FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission File Number 1-13995
CHICAGO TITLE CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 36-4217886
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
171 North Clark Street
Chicago, Illinois 60601
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(Address of Principal Executive Offices and Zip Code)
(888) 431-4288
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days: YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date:
21,819,885
---------------------
(As of July 31, 1999)
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CHICAGO TITLE CORPORATION
Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(In thousands, except share data)
ASSETS
------
<CAPTION>
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
<S> <C> <C>
Cash on hand and in banks. . . . . . $ 52,864 $ 39,230
Cash pledged to secure trust and
escrow deposits. . . . . . . . . . 206,552 93,887
Marketable securities, available-for-sale:
Fixed maturities, at fair value
(amortized cost of $1,068,288 and
$1,136,432 in 1999 and 1998,
respectively). . . . . . . . . . 1,066,043 1,158,664
Equity securities, at fair value
(cost of $33,640 and $33,079
in 1999 and 1998, respectively) 32,129 35,464
---------- ----------
Total marketable securities 1,098,172 1,194,128
Receivables, including accrued investment
income, less allowance for doubtful
accounts of $13,770 and $14,072 in
1999 and 1998, respectively. . . . 72,157 75,840
Deferred federal income taxes. . . . 106,251 89,553
Fixed assets, net. . . . . . . . . . 110,154 104,322
Title plants . . . . . . . . . . . . 152,449 151,600
Goodwill . . . . . . . . . . . . . . 132,307 90,581
Other assets (Note 3). . . . . . . . 98,550 42,618
---------- ----------
Total assets . . . . . . . $2,029,456 $1,881,759
========== ==========
<PAGE>
CHICAGO TITLE CORPORATION
Consolidated Balance Sheets - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
(UNAUDITED)
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------
Accounts payable . . . . . . . . . . $ 103,366 $ 112,136
Accrued expenses and other liabilities 182,762 172,253
Bank and other long term debt. . . . 21,487 21,648
Reserve for title losses . . . . . . 646,535 618,831
Trust and escrow deposits secured
by pledged assets. . . . . . . . . 596,921 495,299
---------- ----------
Total liabilities. . . . . 1,551,071 1,420,167
Stockholders' Equity (Note 6):
Common stock-par value of $1 per share,
authorized 66,000,000 shares; issued and
outstanding 21,768,996 shares at
June 30, 1999 (net of 241,867 treasury
shares) and 21,905,685 shares at
December 31, 1998 (net of 20,966
treasury shares) . . . . . . . . 21,769 21,906
Additional paid-in capital . . . . 120,945 127,270
Unearned compensation-restricted stock
and employee stock award plans . (11,040) (15,573)
Retained earnings (Note 5) . . . . 349,152 311,988
Accumulated other comprehensive income
(Note 4) . . . . . . . . . . . . (2,441) 16,001
---------- ----------
Total stockholders' equity 478,385 461,592
---------- ----------
Total liabilities and
stockholders' equity . . $2,029,456 $1,881,759
========== ==========
<FN>
See accompanying notes to consolidated quarterly financial statements
</TABLE>
<TABLE>
CHICAGO TITLE CORPORATION
Consolidated Statements of Income
For the three and six months ended June 30, 1999 and 1998 (Unaudited)
(In thousands, except per share data)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Title, escrow, trust and other revenue . . . $ 513,026 $ 461,757 $ 984,836 $ 847,561
Investment income. . . . . . . . . . . . . . 15,070 15,748 31,677 30,553
Net realized investment gains. . . . . . . . 215 167 1,249 538
---------- ---------- ---------- ----------
Total revenues . . . . . . . . . . . 528,311 477,672 1,017,762 878,652
---------- ---------- ---------- ----------
EXPENSES:
Salaries and other employee benefits . . . . 161,478 167,021 315,011 294,624
Commissions paid to agents . . . . . . . . . 179,947 153,743 352,143 285,233
Provision for title losses . . . . . . . . . 31,676 30,467 61,493 56,746
Interest expense . . . . . . . . . . . . . . 950 1,110 2,029 2,405
Other operating and administrative expenses. 108,929 104,110 206,615 186,383
---------- ---------- ---------- ----------
Total expenses . . . . . . . . . . . 482,980 456,451 937,291 825,391
---------- ---------- ---------- ----------
Operating income from continuing operations
before income taxes. . . . . . . . . . . . . 45,331 21,221 80,471 53,261
Income taxes . . . . . . . . . . . . . . . . . 15,269 10,518 27,220 21,317
---------- ---------- ---------- ----------
Net income from continuing operations. . . . . 30,062 10,703 53,251 31,944
Net income from discontinued operations. . . . - 4,034 - 9,013
---------- ---------- ---------- ----------
Net income . . . . . . . . . . . . . . . . . . $ 30,062 $ 14,737 $ 53,251 $ 40,957
=========== ========== ========== ==========
CHICAGO TITLE CORPORATION
Consolidated Statements of Income - CONTINUED
For the three and six months ended June 30, 1999 and 1998 (Unaudited)
(In thousands, except per share data)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1999 1998 1999 1998
----------- ---------- ----------- ----------
Basic and diluted earnings per share (Note 2 & 6):
Continuing operations . . . . . . . . . . . $ 1.38 $ 0.49 $ 2.44 $ 1.46
Discontinued operations . . . . . . . . . . - 0.18 - 0.41
---------- ---------- ---------- ----------
Net earnings per share . . . . . . . . . . . . $ 1.38 $ 0.67 $ 2.44 $ 1.87
========== ========== ========== ==========
<FN>
See accompanying notes to consolidated quarterly financial statements.
</TABLE>
<PAGE>
<TABLE>
CHICAGO TITLE CORPORATION
Consolidated Statements of Cash Flows
For the six months ended June 30, 1999 and 1998 (Unaudited)
(In thousands)
<CAPTION>
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998
------------ -----------
<S> <C> <C>
Cash flows from continuing operations activities:
Net income from continuing operations. . . . . . . . . . . . . . . . . $ 53,251 $ 31,944
Adjustments to reconcile net income from continuing operations
to net cash provided by continuing operations activities:
Depreciation and amortization. . . . . . . . . . . . . . . . . . . 27,218 16,935
Changes in assets and liabilities:
Cash pledged to secure trust and escrow deposits . . . . . . . . (112,664) (186,963)
Receivables. . . . . . . . . . . . . . . . . . . . . . . . . . . 3,942 (9,507)
Current and deferred federal income taxes. . . . . . . . . . . . (2,219) (13,792)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . (55,498) 6,883
Accounts payable and accrued expenses and other liabilities. . . (5,384) 10,568
Reserve for title losses . . . . . . . . . . . . . . . . . . . . 27,804 20,120
Trust and escrow deposits secured by pledged assets. . . . . . . 101,509 135,677
Gain on sale of investments. . . . . . . . . . . . . . . . . . . . (1,249) (538)
---------- ----------
Net adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,541) (20,617)
---------- ----------
Net cash provided by continuing operations activities. . . . . . . . . . 36,710 11,327
---------- ----------
Dividends received from Alleghany Asset Management, Inc. (Note 2). . . . - 7,472
---------- ----------
Net cash provided by (used in) operations. . . . . . . . . . . . . . . . 36,710 18,799
---------- ----------
Cash flows from investing activities:
Purchase of long-term marketable securities. . . . . . . . . . . . . . (265,031) (206,791)
Sales of long-term marketable securities . . . . . . . . . . . . . . . 188,749 94,677
Maturities and redemptions of long-term marketable securities. . . . . 125,260 61,219
Net sales of short-term investments. . . . . . . . . . . . . . . . . . 24,704 99,386
Purchases of other invested assets . . . . . . . . . . . . . . . . . . (3,570) (3,418)
Sales of other invested assets . . . . . . . . . . . . . . . . . . . . 1,103 1,688
Purchases of fixed assets. . . . . . . . . . . . . . . . . . . . . . . (18,273) (14,385)
Sales of fixed assets. . . . . . . . . . . . . . . . . . . . . . . . . 982 2,174
Purchases of title plants. . . . . . . . . . . . . . . . . . . . . . . (80) (225)
Purchases of subsidiaries (Note 7) . . . . . . . . . . . . . . . . . . (53,873) (26,979)
Cash of acquired subsidiaries. . . . . . . . . . . . . . . . . . . . . 4,197 3,606
---------- ----------
Net cash provided by investing activities. . . . . . . . . . . . . . . . 4,168 10,952
---------- ---------
CHICAGO TITLE CORPORATION
Consolidated Statements of Cash Flows - CONTINUED
For the six months ended June 30, 1999 and 1998 (Unaudited)
(In thousands)
SIX MONTHS ENDED JUNE 30,
----------------------------
1999 1998
------------ -----------
Cash flows from financing activities:
Principal payments on bank and other long term debt. . . . . . . . . . (19,615) (1,288)
Principal receipts on bank and other long term debt. . . . . . . . . . 19,300 --
Payment of cash dividends (Note 5) . . . . . . . . . . . . . . . . . . (15,290) --
Original issuance and reissuance of treasury stock . . . . . . . . . . 3,703 --
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . (15,342) --
Cash remaining with discontinued operations (Note 2) . . . . . . . . . - (3,043)
---------- ----------
Net cash used in financing activities. . . . . . . . . . . . . . . . . . (27,244) (4,331)
---------- ----------
Net increase in cash . . . . . . . . . . . . . . . . . . . . . . . . . . 13,634 25,420
Cash at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . 39,230 21,219
---------- ----------
Cash as of balance sheet date. . . . . . . . . . . . . . . . . . . . . . $ 52,864 $ 46,639
========== ==========
<FN>
See accompanying notes to consolidated quarterly financial statements
</TABLE>
<PAGE>
CHICAGO TITLE CORPORATION
NOTES TO CONSOLIDATED QUARTERLY FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) BASIS OF PRESENTATION
This report should be read in conjunction with the Annual Report on
Form 10-K for the year ended December 31, 1998 and the Quarterly Report on
Form 10-Q for the quarter ended March 31, 1999 of Chicago Title Corporation
(the "Company"). The unaudited consolidated financial information included
in this report has been prepared in conformity with the accounting
principles and practices reflected in the consolidated financial statements
included in the aforementioned Form 10-K filed with the Securities and
Exchange Commission. All adjustments are of a normal recurring nature
except as described herein and are, in the opinion of management, necessary
for a fair presentation of the consolidated results for the interim
periods. The results of operations for the interim periods are not
necessarily indicative of results for a full year.
Certain reclassifications have been made to the 1998 consolidated
financial statements to conform to the 1999 presentation.
(2) THE SPIN-OFF
In June 1998, the Company was spun off from Alleghany Corporation and
became an independent, publicly traded company (the "Spin-Off"). Prior to
the Spin-Off, the Company performed trust and asset management services
through a subsidiary, Alleghany Asset Management, Inc. This subsidiary
remained with Alleghany Corporation after the Spin-Off. Accordingly, the
results of operations of this subsidiary in 1998 are reported in the
Company's statements of income as discontinued operations. As a result of
the Spin-Off, Alleghany Asset Management made no contribution to 1999
results. Net income from discontinued operations was $4,034, or $0.18 per
basic and diluted share, in the second quarter of 1998. For the six months
ended June 30, 1998, net income from discontinued operations was $9,013, or
$0.41 per basic and diluted share.
(3) ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1999, the Company adopted Statement of Position
("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which provides guidance on accounting for the
costs of computer software intended for internal use. For the second
quarter and year-to-date as of June 30, 1999, costs in progress of $1,743
and $3,817, respectively, were incurred and capitalized for internal system
development. These costs are primarily attributable to the Company's
previously announced electronic spine project.
In June 1998, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting
for Derivative Instruments and Hedging Activities". SFAS No. 133
establishes accounting and reporting standards for derivative instruments
and hedging activities. SFAS No. 133, as subsequently amended by SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities -
Deferral of the Effective Date of FASB Statement No. 133 - an amendment of
FASB Statement No. 133", is effective for financial statements for fiscal
years beginning after June 15, 2000. While the Company is still evaluating
this standard, adoption of SFAS No. 133 is not expected to have a material
impact on the financial position or results of operations of the Company.
<PAGE>
(4) COMPREHENSIVE INCOME
Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting Comprehensive Income" requires total comprehensive income be
reported in condensed financial statements of interim periods. Total
comprehensive income consists of net income and other comprehensive income.
The Company's total comprehensive income for the three months ended
June 30, 1999 and 1998 was $18,885 and $14,628, respectively. The Company's
total comprehensive income was $34,809 and $40,888 for the six months ended
June 30, 1999 and 1998, respectively. Other comprehensive income relates to
changes in unrealized appreciation (depreciation) of marketable securities,
net of deferred taxes, and was $(11,177) and $(109) for the three months
ended June 30, 1999 and 1998, respectively, and $(18,442) and $(69) for the
six months ended June 30, 1999 and 1998, respectively.
(5) DIVIDENDS
On April 27 and July 27, 1999, the Company's Board of Directors
declared cash dividends of $0.36 per share, payable on June 15 and
September 15, 1999, respectively, to stockholders of record on June 1 and
September 1, 1999, respectively.
(6) WEIGHTED AVERAGE SHARES OUTSTANDING
The weighted average number of shares outstanding for the three and
six months ended June 30, 1999 was 21,782,692 and 21,833,633, respectively.
The weighted average number of shares outstanding for the comparable
periods in 1998 was 21,906,651.
(7) ACQUISITIONS
During the second quarter of 1999, the Company acquired the assets
of, or stock in, various companies for a total cost of $18,440. These
acquisitions were accounted for using the purchase method of accounting.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations--Comparison of Three and Six Months Ended June 30,
1999 and 1998
Net Income
For the second quarter of 1999, net income was $30.1 million, or
$1.38 per share on both a basic and diluted basis. Exclusive of $21.2
million in after-tax non-recurring Spin-Off and related management
restructuring costs, net income from continuing operations amounted to
$31.9 million, or $1.46 per basic and diluted share, for the second quarter
of 1998. Net income for the second quarter of 1999 represents the second
highest income level the Company has achieved, surpassed only by the second
quarter of 1998, excluding the impact of Spin-Off costs and discontinued
operations. Year to date net income was $53.3 million, or $2.44 per
share on both a basic and diluted basis. Exclusive of $21.6 million in
after-tax non-recurring Spin-Off and related management restructuring
costs, net income from continuing operations amounted to $53.5 million, or
$2.44 per basic and diluted share for the same period in 1998.
Operating Revenues
The Company's gross revenue for the three months ended June 30, 1999
was $528.3 million, an increase of 10.6 percent from the same period in
1998. Residential home sales transactions remained strong, more than
offsetting the decline in residential refinance business as interest rates
slowly rose. The residential refinance sector represented approximately
17.5 percent of total direct title premiums for the second quarter of 1999,
compared to 22.4 percent for the second quarter of 1998. Commercial markets
also continued at a very healthy pace.
Title, escrow, trust and other revenue was $513.0 million in the
second quarter of 1999, an increase of $51.3 million or 11.1 percent from
the year earlier period. The Company's continued focus on expanding its
array of available services and improving electronic distribution, resulted
in a 26.6 percent increase in real estate related services revenue which
rose to $26.1 million for the second quarter of 1999 compared to $20.6
million for the second quarter of 1998. For the three months ended June
30, 1999, gross title premiums from agents and approved attorneys increased
by $38.7 million and property information sales and escrow fees increased
by $4.8 million. Direct title premiums remained relatively flat year-over-
year. The remainder of the increase was seen in other categories.
Residential purchase revenue realized quarter-over-quarter
improvements of almost 18.4 percent. During the second quarter of 1999,
this sector represented 50.4 percent of total direct revenue compared to
43.2 percent during the second quarter of 1998. Commercial and industrial
("C&I") activity remained quite strong, accounting for 32.1 percent of
1999's second quarter direct revenue.
For the first six months of 1999, title, escrow, trust and other
revenue was $984.8 million, an increase of 16.2 percent from the first six
months of 1998. Real estate related services revenue rose 28.1 percent to
$47.6 million for the first half of 1999 compared to $37.2 million for the
first half of 1998. For the six months ended June 30, 1999, direct title
premiums increased by $16.4 million, gross title premiums from agents and
approved attorneys increased by $90.0 million, and property information
sales and escrow fees increased by $13.4 million from the year earlier
period. The remainder of the increase was seen in other categories.
<PAGE>
During the second quarter of 1999, 67.9 percent of the Company's
direct title premiums were attributable to residential transactions, of
which 50.4 percent were purchase transactions and 17.5 percent were
refinancings. During the second quarter of 1998, 65.6 percent of the
Company's direct title premiums were attributable to residential
transactions, of which 43.2 percent were purchase transactions and 22.4
percent were refinancings. The remaining direct title premiums for each
period were attributable to C&I transactions.
During the first six months of 1999, 68.8 percent of the Company's
direct title premiums were attributable to residential transactions, of
which 47.0 percent were purchase transactions and 21.8 percent were
refinancings. During the first six months of 1998, 64.8 percent of the
Company's direct title premiums were attributable to residential
transactions, of which 40.4 percent were purchase transactions and 24.4
percent were refinancings. The remaining direct title premiums for each
period were attributable to C&I transactions.
Investment Income
Investment income totaled $15.1 million for the second quarter and
$31.7 million for the first six months of 1999 as compared with $15.7
million and $30.6 million, respectively, for the same periods last year. On
a pre-tax basis, realized gains from sales of marketable securities were
$0.2 million and $1.2 million for the three and six months ended June 30,
1999, respectively. For the three and six months ended June 30, 1998,
realized gains from sales of marketable securities were $0.2 million and
$0.5 million on a pre-tax basis. The average duration of the portfolio at
June 30, 1999 was 2.8 years as compared with 2.4 years at December 31,
1998.
Expenses
COMMISSIONS PAID TO AGENTS. Payment of commissions to title insurance
agents constitutes the largest single expense incurred by the Company
(excluding non-recurring labor costs associated with the Spin-Off in 1998).
The commission rate varies by geographic area in which the commission is
earned, primarily due to competitive factors and the level of services
performed. The percentage of premiums retained by agents amounted to 74.8
and 75.8 percent for the three and six months ended June 30, 1999,
respectively. For the three and six months ended June 30, 1998 the
percentage of premiums retained by agents amounted to 76.2 and 76.1
percent, respectively. The Company reports amounts retained by agents,
along with amounts paid to approved attorneys, as commissions paid to
agents in its consolidated statements of income.
<PAGE>
SALARIES AND OTHER EMPLOYEE BENEFITS. This category of expense
represents the cost of salaries, incentive compensation and benefits paid
to employees. One key ratio monitored by management is the amount of these
expenses as a percentage of operating revenue, net of commissions paid to
agents. The following table summarizes this ratio:
(dollars in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Title, escrow, trust
and other revenue. $ 513,026 $ 461,757 $ 984,836 $ 847,561
Commissions paid
to agents. . . . . (179,947) (153,743) (352,143) (285,233)
--------- --------- --------- ---------
Net revenue. . . . . 333,079 308,014 632,693 562,328
--------- --------- --------- ---------
Total salaries and
other employee
benefits . . . . . 161,478 167,021 315,011 294,624
Less Spin-Off and
related management
restructuring costs-
labor related. . . - (23,196) - (23,196)
--------- --------- --------- ---------
Total salaries and
other employee
benefits, net. . . 161,478 143,825 315,011 271,428
--------- --------- --------- ---------
Percentage . . . . . 48.5% 46.7% 49.8% 48.3%
========= ========= ========= =========
During the second quarter of 1999, the level of total salaries and
other employee benefits as a percentage of net revenue was 48.5 percent as
compared to 46.7 percent for the same period in 1998 (excluding Spin-Off
and related management restructuring costs). While this ratio has
increased slightly since last year, it is the second lowest laborratio in
the Company's history and is down relative to the third and fourth
quarters of 1998 and the first quarter of 1999. Since staffing levels
typically lag changes in demand, this ratio was at an unusually low level
in the first and second quarter of 1998 as order volumes increased. During
1999, the Company will continue to manage labor costs and staffing levels
in an effort to ensure that appropriate productivity levels are maintained.
<PAGE>
PROVISION FOR TITLE LOSSES. The following table summarizes key
information pertaining to the Company's provision for title losses:
(dollars in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
Provision for
title losses . . . $ 31,676 $ 30,467 $ 61,493 $ 56,746
Title, escrow,
trust and other
revenue. . . . . . 513,026 461,757 984,836 847,561
Ratio. . . . . . . . 6.2% 6.6% 6.2% 6.7%
As of As of
June 30, December 31,
1999 1998
---------- -------------
Reserve for title losses at
period-end . . . . . . . . . . . $ 646,535 $ 618,831
Paid losses, net of recoveries-
trailing 12 months . . . . . . . 66,792 70,233
Reserve coverage of paid losses-
trailing 12 months . . . . . . . 9.7x 8.8x
For the second quarter of 1999, the provision for title losses was
6.2 percent of total operating revenue, representing a 0.4 percent drop
when compared with the provision rate for the second quarter of 1998. This
lower rate is in recognition of a continued favorable trend in the
Company's claims experience. An additional reduction of 0.3 percent to 0.5
percent in the provision rate is anticipated in the second half of 1999.
OTHER OPERATING AND ADMINISTRATIVE EXPENSES. During the second
quarter of 1999, other operating and administrative expenses increased $4.8
million over such expenses for the same period in 1998. This increase was
split between various categories. The increased level of expense was
primarily due to increases in variable costs associated with the higher
levels of revenue earned in the current year.
During the first six months of 1999, other operating and
administrative expenses increased $20.2 million to $206.6 million, an
increase of 10.9 percent over the first six months of 1998. Excluding pre-
tax Spin-Off and related management restructuring costs of $0.6 million in
the first six months of 1998, other operating and administrative expenses
increased $20.8 million over the same period last year.
Subsequent Event
On August 1, 1999, the Company and Fidelity National Financial, Inc.
a Delaware corporation ("Fidelity"), entered into an Agreement and Plan of
Merger ("Merger Agreement"). Pursuant to the Merger Agreement and subject
to the terms and conditions set forth therein, the Company will be merged
with and into Fidelity, with Fidelity being the surviving corporation of
such merger (the "Merger"). At the Effective Time (as defined in the
Merger Agreement) of the Merger, each issued and outstanding share of
common stock, par value $1.00 per share, of the Company ("Company Common
Shares") will be converted into the right to receive merger consideration
having a value of $52.00 (subject to certain adjustments) and consisting of
cash and shares of common stock, par value $.0001 per share, of Fidelity
("Fidelity Common Shares"). Holders of Company Common Shares will be
provided an opportunity to elect to receive the merger consideration in the
form of cash or in the form of Fidelity Common Shares, subject to
proration. The transaction is expected to be completed in the first
quarter of 2000, subject to approval by the stockholders of the Company and
Fidelity and to certain regulatory approvals.
Liquidity and Capital Resources
At June 30, 1999, the Company and its wholly owned subsidiary,
Chicago Title and Trust Company ("CT&T") - on a stand-alone basis excluding
all other subsidiaries - had total cash, cash equivalents and marketable
securities of $628.0 million, $597.4 million of which were pledged to
secure escrow deposits and other liabilities. At December 31, 1998, the
Company and CT&T - on a stand-alone basis excluding all other subsidiaries
- - had total cash, cash equivalents and marketable securities of $548.4
million, $502.3 million of which was pledged to secure escrow deposits and
other liabilities.
For the six months ended June 30, 1999, the Company's continuing
operations provided cash of $36.7 million. For the comparable period last
year, continuing operations activities provided a total of $11.3 million in
cash. The increase in cash flow between the two periods is primarily
attributable to the absence of after-tax Spin-Off costs of $21.6 million
which were incurred in the first six months of 1998.
The Company continues to expand its direct title operations in high
growth areas and to extend its array of real estate related product
offerings. During the first six months of 1999, the Company used a total of
$53.9 million in cash for acquisitions. The Company used internally
generated funds to finance these acquisitions. The aggregate gross
annualized revenue of these companies is $60.0 million, and the Company
expects each of these acquisitions to be immediately accretive to earnings.
On January 1, 1999, the Company entered into a revolving line of
credit agreement that provides for borrowings of up to $20.0 million. This
agreement will expire on December 31, 1999. Borrowings thereunder, which
bear interest at a floating rate, are available for general corporate
purposes. No amounts were outstanding under this line of credit as of June
30, 1999.
On May 26, 1999, the Company entered into two separate agreements
with banking institutions for lines of credit of $20 million and $25
million, replacing similar lines that CT&T had with the same lenders. The
new lines of credit will expire on May 24, 2000. Borrowings thereunder,
which bear interest at a floating rate equal to LIBOR plus 25 basis points,
are available for general corporate purposes. On May 28, 1999, the Company
borrowed $19.3 million under the $25 million line to repay the outstanding
balance of $19.3 million under a bank credit agreement entered into by CT&T
in connection with the acquisition of two of CT&T's title insurance
subsidiaries, Security Union Insurance Company and Ticor Title Insurance
Company. Such $19.3 million remained outstanding under the $25 million
line, and no amounts were outstanding under the $20 million line, as of
June 30, 1999.
On June 2, 1999, the Company entered into a bank credit agreement
providing for maximum borrowings of $50 million on a revolving basis,
replacing a similar agreement that CT&T had with the same lenders. The new
credit agreement will expire in June 2004. Borrowings thereunder, which
bear interest at a floating rate, are available for general corporate
purposes. No amounts were outstanding under this credit agreement as of
June 30, 1999.
In addition to the credit relationships described above, in
connection with the escrow and closing services that the Company offers to
its customers, the Company deposits substantial funds into demand deposit
accounts with various financial institutions. The Company negotiates for
and receives a range of banking services from these institutions as
permitted by banking laws and regulations, such as direct services,
payments to vendors (including one or more of the Company's subsidiaries)
that provide escrow accounting and other services, and credit
accommodations including short-term low rate loans to the Company secured
by its assets, primarily commercial paper purchased by the Company with the
proceeds of such loans.
<PAGE>
On January 26 and April 27, 1999, the Company's Board of Directors
declared cash dividends of $0.34 and $0.36 per share, respectively, payable
on March 15 and June 15, 1999, respectively, to stockholders of record as
of March 1 and June 1, 1999, respectively. On July 27, 1999, the
Company's Board of Directors declared a cash dividend of $0.36 per share
payable on September 15, 1999, to stockholders of record as of September 1,
1999.
The Company's common stockholders' equity per share as of June 30,
1999 was $21.98.
In June 1999, the Company filed a registration statement under the
Securities Act of 1933 to issue $75.0 million of debt, net proceeds of
which were expected to be used for general corporate purposes including the
repayment of existing debt and the funding of potential acquisitions. In
light of the execution of the Merger Agreement by the Comapnay and Fidelity
National Financial, Inc. discussed elsewhere in this report, the Company
has not yet determined whether to proceed with this offering at this time.
Management believes cash generated from operations, investments, and
cash available from financing activities will provide sufficient liquidity
to meet the Company's currently foreseeable needs.
Year 2000 Issues
OVERVIEW. As the year 2000 approaches, many computer systems
worldwide have the potential to malfunction or produce incorrect
information due to programming limitations relating to the storage and
manipulation of dates. For efficiency and to economize storage space,
computer manufacturers and software designers often omitted the first two
digits of the year when referring to dates in their programs. Consequently,
if not corrected, these programs will read the year 2000 (00 according to
the computer) as the year 1900. Many programs utilized by the Company and
its subsidiaries use only two digits to identify the year, and failure to
remediate this situation could lead to a disruption in the business
operations of the Company.
In response to "Year 2000" concerns, the Company has adopted a
six-phase corporate plan for itself and its subsidiaries entitled "Planning
for Year 2000" (the "Year 2000 Plan"). The Year 2000 Plan was designed to
help determine the extent of Year 2000 issues within each of its
information technology and non-information technology systems and to
facilitate remedial action. The six phases of the Year 2000 Plan are: (i)
inventory, (ii) assessment, (iii) remediation, (iv) system testing, (v)
implementation, and (vi) audit. Included within the scope of this plan are
centrally developed systems utilized on a company-wide basis in title
plants, title production units, claims processing, human resources and
financial management; decentralized systems; and systems that function
through third-party relationships.
The Year 2000 Committee, composed of representatives from the
Internal Audit, Information Services and General Counsel's Departments of
the Company, directs and monitors the Company's Year 2000 compliance
activities.
Information Technology
INVENTORY AND ASSESSMENT. The Company completed an initial inventory
of its information technology systems in 1997. Evaluations were done of
centrally supported business critical and non-critical systems as well as
the integrated communications between certain systems. This review also
covered all equipment in the central data center, including hardware,
software, and databases.
<PAGE>
Decentralized systems have been identified and evaluated at the local
and regional levels based upon responses to a comprehensive questionnaire
developed and distributed by the Information Services Department (the
"Field Office Survey"), which requests that field offices determine the
business criticality of any systems that may have been locally developed or
acquired. Field office managers are required to update their responses to
the Field Office Survey on a monthly basis. These responses are being sent
to the Internal Audit Department for review and for use in ongoing audit
activities.
The Field Office Survey specifically directs field office managers to
review and report the Year 2000 status of all hardware used in the field
offices, which consists mainly of personal computers (PCs). The Company has
received certification from all major PC manufacturers of the Year 2000
compliance of their specific models. Information regarding the Year 2000
readiness of such models has been posted on the Intranet (which is the
Company's computerized internal communications system). In addition, the
field offices have used software packages to test the Year 2000
preparedness of all local hardware used in regular business operations. In
order to assure Year 2000 compliance of the software installed on these
PCs, the Company is collecting vendor certifications and conducting proxy
testing of each such program.
Business critical operations which interface with computer hardware,
software or databases of third-party service providers, customers and
agents have been identified. The Company has requested written
certification of Year 2000 compliance from key third-party service
providers, customers and agents that interface with its business systems,
and continues its efforts to survey their Year 2000 readiness.
Due diligence efforts for recent acquisitions have included
verification of Year 2000 readiness, estimated expenditures toward Year
2000 compliance and certification of internal and external systems.
REMEDIATION. Modifications to centrally developed and supported
systems are one hundred percent complete. As previously mentioned, field
offices are being asked to provide monthly updates on the Year 2000
readiness of those systems developed or acquired locally. Use of the PC
evaluation software on field office PCs resulted in the identification of
more equipment that requires replacement. As a result, additional funding
for renovation or replacement of local systems was required. This process
was nearing completion by the end of the second quarter of 1999.
The Company has been receiving information from its key service
providers, customers and agents about their efforts relating to Year 2000
readiness. Although such information generally indicates that the systems
of the Company's key vendors, customers and agents will be ready for Year
2000, there can be no assurance that such systems will be remediated on a
timely basis.
SYSTEM TESTING. Testing of centrally supported applications is one
hundred percent complete. Off-site end-to-end application tests of the data
transfer between integrated business critical systems occurred in May 1999
and will be repeated in August 1999. Additional testing necessary to
conform to Federal Financial Institutions Examination Council ("FFIEC")
guidelines took place during the first half of 1999 while follow-up testing
is expected to be completed in August. FFIEC guidelines have been adopted
by various regulatory and licensing authorities and are considered by them
when performing on-site audits of the Company. Central documentation
libraries have been created to make test plans and test results more
readily available to auditors for these authorities.
Testing methodologies used for locally developed or acquired systems
have been at the discretion of field office management. The Field Office
Survey continuously requests additional information on testing of business
critical local systems and equipment.
<PAGE>
IMPLEMENTATION. One hundred percent of all centrally supported
systems modified to be Year 2000 compliant have been installed and are
currently in use. Significant hardware purchases for Year 2000 compliance
of central systems have been completed. Additional expenditures for field
office hardware may be required as verification of locally developed or
acquired systems is completed.
AUDIT. The final phase of the Year 2000 Plan consists of continuous
monitoring of the Company's remediation efforts. The completion of
milestones and the satisfaction of objectives defined in the Year 2000 Plan
provide checkpoints to assess the status of the Company's Year 2000
readiness. Audits of central systems and local and regional systems are
being conducted by the Internal Audit and Information Services Departments.
Non-Information Technology
The Company has completed its inventory and assessment of
non-information technology systems to determine to what extent such systems
are in need of Year 2000 remediation. The Company has identified the
operations of its facilities (elevators, heating and air conditioning units
and the like), office equipment (such as copiers, facsimile machines,
telephones, and voicemail), telephone and data lines and the supply of
electrical power as examples of non-information technology upon which the
Company is dependent. However, the Company is not more dependent on these
technologies than other businesses in the United States. The Company has
received certifications from the owner of its headquarters building that
the building's systems are Year 2000 compliant.
The Company has not identified any Year 2000 problems associated with
its non-information technology systems that have not either been remediated
or replaced, or scheduled to be remediated or replaced prior to January 1,
2000, or that are likely to pose any material risks to the Company's direct
business operations.
Costs for Year 2000 Remediation
In respect of remediation of central systems, the Company spent
approximately $2.8 million through the end of 1998, and approximately $1.1
million in 1999 to date out of a budget of $1.2 million for this year. To
remediate local systems, the Company spent approximately $2.1 million
through the end of 1998, and approximately $1.7 million in 1999 to date out
of a budget of $3.5 million for this year. The source of these sums is
corporate operating funds. The Company does not separately track the cost
of and time spent by its own internal employees on the Year 2000 project
because such costs are principally the related payroll costs for its
Information Services department. There may be other, non-material costs
which have also not been separately tracked.
Risks Related to Year 2000 Issues
The Company's operations are heavily dependent upon its information
technology business systems. Although not reasonably likely to occur, the
Company believes that a possible worst case scenario could result from a
combination of failures in its business critical information technology
systems coupled with failures in the real estate transaction, and banking
businesses generally. The Company believes that such failures could create
obstacles to providing certain services, such as production of title
insurance policies, settlement of real estate transactions and disbursement
of funds. In such a scenario, the Company might be forced to rely on the
manual or typewritten processing of transactions, or, if feasible, to shift
processing to other company systems or third party data processing vendors.
Such problems could have a material adverse effect on the Company's
operations in that it could lead to a decline in its volume of business or
an increase in its costs, the extent of which are not estimable. However,
any such failure would be likely to impact others in the industry as well,
and the Company has no reason to believe that it would be any more
adversely affected than other title insurance companies.
<PAGE>
Contingency Planning
Three types of events demanding contingency plans are identified in
the Year 2000 Plan: catastrophic events, such as failure of the national
power grid; major events, such as telephone or facilities failures; and
internal events, such as failures of specific components of the Company's
information technology business systems. In response to the possibility
that Year 2000 failures might occur, business resumption contingency
planning (other than for catastrophic events, which are outside the control
of the Company) has been or is being completed at each of the corporate,
regional, and local levels.
Although it is impossible to plan for every contingency, the Company
has taken steps to identify certain problems which might occur and
prioritize them in accordance with their relative risk. More complex
systems (e.g., business critical information technology systems and major
facilities) tend to be more high risk, and the Company focused on those in
its contingency planning.
Business resumption contingency plans have been or are being
developed to provide for the transfer of business operations from a non-
compliant Year 2000 facility to the nearest fully operational facility.
Contingency plans were also developed to allow fully operational systems to
provide alternative data processing capabilities for select systems that
experience failures. Examples of specific systems for which contingency
plans have been developed include branch processing and accounting,
financial accounting, general ledger, and payroll/human resources. In
accordance with FFIEC guidelines, methods of testing business resumption
contingency plans have been or are being developed and such testing is
taking place during the third quarter of 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market demand for the Company's primary products, like that of other
companies within the title insurance industry, is highly dependent upon the
volume of lending activity that is secured by real estate. While the volume
of real estate lending is strongly influenced by general economic
conditions, the level of interest rates (as well as the direction and
magnitude of changes in interest rates) is a particularly important factor.
Lower interest rates tend to improve the affordability of housing and
commercial space and therefore promote higher levels of construction and
real estate sales. Lower interest rates also make the refinancing of
existing loans secured by real estate more economically feasible.
Conversely, the increased financing costs associated with higher interest
rates tend to lower the demand for real estate and reduce the amount of
real estate lending. Consequently, the Company's revenue tends to expand in
periods of lower interest rates and contract in periods of higher interest
rates.
The Company's Annual Report on Form 10-K for the year ended
December 31, 1998 provides a detailed discussion of the market risks
affecting the Company's operations. Based on the Company's assessments as
of June 30, 1999, no material change has occurred in its market risk from
amounts disclosed in its 1998 Form 10-K.
<PAGE>
Forward-Looking Statements
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Quantitative and Qualitative Disclosures About
Market Risk" set forth in this report contain disclosures which are
forward-looking statements. Forward-looking statements include all
statements that do not relate solely to historical or current facts, and
can be identified by the use of words such as "may," "will," "expect,"
"project," "estimate," "anticipate," "plan" or "continue." These
forward-looking statements are based upon the Company's current plans or
expectations and are subject to a number of uncertainties and risks that
could significantly affect current plans and anticipated actions and the
Company's future financial condition and results. These uncertainties and
risks include, but are not limited to, those relating to conducting
operations in a competitive environment; the effect of fluctuations in the
volume of real estate transactions; acquisition activities; general
economic conditions; the relatively high costs of producing title evidence
when premiums are subject to regulatory and competitive restraints; the
effect of interest rate levels on the Company's investment portfolio; the
effect of state regulations requiring maintenance of minimum levels of
capital and surplus and restricting the payment of dividends; the success
of the Company in achieving Year 2000 compliance; and the risk of
substantial claims by large classes of claimants, such as aboriginal title
claims of Native Americans. As a consequence, current plans, anticipated
actions and future financial condition and results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Company.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On May 19, 1999, the California Attorney General, on behalf of
the People of the State of California, the Controller of the State of
California and the Insurance Commissioner of the State of California filed
a compliant against an alleged class of defendants consisting of title
insurers and escrow companies doing business in California. The complaint
alleges that defendants failed to escheat certain escrow funds to the State
of California, charged home buyers and other customers improper fees, and
failed to pay over to customers interest payments, or payments in lieu of
interest, made by various banks on escrow funds deposited by defendants on
behalf of such customers, in violation of various California laws. The
plaintiffs seek damages according to proof, return of allegedly improper
fees, disgorgement of the alleged interest payments or payments in lieu of
interest, payment to the State of California of the funds that allegedly
should have been escheated, interest, costs of suit including attorneys'
fees and investigative fees, civil penalties and injunctive relief.
Neither the Company nor any of its subsidiaries has been identified by name
as a defendant in this lawsuit.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) On April 8, 1999, the Company issued 35,713 shares to Richard
Pollay in partial settlement of units granted pursuant to the Company's
Performance Unit Incentive Plan of 1995. This issuance was exempt from
registration under the Securities Act of 1933, as amended, pursuant to
Section 4(2) thereof, as a transaction not involving a public offering.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's 1999 Annual Meeting of Stockholders was held on
April 27, 1999. At the Annual Meeting, five directors were elected to serve
for three-year terms on the Company's Board of Directors, by the following
votes:
Director For Withheld
-------- --- --------
Norman R Bobins 17,376,277 15,611
John F. Farrell, Jr. 17,376,655 15,233
Robert M. Hart 17,376,496 15,392
Philip G. Heasley 17,376,655 15,233
Alan N. Prince 17,375,963 15,925
At the Annual Meeting, the selection of KPMG LLP as auditors
for the Company for the year 1999 was ratified by a vote of 17,375,687
shares in favor and 6,580 shares opposed. A total of 9,621 shares
abstained from voting.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
EXHIBIT NUMBER DESCRIPTION
10.1(a) Agreement and Plan of Merger, dated as of August
1, 1999 (the "Merger Agreement"), by and between
Fidelity National Financial, Inc. and the Company,
filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated August 4, 1999, is
incorporated herein by reference.
10.1(b) List of Contents of Exhibits to the Merger
Agreement, filed as Exhibit 99.2 to the Company's
Current Report on Form 8-K dated August 4, 1999,
is incorporated herein by reference.
10.2 Line of Credit Agreement dated January 1,
1999,between the Company and Union Bank of
California, N.A.
10.3 Line of Credit Agreement dated May 26, 1999,
between the Company and U.S. Bank National
Association.
10.4 Line of Credit Agreement dated May 26, 1999,
between the Company and LaSalle Bank National
Association.
10.5(a) Revolving Loan and Credit Agreement dated as of
June 2, 1999 (the Revolving "Credit Agreement"),
among the Company, the various financial
institutions parties thereto and LaSalle Bank
National Association.
10.5(b) List of Contents of Exhibits to the Revolving
Credit Agreement.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the second quarter of 1999.
However, the Company filed a report on Form 8-K dated August 4, 1999, to
report in Item 5 thereof that the Company entered into the Merger Agreement
with Fidelity National Financial, Inc., as discussed elsewhere in this
report.
<PAGE>
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 thereunto duly authorized.
CHICAGO TITLE CORPORATION
Registrant
Date: August 13, 1999 /s/ Peter G. Leemputte
----------------------------------------------
Peter G. Leemputte
Executive Vice President, Chief Administrative
Officer and Chief Financial Officer
(principal financial officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
10.1(a) Agreement and Plan of Merger, dated as of August
1, 1999 (the "Merger Agreement"), by and between
Fidelity National Financial, Inc. and the Company,
filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K dated August 4, 1999, is
incorporated herein by reference.
10.1(b) List of Contents of Exhibits to the Merger
Agreement, filed as Exhibit 99.2 to the Company's
Current Report on Form 8-K dated August 4, 1999,
is incorporated herein by reference.
10.2 Line of Credit Agreement dated January 1, 1999,
between the Company and Union Bank of California,
N.A.
10.3 Line of Credit Agreement dated May 26, 1999,
between the Company and U.S. Bank National
Association.
10.4 Line of Credit Agreement dated May 26, 1999,
between the Company and LaSalle Bank National
Association.
10.5(a) Revolving Loan and Credit Agreement dated as of
June 2, 1999 (the Revolving "Credit Agreement"),
among the Company, the various financial
institutions parties thereto and LaSalle Bank
National Association.
10.5(b) List of Contents of Exhibits to the Revolving
Credit Agreement.
27 Financial Data Schedule.
EXHIBIT 10.2
- ------------
November 10, 1998
Mr. A. Larry Sisk
Vice President and Treasurer
Chicago Title Corporation
171 North Clark Street
Chicago, Illinois 60601-3294
Ladies and Gentlemen:
Pursuant to our discussions Union Bank of California, N.A. (the Bank) is
pleased to offer a credit facility to Chicago Title Corporation (the
Borrower), it being understood that Bank shall make advances available on
the following terms and conditions:
The terms of the facility are:
1. Borrower Chicago Title Corporation
Chicago, Illinois
2. Amount: The aggregate amount outstanding shall not exceed
$20,000,000.00.
3. Purpose: For general corporate purposes.
4. Evidence of Indebtedness: Promissory Note (Base Rate) to be signed by
Borrower in the form of Exhibit A hereto (the
Note).
5. Expiration: This facility will expire on December 31, 1999
(Expiration Date).
6. Interest Rate: The unpaid principal balance of all loans shall, at
Borrower's option, bear interest at a rate per
annum equal to:
(a) For any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such
day plus one half of one percent (0.50%) or
(b) the Reference Rate (hereinafter defined)
for such day. Reference Rate means the rate
per annum set by Bank from time to time and
called its Reference Rate. Interest on each
advance bearing interest at the Reference
Rate shall be calculated on the basis of a
year of 360 days and counting actual days
elapsed, and shall be payable quarterly on
the last day of each quarter.
(c) LIBOR (London Inter Bank Offered Rate)
as determined by Bank plus one-quarter of one
percent (0.25%) per annum (the LIBOR Rate).
Borrowings under this option shall be on an
as available basis for periods of one, two,
three, or six months (each, an Interest
Period) selected by Borrower. Interest on
borrowings under this option shall be payable
quarterly on the last day of each quarter and
on the Base Rate Maturity Date, and shall be
calculated on actual days elapsed based on a
360 day year.
In the event that deposits in the amount and for
the term of the selected Interest Period are
unavailable to Bank, or that by reason of
circumstances affecting the Eurodollar markets
generally, adequate and reasonable means do not
exist for ascertaining the interest rate applicable
to any loans bearing interest at the LIBOR Rate for
the selected Interest Period, Borrower shall either
repay such loan or direct Bank to convert such loan
into a loan bearing interest at a rate and for an
Interest Period which is available on the last day
of the then current Interest Period, said choice
between repayment or conversion to be solely at
Borrower's option.
If it shall become unlawful (or contrary to any
direction from or requirement of any governmental
authority having jurisdiction over the Bank) for
Bank to honor its commitment hereunder or continue
to fund or maintain any loan or to perform its
obligations hereunder, then this commitment shall
thereupon be canceled and, if it shall become
unlawful for Bank to continue to fund or maintain
any loan, Borrower shall prepay without premium or
penalty such loan together with accrued interest
thereon on the last day of the then current
Interest Period with respect to each such loan or
on such earlier date as may be required by law.
Each request by Borrower for a loan bearing
interest at the LIBOR Rate must be received by Bank
no later than 10:00 a.m. Pacific time on the
Business Day which is three (3) days prior to the
day it is to be funded. A request for a Federal
Funds Rate or a Reference Rate loan must be
received by Bank no later than 10:00 a.m. Pacific
time on the day it is to be funded.
7. Draw Maturities: No loan hereunder may mature later than the
Expiration Date.
8. Prepayment: Prepayments will be permitted only with prior
consent of Bank and in accordance with the terms of
the Note.
9. Commitment Fee: Borrower will pay a fee of ten (10) basis points
per annum of the unused portion of the amount
available hereunder, payable in arrears at the end
of each calendar quarter.
10. Covenants: Until the Expiration Date or termination of the of
the commitment and thereafter until all obligations
of the Borrower to the Bank have been satisfied and
discharged in full, the Borrower agrees that it,
with respect to the following covenants will:
(a) Consolidated Net Worth. Not permit
Consolidated Net Worth at the close of any fiscal
quarter to be less than $275,000,000; and
(b) Leverage Ratio. Not permit the Leverage Ratio
at the close of any fiscal quarter to be greater
than 0.45 to 1.0; and
(c) Interest Expense Coverage Ratio. Not permit the
ratio during any period of six consecutive fiscal
quarters of Earnings Before Interest and Taxes to
Interest Expense to be less than 2.5 to 1.0.
Capitalized covenant terms shall have the meaning
as defined in that certain Revolving Loan and
Credit Agreement entered into between Chicago Title
and Trust Company and certain Commercial Lending
Institutions and Lasalle National Bank as
Administrative Agent dated as of May 29, 1998, as
such defined terms are in effect as of the date of
this credit facility letter agreement. Any
violation of any of the above described covenants
shall be an Event of Default under the Note.
11. Cancellation: Borrower may cancel this facility at any time with
five (5) days written notice to Bank. Bank may
cancel this commitment upon the occurrence of a
Default as defined in the Note, such cancellation
to be effective upon the giving of written notice
to Borrower. Upon any such cancellation, Borrower
will pay to Bank any and all amounts due to Bank
hereunder, including without limitation any
Prepayment amounts which may be due under the Note.
Borrower understands and agrees that this facility is not assignable by
Borrower. Bank reserves the right to sell participations in this facility.
Your signing and returning these documents constitutes your agreement to
the terms and conditions of this credit facility. This offer expires on
December 31,1998, unless a signed copy of this letter, the enclosed
Promissory Note (Base Rate) and other documents are returned to my
attention by then. If the Bank does not have on file a current borrowing
resolution, a copy of the Borrower;s filed Articles of Incorporation and
any Amendments thereto and certificate of incumbency for authorized signers
for borrowings, please provide these at the time you return the signed
letter and Promissory Note.
Yours truly,
UNION BANK OF CALIFORNIA, N.A.
By: /S/ Joseph M. Argabrite
Joseph M. Argabrite
Vice President
Accepted and agreed to this 18th day of November, 1998.
CHICAGO TITLE CORPORATION
By: /S/ Peter G. Leemputte
Its: EVP, CFO and CAO
By: /S/ A. Larry Sisk
Its: VP and Treasurer
<PAGE>
PROMISSORY NOTE
(BASE RATE)
CHICAGO TITLE CORPORATION
Borrower Address Office Loan Number
171 North Clark Street Maturity Date $20,000,000.00
Chicago, Illinois 60601-3294 December 31, 1999
Los Angeles, California Date: January 1, 1999 $20,000,000.00
FOR VALUE RECEIVED, on December 31, 1999, the undersigned ("Debtor")
promises to pay to the order of UNION BANK OF CALIFORNIA, N.A. ("Bank"), as
indicated below, the principal sum of TWENTY MILLION AND NO/100 Dollars ($
20,000,000.00) or so much thereof as is disbursed, together with interest
on the balance of such principal from time to time outstanding, at the per
annum rate or rates and at the times set forth below.
1. INTEREST PAYMENTS. Debtor shall pay interest on the last day of each
calendar quarter (commencing March 31, 1999). Should interest not be paid
when due, it shall become part of the principal and bear interest as herein
provided. All computations of interest under this note shall be made on
the basis of a year of 360 days, for actual days elapsed.
a. BASE INTEREST RATE. At Debtor's option, amounts outstanding
hereunder in increments of at least $10,000 shall bear interest at a
rate, based on an index selected by Debtor, which is 0.25% per annum
in excess of Bank's LIBOR Rate for the Interest Period selected by
Debtor; or
b. FEDERAL FUNDS RATE / REFERENCE RATE. The higher of (a) the 0.50%
per annum in excess of the Bank's Federal Funds Rate, or (b) the
Bank's Reference Rate.
Any Base Interest Rate may not be changed, altered or otherwise
modified until the expiration of the Interest Period selected by
Debtor except as provided in paragraph 4. The exercise of interest
rate options by Debtor shall be as recorded in Bank's records, which
records shall be prima facie evidence of the amount borrowed under
either interest option and the interest rate; provided, however, that
failure of Bank to make any such notation in its records shall not
discharge Debtor from its obligations to repay in full with interest
all amounts borrowed. In no event shall any Interest Period extend
beyond the maturity date of this note.
To exercise this option, Debtor may, from time to time with respect to
principal outstanding on which a Base Interest Rate is not accruing,
and on the expiration of any Interest Period with respect to principal
outstanding on which a Base Interest Rate has been accruing, select an
index offered by Bank for a Base Interest Rate Loan and an Interest
Period by telephoning an authorized lending officer of Bank located at
the banking office identified below prior to 10:00 a.m., Pacific time,
on any Business Day and advising that officer of the selected index,
the Interest Period and the Origination Date selected (which
Origination Date, for a Base Interest Rate Loan based on the LIBOR
Rate, shall follow the date of such selection by no more than three
(3) Business Days).
Bank will mail a written confirmation of the terms of the selection to
Debtor promptly after the selection is made. Failure to send such
confirmation shall not affect Bank's rights to collect interest at the
rate selected. If, on the date of the selection, the index is
unavailable for any reason, the selection shall be void. Bank
reserves the right to fund the principal from any source of funds
notwithstanding any Base Interest Rate selected by Debtor.
c. VARIABLE INTEREST RATE. All principal outstanding hereunder
which is not bearing interest at a Base Interest Rate or the Federal
Funds Rate shall bear interest at the Reference Rate, which rate shall
vary as and when the Reference Rate changes.
At any time prior to the maturity of this note, subject to the
provisions of paragraph 4, below, of this note, Debtor may borrow,
repay and reborrow hereon so long as the total outstanding at any one
time does not exceed the principal amount of this note. Debtor shall
pay all amounts due under this note in lawful money of the United
States at Bank's Risk Management Department, 445 S. Figueroa Street,
G13-268, Los Angeles, California 90071 Office, or such other office
as may be designated by Bank, from time to time.
2. LATE PAYMENTS. If any payment required by the terms of this note
shall remain unpaid ten days after same is due, at the option of Bank,
Debtor shall pay a fee of $100 to Bank.
3. INTEREST RATE FOLLOWING DEFAULT. In the event of default, at the
option of Bank, and, to the extent permitted by law, interest shall be
payable on the outstanding principal under this note at a per annum rate
equal to two percent (2%) in excess of the interest rate specified in
paragraph 1.b, above, calculated from the date of default until all amounts
payable under this note are paid in full.
4. PREPAYMENT.
a. Amounts outstanding under this note bearing interest at a rate
based on the Reference Rate may be prepaid in whole or in part at any
time, without penalty or premium. Amounts outstanding under this note
bearing interest at a Base Interest Rate may only be prepaid, in whole
or in part provided Bank has received not less than five (5) Business
Days prior written notice of an intention to make such prepayment and
Debtor pays a prepayment fee to Bank in an amount equal to the present
value of the product of: (i) the difference (but not less than zero)
between (a) the Base Interest Rate applicable to the principal amount
which Debtor intends to prepay, and (b) the return which Bank could
obtain if it used the amount of such prepayment of principal to
purchase at bid price regularly quoted securities issued by the United
States having a maturity date most closely coinciding with the
relevant Base Rate Maturity Date and such securities were held by Bank
until the relevant Base Rate Maturity Date ("Yield Rate"); (ii) a
fraction, the numerator of which is the number of days in the period
between the date of prepayment and the relevant Base Rate Maturity
Date and the denominator of which is 360; and (iii) the amount of the
principal so prepaid (except in the event that principal payments are
required and have been made as scheduled under the terms of the Base
Interest Rate Loan being prepaid, then an amount equal to the lesser
of (A) the amount prepaid or (B) 50% of the sum of (1) the amount
prepaid and (2) the amount of principal scheduled under the terms of
the Base Interest Rate Loan being prepaid to be outstanding at the
relevant Base Rate Maturity Date). Present value under this note is
determined by discounting the above product to present value using the
Yield Rate as the annual discount factor.
b. In no event shall Bank be obligated to make any payment or refund
to Debtor, nor shall Debtor be entitled to any setoff or other claim
against Bank, should the return which Bank could obtain under the
above prepayment formula exceed the interest that Bank would have
received if no prepayment had occurred. All prepayments shall include
payment of accrued interest on the principal amount so prepaid and
shall be applied to payment of interest before application to
principal. A determination by Bank as to the prepayment fee amount,
if any, shall be conclusive.
<PAGE>
c. Such prepayment fee, if any, shall also be payable if prepayment
occurs as the result of the acceleration of the principal of this note
by Bank because of any default hereunder. If, following such
acceleration, all or any portion of a Base Interest Rate Loan is
satisfied, whether through sale of property encumbered by any security
agreement or other agreement securing this note, at a foreclosure sale
held thereunder or through the tender of payment at any time following
such acceleration, but prior to such a foreclosure sale, then such
satisfaction shall be deemed an evasion of the prepayment conditions
set forth above, and Bank shall, automatically and without notice or
demand, be entitled to receive, concurrently with such satisfaction
the prepayment fee set forth above, and the amount of such prepayment
fee shall be added to the principal. DEBTOR HEREBY ACKNOWLEDGES AND
AGREES THAT BANK WOULD NOT MAKE THE LOAN TO DEBTOR EVIDENCED BY THIS
NOTE WITHOUT DEBTOR'S AGREEMENT, AS SET FORTH ABOVE, TO PAY BANK A
PREPAYMENT FEE UPON THE SATISFACTION OF ALL OR ANY PORTION OF THE
PRINCIPAL BEARING INTEREST AT A BASE INTEREST RATE FOLLOWING THE
ACCELERATION OF THE MATURITY DATE HEREOF BY REASON OF A DEFAULT.
DEBTOR HAS CAUSED THOSE PERSONS SIGNING THIS NOTE ON ITS BEHALF TO
SEPARATELY INITIAL THE AGREEMENT CONTAINED IN THIS PARAGRAPH BY
PLACING THEIR INITIALS BELOW:
INITIALS: PGL and ALS
5. DEFAULT AND ACCELERATION OF TIME FOR PAYMENT. Default shall include
any of the following: (a) the failure of Debtor to make any payment
required under this note when due; (b) any breach, misrepresentation or
other default by Debtor under the terms of this Note and the Credit
Facility Letter referenced in paragraph (i) below; (c) the insolvency of
Debtor, or the failure of Debtor generally to pay such debts as such debts
become due; (d) the commencement as to the Debtor of any voluntary or
involuntary proceeding under any laws relating to bankruptcy, insolvency,
reorganization, arrangement, debt adjustment or debtor relief; (e) the
making of an assignment for the benefit of such Debtor's creditors; (f) the
appointment, or commencement of any proceeding for the appointment of a
receiver, trustee, custodian or similar official for all or substantially
all of Debtor's property; (g) the commencement of any proceeding for the
dissolution or liquidation of the Debtor; (h) the termination of existence
of the Debtor, whether by sale, merger or consolidation; or (i) default
under any covenant set forth in that certain Credit Facility Letter
Agreement dated November 10, 1998 between Debtor and Bank. Upon the
occurrence of any such default, Bank, in its discretion, may cease to
advance funds hereunder and may declare all obligations under this note
immediately due and payable; however, upon the occurrence of an event of
default under d, e, f, or g, all principal and interest shall automatically
become immediately due and payable.
6. ADDITIONAL AGREEMENTS OF DEBTOR. If any amounts owing under this note
are not paid when due, Debtor promises to pay all costs and expenses,
including reasonable attorneys' fees, incurred by Bank in the collection or
enforcement of this note. Debtor and any endorsers of this note, for the
maximum period of time and the full extent permitted by law, (a) waive
diligence, presentment, demand, notice of nonpayment, protest, notice of
protest, and notice of every kind; (b) waive the right to assert the
defense of any statute of limitations to any debt or obligation hereunder;
and (c) consent to renewals and extensions of time for the payment of any
amounts due under this note. If this note is signed by more than one
party, the term "Debtor" includes each of the undersigned and any
successors in interest thereof; all of whose liability shall be joint and
several. The receipt of any check or other item of payment by Bank, at its
option, shall not be considered a payment on account until such check or
other item of payment is honored when presented for payment at the drawee
bank. Bank may delay the credit of such payment based upon Bank's schedule
of funds availability, and interest under this note shall accrue until the
funds are deemed collected. In any action brought under or arising out of
this note, Debtor, including their successors and assigns, hereby consent
to the jurisdiction of any competent court within the State of California,
as provided in any alternative dispute resolution agreement executed
between Debtor and Bank, and consent to service of process by any means
authorized by said state's law. The term "Bank" includes, without
limitation, any holder of this note. This note shall be construed in
accordance with and governed by the laws of the State of California. This
note hereby incorporates any alternative dispute resolution agreement
previously, concurrently or hereafter executed between Debtor and Bank.
7. DEFINITIONS. As used herein, the following terms shall have the
meanings respectively set forth below: "Base Interest Rate" shall mean a
rate of interest based on the LIBOR Rate. "Base Interest Rate Loan" shall
mean amounts outstanding under this note that bear interest at a Base
Interest Rate. "Base Rate Maturity Date" shall mean the last day of the
Interest Period with respect to principal outstanding under a Base Interest
Rate Loan. "Business Day" shall mean a day which is not a Saturday or
Sunday on which Bank is open for business in the state identified in
paragraph 6, above, and with the respect to the rate of interest based on
the LIBOR Rate, on which dealings in U.S. dollar deposits outside of the
United States may be carried on by Bank. "Interest Period" shall mean any
calendar period of one, two, three, six, nine or twelve months. In
determining an Interest Period, a month means a period that starts on one
Business Day in a month and ends on and includes the day preceding the
numerically corresponding day in the next month. For any month in which
there is no such numerically corresponding day, then as to that month, such
day shall be deemed to be the last calendar day of such month. Any
Interest Period which would otherwise end on a non-Business Day shall end
on the next succeeding Business Day unless that is the first day of a
month, in which event such Interest Period shall end on the next preceding
Business Day. "LIBOR Rate" shall mean a per annum rate of interest
(rounded upward, if necessary, to the nearest 1/100 of 1%) at which dollar
deposits, in immediately available funds and in lawful money of the United
States would be offered to Bank, outside of the United States, for a term
coinciding with the Interest Period selected by Debtor and for an amount
equal to the amount of principal covered by Debtor's interest rate
selection, plus Bank's costs, including the cost, if any of reserve
requirements. "Origination Date" shall mean the Business Day on which
funds are made available to Debtor relating to Debtor's selection of a Base
Interest Rate. "Reference Rate" shall mean the rate announced by Bank from
time to time at its corporate headquarters as its Reference Rate. The
Reference Rate is an index rate determined by Bank from time to time as a
means of pricing certain extensions of credit and is neither directly tied
to any external rate of interest or index nor necessarily the lowest rate
of interest charged by Bank at any given time.
Federal Funds Rate means the rate determined by Bank to be the per annum
rate at which Bank can acquire term Federal funds overnight deposits for an
amount equal to the amount of principal covered by Debtor's interest rate
election, and adjusted to reflect Bank's costs.
CHICAGO TITLE CORPORATION
By /S/ Peter G. Leemputte
Title EVP, CFO and CAO
By /S/ A. Larry Sisk
Title VP and Treasurer
EXHIBIT 10.3
- ------------
Mr. A. Larry Sisk
Vice President and Treasurer
Chicago Title Corporation
171 North Clark Street
Chicago, Illinois 60601-3294
Dear Mr. Sisk:
U.S. Bank National Association (the Bank) is pleased to offer a credit
facility to Chicago Title Corporation (the Borrower), it being understood
that Bank shall make advances available on the following terms and
conditions:
The terms of the facility are:
1) Borrower: Chicago Title Corporation
Chicago, Illinois
2) Amount: The aggregate amount outstanding shall not exceed Twenty-
Five Million Dollars ($25,000,000.00)
3) Purpose: For general corporate purposes.
4) Evidence of Indebtedness: Revolving Credit Note to be signed by
Borrower in the form of Exhibit A
hereto (the Note).
5) Expiration: This facility will expire on May 24, 2000 (Expiration
Date).
6) Interest Rate: The unpaid principal balance of all loans shall, at
Borrower's option, bear interest at a rate per
annum equal to:
(a) the per annum rate of interest at which
overnight federal funds are from time to time
offered to Bank by any bank in the interbank
market, as stated by Bank (the Federal Funds
Rate), plus one quarter of one percent (1/4%)
per annum. Interest on each advance bearing
interest at the Federal Funds Rate shall be
calculated on the basis of a year of 360 days
and actual days elapsed, and shall be payable
at the earlier to occur of every ninety (90)
days or the maturity of each such advance.
(b) Bank's Base Rate, which means, for any day, a
rate per annum equal to the higher of (a) the
Federal Funds Rate for such day plus one half
of one percent (1/2%) or (b) the Reference
Rate (hereinafter defined) for such day.
Reference Rate which means the rate per annum
set by Bank from time to time and called its
Reference Rate. Interest on each advance
bearing interest at the Base Rate shall be
calculated on the basis of a year 360 days
and actual days elapsed, and shall be payable
every ninety (90) days.
(c) LIBOR (London Inter Bank Offered Rate) as
determined by Bank plus twenty-five (25)
basis points per annum (the LIBOR Rate).
Borrowings under this option shall be on an
as available basis for periods of one, two,
three or six months (each, an Interest
Period) selected by Borrower. Interest on
borrowings under this option shall be payable
at the earlier to occur of every ninety (90)
days and the maturity of each draw, and shall
be calculated on actual days elapsed on a 360
day year.
In the event that deposits in the amount and for
the term of the selected Interest Period are
unavailable to Bank, or that by reason of
circumstances affecting the Eurodollar markets
generally, adequate and reasonable means do not
exist for ascertaining the interest rate applicable
to any loans bearing interest at the LIBOR Rate for
the selected Interest Period, Borrower shall either
repay such loan or direct Bank to convert such loan
into a loan bearing interest at a rate and for an
Interest period which is available on the last day
of the then current Interest Period, said choice
between repayment or conversion to be solely at
Borrower's option.
If it shall become unlawful (or contrary to any
direction from or requirement of any governmental
authority having jurisdiction over the Bank) for
Bank to honor its commitment hereunder or continue
to fund or maintain any loan or to perform its
obligations hereunder, then this commitment shall
thereupon be canceled and, if it shall become
unlawful for Bank to continue to fund or maintain
any loan, Borrower shall prepay without premium or
penalty such loan together with accrued interest
thereon on the last day of the then current
Interest Period with respect to each such loan or
on such earlier date as may be required by law.
Each request by Borrower for a loan bearing
interest at the LIBOR Rate must be received by Bank
no later than 1:00 p.m. Chicago, Illinois time, on
the day which is three (3) days prior to the day it
is to be funded. A request for Federal Funds Rate
loans must be received by Bank no later than 12:00
p.m. Chicago, Illinois time, on the day it is to be
funded. A request for Base Rate loans must be
received by Bank no later than 2:00 p.m. Chicago,
Illinois time, on the day that it is to be funded.
7) Draw Maturities: No loan hereunder may mature later than the
Expiration Date.
8) Prepayment: Prepayments will be permitted only with prior consent of
Bank. Any break funding charges incurred by Bank shall
be for the account of Borrower.
9) Commitment Fee: Borrower will pay a fee of ten (10) basis points
per annum of the unused portion of the amount
available hereunder, payable in arrears at the end
of each calendar quarter.
10) Cross-default Provisions: Default(s) by Borrower in the payment
of any other obligations of Borrower,
which in the aggregate exceed
$10,000,000 shall also be an event of
default hereunder.
11) Year 2000: The Company has reviewed the areas within its business
and operations which could be adversely affected by, and
has developed or is developing a program to address on a
timely basis, the Year 2000 Problem (that is, the risk
that computer application used by the Company may be
unable to recognize and perform properly date-sensitive
functions involving certain dates prior to and any date
after December 31, 1999).
12) Cancellation: Borrower may cancel this facility at any time with
five (5) days written notice to Bank. Bank may
cancel this commitment upon the occurrence of an
Event of Default as defined in the Note, such
cancellation to be effective upon the giving of
written notice to Borrower. Upon any such
cancellation, Borrower will pay to Bank any and all
amounts due to Bank hereunder, including without
limitation any break funding costs.
Borrower understands and agrees that this facility is not assignable by
Borrower. Bank reserves the right to sell participations in this facility.
By Oregon Statute (ORS 41.580) the following disclosure is required: Under
Oregon law, most agreements, promises and commitments made by lenders after
October 3, 1989, concerning loans and other credit extensions which are not
for personal, family or household purposes or secured solely by the
borrower's residence must be in writing, express consideration and be
signed by Lender to be enforceable.
We trust that the foregoing adequately sets forth the terms and conditions
of our mutual agreement with respect to this facility. If you are in
agreement with the above, please complete, sign and return the enclosed
Note.
Yours truly,
/S/ Steven T. Williams
Steven T. Williams
Vice President
U.S. Bank National Association
Agreed to and accepted this 26th day of May, 1999.
CHICAGO TITLE CORPORATION
By: /S/ Peter G. Leemputte
Title: EVP, CFO and CAO
By: A. Larry Sisk
Title: VP and Treasurer
<PAGE>
REVOLVING PROMISSORY NOTE
$25,000,000 Dated: May 26, 1999
Due: May 24, 2000
On May 24, 2000, the undersigned (the Company), for value received,
promises to pay to the order of U.S. Bank National Association (the Bank),
the lesser of: the principal sum of Twenty-Five Million Dollars
($25,000,000) or the aggregate unpaid principal amount outstanding under
the credit facility made available by the Bank to Company, with interest
(computed on actual days elapsed on the basis of a 360 days year) on any
and all principal amounts outstanding hereunder from time to time from the
date hereof until maturity together with all costs of collection, including
reasonable attorneys' fees, upon default. Interest shall be payable as
more particularly set forth in that certain Facility Letter of even date
herewith by the Bank to Company, the terms and conditions of which are
incorporated herein by reference. The proceeds available hereunder are for
direct advances.
Any portion of principal hereof which is not paid when due whether at
stated maturity, by acceleration, or otherwise, shall bear interest payable
on demand at an interest rate equal at all times to one percent (1%) above
the applicable rate in effect with respect to such portion at such
maturity. All payments hereunder shall be applied first to interest on the
unpaid balance at the rate herein specified and then to principal.
The Bank shall make loans available hereunder upon Company's oral or
written request. The proceeds of such loans shall be made available at the
office of the Bank by credit to the account of Company or by other means
requested by Company and acceptable to the Bank. The Bank is authorized to
rely on telephonic or telegraphic loan requests which the Bank believes in
its good faith judgment to emanate from a representative of Company who has
been authorized in writing by an officer or director of Company, whether or
not that is in fact the case.
All amounts outstanding under this Note shall become immediately due and
payable, at the option of the holder hereof, without any demand or notice
whatsoever, in the event that Company shall do any of the following (each,
an Event of Default) (a) fail to make any payment when due of principal or
interest on this Note or the Facility Letter, or (b) fail to make
payment(s) when due of any other obligation(s) of Company which in the
aggregate exceed $10,000,000. In addition, this and all other obligations
of Company to the holder hereof shall be and become due and payable
immediately without any demand or notice whatsoever in the event of any
assignment for the benefit of creditors of, or the commencement of any
bankruptcy, receivership, insolvency, reorganization, dissolution or
liquidation proceedings by or against Company, or in the event of any
garnishment, attachment, levy or lien being asserted against any deposit
balance maintained (or any property deposited) with the holder hereof by
Company. In addition, the Bank's commitment shall, at the Bank's option,
be terminated upon the occurrence of any of the above.
All advances made by the Bank and all payments made by Company on account
of the unpaid principal amount hereof, shall be recorded on the books and
records of the Bank. Company agrees that in any action or proceeding
instituted to collect or enforce collection of this Note, the amount
endorsed on the reverse side of the Note at that time or inscribed in such
other records of the Bank shall be prima facie evidence of the unpaid
principal balance of this Note.
The Note is to be governed and construed according to the laws of the State
of Oregon.
<PAGE>
If any payment to be made by Company hereunder shall become due on a
Saturday, Sunday or business holiday under the laws of the State of Oregon,
such payment shall be made on the next succeeding business day and such
extension shall be included in computing any interest in respect of such
payment.
Company hereby agrees that any and all information relating to Company
which is (i) furnished by Company to the Bank (or to any affiliate of the
Bank), and (ii) non-public, confidential or proprietary in nature, shall be
kept strictly confidential by the Bank or such affiliate, provided,
however, that such information and other credit information relating to
Company may be distributed by the Bank or such affiliate to the Bank's or
such affiliate's directors, officers, employees, affiliates, attorneys,
auditors and regulators, and to any other party upon the order of a court
or other governmental agency having jurisdiction over the Bank or such
affiliate.
CHICAGO TITLE CORPORATION
By: /S/ Peter G. Leemputte
Title: EVP, CFO and CAO
By: /S/ A. Larry Sisk
Title: VP and Treasurer
EXHIBIT 10.4
- ------------
May 26,1999
Mr. A. Larry Sisk
Vice President and Treasurer
Chicago Title Corporation
171 North Clark Street
Chicago, Illinois 60601-3294
Ladies and Gentlemen:
Pursuant to our discussions, LaSalle Bank National Association (formerly
known as LaSalle National Bank) (the Bank) is pleased to offer a credit
facility to Chicago Title Corporation (the Borrower), it being understood
that Bank shall make advances available on the following terms and
conditions:
The terms of the facility are:
1. Borrower: Chicago Title Corporation
Chicago, Illinois
2. Amount: The aggregate amount outstanding shall not exceed
$20,000,000.
3. Purpose: For general corporate purposes.
4. Evidence of Indebtedness: Revolving Credit Note to be signed by
Borrower in the form of Exhibit A
hereto (the Note).
5. Expiration: This facility will expire on May 24, 2000 (Expiration
Date).
6. Interest Rate: The unpaid principal balance of all loans shall, at
Borrower's option, bear interest at a rate per
annum equal to:
a) the per annum rate of interest at which overnight federal
funds are from time to time offered to Bank by any bank
in the interbank market, as stated by Bank (the Federal
Funds Rate), plus one quarter of one percent (1/4%) per
annum. Interest on each advance bearing interest at the
Federal Funds Rate shall be calculated on the basis of a
year of 360 days and actual clays elapsed, and shall be
payable at the earlier to occur of every ninety (90) days
and the maturity of each such advance.
b) Bank's Base Rate, which means, for any day, a rate per
annum equal to the higher of(a) the Federal Funds Rate
for such day plus one half of one percent (1/2%) or Co)
the Prime Rate (hereinafter defined) for such day. Prime
Rate which means the rate per annum set by Bank from time
to time and called its Prime Rate. Interest on each
advance bearing interest at the Base Rate shall be
calculated on the basis of a year 360 days and actual
days elapsed, and shall be payable every ninety (90)
days.
<PAGE>
c) LIBOR (London Inter Bank Offered Rate) as determined by
Bank plus twenty-five (25) basis points per annum (the
LIBOR Rate). Borrowings under this option shall be on an
as available basis for periods of one, two, three or six
months (each, an Interest Period) selected by Borrower.
Interest on borrowings under this option shall be payable
at the earlier to occur of every ninety (90) days and the
maturity of each draw, and shall be calculated on actual
days elapsed on a 360 day year.
In the event that deposits in the amount and for the term of the
selected Interest Period are unavailable to Bank, or that by reason
of ei,cumstances affecting the Eurodollar markets generally, adequate
and reasonable means do not exist for ascertaining the interest rate
applicable to any loans bearing interest at the LIBOR Rate for the
selected Interest Period, Borrower shall either repay such loan or
direct Bank to convert such loan into a loan bearing interest at a
rate and for an Interest Period which is available on the last day of
the then current Interest Period, said choice between repayment or
conversion to be solely at Borrower's option.
If it shall become unlawful (or contrary to any direction from or
requirement of any governmental authority having jurisdiction over
the Bank) for Bank to honor its commitment hereunder or continue to
fund or maintain any loan or to perform its obligations hereunder,
then this commitment shall thereupon be canceled and, if it shall
become unlawful for Bank to continue to fund or maintain any loan,
Borrower shall prepay withom premium or penalty such loan together
with accrued interest thereon on the last day of the then current
Interest Period with respect to each such loan or on such earlier
date as may be required by law.
Each request by Borrower for a loan bearing interest at the LIBOR
Rate must be received by Bank no later than 1:00 p.m. Chicago,
Illinois time, on the day which is three O) days prior to the day its
is to be funded. A request for Federal Funds Rate loans must be
received by Bank no later than 12:00 p.m. Chicago, Illinois time, on
the day it is to be funded. A request for Base Rate loans must be
received by Bank no later than 2:00 p.m. Chicago, Illinois time, On
he day that it is to be funded.
7) Draw Maturities: No loan hereunder may mature later than the
Expiration Date.
8) Prepayment: Prepayments will be permitted only with prior consent of
Bank. Any break funding charges incurred by Bank shall be
for the account of Borrower.
9) Commitment Fee: Borrower will pay a fee often (10) basis points per
annum of the unused portion of the amount available
hereunder, payable in arrears at the end of each
calendar quarter.
10) Cross-default Provisions: Default(s) by Borrower in the payment
of any other obligations of Borrower,
which in the aggregate exceed $ I
0,000,000 shall also be an event of
default hereunder.
11) Cancellation: Borrower may cancel this facility at any time with
five (5) days written notice to Bank. Bank may
cancel this commitment upon the occurrence of an
Event of Default as defined in the Note, such
cancellation to be effective upon the giving of
written notice to Borrower. Upon any such
cancellation, Borrower will pay to Bank any and all
amounts due to Bank hereunder, including without
limitation any break funding costs.
Borrower understands and agrees that this facility is not assignable by
Borrower. Bank reserves the right to sell participations in this facility.
We trust that the foregoing adequately sets forth the terms and conditions
of our mutual agreement with respect to this facility. If you are in
agreement with the above, please complete, sign and remit the enclosed
Note.
Yours truly,
LASALLE BANK NATIONAL ASSOCIATION
Janet Gates
Vice President
Agreed to and accepted this 26 day of May, 1999.
CHICAGO TITLE CORPORATION
By: /S/ Peter G. Leemputte
Its: EVP, CFO and CAO
By: /S/ A. Larry Sisk
Its: VP and Treasurer
EXHIBIT A
REVOLVING PROMISSORY NOTE
$20,000,000 Dated: May 26, 1999
Due: May 24, 2000
On May 24, 2000, the undersigned (the Company), for value received,
promises to pay to the order of LaSalle Bank National Association (formerly
known as LaSalle National Bank) (the Bank), the lesser of: the principal
sum of Twenty Million Dollars ($20,000,000) or the aggregate unpaid
principal amount outstanding under the credit facility made available by
the Bank to Company, with interest (computed on actual days elapsed on the
basis of a 360 day year) on any and all principal amounts outstanding
hereunder from time to time from the date hereof until maturity together
with all costs of collection, including reasonable attorneys' fees, upon
default. Interest shall be payable as more particularly set forth in that
certain Facility Letter of even date herewith by the Bank to Company, the
terms and conditions of which are incorporated herein by reference. The
proceeds available hereunder are for direct advances.
Any portion of principal hereof which is not paid when due whether
at stated maturity, by acceleration, or otherwise, shall bear interest
payable on demand at an interest rate equal at all times to one percent
(1%) above the applicable rate in effect with respect to such portion at
such maturity. All payments hereunder shall be applied first to interest on
the unpaid balance at the rate herein specified and then to principal.
The Bank shall make loans available hereunder upon Company's Oral or
written request. The proceeds of such loans shall be made available at the
office of the Bank by credit to the account of Company or by other means
requested by Company and acceptable to the Bank. The Bank is authorized to
rely on telephonic or telegraphic loan requests which the Bank believes in
its good faith judgment to emanate from a representative of Company who has
been authorized in writing by an officer or director of Company, whether or
not that is in fact the case.
All amounts outstanding under this Note shall become immediately due
and payable, at the option of the holder hereof, without any demand or
notice whatsoever, in the event that Company, shall do any of the following
(each, an Event of Default) (a) fail to make any payment when due of
principal or interest on this Note, or (b) fail to make payment(s) when due
of any other obligation(s) of Company which in the aggregate exceed
$10,000,000. In addition, this and all other obligations of Company to the
holder hereof shall be and become due and payable immediately without any
demand or notice whatsoever in the event of any assignment for the benefit
of creditors of, or the commencement of any bankruPtCy, receivership,
insolvency, reorganization, dissolution or liquidation proceedings by or
against Company, or in the event of any gamlshment, attachment, levy or
llen being asserted against any deposit balance maintained (or any property
deposited) with the holder hereof by Company. In addition, the Bank's
commitment shall, at the Bank's option, be terminated upon the occurrence
of any of the above.
All advances made by the Bank and all payments made by Company on
account of the unpaid principal amount hereof, shall be recorded on the
books and records of the Bank. Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
amount endorsed on the reverse side of the Note at that time or inscribed
in such other records of the Bank shall be prima facie evidence of the
unpaid principal balance of this Note
The Note is to be governed and construed according to the laws of the
State of Illinois.
<PAGE>
If any payment to be made by Company hereunder shall liecome due on a
Saturday, Sunday or business holiday under the laws of the State of
Illinois, such payment shall bc made on the next succeeding business day
and such extension shall be included in computing any interest in respect
of such payment.
Neither Company nor any affiliate Of Company shall use any portion of
the proceeds of the loans, either directly or indirectly, for the purpose
of (i) purchasing any securities underwritten or privately placed by ABN
AMRO Securities (USA) Inc. (AASI), an affiliate of the Bank, or (ii)
refinancing or making payments of principal, interest or dividends on any
securities issued by Company or any affiliate of Company, and underwritten,
privately placed or dealt in by AASI.
The Company has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address, on a timely basis, theYear 2000 Problem (that is, the
risk that computer applications used by the Company may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999).
Company hereby agrees that any and all information relating to
Company which is (i) furnished by Company to thc Bank (or to any affiliate
of the Bank), and (ii) non-public, confidential or proprietary in nature,
shall be kept strictly confidential by the Bank or such affiliate,
provided, however, that such information and other credit information
relating to Company may be distributed by the Bank or such affiliate to the
Bank's or such affiliate's directors, officers, employees, affiliates,
attorneys, auditors and regulators, and to any other party upon the order
of a court or other governmental agency having jurisdiction over the Bank
or such affiliate.
CHICAGO T1TLE CORPORATION
By:
REVOLVING PROMISSORY NOTE
$20,000,000 Dated: May 26, 1999
Due: May 24, 2000
On May 24, 2000, the undersigned (the Company), for value received,
promises to pay to the order of LaSalle Bank National Association (formerly
known as LaSalle National Bank) (the Bank), the lesser of: the principal
sum of Twenty Million Dollars ($20,000,000) or the aggregate unpaid
principal amount outstanding under the credit facility made available by
the Bank to Company, with interest (computed on actual days elapsed on the
basis of a 360 day year) on any and all principal amounts outstanding
hereunder from time to time from the date hereof until maturity together
with all costs of collection, including reasonable attorneys' fees, upon
default. Interest shall be payable as more' particularly set forth in that
certain Facility Letter of even date herewith by the Bank to Company, the
terms and conditions of which are incorporated herein by reference. The
proceeds available hereunder are for direct advances.
Any portion of principal hereof which is not paid when due whether at
stated maturity, by acceleration, or otherwise, shall bear interest payable
on demand at an interest rate equal at all times to one percent (1%) above
the applicable rate in effect with respect to such portion at such
maturity. All payments hereunder shall be applied first to interest on the
unpaid balance at the rate herein specified and then to principal.
The Bank shall make loans available hereunder upon Company's oral or
written request. The proceeds of such loans shall be made available at the
office of the Bank by credit to the account of Company or by other means
requested by Company and acceptable to the Bank. The Bank is authorized to
rely on telephonic or telegraphic loan requests which the Bank believes in
its good faith judgment to emanate from a representative of Company who has
been authorized in writing by an officer or director of Company, whether or
not that is in fact the case.
All amounts outstanding under this Note shall become immediately due
and payable, at the option of the holder hereof, without any demand or
notice whatsoever, in the event that Company, shall do any of the following
(each, an Event of Default) (a) fail to make any payment when due of
principal or interest on this Note, or (b) fail to make payment(s) when due
of any other obligntion(s) of Company which in the aggregate exceed
$10,000,000. In addition, this and all other obligations of Company to the
holder hereof shall be and become due and payable immediately without any
demand or notice whatsoever in the event of any assignment for the benefit
of creditors of, or the commencement of any bankruptcy, reeeivership,
insolvency; reorganization, dissolution or liquidation proceedings by or
against Company, or in the event of any garnishment, attachment, levy or
lien being asserted against any deposit balance maintained (or any property
deposited) with the holder hereof by Company. In addition, the Bank's
commitment shall, at the Bank's option, be terminated upon the occurrence
of any of the above.
All advances made by the Bank and all payments made by Company on
account ofthe unpaid principal amount hereof, shall be recorded on the
books and records of the Bank. Company agrees that in any action or
proceeding instituted to collect or enforce colicetlon of this Note, the
amount endorsed on the reverse side of the Note at that time or inscribed
in such other records of the Bank shall be prima facie evidence of the
unpaid principal balance of this Note.
<PAGE>
The Note is to be governed and construed according to the laws of the State
of Illinois.
If any payment to be made by Company hereunder shall become due on a
Saturday, Sunday or business holiday under the laws of the State of
Illinois, such ipayment shall be made on the next succeeding business day
and such extension shall be included in computing any interest in respect
of such payment.
Neither Company nor any affiliate of Company shall use any portion of
the proceeds of the loans, either directly or indirectly, for the purpose
of (i) purchasing any securities underwritten or privately placed by ABN
AMRO Securities (USA) Inc. (AASI), an affiliate of the Bank, or (ii)
refinancing or making payments of principal, interest or dividends on any
securities issued by Company or any affiliate of Company, and underwritten,
privately placed or dealt in by AASI.
The Company has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address on a timely basis, the Year 2000 Problem (that is, the
risk that computer applications used by the Company may be unable to
recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999).
Company hereby agrees that any and all information relating to
Company which is (i) furnished by Company to the Bank (or to any affiliate
of the Bank), and (ii) non-public, confidential or proprietary in nature,
shall be kept strictly confidential by the Bank or such affiliate,
provided, however, that such information and other credit information
relating to Company may be distributed by the Bank or such affiliate to the
Bank's or such affiliate's directors, officers, employees, affiliates,
attorneys, auditors and regulators, and to any other party upon the order
of a court or other governmental agency having. jurisdiction over the Bank
or such affiliate.
CHICAGO TITLE CORPORATION
EXHIBIT 10.5(a)
- ---------------
U.S. $50,000,000
AMENDED AND RESTATED
REVOLVING LOAN AND CREDIT AGREEMENT
dated as of June 2, 1999
among
CHICAGO TITLE CORPORATION
as the Borrower,
CHICAGO TITLE AND TRUST COMPANY
as the Company,
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS
as the Lenders,
and
LASALLE BANK N.A.
as Administrative Agent for the Lenders.
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS
SECTION 1.1 Defined Terms
SECTION 1.2 Use of Defined Terms
SECTION 1.3 Cross-References
SECTION 1.4 Accounting Terms; Financial Statements
SECTION 1.5 1031 Exchange Activities
SECTION 2. COMMITMENT OF THE LENDERS; CONDITIONS
SECTION 2.1 Commitment
SECTION 2.2 Conditions to the Loans
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS
SECTION 3.1 Applicable Interest Rates.
SECTION 3.2 Minimum and Maximum Borrowing Amounts
SECTION 3.3 Borrowing Procedures
SECTION 3.4 Interest Periods
SECTION 3.5 Renewals and Conversions
SECTION 3.6 Prepayments
SECTION 3.7 Default Rate
SECTION 3.8 Notes
SECTION 3.9 Commitment Terminations
SECTION 3.10 Funding Indemnity
SECTION 3.11 Change in Circumstances, Etc.
SECTION 3.12 Place and Application of Payments
SECTION 4. FEES
SECTION 4.1 Fees
SECTION 4.2 Administrative Agent's Fee
SECTION 4.3 Facility Fee
SECTION 5. TAXES AND OTHER MATTERS
SECTION 5.1 Taxes
SECTION 5.2 Making of Loans by Administrative Agent.
SECTION 5.2.1 Assumptions by Administrative Agent
SECTION 5.2.2. Delegation of Authority to Administrative Agent24
SECTION 5.3 Sharing of Payment
SECTION 5.4 Setoff
SECTION 5.5 Use of Proceeds
SECTION 6. WARRANTIES
SECTION 6.1 Organization, etc
SECTION 6.2 Authorization; No Conflict
SECTION 6.3 Validity and Binding Nature
SECTION 6.4 Financial Statements
SECTION 6.5 Litigation and Contingent Liabilities
SECTION 6.6 Liens
SECTION 6.7 Subsidiaries
SECTION 6.8 Investment Company Act
SECTION 6.9 Public Utility Holding Company Act
SECTION 6.11 Ownership of Properties
SECTION 6.12 Taxes
SECTION 6.13 Pension and Welfare Plans
SECTION 6.14 Accuracy of Information
SECTION 6.15 Year 2000
SECTION 6.16 SEC Documents
SECTION 7. COMPANY'S COVENANTS
SECTION 7.1 Reports, Certificates and Other Information
SECTION 7.1.1 Company Audit Report
SECTION 7.1.2 Annual Company Unaudited Statements
SECTION 7.1.3 Company Interim Reports
SECTION 7.1.4 Certificates
SECTION 7.1.5 Annual Statement Blanks
SECTION 7.1.6 Quarterly Statement Blanks
SECTION 7.1.7 Notice of Default and Litigation
SECTION 7.1.8 SEC Reports
SECTION 7.1.9 Subsidiaries
SECTION 7.1.10 ERISA
SECTION 7.1.10 Additional Information
SECTION 7.2 Books, Records and Inspections
SECTION 7.3 Insurance
SECTION 7.4 Taxes
SECTION 7.5 Consolidated Net Worth
SECTION 7.6 Statutory Surplus
SECTION 7.7 Interest Expense Coverage Ratio
SECTION 7.8 Liquidity
SECTION 7.9 Loss Reserve Ratio
SECTION 7.10 Restricted Payments
SECTION 7.11 Indebtedness
SECTION 7.12 Liens
SECTION 7.13 Mergers, Consolidations, Purchases
SECTION 7.14 Asset Dispositions
SECTION 7.15 Leverage Ratio
SECTION 7.16 Existing Business
SECTION 7.17 Other Agreements
SECTION 8. CONDITIONS OF LENDING.
SECTION 8.1 Documents
SECTION 8.1.1 Notes
SECTION 8.1.2 Corporate Documents
SECTION 8.1.3 Incumbency and Signatures
SECTION 8.1.4 Confirmatory Certificate
SECTION 8.1.5 Good Standing.
SECTION 8.1.6 Instructions
SECTION 8.1.7 Other
SECTION 8.2 Further Conditions
SECTION 9. EVENTS OF DEFAULT AND THEIR EFFECT
SECTION 9.1 Events of Default
SECTION 9.1.1 Non-Payment of Notes, etc.
SECTION 9.1.2 Non-Payment of Other Indebtedness
SECTION 9.1.3 Bankruptcy, Insolvency, etc.
SECTION 9.1.4 Non-Compliance with this Agreement
SECTION 9.1.5 Warranties
SECTION 9.1.6 Change of Control
SECTION 9.1.7 Judgments
SECTION 9.1.8 Pension Plans
SECTION 9.2 Effect of Event of Default
SECTION 10. THE ADMINISTRATIVE AGENT
SECTION 10.1 Actions
SECTION 10.2 Exculpation
SECTION 10.3 Successor
SECTION 10.4 Loans by LaSalle
SECTION 10.5 Credit Decisions
SECTION 10.6 Copies, etc
SECTION 11. MISCELLANEOUS PROVISIONS
SECTION 11.1 Waivers, Amendments, etc
SECTION 11.2 Notices
SECTION 11.3 Costs, Expenses and Taxes
SECTION 11.4 Indemnification
SECTION 11.5 Survival
SECTION 11.6 Severability
SECTION 11.7 Captions
SECTION 11.8 Execution in Counterparts, Effectiveness, etc.
SECTION 11.9 Governing Law
SECTION 11.10 Successors and Assigns
SECTION 11.11 Sale and Transfer of Notes; Participations in Notes
SECTION 11.11.1 Assignments
SECTION 11.11.2 Participations
SECTION 11.12 Other Transactions
SECTION 11.13 Forum Selection and Consent to Jurisdiction
SECTION 11.14 Waiver of Jury Trial
SECTION 11.15 Confidentiality
SECTION 11.16 Special Purpose Funding Vehicle
<PAGE>
EXHIBITS
Exhibit A - Revolving Note
Exhibit B - Borrowing Notice
Exhibit C - Lender Assignment Agreement
Exhibit D - Scheduled Properties
Exhibit E - Accountant's Letter
SCHEDULES
Schedule 6.5 - Litigation and Contingent Claims
Schedule 6.6 - Liens
Schedule 6.7 - Subsidiaries
Schedule 6.13 - Pension and Welfare Plans
Schedule 7.11 - Indebtedness
<PAGE>
AMENDED AND RESTATED
REVOLVING LOAN AND CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING LOAN AND CREDIT AGREEMENT, dated
as of June 2, 1999, among CHICAGO TITLE CORPORATION, a Delaware corporation
(CTC or the Borrower), CHICAGO TITLE AND TRUST COMPANY, an Illinois
corporation (CTT or the Company), the various financial institutions as
are or may become parties hereto (collectively, the Lenders), and LASALLE
BANK N.A., as administrative agent (the Administrative Agent) for the
Lenders.
W I T N E S E T H:
WHEREAS, on May 29, 1998 the Company entered into the Revolving Loan
and Credit Agreement with Lenders and Agent and, as of the date thereof,
the Company was wholly-owned by Alleghany Corporation, a Delaware
corporation (Alleghany), and was engaged directly and through its various
Subsidiaries in the business of issuing title insurance and providing other
related services for residential and commercial real estate transactions;
and
WHEREAS, as of June 17, 1998, Alleghany transferred all of the issued
and outstanding shares of the Company owned by Alleghany to CTC and
distributed the shares of CTC to Alleghany stockholders; and
WHEREAS, the Company requested that the Lenders substitute CTC as the
borrower under this Agreement and amend certain other provisions of the
Agreement; and
WHEREAS, the Lenders and the Administrative Agent wish to make
available to the Company the loans provided for herein to effect such
extension of credit on a revolving credit basis, in each case on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, and subject to the terms and conditions hereof, the parties hereto,
intending to be bound hereby, further agree as follows:
SECTION 1.DEFINITIONS
SECTION 1.1DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its Preamble and
Recitals, shall, except where the context otherwise requires, have the
following meanings (such meanings to be equally applicable to the singular
and plural forms thereof):
ADJUSTED TOTAL ASSETS shall mean for any fiscal year the total assets
of the Company and its Subsidiaries on a consolidated basis as at the
commencement of such fiscal year, as shown on a consolidated balance sheet
of the Company prepared as at the end of the preceding fiscal year in
accordance with generally accepted accounting principles consistently
applied, less any amounts shown on such consolidated balance sheet
representing Unrestricted Assets.
ADMINISTRATIVE AGENT is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to SECTION 10.3.
AFFILIATE of any Person shall mean a corporation which controls, is
controlled by or is under common control with such Person.
AGREEMENT shall mean, on any date, the Revolving Loan and Credit
Agreement as the same may, from time to time, be amended, supplemented,
amended and restated, or otherwise modified and in effect as of such date.
<PAGE>
ANNUAL STATEMENT BLANK shall mean the annual statement of the
conditions and affairs of each Title Insurance Subsidiary in the form
prescribed by its applicable State regulatory authority for title insurance
companies and prepared in accordance with applicable statutory accounting
principles.
APPLICABLE LIBOR MARGIN, for purposes of determining the interest
rate on a LIBOR Loan, means initially 0.25% (the Normal LIBOR Margin),
provided, however, that the Normal LIBOR Margins shall be subject to
quarterly adjustment, commencing with the fiscal quarter commencing July 1,
1998, based on the following matrix:
Applicable LIBOR Margin
Leverage Ratio for LIBOR Loans
Less than 0.20:1.00 0.25%
0.20:1.00 through but less
than 0.25:1.00 0.30%
0.25:1.00 through but less
than 0.30:1.00 0.35%
0.30:1.00 through but less
than 0.35:1.00 0.40%
Greater than or equal to
0.35:1.00 0.50%
APPROVED INVESTMENTS shall mean investments (i) in direct obligations
of, or obligations the principal of and interest on which are fully
guaranteed by, the United States of America, (ii) in obligations issued or
guaranteed by any agency or instrumentality of the United States of
America, (iii) in certificates of deposit of, and time deposits in, any
bank organized under the laws of the United States of America or any State
thereof whose short-term commercial paper rating from Standard & Poor's
Corporation is at least A-1 or the equivalent thereof or from Moody's
Investors Service, Inc. is at least P-1 or the equivalent thereof (or in
the event that neither such company is providing such service, any other
similar nationally recognized rating service), or (iv) in short-term notes
or other obligations rated P-1 by Moody's Investors Service, Inc. or A-1 by
Standard and Poor's Corporation (or in the event that neither such company
is providing such service, any other similar nationally recognized rating
service).
ASSIGNEE LENDER is defined in SECTION 11.11.1.
AUTHORIZED OFFICER means one or more officers of the Company duly
authorized (and so certified to the Administrative Agent by the corporate
Secretary of the Company pursuant to a certificate of authority and
incumbency from time to time satisfactory to Administrative Agent), acting
alone, to request Loans hereunder and execute and deliver documents,
instruments, agreements, reports, statements and certificates in connection
herewith.
BASE RATE means, for any day, the higher of (a) the sum of (x) one-half
percent (0.50%) plus (y) the latest Federal Funds Rate; and (b) the
rate of interest in effect for such day as publicly announced from time to
time by the Administrative Agent in Chicago, Illinois as its prime
commercial rate. The prime commercial rate is a rate set by the
Administrative Agent based upon various factors including the
Administrative Agent's costs and desired return, general economic
conditions and other factors and is used as a reference point for pricing
some loans, which may be priced at, above or below such announced rate; any
change in the Base Rate resulting from a change in said prime commercial
rate shall be effective as of the date of the relevant change in said prime
commercial rate.
<PAGE>
BASE RATE LOAN means a Loan bearing interest at the rate specified in
Section 3.1(a) hereof.
BORROWING NOTICE means the request of the Company for Loans, as
further described in Section 3.3 hereof.
BUSINESS DAY shall mean
(a)any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed in Chicago,
Illinois and New York, New York; and
(b)relative to the making, continuing, prepaying or repaying of
any LIBOR Loans, any day on which dealings in Dollars are carried on in the
London interbank market.
CAPITALIZED LEASE of a Person means any lease of real or personal
property by such Person as lessee which would be capitalized on a balance
sheet of such Person prepared in accordance with generally accepted
accounting principles.
CAPITALIZED LEASE OBLIGATIONS of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as
a liability on a balance sheet of such Person prepared in accordance with
generally accepted accounting principles.
CASH AND MARKETABLE SECURITIES shall mean as at the end of any fiscal
quarter (i) with respect to the Title Insurance Subsidiaries all assets on
a combined basis for the Title Insurance Subsidiaries which are included on
page 2, lines 1, 2.1, 2.2, and 6 (excluding preferred stock and common
stock of Affiliates) of the Form 9 Annual Statement Blank and the Quarterly
Statement Blank of the Title Insurance Subsidiaries as at such date (or the
equivalent items if the forms of said Annual Statement Blank or Quarterly
Statement Blank shall be amended) and (ii) with respect to the Company, all
assets which would be included on page 2, lines 1, 2.1, 2.2, and 6
(excluding preferred stock and common stock of Affiliates) of the Form 9
Annual Statement Blank of the Company (or the equivalent items if the form
of said Annual Statement Blank shall be amended) if the Company was filing
such form based on applicable statutory accounting principles applied on a
basis consistent with those applied on December 31, 1998.
COMMITMENT shall mean, relative to any Lender, such Lender's
obligation to make Loans pursuant to Section 2.1.
COMPANY shall mean prior to the date hereof, CTT, and as of the date
hereof, CTC.
COMMITMENT AMOUNT shall mean, on any date $50,000,000, or such lesser
amount resulting from any termination by the Company pursuant to Section
3.9.
CONSOLIDATED NET INCOME shall mean consolidated total revenues of the
Company and its Subsidiaries, less all consolidated charges which should be
deducted before arriving at net income, as determined in accordance with
generally accepted accounting principles.
CONSOLIDATED NET WORTH shall mean the sum of the capital stock,
additional paid-in capital and retained earnings accounts of the Company
and its Subsidiaries as shown on the Company's consolidated balance sheet
prepared in accordance with generally accepted accounting principles;
provided, however that Consolidated Net Worth shall be reduced by the face
amount of any debt instruments of Affiliates which are not Subsidiaries of
the Company owned by the Company or its Subsidiaries. The Company
implemented at December 31, 1993, the provisions of Statement of Financial
Accounting Standards Bulletin Number 115. Under this statement, the
Company's investments in certain marketable securities are periodically
valued at fair values, with the changes in such values being recorded
directly in stockholder's equity. The Company and the Lenders agree that
for purposes of the computation of Consolidated Net Worth, unrealized gains
and losses resulting from such changes in fair values shall be excluded
from such computations.
CONTROLLED GROUP shall mean all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Company, are treated as a single employer under Section 414(b) or 414(c) of
the Internal Revenue Code or Section 4001 of ERISA.
CTC shall mean Chicago Title Corporation, a Delaware corporation.
CTI shall mean Chicago Title Insurance Company, a Missouri
corporation and Subsidiary of the Company.
CTT shall mean Chicago Title and Trust Company, an Illinois
corporation.
DEBT SERVICE shall mean, for any fiscal period, the sum of (i)
Interest Expense for such period, plus (ii) all amounts of principal paid
or payable on all indebtedness for borrowed money or for the deferred
purchase price of property (including the Notes for such period, plus (iii)
any reductions from time to time in Capitalized Lease Obligations appearing
as indebtedness on the liability side of a balance sheet in accordance with
generally accepted accounting principles; provided that the term Debt
Service shall not include any obligation to the extent such obligation is
permitted by Section 7.11(v), 7.11(vii) or 7.11(x).
DEFAULT RATE is defined in Section 3.7.
DOLLAR AND $ shall mean lawful money of the United States.
DOMESTIC OFFICE shall mean, relative to any Lender, the office of
such Lender designated as such below its signature hereto or designated in
the Lender Assignment Agreement or such other office of a Lender (or any
successor or assign of such Lender) within the United States as may be
designated from time to time by notice from such Lender, as the case may
be, to each other Person party hereto.
EARNINGS BEFORE INTEREST AND TAXES shall mean, for any fiscal period,
the sum of (i) Consolidated Net Income of the Company for such period, plus
(ii) all Interest Expense of the Company and its Subsidiaries deducted in
determining Consolidated Net Income for such period, plus (iii) any
provision for federal, state or local income taxes or franchise taxes
deducted in determining Consolidated Net Income for such period, as
determined in accordance with generally accepted accounting principles.
ENVIRONMENTAL LAWS shall mean all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines
(including consent decrees and administrative orders) relating to public
health and safety and protection of the environment.
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
EURODOLLAR RESERVE PERCENTAGE is defined in Section 3.1(b) hereof.
EVENT OF DEFAULT shall mean any of the events described in Section
9.1.
1031 EXCHANGE ACTIVITIES shall mean transactions in which the Company
or any of its Affiliate Companies act as a qualified intermediary,
qualified trustee or qualified escrowee in the exchange of property held
for productive use or investment pursuant to the provisions of Section 1031
of the Internal Revenue Code of 1986, as amended.
<PAGE>
EXPIRATION DATE is defined in Section 2.1.
FACILITY FEE is the amount per annum equal to the following
percentage multiplied by the Commitment Amount payable in arrears on the
last day of each calendar quarter, commencing June 30, 1998 (initially
0.10%):
Leverage Ratio Applicable Facility Fee
Less than 0.20:1.00 0.10%
0.20:1.00 through but less
than 0.25:1.00 0.125%
0.25:1.00 through but less
than 0.30:1.00 0.15%
0.30:1.00 through but less
than 0.35:1.00 0.20%
Greater than or equal to
0.35:1.00 0.25%
The Administrative Agent shall determine the Facility Fee, and its
determination thereof shall be conclusive and binding except in the case of
manifest error. Not later than fifteen (15) days after the Administrative
Agent's receipt of the quarterly financial statements required by Section
7.1.3 hereof for a given fiscal quarter (or, in the case of year end, the
receipt of the annual financial statements required by Section 7.1.2 hereof
for a given fiscal year) and the letter from the Company, accompanied by a
certificate signed by the Chief Financial Officer or Treasurer of the
Company computing the Leverage Ratio as of the close of the most recently
completed fiscal quarter required by Section 3.1(c) hereof, the
Administrative Agent shall determine whether such financial information
indicates such a change in the Leverage Ratio as would justify a change in
the Facility Fee and shall then notify the Company of such determination
and of any change in the Facility Fee resulting therefrom. Any change in
the Facility Fee shall be effective retroactively as of the close of the
most recently completed fiscal quarter and with such new Facility Fee to
continue in effect until the effectiveness of the next redetermination
thereof. Any determination by the Administrative Agent of the Leverage
Ratio shall be conclusive and binding upon the Company except in the case
of manifest error.
FEDERAL FUNDS RATE shall mean, for any period, a fluctuating
interest rate per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve
Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on transactions in
an amount equal to the outstanding principal amount of the Notes received
by the Administrative Agent from three federal funds brokers of recognized
standing selected by it.
INDEMNIFIED LIABILITIES is defined in Section 11.4.
INDEMNIFIED PARTIES is defined in Section 11.4.
<PAGE>
INTEREST EXPENSE shall mean, for any fiscal period, all amounts
paid or payable by the Company and its Subsidiaries on a consolidated basis
as interest expense on all indebtedness for borrowed money or for the
deferred purchase price of property or as the implicit interest expense on
all obligations which are regarded as Capitalized Lease Obligations for
accounting purposes, as determined in accordance with generally accepted
accounting principles, provided that the term Interest Expense shall not
include any interest on any obligation to the extent such obligation is
permitted by Section 7.11(v), 7.11(vii) or 7.11(x).
INTEREST PERIOD is defined in Section 3.4 hereof.
INVESTMENT BORROWINGS shall mean indebtedness of the Company or a
Subsidiary having a maturity of 92 days or less representing borrowings
from a bank or banks with which the Company or such Subsidiary has a
depositary relationship, which borrowings shall be fully secured by
Approved Investments purchased by the Company with the proceeds of such
borrowings.
LASALLE shall mean LaSalle Bank N.A., and any successor corporation
thereto by merger, consolidation or otherwise.
LENDER ASSIGNMENT AGREEMENT shall mean a Lender Assignment Agreement
substantially in the form of EXHIBIT C hereto.
LENDERS - see Preamble.
LEVERAGE RATIO means the ratio of Long-Term Indebtedness to
Consolidated Net Worth.
LIBOR LOAN means a Loan bearing interest at the rate specified in
Section 3.1(b) hereof.
LOANS is defined in Section 2.1.
LOAN DOCUMENTS shall mean this Agreement, the Notes and each
Borrowing Notice.
LONG-TERM INDEBTEDNESS shall mean all indebtedness of the Company and
its Subsidiaries for borrowed money or on account of deposits (other than
trust and escrow balances) or advances, all indebtedness of the Company and
its Subsidiaries for the deferred purchase price of property and services
to the extent provided in Section 7.11, all indebtedness of others assumed
or guaranteed by the Company or any of its Subsidiaries or in respect of
which the Company or any Subsidiary is secondarily or contingently liable
(other than (x) by endorsement of negotiable instruments in the course of
collection, and (y) other indebtedness of others guaranteed by the Company
or any of its Subsidiaries or in respect of which the Company or any
Subsidiary is secondarily or contingently liable not exceeding at any one
time an aggregate of $15,000,000) and all Capitalized Lease Obligations of
the Company and its Subsidiaries, which indebtedness or obligation is in
each case by its terms payable more than one year after the date of such
determination; provided that the term Long-Term Indebtedness shall not
include any obligation which is permitted by Section 7.11(vii), 7.11(viii)
or 7.12 nor shall it include any obligation to the extent such obligation
is permitted by Section 7.11(x).
LOSS RESERVES shall mean as at the end of any fiscal quarter all
amounts for the Title Insurance Subsidiaries on a combined basis which are
shown as Reserve for undetermined title losses of which notice has been
received on line 1, page 3 of the Form 9 Annual Statement Blank and the
Quarterly Statement Blank of the Title Insurance Subsidiaries as at such
date (or the equivalent item if the forms of said Annual Statement Blank or
Quarterly Statement Blank shall be amended).
<PAGE>
MATERIAL ADVERSE EFFECT means, relative to any occurrence, event,
condition or circumstance, or any change therein, of whatever nature
(including any adverse determination in any litigation, arbitration, or
governmental investigation or proceeding), a materially adverse effect on:
(i) the assets of or the business, financial condition, or operations of
the Company and its Subsidiaries taken as a whole; (ii) the ability of the
Company to timely or fully perform any of the payment, performance or other
material obligations involving the Loan Documents or a payment default in
respect of any of their debt in excess of $10,000,000 or other default the
effect of which is to accelerate the maturity of any of their debt in
excess of $10,000,000; (iii) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of the Administrative Agent or any Lender to enforce any rights or
remedies under or in connection with any Loan Document.
NET ASSET SALES shall mean, for any fiscal year, the excess, if any,
of (i) sales or other dispositions of assets in such fiscal year, over (ii)
purchases or other acquisitions of assets in such fiscal year; provided,
however, that Net Asset Sales shall not include sales or purchases of
Unrestricted Assets. Repayments by third parties to the Company or any
Subsidiary of loans and other amounts receivable shall not be deemed to be
sales or other dispositions of assets for purposes of the foregoing
definition.
NOTE shall mean a promissory note of the Company payable to any
Lender, in the form of EXHIBIT A hereto (as such promissory note may be
amended, endorsed, supplemented, substituted, renewed, extended, restated,
or otherwise modified from time to time), evidencing the aggregate
indebtedness of the Company to such Lender resulting from outstanding
Loans, and also means all other promissory notes accepted from time to time
in substitution therefor or renewal thereof.
OBLIGATIONS shall mean all obligations (monetary or otherwise) of the
Company arising under and in connection with this Agreement, the Notes or
any other Loan Document.
PARTICIPANT is defined in Section 11.11.2.
PBGC shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
PENSION PLAN shall mean a pension plan, as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which
the Company or any corporation, trade or business that is, along with the
Company, a member of a Controlled Group, may have liability, including any
liability by reason of having been a substantial employer within the
meaning of Section 4063 of ERISA at any time during the preceding five
years, or by reason of being deemed to be a contributing sponsor under
Section 4069 of ERISA.
PERCENTAGE shall mean, relative to any Lender, the percentage set
forth opposite its signature hereto or set forth in the Lender Assignment
Agreement, as such percentage may be adjusted from time to time pursuant to
Lender Assignment Agreement(s) executed by such Lender and its Assignee
Lender(s) and delivered pursuant to Section 11.11.
PERSON shall mean any natural person, corporation, partnership, firm,
association, trust, government, governmental agency or any other entity,
whether acting in an individual, fiduciary or other capacity.
PLAN shall mean any Pension Plan or Welfare Plan.
QUARTERLY STATEMENT BLANK shall mean the quarterly statement of the
conditions and affairs of each Title Insurance Subsidiary in the form
prescribed by its applicable State regulatory authority for title insurance
companies and prepared in accordance with applicable statutory accounting
principles.
REFERENCE BANK means ABN/AMRO Bank.
REQUIRED LENDERS shall mean, at any time, Lenders holding at least
51% of the then aggregate outstanding principal amount of the Notes then
held by the Lenders, or, if no such principal amount is then outstanding,
Lenders having at least 51% of the Commitments.
RESTRICTED PAYMENTS is defined in Section 7.10.
REVOLVING LOAN or REVOLVING LOANS is defined in Section 2.1.
SCHEDULED PROPERTIES shall mean the real property listed on Exhibit D
hereto.
SECURITY UNION shall mean Security Union Title Insurance Company, a
California corporation.
STATUTORY PREMIUM RESERVE shall mean as at the end of any fiscal
quarter all amounts on a combined basis for the Title Insurance
Subsidiaries which would be shown as statutory premium reserve on line 2,
page 3 of the Form 9 Annual Statement Blank and the Quarterly Statement
Blank of the Title Insurance Subsidiaries as at such date (or the
equivalent item if the forms of said Annual Statement Blank or Quarterly
Statement Blank shall be amended).
STATUTORY SURPLUS shall mean as at the end of any fiscal quarter the
combined surplus of all Title Insurance Subsidiaries, computed for them in
the same manner as the item that is required to be filed as Surplus as
Regards Policy Holders on line 26, page 3 of the Form 9 Annual Statement
Blank and the Quarterly Statement Blank of the Title Insurance Subsidiaries
as at such date (or the equivalent item if the forms of said Annual
Statement Blank or Quarterly Statement Blank shall be amended).
SUBSIDIARY shall mean a corporation of which the Company and/or its
other Subsidiaries own, directly or indirectly, such number of outstanding
shares as have more than 50% of the ordinary voting power for the election
of directors.
TAXES is defined in Section 5.1.
TERMINATION DATE means May 29, 2004.
TITLE INSURANCE SUBSIDIARIES shall mean CTI, Security Union and TT;
provided, however, that in the event a Subsidiary of CTI, Security Union or
TT in existence on the date of execution and delivery hereof subsequently
becomes a direct Subsidiary of the Company, the term Title Insurance
Subsidiaries shall mean CTI, Security Union, TT and such Subsidiary. In
determining compliance by the Title Insurance Subsidiaries with the various
covenants applicable to them in Section 7, such determinations shall be
based on applicable statutory accounting principles applied on a basis
consistent with those at the time in effect. It is understood and agreed
that statutory accounting principles require that all Subsidiaries of Title
Insurance Subsidiaries be carried on the books of such Title Insurance
Subsidiaries on a statutory equity basis.
TT shall mean Ticor Title Insurance Company, a California
corporation.
TYPE means, with regard to each Loan, such Loan is either a Base Rate
Loan or a LIBOR Loan.
UNMATURED EVENT OF DEFAULT shall mean any event which if it continues
uncured will, with lapse of time or notice or lapse of time and notice,
constitute an Event of Default.
UNRESTRICTED ASSETS shall mean cash and marketable securities
(including, without limitation, certificates of deposit and assets pledged
to secure trust and escrow deposits), mortgages and non-operating real
estate (including, without limitation, claims acquired properties).
WELFARE PLAN shall mean a welfare plan, as such term is defined in
Section 3(1) of ERISA.
SECTION 1.2 USE OF DEFINED TERMS. Unless otherwise defined or
the context otherwise requires, terms for which meanings are provided in
this Agreement shall have such meanings when used in each Note, Borrowing
Notice, notice and other communication delivered from time to time in
connection with this Agreement.
SECTION 1.3 CROSS-REFERENCES. Unless otherwise specified,
references in this Agreement and in each other Loan Document to any Section
are references to such Section of this Agreement.
SECTION 1.4 ACCOUNTING TERMS; FINANCIAL STATEMENTS. All
accounting terms used herein but not expressly defined in this Agreement
have the respective meanings given to them in accordance with generally
accepted accounting principles. Unless otherwise provided herein, all
computations and determinations for purposes of determining compliance with
the financial requirements of this Agreement shall be made in accordance
with generally accepted accounting principles on a basis consistent with
those at the time in effect; provided, however, that if any changes in
generally accepted accounting principles are hereafter required or
permitted and are adopted by the Company and such changes result in a
material change in the method of calculation of any of the financial
covenants or restrictions contained in Section 7 or in the related
definitions or terms used herein, the parties hereto agree to enter into
negotiations in good faith in order to amend such provisions so as to
reflect equitably such changes with the desired result that the criteria
for evaluating the Company's financial condition shall be the same after
such changes as if such changes had not been made.
SECTION 1.5 1031 EXCHANGE ACTIVITIES. Any debt reported on the
Financial Statements of the Company or any of its affiliate companies
resulting from 1031 exchange activities prior to June 30, 1999 shall be
excluded from all financial covenant tests under Section 7 hereof.
SECTION 2. COMMITMENT OF THE LENDERS; CONDITIONS.
SECTION 2.1 COMMITMENT. Subject to the terms and conditions of
this Agreement, the Lenders severally agree to lend to the Company at any
time and from time to time, from the date hereof until the earlier of the
Termination Date or the occurrence of an Event of Default or Unmatured
Event of Default hereunder (the earlier of such dates hereinafter referred
to as the Expiration Date), such sums, in a minimum amount(s) as set
forth in Section 3.2 hereof, as the Company may request from time to time
by a Borrowing Notice pursuant to Section 3.3 hereof; provided, however,
that the aggregate principal amount of all loans outstanding under this
Section 2.1 (individually, a Revolving Loan or Loan or, collectively,
the Revolving Loans or Loans) at any one time shall not exceed Fifty
Million Dollars ($50,000,000) (such obligations hereinafter referred to as
the Commitment). Subject to the terms and conditions hereof, the Company
may borrow or repay and reborrow hereunder, from the date hereof until the
Expiration Date, either the full amount of the Commitment or any lesser sum
in the minimum amounts referred to herein. If, at any time, the Revolving
Loans exceed the Commitment, the Company shall immediately notify the
Administrative Agent of the existence of and pay to the Administrative
Agent the amount of such excess. Borrowings of the Loans shall be made
ratably from the Lenders in proportion to their respective Percentages.
SECTION 2.2 CONDITIONS TO THE LOANS. Notwithstanding any other
provision of this Agreement, no Lender shall be required to make the Loans
provided for hereunder if the conditions precedent to the making of the
Loans specified in Section 8 have not been satisfied.
SECTION 3. GENERAL PROVISIONS APPLICABLE TO ALL LOANS.
<PAGE>
SECTION 3.1 APPLICABLE INTEREST RATES. The Company may elect
that each borrowing of Loans be made by means of a Base Rate Loan or a
LIBOR Loan; provided, however, that there shall not be more than eight
borrowings of LIBOR Loans outstanding at any time.
(a) BASE RATE LOANS. Each Base Rate Loan made by the Lenders shall
bear interest (computed on the basis of a year of 360 days and actual days
elapsed) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) at a rate per
annum equal to the Base Rate from time to time in effect. Interest on all
Base Rate Loans is payable on the last day of each calendar quarter and at
maturity (whether by acceleration or otherwise) commencing June 30, 1998.
(b) LIBOR LOANS. Each LIBOR Loan made by the Lenders shall bear
interest (computed on the basis of a year of 360 days and actual days
elapsed) on the unpaid principal amount thereof from the date such Loan is
made until maturity (whether by acceleration or otherwise) at a rate per
annum equal to the sum of (x) the Applicable LIBOR Margin for LIBOR Loans
plus (y) the Adjusted LIBOR, payable on the last day of the applicable
Interest Period and at maturity (whether by acceleration or otherwise),
and, if the applicable Interest Period is longer than three months, on each
day occurring every three months after the date such Loan is made.
ADJUSTED LIBOR means, for any borrowing of LIBOR Loans, a rate per
annum determined in accordance with the following formula:
LIBOR
-----------------------------
Adjusted LIBOR = 100% - Eurodollar Reserve Percentage
LIBOR means, for an Interest Period for a borrowing of LIBOR Loans,
the offered rate per annum for deposits of Dollars for the requested period
that appears on Telerate Page 3750 as of 11:00 A.M. (London, England time)
two (2) Business Days prior to the first day in such Interest Period. If
no such offered rate exists, such rate will be the rate of interest per
annum, as determined by the Administrative Agent (rounded upwards, if
necessary, to the nearest 1/100th of 1%) at which deposits of Dollars in
immediately available funds are offered at 11:00 A.M. (London, England
time) two (2) Business Days prior to the first day in such Interest Period
by major financial institutions reasonably satisfactory to the
Administrative Agent in the London interbank market for the requested
period and for an amount equal or comparable to the principal amount of the
LIBOR Loans outstanding on such date of determination. If no such deposits
are offered by such institutions, such rate will be the rate in effect for
the prior Interest Period.
EURODOLLAR RESERVE PERCENTAGE means, for any borrowing of LIBOR
Loans, the daily average for the applicable Interest Period of the maximum
rate at which reserves (including, without limitation, any supplemental,
marginal and emergency reserves) are imposed during such Interest Period by
the Board of Governors of the Federal Reserve System (or any successor)
under Regulation D on eurocurrency liabilities, as defined in such
Board's Regulation D, (or in respect of any other category of liabilities
that includes deposits by reference to which the interest rate on LIBOR
Loans is determined or any category of extension of credit or other assets
that include loans by non-United States offices of Lender to United States
residents) subject to any amendments of such reserve requirement by such
Board or its successor, taking into account any transitional adjustments
thereto. For purposes of this definition, the LIBOR Loans shall be deemed
to be eurocurrency liabilities as defined in Regulation D.
<PAGE>
(c) MARGIN AND RATE DETERMINATIONS. The Administrative Agent shall
determine each interest rate applicable to the Loans hereunder, and its
determination thereof shall be conclusive and binding except in the case of
manifest error. Not later than fifteen (15) days after the Administrative
Agent's receipt of the quarterly financial statements required by Section
7.1.3 hereof for a given fiscal quarter (or, in the case of a year end, the
receipt of the annual financial statements required by Section 7.1.2 hereof
for a given fiscal year) and a letter from the Company requesting a change
in the Applicable LIBOR Margin, accompanied by a certificate signed by the
Chief Financial Officer or Treasurer of the Company computing the Leverage
Ratio as of the close of the most recently completed fiscal quarter, the
Administrative Agent shall determine whether such financial information
indicates such a change in the Leverage Ratio as would justify a change in
the Applicable LIBOR Margin and shall then notify the Company of such
determination and of any change in the Applicable LIBOR Margin resulting
therefrom. Any change in the Applicable LIBOR Margin shall be effective
retroactively as of the close of the most recently completed fiscal quarter
and with such new Applicable LIBOR Margin to continue in effect until the
effectiveness of the next redetermination thereof. Any determination by
the Administrative Agent of the Leverage Ratio shall be conclusive and
binding upon the Company except in the case of manifest error.
SECTION 3.2 MINIMUM AND MAXIMUM BORROWING AMOUNTS. Each
borrowing of Base Rate Loans shall be in an amount not less than $500,000
or any larger amount that is an integral multiple of $100,000. Each
borrowing of LIBOR Loans shall be in an amount not less than $1,000,000, or
any larger amount that is an integral multiple of $100,000.
SECTION 3.3 BORROWING PROCEDURES.
(a) NOTICE TO THE ADMINISTRATIVE AGENT. The Company shall give
telephonic or telecopy notice to the Administrative Agent in the form
attached hereto as Exhibit B (the Borrowing Notice) (which notice shall
be irrevocable once given and, if by telephone, shall be promptly confirmed
in writing) by no later than 12:00 noon (Chicago time) (i) on the date at
least three (3) Business Days prior to the date of each requested borrowing
of LIBOR Loans and (ii) on the date of any requested borrowing of Base Rate
Loans. Each such notice shall specify (i) the date of the requested
borrowing (which shall be a Business Day), (ii) the amount of the requested
borrowing, (iii) the type of Loans requested (if no election as to type of
borrowing is specified in any such notice, then the requested borrowing
shall be of Base Rate Loans), and (iv) if such borrowing is to be comprised
of LIBOR Loans, the Interest Period applicable thereto. The Company agrees
that the Administrative Agent may rely on any such telephonic or telecopy
notice given by any person the Administrative Agent in good faith believes
is an Authorized Officer without the necessity of independent investigation
and in the event any notice by such means conflicts with the written
confirmation, such telephone or telecopy notice shall govern if the
Administrative Agent has acted in reliance thereon.
(b) DISBURSEMENT OF LOANS. Not later than 2:00 p.m. (Chicago time)
on the date of any borrowing (a Funding Date) of LIBOR Loans or Base Rate
Loans, each Lender shall make available its Loan in funds immediately
available in Chicago, Illinois, except to the extent such borrowing is
either a reborrowing, in whole or in part, of the principal amount of a
maturing borrowing of Loans (a Refunding Borrowing) in which case Lender
shall record the Loan made by it as a part of such Refunding Borrowing on
its books or records or on a schedule to the appropriate Note, as provided
in Section 3.8(b) hereof, and shall effect the repayment, in whole or in
part, as appropriate, of its maturing Loan or reimbursement obligation
through the proceeds of such new Loan. Subject to Section 8 hereof, the
Lenders shall make the proceeds of each borrowing available to the Company
at the Administrative Agent's principal office in Chicago, Illinois.
<PAGE>
SECTION 3.4 INTEREST PERIODS. As provided in Section 3.3 hereof,
at the time of each request for the borrowing of LIBOR Loans hereunder the
Company shall select an Interest Period applicable to such Loans from among
the available options. The term Interest Period means the period
commencing on the date a borrowing of LIBOR Loans is made and ending on the
date, as the Company may select, 1, 2 or 3, 6 or 12 months thereafter;
provided, however, that:
(a) the Company may not select an Interest Period that extends
beyond the Termination Date;
(b) whenever the last day of any Interest Period would otherwise be
a day that is not a Business Day, the last day of such Interest
Period shall be extended to the next succeeding Business Day,
provided that, if such extension would cause the last day of
such Interest Period to occur in the following calendar month,
the last day of such Interest Period shall be the immediately
preceding Business Day; and
(c) for purposes of determining the Interest Period for a borrowing
of LIBOR Loans, a month means a period starting on one day in a
calendar month and ending on the numerically corresponding day
in the next calendar month; provided, however, that if there is
no numerically corresponding day in the month in which such an
Interest Period is to end or if such an Interest Period begins
on the last Business Day of a calendar month, then such
Interest Period shall end on the last Business Day of the
calendar month in which such Interest Period is to end.
SECTION 3.5 RENEWALS AND CONVERSIONS. The Company may elect from
time to time to convert all or a part of one Type of Loan into another Type
of Loan or to renew all or part of a Loan by giving the Administrative
Agent notice (effective upon receipt) by 12:00 noon (Chicago time) on the
proposed date of conversion into a Base Rate Loan, and at least three (3)
Business Days before the conversion into or renewal of a LIBOR Loan,
specifying (i) the renewal or conversion date, (ii) the amount of the Loans
to be converted or renewed, (iii) in the case of conversions, the Type of
Loan to be converted into, and (iv) in the case of renewals of or
conversion into LIBOR Loans, the duration of the Interest Period applicable
to such Loan, provided that (a) after such renewal or conversion the
minimum principal amount of each Loan with the same Interest Period shall
be One Million Dollars ($1,000,000), and (b) LIBOR Loans can only be
renewed or converted on the last day of the Interest Period for such Loan.
The Administrative Agent shall promptly notify each applicable Lender of
each such notice. All conversions shall be made on a proportional basis
among the Lenders providing such converted Loan.
The Company shall give telephonic or telecopy notice to the
Administrative Agent (which notice shall be irrevocable once given, and if
by telephone, shall be promptly confirmed in writing) and shall be given
not later than 12:00 noon (Chicago time) on a Business Day which is not
less than the number of Business Days specified above for such notice. If
the Company fails to give the Administrative Agent the notice specified
above for the renewal or conversion of a LIBOR Loan prior to the end of the
Interest Period of such Loan, such Loan shall automatically be converted
into a Base Rate Loan on the last day of the Interest Period for such Loan.
SECTION 3.6 PREPAYMENTS.
<PAGE>
(a) GENERALLY. The Company shall have the privilege of prepaying
without premium or penalty and in whole or in part (but, if in part, then:
(i) in an amount not less than $500,000 or any larger amount that is an
integral multiple of $100,000 in the case of Base Rate Loans, and in an
amount not less than $1,000,000 or any larger amount that is an integral
multiple of $100,000 in the case of LIBOR Loans and (ii) in an amount such
that the minimum amount required for a borrowing pursuant to Section 3.2
hereof remains outstanding) on any Business Day upon prior notice to the
Administrative Agent which must be received by the Administrative Agent by
no later than 12:00 noon (Chicago time) on the date of such prepayment in
the case of Base Rate Loans and by no later than 12:00 noon (Chicago time)
on the date three Business Days in advance of the date of such prepayment
in the case of LIBOR Loans, such prepayment to be made by the payment of
the principal amount to be prepaid and accrued interest thereon and, in the
case of LIBOR Loans, any compensation required by Section 3.10 hereof.
Partial prepayments of any outstanding type of Loan shall be applied to the
various borrowings at the direction of the Company.
(b) REBORROWINGS. Any amount paid or prepaid on the Revolving
Loans before the Expiration Date may, subject to the terms and conditions
of this Agreement, be borrowed, repaid and borrowed again.
SECTION 3.7 DEFAULT RATE. If any Event of Default has occurred
and is continuing, then each Loan or other monetary Obligation shall bear
interest, after as well as before judgment (computed on the basis of a year
of 360 days and actual days elapsed) from the date of such Event of Default
until such Loan or other monetary Obligation is paid in full, payable on
demand, at a rate per annum (the Default Rate) equal to:
(a) with respect to any Base Rate Loan, the sum of two percent (2%)
plus the Base Rate from time to time in effect; and
(b) with respect to any LIBOR Loan, the sum of two percent (2%)
plus the rate of interest in effect thereon at the time of such default
until the end of the Interest Period applicable thereto and, thereafter, at
a rate per annum equal to the sum of two percent (2%) plus the Base Rate
from time to time in effect; and
(c) with respect to other monetary Obligations for which a Default
Rate is not otherwise specified, the sum of two percent (2%) plus the Base
Rate from time to time in effect.
SECTION 3.8 NOTES.
(a) FORM OF NOTES. In order to evidence the Revolving Loans, at
the time of the making of the initial Revolving Loans, the Company will
execute and deliver promissory notes, dated the date hereof, payable to the
order of each Lender in the principal amount of its Commitment (together
with any and all amendments, modifications, supplements, substitutions,
renewals, extensions and restatements, thereof and therefor, individually,
the Note or collectively, the Notes), substantially in the form of
Exhibit A hereto.
(b) RECORDING PROCEDURES. The Administrative Agent and each Lender
shall record on their books or records or on a schedule to the appropriate
Note the amount of each Loan made by such Lender to the Company, the
Interest Period thereof (if applicable), all payments of principal and
interest and the principal balance from time to time outstanding thereon,
the interest rate applicable thereto, and, in respect of any Loan, the type
of such Loan; provided that prior to the transfer of any Note all such
amounts shall be recorded on a schedule to such Note. The record thereof,
whether shown on such books or records of such Lender and the
Administrative Agent or on a schedule to any Note, shall be prima facie
evidence as to all such amounts (and, in the case of any discrepancy
therein, in the absence of manifest error, the books and records of the
Administrative Agent shall control); provided, however, that the failure of
the Administrative Agent to record any of the foregoing or any error in any
such record shall not limit or otherwise affect the obligation of the
Company to repay all Loans made hereunder together with accrued interest
thereon. The Administrative Agent will account separately to the Company
monthly with a statement of Loans, charges and payments made to and by the
Company pursuant to this Agreement, and such accounts shall be deemed
final, binding and conclusive, save for manifest error, unless the
Administrative Agent is notified by the Company in writing to the contrary
within 30 days of the date the account to the Company was so rendered.
Such notice by the Company shall be deemed an objection to only those items
specifically objected to therein. Failure of the Administrative Agent to
render such account shall in no way offset the rights of the Administrative
Agent or of the Lenders hereunder. At the request of any Lender and upon
such Lender tendering to the Company the Note to be replaced, the Company
shall furnish a new Note to such Lender to replace any outstanding Note and
at such time the first notation appearing on a schedule on the reverse side
of, or attached to, such Note shall set forth the aggregate unpaid
principal amount of all Loans, if any, then outstanding thereon.
SECTION 3.9 COMMITMENT TERMINATIONS. The Company shall have the
right at any time and from time to time, upon prior written notice to the
Administrative Agent, to terminate without premium or penalty, in whole or
in part, any Commitment, each such termination (whether in whole or in
part) to be effective as of the close of the calendar quarter specified in
such notice (provided such effective date occurs no earlier than five (5)
Business Days after such notice) and each partial termination to be in an
amount not less than $500,000 or any larger amount that is an integral
multiple of $100,000; provided that the Commitments may not be reduced to
an amount less than the aggregate principal amount of the utilization then
outstanding thereunder. Any termination of Commitments pursuant to this
Section 3.9 may not be reinstated.
SECTION 3.10 FUNDING INDEMNITY. In the event any Lender shall
incur any loss, cost or expense (including, without limitation, any loss of
profit, and any loss, cost or expense incurred by reason of the liquidation
or re-employment of deposits or other funds acquired by such Lender to fund
or maintain any LIBOR Loan or the relending or reinvesting of such deposits
or amounts paid or prepaid to such Lender) as a result of:
(a) any payment (including prepayment) of a LIBOR Loan on a date
other than the last day of its Interest Period for any reason, whether
before or after default, and whether or not such payment is required by any
provisions of this Agreement, or
(b) any failure (because of a failure to meet the conditions of
Sections 2.2, 8 or otherwise) by the Company to borrow a LIBOR Loan on the
date specified in a notice given pursuant to Section 3.3 hereof,
then, upon the demand of such Lender, the Company shall pay to such Lender
such amount as will reimburse such Lender for such loss, cost or expense.
If such Lender makes such a claim for compensation, it shall provide to the
Company a certificate executed by an officer of such Lender setting forth
the amount of such loss, cost or expense in reasonable detail (including an
explanation of the basis for and the computation of such loss, cost or
expense) and the amounts shown on such certificate shall be deemed
rebuttably presumptive evidence of the correctness thereof.
SECTION 3.11 CHANGE IN CIRCUMSTANCES, ETC.
(a) CHANGE OF LAW. Notwithstanding any other provisions of this
Agreement or any Note, if at any time after the date hereof any change in
applicable Law or in the interpretation thereof makes it unlawful for any
Lender to make or continue to maintain LIBOR Loans or to give effect to its
obligations as contemplated hereby, such Lender shall promptly give notice
thereof to the Company and the Administrative Agent, and such Lender's
obligations to make or maintain LIBOR Loans under this Agreement shall
terminate until it is no longer unlawful for such Lender to make or
maintain LIBOR Loans. The Company shall prepay on demand the outstanding
principal amount of any such affected LIBOR Loans, together with all
interest accrued thereon and all other amounts then due and payable to such
Lender under this Agreement; provided, however, subject to all of the terms
and conditions of this Agreement, the Company may then elect to borrow the
principal amount of the affected LIBOR Loan from such Lender by means of a
Base Rate Loan from Lenders.
(b) UNAVAILABILITY OF DEPOSITS OR INABILITY TO ASCERTAIN, OR
INADEQUACY OF, LIBOR. If on or prior to the first day of any Interest
Period for any borrowing of LIBOR Loans:
(i) the Administrative Agent advises the Company that
deposits in United States Dollars (in the applicable amounts) are not being
offered to it or the Reference Bank in the interbank eurodollar market, for
such Interest Period, or
(ii) the Administrative Agent advises the Company that LIBOR
as determined by the Reference Bank will not adequately and fairly reflect
the cost to Lenders of funding LIBOR Loans for such Interest Period,
then, until the Administrative Agent notifies the Company and the Lenders
that the circumstances giving rise to such suspension no longer exist, the
obligation of the Lenders to make LIBOR Loans shall be suspended.
(c) INCREASED COST AND REDUCED RETURN.
(1) If on or after the date hereof, the adoption of any
applicable Law, or any change therein, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender with any request or directive (whether
or not having the force of law) of any such authority, central bank or
comparable agency:
(i) shall subject any Lender to any tax, duty or
other charge with respect to the Loans, the Notes or its obligation to make
Loans, or shall change the basis of taxation of payments of such Lender of
the principal of or interest on the Loans or any other amounts due under
this Agreement in respect of its Loans or its obligation to make Loans
(except for changes in the rate of tax on the overall net income of such
Lender imposed by the jurisdiction in which such Lender's principal
executive office is located); or
(ii) shall impose, modify or deem applicable any
reserve, special deposition or similar requirement (including, without
limitation, any such requirement imposed by the Board of Governors of the
Federal Reserve System, but excluding with respect to any LIBOR Loans any
such requirement included in an applicable Eurodollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Lender or shall impose on such Lender or on the interbank market
any other condition affecting the Loans, the Notes or such Lender's
obligation to make Loans;
and the result of any of the foregoing is to increase the cost to such
Lender of making or maintaining any Loan, or to reduce the amount of any
sum received or receivable by any Lender or the Administrative Agent under
this Agreement or under the Notes with respect thereto, by an amount deemed
by the Administrative Agent or such Lender to be material, then, within
fifteen (15) days after demand by the Administrative Agent or such Lender,
the Company shall be obligated to pay such Lender such additional amount or
amounts as will compensate the Administrative Agent and such Lender for
such increased cost or reduction (computed commencing on the effective date
of any event mentioned herein). The Administrative Agent or such Lender
agree to use their best efforts to give the Company notice of the
occurrence of any event mentioned herein.
(2) If the Administrative Agent or any Lender shall
determine that the adoption after the date hereof of any applicable Law
regarding capital adequacy, or any change in any existing Law, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Administrative Agent or any Lender (or any of their branches or any
corporation controlling the Administrative Agent or any Lender (or any of
its branches or any corporation controlling the Administrative Agent or any
Lender) with any request or directive regarding capital adequacy (whether
or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of
return on the Administrative Agent's or any Lender's or such corporation's
capital, as the case may be, as a consequence of the Administrative Agent's
or any Lender's obligations hereunder or for the credit which is the
subject matter hereof to a level below that which the Administrative Agent
or any Lender or such corporation could have achieved but for such
adoption, change or compliance (taking into consideration the
Administrative Agent's or any Lender's or such corporation's policies with
respect to liquidity and capital adequacy) by an amount deemed by the
Administrative Agent or any Lender to be material, then from time to time,
within fifteen (15) days after demand by the Administrative Agent or any
Lender, the Company shall pay to the Administrative Agent or such Lender
such additional amount or amounts reasonably determined by the
Administrative Agent or such Lender as will compensate the Administrative
Agent or such Lender for the reduction.
(d) DISCRETION OF LENDERS AS TO MANNER OF FUNDING. Notwithstanding
any other provision of this Agreement, each Lender shall be entitled to
fund and maintain its funding of all or any part of the Loans in any manner
it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations hereunder shall be made as if such Lender had
actually funded and maintained each LIBOR Loan through the purchase of
deposits in the relevant market having a maturity corresponding to such
Loan's Interest Period and bearing an interest rate equal to LIBOR, for
such Interest Period.
SECTION 3.12 PLACE AND APPLICATION OF PAYMENTS. All payments of
principal of and interest on the Loans, and all payments of fees and all
other amounts payable under this Agreement shall be made to the
Administrative Agent no later than 12:00 Noon (Chicago time) at the
principal office of the Administrative Agent in Chicago, Illinois (or such
other location in the State of Illinois as the Lender may designate to the
Company). Any payments received after such time shall be deemed to have
been received by the Lenders on the next Business Day. All such payments
shall be made in lawful money of the United States of America, in
immediately available funds at the place of payment, without setoff or
counterclaim. Alternatively, at its sole discretion, the Administrative
Agent or any Lender may charge against or debit any deposit account or
other monies of the Company on deposit with or in possession of the
Administrative Agent or such Lender (other than accounts held in a
fiduciary capacity), all or any part of any amount due hereunder or under
the Notes. The Administrative Agent's and the Lender's right from time to
time after the occurrence or happening of an Event of Default hereunder
(which has not been cured or waived in a writing signed by the
Administrative Agent and such Lender) to set off indebtedness owing by the
Company to the Administrative Agent or such Lender against any Company's
monies, deposits, credits, accounts or other property now or at any time in
the possession or control of the Administrative Agent or such Lender,
except as provided herein, is hereby acknowledged and agreed to by the
Company.
SECTION 4. FEES.
SECTION 4.1 FEES. The Company agrees to pay the fees set forth
in this Section 4. All such fees shall be non-refundable.
SECTION 4.2 ADMINISTRATIVE AGENT'S FEE. The Company agrees to
pay to the Administrative Agent for its own account fees in the respective
amounts equal to the amounts previously agreed to in separate writings by
the Company and the Administrative Agent.
SECTION 4.3 FACILITY FEE. The Company agrees to pay to the
Administrative Agent on behalf of the Lenders the Facility Fee.
SECTION 5. TAXES AND OTHER MATTERS
SECTION 5.1 TAXES. All payments by the Company of principal of,
and interest on, the Notes and all other amounts payable hereunder shall be
made free and clear of and without deduction for any present or future
income, excise, stamp or franchise taxes and other taxes, fees, duties,
withholdings or other charges of any nature whatsoever imposed by any
taxing authority, but excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts (such non-excluded items
being called Taxes). In the event that any withholding or deduction from
any payment to be made by the Company hereunder is required in respect of
any Taxes pursuant to any applicable law, rule or regulation, then the
Company will
(a) pay directly to the relevant authority the full amount required
to be so withheld or deducted;
(b) promptly forward to the Administrative Agent an official
receipt or other documentation satisfactory to the Administrative Agent
evidencing such payment to such authority; and
(c) pay to the Administrative Agent for the account of the Lenders
such additional amount or amounts as is necessary to ensure that the net
amount actually received by each Lender will equal the full amount such
Lender would have received had no such withholding or deduction been
required.
Moreover, if any Taxes are directly asserted against the Administrative
Agent or any Lender with respect to any payment received by the
Administrative Agent or such Lender hereunder, the Administrative Agent or
such Lender may pay such Taxes and the Company will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such Person after the
payment of such Taxes (including any Taxes on such additional amount) shall
equal the amount such Person would have received had not such Taxes been
asserted.
If the Company fails to pay any Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent, for the
account of the respective Lenders, the required receipts or other required
documentary evidence, the Company shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any
Lender as a result of any such failure. For purposes of this Section 5.1, a
distribution hereunder by the Administrative Agent or any Lender to or for
the account of any Lender shall be deemed a payment by the Company.
Upon the request of the Company or the Administrative Agent, each
Lender that is organized under the laws of a jurisdiction other than the
United States shall, prior to the due date of any payments under the Notes,
execute and deliver to the Company and the Administrative Agent, on or
about the first scheduled payment date in each fiscal year, one or more (as
the Company or the Administrative Agent may reasonably request) United
States Internal Revenue Service Forms 4224 or Forms 1001 or such other
forms or documents (or successor forms or documents), appropriately
completed, as may be applicable to establish the extent, if any, to which a
payment to such Lender is exempt from withholding or deduction of Taxes.
SECTION 5.2 MAKING OF LOANS BY ADMINISTRATIVE AGENT.
SECTION 5.2.1 ASSUMPTIONS BY ADMINISTRATIVE AGENT. Notwithstanding
the occurrence or continuance of an Unmatured Event of Default or Event of
Default or other failure of any condition to the making of Loans hereunder,
unless the Administrative Agent shall have received notice from a Lender in
accordance with the provisions of Section 5.2.2 prior to a proposed
borrowing date that such Lender will not make available to the
Administrative Agent such Lender's Percentage of the amount to be borrowed
on such date, the Administrative Agent may assume that such Lender will
make such portion available to the Administrative Agent in immediately
available funds, and the Administrative Agent may (but shall not be so
required), in reliance upon such assumption, make available to the Company
on such date a corresponding amount. If and to the extent any Lender shall
not have made its full amount available to the Administrative Agent in
immediately available funds and the Administrative Agent in such
circumstances has made available to the Company such amount, that Lender
shall on the next Business Day following the date of such borrowing make
such amount available to the Administrative Agent, together with interest
at the Federal Funds Rate for and determined as of each day during such
period. A notice of the Administrative Agent submitted to any Lender with
respect to amounts owing under this Section 5.2.1 shall be conclusive,
absent manifest error. If such amount is so made available, such payment
to the Administrative Agent shall constitute such Lender's Loan on the date
of borrowing for all purposes of this Agreement. If such amount is not
made available to the Administrative Agent on the next Business Day
following the date of such borrowing, the Administrative Agent shall notify
the Company of such failure to fund and, upon demand by the Administrative
Agent, the Company shall pay such amount to the Administrative Agent for
the Administrative Agent's account, together with interest thereon for each
day elapsed since the date of such borrowing, at a rate per annum equal to
the interest rate applicable at the time to the Loans comprising such
borrowing. If such Lender shall repay to the Administrative Agent such
corresponding amount, the amount so repaid shall constitute such Lender's
Percentage of the Loan made on such borrowing date for purposes of this
Agreement. The failure of any Lender to make its Percentage of any Loan
available shall not (without regard to whether the Company shall have
returned the amount thereof to the Administrative Agent in accordance with
this Section 5.2.1) relieve it or any other Lender of its obligation, if
any, hereunder to make its Percentage of such Loan available on such
borrowing date, but no Lender shall be responsible for the failure of any
other Lender to make its Percentage of such Loan available on the borrowing
date.
SECTION 5.2.2. DELEGATION OF AUTHORITY TO ADMINISTRATIVE AGENT.
Without limiting the generality of Section 10, each Lender expressly
authorizes the Administrative Agent to determine on behalf of such Lender
the creation or elimination of any reserves against the Revolving Loans.
Such authorization may be withdrawn by the Required Lenders by giving the
Administrative Agent written notice of such withdrawal signed by the
Required Lenders; provided, however, that unless otherwise agreed by the
Administrative Agent such withdrawal of authorization shall not become
effective until the thirtieth Business Day after receipt of such notice by
the Administrative Agent. Thereafter, the Required Lenders shall jointly
instruct the Administrative Agent in writing regarding such matters with
such frequency as the Required Lenders shall jointly determine. Unless and
until the Administrative Agent shall have received written notice from the
Required Lenders as to the existence of an Unmatured Event of Default, an
Event of Default or some other circumstance which would relieve the Lenders
of their respective obligations to make Loans hereunder, which notice shall
be in writing and shall be signed by the Required Lenders and shall
expressly state that the Required Lenders do not intend to make available
to the Administrative Agent such Lenders' ratable share of Loans made after
the effective date of such notice, the Administrative Agent shall be
entitled to continue to make the assumptions described in Section 5.2.1.
After receipt of the notice described in the preceding sentence, which
shall become effective on the third Business Day after receipt of such
notice by the Administrative Agent unless otherwise agreed by the
Administrative Agent, the Administrative Agent shall be entitled to make
the assumptions described in Section 5.2.2 as to any Loans as to which it
has not received a written notice to the contrary prior to 11:00 a.m.
(Chicago time) on the Business Day next preceding the day on which the Loan
is to be made. The Administrative Agent shall not be required to make any
Loan as to which it shall have received notice by a Lender of such Lender's
intention not to make its ratable portion of such Loan available to the
Administrative Agent. Any withdrawal of authorization under this Section
5.2.2 shall not affect the validity of any Loans made prior to the
effectiveness thereof.
SECTION 5.3 SHARING OF PAYMENTS. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application
of setoff or otherwise) on account of any Loan (other than pursuant to the
terms of Sections 3.10 and 3.11) in excess of its pro rata share of
payments then or therewith obtained by all Lenders, such Lender shall
purchase from the other Lenders such participations in their Notes as shall
be necessary to cause such purchasing Lender to share the excess payment or
other recovery ratably with each of them; provided, however, that if all or
any portion of the excess payment or other recovery is thereafter recovered
from such purchasing Lender, the purchase shall be rescinded and each
Lender which has sold a participation to the purchasing Lender shall repay
to the purchasing Lender the purchase price to the ratable extent of such
recovery together with an amount equal to such selling Lender's ratable
share (according to the proportion of
(a) the amount of such selling Lender's required repayment to the
purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Company agrees that any
Lender so purchasing a participation from another Lender pursuant to this
Section may, to the fullest extent permitted by law, exercise all its
rights of payment (including pursuant to Section 5.4) with respect to such
participation as fully as if such Lender were the direct creditor of the
Company in the amount of such participation. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured
claim in lieu of a setoff to which this Section applies, such Lender shall,
to the extent practicable, exercise its rights in respect of such secured
claim in a manner consistent with the rights of the Lenders entitled under
this Section to share in the benefits of any recovery on such secured
claim.
SECTION 5.4 SETOFF. Each Lender shall, upon the occurrence
of any Default described in Section 9.1.3 or any other Event of Default,
have the right to appropriate and apply to the payment of the Obligations
owing to it (whether or not then due), and (as security for such
Obligations) the Company hereby grants to each Lender a continuing security
interest in, any and all balances, credits, deposits, accounts or moneys of
the Company (other than accounts held in a fiduciary capacity) then or
thereafter maintained with such Lender; provided, however, that any such
appropriation and application shall be subject to the provisions of Section
5.3. Each Lender agrees promptly to notify the Company and the
Administrative Agent after any such setoff and application made by such
Lender; provided, however, that the failure to give such notice shall not
affect the validity of such setoff and application. The rights of each
Lender under this Section are in addition to other rights and remedies
(including other rights of setoff under applicable law or otherwise) which
such Lender may have.
SECTION 5.5 USE OF PROCEEDS. The Company will apply the proceeds
of the Loans for working capital, acquisitions and general corporate
purposes in compliance with all applicable law including, but not limited
to, Regulation U of the Board of Governors of the Federal Reserve System.
SECTION 6. WARRANTIES. To induce the Lenders and the
Administrative Agent to enter into this Agreement and to make the Loans
hereunder, the Company represents and warrants unto the Administrative
Agent and each Lender, as of the date hereof, and as of the date of each
disbursement of each of the Loans, the following, which shall survive the
execution and delivery of this Agreement, the Notes and the Loan Documents
and until all of the Obligations have been paid, satisfied or discharged in
full, regardless of any investigation by the Administrative Agent or any
Lender of the Company's financial condition or assets:
SECTION 6.1 ORGANIZATION, ETC. The Company is a corporation duly
existing and in good standing under the laws of the State of Illinois; each
Subsidiary is a corporation duly existing and in good standing under the
laws of the state of its respective incorporation; the Company and each
Subsidiary is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction where the failure to be so
qualified would have a Material Adverse Effect; and the Company has full
power and authority and holds all requisite governmental licenses, permits
and other approvals to own and hold its properties and to conduct its
business substantially as currently conducted by it.
SECTION 6.2 AUTHORIZATION; NO CONFLICT. The execution and
delivery of this Agreement, the borrowing hereunder, the execution and
delivery of the Notes, and the performance by the Company of its
obligations under this Agreement and the Notes, are within the Company's
corporate powers, have been duly authorized by all necessary corporate
action on the part of the Company, and do not and will not contravene or
conflict with any provision of law, governmental regulation or court decree
or order to which the Company is subject or of the charter or by-laws of
the Company or of any agreement binding upon the Company, or result in or
require the imposition of, a lien on any of the Company's or its
Subsidiaries' properties.
SECTION 6.3 VALIDITY AND BINDING NATURE. This Agreement is, and
the Notes when duly executed and delivered will be, legal, valid and
binding obligations of the Company enforceable against the Company in
accordance with their respective terms.
SECTION 6.4 FINANCIAL STATEMENTS. The Company's audited
consolidated financial statements as at December 31, 1998, and CTT's
unaudited financial statements as at December 31, 1998, copies of which
have been furnished to the Lenders, have been prepared in conformity with
generally accepted accounting principles applied on a basis consistent with
that of the preceding fiscal year (except as otherwise set forth therein
with respect to the discontinued operations of Alleghany Asset Management),
and present fairly the financial condition of the Company and its
Subsidiaries (or CTT as the case may be) as at December 31, 1998 and the
results of their operations for the fiscal year ended December 31, 1998.
Each of the Annual Statement Blanks for CTI, TT and Security Union as at
December 31, 1998, copies of which have been furnished to the Lenders, has
been prepared in conformity with applicable statutory accounting principles
applied on a basis consistent with that of the preceding fiscal year, and
presents fairly the financial condition of CTI, TT or Security Union, as
the case may be, as at such date and the results of their operations for
the period then ended.
SECTION 6.5 LITIGATION AND CONTINGENT LIABILITIES. Schedule 6.5
hereto sets forth a list, as of the date specified, of all pending
litigation, including, without limitation, title insurance claims and
claims arising under Environmental Laws, which, if adversely determined,
are likely to result in a judgment in any one case against the Company or
any Subsidiary of $100,000 or more over and above any applicable insurance
coverage. All pending litigation, including, without limitation, title
insurance claims and claims arising under Environmental Laws, which, if
adversely determined, is likely to result in a judgment in any one case
against the Company or any Subsidiary of less than $100,000 over and above
any applicable insurance coverage does not exceed (x) $100,000,000 for
Loans made until June 1, 2001 and (y) $150,000,000 for Loans made after
June 1, 2001until the Expiration Date). Except as set forth in such
Schedule, no litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings are pending
or, to the best knowledge of the Company, threatened against the Company or
any Subsidiary which would, if adversely determined, have a Material
Adverse Effect. Other than any liability incident to such litigation or
proceedings and contingent liabilities of the Title Insurance Subsidiaries
incurred in the ordinary course of their business, neither the Company nor
its Subsidiaries have any contingent liabilities which would have a
Material Adverse Effect, which are not provided for or disclosed in the
financial statements referred to in Section 6.4.
SECTION 6.6 LIENS. None of the assets of the Company or any
Subsidiary is subject to any mortgage, pledge, title retention lien, or
other lien, encumbrance or security interest, except as permitted under
Section 7.12.
SECTION 6.7 SUBSIDIARIES. The Company has no Subsidiaries except
those listed in Schedule 6.7.
SECTION 6.8 INVESTMENT COMPANY ACT. The Company is not an
investment company or a company controlled by an investment company,
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 6.9 PUBLIC UTILITY HOLDING COMPANY ACT. Neither the
Company nor any Subsidiary is a holding company, or a subsidiary
company of a holding company, or an affiliate, of a holding company
or of a subsidiary company of a holding company, within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
SECTION 6.10 REGULATION U. The Company is not engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock
(within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System).
SECTION 6.11 OWNERSHIP OF PROPERTIES. The Company and each of its
Subsidiaries owns good and marketable title to all of its properties and
assets, real and personal, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all liens, charges or claims (including
infringement claims with respect to patents, trademarks, copyrights and the
like) except as permitted pursuant to Section 7.12. The Company and each
of its Subsidiaries is in compliance with all material requirements of law,
including Environmental Laws, and all terms and provisions of all contracts
and other instruments binding upon the Company or any of its properties or
other assets, the failure to comply with which would have a Material
Adverse Effect.
SECTION 6.12 TAXES. The Company and its Subsidiaries have filed
all tax returns and reports required by law to have been filed by it and
has paid all taxes and governmental charges thereby shown to be owing,
except any such taxes or charges which are being diligently contested in
good faith by appropriate proceedings and for which adequate reserves in
accordance with generally accepted accounting principles shall have been
set aside on its books.
SECTION 6.13 PENSION AND WELFARE PLANS. During the twelve-
consecutive-month period prior to the date of the execution and delivery of
this Agreement and prior to the date hereof, no steps have been taken to
terminate any plan, and no contribution failure has occurred with respect
to any Pension Plan sufficient to give rise to a lien in excess of
$10,000,000 under Section 302(f) of ERISA. No condition exists or event or
transaction has occurred with respect to any Pension Plan which might
result in the incurrence by the Company or any member of the Controlled
Group of any liability, fine or penalty in excess of $10,000,000. Except
as disclosed in Schedule 6.13, neither the Company nor any member of the
Controlled Group has any contingent liability with respect to any post-
retirement benefit under a Welfare Plan, other than liability for
continuation coverage described in Part 6 of Title I of ERISA.
SECTION 6.14 ACCURACY OF INFORMATION. All factual
information heretofore or contemporaneously furnished by or on behalf of
the Company in writing to the Administrative Agent or any Lender for
purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished by or on behalf of the Company to the Administrative Agent or any
Lender will be, true and accurate in every material respect on the date as
of which such information is dated or certified and as of the date of
execution and delivery of this Agreement by the Administrative Agent and
such Lender, and such information is not, or shall not be, as the case may
be, incomplete by omitting to state any material fact necessary to make
such information not misleading.
<PAGE>
SECTION 6.15 YEAR 2000. The Company and its Subsidiaries have
reviewed the areas within their business and operations which could be
adversely affected by, and have developed or are developing a program to
address on a timely basis, the Year 2000 Problem (that is, the risk that
computer applications used by the Company and its Subsidiaries may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date on or after December 31, 1999), and
have made related appropriate inquiry of material suppliers and vendors.
Based on such review and program, the Company believes that the Year 2000
Problem will not have a Material Adverse Effect on the Company. From time
to time, at the request of the Bank, the Company and its subsidiaries shall
provide to the Bank such updated information or documentation as is
requested regarding the status of their efforts to address the Year 2000
Problem.
SECTION 6.16 SEC DOCUMENTS. Since June 17, 1998, the Company has
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the Securities and Exchange Commission (the
SEC) (all of the foregoing being hereinafter referred to as the SEC
Documents). The Company has delivered to the Administrative Agent true
and complete copies of the SEC Documents. As of their respective dates,
the SEC Documents complied in all material respects with the requirements
of the Securities Act of 1933, as amended (the Securities Act), or the
Securities Exchange Act of 1934, as amended (the Exchange Act), as the
case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and none of the SEC Documents
(when read togther with all exhibits included therein and financial
statement schedules thereto and documents (other than exhibits)
incorporated by reference) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
SECTION 7. COMPANY'S COVENANTS.
Until the expiration or termination of the Commitment and thereafter
until all Obligations of the Company hereunder have been satisfied and
discharged in full, the Company agrees that it will:
SECTION 7.1 REPORTS, CERTIFICATES AND OTHER INFORMATION. Furnish
to the Administrative Agent (with sufficient copies for the Lenders):
SECTION 7.1.1 COMPANY AUDIT REPORT. Within 90 days after each
fiscal year of the Company, a copy of an annual audit report of the Company
and its Subsidiaries prepared on a consolidated basis and in conformity
with generally accepted accounting principles applied on a basis consistent
(to the extent possible) with the audited consolidated financial statements
of the Company and its Subsidiaries as at December 31, 1998, duly certified
by independent certified public accountants of recognized standing selected
by the Company, together with (i) a certificate from such accountants
containing a computation (prepared either by such accountants or the
Company) of, and showing compliance with, each of the financial ratios and
restrictions contained in this Section 7 and to the effect that, in making
the examination necessary for the signing of such annual audit report by
such accountants, they have not become aware of any Event of Default or
Unmatured Event of Default that has occurred and is continuing, or if they
have become aware of any such event, describing it and the steps, if any,
being taken by the Company to cure it and (ii) a letter addressed to the
Company, the Administrative Agent and the Lenders from such accountants in
substantially the same form as Exhibit E.
SECTION 7.1.2 ANNUAL COMPANY UNAUDITED STATEMENTS. Within 90 days
after each fiscal year of the Company, a copy of its unaudited balance
sheet as at the end of such fiscal year and a statement of earnings for
such fiscal year, prepared on an unconsolidated basis and signed by a
proper accounting officer of the Company.
<PAGE>
SECTION 7.1.3 COMPANY INTERIM REPORTS. Within 60 days after each
quarter (except the last quarter) of each fiscal year of the Company, a
copy of unaudited financial statements of the Company and its Subsidiaries
prepared in the same manner as the audit report referred to in Section
7.1.1, subject to normal recurring year-end adjustments, signed by a proper
accounting officer of the Company and consisting of at least a balance
sheet as at the close of such quarter and statements of earnings and
statement of cash flows for the period from the beginning of such fiscal
year to the close of such quarter; provided, however, that such unaudited
financial statements need not be more detailed than what would be required
for a quarterly report to the Securities and Exchange Commission on Form
10-Q.
SECTION 7.1.4 CERTIFICATES. Contemporaneously with the furnishing
of a copy of each annual Company audit report and of each set of quarterly
Company statements provided for in this Section 7.1, a certificate dated
the date of such annual report or such set of quarterly statements and
signed by the President, the Chief Financial Officer or the Treasurer of
the Company, to the effect that no Event of Default, or Unmatured Event of
Default, has occurred and is continuing, or, if there is any such an event,
describing it and the steps, if any, being taken to cure it and containing
(except in the case of the certificate dated the date of such annual
report) a computation of, and showing compliance with, each of the
financial ratios and restrictions contained in this Section 7 and a
statement of the maximum amount of any Investment Borrowings during such
quarter and that the security therefor consisted of Approved Investments.
SECTION 7.1.5 ANNUAL STATEMENT BLANKS. Within 90 days after each
fiscal year of each Title Insurance Subsidiary, a copy of its Annual
Statement Blank filed with its applicable State regulatory commission for
such fiscal year and prepared in accordance with applicable statutory
accounting requirements from time to time in effect.
SECTION 7.1.6 QUARTERLY STATEMENT BLANKS. Within 60 days
after each quarter (except the last quarter) of each fiscal quarter of each
Title Insurance Subsidiary, a copy of its Quarterly Statement Blank filed
with its applicable State regulatory commission for such fiscal quarter and
prepared in accordance with applicable statutory accounting requirements
from time to time in effect.
SECTION 7.1.7 NOTICE OF DEFAULT AND LITIGATION. Forthwith upon
learning of the occurrence of any of the following, written notice thereof,
describing the same and the steps being taken by the Company or the
Subsidiary affected with respect thereto: (i) the occurrence of an Event of
Default or an Unmatured Event of Default, or (ii) the institution of, or
any adverse determination in, any litigation, arbitration proceeding or
governmental proceeding which would have, or has, a Material Adverse
Effect.
SECTION 7.1.8 SEC REPORTS. Within ten Business Days after the due
date for filing with the Securities and Exchange Commission (SEC), all
filings with the SEC including but not limited to those on Forms 10-K, 10-Q
and 8-K.
SECTION 7.1.9 SUBSIDIARIES. Contemporaneously with the furnishing
of a copy of each annual audit report of the Company pursuant to Section
7.1.1, a written report of any changes in the list of Subsidiaries.
SECTION 7.1.10 ERISA. Immediately upon becoming aware of the
institution of any steps by the Company or any other Person to terminate
any Pension Plan, or the failure to make a required contribution to any
Pension Plan if such failure is sufficient to give rise to a lien under
Section 302(f) of ERISA, or the taking of any action with respect to a
Pension Plan which could result in the requirement that the Company furnish
a bond or other security to the PBGC or such Pension Plan, which could
result in the incurrence by the Company of any material liability, fine or
penalty, or any material increase in the contingent liability Welfare Plan
benefit, notice thereof and copies of all documentation relating thereto.
SECTION 7.1.10 ADDITIONAL INFORMATION. Such other information
respecting the conditions or operations, financial or otherwise, of the
Company or any of its Subsidiaries as any Lender through the Administrative
Agent may from time to time reasonably request.
SECTION 7.2 BOOKS, RECORDS AND INSPECTIONS. Maintain, and cause
each Subsidiary to maintain, complete and accurate books and records;
permit, and cause each Subsidiary to permit, access by the Administrative
Agent and each Lender to the books and records of the Company and of any
Subsidiary; provided, however, that such access shall not unreasonably
interfere with the normal business operations of the Company or such
Subsidiary.
SECTION 7.3 INSURANCE. Maintain, and cause each Subsidiary to
maintain, such insurance as may be required by law and such other
insurance, to such extent as is reasonably available (as determined by the
Company) and against such hazards and liabilities, as is customarily
maintained by companies similarly situated; provided, however, that, in
lieu of or supplemental to any insurance referred to in this Section 7.3,
the Company may adopt such other plan or method of protection in respect of
its properties or other risks, whether by establishment of an insurance
fund or reserve or by otherwise conforming to the practices of similar
companies maintaining systems of self-insurance, as may be determined by
the Company in its reasonable business judgment.
SECTION 7.4 TAXES. Pay, and cause each Subsidiary to pay, when
due all taxes, assessments, and other governmental charges or levies
imposed upon it, as well as all lawful claims for labor, materials, and
supplies or otherwise which, if unpaid, might give rise to liens or charges
upon its property, except as contested in good faith and by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted accounting principles shall have been set aside on its books.
SECTION 7.5 CONSOLIDATED NET WORTH. Not permit Consolidated Net
Worth at the close of any fiscal quarter to be less than $275,000,000.
SECTION 7.6 STATUTORY SURPLUS. Not permit Statutory Surplus of
the Title Insurance Subsidiaries on a combined basis at the close of any
fiscal quarter to be less than $185,000,000.
SECTION 7.7 INTEREST EXPENSE COVERAGE RATIO. Not permit the
ratio during any period of six consecutive fiscal quarters of Earnings
Before Interest and Taxes to Interest Expense to be less than 2.5 to 1.0.
SECTION 7.8 LIQUIDITY. Not permit Cash and Marketable Securities
of the Title Insurance Subsidiaries on a combined basis at the close of any
fiscal quarter plus Cash and Marketable Securities of the Company on an
unconsolidated basis at the close of any fiscal quarter to be less than the
Statutory Premium Reserve of the Title Insurance Subsidiaries on a combined
basis plus the next twelve months of Debt Service.
SECTION 7.9 LOSS RESERVE RATIO. Not permit the ratio as at the
close of any fiscal quarter of Loss Reserves of the Title Insurance
Subsidiaries to their Statutory Surplus on a combined basis to be greater
than 0.9 to 1.0.
SECTION 7.10 RESTRICTED PAYMENTS. Not purchase or redeem any
shares of the capital stock of the Company, declare or pay any dividends
thereon (other than stock dividends), make any distribution to stockholders
or set aside any funds for any such purpose, or make any loans or advances
to Affiliates which are not Subsidiaries of the Company (all of which
purchases, redemptions, declarations, payments, distributions or loans and
advances hereinabove referred to being collectively called Restricted
Payments); provided, however, that so long as no Event of Default, or
Unmatured Event of Default, has occurred and is continuing (or would occur
as the result of a Restricted Payment hereinbelow permitted), the Company
may (i) make Restricted Payments to its parent corporation or purchase debt
instruments of Affiliates which are not Subsidiaries of the Company from
time to time provided that the Company's Consolidated Net Worth would not
be reduced thereby below $275,000,000 and (ii) make Restricted Payments to
its parent corporation of an amount which represents the income taxes that
would have been payable by the Company and the Subsidiaries of the Company
forming part of the affiliated group for income tax purposes if the Company
had not filed consolidated income tax returns as part of an affiliated
group with CTC.
SECTION 7.11 INDEBTEDNESS. Not, and not permit any Subsidiary to,
incur or permit to exist any indebtedness for borrowed money, or for the
deferred purchase price of any property, or for the deferred purchase price
of any services the obligations for which would be reflected on an audited
consolidated balance sheet of the Company and its Subsidiaries (or which
contract would be reflected in the footnotes thereto, but excluding all
leases accounted for as operating leases) prepared in accordance with
generally accepted accounting principles, or under capitalized leases,
except (i) the Notes, (ii) short term indebtedness of the Company and its
Subsidiaries (but excluding (a) bank debt of CTT, or (b) debt of CTT
incurred pursuant to a public or private offering under the Securities Act
of 1933, as amended) in an aggregate amount not in excess of $50,000,000
for working capital purposes, provided that no such indebtedness referred
to in this clause (ii) shall be outstanding for a period of at least 2
consecutive months in each fiscal year, (iii) indebtedness of Subsidiaries
to the Company and to other Subsidiaries and of the Company to
Subsidiaries, (iv) current accounts payable arising in the ordinary course
of business, (v) Investment Borrowings, (vi) other Long- Term Indebtedness
of the Company and any Subsidiary (but excluding (a) bank debt of CTT, or
(b) debt of CTT incurred pursuant to a public or private offering under the
Securities Act of 1933, as amended) to the extent permitted by Section
7.15; provided, however, any such Long-Term Indebtedness of any Subsidiary
shall not exceed an aggregate amount of $35,000,000, (vii) indebtedness
incurred by Subsidiaries engaged in the title insurance business in the
ordinary course of business in aid of recoupment or reduction or settlement
of title claims and losses, provided that the principal amount of all such
indebtedness outstanding plus the then remaining Loss Reserves, if all
treated as Loss Reserves, would not result in a violation of Section 7.9,
(viii) Capitalized Lease Obligations of the Company and its Subsidiaries
which at any one time in the aggregate do not exceed an amount equal to (x)
$30,000,000, minus (y) the aggregate outstanding principal amount of
indebtedness in connection with which liens permitted by Section 7.12(i)
exist, (ix) other indebtedness outstanding on the date hereof and listed in
Schedule 7.11 or hereafter incurred in connection with liens permitted by
Section 7.12, and (x) indebtedness incurred by the Company in connection
with any sale and leaseback involving only Scheduled Properties or any
indebtedness secured only by a lien on Scheduled Properties, to the extent
such lease or other indebtedness is either non-recourse to the Company or
the present value of such lease payments or the principal amount of such
indebtedness, as the case may be does not exceed 75% of the appraised value
of such Scheduled Properties.
SECTION 7.12 LIENS. Not, and not permit any Subsidiary to, create
or permit to exist any mortgage, pledge, title retention lien, or other
lien, encumbrance or security interest with respect to any assets now owned
or hereafter acquired, except (i) in connection with the acquisition of
real or personal property after the date hereof, and attaching only to the
real or personal property being acquired, if the indebtedness of the
Company and all Subsidiaries secured thereby does not exceed in the
aggregate at any one time outstanding an amount equal to (x) $30,000,000,
minus (y) the then aggregate amount of Capitalized Lease Obligations
permitted by Section 7.11(viii); (ii) for current taxes, assessments and
governmental charges or levies not delinquent or being contested in good
faith and by appropriate proceedings for which adequate reserves have been
made; (iii) liens incurred or pledges or deposits made in connection with
worker's compensation, unemployment insurance, old-age pensions, social
security and public liability and similar legislation; (iv) liens, pledges
or deposits to secure the performance of bids, tenders, leases, contracts
(other than for the repayment of borrowed money), statutory and regulatory
obligations, surety and appeal bonds and other obligations of like nature,
incurred as an incident to the ordinary course of business; (v) statutory
liens of landlords and other liens imposed by law, such as carriers',
warehousemen's, mechanics', materialmen's and vendors' liens, incurred in
good faith in the ordinary course of business; (vi) liens arising in the
ordinary course of business for sums not due or sums being contested in
good faith and by appropriate proceedings and not involving any deposits or
advances or borrowed money or the deferred purchase price of property or
services; (vii) liens granted by any Subsidiary to secure indebtedness of
such Subsidiary to the Company or to any other Subsidiary or liens granted
by the Company to secure indebtedness of the Company to any Subsidiary;
(viii) liens in connection with Investment Borrowings; (ix) liens existing
or incurred on claims acquired property in the ordinary course of business
of Subsidiaries engaged in the title insurance business, (x) any other
liens securing indebtedness or obligations which in the aggregate do not
exceed $10,000,000; (xi) liens existing on the date hereof and disclosed on
Schedule 6.6 or in the financial statements delivered pursuant to Section
6.4 and (xii) liens granted in connection with indebtedness permitted under
Section 7.11(x).
SECTION 7.13 MERGERS, CONSOLIDATIONS, PURCHASES. Not, and not
permit any Subsidiary to, be a party to any merger or consolidation, 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
other person or entity, except for (i) any such merger or consolidation by
any wholly-owned Subsidiary into the Company or into, with or to any other
wholly-owned Subsidiary and any such purchase or other acquisition by the
Company or any wholly-owned Subsidiary of the assets or stock of any
wholly-owned Subsidiary and (ii) any such merger, consolidation, purchase,
or other acquisition of assets or stock by the Company or any Subsidiary if
(x) in the case of a merger or consolidation involving the Company, the
surviving corporation shall be the Company, (y) as of the date of the
execution of the agreement providing for such merger, consolidation,
purchase, or other acquisition, the fair value of the consideration to be
paid in connection therewith shall not exceed $60,000,000, and (z) no Event
of Default or Unmatured Event of Default shall have occurred and be
continuing at the time of such merger, consolidation, purchase, or other
acquisition, or shall occur as a result of such merger, consolidation,
purchase, or other acquisition. For the purposes of this Section 7.13, the
consideration to be paid in connection with any merger, consolidation,
purchase, or other acquisition shall be valued in accordance with generally
accepted accounting principles.
SECTION 7.14 ASSET DISPOSITIONS. Not, and not permit any
Subsidiary to sell, transfer, convey or lease all or any substantial part
of its assets except in the ordinary course of business; provided, however,
there shall be excluded from the restrictions of this Section 7.14 (i)
sales or other dispositions of the stock or assets of the Company or a
Subsidiary required by governmental or regulatory authorities; (ii) Net
Asset Sales in an amount not exceeding 10% of Adjusted Total Assets in each
fiscal year; (iii) sales or other dispositions of Unrestricted Assets; and
(iv) sales or other dispositions of assets by a Subsidiary to the Company
or another Subsidiary, or by the Company to a Subsidiary. For purposes of
this Section 7.14, sales of Scheduled Properties shall be included in
computing Net Asset Sales but the Company shall not be in default hereunder
if Net Asset Sales exceed the amount permitted by Section 7.14(ii) solely
as a result of such inclusion.
SECTION 7.15 LEVERAGE RATIO. Not permit the Leverage Ratio as at
the close of any fiscal quarter to be greater than 0.45 to 1.0.
SECTION 7.16 EXISTING BUSINESS. Carry on, and cause each
Subsidiary to carry on, its title insurance, escrow, trust company and/or
other real estate related services, business, or businesses in
substantially the same manner as presently being conducted.
SECTION 7.17 OTHER AGREEMENTS. Not enter into any agreement
containing any material provision which would be violated or breached in a
material way by the performance of its obligations hereunder or under any
instrument or document delivered or to be delivered by it hereunder or in
connection herewith.
SECTION 8. CONDITIONS OF LENDING.
Notwithstanding any other provisions of this Agreement, the Lenders,
at their sole option and in their sole discretion, need not make any Loans
available to the Company unless the conditions precedent described below
are fulfilled:
SECTION 8.1 DOCUMENTS. The obligation of each Lender to make its
Loan is, in addition to the conditions precedent specified in Section 8.2,
subject to the condition precedent that the Administrative Agent shall have
received all of the following, each duly executed and dated as of the date
hereof, in form and substance satisfactory to the Administrative Agent:
SECTION 8.1.1 NOTES. The Administrative Agent shall have received,
for the account of each Lender, its Note duly executed and delivered by the
Company.
SECTION 8.1.2 CORPORATE DOCUMENTS. Certified copies of the
articles of incorporation and bylaws of the Company and certified copies of
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance, respectively, of this Agreement, the
Notes, and other documents provided for in this Agreement.
SECTION 8.1.3 INCUMBENCY AND SIGNATURES. A certificate of the
Secretary or an Assistant Secretary of the Company certifying the names of
the officer or officers of the Company authorized to sign this Agreement
and the Notes and other documents provided for in this Agreement, together
with a sample of the true signature of each such officer.
SECTION 8.1.4 CONFIRMATORY CERTIFICATE. A certificate signed by
the President, the Chief Financial Officer or the Treasurer of the Company
as to the matters set out in Section 8.2 .
SECTION 8.1.5 GOOD STANDING. Certificate of the Secretary of State
of Illinois as to the good standing of the Company.
SECTION 8.1.6 INSTRUCTIONS. Written instructions from the Company
to the Administrative Agent directing the distribution of the proceeds of
the initial Revolving Loans made pursuant to this Agreement.
SECTION 8.1.7 OTHER. Such other documents as the Administrative
Agent or any Lender may reasonably request.
SECTION 8.2 FURTHER CONDITIONS. The obligation of each Lender to
make its Loan is subject to the following further conditions precedent:
(a) no Event of Default, or Unmatured Event of Default, has occurred and is
continuing or will result from the making of the Loans, (b) the warranties
of the Company contained in Section 6 are true and correct as of each
borrowing of a Loan hereunder, with the same effect as though made on the
Loan Date, (except for the warranties made as of a specific date, which
were true and correct as of such date), (c) all governmental approvals and
court orders that are necessary for the Company to consummate the
transactions contemplated by this Agreement and the Notes and to perform
its obligations thereunder have been received, (d) after giving effect to
the Loans, the aggregate principal amount of all such Loans shall not
exceed the Commitment, (e) such loan shall not violate any order, judgment
or decree of any court or other authority or any provision of law
applicable to the Administrative Agent or the Lenders, as then in effect,
and (f) the Administrative Agent shall have received the Notes, the
Borrowing Notice and the fees as required hereunder.
SECTION 9. EVENTS OF DEFAULT AND THEIR EFFECT.
SECTION 9.1 EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default under this Agreement:
<PAGE>
SECTION 9.1.1 NON-PAYMENT OF NOTES, ETC. Default, and the
continuance thereof for one day, in the payment when due of any principal
of the Notes or default, and continuance thereof for five days, in the
payment when due of any interest on the Notes or any fees payable or
amounts due by the Company hereunder.
SECTION 9.1.2 NON-PAYMENT OF OTHER INDEBTEDNESS. Default in the
payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any other indebtedness for borrowed money or
the deferred purchase price of property of, or guaranteed by, the Company
or any Subsidiary (except any such indebtedness of any Subsidiary to the
Company or to any other Subsidiary) in excess of $10,000,000 or default in
the performance or observance of any obligation or condition with respect
to any such other indebtedness in excess of $10,000,000 if the effect of
such default is to accelerate the maturity of any such indebtedness or to
permit the holder or holders thereof, or any trustee or agent for such
holders, to cause such indebtedness to become due and payable prior to its
expressed maturity, and such default shall not have been remedied or
discharged within any applicable grace period.
SECTION 9.1.3 BANKRUPTCY, INSOLVENCY, ETC. The Company or any
Subsidiary admits in writing its inability to pay debts as they become due;
or the Company or any Subsidiary applies for, consents to, or acquiesces in
the appointment of, a trustee, receiver or other custodian for the Company
or such Subsidiary or any property thereof, or makes a general assignment
for the benefit of creditors; or, in the absence of such application,
consent or acquiescence, a trustee, receiver or other custodian is
appointed for the Company or any Subsidiary or for a substantial part of
the property of any thereof and is not discharged within 60 days; or any
bankruptcy, reorganization, debt arrangement, or other case or proceeding
under any bankruptcy or insolvency law, or any dissolution or liquidation
proceeding (except the voluntary dissolution, not under any bankruptcy or
insolvency law, of a Subsidiary other than a Title Insurance Subsidiary),
is commenced in respect of the Company or any Subsidiary, and if such case
or proceeding is not commenced by the Company or such Subsidiary, it is
consented to or acquiesced in by the Company or such Subsidiary or remains
for 60 days undismissed; or the Company or any Subsidiary takes any
corporate action to authorize, or in furtherance of, any of the foregoing.
SECTION 9.1.4 NON-COMPLIANCE WITH THIS AGREEMENT. Failure by the
Company to comply with or to perform any provision of this Agreement (and
not constituting an Event of Default under any of the preceding provisions
of this Section 9) and continuance of such failure for 30 days after notice
thereof to the Company from the Administrative Agent, or from any Lender.
SECTION 9.1.5 WARRANTIES. Any warranty made by the Company herein
is breached or is false or misleading in any material respect, or any
schedule, certificate, financial statement, report, notice, or other
writing furnished by the Company to the Administrative Agent or the Lenders
is false or misleading in any material respect, in each case on the date as
of which the facts therein set forth are stated or certified.
SECTION 9.1.6 CHANGE OF CONTROL. CTC, or a Subsidiary of CTC,
shall not own, directly or indirectly, 100% of the issued and outstanding
voting capital stock of the CTT.
SECTION 9.1.7 JUDGMENTS. Any judgment or order for the payment of
money in excess of $10,000,000 shall be rendered against the Company or any
of its Subsidiaries and either
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of 30 consecutive days during which a
stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect.
SECTION 9.1.8 PENSION PLANS. Any of the following events shall
occur with respect to any Pension Plan
(a) the institution of any steps by the Company, any member of its
Controlled Group or any other Person to terminate a Pension Plan if, as a
result of such termination, the Company or any such member could be
required to make a contribution to such Pension Plan, or could reasonably
expect to incur a liability or obligation to such Pension Plan, in excess
of $10,000,000; or
(b) a contribution failure occurs with respect to any Pension Plan
sufficient to give rise to a lien in excess of $ 10,000,000 under Section
302(f) of ERISA.
SECTION 9.2 EFFECT OF EVENT OF DEFAULT. If any Event of Default
described in Section 9.1.3 shall occur, the Notes shall become immediately
due and payable, all without notice of any kind; and in the case of any
other Event of Default, the Administrative Agent, upon the direction of the
Required Lenders, shall by written notice to the Company, declare the Notes
to be due and payable, whereupon the Notes shall become immediately due and
payable, all without any other notice of any kind.
SECTION 10. THE ADMINISTRATIVE AGENT
SECTION 10.1 ACTIONS. Each Lender hereby appoints LaSalle as its
Administrative Agent under and for purposes of this Agreement, the Notes
and each other Loan Document. Each Lender authorizes the Administrative
Agent to act on behalf of such Lender under this Agreement, the Notes and
each other Loan Document and, in the absence of other written instructions
from the Required Lenders received from time to time by the Administrative
Agent (with respect to which the Administrative Agent agrees that it will
comply, except as otherwise provided in this Section or as otherwise
advised by counsel), to exercise such powers hereunder and thereunder as
are specifically delegated to or required of the Administrative Agent by
the terms hereof and thereof, together with such powers as may be
reasonably incidental thereto. Each Lender hereby indemnifies (which
indemnity shall survive any termination of this Agreement) the
Administrative Agent, pro rata according to such Lender's Percentage, from
and against any and all liabilities, obligations, losses, damages, claims,
costs or expenses of any kind or nature whatsoever which may at any time be
imposed on, incurred by, or asserted against, the Administrative Agent in
any way relating to or arising out of this Agreement, the Notes and any
other Loan Document, including reasonable attorneys' fees, and as to which
the Administrative Agent is not reimbursed by the Company; provided,
however, that no Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final
proceeding to have resulted solely from the Administrative Agent's gross
negligence or wilful misconduct. The Administrative Agent shall not be
required to take any action hereunder, under the Notes or under any other
Loan Document, or to prosecute or defend any suit in respect of this
Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the
Administrative Agent shall be or become, in the Administrative Agent's
determination, inadequate, the Administrative Agent may call for additional
indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
SECTION 10.2 EXCULPATION. Neither the Administrative Agent nor
any of its directors, officers, employees or agents shall be liable to any
Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or
therewith, except for its own wilful misconduct or gross negligence, nor
responsible for any recitals or warranties herein or therein, nor for the
effectiveness, enforceability, validity or due execution of this Agreement
or any other Loan Document, nor to make any inquiry respecting the
performance by the Company of its obligations hereunder or under any other
Loan Document. Any such inquiry which may be made by the Administrative
Agent shall not obligate it to make any further inquiry or to take any
action. The Administrative Agent shall be entitled to rely upon advice of
counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which the Administrative Agent believes to be genuine
and to have been presented by a proper Person.
SECTION 10.3 SUCCESSOR. The Administrative Agent may resign as
such at any time upon at least 30 days' prior notice to the Company and all
Lenders. If the Administrative Agent at any time shall resign, the
Required Lenders may appoint another Lender as a successor Administrative
Agent which shall thereupon become the Administrative Agent hereunder. If
no successor Administrative Agent shall have been so appointed by the
Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving notice of resignation,
then the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which shall be one of the Lenders
or, with the approval of the Company (such approval not to be unreasonably
withheld), a commercial banking institution organized under the laws of the
U.S. (or any State thereof) or a U.S. branch or agency of a commercial
banking institution, and having a combined capital and surplus of at least
$500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall be entitled to receive from the retiring
Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement.
After any retiring Administrative Agent's resignation hereunder as the
Administrative Agent, the provisions of
(a) this Section 10 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Administrative Agent
under this Agreement; and
(b) Section 10.2 and Section 10.3 shall continue to inure to its
benefit.
SECTION 10.4 LOANS BY LASALLE. LaSalle shall have the same rights
and powers with respect to (x) the Loans made by it or any of its
Affiliates, and (y) the Notes held by it or any of its Affiliates as any
other Lender and may exercise the same as if it were not the Administrative
Agent. LaSalle and its Affiliates may accept deposits from, lend money to,
and generally engage in any kind of business with the Company or any
Subsidiary or Affiliate of the Company as if LaSalle were not the
Administrative Agent hereunder.
SECTION 10.5 CREDIT DECISIONS. Each Lender acknowledges that it
has, independently of the Administrative Agent and each other Lender, and
based on such Lender's review of the financial information of the Company,
this Agreement, the other Loan Documents (the terms and provisions of which
being satisfactory to such Lender) and such other documents, information
and investigations as such Lender has deemed appropriate, made its own
credit decision to extend its Commitment. Each Lender also acknowledges
that it will, independently of the Administrative Agent and each other
Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights
and privileges available to it under this Agreement or any other Loan
Document.
SECTION 10.6 COPIES, ETC.. The Administrative Agent shall give
prompt notice to each Lender of each notice or request required or
permitted to be given to the Administrative Agent by the Company pursuant
to the terms of this Agreement (unless concurrently delivered to the
Lenders by the Company). The Administrative Agent will distribute to each
Lender each document or instrument received for its account and copies of
all other communications received by the Administrative Agent from the
Company for distribution to the Lenders by the Administrative Agent in
accordance with the terms of this Agreement.
SECTION 11. MISCELLANEOUS PROVISIONS
SECTION 11.1 WAIVERS, AMENDMENTS, ETC.. The provisions of
this Agreement and of each other Loan Document may from time to time be
amended, modified or waived, if such amendment, modification or waiver is
in writing and consented to by the Company and the Required Lenders;
provided, however, that no such amendment, modification or waiver which
would:
(a) modify any requirement hereunder that any particular action be
taken by all the Lenders or by the Required Lenders shall be effective
unless consented to by each Lender;
(b) modify this Section 11.1, change the definition of Required
Lenders, increase the Commitment Amount or the Percentage of any Lender or
reduce the Facility Fee in Section 4.3 shall be made without the consent of
each Lender and each holder of a Note;
(c) extend the due date for, or reduce the amount of, any scheduled
repayment or prepayment of principal of or interest on the Notes (or reduce
the principal amount of or rate of interest on the Notes) shall be made
without the consent of the holder of that Note; or
(d) affect adversely the interests, rights or obligations of the
Administrative Agent qua the Administrative Agent shall be made without the
consent of the Administrative Agent.
No failure or delay on the part of the Administrative Agent, any Lender or
the holder of any Note in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude
any other or further exercise thereof or the exercise of any other power or
right. No notice to or demand on the Company in any case shall entitle it
to any notice or demand in similar or other circumstances. No waiver or
approval by the Administrative Agent, any Lender or the holder of any Note
under this Agreement or any other Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 NOTICES. All notices and other communications
provided to any party hereto under this Agreement or any other Loan
Document shall be in writing or by Telex or by facsimile and addressed,
delivered or transmitted to such party at its address, Telex or facsimile
number set forth below its signature hereto or set forth in the Lender
Assignment Agreement or at such other address, Telex or facsimile number as
may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed
given when received; any notice, if transmitted by Telex or facsimile,
shall be deemed given when transmitted (answerback confirmed in the case of
Telexes).
SECTION 11.3 COSTS, EXPENSES AND TAXES. The Company agrees to pay
on demand all out-of-pocket costs and expenses of the Administrative Agent
(including the reasonable fees and out-of-pocket expenses of Lord, Bissell
& Brook, counsel for the Administrative Agent and of local counsel, if any,
who may be retained by said counsel) in connection with the preparation,
execution, delivery, administration, syndication and marketing of this
Agreement, the Notes and all other instruments or documents provided for
herein or delivered or to be delivered hereunder or in connection herewith,
in the case of the foregoing subject to limitations previously agreed by
the Company and the Administrative Agent, and all out-of-pocket costs and
expenses (including reasonable attorneys' fees and legal expenses) incurred
by the Administrative Agent in connection with the enforcement of this
Agreement, the Notes, any such other instruments or documents or any
collateral security. In addition, the Company agrees to pay, and to save
the Administrative Agent and the Lenders harmless from all liability for,
any stamp or other taxes (excluding franchise taxes and taxes imposed on or
measured by any Lender's net income or receipts) which may be payable in
connection with the execution or delivery of this Agreement, the borrowing
hereunder, or the issuance of the Notes or of any other instruments or
documents provided for herein or delivered or to be delivered hereunder or
in connection herewith. The Company also agrees to reimburse the
Administrative Agent and each Lender upon demand for all reasonable out-of-
pocket expenses (including attorneys' fees and legal expenses including the
allocated time charges of each Lender's legal departments, as their
respective internal counsel) incurred by the Administrative Agent or such
Lender in connection with (x) the negotiation of any restructuring or
work-out, whether or not consummated, of any Obligations and (y) the
enforcement of any Obligations.
SECTION 11.4 INDEMNIFICATION. In consideration of the execution
and delivery of this Agreement by each Lender and the extension of the
Commitments, the Company hereby indemnifies, exonerates and holds the
Administrative Agent and each Lender and each of their respective officers,
directors, employees and agents (collectively, the Indemnified Parties)
free and harmless from and against any and all actions, causes of action,
suits, losses, costs, liabilities and damages, and expenses incurred in
connection therewith (irrespective of whether any such Indemnified Party is
a party to the action for which indemnification hereunder is sought),
including reasonable attorneys' fees and disbursements (collectively, the
Indemnified Liabilities), incurred by the Indemnified Parties or any of
them as a result of, or arising out of, or relating to
(a) any transaction financed or to be financed in whole or in part,
directly or indirectly, with the proceeds of the Loans; or
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any action
brought by or on behalf of the Company as the result of any determination
by the Required Lenders pursuant to Section 8 not to fund the Loans);
except for (i) any such Indemnified Liabilities arising for the account of
a particular Indemnified Party by reason of the relevant Indemnified
Party's gross negligence or wilful misconduct or (ii) any such Indemnified
Liabilities resulting from claims by the Administrative Agent or any Lender
against any other Lender or any Lender against the Administrative Agent
that are not attributable to the Company's actions and for which the
Company otherwise has no liability. If and to the extent that the
foregoing undertaking may be unenforceable for any reason, the Company
hereby agrees to make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law. Each Indemnified Party agrees to notify the Company
of any event which could give rise to any Indemnified Liabilities and to
consult with the Company to determine the best defense with respect to the
same.
SECTION 11.5 SURVIVAL. The obligations of the Company
under Sections 3.10, 3.11, 5.1, 11.3 and 11.4, and the obligations of the
Lenders under Section 11.1, shall in each case survive any termination of
this Agreement, the payment in full of all Obligations and the termination
of all Commitments. The representations and warranties made by the Company
in this Agreement and in each other Loan Document shall survive the
execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6 SEVERABILITY. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such provision and such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement or such Loan
Document or affecting the validity or enforceability of such provision in
any other jurisdiction.
SECTION 11.7 CAPTIONS. Section captions used in this Agreement
are for convenience only, and shall not affect the construction of this
Agreement.
SECTION 11.8 EXECUTION IN COUNTERPARTS, EFFECTIVENESS, ETC. This
Agreement may be executed by the parties hereto in several counterparts,
each of which shall be deemed to be an original and all of which shall
constitute together but one and the same agreement. This Agreement shall
become effective when counterparts hereof executed on behalf of the Company
and each Lender (or notice thereof satisfactory to the Administrative
Agent) shall have been received by the Administrative Agent and notice
thereof shall have been given by the Administrative Agent to the Company
and each Lender.
SECTION 11.9 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL
EACH BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF ILLINOIS. All obligations of the Company and the rights of the
Administrative Agent and any Lender expressed herein or in the Notes shall
be in addition to and not in limitation of those provided by applicable
law. This Agreement, the Notes and the other Loan Documents constitute the
entire understanding among the parties hereto with respect to the subject
matter hereof and supersede any prior agreements, written or oral, with
respect thereto.
SECTION 11.10 SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that:
(a) the Company may not assign or transfer its rights
or obligations hereunder without the prior written consent of the
Administrative Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders are
subject to Section 11.11.
SECTION 11.11 SALE AND TRANSFER OF NOTES; PARTICIPATIONS IN NOTES.
Each Lender may assign, or sell participations in, its Note and Commitment
to one or more other Persons in accordance with this Section 11.11.
SECTION 11.11.1 ASSIGNMENTS. Any Lender,
(a) with the written consents of the Company and the Administrative
Agent (which consents shall not be unreasonably delayed or withheld and
which consent, in the case of the Company, shall be deemed to have been
given in the absence of a written notice delivered by the Company to the
Administrative Agent, on or before the tenth Business Day after receipt by
the Company of such Lender's request for consent, stating, in reasonable
detail, the reasons why the Company proposes to withhold such consent) may
at any time assign and delegate to one or more commercial banks or other
financial institutions, and
(b) with notice to the Company and the Administrative Agent, but
without the consent of the Company or the Administrative Agent, may assign
and delegate to any of its Affiliates or to any other Lender (each Person
described in either of the foregoing clauses as being the Person to whom
such assignment and delegation is to be made, being hereinafter referred to
as an Assignee Lender), all or any fraction of such Lender's Note and
Commitment (which assignment and delegation shall be of a constant, and not
a varying, percentage of all the assigning Lender's Note and Commitment) in
a minimum aggregate amount of $4,000,000; provided, however, that any such
Assignee Lender will comply, if applicable, with the provisions contained
in the penultimate sentence of Section 5.1 and further, provided, however,
that, the Company and the Administrative Agent shall be entitled to
continue to deal solely and directly with such Lender in connection with
the interests so assigned and delegated to an Assignee Lender until
(i) written notice of such assignment and delegation,
together with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Company and
the Administrative Agent by such Lender and such Assignee Lender,
(ii) such Assignee Lender shall have executed and delivered to
the Company and the Administrative Agent a Lender Assignment Agreement,
accepted by the Administrative Agent, and
(iii) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights
and obligations hereunder have been assigned and delegated to such Assignee
Lender in connection with such Lender Assignment Agreement, shall have the
rights and obligations of a Lender hereunder and under the other Loan
Documents, and (y) the assignor Lender, to the extent that rights and
obligations hereunder have been assigned and delegated by it in connection
with such Lender Assignment Agreement, shall be released from its
obligations hereunder and under the other Loan Documents. Within five
Business Days after its receipt of notice that the Administrative Agent has
received an executed Lender Assignment Agreement, the Company shall execute
and deliver to the Administrative Agent (for delivery to the relevant
Assignee Lender) a new Note evidencing such Assignee Lender's assigned Note
and Commitment and, if the assignor Lender has retained a portion of its
Note and its Commitment hereunder, a replacement Note in the principal
amount of the portion of the Note and Commitment retained by the assignor
Lender hereunder (such Notes to be in exchange for, but not in payment of,
that Note then held by such assignor Lender). Each such Note shall be
dated the date of the predecessor Note. The assignor Lender shall mark the
predecessor Note exchanged and deliver it to the Company. Accrued
interest on that part of the predecessor Note evidenced by the new Note
shall be paid as provided in the Lender Assignment Agreement. Accrued
interest on that part of the predecessor Note evidenced by the replacement
Note shall be paid to the assignor Lender. Accrued interest shall be paid
at the same time or times provided in the predecessor Note and in this
Agreement. Such assignor Lender or such Assignee Lender must also pay a
processing fee to the Administrative Agent upon delivery of any Lender
Assignment Agreement in the amount of $3,000. Any attempted assignment and
delegation not made in accordance with this Section 11.11.1 shall be null
and void.
SECTION 11.11.2 PARTICIPATIONS. Any Lender may at any time sell to
one or more financial institutions (each of such financial institution
being herein called a Participant) participating interests in its Note or
Commitment, or other interests of such Lender hereunder; provided, however,
that
(a) no participation contemplated in this Section 11.11 shall
relieve such Lender from its Commitment or its other obligations hereunder
or under any other Loan Document,
(b) such Lender shall remain solely responsible for the performance
of its Commitment and such other obligations,
(c) the Company and the Administrative Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement and each of the other Loan
Documents,
(d) no Participant, unless such Participant is an Affiliate of such
Lender, or is itself a Lender, shall be entitled to require such Lender to
take or refrain from taking any action hereunder or under any other Loan
Document, except that such Lender may agree with any Participant that such
Lender will not, without such Participant's consent, take any actions of
the type described in clause (b) or (c) of Section 11.1, and
(e) the Company shall not be required to pay any amount under
Section 5.1 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
The Company acknowledges and agrees that each Participant, for purposes of
Sections 3.10, 3.11, 5.1, 5.3, 5.4, 11.3 and 11.4, shall be considered a
Lender.
SECTION 11.12 OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Administrative Agent or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any
other Loan Document, with the Company or any of its Affiliates in which the
Company or such Affiliate is not restricted hereby from engaging with any
other Person.
SECTION 11.13 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE LENDERS OR THE COMPANY SHALL BE BROUGHT AND
MAINTAINED EXCLUSIVELY IN THE COURTS OF THE STATE OF ILLINOIS OR IN THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS. THE
COMPANY HEREBY EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE
COURTS OF THE STATE OF ILLINOIS AND OF THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF ILLINOIS FOR THE PURPOSE OF ANY SUCH LITIGATION AS
SET FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED
THEREBY IN CONNECTION WITH SUCH LITIGATION. THE COMPANY FURTHER
IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL, POSTAGE
PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.
THE COMPANY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO
THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. TO THE EXTENT THAT THE COMPANY HAS OR HEREAFTER
MAY ACQUIRE ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF FROM ANY LEGAL
PROCESS (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS
PROPERTY, THE COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF
ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14 WAIVER OF JURY TRIAL. THE ADMINISTRATIVE AGENT, THE
LENDERS AND THE COMPANY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF THE
ADMINISTRATIVE AGENT, THE LENDERS OR THE COMPANY. THE COMPANY ACKNOWLEDGES
AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS
PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN DOCUMENT TO WHICH IT
IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE
ADMINISTRATIVE AGENT AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH
SUCH OTHER LOAN DOCUMENT.
SECTION 11.15 CONFIDENTIALITY. The Administrative Agent and each
Lender shall hold nonpublic information obtained pursuant to the
requirements of this Agreement other than information (a) that is, or
generally becomes, available to the public, (b) that was or becomes
available to the Administrative Agent or any Lender on a nonconfidential
basis, or (c) that becomes available to the Administrative Agent or any
Lender from a Person or other source that is not to the knowledge of
Administrative Agent or such Lender (as the case may be), otherwise bound
by a confidentiality obligation to the Company, in accordance with its
customary procedures for treatment of confidential information and in
accordance with safe and sound banking practices and in any event, may make
disclosure reasonably required by any bona fide transferee or participant
in connection with the contemplated transfer of any Loan or Note or
participation therein or as required or requested by any governmental
agency or representative thereof pursuant to legal process.
SECTION 11.16 SPECIAL PURPOSE FUNDING VEHICLE. Notwithstanding
anything to the contrary contained herein, any Lender (a Granting Bank)
may grant to a special purpose funding vehicle (an SPC) of such Granting
Bank, identified as such in writing from time to time by the Granting Bank
to the Administrative Agent and the Company, the option to provide all or
any part of any Loan that such Granting Bank would otherwise be obligated
to make hereunder, provided that (i) nothing herein shall constitute a
commitment to make any Loan by any SPC, (ii) if an SPC elects not to
exercise such option or otherwise fails to provide all or any part of such
Loan, the Granting Bank shall be obligated to make such Loan pursuant to
the terms hereof, and (iii) the rights of any such SPC shall be derivative
of the rights of the Granting Bank, and each SPC shall be subject to all of
the restrictions upon the Granting Bank herein contained. Each SPC shall
be conclusively presumed to have made arrangements with its Granting Bank
for the exercise of voting and other rights hereunder in a manner which is
acceptable to the SPC, and the Administrative Agent, the other Lenders and
the Company shall be entitled to rely upon and deal solely with the
Granting Bank with respect to Loans made by or through its SPC. The making
of a Loan by an SPC hereunder shall utilize the Commitment of the Granting
Bank to the same extent, and as if, such Loan were made by the Granting
Bank. Each party hereto hereby agrees (which agreement shall survive the
termination of this Agreement) that, prior to the date that is one year and
one day after the payment in full of all outstanding senior indebtedness of
any SPC, it will not institute against, or join any other person in
instituting against, such SPC, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or similar proceedings under the laws
of the United States or any State thereof, provided that the Granting Bank
for each SPC hereby agrees to indemnify, save and hold harmless each other
party hereto for any loss, cost, damage and expense arising out of their
inability to institute any such proceeding against its SPC. In addition,
notwithstanding anything to the contrary contained in this Section 11.16,
any SPC may (i) with notice to, but without the prior written consent of,
the Company or the Administrative Agent and without paying any processing
fee therefor, assign all or a portion of its interests in any Loans to its
Granting Bank or to any financial institutions providing liquidity and/or
credit facilities to or for the account of such SPC to fund the Loans made
by such SPC or to support the securities (if any) issued by such SPC to
fund such Loans (but nothing contained herein shall be construed in
derogation of the obligation of the Granting Bank to make Loans hereunder),
provided that neither the consent of the SPC or of any such assignee shall
be required for amendments or waivers of provisions of the Loan Documents,
and (ii) disclose on a confidential basis (in the same manner described in
Section 11.15) any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of a surety, guarantee
or credit or liquidity enhancement to such SPC.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized as of
the day and year first above written.
CHICAGO TITLE CORPORATION
By: /S/ Peter G. Leemputte
Its: EVP, CFO and CAO
By: /S/ A. Larry Sisk
Its: VP and Treasurer
171 North Clark Street
Chicago, Illinois 60601
Facsimile No: (312) 223-5955
Attention: A. Larry Sisk
CHICAGO TITLE AND TRUST COMPANY
By: /S/ Peter G. Leemputte
Its: EVP, CFO and CAO
By: /S/ A. Larry Sisk
Its: VP and Treasurer
171 North Clark Street
Chicago, Illinois 60601
Facsimile No: (312) 223-5955
Attention: A. Larry Sisk
LASALLE BANK N.A.
as Administrative Agent
By: /S/ Janet Gates
Its: Senior Vice President
135 South LaSalle Street
Chicago, Illinois 60603
Facsimile No: (312) 904-6189
Attention: Janet R. Gates
PERCENTAGE LENDERS
40% LASALLE BANK N.A.
By: /S/ Janet Gates
Title: Senior Vice President
Domestic
Office: 135 South LaSalle Street
Chicago, Illinois 60603
Facsimile No.: (312) 904-6189
Attention: Janet R. Gates
LIBOR Office: Same as above
20% CHASE BANK OF TEXAS, N.A.
By: /S/ James M. Chuckray
Title: Vice President
Domestic
Office: 2200 Ross Avenue
Dallas, Texas 75201
Facsimile No.: (214) 965-2290
Attention: James M. Chuckray
LIBOR Office: Same as above
20% U.S. BANK NATIONAL ASSOCIATION
By: /S/ Steven T. Williams
Title: Vice President
Domestic
Office: 555 S.W. Oak Street, PL-4
Portland, Oregon 97204
Facsimile No.: (503) 275-5428
Attention: Steven T. Williams
LIBOR Office: Same as above
<PAGE>
20% BANK OF MONTREAL
By:_____________________________________
Title:__________________________________
Domestic
Office: 115 South LaSalle Street
12th Floor
Chicago, Illinois 60603
Facsimile No.: (312) 845-2199
Attention: John T. Mead, Jr., Director
LIBOR Office: Same as above
EXHIBIT 10.5(b)
- ---------------
LIST OF CONTENTS OF EXHIBITS TO THE REVOLVING CREDIT AGREEMENT
EXHIBITS
Exhibit A First Replacement Revolving Note
Exhibit B Borrowing Notice
Exhibit C Assignment Agreement
Exhibit D Scheduled Properties
Exhibit E Accountant's Letter
SCHEDULES
Schedule 6.5 Litigation and Contingent Claims
Schedule 6.6 Liens
Schedule 6.7 Subsidiaries
Schedule 6.13 Pension and Welfare Plans
Schedule 7.11 Indebtedness
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CHICAGO
TITLE CORPORATION'S CONSOLIDATED BALANCE SHEET AT JUNE 30, 1999 AND THE
CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFED IN ITS ENTIRETY BY REFERANCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 0
[DEBT-HELD-FOR-SALE] 1,066,043
[DEBT-CARRYING-VALUE] 0
[DEBT-MARKET-VALUE] 0
[EQUITIES] 32,129
[MORTGAGE] 0
[REAL-ESTATE] 0
[TOTAL-INVEST] 1,098,172
<CASH> 259,416
[RECOVER-REINSURE] 0
[DEFERRED-ACQUISITION] 0
<TOTAL-ASSETS> 2,029,456
[POLICY-LOSSES] 646,535
[UNEARNED-PREMIUMS] 0
[POLICY-OTHER] 0
[POLICY-HOLDER-FUNDS] 0
[NOTES-PAYABLE] 21,487
0
0
<COMMON> 21,769
<OTHER-SE> 456,616
<TOTAL-LIABILITY-AND-EQUITY> 2,029,456
[PREMIUMS] 513,026
[INVESTMENT-INCOME] 15,070
[INVESTMENT-GAINS] 215
[OTHER-INCOME] 0
[BENEFITS] 31,676
[UNDERWRITING-AMORTIZATION] 0
[UNDERWRITING-OTHER] 451,304
<INCOME-PRETAX> 45,331
<INCOME-TAX> 15,269
<INCOME-CONTINUING> 30,062
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,062
<EPS-BASIC> 1.38
<EPS-DILUTED> 1.38
[RESERVE-OPEN] 0
[PROVISION-CURRENT] 0
[PROVISION-PRIOR] 0
[PAYMENTS-CURRENT] 0
[PAYMENTS-PRIOR] 0
[RESERVE-CLOSE] 0
[CUMULATIVE-DEFICIENCY] 0
</TABLE>
