<PAGE> 1
EXHIBIT 10.43
================================================================================
SECOND AMENDED AND RESTATED LOAN AGREEMENT
between
UICI,
a Delaware Corporation
and
LM FINANCE LLC,
a Nevada Limited Liability Company
Dated as of
July 27, 2000
================================================================================
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
ARTICLE 1 Definitions...................................................................................1
Section 1.1 Definitions.................................................................................1
Section 1.2 Other Definitional Provisions...............................................................8
Section 1.3 Accounting Terms and Determinations.........................................................8
ARTICLE 2 The Loan......................................................................................8
Section 2.1 The Loan....................................................................................9
Section 2.2 Use of Proceeds and Other Actions...........................................................9
Section 2.3 The Notes...................................................................................9
Section 2.4 Repayment of the Loan.......................................................................9
Section 2.5 Interest...................................................................................10
Section 2.6 Certain Notices............................................................................10
Section 2.7 Computations...............................................................................10
Section 2.8 Method of Payment..........................................................................10
Section 2.9 Taxes on Payments..........................................................................10
Section 2.10 Collateral................................................................................12
ARTICLE 3 Actions of the Lender........................................................................12
Section 3.1 Actions to be Taken by the Lender at Closing Date..........................................12
Section 3.2 The Chesapeake Life Insurance Company......................................................12
ARTICLE 4 Conditions Precedent.........................................................................13
Section 4.1 Execution of Agreement.....................................................................13
ARTICLE 5 Representations and Warranties...............................................................14
Section 5.1 Corporate Existence........................................................................14
Section 5.2 Financial Statements.......................................................................14
Section 5.3 Corporate Action; No Breach................................................................15
Section 5.4 Operation of Business......................................................................15
Section 5.5 Litigation and Judgments...................................................................15
Section 5.6 Rights in Properties; Liens................................................................15
Section 5.7 Enforceability.............................................................................15
Section 5.8 Approvals..................................................................................15
Section 5.9 Debt.......................................................................................15
Section 5.10 Taxes.....................................................................................16
Section 5.11 Margin Securities.........................................................................16
Section 5.12 ERISA.....................................................................................16
Section 5.13 Disclosure................................................................................16
Section 5.14 Subsidiaries; Capitalization..............................................................16
Section 5.15 Agreements................................................................................17
Section 5.16 Compliance with Laws......................................................................17
Section 5.17 Investment Company Act....................................................................17
Section 5.18 Public Utility Holding Company Act........................................................17
Section 5.19 Environmental Matters.....................................................................17
Section 5.20 Labor Disputes and Acts of God............................................................17
Section 5.21 Year 2000 Compliance......................................................................17
Section 5.22 Collateral................................................................................18
ARTICLE 6 Positive Covenants...........................................................................18
Section 6.1 Reporting Requirements.....................................................................18
Section 6.2 Maintenance of Existence; Conduct of Business..............................................19
Section 6.3 Maintenance of Properties..................................................................19
</TABLE>
INDICES TO EXHIBITS AND SCHEDULES - Solo Page
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<TABLE>
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Section 6.4 Taxes and Claims...........................................................................19
Section 6.5 Insurance..................................................................................19
Section 6.6 Inspection Rights..........................................................................19
Section 6.7 Keeping Books and Records..................................................................20
Section 6.8 Compliance with Laws.......................................................................20
Section 6.9 Compliance with Agreements.................................................................20
Section 6.10 Further Assurances........................................................................20
Section 6.11 Year 2000 Compliance......................................................................20
ARTICLE 7 Negative Covenants...........................................................................20
Section 7.1 Debt.......................................................................................20
Section 7.2 Limitation on Liens........................................................................20
Section 7.3 Mergers, Etc...............................................................................22
Section 7.4 Investments................................................................................22
Section 7.5 Transactions With Affiliates...............................................................23
Section 7.6 Disposition of Property....................................................................23
Section 7.7 Lines of Business..........................................................................24
Section 7.8 Restrictions on Insurance Subsidiaries.....................................................24
Section 7.9 Prepayment of Debt.........................................................................24
Section 7.10 Use of Proceeds of Refund Claim...........................................................24
ARTICLE 8 Financial Covenants..........................................................................24
Section 8.1 Financial Covenant.........................................................................24
ARTICLE 9 Default......................................................................................24
Section 9.1 Events of Default..........................................................................24
Section 9.2 Remedies...................................................................................26
Section 9.3 Performance by the Lender..................................................................27
Section 9.4 Continuance of Default.....................................................................27
Section 9.5 Setoff.....................................................................................27
ARTICLE 10 Miscellaneous...............................................................................27
Section 10.1 Expenses..................................................................................27
Section 10.2 Indemnification...........................................................................27
Section 10.3 Limitation of Liability...................................................................28
Section 10.4 No Duty...................................................................................28
Section 10.5 No Fiduciary Relationship.................................................................28
Section 10.6 Equitable Relief..........................................................................28
Section 10.7 No Waiver; Cumulative Remedies............................................................29
Section 10.8 Participations............................................................................29
Section 10.9 Survival..................................................................................29
Section 10.10 Entire Agreement; Amended and Restatement; Release.......................................29
Section 10.11 Amendments...............................................................................30
Section 10.12 Maximum Interest Rate....................................................................30
Section 10.13 Notices..................................................................................31
Section 10.14 Governing Law; Submission to Jurisdiction................................................31
Section 10.15 Counterparts.............................................................................31
Section 10.16 Severability.............................................................................31
Section 10.17 Headings.................................................................................31
Section 10.18 Construction.............................................................................31
Section 10.19 Independence of Covenants................................................................31
Section 10.20 Waiver of Jury Trial.....................................................................31
Section 10.21 Confidentiality..........................................................................32
Section 10.22 Waiver of Defaults.......................................................................32
</TABLE>
TABLE OF CONTENTS - Page ii
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description of Exhibit Section
------- ---------------------- -------
<S> <C> <C>
"A" Form of Series A Note 2.2
"B" Form of Series B Note 2.2
"C" Matters to be Addressed by Opinion of Counsel 4.1(r)
"D" Form of Pledge Agreement 1.1
"E" Form of Release 1.1
"F" Form of USI Release 1.1
"G" Form of Compliance Certificate 1.1
</TABLE>
INDEX TO SCHEDULES
<TABLE>
<CAPTION>
Schedule Description of Schedule
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<S> <C>
7.1 Existing Debt
7.2 Existing Liens; Restrictions on Subsidiaries
7.4 Existing Investments
</TABLE>
TABLE OF CONTENTS - Page iii
<PAGE> 5
SECOND AMENDED AND RESTATED LOAN AGREEMENT
This SECOND AMENDED AND RESTATED LOAN AGREEMENT (this "Agreement"),
dated as of July 27, 2000, is between UICI, a Delaware corporation (the
"Borrower") and LM Finance, LLC, a Nevada limited liability company (the
"Lender").
RECITALS. On March 14, 2000, the Borrower entered into an Amended and
Restated Loan Agreement, dated as of 10 March 2000, among the Borrower, Bank of
America, Fleet National Bank ("Fleet") and Bank One, NA ("BONA" and collectively
with Bank of America and Fleet, the "Banks"), and Bank of America, as
Administrative Agent (the "Agent"), BONA, as Documentation Agent, and Fleet, as
co-agent (the "Existing Agreement"). At the effective time of the Existing
Agreement, the aggregate outstanding amount of the Loans made by the Banks
pursuant to the Existing Agreement was $25,000,000.00. After the Borrower made
certain payments to the Banks, the outstanding principal amount of the loans
under the Existing Agreement owed to the Banks by the Borrower (collectively
the, "Bank Loans") was $6,000,000. On June 28, 2000, the Lender acquired the
rights and interests of the Banks under the Existing Agreement and the documents
related thereto, the Bank Loans, the promissory notes evidencing the
indebtedness of the Borrower to the Banks under the Existing Agreement, and the
rights of the Banks in the collateral in which the Borrower and other Persons,
on the Borrower's behalf, had granted security interests to the Banks. The
Borrower issued a promissory note on that date to the Lender in the amount of
$6,000,000.00 in substitution for the notes that the Lender had acquired from
the Banks (the "Existing Note").
On March 14, 2000, the Lender extended a loan in the amount of
$70,000,000.00 (the "USI Loan") to UICI Sub I, Inc., a subsidiary of the
Borrower ("USI"), which loan was fully guaranteed by Borrower. The Lender, the
Borrower and USI have agreed that simultaneously with the execution of this
Agreement, on the terms and subject to the conditions to the Lender's
obligations to lend hereunder, the Lender will make an additional extension of
credit to the Borrower in the amount of $64,000,000.00, the Borrower will make a
capital contribution to USI of $64,000,000.00 out of the proceeds of that
additional extension of credit to the Borrower by the Lender hereunder, USI will
repay the USI Loan to the Lender with the proceeds of that capital contribution
and additional funds to be provided by the Borrower or USI, and the Lender will
release its security interests in all of the collateral that secures the
repayment of the USI Loan.
The Borrower and the Lender have agreed to amend and restate the
Existing Agreement to set forth the terms of and the conditions subject to which
the Lender is making the Loan made to the Borrower, and are doing so by entering
into this Agreement.
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto agree that the rights and
obligations of the Lender and the Borrower with respect to the Loan shall be and
hereby are amended and restated as herein provided in substitution for and
replacement of the Existing Agreement, such amended and restated loan agreement
to read in its entirety as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 1
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"8.75% Senior Note Agreement" means that certain Note Purchase
Agreement dated as of June 1, 1994 among the Borrower and the purchasers party
thereto relating to the Borrower's 8.75% Senior Notes due 2004, as the same may
be amended or otherwise modified from time to time.
"Additional Loan" means the Additional Secured Loan and the Series B
Loan.
"Additional Secured Loan" has the meaning specified in Section 2.1.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled by,
or is under common control with, such Person; (b) that directly or indirectly
beneficially owns or holds ten percent (10%) or more of the voting stock of such
Person; or (c) ten percent (10%) or more of the voting stock of which is
directly or indirectly beneficially owned or held by the Person in question. The
term "control" means the possession, directly or indirectly, of the power to
direct or cause direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract, or otherwise; provided,
however, in no event shall the Lender or any Affiliate of the Lender be deemed
an Affiliate of the Borrower or any of the Subsidiaries.
"Agent" has the meaning specified in the Recitals.
"Base Rate" means, for any day, the "PRIME RATE" published from time to
time in the Money Rates column of The Wall Street Journal (Central Edition);
provided, however, if the Money Rates column of The Wall Street Journal (Central
Edition) ceases to be published or otherwise does not designate a "PRIME RATE"
as of any business day, "Base Rate" means the rate of interest per annum
publicly announced by The Chase Manhattan Bank as its prime rate in effect at
its principal office in New York City; in each case each change in such rate
shall be effective from and including the Business Day such change is published
or announced, as the case may be.
"Business Day" means any day on which commercial banks are not
authorized or required to close in Dallas, Texas.
"Capital Lease Obligations" means, as to any Person, the obligations of
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property, which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP. For purposes of this Agreement, the amount of
such Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Capital Stock" means any capital stock or other ownership interests of
any Person and any interests therein or relating thereto, including without
limitation, any options, warrants or other rights to acquire any interest
therein or thereto.
"Closing Date" means July 27, 2000.
"CMO Derivative Investment" has the meaning specified in Section 7.4.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means the Series A Collateral.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 2
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"Compliance Certificate" means the Compliance Certificate relating to
the 8.75% Senior Note Agreement from the Borrower substantially in the form of
Exhibit G hereto.
"Debt" means as to any Person at any time (without duplication): (a)
all obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments; (c)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable of such Person arising in the ordinary
course of business that are not past due by more than ninety (90) days; (d) all
Capital Lease Obligations of such Person; (e) all Debt or other obligations of
others Guaranteed by such Person; (f) all obligations secured by a Lien existing
on property owned by such Person, whether or not the obligations secured thereby
have been assumed by such Person or are non-recourse to the credit of such
Person; (g) all reimbursement obligations of such Person (whether contingent or
otherwise) in respect of letters of credit, bankers' acceptances, surety or
other bonds and similar instruments; (h) all obligations of such Person to
redeem or retire shares of Capital Stock of such Person except any obligations
to repurchase common Capital Stock of the Borrower issued to officers, employees
and agents of the Borrower or its Subsidiaries pursuant to a stock option plan,
stock purchase plan, other compensation plan or other compensation arrangement
authorized by the Board of Directors of the Borrower; (i) all obligations and
liabilities of such Person under Interest Rate Protection Agreements; (j) all
liabilities of such Person in respect of unfunded vested benefits under any
Plan; (k) all obligations of such Person, contingent or otherwise, for the
payment of money under any non-compete, consulting or similar agreement or any
other similar arrangements providing for the deferred payment of the purchase
price for an acquisition; and (l) all other amounts required to be reflected as
a liability on a consolidated balance sheet of such Person in accordance with
GAAP other than accruals, taxes, time deposits and policy liabilities.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two percent
(2.0%) plus the Base Rate as in effect from time to time.
"Dollars" and "$" mean lawful money of the United States of America.
"Domestic Insurance Subsidiary" means an Insurance Subsidiary organized
under the laws of a jurisdiction located within the United States of America.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the environment,
as such laws, regulations, and requirements may be amended or otherwise modified
from time to time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business that is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as the Borrower or is under common control (within
the meaning of Section 414(c) of the Code) with the Borrower.
"Event of Default" has the meaning specified in Section 9.1.
"Existing Agreement" has the meaning specified in the Recitals hereto.
"Existing Loan" has the meaning specified in Section 2.1.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 3
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"Existing Note" has the meaning specified in the Recitals.
"Existing Pledge Agreement" means the Pledge Agreement, dated as of
March 10, 2000, made by and between the Borrower and the Agent, relating to the
pledge of shares of the Capital Stock of Mid-West and HealthAxis by the Borrower
to the Agent.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting Principles Board of
the American Institute of Certified Public Accountants and/or in statements of
the Financial Accounting Standards Board and/or their respective successors and
which are applicable in the circumstances as of the date in question. Accounting
principles are applied on a "consistent basis" when the accounting principles
applied in a current period are comparable in all material respects to those
accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory, or administrative functions of or pertaining to
government.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing the payment or
performance of any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of such Person (a) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) and (b) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect the obligee against loss
in respect thereof (in whole or in part and including without limitation, any
agreement binding a Person to make Investments in or otherwise transfer funds to
or for the benefit of another Person for purposes of assuring such other
Person's financial liquidity, assuring such other Person's compliance with the
capital adequacy requirements imposed by agreement or applicable law or
otherwise assuring such other Person's compliance with financial covenants or
other financial statement conditions); provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Material" means any material that is or becomes listed,
regulated, or addressed under any Environmental Law.
"HealthAxis" means HealthAxis.com, Inc., a Pennsylvania corporation.
"Insurance Regulatory Authority" shall mean, with respect to any
Domestic Insurance Subsidiary, the Governmental Authority of such Domestic
Insurance Subsidiary's state of domicile with whom such Domestic Insurance
Subsidiary is required to file its annual financial statement prepared in
accordance with SAP.
"Insurance Subsidiary" shall mean any Subsidiary that is authorized or
admitted to carry on or transact one or more aspects of the business of selling,
issuing or underwriting insurance or reinsurance.
"Interest Rate Protection Agreements" means, with respect to any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specified
contingencies.
"Investments" has the meaning specified in Section 7.4.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 4
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"Lender" means LM Finance, LLC, a Nevada limited liability company.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether arising
by contract, operation of law, or otherwise.
"Loan" has the meaning specified in Section 2.1.
"Loan Documents" means this Agreement, the Pledge Agreement, the
Release, the USI Release, and all promissory notes, assignments, guaranties,
security agreements, financing statements and other agreements executed and
delivered pursuant to or in connection with this Agreement, as such agreements
may be amended or otherwise modified from time to time.
"Material Adverse Effect" means the occurrence of any event or the
existence of any condition that reasonably could be expected to have a material
adverse effect on (a) the properties, prospects, business, operations, condition
(financial or otherwise), liabilities, or capitalization of the Borrower or
Mid-West, (b) the ability of the Borrower to pay and perform the Obligations
when due, or (c) the validity or enforceability of any of the Loan Documents or
the rights and remedies of the Lender thereunder. In determining whether any
individual event could reasonably be expected to result in a Material Adverse
Effect, notwithstanding that such event does not itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the cumulative
effect of such event and all other then existing events could reasonably be
expected to result in a Material Adverse Effect.
"Maximum Rate" with respect to the Lender, the maximum non-usurious
interest rate, if any, that any time or from time to time may be contracted for,
taken, reserved, charged, or received with respect to the Existing Note or the
Notes or on other amounts, if any, payable to the Lender pursuant to this
Agreement or any other Loan Document, under laws applicable to the Lender which
are presently in effect, or, to the extent allowed by law, under such applicable
laws which may hereafter be in effect and which allow a higher maximum
non-usurious interest rate than applicable laws now allow. The Maximum Rate
shall be calculated in a manner that takes into account any and all fees,
payments, and other charges in respect of the Loan Documents that constitute
interest under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the Maximum Rate
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of determining the Maximum Rate under Texas law,
the applicable rate ceiling shall be the weekly ceiling described in, and
computed in accordance with the Texas Finance Code; provided, however, that to
the extent permitted by applicable law, the Lender shall have the right to
change the applicable rate ceiling from time to time in accordance with
applicable law.
"Mid-West" means Mid-West National Life Insurance Company of Tennessee.
"Mid-West Stock" means all of the issued and outstanding shares of the
capital stock of Mid-West.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by the Borrower or
any ERISA Affiliate and which is covered by Title IV of ERISA.
"NAIC" shall mean the National Association of Insurance Commissioners,
or any successor organization.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 5
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"Notes" means the Series A Note and the Series B Note.
"Obligations" means the Series A Obligations, the Series B Obligations
and all other obligations, indebtedness, and liabilities of the Borrower to the
Lender, arising pursuant to any of the Loan Documents and not specifically
Series A Obligations or Series B Obligations, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, and all fees, costs, and
expenses (including reasonable attorney's fees) provided for in the Loan
Documents and not specifically Series A Obligations or Series B Obligations.
"Other Taxes" has the meaning specified in Section 2.10.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Person" means any individual, corporation, limited liability company,
business trust, association, company, partnership, joint venture, Governmental
Authority, or other entity.
"Plan" means any employee benefit or other plan established or
maintained by the Borrower or any ERISA Affiliate and which is covered by Title
IV of ERISA.
"Pledge Agreement" means the Amended and Restated Pledge Agreement of
even date herewith from the Borrower in favor and for the benefit of the Lender
substantially in the form of Exhibit D hereto.
"Principal Office" means the principal office of the Lender, presently
located at 2121 Precinct Line Road, Hurst, Texas 76094.
"Prohibited Transaction" means any transaction set forth in Section 406
of ERISA or Section 4975 of the Code.
"Refund Claim" means the rights of the Borrower in and to a refund of
$22,213,574 of payments made to the United States Department of the Treasury or
United States Internal Revenue Service by the Borrower in payment of federal
income taxes of the Borrower and its consolidated tax group, which rights to
such refund relate to the loss carry backs for the tax years ended December 31,
1998 and 1999.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Release" means the Release to be made between the Lender and the
Borrower in the form attached to this Agreement as Exhibit F.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA.
"SAP" means, with respect to any Domestic Insurance Subsidiary,
statutory accounting practices prescribed or permitted by the insurance laws or
regulations or the Insurance Regulatory Authority in the jurisdiction of the
domicile of such Domestic Insurance Subsidiary for the preparation of financial
statements and other financial reports by insurance companies of the same type
as such Domestic Insurance Subsidiary. Statutory accounting practices are
applied on a "consistent basis" when the practices applied in a current period
are comparable in all material respects to those practices applied in a
preceding period.
"SCS" means Specialized Card Services, Inc., a South Dakota
corporation.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 6
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"Series A Collateral" means the property described as Series A
Collateral in the Pledge Agreement.
"Series A Loan" has the meaning specified in Section 2.1.
"Series A Note" means the promissory note in the original principal
amount of $38,000,000.00 provided for by Section 2.2 hereof, in the form of
Exhibit A hereto, to be executed and delivered by the Borrower to the Lender in
connection with the consummation of the Series A Loan, and all extensions,
renewals, and modifications thereof and all substitutions therefor.
"Series A Obligations" means all obligations, indebtedness, and
liabilities of the Borrower to the Lender, arising pursuant to any of the Loan
Documents relating to the Series A Loan, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligation of the Borrower to repay the Series A Loan, interest
on the Series A Loan, and all fees, costs, and expenses (including reasonable
attorney's fees) provided for in the Loan Documents relating to the Series A
Loan.
"Series B Loan" has the meaning specified in Section 2.1.
"Series B Note" means the promissory note in the original principal
amount of $32,000,000.00 provided for by Section 2.2 hereof, in the form of
Exhibit B hereto, to be executed and delivered by the Borrower to the Lender in
connection with the consummation of the Series B Loan, and all extensions,
renewals, and modifications thereof and all substitutions therefor.
"Series B Obligations" means all obligations, indebtedness, and
liabilities of the Borrower to the Lender, arising pursuant to any of the Loan
Documents relating to the Series B Loan, now existing or hereafter arising,
whether direct, indirect, related, unrelated, fixed, contingent, liquidated,
unliquidated, joint, several, or joint and several, including, without
limitation, the obligation of the Borrower to repay the Series B Loan, interest
on the Series B Loan, and all fees, costs, and expenses (including reasonable
attorney's fees) provided for in the Loan Documents relating to the Series B
Loan.
"Subsidiary" means any corporation or other entity of which at least a
majority of the outstanding shares of stock or other ownership interests having
by the terms thereof ordinary voting power to elect a majority of the board of
directors (or Persons performing similar functions) of such corporation or
entity (irrespective of whether or not at the time, in the case of a
corporation, stock of any other class or classes of such corporation shall have
or might have voting power by reason of the happening of any contingency) is at
the time directly or indirectly owned or controlled by the Borrower or one or
more of the Subsidiaries or by the Borrower and one or more of the Subsidiaries.
"Taxes" has the meaning specified in Section 2.10.
"Term" means the period from and including the Closing Date through and
including the earlier to occur of (a) the Termination Date and (b) such date
prior to the Termination Date on which the Obligations are paid in full.
"Termination Date" means January 1, 2002.
"Transactions" means the transactions contemplated by this Agreement,
including without limitation the making of the Additional Loan.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 7
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"USI" means UICI Sub I, Inc., a Delaware corporation.
"USI Collateral" means the 3,000,000.00 shares of the Class A Common
Stock of, and 51,000,000.00 shares of the Class B Common Stock of, National
Motor Clubs of America, Inc. and the 2,000,000.00 shares of HealthAxis.com
common stock pledged to the Lender to secure the USI Debt.
"USI Debt" means the principal and accrued but unpaid interest owing by
USI to the Lender pursuant to the USI Note.
"USI Note" means that certain promissory note in the original principal
amount of $70,000,000.00 dated as of March 14, 2000 by USI to the Lender.
"USI Release" means the Termination Agreement and Release to be made
among the Lender, the Borrower, USI and SCS in the form attached to this
Agreement as Exhibit G.
"Year 2000 Ready" has the meaning specified in Section 5.21.
"Year 2000 Problem" has the meaning specified in Section 5.21.
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas from time to time.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement. Terms
used herein that are defined in the UCC, unless otherwise defined herein, shall
have the meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations. Except as otherwise
expressly provided herein with respect to clause (g) of Section 7.4, Section 8.1
and the separate financial statements of the Domestic Insurance Subsidiaries,
all accounting terms used herein shall be interpreted, and all financial
statements and certificates and reports as to financial matters required to be
delivered to the Lender hereunder shall be prepared, in accordance with GAAP, on
a basis consistent with those used in the preparation of the financial
statements referred to in Section 5.2 hereof. All calculations made for the
purposes of determining compliance with the provisions of this Agreement (except
the provisions of clause (g) of Section 7.4 and Section 8.1) shall be made by
application of GAAP, on a basis consistent with those used in the preparation of
the financial statements referred to in Section 5.2 hereof. The calculations
made for the purposes of determining compliance with clause (g) of Section 7.4
and Section 8.1 shall be made by application of SAP, on a basis consistent with
those used in the preparation of the Mid-West financial statements referred to
in Section 5.2. All separate financial statements of Mid-West delivered under
Section 6.1 shall be prepared in accordance with SAP, on a basis consistent with
those used in the preparation of the Mid-West financial statements referred to
in Section 5.2. To enable the ready and consistent determination of compliance
by the Borrower with its obligations under this Agreement, the Borrower will not
change the last day of its fiscal year from December 31, or the last days of the
first three fiscal quarters of the Borrower in each of its fiscal years from
March 31, June 30, and September 30, respectively.
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ARTICLE 2
The Loan
Section 2.1 The Loan. On the date of execution of this Agreement, the
outstanding principal amount of the Loan under this Agreement shall equal
$6,000,000.00 (the "Existing Loan"). On the Closing Date, subject to the terms
and conditions of this Agreement (including the satisfaction of the conditions
in Article IV), the Lender shall lend to the Borrower, and the Borrower shall
borrow from the Lender, (i) another $32,000,000.00 (the "Additional Secured
Loan"), which loan, together with the Existing Loan, shall constitute the
"Series A Loan" and be evidenced by the Series A Note, which promissory note
shall be a replacement promissory note for the Existing Note and which shall
have the benefits of the Pledge Agreement and the Collateral as described in
Section 2.14, and (ii) another $32,000,000.00, which loan shall constitute the
"Series B Loan" and shall be evidenced by the Series B Note.
Section 2.2 Use of Proceeds and Other Actions. Upon the funding of the
Additional Loan on the Closing Date, the Borrower agrees that it shall make a
capital contribution to USI in the amount of the proceeds of such Additional
Loan on the Closing Date and shall cause USI to repay the USI Debt in full on
the Closing Date. For ease of administration, the Borrower hereby irrevocably
instructs and directs the Lender, upon making the Additional Loan, to credit the
proceeds of the Additional Loan to the account of USI on behalf of the Borrower
and apply those proceeds to the payment of the obligations of USI to Lender
pursuant to the USI Note. Prior to the Closing, the Borrower shall provide to
the Lender irrevocable written instructions from USI instructing the Lender to
apply the proceeds of such capital contribution from the Borrower to USI to the
payment of the obligations of USI to the Lender.
Section 2.3 The Notes. Prior to the Closing Date, the Loan shall be
evidenced by the Existing Note. On the Closing Date, the Borrower shall execute
and deliver to the Lender (i) the Series A Note, in substitution and replacement
of the Existing Note and to evidence that part of the Additional Loan which is
part of the Series A Loan, and (ii) the Series B Note. Promptly upon receipt of
the duly executed Notes in accordance with the terms of this Agreement, the
Lender will return the Existing Note to the Borrower marked as "Replaced."
Section 2.4 Repayment of the Loan.
(a) Monthly and Termination Payments. The Borrower agrees to
pay to the Lender $700,000 on the last day of each month in repayment of the
principal amount of the Loan and to pay to the Lender on the Termination Date
the then outstanding and unpaid principal balance of the Loan. All such payments
under any Note shall be applied first to the payment of the outstanding
principal amount of the Series B Loan, and, after the outstanding principal
amount of the Series B Loan is paid in full, the outstanding principal amount of
the Series A Loan, and, after the principal amount of the Loan has been paid in
full, to the unpaid accrued interest on the Series B Loan and, after all accrued
and unpaid interest on the Series B Loan is paid in full, then on unpaid accrued
interest on the Series A Loan.
(b) Mandatory Prepayment. Upon Borrower's receipt of any
payment from the United States Department of Treasury or United States Internal
Revenue Service pursuant to or in payment of the Refund Claim, Borrower agrees
to pay to the Lender in repayment of the outstanding principal balance of the
Loan an amount equal to the proceeds of such payment received by Borrower, which
amount shall be applied by the Lender as a repayment of principal under the
Series B Loan; provided, however that, in the event that the Borrower prepays,
on or before the date the Borrower receives any payment with respect to or in
payment of the Refund Claim, the Series B Note in an amount greater than or
equal to $22,213,574, then the Borrower's obligation to prepay the Series B Note
with the payment or payments of the Refund Claim when, as and if received by the
Borrower, shall terminate.
(c) Optional Prepayments of the Loan. The Borrower shall have
the right from time to time to prepay the Loan or any principal or interest
portion thereof without premium or penalty. Any such prepayment shall be made on
the last day of a calendar month.
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Section 2.5 Interest.
(a) Interest Rate. Interest shall accrue on the unpaid
principal amount of the Loan outstanding from time to time at the Base Rate as
in effect from time to time. To the extent the Lender may charge compounded
interest consistent with applicable law, accrued, but unpaid interest will also
bear interest at the Base Rate, with such interest to be compounded quarterly.
(b) Payment Dates. Accrued interest on the Loan shall be due
and payable on earlier to occur of the Termination Date and the date, if a date
prior to the Termination Date, on which the outstanding principal amount of the
Loan is paid in full. At the time of the payment of the accrued interest on the
Loan, the Borrower will provide to the Lender a report that will show in
reasonable detail (i) the different rates at which interest accrued on the Loan
from time to time as a result of changes in the Base Rate, if any, (ii) any date
or dates on which the Base Rate changed, and (iii) the calculation of the amount
of interest that actually accrued on the Loan in each calendar month or any part
of a calendar month during the Term.
(c) Default Interest. Notwithstanding the foregoing, the
Borrower will pay to the Lender interest at the applicable Default Rate on any
principal of the Loan, and (to the fullest extent permitted by law) on any other
amount payable by the Borrower under this Agreement or any other Loan Document
to or for the account of the Lender which is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time on
demand.
Section 2.6 Certain Notices. Notices by the Borrower to the Lender of
prepayments of the Loan shall be irrevocable and shall be effective only if
received by the Lender not later than 11:00 a.m. Dallas, Texas, time on the
Business Day of the prepayment of the Loan. Each such notice of a prepayment
shall specify the amount to be prepaid and the date of the prepayment (which
shall be a Business Day).
Section 2.7 Computations. Interest and fees payable by the Borrower
hereunder and under the other Loan Documents shall be computed on the basis of a
year of 365 or 366 days and the actual number of days elapsed (including the
first day but excluding the last day) occurring in the period for which payable.
Section 2.8 Method of Payment. All payments of principal, interest, and
other amounts to be made by the Borrower under this Agreement and the other Loan
Documents shall be made to the Lender at the Principal Office or at such other
address or bank account of the Lender as the Lender shall designate upon written
notice to Borrower for such purpose. for the account of Lender in Dollars and in
immediately available funds, without setoff, deduction, or counterclaim, not
later than 11:00 a.m., Dallas, Texas time on the date on which such payment
shall become due (each such payment made after such time on such due date to be
deemed to have been made on the next succeeding Business Day). The Borrower
shall, at the time of making each such payment, specify to the Lender the sums
payable by the Borrower under this Agreement and the other Loan Documents to
which such payment is to be applied. If the Borrower fails to so specify, or if
an Event of Default exists, the Lender may apply such payment to the Obligations
in such order and manner as it may elect in its sole discretion. Whenever any
payment under this Agreement or any other Loan Document shall be stated to be
due on a day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and fee, as the case may
be.
Section 2.9 Taxes on Payments.
(a) After-Tax Basis of Payments. Any and all payments by the
Borrower to or for the account of the Lender hereunder or under any other Loan
Document shall be made free and clear of and without
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deduction for any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, taxes imposed on its overall income, gross receipts, capital or gains
and franchise or similar taxes, in each case, imposed on it by the jurisdiction
under the laws of which the Lender is organized or any political subdivision
thereof (all such non-excluded taxes, duties, levies, imposts, deductions,
charges, withholdings, and liabilities being hereinafter referred to as
"Taxes"). If the Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable under this Agreement or any other Loan Document to
the Lender, (i) the sum payable shall be increased as necessary so that after
making all required deductions (including deductions applicable to additional
sums payable under this Section 2.9) the Lender receives an amount equal to the
sum it would have received had no such deductions been made, (ii) the Borrower
shall make such deductions, (iii) the Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law, and (iv) the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing payment thereof. In
addition, the Borrower agrees to pay any and all present or future stamp or
documentary taxes and any other excise or property taxes or charges or similar
levies which arise from any payment made under this Agreement or any other Loan
Document or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Loan Document (hereinafter referred to as "Other
Taxes").
(b) Indemnity for Taxes. The Borrower agrees to indemnify the
Lender for the full amount of Taxes and Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 2.9) paid by the Lender (as the case may be)
and any liability (including penalties, interest, and expenses) arising
therefrom or with respect thereto.
(c) Mitigation. If the Borrower is required to pay additional
amounts to or for the account of the Lender pursuant to this Section 2.9, then
the Lender will agree to use reasonable efforts to change the jurisdiction of
its office from which the Loan is made or to which the interest on and principal
of the Loan is payable so as to eliminate or reduce any such additional payment
which may thereafter accrue if such change, in the judgment of the Lender, is
not otherwise disadvantageous to the Lender.
(d) Receipts for Taxes Paid. Within thirty (30) days after the
date of any payment of Taxes, the Borrower shall furnish to the Lender the
original or a certified copy of a receipt evidencing such payment.
(e) Survival. Without prejudice to the survival of any other
agreement of the Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 2.9 shall survive the payment in full of the
Notes.
(f) Refunds and Credits. If the Lender shall become aware that
it is entitled to claim a refund from, or to a tax credit on any tax return
filed by the Lender with, a Governmental Authority in respect of Taxes or Other
Taxes as to which it has been indemnified by the Borrower, or with respect to
which the Borrower has paid additional amounts, pursuant to this Section 2.9, it
shall promptly notify the Borrower of the availability of such refund claim or
right to a tax credit and shall, within thirty (30) days after receipt of a
request by the Borrower, make a claim to such Governmental Authority for such
refund, or claim such credit on the next such tax return filed by it, in each
case, at the Borrower's expense. If the Lender receives a refund (including
pursuant to a claim for refund made pursuant to the preceding sentence) in
respect of any Taxes or Other Taxes as to which it has been indemnified by the
Borrower or with respect to which the Borrower had paid additional amounts
pursuant to this Section 2.9 or receives benefit from such tax credit, it shall
within thirty (30) days from the date of the receipt of such refund or such
benefit pay over such refund or an amount equal to such benefit to the Borrower
(but only to the extent of indemnity payments made, or additional amounts paid,
by the Borrower under this Section 2.9 with respect to the Taxes or Other Taxes
giving rise to such refund), net of all out-of-pocket expenses of the Lender and
without interest (other than interest paid by the relevant Governmental
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 11
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Authority with respect to such refund); provided, however, that the Borrower,
upon the request of the Lender, agrees to repay the amount paid over to the
Borrower (plus penalties, interest or other charges) to the Lender in the event
the Lender is required to repay such refund to such Governmental Authority.
Section 2.10 Collateral. To secure the repayment of the Series A Loan,
the first priority, perfected security interest in the Mid-West Stock and its
proceeds, including all Series A Collateral as defined in the Pledge Agreement,
that the Lender held in the Mid-West Stock pursuant to the Existing Agreement
shall continue in effect and shall secure the repayment of the Series A Loan,
but shall be governed by the Pledge Agreement, which will amend and restate in
full the Existing Pledge Agreement.
ARTICLE 3
Actions of the Lender
Section 3.1 Actions to be Taken by the Lender at Closing Date. On the
Closing Date, in addition to making the Additional Loan as provided in Section
2.1, the Lender shall:
(a) Upon receipt of the deliveries required to be made pursuant
to Section 4.1, release, without recourse, representation or warranty, the
security interest that it holds in four million (4,000,000) shares of HealthAxis
common stock, which security interest was granted to the Lender pursuant to the
Existing Pledge Agreement, and, in connection therewith, execute and deliver the
Release to the Borrower and return the certificates representing such shares of
the HealthAxis common stock to the Borrower, along with all stock powers or
other instruments of transfer provided to the Banks by the Borrower in
connection with the pledge of those shares to the Banks, to the extent such
certificates and stock powers have been delivered by the Agent to the Lender;
(b) upon the payment in full of the USI Debt by USI, release,
without recourse, representation or warranty, the security interests that the
Lender holds in the USI Collateral, terminate without recourse, representations
or warranties the guaranties of the USI Debt executed by the Borrower and SCS in
favor of the Lender, terminate, without recourse, representation or warranty,
the Post-Closing Agreement, dated as of March 14, 2000, between the Lender, USI
and SCS, and, in connection therewith, execute and deliver the USI Release to
USI and SCS and return the certificates representing the shares of the
HealthAxis common stock and the shares of the Capital Stock of National Motor
Clubs of America, Inc. constituting part of the USI Collateral to USI previously
delivered to Lender, along with all stock powers or other instruments of
transfer provided to the Lender by USI in connection with the pledge of those
shares to the Lender; and
(c) execute and deliver the Pledge Agreement in amendment and
restatement in full of the Existing Pledge Agreement.
The Lender agrees that each of USI and SCS shall be a third party beneficiary of
Section 3.1(b) of this Agreement and entitled to enforce the obligations of the
Lender pursuant to clause (b) above to the same extent and in the same manner as
if it were a party to this Agreement.
Section 3.2 The Chesapeake Life Insurance Company. The Lender and the
Borrower agree that the Borrower shall not have any further liability or
obligation with respect to the prepayment of the Obligations with the proceeds
of any dividends on the Capital Stock of The Chesapeake Life Insurance Company
and, without in any manner limiting the amendment and restatement in full of the
Existing Agreement that is effected by the execution and delivery of this
Agreement, that the obligations of the Borrower as set forth in Section 2.5(a)
of the Existing Agreement are terminated and that such provision of the Existing
Agreement is without further force or effect.
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ARTICLE 4
Conditions Precedent
Section 4.1 Execution of Agreement. All obligations of Lender
hereunder, including without limitation the obligation of the Lender to
consummate the Additional Loan and to take the actions contemplated by Section
3.1, are subject to the following conditions precedent:
(a) Payment of USI Loan. The Lender shall have received
irrevocable instructions from USI and from the Borrower in form and substance
satisfactory to it requiring the Lender to credit the proceeds of the Additional
Loan to the payment of the USI Loan, and shall have received an amount in
immediately available funds equal to the excess of (x) the principal amount of
the USI Loan outstanding prior to the crediting of the proceeds of the
Additional Loan to the payment thereof plus accrued, but unpaid interest on the
USI Loan up to but excluding the date of payment and all other obligations due
and payable with respect thereto as of the Closing Date over (y) the proceeds of
the Additional Loan to be applied to the payment of the USI Loan per the
irrevocable instructions received by the Lender from the Borrower. At the time
of the payment, the Borrower shall cause USI to provide the Lender with a
written document showing the calculation of the accrued interest on the USI Loan
which shall be in a form reasonably satisfactory to the Lender.
(b) Deliveries. The Lender shall have received on or before the
Closing Date all of the following, each dated (unless otherwise indicated) as of
the Closing Date, in form and substance satisfactory to the Lender:
(i) Resolutions. Resolutions of the Board of Directors of
the Borrower certified by its Secretary or an Assistant Secretary which
authorize the execution, delivery, and performance by the Borrower of this
Agreement and the other Loan Documents to which the Borrower is or is to be a
party, which resolutions shall indicate that the Loan and the transactions
between the Borrower and the Lender contemplated by this Agreement and the other
Loan Documents have been approved in accordance with Section 144(a)(2) of the
Delaware General Corporation Law;
(ii) Incumbency Certificate. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of the Borrower certifying
the name of each officer of the Borrower (A) who is authorized to sign this
Agreement and each of the other Loan Documents to which the Borrower is or is to
be a party (including the certificates contemplated herein) together with
specimen signatures of each such officer and (B) who will, until replaced by
other officers duly authorized for that purpose, act as its representative for
the purposes of signing documents and giving notices and other communications in
connection with this Agreement and the transactions contemplated hereby;
(iii) Certificate of Incorporation. The certificate of
incorporation of each of the Borrower and Mid-West certified by the Secretary of
State of the state of their respective states of organization and dated a
current date;
(iv) Bylaws. The bylaws of the Borrower and Mid-West
certified by a Secretary or an Assistant Secretary of the Borrower;
(v) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation of each of the
Borrower and Mid-West as to its existence and good standing, each dated a
current date;
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(vi) The Notes. The Series A Note and the Series B Note
executed by the Borrower;
(vii) Pledge Agreement and Stock Certificates. The Pledge
Agreement executed by the Borrower and, to the extent not previously delivered
to the Lender by the Banks, stock certificates representing 100% of the Mid-West
Stock, along with stock powers executed in blank in form sufficient to permit
the Lender to transfer such shares of the Mid-West Stock into the name of the
Lender;
(viii) Compliance Certificate. The Compliance Certificate
executed by an officer of the Borrower.
(ix) Opinion of Counsel. A favorable opinion of legal
counsel to the Borrower, as to the matters set forth in Exhibit C hereto; and
(x) Attorneys' Fees and Expenses. Evidence that the costs
and expenses (including reasonable attorney's fees) referred to in Section 10.1,
to the extent invoiced on or before the Closing, shall have been paid in full by
the Borrower;
(c) No Default. No Default hereunder or under the 8.75% Senior
Note shall have occurred and be continuing or would result from the execution of
this Agreement or consummation of the Transactions;
(d) Representations and Warranties. All of the representations
and warranties contained in Article 5 hereof and in the other Loan Documents
shall be true, correct and complete in all material respects;
(e) Payment of Accrued Interest on Existing Loan. The Borrower
shall have paid to the Lender all accrued, but unpaid, interest on the Existing
Loan up to but excluding the Closing Date, along with a written document showing
the calculation of the accrued interest on the Existing Loan which shall be in a
form reasonably satisfactory to the Lender.
(f) Additional Documentation. The Lender shall have received
such additional approvals, opinions, or documents as the Lender or its legal
counsel, Mayer, Brown & Platt, may reasonably request.
ARTICLE 5
Representations and Warranties
To induce the Lender to enter into this Agreement, the Borrower
represents and warrants to the Lender that:
Section 5.1 Corporate Existence. Each of the Borrower and Mid-West (a)
is a corporation duly organized, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation or organization; (b) has all
requisite power and authority to own its assets and carry on its business as now
being or as proposed to be conducted; and (c) is qualified to do business in all
jurisdictions in which the nature of its business makes such qualification
necessary and where failure to so qualify would have a Material Adverse Effect.
The Borrower has the corporate power and authority and legal right to execute,
deliver, and perform its obligations under this Agreement and the other Loan
Documents to which it is or may become a party.
Section 5.2 Financial Statements. The Borrower has delivered to the
Lender financial statements for Mid-West as at and for the fiscal year ended
December 31, 1999 and as at and for the quarter ended March 31, 2000. Such
financial statements are complete and correct, have been prepared in accordance
with SAP, and
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fairly and accurately present the financial condition of Mid-West as of the
dates indicated therein and the results of operations for the periods indicated
therein subject, as applicable, to normal year-end audit adjustments.
Section 5.3 Corporate Action; No Breach. The execution, delivery, and
performance by the Borrower of this Agreement and the other Loan Documents to
which the Borrower is or may become a party and compliance with the terms and
provisions hereof and thereof have been duly authorized by all requisite
corporate action on the part of the Borrower and do not and will not (a) violate
or conflict with, or result in a breach of, or require any consent under (i) the
certificate of incorporation or bylaws of the Borrower or Mid-West, (ii) any
applicable law, rule, or regulation or any order, writ, injunction, or decree of
any Governmental Authority or arbitrator, or (iii) any agreement or instrument
to which the Borrower or Mid-West is a party or by which any of them or any of
their property is bound or subject (except for such agreements and instruments
which if so violated or breached could not reasonably be expected to have a
Material Adverse Effect and such consents thereunder which if not obtained could
not reasonably be expected to have a Material Adverse Effect), or (b) constitute
a default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the property of the Borrower or Mid-West.
Without limiting the generality of the foregoing, (i) all Debt outstanding
hereunder is permitted to be incurred by the Borrower pursuant to Section 8.4 of
the 8.75% Senior Note Agreement and (ii) all Liens granted pursuant to the
Transactions are permitted pursuant to Section 8.5 of the 8.75% Senior Note
Agreement.
Section 5.4 Operation of Business. Mid-West possesses all licenses,
permits, franchises, patents, copyrights, trademarks, and tradenames, or rights
thereto, necessary to conduct its business substantially as now conducted and as
currently proposed to be conducted without Material Adverse Effect and Mid-West
is not in violation in any material respect of any valid rights of others with
respect to any of the foregoing.
Section 5.5 Litigation and Judgments. As of the date hereof, no action,
suit, investigation, or proceeding before or by any Governmental Authority or
arbitrator is pending, or to the knowledge of the Borrower, has been threatened
against or affecting Mid-West which, if adversely determined, could reasonably
be expected to have a Material Adverse Effect. There are no unstayed or
un-discharged judgments against Mid-West which would constitute an Event of
Default under Section 9.1 (h).
Section 5.6 Rights in Properties; Liens. Mid-West has good and
indefeasible title to or valid leasehold interests in its properties, real and
personal, including the properties and leasehold interests reflected in the
financial statements described in Section 5.2, and none of the properties or
leasehold interests of Mid-West is subject to any Lien, except as permitted by
Section 7.2.
Section 5.7 Enforceability. This Agreement constitutes, and the other
Loan Documents, when executed and delivered, shall constitute the legal, valid,
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms, except as limited by bankruptcy,
insolvency, or other laws of general application relating to the enforcement of
creditors' rights and general principles of equity.
Section 5.8 Approvals. No authorization, approval, or consent of, and
no filing or registration with, any Governmental Authority or third party is or
will be necessary for the execution, delivery, or performance by the Borrower of
this Agreement and the other Loan Documents or for the validity or
enforceability thereof. Without limiting the generality of the forgoing, no
authorization, approval, or consent of, and no filing or registration with, any
Insurance Regulatory Authority is required for the pledge of the Capital Stock
of Mid-West by the Borrower.
Section 5.9 Debt. Mid-West has no Debt, except as permitted by Section
7.1.
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Section 5.10 Taxes. Mid-West has filed all tax returns (federal, state,
and local) required to be filed, including all income, franchise, employment,
property, and sales tax returns, and has paid all of its liabilities for taxes,
assessments, governmental charges, and other levies that are due and payable
except for those liabilities whose amount, applicability, or validity is being
contested in good faith by appropriate proceedings being diligently pursued, and
for which adequate reserves have been established. The Borrower knows of no
pending investigation of Mid-West by any taxing authority or of any pending but
un-assessed material tax liability of Mid-West.
Section 5.11 Margin Securities. Neither the Borrower nor Mid-West is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations T, U, or X of the Board of Governors of the Federal
Reserve System), and no part of the proceeds of any Loan will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing or carrying margin stock.
Section 5.12 ERISA. Mid-West is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan.
No notice of intent to terminate a Plan has been filed, nor has any Plan been
terminated. No circumstances exist which constitute grounds entitling the PBGC
to institute proceedings to terminate, or appoint a trustee to administer, a
Plan, nor has the PBGC instituted any such proceedings. Mid-West has not
completely or partially withdrawn from a Multiemployer Plan. Mid-West has met
its minimum funding requirements under ERISA with respect to all of its Plans,
and the present value of all vested benefits under each Plan do not exceed the
fair market value of all Plan assets allocable to such benefits, as determined
on the most recent valuation date of the Plan and in accordance with ERISA.
Mid-West has incurred no liability to the PBGC under ERISA.
Section 5.13 Disclosure. No statement, information, report,
representation, or warranty made by the Borrower in respect of Mid-West contains
any untrue statement of a material fact or omits to state any material fact
necessary to make the statements therein not misleading in light of the
circumstances under which such statement, information, report, representation or
warranty was provided. There is no fact known to the Borrower which has had or
which could reasonably be expected to have a material adverse effect on (a) the
properties, prospects, business, operations, condition (financial or otherwise),
liabilities, or capitalization of Mid-West, or (b) the value of the Collateral
or the validity, priority or perfection of the Lien on the Collateral, or (c)
the validity or enforceability of any of the Loan Documents or the rights and
remedies of the Lender thereunder.
Section 5.14 Subsidiaries; Capitalization. The Borrower owns 100% of
the Capital Stock of Mid-West. Mid-West is a duly organized and validly existing
insurance company organized under the laws of the State of Tennessee. Mid-West's
authorized Capital Stock is 2,000,000 shares of common stock, $2.00 par value,
1,000,000 shares of which are issued and outstanding. All of the outstanding
Capital Stock of Mid-West have been validly issued, are fully paid, and are
non-assessable. There are no outstanding subscriptions, options, warrants,
calls, or rights (including preemptive rights) to acquire, and no outstanding
securities or instruments convertible into, Capital Stock of Mid-West. Except
for this Agreement, the Pledge Agreement, and the 8.75% Senior Note Agreement,
neither the Borrower nor the Collateral is subject to any agreement (including
without limitation, any voting rights agreement, registration rights agreement
or shareholder agreement) restricting or otherwise effecting the right to vote
on matters with respect to the Collateral, the right to buy or sell any of the
Collateral, the right to register the Collateral under any securities laws and
regulations, the right to transfer the Collateral or any other right, title or
interest in or to the Collateral. The Collateral is not subject to any
restriction on transfer or assignment except for compliance with applicable
securities laws and regulations and except that the ability of the Lender to
sell the Mid-West Capital Stock under the terms of the Pledge Agreement is
subject to compliance with insurance laws and regulations applicable to the
change in control of insurance companies.
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Mid-West is not required to submit reports to any securities exchange or the
Securities and Exchange Commission and the Collateral is not listed on any
securities exchange.
Section 5.15 Agreements. Mid-West is not a party to any indenture,
loan, or credit agreement, or to any lease or other agreement or instrument, or
subject to any charter or corporate restriction that could reasonably be
expected to have a Material Adverse Effect in absence of a default thereunder.
Mid-West is not in default in any material respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument material to its business to which it is
a party.
Section 5.16 Compliance with Laws. Mid-West is not in violation in any
material respect of any applicable law, rule, regulation, order, or decree of
any Governmental Authority or arbitrator, including, without limitation, any
Environmental Law.
Section 5.17 Investment Company Act. Neither the Borrower nor Mid-West
is an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 5.18 Public Utility Holding Company Act. Neither the Borrower
nor Mid-West is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility" within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
Section 5.19 Environmental Matters. Except for instances of
noncompliance with or exceptions to the following that should not have,
individually or in the aggregate, a Material Adverse Effect: (i) no Hazardous
Materials exist on, about, or within or have been used, generated, stored,
transported, disposed of on, or released from any of the properties of Mid-West
except in compliance with applicable Environmental Laws and (ii) the use which
Mid-West makes and intends to make of its properties will not result in the use,
generation, storage, transportation, accumulation, disposal, or release of any
Hazardous Material on, in, or from any of its properties except in compliance
with applicable Environmental Laws.
Section 5.20 Labor Disputes and Acts of God. Neither the business nor
the properties of Mid-West are affected by any fire, explosion, accident,
strike, lockout, or other labor dispute, drought, storm, hail, earthquake,
embargo, act of God or of the public enemy, or other casualty (whether or not
covered by insurance) that is having or could have a Material Adverse Effect.
Section 5.21 Year 2000 Compliance.
(a) Mid-West has (i) undertaken a detailed review and
assessment of all areas within its business and operations that could be
adversely affected by the "Year 2000 Problem" (that is, the risk that computer
applications used by Mid-West may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (ii) developed a detailed plan and time line for addressing
the Year 2000 Problem on a timely basis, and (iii) to date, implemented that
plan in accordance with that timetable in all material respects. Mid-West
reasonably anticipates that all computer applications that are material to its
business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (that
is, be "Year 2000 Ready").
(b) Mid-West has inquired with each of its key suppliers,
vendors and customers as to whether such Persons are Year 2000 Ready in all
material respects. Mid-West has not received any indication that leads it to
believe that any such key supplier, vendor or customer will fail to be Year 2000
Ready in a manner that will result in a Material Adverse Effect. For purposes
hereof, "key suppliers, vendors and customers" refers to those suppliers,
vendors and customers of Mid-West the business failure of which would with
reasonable probability be expected to have a Material Adverse Effect.
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Section 5.22 Collateral. The Borrower owns, and with respect to
Collateral acquired after the date hereof, the Borrower will own, legally and
beneficially, the Collateral free and clear of any Lien, security interest,
pledge, claim, or other encumbrance or any right or option on the part of any
third Person to purchase or otherwise acquire the Collateral or any part
thereof, except for the security interest granted or to be granted under the
Pledge Agreement. The Borrower has filed with the Internal Revenue Service the
documentation required by applicable law to assert the Refund Claim. The
Borrower has the unrestricted right to grant a security interest in the Series A
Collateral as contemplated by the Pledge Agreement. The principal place of
business and chief executive office of the Borrower, and the office where the
Borrower keeps its books and records, is located at the address for notices of
the Borrower set forth in this Agreement. Notwithstanding anything to the
contrary in this Agreement, the Borrower makes no representation or warranty
that the United States Department of the Treasury or the United States Internal
Revenue Service will pay to the Borrower or any member of its consolidated tax
group all or any portion of the amounts subject to the Refund Claim.
Section 5.23. No Default. No Default under this Agreement or under the
8.75% Senior Note Agreement has occurred and is continuing or would result from
the execution, delivery and performance by the Borrower of its obligations under
this Agreement or the other Loan Documents including, without limitation, the
consummation of the Transactions.
ARTICLE 6
Positive Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding, the Borrower will perform and observe the
following positive covenants unless the Lender otherwise agrees:
Section 6.1 Reporting Requirements. The Borrower will furnish to the
Lender:
(a) Quarterly Financial Statements. As soon as available, and
in any event within ninety (90) days after the end of each of the quarters of
each fiscal year of the Borrower commencing with the fiscal quarter ended June
30, 2000, (i) a copy of an unaudited financial report of the Borrower and the
Subsidiaries as of the end of such fiscal quarter and for the portion of the
fiscal year then ended containing, on a consolidated, consolidating and business
segment basis, balance sheets and statements of income, stockholders' equity,
and cash flow, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, all in reasonable detail
certified by the chief financial officer of the Borrower to have been prepared
in accordance with GAAP (except for such exceptions therefrom which are
disclosed therein) and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of operations of the
Borrower and the Subsidiaries, on a consolidated, consolidating and business
segment basis, at the date and for the periods indicated therein and (ii) a copy
of an unaudited financial report of Mid-West as of the end of such fiscal
quarter and for the portion of the fiscal year then ended prepared in accordance
with SAP as filed with the applicable Insurance Regulatory Authority and
certified by the chief financial officer of the Borrower to have been prepared
in accordance with SAP and to fairly and accurately present (subject to year-end
audit adjustments) the financial condition and results of operations of
Mid-West, at the date and for the periods indicated therein;
(b) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings by or before any
Governmental Authority or arbitrator affecting the Borrower or Mid-West which,
if determined adversely to the Borrower or Mid-West, could have a Material
Adverse Effect;
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(c) Notice of Default. As soon as possible and in any event
within five (5) days after the Borrower becomes aware of any Default, a written
notice setting forth the details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
(d) Notice of Material Adverse Change. As soon as possible and
in any event within five (5) days after the Borrower becomes aware of occurrence
thereof, written notice of any matter that could have a Material Adverse Effect;
and
(e) General Information. Promptly, such other information
concerning the Borrower or Mid-West (including financial statements of and other
reports regarding Mid-West) as the Lender may from time to time reasonably
request.
Section 6.2 Maintenance of Existence; Conduct of Business. The Borrower
will, and will cause Mid-West to, preserve and maintain its corporate existence
and all of its leases, privileges, licenses, permits, franchises,
qualifications, and rights that are necessary or desirable in the ordinary
conduct of its business. The Borrower will, and will cause Mid-West to, conduct
its business in an orderly and efficient manner in accordance with good business
practices.
Section 6.3 Maintenance of Properties. The Borrower will, and will
cause Mid-West to, maintain, keep, and preserve all of its properties necessary
or useful in the proper conduct of its business in good repair, working order,
and condition and make all necessary repairs, renewals, replacements,
betterments, and improvements thereof.
Section 6.4 Taxes and Claims. The Borrower will, and will cause
Mid-West to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges imposed
on it or its income or profits or any of its property, and (b) all lawful claims
for labor, material, and supplies, which, if unpaid, might become a Lien upon
any of its property; provided, however, that neither the Borrower nor Mid-West
shall be required to pay or discharge any tax, levy, assessment, or governmental
charge or claim for labor, material, or supplies whose amount, applicability, or
validity is being contested in good faith by appropriate proceedings being
diligently pursued and for which adequate reserves have been established.
Section 6.5 Insurance. The Borrower will, and will cause Mid-West to,
keep insured by financially sound and reputable insurers all property of a
character usually insured by Persons engaged in the same or similar business
similarly situated against loss or damage of the kinds and in the amounts
customarily insured against by such Persons and carry such other insurance as is
usually carried by such Persons.
Section 6.6 Inspection Rights. When no Event of Default exists and
subject to all confidentiality agreements entered into by the Borrower or
Mid-West in the ordinary course of its business (including those entered into in
connection with equity and asset acquisitions and the acquisition and use of
intellectual property) and the limitations on disclosure imposed therein, the
Borrower will, and will cause Mid-West to, permit representatives of the Lender,
during normal business hours and upon no less than two (2) Business Days prior
notice, to examine, copy, and make extracts from its books and records, to visit
and inspect its properties, and to discuss its business, operations, and
financial condition with its officers, employees, and independent certified
public accountants. If an Event of Default exists, the Borrower will, and will
cause Mid-West to, permit representatives of the Lender, during normal business
hours but without prior notice, to examine, copy, and make extracts from its
books and records, to visit and inspect its properties, and to discuss its
business, operations, and financial condition with its officers, employees, and
independent certified public accountants.
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Section 6.7 Keeping Books and Records. The Borrower will, and will
cause Mid-West to, maintain proper books of record and account in which full,
true, and correct entries in conformity with GAAP (and with respect to Mid-West,
SAP) shall be made of all dealings and transactions in relation to its business
and activities.
Section 6.8 Compliance with Laws. The Borrower will, and will cause
Mid-West to, comply in all material respects with all applicable laws, rules,
regulations, orders, and decrees of any Governmental Authority or arbitrator.
Section 6.9 Compliance with Agreements. The Borrower will, and will
cause Mid-West to, comply in all material respects with all agreements,
contracts, and instruments binding on it or affecting its properties or
business.
Section 6.10 Further Assurances. The Borrower will, and will cause
Mid-West to, execute and deliver such further documents and take such further
action as may be requested by the Lender to carry out the provisions and
purposes of this Agreement and the other Loan Documents.
Section 6.11 Year 2000 Compliance. The Borrower will promptly notify
the Lender in the event the Borrower discovers or determines that any computer
application (including those of its key suppliers, vendors and customers) will
not be Year 2000 Ready on a timely basis and a Material Adverse Effect will
occur as a result thereof.
ARTICLE 7
Negative Covenants
The Borrower covenants and agrees that, as long as the Obligations or
any part thereof are outstanding, the Borrower will perform and observe the
following negative covenants unless the Lender otherwise agrees:
Section 7.1 Debt. The Borrower will not permit Mid-West to incur,
create, assume, or permit to exist any Debt, except:
(a) Debt in the amount disclosed on Schedule 7.1 (including any
advances made on or after the Closing Date pursuant to the commitments to lend
disclosed on Schedule 7.1) hereto and any extensions, renewals or refinancings
of such existing Debt so long as (i) the principal amount of such Debt after
such renewal, extension or refinancing shall not exceed the principal amount of
such Debt which was outstanding immediately prior to such renewal, extension or
refinancing, and (ii) such Debt shall not be secured by any assets other than
assets securing such Debt, if any, prior to such renewal, extension or
refinancing;
(b) Guaranties given in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money bonds and
other similar obligations; and
(c) Debt constituting obligations to reimburse worker's
compensation insurance companies for claims paid by such companies on Mid-West's
behalf in accordance with the policies issued to Mid-West.
Section 7.2 Limitation on Liens. The Borrower will not permit Mid-West
to incur, create, assume, or permit to exist any Lien upon any of its property,
whether now owned or hereafter acquired, except the following:
(a) Liens disclosed on Schedule 7.2 hereto, and Liens created
and existing in connection with any extensions, renewals or refinancings of the
Debt secured by such Liens as permitted under Section 7.1(a)
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 20
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provided that (i) no such Lien is expanded to cover any additional property
(other than after acquired title in or on such property and proceeds of the
existing collateral and other than property having no greater fair market value
than the existing collateral for which such property is being substituted as new
collateral) after the date hereof; and (ii) no such Lien is spread to secure any
additional Debt after the date hereof;
(b) Encumbrances consisting of easements, zoning restrictions,
or other restrictions on the use of real property that do not (individually or
in the aggregate) materially affect the value of the property encumbered thereby
or materially impair the ability of Mid-West to use such property in its
business, and none of which is violated in any material respect by existing or
proposed structures or land use;
(c) Liens (other than Liens relating to liabilities resulting
from the violation of Environmental Laws or ERISA) for taxes, assessments, or
other governmental charges that are not delinquent or which are being contested
in good faith and for which adequate reserves have been established;
(d) Liens of mechanics, materialmen, warehousemen, carriers, or
other similar statutory Liens securing obligations that are not yet due and are
incurred in the ordinary course of business or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens resulting from good faith deposits to (i) secure
payments of workmen's compensation or other social security programs, (ii)
secure the performance of tenders, statutory obligations, surety and appeal
bonds, bids, contracts (other than for payment of Debt), or leases made in the
ordinary course of business, (iii) satisfy escrow obligations under reinsurance
agreements and (iv) satisfy statutory obligations imposed by applicable
Insurance Regulatory Authorities;
(f) Purchase-money Liens on any property hereafter acquired or
a Lien incurred in connection with any conditional sale or other title retention
agreement or Capital Lease Obligation; provided that:
(i) any property subject to the foregoing is acquired by
Mid-West in the ordinary course of its business and the Lien on the property
attaches concurrently or within sixty (60) days after the acquisition thereof;
(ii) the Debt secured by any Lien so created, assumed, or
existing shall not exceed the lesser of the cost or fair market value at the
time of acquisition of the property covered thereby;
(iii) each such Lien shall attach only to the property so
acquired; and
(iv) the Debt incurred is permitted by Section 7.1(d);
(g) Any extension, renewal or replacement of any of the Liens
described in clauses (b) through (f), provided that Liens permitted thereby
shall not be spread to cover any additional Debt or property (other than after
acquired title in or on such property and proceeds of the existing collateral
and other than property having no greater fair market value than the existing
collateral for which such property is being substituted as collateral);
(h) Any attachment or judgment Lien not constituting an Event
of Default;
(i) Any interest or title of a licensor, lessor or sublessor
under any license or lease incurred in the ordinary course of business; and
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(j) Liens against equipment arising from precautionary UCC
financing statement filings regarding operating leases entered into by Mid-West
in the ordinary course of business.
Mid-West shall not enter into or assume any agreement prohibiting the creation
or assumption of any Lien upon its properties, whether now owned or hereafter
acquired unless such agreement permits the granting of Liens to secure the
Obligations; provided that, in connection with any Debt permitted to be incurred
under Section 7.1 which is used to finance the acquisition of an asset and any
Lien securing the payment thereof permitted by this Section 7.2, Mid-West may
agree that it will not permit any other Liens to encumber the asset so acquired.
Except as provided herein, as disclosed in Schedule 7.2 and as may be imposed by
any applicable laws and regulations, the Borrower will not directly or
indirectly create or otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability of Mid-West to:
(1) pay dividends or make any other distribution on any of its Capital Stock; or
(2) subject to subordination provisions, pay any Debt owed to the Borrower.
Section 7.3 Mergers, Etc. The Borrower will not and will not permit
Mid-West to become a party to a merger or consolidation, or purchase or
otherwise acquire all of the properties of any Person or purchase or acquire
properties of a Person with a book value in excess of ten percent (10%) of the
book value of all properties of such Person (as determined as of the date of
acquisition) or any shares or other evidence of beneficial ownership of any
Person, or wind-up, dissolve, or liquidate itself.
Section 7.4 Investments. The Borrower will not permit Mid-West to make
or permit to remain outstanding any advance, loan, extension of credit, or
capital contribution to or investment in any Person, or purchase or own any
stock, bonds, notes, debentures, or other securities of any Person, or be or
become a joint venturer with or partner of any Person or purchase all the
properties of a Person or purchase properties of a Person with a book value in
excess of ten percent (10%) of the book value of all properties of such Person
determined as of the date of acquisition (all such transactions being herein
called "Investments"), except:
(a) Mid-West may make Investments in readily marketable direct
obligations of the United States of America or any agency thereof or readily
marketable direct obligations guaranteed or insured as to principal and interest
by the United States of America or any agency thereof;
(b) Mid-West may make Investments in (i) fully insured
certificates of deposit; and (ii) other certificates of deposit issued by any
commercial bank operating in the United States of America having capital and
surplus in excess of $500,000,000 and rated in one of the four highest unsecured
long-term debt ratings of Standard & Poor's Ratings Group ("S&P") or Moody's
Investors Service, Inc. ("Moody's");
(c) Mid-West may make Investments in commercial paper of a
domestic issuer if at the time of purchase such paper is rated in one of the two
highest ratings of S&P or Moody's;
(d) Mid-West may in the ordinary course of business (i) make
advances to Lenders, officers, directors and employees for business expenses
incurred in the ordinary course of business; and (ii) make advances to Lenders
against future commissions in accordance with past practices or standard
industry practice;
(e) Mid-West may hold Investments received in connection with
the bankruptcy or reorganization of vendors, suppliers and customers and in
connection with the settlement of delinquent obligations of, and disputes with,
vendors, customers and suppliers arising in the ordinary course of business;
(f) Mid-West may make extensions of trade credit in the
ordinary course of business; and
(g) Mid-West may make Investments in the following:
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(i) Debt securities (excluding CMO Derivative Investments,
as defined below) rated BBB- or better by S& P, Baa3 or better by Moody's or
NAIC-2 or better by the NAIC; provided that any such Investment which, at any
time after which it is made ceases to meet such rating requirements, shall not
be prohibited until a period of forty-five (45) days after the date on which
such rating requirement is no longer met;
(ii) preferred stock by issuers whose debt instruments meet
the rating requirements specified in clause (g)(i) above; provided that the
aggregate book value of the Investments made pursuant to the permissions of this
clause (h)(ii) shall not exceed twenty percent (20%) of the statutory surplus of
Mid-West determined in accordance with SAP;
(iii) insurance policy loan made to insureds in the
ordinary course of business; and
(iv) CMO Derivative Investments of Mid-West in an amount
not to exceed, in the aggregate five percent (5%) of the statutory surplus of
Mid-West determined in accordance with SAP (As used herein, the term "CMO
Derivative Investments" means any interest in a volatile tranche of a
collateralized mortgage obligation, including without limitation, such interests
typically classified as z bonds, inverse floaters, PAC II, PAC III, Ioettes,
support bonds, interest-only investments, principal-only investments, residuals,
inverse IO's and super floaters); and
(h) Mid-West may maintain the Investments described on Schedule
7.4 hereto.
Mid-West may not make investments under any of the permissions of this Section
7.4 in any Subsidiary engaged in the credit card business (including, without
limitation, United Credit National Bank) or any Subsidiary owning such a
Subsidiary.
Section 7.5 Transactions With Affiliates. The Borrower will not permit
Mid-West to enter into any transaction, including, without limitation, the
purchase, sale, or exchange of property or the rendering of any service, with
any Affiliate of the Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of Mid-West's business and upon fair and reasonable
terms no less favorable to Mid-West than would be obtained in a comparable
arms-length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary.
Section 7.6 Disposition of Property. The Borrower will not permit
Mid-West to sell, lease, assign, transfer, or otherwise dispose of any of its
property, except (a) dispositions of inventory, in the ordinary course of
business, including any sale or other transfer pursuant to a securitization; (b)
dispositions of assets reasonably and in good faith determined by Mid-West to be
obsolete or no longer necessary to its business if no Default exists or would
result therefrom; (c) licenses, sublicenses, leases and subleases of
intellectual property, general intangibles, or other property (other than
Capital Stock), in each case in the ordinary course of business, that do not
materially interfere with the business of Mid-West; (d) the sale of overdue
accounts receivable arising in the ordinary course of business, but only in
connection with the compromise or settlement thereof; (e) the disposition of
property by Mid-West in connection with reinsurance treaties or agreements
entered into in the ordinary course of business; and (f) the disposition of
Investments in the ordinary course of business in connection with the management
of its investment portfolio provided the proceeds thereof are utilized to
satisfy policy liabilities and expenses incurred in the ordinary course of
business, are reinvested in accordance with Section 7.4 or are held as cash. The
Borrower shall not sell or otherwise dispose of any of its assets for any
consideration with a value that is less than a value equivalent to the value of
the assets which have been sold or otherwise disposed of, with such equivalent
value being conclusively determined for purposes of this covenant by a written
resolution of the Board of Directors of the Borrower.
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Section 7.7 Lines of Business. The Borrower will not permit Mid-West to
engage in any line or lines of business activity other than the insurance
business, other businesses in which it is engaged on the date hereof, any
businesses reasonably related thereto and the sale of products or services
utilizing the existing channels of distribution currently utilized by Mid-West.
Section 7.8 Restrictions on Insurance Subsidiaries. The Borrower will
not permit any Insurance Subsidiary to make any Investment in, provide any
Guarantee for the benefit of, or make any type of deposit with any Subsidiary
engaged in the credit card business (including, without limitation, United
Credit National Bank) or any Subsidiary owning such a Subsidiary.
Section 7.9 Prepayment of Debt. The Borrower will not prepay the Debt
outstanding pursuant to the 8.75% Senior Note Agreement except (i) for
prepayments resulting from a refinancing of the entire amount thereof; (ii) the
Borrower may prepay such Debt if the Consolidated Net Worth immediately prior to
such prepayment is Six Hundred Fifty Million Dollars ($650,000,000) or more; and
(iii) the Borrower may make mandatory prepayments pursuant to Section 5.1 of the
8.75% Senior Note Agreement.
Section 7.10 Use of Proceeds of Refund Claim. The Borrower will not
grant any liens on the Refund Claim, or use the proceeds of the Refund Claim, or
make any payment with or otherwise dispose of any amounts received from the
United States Treasury or Internal Revenue Service pursuant to the Refund Claim,
for any purpose other than to repay the outstanding principal balance of the
Series B Loan, if any, until the Series B Loan is paid in full.
ARTICLE 8
Financial Covenants
Section 8.1 Financial Covenant. The Borrower covenants and agrees that,
as long as the Obligations or any part thereof are outstanding, the Borrower
shall cause the statutory capital and surplus of Mid-West, as determined in
accordance with SAP, at all times to be no less than fifty million dollars
($50,000,000).
ARTICLE 9
Default
Section 9.1 Events of Default. Each of the following shall be deemed an
"Event of Default":
(a) The Borrower shall fail to pay (i) when due any principal
payable under any Loan Document or any part thereof; (ii) within three (3)
Business Days of the date due any interest payable under the Loan Documents or
any part thereof; and (iii) within five (5) Business Days after the date the
Borrower receives written notice of the failure to pay when due any other
Obligation or any part thereof.
(b) Any representation, warranty or certification made or
deemed made by the Borrower (or any of its officers) in any Loan Document or in
any certificate, report, notice, or financial statement furnished at any time in
connection with this Agreement shall be false, misleading, or erroneous in any
material respect when made or deemed to have been made.
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(c) The Borrower shall fail to perform, observe, or comply with
(1) any covenant, agreement, or term contained in clauses (a), (b), (c) and (d)
of Section 6.1, Article 7, or Article 8 of this Agreement; or (2) any other
covenant, agreement, or term contained in this Agreement or any other Loan
Document (other than covenants to pay the Obligations) and such failure shall
continue for a period of ten (10) days after the earlier of (i) the date the
Lender provides the Borrower with notice thereof or (ii) the date the Borrower
should have notified the Lender thereof in accordance with Section 6.1(c)
hereof.
(d) The Borrower or Mid-West shall admit in writing its
inability to, or be generally unable to, pay its debts as such debts become due.
(e) The Borrower or Mid-West shall (i) apply for or consent to
the appointment of, or the taking of possession by, a receiver, rehabilitator,
conservator, custodian, trustee, liquidator or the like of itself or of all or a
substantial part of its property, (ii) make a general assignment for the benefit
of its creditors, (iii) commence a voluntary case under the United States
Bankruptcy Code (as now or hereafter in effect, the "Bankruptcy Code"), (iv)
institute any proceeding or file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency, reorganization, liquidation,
dissolution, winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing to, any
petition filed against it in an involuntary case under the Bankruptcy Code or
under any other such law, or (vi) take any corporate or other action for the
purpose of effecting any of the foregoing.
(f) A proceeding or case shall be commenced, without the
application, approval or consent of the Borrower or Mid-West in any court of
competent jurisdiction, seeking (i) its reorganization, liquidation,
dissolution, arrangement or winding-up, or the composition or readjustment of
its debts, (ii) the appointment of a receiver, rehabilitator, conservator,
custodian, trustee, liquidator or the like of the Borrower or Mid-West or of all
or any substantial part of its property, or (iii) similar relief in respect of
the Borrower or Mid-West under any law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts, and such
proceeding or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) or more days; or an order for
relief against the Borrower or Mid-West shall be entered in an involuntary case
under the Bankruptcy Code.
(g) Mid-West shall fail to discharge within a period of thirty
(30) days after the commencement thereof any unstayed attachment, sequestration,
forfeiture, or similar proceeding or proceedings involving an aggregate amount
in excess of Ten Million Dollars ($10,000,000) against any of its properties.
The Borrower shall fail to discharge within a period of thirty (30) days after
the commencement thereof any unstayed attachment, sequestration, forfeiture, or
similar proceeding or proceedings involving the Collateral. The Series A
Collateral shall for any reason become subject to any Lien other than the Liens
of the Lender created by the Pledge Agreement.
(h) A final judgment or judgments for the payment of money in
excess of Ten Million Dollars ($10,000,000) in the aggregate shall be rendered
by a court or courts against Mid-West and the same shall not be discharged (or
provision shall not be made for such discharge), or a stay of execution thereof
shall not be procured, within thirty (30) days from the date of entry thereof
and Mid-West shall not, within said period of thirty (30) days, or such longer
period during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal.
(i) Mid-West shall fail to pay when due any principal of or
interest on any Debt (other than the Obligations) in excess of Five Million
Dollars ($5,000,000), or the maturity of any such Debt shall have been
accelerated, or any such Debt shall have been required to be prepaid in full
prior to the stated maturity thereof, or any event shall have occurred that
permits (or, with the giving of notice or lapse of time or both, would permit)
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 25
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any holder or holders of such Debt or any Person acting on behalf of such holder
or holders to accelerate the maturity thereof or require any such prepayment.
(j) This Agreement or any other Loan Document shall cease to be
in full force and effect (unless the Obligations have been paid in full) or
shall be declared null and void or the validity or enforceability thereof shall
be contested or challenged by the Borrower or Mid-West or any of their
respective shareholders, or any lien or security interest created or intended to
be created by the Loan Documents shall for any reason (other than the fault of
the Lender) cease to be or shall not be a valid, first priority, perfected
security interest in and lien upon any of the Collateral purported to be covered
thereby (except to the extent that the Collateral is released in accordance with
the terms of this Agreement and the other Loan Documents), the Borrower shall
deny that it has any further liability or obligation under any of the Loan
Documents.
(k) Any of the following events shall occur or exist with
respect to the Borrower or Mid-West: (i) any Prohibited Transaction involving
any Plan; (ii) any Reportable Event with respect to any Plan; (iii) the filing
under Section 4041 of ERISA of a notice of intent to terminate any Plan or the
termination of any Plan; (iv) any event or circumstance that might constitute
grounds entitling the PBGC to institute proceedings under Section 4042 of ERISA
for the termination of, or for the appointment of a trustee to administer, any
Plan, or the institution by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a Multiemployer Plan
or the reorganization, insolvency, or termination of any Multiemployer Plan; and
in each case above, such event or condition, together with all other events or
conditions, if any, have subjected or could in the reasonable opinion of the
Lender subject the Borrower to any tax, penalty, or other liability to a Plan, a
Multiemployer Plan, the PBGC, or otherwise (or any combination thereof) which in
the aggregate exceed or could reasonably be expected to exceed Ten Million
Dollars ($10,000,000).
(l) The Borrower, Mid-West or any of their respective officers,
directors, employees, or agents (not including any insurance agent acting for
Mid-West) becomes subject to any order, agreement or other enforcement action of
any Insurance Regulatory Authority applicable to the violation or alleged
violation of any insurance laws or regulations applicable to Mid-West or
applicable to the financial condition, investments or other business affairs of
Mid-West.
Section 9.2 Remedies. If any Event of Default exists, the Lender may do
any one or more of the following:
(a) Acceleration. By notice to the Borrower, declare all
outstanding principal of and accrued and unpaid interest on the Notes and all
other amounts payable by the Borrower under the Loan Documents immediately due
and payable, and the same shall thereupon become immediately due and payable,
without any other notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other formalities of
any kind, all of which are hereby expressly waived by the Borrower.
(b) Judgment. Reduce any claim to judgment.
(c) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Lender to secure payment and performance of the Obligations in
accordance with the terms of the Loan Documents.
(d) Rights. Exercise any and all rights and remedies afforded
by the laws of the State of Texas or any other jurisdiction, by any of the Loan
Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under Section
9.1(d), (e) or (f), the outstanding principal of and accrued and unpaid interest
on the Notes and all other amounts payable by the Borrower under the Loan
Documents shall thereupon become immediately due and payable without notice,
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 26
<PAGE> 31
demand, presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of which
are hereby expressly waived by the Borrower.
Section 9.3 Performance by the Lender. If the Borrower shall fail to
perform any covenant or agreement in accordance with the terms of the Loan
Documents, the Lender may perform or attempt to perform such covenant or
agreement on behalf of the Borrower. In such event, the Borrower shall, at the
request of the Lender, promptly pay any amount expended by the Lender in
connection with such performance or attempted performance to the Lender at the
Principal Office, together with interest thereon at the applicable Default Rate
from and including the date of such expenditure to but excluding the date such
expenditure is paid in full. Notwithstanding the foregoing, it is expressly
agreed that the Lender shall not have any liability or responsibility for the
performance of any obligation of the Borrower under this Agreement or any of the
other Loan Documents.
Section 9.4 Continuance of Default. For purposes of all Loan Documents,
(a) a Default which is capable of being remedied shall be deemed to exist until
the Lender shall have actually received evidence reasonably satisfactory to
Lender that such Default shall have been remedied and (b) a Default not capable
of being remedied shall be deemed to exist until waived in accordance with the
Loan Document.
Section 9.5 Setoff. If an Event of Default shall have occurred and be
continuing, the Lender is hereby authorized at any time and from time to time,
without notice to the Borrower (any such notice being hereby expressly waived by
the Borrower), to set off and apply any and all amounts (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Lender to or for the credit or the account of the Borrower
against any and all of the Obligations, irrespective of whether or not the
Lender shall have made any demand under any Loan Document and although such
Obligations may be unmatured. The Lender agrees promptly to notify the Borrower
after any such setoff and application, provided that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
and remedies of the Lender hereunder are in addition to other rights and
remedies (including, without limitation, other rights of setoff) that the Lender
may have.
ARTICLE 10
Miscellaneous
Section 10.1 Expenses. The Borrower hereby agrees to pay on demand: (a)
all out-of-pocket costs and expenses of the Lender in connection with the
preparation, negotiation, execution, and delivery of this Agreement and the
other Loan Documents and any and all amendments, modifications, renewals,
extensions, and supplements thereof and thereto, including, without limitation,
the reasonable fees and expenses of legal counsel for the Lender, (b) all
out-of-pocket costs and expenses of the Lender in connection with any Default
and the enforcement of this Agreement or any other Loan Document, including,
without limitation, the reasonable fees and expenses of legal counsel for the
Lender, (c) all transfer, stamp, documentary, or other similar taxes,
assessments, or charges levied by any Governmental Authority in respect of this
Agreement or any of the other Loan Documents, and (d) all other out-of-pocket
costs and expenses incurred by the Lender in connection with this Agreement or
any other Transaction Document.
Section 10.2 INDEMNIFICATION. THE BORROWER SHALL INDEMNIFY THE LENDER
AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE MEMBERS, OFFICERS, DIRECTORS,
EMPLOYEES, MANAGERS, ATTORNEYS, AND AGENTS FROM, AND HOLD EACH OF THEM HARMLESS
AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS,
DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) TO
WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR
RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY,
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 27
<PAGE> 32
PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B)
ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY
THE BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT
CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED
RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON,
ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OF THE BORROWER OR ANY
SUBSIDIARY, OR (E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR
OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING. WITHOUT LIMITING ANY
PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS
INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS
SECTION SHALL (i) BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL
LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS,
COSTS, AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) ARISING OUT OF OR
RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON AND (ii) SHALL
NOT BE INDEMNIFIED OR HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES
(INCLUDING REASONABLE ATTORNEY FEES) ARISING OUT OF OR RESULTING FROM THE
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE OF SUCH PERSON OR WHICH IS INCURRED BY
SUCH PERSON SOLELY AS A RESULT OF HIS POSITION AS AN OFFICER, DIRECTOR OR
CONTROLLING STOCKHOLDER OF THE BORROWER OR ANY SUBSIDIARY OF THE BORROWER AND
NOT IN HIS CAPACITY AS A MEMBER, OFFICER, DIRECTOR, EMPLOYEE, MANAGER, ATTORNEY,
AGENT OR AFFILIATE OF THE LENDER OR ANY OF ITS AFFILIATES.
Section 10.3 Limitation of Liability. None of the Lender or any
Affiliate, officer, director, employee, attorney, manager, or agent thereof
shall have any liability with respect to, and the Borrower hereby waives,
releases, and agrees not to sue any of them upon, any claim for any special,
indirect, incidental, consequential, exemplary or punitive damages suffered or
incurred by the Borrower in connection with, arising out of, or in any way
related to, this Agreement or any of the other Loan Documents, or any of the
transactions contemplated by this Agreement or any of the other Loan Documents.
None of the Borrower, any Obligated Party nor any Affiliate, officer, director,
employee, attorney, or agent thereof shall have any liability with respect to,
and the Lender hereby waives, releases, and agrees not to sue any of them upon,
any claim for any special, indirect, incidental, consequential, exemplary or
punitive damages suffered or incurred by any of them in connection with, arising
out of, or in any way related to, this Agreement or any of the other Loan
Documents, or any of the transactions contemplated by this Agreement or any of
the other Loan Documents.
Section 10.4 No Duty. All attorneys, accountants, appraisers, and other
professional Persons and consultants retained by the Lender shall have the right
to act exclusively in the interest of the Lender and shall have no duty of
disclosure, duty of loyalty, duty of care, or other duty or obligation of any
type or nature whatsoever to the Borrower or any of the Borrower's shareholders
or any other Person.
Section 10.5 No Fiduciary Relationship. The relationship between the
Borrower and the Lender is solely that of debtor and creditor, and the Lender
does not have any fiduciary or other special relationship with the Borrower, and
no term or condition of any of the Loan Documents shall be construed so as to
deem the relationship between the Borrower and the Lender to be other than that
of debtor and creditor. No joint venture or partnership is created by this
Agreement between the Borrower and the Lender.
Section 10.6 Equitable Relief. The Borrower recognizes that in the
event the Borrower fails to pay, perform, observe, or discharge any or all of
the Obligations, any remedy at law may prove to be inadequate relief
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 28
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to the Lender. The Borrower therefore agrees that the Lender, if the Lender so
requests, shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.
Section 10.7 No Waiver; Cumulative Remedies. No failure on the part of
the Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power, or privilege under this Agreement or any other
Loan Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power, or privilege under this Agreement or any other
Loan Document preclude any other or further exercise thereof or the exercise of
any other right, power, or privilege. The rights and remedies provided for in
this Agreement and the other Loan Documents are cumulative and not exclusive of
any rights and remedies provided by law.
Section 10.8 Participations. The Lender may sell participations to one
or more Persons in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Loans); provided, however, that:
(i) the Lender's obligations under this Agreement shall remain unchanged, (ii)
the Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participant shall be entitled to the
benefit of the right of set-off contained in Section 9.5, and (iv) the Borrower
shall continue to deal solely and directly with the Lender in connection with
the Lender's rights and obligations under this Agreement, and the Lender shall
retain the sole right to enforce the obligations of the Borrower relating to the
Loan and to approve any amendment, modification, or waiver of any provision of
this Agreement.
Section 10.9 Survival. All representations and warranties made or
deemed made in this Agreement or any other Loan Document or in any document,
statement, or certificate furnished in connection with this Agreement shall
survive the execution and delivery of this Agreement and the other Loan
Documents and the making of the Loan, and no investigation by the Lender or any
closing shall affect the representations and warranties or the right of the
Lender to rely upon them. Without prejudice to the survival of any other
obligation of the Borrower hereunder, the obligations of the Borrower under
Section 2.9 and Sections 10.1 and 10.2 shall survive repayment of the Notes.
Section 10.10 Entire Agreement; Amended and Restatement; Release. THIS
AGREEMENT, THE EXISTING NOTE, UPON THEIR EXECUTION, THE NOTES, AND THE OTHER
LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE
PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS,
REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE
SUBJECT MATTER HEREOF (INCLUDING, WITHOUT LIMITATION, THE EXISTING AGREEMENT)
AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES THERETO. This Agreement amends and
restates in its entirety the Existing Agreement. The execution of this
Agreement, the Notes and the other Loan Documents executed in connection
herewith does not extinguish the indebtedness outstanding in connection with the
Existing Agreement nor does it constitute a novation with respect to such
indebtedness. THE BORROWER REPRESENTS AND WARRANTS THAT AS OF THE CLOSING DATE
THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR COUNTERCLAIMS TO ITS
OBLIGATIONS UNDER THE EXISTING AGREEMENT OR THE DOCUMENTATION RELATING THERETO.
TO INDUCE THE LENDER TO ENTER INTO THIS AGREEMENT, THE BORROWER WAIVES ANY AND
ALL CLAIMS, OFFSETS, DEFENSES OR COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN,
ARISING PRIOR TO THE DATE HEREOF AND HEREBY RELEASES THE LENDER AND ITS MEMBERS
AND THEIR RESPECTIVE MANAGERS, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS AND
ATTORNEYS (COLLECTIVELY THE "RELEASED PARTIES") FROM ANY AND ALL OBLIGATIONS,
INDEBTEDNESS, LIABILITY, CLAIMS, RIGHTS, CAUSES OF ACTION OR
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 29
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DEMANDS WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED WHICH THE
BORROWER EVER HAD, NOW HAS, CLAIMS TO HAVE OR MAY HAVE AGAINST ANY RELEASED
PARTY ARISING PRIOR TO THE CLOSING DATE AND FROM OR IN CONNECTION WITH THE
EXISTING AGREEMENT OR THE DOCUMENTATION EXECUTED IN CONNECTION THEREWITH OR THE
TRANSACTIONS CONTEMPLATED THEREBY.
Section 10.11 Amendments. No amendment or waiver of any provision of
this Agreement, the Existing Note, the Notes, or any other Loan Document to
which the Borrower is a party, nor any consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be agreed or
consented to by the Borrower, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, that no amendment, waiver, or consent shall, unless in writing and
signed by all of the Lender and the Borrower, do any of the following: (a)
subject the Lender to any additional obligations; (b) reduce the principal of,
or interest on, the Notes or any fees or other amounts payable hereunder; (c)
postpone any date fixed for any payment of principal of, or interest on, the
Notes or any fees or other amounts payable hereunder; (d) change the percentage
of the aggregate unpaid principal amount of any Note or which shall be required
for the Lender to take any action under this Agreement; or (e) change any
provision contained in this Section 10.11.
Section 10.12 Maximum Interest Rate.
(a) No interest rate specified in this Agreement or any other
Loan Document shall at any time exceed the Maximum Rate. If at any time the
interest rate (the "Contract Rate") for any Obligation shall exceed the Maximum
Rate, thereby causing the interest accruing on such Obligation to be limited to
the Maximum Rate, then any subsequent reduction in the Contract Rate for such
Obligation shall not reduce the rate of interest on such Obligation below the
Maximum Rate until the aggregate amount of interest accrued on such Obligation
equals the aggregate amount of interest which would have accrued on such
Obligation if the Contract Rate for such Obligations had at all times been in
effect.
(b) Notwithstanding anything to the contrary contained in this
Agreement or the other Loan Documents, none of the terms and provisions of this
Agreement or the other Loan Documents shall ever be construed to create a
contract or obligation to pay interest at a rate in excess of the Maximum Rate;
and the Lender shall never charge, receive, take, collect, reserve or apply, as
interest on the Obligations, any amount in excess of the Maximum Rate. The
parties hereto agree that any interest, charge, fee, expense or other obligation
provided for in this Agreement or in the other Loan Documents which constitutes
interest under applicable law shall be, ipso facto and under any and all
circumstances, limited or reduced to an amount equal to the lesser of (i) the
amount of such interest, charge, fee, expense or other obligation that would be
payable in the absence of this Section 10.12(b), or (ii) an amount, which when
added to all other interest payable under this Agreement or the other Loan
Documents, equals the Maximum Rate. If, notwithstanding the foregoing, the
Lender ever contracts for, charges, receives, takes, collects, reserves or
applies as interest any amount in excess of the Maximum Rate, such amount which
would be deemed excessive interest shall be deemed a partial payment or
prepayment of principal of the Obligations and treated hereunder as such; and if
the Obligations, or applicable portions thereof, are paid in full, any remaining
excess shall promptly be paid to the Borrower. In determining whether the
interest paid or payable, under any specific contingency, exceeds the Maximum
Rate, the Borrower and the Lender shall, to the maximum extent permitted by
applicable law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate and spread in equivalent
unequal parts the total amount of interest throughout the entire contemplated
term of the Obligations, or applicable portions thereof, so that the interest
rate does not exceed the Maximum Rate at any time during the term of the
Obligations; provided that, if the unpaid principal balance is paid and
performed in full prior to the end of the full contemplated term thereof, and
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 30
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if the interest received for the actual period of existence thereof exceeds the
Maximum Rate, the Lender shall refund to the Borrower the amount of such excess
and, in such event, the Lender shall not be subject to any penalties provided by
any laws for contracting for, charging, receiving, taking, collecting, reserving
or applying interest in excess of the Maximum Rate.
(c) The provisions of Chapter 346 of the Finance Code of Texas are
specifically declared by the parties hereto not to be applicable to any Loan
Documents or to the transactions contemplated thereby.
Section 10.13 Notices. All notices and other communications provided
for in this Agreement and the other Loan Documents to which the Borrower is a
party shall be given or made in writing and telecopied, mailed by certified mail
return receipt requested, or delivered to the intended recipient at the "Address
for Notices" specified below its name on the signature pages hereof. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopy, subject to telephone
confirmation of receipt, or personally delivered or, in the case of a mailed
notice, upon receipt, in each case given or addressed as aforesaid.
Section 10.14 Governing Law; Submission to Jurisdiction. This Agreement
and the Notes shall be governed by, and construed in accordance with, the laws
of the State of Texas and applicable laws of the United States of America. THE
BORROWER HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE NORTHERN DISTRICT OF TEXAS AND OF ANY TEXAS STATE COURT
SITTING IN DALLAS, TEXAS, FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. THE BORROWER IRREVOCABLY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORM.
Section 10.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 10.16 Severability. Any provision of this Agreement held by a
court of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be invalid or illegal.
Section 10.17 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 10.18 Construction. Each of the Borrower and the Lender
acknowledges that it has had the benefit of legal counsel of its own choice and
has been afforded an opportunity to review this Agreement and the other Loan
Documents with its legal counsel and that this Agreement and the other Loan
Documents shall be construed as if jointly drafted by the parties hereto.
Section 10.19 Independence of Covenants. All covenants hereunder shall
be given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of a Default if such action is taken or such condition
exists.
Section 10.20 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 31
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WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM
(WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO
ANY OF THE TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT
THEREOF.
Section 10.21 Confidentiality. The Lender agrees to keep any Designated
Information (as defined below) delivered or made available by the Borrower to it
confidential from anyone other than Persons employed or retained by the Lender
who are, or are expected to be, engaged in evaluating, approving, structuring or
administering the credit facility provided herein; provided that nothing herein
shall prevent the Lender from disclosing such Designated Information: (a) upon
the order of any court or administrative agency, (b) upon the request or demand
of any regulatory agency or authority with which the Lender is required to
comply, (c) which had been publicly disclosed other than as a result of a
disclosure by the Lender prohibited by this Agreement, (e) in connection with
any litigation to which the Lender or any of its Affiliates may be a party, (f)
to the extent necessary in connection with the exercise of any remedy hereunder,
(g) to the Lender's legal counsel and independent auditors, (h) to any Affiliate
of the Lender, solely in connection with this Agreement, and (i) subject to
provisions substantially similar to those contained in this Section, to any
actual or proposed participant or assignee of any of its rights and obligations
under the Loan Documents in accordance with the terms hereof. The term
"Designated Information" means any information that has been designated by the
Borrower in writing as confidential. If the Lender or any Person to whom the
Lender gives Designated Information is to disclose any Designated Information
pursuant to clause (b) or (e), such Person shall notify the Borrower of the
proposed disclosure promptly after determining it must make such disclosure so
that the Borrower or a Subsidiary may seek a protective order as necessary to
protect the unnecessary disclosures of Designated Information.
Section 10.22 Waiver of Defaults. The Lender waives any Default (as
defined in the Existing Agreement) that may have existed under the terms of the
Existing Agreement and agrees not to exercise any rights or remedies available
as a result of the occurrence thereof or the occurrence of any of the events
described in the Recitals hereto. To induce the Lender to agree to the terms of
this Agreement (including without limitation, this Section 10.22, the Borrower
agrees that the foregoing waiver shall not constitute and shall not be deemed a
waiver of any Default hereunder, whether arising as a result of the further
violation of covenants or representations contained in the Existing Agreement
which are continued hereunder or otherwise, or a waiver of any rights or
remedies arising as a result of such Defaults under this Agreement. The breach
of any representation or warranty set forth herein or the failure to comply with
any covenants set forth herein on or after the date on which this Agreement is
executed and delivered shall constitute a Default.
SECOND AMENDED AND RESTATED LOAN AGREEMENT - Page 32
<PAGE> 37
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
THE BORROWER:
UICI,
a Delaware Corporation
By:
---------------------------------
Name: Glenn W. Reed
Title: Executive Vice President
Address for Notices:
4001 McEwen Drive, Suite 200
Dallas, Texas 75244
Telephone No.: 972-392-6733
Telecopy No.: 972-392-6721
Attention: Chief Financial Officer
SCHEDULE 7.4, Solo Page
