UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
ACCEL International Corporation
-----------------------------------------
(Name of Issuer)
Common Stock, par value $0.10 per share
-----------------------------------------
(Title of Class of Securities)
004299 10 3
-----------------------------------------
(CUSIP Number)
William H. Cuddy, Esq. (860) 275-0100
Day, Berry & Howard
CityPlace I, Hartford, CT
-----------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
December 15, 1995
-----------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ X ]. (A
fee is not required only if the reporting person: (1) has a previous statement
on file reporting beneficial ownership of more than five percent of the class
of securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of the five percent or less of such
class.) (See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page. The information required on the
remainder of this cover page shall not be deemed to be "filed" for the
purpose of Section 18 of the Securities and Exchange Act of 1934 ("Act") or
otherwise subject to the liabilities of that section or the Act but shall
be subject to all other provisions of the Act (however, see the Notes).
Continued on the following pages
Page 1 of 48 Pages
<PAGE>
Page 2 of 48 Pages
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Insurance Holdings Limited Partnership 06-1388818
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a)[ ]
(b)[X]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
[ ]
6. CITIZENSHIP OR PLACE OR ORGANIZATION
CONNECTICUT
7. SOLE VOTING POWER
NUMBER OF 335,000 shares*
SHARES 8. SHARED VOTING POWER
BENEFICIALLY -0- shares
OWNED BY 9. SOLE DISPOSITIVE POWER
EACH 335,000 shares*
REPORTING PERSON 10. SHARED DISPOSITIVE POWER
WITH -0- shares
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
335,000 shares*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES* [ ]
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
*7.5%, to the extent the reporting person has been temporarily
transferred dispositive power and voting power over the securities
as described herein in Item 6
14. TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 48 Pages
STATEMENT ON SCHEDULE 13D
Item 1. Security and Issuer
The class of equity securities to which this Statement on Schedule 13D
relates is the common stock, par value $0.10 per share (the "Common Stock"), of
ACCEL Corporation ("ACCEL"), a Delaware corporation whose principal executive
offices are located at 475 Metro Place, North Dublin, Ohio 13017.
Item 2. Identity and Background
(a) Name:
Insurance Holdings Limited Partnership (the "reporting person")
(b) Residence or Business Address:
C/O Chase Enterprises
One Commercial Plaza
Hartford, Connecticut 06103
(c) Present Principal Occupation or Employment:
The reporting person is a limited partnership which provides
consulting services to affiliated and non-affiliated insurance
companies.
The information required by subsections (a) through (c) of this Item 2
with respect to the general partner and controlling person of the reporting
person as of the date hereof is incorporated herein by reference to such
information in Exhibit A filed herewith.
(d) During the past five years, the reporting person has not been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors). During the past five years, neither the general partner nor any
of the controlling persons of the reporting person has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors).
(e) During the past five years, the reporting person has not been a
party to a civil proceeding of a judicial or administrative body of competent
<PAGE>
Page 4 of 48 Pages
jurisdiction nor has it, as a result of any such proceeding, been subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
or mandating activities subject to, federal or state securities laws
or finding any violation with respect to such laws. During the past five
years, neither the general partner nor any of the controlling persons of the
reporting person has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction, nor has any of them, as a result
of any such proceeding, been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
(f) Citizenship: The reporting person is a limited partnership
organized under the laws of the State of Connecticut. The general partner of
the reporting person is a Connecticut corporation. Each of the controlling
persons of the reporting person is a citizen of the United States of America.
Item 3. Source and Amount of Funds or Other Considerations
As described in greater detail in Item 6, the reporting person borrowed
335,000 shares of Common Stock (the "Borrowed Securities") from Rhoda Chase,
pursuant to a letter agreement (the "Letter Agreement") dated December 15, 1995
between the reporting person and Rhoda Chase (the "Lender"). In exchange for
the Lender lending the Borrowed Securities, the reporting person has agreed to
pay quarterly to the Lender a service fee (the "Service Fee") equal to six
percent (6%) per annum of the average monthly market value of the Borrowed
Securities pro rated over the number of days the Letter Agreement is in effect.
The reporting person intends to use working capital to pay the Service Fee.
Item 4. Purpose of Transaction
The reporting person has pledged the Borrowed Securities to provide
additional collateral for a working capital loan. Based on its ongoing
evaluation of the business, prospects and financial condition of ACCEL, the
market for and price of the Common Stock, other opportunities available to it,
offers for the Borrowed Securities, general economic conditions and other
future developments, the reporting person may decide to sell, seek the
sale of or otherwise transfer, or continue to pledge or otherwise encumber all
or part of its present or future beneficial holdings of Common Stock, or may
decide to borrow or acquire additional Common Stock either in the open market,
in private transactions, or by any other permissible means.
Other than the above, as of the date hereof, the reporting person does
not have any plans or proposals that relate to or would result in any of the
following:
<PAGE>
Page 5 of 48 Pages
(a) The acquisition by any person of additional securities of ACCEL,
or the disposition of securities of ACCEL;
(b) An extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving ACCEL or any of its subsidiaries;
(c) A sale or transfer of a material amount of assets of ACCEL or of
any of its subsidiaries;
(d) Any change in the present board of directors or management of
ACCEL, including any plans or proposals to change the number or term of
directors or to fill any existing vacancies on the board;
(e) Any material change in the present capitalization or dividend
policy of ACCEL;
(f) Any other material change in ACCEL's business or corporate
structure;
(g) Changes in ACCEL's charter, bylaws or instruments corresponding
thereto or other actions which may impede the acquisition of control of ACCEL
by any person;
(h) Causing a class of securities of ACCEL to be delisted from a
national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) A class of equity securities of ACCEL becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); or
(j) Any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer
(a) As of the date hereof, the reporting person may be deemed to
beneficially own the 335,000 shares of Common Stock, or 7.5% of the 4,446,432
shares of Common Stock outstanding as of October 31, 1995, it borrowed pursuant
to the Letter Agreement.
(b) As described in greater detail herein in Item 6, the reporting
person has the sole power to vote, direct the voting of, dispose of, or direct
the disposition of the Borrowed Securities during the term of the Letter
Agreement.
<PAGE>
Page 6 of 48 Pages
(c) Besides the following transaction, no transactions have occurred
during the past sixty days:
<TABLE>
<CAPTION>
Where and
Character of Price Number How Transaction
Date Transaction Per Share of Shares Was Effected
<S> <C> <C> <C> <C>
12/15/95 Loan of the Borrowed Securities * 335,000 Private
by Rhoda Chase to the reporting person Transaction
described
in greater
detail in
Items 3 and 6.
</TABLE>
____________________________
* The Service Fee that the reporting person must pay for use of the Borrowed
Securities is described herein in Item 3.
(d) As described in greater detail herein in Item 6, the Lender may
be deemed to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the Borrowed Securities
during the term of the Letter Agreement.
(e) Not Applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships With Respect
to Securities of the Issuer
The reporting person has borrowed the Borrowed Securities from the
Lender pursuant to the Letter Agreement. Under the terms of the Letter
Agreement, the reporting person has full use of the Borrowed Securities,
including the right to sell, pledge or otherwise transfer or encumber the
Borrowed Securities, until termination of the Letter Agreement. In exchange
for use of the Borrowed Securities, the reporting person is to pay the Lender
the Service Fee for the use of the Borrowed Securities. In addition, the
reporting person is to pay to the Lender any cash dividends or distributions
declared by ACCEL on the Common Stock during the term of the Letter Agreement.
Upon the termination of the Letter Agreement, the reporting person is to
deliver to the Lender securities that are identical in kind and amount to the
Borrowed Securities and including all dividends and distributions in the form
of stock, rights, warrants or other securities which ACCEL makes during the
term of the Letter Agreement. The Letter Agreement is to terminate December
31, 1998 unless terminated sooner by one of the parties pursuant to the terms
of the Letter Agreement.
The reporting person has pledged the Borrowed Securities to Comerica
Bank to secure a $4,300,000 term loan facility pursuant to a Letter Agreement,
Term Loan and Security Agreement each of which is dated December 22, 1995.
<PAGE>
Page 7 of 48 Pages
Other than the foregoing, the reporting person knows of no contracts,
arrangements, understandings or relationships (legal or otherwise) between any
of the persons named in Item 2 and any other person with respect to any
securities of ACCEL including, but not limited to, transfer or voting of any of
the securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or the
giving or withholding of proxies.
The reporting person has not agreed to act together with any of the
foregoing persons or with any other person or entity for the purpose of
acquiring, holding, voting or disposition of shares of Common Stock and the
reporting person disclaims membership in any "group" with respect to the Common
Stock for purposes of Section 13(d)(3) of the Exchange Act or Rule 13d-5(b)(1)
adopted thereunder.
Item 7. Material to be Filed as Exhibits
A. Schedule of general partners and controlling persons of the
reporting person.............................................Page 10
B. Letter Agreement dated December 15, 1995 regarding
loan of Common Stock of ACCEL................................Page 11
C. Letter Agreement, Term Note and Security
Agreement dated December 22, 1995............................Page 13
<PAGE>
Page 8 of 48 Pages
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief,
the reporting person certifies that the information set forth in this Statement
is true, complete and correct.
Dated: January 5, 1996
INSURANCE HOLDINGS LIMITED PARTNERSHIP
BY: CHASE INSURANCE CORPORATION
Its General Partner
By: /s/ Cheryl Chase Freedman
Name: Cheryl Chase Freedman
Title: Executive Vice President
<PAGE>
Page 9 of 48 Pages
<TABLE>
<CAPTION>
EXHIBIT A
IDENTITY AND BACKGROUND OF GENERAL PARTNERS AND CONTROLLING PERSONS
OF
INSURANCE HOLDINGS LIMITED PARTNERSHIP
| | | | Titles With | Aggregate # | |
| | | |reporting person or | of Shares of |Percentage |
| | Residence or |Principal Occupation | Chase Insurance | Common Stock | of Common |
| Name | Business Address | or Employment | Corporation | Owned | Stock |
| | | | | |Owned |
<S> <C> <C> <C> <C> <C>
|Chase Insurance |C/O Chase Enterprises |General Partner of |General Partner of |None |0% |
|Corporation |("Chase") |reporting person |reporting person | | |
|("CIC") | One Commercial | | | | |
| |Plaza, | | | | |
| |Hartford, CT 06103 | | | | |
|David T. Chase |C/O Chase Enterprises |Chairman of the Board |President of CIC |382,000* |8.6%* |
| |One Commercial Plaza, |of | | | |
| |Hartford, CT 06103 |Directors and | | | |
| | |President of Chase | | | |
|Arnold L. Chase |C/O Chase Enterprises |Executive President of |Executive Vice |None |0% |
| |One Commercial Plaza, |Chase |President of CIC | | |
| |Hartford, CT 06103 | | | | |
|Cheryl Chase |C/O Chase Enterprises |Executive Vice |Executive Vice |None |0% |
|Freedman |One Commercial Plaza, |President of Chase |President of CIC | | |
| |Hartford, CT 06103 | | | | |
|John P. Redding |C/O Chase Enterprises |Senior Vice President |Vice President of |None |0% |
| |One Commercial Plaza, |of |CIC | | |
| |Hartford, CT 06103 |Chase | | | |
</TABLE>
* Shares held by spouse with respect to which David T. Chase disclaims
beneficial ownership.
<PAGE>
Page 10 of 48 Pages
EXHIBIT B
RHODA L. CHASE
C/O CHASE ENTERPRISES, ONE COMMERCIAL PLAZA
HARTFORD, CT 06103
December 15, 1995
Insurance Holdings Limited Partnership
C/O Chase Enterprises
One Commercial Plaza
Hartford, CT 06103
Re: Loan of Common Stock of ACCEL International Corporation
This letter will set forth and confirm the agreement entered into
between Insurance Holdings Limited Partnership ("Borrower") and Rhoda L. Chase
("Lender") regarding shares of common stock of ACCEL International Corporation
(the "Company").
1. Lender hereby confirms that it has loaned to Borrower 335,000
shares of the common stock, par value, $.10 per share, of the Company
("Borrowed Securities").
2. Until this Agreement is terminated, Borrower shall have the full
use of the Borrowed Securities including the right to sell, pledge or otherwise
transfer or encumber such securities to others.
3. Upon the termination of this Agreement, Borrower shall deliver
to Lender securities identical in kind and amount to the Borrowed Securities
and including all dividends and distributions in the form of stock, rights,
warrants or other securities which the Company has made during the term of this
Agreement with respect to the Borrowed Securities. During the term of this
agreement and from time to time but in no event later than ten (10) days after
the date of any distributions, Borrower shall pay over to Lender in cash the
<PAGE>
Page 11 of 48 Pages
amount of any cash dividends or distributions made by the Company respecting
the Borrowed Securities. In the event of a recapitalization, stock split or
other exchange by the Company with respect to the Borrowed Securities, the
exchanged or newly issued shares shall be deemed identical in kind to
the Borrowed Securities.
4. Borrower agrees to pay Lender a service fee for the use of the
Borrowed Securities. The service fee shall be six percent (6%) per annum of
the average monthly market value of the Borrowed Securities pro rated over the
number of days this Agreement is in effect. Such fee shall be due and payable
quarterly on the last day of each March, June, September and December for which
this Agreement is in effect.
5. Upon demand, Borrower will secure its obligations under this
agreement by delivering the Lender marketable securities, or other property
having a market value of at least one hundred and five percent (105%) of the
market value of the Borrowed Securities. Such transfer of property as security
shall be accompanied by such instruments and documents as shall be adequate to
provide Lender with a good and valid security interest therein. The said
security interest shall give Borrower the right to substitute collateral.
Except in the event of default by Borrower, Lender shall not have any right
to sell or otherwise dispose of the collateral.
6. Lender and Borrower agree that the loan of the Borrowed
Securities shall not reduce Lender's risk of loss or opportunity for gain
respecting the Borrowed Securities.
7. Borrower and Lender agree that they shall maintain their
respective books and records with respect to the Borrowed Securities to reflect
the transfer of said securities under this Agreement; to record any obligation
that may arise with respect to any dividends or distributions respecting the
Borrowed Securities which may be made by the Company; to record the transfer of
any property or cash in satisfaction of any dividend or distribution
obligation; and to record the transfer of stock in whole or partial
satisfaction of the obligation respecting return of the Borrowed Securities.
Borrower and Lender further agree that they will, upon reasonable request,
confirm to the other or any auditors of the other their respective obligations
with respect to the Borrowed Securities. The obligation hereunder regarding
the records of the parties shall also apply with respect to any collateral
which may be transferred to secure Borrower's obligation.
8. Unless otherwise sooner terminated as herein provided, this
Agreement shall terminate on December 31, 1998. Borrower reserves the right to
terminate this Agreement by return of the Borrowed Securities upon two (2)
days' notice to Lender. Such right of termination shall be exercisable in
whole or in part. Lender reserves the right to terminate this agreement on
written notice to Borrower of five (5) business days, at which time Borrower
shall fulfill its obligations to Lender as provided in paragraph 3 hereof.
<PAGE>
Page 12 of 48 Pages
9. This Agreement shall be binding upon the respective successors
and assigns of Lender and Borrower.
Please confirm that the foregoing sets forth our understanding
regarding the Borrowed Securities by signature below.
Very truly yours,
Rhoda L. Chase
THE FOREGOING IS HEREBY
CONFIRMED AND AGREED TO BY:
Insurance Holdings Limited Partnership
By: Chase Insurance Corporation,
its General Partner
Cheryl Chase Freedman
Executive Vice President
<PAGE>
Page 13 of 48 Pages
EXHIBIT C
December 22, 1995
Insurance Holdings Limited Partnership
One Commercial Plaza
Hartford, CT 06603
Gentlemen:
Comerica Bank ("Bank") is pleased to advise you that it has approved a
$4,300,000 term loan facility ("Loan") for Insurance Holdings Limited
Partnership, a Connecticut limited partnership ("Borrower"), to be evidenced by
a promissory note ("Note") in the form attached hereto as Exhibit "A"), subject
to the terms and conditions of this letter agreement.
Upon execution of this Note, Three Hundred Thousand Dollars ($300,000)
in proceeds of the Note shall be deposited into interest-bearing money market
investment account number ________ maintained at Bank ("Interest Reserve
Account"). On each date on which interest on the indebtedness outstanding
under the Note shall be due and payable in accordance with the terms of the
Note, Bank shall automatically debit the Interest Reserve Account in an amount
equal to the accrued but unpaid interest on the Note as of such date ("Interest
Payment"), and apply the proceeds thereof to such Interest Payment.
The Loan shall be secured by a pledge of Borrower's interest in the
Interest Reserve Account and Borrower's right, title and interest to certain
shares of the capital stock of Accel International, Security Connecticut Corp.
and Bank of Boston as set forth on Exhibit "B" attached hereto and by an
assignment of Borrower's interest in that certain Consulting Agreement between
Borrower and Ranger Insurance Company ("Ranger") dated January 6, 1994
("Consulting Agreement").
As a condition to the Loan, Borrower shall cause Ranger and CRC
(Bermuda) Insurance Limited ("CRC") to execute the Consent to Assignment of
<PAGE>
Page 14 of 48 Pages
Collateral Security ("Consent") in the form attached hereto as Exhibit "C".
Pursuant to paragraph (f) of the Consent, Ranger and CRC are required to pay
directly to Bank each of the annual $2,000,000 payments (excluding the
$2,000,000 payment which is due and payable on December 31, 1995 ("1995
Payment")) which shall become due and payable to Borrower under the Consulting
Agreement (each a "Ranger Payment"). The proceeds of each Ranger Payment (or
any other monies or other proceeds received by Bank pursuant to any collateral
security agreement ("Collateral Proceeds")) shall be applied by Bank as
follows:
(i) there shall be deposited to the Interest Reserve Account an
amount equal to the difference between $300,000 and the balance
of the Interest Reserve Account as of such date;
(ii) the balance of the proceeds of the Ranger Payment or Collateral
Proceeds, as applicable, shall be applied to the principal
outstanding under the Note (the "Prepayment Amount"); provided,
however, if such application would result in the prepayment of
any portion of the Note which bears interest at the Eurodollar-
based Rate, then such Prepayment Amount shall be deposited to
the Interest Reserve Account until the earlier of (A) thirty
(30) days following the date of such deposit, (B) the next
succeeding expiration of an Interest Period and (C) such other
date selected by Borrower in writing to Bank, at which time the
Bank shall debit the Interest Reserve Account in an amount equal
to the Prepayment Amount and apply the proceeds thereof to the
principal outstanding under the Note; and
(iii) any excess over principal outstanding under the Note shall be
paid to Borrower.
The proceeds of each Ranger Payment applied to reduce the principal
outstanding under the Note shall be subject to the terms and conditions of the
Note, including, without limitation, the prepayment penalty provisions thereof.
On or before January 5, 1996, Borrower shall provide Bank with evidence
satisfactory to Bank that the 1995 Payment has been made by Ranger or CRC to
Borrower.
<PAGE>
Page 15 of 48 Pages
Within five (5) business days after written demand by Bank from time to
time, Borrower shall deposit additional funds to the Interest Reserve Account
in an amount as determined by Bank as shall be necessary to meet all required
Interest Payments under the Note, but in no event shall Borrower be required at
any time to maintain a balance of more than $300,000 in the Interest Reserve
Account (plus any Prepayment Amount deposited therein pursuant to the terms of
this letter agreement which has not yet been applied to prepay principal).
So long as any indebtedness remains outstanding under the Note,
Borrower shall have no right to withdraw any funds from the Interest Reserve
Account.
A default under this letter agreement shall constitute an Event of
Default under the Note.
Please indicate your consent to the terms of this letter agreement by
signing below.
Sincerely,
COMERICA BANK
By: /s/ John E. Sasinowski
Jon E. Sasinowski
Its: Vice President
Agreed to and Accepted by:
INSURANCE HOLDINGS LIMITED PARTNERSHIP,
a Connecticut limited partnership
By: Chase Insurance Corporation, a Connecticut
Corporation
Its: General Partner
By: /s/ John P. Redding
Its: Vice President
<PAGE>
Page 16 of 48 Pages
TERM NOTE
(EURODOLLAR INSTALLMENT NOTE)
Tax I.D. No.: 06-1388818
$4,300,000
Detroit, Michigan
December 22, 1995
ON OR BEFORE DECEMBER 31, 1998, FOR VALUE RECEIVED, the undersigned,
Insurance Holdings Limited Partnership, a Connecticut limited partnership
("Borrower"), promises to pay to the order of COMERICA BANK, a Michigan
banking corporation ("Bank"), the principal sum of Four Million Three Hundred
Thousand Dollars ($4,300,000) in lawful money of the United States of America,
together with interest thereon as hereinafter set forth.
This Note shall be subject to the terms and conditions of that certain
letter agreement dated December 22, 1995 between Borrower and Bank, as the same
may be amended, restated, supplemented or replaced from time to time ("Letter
Agreement").
The indebtedness outstanding hereunder from time to time shall bear
interest either at the Eurodollar-based Rate or the Prime-based Rate, as
elected by Borrower from time to time, or as otherwise determined under the
terms and conditions of this Note. With respect to any portion of this Note
with respect to which the Applicable Interest Rate is the Prime-based Rate,
interest shall be payable monthly in arrears on the first Business Day of each
month, commencing February 1, 1996, and at maturity (whether by acceleration
or otherwise). With respect to any portion of this Note with respect to which
the Applicable Interest Rate is the Eurodollar-based Rate, interest shall be
payable in arrears on the last day of each Interest Period applicable thereto;
provided, however, if such Interest Period is longer than three (3) months,
interest shall be payable quarterly commencing three months following the first
day of such Interest Period and on the same day of each quarter thereafter
and on the last day of such Interest Period.
Interest accruing at the Prime-based Rate shall be computed on the
basis of a 360-day year and shall be assessed for the actual number of days
elapsed, and in such computation, effect shall be given to any change in the
Prime-based Rate as a result of any change in the Prime Rate on the date of
each such change.
Interest accruing at the Eurodollar-based Rate shall be computed on the
basis of a 360-day year and shall be assessed for the actual number of days
elapsed from the first day of the Interest Period applicable thereto, but not
including the last day thereof.
<PAGE>
Page 17 of 48 Pages
The amount from time to time outstanding under this Note, the
Applicable Interest Rates, the Interest Periods, if applicable, and the amount
and date of any repayment shall be noted on Bank's books and records, which
shall be conclusive evidence thereof, absent manifest error; provided, however,
any failure by Bank to make any such notation, or any error in any such
notation, shall not relieve Borrower of its obligation to repay Bank all
principal, all accrued and unpaid interest thereon, and all other amounts
payable by Borrower to Bank under or pursuant to this Note in accordance with
the terms hereof.
Borrower shall elect the initial Interest Period applicable to this
Note or portion thereof by delivering to Bank, by 11:00 a.m. (Detroit, Michigan
time), three (3) Business Days prior to the proposed effective date of any
Eurodollar-based Rate, a Notice of Term Rate executed by the duly authorized
general partner of the Borrower. Without limiting any other provisions of this
Note, the Borrower's right and ability to elect the Eurodollar-based
Rate as the Applicable Interest Rate hereunder shall be subject to the
following:
(a) the principal indebtedness outstanding under this Note must be
at least Two Hundred Fifty Thousand Dollars ($250,000.00);
(b) no Event of Default, or any condition or event which, with the
giving of notice or the running of time, or both, would
constitute an Event of Default, shall have occurred and be
continuing as of the date of such Notice of Term Rate; and
(c) any election by Borrower of the Eurodollar-based Rate as the
Applicable Interest Rate for any Interest Period under this Note
is not revocable by Borrower.
Provided that no Event of Default shall have occurred and be
continuing, Borrower may elect to continue a portion of this Note with respect
to which the Applicable Interest Rate is the Eurodollar-based Rate by giving
irrevocable written notice thereof to the Bank by its Notice of Term Rate
specifying the duration of the succeeding Interest Period therefor. Except as
provided in the following paragraph, for any period of time for which a Notice
of Term Rate has not been delivered to Bank, or for any period of time during
which Borrower is not entitled to elect the Eurodollar-based Rate in accordance
with the terms hereof or the Eurodollar-based Rate is not otherwise available
to Borrower as the Applicable Interest Rate in accordance with the terms of
this Note, the Prime-based Rate shall automatically be the Applicable Interest
Rate hereunder, subject to the provisions hereof with regard to the payment of
interest at the Default Rate.
Notwithstanding anything set forth in the preceding paragraph to the
contrary, unless Borrower notifies Bank in writing to the contrary by
delivering to Bank a Notice of Term Rate or written notice of intent to prepay
<PAGE>
Page 18 of 48 Pages
a portion of the indebtedness hereunder which bears interest at the Eurodollar-
based Rate three (3) Business Days prior to the expiration of an Interest
Period, Borrower shall be deemed to have elected (subject to its right and
ability to so elect as of such date) to continue that portion of the
indebtedness outstanding hereunder to which such Interest Period is applicable
at the Eurodollar-based Rate with an Interest Period of thirty (30) days.
This Note may be prepaid in whole or in part without penalty or
premium, but with accrued interest on the principal being prepaid to the date
of such prepayment, provided that: in the case of that portion of this Note
bearing interest at the Eurodollar-based Rate, each partial prepayment shall be
in an amount not less than $250,000, and such prepayment may only be made on
the last Business Day of the then current Interest Period with respect thereto
and the undersigned shall give written notice of intent to prepay that portion
of this Note which bears interest at the Eurodollar-based Rate not less than
three (3) Business Days prior to the expiration of the applicable Interest
Period. In the event that the Eurodollar-based Rate is the Applicable Interest
Rate with respect to the principal indebtedness outstanding under this Note,
and any payment or prepayment of such indebtedness shall occur on any day
other than the last day of the Interest Period then applicable thereto
(whether voluntarily, by acceleration, or otherwise) or if an Applicable
Interest Rate shall be changed during any Interest Period under or otherwise in
accordance with the terms of this Note, or if Borrower shall fail to make any
payment of principal or interest hereunder at any time with respect to
which the Eurodollar-based Rate is the Applicable Interest Rate hereunder,
Borrower shall reimburse Bank on demand for any resulting loss, cost or expense
incurred by Bank as a result thereof, including, without limitation, any such
loss, cost or expense incurred in obtaining, liquidating, employing or
redeploying deposits from third parties. Such amount payable by Borrower to
Bank hereunder may include, without limitation, an amount equal to the excess,
if any, of (a) the amount of interest which would have accrued on the amounts
so prepaid for the period from the date of such prepayment through the last day
of the relevant Interest Period therefor, at the Applicable Interest Rate for
such indebtedness, as provided under this Note, over (b) the amount of interest
(as reasonably determined by Bank) which would have accrued to Bank on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. Calculation of any amounts payable
to Bank under this paragraph shall be made as though Bank shall have
actually funded or committed to fund the relevant indebtedness hereunder
through the purchase of an underlying deposit in an amount equal to the amount
of such indebtedness and having a maturity comparable to the relevant Interest
Period; provided, however, that Bank may fund the indebtedness hereunder in any
manner it deems fit, and the foregoing assumption shall be utilized only for
the purpose of the calculation of amounts payable under this paragraph. Upon
the written request of Borrower, Bank shall deliver to Borrower a certificate
setting forth bases for determining such losses, costs and expenses, which
certificate shall be conclusively presumed correct, absent manifest effort.
Any partial prepayment under this Note shall be applied to the installments due
under this Note in the inverse order of their maturities.
<PAGE>
Page 19 of 48 Pages
For purposes of this Note, the Ranger Payments (as defined in the
Letter Agreement) shall be applied to reduce the principal outstanding of this
Note as set forth in the Letter Agreement and shall be subject to the
prepayment penalty provisions of this Note.
For any portion of this Note for which the Applicable Interest Rate is
the Eurodollar-based Rate, if Bank shall designate a Eurodollar Lending Office
which maintains books separate from those of the rest of Bank, Bank shall have
the option of maintaining and carrying this Note, and the indebtedness
hereunder, on the books of such Eurodollar Lending Office.
If, with respect to any Interest Period, Bank determines that, (a) by
reason of circumstances affecting the foreign exchange and interbank markets
generally, deposits in Eurodollars in the applicable amounts or for the
relative maturities are not being offered to the Bank for such Interest Period,
or (b) that the Eurodollar-based Rate will not adequately reflect the cost to
Bank of maintaining the indebtedness under this Note at the Eurodollar-
based Rate for such Interest Period, then Bank shall forthwith give notice
thereof to the Borrower. Thereafter, until Bank notifies Borrower that such
circumstances no longer exist, the obligation of Bank to maintain the
indebtedness outstanding under this Note or any portion thereof at the
Eurodollar-based Rate, and the right of Borrower to elect the Eurodollar-based
Rate as the Applicable Interest Rate for the indebtedness under this Note
or any portion thereof, shall be suspended.
If, after the date hereof, the introduction of, or any change in, any
applicable law, rule or regulation or in the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by Bank (or its Eurodollar Lending
Office) with any request or directive (whether or not having the force
of law) of any such authority, shall make it unlawful or impossible for the
Bank (or its Eurodollar Lending Office) to honor its obligations hereunder to
maintain the indebtedness under this Note with interest at the Eurodollar-based
Rate, Bank shall forthwith give notice thereof to Borrower. Thereafter, (a)
the obligation of Bank to maintain the indebtedness outstanding under this Note
or any portion thereof at the Eurodollar-based Rate, and the right of Borrower
to elect the Eurodollar-based Rate as the Applicable Interest Rate for the
indebtedness under this Note or any portion thereof, shall be suspended, and
thereafter, until Bank gives notice to Borrower that the conditions or
circumstances causing or giving rise to such suspension no longer exist, the
Prime-based Rate shall be the Applicable Interest Rate for the indebtedness
outstanding under this Note; and (b) if Bank may not lawfully continue to
maintain the indebtedness outstanding under this Note or any portion thereof at
the Eurodollar-based Rate to the end of the then current Interest Period
applicable thereto, the Prime-based Rate shall be the Applicable Interest Rate
for the remainder of such Interest Period.
<PAGE>
Page 20 of 48 Pages
If the adoption after the date hereof, or any change after the date
hereof in, any applicable law, treaty, rule, or regulation (whether domestic or
foreign) of any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
Bank (or its Eurodollar Lending Office) with any request or directive (whether
or not having the force of law) made by any such authority, central bank or
comparable agency after the date hereof, including, without limitation, any
risk-based capital guidelines:
(a) shall subject Bank (or its Eurodollar Lending Office) to any
tax, duty or other charge with respect to this Note or the
indebtedness hereunder or shall change the basis of taxation of
payments to Bank (or its Eurodollar Lending Office) of the
principal of or interest on this Note or any other amounts due
under this Note in respect thereof (except for changes in the
rate of tax on the overall net income of Bank or its Eurodollar
Lending Office imposed by the jurisdiction in which Bank's
principal executive office or Eurodollar Lending Office is
located); or
(b) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the
Federal Reserve System), special deposit or similar requirement
against assets of, deposits with or for the account of, or
credit extended by Bank (or its Eurodollar Lending Office) or
shall impose on Bank (or its Eurodollar Lending Office)
or the foreign exchange and interbank markets any other
condition affecting this Note or the indebtedness hereunder;
and the result of any of the foregoing is to increase the cost to Bank of
maintaining any part of the indebtedness hereunder or to reduce the amount of
any sum received or receivable by Bank under this Note by an amount deemed by
Bank to be material, then Bank shall promptly notify Borrower of such fact and
demand compensation therefor from Borrower, and, within fifteen (15) days after
such demand by Bank, Borrower agrees to pay to Bank such additional amounts as
are sufficient to compensate Bank for such increased cost or reduction. A
certificate of Bank, prepared in good faith and in reasonable detail by Bank
and submitted by the Bank to the Borrower, setting forth the basis for
determining such additional amount or amounts necessary to compensate Bank
shall be conclusively presumed, absent manifest error.
In the event that any applicable law, treaty, rule or regulation
(whether domestic or foreign) now or hereafter in effect and whether or not
presently applicable to the Bank, or any interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by the Bank with any guideline,
request or directive of any such authority (whether or not having the force of
law) including any risk-based capital guidelines, affects or would affect the
<PAGE>
Page 21 of 48 Pages
amount of capital required or expected to be maintained by the Bank (or any
corporation controlling the Bank) and the Bank determines that the amount of
such capital is increased by or based upon the existence of any obligations of
the Bank hereunder or the making of the loan under this Note or maintaining the
indebtedness hereunder and such increase has the effect of reducing the rate
of return on the Bank's (or such controlling corporation's) capital as a
consequence of such obligations or the making of such loan or maintaining of
such indebtedness hereunder to a level below that which the Bank (or such
controlling corporation) could have achieved but for such circumstances (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by the Bank to be material, then the Borrower shall pay to the Bank,
within fifteen (15) days of Borrower's receipt of written notice from Bank
demanding such compensation, additional amounts sufficient to compensate the
Bank (or such controlling corporation) for any increase in the amount of
capital and reduced rate of return which the Bank reasonably determines to be
allocable to the existence of any obligations of the Bank hereunder or to the
making of such loan or maintaining the indebtedness hereunder. A certificate
of Bank as to the amount of such compensation, prepared in good faith and in
reasonable detail by the Bank and submitted by the Bank to the Borrower, shall
be conclusive and binding for all purposes, absent manifest error.
Upon the occurrence and during the continuance of any Event of Default,
Bank may at any time and from time to time, without notice to the Borrower (any
requirement for such notice being expressly waived by the Borrower) set off and
apply against any and all of the indebtedness of any of the Borrower to Bank
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by Bank to or for the
credit or the account of the Borrower and any property of the Borrower
from time to time in possession of Bank, irrespective of whether or not Bank
shall have made any demand hereunder and although such obligations may be
contingent and unmatured. The rights of Bank under this paragraph are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) which Bank may otherwise have.
Upon the occurrence of an Event of Default, Bank may declare this Note
due forthwith and collect, deal with and dispose of all or any part of any
security in any manner permitted or authorized by the Michigan Uniform
Commercial Code or other applicable law (including public or private sale) and
after deducting reasonable expenses (including, without limitation, reasonable
attorneys' fees and expenses) Bank may apply the proceeds and any deposits or
credits in part or full payment of any said liabilities, whether due or not, in
any manner or order Bank elects.
In the event that and so long as any Event of Default shall have
occurred and be continuing, the indebtedness outstanding under this Note shall
bear interest at the Default Rate.
<PAGE>
Page 22 of 48 Pages
For the purposes of this Note the following terms will have the
following meanings:
"Applicable Interest Rate" shall mean the Eurodollar-based Rate or the
Prime-based Rate, as selected by Borrower from time to time, subject to the
terms and conditions of this Note.
"Business Day" shall mean any day other than a Saturday, Sunday or
holiday on which Bank is open for all or substantially all of its domestic and
international commercial banking business (including dealings in foreign
exchange) in Detroit, Michigan.
"Eurodollar-based Rate" shall mean a per annum interest rate which is
the sum of one and one-half percent (1-1/2%) plus the quotient of:
(a) the per annum interest rate at which Bank's Eurodollar
Lending Office offers deposits to prime banks in the
eurodollar market in an amount comparable to the
principal amount outstanding under this Note and for a
period equal to the respective Interest Period at
approximately 11:00 a.m., Detroit, Michigan time, two
(2) Business Days prior to the first day of such
Interest Period;
divided by
(b) a percentage equal to 100% minus the maximum rate on
such date at which Bank is required to maintain reserves
on "Euro-currency Liabilities" as defined in and
pursuant to Regulation D of the Board of Governors of
the Federal Reserve System or, if such regulation or
definition is modified, and as long as Bank is required
to maintain reserves against a category of liabilities
which includes eurodollar deposits or includes a
category of assets which includes eurodollar loans, the
rate at which such reserves are required to be
maintained on such category.
"Default Rate" means the sum of three percent (3%) plus the Applicable
Interest Rate under this Note.
"Eurodollar Lending Office" shall mean Bank's office located in the
Grand Cayman Islands, British West Indies, or such other branch of Bank,
domestic or foreign, as it may hereafter designate as its Eurodollar Lending
Office by notice to Borrower.
"Event of Default" means the occurrence of any one of the following:
(a) Borrower shall fail to pay the principal or interest
hereunder or shall fail to pay any other amount owing by
<PAGE>
Page 23 of 48 Pages
the Borrower to Bank, whether under this Note or
otherwise, when due in accordance with the terms
hereof or thereof; or
(b) any representation, warranty, certification or statement
made or deemed to have been made by Borrower herein or
in any certificate, financial statement or other
document or agreement by the terms hereof or thereof
delivered to Bank pursuant hereto shall prove to be
untrue in any material respect; or
(c) Borrower shall fail to comply with any of the terms or
provisions of any agreement between Borrower and the
Bank; or
(d) if without the written consent of Bank there is any
termination, notice of termination or breach of any
guaranty, pledge, collateral assignment or subordination
agreement relating to all or any part of the
indebtedness evidenced by this Note; or
(e) if there is any failure by Borrower to pay when due any
of its indebtedness (other than to the Bank) or in the
observance or performance of any term, covenant or
condition in any document evidencing, securing or
relating to such indebtedness; or
(f) if the Bank deems itself insecure, believing that the
prospect of payment of this Note or any of the
indebtedness is impaired or shall fear deterioration,
removal or waste of any of the collateral securing
the indebtedness evidenced by this Note; or
(g) Borrower becomes insolvent or the subject of a voluntary
or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition
proceeding, ceases doing business as going concern or
dissolves; or any general partner of Borrower dies,
becomes incompetent or becomes the subject of a
bankruptcy proceeding; if there is filed or issued a
levy or writ of attachment or garnishment or other like
judicial process upon Borrower or any of the collateral
securing the indebtedness evidenced by this Note,
including without limit, any accounts with the Bank; or
(h) the failure for any reason of Ranger Insurance Company
("Ranger") or any successor in interest of Ranger to
make any of the annual payments (including, without
limitation the $2,000,000 payment due on December 31,
1995) required under paragraph 2 of that certain
Consulting Agreement dated January 6, 1994 by and
<PAGE>
Page 24 of 48 Pages
between Ranger and Borrower, Ranger's interest having
been assigned to CRC (Bermuda) Reinsurance Limited
pursuant to that certain Assignment and Assumption of
Rights and Obligations dated as of January 1,
1995 between Ranger and CRC; or
(i) the failure of Ranger or CRC to comply with the terms
and conditions of that certain Consent to Assignment as
Collateral Security, dated as of December 22, 1995, by
and among Ranger, CRC and Bank, as the same may be
amended from time to time.
"Interest Period" shall mean a period of one (1) month, two (2) months,
three (3) months or six (6) months as selected by Borrower pursuant to the
terms of the Note, commencing on the effective date of an election of the
Eurodollar-based Rate made in accordance with the terms of this Agreement,
provided that:
(a) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the
next succeeding Business Day, except that if the next
succeeding Business Day falls in another calendar month,
the Interest Period shall end on the next preceding
Business Day, and when an Interest Period begins on a
day which has no numerically corresponding day in the
calendar month during which such Interest Period is to
end, it shall end on the last Business Day of such
calendar month;
(b) no Interest Period with respect to that portion of the
Term Note required to be paid on any principal
installment date shall end past such principal
installment date; and
(c) no Interest Period shall extend beyond the maturity date
set forth in this Note.
"Notice of Term Rate" shall mean a Notice of Term Rate in form similar
to that attached to this Note as Exhibit "A" issued and delivered by Borrower
to Bank in accordance with the terms of this Note.
"Prime Rate" means the per annum interest rate established by Bank as
its prime rate for its borrowers, as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by Bank at any such
time.
"Prime-based Rate" shall mean a per annum interest rate which is equal
to the greater of (i) the Prime Rate; or (ii) the rate of interest equal to the
sum of (a) one percent (1%) and (b) the rate of interest equal to the average
<PAGE>
Page 25 of 48 Pages
of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers (the "Overnight
Rates") as published by the Federal Reserve Bank of New York, or, if the
overnight Rates are not so published for any day, the average of the quotations
for the Overnight Rates received by Bank from three (3) Federal funds brokers
of recognized standing selected by Bank, as the same may be changed from time
to time. Effect shall be given to any change in the Prime-based Rate as a
result of any change in the Prime Rate or Overnight Rates on the date of any
such change in the Prime Rate or Overnight Rates, as applicable.
Borrower agrees to make all payments to Bank of any and all amounts due
and owing by Borrower to Bank hereunder, including, without limitation, monthly
installments of principal and interest, on the date provided for such payment,
in United States Dollars in immediately available funds at the office of Bank
located at One Detroit Center, 500 Woodward Avenue, Detroit, Michigan 48226, or
such other address as Bank may notify Borrower in writing.
No delay or failure of Bank in exercising any right, power or privilege
hereunder shall affect such right, power or privilege, nor shall any single or
partial exercise thereof preclude any further exercise thereof, or the exercise
of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have, whether by other instruments or by law.
This Note shall bind the Borrower and the Borrower's successors and
assigns.
THE BORROWER AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF ITS
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE.
This Note has been deemed to have been delivered at Detroit, Michigan,
and shall be governed by and construed and enforced in accordance with the laws
of the State of Michigan. Whenever possible, each provision of this Note shall
be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Note shall be prohibited by or invalid under
applicable law, such provision shall be ineffective to the extent of such
<PAGE>
Page 26 of 48 Pages
prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Note.
INSURANCE HOLDINGS
LIMITED PARTNERSHIP,
a Connecticut limited partnership
By: CHASE INSURANCE
CORPORATION, a Connecticut
corporation
Its: General Partner
By: /s/ John P. Redding
Its: Vice President
<PAGE>
Page 27 of 48 Pages
EXHIBIT "A"
NOTICE OF TERM RATE
With reference to the $4,300,000 Term Note dated as of December 22,
1995 made by the undersigned payable to Comerica Bank ("Bank") subject to the
terms and conditions of said Note, the undersigned hereby elects the
________________________* Rate as the Applicable Interest Rate for
________________________________ _______________________ Dollars ($__________)
of the principal indebtedness outstanding under said Note. Such election shall
be effective as of ________________, 19___ and the Interest Period applicable
thereto, if any, shall be ____________________.**
The undersigned hereby certifies that as of the date hereof, no Event
of Default, and no condition or event which, with the running of time or the
giving of notice, or both, would constitute an Event of Default, has occurred
and is continuing under said Promissory Note.
- ----------------------------
*Insert, as applicable, "Eurodollar-based" or "Prime-based".
**For a Eurodollar-based Rate, insert 1, 2, 3 or 6 months.
<PAGE>
Page 28 of 48 Pages
Capitalized terms used but not otherwise defined herein shall have the
meanings ascribed to them in said Promissory Note.
Dated this _______ day of _______________________, 19__.
INSURANCE HOLDINGS LIMITED
PARTNERSHIP, a Connecticut limited
partnership
By: CHASE INSURANCE CORPORATION,
a corporation
Its: General Partner
By:
Its:
<PAGE>
Page 29 of 48 Pages
SECURITY AGREEMENT
(Negotiable Collateral)
For value received, the undersigned ("Debtor") assigns, transfers,
delivers, and pledges to Comerica Bank, a Michigan banking corporation, whose
address is 100 Renaissance Center, Detroit, Michigan 48243 ("Bank"), a
continuing security interest in (a) the following securities, stocks, bonds,
notes, instruments, documents of title, and/or other property; (b) interest,
dividends, increase, profits, new securities or other increments, distributions
or rights of any kind received on account of this property; (c) Debtor's
Property in Possession of Bank; and (d) all property substituted therefor or
for any part thereof, all records (including computer software) pertaining
thereto and all rights, products or Proceeds thereof (whether cash or non-cash
Proceeds) resulting from any sale or exchange or transfer thereof or arising by
virtue of ownership thereof (such as, but not limited to, the rights to
additional or other securities or property upon any corporate reorganization,
merger, consolidation, liquidation, or dissolution, offering of stock rights,
stock split or stock or liquidating dividend or the rights to any goods
evidenced by such property or insurance proceeds with respect thereto), and all
subscription, voting, and preferential rights:
See Exhibit "A"
to secure payment of any and all sums, indebtedness and liabilities of any and
every kind now owing or later to become due to the Bank from Debtor during the
term of this Agreement, however created, incurred, evidenced, acquired or
arising, whether under any note(s), guaranty(ies), letter of credit
agreement(s), evidence(s) of indebtedness or under any other instrument,
obligation, guaranty, contract or agreement or dealing of any and every kind
now existing or later entered into between the Debtor and the Bank, or
otherwise, and whether direct, indirect, primary, secondary, fixed, contingent,
joint or several, due or to become due, together with interest and charges, and
including, without limit, all present and future indebtedness or obligations of
third parties to the Bank which is guaranteed by the Debtor and the present or
future indebtedness originally owing by the Debtor to third parties and
assigned by third parties to the Bank, and any and all renewals, extensions or
modifications of any of them (the "Indebtedness").
<PAGE>
Page 30 of 48 Pages
1. Definitions. As used in this Agreement:
1.1 "Collateral" means any and all property of Debtor in which Bank
now has or by this Agreement now or later acquires a security
interest.
1.2 "Debtor's Property in Possession of Bank" means goods,
instruments, documents, policies and certificates of insurance,
deposits, money or other property now owned or later acquired by
Debtor or in which Debtor now has or later acquires an interest
and which are now or later in possession of Bank, or as to which
Bank now or later controls possession by documents or otherwise.
1.3 "Environmental Law" means any laws, ordinances, directives,
orders, statutes, or regulations an object of which is to
regulate or improve health, safety, or the environment,
including, without limit, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended (42
USC 9601 et seq.), the Resource Conservation and Recovery
Act, as amended (42 USC 6901 et seq.), and the Michigan
Environmental Response Act, as amended (MCL 299.601 et seq.).
1.4 "Hazardous Materials" means each and all of the following:
hazardous materials and/or substances as defined in any
Environmental Law, petroleum, petroleum by-products, natural
gas, flammable explosives, radioactive materials, and toxic
materials.
1.5 "Proceeds" has the meaning assigned it in Article 9 of the
Uniform Commercial Code, as of the date of this Agreement, and
also includes, without limit, cash or other property which were
proceeds and are recovered by a bankruptcy trustee or otherwise
as a preferential transfer by Debtor.
1.6 "Uniform Commercial Code" means Act No. 174 of the Michigan
Public Acts of 1962, as amended.
1.7 Except as otherwise provided in this Agreement, all terms in
this Agreement have the meanings assigned to them in Article 9
(or, absent definition in Article 9, in any other Article) of
the Uniform Commercial Code, as of the date of this Agreement.
<PAGE>
Page 31 of 48 Pages
2. Warranties, Covenants and Agreements. Debtor warrants, covenants and
agrees as follows:
2.1 Bank at its option may disburse loan proceeds directly to the
seller of any Collateral to be acquired with proceeds of loans
from Bank.
2.2 Bank, at its option, may require delivery of any Collateral to
Bank at any time with such endorsements or assignments of the
Collateral as Bank may request.
2.3 Debtor shall (a) keep adequate records of the Collateral and
other records as Bank shall determine to be appropriate; and (b)
allow Bank to examine, inspect and make abstracts from, or copy
any of Debtor's books and records (relating to the Collateral or
otherwise and whether printed or in magnetic tape or discs or in
other machine readable form).
2.4 At any time and without notice during the continuation of an
Event of Default, the Bank may (a) cause the Collateral or any
portion of it to be transferred to its name or to the name of
its nominee or nominees; (b) receive or collect by legal
proceedings or otherwise all dividends, interest, principal
payments and other sums and all other distributions at any time
payable or receivable on account of the Collateral, and hold the
same as Collateral, or apply the same to the Indebtedness, the
manner and distribution of the application to be in the sole
discretion of the Bank; (c) enter into any extension,
subordination, reorganization, deposit, merger or consolidation
agreement or any other agreement relating to or affecting the
Collateral, and deposit or surrender control of the Collateral,
and accept other property in exchange for the Collateral and
hold or apply the property or money so received in accordance
with the provisions of this Agreement.
2.5 The Bank may assign any of the Indebtedness and deliver all or
any part of the Collateral to its assignee, who then shall have
with respect to the Collateral so delivered all the rights and
powers of the Bank under this Agreement, and after that the Bank
shall be fully discharged from all liability and responsibility
with respect to the Collateral so delivered.
2.6 If Bank, acting in its sole discretion, redelivers Collateral to
Debtor or Debtor's designee for the purpose of
(a) the ultimate sale or exchange thereof, or
<PAGE>
Page 32 of 48 Pages
(b) presentation, collection, renewal, or registration of
transfer thereof, or
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing therewith
preliminary to sale or exchange, such redelivery shall
be in trust for the benefit of Bank and shall not
constitute a release of Bank's security interest therein
or in the proceeds or products thereof unless Bank
specifically so agrees in writing. If Debtor requests
any such redelivery, Debtor will deliver with such
request a duly executed financing statement in form and
substance satisfactory to Bank. Any proceeds of
Collateral coming into Debtor's possession as a result
of any such redelivery shall be held in trust for Bank
and forthwith delivered to Bank for application on the
Indebtedness. Bank may (if, in its sole discretion, it
elects to do so) deliver the Collateral or any part of
the Collateral to Debtor, and such delivery by Bank
shall discharge Bank from any and all liability or
responsibility for such Collateral.
2.7 Debtor acknowledges and agrees that the Bank has no obligation
to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of the
Indebtedness, and Debtor is not relying upon assets in which the
Bank has or may have a lien or security interest for payment of
the Indebtedness.
2.8 Debtor shall at the request of Bank (a) mark its records and the
Collateral to clearly indicate the security interest of Bank
under this Agreement, and (b) deliver to Bank all accounting and
other records pertaining to, and all writings evidencing, the
Collateral or any portion of it, together with all books,
records and documents of Debtor related to it in whatever form
kept by Debtor, whether printed or in magnetic tape or discs or
in other machine readable form or otherwise, and all forms,
programs, software and other materials and instructions
necessary or useful to Bank, to monitor the Collateral or
enforce its rights under this Agreement.
2.9 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Debtor shall be
deemed to have warranted that (a) Debtor has the right and
authority to subject it to a security interest granted to Bank
and (b) none of the Collateral is subject to any security
interest other than that in favor of Bank and there are no
financing statements on file, other than in favor of Bank.
<PAGE>
Page 33 of 48 Pages
2.10 Debtor will keep the Collateral free at all times from any and
all claims, liens, security interests and encumbrances other
than those in favor of Bank. Debtor will not, without the prior
written consent of Bank, sell, transfer or lease, or permit or
suffer to be sold, transferred or leased, any or all of the
Collateral. Bank pr its agents or attorneys may at all
reasonable times inspect the Collateral and may enter upon all
premises where the Collateral is kept or might be located.
2.11 Debtor shall take or cause to be taken and execute or cause to
be executed all financing statements, endorsements, assignments
and other writings requested by Bank to establish, maintain,
reinstate, and/or continue the perfected and first priority
status of the security interest of Bank in the Collateral or to
implement or further effectuate the terms or purpose of this
Agreement, although the failure of the Debtor to do so shall not
affect in any way Bank's perfected and first priority security
interest in the Collateral, and will on demand pay all costs and
expenses of filing and recording, including the costs of any
record searches, deemed necessary by Bank from time to time, to
establish or determine the validity and the priority of Bank's
security interest. Debtor further makes, constitutes and
appoints Bank its true and lawful attorney-in-fact with full
power of substitution during the continuation of an Event of
Default to take any action in furtherance of this Agreement,
including, without limitation, the signing of financing
statements, endorsing of instruments, and the execution and
delivery of all documents and agreements necessary to
obtain or accomplish any protection for or collection or
disposition of any part of the Collateral. Such appointment
shall be deemed irrevocable and coupled with an interest.
2.12 Debtor will pay promptly and within the time that they can be
paid without interest or penalty all taxes, assessments and
similar imposts and charges which at any time are or may become
a lien, charge, or encumbrance upon any of the Collateral,
except to the extent contested in good faith and bonded in a
manner satisfactory to Bank. If Debtor fails to pay any of
these taxes, assessments or other charges in the time provided
above, Bank has the option (but not the obligation) to do so and
Debtor agrees to repay all amounts so expended by Bank
immediately upon demand, together with interest at the highest
default rate which could be charged by Bank to Debtor on any
Indebtedness.
2.13 [Reserved]
2.14 [Reserved]
<PAGE>
Page 34 of 48 Pages
2.15 Debtor agrees to reimburse Bank upon demand for all fees and
expenses incurred by Bank (a) in seeking to collect the
Indebtedness or any part of it (through formal or informal
collection actions, workouts or otherwise), in defending the
validity or priority of its security interest, or in pursuing
its rights and remedies under this Agreement or under any other
agreement between Bank and Debtor; (b) in connection with any
proceeding (including, without limit, bankruptcy, insolvency,
administrative, appellate, or probate proceedings or any
lawsuit) in which Bank at any time is involved as a result of
any lending relationship or other financial accommodation
involving Bank and Debtor; or (c) incurred by Bank during the
continuance of an Event of Default, which fees and expenses
relate to or would not have been incurred but for any lending
relationship or other financial accommodation involving Bank and
Debtor. The fees and expenses include, without limit, court
costs, legal expenses, reasonable attorneys' fees, paralegal
fees, internal transfer charges for in-house attorneys and
paralegals and other services, and audit expenses.
2.16 Debtor at all times shall be in material compliance with all
applicable laws.
2.17 (a) Debtor is and shall be in strict compliance with all
Environmental Laws. There are not and will not be
Hazardous Materials on, in or under any real or personal
property ("Property") now or at any time owned,
occupied, or operated by Debtor which in any manner
violates any Environmental Law or which could be subject
to remediation pursuant to any Environmental Law.
Debtor has not disposed of, manufactured, treated,
stored, handled, used, transported, or generated
Hazardous Materials, and shall not in the future do any
of the above acts in violation of any Environmental
Law.
(b) Debtor shall promptly conduct all investigations,
testing, removal and other actions necessary to clean up
and remove all Hazardous Materials on or affecting the
Property in accordance with all Environmental Laws.
These actions will not be deemed to cure any breach of
this Section.
(c) Debtor shall defend, indemnify and hold harmless Bank,
its employees, agents, shareholders, officers and
directors from and against any and all claims, damages,
fines, expenses, liabilities or causes of action of
whatever kind, including without limit consultant fees,
<PAGE>
Page 35 of 48 Pages
legal expenses, and reasonable attorneys' fees,
suffered by any of them as a direct or indirect result
of any actual or asserted violation of any Environmental
Law or of any remediation relating to the Property
required by any Environmental Law.
(d) Upon ten days notice to Debtor except in an emergency or
where not practical under applicable law), Bank may (but
is not obligated to) enter on the Property or take such
other actions as it deems appropriate to inspect, test
for, clean up, remove, minimize the impact of, or advise
governmental agencies of the possible existence of any
Hazardous Materials upon Bank's receipt of any
notice from any source asserting the existence of any
Hazardous Materials in violation of Environmental Laws.
All costs and expenses so incurred by Bank, including
without limit consultant fees, legal expenses and
reasonable attorneys' fees, shall be payable by Debtor
upon demand, together with interest at the highest
default rate which could be charged by Bank to Debtor on
any Indebtedness.
(e) The provisions of this section shall survive the
repayment of the Indebtedness, the satisfaction of all
other obligations of Debtor to Bank, the discharge or
termination by Bank of any lien or security interest
from Debtor, and the foreclosure of or exercise of
rights as to any Collateral.
2.18 Debtor acknowledges and agrees that if any Guaranty is executed
by the Debtor in connection with or related to this Agreement,
all waivers contained in that Guaranty shall be and are
incorporated by reference into this Agreement.
3. Collection of Proceeds.
3.1 Immediately upon notice to Debtor by Bank and at all times after
that, Debtor agrees to hold in trust for Bank all payments
received in connection with the Collateral and from the sale,
lease or other disposition of any Collateral, all rights by way
of suretyship or guaranty and all rights in the nature of a
mortgage, lien or security interest which Debtor now has
or may later acquire regarding the Collateral. Debtor agrees to
collect and enforce payment of all Collateral until Bank shall
direct Debtor to the contrary and, from and after this
direction, Debtor agrees to fully and promptly cooperate and
<PAGE>
Page 36 of 48 Pages
assist Bank (or any other person as Bank shall designate) in the
collection and enforcement of all Collateral. Immediately upon
notice to such effect to Debtor by Bank and at all times
after that, Debtor agrees to (a) endorse to Bank and immediately
deliver to Bank all payments received by Debtor on Collateral or
from the sale, lease or other disposition of any Collateral or
arising from any other rights or interests of Debtor in the
Collateral, in the form received by Debtor without commingling
with any other funds, and (b) immediately deliver to Bank all
property in Debtor's possession or later coming into Debtor's
possession through enforcement of Debtor's rights or interests.
3.2 During the continuation of an Event of Default, Debtor
irrevocably authorizes Bank or any Bank employee or agent to
endorse the name of Debtor upon any Collateral, checks, or other
items which are received in payment of any Collateral, and to do
any and all things necessary in order to reduce these items to
money.
3.3 Bank shall have no duty as to the collection or protection of
Collateral or the proceeds of it, nor as to the preservation of
any related rights, beyond the use of reasonable care in the
custody and preservation of Collateral in the possession of
Bank. Debtor agrees to take all steps necessary to preserve
rights against prior parties with respect to Debtor's Property
in Possession of Bank.
3.4 For the purpose of calculating interest on the Indebtedness,
Debtor understands that Bank imposes a minimum one business day
delay in crediting payments received by Bank against the
Indebtedness to allow time for collection and Debtor agrees that
Bank may, at Bank's option, make such credits only when payments
are actually collected by Bank in immediately available funds.
Any credit of payment by Bank prior to receipt by Bank of
immediately available funds is conditional upon Bank's
receipt of those funds. For the purpose of calculating the
principal amount which Debtor may request to borrow from Bank
under any borrowing arrangements with Bank, Debtor understands
that Bank may, at Bank's option, use a method different from
that used for the purpose of calculating interest.
4. Defaults, Enforcement and Application of Proceeds.
4.1 Upon the occurrence of any of the following events (each an
"Event of Default"), Debtor shall be in default under this
Agreement:
<PAGE>
Page 37 of 48 Pages
(a) Any failure or neglect to comply with, or breach of, any
of the terms, provisions, warranties or covenants of
this Agreement, or any other agreement or commitment
between Debtor or any guarantor of any of the
Indebtedness ("guarantor") and Bank; or
(b) Any failure to pay the Indebtedness when due, or such
portion of it as may be due, by acceleration or
otherwise; or
(c) Any warranty, representation, financial statement or
other information made, given or furnished to Bank by or
on behalf of Debtor or any guarantor shall be, or shall
prove to have been, false or materially misleading when
made, given, or furnished; or
(d) Any loss, theft, substantial damage or destruction to or
of any of the Collateral, or the issuance or filing of
any attachment, levy, garnishment or the commencement of
any proceeding in connection with any of the Collateral
or of any other judicial process of, upon or in respect
of Debtor or any guarantor or any of the Collateral; or
(e) Sale or other disposition by Debtor or guarantor of any
substantial portion of its assets or property or
voluntary suspension of the transaction of business by
Debtor or any guarantor, or death, dissolution,
termination of existence, merger, consolidation,
insolvency, business failure or assignment for the
benefit of creditors of or by Debtor or any guarantor;
or commencement of any proceedings under any state or
federal bankruptcy or insolvency laws or laws for the
relief of debtors by or against Debtor or any guarantor;
or the appointment of a receiver, trustee, court
appointee, sequestrator or otherwise, for all or any
part of the property of Debtor or any guarantor; or
(f) Any termination or notice of termination of any guaranty
of collection or payment of, or any breach, termination
or notice of termination of any subordination agreement,
pledge, or collateral assignment relating to, all or any
part of the Indebtedness; or
(g) Any failure by Debtor or any guarantor to pay when due
any of its indebtedness (other than to Bank) or in the
observance or performance of any term, covenant or
condition in any agreement evidencing, securing or
relating to that indebtedness; or
<PAGE>
Page 38 of 48 Pages
(h) Bank deems the margin of Collateral insufficient or
itself insecure, in good faith believing that the
prospect of payment of the Indebtedness or performance
of this Agreement is impaired or shall fear
deterioration, removal or waste of the Collateral.
4.2 Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Debtor declare any or all
of the Indebtedness to be immediately due and payable, and shall
have and may exercise any one or more of the following rights
and remedies:
(a) exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured parties
under the provisions of the Uniform Commercial Code and
other applicable law;
(b) institute legal proceedings to foreclose upon and
against the lien and security interest granted by this
Agreement, to recover judgment for all amounts then due
and owing as Indebtedness, and to collect the same out
of any of the Collateral or the proceeds of any sale of
it;
(c) institute legal proceedings for the sale, under the
judgment or decree of any court of competent
jurisdiction, of any or all of the Collateral; and/or
(d) personally or by agents, attorneys, or appointment of a
receiver, enter upon any premises where the Collateral
or any part of it may then be located, and take
possession of all or any part of it and/or render it
unusable; and without being responsible for loss or
damage to such Collateral,
(i) hold, store, and keep idle, or lease, operate,
remove or otherwise use or permit the use of the
Collateral or any part of it, for that time and
upon those terms as Bank, in its sole discretion,
deems to be in its own best interest, and
demand, collect and retain all resulting earnings
and other sums due and to become due from any
party, accounting only for net earnings, if any
(unless the Collateral is retained in
satisfaction of the Indebtedness, in which case
no accounting will be necessary), arising from
that use (which net earnings may be applied
against the Indebtedness) and charging against
all receipts from the use of the Collateral or
<PAGE>
Page 39 of 48 Pages
from its sale, by court proceedings or pursuant
to subsection (ii) below, all other costs,
expenses, charges, damages and other losses
resulting from that use; and/or
(ii) sell, lease, dispose of, or cause to be sold,
leased or disposed of, all or any part of the
Collateral at one or more public or private
sales, leasings or other dispositions, at
places and times and on terms and conditions as
Bank may deem fit, without any previous demand or
advertisement; and except as provided in this
Agreement, all notice of sale, lease or other
disposition, and advertisement, and other
notice or demand, any right or equity of
redemption, and any obligation of a prospective
purchaser or lessee to inquire as to the power
and authority of Bank to sell, lease or otherwise
dispose of the Collateral or as to the
application by Bank of the proceeds of sale or
otherwise, which would otherwise be required by,
or available to Debtor under, applicable law are
expressly waived by Debtor to the fullest extent
permitted.
At any sale pursuant to this Section 4.2, whether under
the power of sale, by virtue of judicial proceedings or
otherwise, it shall not be necessary for Bank or a
public officer under order of a court to have present
physical or constructive possession of the Collateral
to be sold. The recitals contained in any conveyances
and receipts made and given by Bank or the public
officer to any purchaser at any sale made pursuant to
this Agreement shall, to the extent permitted by
applicable law, conclusively establish the truth and
accuracy of the matters stated (including, without
limit, as to the amounts of the principal of and
interest on the Indebtedness, the accrual and nonpayment
of it and advertisement and conduct of the sale); and
all prerequisites to the sale shall be presumed to have
been satisfied and performed. Upon any sale of any of
the Collateral, the receipt of the officer making the
sale under judicial proceedings or of Bank shall be
sufficient discharge to the purchaser for the purchase
money, and the purchaser shall not be obligated to see
to the application of the money. Any sale of any
of the Collateral under this Agreement shall be a
perpetual bar against Debtor with respect to that
Collateral.
4.3 Debtor shall (at any time) at the request of Bank, notify the obligors
of the security interest of Bank in any Collateral and direct payment
<PAGE>
Page 40 of 48 Pages
of it to Bank. Bank may, itself, upon the occurrence of any Event of
Default so notify and direct any obligor and may take control of any
proceeds to which it may be entitled under this Agreement.
4.4 The proceeds of any sale or other disposition of Collateral authorized
by this Agreement shall be applied by Bank first upon all expenses
authorized by the Uniform Commercial Code and all reasonable attorney
fees and legal expenses incurred by Bank; the balance of the proceeds
of the sale or other disposition shall be applied in the payment of the
Indebtedness, first to interest, then to principal, then to remaining
Indebtedness and the surplus, if any, shall be paid over to Debtor or
to such other person(s) as may be entitled to it under applicable law.
Debtor shall remain liable for any deficiency, which it shall pay to
Bank immediately upon demand.
4.5 Nothing in this Agreement is intended, nor shall it be construed, to
preclude Bank from pursuing any other remedy provided by law for the
collection of any or all of the Indebtedness or for the recovery of any
other sum to which Bank may be or become entitled for the breach of
this Agreement by Debtor. Nothing in this Agreement shall reduce or
release in any way any rights or security interests of Bank contained
in any existing agreement between Debtor and Bank, nor shall
anything in this Agreement modify the terms of any Indebtedness owing
to Bank on a demand basis.
4.6 No waiver of default or consent to any act by Debtor shall be effective
unless in writing and signed by an authorized officer of Bank. No
waiver of any default or forbearance on the part of Bank in enforcing
any of its rights under this Agreement shall operate as a waiver of any
other default or of the same default on a future occasion or of any
rights.
4.7 Debtor irrevocably appoints Bank or any employee or agent of Bank
(which appointment is coupled with an interest) the true and lawful
attorney of Debtor (with full power of substitution) in the name, place
and stead of, and at the expense of, Debtor to do any of the following
during a continuation of an Event of Default:
(a) to demand, receive, sue for and give receipts or acquittances
for any moneys due or to become due on any Collateral and to
endorse any item representing any payment on or proceeds of the
Collateral;
(b) with respect to any Collateral, to assent to any or all
extensions or postponements of the time of its payment or any
other indulgence in connection with it, to the substitution,
exchange, or release of Collateral, to the addition or release
<PAGE>
Page 41 of 48 Pages
of any party primarily or secondarily liable, to the acceptance
of partial payments on it and the settlement, compromise or
adjustment of it, all in a manner and at times as Bank shall
deem advisable;
(c) to make all necessary transfers of all or any part of the
Collateral in connection with any sale, lease or other
disposition made pursuant to this Agreement;
(d) to adjust and compromise any insurance loss on the Collateral
and to endorse checks or drafts payable to Debtor in connection
with the insurance;
(e) to execute and deliver for value all necessary or appropriate
bills of sale, assignments and other instruments in connection
with any sale, lease or other disposition of the Collateral.
Debtor ratifies and confirms all that its said attorney (or any
substitute) shall lawfully do under this Agreement.
Nevertheless, if requested by Bank or a purchaser or lessee,
Debtor shall ratify and confirm any sale, lease or other
disposition by executing and delivering to Bank or the purchaser
or lessee all proper bills of sale, assignments, releases,
leases and other instruments as may be designated in any
request; and
(f) to execute and file in the name of and on behalf of Debtor all
financing statements or other filings deemed necessary or
desirable by Bank to evidence, perfect or continue the security
interests granted in this Agreement.
4.8 Upon the occurrence and continuation of an Event of Default, Debtor
also agrees, upon request of Bank, to assemble the Collateral and make
it available to Bank at any place designated by Bank which is
reasonably convenient to Bank and Debtor.
5. Miscellaneous.
5.1 This Agreement shall in all respects be governed by and
construed in accordance with the laws of the State of Michigan.
5.2 This Agreement shall be terminated only by the filing of a
termination statement in accordance with and when required under
the applicable provisions of the Uniform Commercial Code, but
the obligations contained in Section 2.17 of this Agreement
<PAGE>
Page 42 of 48 Pages
shall survive termination. Until terminated, the security
interest created by this Agreement shall continue in full force
and effect and shall secure and be applicable to all advances
now or later made by Bank to Debtor, whether or not Debtor is
indebted to Bank immediately prior to the time of any advance,
and to all other Indebtedness.
5.3 Notwithstanding any prior revocation, termination, surrender or
discharge of this Agreement, the effectiveness of this Agreement
shall automatically continue or be reinstated, as the case may
be, in the event that (a) any payment received or credit given
by the Bank in respect of the Indebtedness is returned,
disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion of trust funds, or otherwise
under any applicable state or federal law, including, without
limitation, laws pertaining to bankruptcy or insolvency, in
which case this Agreement shall be enforceable against Debtor as
if the returned, disgorged or rescinded payment or credit had
not been received or given, whether or not the Bank relied upon
this payment or credit or changed its position as a consequence
of it; or (b) any liability is imposed, or sought to be imposed,
against the Bank relating to the environmental condition of, or
the presence of Hazardous Materials on, in or about, any
Property given as Collateral to the Bank whether this condition
is known or unknown, now exists or subsequently arises
(excluding only conditions which arise after any acquisition by
the Bank of any such Property, by foreclosure, in lieu
of foreclosure or otherwise, to the extent due to the wrongful
act or omission of the Bank), in which case this Agreement shall
be enforceable to the extent of all liability, costs and
expenses (including without limit reasonable attorney fees)
incurred by the Bank as the direct or indirect result of any
environmental condition or Hazardous Materials. In the
event of continuation or reinstatement of this Agreement, Debtor
agree(s) upon demand by the Bank to execute and deliver to the
Bank those documents which the Bank determines are appropriate
to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of Debtor to
do so shall not affect in any way the reinstatement or
continuation. If Debtor does not execute and deliver to
the Bank upon demand such documents, the Bank and each Bank
officer is irrevocably appointed (which appointment is coupled
with an interest) the true and lawful attorney of Debtor (with
full power of substitution) to execute and deliver such
documents in the name and on behalf of Debtor.
5.4 This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors
and assigns and to any other holder who derives from Bank title
<PAGE>
Page 43 of 48 Pages
to or an interest in the Indebtedness or any portion of it, and
shall bind Debtor and the heirs, legal representatives,
successors and assigns of Debtor.
5.5 It there is more than one Debtor, all undertakings, warranties
and covenants made by Debtor and all rights, powers and
authorities given to or conferred upon Bank are made or given
jointly and severally.
5.6 In addition to Bank's other rights, any indebtedness owing from
Bank to Debtor can be set off and applied by Bank on any
Indebtedness at any time(s) either before or after maturity or
demand without notice to anyone.
5.7 Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Debtor of any action to be taken under this
Agreement, Debtor agrees that a written notice given to it at
least five days before the date of the act shall be reasonable
notice of the act and, specifically, reasonable notification of
the time and place of any public sale or of the time after which
any private sale, lease or other disposition is to be made,
unless a shorter notice period is reasonable under the
circumstances. A notice shall be deemed to be given under this
Agreement when delivered to Debtor or when placed in an envelope
addressed to Debtor and deposited, with postage prepaid, in a
post office or official depository under the exclusive care and
custody of the United States Postal Service. The mailing shall
be registered, certified, or first class mail.
5.9 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in any filing office.
5.10 No single or partial exercise, or delay in the exercise, of any
right or power under this Agreement, shall preclude other or
further exercise of the rights and powers under this Agreement.
5.11 The unenforceability of any provision of this Agreement shall
not affect the enforceability of the remainder of this
Agreement.
5.12 No waiver, consent, modification or change of the terms of this
Agreement shall bind the Debtor or the Bank unless in writing
and signed by the waiving party or an authorized officer of the
<PAGE>
Page 44 of 48 Pages
waiving party, and then this waiver, consent, modification or
change shall be effective only in the specific instance and for
the specific purpose given.
5.13 This Agreement constitutes the entire agreement of Debtor and
Bank with respect to the subject matter of this Agreement.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate payment
of any or all of that Indebtedness at any time(s), whether or
not an Event of Default has occurred.
6. Statement of Business Name, Residence and Location of Collateral.
Debtor warrants, covenants and agrees as follows:
6.1 Debtor's chief executive office is located in the County of
_______________________.
6.2 [Reserved]
6.3 Any other place of business and/or residence of Debtor are
indicated
below:______________________________________________________
____________________________________________________________
____________________________________________________________
_________________.
6.4 Debtor's correct legal name is set forth at the end of this
Agreement. During the past five years, Debtor has not conducted
business under any other name except as set forth in any
appropriately labeled schedule attached to this Agreement.
6.5 Until Bank is advised in writing by Debtor to the contrary, all
notices, requests and demands required under this Agreement or
by law shall be given to, or made upon, Debtor at the address
indicated in Section 6.2 above.
6.6 The Collateral (or any records concerning the Collateral) will
be kept at Debtor's address(es) above and/or in the County
of________________________.
<PAGE>
Page 45 of 48 Pages
Mailing
Address:_________________________________________________________.
No. and Street City State Zip Code
6.7 Debtor will give Bank not less than ninety (90) days' prior
written notice of all contemplated changes in Debtor's name,
identity, corporate structure, and/or any of the above
addresses, but the giving of this notice shall not cure any
default caused by this change.
7. JURY WAIVER.
7.1 DEBTOR AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF,
OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
8. SPECIAL PROVISIONS APPLICABLE TO THIS AGREEMENT.
If on the last day of any of Debtor's fiscal quarters the value of the
Collateral (excluding the money market investment account identified on Exhibit
"A" attached hereto) as determined by Bank in its sole but reasonable
discretion shall be less than ninety percent (90%) of the Collateral Value
Requirement, Debtor shall upon ten (10) days' prior written notice from Bank
provide or cause to be provided to Bank additional marketable securities
acceptable to Bank as collateral security for the Indebtedness having a value,
as determined by Bank in its sole but reasonable discretion, that when
added to the Collateral (excluding the money market investment account
identified on Exhibit "A" attached hereto) shall not be less than ninety
percent (90%) of the Collateral Value Requirement.
"Collateral Value Requirement" initially shall mean $2,000,000. Upon
Bank's receipt of each Ranger Payment (as defined in that certain letter
agreement dated December __, 1995 by and between Debtor and Bank, as the same
may be amended from time to time ("Letter Agreement")), the Collateral Value
Requirement shall be reduced by amount equal to amount of the Collateral Value
Requirement immediately prior to the receipt of the Ranger Payment times a
<PAGE>
Page 46 of 48 Pages
fraction equal to the corresponding Prepayment Amount (as defined in the Letter
Agreement) divided by the aggregate outstanding principal Indebtedness.
Notwithstanding anything to the contrary set forth herein, so long as
no Event of Default has occurred and is continuing, upon the written request of
Debtor from time to time delivered to Bank not more than five (5) business days
before the last day of any of Debtor's fiscal quarters, Bank shall release from
its lien and security interest granted hereunder that portion of the Collateral
(excluding the money market investment account described on Exhibit "A"
attached hereto) having a value (as of the last day of such fiscal quarter) in
excess of one hundred ten percent (110%) of the Collateral Value Requirement.
Dated and delivered on: INSURANCE HOLDINGS LIMITED PARTNERSHIP, a
Connecticut limited partnership
December 22, 1995
at Detroit, Michigan By: Chase Insurance Corporation
Its: General Partner
By:/s/ John P. Redding
Its: Vice President
<PAGE>
Page 47 of 48 Pages
EXHIBIT "A"
All of the Debtor's right, title and interest, including security
entitlement in
(a) (i) the following securities, stocks, bonds, notes,
instruments, documents of title, and/or other property of Debtor
which are credited to participant account of Bank maintained
with Depository Trust Company and/or on deposit in the brokerage
accounts of the Debtor at Comerica Securities, Inc. including
the account for Debtor, Account No. _____________ (the
"Brokerage Account"); (ii) interest, dividends, increase,
profits, new securities or other increments, distributions or
rights of any kind received on account of this property; (iii)
Debtor's property in possession of Bank; and (iv) all property
substituted therefor or for any part thereof, all records
(including computer software) pertaining thereto and all rights,
products or proceeds thereof (whether cash or non-cash
proceeds) resulting from any sale or exchange or transfer
thereof or arising by virtue of ownership thereof (such as, but
not limited to, the rights to additional or other securities or
property upon any corporate reorganization, merger,
consolidation, liquidation, or dissolution, offering of stock
rights, stock split or stock or liquidating dividend or the
rights to any goods evidenced by such property or insurance
proceeds with respect thereto), and all subscription, voting,
and preferential rights:
335,000 shares of the capital stock of Accel
International; and
20,000 shares of the capital stock of Security
Connecticut Corp.; and
10,500 shares of the capital stock of Bank of Boston;
(b) Money Market Investment Account #_____________
maintained at Bank and all cash, securities and other financial
assets at any time deposited therein;
(c) the Brokerage Account and all cash, securities and other
financial assets at any time deposited therein;
(d) and all monies due or to become due to Debtor under or
in connection with the Consulting Agreement dated January 6,
<PAGE>
Page 48 of 48 Pages
1994 between Debtor and Ranger Insurance Company and all
documents and instruments executed and delivered from time to
time in connection therewith and all collateral security for the
obligations arising under such agreement and under any and all
additions, amendments, supplements or other modifications
thereof, now or hereafter in effect; and
(e) any proceeds of the foregoing.
