> 14
Shares by the Underwriters (it being understood that such counsel need
not express any opinion with regard to insurance regulatory matters).
(ix) To such counsel's knowledge and other than as disclosed
in or contemplated by the Prospectus, (A) there is no litigation,
arbitration, claim, proceeding (formal or informal) or investigation
pending or threatened (or any reasonable basis therefor) in which the
Company or any of its subsidiaries is a party or of which any of its
properties or assets is the subject which, if determined adversely to
the Company or any of its subsidiaries, would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and
(B) neither the Company nor any of its subsidiaries is in violation of,
or in default with respect to, any foreign or domestic statute, rule,
regulation, order, judgment or decree, (excluding any insurance law,
rule, regulation, order, judgment or decree).
(x) This Agreement has been duly authorized, executed and
delivered by the Company.
(xi) The Registration Statement and the Prospectus and each
amendment or supplement thereto (other than the financial statements and
related schedules and other financial and statistical data therein and
the section therein entitled "Underwriting," as to which such counsel
need express no opinion), as of their respective effective or issue
dates, complied as to form in all material respects with the
requirements of the Act and the rules and regulations thereunder. The
descriptions in the Registration Statement and the Prospectus of
statutes, legal and governmental proceedings (excluding insurance and
Florida laws, regulations, and governmental proceedings, as to which
such counsel need not express an opinion), or contracts and other
documents are accurate in all material respects and fairly present the
information required to be shown, and such counsel does not know of any
statutes or legal or governmental proceedings required to be described
in the Registration Statement or Prospectus that are not described as
required or of any contracts or documents of a character required to be
described in the Registration Statement or Prospectus or to be filed as
exhibits to the Registration Statement which are not described and filed
as required.
(xii) The Registration Statement is effective under the Act,
any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b),
and no stop order suspending the effectiveness of the Registration
Statement or any part thereof has been issued and, to such counsel's
knowledge, no proceedings for that purpose have been instituted or
threatened or are contemplated by the Commission.
(xiii) The Company is not, and will not be as a result of the
consummation of the transactions contemplated by this Agreement, an
"investment company," or a company "controlled" by an "investment
company," within the meaning of the Investment Company Act of 1940.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on warranties, representations and
certificates of responsible officers of the Company and public officials and, as
to matters involving the application of laws of any jurisdiction other than
Georgia or the United States, to the extent satisfactory in form and scope to
counsel for the Underwriters, upon the opinion of local counsel satisfactory to
counsel for the Underwriters, provided that such counsel states such counsel
believes that the Underwriters are justified in relying upon such opinion and
copies of such opinion are delivered to the Underwriters and counsel for the
Underwriters.
In addition, such counsel shall state that (i) based solely upon a
letter from The Nasdaq Stock Market to the Company attached to such counsel's
opinion, the Firm Shares and the Optional Shares have been approved for
quotation on The Nasdaq National Market upon issuance, (ii) based solely upon a
certificate of officers of the Company, no securities of the Company have
previously been offered or sold
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<PAGE> 15
to any person who is not a Florida resident, except in connection with the
transactions contemplated by this Agreement, and (iii) such counsel has
participated in conferences with officers and other representatives of the
Company and the Underwriters and their counsel during which the contents of the
Registration Statement and the Prospectus and related matters were discussed and
reviewed, and, although such counsel has not independently verified and is not
passing upon and does not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or the Prospectus, on the basis of the information that such counsel
developed in the course of the performance of the services referred to above,
considered in the light of such counsel's understanding of the applicable law,
nothing came to their attention that caused them to believe that the
Registration Statement or the Prospectus (other than the financial statements
and schedules and the other financial and statistical data therein, as to which
such counsel need express no belief), on such effective date, contained any
untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading.
(d) The Underwriters shall have received an opinion, dated at each
Time of Delivery, of Maida, Galloway & Neal, P.A., to the effect that:
(i) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of Florida and has the corporate power and authority to
own or lease its properties and conduct its business as described in the
Registration Statement and the Prospectus. The Company has the corporate
power and authority to enter into this Agreement and perform its
obligations hereunder.
(ii) The Company's authorized, issued and outstanding capital
stock is set forth in the Prospectus. All of the issued shares of Common
Stock of the Company have been duly authorized and validly issued, are
fully paid and nonassessable and conform to the description of the
Common Stock contained in the Prospectus. None of the issued shares of
capital stock of the Company has been issued or is owned or held in
violation of any preemptive rights of shareholders, and no person or
entity (including any holder of outstanding shares of capital stock of
the Company) has any statutory preemptive or, to the knowledge of such
counsel, other rights to subscribe for any of the Shares. All offers and
sales of the Company's capital stock outstanding prior to the date
hereof were the subject of an available exemption from the registration
or qualification requirements of the Florida securities or blue sky laws
(to the extent such offers and sales were subject to such Florida laws).
(iii) The Shares to be issued and sold by the Company have
been duly authorized and, when issued and delivered against payment
therefor as provided herein, will be validly issued and fully paid and
nonassessable and will conform to the description of the Common Stock
contained in the Prospectus, and the certificates evidencing the Shares
comply with all requirements of applicable law.
(iv) ESIF holds such insurance licenses, certificates and
permits from governmental authorities (including, without limitation,
Insurance Licenses) which are necessary to the conduct of its business
as described in the Prospectus, and the Company and ESIF have fulfilled
and performed all obligations necessary to maintain the Insurance
Licenses. Neither the Company nor ESIF has received any notice of, and
such counsel has no knowledge of, any action, suit, proceeding, or
investigation, and to the best knowledge of such counsel there has been
no threatened action, suit, proceeding or investigation, that could
reasonably be expected to result in the revocation, termination or
suspension of any Insurance Licenses.
(v) The issue and sale of the Shares being issued at such
Time of Delivery and the performance of this Agreement and the
consummation of the transactions herein contemplated will not violate
any Florida statute, rule, or regulation, or to the extent known to such
counsel,
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<PAGE> 16
any order, judgment, or decree of any court or governmental agency or
body having jurisdiction over the Company or any of its properties or
assets related to insurance regulatory matters.
(vi) No consent, approval, authorization, order, or
declaration of or from, or registration, qualification or filing with,
any Florida court or Florida governmental agency or body or to the
knowledge of such counsel from any other court, governmental agency or
body related to insurance regulatory matters is required for the issue
and sale of the Shares or the consummation of the transactions
contemplated by this Agreement, except such as have been obtained under
the Florida Insurance Code and the rules and regulations thereunder.
(vii) The Plan has been duly adopted by the required vote of
ESIF's Board of Trustees and members and is in compliance with the
insurance laws of the State of Florida applicable to the reorganization
of group self-insurance funds into stock property and casualty insurance
companies. Other than the conditions to effectiveness set forth in the
Order or in the Plan, no other approvals are required to be obtained
under the Florida Insurance Code for the effectiveness of the Plan.
Prior to or contemporaneously with the First Time of Delivery (as
hereinafter defined) each of the actions required to occur prior to the
effectiveness of the Plan pursuant to the Order or the Plan will have
occurred.
(viii) To such counsel's knowledge and other than as disclosed
in or contemplated by the Prospectus, neither the Company nor any of its
subsidiaries is in violation of, or in default with respect to, any
Florida statute, rule, regulation, order, judgment or decree, or as to
insurance regulatory matters, any other statute, rule, regulation,
order, judgment or decree.
(ix) The descriptions in the Registration Statement and the
Prospectus of insurance-related and Florida laws and regulations and
governmental proceedings are accurate and fairly present the information
required to be shown, and such counsel does not know of any insurance
related or Florida laws or regulations or governmental proceedings
required to be described in the Registration Statement or Prospectus
that are not described as required.
In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deem proper, on warranties, representations and
certificates of responsible officers of the Company and public officials.
In addition, such counsel shall state that such counsel has participated
in conferences with officers and other representatives of the Company and the
Underwriters and their counsel during which the contents of the Registration
Statement and the Prospectus and related matters were discussed and reviewed,
and, although such counsel has not independently verified and is not passing
upon and does not assume any responsibility for the accuracy, completeness or
fairness of the statements contained in the Registration Statement or the
Prospectus, on the basis of the information that such counsel developed in the
course of the performance of the services referred to above, considered in the
light of such counsel's understanding of the applicable law, nothing came to
their attention that caused them to believe that the Registration Statement or
the Prospectus, on such effective date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
(e) The Underwriters shall have received from Ernst & Young LLP and
Brinton & Mendez letters as of the date hereof and as of the Effective Date and
each Time of Delivery, in form and substance satisfactory to the Underwriters,
to the effect set forth in Annex I and Annex II hereto, respectively. In the
event that the letters referred to in this Section 7(e) set forth any changes,
decreases or increases in the items specified in clause (iii) of Annex I, it
shall be a further condition to the obligations of the Underwriters that (i)
such letters shall be accompanied by a written explanation by the Company as to
the significance thereof, unless the Underwriters deem such explanation
unnecessary, and (ii) such changes, decreases, or increases do not, in the
reasonable judgment of the Underwriters, make it impracticable or
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<PAGE> 17
inadvisable to proceed with the purchase, sale and delivery of the Shares being
delivered at such Time of Delivery as contemplated by the Registration
Statement, as amended as of the date of such letter.
(f) Since the date of the latest audited financial statements
included in the Prospectus, the Company and its subsidiaries shall not have
sustained (i) any loss or interference with their respective businesses from
fire, explosion, flood, hurricane or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental action, order or
decree, otherwise than as disclosed in or contemplated by the Prospectus, or
(ii) any change, or any development involving a prospective change (including
without limitation a change in management or control of the Company) in or
affecting the position (financial or otherwise), results of operations, net
worth or business prospects of the Company and its subsidiaries, otherwise than
as disclosed in or contemplated by the Prospectus, the effect of which, in
either such case, is in the reasonable judgment of the Underwriters so material
and adverse as to make it impracticable or inadvisable to proceed with the
purchase, sale, and delivery of the Shares being delivered at such Time of
Delivery as contemplated by the Registration Statement, as amended as of the
date hereof.
(g) Subsequent to the date hereof there shall not have occurred any
of the following: (i) any suspension or limitation in trading in securities
generally on the New York Stock Exchange, or any setting of minimum prices for
trading on such exchange or in the Common Stock by the Commission or The Nasdaq
Stock Market; (ii) a moratorium on commercial banking activities in New York or
Florida declared by either federal or state authorities; or (iii) any outbreak
or escalation of hostilities involving the United States, declaration by the
United States of a national emergency or war or any other national or
international calamity or emergency if the effect of any such event specified in
this clause (iii) in the reasonable judgment of the Underwriters makes it
impractical or inadvisable to proceed with the purchase, sale and delivery of
the Shares being delivered at such Time of Delivery as contemplated by the
Registration Statement, as amended as of the date hereof.
(h) The Company shall have furnished to the Underwriters at such
Time of Delivery certificates of officers of the Company, reasonably
satisfactory to the Underwriters, as to the accuracy in all material respects of
the representations and warranties of the Company herein at and as of such Time
of Delivery, as to the performance by the Company of all of their respective
obligations hereunder to be performed at or prior to such Time of Delivery, and
as to such other matters as the Underwriters may reasonably request, and the
Company shall have furnished or caused to be furnished certificates as to the
matters set forth in subsections (a) and (f) of this Section 7, and as to such
other matters as the Underwriters may reasonably request.
(i) The Shares shall have been approved for quotation on the Nasdaq
National Market.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject, under the Act or
otherwise, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement made by the Company in Section 1 of this Agreement;
(ii) any untrue statement or alleged untrue statement of any material fact
contained in (A) the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto,
or (B) any application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written information furnished by
or on behalf of the Company filed in any jurisdiction in order to qualify the
Shares under the securities or blue sky laws thereof or filed with the
Commission or any securities association or securities exchange (each an
"Application"); or (iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or any Application a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse each Underwriter for any
-17-
<PAGE> 18
legal or other expenses reasonably incurred by such Underwriter in connection
with investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any Amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or
any Application in reliance upon and in conformity with written information
furnished to the Company by any Underwriter expressly for use therein. The
obligations of the Company to indemnify the Underwriters (or any controlling
person of such Underwriter) pursuant to this indemnity agreement are subject to
the condition that, insofar as such losses, claims, damages, liabilities or
expenses relate to any such untrue statement, alleged untrue statement, omission
or alleged omission made in a Preliminary Prospectus that is corrected in the
Prospectus, such indemnity agreement shall not inure to the benefit of any
Underwriter from whom the person asserting such losses, liabilities, claims,
damages or expenses purchased the Shares in the Offering, if (i) such
Underwriter failed to deliver a copy of the Prospectus to such person at or
prior to the time delivery of the Prospectus as is required by the Act, unless
such failure was due to the failure by the Company to provide copies of the
Prospectus to such Underwriter; and (ii) the delivery of such Prospectus to such
person would have constituted a complete defense to the losses, claims, damages,
liabilities or expenses asserted by such person. The Company will not, without
the prior written consent of each Underwriter, settle or compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit or
proceeding (or related cause of action or portion thereof) in respect to which
indemnification may be sought hereunder (whether or not such Underwriter is a
party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of such Underwriter from
all liability arising out of such claim, action, suit or proceeding (or related
cause of action or portion thereof).
(b) Each Underwriter, severally but not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or liabilities
to which the Company may become subject under the Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in the Registration Statement or any amendment
thereto, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Application or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by such
Underwriter expressly for use therein; and will reimburse the Company for any
legal or other expenses reasonably incurred by the Company in connection with
investigating or defending any such loss, claim, damage, liability or action.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any such action include both the indemnified party and
the indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party and such
indemnified party shall have the right to select separate counsel to defend such
action on behalf of such indemnified party, provided, further, however, that the
Company shall be liable for the fees and expenses of only one separate firm of
attorneys (in addition to
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<PAGE> 19
local counsel) for all indemnified parties at any time in connection with any
action, suit or proceeding, or in a series of separate but substantially similar
or related actions, suits or proceedings arising out of the same general
allegations and circumstances. After such notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof and
approval by such indemnified party of counsel appointed to defend such action,
the indemnifying party will not be liable to such indemnified party under this
Section 8 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
or (ii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party. Nothing in this
Section 8(c) shall preclude an indemnified party from participating at its own
expense in the defense of any such action so assumed by the indemnifying party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a), (b) or (c) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection with the
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Underwriters on the other and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement or
omission. The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to above in this subsection (d). The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (d), (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Shares underwritten
by it and distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and (ii) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters
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<PAGE> 20
may otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who controls the
Company within the meaning of the Act.
9. DEFAULT OF UNDERWRITER.
(a) If any Underwriter defaults in its obligation to purchase Shares
at a Time of Delivery, the Underwriters in their discretion may arrange for
their or another party or other parties to purchase such Shares on the terms
contained herein. If within thirty-six hours after such default by any
Underwriter the Underwriters do not arrange for the purchase of such Shares, the
Company shall be entitled to a further period of thirty-six hours within which
to procure another party or other parties satisfactory to the Underwriters to
purchase such Shares on such terms. In the event that, within the respective
prescribed periods, the Underwriters notify the Company that they have so
arranged for the purchase of such Shares, or the Company notifies the
Underwriters that they have so arranged for the purchase of such Shares, the
Underwriters or the Company shall have the right to postpone a Time of Delivery
for a period of not more than seven days in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the Prospectus, or in
any other documents or arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus that in the opinion
of the Underwriters may thereby be made necessary. The cost of preparing,
printing and filing any such amendments shall be paid for by the Underwriters.
The term "Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person had originally
been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by the Underwriters and
the Company as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of the aggregate
number of Shares to be purchased at such Time of Delivery, then the Company
shall have the right to require each non-defaulting Underwriter to purchase the
number of Shares which such Underwriter agreed to purchase hereunder at such
Time of Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made, but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. TERMINATION.
(a) This Agreement may be terminated with respect to (i) the Firm
Shares or (ii) any Optional Shares, in the sole discretion of the Underwriters,
by notice to the Company given prior to the First Time of Delivery or any
Subsequent Time of Delivery, respectively, in the event that (a) any condition
to the obligations of the Underwriters set forth in Section 7 hereof has not
been satisfied, or (b) the Company shall have failed, refused or been unable to
deliver the Shares or to perform all obligations and satisfy all conditions on
its part to be performed or satisfied hereunder at or prior to such Time of
Delivery, in either case other than by reason of a default by any of the
Underwriters. If this Agreement is terminated pursuant to this Section 10(a),
the Company will reimburse the Underwriters severally upon demand for all
out-of-pocket expenses (including reasonable counsel fees and disbursements)
that shall have been reasonably incurred by them in connection with the proposed
purchase and sale of the Shares. The Company shall not in any event be liable to
any of the Underwriters for the loss of expected profits from the transactions
covered by this Agreement.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter by the Underwriters and the Company as
provided in Section 9(a), the aggregate number of such Shares which remains
unpurchased exceeds one-eleventh of the aggregate number of Shares to be
purchased at such Time of Delivery, or if the Company shall not exercise the
right described in Section 9(b) to require non-defaulting Underwriter to
purchase Shares of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to a Subsequent Time of Delivery, the obligations of
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<PAGE> 21
the Underwriters to purchase and of the Company to sell the Optional Shares)
shall thereupon terminate, without liability on the part of any non-defaulting
Underwriter to the Company, except for the expenses to be borne by the Company
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
11. SURVIVAL. The respective indemnities, agreements,
representations, warranties and other statements of the Company and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person referred to in
Section 8(e) or the Company or any officer or director or controlling person of
the Company referred to in Section 8(e), and shall survive delivery of and
payment for the Shares. The respective agreements, covenants, indemnities and
other statements set forth in Sections 6 and 8 hereof shall remain in full force
and effect, regardless of any termination or cancellation of this Agreement.
12. NOTICES. All communications hereunder shall be in writing and,
if sent to any of the Underwriters, shall be mailed, delivered or telecopied and
confirmed in writing to the Underwriters in care of Raymond James & Associates,
Inc., 880 Carillon Parkway, St. Petersburg, Florida 33716, Attention: Joel
Kallett, with a copy to Holland & Knight LLP, 400 North Ashley Drive, Tampa,
Florida 33602, Attention: Michael L. Jamieson, Esq.; and if sent to the Company,
shall be mailed, delivered or telecopied and confirmed in writing to the Company
at 2310 A-Z Park Road, Lakeland, Florida 33601, Attention: William B. Bull with
a copy to Alston & Bird LLP, 1201 West Peachtree Street, Atlanta, Georgia
30309-3424, Attention M. Hill Jeffries, Esq.
13. ACTION BY THE UNDERWRITERS. Any action under this Agreement
taken by Raymond James & Associates, Inc. will be binding upon the Underwriters.
14. BINDING EFFECT. This Agreement shall be binding upon, and inure
solely to the benefit of, the Underwriters, the Company and to the extent
provided in Sections 8 and 10 hereof, the officers and directors and controlling
persons referred to therein and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement. No purchaser of any of the
Shares from any Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
15. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without giving effect to any
provisions regarding conflicts of laws.
16. COUNTERPARTS. This Agreement may be executed by any one or more
of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such counterparts shall together constitute
one and the same instrument.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us one of the counterparts hereof, and upon
the acceptance hereof by Raymond James & Associates, Inc., on behalf of each of
the Underwriters, this letter will constitute a binding agreement among the
Underwriters and the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the authority set
forth in the Master Agreement among Underwriters, a copy of which shall be
submitted to the Company for examination, upon request, but without warranty on
the part of the Underwriters as to the authority of the signers thereof.
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<PAGE> 22
Very truly yours,
SUMMIT HOLDING SOUTHEAST, INC.
By:
------------------------------
Title:
----------------------------
The foregoing Agreement is hereby confirmed and accepted as of the date first
written above at May 21, 1997.
RAYMOND JAMES & ASSOCIATES, INC.
By: Raymond James & Associates, Inc.
By:
----------------------------------------------
On behalf of each of the Underwriters
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<PAGE> 23
SCHEDULE I
<TABLE>
<CAPTION>
Number of
Firm Shares
to be
Underwriter Purchased
- ----------- ---------
<S> <C>
Raymond James & Associates, Inc. 1,490,507
ABN AMRO Chicago Corporation 1,490,506
Alex, Brown & Sons Incorporated 110,000
Donaldson, Lufkin & Jenrette Securities Corp. 110,000
A.G. Edwards & Sons, Inc. 110,000
Salomon Brothers Inc. 110,000
Robert W. Baird & Co. Incorporated 70,000
Dain Bosworth Incorporated 70,000
Friedman, Billings, Ramsey & Co., Inc. 70,000
Interstate/Johnson Lane Corporation 70,000
Janney Montgomery Scott Inc. 70,000
Legg Mason Wood Walker, Incorporated 70,000
The Robinson-Humphrey Company, Inc. 70,000
Allen & Company of Florida Inc. 50,000
Brean Murray & Co., Inc. 50,000
Sandler, O'Neill & Partners, L.P. 50,000
------
TOTAL 4,061,013
=========
</TABLE>
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<PAGE> 24
ANNEX I
Pursuant to Section 7(e) of the Underwriting Agreement, Ernst & Young
LLP shall furnish a letter to the Underwriters to the effect that:
(i) they are independent public accountants with respect to the
Company within the meaning the Act and the applicable published rules and
regulations thereunder;
(ii) in their opinion, the financial statements and schedules audited
by them and included in the Prospectus and the Registration Statement comply as
to form in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the latest available interim financial statements of the Company, inspection
of the minute books of the Company since the date of the latest audited
financial statements included in the Prospectus, inquiries of officials of the
Company responsible for financial accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements of the Company
included in the Registration Statement and the Prospectus do not comply
in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder or are not in conformity with generally accepted principles
applied on the basis substantially consistent with that of the audited
financial statements included in the Registration Statement and the
Prospectus;
(B) the unaudited amounts for sales, net revenues and total
and per share amounts of net income included in the Registration
Statement and the Prospectus do not agree with the amounts set forth in
the unaudited financial statements for those same periods or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the corresponding amounts in
the audited financial statements included in the Registration Statement
and the Prospectus;
(C) as of a specified date not more than five days prior to
the date of such letter, there were any changes in the capital stock
(other than the issuance of capital stock upon exercise of options which
were outstanding on the date of the latest balance sheet included in the
Prospectus) or any increase in inventories or the long-term debt or
short-term debt of the Company, or any decreases in net current assets
or net assets or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or may occur or which are
described in such letter;
(D) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in Clause (A) there were any decreases in net sales or operating income
or the total or per share amounts of net income or other items specified
by the Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length
specified by the Underwriters, except in each case for increases or
decreases which the Prospectus discloses have occurred or may occur
which are described in such letter; and
(iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph
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<PAGE> 25
(iii) above, they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information specified
by the Underwriters which are derived from the general accounting records of the
Company, included in the Registration Statement and the Prospectus, or which
appear in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Underwriters, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and have found them to be in agreement.
References to the Registration Statement and the Prospectus in this
Annex I shall include any amendment or supplement thereto at the date of such
letter.
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<PAGE> 26
ANNEX II
Pursuant to Section 7(e) of the Underwriting Agreement, Brinton & Mendez
shall furnish a letter to the Underwriters to the effect that:
(i) they are independent public accountants with respect to the
Company within the meaning the Act and the applicable published rules and
regulations thereunder;
(ii) in their opinion, the financial statements and schedules audited
by them and included in the Prospectus and the Registration Statement comply as
to form in all material respects with the applicable accounting requirements of
the Act and the related published rules and regulations thereunder;
(iii) On the basis of limited procedures, not constituting an audit in
accordance with generally accepted auditing standards, consisting of a reading
of the latest available interim financial statements of the Company, inspection
of the minute books of the Company since the date of the latest audited
financial statements included in the Prospectus, inquiries of officials of the
Company responsible for financial accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) the unaudited financial statements of the Company
included in the Registration Statement and the Prospectus do not comply
in form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations
thereunder or are not in conformity with generally accepted principles
applied on the basis substantially consistent with that of the audited
financial statements included in the Registration Statement and the
Prospectus;
(B) the unaudited amounts for sales, net revenues and total
and per share amounts of net income included in the Registration
Statement and the Prospectus do not agree with the amounts set forth in
the unaudited financial statements for those same periods or are not in
conformity with generally accepted accounting principles applied on a
basis substantially consistent with that of the corresponding amounts in
the audited financial statements included in the Registration Statement
and the Prospectus;
(C) as of a specified date not more than five days prior to
the date of such letter, there were any changes in the capital stock
(other than the issuance of capital stock upon exercise of options which
were outstanding on the date of the latest balance sheet included in the
Prospectus) or any increase in inventories or the long-term debt or
short-term debt of the Company, or any decreases in net current assets
or net assets or other items specified by the Underwriters, or any
increases in any items specified by the Underwriters, in each case as
compared with amounts shown in the latest balance sheet included in the
Prospectus, except in each case for changes, increases or decreases
which the Prospectus discloses have occurred or may occur or which are
described in such letter;
(D) for the period from the date of the latest financial
statements included in the Prospectus to the specified date referred to
in Clause (A) there were any decreases in net sales or operating income
or the total or per share amounts of net income or other items specified
by the Underwriters, or any increases in any items specified by the
Underwriters, in each case as compared with the comparable period of the
preceding year and with any other period of corresponding length
specified by the Underwriters, except in each case for increases or
decreases which the Prospectus discloses have occurred or may occur
which are described in such letter; and
(iv) In addition to the audit referred to in their report(s) included
in the Prospectus and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraph
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<PAGE> 27
(iii) above, they have carried out certain specified procedures, not
constituting an audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information specified
by the Underwriters which are derived from the general accounting records of the
Company, included in the Registration Statement and the Prospectus, or which
appear in Part II of, or in exhibits and schedules to, the Registration
Statement specified by the Underwriters, and have compared certain of such
amounts, percentages and financial information with the accounting records of
the Company and have found them to be in agreement.
References to the Registration Statement and the Prospectus in this
Annex I shall include any amendment or supplement thereto at the date of such
letter.
-27-
<PAGE> 1
EXHIBIT 10.1
================================================================================
CREDIT AGREEMENT
among
SUMMIT HOLDING SOUTHEAST, INC.
THE LENDERS NAMED HEREIN,
AND
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
as Agent
$37,675,000 Credit Facilities
Dated as of May 28, 1997
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I DEFINITIONS .......................................... 2
1.1 Defined Terms ........................................ 2
1.2 Use of Defined Terms ................................. 29
1.3 Cross References; Headings ........................... 29
1.4 Accounting Terms ..................................... 29
1.5 Time References ...................................... 30
1.6 Other Definitional Provisions ........................ 30
ARTICLE II TERM LOANS ........................................... 30
2.1 Term Loans ........................................... 30
2.2 Term Notes. .......................................... 30
2.3 Scheduled Repayment of Term Loans. ................... 30
2.4 Mandatory Prepayment of Term Loans. .................. 31
2.5 Voluntary Prepayment of Term Loans. .................. 31
2.6 LIBOR Breakage; Interest; Etc. ....................... 32
ARTICLE III REVOLVING CREDIT FACILITY ............................ 32
3.1 Loans ................................................ 32
3.2 Voluntary Termination; Reduction of Commitments. ..... 34
3.3 Voluntary Prepayments ................................ 35
3.4 Mandatory Repayment of Loans ......................... 35
3.5 Unused Commitment Fee ................................ 36
3.6 Revolving Credit Notes ............................... 36
ARTICLE IV INTEREST; ADDITIONAL PROVISIONS ...................... 36
4.1 Interest Rates ....................................... 36
4.2 Interest Payment Dates ............................... 37
4.3 Computation of Rates ................................. 37
4.4 Default Rate; Post-Petition Interest. ................ 37
4.5 Maximum Interest Rate ................................ 37
4.6 Conversion to and Renewal of LIBOR Loans ............. 38
4.7 Restrictions on Interest Rate Options ................ 38
4.8 Illegality ........................................... 39
4.9 Limitation on LIBOR Loans ............................ 39
4.10 Procedures Regarding Payments ........................ 40
4.11 Payment Not at End of Interest Period ................ 41
4.12 Increased Costs ...................................... 41
4.13 Taxes ................................................ 42
4.14 Application of Payments; Pro Rata Funding ............ 43
4.15 Recordkeeping ........................................ 44
ARTICLE V CONDITIONS OF CLOSING AND BORROWING .................. 44
5.1 Closing .............................................. 44
5.2 Conditions to the Closing ............................ 44
5.2.1 Loan and Security Documents ................ 44
5.2.2 Certificates; Opinions ..................... 45
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
5.2.3 Other Documents ................................ 46
5.2.4 Investment Portfolio ........................... 48
5.2.5 Litigation ..................................... 48
5.2.6 No Material Adverse Event ...................... 48
5.2.7 Discontinued Operations ........................ 48
5.2.8 Fees ........................................... 48
5.3 Continuing Conditions .................................... 48
ARTICLE VI REPRESENTATIONS AND WARRANTIES ........................... 49
6.1 Corporate Organization and Power ......................... 49
6.2 Certain Agreements ....................................... 49
6.3 Litigation; Government Regulation ........................ 50
6.4 Taxes .................................................... 50
6.5 Conflicts With Other Instruments, Laws ................... 50
6.6 Governmental Compliance .................................. 51
6.7 Default .................................................. 51
6.8 Margin Securities ........................................ 51
6.9 Insurance ................................................ 51
6.10 Ownership of Properties; Subsidiaries .................... 52
6.11 Business Locations ....................................... 52
6.12 Accuracy of Information .................................. 52
6.13 Subsidiaries; Affiliates ................................. 52
6.14 Investment Company Act ................................... 52
6.15 Employee Plans; ERISA .................................... 53
6.16 Pro Forma Balance Sheet .................................. 54
6.17 GAAP Financial Statements. ............................... 54
6.18 Statutory Financial Statements ........................... 54
6.19 Projections .............................................. 55
6.20 Solvency ................................................. 56
6.21 Environmental Matters .................................... 56
6.22 Assets for Conduct of Business ........................... 56
6.23 Trade Relations .......................................... 57
6.24 Securities Laws .......................................... 57
6.25 Compliance with Laws ..................................... 57
6.26 Employees and Labor ...................................... 57
6.27 First Priority ........................................... 58
6.28 Material Contracts ....................................... 58
6.29 Reinsurance .............................................. 58
6.30 Policies of Insurance .................................... 58
6.31 No Burdensome Restrictions. .............................. 58
6.32 Plan of Conversion ....................................... 59
ARTICLE VII AFFIRMATIVE COVENANTS .................................... 59
7.1 Repayment of Obligations; Certain Prepayments ............ 60
7.2 Performance Under Credit Documents; Use of Proceeds ...... 60
7.3 Reports, Certificates and Other Information .............. 61
7.4 Corporate Existence; Foreign Qualification ............... 66
7.5 Books, Records and Inspections ........................... 66
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
7.6 Insurance; Assets. ....................................... 66
7.7 Taxes and Liabilities .................................... 66
7.8 Employee Benefit Plans ................................... 67
7.9 COBRA .................................................... 67
7.10 Pledge and Security Agreements ........................... 67
7.11 Compliance with Laws ..................................... 67
7.12 Maintenance of Permits ................................... 67
7.13 Interest Rate Protection ................................. 67
7.14 Dividends ................................................ 67
7.15 Key Man Life Insurance ................................... 68
7.16 Business Activities ...................................... 68
7.17 Disbursement Instructions ................................ 68
7.18 Further Assurances ....................................... 68
7.19 Certain Fees ............................................. 68
ARTICLE VIII FINANCIAL COVENANTS ...................................... 69
8.1 Borrower Financial Covenants ............................. 69
8.2 Summit Holding Financial Covenants. ...................... 69
8.3 Insurance Subsidiary Financial Covenants ................. 70
8.4 Capital Expenditures ..................................... 70
ARTICLE VIII A NEGATIVE COVENANTS ..................................... 71
8A.1. Reinsurance Agreements ................................... 71
8A.2. Guarantees, Loans, Advances and Investments .............. 71
8A.3 Mergers, Consolidations and Sales ........................ 71
8A.4 Change in Control; Issuance of Stock ..................... 72
8A.5 Leases ................................................... 72
8A.6. Unconditional Purchase Obligations ....................... 72
8A.7 Subsidiaries; Investment of Proceeds ..................... 72
8A.8 Business Activities ...................................... 73
8A.9 Transactions with Affiliates ............................. 73
8A.10 Indebtedness ............................................. 73
8A.11 Liens .................................................... 73
8A.12 Restricted Payments ...................................... 73
8A.13 Negative Pledge Agreements ............................... 74
8A.14 No Amendment of Documents ................................ 74
8A.15 Fiscal Year .............................................. 74
8A.16 Certain Investments ...................................... 74
8A.17 Hazardous Materials ...................................... 75
ARTICLE IX EVENTS OF DEFAULT ........................................ 75
9.1 Events of Default ........................................ 75
ARTICLE X RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT;
INTERCREDITOR PROVISIONS.................................. 78
10.1 Rights and Remedies ...................................... 79
10.2 Rights and Remedies Cumulative; Non-waiver; Etc .......... 79
10.3 Rights in Property Held by the Lenders ................... 79
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
10.4 Cross-collateralization; No Marshalling .................. 79
10.5 Set-off .................................................. 80
10.6 Intercreditor Provisions ................................. 80
ARTICLE XI PAYMENT OF FEES AND EXPENSES ............................. 81
11.1 Fees and Expenses ........................................ 81
11.2 Administrative Fee ....................................... 82
ARTICLE XII THE AGENT ................................................ 82
12.1 Appointment .............................................. 82
12.2 Nature of Duties ......................................... 82
12.3 Absence of Reliance on the Agent ......................... 83
12.4 Certain Rights of the Agent .............................. 84
12.5 Notice of Default ........................................ 84
12.6 Reliance by Agent ........................................ 84
12.7 Indemnification .......................................... 85
12.8 The Agent in its Individual Capacity ..................... 85
12.9 Holders .................................................. 85
12.10 Successor Agent .......................................... 85
12.11 Collateral Matters ....................................... 86
12.12 Non-receipt of Funds by the Agent ........................ 86
ARTICLE XIII ASSIGNMENT AND PARTICIPATION ............................. 87
13.1 Assignments .............................................. 87
13.2 Participations ........................................... 89
13.3 Miscellaneous ............................................ 89
ARTICLE XIV MISCELLANEOUS ............................................ 89
14.1 Survival of Agreements ................................... 90
14.2 Governing Law; Consent to Jurisdiction ................... 90
14.3 Arbitration; Remedies .................................... 91
14.4 Notice ................................................... 92
14.5 Indemnification of the Agent and the Lenders ............. 93
14.6 Waivers by the Borrower .................................. 93
14.7 Assignment and Sale ...................................... 94
14.8 Amendment or Waiver ...................................... 94
14.9 Severability ............................................. 94
14.10 Entire Agreement ......................................... 95
14.11 Binding Effect ........................................... 95
14.12 Execution in Counterparts ................................ 95
14.13 Conflict of Terms ........................................ 95
14.14 Injunctive Relief ........................................ 95
14.15 Termination .............................................. 95
</TABLE>
<PAGE> 6
TABLE OF EXHIBITS AND SCHEDULES
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Compliance Certificate
Exhibit C Excess Cash Flow Calculation
Exhibit D Form of Interest Rate Election Notice
Exhibit E Form of Notice of Borrowing
Exhibit F Form of Revolving Credit Note
Exhibit G Form of Term Note
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
Schedule 6.3 Claims Against Borrower
Schedule 6.4 Taxes
Schedule 6.6 Compliance; Jurisdictions of Borrower Affiliates
Schedule 6.9 Insurance Policies
Schedule 6.10 Ownership of Properties
Schedule 6.11 Borrower Affiliate Offices
Schedule 6.13 Borrower Affiliates
Schedule 6.15 Employee Plans
Schedule 6.21 Environmental Matters
Schedule 6.22 Certain Assets
Schedule 6.28 Material Contracts
Schedule 6.29 Reinsurance Agreements
Schedule 7.16 Business Activities
Schedule 8A.1 Certain Reinsurers
Schedule 8A.2 Contingent Liabilities
Schedule 8A.9 Certain Affiliate Transactions
</TABLE>
<PAGE> 7
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of the 28th day of May, 1997 (the "Credit
Agreement" or the "Agreement"), is by and between SUMMIT HOLDING SOUTHEAST,
INC., a Florida corporation with its principal offices in Lakeland, Florida
(the "Borrower"); the banking and financial institutions listed on the
signature pages hereof or that become parties hereto after the date hereof in
their respective capacities as lenders hereunder (collectively, the "Lenders");
and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking association
with its principal offices in Charlotte, North Carolina, acting in the manner
and to the extent described in ARTICLE XII hereof (in such capacity, the
"Agent").
RECITALS
A. The Borrower is the corporate parent of Summit Holding Corporation
("Summit Holding").
B. Summit Holding has been party to that certain Credit Agreement, dated
as of January 16, 1996, with the Agent and the Lenders (as amended, the "Summit
Holding Credit Agreement"), originally providing for the extension of a
$36,000,000 term loan facility and a $8,000,000 revolving credit facility to
Summit Holding by the Lenders.
C. As of November 21, 1996, the Lenders' commitments under the Summit
Holding Credit Agreement were reduced to an aggregate amount equal to
$38,000,000 (consisting of $33,000,000 in respect of term loans and $5,000,000
in respect of the revolving credit facility). On March 31, 1997, a principal
payment of $325,000 was made in respect of the term loans.
D. Summit Holding, the Borrower and their affiliates desire to effect a
corporate restructuring pursuant to which (i) Employers Self Insurers Fund, a
Florida self-insurance fund that is the owner of all of the capital stock of
Summit Holding ("ESIF"), would be converted to a stock insurance company to be
named "Bridgefield Employers Insurance Company" ("Bridgefield Employers"), (ii)
the Borrower would acquire ownership of Summit Holding and Bridgefield
Employers and complete an initial public offering of its capital stock and
(iii) the capital stock of Bridgefield Casualty Insurance Company ("Bridgefield
Casualty") would be contributed to Bridgefield Employers.
E. Summit Holding and the Borrower desire that the Borrower assume Summit
Holding's repayment obligations under the Summit Holding Credit Agreement (but
only upon consummation of such transactions), and the Agent and the Lenders are
willing to permit such assumption on the terms set forth herein and in the
other Loan Documents.
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<PAGE> 8
F. Certain non-Insurance Subsidiaries of the Borrower will jointly and
severally guarantee the Obligations of the Borrower hereunder.
G. The Obligations of the Borrower will be secured by a perfected first
priority lien on and security interest in the Collateral pledged to the Agent
(for the benefit of the Lenders) by the Borrower and its Subsidiaries, all as
more particularly set forth herein and in the other Loan Documents.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the
Agent hereby agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For purposes of this Credit Agreement, in addition to
the terms defined elsewhere herein, the following terms shall have the meanings
set forth below:
"Account Designation Letter" shall mean a letter from the Borrower to the
Agent, duly completed and signed by an Authorized Officer and in form and
substance satisfactory to the Agent, listing any one or more accounts to which
the Borrower may from time to time request the Agent to forward the proceeds of
any Loans made hereunder.
"Actuarial Report" shall mean an actuarial review and valuation statement
of an Insurance Subsidiary's or a Fund's loss and loss adjustment expense
reserve positions as of the end of such Person's fiscal year (or such other
date requested by the Agent) with respect to the insurance business in force,
as prepared in connection with such Person's Annual Statement and covering such
other subjects as are customary in actuarial reviews and reasonably requested
by the Agent, prepared by an independent actuarial firm acceptable to the Agent
in accordance with reasonable actuarial assumptions and procedures, not
inconsistent with the assumptions and procedures previously employed, and
accompanied by a report prepared by such actuarial firm reviewing the adequacy
of loss reserves of an Insurance Subsidiary or Fund, as appropriate (which firm
shall be provided access to or copies of all reserves analyses and valuations
relating to the insurance business of each such Insurance Subsidiary or Fund)
together with its opinion affirming the adequacy of such loss reserves.
"Adjusted Base Rate" shall mean, at any time with respect to any Loan, a
rate per annum equal to the Base Rate plus the Applicable Margin for Base Rate
Loans, each as in effect at such time.
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"Adjusted LIBOR Rate" shall mean, at any time with respect to any Loan, a
rate per annum equal to the LIBOR Rate plus the Applicable Margin for LIBOR
Loans, each as in effect at such time.
"Admitted Assets" shall mean, as to an Insurance Subsidiary, the amount,
as of any date, shown on line 21, page 2 column 1 of the 1995 Annual Statement
of such Insurance Subsidiary (or any similar line, page and column reference in
any subsequent Annual Statement), or the amount determined in a consistent
manner for any date other than one as of which an Annual Statement is prepared.
"Advance" shall mean an advance of funds by a Lender to the Agent pursuant
to the Revolving Credit Commitment of such Lender, to be disbursed by the Agent
to the Borrower as a Revolving Loan from such Lender.
"Affiliate" shall mean, as to any Person, each of the Persons that
directly or indirectly, through one or more intermediaries, owns or controls,
or is controlled by or under common control with, such Person. For the purpose
of this definition, "control" means the possession, direct or indirect, of the
power to direct or cause the direction of management and policies, whether
through the ownership of voting securities, by contract or otherwise, provided
that in any event: (a) any Person which owns directly or indirectly 20% or more
of the Securities having ordinary voting power for the election of directors or
other governing body of a corporation or 20% or more of the partnership or
other ownership interests of any other Person (other than as a limited partner
of such other Person) will be deemed to control such corporation or other
Person, and (b) each director and executive officer of the Borrower or any
Subsidiary of the Borrower shall be deemed to be an Affiliate of the Borrower.
"Agent" shall mean First Union and any successor agents appointed pursuant
to ARTICLE XII.
"Agreement" shall mean this Credit Agreement, together with any
amendments, modifications, supplements, exhibits and schedules hereto and
restatements hereof, in whole or in part.
"Annual Statement" shall mean an annual financial statement of an
Insurance Subsidiary or of a Fund, as appropriate, as required to be filed with
the insurance commissioner (or similar authority) of its state of domicile,
together with all exhibits and schedules filed therewith, prepared in
conformity with SAP.
"Applicable Margin" shall mean, at any time with respect to any Loan, the
applicable percentage as determined under the following matrix with reference
to the ratio of the Borrower's Fee/Commitment Ratio as provided below:
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<TABLE>
Fee/Commitment Ratio Base Rate Loans LIBOR Loans
- -------------------- --------------- -----------
But Less than
-------------
Greater than or Equal to
------------ -----------
<S> <C> <C> <C>
1.35 to 1.00 2.00 to 1.00 1.00% 3.00%
2.00 to 1.00 2.50 to 1.00 0.50% 2.50%
2.50 to 1.00 _______ 0.00% 2.00%
</TABLE>
Notwithstanding any provision herein to the contrary, from the Closing Date
until the date on which the Agent shall have received a Compliance Certificate
demonstrating that the Borrower shall have attained a Fixed Charge Coverage
Ratio of not less than 1.15 to 1.00 as of the end of the most recently
completed fiscal quarter (for the period of four consecutive fiscal quarters
then ending) after the satisfaction of the requirements set forth in SECTION
5.2.3(F) with respect to the IPO or another equity offering, the Loans shall
bear interest at the Base Rate plus one percent (1.00%). Once the Borrower
attains the Fixed Charge Coverage Ratio specified above, the Loans will bear
interest in accordance with the matrix set forth above, and accordingly will be
reset from time to time within 10 Business Days after receipt by the Agent in
accordance with SECTION 7.3(A)(I) of financial statements together with a
Compliance Certificate (reflecting the computation of the Borrower's
Fee/Commitment Ratio as of the last day of the preceding fiscal quarter,
beginning with the fiscal quarter ending March 31, 1997) that provides for
different Applicable Margins than those then in effect.
"Approved Stock Plan" shall mean the Summit Holding Southeast, Inc. 1996
Long-Term Incentive Plan adopted by the Borrower's management effective as of
November 20, 1996, pursuant to which certain employees of the Borrower may
acquire up to 500,000 shares in the aggregate of the Borrower's common stock.
"Assignment and Acceptance" shall mean an Assignment and Acceptance
Agreement between any Lender and an Eligible Assignee, pursuant to which such
Lender assigns to such assignee, and such assignee accepts, all or a portion of
such Lender's rights and obligations under this Credit Agreement, substantially
in the form of EXHIBIT A hereto.
"Authorized Officer" shall mean the president or chief financial officer of
the Borrower or any other officer of the Borrower authorized by resolution of
the board of directors of the Borrower to engage in the activity specified
herein with respect to such officer and whose signatures and incumbency shall
have been certified to the Agent pursuant to SECTION 5.2.2(B).
"Bankruptcy Code" shall mean 11 U.S.C. Section Section 101 et seq., as
amended from time to time, and any successor statute.
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<PAGE> 11
"Base Rate" shall mean the per annum interest rate publicly announced from
time to time by First Union from its principal office in Charlotte, North
Carolina to be its prime rate, which may not necessarily be its best lending
rate, and adjusted to conform to changes as of the opening of business on the
date of any such change in such prime rate. In the event First Union shall
abolish or abandon the practice of announcing its prime rate or should the same
be unascertainable, the Agent, with the consent of the Required Lenders, shall
designate a reasonably comparable reference rate that shall be deemed to be the
Base Rate under this Credit Agreement and the other Credit Documents.
"Base Rate Loan" shall mean, at any time, any outstanding Loan that bears
interest at the Adjusted Base Rate.
"Borrower" shall mean Summit Holding Southeast, Inc., a Florida
corporation and its successors and assigns.
"Borrower Affiliate" shall mean the Borrower or any of its Subsidiaries.
"Borrower Cash Flow" shall mean, for any period, (a) the sum of (i) EBITDA
(Borrower-Stand Alone), (ii) EBITDA (Summit Holding), (iii) the amount of all
dividends actually paid to the Borrower by Bridgefield Employers in compliance
with all applicable Requirements of Law, (iv) the amount of all payments made
by Bridgefield Employers pursuant to the Bridgefield Employers Tax Sharing
Agreement and (v) without duplication, any non-cash expenses and charges
reducing income of Summit Holding, all for such period, minus (b) Capital
Expenditures for such period, minus (c) the total amount of cash taxes actually
paid by the Borrower during such period, minus (d) without duplication, any
non-cash expenses or charges increasing income of Summit Holding.
"Borrower Pledge Agreement" shall mean the pledge agreement, dated as of
the Closing Date, between the Borrower and the Agent (for the benefit of the
Lenders), together with any amendments, modifications and supplements thereto,
any replacements, restatements, renewals and extensions thereof, and any
substitutes therefor, in whole or in part.
"Borrower Security Agreement" shall mean the security agreement, dated as
of the Closing Date, between the Borrower and the Agent (for the benefit of the
Lenders), together with any amendments, modifications and supplements thereto,
any replacements, restatements, renewals and extensions thereof, and any
substitutes therefor, in whole or in part.
"Borrowing" shall mean the incurrence by the Borrower on a given date of
Loans pursuant to ARTICLE II OR III.
"Borrowing Date" shall mean any Business Day on which a Borrowing is made,
as provided in ARTICLE II or III hereof.
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"Bridgefield Casualty" shall mean Bridgefield Casualty Insurance Company,
a Florida property and casualty insurance corporation.
"Bridgefield Casualty Management Agreement" shall mean the Managing
General Agent Agreement, dated December 29, 1995, between the Bridgefield
Casualty and Summit Consulting, together with any amendments, modifications and
supplements thereto, any replacements, restatements, renewals or extensions
thereof and any substitutes therefor, in whole or in part.
"Bridgefield Employers" shall mean Bridgefield Employers Insurance
Company, a Florida property and casualty insurance company and a successor in
interest to ESIF.
"Bridgefield Employers Management Agreements" shall mean the Summit Claims
Management Agreement and the Summit Loss Management Agreement (which agreements
were identified as the "ESIF Management Agreements" under the Summit Holding
Credit Agreement), or any Managing General Agent Agreement, in form and
substance satisfactory to the Required Lenders, as entered into after the date
hereof, in each case together with any amendments, modifications and
supplements thereto, any replacements, restatements, renewals or extensions
thereof and any substitutes therefor, in whole or in part.
"Bridgefield Casualty Tax Sharing Agreement" shall mean the Tax Sharing
Agreement, dated May 27, 1997, between Bridgefield Employers and Bridgefield
Casualty (which agreement shall be in form and substance satisfactory to the
Required Lenders), together with any amendments, modifications and supplements
thereto, any replacements, restatements, renewals or extensions thereof and any
substitutes therefor, in whole or in part.
"Bridgefield Employers Tax Sharing Agreement" shall mean the Tax Sharing
Agreement, dated May 27, 1997, between Bridgefield Employers and the Borrower
(which agreement shall be in form and substance satisfactory to the Required
Lenders), together with any amendments, modifications and supplements thereto,
any replacements, restatements, renewals or extensions thereof and any
substitutes therefor, in whole or in part.
"Business Day" shall mean (a) for all purposes other than as covered by
clause (b) below, any day excluding Saturday, Sunday and any day that shall be
in the City of Charlotte, North Carolina, a legal holiday or a day on which
banking institutions are authorized by law or other governmental actions to
close, and (b) with respect to all determinations and notices in connection
with, and payments of principal and interest on, LIBOR Loans, any day that is a
Business Day described in clause (a) and that is also a day for trading by and
between banks in Dollar deposits in the London interbank market.
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<PAGE> 13
"CICF" shall mean Commercial Insurance of Central Florida, Inc., a Florida
corporation.
"Capital Expenditures" shall mean, for any period, the aggregate cost
(less the amount of trade-in allowance included in such cost) of all capital
assets acquired by any of the Borrower Affiliates during such period, exclusive
of Capital Lease Obligations, each calculated in accordance with GAAP.
"Capital Lease" shall mean any lease of any property that would, in
accordance with GAAP, be required to be classified and accounted for as a
capital lease on a balance sheet of the lessee.
"Capital Lease Obligations" shall mean, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder that would, in accordance
with GAAP, appear on a balance sheet of such lessee in respect of such Capital
Lease.
"Carolina Med" shall mean Carolina Med Summit, Inc., a North Carolina
corporation.
"Carolina Summit" shall mean Carolina Summit Healthcare, Inc., a North
Carolina corporation.
"Cash Equivalents" shall mean (a) securities issued or unconditionally
guaranteed by the United States of America or any agency or instrumentality
thereof, backed by the full faith and credit of the United States of America and
maturing within one year from the date of acquisition; (b) securities issued by
any state of the United States of America or any political subdivision or public
instrumentality thereof, maturing within one year from the date of acquisition
and, at the time of acquisition, having the highest rating obtainable from
Standard & Poor's Corporation and Moody's Investors Service, Inc. (the "Rating
Agencies"); (c) commercial paper issued by any Person organized under the laws
of the United States of America, maturing no more than one year from the date of
acquisition and, at the time of acquisition, having a rating of at least A-1 or
the equivalent thereof by Standard & Poor's Corporation and at least P-1 or the
equivalent thereof by Moody's Investors Service, Inc.; (d) time deposits and
certificates of deposit that are insured by the Federal Deposit Insurance
Corporation (the "FDIC") or any successor instrumentality of the government of
the United States of America up to the applicable limit on insurance granted by
the FDIC or such other instrumentality with respect to such instruments (it
being understood that the amount invested in such instrument may not exceed the
limit on such insurance), maturing within one year from the date of issuance and
issued by a bank or trust company organized under the laws of the United States
of America or any state thereof and having combined capital and surplus of at
least $250,000,000; (e) repurchase obligations with a term not exceeding seven
(7) days with respect to underlying securities of the types described in clause
(a) above entered into with any bank or trust company meeting the qualifications
specified in clause (d) above; and (f) money market funds
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<PAGE> 14
substantially all of whose assets are comprised of securities of the types
described in clauses (a) through (e) above.
"Change in Control" shall mean the occurrence of one or more of the
following events: (i) a majority of the members of the board of directors
shall not constitute Continuing Directors; (ii) the board of directors of the
Borrower shall approve any plan or proposal for the liquidation or dissolution
of the Borrower or all or substantially all of its assets; or (iii) any
"Person" (as defined in Section 13(d) of the Exchange Act and the regulations
promulgated thereunder) or group of such Persons, together with any Affiliates
thereof, shall as a result of a tender or exchange offer, open market
purchases, privately negotiated purchases or otherwise, have become the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Borrower representing 20% of the
voting stock of such corporation.
"Closing" shall mean the consummation of the transactions contemplated by
this Credit Agreement and the other Credit Documents upon the satisfaction of
the conditions set forth in Article V hereof.
"Closing Date" shall mean May 28, 1997, or such other date as is agreed
upon by the parties hereto (but in no event later than September 30, 1997).
"Collateral" shall mean and include all the assets, property or interests
in property of the Borrower and its Subsidiaries (excluding assets owned by any
Insurance Subsidiary), whether now owned or hereafter acquired or created,
securing the Obligations pursuant to the Credit Documents, and all other
property and interests in personal property that shall from time to time secure
the Obligations.
"Commission" shall mean the Securities and Exchange Commission.
"Commitment" shall mean, at any time for any Lender, such Lender's Term
Loan Commitment plus its Revolving Credit Commitment.
"Compliance Certificate" shall mean a certificate duly executed by an
Authorized Officer substantially in the form of EXHIBIT B, with such changes as
the Agent may from time to time reasonably request, for the purpose of
monitoring the Borrower's compliance herewith.
"Consent Order" shall mean that certain Consent Order, dated November 15,
1996, issued by the Florida Department of Insurance, a true and complete copy
of which has been delivered to the Agent (as amended, modified or supplemented
from time to time).
"Consolidated Indebtedness" shall mean the Indebtedness of Borrower and
its Subsidiaries determined on a consolidated basis in accordance with GAAP
(provided, however, that such amount will be limited to Indebtedness that is
funded as of the date of
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<PAGE> 15
determination and, accordingly, will exclude any portion of the Revolving Line
of Credit that is unused as of such date).
"Consolidating" shall mean, with respect to Financial Statements of the
Borrower and its Subsidiaries, financial statements containing the relevant
information for the Borrower, Bridgefield Employers and Summit Holding
(including appropriate entries (through footnotes or otherwise) for Heritage
Summit and Summit Consulting).
"Contingent Liability" shall mean any agreement, undertaking or
arrangement by which any Person guarantees, endorses, acts as surety for or
otherwise becomes or is contingently liable for (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a
creditor against loss) the debt, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or for the payment of dividends or other distributions upon the shares of any
other Person or undertakes or agrees (contingently or otherwise) to purchase,
repurchase or otherwise acquire or become responsible for any Indebtedness,
obligation or liability or any security therefor, or to provide funds for the
payment or discharge thereof (whether in the form of loans, advances, stock
purchases, capital contributions or otherwise), or to maintain solvency,
assets, level of income, or other financial condition of any other Person, or
to make payment or transfer property to any other Person other than for value
received; provided, however, that obligations entered into in the ordinary
course of an Insurance Subsidiary's business under insurance policies or
contracts issued by it or to which it is a party, including reinsurance
treaties (and security posted by any such Insurance Subsidiary in the ordinary
course of its business to secure obligations thereunder) shall not be deemed to
be Contingent Liabilities of such Subsidiary or the Borrower for the purposes
of this Credit Agreement.
"Continuing Director" shall mean, at any time as to any Person, (i) any
member of the board of directors who is a director of such Person at the
Closing Date, or (ii) any Person who becomes a member of the board of directors
if such person was appointed or nominated for election to the board of
directors by a majority of the Continuing Directors.
"Contractual Obligation" shall mean, relative to any Person, any
obligation, commitment or undertaking under any agreement or other instrument
to which such Person is a party or by which it or any of its property is bound
or subject.
"Conversion" shall mean the conversion of ESIF to a Florida stock
insurance company pursuant to the Plan of Conversion.
"Credit Documents" shall mean and collectively refer to this Agreement,
each of the Notes, the Borrower Security Agreement, the Borrower Pledge
Agreement, the Guaranty, the Subsidiary Pledge Agreement, the Subsidiary
Security Agreement, all Supplemental Documentation and any and all amendments,
modifications, replacements, substitutes and supplements to such documents,
together with any other documents
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<PAGE> 16
executed by or on behalf of the Borrower, its Subsidiaries or other Affiliates
in connection with any of the foregoing or that designate themselves Credit
Documents under this Credit Agreement.
"Default" shall mean any of the events or conditions specified in ARTICLE
IX, regardless of whether there shall have occurred any passage of time or
giving of notice or both that would be necessary to constitute such event or
condition an Event of Default.
"Default Rate" shall mean, with respect to any Loan, an interest rate
equal to the sum of (a) the higher of the Elected Rate for such Loan or the
Adjusted Base Rate, plus (b) two (2) percentage points.
"Department" shall mean (a) with respect to an Insurance Subsidiary and
FRF, the Florida Department of Insurance or such other Governmental Authority
of its state of domicile charged with regulating insurance companies or
insurance holding companies, (b) with respect to KRF, the Kentucky Department
of Workers' Claims, and (c) with respect to LRA and LESA, the Louisiana
Department of Insurance.
"Discontinued Operations" shall mean the businesses conducted by Meritec,
Carolina Summit and Carolina Med.
"Dollars" or "$" shall mean dollars of the United States of America.
"EBITDA (Borrower-Stand Alone)" shall mean, with respect to the Borrower
for any period, the sum of (a) Net Income for such period, (b) Interest Expense
for such period, (c) federal, state and local income and franchise taxes
deducted from revenue in determining Net Income for such period and (d)
depreciation and amortization deducted from revenue in determining Net Income
for such period; less (e) to the extent included in Net Income, the sum of (i)
all income distributed by Bridgefield Employers as dividends in compliance with
all applicable Requirements of Law for such period, (ii) all undistributed
income of the Borrower's Insurance Subsidiaries for such period and (iii)
EBITDA (Summit Holding) for such period (provided, however, that the
calculation of EBITDA will exclude items attributable to the Discontinued
Operations).
"EBITDA (Summit Holding)" shall mean, for any period, the sum of (a) net
income of Summit Holding and its Subsidiaries determined in accordance with GAAP
on a consolidated basis for such period, (b) interest expense of Summit Holding
for such period, (c) payments made (i) in respect of federal, state and local
income and franchise taxes deducted from revenue in determining such net income
for the period prior to the Closing Date and (ii) to the Borrower under the
Summit Holding Tax Sharing Agreement for the period from and after the Closing
Date and (d) depreciation and amortization deducted from revenue in determining
such net income; less (e) to the extent included in such net income, the sum of
(i) all income distributed by any Insurance Subsidiary as dividends in
compliance with all applicable Requirements of Law and (ii) all undistributed
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<PAGE> 17
income of any Insurance Subsidiaries (provided, however, that the calculation of
EBITDA will exclude items attributable to the Discontinued Operations).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
and any successor statute of similar import, together with the regulations
thereunder, as amended, reformed or otherwise modified and in effect from time
to time. References to sections of ERISA shall be construed to also refer to
successor sections.
"ERISA Event" shall mean, with respect to any Person, (a) a Reportable
Event (other than a Reportable Event not subject to the provision for 30-day
notice to the Pension Benefit Guaranty Corporation under regulations issued
under Section 4043 of ERISA and other than a Reportable Event for which
penalties applicable for failure to provide notice to the Pension Benefit
Guaranty Corporation have been waived by applicable regulation or
administrative action by the Pension Benefit Guaranty Corporation), (b) the
withdrawal of such Person or any Affiliate of such Person from an Employee Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(92) of ERISA if such withdrawal would have a Material Adverse
Effect on such Person, (c) the filing of a notice of intent to terminate an
Employee Plan under a distress termination or the treatment of a Plan amendment
as a distress termination under Section 4041(c) of ERISA, (d) the institution
of proceedings to terminate an Employee Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, (e) the failure to make required
contributions that would result in the imposition of a lien under Section 412
of the Internal Revenue Code or Section 302 of ERISA, or (f) any other event or
condition which reasonably constitutes grounds under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Employee
Plan.
"ESIF" shall mean Employers Self Insurers Fund, a group self insurance
fund organized under the laws of the State of Florida.
"Effective Federal Funds Rate" shall mean, for any day, the interest rate
per annum equal to the weighted average of the rates of overnight federal funds
transactions with members of the Federal Reserve System arranged by federal
funds brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank of
Richmond, or if such rate is not so published on the relevant Business Day, the
average of the quotations for such day on such transactions received by the
Agent from three federal funds brokers of recognized standing selected by the
Agent.
"Elected Rate" shall mean the rate of interest with respect to a Loan as
selected by the Borrower, or as may apply as a result of a conversion, in
either case pursuant to ARTICLE IV hereof.
"Eligible Assignee" shall mean shall mean (a) a commercial bank organized
under the laws of the United States or any state thereof and having total
assets in excess of
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<PAGE> 18
$5,000,000,000, (b) a commercial bank organized under the laws of any other
country that is a member of the OECD or a political subdivision of any such
country and having total assets in excess of $5,000,000,000, provided that such
bank is acting through a branch or agency located in the United States, in the
country under the laws of which it is organized or in another country that is
also a member of the OECD, (c) the central bank of any country that is a member
of the OECD, (d) a finance company, mutual fund, insurance company or other
financial institution that is engaged in making, purchasing or otherwise
investing in commercial loans in the ordinary course of its business and having
total assets in excess of $3,000,000,000, (d) any Affiliate of an existing
Lender or (f) any other Person (other than an Affiliate of the Borrower)
approved by the Agent and the Borrower, which approval shall not be unreasonably
withheld.
"Employee Plan" shall mean any "employee benefit plan" within the meaning
of Section 3(3) of ERISA maintained by the Borrower or its Subsidiaries other
than a Multiemployer Plan.
"Employers Safety" shall mean Employers Safety Group Association, Inc., a
Florida corporation.
"Employment Agreements" shall mean, collectively, the Employment and
Confidentiality Agreement dated May 28, 1997 between the Borrower and William
B. Bull, the Employment and Confidentiality Agreement dated May 28, 1997
between the Borrower and Russell L. Wall, the Employment and Confidentiality
Agreement dated January 16, 1996 between Summit Loss and Allen C. Bennett and
the Employment and Confidentiality Agreement dated of January 16, 1996 between
Summit Claims and Rick T. Hodges, as such agreements may be amended, modified,
supplemented, restated or restated from time to time.
"Environmental Law" shall mean any federal, state or local law, statute,
ordinance, rule, regulation, permit, license, approval, interpretation, order,
guidance or other legal requirement (including without limitation any subsequent
enactment, amendment or modification) relating to the protection of human health
or the environment, including, but not limited to, any requirement pertaining to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation, handling, reporting, licensing, permitting, investigation or
remediation of materials that are or may constitute a threat to human health or
the environment. Without limiting the foregoing, each of the following is an
Environmental Law: the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et. seq.) ("CERCLA"), the Hazardous
Material Transportation Act (49 U.S.C. Section 1801 et. seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et. seq.) ("RCRA"), the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et. seq.), the Clean
Air Act (42 U.S.C. Section 7401 et. seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et. seq.), the Safe Drinking Water Act (42 U.S.C. Section
300, et. seq.), and the Occupational Safety and Health Act (29 U.S.C. Section
651 et. seq.) ("OSHA"), as such laws have been amended or supplemented, and each
similar
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<PAGE> 19
federal, state and local statute, and each rule and regulation promulgated under
such federal, state and local laws.
"Event of Default" shall have the meaning specified in ARTICLE IX hereof.
"Excess Cash Flow" shall mean, for any fiscal year, an amount determined
as follows: Borrower Cash Flow for such fiscal year, minus the sum of the
following: (a) the aggregate of all principal payments and prepayments actually
made by the Borrower in respect of (i) the Term Loans or (ii) the Revolving
Loans to the extent such payments permanently reduce the Revolving Credit
Commitment, (b) the amount of all interest and fees paid by the Borrower in
respect of the Loans during such fiscal year, and (c) the amount paid by Summit
Holding as of December 31 of such fiscal year, representing a prepaid
reinsurance premium for (and only for) the next succeeding fiscal quarter, all
as calculated pursuant to SECTION 7.1(C) on an Excess Cash Flow Calculation
executed and delivered to the Agent by the Borrower.
"Excess Cash Flow Calculation" shall mean the Borrower's calculation of
Excess Cash Flow for any fiscal year substantially in the form of EXHIBIT C,
delivered to the Agent pursuant to SECTION 7.1(C).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"FRF" shall mean Florida Retail Federation Self Insurers Fund, a group
self insurance fund organized under the laws of the State of Florida.
"FRF Management Agreement" shall mean the Administrator's Contract, dated
December 1, 1978, and as amended by Addenda dated December 9, 1982 and August
22, 1985, between Summit Consulting and FRF, together with any amendments,
modifications and supplements thereto, any replacements, restatements, renewals
or extensions thereof and any substitutes therefor, in whole or in part.
"Fee/Commitment Ratio" shall mean, as of the date of determination, the
ratio of (i) Fee Income during the period of four consecutive fiscal quarters
ending on such date, to (ii) the Total Commitment as of such date.
"Fee Income" shall mean for any period, the amount reflected as "Gross Fee
Revenue" on Summit Holding's consolidated income statement for such period (as
calculated in a manner consistent with that applicable to the Borrower's
audited income statements), which amount is attributable to income arising out
of the Management Agreements and any other agreements generating fee income in
the ordinary course of business.
"Financials" or "Financial Statements" shall mean the consolidated and
Consolidating balance sheet and statements of income and cash flow, to be
delivered to the Lenders by the Borrower pursuant to SECTIONS 6.17, 6.18,
7.3(A) and 7.3(B) hereof, including without limitation any interim Financial
Statements.
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<PAGE> 20
"Financing Statements" shall mean the UCC-1 financing statements executed
and delivered by the Borrower Affiliates or other Affiliates of the Borrower to
the Agent in respect of the Collateral, together with any replacements thereof
or any amendments thereto.
"First Union" shall mean First Union National Bank of North Carolina, a
national banking association with its principal offices in Charlotte, North
Carolina.
"Fixed Charge Coverage Ratio" shall mean, for the applicable Measurement
Period, the ratio determined by dividing (a) the amount of Borrower Cash Flow
for such period by (b) the sum of (i) the Borrower's Historical Debt Service
for such period and (ii) any amounts actually paid by the Borrower in respect
of its Series A preferred capital stock during such period. For purposes of
the determination of the Applicable Margin and SECTION 4.1 hereof, with respect
to the period prior to Closing, the numerator of the Fixed Charge Coverage
Ratio will be determined by calculating the difference of EBITDA (Summit
Holding) for such period and the sum of (i) Capital Expenditures of Summit
Holding and its Subsidiaries for such period and (ii) the amount of all taxes
paid by Summit Holding and its Subsidiaries for such period, and the
denominator of such ratio will be determined by calculating (in a manner
consistent with the calculation contemplated herein with respect to the
Borrower) Summit Holding's historical debt service.
"Funds" shall mean LRA, KRF, LESA and FRF.
"Generally Accepted Accounting Principles" or "GAAP" shall mean generally
accepted accounting principles, as recognized by the American Institute of
Certified Public Accountants, consistently applied and maintained on a
consistent basis for a Person throughout the period indicated and consistent
with the prior financial practice of such Person.
"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, including, without limitation, the Department or any similar
body or agency.
"Guaranty" shall mean the guaranty agreement, dated the Closing Date, of
Summit Holding, Summit Consulting, CICF, Summit Claims, Summit Loss, and
Healthcare Holdings in favor of the Agent (for the benefit of the Lenders),
together with any amendments, new guarantor accessions, modifications and
supplements thereto, any replacements, restatements, renewals or extensions
thereof, and any substitutes therefor, in whole or in part.
"Hazardous Substance" shall mean any substance or material meeting any one
or more of the following criteria: (a) it is or contains a substance designated
as a hazardous
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<PAGE> 21
waste, hazardous substance, hazardous material, pollutant, contaminant or toxic
substance under any Environmental Law; (b) it is toxic, explosive, corrosive,
reactive, ignitable, infectious, radioactive, mutagenic, dangerous or otherwise
hazardous; (c) its presence at some quantity requires investigation,
notification or remediation under any Environmental Law or common law; (d) it
constitutes a danger, a nuisance, a trespass or a health or safety hazard to
persons or property; or (e) it is or contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived
substances or waste, crude oil or any fraction thereof, nuclear fuel, natural
gas or synthetic gas.
"Healthcare Holdings" shall mean Summit Healthcare Holdings, Inc., a
Florida corporation.
"Heritage Summit" shall mean Heritage/Summit Healthcare of Florida, Inc.,
a Florida corporation.
"Historical Debt Service" shall mean, with respect to the Borrower, and
for any Measurement Period, an amount equal to the total of all scheduled
principal (exclusive of any amounts of the Loans reborrowed pursuant to this
Agreement and exclusive of any amounts prepaid pursuant to Section 7.1(c)) and
Interest Expense paid by the Borrower in respect of all Indebtedness of the
Borrower during such period.
"IPO" shall mean the initial public offering of the Borrower's Series A
preferred stock and its common stock in connection with its registration
statement on Form S-1 as filed with the Commission on November 20, 1996
(Commission File No. 333-16499), as amended by an amendment dated December 9,
1996 and as otherwise amended from time to time.
"Increased Costs" is defined in SECTION 4.12(A).
"Indebtedness" of a Person shall mean (a) indebtedness of such Person for
borrowed money including without limitation all obligations evidenced by bonds,
debentures, notes or other similar instruments (including, with respect to the
Borrower, all indebtedness in respect of the Loans and with respect to
Revolving Loans, including the Total Revolving Credit Commitment whether or not
the Borrower has borrowed the entire amount thereof), (b) indebtedness of such
Person for the deferred purchase price of services or property (except for such
deferred obligations owed in respect of such purchases made in the ordinary
course of business, to the extent such amounts are ultimately paid in
accordance with the terms of such purchases), (c) obligations of such Person
under Capital Leases, (d) indebtedness of such Person arising under acceptance
facilities, (e) all obligations of such Person in respect of the Rate
Protection Agreement (it being understood that the amount of Indebtedness of
such Person under such Rate Protection Agreement as of any date shall be deemed
to equal the termination value payable by such Person if such Rate Protection
Agreement were terminated on such date), (f) indebtedness of such Person
consisting of unpaid and overdue reimbursement
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obligations in respect of all obligations under letters of credit issued for the
account of such Person, (g) all unfunded pension fund obligations and
liabilities, and (h) all Contingent Liabilities of such Person in respect of any
of the foregoing (including, without limitation, with respect to each of the
foregoing clauses (a) through (g), any such indebtedness or obligation that is
non-recourse to the credit of such Person but is secured by assets of such
Person, but only to the extent of the value of such assets). It is agreed that
"Indebtedness" of the Borrower will not include the Borrower's Series A
preferred stock unless and to the extent that the terms of such Stock are
amended to provide for the mandatory redemption thereof prior to the Loan
Termination Date or within a period of 180 days thereafter.
"Insurance Code" shall mean, as to any Insurance Subsidiary, the Insurance
Code of the state of domicile of such Insurance Subsidiary and any successor
statute of similar import, together with the regulations thereunder, as amended
or otherwise modified and in effect from time to time. References to sections
of the Insurance Code shall be construed to also refer to successor sections.
"Insurance Holding Company Systems Act" shall mean the Florida Insurance
Holding Company Systems Act, Florida Insurance Code Section 628.801 et seq.
"Insurance Policies" shall mean policies purchased from insurance
companies by either the Borrower or any Subsidiary for its own account to
insure against its own liability and property loss (including, without
limitation, casualty, liability and workers' compensation insurance), other
than Reinsurance Agreements.
"Insurance Subsidiary" shall mean any of Bridgefield Casualty, Bridgefield
Employers or U.S. Employers, as applicable, and its successors and assigns.
"Interest Coverage Ratio" shall mean, as of the date of determination, the
ratio of (i) EBITDA (Summit Holding) for the fiscal quarter ending on such
date, less the total of all Capital Expenditures made by Summit Holding during
such quarter to (ii) Interest Expense for such quarter.
"Interest Expense" shall mean, with respect to the Borrower for any period,
the sum of (a) gross interest expense of the Borrower and its Subsidiaries for
such period, including (i) the amortization of debt discounts, (ii) the
amortization of all fees payable in connection with the incurrence of
Indebtedness to the extent included in interest expense and (iii) the portion of
any payments or accruals with respect to Capital Lease Obligations allocable to
interest expense, (b) any amounts paid during such period in respect of the Rate
Protection Agreement (except for any payments required to be made upon the early
termination thereof) and (c) any other capitalized interest of the Borrower and
its Subsidiaries for such period, in all cases determined on a consolidated
basis in accordance with GAAP consistently applied.
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<PAGE> 23
"Interest Period" shall mean, relative to any LIBOR Loan, the period that
begins on (and includes) the date on which such LIBOR Loan is made or continued
as, or converted into, a LIBOR Loan pursuant to SECTION 4.6 and, unless the
maturity of such LIBOR Loan is accelerated, ends on (but excludes) the day
which numerically corresponds to such date one, two or three months thereafter,
as the Borrower may select in its relevant notice pursuant to SECTION 4.6;
provided, however, that:
(a) all LIBOR Loans comprising a single Borrowing shall at all times have
the same Interest Period;
(b) if there exists no numerically corresponding day in such month, such
Interest Period shall end on the last Business Day of such month;
(c) if such Interest Period would otherwise end on a day which is not a
Business Day, such Interest Period shall end on the next following Business Day
(unless such next following Business Day is the first Business Day of a
calendar month, in which case such Interest Period shall end on the Business
Day next preceding such numerically corresponding day);
(d) no LIBOR Loans may be incurred prior to the third Business Day after
the Closing Date;
(e) if the Borrower shall fail to provide in an Interest Rate Election
Notice an appropriate duration of an Interest Period, then the Borrower shall
be deemed to have selected the Adjusted Base Rate; and
(f) the Borrower shall not be permitted to select, and there shall not be
applicable, any Interest Period that would end later than the Loan Termination
Date.
"Interest Rate Election Notice" shall mean a notice in the form attached
hereto as EXHIBIT D to be delivered by the Borrower to the Agent pursuant to
SECTION 3.1(B) and SECTION 4.6.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, and
any successor statute of similar import, together with the regulations
thereunder, as amended, reformed or otherwise modified and in effect from time
to time. References to sections of the Internal Revenue Code shall be
construed to also refer to successor sections.
"Invested Assets" shall mean, as to any Insurance Subsidiary, the amount
shown on line 8A, page 2, column 1 of the 1995 Annual Statement of such
Insurance Subsidiary (or any similar line, page and column reference in any
subsequent Annual Statement), or an amount determined in a consistent manner for
any date other than one as of which an Annual Statement is prepared.
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<PAGE> 24
"Investment Grade Securities" shall mean (a) U.S. Government Obligations;
(b) any certificate of deposit, maturing not more than 365 days after the date
of acquisition, issued by, or time deposit of, a commercial banking institution
that has combined capital and surplus of not less than $250,000,000 or its
equivalent in foreign currency, whose debt is rated at the time as of which any
investment there is made, of "A" (or higher) according to Standard & Poor's
Corporation ("S&P") and "A2" by Moody's Investors Services, Inc. ("Moody's");
(c) commercial paper, maturing not more than 270 days after the date of
acquisition, issued by a corporation (other than an Affiliate or Subsidiary of
the Borrower) with a rating, at the time as of which any investment therein is
made, of "A1" (or higher) according to S&P and "P-1" (or higher) according to
Moody's; (d) any bankers' acceptances or any market deposit accounts, in each
case, issued or offered by any commercial bank having capital and surplus in
excess of $250,000,000 or its equivalent in foreign currency, whose debt is
rated at the time as of which any investment there is made, of "A" (or higher)
according to S&P and "A2" by Moody's; (e) non-equity securities that are rated
"BBB-" or better by S&P and "Baa3" or better by Moody's, or "2" or better by
the SVO; and (f) any fund investing exclusively in investments of the types
described in clauses (a) through (e) above. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the United
States of America for the timely payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and acting
as an agency or instrumentality of the United States of America the timely
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act of 1933, as amended), as custodian with respect to any such
U.S. Government Obligation or a specific payment of principal of or interest on
any such U.S. Government Obligation held by such custodian for the account of
the holder of such depository receipt; provided that (except as required by
law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by
the custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation evidenced
by such depository receipt.
"Issuer Group" shall mean any Person and each of the Persons that directly
or indirectly, through one or more intermediaries, owns or controls, is
controlled by or under common control with, such Person. For the purpose of
this definition, with respect to any Person that is controlled through the
voting of Securities, "control" means the possession, direct or indirect, of
the power to vote 50% or more of the Securities having ordinary voting power
for the election of directors or other managers of such person. Such term
shall not include a Person that is a governmental unit, political subdivision
thereof or any government agency.
"KRF" shall mean Kentucky Retail Federation Self Insurers Fund, a group
self insurance fund organized under the laws of the State of Kentucky.
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<PAGE> 25
"KRF Management Agreement" shall mean the Administrator's Contract, dated
August 9, 1995, between Summit Consulting and KRF, together with any
amendments, modifications and supplements thereto, any replacements,
restatements, renewals or extensions thereof and any substitutes therefor, in
whole or in part.
"Key Man Life Insurance Policy" shall mean the $2,000,000 life insurance
policy covering the life of William B. Bull, together with any amendments or
replacements thereof, endorsements thereto or substitutes therefor, in whole or
in part.
"LESA" shall mean Louisiana Employers Safety Association Self Insurers
Fund, a group self insurance fund organized under the laws of the State of
Louisiana.
"LESA Management Agreement" shall mean the Administrator's Contract dated
March 23, 1982 and as amended by an Addendum dated August 1, 1982, between
Summit Consulting and LESA, together with any amendments, modifications and
supplements thereto, any replacements, restatements, renewals or extensions
thereof and any substitutes therefor, in whole or in part.
"LRA" shall mean Louisiana Retailers Association Self Insurers Fund, a
group self insurance fund organized under the laws of the State of Louisiana.
"LRA Management Agreement" shall mean the Administrator's Contract, dated
June 24, 1980 and as amended by an Addendum dated February 10, 1983, between
Summit Consulting and LRA, together with any amendments, modifications and
supplements thereto, any replacements, restatements, renewals or extensions
thereof and any substitutes therefor, in whole or in part.
"LIBOR" means the rate for deposits in Dollars for a period equal to the
Interest Period selected by the Borrower, which rate appears on the Telerate
Page 3750 at approximately 11:00 a.m. London time, two (2) Business Days prior
to the commencement of the applicable Interest Period. If, for any reason,
such rate is not available, then "LIBOR" shall mean the rate per annum at
which, as determined by the Agent, Dollars in the amount of $5,000,000 are
being offered to leading banks at approximately 11:00 a.m. London time, two (2)
Business Days prior to the commencement of the applicable Interest Period for
settlement in immediately available funds by leading banks in the London
interbank market for a period equal to the Interest Period selected.
"LIBOR Loan" shall mean, at any time, any Loan that bears interest at such
time at the Adjusted LIBOR Rate.
"LIBOR Rate" means a rate per annum (rounded upwards, if necessary, to the
next higher 1/100th of 1%) determined by the Agent pursuant to the following
formula:
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LIBOR Rate = LIBOR
-----------------------------------
1 minus the Reserve Requirement
"Lender" shall mean each financial institution signatory hereto and each
other financial institution that may become a party to this Agreement pursuant
to SECTION 13.1 hereof, and its successors or assigns.
"Leverage Ratio" shall mean a ratio, determined as of the last day of each
fiscal quarter of the Borrower, equal to (a) Consolidated Indebtedness at such
time, to (b) Total Capitalization of the Borrower at such time.
"Licenses" is defined in SECTION 6.6.
"Loan Termination Date" shall mean the earliest of (a) June 30, 2002 or
such earlier date on which the Loans are required to be repaid in full pursuant
hereto, adjusted as the result of any mandatory or voluntary prepayments
hereunder, (b) the date of termination by the Required Lenders after the
occurrence and during the continuance of an Event of Default; (c) such date of
termination as is mutually agreed upon by the Lenders and the Borrower; and (d)
the date after all Obligations have been paid in full and the Lenders are no
longer obligated to make Advances on Revolving Loans hereunder.
"Loans" shall mean the Term Loans and the Revolving Loans made by the
Lenders pursuant to ARTICLES II and III hereof.
"Management Agreement" shall mean any of the Bridgefield Employers
Management Agreements, the LESA Management Agreement, the LRA Management
Agreement, the KRF Management Agreement, the FRF Management Agreement and the
Bridgefield Casualty Management Agreement, in each case together with any
amendments, modifications and supplements thereto, any replacements,
restatements, renewals or extensions thereof and any substitutes therefor, in
whole or in part.
"Margin Stock" shall have the meaning provided in Regulation U.
"Material Adverse Effect" shall mean, relative to any occurrence, of
whatever nature (including any determination in litigation, arbitration or
governmental proceeding or investigation), of a materially adverse effect on:
(a) the assets, business, financial condition, operations or prospects of
a Borrower Affiliate;
(b) any Management Agreement;
(c) the ability of any Person to perform any of its payment or other
obligations under this Credit Agreement, any of the Notes, or any of the other
Credit Documents.
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Except where otherwise expressly indicated, the term "Material Adverse
Effect" shall refer to such an effect on the Borrower and its Subsidiaries,
taken as a whole.
"Material Asset" shall mean (a) any asset or line of business of any
Borrower Affiliate material to the operations or financial condition of such
Borrower Affiliate, including, but not limited to the following types of
assets: (i) as to any Borrower Affiliate, any asset or group of assets to which
10% or more of the Borrower Affiliate's gross revenues (on a stand alone basis)
are attributable, and (ii) as to an Insurance Subsidiary, (A) any insurance
product line to which greater than five percent (5%) of such Subsidiary's Net
Written Premiums in the prior fiscal year are attributable, or (B) any asset or
group of assets to which ten percent (10%) of such Subsidiary's Admitted Assets
are attributable, and (b) the Stock or other Securities of any Subsidiary of
the Borrower.
"Measurement Period" shall have the meaning assigned to such term in
Section 8.1 hereof.
"Meritec" shall mean Meritec Solutions, Inc., a Georgia corporation.
"Multiemployer Plan" shall mean any "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA to which any Borrower Affiliate is
required to make contributions.
"NAIC" shall mean the National Association of Insurance Commissioners, or
any successor thereto.
"Net Cash Proceeds" shall mean, with respect to the issuance and sale by
the Borrower of any capital stock or other equity securities of the Borrower
(or any rights, warrants or options relating thereto), cash payments received
net of reasonable accounting, legal and recording expenses, selling and
brokerage commissions and discounts and underwriting fees and discounts and
other reasonable fees and expenses incurred in connection with such issuance
and sale.
"Net Income" shall mean, for any period, net income (or loss) for the
Borrower and its Subsidiaries on a consolidated basis for such period,
determined in accordance with GAAP.
"Net Worth" shall mean, as to any Person and as of any date, the
consolidated stockholders' equity of such Person and its Subsidiaries determined
on a consolidated basis in accordance with GAAP, excluding the effect of FASB
115. It is agreed that "Net Worth" of the Borrower will include the Borrower's
Series A preferred stock unless and to the extent that the terms of such Stock
are amended to provide for the mandatory redemption thereof prior to the Loan
Termination Date or within a period of 180 days thereafter.
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"Net Written Premiums" shall mean as to any Insurance Subsidiary, as of
any date, the total amount of premiums written after deducting or adding
premiums on business ceded to or assumed from others as shown on line 32,
column 4, Part 2B of page 8 of the 1995 Annual Statements (or any similar line,
page and column reference in any subsequent Annual Statement), or an amount
determined in a consistent manner for any date other than one as of which an
Annual Statement is prepared.
"Note" shall mean any Term Note or any Revolving Credit Note.
"Notice of Borrowing" shall mean a notice from the Borrower to the Agent
indicating the Borrower's desire to effect a Borrowing under the Revolving Line
of Credit, substantially in the form of EXHIBIT E.
"OECD" shall mean the Organization for Economic Cooperation and
Development and any successor thereto.
"Obligations" shall mean and include the Loans and all other loans,
advances, indebtedness, liabilities, obligations, covenants and duties
(including post-petition interest on the foregoing, to the extent lawful)
owing, arising, due or payable jointly or severally, from the Borrower to any
Lender, of any kind or nature, present or future, howsoever evidenced, created,
incurred, acquired or owing, whether arising under this Credit Agreement, the
Notes, the Borrower Pledge Agreement, the Borrower Security Agreement, the
Subsidiary Pledge Agreement, the Subsidiary Security Agreement or the other
Credit Documents, whether direct or indirect (including those acquired by
assignment), absolute or contingent, primary or secondary, due or to become
due, now existing or hereafter arising and however acquired. The term
includes, without limitation, all interest, charges, expenses, fees, attorneys'
fees and any other sums chargeable to the Borrower by any Lender under this
Credit Agreement or any of the other Credit Documents.
"Other Taxes" is defined in SECTION 4.13(B).
"Payment Date" shall mean (a) with respect to any LIBOR Loan, the last day
of each Interest Period with respect thereto, and (b) with respect to any Base
Rate Loan, each March 31, June 30, September 30 and December 31, commencing
March 31, 1997, until the Loans are fully repaid.
"Pension Benefit Guaranty Corporation" shall mean the Pension Benefit
Guaranty Corporation or any entity succeeding to any or all of its functions.
"Pension Plan" shall mean any Employee Plan, other than a Multiemployer
Plan, which is subject to Title IV of ERISA or Section 412(n) of the Code.
"Permitted Indebtedness" shall mean (a) the Loans, (b) current accounts
payable arising in the ordinary course of business and not overdue, (c)
non-current accounts
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payable being contested in good faith and by appropriate proceedings, and with
respect to which adequate reserves have been established, and are being
maintained, in accordance with GAAP, (d) current amounts due within seven
Business Days to or from brokers for securities transactions in the ordinary
course of business, (e) Capital Lease Obligations the total amount of which
shall not at any time exceed $500,000, (f) deferred taxes accrued in the
ordinary course of business that are reflected as a liability in accordance with
GAAP, (g) the Rate Protection Agreement, the total amount of which Indebtedness
(as specifically defined in clause (e) of the definition of "Indebtedness") may
not at any time exceed $3,000,000, and (h) any Indebtedness underlying Permitted
Liens.
"Permitted Liens" shall mean any of the following liens securing any
Indebtedness of the Borrower on its property, real or personal, whether now
owned or hereafter acquired:
(a) liens securing the Obligations of the Borrower;
(b) liens of carriers, warehousemen, mechanics and materialmen incurred in
the ordinary course of business for sums not yet due and payable;
(c) liens incurred in the ordinary course of business in connection with
workers' compensation, unemployment insurance or other forms of governmental
insurance or benefits, or to secure the performance of letters of credit,
bids, tenders, statutory obligations, leases and contracts (other than for
borrowed funds) entered into in the ordinary course of business or to secure
obligations on surety or appeal bonds;
(d) (i) liens for current taxes, assessments or other governmental charges
that are not delinquent or remain payable without any penalty or that are being
contested in good faith and with due diligence by appropriate proceedings but
do not in any Lender's judgment adversely affect such Lender's rights or the
priority of such Lender's lien in the Collateral, and if the Borrower has
established adequate reserves with respect thereto in accordance with GAAP, or
(ii) with respect to liens arising in connection with income tax withholding,
the Borrower has established reserves satisfactory to such Lender with respect
thereto;
(e) statutory liens of banks and other financial institutions arising
during the collection of instruments in the ordinary course of business; and
(f) purchase money security interests or retention of title to any property
by the vendor (or equipment financing company) thereof solely to secure payment
for such property, which liens shall not secure indebtedness in excess of an
aggregate amount of $1,000,000 at any time.
"Person" shall mean a corporation, an association, a joint venture, a
partnership, an organization, a business, an individual, a trust or a
government or political subdivision thereof or any government agency.
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<PAGE> 30
"Plan of Conversion" shall mean the Amended Plan of Conversion and
Recapitalization of ESIF as adopted by ESIF's members on May 9, 1997 and as
approved by the Department on November 15, 1996, as amended from time to time.
"Pledge Agreements" shall mean the Borrower Pledge Agreement and the
Subsidiary Pledge Agreement and all the pledge agreements executed and
delivered to the Agent at any time by any Borrower Affiliate, together with any
amendments, modifications and supplements thereto, any replacements,
restatements, renewals and extensions thereof, and any substitutes therefor, in
whole or in part.
"Pro Rata Share" of any amount shall mean, with respect to any Lender at
any time, the product of (a) a fraction the numerator of which is the amount of
such Lender's Commitment at such time and the denominator of which is the Total
Commitment at such time, times (b) such amount; provided that if the Pro Rata
Share of any Lender is to be determined after the Commitments have been
terminated, then such Pro Rata Share shall be determined immediately prior (and
without giving effect) to such termination.
"Prohibited Transaction" shall have the meaning given such term under
ERISA or Section 4975 of the Internal Revenue Code.
"Projections" shall mean the financial projections described in SECTION
6.19 hereof.
"Rate Protection Agreement" shall mean that certain ISDA Master Agreement,
dated February 12, 1996, between Summit Holding and First Union, which
agreement was entered into in accordance with the terms of the Summit Holding
Credit Agreement.
"Realty" any real property owned or leased by any Borrower Affiliate.
"Register" is defined in SECTION 13.1(B) hereof.
"Regulation D" shall mean Regulation D of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 204, or any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Regulation G" shall mean Regulation G of the Board of Governors of the
Federal Reserve System, 12 C.F.R. Part 207, or any successor or other
regulation relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Regulation T" shall mean Regulation T promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 220.3 and 220.4, or
any successor or other regulation hereafter promulgated by said Board to
replace the prior Regulation T and having substantially the same function.
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<PAGE> 31
"Regulation U" shall mean Regulation U promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 221, or any successor
or other regulation hereafter promulgated by said Board to replace the prior
Regulation U and having substantially the same function.
"Regulation X" shall mean Regulation X promulgated by the Board of
Governors of the Federal Reserve System, 12 C.F.R. Part 224, or any successor
or other regulation hereafter promulgated by said Board to replace the prior
Regulation X and having substantially the same function.
"Regulatory Change" shall mean, relative to any Lender any change in (or
the adoption, implementation, phase-in or commencement of effectiveness of) any
federal, state or foreign law applicable to such Lender, or regulation,
interpretation, directive, requirement or request applicable to such Lender of
any court or Governmental Authority charged with the interpretation or
administration of any such law or of any fiscal, monetary or other authority
having jurisdiction over such Lender, or any change in the application to such
Lender of any such existing law, regulation, interpretation, directive,
requirement or request, occurring after the Closing Date.
"Reinsurance Agreements" shall mean any agreement, contract, treaty,
certificate or other arrangement whereby an Insurance Subsidiary or a Fund
agrees to transfer, cede or retrocede to another insurer or reinsurer all or
part of the liability assumed by such an Insurance Subsidiary or Fund under a
policy or policies of insurance issued by such Insurance Subsidiary or under an
insurance obligation of a Fund.
"Reportable Event" shall have the meaning given such term in ERISA.
"Required Lenders" shall mean the Lenders having in the aggregate a Voting
Percentage of 100%; provided, however, that if as of the end of the fiscal
quarter following the one year anniversary of the IPO, there shall not have
occurred (from the Closing Date through such quarter end) an Event of Default
described in Section 9.1(a) or 9.1(b), then, effective as of such quarter end,
such term shall mean the Lenders having in the aggregate a Voting Percentage of
66-2/3%
"Requirement of Law" for any Person shall mean the articles of
incorporation and bylaws or other organizational or governing documents of such
Person, and any federal, state or local law (whether statutory, judicial or
administrative), treaty, rule, ordinance or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Reserve Requirement" shall mean, with respect to any Interest Period,
that reserve percentage (expressed as a decimal), as provided by the Board of
Governors of the Federal Reserve System (or any successor governmental body)
applied for determining the maximum reserve requirements (including without
limitation, basic, supplemental,
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marginal and emergency reserves) under Regulation D with respect to
"Eurocurrency liabilities" as currently defined in Regulation D, or under any
similar or successor regulation with respect to Eurocurrency liabilities or
Eurocurrency funding. Each determination by a Lender of the Reserve Requirement
shall, in the absence of manifest error, be conclusive and binding.
"Revolving Credit Commitment" shall mean, with respect to any Lender at
any time, the amount set forth opposite such Lender's name on its signature
page under the caption "Revolving Credit Commitment" or, if such Lender has
entered into one or more Assignment and Acceptances, the amount set forth for
such Lender at such time in the Register maintained by the Agent pursuant to
this Agreement, in either case as such amount may be reduced from time to time
pursuant hereto.
"Revolving Credit Note" shall mean a promissory note of the Borrower
substantially in the form of EXHIBIT F, executed and delivered to the Agent for
the benefit of a Lender pursuant to SECTION 3.6 hereof or, in connection with
an Assignment and Acceptance, pursuant to SECTION 13.1(D), together with any
amendments, modifications and supplements thereto and restatements thereof, in
whole or in part.
"Revolving Line of Credit" shall mean the revolving line of credit
established by the Lenders under SECTION 3.1(A) hereof.
"Revolving Loans" shall have the meaning assigned to such term in SECTION
3.1 hereof.
"SVO" shall mean the Securities Valuation Office of the NAIC, or any
successor thereto.
"Securities" shall mean common and preferred stock, partnership units and
participations, certificates of equity contribution, limited liability company
membership interests, notes, bonds, debentures, surplus debentures or notes,
trust receipts and other obligations, instruments or evidences of indebtedness,
including debt instruments of public and private issuers and tax-exempt
securities (including, without limitation, warrants, rights, put and call
options and other options relating thereto or any combination thereof),
guarantees of indebtedness, choses in action, other property or interests
commonly regarded as securities or any form of interest or participation
therein (whether certificated or uncertificated) or any instruments convertible
into any of the foregoing.
"Security Agreements" shall mean the Borrower Security Agreement and the
Subsidiary Security Agreement.
"Solvent" shall mean, with respect to any Person at any time, that such
Person (a) has capital sufficient to carry on its business as presently
conducted, (b) has assets with a fair saleable value at such time (i) not less
than the amount required to pay the probable liability on its then existing
debts as they become absolute and matured and (ii) greater
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<PAGE> 33
than the total amount of its liabilities (including identified contingent
liabilities) at such time, and (c) does not then intend to, and does not then
believe that it will, incur debts or liabilities beyond its ability to pay such
debts and liabilities as they mature, and, in the case of a Subsidiary, such
term shall mean that such Subsidiary, at such time, satisfies the minimum
capital requirements of any relevant Department.
"Statutory Accounting Principles" or "SAP" shall mean the statutory
accounting practices prescribed or permitted by the insurance commissioner (or
other similar authority) in the State of Florida or other applicable state for
the preparation of (a) with respect to an Insurance Subsidiary, Annual
Statements and other financial reports by insurance corporations of the same
type as the Insurance Subsidiaries, as applied by each Insurance Subsidiary on
a basis consistent with prior periods or (b) with respect to any Fund,
financial statements and other reports by such Fund, as applied or a basis
consistent with prior periods.
"Statutory Financial Statements" is defined in SECTION 6.18(A).
"Statutory Liabilities" shall mean, as to any Insurance Subsidiary, as of
any date, the total amount shown on line 21, page 3, column 1 of the 1995
Annual Statements (or any similar line, page and column reference in any
subsequent Annual Statement), or an amount determined in a consistent manner
for any date other than one as of which an Annual Statement is prepared.
"Statutory Surplus" shall mean, as to any Insurance Subsidiary, as of any
date, the total amount of capital and surplus shown on line 32, page 4, column
1 of the 1995 Annual Statement (or any similar line, page and column reference
in any subsequent Annual Statement), or an amount determined in a consistent
manner for any date other than one as of which an Annual Statement is prepared.
"Stock" shall mean all shares, options, interests or other equivalents
(howsoever designated) of or in a corporation, whether voting or non-voting,
including, without limitation, common stock, warrants, preferred stock,
convertible debentures and all agreements, instruments and documents
convertible, in whole or in part, into any one or more or all of the foregoing.
"Subsidiary" shall mean a corporation of which the indicated Person and/or
its other Subsidiaries, individually or in the aggregate, own, directly or
indirectly, such number of outstanding shares as have at the time of any
determination hereunder more than 50% of the ordinary voting power for the
election of directors (or their equivalent under the laws of the jurisdiction of
organization of such corporation). Except where otherwise expressly indicated,
references herein to "Subsidiary" shall mean a Subsidiary of the Borrower.
"Subsidiary Pledge Agreement" shall mean the pledge agreement, dated as of
the Closing Date, between Summit Consulting, Summit Healthcare and the Agent
(for the
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benefit of the Lenders), together with any amendments, modifications and
supplements thereto, any replacements, restatements, renewals and extensions
thereof, and any substitutes therefor, in whole or in part.
"Subsidiary Security Agreement" shall mean the security agreement, dated
as of the closing date, between certain Subsidiaries of the Borrower and the
Agent, (for the benefit of the Lenders), together with any together with any
amendments, modifications and supplements thereto, any replacements,
restatements, renewals and extensions thereof, and any substitutes therefor, in
whole or in part.
"Summit Claims" shall mean Summit Claims Management, Inc., a Florida
corporation.
"Summit Claims Management Agreement" shall mean the Agreement, dated
January 1, 1994, between Summit Claims and ESIF, together with any amendments,
modifications and supplements thereto, any replacements, restatements, renewals
or extensions thereof and any substitutes therefor, in whole or in part, as
assigned by ESIF to Bridgefield Employers.
"Summit Consulting" shall mean Summit Consulting, Inc., a Florida
corporation.
"Summit Holding" is defined in the Recitals.
"Summit Holding Credit Agreement" is defined in the Recitals.
"Summit Holding Tax Sharing Agreement" shall mean the Tax Sharing
Agreement, dated May 27, 1997, between Summit Holding and the Borrower (which
agreement shall be in form and substance satisfactory to the required Lenders),
together with any amendments, modifications and supplements thereto, any
replacements, restatements, renewals or extensions thereof and any substitutes
therefor, in whole or in part.
"Summit Loss" shall mean Summit Loss Control Services, Inc., a Florida
corporation.
"Summit Loss Management Agreement" shall mean the Contract, as amended by
an Addendum dated October 15, 1987, between Summit Loss and ESIF, together with
any amendments, modifications and supplements thereto, any replacements,
restatements, renewals or extensions thereof and any substitutes therefor, in
whole or in part, as assigned by ESIF to Bridgefield Employers.
"Supplemental Documentation" shall mean all agreements, instruments,
documents, financing statements, notices of assignment of accounts, schedules
of accounts assigned, mortgages, deeds of trust, certificates of title and
other written matter necessary or requested by the Agent or the Lenders to
perfect and maintain perfected each Lender's
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<PAGE> 35
security interest in the Collateral and to consummate the transactions
contemplated by this Credit Agreement and the other Credit Documents.
"Taxes" is defined in SECTION 4.13(A).
"Tax Sharing Agreement" shall mean either of the Summit Holding Tax
Sharing Agreement, the Bridgefield Casualty Tax Sharing Agreement or the
Bridgefield Employers Tax Sharing Agreement.
"Term Loan Commitment" shall mean, with respect to any Lender at any time,
the amount set forth opposite such Lender's name on its signature page under
the caption "Term Loan Commitment" or, if such Lender has entered into one or
more Assignment and Acceptances, the amount set forth for such Lender at such
time in the Register maintained by the Lender pursuant to this Agreement, in
either case, as such amount may be reduced from time to time pursuant hereto.
"Term Loans" shall have the meaning given to such term in SECTION 2.1
hereof.
"Term Note" shall mean a promissory note of the Borrower substantially in
the form of EXHIBIT G, executed and delivered to a Lender pursuant to SECTION
2.2 hereof or, in connection with an Assignment and Acceptance, pursuant to
SECTION 13.1(D), together with any amendments, modifications and supplements
thereto and restatements thereof, in whole or in part.
"Total Capitalization" shall mean, with respect to any Person, and as of
any date, the sum of (a) the amount of such Person's Consolidated Indebtedness
as of such date and (b) the amount of such Person's Net Worth as of such date.
"Total Commitment" shall mean, at any time, the sum of the Term Loan
Commitments and the Revolving Credit Commitments, which shall not exceed
$37,675,000 in the aggregate for all Lenders, as reduced from time to time
pursuant to ARTICLES II and III hereof.
"Total Revolving Credit Commitment" shall mean, at any time, the sum of
the Revolving Credit Commitments of the Lenders at such time, which shall not
exceed $5,000,000 in the aggregate (as reduced from time to time as required
hereunder).
"Total Term Loan Commitment" shall mean, at any time, the sum of the Term
Loan Commitments of the Lenders at such time, which shall not exceed
$32,675,000 in the aggregate.
"U.S. Employers" shall mean U.S. Employers Insurance Company, a Cayman
property and casualty insurance company.
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<PAGE> 36
"U.S. Government Securities" shall mean obligations of, or guaranteed as
to principal and interest by, the United States Government.
"Voting Percentage" shall mean, with respect to each Lender, a percentage
equal, at the time of computation, to the quotient (expressed as a percentage)
of the Loans advanced by such Lender divided by the total amount of the Loans
then outstanding.
"Welfare Plan" shall mean any "employee welfare benefit plan" as such term
is defined in ERISA, as to which the Borrower or its Subsidiaries has any
liability.
1.2 Use of Defined Terms. Unless otherwise defined or the context
otherwise requires, terms for which meanings are provided in this Credit
Agreement shall have such meanings when used in the schedules hereto, the
Credit Documents, the exhibits and any other communications delivered from time
to time in connection with this Credit Agreement.
1.3 Cross References; Headings. The words "hereof," "herein" and
"hereunder" and words of similar import, when used in this Credit Agreement or
in any of the Credit Documents shall refer to this Credit Agreement or such
Credit Document as a whole and not to any particular provision of this Credit
Agreement or such Credit Document. Section, schedule and exhibit references
contained in this Credit Agreement are references to sections, schedules and
exhibits in or to this Credit Agreement unless otherwise specified. Any
reference in any section or definition to any clause is, unless otherwise
specified, to such clause of such section or definition. The various headings
in this Credit Agreement and the Credit Documents are inserted for convenience
only and shall not affect the meaning or interpretation of this Credit
Agreement or such Credit Document or any provision hereof or thereof.
1.4 Accounting Terms. Any accounting terms used in this Credit Agreement
that are not specifically defined shall have the meanings customarily given them
in accordance with GAAP or, if used in the context of an Insurance Subsidiary,
Statutory Accounting Principles (or if any such term has no customary meaning
under Statutory Accounting Principles, then such term shall have the meaning
customarily given it in accordance with GAAP); provided, however, that, in the
event that changes in GAAP shall be mandated by the Financial Accounting
Standards Board, changes in Statutory Accounting Principles shall be mandated by
applicable Governmental Authorities or the NAIC or any similar accounting body
of comparable standing, or any change in accounting practices shall be
recommended, by the Borrower's independent certified public accountants, and to
the extent that such changes would modify or could modify such accounting terms
or the interpretation or computation thereof, such changes shall be followed in
defining such accounting terms only from and after the date the Borrower, the
Agent and the Lenders shall have amended this Credit Agreement to the extent
necessary to reflect any such changes in the financial covenants and other terms
and conditions of this Credit Agreement. References to amounts on particular
exhibits, schedules, lines, pages and columns of the Annual Statement are based
on the format promulgated by the
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<PAGE> 37
NAIC for the 1994 Annual Statements. If such format is changed in future years
so that different information is contained in such items or they no longer
exist, it is understood that the reference is to information consistent with
that reported in the referenced item in the Insurance Subsidiaries' 1994 Annual
Statements.
1.5 Time References. Any reference in this Agreement or in any other
Credit Document to the time of day shall mean such time in Charlotte, North
Carolina.
1.6 Other Definitional Provisions. Unless the context otherwise requires,
words in the singular include the plural and words in the plural include the
singular. In addition, when used herein, the terms "best knowledge of" or "to
the best knowledge of" any Person shall mean matters within the actual
knowledge of such Person (or an executive officer or general partner of such
Person) or which should have been known by such Person after reasonable
inquiry.
ARTICLE II
TERM LOANS
2.1 Term Loans. The parties acknowledge that as of the date hereof, there
is outstanding under the Summit Holding Credit Agreement an aggregate principal
balance of $32,675,000 in respect of the term loan facility thereunder
(together with interest thereon in an amount equal to $500,109.03). Effective
as of the Closing, the Borrower unconditionally assumes Summit Holding's
obligation to repay such amounts (together with any other amounts accruing with
respect thereto after the date hereof to and including the Closing Date), and
such term loans assumed by the Borrower shall be deemed to be converted to Term
Loans hereunder. Once repaid or prepaid, Term Loans (or any portion thereof)
may not be reborrowed.
2.2 Term Notes. A Term Loan made by a Lender shall be evidenced by a Term
Note appropriately completed in substantially the form of EXHIBIT F. Each Term
Note shall (a) be executed by the Borrower, (b) be payable to the order of such
Lender, (c) be dated as of the Closing Date (or, in the case of Term Notes
issued pursuant to an Assignment and Acceptance, as of the date thereof), (d)
be in a stated principal amount equal to such Lender's Term Loan Commitment,
(e) bear interest in accordance with the provisions of ARTICLE IV, as the same
may be applicable to the Loans made by such Lender from time to time, and (f)
be entitled to all of the benefits of this Agreement and the other Credit
Documents and subject to the provisions hereof and thereof.
2.3 Scheduled Repayment of Term Loans.
(a) Except to the extent due or made sooner pursuant to the terms and
conditions of this Agreement, including pursuant to SECTIONS 2.4 and 2.5, the
Borrower will repay the aggregate outstanding principal amount of the Term
Loans in the amounts and on the dates set forth below:
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<PAGE> 38
<TABLE>
<CAPTION>
Date Principal Payment
---- -----------------
<S> <C>
June 30, 1997 775,000
September 30, 1997 700,000
December 31, 1997 500,000
March 31, 1998 900,000
June 30, 1998 1,600,000
September 30, 1998 1,400,000
December 31, 1998 1,100,000
March 31, 1999 1,100,000
June 30, 1999 1,600,000
September 30, 1999 1,600,000
December 31, 1999 1,300,000
March 31, 2000 1,500,000
June 30, 2000 1,900,000
September 30, 2000 2,000,000
December 31, 2000 2,200,000
March 31, 2001 2,200,000
June 30, 2001 2,200,000
September 30, 2001 2,200,000
December 31, 2001 2,500,000
March 31, 2002 2,000,000
June 30, 2002 1,400,000
</TABLE>
(b) Notwithstanding any other provision in this Agreement, the then
aggregate outstanding principal amount of the Term Loans shall be due and
payable in full on June 30, 2002.
2.4 Mandatory Prepayment of Term Loans.
(a) The Borrower shall make prepayments of the Term Loans as required
by SECTIONS 7.1(B) and (C).
(b) The Borrower shall repay the Term Loans, in full, upon the
occurrence of an Event of Default and acceleration of the Obligations by the
Required Lenders pursuant to ARTICLE X hereof, or upon the occurrence of an
Event of Default under SECTIONS 9.1(G), (H) or (I) and the automatic
acceleration thereunder.
2.5 Voluntary Prepayment of Term Loans. The Borrower may, from time to
time on any Business Day, make a voluntary prepayment, in whole or in part, of
the outstanding principal amount of the Term Loans; provided, however, that (a)
no such prepayment of any LIBOR Loan may be made on any day other than the last
day of the Interest Period for such Loan unless the Borrower compensates the
Lenders as provided in SECTION 4.11, (b) all such voluntary prepayments shall
require at least three (3) Business
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Days' prior written notice to the Agent, (c) all such voluntary prepayments
shall be in a minimum amount of $500,000 and an integral multiple of $100,000
(or, if less, the outstanding principal amount of the Term Loans then
outstanding) and (d) each such prepayment shall be applied to reduce the
scheduled repayments on the Term Loans in inverse order of maturity. Each such
notice of prepayment shall specify the proposed date of such prepayment, the
aggregate principal amount thereof and whether the Term Loans to be prepaid are
Base Rate Loans or LIBOR Loans, and shall be irrevocable and shall bind the
Borrower to make such prepayment on the terms specified therein.
2.6 LIBOR Breakage; Interest; Etc. Each payment or prepayment of the Term
Loans made pursuant to SECTION 2.3, 2.4 or 2.5 shall be subject to the
provisions of SECTION 4.11. Interest accruing to the date of prepayment in
respect of any amount of principal prepaid pursuant to SECTION 2.4 or 2.5 shall
be paid on the earlier of (i) the next succeeding Payment Date or (ii) the Loan
Termination Date.
ARTICLE III
REVOLVING CREDIT FACILITY
3.1 Loans.
(a) The Lenders hereby establish, on the terms and conditions of this
Agreement and in reliance upon the representations and warranties made
hereunder, a revolving line of credit in favor of the Borrower in the aggregate
principal amount up to the Total Revolving Credit Commitment and agree to make
and remake one or more Loans ("Revolving Loans") to the Borrower, upon the
terms and conditions set forth in this ARTICLE III, from time to time on any
Business Day during the period from the date hereof through the Loan
Termination Date. Subject to the provisions of this Agreement (including,
without limitation, the schedule of reduction of Revolving Credit Commitments
contained in SECTION 3.2(B) hereof), the Borrower may borrow, repay (without
penalty except for LIBOR breakage costs under SECTION 4.11) and reborrow any
amount of the Revolving Loans, provided that the aggregate principal amount of
Revolving Loans outstanding at any one time may not exceed the Total Revolving
Credit Commitment at such time; and provided further that the amount advanced
by any Lender hereunder at any time shall not exceed such Lender's Revolving
Credit Commitment at such time. Notwithstanding the foregoing, no Lender shall
have any obligation to lend funds at any time when an Event of Default exists
or when there exists any event or condition that, with the lapse of time,
giving of notice or making of such advance, would constitute an Event of
Default. The parties acknowledge that as of the date hereof, there is
outstanding under the Summit Holding Credit Agreement an aggregate principal
balance of $0.00 in respect of the revolving credit facility thereunder
(together with interest thereon in an amount equal to $0.00). Effective as of
the Closing, the Borrower unconditionally assumes Summit Holding's obligation to
repay such amounts (together with any other amounts accruing with respect
thereto after the date hereof to and including the Closing
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<PAGE> 40
[FN]
Date), and such revolving loans assumed by the Borrower shall be deemed to be
converted to Revolving Loans hereunder.
(b) Whenever the Borrower desires to borrow under the Revolving Line
of Credit, the Borrower shall give the Agent prior to 12:00 noon at least three
(3) Business Days' prior notice of each LIBOR Loan and at least one (1) Business
Day's prior notice of each Base Rate Loan to be made hereunder, pursuant to a
Notice of Borrowing. Each such Notice of Borrowing shall be irrevocable and
shall specify (i) the aggregate principal amount of the Revolving Loans to be
made pursuant to such Borrowing, and (ii) the requested date of the Borrowing
(the "Borrowing Date") (which shall be a Business Day) and shall include an
Interest Rate Election Notice. Upon the receipt of such Notice of Borrowing from
the Borrower, the Agent shall promptly notify each Lender thereof.
Each Lender will make the amount of its Pro Rata Share of each
Revolving Loan available to the Agent for the account of the Borrower in the
form of an Advance at the office of the Agent in immediately available funds
prior to 1:00 p.m. on the Borrowing Date. All wire transfers to the Agent shall
be sent to the account described on the Agent's signature page hereto, unless
otherwise instructed by the Agent. The proceeds of all such Advances will then
be made available by 2:00 p.m. on the Borrowing Date to the Borrower by the
Agent at the office of the Agent specified in SECTION 14.4 by crediting the
aggregate amount of such Advances to the account of the Borrower on the books of
such office or pursuant to other instructions of the Borrower as provided under
subsection (c) below.
Unless the Agent has been notified to the contrary prior to 1:00 p.m.
on any Borrowing Date, the Agent may assume that each Lender has made an Advance
in the amount of its Pro Rata Share of each Revolving Loan to the Agent on such
Borrowing Date, and the Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount as part of a Revolving Loan. If
any Lender shall not have made its required Advance available to the Agent in
the manner set forth herein, such Lender agrees to pay to the Agent, on demand,
such Advance, together with interest thereon for each day from the date such
corresponding Revolving Loan amount is made available to the Borrower, until the
date such Loan amount is repaid to the Agent, at the Effective Federal Funds
Rate. If such Lender shall reimburse to the Agent its pro rata share of such
Revolving Loan amount within three (3) Business Days after the Borrowing Date,
such amount so reimbursed shall constitute such Lender's Advance as part of such
Revolving Loan for purposes of this Agreement. If such Lender does not make its
Advance available to the Agent within three (3) Business Days after the
Borrowing Date, the Borrower (to the extent the proceeds of the corresponding
Revolving Loan amount have been made available by the Agent, on behalf of such
Lender, to the Borrower) agrees to repay to the Agent on demand an amount equal
to such defaulted Advance together with interest thereon at the rate applicable
to the Revolving Loans disbursed on the Borrowing Date, for each date such
amount is made available to the Borrower until such amount is repaid to the
Agent. The failure of any Lender to make its required Advance available to the
Agent shall not relieve any other Lender of its obligation hereunder to
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<PAGE> 41
make its Advance on the respective Borrowing Date, or relieve the Lender who
failed to make such Advance to subsequently make such Advance, or relieve any
Lender (including the Lender who failed to make such Advance) of its obligation,
if any, hereunder to make its Advance as part of any subsequent Revolving Loans,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance of any other Lender as part of any Revolving Loan.
(c) The Borrower hereby irrevocably authorizes the Agent to disburse
the proceeds of each Revolving Loan under this Agreement (i) in accordance with
the terms of any written instructions from the Borrower (provided that the Agent
shall not be obligated under any circumstances to forward amounts to any account
not listed in an Account Designation Letter), (ii) pursuant to SECTION 4.10
hereof, to advance to the Lenders principal and interest payable hereunder, fees
payable under SECTION 3.5 and any Lender's fees for cash management services
provided by such Lender from time to time to the Borrower, or (iii) to the
Borrower's controlled disbursement or depository accounts with its bank in an
amount equal to the sum necessary to cover checks or other items of payment
drawn by the Borrower upon such account and presented for payment, but in no
event shall the Agent, on behalf of the Lenders, be obligated to make advances
hereunder in amounts necessary to cover any such checks or other items of
payment presented to the extent that the Borrower is not otherwise entitled to
receive the proceeds of Revolving Loans in such amounts from the Agent, on
behalf of the Lenders. The Borrower may at any time deliver to the Agent an
Account Designation Letter listing any additional accounts or deleting any
accounts listed in a previous Account Designation Letter.
(d) Each request for a Revolving Loan and each Advance made by a
Lender for the benefit of the Borrower shall constitute a new certification by
the Borrower as of the date of such request or Advance (i) that the
representations and warranties of the Borrower contained in ARTICLE VI remain
true and correct as of such date (except where such representation or warranty
speaks as of a specified date) and (ii) that, with respect to and after giving
effect to such Advance, no Event of Default, nor any event or condition that
with notice, lapse of time or the making of any such Advance would constitute an
Event of Default, has occurred and is continuing as of such date.
(e) Notwithstanding any provision herein to the contrary, as an
additional covenant of the Borrower hereunder, the Borrower shall maintain a
zero ($0.00) balance under the Revolving Line of Credit for a period of at least
five consecutive Business Days during each fiscal quarter, beginning with the
fiscal quarter ending June 30, 1997.
3.2 Voluntary Termination; Reduction of Commitments.
(a) At any time and from time to time during the term of this
Agreement, upon at least three (3) Business Days' prior written notice to the
Agent, the Borrower may terminate in whole or reduce in part the Total Revolving
Credit Commitment, provided that any such partial reduction shall be in an
aggregate amount of
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<PAGE> 42
not less than $300,000 or, if greater, shall be in an integral multiple of
$100,000 in excess thereof. The amount of any termination or reduction made
under this subsection (a) may not thereafter be reinstated (and any reduction
shall be applied in inverse order of scheduled reduction).
(b) On each date set forth below, the Total Revolving Credit
Commitment shall automatically be permanently reduced to the lower of (i) the
amount set forth below opposite such date or (ii) the amount to which the Total
Revolving Credit Commitment has been previously reduced pursuant to subsection
(a) above or subsection (c) below:
<TABLE>
<CAPTION>
Date Credit Commitment
---- -----------------
<S> <C>
June 30, 2000 3,500,000
June 30, 2001 2,000,000
June 30, 2002 0
</TABLE>
(c) The Total Revolving Credit Commitment (and each Lender's Revolving
Credit Commitment) shall also be reduced as provided in SECTIONS 7.1(B) below.
(d) The Total Revolving Credit Commitment, and the Revolving Credit
Commitment of each Lender, shall terminate in its entirety on the Loan
Termination Date unless sooner terminated pursuant to subsection (a) above or
SECTION 10.1 hereof.
(e) Each reduction of the Total Revolving Credit Commitment under this
Section shall be applied ratably to the Revolving Credit Commitments of the
Lenders according to their respective Revolving Credit Commitments. After any
such reduction, the fee required under SECTION 3.5 shall be calculated with
respect to the reduced Total Revolving Credit Commitment.
(f) Upon each reduction of the Total Revolving Credit Commitment under
this SECTION 3.2, the Borrower will pay to the Agent on the date of such
reduction, for the ratable benefit of the Lenders, an amount equal to the
positive difference, if any, of (i) the aggregate principal amount outstanding
under the Revolving Loans as of such date, minus (ii) the amount to which the
Total Revolving Credit Commitment is being reduced as of such date, together
with any loss or expenses required under SECTION 4.11. Interest accruing to the
date of prepayment in respect of any amount of principal prepaid pursuant to
this Section 3.2 shall be paid on the earlier of (i) the next succeeding Payment
Date or (ii) the Loan Termination Date.
3.3 Voluntary Prepayments. The Borrower may, from time to time on any
Business Day, make a voluntary prepayment, in whole or in part, of the
outstanding principal amount of the Loans and (subject to the other provisions
of this ARTICLE III such amounts may be reborrowed from time to time);
provided, however, that (a) no such
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prepayment of any LIBOR Loan may be made on any day other than the last day of
the Interest Period for such Loan unless the Borrower compensates the Lenders as
provided in SECTION 4.11, (b) all such voluntary prepayments resulting in a
permanent reduction of the Total Revolving Credit Commitment shall require at
least three (3) Business Days' prior written notice to the Agent, (c) all such
voluntary prepayments shall be in a minimum amount of $300,000 and an integral
multiple of $100,000 (or, if less, the outstanding principal amount of the
Revolving Loans then outstanding). Interest accruing to the date of prepayment
in respect of any amount of principal prepaid pursuant to this SECTION 3.3 shall
be paid on the earlier of (i) the next succeeding Payment Date or (ii) the Loan
Termination Date.
3.4 Mandatory Repayment of Loans. The Borrower shall repay the Revolving
Loans:
(a) In full, upon the occurrence of an Event of Default and
acceleration of the Obligations by the Required Lenders pursuant to ARTICLE X
hereof, or upon the occurrence of an Event of Default under SECTIONS 9.1(G), (H)
and (I) and the automatic acceleration thereunder; and
(b) In part, immediately in the event that the total principal amount
outstanding at any time under the Revolving Loans exceeds the amount of the
Total Revolving Credit Commitment at such time, in the amount of such excess.
(c) In part, as provided in SECTION 7.1(B).
3.5 Unused Commitment Fee. During the term of this Agreement, the
Borrower shall pay to the Agent, for the ratable benefit of the Lenders, an
unused commitment fee at the rate of .375% per annum on the average daily
undisbursed portion of the Total Revolving Credit Commitment (calculated based
on a year consisting of 360 days). Such fee shall accrue from and include the
Closing Date to and including the Loan Termination Date, shall be payable (a)
on the last Business Day of each fiscal quarter beginning with the fiscal
quarter ending June 30, 1997, and (b) on the Loan Termination Date.
3.6 Revolving Credit Notes. On the Closing Date, the Borrower shall
execute and deliver to each of the Lenders then party hereto, and on the date
that any other Person becomes a Lender, the Borrower shall execute and deliver
to such Lender, a Revolving Credit Note to evidence such Lender's Revolving
Loans. Each Revolving Credit Note shall (a) be substantially in the form of
EXHIBIT E hereto, (b) be payable to the order of the appropriate Lender and be
dated the date such Person becomes a Lender (except that the Notes of the
Persons who are Lenders as of the Closing Date shall be dated the Closing Date),
(c) be in the stated principal amount of such Lender's Revolving Credit
Commitment and (d) bear interest in accordance with the applicable provisions of
ARTICLE IV hereof. The amount of principal owing on each Revolving Credit Note
at any given time shall be the aggregate amount of all Revolving Loans made
under such Revolving
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<PAGE> 44
Credit Note, less all payments of principal theretofore made by the Borrower and
applied to such Revolving Credit Note in accordance with the terms hereof.
ARTICLE IV
INTEREST; ADDITIONAL PROVISIONS
4.1 Interest Rates. The Borrower covenants and agrees to pay to the
Agent, for the ratable credit of the Lenders, interest on the unpaid principal
amount of the Loans for the period commencing on the date each such Loan is
made until such Loan is paid in full, at the rates per annum specified below:
(a) On that portion of the outstanding principal amount of the Loans
maintained from time to time as Base Rate Loans, interest shall accrue at the
Adjusted Base Rate; and
(b) On that portion of the outstanding principal amount of the Loans
maintained from time to time as LIBOR Loans, interest shall accrue at a rate per
annum equal to the Adjusted LIBOR Rate from time to time in effect for each
Interest Period.
Notwithstanding any provision herein to the contrary, from the Closing
Date until the date on which the Agent shall have received a Compliance
Certificate demonstrating that the Borrower shall have attained a Fixed Charge
Coverage Ratio of not less than 1.15 to 1.00 as of the end of the most recently
completed fiscal quarter (for the period of four consecutive fiscal quarters
then ending), after the satisfaction of the requirements set forth in SECTION
5.2.3(F) with respect to the IPO or another equity offering, the Loans shall
bear interest at the Base Rate plus one percent (1.00%).
4.2 Interest Payment Dates. Accrued interest on the Loans shall be paid
on the Payment Dates, commencing with the first such date following the Closing
Date.
4.3 Computation of Rates.
(a) The Agent, upon determining the interest rate for any Borrowing
for any Interest Period, shall promptly notify the Borrower and the Lenders
thereof. The Agent shall promptly notify the Borrower and the Lenders of any
change in the Base Rate and the effective date thereof. Failure of the Agent to
provide the Borrower or the Lenders with any notice described in this SECTION
4.3(A) shall not affect any obligations of the Borrower or the Lenders hereunder
nor will such failure result in any liability on the part of the Agent to the
Borrower or any Lender.
(b) Interest on each Loan, whether maintained as a Base Rate Loan or a
LIBOR Loan, shall be computed on the basis of actual days elapsed and a year
consisting of 360 days.
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<PAGE> 45
4.4 Default Rate; Post-Petition Interest. Notwithstanding any other
provision of this Agreement, upon and during the continuance of any Event of
Default, without any required notice to the Borrower, all outstanding principal
amounts of the Loans, and to the full extent permitted by law, all interest
accrued on the Loans, shall bear interest at the Default Rate, and such default
interest shall be payable on demand. Additionally, and notwithstanding any
other provision of this Agreement, at the option of the Required Lenders, all
LIBOR Loans then outstanding shall immediately and automatically be converted
into Base Rate Loans. To the full extent permitted by applicable law, interest
shall continue to accrue on the Notes after the filing by or against the
Borrower of any petition seeking any relief in bankruptcy or under any act or
law pertaining to insolvency or debtor relief, whether state, federal or
foreign.
4.5 Maximum Interest Rate. Nothing contained in this Credit Agreement or
in any Note shall be deemed to establish or require the payment of interest to
any Lender at a rate in excess of the maximum rate permitted in the
jurisdiction of enforcement of this Credit Agreement or such Note. In the
event that the rate of interest required to be paid under other provisions of
this Credit Agreement or a Note exceeds the maximum rate permitted in such
jurisdiction, the rate of interest required to be paid hereunder and under such
Note shall be automatically reduced to the maximum rate permitted in such
jurisdiction, and any amounts collected in excess of the permissible amount
shall be deemed a voluntary prepayment of principal of the Term Loans or
Revolving Loans, whichever is applicable.
4.6 Conversion to and Renewal of LIBOR Loans. On the terms and subject to
the conditions of this Agreement, the Borrower may elect (a) at any time to
convert a Loan that is a Base Rate Loan into a LIBOR Loan, or (b) at the end of
any Interest Period with respect to a LIBOR Loan, to convert such LIBOR Loan
into a Base Rate Loan or to renew such LIBOR Loan for an additional Interest
Period. Except as set forth in SECTION 4.7, Loans may be renewed or converted
in whole or in part. Each such election shall be made by the Borrower
delivering to the Agent an Interest Rate Election Notice executed by an
Authorized Officer of Borrower prior to 12:00 noon at least three Business Days
prior to the effective date of any conversion to or renewal of a LIBOR Loan and
at least one Business Day prior to the effective date of any conversion to a
Base Rate Loan, specifying (x) in the case of a conversion to or a renewal of a
LIBOR Loan, the Interest Period; (y) the date of conversion or renewal (which
date shall be a Business Day, and in the case of a conversion from a LIBOR Loan
to a Base Rate Loan, the last day of the Interest Period therefor); and (z) the
amount and type of conversion or renewal. Upon timely receipt of an Interest
Rate Election Notice, the Agent shall promptly notify the Borrower and the
Lenders of the applicable Elected Rate for the Interest Periods selected in such
Interest Rate Election Notice; provided, however, that the failure by the Agent
to provide any such notice shall not, in any way, affect or diminish the
Borrower's obligations to any Lender, or any Lender's rights under this
Agreement, the Notes or any of the other Credit Documents. If, within the time
period required under this SECTION 4.6, the Agent shall not have received an
Interest Rate Election Notice from the Borrower of an election
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<PAGE> 46
to renew a LIBOR Loan for an additional Interest Period, then, upon the
expiration of the Interest Period therefor, such LIBOR Loan shall be converted
automatically to a Base Rate Loan.
4.7 Restrictions on Interest Rate Options. Notwithstanding any provision
herein to the contrary, the right of the Borrower to elect the interest rate
option applicable to any Loan or Loans shall be subject to the following
restrictions:
(a) the aggregate principal amount of each Borrowing hereunder (y) in
the case of Borrowings comprised of Base Rate Loans, shall not be less than
$500,000 and, if greater, shall be in an integral multiple of $100,000 in excess
thereof, and (z) in the case of Borrowings comprised of LIBOR Loans, shall not
be less than $1,000,000 and, if greater, shall be in an integral multiple of
$100,000 in excess thereof.
(b) if the Borrower shall have failed to designate the type of Loans
comprising a Borrowing, the Borrower shall be deemed to have requested a
Borrowing comprised of Base Rate Loans.
(c) A continuation or conversion of a LIBOR Loan or any conversion of
a Base Rate Loan to a LIBOR Loan must be in an amount such that the aggregate
amount of the succeeding LIBOR Loan made by the Lenders complies with paragraph
4.7(a) above;
(d) The Interest Period for each LIBOR Loan shall be either one, two
or three months in duration, if available, and if the Borrower shall have failed
to select the duration of the Interest Period to be applicable to any Borrowing
of LIBOR Loans, then the Borrower shall be deemed to have selected an Interest
Period with a duration of one month.
(e) No portion of the outstanding principal amount of any Loan may be
renewed as, or be converted into, a LIBOR Loan if any Default or Event of
Default has occurred and is continuing;
(f) No portion of the outstanding principal amount of any Loan may be
made or renewed as, or be converted into, a LIBOR Loan if, after giving effect
to such action, the Interest Period applicable thereto shall extend beyond the
date of any mandatory prepayment of any Loans unless a sufficient principal
amount of such Loan is being maintained as a Base Rate Loan or as a LIBOR Loan
having an Interest Period ending on or prior to the date of any such scheduled
mandatory prepayment to permit such repayment to be applied in full to Base Rate
Loans; and
(g) LIBOR Loans may not be outstanding under more than three (3)
separate Interest Periods at any one time.
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<PAGE> 47
4.8 Illegality. Notwithstanding any other provision of this Credit
Agreement, if as the result of any Regulatory Change, any Lender shall
determine that it is unlawful for such Lender to make, renew, or maintain any
Loan as, or to convert any Loan into, a LIBOR Loan, the obligations of all
Lenders to make, renew or maintain any portion of the principal amount of any
Loan as, or to convert any Loan into, a LIBOR Loan shall be, upon such
determination (and telephonic notice thereof, confirmed in writing, to the
Agent and the Borrower), forthwith suspended until such Lender shall notify the
Agent that the circumstances causing such suspension no longer exist, and all
LIBOR Loans shall automatically convert into Base Rate Loans in accordance with
SECTION 4.6.
4.9 Limitation on LIBOR Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the date on which all or any portion of a
Loan is to be made or renewed as, or converted into, a LIBOR Loan:
(i) the Agent or any Lender shall have determined (which
determination shall be conclusive) that quotations of interest rates for the
relevant deposits are not being provided by the relevant Persons in the relevant
amounts or for the relevant maturities for purposes of determining the rate of
interest for such LIBOR Loans under this Credit Agreement, or
(ii) the Agent or any Lender determines that the rate of interest
referred to in the definition of Adjusted LIBOR Rate in SECTION 1.1 hereof upon
the basis of which the rate of interest on any LIBOR Loan for such period is
determined does not accurately reflect the cost to such Lender of making or
maintaining such LIBOR Loans for such period,
then the Agent or such Lender shall give the Borrower and the other Lenders
prompt notice thereof, and the obligations of all Lenders hereunder to make or
renew any portion of the principal amount of any Loan as, or convert any
portion of any Loan into, LIBOR Loans shall be suspended until the Agent shall
notify the Lenders that the circumstances causing such suspension no longer
exist.
4.10 Procedures Regarding Payments.
(a) All payments (including prepayments) by the Borrower on account of
principal, interest and fees due hereunder and under the Notes shall be made, in
immediately available funds, to the Agent, for the account of the Lenders, at
the address of the Agent set forth in SECTION 14.4, prior to 12:00 noon, on the
date payment is due, or at such other place as is designated in writing by the
Agent. The Agent shall thereafter cause to be distributed on the same day (if
payment was actually received by 12:00 noon on such day) like funds relating to
payment of principal, interest or fees ratably to the Lenders entitled to
receive any such payment in accordance with the terms of this Credit Agreement.
Any payments under this Credit Agreement that are made later than 12:00 noon
shall be deemed to have been made on the next succeeding Business Day. The
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<PAGE> 48
Agent shall notify the Borrower and the Lenders of the amounts distributed to
each Lender.
(b) If any payment of principal, interest or fees is otherwise
required by this Credit Agreement to be made on any day that is not a Business
Day, payment shall be deemed required on the next succeeding Business Day;
provided, however, that this SECTION 4.10(B) shall not affect the determination
of the expiration of an Interest Period for a LIBOR Loan.
(c) Each of the Lenders agrees, for the benefit of all of the Lenders,
that if, at any time following the acceleration of any of the Obligations, it
should receive any amount payable under this Credit Agreement or a Note
(including without limitation any voluntary payment, realization upon security,
exercise of the right of set-off or banker's lien, counterclaim or cross action,
enforcement of any right under the Credit Documents) that is applicable to the
payment of any of the Obligations, of a sum that with respect to the related sum
or sums received by other Lenders is in a greater proportion than the total of
such Obligations then owed and due to such Lender bears to the total of such
Obligations then owed and due to all of the Lenders immediately prior to such
receipt, then such Lender receiving such excess payment shall purchase for cash
without recourse or warranty from the other Lenders an interest in the
Obligations of the Borrower to such Lenders in such amount as shall result in a
proportional participation by all of the Lenders in such amount; provided, that
if all or any portion of such excess amount is thereafter recovered from such
Lender, such purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest.
(d) The Borrower hereby irrevocably authorizes the Agent to advance to
the Lenders principal and interest payable hereunder, fees payable under SECTION
3.5 and any Lender's standard fees for cash management services provided by such
Lender from time to time to the Borrower, all payable by drawing such amounts
under the Revolving Line of Credit provided under this Agreement as of the
respective due dates of such principal, interest and fees; provided that the
failure of the Agent so to advance and pay any such amounts by drawing under the
Loans will not affect the Borrower's obligation to pay such principal, interest
and fees as and when due and payable.
4.11 Payment Not at End of Interest Period. The Borrower shall pay the
Agent, for the credit of the Lenders, such amount or amounts as shall
compensate each Lender for any loss, cost or expense incurred by such Lender as
a result of:
(i) any payment or prepayment by the Borrower of a LIBOR Loan on
a date other than the last day of an Interest Period for such LIBOR Loan; or
(ii) any failure by the Borrower to borrow a LIBOR Loan on the
effective date for such borrowing specified in the relevant Interest Rate
Election Notice electing the Adjusted LIBOR Rate as the Elected Rate;
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<PAGE> 49
such compensation to include, without limitation, an amount equal to the
excess, if any, of (a) the amount of interest that would have accrued on the
amount so paid or prepaid or not borrowed for the period from the date of such
payment, prepayment or failure to borrow to the last day of the then current
Interest Period for such LIBOR Loan (or, in the case of a failure to borrow,
the Interest Period for such LIBOR Loan that would have commenced on the date
of such failure to borrow) at the applicable rate over (b) the amount of
interest (as reasonably determined by such Lender, which determination shall,
absent manifest error, be conclusive) such Lender would have paid on such
deposits of comparable amounts having terms comparable to such period.
4.12 Increased Costs.
(a) If at any time after the date hereof, and from time to time, any
Lender determines that the adoption or modification of any applicable federal,
state, local or foreign law, rule or regulation regarding such Lender's required
levels of reserves, insurance or capital (including any allocation of capital
requirements or conditions, but excluding federal income tax liability), or
similar requirements, or any interpretation or administration thereof by any
court, governmental authority, central bank or comparable agency charged with
the interpretation, administration or compliance of such Lender with any of such
requirements, has or would have the effect of (i) increasing such Lender's net
costs relating to the Loans (including LIBOR Loans) hereunder (which, with
respect to any Base Rate Loan, such increase in costs is not reflected in an
increase in the Adjusted Base Rate as determined by such Lender in its
reasonable discretion), (ii) reducing the yield or rate of return of such Lender
on the Loans (including LIBOR Loans) hereunder, to a level below that which such
Lender could have achieved but for the adoption or modification of any such
requirements, (iii) changing the basis of taxation of payments to such Lender of
the principal or interest on any LIBOR Loan or other amounts payable under this
Credit Agreement in respect thereof or (iv) imposing of any reserve, special
deposit or similar requirements relating to any extensions of credit on other
assets of, or any deposits with or other liabilities of, such Lender (such
increases or reductions collectively referred to as "Increased Costs"), the
Borrower shall, within fifteen (15) days of any request by Lender, pay to such
Lender an amount equal to such Increased Costs. No failure by any Lender to
demand payment of any additional amounts payable hereunder shall constitute a
waiver of such Lender's right to demand payment of any amounts arising at any
subsequent time. Nothing herein contained shall be construed or so operate as to
require the Borrower to pay any interest, fees, costs or charges greater than is
permitted by applicable law.
(b) Without limiting the effect of SECTION 4.12(A), in the event that,
by reason of any Regulatory Change, any Lender either (i) incurs increased costs
based on or measured by the excess above a specified level of the amount of a
category of deposits or other liabilities of such Lender that includes deposits
by reference to which the interest rate on LIBOR Loans is determined as provided
in this Credit Agreement or a category of extensions of credit or other assets
of such Lender that includes LIBOR Loans or (ii) becomes subject to restrictions
on the amount of such category of liabilities or assets
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that it may hold, then, if such Lender so elects by notice to the Borrower and
the Agent, the obligation of such Lender to make, renew and convert Loans of any
other type into, LIBOR Loans hereunder, shall be suspended until the date such
Regulatory Change ceases to be in effect (and all LIBOR Loans then outstanding
shall be converted into Base Rate Loans in accordance with SECTION 4.6 hereof).
(c) Determinations by any Lender for purposes of SECTIONS 4.8 or 4.12
of the effect of any Regulatory Change on its costs or legality of making or
maintaining LIBOR Loans or on amounts receivable by it in respect of LIBOR
Loans, and of the additional amounts required to compensate such Lender in
respect of any Increased Costs, shall, absent manifest error, be conclusive.
4.13 Taxes.
(a) Any and all payments by the Borrower hereunder or under the Notes
shall be made, in accordance with the terms hereof and thereof, free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto, excluding taxes measured by net income and franchise taxes, imposed on
any Lender by the jurisdiction under the laws of which such Lender is organized
or transacting business or any political subdivision thereof (all such
non-excluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to such Lender, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this SECTION 4.13) such Lender
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions, (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority for the account of such Lender in accordance with applicable
law, and (iv) the Borrower shall deliver to such Lender evidence of such payment
to the relevant taxation authority or other authority.
(b) In addition, the Borrower agrees to pay any and all present or
future intangibles, stamp or documentary taxes or any other excise or property
taxes, charges or similar levies of the United States or any state or political
subdivision thereof or any applicable foreign jurisdiction that arise from any
payment made hereunder or from the execution, delivery or registration of, or
otherwise with respect to, this Credit Agreement (hereinafter referred to as
"Other Taxes").
(c) The Borrower hereby agrees to indemnify the Agent and each Lender
for the full amount of Taxes or Other Taxes (including without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 4.13) paid by the Agent and any Lender (as the case may be) and any
liability (including penalties, interest and expenses, but excluding any amounts
arising out of Agent's or any Lender's gross negligence, willful misconduct or
noncompliance with any applicable tax
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laws) arising therefrom or with respect thereto. This indemnification shall be
made within 30 days from the date any Lender makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by the
Borrower pursuant to this SECTION 4.13, the Borrower will furnish to the
relevant Lender the original or a certified copy of a receipt evidencing payment
thereof.
(e) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
this SECTION 4.13 shall survive the payment in full of principal and interest
hereunder.
4.14 Application of Payments; Pro Rata Funding.
(a) Except as otherwise specifically set forth in this Agreement and
unless the Agent is specifically instructed by the Borrower, all payments made
by the Borrower shall be applied (i) first, to the payment of amounts due under
SECTION 4.11, (ii) second, to the payment of accrued and unpaid fees and
interest on the Term Notes, (iii) third, to the payment of accrued and unpaid
fees and interest on the Revolving Credit Notes, (iv) fourth, to the payment of
unpaid principal on the Term Notes and (v) fifth, to the payment of unpaid
principal on the Revolving Credit Notes. Payments of principal on the Notes
shall be applied to such Loans outstanding as directed by the Borrower or, in
the absence of any such direction, shall be applied first to the payment of Base
Rate Loans and second to the payment of LIBOR Loans in the order of the soonest
to mature. If there is more than one LIBOR Loan maturing on any one day, then,
in the absence of contrary directions from the Borrower, payment shall be
applied to the LIBOR Loan bearing the higher rate of interest. Notwithstanding
the foregoing, during the continuance of an Event of Default, the Agent shall
apply all such payments to the Obligations in any amounts and in any priority as
the Required Lenders in their sole discretion determine.
(b) All Loans hereunder shall be funded by the Lenders pro rata on the
basis of their Revolving Credit Commitments and their Term Loan Commitments, as
the case may be, rounded to the nearest penny.
4.15 Recordkeeping. The Agent shall record in its records the respective
Commitments of the Lenders, the principal amount of the Loans, the amount of
the Loans that are Base Rate Loans and LIBOR Loans and each repayment thereof.
The aggregate unpaid principal amount so recorded shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on the Notes.
The failure so to record any such information or any error in such recording of
any information shall not, however, limit or otherwise affect the actual
obligations of the Borrower hereunder or under the Notes to repay the principal
amount of the Loans together with all interest accruing thereon. Each Lender
will record on its internal records the amount of each Loan made by it and each
payment in respect thereof. Failure to make any such recordation, or any error
in such recordation, shall not affect the Borrower's Obligations in respect of
such Loans.
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ARTICLE V
CONDITIONS OF CLOSING AND BORROWING
5.1 Closing. The Closing shall take place on the Closing Date, or at such
other time as the parties hereto shall mutually agree, at the offices of
Robinson, Bradshaw & Hinson, P.A., 1900 Independence Center, 101 North Tryon
Street, Charlotte, North Carolina 28246. Upon the Closing, the Summit Holding
Credit Agreement shall be deemed superseded by the terms hereof.
5.2 Conditions to the Closing. The Closing by the Lenders and the
obligation of the Lenders to consummate the transactions contemplated hereby on
the Closing Date shall be subject to the prior or concurrent satisfaction
(except as expressly provided otherwise in form and substance satisfactory to
the Agent) of each of the conditions precedent set forth below (it being
understood that (i) until all such conditions are either fulfilled or waived in
writing by the Lenders, the Summit Holding Credit Agreement will remain in full
force and effect, and (ii) in the event all such conditions are not either
fulfilled or waived in writing by the Lenders by September 30, 1997, then this
Agreement will be terminated and of no further force or effect, and the terms
of the Summit Holding Credit Agreement will remain in full force and effect.)
5.2.1 Loan and Security Documents. The Agent shall have received all of
the following, each duly executed and dated the Closing Date (or such earlier
date as shall be satisfactory to the Lenders), in form and substance
satisfactory to the Lenders and in full force and effect with no default
existing thereunder as of the Closing Date:
(a) the Term Notes and the Revolving Credit Notes (each payable to
the Lender to whom such Note is issued pursuant to SECTIONS 2.2 and 3.6 hereof);
(b) the Borrower Pledge Agreement (together with stock certificates
representing the Securities pledged thereunder, accompanied by stock powers duly
executed in blank);
(c) the Borrower Security Agreement;
(d) the Guaranty;
(e) the Subsidiary Pledge Agreement (together with stock certificates
representing the Securities pledged thereunder, accompanied by stock powers duly
executed in blank);
(f) the Subsidiary Security Agreement;
(g) the Financing Statements and all other filings or recordings
necessary to perfect the security interests of the Agent in the Collateral;
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(h) the Key Man Life Insurance Policy, duly and validly assigned to
the Agent for the benefit of the Lenders pursuant to documentation in form and
substance satisfactory to the Agent; and
(i) a novation relating to the Rate Protection Agreement, making it
applicable to the Borrower.
5.2.2 Certificates; Opinions.
(a) Certificate of Borrower. The Agent shall have received a
certificate dated as of the Closing Date from the president or the chief
financial officer of the Borrower, in form and substance satisfactory to the
Agent, to the effect that all representations and warranties of the Borrower
contained in this Agreement and the other Credit Documents are true, correct and
complete; that the conditions set forth in Sections 5.2.5 have been fulfilled;
that no Borrower Affiliate is in violation of any of the covenants contained in
this Agreement and the other Credit Documents; that, after giving effect to the
transactions contemplated by this Agreement, no Default or Event of Default has
occurred and is continuing; and that the Borrower has satisfied in all material
respects each of the closing conditions set forth in this ARTICLE V.
(b) Secretary's Certificate. The Agent shall have received a
certificate dated as of the Closing Date of the corporate secretary or an
assistant secretary of each Borrower Affiliate certifying: (i) that attached
thereto is a true and complete copy of the bylaws of such Borrower Affiliate as
in effect on the date of such certification; (ii) to the extent applicable, that
attached thereto is a true and complete copy of resolutions adopted by the Board
of Directors of such Borrower Affiliate, authorizing the borrowings contemplated
hereunder (in the case of the Borrower only) and the execution, delivery and
performance of the Credit Documents to which it is a party; and (iii) to the
extent applicable, as to the incumbency and genuineness of the signature of each
officer of such Borrower Affiliate executing any of the Credit Documents.
(c) Articles of Incorporation. The Agent shall have received copies
of the articles of incorporation and all amendments thereto of each Borrower
Affiliate, each certified as of a recent date by the Secretary of State of its
state of incorporation, together with a certification by the corporate secretary
or an assistant secretary of each such Borrower Affiliate that such articles of
incorporation have not been amended since such date.
(d) Certificates of Good Standing. The Agent shall have received
short-form certificates as of a recent date of the good standing of each
Borrower Affiliate under the laws of its state of incorporation and each state
in which it is qualified to conduct business as a foreign corporation.
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(e) Certificate of Authority. The Agent shall have received a
certificate of authority for each Insurance Subsidiary issued by the relevant
Department no earlier than thirty (30) days prior to the Closing Date.
(f) Opinion of Counsel. The Agent shall have received an executed
legal opinion of Alston & Bird LLP, special counsel to Borrower, and Maida,
Galloway & Neal, regulatory counsel to the Borrower, each dated as of the
Closing Date and addressed to the Agent and the Lenders, in form and substance
reasonably satisfactory to the Lenders.
(g) Account Designation Letter. The Agent shall have received an
Account Designation Letter, together with written instructions from an
Authorized Officer, including wire transfer information, directing the payment
of the proceeds of the initial Loans to be made hereunder.
5.2.3 Other Documents. The Agent shall have received, in form and
substance reasonably satisfactory to the Agent:
(a) Financial Statements. Evidence that the Borrower shall have
delivered to the Lenders prior to the Closing Date the pro forma consolidated
and Consolidating balance sheets and income statements required by SECTION 6.16
(it being understood that the financial statements contained in the Borrower's
registration statement described in the definition of "IPO" satisfy such
condition), each of the Financial Statements required by SECTION 6.17, the
Statutory Financial Statements required by SECTION 6.18, the Projections
required by SECTION 6.19 and the most recently prepared financial statements for
U.S. Employers.
(b) Insurance. Evidence that the Borrower and its Subsidiaries are
maintaining the Insurance Policies, which are in compliance with SECTION 6.9
hereof.
(c) Consents. Certified copies of each material consent, license and
approval required in connection with (i) the execution, delivery, performance,
validity and enforceability of this Credit Agreement and the other Credit
Documents, (ii) the consummation of the Conversion and the IPO and (iii) the
conduct by the Borrower Affiliates of their respective businesses after the
Closing Date, including in each case without limitation, any required approvals
of the commissioners of insurance (or similar authorities) of the State of
Florida and any other Governmental Authority whose approval is required by law
(such consents, licenses and approvals, if any, to be in full force and effect,
and all of the consents required to be obtained or made on or before the
consummation of the transactions contemplated hereby).
(d) Financial Condition Certificate. A certificate certified as
accurate by the Borrower's chief financial officer, as to the financial
condition of the Borrower.
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(e) UCC Search. The Agent shall have received the results of a search
of all filings made against each Borrower Affiliate under the Uniform Commercial
Code as in effect in any state in which any assets of such Borrower Affiliate
are located indicating that such assets are free and clear of any lien or
encumbrances except for Permitted Liens.
(f) IPO; Conversion. Evidence satisfactory to the Agent that (i) the
Borrower's registration statement on Form S-1 as initially filed with the
Commission on November 20, 1996 (and as amended on December 9, 1996, January 8,
1997, January 27, 1997, February 21, 1997, March 13, 1997, April 4, 1997, April
15, 1997 and May 12, 1997, which amendments are deemed approved by the Lenders)
(A) shall not have been further amended except as approved by the Lenders and
(B) shall have become effective, (ii) the IPO or another equity offering on
terms acceptable to the Lenders shall have been consummated (yielding proceeds
net of transaction expenses of not less than $40,000,000), and (iii) the Plan of
Conversion shall not have been amended except as approved by the Lenders and the
Conversion shall have been consummated (such that the Borrower is the legal and
beneficial owner of all of the Stock and Securities of Summit Holding and
Bridgefield Employers, and Bridgefield Employers is the legal and beneficial
owner of all of the Stock and Securities of Bridgefield Casualty).
(g) Fairness Opinion. The agent shall have received a true and
complete copy of the fairness opinion of Chicago Corporation delivered in
connection with the Conversion.
(h) Employment Agreements. True, correct and complete copies of each
of the Employment Agreements, each duly and validly authorized by each party
thereto.
(i) Management Agreements. True, correct and complete copies of each
of the Management Agreements, each duly and validly authorized by each party
thereto.
(j) Consent Order. The Consent Order shall be in full force and
effect and shall not have been terminated or amended (except as approved by the
Required Lenders).
(k) Tax Sharing Agreements. A true, correct and complete copy of each
of the Tax Sharing Agreements, duly and validly authorized by each party
thereto.
(l) Other. Such other documents as the Agent may reasonably request.
5.2.4 Investment Portfolio. The Borrower shall have caused each Insurance
Subsidiary to deliver to the Agent such information necessary to disclose to
the Agent such entity's investment portfolio as of the calendar month-end
immediately preceding the Closing Date, together with a listing of all
securities transactions in the investment portfolio from the date of such
information through the Closing Date, and no change
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which would have a Material Adverse Effect shall have occurred with respect to
such investment portfolio since the date of such disclosure.
5.2.5 Litigation. No litigation (including, without limitation,
derivative actions), arbitration, governmental investigation or proceeding or
inquiry (a) shall be, on the Closing Date, pending, or to the knowledge of the
Borrower, threatened, that seeks to enjoin or otherwise prevent the
consummation of, or to recover any damages or to obtain relief as a result of,
the Loans, the consummation of the Conversion or the IPO, or (b) shall exist
that in the reasonable opinion of the Agent could be expected to have a
Material Adverse Effect on any Borrower Affiliate or any of the Funds.
5.2.6 No Material Adverse Event. No event shall have occurred since
September 30, 1996 that individually or in the aggregate has had or could be
expected to have a Material Adverse Effect on any Borrower Affiliate.
5.2.7 Discontinued Operations. The Agent shall have received evidence in
form and substance satisfactory to it that (a) all Borrower Affiliates'
investments in the Discontinued Operations shall have been terminated, (b)
Meritec, Carolina Med and Carolina Summit shall have been liquidated and
dissolved (and their operations wound-up) in accordance with all applicable
Requirements of Law (provided, however, that Meritec and Carolina Med will be
permitted to maintain their respective corporate existences for the sole
purpose of being parties to the leases that are in force as of the date hereof
(and any subleases relating thereto, but excluding any leases of any other real
property) and (c) the Borrower's corporate airplane shall have been sold.
5.2.8 Fees. The Borrower shall have paid the fee contemplated by clause
(ii) of Section 7.19 hereof.
5.3 Continuing Conditions. The following shall be conditions to the
Lenders' obligations to make Loans on the Closing Date and the dates of each
Borrowing thereafter, and each request for a Borrowing hereunder shall
constitute a certification by the Borrower that:
(a) No Default. No Default or Event of Default shall have occurred
and be continuing or will result from the making of the Loans hereunder; and
(b) Warranties and Representations. (i) All warranties and
representations contained in this Credit Agreement and the Credit Documents
shall be true and correct as of such date with the same effect as though made on
the date of and concurrently with the making of such Loan (except where such
representations speak as of a specified date) and (ii) all covenants contained
herein in this Credit Agreement and the Credit Documents to be performed by each
of the parties thereto (other than the Agent or the Lenders) prior to such date
shall have been performed.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Credit Agreement and to make the
Loans, the Borrower makes the following warranties and representations to the
Agent and the Lenders, all of which shall be true and correct as of the date
hereof, the Closing Date and any other date on which any Loans are made
hereunder (except where any such representation speaks only as of a specified
date):
6.1 Corporate Organization and Power. Each Borrower Affiliate (a) is a
corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation, (b) is duly qualified to do business and in
good standing in each jurisdiction where, because of the nature of its
activities or properties, the failure to so qualify would have a Material
Adverse Effect on such Borrower Affiliate, (c) has the requisite corporate
power and authority and the right to own and operate its properties, to lease
the property it operates under lease, and to conduct its business as now and
proposed to be conducted and (d) has obtained all material licenses, permits,
consents or approvals from or by, and has made all material filings with, and
given all notices to, all Governmental Authorities having jurisdiction, to the
extent required for such ownership, operation and conduct (including, without
limitation, the consummation of the Conversion and the IPO and the transactions
contemplated by this Credit Agreement and the other Credit Documents) as to
each of the foregoing. The execution, delivery and performance by each
Borrower Affiliate of each Credit Document to which it is a party and the
consummation of the transactions contemplated hereby and thereby are within its
corporate powers and have been duly authorized by all necessary corporate
action (including, without limitation, shareholder approval, if required).
Each Borrower Affiliate has received all material governmental and other
consents and approvals (if any shall be required) necessary for such execution,
delivery and performance of this Credit Agreement and the other Credit
Documents, and such execution, delivery and performance do not and will not
contravene or conflict with, or create a lien or right of termination or
acceleration under, any Requirement of Law or Contractual Obligation binding
upon any Borrower Affiliate. This Credit Agreement and each of the Credit
Documents is (or when executed and delivered will be) the legal, valid, and
binding obligation of each Borrower Affiliate party thereto, enforceable
against such Borrower Affiliate in accordance with its respective terms.
6.2 Certain Agreements. There have been delivered to the Agent, on behalf
of each Lender, true, correct and complete copies of each of the Credit
Agreement, such Lender's Notes, and each of the other Credit Documents and any
other material documents required to be delivered by the Borrower in connection
therewith, as amended to the date hereof, and all exhibits and schedules
delivered in connection therewith. Each of the Credit Documents existing as of
the Closing Date is in full force and effect, and each Borrower Affiliate party
thereto has performed all of its material obligations thereunder required to be
performed on or prior to the date hereof.
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6.3 Litigation; Government Regulation. No claim, litigation (including,
without limitation, derivative actions), arbitration, or governmental
investigation, proceeding or inquiry is pending or, to the knowledge of the
Borrower, threatened against any Borrower Affiliate or any Fund (a) that would,
if adversely determined, have a Material Adverse Effect on such Borrower
Affiliate or (b) that relates to any of the transactions contemplated hereby,
and there is no basis known to the Borrower for any of the foregoing. SCHEDULE
6.3 sets forth all claims, litigation, arbitration, and governmental
investigations, proceedings or inquiries pending or, to the knowledge of the
Borrower, threatened against any Borrower Affiliate and any Fund as of the date
hereof and the Closing Date, and none of such actions, individually or in the
aggregate, if adversely determined would have a Material Adverse Effect on such
Borrower Affiliate or any such Fund. No Borrower Affiliate has any material
contingent liabilities not provided for or referred to in the Financial
Statements and Statutory Financial Statements delivered pursuant to SECTIONS
6.17, 6.18 and 7.3.
6.4 Taxes. No Borrower Affiliate is delinquent in the payment of any
taxes that have been levied or assessed by any Governmental Authority against
it or its assets. Each Borrower Affiliate has timely filed all tax returns
that are required by law to be filed, and has paid all taxes shown on said
returns and all other assessments or fees levied upon such Borrower Affiliate,
or upon its respective properties to the extent that such taxes, assessments or
fees have become due and if not due, such taxes have been adequately provided
for or are being contested in good faith by appropriate proceedings. Except as
set forth in SCHEDULE 6.4, no controversy in respect of income taxes is pending
or, to the Borrowers's knowledge, threatened, against any Borrower Affiliate.
As used in this SECTION 6.4, the term "taxes" includes all taxes of any nature
whatsoever and however denominated, including, without limitation, income,
sales, use, and excise taxes, import and governmental fees, duties and all
other charges, as well as additions to tax, penalties and interest thereon,
imposed by any government or instrumentality.
6.5 Conflicts With Other Instruments, Laws. Neither the execution,
delivery or performance of the Credit Documents executed by any Borrower
Affiliate nor its compliance therewith: (a) conflicts or will conflict with or
results or will result in any breach of, or constitutes or will constitute,
with the passage of time or the giving of notice or both, a default under, or
requires the consent or approval of any Person with respect to, (i) the
articles of incorporation or bylaws of any Borrower Affiliate, (ii) any law,
rule, statute or regulation or any order, writ, injunction or decree of any
court or governmental authority (including the Consent Order) or (iii) any
material agreement or instrument to which any Borrower Affiliate is a party or
by which such Borrower Affiliate, or its respective properties, is bound or (b)
results or will result in the creation or imposition of any lien, charge or
encumbrance upon its properties pursuant to any such agreement or instrument,
except the liens and security interests created by the Credit Documents.
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6.6 Governmental Compliance.
(a) Each Borrower Affiliate has been and is in good standing with
respect to all material governmental approvals, licenses, permits, certificates,
inspections, consents and franchises necessary to continue to conduct its
business as heretofore conducted and to own or lease and operate its properties
as now owned or leased by them. Except as set forth in SCHEDULE 6.6, none of
such approvals, licenses, permits, certificates, consents or franchises contains
any term, provision, condition or limitation more burdensome than such as are
generally applicable to Persons engaged in the same or similar business as
either such Borrower Affiliate.
(b) SCHEDULE 6.6 lists all of the jurisdictions in which any Insurance
Subsidiary, as of the date hereof, holds licenses, permits or authorizations to
transact its business, or in which either such entity has applied for any
licenses, permits or authorizations (including, without limitation, licenses or
certificates of authority from any Departments) (collectively, as in effect on
the Closing Date and at any time thereafter, the "Licenses"), except where
failure to hold any such License would not have a Material Adverse Effect. No
License is the subject of a proceeding for suspension, revocation or limitation
or any similar proceedings, there is no sustainable basis for such a suspension,
revocation or limitation, and no such suspension, revocation or limitation is
threatened by any Governmental Authority, except where failure to hold any such
License would not have a Material Adverse Effect. SCHEDULE 6.6 indicates the
line or lines of insurance in which each of the Insurance Subsidiaries (or its
predecessors) is permitted to be engaged with respect to each License therein
listed, or each line of business in which management of the Borrower intends (as
of the Closing Date) such Subsidiaries to be engaged with respect to Licenses to
be applied for. Neither of the Insurance Subsidiaries (nor any of its
predecessors) transacts any business, directly or indirectly, in any state other
than those enumerated on SCHEDULE 6.6 hereto, where such business requires any
license, permit, governmental approval, consent or other authorization, except
where failure to hold any such License would not have a Material Adverse Effect.
6.7 Default. No event has occurred and is continuing that constitutes a
Default or an Event of Default.
6.8 Margin Securities. 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 Loans will be used to
purchase or carry any Margin Stock in violation of Regulation U or to extend
credit for the purpose of purchasing or carrying any Margin Stock in violation
of Regulation U.
6.9 Insurance. SCHEDULE 6.9 sets forth a true and correct summary of all
Insurance Policies in place as of the date hereof and the Closing Date. Each
Borrower Affiliate is adequately insured for its benefit under the Insurance
Policies, with coverage of types and in amounts as are customary in the
Borrower Affiliates' respective businesses, which policies are issued by
insurers of recognized responsibility. No notice of any pending or threatened
cancellation or premium increase has been received by a Borrower
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Affiliate with respect to any such Insurance Policies. Each Borrower Affiliate
is in substantial compliance with all material conditions contained in such
Insurance Policies.
6.10 Ownership of Properties; Subsidiaries. On the date of any Loan, each
Borrower Affiliate will have good title to all of its properties and assets,
real and personal, of any nature whatsoever reflected in the Financial
Statements and Statutory Financial Statements. Except as set forth in SCHEDULE
6.10, as of the Closing Date (and thereafter) Borrower will own 100% of the
outstanding Stock and Securities of Summit Holding and Bridgefield Employers;
Summit Holding will own 100% of the outstanding Stock and Securities of Summit
Consulting and Healthcare Holdings; Healthcare Holdings will own 100% of the
Stock of Heritage Summit; Summit Consulting will own 100% of the Stock and
Securities of each of CICF, Summit Claims and Summit Loss; and Bridgefield
Employers will own 100% of the outstanding Stock and Securities of Bridgefield
Casualty, U.S. Employers and Employers Safety, in each case free and clear of
all liens, encumbrances and charges whatsoever.
6.11 Business Locations. SCHEDULE 6.11 lists each of the locations where
each of the Borrower Affiliates maintains an office, a place of business or any
records.
6.12 Accuracy of Information. All factual written information furnished
heretofore or contemporaneously herewith by any Borrower Affiliate or known by
any Borrower or Borrower Affiliate to have been furnished on its behalf to the
Agent or the Lenders for purposes of or in connection with this Credit
Agreement or any of the transactions contemplated hereby, as supplemented to
the date hereof, is, and all other such factual written information hereafter
furnished by or on behalf of any Borrower Affiliate to the Agent or the Lenders
will be, true and accurate in every material respect on the date as of which
such information is dated or certified and not incomplete by omitting to state
any material fact necessary to make such information not misleading, and the
Borrower has notified the Lenders of all events that have occurred since such
date that would render such information incomplete or misleading in any
material respect; provided, however, that projections and other forward-looking
information have been prepared as stated in SECTION 6.19 hereof and are not
otherwise warranted by Borrower hereunder.
6.13 Subsidiaries; Affiliates. As of the Closing Date, the Borrower will
have no Subsidiaries other than Summit Holding, Summit Consulting, CICF, Summit
Claims, Summit Loss, Healthcare Holdings, Heritage Summit, Bridgefield
Employers, Bridgefield Casualty, U.S. Employers and Employers Safety, and no
Affiliates other than as set forth on SCHEDULE 6.13 hereto.
6.14 Investment Company Act. No Borrower Affiliate is an "investment
company" or a company "controlled by an investment company," within the meaning
of the Investment Company Act of 1940, as amended.
6.15 Employee Plans; ERISA. Except as would not or as could not
reasonably be expected to have a Material Adverse Effect:
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(a) Set forth on SCHEDULE 6.15 is a list of all Employee Plans that
are intended to satisfy Code Section 401(a) and maintained with respect to
employees of each Borrower Affiliate, a list of all Multiemployer Plans and a
list of all Welfare Plans that provide post-retirement benefits to former
employees. All such plans that are subject to ERISA are in compliance therewith.
(b) Except as set forth in SCHEDULE 6.15, no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the Internal
Revenue Code), whether or not waived, has occurred with respect to any Pension
Plan, and no ERISA Event has occurred or is reasonably expected to occur with
respect to any Pension Plan. Except as set forth in SCHEDULE 6.15, the present
value of all accrued benefits under each Pension Plan (based on those
assumptions used to fund such Pension Plan) did not, as of the most recent
valuation date, exceed the then current value of the assets of such Pension Plan
allocable to such benefits. Except as set forth in SCHEDULE 6.15, full payment
has been made on or before the due date thereof of all amounts that any Borrower
Affiliate is required under the terms of each such Pension Plan to have paid as
contributions to such plan.
(c) Except as set forth in SCHEDULE 6.15, no Borrower Affiliate has
incurred any withdrawal liability under Section 4201 of ERISA.
(d) No Borrower Affiliate has participated in any Prohibited
Transaction that has subjected, or may reasonably subject, it to any material
civil penalty or tax imposed by Section 502(i) of ERISA or Section 4975 of the
Internal Revenue Code, respectively. Except as set forth in SCHEDULE 6.15, no
Borrower Affiliate has incurred, or is reasonably expected to incur, any
liability to the Pension Benefit Guaranty Corporation (other than for insurance
premiums, which have been paid when due).
(e) The present value (determined using actuarial and other
assumptions that are reasonable in respect of the benefits provided and the
employees participating) of the liability of any Borrower Affiliate for
post-retirement benefits to be provided to their current and former employees
under all Welfare Plans does not, in the aggregate, exceed the assets under all
such plans allocable to such benefits by an amount that would materially and
adversely affect the financial condition of such Borrower Affiliate or the
Borrower's ability to perform its obligations hereunder.
(f) The execution and delivery of this Credit Agreement will not
involve any transaction that is subject to the prohibitions of Section 406 of
ERISA or in connection with which a tax could be imposed pursuant to Section
4975 of the Internal Revenue Code.
(g) Except as set forth in SCHEDULE 6.15, no Borrower Affiliate is
making or has ever made or been required to make any contributions to a
Multiemployer Plan.
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6.16 Pro Forma Balance Sheet. The pro forma consolidated and Consolidating
balance sheets and income statements of the Borrower and its Subsidiaries as of
December 31, 1996 (true and complete copies of which have been delivered to the
Agent and which give effect to the Conversion and the IPO) (a) give effect to
the Loans (as though the amount of the Total Commitment had been borrowed), and
the other transactions contemplated by this Agreement and the other Credit
Documents, (b) appropriately reflect the pro forma financial condition of the
Borrower and its Subsidiaries as of such date and (c) are prepared in accordance
with GAAP (subject to the absence of footnotes required by GAAP and subject to
year-end audit adjustments), in good faith and based upon stated assumptions
having a reasonable basis.
6.17 GAAP Financial Statements. Prior to the Closing Date the Borrower has
delivered to the Agent the Financial Statements consisting of the audited
consolidated balance sheets of Summit Holding as of December 31, 1996 and of the
predecessor to Summit Holding and its Subsidiaries as of December 31, 1995,
December 31, 1994, December 31, 1993 and December 31, 1992 and the related
statements of income and cash flows for the fiscal years then ended, and the
unaudited consolidated balance sheets of Summit Holding and its Subsidiaries as
of March 31, 1997 and the related statements of income and cash flows for the
three-month period then ended. All Financial Statements delivered to the Lenders
have been prepared by the Borrower in accordance with GAAP, and they contain no
material misstatement or omission and fairly present in all material respects
the financial position, assets and liabilities of Summit Holding (or its
predecessors as appropriate) and its Subsidiaries, on a consolidated basis, as
of the respective dates thereof and the results of operations of Summit Holding
(or its predecessors as appropriate) and its Subsidiaries, on a consolidated
basis, for the respective periods then ended. Since December 31, 1996, there has
been no material adverse change in the assets, liabilities or financial position
of any Borrower Affiliate or in the results of any such Borrower Affiliate's
operations, and no Borrower Affiliate has incurred any obligation or liability
that could materially and adversely affect its financial condition, business
operations or the Collateral.
6.18 Statutory Financial Statements.
(a) The Annual Statements of each Insurance Subsidiary including,
without limitation, the provisions made therein for investments and the
valuation thereof, losses (reserves), and Statutory Liabilities, as filed with
the Department and delivered to Agent pursuant hereto (collectively, the
"Statutory Financial Statements"), have been prepared in accordance with SAP.
Each such Statutory Financial Statement was in compliance with applicable law
when filed. The Statutory Financial Statements fairly present in all material
respects the financial position, the results of operations, changes in equity
and changes in financial position of each Insurance Subsidiary as of and for the
respective dates and periods indicated therein in accordance with SAP, except as
set forth in the notes thereto. Except for liabilities and obligations disclosed
or provided for in the Statutory Financial Statements, including, without
limitation, losses (reserves) and
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Statutory Liabilities (all of which have been computed in accordance with SAP),
no Insurance Subsidiary had as of the respective dates of each of such Statutory
Financial Statements, any liabilities or obligations (whether absolute or
contingent and whether due or to become due) that in conformity with SAP would
have been required to be or should be disclosed or provided for in such
Statutory Financial Statements. All books of account of each of the Insurance
Subsidiaries fully and fairly disclose in all material respects all of the
transactions, properties, assets, investments, liabilities and obligations of
each Insurance Subsidiary, and all of such books of account are in the
possession of each Insurance Subsidiary, and are true, correct and complete in
all material respects.
(b) The investments of each Insurance Subsidiary and for each Fund
reflected in the most recently prepared Annual Statements comply in all material
respects with all applicable requirements of the Department as well as those of
any other Governmental Authority with jurisdiction over the investment of such
Person's funds.
(c) The amounts shown in the most recently prepared Annual Statement
for each Insurance Subsidiary and for each Fund for (i) aggregate losses
(reserves) and loss adjustment expenses for insurance policies and contracts
(set forth in lines 1 and 2, column 1, of page 3 thereof), (ii) agents' balances
and uncollected premiums (as set forth in lines 9.1, 9.2 and 9.3, column 1, of
page 2 thereof) and (iii) Statutory Liabilities were computed in accordance with
commonly accepted actuarial standards consistently applied and were fairly
stated in accordance with sound actuarial principles, were based on actuarial
assumptions that were in accordance with or more stringent than those called for
in the insurance policies and contracts and in the related reinsurance,
co-insurance or similar contracts of such Insurance Subsidiaries, were computed
on the basis of assumptions consistent with those of the preceding fiscal year
or Quarter, as the case may be, and met the requirements of the Department, as
applicable, as well as those of any other applicable Governmental Authority.
Such losses (reserves) established by each Insurance Subsidiary and each Fund
were adequate as of such date for the payment by such Insurance Subsidiary of
all insurance benefits, losses, claims and investigative expenses of such
Insurance Subsidiary and each Fund, as appropriate.
(d) Marketable securities and short term investments reflected in each
Insurance Subsidiary's and each Fund's Annual Statement are valued at cost,
amortized cost or market value, as required by applicable law or regulation.
6.19 Projections. Prior to the date hereof, the Borrower has delivered to
the Lenders projected statements of income and balance sheets of the Borrower
Affiliates, on a consolidated and Consolidating basis, and after giving effect
to the making of the Loans and the other transactions contemplated hereby,
covering the period through December 31, 2002 (the "Projections"). Such
Projections (true and correct copies of which have been delivered to the Agent
and which have not been updated by Borrower's management) have been prepared by
the executive and financial personnel of the Borrower Affiliates, in the light
of the past business of the Borrower Affiliates and on the basis of the
assumptions that are set forth therein. Such Projections have been prepared in
good faith,
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have a reasonable basis and represent the good faith opinion of the Borrower and
senior management of the Borrower Affiliates and constitute a reasonable basis
for the assessment of future performance of the Borrower Affiliates. Except as
otherwise noted therein, the practices followed in preparing such Projections do
not differ materially from financial planning practices usually followed by the
Borrower Affiliates in good faith and in the regular course of business.
6.20 Solvency. The Borrower is Solvent, and will not, as a result of the
transactions contemplated hereby become not Solvent or be left with
unreasonably small capital.
6.21 Environmental Matters. (a) The Realty owned or operated by each
Borrower Affiliate currently or in the past (all of which Realty owned or
operated by any Borrower Affiliate as of the date hereof or on the Closing Date
being listed in SCHEDULE 6.21), including without limitation the improvements
thereon and the soil and groundwater thereunder: (i) does not contain and is
not contaminated by any Hazardous Substance; (ii) does not contain and has not
previously contained any asbestos or underground storage tanks; and (iii) (A)
has never been the subject of any activities representing a violation or
alleged violation of any Environmental Law or any report to or action by a
governmental authority pursuant to any Environmental Law; (B) has not had any
release of any Hazardous Substance from, on, in or upon it; and (C) has never
been the subject of an environmental audit or assessment, or remedial action
for an environmental problem; provided, however, that the foregoing
representations, to the extent they relate to the period prior to the time the
Realty in question was owned or operated by a Borrower Affiliate, shall be
limited to the knowledge of the Borrower Affiliates. With respect to any
Realty owned or operated by any Borrower Affiliate in the past, but not
currently owned or operated by such Borrower Affiliate, the representations set
forth above in this SECTION 6.21 shall be deemed to apply as of the last date
that such Borrower Affiliate owned or operated the property in question.
(b) The Borrower and each Insurance Subsidiary: (i) have never sent a
Hazardous Substance to a site that is contaminated by any Hazardous Substance or
that, pursuant to any Environmental Law, (1) has been placed on the "National
Priorities List", the "CERCLIS" list, or any similar state or federal list, or
(2) is subject to or the source of a claim, an administrative order or other
request to take "removal", "remedial", "corrective" or any other "response"
action, as defined in any Environmental Law, or to pay for the costs of any such
action at the site; (ii) are in compliance in all material respects with all
Environmental Laws in all of their activities and operations; and (iii) are not
involved in any suit or proceeding and have not received any notice or request
for information from any governmental authority or other third party with
respect to a release or threatened release of any Hazardous Substance or a
violation or alleged violation of any Environmental Law, and have not received
notice of any claims from any person or entity relating to property damage or to
personal injuries from exposure to any Hazardous Substance.
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6.22 Assets for Conduct of Business. Each of the Borrower Affiliates
possesses adequate assets, contract rights, patents, patent applications,
copyrights, trademarks, servicemarks and trade names, or licenses thereto, to
continue to conduct its business as heretofore conducted, without any material
conflict with the rights of others, and all such patents, patent applications,
copyrights, trademarks, servicemarks, trade names and licenses in existence on
the date hereof are listed on SCHEDULE 6.22 attached hereto.
6.23 Trade Relations. There exists no actual or, to the best of the
Borrower's knowledge following due inquiry, threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship of any Borrower Affiliate with any customer or any group of
customers whose purchases individually or in the aggregate are material to the
business of such Borrower Affiliate (including, with respect to any of the
Management Agreements, business relationships with any of the Funds and
business relationships with any employees that are members of any of the
Funds), or with any insurance agent or insurance agency or group of insurance
agents or insurance agencies, whose business relationship is individually or in
the aggregate material to the business of such Borrower Affiliate, and there
exists no present condition or state of facts or circumstances that would have
a Material Adverse Effect on any Borrower Affiliate or prevent such Borrower
Affiliate from conducting its business after the consummation of the
transactions contemplated by this Credit Agreement in substantially the same
manner in which it has heretofore been conducted.
6.24 Securities Laws. No Borrower Affiliate, nor anyone acting on behalf
of any such Person, has directly or indirectly offered any interest in any Note
or any other Obligation for sale to, or solicited any offer to acquire any such
interest from, or has sold any such interest to, any Person that would subject
the issuance or sale of such Note or any other liability to registration under
the Securities Act of 1933, as amended.
6.25 Compliance with Laws. No Borrower Affiliate is in violation of any
law, ordinance, rule, regulation, order, policy, guideline or other requirement
of any Governmental Authority, if the effect of such violation, or cumulative
effect of such violations, could reasonably be expected to have a Material
Adverse Effect on such Borrower Affiliate and, to the best of the Borrower's
knowledge, no such violation has been alleged, and each Borrower Affiliate (a)
has filed in a timely manner all reports, documents and other materials required
to be filed by it with any Governmental Authority, if such failure to so file
could reasonably be expected to have a Material Adverse Effect on such Borrower
Affiliate, and the information contained in each of such filings is true,
correct and complete in all material respects, and (b) has retained all records
and documents required to be retained by it pursuant to any law, ordinance,
rule, regulation, order, policy, guideline or other requirement of any
Governmental Authority, if the failure to so retain such records and documents
could reasonably be expected to have a Material Adverse Effect on such Borrower
Affiliate.
6.26 Employees and Labor. There is no unfair labor practice complaint
against any Borrower Affiliate pending before the National Labor Relations
Board or any state or
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local agency and there is not a labor strike or other labor dispute pending or,
to the best of the Borrower's knowledge, threatened, affecting any of the
foregoing that if adversely resolved would have a Material Adverse Effect on
such Borrower Affiliate and, to the best of the Borrower's knowledge, there are
no organizational attempts affecting any of the employees of any Borrower
Affiliate that could have a Material Adverse Effect on any Borrower Affiliate.
There is no grievance, labor dispute or work stoppage involving or affecting any
Borrower Affiliate pending or, to the best of the Borrower's knowledge,
threatened that could have a Material Adverse Effect on any Borrower Affiliate.
6.27 First Priority. Each of the Pledge Agreements and each of the
Security Agreements (assuming possession by the Agent of certificates
representing Collateral consisting of Securities and proper and timely filing
of the Financing Statements and continuation statements in the locations set
forth in the Schedules to the Security Agreements) creates a valid and
perfected first priority security interest and lien in and to the Collateral
described therein, in each case enforceable against the Borrower Affiliate
party thereto and all third parties in all relevant jurisdictions and securing
the payment of all Obligations purported to be secured thereby.
6.28 Material Contracts. SCHEDULE 6.28 lists all existing contracts,
agreements and commitments of each Borrower Affiliate as of the date hereof and
on the Closing Date (including without limitation any commitments in respect of
any Indebtedness), whether written or oral, that (a) extend for one (1) year or
more and involve the receipt or payment of more than $100,000 (b) relate to
employment or labor matters (except individual employment contracts), or (c)
are material to the business, property, assets, operations or condition,
financial or otherwise, of any Borrower Affiliate. No Borrower Affiliate is in
default with respect to any agreement listed on SCHEDULE 6.28 or any indenture,
loan agreement, mortgage, lease, deed or similar agreement relating to the
borrowing of monies to which such Borrower Affiliate is a party or by which it
is bound.
6.29 Reinsurance. SCHEDULE 6.29 lists all existing Reinsurance Agreements
(as of the date hereof and on the Closing Date) of each Insurance Subsidiary and
of each Fund entered into since January 1, 1993. As of the date hereof all such
Reinsurance Agreements are in full force and effect. No party to any such
agreements is in default in any material respect as to any provision thereof,
and no such agreement contains any provision providing that the other party
thereto may terminate such agreement by reason of the transactions contemplated
by the Credit Agreement. To the knowledge of the Borrower, there is no reason to
believe that the financial condition of any other party to any such Reinsurance
Agreement is impaired with the result that a default thereunder may reasonably
be anticipated.
6.30 Policies of Insurance. Except with respect to terms specifically
negotiated with policyholders, if any, all policies of insurance issued by any
Insurance Subsidiary as now in force are, to the extent required under
applicable law, on forms approved by the appropriate Governmental Authorities
in the jurisdictions where issued or have been filed with and not objected to
by such Governmental Authorities within the period provided for
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objection. None of the terms embraced by the exception contained in the
preceding sentence could reasonably be expected to have a Material Adverse
Effect on the enforceability of any such policies or jeopardizes, or could
reasonably be expected to jeopardize, the License of any Insurance Subsidiary in
any jurisdiction. Any rates for premiums required to be filed with or approved
by any Governmental Authority have been so filed or approved, and such premiums
charged by each Insurance Subsidiary conform thereto.
6.31 No Burdensome Restrictions. There exists no restriction or
encumbrance on (i) the creation or assumption of any Lien upon the assets or
properties of any Borrower Affiliate as security, directly or indirectly, for
the Obligations, or (ii) the ability of any Subsidiary (other than either of
the Insurance Subsidiaries which are subject to certain regulatory
restrictions, including those contained in the Consent Order) to make any
dividend payments or other distributions in respect of its capital stock or any
other interest or participation in its profits owned by the Borrower, or to
make loans or advances thereto, except for the terms of this Agreement and the
other Credit Documents, or customary provisions restricting subletting or
assignment of any lease governing a leasehold interest of any Borrower
Affiliate; and no Borrower Affiliate is a party to or bound by any other
restriction, encumbrance or obligation, whether pursuant to its articles or
certificate of incorporation, bylaws, contract or any applicable Requirement of
Law, that could reasonably be expected to have a Material Adverse Effect.
6.32 Plan of Conversion. With respect to the Plan of Conversion, the
Borrower hereby represents and warrants as follows:
(a) The Borrower has delivered to the Agent a true, complete and
correct copy of such document, together with all amendments and modifications
thereto. Such plan (as amended) comprises a full and complete statement of the
transactions contemplated thereby, and there are no agreements or
understandings, written or oral, or side agreements not contained therein that
modify the substance thereof.
(b) Such plan has been duly authorized by all necessary corporate or
other action on the part of the Borrower Affiliates party thereto, has been
validly executed and delivered by the Borrower Affiliates party thereto and is
the legal, valid and binding obligation of the Borrower Affiliates party
thereto, enforceable in accordance with its terms.
(c) As of the Closing Date such plan will be in full force and effect
and, except with the Lenders' prior approval, has not been amended or modified,
and no provision thereof has been waived by any party thereto.
(d) As of the Closing Date, each of the transactions contemplated by
such agreement shall have been consummated and all of the conditions to the
consummation thereof (as provided therein and as provided in the Department's
consent with respect thereto) have been fully satisfied or waived, such that, as
of the Closing Date
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hereof, ESIF shall have been converted to Bridgefield Employers, which shall
have become a wholly owned Subsidiary of the Borrower.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until payment in full of all Obligations of the Borrower to each of the
Lenders, the Borrower covenants and agrees that, unless the Required Lenders
consent otherwise in writing, the Borrower shall:
7.1 Repayment of Obligations; Certain Prepayments.
(a) Promptly repay the Obligations when due, including without
limitation the amounts due under the Notes, according to the terms of this
Credit Agreement and the other Credit Documents.
(b) Promptly upon its receipt thereof, but in any event not later than
two (2) Business Days after the date thereof, the Borrower will make a mandatory
prepayment of the aggregate outstanding principal amount of the Term Loans in an
amount equal to 100% of the Net Cash Proceeds from the issuance, sale or other
disposition of its capital stock or other equity securities or of any rights,
warrants or options to purchase or acquire any shares of its capital stock or
other equity securities (in any such case, a "Sale"), provided that such Sale
yields Net Cash Proceeds of $2,000,000 or more; provided, however, that the
Borrower will have no such obligations in respect of the IPO or any other equity
offering satisfying the requirements set forth in SECTION 5.2.3(F). Any such
payments shall be applied to the Term Loans in inverse order of maturity and,
once such Term Loans have been repaid in full, such payments shall be applied to
the Revolving Loans in inverse order of scheduled reduction, and any such
prepayment, to the extent applied to the Revolving Loans, will result in
permanent reductions to the Total Revolving Credit Commitment (and corresponding
reductions in each Lender's Revolving Credit Commitment).
(c) Concurrently with the delivery of its annual Financial Statements
after the end of each fiscal year of the Borrower pursuant to SECTION
7.3(A)(II), beginning with the fiscal year ending December 31, 1997, but in any
event not later than ninety days (90) after the last day of each such fiscal
year, the Borrower will make a mandatory principal prepayment of the aggregate
outstanding principal amount of the Term Loans (with a corresponding reduction
in the Total Term Loan Commitment) in an amount equal to 75% of Excess Cash
Flow, if any, for such fiscal year. Each such prepayment shall be accompanied by
the Borrower's Excess Cash Flow Calculation for such period, certified by the
Borrower's chief financial officer, which calculation shall be subject to the
reasonable approval of the Required Lenders. Any such prepayments shall be
applied to the Term Loans in inverse order of maturity.
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(d) In the event the Borrower raises proceeds (net of
transaction expenses) in excess of $55,000,000 in connection with the IPO or
another equity offering satisfying the requirements set forth in Section
5.2.3(f), the Borrower will make a mandatory prepayment of the aggregate
outstanding principal amount of the Term Loans in an amount equal to fifty
percent (50%) of the aggregate amount of such total net proceeds in excess of
$55,000,000. Any such payments shall be applied to the Term Loans in inverse
order of maturity.
7.2 Performance Under Credit Documents; Use of Proceeds.
(a) Perform, and cause its Subsidiaries to perform, all
obligations required to be performed by each such Borrower Affiliate, as
applicable, under the terms of this Credit Agreement and the other Credit
Documents and any other agreements now or hereafter existing or entered into
between any such Borrower Affiliate and the Lenders, subject to notice and cure
provisions contained therein.
(b) Use the proceeds of the Revolving Loans solely for general
corporate purposes in the ordinary course of the Borrower's business as
historically conducted.
7.3 Reports, Certificates and Other Information. Furnish or cause
to be furnished to the Agent and the Lenders:
(a) GAAP Financial Statements.
(i) Within 45 days after the end of each of the
first three fiscal quarters of each fiscal year of the Borrower, (A) a copy of
the unaudited consolidated and Consolidating balance sheet of the Borrower and
its Subsidiaries, as of the close of such fiscal quarter, and (B) a copy of the
unaudited consolidated and Consolidating statements of income, retained earnings
and cash flows of the Borrower and its Subsidiaries for such fiscal quarter and
for the elapsed portion of the fiscal year, all prepared in accordance with GAAP
(subject to normal year-end adjustments and except that footnote and schedule
disclosure may be abbreviated) and accompanied by the certification of the chief
executive officer or chief financial officer of the Borrower that all such
Financial Statements are complete and correct and present fairly, in all
material respects, in accordance with GAAP (subject to normal year-end
adjustments) the financial position and results of operations of the Borrower
and its Subsidiaries as at the end of such fiscal quarter, and for such fiscal
quarter and for the elapsed portion of the fiscal year.
(ii) Within 90 days after the close of each
fiscal year, a copy of the annual audited consolidated and unaudited
Consolidating Financial Statements of the Borrower, consisting of the audited
consolidated and unaudited Consolidating balance sheets and statements of
income, changes in stockholders equity and cash flows, setting forth (in
comparative form, in the case of consolidated figures) in each case the
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consolidated and Consolidating figures for the previous fiscal year, which
Financial Statements shall be prepared in accordance with GAAP, and in the case
of audited Financial Statements accompanied by a report of the independent
certified public accountants regularly retained by the Borrower, or any other
firm of independent certified public accountants of recognized national standing
selected by the Borrower, that contains an opinion that is not qualified and
that is reasonably acceptable to the Required Lenders, to the effect that all
such Financial Statements present fairly in all material respects in accordance
with GAAP the consolidated financial position and the consolidated results of
operations and cash flows of the Borrower and its Subsidiaries as at the end of
such fiscal year and for such fiscal year, and in the case of unaudited
Financial Statements, such Financial Statements shall be prepared in accordance
with GAAP accompanied by the certification of the chief executive officer or
chief financial officer of the Borrower that all such Financial Statements are
complete and correct and present fairly in all material respects in accordance
with GAAP the Consolidating financial position and the Consolidating results of
operations and cash flows of the Borrower its Subsidiaries as at the end of such
fiscal year and for such fiscal year.
(iii) Within 30 days after the end of each month,
(A) a copy of the unaudited consolidated balance sheet of Summit Holding (and,
to the extent prepared by the Borrower, the unaudited consolidated and
Consolidating balance sheet of the Borrower and its Subsidiaries), as of the
close of such month, and (B) a copy of the unaudited consolidated statements of
income, retained earnings and cash flows of Summit Holding (and, to the extent
prepared by the Borrower, the unaudited consolidated and Consolidating
statements of income, retained earnings and cash flows of the Borrower and its
Subsidiaries) for such month, all prepared in accordance with GAAP (subject to
normal year-end adjustments).
(b) SAP Financial Statements.
(i) As soon as possible, but in any event within
75 days after the end of each fiscal year of each Insurance Subsidiary (and,
with respect to the Funds, within 180 days after the end of each fiscal year of
the Funds), a copy of the Annual Statement of such Insurance Subsidiary and each
Fund for such fiscal year prepared in accordance with SAP and, in the case of
each Insurance Subsidiary, accompanied by the certification of the chief
financial officer or chief executive officer of such Subsidiary that such
financial statement is complete and correct and presents fairly in all material
respects in accordance with SAP the financial position of such Subsidiary for
such fiscal year.
(ii) If reasonably requested by the Required
Lenders by written notice delivered to the Borrower within 45 days after
delivery of each Insurance Subsidiary's or a Fund's Annual Statement pursuant to
SECTION 7.3(b)(i), within 90 days after the date of such request, a copy of such
Insurance Subsidiary's or Fund's Annual Statement prepared in accordance with
SAP, certified, in the case of an Insurance Subsidiary, without qualification by
the independent certified public accountants regularly retained by such
Insurance Subsidiary, or any other firm of independent certified public
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accountants of recognized national standing selected by the Borrower and
reasonably acceptable to the Required Lenders that such Annual Statement is
complete and correct and presents fairly in all material respects in accordance
with SAP such Insurance Subsidiary's financial position for such fiscal year.
(iii) As soon as possible, but in any event within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of such Insurance Subsidiary and each Fund (and, in the case of each Fund,
within 45 days after the fourth fiscal quarter of each fiscal year of each
Fund), a copy of such Insurance Subsidiary's and each Fund's quarterly statement
for such fiscal quarter, all prepared in accordance with SAP and, in the case of
an Insurance Subsidiary, accompanied by the certification of such Insurance
Subsidiary's chief financial officer or chief executive officer that all such
financial statements are complete and correct and present fairly in all material
respects in accordance with SAP such Insurance Subsidiary's financial position
for the periods then ended.
(iv) Within 90 days after the end of each fiscal
year of each Insurance Subsidiary and the Funds, a copy of such Insurance
Subsidiary's and each Fund's "Statement of Actuarial Opinion" which is provided
to the relevant Department (or equivalent information should the Department not
require such a statement) as to the adequacy of such Insurance Subsidiary's and
the Fund's loss reserves. Such opinion shall be in the format prescribed by the
applicable Insurance Code.
(v) Within 90 days after the end of each fiscal
year, an Actuarial Report prepared by an independent actuary acceptable to the
Required Lenders and certified as to the reserve position as of such fiscal year
end by such independent actuary for (A) each Insurance Subsidiary and (B) each
of the Funds.
(vi) Within 30 days of filing with the
Department, each Insurance Subsidiary's management discussion and analysis.
(c) Compliance Certificates. Within 45 days of the end of
each fiscal quarter of Borrower or within 90 days of the end of a fiscal quarter
that is also the end of a fiscal year of Borrower, and at any other time no
later than 30 days following a written request of the Agent, a duly completed
Compliance Certificate, signed by the chief financial officer of the Borrower,
containing, among other things, a computation of, and showing compliance with,
each of the applicable financial ratios and financial restrictions contained in
ARTICLE VIII and to the effect that, to the best of such officer's knowledge, as
of such date no Default or Event of Default has occurred and is continuing.
(d) Notice of Default. As soon as practicable, but in any
event within five (5) Business Days after the Borrower becomes aware of the
existence of any Default or Event of Default, or any development that would have
a Material Adverse Effect on any Borrower Affiliate, telephonic, facsimile, or
telegraphic notice specifying the nature of such Default, Event of Default or
development, including the anticipated effect thereof,
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which notice shall be promptly confirmed in writing within two (2) Business
Days, other than developments that affect the economy of the United States
generally or the insurance industry generally.
(e) Additional Information. The following documentation
and other information:
(i) Documentation. Except as otherwise expressly
indicated, promptly upon receipt by a Borrower Affiliate:
(A) Not later than sixty (60) days
after the updating thereof, and in any event not less frequently than
annually and not later than sixty (60) days prior to the end of each
fiscal year of the Borrower, a copy of the consolidated and
Consolidating projections of cash flow, balance sheets and income
statements covering the period through the Loan Termination Date,
substantially in the form of the materials delivered to the Lenders
pursuant to SECTION 6.19 hereof.
(B) Not later than sixty (60) days
prior to the end of each fiscal year of the Borrower, new business
plans (or budgets) for the Borrower Affiliates for the following fiscal
year.
(C) A copy of any reports on
examination or similar reports, financial examination reports or market
conduct examination reports by a Governmental Authority with respect to
any Borrower Affiliate's business.
(D) Copies of all Insurance Holding
Company Systems Act filings with Governmental Authorities by any
Borrower Affiliate not later than five (5) Business Days after such
filings are made, including, without limitation, filings that seek
approval of Governmental Authorities with respect to transactions
between any Borrower Affiliate and any Affiliates thereof.
(E) Copies of all material detailed
financial and management reports regarding any Borrower Affiliate
submitted to any such entity by independent public accountants in
connection with each annual or interim audit report made by such
accountants of the books of such entity.
(F) Promptly upon the sending, filing
or receipt thereof, copies of (i) all financial statements, reports,
notices and proxy statements that the Borrower or any of its
Subsidiaries shall send or make available generally to its
shareholders, and (ii) all reports on Form 10-Q, Form 10-K or Form 8-K
(or their successor forms) or registration statements and prospectuses
(other than on Form S-8 or its successor form) that the Borrower or any
of its Subsidiaries shall render to or file with the Securities and
Exchange Commission, the National Association of Securities Dealers,
Inc. or any national securities exchange.
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(G) Not later than 45 days after the
end of each fiscal quarter, statements of the sales and renewals for
each of the Funds, Bridgefield Casualty and Bridgefield Employers.
(ii) Notices. Within five (5) Business Days after
a Borrower Affiliate obtains knowledge thereof, notice of:
(A) Actual suspension, termination,
limitation or revocation of any material license of any Borrower
Affiliate by any Governmental Authority or of receipt of notice from
any Governmental Authority notifying a Borrower Affiliate of a hearing
relating to such a suspension, termination, limitation or revocation,
including any request by a Governmental Authority that commits any
Borrower Affiliate to take, or refrain from taking, any action or that
otherwise materially and adversely affects the authority of such
Borrower Affiliate to conduct its business.
(B) Any pending or threatened inquiry,
investigation or regulatory proceeding (other than routine periodic
inquiries, investigations or reviews) by any Governmental Authority
concerning the business, practices or operations of any Borrower
Affiliate or any Fund.
(C) Any actual or, to the best of the
Borrower's knowledge, formally proposed material changes in the
Insurance Code governing the investment or dividend practices of
Florida domiciled insurance companies or any change in any Requirement
of Law that would reasonably be expected to have a Material Adverse
Effect on the business, financial condition or prospects of any
Borrower Affiliate.
(D) Any change or modification to any
Reinsurance Agreement whether entered into before or after the Closing
Date including Reinsurance Agreements, if any, that are in a runoff
mode on the Closing Date, which change or modification could reasonably
be expected to have a Material Adverse Effect on any Borrower
Affiliate, or any written notice received by any Borrower Affiliate of
denial of coverage, litigation, claim or arbitration arising out of any
Reinsurance Agreement to which such entity is a party.
(E) (i) The institution of, or any
adverse determination in, any litigation, arbitration proceeding or
governmental proceeding (including any Internal Revenue Service or
Department of Labor proceeding with respect to any Employee Plan or
Welfare Plan) that could, if adversely determined, be reasonably
expected to have a Material Adverse Effect on any Borrower Affiliate,
(ii) the failure of any Borrower Affiliate timely to make a required
contribution to any Employee Plan if such failure is sufficient to give
rise to a lien under section 302(f)(1) of ERISA, or (iii) the
institution of any steps by any Borrower Affiliate
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to withdraw from, or the institution of any steps by any Borrower
Affiliate to terminate under a distress termination, any Employee Plan
or the taking of any action with respect to an Employee Plan that could
result in the requirement that the Borrower Affiliate furnish a bond or
other security to such Employee Plan, or the occurrence of any event
with respect to any Employee Plan that could result in the incurrence
by any Borrower Affiliate of any material liability (other than a
liability for contributions or premiums), fine or penalty (any of which
events listed in this subparagraph (iii) individually or in the
aggregate could reasonably be expected to have a Material Adverse
Effect).
(F) Any change in the name or principal
place of business of any Borrower Affiliate.
(G) Any other matter or event that has,
or could be reasonably likely to have, a Material Adverse Effect on any
Borrower Affiliate or any Fund.
(f) Other Information. From time to time such other
information concerning any Borrower Affiliate as the Agent may reasonably
request.
7.4 Corporate Existence; Foreign Qualification. Do and cause to be
done at all times all things necessary to (a) maintain and preserve the
corporate existence of each Borrower Affiliate, (b) be, and ensure that each
Borrower Affiliate is, duly qualified to do business and be in good standing as
a foreign corporation in each jurisdiction where because of the nature of such
Borrower Affiliate's business, the failure to so qualify would have a Material
Adverse Effect on such Borrower Affiliate, (c) comply, and cause each other
Borrower Affiliate to comply, with all material Contractual Obligations and
Requirements of Law binding upon such entity (except for any instance of
noncompliance that could reasonably be expected to have a Material Adverse
Effect), and (d) do or cause to be done all things reasonably necessary to
preserve and keep in full force and effect required for each Borrower Affiliate
to be engaged in each business in which such Borrower Affiliate is so engaged.
7.5 Books, Records and Inspections. (a) Maintain, and cause its
Subsidiaries to maintain books and records which are complete and accurate in
all material respects, (b) permit, and cause each other Borrower Affiliate to
permit access at reasonable times and upon reasonable prior notice by the Agent
to its books and records, (c) permit, and cause each other Borrower Affiliate to
permit, the Agent to inspect at reasonable times its properties and operations,
and (d) permit, and cause each other Borrower Affiliate to permit, the Agent to
discuss its business, operations and financial condition with such Borrower
Affiliate's officers.
7.6 Insurance; Assets.
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(a) Maintain, and cause each other Borrower Affiliate to
maintain, such Insurance Policies as may be required by law or as are
customarily maintained by prudent companies similarly situated.
(b) Maintain fire and casualty insurance on its personal
property and leasehold improvements at least equal to the current level of
coverage in place as of the Closing Date as set forth in SCHEDULE 6.9.
(c) Keep all properties of the Borrower Affiliates in
reasonably good working order and condition in the manner customary for
companies of like size in similar businesses and as may be required for the
continued conduct of their respective businesses, except to the extent that the
failure to so keep any such property, together with the failure to so keep all
other such properties, would not have a Material Adverse Effect on the
prospects, business, operations, properties or financial condition of the
Borrower and its Subsidiaries, taken as a whole.
7.7 Taxes and Liabilities. Pay, and cause each other Borrower
Affiliate to pay, when due, all material taxes, assessments and other material
liabilities except as contested in good faith and by appropriate proceedings,
with respect to which reserves have been established, and are being maintained,
in accordance with GAAP, if and so long as such contest could not reasonably be
expected to have a Material Adverse Effect on any Borrower Affiliate.
7.8 Employee Benefit Plans. Maintain, and cause each other
Borrower Affiliate to maintain, each Employee Plan and Welfare Plan in
compliance in all material respects with all applicable Requirements of Law.
7.9 COBRA. Operate, and cause each other Borrower Affiliate to
operate, each Employee Plan of such Borrower Affiliate in such a manner that
such Borrower Affiliate will not incur any material tax liability under Section
4980B of the Internal Revenue Code or any material liability to any qualified
beneficiary as defined in such Section 4980B.
7.10 Pledge and Security Agreements. From and after the Closing
Date cause each of the Security Agreements, each of the Pledge Agreements and
the Guaranty to be and remain valid, and to maintain first priority perfected
security interests in all of the Collateral described therein in favor of the
Agent for the benefit of the Lenders.
7.11 Compliance with Laws. Comply, and cause each other Borrower
Affiliate to comply, with all federal, state and local laws, rules and
regulations related to its businesses (including, without limitation, the
establishment of all insurance reserves required to be established under SAP and
applicable laws restricting the Insurance Subsidiaries' investments, and
compliance by the Borrower Affiliates with the terms of the Consent Order).
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7.12 Maintenance of Permits. Maintain, and cause each other
Borrower Affiliate to maintain, all material Licenses as may be required for the
conduct of its business by any state, federal or local government agency or
instrumentality.
7.13 Interest Rate Protection. As of the Closing Date, the Borrower
shall take all steps necessary to cause the Rate Protection Agreement to be
assigned to the Borrower, with all amendments incident thereto as are in form
and substance satisfactory to the Agent. Except for such Rate Protection
Agreement, the Borrower shall not enter into (a) any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate collar agreement, interest rate
hedge agreement, basis swap agreement, forward rate agreement or other similar
agreement or arrangement designed to protect any Person against fluctuations in
interest rates (including any option to enter into any of the foregoing and any
master agreement for any of the foregoing); (b) any foreign exchange contract,
forward foreign exchange agreement, currency swap agreement, cross-currency rate
swap agreement, currency option or other similar agreement or arrangement
designed to protect any Person against fluctuations in currency values
(including any option to enter into any of the foregoing and any master
agreement for any of the foregoing); or (c) to the extent not covered by clauses
(a) and (b) above, any derivative instrument, agreement or product used or
entered into by any Person in the ordinary course of selling, issuing or
underwriting insurance or reinsurance.
7.14 Dividends. The Borrower shall from time to time cause each of
its Subsidiaries to declare and pay dividends to the Borrower to the extent
necessary to satisfy the Obligations hereunder (such amounts to include, without
limitation, Net Income received by any Borrower Affiliates in respect of the
Management Agreements) to the extent allowed by law. The Lenders acknowledge and
agree that the ability of each Insurance Subsidiary to declare or pay dividends
is subject to limitations as set forth in the Consent Order, but the Borrower
(no less frequently than annually) shall request any approvals of the Department
necessary to permit the payment of such dividends.
7.15 Key Man Life Insurance. The Borrower will exercise its
reasonable best efforts to maintain the Key Man Life Insurance Policy at all
times during the term hereof and, in the event of any termination of such
policy, to obtain another policy in form or substance acceptable to the Required
Lenders.
7.16 Business Activities. The Borrower will, and will cause each of
its Subsidiaries to, remain in substantially the same lines of business in which
they are engaged as of the Closing Date (which lines of business are described
on SCHEDULE 7.16 hereto); provided, that no Borrower Affiliate may re-enter any
business previously conducted in connection with the Discontinued Operations
(provided, further, that Meritec and Carolina Med will be permitted to maintain
their respective corporate existences for the sole purpose of being parties to
the leases that are in force as of the date hereof (and any subleases relating
thereto, but excluding any leases of any other real property).
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7.17 Disbursement Instructions. The Borrower will notify the Agent
in writing (in an instrument substantially in the form of the Account
Designation Letter) of any changes in the information contained in the Account
Designation Letter.
7.18 Further Assurances. The Borrower will, and will cause each of
its Subsidiaries to, make, execute, endorse, acknowledge and deliver to the
Agent and the Lenders any amendments, modifications or supplements hereto or
restatements hereof and any other agreements, instruments, financing statements,
certificates, stock powers or other documents or instruments, and take any and
all such other actions, as may from time to time be reasonably requested by the
Agent or any Lender to perfect and maintain the validity and priority of the
liens granted pursuant to the Credit Documents and to effect, confirm or further
assure or protect and preserve the interests, rights and remedies of the Lenders
and the Agent under this Agreement and the other Credit Documents and to secure
payment and performance of the Obligations. Furthermore, the Borrower will, and
will cause each of its Subsidiaries to, exercise their respective best efforts
to ensure that all Obligations are performed as required hereunder.
7.19 Certain Fees. As consideration for the Lenders' agreement to
enter into this Agreement, (i) in the event the Borrower and its Affiliates have
not raised net proceeds of $40,000,000 or more in connection with the IPO or any
other any equity offering on or before September 30, 1997, the Borrower will pay
to the Agent, for the ratable benefit of the Lenders, a fee equal to $665,000
(which amount shall be due and payable on or before December 31, 1997), or (ii)
in the event the Borrower and its Affiliates have raised net proceeds of
$40,000,000 or more in connection with the IPO or any such equity offering on or
before September 30, 1997, the Borrower will pay to the Agent, for the ratable
benefit of the Lenders, a fee of $285,000 (payable at the Closing hereof). In
the event the Loans are repaid in full on or before December 31, 1997, then
payment of any such theretofore unpaid fees will be waived by the Lenders.
ARTICLE VIII
FINANCIAL COVENANTS
Until payment in full of all Obligations of the Borrower to each of the
Lenders, the Borrower covenants and agrees that, unless the Required Lenders
consent in writing, the Borrower shall not, and shall not permit any Borrower
Affiliate, to:
8.1 Borrower Financial Covenants.
(a) Net Worth. Permit the Borrower's Net Worth to be less
than (i) $70,000,000 at any time from and after the Closing Date through and
including December 31, 1997; (ii) $75,000,000 at any time from and after January
1, 1998 through and
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including December 31, 1998; (iii) $85,000,000 at any time from and after
January 1, 1999 through and including December 31, 1999; and (iv) $95,000,000 at
any time thereafter.
(b) Fixed Charge Coverage Ratio. (i) As of the end of any
fiscal quarter of the Borrower (A) with respect to the period from January 1,
1997 through September 30, 1997, for the number of consecutive fiscal quarters
having elapsed as of the end of such fiscal quarter, and (B) from and after
October 1, 1997, for the period of four consecutive fiscal quarters ending with
such fiscal quarter (each, a "Measurement Period"), permit the Fixed Charge
Coverage Ratio to be less than (x) 1.05 to 1.0 for any Measurement Period ending
on or before December 31, 1999, or (y) 1.15 to 1.0 for any subsequent
Measurement Period (it being understood that the fees contemplated by Section
7.19 hereof will not be included in any such calculations); provided, further,
that the Borrower shall not permit the Fixed Charge Coverage Ratio for any
single fiscal quarter (beginning with the quarter ending March 31, 1997) to be
less than 0.9 to 1.0.
(c) Leverage Ratio. Permit the Leverage Ratio as of the
end of any fiscal quarter to be more than (i) .30 to 1.0 as of the end of any
fiscal quarter from and after the Closing Date through December 31, 1998; (ii)
.25 to 1.0 as of the end of any subsequent fiscal quarter through December 31,
1999; and (iii) .20 to 1.0 as of the end of any fiscal quarter thereafter.
8.2 Summit Holding Financial Covenants.
(a) Fee/Commitment Ratio. As of the end of any fiscal
quarter during the following periods, permit the Fee/Commitment Ratio to be less
than the following;
<TABLE>
<CAPTION>
Period Minimum
------ -------
<S> <C>
December 31, 1996 1.35 to 1.0
through March 31, 1997
June 30, 1997 through 1.45 to 1.0
December 31, 1997
March 31, 1998
through December 31, 1998 1.50 to 1.0
Thereafter 2.00 to 1.0
</TABLE>
(b) Minimum Fee Income. Permit Fee Income for any fiscal
quarter (i) from the quarter ending March 31, 1997 through the fiscal quarter
ending December 31, 1997, to be less than $10,000,000, (ii) from January 1, 1998
through the fiscal quarter ending December 31, 1998, to be less than $12,000,000
or (iii) thereafter, to be less than $14,000,000.
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8.3 Insurance Subsidiary Financial Covenants.
(a) Operating Leverage. Permit the ratio of (i) any
Insurance Subsidiary's Net Written Premiums in any fiscal year to (ii) the
Statutory Surplus of such Insurance Subsidiary as of the end of such fiscal
year, to exceed (A) 3.0 to 1.0 for each fiscal year through the fiscal year
ending December 31, 1998, and (B) 2.5 to 1.0 for each fiscal year thereafter.
(b) Risk-Based Capital. Permit Total Adjusted Capital of
any Insurance Subsidiary as of the end of any fiscal year (beginning with the
fiscal year ending December 31, 1997) to be less than 150% of the Company Action
Level RBC. For purposes of this Section, "Total Adjusted Capital" and "Company
Action Level RBC" shall have the meanings assigned to such terms under the NAIC
Risk-Based Capital Model Act as promulgated by the NAIC as of the date hereof
(it being understood that in the event the Florida Department adopts risk-based
capital standards during the term hereof, the parties agree that calculations
with respect to this covenant will be made in a manner consistent with standards
used by such Department).
(c) Statutory Net Worth. Permit the aggregate Statutory
Surplus of all Insurance Subsidiaries, collectively, to be less than (i)
$35,000,000 at any time from and after the Closing Date through and including
December 31, 1997; (ii) $40,000,000 at any time from and after January 1, 1998
through and including December 31, 1998; (iii) $45,000,000 at any time from and
after January 1, 1999 through and including December 31, 1999; and (iv)
$50,000,000 at any time thereafter.
8.4 Capital Expenditures. Make any Capital Expenditure if, after
giving effect to such Capital Expenditure, the aggregate amount of all such
Capital Expenditures made by the Borrower Affiliates for the period of four
consecutive fiscal quarters ending as of the end of the then-current fiscal
quarter shall exceed $500,000.
ARTICLE VIIIA
NEGATIVE COVENANTS
Until payment in full of all Obligations of the Borrower to each of the
Lenders, the Borrower covenants and agrees that, unless the Required Lenders
consent in writing, the Borrower shall not, and shall not permit any Borrower
Affiliate, to:
8A.1. Reinsurance Agreements. Permit Summit Consulting to place any
new Reinsurance Agreements involving FRF, LESA, LRA, or KRF, or permit any
Insurance Subsidiary to be party to any new Reinsurance Agreement, with any
reinsurer (other than those reinsurers set forth on SCHEDULE 8A.1, as to which
no rating requirement shall apply) that is not rated "A-" or better by A.M. Best
& Company, Inc.
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8A.2. Guarantees, Loans, Advances and Investments. Incur any
Contingent Liability or become or be responsible in any manner (whether by
agreement to purchase any obligations, stock, assets, goods or services, or to
supply or advance any funds, assets, goods or services, or otherwise) with
respect to any undertaking of any other Person, or make or permit to exist any
loans or advances to, or investments in, any other Person, except for (a) the
endorsement, in the ordinary course of collection, of instruments payable to it
or to its order, (b) investments in Subsidiaries as described in SECTION 6.10
hereof, (c) with respect to each Insurance Subsidiary, such investments as are
not in violation of SECTION 8A.16, (d) relocation loans, travel and petty cash
advances and other similar advances to the employees of a Borrower Affiliate in
the ordinary course of business, (e) current amounts due within seven Business
Days to or from brokers for securities transactions in the ordinary course of
business and (f) Contingent Liabilities set forth on SCHEDULE 8A.2;
notwithstanding any provision herein to the contrary, no loan, advance or
investment may result in any reduction in cash, Cash Equivalents, or Net Worth
of the Borrower and its Subsidiaries on a consolidated basis; provided, however,
that any Subsidiary may make any loans, or advances to or investments in the
Borrower.
8A.3 Mergers, Consolidations and Sales.
(a) Merge or consolidate with, or purchase or otherwise
acquire, or permit any Borrower Affiliate to merge or consolidate with, or
purchase or otherwise acquire, all or substantially all of the assets or stock
of any class of, or any partnership or joint venture interest in, any Person.
(b) Sell, transfer, convey or lease, or permit any other
Borrower Affiliate to sell, convey or lease, any Material Asset to any Person.
(c) Transfer, dispose of, pledge or otherwise encumber,
or permit any Borrower Affiliate to transfer, dispose of, pledge or otherwise
encumber, any Stock of any of its Subsidiaries to any Person other than pursuant
to any of the Pledge Agreements.
8A.4 Change in Control; Issuance of Stock.
(a) Permit a Change in Control to occur without the prior
written consent of the Required Lenders, which may withhold their consent in
their absolute discretion; or
(b) Except in connection with the IPO (or another equity
offering meeting the requirements set forth in SECTION 5.2.3(f)), issue any
Stock, or permit any other Borrower Affiliate to issue any Stock, options or
warrant or other rights to purchase such Stock, to any Person without the prior
written consent of the Required Lenders, which may withhold consent in their
absolute discretion; provided, however, that Borrower shall be permitted to
issue its Stock, or options or warrants to purchase its Stock, to any Person if
and only if 100% of the Net Cash Proceeds from such offering are paid to the
Lenders as a prepayment of the Loans in accordance with SECTION 7.1(b)
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hereof; provided, further, that from time to time the Borrower may issue shares
of its Stock to such entity's employees under the Approved Stock Plan.
8A.5 Leases. Incur or permit to exist any obligation or liability
under any lease other than in the ordinary course of business and, subject to
the definition of "Permitted Indebtedness," other than Capital Lease
Obligations.
8A.6 Unconditional Purchase Obligations. Enter into any contract
for the purchase of materials, supplies or other property or services, if such
contract requires that payment be made by it regardless of whether delivery is
ever made of such materials, supplies or other property or services.
8A.7 Subsidiaries; Investment of Proceeds.
(a) Create or permit to exist any Subsidiary, other than
Summit Holding, Summit Consulting, CICF, Summit Claims, Summit Loss, Healthcare
Holdings, Heritage Summit, Bridgefield Employers, Bridgefield Casualty, U.S.
Employers or Employers Safety, unless (i) the consent of the Required Lenders is
obtained, (ii) the Stock of such Subsidiary is pledged to the Agent pursuant to
a pledge agreement satisfactory in form and substance to the Agent (together
with the delivery to the Agent of legal opinions, in form and substance
satisfactory to the Agent, as to the effectiveness of such pledge and the
perfection of the liens granted thereby), and (iii) this Agreement and any other
Credit Documents are amended, at Borrower's expense, to the satisfaction of the
Required Lenders, to take into account any such additional Subsidiary (it being
understood that the Borrower has incorporated (but not completed the
organization of) Summit Consulting, Inc. of Louisiana, a Louisiana corporation,
and that the Lenders consent to the organization of such Subsidiary (the Stock
of which will be owned by Summit Consulting) so long as (i) the foregoing
requirements are satisfied and (ii) such Subsidiary is capitalized only with (A)
its own cash flow and (B) capital contributions on the part of the Borrower or
its other Subsidiaries not in excess of $100,000 in the aggregate; or
(b) Contribute any proceeds of the Revolving Loans to the
capital (on a permanent basis) of any Subsidiary.
8A.8 Business Activities. Engage in any business other than the
businesses conducted by the Borrower and its Subsidiaries as of the date hereof
(subject to the proviso contained in SECTION 7.16), or engage in the business of
writing insurance policies other than through the Insurance Subsidiaries, or
conduct any business through or on behalf of any Discontinued Operation.
8A.9 Transactions with Affiliates. Except as set forth on SCHEDULE
8A.9, enter into, or permit any Borrower Affiliate to enter into, or cause,
suffer or permit to exist, directly or indirectly, any arrangement, transaction
(or series of related transactions) or contract with or for the benefit of any
of its Affiliates or any Affiliate of any other
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Borrower Affiliate (or any officer, director or shareholder thereof) unless (a)
such arrangement, transaction or contract is in the ordinary course of business,
reasonably intended to satisfy the reasonable business requirements of such
Borrower Affiliate, and only on terms and conditions at least as favorable to
such Borrower Affiliate as the terms and conditions that would apply in a
similar arrangement, transaction or contract with a Person not an Affiliate, (b)
such transaction has been approved by a majority of the disinterested directors
of the Borrower and (c) with respect to any transaction or series of related
transactions involving aggregate payments in excess of $1,000,000, the Borrower
receives an opinion from a nationally recognized investment banking firm, or
other nationally or regionally recognized appraisal firm, that such transaction
is fair to the Borrower Affiliate from a financial point of view.
8A.10 Indebtedness. Incur or permit to exist any Indebtedness except
Permitted Indebtedness.
8A.11 Liens. Pledge, grant any lien or security interests in or
otherwise encumber, or permit any Subsidiary to pledge, grant any lien or
security interest in or otherwise encumber, any assets or other properties now
owned or thereafter acquired by such Borrower Affiliate (including, without
limitation, any Stock or Securities owned by such Borrower Affiliate), other
than Permitted Liens.
8A.12 Restricted Payments. The Borrower will not, and will not
permit or cause any of its Subsidiaries to, directly or indirectly, declare or
make any cash dividend payment, or make any other distribution of cash, property
or assets, in respect of any of its Stock or Securities or other ownership
interests or any warrants, rights or options to acquire its Stock or Securities
or other ownership interests, or purchase, redeem, retire or otherwise acquire
for value any shares of its Stock or Securities or other ownership interests or
any warrants, rights or options to acquire its Stock or Securities or other
ownership interests (any such payments or distributions being referred to herein
as "Restricted Payments"), or set aside funds for any of the foregoing, or enter
into any agreement (other than this Agreement) that restricts its ability to
declare or make any Restricted Payments, except that:
(a) the Borrower may declare and make dividend payments
or other distributions payable solely in its common stock;
(b) any direct or indirect wholly owned Subsidiary of the
Borrower may declare and make dividend payments or other distributions to the
Borrower or another wholly owned Subsidiary of the Borrower; and
(c) the Borrower may declare and pay dividends in respect
of its Series A preferred capital stock to the extent of any Excess Cash Flow
not required to be prepaid pursuant to SECTION 7.1(c) (so long as no Default or
Event of Default has occurred and is continuing or would result therefrom).
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Notwithstanding any provision herein to the contrary, no Borrower Affiliate may
make any payment of cash or distribution of any other property to any Insurance
Subsidiary.
8A.13 Negative Pledge Agreements. Except as set forth in SCHEDULE
6.10, create, incur, assume or suffer to exist any agreement, other than this
Credit Agreement and the Credit Documents, that places any restrictions (a) upon
the right of a Borrower Affiliate to sell, pledge or otherwise dispose of any
material portion of its properties now owned or thereafter acquired other than
as permitted herein, except for such restrictions imposed by federal or state
securities laws, (b) upon the right of a Borrower Affiliate to sell, pledge or
otherwise dispose of any Stock or Securities owned by it, or (c) upon the right
or ability of any Subsidiary to pay dividends or make any other distributions on
its Stock held by the Borrower, respectively, or to pay any obligation owed to
the Borrower.
8A.14 No Amendment of Documents. Enter into or permit to exist any
amendment, modification or waiver to or termination of any of the Credit
Documents, the Plan of Conversion, any Tax Sharing Agreement, any of the
Management Agreements or the terms of the Borrower's Stock (including without
limitation through an amendment of the Borrower's articles of incorporation), or
the termination (other than any termination pursuant to the terms of any
Employment Agreement) of any noncompetition, confidentiality or similar
restrictive provisions of the Employment Agreements, except with the consent of
the Required Lenders.
8A.15 Fiscal Year. Change its fiscal year from a fiscal year ending
on December 31 (it being understood that Bridgefield Employers shall change its
fiscal year from one ending on March 31 to one ending on December 31, as
contemplated by the Department).
8A.16 Certain Investments. Permit the assets of any Insurance
Subsidiary to be invested at any time in violation of the following limitations:
(a) All investments shall be in compliance with the
Insurance Code as applicable to each of the Insurance Subsidiaries as well as
the applicable insurance laws and regulations of any other applicable
jurisdiction relating to investments by each Insurance Subsidiary.
(b) No less than one hundred percent (100%) of any
Insurance Subsidiary's investments in bonds or similar instruments (the "Bond
Portfolio") shall be Investment Grade Securities; provided, however, that in the
event any Investment Grade Securities become non-Investment Grade Securities
while held by such Insurance Subsidiary ("Downgraded Investments"), such
Subsidiary shall be permitted to hold such Downgraded Investments without regard
to the foregoing limitation, but only to the extent that no more than one
percent of the aggregate value of the Bond Portfolio is invested at any time in
Downgraded Investments.
(c) No more than ten percent (10%) of the Invested Assets
shall be invested, in the aggregate, in real estate, mortgages, or any
Securities (including
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investments in Affiliates but excluding Investment Grade Securities); provided,
however, that there shall be no limit on the amount that any Insurance
Subsidiary may loan to or invest in the Borrower.
(d) No more than two percent (2%) of Invested Assets
shall be invested, taking all forms of investment into account, in any single
Issuer Group.
8A.17 Hazardous Materials. The Borrower will not, and will not
permit or cause any Borrower Affiliate to, (a) permit any Hazardous Substances
to be brought on to or located on any real property owned or operated by the
Borrower or any Insurance Subsidiary, except in full compliance with all
applicable Environmental Laws and then only as needed in connection with typical
insurance business activities, or (b) violate any Environmental Law.
ARTICLE IX
EVENTS OF DEFAULT
9.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Credit
Agreement, the Notes and the other Credit Documents:
(a) The Borrower shall fail to pay any principal or
interest on the Loans, any fees or any other Obligations when due;
(b) The Borrower or any Borrower Affiliate shall fail or
neglect to observe, perform or comply with any term, provision, condition or
covenant contained in SECTIONS 3.1(e), 7.1, 7.2(b) 7.3(c), 7.4(a), 7.10, 7.15,
7.16 or in ARTICLE VIII OR VIIIA of this Credit Agreement; provided, however,
that any Defaults arising under SECTIONS 8.1(a), 8.1(c), 8.3(a), 8.3(b), 8.3(c)
and SECTION 8A.16 shall be subject to the cure period set forth in SECTION
9.1(c) below, and Defaults arising under SECTIONS 7.10, 8A.11 and 8A.13 shall
also be subject to such cure period but only to the extent so provided in the
last clause of SECTION 9.1(c);
(c) The Borrower shall fail or neglect to observe,
perform or comply with any other term, provision, condition or covenant
contained in this Credit Agreement, except those enumerated in SECTIONS 9.1(a)
or 9.1(b) above, and the same is not cured to the Required Lenders' satisfaction
within thirty (30) days after the Borrower acquires knowledge thereof (it being
understood that any Defaults arising under any of SECTIONS 7.10, 8A.11 or 8A.13
shall be subject to the cure period contemplated by this paragraph (c) if and to
the extent such Liens or restrictions are involuntary and not the result of
affirmative conduct of a Borrower Affiliate);
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(d) Any representation or warranty made in writing by or
on behalf of any Borrower Affiliate in this Credit Agreement or the other Credit
Documents or in any certificate, instrument or document delivered in connection
herewith or therewith, or in connection with the transactions contemplated
hereby or thereby, shall prove to have been false or incorrect in any material
respect at the time as of which such representation or warranty was made;
(e) Any Borrower Affiliate shall fail to observe, perform
or comply with any term, condition or covenant contained in any of the Credit
Documents other than this Agreement, and such failure shall continue unremedied
for any grace period specifically applicable thereto;
(f) Any Borrower Affiliate shall fail to pay when due,
whether by scheduled maturity, acceleration or otherwise (taking into account
any applicable grace period), any principal of, interest on or other amount
payable in respect of any Indebtedness (other than the Indebtedness incurred
pursuant to this Agreement) having an aggregate principal amount of at least
$500,000; any other default or event of default shall occur under the terms of
any agreement or instrument pursuant to which a Borrower Affiliate has incurred
any such Indebtedness, the effect of which default or event of default is to
accelerate, or permit acceleration of (after any applicable grace period, notice
or lapse of time), the maturity of at least $500,000 in principal amount of such
Indebtedness; or any such Indebtedness of a Borrower Affiliate shall be declared
to be due and payable or required to be prepaid or redeemed (other than pursuant
to a regular schedule therefor), purchased or defeased, or an offer to prepay,
redeem, purchase or defease shall be required to be made, in each case prior to
the stated maturity thereof;
(g) The institution of an action or proceeding by any
Governmental Authority seeking to place any Borrower Affiliate under
supervision, conservation or rehabilitation, or the appointment of a receiver of
any such entity;
(h) Any Borrower Affiliate shall (i) file a voluntary
petition or commence a voluntary case seeking liquidation, reorganization,
dissolution, arrangement, readjustment of debts or any other relief under the
Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar
law now or hereafter in effect, (ii) consent to the appointment of or taking
possession by a custodian, trustee, receiver or similar official for or of all
or a substantial part of its properties (or any of the Collateral), (iii) fail
generally to pay its debts as they become due or admit in writing its inability
to pay its debts generally as they become due, (iv) make a general assignment
for the benefit of creditors or (v) take any corporate action to authorize or
approve any of the actions described above;
(i) Any involuntary petition or case shall be filed or
commenced against a Borrower Affiliate seeking liquidation, reorganization,
dissolution, arrangement, readjustment of debts, the appointment of a custodian,
trustee, receiver or similar official for it or all or a substantial part of its
properties (or any of the Collateral) or any other
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relief under the Bankruptcy Code or under any other applicable bankruptcy,
insolvency or similar law now or hereafter in effect, which petition or case is
not dismissed, bonded or discharged within sixty (60) days of the date of
filing; or an order for relief (including, without limitation, the appointment
of a custodian, trustee, receiver or similar official) shall be entered in any
such proceeding, which order is not immediately stayed or made subject to other
similar relief;
(j) Any Borrower Affiliate shall (i) cease to be Solvent,
or (ii) be enjoined, restrained or in any way prevented by order of court or any
other Governmental Authority from conducting all or any material part of its
business affairs (except for the Discontinued Operations);
(k) Any one or more judgments, writs or warrants of
attachment, executions or similar processes involving an aggregate amount in
excess of $500,000 shall be entered or filed against any Borrower Affiliate or
any of its respective properties, and all such judgments and processes shall not
be paid, dismissed, vacated, stayed, discharged or bonded within thirty (30)
days or in any event later than five (5) days prior to the date of any proposed
sale thereunder, and, if bonded, such bond (or a replacement bond) shall not
continue in effect at all times until such judgment is dismissed or discharged;
(l) Any lien, levy or assessment, or notice thereof,
shall be filed of record with respect to all or any portion of the assets of any
Borrower Affiliate by the United States, or any department, agency or
instrumentality thereof, or by any other Governmental Authority, including,
without limitation, the Pension Benefit Guaranty Corporation; such lien, levy or
assessment, taken together with all other Liens, levies or assessments then of
record with respect to the assets of the Borrower Affiliates, taken as a whole,
exceeds $500,000; and such lien, levy or assessment shall be executed upon or
shall not be paid, dismissed, vacated, stayed, released, bonded or discharged
within thirty (30) days after the same becomes a lien or, in the case of a lien
involving ad valorem taxes, prior to the last day when payment may be made
without penalty;
(m) Any one or more licenses, permits or authorizations
now or hereafter held by any Borrower Affiliate shall be terminated, suspended
or revoked or shall not be renewed, which terminations, suspensions, revocations
or failures to renew would, individually or in the aggregate, be reasonably
likely to have a Material Adverse Effect;
(n) Any Credit Document, at any time after execution and
delivery thereof, shall for any reason cease to be a legal, valid and binding
obligation of any Borrower Affiliate or other Affiliate that is a party thereto
(including any party that becomes a party thereto after the Closing Date),
enforceable against such party, or to give the Agent the rights, powers and
remedies purported to be created thereby, including, without limitation, a
valid, first priority perfected security interest in and lien upon all of the
Collateral purported to be covered thereby, subject only to Permitted Liens, in
each case unless any such cessation is due to any act or failure to act on the
part of the Agent or any Lender;
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(o) Any Subsidiary of the Borrower or any Person acting
on behalf of any such Subsidiary shall deny or disaffirm such Subsidiary's
obligations under the Guaranty;
(p) The occurrence of any of the following events that
could reasonably be expected to have a Material Adverse Effect: (i) the
happening of a Reportable Event (the reporting of which to the Pension Benefit
Guaranty Corporation or the penalties applicable for failure to notify the
Pension Benefit Guaranty Corporation of such Reportable Event have not been
waived by the Pension Benefit Guaranty Corporation or by applicable regulations)
with respect to any Employee Plan; (ii) the termination of any Pension Plan in a
"distress termination" under the provisions of section 4041 of ERISA; (iii) the
appointment of a trustee by an appropriate United States District Court to
administer any Pension Plan; (iv) the institution of any proceedings by the
Pension Benefit Guaranty Corporation to terminate any Pension Plan or to appoint
a trustee to administer any such plan; and (v) the failure of the Borrower to
notify the Agent promptly upon receipt by a Borrower Affiliate of any notice of
the institution of any proceeding or any other actions that may result in the
termination of any such plan;
(q) Either of the Pledge Agreements or either of the
Security Agreements ceases, for any reason other than as a result of action
taken or omitted to be taken by the Agent, to be in full force and effect;
(r) The cancellation, termination or expiration, prior to
repayment in full of the Loans, of any one or more of the Management Agreements
representing ten percent (10%) or more of the gross fee revenues paid in the
aggregate to Summit Consulting, CICF, Summit Claims or Summit Loss, as
appropriate, by the Funds under the Management Agreements, by Bridgefield
Employers to the service providers under the Bridgefield Employers Management
Agreements and by Bridgefield Casualty to Summit Consulting under the
Bridgefield Casualty Management Agreement (as calculated on an annual basis);
(s) The ceasing of any person party to any Employment
Agreement to be employed by the Borrower, if such person is not replaced within
90 days following such termination with a person reasonably acceptable to the
Required Lenders; and
(t) The failure of any new reinsurer of any Insurance
Subsidiary to carry a rating of "A-" or better by A.M. Best & Company, Inc.
ARTICLE X
RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT;
INTERCREDITOR PROVISIONS
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10.1 Rights and Remedies. Upon and after the occurrence of any
Event of Default, the Agent shall, upon request of the Required Lenders, by
notice to the Borrower, take any or all of the following actions, without
prejudice to the rights of any Lender to enforce its claims against the
Borrower, except as otherwise specifically provided for in this Credit
Agreement: (a) declare the Total Commitment terminated, whereupon the Revolving
Credit Commitment of each Lender shall forthwith terminate immediately and any
fees payable in respect thereof shall forthwith become due and payable without
any other notice of any kind; (b) declare all or any part of the Obligations
owing hereunder immediately due and payable, whereupon such Obligations shall
become immediately due and payable without presentment, demand, protest, notice
or legal process of any kind, all of which are hereby expressly waived by the
Borrower and/or (c) exercise all of the rights and remedies of the Lenders under
this Credit Agreement, the Guaranty, any of the Pledge Agreements, any of the
Security Agreements, the other Credit Documents and applicable law), in order to
satisfy all of the Borrower's Obligations, including, but not limited to, the
enforcement of any or all liens and security interests created pursuant to the
Credit Documents; provided, however, that all obligations shall automatically
become due and payable upon the occurrence of an Event of Default pursuant to
SECTIONS 9.1(g), (h) or (i) hereof.
10.2 Rights and Remedies Cumulative; Non-waiver; Etc. The
enumeration of the Lenders' rights and remedies set forth in this Credit
Agreement is not intended to be exhaustive and the exercise by any Lender of any
right or remedy shall not preclude the exercise of any other rights or remedies,
all of which shall be cumulative, and shall be in addition to any other right or
remedy given hereunder, under the Credit Documents or under any other agreement
between any of the Borrower Affiliates and any of the Lenders or which may now
or hereafter exist in law or in equity or by suit or otherwise. No delay or
failure to take action on the part of the Agent or any Lender in exercising any
right, power or privilege shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, power or privilege preclude other
or further exercise thereof or the exercise of any other right, power or
privilege or shall be construed to be a waiver of any Event of Default. No
course of dealing between the Borrower and the Agent or any Lender or the agents
or employees of either of them shall be effective to change, modify or discharge
any provision of this Agreement or to constitute a waiver of any Default or
Event of Default.
10.3 Rights in Property Held by the Lenders. As additional security
for the Obligations, the Borrower hereby assigns, transfers and sets over to the
Agent, for the benefit of the Lenders, all of its right, title, and interest in
and to, and grants the Agent, for the benefit of the Lenders, a lien on and a
security interest in, all amounts that may be owing from time to time by any
Lender or any of its Affiliates to the Borrower in any capacity, including
without limitation any balance or share belonging to the Borrower, or any
deposit or other account with such Lender or any of its Affiliates, which lien
and security interest shall be independent of, and in addition to, any right of
set-off that any Lender has under this Agreement or otherwise.
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10.4 Cross-collateralization; No Marshalling. The Collateral and
all other collateral that the Lenders or any of them may at any time acquire
from the Borrower or its Subsidiaries in connection with any of its Obligations
under the Credit Documents shall constitute cross-collateral for all of its
Obligations, without apportionment or designation as to any particular
Obligation, and the Agent shall have the right, in its sole discretion, to
determine the order in which the Lenders' rights in or remedies against such
Collateral are to be exercised and which types of such Collateral or which
portions of such Collateral are to be proceeded against and the order of
application of proceeds of such Collateral as against particular Obligations of
the Borrower. The Agent and the Lenders shall have no obligation to marshall any
such Collateral or apply the same in any fashion.
10.5 Set-off. The Borrower agrees that, in addition to any rights
now or hereafter granted under applicable law or otherwise, the Agent and each
of the Lenders shall have, and are hereby granted by the Borrower and authorized
to exercise, all rights of set-off provided by applicable law (to the fullest
extent thereof) and, in addition thereto, the Borrower agrees that at any time
(a) any payment or amount owing by the Borrower or any of its Subsidiaries under
or in connection with this Credit Agreement or the Credit Documents is then due
or (b) any Event of Default exists, each Lender or the Agent, without advance
notice to the Borrower of any kind (any such notice being expressly waived by
the Borrower), may set-off and apply to the payment of such payment or other
amount any and all balances, credits, deposits, accounts or moneys (general or
special, time or demand, provisional or final) at any time held and any other
Indebtedness at any time owing by the Agent or any Lender to or for the credit
or the account of the Borrower against any or all of the Obligations of the
Borrower to the Agent or any Lender under this Credit Agreement or any other
Credit Document, now or hereafter existing, whether or not such Obligations have
matured. The Agent and each Lender agree promptly to notify the Borrower after
any such set-off or application by it, provided that the failure to give such
notice shall not affect the validity of such set-off or application.
10.6 Intercreditor Provisions. (a) Upon the occurrence and during
the continuance of an Event of Default, the proceeds of any sale, disposition or
other realization upon all or any part of the Collateral (including any proceeds
of Collateral) payable to the Agent, for the benefit of the Lenders, and all
payments made to the Agent, for the benefit of the Lenders, under this
Agreement, the Notes and any of the other Credit Documents, shall be applied by
the Agent in the following order:
(i) First, to the payment in full of all
reasonable costs and expenses incurred by the Agent in connection with the sale,
disposition or other realization upon the Collateral, including, without
limitation, out-of-pocket costs, court costs, attorneys' fees and all
liabilities and advances incurred by the Agent in connection therewith, and all
other fees, expenses and amounts due to the Agent hereunder and under the other
Credit Documents;
(ii) Second, to the payment in full of all
reasonable costs and expenses incurred by the Lenders in connection with the
sale, disposition or other
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realization upon the Collateral, including, without limitation, out-of-pocket
costs, court costs, attorneys' fees (to the extent actually incurred) and all
liabilities and advances incurred by the Lenders in connection therewith, but
only to the extent that such costs and expenses are required to be paid
hereunder and under the other Credit Documents;
(iii) Third, to the payment in full of all
interest with respect to the Obligations accrued and unpaid as of the date of
the Agent's receipt of such proceeds, pro rata to each Lender based on the
percentage that the amount of such interest owed to such Lender bears to the
aggregate amount of such interest owed to all Lenders;
(iv) Fourth, to the payment in full of all
remaining Obligations (including, without limitation, principal on the Loans)
outstanding and unpaid as of the date of the Agent's receipt of such proceeds,
pro rata to each Lender based on the percentage that the amount of such
Obligations owed to such Lender bears to the aggregate amount of such
Obligations owed to all Lenders; and
(v) The balance, to the Borrower or to such
other Persons as may be required by law.
(b) Each Lender agrees that it shall not, unless
specifically requested to do so by the Agent, commence or cause to be commenced
against the Borrower any enforcement proceeding with respect to a Note or this
Credit Agreement.
ARTICLE XI
PAYMENT OF FEES AND EXPENSES
11.1 Fees and Expenses. Whether or not the transactions
contemplated by this Agreement shall be consummated, the Borrower shall be
obligated:
(a) to pay or reimburse the Agent upon demand and after
notice in accordance with SECTION 14.4 for all reasonable expenses (including,
without limitation, reasonable attorneys' fees to the extent actually incurred)
incurred or paid by the Agent in connection with: (i) the preparation,
execution, delivery, interpretation, modification, syndication, amendment or
termination of this Agreement or the other Credit Documents or any consent or
waiver requested by the Borrower hereunder or thereunder; (ii) charges for
appraisers, examiners, environmental consultants, auditors or similar Persons
whom the Agent may engage with respect to rendering opinions concerning the
financial condition of the Borrower and its Subsidiaries; and (iii) any
commercially reasonable attempt to inspect, verify, protect, preserve, collect,
sell, liquidate or otherwise dispose of the Collateral or any other assets of
any Borrower Affiliate;
(b) to pay or reimburse the Agent and each Lender upon
demand and after notice in accordance with SECTION 14.4 for all reasonable
expenses (including,
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without limitation, reasonable attorneys' fees to the extent actually incurred,
but excluding salaries of the Agent's or such Lender's regularly employed
personnel and overhead) incurred or paid by the Agent or such Lender in good
faith in connection with: (i) any litigation, contest, dispute, suit or
proceeding or action (whether instituted by the Agent, the Lenders, or any of
them, the Borrower or any other Person) in any way relating to this Agreement or
the other Credit Documents or to the Borrower's or any Subsidiary's affairs
(other than a dispute solely between or among the Lenders); (ii) any attempt by
the Agent or such Lender to enforce any of its rights against the Borrower or
any other Person that may be obligated to the Agent or such Lender by virtue of
this Agreement or the other Credit Documents; and (iii) any refinancing or
restructuring of the credit arrangement provided under this Agreement in the
nature of a "work-out" or in any insolvency or bankruptcy proceeding;
(c) to pay and hold the Agent and each Lender harmless
from and against any and all liability and loss with respect to or resulting
from the nonpayment or delayed payment of any and all intangibles, documentary
stamp and other similar taxes, fees and excises, if any, including any interest
and penalties, that may be, or be determined to be, payable in connection with
the transactions contemplated by this Agreement and the other Credit Documents
or in any modification hereof or thereof; and
(d) to pay and hold the Agent and each Lender harmless
from and against any and all finder's or brokerage fees and commissions that may
be payable in connection with the transactions contemplated by this Agreement
and the other Credit Documents, other than any fees or commissions of finders or
brokers engaged by the Agent or any Lender.
11.2 Administrative Fee. Pay to the Agent the administrative fee in
the amount and manner set forth in the supplemental fee letter, dated November
30, 1995, executed in connection with the Summit Holding Credit Agreement.
ARTICLE XII
THE AGENT
12.1 Appointment. The Lenders hereby designate and appoint First
Union as Agent to act as specified herein and in the other Credit Documents.
Each Lender hereby authorizes, and each holder of any Note by the acceptance of
such Note shall be deemed to authorize, the Agent to take such action as agent
on its behalf under the provisions of this Agreement and the other Credit
Documents and any other instruments and agreements referred to herein or
therein, and to exercise such powers and to perform such duties hereunder and
thereunder, as are specifically delegated to or required of the Agent by the
terms hereof or thereof and such other powers as are reasonably incidental
thereto. The Agent may execute any of its duties under this Agreement or any
other Credit Document
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by or through agents or attorneys-in-fact and shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact that it selects with
reasonable care.
12.2 Nature of Duties. The Agent shall have no duties or
responsibilities other than those expressly set forth in this Agreement and the
other Credit Documents. Neither the Agent nor any of its officers, directors,
employees or agents shall be liable for any action taken or omitted by it or
them as such hereunder or under any other Credit Document or in connection
herewith or therewith, unless caused by its or their gross negligence or willful
misconduct. The duties of the Agent shall be mechanical and administrative in
nature; the Agent shall not have by reason of this Agreement or any other Credit
Document a fiduciary relationship in respect of any Lender or the holder of any
Note; and nothing in this Agreement or any other Credit Document, express or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations or liabilities in respect of this Agreement or any other Credit
Document except as expressly set forth herein or therein.
12.3 Absence of Reliance on the Agent.
(a) Each Lender acknowledges that neither the Agent nor
any of its officers, directors, employees or agents has made any representation
or warranty to it and that no act by the Agent hereinafter taken, including any
review of the affairs of the Borrower and its Subsidiaries, shall be deemed to
constitute any representation or warranty by the Agent to any Lender.
(b) Each Lender acknowledges that, independently and
without reliance upon the Agent or any other Lender and based on such documents
and information as it has deemed and may deem appropriate, (i) it has made its
own appraisal of and investigation into the business, prospects, operations,
properties, financial and other condition and creditworthiness of the Borrower
and its Subsidiaries in connection with its decision to enter into this
Agreement and extend credit to the Borrower hereunder, and (ii) it will continue
to make its own credit analysis, appraisals and decisions in taking or not
taking action hereunder.
(c) Except as expressly provided in this Agreement, the
Agent shall have no duty or responsibility, either initially or on a continuing
basis, to provide any Lender or the holder of any Note with any credit or other
information concerning the business, prospects, operations, properties,
financial or other condition or creditworthiness of the Borrower, its
Subsidiaries or any other Person that may come into its possession, whether
before the making of the initial Loans or at any time or times thereafter.
(d) The Agent shall not be responsible to any Lender or
the holder of any Note for any recitals, statements, information,
representations or warranties herein or in any other Credit Document or in any
document, instrument, certificate or other writing delivered in connection
herewith or therewith or for the execution, effectiveness, genuineness,
validity, enforceability, perfection, priority or sufficiency of this Agreement
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or any other Credit Document or the financial condition of the Borrower, its
Subsidiaries or any other Person, or be required to make any inquiry concerning
either the performance or observance of any of the terms, provisions or
conditions of this Agreement or any other Credit Document, or the financial
condition of the Borrower, its Subsidiaries or any other Person or the existence
or possible existence of any Default or Event of Default.
(e) The Agent shall be under no obligation or duty to
take any action under this Agreement or any other Credit Document if taking such
action (i) would subject the Agent to a tax in any jurisdiction where it is not
then subject to a tax, (ii) would require the Agent to qualify to do business in
any jurisdiction where it is not then so qualified, unless the Agent receives
security or indemnity satisfactory to it against any tax or other liability in
connection with such qualification or resulting from the taking of such action
in connection therewith or (iii) would subject the Agent to in personam
jurisdiction in any location where it is not then so subject.
12.4 Certain Rights of the Agent. If the Agent shall request
instructions from the Required Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Credit
Document, the Agent shall be entitled to refrain from such act or taking such
action unless and until it shall have received such instructions, and the Agent
shall incur no liability by reason of so refraining. The Agent shall not be
obligated to take any action hereunder or under any other Credit Document (a) if
such action would, in the reasonable opinion of the Agent, be contrary to
applicable law or this Agreement or the other Credit Documents, (b) if it shall
not receive such advice or concurrence of the Required Lenders as it reasonably
deems appropriate or (c) if it shall not first be indemnified to its
satisfaction by the Lenders requesting such action against any and all liability
and expense that may be incurred by it by reason of taking or continuing to take
any such action. Without limiting the foregoing, no Lender or holder of any Note
shall have any right of action whatsoever against the Agent as a result of the
Agent's acting or refraining from acting hereunder or under any other Credit
Document in accordance with the instructions of the Required Lenders.
12.5 Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default, other
than any Default or Event of Default arising out of the failure to pay any
principal, interest, fees or other amounts payable to the Agent for the account
of the Lenders, unless the Agent has received written notice from the Borrower
or a Lender describing such Default or Event of Default and stating that such
notice is a "notice of default." In the event that the Agent receives such a
notice, the Agent shall give notice thereof to the Lenders as soon as reasonably
practicable; provided, however, that if any such notice has also been furnished
to the Lenders, the Agent shall have no obligation to notify the Lenders with
respect thereto. Each Lender shall promptly give the Agent such a notice upon
its actual knowledge of a Default or an Event of Default; provided, however,
that the failure of any Lender to deliver such notice in the absence of gross
negligence or willful misconduct shall not affect its rights hereunder or under
the other Credit Documents.
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12.6 Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
statement, consent, certificate, telex, teletype or facsimile message, order or
other documentary, teletransmission or telephone message believed by it in good
faith to be genuine and correct and to have been signed, sent or made by the
proper Person. The Agent may consult with legal counsel (including counsel for
the Borrower), independent public accountants and other experts selected by it
with respect to all matters pertaining to this Agreement and the other Credit
Documents and its duties hereunder and thereunder and shall not be liable for
any action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
12.7 Indemnification. To the extent the Agent is not reimbursed by
or on behalf of the Borrower, and without limiting the obligation of the
Borrower to do so, the Lenders will reimburse and indemnify the Agent, in
proportion to their respective percentages as used in determining the Required
Lenders, from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys' fees
and expenses) or disbursements of any kind or nature whatsoever that may at any
time (including at any time following the indefeasible repayment in full of the
Loans) be imposed on, incurred by or asserted against the Agent in any way
relating to or arising out of this Agreement or any other Credit Document or the
transactions contemplated hereby or thereby or any action taken or omitted by
the Agent under or in connection with any of the foregoing, and in particular
will reimburse the Agent for out-of-pocket expenses promptly upon demand by the
Agent therefor; provided, however, that no Lender shall be liable for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements finally determined by a court
of competent jurisdiction and not subject to any appeal (or pursuant to
arbitration as set forth in SECTION 14.3) to have resulted from the Agent's
gross negligence or willful misconduct.
12.8 The Agent in its Individual Capacity. With respect to its
Commitments, the Loans made by it and the Notes issued to it, the Agent shall
have the same rights and powers under the Credit Documents as any other Lender
or holder of a Note and may exercise the same as though it were not performing
the agency duties specified herein; and the terms "Lenders," "Required Lenders,"
"holders of Notes" and any similar terms shall, unless the context clearly
otherwise indicates, include the Agent in its individual capacity. The Agent may
accept deposits from, lend money to and generally engage in any kind of banking,
trust, financial advisory or other business with the Borrower or any of its
Subsidiaries or any of their respective Affiliates as if it were not performing
the agency duties specified herein, and may accept fees and other consideration
from the Borrower for services in connection with this Agreement and otherwise
without having to account for the same to the Lenders.
12.9 Holders. The Agent may deem and treat the payee of any Note as
the holder thereof for all purposes hereof unless and until a written notice of
the assignment, transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent.
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Any request, authority or consent of any Person that, at the time of making such
request or giving such authority or consent, is the holder of any Note, shall be
conclusive and binding on any subsequent holder, transferee, assignee or
endorsee, as the case may be, of such Note or of any Note or Notes issued in
exchange therefor.
12.10 Successor Agent. The Agent may resign at any time upon sixty
(60) days' prior written notice to the Borrower and the Lenders. Such
resignation shall take effect upon the appointment of a successor Agent as
provided hereinbelow. Upon any such notice of resignation, the Required Lenders
(so long as no Default or Event of Default has occurred and is continuing, with
the consent of the Borrower, which consent shall not be unreasonably withheld)
will appoint from among the Lenders a successor Agent. If no successor Agent
shall have been appointed within such sixty-day period, the Agent may appoint,
after consulting with the Lenders and the Borrower, a successor agent from among
the Lenders, who shall serve as Agent until such time, if any, as the Required
Lenders shall have appointed a successor Agent as provided hereinabove. Upon the
written acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder and under
the other Credit Documents. After any retiring Agent's resignation as Agent, the
provisions of this Article shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent. Until Borrower is duly notified of
a successor Agent, all payments and notices provided to Agent shall be deemed
duly made and given under this Agreement.
12.11 Collateral Matters.
(a) The Agent is hereby authorized on behalf of all the
Lenders, without the necessity of any notice to or further consent from the
Lenders, from time to time (but without any obligation) to take any action with
respect to the Collateral and the Credit Documents that may be necessary to
perfect and maintain perfected the liens upon the Collateral granted pursuant to
the Credit Documents.
(b) The Lenders hereby irrevocably authorize the Agent,
at its option and in its discretion, to release any lien granted to or held by
the Agent upon any Collateral (i) upon termination of the Commitments and
indefeasible payment in full of all Obligations, (ii) constituting property sold
or to be sold or disposed of as part of or in connection with a disposition
permitted hereunder, (iii) constituting property in which neither the Borrower
nor any Subsidiary owned any interest at the time such lien was granted or at
any time thereafter or (iv) if approved, authorized or ratified in writing by
the Lenders or the Required Lenders, as may be required with respect to any such
release in accordance with SECTION 14.8. Upon request by the Agent at any time,
the Lenders will confirm in writing the Agent's authority to release Collateral
pursuant to this subsection (b).
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12.12 Non-receipt of Funds by the Agent. Unless the Agent shall have
been notified by a Lender or the Borrower (any such party being herein called
the "Payor") prior to the date on which such Payor is to make payment to the
Agent of the proceeds of the Loan to be made by it hereunder (in the case of a
Lender) or such Payor is to make a payment hereunder or under the Note to the
Agent for the account of the Lenders (in the case of the Borrower), as the case
may be (such payment being herein called the "Required Payment"), which notice
shall be effective upon receipt, that the Payor does not intend to make the
Required Payment to the Agent, the Agent may assume that the Required Payment
has been made and may, in reliance upon such assumption (but shall not be
required to), make the amount thereof available to the intended recipient on
such date and, if the Payor has not in fact made the Required Payment to the
Agent, the recipient of such payment (and, if such recipient is the Borrower and
the Lender which is the Payor fails to pay the amount thereof to the Agent
forthwith upon such demand, the Borrower) shall, on demand, repay to the Agent
the amount made available to it, together with interest thereon in respect of
each day during the period commencing on the date such amount was so made
available by the Agent until the date the Agent recovers such amount, at a rate
per annum equal to (a) in the case of the Borrower, the Default Rate, provided,
that if the Borrower has to repay such amount through no fault of its own, the
Borrower shall pay the Base Rate and (b) in the case of a Lender, for the first
three (3) Business Days the rate set by interbank custom and practice for the
correction of errors among banks and for every day thereafter the Default Rate.
ARTICLE XIII
ASSIGNMENT AND PARTICIPATION
13.1 Assignments.
(a) With the prior consent of the Agent and the Borrower,
which consent shall not be unreasonably withheld, each Lender may assign to one
or more other Persons all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitments,
the outstanding Loans made by it and the Note or Notes held by it); provided,
however, that (i) except in the case of an assignment to an Affiliate of such
Lender or a Person that, immediately prior to such assignment, was a Lender, the
amount of the Commitments of such assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Assignment and Acceptance
with respect to each such assignment) shall in no event be less than the lesser
of (y) the aggregate Commitments of such Lender immediately prior to such
assignment or (z) $5,000,000, (ii) each such assignment shall be to an Eligible
Assignee, (iii) each such assignment shall be of an equal, pro rata percentage
of such Lender's rights and obligations (including its Commitment) under each of
the Term Loans and the Revolving Loans, and (iv) the parties to each such
assignment will execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any Note
or Notes subject to such assignment, and will pay a
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processing fee of $3,000 to the Agent for its own account. Upon such execution,
delivery, acceptance and recording of the Assignment and Acceptance, from and
after the effective date specified therein (a) the assignee thereunder shall be
deemed a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Assignment and Acceptance, shall have
the rights and obligations of such Lender hereunder with respect thereto and (b)
the assigning Lender shall, to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment and Acceptance, relinquish
its rights and be released from its obligations under this Agreement (and, in
the case of an Assignment and Acceptance covering all or the remaining portion
of such assigning Lender's rights and obligations under this Agreement, such
Lender shall cease to be a party hereto).
(b) By executing and delivering an Assignment and
Acceptance, the assigning Lender and the assignee thereunder confirm to and
agree, with each other and with the other parties hereto, as follows: (i) other
than as may be provided in such Assignment and Acceptance, such assigning Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or any other Credit Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other Credit Document or any other instrument or document furnished hereto
or pursuant thereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or any of its Subsidiaries or the performance or observance by
the Borrower or any of its Subsidiaries of any of their respective obligations
under this Agreement or any other Credit Document or any other instrument or
document furnished pursuant hereto or thereto; (iii) such assignee confirms that
it has received a copy of this Agreement, together with copies of the Financial
Statements and such other documents and information as it has deemed appropriate
to make its own credit analysis and decision to enter into this Agreement; (iv)
such assignee will, independently and without reliance upon the Agent, the
assigning Lender or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers and discretion under this Agreement and the other Credit
Documents and any other instruments and agreements referred to herein or
therein, and to exercise such powers and to perform such duties hereunder and
thereunder, as are specifically delegated to or required of the Agent by the
terms hereof or thereof and such other powers as are reasonably incidental
thereto; and (vii) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this Agreement are
required to be performed by it as a Lender.
(c) The Agent will maintain a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans
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owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agent and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance
executed by an assigning Lender and an assignee, together with any Note or Notes
subject to such assignment, the Agent will, if such Assignment and Acceptance
has been completed and is in substantially the form of EXHIBIT A, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give notice thereof to the Borrower. Within five (5)
Business Days after its receipt of such notice, the Borrower, at its own
expense, will execute and deliver to the Agent in exchange for the surrendered
Note or Notes a new Note or Notes to the order of such assignee in an amount
equal to the Commitment or Commitments assumed by it pursuant to such Assignment
and Acceptance and, to the extent the assigning Lender has retained its
Commitments hereunder, a new Note or Notes to the order of the assigning Lender
in an amount equal to the Commitment or Commitments retained by it hereunder.
Such new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the forms of EXHIBIT F or G, as appropriate.
13.2 Participations. Each Lender may sell to one or more other
Persons participations in any portion comprising less than all of its rights and
obligations under this Agreement (including, without limitation, a portion of
its Commitments, the outstanding Loans made by it and the Note or Notes held by
it); provided, however, that (a) such Lender's obligations under this Agreement
shall remain unchanged, (b) such Lender shall remain solely responsible for the
performance of such obligations, (c) the Borrower, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (d)
any such participation shall be in an amount of not less than $5,000,000, (e) no
Lender shall sell any participation that, when taken together with all other
participations, if any, sold by such Lender, covers all of such Lender's rights
and obligations under this Agreement (including, without limitation, all of its
Commitments, the outstanding Loans made by it and the Note or Notes held by it),
(f) each such participation shall be of an equal, pro rata percentage of such
Lender's rights and obligations (including its Commitments) under the Term Loans
and the Revolving Loans, and (g) no Lender shall permit any participant to have
any voting rights or any right to control the vote of such Lender with respect
to any amendment, modification, waiver, consent or other action hereunder or
under any other Credit Document except as to actions of the type described in
SECTION 14.8(a). In the case of a participation, the participant shall not have
any rights under this Agreement or any of the other Credit Documents, the
participant's rights against the granting Lender in respect of such
participation to be those set forth in the participation agreement, and all
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amounts payable by the Borrower hereunder shall be determined as if such Lender
had not sold such participation; provided, however, that each such participant
shall have the rights of a Lender for purposes of SECTIONS 4.11, 4.12, 4.13,
10.2 and 10.5, and shall be entitled to the benefits thereto, to the extent that
the Lender selling such participation would be entitled to such benefits if the
participation had not been sold.
13.3 Miscellaneous.
(a) The Agent and each Lender may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section, disclose to the assignee or participant, or proposed assignee or
participant, any information relating to the Borrower and its Subsidiaries
furnished to it by or on behalf of any other party hereto.
(b) Nothing herein shall prohibit the pledging by any
Lender of any Note to any Federal Reserve Bank in connection with borrowings
from the Federal Reserve Bank (provided that any such pledge shall not affect
the obligations of such Lender hereunder).
ARTICLE XIV
MISCELLANEOUS
14.1 Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of the Borrower
in connection with the transactions contemplated hereby shall survive the
execution and delivery of this Credit Agreement and the other Credit Documents.
No termination or cancellation (regardless of cause or procedure) of this Credit
Agreement shall in any way affect or impair the powers, obligations, duties,
rights and liabilities of the parties hereto in any way with respect to (a) any
transaction or event occurring prior to such termination or cancellation, (b)
the Collateral or (c) any of the Borrower's undertakings, agreements, covenants,
warranties and representations contained in this Credit Agreement and the other
Credit Documents and all such undertakings, agreements, covenants, warranties
and representations shall survive such termination or cancellation until payment
in full of the Obligations. The Borrower further agrees that to the extent the
Borrower makes a payment or payments to the Lenders, which payment or payments
or any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy, insolvency or similar state or federal
law, common law or equitable cause, then, to the extent of such payment or
repayment, the Obligation or part thereof intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
received by the Lenders.
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14.2 Governing Law; Consent to Jurisdiction. THIS AGREEMENT HAS
BEEN EXECUTED, DELIVERED AND ACCEPTED AT, AND SHALL BE DEEMED TO HAVE BEEN MADE
IN, NORTH CAROLINA AND SHALL BE INTERPRETED, AND THE RIGHTS AND LIABILITIES OF
THE PARTIES HERETO DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED
TO CONFLICTS OF LAW PROVISIONS) OF THE STATE OF NORTH CAROLINA. AS PART OF THE
CONSIDERATION FOR NEW VALUE THIS DAY RECEIVED, THE BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE COURT WITHIN MECKLENBURG COUNTY, NORTH CAROLINA OR
ANY FEDERAL COURT LOCATED WITHIN THE WESTERN DISTRICT OF THE STATE OF NORTH
CAROLINA FOR ANY PROCEEDING INSTITUTED HEREUNDER OR UNDER ANY OF THE OTHER
CREDIT DOCUMENTS, OR ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OF THE OTHER CREDIT DOCUMENTS, OR ANY PROCEEDING TO WHICH THE LENDER OR THE
BORROWER IS A PARTY, INCLUDING ANY ACTIONS BASED UPON, ARISING OUT OF, OR IN
CONNECTION WITH ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENT (WHETHER
ORAL OR WRITTEN) OR ACTIONS OF THE LENDER OR THE BORROWER. THE BORROWER
IRREVOCABLY AGREES TO BE BOUND (SUBJECT TO ANY AVAILABLE RIGHT OF APPEAL) BY ANY
JUDGMENT RENDERED OR RELIEF GRANTED THEREBY AND FURTHER WAIVES ANY OBJECTION
THAT IT MAY HAVE BASED ON LACK OF JURISDICTION OR IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY SUCH PROCEEDING. THE BORROWER CONSENTS THAT ALL
SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED MAIL DIRECTED TO IT AT ITS
ADDRESS SET FORTH HEREINBELOW, AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON THE EARLIER OF ACTUAL RECEIPT THEREOF OR FIVE (5) DAYS AFTER
DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE PREPAID AND PROPERLY
ADDRESSED. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE LENDER TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER IN THE COURTS OF ANY OTHER
JURISDICTION.
14.3 Arbitration; Remedies.
(a) Upon demand of any party hereto, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to this Agreement or any
of the Credit Documents ("Disputes") between or among parties hereto or thereto
shall be resolved by binding arbitration as provided herein. Institution of a
judicial proceeding by a party does not waive the right of that party to demand
arbitration hereunder. Disputes may include, without limitation, tort claims,
counterclaims, claims brought as class actions, claims arising from documents
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executed in the future, or claims arising out of or connected with the
transaction contemplated by this Agreement or any of the Credit Documents.
Arbitration shall be conducted under and governed by the Commercial Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") and Title 9 of the U.S. Code. All arbitration hearings
shall be conducted in Charlotte, North Carolina. The expedited procedures set
forth in Rule 51 et seq. of the Arbitration Rules shall be applicable to claims
of less than $1,000,000. All applicable statutes of limitation shall apply to
any Dispute. A judgment upon the award may be entered in any court having
jurisdiction. The panel from which all arbitrators are selected shall be
comprised of licensed attorneys. The single arbitrator selected for expedited
procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. Notwithstanding the foregoing, this arbitration provision does not
apply to disputes under or related to any Hedge Agreements.
(b) Notwithstanding the foregoing, Borrower, Agent and
Lenders agree to preserve, without diminution, certain remedies that any party
hereto may employ or exercise freely, either alone, in conjunction with or
during a Dispute. Borrower, Agent and Lenders shall have the right to proceed in
any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable: (i) all rights to foreclose against any real
or personal property or other security by exercising a power of sale granted
under any Credit Documents or under applicable law or by judicial foreclosure
and sale, including a proceeding to confirm the sale; (ii) all rights of
self-help including peaceful occupation of real property and collection of
rents, set-off, and peaceful possession of personal property; (iii) obtaining
provisional or ancillary remedies including injunctive relief, sequestration,
garnishment, attachment, appointment of receiver and filing an involuntary
bankruptcy proceeding; and (iv) when applicable, a judgment by confession of
judgment. Preservation of these remedies does not limit the power of an
arbitrator to grant similar remedies that may be requested by a party in a
Dispute.
Borrower, Agent and Lenders agree that they shall not have a
remedy of punitive or exemplary damages against the other in any Dispute and
hereby waive any right or claim to punitive or exemplary damages they have now
or which may arise in the future in connection with any Dispute whether the
Dispute is resolved by arbitration or judicially.
14.4 Notice. All notices and other communications hereunder shall
be in writing and shall be deemed to have been validly served, given or
delivered five (5) days after deposit in the United States mails with postage
prepaid, and addressed to the party to be notified as follows (it being
understood that the below-described copies of notices being sent to Persons
other than the parties to be notified shall not themselves constitute notice
hereunder):
If to the Borrower: Summit Holding Southeast, Inc.
2310 A-Z Park Road
Lakeland, Florida 33801
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Attn: William B. Bull
Facsimile Number: (941) 665-2926
Telephone Number: (941) 665-6060
with copies to: Alston & Bird, LLP
One Atlantic Center
1201 West Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Sidney J. Nurkin
Facsimile Number: (404) 881-7777
Telephone Number: (404) 881-7000
If to the Agent at: First Union National Bank of North Carolina
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0735
Attn: Agency Services
Facsimile Number: (704) 383-0288
Telephone Number: (704) 383-0281
with copies to: First Union National Bank of North Carolina
One First Union Center, DC-5
301 South College Street
Charlotte, North Carolina 28288--0735
Attn: John E. Guenther
Facsimile Number: (704) 383-7611
Telephone Number: (704) 383-3560
Robinson, Bradshaw & Hinson, P.A.
101 North Tryon Street, Suite 1900
Charlotte, North Carolina 28246
Attn: Haynes P. Lea
Facsimile Number: (704) 378-4000
Telephone Number: (704) 377-2536
and if to any Lender, at its address specified for such Lender on its signature
page hereto or to such other address as each party may designate for itself by
like notice, or shall be deemed to have been validly served, given or delivered
on the date of delivery to such party at such address, if notice is given or
delivered by hand, telex, telegram or facsimile transmitter.
14.5 Indemnification of the Agent and the Lenders. From and at all
times after the date of this Agreement, and in addition to the fees, costs and
expenses payable under SECTION 11.1 and all of the Agent's and the Lenders'
other rights and remedies, the Borrower agrees to indemnify, defend and hold
harmless the Agent and each Lender and
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each of their respective directors, officers, employees, agents and Affiliates
(each, an "Indemnified Person") against any and all claims, losses, damages,
liabilities, requirements, judgments, liens, costs and expenses of any kind or
nature whatsoever, including, without limitation, reasonable attorneys' fees and
expenses (collectively, "Indemnified Costs"), actually incurred by or asserted
against any such Indemnified Person from and after the date hereof, whether
direct, indirect or consequential, as a result of or arising from or in any way
relating to any action, suit or proceeding (including any inquiry or
investigation) by any Person, whether threatened or initiated, arising from or
in connection with the negotiation, preparation, execution, breach, performance
or enforcement of this Agreement, any of the other Credit Documents, the
exercise of any right or remedy hereunder or thereunder, including, without
limitation, the actual or alleged (a) generation, presence, transport, disposal
or release of any Hazardous Substance by any Borrower Affiliate on, to, in,
about or from any real property owned or operated by any Borrower Affiliate
(currently or in the past), or (b) violation of any Environmental Law by any
Borrower Affiliate, in any case whether or not any such Indemnified Person is a
party to any such action, suit or proceeding or a subject of any such inquiry or
investigation; provided, however, that no Indemnified Person shall have the
right to be indemnified hereunder for any Indemnified Costs to the extent
resulting from the gross negligence or willful misconduct of such Indemnified
Person as finally determined pursuant to SECTION 14.3. All of the foregoing
Indemnified Costs of any Indemnified Person shall be paid or reimbursed by the
Borrower, as and when incurred and upon demand, and shall be additional
Obligations hereunder.
14.6 Waivers by the Borrower. Except as otherwise provided for in
this Credit Agreement, the Borrower waives (a) presentment, demand and protest
and notice of presentment, protest, default, non-payment, maturity and all other
notices; (b) notice prior to taking possession or control of the Collateral or
any bond or security that might be required by any court prior to allowing the
Agent or any Lender to exercise any of the Lenders' remedies under this Credit
Agreement or the other Credit Documents; and (c) the benefit of all valuation,
appraisement and exemption laws.
14.7 Assignment and Sale. The Borrower may not sell, assign or
transfer this Credit Agreement, or the other Credit Documents or any portion
thereof, including without limitation, the Borrower's rights, title, interests,
remedies, powers, and duties hereunder or thereunder. The Borrower hereby
consents to any of the Lenders' participation, sale, assignment, transfer or
other disposition at any time or times hereafter of this Credit Agreement or the
other Credit Documents or of the Borrower's Obligations, or of any portion
hereof or thereof, including without limitation, such Lender's rights, title,
interests, remedies, powers and duties hereunder or thereunder.
14.8 Amendment or Waiver. Except as may be otherwise specifically
set forth in this Agreement or the other Credit Documents, neither this
Agreement nor any other Credit Document nor any provision hereof or thereof may
be amended, modified, waived, discharged or terminated, and no consent to any
departure by the Borrower from any
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<PAGE> 104
provision hereof or thereof may be given, except in a writing signed by the
Required Lenders; provided, however, that:
(a) no such amendment, modification, waiver, discharge,
termination or consent shall, without the consent of each Lender holding
Obligations directly affected thereby, (i) reduce the principal amount of, or
rate of interest on, any Loan, or reduce any fees or other Obligations (other
than fees payable to the Agent for its own account) or any obligations of any
Person now or hereafter primarily or contingently liable with respect to the
Obligations or (ii) postpone any date fixed for any payment of principal,
interest (other than additional interest payable hereunder during the
continuance of an Event of Default), fees (other than fees payable to the Agent
for its own account) or any other Obligations;
(b) no such amendment, modification, waiver, discharge,
termination or consent shall, without the consent of all Lenders, (i) increase
the Commitments of any Lender (it being understood that a waiver of any Default
or Event of Default or of any mandatory reduction in the Total Commitment shall
not constitute such an increase), (ii) change the definition of "Required
Lenders" or otherwise change the number or percentage of Lenders that shall be
required for the Lenders or any of them to take or approve, or direct the Agent
to take, any action hereunder, (iii) amend, modify or waive any of the
provisions for extending, or take action to extend, the term of the (iv) amend
any provision of this Section or of SECTIONS 4.11, 4.12, 4.13, 10.2 or 10.5,
(vi) release any of the Collateral or (vii) consent to the assignment or
transfer by the Borrower, or by any other Person now or hereafter primarily or
contingently liable with respect to the Obligations, of any of its rights and
obligations under this Agreement or any of the other Credit Documents;
(c) no provision relating to the rights or obligations of
the Agent under this Agreement or any of the other Credit Documents may be
amended, modified or waived without the consent of the Agent.
14.9 Severability. To the extent any provision of this Agreement is
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Credit Agreement.
14.10 Entire Agreement. This Credit Agreement and the other
documents, certificates and instruments referred to herein constitute the entire
agreement between the parties and supersede and rescind any prior agreements
relating to the subject matter hereof, including, without limitation, the
Commitment Letter.
14.11 Binding Effect. All of the terms of this Credit Agreement and
the other Credit Documents, as the same may from time to time be amended, shall
be binding upon, inure to the benefit of and be enforceable by the respective
successors and assigns of the Borrower, the Agent and the Lenders. This
provision, however, shall not be deemed to modify SECTION 14.7.
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<PAGE> 105
14.12 Execution in Counterparts. This Credit Agreement may be
executed in two or more counterparts, which when assembled shall constitute one
and the same agreement.
14.13 Conflict of Terms. The provisions of the exhibits hereto and
the other Credit Documents and any schedule or annex hereto are incorporated in
this Credit Agreement by this reference thereto. Except as otherwise provided in
this Credit Agreement and except as otherwise provided in the other Credit
Documents, if any provision contained in this Credit Agreement is in conflict
with, or inconsistent with, any provision of the other Credit Documents, the
provision contained in this Credit Agreement shall control.
14.14 Injunctive Relief. The Borrower recognizes that in the event
the Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Credit Agreement, any remedy of law may prove to be
inadequate relief to the Lenders. The Borrower therefore agrees that the
Lenders, if the Lenders so request, shall be entitled to temporary and permanent
injunctive relief in any such case without the necessity of proving actual
damages.
14.15 Termination. Upon the repayment in full of all of the
Obligations, the Borrower shall have no further liability under this Agreement
or any of the other Credit Documents.
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<PAGE> 106
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be executed in their corporate names by their duly authorized
corporate officers as of the date first above written.
SUMMIT HOLDING SOUTHEAST,
INC.
By: /S/ WILLIAM B. BULL
-----------------------------------------
Title: President
--------------------------------------
(signatures continued)
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<PAGE> 107
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent and as
Lender
Term Loan Commitment: By: /S/ GAIL M. GOLIGHTLY
-----------------------------------------
$10,396,590.92 Title: Senior Vice President
--------------------------------------
Revolving Credit Commitment:
$1,590,909.08 First Union National Bank of North Carolina
ABA # 053 000 219
Charlotte, North Carolina
Attention: Syndications Agency Services
R/C 5007 G/L# 465906
Address for notices:
First Union National Bank of North Carolina
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0735
Attention: Agency Services
Telecopy: 704/383-0288
Telephone: 704/383-0281
with a copy to:
First Union National Bank of North Carolina
One First Union Center, 5th Floor
301 South College Street
Charlotte, North Carolina 28288
Attention: John E. Guenther
Telecopy: 704/383-7611
Telephone: 704/383-3560
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<PAGE> 108
(signatures continued)
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<PAGE> 109
BANK ONE, TEXAS, N.A.
Term Loan Commitment: By: /S/ D. KEITH THOMPSON
-----------------------------
$7,426,136.36 Title: Assistant Vice President
--------------------------
Revolving Credit Commitment:
$1,136,363.64 Bank One, Texas, N.A.
ABA # 111 000 614
Dallas, Texas
Attention: Vicki George
Further Credit: # 010 990 4045
Ref: Summit Holding Southeast, Inc.
Address for notices:
Bank One, Texas, N.A.
1717 Main Street, 4th Floor
Dallas, Texas 75201
Attention: D. Keith Thompson
Telecopy: 214/290-2332
Telephone: 214/290-2303
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<PAGE> 110
(signatures continued)
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<PAGE> 111
UNION BANK OF CALIFORNIA, N.A.
Term Loan Commitment: By: /S/ KRISTINE A. KASSELMAN
-----------------------------------------
$7,426,136.36 Title: Vice President
--------------------------------------
Revolving Credit Commitment:
$1,136,363.64 Union Bank of California, N.A.
ABA # 122 000 496
Monterey Park, California
Wire Transfer Clearing Acct. # 070-196431
Attention: Commercial Loan Operations
Ref: Summit Holding Southeast, Inc.
Address for notices:
Union Bank of California, N.A.
550 South Hope Street, 40230
Third Floor
Los Angeles, California 90071
Attention: Kristine A. Kasselman
Telecopy: 213/243-3552
Telephone: 213/243-3546
(signatures continued)
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<PAGE> 112
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION
Term Loan Commitment: By: /S/ TIMOTHY MANN
-----------------------------------------
$7,426,136.36 Title: Vice President
--------------------------------------
Revolving Credit Commitment:
$1,136,363.64 SouthTrust Bank of Alabama, National
Association
ABA # 062 000 080
Birmingham, Alabama
Attention: Florida Corporate
Ref: Summit Holding Southeast, Inc.
Address for notices:
SouthTrust Bank of Alabama, National
Association
150 Second Avenue North, Suite 470
St. Petersburg, Florida 33701
Attention: Timothy Mann
Telecopy: 813/898-5319
Telephone: 813/824-8974
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<PAGE> 113
EXHIBIT A
FORM OF
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT AND ACCEPTANCE (this "Assignment and Acceptance") is
made this _____ day of ____________, ____, by and between ______________________
(the "Assignor"), and ___________________________ (the "Assignee"). Reference is
made to the Credit Agreement, dated as of ____________, 199_ (as amended,
modified, supplemented or restated from time to time, the "Credit Agreement"),
among Summit Holding Southeast, Inc. (the "Borrower"), certain banks and other
financial institutions from time to time parties thereto (the "Lenders"), and
First Union National Bank of North Carolina, as Agent for the Lenders. Unless
otherwise defined herein, terms defined in the Credit Agreement are used herein
with the same meaning.
The Assignor and the Assignee hereby agree as follows:
1. ASSIGNMENT AND ASSUMPTION. Subject to the terms and conditions
hereof, the Assignor hereby sells and assigns to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, without recourse and, except as
expressly provided herein, without representation or warranty, that interest as
of the Effective Date (as hereinafter defined) in and to all of the Assignor's
rights and obligations under the Credit Agreement (in its capacity as a Lender
thereunder), represented by the percentage interest or interests specified in
Item 4 of Annex I of the aggregated outstanding rights and obligations of the
Lenders under the Credit Agreement with respect to the Commitments to which such
percentage interest or interests correspond (each such assigned interest, an
"Assigned Share"), including, without limitation, all rights and obligations of
the Assignor with respect to the Note(s) held by the Assignor and the Assigned
Share of the Loans. After giving effect to such sale and assignment, the
Assignee's Commitments, and the aggregate outstanding principal amounts of the
Loans owing to the Assignee, will be as set forth in Item 4 of Annex I.
2. THE ASSIGNOR. The Assignor (i) represents and warrants that it
is the legal and beneficial owner of the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim, (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Loan Document or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other Loan Document or any other instrument or document
furnished pursuant thereto, or the collectability of the Loans made thereunder,
and (iii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or any of its Subsidiaries or
the performance or observance by the Borrower or any of its Subsidiaries of any
of their respective obligations under the Credit Agreement or any other Loan
Document or any other instrument or document furnished pursuant thereto.
3. THE ASSIGNEE. The Assignee (i) confirms that it has received a
copy of the Credit Agreement, together with copies of the Financial Statements
and such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into this Assignment and
Acceptance, (ii) represents that (A) it has the full power and authority and has
taken all action necessary to execute, deliver and perform its obligations
-108-
<PAGE> 114
under this Assignment and Acceptance and all other instruments incident hereto
and (B) this Assignment and Acceptance constitutes the legal, valid and binding
obligation of Assignee, enforceable against Assignee in accordance with its
terms, (iii) agrees that it will, independently and without reliance upon the
Agent, the Assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement, (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement and the other
Loan Documents and any other instruments and agreements referred to therein, and
to exercise such powers and to perform such duties thereunder, as are
specifically delegated to or required of the Agent by the terms thereof and such
other powers as are reasonably incidental thereto, (v) agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Credit Agreement are required to be performed by it as a Lender, and (vi)
specifies as its address for payments and notices the office set forth on Annex
I hereto.
4. EFFECTIVE DATE. Following the execution of this Assignment and
Acceptance by the Assignor and the Assignee, an executed original hereof,
together with all attachments hereto and the processing fee referred to in
SECTION 13.1(a) of the Credit Agreement, shall be delivered to the Agent. The
effective date of this Assignment and Acceptance (the "Effective Date") shall be
the later of (i) the date of acceptance hereof by the Agent or (ii) the date, if
any, designated as the Effective Date in Item 5 of Annex I. As of the Effective
Date, (y) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, shall have the rights and
obligations of a Lender thereunder and under the other Credit Documents, and (z)
the Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement and the other Loan Documents [and shall cease to be a party
thereto](1).
5. PAYMENTS; SETTLEMENT. From and after the Effective Date, the
Agent will make all payments required to be made by it under the Credit
Agreement in respect of each Assigned Share under the Credit Agreement
(including, without limitation, all payments of principal, interest and fees in
respect of the Assigned Share of all Loans and Commitments assigned hereunder)
directly to the Assignee. Upon the Effective Date, and as a condition to the
effectiveness of this Assignment and Acceptance, the Assignee will pay to the
Assignor an amount, to be specified in writing by the Assignor to the Assignee,
that represents the Assigned Share of the principal amount of all Loans that are
outstanding under the Credit Agreement on the Effective Date and are being
assigned to the Assignee hereunder, net of any closing costs. The Assignor and
Assignee will be responsible for making between themselves all appropriate
adjustments in payments due under the Credit Agreement in respect of the period
prior to the Effective Date. [Notwithstanding any other provision of this
Assignment and Acceptance, the Credit Agreement or any of the other Loan
Documents, the Assignor shall be entitled to retain for its own account any fees
that may have been paid or may be payable to the Assignor under the Credit
Agreement or the other Loan Documents in a capacity other than as a Lender,
including, to the extent applicable, as Agent.](2)
- ------------------------------
(1) Insert if Assignment and Acceptance covers all or the remaining portion
of the Assignor's rights and obligations under the Credit Agreement.
(2) Insert if First Union is the Assignor.
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<PAGE> 115
6. GOVERNING LAW. This Assignment and Acceptance shall be
governed by, and construed in accordance with, the internal laws of the State of
North Carolina (without regard to the conflicts of laws principles thereof).
7. ENTIRE AGREEMENT. This Assignment and Acceptance, together
with the Credit Agreement and the other Loan Documents, embody the entire
agreement and understanding between the parties hereto and supersede all prior
agreements and understandings of the parties, verbal or written, relating to the
subject matter hereof.
8. SUCCESSORS AND ASSIGNS. This Assignment and Acceptance shall
be binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and assigns.
9. COUNTERPARTS. This Assignment and Acceptance may be executed
in any number of counterparts and by different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which shall together constitute one and the same
instrument.
10. FURTHER ASSURANCES. The Assignor and the Assignee hereby agree
to execute and deliver such other instruments, and take such other action, as
either party may reasonably request in connection with the transactions
contemplated by this Assignment and Acceptance, including, without limitation,
the delivery of any notices to the Borrowers or the Agent which may be required
in connection with the assignment contemplated hereby.
11. NOTICES. All communications among the parties hereto and
notices in connection herewith shall be in writing, hand-delivered or sent by
ordinary mail or facsimile transmitter, addressed as follows: (a) if to the
Assignor or the Assignee, at their respective addresses set forth on the
signature pages hereof and (b) if to the Borrower or the Agent, at their
respective addresses set forth on the signature pages of the Credit Agreement.
All such communications and notices shall be effective upon receipt.
12. INTEGRATION OF TERMS. This Assignment and Acceptance contains
the entire agreement between the parties hereto relating to the subject matter
hereof and supersedes all oral statements and other writings with respect to the
subject matter hereof.
13. EXPENSES. Each party hereto agrees to bear its own expenses in
connection with this Assignment and Acceptance and any other documents required
or permitted to be executed or delivered by it in connection with this
Assignment and Acceptance.
14. AMENDMENT. This Assignment and Acceptance may not be amended,
waived or otherwise modified except by an instrument in writing signed by each
party hereto.
IN WITNESS WHEREOF, the parties have caused this Assignment and
Acceptance to be executed by their duly authorized officers as of the date first
above written.
ASSIGNOR:
--------------------------------
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<PAGE> 116
By:
-----------------------------------------
Title:
--------------------------------------
ASSIGNEE:
--------------------------------------------
By:
-----------------------------------------
Title:
--------------------------------------
Accepted this _______ day of
______________, 19___:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA, as Agent
By:
---------------------------
Title:
------------------------
ANNEX I
1. Borrower: Summit Holding Southeast, Inc.
2. Name and Date of Credit Agreement:
Credit Agreement, dated as of __________ __, 199_, among Summit Holding
Southeast, Inc. and certain Lenders from time to time parties thereto,
and First Union National Bank of North Carolina, as Agent.
3. Date of Assignment and Acceptance: ________________, 19___.
4. Amounts (as of date of Item 3 above):
<TABLE>
<CAPTION>
Aggregate Amount of
for all Assigned Assigned
Lenders Share(3) Share
------- -------- -----
<S> <C> <C> <C>
Term Loans $33,000,000 % $
--------- ---------
Revolving Loans $ 5,000,000 % $
--------- ---------
5. Effective Date:
</TABLE>
- ------------------------------
(3) Percentage taken to no more than four decimal places. This percentage
shall be identical with respect to all of the Commitments and Loans of each
Assignor in connection with any single Assignment and Acceptance.
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<PAGE> 117
5. Effective Date:
6. Addresses for Payments and Notices:
Assignor: ____________________________________________
____________________________________________
____________________________________________
Attention:__________________________________
Telecopy:___________________________________
Reference:__________________________________
Assignee: ____________________________________________
____________________________________________
____________________________________________
Attention:__________________________________
Telecopy:___________________________________
Reference:__________________________________
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<PAGE> 118
EXHIBIT B
FORM OF
COMPLIANCE CERTIFICATE
For [Fiscal Quarter] [Fiscal Year]
ended ________________.
Preparation Date: _____________
First Union National Bank of North Carolina,
as Agent
One First Union Center, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Re: Credit Agreement dated as of __________ __, 199_
THIS CERTIFICATE is given pursuant to SECTION 7.3(c) of the Credit
Agreement, dated as of __________ __, 1997 (as amended, modified, supplemented
or restated from time to time, the "Credit Agreement," the terms defined therein
being used herein as therein defined), by and among Summit Holding Southeast,
Inc., a Florida corporation (the "Borrower"), various financial institutions
which are, or may become, parties thereto (the "Lenders") and First Union
National Bank of North Carolina, a national banking association having its
principal place of business at 301 South College Street, Charlotte, North
Carolina 28288, as agent for the Lenders (the "Agent").
The undersigned hereby certifies to the Lenders that:
1. He is the duly elected Chief Financial Officer of the
Borrower.
2. The undersigned has reviewed the terms of the Credit Agreement
and has made, or caused to be made under the supervision of the undersigned, a
review in reasonable detail of the transactions and condition of the Borrower
and its Subsidiaries for the [Fiscal Quarter] [Fiscal Year] ending ____________,
19__, (the "Fiscal Period").
3. The examination described in paragraph 2 above did not
disclose, and the undersigned has no actual knowledge of the existence of, any
Default or Event of Default during or at the end of the accounting period
covered by such financial statements or as of the date of this Certificate. [,
except as set forth below.
Describe here or in a separate attachment any exceptions to paragraph 3
above by listing, in reasonable detail, the nature of the Default or Event of
Default, the period during which it existed and the action that the Borrower has
taken or proposes to take with respect thereto.]
4. The figures set forth in Covenant Compliance Worksheet
attached hereto as Attachment A accurately represent amounts required to be
calculated under the various covenants of the Credit Agreement, each as of the
last day of the Fiscal Period unless otherwise indicated.
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<PAGE> 119
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Certificate as of the _______ day of ___________, ____.
[signature of CFO]
----------------------------------
Name:
---------------------------------------
Chief Financial Officer
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<PAGE> 120
ATTACHMENT A
COVENANT COMPLIANCE WORKSHEET
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
NET WORTH
(SECTION 8.1(a) OF THE CREDIT AGREEMENT): REQUIRED TO BE NOT LESS THAN ___________(4)_
- ------------------------------------------------------------------------------------------------
<S> <C>
(1) Borrower's Net Worth $
============
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
FIXED CHARGE COVERAGE RATIO
(SECTION 8.1(b) OF THE CREDIT AGREEMENT): REQUIRED TO BE NOT LESS THAN ____ TO ____(5)
- ------------------------------------------------------------------------------------------------
<S> <C>
(1) Borrower Cash Flow for the Measurement Period
(See Attachment B) $
------------
(2) Borrower's Historical Debt Service for such period
------------
(3) Amounts paid in respect of Series A preferred
stock for such period ------------
(4) Sum of Lines 2 and 3 $
------------
(5) Fixed Charge Coverage Ratio:
Divide Line 1 by Line 4
============
- ------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(4) Complete the appropriate measure: (A) $70,000,000 at any time from
and after the Closing Date through December 31, 1997; (B) $75,000,000 at any
time from and after January 1, 1998 through December 31, 1998; and (C)
$85,000,000 at any time from and after January 1, 1999 through December 31,
1999; and (D) $95,000,000 at any time thereafter
(5) Complete the appropriate measure: (A) 1.05 to 1.10 for any
Measurement Period ending on or before December 31, 1999, and (B) 1.15 to 1.0
for any Measurement thereafter; provided, that the Borrower shall not permit the
Fixed Charge Coverage Ratio for any single fiscal quarter (beginning with the
quarter ending March 31, 1997) to be less than 0.9 to 1.0.
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<PAGE> 121
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
LEVERAGE RATIO
(SECTION 8.1(c) OF THE CREDIT AGREEMENT): REQUIRED TO BE NOT MORE THAN ____ TO ____(6)
- ------------------------------------------------------------------------------------------------
<S> <C>
(1) Consolidated Indebtedness $
------------
(2) Total Capitalization of Borrower
(a) Consolidated Indebtedness of Borrower $
------------
(b) Consolidated Net Worth of Borrower
(c) Total Capitalization: Add Lines 2(a) and 2(b) $
============
(3) Leverage Ratio: Divide Line 1 by Line 2(c)
============
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
FEE/COMMITMENT RATIO
(SECTION 8.2(a) OF THE CREDIT AGREEMENT): Required to be not less than ____ to ____%(7)
- ------------------------------------------------------------------------------------------------
<S> <C>
(1) Total Fees $
------------
(2) Total Commitments $
------------
(3) Fee/Commitment Ratio: Divide Line 1 by Line 2
============
- ------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(6) Complete the appropriate measure (A) .30 to 1.0 at the end of any
fiscal quarter from and after the Closing Date through December 31, 1998, (B)
.25 to 1.0 as of the end of any fiscal quarter thereafter through December 31,
1999 and (C) .20 to 1.0 as of the end of any fiscal quarter thereafter.
(7) Complete the appropriate measure: (A) 1.35 to 1.0 for each fiscal
quarter during the period from and after December 31, 1996 through March 31,
1997, (B) 1.45 to 1.0 for each fiscal quarter thereafter through December 31,
1997, (C) 1.50 to 1.0 for each fiscal quarter thereafter through December 31,
1998 and (D) 2.0 to 1.0 as of the end of any fiscal quarter thereafter.
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<PAGE> 122
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
MINIMUM FEE INCOME
(SECTION 8.2(b) OF THE CREDIT AGREEMENT): REQUIRED TO BE AT LEAST $________(8)
- ------------------------------------------------------------------------------------------------
(1) Total Fee Income $
============
- ------------------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
OPERATING LEVERAGE - INSURANCE SUBSIDIARIES
(SECTION 8.3(a) OF THE CREDIT AGREEMENT): REQUIRED TO BE NOT MORE THAN ____ TO ____(9)
- ------------------------------------------------------------------------------------------------
<S> <C>
(1)(a) Net Written Premiums (Bridgefield Employers) $
------------
(b) Net Written Premiums (Bridgefield Casualty) $
------------
(2)(a) Statutory Surplus (Bridgefield Employers) $
------------
(b) Statutory Surplus (Bridgefield Casualty) $
------------
(3)(a) Operating Leverage (Bridgefield Employers)
(Divide line (1)(a) by line (2)(a)) ============
(b) Operating Leverage (Bridgefield Casualty)
(Divide line (1)(b) by line (2)(b))
============
- ------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(8) Complete the appropriate measure: (A) $10,000,000 for each fiscal
quarter from March 31, 1997 through December 31, 1997; (B) $12,000,000 for each
fiscal thereafter through December 31, 1998; and (C) $14,000,000 for any fiscal
quarter thereafter.
(9) Complete the appropriate measure: (A) 3.0 to 1.0 for each fiscal
year through the fiscal year ending December 31, 1998 and (B) 2.5 to 1.0 for
each fiscal year thereafter.
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<PAGE> 123
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
RISK-BASED CAPITAL PERCENTAGE - INSURANCE SUBSIDIARIES
(SECTION 8.3(b) OF THE CREDIT AGREEMENT): REQUIRED TO BE NOT LESS THAN 150%(10)
- -------------------------------------------------------------------------------------------------
<S> <C>
(1)(a) Total Adjusted Capital of Bridgefield Employers
as of the end of the current fiscal year $
------------
(b) Total Adjusted Capital of Bridgefield Casualty
as of the end of the current fiscal year $
------------
(2) Company Action Level RBC
------------
(3)(a) Bridgefield Employers Risk Based Capital Percentage
(Divide line (1)(a) by line (2) and multiply by 100%) ============
(b) Bridgefield Casualty Risk Based Capital Percentage
(Divide line (1)(b) by line (2) and multiply by 100%)
============
- -------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(10) Tested only at year end.
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<PAGE> 124
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
STATUTORY NET WORTH
(SECTION 8.3(c) OF THE CREDIT AGREEMENT REQUIRED TO BE NOT LESS THAN $___________(11)
- -------------------------------------------------------------------------------------------------
<S> <C>
(1) Statutory Surplus of Bridgefield Employers
as of end of period $
------------
(2) Statutory Surplus of Bridgefield Casualty
as of end of period $
------------
(3) Aggregate Statutory Surplus of Insurance Subsidiaries
(Add lines (1) and (2)) $
============
- -------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURES - BORROWER AFFILIATES
(SECTION 8.4 OF THE CREDIT AGREEMENT) REQUIRED TO BE NOT MORE THAN $500,000
- -------------------------------------------------------------------------------------------------
<S> <C>
(1) Capital Expenditures for the period of four fiscal quarters
ending as of the end of the current fiscal quarter $
============
- -------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------------
(11) Complete the appropriate measure: (A) $45,000,000 for each fiscal
quarter through December 31, 1997; (B) $50,000,000 for each fiscal quarter
thereafter through December 31, 1998; (C) $55,000,000 for each fiscal quarter
thereafter through December 31, 1999; and (D) $60,000,000 for each fiscal
quarter thereafter.
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<PAGE> 125
ATTACHMENT B
COVENANT COMPLIANCE WORKSHEET
(A) BORROWER CASH FLOW
<TABLE>
<S> <C>
(1) EBITDA (Borrower-Stand Alone): $
----------
(a) Borrower's Net Income for the applicable period +
----------
Additions to Net Income (in all cases without duplication):
-----------------------------------------------------------
(b) Borrower's Interest Expense for such period +
----------
(c) Taxes deducted from revenue in determining Net Income for such
period
(d) Depreciation and amortization for such period +
----------
(e) Total of Sources (sum of lines (a) through (d)) $
==========
Deductions from Net Income to the extent included therein:
----------------------------------------------------------
(f) Income distributed to Borrower by Bridgefield Employers for ( )
such period ----------
(g) Undistributed income of Insurance Subsidiaries for such period ( )
----------
(h) EBITDA (Summit Holding) for such period (see line (2)(j) below) ( )
----------
(i) Total of Deductions (sum of lines (f), (g) and (h)) $
(j) Total EBITDA (Borrower-Stand Alone) $
(Subtract line (i) from line (e)) ==========
(2) EBITDA (Summit Holding):
(a) Net income of Summit Holding and it Subsidiaries for the $
applicable period ----------
Additions to net income (without in all cases duplication):
-----------------------------------------------------------
(b) Interest expense of Summit Holding and its Subsidiaries for +
the applicable period ----------
(c) Taxes deducted from revenue in determining net income of +
Summit Holding, pre-Closing Date ----------
</TABLE>
-120-
<PAGE> 126
<TABLE>
<S> <C>
(d) Payments made to Borrower by Summit Holding under the Tax +
Sharing Agreement, subsequent to Closing Date ----------
(e) Depreciation and amortization for such period +
----------
(f) Total sources (sum of lines (a) through (e)) $
==========
Deductions from net income:
---------------------------
(g) Income distributed to Summit Holding by any Insurance Subsidiary ( )
----------
(h) Undistributed income of any Insurance Subsidiaries ( )
----------
(i) Total deductions (sum of lines (g) and (h)) $
==========
(j) Total EBITDA (Summit Holding) $
(subtract line (i) from line (f)) ==========
(3) Amount of dividends paid to Borrower by Bridgefield Employers $
----------
(4) Amount of tax sharing payments made to Borrower by Bridgefield
Employers $
----------
(5) Amount of non-cash expenses and charges reducing income of Summit $
Holding, without duplication ----------
(6) Total of sources $
(Sum of lines (1)(j), (2)(j), (3), (4) and (5)) ----------
(7) Capital Expenditures for such period $
----------
(8) Amount of cash taxes paid by Borrower during period $
----------
(9) Amount of non-cash expenses or other charges increasing net income $
of Summit Holding, without duplication ----------
(10) Total of Deductions (Sum of lines (7), (8) and (9)) $
----------
(11) Total Borrower Cash Flow $
(Subtract line (10) from line (6)) ==========
</TABLE>
-121-
<PAGE> 127
EXHIBIT C
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
EXCESS CASH FLOW CALCULATION
FOR THE FISCAL YEAR ENDED _______________, _____ (THE "FISCAL YEAR")
- ----------------------------------------------------------------------------------------------------
(All figures are for the Borrower and its Subsidiaries for the Fiscal Year on a consolidated basis.)
<S> <C>
(1) Borrower Cash Flow (per Compliance Certificate as of December 31 of
Fiscal Year)
(2) Uses of cash flow:
(a) Principal payments and prepayments actually made by the Borrower
in respect of the Term Loans $
---------
(b) Principal payments and prepayments actually made by the Borrower
in respect of the Revolving Loans to the extent such payments
permanently reduce the Revolving Credit Commitment $
---------
(c) Interest and Fees in respect of the Loans $
---------
(d) Prepaid Reinsurance premium for (and only for) next fiscal quarter $
---------
(e) Sum of uses: Add Lines 2(a), 2(b), 2(c) and 2(d) $
=========
(3) Excess Cash Flow: Subtract Line 4(e) from Line 1 $
=========
(4) Amount of Excess Cash Flow prepayment (multiply line (3)(e) by .75) $
=========
- ---------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 128
EXHIBIT D
FORM OF
INTEREST RATE ELECTION NOTICE
[Date]
First Union National Bank
of North Carolina, as Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
Pursuant to the provisions of the Credit Agreement, dated as of
__________ __, 199_ (the "Credit Agreement"), and the other Credit Documents
made by and between the undersigned, as Borrower, and you, as agent for the
lenders named therein (the "Lenders") and the Lenders, this Interest Rate
Election Notice is being delivered as required under [SECTION 3.1(b)/4.6] of the
Credit Agreement. All terms used herein and not otherwise defined herein shall
have the respective meanings assigned to such terms in the Credit Agreement.
Effective on _________________ [specify date]12, we hereby elect to
enter into a __________________________ [specify whether new Loan or
continuation or conversion of an existing Loan] of $__________ [specify amount
to be loaned, continued or converted] [of the
_______________________________________________________ [if a continuation or
- ------------------------------
(12) Shall be a Business Day at least one Business Day after the date
hereof (in the case of any conversion of LIBOR Loans into Base Rate Loans) or at
least three Business Days after the date hereof (in the case of any conversion
of Base Rate Loans into, or continuation of, LIBOR Loans), and additionally, in
the case of any conversion of LIBOR Loans into Base Rate Loans, or continuation
of LIBOR Loans, shall be the last day of the Interest Period applicable thereto.
-123-
<PAGE> 129
conversion, identify Loan to be continued or converted by type, date and amount]
Loan currently outstanding]. Interest on the ____________ [specify new,
continued or converted] Loan shall be determined by reference to the
_____________________ [specify either "Adjusted LIBOR Rate" or "Adjusted Base
Rate"] [and shall be for an Interest Period of _________________ [if a LIBOR
Loan, specify period of LIBOR Loan, which may be either one, two or three
month(s)]].
The undersigned hereby certifies that the following statements are true
on the date hereof and will be true on the effective date of the
above-referenced [new Loan/continuation/conversion]:
(A) Each of the representations and warranties contained
in ARTICLE VI of the Credit Agreement and in the other Loan Documents
are and will be true and correct before and after giving effect to the
[new Loan/continuation/conversion], as though made on each such date
(except to the extent any such representation or warranty relates
solely to a prior date); and
(B) No Default or Event of Default has occurred and is
continuing or would result therefrom.
Very truly yours,
SUMMIT HOLDING SOUTHEAST, INC.
By:
-----------------------------------
Title:
--------------------------------
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<PAGE> 130
EXHIBIT E
FORM OF
NOTICE OF BORROWING
[Date]
First Union National Bank
of North Carolina, as Agent
One First Union Center, TW-10
301 South College Street
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Ladies and Gentlemen:
The undersigned, Summit Holding Southeast, Inc. (the "Borrower"),
refers to the Credit Agreement, dated as of __________ __, 199_, among the
Borrower, certain banks and other financial institutions from time to time
parties thereto (the "Lenders"), and you, as Agent for the Lenders (as amended,
modified, supplemented or restated from time to time, the "Credit Agreement,"
the terms defined therein being used herein as therein defined), and, pursuant
to SECTION 3.1(b) of the Credit Agreement, hereby gives you irrevocable notice
that the undersigned hereby requests a Borrowing under the Credit Agreement, and
to that end sets forth below the information relating to such Borrowing (the
"Proposed Borrowing") as required by SECTION 3.1(b) of the Credit Agreement:
(i) The aggregate principal amount of the Proposed
Borrowing is $_______________.
(ii) The Business Day of the Proposed Borrowing is
_______________ (the "Borrowing Date").13
Enclosed herewith is an Interest Rate Election Notice with respect to the
Proposed Borrowing.
The undersigned hereby certifies that the following statements are true
on the date hereof and will be true on the Borrowing Date:
(A) Each of the representations and warranties contained
in ARTICLE VI of the Credit Agreement and in the other Credit Documents
are and will be true and correct before and after giving effect to the
Proposed Borrowing and to the application of the proceeds therefrom, as
though made on each such
- ------------------------------
(13) Shall be a Business Day at least one Business Day after the date
hereof (in the case of Base Rate Loans) or at least three Business Days after
the date hereof (in the case of LIBOR Loans).
-125-
<PAGE> 131
date (except to the extent any such representation or warranty relates
solely to a prior date); and
(B) No Default or Event of Default has occurred and is
continuing or would result from the Proposed Borrowing or from the
application of the proceeds therefrom.
Very truly yours,
SUMMIT HOLDING SOUTHEAST, INC.
By:
-----------------------------------
Title:
--------------------------------
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<PAGE> 132
EXHIBIT F
REVOLVING CREDIT NOTE
$_______________ __________ __, 199__
Charlotte, North Carolina
FOR VALUE RECEIVED, SUMMIT HOLDING SOUTHEAST, INC., a Florida
corporation (the "Borrower"), hereby promises to pay to the order of
_______________________________________________________________ (the
"Lender"), at the offices of First Union National Bank of North Carolina (the
"Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina 28288-0735 (or at such other place or places as the Agent may
designate), the principal sum of up to
___________________ AND ____/100 DOLLARS ($______________), or such
lesser amount as may constitute the unpaid principal amount of Revolving Loans
advanced by the Lender and outstanding under that certain Credit Agreement dated
__________ __, 199_, by and among the Borrower, the Agent and the Lenders party
thereto (as the same may be amended, modified or supplemented from time to time,
the "Credit Agreement"), under the terms and conditions of this promissory note
(this "Revolving Credit Note") and the Credit Agreement. The Borrower also
unconditionally promises to pay interest on the aggregate unpaid principal
amount of this Revolving Credit Note at the rates provided in the Credit
Agreement and to pay all other Obligations when due.
This Revolving Credit Note is one of a series of Notes referenced in
the Credit Agreement and issued to evidence the Revolving Line of Credit made by
the Lenders pursuant to Article III of the Credit Agreement, which Notes replace
and supersede the revolving credit notes issued pursuant to the Summit Holding
Credit Agreement (as defined in the Credit Agreement).
The defined terms in the Credit Agreement are used herein with the same
meanings given them in the Credit Agreement. All of the terms, conditions and
covenants of the Credit Agreement are expressly made a part of this Revolving
Credit Note by reference in the same manner and with the same effect as if set
forth herein at length and any holder of this Revolving Credit Note is entitled
to the benefits of and remedies provided in the Credit Agreement and the other
Credit Documents. Reference is made to the Credit Agreement for provisions for
the maturity, payment, prepayment and acceleration of this Revolving Credit
Note.
In the event of an acceleration of the maturity of this Revolving
Credit Note, this Revolving Credit Note shall become immediately due and
payable, without presentation, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower.
In the event this Revolving Credit Note is not paid when due at any
stated or accelerated maturity, the Borrower agrees to pay all Obligations,
including without limitation all reasonable attorneys' fees and expenses
actually incurred in connection with collection of the Obligations.
This Revolving Credit Note has been executed and delivered in
Charlotte, North Carolina and shall be governed by and construed in accordance
with the internal laws and judicial decisions of the State of North Carolina.
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<PAGE> 133
IN WITNESS WHEREOF, the Borrower has caused this Revolving Credit Note
to be executed by its duly authorized corporate officers as of the day and year
first above written.
SUMMIT HOLDING SOUTHEAST, INC.
By:
----------------------------------
Title:
-------------------------------
Tax Identification Number: ____________
-128-
<PAGE> 134
EXHIBIT G
FORM OF
TERM NOTE
$_______________ ____________ ___, 199__
Charlotte, North Carolina
FOR VALUE RECEIVED, SUMMIT HOLDING SOUTHEAST, INC., a Florida
corporation (the "Borrower"), hereby promises to pay to the order of
_________________________________________________________________ (the
"Lender"), at the offices of First Union National Bank of North Carolina (the
"Agent") located at One First Union Center, 301 South College Street, Charlotte,
North Carolina 28288-0735 (or at such other place or places as the Agent may
designate), the principal sum of
________________________ AND ___/100 DOLLARS ($______________), under
that certain Credit Agreement dated __________ __, 199_, by and among the
Borrower, the Agent and the Lenders party thereto (as the same may be amended,
modified or supplemented from time to time, the "Credit Agreement"), under the
terms and conditions of this promissory note (this "Term Note") and the Credit
Agreement. The Borrower also unconditionally promises to pay interest on the
aggregate unpaid principal amount of this Term Note at the rates provided in the
Credit Agreement and to pay all other Obligations when due.
This Term Note is one of a series of Notes referenced in the Credit
Agreement and issued to evidence the Term Loan made by the Lenders pursuant to
Article II of the Credit Agreement, which Notes replace and supersede the
revolving credit notes issued pursuant to the Summit Holding Credit Agreement.
The defined terms in the Credit Agreement are used herein with the same
meanings given them in the Credit Agreement. All of the terms, conditions and
covenants of the Credit Agreement are expressly made a part of this Term Note by
reference in the same manner and with the same effect as if set forth herein at
length and any holder of this Term Note is entitled to the benefits of and
remedies provided in the Credit Agreement and the other Credit Documents.
Reference is made to the Credit Agreement for provisions for the maturity,
payment, prepayment and acceleration of this Term Note.
In the event of an acceleration of the maturity of this Term Note, this
Term Note shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by the
Borrower.
In the event this Term Note is not paid when due at any stated or
accelerated maturity, the Borrower agrees to pay all Obligations, including
without limitation all reasonable attorneys' fees and expenses actually incurred
in connection with collection of the Obligations.
This Term Note has been executed and delivered in Charlotte, North
Carolina and shall be governed by and construed in accordance with the internal
laws and judicial decisions of the State of North Carolina.
-129-
<PAGE> 135
IN WITNESS WHEREOF, the Borrower has caused this Term Note to be
executed by its duly authorized corporate officers as of the day and year first
above written.
SUMMIT HOLDING SOUTHEAST, INC.
By:
----------------------------------
Title:
-------------------------------
Tax Identification Number: __________
-130-
<PAGE> 136
SCHEDULES TO
CREDIT AGREEMENT
among
SUMMIT HOLDING SOUTHEAST, INC.
THE LENDERS NAMED HEREIN,
AND
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA
as Agent
Dated as of May 28, 1997
-131-
<PAGE> 137
SCHEDULE 6.3
Claims Against Borrower
Summit Holdings and its Subsidiaries, serving in their capacity as
agents for or administrators of the various Funds that are administered by
Summit Holdings and its Subsidiaries, appear as parties in lawsuits arising in
the ordinary course of business of such Funds involving adjudication of claims,
collection of premiums and similar matters. Neither Summit Holdings nor any of
its Subsidiaries is a party to any lawsuit directed against Summit Holdings or
any such Subsidiary in its individual capacity or against its assets.
-132-
<PAGE> 138
SCHEDULE 6.4
Taxes
The federal income tax returns of Summit Holding for the tax years
ending December 31, 1993, December 31, 1994 and December 31, 1995 and for the
period ending January 12, 1996 are being audited by the Internal Revenue
Service. Based upon advice from the Borrower's tax advisers, Ernst & Young, LLP,
who are representing the Borrower in connection with this audit, the Borrower
believes that the probable result of such audit could not reasonably be expected
to have a materially adverse effect on the financial condition of the Borrower
and its Subsidiaries taken as a whole.
-133-
<PAGE> 139
SCHEDULE 6.6
Compliance; Jurisdictions of Borrower Affiliates
Bridgefield Casualty is a party to that certain Consent Order with the
Florida Department of Insurance dated January 9, 1996 which order restricts,
among other things, the Insurance Subsidiary's ability to pay dividends. Subject
to the foregoing Consent Order, Bridgefield Casualty is licensed to transact
business in the State of Florida in connection with the insurance and
reinsurance of workers' compensation claims. Upon the effectiveness of the
Conversion, the foregoing Consent Order will be supplanted by the Consent Order
(as defined in the Credit Agreement), and subject to the Consent Order,
Bridgefield Employers is licensed to transact business in the State of Florida
in connection with the insurance and reinsurance of workers' compensation
claims.
U.S. Employers is licensed to transact business in the Cayman Islands
in connection with reinsurance of workers' compensation claims.
-134-
<PAGE> 140
SCHEDULE 6.9
Insurance Policies
1. The Borrower and its Subsidiaries are insured by FRF, LRA and KRF for
workers' compensation claims in the states of Florida (coverage number
0520-11563, 0999-02345 and 0214-00798, respectively) Louisiana and
Kentucky for the following amounts: Statutory (Each Accident), $100,000
(Disease-Each Employee), $500,000 (Disease Policy Limit), respectively.
2. The Borrower and its Subsidiaries have Commercial Property Coverage
with Scottsdale Insurance Company (Policy No. CFS 0122972) for Building
and Personal Property Damage for the replacement value of the property.
3. The Borrower and its Subsidiaries have Commercial Crime Coverage with
National Union Fire Insurance Company (Policy No. 4849613) for the
following items and amounts:
Employee Dishonesty $10,000,000
Computer Fraud $10,000,000
Forgery or Alteration $10,000,000
Theft, Disappearance and Destruction $1,000,000
Robbery and Safe Burglary $1,000,000
Property other than Money and Securities $1,000,000
4. The Borrower and its Subsidiaries have insurance with Chubb Custom
Insurance Company and Allstate Insurance Company (Policy No.
98-7947-20-08) and 049665573, respectively for Commercial General,
Liability and .
5. The Borrower and its Subsidiaries have a $500,000 limit comprehensive
property coverage policy with Hartford Steam Boiler Inspection and
Insurance Company (Policy No. FBP-AT-9443803-00).
6. The Borrower and its Subsidiaries have a property insurance with
Hartford Steam Boiler Inspection and Insurance Company for data
processing equipment (Policy No. CSI-AT-9443804-02).
7. The Borrower and its Subsidiaries have insurance with American National
Fire for Catastrophe Liability (Policy No. EXX 868869203); $10,000,000
limit.
8. The Borrower and its Subsidiaries have Employment Related Practices
Liability Insurance with Fireman's Fund Insurance Company (Policy No.
CEP02967629) $1,000,000 limit.
9. The Borrower maintains a $2,000,000 key man life insurance policy with
Jackson National Life Insurance Company, Policy No. 0021180510, on
William B. Bull.
10. Summit Consulting maintains life insurance on William B. Bull in a face
amount of $7,100,000.
-135-
<PAGE> 141
11. Summit Consulting maintains life insurance on Allen C. Bennett in a
face amount of $1,500,000.
12. Summit Consulting maintains life insurance on Russell L. Wall in a face
amount of $1,500,000.
13. Summit Consulting maintains blanket automobile insurance under a policy
with General Accident Insurance Company Policy No. BA0252010.
-136-
<PAGE> 142
SCHEDULE 6.10
Ownership of Properties
None.
-137-
<PAGE> 143
SCHEDULE 6.11
Borrower Affiliate Offices
The Borrower and its Subsidiaries occupy space leased by Summit Consulting in
Lakeland Florida. The principal address of the corporate campus is:
2310 A-Z Park Road
Lakeland, Florida
Summit Consulting leases space in Baton Rouge, Louisiana. The address is:
9434 Interline Avenue
Baton Rouge, Louisiana
Summit Consulting leases space in Lexington, Kentucky. The address is:
1018 New Circle Road, NE
Suite 105
Lexington, Kentucky
Summit Claims leases space in Fort Lauderdale, Florida. The address is:
100 West Cypress Creek Road, Suite 955
Fort Lauderdale, Florida
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<PAGE> 144
SCHEDULE 6.13
Borrower Affiliates
None, other than (a) the directors and executive officers of the
Borrower and its Subsidiaries and (b) as disclosed in items 1 an 2 of Schedule
8A.9.
-139-
<PAGE> 145
SCHEDULE 6.15
Employee Plans
1. The Approved Stock Plan.
2. Summit Consulting, Inc. Retirement Plan.
3. Summit Consulting, Inc. Flexible Benefits Plan.
-140-
<PAGE> 146
SCHEDULE 6.21
Environmental Matters
The real property, the possession of which is pursuant to the leases
described in items #1 through #9 on Schedule 6.28 constitute all the Realty.
-141-
<PAGE> 147
SCHEDULE 6.22
Certain Assets
Trademarks
The following trademarks are owned or licensed by the Borrower and its
Subsidiaries and have been registered with the U.S. Patent and Trademark office:
1. AuditWorx (reg. no. 1,762,570)
2. Summit (reg. no. 1,669,724)
3. Compformation (reg. no. 1,673,646)
4. Smart (no. 74-649,827 (pending))
The following is a list of all trademarks that are owned or licensed for the
Borrower and its Subsidiaries and have been registered with the State of
Florida:
1. Good Health Trust & Design (reg. no. 294A00044034)
2. The Claims Center (reg. no. 393A00127852)
Service Marks
Summit Logo (serial no. 741 119972; registration pending)
Copyrights
AuditWorx 2.01 (reg. no. TX 3 189 459; for computer software)
-142-
<PAGE> 148
SCHEDULE 6.28
Material Contracts
1. Sublease Agreement dated as of May 20, 1992 between Pitney Bowes Inc.,
as sublessor, and Summit Consulting, Inc. as sublessee (for the
premises located at 9434 Interline Avenue, Baton Rouge, Louisiana), as
modified by that certain letter dated July 31, 1995 between Summit
Consulting, Inc. and Pitney Bowes Inc. (whereby Summit Consulting, Inc.
exercises a three year extension option)
2. Lease Agreement dated as of September 20, 1989 between Knight Trade
Centre South Acquisition Corp., as lessor, and Summit Claims
Management, Inc., as lessee (for the premises located at 100 West
Cypress Creek Road, Suite 975, Fort Lauderdale, Florida), as modified
by that certain Addendum I between Knight Trade Center South
Acquisition Corp. and Summit Claims Management, Inc., as amended by
that certain Amendment Agreement dated July 31, 1991 between Cypress
Broward Trade Centre, Inc. and Summit Claims Management, Inc., and as
modified by that certain Addendum I dated July 19, 1995 between Cypress
Broward Trade Centre, Inc. and Summit Claims Management, Inc.
3. Lease Agreement dated March 27, 1990 between C. C. Dockery and Thomas
S. Petcoff, as lessors, and Summit Consulting, Inc., as lessee (for the
premises located on lots 1, 2, 3 and 4 at 2330 and 2340 A-Z Park Road,
Lakeland, Florida), as extended by that certain Lease Agreement dated
April 7, 1992 between C.C. Dockery and Thomas S. Petcoff, as lessors,
and Summit Consulting, Inc., as lessee (included in this Schedule as
item number 5).
4. Lease Agreement dated April 7, 1992 between C.C. Dockery and Thomas S.
Petcoff, as lessors, and Summit Consulting, Inc., as lessee (for the
premises located on lots 5, 6, 7 and 8 at 2026 and 2036 Crystal Wood
Drive, Lakeland, Florida).
5. Lease Agreement dated May 30, 1990 between C.C. Dockery and Thomas S.
Petcoff, as lessors, and Summit Consulting, Inc., as lessee (for the
premises located on lots 11 and 12 at 2025 Crystal Park Drive,
Lakeland, Florida), as extended by that certain Lease Agreement dated
April 7, 1992 between C.C. Dockery and Thomas S. Petcoff, as lessors,
and Summit Consulting, Inc., as lessee (included in this Schedule as
item number 5).
6. Lease Agreement dated December 6, 1988 between C.C. Dockery and Thomas
S. Petcoff, as lessors, and Summit Consulting, Inc., as lessee (for the
premises located on lots 9, 10, 13, 14, 15 and 16 at 2310 A-Z Park
Road, 2111 Crystal Wood Drive, 2320 A-Z Park Drive, and 2015 Crystal
wood Drive, all in Lakeland, Florida), as amended by that certain
Amendment to Lease Agreement dated March 27, 1990 between C.C. Dockery
and Thomas S. Petcoff, as lessors, and Summit Consulting, Inc., as
lessee, and as extended by that certain Lease Agreement dated April 7,
1992 between C.C. Dockery and Thomas S. Petcoff, as lessors, and Summit
Consulting, Inc., as lessee (included in this Schedule as item number
5).
-143-
<PAGE> 149
7. Sublease Agreement dated April 7, 1992 between Summit Consulting, Inc.,
as sublessor, and Dockery Management corporation, as sublessee (for the
premises located at Building 8 at 2026 Crystal Wood Drive, Lakeland,
Florida).
8. Lease Agreement dated December 4, 1996 between B.L. Radden & Son, as
lessor, and Summit Consulting, Inc. (for the premises located at 1018
New Circle Road, NE, Suite 105, Lexington, Kentucky).
9. Lease dated November 13, 1990 between John Andras, as lessor, and
Summit Consulting, Inc., as lessee (for the premises located at Lot #3,
2033 Edenfield Place, Lakeland, Florida), as modified by that certain
letter dated November 30, 1993 between Summit Consulting, Inc. and Mr.
John Andras (whereby Summit Consulting, Inc. agrees to a three year
lease extension), and as modified by that certain letter dated July 28,
1995 between John J. Andras and Summit Consulting, Inc. (whereby John
Andras informs Summit Consulting, Inc. that he has sold the property to
Anchor Investment).
10. Administrator's Agreement dated August 9, 1995 between Kentucky Retail
Federation Self Insurers Fund and Summit Consulting, Inc. (for
administrative services).
11. Letter of Agreement dated June 8, 1995 between Professional Review
Network and Summit Claims management, Inc., related to that certain
Letter of Intent dated May 15, 1995 between Professional Review Network
and Summit Claims Management, Inc., (for rehabilitation services).
12. Administrator's Contract dated March 30, 1978 between C.C. Dockery,
President of Summit Consulting, Inc., and Associated Industries of
Florida Self-Insurers Fund, as modified by that certain Addendum dated
July 26, 1978 between Associated Industries of Florida Self Insurers
Fund and Summit Consulting, Inc., as modified by that certain Addendum
dated January 9, 1980 between Associated Industries of Florida
Self-Insurers Fund and Summit Consulting, Inc., as modified by that
certain Assignment and Acceptance dated July 15, 1982 between C.C.
Dockery and Summit Consulting, Inc., and as modified by that certain
Addendum Acknowledging Name Change dated October 15, 1987 between
Summit Consulting, Inc. and Bridgefield Employers (for administrative
services).
13. Contract dated January 1, 1980 between C.C. Dockery, President of
Summit Loss Control Services, Inc. and Associated Industries of Florida
Self-Insurers Fund, as modified by that certain Addendum Acknowledging
Name Change dated October 15, 1987 between Summit Loss Control
Services, Inc. and Bridgefield Employers (for loss control programs and
safety engineering services).
14. Agreement dated January 1, 1994 between Bridgefield Employers and
Summit Claims Management, Inc. (for administrative services).
15. Managing General Agent Agreement, dated May 28, 1997, between
Bridgefield Employers and Summit Consulting, Inc.
16. Administrator's Contract dated December 1, 1978 between Florida Retail
Federation Self Insurers Fund and C.C. Dockery, President of Summit
Consulting, Inc., as
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modified by that certain Assignment and Acceptance dated July 15, 1982
between C.C. Dockery and Summit Consulting, Inc., as modified by that
certain Addendum dated December 9, l982 between Florida Retail
Federation Self Insurers Fund and Summit Consulting, Inc., and as
modified by that certain Addendum dated August 22, 1985 between Florida
Retail Federal Self Insurers Fund and Summit Consulting, Inc. (for
administrative services).
17. Contract dated January 1, 1982 between Summit Loss Control Services,
Inc. and Summit Consulting, Inc. (for safety engineering and loss
control services to Florida Retail Federation Self Insurers Fund).
18. Licensing and Royalty Agreement dated July 1, 1985 between Florida
Retail Federation and Summit Consulting, Inc. (for use of logo in
exchange for payment of royalty).
19. Administrator's Contract dated March 23, 1982 between Louisiana
Employers Safety Association Self Insurers Fund and Summit Consulting,
Inc., as modified by that certain Addendum dated August 1, 1982 between
Louisiana Employers Safety Association, Inc. and Summit Consulting,
Inc. (for administrative services).
20. Contract between Summit Loss Control Services, Inc. and Summit
Consulting, Inc. (for safety engineering and loss control services to
Louisiana Employers Safety Association Self Insurers Fund).
21. Administrator's Contract dated June 24, 1980 between Louisiana
Retailers Association Self Insurers Fund and Summit Consulting, Inc.,
as modified by that certain Addendum dated February 10, 1983, between
Louisiana Retailers Association Self Insurers Fund and Summit
Consulting, Inc., and as modified by that certain Amendment dated June
5, 1985, between Louisiana Retailers Association Self Insurers Fund and
Summit Consulting, Inc. (for administrative services).
22. Contract dated January 1, 1982 between Summit Loss Control Services,
Inc. and Summit Consulting, Inc. (for safety engineering and loss
control services to Louisiana Retailers Association Self Insurers
Fund).
23. Licensing and Royalty Agreement dated June 1, 1985 between Louisiana
Retailers Association and Summit Consulting, Inc. (for use of logo in
exchange for payment of royalty).
24. Nonsolicitation Agreement dated as of February 27, 1992 among Summit
Consulting, Inc., Summit Holding Corporation, Alexander & Alexander,
Inc., and Alexsis, Inc. (five year nonsolicitation agreement).
25. License Agreement dated October 1, 1994 between Florida Retail
Federation and Summit Consulting, Inc. (licensing Summit Consulting,
Inc. to use Florida Retail Federation's name, logo, service marks, and
trademarks).
26. Loan Agreement and Collateral Assignment and Security Agreement dated
July 15, 1994 between Commercial Insurance Consultants, Inc. and Summit
Consulting, Inc. (whereby Summit Consulting, Inc. loans $300,000 to
Commercial Insurance
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Consultants, Inc.), together with (i) that certain Promissory Note
dated July 15, 1994 between Commercial Insurance Consultants, Inc. and
Summit Consulting, Inc., (ii) that certain Continuing Guaranty dated
July 13, 1994 by John Hughes, and (iii) that certain Continuing
Guaranty dated July 13, 1994 by Carlos Sutton.
27. License Agreement dated July 1, 1993 between Florida Retail Federation
and Summit Consulting, Inc. (for use of name, logo, service marks, and
trademarks in connection with workers' compensation self insurers fund
program in exchange for payment of royalty).
28. Agreement between Bridgefield Casualty Insurance Company, through its
managing general agent, Summit Consulting, Inc. and Florida Retail
Federation, Inc. (for (i) payment of royalties to Florida Retail
Federation in exchange for recommendation and endorsement of
Bridgefield Casualty Insurance Company to fund members and (ii) use of
trademarks, copyrights, service marks, designs and logos by Bridgefield
Casualty Insurance Company)
29. Worker's Compensation Services Agreement, dated as of November 15,
1995, by and between Vincom/HIP Occupational Health Systems and
Bridgefield Casualty Insurance Company.
30. The Employment Agreements.
31. Income Tax Sharing Agreement dated May 27, 1997 by and between the
Borrower and Summit Holding.
32. Income Tax Sharing Agreement dated May 27, 1997 by and between the
Borrower and Bridgefield Employers.
33. Income Tax Sharing Agreement dated May 27, 1997 by and between
Bridgefield Employers and Bridgefield Casualty.
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SCHEDULE 6.29
Reinsurance Agreements
1. Medical Excess of Loss Reinsurance Agreement, between U.S. RE
Corporation and FRF, dated September 3, 1993. (Cover Note No.
02655193).
2. Excess of Loss Cover Agreement between Lloyd's of London (named
syndicates) and FRF, dated January 1, 1993.
3. Excess Workers Compensation and Employers Liability Policy issued by
Continental Casualty Company (CNA Insurance Companies) in favor of
LESA. Policy No. W-128575463.
4. Excess of Loss Reinsurance Agreement between The Federal Insurance
Company (Duncanson & Holt Europe, Ltd.) and LESA, dated April 1, 1993.
5. Insuring Agreement between Columbia Casualty Company (CNA Insurance
Companies) and LRA. Policy No. SR-83093055
6. Specific Employers Excess Occupational Accident Insurance Certificate
No. TNCO145/93/105 issued by Stirling Cooke Insurance Brokers Ltd. in
favor of LRA.
7. Reinsurance Agreement dated March 30, 1995 between U.S. RE Corporation
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf) (Cover Note No. 02645195).
8. Reinsurance Agreement dated March 30, 1995 between U.S. RE Corporation
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf) (Cover Note No. 02645095).
9. Occupational Accident Excess of Loss Reinsurance Agreement First Layer
effective April 1, 1995 between Bridgefield Employers (Signed by
William B. Bull on Bridgefield Employers' behalf) and Federal Insurance
Company through Duncanson & Holt Europe Ltd.
10. Workers' Compensation Excess Agreement dated February 8, 1995 between
Crossroads Insurance Company Ltd. and Bridgefield Employers (signed by
William B. Bull on Bridgefield Employers' behalf) (Agreement No.
C162-65-700) as modified by that certain Workers' Compensation Excess
Agreement Declarations effective April 1, 1995 between Crossroads
Insurance Company Ltd. and Bridgefield Employers (signed by William B.
Bull on Bridgefield Employers' behalf), and as modified by those
certain Endorsements Numbers 1-10 effective April 1, 1995 between
Crossroads Insurance Company Ltd. and Bridgefield Employers (signed by
William B. Bull on Bridgefield Employers' behalf).
11. Reinsurance Agreement dated May 13, 1994 between U.S. RE Corporation
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf) (Cover Note No. 02645094).
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12. Excess Workers Compensation and Employers Liability Policy dated April
10, 1995 between Continental Casualty Company and Bridgefield Employers
(Policy No. W-128575396A), as modified by those certain Endorsements
Numbers 1-5 effective April 1, 1995 between Continental Casualty
Company and Bridgefield Employers.
13. Excess Workers Compensation and Employers Liability Policy dated April
7, 1994 between Continental Casualty Company and Bridgefield Employers
(Policy No. W-128575396), as modified by those certain Endorsements
Numbers 1-9 effective April 1, 1994 between Continental Casualty
Company and Bridgefield Employers.
14. Reinsurance Agreement dated December 17, 1993 between U.S. RE
Corporation and Bridgefield Employers (signed by William B. Bull on
Bridgefield Employers' behalf) (Cover No. No. 02645093)
15. Workers Compensation Excess Agreement dated February 3, 1993 between
Crossroads Insurance, Inc. and Bridgefield Employers (signed by William
B. Bull on Bridgefield Employers' behalf) (Agreement No. C162-56-700),
as modified by that certain Workers Compensation Excess Agreement
Declarations effective April 1, 1993 between Crossroads Insurance, Inc.
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf), and as modified by those certain Endorsements
Number 1-10 effective April 1, 1993 between Crossroads Insurance, Inc.
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf).
16. Workers Compensation Excess Agreement dated March 31, 1994 between
Crossroads Insurance, Inc. and Bridgefield Employers (signed by William
B. Bull on Bridgefield Employers' behalf) (Agreement No. C162-60-700)
as modified by that certain Workers Compensation Excess Agreement
Declarations effective April 1, 1994 between Crossroads Insurance, Inc.
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf), and as modified by those certain Endorsements
Numbers 1-10 effective April 1, 1994 between Crossroads Insurance, Inc.
and Bridgefield Employers (signed by William B. Bull on Bridgefield
Employers' behalf).
17. Excess Workers Compensation and Employers Liability Policy dated April
22, 1993 between Transamerica Insurance Company and Bridgefield
Employers (Policy No. W-141641D), as modified by those certain
Endorsements Numbers 1-5, and 7 effective April 1, 1993 between
Transamerica Insurance Company and Bridgefield Employers.
18. Excess Workers Compensation and Employers Liability Policy dated
January 23, 1995 between Continental Casualty Company and Florida
Retail Federation Self Insurers Fund (Policy No. W-128573499A), as
modified by those certain Endorsements Numbers 1-4 effective January 1,
1995 between Continental Casualty Company and Florida Retail Federation
Self Insurers Fund.
19. Workers Compensation Excess Agreement dated January 11, 1995 between
Crossroads Insurance, Inc. and Florida Retail Federation Self Insurers
Fund (signed by William B. Bull on FRFSIF's behalf) (Agreement No.
C162-64-700), as modified by that certain Workers Compensation Excess
Agreement Declarations effective January 1, 1995 between Crossroads
Insurance, Inc. and Florida Retail Federation Self Insurers Fund
(signed by William B. Bull on FRFSIF's behalf), and as modified by
those certain
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Endorsements Numbers 1-8 effective January 1, 1995 between Crossroads
Insurance, Inc. and Florida Retail Federation Self Insurers Fund
(signed by William B. Bull on FRFSIF's behalf).
20. Excess Workers Compensation and Employers Liability Policy dated
January 24, 1994 between Continental Casualty Company and Florida
Retain Federation Self Insurers Fund (Policy No. W-128573499), as
modified by those certain Endorsements Numbers 1-6, and 8 effective
January 1, 1994 between Continental Casualty Company and Florida Retail
Federation Self Insurers Fund, as modified by that certain Endorsement
Number 7 effective April 1, 1994 between Continental Casualty Company
and Florida Retail Federation Self Insurers Fund, as modified by those
certain Endorsements Numbers 9 and 10 effective June 30, 1994 between
Continental Casualty Company and Florida Retail Federation Self
Insurers Fund, and as modified by that certain Endorsement Number 11
effective September 30, 1994 between Continental Casualty Company and
Florida Retail Federation Self Insurers Fund.
21. Reinsurance Agreement dated January 31, 1994 between U.S. RE
Corporation and Florida Retail Federation Self Insurers Fund (signed by
Summit Consulting, Inc. on FRFSIF's behalf) (Cover Note No. 02655294).
22. Workers Compensation Excess of Loss Reinsurance Agreement effective
January 1, 1994 between Florida Retail Federation Self Insurers Fund
and Clarendon National Insurance Company per Raydon Underwriting
Management Company, Ltd. (signed by William B. Bull on FRFSIF's
behalf), as modified by Florida Mandatory Endorsements Numbers 1 and 2
(attached thereto as page 13 of 13).
23. Workers Compensation Excess Agreement dated December 23, 1993 between
Florida Retail Federation Self Insurers Fund and Crossroads Insurance,
Inc. (signed by William B. Bull on FRFSIF's behalf) (Agreement No.
C162-59-700), as modified by that certain Workers Compensation Excess
Agreement Declarations effective January 1, 1994 between Florida Retail
Federation Self Insurers Fund and Crossroads Insurance, Inc. (signed by
William B. Bull an FRFSIF's behalf), and as modified by those certain
Endorsements Numbers 1-8 effective January 1, 1994 between Florida
Retail Federation Self Insurers Fund and Crossroads Insurance, Inc.
(signed by William B. Bull on FRFSIF's behalf).
24. Excess Workers Compensation and Employers Liability Policy dated
January 18, 1993 between Florida Retail Federation Self Insurers Fund
and Transamerica Insurance Company (Policy No. W-141601D), as modified
by those certain Endorsements Number 1-4, 6, 11, 13, 15, and 16
effective January 1, 1993 between Florida Retail Federation Self
Insurers Fund and Transamerica Insurance Company, as modified by that
certain Endorsement Number 5 effective April 1, 1993 between Florida
Retail Federation Self Insurers Fund and Transamerica Insurance
Company, as modified by those certain Endorsements Numbers 7-9
effective July 1, 1993 between Florida Retail Federation Self Insurers
Fund and Transamerica Insurance Company, and as modified by that
certain Endorsement Number 10 effective October 1, 1993 between Florida
Retail Federation Self Insurers Fund and Transamerica Insurance
Company.
25. Workers Compensation Excess Agreement dated December 19, 1992 between
Florida Retail Federation Self Insurers Fund and Crossroads Insurance,
Inc. (signed by
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William B. Bull on FRFSIF's behalf) (Agreement No. C162-55-70), as
modified by that certain Workers Compensation Excess Agreement
Declarations effective January 1, 1993 between Florida Retail
Federation Self Insurers Fund and Crossroads Insurance, Inc. (signed by
William B. Bull on FRFSIF's behalf), and as modified by those certain
Endorsements Numbers 1-7 effective January 1, 1993 between Florida
Retail Federation Self Insurers Fund and Crossroads Insurance, Inc.
(signed by William D. Bull on FRFSIF's behalf).
26. Reinsurance Agreement dated September 3, 1993 between Florida Retail
Federation Self Insurers Fund and U.S. RE Corporation (signed by Summit
Consulting, Inc. on FRFSIF's behalf) (Cover Note No. 02655193).
27. Medical Excess of Loss Reinsurance Agreement effective January 1, 1993
between Florida Retail Federation Self Insurers Fund and Federal
Insurance Company per Duncanson & Holt Europe, Limited (signed by
William B. Bull on FRFSIF's behalf), as modified by Florida Mandatory
Endorsements Numbers 1 and 2 (attached thereto as page 11 of 11).
28. Excess of Loss Cover effective January 1, 1993 between Florida Retail
Federation Self Insurers Fund and Lloyd's London.
29. Excess Workers Compensation and Employers Liability Policy dated May 1,
1995 between Louisiana Employers Safety Association Self Insurers Fund
("LESASIF") and Continental Casualty Company (Policy No. W-128575463A),
as modified by those certain Endorsements Numbers 1-5 effective April
1, 1995 between Louisiana Employers Safety Association Self Insurers
Fund and Continental Casualty Company.
30. Reinsurance Agreement dated May 22, 1995 between Louisiana Employers
Safety Association Self Insurers Fund and Crossroads Insurance Company,
Ltd. (signed by William B. Bull on LESASIF's behalf), (Agreement No.
C162-67-700), as modified by that certain Aggregate Reinsurance Workers
Compensation Agreement effective April 1, 1995 between Louisiana
Employers Safety Association Self Insurers Fund and Crossroads
Insurance Company, Ltd. (signed by William B. Bull on LESASIF's
behalf), and as modified by those certain Endorsements Numbers 1-7
effective April 1, 1995 between Louisiana Employers Safety Association
Self Insurers Fund and Crossroads Insurance Company, Ltd. (signed by
William B. Bull on LESASIF's behalf).
31. Excess Workers Compensation and Employers Liability Policy dated April
11, 1994 between Louisiana Employers Safety Association Self Insurers
Fund and Continental Casualty Company (Policy No. W-128575463), as
modified by those certain Endorsements Numbers 1-4 effective April 1,
1994 between Louisiana Employers Safety Association Self Insurers Fund
and Continental Casualty Company.
32. Reinsurance Agreement dated March 31, 1994 between Louisiana Employers
Safety Association Self Insurers Fund and Crossroads Insurance Company,
Ltd. (signed by William B. Bull on LESASIF's behalf) (Agreement No.
C162-61-700), as modified by that certain Aggregate Reinsurance Workers
Compensation Agreement effective April 1, 1994 between Louisiana
Employers Safety Association Self Insurers Fund and Crossroads
Insurance, Inc. (signed by William B. Bull LESASIF's behalf), and as
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modified by those certain Endorsements Numbers 1-7 effective April 1,
1994 between Louisiana Employers Safety Association Self Insurers Fund
and Crossroads Insurance, Inc. (signed by William B. Bull on LESASIF's
behalf).
33. Excess of Loss Cover effective April 1, 1994 between Louisiana
Employers Safety Association Self Insurers Fund and L.I.R.M.A.
34. Excess Workers Compensation and Employers Liability Policy dated April
19, 1993 between Louisiana Employers Safety Association Self Insurers
Fund and Transamerica Insurance Company (Policy No. W-141774C), as
modified by those certain Endorsements Numbers 1-3 effective April 1,
1993 between Louisiana Employers Safety Association Insurers Fund and
Transamerica Insurance Company.
35. Reinsurance Agreement dated March 12, 1993 between Louisiana Employers
Safety Association Self Insurers Fund and Crossroads Insurance, Inc.
(signed by William B. Bull on LESASIF's behalf) (Agreement No.
C162-57-700), as modified by that certain Aggregate Reinsurance Workers
Compensation Agreement effective April 1, 1993 between Louisiana
Employers Safety Association Self Insurers Fund and Crossroads
Insurance, Inc. (signed by William B. Bull on LESASIF's behalf), and as
modified by those certain Endorsements Numbers 1-9 effective April 1,
1993 between Louisiana Employers Safety Association Self Insurance Fund
and Crossroads Insurance, Inc. (signed by William B. Bull on LESASIF's
behalf).
36. Excess of Loss Cover effective April 1, 1993 between Louisiana
Employers Safety Association Self Insurers Fund and L.I.R.M.A.
37. Excess Workers Compensation and Employers Liability Policy dated June
20, 1995 between Louisiana Retailers Association Self Insurers Fund and
Continental Casualty Company (Policy No. W-128576113A), as modified by
those certain Endorsements Numbers 1-4 effective July 1, 1995 between
Louisiana Retailers Association Self Insurers Fund and Continental
Casualty Company.
38. Reinsurance Agreement dated July 10, 1995 between Louisiana Retailers
Association Self Insurers Fund ("LRASIF") and Crossroads Insurance
Company, Ltd. (signed by William B. Bull on LRASIF's behalf) (Agreement
No. C162-68-700), as modified by that certain Aggregate Workers
Compensation Agreement effective July 1, 1995 between Louisiana
Retailers Association Self Insurers Fund and Crossroads Insurance
Company, Ltd., (signed by William B. Bull on LRASIF's behalf), and as
modified by those certain Endorsements Numbers 1-9 effective July 1,
1995 between Louisiana Retailers Association Self Insurers Fund and
Crossroads Insurance Company, Ltd. (signed by William B. Bull on
LRASIF's behalf).
39. Employers Reimbursement for Occupational Accidents dated June 1, 1995
between Louisiana Retailers Association Self Insurers Fund and Columbia
Casualty Company.
40. Specific Excess Workers Compensation Policy dated June 27, 1994 between
Louisiana Retailers Association Self Insurers Fund and Continental
Casualty Company (Policy No. W-128576113), as modified by those certain
Endorsements Numbers 1-4 effective July 1, 1994 between Louisiana
Retailers Association Self Insurers Fund and Continental Casualty
Company.
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41. Reinsurance Agreement dated June 24, 1994 between Louisiana Retailers
Association Self Insurers Fund and Crossroads Insurance, Inc. (signed
by William B. Bull on LRASIF's behalf) (Agreement No. C162-63-700), as
modified by that certain Aggregate Reinsurance Workers Compensation
Agreement effective July 1, 1994 between Louisiana Retailers
Association Self Insurers Fund and Crossroads Insurance, Inc. (signed
by William B. Bull on LRASIF's behalf), and as modified by those
certain Endorsements Numbers 1-9 effective July 1, 1994 between
Louisiana Retailers Association Self Insurers Fund and Crossroads
Insurance, Inc. (signed by William B. Bull on LRASIF's behalf).
42. Excess Workers Compensation and Employers Liability Policy dated July
12, 1993 between Louisiana Retailers Association Self Insurers Fund and
Transamerica Insurance Company (Policy No. W-141674D), as modified by
those certain Endorsements Numbers 1-3 effective July 1, 1993 between
Louisiana Retailers Association Self Insurers Fund and Transamerica
Insurance Company.
43. Reinsurance Agreement dated June 17, 1993 between Louisiana Retailers
Association Self Insurers Fund and Crossroads Insurance, Inc. (signed
by William B. Bull on LRASIF's behalf) (Agreement No. C162-58-700), as
modified by that certain Aggregate Reinsurance Workers Compensation
Agreement effective July 1, 1993 between Louisiana Retailers
Association Self Insurers Fund and Crossroads Insurance, Inc. (signed
by William B. Bull on LRASIF's behalf), and as modified by those
certain Endorsements Numbers 1-9 effective July 1, 1993 between
Louisiana Retailers Association Self Insurers Fund and Crossroads
Insurance, Inc. (signed by William B. Bull on LRASIF's behalf).
44. Specific Employers Excess Occupational Accident Insurance dated April
22, 1994 between Louisiana Retailers dated Association Self Insurers
Fund and Stirling Cooke Insurance Brokers, Ltd.
45. Excess Workers Compensation and Employers Liability Policy dated
January 1, 1997 between Florida Retail Federation Self Insurers Fund
and Continental Casualty Company (Policy No. W-128573499C), as modified
by those certain Endorsements Numbers 1-3 effective January 1, 1996
between Florida Retail Federation Self Insurers Fund and Continental
Casualty Company.
46. Workers' Compensation Quota Share Reinsurance Agreement dated January
1, 1997 between Florida Retail Federation Self Insurers Fund and
American Re-Insurance Company (Policy No. 0018-0001) (signed by William
B. Bull of FRFSIF's behalf).
47. Workers' Compensation Excess Agreement dated January 1, 1997 and
revised March 3, 1997 between Crossroads Insurance Company Ltd. and
Florida Retail Federation Self Insurers Fund (Policy C162-73-700), as
modified by those certain Endorsements Numbers 1-8 effective January 1,
1997 between Crossroads Insurance Company Ltd. and Florida Retail
Federation Self Insurers Fund (signed by William B. Bull on FRFSIF's
behalf).
48. Employer Reimbursement Occupational Accident Insurance Policy dated
January 1, 1996 between Continental Casualty Company and Florida Retail
Federation Self
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Insurers Fund (Policy No. SR-83093061), as modified by those certain
Endorsements Numbers 1-6 effective January 1, 1996 between Continental
Casualty Company and Florida Retail Federation Self Insurers Fund.
49. Excess Workers Compensation and Employers Liability Policy dated
January 1, 1996 between Continental Casualty Company and Florida Retail
Federation Self Insurers Fund (Policy No. W-128573499B), as modified by
those certain Endorsements Numbers 1-4 effective January 1, 1996
between Continental Casualty Company and Florida Retail Federation Self
Insurers Fund.
50. Workers' Compensation Excess Agreement dated January 1, 1996 between
Crossroads Insurance Company Ltd. and Florida Retail Federation Self
Insurers Fund (Policy No. C162-69-700), as modified by those certain
Endorsements Number 1-8 effective January 1, 1996 between Crossroads
Insurance Company Ltd. and Florida Retail Federation Self Insurers Fund
(signed by William B. Bull on FRFSIF's behalf).
51. Excess of Loss Reinsurance Agreement dated April 1, 1997 between John
Hancock Mutual Life Insurance (per JEH Reinsurance Underwriting
management (Bermuda) Limited) and Employers Self Insurers Fund (Cover
Note No. TNC0822/97).
52. Workers' Compensation Specific Excess of Loss Contract dated April 1,
1997 between U.S. Re Corporation and Employers Self Insurers Fund
(Binder).
53. Workers' Compensation Excess and Employers Liability Policy dated April
1, 1997 between National Union Fire Insurance Company of Pittsburgh, PA
and Employers Self Insurers Fund (Policy No. 4155738) as modified by
those certain Endorsements Numbers 1-7 effective April 1, 1997 between
National Union Fire Insurance Company of Pittsburgh, PA and Employers
Self Insurers Fund.
54. Workers' Compensation Quota Share Reinsurance Agreement dated April 1,
1997 between AON RE Worldwide (with various proportions taken by
Constitution Reinsurance, St. Paul Fire and Marine Insurance Company,
and Transatlantic Reinsurance Company)and Employers Self Insurers Fund.
55. Occupational Accident Excess of Loss Reinsurance Agreement _ First
Layer dated April 1, 1996 between The Various Lloyd's Syndicates and
Employers Self Insurers Fund, as modified by those certain Endorsements
Numbers 1-2 effective April 1, 1996 between The Various Lloyd's
Syndicates and Employers Self Insurers Fund (signed by William B. Bull
on behalf of Bridgefield Employers).
56. Excess Workers' Compensation and Employers Liability Policy dated April
1, 1996 between National Union Fire Insurance Company of Pittsburgh, PA
and Employers Self Insurers Fund (Policy No. 4155738), as modified by
those certain Endorsements Numbers 1-7 effective April 1, 1996 between
National Union Fire Insurance Company of Pittsburgh, PA and Employers
Self Insurers Fund.
57. Specific Excess Workers' Compensation and Employers Liability Policy
dated January 1, 1996 between Reliance national Indemnity Company and
Kentucky Retail Federation Self Insurers Fund (Policy No. NXC
0126698-00), as modified by those certain Endorsements Numbers 1-6,
Voluntary Compensation and Employers' Liability
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coverage Endorsement, and Kentucky Endorsement effective January 1,
1996 between Reliance National Indemnity Company and Kentucky Retail
Federation Self Insurers Fund.
58. Aggregate Excess Workers' Compensation Indemnity Agreement dated
January 1, 1996 between Reliance National Indemnity Company and
Kentucky Retail Federation Self Insurers Fund (Policy No. NAG
0126690-00), as modified by those certain Endorsements Numbers 1 and
Kentucky Endorsement effective January 1, 1996 between Reliance
National Indemnity Company and Kentucky Retail Federation Self Insurers
Fund.
59. Excess of Loss Reinsurance dated April 1, 1997 between John Hancock
Mutual Life Insurance Company (per JEH Reinsurance Underwriting
Management (Bermuda) Limited and Bridgefield Casualty Insurance Company
(Cover Note No. TNC0827-97).
60. Workers' Compensation and Employers' Liability Excess of Loss
Reinsurance Contract dated January 1, 1997 between Continental Casualty
Company and Bridgefield Casualty Insurance Company (Contract No.
W-128579478A) (signed by David T. Cederholm on behalf of BCIC).
61. Workers' Compensation Quota Share Agreement dated January 1, 1997
between American Re-Insurance Company and Bridgefield Casualty
Insurance Company (A/R #2846-0001) as modified by Endorsement Number 1
effective January 1, 1997 between American Re-Insurance Company and
Bridgefield Casualty Insurance Company (signed by David T. Cederholm on
behalf of BCIC).
62. Workers' Compensation Excess of Loss Reinsurance Agreement dated
January 1, 1996 between Continental Casualty Company and Bridgefield
Casualty Insurance Company (Contract Number W-128579478 (signed by
David T. Cederholm on behalf of BCIC).
63. Workers' Compensation Quota Share Reinsurance Agreement with Cover Note
dated January 1, 1996 between American Re-Insurance Company and
Bridgefield Casualty Insurance Company (Agreement No. 2846-0001)
(signed by William B. Bull on behalf of BCIC).
64. Excess Workers' Compensation and Employers Liability Policy dated July
1, 1996 between Continental Casualty Company and Louisiana Retailers
Association Self Insurers Fund (Policy No. W-128576113B) as modified by
those certain Endorsements Numbers 1-5 effective July 1, 1996 between
Continental Casualty Company and Louisiana Retailers Association Self
Insurers Fund.
65. Reinsurance Agreement dated July 1, 1996 between Crossroads Insurance
Company Ltd. and Louisiana Retailers Association Self Insurers Fund
(Policy No. C162-72-700) as modified by those certain Endorsements
Numbers 1-9 between Crossroads Insurance Company Ltd. and Louisiana
Retailers Association Self Insurers Fund (signed by William B. Bull on
behalf of LRASIF).
66. Excess Workers' Compensation and Employers Liability Policy dated April
1, 1996 between Continental Casualty Company and Louisiana Employers
Safety Association Self Insurers Fund (Policy No. W-128575463B) as
modified by those certain
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Endorsements Numbers 1-4 effective April 1, 1996 between Continental
Casualty Company and Louisiana Employers Safety Association Self
Insurers Fund.
67. Reinsurance Agreement dated April 1, 1996 between Crossroads Insurance
Company Ltd. and Louisiana Employers Safety Association Self Insurers
Fund (Policy No. C162-70-700) as modified by those certain Endorsements
Numbers 1-7 between Crossroads Insurance Company Ltd. and Louisiana
Employers Safety Association Self Insurers Fund (signed by William B.
Bull on behalf of LESASIF).
68. Excess Workers' Compensation and Employers Liability Policy dated April
1, 1997 between Continental Casualty Company and Louisiana Employers
Safety Association Self Insurers Fund (Policy No. W-128575463C
Confirmation) as modified by those certain Endorsements effective April
1, 1997 between Continental Casualty Company and Louisiana Employers
Safety Association Self Insurers Fund.
69. Reinsurance Agreement dated April 1, 1997 between Crossroads Insurance
Company Ltd. and Louisiana Employers Safety Association Self Insurers
Fund (Policy No. C162-74-700) as modified by those certain Endorsements
Numbers 1-7 between Crossroads Insurance Company Ltd. and Louisiana
Employers Safety Association Self Insurers Fund (signed by William B.
Bull on behalf of LESASIF).
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SCHEDULE 7.16
Business Activities
The Borrower and the Borrower Affiliates are engaged in the business of
worker's compensation insurance related activities. Specifically:
Summit Consulting, through its three operating subsidiaries Summit
Claims, Summit Loss and CICF, provides administrative services including
marketing, policy administration, claims investigation and management, loss
control, safety consultation, reinsurance placement, and financial and
regulatory reporting.
Each of Bridgefield Casualty Insurance Company and Bridgefield
Employers Insurance Company is licensed by the State of Florida to underwrite
property and casualty insurance.
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SCHEDULE 8A.1
Certain Reinsurers
1. Lloyd's of London
2. Crossroads Insurance Company, Ltd.
3. American Reinsurance Corp.
4. National Reinsurance Corp.
5. CNA Insurance Companies (specifically including, without limitation,
Columbia Casualty Company and Continental Casualty Company)
6. Transamerica Insurance Company
7. U.S. RE Corporation
8. The Federal Insurance Company (Duncanson & Holt Europe, Ltd.)
9. Clarendon Insurance
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SCHEDULE 8A.2
Contingent Liabilities
None.
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SCHEDULE 8A.9
Certain Affiliate Transactions
1. Summit Consulting has a verbal agreement with Duke Leasing, an aircraft
leasing corporation, whereby Summit Consulting leases an aircraft on an
hourly rate from Duke Leasing and, in turn, provides aircraft
management and pilot services to Duke Leasing. The principal owner of
Duke Leasing is C.C. Dockery, director of the Borrower and principal of
Crossroads Insurance Company Ltd. (See item no. 2 on Schedule 8A.1).
2. The sponsoring organization for LESA is the Louisiana Employers Safety
Association. The Louisiana Employers Safety Association has various
verbal agreements with Summit Consulting, Inc. to provide newsletter
production, collection of dues, and general bookkeeping services.
William B. Bull, President and Chief Executive Officer of Summit
Consulting, Inc. owns 100% of the outstanding stock of the Louisiana
Employers Safety Association.
3. See Schedule 6.28 for a list of safety engineering and loss control
services agreements between Summit Consulting and Summit Loss.
4. The Bridgefield Management Agreement.
5. The Employment Agreements.
6. See matters discussed under "Certain Transactions" in the Form S-1
filed with the Securities and Exchange Commission in connection with
the IPO.
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