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EXHIBIT (d)(5)
SUBORDINATION AGREEMENT
SUBORDINATION AGREEMENT, (the "Agreement") dated as of June 20, 2000, among
COMPUTER SCIENCES CORPORATION, a Nevada corporation, the "Subordinated Lender"),
BANK OF AMERICA, N.A., as Agent (the "Agent"), for the Banks party to the Credit
Agreements referred to below (the "Senior Lenders") and, POLICY MANAGEMENT
SYSTEMS CORPORATION, a South Carolina corporation (the "Company").
STATEMENT OF PURPOSE
WHEREAS, the Company is a party to the Credit Agreements (as hereinafter
defined) by and among the Agent, the Guarantors party thereto and the Senior
Lenders party thereto, pursuant to which the Company has incurred Senior Debt
(as hereinafter defined);
WHEREAS, the Company is, or will be, indebted to the Subordinated Lender
pursuant to the terms of the Notes (as such terms are hereinafter defined); and
WHEREAS, the parties hereto desire to provide for the subordination, as
herein provided, of the payment of Subordinated Debt (as hereinafter defined) to
the payment of Senior Debt;
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, and to induce the Agent and the Senior Lenders to permit
the issuance of the Notes and to continue to provide the Senior Debt and other
extensions of credit under the Credit Agreements, it is agreed as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 DEFINITIONS. As used herein, the following terms shall have
the meanings specified below:
"Collateral" shall mean the "Collateral", as such term is defined in the
Credit Agreements.
"Collection Action" shall mean (a) to collect, make demand for or
accelerate the Subordinated Debt or (b) to initiate or participate with others
in any Insolvency Event or any other suit, action or proceeding against the
Company to (i) enforce payment of or to collect the whole or any part of the
Subordinated Debt or (ii) commence judicial enforcement of any of the rights and
remedies under the Notes or applicable law with respect to the Subordinated
Debt.
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"Company" shall mean Policy Management Systems Corporation, a South
Carolina corporation, and any successor or assign thereof, including, without
limitation, any debtor-in-possession, liquidator or receiver.
"Credit Agreements" shall mean a collective reference to (i) the Credit
Agreement dated as of August 8, 1997, as amended by a First Amendment to Credit
Agreement dated as of November 1, 1999, a Second Amendment to Credit Agreement
dated as of February 10, 2000, a Third Amendment to Credit Agreement dated as of
March 30, 2000 and a Fourth Amendment to Credit Agreement dated as of April 24,
2000 by and among the Company, the Guarantors party thereto, the Agent and the
Senior Lenders party thereto and (ii) the Term Loan Agreement dated as of
November 5, 1999, as amended by a First Amendment to Term Loan Agreement dated
as of February 10, 2000, a Second Amendment to Term Loan Agreement dated as of
March 30, 2000 and a Third Amendment to Term Loan Agreement dated as of April
24, 2000 by and among the Company, the Guarantors party thereto, the Agent and
the Senior Lenders party thereto, each as the same may be amended, modified,
renewed or extended from time to time.
"Event of Default" shall mean an "Event of Default", as such term is
defined in the Credit Agreements.
"Insolvency Event" shall have the meaning set forth in Section 2.2(a)
hereof.
"Notes" shall mean, collectively, (i) the Subordinated Promissory Note
dated June 20, 2000 in the aggregate principal amount of up to $19,000,000
executed by the Company in favor of the Subordinated Lender, (ii) the
Subordinated Promissory Note dated after June 20, 2000 in the aggregate
principal amount of up to $5,000,000 executed by the Company in favor of the
Subordinated Lender and (iii) the Subordinated Promissory Notes dated after June
20, 2000 in the aggregate principal amount of up to $30,000,000 executed by the
Company in favor of the Subordinated Lender.
"Senior Debt" shall mean all obligations of the Company arising under the
Credit Agreements and the Senior Notes, whether for principal, interest
(including interest accruing after the occurrence of an Insolvency Event whether
or not the same is allowed as a claim), prepayment premium, fees, expenses or
otherwise and any extensions, renewals or refinancings thereof. To the extent
any payment of Senior Debt (by or on behalf of the Company, as proceeds of
security or enforcement of any right of set-off or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver or similar party under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by or
paid over to, such trustee, receiver or other similar party, the Senior Debt or
part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
"Senior Lenders" shall have the meaning in the recitals hereto.
"Senior Notes" shall mean each of the "Note" or "Notes", as such terms are
defined in each of the Credit Agreements.
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"Subordinated Debt" shall mean all obligations of the Company under the
Notes whether for principal, interest (including interest accruing after the
occurrence of an Insolvency Event, whether or not the same is allowed as a
claim) prepayment premium, fees, expenses or otherwise. To the extent any
payment of Subordinated Debt (by or on behalf of the Company as proceeds of
security or enforcement of any right of set-off or otherwise) is declared to be
fraudulent or preferential, set aside or required to be paid to a trustee,
receiver or similar party under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then if such payment is recovered by or
paid over to, such trustee, receiver or other similar party, the Subordinated
Debt or part thereof originally intended to be satisfied shall be deemed to be
reinstated and outstanding as if such payment had not occurred.
"Subordinated Lender" shall have the meaning set forth in the recitals
hereto.
ARTICLE II
SUBORDINATION
SECTION 2.1 SUBORDINATION.
(a) General. The Subordinated Lender agrees and covenants that the
Subordinated Debt is and shall be subordinate in right and order of payment to
the payment in full of the Senior Debt and the cancellation of the Commitments
(as defined in the Credit Agreements) of the Senior Lenders on the terms and
conditions set forth herein.
(b) Permitted Payments. The Subordinated Lender shall not be entitled to
receive payments of interest or principal on the Notes until the Senior Debt is
paid in full and the Commitments (as defined in the Credit Agreements) of the
Senior Lenders are cancelled; provided, however, that, following the termination
of the merger agreement between the Company and the Subordinated Lender as
referred to in the Notes, the Subordinated Lender may receive payment in full of
the Notes from the Company out of the proceeds of replacement notes which (i)
refinance the Notes in full; (ii) are subordinated to the Senior Debt pursuant
to a subordination agreement substantively similar to this Agreement; and (iii)
are in the same aggregate amount as the Notes.
SECTION 2.2 PRIORITY AND PAYMENT OF PROCEEDS IN CERTAIN EVENTS.
(a) Insolvency or Dissolution of the Company. Upon any payment or
distribution of all or any of the assets or securities of the Company of any
kind or character, whether in cash, property or securities, upon any
dissolution, winding up, liquidation, reorganization, arrangement, protection,
relief or composition of the Company or its debts, whether voluntary or
involuntary, total or partial, or in bankruptcy, insolvency, receivership,
arrangement, reorganization, relief or other proceedings, or upon an assignment
for the benefit of creditors or any other marshaling of the assets and
liabilities of the Company (any such events or proceedings being an "Insolvency
Event"), all Senior Debt shall first be paid
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in full before the Subordinated Lender shall be entitled to receive any payment
of the Subordinated Debt. Upon the occurrence of any Insolvency Event, any
payment or distribution of assets or securities of the Company of any kind or
character, whether in cash, property or securities (other than securities,
including, without limitation, equity securities, the payment of which (i) is
subordinate, to the extent provided in this Article II with respect to the
Subordinated Debt, to the payment of all Senior Debt of the Company at the time
outstanding and to the payment of all securities issued in exchange therefor to
the holders of all such Senior Debt at the time outstanding and (ii) is not
payable prior to payment in full of the Senior Debt), to which the Subordinated
Lender would be entitled, except for the provisions of this Article II, shall be
made by the Company or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, directly to
Agent for the benefit of the Senior Lenders for application (in the case of
cash) to or as collateral (in the case of non-cash property or securities) for
the payment in full of all Senior Debt after giving effect to any concurrent
payment or distribution to the Agent for the benefit of the Senior Lenders on
the Senior Debt.
(b) Payments in General. No direct or indirect payment or distribution by
or on behalf of the Company in respect of the Subordinated Debt upon
acceleration or otherwise, shall be made, and no other consideration in respect
of the Subordinated Debt shall be given or received other than as permitted by
Section 2.1(b) herein.
(c) Certain Payments Held in Trust. In the event that, notwithstanding the
foregoing provisions prohibiting such payment or distribution or such giving or
receipt of consideration, the Subordinated Lender shall have received any
payment or distribution or consideration in respect of the Subordinated Debt
contrary to such provisions, then, and in such event, such payment or
distribution or consideration shall be received and held in trust for the Agent
for the benefit of the Senior Lenders and shall be paid over or delivered to the
Agent for the benefit of the Senior Lenders for application to or as collateral
for the payment or prepayment of all Senior Debt in full after giving effect to
any concurrent payment or distribution to the Agent for the benefit of the
Senior Lenders in respect of the Senior Debt. No amount paid by the Company to
the holder or holders of the Subordinated Debt and paid over by the holder or
holders of the Subordinated Debt to the holders of the Senior Debt pursuant to
this Article II shall, as between the Company and the holder or holders of the
Subordinated Debt, be deemed to be a payment by the Company to or on account of
such Subordinated Debt.
SECTION 2.3 RESTRICTIONS ON ACTION BY SUBORDINATED LENDER. Until the
Senior Debt is paid in full, the Subordinated Lender shall not, without the
prior written consent of the Senior Lenders, take any Collection Action with
respect to the Subordinated Debt.
SECTION 2.4 MISCELLANEOUS.
(a) The provisions of this Article II shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of any of the Senior
Debt is rescinded or must otherwise be returned by the Agent or the Senior
Lenders or any other
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recipient thereof, as the case may be, upon the insolvency, bankruptcy or
reorganization of the Company or otherwise, all as though such payment had not
been made.
(b) No failure on the part of the Agent or the Senior Lenders to exercise,
and no delay in exercising, any right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof of the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
(c) The provisions of this Article II constitute a continuing agreement and
shall (i) remain in full force and effect until the Credit Agreements shall have
been terminated and the Senior Debt shall have been paid in full, (ii) be
binding upon the Subordinated Lender and its successors and assigns and (iii)
inure to the benefit of and be enforceable by the Agent and each of the Senior
Lenders and its respective successors, transferees and assigns.
ARTICLE III
MISCELLANEOUS
SECTION 3.1 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement or consent to any departure by the Agent, or the Subordinated
Lender herefrom shall in any event be effective unless the same shall be in
writing and signed by the Agent and the Subordinated Lender, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No amendment or waiver of any provision of the
Notes shall in any event be effective unless the same shall be in writing and
signed by the Agent.
SECTION 3.2 ADDRESSES FOR NOTICES. All communications and notices provided
for hereunder shall be sent by personal delivery, nationally recognized
overnight courier, facsimile or certified or registered mail, to the parties
hereto at their respective addresses set forth below, or to such other address
with respect to any party as such party shall notify the other parties hereto in
writing. All such notices and other communications shall be deemed to have been
received (a) when delivered, if personally delivered or sent via facsimile, (b)
one day following delivery to a nationally recognized overnight courier or (c)
on the third business day following the date on which the piece of mail
containing such communication is posted, if sent by certified or registered
mail.
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Agent:
Bank of America, N.A.
as Agent for the Senior Lenders
100 North Tryon Street, 17th Floor
Charlotte, NC 28255
Telecopy No.: (704) 388-0960
Attention: Mr. Michael J. McKenney
Subordinated Lender:
Computer Sciences Corporation
2100 East Grand Avenue
El Segundo, CA 90245
Telecopy No.: (310) 322-9767
Attention: Leon J. Level
Company:
Policy Management Systems Corporation
One PMSC Center
Blythewood, SC 29016
Telecopy No.: 803-333-6986
Attention: Elizabeth D. Powers
SECTION 3.3 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York.
SECTION 3.4 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which, when so executed, shall be deemed to be an original
and all of which, when taken together, shall constitute but one and the same
agreement.
SECTION 3.5 ADDITIONAL DOCUMENTS AND ACTIONS. The Agent and the
Subordinated Lender shall at any time, and from time to time, after the
execution and delivery of this Agreement, promptly execute and deliver such
further documents and do such further acts and things as each party reasonably
may request that may be necessary in order to effect fully the purposes of this
Agreement.
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SECTION 3.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the Company, the Agent, the Subordinated Lender and
each other present or future holder of Subordinated Debt and their respective
successors and assigns.
IN WITNESS WHEREOF, the Agent, on behalf of the Senior Lenders, the
Subordinated Lender and the Company have caused this Agreement to be duly
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
SUBORDINATED LENDER:
COMPUTER SCIENCES CORPORATION
By: /s/ PAUL T. TUCKER
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Name: Paul T. Tucker
Title: Vice President
AGENT:
BANK OF AMERICA, N.A., as Agent for the
Senior Lenders
By: /s/ MICHAEL I. McKENNEY
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Name: Michael I. McKenney
Title: Management Director
COMPANY:
POLICY MANAGEMENT SYSTEMS
CORPORATION
By: /s/ STEPHEN G. MORRISON
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Name: Stephen G. Morrison
Title: Executive Vice President
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