<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
- --- Act of 1934 [fee required]
For the fiscal year ended December 31, 1996
---------------------
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 [no fee required]
For the transition period from to .
----------------- ----------------
Commission file number 2-79192.
-------
HAMPSHIRE FUNDING, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW HAMPSHIRE 02-0277842
- -------------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
ONE GRANITE PLACE, CONCORD, NEW HAMPSHIRE 03301
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (603) 226-5000
-----------------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Programs for coordinating the acquisition of mutual fund shares and insurance
- -----------------------------------------------------------------------------
Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and has been subject to such filing requirements
for the past 90 days.
YES X NO
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within 60 days prior to the date of
filing. NONE
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of March 15, 1997: 50,000 shares, all of which are owned by
Chubb Life Insurance Company of America.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
The total number of pages, including exhibits, is 54, and the exhibit index
appears on pages 21 through 22.
<PAGE>
PART I
Item 1 - Description of Business
- --------------------------------
(a) General Development of Business
-------------------------------
Hampshire Funding, Inc. ("the Company") was incorporated in the State of
New Hampshire on December 8, 1969, as a wholly-owned subsidiary of Chubb
Life Insurance Company of America ("CLA" or the "Parent" Corporation). The
Company became a wholly-owned subsidiary of The Chubb Corporation on
December 21, 1971, when CLA sold all the outstanding stock of the Company.
On April 1, 1981, the Company's common stock was transferred by
contribution to Chubb Life Insurance Company of New Hampshire ("CLNH"). On
July 1, 1991, CLNH and CLA merged with and into The Volunteer State Life
Insurance Company, which on the same date re-domesticated from Tennessee
to New Hampshire and changed its name to Chubb Life Insurance Company of
America (the "Parent Corporation"). As a result of said merger, all of the
common stock of the company is owned by the Parent Corporation. In
addition, the Company owns 100% of the outstanding shares of Hampshire
Syndications, Inc., incorporated in New Hampshire on October 9, 1986.
On February 24, 1997, The Chubb Corporation announced that it had signed a
definitive agreement to sell the Parent Corporation and its subsidiaries
to Jefferson-Pilot Corporation subject to regulatory approvals.
The Company, in affiliation with the Parent Corporation, Chubb Colonial
Life Insurance Company ("Colonial"), Chubb Sovereign Life Insurance
Company ("Chubb Sovereign") (collectively "Insurance Companies") and Chubb
Securities Corporation (the "Broker-Dealer"), a member of the National
Association of Securities Dealers, Inc. ("NASD"), is primarily engaged in
the offering and administration of programs which coordinate the
acquisition of mutual fund shares and life or health insurance (the
"Programs"). The Programs are intended, in part, to augment the sales
activities of the Broker-Dealer and the Insurance Companies.
(b) Financial Information About Industry Segments
---------------------------------------------
Revenues, operating profit and loss, and identifiable assets for the three
years ended December 31, 1996, are included in Item 6 - Selected Financial
Data and Item 8 - Financial Statements and Supplementary Data.
(c) Narrative Description of Business
---------------------------------
The Company offers and administers Programs which involve initial and
periodic cash purchases of mutual fund shares. Under the Programs,
purchasers of a Program ("Participants") make initial and periodic
purchases of mutual fund shares for cash with automatic reinvestment of
all distributions. Participants obtain insurance coverage through a series
of insurance premium loans offered by the Company. Loans to Participants
are secured by Participants' initial and periodic purchases of mutual fund
shares. The mutual fund shares are registered in the Company's name as
Custodian for Participants.
The objective of a Program is the utilization of the appreciation, if any,
in the value of the mutual fund shares and any dividends or capital gains
distributions thereon to aid in offsetting the principal and accumulated
interest on the loans.
The Programs are offered for sale by those agents of the Insurance
Companies who qualify as registered representatives, through the Broker-
Dealer, under the regulations of the NASD.
2 of 54
<PAGE>
Revenues derived from Participant Programs include loan interest and fees.
For the years ended December 31, 1996, 1995 and 1994 such revenues were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest on Loans $4,412,729 $3,899,087 $3,094,809
Program Fees 484,906 456,556 464,851
</TABLE>
Regulation
----------
The Company is authorized to offer Programs using insurance policies
offered by the Insurance Companies. Insurance available for purchase in
connection with a Program may vary from state to state, depending on
whether the Parent Corporation, Colonial or Chubb Sovereign is licensed to
sell insurance in a particular jurisdiction, and whether a jurisdiction in
which one of the Insurance Companies is licensed has approved the sale of
a particular insurance product.
Each Insurance Company offers several types of policies within the
Program. The Insurance Companies are subject to the regulations of the
insurance department of each state in which they are licensed to do
business. In addition, the Parent Corporation, through Chubb Separate
Account A, offers for sale a variable universal life insurance policy,
which is subject to regulation by the Securities and Exchange Commission.
Policies, including the variable universal life insurance product, issued
under the Program may not be identical in each state or jurisdiction.
Regulations that determine the types of policies and their provisions may
differ in each state. As a result, the Insurance Companies have internal
procedures designed to ensure that only approved policies are issued in
each state.
The Company has filed a Registration Statement under the Securities Act of
1933, as amended, with the Securities and Exchange Commission. The Company
is also subject to supervision by the Commissioners of Securities of the
jurisdictions in which the Company is authorized to offer the Programs for
sale.
The insurance agents who sell the Programs are subject to the oversight
and regulation of the insurance department of each jurisdiction where they
are licensed. In addition, only those agents who are registered
representatives of the Broker-Dealer may sell Programs; thus the insurance
agents are also subject to supervision and regulation of the NASD and
securities department of each jurisdiction where they are licensed.
Dependence Upon a Single or a Few Customers
-------------------------------------------
The Company is not dependent upon a single or a few customers. The loss of
one or a few customers would not have a material adverse effect on the
business of the Company.
Competition
-----------
The Company faces limited competition in the sale of Programs, as the
number of companies offering plans similar to the Programs is quite small.
Historically, a large number of companies offered programs combining the
purchase of insurance and mutual fund shares; however, in recent years the
number of companies has reduced dramatically.
The business of the Insurance Companies is highly competitive. The
Insurance Companies compete on a nationwide basis with a large number of
insurance companies, and also compete with other financial service
companies in the area of equities, retirement planning and financial
planning. Finally, there has been a recent trend of greater involvement by
banks and thrifts in the insurance industry. Competition is based upon
cost of insurance, client service, performance of the cash value component
of whole life insurance, and agent loyalty to a company.
3 of 54
<PAGE>
Employees
---------
The Company has no paid employees. Chubb America Service Corporation (the
"Service Company"), a wholly-owned subsidiary of the Parent Corporation,
is a management service company organized and operated to provide employee
and office services, as well as certain operating assets, to the Company
and its affiliates. The Service Company employs all of the personnel who
perform business functions for the Company. The Service Company believes
that its relationship with employees is good.
(d) Financial Information About Foreign and Domestic Operations and Export
----------------------------------------------------------------------
Sales
-----
All sales and operations of the Company are conducted within the United
States.
Item 2 - Properties
- -------------------
The Company does not own or lease any real property. The Company occupies a
portion of the home office of the Parent Corporation located at One Granite
Place, Concord, New Hampshire. The use by the Company of such facilities and
the equipment and furnishings owned by the Service Company, the Parent
Corporation, or any of the other Insurance Companies is subject to a pro-rata
allocation of expenses.
Item 3 - Legal Proceedings
- --------------------------
The Company may become involved from time to time with legal proceedings arising
out of the ordinary course of its business. For the year ended December 31,
1996, the Company was not involved in any legal proceedings.
Item 4 - Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not Applicable.
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<PAGE>
PART II
Item 5 - Market for Registrant's Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------------------
(a) Holders
-------
Not publicly traded.
(b) Market Information
------------------
1 (See Item 12, Security Ownership of Certain Beneficial Owners and
Management.)
(c) Dividends
---------
The Company has not authorized or paid any dividends since inception.
There are no restrictions presently known on the Company's ability to
pay dividends except for general New Hampshire corporate laws relating
to earnings.
Item 6 - Selected Financial Data
- --------------------------------
<TABLE>
<CAPTION>
Selected Statement of Operations
Data: Year Ended December 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Revenue $ 4,957,607 $ 4,435,676 $ 3,590,273 $ 3,004,114 $ 2,699,890
========== ========== ========== ========== ==========
Net Income $ 314,298 $ 232,354 $ 458,294 $ 514,505 $ 330,545
========== ========== ========== ========== ==========
Dividends Per Common Share $ -- $ -- $ -- $ -- $ --
========== ========== ========== ========== ==========
Selected Balance Sheet Data:
December 31, 1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Total Assets $54,763,977 $47,376,608 $42,241,816 $33,773,719 $27,905,714
========== ========== ========== ========== ==========
Loans Payable $50,851,618 $43,899,673 $38,889,535 $30,924,833 $25,382,406
========== ========== ========== ========== ==========
</TABLE>
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<PAGE>
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
Liquidity and Capital Resources
- -------------------------------
The Company offers investment programs (the "Programs") which coordinate the
acquisition of mutual fund shares and insurance over a period of ten years.
Under the Programs, purchasers of a Program ("Participants") purchase life and
health insurance from affiliated insurance companies (the "Insurance Companies")
and finance the premiums through a series of loans secured by mutual fund
shares. Upon issuance of a policy by an Insurance Company, the Company makes a
loan to the Participant in an amount equal to the selected premium mode. As each
premium becomes due, if not paid in cash, a new loan equal to the next premium
and administrative fee is made and added to the Participant's account
indebtedness ("Account Indebtedness"). Thus, interest, as well as principal, is
borrowed and mutual fund shares are pledged as collateral. Each loan made by the
Company must initially be secured by mutual fund shares which have a value of at
least 250% of the loan, except for the initial premium loan of Programs using
certain no-load funds, where the collateral requirement is 1800%. In addition,
the aggregate value of all mutual fund shares pledged as collateral must be at
least 150% of the Participant's total Account Indebtedness. If the value of the
shares pledged to the Company declines below 130% of the Company's indebtedness,
the Company will terminate the Programs and liquidate shares sufficient to repay
the indebtedness.
Collateral loans receivable from Participants were $52,979,267 (including
accrued interest of $1,365,191) at December 31, 1996. Annual amounts due to the
Company were as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002-2006
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Collateral loans receivable $3.4 $2.9 $4.1 $6.6 $9.2 $26.8
(in millions)
</TABLE>
The Company's funds for financing the Programs are currently obtained through a
Revolving Credit Agreement with a non-affiliated bank, SunTrust Bank of Atlanta,
Georgia ("SunTrust"). The Company entered into this Revolving Credit Agreement
on October 23, 1996 which provides for advances up to $60,000,000 and expires on
October 22, 2001. The Revolving Credit Agreement contains restrictions on equity
and indebtedness with other non-affiliates. All indebtedness and obligations of
the Company under the Revolving Credit Agreement, are guaranteed by Chubb Life.
The Revolving Credit Agreement with SunTrust replaced the Company's loan
agreements with its affiliates, Chubb Life and Colonial, which provided for
advances not to exceed $20,000,000 and $29,000,000, respectively. As all
advances under affiliated loan agreements became due during October and November
of 1996, the Company borrowed amounts under the new Revolving Credit Agreement
with SunTrust and paid Chubb Life and Colonial the outstanding principal and
interest. At December 31, 1996, the Company had no loans outstanding to
affiliates. The interest rate on advances made under the SunTrust Revolving
Credit Agreement is variable and based on short-term interest rates.
The continuance of the Program is dependent upon the Company's ability to
provide, or arrange for the financing of insurance premiums for Participants.
Prior to its Revolving Credit Agreement with SunTrust, such financing was
available from its affiliates, Colonial and Chubb Life. The Company expects that
it will be able to obtain this financing for the foreseeable future from non-
affiliates or affiliates.
If the Company is unable to borrow funds in the future or continue to borrow
funds under its credit agreement for the purpose of financing loans to
Participants for the payment of insurance premiums, it may not be able to
continue the sale of the Programs.
Although the Company's present financing arrangement with its lender does not
include the assignment of a Participant's mutual fund shares to the lender as
security, the Company is authorized to assign a Participant's mutual fund shares
to a lender as collateral security for the Company's indebtedness pursuant to
any financing arrangements. If any such assignment takes place and the Company
subsequently defaults on an obligation for which the Participant's mutual fund
shares have been pledged as security, the mutual fund shares may be redeemed by
the lender to whom the obligation is owed. A lender may cease to provide
financing if the Company is in default under its credit agreement. In this case,
Programs will be terminated on their renewal dates.
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<PAGE>
At December 31, 1996 the Company had borrowed $50,500,000 under its Credit
Agreement with SunTrust. At December 31, 1995 the Company had borrowed
$44,200,000 ($26,000,000 under its loan agreement with Colonial and $18,200,000
under its loan agreement with Chubb Life). The increase in amounts borrowed by
the Company year to year was used to fund additional premium loans.
In addition to loans payable, the Company has other short-term amounts due to
affiliates related to insurance premium payments and expense reimbursements to
the Service Company.
The Service Company, a wholly-owned subsidiary of the Parent Corporation, is a
management service company which provides employee services and office
facilities to the Company and its affiliates under a Service Agreement. The
Company pays the Service Company a monthly fee in accordance with mutually
agreed upon cost allocation methods which the Companies believe reflect a
proportional allocation of common expenses and are commensurate for the
performance of the applicable duties.
Working capital in 1996 and 1995 was provided by Participants' loan repayments,
administrative fees for the placement and maintenance of Programs and interest
earned on investments.
Loan schedule as of December 31, 1996:
<TABLE>
<CAPTION>
Loan Face Days to Maturity
Source Date (mils) Rate Maturity Date
- ------ ---- ------ ---- -------- --------
<S> <C> <C> <C> <C> <C>
SunTrust 10/23/96 10.5 5.78% 180 04/21/97
10/28/96 13.0 5.68% 91 01/27/97
10/30/96 2.3 5.68% 90 01/28/97
11/08/96 23.7 5.65% 90 02/06/97
12/27/96 1.0 5.74% 90 03/27/97
----
$50.5
</TABLE>
Results of Operations
- ---------------------
The Company concluded the year ended December 31, 1996 with net operating income
of $314,298 as compared to net operating income of $232,354 in 1995, and
$458,294 in 1994.
Total revenues through December 31, 1996 were $4,957,607 versus $4,435,676 in
1995, and $3,590,273 in 1994. These revenues include interest on collateral
loans receivable, program fees, interest on investments and partnership income.
The largest source of revenue was represented by interest on collateral loans
receivable.
The growth in collateral loan interest resulted from the increase in collateral
loans receivable year to year. Collateral loans receivable as of December 31,
1996 were $52,979,267 as compared to $47,059,897 in 1995, and $40,805,159 in
1994. Comparatively, collateral loan interest was $4,412,729, $3,899,087 and
$3,094,809 for the years ended December 31, 1996, 1995 and 1994. The average
interest rate charged to each Participant's outstanding loan balance was 8.95%,
9.22% and 8.65% for the years 1996, 1995 and 1994, respectively.
The Company's collateral loans receivable, collateral loan interest and average
interest rate charged to each Participant's loan balance for the three years
ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Collateral loans receivable $52,979,267 $47,059,897 $40,805,159
Collateral loan interest $ 4,412,729 $ 3,899,087 $ 3,094,809
Average Participant interest rate 8.95% 9.22% 8.65%
</TABLE>
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<PAGE>
Interest expense on the Loan Agreements increased each year since 1994 due to
changes in interest rates and amounts borrowed by the Company. The Company's
outstanding loans payable, interest expense and average cost of borrowings for
the three years ended December 31 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Loans payable $50,851,618 $43,899,673 $38,889,535
Interest expense $ 2,957,224 $ 2,730,924 $ 1,516,229
Average loan interest rate 6.40% 6.70% 4.60%
</TABLE>
The Company's ability to achieve and maintain a spread between its cost of funds
necessary to finance premium loans and the lending rate charged to Program
Participants may impact its future operating results. The interest rate spread
is intended to provide sufficient revenue to offset the Company's general and
administrative expenses. General and administrative expenses (including state
taxes), arising from normal operating activities through December 31, 1996, were
$1,516,065 as compared to $1,347,286 in 1995, and $1,308,976 in 1994.
The Company may increase the interest rate charged to Participants to a maximum
of the prime interest rate plus 3% as its cost of borrowing increases. If the
Company's cost of borrowing were to rise significantly above the prime interest
rate, its ability to maintain an adequate interest rate spread would be
difficult and future earnings could be adversely impacted.
Program fees include placement, administrative and termination fees as well as
charges for special services. For the years ended December 31, 1996, 1995 and
1994 the number of Programs administered by the Company were 6,131, 6,521 and
6,662, respectively.
Investment income earned by the Company declined in 1996 as compared to 1995 due
to a decrease in investment returns on cash equivalents held during 1996.
8 of 54
<PAGE>
Item 8 - Financial Statements and Supplementary Data
- ----------------------------------------------------
The financial statements included herein are listed in the following index.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page References
---------------
<S> <C>
Report of Independent Auditors 10
Consolidated Balance Sheets at December 31, 1996 and 1995 11
Consolidated Statements of Income and Retained Earnings
for each of the three years in the period ended December 31, 1996 12
Consolidated Statements of Cash Flows for the each of the three years
in the period ended December 31, 1996 13
Notes to Consolidated Financial Statements 14
</TABLE>
All schedules have been omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements, and
the notes thereto.
9 of 54
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Hampshire Funding, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Hampshire
Funding, Inc. and Subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income and retained earnings, and cash flows for each
of the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Hampshire Funding,
Inc. and Subsidiary at December 31, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the financial statements, in 1994 the Company changed
its method of accounting for postemployment benefits.
Ernst & Young LLP
Boston, Massachusetts
January 30, 1997,
except for Note 7, as to which the date is
February 24, 1997
10 of 54
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31
1996 1995
--------------------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 1,771,795 $ 289,918
Accounts receivable from customers 12,915 26,793
--------------------------
Total current assets 1,784,710 316,711
Collateral notes receivable (including accrued
interest of $1,365,191 in 1996 and $1,207,853
in 1995) 52,979,267 47,059,897
--------------------------
Total assets $54,763,977 $47,376,608
==========================
Liabilities and stockholder's equity
Liabilities:
Due to affiliates $ 1,397,478 $ 1,133,593
Accrued expenses and other liabilities 120,473 263,232
--------------------------
Total current liabilities 1,517,951 1,396,825
Loans payable (including accrued interest of
$351,618 in 1996 and net of prepaid interest
of $300,327 in 1995) 50,851,618 43,899,673
--------------------------
Total liabilities 52,369,569 45,296,498
--------------------------
Stockholder's equity:
Common stock, par value $1 per share; authorized
100,000 shares; issued and outstanding 50,000
shares 50,000 50,000
Additional paid-in capital 550,000 550,000
Retained earnings 1,794,408 1,480,110
--------------------------
Total stockholder's equity 2,394,408 2,080,110
--------------------------
Total liabilities and stockholder's equity $54,763,977 $47,376,608
==========================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Income and Retained Earnings
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
--------------------------------------
<S> <C> <C> <C>
Revenues:
Interest on collateral notes receivable $4,412,729 $3,899,087 $3,094,809
Program participant fees 484,906 456,556 464,851
Interest on investments 59,972 74,648 30,613
Partnership syndication fees 5,385
--------------------------------------
4,957,607 4,435,676 3,590,273
Operating expenses:
Interest on loan agreements 2,957,224 2,730,924 1,516,229
General and administrative 1,464,569 1,299,523 1,260,818
Realized loss on investments 60,000
--------------------------------------
4,421,793 4,030,447 2,837,047
--------------------------------------
Income before income taxes 535,814 405,229 753,226
Federal and state income tax (benefit):
Federal--Current 170,020 125,112 257,593
Federal--Deferred (10,819)
State tax 51,496 47,763 48,158
--------------------------------------
221,516 172,875 294,932
--------------------------------------
Net income 314,298 232,354 458,294
Retained earnings at
beginning of year 1,480,110 1,247,756 789,462
--------------------------------------
Retained earnings at end of year $1,794,408 $1,480,110 $1,247,756
======================================
</TABLE>
See accompanying notes.
12 of 54
<PAGE>
Hampshire Funding, Inc. and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
---------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 314,298 $ 232,354 $ 458,294
Adjustments to reconcile net income to net
cash used in operating activities:
(Increase) decrease in accounts
receivable from customers 13,878 20,422 (9,535)
Decrease in accrued expenses and other
liabilities (142,759) (53,018) (57,749)
Increase in due to affiliates 263,885 23,361 24,807
Increase in collateral notes receivable (5,919,370) (6,254,738) (7,456,787)
Change in prepaid interest and interest
accrued on loan agreements 651,945 310,138 (235,298)
----------------------------------------------------
Net cash used in operating activities (4,818,123) (5,721,481) (7,276,268)
Investing activity
Write off of limited partnership investment 60,000
Financing activities
Proceeds from non-affiliated loan agreement 50,500,000
Proceeds from affiliated loan agreements 86,500,000 69,025,000 73,400,000
Principal payments on affiliated
loan agreements (130,700,000) (64,325,000) (65,200,000)
----------------------------------------------------
Net cash provided by financing activities 6,300,000 4,700,000 8,200,000
----------------------------------------------------
Increase (decrease) in cash and cash
equivalents 1,481,877 (1,021,481) 983,732
Cash and cash equivalents at beginning
of year 289,918 1,311,399 327,667
----------------------------------------------------
Cash and cash equivalents at end of year $ 1,771,795 $ 289,918 $ 1,311,399
====================================================
</TABLE>
See accompanying notes.
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<PAGE>
Hampshire Funding, Inc. and Subsidiary
Notes to Consolidated Financial Statements
December 31, 1996
1. Summary of Significant Accounting Policies
------------------------------------------
Principles of Consolidation
- ----------------------------
The accompanying consolidated financial statements include the accounts of
Hampshire Funding, Inc. (Hampshire) and its wholly-owned subsidiary, Hampshire
Syndications, Inc. Hampshire is a wholly-owned subsidiary of Chubb Life
Insurance Company of America (Chubb Life). Affiliates of Chubb Life include
Chubb Colonial Life Insurance Company (Colonial), Chubb Sovereign Life Insurance
Company (Chubb Sovereign), Chubb America Service Corporation (CASC), Chubb
Investment Advisory Corporation and Chubb Securities Corporation (Chubb
Securities), which are all 100% owned by Chubb Life. Chubb Life is 100% owned by
The Chubb Corporation (Chubb).
The preparation of financial statements in conformity with generally accepted
accounting principles requires Hampshire's management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Nature of Operations and Transactions with Affiliates
- -----------------------------------------------------
Hampshire offers and administers Programs whereby Participants obtain life
insurance coverage solely from Chubb Life, Chubb Colonial and Chubb Sovereign.
Under the Programs, insurance premiums are paid by Participants through a series
of loans from Hampshire which are recorded as "collateral notes receivable."
Loans to the Participants are secured by Participants' ownership in shares of
regulated investment companies. The loans to Participants were funded
substantially with the proceeds from loan arrangements with Chubb Colonial and
Chubb Life. During 1996, Hampshire's loan agreements with Chubb Colonial and
Chubb Life were replaced with a loan agreement with a non-affiliate. Hampshire
borrowed amounts under its new loan agreement and repaid all principal and
interest owed to affiliates (see Note 6). Chubb Securities is a registered
broker-dealer that buys and sells the shares for Participants. The fair value of
a Participant's secured investment company shares must exceed 150% of the total
loan balance plus accrued interest (Participant's Total Account Indebtedness).
If the value of the shares pledged as collateral to Hampshire declines below
130% of the Participant's Total Account Indebtedness, Hampshire will terminate
the Program and liquidate shares sufficient to repay the indebtedness. All
Programs are ten years in length. Upon Program conclusion, loan balances and
accrued interest become due.
14 of 54
<PAGE>
1. Summary of Significant Accounting Policies (continued)
------------------------------------------------------
Nature of Operations and Transactions with Affiliates (continued)
- ------------------------------------------------------------------
Collateral loans receivable from Participants were $52,979,267 (including
accrued interest of $1,365,191) at December 31, 1996. Annual amounts due to
Hampshire under collateral notes receivable were as follows:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002-2006
---- ---- ---- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
Collateral loans receivable
(in millions) $3.4 $2.9 $4.1 $6.6 $9.2 $26.8
</TABLE>
Substantially all general and administrative expenses are allocated to Hampshire
by CASC in accordance with mutually agreed upon cost allocation methods that
Hampshire and CASC believe reflect a proportional allocation of common expenses
and which are commensurate for the performance of the applicable duties.
Recognition of Revenues and Expenses
- ------------------------------------
Interest on collateral notes receivable and administrative fees charged to
Participants for establishing and maintaining Programs are recognized as revenue
when earned. Partnership syndication fees represent fees earned by Hampshire
Syndications, Inc. as a participating general partner of certain limited
partnerships. No syndication fees were earned in either 1996 or 1994; $5,385 was
earned in 1995.
Cash Equivalents
- ----------------
Cash equivalents include cash invested in securities purchased under repurchase
agreements and short-term corporate notes, all of which have remaining
maturities of three months or less at the date of purchase.
On December 20, 1996, Hampshire entered into a reverse repurchase agreement with
Fleet Bank (Bank) in the amount of $208,000. The agreement matures on
January 24, 1997. This reverse repurchase agreement is included in cash
equivalents in the accompanying consolidated balance sheet. Hampshire requires
that the market value of the underlying securities provided as collateral for
repurchase agreements be a minimum of 100% of their contractual resale price to
the Bank.
Short-term corporate notes are carried at cost which approximates market value.
Reclassifications
- -----------------
Certain previously reported amounts have been reclassified to conform with the
1996 presentation.
15 of 54
<PAGE>
2. Change in Accounting Principles
-------------------------------
Effective January 1, 1994, Chubb Life and Hampshire adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". SFAS No. 112 requires that
the expected cost of providing post employment benefits, principally severance,
disability and unemployment benefits, to former or inactive employees, their
beneficiaries and covered dependents be accrued during the years that the
employees render the necessary service. Prior to 1994, the pay as you go, or
cash method was used to recognize the cost of these benefits. The cumulative
effect of this change as of January 1, 1994 and Hampshire's allocated portion of
such costs have been immaterial to Hampshire.
3. Federal Income Taxes
--------------------
The operations of Hampshire are included in the consolidated federal income tax
return of Chubb. Federal income tax is allocated by Chubb Life as if Hampshire
filed a separate income tax return. Deferred tax assets and liabilities are
recognized for the expected future tax effects attributable to temporary
differences between the financial reporting and tax bases of assets and
liabilities, based on enacted tax rates and other provisions of tax law. Federal
income taxes have been provided at the statutory rate of 35% in 1996, 1995 and
1994.
Hampshire made income tax payments to Chubb of $134,982, $59,326 and $336,577 in
1996, 1995 and 1994, respectively.
4. Retirement Benefits
-------------------
Hampshire participates in the Pension Plan for the Employees of Chubb Life and
Participating Affiliates, a defined benefit plan, which covers substantially all
of its employees. Accumulated plan benefits, plan net assets and net periodic
pension costs by component for Hampshire are not determinable. Costs allocated
by Chubb Life to Hampshire during 1996, 1995 and 1994 relative to the Pension
Plan were $18,022, $24,218 and $24,269, respectively.
Certain health and life insurance benefits for all eligible retired employees
are provided by Chubb Life. Benefits are paid as covered expenses are incurred.
Health care coverage is contributory. Retiree contributions vary based upon a
retiree's age, type of coverage and years of service with Hampshire. Life
insurance is noncontributory. The expected cost of providing these
postretirement benefits to employees and their beneficiaries and covered
dependents are being accrued during the years that the employees render the
necessary service.
5. Option and Incentive Plans
--------------------------
As a subsidiary of Chubb, Hampshire and its employees are eligible to
participate in the following option and incentive plans:
The Employee Stock Ownership Plan (ESOP) is funded through semi-annual
contributions in amounts determined at the discretion of Chubb's Boards of
Directors. A portion of Chubb common stock is allocated to eligible
employees as contributions are made by Chubb.
The Capital Accumulation Plan, a savings plan, is funded by employee
contributions. Hampshire makes a matching contribution equal to 100% of each
eligible employee's pre-tax elective contributions, up to 4% of the
employee's compensation. Contributions are invested at the election of the
employee in Chubb's common stock or in various other investment funds.
16 of 54
<PAGE>
Hampshire's proportionate share of costs related to these option and incentive
plans were $41,182, $36,247 and $39,394 for the years ended December 31, 1996,
1995 and 1994, respectively.
Total costs allocated by Chubb Life to Hampshire, during the year presented
relative to the above benefits, have been included in General and Administrative
expenses in the accompanying financial statements.
6. Loan Agreements
---------------
On October 23, 1996, Hampshire entered into a Revolving Loan Agreement with a
non-affiliate, SunTrust Bank of Atlanta, Georgia ("SunTrust"). This revolving
loan agreement provides loan arrangements for advances up to $60,000,000 and
expires on October 22, 2001. The agreement contains restrictions on equity and
indebtedness with other non-affiliates. All indebtedness and obligations of
Hampshire, under the loan agreement, are guaranteed by Chubb Life. The revolving
loan agreement with SunTrust replaced Hampshire's loan agreements with its
affiliates, Chubb Life and Colonial, which provided for advances not to exceed
$20,000,000 and $29,000,000, respectively. As all advances under affiliated loan
agreements became due during October and November of 1996, Hampshire borrowed
amounts under the new loan agreement with SunTrust and paid Chubb Life and
Colonial the outstanding principal and interest. At December 31, 1996, Hampshire
had no loans outstanding to affiliates.
The interest rate on advances made under the SunTrust loan agreement is variable
and based on short-term interest rates. At December 31, 1996, Hampshire had
borrowed $50,500,000 under the agreement at rates that ranged from 5.65% to
5.78%. The interest rates on amounts borrowed from affiliates during 1996 ranged
from 5.05% to 8.95%. At December 31, 1995, Hampshire had borrowed $26,000,000
under it loan agreement with Colonial and $18,200,000 under its loan agreement
with Chubb Life.
Interest paid, including prepayments, on loan agreements was $2,305,279,
$2,420,786 and $1,751,527 in 1996, 1995 and 1994, respectively.
7. Subsequent Event
----------------
On February 24, 1997, The Chubb Corporation announced that it had signed a
definitive agreement to sell Chubb Life and its subsidiaries to Jefferson-Pilot
Corporation. The sale is subject to regulatory approvals.
17 of 54
<PAGE>
Item 9 - Changes in and Disagreements With Accountants on Accounting and
- ------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not Applicable
PART III
Item 10 - Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The following sets forth information relating to Directors and Executive
Officers of the Company as of December 31, 1996.
<TABLE>
<CAPTION>
Name/(1)/ Age Position/(2)/
---- --- --------
<S> <C> <C>
Ronald J. Angarella 37 President, Chairman and Director
Ernest J. Tsouros 63 Director
Frederick H. Condon 61 Director
John A. Weston 37 Treasurer, Principal Financial and
Accounting Officer
Charles C. Cornelio 37 Vice President, General Counsel and Secretary
Carol R. Hardiman 42 Vice President, Administration
Shari J. Lease 42 Assistant Secretary
</TABLE>
Ronald R. Angarella was elected President and Chairman of the Broker Dealer in
October 1995. Mr. Angarella was elected Senior Vice President of the Parent
Corporation and Vice Chairman of the Broker-Dealer in November 1994. Mr.
Angarella served as Vice President, Staff Management of the Parent Corporation
from September 1992 to November 1994, and Assistant Vice President, Staff
Management of the Parent Corporation from February 1992 to September 1992. From
March 1990 to February 1992 he served as Assistant Vice President, Marketing of
the Broker-Dealer.
Ernest J. Tsouros was elected Director of the Company and the Broker-Dealer in
May 1969. His principal occupation since 1982 has been as Vice President of the
Parent Corporation. He also serves as Vice President of Colonial and the Service
Company.
Frederick H. Condon was elected Director of the Company and the Broker-Dealer in
February 1984. His principal occupation since 1985 has been as Senior Vice
President, General Counsel and Secretary of the Parent Corporation. He serves as
Senior Vice President, General Counsel and Secretary of Colonial, Chubb
Sovereign, and the Service Company and as Vice President and Director of
Hampshire Syndications, Inc.
John A. Weston was elected Treasurer of the Company and the Broker-Dealer in
August 1988. His principal occupation since April of 1995 has been as Assistant
Vice President of the Parent Corporation. He was elected Treasurer of Chubb
Investment Funds, Inc. and Chubb America Fund, Inc. in April 1992, Treasurer of
Chubb Investment Advisory Corporation in May 1992, and Hampshire Syndications,
Inc. in July 1991. From July 1989 to April 1995 Mr. Weston was Mutual Fund
Accounting Officer for the Parent Corporation.
Charles C. Cornelio was elected Vice President, General Counsel and Secretary of
the Company, the Broker-Dealer, and Hampshire Syndications, Inc. in May 1993.
His principal occupation since December, 1996 has been as Executive Vice
President and Chief Administrative Officer of the Parent Corporation. From
December, 1994 to September, 1996 he served as Senior Vice President and Chief
Administrative Officer for the Parent Corporation. From March 1992 to December
1994 he served as Vice President, Counsel and Assistant Secretary for the Parent
Corporation. He also serves as Executive Vice President and Chief Administrative
Officer
18 of 54
<PAGE>
of Colonial and the Service Company and as Vice President, General Counsel to
Chubb Investment Funds, Inc. and Chubb America Fund, Inc. From September 1988 to
October 1989 Mr. Cornelio was Assistant Counsel of the Parent Corporation, and
from October 1989 to June 1991 he was Associate Counsel of the Parent
Corporation. He also serves as a Director of Hampshire Syndications, Inc.
Carol R. Hardiman was elected Vice President, Administration of the Company and
the Broker-Dealer in June 1989. From October 1987 to May 1989, she was Assistant
Vice President of the Company and the Broker-Dealer.
Shari J. Lease was elected Assistant Secretary of the Company and the Broker-
Dealer in December 1994. Her principal occupation since April 1995 has been as
Assistant Vice President and Counsel of the Parent Corporation. Ms. Lease was
elected Secretary of Chubb Investment Funds, Inc. and Chubb America Fund, Inc.,
in April 1992 and Assistant Secretary of Hampshire Syndications, Inc. in May
1994. She served as Associate Counsel of the Parent Corporation from April 1994
to April 1995, Assistant Counsel of the Parent Corporation from October 1990 to
April 1994 and Assistant Secretary of Chubb Investment Funds, Inc. and Chubb
America Fund, Inc. from July 1991 to April 1992.
- --------------------------
/(1)/ There are no family relationships existing between or among any of the
above-listed Directors or Executive Officers.
/(2)/ The term of office of each of the foregoing Directors and Executive
Officers extends until the annual meetings of the shareholders and Board
of Directors or until removed by the Board of Directors.
19 of 54
<PAGE>
Item 11 - Executive Compensation
- --------------------------------
(a) General
-------
The Company pays no remuneration to its Directors and Officers, nor does
it have any agreement, commitment, or plan to pay salaries or
compensation to any Director or Officer on other than a nominal basis.
The Service Company employs all of the personnel who perform business
functions for the Company, which personnel also perform functions for
affiliates of the Company.
Item 12 - Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The table below sets forth ownership of the Company's issued and
outstanding common stock as of March 15, 1997.
<TABLE>
<CAPTION>
Title of Name and Address Amount and Nature of Percent of
Class of Beneficial Owner Beneficial Ownership Class
-------- ------------------- -------------------- ----------
<S> <C> <C> <C>
Common Chubb Life Insurance 50,000 shares of record 100
Company of America
One Granite Place
Concord, New Hampshire
</TABLE>
(b) Security Ownership of Management
--------------------------------
None.
Item 13 - Certain Relationships and Related Transactions
- --------------------------------------------------------
(a) Transactions With Management and Others
---------------------------------------
The Company, the Parent Corporation, Colonial and Chubb Sovereign all
have agreements with the Service Company whereby the Service Company
provides service and joint operations. In addition, the Company utilizes
furniture, equipment and fixtures owned by one or more of the Insurance
Companies. The Company pays the Service Company a fee, determined in
accordance with mutually agreed upon cost allocation methods, which the
Companies believe reflect a proportional allocation of common costs and
are commensurate for the performance of the applicable duties.
Prior to October 23, 1996, the Company's funds for financing the Programs
were obtained through Loan Agreements and Company-Lender Agreements
(together the "Agreements") with Colonial and Chubb Life. The Agreements
provided for revolving credit arrangements under which Colonial made
advances to the Company in an amount not to exceed $29,000,000, and Chubb
Life made advances to the Company in an amount not to exceed $20,000,000.
The loans were made at short-term lending rates agreed upon by the
Company.
On October 23, 1996, the Company entered into a Revolving Credit
Agreement with SunTrust Bank. As all advances under affiliated loan
agreements became due during October and November of 1996, the Company
borrowed amounts under the new Revolving Credit Agreement with SunTrust
Bank and paid Chubb Life and Colonial the outstanding principal and
interest. At December 31, 1996, the Company had no loans outstanding to
affiliates.
(b) Certain Business Relationships
------------------------------
See Item 10, Directors and Executive Officers of the Registrant.
20 of 54
<PAGE>
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on Form 8K
- -------------------------------------------------------------------------
(a) Documents filed as a part of this Report.
1. The following consolidated financial statements of Hampshire
Funding, Inc. and Subsidiary are included in Item 8:
(i) Report of Independent Auditors
(ii) Consolidated Balance Sheets as of December 31, 1996 and
1995
(iii) Consolidated Statements of Income and Retained Earnings for
each of the three years in the period ended December 31,
1996.
(iv) Consolidated Statements of Cash Flows for each of the three
years in the period ended December 31, 1996.
(v) Notes to Consolidated Financial Statements
2. Financial Statement Schedules
All Schedules have been omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the financial statements and the notes thereto.
3. Exhibits
(i) Pursuant to Rule 12b-23 and General Instruction G, the
following exhibits required to be filed with this Report
pursuant to the Instructions for Item 14 above are
incorporated by reference from the reference source cited
in the table below.
Reg S-K
Item 601
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<S> <C> <C>
(1) Distribution Agreement Form 10-K, filed
between the Company and March 15, 1990, for the
Chubb Securities Corporation year ended December 31,
dated March 1, 1990 1989, pp. 23-24
(3) (i) Articles of Incorporation Form 10-K, filed
of Company March 15, 1990, for the
year ended December 31,
1989, pp. 25-27
</TABLE>
21 of 54
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Table No. Document Reference Source
--------- -------- ----------------
<S> <C> <C>
(ii) By-Laws of Company Form 10-K, filed
March 15, 1990, for the year
ended December 31, 1989, pp.
28-46
(22) Subsidiaries of the Registrant Form 10-K, filed
March 15, 1990, for the year
ended December 31, 1989, pp.
66
(ii) Filed by enclosure,
<CAPTION>
Reg S-K
Item 601
<S> <C> <C>
(4) (i) Agency Agreement and pp. 24-26
Limited Power of Attorney
(ii) Change in Participant in pp. 27-28
Program
(iii) Disclosure Statement p. 29
(10) (a) Revolving Credit Agreement pp. 30-44
between the Company and
SunTrust Bank, dated
October 23, 1996
(b) Revolving Credit Note pp. 45-46
between the Company and
SunTrust Bank dated
October 23, 1996
(c) Guaranty between Chubb Life pp. 47-53
and SunTrust Bank dated
October 23, 1996
(27) Financial Data Schedule p. 54
(b) Reports on Form 8-K
</TABLE>
No Reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1996.
22 of 54
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
DATE: March 18, 1997 HAMPSHIRE FUNDING, INC.
By: /s/ RONALD R. ANGARELLA
---------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ RONALD R. ANGARELLA President and Director March 18, 1997
- -------------------------------
Ronald R. Angarella
/s/ FREDERICK H. CONDON Director March 18, 1997
- -------------------------------
Frederick H. Condon
/s/ ERNEST J. TSOUROS Director March 18, 1997
- -------------------------------
Ernest J. Tsouros
/s/ JOHN A. WESTON Treasurer, Principal Financial March 18, 1997
- ------------------------------- and Accounting Officer
John A. Weston
</TABLE>
23 of 54
<PAGE>
EXHIBIT (4)(a)
AGENCY AGREEMENT AND
[LOGO OF HAMPSHIRE FUNDING, INC. APPEARS HERE] LIMITED POWER OF ATTORNEY
- --------------------------------------------------------------------------------
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord,
NH 03302-2005
Check Applicable Box: [_] Original Agreement [_] Modification of Agreement
Subject to the agreement of Hampshire Funding, Inc. (the "Company")
I (We) (the "Participant(s)") hereby establish a Hampshire Funding, Inc.
Program for the Acquisition of Mutual Fund Shares and Insurance (the "Program")
which Program is described in the Company's Prospectus (the "Prospectus").
This Agency Agreement and Limited Power of Attorney (the "Agreement") shall be
governed by and interpreted in accordance with the laws of the State of New
Hampshire. Singular nouns and pronouns shall be read in the plural, where
applicable.
I hereby appoint the Company as my Agent and attorney-in-fact and assign and
transfer to the Company as my Agent all my interest in my investment account(s)
and in any future additions thereto which are or will be held pursuant to my
Program (hereinafter referred to as the "Account") with open-end investment
companies registered under the Investment Company Act of 1940 (hereinafter
referred to as the "Fund") and all shares of the Fund (hereinafter referred to
as the "Shares"), except the right to vote as a shareholder in all matters
relating to the Fund. The Account and Shares shall be held in the Company's name
or in that of its nominee as custodian for my Account, which shall be held
pursuant to the terms of this Agreement and the current Prospectus.
1. I hereby authorize the Company to make advances on my behalf to pay premiums
as they become due or excess premiums as agreed to by the Company, including
renewal premiums, on any insurance policy available through the Program for
which I have instructed the Company to pay the premiums, or on any policies
purchased to replace said policies.
This Agreement shall evidence my obligation to repay the advances as described
herein. I agree to pay the Company the amount of all such advances, including
interest at a per annum rate determined by the company, which may change at any
time during the Program but which at no time shall be less than the nominal
interest rate of 6% per annum nor more than 3 percentage points above the prime
or base rate as quoted in the Wall Street Journal; nor more than the maximum
rate permitted by the laws of the State of New Hampshire, which laws shall
govern all matters of interest and charges hereunder. Any change in the
interest rate made by the Company will become effective immediately without
prior notice to the Participants. Interest will be compounded monthly,
quarterly, semiannually or annually, which shall be determined by the frequency
of the premium advances, i.e. the premium payment mode for the policy. The
aggregate advances plus accrued interest is hereinafter referred to as the
"Account Indebtedness". I hereby pledge with and authorize the Company to hold
as custodian and pledge my Shares as collateral security for the payment of the
Account Indebtedness in accordance with the terms herein and those of the
current Prospectus. I understand and agree that if I do not pay the accrued
interest upon its due date, the due date of the subsequent premium, the
principal amount of my Account Indebtedness shall be increased by the amount of
all accrued interest, the intent being that interest not paid when due shall be
deemed thereafter to be principal and shall be treated in the same manner as
advances made for insurance premiums.
2. I authorize the Company as my attorney-in-fact to accept on my behalf and
acknowledge the receipt of disclosure statements for the extension of credit
under the applicable regulations of the Federal Truth-In-Lending Act, if any,
for subsequent delivery to me.
3. I further hereby authorize the Company to assign and transfer my Account
indebtedness, and any Shares pledged to the Company as required to secure such
Account Indebtedness as collateral security for the Company's indebtedness
pursuant to any financing arrangements with certain lenders, but only to the
extent of the Account Indebtedness plus the current premium or premiums of the
policies listed above. Such Account Indebtedness and the Shares pledged to
secure the Company's Indebtedness shall not exceed my Account Indebtedness and
the Shares pledged to the Company in accordance with the terms of the
Prospectus. I further understand that in the event any of my pledged Shares are
sold or redeemed pursuant to the terms of this Agreement, the Prospectus, or the
Company's financing arrangements, my financial responsibility will be limited
by the amount of my Account Indebtedness to the Company; that the proceeds of
the sale or redemption of any Shares in excess of my Account Indebtedness will
be paid to me as though I specifically requested withdrawal of the same, unless
investment thereof is directed by me in writing, via mail or facsimile, in which
event I understand: (i) regular investment charges, if any, will be charged
with respect to any purchase of additional Shares; (ii) the number of Shares so
sold or redeemed shall not exceed the number of full Shares the sale or
redemption value of which will provide cash equal to my Account Indebtedness
hereunder; and (iii) any pledged Shares not sold or redeemed to satisfy my
Account Indebtedness will be delivered to my Account and released from all
pledge arrangements contemplated hereby.
4. I understand that I may at any time elect to pay the interest on my Account
Indebtedness in cash or to prepay in cash my Account Indebtedness in full or in
part, provided that I pay fees and charges as stated in the Prospectus which is
current at the time of termination or payment of Account Indebtedness. If the
Account Indebtedness is prepaid in full, the Program and this Agreement will
terminate.
Form 4-0701 Ed. 3/97 Page 1 of 3
24 of 54
<PAGE>
5. I authorize the Company, as my attorney-in-fact, to execute on my behalf
any stock transfer power subject to the limitations stated herein and in the
Prospectus.
6. I agree to pay the Company annually an administrative charge which will
reasonably compensate it for its services pursuant hereto. Unless such
administrative charge is paid by me in cash, the Company, at its discretion,
hereby is further authorized to pay this charge by redeeming Shares in the
amount equal to such charge or to increase my Account Indebtedness by an amount
equal to that charge. I also understand that I may pay the entire administrative
charges over the life of the Program by paying, at the time this Agreement is
signed, a nonrefundable lump sum fee. I also agree to pay all termination fees
and liquidation charges upon termination of the Program and all charges for
special services in accordance with the current Prospectus.
7. This Appointment and Agreement may be terminated effective immediately by me
upon written notice mailed or transmitted via facsimile to the Company and will
be terminated by the Company upon the happening of any of the following events:
1) the death of all Participants of the Program; 2) the death of all Insureds
covered by a policy (ies) under the Program; 3) if the Shares held as collateral
for the Account Indebtedness fail to meet the minimum collateral requirements
due either to a decline in value of the Shares or an increase in the Account
Indebtedness as set forth in the Prospectus; 4) if the Program fails to meet the
Program's minimum investment requirements set forth in the Prospectus due to a
decrease in the insurance premiums advanced under the Program unless waived by
the Company to the extent permitted by law; 5) the date ten (10) years from the
due date of the initial premium advanced (Normal Expiration Date), unless
extended by mutual agreement between the Company and the Participant; or 6) upon
the inability of the Company to provide or arrange for financing of premiums. If
the Participant is a corporation, "death of all Participants" shall be read "the
dissolution, or bankruptcy" of the corporation or the appointment of a trustee
or receiver for its property; if a Trustee pursuant to a valid trust instrument,
the termination of the trust. Notwithstanding such termination, the appointments
made hereunder shall continue in effect for the purpose of redeeming my Shares
or otherwise effecting payment of my Account Indebtedness. The Company, any
lender, and the Fund shall be entitled to rely and act upon the authority
granted by me under this Agreement until each of them respectively has received
actual written notice of its revocation or termination.
8. I understand that the Company cannot give any assurance that the proposed
insured, in an application for a policy to be included in a Program, will
qualify for insurance. No fees charged at the initiation of a Program apply to
insurance, thus no conditional receipt for insurance coverage will be issued;
that is, I will be without insurance coverage until (i) the application for
insurance is approved and (ii) the expiration of 31 days from the date of
purchase of the mutual fund shares. If I wish to conditionally obtain insurance
coverage prior to completion of the underwriting process, I may pay an
additional premium payment equal to one-twelfth of the scheduled annual premium
for my Program, or fifty dollars, whichever is greater, in exchange for a
conditional receipt at the time the insurance application is completed. I
understand that such conditional insurance coverage may not be available in all
cases.
9. Upon termination of this Agreement, the Program shall terminate and a
sufficient number of Shares held as collateral will be redeemed on a purely
discretionary basis by the Company to pay off the Account Indebtedness. The
remaining shares received from a pledgee or otherwise will be reregistered in
the name of the Participant. No investment of cash received in my Account upon
termination of this Agreement shall be made by the Company unless investment
thereof is directed by me in writing, in which event regular investment charges
will be made.
10. Subject to the agreement of the Company, the Participant in this Program may
be changed. The successor Participant must determine that the investment is
suitable for him/her and adopt all the terms of this Agreement as his/her own,
including the assumption of liability for the Account Indebtedness.
11. A policy may be added to the Program or the Program modified after its
inception upon agreement with the Company. However, the Program, if not
otherwise terminated, shall still terminate on the Normal Expiration Date,
unless extended by mutual agreement between the Company and the Participant.
12. The Program and all Shares held and/or purchased under the terms of a
Program for which there is more than one Participant will be held by Hampshire
Funding, Inc. as Custodian for all Participants as Joint Owners with rights of
survivorship, irrespective of the ownership of any shares prior to the
commencement of the Program.
Federal Reserve Board Regulation Z
Disclosure Statement
All figures assume: 1) this Agreement will be in full force and effect
until the date ten (10) years from the due date of the initial premium advanced
under the Program, when the full amount of the loan (Account Indebtedness) will
be repaid; 2) the annual administrative charges are financed unless otherwise
indicated; 3) the interest rate, which is a variable rate and subject to change
at any time, remains the same throughout the ten year period of this Agreement;
and 4) no charges have been incurred for special services due to modification of
the Program.
If premiums of a variable or dynamic life insurance policy are paid
under the Program, the amount and timing of payments are assumed to follow the
recommended payment schedule for the policy's current interest rate, which is
provided by the appropriate insurance company. These figures may change over the
life of the Program,
Form 4-0701 Ed. 3/97 Page 2 of 3
25 of 54
<PAGE>
depending upon deviations from the payment schedule, changes in the policy's
interest rate, which is variable, and the policy's face amount.
1. Amount Financed, the amount of credit provided to you on your behalf
$______________.
2. FINANCE CHARGE, the dollar amount the credit will cost you
$______________.
3. Total of Payments, the amount you will have paid when you have repaid
the loan $____________.
4. ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate.
Excluding annual administrative fee _______. Including annual
administrative fee ________.
You have the right to receive a written itemization of the Amount Financed. Do
you desire an itemization?
[_] Yes [_] No
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual fund
account to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged if
the loan balance is reduced. Refer to the terms of this Agreement and the
Prospectus which is current at the time of termination or payment of Account
Indebtedness for information regarding these fees and charges and relating to
default, your obligation to maintain adequate security, the right of Hampshire
Funding, Inc. to terminate the Program and require repayment of the Account
Indebtedness and any other transaction charges which may have been incurred.
VARIABLE RATE: The Annual Percentage Rate may increase or decrease at any time
during the term of the Program at the discretion of Hampshire Funding, Inc. The
nominal interest rate will in no event be less than 6% per annum nor exceed 3
percentage points above the prime or base rate as quoted in the Wall Street
Journal. An increase in the rate will mean a larger amount will be due upon
termination of the Program; additional collateral may be required in accordance
with the Margin Requirements of the Company. For example, if a Participant were
paying annual premiums of $1,000 at a nominal interest rate of 12.000% for the
ten year life of the Program, the Total of Payments, including the
administrative fee would be $20,833.86 with an Annual Percentage Rate of
13.016%. If the Participant were paying the same premium at a nominal interest
rate of 13.000% for the ten year life of the Program, the Total of Payments,
including the administrative fee would be $22,063.18 with an Annual Percentage
Rate of 14.015%, rather than the figures shown above. See the Prospectus for
further details relating to the Margin Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of your Shares as
described in this Agreement and the current Prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
- --------------------------------------------------------------------------------
MODIFICATION OF PROGRAM [_] check box if applicable
This Modification of Program contains the Federal Reserve Board Regulation Z
Disclosure Statement for
[_] addition of policy number(s)
[_] increase in premiums to be advanced due to modification of policy number(s)
in Hampshire Funding, Inc. Program No. ______________, established pursuant to
an Agency Agreement and Limited Power of Attorney executed by Hampshire
Funding, Inc. and __________________, on _______________________, with an
expiration date of __________________________.
- --------------------------------------------------------------------------------
I ACKNOWLEDGE, PRIOR TO THE CONSUMMATION OF THE TRANSACTION DISCLOSED HEREIN,
RECEIPT OF A COPY OF THIS AGREEMENT CONTAINING THE DISCLOSURES REQUIRED BY
FEDERAL LAW. I FURTHER ACKNOWLEDGE A COPY OF ALL APPLICABLE PROSPECTUSES (E.G.,
THE COMPANY PROSPECTUS, MUTUAL FUND PROSPECTUS AND VARIABLE PRODUCT PROSPECTUS).
I UNDERSTAND I WILL RECEIVE AN EXECUTED COPY OF THIS AGREEMENT AFTER IT HAS BEEN
COUNTERSIGNED BY THE COMPANY. I ALSO UNDERSTAND THAT I HAVE THE RIGHT TO
PURCHASE LIFE INSURANCE ONLY, EQUITY PRODUCTS ONLY, OR BOTH LIFE INSURANCE AND
EQUITY PRODUCTS SEPARATELY.
*Participant (1) *Participant (2)
Signs X Signs X
- ----------------------------------- -----------------------------------------
Street Street
- ----------------------------------- -----------------------------------------
Town State Zip Town State Zip
Date: Date:
----------------------------- -----------------------------------
Hampshire Funding, Inc. hereby accepts and agrees to act under the foregoing
Agency Agreement and Limited Power of Attorney.
HAMPSHIRE FUNDING, INC. By:
P.O. BOX 2005 --------------------------------------
Concord, New Hampshire 03302 Date:
-----------------------------------
Form 4-0701 Ed. 3/97 Page 3 of 3
26 of 54
<PAGE>
EXHIBIT (4)(b)
[LOGO OF HAMPSHIRE FUNDING APPEARS HERE] CHANGE IN PARTICIPANT
IN PROGRAM
- --------------------------------------------------------------------------------
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord, NH 03302
Change of Participant in Hampshire Funding Program No. ____________ Established
By Agency Agreement and Limited Power of Attorney dated _______________________.
By signing below, and subject to the agreement of Hampshire Funding, Inc. I
(we),_________________________________________________________, the
Assignor(s), do hereby assign, transfer and set over all my (our) right, title
and interest in Hampshire Funding Program (The "Program") No.____ established
pursuant to the above Agency Agreement, to _____________________________________
_______________________________________________________________________________,
the Assignee(s), who by signing below does hereby accept said assignment and the
terms set forth below. I (we), the Assignor(s), specifically assign, transfer
and set over all my (our) right, title and interest in all mutual fund shares
held as collateral security for said Program and authorize Hampshire Funding,
Inc. to register such shares in the name of "Hampshire Funding, Inc. C/F
________________________________(Assignee(s))," such shares being currently
registered in Hampshire Funding, Inc.'s name as custodian for me (us), the
Assignor(s).
The Assignee(s) hereby (1) acknowledges receipt of a copy of Hampshire
Funding, Inc.'s Prospectus (the "Prospectus") and the aforesaid Agency
Agreement, (2) adopts and agrees to each and every term of the Agency Agreement,
and (3) appoints Hampshire Funding, Inc. as his attorney-in-fact to perform all
the functions described therein including but not limited to the pledging of all
shares in the Account, and authorizes Hampshire Funding, Inc. to continue
advances of monies for premiums for the insurance policies included in said
Program, and does hereby accept as his own, the obligation to repay the Account
Indebtedness as defined in the Agency Agreement, whether incurred under it
before or after this date.
The Assignee(s) understands that all transactions governing the Program will
be governed by the terms of said Agency Agreement and the Prospectus and both
Assignor(s) and Assignee(s) fully understand that said Program and the Agency
Agreement shall terminate and the Account Indebtedness be repaid immediately,
should the Assignee(s) not qualify for the Program. In that event, the remaining
shares following repayment of the Account Indebtedness shall be reregistered in
the name of the Assignee(s).
The Assignee(s) further acknowledge receipt of the Disclosure Statement
required by Federal Reserve Board Regulation Z, which is made by Hampshire
Funding, Inc. with respect to any sums borrowed pursuant to said Agency
Agreement. The figures below assume actual advances, accrued interest and
administrative fees from the inception of the Program to date and future
advances made at the current interest rate, which is a variable rate, and for
the current administrative fee, which is assumed to be financed unless otherwise
indicated. The figures do not include charges incurred for special services due
to modification of the Program. The Disclosure Statement assumes the Program
will be in full force and effect until the date ten years from the due date of
the initial premium advanced under said Program, at which time the full amount
of the loan (Account Indebtedness) will be repaid.
If premiums of a variable or dynamic life insurance policy are paid under the
Program, the amount and timing of payments are assumed to follow the recommended
payment schedule for the policy's current interest rate, which is provided by
the appropriate insurance company. These figures may change over the life of the
Program, depending upon deviations from the payment schedule, changes in the
policy's interest rate, which is variable, and the policy's face amount.
1. Amount Financed, the amount of credit provided to you on your behalf
$__________.
2. FINANCE CHARGE, the dollar amount the credit will cost you $__________.
3. Total of Payments, the amount you will have paid when you have repaid the
loan $______________.
4. ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate. Excluding
annual administrative fee __________%. Including annual administrative fee
____________%.
You have the right to receive a written itemization of the Amount Financed.
Do you desire an itemization?
[_] Yes [_] No
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual fund
account to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged if
the loan balance is reduced. Refer to the terms of the Agency Agreement and the
Prospectus which is current at the time of termination or payment of Account
Indebtedness for information regarding these fees and charges and relating to
default, your obligation to maintain adequate security, the right of Hampshire
Funding, Inc. to terminate the Program and require repayment of the Account
Indebtedness and any other transaction charges which may have been incurred.
RETURN ALL COPIES TO HOME OFFICE
Form 4-0858 Ed. 3/94 Page 1 of 2
27 of 54
<PAGE>
VARIABLE RATE: The Annual Percentage Rate may increase or decrease during the
term of this transaction at the discretion of Hampshire Funding, Inc. Any change
in the interest rate made by the Company will become effective immediately
without prior notice to the Participants. The nominal interest rate will in no
event be less than 6% per annum nor exceed 3 percentage points above the prime
or base rate as quoted in the Wall Street Journal. An increase in the rate will
mean a larger amount will be due upon termination of the Program; additional
collateral may be required in accordance with the Margin Requirements of the
Company. For example, if the nominal interest rate on the premium advances was
increased by 1% from the current rate, the Total of Payments including the
administrative fee would be ____________ with an Annual Percentage Rate of
______% rather than the figures shown above. See the current Prospectus for
further details relating to the Margin Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of the Participant's
shares, as described in the Agency Agreement and the current prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
I (WE), THE ASSIGNEE(S), ACKNOWLEDGE, PRIOR TO THE FIRST PREMIUM ADVANCE MADE
FOLLOWING CHANGE OF PARTICIPANT, RECEIPT OF A COPY OF ALL APPLICABLE
PROSPECTUSES, THE AGENCY AGREEMENT AND THIS ASSIGNMENT CONTAINING THE
DISCLOSURES REQUIRED BY FEDERAL LAW. I (WE) UNDERSTAND THAT I (WE) WILL RECEIVE
AN EXECUTED COPY OF THIS ASSIGNMENT AFTER IT HAS BEEN COUNTERSIGNED BY THE
COMPANY.
Assignor (1)
Signs X ________________________________________________________________________
________________________________________________________________________________
Street
________________________________________________________________________________
Town State Zip
Date: __________________________________________________________________________
Assignor (2)
Signs X ________________________________________________________________________
________________________________________________________________________________
Street
________________________________________________________________________________
Town State Zip
Date: __________________________________________________________________________
Assignee (1)
Signs X ________________________________________________________________________
________________________________________________________________________________
Street
________________________________________________________________________________
Town State Zip
Date: __________________________________________________________________________
Assignee (2)
Signs X ________________________________________________________________________
________________________________________________________________________________
Street
________________________________________________________________________________
Town State Zip
Date: __________________________________________________________________________
HAMPSHIRE FUNDING, INC. hereby accepts and agrees to act under said Agency
Agreement and under the terms of this Agreement.
HAMPSHIRE FUNDING, INC.
P.O. BOX 2005
CONCORD, NEW HAMPSHIRE 03302
By _________________________________
Date: ______________________________
RETURN ALL COPIES TO HOME OFFICE
Form 4-0858 Ed. 3/94 Page 2 of 2
28 of 54
<PAGE>
EXHIBIT (4)(c)
DISCLOSURE
[LOGO OF HAMPSHIRE FUNDING, INC. APPEARS HERE] STATEMENT
- --------------------------------------------------------------------------------
Hampshire Funding, Inc., One Granite Place, P.O. Box 2005, Concord,
NH 03302-2005
Federal Reserve Board Regulation Z Disclosure Statement for
[_] increase in premiums to be advanced under the same policy
[_] change in premium payment mode
in Hampshire Funding Program ("Program") No. ______________ established
pursuant to an Agency Agreement and Limited Power of Attorney executed by and
between Hampshire Funding, Inc. and ____________________________________________
______________________________________________ on __________________________.
The figures below assume actual advances, accrued interest and administrative
fees from the inception of the Program to date, and future advances made at the
current interest rate, which is a variable rate, and for the current
administrative fee, which is assumed to be financed unless otherwise indicated.
The figures do not include charges incurred for special services due to
modification of the Program. The Disclosure Statement assumes the Program will
be in full force and effect until the Normal Expiration Date, ten years from the
due date of the initial premium advanced under the Agency Agreement, at which
time the full amount of the loan (Account Indebtedness) will be repaid.
If premiums of a variable or dynamic life insurance policy are paid under
the Program, the amount and timing of payments are assumed to follow the
recommended payment schedule for the policy's current interest rate, which is
provided by the appropriate insurance company. These figures may change over
the life of the Program, depending upon deviations from the payment schedule,
changes in the policy's interest rate, which is variable, and the policy's face
amount.
1. Amount Financed, the amount of credit provided to you on your behalf
$___________.
2. FINANCE CHARGE, the dollar amount the credit will cost you $______________.
3. Total of Payments, the amount you will have paid when you have repaid the
loan $____________.
4. ANNUAL PERCENTAGE RATE, the cost of your credit as a yearly rate. Excluding
annual administrative fee _________%. Including annual administrative fee
_________%.
You have the right to receive a written itemization of the Amount Financed. To
receive written itemization of the Amount Financed, please call customer service
at 1-800-258-3648, extension 5348.
DEFAULT CHARGE: There are no default, delinquency or collection charges.
Reasonable fees will be charged for special services such as loan reductions,
protested checks, changes in frequency of advances, changes from one mutual
fund to another, redemption of mutual fund shares, and others.
PREPAYMENT: A termination fee and liquidation charges will be imposed if the
Account Indebtedness is prepaid in full; reasonable fees also will be charged
if the loan balance is reduced. Refer to the terms of the Agency Agreement and
the Prospectus which is current at the time of termination or payment of
Account Indebtedness for information regarding these fees and charges and
relating to default, your obligation to maintain adequate security, the right
of Hampshire Funding, Inc. to terminate the Program and require repayment of
the Account Indebtedness and any other transaction charges which may have been
incurred.
VARIABLE RATE: The Annual Percentage Rate may increase or decrease at any
time during the term of the Program at the discretion of Hampshire Funding,
Inc. Any change in the interest rate made by the Company will become effective
immediately without prior notice to the Participants. The nominal interest
rate will in no event be less than 6% per annum nor exceed 3 percentage points
above the prime or base rate as quoted in the Wall Street Journal. An increase
in the rate will mean a larger amount will be due upon termination of the
Program; additional collateral may be required in accordance with the Margin
Requirements of the Company. For example, if the nominal interest rate on the
premium advances was increased by 1% from the current rate, the Total of
Payments including the administrative fee would be ____________ with an
Annual Percentage Rate of ______% rather than the figures shown above. See the
current Prospectus for further details relating to the Margin Requirements.
SECURITY: The Account Indebtedness is secured by the pledge of your shares,
as described in the Agency Agreement and the current Prospectus.
CREDIT INSURANCE: Credit life and disability insurance are not required to
obtain credit.
Form 4-01005 29 of 54
<PAGE>
EXHIBIT (10)(a)
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT, dated as of October 23, 1996 (the
"Agreement"), by and between Hampshire Funding, Inc., a corporation organized
and existing under the laws of the State of New Hampshire (the "Borrower"), and
SunTrust Bank, Atlanta, a Georgia banking corporation (the "Bank").
W I T N E S S E T H:
--------------------
THAT for and in consideration of the sum of $10.00 in hand paid by the
Bank to the Borrower, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, intending
to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Definitions. In addition to the other terms defined
-----------
herein, the following terms used herein shall have the meanings herein specified
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):
"Advance" shall mean any advance by the Bank under the Commitment.
-------
"Agreement" shall mean this Revolving Credit Agreement, either as
---------
originally executed or as it may be from time to time supplemented, amended,
renewed or extended.
"Business Day" shall mean a day of the year on which commercial banks
------------
are not required or authorized to close in Atlanta, Georgia.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time, and the regulations promulgated and the rulings issued thereunder.
"Commitment" shall mean, the amount set forth in Section 2.01 hereof.
----------
"Debt" shall mean (i) indebtedness for borrowed money or for the
----
deferred purchase price of property or services (other than trade accounts
payable on customary terms in the ordinary course of business), (ii) financial
obligations evidenced by bonds, debentures, notes or other similar instruments,
(iii) financial obligations as lessee under leases which shall have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases, and (iv) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or financial obligations of others of the kinds referred to in
clauses (i) through (iii) above; provided, however, the term "Debt" shall not
-------- -------
include any indebtedness, financial obligation or other obligation of Borrower
or any Subsidiary owing to any corporation or other entity that is wholly owned
(directly or indirectly) by the Borrower, the Guarantor or The Chubb
Corporation.
"Default" shall mean any event that, with notice or lapse of time or
-------
both, would constitute an Event of Default.
"Dollar" and the sign "$" shall mean lawful money of the United States
------
of America.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"Eurodollar Business Day" shall mean any day on which commercial banks
-----------------------
are open for domestic and international business, including dealings in United
States dollar deposits, in London, England, New York, New York, and Atlanta,
Georgia.
"Eurodollar Rate" shall mean, with respect to any Interest Period
---------------
relating thereto, the rate per annum equal to the quotient of (a) the average
(rounded upwards to the nearest 1/100 of 1%) of the rate at which deposits in
immediately available funds in United States dollars are available to the Bank
in the London interbank eurodollar market two Eurodollar Business Days prior to
the beginning of such Interest Period at or about 10:00 a.m. Atlanta, Georgia
time, for delivery on the first day of such Interest Period for a period equal
to such Interest
30 of 54
<PAGE>
Period and in an amount substantially equal to the amount of such Advance,
divided by (b) a number equal to 1.00 minus the aggregate of the rates
(expressed as a decimal) of reserve requirements in effect on the date two
Business Days prior to the beginning of such Interest Period (including without
limitation basic, supplemental, marginal and emergency reserves under the
regulations of the Board of Governors of the Federal Reserve System or any
successor thereto), as now and from time to time in effect, dealing with reserve
requirements for eurocurrency funding (currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board) maintained by a member bank of the
Federal Reserve System.
"Event of Default" shall have the meaning set forth in Article VII.
----------------
"Guarantor" shall mean Chubb Life Insurance Company of America, a New
---------
Hampshire corporation.
"Guaranty" shall mean the guaranty executed by the Guarantor in
--------
substantially the form of Exhibit B hereto, either as originally executed or as
---------
it may be from time to time supplemented, modified, amended, renewed or
extended.
"Interest Period" shall mean a period of one, two, three or six months
---------------
as the Borrower may elect as provided in this Agreement; provided, however,
-------- -------
that:
(i) the Interest Period for any Advance shall commence on the
expiration date of the immediately preceding Interest Period;
(ii) if any Interest Period would otherwise expire on a day which is
not a Eurodollar Business Day, such Interest Period shall expire on the next
succeeding Eurodollar Business Day, provided that if any Interest Period would
otherwise expire on a day which is not a Eurodollar Business Day but is a day of
the month after which no further Eurodollar Business Day occurs in such month,
such Interest Period shall expire on the next preceding Eurodollar Business Day;
(iii) any Interest Period which begins on the last Eurodollar
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall, subject to part (iv) below, end on the last Eurodollar Business Day of a
calendar month; and
(iv) no Interest Period shall extend beyond the Termination Date.
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or charge of any kind (including any written agreement to give
any of the foregoing, any conditional sale or other title retention agreement,
any lease in the nature thereof, and the filing of or agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction).
"Loan Documents" shall mean and include, as the context requires, this
--------------
Agreement, the Note, the Guaranty and any and all other instruments, agreements,
documents and writings contemplated hereby or executed in connection herewith.
"Person" shall mean an individual, partnership, corporation (including
------
a business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, or a government or
any political subdivision or agency thereof.
"Plan" shall mean any "employee benefit plan" maintained by or on
----
behalf of Borrower, any Subsidiary, or any ERISA Affiliate, as defined in
Section 3(3) of ERISA.
"Prime Rate" shall mean the per annum rate of interest designated from
----------
time to time by the Bank to be its prime rate, with any change in the rate of
interest resulting from a change in the Prime Rate to be effective as of the
opening of business of the Bank on the day of such change.
"Restricted Subsidiary" shall mean Hampshire Syndications, Inc.
---------------------
"Revolving Credit Note" or "Note" shall mean a promissory note of the
--------------------- ----
Borrower payable to the order of the Bank, in substantially the form of
Exhibit A attached hereto, evidencing the maximum aggregate principal
indebtedness of the Borrower to the Bank under the Commitment, either as
originally executed or as it may be from time to time supplemented, modified,
amended, renewed or extended.
31 of 54
<PAGE>
"Subsidiary" shall mean any corporation or other entity of which
----------
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by a corporation.
"Termination Date" shall mean the Termination Date of the Commitment
----------------
as defined in Section 2.07.
SECTION 1.02. Accounting Terms. Unless otherwise specified herein,
----------------
all accounting terms not specifically defined herein shall be construed as
having the respective meanings customary under generally accepted accounting
principles consistently applied from and after the date of the initial Advances.
ARTICLE II
AMOUNT AND TERMS OF LOANS
-------------------------
SECTION 2.01. Commitment and Revolving Credit Note. Subject to and
------------------------------------
upon the terms and conditions set forth in this Agreement, the Bank establishes
until October 22, 2001 a revolving credit in favor of the Borrower in aggregate
principal at any one time outstanding equal to SIXTY MILLION DOLLARS
($60,000,000.) (the "Commitment"). Within the limit of the Commitment, the
Borrower may borrow, repay and reborrow under the terms of this Agreement;
provided, however, that the Borrower may neither borrow nor reborrow should
there exist a Default or an Event of Default. All Advances shall be evidenced
by a single Revolving Credit Note payable to the Bank in the form of Exhibit A
---------
attached hereto. The Revolving Credit Note shall be dated the date hereof,
shall be payable to the order of the Bank in the principal amount of
$60,000,000, shall bear interest as hereinafter provided and shall mature on
October 22, 2001, or sooner should the principal and accrued interest thereon
become immediately due and payable as provided for hereinafter. The aggregate
principal amount of each Advance under the Commitment shall be not less than
$500,000 and shall be in integral multiples of $100,000.
SECTION 2.02. Interest on Revolving Credit Note. Interest shall
---------------------------------
accrue on the unpaid principal amount of each Advance under the Commitment at a
per annum rate equal to the Eurodollar Rate for an Interest Period of one, two,
three or six months, plus an additional fifteen one-hundredths of one percent
(0.15%) per annum, as selected by the Borrower, subject to and in accordance
with the terms of this Agreement; provided that, the Borrower may not select a
-------------
Eurodollar Rate for which the Interest Period would extend beyond October 22,
2001.
SECTION 2.03. Method of Borrowing Under the Commitment. The Borrower
----------------------------------------
shall give the Bank written or telephonic notice (promptly confirmed in writing)
of any requested Advance under the Commitment (a "Notice of Borrowing")
specifying (i) the amount of the Advance, (ii) the date the proposed Advance is
to be made (which shall be a Eurodollar Business Day), and (iii) the duration of
the initial Interest Period. Each Notice of Borrowing shall be given to the
Bank not later than 11:00 a.m. (Atlanta, Georgia time) on the second Eurodollar
Business Day preceding the day of such requested Advance. The Bank shall be
entitled to rely on any telephonic Notice of Borrowing which it believes in good
faith to have been given by a duly authorized officer or employee of the
Borrower and any Advance made by the Bank based on such telephonic notice shall,
when wired by the Bank to the Borrower's account, which account will be
specified in the above-described notice given by Borrower to Bank, be Advances
for all purposes hereunder.
SECTION 2.04. Selection of Successive Interest Periods. The Borrower
----------------------------------------
shall give the Bank telephonic notice (promptly confirmed in writing) at least
three Business Days prior to the continuation of any Advance, such notice to
specify the Interest Period selected by the Borrower for such Advance. If the
Bank does not receive timely notice of any succeeding Interest Period selected
by the Borrower as provided for herein or if the Borrower selects an Interest
Period which is not available under Section 2.02, the Borrower shall be deemed
to have selected an Interest Period of one month.
SECTION 2.05. Revolving Credit Note Interest Payment Dates. Interest
--------------------------------------------
on the Revolving Credit Note shall be payable (i) on the last day of the
relevant Interest Period for Interest Periods of 90 days or less, (ii) every 90
days after the date of the Advance for Interest Periods greater than 90 days,
and (iii) on the Termination Date.
SECTION 2.06. Prepayment of Advances Under the Commitment. The
-------------------------------------------
Borrower shall have the right to prepay Advances under the Commitment, in whole
at any time or in part from time to time, without premium or penalty but with
accrued interest on the principal amount prepaid to the date of such prepayment,
provided that (i) the Borrower gives the Bank at least three Business Days'
prior written notice of such prepayment, specifying the date such prepayment
will occur and the Advances to be prepaid, (ii) each partial prepayment shall be
in an amount of at least $500,000 or integral multiples thereof, and (iii) any
Advance may only be prepaid on the last day of the then current Interest Period
with respect thereto. If Borrower prepays any Advance on a day other than
32 of 54
<PAGE>
the last day of the then current Interest Period with respect thereto, whether
at the option of Borrower or upon termination of the Commitment by the Bank as
herein provided, the Borrower shall promptly pay, upon demand of the Bank, such
amount or amounts as may be reasonably necessary to compensate the Bank for any
loss or expense sustained or incurred by the Bank as a result of such payment.
The Bank shall certify the amount of such loss or expense to the Borrower, and
such certification shall be conclusive absent manifest error.
SECTION 2.07. Revolving Credit Period; Termination Date. The unpaid
------------------------------------ ----
principal balance and all accrued and unpaid interest on the Revolving Credit
Note will be due and payable upon the first of the following dates or events to
occur: (i) acceleration of the maturity of the Revolving Credit Note in
accordance with the remedies contained in Section 7.02 of this Agreement;
(ii) termination of the Commitment by the Bank as provided in Section 2.08 of
this Agreement or (iii) upon the expiration of the Commitment on October 22,
2001 (the "Termination Date").
SECTION 2.08. Optional Termination by Bank. Borrower shall provide at
-----------------------------
least 14 days' prior written notice to the Bank before the Borrower, the
Guarantor or the Restricted Subsidiary enters into any transaction of merger,
consolidation, pooling of interest, joint venture, syndicate or other
combination with any other Person or sells, leases, transfers or otherwise
disposes of all or a substantial part of its assets (whether now owned or
hereafter acquired), in any single transaction or series of related
transactions, to any Person, provided that, no such notice need be given:
(a) if the Restricted Subsidiary merges with the Guarantor provided
that the Guarantor shall be the continuing or surviving corporation; or
(b) if the Restricted Subsidiary sells, leases or otherwise disposes
of any of its assets to the Guarantor.
Upon receipt of such notice, the Bank may in its sole discretion terminate the
Commitment effective on the termination date specified in a written notice to
the Borrower, which termination date shall be at least 60 days after the date of
the Bank's written notice to the Borrower. Upon such termination date the
Borrower will pay to Bank the unpaid principal balance and all accrued but
unpaid interest then owing upon all outstanding Advances.
SECTION 2.09. Facility Fee. The Borrower shall pay to the Bank a
------------
facility fee on the full amount of the Commitment at a rate equal to 0.06% per
annum calculated on a year of 360 days for the actual number of days elapsed
(the "Facility Fee"). Such Facility Fee shall accrue from and including the
date this Agreement is executed (but excluding the Termination Date) and shall
be payable on the last Business Day of each calendar quarter and on the
Termination Date.
SECTION 2.10. Illegality. Notwithstanding any other provisions of
----------
this Agreement, if any change in any applicable law, regulation or directive, or
in the interpretation or application thereof shall make it unlawful or
impractical for the Bank to make or maintain any Advance at a rate of interest
based upon the Eurodollar Rate, the obligation of the Bank hereunder to make or
maintain Advances based upon the Eurodollar Rate shall forthwith be cancelled
and the Borrower shall, if any Advances are then outstanding, promptly upon
request from the Bank, either, at the option of the Borrower, pay all such
Advances or convert such Advances to bear interest at the Prime Rate. If any
such payment or conversion is made on a day that is not the last day of the then
current Interest Period, the Borrower shall promptly pay, upon demand of the
Bank such amount or amounts as may be necessary to compensate the Bank for any
loss or expense sustained or incurred by the Bank as a result of such payment or
conversion. The Bank shall certify the amount of such loss or expense to the
Borrower, and such certification shall be conclusive absent manifest error.
SECTION 2.11. Increased Costs. In the event that any change (other
---------------
than any change by way of imposition or increase of reserve requirements
included in the calculation of the Eurodollar Rate) in any applicable law,
treaty or governmental regulation, or in the interpretation or application
thereof, or compliance by the Bank with any guideline, request or directive
(whether or not having the force of law) from any central bank or other U.S. or
foreign financial, monetary or other governmental authority, shall: (a) subject
the Bank to any tax of any kind whatsoever with respect to this Agreement or any
Advance or change the basis of taxation of payments to the Bank of principal,
interest, fees or any other amount payable hereunder (except for changes in the
rate of tax on the overall net income of the Bank); (b) impose, modify, or hold
applicable any reserve, special deposit, assessment or similar requirement
against assets held by, or deposits in or for the account of, advances or loans
by, or other credit extended by or committed to be extended by any office of the
Bank, including, without limitation, pursuant to Regulation D of the Board of
Governors of the Federal Reserve System; or (c) impose on the Bank any other
condition with respect to this Agreement, the Note, or any Advance hereunder;
and the result of any of the foregoing is to increase the cost to the Bank of
making or committing to make, renewing or maintaining any Advance or to reduce
the amount of any payment (whether of principal, interest or otherwise) in
respect of any
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Advance, THEN, IN ANY CASE, the Borrower shall promptly pay from time to time,
upon demand of the Bank, such reasonable additional amounts as will compensate
the Bank for such additional cost or such reduction, as the case may be. The
Bank shall certify the amount of such additional cost or reduced amount to the
Borrower, and such certification shall be conclusive absent manifest error.
SECTION 2.12. Failure to Complete Borrowings. The Borrower hereby
------------------------------
agrees to indemnify the Bank and hold the Bank harmless from any loss, cost or
expense it may sustain or incur as a consequence of the failure by the Borrower
to complete any borrowing after a Notice of Borrowing has been given to the
Bank, including, without limitation, any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
the Bank to fund the Advance when the Advance, as a result of such failure, is
not made on such date. The Bank shall certify the amount of its loss or expense
to the Borrower, and such certification shall be conclusive absent manifest
error.
SECTION 2.13. Capital Adequacy. If, after the date of this Agreement,
----------------
the Bank shall have determined that the adoption of any applicable law, rule or
regulation regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Bank with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Bank's capital as a consequence of its
obligations hereunder to a level below that which the Bank could have achieved
but for such adoption, change or compliance (taking into consideration the
Bank's policies with respect to capital adequacy) by an amount deemed by the
Bank to be material, then from time to time, promptly upon demand by the Bank,
the Borrower shall pay the Bank such additional amount or amounts as will
compensate the Bank for such reduction, but in no event will such compensation
exceed the rate of return that would have been received by Bank in the absence
of such adoption, change or compliance. A certificate of the Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive absent manifest error.
In determining any such amount, the Bank may use any reasonable averaging and
attribution methods.
SECTION 2.14. Survival. The obligations of the Borrower under
--------
Sections 2.10, 2.11 and 2.12 shall survive termination of this Agreement and
payment of the Note but only to the extent such obligations arose prior to such
termination and payment.
SECTION 2.15. Effect of Interest Periods on Loan Maturities; Re-
-------------------------------------------------
Lending. Any other provision of this Agreement to the contrary notwithstanding,
- -------
each Advance hereunder shall be due and payable in full on the last day of the
Interest Period applicable to such Advance, on which day the Bank agrees to make
a further loan in an amount not more than the Advance so matured, subject to the
terms and conditions of Section 3.02; provided, however, the commitment to make
loans by the Bank as described in Section 2.01 hereof shall not be limited
hereby.
SECTION 2.16. Making of Payments. The Facility Fee and all payments
------------------
of principal of, or interest on, the Note shall be made in immediately available
funds to the Bank at its principal office in Atlanta, Georgia. All such
payments shall be made not later than 11:00 a.m. (Atlanta, Georgia time) and
funds received after that hour shall be deemed to have been received by the Bank
on the next following Business Day.
SECTION 2.17. Default Rate of Interest. If the Borrower shall fail to
------------------------
pay on the due date therefor, whether by acceleration or otherwise, any
principal owing under the Note, then interest shall accrue on such unpaid
principal from the due date until and including the date on which such principal
is paid in full at a rate of interest equal to the Prime Rate plus an additional
one percent (1%) per annum.
SECTION 2.18. Calculation of Interest. Interest payable on the Note
-----------------------
shall be calculated on the basis of a year of 360 days and paid for the actual
number of days elapsed.
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ARTICLE III
CONDITIONS TO BORROWINGS
------------------------
The obligation of the Bank to make an Advance to the Borrower
hereunder is subject to the satisfaction of the following conditions:
SECTION 3.01. Conditions Precedent to Initial Advance. At the time of
---------------------------------------
the making by the Bank of the initial Advance hereunder, all obligations of the
Borrower to the Bank incurred prior to the initial Advance (including, without
limitation, the Borrower's obligation to reimburse the fees and disbursements of
counsel to the Bank and any fees payable to the Bank on or prior to such date)
shall have been paid in full, and the Bank shall have received the following,
each dated as of the date of the initial Advance, in form and substance
satisfactory to the Bank:
(a) A duly executed Note payable to the order of the Bank in the
principal amount of the Commitment.
(b) Copies of the organizational papers of each of the Borrower and
Guarantor certified as true and correct by the Secretary of State of the State
of its incorporation, and certificates from the Secretaries of State of the
State of incorporation of the Borrower and Guarantor certifying their respective
good standing as a corporation in such States.
(c) Certified copies of the by-laws of the Borrower and Guarantor,
of resolutions of the Board of Directors of the Borrower approving this
Agreement and the Note and the borrowings hereunder, of resolutions of the Board
of Directors of the Guarantor approving the Guaranty and of all documents
evidencing other necessary corporate action and governmental approvals, if any,
with respect to this Agreement, the Note and the Guaranty.
(d) A certificate of the Secretary or Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to execute this Agreement and the Note and the other
documents to be delivered by it hereunder and a certificate of the Secretary or
Assistant Secretary of the Guarantor certifying the names and true signatures of
the officers of Guarantor authorized to execute the Guaranty and the other
documents to be delivered by it hereunder.
(e) The duly executed Guaranty.
(f) Favorable written opinions of counsel for the Borrower with
respect to the matters set forth in Sections 4.01, 4.02, 4.03, 4.04, 4.08, 4.10
and 4.11 of this Agreement and of counsel for the Guarantor with respect to the
matters set forth in Sections 1.01, 1.02, 1.03, 1.04, 1.08 and 1.10 of the
Guaranty, and covering such additional matters relating to the transactions
contemplated hereby as the Bank may reasonably request.
(g) All corporate and other proceedings taken or to be taken in
connection with the transactions contemplated hereby and all Loan Documents and
other documents incident thereto or delivered in connection therewith shall be
satisfactory in form and substance to the Bank.
SECTION 3.02. Conditions Precedent to Each Advance. At the time of
------------------------------------
the making by the Bank of each Advance hereunder (including the initial Advance)
(a) the following statements shall be true (and each of the giving by the
Borrower of a Notice of Borrowing in accordance with Section 2.03 hereof and the
acceptance by the Borrower of the proceeds of such Advance shall constitute a
representation and warranty by the Borrower that on the date of such Advance,
before and after giving effect thereto and to the application of the proceeds
therefrom, such statements are true):
(i) The representations and warranties contained in Article IV
hereof are true and correct on and as of the date of such Advance as though made
on and as of such date, and
(ii) No Default or Event of Default exists or would result from such
Advance or from the application of the proceeds therefrom; and
(b) the Bank shall have received such other approvals, opinions or documents as
it may reasonably request.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower represents and warrants as follows:
SECTION 4.01. Corporate Existence. The Borrower is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of the State of
New Hampshire and each Subsidiary is duly organized, validly existing and in
good standing under the law of the jurisdiction in which it is incorporated.
The Borrower and each Subsidiary is duly qualified and in good standing as a
foreign corporation authorized to do business in each jurisdiction (other than
the jurisdiction of its incorporation) in which the nature of its activities or
the character of the properties it owns or leases makes such qualification
necessary.
SECTION 4.02. Corporate Power and Authority; Contravention. The
--------------------------------------------
execution, delivery and performance by the Borrower of this Agreement and the
Note are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action (including any necessary shareholder action), and
do not and will not (i) violate any provision of any law, rule or regulation,
any judgment, order or ruling of any court or governmental agency, the
organizational papers or by-laws of the Borrower, or any indenture, agreement or
other instrument to which the Borrower is a party or by which the Borrower or
any of its properties is bound, or (ii) be in conflict with, result in a breach
of, or constitute with notice or lapse of time or both a default under any such
indenture, agreement or other instrument.
SECTION 4.03. Enforceability. This Agreement and the Note are the
--------------
legal, valid and binding agreements of the Borrower, enforceable against the
Borrower in accordance with their respective terms, except as the enforceability
of either of them may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors' rights and remedies generally and
by general principles of equity, whether considered in a proceeding at law or in
equity.
SECTION 4.04. Governmental Consent. Neither the nature of the
--------------------
Borrower or any of its Subsidiaries nor any of their respective businesses or
properties, nor any relationship between the Borrower or any Subsidiary and any
other Person, nor any circumstance in connection with the execution and delivery
of the Loan Documents and the consummation of the transactions contemplated
thereby is such as to require any authorization, consent, approval, order,
license, exemption or other action by or notice to or filing with any court or
administrative or governmental body (other than routine filings, if any, after
the date of closing with the Securities and Exchange Commission and/or state
Blue Sky authorities) in connection with the execution and delivery of this
Agreement, the Note, and the other Loan Documents or fulfillment of or
compliance with the terms and provisions hereof or thereof.
SECTION 4.05. Insurance. Each property owned by the Borrower or any
---------
of its Subsidiaries is insured for the benefit of the Borrower or a Subsidiary
in amounts deemed adequate by the Borrower's management against risks
customarily insured against by Persons operating businesses similar to those of
the Borrower or its Subsidiaries in the localities where such properties are
located.
SECTION 4.06. Financial Statements. The Borrower has furnished the
--------------------
Bank with the following financial statements, identified by the chief financial
officer of the Borrower: consolidated balance sheets of the Borrower and its
Subsidiaries as at December 31, 1995, 1994 and 1993, and consolidated statements
of income, retained earnings and changes in financial position of the Borrower
and its Subsidiaries for such years, all certified by Ernst & Young. All such
financial statements (including any related schedules and/or notes) are true and
correct in all material respects (subject, as to interim statements, to changes
resulting from audits and normal year end adjustments) , have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, and show all liabilities, direct and
contingent, of the Borrower and its Subsidiaries required to be shown in
accordance with such principles. The balance sheets fairly present the
condition of the Borrower and its Subsidiaries as at the dates thereof, and the
statements of income and statements of retained earnings and changes in
financial position fairly present the results of the operations of the Borrower
and its Subsidiaries for the periods indicated. There has been no material
adverse change in the business, condition or operations (financial or
otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole
since December 31, 1995.
SECTION 4.07. Taxes. The Borrower and each of its Subsidiaries has
-----
filed all federal, state and other income tax returns which are required to be
filed, and each has paid all taxes as shown on such returns and on all
assessments received by it to the extent that such taxes have become due or
except such as are being contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance with
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<PAGE>
generally accepted accounting principles. Federal, state and other income tax
returns of the Borrower and its Subsidiaries have been examined and reported on
by the taxing authorities or closed by applicable statutes and satisfied for all
fiscal years prior to and including the fiscal year ended on December 31, 1990.
SECTION 4.08. Actions Pending. There is no action, suit,
---------------
investigation, or proceeding pending or, to the best knowledge of the Borrower,
threatened against the Borrower or any of its Subsidiaries or any properties or
rights of the Borrower or any of its Subsidiaries, by or before any court,
arbitrator or administrative or governmental body, which might result in any
material adverse change in the business, condition or operations (financial or
otherwise), or prospects of the Borrower and its Subsidiaries taken as a whole
or which in any manner draws into question the validity of this Agreement or the
Note.
SECTION 4.09. Title to Properties. The Borrower and each of its
-------------------
Subsidiaries has good and marketable title to its respective real properties
(other than real properties that it leases) and good title to all of its other
respective properties and assets, including the properties and assets reflected
in the balance sheet as at December 31, 1995, hereinabove described (other than
properties and assets disposed of in the ordinary course of business), subject
to no Lien of any kind except Liens permitted by Section 6.01. The Borrower and
each of its Subsidiaries enjoys peaceful and undisturbed possession under all
leases necessary in any material respect for the operation of its respective
properties and assets, none of which contains any unusual or burdensome
provisions which might materially affect or impair the operations of such
properties and assets. All such leases are valid and subsisting and in full
force and effect.
SECTION 4.10. Federal Reserve Regulations. Each Advance will be used
---------------------------
solely for the purposes specified in this Agreement and none of such proceeds
will be used for the purpose of purchasing or carrying any "margin stock" in the
Borrower's name or for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any such "margin stock" or
for any other purpose which might constitute this transaction a "purpose credit"
as to the Bank. As used in this Section 4.10 the terms "margin stock" and
"purpose credit" shall have the meanings assigned to such terms in Regulation U
(12 C.F.R. Part 221) of the Board of Governors of the Federal Reserve System.
Neither the Borrower nor any agent of the Borrower acting on its behalf has
taken or will take any action which might cause this Agreement or the Note to
violate Regulations G, T, U, or X or (to the best knowledge of the Borrower) any
other regulation of the Board of Governors of the Federal Reserve System or to
violate the Securities Exchange Act of 1934, as amended, in each case as now in
effect or as the same may hereafter be in effect.
SECTION 4.11. Conflicting Agreements or Other Matters. Neither the
---------------------------------------
Borrower nor any of its Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially and
adversely affects its business, property or assets, or financial condition or
prospects. Neither the execution or delivery of this Agreement or the other
Loan Documents, nor fulfillment of or compliance with the terms and provisions
hereof and thereof, will conflict with, or result in a breach of the terms,
conditions or provisions of, or constitute a default under, or result in any
violation of, or result in the creation of any Lien upon any of the properties
or assets of the Borrower or any of its Subsidiaries pursuant to, the charter or
by-laws of the Borrower or any Subsidiary, any award of any arbitrator or any
agreement (including any agreement with stockholders), instrument, order,
judgment, decree, statute, law, rule or regulation to which the Borrower or any
of its Subsidiaries is subject. Neither the Borrower nor any of its
Subsidiaries is a party to, or otherwise subject to any provision contained in,
any instrument evidencing indebtedness of the Borrower or any of its
Subsidiaries, any agreement relating thereto or any other contract or agreement
(including its charter) which limits the amount of, or otherwise imposes
restrictions on the incurring of, Debt of the Borrower of the type to be
evidenced by the Note.
SECTION 4.12. Possession of Franchises, Licenses, Etc. The Borrower
---------------------------------------
and its Subsidiaries possess all franchises, certificates, licenses, permits and
other authorizations from governmental political subdivisions or regulatory
authorities, and all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the ownership, maintenance and operation of any of their
respective properties and assets, and neither the Borrower nor any of its
Subsidiaries is in violation of any thereof.
SECTION 4.13. Compliance with ERISA. As of the date hereof each Plan
---------------------
maintained by Borrower or any Subsidiary is in compliance with ERISA in all
material respects.
SECTION 4.14. Disclosure. Neither this Agreement nor any other
----------
document, certificate or statement furnished to the Bank by or on behalf of the
Borrower in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact peculiar to the
Borrower or any of its Subsidiaries which materially adversely affects or in the
future may (so far as the Borrower can now foresee) materially adversely affect
the
37 of 54
<PAGE>
business, property or assets, or financial condition of the Borrower or any of
its Subsidiaries which has not been set forth in this Agreement or in the other
documents, certificates and statements furnished to the Bank by or on behalf of
the Borrower prior to the date hereof in connection with the transactions
contemplated hereby.
ARTICLE V
AFFIRMATIVE COVENANTS
---------------------
So long as the Note shall remain unpaid or the Bank shall have any
Commitment hereunder, the Borrower will, unless the Bank shall otherwise consent
in writing:
SECTION 5.01. Corporate Existence; Maintenance of Properties. (i) Do
----------------------------------------------
or cause to be done all things necessary to preserve and maintain, and cause
each of its Subsidiaries to preserve and maintain, its respective corporate
existence, rights and franchises, (ii) cause its properties and the properties
of its Subsidiaries used or useful in the conduct of their respective businesses
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereto, all as in
the judgment of the Borrower may be necessary so that the businesses carried on
in connection therewith may be properly and advantageously conducted at all
times and (iii) will and will cause each of its Subsidiaries to qualify and
remain qualified to conduct business in each jurisdiction where the nature of
the business or ownership of property by the Borrower, or such Subsidiary, as
the case may be, may legally require such qualification.
SECTION 5.02. Compliance with Laws, Etc. Comply, and cause each of
-------------------------
its Subsidiaries to comply in all material respects, with all applicable
federal, state, and local laws, rules, regulations and orders, including,
without limitation, all federal, state and local laws, rules, regulations and
orders relating to insurance activities.
SECTION 5.03. Taxes and Claims. Pay, and cause each of its
----------------
subsidiaries to pay and discharge, or cause to be paid and discharged,
(i) before the same shall become delinquent, all taxes, assessments and other
governmental charges levied or imposed upon it or upon its income, profits or
properties and (ii) all claims (including, without limitation, claims for labor,
materials, supplies or services) which might, if unpaid, become a Lien upon and
of its property, provided that, in each case, neither the Borrower nor any
Subsidiary shall be required to pay or cause to be paid or discharged any such
tax, assessment, charge or claim whose amount or validity is being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves are being maintained and, provided, further, that the Borrower shall,
and shall cause each Subsidiary to, pay all such taxes, assessments, charges and
claims forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor.
SECTION 5.04. Compliance with Other Agreements. Conduct, and cause
--------------------------------
each Subsidiary to conduct, its business operations and obtain all necessary
permits and licenses in compliance with all agreements, indentures and mortgages
to which it is a party or by which it or any of its properties is bound.
SECTION 5.05. Inspection of Property. For purposes of verifying
----------------------
compliance with the terms of this Agreement, the Borrower will permit any Person
designated in writing by the Bank, at the Bank's expense, to visit and inspect
any of the properties of the Borrower and any of its Subsidiaries, to examine
the corporate books and financial records of the Borrower and its Subsidiaries
and make copies thereof and take extracts therefrom, and to discuss the affairs,
finances and accounts of any of such corporations with the principal officers of
the Borrower and its independent public accountants, all at such reasonable
times and as often as the Bank may reasonably request.
SECTION 5.06. Business. Remain, and cause each Subsidiary to remain,
--------
substantially in the respective business in which the Borrower and each
Subsidiary is engaged as of the date of this Agreement.
SECTION 5.07. Reporting Covenants. Deliver to the Bank:
-------------------
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Borrower, a consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of income, retained earnings and changes in financial
position for such fiscal year, setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail and
accompanied by a report thereon of Ernst & Young or other independent public
accountants acceptable to the Bank, which report will be unqualified as to scope
of audit and shall state that such consolidated financial statements present
fairly the consolidated financial condition of the Borrower and its Subsidiaries
as at the end of such fiscal year, and the consolidated results of operations
and changes in financial position of the Borrower and
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<PAGE>
its Subsidiaries for such fiscal year in accordance with generally accepted
accounting principles consistently applied and that the audit by such
accountants in connection with such consolidated financial statements was made
in accordance with generally accepted auditing standards;
(b) as soon as available and in any event within 45 days after the
end of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as of the end of
such quarter and the related consolidated statements of income, retained
earnings and changes in financial position for such quarter and for the portion
of the Borrower's fiscal year ended at the end of such quarter, setting forth in
each case in comparative form the figures for the corresponding quarter and the
corresponding portion of the Borrower's previous fiscal year, all certified
(subject to normal year end adjustments) as to fairness of presentation,
preparation in accordance with generally accepted accounting principles and
consistency of accounting methods by the chief financial officer of the
Borrower;
(c) forthwith upon the occurrence of any Default or Event of
Default, a certificate of the chief financial officer of the Borrower setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto;
(d) promptly after (i) the occurrence thereof, notice of the
institution by any Person of any action, suit or proceeding or any governmental
investigation or any arbitration, before any court or arbitrator or any
governmental or administrative body, agency, or official, against the Borrower,
any Subsidiary, or any material property of any of them, which action, suit,
proceeding, investigation or arbitration would be deemed material under
generally accepted accounting principles or (ii) the receipt of actual knowledge
thereof, notice of the threat of any such action, suit, proceeding,
investigation or arbitration, each such notice under this subsection to specify,
if known, the amount of damages being claimed or other relief being sought, the
nature of the claim, the Person instituting the action, suit, proceeding,
investigation or arbitration, and any other significant features of the claim;
(e) such other information respecting the condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries, as the Bank
may from time to time reasonably request.
SECTION 5.08. Use of Proceeds. The proceeds of each Advance under the
---------------
Commitment will be used solely to fund policyholder loans secured by mutual
fund shares.
ARTICLE VI
NEGATIVE COVENANTS
------------------
So long as the Note shall remain unpaid or the Bank shall have any
Commitment hereunder, the Borrower will not, without the written consent of the
Bank:
SECTION 6.01. Liens, Etc. Create, assume or suffer to exist, or
----------
permit any of its Subsidiaries to create, assume or suffer to exist, any Lien
upon any of its property or assets whether now owned or hereafter acquired,
except:
(a) Liens for taxes or assessments or other governmental charges or
levies not yet due or which are being actively contested in good faith by
appropriate proceedings if adequate reserves with respect thereto are maintained
on the books of the Borrower or its Subsidiaries, as the case may be, in
accordance with generally accepted accounting principles;
(b) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed by law created in
the ordinary course of business for amounts not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves are being maintained;
(c) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with workmens'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations (other than obligations for the payment of
borrowed money);
(d) easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering with the ordinary conduct of the
business of the Borrower or any of its Subsidiaries or any of their respective
properties.
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<PAGE>
SECTION 6.02. Debt. Create, incur, assume or suffer to exist, or
----
permit any of its Subsidiaries to create, incur, assume or suffer to exist, any
Debt which at any time shall exceed the aggregate principal sum of $200,000.
SECTION 6.03. Shareholders Equity. Permit its total shareholders'
-------------------
equity, determined in accordance with generally accepted accounting principles,
to be less than $1,000,000. at any time.
SECTION 6.04. ERISA Compliance. Neither borrower nor any Subsidiary
----------------
will take, or fail to take nor permit any ERISA Affiliate to take, or fail to
take, any action with respect to a Plan including, but not limited to,
(i) establishing any Plan, (ii) amending any Plan, (iii) terminating or
withdrawing from any Plan, or (iv) incurring an amount of unfunded benefit
liabilities, as defined in Section 4001(a)(18) of ERISA, or any withdrawal
liability under Title IV of ERISA, where such action or failure could have a
material adverse effect on the financial condition or operations of Borrower or
any Subsidiary, result in a lien on their property, or require Borrower or any
Subsidiary to provide any security.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
------------------------------
SECTION 7.01. Events of Default. Any one or more of the following
-----------------
shall constitute an Event of Default hereunder:
(a) The Borrower fails to pay when due any payment of principal or
interest due on the Note or any other sum payable hereunder within five (5) days
after such principal, interest or other sums becomes due and payable; or
(b) Any representation or warranty contained herein or deemed to
have been made hereunder or made by or furnished on behalf of the Borrower in
connection herewith shall be false or misleading in any material respect as of
the date made or deemed to have been made; or
(c) The Borrower fails to perform or observe any covenant, term or
condition contained in Section 5.07 or 5.08 or Article VI of this Agreement; or
(d) The Borrower fails to perform or observe any other material
covenant or material agreement of this Agreement not specifically referred to
elsewhere in this Section 7.01 and such failure shall continue for more than 10
calendar days; or
(e) Any representation or warranty contained in the Guaranty or
deemed to have been made in the Guaranty or made by or furnished on behalf of
the Guarantor in connection with the Guaranty shall be false or misleading in
any respect as of the date made or deemed to have been made; or
(f) The Guarantor fails to perform any covenant contained in
Article II of the Guaranty or terminates, withdraws, or denies liability under,
the Guaranty; or
(g) The Borrower ceases to be wholly-owned (directly or indirectly)
by Guarantor; or
(h) The Borrower, the Guarantor or the Restricted Subsidiary (i)
defaults in any payment of principal or interest on any other obligation for
money borrowed (or any obligation under a capital lease, any obligation under a
conditional sale or other title retention agreement, any obligation issued or
assumed as full or partial payment for property whether or not secured by a
purchase money mortgage, or any obligation under notes payable or drafts
accepted representing extensions of credit) beyond any period of grace provided
with respect thereto, or (ii) fails to perform or observe any other agreement,
term or condition contained in any agreement under which any obligation
described in clause (i) is created (or if any other event shall occur and be
continuing thereunder) with an outstanding principal balance in excess of
$25,000,000. and the effect of such failure or other event is to cause or to
permit the holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause such obligation to become due prior to any stated
maturity; or
(i) The Borrower, the Guarantor or the Restricted Subsidiary fails
to pay its debts generally as they become due or shall admit in writing its
inability to pay its debts generally; or
(j) The Borrower, the Guarantor or the Restricted Subsidiary shall
make or take any action to make an assignment for the benefit of creditors,
petition or take any action to petition any tribunal for the
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<PAGE>
appointment of a custodian, receiver or any trustee for it or a substantial part
of its assets, or shall commence or take any action to commence any proceeding
under any bankruptcy, reorganization, arrangement, readjustment of debt,
dissolution, liquidation or debtor relief law or statute of any jurisdiction,
whether now or hereafter in effect including, without limitation, the Bankruptcy
Code; or, if there shall have been filed any such petition or application, or
any such proceeding shall have been commenced against it, in which an order for
relief is entered which remains unstayed and in effect for more than 60 days; or
the Borrower, the Guarantor or the Restricted Subsidiary by any act or omission
shall indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or any trustee for it or any substantial part of any of its properties,
or shall suffer to exist any such custodianship, receivership or trusteeship; or
any corporate action is taken by the Borrower or any Subsidiary for the purpose
of effecting any of the foregoing; or
(k) The Borrower, the Guarantor or the Restricted Subsidiary shall
have concealed, removed, or permitted to be concealed or removed, any part of
its property, with intent to hinder, delay or defraud its creditors or any of
them, or made or suffered a transfer of any of its property which may be
fraudulent under any bankruptcy, fraudulent conveyance or similar law; or shall
have made any transfer of its property to or for the benefit of a creditor at a
time when other creditors similarly situated have not been paid while the
Borrower, the Guarantor or the Restricted Subsidiary is insolvent; or shall have
suffered or permitted, while insolvent, any creditor to obtain a Lien upon any
of its property through legal proceedings or distraint; or
(l) Any order, judgment or decree is entered in any proceedings
against the Borrower, the Guarantor or the Restricted Subsidiary decreeing the
dissolution of the Borrower, the Guarantor or the Restricted Subsidiary and such
order, judgment or decree remains unstayed and in effect for more than 60 days;
or
(m) A judgment or order for the payment of money in an amount in
excess of $30,000,000 or otherwise materially adverse to the business, financial
condition, results of operations or prospects of the Borrower, the Guarantor or
the Restricted Subsidiary is rendered against the Borrower, the Guarantor or the
Restricted Subsidiary and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall be any
period of 30 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
SECTION 7.02. Remedies on Default.
-------------------
(a) Upon the occurrence and during the continuation of an Event of
Default (other than an Event of Default described in Section 7.01(j)), the Bank
may, at its election, (i) terminate all obligations to the Borrower, including,
without limitation, all obligations to make Advances under this Agreement, (ii)
declare the Note, including, without limitation, principal, accrued interest and
costs of collection (including, without limitation, reasonable attorneys' fees
if collected by or through an attorney at law or in bankruptcy, receivership or
other judicial proceedings) immediately due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are expressly
waived.
(b) Upon the occurrence of an Event of Default under Section
7.01(j), (i) all obligations of the Bank to the Borrower, including, without
limitation, all obligations to make Advances under this Agreement, shall
terminate automatically and (ii) the Note, including, without limitation,
principal, accrued interest and costs of collection (including, without
limitation, reasonable attorneys' fees if collected by or through an attorney at
law or in bankruptcy, receivership or other judicial proceedings) shall be
immediately due and payable, without presentment, demand, protest, or any other
notice of any kind, all of which are expressly waived.
(c) Upon the occurrence of an Event of Default and acceleration of
the Note as provided in (a) or (b) above, the Bank may pursue any remedy
available under this Agreement, under the Note, or under any other Loan
Document, or available at law or in equity, all of which shall be cumulative.
(d) All payments with respect to this Agreement received by the
Bank after the occurrence of an Event of Default and acceleration of the Note,
shall be applied first, to the costs and expenses incurred by the Bank as a
-----
result of the Default, second, to the payment of accrued and unpaid fees, third,
------ -----
to the payment of accrued and unpaid interest on the Note, to and including the
date of such application, fourth, to the payment of the unpaid principal of the
------
Note, and fifth, to the payment of all other amounts then owing to the Bank
-----
under the Loan Documents. No application of the payments will cure any Event of
Default or prevent acceleration, or continued acceleration, of amounts payable
under the Loan Documents or prevent the exercise, or continued exercise, of
rights or remedies of the Bank hereunder or under applicable law.
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<PAGE>
ARTICLE VIII
MISCELLANEOUS
-------------
SECTION 8.01. No Waiver. No delay or failure on the part of the Bank
---------
or any holder of any of the Note in the exercise of any right, power or
privilege granted under this Agreement, under any other Loan Document, or
available at law or in equity, shall impair any such right, power or privilege
or be construed as a waiver of any Event of Default or any acquiescence therein.
No single or partial exercise of any such right, power or privilege shall
preclude the further exercise of such right, power or privilege. No waiver
shall be valid against the Bank unless made in writing and signed by the Bank,
and then only to the extent expressly specified therein.
SECTION 8.02. Notices. Unless otherwise provided herein, all notices,
-------
requests and other communications provided for hereunder shall be in writing
(including bank wire, telex, telecopy or similar teletransmission or writing)
and shall be given at the following addresses:
(1) If to the Bank, SunTrust Bank, Atlanta
711 Fifth Avenue, 16th Floor
New York, New York 10022
Attention: U.S. Corporate - Northeast Group
Telecopy: (212) 371-9386
(2) If to Borrower, Hampshire Funding, Inc.
One Granite Place, P.O. Box 515
Concord, N.H. 03302
Attention: Russell C. Simpson
Telecopy: (603) 229-6101
Any such notice, request or other communication shall be effective (i) if given
by telecopy, when such telecopy is transmitted to the telecopy number specified
above and the appropriate confirmation is received, (ii) if given by mail, upon
the earlier of receipt or the third Business Day after such communication is
deposited in the United States mails, registered or certified, with first class
postage prepaid, addressed as aforesaid or (iii) if given by any other means
(including, without limitation, by air courier), when delivered at the address
specified herein. The Borrower or the Bank may change its address for notice
purposes by notice to the other parties in the manner provided herein.
SECTION 8.03. Governing Law. This Agreement and all other Loan
-------------
Documents shall become effective upon execution by the Bank in Atlanta, Georgia
and shall be governed by and interpreted in accordance with the laws of the
State of Georgia.
SECTION 8.04. Survival of Representations and Warranties. All
------------------------------------------
representations and warranties contained herein or made by or furnished on
behalf of the Borrower in connection herewith shall survive the execution and
delivery of this Agreement and all other Loan Documents.
SECTION 8.05. Descriptive Headings. The descriptive headings of the
--------------------
several sections of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
SECTION 8.06. Severability. If any part of any provision contained in
------------
this Agreement or in any other Loan Document shall be invalid or unenforceable
under applicable law, said part shall be ineffective to the extent of such
invalidity only, without in any way affecting the remaining parts of said
provision or the remaining provisions.
SECTION 8.07. Time Is of the Essence. Time is of the essence in
----------------------
interpreting and performing this Agreement and all other Loan Documents.
SECTION 8.08. Counterparts. This Agreement may be executed in any
------------
number of counterparts, each of which shall be deemed to be an original and all
of which, taken together, shall constitute one and the same instrument.
SECTION 8.09. Payment of Costs. The Borrower shall pay all costs,
----------------
expenses, taxes and fees (i) incurred by the Bank in connection with the
preparation, execution and delivery of this Agreement and all other Loan
Documents including, without limitation, the costs and professional fees of
counsel for the Bank, whether or not
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<PAGE>
the transaction contemplated hereby shall be consummated, and any and all stamp,
intangible or other taxes that may be payable or determined in the future to be
payable in connection therewith, but specifically excluding any franchise taxes
at any time paid by Bank and all taxes at any time imposed on the overall net
income of the Bank; (ii) incurred by the Bank in connection with administration
of the Advances and the Loan Documents in accordance with the provisions thereof
and the preparation, execution and delivery of any waiver, amendment or consent
by the Bank relating to the Loan Documents, including, without limitation, the
costs and professional fees of counsel for the Bank; and (iii) incurred by the
Bank in enforcing the Loan Documents, including, without limitation, reasonable
attorneys' fees of counsel for the Bank.
SECTION 8.10. Successors and Assigns. This Agreement shall bind and
----------------------
inure to the benefit of the Borrower and the Bank, and their respective
successors and assigns; provided, however, the Borrower shall have no right to
-----------------
assign its rights or obligations hereunder to any Person. Notwithstanding
anything in this Agreement to the contrary, the Bank shall have the right, but
shall not be obligated, (i) to sell participations in the loans made pursuant
hereto to non-affiliated banks and financial institutions; provided, however,
-------- -------
(a) any such participations sold by Bank shall be in a minimum principal amount
of $10,000,000, and (b) no such participant shall have any rights hereunder, and
(c) the Bank shall have received the Borrower's written consent (which consent
shall not be unreasonably withheld) prior to the sale of any such participation,
and (ii) to sell participations in the loans made pursuant hereto to any
affiliate of the Bank provided that no such participant shall have any rights
--------
hereunder.
SECTION 8.11. Cumulative Remedies; No Waiver. The rights, powers, and
------------------------------
remedies of the Bank provided herein or in any other Loan Document are
cumulative and not exclusive of any right, power, or remedy provided by law or
equity.
SECTION 8.12. Amendments; Consents. No amendment, modification,
--------------------
supplement, termination, or waiver of any provision of this Agreement or any
other Loan Document, and no consent to any departure by the Borrower, the
Guarantor or the Restricted Subsidiary therefrom, may in any event be effective
unless in writing signed by the Bank, and then only in the specific instance and
for the specific purpose given.
SECTION 8.13. Set-Off. Upon the occurrence and during the
-------
continuation of an Event of Default, the Borrower authorizes the Bank, without
notice or demand, to apply any indebtedness due or to become due to the
Borrower, the Guarantor or any Subsidiary of the Guarantor from the Bank in
satisfaction of any of the indebtedness, liabilities or obligations of the
Borrower under this Agreement or under any other Loan Document, including,
without limitation, the right to set-off against any deposits or other cash
collateral of the Borrower, the Guarantor or any Subsidiary of the Guarantor
held by the Bank.
SECTION 8.14. Indemnity. The Borrower agrees to protect, indemnify
---------
and save harmless the Bank, and all directors, officers, employees and agents of
the Bank, from and against any and all (i) claims, demands and causes of action
of any nature whatsoever brought by any Person not a party to this Agreement and
arising from or related or incident to this Agreement or any other Loan
Document, (ii) costs and expenses incident to the defense of such claims,
demands and causes of action, including, without limitation, reasonable
attorneys' fees, and (iii) liabilities, judgments, settlements, penalties and
assessments arising from such claims, demands and causes of action, provided
such claims, costs and liabilities are not proximately caused by such Bank's
gross negligence or willful misconduct or breach of this Agreement. The
indemnity contained in this section shall survive the termination of this
Agreement.
SECTION 8.15. Usury. It is the intent of the parties hereto not to
-----
violate any federal or state law, rule or regulation pertaining either to usury
or to the contracting for or charging or collecting of interest, and the
Borrower and the Bank agree that, should any provision of this Agreement or of
the Note, or any act performed hereunder or thereunder, violate any such law,
rule or regulation, then the excess of interest contracted for or charged or
collected over the maximum lawful rate of interest shall be applied to the
-------
outstanding principal indebtedness due to the Bank by the Borrower under this
Agreement.
SECTION 8.16. Jurisdiction and Venue. The Borrower agrees, without
----------------------
power of revocation, that any civil suit or action brought against it as a
result of any of its obligations under this Agreement or under any other Loan
Document may be brought against it either in the Superior Court of Fulton
County, Georgia, or in the United States District Court for the Northern
District of Georgia, and the Borrower hereby irrevocably submits to the
jurisdiction of such courts and irrevocably waives, to the fullest extent
permitted by law, any objections that it may now or hereafter have to the laying
of the venue of such civil suit or action and any claim that such civil suit or
action has been brought in an inconvenient forum, and the Borrower agrees that
final judgment in any such civil suit or action shall be conclusive and binding
upon it and shall be enforceable against it by suit upon such judgment in any
court of competent jurisdiction.
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<PAGE>
SECTION 8.17. Construction. Should any provision of this Agreement
------------
require judicial interpretation, the parties hereto agree that the court
interpreting or construing the same shall not apply a presumption that the terms
hereof shall be more strictly construed against one party by reason of the rule
of construction that a document is to be more strictly construed against the
party that itself or through its agents prepared the same, it being agreed that
the Borrower, the Bank and their respective agents have participated in the
preparation hereof.
SECTION 8.18. Entire Agreement. This Agreement and the other Loan
----------------
Documents executed and delivered contemporaneously herewith, together with the
exhibits and schedules attached hereto and thereto, constitute the entire
understanding of the parties with respect to the subject matter hereof, and any
other prior or contemporaneous agreements, whether written or oral, with respect
thereto including, without limitation, any loan commitment from the Bank to the
Borrower, are expressly superseded hereby. The execution of this Agreement and
the other Loan Documents by the Borrower was not based upon any facts or
materials provided by the Bank, nor was the Borrower induced to execute this
Agreement or any other Loan Document by any representation, statement or
analysis made by the Bank.
SECTION 8.19. Confidentiality. Any information disclosed by the
---------------
Borrower or the Guarantor to the Bank, which was (a) disclosed to Bank in
connection with the arrangements provided for herein, (b) proprietary in nature
and not available in the public domain at the time of disclosure to Bank, and
(c) subject to specific nondisclosure policies of Borrower or Guarantor, as the
case may be, at the time of disclosure to Bank, shall not be disclosed by the
Bank to any other Person except (i) to its directors, officers, employees and
agents, including its independent accountants and legal counsel, (ii) to
regulators and other Persons pursuant to statutory and regulatory requirements
(iii) pursuant to any mandatory court order, subpoena or other legal process
(iv) to the Bank or an affiliate thereof, (v) pursuant to any agreement
heretofore or hereafter made between the Bank and the Borrower or the Guarantor
which permits such disclosure, (vi) in connection with the exercise of any
remedy under this Agreement or the Note (vii) in connection with any claim or
defense asserted by or against Bank, Borrower, or Guarantor, or (viii) subject
to an agreement containing provisions substantially the same as those of this
Section, to any participant in or assignee of, or prospective participant in or
assignee of, any loan or Commitment. The provisions of this Section 8.19 shall
be deemed satisfied by the Bank if and to the extent the Bank shall have used
its reasonable best efforts to maintain the confidentiality of the data or
information referred to above, exercising the same degree of care that the Bank
would accord to its own confidential information or documents.
WITNESS the hand and seal of the parties hereto through their duly
authorized officers, as of the date first above written.
BORROWER:
Hampshire Funding, Inc.
By:
---------------------------------------
Title:
------------------------------------
[CORPORATE SEAL]
Attest:
------------------------------------
Title:
-------------------------------------
BANK:
SunTrust Bank, Atlanta
By:
----------------------------------------
Title:
-------------------------------------
[BANK SEAL] And:
---------------------------------------
Title:
-------------------------------------
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<PAGE>
EXHIBIT (10)(b)
REVOLVING CREDIT NOTE
---------------------
PRINCIPAL: $60,000,000.00
DATE: October 23, 1996
PLACE: Atlanta, Georgia
FOR VALUE RECEIVED, the undersigned HAMPSHIRE FUNDING, INC., a New
Hampshire corporation (the "Borrower"), unconditionally promises to pay to the
order of SUNTRUST BANK, ATLANTA, a Georgia banking corporation, on October 22,
2001 or sooner upon the occurrence of an Event of Default, the principal sum of
SIXTY MILLION AND NO/100 DOLLARS ($60,000,000.00) or so much thereof as shall
have been advanced hereunder and remain outstanding.
In addition to principal, the Borrower agrees to pay interest on the
principal amounts outstanding hereunder from time to time from the date hereof
until paid at the rates as provided in the Revolving Credit Agreement (as
hereinafter defined). All payments of principal and interest hereunder shall be
made in U.S. dollars and in immediately available funds at the principal offices
of the Bank in Atlanta, Georgia, or at such other location as the holder(s)
hereof shall designate in writing.
This Note evidences indebtedness incurred under, and is subject to the
terms and provisions of, a certain Revolving Credit Agreement dated as of
October 23, 1996 (together with all amendments thereto, being herein referred to
as the "Revolving Credit Agreement") between the Borrower and the Bank, to which
Revolving Credit Agreement reference is hereby made for a statement of said
terms and provisions. This Note is entitled to the benefits and security as
provided in the Revolving Credit Agreement and the Guaranty dated as of
October 23, 1996, executed by Chubb Life Insurance Company of America in favor
of the Bank.
Upon the occurrence and during the continuation of any Event of
Default provided in the Revolving Credit Agreement other than under
Section 7.01(j), the Bank may declare the entire unpaid balance hereof to be,
and upon the occurrence of an Event of Default under Section 7.01(j), the entire
unpaid balance hereof shall become immediately due and payable in the manner and
with the effect provided in the Revolving Credit Agreement, and Bank may
thereupon exercise any of the remedies referred to in the Revolving Credit
Agreement or existing under applicable law.
In addition to and not in limitation of the foregoing and the
provisions of the Revolving Credit Agreement, the Borrower further agrees to pay
all expenses of collection, including reasonable attorneys' fees, if this Note
shall be collected by law or through an attorney at law, or in bankruptcy,
receivership or other court proceedings.
This Note may be prepaid in accordance with the terms and provisions
of Section 2.06 of the Revolving Credit Agreement.
This Note has been delivered in Atlanta, Georgia, and shall be
governed by and construed under the laws of Georgia. Time is of the essence
under this Note.
PRESENTMENT, PROTEST AND NOTICE OF DISHONOR ARE HEREBY WAIVED BY THE
BORROWER.
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<PAGE>
Executed under hand and seal of the Borrower as of the date first
above written.
HAMPSHIRE FUNDING, INC.
[CORPORATE SEAL] By:
----------------------------------------
Title:
-----------------------------
Attest:
------------------------------------
Title:
-----------------------------
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<PAGE>
EXHIBIT (10)(c)
GUARANTY
--------
This Guaranty is made by CHUBB LIFE INSURANCE COMPANY OF AMERICA, a
New Hampshire corporation, (the "Guarantor"), in favor of SUNTRUST BANK,
ATLANTA, a Georgia banking corporation (the "Bank").
The Bank and HAMPSHIRE FUNDING, INC. (the "Borrower") are parties to a
Loan Agreement dated as of October 23, 1996 (as amended, modified and
supplemented and in effect from time to time, the "Loan Agreement") providing
for a Revolving Credit Commitment not to exceed the aggregate principal amount
of $60,000,000.00 at any one time outstanding. Unless otherwise provided
herein, defined terms shall have the meanings ascribed to them in the Loan
Agreement. The Advances under the Revolving Credit are evidenced by a Revolving
Credit Note dated October 23, 1996 executed by Borrower (the "Note"). As a
condition to the Bank's willingness to enter into the Loan Agreement, the Bank
has required that the Guarantor enter into this Guaranty.
The Guarantor hereby represents and warrants to the Bank that the
Advances to the Borrower shall be to the benefit of the Guarantor and in
consideration thereof, and for other good and valuable consideration, and
intending to be legally bound hereby, the Guarantor hereby represents and
warrants to, and agrees with, the Bank as follows:
ARTICLE I
---------
REPRESENTATIONS AND WARRANTIES
------------------------------
The Guarantor represents and warrants as follows:
SECTION 1.01. The Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Hampshire and
each of its Subsidiaries is duly organized, validly existing and in good
standing under the law of the jurisdiction in which it is incorporated. The
Guarantor and each of its Subsidiaries is duly qualified and in good standing as
a foreign corporation authorized to do business in each jurisdiction (other than
the jurisdiction of its incorporation) in which the nature of its activities or
the character of the properties it owns or leases makes such qualification
necessary.
SECTION 1.02. The execution, delivery and performance by the Guarantor
of this Guaranty are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action (including any necessary
shareholder action), and do not and will not (i) violate any provision of any
law, rule or regulation, any judgment, order or ruling of any court or
governmental agency, the organizational papers or by-laws of the Guarantor, or
any indenture, agreement or other instrument to which the Guarantor is a party
or by which the Guarantor or any of its properties is bound, or (ii) be in
conflict with, result in a breach of, or constitute with notice or lapse of time
or both a default under any such indenture, agreement or other instrument.
SECTION 1.03. This Guaranty is the legal, valid and binding agreement
of the Guarantor, enforceable against the Guarantor in accordance with its
terms, except as its enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights and
remedies generally and by general principles of equity, whether considered in a
proceeding at law or in equity.
SECTION 1.04. Neither the nature of the Guarantor or any of its
Subsidiaries nor any of their respective businesses or properties, nor any
relationship between the Guarantor or any Subsidiary and any other Person, nor
any circumstance in connection with the execution and delivery of the Loan
Documents and the consummation of the transactions contemplated thereby is such
as to require any authorization, consent, approval, order, license, exemption or
other action by or notice to or filing with any court or administrative or
governmental body (other than routine filings, if any, after the date of closing
with the Securities and Exchange Commission and/or state Blue Sky authorities)
in connection with the execution and delivery of this Guaranty and the other
Loan Documents or fulfillment of or compliance with the terms and provisions
hereof or thereof.
SECTION 1.05. All the outstanding shares of the capital stock of
Borrower and Chubb Colonial Life Insurance Company and Chubb Sovereign Life
Insurance Company (hereinafter referred to individually as a "Restricted
Subsidiary" and collectively as "Restricted Subsidiaries") have been validly
issued and are fully paid and nonassessable and all such outstanding shares are
owned of record and beneficially by the Guarantor free of any Lien or claim.
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<PAGE>
SECTION 1.06. The Guarantor has furnished the Bank with the following
financial statements, identified by the chief financial officer of the
Guarantor: (i) consolidated balance sheets of the Guarantor and its Subsidiaries
as at December 31, 1995, 1994 and 1993, and consolidated statements of income,
retained earnings and changes in financial position of the Guarantor and its
Subsidiaries for such years, all certified by Ernst & Young; and (ii) statutory
financial statements of the Guarantor each of the Restricted Subsidiaries as at
December 31, 1995, 1994 and 1993. All such financial statements (including any
related schedules and/or notes) are true and correct in all material respects
(subject, as to interim statements, to changes resulting from audits and normal
year end adjustments), have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods involved or in
accordance with statutory requirements, as the case may be, and show all
liabilities, direct and contingent, of the Guarantor and its Subsidiaries
required to be shown in accordance with such principles or requirements, as the
case may be. The balance sheets fairly present the condition of the Guarantor
and its Subsidiaries as at the dates thereof, and the statements of income and
statements of retained earnings and changes in financial position fairly present
the results of the operations of the Guarantor and its Subsidiaries for the
periods indicated. There has been no material adverse change in the business,
condition or operations (financial or otherwise), or prospects of the Guarantor
and its Subsidiaries taken as a whole since December 31, 1995.
SECTION 1.07. The Guarantor and each of its Subsidiaries has filed all
federal, state and other income tax returns which are required to be filed, and
each has paid all taxes as shown on such returns and on all assessments received
by it to the extent that such taxes have become due or except such as are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with generally accepted accounting
principles. Federal, state and other income tax returns of the Guarantor and
its Subsidiaries have been examined and reported on by the taxing authorities or
closed by applicable statutes and satisfied for all fiscal years prior to and
including the fiscal year ended on December 31, 1990.
SECTION 1.08. There is no action, suit, investigation, or proceeding
pending or, to the best knowledge of the Guarantor, threatened against the
Guarantor or any of its Subsidiaries or any properties or rights of the
Guarantor or any of its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body, which might result in any material adverse
change in the business, condition or operations (financial or otherwise), or
prospects of the Guarantor and its Subsidiaries taken as a whole or which in any
manner draws into question the validity of this Guaranty.
SECTION 1.09. The Guarantor and each of its Subsidiaries has good and
marketable title to its respective real properties (other than real properties
that it leases) and good title to all of its other respective properties and
assets, including the properties and assets reflected in the balance sheet as at
December 31, 1995 hereinabove described (other than properties and assets
disposed of in the ordinary course of business).
SECTION 1.10. Neither the execution or delivery of this Guaranty or
the other Loan Documents, nor fulfillment of or compliance with the terms and
provisions hereof and thereof, will conflict with, or result in a breach of the
terms, conditions or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon any of the
properties or assets of the Guarantor or any of its Subsidiaries pursuant to,
the charter or by-laws of the Guarantor or any Subsidiary, any award of any
arbitrator or any agreement (including any agreement with stockholders),
instrument, order, judgment, decree, statute, law, rule or regulation to which
the Guarantor or any of its Subsidiaries is subject. Neither the Guarantor nor
any of its Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the Guarantor or any of
its Subsidiaries, any agreement relating thereto or any other contract or
agreement (including its charter) which limits the amount of, or otherwise
imposes restrictions on contingent obligations of the Guarantor of the type
evidenced hereby.
SECTION 1.11. The Guarantor and each of its Subsidiaries possess all
franchises, certificates, licenses, permits and other authorizations from
governmental, political subdivisions or regulatory authorities, and all patents,
trademarks, service marks, trade names, copyrights, licenses and other rights,
free from burdensome restrictions, that are necessary for the ownership,
maintenance and operation of any of their respective properties and assets and
neither the Borrower nor any of its Subsidiaries is in violation of any thereof.
48 of 54
<PAGE>
ARTICLE II
----------
AFFIRMATIVE COVENANTS
---------------------
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under the Loan Agreement, the Guarantor will, unless the Bank shall
otherwise consent in writing:
SECTION 2.01. (i) Do or cause to be done all things necessary to
preserve and maintain, and cause each of its Restricted Subsidiaries to preserve
and maintain, its respective corporate existence, rights and franchises, except
as otherwise permitted pursuant to Section 2.08 hereof, (ii) cause its
properties and the properties of its Restricted Subsidiaries used or useful in
the conduct of their respective businesses to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereto, all as in the judgment of the Guarantor may be
necessary so that the businesses carried on in connection therewith may be
properly and advantageously conducted at all times and (iii) will and will cause
each of its Restricted Subsidiaries to qualify and remain qualified to conduct
business in each jurisdiction where the nature of the business or ownership of
property by the Guarantor, or such Restricted Subsidiary, as the case may be,
may legally require such qualification.
SECTION 2.02. Comply, and cause each of its Subsidiaries to comply,
with all applicable federal, state, and -local laws, rules, regulations and
orders, including, without limitation, all federal, state and local laws, rules,
regulations and orders relating to insurance activities.
SECTION 2.03. Pay, and cause each of its Subsidiaries to pay and
discharge, or cause to be paid and discharged, (i) before the same shall become
delinquent, all taxes, assessments and other governmental charges levied or
imposed upon it or upon its income, profits or properties and (ii) all claims
(including, without limitation, claims for labor, materials, supplies or
services) which might, if unpaid, become a Lien upon any of its property,
provided that, in each case, neither the Guarantor nor any Subsidiary shall be
required to pay or cause to be paid or discharged any such tax, assessment,
charge or claim whose amount or validity is being contested in good faith by
appropriate proceedings and with respect to which adequate reserves are being
maintained and, provided, further, that the Guarantor shall, and shall cause
each of its Subsidiaries to, pay all such taxes, assessments, charges and claims
forthwith upon the commencement of proceedings to foreclose any Lien which may
have attached as security therefor.
SECTION 2.04. Conduct, and cause each of its Subsidiaries to conduct,
its business operations and obtain all necessary permits and licenses in
compliance with all agreements, indentures and mortgages to which it is a party
or by which it or any of its properties is bound.
SECTION 2.05. Permit any Person designated in writing by the Bank, at
the Bank's expense, to visit and inspect any of the properties of the Guarantor
and any of its Subsidiaries, to examine the corporate books and financial
records of the Guarantor and its Subsidiaries and make copies thereof and take
extracts therefrom, and to discuss the affairs, finances and accounts of any of
such corporations with the principal officers of the Guarantor and its
independent public accountants, all at such reasonable times and as often as the
Bank may reasonably request.
SECTION 2.06. Remain, and cause each Subsidiary to remain,
substantially in the respective business in which the Guarantor and each
Subsidiary is engaged as of the date of this Guaranty.
SECTION 2.07. Deliver to the Bank:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Guarantor, a consolidated balance sheet of
the Guarantor and its Subsidiaries as of the end of such fiscal year and
the related consolidated statements of income, retained earnings and
changes in financial position for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by a report thereon of Ernst & Young or
other independent public accountants acceptable to the Bank, which report
will be unqualified as to scope of audit and shall state that such
consolidated financial statements present fairly the consolidated financial
condition of the Guarantor and its Subsidiaries as at the end of such
fiscal year, and the consolidated results of operations and changes in
financial position of the Guarantor and its Subsidiaries for such fiscal
year in accordance with generally accepted accounting principles
consistently applied and that the audit by such accountants in connection
with such consolidated financial statements was made in accordance with
generally accepted auditing standards;
49 of 54
<PAGE>
(b) as soon as available and in any event within 45 days after the
end of the first three quarters of each fiscal year of the Guarantor, a
consolidated balance sheet of the Guarantor and its Subsidiaries as of the
end of such quarter and the related consolidated statements of income,
retained earnings and changes in financial position for such quarter and
for the portion of the Guarantor's fiscal year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the Guarantor's
previous fiscal year, all certified (subject to normal year end adjustment)
as to fairness of presentation, preparation in accordance with generally
accepted accounting principles and consistency of accounting methods by the
chief financial officer of the Guarantor;
(c) as soon as available and in any event within 90 days after the
end of each fiscal year of Guarantor and each Restricted Subsidiary, a copy
of Guarantor's and each Restricted Subsidiary's statutory financial
statements for such fiscal year, certified as to compliance with statutory
reporting requirements by the chief financial officer of Guarantor or such
Restricted Subsidiary;
(d) as soon as available and in any event within 45 days after the
end of the first three quarters of each fiscal year of Guarantor and each
Restricted Subsidiary, a copy of Guarantor's and each Restricted
Subsidiary's statutory financial statements for such quarter, all certified
(subject to normal year end adjustments) as to compliance with statutory
reporting requirements by the chief financial officer of Guarantor or such
Restricted Subsidiary;
(e) promptly upon the mailing or filing thereof, copies of all
reports and proxy statements which the Guarantor sends to its security
holders, and copies of all reports and registration statements which the
Guarantor or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange; and
(f) such other information respecting the condition or operations,
financial or otherwise, of the Guarantor or any of its Subsidiaries, as the
Bank may from time to time reasonably request.
NEGATIVE COVENANTS
------------------
So long as the Note shall remain unpaid or the Bank shall have any
Commitment under the Loan Agreement, the Guarantor will not, without the written
consent of the Bank:
SECTION 2.08. Permit the Borrower or any Restricted Subsidiary (either
directly or indirectly by the issuance of rights or options for, or securities
convertible into, such shares) to issue, sell or dispose of any shares of its
stock of any class (other than directors' qualifying shares, if any) except to
the Guarantor, the Borrower or another Restricted Subsidiary.
SECTION 2.09. Permit the ratio of Total Adjusted Capital to Company
Action Level Risk-Based Capital to at any time be less than 1.25:1. Company
Action Level is defined as two times Authorized Control Level Risk-Based
Capital. Authorized Control Level Risk-Based Capital and Total Adjusted Capital
will be calculated using the 1995 NAIC Life Risk-Based Capital formulas and are
published in the Five-Year Historical Data Section of the Life and Accident &
Health Annual Statement.
ARTICLE III
-----------
GUARANTY AGREEMENTS
-------------------
SECTION 3.01. Guarantor hereby unconditionally and irrevocably
guarantees to the Bank, and any transferee of the Bank, the full and prompt
payment of all indebtedness evidenced by the Note and all other present and
future liabilities of Borrower to the Bank in connection with the Note, all
renewals or extensions in whole or in part of such Note, all indebtedness and
obligations under the Loan Agreement, all amounts advanced by the Bank to
protect or preserve the value of any security for this Guaranty or the Note, and
all costs, charges, expenses (including reasonable attorneys' fees) incurred or
sustained by the Bank in enforcing the obligations of Borrower under the Note or
Loan Agreement or of Guarantor hereunder (collectively, the "Liabilities"). If
any portion of the Liabilities is not paid when due, Guarantor hereby agrees to
and will immediately pay same, without resort by Bank to any other Person or
party. The obligation of Guarantor to Bank hereunder is primary, absolute and
unconditional.
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<PAGE>
SECTION 3.02. This Guaranty is continuing in nature and shall be
effective with respect to the full amount of Liabilities outstanding, now
existing or hereafter made or extended, regardless of the amount. This Guaranty
shall remain in full force and effect until such time as all Liabilities have
been paid in full and until Bank has no further obligation to extend credit
under the Revolving Credit Commitment.
SECTION 3.03. Guarantor acknowledges and agrees that the amounts
outstanding under the Note may fluctuate from time to time hereafter, and that
Borrower may make payments on the Note from time to time hereafter. Guarantor
expressly agrees that this Guaranty shall continue in full force and effect
notwithstanding such fluctuations and payments, and whether or not any amounts
are outstanding under the Note at any particular time.
SECTION 3.04. Guarantor hereby waives notice of Bank's acceptance of
this Guaranty and the creation, extension or renewal of any of the Liabilities
and of any occurrence of a Default or an Event of Default. Guarantor hereby
consents and agrees that, at any time or times, without notice to or further
approval from Guarantor, and without in any way affecting the obligations of
Guarantor hereunder, Bank may, with or without consideration (i) release,
compromise with, or agree not to sue, in whole or in part, Borrower or any other
obligor, guarantor, endorser or surety on any of the Liabilities, (ii) renew,
extend, accelerate, or increase or decrease the principal amount of the Note,
either in whole or in part, (iii) amend, waive, or otherwise modify any of the
terms of any of the Liabilities or of any mortgage, security deed, security
agreement, pledge agreement or other undertaking of Borrower or any other
obligor, endorser, guarantor or surety in connection with any of the
Liabilities, and (iv) apply any payment received from Borrower or any other
obligor, guarantor, endorser or surety on any of the Liabilities to any of the
Liabilities which Bank may choose.
SECTION 3.05. Guarantor hereby consents and agrees that Bank may at
any time or times, either with or without consideration, surrender, release or
receive any property or other collateral of any kind or nature whatsoever held
by it or for its account securing any of the Liabilities, or substitute any
collateral so held by Bank for other collateral of like or different kind,
without notice to or further consent from Guarantor, and such surrender,
receipt, release or substitution shall not in any way affect the obligations of
Guarantor hereunder. Bank shall have full authority to adjust, compromise, and
receive less than the amount due upon any such collateral, and may enter into
any accord and satisfaction agreement with respect to the same as Bank may deem
advisable without affecting the obligations of Guarantor hereunder. Bank shall
be under no duty to undertake to collect upon such collateral or any part
thereof, and Guarantor's obligations hereunder shall not be affected by Bank's
alleged negligence or mistake in judgment in handling, disposing of, obtaining,
or failing to collect upon or perfect a security interest in, any such
collateral.
SECTION 3.06. Guarantor hereby waives presentment, demand, protest,
and notice of dishonor of any of the Liabilities. Bank shall have no duty or
obligation, whether pursuant to O.C.G.A. (S) 10-7-24 or otherwise (i) to proceed
or exhaust any remedy against Borrower, any other obligor, guarantor, endorser,
or surety on any of the Liabilities, or any other security held by Bank for any
of the Liabilities, or (ii) to give any notice whatsoever, other than as
provided in the Loan Agreement, to Borrower, Guarantor, or any other obligors
guarantor, endorser, or surety on any of the Liabilities, before bringing suit,
exercising rights to any such security, or instituting proceedings of any kind
against Guarantor, Borrower, or both of them, and Guarantor hereby waives any
requirement for such actions by Bank. Upon the occurrence of an Event of
Default and Bank's demand on Guarantor hereunder, Guarantor shall be held and
bound to Bank directly as principal debtor in respect of the payment of the
Liabilities, such liability of Guarantor being joint and several with Borrower
and all other obligors, guarantors, endorsers and sureties on the Liabilities.
SECTION 3.07. All present and future indebtedness of Borrower to
Guarantor is hereby assigned to Bank and postponed to the present and future
indebtedness of Borrower to Bank, and all monies received from Borrower or for
Borrower's account by Guarantor after an Event of Default shall be received in
trust for Bank, and promptly upon receipt paid over to Bank at Bank's request
until Borrower's indebtedness to Bank is fully paid and satisfied, all without
prejudice to and without in any way affecting the obligations of Guarantor
hereunder. Until all Liabilities have been paid in full, Guarantor shall not
have any rights of subrogation or otherwise to participate in any security held
by Bank for any of the Liabilities, and Guarantor hereby waives such rights.
SECTION 3.08. Upon the bankruptcy of Borrower, Bank's rights hereunder
shall not be affected or impaired by any omission to prove all or any portion of
its claims, and Bank may in its discretion value or refrain from valuing any
security held by it without in any way releasing, reducing or otherwise
affecting Guarantor's obligations hereunder. Guarantor agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment of the Liabilities is rescinded or must otherwise be
returned or restored by Bank upon the insolvency or bankruptcy of Borrower or
any other obligor, guarantor, endorser or surety on any of the Liabilities, all
as though such payment had not been made.
51 of 54
<PAGE>
ARTICLE IV
MISCELLANEOUS
-------------
SECTION 4.01. This Guaranty is in addition to, and shall not prejudice
or be prejudiced by, any other guarantee, surety, agreement, or instrument which
Bank may now or hereafter hold in connection with any of the Liabilities.
Bank's rights and remedies hereunder are cumulative and are in addition to any
rights or remedies otherwise available to Bank pursuant to agreements or under
law. If any provision of this Guaranty or the application thereof to any Person
or circumstance shall, to any extent, be invalid or unenforceable, the remainder
of this Guaranty or the application of such provision to other Persons or
circumstances, other than those as to which it is held invalid or unenforceable,
shall not be affected thereby, and each provision of this Guaranty shall be
valid and enforceable to the full extent permitted by law.
SECTION 4.02. Guarantor authorizes Bank, without notice or demand, to
apply any indebtedness due or to become due to Guarantor from Bank, (including
any of its offices, branches or agencies) in satisfaction of any of Guarantor's
obligations hereunder, including, but not limited to, the right to set off
against any deposits or other cash collateral of Guarantor held by Bank at any
office, branch or agency.
SECTION 4.03. This Guaranty contains the entire agreement between the
parties relating to the subject matter hereof, and no provision hereof may be
waived or modified except by a writing executed by Guarantor and Bank. There is
no understanding that any Person other than Guarantor shall execute this or any
similar Guaranty. Guarantor's execution of this Guaranty was not based upon any
facts or materials provided by Bank, nor was Guarantor induced to execute this
Guaranty by any representation, statement or information made or furnished by
Bank. Guarantor further acknowledges and agrees that Guarantor assumes sole
responsibility for independently obtaining any information or reports deemed
necessary by Guarantor in reaching any decision to execute this Guaranty.
SECTION 4.04. The failure or forbearance of Bank on any occasion to
exercise any rights or remedies hereunder or otherwise granted to it by law or
another agreement shall not affect the obligations of Guarantor hereunder and
shall not constitute a waiver of such right or remedy or preclude the later or
further exercise thereof. Time is of the essence of this Guaranty and
Guarantor's obligations hereunder.
SECTION 4.05. Any notice, communication or demand which may be
required hereunder shall be in writing, delivered by hand or sent by first-
class, registered or certified mail, postage prepaid, return receipt requested,
to the following addresses:
(1) If to Bank: SunTrust Bank, Atlanta
711 Fifth Avenue, 16th Floor
New York, New York 10022
Attention: U.S. Corporate - Northeast Group
(2) If to Guarantor: Chubb Life Insurance Company of America
One Granite Place, P.O. Box 515
Concord, N.H. 03302
Attention: Russell C. Simpson
Any such notice shall be effective upon receipt if delivered by hand and, if
mailed, upon the earlier of (i) receipt or (ii) the third business day after
mailing. Either Guarantor or Bank may change its address for notice purposes by
notice to the other party in the manner provided herein.
SECTION 4.06. Guarantor agrees, without power of revocation, that any
civil suit or action brought against it as a result of any of its obligations
under this Guaranty may be brought against it either in the Superior Court of
Fulton County, Georgia, or in the United States District Court for the Northern
District of Georgia, Atlanta Division, and Guarantor hereby irrevocably submits
to the jurisdiction of such courts and irrevocably waives, to the fullest extent
permitted by law, any objections that it may now or hereafter have to the laying
of the venue of such civil suit or action and any claim that such civil suit or
action has been brought in an inconvenient forum, and Guarantor agrees that
final judgment in any such civil suit or action shall be conclusive and binding
upon it and shall be enforceable against it by suit upon such judgment in any
court of competent jurisdiction.
52 of 54
<PAGE>
SECTION 4.07. This Guaranty shall become effective upon acceptance by
the Bank in Atlanta, Georgia. This Guaranty and its performance, interpretation,
and enforcement shall in all respects be governed by the laws of the State of
Georgia. This Guaranty shall bind and inure to the benefit of the respective
heirs, legal representatives, successors and assigns of Guarantor and Bank.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty under hand
and seal of its duly authorized representatives as of October 23, 1996.
CHUBB LIFE INSURANCE COMPANY OF AMERICA
By:
-------------------------------------------
Title:
------------------------------------
Attest:
-----------------------------------------
Title:
------------------------------------
[CORPORATE SEAL]
Accepted this 23rd day
of October, 1996.
SUNTRUST BANK, ATLANTA
By:
-------------------------------
Title:
---------------------
53 of 54
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<PAGE>
<ARTICLE> 5
<CIK> 0000205422
<NAME> HAMPSHIRE FUNDING, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 1,771,795
<SECURITIES> 0
<RECEIVABLES> 52,992,182
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<CURRENT-ASSETS> 1,784,710
<PP&E> 0
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<CURRENT-LIABILITIES> 1,517,951
<BONDS> 50,851,618
0
0
<COMMON> 50,000
<OTHER-SE> 2,344,408
<TOTAL-LIABILITY-AND-EQUITY> 54,763,977
<SALES> 0
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<INCOME-PRETAX> 535,814
<INCOME-TAX> 221,516
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