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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-7461
ACCEPTANCE INSURANCE COMPANIES INC.
(Exact name of registrant as specified in its charter)
Delaware 31-0742926
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
222 South 15th St., Suite 600 N.
Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(402) 344-8800
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES XX NO
---- ----
The number of shares of each class of the Registrant's common
stock outstanding on August 10, 1995 was:
Class of Common Stock No. of Shares Outstanding
Common Stock, $.40 Par Value 15,101,236
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ACCEPTANCE INSURANCE COMPANIES INC.
FORM 10-Q
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets
June 30, 1995 (unaudited) and December 31, 1994
(audited)
Consolidated Statements of Operations (unaudited)
Three Months and Six Months Ended June 30, 1995 and
1994
Consolidated Statements of Cash Flows (unaudited)
Six Months Ended June 30, 1995 and 1994
Notes to Interim Consolidated Financial Statements
(unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
PART I. FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
1995 1994
--------- -----------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Investments:
Fixed maturities available for sale $220,170 $190,180
Marketable equity securities - preferred
stock 12,581 6,758
Marketable equity securities - common
stock 9,948 5,772
Mortgage loans and other investments 1,747 1,869
Real estate 3,881 3,891
Short-term investments, at cost, which
approximates market 63,199 56,273
-------- --------
311,526 264,743
Cash 1,352 9,339
Equity investment in Major Realty
Corporation 4,922 5,079
Receivables, net 80,728 76,993
Reinsurance recoverable on unpaid loss
and loss adjustment expenses 107,328 79,811
Prepaid reinsurance premiums 34,287 25,988
Property and equipment, net 5,053 4,572
Deferred policy acquisition costs 22,677 19,834
Excess of cost over acquired net assets 37,572 38,142
Deferred income tax 8,570 13,025
Other assets 9,586 5,561
-------- --------
Total assets $623,601 $543,087
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Losses and loss adjustment expenses $266,812 $221,325
Unearned premiums 116,901 97,170
Amounts payable to reinsurers 24,630 19,309
Accounts payable and accrued liabilities 12,789 16,529
Bank borrowings 29,000 29,000
-------- --------
Total liabilities 450,132 383,333
Contingencies -- --
<PAGE>
Stockholders' equity:
Preferred stock, no par value, 5,000,000
shares authorized, none issued -- --
Common stock, $.40 par value, 20,000,000
shares authorized; 15,135,773 and
15,128,846 shares issued 6,054 6,052
Capital in excess of par value 194,757 194,674
Unrealized gain (loss) on
available-for-sale securities,
net of tax (4,557) (13,705)
Accumulated deficit (18,521) (23,003)
-------- --------
177,733 164,018
Less:
Treasury stock, at cost, 35,559 shares (1,564) (1,564)
Contingent stock, 240,000 shares (2,700) (2,700)
-------- --------
Total stockholders' equity 173,469 159,754
-------- --------
Total liabilities and stockholders'
equity $623,601 $543,087
======== ========
<FN>
The accompanying notes are an integral part of the
interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
for the three months and six months ended June 30, 1995 and 1994
(in thousands, except per share data)
(unaudited)
Three Months Six Months
-------------- ---------------
1995 1994 1995 1994
----- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Insurance premiums earned $62,413 $46,716 $113,689 $84,694
Insurance agency commissions 769 949 1,642 1,802
Net investment income 4,817 3,040 9,238 5,677
Net realized capital gains 599 161 1,033 398
------- ------- -------- -------
68,598 50,866 125,602 92,571
------- ------- -------- -------
Costs and expenses:
Cost of revenues:
Insurance losses and loss
adjustment expenses 44,513 34,363 79,119 60,583
Insurance agency costs 742 855 1,452 1,667
Insurance underwriting
expenses 19,892 12,056 36,008 23,953
General and administrative
expenses 649 389 1,248 692
------- ------- -------- -------
65,796 47,663 117,827 86,895
------- ------- -------- -------
Operating profit 2,802 3,203 7,775 5,676
------- ------- -------- -------
Other income (expense):
Interest expense (531) (371) (1,044) (699)
Share of net loss of investee (83) (71) (157) (154)
Other, net 41 58 81 45
------- ------- -------- -------
(573) (384) (1,120) (808)
------- ------- -------- -------
Income before income taxes
and minority interests 2,229 2,819 6,655 4,868
Income tax expense:
Current 1,465 65 1,690 65
Deferred (735) (2,200) 483 (2,200)
Minority interests in net
income of consolidated
subsidiaries -- -- -- 80
------- ------- -------- -------
Net income $ 1,499 $ 4,954 $ 4,482 $ 6,923
======= ======= ======== =======
Earnings per share:
Primary $.10 $.41 $.30 $.61
======= ======= ======== =======
Fully diluted $.10 $.40 $.29 $.59
======= ======= ======== =======
<FN>
The accompanying notes are an integral part of the
interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1995 and 1994
(in thousands)
(unaudited)
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,482 $ 6,923
Net adjustment to reconcile net
income to net cash provided by
operating activities 21,640 20,990
------- -------
Net cash provided by operating activities 26,122 27,913
------- -------
Cash flows from investing activities:
Proceeds from sales of investments -- 641
Proceeds from sales of investments
available for sale 61,744 13,631
Proceeds from maturities of investments 10,481 508
Proceeds from maturities of investments
available for sale 4,706 11,162
Purchases of investments (18,740) (5,731)
Purchases of investments available for
sale (91,624) (41,125)
Purchases of property and equipment (1,242) (678)
-------- -------
Net cash used for investing activities (34,675) (21,592)
-------- --------
Cash flows from financing activities:
Repayments of bank borrowing -- (18,597)
Proceeds from bank borrowings -- 29,000
Repayments of other borrowings -- (323)
Minority interests -- 7
Proceeds from issuance of common stock 85 225
Other -- (340)
------- -------
Net cash provided by financing activities 85 9,972
------- -------
Net increase (decrease) in cash and
short-term investments (8,468) 16,293
Cash and short-term investments at
beginning of period 50,236 17,561
------- -------
Cash and short-term investments at
end of period $41,768 $33,854
======= =======
Supplemental disclosure of cash flow
information:
Cash paid during the period for interest $ 1,079 $ 572
======= =======
<PAGE>
Cash paid during the period for
income taxes $ 2,853 $ 58
======= =======
<FN>
The accompanying notes are an integral part of the
interim consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. Summary of Significant Accounting Policies:
Principles of Consolidation
The Company's consolidated financial statements include the
accounts of Acceptance Insurance Companies Inc. and its
majority owned subsidiaries (the "Company"). All
significant intercompany transactions have been eliminated.
Management's Opinion
The accompanying consolidated financial statements reflect
all adjustments, consisting only of normal recurring
adjustments except as otherwise disclosed, which in the
opinion of management are considered necessary to fairly
present the Company's financial position as of June 30, 1995
and December 31, 1994, and the results of operations for the
three months and six months ended June 30, 1995 and 1994 and
cash flows for the six months ended June 30, 1995 and 1994.
Statements of Cash Flows
The Company aggregates cash and short-term investments with
maturity dates of three months or less from the date of
purchase for purposes of reporting cash flows. As of June
30, 1995 approximately $22,783,000 of short-term investments
had a maturity date at acquisition of greater than three
months.
Recent Statements of Financial Accounting Standards
On January 1, 1995 the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 114 and 118,
"Accounting by Creditors for Impairment of a Loan." As of
January 1, 1995 and June 30, 1995 the Company has no
material loans that are considered impaired. Accordingly,
the adoption of SFAS No. 114 and 118 had no effect on the
Company's financial statements.
Reclassifications
Certain prior year accounts have been reclassified to
conform with current period presentation.
2. Per Share Data:
Primary and fully diluted earnings per share are based on
the weighted average shares outstanding of approximately
15.0 million and 15.2 million, respectively, for the three
months ended June 30, 1995 and approximately 13.5 million
and 13.7 million, respectively, for the three months ended
June 30, 1994. Primary earnings per share and fully diluted
earning per share are based on the weighted average shares
outstanding of approximately 15.0 million and 15.2 million,
respectively, for the six months ended June 30, 1995 and
approximately 13.3 million and 13.5 million, respectively,
for the six months ended June 30, 1994. Included in
weighted average shares outstanding in 1994 is the assumed
exercise of all outstanding options and warrants utilizing
the modified treasury stock method, since average
outstanding options and warrants during the period exceeded
20% of the outstanding stock. Under this method,
appropriate adjustment to net income is made to reflect the
assumed use of the proceeds of the exercise.
3. Investments
The amortized cost and related market values of debt and
equity securities in the accompanying balance sheets are as
follows (in thousands):
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ------
<S> <C> <C> <C> <C>
June 30, 1995:
Fixed maturities available
for sale:
U.S. Treasury and
government securities $ 64,051 $ 1,033 $ 136 $ 64,948
States, municipalities and
political subdivisions 61,112 1,123 472 61,763
Mortgage-backed securities 73,020 277 9,360 63,937
Other debt securities 29,302 683 463 29,522
-------- ------- ------- -------
227,485 3,116 10,431 220,170
======== ======= ======= =======
Marketable equity
securities - preferred
stock $ 12,997 $ 70 $ 486 $ 12,581
======== ======= ======= ========
Marketable equity
securities - common
stock $ 9,226 $ 1,351 $ 629 $ 9,948
======== ======= ======= ========
December 31, 1994:
Fixed maturities available
for sale:
U.S. Treasury and
government securities $ 68,308 $ 4 $ 2,225 $ 66,087
States, municipalities and
political subdivisions 39,544 8 1,957 37,595
Mortgage-backed securities 73,024 -- 13,949 59,075
Other debt securities 28,199 100 876 27,423
-------- ------- ------- --------
$209,075 $ 112 $19,007 $190,180
======== ======= ======= ========
Marketable equity
securities - preferred
stock $ 7,803 $ 4 $ 1,049 $ 6,758
======== ======= ======= ========
Marketable equity
securities - common
stock $ 5,960 $ 530 $ 718 $ 5,772
======== ======= ======= ========
</TABLE>
4. Insurance Premiums and Claims
Insurance premiums written and earned by the Company's
insurance subsidiaries for the three months and six months
ended June 30, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Direct premiums written $110,406 $94,077 $212,706 $168,347
Assumed premiums written 9,685 5,246 10,150 6,395
Ceded premiums written (53,129) (41,691) (97,735) (69,623)
-------- -------- -------- --------
Net premiums written $ 66,962 $57,632 $125,121 $105,119
======== ======== ======== ========
Direct premiums earned $102,208 $81,705 $191,814 $144,487
Assumed premiums earned 10,214 5,256 11,403 6,159
Ceded premiums earned (50,009) (40,245) (89,528) (65,952)
-------- -------- -------- --------
Net premiums earned $ 62,413 $46,716 $113,689 $ 84,694
======== ======== ======== ========
</TABLE>
Insurance loss and loss adjustment expenses have been
reduced by recoveries recognized under reinsurance contracts
of approximately $51,379,000 and $30,828,000 for the three
months ended June 30, 1995 and 1994, respectively. Insurance
loss and loss adjustment expenses have been reduced by
recoveries recognized under reinsurance contracts of
approximately $78,830,000 and $47,962,000 for the six months
ended June 30, 1995 and 1994, respectively.
5. Bank Borrowings, Term Debt and Other Borrowings:
The Company's borrowing arrangements with its bank lenders
as of June 30, 1995 provided a $35 million line of credit
with interest payable quarterly at the prime rate or LIBOR
plus a margin of 1% to 1.75%, depending on the Company's
debt to equity ratio. On June 30, 1995, the Company had $29
million outstanding under this arrangement. On July 6, 1995
the Company elected LIBOR plus 1% percent or 7.05% through
August 7, 1995.
In July of 1995, the Company's bank lenders agreed to a new
$90 million line of credit facility to replace its existing
$35 million line of credit. The $90 million facility will
be utilized primarily to capitalize the Company's insurance
company subsidiaries.
Generally, the new agreement provides for a $75 million
three year revolving line of credit which, with the consent
of the banks, can be renewed annually for three years, and a
$15 million line of credit with a maturity of the earlier of
July 1997 or one year from the date of borrowing. Further,
the Company will select its interest rate as either the
prime rate or LIBOR plus a margin of .75% to 1.5% and 1.5%
to 2.25% for the $75 million revolving line of credit and
$15 million line of credit, respectively, depending on the
Company's debt to equity ratio.
6. Income Taxes:
As of June 30, 1995, management believes it is more likely
than not that the Company will realize a portion of the
deferred tax asset. The valuation allowance at June 30,
1995 primarily relates to capital loss items whose
realization is uncertain. The net deferred tax asset is as
follows (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------- -----------
<S> <C> <C>
Unpaid losses and loss adjustment
expenses 7,851 7,263
Unearned premiums 5,783 4,840
Allowances for doubtful accounts 722 449
Other 1,904 1,599
Unrealized loss on marketable
equity securities -- 419
Unrealized loss on fixed maturities
available for sale 2,560 6,424
Major Realty basis difference 7,912 7,632
------- ------
Deferred tax asset 26,732 28,626
------- ------
Deferred policy acquisition costs (7,937) (6,744)
Other (2,085) (681)
Unrealized gain on marketable
equity securities (107) --
-------- ------
Deferred tax liability (10,129) (7,425)
-------- ------
16,603 21,201
Valuation allowance (8,033) (8,176)
------- -------
Net deferred tax asset $ 8,570 $13,025
======= =======
</TABLE>
Income taxes computed by applying statutory rates to income
before income taxes are reconciled to the provision for
income taxes set forth in the consolidated financial
statements as follows for the six months ended June 30, 1995
(in thousands):
<TABLE>
<S> <C>
Computed U.S. federal income taxes $2,328
Nondeductible amortization of goodwill and
other intangibles 269
Tax-exempt interest income (437)
Dividends received deduction (145)
Other 158
------
Income taxes provided $2,173
======
</TABLE>
<PAGE>
PART I.
-------
Item 2.
ACCEPTANCE INSURANCE COMPANIES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of financial condition
and results of operations of the Company and its consolidated
subsidiaries is based upon the Company's interim consolidated
financial statements and the notes thereto included in this
report.
RESULTS OF OPERATIONS
Three months and six months ended June 30, 1995
Compared to three months and six months ended June 30, 1994
The Company's net income for the three months ended June 30, 1995
decreased 69.7% from the same period in 1994, while the net
income for six months decreased by 35.3% as compared to the first
six months of 1994. The second quarter of 1995 was positively
impacted by an increase in net premiums earned, an increase in
net investment income and realized capital gains, and an
improvement in the loss ratio of the Company all when compared
with the same period a year earlier. These positive effects were
more than offset by an increase in the underwriting expense
ratio, an increase in general and administrative expense, an
increase in interest expense and a change in the provision for
income taxes from a benefit in the second quarter of 1994 to a
tax expense in the second quarter of 1995.
The Company's results for the six months ended June 30, 1995 also
showed a declining net income from the period ended June 30,
1994, but the decline was only 35.3% as the results of the three
months ended June 30, 1995 were offset by an increase in net
income during the three months ended March 31, 1995 of 51.5% over
the same period in 1994.
The Company's net premiums earned increased by 33.6% and 34.2% in
the three and six months ended June 30, 1995 respectively as
compared to the similar periods a year earlier. These increases
were principally attributable to growth in the direct premiums
written by the Company's general agency and program divisions,
offset in part by declining premium revenues in the nonstandard
automobile division. The rate of growth in the Company's direct
premiums written decreased from 37.7% in the first quarter of
1995 to 17.4% during the second quarter of 1995, both percentages
as compared to the same periods in 1994. The Company believes
that this somewhat diminished rate of growth should continue for
the remainder of 1995 in its non crop lines of business, but
higher growth rates are predicted for the crop lines.
Coupled with this increase in premium revenues was an improvement
in the Company's loss ratio. The Company's loss ratios fell from
73.6% in the three months ended June 30, 1994 to 71.3% for the
three months ended June 30, 1995 and from 71.5% in the six months
ended June 30, 1994 to 69.6% for the six months ended June 30,
1995. The higher loss ratio for the second quarter of 1995 as
compared to the first quarter of 1995 was attributable to losses
the Company suffered in a series of wind and hail storms
occurring across Texas and Louisiana during the months of April
and May in which the Company incurred approximately $1.1 million
of pre tax losses. In addition, during the second quarter of
1995, the Company experienced a deterioration in the loss ratio
of its commercial automobile liability business. This was
principally attributable to a more rapid emergence of losses from
the 1994 year than had been expected by the Company. At this
time, the Company is continuing to monitor closely the results in
the commercial automobile lines in order to determine whether
these higher loss ratios indicate a continuing trend or merely a
quarterly aberration from normal patterns.
Offsetting the improved loss ratio was an increase in the
Company's expense ratio from 25.8% and 28.3% respectively in the
three and six months ended June 30, 1994 to 31.9% and 31.7%
respectively in the three and six months ended June 30, 1995.
This increase was mainly attributable to the Company recording an
estimated operating expense margin in its crop insurance lines
the second quarter of 1994, compared to no such margin being
recognized in the second quarter of 1995. In 1995, problems
arising out of delayed planting issues resulted in changing rules
under the new Federal MPCI program, and therefore, the Company
could not estimate any operating expense margin under the
program. To a lesser extent, the Company's expense ratio
increased from costs associating with developing new property and
casualty programs in its Program Division.
Thus, improved loss ratios were more than offset by increased
expense ratios for both the three and six months ended June 30,
1995 as compared to the similar periods a year earlier. This
resulted in an increase in the Company's combined underwriting
ratios from 99.4% and 99.8% in the three and six months ended
June 30, 1994 to 103.2% and 101.3% in the same periods a year
later.
The Company's investment income increased 58.5% and 62.7%
respectively in the three and six months ended June 30, 1995 from
the same three and six month periods during 1994. This increase
in investment income principally resulted from an increase in the
average size of the investment portfolio of the Company. During
the three and six months ended June 30, 1995 the Company's
average investment portfolio was approximately $308.7 million and
$302.8 million respectively as compared to $205.1 million and
$196.0 million during the similar periods ended June 30, 1994.
In addition, the Company's average investment yield also
increased for the three and six months ended June 30, 1995 as
compared to the same periods in 1994. Investment yields for the
three and six months ended June 30, 1995 were 6.24% and 6.10%
respectively. For the three and six months ended June 30, 1994
the Company's investment yield was 5.93% and 5.79% respectively.
The size of the investment portfolio increased from retained
earnings, positive cash flows, and approximately $53.4 million in
proceeds from the exercise of warrants in December of 1994.
Investment yields increased as the overall interest rate
environment present during the first and second quarters of 1995
was higher than the interest rate environment in the first and
second quarters of 1994.
The Company's income from realized capital gains also increased
in the three and six months ended June 30, 1995 when compared to
the similar periods a year earlier. These increases resulted
primarily from changes in the interest rate environment which
provided the Company with opportunities to realize gains in its
fixed income portfolio as well as from the sale of certain equity
securities.
The Company experienced an increase in its general and
administrative expense as well as its interest expense during the
two reporting periods of 1995 as compared to the similar periods
in 1994. General and administrative expenses increased from
expenses associated with a proposed offering of convertible
debentures which was withdrawn by the Company in May of 1995.
Interest expense increased in the two reporting periods of 1995
due to both an increase in interest rates as well as an increase
in average outstanding bank borrowings.
The largest single component of the decrease in the Company's net
income in the 1995 reporting periods was the impact of income
taxes. During the three and six months ended June 30, 1994, the
Company's net income benefitted from a deferred tax benefit of
$2.2 million. Not only was there no such deferred tax benefit
during the three and six months ended June 30, 1995, but there
were no net operating loss carryforwards to diminish tax payments
in the three and six month periods of 1995 as there had been
during the same time periods in 1994. The deferred tax benefit
resulted from the Company meeting the realizability test under
SFAS No. 109, "Accounting for Income Taxes," adopted by the
Company in January 1993. SFAS No. 109 requires that the Company
recognize the deferred tax asset for all temporary differences
and net operating loss carryforwards and a related valuation
allowance account when realization of the asset is uncertain.
The Company had reported pre tax losses from 1989 through 1992.
Although the circumstances that generated these losses were not
indicative of operating income, management was uncertain of
future earnings and recorded the related valuation allowance
account. Management continued assessing the weight of evidence
at each balance sheet and at June 30, 1994 believed it was more
likely than not that the Company would realize a portion of the
deferred tax asset. The deferred tax benefit of $2.2 million in
the three and six months ended June 30, 1994 is a portion of the
deferred tax asset that was estimated to be realized in future
years. For the three and six months ended June 30, 1995 the
Company was in a fully taxable situation, thus providing for
decreases in the Company's net income of approximately $2.9 and
$4.3 million in the three and six months ended June 30, 1995 when
compared to the same periods in 1994.
Recent Statement of Financial Accounting Standards
On January 1, 1995 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 114 and 118, "Accounting by
Creditors for Impairment of a Loan." As of January 1, 1995 and
June 30, 1995 the Company has no material loans that are
considered impaired. Accordingly, the adoption of SFAS No. 114
and 118 had no effect on the Company's financial statements.
LIQUIDITY AND CAPITAL RESOURCES
The Company has included a discussion of the liquidity and
capital resources requirements of the Company and the Company's
insurance subsidiaries.
The Company - Parent Only
As an insurance holding company, the Company's assets consist
primarily of the capital stock of its subsidiaries, a surplus
note issued by one of its insurance company subsidiaries and
investments held at the holding company level. The Company's
primary sources of liquidity are dividends and other
distributions from subsidiaries, interest payments on the surplus
note, tax sharing payments from its subsidiaries and net
investment income from, and proceeds from the sale of, holding
company investments. The Company's liquidity needs are primarily
to service debt, pay operating expenses and taxes and make
investments in subsidiaries.
Dividends from the insurance subsidiaries of the Company are
regulated by the state regulatory authorities of the states in
which each subsidiary is domiciled. The laws of such states
generally restrict dividends form insurance companies to parent
companies to certain statutorily approved limits. As of June 30,
1995, the statutory limitations on dividends from the insurance
company subsidiaries to the parent without further insurance
department approval were approximately $6.0 million. In addition
to dividends, the parent company receives additional liquidity
from cash flows from agency and claims service operations of its
noninsurance company subsidiaries.
The Company currently holds a surplus note issued by one of its
insurance company subsidiaries in the amount of $20.0 million,
bearing interest at the rate of 9% per annum, payable quarterly.
Although repayment of all or part of the principal of this
surplus note requires prior insurance department approval, no
prior approval of interest payments currently is required.
At June 30, 1995, the Company held approximately $8.2 million of
cash and investments available to meet liquidity needs.
The Company is also a party to a Revolving Credit Facility with a
group of bank lenders which is secured by substantially all of
the Company's assets. At June 30, 1995 the maximum amount which
might have been borrowed under the facility was $35.0 million.
On July 26, 1995 the Company closed on a new facility under which
the Company's maximum borrowing limit was increased to $90
million. Generally, the new agreement provides for a $75 million
three year revolving line of credit which, with the consent of
the banks, can be renewed annually for three years, and a $15
million line of credit with a maturity of the earlier of July
1997 or one year from the date of borrowing. Further, the
Company will select its interest rate at either the Prime rate or
LIBOR plus a margin of .75% to 1.5% and 1.5% to 2.25% for the $75
million revolving line of credit and $15 million line of credit,
respectively, depending on the Company's debt to equity ratio.
As of June 30, 1995 the Company had $29 million outstanding under
its previous bank facility. This $29 million continues to be
outstanding under the Company's new facility.
The $90 million facility will be utilized primarily to capitalize
the Company's insurance company subsidiaries. The Company
intends to borrow additional funds from the new facility to
further capitalize its insurance company operations during the
third quarter of 1995. It is believed that the new borrowings
will increase the outstanding debt under the new facility to
approximately $50 million by the end of the third quarter.
Insurance Companies
The principal liquidity needs of the insurance companies are to
fund losses and loss adjustment expense payments, to pay
underwriting expenses including commissions to agents, to pay
interest under the surplus note described above and to make tax
payments. Available sources for these requirements are premiums
received and cash flows from investment activities. Together,
these sources historically have been adequate to meet the
described requirements on a timely basis. The Company monitors
the cash flows of its insurance company subsidiaries and attempts
to maintain sufficient cash to meet current operating expenses
and to structure its investment portfolio of a duration which
approximates the estimated cash requirements for the payment of
loss and loss adjustment expense.
<PAGE>
Changes in Financial Condition
The Company's stockholders' equity increased by approximately
$13.7 million at June 30, 1995 as compared to December 31, 1994
principally as a result of net income of $4.5 million generated
during the first six months of 1995 and a decrease in the
unrealized loss, net of tax, in the Company's available for sale
securities from $13.7 million at December 31, 1994 to $4.5
million at June 30, 1995.
The NAIC has released it Risk Based Capital (RBC) formula for
property and casualty insurance companies. The Company's
insurance company subsidiaries have reviewed and applied this RBC
formula for the 1994 year and have exceeded the requirements of
such formula.
Consolidated Cash Flow
Cash flows from operating activities were relatively similar in
the six months ended June 30, 1995 as compared to the same six
months in 1994. Operating activities produced $26.1 million of
positive cash flow during the first six months of 1995 compared
to $27.9 million in the first six months of 1994.
Inflation
The Company does not believe that inflation has had a material
impact on its financial condition or the results of operation.
<PAGE>
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index.
(b) No reports on Form 8-K were filed by the registrant
during the quarter for which this report is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ACCEPTANCE INSURANCE COMPANIES INC.
/s/ Kenneth C. Coon
August 15, 1995 ------------------------------
Kenneth C. Coon
Chief Executive Officer
/s/ Georgia M. Mace
August 15, 1995 ------------------------------
Georgia M. Mace
Treasurer and Chief Accounting
Officer
<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 1995
EXHIBIT INDEX
NUMBER EXHIBIT DESCRIPTION
3.(i) Amendment to the Registrant's Restated Certificate of
Incorporation.
10.1 $90,000,000 Credit Agreement By and Among the
Registrant, NBD Bank, N.A., First National Bank of
Omaha, FirsTier Bank, N.A., Comerica Bank, First
Interstate Bank of Arizona and NBD Bank, N.A., As
Agent, dated as of July 26, 1995.
10.2 Intercompany Federal Income Tax Allocation Agreement
between Acceptance Insurance Holdings Inc. and its
subsidiaries and the Registrant dated April 12, 1990,
and related agreements. Incorporated by reference to
Exhibit 10i to the Registrant's Annual Report on Form
10-K for the fiscal year ended August 31, 1990.
10.3 Amended and Restated Registration Rights Agreement,
dated April 9, 1990, between the Registrant and
Patricia Investments, Inc. Incorporated by reference
to Exhibit 10d to the Registrant's Quarterly Report on
Form 10-Q for the period ended May 31, 1990.
10.4 Warrants to purchase a total of 389,507 shares of
common stock ($.10 par value) of the Registrant dated
April 10, 1992, issued by the Registrant to the various
purchasers of the Floating Rate Secured Subordinated
Notes, due 1993, Series A and B. Incorporated by
reference to Exhibit 10.41 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1991.
10.5 Employment Agreement dated February 19, 1990 between
Acceptance Insurance Holdings Inc., the Registrant and
Kenneth C. Coon. Incorporated by reference to Exhibit
10.65 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1991.
10.6 Employment Agreement dated July 2, 1993 between the
Registrant and John P. Nelson. Incorporated by
reference to Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30,
1994.
10.7 Employment Agreement dated July 2, 1993 between the
Registrant and Richard C. Gibson. Incorporated by
reference to Exhibit 10.6 to the Registrant's Quarterly
Report on Form 10-Q for the period ended September 30,
1994.
11 Computation of Income per share.
27 Financial Data Schedule.
99.1 The Registrant's Amended 1992 Incentive Stock Option
Plan. Incorporated by reference to the Registrant's
Proxy Statement filed on or about May 2, 1995.
99.2 The Registrant's Amended Employee Stock Purchase Plan.
Incorporated by reference to the Registrant's Proxy
Statement filed on or about April 29, 1994.
99.3 The Registrant's Employee Stock Ownership and Tax
Deferred Savings Plan as merged, amended and restated
effective October 1, 1990. Incorporated by reference
to Exhibit 10.4 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended November 30, 1990.
99.4 First Amendment to the Registrant's Employee Stock
Ownership and Tax Deferred Savings Plan. Incorporated
by reference to Exhibit 99.4 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1993.
99.5 Second Amendment to the Registrant's Employee Stock
Ownership and Tax Deferred Savings Plan. Incorporated
by reference to Exhibit 99.5 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December
31, 1993.
EXHIBIT 3.(i)
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
ACCEPTANCE INSURANCE COMPANIES INC., a corporation organized and
existing under and by virtue of the General Corporation Law of
the State of Delaware, DOES HEREBY CERTIFY:
FIRST: That by action of the Board of Directors of
Acceptance Insurance Companies Inc., a resolution was duly
adopted setting forth a proposed amendment to the Restated
Certificate of Incorporation of said corporation, declaring said
amendment to be advisable and submitted such amendment to the
holders of the outstanding shares of Common Stock, $.40 per
share, of said corporation entitled to vote thereon as a class by
the provisions of the Restated Certificate of Incorporation. The
resolution setting forth the proposed amendment is as follows:
INCREASE IN AUTHORIZED COMMON STOCK
WHEREAS, the board of directors of the
Company deems it to be in the best interest
of the Company and its shareholders to amend
the Company's Restated Certificate of
Incorporation to increase authorized capital
from 20 million shares of common stock, par
value $.40 per share, to 40 million such
shares;
THEREFORE, BE IT RESOLVED, that the first
sentence of Article IV of the Company's
Restated Certificate of Incorporation be
amended to read as follows:
"ARTICLE IV
The total number of shares of all classes of
stock which the Corporation shall have the
authority to issue is forty-five million
($45,000,000) shares, consisting of five
million (5,000,000) shares of preferred stock
without par value (hereinafter "Preferred
Stock"), and forty million (40,000,000)
shares of Common Stock, par value forty cents
($.40) per share (hereinafter "Common
Stock")."
RESOLVED FURTHER, that shareholders will be asked to
approve such amendment at the Annual Meeting of
shareholders to be held May 25, 1995.
SECOND: That such amendment was adopted by vote of the
holders of a majority of the outstanding shares of Common Stock
of said Corporation entitled to vote therefor by the Restated
Certificate of Incorporation, and accordingly that said amendment
was duly adopted in accordance with the provisions of Section 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, Acceptance Insurance Companies Inc.
has caused this Certificate to be signed by Kenneth C. Coon, its
Chairman and Chief Executive Officer and attested by Donn E.
Davis, its Secretary, this 25th day of May, 1995.
/s/ Kenneth C. Coon
By ________________________________
Kenneth C. Coon
Chairman and Chief Executive
Officer
ATTEST:
/s/ Donn E. Davis
By ____________________________
Donn E. Davis, Secretary
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
ACCEPTANCE INSURANCE COMPANIES INC.
The last Restated Certificate of Incorporation of
Acceptance Insurance Companies Inc., under the name Orange-Co.,
Inc., was filed with the Secretary of State of Delaware on August
5, 1974 (the date of original incorporation of the Corporation
was June 23, 1969). The following Restated Certificate of
Incorporation restates and integrates and does not further amend
the provisions of such Restated Certificate of Incorporation as
heretofore amended or supplemented, and there is no discrepancy
between those provisions and the provisions of this Restated
Certificate of Incorporation.
ARTICLE I.
The name of the Corporation shall be Acceptance
Insurance Companies Inc.
ARTICLE II.
The address of the corporation's registered office is
Corporation Trust Center, 1209 Orange Street, Wilmington, County
of New Castle, Delaware. The Corporation Trust Company is the
corporation's registered agent at that address.
ARTICLE III.
The purpose of the corporation is to engage in any
lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV.
The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is
twenty-five million (25,000,000) shares, consisting of five
million (5,000,000) shares of preferred stock without par value
(hereinafter "Preferred Stock"), and twenty million (20,000,000)
shares of common stock par value forty cents ($.40) per share
(hereinafter "Common Stock"). The designations, powers,
preferences and relative participating, operational or other
special rights, if any, and the limitations, restrictions or
qualifications of each class of stock shall be governed by the
following provisions:
Section 1. The Board of Directors of the corporation
is hereby authorized at any time, and from time to time, to
provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, or without
voting powers, and with such designations, preferences and
relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as shall be
stated and expressed in the resolution or resolutions providing
for the issue thereof adopted by the Board of Directors, and as
are not stated and expressed in the Certificate of Incorporation,
including (but without limiting the generality thereof) the
following:
(a) The designation of, and the number of shares which
shall constitute, such series, which number may be increased
(except where otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of
shares constituting such series then outstanding) from time to
time by like action of the Board of Directors;
(b) The rate and times at which, and the terms and
conditions upon which, dividends on such series shall be payable,
the relation which such dividends shall bear to the dividends
payable on any other class or series of stock and whether such
dividends shall be cumulative and, if so, from which date or
dates for each such series;
(c) Whether the shares of such series shall be subject
to redemption by the corporation and, if made subject to
redemption, the price or prices and the time or times at which,
and the terms and conditions upon which, such series may be
redeemed;
(d) The terms and amount of any sinking fund or
redemption or purchase account, if any, to be provided for the
redemption or purchase of the shares of such series;
(e) Whether the shares of such series shall be
convertible into or exchangeable for shares of any other class or
classes, or of any other series of any class or classes, of stock
of the corporation, and, if provision be made for conversion or
exchange, the times, prices, rates, adjustments, and other terms
and conditions of such conversion or exchange;
(f) Whether the shares of such series which shall have
been redeemed, converted or exchanged shall have the status of
authorized but unissued Preferred Stock, and whether they may be
reissued as the shares of the same or any other series;
(g) The voting rights, if any, of the holders of
shares of such series with respect to the election of directors
or otherwise;
(h) The rights of the holders of such series in the
event of liquidation or dissolution of the corporation including
possible preferences over the Common Stock;
(i) The price or other consideration for which the
shares of such series shall be issued, and, if deemed desirable,
the stated value or other valuation of the shares constituting
such series;
(j) Any other preferences, and relative,
participating, optional or other special rights of such shares,
and qualifications, limitations or restrictions thereof, to the
full extent now or hereafter permitted by the laws of the State
of Delaware.
Section 2. All shares of Preferred Stock of any one
series shall be identical with each other in all respects except
as to dates, if any, from and after which dividends thereon shall
be cumulative.
Section 3. The holders of Common Stock shall be
entitled to one vote per share for all purposes.
Section 4. No holder of shares of any class of stock
of the corporation shall be entitled as a matter of right to
subscribe for, purchase or receive any additional shares of any
class of stock of the corporation which it may issue or sell,
whether out of the number of shares presently authorized or
authorized by any amendment of the Certificate of Incorporation
or out of shares of stock of the corporation acquired by it after
the issuance thereof and no holder of shares of any class of
stock of the corporation shall be entitled as a matter of right
to subscribe for, or purchase or receive any bonds, debentures or
other obligations which the corporation may at any time issue or
sell.
Section 5. Effective as of 5:00 p.m., Eastern Standard
Time, on the date that the Certificate of Amendment adding this
paragraph to this Article IV is filed with the Secretary of State
of the State of Delaware (the "Effective Date"), each four (4)
outstanding shares of Common Stock of the Corporation, the par
value of which was theretofore ten cents ($.10) per share, shall
be converted into and become one (1) fully-paid and nonassessable
share of Common Stock of the Corporation par value forty cents
($.40) per share. No fractional shares will be issued in
connection with the foregoing conversion. In lieu of issuing
fractional shares arising as a result of the conversion, a
shareholder who holds fewer than four shares immediately prior to
the Effective Date will be entitled to receive from the
Corporation cash in an amount equal to the closing sale price per
share of the Common Stock on the New York Stock Exchange
Composite Tape on the day prior to the Effective Date
("Fractional Share Amount") multiplied by the number of shares of
Common Stock held immediately prior to the Effective Date.
Shareholders who hold more than four shares immediately prior to
the Effective Date will be entitled to receive from the
Corporation cash in an amount equal to the Fractional Share
Amount multiplied by the number of shares of Common Stock held
immediately prior to the Effective Date that are not evenly
divisible by four in lieu of fractional shares.
ARTICLE V.
The Board of Directors may make, alter, amend or repeal
the by-laws of the corporation without the vote or assent of the
stockholders.
ARTICLE VI.
Meetings of stockholders may be held within or without
the State of Delaware as the by-laws may provide. The books of
the corporation may be kept (subject to any provision of the laws
of Delaware) outside the State of Delaware at such place or
places as may be designated from time to time by the Board of
Directors or in the by-laws of the corporation. Elections of
directors need not be by written ballot unless the by-laws of the
corporation shall so provide.
ARTICLE VII.
Section 1. A director of the corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, as the
same exists or hereafter may be amended, or (iv) for any
transaction from which the director derived an improper personal
benefit. If the General Corporation law of the State of Delaware
hereafter is amended to authorize the further elimination or
limitation of the liability of directors, then the liability of a
director of the corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the
fullest extent permitted by the amended General Corporation Law
of the State of Delaware. No amendment to or repeal of this
Article VII shall apply to or have any effect on the liability or
alleged liability of any director of the corporation for or with
respect to any acts of omissions of such director occurring prior
to such amendment or repeal.
Section 2. Indemnification and Insurance.
(a) Right to Indemnification. Each person who was or
is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer of the corporation or is or was serving at
the request of the corporation as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest
extent permissible under the law of the State of Delaware, as the
same exists or may hereafter be changed (but, in the case of any
such change, only to the extent that such change permits the
corporation to provide broader indemnification rights than said
law permitted the corporation to provide prior to such change),
except as otherwise specifically prohibited by paragraph (b)
hereof, against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person
who has ceased to be director, officer, employee or agent and
shall inure to the benefit of his or her heirs, executors and
administrators, provided, however, that, except as provided in
paragraph (c) hereof with respect to proceedings seeking to
enforce rights to indemnification, the corporation shall
indemnify any such person seeking indemnification in connection
with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board
of Directors of the corporation. The right to indemnification
conferred in this Section shall be a contract right and shall
include the right to be paid by the corporation the expenses
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that the payment of such expenses
incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be
determined by a final decision by a court having competent
jurisdiction or other final adjudication that such director or
officer is not entitled to be indemnified under this Section or
otherwise.
(b) Limitation on Indemnification. Paragraph (a)
notwithstanding, the corporation shall not indemnify any such
person with respect to any of the following matters: (i)
remuneration paid to such person if it shall be determined by a
final decision by a court having competent jurisdiction or other
final adjudication that such remuneration was in violation of
law; or (ii) any accounting of profits made from the purchase or
sale by such person of the corporation's securities within the
meaning of Section 16(b) of the Securities Exchange Act of 1934
and amendments thereto or similar provisions of any federal,
state or local statutory law; or (iii) actions brought about or
contributed to by the dishonesty of such person, if a final
decision by a court having competent jurisdiction or other final
adjudication adverse to such person establishes that acts of
active and deliberate dishonesty were committed or attempted by
such person with actual dishonest purpose and intent and were
material to the adjudication; or (iv) actions based on or
attributable to such person having gained any personal profit or
advantage to which he was not entitled, in the event that a final
decision by a court having competent jurisdiction or other final
adjudication adverse to such person establishes that such person
in fact gained such personal profit or other advantage to which
he was not entitled; or (v) any matter in respect of which a
final decision by a court with competent jurisdiction or other
final adjudication shall determine that indemnification is
unlawful.
(c) Right of Claimant to Bring Suit. If a claim under
paragraph (a) of this Section is not paid in full by the
corporation within sixty days after a written claim has been
received by the corporation, except in the case of a claim for
expenses incurred in defending a proceeding in advance of its
final disposition, which case the applicable period shall be
twenty days, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim
and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim.
It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required
undertaking has been tendered to the corporation) that under
clauses (i), (ii), (iii), (iv) or (v) of paragraph (b) the
corporation is not required to indemnify the claimant for the
amount claimed, but the burden of providing such defense shall be
on the corporation. Neither the failure of the corporation
(including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances, nor an actual determination by
the corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that indemnification is not
proper in the circumstances, shall be a defense to the action or
create a presumption that indemnification is not proper in the
circumstances.
(d) Non-Exclusivity of Rights. The right to
indemnification and the payment of expenses incurred in defending
a proceeding in advance of its final disposition conferred in
this Section shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision
of the Certificate of Incorporation, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise.
(e) Insurance. The corporation may maintain
insurance, at its expense, to protect itself and any director,
officer, employee or agent of the corporation or another
corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether
or not the corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware
General Corporation Law or otherwise.
(f) Indemnification of Employees and Agents of the
Corporation. The corporation may, to the extent authorized from
time to time by the Board of Directors, grant rights to
indemnification, and to be paid by the corporation the expenses
incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Section 2 with respect
to the indemnification and advancement of expenses of directors
and officers of the corporation.
ARTICLE VIII.
The corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
ARTICLE IX.
This Restated Certificate of Incorporation has been
duly adopted by the directors of the corporation in accordance
with the provisions of Section 245 of the General Corporation Law
of Delaware.
IN WITNESS WHEREOF, the undersigned, being the
Chairman, President and Chief Executive Officer of Acceptance
Insurance Companies Inc. has hereunto set his hand hereto and
attested by its Secretary, all as of this 20th day of October,
1993.
/s/ Kenneth C. Coon
_____________________________
Kenneth C. Coon, Chairman,
President and Chief Executive
Officer
/s/ Donn E. Davis
____________________________
Donn E. Davis, Secretary
EXHIBIT 10.1
EXECUTION COPY
ACCEPTANCE INSURANCE COMPANIES INC.
__________________________________________
$90,000,000
CREDIT AGREEMENT
dated as of July 26, 1995
__________________________________________
NBD BANK, as Agent
COMERICA BANK
FIRST NATIONAL BANK OF OMAHA
and
FIRSTIER BANK, N.A.,
as Co-Agents
and
NBD BANK
COMERICA BANK
FIRST NATIONAL BANK OF OMAHA
FIRSTIER BANK, N.A.
and
FIRST INTERSTATE BANK OF ARIZONA,
as Banks
<PAGE>
TABLE OF CONTENTS
Page
Article
I. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . 1
1.1 Certain Definitions . . . . . . . . . . . . . . 1
1.2 Other Definitions; Rules of
Construction. . . . . . . . . . . . . . . . . . 12
II. THE COMMITMENTS AND THE LOANS. . . . . . . . . . . . 13
2.1 Commitments of the Banks. . . . . . . . . . . . 13
(a) Revolving Credit Commitments . . . . . . . 13
(b) Line of Credit Commitments . . . . . . . . 13
2.2 Termination and Reduction of
Commitments . . . . . . . . . . . . . . . . . . 13
2.3 Fees. . . . . . . . . . . . . . . . . . . . . . 13
(a) Revolving Credit Commitment Fee. . . . . . 13
(b) Line of Credit Commitment Fee. . . . . . . 14
(c) Closing Fee. . . . . . . . . . . . . . . . 14
(d) Agent's Fee. . . . . . . . . . . . . . . . 14
2.4 Disbursement of Loans . . . . . . . . . . . . . 14
2.5 Conditions for First Disbursement . . . . . . . 15
(a) Charter Documents. . . . . . . . . . . . . 15
(b) By-Laws and Corporate
Authorizations . . . . . . . . . . . . . . 16
(c) Incumbency Certificate . . . . . . . . . . 16
(d) Notes. . . . . . . . . . . . . . . . . . . 16
(e) Security Documents . . . . . . . . . . . . 16
(f) Legal Opinion. . . . . . . . . . . . . . . 16
(g) Consents, Approvals, Etc . . . . . . . . . 16
(h) Fees . . . . . . . . . . . . . . . . . . . 16
(i) Termination of 1992 Credit
Agreement. . . . . . . . . . . . . . . . . 16
(j) Subrogation and Contribution
Agreement. . . . . . . . . . . . . . . . . 17
(k) Pledged Subsidiary Good-Standing
Certificate. . . . . . . . . . . . . . . . 17
(l) Other Documents and Matters. . . . . . . . 17
2.6 Further Conditions for Disbursement . . . . . . 17
2.7 Subsequent Elections as to Borrowings . . . . . 17
2.8 Limitation of Requests and Elections. . . . . . 18
2.9 Minimum Amounts; Limitation on Number of
Borrowings; Etc.. . . . . . . . . . . . . . . . 18
2.10 Security and Collateral . . . . . . . . . . . . 18
2.11 Extension of Revolving Credit Termination Date 18
III. PAYMENTS AND PREPAYMENTS OF BORROWINGS . . . . . . . 20
3.1 Principal Payments and Prepayments. . . . . . . 20
3.2 Interest Payments . . . . . . . . . . . . . . . 20
3.3 Payment Method. . . . . . . . . . . . . . . . . 21
3.4 No Setoff or Deduction. . . . . . . . . . . . . 21
3.5 Payment on Non-Business Day; Payment
Computations. . . . . . . . . . . . . . . . . . 22
3.6 Additional Costs. . . . . . . . . . . . . . . . 22
3.7 Illegality and Impossibility. . . . . . . . . . 23
3.8 Indemnification . . . . . . . . . . . . . . . . 23
IV. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 24
4.1 Corporate Existence and Power . . . . . . . . . 24
4.2 Corporate Authority . . . . . . . . . . . . . . 24
4.3 Binding Effect. . . . . . . . . . . . . . . . . 24
4.4 Subsidiaries. . . . . . . . . . . . . . . . . . 24
4.5 Litigation. . . . . . . . . . . . . . . . . . . 25
4.6 Financial Condition . . . . . . . . . . . . . . 25
4.7 Use of Loans. . . . . . . . . . . . . . . . . . 25
4.8 Consents, Etc.. . . . . . . . . . . . . . . . . 26
4.9 Taxes . . . . . . . . . . . . . . . . . . . . . 26
4.10 Title to Properties . . . . . . . . . . . . . . 26
4.11 ERISA . . . . . . . . . . . . . . . . . . . . . 26
4.12 Disclosure. . . . . . . . . . . . . . . . . . . 27
4.13 Environmental Matters . . . . . . . . . . . . . 27
4.14 Integrated Operation. . . . . . . . . . . . . . 28
V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . 28
5.1 Affirmative Covenants . . . . . . . . . . . . . 28
(a) Preservation of Corporate Existence,
Etc. . . . . . . . . . . . . . . . . . . . 28
(b) Compliance with Laws, Etc. . . . . . . . . 28
(c) Maintenance of Properties;
Insurance. . . . . . . . . . . . . . . . . 29
(d) Reporting Requirements . . . . . . . . . . 29
(e) Accounting; Access to Records,
Books, Etc.. . . . . . . . . . . . . . . . 31
(f) Additional Collateral. . . . . . . . . . . 31
(g) Further Assurances . . . . . . . . . . . . 31
(h) Loss Reserve Adequacy. . . . . . . . . . . 32
5.2 Negative Covenants. . . . . . . . . . . . . . . 32
(a) Cash Flow Coverage Ratio . . . . . . . . . 32
(b) Funded Debt to Total
Capitalization . . . . . . . . . . . . . . 32
(c) Tangible Net Worth . . . . . . . . . . . . 32
(d) Net Written Premiums to Statutory
Surplus. . . . . . . . . . . . . . . . . . 32
(e) Investment Quality . . . . . . . . . . . . 32
(f) Quality of Reinsurers. . . . . . . . . . . 33
(g) NAIC Ratio Requirements. . . . . . . . . . 33
(h) Merger; Acquisitions; Etc. . . . . . . . . 33
(i) Disposition of Assets. . . . . . . . . . . 33
(j) Nature of Business . . . . . . . . . . . . 33
(k) Stock of Subsidiaries. . . . . . . . . . . 33
(l) Indebtedness . . . . . . . . . . . . . . . 34
(m) Liens. . . . . . . . . . . . . . . . . . . 34
(n) Contingent Liabilities . . . . . . . . . . 35
(o) Inconsistent Agreements. . . . . . . . . . 36
(p) Dividends and Other Restricted
Payments . . . . . . . . . . . . . . . . . 36
(q) Transactions with Affiliates . . . . . . . 36
(r) Payments and Modification of
Subordinated Debt. . . . . . . . . . . . . 36
(s) Tax Sharing Agreement. . . . . . . . . . . 36
(t) Negative Pledge Prohibition. . . . . . . . 36
(u) Loans and Advances to Non-Material
Subsidiaries . . . . . . . . . . . . . . . 36
VI. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . 37
6.1 Events of Default . . . . . . . . . . . . . . . 37
(a) Nonpayment . . . . . . . . . . . . . . . . 37
(b) Misrepresentation. . . . . . . . . . . . . 37
(c) Certain Covenants. . . . . . . . . . . . . 37
(d) Other Defaults . . . . . . . . . . . . . . 37
(e) Cross Default. . . . . . . . . . . . . . . 37
(f) Judgments. . . . . . . . . . . . . . . . . 37
(g) ERISA. . . . . . . . . . . . . . . . . . . 38
(h) Insolvency, Etc. . . . . . . . . . . . . . 38
(i) Security Documents . . . . . . . . . . . . 39
(j) Key Management . . . . . . . . . . . . . . 39
(k) Regulatory Action. . . . . . . . . . . . . 39
(l) Maintenance of Catastrophic
Reinsurance. . . . . . . . . . . . . . . . 39
6.2 Remedies. . . . . . . . . . . . . . . . . . . . 39
VII. THE AGENT AND THE BANKS. . . . . . . . . . . . . . . 40
7.1 Appointment and Authorization . . . . . . . . . 40
7.2 Agent and Affiliates. . . . . . . . . . . . . . 40
7.3 Scope of Agent's Duties . . . . . . . . . . . . 41
7.4 Reliance by Agent . . . . . . . . . . . . . . . 41
7.5 Default . . . . . . . . . . . . . . . . . . . . 41
7.6 Liability of Agent. . . . . . . . . . . . . . . 41
7.7 Nonreliance on Agent and Other Banks. . . . . . 42
7.8 Indemnification . . . . . . . . . . . . . . . . 42
7.9 Successor Agent . . . . . . . . . . . . . . . . 43
7.10 Sharing of Payments . . . . . . . . . . . . . . 43
7.11 The Co-Agents . . . . . . . . . . . . . . . . . 44
VIII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . 44
8.1 Amendments, Etc . . . . . . . . . . . . . . . . 44
8.2 Notices . . . . . . . . . . . . . . . . . . . . 45
8.3 No Waiver By Conduct; Remedies
Cumulative. . . . . . . . . . . . . . . . . . . 45
8.4 Reliance on and Survival of Various
Provisions. . . . . . . . . . . . . . . . . . . 46
8.5 Expenses; Indemnification . . . . . . . . . . . 46
8.6 Successors and Assigns. . . . . . . . . . . . . 47
8.7 Counterparts. . . . . . . . . . . . . . . . . . 50
8.8 Governing Law . . . . . . . . . . . . . . . . . 50
8.9 Table of Contents and Headings. . . . . . . . . 50
8.10 Construction of Certain Provisions. . . . . . . 50
8.11 Integration and Severability. . . . . . . . . . 50
8.12 Independence of Covenants . . . . . . . . . . . 51
8.13 Interest Rate Limitation. . . . . . . . . . . . 51
8.14 WAIVER OF JURY TRIAL. . . . . . . . . . . . . . 51
EXHIBITS
Exhibit A Line of Credit Note
Exhibit B Revolving Credit Note
Exhibit C Request for Borrowing
Exhibit D Request for Continuation or Conversion of
Borrowing
Exhibit E Guaranty Agreement
Exhibit F-1, F-2 & F-3 Pledge Agreements
Exhibit G Tax Sharing Agreement
Exhibit H Subrogation and Contribution Agreement
Exhibit I Extension Request
Exhibit J Assignment and Acceptance
SCHEDULES
Schedule 4.4 Subsidiaries
Schedule 4.5 Litigation
Schedule 5.2(m) Indebtedness
Schedule 5.2(n) Liens
<PAGE>
THIS CREDIT AGREEMENT, dated as of July 26, 1995 (this
"Agreement"), is by and among ACCEPTANCE INSURANCE COMPANIES INC.,
a Delaware corporation (the "Company"), the banks set forth on the
signature pages hereof and the banks that otherwise become a party
hereto pursuant to Section 8.6 (collectively the "Banks" and
individually a "Bank"), NBD Bank, a Michigan banking corporation,
as agent for the Banks (in such capacity, the "Agent"), and
COMERICA BANK, a Michigan banking corporation, FIRST NATIONAL BANK
OF OMAHA, a national banking association, and FIRSTIER BANK, N.A.,
a national banking association, as co-agents (in such capacity,
collectively the "Co-Agents" and individually a "Co-Agent").
INTRODUCTION
The Company desires to obtain (i) a three-year revolving
credit facility in the principal amount of $75,000,000 and (ii) a
364-day line of credit in the principal amount of $15,000,000 in
order to provide funds for its general corporate purposes, and the
Banks are willing to establish such a revolving credit facility and
line of credit in favor of the Company on the terms and conditions
herein set forth.
In consideration of the premises and of the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used herein the following
terms shall have the following respective meanings:
"Adjusted Debt Service" shall mean, for any period, the
sum of (a) Interest Expense for such period, plus (b) the amount
equal to twenty percent (20%) of the aggregate outstanding
principal balance of the Revolving Credit Loans as of the end of
such period.
"Affiliate", when used with respect to any person, shall
mean any other person which, directly or indirectly, controls or is
controlled by or is under common control with such person. For
purposes of this definition "control" (including the correlative
meanings of the terms "controlled by" and "under common control
with"), with respect to any person, shall mean possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such person, whether through the
ownership of voting securities or by contract or otherwise.
"AIC" shall mean Acceptance Insurance Company, a Nebraska
corporation.
"AIH" shall mean Acceptance Insurance Holdings Inc., a
Nebraska corporation.
"Applicable Margin" shall mean, for purposes of
determining the Eurodollar Rate applicable to Eurodollar Rate
Revolving Credit Loans or Eurodollar Rate Line of Credit Loans
outstanding during any fiscal quarter of the Company (the
"Application Quarter"), the "Applicable Margin for Revolving Credit
Loans" or "Applicable Margin for Line of Credit Loans", as the case
may be, determined in accordance with the chart below based upon
the ratio of Funded Debt to Total Capitalization (the "Relevant
Ratio") as of the end of the second to last fiscal quarter of the
Company preceding the Application Quarter:
<TABLE>
<CAPTION>
Ratio of Funded Applicable Margin Applicable Margin
Debt to Total for Revolving for Line of
Level Capitalization Credit Loans Credit Loans
----- --------------- ----------------- -----------------
<S> <C> <C> <C>
1 Equal to or greater 1.50% 2.25%
than 0.40 to 1.00
2 Equal to or greater 1.25% 2.00%
than 0.30 to 1.00
but less than 0.40
to 1.00
3 Equal to or greater 1.00% 1.75%
than 0.20 to 1.00
but less than 0.30
to 1.00
4 Less than 0.20 to 0.75% 1.50%
1.00
</TABLE>
; provided that (a) at all times that all or any portion of the
Line of Credit Loans are outstanding, the Applicable Margin for
Revolving Credit Loans at each Level set forth in the above chart
shall automatically be deemed increased by 50 basis points (e.g.,
at Level 1 the Applicable Margin for Revolving Credit Loans would
be deemed increased to 2.00%) and (b) the Applicable Margin for
Line of Credit Loans at each Level set forth in the above chart
shall automatically be deemed increased by 25 basis points at the
completion of each successive six-month period following the date
the Line of Credit Loans are made (e.g., if the Line of Credit
Loans are made on October 15, 1995, then on April 15, 1996 the
Applicable Margin at Level 1 for Line of Credit Loans would be
deemed increased to 2.50%, on October 15, 1996 the Applicable
Margin at Level 1 for Line of Credit Loans would be deemed
increased to 2.75% and so on). Subject to clauses (a) and (b) of
the above proviso, each change in the Applicable Margins in
accordance with this definition shall become effective on the first
day of each Application Quarter. Notwithstanding anything in this
Agreement to the contrary, and without limiting any of the other
rights of the Agent and the Banks under this Agreement, if the
Company shall have failed to deliver to the Agent the certificate
of the chief financial officer of the Company as required under
Section 5.1(d)(ii) or (iii) for any fiscal quarter of the Company
prior to the first day of the second fiscal quarter of the Company
immediately following such fiscal quarter, then, until such time as
the Company shall have delivered such certificate to the Agent, the
"Applicable Margins" for such second following fiscal quarter shall
be determined based upon the assumption that the Relevant Ratio as
of the end of such preceding fiscal quarter was equal to or greater
than 0.40 to 1.00, and upon delivery of such certificate for such
preceding fiscal quarter, the Applicable Margins shall be adjusted
(if necessary) in accordance with this definition and the Relevant
Ratio, subject to the other rights of the Agent and the Banks under
this Agreement. Any change in the Applicable Margin with respect
to any Eurodollar Rate Loan shall occur on the date determined in
accordance with this definition of "Applicable Margin", regardless
of the fact that such date may occur during the Eurodollar Interest
Period with respect to such Eurodollar Rate Loan and that such date
may not be the last day of such Eurodollar Interest Period.
"Assignment and Acceptance" shall have the meaning
ascribed thereto in Section 8.6.
"Augmented Cash Flow" shall mean, for any period, the sum
of (a) Cash and Cash Equivalents of the Company as of the end of
such period, plus (b) the interest income of the Company for such
period, determined in accordance with Generally Accepted Accounting
Principles, plus (c) Net Tax Sharing Payments for such period, plus
(d) Dividends Paid or Receivable for such period, plus (e) Proceeds
From Employee Stock Purchases for such period, plus (f) Proceeds
From Equity Transactions for such period, minus (g) New Investments
in Subsidiaries for such period.
"Borrowing" shall mean the aggregation of Loans of the
Banks to be made to the Company, or continuations and conversions
of any Loans, made pursuant to Article II on a single date and, in
the case of any Eurodollar Rate Loans, for a single Interest
Period, which Borrowings may be classified for purposes of this
Agreement by reference to the type of Loans comprising the related
Borrowing, e.g., a "Revolving Credit Loan Borrowing" is a Borrowing
comprised of Revolving Credit Loans, a "Line of Credit Loan
Borrowing" is a Borrowing comprised of the Line of Credit Loans, a
"Eurodollar Rate Borrowing" is a Borrowing comprised of Eurodollar
Rate Loans and a "Floating Rate Borrowing" is a Borrowing comprised
of "Floating Rate Loans."
"Business Day" shall mean a day other than a Saturday,
Sunday or other day on which the Agent is not open to the public
for carrying on substantially all of its banking functions in
Detroit, Michigan.
"Capital Expenditures" shall mean, with respect to any
period, the Dollar amount of all gross expenditures (including the
capitalized portion of obligations for such period under Capital
Leases) made for fixed assets, real property, plant and equipment
and all renewals thereof and improvements and replacements thereto
(but not repairs thereof) and all other expenditures made or
committed to be made during such period that are required to be
capitalized in accordance with Generally Accepted Accounting
Principles.
"Capital Lease" of any person shall mean any lease which,
in accordance with generally accepted accounting principles, is or
should be capitalized on the books of such person.
"Cash and Cash Equivalents" shall mean, as of any date,
(a) cash that is then owned by the Company and (b) any of the
following then owned by the Company: (i) commercial paper of any
United States issuer having a rating of P-1 (or the equivalent
thereof) or higher then given by Moody's Investors Service, Inc. or
A-1 (or the equivalent thereof) or higher then given by Standard &
Poor's Ratings Group, (ii) direct obligations of, and obligations
fully guaranteed by, the United States of America, and (iii)
certificates of deposit of any commercial bank that is a member of
the Federal Reserve System and that has capital, surplus and
undivided profits (as shown on its most recently published
statement of condition) aggregating not less than $100,000,000,
provided, that each of the foregoing has a maturity date not later
than 180 days after the date of acquisition thereof by the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations thereunder.
"Commitments" shall mean the Revolving Credit Commitments
and the Line of Credit Commitments.
"Consolidated" or "consolidated" shall mean, when used
with reference to any financial term in this Agreement, the
aggregate for two or more persons of the amounts signified by such
term for all such persons determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Consolidated Net Worth" shall mean, as of any date, the
total assets of the Company and its Subsidiaries, determined on a
consolidated basis in accordance with Generally Accepted Accounting
Principles, minus the total liabilities of the Company and its
Subsidiaries determined on a consolidated basis in accordance with
Generally Accepted Accounting Principles.
"Contingent Liabilities" of any person shall mean, as of
any date, all obligations of others for which such person is
contingently liable, as guarantor, surety, accommodation party,
partner or in any other capacity, or in respect of which
obligations such person assures a creditor against loss or agrees
to take any action to prevent any such loss (other than
endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all
reimbursement obligations of such person in respect of any letters
of credit, surety bonds or similar obligations and all obligations
of such person to advance funds to, or to purchase assets, property
or services from, any other person in order to maintain the
financial condition of such other person.
"Cumulative Net Income" of any person shall mean, as of
any date, the net income (after deduction for income and other
taxes of such person, or its shareholders in the case of a
corporation that has elected to be taxed as a Subchapter S
corporation under the Code, determined by reference to income or
profits of such person) for the period commencing January 1, 1995
through the end of the most recently completed fiscal year of such
person (but without reduction for any net loss incurred for any
fiscal year during such period), all as determined in accordance
with Generally Accepted Accounting Principles.
"Default" shall mean any event or condition which might
become an Event of Default with notice or lapse of time or both.
"Dividends Paid or Receivable" shall mean, for any
period, the aggregate amount of dividends and other payments and
distributions in respect of the capital stock of the Guarantors,
and any other direct Subsidiary of the Company from time to time,
that is, or is available to be, paid to the Company during such
period.
"Dollars" and "$" shall mean the lawful money of the
United States of America.
"Effective Date" shall mean the effective date specified
in the final paragraph of this Agreement.
"Environmental Laws" at any date shall mean all
provisions of law, statutes, ordinances, rules, regulations,
judgments, writs, injunctions, decrees, orders, awards and
standards promulgated by the government of the United States of
America or any foreign government or by any state, province,
municipality or other political subdivision thereof or therein, or
by any court, agency, instrumentality, regulatory authority or
commission of any of the foregoing concerning the protection of, or
regulating the discharge of substances into, the environment.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations thereunder.
"ERISA Affiliate" shall mean, with respect to any person,
any trade or business (whether or not incorporated) which, together
with such person or any Subsidiary of such person, would be treated
as a single employer under Section 414 of the Code.
"Eurodollar Business Day" shall mean, with respect to any
Eurodollar Rate Loan, a day which is both a Business Day and a day
on which dealings in Dollar deposits are carried out in the London
interbank market.
"Eurodollar Interest Period" shall mean, with respect to
any Eurodollar Rate Loan, the period commencing on the day such
Eurodollar Rate Loan is made or converted to a Eurodollar Rate Loan
and ending on the day which is one, two, three, six or twelve
months thereafter, as the Company may elect under Section 2.7, and
each subsequent period commencing on the last day of the
immediately preceding Eurodollar Interest Period and ending on the
day which is one, two, three, six or twelve months thereafter, as
the Company may elect under Section 2.7, provided, however, that
(a) any Eurodollar Interest Period which commences on the last
Eurodollar Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate
subsequent calendar month) shall end on the last Eurodollar
Business Day of the appropriate subsequent calendar month, (b) each
Eurodollar Interest Period which would otherwise end on a day which
is not a Eurodollar Business Day shall end on the next succeeding
Eurodollar Business Day or, if such next succeeding Eurodollar
Business Day falls in the next succeeding calendar month, on the
next preceding Eurodollar Business Day, and (c) no Eurodollar
Interest Period which would end after the Line of Credit Loan
Maturity Date (or the Revolving Credit Termination Date with
respect to Revolving Credit Loans) shall be permitted.
"Eurodollar Rate" shall mean, with respect to any
Eurodollar Rate Loan and the related Eurodollar Interest Period,
the per annum rate that is equal to the sum of:
a. the Applicable Margin, plus
AR the rate per annum obtained by dividing
(i) the per annum rate of interest at which
deposits in Dollars for such Eurodollar
Interest Period and in an aggregate amount
comparable to the amount of such Eurodollar
Rate Loan to be made by the Agent in its
capacity as a Bank hereunder are offered to
the Agent by other prime banks in the London
interbank market at approximately 11:00 a.m.
London time on the second Eurodollar Business
Day prior to the first day of such Eurodollar
Interest Period by (ii) an amount equal to one
minus the stated maximum rate (expressed as a
decimal) of all reserve requirements
(including, without limitation, any marginal,
emergency, supplemental, special or other
reserves) that are specified on the first day
of such Eurodollar Interest Period by the
Board of Governors of the Federal Reserve
System (or any successor agency thereto) for
determining the maximum reserve requirement
with respect to eurocurrency funding
(currently referred to as "Eurocurrency
liabilities" in Regulation D of such Board)
maintained by a member bank of such System;
all as conclusively determined by the Agent, such sum to be rounded
up, if necessary, to the nearest whole multiple of one one-
hundredth of one percent (1/100 of 1%).
"Eurodollar Rate Loan" shall mean any Loan which bears
interest at the Eurodollar Rate.
"Event of Default" shall mean any of the events or
conditions described in Section 6.1.
"Federal Funds Rate" shall mean the per annum rate
established and announced by the Agent from time to time as the
opening federal funds rate paid by the Agent in its regional
federal funds market for overnight borrowings from other banks.
"Floating Rate" shall mean the per annum rate equal to
the greater of (a) the Prime Rate in effect from time to time, and
(b) the sum of one percent (1%) per annum plus the Federal Funds
Rate in effect from time to time; which Floating Rate shall change
simultaneously with any change in such Prime Rate or Federal Funds
Rate, as the case may be.
"Floating Rate Loan" shall mean any Loan which bears
interest at the Floating Rate.
"Funded Debt" shall mean, as of any date, all interest
bearing Indebtedness of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles, including, without limitation, the
aggregate outstanding principal amount of the Loans and obligations
of the Company and its Subsidiaries under Capital Leases, provided,
that "Funded Debt" shall not include Subordinated Debt.
"Generally Accepted Accounting Principles" shall mean
generally accepted accounting principles applied on a basis
consistent with that reflected in the financial statements referred
to in Section 4.6.
"Guarantors" shall mean AIH and TRG; and "Guarantor"
shall mean any one of such Guarantors.
"Guaranty" shall mean the Guaranty Agreement entered into
by the Guarantors for the benefit of the Agent and the Banks in
substantially the form of Exhibit E hereto, as amended or modified
from time to time.
"Indebtedness" of any person shall mean, as of any date,
(a) all obligations of such person for borrowed money, (b) all
obligations of such person as lessee under any Capital Lease, (c)
all obligations which are secured by any Lien existing on any asset
or property of such person whether or not the obligation secured
thereby shall have been assumed by such person, (d) all obligations
of such person for the unpaid purchase price for goods, property or
services acquired by such person, except for trade accounts payable
arising in the ordinary course of business that are not past due,
(e) all obligations of such person to purchase goods, property or
services where payment therefor is required regardless of whether
delivery of such goods or property or the performance of such
services is ever made or tendered (generally referred to as "take
or pay contracts"), (f) all liabilities of such person in respect
of Unfunded Benefit Liabilities under any Plan of such person or of
any ERISA Affiliate, (g) all obligations of such person in respect
of any interest rate or currency swap, rate cap or other similar
transaction (valued in an amount equal to the highest termination
payment, if any, that would be payable by such person upon
termination for any reason on the date of determination), and (h)
all obligations of others similar in character to those described
in clauses (a) through (g) of this definition for which such person
is contingently liable, as guarantor, surety, accommodation party,
partner or in any other capacity, or in respect of which
obligations such person assures a creditor against loss or agrees
to take any action to prevent any such loss (other than
endorsements of negotiable instruments for collection in the
ordinary course of business), including without limitation all
reimbursement obligations of such person in respect of letters of
credit, surety bonds or similar obligations and all obligations of
such person to advance funds to, or to purchase assets, property or
services from, any other person in order to maintain the financial
condition of such other person.
"Insurance Subsidiaries" shall mean AIC, RIC, Acceptance
Indemnity Insurance Company, a Nebraska corporation, Phoenix
Indemnity Insurance Company, an Arizona corporation, American
Growers Insurance Company, a Nebraska corporation, and any other
direct or indirect Subsidiary of the Company now owned or hereafter
acquired that writes insurance; and "Insurance Subsidiary" shall
mean any one of the Insurance Subsidiaries.
"Interest Expense" shall mean, for any period (without
duplication with respect to any other period), all interest paid,
payable or accrued during such period by the Company and its
Subsidiaries on Indebtedness of the Company and its Subsidiaries,
determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles.
"Interest Payment Date" shall mean (a) with respect to
any Eurodollar Rate Loan, the last day of each Interest Period with
respect to such Eurodollar Rate Loan and, in the case of any
Interest Period exceeding three months, those days that occur
during such Interest Period at intervals of three months after the
first day of such Interest Period, and (b) in all other cases, the
last Business Day of each March, June, September and December
occurring after the date hereof, commencing with the first such
Business Day occurring after the date of this Agreement.
"Interest Period" shall mean any Eurodollar Interest
Period.
"Lien" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, option,
conditional sale or title retaining contract, sale and leaseback
transaction, financing statement filing, lessor's or lessee's
interest under any lease, subordination of any claim or right, or
any other type of lien, charge, encumbrance, preferential
arrangement or other claim or right.
"Line of Credit Commitment" shall mean, with respect to
any Bank, the commitment of such Bank to make a Line of Credit Loan
pursuant to Section 2.1(b), in a principal amount not exceeding the
"Line of Credit Commitment Amount" for such Bank set forth next to
the name of such Bank in the signature pages hereof (or, with
respect to any Bank that becomes a party hereto pursuant to Section
8.6, set forth in such Bank's Assignment and Acceptance), as such
amount may be reduced from time to time pursuant to Section 2.2.
"Line of Credit Loan" shall mean any loan under Section
2.4 evidenced by a Line of Credit Note and made pursuant to Section
2.1(b).
"Line of Credit Loan Maturity Date" shall mean July 26,
1997.
"Line of Credit Note" shall mean any promissory note of
the Company evidencing the Line of Credit Loans, in substantially
the form annexed hereto as Exhibit A, as amended or modified from
time to time and together with any promissory note or notes issued
in exchange or replacement therefor.
"Line of Credit Expiry Date" shall mean the earlier to
occur of (a) July 26, 1996 and (b) the date on which the Line of
Credit Commitments shall be terminated pursuant to Section 2.2 or
6.2.
"Loan" shall mean any Revolving Credit Loan or Line of
Credit Loan. Any such Loan or portion thereof may also be
denominated as a Floating Rate Loan or a Eurodollar Rate Loan and
such Loans are referred to herein as "types" of Loans.
"Multiemployer Plan" shall mean any "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA or Section 414(f) of the
Code.
"NAIC" shall mean the National Association of Insurance
Commissioners and any successor thereto.
"Net Tax Sharing Payments" shall mean, with respect to
any period, the excess, if any, of the aggregate amount of payments
received by the Company from its Subsidiaries under the Tax Sharing
Agreement during such period over the aggregate amount of payments
made by the Company to the Internal Revenue Service during such
period.
"Net Worth" of any person shall mean, as of any date, the
amount of any capital stock, paid in capital and similar equity
accounts plus (or minus in the case of a deficit) the capital
surplus and retained earnings of such person and the amount of any
foreign currency translation adjustment account shown as a capital
account of such person.
"Net Written Premiums" shall mean, with respect to any
Subsidiary of the Company, such Subsidiary's gross written premiums
less (a) returned premiums and (b) ceded reinsurance costs.
"New Investments in Subsidiaries" shall mean, with
respect to any period, the aggregate amount of additional capital
investments made by the Company in Subsidiaries of the Company
during such period.
"1994 Credit Agreement" shall mean the Credit Agreement,
dated as of March 31, 1994, by and among the Company, certain of
the Banks, and NBD Bank (formerly known as NBD Bank, N.A.), as
agent for such Banks.
"Non-Material Subsidiaries" shall mean The Major Group,
Inc., a Florida corporation, and its subsidiaries formerly engaged
in the real estate development business, so long as The Major
Group, Inc. and each of such subsidiaries is not operating, has no
assets and has no liabilities.
"Note" shall mean any Revolving Credit Note or Line of
Credit Note.
"Overdue Rate" shall mean (a) in respect of principal of
Floating Rate Loans, a rate per annum that is equal to the sum of
three percent (3%) per annum plus the Floating Rate, (b) in respect
of principal of Eurodollar Rate Loans, a rate per annum that is
equal to the sum of three percent (3%) per annum plus the per annum
rate in effect thereon until the end of the then current Interest
Period for such Loan and, thereafter, a rate per annum that is
equal to the sum of three percent (3%) per annum plus the Floating
Rate, and (c) in respect of other amounts payable by the Company
hereunder (other than interest), a per annum rate that is equal to
the sum of three percent (3%) per annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation and any entity succeeding to any or all of its
functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section
5.2(i) hereof.
"Person" or "person" shall include an individual, a
corporation, an association, a partnership, a trust or estate, a
joint stock company, an unincorporated organization, a joint
venture, a trade or business (whether or not incorporated), a
government (foreign or domestic) and any agency or political
subdivision thereof, or any other entity.
"Plan" shall mean, with respect to any person, any
pension plan (including a Multiemployer Plan) subject to Title IV
of ERISA or to the minimum funding standards of Section 412 of the
Code which has been established or maintained by such person, any
Subsidiary of such person or any ERISA Affiliate, or by any other
person if such person, any Subsidiary of such person or any ERISA
Affiliate could have liability with respect to such pension plan.
"Pledge Agreements" shall mean the Pledge Agreements
entered into by the Company and each of the Guarantors for the
benefit of the Banks and the Agent pursuant to this Agreement in
substantially the form of Exhibit F-1, F-2 and F-3 hereto,
respectively, as amended or modified from time to time; and "Pledge
Agreement" shall mean any one of such Pledge Agreements.
"Pledged Subsidiaries" shall mean the Guarantors, AIC,
RIC, Seaboard Underwriters, Inc., a North Carolina corporation, and
any other Subsidiaries of the Company from time to time the capital
stock of which is required to be pledged to the Agent for the
benefit of the Banks pursuant to Section 5.1(f).
"Pledgors" shall mean each of the Company and the
Guarantors; and "Pledgor" shall mean any one of the Pledgors.
"Prime Rate" shall mean the per annum rate announced by
the Agent from time to time as its "prime rate" (it being
acknowledged that such announced rate may not necessarily be the
lowest rate charged by the Agent to any of its customers); which
Prime Rate shall change simultaneously with any change in such
announced rate.
"Proceeds From Employee Stock Purchases" shall mean, with
respect to any period, the aggregate amount of cash proceeds
received by the Company during such period from sales of capital
stock of the Company to Company employees through the employee
stock purchase plan.
"Proceeds From Equity Transactions" shall mean, with
respect to any period, the aggregate amount of cash proceeds
received by the Company during such period from sales of stock.
"Prohibited Transaction" shall mean any transaction
involving any Plan which is proscribed by Section 406 of ERISA or
Section 4975 of the Code.
"Reportable Event" shall mean a reportable event as
described in Section 4043(b) of ERISA including those events as to
which the thirty (30) day notice period is waived under Part 2615
of the regulations promulgated by the PBGC under ERISA.
"Required Banks" shall mean, at any time, Banks holding
not less than (i) 66-2/3% of the aggregate principal amount of the
Loans then outstanding or (ii) 66-2/3% of the Commitments if no
Loans are then outstanding.
"Revolving Credit Commitment" shall mean, with respect to
any Bank, the commitment of such Bank to make Revolving Credit
Loans pursuant to Section 2.1(a), in amounts not exceeding in
aggregate principal amount outstanding at any time the "Revolving
Credit Commitment Amount" for such Bank set forth next to the name
of such Bank in the signature pages hereof (or, with respect to any
Bank that becomes a party hereto pursuant to Section 8.6, set forth
in such Bank's Assignment and Acceptance), as such amount may be
reduced from time to time pursuant to Section 2.2.
"Revolving Credit Loan" shall mean any loan under Section
2.4 evidenced by a Revolving Credit Note and made pursuant to
Section 2.1(a).
"Revolving Credit Note" shall mean any promissory note of
the Company evidencing the Revolving Credit Loans, in substantially
the form annexed hereto as Exhibit B, as amended or modified from
time to time and together with any promissory note or notes issued
in exchange or replacement therefor.
"Revolving Credit Termination Date" shall mean the
earlier to occur of (a) July 26, 1998 and (b) the date on which the
Revolving Credit Commitments shall be terminated pursuant to
Section 2.2 or 6.2.
"RIC" shall mean Redland Insurance Company, an Iowa
corporation.
"SAP" shall mean statutory accounting principles
formulated by the NAIC and permitted under the laws of Nebraska or,
with respect to any Insurance Subsidiary not incorporated under the
laws of Nebraska, under the laws of such Subsidiary's place of
incorporation.
"Security Documents" shall mean, collectively, the
Guaranty, the Pledge Agreements and all other related agreements
and documents, including assignments separate from certificates,
stock powers and similar documents, delivered pursuant to this
Agreement or otherwise entered into by any person to secure the
Loans.
"Statutory Surplus" of any person shall mean the
statutory surplus of such person computed in the manner required
for page 3, column 1, line 25 of its annual statement of condition
and affairs prepared in accordance with SAP.
"Subordinated Debt" of any person shall mean, as of any
date, that Indebtedness of such person for borrowed money which is
expressly subordinate and junior in right and priority of payment
to the Loans and other Indebtedness of such person to the Banks and
the Agent in manner and by agreement satisfactory in form and
substance to the Required Banks.
"Subsidiary" of any person shall mean any other person
(whether now existing or hereafter organized or acquired) in which
(other than directors qualifying shares required by law) at least
a majority of the securities or other ownership interests of each
class having ordinary voting power or analogous right (other than
securities or other ownership interests which have such power or
right only by reason of the happening of a contingency), at the
time as of which any determination is being made, are owned,
beneficially and of record, by such person or by one or more of the
other Subsidiaries of such person or by any combination thereof;
provided that the terms "Subsidiary" and "Subsidiaries" shall not
include the Non-Material Subsidiaries.
"Tax Sharing Agreement" shall mean the agreement dated
April 12, 1990 among the Company and its Subsidiaries relating to
the allocation of income taxes among them, as such agreement is in
effect on the Effective Date, a copy of which is attached hereto as
Exhibit G.
"Total Capitalization" shall mean, as of any date, the
sum of (a) Consolidated Net Worth, plus (b) Subordinated Debt of
the Company, plus (c) Funded Debt.
"TRG" shall mean The Redland Group, Inc., an Iowa
corporation.
"Unfunded Benefit Liabilities" shall mean, with respect
to any Plan as of any date, the amount of the unfunded benefit
liabilities determined in accordance with Section 4001(a)(18) of
ERISA.
1.2 Other Definitions; Rules of Construction. As used
herein, the terms "Agent", "Bank", "Banks", "Company" and "this
Agreement" shall have the respective meanings ascribed thereto in
the introductory paragraph of this Agreement. Such terms, together
with the other terms defined in Section 1.1, shall include both the
singular and the plural forms thereof and shall be construed
accordingly. All computations required hereunder and all financial
terms used herein shall be made or construed in accordance with
Generally Accepted Accounting Principles unless such principles are
inconsistent with the express requirements of this Agreement;
provided that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article V to eliminate the effect
of any change in Generally Accepted Accounting Principles in the
operation of such covenant (or if the Agent notifies the Company
that the Required Banks wish to amend Article V for such purpose),
then the Company's compliance with such covenant shall be
determined on the basis of Generally Accepted Accounting Principles
in effect immediately before the relevant change in Generally
Accepted Accounting Principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner
satisfactory to the Company and the Required Banks. Use of the
terms "herein", "hereof", and "hereunder" shall be deemed
references to this Agreement in its entirety and not to the Section
or clause in which such term appears. References to "Sections" and
"subsections" shall be to Sections and subsections, respectively,
of this Agreement unless otherwise specifically provided.
ARTICLE II.
THE COMMITMENTS AND THE LOANS
2.1 Commitments of the Banks.
(a) Revolving Credit Commitments. Each Bank agrees,
for itself only, subject to the terms and conditions of this
Agreement, to make Revolving Credit Loans to the Company, from time
to time from and including the Effective Date to but excluding the
Revolving Credit Termination Date, not to exceed in aggregate
principal amount at any time outstanding the amount of the
Revolving Credit Commitment of such Bank as of the date any such
Loan is made.
(b) Line of Credit Commitments. Each Bank further
agrees, for itself only, subject to the terms and conditions of
this Agreement, to make a single Line of Credit Loan, at any one
time from and including the Effective Date to but excluding the
Line of Credit Expiry Date, in the principal amount equal to the
Line of Credit Commitment of such Bank as of the date such Loan is
made.
2.2 Termination and Reduction of Commitments. (a) The
Company shall have the right to terminate or reduce the Revolving
Credit Commitments and the Line of Credit Commitments at any time
and from time to time at its option, provided that (i) the
Revolving Credit Commitments may not be reduced or terminated if
the Line of Credit Commitments are still in effect or any Line of
Credit Loans are then outstanding, (ii) the Company shall give
notice of such termination or reduction to the Agent (with
sufficient executed copies for each Bank) specifying the amount and
effective date thereof, (iii) each partial reduction of the
Commitments shall be in a minimum amount of $500,000 and in an
integral multiple of $100,000 and shall reduce the Commitments of
all of the Banks proportionately in accordance with the respective
Commitments amounts for each such Bank set forth in the signature
pages hereof next to name of each such Bank, (iv) no such
termination or reduction shall be permitted with respect to any
portion of the Commitments as to which a request for a Loan
pursuant to Section 2.4 is then pending and (v) the Revolving
Credit Commitments and Line of Credit Commitments may not be
terminated if any Revolving Credit Loans or Line of Credit Loans,
as the case may be, are then outstanding and may not be reduced
below the principal amount of Revolving Credit Loans or Line of
Credit Loans, as the case may be, then outstanding. The
Commitments or any portion thereof terminated or reduced pursuant
to this Section 2.2 may not be reinstated.
2.3 Fees.
(a) Revolving Credit Commitment Fee. The Company
agrees to pay to each Bank a commitment fee on the daily average
unused amount of such Bank's Revolving Credit Commitment, for the
period from the Effective Date to but excluding the Revolving
Credit Termination Date, at a rate equal to three-eighths of one
percent (3/8 of 1%) per annum. Accrued revolving credit commitment
fees shall be payable quarterly in arrears on the last Business Day
of each June, September, December, and March, commencing on the
first such day occurring after the date hereof, and on the
Revolving Credit Termination Date.
(b) Line of Credit Commitment Fee. The Company
further agrees to pay to each Bank a commitment fee on the amount
of such Bank's Line of Credit Commitment, for the period from the
Effective Date to but excluding the earlier to occur of (i) the
date the Line of Credit Loans are made or (ii) the Line of Credit
Expiry Date, at a rate equal to three-eighths of one percent (3/8
of 1%) per annum. Accrued line of credit commitment fees shall be
payable quarterly in arrears on the last Business Day of each
March, June, September and December, commencing on the first such
Business Day occurring after the Effective Date, and on the earlier
to occur of (i) the date the Line of Credit Loans are made or (ii)
the Line of Credit Expiry Date.
(c) Closing Fee. The Company further agrees to pay
to the Banks collectively a closing fee for this Agreement in the
amount of $117,000. Such closing fee shall be payable on or prior
to the Effective Date.
(d) Agent's Fees. The Company further agrees to pay
to the Agent such fees for arranging this Agreement and agency fees
for its services as Agent under this Agreement in such amounts and
on such schedule as may from time to time be agreed upon by the
Company and the Agent.
2.4 Disbursement of Loans. (a) The Company shall give
the Agent notice of each requested Borrowing in substantially the
form of Exhibit C hereto (with sufficient executed copies for each
Bank) not later than 10:00 a.m. Detroit time (i) three Eurodollar
Business Days prior to the date such Borrowing is requested to be
made if such Borrowing is to be made as a Eurodollar Rate
Borrowing, and (ii) on the date such Borrowing is requested to be
made if such Borrowing is to be made as a Floating Rate Borrowing,
which notice shall specify whether such Borrowing is a Revolving
Credit Borrowing or the Line of Credit Borrowing, whether a
Eurodollar Rate Borrowing or Floating Rate Borrowing is requested
and, in the case of each requested Eurodollar Rate Borrowing, the
Interest Period to be initially applicable to such Borrowing. The
Agent shall as soon as practicable provide notice of such requested
Borrowing to each Bank. The Company hereby directs and authorizes
the Agent to disburse the proceeds of the initial Borrowing
hereunder to the Banks party to the 1994 Credit Agreement in
amounts sufficient to repay all then existing indebtedness of the
Company and its Subsidiaries to such Banks under the 1994 Credit
Agreement. The initial Borrowing hereunder shall be in an amount
at least sufficient to make such repayment to the Banks. Subject
to the terms and conditions of this Agreement, the remaining
proceeds of the initial Borrowing and the proceeds of each
subsequent Borrowing shall be made available to the Company by
depositing the proceeds thereof, in immediately available funds, in
an account maintained and designated by the Company at the
principal office of the Agent.
(b) Each Bank, on the date any Borrowing is
requested to be made, shall make its pro rata share of such
Borrowing available in immediately available funds at the principal
office of the Agent for disbursement to the Company. Unless the
Agent shall have received notice from any Bank prior to the date
such Borrowing is requested to be made under this Section 2.4 that
such Bank will not make available to the Agent such Bank's pro rata
portion of such Borrowing, the Agent may assume that such Bank has
made such portion available to the Agent on the date such Borrowing
is requested to be made in accordance with this Section 2.4. If
and to the extent such Bank shall not have so made such pro rata
portion available to the Agent, the Agent may (but shall not be
obligated to) make such amount available to the Company, and such
Bank and the Company severally agree to pay to the Agent forthwith
on demand such amount together with interest thereon, for each day
from the date such amount is made available to the Company by the
Agent until the date such amount is repaid to the Agent, at a rate
per annum equal to the interest rate applicable to such Borrowing
during such period. If such Bank shall pay such amount to the
Agent together with interest, such amount so paid shall constitute
a Loan by such Bank as a part of the related borrowing for purposes
of this Agreement. The failure of any Bank to make its pro rata
portion of any such Borrowing available to the Agent shall not
relieve any other Bank of its obligation to make available its pro
rata portion of such Borrowing on the date such Borrowing is
requested to be made, but no Bank shall be responsible for failure
of any other Bank to make such pro rata portion available to the
Agent on the date of any such Borrowing.
(c) All Revolving Credit Loans made under this
Section 2.4 shall be evidenced by the Revolving Credit Notes and
the Line of Credit Loans under this Section 2.4 shall be evidenced
by the Line of Credit Notes. All such Loans shall be due and
payable and bear interest as provided in Article III. Each Bank is
hereby authorized by the Company to record on the schedules
attached to its Notes, or in its books and records, the date, and
amount and type of each Loan and the duration of the related
Interest Period (if applicable), the amount of each payment or
prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the
case may be, shall constitute prima facie evidence of the
information so recorded, provided, however, that failure of any
Bank to record, or any error in recording, any such information
shall not relieve the Company of its obligation to repay the
outstanding principal amount of the Loans, all accrued interest
thereon and other amounts payable with respect thereto in
accordance with the terms of the Notes and this Agreement. Subject
to the terms and conditions of this Agreement, the Company may
borrow Revolving Credit Loans under this Section 2.4, prepay
Revolving Credit Loans pursuant to Section 3.1 and reborrow
Revolving Credit Loans under this Section 2.4. The Company may
only borrow Line of Credit Loans one time. The Company may prepay
all or any lesser portion of the Line of Credit Loans pursuant to
Section 3.1, but any such portion of the Line of Credit Loans
prepaid may not be reborrowed.
2.5 Conditions for First Disbursement. The obligation
of the Banks to make Loans for the first Borrowing hereunder is
subject to receipt by the Agent of the following documents (in a
sufficient quantity of originals for distribution to all the Banks,
which distribution the Agent shall make promptly after the
Effective Date), and completion of the following matters, in form
and substance satisfactory to the Agent:
(a) Charter Documents. Certificates of recent date
of the appropriate authority or official of the Company's and each
Guarantor's state of incorporation (listing all charter documents
of each such person on file in that office if such listing is
available) and certifying as to the good standing and corporate
existence of each such person together with copies of such charter
documents of each such person, certified as of a recent date by
such authority or official and certified as true and correct as of
the Effective Date by a duly authorized officer of each such
person;
(b) By-Laws and Corporate Authorizations. Copies of
the by-laws of each of the Company and the Guarantors, together
with all authorizing resolutions and evidence of other corporate
action taken by each such person to authorize the execution,
delivery and performance by it of this Agreement, the Notes and
the Security Documents to which it is a party and the consummation
by it of the transactions contemplated hereby, certified as true
and correct as of the Effective Date by a duly authorized officer
of each such person;
(c) Incumbency Certificate. A certificate of
incumbency of each of the Company and the Guarantors, containing,
and attesting to the genuineness of, the signatures of those
officers authorized to act on behalf of each such person in
connection with this Agreement, the Notes and the Security
Documents to which it is a party and the consummation by it of the
transactions contemplated hereby, certified as true and correct as
of the Effective Date by a duly authorized officer of each such
person;
(d) Notes. The Revolving Credit Notes and Line of
Credit Notes duly executed on behalf of the Company for all the
Banks;
(e) Security Documents. The Guaranty duly executed
on behalf of the Guarantors and the Pledge Agreements duly executed
on behalf of the Pledgors granting to the Banks and the Agent the
collateral intended to be provided pursuant to Section 2.10,
together with the original certificates representing all shares of
stock subject to the Pledge Agreements and an equal number of
assignments separate from certificates executed in blank;
(f) Legal Opinion. The favorable written opinion of
Crosby, Guenzel, Davis, Kessner & Kuester, general counsel for the
Company and the Guarantors, with respect to each of the matters set
forth in Article IV (other than Sections 4.6, 4.7, 4.9, 4.10, 4.12,
4.13 and 4.14) and as to such other matters as the Banks and the
Agent may reasonably request;
(g) Consents, Approvals, Etc. Copies of all
governmental and nongovernmental consents, approvals,
authorizations, declarations, registrations or filings, if any,
required on the part of the Company or any Guarantor in connection
with the execution, delivery and performance of this Agreement, the
Notes, the Security Documents or the transactions contemplated
hereby or as a condition to the legality, validity or
enforceability of this Agreement, the Notes or any of the Security
Documents, certified as true and correct and in full force and
effect as of the Effective Date by a duly authorized officer of the
Company, or, if none is required, a certificate of such officer to
that effect;
(h) Fees. The payment in full, in immediately
available funds, of all fees required to be paid by the Company
under this Agreement on or before the Effective Date;
(i) Termination of 1994 Credit Agreement. The 1994
Credit Agreement shall be terminated;
(j) Subrogation and Contribution Agreement. A
subrogation and contribution agreement substantially in the form of
Exhibit H hereto by and among, and duly executed on behalf of, the
Company and the Guarantors;
(k) Pledged Subsidiary Good-Standing Certificates.
Certificates of recent date of the appropriate authority or
official of each Pledged Subsidiary's state of incorporation
certifying as to the good standing and corporate existence of each
such Pledged Subsidiary; and
(l) Other Documents and Matters. Such other
documents, and the completion of such other matters, as the Agent
may reasonably request.
2.6 Further Conditions for Disbursement. The obligation
of the Banks to make Loans for any Borrowing (including the first
Borrowing), or any continuation or conversion under Section 2.7, is
further subject to the satisfaction of the following conditions
precedent:
(a) The representations and warranties contained in
Article IV hereof and in the Security Documents shall be true and
correct on and as of the date such Borrowing is made (both before
and after such Borrowing is made) as if such representations and
warranties were made on and as of such date; and
(b) No Default or Event of Default shall exist or
shall have occurred and be continuing on the date such Borrowing is
made (whether before or after such Borrowing is made).
The Company shall be deemed to have made a representation and
warranty to the Banks at the time of each Borrowing to the effects
set forth in clauses (a) and (b) of this Section 2.6. For purposes
of this Section 2.6, the representations and warranties contained
in Section 4.6 shall be deemed made with respect to both the
financial statements referred to therein and the most recent
financial statements delivered pursuant to Section 5.1(d).
2.7 Subsequent Elections as to Borrowings. The Company
may elect (a) to continue a Floating Rate Borrowing, or a portion
thereof, as a Floating Rate Borrowing, or (b) to convert a Floating
Rate Borrowing, or a portion thereof, to a Eurodollar Rate
Borrowing, or (c) to convert a Eurodollar Rate Borrowing, or a
portion thereof, to a Floating Rate Borrowing, in each case by
giving notice thereof to the Agent (with sufficient executed copies
for each Bank) in substantially the form of Exhibit D hereto not
later than 10:00 a.m. Detroit time three Eurodollar Business Days
prior to the date any such continuation of or conversion to a
Eurodollar Rate Borrowing is to be effective and not later than
10:00 a.m. Detroit time on the date such continuation or conversion
is to be effective in all other cases, provided that, if a
continuation of a Borrowing as, or a conversion of a Borrowing to,
a Eurodollar Rate Borrowing is requested, such notice shall also
specify the Interest Period to be applicable thereto upon such
continuation or conversion. The Agent shall as soon as practicable
provide notice of such election to the Banks. If the Company shall
not timely deliver such a notice with respect to any outstanding
Eurodollar Rate Borrowing, the Company shall be deemed to have
elected to convert such Borrowing to a Floating Rate Borrowing on
the last day of the then current Interest Period with respect to
such Borrowing.
2.8 Limitation of Requests and Elections.
Notwithstanding any other provision of this Agreement to the
contrary, if, upon receiving a request for a continuation of a
Eurodollar Rate Borrowing as a Eurodollar Rate Borrowing, or a
request for conversion of a Floating Rate Borrowing to a Eurodollar
Rate Borrowing, (a) deposits in Dollars for periods comparable to
the Interest Period elected by the Company are not available to one
or more of the Banks in the London interbank market, (b) the
Eurodollar Rate will not adequately and fairly reflect the cost to
any Bank of making, funding or maintaining the related Eurodollar
Rate Borrowing or (c) by reason of national or international
financial, political or economic conditions or by reason of any
applicable law, treaty or other international agreement, rule or
regulation (whether domestic or foreign) now or hereafter in
effect, or the interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof, or compliance by any Bank with any
guideline, request or directive of such authority (whether or not
having the force of law), including without limitation exchange
controls, it is impracticable, unlawful or impossible for, or shall
limit or impair the ability of, any Bank to make or fund the
relevant Borrowing or to continue such Borrowing as a Borrowing of
the then existing type or to convert a Borrowing to such a
Borrowing, then the Company shall not be entitled, so long as such
circumstances continue, to request a Borrowing of the affected type
pursuant to Section 2.4 or a continuation of or conversion to a
Borrowing of the affected type pursuant to Section 2.7. In the
event that such circumstances no longer exist, the Banks shall
again consider requests for Borrowings of the affected type
pursuant to Section 2.4, and requests for continuations of and
conversions to Borrowings of the affected type pursuant to Section
2.7.
2.9 Minimum Amounts; Limitation on Number of Borrowings;
Etc. Except for (a) Revolving Credit Borrowings which exhaust the
entire remaining amount of the Revolving Credit Commitments, and
(b) payments required pursuant to Section 3.7, each Borrowing and
each continuation or conversion pursuant to Section 2.7 and each
prepayment thereof shall be (i) in the case of Eurodollar Rate
Borrowings, in a minimum amount of $500,000 and in an integral
multiple of $100,000 and (ii) in the case of Floating Rate
Borrowings, in a minimum amount of $100,000 and in an integral
multiple thereof.
2.10 Security and Collateral. To secure the payment
when due of the Notes and all other obligations of the Company
under this Agreement to the Banks and the Agent, the Guarantors
shall execute and deliver the Guaranty to the Banks and the Agent,
and the Pledgors shall execute and deliver to the Banks and the
Agent the Pledge Agreements pledging all capital stock of the
Pledged Subsidiaries.
2.11 Extension of Revolving Credit Termination Date.
The Revolving Credit Termination Date and the obligation to make
mandatory repayment of the outstanding principal amount of the
Revolving Credit Loans on the Revolving Credit Termination Date
shall be subject to extension as set forth in this Section 2.11.
(a) Request for Extension of Revolving Credit
Termination Date. Notwithstanding anything in this Agreement to
the contrary, not later than 60 days prior to each anniversary of
the Effective Date, the Company may, by delivery to the Agent of a
duly completed extension request in the form of Exhibit I hereto
(an "Extension Request"), which Extension Request must be
accompanied by the audited financial statements required by Section
5.1(d)(iii), irrevocably request that each Bank extend for a single
one-year period the Revolving Credit Termination Date relating to
such Bank's Revolving Credit Commitment.
(b) Consent to Extension of Revolving Credit
Termination Date. (i) The Agent shall, promptly after receipt of
any such Extension Request pursuant to subsection (a) above, notify
each Bank by providing to them a copy of the Extension Request.
(ii) Each Bank shall, within 30 days of receipt
of the Extension Notice, notify the Agent whether or not it
consents to the request of the Company set forth in such Extension
Request (each Bank consenting to such request hereinafter is
referred to as a "Consenting Bank"). Thereafter, the Agent shall
promptly notify the Company which Banks, if any, have consented to
such request. The decision to consent or not to consent to any
such request shall be made by each Bank in its sole and absolute
discretion.
(iii) Each Bank that elects not to extend the
Revolving Credit Termination Date with respect to its Revolving
Credit Commitment (a "Non-Consenting Bank") hereby agrees that if
any other Bank or financial institution acceptable to the Company
and the Agent offers to purchase such Non-Consenting Bank's Line of
Credit Commitment and Revolving Credit Commitment for a purchase
price equal to the sum of all amounts then owing to such Non-
Consenting Bank with respect to the Loans and all other amounts
accrued for the account of such Non-Consenting Bank, including,
without limitation, amounts pursuant to Section 3.8, such Non-
Consenting Bank will promptly assign, sell and transfer all of its
right, title, interest and obligations with respect to the
foregoing to such other Bank or financial institution pursuant to
and on the terms specified in an Assignment and Acceptance.
(iv) Notwithstanding anything herein to the
contrary, the Revolving Credit Termination Date will not be
extended unless all Banks have consented to the extension or, if
there is any Non-Consenting Bank, another Bank or financial
institution (a "Replacement Bank") has agreed to purchase such Non-
Consenting Bank's Commitments pursuant to the terms of subsection
(b)(iii) above; provided that if all Consenting Banks and
Replacement Banks agree, the Revolving Credit Termination Date may
be extended for a one-year period with respect to such Consenting
Banks and Replacement Banks (but not the remaining Non-Consenting
Banks), in which case, (A) on the existing Revolving Credit
Termination Date with respect to the remaining Non-Consenting
Banks, the Company shall repay all Revolving Credit Loans and all
other amounts owing to the Non-Consenting Banks, which payments
shall, so long as the Loans of the Consenting Banks and Replacement
Banks are not then due and payable, be solely for such Non-
Consenting Banks and shall not be shared by the Consenting Banks
and Replacement Banks, and (B) the Revolving Credit Commitment of
each Consenting Bank and Replacement Bank shall remain unchanged,
but each Consenting Bank's and Replacement Bank's pro rata share of
the total Revolving Credit Commitments going forward shall be
adjusted in accordance with the new Bank group.
ARTICLE III.
PAYMENTS AND PREPAYMENTS OF BORROWINGS
3.1 Principal Payments and Prepayments.
(a) Unless earlier payment is required under this
Agreement, the Company shall pay to the Banks on the Revolving
Credit Termination Date the entire outstanding principal amount of
the Revolving Credit Loans.
(b) Unless earlier payment is required under this
Agreement, the Company shall pay to the Banks on the Line of Credit
Loan Maturity Date the entire outstanding principal amount of the
Line of Credit Loans.
(c) The Company may at any time and from time to
time prepay all or a portion of the Loans, without premium or
penalty, provided that the Company may not prepay any portion of
any Loan as to which an election for a continuation of or a
conversion to a Eurodollar Rate Loan is pending pursuant to Section
2.7.
(d) Notwithstanding anything herein to the contrary,
immediately upon the Company's receipt thereof, the Company shall
prepay the Line of Credit Loans with the entire proceeds (but only
to the extent of the then aggregate outstanding principal balance
of the Line of Credit Loans) received by the Company from any (i)
Subordinated Debt and (ii) capital stock, any securities
exchangeable for or convertible into capital stock and any
warrants, rights or other options to purchase or otherwise acquire
capital stock or securities issued by the Company.
3.2 Interest Payments. The Company shall pay interest
to the Banks on the unpaid principal amount of each Loan, for the
period commencing on the date such Loan is made until such Loan is
paid in full, on each Interest Payment Date and at maturity
(whether at stated maturity, by acceleration or otherwise), and
thereafter on demand, at the following rates per annum:
(a) During such periods that such Loan is a Floating
Rate Loan, the Floating Rate.
(b) During such periods that such Loan is a
Eurodollar Rate Loan, the Eurodollar Rate applicable to such Loan
for each related Eurodollar Interest Period.
Notwithstanding the foregoing paragraphs (a) and (b), if the
Required Banks shall so require at any time, the Company shall pay
interest on demand by the Agent at the Overdue Rate on the
outstanding principal amount of any Loan and any other amount
payable by the Company hereunder (other than interest) which is not
paid in full when due (whether at stated maturity, by acceleration
or otherwise) for the period commencing on the due date thereof
until the same is paid in full.
3.3 Payment Method. (a) All payments to be made by the
Company hereunder will be made in Dollars and in immediately
available funds to the Agent for the account of the Banks at its
address set forth next to its name in the signature pages hereof
not later than 1:00 p.m. Detroit time on the date on which such
payment shall become due. Payments received after 1:00 p.m.
Detroit time shall be deemed to be payments made prior to 1:00 p.m.
on the next succeeding Business Day (or Eurodollar Business Day
with respect to payments in respect of Eurodollar Rate Loans).
(b) At the time of making each such payment, the
Company shall, subject to the other terms and conditions of this
Agreement, specify to the Agent that Borrowing or other obligation
of the Company hereunder to which such payment is to be applied.
In the event that the Company fails to so specify the relevant
obligation or if an Event of Default shall have occurred and be
continuing, the Agent may apply such payments as it may determine
in its sole discretion to obligations of the Company to the Banks
arising under this Agreement or otherwise.
(c) On the day such payments are deemed received,
the Agent shall remit to the Banks their pro rata shares of such
payments in immediately available funds. In the event the Agent
fails to so remit to the Banks their pro rata shares of such
payments on the day such payments are deemed received, the Agent
shall pay to the Banks interest on such amounts until paid at the
Federal Funds Rate. In the case of payments of principal and
interest on any Borrowing, such pro rata shares shall be determined
with respect to each such Bank by the ratio which the outstanding
principal balance of its Loan included in such Borrowing bears to
the outstanding principal balance of the Loans of all of the Banks
included in such Borrowing, and in the case of fees paid pursuant
to Section 2.3 and other amounts payable hereunder (other than the
Agent's fees payable pursuant to Section 2.3(d) and amounts payable
to any Bank under Section 3.6, 3.7 or 3.8), such pro rata shares
shall be determined with respect to each such Bank by the ratio
which the Commitments of such Bank bear to the Commitments of all
the Banks.
3.4 No Setoff or Deduction. All payments of principal
of and interest on the Loans and other amounts payable by the
Company hereunder shall be made by the Company without setoff or
counterclaim, and, subject to the next succeeding sentence, free
and clear of, and without deduction or withholding for, or on
account of, any present or future taxes, levies, imposts, duties,
fees, assessments, or other charges of whatever nature, imposed by
any governmental authority, or by any department, agency or other
political subdivision or taxing authority. If any such taxes,
levies, imposts, duties, fees, assessments or other charges are
imposed, the Company will pay such additional amounts as may be
necessary so that payment of principal of and interest on the Loans
and other amounts payable hereunder, after withholding or deduction
for or on account thereof, will not be less than any amount
provided to be paid hereunder and, in any such case, the Company
will furnish to the Banks certified copies of all tax receipts
evidencing the payment of such amounts within 45 days after the
date any such payment is due pursuant to applicable law.
3.5 Payment on Non-Business Day; Payment Computations.
Except as otherwise provided in this Agreement to the contrary,
whenever any installment of principal of, or interest on, any Loan
or any other amount due hereunder becomes due and payable on a day
which is not a Business Day, the maturity thereof shall be extended
to the next succeeding Business Day and, in the case of any
installment of principal, interest shall be payable thereon at the
rate per annum determined in accordance with this Agreement during
such extension. Computations of interest and other amounts due
under this Agreement, including, without limitation, the commitment
fees payable under Sections 2.3(a) and (b), shall be made on the
basis of a year of 365 or 366 days, as the case may be (or 360 days
when determining the Eurodollar Rate), for the actual number of
days elapsed, including the first day but excluding the last day of
the relevant period.
3.6 Additional Costs. (a) In the event that any
applicable law, rule or regulation (whether domestic or foreign) or
treaty or other international agreement now or hereafter in effect
and whether or not presently applicable to any Bank or the Agent,
or any interpretation or administration thereof by any
governmental authority charged with the interpretation or
administration thereof, or compliance by any Bank or the Agent with
any guideline, request or directive of any such authority (whether
or not having the force of law), shall (i) affect the basis of
taxation of payments to any Bank or the Agent of any amounts
payable by the Company under this Agreement (other than taxes
imposed on the overall net income of any Bank or the Agent by the
jurisdiction, or by any political subdivision or taxing authority
of any such jurisdiction, in which such Bank or the Agent, as the
case may be, has its principal office), or (ii) shall impose,
modify or deem applicable any reserve, special deposit or similar
requirement against assets of, deposits with or for the account of,
or credit extended by any Bank or the Agent, or (iii) shall impose
any other condition with respect to this Agreement, the
Commitments, the Notes or the Loans, and the result of any of the
foregoing is to increase the cost to any Bank of making, funding or
maintaining any Eurodollar Rate Loan or to reduce the amount of any
sum receivable by any Bank or the Agent, as the case may be,
thereon, then the Company shall pay to such Bank or the Agent, as
the case may be, from time to time, upon request by such Bank (with
a copy of such request to be provided to the Agent) or the Agent,
additional amounts sufficient to compensate such Bank or the Agent,
as the case may be, for such increased cost or reduced sum
receivable to the extent such Bank or the Agent is not compensated
therefor in the computation of the interest rate applicable to such
Eurodollar Rate Loan. A statement as to the amount of such
increased cost or reduced sum receivable, prepared in good faith
and in reasonable detail by such Bank or the Agent, as the case may
be, and submitted by such Bank or the Agent, as the case may be, to
the Company, shall be conclusive and binding for all purposes
absent demonstrable error in computation.
(b) In the event that any applicable law, rule or
regulation (whether domestic or foreign) or treaty or other
international agreement now or hereafter in effect and whether or
not presently applicable to any Bank or the Agent, or any
interpretation or administration thereof by any governmental
authority charged with the interpretation or administration
thereof, or compliance by any Bank or the Agent with any guideline,
request or directive of any such authority (whether or not having
the force of law), including any risk-based capital guidelines,
affects or would affect the amount of capital required or expected
to be maintained by such Bank or the Agent (or any corporation
controlling such Bank or the Agent) and such Bank or the Agent, as
the case may be, determines that the amount of such capital is
increased by or based upon the existence of such Bank's or the
Agent's obligations hereunder and such increase has the effect of
reducing the rate of return on such Bank's or the Agent's (or such
controlling corporation's) capital as a consequence of such
obligations hereunder to a level below that which such Bank or the
Agent (or such controlling corporation) could have achieved but for
such circumstances (taking into consideration its policies with
respect to capital adequacy) by an amount deemed by such Bank or
the Agent to be material, then the Company shall pay to such Bank
or the Agent, as the case may be, from time to time, upon request
by such Bank (with a copy of such request to be provided to the
Agent) or the Agent, additional amounts sufficient to compensate
such Bank or the Agent (or such controlling corporation) for any
increase in the amount of capital and reduced rate of return which
such Bank or the Agent reasonably determines to be applicable to
the existence of such Bank's or the Agent's obligations hereunder.
A statement as to the amount of such compensation, prepared in good
faith and in reasonable detail by such Bank or the Agent, as the
case may be, and submitted by such Bank or the Agent to the
Company, shall be conclusive and binding for all purposes absent
demonstrable error in computation.
3.7 Illegality and Impossibility. In the event that any
applicable law, rule or regulation (whether domestic or foreign) or
treaty or other international agreement now or hereafter in effect
and whether or not presently applicable to any Bank, or any
interpretation or administration thereof by any governmental
authority charged with the interpretation or administration
thereof, or compliance by any Bank with any guideline, request or
directive of such authority (whether or not having the force of
law), including without limitation exchange controls, shall make it
unlawful or impossible for any Bank to maintain any Loan under this
Agreement, the Company shall, upon receipt of notice thereof from
such Bank, repay in full the then outstanding principal amount of
each Loan so affected, together with all accrued interest thereon
to the date of payment and all amounts owing to such Bank under
Section 3.8, (a) on the last day of the then current Interest
Period applicable to such Loan if such Bank may lawfully continue
to maintain such Loan to such day, or (b) immediately if such Bank
may not continue to maintain such Loan to such day. Nothing in
this Section 3.7 shall prohibit the Company from, subject to the
other terms and conditions of this Agreement, using the proceeds of
any Borrowing of a type not then effected as contemplated by this
Section 3.7 to make any repayment of any Borrowing of a type so
effected as required under this Section 3.7.
3.8 Indemnification. If the Company makes any payment
of principal with respect to any Eurodollar Rate Borrowing on any
other date than the last day of an Interest Period applicable
thereto (whether pursuant to Section 3.7, Section 6.2 or
otherwise), or if the Company fails to borrow any Eurodollar Rate
Borrowing after notice has been given to the Banks in accordance
with Section 2.4, or if the Company fails to make any payment of
principal or interest in respect of a Eurodollar Rate Borrowing
when due, the Company shall reimburse each Bank on demand for any
resulting loss or expense incurred by each such Bank, including
without limitation any loss incurred in obtaining, liquidating or
employing deposits from third parties. A statement as to the
amount of such loss or expense, prepared in good faith and in
reasonable detail by such Bank and submitted by such Bank to the
Company, shall be conclusive and binding for all purposes absent
demonstrable error in computation. Calculation of all amounts
payable to any Bank under this Section 3.8 shall be made as though
such Bank shall have actually funded or committed to fund the
relevant Eurodollar Rate Borrowing through the purchase of an
underlying deposit in an amount equal to the amount of the Loan to
be made by such Bank as part of such Borrowing in the relevant
market and having a maturity comparable to the related Interest
Period and through the transfer of such deposit to a domestic
office of such Bank in the United States; provided, however, that
each Bank may fund any Eurodollar Rate Loan in any manner it sees
fit and the foregoing assumption shall be utilized only for the
purpose of calculation of amounts payable under this Section 3.8.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Banks and the
Agent that:
4.1 Corporate Existence and Power. Each of the Company
and the Guarantors is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation, and is duly qualified to do business, and is in good
standing, in all additional jurisdictions where such qualification
is necessary under applicable law. Each of the Company and the
Guarantors has all requisite corporate power to carry on its
business as now being conducted and as proposed to be conducted,
and to execute and deliver this Agreement, the Notes and the
Security Documents to which it is a party and to engage in the
transactions contemplated by this Agreement.
4.2 Corporate Authority. The execution, delivery and
performance by the Company of this Agreement and the Notes, and the
execution, delivery and performance by each of the Company and the
Guarantors of the Security Documents to which it is a party, have
been duly authorized by all necessary corporate action and are not
in contravention of any law, rule or regulation, or any judgment,
decree, writ, injunction, order or award of any arbitrator, court
or governmental authority, or of the terms of any such person's
charter or by-laws, or of any contract or undertaking to which any
such person is a party or by which any such person or any of its
property may be bound or affected.
4.3 Binding Effect. This Agreement is, and the Notes
and the Security Documents to which the Company or either Guarantor
is a party when delivered hereunder will be, legal, valid and
binding obligations of the Company or such Guarantor, as the case
may be, enforceable against each such person in accordance with
their respective terms.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets
forth the corporate name, jurisdiction of incorporation and
ownership of each Subsidiary of the Company. Each such Subsidiary
and each corporation becoming a Subsidiary of the Company after the
date hereof is and will be a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is and will be duly qualified to do business in
each additional jurisdiction where such qualification is or may be
necessary under applicable law. Each Subsidiary of the Company has
and will have all requisite corporate power to own or lease the
properties used in its business and to carry on its business as now
being conducted and as proposed to be conducted, and to execute and
deliver the Security Documents to which it is a party and to engage
in the transactions contemplated thereby. All outstanding shares
of capital stock of each class of each Subsidiary of the Company
have been and will be validly issued and are and will be fully paid
and nonassessable and, except as otherwise indicated in Schedule
4.4 hereto or disclosed in writing to the Agent and the Banks from
time to time, are and will be owned, beneficially and of record, by
the Company or another Subsidiary of the Company free and clear of
any Liens.
4.5 Litigation. Except as set forth in Schedule 4.5
hereto, there is no action, suit or proceeding pending or, to the
best of the Company's knowledge, threatened against or affecting
the Company or any of its Subsidiaries before or by any court,
governmental authority or arbitrator, which if adversely decided
might result, either individually or collectively, in any material
adverse change in the business, properties, operations or
condition, financial or otherwise, of the Company or any of its
Subsidiaries or in any material adverse effect on the legality,
validity or enforceability of this Agreement, the Notes or the
Security Documents and, to the best of the Company's knowledge,
there is no basis for any such action, suit or proceeding.
4.6 Financial Condition. The consolidated balance sheet
of the Company and its Subsidiaries and the consolidated statements
of income, retained earnings and cash flows of the Company and its
Subsidiaries for the fiscal year ended December 31, 1994 and
reported on by Deloitte & Touche, independent certified public
accountants, and the interim consolidated balance sheet and interim
consolidated statements of income, retained earnings and cash flows
of the Company and its Subsidiaries, as of or for the three-month
period ended on March 31, 1995, copies of which have been furnished
to the Banks, fairly present, and the financial statements of the
Company and its Subsidiaries delivered pursuant to Section 5.1(d)
will fairly present, the consolidated financial position of the
Company and its Subsidiaries as at the respective dates thereof,
and the consolidated results of operations of the Company and its
Subsidiaries for the respective periods indicated, all in
accordance with Generally Accepted Accounting Principles
consistently applied (subject, in the case of said interim
statements, to year-end audit adjustments). There has been no
material adverse change in the business, properties, operations or
condition, financial or otherwise, of the Company or any of its
Subsidiaries since December 31, 1994. There is no material
Contingent Liability of the Company or any of its Subsidiaries that
is not reflected in such financial statements or in the notes
thereto.
4.7 Use of Loans. The Company will use the proceeds of
the Loans to refinance all existing indebtedness of the Company and
its Subsidiaries to the Banks and for the Company's other corporate
purposes; provided that the Company shall not use the proceeds of
the Loans to repay the indebtedness of Acceptance Premium Finance
Company, an Arizona corporation of which the Company is a parent,
owing to NBD Bank. Neither the Company nor any of its Subsidiaries
extends or maintains, in the ordinary course of business, credit
for the purpose, whether immediate, incidental, or ultimate, of
buying or carrying margin stock (within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Loan will be used for the purpose,
whether immediate, incidental, or ultimate, of buying or carrying
any such margin stock or maintaining or extending credit to others
for such purpose. After applying the proceeds of each Loan, such
margin stock will not constitute more than 25% of the value of the
assets (either of the Company alone or of the Company and its
Subsidiaries on a consolidated basis) that are subject to any
provisions of this Agreement or any Security Document that may
cause the Loans to be deemed secured, directly or indirectly, by
margin stock.
4.8 Consents, Etc. Except for such consents, approvals,
authorizations, declarations, registrations or filings delivered by
the Company pursuant to Section 2.5(g), if any, each of which is in
full force and effect, no consent, approval or authorization of or
declaration, registration or filing with any governmental authority
or any nongovernmental person or entity, including without
limitation any creditor, lessor or stockholder of the Company or
any of its Subsidiaries, is required on the part of the Company or
any Guarantor in connection with the execution, delivery and
performance of this Agreement, the Notes, the Security Documents or
the transactions contemplated hereby or as a condition to the
legality, validity or enforceability of this Agreement, the Notes
or any of the Security Documents.
4.9 Taxes. The Company and its Subsidiaries have filed
all tax returns (federal, state and local) required to be filed and
have paid all taxes shown thereon to be due, including interest and
penalties, or have established adequate financial reserves on their
respective books and records for payment thereof. Neither the
Company nor any of its Subsidiaries knows of any actual or proposed
tax assessment or any basis therefor, and no extension of time for
the assessment of deficiencies in any federal or state tax has been
granted by the Company or any such Subsidiary.
4.10 Title to Properties. Except as otherwise
disclosed in the latest balance sheet delivered pursuant to Section
4.6 or 5.1(d) of this Agreement, the Company or one or more of its
Subsidiaries have good and marketable fee simple title to all of
the real property, and a valid and indefeasible ownership interest
in all of the other properties and assets (including, without
limitation, the collateral subject to the Security Documents to
which any of them is a party) reflected in said balance sheet or
subsequently acquired by the Company or any such Subsidiary. All
of such properties and assets are free and clear of any Lien,
except for Permitted Liens.
4.11 ERISA. The Company, its Subsidiaries, their
ERISA Affiliates and their respective Plans are in compliance in
all material respects with those provisions of ERISA and of the
Code which are applicable with respect to any Plan. No Prohibited
Transaction and no Reportable Event has occurred with respect to
any such Plan. None of the Company, any of its Subsidiaries or any
of their ERISA Affiliates is an employer with respect to any
Multiemployer Plan. The Company, its Subsidiaries and their ERISA
Affiliates have met the minimum funding requirements under ERISA
and the Code with respect to each of their respective Plans, if
any, and have not incurred any liability to the PBGC or any Plan.
The execution, delivery and performance of this Agreement, the
Notes and the Security Documents does not constitute a Prohibited
Transaction. There is no material Unfunded Benefit Liability with
respect to any Plan of the Company, its Subsidiaries or their ERISA
Affiliates.
4.12 Disclosure. No report or other information
furnished in writing by or on behalf of the Company or any of its
Subsidiaries to any Bank or the Agent in connection with the
negotiation or administration of this Agreement contains any
material misstatement of fact or omits to state any material fact
or any fact necessary to make the statements contained therein not
misleading in light of the circumstances in which they were made.
Neither this Agreement, the Notes, the Security Documents nor any
other document, certificate, or report or statement or other
information furnished to any Bank or the Agent by or on behalf of
the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby 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 in light of the circumstances in which they were made.
There is no fact known to the Company which materially and
adversely affects, or which in the future may (so far as the
Company can now foresee) materially and adversely affect, the
business, properties, operations or condition, financial or
otherwise, of the Company or any of its Subsidiaries, which has not
been set forth in this Agreement or in the other documents,
certificates, statements, reports and other information furnished
in writing to the Banks by or on behalf of the Company in
connection with the transactions contemplated hereby.
4.13 Environmental Matters. The Company and each of
its Subsidiaries is in compliance with all Environmental Laws in
jurisdictions in which the Company or any such Subsidiary owns or
operates, or has owned or operated, a facility or site, or arranges
or has arranged for disposal or treatment of hazardous substances,
solid waste, or other wastes, accepts or has accepted for transport
any hazardous substances, solid wastes or other wastes or holds or
has held any interest in real property or otherwise. No demand,
claim, notice, action, administrative proceeding, investigation or
inquiry whether brought by any governmental authority, private
person or entity or otherwise, arising under, relating to or in
connection with any Environmental Laws is pending or threatened
against the Company or any of its Subsidiaries, any real property
in which the Company or any such Subsidiary holds or has held an
interest or any past or present operation of the Company or any
such Subsidiary. Neither the Company nor any of its Subsidiaries
(a) is the subject of any federal or state investigation evaluating
whether any remedial action is needed to respond to a release of
any toxic substances, radioactive materials, hazardous wastes or
related materials into the environment, (b) has received any notice
of any toxic substances, radioactive materials, hazardous waste or
related materials in, or upon any of its properties in violation of
any Environmental Laws, (c) knows of any basis for any such
investigation, notice or violation, or (d) owns or operates, or has
owned or operated, property which appears on the United States
National Priority List or any other governmental listing which
identifies sites for remedial clean-up or investigatory actions.
No release, threatened release or disposal of hazardous waste,
solid waste or other wastes is occurring or has occurred on, under
or to any real property in which the Company or any of its
Subsidiaries holds any interest or performs any of its operations,
in violation of any Environmental Law.
4.14 Integrated Operation. The Company, the
Guarantors and the other Subsidiaries of the Company are engaged as
an integrated group in the insurance business. The integrated
operation requires financing on such a basis that credit is
supplied to the Company for the continued successful operation of
the integrated group as a whole, and each of the Guarantors has
requested the Banks to make credit available to the Company for the
purpose of financing the integrated operations of the Company, the
Guarantors and the other Subsidiaries of the Company, with each of
such entities expecting to derive benefit, directly or indirectly,
from the credit extended by the Banks to the Company, both in each
entity's separate capacity and as a member of the integrated group,
in as much as the successful operation and condition of each such
entity is dependent upon the continued successful performance of
the functions of the integrated group as a whole.
ARTICLE V.
COVENANTS
5.1 Affirmative Covenants. The Company covenants and
agrees that, until the Revolving Credit Termination Date and
thereafter until the payment in full of the principal of and
accrued interest on the Notes and the performance of all other
obligations of the Company under this Agreement, unless the
Required Banks shall otherwise consent in writing, it shall, and
shall cause each of its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do or
cause to be done all things necessary to preserve, renew and keep
in full force and effect its legal existence and its qualification
as a foreign corporation in good standing in each jurisdiction in
which such qualification is necessary under applicable law, and
the rights, licenses, permits (including those required under
Environmental Laws), franchises, patents, copyrights, trademarks
and trade names material to the conduct of its businesses; and
defend all of the foregoing against all claims, actions, demands,
suits or proceedings at law or in equity or by or before any
governmental instrumentality or other agency or regulatory
authority.
(b) Compliance with Laws, Etc. Comply in all
material respects with all applicable laws, rules, regulations and
orders of any governmental authority, whether federal, state, local
or foreign (including without limitation ERISA, the Code and
Environmental Laws), in effect from time to time; and pay and
discharge promptly when due all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, revenues or
property, before the same shall become delinquent or in default, as
well as all lawful claims for labor, materials and supplies or
otherwise, which, if unpaid, might give rise to Liens upon such
properties or any portion thereof, except to the extent that
payment of any of the foregoing is then being contested in good
faith by appropriate legal proceedings and with respect to which
adequate financial reserves have been established on the books and
records of the Company or any of its Subsidiaries.
(c) Maintenance of Properties; Insurance. Maintain,
preserve and protect all property that is material to the conduct
of the business of the Company or any of its Subsidiaries and keep
such property in good repair, working order and condition and from
time to time make, or cause to be made, all needful and proper
repairs, renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection
therewith may be properly conducted at all times in accordance with
customary and prudent business practices for similar businesses;
and to maintain in full force and effect insurance with responsible
and reputable insurance companies or associations in such amounts,
on such terms and covering such risks, including fire and other
risks insured against by extended coverage, as is usually carried
by companies engaged in similar businesses and owning similar
properties similarly situated and maintain in full force and effect
public liability insurance, insurance against claims for personal
injury or death or property damage occurring in connection with any
of its activities or any properties owned, occupied or controlled
by it, in such amount as it shall reasonably deem necessary, and
maintain such other insurance as may be required by law or as may
be reasonably requested by the Agent for purposes of assuring
compliance with this Section 5.1(c).
(d) Reporting Requirements. Furnish to the Agent
(with a copy for each of the Banks) the following:
(i) Promptly and in any event within
three calendar days after becoming aware of the occurrence of (A)
any Default or Event of Default, (B) the commencement of any
material litigation against, by or affecting the Company, or any of
its Subsidiaries, and any material developments therein, (C)
entering into any material contract or undertaking that is not
entered into in the ordinary course of business or (D) any
development in the business or affairs of the Company or any of its
Subsidiaries which has resulted in or which is likely, in the
reasonable judgment of the Company, to result in a material adverse
change in the business, properties, operations or condition,
financial or otherwise of the Company or any of its Subsidiaries,
a statement of the chief financial officer of the Company setting
forth details of each such Default or Event of Default or such
litigation, material contract or undertaking or development and the
action which the Company or such Subsidiary, as the case may be,
has taken and proposes to take with respect thereto;
(ii) As soon as available and in any event
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Company, a certificate of the
chief financial officer of the Company stating (A) that no Default
or Event of Default has occurred and is continuing or, if a Default
or Event of Default has occurred and is continuing, a statement
setting forth the details thereof and the action which the Company
has taken and proposes to take with respect thereto, and (B) that
a computation (which computation shall accompany such certificate
and shall be in reasonable detail) showing compliance with
Sections 5.2(a), (b), (c), (d), (e), (f) and (g) is in conformity
with the terms of this Agreement;
(iii) As soon as available and in any event
within 120 days after the end of each fiscal year of the Company,
a copy of the consolidating and consolidated balance sheets of the
Company and its Subsidiaries as of the end of such fiscal year and
the related consolidating and consolidated statements of income,
retained earnings and cash flows of the Company and its
Subsidiaries for such fiscal year, with a customary audit report of
Deloitte & Touche, or other independent certified public
accountants of comparable standing selected by the Company, without
qualifications unacceptable to the Required Banks, together with a
certificate of the chief financial officer of the Company stating
(A) that no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is
continuing, a statement setting forth the details thereof and the
action which the Company has taken and proposes to take with
respect thereto, and (B) that a computation (which computation
shall accompany such certificate and shall be in reasonable detail)
showing compliance with Sections 5.2(a), (b), (c), (d), (e), (f)
and (g) is in conformity with the terms of this Agreement;
(iv) As soon as available and in any event
within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of Acceptance Insurance Company, a
Nebraska corporation, and Redland Insurance Company, an Iowa
corporation, the quarterly statement of the condition and affairs
of each such company, including all schedules of investments, all
in reasonable detail and duly certified by the chief financial
officer of the Company as having been prepared in accordance with
SAP;
(v) As soon as available and in any event
within 90 days after the end of each Insurance Subsidiary's fiscal
year, the annual statement of the condition and affairs of each
such Insurance Subsidiary, including all schedules of investments,
all in reasonable detail and duly certified by the chief financial
officer of the Company as having been prepared in accordance with
SAP;
(vi) Promptly after the sending, filing or
receipt thereof, copies of all reports, proxy statements and
financial statements which the Company or any of its Subsidiaries
sends to or files with any of their respective security holders or
any securities exchange or the Securities and Exchange Commission
or any successor agency thereof, or with the NAIC or other
regulators, and all reports, notices, inquiries and other material
documents received by the Company or any of its Subsidiaries from
the NAIC or other regulators;
(vii) Promptly and in any event within 10
calendar days after receiving or becoming aware thereof (A) a copy
of any notice of intent to terminate any Plan of the Company, its
Subsidiaries or any ERISA Affiliate filed with the PBGC, (B) a
statement of the chief financial officer of the Company setting
forth the details of the occurrence of any Reportable Event with
respect to any such Plan, (C) a copy of any notice that the
Company, any of its Subsidiaries or any ERISA Affiliate may receive
from the PBGC relating to the intention of the PBGC to terminate
any such Plan or to appoint a trustee to administer any such Plan,
or (D) a copy of any notice of failure to make a required
installment or other payment within the meaning of Section 412(n)
of the Code or Section 302(f) of ERISA with respect to any such
Plan;
(viii) Promptly and in any event within
10 days after receipt, a copy of any management letter or
comparable analysis prepared by the auditors of the Company or any
of its Subsidiaries;
(ix) Promptly and in any event within 10
calendar days after receipt thereof by each Insurance Subsidiary,
a copy of the annual loss reserve adequacy certification for such
Insurance Subsidiary; and
(x) Promptly such other information
respecting the business, properties, operations, or condition,
financial or otherwise, of the Company or any of its Subsidiaries
as the Agent (whether on behalf of itself or any Bank) may from
time to time request.
(e) Accounting; Access to Records, Books, Etc.
Maintain a system of accounting established and administered in
accordance with sound business practices to permit preparation of
financial statements in accordance with Generally Accepted
Accounting Principles and SAP and to comply with the requirements
of this Agreement and, at any reasonable time and from time to
time, permit any Bank or the Agent or any agents or representatives
thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the
Company and its Subsidiaries, and to discuss the affairs, finances
and accounts of the Company and its Subsidiaries with its
directors, officers, employees and independent auditors, and by
this provision the Company hereby authorizes such persons to
discuss such affairs, finances and accounts with any Bank or the
Agent.
(f) Additional Collateral. Promptly execute
and deliver, or cause to be executed and delivered, additional
Security Documents, within 30 days after request therefor by the
Agent, sufficient to pledge to the Agent for the benefit of the
Banks and the Agent any and all direct equity interests of the
Company or either Guarantor in any Insurance Subsidiaries acquired
after the Effective Date, including, without limitation, those
acquired by the Company pursuant to a merger permitted under
Section 5.2(h). The Company shall notify the Agent in writing
(with sufficient copies for the Banks), within 10 days after the
occurrence thereof, of any event or condition that may require
additional action of any nature in order to comply with this
Section 5.1(f) or create or preserve the effectiveness and
perfected status of the liens and security interests of the Banks
and the Agent with respect to the collateral described in Section
2.10, including, without limitation, any after acquired collateral
of such type. This Section 5.1(f) shall not affect the obligations
of the Company or rights of the Banks under Section 5.2(h).
(g) Further Assurances. Execute and deliver,
or cause to be executed and delivered, within 30 days after request
therefor by the Agent all further instruments and documents and
take all further action that may be necessary or desirable, or that
the Agent may request, in order to give effect to, and to aid in
the exercise and enforcement of the rights and remedies of the
Banks and the Agent under, this Agreement, the Notes and the
Security Documents.
(h) Loss Reserve Adequacy. With respect to
each Insurance Subsidiary, maintain adequate loss reserves and
receive annually a certification to such effect.
5.2 Negative Covenants. Until the Revolving Credit
Termination Date and thereafter until the payment in full of the
principal of and accrued interest on the Notes and the performance
of all other obligations of the Company under this Agreement, the
Company agrees that, unless the Required Banks shall otherwise
consent in writing, it shall not, and shall not permit any of its
Subsidiaries to:
(a) Augmented Cash Flow Coverage Ratio.
Permit or suffer the ratio of Augmented Cash Flow to Adjusted Debt
Service to be less than 1.00 to 1.00 as of the last day of any
fiscal quarter of the Company, in each case determined for the
period of four fiscal quarters of the Company then ended.
(b) Funded Debt to Total Capitalization.
Permit or suffer the ratio of Funded Debt to Total Capitalization
at any time to be greater than 0.50 to 1.00.
(c) Net Worth. Permit or suffer the
consolidated Net Worth of the Company and its Subsidiaries at any
time to be less than the sum of (i) $155,000,000 plus (ii) 50% of
the consolidated Cumulative Net Income of the Company and its
Subsidiaries for the period commencing January 1, 1995.
(d) Net Written Premiums to Statutory Surplus.
Permit or suffer the ratio of (i) the Net Written Premiums of any
Subsidiary of the Company to (ii) the Statutory Surplus of such
Subsidiary, as of the end of any fiscal quarter of such Subsidiary,
to be greater than the ratio set forth below opposite the name of
such Subsidiary, in each case determined for the period of four
fiscal quarters of such Subsidiary then ended:
Acceptance Insurance Company 2.50 to 1.00
Acceptance Indemnity Insurance
Company 2.50 to 1.00
Phoenix Indemnity Insurance
Company 3.00 to 1.00
American Growers Insurance
Company 3.50 to 1.00
Redland Insurance Company 3.50 to 1.00
(e) Investment Quality. Permit or suffer any
material change in either (i) the quality of the investments or
(ii) the investment policies of the Company or any of its
Subsidiaries.
(f) Quality of Reinsurers. Permit or suffer
(i) with respect to all reinsurance other than crop reinsurance
referred to in clause (ii) below, at any time greater than 10%
(based upon the then Dollar amount of ceded risk) of all contracts
for reinsurance purchased by the Company and its Subsidiaries to be
with reinsurers having a rating of less than A- as determined by
A.M. Best Company (or the ISI equivalent for European reinsurers),
or (ii) with respect to crop reinsurance (both hail and multi-
peril) owned by the Company and its Subsidiaries, any material
change in the quality of such reinsurance.
(g) NAIC Ratio Requirements. Permit or suffer
any of the Subsidiaries of the Company to at any time be outside
the recommended range for more than four of the NAIC ratio tests
(other than excess capital contributions).
(h) Merger; Acquisitions; Etc. Purchase or
otherwise acquire, whether in one or a series of transactions, all
or a substantial portion of the business, assets, rights, revenues
or property, real, personal or mixed, tangible or intangible, of
any person, or all or a substantial portion of the capital stock or
other ownership interest in any other person, provided that,
subject to the provisions of Section 5.1(f), this Section 5.2(h)
shall not prohibit any such purchase or acquisition (i) in which
the total consideration paid or exchanged therefor is capital stock
of the Company or capital stock of any Subsidiaries of the Company
not subject to a Pledge Agreement or (ii) with respect to which the
aggregate Indebtedness incurred or assumed by the Company and its
Subsidiaries does not exceed $5,000,000 or (iii) by AIH and TRG
(or, following a merger of the Guarantors into the Company, by the
Company) from AIC and RIC of the capital stock of Phoenix Indemnity
Insurance Company and American Growers Insurance Company,
respectively; nor merge or consolidate or amalgamate with any other
person or take any other action having a similar effect, nor enter
into any joint venture or similar arrangement with any other
person, provided that this Section 5.2(h) shall not prohibit the
merger of one or both of the Guarantors into the Company.
(i) Disposition of Assets. Sell, lease,
license, transfer, assign or otherwise dispose of all or a material
portion of its business, assets, rights, revenues or property,
real, personal or mixed, tangible or intangible, whether in one or
a series of transactions, other than sales in the ordinary course
of business of securities owned by the Company or any of its
Subsidiaries for investment purposes, provided that this Section
5.2(i) shall not prohibit the sale by AIC or RIC to AIH and TRG,
respectively (or to the Company), of the capital stock of Phoenix
Indemnity Insurance Company and American Growers Insurance Company
as contemplated under Section 5.2(h).
(j) Nature of Business. Make any substantial
change in the nature of its business from that engaged in on the
date of this Agreement or engage in any other businesses other than
those in which it is engaged on the date of this Agreement.
(k) Stock of Subsidiaries. Sell, pledge
(other than pursuant to the Pledge Agreements), create a security
interest in or otherwise encumber, dispose of or transfer any
shares of capital stock of any of its Subsidiaries; nor issue any
additional shares of capital stock.
(l) Indebtedness. Create, incur, assume or in
any manner become liable in respect of, or suffer to exist, any
Indebtedness other than:
(i) The Loans and other indebtedness to
the Banks hereunder;
(ii) Indebtedness in aggregate outstanding
principal amount not exceeding $500,000 which is secured by one or
more Liens permitted by Section 5.2(m)(vi);
(iii) Indebtedness of any Subsidiary of the
Company owing to the Company or to any other Subsidiary of the
Company;
(iv) Unsecured current Indebtedness
constituting obligations for the unpaid purchase price of goods,
property or services in aggregate outstanding principal amount not
exceeding $500,000 incurred in the ordinary course of business (A)
to a seller of inventory purchased for sale in the ordinary course
of business of the Company or any of its Subsidiaries, (B) to a
seller of other property used in the business of the Company or any
of its Subsidiaries or (C) to a provider of services to the Company
or any of its Subsidiaries; and
(v) Subordinated Debt of the Company or
any of its Subsidiaries; and
(vi) The other Indebtedness described in
Schedule 5.2(n) hereto, having the same terms as those existing on
the date of this Agreement, but no extension or renewal thereof
shall be permitted.
(m) Liens. Create, incur or suffer to exist
any Lien on any of the assets, rights, revenues or property, real,
personal or mixed, tangible or intangible, whether now owned or
hereafter acquired, of the Company or any of its Subsidiaries,
other than:
(i) Liens for taxes not delinquent or for
taxes being contested in good faith by appropriate proceedings and
as to which adequate financial reserves have been established on
its books and records;
(ii) Liens (other than any Lien imposed by
ERISA or any Environmental Law) created and maintained in the
ordinary course of business which are not material in the
aggregate, and which would not have a material adverse effect on
the business or operations of the Company or any of its
Subsidiaries and which constitute (A) pledges or deposits under
worker's compensation laws, unemployment insurance laws or similar
legislation, (B) good faith deposits in connection with bids,
tenders, contracts or leases to which the Company or any of its
Subsidiaries is a party for a purpose other than borrowing money or
obtaining credit, including rent security deposits, (C) liens
imposed by law, such as those of carriers, warehousemen and
mechanics, if payment of the obligation secured thereby is not yet
due, (D) Liens securing taxes, assessments or other governmental
charges or levies not yet subject to penalties for nonpayment, and
(E) pledges or deposits to secure public or statutory obligations
of the Company or any of its Subsidiaries, or surety, customs or
appeal bonds to which the Company or any of its Subsidiaries is a
party;
(iii) Liens affecting real property which
constitute minor survey exceptions or defects or irregularities in
title, minor encumbrances, easements or reservations of, or rights
of others for, rights of way, sewers, electric lines, telegraph and
telephone lines and other similar purposes, or zoning or other
restrictions as to the use of such real property, provided that all
of the foregoing, in the aggregate, do not at any time materially
detract from the value of said properties or materially impair
their use in the operation of the businesses of the Company or any
of its Subsidiaries;
(iv) Liens created pursuant to the
Security Documents and Liens expressly permitted by the Security
Documents;
(v) Each Lien described in
Schedule 5.2(m) hereto may be suffered to exist upon the same terms
as those existing on the date hereof, but no extension or renewal
thereof shall be permitted;
(vi) Any Lien created to secure payment of
a portion of the purchase price of any tangible fixed asset
acquired by the Company or any of its Subsidiaries, or payments
under any Capital Lease for the lease of any tangible fixed asset
leased by the Company or any of its Subsidiaries, may be created or
suffered to exist upon such fixed asset if the outstanding
principal amount of the Indebtedness secured by such Lien does not
at any time exceed the purchase price of such fixed asset and the
aggregate principal amount of all Indebtedness secured by such
Liens, plus the capitalized amount of all such capital Leases does
not exceed $500,000, provided that such Lien does not encumber any
other asset at any time owned by the Company or such Subsidiary;
and
(vii) Liens in favor of the Company or any
of its Subsidiaries as security for Indebtedness permitted by
Section 5.2(n)(iii); and
(viii) The interest or title of a lessor
under any lease otherwise permitted under this Agreement with
respect to the property subject to such lease to the extent
performance of the obligations of the Company or its Subsidiary
thereunder are not delinquent.
(n) Contingent Liabilities. Create, incur, assume,
or in any manner become liable in respect of, or suffer to exist,
any Contingent Liabilities, other than those under the Guaranty
Agreement, dated as of October 7, 1994, made by the Company in
favor of NBD Bank (formerly known as NBD Bank, N.A.), as amended,
supplemented, extended, restated or otherwise modified from time to
time, relating to the indebtedness of Acceptance Premium Finance
Company, an Arizona corporation (the "APFC Debt Guaranty");
provided that the principal indebtedness guaranteed by the Company
under the APFC Debt Guaranty shall not exceed $25,000,000.
(o) Inconsistent Agreements. Enter into any
agreement containing any provision which would be violated or
breached by this Agreement or any of the transactions contemplated
hereby or by performance by the Company or any of its Subsidiaries
of its obligations in connection therewith.
(p) Dividends and Other Restricted Payments. Make,
pay, declare or authorize any dividend, payment or other
distribution in respect of any class of its capital stock or any
dividend, payment or distribution in connection with the
redemption, purchase, retirement or other acquisition, directly, of
any shares of it capital stock other than such dividends, payments
or other distributions to the extent payable solely in shares of
the capital stock of the Company or to the extent payable to the
Company by a Subsidiary of the Company.
(q) Transactions with Affiliates. Enter into,
become a party to, or become liable in respect of, any contract or
undertaking with any Affiliate except in the ordinary course of
business and on terms not less favorable to the Company or such
Subsidiary than those which could be obtained if such contract or
undertaking were an arms length transaction with a person other
than an Affiliate.
(r) Payments and Modification of Subordinated Debt.
Make any optional payment, prepayment or redemption of any
Subordinated Debt, nor amend or modify, or consent or agree to any
amendment or modification, which would shorten any maturity or
increase the amount of any payment of principal or increase the
rate (or require earlier payment) of interest on any such
Subordinated Debt, nor amend any agreement under which any
Subordinated Debt is issued or created or otherwise related
thereto, nor enter into any agreement or arrangement providing for
the defeasance of any Subordinated Debt.
(s) Tax Sharing Agreement. Permit or suffer the Tax
Sharing Agreement to be amended or modified or any provision
thereof to be waived, or permit or suffer any Subsidiary of the
Company to enter into any other tax sharing arrangement.
(t) Negative Pledge Prohibition. Enter into any
agreement with any person (other than pursuant to this Agreement)
that prohibits the Company or any of its Subsidiaries from acting
to, or in any way limits the ability of the Company or any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien
upon any capital stock of any Insurance Subsidiary.
RAR Loans and Advances to the Non-Material
Subsidiaries. Make any loan or advance of any of its funds or
property or make any other extension of credit to, or make any
investment whatsoever in, any of the Non-Material Subsidiaries.
ARTICLE VI.
DEFAULT
6.1 Events of Default. The occurrence of any one of the
following events or conditions shall be deemed an "Event of
Default" hereunder unless waived pursuant to Section 8.1:
(a) Nonpayment. The Company shall fail to pay when
due any principal of or interest on the Notes or any fees or any
other amount payable hereunder; or
(b) Misrepresentation. Any representation or
warranty made by the Company in Article IV hereof or in any
Security Document or any other certificate, report, financial
statement or other document furnished by or on behalf of the
Company in connection with this Agreement, shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) Certain Covenants. The Company shall fail to
perform or observe any term, covenant or agreement contained in
Article V hereof; or
(d) Other Defaults. The Company shall fail to
perform or observe any other term, covenant or agreement contained
in this Agreement or in the Security Documents, and any such
failure shall remain unremedied for 15 calendar days after notice
thereof shall have been given to the Company by the Agent (or such
longer period of time as may be specified in such Security
Document); or
(e) Cross Default. The Company or any of its
Subsidiaries shall fail to pay any part of the principal of, the
premium, if any, or the interest on, or any other payment of money
due under any of its Indebtedness (other than Indebtedness
hereunder), beyond any period of grace provided with respect
thereto, which individually or together with other such
Indebtedness as to which any such failure exists has an aggregate
outstanding principal amount in excess of $500,000; or if the
Company or any of its Subsidiaries fails to perform or observe any
other term, covenant or agreement contained in, or if any other
event or condition occurs or exists under, any agreement, document
or instrument evidencing or securing any such Indebtedness having
such aggregate outstanding principal amount, or under which any
such Indebtedness was incurred, issued or created, beyond any
period of grace, if any, provided with respect thereto if the
effect of such failure is either (i) to cause, or permit the
holders of such Indebtedness (or a trustee on behalf of such
holders) to cause, any payment in respect of such Indebtedness to
become due prior to its due date or (ii) to permit the holders of
such Indebtedness (or a trustee on behalf of such holders) to
accelerate the maturity of such indebtedness, whether or not such
failure to perform shall be waived by the holders (or a trustee) of
such Indebtedness; or
(f) Judgments. One or more judgments or orders for
the payment of money in an aggregate amount of $2,000,000 shall be
rendered against the Company or any of its Subsidiaries, or any
other judgment or order (whether or not for the payment of money)
shall be rendered against or shall affect the Company or any of its
Subsidiaries which causes or could cause a material adverse change
in the business, properties, operations or condition, financial or
otherwise, of the Company or any of its Subsidiaries or which does
or could have a material adverse effect on the legality, validity
or enforceability of this Agreement, the Notes or any Security
Document, and either (i) such judgment or order shall have remained
unsatisfied and the Company or such Subsidiary shall not have taken
action necessary to stay enforcement thereof by reason of pending
appeal or otherwise, prior to the expiration of the applicable
period of limitations for taking such action or, if such action
shall have been taken, a final order denying such stay shall have
been rendered, or (ii) enforcement proceedings shall have been
commenced by any creditor upon any such judgment or order; or
(g) ERISA. The occurrence of a Reportable Event
that results in or could result in liability of the Company, or any
of its Subsidiaries or their ERISA Affiliates to the PBGC or to any
Plan and such Reportable Event is not corrected within thirty (30)
days after the occurrence thereof; or the occurrence of any
Reportable Event which could constitute grounds for termination of
any Plan of the Company, or any of its Subsidiaries or their ERISA
Affiliates by the PBGC or for the appointment by the appropriate
United States District Court of a trustee to administer any such
Plan and such Reportable Event is not corrected within thirty (30)
days after the occurrence thereof; or the filing by the Company,
any of its Subsidiaries or any of their ERISA Affiliates of a
notice of intent to terminate a Plan or the institution of other
proceedings to terminate a Plan; or the Company, any of its
Subsidiaries or any of their ERISA Affiliates shall fail to pay
when due any liability to the PBGC or to a Plan; or the PBGC shall
have instituted proceedings to terminate, or to cause a trustee to
be appointed to administer, any Plan of the Company, any of its
Subsidiaries or any of their ERISA Affiliates; or any person
engages in a Prohibited Transaction with respect to any Plan which
results in or could result in liability of the Company, any of its
Subsidiaries or any of their ERISA Affiliates, or any Plan of the
Company, any of its Subsidiaries or their ERISA Affiliates or
fiduciary of any such Plan; or failure by the Company, any of its
Subsidiaries or any of their ERISA Affiliates to make a required
installment or other payment to any Plan within the meaning of
Section 302(f) of ERISA or Section 412(n) of the Code that results
in or could result in liability of the Company, any of its
Subsidiaries or any of their ERISA Affiliates to the PBGC or any
Plan; or the withdrawal of the Company, any of its Subsidiaries or
any of their ERISA Affiliates from a Plan during a plan year in
which it was a "substantial employer" as defined in Section
4001(9a)(2) of ERISA; or the Company, any of its Subsidiaries or
any of their ERISA Affiliates becomes an employer with respect to
any Multiemployer Plan without the prior written consent of the
Required Banks; or
(h) Insolvency, Etc. The Company or any of its
Subsidiaries shall be dissolved or liquidated (or any judgment,
order or decree therefor shall be entered), or shall generally not
pay its debts as they become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general
assignment for the benefit of creditors, or shall institute, or
there shall be instituted against the Company or any of its
Subsidiaries, any proceeding or case seeking to adjudicate it a
bankrupt or insolvent or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief or protection of
debtors or seeking the entry of an order for relief, or the
appointment of a receiver, trustee, custodian or other similar
official for it or for any substantial part of its assets, rights,
revenues or property, and, if such proceeding is instituted against
the Company or such Subsidiary and is being contested by the
Company or such Subsidiary, as the case may be, in good faith by
appropriate proceedings, such proceeding shall remain undismissed
or unstayed for a period of 60 days; or the Company or such
Subsidiary shall take any action (corporate or other) to authorize
or further any of the actions described above in this subsection;
or
(i) Security Documents. Any event of default
described in any Security Document shall have occurred and be
continuing, or any material provision of any Security Document
shall at any time for any reason cease to be valid and binding and
enforceable against any obligor thereunder, or the validity,
binding effect or enforceability thereof shall be contested by any
person, or any obligor shall deny that it has any or further
liability or obligation thereunder, or any material provision
thereof shall be terminated, invalidated or set aside, or be
declared ineffective or inoperative or in any way cease to give or
provide to the Banks and the Agent the benefits purported to be
created thereby; or
(j) Key Management. The Chief Executive Officer of
the Company as of the date hereof shall cease for any reason to
serve actively in such position, whether by reason of death,
disability, resignation, action of the Company's Board of Directors
or shareholders or otherwise.
(k) Regulatory Action. The Company or any of its
Insurance Subsidiaries shall be prohibited by any state board,
commission, department, agency, authority or other regulatory body
from issuing insurance policies in any jurisdiction; or
(l) Maintenance of Catastrophic Reinsurance. The
Company or any of its Insurance Subsidiaries shall fail to maintain
such catastrophic reinsurance as a prudent insurance company would
deem necessary.
6.2 Remedies.
(a) Upon the occurrence and during the continuance
of any Event of Default, the Agent may and, upon being directed to
do so by the Required Banks, shall by notice to the Company
terminate the Commitments or declare the outstanding principal of,
and accrued interest on, the Notes and all other amounts owing
under this Agreement to be immediately due and payable, or both,
whereupon the Commitments shall terminate forthwith and all such
amounts shall become immediately due and payable, or both, as the
case may be, provided that in the case of any event or condition
described in Section 6.1(h) with respect to the Company, the
Commitments shall automatically terminate forthwith and all such
amounts shall automatically become immediately due and payable
without notice; in all cases without demand, presentment, protest,
diligence, notice of dishonor or other formality, all of which are
hereby expressly waived.
(b) The Agent may and, upon being directed to do so
by the Required Banks, shall, in addition to the remedies provided
in Section 6.2(a), exercise and enforce any and all other rights
and remedies available to it or the Banks, whether arising under
this Agreement, the Notes or any Security Document or under
applicable law, in any manner deemed appropriate by the Agent,
including suit in equity, action at law, or other appropriate
proceedings, whether for the specific performance (to the extent
permitted by law) of any covenant or agreement contained in this
Agreement or in the Notes or any Security Document or in aid of the
exercise of any power granted in this Agreement, the Notes or any
Security Document.
(c) Upon the occurrence and during the continuance
of any Event of Default, each Bank may at any time and from time to
time, without notice to the Company (any requirement for such
notice being expressly waived by the Company) set off and apply
against any and all of the obligations of the Company now or
hereafter existing under this Agreement any and all deposits
(general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Bank to
or for the credit or the account of the Company and any property of
the Company from time to time in possession of such Bank,
irrespective of whether or not such Bank shall have made any demand
hereunder and although such obligations may be contingent and
unmatured. The Company hereby grants to the Banks and the Agent a
lien on and security interest in all such deposits, indebtedness
and property as collateral security for the payment and performance
of the obligations of the Company under this Agreement. The rights
of such Bank under this Section 6.2(c) are in addition to other
rights and remedies (including, without limitation, other rights of
setoff) which the Banks may have.
ARTICLE VII.
THE AGENT AND THE BANKS
7.1 Appointment and Authorization. Each Bank hereby
irrevocably appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this
Agreement, the Notes and the Security Documents as are delegated to
the Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto. The provisions of
this Article VII are solely for the benefit of the Agent and the
Banks, and the Company shall not have any rights as a third party
beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement, the Agent shall act
solely as agent of the Banks and does not assume and shall not be
deemed to have assumed any obligation towards or relationship of
agency or trust with or for the Company.
7.2 Agent and Affiliates. NBD Bank in its capacity as
a Bank hereunder shall have the same rights and powers hereunder as
any other Bank and may exercise or refrain from exercising the same
as though it were not the Agent. NBD Bank and its affiliates may
(without having to account therefor to any Bank) accept deposits
from, lend money to, and generally engage in any kind of banking,
trust, financial advisory or other business with the Company or any
of its Subsidiaries as if it were not acting as Agent hereunder,
and may accept fees and other consideration therefor without having
to account for the same to the Banks.
7.3 Scope of Agent's Duties. The Agent shall have no
duties or responsibilities except those expressly set forth herein,
and shall not, by reason of this Agreement, have a fiduciary
relationship with any Bank, and no implied covenants,
responsibilities, duties, obligations or liabilities shall be read
into this Agreement or shall otherwise exist against the Agent. As
to any matters not expressly provided for by this Agreement
(including, without limitation, collection and enforcement actions
under the Notes and the Security Documents), the Agent shall not be
required to exercise any discretion or take any action, but the
Agent shall take such action or omit to take any action pursuant to
the reasonable written instructions of the Required Banks and may
request instructions from the Required Banks. The Agent shall in
all cases be fully protected in acting, or in refraining from
acting, pursuant to the written instructions of the Required Banks
(or all of the Banks, as the case may be, in accordance with the
requirements of this Agreement), which instructions and any action
or omission pursuant thereto shall be binding upon all of the
Banks; provided, however, that the Agent shall not be required to
act or omit to act if, in the judgment of the Agent, such action or
omission may expose the Agent to personal liability or is contrary
to this Agreement, the Notes, the Security Documents or applicable
law.
7.4 Reliance by Agent. The Agent shall be entitled to
rely upon any certificate, notice, document or other communication
(including any cable, telegram, telex, facsimile transmission or
oral communication) believed by it to be genuine and correct and to
have been sent or given by or on behalf of a proper person. The
Agent may treat the payee of any Note as the holder thereof unless
and until the Agent receives written notice of the assignment
thereof pursuant to the terms of this Agreement signed by such
payee and the Agent receives the written agreement of the assignee
that such assignee is bound hereby to the same extent as if it had
been an original party hereto. The Agent may employ agents
(including without limitation collateral agents) and may consult
with legal counsel (who may be counsel for the Company),
independent public accountants and other experts selected by it and
shall not be liable to the Banks, except as to money or property
received by it or its authorized agents, for the negligence or
misconduct of any such agent selected by it with reasonable care or
for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or experts.
7.5 Default. The Agent shall not be deemed to have
knowledge of the occurrence of any Default or Event of Default,
unless the Agent has received written notice from a Bank or the
Company specifying such Default or Event of Default and stating
that such notice is a "Notice of Default". In the event that the
Agent receives such a notice, the Agent shall give written notice
thereof to the Banks.
7.6 Liability of Agent. Neither the Agent nor any of
its directors, officers, agents, or employees shall be liable to
the Banks for any action taken or not taken by it or them in
connection herewith with the consent or at the request of the
Required Banks or in the absence of its or their own gross
negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any
recital, statement, warranty or representation contained in this
Agreement, any Note or any Security Document, or in any
certificate, report, financial statement or other document
furnished in connection with this Agreement, (ii) the performance
or observance of any of the covenants or agreements of the Company,
(iii) the satisfaction of any condition specified in Article II
hereof, or (iv) the validity, effectiveness, legal enforceability,
value or genuineness of this Agreement, the Notes, any Security
Document or any other instrument or document furnished in
connection herewith.
7.7 Nonreliance on Agent and Other Banks. Each Bank
acknowledges and agrees that it has, independently and without
reliance on the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate, made its
own credit analysis of the Company and decision to enter into this
Agreement and that it will, independently and without reliance upon
the Agent or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to
make its own analysis and decision in taking or not taking action
under this Agreement. The Agent shall not be required to keep
itself informed as to the performance or observance by the Company
of this Agreement, the Notes or the Security Documents or any other
documents referred to or provided for herein or to inspect the
properties or books of the Company and, except for notices, reports
and other documents and information expressly required to be
furnished to the Banks by the Agent hereunder, the Agent shall not
have any duty or responsibility to provide any Bank with any
information concerning the affairs, financial condition or business
of the Company or any of its Subsidiaries which may come into the
possession of the Agent or any of its affiliates.
7.8 Indemnification. The Banks agree to indemnify the
Agent (to the extent not reimbursed by the Company, but without
limiting any obligation of the Company to make such reimbursement),
ratably according to the respective principal amounts of the Loans
then outstanding made by each of them (or if no Loans are at the
time outstanding, ratably according to the respective amounts of
their Commitments), from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature
whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted
against the Agent in any way relating to or arising out of this
Agreement or the transactions contemplated hereby or any action
taken or omitted by the Agent under this Agreement, provided,
however, that no Bank shall be liable for any portion of such
claims, damages, losses, liabilities, costs or expenses resulting
from the Agent's gross negligence or willful misconduct. Without
limitation of the foregoing, each Bank agrees to reimburse the
Agent promptly upon demand for its ratable share of any out-of-
pocket expenses (including without limitation fees and expenses of
counsel) incurred by the Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, to the extent that the
Agent is not reimbursed for such expenses by the Company, but
without limiting the obligation of the Company to make such
reimbursement. Each Bank agrees to reimburse the Agent promptly
upon demand for its ratable share of any amounts owing to the Agent
by the Banks pursuant to this Section. If the indemnity furnished
to the Agent under this Section shall, in the judgment of the
Agent, be insufficient or become impaired, the Agent may call for
additional indemnity from the Banks and cease, or not commence, to
take any action until such additional indemnity is furnished.
7.9 Successor Agent. The Agent may resign as such at
any time upon ten days' prior written notice to the Company and the
Banks. In the event of any such resignation, the Banks shall, by
an instrument in writing delivered to the Company and the Agent,
appoint a successor, which shall be a commercial bank organized
under the laws of the United States or any State thereof and having
a combined capital and surplus of at least $500,000,000. If a
successor is not so appointed or does not accept such appointment
before the Agent's resignation becomes effective, the retiring
Agent may appoint a temporary successor to act until such
appointment by the Banks is made and accepted or if no such
temporary successor is appointed as provided above by the retiring
Agent, the Banks shall thereafter perform all the duties of the
Agent hereunder until such appointment by the Banks is made and
accepted. Any successor to the Agent shall execute and deliver to
the Company and the Banks an instrument accepting such appointment
and thereupon such successor Agent, without further act, deed,
conveyance or transfer shall become vested with all of the
properties, rights, interests, powers, authorities and obligations
of its predecessor hereunder with like effect as if originally
named as Agent hereunder. Upon request of such successor Agent,
the Company and the retiring Agent shall execute and deliver such
instruments of conveyance, assignment and further assurance and do
such other things as may reasonably be required for more fully and
certainly vesting and confirming in such successor Agent all such
properties, rights, interests, powers, authorities and obligations.
The provisions of this Article VII shall thereafter remain
effective for such retiring Agent with respect to any actions taken
or omitted to be taken by such Agent while acting as the Agent
hereunder.
7.10 Sharing of Payments. The Banks agree among
themselves that, in the event that any Bank shall obtain payment in
respect of any Loan or any other obligation owing to the Banks
under this Agreement through the exercise of a right of set-off,
banker's lien, counterclaim or otherwise in excess of its ratable
share of payments received by all of the Banks on account of the
Loans and other obligations (or if no Loans are outstanding,
ratably according to the respective amounts of the Commitments),
such Bank shall promptly purchase from the other Banks
participations in such Loans and other obligations in such amounts,
and make such other adjustments from time to time, as shall be
equitable to the end that all of the Banks share such payment in
accordance with such ratable shares. The Banks further agree among
themselves that if payment to a Bank obtained by such Bank through
the exercise of a right of set-off, banker's lien, counterclaim or
otherwise as aforesaid shall be rescinded or must otherwise be
restored, each Bank which shall have shared the benefit of such
payment shall, by repurchase of participations theretofore sold,
return its share of that benefit to each Bank whose payment shall
have been rescinded or otherwise restored. The Company agrees that
any Bank so purchasing such a participation may, to the fullest
extent permitted by law, exercise all rights of payment, including
set-off, banker's lien or counterclaim, with respect to such
participation as fully as if such Bank were a holder of such Loan
or other obligation in the amount of such participation. The Banks
further agree among themselves that, in the event that amounts
received by the Banks and the Agent hereunder are insufficient to
pay all such obligations or insufficient to pay all such
obligations when due, the fees and other amounts owing to the Agent
in such capacity shall be paid therefrom before payment of
obligations owing to the Banks under this Agreement. Except as
otherwise expressly provided in this Agreement, if any Bank or the
Agent shall fail to remit to the Agent or any other Bank an amount
payable by such Bank or the Agent to the Agent or such other Bank
pursuant to this Agreement on the date when such amount is due,
such payments shall be made together with interest thereon for each
date from the date such amount is due until the date such amount is
paid to the Agent or such other Bank at a rate per annum equal to
the rate at which borrowings are available to the payee in its
overnight federal funds market. It is further understood and
agreed among the Banks and the Agent that if the Agent shall engage
in any other transactions with the Company and shall have the
benefit of any collateral or security therefor which does not
expressly secure the obligations arising under this Agreement
except by virtue of a so-called dragnet clause or comparable
provision, the Agent shall be entitled to apply any proceeds of
such collateral or security first in respect of the obligations
arising in connection with such other transaction before
application to the obligations arising under this Agreement.
7.11 The Co-Agents. Notwithstanding anything in this
Agreement to the contrary, none of the Co-Agents, in such capacity,
shall have any rights, powers, duties, responsibilities or
obligations; provided that each of Comerica Bank, First National
Bank of Omaha and FirsTier Bank, N.A., in its capacity as a Bank,
shall have the same rights and powers hereunder as any other Bank
and may exercise or refrain from exercising the same as though it
were not a Co-Agent.
ARTICLE VIII.
MISCELLANEOUS
8.1 Amendments, Etc. (a) This Agreement may be
amended from time to time and any provision hereof may be waived by
the parties hereto. No such amendment, modification, termination
or waiver of any provision of this Agreement nor any consent to any
departure therefrom shall be effective unless the same shall be in
writing and signed by the Company and the Required Banks and, to
the extent any rights or duties of the Agent may be affected
thereby, the Agent, provided, however, that no such amendment,
modification, termination, waiver or consent shall, without the
consent of the Agent and all of the Banks, (i) authorize or permit
the extension of time for, or any reduction of the amount of, any
payment of the principal of, or interest on, the Notes, or any fees
or other amount payable hereunder, (ii) subject to Section 2.11,
amend, extend or terminate the Revolving Credit Termination Date,
the Line of Credit Expiry Date, the Line of Credit Loan Maturity
Date or the respective Commitments of any Bank or modify the
provisions of this Section regarding the taking of any action under
this Section or the provisions of Section 7.10 or the definition of
Required Banks or any provision of this Agreement requiring the
consent of all of the Banks, (iii) provide for the discharge of any
collateral subject to any Security Document, or (iv) modify any
other provision of this Agreement which by its terms requires the
consent of all of the Banks.
(b) Any such amendment, waiver or consent shall be
effective only in the specific instance and for the specific
purpose for which given.
(c) Notwithstanding anything herein to the contrary,
no Bank that is in default of any of its obligations, covenants or
agreements under this Agreement shall be entitled to vote (whether
to consent or to withhold its consent) with respect to any
amendment, modification, termination or waiver of any provision of
this Agreement or any departure therefrom or any direction from the
Banks to the Agent, and, for purposes of determining the Required
Banks at any time when any of the Banks are in default under this
Agreement, the Commitments and Loans of such defaulting Banks shall
be disregarded.
8.2 Notices. (a) Except as otherwise provided in
Section 8.2(c) hereof, all notices and other communications
hereunder shall be in writing and shall be delivered or sent to the
Company at Suite 600 North, 222 S. 15th Street, Omaha, Nebraska,
68102, Attention: William J. Gerber, Facsimile No. (402) 345-9190,
Telephone No. (402) 344-8800, and to the Agent and the Banks at the
respective addresses for notices set forth on the signatures pages
hereof, or to such other address as may be designated by the
Company, the Agent or any Bank by notice to the other parties
hereto. All notices and other communications shall be deemed to
have been given at the time of actual delivery thereof to such
address, or, unless sooner delivered, (i) if sent by certified or
registered mail, postage prepaid, to such address, on the third day
after the date of mailing, (ii) if sent by telex, upon receipt of
the appropriate answerback, or (iii) if sent by facsimile
transmission, upon confirmation of receipt by telephone at the
number specified for confirmation, provided, however, that notices
to the Agent shall not be effective until received.
(b) Notices by the Company to the Agent with respect
to terminations or reductions of the Commitments pursuant to
Section 2.2, requests for Borrowings pursuant to Section 2.4, and
requests for continuations or conversions of Borrowings pursuant to
Section 2.7 shall be irrevocable and binding on the Company.
(c) Any notice to be given by the Company to the
Agent pursuant to Sections 2.2, 2.4 or 2.7 and any notice to be
given by the Agent or any Bank hereunder, may be given by
telephone, and all such notices given by the Company must be
immediately confirmed in writing in the manner provided in Section
8.2(a). Any such notice given by telephone shall be deemed
effective upon receipt thereof by the party to whom such notice is
to be given.
8.3 No Waiver By Conduct; Remedies Cumulative. No
course of dealing on the part of the Agent or any Bank, nor any
delay or failure on the part of the Agent or any Bank in exercising
any right, power or privilege hereunder shall operate as a waiver
of such right, power or privilege or otherwise prejudice the
Agent's or such Bank's rights and remedies hereunder; nor shall any
single or partial exercise thereof preclude any further exercise
thereof or the exercise of any other right, power or privilege. No
right or remedy conferred upon or reserved to the Agent or any Bank
under this Agreement, the Notes or any Security Document is
intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative and in addition to every other
right or remedy granted thereunder or now or hereafter existing
under any applicable law. Every right and remedy granted by this
Agreement, the Notes or any Security Document or by applicable law
to the Agent or any Bank may be exercised from time to time and as
often as may be deemed expedient by the Agent or any Bank and,
unless contrary to the express provisions of this Agreement, any
Security Document, irrespective of the occurrence or continuance of
any Default or Event of Default.
8.4 Reliance on and Survival of Various Provisions. All
terms, covenants, agreements, representations and warranties of the
Company made herein or in any Security Document or in any
certificate, report, financial statement or other document
furnished by or on behalf of the Company in connection with this
Agreement shall be deemed to be material and to have been relied
upon by the Banks, notwithstanding any investigation heretofore or
hereafter made by any Bank or on such Bank's behalf, and those
covenants and agreements of the Company set forth in Sections 3.6,
3.8 and 8.5 hereof shall survive the repayment in full of the Notes
and the termination of the Commitments.
8.5 Expenses; Indemnification. (a) The Company agrees
to pay, or reimburse the Agent for the payment of, on demand, (i)
the reasonable fees and expenses of counsel to the Agent, including
without limitation the fees and expenses of Messrs. Dickinson,
Wright, Moon, Van Dusen & Freeman, in connection with the
preparation, execution, delivery and administration of this
Agreement, the Notes and the Security Documents and in connection
with advising the Agent as to its rights and responsibilities with
respect thereto; provided that the Company's liability with respect
to fees of counsel for the Agent in connection with the foregoing
matters shall not exceed $15,000, (ii) the reasonable fees of
counsel to the Agent in connection with any amendments, waivers or
consents in connection therewith, (iii) all stamp and other taxes
and fees payable or determined to be payable in connection with the
execution, delivery, filing or recording of this Agreement, the
Notes or the Security Documents (or the verification of filing,
recording, perfection or priority thereof) or the consummation of
the transactions contemplated hereby, and any and all liabilities
with respect to or resulting from any delay in paying or omitting
to pay such taxes or fees, and (iv) all reasonable costs and
expenses of the Agent and the Banks (including reasonable fees and
expenses of counsel and whether incurred through negotiations,
legal proceedings or otherwise) in connection with any Default or
Event of Default or the enforcement of, or the exercise or
preservation of any rights under, this Agreement, the Notes or any
Security Document or in connection with any refinancing or
restructuring of the credit arrangements provided under this
Agreement.
(b) The Company hereby indemnifies and agrees to
hold harmless the Banks and the Agent, and their respective
officers, directors, employees and agents, from and against any and
all claims, damages, losses, liabilities, costs or expenses of any
kind or nature whatsoever (including reasonable attorneys fees and
disbursements incurred in connection with any investigative,
administrative or judicial proceeding whether or not such person
shall be designated as a party thereto) which the Banks or the
Agent or any such person may incur or which may be claimed against
any of them by reason of or in connection with entering into this
Agreement or the transactions contemplated hereby, including
without limitation those arising under Environmental Laws;
provided, however, that the Company shall not be required to
indemnify any such Bank and the Agent or such other person, to the
extent, but only to the extent, that such claim, damage, loss,
liability, cost or expense is attributable to the gross negligence
or willful misconduct of such Bank or the Agent, as the case may
be.
8.6 Successors and Assigns. (a) This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, provided that the Company
may not, without the prior written consent of the Banks, assign its
rights or obligations hereunder or under the Notes or any Security
Document and the Banks shall not be obligated to make any Loan
hereunder to any entity other than the Company.
(b) Any Bank may, with the prior written consent of
the Company and the Agent, sell to any financial institution or
institutions, and such financial institution or institutions may
further sell, a participation interest (undivided or divided) in,
the Loans and such Bank's rights and benefits under this Agreement,
the Notes and the Security Documents, and to the extent of that
participation interest such participant or participants shall have
the same rights and benefits against the Company under Section 3.6,
3.8 and 6.2(c) as it or they would have had if such participant or
participants were such Bank making the Loans to the Company
hereunder, provided, however, that (i) such Bank's obligations
under this Agreement shall remain unmodified and fully effective
and enforceable against such Bank, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Bank shall remain the holder of its
Notes for all purposes of this Agreement, (iv) the Company, the
Agent and the other Banks shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and
obligations under this Agreement, and (v) such Bank shall not grant
to its participant any rights to consent or withhold consent to any
action taken by such Bank, or the Agent under this Agreement other
than action requiring the consent of all of the Banks hereunder).
(c) The Agent from time to time in its sole
discretion may appoint agents for the purpose of servicing and
administering this Agreement and the transactions contemplated
hereby and enforcing or exercising any rights or remedies of the
Agent provided under this Agreement, the Notes, any Security
Documents or otherwise. In furtherance of such agency, the Agent
may from time to time direct that the Company and the Guarantors
provide notices, reports and other documents contemplated by this
Agreement (or duplicates thereof) to such agent. The Company
hereby consents to the appointment of such agent and agrees to
provide all such notices, reports and other documents and to
otherwise deal with such agent acting on behalf of the Agent in the
same manner as would be required if dealing with the Agent itself.
(d) Each Bank may, with the prior written consent
of the Company and the Agent, assign to one or more banks or other
entities all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its
Commitments, the Loans owing to it and the Notes held by it);
provided, however, that (i) each such assignment shall be of a
uniform, and not a varying, percentage of all rights and
obligations of such Bank under this Agreement with respect to its
Revolving Credit Commitment and Revolving Credit Loans, its Line of
Credit Commitment and Line of Credit Loans and otherwise, (ii)
except in the case of an assignment of all of a Bank's rights and
obligations under this Agreement, (A) the amount of the Commitments
of the assigning Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and
Acceptance with respect to such assignment) shall in no event be
less than $5,000,000, and in integral multiples of $1,000,000
thereafter, or such lesser amount as to which the Company and the
Agent may consent and (B) after giving effect to each such
assignment, the amount of the Commitments of the assigning Bank
shall in no event be less than the greater of (1) the amount equal
to fifty percent (50%) of the original amount of such Bank's
Commitments or (2) $5,000,000, (iii) the parties to each such
assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register, an Assignment and
Acceptance in the form of Exhibit J hereto (an "Assignment and
Acceptance"), together with the Notes subject to such assignment
and a processing and recordation fee of $3,000, and (iv) any Bank
may without the consent of the Company or the Agent, and without
paying any fee, assign to any Affiliate of such Bank that is a bank
or financial institution all of its rights and obligations under
this Agreement. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in such
Assignment and Acceptance, (x) the assignee thereunder shall be a
party hereto and, to the extent that rights and obligations
hereunder have been assigned to it pursuant to such Assignment and
Acceptance, have the rights and obligations of a Bank hereunder and
(y) the Bank assignor thereunder shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of the remaining portion of
an assigning Bank's rights and obligations under this Agreement,
such Bank shall cease to be a party hereto).
(e) By executing and delivering an Assignment and
Acceptance, the Bank assignor thereunder and the assignee
thereunder confirm to and agree with each other and the other
parties hereto as follows: (i) other than as provided in such
Assignment and Acceptance, such assigning Bank makes no
representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or
in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to the
financial condition of the Company or the performance or observance
by the Company of any of its obligations under this Agreement or
any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this
Agreement, together with copies of the financial statements
referred to in Section 4.6 and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and Acceptance;
(iv) such assignee will, independently and without reliance upon
the Agent, such assigning Bank or any other Bank and based on such
documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are
delegated to the Agent by the terms hereof, together with such
powers and discretion as are reasonably incidental thereto; and
(vi) such assignee agrees that it will perform in accordance with
their terms all of the obligations that by the terms of this
Agreement are required to be performed by it as a Bank.
(f) The Agent shall maintain at its address
designated on the signature pages hereof a copy of each Assignment
and Acceptance delivered to and accepted by it and & register for
the recordation of the names and addresses of the Banks and the
Commitments of, and principal amount of the Loans owing to, each
Bank from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent
manifest error, and the Company, the Agent and the Banks may treat
each person whose name is recorded in the Register as a Bank
hereunder for all purposes of this Agreement. The Register shall
be available for inspection by the Company or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and an assignee, together with the
Notes subject to such assignment, the Agent shall, if such
Assignment and Acceptance has been completed, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the
Company. Within five Business Days after its receipt of such
notice, the Company, at its own expense, shall execute and deliver
to the Agent in exchange for the surrendered Notes new Notes to the
order of such assignee in an aggregate amount equal to the
Commitments assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Bank has retained Commitments
hereunder, new Notes to the order of the assigning Bank in an
amount equal to the aggregate Commitments retained by it hereunder.
Such new Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Notes, shall be
dated the effective date of such Assignment and Acceptance and
shall otherwise be in substantially the form of Exhibits A and B
hereto.
(h) The Company shall not be liable for any costs
or expenses of any Bank in effectuating any participation or
assignment under this Section 8.6.
(i) The Banks may, in connection with any
participation or assignment or proposed participation or assignment
pursuant to this Section 8.6, disclose to the participant or
assignee or proposed participant or assignee any information
relating to the Company and its Subsidiaries.
(j) Notwithstanding any other provision set forth
in this Agreement, any Bank may at any time create a security
interest in, or assign, all or any portion of its rights under this
Agreement (including, without limitation, the Loans owing to it and
the Notes held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the
Federal Reserve System; provided that such creation of a security
interest or assignment shall not release such Bank from its
obligations under this Agreement.
8.7 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties
hereto may execute this Agreement by signing any such counterpart.
8.8 Governing Law. This Agreement is a contract made
under, and shall be governed by and construed in accordance with,
the law of the State of Michigan applicable to contracts made and
to be performed entirely within such State and without giving
effect to choice of law principles of such State. The Company and
the Banks further agree that any legal or equitable action or
proceeding with respect to this Agreement, the Notes or any
Security Document or the transactions contemplated hereby may be
brought in any court of the State of Michigan, or in any court of
the United States of America sitting in Michigan, and the Company
and the Banks hereby submit to and accept generally and
unconditionally the jurisdiction of those courts with respect to
its person and property, and, in the case of the Company,
irrevocably consents to the service of process in connection with
any such action or proceeding by personal delivery to such agent or
to the Company, as the case may be, or by the mailing thereof by
registered or certified mail, postage prepaid to the Company at its
address for notices pursuant to Section 8.2. Nothing in this
paragraph shall affect the right of the Banks and the Agent to
serve process in any other manner permitted by law or limit the
right of the Banks or the Agent to bring any such action or
proceeding against the Company or property in the courts of any
other jurisdiction. The Company and the Banks hereby irrevocably
waive any objection to the laying of venue of any such action or
proceeding in the above described courts.
8.9 Table of Contents and Headings. The table of
contents and the headings of the various subdivisions hereof are
for the convenience of reference only and shall in no way modify
any of the terms or provisions hereof.
8.10 Construction of Certain Provisions. If any
provision of this Agreement refers to any action to be taken by any
person, or which such person is prohibited from taking, such
provision shall be applicable whether such action is taken directly
or indirectly by such person, whether or not expressly specified in
such provision.
8.11 Integration and Severability. This Agreement
embodies the entire agreement and understanding between the Company
and the Agent and the Banks, and supersedes all prior agreements
and understandings, relating to the subject matter hereof. In case
any one or more of the obligations of the Company under this
Agreement, the Notes or any Security Document shall be invalid,
illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining obligations of the
Company shall not in any way be affected or impaired thereby, and
such invalidity, illegality or unenforceability in one jurisdiction
shall not affect the validity, legality or enforceability of the
obligations of the Company under this Agreement, the Notes or any
Security Document in any other jurisdiction.
8.12 Independence of Covenants. All covenants
hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any such covenant, the fact
that it would be permitted by an exception to, or would be
otherwise within the limitations of, another covenant shall not
avoid the occurrence of a Default or an Event of Default if such
action is taken or such condition exists.
8.13 Interest Rate Limitation. Notwithstanding any
provisions of this Agreement, the Notes or any Security Document,
in no event shall the amount of interest paid or agreed to be paid
by the Company exceed an amount computed at the highest rate of
interest permissible under applicable law. If, from any
circumstances whatsoever, fulfillment of any provision of this
Agreement, the Notes or any Security Document at the time
performance of such provision shall be due, shall involve exceeding
the interest rate limitation validly prescribed by law which a
court of competent jurisdiction may deem applicable hereto, then,
ipso facto, the obligations to be fulfilled shall be reduced to an
amount computed at the highest rate of interest permissible under
applicable law, and if for any reason whatsoever any Bank shall
ever receive as interest an amount which would be deemed unlawful
under such applicable law such interest shall be automatically
applied to the payment of principal of the Loans outstanding
hereunder (whether or not then due and payable) and not to the
payment of interest, or shall be refunded to the Company if such
principal and all other obligations of the Company to the Banks
have been paid in full.
8.14 WAIVER OF JURY TRIAL. THE BANKS AND THE AGENT
AND THE COMPANY, AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO
CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING,
STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THEM.
NEITHER ANY BANK, THE AGENT, NOR THE COMPANY SHALL SEEK TO
CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION IN WHICH
A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT
BE DEEMED TO HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY
ANY PARTY HERETO EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY SUCH
PARTY.
[This space intentionally left blank. Signature blocks begin on
next page.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered on the 26th day of
July, 1995, which shall be the Effective Date of this Agreement,
notwithstanding the day and year first above written.
ACCEPTANCE INSURANCE COMPANIES INC.
By_________________________________
Its___________________________
Revolving Credit Commitment NBD BANK, individually and
Amount: $20,833,333 as Agent
Line of Credit
Commitment Amount: $4,166,667 By_________________________________
Its Vice President
Address for Notices:
NBD Bank
611 Woodward Avenue
Detroit, Michigan 48226
Attention: National Banking
Division
Telex No.: 230729
Answerback: NATIONBANK-DET
Facsimile No.: (313) 225-2649
Facsimile Confirmation
No.: (313) 225-1572
<PAGE>
Revolving Credit Commitment COMERICA BANK
Amount: $18,333,333
Line of Credit
Commitment Amount: $3,666,667 By_________________________________
Its Vice President
Address for Notices:
Comerica Bank
Metropolitan Loans-A
One Detroit Center
Detroit, Michigan 48226
Attention: Jon E. Sasinowski
Facsimile No.: (313) 222-5759
Facsimile Confirmation
No.: (313) 222-4865
Revolving Credit Commitment FIRST NATIONAL BANK OF OMAHA
Amount: $13,333,333
Line of Credit
Commitment Amount: $2,666,667 By_________________________________
Its Senior Vice President
Address for Notices:
First National Bank of Omaha
One First National Center
Omaha, Nebraska 68102
Attention: James P. Bonham
Telex No.: 484410
Answerback: FIRSTNATBK-OMA
Facsimile No.: (402) 633-3519
Facsimile Confirmation
No.: (402) 341-0500
<PAGE>
Revolving Credit Commitment FIRSTIER BANK, N.A.
Amount: $12,500,000
Line of Credit
Commitment Amount: $2,500,000 By_________________________________
Its Vice President
Address for Notices:
FirsTier Bank, N.A.
1700 Farnam
Omaha, Nebraska 68102
Attention: Lawrence F. Uebner
Facsimile No.: (402) 348-6841
Facsimile Confirmation
No.: (402) 348-6294
Revolving Credit Commitment FIRST INTERSTATE BANK OF ARIZONA
Amount: $10,000,000
Line of Credit
Commitment Amount: $2,000,000 By_______________________________
Its Vice President
Address for Notices:
First Interstate Bank of Arizona
100 W. Washington
Phoenix, Arizona 85003
Attention: Jenny L. Apker
Facsimile No.: (602) 229-4409
Facsimile Confirmation
No.: (602) 528-6633
<PAGE>
EXHIBIT A
LINE OF CREDIT NOTE
$______________ July __, 1995
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, ACCEPTANCE INSURANCE
COMPANIES INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of _____________________, a
_________________ (the "Bank"), at the principal banking office of
the Agent in lawful money of the United States of America and in
immediately available funds, the principal sum of
_____________________ Dollars ($_________________), or such lesser
amount as is noted on the schedule attached hereto or in the Bank's
books and records, on the Line of Credit Loan Maturity Date; and to
pay interest on the unpaid principal balance hereof from time to
time outstanding, in like money and funds, for the period from the
date hereof until the Line of Credit Loan evidenced hereby shall be
paid in full, at the rates per annum and on the dates provided in
the Credit Agreement referred to below.
The Bank is hereby authorized by the Company to note on
the schedule attached to this Note, or on its books and records,
the date, amount and type of the Line of Credit Loan, the interest
rate applicable from time to time, the duration of the related
Interest Period (if applicable), the amount of each payment or
prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the
case may be, shall constitute prima facie evidence of the
information so noted absent manifest error in computation, provided
that any failure by the Bank to make any such notation shall not
relieve the Company of its obligation to repay the outstanding
principal amount of this Note, all accrued interest hereon and any
other amount payable with respect hereto in accordance with the
terms of this Note and the Credit Agreement.
The Company and each endorser or guarantor hereof waive
demand, presentment, protest, diligence, notice of dishonor and any
other formality in connection with this Note. Should the
indebtedness evidenced by this Note or any part thereof be
collected in any proceeding or be placed in the hands of attorneys
for collection, the Company agrees to pay, in addition to the
principal and interest due and payable hereon, all costs of
collecting this Note, including attorneys' fees and expenses.
This Note evidences a Line of Credit Loan made under a
Credit Agreement, dated as of July __, 1995, by and among the
Company, the banks (including the Bank) party thereto, NBD Bank, as
agent for the banks, and the co-agents party thereto, as amended,
supplemented, extended or otherwise modified from time to time (the
"Credit Agreement"), to which reference is hereby made for a
statement of the circumstances under which this Note is subject to
prepayment and under which its due date may be accelerated and for
a description of the collateral and security securing this Note.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
This Note is made under, and shall be governed by and
construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of
such State.
ACCEPTANCE INSURANCE COMPANIES INC.
By:_________________________________
Its:________________________________
<PAGE>
EXHIBIT B
REVOLVING CREDIT NOTE
$______________ July __, 1995
Detroit, Michigan
FOR VALUE RECEIVED, the undersigned, ACCEPTANCE INSURANCE
COMPANIES INC., a Delaware corporation (the "Company"), hereby
promises to pay to the order of _____________________, a
_________________ (the "Bank"), at the principal banking office of
the Agent in lawful money of the United States of America and in
immediately available funds, the principal sum of
_____________________ Dollars ($_________________), or such lesser
amount as is noted on the schedule attached hereto or in the Bank's
books and records, on the Revolving Credit Termination Date; and to
pay interest on the unpaid principal balance hereof from time to
time outstanding, in like money and funds, for the period from the
date hereof until the Revolving Credit Loans evidenced hereby shall
be paid in full, at the rates per annum and on the dates provided
in the Credit Agreement referred to below.
The Bank is hereby authorized by the Company to note on the
schedule attached to this Note, or on its books and records, the
date, amount and type of each Revolving Credit Loan, the interest
rate applicable from time to time, the duration of the related
Interest Period (if applicable), the amount of each payment or
prepayment of principal thereon, and the other information provided
for on such schedule, which schedule or books and records, as the
case may be, shall constitute prima facie evidence of the
information so noted absent manifest error in computation, provided
that any failure by the Bank to make any such notation shall not
relieve the Company of its obligation to repay the outstanding
principal amount of this Note, all accrued interest hereon and any
other amount payable with respect hereto in accordance with the
terms of this Note and the Credit Agreement.
The Company and each endorser or guarantor hereof waive demand,
presentment, protest, diligence, notice of dishonor and any other
formality in connection with this Note. Should the indebtedness
evidenced by this Note or any part thereof be collected in any
proceeding or be placed in the hands of attorneys for collection,
the Company agrees to pay, in addition to the principal and
interest due and payable hereon, all costs of collecting this
Note, including attorneys' fees and expenses.
This Note evidences one or more Revolving Credit Loans made
under a Credit Agreement, dated as of July __, 1995, by and among
the Company, the banks (including the Bank) party thereto, NBD
Bank, as agent for the banks, and the co-agents party thereto, as
amended, supplemented, extended or otherwise modified from time to
time (the "Credit Agreement"), to which reference is hereby made
for a statement of the circumstances under which this Note is
subject to prepayment and under which its due date may be
accelerated and for a description of the collateral and security
securing this Note. Capitalized terms used but not defined herein
shall have the respective meanings ascribed thereto in the Credit
Agreement.
This Note is made under, and shall be governed by and construed
in accordance with, the laws of the State of Michigan applicable to
contracts made and to be performed entirely within such State and
without giving effect to choice of law principles of such State.
ACCEPTANCE INSURANCE COMPANIES INC.
By:_________________________________
Its:________________________________
<PAGE>
EXHIBIT C
REQUEST FOR BORROWING
[Date]
NBD Bank, as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: National Banking Division
The undersigned (the "Company") hereby requests [a
Revolving Credit] [the Line of Credit] Borrowing pursuant to
Section 2.4 of the Credit Agreement, dated as of July __, 1995 (the
"Credit Agreement"), by and among the Company, the banks party
thereto, you, as agent for the banks, and the co-agents party
thereto, in the amount of $__________, to be made on __________,
19___, and to be evidenced by the Company's [Revolving Credit]
[Line of Credit] Notes. Capitalized terms used but not defined
herein shall have the respective meanings assigned to them in the
Credit Agreement.
Such Borrowing shall initially be a _________________
[insert either Eurodollar Rate Borrowing or Floating Rate
Borrowing]. [If a Eurodollar Rate Borrowing, add the following:
The initial Interest Period shall be ____________ [insert permitted
Interest Period].]
In support of this request, the Company hereby represents
and warrants that:
1. The representations and warranties contained in
Article IV of the Credit Agreement are true and correct on and as
of the date hereof, and will be true and correct on the date of the
making of such Borrowing (both before and after such Borrowing is
made), as if such representations and warranties were made on and
as of such dates.
2. No Default or Event of Default has occurred and is
continuing or will exist on the date of the making of such
Borrowing (both before and after such Borrowing is made).
3. Acceptance of the proceeds of such Borrowing by the
Company shall be deemed to be a further representation and warranty
that the representations and warranties made herein are true and
correct at the time such proceeds are disbursed.
<PAGE>
ACCEPTANCE INSURANCE COMPANIES INC.
By_________________________________
Its________________________________
<PAGE>
EXHIBIT D
REQUEST FOR CONTINUATION OR CONVERSION OF BORROWING
[Date]
NBD Bank, as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: National Banking Division
The undersigned (the "Company") hereby requests that
$__________ of the principal amount of the [Revolving Credit] [Line
of Credit] Borrowing originally made on _____________, 19___, which
Borrowing is currently a ___________________ [insert type of
Borrowing], be continued as or converted to, as the case may be, a
______________________ [insert type of Borrowing requested] on
_______________, 19___. [If such Borrowing is requested to be
converted to a Eurodollar Rate Borrowing, add the following: The
Company hereby elects an Interest Period for such Borrowing of
____________________ [insert permitted Interest Period].]
Capitalized terms used but not defined herein shall have
the respective meanings assigned to them in the Credit Agreement,
dated as of July __, 1995, by and among the Company, the banks
party thereto, you, as agent for the banks, and the co-agents party
thereto.
ACCEPTANCE INSURANCE COMPANIES INC.
By:__________________________________
Its:______________________________
<PAGE>
EXHIBIT E
GUARANTY AGREEMENT
THIS GUARANTY AGREEMENT, dated as of July 26, 1995 (this
"Guaranty"), is made by ACCEPTANCE INSURANCE HOLDINGS INC., a
Nebraska corporation, and THE REDLAND GROUP, INC., an Iowa
corporation (collectively, the "Guarantors" and individually, a
"Guarantor"), in favor of NBD BANK, a Michigan banking corporation,
as agent (in such capacity, the "Agent") for the banks
(collectively the "Banks" and individually a "Bank") from time to
time party to the Credit Agreement (as defined below).
INTRODUCTION
A. Acceptance Insurance Companies Inc., a Delaware corporation
(the "Company"), the Banks, the Agent and the Co-Agents party
thereto have entered into the Credit Agreement, dated as of
July 26, 1995 (as amended, supplemented, extended, restated or
otherwise modified from time to time, the "Credit Agreement"),
pursuant to which the Banks may, subject to the terms and
conditions of the Credit Agreement, make Line of Credit Loans and
Revolving Credit Loans to the Company, as evidenced by the Line of
Credit Notes and Revolving Credit Notes, respectively, issued by
the Company to the Banks.
B. As a condition, among others, to the effectiveness of the
obligations of the Banks under the Credit Agreement, each Guarantor
is required to guarantee to the Agent and the Banks the prompt and
complete payment when due of all indebtedness, obligations and
liabilities of the Company to the Agent and the Banks under the
Credit Agreement and such Line of Credit Notes and Revolving Credit
Notes.
C. The Company, the Guarantors and other Subsidiaries of the
Company are engaged as an integrated group in the insurance
business. The integration requires financing on such a basis that
credit is supplied to the Company for the continued successful
operation of the integrated group as a whole. Each of the Company
and the Guarantors has therefore requested the Banks to make credit
available to the Company for the purpose of financing the
integrated operations of the Company, the Guarantors and such other
Subsidiaries, with each of such entities expecting to derive
benefit, directly or indirectly, from the credit extended by the
Banks to the Company, both in each entity's separate capacity and
as a member of the integrated group, in as much as the successful
operation and condition of each such entity is dependent upon the
continued successful performance of the functions of the integrated
group as a whole.
D. Each Guarantor has reviewed and is familiar with the Credit
Agreement and all documents, agreements, instruments and
certificates evidencing or otherwise pertaining to the Loans (all
of the foregoing being herein collectively referred to as the
"Operative Documents"), and each Guarantor has determined that it
is in its interest and to its financial benefit to enter into this
Guaranty.
NOW, THEREFORE, for valuable consideration, the receipt of
which is hereby acknowledged, and as further consideration and as
an inducement to the Banks to enter into the Credit Agreement, each
Guarantor agrees with the Agent for the benefit of the Agent and
the Banks as follows:
1. Guarantee of Obligations. (a) Each Guarantor hereby, as
primary obligor and not as surety only, (i) guarantees to the Banks
and the Agent the prompt payment of the principal sum of Ninety
Million Dollars ($90,000,000), together with interest thereon, in
accordance with the terms of the Line of Credit Notes, the
Revolving Credit Notes and the Credit Agreement, (ii) guarantees to
the Banks and the Agent the prompt payment and performance of all
other indebtedness, obligations and liabilities of the Company to
the Agent and the Banks under the Credit Agreement and any note or
notes issued in replacement of or substitution for the Line of
Credit Notes and/or the Revolving Credit Notes, (iii) guarantees to
the Banks and the Agent the performance and observance within any
grace period applicable thereto of each and every term, covenant or
agreement contained in any Operative Document to be performed or
observed on the part of the Company or the other Guarantor, and
(iv) agrees to make prompt payment, on demand, of any and all costs
and expenses incurred by the Agent in connection with enforcing the
obligations of any Guarantor hereunder, including without
limitation the reasonable fees and disbursements of counsel (all of
the foregoing being collectively referred to as the "Guaranteed
Obligations"), provided, however, that the amount of the Guaranteed
Obligations of each Guarantor shall be subject to the limitation
set forth in Section 11 of this Guaranty.
(b) If for any reason any duty, agreement or obligation of the
Company contained in any Operative Document shall not be performed
or observed by the Company as provided therein, or if any amount
payable under or in connection with any Operative Document shall
not be paid in full when the same becomes due and payable, each
Guarantor undertakes, but without duplication, to perform or cause
to be performed within any grace period applicable thereto each of
such duties, agreements and obligations and to pay forthwith each
such amount to the Agent for the benefit of the Agent and the Banks
regardless of any defense or setoff or counterclaim which the
Company may have or assert, and regardless of any other condition
or contingency. If any Guarantor shall make any payments in
respect of the Guaranteed Obligations, such Guarantor shall be
subrogated pro tanto to the rights of the Agent and the Banks in
connection therewith, provided, however, that no such rights of
subrogation or any other rights of such Guarantor against the
Company in connection with the transactions contemplated hereby
shall accrue or be exercisable by such Guarantor until full and
final payment and performance of the Guaranteed Obligations and the
termination or expiration of all credit facilities provided by the
Banks to the Company and of all letters of credit, bankers'
acceptances and guarantees, the obligations of the Company in
respect of which constitute part of the Guaranteed Obligations.
2. Nature of Guaranty. This Guaranty is an absolute and
unconditional and irrevocable guaranty of payment and not a
guaranty of collection and is wholly independent of and in addition
to other rights and remedies of the Agent and the Banks and is not
contingent upon the pursuit by the Agent or the Banks of any such
rights and remedies, such pursuit being hereby waived by each
Guarantor.
3. Waivers and Other Agreements. Each Guarantor hereby
unconditionally (a) waives any requirement that the Agent or any
Bank, in the event of any default by the Company, first make demand
upon, or seek to enforce remedies against, the Company before
demanding payment under or seeking to enforce this Guaranty, (b)
covenants that this Guaranty will not be discharged except by
complete performance of all obligations of the Company contained in
the Operative Documents, (c) agrees that this Guaranty shall remain
in full force and effect without regard to, and shall not be
affected or impaired by, without limitation, any invalidity,
irregularity or unenforceability in whole or in part of any of the
Operative Documents, or any limitation on the liability of the
Company thereunder, or any limitation on the method or terms of
payment thereunder which may now or hereafter be caused or imposed
in any manner whatsoever, (d) waives diligence, presentment and
protest with respect to, and any notice of default or dishonor in
the payment of, any amount at any time payable by the Company under
or in connection with, any of the Operative Documents, and further
waives any requirement of notice of acceptance of, or other
formality relating to, this Guaranty and (e) agrees that the
Guaranteed Obligations shall include any amounts paid by the
Company to the Agent or any Bank which may be required to be
returned to the Company or to its representative or to a trustee,
custodian or receiver for the Company.
4. Obligations Absolute. The obligations, covenants,
agreements and duties of any Guarantor under this Guaranty shall
not be released, affected or impaired by any of the following
whether or not undertaken with notice to or consent of any
Guarantor: (a) any assignment or transfer, in whole or in part, of
any of the Guaranteed Obligations or of any of the Operative
Documents, or (b) any waiver by the Agent or any Bank, or by any
other person, of the performance or observance by the Company of
any of the agreements, covenants, terms or conditions contained in
any of the Operative Documents, or (c) any indulgence in or the
extension of the time for payment by the Company of any amounts
payable under or in connection with any of the Operative Documents,
or of the time for performance by the Company of any other
obligations under or arising out of any of the Operative Documents,
or the extension or renewal thereof, or (d) the modification,
amendment or waiver (whether material or otherwise) of any duty,
agreement or obligation of the Company set forth in any of the
Operative Documents (the modification, amendment or waiver from
time to time of any of the Operative Documents to which the Company
is a party being expressly authorized without further notice to or
consent of any Guarantor), or (e) the voluntary or involuntary
liquidation, sale or other disposition of all or substantially all
of the assets of the Company or any receivership, insolvency,
bankruptcy, reorganization, or other similar proceedings, affecting
the Company or the Company's assets, or (f) the release of any
security, if any, for the obligations of the Company under any of
the Operative Documents, or the impairment of or failure to perfect
an interest in any such security, or (g) the merger or
consolidation of the Company with any other person, or (h) the
release or discharge of any Borrower from the performance or
observance of any agreement, covenant, term or condition contained
in any of the Operative Documents, by operation of law, or (i) the
running of any limitations period otherwise applicable, or (j) any
other cause whether similar or dissimilar to the foregoing which
would release, affect or impair the obligations, covenants,
agreements or duties of any Guarantor hereunder.
5. Joint and Several Obligations. The obligations of the
Guarantors hereunder shall be several and also joint each with all
or with any one or more of the other parties now or hereafter
guaranteeing any of the Guaranteed Obligations, and such
obligations of the Guarantors may be enforced against each
Guarantor separately or against any two or more jointly, or against
some separately and some jointly.
6. Events of Default. The occurrence of any of the following
events or conditions shall be deemed an "Event of Default"
hereunder:
(a) Any Guarantor shall fail to pay when due any amount
payable under Section 1 hereof;
(b) Any representation or warranty made by any Guarantor
in this Guaranty or in any other document or certificate furnished
by or on behalf of any Guarantor in connection with this Guaranty
shall prove to have been incorrect in any material respect when
made or deemed made;
(c) Any Guarantor shall fail to perform or observe any
term, covenant or agreement contained in this Guaranty; or
(d) Any Event of Default shall occur under the Credit
Agreement.
7. Remedies. (a) Upon the occurrence and during the
continuance of any Event of Default, the Agent on behalf of itself
and the Banks, may, in addition to the remedies provided in the
Operative Documents, enforce its rights either by suit in equity,
or by action at law, or by other appropriate proceedings, whether
for the specific performance (to the extent permitted by law) of
any covenant or agreement contained in this Guaranty or in aid of
the exercise of any power granted in this Guaranty and may enforce
payment under this Guaranty and any of its other rights available
at law or in equity.
(b) Upon the occurrence and during the continuance of any
Event of Default hereunder, the Banks are hereby authorized at any
time and from time to time, without notice to any Guarantor (any
requirement for such notice being expressly waived by each
Guarantor) to set off and apply against any and all of the
obligations of the Guarantors now or hereafter existing under this
Guaranty any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at
any time owing by the Banks to or for the credit or the account of
the Guarantors and any property of the Guarantors from time to time
in possession of the Banks, irrespective of whether or not the
Agent or any Bank shall have made any demand hereunder and although
such obligations may be contingent and unmatured. The rights of
the Banks under this Section 7(b) are in addition to other rights
and remedies (including, without limitation, other rights of
setoff) which the Agent and the Banks may have.
(c) To the extent that it lawfully may, each Guarantor
agrees that it will not at any time insist upon or plead, or in any
manner whatever claim or take any benefit or advantage of any
applicable present or future stay, extension or moratorium law,
which may affect observance or performance of the provisions of
this Guaranty or any of the Operative Documents nor will it claim,
take or insist upon any benefit or advantage of any present or
future law providing for the evaluation or appraisal of any
security for its obligations hereunder or the obligations of the
Company under the Operative Documents prior to any sale or sales
thereof which may be made under or by virtue of any instrument
governing the same.
8. Payments. All amounts payable by the Guarantors under this
Guaranty shall be paid to the Agent at its main office in Detroit,
Michigan, or otherwise as the Agent may from time to time direct,
in full free and clear of any present or future taxes, levies,
imposts, duties, charges, fees or withholdings whatsoever. If any
Guarantor is compelled by law to make any deduction or withholding
it will promptly pay to the Agent such additional amount as will
result in the net amount received by the Agent being equal to the
full amount which would have been receivable had there been no
deduction or withholding.
9. No Setoff, Etc. by Guarantors. No setoff, counterclaim,
reduction or diminution of an obligation, or any defense of any
kind or nature (other than performance by the Guarantors of each of
their obligations hereunder) which the undersigned have or may have
against the Banks or the Agent shall be available hereunder to the
Guarantors against the Banks or the Agent.
10. Indemnity. As a separate, additional and continuing
obligation, the Guarantors unconditionally and irrevocably
undertake and agree with the Banks and the Agent that, should the
Guaranteed Obligations not be recoverable from the Guarantors as
Guarantors under this Guaranty for any reason whatsoever
(including, without limitation, by reason of any provision of any
Operative Document being or becoming void, unenforceable, or
otherwise invalid under any applicable law) then, notwithstanding
any knowledge thereof by the Banks or the Agent at any time, the
Guarantors as original and independent obligors, upon demand by the
Agent, will make payment to the Agent of the Guaranteed Obligations
by way of a full indemnity in such currency and otherwise in such
manner as is contemplated by the Guaranteed Obligations.
11. Limitation of Guaranteed Amount. (a) For purposes of this
Section 11, the following terms shall have the following respective
meanings:
"Adjusted Net Worth" of any Guarantor shall mean, as of
any date of determination thereof, the excess of (i) the
aggregate value of all assets of such Guarantor,
contingent or otherwise, at a fair valuation, as of the
date of such determination, over (ii) the sum of all
liabilities of such Guarantor, contingent or otherwise, as
of the date of such determination (excluding, however, all
liabilities of such Guarantor in respect of this
Guaranty).
"Maximum Guaranteed Amount" of any Guarantor shall mean,
as of any date of determination thereof, the greatest of
(i) the aggregate amount of all credit extended by the
Banks under the Credit Agreement for the benefit of the
Company to the extent that the proceeds thereof are
extended directly to such Guarantor or are used to make
a Valuable Transfer to such Guarantor, (ii) ninety-five
percent (95%) of the Adjusted Net Worth of such Guarantor
at the date it incurred its obligation under this
Guaranty, and (iii) the maximum amount for which this
Guaranty may be enforced against such Guarantor as of such
date of determination.
"Valuable Transfer" shall mean, in respect of any
Guarantor, (i) all loans or advances made to such
Guarantor with proceeds of the credit extended by the
Banks under the Credit Agreement which have not been
repaid by such Guarantor, (ii) all capital contributions
made to such Guarantor with proceeds of the credit
extended by the Banks, (iii) all debt securities or other
obligations of such Guarantor acquired from such Guarantor
or retired by such Guarantor with proceeds of such credit
extended by the Banks, (iv) the fair market value of all
property acquired with proceeds of such credit extended by
the Banks and transferred, absolutely and not as
collateral, to such Guarantor, (v) all equity securities
of such Guarantor acquired from such Guarantor with
proceeds of such credit extended by the Banks, and (vi)
the value of any quantifiable economic benefits not other-
wise included in clauses (i) through (v) above, but
includable in accordance with applicable federal and state
laws governing determinations of fraudulent conveyances or
the insolvency of debtors, accruing to such Guarantor as
a result of such credit extended by the Banks.
(b) Notwithstanding any other provision in this Guaranty
to the contrary, the maximum liability of each Guarantor hereunder
shall in no event exceed such Guarantor's Maximum Guaranteed
Amount. Each Guarantor agrees, however, that the Guaranteed
Obligations may at any time and from time to time exceed the
Maximum Guaranteed Amount of such Guarantor or the aggregate
Maximum Guaranteed Amounts of all of the Guarantors without
impairing this Guaranty or affecting the rights and remedies of the
Agent and the Banks. No payment or payments made by the Company or
any receipt or collection by the Agent or any Bank or any setoff or
appropriation or application at any time or from time to time in
reduction or in payment of the Guaranteed Obligations shall be
deemed to modify, reduce, release or otherwise affect the
liability of any Guarantor hereunder, and each Guarantor shall
remain liable for the Guaranteed Obligations up to its Maximum
Guaranteed Amount until the first to occur of the full and final
payment to the Agent by such Guarantor of its Maximum Guaranteed
Amount or the full and final payment of the Guaranteed Obligations.
12. Amendments, Etc. This Guaranty may be amended from time
to time and any provision hereof may be waived by the parties
hereto. No such amendment or waiver of any provision of this
Guaranty nor consent to any departure by any Guarantor therefrom
shall in any event be effective unless the same shall be in writing
and signed by the Agent and each of the Guarantors, and then such
amendment, waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
13. Notices. All notices, demands, requests, consents and
other communications hereunder shall be in writing and shall be
delivered or sent to all or any of the Guarantors at Suite 600
North, 222 S. 15th Street, Omaha, Nebraska, Attention: William J.
Gerber, Facsimile No. (402) 345-9190, and to the Agent at 611
Woodward Avenue, Detroit, Michigan 48226, Attention: National
Banking Division, Facsimile No. (313) 225-2649, or to such other
address as may be designated by the Guarantors or the Agent by
notice to the other. All notices and other communications shall be
deemed to have been given at the time of actual delivery thereof to
such address, or if sent by certified or registered mail, postage
prepaid, to such address, on the fifth day after mailing.
14. Solvency Representation and Warranty. Each Guarantor
represents and warrants that such Guarantor, and each such
Guarantor and its subsidiaries, if any, taken as a whole, is
Solvent and will, after each borrowing by the Company under the
Credit Agreement, and after each borrowing by such Guarantor of any
proceeds of any such borrowing, be Solvent. As used herein,
"Solvent" and "Solvency" mean with respect to any Person (as
defined in the Credit Agreement) on a particular date, that on such
date (i) the fair value of the property of such Person is greater
than the total amount of liabilities, including, without
limitation, contingent liabilities of such Person, (ii) the present
fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of
such Person on its debts as they become absolute and matured, (iii)
such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as
such debts and liabilities mature, and (iv) such Person is not
engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person's property would
constitute an unreasonably small capital.
15. Conduct No Waiver; Remedies Cumulative. The obligations
of each Guarantor under this Guaranty are continuing obligations
and a fresh cause of action shall arise in respect of each Event of
Default hereunder. No course of dealing on the part of any Bank or
the Agent, nor any delay or failure on the part of any Bank or the
Agent in exercising any right, power or privilege hereunder shall
operate as a waiver of such right, power or privilege or otherwise
prejudice the Banks' and the Agent's rights and remedies hereunder;
nor shall any single or partial exercise thereof preclude any
further exercise thereof or the exercise of any other right, power
or privilege. No right or remedy conferred upon or reserved to the
Banks and the Agent under this Guaranty is intended to be exclusive
of any other right or remedy, and every right and remedy shall be
cumulative and in addition to every other right or remedy given
hereunder or now or hereafter existing under any applicable law.
Every right and remedy given by this Guaranty or by applicable law
to the Banks and the Agent may be exercised from time to time and
as often as may be deemed expedient by the Banks or the Agent, as
the case may be.
16. Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of each
Guarantor made herein or in any certificate or other document
delivered pursuant hereto shall be deemed to be material and to
have been relied upon by the Banks and the Agent, notwithstanding
any investigation heretofore or hereafter made by the Banks or the
Agent or on the Banks' or the Agent's behalf.
17. Successors and Assigns. The rights and remedies of the
Banks and the Agent hereunder shall inure to the benefit of, and
the duties and obligations of each Guarantor hereunder, shall be
binding upon the parties hereto and their respective successors and
assigns.
18. Governing Law; Submission to Jurisdiction; Waivers. This
Guaranty is a contract made under, and shall be governed by and
construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be performed entirely within
such State and without giving effect to choice of law principles of
such State. Each Guarantor further agrees that any legal action or
proceeding with respect to this Guaranty or any Operative Document
or the transactions contemplated hereby may be brought in any court
of the State of Michigan, or in any court of the United States of
America sitting in Michigan, and each Guarantor hereby submits to
and accepts generally and unconditionally the non-exclusive
jurisdiction of those courts with respect to its person and
property, and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery
to such Guarantor or by the mailing thereof by registered or
certified mail, postage prepaid to such Guarantor, at the address
set forth in Section 13. Nothing in this Section shall affect the
right of the Agent to serve process in any other manner permitted
by law or limit the right of the Agent to bring any such action or
proceeding against any Guarantor or property in the courts of any
other jurisdiction. Each Guarantor hereby irrevocably waives any
objection to the laying of venue of any such suit or proceeding in
the above described courts.
19. Headings; Definitions. The headings of the various sub-
divisions hereof are for convenience of reference only and shall in
no way modify any of the terms or provisions hereof. Capitalized
terms used but not defined herein shall have the respective
meanings ascribed thereto in the Credit Agreement.
20. Integration and Severability. This Guaranty embodies the
entire agreement and understanding between each Guarantor and the
Banks and the Agent, and supersedes all prior agreements and
understandings, relating to the subject matter hereof. In any case
one or more of the obligations of any Guarantor under this Guaranty
shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining obligations
of the Guarantors shall not in any way be affected or impaired
thereby, and such invalidity, illegality or unenforceability in one
jurisdiction shall not affect the validity, legality or
enforceability of the obligations of the Guarantors under this
Guaranty in any other jurisdiction. If at any time any portion of
the Guaranteed Obligations shall be determined by a court of
competent jurisdiction to be invalid, unenforceable, or avoidable,
the remaining portion of the Guaranteed Obligations shall not in
any way be affected, impaired or prejudiced thereby and all of the
Guarantors obligations hereunder with respect to such remaining
portion shall continue, to the fullest extent permitted by law.
<PAGE>
21. Counterpart Execution. This Guaranty may be signed upon
any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were
upon the same instrument. This Guaranty shall become effective as
to each Guarantor when a counterpart hereof shall have been signed
by such Guarantor.
22. WAIVER OF JURY TRIAL. EACH OF THE BANKS AND THE AGENT, IN
ACCEPTING THIS GUARANTY, AND EACH OF THE GUARANTORS, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF
THEM MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR
ARISING OUT OF THIS GUARANTY OR ANY RELATED INSTRUMENT OR AGREEMENT
OR ANY OF THE TRANSACTIONS CONTEMPLATED BY THIS GUARANTY OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NEITHER THE BANKS AND THE AGENT NOR ANY
GUARANTOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY ANY BANK, THE AGENT OR ANY
GUARANTOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be duly executed and delivered as of the day and year first set
forth above.
ACCEPTANCE INSURANCE HOLDINGS INC.
By:________________________________
Its:____________________________
THE REDLAND GROUP, INC.
By:________________________________
Its:____________________________
<PAGE>
EXHIBIT F-1
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of July __, 1995 (this "Pledge
Agreement"), is made by ACCEPTANCE INSURANCE COMPANIES INC., a
Delaware corporation (the "Pledgor"), in favor of NBD BANK, a
Michigan banking corporation, as agent (in such capacity, the
"Agent") for the banks (collectively the "Banks" and individually
a "Bank") from time to time party to the Credit Agreement (as
defined below).
INTRODUCTION
A. The Pledgor, the Banks, the Agent and the Co-Agents party
thereto have entered into the Credit Agreement, dated as of July
__, 1995 (as amended, supplemented, extended, restated or otherwise
modified from time to time, the "Credit Agreement"), pursuant to
which the Banks may, subject to the terms and conditions of the
Credit Agreement, make Line of Credit Loans and Revolving Credit
Loans to the Company, as evidenced by the Line of Credit Notes and
Revolving Credit Notes, respectively, issued by the Pledgor to the
Banks.
B. As a condition, among others, to the effectiveness of the
obligations of the Banks under the Credit Agreement, the Pledgor is
required to pledge to the Agent, for the benefit of the Agent and
the Banks, and grant to the Agent for the benefit of the Agent and
the Banks a first-priority security interest in, all of the capital
stock now or hereafter issued and outstanding of Acceptance
Insurance Holdings Inc., a Nebraska corporation, and The Redland
Group, Inc., an Iowa corporation (collectively the "Pledged
Subsidiaries" and individually a "Pledged Subsidiary").
NOW THEREFORE, for value received, the Pledgor hereby grants
a first-priority security interest in and to one hundred percent
(100%) of the capital stock from time to time issued and
outstanding of each Pledged Subsidiary, whether such capital stock
now or hereafter is owned by the Pledgor, and herewith delivers to
the Agent stock certificates representing one hundred percent
(100%) of the issued and outstanding capital stock of each Pledged
Subsidiary now owned by the Pledgor (said shares of stock, together
with any stock rights, stock dividends, liquidating dividends, new
securities, payments, distributions and proceeds (including cash
dividends and sale proceeds) and any other shares and securities
from time to time receivable or otherwise distributed in respect of
or in exchange for any or all of such shares, being called the
"Pledged Stock"), to secure (a) the payment of the principal sum of
Ninety Million Dollars ($90,000,000), together with interest
thereon, in accordance with the terms of the Line of Credit Notes,
the Revolving Credit Notes and the Credit Agreement, (b) all other
indebtedness, obligations and liabilities of the Pledgor to the
Agent and the Banks under the Credit Agreement and any note or
notes issued in replacement of or substitution for the Line of
Credit Notes and/or the Revolving Credit Notes, and (c) the
performance of the covenants herein and in the Credit Agreement and
reimbursement of any monies expended by the Agent or any Bank in
connection therewith (all of the aforesaid indebtedness,
obligations and liabilities of the Pledgor being herein called the
"Secured Obligations", and all of the documents, agreements and
instruments between or among the Pledgor and the Agent, the Banks
or any of them evidencing or securing the repayment of, or
otherwise pertaining to, the Secured Obligations, including without
limitation the Credit Agreement, being herein collectively called
the "Operative Documents").
The Pledgor further represents and warrants to, and agrees
with, the Agent, for the benefit of the Agent and the Banks, as
follows:
1. Representations and Warranties. The Pledgor represents and
warrants that the Pledged Stock is represented by the stock
certificate or certificates described on Schedule 1 attached hereto
and that such stock certificate or certificates, accompanied by an
instrument of assignment or transfer duly executed in blank by the
Pledgor as the owner named in such stock certificate or
certificates, have been delivered to the Agent by the Pledgor. The
Pledgor further represents and warrants that the Pledged Stock is
duly authorized and validly issued, fully paid and nonassessable
and constitutes all of the issued and outstanding shares of the
capital stock of the Pledged Subsidiaries, and none of the Pledged
Subsidiaries has any obligation to authorize capital stock or issue
capital stock to any person or entity, that the Pledgor is the
legal and beneficial owner of the Pledged Stock, free and clear of
all liens (including without limitation pledges, assignments, title
retaining contracts or other types of security interests) other
than the lien of the Agent hereunder, with full right and power to
deliver, pledge and assign the Pledged Stock to the Agent
hereunder, and that the pledge of the Pledged Stock pursuant to
this Pledge Agreement creates in favor of the Agent a valid and
perfected first-priority security interest in the Pledged Stock
enforceable against the Pledgor and all third parties and securing
the payment of the Secured Obligations, except that the consents of
the insurance directors of the States of Arizona, Iowa and Nebraska
are necessary prior to the enforcement of the remedies provided in
this Agreement.
2. Title; Stock Rights, Dividends, Etc. The Pledgor will
warrant and defend the Agent's title to the Pledged Stock, and the
rights herein created, against all claims of all persons, and will
maintain and preserve the Agent's security interest in the Pledged
Stock. It is understood and agreed that the collateral hereunder
includes any stock rights, stock dividends, liquidating dividends,
new securities, payments, distributions and proceeds (including
cash dividends and sale proceeds) and other property to which the
Pledgor may become entitled by reason of the ownership of the
Pledged Stock during the existence of this Pledge Agreement, and
any such property received by the Pledgor shall be held in trust
and forthwith delivered to the Agent to be held hereunder in
accordance with the terms of this Pledge Agreement.
3. Registration Rights. If any Pledged Subsidiary at any time
or from time to time proposes to register any of its securities
under the Securities Act of 1933, the Pledgor will at each such
time give notice to the Agent of such Pledged Subsidiary's
intentions so to do. Upon the request of the Agent given within 30
days after receipt of such notice, the Pledgor will cause all
Pledged Stock to be included in the registration statement proposed
to be filed, all to the extent requisite to permit the public sale
or other public disposition of such Pledged Stock so registered by
the holders thereof. The costs and expenses of all such
registrations and qualifications under said Act shall be paid by
the Pledgor or such Pledged Subsidiary, except that underwriting
discounts and commissions in respect of any Pledged Stock sold
pursuant to any such registration statement shall be borne by the
sellers thereof. As expeditiously as possible after the effective
date of any such registration statement, the Pledgor will deliver
in exchange for any certificates representing shares of Pledged
Stock so registered pursuant to such registration, which bear any
restrictive legend, new Pledged Stock certificates not bearing such
legend or any similar legend. In the event of any such
registration, the Pledgor hereby agrees to indemnify and hold
harmless the Agent and each Bank against any losses, claims,
damages or liabilities to which any of them may become subject to
the extent that such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration
statement, and any preliminary prospectus or filed prospectus, or
in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Agent
and each Bank for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any
such loss, claim, damage or liability. The indemnifications
contained in this Section shall include each person, if any, who
controls the Agent or any of the Banks.
4. Events of Default; Remedies.
(a) Upon the occurrence of any Event of Default, the Agent
shall have all of the rights and remedies provided to it or any
Bank by law and/or by this Pledge Agreement or any other Operative
Document, including but not limited to all of the rights and
remedies of a secured party under the Michigan Uniform Commercial
Code, and the Pledgor hereby authorizes the Agent to sell all or
any part of the Pledged Stock at public or private sale and to
apply the proceeds of such sale to the costs and expenses thereof
(including the reasonable attorneys' fees and disbursements
incurred by the Agent) and then to the payment of the other
Secured Obligations. Any requirement of reasonable notice shall be
met if the Agent sends such notice to the Pledgor by registered or
certified mail, at least 5 days prior to the date of sale,
disposition or other event giving rise to the required notice. The
Agent or any Bank may be the purchaser at any such sale. The
Pledgor expressly authorizes such sale or sales of the Pledged
Stock in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing indebtedness
or other obligations owed to the Agent or any Bank. The Agent
shall be under no obligation to preserve rights against prior
parties.
(b) The Pledgor hereby waives as to the Agent and the Banks
any right of subrogation or marshalling of such stock and other
collateral for indebtedness or other obligations owed to the Agent
or any Bank. To this end, the Pledgor hereby expressly agrees that
any such collateral or other security of the Pledgor or any other
party which the Agent or any Bank may hold, or which may come to
any of them or their possession, may be dealt with in all respects
and particulars as though this Pledge Agreement were not in
existence. The Pledgor agrees and acknowledges that because of
applicable securities laws, the Agent may not be able to effect a
public sale of the Pledged Stock and sales at a private sale may be
on terms less favorable than if such securities were sold at a
public sale and may be at a price less favorable than a public
sale. The Pledgor agrees that all such private sales made under
the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
5. Additional Remedies; Irrevocable Proxy. (a) Upon the
occurrence of any Event of Default, the Agent also shall have the
right to vote the Pledged Stock on all questions after giving
notice to the Pledgor of the Agent's election to exercise such
right. In the absence of any such Event of Default, the Pledgor
shall have the right to vote the Pledged Stock on all questions,
provided that voting by the Pledgor of the Pledged Stock shall be
in conformity with performance of the obligations of the Pledgor
under the Operative Documents.
(b) Whenever an Event of Default has occurred, the Agent
may transfer into its name, or into the name of its nominee or
nominees, any or all of the Pledged Stock and, as provided above,
may vote any or all of the Pledged Stock (whether or not so
transferred) and may otherwise act with respect thereto as though
it were the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-
fact of the Pledgor, with full power of substitution, to do so.
(c) In furtherance of the foregoing, it is acknowledged
that the Agent may vote the Pledged Stock to remove the directors
and officers of any Pledged Subsidiary or any of them, and to elect
new directors and officers of any Pledged Subsidiary, who
thereafter shall manage the affairs of such Pledged Subsidiary,
operate its properties and carry on its business and otherwise take
any action with respect to the business, properties and affairs of
such Pledged Subsidiary which such new directors shall deem
necessary or appropriate, including, but not limited to, the
maintenance, repair, renewal or alteration of any or all of the
properties of such Pledged Subsidiary, the leasing, subleasing,
sale or other disposition of any or all of such properties, the
borrowing of money on the credit of such Pledged Subsidiary, and
the employment of attorneys, agents or other employees deemed by
such new directors to be necessary for the proper operation,
conduct, winding up or liquidation of the business, properties and
affairs of such Pledged Subsidiary, and all revenues from the
operation, conduct, winding up or liquidation of the business,
properties and affairs of such Pledged Subsidiary after the payment
of expenses thereof shall be applied to the payment of the Secured
Obligations.
(d) The Pledgor agrees that the proxy granted in this
Section 5 is coupled with an interest and is and shall be both
valid and irrevocable so long as the Pledged Stock is subject to
this Pledge Agreement. The Pledgor further acknowledges that the
terms of said proxy may exceed three years from the date hereof.
6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Agent or any Bank under any Operative Document is
intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative in addition to every other
right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy of the Agent or any
Bank under any Operative Document or under applicable law may be
exercised from time to time and as often as may be deemed expedient
by the Agent or such Bank. To the extent that it lawfully may, the
Pledgor agrees that it will not at any time insist upon, plead, or
in any manner whatever claim or take any benefit or advantage of
any applicable present or future stay, extension or moratorium law,
which may affect observance or performance of any provisions of any
Operative Document; nor will it claim, take or insist upon any
benefit or advantage of any present or future law providing for the
valuation or appraisal of any security for its obligations under
any Operative Document prior to any sale or sales thereof which may
be made under or by virtue of any instrument governing the same;
nor will it, after any such sale or sales, claim or exercise any
right under any applicable law to redeem any portion of such
security so sold.
7. Expenses. The Pledgor agrees to pay and reimburse the
Agent and each Bank for, and indemnify and hold the Agent and each
Bank harmless against, all costs, expenses, taxes and fees
(including reasonable attorneys' fees and disbursements) and any
liability incurred in connection with the administration and
enforcement of this Pledge Agreement, including without limitation
the assignment, transfer and delivery of the Pledged Stock to the
Pledgor pursuant to Section 13. Such undertaking of the Pledgor
shall survive the termination of this Pledge Agreement.
8. Conduct No Waiver. No waiver of default shall be effective
unless in writing executed by the Agent and waiver of any default
or forbearance on the part of the Agent in enforcing any of its
rights under this Pledge Agreement shall not operate as a waiver of
any other default or of the same default on a future occasion or of
such right.
9. Headings; Definitions. The headings of the various
subdivisions hereof are for convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
10. Notices. All notices, demands, requests, consents and
other communications hereunder shall be in writing and shall be
delivered or sent to the Pledgor at Suite 600 North, 222 S. 15th
Street, Omaha, Nebraska, Attention: William J. Gerber, Facsimile
No. (402) 345-9190, and to the Agent at 611 Woodward Avenue,
Detroit, Michigan, Attention: National Banking Division,
Facsimile No. (313) 225-2649, or to such other address as may be
designated by the Pledgor or the Agent by notice to the other. All
notices and other communications shall be deemed to have been given
at the time of actual delivery thereof to such address, or if sent
by the Agent to the Pledgor by certified or registered mail,
postage prepaid, to such address, on the fifth day after mailing.
11. Amendments. None of the terms and provisions of this
Pledge Agreement may be modified or amended in any way except by an
instrument in writing executed by the Pledgor and the Agent.
12. Severability. If any one or more provisions of this Pledge
Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected,
impaired or prejudiced thereby. If at any time any portion of the
Secured Obligations shall be determined by a court of competent
jurisdiction to be invalid, unenforceable or avoidable, the
remaining portion of the Secured Obligations shall not in any way
be affected, impaired or prejudiced thereby and all Pledged Stock
pledged hereunder shall continue to secure, to the fullest extent
permitted by law, such remaining portion of the Secured
Obligations.
13. Successors and Assigns; Termination. This Pledge Agreement
shall create a continuing security interest in the Pledged Stock
and shall (a) remain in full force and effect until full and final
payment and performance of the Secured Obligations and the
termination or expiration of all lending facilities provided by the
Banks or any of them to the Pledgor and of all letters of credit,
bankers' acceptances and guarantees, the obligations of the Pledgor
in respect of which constitute part of the Secured Obligations, (b)
be binding upon the Pledgor, its successors and assigns, and (c)
inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Agent and the Banks and their
successors, transferees and assigns. Upon the full and final
payment and performance of the Secured Obligations and the
termination or expiration of all such lending facilities, letters
of credit, bankers' acceptances and guarantees, the security
interest granted hereby shall terminate and all rights to the
Pledged Stock shall revert to the Pledgor. Upon any such
termination, the Agent shall assign, transfer and deliver without
recourse and without warranty the Pledged Stock to the Pledgor (and
any property received in respect thereof) as has not theretofore
been sold or otherwise applied pursuant to the provisions of this
Pledge Agreement; provided, however, that this Pledge Agreement
shall continue to be effective or shall be automatically
reinstated, as the case may be, if at any time payment, in whole or
in part, of any of the Secured Obligations or other indebtedness of
the Pledgor is reduced, rescinded or must otherwise be restored or
returned by the Agent or any of the Banks upon
the bankruptcy, insolvency, dissolution, liquidation or
reorganization of the Pledgor or upon or as a result of the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to the Pledgor or its property or
otherwise.
14. Governing Law; Submission to Jurisdiction; Waivers. This
Pledge Agreement is a contract made under, and shall be governed by
and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be per formed entirely within
such State and without giving effect to choice of law principles of
such State. The Pledgor further agrees that any legal action or
proceeding with respect to this Pledge Agreement or any Operative
Document or the transactions contemplated hereby may be brought in
any court of the State of Michigan, or in any court of the United
States of America sitting in Michigan, and the Pledgor hereby
submits to and accepts generally and unconditionally the non-
exclusive jurisdiction of those courts with respect to its person
and property, and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery
to the Pledgor or by the mailing thereof by registered or certified
mail, postage prepaid to the Pledgor at its address set forth in
Section 10. Nothing in this Section shall affect the right of the
Agent to serve process in any other manner permitted by law or
limit the right of the Agent to bring any such action or proceeding
against the Pledgor or property in the courts of any other
jurisdiction. The Pledgor hereby irrevocably waives any objection
to the laying of venue of any such suit or proceeding in the above
described courts.
15. WAIVER OF JURY TRIAL. THE AGENT AND THE BANKS, IN
ACCEPTING THIS PLEDGE AGREEMENT, AND THE PLEDGOR, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS PLEDGE AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NONE OF THE AGENT, THE BANKS AND THE
PLEDGOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE AGENT, ANY BANK OR THE
PLEDGOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the Pledgor has caused this Pledge
Agreement to be duly executed as of the day and year first above
written.
ACCEPTANCE INSURANCE COMPANIES INC.
By:__________________________________
Its:_____________________________
<PAGE>
EXHIBIT F-2
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of July __, 1995 (this "Pledge
Agreement"), is made by ACCEPTANCE INSURANCE HOLDINGS INC., a
Nebraska corporation (the "Pledgor"), in favor of NBD BANK, a
Michigan banking corporation, as agent (in such capacity, the
"Agent") for the banks (collectively the "Banks" and individually
a "Bank") from time to time party to the Credit Agreement (as
defined below).
INTRODUCTION
A. Acceptance Insurance Companies Inc., a Delaware corporation
(the "Company"), the Banks, the Agent and the Co-Agents party
thereto have entered into the Credit Agreement, dated as of July
__, 1995 (as amended, supplemented, extended, restated or otherwise
modified from time to time, the "Credit Agreement"), pursuant to
which the Banks may, subject to the terms and conditions of the
Credit Agreement, make Line of Credit Loans and Revolving Credit
Loans to the Company, as evidenced by the Line of Credit Notes and
Revolving Credit Notes, respectively, issued by the Company to the
Banks.
B. The Pledgor and The Redland Group, Inc. have made in favor
of the Agent and the Banks that certain Guaranty Agreement, dated
as of July __, 1995 (as amended, supplemented, extended, restated
or otherwise modified from time to time, the "Guaranty"), pursuant
to which the Pledgor guarantees to the Agent and the Banks the
prompt and complete payment when due of all indebtedness,
obligations and liabilities of the Company to the Agent and the
Banks under the Credit Agreement and such Line of Credit Notes and
Revolving Credit Notes.
C. As a condition, among others, to the effectiveness of the
obligations of the Banks under the Credit Agreement, the Pledgor is
required to pledge to the Agent, for the benefit of the Agent and
the Banks, and grant to the Agent for the benefit of the Agent and
the Banks a first-priority security interest in, all of the capital
stock now or hereafter issued and outstanding of Acceptance
Insurance Company, a Nebraska corporation, and Seaboard
Underwriters, Inc., a North Carolina corporation (collectively, the
"Pledged Subsidiaries" and individually a "Pledged Subsidiary").
NOW THEREFORE, for value received, the Pledgor hereby grants
a first-priority security interest in and to one hundred percent
(100%) of the capital stock from time to time issued and
outstanding of each Pledged Subsidiary, whether such capital stock
now or hereafter is owned by the Pledgor, and herewith delivers to
the Agent stock certificates representing one hundred percent
(100%) of the issued and outstanding capital stock of each Pledged
Subsidiary now owned by the Pledgor (said shares of stock, together
with any stock rights, stock dividends, liquidating dividends, new
securities, payments, distributions and proceeds (including cash
dividends and sale proceeds) and any other shares and securities
from time to time receivable or otherwise distributed in respect of
or in exchange for any or all of such shares, being called the
"Pledged Stock"), to secure (a) the payment of the principal sum of
Ninety Million Dollars ($90,000,000), together with interest
thereon, in accordance with the terms of the Line of Credit Notes,
the Revolving Credit Notes and the Credit Agreement, (b) all other
indebtedness, obligations and liabilities of the Company to the
Agent and the Banks under the Credit Agreement and any note or
notes issued in replacement of or substitution for the Line of
Credit Notes and/or the Revolving Credit Notes, (c) all
indebtedness, obligations and liabilities of the Pledgor to the
Bank under the Guaranty, and (d) the performance of the covenants
herein and in the Guaranty and reimbursement of any monies expended
by the Agent or any Bank in connection therewith (all of the
aforesaid indebtedness, obligations and liabilities of the Company
and the Pledgor being herein called the "Secured Obligations", and
all of the documents, agreements and instruments between or among
the Company or the Pledgor and the Agent, the Banks or any of them
evidencing or securing the repayment of, or otherwise pertaining
to, the Secured Obligations, including without limitation the
Credit Agreement and the Guaranty, being herein collectively called
the "Operative Documents").
The Pledgor further represents and warrants to, and agrees
with, the Agent, for the benefit of the Agent and the Banks, as
follows:
1. Representations and Warranties. The Pledgor represents and
warrants that the Pledged Stock is represented by the stock
certificate or certificates described on Schedule 1 attached hereto
and that such stock certificate or certificates, accompanied by an
instrument of assignment or transfer duly executed in blank by the
Pledgor as the owner named in such stock certificate or
certificates, have been delivered to the Agent by the Pledgor. The
Pledgor further represents and warrants that the Pledged Stock is
duly authorized and validly issued, fully paid and nonassessable
and constitutes all of the issued and outstanding shares of the
capital stock of the Pledged Subsidiaries, and none of the Pledged
Subsidiaries has any obligation to authorize capital stock or issue
capital stock to any person or entity, that the Pledgor is the
legal and beneficial owner of the Pledged Stock, free and clear of
all liens (including without limitation pledges, assignments, title
retaining contracts or other types of security interests) other
than the lien of the Agent hereunder, with full right and power to
deliver, pledge and assign the Pledged Stock to the Agent
hereunder, and that the pledge of the Pledged Stock pursuant to
this Pledge Agreement creates in favor of the Agent a valid and
perfected first-priority security interest in the Pledged Stock
enforceable against the Pledgor and all third parties and securing
the payment of the Secured Obligations, except that the consents of
the insurance directors of the States of Arizona and Nebraska are
necessary prior to the enforcement of the remedies provided in this
Agreement.
2. Title; Stock Rights, Dividends, Etc. The Pledgor will
warrant and defend the Agent's title to the Pledged Stock, and the
rights herein created, against all claims of all persons, and will
maintain and preserve the Agent's security interest in the Pledged
Stock. It is understood and agreed that the collateral hereunder
includes any stock rights, stock dividends, liquidating dividends,
new securities, payments, distributions and proceeds (including
cash dividends and sale proceeds) and other property to which the
Pledgor may become entitled by reason of the ownership of the
Pledged Stock during the existence of this Pledge Agreement, and
any such property received by the Pledgor shall be held in trust
and forthwith delivered to the Agent to be held hereunder in
accordance with the terms of this Pledge Agreement.
3. Registration Rights. If any Pledged Subsidiary at any time
or from time to time proposes to register any of its securities
under the Securities Act of 1933, the Pledgor will at each such
time give notice to the Agent of such Pledged Subsidiary's
intentions so to do. Upon the request of the Agent given within 30
days after receipt of such notice, the Pledgor will cause all
Pledged Stock to be included in the registration statement proposed
to be filed, all to the extent requisite to permit the public sale
or other public disposition of such Pledged Stock so registered by
the holders thereof. The costs and expenses of all such
registrations and qualifications under said Act shall be paid by
the Pledgor or such Pledged Subsidiary, except that underwriting
discounts and commissions in respect of any Pledged Stock sold
pursuant to any such registration statement shall be borne by the
sellers thereof. As expeditiously as possible after the effective
date of any such registration statement, the Pledgor will deliver
in exchange for any certificates representing shares of Pledged
Stock so registered pursuant to such registration, which bear any
restrictive legend, new Pledged Stock certificates not bearing such
legend or any similar legend. In the event of any such
registration, the Pledgor hereby agrees to indemnify and hold
harmless the Agent and each Bank against any losses, claims,
damages or liabilities to which any of them may become subject to
the extent that such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration
statement, and any preliminary prospectus or filed prospectus, or
in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Agent
and each Bank for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any
such loss, claim, damage or liability. The indemnifications
contained in this Section shall include each person, if any, who
controls the Agent or any of the Banks.
4. Events of Default; Remedies.
(a) Upon the occurrence of any Event of Default, the Agent
shall have all of the rights and remedies provided to it or any
Bank by law and/or by this Pledge Agreement or any other Operative
Document, including but not limited to all of the rights and
remedies of a secured party under the Michigan Uniform Commercial
Code, and the Pledgor hereby authorizes the Agent to sell all or
any part of the Pledged Stock at public or private sale and to
apply the proceeds of such sale to the costs and expenses thereof
(including the reasonable attorneys' fees and disbursements
incurred by the Agent) and then to the payment of the other
Secured Obligations. Any requirement of reasonable notice shall be
met if the Agent sends such notice to the Pledgor by registered or
certified mail, at least 5 days prior to the date of sale,
disposition or other event giving rise to the required notice. The
Agent or any Bank may be the purchaser at any such sale. The
Pledgor expressly authorizes such sale or sales of the Pledged
Stock in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing indebtedness
or other obligations owed to the Agent or any Bank. The Agent
shall be under no obligation to preserve rights against prior
parties.
(b) The Pledgor hereby waives as to the Agent and the Banks
any right of subrogation or marshalling of such stock and other
collateral for indebtedness or other obligations owed to the Agent
or any Bank. To this end, the Pledgor hereby expressly agrees that
any such collateral or other security of the Pledgor or any other
party which the Agent or any Bank may hold, or which may come to
any of them or their possession, may be dealt with in all respects
and particulars as though this Pledge Agreement were not in
existence. The Pledgor agrees and acknowledges that because of
applicable securities laws, the Agent may not be able to effect a
public sale of the Pledged Stock and sales at a private sale may be
on terms less favorable than if such securities were sold at a
public sale and may be at a price less favorable than a public
sale. The Pledgor agrees that all such private sales made under
the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
5. Additional Remedies; Irrevocable Proxy. (a) Upon the
occurrence of any Event of Default, the Agent also shall have the
right to vote the Pledged Stock on all questions after giving
notice to the Pledgor of the Agent's election to exercise such
right. In the absence of any such Event of Default, the Pledgor
shall have the right to vote the Pledged Stock on all questions,
provided that voting by the Pledgor of the Pledged Stock shall be
in conformity with performance of the obligations of the Pledgor
under the Operative Documents.
(b) Whenever an Event of Default has occurred, the Agent
may transfer into its name, or into the name of its nominee or
nominees, any or all of the Pledged Stock and, as provided above,
may vote any or all of the Pledged Stock (whether or not so
transferred) and may otherwise act with respect thereto as though
it were the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-
fact of the Pledgor, with full power of substitution, to do so.
(c) In furtherance of the foregoing, it is acknowledged
that the Agent may vote the Pledged Stock to remove the directors
and officers of any Pledged Subsidiary or any of them, and to elect
new directors and officers of any Pledged Subsidiary, who
thereafter shall manage the affairs of such Pledged Subsidiary,
operate its properties and carry on its business and otherwise take
any action with respect to the business, properties and affairs of
such Pledged Subsidiary which such new directors shall deem
necessary or appropriate, including, but not limited to, the
maintenance, repair, renewal or alteration of any or all of the
properties of such Pledged Subsidiary, the leasing, subleasing,
sale or other disposition of any or all of such properties, the
borrowing of money on the credit of such Pledged Subsidiary, and
the employment of attorneys, agents or other employees deemed by
such new directors to be necessary for the proper operation,
conduct, winding up or liquidation of the business, properties and
affairs of such Pledged Subsidiary, and all revenues from the
operation, conduct, winding up or liquidation of the business,
properties and affairs of such Pledged Subsidiary after the payment
of expenses thereof shall be applied to the payment of the Secured
Obligations.
(d) The Pledgor agrees that the proxy granted in this
Section 5 is coupled with an interest and is and shall be both
valid and irrevocable so long as the Pledged Stock is subject to
this Pledge Agreement. The Pledgor further acknowledges that the
terms of said proxy may exceed three years from the date hereof.
6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Agent or any Bank under any Operative Document is
intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative in addition to every other
right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy of the Agent or any
Bank under any Operative Document or under applicable law may be
exercised from time to time and as often as may be deemed expedient
by the Agent or such Bank. To the extent that it lawfully may, the
Pledgor agrees that it will not at any time insist upon, plead, or
in any manner whatever claim or take any benefit or advantage of
any applicable present or future stay, extension or moratorium law,
which may affect observance or performance of any provisions of any
Operative Document; nor will it claim, take or insist upon any
benefit or advantage of any present or future law providing for the
valuation or appraisal of any security for its obligations under
any Operative Document prior to any sale or sales thereof which may
be made under or by virtue of any instrument governing the same;
nor will it, after any such sale or sales, claim or exercise any
right under any applicable law to redeem any portion of such
security so sold.
7. Expenses. The Pledgor agrees to pay and reimburse the
Agent and each Bank for, and indemnify and hold the Agent and each
Bank harmless against, all costs, expenses, taxes and fees
(including reasonable attorneys' fees and disbursements) and any
liability incurred in connection with the administration and
enforcement of this Pledge Agreement, including without limitation
the assignment, transfer and delivery of the Pledged Stock to the
Pledgor pursuant to Section 13. Such undertaking of the Pledgor
shall survive the termination of this Pledge Agreement.
8. Conduct No Waiver. No waiver of default shall be effective
unless in writing executed by the Agent and waiver of any default
or forbearance on the part of the Agent in enforcing any of its
rights under this Pledge Agreement shall not operate as a waiver of
any other default or of the same default on a future occasion or of
such right.
9. Headings; Definitions. The headings of the various
subdivisions hereof are for convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Guaranty.
10. Notices. All notices, demands, requests, consents and
other communications hereunder shall be in writing and shall be
delivered or sent to the Pledgor at Suite 600 North, 222 S. 15th
Street, Omaha, Nebraska, Attention: William J. Gerber, Facsimile
No. (402) 345-9190, and to the Agent at 611 Woodward Avenue,
Detroit, Michigan, Attention: National Banking Division,
Facsimile No. (313) 225-2649, or to such other address as may be
designated by the Pledgor or the Agent by notice to the other. All
notices and other communications shall be deemed to have been given
at the time of actual delivery thereof to such address, or if sent
by the Agent to the Pledgor by certified or registered mail,
postage prepaid, to such address, on the fifth day after mailing.
11. Amendments. None of the terms and provisions of this
Pledge Agreement may be modified or amended in any way except by an
instrument in writing executed by the Pledgor and the Agent.
12. Severability. If any one or more provisions of this Pledge
Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected,
impaired or prejudiced thereby. If at any time any portion of
the Secured Obligations shall be determined by a court of competent
jurisdiction to be invalid, unenforceable or avoidable, the
remaining portion of the Secured Obligations shall not in any way
be affected, impaired or prejudiced thereby and all Pledged Stock
pledged hereunder shall continue to secure, to the fullest extent
permitted by law, such remaining portion of the Secured
Obligations.
13. Successors and Assigns; Termination. This Pledge Agreement
shall create a continuing security interest in the Pledged Stock
and shall (a) remain in full force and effect until full and final
payment and performance of the Secured Obligations and the
termination or expiration of all lending facilities provided by the
Banks or any of them to the Company and the Pledgor and of all
letters of credit, bankers' acceptances and guarantees, the
obligations of the Company or the Pledgor in respect of which
constitute part of the Secured Obligations, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of the Agent hereunder, to the benefit of
the Agent and the Banks and their successors, transferees and
assigns. Upon the full and final payment and performance of the
Secured Obligations and the termination or expiration of all such
lending facilities, letters of credit, bankers' acceptances and
guarantees, the security interest granted hereby shall terminate
and all rights to the Pledged Stock shall revert to the Pledgor.
Upon any such termination, the Agent shall assign, transfer and
deliver without recourse and without warranty the Pledged Stock to
the Pledgor (and any property received in respect thereof) as has
not theretofore been sold or otherwise applied pursuant to the
provisions of this Pledge Agreement; provided, however, that this
Pledge Agreement shall continue to be effective or shall be
automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations or
other indebtedness of the Pledgor is reduced, rescinded or must
otherwise be restored or returned by the Agent or any of the Banks
upon the bankruptcy, insolvency, dissolution, liquidation or
reorganization of the Pledgor or upon or as a result of the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to the Pledgor or its property or
otherwise.
14. Governing Law; Submission to Jurisdiction; Waivers. This
Pledge Agreement is a contract made under, and shall be governed by
and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be per formed entirely within
such State and without giving effect to choice of law principles of
such State. The Pledgor further agrees that any legal action or
proceeding with respect to this Pledge Agreement or any Operative
Document or the transactions contemplated hereby may be brought in
any court of the State of Michigan, or in any court of the United
States of America sitting in Michigan, and the Pledgor hereby
submits to and accepts generally and unconditionally the non-
exclusive jurisdiction of those courts with respect to its person
and property, and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery
to the Pledgor or by the mailing thereof by registered or certified
mail, postage prepaid to the Pledgor at its address set forth in
Section 10. Nothing in this Section shall affect the right of the
Agent to serve process in any other manner permitted by law or
limit the right of the Agent to bring any such action or proceeding
against the Pledgor or property in the courts of any other
jurisdiction. The Pledgor hereby irrevocably waives any objection
to the laying of venue of any such suit or proceeding in the above
described courts.
15. WAIVER OF JURY TRIAL. THE AGENT AND THE BANKS, IN
ACCEPTING THIS PLEDGE AGREEMENT, AND THE PLEDGOR, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS PLEDGE AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NONE OF THE AGENT, THE BANKS AND THE
PLEDGOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE AGENT, ANY BANK OR THE
PLEDGOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the Pledgor has caused this Pledge
Agreement to be duly executed as of the day and year first above
written.
ACCEPTANCE INSURANCE HOLDINGS INC.
By:_________________________________
Its:_____________________________
<PAGE>
EXHIBIT F-3
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT, dated as of July __, 1995 (this "Pledge
Agreement"), is made by THE REDLAND GROUP, INC., an Iowa
corporation (the "Pledgor"), in favor of NBD BANK, a Michigan
banking corporation, as agent (in such capacity, the "Agent") for
the banks (collectively the "Banks" and individually a "Bank") from
time to time party to the Credit Agreement (as defined below).
INTRODUCTION
A. Acceptance Insurance Companies Inc., a Delaware corporation
(the "Company"), the Banks, the Agent and the Co-Agents party
thereto have entered into the Credit Agreement, dated as of July
__, 1995 (as amended, supplemented, extended, restated or otherwise
modified from time to time, the "Credit Agreement"), pursuant to
which the Banks may, subject to the terms and conditions of the
Credit Agreement, make Line of Credit Loans and Revolving Credit
Loans to the Company, as evidenced by the Line of Credit Notes and
Revolving Credit Notes, respectively, issued by the Company to the
Banks.
B. The Pledgor and Acceptance Insurance Holdings Inc. have
made in favor of the Agent and the Banks that certain Guaranty
Agreement, dated as of July __, 1995 (as amended, supplemented,
extended, restated or otherwise modified from time to time, the
"Guaranty"), pursuant to which the Pledgor guarantees to the Agent
and the Banks the prompt and complete payment when due of all
indebtedness, obligations and liabilities of the Company to the
Agent and the Banks under the Credit Agreement and such Line of
Credit Notes and Revolving Credit Notes.
C. As a condition, among others, to the effectiveness of the
obligations of the Banks under the Credit Agreement, the Pledgor is
required to pledge to the Agent, for the benefit of the Agent and
the Banks, and grant to the Agent for the benefit of the Agent and
the Banks a first-priority security interest in, all of the capital
stock now or hereafter issued and outstanding of Redland Insurance
Company, an Iowa corporation (the "Pledged Subsidiary").
NOW THEREFORE, for value received, the Pledgor hereby grants
a first-priority security interest in and to one hundred percent
(100%) of the capital stock from time to time issued and
outstanding of the Pledged Subsidiary, whether such capital stock
now or hereafter is owned by the Pledgor, and herewith delivers to
the Agent stock certificates representing one hundred percent
(100%) of the issued and outstanding capital stock of the Pledged
Subsidiary, other than .01% representing directors' qualifying
shares (said shares of stock, together with any stock rights, stock
dividends, liquidating dividends, new securities, payments,
distributions and proceeds (including cash dividends and sale
proceeds) and any other shares and securities from time to time
receivable or otherwise distributed in respect of or in exchange
for any or all of such shares, being called the "Pledged Stock"),
to secure (a) the payment of the principal sum of Ninety Million
Dollars ($90,000,000), together with interest thereon, in
accordance with the terms of Line of Credit Notes, the Revolving
Credit Notes and the Credit Agreement, (b) all other indebtedness,
obligations and liabilities of the Company to the Agent and the
Banks under the Credit Agreement and any note or notes issued in
replacement of or substitution for the Line of Credit Notes and/or
the Revolving Credit Notes, (c) all indebtedness, obligations and
liabilities of the Pledgor to the Bank under the Guaranty, and (d)
the performance of the covenants herein and in the Guaranty and
reimbursement of any monies expended by the Agent or any Bank in
connection therewith (all of the aforesaid indebtedness,
obligations and liabilities of the Company and the Pledgor being
herein called the "Secured Obligations", and all of the documents,
agreements and instruments between or among the Company or the
Pledgor and the Agent, the Banks or any of them evidencing or
securing the repayment of, or otherwise pertaining to, the Secured
Obligations, including without limitation the Credit Agreement and
the Guaranty, being herein collectively called the "Operative
Documents").
The Pledgor further represents and warrants to, and agrees
with, the Agent, for the benefit of the Agent and the Banks, as
follows:
1. Representations and Warranties. The Pledgor represents and
warrants that the Pledged Stock is represented by the stock
certificate or certificates described on Schedule 1 attached hereto
and that such stock certificate or certificates, accompanied by an
instrument of assignment or transfer duly executed in blank by the
Pledgor as the owner named in such stock certificate or
certificates, have been delivered to the Agent by the Pledgor. The
Pledgor further represents and warrants that the Pledged Stock is
duly authorized and validly issued, fully paid and nonassessable
and constitutes all of the issued and outstanding shares of the
capital stock of the Pledged Subsidiaries, and the Pledged
Subsidiary has no obligation to authorize capital stock or issue
capital stock to any person or entity, that the Pledgor is the
legal and beneficial owner of the Pledged Stock, free and clear of
all liens (including without limitation pledges, assignments, title
retaining contracts or other types of security interests) other
than the lien of the Agent hereunder, with full right and power to
deliver, pledge and assign the Pledged Stock to the Agent
hereunder, and that the pledge of the Pledged Stock pursuant to
this Pledge Agreement creates in favor of the Agent a valid and
perfected first-priority security interest in the Pledged Stock
enforceable against the Pledgor and all third parties and securing
the payment of the Secured Obligations, except that the consents of
the insurance directors of the States of Iowa and Nebraska are
necessary prior to the enforcement of the remedies provided in this
Agreement.
2. Title; Stock Rights, Dividends, Etc. The Pledgor will
warrant and defend the Agent's title to the Pledged Stock, and the
rights herein created, against all claims of all persons, and will
maintain and preserve the Agent's security interest in the Pledged
Stock. It is understood and agreed that the collateral hereunder
includes any stock rights, stock dividends, liquidating dividends,
new securities, payments, distributions and proceeds (including
cash dividends and sale proceeds) and other property to which the
Pledgor may become entitled by reason of the ownership of the
Pledged Stock during the existence of this Pledge Agreement, and
any such property received by the Pledgor shall be held in trust
and forthwith delivered to the Agent to be held hereunder in
accordance with the terms of this Pledge Agreement.
3. Registration Rights. If the Pledged Subsidiary at any time
or from time to time proposes to register any of its securities
under the Securities Act of 1933, the Pledgor will at each such
time give notice to the Agent of the Pledged Subsidiary's
intentions so to do. Upon the request of the Agent given within 30
days after receipt of such notice, the Pledgor will cause all
Pledged Stock to be included in the registration statement proposed
to be filed, all to the extent requisite to permit the public sale
or other public disposition of such Pledged Stock so registered by
the holders thereof. The costs and expenses of all such
registrations and qualifications under said Act shall be paid by
the Pledgor or the Pledged Subsidiary, except that underwriting
discounts and commissions in respect of any Pledged Stock sold
pursuant to any such registration statement shall be borne by the
sellers thereof. As expeditiously as possible after the effective
date of any such registration statement, the Pledgor will deliver
in exchange for any certificates representing shares of Pledged
Stock so registered pursuant to such registration, which bear any
restrictive legend, new Pledged Stock certificates not bearing such
legend or any similar legend. In the event of any such
registration, the Pledgor hereby agrees to indemnify and hold
harmless the Agent and each Bank against any losses, claims,
damages or liabilities to which any of them may become subject to
the extent that such losses, claims, damages or liabilities arise
out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any such registration
statement, and any preliminary prospectus or filed prospectus, or
in any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse the Agent
and each Bank for any legal or other expenses reasonably incurred
by any of them in connection with investigating or defending any
such loss, claim, damage or liability. The indemnifications
contained in this Section shall include each person, if any, who
controls the Agent or any of the Banks.
4. Events of Default; Remedies.
(a) Upon the occurrence of any Event of Default, the Agent
shall have all of the rights and remedies provided to it or any
Bank by law and/or by this Pledge Agreement or any other Operative
Document, including but not limited to all of the rights and
remedies of a secured party under the Michigan Uniform Commercial
Code, and the Pledgor hereby authorizes the Agent to sell all or
any part of the Pledged Stock at public or private sale and to
apply the proceeds of such sale to the costs and expenses thereof
(including the reasonable attorneys' fees and disbursements
incurred by the Agent) and then to the payment of the other
Secured Obligations. Any requirement of reasonable notice shall be
met if the Agent sends such notice to the Pledgor by registered or
certified mail, at least 5 days prior to the date of sale,
disposition or other event giving rise to the required notice. The
Agent or any Bank may be the purchaser at any such sale. The
Pledgor expressly authorizes such sale or sales of the Pledged
Stock in advance of and to the exclusion of any sale or sales of or
other realization upon any other collateral securing indebtedness
or other obligations owed to the Agent or any Bank. The Agent
shall be under no obligation to preserve rights against prior
parties.
(b) The Pledgor hereby waives as to the Agent and the Banks
any right of subrogation or marshalling of such stock and other
collateral for indebtedness or other obligations owed to the Agent
or any Bank. To this end, the Pledgor hereby expressly agrees that
any such collateral or other security of the Pledgor or any other
party which the Agent or any Bank may hold, or which may come to
any of them or their possession, may be dealt with in all respects
and particulars as though this Pledge Agreement were not in
existence. The Pledgor agrees and acknowledges that because of
applicable securities laws, the Agent may not be able to effect a
public sale of the Pledged Stock and sales at a private sale may be
on terms less favorable than if such securities were sold at a
public sale and may be at a price less favorable than a public
sale. The Pledgor agrees that all such private sales made under
the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
5. Additional Remedies; Irrevocable Proxy. (a) Upon the
occurrence of any Event of Default, the Agent also shall have the
right to vote the Pledged Stock on all questions after giving
notice to the Pledgor of the Agent's election to exercise such
right. In the absence of any such Event of Default, the Pledgor
shall have the right to vote the Pledged Stock on all questions,
provided that voting by the Pledgor of the Pledged Stock shall be
in conformity with performance of the obligations of the Pledgor
under the Operative Documents.
(b) Whenever an Event of Default has occurred, the Agent
may transfer into its name, or into the name of its nominee or
nominees, any or all of the Pledged Stock and, as provided above,
may vote any or all of the Pledged Stock (whether or not so
transferred) and may otherwise act with respect thereto as though
it were the outright owner thereof, the Pledgor hereby irrevocably
constituting and appointing the Agent as the proxy and attorney-in-
fact of the Pledgor, with full power of substitution, to do so.
(c) In furtherance of the foregoing, it is acknowledged
that the Agent may vote the Pledged Stock to remove the directors
and officers of the Pledged Subsidiary or any of them, and to elect
new directors and officers of the Pledged Subsidiary, who
thereafter shall manage the affairs of the Pledged Subsidiary,
operate its properties and carry on its business and otherwise take
any action with respect to the business, properties and affairs of
the Pledged Subsidiary which such new directors shall deem
necessary or appropriate, including, but not limited to, the
maintenance, repair, renewal or alteration of any or all of the
properties of the Pledged Subsidiary, the leasing, subleasing, sale
or other disposition of any or all of such properties, the
borrowing of money on the credit of the Pledged Subsidiary, and the
employment of attorneys, agents or other employees deemed by such
new directors to be necessary for the proper operation, conduct,
winding up or liquidation of the business, properties and affairs
of the Pledged Subsidiary, and all revenues from the operation,
conduct, winding up or liquidation of the business, properties and
affairs of the Pledged Subsidiary after the payment of expenses
thereof shall be applied to the payment of the Secured Obligations.
(d) The Pledgor agrees that the proxy granted in this
Section 5 is coupled with an interest and is and shall be both
valid and irrevocable so long as the Pledged Stock is subject to
this Pledge Agreement. The Pledgor further acknowledges that the
terms of said proxy may exceed three years from the date hereof.
6. Remedies Cumulative. No right or remedy conferred upon or
reserved to the Agent or any Bank under any Operative Document is
intended to be exclusive of any other right or remedy, and every
right and remedy shall be cumulative in addition to every other
right or remedy given hereunder or now or hereafter existing under
any applicable law. Every right and remedy of the Agent or any
Bank under any Operative Document or under applicable law may be
exercised from time to time and as often as may be deemed expedient
by the Agent or such Bank. To the extent that it lawfully may, the
Pledgor agrees that it will not at any time insist upon, plead, or
in any manner whatever claim or take any benefit or advantage of
any applicable present or future stay, extension or moratorium law,
which may affect observance or performance of any provisions of any
Operative Document; nor will it claim, take or insist upon any
benefit or advantage of any present or future law providing for the
valuation or appraisal of any security for its obligations under
any Operative Document prior to any sale or sales thereof which may
be made under or by virtue of any instrument governing the same;
nor will it, after any such sale or sales, claim or exercise any
right under any applicable law to redeem any portion of such
security so sold.
7. Expenses. The Pledgor agrees to pay and reimburse the
Agent and each Bank for, and indemnify and hold the Agent and each
Bank harmless against, all costs, expenses, taxes and fees
(including reasonable attorneys' fees and disbursements) and any
liability incurred in connection with the administration and
enforcement of this Pledge Agreement, including without limitation
the assignment, transfer and delivery of the Pledged Stock to the
Pledgor pursuant to Section 13. Such undertaking of the Pledgor
shall survive the termination of this Pledge Agreement.
8. Conduct No Waiver. No waiver of default shall be effective
unless in writing executed by the Agent and waiver of any default
or forbearance on the part of the Agent in enforcing any of its
rights under this Pledge Agreement shall not operate as a waiver of
any other default or of the same default on a future occasion or of
such right.
9. Headings; Definitions. The headings of the various
subdivisions hereof are for convenience of reference only and shall
in no way modify any of the terms or provisions hereof.
Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Guaranty.
10. Notices. All notices, demands, requests, consents and
other communications hereunder shall be in writing and shall be
delivered or sent to the Pledgor at Suite 600 North, 222 S. 15th
Street, Omaha, Nebraska, Attention: William J. Gerber, Facsimile
No. (402) 345-9190, and to the Agent at 611 Woodward Avenue,
Detroit, Michigan, Attention: National Banking Division,
Facsimile No. (313) 225-2649, or to such other address as may be
designated by the Pledgor or the Agent by notice to the other. All
notices and other communications shall be deemed to have been given
at the time of actual delivery thereof to such address, or if sent
by the Agent to the Pledgor by certified or registered mail,
postage prepaid, to such address, on the fifth day after mailing.
11. Amendments. None of the terms and provisions of this
Pledge Agreement may be modified or amended in any way except by an
instrument in writing executed by the Pledgor and the Agent.
12. Severability. If any one or more provisions of this Pledge
Agreement should be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected,
impaired or prejudiced thereby. If at any time any portion of
the Secured Obligations shall be determined by a court of competent
jurisdiction to be invalid, unenforceable or avoidable, the
remaining portion of the Secured Obligations shall not in any way
be affected, impaired or prejudiced thereby and all Pledged Stock
pledged hereunder shall continue to secure, to the fullest extent
permitted by law, such remaining portion of the Secured
Obligations.
13. Successors and Assigns; Termination. This Pledge Agreement
shall create a continuing security interest in the Pledged Stock
and shall (a) remain in full force and effect until full and final
payment and performance of the Secured Obligations and the
termination or expiration of all lending facilities provided by the
Banks or any of them to the Company and the Pledgor and of all
letters of credit, bankers' acceptances and guarantees, the
obligations of the Company or the Pledgor in respect of which
constitute part of the Secured Obligations, (b) be binding upon the
Pledgor, its successors and assigns, and (c) inure, together with
the rights and remedies of the Agent hereunder, to the benefit of
the Agent and the Banks and their successors, transferees and
assigns. Upon the full and final payment and performance of the
Secured Obligations and the termination or expiration of all such
lending facilities, letters of credit, bankers' acceptances and
guarantees, the security interest granted hereby shall terminate
and all rights to the Pledged Stock shall revert to the Pledgor.
Upon any such termination, the Agent shall assign, transfer and
deliver without recourse and without warranty the Pledged Stock to
the Pledgor (and any property received in respect thereof) as has
not theretofore been sold or otherwise applied pursuant to the
provisions of this Pledge Agreement; provided, however, that this
Pledge Agreement shall continue to be effective or shall be
automatically reinstated, as the case may be, if at any time
payment, in whole or in part, of any of the Secured Obligations or
other indebtedness of the Pledgor is reduced, rescinded or must
otherwise be restored or returned by the Agent or any of the Banks
upon the bankruptcy, insolvency, dissolution, liquidation or
reorganization of the Pledgor or upon or as a result of the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to the Pledgor or its property or
otherwise.
14. Governing Law; Submission to Jurisdiction; Waivers. This
Pledge Agreement is a contract made under, and shall be governed by
and construed in accordance with, the laws of the State of Michigan
applicable to contracts made and to be per formed entirely within
such State and without giving effect to choice of law principles of
such State. The Pledgor further agrees that any legal action or
proceeding with respect to this Pledge Agreement or any Operative
Document or the transactions contemplated hereby may be brought in
any court of the State of Michigan, or in any court of the United
States of America sitting in Michigan, and the Pledgor hereby
submits to and accepts generally and unconditionally the non-
exclusive jurisdiction of those courts with respect to its person
and property, and irrevocably consents to the service of process in
connection with any such action or proceeding by personal delivery
to the Pledgor or by the mailing thereof by registered or certified
mail, postage prepaid to the Pledgor at its address set forth in
Section 10. Nothing in this Section shall affect the right of the
Agent to serve process in any other manner permitted by law or
limit the right of the Agent to bring any such action or proceeding
against the Pledgor or property in the courts of any other
jurisdiction. The Pledgor hereby irrevocably waives any objection
to the laying of venue of any such suit or proceeding in the above
described courts.
15. WAIVER OF JURY TRIAL. THE AGENT AND THE BANKS, IN
ACCEPTING THIS PLEDGE AGREEMENT, AND THE PLEDGOR, AFTER CONSULTING
OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF
THIS PLEDGE AGREEMENT OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY
OF THE TRANSACTIONS CONTEMPLATED BY THIS PLEDGE AGREEMENT OR ANY
COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF ANY OF THEM. NONE OF THE AGENT, THE BANKS AND THE
PLEDGOR SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE,
ANY SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY
OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN
WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED
IN ANY RESPECT OR RELINQUISHED BY THE AGENT, ANY BANK OR THE
PLEDGOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF THEM.
IN WITNESS WHEREOF, the Pledgor has caused this Pledge
Agreement to be duly executed as of the day and year first above
written.
THE REDLAND GROUP, INC.
By:_________________________________
Its:_____________________________
<PAGE>
EXHIBIT G
INTERCOMPANY FEDERAL INCOME TAX ALLOCATION AGREEMENT
<PAGE>
EXHIBIT H
SUBROGATION AND CONTRIBUTION AGREEMENT
THIS SUBROGATION AND CONTRIBUTION AGREEMENT, dated as
of July __, 1995 (this "Agreement"), is by and among ACCEPTANCE
INSURANCE HOLDINGS INC., a Nebraska corporation, and THE REDLAND
GROUP, INC., an Iowa corporation (collectively the "Guarantors"
and individually a "Guarantor"), and ACCEPTANCE INSURANCE
COMPANIES INC., a Nebraska corporation (the "Borrower").
INTRODUCTION
A. The Borrower, the banks party thereto
(collectively the "Banks" and individually a "Bank"), NBD Bank, a
Michigan banking corporation, as agent (in such capacity, the
"Agent") for the Banks, and the co-agents party thereto have
entered into the Credit Agreement, dated as of July __, 1995 (as
amended, supplemented, extended, restated or otherwise modified
from time to time, the "Credit Agreement"), pursuant to which the
Banks may, subject to the terms and conditions thereof, from time
to time extend credit to the Borrower. Each of the Guarantors
has guaranteed the payment of all indebtedness, obligations and
liabilities of the Borrower to the Banks under the Credit
Agreement (the "Guaranteed Obligations") pursuant to a separate
Guaranty Agreement of even date with the Credit Agreement (each,
as amended, supplemented, extended, restated or otherwise
modified from time to time, a "Guaranty").
B. The Guarantors wish to enter into this Subrogation
and Contribution Agreement with the Borrower to effect an
equitable sharing of their risk in guaranteeing the Guaranteed
Obligations.
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Subrogation and Contribution. If either Guarantor
makes a payment in respect of the Guaranteed Obligations it shall
be subrogated to the rights of the payee against the Borrower
with respect to such payment and shall have the rights of
contribution set forth below against the other Guarantor;
provided that such Guarantor shall not enforce its rights to any
payment by way of subrogation or by exercising its right of
contribution until all the Guaranteed Obligations shall have been
paid in full. If either Guarantor makes a payment in respect of
the Guaranteed Obligations that is smaller in proportion to its
Payment Share (as hereinafter defined) than the payment made by
the other Guarantor in respect of the Guaranteed Obligations is
in proportion to the amount of its Payment Share, the Guarantor
making such proportionately smaller payment shall, when permitted
by the preceding sentence, pay to the other Guarantor an amount
such that the net payments made by the Guarantors in respect of
the Guaranteed Obligations shall be shared between the Guarantors
pro rata in proportion to their respective Payment Shares. If
either Guarantor receives any payment by way of subrogation that
is greater in proportion to the amount of its Payment Share than
the payment received by the other Guarantor is in proportion to
the amount of its Payment Share, the Guarantor receiving such
proportionately greater payment shall, when permitted by the
second preceding sentence, pay to the other Guarantor an amount
such that the subrogation payments received by the Guarantors
shall be shared among the Guarantors pro rata in proportion to
their respective Payment Shares. Notwithstanding anything to the
contrary contained in this paragraph or in this Agreement, no
liability or obligation of any Guarantor that shall accrue
pursuant to this Agreement shall be paid nor shall it be deemed
owed pursuant to this Agreement until all of the Guaranteed
Obligations shall be paid in full.
For purposes hereof, the "Payment Share" of each
Guarantor shall be the sum of (a) the aggregate proceeds of the
Guaranteed Obligations received by such Guarantor (and, if
received subject to a repayment obligation, remaining unpaid on
the Determination Date, as hereinafter defined), plus (b) the
product of (i) the aggregate Guaranteed Obligations remaining
unpaid on the date such Guaranteed Obligations become due and
payable in full, whether by stated maturity, acceleration, or
otherwise (the "Determination Date") reduced by the amount of
such Guaranteed Obligations attributed to Guarantors pursuant to
clause (a) above, times (ii) a fraction, the numerator of which
is such Guarantor's net worth on the effective date of this
Agreement (determined as of the end of the immediately preceding
fiscal reporting period of the Guarantor), and the denominator of
which is the aggregate net worth of both Guarantors on such
effective date.
2. Representations and Warranties. Each party hereto
represents and warrants to each other party hereto and to its
successors and assigns that:
(a) the execution, delivery and performance by
such party of this Agreement are within such party's corporate
powers, have been duly authorized by all necessary corporate
action, require no action by or in respect of, or filing with,
any governmental body, agency or official, do not contravene, or
constitute a default under, any provision of applicable law or
regulation or of the articles of incorporation or other charter
document or bylaws of such party, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon such
party, and do not and will not result in the creation or
imposition of any lien, security interest or other charge or
encumbrance on any asset of such party; and
(b) this Agreement constitutes a legal, valid and
binding obligation of such party, enforceable against such party
in accordance with its terms.
3. No Waivers, Etc. No failure or delay by either
Guarantor in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The
rights and remedies herein provided shall be cumulative and non-
exclusive of any rights or remedies provided by law.
4. Amendment or Waiver. Any provision of this
Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the parties
hereto, is consented to in writing by the Agent and complies with
the terms of the Guaranty.
5. Binding Effect. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns.
6. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Michigan.
7. Counterpart Execution. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall
become effective as to each party hereto when a counterpart
hereof shall have been signed by such party.
8. Delivery of Agreement to the Agent. An executed
copy of this Agreement shall be delivered to the Agent in support
of the Guaranty.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
GUARANTORS: ACCEPTANCE INSURANCE HOLDINGS INC.
By:__________________________________
Its:____________________________
<PAGE>
THE REDLAND GROUP, INC.
By:___________________________________
Its:_____________________________
BORROWER: ACCEPTANCE INSURANCE COMPANIES INC.
By:___________________________________
Its:_____________________________
<PAGE>
EXHIBIT I
EXTENSION REQUEST
_________, 19___
NBD Bank, as Agent
611 Woodward Avenue
Detroit, Michigan 48226
Attention: National Banking Division
Re: Acceptance Insurance Companies, Inc.
Ladies and Gentlemen:
This Extension Request is delivered to you pursuant to
Section 2.11 of the Credit Agreement, dated as of July __, 1995,
as amended or modified (the "Credit Agreement"), by and among
Acceptance Insurance Companies Inc., a Delaware corporation (the
"Company"), the banks party thereto, you, as agent for the banks,
and the co-agents party thereto. Capitalized terms used but not
defined herein shall have the respective meanings ascribed
thereto in the Credit Agreement.
The Company hereby requests that the Revolving Credit
Termination Date be extended from ______________, 199__ to
_________________, 199___.
ACCEPTANCE INSURANCE COMPANIES INC.
By:____________________________________
Its:______________________________
<PAGE>
EXHIBIT J
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of
July __, 1995 (as amended, supplemented, extended or otherwise
modified from time to time, the "Credit Agreement"), by and among
ACCEPTANCE INSURANCE COMPANIES INC., a Delaware corporation, the
banks party thereto (the "Banks"), NBD BANK, a Michigan banking
corporation, as agent (in such capacity, the "Agent") for the
Banks, and the co-agents party thereto. Terms defined in the
Credit Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on
Schedule 1 agree as follows:
1. The Assignor hereby sells and assigns (without
recourse) to the Assignee, and the Assignee hereby purchases and
assumes from the Assignor, an interest in and to the Assignor's
rights and obligations under the Credit Agreement as of the
Effective Date (as hereinafter defined) equal to the percentage
interest specified on Schedule 1 of all of the Assignor's
outstanding rights and obligations under the Credit Agreement.
After giving effect to such sale and assignment, the Assignee's
[Line of Credit Commitment and] Revolving Credit Commitment and
the amount of the [Line of Credit Loans and] Revolving Credit
Loans owing to the Assignee will be as set forth on Schedule 1.*
2. The Assignor (i) represents and warrants that it
is the legal and beneficial owner of the interest being assigned
by it hereunder and that such interest is free and clear of any
adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the
Credit Agreement or any instrument or other document furnished
pursuant thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of the Credit
Agreement or any instrument or other document furnished pursuant
thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the performance or observance by
the Company of any of its obligations under the Credit Agreement
or any instrument or other document pursuant thereto; and (iv)
attaches the [Line of Credit Note and] Revolving Credit Note held
by the Assignor and requests that the Agent issue [a new Line of
Credit Note and] a new Revolving Credit Note payable to the order
of the Assignee.
3. The Assignee (i) confirms that it has received a
copy of the Credit Agreement, together with copies of the
financial statements referred to in Section 4.6 thereof and such
other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor
or any other Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit
Agreement; (iii) appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and
discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (iv) agrees that
it will perform in accordance with the terms of the Credit
Agreement all of the obligations that are required to be
performed by it as a Bank; and (v) if the Assignee is organized
under the laws of a jurisdiction outside of the United States,
attaches the forms prescribed by the Internal Revenue Service of
the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding
taxes with respect to all payments to be made to the Assignee
under the Credit Agreement and the Notes and such other documents
as are necessary to indicate that all such payments are subject
to such taxes at a rate reduced by an applicable tax treaty.
4. Following the execution of this Assignment and
Acceptance, it will be delivered to the Agent for acceptance and
recording by the Agent. The effective date for this Assignment
and Acceptance (the "Effective Date") shall be the date of accep-
tance hereof by the Agent, unless otherwise specified on Schedule
1.
5. Upon consent hereto by the Company and the Agent
and such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Bank thereunder
and (ii) the Assignor shall, to the extent provided in this
Assignment and Acceptance, relinquish its rights and be released
from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent,
from and after the Effective Date, the Agent shall make all
payments under the Credit Agreement and the Notes in respect of
the interest assigned hereby (including, without limitation, all
payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make
all appropriate adjustments in payments under the Credit
Agreement and the Notes for periods prior to the Effective Date
directly between themselves.
7. This Assignment and Acceptance shall be governed
by, and construed in accordance with, the laws of the State of
Michigan.
8. This Assignment and Acceptance may be executed in
any number of counterparts and by different parties hereto in
separate counterparts, each of which when executed shall be
deemed to be an original and all of which taken together shall
constitute one and the same agreement. Delivery of an executed
Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have
caused Schedule 1 to this Assignment and Acceptance to be
executed by their officers thereunto duly authorized as of the
date specified thereon.
*Bracketed references to Line of Credit facility to be used if
Line of Credit Loans are outstanding.<PAGE>
<TABLE>
<CAPTION> SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
WITH RESPECT TO
ACCEPTANCE INSURANCE COMPANIES INC.
CREDIT AGREEMENT
<S> <C>
Percentage Interest of Assignor's Commitment[s]
assigned: __________%
[Assignee's Line of Credit Commitment: $__________]
Assignee's Revolving Credit Commitment: $__________
[Aggregate outstanding principal amount
of Line of Credit Loans assigned: $__________]
Aggregate outstanding principal amount of
Revolving Credit Loans assigned: $__________
[Principal amount of Line of Credit Note
payable to Assignee: $__________]
Principal amount of Revolving Credit Note
payable to Assignee: $__________
[Principal amount of Line of Credit Note
payable to Assignor: $__________]
Principal amount of Revolving Credit Note
payable to Assignor: $__________
Effective Date (if other than date
of acceptance by Agent): ___________
</TABLE>
[NAME OF ASSIGNOR], as Assignor
By: ___________________________
Its:
Dated: _____________, 19__
[NAME OF ASSIGNEE], as Assignee
By:____________________________
Its:
<PAGE>
Address for Notices:
_______________________________
_______________________________
_______________________________
Attention:_____________________
Telex No.:_____________________
Answerback:____________________
Facsimile No.:_________________
Facsimile Confirmation
No.:______________________
Consented to and Consented to this ____ day
accepted this ___ day of ________________ , 19__:
of ___________, 19__:
NBD Bank, as Agent ACCEPTANCE INSURANCE COMPANIES INC.
By:________________________ By: ___________________________
Its: ___________________ Its: ______________________
<TABLE>
<CAPTION>
ACCEPTANCE INSURANCE COMPANIES INC.
COMPUTATION OF INCOME PER SHARE
for the three months and six months ended June 30, 1995 and 1994
(in thousands, except per share data)
(unaudited)
Exhibit 11
Three Months Six Months
--------------- ----------------
1995 1994(a) 1995 1994(a)
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
Net income $ 1,499 $ 4,954 $ 4,482 $ 6,923
Adjustment for interest
expense reduction and
interest income from
assumed proceeds -- 556 -- 1,163
------- ------- ------- -------
Adjusted net income $ 1,499 $ 5,510 $ 4,482 $ 8,086
======= ======= ======= =======
Weighted average number
of shares outstanding 14,856 9,983 14,855 9,848
Adjustment for stock options 128 -- 137 --
Adjustment for shares issuable -- 3,497 -- 3,495
------- ------- ------- -------
Adjusted weighted average
number of shares outstanding 14,984 13,480 14,992 13,343
======= ======= ======= =======
Primary earning per share $.10 $.41 $.30 $.61
======= ======= ======= =======
FULLY DILUTED EARNINGS
PER SHARE:
Net income $ 1,499 $ 4,954 $ 4,482 $ 6,923
Adjustment for interest
expense reduction and
interest income from
assumed proceeds -- 508 -- 1,059
------- ------- ------- -------
Adjusted net income $ 1,499 $ 5,462 $ 4,482 $ 7,982
======= ======= ======= =======
Weighted average number
of shares outstanding 15,096 10,223 15,095 10,088
Adjustment for stock options 128 -- 137 --
Adjustment for shares issuable -- 3,449 -- 3,423
------- ------- ------- -------
Adjusted weighted average
number of shares outstanding 15,224 13,672 15,232 13,511
======= ======= ======= =======
Fully diluted earnings per
share $.10 $.40 $.29 $.59
======= ======= ======= =======
<FN>
(a) As of June 30, 1994, the number of shares of the Company's
common stock obtainable of exercise of outstanding options and
warrants in the aggregate exceeds 20% of the common shares
outstanding. Therefore, the method of calculating earnings per
share has been adjusted accordingly as provided by APB Opinion
No. 15.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<DEBT-HELD-FOR-SALE> 220,170
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 22,529
<MORTGAGE> 1,747
<REAL-ESTATE> 3,881
<TOTAL-INVEST> 311,526
<CASH> 1,352
<RECOVER-REINSURE> 12,958
<DEFERRED-ACQUISITION> 22,677
<TOTAL-ASSETS> 623,601
<POLICY-LOSSES> 266,812
<UNEARNED-PREMIUMS> 116,901
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 29,000
<COMMON> 6,054
0
0
<OTHER-SE> 167,415
<TOTAL-LIABILITY-AND-EQUITY> 623,601
113,689
<INVESTMENT-INCOME> 9,238
<INVESTMENT-GAINS> 1,033
<OTHER-INCOME> 1,642
<BENEFITS> 79,119
<UNDERWRITING-AMORTIZATION> (2,843)
<UNDERWRITING-OTHER> 38,851
<INCOME-PRETAX> 6,655
<INCOME-TAX> 2,173
<INCOME-CONTINUING> 4,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,482
<EPS-PRIMARY> .30
<EPS-DILUTED> .29
<RESERVE-OPEN> 0<F1>
<PROVISION-CURRENT> 0<F1>
<PROVISION-PRIOR> 0<F1>
<PAYMENTS-CURRENT> 0<F1>
<PAYMENTS-PRIOR> 0<F1>
<RESERVE-CLOSE> 0<F1>
<CUMULATIVE-DEFICIENCY> 0<F1>
<FN>
<F1>This amount is presented on an annual basis. See 12/31/94 10-K for the most
recent reported amounts.
</FN>
</TABLE>
